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Home buying and mortgages can be overwhelming as it is. Unfortunately, home and mortgage prices become more complicated when you factor in the effects of inflation and economic changes. On a more positive note, understanding the impact of these factors allows one to better predict how prices will shift throughout the years.

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Website #1 - What to Expect for Canadian Real Estate in 2021

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Website #1 - What to Expect for Canadian Real Estate in 2021

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This CTV News article delves into the state of several housing markets in this 2021 article, including the markets of Toronto, Vancouver, and Calgary.

I chose this article because it does a good job at summarizing the individual details of several housing markets within Canada. It also mentioned and debunked a popular myth which was that the COVID-19 pandemic was going to hurt the Canadian housing market. It instead proves the opposite by detailing the flourishing states of these four Canadian markets.

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TORONTO -- If you've been sitting on the sidelines of the real estate market with a chunk of savings hoping for house prices to plummet, 2021 probably won't be your year, Canadian real estate market experts say.

The COVID-19 pandemic didn't devastate Canada's hottest housing markets the way some forecasters predicted. In fact, in cities like Toronto and Vancouver, fierce competition for detached houses meant back-to-back months of record-breaking prices.

CTVNews.ca chatted with real estate agents and experts in Vancouver, Calgary, Toronto and Montreal to get their predictions for where the market is headed. While each expert expects 2021's market to look a little different, they all anticipate that prices for mid-range detached homes will only go up as more Canadians seek out home offices and backyards to make life with COVID-19 a little more comfortable.

Ultra-low interest rates, introduced in the early days of the pandemic, are making those purchases particularly attractive for first-time buyers who haven't seen their livelihoods jeopardized by COVID-19.

"COVID has made people appreciate the space that they live in - or on the flip side, not appreciate it," Vancouver-based agent Mark Wiens told CTVNews.ca earlier in December. "They're taking a more critical eye to where they live."

While bidding wars for houses are poised to heat up in many parts of the country, condos are a different story. All the experts agreed that small one-bedroom condos in downtown cores have already seen a price hit in 2020, and these prices aren't expected to quickly rebound in early 2021.

That's bad news for condo owners looking to sell, but possibly good news for anyone keen to buy a small space in hopes that, eventually, the perks of downtown living will return.

TORONTO: RECORD HOUSE PRICES, BUT CONDOS STRUGGLING

The Toronto real estate market has shown no signs of slowing down. Agents sold a record-breaking 10,563 homes in October, a 25-per-cent increase from the year prior. The same month, the average price for detached homes jumped to $1,204,844, a 14.8-per-cent increase from October 2019.

Lauren Haw, CEO of Zoocasa, a real estate agency that offers market analysis, said a big reason for that surge was pent-up demand from the early months of the pandemic, when many buyers and sellers froze.

"Everybody locked in their homes discovered the things they wanted to change. Some people wanted to change their homes, invest in a bigger kitchen. Some other people decided, 'I want a big change, I'm going to move out of the city,'" she said.

That's translated into a "small-town revival," Haw said, with cities and towns throughout southern Ontario seeing fierce competition for houses.

"We will see that trend continue to happen," Haw said. "People who said, 'I'm gonna buy this $600,000 one-bedroom condo in downtown Toronto,' are now saying, 'I can work from home in Barrie, Ancaster, Guelph or London.' And people in London are doing the same and moving to Strathroy and Woodstock."

If the economy continues to recover from COVID-19 shutdowns and interest rates remain low, that will likely translate into upward pressure on housing prices, Haw said.

In October, as Toronto house prices broke records again, the UBS Global Real Estate Bubble Index ranked Toronto third in the world on a list of cities most at risk of experiencing a property bubble. Vancouver, the only other city on the list, ranked eighth.

Haw doesn't expect the bubble to burst in 2021.

"I don't see a price correction coming in 2021. That being said, it's been 30 years since a major correction in the Toronto real estate market," she said.

"But this pandemic didn't do it. What's it going to take? I don't know what it will be that will drive the Toronto market into price decline."

Where she does expect to see prices suffer is in one-bedroom condos, particularly in buildings downtown with a high proportion of renters and Airbnbs. Condo sales fell 8.5 per cent in the city of Toronto in October, with far less interest in smaller units in the densely populated core.

"I don't think we're currently at the bottom of condo prices, so I do think urban condo prices will continue to suffer in Q1," Haw said, adding that a vaccine could change that.

"I'd hope that means service centres start to recover, the economy starts to rebound, businesses rebound, everyone runs to their local restaurants, which will be good for the economy, so we see renters come back to the city. If renters come back, we won't see investors need to sell off one-bedroom condos."

