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With extended lockdowns, schools and offices shuttered, as well as many of our favourite amenities closed for long stretches due to the COVID-19 pandemic, Canadians have been spending a lot more time at home this past year. This has caused some buyers to reevaluate what they’re looking for in a home, including a desire for additional living space, whether it was in search of a dedicated home workspace or simply a larger backyard.
As provinces and territories continue to roll out vaccines and reopening plans move forward, it’s worth considering if the desire and demand for larger homes will persist as the pandemic recedes, and how the need for roomier residences has impacted markets across the country.
Today, we speak with Keith Stewart, Economist with the Real Estate Board of Greater Vancouver’s economist, and Shaun Cathcart, Director and Senior Economist, Housing Data and Market Analysis at the Canadian Real Estate Association (CREA), who share their thoughts on the future of this trend.
Why did people start buying larger homes in the first place?
Buyers during the COVID-19 pandemic have gone out hunting for bigger homes for a few reasons, including millennials who are starting families to form households of their own, changing home feature needs, and a boost in spending power for some families.
At a basic level, our homes have become much more than a place to eat and sleep since the first round of pandemic-induced lockdowns. Instead, where we live has evolved into a classroom, gym, conference room and all sources of entertainment. By upgrading to a bigger home, buyers are able to gain greater square footage to accommodate more of their needs.
“More space enables you to have those additional functionalities in your space,” explained Cathcart. “Of course, that’s where you have a lot of extra money rattling around to make home everything when so many other things people spend money on, we weren’t doing.”
Since the Bank of Canada made its first round of cuts to its mortgage rate-influencing overnight rate in early March 2020, mortgage rates have been hovering around all-time lows. Stewart says plunging interest rates have been a catalyst for some people to jump on an opportunity to make a purchase. This also coincides with a bulge in the late-twenties to early-thirties millennial demographic, who are now entering family-rearing years and setting their sights on suburban markets.
“That’s been the backdrop behind COVID, and I think what you’ve really seen is some shifting in preferences and some untethering of people’s work, and I really point back to those plunging interest rates,” said Stewart. “They’ve really brought these moves people were going to do or contemplated [and] concentrated [them] into a very particular point in time. That’s why we see this record sales activity nationally.”
How does the demand for larger homes affect the market?
Competitive market conditions have persisted long after the first wave of lockdowns in spring 2020, which has influenced supply and demand for homes with a larger square footage.
Cathcart explains many communities were already in seller’s market territory prior to the pandemic. Since March 2020 however, more buyers entered the picture and were clamoring for the comparatively smaller number of listings that were available, leading to multiple offer scenarios on larger homes, he said. With the supply of homes already imbalanced compared to demand, CREA reported in its most recent national housing update that the number of newly listed homes dropped by 6.4% from April to May.
The desire for larger living spaces may have also played a role in fueling higher demand and prices in recreational and suburban areas over the last year. Commonly referred to as the Urban Exodus, the pandemic saw an accelerated trend of city dwellers with the ability to work remotely relocating to rural or suburban communities, locations that would typically offer more house for less money.
For instance, average sale prices for homes in some recreational markets are expected to see annual increases in the 20% to 40% range, according to research published in the 2021 RE/MAX Recreational Property Report.
What home trends will we see in the near future?
With the end of the pandemic on the horizon, the home buying frenzy looks to be slowly cooling off.
“A lot of the frenzy we’ve seen in the last year has seen people looking to find a place to ride out this pandemic in, and so you’d expect some of that urgency is going to fade at this point because we’re sort of near the finish line,” said Cathcart.
In June, CREA reported a 7.4% monthly decline in home sales from April to May. This can be attributed to freshly implemented lockdowns, high home prices, buyer fatigue, and increases in interest rates. The greatest deceleration of month-to-month price growth was found in the single-family segment when compared to townhome and apartment property types.
When it comes to buyers moving out of cities and into other areas, largely thanks to the freedom of remote working, Cathcart believes this trend will continue for some time after the pandemic, but not at its current rate. It will take time for companies and individuals to settle into the post-pandemic world, which will result in some continued movement in and out of cities in the meantime.
“Housing is typically a long-term thing you would plan for, but there’s not a lot of certainty about what a post-COVID world is going to look like yet,” explained Cathcart.
For urban buyers who may have traded in their single-family home and relocated to a more affordable place in the country, Cathcart predicts some people may purchase a smaller condo near their city workplace as a go-between.
“There have been lots of questions about whether this urban exodus will continue or reverse itself, but it’s more complicated. Maybe you buy that retirement place up in cottage country, but you also get yourself a condo in Toronto and that’s your pied-à-terre to go back into the office when you do have to do it,” he said. “Maybe your place of employment moves away or closer to you, or maybe you decide to take a new job closer to your new home, or one that is entirely remote work? There are a lot of moving parts to this.”
If you’re looking to upgrade to a larger property, or want more insight on COVID-19 trends in your local market, consult the advice of a qualified REALTOR® for the most up-to-date insights.