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Average monthly rents in the Greater Toronto Area surged 21 per cent on a year-over-year basis in August, according to the latest rent report by Rentals.ca and Bullpen Research & Consulting.

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Rent for all property types was up $430 to $2,528 from $2,098 in August 2021, further surpassing the pre-pandemic high of $2,461 recorded in 2019. The average is also now 28.2 per cent above the COVID low of $1,972 per month set last April.

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August rent was also up on a monthly basis, rising 2.7 per cent since July. Rental rates in the GTA have now risen by two per cent or more for the past four consecutive months, following a rise of 5.7 per cent in May, which was a multi-year high.

Rent inflation can largely be chalked up to the rising interest rate environment, “which has made owning a home more expensive and resulted in a swift decline in prices in the resale market,” the report said.

With the Bank of Canada expected to continue to hike interest rates, demand for rental properties could persist.

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In the Toronto market, apartment rents jumped 20.1 per cent. The area with the highest average across all property types was the Bay Street Corridor, at $2,779.

So far in the third quarter, average rents in Toronto have increased 13.8 per cent from the second quarter, ahead of North York (10.1 per cent), Scarborough (9.4 per cent), Etobicoke (5.7 per cent) and Mississauga (5.1 per cent).

  1. A person walking by a row of houses in Toronto.

    Investors are trying to fill the multifamily rental housing gap and that’s not a bad thing

  2. The growth in renter households has more than doubled the growth of owner households, Statistics Canada says.

    Canada’s homeownership rate is declining while renting is on the rise

  3. A for sale sign is displayed outside a home in Toronto.

    Canada’s home sales and prices are falling. Has something changed in the housing market?

“From May to August, the Greater Toronto Area rental market has experienced four significant monthly rent increases, as tenant demand has skyrocketed due to interest rate changes, a resale house price correction and the typical seasonal fall uptick,” said Ben Myers, president of Bullpen.

He noted as well that listings on TorontoRentals.com hit a multi-year high in August, doubling over the past year and up 166 per cent from August 2020.

“Prospective tenants are seeing limited vacancies due to an extreme imbalance between supply and demand, with year-to-date new housing completions down 22 per cent annually in the metro area per CMHC,” he said.

• Email: shcampbell@postmedia.com

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If large financial firms and institutions are prevented from investing in multifamily rental housing, who else will pick up the tab?

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The growing role of financial firms and institutional investors in multifamily rental housing has been criticized for eroding affordability in Canada and elsewhere, leading many to ask governments to limit or restrict their abilities to buy properties.

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A new report by the Office of the Federal Housing Advocate that explores this “financialization” of housing and its impact on lower-income racialized communities in Toronto is critical of the “entry of financial firms and institutional investors seeking to convert multifamily real estate into a financial vehicle to generate wealth.”

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The report suggests institutional investors have contributed to increasing rents, the eviction of non-paying tenants and forcing paying tenants to leave for renovations that housing advocates consider a cover that landlords use so that they can find higher-paying tenants.

Securing shelter for the most vulnerable in society is critical for social justice and the collective welfare of all. Providing affordable shelter for low-income households and social housing for those who cannot bear the cheapest market rent is the state’s and society’s collective commitment.

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But providing multifamily housing is a capital-intensive enterprise. Constructing a new, purpose-built rental housing structure costs millions of dollars. Its maintenance and ownership over extended periods require significant investments.

All of which begs a few questions: if large investors are prevented from investing in multifamily rental housing, who is going to pick up the tab? The share of multifamily housing owned by institutional investors has increased, but has this increase automatically led to adverse housing outcomes for all? Without the huge investments needed to build new purpose-built rental housing, would there have been the recent resurgence in rental supply?

Recent Statistics Canada data presents a relatively optimistic picture for affordable housing. The number of households in 2021 experiencing core housing needs — that is, those facing affordability challenges, crowding or living in structurally compromised dwellings — has declined since 2016, according to 2021 census data. Also, a noticeably smaller share of the population experienced affordability challenges in 2021 than in 2016.

