In January, we have seen sales of existing homes rise by 1.3% compared to December of 2012. If we compare these figures to this time last year, there is only a small decrease in sales. Home Price Index also increased by 3.1% last month which is a small increase since April 2011. This suggests that the housing market is not in trouble as some economists are predicting.
Sales initially began falling fast in 2012, furthermore, the new B20 lending rules that the government introduced and instilled in July did not help this situation. However, the reason the government implemented these new mortgage rules was from strictly the fear of having a housing market crash from very low interest rates offered by lenders. In other words, we did not want to become victim to a housing market crash that the United States experienced a couple of years back and is still feeling the initial burn of the impact.
Economists still cannot agree on whether we face the same fate as the United States or if we can escape it by a thin thread and have a gradual soft landing/transition.
If we shift towards the latter of perspectives, one can note that prices of homes in Canada have been steadily rising in the past three years. However, there is no denying a fall in January, but one must realize that these first quarters of the year are typically slow times in the real estate industry. Experts predict if the trends keep pushing the way they are going, these declines will begin to fade and things should be in full swing after the first quarter of this year has passed.
This however, is not a sign of a dying market. Sales have actually picked up in the Canada’s most expensive cities since December 2012: Toronto and Vancouver. Due to the surge in buying in these particular cities and how interest rates are still relatively low, it would be ideal to buy now before housing costs increase as interest rates will follow in suit. The current key lending rate has been 1% since September 2010, governed by the Bank of Canada. Predictions by experts have shown that there should be no substantial increase to these interest rates until about early 2014.
This means that if you are currently in the market to buy, it is music to your ears. If you are in the market to sell, it can be viewed as bittersweet for now, until the housing market picks up again for the spring market.