Record high sales seen again in March

For the second month in a row, sales activity not only reached a monthly high but also hit new record highs for any given month. Gains occurred across every property type as they all hit new record highs.

An increase in new listings this month helped support the growth in sales activity. However, inventories have remained relatively low, ensuring the market continues to favour the seller. 

“While supply levels have improved from levels seen over the past four months, inventory levels are still well below what we traditionally see in March, thanks to stronger than expected sales activity,” said CREB® Chief Economist Ann-Marie Lurie. “With just over one month of supply in the market, the persistently tight market conditions continue to place significant upward pressure on prices.”

With an unadjusted benchmark price of $518,600 this month, the monthly gain increased by another four per cent. After three consecutive gains, prices have risen by nearly $55,000 since December and currently sit nearly 18 per cent higher than last year’s levels.

Despite the strong start to the year, price gains and rising lending rates are expected to weigh on demand in the second half of this year. Nonetheless, persistently tight conditions will likely continue to impact the market over the next several months.
Detached

Sales continued to surge in March reaching record highs, thanks to a boost in new listings. Year-over-year sales growth occurred in every district of the city except the City Centre. The pullback in the City Centre is likely related to the significant drop in new listings, providing less choice for potential buyers.  

The months of supply for detached homes has been below one month since December. The exceptionally tight conditions have had a significant impact on home prices. The benchmark price for detached properties rose to $620,500 in March, which is over $73,000 higher than December levels and 20 per cent higher than levels recorded last year. Gains in prices have also caused a significant shift in the distribution of homes, where over 57 per cent of the available supply is priced over $600,000.

Semi-Detached

Semi-detached sales posted another record month of sales and year-to-date sales are over 43 per cent higher than last year. Improvements in new listings helped support some of the growth in sales but did little to improve the inventory situation.  

Inventory levels remain relatively low, causing the months of supply to remain nearly 70 per cent lower than long term trends for this time of year. Tight conditions caused prices to trend up again this month, for an unadjusted monthly gain of nearly four per cent. Prices trended up across all districts and are 16 per cent higher than last March. Year-over-year price gains have ranged from a low of nine per cent in the City Centre to a high of nearly 22 per cent in the North district.

Row

Row sales reached an all-time record high this month, contributing to year-to-date sales of 1,550 units, which is a 96 per cent increase over last year. An increase in new listings helped support the strong sales. However, inventory levels have been steadily declining compared to the previous year and are at the lowest March levels seen compared to the past seven years. Strong sales this month combined with the lower inventory levels saw the months of supply push below one month.

The persistently tight conditions have placed significant upward pressure on prices. In March, the benchmark price reached $335,400, which is over four per cent higher than last month and nearly 17 per cent higher than last year. While strong gains have occurred across all districts of the city, the North East, North West, South and East districts have not yet recorded full price recovery from their previous highs.

Apartment Condominium

Apartment sales continued to surge in March, contributing to the best start of the year on record. The sudden shift in demand could be related to less supply choice in lower price ranges for other property types, causing many to turn to the condominium market. The rise in sales has outpaced the growth in new listings, causing inventories to ease compared to last year and the months of supply to drop to the lowest recorded since 2007.

After several months of tight conditions, we are seeing upward pressure on prices. In March, the benchmark price rose to $265,900 – nearly three per cent higher than last month and six per cent higher than last year. The recent gain in price has helped support some price recovery in this sector, but prices remain over 11 per cent below previous highs.
REGIONAL MARKET FACTS
Airdrie

For the second month in row, new listings in Airdrie reached a record high for the month. This helped support further sales growth in the city. The sales to new listings ratio has eased to 75 per cent, providing some opportunity to see inventory levels improve relative to figures recorded over the previous five months. However, inventory levels remain exceptionally low relative to sales, keeping the months of supply below one month.

There has been less than one month of supply in this market since November of last year. The exceptionally tight conditions have caused significant gains in prices. In March, the benchmark price rose to $473,400, nearly 10 per cent higher than last month and 30 per cent higher than last year. The highest gains occurred for both detached and semi-detached homes.