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Lowest-income earners reported the most significant improvement in housing outcomes, the data shows. Statistics Canada speculates that housing outcomes of lower-income households improved, partly because of government support programs during the pandemic.

Despite the increased investments in purpose-built rental housing by institutional investors, the experience during the pandemic suggests government programs and safety nets can improve housing outcomes irrespective of the size and structure of the landlords.

Food is as essential as housing for well-being, so multifamily purpose-built rental housing is a business similar to grocery stores. But you don’t see campaigns to convince large retailers to fix the price of a loaf of bread or carton of milk, so why target private landlords to provide non-market housing to those who cannot afford market rents?

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  1. Since price movements with larger deviations from the long-term trend influence consumer sentiments more, the idea that buyers' remorse is more pronounced now is taking root.

    Falling housing prices may not be leading to widespread buyers’ remorse the way you think

  2. None

    There is more at risk in Canada’s housing downturn than just prices

  3. None

    Canada’s housing market isn’t melting down as you’ve been led to think

Many provincial governments have implemented various versions of rent controls over the years while also offloading the provision of affordable and social housing responsibilities to private landlords.

No society or economy can function if lower-income wage earners cannot afford shelter. With rising housing prices and rents and extremely low rental vacancy rates, many families cannot meet their shelter needs without compromising spending on other essentials, such as food and clothing. Many are priced out of their cities and forced to commute unacceptably long distances on inconvenient transport systems. This must change.

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At the same time, we must also help governments realize that forcing private landlords to bear the costs of affordable rental housing will not solve the problem. Just as governments don’t force ceiling prices on home sellers, they should refrain from putting arbitrary restrictions on landlords.

The way forward is for the government to facilitate the increased supply of both market and non-market rental housing. The three tiers of governments are endowed with the resources to be part of the solution by making Crown land in and near urban centres available for affordable and, more importantly, social housing, reducing or eliminating development charges for those who build affordable housing, and streamlining the approval process so that the private sector can expedite the supply of affordable housing.

Blocking investment in rental construction or subsequent maintenance and naïvely hoping that the governments will pick up the tab will only worsen matters for struggling families.

Murtaza Haider is a professor of real estate management and director of the Urban Analytics Institute at Toronto Metropolitan University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.

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Canada’s homeownership rate has declined to 66.5% after peaking in 2011 at 69% as people struggle to get off sidelines

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Canada’s homeownership rate has declined to 66.5 per cent after peaking in 2011 at 69 per cent, according to a Statistics Canada release Wednesday, with the agency acknowledging that people are having a hard time getting off the sidelines.

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“Trying to figure out the right time to buy is a difficult decision that can leave Canadians wondering how long they want to hold out on entering the real estate market — or whether they even want to,” the agency said in its report.

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While the slowdown in home starts and sales continues, home prices had previously increased to such levels that even a major correction may not be enough for most Canadians to enter the market given current interest rates.

Adults under the age of 75, especially young millennials aged 25 to 29 years, were less likely to own their home in 2021 than a decade earlier, according to the Statistics Canada report, Portrait of Housing in Canada 2011-2021.

Meanwhile, the growth in renter households has more than doubled the growth of owner households. The agency said renter households grew 21 per cent between 2011 and 2021 compared to the homeownership growth rate of 8.4 per cent.

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Housing is still at its most unaffordable level in 30 years — since the height of the housing bubble in the 1980s and the 1990s — according to recent reports by the National Bank of Canada and Royal Bank of Canada.

Despite the higher costs, Statistics Canada said the number of households that spent more than 30 per cent of their income on housing declined to 20.9 per cent in 2021 from 24 per cent in 2016.

The rate of unaffordable housing for renters fell to 33.2 per cent from 40 per cent during the same timeframe, with most of the decline occurring among renters earning below the median renter household income (68.4 per cent in 2016, compared with 56 per cent in 2021).

According to Statistics Canada, Canadians found housing more affordable in 2021 because they had higher incomes, in large part due to pandemic support programs.

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Despite broad-based increases in wages and salaries, however, income inequality increased in the first quarter of 2022 compared to the same quarter a year earlier, according to the latest Distributions of Household Economic Accounts estimates.

