Market Insights

Top Factors Affecting Real Estate Trends 2021

January 17, 2021

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Top Factors Affecting Real Estate Trends 2021

2020 was a year of disruption not only for the real estate sector but also for everyone. Â Much has changed since the spread of COVID-19. Though we now have its vaccine and a plan to live with it, we still worry about how it will impact real estate trends in 2021.

The real estate trends of 2020 gave us a head start by showing some unusual activities in quarter two while rebounding aggressively in quarter three. According to an earlier prediction by the Canada Mortgage and Housing Corporation (CMHC), it was expected that home sales would decline, ranging between 19%-29%, and rebound gradually in 2021. However, moving forward from the third quarter, the national sales reached 544,413 units, showing a sales hike of 11.1%, compared to the same period in 2019.

With that said, real estate trends in 2021 might see some more challenges due to specific reasons. And it would be best if you prepare yourself for those.

Factors Affecting Real Estate Market Trends

  1. Low Inventory
    • What to do when the inventory is low?
  2. Rising House Prices
    • What should buyers do?
    • What do most sellers expect from this?
  3. Low Mortgage Rate
  4. Innovation in Real Estate Services
  5. City Wise Real estate trends 2021
    • Toronto, Ontario
    • Mississauga, Ontario
    • Oakville, Ontario
    • Vancouver, British Columbia
    • Calgary, Alberta
    • Saskatoon, Saskatchewan
    • Winnipeg, Manitoba
    • Saint John, New Brunswick

Low Inventory

Home listings in Canada are nearly at an all-time low. According to recent CREA stats, the country's sales-to-listings ratio is around 74.8% as of November 2020. It means that the demand is high compared to the supply, making it a sellers' market.

What to do when the inventory is low?

Act Vigilantly

In a situation like this, you need to be vigilant and may have to act fast. Sync your search with your real estate agent's listings, and try to grab the opportunity to buy that bungalow soon it is updated in the listings.

Hire a Realtor with Multiple Options

The pandemic has changed the way we used to work and live. People are working from home and prefer residing in the suburbs in single-family homes.

In a situation like this, you need a realtor operating with multiple serving locations and having a wide range of home options for you.

Get Pre-approved Mortgage

The mortgage has always been a significant challenge for home buyers. It is one lengthy process and requires prompt actions. When the inventory is low, getting the mortgage approved before selecting the house is always a good idea.

For this, manage your finances well before buying a house.

Rising House Prices

After the pandemic, the ball is mostly in the sellers' court. There are more buyers than sellers, giving less negotiation room to home buyers.

According to some rough stats, residential prices are expected to rise by 4-6% in 2021. It is speculated that people within the country would keep on relocating and buying houses to further boost the real estate sector.

On the contrary, based on past real estate market trends, it is also believed that the market would remain the primary investment option in 2021.

While these are all predictions based on the housing market trends of 2020 and beyond, one thing is for sure; COVID-19 has changed the way people used to think and live. And to adapt to the current situation, everyone (buyers & sellers) needs to plan when buying or selling a house.

What should buyers do?

When buying a home in 2021, consider following a strategic plan. Here is an idea to plan your journey:

Manage Your Finances

Identify your budget to afford to buy a new house. Some experts suggest allocating at least 20% of your household income to savings. Or you could make a thorough budget incorporating necessary expenses (house rent, utility bills, grocery, etc.), current debts, and a small amount for miscellaneous expenses.

The remaining amount goes for your new home's expenses (down payment, realtor fees, home financing, etc.)

Save up to 20% for Down Payment

5% is the minimum amount required for the down payment. But an amount below 20% requires mortgage loan insurance. Mortgage loan insurance or private mortgage insurance (PMI) is an additional amount paid to protect the lender (not you).

If you do not have 20% as a down payment, you still could start saving, starting today. Based on your family income, try to minimize your expenses to the maximum level. COVID-19 has already guided us a lot; how to avoid traveling, eating out, shopping, etc., costs. It will help if you make it a practice to buy a new home.

Fixed or Variable Mortgage

The fixed mortgage has a preset rate for the entire period of the term. In contrast, the variable mortgage varies depending on external factors, including the market interest rate.

The variable mortgage rate (VMR) is relatively lower than the fixed mortgage rate (FMR) and sounds like a better option. But if the market interest rates go up, so would VMR.

In an interview with BNN Bloomberg, Christophe Alexander said;

We are hoping that things soften out towards the middle of next year. But inventory is going to continue to be tight right across Canada, and there is still a strong desire for Canadians to buy real estate, and you couple that with lowest interest rates, it will be a very busy market in 2021.

