As you are most likely aware by now, the mortgage rules changed on October 17th – if not here you can find a summary of changes. I am going to give you my opinion of what this means to the Calgary Real estate Market.
First some facts: Sales for the month of October were
Week 1 – 352
Week 2 – 375
Week 3 – 463 (rule change week)
Week 4 – 386
Looking at our sales by week makes it very clear that we saw a large spike in sales that was driven by buyers jumping in before the changes took effect. This to me means that the new rules are going to have a large effect of Calgary Real Estate sales volumes.
I forecast that:
- We will now see a substantial decrease in sales as buyers can no longer buy what they thought they would be able to afford. This will increase the number of homes for sale in Calgary putting us into more of a buyers market than we were. Ultimately this will put further downward pressure on pricing.
- Buyers will back off buying as they believe that less people can buy so prices will come down.
- Over the next 3 months we will see a shift in what people are buying due to affordability. IE: Those that were looking at starter homes will now be buying Townhouses and those looking at townhouses will now look at apartment condos.
- I predict that it will take 3 to 4 months before we start to find out what the new normal really is.
Unintended Consequences:
- Buyers may be driven to borrrow private money (at a higher cost) just to secure the home they want putting them more at risk than before the rule change.
- Mortgage interest rates are going to increase. Already the TD Canada Trust increased their rates as the cost & risk of lending money for mortgages has increased.
For a great article explaining above click here