City dwellers faced the highest unaffordable housing rates. The percentage of renters spending more than 30 per cent of their income on shelter costs in 2021 was above the national average in 33 of 42 large urban downtowns.

More than one-third of dwellings built from 2011 to 2021 were occupied and primarily maintained by millennial renters or owners in 2021, the largest share of any generation. Millennials also represented the largest share of condominium occupants (30.2 per cent).

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  1. Teranet–National Bank National Composite House Price posted its largest drop in its history Tuesday.

    Teranet home price index posts biggest drop in its history

  2. Since price movements with larger deviations from the long-term trend influence consumer sentiments more, the idea that buyers' remorse is more pronounced now is taking root.

    Falling housing prices may not be leading to widespread buyers’ remorse the way you think

  3. Homes under construction in a development in Langford, B.C.

    Housing inventory may reach crisis point in major Canadian centres, report finds

But Canadian housing starts have declined since Statistics Canada collected the data for its report. The decline in August was 2.8 per cent, to 267,443 units, on a seasonally adjusted annual basis, from 275,158 units in July, according to data released by Canada Mortgage and Housing Corp. The decline comes amid widespread concern about a shortage of housing supply in the country.

Residents of Atlantic Canada have historically been the most likely to be homeowners, and this remained true in 2021 even though rates declined. Indeed, the largest declines in the country were posted in Prince Edward Island, down to 68.8 per cent from 73.4 per cent, and Nova Scotia, down to 66.8 per cent from 70.8 per cent.

British Columbia had the third-largest decline in homeownership (66.8 per cent from 70 per cent), followed by Ontario, which was down to 68.4 per cent from 71.4 per cent.

Quebec had the smallest drop (to 59.9 per cent from 61.2 per cent), but still had the lowest homeownership rate in Canada, as has historically been the case. The Northwest Territories had the only increase.

• Email: shcampbell@postmedia.com

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Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

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Home prices so high that even a major correction may not be enough for most Canadians to enter the market as interest rates rise

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Canada’s homeownership rate has declined to 66.5 per cent after peaking in 2011 at 69 per cent, according to a Statistics Canada release Wednesday, with the agency acknowledging that people are having a hard time getting off the sidelines.

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“Trying to figure out the right time to buy is a difficult decision that can leave Canadians wondering how long they want to hold out on entering the real estate market — or whether they even want to,” the agency said in its report.

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While the slowdown in home starts and sales continues, home prices had previously increased to such levels that even a major correction may not be enough for most Canadians to enter the market given current interest rates.

Adults under the age of 75, especially young millennials aged 25 to 29 years, were less likely to own their home in 2021 than a decade earlier, according to the Statistics Canada report, Portrait of Housing in Canada 2011-2021.

Meanwhile, the growth in renter households has more than doubled the growth of owner households. The agency said renter households grew 21 per cent between 2011 and 2021 compared to the homeownership growth rate of 8.4 per cent.

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Housing is still at its most unaffordable level in 30 years — since the height of the housing bubble in the 1980s and the 1990s — according to recent reports by the National Bank of Canada and Royal Bank of Canada.

Nevertheless, Statistics Canada said the number of households that spent more than 30 per cent of their income on housing declined to 20.9 per cent in 2021 from 24 per cent in 2016.

The rate of unaffordable housing for renters fell to 33.2 per cent from 40 per cent during the same timeframe, with most of the decline occurring among renters earning below the median renter household income (68.4 per cent in 2016, compared with 56 per cent in 2021).

According to Statistics Canada, Canadians found housing more affordable in 2021 because they had higher incomes, in large part due to pandemic support programs.

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Even with the broad-based increases in wages and salaries, income inequality increased in the first quarter of 2022 compared to the same quarter a year earlier, according to the latest Distributions of Household Economic Accounts estimates.

City dwellers faced the highest unaffordable housing rates. The percentage of renters spending more than 30 per cent of their income on shelter costs in 2021 was above the national average in 33 of 42 large urban downtowns.

“We’re seeing the results of people dropping out of the homeownership game, and they’re moving into rental and there’s just not enough affordable rentals being built,” Cherise Burda, executive director of City Building TMU at Toronto Metropolitan University, said of the current market.

