All eyes on interest rate announcement as Ottawa’s ‘hesitant’ home market hits lull


As the Bank of Canada prepares to make another interest rate announcement Wednesday, homebuyers, sellers and industry watchers alike are keeping a wary eye on Ottawa’s “hesitant” real estate market. 

According to the Ottawa Real Estate Board (OREB), while local home sales in October declined by a relatively modest 2.7 per cent compared to October 2022, they dropped by 12.3 per cent when measured over the first 10 months of the year and fell 36.4 per cent below the five-year average.

“Our agents, they’re struggling a bit. We’re seeing a softer market, fewer sales and prices are holding right about equal to what they were last year,” OREB president Ken Dekker told CBC Radio’s Ottawa Morning last week.

Dekker said it’s a major shift from the “crazy” COVID-era market, when “any house you put on the market would sell, many times for over what you were asking.”

These days, he said, there’s less inventory and fewer buyers and those who are dipping their toes in tend to be less willing to take the plunge.

Affordability a key factor

According to John Andrew, an independent real estate consultant and retired Queen’s University business professor, one key factor in the current slowdown is affordability intrinsically tied to mortgage rates.

“Fewer buyers are qualifying for mortgages. We’re looking at mortgage rates that are at about a 22-year high,” Andrew said, noting the current five-year fixed rate is around 5.6 per cent.

Another rate increase would push that higher.

“It’s harder for borrowers to qualify for mortgages, especially if they’re self-employed or they have unusual work histories,” Andrew said.

Dekker agreed. 

“It just comes to affordability,” he said. “With the stress test on top of higher interest rates, people are just not qualifying and more and more people are just getting out of the market, hoping that interest rates come down or prices continue to come down.”

‘Sellers are not panicking’

At the same time, home prices aren’t really coming down, Andrew said. 

“Sellers are not panicking here,” he said. “So the buyers are sitting on the sidelines and the sellers are not lowering their listing prices.”

According to OREB, the average price of homes sold in Ottawa in October was $660,836, up 2.9 per cent over the previous October. Year-to-date, however, prices have dropped 5.9 per cent over the first 10 months of 2022.

Dekker said despite the dwindling inventory and more cautious atmosphere, houses are still selling — but it’s generally taking longer.

“The house that’s properly priced and presented well and in great condition is still, in today’s market, some of them are getting multiple offers on their property,” he said. “There’s still a demand, but that demand is hesitant.”

OREB, a non-profit industry association that represents realtors in the Ottawa area, is cautioning would-be homebuyers against holding off too long.

“Now is a prime time for buyers to be looking for opportunities before the current carries us from a balanced market into seller’s territory,” the organization writes in its October report, characterizing the current climate as a “typical lull.”

Ottawa Morning8:12Ottawa’s real estate market has slowed

Home sales have hit a lull in Ottawa. We hear from a real estate analyst about why this is, and where the market might go next.

Sign up to receive the best Underground art & real estate news in your inbox everyday.

We don’t spam! Read our privacy policy for more info.

This post was originally published on this site