VANCOUVER: 'AN INCREDIBLE YEAR'

Vancouver remains a seller's market, according to the chairwoman of the Real Estate Board of Greater Vancouver. In November, the benchmark price of a Vancouver home hit $1,044,000, up 5.8 per cent from November 2019. The number of sales passed 3,000 for the first time since 2015, which marked the second-best November in the last 10 years.

In one word, 2020 has been "incredible," according to Vancouver agent Mark Wiens.

"Except for April and May, we've seen huge year-over-year increases in the number of sales each month," Wiens said.

For 2021, Wiens said he expects to see the prices of houses continue to rise at high levels, with all the time spent at home this winter giving people more time to reconsider their living situations.

"There is momentum going on and it's not going break up any time soon," he said.

Vancouver's housing market has long been supported by foreign buyers. When COVID-19 arrived and the border shut down, there were concerns that the housing market could be rattled.

Simply put, that didn't happen, Wiens said.

"People believed the market was solely fuelled by foreign buyers, that things would collapse because of travel restrictions ... it hasn't changed anything at all," he said.

Similar to Toronto, Vancouver's downtown condo market has taken a hit, with a three-per-cent decrease year over year in prices.

Wiens said that presents an opportunity for buyers.

"What I'm telling all my buyers is to buy downtown immediately, if you've considering it," he said.

"If you think about the downtown market, what makes it great is the lifestyle, restaurants, bars clubs, that stuff is shut down and it's going to come back and it's going to come back hard."

While the market for houses will likely remain competitive in early 2021, the first few months of the year could be the time to find a deal for downtown condos, Wiens said.

"So you'll still be looking at a discount if you buy downtown in March 2021, I believe," Wiens said.

As for a price collapse, Wiens agrees that 2021 isn't the year, pointing to the high demand.

"A bubble burst is not imminent. It's just not going to happen. It's really not."

CALGARY: 'A DOUBLE WHAMMY'

It's a less rosy picture in Calgary. The pandemic arrived at a time when the city was still grappling with the repercussions of the struggling oil sector. Year-to-date sales were down nearly six per cent in October, despite a jump in sales that month.

Calgary-based agent Justin Havre pointed out that the average price for detached homes is flat in Calgary, at 0.74 per cent higher than in 2019. Fewer houses are being listed, with inventory down about 12 per cent.

The reason Calgary is facing challenges has a lot to do with the oil industry, Havre said.

"We experienced a bit of a double whammy because we're very reliant on the energy sector here in Calgary, and we've been in a downturn since 2014, 2015 when oil prices collapsed. And so when they collapsed again, we were like, 'Come on.'"

Based on economic indicators, such as Alberta having the second-highest unemployment rate in the country, Havre said he's surprised the market is doing as well as it is.

"It's very interesting that we're seeing the activity that we're seeing, and we're pleasantly surprised," he said.

The biggest drop in prices has been seen in the downtown condo market and luxury real estate over $1 million, Havre said. In one case, a house that sold for $11 million a few years ago sold in 2020 for $6 million -- a staggering drop that Havre said suggests luxury buyers are simply not interested in making a move.

Looking ahead, he expects 2021 will be another tough for Calgary, with more struggling homeowners facing foreclosure in the first half of the year.

"The writing is on the wall with 21 per cent of mortgages being deferred. Many of those people deferred them because of loss of jobs," he said. "If they haven't been able to find employment, and then they haven't been able to sell their property, foreclosure may be the unfortunate circumstance for some people."

As for opportunities to buy, Havre echoed the sentiment that condos in the downtown core will likely see reduced prices for a little while.

"There will be some great opportunities for buyers in the downtown area," he said. "But the pandemic has really made people think long and hard about what it's like to live in apartment buildings. Do they feel comfortable living in such high-density environments when we are still in a pandemic?"

MONTREAL: VACCINE COULD COOL PRICES

Montreal saw a major jump among all property types in 2020, with the city seeing a 32-per-cent leap in residential sales in November 2020 compared to November 2019. Median prices also jumped, with single-family homes up 17 per cent and condos up 14 per cent.

A limited supply of houses on the market helped fuel that price rally, with more buyers desperate for extra space competing for fewer properties, according to Montreal-based real estate agent Georges Bardagi.

The pandemic is also pushing people outside city centres, he said.

"So they say, 'Why pay $500,000 for a 500-square-foot condo when for the same price I can have a pool, a basement office, and I don't have to commute to the city anymore?'" he said.

Montreal's condo market is a bit of an outlier, Bardagi said, compared to cites like Toronto and Vancouver. Prices in Montreal haven't seen the same drop in price because Montreal simply doesn't have the same number of condos.

