Amid the uncertainty so prevalent in today's real estate conversations, spectators may be surprised to learn that in the current market, opportunity is actually alive and well.
In an article written for Canadian Mortgage Professional almost exactly two years ago, I predicted that interest rates were too good to be true, and could not be sustained indefinitely. I encouraged fellow brokers to secure 5- and 10-year fixed-rate solutions at every opportunity, and for almost every borrower.
That opportune period of borrowing has disappeared and is showing no sign of returning.
Similarly, today's economic climate presents a rare opportunity that will not last forever. Now is the time to be buying real estate in strong regional markets, such as Toronto and other metropolitan centres in Canada.
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Initially, many may ask: how can this be the case, when interest rates are at decades-high levels and inflation is running rampant? The answer lies in the way buyers are busy processing the new landscape and have been scared into inactivity.
With so few active buyers placing bona fide offers, the bidding wars have lessened, allowing a more natural rhythm of buying to occur.
In fact, many buyers in the GTA are enjoying conditions that have not been seen in years. The duress of competing against a multitude of competitive bids has, for the time being, calmed down. Unconditional offers have (almost) disappeared. Home inspections, financing conditions, and a lawyer's review of the status certificate are once again commonplace.
Winter home/Shutterstock
When will the market ramp up again? It is too early to tell -- but it will not take much:
- In recent days, bond yields have dropped. With it, we have also seen fixed-rate mortgages pull back. This might be the trigger.
- 10 years ago, Canadian borrowers enjoyed 35- and 40-year amortizations. If they return with mainstream lenders, monthly carrying costs could drop and kickstart the housing market recovery.
- Or, perhaps the regulator will revisit their (now dated) stress-test guidelines, enabling borrowers to qualify with their contract rate. This too could bring buyers back from the sidelines.
How long this period of buying opportunity will last, no one knows. One thing is for certain, especially when the buyers return: bidding wars will be back as well, and many will wish that they had acted sooner.
This article was produced in partnership with STOREYS Custom Studio.
