House hunters still waiting for prices to drop further before buying may have sat on the sidelines too long, according to a new report. A study released Thursday shows home values in some major markets across Canada have recovered to levels where they were before the recent market drop. Economists agree and say the power has shifted to a seller’s market in recent months, after the buyer’s were in control for more than a year.
Low interest rates, pent-up demand, and improved affordability as a result of record low interest rates are behind the recovery. This has resulted in buyers taking advantage of the low rates and jumping into the market place. Buyers who have waited for the market to ‘bottom out’ have waited too long. Housing prices have been on the rise and with a small inventory of available houses, sellers are getting close to their asking price, and in some markets, multiple offers are driving the prices over list price.
The market turn around can be attributed to the government’s new incentive programs, particularly for new home buyers. Earlier this year, Ottawa increased the amount first-time home buyers can withdraw from their RRSPs from $20,000 to $25,000, and implemented a tax credit for first-timers of up to $750 to help cover closing costs. It also introduced new tax credits of up to $1,350 for home buyers who do renovations.
The lack of supply has also affected the upward turn in housing prices. Sellers aren’t putting their homes on the market because they are anticipating prices to rise further. Less inventory for buyers drives up demand, and in turn price.
Bank of Canada governor Mark Carney has issued a conditional commitment to keep the policy rate at the record low of 0.25 per cent until next summer, which means mortgage rates will likely remain at record lows for awhile longer.
A strong and stable market will bring more listings. An increase in listings and a levelling off in demand will bring us back to a balanced market over the next few months. You can follow the trends more closely by following me on TWITTER, FACEBOOK or on my website, www.seansells.ca