"It's still very much a growing market," he said. "The demand for condos downtown has slowed down like everywhere else, but I think the effect is probably smaller in Montreal."

While the emergence of the pandemic was expected to knock down housing prices, Bardagi suggested that, now, the opposite is true: as vaccines are introduced and the economy returns to normal, he suspects more people will feel comfortable listing their houses. With more properties on the market, housing prices should stabilize, he says.

"We expect Q1 and Q2 to be more of the same until a vaccine comes in and we come back to a somewhat more regular situation, which will probably be in the summer or next fall," he said.

One factor that could make a major difference is when Canada decides to reopen the borders. Bardagi said he anticipates a surge of foreign buyers who've been waiting in the wings will flood the market.

"If that happens in the second half of 2021 or the first half of 2022, it'll be a game changer," he said. "There will be planes full of people who want to move here and buy here."

Bardagi said it can sometimes be easy to forget how attractive life in Canada can be to outsiders, and that a new wave of international buyers could throw gasoline on an already burning real estate market.

"Besides winter and road construction, it's a great place to live."

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What to expect for Canadian real estate in 2021

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TORONTO -- If you've been sitting on the sidelines of the real estate market with a chunk of savings hoping for house prices to plummet, 2021 probably won't be your year, Canadian real estate market experts say. The COVID-19 pandemic didn't devastate Canada's hottest housing markets the way some forecasters predicted.

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Video #1 - How Does Inflation Affect a Mortgage?

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Video #1 - How Does Inflation Affect a Mortgage?

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This video contains a quick overview of the impact of inflation on mortgage payments. He discusses the interactions between inflation and income, as well as discusses assumptions that are important to abandon when considering how to best make mortgage payment during inflation.

I chose this video for its brief and comprehensible take on the effects of inflation on mortgage payments and how these effects vary for different individuals. He mentions that wage increases do not always align with inflation. This means that even if you do receive a raise, if it does not match the rate of inflation, you will still be putting the same percentage of your income away towards your mortgage payment.

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Video #2 - The Impact of Inflation on Real Estate

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Video #2 - The Impact of Inflation on Real Estate

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This video begins looks at inflation in depth before going on to explain the impact of inflation on consumers. The speaker discusses the impact of inflation on home loans and what it means for borrowers.

I chose this video because the speaker gives advice on how to make smart choices with your money during inflation. He speaks specifically about fixed rate debt and how despite the fact that the amount owed for a mortgage stays the same, inflation actually benefits borrowers. This is because the debt they are obligated to pay is now being paid for with devalued dollars and this enables people to actually save because they are not losing as much purchasing power.

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Website #2 - Vancouver's Housing Market is Stabilizing After a Policy-Driven Slump

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Website #2 - Vancouver's Housing Market is Stabilizing After a Policy-Driven Slump

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This BNN Bloomberg article discusses the slow stabilization of the Vancouver housing market. It goes further to discuss how Vancouver went from one of the world's most booming real estate markets to being in a slump, as well as the impact of government policies on housing prices.

I chose this article for its focus on the impact of government policies on housing prices. It paraphrases the International Monetary Fund as saying that often the outcome of policies designed to help consumers by allowing them to borrow more is increased housing prices.

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Vancouver home sales rebounded 46 per cent in September in a sign that Canada's most expensive home market may be finding its feet following a policy-driven downturn.

It was the third consecutive month that the number of properties sold was up from the same period last year. Prices, however, continue to slip: the benchmark home price fell 7.3 per cent in September compared with the same month last year, according to the Real Estate Board of Greater Vancouver.

Vancouver, once one of the world's hottest real estate markets, has been reeling under a slew of government policies introduced since 2016 to tame years of relentless growth that made the city the most unaffordable on the continent.

Both the Liberal and Conservative parties are promising to make home buying more affordable in the current federal election campaign. Prime Minister Justin Trudeau is pledging to boost the cap on homes eligible for a 10 per cent government-equity stake to almost $800,000 in costly markets like Vancouver and Toronto while the Conservatives plan to extend mortgage amortizations and ease qualifications.

The International Monetary Fund said in a blog post Wednesday that policies designed to help buyers enter the housing market by allowing them to borrow more tend to ultimately boost property prices and fail to improve affordability.

"Well-meaning policies that aim to improve housing affordability by increasing households' capacity to borrow may unintentionally raise house prices-ultimately resulting in homebuyers having to borrow more and leading to higher household debt," it said. "Why? Because housing supply is fixed in the short term."

