Yet another interest rate hike by the Bank of Canada has contributed to the recent chill in real estate prices across the country.
But in Cochrane, the market has gone from ‘crazy’ to ‘a little less crazy’ in the last few weeks.
A slight decrease in demand and a slight fall in prices from an overheated market do not add up to anything to worry about, according to local agent Kendra Watt, of CIR Realty of Cochrane.
“The market in Cochrane is still hot. Everyone talks about it cooling down and things are slowing down, which is true, so it’s not as chaotic as it was six weeks ago. But housing prices are still elevated, and there’s still really low inventory, and there’s still lots of buyers out there. So it’s still very much a hot market,” she said.
Watt attributes the minor cooling off in Cochrane to two things – rising interest rates, and the fact that sales in Cochrane and Calgary from February to April were fuelled by buyers from Ontario and British Columbia.
When the Ontario market cooled, the number of buyers went down.
“It’s a noticeable drop, without as many Ontario buyers now,” Watt said.
That doesn’t mean market watchers or potential home sellers in Cochrane need to start panicking, however.
“Cochrane is an excellent community to invest in,” Watt said. “Not only is it a great community to raise your family and get easy access to amenities and outdoor activities, it’s also offering housing prices that remain below the national average.
“Even though prices took a sharp increase, the desirability of this community and this market is expected to maintain these higher prices over the next few years.”
Overall, house prices are still elevated in Cochrane, compared to last year.
For the month of May, there were 101 sales of single-family homes (not condos), with an average sale price of $586,831. Comparatively, in May 2021, there were 102 sales with an average sale price of $461,361.
Echoing Watt when describing the local market, ‘less crazy’ is the descriptive used by Vivian Cox, of Century 21 in Cochrane.
“A house listed the other day, four days on the market, they let the property go for $5,000 less than listed price, which was not heard of in the last year,” she said. “In the last year, if it came on the market, within so many days you had to pay full list. Now, we’re seeing a bit of negotiation again.”
She said she’s noticed a bit of a cool down over the past three weeks, but Cochrane still has advantages over other parts of the country, not the least of which is affordability.
The Calgary Real Estate Board (CREB) reports that sales in Cochrane continued to remain strong in May, supporting a year-to-date annual gain of nearly seven per cent.
One of the effects of interest rate hikes is that they make mortgages a bit harder for those who may be pushing the limits of what they can afford.
Anyone applying for a mortgage to buy a home has to first pass a stress test in order to confirm whether or not they can handle higher rates. Even the relatively small rate hikes that have been seen so far this year could mean many would-be buyers are failing to meet the new, higher bar, which could lead to them looking for cheaper homes, or delaying the purchase indefinitely.
In the midst of two straight months of rising interest rates and the Bank of Canada’s 0.5 per cent hike last week, there has been a real estate market cool down across the country.
The national average home price peaked in February, but has declined for two consecutive months.
The Canadian Real Estate Association (CREA), reported that the country’s home price index fell 0.6 per cent between March and April this year, the first time in over two years.
RBC real estate experts predict prices will fall by 2.2 per cent in 2023.
Home re-sales experienced a 12.6 per cent drop. The CREA points to the interest rate hikes by the Bank of Canada as the cause of the slowdown.
On its website, the Canada Mortgage and Housing Corporation (CMHC) states homebuyers may be rethinking their options as mortgage costs rise, and no one is sure when home prices may start to level off or fall.
Lending rates in the early days of the COVID-19 pandemic were reduced in Canada, but those record-low borrowing rates have contributed to rising inflation, which is what's prompting the central bank to change direction.
Food prices went up 9.7 per cent in the past year, while shelter costs are up by 7.4 per cent.
The Bank of Canada raised its benchmark interest rate to 0.5 per cent in early March, and then again to one per cent in April. Then, the central bank raised the interest rate to 1.5 per cent on June 1 and signalled that more hikes are on the way.
In its June 1 statement, the Bank of Canada said the increase in global inflation is “occurring as the global economy slows. The Russian invasion of Ukraine, China’s COVID-related lockdowns, and ongoing supply disruptions are all weighing on activity and boosting inflation.”
The central bank added there is no relief in sight, as inflation “will likely move even higher in the near term before beginning to ease.”
Inflation reached 6.8 per cent for the month of April – well above the Bank of Canada’s forecast, and the highest it’s been in 31 years.
