Economy in 2015 good for buying a home
The outlook for the Canadian economy in 2015 in general is looking rosy. As you know, we are, for the most part, influenced by the U.S. economy. Economic recovery in the US is growing at the consumer level and demand for goods will pull many other countries along with it, including Canada. Since important sectors of the Canadian economy are connected to activity in the oil patch, and oil prices have fallen sharply, the Bank of Canada and economists are weighing the potential risks to Canada's growth this year. The recent plunge in oil prices may temper activity in housing next year, especially in western provinces.
"The effect of lower oil prices on Canada's housing markets is something of a wild card at the moment," CREA's chief economist Gregory Klump said in an interview with CBC News. "It's not clear how far oil prices may drop or for how long they'll stay down. How that plays out may affect the outlook for interest rates, job growth, consumer confidence and sentiment about making major purchases."
While the turmoil in the oil patch is expected to last a while, many of the economists and strategists at Canada's Big Six banks see the falling Canadian dollar, coupled with U.S. demand for Canadian exports, as a way of offsetting the negative effects of lower oil prices. The expectations for Canadian GDP growth have been trimmed, which means that it's unlikely we'll see the Bank of Canada increase the overnight rate in the first quarter of 2015, with some economists not expecting an increase until later in the year. When the prime rate does start to rise, the rate would likely inch up a quarter-percentage point at a time, making the coming increases relatively easy to manage. For the real estate sector in Canada, the market will be steady. The Canada Mortgage and Housing Corporation (CMHC) says it expects housing starts and MLS Listings in 2015 to be about the same as they were this year, and in line with economic and demographic trends. Also, The Canadian Real Estate Association (CREA) has revised its forecast. With low mortgage rates sticking around for awhile and stronger than expected sales activity in 2014, the association predicts that sales activity will increase in 2015. Because Canadian exports, job growth and incomes are expected to improve, the housing market will see increased activity, especially in areas where demand was soft in 2014. A report released in November, 2014 by the Canadian Association of Mortgage Professionals (CAAMP) maintains that the residential mortgage market is strong and growth will be steady. CAAMP also reports that mortgage credit growth for the past five years has been steady at 6.2%. For the past two years, growth has been steady at 5.2%. It cites a few key factors that suggest that 2015 will be more of the same.
Canadians will continue to move away from communities with low-cost housing to communities that offer more job opportunities
Resale market activity is widely anticipated to stay close to current levels in 2015 and 2016.
Low interest rates will continue to allow mortgage holders to repay their mortgages through lump-sum payments and to regularly pay more than they are required to, based on their amortization schedules.
With all that said, timing the market perfectly is difficult. Usually consumers will take a look at their personal finances and then decide if they can afford to buy a house, move up to a larger house, or downsize to a smaller home. However, Canadian consumers are also paying down their debt before the Bank of Canada starts to push up its interest rate.
If you're considering a new home purchase, lets talk. If you have friends or family who would like to learn more about their options, please consider recommending me. Although my business comes from many sources, referrals from you rank at the top of my list.
Happy New Year!