In our profession, we tend to get this question a lot. The housing market is a very tricky machine and it is very hard to predict the path it will take in the future. In order to try to understand the direction of the housing market, perhaps its worth considering some underlying factors.
It is a reasonable assumption, that most home buyers make housing purchases with the assistance of a mortgage. And since most mortgages are held by lending institutions, they are a major part of the discussion when trying to understand the housing market.
In the recent years, house prices have climbed significantly in the Brampton, Mississauga and pretty much everywhere in the GTA. Although we cannot explain the demand and the reasons why buyers in the housing market are more willing than ever to enter the market at higher prices year over year, we can speak to the vehicle that helped make that happen. Under the old mortgage rules, the amount of income needed to get approved for a specific sum of a mortgage loan, was less than it is under the new guidelines. For example, if an annual salary of $100,000 could afford a mortgage of roughly $500,000.00 in prior years, this is now down to roughly $425,000.00 today (approximately).
These recent rule changes have tackled one’s financial ability to purchase a home, even if their desire to buy the home at a certain price is unchanged. In other words, the demand may still be there, but the ability to purchase a home at any given price point is forced by this downward pressure. So, if a motivated buyer is willing to purchase a home for the asking price of the seller, they would first need to assess their ability to do so under these new rules. If the seller is unable to find a buyer who can purchase their home due to financial difficulties under these new rules, then the seller would likely need to reduce their price. This was the ultimate goal of the mortgage qualifying rule changes…to cool the housing market and the unsustainable growth it was experiencing in previous years.
Today, it seems that the housing market has cooled and stabilized and any crash that was experienced/perceived, would only be for those that purchased during the peak period of early 2017. This is because, their home today may be valued less than what they had purchase it for during that time.