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“We’re doing something wrong. With all this effort and energy and resources from the national housing strategy, we’re not generating more affordable units. We need to have a really targeted focus for the next several years on building affordable rental because that’s where people are dropping down in the housing ladder, and that’s where we need effort and funding and resources the most.”

More than one-third of dwellings built from 2011 to 2021 were occupied and primarily maintained by millennial renters or owners in 2021, the largest share of any generation. Millennials also represented the largest share of condominium occupants (30.2 per cent).

  1. Teranet–National Bank National Composite House Price posted its largest drop in its history Tuesday.

    Teranet home price index posts biggest drop in its history

  2. Since price movements with larger deviations from the long-term trend influence consumer sentiments more, the idea that buyers' remorse is more pronounced now is taking root.

    Falling housing prices may not be leading to widespread buyers’ remorse the way you think

  3. Homes under construction in a development in Langford, B.C.

    Housing inventory may reach crisis point in major Canadian centres, report finds

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But Canadian housing starts have declined since Statistics Canada collected the data for its report. The decline in August was 2.8 per cent, to 267,443 units, on a seasonally adjusted annual basis, from 275,158 units in July, according to data released by Canada Mortgage and Housing Corp. The decline comes amid widespread concern about a shortage of housing supply in the country.

Residents of Atlantic Canada have historically been the most likely to be homeowners, and this remained true in 2021 even though rates declined. Indeed, the largest declines in the country were posted in Prince Edward Island, down to 68.8 per cent from 73.4 per cent, and Nova Scotia, down to 66.8 per cent from 70.8 per cent.

British Columbia had the third-largest decline in homeownership (66.8 per cent from 70 per cent), followed by Ontario, which was down to 68.4 per cent from 71.4 per cent.

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Quebec had the smallest drop (to 59.9 per cent from 61.2 per cent), but still had the lowest homeownership rate in Canada, as has historically been the case. The Northwest Territories had the only increase.

Overall, the agency’s release indicates there is more pressure on the rental market regardless of increased household incomes, leaving the housing industry worried that both rental and homeowner prices are growing out of reach for many.

“We are going to push people out of our cities, out of our urban areas, even our suburban areas because people can’t afford to live there,” Burda said. “It’s really critical, if we want to maintain a workforce, to keep our cities functioning, to keep our cities welcoming. We need to focus on building more affordable housing.”

• Email: shcampbell@postmedia.com

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Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

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2.4% decline in August largest since index started in 1999

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A Canadian home price index posted the largest drop in its history Tuesday as rising borrowing rates put a damper on the country’s housing market.

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The Teranet–National Bank National Composite House Price Index fell 2.4 per cent from July to August, on an unadjusted basis. It was the largest monthly decline recorded since the index started in 1999. On an adjusted basis, the index fell 2.1 per cent, month over month, also a record and the fourth decline in a row.

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Home prices fell in nine of the 11 metropolitan areas included in the index with the largest declines recorded in Hamilton, Ont. (-5.4 per cent), Ottawa-Gatineau (-3.8 per cent), Halifax (-3.6 per cent) and Toronto (-3.5 per cent).

Calgary and Edmonton bucked the trend with month over month gains of 1.3% and 2.8%, respectively.

For cities not included in the index, Teranet observed the largest price declines in Saint John, N.B. (-7.8 per cent), Brantford, Ont. (-7.7 per cent), Barrie, Ont. (-6.7 per cent) and Kitchener (-6.2 per cent). Lethbridge, like its Alberta brethren, was up 2.6 per cent.

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Teranet’s reading echoes early data from other housing sources.

The Canadian Real Estate Association reported last week that the national average home price dropped 3.9 per cent in August from last year to $637,673. Monthly, the national average price, heavily influenced by sales in Greater Vancouver and the Greater Toronto Area, crept up $7,702 over July.

Meanwhile, the Aggregate Composite MLS Home Price Index (HPI) edged down 1.6 per cent on a month-over-month basis in August, not a small decline historically, but smaller than those in June and July.

