How the Mortgage Rule Changes will affect the market

My thoughts on the new mortgage rules and how they most likely will play out... Although the qualification process will not directly affect those purchasing with cash, that is a very small percentage of the buying pool, most buyers have some sort of a mortgage or loan on a property they are purchasing.

From now until the end of December we will most likely see a bit of a frenzy in sales, especially for those buyers that have been sitting on the fence waiting to “see what happens” in the market. As of the beginning of 2018, those new rules will make a huge change in transactions. I predict sales will be down for the entire year. (Thanks Ram Sund for this image!)

Overnight, most buyers purchasing power will drop about 20%!! The question is how that will affect the value of properties in the beginning of the year. I would suggest that values will not drop 20% overnight, but will see a steady decline for the first few weeks and months of the year. It will take much longer for the change to make a big difference in pricing. What WILL happen is a huge drop in the number of sales. First off, January, February and often March typically see a lower number of sales due to the season and the inclement weather associated with deep winter. So the seasonal slow down along with the new mortgage process will grind sales figures even further.

Normally, we see an increase in sales when the weather turns to spring (whenever that may be!) and the bulk of our sales are from late spring to early summer. This is prime time for sales and how we do in that short period of time will dictate how the rest of the year goes. If we still see dismal sales figures in April, May and June, it could trigger sellers to become more anxious causing further price reductions pushing values down as sellers compete with other sellers for the shallow buying pool.

Future interest rate increases will undoubtedly further complicate our challenges. Although we had a reprieve this week when the Bank of Canada kept lending rates in check, they did hint that an increase is likely in the foreseeable future.

So what does this mean “now”?

The next couple of weeks may be key for a buyer making a new purchase to maximize their buying power. That same period of time is also going to be key for a seller to maximize their equity position for the next few weeks, months and possibly years.

The time is NOW!