Buying Despite Higher Interest Rates

Sterling Homes Calgary

August 16, 2022

You’re interested in buying a new home and are thrilled about the limitless possibilities, but you’re hesitant and want to wait. Don’t Wait! Why? You are here for a reason, after all. Somewhere deep inside, you want to make a move. Let’s look at why you should buy now, despite the looming rise of interest rates.

The Highs and Lows of the Market

Higher interest rates can create downward pressure on property values and the housing sector in general as they reduce consumer demand and purchasing power. That being said, every real estate market has its own supply and demand differences and ultimately this still drives home prices in each market.

That’s why the three most important factors in real estate are location, location, and location. For instance, the Calgary region has very strong demand fundamentals with its positive economic momentum and strong population growth.

It also has relatively affordable housing when compared to British Columbia and Ontario along with ongoing low supply of property within the market.

Looking at Historical Cues

According to Jonathan Miller, CEO of Miller Samuel Inc., a U.S. based real estate appraisal and consulting company, “low rates make housing less affordable.” Although this idea seems contradictory, it is one that merits investigation. It’s no secret that low interest rates have fueled the overheated housing market. Low rates coupled with depressed inventory levels have been driving up prices — the simple law of supply and demand which is also a key factor driving up rents right now in Canada due to housing supply shortages.

When we look at the late 1980’s and early 1990’s, home affordability was worse than it is now. Yet, sales managed to hold relatively stable over that period. Does this mean home prices will go down? Not necessarily.

This results in additional inventory availability, but demand is still increasing, especially with out-of-town buyers and investors, fewer bidding wars but not a lot of negotiation, inflation starting to correct itself decreasing living expenditures and opening up disposable income, as well as an increase in the profitability of financial assets / investments.

What does this all mean? It means historically, we are in an excellent place. The surge in interest rates simply seems dramatic because mortgage interest rates achieved record-breaking lows over the past two years

Enlist the Experts

Still worried about how you will be able to afford a new home? Rates can be held and locked in for over a year by our loan partners. Every step of the journey, our committed lender specialists can help you by collaborating closely with the sales and construction teams to ensure there are no unforeseen obstacles.

Programs like the First Time Homebuyers, Rental Offsets, Government First Home Incentive Programs, Mortgage Staging, Marital Breakdown, Aging in Place, Military / RCMP Programs, and Newcomers to Canada can assist and lessen any uncertainties.

If you would like to know more, visit our resources page and get in touch with our home buying experts.

About the Author: Sterling Homes Calgary

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