The Teranet-National Bank index is still higher than a year ago, up 8.9 per cent in August — “the fourth consecutive month of lower growth than the previous month.”

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  1. Housing starts in Canada fell in August, the Canada Mortgage and Housing Corporation reported.

    Housing starts decline almost 3%, amid concerns about supply

  2. A realtor's sign outside a house for sale in Toronto.

    Canada’s average home price down almost 4% from last year

Price increases were recorded in all 11 cities that it tracks. Halifax home prices rose the most with a 15.4 per cent year-over-year increase, followed by Victoria with a 14.8 per cent gain and Calgary with a 13.6 per cent increase.

The 20 other cities tracked by Teranet but not included in the index also experienced price increases year over year.

The index includes the following cities: Calgary, Edmonton, Vancouver, Victoria, Winnipeg, Halifax, Hamilton, Ottawa-Gatineau, Toronto, Montreal, Quebec City.

With a file from Shantaé Campbell, Financial Post

• Email: gmvsuhanic@postmedia.com | Twitter:

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Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

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In an increasingly complex world, the Financial Post should be the first place you look for answers. Our FP Answers initiative puts readers in the driver’s seat: you submit questions and our reporters find answers not just for you, but for all our readers. Today, we answer questions from several of our readers on fixed vs variable mortgages.

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A recent poll suggests a large number of homebuyers who bought at the peak are quite pleased with their purchase

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People who bought homes when prices were peaking earlier this year must be wondering if they made the right decision at the right time now that prices are declining.

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Homebuyers and sellers have long been familiar with remorse. As soon as a transaction is agreed upon in principle — a firm offer — remorse can set in.

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Sellers might believe they were too quick to accept an offer and wonder if there could have been a higher offer had they waited a bit longer. Buyers, meanwhile, are more likely to experience remorse after their offer is accepted, fearing they might have overpaid since why else would the sellers have accepted their offer.

Real estate agents are typically able to convince buyers and sellers that they have made the right decision when housing markets are balanced with moderate increases in prices. But that becomes more difficult when large declines in housing prices are observed over a short period, such as has happened since February.

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The decline in average prices — not adjusted for housing quality, type and size — is more pronounced than the size- and quality-adjusted housing price indexes. But since price movements with larger deviations from the long-term trend influence consumer sentiments more, the idea that buyers’ remorse is more pronounced now is taking root.

In the Greater Toronto Area, average housing prices declined to $1.08 million in August from $1.33 million in February, a decline of more than $250,000, or 19 per cent. Those who purchased homes at the peak of the market must be wondering about the timing of their purchase. Some might even be experiencing remorse, but perhaps not as many as people think.

A recent poll by Zolo Realty interviewed almost 1,200 people who bought a home during the pandemic and found that the large majority of them were quite pleased with their purchase. Indeed, 63 per cent reported “they would still be happy in their home even if the real estate market dropped significantly.”

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Buyers who relocated to a different province were even more likely to be satisfied, which is perhaps driven by the cheaper prices they paid relative to the places they moved from.

But what about the risk-takers who were fast and loose with their buying decisions and waived financing and inspection conditions when they bought homes? A much smaller share of these buyers, 58 per cent, expressed continued satisfaction with their purchase. Put differently, 42 per cent of such buyers may now be having mixed feelings.

Nevertheless, 84 per cent of those who paid over the list price during the pandemic were still pleased with their purchase. They may not necessarily have overpaid, because list prices during the pandemic were deliberately set lower than the price of recent comparable sales to attract buyers and encourage bidding wars.

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Overall, though, the Zolo Realty poll suggests buyers’ remorse is not as widespread as recent blaring headlines suggest.

There are a few reasons why concerns about remorse are exaggerated. First, talk of remorse is mostly anecdotal and based on conversations with a few realtors rather than proper surveys of recent homebuyers.

