The real estate market in Canada last year suffered lower overall sales. In 2018, the market has started at a slow pace. However, toward the end of 2017, the market had flattened out.
Current Activity In The Canadian Real Estate Market
In the spring and summer months of last year, activity was down with the numbers of listings increasing. This situation brought small increasing residential pricing for housing. With this situation, the market had moderate increases and flattened out toward the end of 2017. Even though activity and sales of Canadian real estate were booming before 2017, amendments to mortgage regulations have caused a slowing of the Candaisn's real estate market.
With the new amendments to mortgage regulations, all lenders must qualify new loan applicants. Also, those renewing a mortgage or negotiating a new lender must follow these new regulations. As of 2018, all loan applicants are qualified on the mortgage rates which run around 200 points more than previously discounted mortgage rates. These new regulations were voted on and approved in the latter part of last year. These regulations went into effect on January 1, 2018.
What Do These New Regulations Mean For The Canadian Real Estate Market
While the earlier boom in real estate sales may be over, the Candian real estate market is in a state of balance. Concerning months of inventory, in the late part of 2017 in housing inventory, the average months of housing inventory were 4.8 months. The number of months of inventory signifies how it could take to liquate actual inventories at the present rate of sales activity. Overall, the current long-time average is 5.2 months. Presently, these numbers represent a balanced market showing the housing inventory is meeting the demand.
The most disappointing outlook comes from The Candian Real Estate Association. CREA is a trade organization that includes over 100,000 of real estate brokers, and agents in Canada. CREA has dramatically lowered its real estate sales project for 2018. CREA's financial analysts feel the stronger mortgage rules and affordability issues in Canda's real estate markets will slow the Canadian real estate market.
CREA has posted a possible decrease of 5.3% in the number of actual home sales. CREA has projected a 1.4% decrease in national average housing prices for this year. This decrease is based off last year's average housing price of $503,400, bring the average housing price for 2018 at 496, 353. If CREA statistics forecast is accurate, this year would be the first year the national housing price has decreased since the worldwide recession in 2008.
The Forecast For Buyers
Unfortunately, stricter lending regulations usually indicate possible higher interest rates. For buyers, they will not be able to afford the same home as they could have bought just last year. On average for the new home buyer, their housing budget will have to be reduced from 5% to 25%. On borrowers qualifying for a mortgage with a down payment of less than 20% would see an 18% reduction in the maximum purchase price in the home they could buy.
As a buyer, a mortgage pre-approval is a good idea before you start shopping for your home. For home borrowers having issues qualifying with a traditional lender, a non-prime lender could be a good choice. Non-prime lenders will allow higher debt ratios. However, these lenders charge higher mortgage rates. Some non-prime lenders may charge a lower interest rate but make up for their lost revenue by adding additional fees.
The days of selling a home in a week or two are gone. However, the changes in the market will warrant rapid housing price changes creating a balance stable real estate market in Canada.
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