After two years of remarkable growth in the Canadian real estate market, the housing industry is experiencing a change. Perhaps it is a path to normalization, or maybe it is a sharp correction. Whatever the case may be, it is unlikely that Canada’s housing market will continue the meteoric growth it has enjoyed since the early days of the coronavirus pandemic.


Indeed, many trends are forming in Canada: interest rates are rising, mortgage rates are going up, sales activity is slowing down, prices remain high, and supplies fail to meet strong demand. Because of this, many market participants – buyers and sellers – have questions. As a result, they are turning to Google to have their questions answered. But what exactly are they asking about anyway?


Here are some of the most popular queries that Canadians have about one of the world’s hottest real estate markets:


5 Most Googled Questions About Canada’s Housing Market


#1 What is Going on with Canada’s Housing Market?

The Canadian housing market is starting to slow down. Average selling prices have decreased, and the market is expected to continue to cool down, with average prices continuing to decrease.


According to the Canadian Real Estate Association (CREA), the volume of homes sold in June 2022 was down by 23.9 percent compared to the same period a year ago. This trend has been occurring since February and indicates the market’s direction in the coming months because spring and summer are typically strong months for home sales. Therefore, home sales are projected to return to their pre-crisis levels finally.


#2 What is Affecting Housing Prices in Canada at This Point?

Housing prices in Canada are affected by lending rates as this rate can make mortgages more expensive for buyers and impact homebuyers’ purchasing power. Higher mortgage rates are dragging prices lower.


The market saw significant affordability deterioration during the pandemic, and many investors and end-users piled into the housing market as it advanced. But now, as sales and prices trend downward, buyers are being forced to accept lower offers. Many people now want to dispose of their properties as the change in interest rates makes it unaffordable for them to continue carrying the properties they have already purchased.


#3 When Will the Housing Bubble Burst in Canada?

The rapid pace of the market over the last two years has made talk of the Canadian housing bubble front and centre. Also, interest rates during that time were at historic lows, allowing Canadians to take on enormous levels of debt that climbed to record highs, thus making them more vulnerable to economic downturns. Now, the housing market is slowing, and some forecasters are alluding to the idea that home prices will moderate further in 2023 and 2024.


However, any bubble chatter is purely based on present market trends. Furthermore, low supply levels and high demand work against the idea that the Canadian housing bubble will burst.


#4 What Needs to Change to Make Housing More Affordable in Canada?

There is a need for governments to put in resources and build and maintain social housing. During the last two years, the housing market made it impossible for many families with limited incomes to afford rent, let alone buy. People need to earn wages that align with the growing annual inflation rate and market dynamics. The housing market is not equipped to provide affordable housing for low-income families. This can only change if the governments step in.


In addition, many people bought properties that were affordable for them during the pandemic because of low-interest rates. However, since borrowing costs are swelling, recent homeowners may not be able to sustain their own once their mortgage renewals are due.


#5 What Canadian Housing Market Trends Should One Watch Out for in 2022?

Once again, interest rates will likely continue to rise, which was expected after a series of drops during the pandemic. Now that the economy is bouncing back and slowly recovering from the economic impact of the last two years, mortgage rates will climb amid the central bank’s inflation-busting tightening cycle.


Low supply in the Canadian housing market will continue to be a source of concern. Nearly 1.2 million people are expected to immigrate to Canada by 2024, and these people will need a home. Will the housing market be able to match this demand? Industry experts are doubtful.


Looking Beyond 2022

Market analysts and real estate agents are noticing that the real estate market is slowing down, whether in the major urban centres or rural communities. As a result, the Bank of Canada (BoC) has signalled that it will accelerate rate hikes to combat soaring price inflation. But the concern is that the economy will slip into a recession, potentially impacting the real estate market in the process.

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When prospective homebuyers are exploring the Canadian real estate market and searching for a residential property, many typically only concentrate on the sale price, monthly mortgage payments and interest rates. But this doesn’t tell the whole story. To get a more accurate picture and create a realistic budget, homebuyers should determine the monthly expenses for carrying home.


In recent weeks, many reports have surfaced suggesting that some buyers regret their decision to buy at the height of the market, which peaked during the pandemic. While the primary concern is that housing prices have started to come down and borrowing costs have begun climbing, potentially eating away at equity, families are also worried about the growing costs of home ownership.


This is the challenge when FOMO (fear of missing out) sinks in, and homebuyers refrain from doing their due diligence.