Cochrane

Sales this month reached new record highs and are more than double the levels traditionally seen in March. Like most markets, Cochrane has struggled with strong demand relative to the supply. Inventory levels did edge up over last month but with only 86 units available, it is still among the lowest levels of March inventory recorded for the town. It was also the fifth consecutive month that the months of supply remained below one month.

The persistently tight market conditions resulted in further price gains. In March, the benchmark price reached $520,000, which is nearly six per cent higher than last month and 23 per cent higher than last year’s levels.

Okotoks

Like Airdrie and Calgary, sales in Okotoks reached a new all-time record high this March. Improving sales were possible thanks to a gain in new listings. The increase in new listings this month also helped support some modest gains in inventory levels compared to what has been available in the market over the past seven months. However, with only 99 units available and 113 sales, the months of supply still remains exceptionally tight at under one month.

Persistently tight market conditions have caused persistent upward pressure on prices. After five months of consecutive gains, the benchmark price in March reached $534,200, nearly 13 per cent higher than last year.

Bank of Canada increases policy interest rate

The Bank of Canada today increased its target for the overnight rate to ½ %, with the Bank Rate at ¾ % and the deposit rate at ½ %. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds on its balance sheet roughly constant until such time as it becomes appropriate to allow the size of its balance sheet to decline.

The unprovoked invasion of Ukraine by Russia is a major new source of uncertainty. Prices for oil and other commodities have risen sharply. This will add to inflation around the world, and negative impacts on confidence and new supply disruptions could weigh on global growth. Financial market volatility has increased. The situation remains fluid and we are following events closely.

Global economic data has come in broadly in line with projections in the Bank’s January Monetary Policy Report (MPR). Economies are emerging from the impact of the Omicron variant of COVID-19 more quickly than expected, although the virus continues to circulate and the possibility of new variants remains a concern. Demand is robust, particularly in the United States. Global supply bottlenecks remain challenging, although there are indications that some constraints have eased.

Economic growth in Canada was very strong in the fourth quarter of last year at 6.7%. This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed. Both exports and imports have picked up, consistent with solid global demand. In January, the recovery in Canada’s labour market suffered a setback due to the Omicron variant, with temporary layoffs in service sectors and elevated employee absenteeism. However, the rebound from Omicron now appears to be well in train: household spending is proving resilient and should strengthen further with the lifting of public health restrictions. Housing market activity is more elevated, adding further pressure to house prices. Overall, first-quarter growth is now looking more solid than previously projected.

CPI inflation is currently at 5.1%, as expected in January, and remains well above the Bank’s target range. Price increases have become more pervasive, and measures of core inflation have all risen. Poor harvests and higher transportation costs have pushed up food prices. The invasion of Ukraine is putting further upward pressure on prices for both energy and food-related commodities. All told, inflation is now expected to be higher in the near term than projected in January. Persistently elevated inflation is increasing the risk that longer-run inflation expectations could drift upwards. The Bank will use its monetary policy tools to return inflation to the 2% target and keep inflation expectations well-anchored.

The policy rate is the Bank’s primary monetary policy instrument. As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further. The Governing Council will also be considering when to end the reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink. The resulting quantitative tightening (QT) would complement increases in the policy interest rate. The timing and pace of further increases in the policy rate, and the start of QT, will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target.

Information note

The next scheduled date for announcing the overnight rate target is April 13, 2022. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

-Bank of Canada

Mortgage Stress Test Rate Increases

Five year fixed interest rates have been rising steadily since last summer / fall from a discounted low of approximately 1.69% to current discounted rates of 2.99% The five year rates are set using the five year benchmark bond as a base or source of funds. On another note, The Bank of Canada meets March 2nd to review the overnight rate which the banks use to determine prime and variable rates. Prime is very likely to increase as well.  

