Housing and mortgage markets are on the upswing

Friday, July 24, 2020   /   by Sergey Korostensky

Housing and mortgage markets are on the upswing

Calgary’s housing market saw a huge uptick in activity in June.

Many of the builders’ new showhomes were closed in the early days of COVID-19, but most have reopened and some are offering private showhome tours by appointment.

Realtors have instigated heightened safety measures for open houses, and online enquiries about homes listed for sale in Alberta on Showtime.com are higher than last year at this time.

The Calgary Real Estate Board reports sales in June were pretty much on par with last year (see facing page) and Mark Herman, a broker with Mortgage Alliance, says business is brisk.

“We are working through three months of COVID-induced mortgage backlog right now,” says Herman. “In March, we were on our way to our fourth best year in the last 16 years. COVID put the brakes on that quickly but the heat has picked right back up. Banks and brokers are very busy, with all four areas of mortgage business hitting at full steam right now.”

The market is firmly in buyers’ territory, says Herman.

“New buyers to the market are taking advantage of all-time, low rates and a great selection of homes at great prices,” he says. “There are a lot of gems coming on the market that are not normally for sale. Some, unfortunately, are places that people can’t carry anymore, or the risk of carrying them is high, such as many AirBnB properties. Without travel, places that were renting out for three times more than market value are now vacant.”

Other buyers are on the move up.

“Move-up buyers are selling in the $300,000 to $500,000 range at prices that are down about 10 percent from what they bought at and are trading up to the $500,000 to $800,000 range,” says Herman. “Prices in this range are often about 20 percent less than they were two or three years ago so this is a great move for those who have had steady income through the COVID slowdown.”

Refinancing and renewals are keeping brokers busy.

“Refinances are way up as banks are not budging on better rates as quickly as broker lenders are and we are able to do some fancy math to see if it is worth paying the penalty to get into a better mortgage,” says Herman. “For renewing and refinancing mortgages, there are some great strategies that allow a low rate now, and then lock into what are expected to be very low rates still to come.”

The world of mortgages has seen a lot of changes, says James Laird, co-founder of Ratehub.ca and president of CanWise Financial mortgage brokerage.

“Canada’s mortgage and housing markets have seen a lot of activity during COVID-19, from mortgage rate drops to policy changes to payment relief options for mortgage holders,” says Laird, who offers his insights on what he expects will be the new normal for the mortgage and housing markets.

Mortgage rates

“Canadians can expect fixed and variable rates to stay at their current historic low until the Canadian and world economies are close to fully recovered. When we start seeing good economic news and good news related to COVID-19, consumers should expect mortgage rates to start to rise.”

Shopping for a mortgage

“COVID-19 has forced Canadians to try new ways of doing most things. With bank branches closed, getting a mortgage is no exception. Pre-COVID, Canadians were already shifting to online sources to research mortgage rates and educate themselves. However, many still preferred in-person interaction before closing their mortgage. COVID-19 has forced Canadians to complete the process without that in-person appointment. Most have been surprised and impressed with the efficiency and level of service available without requiring an in-person meeting.”

First-time home buyers

“The main thing for first-time home buyers to be concerned with is their income and employment. Job losses have disproportionately affected young people, so many who were planning on purchasing will not because of income loss. In order to buy a house, stable income is required. For any first-time home buyer whose income has been interrupted they will have to wait until their employment is stable before entering the market. The fortunate young Canadians with stable income can consider purchasing during COVID-19.

“The benefit of purchasing a home right now is that mortgage rates are at an all-time low and there are less bidding wars than you would typically see in a hot spring market.”

The housing market

“Nationally, home prices have been resilient so far, but it depends how long the economy stays depressed. If we are able to rebound from an employment perspective and an overall economic output perspective in the near term, that is, by the end of this year, then Canadians should expect current home values to remain stable. If unemployment remains high and the economy does not get back to its pre-COVID levels as 2021 unfolds, consumers can expect home prices to soften at some point.”

Mortgage deferral

“For those who have self-enrolled in the mortgage payment deferral program, their household debt is building month over month. However, if the vast majority are able to make their mortgage payment when they come due, this increased debt burden will be manageable. If a sizable percentage of consumers who have deferred their mortgages are not able to make their payments when they come due, the Canadian mortgage and housing market will be severely impacted.”