Predictions are always hard to make and they are never for certain. This year it seems as if the dust is starting to settle from the whirlwind of 2022. The problem is that the slightest disturbance can kick things off again. So all my predictions for real estate in 2023 are based off 2 premises. Number 1 is that the bank does not start increasing interest rates as they have over the past year. Let’s hope for modest increases or status quo going forward. We will get more into that later. Number 2 is that the war in Ukraine does not intensify causing further uncertainty in the world. Something else we will touch on…

Interest Rates

As we head into 2023 I do not expect the Bank of Canada to really make any moves. In December with the last hike their wording was they were going to “pause” things. Even if the rate of inflation is higher than desired, any unlikely increases to the Bank’s interest rates will be modest, at least until late 2023. Where we are going to see movement sooner is with the lenders. They need to lend out money to make money and so they will start to become more competitive. This will essentially be the same as interest rates coming down. Not from the BoC but lenders taking fewer points to win your business. This will not be significant, but every little bit will help build more confidence back into the market.

The Spring Market

I also believe that the spring is going to see more activity as it usually does. Many sellers have been waiting hoping for the market to level out. Unfortunately many of them may be forced to sell by this stage. There will likely be a significant increase in “entry level” or first time home buyer properties coming on the market. Why? Because those that tend to afford more expensive houses usually have higher salaries in white collar careers less affected by the pandemic. Those with blue collar careers more affected by the pandemic are still recovering if not still suffering. They have waited until the best time of year to sell: the spring.

Market Confidence

Overcoming the shock of the war in Ukraine and having become accustom to the effects of sanctions, buyers will have more confidence and will be more active in the spring as well. Increase after increase to the interest rates really made several borrowers worried how much their mortgage payments would be, so they waited to see. Add on top of that how everything from gas to food was becoming more expensive and they were just left uncertain about how much money they had left in their pockets at the end of the day. Now they have an idea of how much.

Things will settle as we head into 2023. Prices are much higher than what they were, but we got use to them by now and have found alternatives. People eat out less often. We no longer splurge on brand names and perhaps get generic items instead. Many of us work from home or drive less often to save on gas. There is not as much uncertainty and we can now return our attention to buying a house. Nearly every buyer I was working with who said they were not going to look right now, continued to look on-line.

What I can not predict for Real Estate in 2023

Here is what I cannot predict: the extent of sellers listing their homes.

Currently we have low demand and supply. Buyers and sellers are waiting. If this continues the market will remain weak. If demand remains low and several properties are listed, this will make it a buyer’s market. I do not believe the prices are going to come down much further though. In fact, without any further exterior influences, I believe prices will begin to increase again in the spring. Not like before but in a more sustainable way.

If demand increases in the spring which is what I believe will happen, but we remain with fewer properties listed, we can expect to see prices begin to increase again – modestly. What happens if both supply and demand increase? It depends at what rate. Hopefully it happens in such a way that the market becomes balanced. This would be much more healthy and you would start to see properties stay on market for a reasonable amount of time and selling at or close to listing with clauses.

So here is to hoping 2023 brings you happiness and success in your real estate dreams. They say you can never predict the bottom of the market, but I would suggest if you wait much longer you will have missed it. Let me know what you think…

If you have any questions or concerns about real estate, please feel free to contact me. I look forward to hearing from you.