A few points to remember and consider;

  • The stress test rate is used to qualify mortgage applicants, currently 5.25% or contract rate plus 2%.
  • The rate is set by the Ministry of Finance using bank posted rates as a guideline.
  • As five year rates are rising in our current environment expect the banks to increase their posted rates.
  • Once the posted rates are increased the stress test rate will increase. Your buyers will qualify for a smaller mortgage.
  • IT IS CERTAIN THE STRESS TEST RATE IS GOING UP.
  • Let’s say the stress test rate goes up by ¼ % to 5.5 %. For each 25 basis point increase or ¼ % increase buyers loose approximately 2.3% of their purchasing power.
  • It is reasonable to expect the stress test rate will go up by ½ % this year. Who knows but seems reasonable.
  • For a typical average price house in Calgary of $475,000, buyers would get a $22,000 smaller mortgage.
  • Lots of assumptions about maxed out debt service ratios and such but still buyers will be getting smaller mortgages soon.
  • Big scheme of things, nothing we as realtors, mortgage brokers, and buyers can do about this, but it might be crucial for some buyers to act sooner rather than later
  • Also this could really impact folks refinancing and needing to get to a certain mortgage amount for equity out of their existing house to get a down payment

CREB® 2022 Forecast: Calgary housing market expected to remain strong this year after record-breaking 2021

According to the report, housing market activity in 2022 is expected to moderate relative to record levels of activity in 2021, while remaining stronger than historical levels.

“Despite challenges with COVID-19, we are starting to see a turnaround in our job and migration numbers, and while interest rates are expected to rise, they remain relatively low. All these factors are expected to support strong housing demand into 2022,” said CREB® Chief Economist Ann-Marie Lurie. 

“The biggest question will be whether supply can meet that demand. It will take time for housing to move out of sellers’ market conditions, so we do anticipate prices will continue to rise this year.”

Rising lending rates are expected to cool some of the demand later this year, but rates are still exceptionally low, supporting strong housing sales, especially from those who experienced increased savings and equity gains throughout the pandemic.  Lurie says economic improvements are also expected to support both job and population growth, adding new sources of demand for housing.

“Despite challenges with COVID-19, we are starting to see a turnaround in our job and migration numbers, and while interest rates are expected to rise, they remain relatively low. All these factors are expected to support strong housing demand into 2022.” – CREB® Chief Economist Ann-Marie Lurie. 

During the pandemic, supply has been a struggle for many industries, including the housing market. New listings have improved, but Lurie says it has not been enough to offset high sales levels, keeping inventories relatively low and likely limiting sales growth in the market. 

As we move through 2022, Lurie says new listings in the resale market should remain relatively strong thanks to higher home prices. At the same time, the new-home sector recorded a surge in starts last year, and the completion of those starts should help add to overall supply choice in the market.

Supply levels are expected to improve relative to demand this year, according to the report. However, conditions are expected to remain relatively tight throughout the spring market, supporting further price gains. 

As the market balance gradually improves, Lurie says upward price pressure in the housing market should ease. Overall, price growth is expected to ease to four per cent in 2022.

“While conditions in the housing market are expected to remain strong, there is a significant amount of uncertainty that could impact housing,” said Lurie. 

“If supply levels remain low relative to demand, we could see stronger-than-expected price growth. On the other hand, if rates rise much faster and higher than expected, it could cause a more significant pullback in sales.”

-CREB

Weekly Showing Report

A quick request to start this weeks showing report. I’d like to start including an entertaining story from the interesting things that we see while showing properties. This will be anonymous, so if you have a funny showing story you would like to share with me, please send it over and I will try and include it in future emails.

This week’s showing report is showing a decent drop off in activity across Alberta which is fascinating as we had another uptick on showings for CIR Realty’s showings. For CIR’s showing activity we saw a big jump in the $300,000 – $500,000 price ranges.  In fact, we had over 1,000 showings in that price range in a single week!!

We have also been tracking the weekly sales activity to correlate it to the number of showings, and while it is early in the process to tell, it appears that there is a two week lag from heightened showings to the sales increasing.  Based on that, we should see an increase in sales volume over the next couple of weeks as we have had increases in showings for two straight weeks so we will keep a close eye on that. 

