Housing prices are going up again, RBC considers the market correction to be over

The latest report by RBC says the correction (prices decline) in Canada’s housing market may be already behind following a year of slowdown with prices falling by almost 18% in Toronto.

The spring became a turning point for the national real estate market with April home resales rising by 11.3% on a monthly basis and marking the largest monthly hike in almost three years.

Home prices showed a monthly increase for the first time since the beginning of 2022 (before the central bank’s aggressive rate hike cycle) and demand-supply conditions “unexpectedly became tight.”

“Recovering demand and lack of inventories have brought sellers back to the dominant position in most major markets, including Toronto, Vancouver, Calgary, and Halifax,” – noted Robert Hogue, senior economist and report author.

Although the market activity is still 11% lower than before the pandemic, that may not last for long if more sellers decide to return to the market. New listings have been lagging resales sharply, but in case home prices keep growing sellers may be more interested in entering the market, Hogue explains.

“Growing prices may encourage more sellers to start acting. In our opinion, many of them have been waiting for the correction to end until conditions become better for them. An increase in supply would help deal with the strong demand that built over the previous year,” – he noted.

In Toronto, home resales were up by 27% in April compared to March, offsetting almost one-quarter of the correction.

The Toronto Regional Real Estate Board says the average home price in Toronto went up from $1.03 million in January (when prices reached their bottom) to $1.15 million in April, marking an almost 10% gain.

According to realtor Cailey Heaps, CEO of the Heaps Estrin Team, there is an insane activity in downtown Toronto as homes get multiple offers again and spend less time on the market.

“We are heading toward a seller’s market but it’s not as strong as during the beginning of the last year,” – she noted. “Today, they have more control than during the second half of 2022.”

The spring market recovery came as a surprise for Hogue, who initially expected a clawback for housing prices and sales in summer.

“April showed stronger price hikes than we anticipated but we still believe prices will not reach pandemic peaks for some time,” – he added.

According to Heaps, the market is entering a stage of stabilization as the “significant price growth” of the last three months isn’t sustainable.