Homes are starting to sell at discounted prices in Canada, a trend that used to be unthinkable just a few months ago for the thriving real estate market in the country.
In various parts of the North American country, houses are being sold at almost a bargain price. An opulent five-bedroom house listed at $2.25 million ended up selling for $1.93 million in Victoria. Also, a home in Halifax was bought $140,000 below its asking price of $900,000.
In the Toronto suburbs, discounts of more than $100,000 are applied to listed houses. A detached home in Mississauga went up for sale in April at $1.6 million and was sold for $1.38 million after a couple of months.
A four-bedroom mini-mansion in Brampton went on the market at $1.8 million, but was sold with a price reduction of $300,000. Also in Brampton, a house listed on the market 35 days at $1.4 million was bought $250,000 lower than the original price.
Another phenomenon to hit Canadian real estate in recent weeks is the spike in "delistings," which means homes are taken off the market after not receiving any bids from buyers. In some regions of Ontario, more houses have been delisted in the past 30 days than the homes that were sold.
"If sellers are chronically overestimating the values of their homes, it's largely because Canadian home sales had spent more than a year being defined by the exact opposite phenomenon. This time in 2021, virtually every real estate market in Canada was seeing homes go to bidding wars that yielded sales up to 20 percent higher than list prices," the National Post reported.
The news outlet added that the return of "sold under ask" pricing to Canadian real estate is one of the most obvious signals of a market that is entering a period of prolonged freefall.
A Royal Bank analysis found that in June alone, home prices fell by 1.9 percent and called it the "largest ever one-month decline." "Canadian home prices are dropping faster and faster, especially in Ontario and parts of British Columbia," the study said.
It's a different story in America
Meanwhile, in the United States, the ever-soaring cost of buying a house has pushed middle-income Americans' homeownership dreams aside. A lot of them stopped shopping and just resorted to renting as consumers are greatly affected by the worsening inflation.
Moreover, the ones who are buying are acquiring more affordable homes. Mortgage demand decreased by 6.3 percent the week ending July 15 from one week earlier, according to Mortgage Bankers Association’s (MBA) weekly survey.
"The market is getting much more challenging for home shoppers – we're seeing some of them just quit and put their plans on hold," Realtor.com chief economist Danielle Hale said.
"Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the worsening economic outlook," MBA economist Joel Kan said.
Aside from mortgage prices shooting up, the availability of houses for sale to middle-class citizens may also have contributed to the low mortgage applications.
A recent analysis by the National Association of Realtors found that across America, about 250,000 houses are currently for sale that is considered affordable for households with $75,000 to $100,000 annual income. This is a marked decline from about 656,000 available homes before the Wuhan coronavirus (COVID-19) pandemic. (Related: LoanDepot to sack 2,000 more workers as mortgage market collapses.)
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