Challenges may be steep – but some conditions are favourable for would-be buyers, executive says
Warren Buffett has a maxim: Be greedy when other people are fearful, and be fearful when other people are greedy.
It’s an adage that rings especially true for the current Canadian mortgage and housing markets, according to Mortgage Outlet co-founder and director Elan Weintraub (pictured), with opportunity to be found despite many challenges.
While the housing market has accelerated at a modest pace in recent weeks after a protracted slowdown throughout 2022, interest rates remain high and affordability is still stretched – but buyers who are ready to purchase can also find advantages in a cooler climate with less competition, according to Weintraub.
“I do think that some buyers are going to say ‘The rates are too high, I don’t want to buy,’ and they’re not going to be buying,” he said. “So I think there could be an opportunity to buy now or to buy soon, because you’re not competing with 15 people.
“Isn’t it much better to buy real estate when you’re not competing [with others]? If you’re a buyer waiting on the sidelines, it could be a really good buying opportunity.”
Interest rates have ticked upwards in recent weeks, with a further Bank of Canada hike expected to arrive in July. That’s likely to have a further cooling effect on the market, Weintraub said, although the continuing lack of available inventory means demand probably won’t fall off a cliff.
“I do think that prices are going to soften a little bit, but I think there’s still a big shortage of supply,” he said. “So I think that there’s going to be a little bit more of an interest rate hike, and I think fixed rates are going to push above 6%. And that’s going to take some buyers out of the market, which will cause some softness.”
Some landlords whose monthly payments have spiked, meanwhile, could end up having to list their properties, Weintraub said, a move that could “bring a little bit of extra supply” to a market where inventory remains rooted at historical lows.
Canadian Real Estate Association (CREA) senior economist Shaun Cathcart noted that while a bumpy ride could be in store in the coming years, home prices were likely to continue climbing.https://t.co/q0c0yiWKRl#mortgagenews #industrytrends #homesales #houseprices
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 22, 2023
Short-term options remain popular – but not all borrowers are the same
A prominent theme of the mortgage market in recent months has seen many borrowers switch from a variable rate to a shorter-term fixed option, allowing them to avoid short-term increases while also anticipating lower rates down the line.
That’s continued in the wake of the Bank of Canada’s latest hike, although Weintraub emphasized the importance of providing tailored advice depending on the borrower’s specific circumstances.
“One piece of advice that I always give my clients is: check with your lender what the lock-in rate is,” he said. “Because it could be 4.89% and it could be 5.79%. And depending on what that lock-in rate is, my suggestion and recommendation might vary.
“So step one is always check in with your lender. Check in with your lender and then check in with me so that I can validate whether you’re getting a good offer or not.”
It’s important to take a range of factors into consideration when assessing whether it makes sense to lock in, Weintraub added. “Are your needs going to change in the next couple of years? Are you renovating? Do you have credit card debt? I do a more holistic assessment rather than just, ‘Hey, what’s the offer?’”
Communication remains top of mind for brokers
Plenty of turbulence has marked Canada’s mortgage and housing markets in 2023, with borrowing costs surging for many borrowers and inflation remaining well above the Bank of Canada’s target level.
In that environment, it’s essential that agents and brokers remain proactive, maintaining a clear line of communication with their clients and making sure that their queries or concerns are addressed, according to Weintraub.
“I think what brokers should be focusing on is helping people and having conversations,” he said. “Reaching out to clients and making sure they’re comfortable, making sure that if they have a variable rate, they can handle it.
“Also, if you’re a broker, and you’re working with realtors – helping the realtors understand the environment and also potentially helping the realtors grow their business, doing education seminars with realtors – that’s also helping them. Reaching into your database and really making sure that you’re supporting your past clients is definitely important.”
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