Local officials call housing report overly pessimistic, unreflective of area’s economic fundamentals

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Local business and real estate officials are calling a Desjardins Group study forecasting home prices in Windsor will drop 44 per cent through 2023 overly pessimistic and unreflective of local economic fundamentals.

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The national report by the financial services corporation lists Windsor as one of the most vulnerable communities in Ontario to price corrections due to rising interest rates and housing prices that rose too quickly during the COVID-19 pandemic. The 44 per cent decline would be the third largest in the province after Bancroft and Chatham-Kent.

“I think the numbers quoted in this report fall on the extreme end,” said Windsor-Essex Regional Chamber of Commerce CEO Rakesh Naidu.

The long-term outlook for Windsor is incredibly strong

“It’s a very pessimistic report.

“The scorching pace of rising prices needed to be slowed down. I don’t think the market will collapse.”

Naidu said the region hasn’t solved its housing supply issue, rental demand remains strong and will increase with the return of international students and more immigrants to the region after the pandemic.

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“The future projects coming to Windsor-Essex aren’t reflected in this report,” Naidu said. “The investments coming here will create the need for a workforce that isn’t entirely here. We’re going to attract people.”

Windsor’s peak average monthly sales price came in March with an average sale coming in at $723,739. In May that average price had dipped for the second consecutive month to $647,331.

However, that price remains 14.37 per cent or about $117,000 higher than a year ago. The cost of building a new home nationally also continues to rise steadily with Statistics Canada reporting Tuesday a 0.5 per cent increase in May compared to 0.3 in April.

Windsor-Essex County Association of Realtors past president Damon Winney said he senses no panic in the market that would be required to reach a 44 per cent decline.

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“You’re talking about over a $300,000 decline on a $700,000-plus home,” said Winney, who is also a co-owner of Jump Realty.

“The level of confidence in that report would be hard to find in a local economy with our employment data and investments being made that will create more jobs and grow the population. I’d have to question this 44 per cent.”

The Desjardins report forecasts the average housing price in Ontario will dip 18 per cent over the next 18 months before prices begin to rise again. It predicts a national sales price decline of 15 per cent.

Western University business professor and director of the Smart Prosperity Institute Mike Moffatt agrees with the overall tone of the Desjardins’ study but thinks Windsor’s bright long-term future may modify the price downturn.

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“I would say 44 per cent would be an absolute worst-case scenario,” Moffatt said. “I certainly expect prices to come down the next 12 to 18 months after we saw massive price growth in the past two years. If prices fell 44 per cent that would be an over-correction.

“The long-term outlook for Windsor is incredibly strong.”

A contraction of 44 per cent over the next 18 months would represent a historic price shift.

Even when the prime rate hit the record level of 22.75 per cent in the early 1980s, local housing prices didn’t crater anywhere near 44 per cent.

The average price fell 21 per cent from 1980 ($57,512) to 1982 ($45,188).

During the financial crisis of 2008-2009, when the auto industry looked on the verge of collapsing, the average price of a local home dipped 5.7 per cent or $9,581.

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Moffatt said his biggest fear is housing prices may get trapped in an extended cycle of boom-and-bust prices.

“We’re in a weird period right now where housing prices are falling, but homes aren’t really becoming more affordable because of the increasing interest rates,” Moffatt said. “It doesn’t make homes more affordable for first-time buyers.”

Moffatt said the Windsor sales data really hasn’t reflected the impact of higher interest rates yet the way it has in the GTA.

He added strong local economic fundamentals, good affordability and the permanence of more people working remotely will also benefit the area.

“The price declines could be milder and the recovery could be quicker for Windsor because of those factors,” Moffatt said.

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Winney said interest rates aren’t the only factor impacting prices. The number of homes available for sale has also risen sharply.

There were 1,438 homes for sale in May in the Windsor area, which was nearly 400 more than in April and 38 per cent more than last May. Through the first five months of 2022, listings have increased about 1,000 compared to 2021.

Manor Realty broker/manager Rob Agnew called the study “an outrageous report” disconnected to the economic realities of the region.

Agnew added he’s already seeing inquiries for homes from those who will be part of the NextStar Energy battery plant scheduled to start construction later this year.

He said interest from those in the Greater Toronto Area, though not as strong as three months ago, is still there.

“I agree with parts of the report that we’re in a pause in the market where buyers are on the fence taking a look at what’s happening with the interest rate hikes,” Agnew said. “The market is stabilising.

“With 5,000 to 6,000 jobs coming on the horizon, to say we home prices are going to drop 44 per cent I just don’t agree with that.

“We’ve already had some people from Korea connected to the battery plant here looking at homes.

“The economic fundamentals locally are strong and only going to get better.”

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