Welcome back to our monthly report on the status of the real estate market.

There is an elephant in the room that I am going to address straight off the bat. Interest rates. I believe the Bank of Canada is going to raise the interest rates on July 12th by .25%.  I also believe this rise in rates will NOT dramatically effect real estate values in any appreciable way. Here’s why.

On May 25, of 2009, the Globe and Mail Headlines were all about how gas prices had just surpassed $1 / litre for the first time ever. I remember exactly where I was when I had to fill up my car with gas for the first time at this new price level. I was furious, incensed and defiant. I put 20 bucks worth of gas into my car and swore I was going to ride my bicycle all summer rather than pay these absurd prices. It was not long before $1 / litre became the norm and my summer was filled with car trips to lake country. Today, I would be in heaven if gas prices were $1 / litre.

Fortunately or unfortunately, I also remember when interest rates on a 5 year fixed mortgage were 21%. These were the highest rates ever in recorded history, and we certainly hope those will never come back. Notwithstanding that, if you take a look at the chart below, you may come away with a different perspective on interest rates. It is a year to year comparison of rates going back 50 years.

Now that you have viewed this chart, does it give you a different perspective? But wait, there is more good news. The inflation rate over the past several months has been dropping. Remember when inflation was at 8.2% last year? May saw a rate of 3.4%, and although the numbers aren’t out yet for June, its widely expected that they will come in around 3%. That means the rise in interest rates will likely be coming to an end when the bank of Canada feels confident that inflation will settle in below 3%. Expect all that to happen by late 2023 or early 2024.

As for the housing charts, its basically showing a significant increase in inventory along with a moderate decrease in the number of sales. This has caused the “sales-to-new-listing ratio” to drop from May’s 60% to 46% in June. This is for two reasons. Firstly, there is some fear around rate hikes coming in July and secondly, banks are becoming increasingly more difficult when it comes to qualifying consumers. They’re just tightening their belts a little, that’s all. 

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Keep this in mind when decided to buy and sell this summer: The price you pay for your home will never change, but the interest rate you pay on your mortgage will. You can rest assured that in 2024, it will be less, making your home more and more affordable as the rates drop back down. Don’t be like the masses as the masses are waiting for interest rates to drop before they buy. The problem with waiting is by the time they do come down, prices will be back up. Take advantage of the market now!

If you are planning on buying or selling real estate in the next few months, feel free to consult with us first as there are very specific strategies we can employ in this market to leverage it in your favour.

Ken Wilder BA, ABR, CH