MLS, Inflation, and Interest Rates
The British Columbia Real Estate Association (BCREA) released its 2022 Second Quarter Housing Forecast.
124,854 units were sold in 2021, and the Multiple Listing Service (MLS) expects a decline of 22% from 2021’s record high to 97,240 units sold. 2023 is forecasted to fall an additional 12.4% to 85,150 units sold.
“After a strong first quarter, BC markets are now adjusting to a much different interest rate environment,” said BCREA Chief Economist Brendon Ogmundson.
The ebbs and flows of the housing market are natural. Over the next two years, the housing market may have a minimal resemblance to the housing market of the past year.
We may see a shift from a low inventory market into a balanced market.
We are recovering from an economic crisis, as we were in 2008. The issues we are experiencing are similar. With supply chain demands, the price of oil, and a war between countries, it was only a matter of time before inflation became a dominant factor for an increase in interest rates.
As inflation continues to rise, the Bank of Canada (BoC) aims to get control by affecting the overnight market rate, otherwise known as the Policy Interest Rate. If the economy is growing too fast, it could lead to a rise in inflation. Unfortunately, the high inflation we are currently seeing is not from a rapidly growing economy. Today, inflation results from supply chain disruptions and pandemic uncertainty. High Inflation is causing an increase in the policy rate. Higher interest rates tend to discourage borrowing, reduce spending and slow down the economy. A reduction in spending tends to put the brakes on inflation.
The BoC has a fine line when it comes to creating balance. How much rate increase will be the correct amount?
When it comes to deciding what is suitable for yourself and your family, finances are a factor to consider. There are a lot of rumours about mortgage interest rates so it is best to talk to your mortgage advisor when seeking advice.
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