fbpx

Mortgage Minute 12: What to Expect in 2022

Welcome to 2022. With ongoing uncertainty in the world what can we expect to see in 2022?

The story of 2021 was dominated once again by the COVID-19 Pandemic, and now that we are in the 3rd calendar year of the pandemic, what can we expect as the world hopefully moves on from the health and financial disaster of the past two years?

2021 Ended with the emergence of the Omicron variant of the virus, reminding us that no – it isn’t over yet! And I expect we will continue to see more variants emerge over the coming months and years – with the hope we get to something much more benign, thus allowing a return to pre-pandemic life.

Today I am going to spend a few minutes discussing what to expect with mortgage interest rates, and I am going to ask two realtors, one in Calgary, and one in Edmonton, what we can expect to see this coming yet.

A year ago, we saw fixed interest rates drop below 1.5% for a 5-year term, hitting a low for fixed interest rates that we had never seen before. This was made possible by the quantitative easing program of the Bank of Canada which was buying bonds. Since fixed interest rates are highly correlated to the bond rates, having a large buyer like the bank of Canada was artificially driving those rates down – which certainly helped keep the housing market moving, even during the low points of the pandemic.

In October the bank announced that it would stop the program of buying bonds, and we very quickly saw the market return to more normal pricing, and currently fixed interest rates are between 2.5% and 3% for most terms and products. Given this is more or less where rates were for the 7 years prior to the emergence of the pandemic, it is not unreasonable to conclude that rates will hover in this range for the foreseeable future.

Variable rates, are impacted by the Bank of Canada’s overnight rate which we know dropped a full 1.5% in March 2020, and hasn’t moved since.

Late 2021 economists were indicating they expect that rate to start increasing in the 3rd quarter of this year, However more recently I came across a more alarmist headline that we can expect to see a 500% increase in rates, over the next year. I call tis alarmist because it is referring to the BANK OVERNIGHT RATE which is sitting at 0.25%! The prediction of this forecast by the National Bank of Canada is that we will see rates rise 1.25% this year, and a further 0.25% mid 2023. This is in-line, or even lower, than other forecasts made over the last 6 months – and would bring the Prime Interest rate back to the level it was on March 1, 2020 – before the pandemic began – by the middle of NEXT YEAR – and with no further forecast for rate increases. So a whole lot of a nothing burger. More of a return to NORMAL.

I reached out to two amazing friends and realtors to get their take on what we can expect to see in both Edmonton and Calgary this coming year.

Josh: Jay Lewis runs the Lewis & Co team at ReMax Excellence and is an excellent resource to understand the market in Edmonton. As we look towards 2022 Jay, what can we expect to see?

Jay: We just wrapped up an exciting 2021. I just read about a report from CMHC expecting a 5% increase in 2022. That’s going to be caused by the reduced inventory causing a reduced selection to buyers. We’ve had a great start to this year with lots of market momentum in January. Edmonton currently has a 3.8 months supply of inventory. That’s actually two months lower than the 10-year average and about 40% lower than the previous three years in January. So, it looks like another competitive year for buyers, and a great year to sell your home.

Josh: So with Fewer Months of supply, what does that mean to buyers?

Jay: So the fewer months of supply means that there are less homes to look at where you are out shopping. This means that when you go out shopping you need to be aggressive and make sure that you have all your ducks in a row. So make sure your mortgage is applied for, and pre-approved so that you can go out and make a strong offer.

Josh: Thanks so much Jay – definitely looking forward to working with you throughout the upcoming year.

Jay: Great! Thanks Josh.

Josh: In Calgary I asked Brad Van De Walle to join me. He runs the the Greater YYC Group at EXP Realty. Brad, as we come out of and amazing 2021, what can we expect to see with Real Estate in Calgary in the coming months?

Brad: Well, to be honest I’m not 100 sure? Inventories are at an all-time low. Last year was by far the craziest year in real estate I’ve had, and I’ve been a realtor in Calgary now for 13 years. We’ve gone from having 6 months of inventory a year and half ago to what seems like 6 days. We have seen a 70+% growth in sales in 2021. We’ve never seen something like this before. A 15-20% growth is massive, but 72% is a lot of houses sold. I think it is the busiest year Calgary’s ever had. So if that’s going to keep up for 2022 it means a great seller’s market. Right now there are homes with 11-15 offers on homes right now, and that’s after only 1 day. I think this will continue as long as the inventory levels are low. This is compounded by a shortage of new homes as well. So I predict another roller coaster year, I’m looking forward to it!

Josh: So things are looking great if you are looking to sell your home in 2022. If someone is looking to buy in 2022, what advice would you give them?

Brad: Don’t give up! It can be challenging. You’re going to probably lose out on a few houses. I believe that going above asking will be a big part of the expectation going forward. But don’t get discouraged. It might take some time, so finding a realtor who’s willing to work with you AND that you want to work with is important.

Josh: So there you have it, in Calgary we are expecting a tough year for buyers but it is still a great time to get in. You can expect continued increases in the value of the home you purchase. And of course, now is the time to really underscore the importance of having a really great agent to support you as both a buyer and a seller in this market. Thanks so much Brad

Brad: You are Welcome.

Josh: So the take away is that we can expect interest rates to return to a more normal level, but with a strong real estate market, it is more important than ever to have a strong pre-approval, and strong representation by a Realtor. And as always, my team is here and ready to talk to you about your plans and to help you prepare for your next step.