Commentary on mortgage rates and real estate outlook:
Affording a house may be just a little bit further down the road
Recently, I did a seminar for REALTORS® on the economic outlook for real estate in the Guelph, Kitchener/Waterloo, Cambridge area and what they can tell their clients about rates. Several economic indicators such as unemployment, consumer and business confidence, inflation are positive – but then why did the Bank of Canada raise its rate? For that very fact: they’re trying to, “head-things-off-at-the-pass”, before the economy overheats and inflation becomes a problem.
Guelph and the surrounding area will continue to benefit from the proximity to the Greater Toronto Area (GTA). People who work in the GTA are willing to drive to affordability. I’ve also noticed more first-homebuyers who wish to own a detached house, look to buy in the Kitchener/Waterloo/Cambridge areas and further as you can still buy a decent detached house for under $380K. The average price of a house in Guelph is just over $500K which may not be affordable or possible (depending on your debt load and income).
There’s no real reason for the Bank of Canada to raise rates again in the near-term, as inflation is still low, and the only part of the economy that was over-heated was the housing market in two key urban areas – Toronto and Vancouver. The Bank of Canada in one of the articles noted below still predicts economic resilience in the light of trade wars.
The mortgage-regulatory changes that occurred in January 2018 did cool the market, but the real issue is not that people were buying homes that they couldn’t afford. The real issue in the housing market is supply and demand. I’ve recently read in a Genworth report that there will be over 500,000 millennial-lead households in the next 10 years. With baby-boomers not yet ready to give up their homes, the one answer to demand is to build more. Many smaller communities outside of major urban areas will benefit from this growth. Guelph is still in a “sellers-market” but higher-priced homes are languishing on the market because people who are selling their homes for $500K are still having a hard time qualifying and stomaching purchasing a home for over $800K which is close to the purchase price needed to leap into the next category of home.
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© Sandra Lastovic is the Principal Broker with the Mortgage Centre in Guelph. With over 15 years’ experience and holds a M.Sc. from the University of Guelph. She was recently ranked at the top 75 agents in Canada by The Canadian Mortgage Professionals annual survey and 2017 Most Influential Women in the Mortgage Industry. She can be reached at 519-763-3900 x1001 or www.skipthebank.ca™