Residential home sales activity recorded through the MLS® system for The Niagara Association of REALTORS® (NAR) totaled 473 units in December 2021, compared to 558 units in December 2020. In December, the Niagara Association of REALTORS® listed 403 residential properties compared to 393 in December 2020. The average days it took to sell a home in December 2021 was 22 days, compared to 30 days in December 2020.

LOOKING AHEAD to 2022

2021 not only met our expectations, it surpassed them with record after record along the way. The question then becomes; will the housing market in 2022 continue at the same pace or is there a possibility of a cooling-off and a downturn?

There are four adjectives which I think are important to understand and use when speaking about the Real Estate market: Accelerate, Decelerate, Appreciation and Depreciation

These are much better words to use when describing our market than what our clients often read or hear in the media, “we are in a bubble, and it is only time before it bursts” nothing could be the farthest from reality.

Three reasons to be optimistic and confident that 2022 will be an exceptional year:

• Interest Rates are projected to stay low – one of the biggest influences for this year’s booming real estate market was the record-low mortgage rates. Most economic projections suggest that by Q2 and Q3 we will see interest rates rise but they will remain historically low. The projected increase by year-end 2022 ranges between 3.30 to 3.37 percent and while this will alter the buying power especially of the entry level Buyer, the Government’s Stress Test of 5.25% ensures that Buyers, especially first-time Buyers, will not over-extend themselves.
• Nationally Home Sales are projected to Decelerate by 8.6% – the pace of the market will be tempered by supply, higher prices, and higher interest rates nationally but because Niagara Region continues to be attractive to GTA centric Buyers there is reason to believe that Niagara may “buck the trend” and that the number of sales will exceed 2021’s record-breaking pace.
• Home Prices will continue to Appreciate – a simple case of supply and demand; increased Buyer demand and low inventory means increased prices, nationally, prices are projected to increase by 7.5 to 7.8 percent with the Niagara Region likely trending higher at 10%.

THE ELEPHANT IN THE ROOM

Well, there may be three . . .

The number of months of listing inventory has only slipped below 2 months four times in history, twice in 2021 alone and with the high demand, it should not be a surprise that prices rose by more than 34% when compared to 2020 and while the expectation is that we will not experience the same extreme in 2022, the same conditions which created the 2021 acceleration will not be any different just because the calendar year has changed.

COVID has delayed plans for many homeowners looking to move the next stage of their life. Market seasonality has been thrown out of the window and recent surveys suggest that there are a significant number of people preparing to enter the market this Winter and we may see more new listings through Q1 than at any other time in 2022.

Sales are forecasted to moderate somewhat in 2022 because of tight supply, higher prices, and higher interest rates potentially heralding a return to a pre-pandemic pace.

The Office of the Superintendent of Financial Institutions governs what people are allowed to borrow and it will be re-evaluating the level of the Stress Test. If the percentage is increased, it could cause a significant impact on a Buyer’s borrowing ability.

Yet another unknown is which of the housing promises made during the recent Federal election will become policy and how those enacted will impact our market.

FINAL THOUGHTS

2021 has been an exciting year for the real estate community with record after record in volume of transactions and new highs in pricing. There will likely be a lot of speculation about the well-being of the market and what might happen in the next while; but assuming the market indicators and the crystal ball are correct, 2022 is going to be another busy year for us here in Niagara Region.

 

Doug Rempel, President of The Niagara Association of REALTORS®.

116 Niagara Street, St. Catharines, ON, L2R 4L4 Tel: (905) 684-9459

MEDIA RELEASE Jan. 3, 2022