If this continues beyond 2021, VMR could be a good option. However, we highly recommend talking to a mortgage lending expert to choose the best option.

What do most sellers expect from this?

It is a sellers' market. You would be expecting a higher profit margin from the resale of your house. Here, you need to be patient to get the right offer.

Compared to November 2019, according to CREA, the actual national average sale price posted a 13.8% YoY gain in November 2020. It means if your house was valued at $1,000,000 in November 2019, it could have been sold for somewhere around $1,130,000 in November 2020. And a further surge of at least 4% could return even more.

Home sellers, while considering gaining profits due to this surge in prices, must also consider what if they have to buy a new home. According to the information (shared above), the inventory is low, and prices are high. It could put you in trouble if you sell the house at an inappropriate time.

To better evaluate your decision to sell your bungalow, consider talking to a real estate agent near you.

Low Mortgage Rates

It is no hidden truth that mortgage interest rates are super low at the moment, giving home buyers an edge to finance a new home. One of the reasons for this low mortgage rate is the government's desire to attract buyers and stabilize the real estate market.

Recently, the Honourable Ahmed Hussein, Minister of Families, Children and Social Development and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC), shared details of the $17.3 million Rapid Housing Initiative allocation for Edmonton and said:

Our Government wants to ensure that every Canadian has a safe and affordable place to call home. Investments with our municipal partners like Edmonton under the Rapid Housing Initiative's Major Cities Stream will go a long way to effectively supporting those who need it most by quickly providing new affordable housing units to vulnerable individuals and families to keep them safe. This is one of the ways our Government's National Housing Strategy continues to provide housing for Canadians from coast to coast to coast.

Keeping the government's initiatives and low mortgage rates in mind, both buyers and sellers need to be well aware before making any rational decision.

  • For homebuyers: do not make any hasty decision buying an expensive house; the mortgage rate may increase at any time during the term period.
  • For home sellers: low-interest rates mean high demand from home buyers, giving you an edge to ask for a higher bid for your house.

Innovation in Real Estate Services

Long before COVID-19, the real estate sector started incorporating modern techniques to market homes. This innovation has helped a lot in boosting the real estate market. Both buyers and sellers can now use this online facility to shortlist their choices or upload their homes with top-ranking real estate agents.

A good realtor will offer you the service to search for homes according to your requirements and budget. All you need is to create an online account following a few simple steps, find the best-matching house using their listings, and contact the realtor to close the deal.

For home sellers, it is even easier - you will create an account, upload pictures of your house, and leave the rest to the realtor.

City Wise Real Estate Trends

According to some research, the expected real estate trends for residential properties in some cities of Canada are:

Toronto, Ontario

  • The housing market is expected to witness a hike of 6%
  • Inventory to remain low, while the demand is on the higher end
  • Average house value for the period January 1st till October 31st, 2020, rose to $918,883

Mississauga, Ontario

  • The housing market is expected to increase by 4%
  • The low inventory level is expected to continue in 2021
  • Average house prices raised to $880,374 from $760,345 within a year

Oakville, Ontario

  • Prices expected to rise by 5%
  • Low inventory a significant concern for the buyers
  • Average house prices raised to $1,169,468 in 2020 compared to the cost of $1,026,539 during 2019

Vancouver, British Columbia

  • Prices to rise by 4%
  • Average house prices grew to $1,270,000
  • High inventory in downtown areas

Calgary, Alberta

  • A surge of 3% is expected at house prices
  • The real estate market is expected to remain balanced in the city
  • Average house prices raised to $458,742 in 2020

Saskatoon, Saskatchewan

  • A 5% increase in house prices is expected
  • Average house prices grew to $346,239 from $331,359 within a year
  • New home-construction project is flourishing

Winnipeg, Manitoba

  • 3% increase is suspected during 2021
  • Average house prices raised to $283,652 from $271,652 during a year
  • Single-detached homes are getting popular

Saint John, New Brunswick

  • A 5% surge is expected for 2021
  • Average house prices raised to $202,195 within a year
  • Inventory is at a medium level, with an average inventory available for a period of 5 to 6 months

Decision-making Gets Easy by Real Estate Trends 2021

While coronavirus will continue to last for an unseen future, we would have to learn to live with it. The best way is to start learning predictions from experts based on past and present situations.

The real estate market trends shared here are one right way to plan your journey and make wise decisions when planning to sell or buy a house. And if you still are unsure what to do, your real estate agent would always help you and give you a good head start.