If these correlations are correct, then I am anticipating based on the showing activity in April, that there is an excess of buyers in the $500,000 – $600,000 and $700,000 – $800,000 range that are looking but have not bought yet.  And based on this weeks and last activity we may see a jump in sales in the $400,000 – $500,000 range.  

We will keep a close watch to see if these trends develop further.

-Steve Phillips, CIR Realty

Mortgage and Consumer Credit Trends: Q4 2021 Data

Our latest release of Mortgage and Consumer Credit Trends data tables cover the fourth quarter of 2020. Here are some key highlights from the data:

Delinquency rates edged lower across all credit types

Mortgage delinquency rates in Canada edged lower to 0.25%. This is the lowest level in the five years that CMHC has reported mortgage delinquency rates. Rates in the major CMAs were below the national average and have fallen to:

  • 0.10% in Toronto
  • 0.14% in Vancouver
  • 0.20% in Montréal

Delinquency rates trended lower across all non-mortgage credit types compared to Q4 2019 to:

  • 1.18% for credit cards (down by  44 basis points)
  • 1.70% for car loans (down by 29 basis points)
  • 0.55% for lines of credit (LOC) (down by 9 basis points)
  • 0.15% for home equity lines of credit (HELOCs) (down by 2 basis points)

Mortgage holders continue to have lower delinquency rates for all other major credit types compared to consumers without a mortgage. That said, the gap between the two groups shrunk.

Mortgage delinquency rates trended lower across all age cohorts:

  • The 25 to 34 year olds, who are typically first-time homebuyers, saw their rate decline to 0.20%, the lowest level of any cohort. This age group accounts for 15% of all mortgage holders.
  • Seniors aged 65 and over, who account for 12% of all mortgage holders, registered the highest delinquency rate of 0.33%.

Delinquency rates declined across all mortgage loan amounts. The highest delinquency rate, at 0.32%, remained for mortgages with the lowest value at origination that is less than $200,000.   

Borrower credit scores trended higher

The share of outstanding and newly originated mortgages held by consumers with a high credit score (700 and above) continued to edge higher. For the outstanding mortgage loans, this share reached 87.71% which is the highest level in the last five years it has been reported by CMHC. For the newly originated mortgage loans this share edged up to 86.06%.

Compared to a year ago, 83.79% of mortgage holders and 83.56% of consumers without a mortgage either maintained or improved their credit scores. The average credit score increased to:

  • 765 for mortgage holders
  • 753 for non-mortgage holders

The average Bankruptcy Navigator Index is a ”predictive” score that estimates the likelihood of a consumer to become insolvent in the next 24 months. Higher scores indicate a lower risk. The score for both mortgage holders (938) and non-mortgage holders (923) reached the highest level over the past five years. This suggests a lower probability of bankruptcies. 

Non-mortgage outstanding balances declined

Total non-mortgage outstanding balances declined compared to Q4 2019. The most notable decline was for credit card outstanding balances:

  • 14.17% for mortgage holders
  • 13.76% for non-mortgage holders

This is followed by lines of credit outstanding balances, which decreased by:

  • 10.72% for mortgage holders
  • 10.14% for non-mortgage holders

Compared to the previous year, average monthly payment obligations declined for all non-mortgage loans with the exception of car loans. Monthly car loan payment obligations increased by:

  • 1.5% for mortgage holders
  • 1.3% for non-mortgage holders

Mortgages accounted for a larger share of consumer debt

Newly originated mortgages as a share of all mortgage loans edged up to 4.94% from 4.39% the year prior. New mortgage loans accounted for 6.93% of outstanding mortgage dollar balance compared to 5.73% in Q4 2019.

Mortgages with a higher loan amount ($400,000 and over) at time of origination as a share of all outstanding mortgages increased. In Q4 2020, these mortgage accounted for 41.42%, up from 37.98% the year prior.

Mortgage loans accounted for a higher share of total outstanding consumer credit balance, which increased to 68.91% from 66.85% a year ago.

