2023 Canadian Home Selling Report
By Clay Jarvis
September 11, 2023
Fears that high mortgage rates and inflation could force a large number of homeowners to sell their properties may prove to be justified. Twenty percent of Canadian homeowners say they plan to sell their primary residence in the next three years. If all follow through, it would result in a historic number of properties hitting the market. But there are reasons to question the likelihood of such an increase.
First, many of those planning to sell don’t appear to be considering it because of desperate financial need. While 22% of homeowners who plan to sell their primary residence say saving money is a leading factor, only 7% say they plan to sell because they can no longer afford their mortgage, according to a NerdWallet study conducted by The Harris Poll among 1,099 Canadian adults — among whom 749 are homeowners — from August 2-7, 2023. A desire to downsize (34%) is the most common reason homeowners plan to sell their primary residence.
Second, some of the obstacles preventing homeowners from selling their primary residence in the next three years — the stress of moving (22%), having to buy a new home when there is limited housing supply available (16%) — aren’t likely to disappear. Other obstacles, like higher mortgage rates potentially affecting home buyers’ budgets (17%), the possibility of having to sell for less than they believe their home is worth (16%) — could be eliminated once rates drop and sales perk up.
“Anything that prevents homeowners from listing their properties is going to put more pressure on buyers,” says Shannon Terrell, personal finance expert at NerdWallet Canada. “But when you’re buying a home, you have to focus on what you can control — your down payment, debt levels and credit score — and be as ready as you can when the right property finally hits the market.”
Key findings
- Most homeowners have no plans to sell. Twenty percent of Canadian homeowners say they plan to sell their primary residence within the next three years.
- Why aren’t homeowners selling? Twenty-two percent of homeowners who do not plan to sell their primary residence in the next three years say the stress of moving is an obstacle preventing them from selling.
- Homeowners who plan to sell have multiple worries. Forty-one percent of homeowners who plan to sell in the next three years say the stress of moving is one of their biggest concerns about selling, while 37% say the same of higher mortgage rates potentially affecting home buyers’ budgets.
- TLC, then MLS. Seventy-three percent of homeowners who plan to sell their primary residence say they plan to repair or renovate the interior of their homes, while 45% plan to make repairs or renovations to the exterior prior to selling to make their home more appealing to potential buyers.
Could 20% of homeowners really sell their homes in the next three years?
Twenty percent of homeowners say they plan to sell their primary residence in the next three years. If all follow through, it could result in approximately 5.4 million new listings — an average of 1.8 million per year — between now and 2026. That’s…optimistic.
The highest number of new listings Canada has seen in the past decade was in 2015, when just over 1 million homes were listed for sale. Considering the various obstacles homeowners face when deciding to sell their homes, buyers probably shouldn’t expect such an unusual amount of new inventory to hit residential housing markets.
Plans to sell other types of properties also seem somewhat exaggerated. Nine percent of Canadians, approximately 3.6 million, say they plan to sell a vacation home in the next three years, while 12% (or 4.8 million) say they plan on selling an investment property during the same period. Those numbers are exponentially higher than recent averages would indicate.
Homeowners don’t appear to be in a rush to sell either. Six percent say they plan to sell their primary residence within the next 12 months, while 4% say they plan to sell within 13-18 months and 5% say they plan to sell 19-24 months from now.
A far larger percentage of homeowners (41%) say they plan to sell their primary residence more than five years from now.
Advice for home buyers:
Although it’s unclear what supply may look like in the next two years, there is a clearer sense that fixed mortgage rates could be in the 4.5% to 5% range by mid-2025, compared to current rates of around 5.25%. When fixed rates soften, buyers tend to pounce, so it’s important to prepare early. If possible, use the coming months to bolster your down payment savings and pay down your debts. Having your finances in good shape when it’s time to get pre-approved for a mortgage can make the process go more smoothly. Lenders may be more inclined to offer you a lower mortgage rate and fund a larger purchase, too.
Why aren’t homeowners selling?
Fifty-five percent of homeowners who don’t plan to sell their primary residence in the next three years say they are being prevented by one or more obstacles.
Despite the current economic climate, the most common obstacle isn’t financial in nature, it’s the stress of moving (22%). Other non-financial obstacles to selling in the next three years include not knowing where to move to (16%) and needing to stay in the home until the homeowner’s children have finished school (8%).
