The Bank of Canada is again hiking interest rates, and the Red Deer-area is seeing a 20 per cent drop in house sales for January.
But the two are only marginally connected, said Dale Russell, a realtor with RE/MAX — who’s actually quite optimistic about housing sales for the rest of 2023.
“Mortgages rates have not gone up at the same rate as the Bank of Canada rates,” he said, noting that interest rates of under five per cent are still available on housing loans.
This, and the fact that more new people are moving to Alberta, are both signs that the housing market will recover and sales will increase later this year, said Russell.
The Bank of Canada raised its benchmark interest rate to 4.5 per cent on Monday as an inflation-busting measure.
Some banks are now officially posting interest rates of 6.5 per cent for five-year mortgages.
But the lending of money is based on supply and demand, said Russell — and the supply right now is out-stripping demand, especially in large centres such as Toronto and Vancouver, where house sales have stalled. (Average house prices in these markets have climbed to over $1 million precipitating a government-ordered moratorium on foreign buyers.)
Since many banks would rather lend their money at a lower rate than not lend it at all, Russell believes home buyers can shop around and still get a manageable interest rate.
He noted some mortgage brokers are still finding clients interest rates of 4.8 per cent for a five-year-mortgage.
In Red Deer, 85 houses were sold so far in January. Russell believes the number could climb over 100 by the end of the month, but it’s still lower than in the first month of 2022 when 125 homes sold.
Part of the problem, locally, is there are not enough houses on the market.
Right now, the housing supply is far lower than the demand, especially for homes under $400,000, said Russell, who believes economic uncertainty coming out of the pandemic is making some people unwilling to take on more debt by trading up to a larger house.
He noted new home builds have also slowed because interest rates have hiked up construction costs amid a shortage of skilled trades people.
This means if more people from out of province continue to move to Alberta — 120,000 did last year to help fill job openings in health care and the energy sector — then Russell believes house sales and prices will strengthen as the year goes on.
lmichelin@reddeeradvocate.com
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