Is This the Housing Break You’ve Been Waiting For?

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New data shows real estate prices across Canada are down for a sixth month straight. The data from the Teranet–National Bank, National Composite House Price Index shows prices fell 0.3 percent in March compared to February.

Save for March in 2009, this is first time prices have fallen in this month in 20 years. In 2009 it was because of the financial crisis. This is creating some concern for real estate watchers. Spring time is traditionally the hottest time for real estate, more inventory is on the market and in previous years low interest rates have kept prices soaring higher.

Higher interest rates

From 2017 to 2018 the Bank of Canada raised rates five times, by a total of 1.25 percent. For many this has added hundreds of dollars to their borrowing costs. For home buyers this has had an effect on affordability too. Higher rates immediately had a cooling effect on housing like we see in the results of this survey. As well a recent study conducted by the CBC about the debt situation of Canadians, found 58 percent of respondents said an increase of more than $100 in their monthly debt payments would force them to change their spending habits to make ends meet. For anyone carrying a variable rate mortgage from before 2017, their costs will have easily risen by $100 or more.

New mortgage rules

In January 2018 the government brought in new – much stricter- rules for mortgage qualification.  Canadians now have to show they could pay their mortgage if the rate was two points higher than their contract rate or the Bank of Canada posted rate, whichever is higher. This has slowed spending down as well.

Price drop different across Canada

The Teranet–National Bank, National Composite House Price Index shows home prices fell for a sixth consecutive month. But the drop was more severe depending on where you live. For example, indexes were down on the month for seven of the 11 metropolitan markets surveyed, Ottawa-Gatineau down 1.5 percent, Victoria down 1.1 percent, Vancouver down 0.5 percent, Calgary down 0.5 percent, Toronto down 0.3 percent, Winnipeg down 0.3 percent and Hamilton down 0.1 percent.

There were some bright spots where markets were up. Halifax up month over month 0.8 percent, Quebec City 0.5 percent Edmonton 0.4 percent and Montreal 0.1 percent. In places like Calgary it was the ninth straight month without a rise with a total decline of 3.7 percent for Vancouver the eighth month total decline of 4.3 percent and for Victoria the sixth total decline of 3.5 percent.

Year over year still ok

Data from the index shows year over year, most major markets are still up. Calgary and Vancouver are the only places to show declines. For this reason experts are saying this month over month decline should not be seen as a collapse in housing prices.

The report says “In Toronto, Canada’s largest real estate market, apartment prices have been up for 17 consecutive months, while prices of other types of dwellings declined only 1.4 percent over the last 6 months. In Vancouver, the most expensive market, employment growing 2.9 percent in Q1 on a y/y basis should limit further home price declines.”

Could now be the time to look at buying?

For home buyers though this may be the break they were waiting for. Prices have softened slightly but market still looks good long term.  Meantime, sellers may have to adjust their expectations of how long their home will take to sell and at what price.

To find out how much you can borrow, compare mortgage rates today.

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