So, what are these rising costs anyway? Here is a list of expenses you will have for carrying home.


What Are the Monthly Expenses of Carrying a Home?


#1 Property Taxes

Every jurisdiction has its own suite of property tax rates. In some places, the property tax rate is too high, and in others, it is below the inflation rate. Either way, homeowners can expect a massive bill at the end of the year, equivalent to roughly between 0.5 percent and 2.5 percent of the market value.


So, if you just bought a $1 million home, you could be slapped with a property tax bill of as much as $25,000.


#2 Home Insurance

Home insurance is critical when you own a home. Since this is the most significant purchasing decision you will ever make in your lifetime, you must obtain a comprehensive package to protect your property and home contents from various issues: vandalism, theft, flooding, and fire. You’ll also need liability insurance if someone is injured on your property.


Whatever the case, home insurance is critical.


#3 Condo Fees (If Applicable)

One of the drawbacks of owning a condominium suite, be it a bachelor's or a two-bedroom plus den, is the monthly condo fee. In some buildings, monthly condo fees are equivalent to rent.


This is why it is imperative to determine the condo fee before closing the deal because you need to know how much the costs will be in addition to carrying a mortgage. The month-to-month fixed cost can really be a financial burden. You should also investigate how much the condo board has in reserves for significant outlays like a new roof. If they don’t have enough saved, i.e., there isn’t enough in the reserve fund, you could be charged a “special assessment.” This means you could suddenly face a large expense that must be paid all at once.


#4 Utilities

If you have rented for many years, you might have avoided paying monthly hydro, heating, gas, and water bills. Although these costs quickly become the norm in renting, new homeowners may never have to deal with these payments.


So, now that you own a home, you will be paying a wide range of utilities that can add financial pressure to your budget every month.


  • Electricity
  • Air conditioner
  • Heat
  • Gas
  • Water
  • Cable, phone, and Internet
  • Water heater rental


#5 Maintenance

While a condominium does not require maintenance except inside your suite, detached or semi-detached home has plenty of maintenance issues that require capital. This includes landscaping, snow removal, gutter cleaning, HVAC maintenance, home cleaning, and many other features.


In addition, if something in your home needs repairing or replacement, such as the dishwasher or washing machine, be ready to fork over many loonies and toonies.


#6 Environment

Let’s say that if you come across mould, termites, cockroaches, rats, or a wide range of other pests in your basement, attic, bathroom, or kitchen, be prepared to find a significant hit to your wallet.


Inflation Is the Enemy Now

Ultimately, asset inflation has been on the rise since the start of the coronavirus pandemic. The average price of a home in Canada is around $700,000, with some markets, such as Toronto and Vancouver, seeing the average cost top $1 million. But everything else will become integral to your monthly carrying costs, which are now more expensive due to 8.1 percent inflation (June 2022, Statistics Canada).


The plumbing repair will be more expensive. The landscaping will be far costlier. The water for your swimming pool will be a financial burden for your home. Everything necessary to live in a home has gone up in price, from the nails a roof repairer will need to the food in your refrigerator. It can be quite a challenge for homeowners.


In the end, this is what you could expect to pay for a $720,000 home each month:


  • Mortgage Payment: $3,444
  • Monthly Property Tax: $325
  • Utilities: $425
  • Home Insurance: $75
  • Cable: $75
  • Internet: $75
  • Phone: $30
  • Maintenance: $100


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Regardless of where you’re buying or the market conditions, there’s one thing every homebuyer has in common: you have to make an offer to purchase a home. Whether you’re still in the browsing stages or have started to put your plan into action, as a prospective buyer, it is wise to do some legwork and gain insight into the process of making an offer. While your real estate agent is there to guide you, the more you know about the home-buying process, the smoother it will be. A smooth process is especially pivotal in a seller’s market, where you’ll need to act fast and take quick and decisive action when you find a property that interests you. This makes understanding how to make an offer on a house essential.


How to Make an Offer on a House


Mortgage Pre-Approval:

New home buyers often wonder if they need pre-approval before making an offer on a house. Unless you’re planning to pay cash for the house, you’ll need to secure financing. It’s a good idea to get pre-approved for a mortgage before making an offer.


You'll be ready for your financing if you have to move quickly with your offer. As a buyer, you’ll know exactly how much you can spend, and the seller also wants the reassurance that you will not back out of the purchase based on financing.


