Several things happened in 2022. The beginning of the slowdown in the economy started when the Bank of Canada (BOC) raised interest rates 10 times over 10 months. In 2022 we started the year with the BOC lending rate set at .25%. When lenders offered a variable rate mortgage they would add 1 or 1.5% on to the lending rate with a total rate set at 1.25% or 1.75%. Rates started to increase in March with a slight increase. The big jumps started in April and by the end of 2022 the BOC lending rate was up to 4.25% and by the end of 2023 the rate peaked at 5.25%.

At the same time the values of homes were slipping. From a peak in February 2022 the average detached home in Oshawa was $1,218,000 and by July it had dropped to $815,000.

What caused these rate increases that collapsed the market was inflation. In February 2022 inflation was at 5.7% and it peaked at 8.1% in June.

It is easy to come to the conclusion that when inflation spikes, the Bank of Canada increases rates to slow the economy down and with fewer homes selling, values slip. Typically this is a short term result and, in my opinion the near future is looking very bright.

Rates have been coming down along with inflation. The target for the BOC is for inflation is to be around 2% and that is where it currently stands. In response, they have dropped their rates by ¾% over the past 3 months. With the lowering of rates, it would make sense that we should start booming again, however my experience, being in this type of market many times in the past, I am not convinced this will happen. Not at this time.

What has happened is that with the Bank of Canada slowing the economy down, they did such a good job that our economy is in a bit of a slump. Productivity is down, our government has implemented some new taxation strategies that will stifle business investment and with our high numbers of immigration, the unemployment rate is up.

So where are the “rays of sunshine” in Canada today? Well I am going to jump into prediction mode and share where we are with Real Estate and where we are most likely going.

The prices for detached homes in Oshawa have mostly stabilized over the past year with Whitby homes prices dropping by 4% and Clarington dropping by 11%. These drops  are the impact of the above metrics but depressed prices rarely last for long. One of the reasons our market boomed and needed to be tamed was that we were in a “housing crisis” and since then Canada has brought in over 1.35M people, all needing shelter. The housing crisis has not gone away it was just stalled by unaffordable rates. We are still in crisis.

What I can see happening is best explained in this graph showing the Bank of Canada predictions for the next 5 years. As you can see next year they are forecasting a drop from the current 4.25% to 2.75% and then to 2,5% in 2026. This would reduce the payment on a $500,000 mortgage by $400 per month in 2025 and by $460 per month in 2026.

When the rates start to shift downward, the Buyers will start buying. This is the natural result of low prices and affordable rates.. What I can see happening is that the prices for detached houses in Oshawa that are currently at $860,000 will jump to around $1M, Whitby will increase from $1,091,000 to $1.2M and Clarington will jump up to $1.1M from the current $887,000.

If you are a Buyer now is the time to purchase.There is no mystery to housing prices, they increase when there is low inventory, affordable rates and a steady supply of Buyers. This is the market we are moving into.

Now is the time. If you are curious about making a move, I can be reached at lindsay@buyselllove.ca  or 905-743-5555.

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