If you’re doing the lending rate versus home price tango, here’s why now might be the time to strike
SOME PERSPECTIVE: SINCE the Great Depression, from 1935 to 2008, for 73 years the prime mortgage rate in Canada never went below four per cent. From 2008 until last month, it never went over four per cent.
That’s 14 straight years of “cheap” money fuelling our housing market. The result was a flood of buyers, foreign and domestic, end users and investors, all wanting in to take advantage of the run up in values.
In 2008, when the low mortgage rate period started, the average price of a home in London was $211,000. That average price climbed steadily, reaching our current level of about $640,000 in September 2021. Our market went on a wild ride for the last 12 months, rising and falling about $200,000 in that period!
After about six months of steady declines from the peak, our region’s home values reached a bottom. Average prices actually rose about two per cent in September, to $644,000. The number of homes sold was still down about 40 per cent compared to historical averages for the month. Price reductions were common as sellers tried to induce buyers to their properties.
Inflation remains the number one priority and target of central bankers in Canada and worldwide. They’re signaling for more rate increases to come through the balance of this year. Economists believe another .75 of a point will do the trick, and that we’ll hopefully steady the ship during a mild recession in 2023, and possibly settle our bank rates back down slightly.
These are unprecedented times (post the Great Depression). The “bubble” of the last year has created some winners and some losers, and the drama of these difficulty times for sellers shouldn’t be minimized. Managing to make informed decisions today does require perspective, but we can only do what’s best for today.
What we know is in the short-term interest rates are going up. We know that house prices have stabilized. We know that we have a housing shortage that will take years or decades to remedy. We know the housing problem will only be exacerbated by increases in immigration and reduced housing starts in the short-run due to a skilled trades shortage and a more cautious builder community.
We should expect house prices to stabilize where they are. We should expect the cost of borrowing to continue to rise for the foreseeable future. We should expect this “stable” housing market, where demand and supply are somewhat aligned, to continue through next year.
For sellers, your home won’t sell if you don’t make it available to the market.
For buyers, if you’re purchasing with a mortgage, the borrowing costs will only go up.
The cost of ownership may never be lower than it is right now. You can’t turn back time to lower rate periods or lower housing cost periods ― you can only make decisions based on today. Secure a mortgage commitment before Halloween, before rates rise again, and find that dream property you didn’t realize you could afford. Lock in a mortgage that you can afford while you can. Don’t live with the regret of having missed this buying opportunity, when rates are still historically low and prices have stabilized.
High- and low-priced real estate listings around town this week
Address: 61-2189 Dundas Street East
MLS number: 40259706
List price: $150,000
Days on market: 156
Size: 1 bedroom, 1 bathroom, 600 square feet
Listing agent: Karen Greasen, Broker, Re/Max Centre City Realty
Address: 1745 Kilally Road
MLS number: 40327717
List price: $3,325,000
Days on market: 25
Size: 3 bedrooms, 4 bathrooms, 4,700 square feet
Listing agent: James Hudson Smith, Sales Representative, Sutton Group-Select Realty Inc. Brokerage
Address: 1-511 Gainsborough Road
MLS number: 40335239
List price: $239,900
Days on market: 7
Size: 2 bedroom, 1 bathroom, 885 square feet
Listing agent: Frances Fletcher, Sales Representative, Keller Williams Lifestyles Realty
Address: 40 Sir Robert Place
MLS number: 40266200
List price: $4,580,000
Days on market: 99
Size: 5 bedrooms, 4 bathrooms, 7,650 square feet
Listing agent: Kim Mullan, Broker, Sutton Group – Select Realty Inc.
London South & West
Address: 32-198 Springbank Drive
MLS number: 40325975
List price: $135,900
Days on market: 26
Size: 2 bedroom, 1 bathroom, 640 square feet
Listing agent: Zahra Khawari, Sales Representative, PC275 Realty Inc.
Address: 1938 Kilgorman Way
MLS number: 40331360
List price: $3,495,000
Days on market: 14
Size: 5 bedrooms, 6 bathrooms, 5,753 square feet
Listing agent: Linda Joan Rice, Sales Representative, Royal LePage Triland Realty
Disclaimer: London Inc. does not guarantee the accuracy of the statistical data on this page. The data does not represent the listings of any one agent or agency but represents the activity of the real estate community in the area. Any real estate agent’s ad appearing is separate from the statistical data provided, which is in no way a part of their advertisement.