  1. Housing starts in Canada fell in August, the Canada Mortgage and Housing Corporation reported.

    Housing starts decline almost 3%, amid concerns about supply

  2. A realtor's sign outside a house for sale in Toronto.

    Canada’s average home price down almost 4% from last year

  3. Homes under construction in a development in Langford, B.C.

    Housing inventory may reach crisis point in major Canadian centres, report finds

Also, most buyers bought homes during the pandemic to satisfy a need. The poll showed that 53 per cent of buyers needed more space, 43 per cent were tired of renting, 28 per cent thought buying was a good investment opportunity and 24 per cent felt their previous home configuration did not meet their needs.

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Another reason for the lack of widespread remorse is that most homebuyers know that even with lower housing prices, their mortgage payments could still be higher because of high interest rates.

Consider the following comparison in mortgage payments. With a 20-per-cent down payment and a five-year fixed rate of 2.3 per cent on a 30-year mortgage, the monthly mortgage payment for an average-priced house in the GTA would have been approximately $4,100 in February. With today’s higher rates of 4.3 per cent, an average-priced home, despite being cheaper, now requires $4,300 in mortgage payments. Higher interest rates also mean borrowers will pay much higher interest over the life of the loan.

Buying a house is a long-term decision for most families who intend to live in the same house for a long time. It is not just a financial investment, but an investment in people and places. For those with a long-term horizon, remorse should not be a concern.

Murtaza Haider is a professor of real estate management and director of the Urban Analytics Institute at Toronto Metropolitan University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.

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Canadian housing starts declined 2.8 per cent to 267,443 units on a seasonally adjusted annual (SAAR) basis in August, from a downward-revised 275,158 annualized units in July, according to data released by the  Canada Mortgage and Housing Corporation on Friday. The decline comes amid widespread concern about a shortage of housing supply in the country.

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Urban starts fell three per cent to 246,771 in August with the rate of multi-unit urban starts down four per cent to 187,602. Urban starts of single-detached homes rose one per cent to 59,169 units.

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Despite the monthly decline, the six-month trend in housing starts remained positive, with the annualized moving average ticking up to 267,309 units in August from 264,467 in July.

A decline in single-detached units in Vancouver was offset by higher multi-unit starts. Toronto posted strong increases across the board, while Montreal recorded a large (33 per cent) decline in multi-unit starts, resulting in the overall decline for Canada.

The August decline comes amid concern about a housing shortage in Canada. A recent report from CMHC concluded that the country would need to build 3.5 million new homes by 2030 to improve affordability, yet Canada is averaging only 200,000 to 300,000 new units per year.

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Home sales, meanwhile, edged down just 1% between July and August

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The average price of homes sold in Canada in August fell 3.9 per cent from the same month last year to $637,673 according to new statistics released Thursday by the Canadian Real Estate Association.

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Home sales, meanwhile, edged down just one per cent between July and August, marking this the sixth consecutive — though smallest — month-over-month decline in volumes.

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It was close to an even split between the number of markets where sales were up and those where sales were down. Gains were led by the Greater Toronto Area (GTA) and a large regional mix of other Ontario markets. These were offset by declines in Greater Vancouver, Calgary, Edmonton, Winnipeg and Halifax-Dartmouth.

Despite the decline from last August, the actual (not seasonally adjusted) national average price inched up $7,702 over July. It is heavily influenced by sales in Greater Vancouver and the GTA, two of Canada’s most active and expensive housing markets.

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  1. Homes under construction in a development in Langford, B.C.

    Housing inventory may reach crisis point in major Canadian centres, report finds

  2. None

    There is more at risk in Canada’s housing downturn than just prices

  3. The Bank of Canada's interest rate hike on Sept. 7 will put homeownership further out of reach for more Canadians, say industry insiders.

    Mortgage stress test in focus as rate hikes ratchet up pressure on borrowers

“August saw national sales hold steady month-to-month for the first time since February which, along with a stabilization of demand/supply conditions in many markets, could be an early sign that this year’s sharp adjustment in housing markets across Canada may have mostly run its course,” Jill Oudil, chair of CREA, said in the report. “Some buyers may choose to remain on the sidelines until they see clearer signs of borrowing costs and prices also stabilizing.”

