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Why you should buy a Calgary home before interest rates rises further

Economists are raising the red flag that the housing market in Calgary is set to worsen in the near future as a result of a rise in interest rates. An economist for TD economics, Diana Petramala said in a video interview that was uploaded in the bank’s website that already there is a 4% dip in home prices and expectations are that the prices are set to deepen further in 2016 and 2017.

Outlook of interest rates

Diana says that they expect home price s to fall by as much as 10% with most of this amount being concentrated in Calgary. This is a good indication that this is without doubt the best time to buy property in Calgary. She adds that mortgage prices should be expected to start rising in December 2015. According to the analysis that they have done on the changes and impact of interest rates in the Canadian real estate market, they have noted that there are high chances of the changes causing prices to fall by between 10 and 15%.

The Calgary Real Estate Board also reported that between January and November 2015, MLS sales in Calgary have deepened by 26.55% in comparison to a year ago. This has also resulted in a dip in the average prices by 0.35 percent to $425,000 while the median sale price has fallen by 2.55% to $469,854.

According to Richard Cho who is the market analysis for CMHC, currently buyers are enjoying low mortgage rates but they are expected to rise in 2016. Despite the rise, prices will remain at some of the lowest levels historically.

How it will affect the housing market

While interest rates will definitely have an effect on the demand for real estate, home buyers should realize that there are other factors that will affect the decision to buy. Factors such as low migration levels and low growth of employment are going to affect the decision home buyers make and these will serve to limit the demand for housing in 2016. Cho said this during a conference on the housing outlook that was organized by CMHC.

CMHC also suggested in their report titled “fall housing outlook” that they expect a rise in interest rates to begin in late 2016. This will result a bit of slowdown in the housing market. CMHC also reported in their 2015 base case scenario that they expect the mortgage interest rate for one year should be somewhere between 2.60 and 3.30% while they foresee the 5 year rate to be between 4.10 and 5.20%. The mortgage rate for the 2016 is expected to be between 3 and 3.80 percent while they expect the rate for 5 years to be between 4.7 to 6%. The report further adds that the annual mortgage rate for 2017 is forecasted to between 3.9 and 4.8 percent while they expect the 5-year rate to be between 5.10 and 6.5 percent. Therefore, if you are considering buying property in Calgary, this is definitely the best time to buy.

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