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CategoryMortgage Rates

The News Says Home Prices Are Falling… But Are They?

At work, on Twitter, on the news – wherever you are, it seems like everyone is talking about home prices plummeting. That’s the big headline. It’s a neat and tidy story that seems to make sense on the surface: home prices skyrocketed. Then rates went up. Then home prices started slipping. It’s the kind of story that gets clicks and sells newspapers. But if you look beneath the surface you’ll see the full story – one that’s a lot more optimistic, and one that the media often fails to report.

So Are Home Prices Falling?

Short answer: yes. If you look at the Teranet–National Bank National Composite House Price Index, you can see that house prices have been steadily declining since May 2022. 

The long answer, however, is much more complicated. If you zoom out, you’ll see that home prices are still not as low as they were in November 2021. November 2021!!! That’s only 14 months ago. You’ll also notice that home prices are still WAY higher than they were at the beginning of the pandemic.

Clearly, the housing market is still strong. Cheap debt and increased savings drove the cost of housing way way up during the pandemic. Now we’re coming back down to reality. This isn’t a crash; it’s a correction. The pandemic era was unprecedented and exceptional, and all that’s happening now is a reset back to normalcy.

What Does This Mean For Me?

The numbers flashing on your TV screens may seem dire, but honestly, it’s not all that bad. The price decreases are fairly nominal at the moment and only affect a small percentage of homeowners. If you bought between February 2022 and October 2022, you may have lost some equity in your home. But that certainly doesn’t mean anyone should panic.  

As long as you plan to hold onto your home for at least 7 years, you’ll be in good shape. Seven years is just enough time to amortize your acquisition costs including legal fees, real estate fees, and land transfer tax. Don’t buy and flip your home. Leave that to the speculators. The housing market isn’t the stock market; real estate is a long term investment that is safe and reliable. Just wait 7 years to ride out any market turbulence and see a return on your investment.

Here’s What I Recommend

Don’t Wait If You’re In Doubt

If you’re having trouble paying your bills, don’t let your credit take a hit. Refinancing may be your best bet. Even if your renewal rate is way higher, it’s important to take action ASAP.

Explore Alternative Lenders

Maybe your credit is a little lower than it used to be, or your income has come down. There are financial institutions that aren’t the big 6 banks that can help. All you have to do is ask. Just make sure you do your due diligence before diving into anything. 

Plan For the Future

For homeowners over 50, your mortgage may be nearly paid off – but you still want to make sure you have adequate financing options for the future. Make sure you’re planning ahead. 

Speak To A Professional

I know I’m a broken record on this, but it’s important to speak to someone who knows what they’re talking about. Don’t get spooked by the news. Chances are, your home value is still much higher than what you originally paid. You could take advantage of the equity that’s in your home to ease the burden of the higher monthly payments. A mortgage professional can help assess your situation and figure out the best way forward.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca

What To Expect in 2023

Happy new year everyone! I hope everyone reading this took some time to reflect and recharge over the holiday season. There was a lot of negativity swirling around in 2022, and I’m sure a lot of you needed a break from it all. I sure did. It’s easy to get swept up in all of the doom-and-gloom. But if you look at the big picture, you might see that there’s a lot to be optimistic about in 2023 – in the housing market, the economy, and beyond.

Continue reading “What To Expect in 2023”

A Stand-Off Between the Bank of Canada and the Government of Canada

To start off, a bit of good news for once: the average 5-year fixed rate mortgage has fallen over the last two months. Some qualified borrowers are now able to secure a rate as low as 4.89%. But of course, it is good news, so you probably didn’t see it reported in the mainstream media. 

Here’s what you likely did see: the overnight rate went up by yet another 0.50% on December 7 to 4.25%. Another staggering increase at a time when most experts predicted rates would start levelling out. Not only is this rate hike significant – it’s actually record-breaking. A whopping 4.00% increase in just 9 months took us from some of the lowest rates of this century to the highest.

Continue reading “A Stand-Off Between the Bank of Canada and the Government of Canada”

Insights From A Top Canadian Economist: Part 2

Canadian economist Benjamin Tal’s presentation at the National Mortgage Brokers Conference was eye-opening. In it, he posited a holistic view of what’s happening with the Canadian economy and what we can expect to happen next. He’s rarely been wrong in the 20 years I’ve been following him – so I thought it was incredibly important to share his insights with you. 

Part 1 of this series dives into the forces he believes are impacting inflation. These include international economies as well as lasting effects from the pandemic. There’s one factor however that I believe is most responsible for our current economic climate and is worthy of a larger conversation: the labour market.

Continue reading “Insights From A Top Canadian Economist: Part 2”

Insights From A Top Canadian Economist: Part 1

Two weeks ago, I attended the National Mortgage Brokers Conference and had the pleasure of seeing one of the most trusted economists in the country speak: Benjamin Tal. Ben is the Deputy Chief Economist at CIBC. I’ve been following him for over 20 years, as have many Canadians, and for good reason; not only is he exceptionally skilled at simplifying complex concepts; he’s also exceptionally skilled at getting it right.

Continue reading “Insights From A Top Canadian Economist: Part 1”