Spring is traditionally the busiest time for real estate and this year, the stakes couldn’t be higher. Follow our Spring Real Estate Survival Guide series as we unpack some of the most pressing questions buyers and sellers are grappling with, plus expert advice on how to navigate the reality of a slower market. Read the first instalment below and check back here for more throughout the week.

Everyone connected to Canada’s housing market is asking the same question as the spring market, historically the busiest time of year, gets underway: Have we hit the bottom?
 

From
realtors to economists to lenders to developers — not to mention would-be home buyers and sellers —
all are looking for signs of whether the real estate market will finally see a turnaround from declining prices.
 

It’s a situation that seemed unfathomable during a two-decade bull run when the country’s housing market defied every expectation to the upside. But for those who have been in the game long enough, the correction that began in
2022 — and which has seen the average national sale price for existing homes decline by nearly 20 per cent to
$663,828 from
$816,720 in February 2022, according to CREA — was not just fathomable, but
inevitable.
 

Frank Clayton, now a senior research fellow at Toronto Metropolitan University, started his career at Canada Mortgage and Housing Corp. in 1967, when “the oldtimers” would look at every twist and turn in the housing market and say they had seen it before.
 

“This is a fairly similar housing cycle,” said Clayton, with a laugh. “We always have a situation where demand kind of shoots up and supply can’t keep up for various reasons, and prices explode. And then the government gets into a panic mode and does something after the peak has been reached.”
 

Typically, the government does all kinds of things to bring more land and supply to the market, which is already happening. That improves affordability, he said, only to put us back into the same cycle again.
 

“We had it in the early 1970s and we had it in the late 1980s,” said Clayton. “Now the contraction is the same, too.”
 

So what are consumers to do? Should they

wait and try and time the bottom of the cycle? There are factors that make that difficult, Clayton said. Aside from needing to separate housing by segment and geography, the bigger picture — what is happening with the economy, including tariffs and the Middle East war and their potential effect on inflation and interest rates — makes predictability harder than ever.

Even within segments, there is variation.

“I will say condos are definitely not at the bottom; there are just so many condos,” Clayton said. 
 

But single-family homes are another story.
 

“The demographics across the country do support single-family houses in a huge way,” he said. “There is just no further to go down.”
 

Boaz Feiner, a principal of Markham, Ont.-based Geranium Homes, said his company has four projects on the go right now, but, like many builders, it has more in the pipeline and has been waiting on the sidelines for the market to break in their direction.
 

“It’s hard to push water up a hill waiting for the market, but conditions are already changing,” he said.
 

A veteran of almost three decades in the market, Feiner said one of the major issues the market has faced has been the unknown, and that is starting to clear.
 

He said the federal and provincial governments had created expectations for market changes, such as development charge deferrals, that had not been enacted. Now, that uncertainty has been removed, and developers no longer need to pay those charges until homes are occupied.
 

“That’s a check mark, an unknown is a known,” he said, adding that a joint federal government and Ontario agreement to remove the harmonized sales tax on new homes for all buyers will have a major impact on stabilizing the market. The tax break was previously only available to first-time buyers.
 

He said sales were already on the uptick before the announcement, although he emphasized that might be more applicable to the low-rise end of the market.
 

“People have been waiting on the sidelines to see what levers the government might pull,” said Feiner.
 

Despite more certainty on the policy side, Dan Eisner, chief executive of Calgary-based True North Mortgage, said consumers are now facing a new risk that for a little while at least seemed to be off the table: rate uncertainty.
 

But a conflict in the Middle East driving up oil and inflation seems to have put rising rates back on the table

“Our clients are doing one of two things. They’re either flipping into a variable because the five-year fixed rates have really kind of spiked along with oil prices and bond yields,” he said. Or, he added, some will just wait on the sidelines.

In just three to four weeks, five-year fixed rates have climbed 50 basis points, which means going with floating-rate debt tied to prime and Bank of Canada decisions, or maybe just waiting for long-term rates to come down.
 

Lower consumer demand could put additional downward pressure on prices.
 

“I can’t imagine a market that likes uncertainty. Yeah, that’s true for businesses and for homebuyers. They’re looking at this and saying, ‘What’s going to happen to oil prices? What’s going to happen to prime?’” said Eisner.
 

He also said the larger economy is a major factor in housing, and that trade with the United States could also impact housing down the road.
 

“Family income is the number one predictor of whether you buy a house or not. A person doesn’t buy a house if they don’t have a job, and they don’t buy a house if they’re worried about their job,” he said.
 

Brittany Kostov, senior director of sales with real estate company Zoocasa, said it’s really just too hard to grab the exact bottom or top of any market.
 

“We look at four stages: recovery, expansion, hyper-supply and then recession,” said Kostov. “Bottoms usually happen in a late recession phase when prices have already corrected and inventory is plentiful and buyers are still nervous. This is where several of our markets are today.”
 

She added that real estate differs sharply by market, but noted condos may be the exception, with corrections happening across the country. “Prices are declining gently, so a significant part of this reset has already happened,” said Kostov.
 

It raises the obvious question of why buy now if the market is going to fall even more, but the real estate executive said the downward trend on pricing has already slowed.
 

CREA’s numbers for the resale market show February prices were almost unchanged, down 0.2 per cent, from the same month last year.
 

“I think you are looking for price declines to come almost to a standstill,” said Kostov, adding there is still a lot of inventory that has to be cleared in major markets. “Buyers just have not returned to the market. They are still hesitating. What the bottom looks like is when buyers feel like they might miss out again. The spring market will be the real test of whether these markets are really turning.”
 

Robert Kavcic, senior economist at the Bank of Montreal, said there is scope for another five to 10 per cent on the downside, but it depends on the market.
 

“If you look at places like the B.C. condo market, there is still a ton of supply in the pipeline,” he said. “Bigger picture is there is probably more downside into the spring, and then it will just be an environment of prices flattening out and going sideways for a long period of time.”
 

He said you can look to investors to really understand why the pricing today doesn’t work. “Returns are just too low (based on rental income), so prices have to adjust lower to clear the market,” said Kavcic.
 

From the homebuyer’s perspective, affordability is still a challenge at these prices, so the inventory won’t clear.
 

“Unless interest rates fall, you will see further downside in prices to get affordability to a level to bring demand back, and we don’t think interest rates will fall this year,” Kavcic said.
 

But even a veteran such as Clayton said some things can still surprise him. “There was this explosion of immigration that was new, and now we are having a population decline,” he said. “Some things you can’t predict. Who predicted this war?”
 

• Email: gmarr@postmedia.com

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