Montreal Real Estate Market Forecast: Q1 2023

What’s going on in the Montreal real estate market, and what’s to come in the near future? We’re going to give you our personal forecast for what we think is going to be happening over the next couple of months.

We’ll be covering how to prepare for the most buyer-friendly market we’ve seen in the last three years. In the last eight months, we’ve seen interest rates increase dramatically: we saw a 4% increase on the variable rate, which has left a lot of buyers thinking about what their next move should be.

We also saw demand pull back significantly, and we’ve seen prices decrease at the same rate. Now, what we’re expecting to see in the spring is buyers reentering the market due to these advantageous prices.

Prices are going to pull back somewhere between 10% to 15%, in total, from their peak in February 2022. That’s going to give buyers the opportunity to step into a market that is a lot more calm, stable, and ripe for building equity over the next 12 to 24 months as inflation stabilizes.

Interest rates

At the time of this writing, five-year rates are between 5% to 5.5%, and two-year rates are somewhere between 5.5% and 6%.

Ever heard the expression “date the rate, marry the home”? Right now, we’re encouraging most of our clients to take a two-year rate because we suspect they’ll come back down after that period. We’re going to be “dating the rate” for the time being, but we found the property of our dreams, so we’re “marrying the home.”

Advice for sellers

Sellers are slowly realizing that prices are no longer where they were last year. That means they’re going to have to adjust their expectations. We’re seeing homes sit on the market for a lot longer, and price reductions are becoming much more common compared to the last three years.

For sellers, It’s more important than ever to consider a really good pricing strategy. You really want to make sure you get the number right on the first try, because the longer your property goes unsold, people will start to worry that there’s something wrong with it.

Homes that are priced properly are still being sold within two to three weeks, but homes that are priced based on outdated strategies are remaining on the market for three, four, five, even six months and up. They’re becoming stale and nobody wants to touch them anymore because they think they’re problematic.

Inflation

Inflation is playing a major role in the market right now, since it’s ultimately determining what kind of interest rates we’ll be seeing. As inflation hit 10%, the Bank of Canada said that was way too high, and they began making efforts to cool the market down.

So, they increased interest rates in hopes of getting inflation back to about 2%. Now, that’s not going to happen overnight. It’s already been about six months since these increases began, and although we have seen inflation start to cool off, it hasn’t returned to the 2% to 3% range.

We’re expecting to reach that goal over the next 12 to 24 months. The last report we read said

inflation was currently around 6.8%, so we’re definitely on the right track. 

Essentially, as inflation comes down, interest rates will follow, which will create a huge spike in equity for most people as people’s buying power increases. When people can afford a larger home for the same monthly payment, prices will automatically go up.

To sum things up…

It’s a really exciting time to be a buyer in this market. We haven’t said that for the last three years, even though there’s been lots of opportunity.

But right now, the fact that we get to go in, do a full due diligence, and negotiate the price down – all while knowing we’ll have a lower monthly payment and have the equity of our home go up significantly – is super exciting.

If you have any specific questions about where the market is headed, book a time to speak with us directly. We can’t wait to hear from you!

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