Have you noticed how much interest rates have crept up? Back in January the target rate (the value at which the Bank of Canada lends money to banks) was only .25%. Today its 3.25%.
In simple terms for every one percent increase reduces a home buyers borrowing ability by about 10%. A buyer approved to borrow $400,000 back in January today would be approved for only $360,000.
Therefore, buyers generally have two options.
Firstly, they can elect to make a bigger down payment. This is hard if not impossible for most people.
Secondly, they may have to consider a less expensive home.
What do I think will happen to sales prices?
At the higher end of the market, we may see home values come down as there will be accelerated pressure on affordability particularly above the $750,000 price point.
Mid-priced home values may flatten.
Lower priced homes for example those under $400,000 may even increase in value as the number of buyers competing for these homes increases due to lower affordability above that figure.
If you are thinking of selling soon, please take some comfort in that Edmonton and area remains one of the most affordable markets in North America.
For most people owning a home with the certainty it provides beats renting. Even when our market ‘crashed’ back in 2008 there was still well over 11,000 home sales registered on the Edmonton MLS® System.
About the author:
You can read more about the author of this blog by clicking this link - Stuart Neal, Broker, REALTOR® & Team Lead.
Our FIXED FEE home selling program gives clients proven results & affordability. To learn more call our Broker Owner & Team Lead Stuart Neal at: 780-760-2014 or visit our program page www.FixedFeeRealty.ca
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