Changes Come Fast!

By  Dwight Trafford | 

The past few weeks have been eye opening indeed in the real estate market. Prices levelling off, more listings, longer sale times, and rising interest rates. What is happening and what does it all mean?

As the weather gets better, listings will always increase. With increased listings, buyers have more options, and prices tend to settle down. This is still a sellers market. Inventory is still 25% of what it would be in a normal market. A “normal" is a market that favours neither the buyer or seller. Canada still has a severe housing shortage which will not get better in the next decade. The law of supply and demand will keep house prices from plummeting. They will level off, fewer buyers will overpay, and the flurry of activity we have experienced will recede. The anticipated increase in immigration, the decrease in emigration, higher cost of construction, will all contribute to the issue of supply and demand.

Interest rates are rising, and with that, buyers will qualify for smaller mortgages. This increase was expected. The only tool the bank of Canada has to slow down the 7% inflation rate is higher interest rates. Consumers can only handle so many increases, and I believe we are close to that now. They will however, go up more. How much more? Time will tell. The tolerable rate of inflation is below 3% and it will take some work to get back there. 60% of mortgages in the past 36 months have been variable, and variable clients are in for a ride. If they can wait it out, I believe they will still end up better off. As rates rise on the variable rate mortgages, those consumers will have less money to spend on other things, which will contribute to a slow down of the economy and hopefully a slow down in rate hikes.

What a difference 3 months make. We still live in the greatest country in the world. Our economy is solid, our real estate market is solid, and realm estate is still the greatest investment you will ever make.