The first 4 months this year showed home sales up 13% in Red Deer, but the 7 months following totalled a decrease of -12%. With November sales -24% lower than November 2018 the year’s total sales are now down -5%.
How come sales started off high in 2018 and then slowed?
We witnessed the result of Canada’s new mortgage rules. The first few months of 2018 appeared busy in the local real estate market with higher sales from buyers prepared for the mortgage changes.
Some 10 per cent of Canadians who got an uninsured mortgage between mid-2016 and mid-2017 would not have qualified under the new standards, a recent analysis by the Bank of Canada suggested. – New mortgage rules 2018: A practical guide
Buyers wanting to buy before the mortgage rules changed knew they only had to be pre-qualified from their lender prior to changes. Generally, when pre-qualified you are locked in with rules and rates for 90 days. People who bought in December may have had their sale close in January and February. Even buyers who were pre-qualified in November 2017 could have made a purchase early Feb that closed in early April and still avoided the impact the new mortgage rules had.
Because the mortgage rules changed it was harder for most people to qualify to buy the home they want, and some who might have qualified in 2017 couldn’t at all in 2018.
Will sales fall even further in 2019?
I don’t predict they will. The impact the new mortgage rules had will diminish as it becomes “old news” and consumers move forward. Prices have decreased somewhat in 2018 and that will lead to buyers, even under the new mortgage rules, able to afford the home they want.
Part of the price decrease this year was directly due in part to the majority of buyers being forced to buy lower-priced homes. If you plan to buy a home in the next couple years the mortgage rules might end up affecting you positively. You will be forced to borrow a lower mortgage (easier to afford and take less time to pay off) and house prices will be relatively lower. You will have to borrow less money for the house you like because it will be priced lower too.
To summarize on a positive note this slow month of December, we’ve seen sales numbers drop in Central Ab but in the long run, local consumers will carry lower mortgage debt while buying better-priced homes. The high inventory rate through the market is also a result of the mortgage rules and fewer homes selling but if you planning to buy, the high inventory rates can give you even more leverage to find the best price!