Why Royal LePage thinks home prices will flatten out in 2023

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Canadians can expect progressively slower price declines as the year progresses

Published on January 13, 2023Last updated on January 13, 20232 minutes read

A A “For Sale” sign hangs outside a home in Toronto. Photo by Carlos Osorio/Reuters files

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Canadian home prices posted their first year-on-year price decline since the global financial crisis in 2022, and while the slump could continue in 2023, real estate company Royal LePage believes the worst is behind the market.

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In the company’s fourth-quarter home price survey released Jan. 13, the real estate company said it expects the first quarter of 2023 to see its sharpest year-over-year price decline, but that Canadians could expect increasingly lower price declines throughout the year .

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“The declines have already happened. We’ve reached a point where things have leveled off,” Royal LePage CEO Phil Soper said in an interview. “Compared to early last year, home prices will be lower, but they’re not going down any further.”

The big declines occurred from April 2022 through late last year, Soper said. While prices in some markets, such as western Canada, are expected to rise again this year, home prices in the greater Toronto area and lower mainland British Columbia “will essentially flatten out this year,” he added.

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Soper said the current market might be tempting for some buyers as the competition is pretty low and not many people want to buy. The downside, however, is that there aren’t many homes for sale either.

With rate hikes expected to slow this year, Soper believes consumer confidence will rise and people will re-enter the market – causing prices to rise again. “Maybe even uncomfortably fast,” he said.

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The house price survey released by Royal LePage found that the fourth quarter of 2022 marked the third straight quarterly decline but the smallest decline yet. The total national home price in Canada fell 2.3 percent quarterly and 2.8 percent year-on-year to $757,100 in the fourth quarter, according to the report. This is the first year-on-year decline since late 2008 during the global financial crisis.

According to the report, despite reports that home prices plummeted in mid-2022, fewer than 113,000 resale transactions took place during the months that saw the highest national benchmark prices. This corresponds to only 0.68 percent of all residential buildings in the country, it said.

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“Approximately half a percent of Canadian homeowners who bought homes during the last peak of the pandemic in the first quarter of 2022 whose homes are now worth less than what they paid for them,” Soper said.

House prices have held up remarkably well in the post-pandemic era, he said, adding that the decline in the last quarter of last year was in line with previous forecasts.

“We want to convey that Canada’s housing stock is in good shape. Canadian homeowners are in good shape. And it’s highly unlikely that we’ll see an increase in defaults and foreclosures,” he said.

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