Effects of the COVID-19 pandemic

The COVID-19 pandemic has had significant social and economic impacts in 2020 throughout Canada.  We have observed unprecedented declines in employment, and increased financial stress for households. The pandemic poses a major risk to housing and financial markets. CMHC continues to monitor the economic impacts associated with the severity and duration of COVID-19.

-CMHC

Bank regulator proposes higher mortgage stress test level, making it harder to qualify for home loan

Canada’s top banking regulator is proposing to raise the mortgage stress test level to 5.25 per cent or two percentage points above the market rate, whichever is higher.

That’s a hike from 4.79 per cent, which is the current average posted rate at Canada’s biggest lenders.

Thursday’s change by the Office of the Superintendent of Financial Institutions (OSFI) means borrowers will need to prove that their finances can pay for the loan at that higher rate, regardless of what a lender is willing to lend them. This would make it harder to qualify for a home loan, shrinking the pool of qualified borrowers and ultimately bringing down some of the upward pressure on house prices in the country.

The regulator says it is seeking submissions from stakeholders about its proposal until May 7th, before the new rules would be put into place for uninsured loans as of June 1.

Known colloquially as the “stress test,” the rules came into force in early 2018 and had the effect of cooling down what was at the time an overheated property market — although after they were announced in late 2017, there was a flurry of last-minute buying by people trying to get in before they would be locked out of buying.

Once they were in place in early 2018, the frenzy died down.

While there are a number of different facets to the rules, officially known as the B-20 Guidelines, they boil down to essentially one principle: would-be home buyers would have their finances tested to see if they could cover their mortgage payments should rates rise much higher than they were at the time they signed up for the mortgage.

The testing bar was set at whatever was higher: two percentage points higher than the mortgage rate they were offered, or whatever the average five-year posted fixed rate is at Canada’s big banks. 

Functionally, that five-year average rate has been the bar that most uninsured borrowers have been asked to meet, since market rates have been much lower than two percentage points below that level for almost the entire period of the stress test’s existence.

A look at the numbers

Currently, the average posted five-year big bank mortgage rate is 4.79 per cent, but it’s not difficult to find a loan at about half that rate, a little over two per cent, by shopping around.

A look at the numbers shows how easy it is to get in over your head.

At two per cent, a 25-year mortgage of $300,000 would cost $1,270 a month. But if rates were to rise to 4.79 per cent, where the big bank posted rates already are, that monthly payment goes up by almost $500 a month, to $1,709.https://datawrapper.dwcdn.net/Dy5YB/1/

That’s an increase of almost 35 per cent to a borrower’s monthly budget. 

At 5.25 per cent, the new stress test rate, the monthly payment would jump to $1,788 a month.

If the numbers show that a borrower’s finances wouldn’t be able to withstand a significant rate hike, the borrower fails the stress test, and a lender isn’t allowed to lend them money. 

COVID-19 changed the plan

The banking regulator was looking into perhaps setting some other sort of benchmark for the stress test prior to COVID-19, but the pandemic shelved those plans.

In addition to the higher rate, OSFI also says it plans to “revisit the calibration of the qualifying rate at least once a year to ensure it remains appropriate for the risks in the environment.”

The move by OSFI comes as the average price of a Canadian home rose by 25 per cent in the year up until the end of February.

That’s prompted a flurry of calls for policymakers to step in again to make sure borrowers aren’t getting in over their heads.

“The current Canadian housing market conditions have the potential to put lenders at increased financial risk,” OSFI said in a statement Thursday. “OSFI is taking proactive action at this time so that banks will continue to be resilient.”

While the regulator’s goal is to ensure the stability of the system for banks, not for borrowers, James Laird, co-founder of Ratehub.ca and president of mortgage brokerage CanWise Financial, says ultimately the move may be what’s best for homebuyers, too.

“In the near term, this change will make it more difficult for first-time homebuyers to qualify for a mortgage,” Laird said, adding that the move will have the effect of lowering buyers’ purchasing power by about five per cent once it’s in place in June.

