Hi there,

Spring is almost here, and the market is certainly heating up!

February 2020 saw 1,254 sales of residential properties coming in at 0.5% higher than the 10 year average for the month, and 36% higher than February 2019.  With new listings hitting the market at a below average rate, this is pushing us back into a Seller’s Market as the ratio of Buyer’s to Seller’s has a higher number of Buyer’s than the market normally has.

Affordability was the number one reason that sales started dropping in mid 2018, and it seems that mortgage rates dropping more than 1% in that same time span, as well as prices coming down has stimulated the market to pick up in activity once again. 

If we do not see more sellers listing their homes in March through May, we will likely see prices continue to climb, as it is simply supply and demand.  More than likely we will see more homes come on the market in the coming months, and it is likely prices will stay quite stable with only a normal seasonal increase.

It seems quite unlikely that we are going to see prices increase anything like we did in 2016-2018, so it would be unlikely that many buyer’s will be priced out of the market again.

With this in mind, if you are thinking of selling your home this spring, you should be able to sell for a better price than one year ago and also much quicker than you would have last year.

If you are looking to buy, we do have to recognize that multiple offer situations are happening more often that they have for the last 2 years. If we go into any offers with a clear plan, we can certainly avoid overpaying.  Multiple offers are not likely to sell at a substantially higher price than the market value unless a buyer really wants a particular home.

Overall the market appears to be in a good spot, and it seems unlikely that the market will make any significant changes in the near future.

If you are thinking about buying or selling in the near future, and just want to bounce some ideas off of me, I am always happy to talk things over. My advice is always free, so get in touch with any questions you might have!
 

In a bold move on Wednesday (March 4, 2020), the Bank of Canada slashed its key interest rate by 50 basis points to 1.25%, in an attempt to keep the economy moving. It cited COVID-19 as the primary reason for its decision. Although winter weather, the rail blockades, and the political climate have also played a role.  

As the country braces for economic impact, the Bank of Canada is attempting to curb anxiety and ease the concern of a possible recession.  

In an interview with BNNBloomberg, the Chief Economist with Manulife Investment Management Frances Donald says,  “We are living through history that will end up in textbooks and case studies as we analyze central bank policy, how effective it is, how quickly central banks should be reacting, and whether or not we look back and say: ‘They acted too late,’ ‘too early,’ or ‘right on time.’ Fifty basis points is a very strong message from the Bank of Canada. They are concerned about downside risks. But, I suspect that this is in conjunction with globally-coordinated rate cuts.”

What does all this mean for the real estate market? Here is what we know.

Savings for Home Buyers

The cut could mean significant savings for home buyers. The lower rate will potentially translate into lower mortgage rates. 

According to Ratehub.ca, a “full 50-basis cut to a $450,000 mortgage on a 2.6 variable rate would shift the mortgage rate to 2.1%, and mean about $115 per month in savings per month, while an $800,000 mortgage is more like $200 a month in savings.”

Banks may choose not to pass on the additional savings because it means more profit for them. Make sure to consult with a mortgage broker to get the best possible rate for your situation. They will be able to compare mortgage rates across multiple lenders.

Stimulate the Real Estate Market

Lower rates could stimulate the real estate market in slower growth areas like Newfoundland and the Prairies. 

An Imbalance

This interest rate drop might create a further imbalance in the Victoria, Toronto, Southern Ontario, Ottawa, and Montreal markets that are already facing hotter markets. Homes are in shorter supply, creating more demand and increased pricing. Economists say this is short term pain for the long term good of the economy and will help keep us out of a recession.

Higher Prices

Home prices may start to rise. As buyers are increasing the amounts they can borrow, supply might begin to drop, driving home prices up. Something to watch!

Global Considerations

Economists are predicting the international markets will slow due to the global impact of COVID-19. Why is this important? There is an anticipated slowing of the global economy, which will impact foreign investments and the supply chain in Canada.

Existing Mortgages

As explained by the Educators Financial group, if you have a mortgage already, how much – and when –you’ll feel the impact of the rate decrease will depend on whether your mortgage is variable or fixed rate, open or closed.* 

If you have a variable rate mortgage, the amount of interest is contingent on the overnight rate. Financial institutions pass on any decrease in the rate to consumers almost immediately.* 

If you have a fixed-rate mortgage, nothing will change until the fixed term ends, and it’s time to renew

Source: https://www.rew.ca/news/the-bank-of-canada-cut-its-key-interest-rate-what-does-it-mean-for-the-real-estate-market