A pre-approval also locks in the current interest rate for up to 120 days, so you can shop with peace of mind knowing that you’re insulated from rate hikes in the near future. If the rate drops, your lender should honour the new lower mortgage rate when you’re ready to make your purchase.


Real Estate Paperwork:

When you’re ready to offer a house, your agent will draw up the necessary paperwork, typically referred to as a Real Estate Purchase Agreement, though its name differs across the country. To be valid, your offer documents may include some specific details, according to Canada Mortgage and Housing Corp.:


  • your legal name, the name of the seller and the address of the property
  • the amount you’re offering to pay (the purchase price) and the amount of your deposit
  • inclusions and exclusions (for example, are the window coverings included in the purchase?)
  • the date you want to take possession (“closing day”)
  • a request for a current land survey
  • the date the offer expires
  • any other conditions that must be met before the contract is finalized (for example, a satisfactory home inspection)


The Price:

When making an offer on a house, be prepared to negotiate. Your negotiating power will depend on a few factors. The current market conditions in the immediate neighbourhood will dictate whether you can make a lowball offer – a likely scenario in a buyer’s market – or perhaps an offer that’s higher than the asking price, which has happened over the last two years in the record-breaking seller’s market brought on by the pandemic.


Deposit:

While “deposit” and “down payment” are often used interchangeably, they differ. At the time of the offer, the buyer should come prepared to put a deposit on the home they hope to buy.


The deposit will be rolled in with your down payment, showing the seller that you’re serious about buying the home and have your finances in order. If the buyer walks away from the deal, they will forfeit their deposit in most cases.


There’s no standard deposit amount. It will vary based on the property type and the buyer’s desire for this particular home. The deposit is generally given to the seller’s agent to be held in trust until the deal is firm.


Down Payment:

A down payment is the amount of money paid up-front as a lump sum when you buy a home. It is calculated as a percentage of the total purchase price. The minimum down payment in Canada is five percent. Remember that this is the bare minimum required to qualify for a mortgage. However, anything below 20 percent is a high-ratio mortgage and requires mortgage loan insurance.


Firm versus Conditional Offer in Real Estate:

With the competitive market brought on by the pandemic, it was common to hear of bidding wars where buyers would make an offer without any conditions. This is called a firm offer. The buyer is 100 percent certain of the purchase. They do not require any conditions for home inspection or financing. Once the offer is made, the buyer can’t back out of the deal.


Conversely, a conditional offer requires specific terms to be satisfied for the offer to be valid. These conditions protect the buyer; some common conditions include:


Purchase conditional on financing: This is a common condition for first-time homebuyers making an offer on a house, and it requires the sign-off of the mortgage lender for the deal to go through. The buyer will have a few days to get this, and the process will include a home appraisal. If the lender does not agree to finance the property, the buyer will notify the seller, and the offer becomes null and void.

Purchase conditional on home inspection: A home is likely the biggest purchase you’ll make in your lifetime, so it’s always recommended that the offer be dependent on a satisfactory home inspection. A professional home inspector will look at things in and around the home that are openly visible (that’s right, they will not be opening up walls or floors). The inspector will examine the structure, roof, plumbing, heating and electrical systems to ensure the house is in good condition. If the home isn’t up to par, this condition allows the buyer to return to the seller and request repairs, a reduction in the price, or can rescind the offer entirely.

Purchase conditional on the sale of a home: If a prospective homebuyer already owns a home, they may want to ensure that it is sold before agreeing to purchase a new property. This isn’t ideal for the seller, as every condition has a potential domino effect.

A firm offer is typical in a hot market. With all other things being equal, a seller is more likely to accept the unconditional offer over one that could fall through for several reasons.


Negotiations:

An experienced real estate agent will be able to advise you on what you can realistically negotiate, depending on the market conditions. In a buyer’s market, you hold the cards knowing that there are plenty of other options on the market. In a seller’s market, you compete with other buyers vying for the same property, so quick action and a strong offer are more likely to work in your favour.


Legal:

Your offer is a legal document, so ensure you read and understand everything outlined in the paperwork. The buyer can take the offer to a lawyer for review before signing anything. And remember, if you don’t understand it, don’t sign it.


Buying a home is a big deal, from the shopping and vetting process to the financial and emotional commitment you’re about to make. The offer is also a legally binding document. All your questions about making an offer on a house are valid. These seemingly small details will have a domino effect throughout the purchase process and even long after you’ve taken possession. Work with an experienced real estate agent and an excellent lawyer to ensure your best interests come first.


