Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Notice to Buyers: Home Prices Could Drop 15% by Year-End 2023

Stock Markets Jun 10, 2022 16:45
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Notice to Buyers: Home Prices Could Drop 15% by Year-End 2023

Rising interest rates will slow down activities in Canada’s red-hot housing market, although homebuyers can’t expect a price relief yet. The earliest it could happen could be 18 months from now. Desjardins’s senior director of Canadian Economics Randall Bartlett and senior economist Helene Begin said prices could “plausibly” fall 15% by the year-end 2023

The Canadian Real Estate Association (CREA) reports that home prices have fallen sequentially for the last two months from a non-seasonally adjusted record of $816,720 in February 2022. Many industry experts believe that the aggressive rate-hike campaign by the Bank of Canada to combat inflation is starting to weigh on the housing market. Homebuyers are also rethinking their options.

A correction to bring back balanced conditions Desjardins’s economists are certain that despite rising interest rates, the Canadian housing market will only bend but not break. They said, “Looking ahead, we believe ever-higher borrowing costs are going to weigh on housing market activity as increasingly interest-sensitive households batten down the hatches for the impending storm.”

A sustained weakness in sales activity should lead to persistent downward pressure on prices. The same economists also said that the expected housing market correction has begun, although it’s not yet widespread. More importantly, it should help bring back more balanced conditions, contrary to the previous supercharged run.

Impact to homebuyers Some prospective homebuyers have pulled out or deferred purchases because of rising borrowing costs. John Pasalis, president of real estate brokerage Realosophy, said, “The full impact of the Bank of Canada’s interest rate hikes likely won’t be felt by homebuyers until the summer months, when many locked-in mortgage rate contracts expire.”

Lauren Haw, CEO of Zoocasa, said both buyers and sellers are on stand-by. She said, “The housing market pre-priced this rate hike and most people expected it, but what wasn’t expected was the signal of ongoing uncertainty around what rate decisions will look like in the coming months.”

Investment alternative For real estate investors, direct ownership isn’t the only option. Real estate investment trusts (REITs) are profitable alternatives. Apart from lower cash outlay and zero landlord responsibilities, REITs pay dividends. The payouts can take the place of rental income. Moreover, the stock price could appreciate.

H&R (TSX:HR.UN) outperforms the TSX year to date at +13.82% versus -2.03%. The $4.1 billion REIT has ownership interests in high-quality office, industrial, residential, and retail properties. At $14.01 per share, the dividend offer is 3.92%. A $30,650 position will generate $100.12 in passive income every month.

In Q1 2022, rentals from investment properties declined 24.3% to $201.7 million versus Q1 2021. However, net income rose 508.2% year over year to $970 million. H&R’s CEO, Tom Hofstedter, said, “Our strong first quarter financial results mark a pivotal moment in the continuation of our transformation and the surfacing of the embedded value within our portfolio.”

Silver lining The central bank has raised its key interest rate three times already in 2022, and economists believe the next hike in July could be 75 basis points. Still, Pasalis says the situation is a silver lining for first-time homebuyers. Higher interest rates are deterrents for Canadians buying homes or real estate for investment purposes.

The post Notice to Buyers: Home Prices Could Drop 15% by Year-End 2023 appeared first on The Motley Fool Canada.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

This Article Was First Published on The Motley Fool

Notice to Buyers: Home Prices Could Drop 15% by Year-End 2023
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email