“However, if this policy has the desired effect of slowing home value appreciation, it may be a good thing for first-time homebuyers in the long run.”

Sherry Cooper, chief economist at Dominion Lending Centres, says the move may well take some of the froth out of market in the long term, but in the short term it’s likely to make this year’s feverish spring market even hotter.

“This all but ensures that the current boom in home buying will accelerate further in the spring market — providing an impetus for borrowers to get in under the June 1 deadline,” she said. “OSFI’s move will trigger an even hotter spring housing market as demand is pulled forward just as it was before the January 1, 2018 implementation date of the current B-20 ruling.”

Weekly Showing Report

Since the markets were more or less turned off this time last year, we took a look at the ten year averages to compare instead of comparing year over year. The total amount of sales across Alberta in March exceeded the ten year average for the month by 56%.

The hot spots in the Province continue to be the bedroom communities such as Cochrane, Okotoks and Airdrie…plus Canmore.  The markets across the Province are all moving quite well with most out performing the ten year averages for sales.

The big question right now is how long this can last, and will the newly implemented restrictions have an impact. The truthful answer is that no one knows for sure as anything can, and has happened in Real estate….and then you add a Pandemic to the mix.  We continue to be in unknown territory.

However, given that we have come through the past year without the bottom falling out of the market, consumer confidence has returned to Real Estate. All indications support the strong markets to continue as the first time home buyers are fuelling the market, allowing teh move up buyers to make a move up the property ladder. With incredibly low interest rates, increased savings and limited options as to where to spend money, people are choosing Real Estate.

While the current pace is not fully sustainable, there are currently more buyers than homes available. Based on the fact that we had just under 14,000 showings on CIR Realty’s listings alone for the month of March, that suggests that there are many buyers still seeking homes.

Busy is an understatement as CIR Realty’s activity continues to skyrocket!  While showing activity has continued to taper down across the Province, we had 13,908 showings on CIR Realty’s listings in the month of March!!! The week over week showings have slowed coming into April, but that is not the case for transactions. To put it into perspective, March was our busiest month in company history by over 55% the last company record!!  In the first week of April we are 10% ahead of the first week in March which suggests that it is going to be an even busier month to come!

Airdrie had one of the best months on record for total transactions in the month of March!   In fact, the sales numbers were 96% higher than the ten year average for sales in March. The increased sales activity, and lower inventory has kept most of the market in a sellers market, with the exception of the Apartment style condos which are edging towards a balanced market. These trends continue to lower days on market, and are having upward pressure on pricing.

The sales in Brooks were 62% higher in total sales compared to the ten year average for the month of March.The market remains to be in very balanced conditions, which is helping lower days on market and the total months of inventory.  With sales occurring in the higher price ranges, the pricing has risen but that does not seem to be indicative to the values in the area, just which price points are currently selling.

Calgary’s sales in all price ranges have greatly exceeded the recent years past for the month of March! In fact, the total volume of sales exceeded the ten year average for the month of March by 55%.  With the lower inventory levels, and increased sales, the months of supply continues to lower as all sectors with the exception of Apartment style condos have moved into the sellers market territory.  This has led to lower days on market and increases in prices across the board.

The hot streak continues in Camrose as sales in March exceeded the ten year average for the month by 84%!  The starter and move up markets are both doing well and we are seeing prices continuing to edge upwards as inventory levels remain low.

Canmore has now moved all sectors of its market into a sellers market as the months of supply are all below 2 months.  Interestingly enough, as the price points in the market increased from $200,000 to $1,000,000+, so did the number of transactions. With sales in the town exceeding the 10 year average for March by 140%, it continues to be one of the hottest markets in the Province!

Cochrane continues to be one of the hottest markets in Alberta, as the total number of sales in March exceeded the ten year average by 122% and hit all time new records for both sales and new listings coming onto the market!  With the steady performance of the market over this past year, each sector has moved into a sellers market with the exception of the Apartment style condo which remains in balanced territory.  The increased sales combined with lower inventory is leading to lower days on market and increases in prices.

