Windsor housing market remains strong despite interest rate hikes

Article content

Despite the recent hikes in bank interest rates, the demand for new homes in the Windsor area remains robust, and the rate of local home prices continues to outpace most other Canadian markets.

Article content

The Windsor census metropolitan area (CMA), which includes Lakeshore, Tecumseh, LaSalle and Amherstburg, saw the prices for new homes rise by twice the national average last month.

Windsor prices rose 0.6 of a percentage in April, according to Statistics Canada’s latest New Home Price Index, compared to the national average rise of 0.3 percentage points. That was the sixth-largest monthly increase among Canada’s 27 CMAs in the report and the second highest in Ontario after Ottawa-Gatineau.

Statistics Canada’s New Home Price Index uses December 2016 as the base from which to measure housing costs and is assigned a value of 100. Windsor has climbed to 144.3 on the index since then.

“I’m not surprised at all,” said Manor Realty general manager Rob Agnew.

Article content

“We still have a huge demand for homes. I think we’re going to see the same thing for the next couple of years with all the economic growth coming to this area.”

The Bank of Canada’s rate hikes did succeed in slowing the rise in new home prices more on a national basis. The first three months of 2022 saw an average national monthly rise of 1.1 percentage points compared to .3 for April.

Agnew said the local market last month saw the first signs of the impact of the rate hikes, with average sales dipping to $692,759 from $723,739 in March.

However, he added, most of that dip came in the resale market. Agnew said he hasn’t seen evidence the new-build market has been impacted yet.

“I’ve actually seen more buyers willing to pay slightly more for a new home than have to get into a bidding war for a used one,” Agnew said. “The prices are fixed, you get to pick out the finishes and designs to meet your needs.

Article content

“There’s a satisfaction about that and it eliminates the worry of wondering if you left money on the table in a bid you didn’t have to leave.”

According to Statistics Canada’s April report, the cost of a new home has risen 12.7 per cent in the past year in Windsor and 9.4 per cent nationally.

The number of homes under construction in Canada was at record levels in both the final quarter of 2021 and the first quarter of this year. The number of houses being built in the first quarter of 2022 was 24 per cent higher than in 2020.

“Locally, we’re no different,” said Brent Klundert, who is vice-president of both homebuilder B.K. Cornerstone Design/Build Ltd. and the Windsor Essex Home Builders’ Association.

“We’re experiencing a bit of a building crunch because there’s not much of a land inventory for residential lots. Land for residential lots is the biggest factor in why prices are going up.”

Article content

The rising cost of land has become significant enough that it has caused a shift in the market in terms of housing style preference. There are an increasing number of two-storey homes being built.

“As land has become more expensive, it’s more expensive to build out on one storey because it requires a bigger footprint,” Klundert said.

“To get the same square footage, you need to build up.”

He added there also needs to be a greater variety of zoning in terms of available density. There’s huge demand for multi-residential zoning that would allow for more townhouses to be built.

“To change to a higher density zone in a single-family residential area can take a long time,” Klundert said. “It can really get bottlenecked at both the county and municipal levels.”

Article content

The other factors driving the price escalation are the cost of softwood lumber and labour. Unprecedented demand has created shortages for both.

“Softwood lumber prices have increased incredibly,” Klundert said. “In the past one to one-and-a-half years, they’ve doubled or even tripled.

“Just the lumber for a typical house we build costs $60,000 to $70,000 more.”

He added just about every item in the construction of a house has gone up and some basic products like drywall, insulation, plastic piping and concrete are on allocation with the limited supply available.

Klundert said he expects the demand for new homes to remain strong with all the positive economic announcements in the past two months. He’s also optimistic that more supply will be available to balance the market.

“Municipalities are working to get sanitary and water sewers and storm sewage management systems up to where they need to be to increase the number of subdivision agreements they can sign onto,” Klundert said.

“You should be seeing more of those come to the area very soon.”

Dwaddell@postmedia.com

twitter.com/winstarwaddell