Priced out: Dramatic increase in house prices puts goal of ownership on pause for some in N.B.

Erin Hickey has just about given up on her quest to own a home in New Brunswick.

In August 2021, she moved into a three-bedroom apartment in Fredericton with her two sons after she and her husband separated.

She expected the stint in her below-ground-level apartment to last just a few months, with plans to purchase a house of her own somewhere outside city limits in 2022.

But two-and-a-half years later, Hickey said, she’s been outbid and feels out of luck finding a home she can afford that can accommodate her family and her work-from-home needs.

She’s now wondering whether she’ll ever achieve her goal of buying a home, especially with her rent taking a bigger portion of her income every year.

“I can’t think of any better way to describe my rent going up than a ticking time bomb, because it’s going to keep increasing,” Hickey said.

“It compounds yearly around five per cent so far … and at some stage, if I stay in this apartment, I’m going to reach the point where my income will not be able to support this rent.”

Hickey attempted to buy a house shortly after the prices in New Brunswick started a meteoric rise, which also happened in other Maritime provinces, after the start of the COVID-19 pandemic.

By the end of last year, the average home in New Brunswick sold for $297,527, compared with $177,055 in 2019, according to data from the Canadian Real Estate Association.

That 68 per cent increase in a four-year period accounted for the sharpest growth in home prices compared to all other provinces and territories.

Hickey said she was looking for something with three bedrooms and space to set up equipment she uses for work as a sewing contractor.

But by the time she was approved to borrow $170,000 in early 2022, the options were slim, based on her budget.

“I had a really good understanding of what houses were going, for … and [$170,000 ] one year previous would have gotten me a house, no problem … and then within that year, that ability was gone.

“Every once in a while I’ll see a house that’s just under $200,000 and I get excited, like, ‘Oh, here we go, maybe things are going to change,’ and those houses are snapped right up.”

At the start of 2023, Hickey said, her search was dealt a further blow after she learned higher interest rates would mean she’d only be pre-approved for $150,000.

“So yeah, there’s no point in looking for a $150,000 house,” she said.

‘Devastating’ trend for buyers

Hickey isn’t alone in her struggle to find a home for under $200,000, said Devon Babineau, a Realtor serving the Moncton area.

She’s had several clients who’ve tried desperately to buy something at that price, including some who’ve been on the hunt since before the start of the pandemic.

“And what they’re able to buy today, compared to what they were looking at before COVID, is devastating to them,” she said.

Babineau said that from speaking to colleagues, she understands the situation is similar in Fredericton and Saint John, with any home under $200,000 either a mini home, or a detached home that requires significant repairs.

Meanwhile, for the homes selling for around $250,000, the competition is intense, she said.

“One couple — we’ve lost five offers already. In the last offer, we pulled the home inspection and we still didn’t win, and we were $30,000 over” the asking price. 

Prices not expected to drop

The growth in home prices in New Brunswick and other Maritime provinces in recent years is “unprecedented,” said Shaun Cathcart, senior economist at the Canadian Real Estate Association.

He said a combination of factors have led to the dramatic rise, including record-low interest rates during the pandemic, coupled with people from other provinces moving to New Brunswick to take advantage of remote work opportunities and the relatively affordable housing prices.

“If you’re an owner in New Brunswick, you’ve done very well. If you’re looking to own in New Brunswick, you’re sort of going up against much higher prices and you’re competing with, you know, people showing up from Ontario,” Cathcart said.

“You’re also competing with people showing up from all around the world because international migration to your province, in every province, it looks like a hockey stick.”

Cathcart said rising interest rates starting in 2022 have helped drag down home prices slightly in more expensive markets, such as Toronto, but in New Brunswick, prices have mostly just flattened.

He said with anticipation growing about possible interest rate cuts, he expects prices will only go up again as more homes hit the market this spring.

“What do I think prices are going to do? I think they’re going to go higher, and I think that they’re going to go higher more in places that are still relatively more affordable, and New Brunswick is still that.”