Real Estate Talk:
Opportunity in a bumpy market

Where opportunities lie in an uncertain real estate market

By Joseph Marovitch

July 21, 2022

The average posted 5-year fixed mortgage rate at CIBC, TD, and RBC is 5.27% +/- at each bank today. With these rising interest rates, buyers are diminishing. There are still more buyers than homes but few, if any, multiple offers. The entire situation where bidding wars took place is now replaced by more flexible sellers. Come September, we should see more homes for sale, and a full-blown buyer’s market.

Therefore, the first opportunity coming to buyers is increased supply in September.

The entire situation where bidding wars took place is now replaced by more flexible sellers. Come September, we should see more homes for sale, and a full-blown buyer’s market.

Over the past two years, buyers who borrowed the down payment on a house because borrowing costs next to nothing, are now getting hit with high-interest rates and inflation at 8.1%. For those who did not have the income in the first place to sustain a property, the carrying costs of the purchased homes must be insurmountable, which is why we will likely see those homes come back on the market before they break the buyer’s bank.

This is where the second opportunity comes. Buyers in the market to purchase may want to put down as much cash as possible in a market-priced home to avoid the high-interest payments.

The third opportunity is to take a shorter mortgage period than five years for an amortization of 25 or 30 years. The federal bank is using all its power to fight inflation through interest rates. Should we all get through the seventh wave of COVID-19, should the Russian war on Ukraine cease, and should governments around the World, like the USA, get their act together and find common ground, we may see those interest rates and inflation drop at which point, and with a shorter mortgage period, owners may refinance at lower interest rates.

‘Like gambling, the moving pieces are interest rates and inflation, but barring an earthquake, terrorism, and war, the one constant is real estate prices will rise whether you buy now or later.’

There will come a point when inflation and interest rates will decrease, however, prices will eventually begin to rise again, especially on the island of Montreal. Like gambling, the moving pieces are interest rates and inflation, but barring an earthquake, terrorism, and war, the one constant is real estate prices will rise whether you buy now or later.

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State of the market

According to recent articles in the National Post, news from RBC, Global News, and the CMHC, real estate prices are starting to plummet across Canada. This is no surprise as the Fed raises interest rates quickly to combat hyperinflation of 8.1%. We are both short on supply and buyers, though buyers still exceed supply.

This is a situation where we just hold on a little longer and do not panic. Come September, we may see many more properties on the market with more flexible terms and prices.

I say we ‘may’ see these changes, however, there are issues that can prolong the bumpy ride. The issues are three-fold.

The first part is the pandemic. The infection rate from the variant BA 5 is rising much quicker than the government is informing the public. However, the government is doing nothing because the Quebec government believes it will affect the upcoming election negatively for them. Except when deaths rise in September due to lack of funding in the health care system and no precautions or warning taking place, what spin will the Quebec government provide the public?

‘This is a situation where we just hold on a little longer and do not panic. Come September, we may see many more properties on the market with more flexible terms and prices.’

The second part is health care. If you speak with health care professionals at any hospital in Montreal, you will discover that there is no budget for staff, medicine, or even Band-Aids. The government thinks it is more important to finance the Language Police than the health care system, again a political decision to not rock the upcoming election. This issue is causing overcrowding and staff to quit.

The third issue is Bill 96, which ignores the charter of human rights and seriously divides the French and everyone else in the province. This bill is leading to many leaving the province, including University graduates and corporations.

We all have the power to direct the situation via voting in the next election. Think about that.

Have a great week, and stay safe.

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Feature image: energepic.com

Other articles by Joseph Marovitch