Crowsnest Pass had another large jump in activity with the sales in March exceeding the ten year average for the month by 109%!  With the continued performance in sales, and lower inventory rates, the months of supply have dropped and are helping stabilize pricing in the area.

Lethbridge’s market continues to be carried by most of the sales occurring in the $200,000 – $400,000 price range, but sales did increase across all price ranges.  In fact the sales for the month outperformed the ten year average for the month by 61%.  The detached and semi detached markets continue to rise while the row and apartment style are still lagging behind with the row housing remaining balanced, and apartment style still well within a buyers market.

Okotoks continues to have low inventory levels and sales are trending well above average which has led to sellers market conditions in all sectors.  The sales in March exceeded the ten year average for the month by 81%.  Home prices have continued to rise in the detached, semi detached and row sectors due to the market conditions, however the apartment style condos have yet to see increases but we anticipate that to change with the low inventory and active market.

Olds is one of the slower markets in the Province….which sounds funny to say because sales are trending 23% higher than the ten year average for sales in March.  With inventory levels being lower than years past, combined with the heightened sales, the months of inventory continue to lower bringing the market closer to a balanced market. We are seeing prices stabilize and anticipate balanced conditions coming into Spring.

Red Deer’s market continues to be a very busy balanced market for across all sectors except for the Apartment style condos that are still in buyers market territory.  The total sales for the month of March exceeded the ten year average for the month by 37%, and listing inventory remains low which is contributing to the market picking up. There are upward trends on pricing in the detached sector as a result of the low months of supply.  We expect these trends to continue into the Spring market.

Rocky Mountain House had the strongest sales in March since 2014 with sales exceeding the ten year average for the month by 33%. With the sales activity and the lower inventory, it has helped lower the months of supply, and the days on market. While the market remains to be more of a buyers market, these improvements are moving it towards a balanced market which is stabilizing pricing.

The Strathmore market continues to strengthen as sales in March exceed the 10 year average for the month by 69%.  The large portion of the market selling is in the $200,000 – $400,000 range.  Given where the most sales are occurring will likely explain the benchmark price lowering month over month but if this activity continues we do anticipate stronger pricing around the corner.

Stettler had a great March with sales trending 25% higher than the ten year average for the month. What we are seeing in Stettler is different from much of the rest of Alberta as there is a relatively normal amount of inventory on the market for this time of year. This is a result of more new listings coming onto the market which should help keep market conditions balanced.

Sundre’s sales continued to climb in 2021 as the transactions in March were 25% higher than the ten year average for the month.  The steady sales, and low inventory is leading to improvements in pricing as the Benchmark price rose month over month.

-Steve Phillips, CIR Realty

What’s behind your mortgage rate

Here’s what determines the interest rate on your mortgage—and why that rate can go up and down.

Buying a home is probably the biggest purchase you’ll ever make. If you’re like most people, you won’t pay cash—you’ll borrow most of the money by taking out a mortgage. And over the life of the mortgage, you’ll pay a lot in interest.

Small changes in interest rates can make a big difference in how much you’ll pay. So it’s important that you understand what determines the interest rate on your mortgage, even if you already own a home.https://www.youtube.com/embed/MZjok5geNz4?rel=0&wmode=transparent

Many factors go into the interest rate you pay.

Some factors are part of the cost of all mortgages

Think of a mortgage as a product you buy. Any business that sells you something tries to make a profit. To do that, the price they charge for the product has to be higher than the cost to make it. A lender profits on your mortgage because you pay more in interest (the price it charges) than what they paid to borrow the money themselves (their funding cost).

This funding cost makes up most of the interest rate on your mortgage. Other factors include your lender’s operating costs and how much the lender needs to cover the risk that you won’t repay the loan. But funding cost is the most important factor.

So, what determines funding cost?

The state of the economy, in Canada and elsewhere, matters a lot

The money that banks lend out comes from depositors and investors, both here in Canada and in other countries. So, funding cost is largely driven by the interest rates in these places. And these rates move up and down for several reasons.

