After the long, drawn-out streak of rising house prices that we have experienced in Canada, the market must be enroute to a cooling off period - eventually. Over the past month, researchers have examined several signs that indicate this time is soon coming and that it may be the time Canadians left out of the housing market have been waiting for. So far, according to Tara Deschamps from The Canadian Press, April 2022’s property sales have decreased 41% from this time last year, and another 27% decrease from just the month prior alone. The Financial Post reports a 3% decrease from March to April in Toronto. The Canadian Press reports an 8.5% decrease in house sales from March to April in the Greater Vancouver Area. The exception to this nation-wide pattern appears to be Calgary, where sales are still decreasing yet prices are rising. The reason for this decrease in sales? The Bank of Canada has increased interest rates from 0.5% to 1% - and as Jennifer Ferreira from CTV News reports, this increase of 50 basis points is the largest increase for Canadians in over 20 years.&nbsp;&nbsp;Experts like David Fleming predict that this increase in interest rates will help Canadians afford homes nationwide. He describes the clear correlation between interest rates and market demand; as interest rates increase, market demand decreases, therefore eventually driving down house prices. The first adjustment to interest rate was back in March where the Bank of Canada increased rates by 25 basis points, from 0.25 to 0.5, as an effort to oppose rising prices; this was the first increase since COVID-19 came around. Fleming that he expects buyers will eventually take advantage of the lowered prices and adjusted interest rates, but he also expects more interest rate adjustments to come. When interest rates first rise, people tend to defer their purchase, causing a surplus of supply, further causing prices to decrease down the line. When these prices are down, especially after a long period of housing prices rising to record-high value, opportunity is created for those who would otherwise be unable to afford a property, such as first-time home buyers.&nbsp;&nbsp;There is another expected interest rate spike coming in June. It is likely that long with this increase, the prices of houses will decrease. The amount of interest shown in purchasing will decrease sales, therefore driving down prices. Whether people will jump at an opportunity to buy will all depend on where the housing prices are. As long at interest rates increase without driving down house prices, people are going to want to wait it out. It is more likely that buyers will not take advantage of the benefits that come along with increased interest rates until it reflects in house prices. Housing affordability needs to be adjusted downward along with the prices.&nbsp;When interest rates increase moderately, it helps with property affordability. What happens if interest rates increase too much? The benefits are not as significant. If interest rates increase too much, too quickly, less people, especially those already in a mortgage, will be able to afford to borrow money. Those already in a mortgage may be at risk of losing their property. Also, raising increase rates can contribute to unemployment. Higher interest rates are known to contribute to cyclical unemployment and will greatly affect workers’ spending leisure, emphasizing the importance of saving.&nbsp;A complicating factor is that we are now entering the “buying season”. Will this disguise some of the market adjustments? Possibly. However, if it does we think that it will be postponing the inevitable.&nbsp;There are those expecting that all of the conditions that we are seeing will come together and result in a Fall or Winter recession. Inflation in the grocery store and at the gas pump, higher interest rates, and a more cautious consumer could slow economic growth at a much quicker pace than is hoped. If this is the case, the housing prices could adjust more significantly and take a much longer time to recover. Be vigilant, but be ready. Opportunities will be available to those that are prepared.&nbsp;

Canadian Market Forecasts: Interest Rates + Affordability

After the long, drawn-out streak of rising house prices that we have experienced in Canada, the market must be enroute to a cooling off period - eventually. Over the past month, researchers have examined several signs that indicate this time is soon coming and that it may be the time Canadians left out of the housing market have been waiting for. So far, according to Tara Deschamps from The Canadian Press, April 2022’s property sales have decreased 41% from this time last year, and another 27% decrease from just the month prior alone. The Financial Post reports a 3% decrease from March to April in Toronto. The Canadian Press reports an 8.5% decrease in house sales from March to April in the Greater Vancouver Area. The exception to this nation-wide pattern appears to be Calgary, where sales are still decreasing yet prices are rising. The reason for this decrease in sales? The Bank of Canada has increased interest rates from 0.5% to 1% - and as Jennifer Ferreira from CTV News reports, this increase of 50 basis points is the largest increase for Canadians in over 20 years. 

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