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August 8th, 2022

How The Last Interest Rate Hike Might Affect Collingwood

Market Reports

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Last month, the Bank of Canada announced a new interest rate increase. This was on the heels of a series of hikes since March to try to cool the hectic real estate market and slow inflation. The results took time, but it looks like it’s working. Housing prices have fallen all over Canada, and the once red-hot seller’s market is more balanced than it has been for years.

Here’s what has already happened in the Greater Georgian Bay area, including Collingwood:

The Canadian Real Estate Association (CREA) reports a 46% decrease in sales of non-waterfront properties compared with June 2021. Waterfront sales declined by 48% over the same time last year. Both are below the five and ten-year averages.

The numbers may sound frightening, but we are not headed for a crash by any means. Last year’s market was frantic like nothing we have ever seen before. What looks like a downturn is simply a correction, which is reflected in the cooling housing values.

The benchmark price for a non-waterfront house is $802,400, down month-over-month but still 11% higher than last year. The median price for waterfront property has dropped to $1,002,500 but is still up 14% from last year. CREA also reports that for the first time in years, the number of available listings in the area has surpassed 2000.

Three things are affecting the Collingwood market: 

  1. Rising interest rates
  2. Fewer buyers looking for houses 
  3. A surge of new listings 

None of this takes into account the latest increase in the interest rate, which is the most significant jump in over 20 years.

What Will Happen Now?

Will this latest interest rate mean disaster for the Collingwood market, which has already slowed down from its mid-winter peak? The news headlines are enough to make anyone panic, but we don’t think there’s any need for alarm just yet. Even if the worst happens, Collingwood remains an affluent area, which will insulate the market from any significant downturns. 

However, the most likely scenario is that the market will correct itself a little further, especially during traditionally slow times like Summer and Winter. Seasonality will likely return, and we expect things to pick up considerably once Fall arrives. In the long-term, we may see housing prices bounce back as real estate values always tend to rise over time.

What Sellers In Collingwood Should Know

If you plan to sell a home, you should first understand the current market and move forward with realistic expectations. It may be discouraging if your house appraises at a lower amount now than it did five months ago. However, keep in mind that the next home you buy will also be lower, so you are shielded from the impact of falling prices.

Of course, you’ll still want to do everything you can to maximize your sale and empower your next move. 

  • Thoroughly cleaning and decluttering is the first step. A clean house instantly appeals to buyers and indicates that the property has been well maintained and cared for.
  • Updating your home and making minor repairs so that it shows well. You don’t have to go overboard, but a few small touches can make a massive difference.
  • Pricing your home strategically. Getting the price right is critical for your house to sell quickly and for the highest possible amount. Too many sellers are trying to command prices that are no longer feasible now that the market has shifted. Their mistake can be your advantage and help your listing stand out to more potential buyers.
  • Marketing your listing to targeted buyers. The more people who see your listing, the more successful and profitable your sale will be. Working with a local real estate agent means your house will get maximum online and offline exposure.

What happens if you need to sell a home on behalf of a parent or relative? The situation becomes a little more complicated. Luckily, you can find helpful tips and advice right here.

What To Expect When Buying In Collingwood

The higher cost of borrowing has caused many would-be buyers to pull out of the market completely. This leaves the field wide open for those who are still looking. You’ll have less competition to contend with. With more listings to choose from, you can afford to be selective about your new home. And for the first time in a long time, you may find sellers who are open to negotiation. 

Need to know more about buying? You can get our free checklist to keep you on track right here.

What Can Buyers Do About Higher Interest Rates?

The single best thing you can do to combat rising rates is to put as much as possible toward your downpayment. The higher your down payment, the smaller your loan. Since interest is based on a percentage, you’ll pay less over time.

If you’re selling and then buying at a later point, you can put the money aside and earn interest on it. In that case, the higher interest rate becomes an advantage to you!

Choosing a shorter amortization period will also mean paying less interest because your loan will be paid off faster. However, you’ll need a healthy income to manage the higher payments comfortably.

Should you choose a variable rate or fixed rate mortgage? You’ll likely want to discuss your options with an experienced mortgage broker. In many cases, you’ll save money on variable rates even when rates increase, but a fixed rate guarantees your payment will remain the same for your entire mortgage term.

Whether buying or selling, an experienced local real estate team gives you your best chance of success in a changing market. Reach out to Keleher + Co. today, and we are happy to answer any questions you may have.

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