Where The Real Estate Market is Headed in 2023

After a big housing market correction in 2022, everyone is wondering how much further home prices will fall in 2023. The Canadian Real Estate Association (CREA) benchmark price of a home in Ontario - a measure that combines sale prices of condominiums, semi-detached, townhouses, and detached houses across all markets in the province - peaked at $1.08 million in March of 2022. This was a 64 per cent leap in just two years, from the start of the COVID-19 pandemic. CREA's benchmark figure for Ontario has since fallen by nearly 20 per cent, but even that sharp decline only takes us back to the level they were at in September of 2021.

Overall, real estate analysts generally expect home prices to continue to fall, but not a lot further than they already have. Prices in Ontario are forecasted to decline through early 2023 but bottom out in the second half of the year. The central bank raised its standard-setting benchmark rate seven times in 2022 in an attempt to tackle inflation. Those higher interest rates have been the biggest factor dampening demand. However, employment levels remain strong and immigration numbers are expected to rise, fuelling demand for housing.

There are also signs that the recently rapid pace of new home construction is slowing. The Canada Mortgage and Housing Corp (CMHC) recently warned that in the Greater Toronto Area, the combination of a sharp drop in condo pre-construction sales, higher building costs and higher interest rates could lead to project cancellations or delays in project launches.

The volume of listings and sales is expected to remain low, people really don't want to list their homes when sales and prices are falling, for obvious reasons. We have more affordable home prices, but on the other hand, we have the continued rising interest rates that are affecting buyers' ability to qualify for the mortgages they need. Prices in the Greater Toronto Area are forecasted to decline to their 2021 levels, roughly an 11 per cent drop from today's average.

My personal advice to you is that if you are buying real estate as an end user or even as an investment, this is definitely the year to take advantage of lower prices and think of your purchase as a long term investment, which will go up in value.