According to a survey done by BMO, 72 percent of aspiring homeowners in Canada are waiting for rate cuts before purchasing a home. With inflation cooling, there is a general expectation of interest rates following suit. Is that expectation correct? For the answer, let’s look at the factors currently contributing to inflation.

The Biggest Contributor

Inflation in March was 2.9%, a slight rise from 2.8% in February due to increased gas prices. Of the 2.9% inflation in March, 1.8% resulted from shelter inflation. In other words, around two-thirds of all inflation was a result of increased housing costs. Specifically, increased monthly payments due to increased interest rates.

Variable rate mortgage holders saw their monthly payments jump up a whopping 30% in the last year. And of those mortgage holders that were landlords, the rent they charged also increased 30%. So, both homeowners and renters saw their housing cost increase significantly.

It would seem then, that the obvious solution is to cut rates so landlords and renters see their housing costs decrease, cooling inflation. But, it is not so simple. When looking at the effects of reducing interest rates, we run into the real cause of shelter inflation: the housing supply shortage.

The Real Cause

TD Economics estimates that Canada could be short over 300,000 housing units between 2024-2026. A result of the population growing faster than the current homebuilding rate in Canada. With such a large shortage in housing units, reducing interest rates would lead to a steep rise in house prices. Reducing interest rates would allow more people to qualify for a mortgage. But, with demand far outpacing supply, adding more qualified buyers would magnify the supply issue. Serving to increase house prices (ie. increased housing costs). Do you see the issue now?

Keep interest rates high and increase housing costs (increased monthly payments). Or, cut interest rates and increase housing costs (increased house prices). In both cases, shelter inflation stays high. Safe to say the Bank of Canada is stuck between a rock and a hard place. It’s clear that the interest rate is not the tool for the job (reducing shelter inflation). Where do we go from here?

The solution lies in increasing the housing supply, easier said than done. Matching housing supply to demand is a long-term effort. It’s going to take time. What does that mean for interest rates? Nothing conclusive yet. But, we can safely deduce that rates probably won’t drop as fast as we hoped. They may still drop, just not as fast as we hoped. Instead of dropping a full percent within a year, it may take two years to reach a full percent drop. Maybe three… As an aspiring homeowner, what can you do?

What can you do?

If you are someone who qualifies to buy a property today, it may be in your best interest to buy that property today instead of waiting for rate cuts. If you wait for rate cuts, you run the risk of buying in a more competitive buying environment. You may save 0.5% on the interest rate, but you may be paying 0.5% less on a mortgage amount that is 2% higher. Rate cuts will introduce more buyers to the market. And as long as the supply issue persists, more buyers will only serve to drive up house prices.

If high interest rates are preventing you from qualifying currently. Then, it is best to focus your attention on the factors on your application that are in your control. Your income, debt, credit & down payment. Interest rates may not be favorable currently. But, an improvement in any one of the aforementioned areas, can significantly impact your qualifying ability. Increasing annual qualifying income by $10,000 (adding a co-applicant), will give you around $50,000 more in mortgage money. Every $700 decrease in monthly payments will increase your mortgage money by around $50,000. Increasing your down payment by $10,000 will reduce the amount of mortgage money you need by $10,000.

Consulting Experts

Whether you qualify today or don’t quite qualify yet, there is benefit in speaking to an expert about your situation. Contact me so we can establish your real estate goals together. Understanding what you seek in a desired property will give us a clearer idea of what the transaction might cost. Having a cost estimate in mind will allow for a clear financing goal to shoot for.

If you aren’t sure that you qualify today, I am happy to put you in touch with my mortgage partner. Different lenders have different requirements. Working with a mortgage broker will make sure you are considering all your lender options beyond just the big banks.

With summer just around the corner, it’s time to dust off those outdoor spaces and get them ready for some serious fun in the sun! Whether you’re prepping your home to impress or simply want to create your own backyard paradise, these easy tips will have your outdoor space looking and feeling fabulous in no time:

1. Let’s Get Tidy: 

Let’s start with the basics – a little spring cleaning for your outdoor space! Sweep away those winter blues, clear out any clutter, and give everything a good hose down. A tidy space instantly feels more inviting, and it’s the perfect canvas for adding some seasonal flair.

2. Green is in!: 

Nothing says “Hello, summer!” like a splash of greenery. Brighten up your outdoor space with some fresh plants and flowers. Whether you’ve got a sprawling garden or just a tiny balcony, there’s always room for a little bit of nature. 

Hot tip: You can hang some baskets, pop some plants in pots, and watch your space come alive!

3. Kick Back and Relax: 

Summer is all about chilling out, so make sure your outdoor setup is up to the task. Invest in some comfy seating – think cozy chairs, loungers, and maybe even a hammock if you’ve got the space. Add some cushions and throws for extra comfort, and you’ll never want to go back inside!

4. Light it up:

Keep the party going long after the sun goes down with some funky outdoor lighting. String up some fairy lights, scatter some lanterns around, and create your own little slice of paradise. Not only will it look cozy, but it’ll also help set the mood for those late-night hangouts.

5. Cook Up a Storm: 

Summer is all about outdoor dining, so why not take your cooking outside? Having an outdoor kitchen setup will take your summer gatherings to the next level. Fire up the BBQ, crack open a cold one, and get ready to feast!

So there you have it – five simple tips to help you get your outdoor space summer-ready. With these easy tricks, your outdoor space will be a sunny haven in no time. So grab a drink, kick back, and get ready to make some memories that’ll last a lifetime!

Local Residential Real Estate Inventory Trending Upwards

KELOWNA, B.C. – May 3rd, 2024. Residential real estate market activity in April heated up to a simmer with new inventory coming on to market, reports the Association of Interior REALTORS® (the Association).
A total of 1,282 residential unit sales were recorded across the Association region in April coming in above March’s 977 units sold and almost on par compared to April 2023 with a 0.1% decrease.

Click here for the full report