Financial Friday #57: Housing Prices Hit the Stratosphere!
Housing Prices Hit the Stratosphere!
"Prices are up and inventory is down" is a familiar refrain when it comes to select Canadian housing markets. The difference this time is prices are way up and inventory is way down in almost every market across Canada.
It seems to defy logic as the pandemic is biting many people hard financially. Depending on where you live, it has been hard enough to buy groceries, let alone a new house! We don’t have a crystal ball on how it is going to end, but here are five reasons why real estate continues to climb.
1. Mortgage rates are very low and really don’t have much more room to fall. First-time buyers and those looking to upgrade their housing probably have some serious fear of missing out syndrome and want to buy and lock-in at currently very attractive rates.
2. The pandemic has reshaped housing needs in that we are all spending a lot more time at home and simply need more space. Dad, mom and the kids may all be working, studying, playing, sleeping and trying to chill-out between the same four walls 24/7 - something has to give.
3. The pandemic may have freed you from your morning commute. Many employers have shifted (at least temporarily) to remote work and this has led some to look at housing much farther afield than previously possible. Whether this trend is permanent or will come to an abrupt end as the pandemic comes under control remains to be seen.
4. Travel dreams have been dashed and with no end to restrictions in sight, a lakeside cottage or ski chalet right here in Canada may be just the answer for some. Throw in more financing leverage with the increased equity in your current home and it is easy to see why vacation properties are hot, hot, hot.
5. Building costs are spiraling upwards as the pandemic drives the price of materials to new highs. Just the framing lumber lumber for an average size home these days can be $20,000 higher than one year ago. That little fixer upper with "good bones" is suddenly a whole lot more attractive (and a lot more expensive) than it used to be when compared to the cost of a new build.
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Mortgage Stress Test Gets Some Changes New rules kicking-in June 1st will drop buying power a few percentage points – but is it enough to cool the red hot housing market and what other measures may be in the works? Home Ownership Dreams Fading Away? A brand-new survey from the Royal Bank indicates that 36% of Canadians under 40 have given up on owning a home and 50% of those looking for a home have a budget of $500K - despite the fact the average home price is approaching $700K. Air Canada Receives a Cash Injection Air Canada's $5.9 billion bailout is good news for their employees and customers looking for a refund on their COVID-canceled flight, but it might not be so friendly to shareholders. The Big IF: What Happens When Rates Go Up? Mortgage rates can’t stay this low forever, so what gives when the inevitable happens and rates begin to rise? |