Meanwhile, The Aggregate Composite MLS Home Price Index (HPI) edged down 1.6 per cent on a month-over-month basis in August, not a small decline historically, but smaller than those in June and July. It was still up by 7.1 per cent on a year-over-year basis in August. This was the first single-digit increase in almost two years, as year-over-year comparisons have been winding down at a brisk pace from the near-30 per cent year-over-year gains logged just six months ago.

• Email: shcampbell@postmedia.com

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Early signs that sharp housing correction may have mostly run its course

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The average price of homes sold in Canada in August fell 3.9 per cent from the same month last year to $637,673 according to statistics released Thursday by the Canadian Real Estate Association, which also scaled back its forecast for price gains and sales for the remainder of the year.

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Sales volumes fell by 24.7 per cent on a year-over-year basis, but edged down just one per cent from July to August, making it the smallest of six consecutive month-over-month declines in sales volumes, the group’s data showed.

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It was close to an even split between the number of markets in which month-over-month sales were up and those in which sales were down. Gains were led by the Greater Toronto Area (GTA) and a large regional mix of other Ontario markets. These were offset by declines in Greater Vancouver, Calgary, Edmonton, Winnipeg and Halifax-Dartmouth.

Despite the decline from last August, the actual national average price, which is heavily influenced by sales in Greater Vancouver and the GTA, inched up $7,702 over July.

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While a nearly two per cent gain might be seen as encouraging by some, TD economist Rishi Sondhi wrote in a note to clients that it was mostly fuelled by a strong month in Toronto, where “it would be tough to argue that conditions have reached a turning point.”

“For instance, sales are still 30 per cent below pre-pandemic levels in Toronto, supply/demand balances continue to favour buyers, and benchmark prices declined at a hefty two per cent monthly rate,” Sondhi wrote.

Bank of Montreal economist Robert Kavcic said there appeared to be a window where some buyers could take advantage.

“Sales stabilized especially in the GTA and Ontario. They’re still at very low levels, ones that you would typically see during a recession or at least a downturn. So, I don’t think buyers are coming back in mass,” Kavcic said in an interview.

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“I think, because some buyers have seen house prices come down 10 or 20 per cent where they’re looking and some buyers are still holding mortgage rate pre-approvals from a couple of months ago, before the Bank of Canada really cranked up interest rates. So they have a pretty good window right now to actually buy something.”

Jill Oudil, chair of CREA, said that she believes that overall, buyers are still reluctant, despite some of the recent drops.

“August saw national sales hold steady month-to-month for the first time since February which, along with a stabilization of demand/supply conditions in many markets, could be an early sign that this year’s sharp adjustment in housing markets across Canada may have mostly run its course,” Oudil said in the report. “Some buyers may choose to remain on the sidelines until they see clearer signs of borrowing costs and prices also stabilizing.”

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Meanwhile, the Aggregate Composite MLS Home Price Index (HPI) edged down 1.6 per cent on a month-over-month basis in August, not a small decline historically, but smaller than those in June and July. The HPI was still up by 7.1 per cent on a year-over-year basis in August. This was the first single-digit increase in almost two years, as year-over-year comparisons have been winding down at a brisk pace from the near-30-per-cent year-over-year gains logged just six months ago.

“The bigger picture is that there is still an enormous interest rate shock to absorb,” Kavcic said. He thinks that the price correction is going to be a slow, drawn-out process because there isn’t any forced selling in the market.

“At the same time, if sellers do want to move a unit, buyers just simply can’t qualify for and pay as much as they did six months ago. So if units are going to trade, they’re going to have to be done at lower prices.” Kavcic said.

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CREA also released a report Thursday updating their previous projections of the resale housing market. The updated report forecasts that the national average home price will rise by 4.7 per cent to $720,255 by the end of 2022, down $42,131 from the $762,386 target it set in June .

Some 532,545 properties are forecasted to trade hands via Canadian MLS Systems in 2022 — a decline of 20 per cent from the 2021 annual record and fewer than the 568,288 projected in June. The downward revision was mainly the result of reduced activity in Ontario, along with smaller revisions in B.C., Alberta, and Quebec.

The group also scaled back its forecast for sales into 2023, when it now predicts 520,156 units will change hands, down from 552,403 projected in June.

• Email: shcampbell@postmedia.com

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