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What is happening with home prices?

What is happening with home prices?
Date Posted: 14/10/2023





Here is the simple and complicated answer...

The day-to-day flow of the (Niagara) real estate market is completely at the mercy of the confidence and overall market sentiment of the buyers and sellers involved.

Quite simply, interest rate increases impact affordability but even more so, the overall confidence of the very people who otherwise need (or want) to move. When we read headlines and hear grocery store check-out conversations revolving around doom and/or gloom, our tendency will be to retreat and stay put.


Which raises one of the most common questions we hear.


What is going to happen to house prices?


Are they going down? Are they going to crash?

The short answer is no one truthfully knows. If the last 5 or 7 years has taught us anything, predicting what is going to happen in the real estate market is dangerous territory. That said, we can only look back at the past 16 months to see the quick and obvious impact that the Bank of Canada’s interest rate increases have had.

Looking closer...


Note: in the first few graphs, you'll see vertical red bars Those represent the Bank of Canada interest rate increases here in 2023.

Have a look at the first graph. We had 3 relatively small interest rate increases of 0.25% in January, June and July. The January increase seemed to have less of an effect, partially due to a few reasons.


  1. we had just gone through a truly terrible back half of 2022. The feeling was the market was at somewhat of a bottom so better days were ahead. Kind of an inverted or forced optimism made us more resilient.
  2. 2022 saw rate increases of .75% and 1% dropped on our front step. As well, there were increased rumblings that the increases were going to stop so by comparison, 0.25% was tolerable.


With that, confidence started to increase, sales volume showed some life and people learned to adjust to the new realities of the marketplace. Note the larger green oval in the graph, which highlights that temporary but notable time of relative calm. 



Perhaps our confidence was a little too eager because overall market data pushed up which caused the Bank of Canada to take notice and edge up rates again, with a 0.25% increase in both June and July (the vertical red bars). Again, the sudden and obvious impact on sale prices was felt as confidence was tripped up and buyers retreated.


As we now move through October, it is starting to feel like perhaps we’re at that bottom again. Or in other words, homes are at prices where active buyers are able to see value and purchase.

Average sale prices have somewhat stabilized over the past 60 – 75 days, at least in relation to the unstable June and July.


Sale Price Predictions 

Have another look at the above graph and you'll see there is data for all of October as well as November and December. This is our forecast, based on previous market data, of what we expect to see home sale prices do for the balance of 2023 should Tiff et al. decide to keep rates where they are. As a result, we expect to see prices hold relatively stable, represented by the smaller green oval. 

Could we be wrong? Absolutely. This is simply our prediction based on past experience and overall data trends. 



What if the Bank of Canada raises rates in October 2023?


That is the other debate. Will there be further downward pressure on home prices if there is another increase, even if it is only 0.25%?


Yes. Based on previous instances, home prices typically take a step back very quickly after a rate increase.


This next graph is again, our theoretical prediction showing average home prices should the BoC raise rates later this month. You will see that a 4th red bar (the rate increase) replaced the smaller green oval. Or in other words, the rate increase replaces any sense of return to stability in Q4 2023.



With that potential rate increase, we would expect to see home prices ease back some more, but not to the extent that we saw in 2022. 



There are a few caveats with this.


Going back to the first sentence of this blog, the (Niagara) real estate market is completely at the mercy of the confidence of the buyers and sellers out there. As we near the finish line of 2023, we are seeing more reports out there with predictions of rate decreases in 2024 and 2025. How the market place (and the humans involved) react to the relevant headlines will directly impact the accuracy of our, or anyones, predictions. 


Even if overall conditions are less than ideal, we are often able to adapt and operate when predictability or stability start to reappear. Again, market sentiment and overall confidence are some of the core ingredients of the real estate soup so as we turn the corner into 2024, we expect to see a market that takes more of a ‘wait and see” approach.


What about the other cities!?

One of the challenges with the smaller market cities, is their monthly data is volatile. In a city with only 12 or 15 sales in a month, an outlier sale, high or low, can render the overall data irrevelant. However, with that said, here is the rest of Niagara broken up into 2 parts. 





Want to learn more?


We wrote a more indepth look at interest rates and the (Niagara) real estate market. 


You can read it by clicking here