An entire year has passed since the World Health Organization declared COVID-19 a global pandemic – and what a year it has been! Faced with uncertainty and unchartered territory, we obeyed public health officials, donned our masks, social distanced, hunkered down and watched with amazement as the Canadian real estate market soared, while most other segments of the economy struggled to survive.
Since last spring, low inventory and fierce competition have led to historically strong levels of housing activity in many markets across the country. Recent statistics released by the Canadian Real Estate Association (CREA) reveal that national home sales set another all-time record in February, ostensibly setting the pace for what lies ahead.
Our pandemic-driven lifestyles will likely have a significant impact on housing trends for months to come as the need for a safe and suitable place to call home becomes fundamentally more important.
Following is what we can expect to see in 2021 and likely beyond.
Home prices will remain solid
During a crisis, housing prices generally fall as people often refrain from making large-ticket purchases in times of uncertainty. It appears, however, that COVID-19 has bucked that theory. Spurred by high demand and short supply, as well as record-low mortgage rates, housing prices are expected to continue rising well into the year. According to CREA, average price trends across the country in 2021 are generally expected to resemble those in 2020, with the national average home price anticipated to rise 9.1%. The arrival of spring will likely bring more homes for sale, but inventory will still remain low relative to demand. Record-breaking prices are expected to continue as the economy begins to recover and interest rates remain low. This trend is anticipated in large municipalities as much as in smaller, traditionally more affordable markets as suburban and rural lifestyles gain in popularity.
The exodus from major cities will continue
The term urban-out migration denotes a response to emerging social, political and economic changes such as those brought on by COVID-19. Lifestyle and behavioural changes are driving people to move outside of major cities, often extending beyond suburbia into more rural areas and even cottage country. Working remotely has enabled many Canadians to buy a home wherever they want, and former die-hard city dwellers are discovering the desirable traits of suburban and rural living with larger space, outdoor amenities and improved work-life balance. This trend may very well continue in a post-pandemic world as many people won’t be returning to an office environment, so the need to live near our place of work is no longer a consideration.
Sales volumes will begin to stabilize
Despite the impacts of COVID-19 or perhaps, more accurately, because of them, 2020 represented a record year for Canadian real estate. The housing market in Canada is highly seasonal with sales typically slow at the start of the year due to post-holiday spending and colder weather. Not so for 2021 with the first few months remaining red hot thanks to the continuation of historically-low mortgage rates coupled with the tenacity of record-high demand and record-low supply.
This whirlwind is, however, expected to level off as more homes are expected to become available in the months ahead. Many sellers, who held off putting their homes on the market in the middle of the pandemic, are now feeling a sense of optimism as the public health situation improves and consumer confidence resumes. Those who were on the fence about selling last year will start to come forward and propel more stable market activity.
Mortgage rates will remain affordable
In an effort to encourage spending and support the economy, the Bank of Canada has maintained its overnight lending rate at 0.25% with no plans for change on the horizon. Not to be outperformed, mortgage rates also remain at an all-time low and are expected to remain as such throughout 2021 and beyond. The hot housing market of late has led to bidding wars and rising offers, which are only possible for many buyers because of the low cost of borrowing. This is welcome news for would-be buyers who, armed with greater purchasing power, see this as an ideal time to enter the market. Existing homeowners will also benefit from building equity at a faster pace thanks to accelerating price appreciation and may want to consider a mortgage refinance to take advantage of lower rates.
Have questions about 2021 real estate trends or your mortgage needs? Answers are a call or email away!