To address housing affordability, Canadian policy makers need a more comprehensive policy that addresses supply, such as making the approval process speedier and more transparent and constructing more rental-only housing, the IMF said.

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Vancouver's housing market is stabilizing after a policy-driven slump - BNN Bloomberg

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Vancouver home sales rebounded 46 per cent in September in a sign that Canada's most expensive home market may be finding its feet following a policy-driven downturn. It was the third consecutive month that the number of properties sold was up from the same period last year.

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Video #3 - Current Mortgage Rates Canada - March 2021 Mortgage Update

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Video #3 - Current Mortgage Rates Canada - March 2021 Mortgage Update

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This video provides a recent look at the mortgage rates in Canada (as on March 2021). The speaker discusses recent drops in variable rate mortgages and raises in fixed rate mortgages. This video does a great job at illustrating the dynamic nature of mortgage rates

I chose this video because the speaker gives an overview of the rises and falls in variable and fixed mortgages rates in Canada. One interesting thing he mentions is that the rise in fixed rate mortgages is heavily connected to the increase in bond yields.

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Current Mortgage Rates Canada - March 2021 Mortgage Update

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Video #4 - Changes coming to the housing market

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Video #4 - Changes coming to the housing market

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This CityNews Toronto video clip briefly discusses developments in the Canadian housing market post-pandemic. It discusses how despite Canadian mortgage rates being extremely low in the past 12 months, they are beginning to increase. The also reporter mentions that TD Bank and National Bank are two banks that have already risen their mortgage rates.

I chose this video because the reporter mentions how experts believe that despite the effects of the pandemic and rising mortgage rates, the housing market is not likely to cool. They add that this has caused the Bank of Canada to be concerned over the state of the current housing market.

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Website #3 - Montreal housing market posts largest price increase in nine years

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Website #3 - Montreal housing market posts largest price increase in nine years

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This article from the Montreal Gazette discusses the large growth in Montreal housing prices, as well as a few of the contributing factors for this growth.

I chose this article because it highlights how rapidly housing markets can increase. The article cites a statement from Royal LePage that the Greater Montreal area's aggregate home prices have increased by 6.3 percent in the fourth quarter.

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Aggregate home prices in the Greater Montreal area rose 6.3 per cent in the fourth quarter of 2019, real-estate company Royal LePage said.

Trees don't grow to the sky, but maybe Montreal real-estate prices will.

Aggregate home prices in the Greater Montreal area rose 6.3 per cent in the fourth quarter to a median of $433,933, the biggest year-over-year percentage increase since 2010, real-estate company Royal LePage said Thursday in a statement. The latest jump means that Montreal-area prices have now increased by more than five per cent for three straight years, the firm said.

The trend looks set to continue this year, with Royal LePage last month forecasting a 5.5-per-cent median price increase for Montreal in 2020. Limited supply, low interest rates, a booming local economy and a steady influx of foreign and Canadian buyers are all driving up prices.

"All the elements in the economy are there to stoke consumer confidence, which translates into strong demand for real estate," Georges Gaucher, who runs the Royal LePage Village brokerage agency in Monkland Village, said in a telephone interview. "The problem is that there are few properties on the market, which puts upward pressure on prices. As things stand now, we don't see any factors that could cause a sudden fall in prices in 2020."

Fourth-quarter price growth was the steepest in the Montreal East region, with an 8.7-per-cent increase, Royal LePage said. Two-storey home prices in the area rose 12 per cent to almost $600,000.

Median prices on the South Shore advanced 7.4 per cent, while those in Montreal Centre gained 7.3 per cent, Royal LePage also said.

Royal LePage's Montreal East region includes such neighbourhoods as Hochelaga-Maisonneuve, Plateau Mont-Royal, Rosemont and Villeray. The firm defines Montreal Centre as including downtown, Griffintown and Point-St-Charles.

1. Bidding wars, multiple offers 'the norm' in Montreal real estate market

2. Montreal real estate market fever still burning strong in November

"The east end has always been a bit of a laggard in terms of property prices, but we're seeing real vigour now," Gaucher said. "There's very little inventory in the western neighbourhoods, so buyers increasingly are turning toward the east end and the suburbs."

Two-storey homes posted the fastest growth of all properties combined, climbing 7.2 per cent in the fourth quarter to a median of $548,374, the data show. Bungalows rose 5.9 per cent to $336,981, while condominiums advanced 4.4 per cent to $338,148.

Aggregate home prices in Montreal - a figure that reflects a weighted average of all property types - are now up 26 per cent compared with the end of 2010.

