Interest Rates Are Rising: Will Ottawa’s Market Stay Strong?
Real Estate Updates • August 12, 2022
It seems the whole nation is abuzz with talk about last month’s interest rate hike. While the other Bank of Canada announcements are old news, this latest report took everyone by surprise. It’s the biggest jump in the rates in nearly 25 years. Overnight, the target rate rose a full percentage point to 2.5%. (Update: In October, interest rates went up by another .5% bringing the overnight rate up to 3.75%.)
How will this rate increases affect Ottawa, given that the country is already feeling the effects of earlier hikes? We don’t yet know what will happen, but our prediction is that everything will work out just fine, especially for Ottawa residents. Here are a few things you should know that may set your mind at ease.
What The Numbers Mean So Far
Whenever there’s a sudden change, fear is always the first response. In the real estate market, buyers begin to hesitate, and sellers worry their home will lose value. If you look at the numbers, you can’t deny that the market is down, at least slightly.
There were 35% fewer houses sold last month compared to July 2021. Prices have also decreased steadily every month from their February peak. The latest stats show the average cost for an Ottawa house is now $716,354. The silver lining is that values are still 5% higher year over year, but even that gap is closing.
Slower sales and falling prices – isn’t this bad news? Not at all. The out-of-control market of the last two years was unsustainable and stressful for everyone, including homeowners who wanted to downsize or upgrade. The numbers now point to a normalization of the market, not a downturn. We are a stone’s throw from a balanced market, which is excellent news for everyone. In a moment, you’ll see why.
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Bad News And Good News For Sellers
First, the bad news: Prices have fallen, buyers are being more selective and houses are taking longer to sell. The fast pace of 2021 to early 2022 was unprecedented, and we’re unlikely to ever see such frantic seller’s market again anytime soon. The good news for sellers?
Even though the market has become more balanced, conditions still lean in your favour, at least for now. When you hear about the “slowing market,” you’ve got to take it with a grain of salt and remember that slow is relative. Nothing can compare with what was happening during the pandemic! What we’re seeing now is simply more of a return to normal than anything else.
If you follow all of the steps to make your house stand out, you can still enjoy a successful sale and end up with a return on your investment. Don’t believe us? Check out this post that reveals the history of housing prices in Ottawa.
And there’s even more good news for sellers. After your house is sold and you’re ready to buy a new place, you’ll be working in a balanced market instead of trying to outbid 20 other buyers on every listing. The experience has become far less stressful for everyone.
What About Buying In The Current Market?
Even though conditions still slightly favour sellers, it’s buyers who are feeling the relief. Housing values are still high, but you no longer have to pay more than a home is worth just to compete in fierce bidding wars.
Even better, you no longer have to settle for a house that may not be suitable because nothing else was available. Last month saw fewer sales but more listings hit the market, which means there is less competition and more houses to choose from. You may even find you have some negotiating power when you’re out looking at properties. If you can, we recommend putting in a home inspection condition to any offers you make to protect you from any unpleasant surprises after closing.
The bad news for buyers is that higher interest rates make borrowing more expensive. Banks are also more stringent with their lending, and you may find it more challenging to qualify for financing.
Getting a pre-approval before house-hunting will help because you can lock in the best possible rate. Plus, you’ll know exactly what you can afford before you start looking. Working with a team of experts, including a mortgage broker and real estate agent, can help you enjoy a successful purchase.
A local real estate agent can help you enjoy a successful purchase in any market, and is even more important when the market shifts. Learn more about buying with West Ottawa Real Estate below:
Will Ottawa’s Housing Market Ever Crash?
Not likely. Any news articles you may find about impending financial doom are generally talking about Toronto, where prices fluctuate wildly depending on the job market. In Ottawa, the abundance of government service and tech jobs make Ottawa’s economy far more stable. There’s also the new Department of National Defence (DND) headquarters that opened recently, drawing approximately 8,500 new residents to the area.
The demand for housing in Ottawa isn’t going anywhere, and the city is hopping trying to keep up with the supply. Market conditions in Ottawa can and will fluctuate slightly. However, our market remains strong and stable, and we’re not likely to ever experience a crash.
Could Ottawa become your new home? We are local real estate experts who know this area inside out and backwards and would love to help you. Reach out to us right here with any questions you may have.
