Barrie Real Estate

Is now a good time to buy?

I have been telling everyone the best thing that could happen to the real estate market in Canada right now would be for our cable companies to stop carrying CNN. We need a break from the panic mode doom and gloom financial health forecasts of economic prophets lined up around the block at CNN headquarters like it was the tryouts for American Nostradamus. My suggestion, watch a good movie. Back to you Wolfe.

A snap shot of our economy here on this side of the 49th shows inflation has dropped from August to September and continues to ease while some are predicting we are actually heading into a period of deflation. The central bank predicts inflation will hover around 1% for 2009. Gas prices which are at the core of inflation, have dropped from a their summer high of $1.37 just a few weeks ago and are now right around the dollar per litre mark, about where they were just over a year ago. The Canadian dollar has dropped to $0.80 US which should stimulate our export volumes and tempt more American tourists and shoppers to go north once again.

Interest rates keep falling and are still at historical lows right now however lenders have begun tightened the purse strings on higher risk borrowers this year. If your credit is good and the property appraises at or within your purchase price then you should not have problems securing a mortgage.

We are still in a general period of stifled growth economically and likely will remain in that shadow for a while yet due to global economic tension. This climate has caused many to hesitate on buying real estate and allowed listing inventory to accumulate this year to previously unseen levels. This presents opportunity for smart investors and savvy home buyers. Right now there are record numbers of properties listed for sale in and around Barrie.

Many of those sellers have been listed longer than they hoped to be and are looking to negotiate. Some will have found the home they want to buy and made offers conditional on their own sale. The clock on their conditional offer is counting down. This happens more frequently in a slow turnover market. Some are finding they are in deeper than they can or want to handle financially with increased energy costs and wish to downsize or cash out of the market altogether for a while. The problem for those in that situation today is it can take a few more months than they are prepared for to close a sale and this puts pressure on them to take the offer presented to them now over chancing the odds of a better offer down the road.

My advice would be turn off the TV and start watching the real estate papers for some of the deals that are out there.

:: Bank rate holds steady in September ::

The Bank of Canada kept its benchmark overnight lending rate steady at 4.5 per cent on September 5th. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, remains at 4.75 per cent.

In a marked departure from recent statements made by the Bank in recent months, the announcement included no mention of the need for further interest rate increases to reign in inflation. Instead, the Bank emphasized a marked increase in uncertainty about the prospects for Canadian economic growth.

The Bank indicated that economic growth in the first of the year was stronger than expected, and that “it now appears that the Canadian economy is operating further above its production potential than was estimated in July.” Such statements are normally accompanied by a message that interest rates will need to rise to prevent economic growth from fueling inflation. However, the Bank also identified that spillover from the U.S. sub-prime mortgage market meltdown into the broader financial market “have led to some tightening of credit conditions for Canadian borrowers, which should temper growth in domestic demand.”

The Bank also said that the ongoing adjustment in the U.S. housing sector “could be more severe and spill over to the U.S. economy more broadly.” It also identified “uncertainty about the extent and duration of the tightening of credit conditions in Canada and, hence, about the tempering effect this will have on growth in domestic demand. “

“The decision by the Bank of Canada to hold interest rates steady was widely expected,” said CREA Chief Economist Gregory Klump. “By making no mention of the need for further interest rate increases, the Bank has signaled it will stay on the sidelines until financial market vertigo subsides, and the outlook for economic growth becomes clearer.” The next rate announcement is scheduled for October 16th.

When the Bank decided to raise interest rates steady on September 5th, the advertised conventional five-year conventional mortgage rate stood at 7.24 per cent – up 0.29 per cent over the peak reached last year. Competition among mortgage lenders remains stiff, which continues to help many borrowers negotiate discounts of one per cent or more off advertised rates.

The rise in mortgage interest rates since June likely encouraged many prospective buyers with pre-approved mortgages to get into the market before their lower pre-approved rates expired, and caused resale housing activity to accelerate. Once higher interest rates start to bite, resale housing activity will gradually ease back from the strong pace seen in the first half of the year.”

An increase in interest rates was factored into the CREA MLS® 2007 market forecast issued in August. “Sales broke all previous records in the first half of 2007, which will push annual MLS® home sales activity to new heights this year and reach the second highest level on record next year. Prices are also forecast to continue rising over the next two years,” Klump added. (CREA 05/09/2007)