Blog by Barb Pasternak,

Blog by Barb Pasternak

<< back to article list

Housing Rebound

DLC Smart Financial Services Newsletter

What's Behind the Housing Rebound?

Just nine months ago, no one in could have predicted the amazing turnaround in a sector everybody had left for dead!  "The speed with which the market rebounded outstripped all expectations," said Gregory Klump, chief economist with the Canadian Real Estate Association.

Sales activity last month set a record for August and not surprisingly prices are now starting to climb. CREA said the average price across the country, which was declining just a few months back, was up 11.3% from a year ago.

So what’s behind the rebound?

Record-low interest rates have become a key driver of the housing market. Five-year fixed rate mortgage are still around 4%. Banks have eased up on credit and are now offering variable-rate mortgages for just above the 2.25% prime rate which is tied to the Bank of Canada's lending rate. In October, that same variable-rate product would have been one percentage point above prime or 3.25%.

"Record-low borrowing costs combined with the growing realization that the economic storm is passing have fuelled the remarkable turnaround," said Doug Porter, deputy chief economist with Bank of Montreal. "One of the reasons the market came flaring back is affordability was so enticing. Now that prices have moved up so smartly in such a short period, I have to wonder whether sales won't dip a bit."

For the next few months, however, the market will be compared to sales statistics from a year ago -- a time when the stock market was crashing, people feared job loss and nobody dared buy a home. The numbers are likely to continue to impress.

*Source National Post

Scott Bowland ~ Senior Mortgage Advisor, AMP                                                    September 30, 2009
DLC Smart Financial Services Inc.