Today talk of the town is How High Will Interest Rates Go in Canada In a Smooth Rock Falls Real Estate Housing Market, while Canadian Real Estate home prices are dropping.
Six months in a row, ever since February 2022, which was just a month before our peak, and you’re even seeing fears now that it obviously makes sense because mortgage interest rates have been skyrocketing.
I have spoken to several people in downtown Toronto who came up with the same assertion, that if mortgage rates are rising, we should get in now before rates continue to rise, and it is true that real estate is being bought and sold.
However, this most recent increase in interest rates, as well as previous increases, are already being felt in the economy. Some may believe that the recent sharp increases in interest Rates would cool the markets, but we should focus on more than just prices.
Keep in mind, though, that house prices in Canada grew by around 27% in 2021 alone. In fact, home affordability may have worsened for Millennial Buyers since prices began to fall. Because affordability is dependent on both the sale price and a household’s ability to pay monthly mortgage payments. A large increase in mortgage rates will drastically boost financing costs.
In order to restore affordability, the asset price – the price of the property itself will need to correct more than it did in the late 1980s, when interest rates came down quickly and helped stabilize affordability as well. Millennial Buyers are quite vulnerable to a decline in Real Estate Housing Market values at this time. A correction in the Rock Falls Real Estate Housing Market has already begun since February 2022.
To help restore some of this affordability, we expect that the peak-to-trough decline in Canadian Real Estate Housing prices will be around 20%.
The ratio of debt to disposable income has increased to 182%, according to Statistics Canada, and that the ratio of Canadians’ debt to their income increased in the second quarter, as their debt rose faster than their income.
Household credit market debt as a percentage of disposable household income increased to 181.7% on an adjusted basis during the second quarter,
So, the rise resulted from a gain in disposable income of 1%, but an increase in household credit market debt of 2.1%. Consumers accumulated $56.3 billion in debt during the second quarter, including $48.7 billion in mortgages.
Debt burdens have been rising for some time, but asset prices have been rising by a greater amount, resulting in rising family net worth.
To support the Canadian Real Estate Housing Market from affordability standpoint the federal government has announced that they will sponsor a rent-to-own program as part of the previously announced $2 billion affordable housing initiative.
The funds, allotted in past budgets, would be used to create around 17,000 additional houses across Canada, including more fast housing for the homeless or those at risk of homelessness, as well as affordable housing projects.
This initiative would support housing providers in developing and launching a new rent-to-own model, which would help Canadians who are in dire need of housing, shift from renting to home ownership one day.
It is almost impossible for Canadians to even save for a down payment to buy a home and I hope that this new initiative will bring economic prosperity to Canadians. Also, I hope that officials from housing agencies will move quickly to work with housing providers to help eligible families move from renting to owning a home ownership.
During the COVID-19 pandemic, home prices in Canada increased by more than 50 percent, driven by record-low interest rates and robust demand. However, recent significant rises in interest rates by the Bank of Canada is an effort to limit high inflation and has slowed the housing market. Moreover, it has given buyers more negotiating power.
Housing affordability is a complicated issue. With rising interest rates and the Rock Falls real estate housing market, we need to find opportunities and solid solutions to support eligible Canadian families in reaching their fullest potential.
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