real estate

Since last October, Canadians have been optimistic that there would be some relief in that the Bank of Canada would decrease interest rates. So much so that the anticipation fueled the real estate market at the beginning of this year, but as we moved out of winter into spring it was apparent that interest rates would stay high and that the relief would come much later than hoped. Let’s face it, it’s been tough for both buyers and sellers and the month of April was indeed a slow month in real estate. The question is now when are rates going to go down and is the Bank of Canada waiting for the United States Federal Reserve to reduce rates? Traditionally Canada has closely followed what goes on south of the border. Unfortunately earlier today the U.S. central bank released a statement that we might not see them make a rate cut this year following a recent increase in inflation.

The question is now when are rates going to go down and is the Bank of Canada waiting for the United States Federal Reserve to reduce rates?

Business insolvencies (unable to pay their debts and can lead to bankruptcy) has increased from last year by 87% and is at the highest level since 2008. The job market is also not doing great with a 20% year over year rate of unemployment. Real estate markets across Canada are feeling the pressure and prices are softening. We are also seeing less building happening which is going to affect the number of available housing for people. We all know that the Canadian Government want to create more housing and anybody and their dog should know that is not going to happen in this current environment and I’m sure the people at the Bank of Canada are aware of this.

For those of you old enough, do you remember what happened in 1996-1997, 1999, and 2003-2004? You may recall that the Bank of Canada went ahead and reduced rates without following the Federal Reserve, going down as far as 3% while the Feds stayed at 5.5%. History shows that Canada does not have to wait and we might actually see rates go down sooner than we fear. Sure we may see the Canadian dollar fall just like those times previously when it took almost $1.50 to buy $1 USD but I am still hopeful we will be seeing some decreases in rates regardless.

The interesting thing about this is that Mark was selling real estate in that time period. He didn’t know then, but he joined real estate in a slow market in 1995 and it remained a slow market until 2002. What he knows now is that when the market does pick up it always goes up higher and faster than when it went down.

Want to know more? Put our expertise to work for you! We know history always repeats itself, don’t look back wishing you had made a good move or smart investment.

In December, the Bank of Canada held interest rates at 5% for the second time and the last increase was back in July, making it safe to say that inflation is on the way down (which is very much needed as people don’t have the disposable income like they had over the last couple years). In fact, people are struggling to pay their high rents and mortgage payments. Have you noticed that you can go to your favorite restaurant and basically get a table at any time? That there is more selection at the stores, and lots of sales where you can actually find something you like? Even gas prices are down! The unemployment rate has increased and people are simply staying put to save money. Technically we are in a recession right now as we’ve had 2 consecutive quarters of negative growth, which Statistic Canada shows but the Bank of Canada is not calling it. Once the Government wants to admit that we are in a recession we will start seeing rate decreases, which is why we expect multiple rate decreases throughout 2024 starting in the first quarter.

High interest rates have created one of the best buying opportunities Mark seen since starting his real estate career in 1995.

With the current bond rate at 3.533% (down from the highest it hit in the past few weeks of 4.45%) we will see lower 3 year and 5 year fixed term rates. Based on the current bond the 5 year fixed term mortgage rate should be around 5.19% and at the moment it is at 5.6%. Part of the reason the rates haven’t gone down yet is that the banks typically aren’t aggressive in lending money out at the end of the year. Once the new year kicks in, banks will be more competitive and we will see the 5 year rate down to where it should be at 5.19%. It gets better, we could see the Bank of Canada drop rates 8 times next year. What does this mean? When the spring comes around the market is going to be smoking. Prices are going to move up quickly and right now will be one of the last low opportunities for a long time to come.

News flash, if you’ve been waiting on the sidelines for interest rates to go down you are going to be competing with everyone else that is currently sitting and waiting for the same thing.

The smartest move you could make is to get into contract now to secure the current price and have a closing in a few months when we expect interest rates to be much lower. You’re purchasing the property at today’s low prices with tomorrow’s low interest rates, it’s a double whammy.