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My Mortgage Blog
There are a lot of questions surrounding affordability in the housing market. There is some uncertainly as to whether the housing market will continue to slow down, with prices starting to decline in some regions, which may make buying a house a reality for first-time home buyers. A common question is: Should I buy now or wait until later. Let’s take a look at a few factors.

Market Slowdown and the decision to buy
There is no doubt the market has slowed down compared to what it was doing two years ago, prior to the introduction of the B-20 rules and the mortgage stress test. It appears that the dire warnings from industry insiders about the impact the stress test would have on the housing market has played out as predicted. While some welcomed the stress test, it may have worked too well, to the point of inertia.

When housing prices and sales steadily rise, buyers and sellers feel confident about their decisions, but confidence in markets takes a dip when prices or sales fall or rise rapidly. Buyers and sellers want to know if the market has hit bottom or if it will decline further. Prospective buyers’ question when they should jump in.
Also, buyers can have different motivations: They may be transitioning from renting, switching homes, or looking for an investment property. Family make-up is another factor – some will have school-aged children, others may have extended family arrangements, still others may be downsizing. The right decision for a buyer or a seller depends on their circumstances and motivations.

A buyer may want to hold on to see whether prices will drop further over the summer, which may or may not be an effective strategy.  For others, especially parents of young children, a move during the school year can be challenging. Sellers usually want to wait for prices to rise, or at least stop falling, before they list their properties. 

Spring Market
The Spring buying market is late due to weather conditions across the country but there are some signs of improvement. The most recent data shows slow but steady activity in home sales across the country, with prices dropping in some regions – it’s all very fluid.

The Economic Big Picture
The Bank of Canada (BoC) has taken a new position on interest rates and is leaving them comparatively low. In fact, there are rumblings that rates could go down in the near future. Our economy is closely tied to the US economy where the Fed has stopped raising rates – Canada’s interest rates can’t really deviate too far from US rates.
At its latest interest rate announcement, the BoC left its rate unchanged, at 1.75%. More importantly, the Bank removed any reference to future rate hikes and instead acknowledged that "monetary policy needs to maintain a degree of accommodation … until the economic outlook improves.”

The Bank acknowledged that the slowdown in global economic growth in the latter part of 2018 was "greater than expected” and it attributed this in large part to uncertainty arising from "trade policy conflicts”. And once again, it predicted "that the economy will pick up in the second half of the year”. 

There was no mention when rates would rise again, but did say, "it will closely monitor "developments in household spending, oil markets, and global trade policy to gauge the extent to which the factors weighing on growth and the inflation outlook are dissipating.”

What to do about the stress test?
The consensus seems to be to modify it. CIBC economist Benjamin Tal said in an interview recently that the stress test has had a broad impact on slowing down the housing market, affecting 50% of new mortgage originations. Because interest rates are not rising any time soon, Tal says the stress test may be too severe. The test also doesn’t take into account that over a 5-year mortgage term, incomes are rising while, at the same time, mortgage principal is getting paid down. By modifying it, more first-time home buyers may be able to get into the market.

There is a lot of pressure on the government from banks, mortgage broker and Realtor associations, as well as economists to consider modifying the stress test – we’ll see what happens as we head into the latter part of an election year.

So, do you buy now or wait and see?
The future is always uncertain. The best way forward is to get the facts about what’s happening, review your personal goals and work with real estate and mortgage brokers who can help you decide.