HOMEBUYERS ON SIDELINES NOW READY TO MAKE A MOVE: BROKER

With the Bank of Canada suggesting it has hit the pause button on interest rate hikes, tighter lending rules possible later this year and before house prices jump, some prospective homebuyers are in a sweet spot for purchasing a house, a Greater Toronto Area (GTA) mortgage and real estate broker says.

Mortgage brokers are seeing a surge of inquiries and pre-approval applications, said Victor Tran, from RATESDOTCA.

"This could mean potential buyers that have been waiting on the sidelines, for the bottom of the market, are now ready to make a move," he said. "We are seeing a huge increase in preapprovals. A lot more than I was expecting."

Tighter federal lending rules could come in the second half of 2023, Tran said. What that means is someone earning $100,000, for example, who now qualifies for a $450,000 mortgage would only qualify for a $350,000 mortgage, he said.

In that case, many buyers have to put down higher down payments or pursue alternative lending options to secure a home, he said.

"Rising mortgage rates have had the biggest impact on home prices declining. Despite lower home prices, most people still can't afford to purchase homes because of high interest rates. We haven't seen interest rates this high since 2007," Tran added.

In January 2023, the GTA saw the second-fewest number of listings in the past 20 years, which means fewer houses are available to be sold.

Data from the Toronto Regional Real Estate Board shows the average house price in the GTA declined by 22.17 per cent, after peaking in February 2022, Tran said.

The average price of a GTA home in February 2022 was $1.33 million, which fell to just under $1.04 million in January 2023.

In York region, those numbers are almost $1.59 million and about $1.29 million, respectively.

"Despite the challenges with affordability and lower prices, I think it's a great time for buyers to enter the market versus pre-february 2022," Tran said.

"It's a better overall experience for buyers right now because there are fewer bidding wars, they can place conditional offers, meaning conditional on mortgage financing, home inspections, etc. There is less rush and less pressure to place an offer before the home is sold, which allows them to see a property multiple times before making a decision and to conduct due diligence. Overall, there is more protection and it is safer for buyers now than when the market was at its peak."

There is a bit of a stalemate in the market at the moment, as sellers want to capture prices at the peak of the red-hot market a year ago and buyers want better prices, especially amid higher interest rates, Tran said.

"Mortgage rates are currently the highest they've been in 15 years, and housing prices are out of reach for most Canadians," he said.

"Unfortunately, most people will still be priced out of the market and cannot afford to purchase. Sure, maybe we'll see an uptick in sales and inventory, but it's highly unlikely we'll see a red-hot housing market like pre-march 2022."