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Homeowners have felt the financial pinch of flooding and thus, have questions about floor insurance. Flooding has surpassed forest fire as Canada’s top cause of property damage. Six percent—and up to 10 percent—of homes across Canada are already uninsurable for flood risk.


As major floods have become more common in communities across Canada over the last decade, it has brought the issue into mainstream consciousness. However, despite growing awareness, homebuyers purchase homes in flood zones without knowing the risks and the protection they need.


With so many homeowners living in high-risk regions, we wanted to examine the importance of flood insurance and share tools that can help determine if you live in a high-risk area.


What is flood insurance, and what does it cover?

With the rise of extreme weather and flooding, Canadian homeowners search for increased protection, including securing the right flood insurance coverage. But, the numbers show that they are falling short.


Your home insurance policy may have provisions for a burst pipe or flood due to an appliance malfunction. Even though you may refer to this type of incident as “flooding,” insurance companies typically classify these events as “water damage.” Flooding is generally an add-on to a standard home insurance policy.


Flooding caused by Mother Nature is called “overland flooding.” Flood insurance covers overland flooding and may even incorporate other forms of flooding, including sewer backup, extreme rain, or waves from a storm or hurricane. You may need comprehensive water or flood insurance policy (or an all-risk policy) to get this coverage.


The terminology differs between insurance companies, so you may want to ask about two add-ons to supplement your policy. The first is sewer backup coverage. It covers water damage from a blockage in the main sewage line. The blockage causes wastewater to reverse direction and flow up into your home.


The second add-on is overland flood coverage. In addition to an overflowing body of water, this protection may cover damage from heavy rainfall and melting snow.


The average claim caused by flooding damage is $43,000. These add-ons may cause your insurance to rise by a few hundred dollars, but they could protect you from a massive reconstruction bill in the future.


Even if you don’t live near a body of water, your home could still experience these other forms of flood damage. It is essential to talk to your insurance provider to see if you are covered.


The federal government does provide financial support to those impacted by flooding. In a large-scale natural disaster, the Government of Canada offers financial assistance for recovery to provincial and territorial governments through Disaster Financial Assistance Arrangements (DFAA). However, there are limits to this coverage. The best course of action is to ensure protection through a home insurance policy.


Examining your home’s flood insurance coverage?

Ninety-four percent of Canadians who live in flood zones are unaware of their potential risk, according to data from the University of Waterloo and The Co-operators. Without knowing the risk of flooding, it is tough to protect yourself from the risks and costs associated with flooding.


One reason for this lack of coverage is a lack of transparency. There is no legal requirement to warn homebuyers that they are moving into a potential flood area, leaving Canadians vulnerable and at the risk of significant financial losses.


You should ask your insurance agent if flood insurance is available for you. If it is, what type of damage is covered, how much does it cover, and what sub-limits or deductibles apply? These simple questions could end up saving you thousands of dollars.


The Insurance Bureau of Canada (IBC) estimates six to 10 percent of Canadian homes are uninsurable due to flooding. That number could climb as insurance companies calculate risk assessments to account for the rising threat of climate change.


The IBC proposes the public sector step in to support Canadian property owners. They suggest a national high-risk residential flood insurance program, which would provide insurance to residents in the most flood-prone areas, funded by the federal government.


Is your home in a flood zone?

A flood map outlines areas that are at the highest risk of flooding. Flood maps provide homeowners with the data to make informed choices about their property. The maps also provide stakeholders with the necessary information to manage flood risk, planning, and emergency preparedness decisions.


Canada has lacked an effective flood map system. Current maps primarily focus on land use planning and engineering but rarely contain information about potential consequences. The existing maps are highly technical and do not help the typical homeowner understand flood risk.


Flood hazard maps are decentralized and incomplete. Municipalities and conservation authorities develop the maps and local information, but it is not available within a central database for Canadians.


The most effective form of flood mapping for Canadian homeowners is flood awareness maps. They provide a narrative along with the flood map. They detail the history of flooding and show the potential for future flooding. Unfortunately, they are not readily available.


Flood insurance and the home-buying process

Because there is currently no flood hazard mapping program available to Canadians, it is essential to speak with your insurance agent. They may have access to flood-risk data through their proprietary systems.


If you are in the home-buying process, it is good to check in with your insurance agent when you are ready to put in an offer. It will give you a sense of what type of expenses and risks are associated with that property, allowing you to make a more informed choice.

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