by Shawn Lackie
When Tiff Macklem and the Bank of Canada announced another rate cut, on January 29th, it set the wheels in motion. Following a series of rate increases, two years ago (eight in total), this latest rate cut was the sixth in a row.
Like everything in life, gravity plays a big role. The Real Estate market has been notorious for its up-and-down cycles over the years. This latest slash of rates and the ensuing market change may lead to bigger discounts to come. Traditionally, variable-rate mortgages reap the immediate benefit of discounted rates.
The fixed-term rates are tied directly to bond yields. So, in some cases, the fixed rates either change very little or not at all. However, things are different, with bond yields falling to their lowest level since 2022 at 2.55 percent. It rebounded slightly to 2.63 percent, but very little changed. This means, you can expect some rate cuts in the fixed-rate packages.
All of this is due to economic uncertainty, thanks to a certain tyrant to the south of us. The foreseeable future also looks to be fraught with that same uncertainty. Will they or won’t they impose punishing tariffs on Canada? Nobody knows anything for certain, and only time will tell what the next round of madness holds. In the meantime, the Canadian economy has some long-term planning needed, to become more self-sufficient and less reliant on the uncertainty the next four years hold.
All of this lunacy comes at a time when the Real Estate market has been flatter than my head. What was recently a seller’s market has become almost no market. Buyers were waiting to see what happened to interest rates. Now, that has become clearer. The next announcement for possible rate changes is March 12th, so there is a good chance things will stay stagnant until then.
With the turmoil created by our American “Friend,” that sense of 'what next' has become pervasive in many areas of commerce, especially in Real Estate. So, what happens next? Good question.
The condo market has pretty much bottomed out in Toronto and, as such, will ripple out to the GTA regions. New home sales have been slow, as has the building of more. The resale market has flat-lined, with not a lot of new inventory to choose from. Properties, as little as two years ago, which would have been flying off the shelf, have been sitting in limbo for up to and, in some cases, over 90 days. We are essentially back to the trend coming out of the late 80s and early 90s.
See where I’m going here? The market, like life, is all about cycles. This ennui will pass, it always does. Then we will be back into a crazed buyer mentality and things will start moving. I seriously doubt the market will ever get to what it was from 2019-2022 but, then again, you just never know. One of my Real Estate Credos is “Always expect the Unexpected.” With the madness going on south of us that rings truer than ever.
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