Strong economic growth means more demand for money

In general, strong economic growth tends to lead to higher interest rates, while weak growth leads to low interest rates. Here’s why: When the economy is strong, more companies want to borrow from investors to expand their business. So, a mortgage provider has to pay a higher interest rate to get investors to lend to it. And when the economy is weak, the reverse is true.

The global economy matters

Many Canadian banks borrow money in other countries, particularly the United States. And keep in mind that the world’s financial markets are interconnected. Interest rates in Canada respond to what happens elsewhere. For example, foreign interest rates fell during 2019. Interest rates for Canadian five-year fixed mortgages dropped in response.

The Bank of Canada influences interest rates

The Bank of Canada also affects interest rates, mainly through changes in our policy interest rate.

When the economy is strong, we may raise this rate to keep inflation from rising above our target. Likewise, when the economy is weak, we may lower our policy rate to keep inflation from falling below target. Changes in the policy interest rate lead to similar changes in short-term interest rates. These include the prime rate, which is used by the banks as a basis for pricing variable-rate mortgages. A policy-rate change can also affect long-term interest rates, especially if people expect that change to be long-lasting.

In the past, high and variable inflation eroded the value of money. In response, investors demanded higher interest rates to offset those effects. This increased funding costs for mortgage lenders. But since the Bank of Canada began targeting inflation in the 1990s, interest rates and uncertainty about future inflation have declined. As a result, funding costs are now much lower.


Mortgage rates and the pandemic

It looked like a puzzle: As the COVID-19 pandemic spread, central banks—including the Bank of Canada—quickly cut interest rates to cushion the blow. But rates on new mortgages didn’t decline much, and some actually went up. Why?

Remember that your lender’s funding cost determines most of the mortgage rate. The cost of funding jumped in the early days of the pandemic as investors became nervous. Many simply wanted to hold on to their cash given how uncertain everything was. So, the funding that is normally easy for lenders to get slowed to a trickle. This drove up the funding cost, even as the Bank of Canada’s policy interest rate fell.

The Bank of Canada has taken many steps to help financial markets work better during the pandemic, along with the federal government and other public authorities. The goal is to ease strains in funding markets, so lenders can keep supplying credit to households and businesses.

These steps include launching programs to make sure lenders can access the funding they need. As a result of these actions, funding costs fell and some mortgage rates on new loans started to decline.

Keep in mind: existing mortgages didn’t become more expensive during the pandemic. They either have an interest rate that is fixed until its next renewal, or a variable interest rate that declined along with the Bank of Canada policy rate.


You and the characteristics of your mortgage also affect how much you pay

Your past credit history and some of the features you choose for your mortgage determine how much risk lenders face when lending to you. More risk means a higher interest rate.

Repayment or credit risk

The most important risk for the lender is that you won’t repay the loan. A high credit score can help lessen this concern, as it shows the lender you’ve been good at repaying your debts. So, you may pay a lower interest rate than those who have a lower score.

If your mortgage is worth more than 80 percent of the value of the home, you’ll have to buy mortgage default insurance. But since insurance protects the lender from the risk of default, you may get a lower interest rate than if you go for an uninsured mortgage with a bigger down payment.

Interest rate risk

Most mortgage loans in Canada are renegotiated every 5 years, but they can be as short as 6 months or as long as 10 years. The more often you renegotiate, the more often you face the risk that the new interest rate will be different than the old one. If you are more comfortable with having your rate fixed for as long as possible, prepare to pay a premium for that peace of mind.

Prepayment risk

The lender risks losing money if you repay your mortgage early—known as prepayment risk. That’s because the lender won’t be able to profit as much from the funds they raised, particularly if interest rates have dropped since the mortgage started. So, an “open” mortgage, which lets you repay all of the loan early, usually has a higher interest rate than a “closed” mortgage, which limits how much you can prepay.

It’s important to shop around!

You’ll most likely find a lower interest rate if you do your homework and are willing to negotiate. Remember, you have a choice of lenders—large banks; smaller, regional banks; credit unions; or mortgage financing companies.

-bankofcanada.com