Just to be clear, the Bank of Canada rate hasn't changed. There has not been an increase in their overnight rate and it is still sitting at 0.25%.
This might, and could change at any time.
And there lies the problem. That last part of the above statement.
It opens the door to all kinds of speculation, interpretations, and blogs like this one adding in their two cents.
The fact of the matter is the Bank of Canada hasn't changed its rates. There are variables that are in our economy that demand a change, but to date, nothing has changed.
But the mere discussion of the matter has significantly changed our real estate industry the last 1.5 months.
Why Do We Speculate?
Speculation is just a theory without any evidence. But it is what our news cycles are based on nowadays. You cannot turn on a device or stream a news source of information nowadays without seeing a panel of experts discussing different opinions about what could happen.
The same can be said about our industry. Everyone owns or has some vested interest in real estate. Whether you are renting, living in a home, or are a landlord, you have experience with real property. Does this make you an expert? It depends.
But everyone has an opinion of how the market is going, where it will be heading, when it will go up or go down, etc. And we have these discussions like the experts on TV.
Personally, I've learned over the years (check out some of my other lessons here) debating the market isn't helpful. Everyone has their own opinion of what will happen and will take action according to what they believe.
Our job as agents is not to speculate for our clients. Our job is to take the market data that we have, the information we have from speaking to experts, and provide a service to our clients that is an educated one so that they can make the best decision possible.
It's our job to cut through the speculation and provide expert advice for our clients that hire us.
My advice for my clients right now is, we know what is happening now. We don't know when the rate will change, we don't know how the market will react, we don't know if the supply will come in the spring. All we know now is that we have the rates we have and the inventory we have now.
Whether they decide to wait or not is totally up to them.
How A Rumor Can Change Everything
As much as I would like to say we only work with cold hard facts, the amount of speculation in our culture now is unprecedented. Not only in real estate, but in all aspects of our news.
But what this speculation does, particularly with the interest rates in housing, is that it creates inflated demand. Which, by all accounts, most policymakers are trying to avoid and reduce across the country.
The speculation of rate increases, makes today's buyers want to purchase a home right away. They have to work with the 90-day rate hold from their lender. After that time, new rates mean less purchasing power (at least that is what is speculated...)
So we have the perfect storm arise, like the one we saw in December (Market Update can be found here). Omnicron has arrived, increasing case counts make sellers scared to sell, the looming rate increases make buyers want to buy more now, and we have a market that as a whole only has 1.6 months of supply. Which is unsustainable.
But what if that speculation wasn't there? What if the buyers that are buying because of the low rate understood that they do have time? Perhaps we might not have the frenzy we have had across the country.
I'll even take it one step further if residents of other parts of the country didn't speculate their ideas of the prairies or Alberta (i.e. that we are not diverse, we only have an O&G economy, or that we have a populist mindset) perhaps those markets would be less strained and more and more people would consider moving here can see what our province has to offer and why we are all very happy to call Calgary and Alberta our home.
Speculation creates this false inflation of a narrative that might not have any teeth. Like the looming interest rate hikes. They may come, but there are other aspects of it that won't allow for massive increases right away.
Our world is surrounded by the opinions of many different influences in our lives. In our housing industry, I would argue we have it the most because everyone has a vested interest. But when speculation leads to an inflated narrative that is causing harm (like today's buyer) it doesn't help.
I try to keep my blog as fact-based as I possibly can. I try and keep my opinion out of most things I write and hopefully that adds some value for you the reader.
Interest rates have risen, that is a fact. The banks have been increasing their prime rates regularly, while their borrowing overnight rate has remained low. Consumers are now paying more to service their mortgage, but unless you are working with a mortgage associate you might not know that.
But the public doesn't see that when they hear an increase coming to the Bank of Canada rate. And those will be the people that will enter the market on top of those already in it, to capitalize on the "low" rate while it is here. Creating that inflated demand.
As always, I thank you deeply for your time. If you'd like to reach out about any questions, my email is firstname.lastname@example.org or you can leave a comment below or connect with me on social media.
Until next time, take care. - Aly