Many areas have seen house prices increase by over 25% year-over-year. Here\’s why:
- People are retiring and moving into their \”forever home.\” 2020 saw twice the number of people retire as 2019, and 2021 is going to follow a similar trend.
- More people are working from home. This creates a very strong incentive to have a nice home – not only is it where you spend your personal time, but it\’s also where you spend your time working. A nice home office is now a priority for many more people, and the definition of nice home office means an office above-grade in a single family home.
- Pent-up demand from 2020. 2020 was considered a seller\’s market but prices didn\’t seem to increase as much as 2021. This is possibly because there weren\’t as many buyers, but just as the sellers were holding off selling their homes, buyers were also hesitant to look at homes because of the paralyzing effects of the pandemic. Once it was clear that house prices were increasing in 2021, that injected a lot of FOMO into the market and caused a surge in demand, which allowed those higher prices to stick around, and even in areas people never thought they would.
People in small towns underestimate the effect of people moving from large cities. For example, Toronto has more people than all of Southwestern Ontario, and it doesn\’t take a high percentage of them to retire in order for house prices to increase in all the surrounding areas. There are many couples who are retiring from the big city to move \”back home to where they grew up\” or just \”to a quiet town.\”
The irony is that millennials have been asking baby boomers to retire for years now, and now that it is happening we are finding that housing affordability is an even bigger problem than before.
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