State of the market recap for 2022

State of the market recap for 2022

​As we embark on 2023, it's time to look back at the dramatic and ever-changing real estate market in 2022. From unsustainable price growth to contraction in some areas, it seems that there hasn't been a "typical" 12 months within this industry for quite some time now. As we prepare for what could lie ahead heading into 2023, let’s take a look at all of the different factors that have shaped the housing market throughout 2022. 

In like a lion...

When I think back to the start of 2022, the housing market came in like a lion. Low inventory, high buyer demand coupled with inexpensive mortgages led to a very competitive start to the year. Properties were selling in multiple offers and over ask (single-family homes sold for 108% of the list price). 

Between January and April 2022, the median sale price rose by $97,500 from $337,500 to $435,000 before declining in a meaningful way for the first time since the start of the pandemic. 

So what happened?

​Back at the beginning of 2022, the Bank of Canada's Overnight Rate was 0.25%. Over the span of 12 months the Bank of Canada aggressively increased the overnight rate by 400 basis points or 4%, prompting a cooling in the markets. The first of these rate increases occurred in March of 2022. An increase of .25% by itself may not have had a significant impact on the market; however, the Bank of Canada was upfront that this was just the first of four planned interest rate increases, and in retrospect, it was the first of seven.

​The increase in the Bank of Canada’s overnight rate led to other interest rates, such as mortgages, also rising—creating instability and concern among consumers. It’s important to remember that while this increase might make it more difficult for people to afford housing, increasing interest rateswill help slow inflation. 

By the end of 2022, the median sale price had fallen to $355,000 from a peak of $435,000 in April of 2022, and while it would be logical to expect that this decrease in home prices would be beneficial to home buyers, the rise of interest rates over the course of the year eliminated any increase in affordability. 

In Feb of 2022, the 5-year fixed rate was hovering around 3.5%, meaning the monthly payment on the median-priced home ($425,000) was just under $2100 per month. By the end of 2022, the median home price had fallen to $355,000, but the 5-year fixed rate had risen to 5.5%, and as a result, the monthly payment for the median-priced home in NS had actually risen $50 per month. 

​And, while no one has a crystal ball, there are a couple of things that aren't going to happen in 2023. Be sure to check out next week's newsletter for my 2023 predictions.