But economics, particularly high mortgage rates, are a factor for some homeowners who don’t plan to sell. Seventeen percent say an obstacle preventing them from selling their primary residence in the next three years is high mortgage rates potentially affecting home buyers’ budgets. Another 17% say having to buy another home when mortgage interest rates are high is preventing them from selling in the next three years.
Current housing market conditions are also having an effect on homeowners’ desire to sell. Having to buy a new home when there is limited supply on the market and possibly having to sell a home for less than the owner believes it’s worth each contributed to preventing 16% of homeowners from selling in the next three years.
Advice for home buyers:
Because sellers have so many reasons for holding onto their properties, you need to prepare for taking a run at a highly competitive, undersupplied market. Establish realistic expectations around the property you’ll be able to afford and likelihood of being outbid several times. Streamline your must-have list for the home you hope to buy and decide what you’re willing to compromise on. And keep in mind that a setback is not a failure.
Homeowners who plan to sell share several concerns
Homeowners who say they plan to sell their primary residence in the next three years share many of the same worries as those who say they have no plans to sell. These concerns appear to be far more widespread among potential sellers, which isn’t entirely surprising considering how close they could be to selling a home at a time of market uncertainty.
The stress of moving is a concern for 41% of homeowners with plans to sell in the next three years. Many are also worried about higher mortgage rates affecting home buyers’ budgets (37%), selling their home for less than they believe it’s worth (27%), buying their next home when there is limited supply (26%) and buying when mortgage rates are high (26%).
Some homeowners who plan to sell in the next three years also have worries related to real estate processes. Nineteen percent say finding a good real estate agent is a concern, while 15% are uneasy about paying a prepayment penalty if they sell before the end of their mortgage term.
Some of these concerns are likely to fade as the market recovers. A continued lack of supply, however, could prevent some, possibly many, homeowners from following through on their plans to sell in the next three years. Those who plan to sell in order to downsize could, for example, be hard-pressed to find a selection of suitable properties on the market when the time comes to start searching for their next home.
Advice for sellers:
Concerns around selling, moving and finding a new property can often be easier to manage if you use the right professionals. Take the time to find an experienced, full-time real estate agent, who should be able to sell your home for top-dollar, help you buy a new one and put you in touch with reputable movers. A mortgage broker may be able to negotiate a competitive rate on your next mortgage, arrange bridge financing if you need it or assist in understanding and navigating any prepayment penalties you might face for breaking your mortgage early.
Modest renos a common choice for sellers
Seventy-three percent of homeowners who plan to sell their primary residence say they plan to repair or renovate the interior of their home prior to selling to make their home more appealing to potential buyers. Forty-five percent say the same for the exterior of their home.
The most common interior renovations include painting (39%), bathroom remodelling (26%), kitchen remodelling (24%) and installing new flooring (24%). Considering their limited scope and DIY potential, these projects may be providing more bang for a homeowner’s buck while inflation drives up material and labour costs.
More extensive or costly repairs, like updating/repairing plumbing (11%), electrical (10%) or HVAC systems (7%), were chosen far less frequently. Home sellers may be willing to let their home’s next owners pay for these major repairs.
The same dynamic appears to be in place where exterior updates are concerned. The most common exterior repair/renovation homeowners who plan to sell their primary residence plan to make in order to make their home more appealing to potential buyers are landscaping improvements (19%). Landscaping is rarely cheap or easy, but it may not require outside experts to complete, unlike repairing or replacing windows (12%), the roof (12%) or siding (6%), which were cited by fewer.
Advice for sellers:
Slashing the cost of renovations often starts by tackling the jobs you can do yourself. Painting a living room or installing a backsplash in your kitchen might seem daunting and messy the first time, but a little Youtube studying can teach you everything you need to know. And before you run to the nearest home improvement superstore to upgrade your appliances, see what you can find used or refurbished. Gently used appliances can provide excellent value, especially if they come with warranties.
Methodology
This survey was conducted online by The Harris Poll on behalf of NerdWallet from August 2-7, 2023 among 1,099 Canadian adults ages 18 and older, among whom 749 are homeowners. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 3.36 percentage points using a 95% confidence level. This credible interval will be wider among subsets of the surveyed population of interest. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Bria Weaver, [email protected]. We used Statistics Canada data on Canada’s current population and homeownership rate to estimate the number of homes that could be listed in the next three years if 20% of homeowners were to sell.
