- Does it make sense to buy in this market?
Based on statistic reports from Buffini & Company. With mortgage rates in Canada remaining at historical lows until at least 2023, borrowers can secure a lower monthly payment on a higher priced home. If a buyer can afford it, they should get pre-qualified with a trusted lender. Otherwise, they can still take advantage of the low rates in several months’ time should prices cool.
- Are prices going to cool down?
The National Association of Realtors projects a temporary, slight leveling off of prices later this year, but no dramatic declines. Still, this could potentially fuel a wave of “second-chance buyers” who have been priced out of the current market.
- Is this market a housing bubble?
Canada wasn’t hit as hard as the US during the housing crisis in 2008, yet this housing market has everyone worried whether today’s hot market will lead to a similar crash. Based on economist’s statistics, they do not think so. They see the activity as evidence of a boom- not a path to a crash.
Some evidence includes:
Prices Match the Market
While rapid price increases can indicate a bubble, things are different in Canada. Housing makes up a significant part of the economy.
In Canada, higher home prices reflect the higher levels of real estate market activity.
A home in Canada costs 46% more than in the US.
The share of GPD, Housing in Canada is 9.3% compared to 4.6% in US.
Borrowers’ Credit Scores Are Up
Qualified buyers are always good news for a real estate market, and Canada has plenty.
87.7% of current borrowers and 86.6% of new borrowers have a 700+ credit score. Up from 83.3% and 83.6% in 2020.
This data suggests that buyers are less likely to default on their mortgages.
Strict Lending Rules
In June 2021, the government strengthened stress test regulations which leads to a new qualifying rate for uninsured mortgages (less than 20% down):
5.25% or two percentage points above their concentrated rate, whichever is higher.
In 2008, many people were tied to mortgages that they could no longer afford. The stricter stress test protects buyers from potential foreclosures. This move is anticipated to help cool the current market.