The Bank of Canada’s decision to keep its key overnight interest rate steady at five per cent for the fourth time was widely expected by the real estate sector, but whether it will be enough to bring buyers back to the market remains up for debate.
“(The) decision to hold rates is certainly a welcomed one for many Canadian homebuyers,” ReMax Canada president Christopher Alexander said in response to the central bank’s Jan. 24 announcement.
Alexander, who pointed to the rush into the market in the early days of the pandemic, said he is hopeful the hold will be enough to induce more activity, “especially for those that have been taking a ‘wait and see’ approach and are waiting for the right time to re-enter the market.”
Mortgage strategist Robert McLister, however, pointed to a different recent historical precedent.
“Last January we saw CREA’s average home price rocket 19 per cent in just five months following the bank’s first rate pause. That’s an extraordinary move,” McLister said. “Will we see the same this spring? It’s not the expectation but if mortgage rates slide into the mid-to-low-four-per-cent range, I sure as heck wouldn’t bet against it.”
James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender, said if the central bank had revealed specifics about a cut that would have jump-started the housing market.
“Any indication of rate cuts from the Bank of Canada would have put upward pressure on home prices immediately,” he said.
Without them, there could be a shift in the opposite direction, given that lenders had been holding off raising mortgage rates after the recent rise in bond yields.
“Lenders will consider moving fixed rates higher since there is no new information from the bank,” Laird said.
One factor working against a prolonged surge in home prices could be the Bank of Canada itself: Central bank governor Tiff Macklem said a jump in home prices could induce the bank to renew its interest rates hikes.
According to the Canadian Real Estate Association (CREA), home prices are forecast to rise in 2024 and 2025, after the MLS Home Price Index (HPI) ended 2023 up 0.7 per cent in December. The average price was also up 5.1 per cent over the previous December to $657,145.
Should there be a resurgence in the real estate market, McLister said rate relief would likely be more gradual.
“If housing activity sizzles more than expected, mortgage rates could remain at a higher altitude, for longer. That doesn’t mean prime rate will hold at 7.20 per cent, but it would imply less rate relief ahead,” he said. “The pace of cuts could be slower and the trough in rates could be higher.”
According to McLister, if housing demand continues to contribute to inflation, the Bank of Canada will face a difficult decision. It may have to choose between tolerating higher home prices or risking negative effects on the broader economy by maintaining high-interest rates.
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TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