Even so, Montreal has a ways to go before catching up with other Canadian cities. Aggregate home prices for all of Canada were $648,544 in the fourth quarter - about 50 per cent higher than in Greater Montreal.
ftomesco@postmedia.com

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Montreal housing market posts largest price increase in nine years

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Aggregate home prices in the Greater Montreal area rose 6.3 per cent in the fourth quarter of 2019, real-estate company Royal LePage said. Trees don't grow to the sky, but maybe Montreal real-estate prices will.

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Website #4 - Toronto home prices projected to go up 6%: Report

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Website #4 - Toronto home prices projected to go up 6%: Report

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This 2019 Toronto Sun article expands on a ReMax report which states that Toronto housing prices are predicted to increase by 6% in 2020. The article attributes this growth to increased demand for detached homes, improved employment rates, and economic growth.

I chose this article because it highlights that simple economic factors such as demand can play a significant role in housing prices. This article states that one source for this increased demand is the high concentration of immigrants in Toronto.

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Housing prices in Toronto are projected to increase by 6% next year, according to a report released by real estate company ReMax.

According to RE/MAX's 2020 Housing Market Outlook Report, the trend of a strong housing market will continue. It's a trend that definitely favours property sellers.

The report noted the average sale price of residential properties in 2019 was $880,841. Next year, the amount is expected to increase to $933,691.

"We really saw some momentum in the second half of this year seeing sales trends going up strongly," said Jason Mercer, Chief Market Analyst for the Toronto Real Estate Board.

"On the price side, we've also seen market conditions tighten up with sales representing a higher share of listings on the market," he said. "There's a competition with would-be buyers and that tends to exert upward pressure on prices, as well."

The report noted the 6% increase is a result of demand in the detached home market, growth in the economy and better employment rates.

ReMax predicts that move-up buyers - those looking to upgrade their current living situation - as those who will drive up demand in 2020.

Mercer said a steady rate in population growth also drives growth in demand for housing ownership - whether it's in the new or re-sell market.

"There is an acceleration in population growth and a lot of that is on the back of immigration," Mercer said. "They're attracted to Canada and a lot of people settle in the GTA because we offer a lot of different job opportunities across different sectors. We also have cultural diversity to go along with that.

"As the population continues to grow, a lot of them choose to purchase housing, whether it be single-detached homes or condos."

1. BRAUN: Greed rules as Toronto house prices rise

2. Downsizing can be beautiful

3. BILD: It's time to update the mortgage stress test

The ReMax report predicts west Scarborough and Durham Region will be areas of high demand next year thanks to the affordability of properties, closeness to public transit and easy access to jobs in downtown Toronto.

In 2019, 76,413 properties were purchased in Toronto, according to the report. That's an increase of 12% from the previous year when buyers snapped up 68,064 properties.

The sale of high-end luxury homes also experienced an 8.5% increase in 2019 and the growth is expected to continue next year.

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Toronto home prices projected to go up 6%: Report

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Housing prices in Toronto are projected to increase by 6% next year, according to a report released by real estate company ReMax. According to RE/MAX's 2020 Housing Market Outlook Report, the trend of a strong housing market will continue. It's a trend that definitely favours property sellers.

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1) What did you learn about your topic that surprised you the most?

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1) What did you learn about your topic that surprised you the most?

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Many of the videos I encountered discusses the significant impact of bond yields on mortgage rates. I previously understood the impact of bonds on the economy, but did not know they could affect mortgage rates as much as they do.

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2) Provide a real-life example of how this topic is relevant or interesting for you.

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2) Provide a real-life example of how this topic is relevant or interesting for you.

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This topic is relevant to me because I am trying to establish savings for a mortgage some time in the future. Understanding the various economic factors that influence housing market prices and mortgage rates will help me to make the smartest decisions with my finances.

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3) If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?

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3) If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?

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The most important piece of information I would pass on to a family member or friend is the complexity of the housing market and mortgage rates. Many people made assumptions about the housing market when the pandemic hit and how it would likely suffer, however, may articles state that housing markets are still hot and thriving. Therefore, I would encourage others to conduct proper research when home buying and mortgage shopping.

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This graph from Trading Economics shows the rise in Canadian home prices from April 2020 to January 2021.

This graph does an excellent job at communicating the rapid increase in Canadian home prices that has occurred in just less than one year.

Source: https://tradingeconomics.com/canada/housing-index

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This graph illustrates the CPI inflation data from 1960 to 2021.

I chose this image as viewing the inflation rates in Canada in relation to the shifts in Canadian housing prices (as can be seen in the previous post) allows us to see that inflation is not the sole dictator of price shifts in the housing market.

Source: https://www.macrotrends.net/countries/CAN/canada/inflation-rate-cpi