The question has been top of mind for many Canadians and people around the globe surrounding the state of the world. From climate change, instability in nations around the global financial concerns, inflationary pressures, supply chains, COVIDs impact on how we live and operate, and geopolitical concerns in nations around the globe.
The world is definitely in a state of instability and the stress is building – for all of us whether it be if we can afford the gas to commute to work, whether our housing is secure with rising prices, or whether we will be able to taper most importantly the rising temperatures around the globe, inflationary pressures and the growing divide between the rich and poor. I will be honest, I lay awake a lot thinking about all of these items and how I can help.
I am facing a funny challenge at the moment – a loss of speech – a friend told me John Mayer once was told he had to rest his voice for 18 months or he wouldn’t be able to sing again, mine will hopefully be short-lived and I doubt I will ever be able to sing and not harm the ears of others but it is allowing me to think of other avenues to connect and communicate the facts, the stats and ways in which you can protect your interests – ensure you are prepared for change and why it’s so important to plant trees and educate our children on financial literacy and giving back to the community.
Many of my clients have turned to me lately to discuss the following:
- What is the impact on the rising rates on my mortgage?
- Is it a good time to buy or sell?
- Should I lock in?
- Should I increase my mortgage payments on a variable-rate mortgage?
- What can I afford? If I wait will I even be able to afford it?
- What should I do?
At the end of the day, the decision is yours – but as professionals are goals are to provide you the resources, knowledge and educational tools to guide you in making an informed decision. Things are changing FAST faster then we’ve seen in 40+ years’ and the gears haven’t shifted down yet, but they can shift quickly.
Here are some facts:
- We experienced the largest job loss in Canada since the Financial Crisis in 2008 this summer, we experienced the largest drop in the construction sector in one month since 2005 in August. Unemployment jumped from 4.9 – 5.4% this has only occurred in a jump of this size half a percent, which has only occurred 5 x in the last near 50 years’
- Canada shed 40,000 jobs in August alone
- 114,000 jobs over the last three months (J,J&A)
- The construction industry shed 38,000 jobs in one month
- Why is this happening?
- Rates are breaking things and FAST
- The payments needed to carry a mortgage on the same property in the fall of 2021 were 50% less than what they are today
- Investors are taking a step back – if you are to invest today at 80% loan to value as an investor you are seeing on average of $1,200 in negative cashflow
- Homeowners are stepping back from leveraging home and borrowing capital to complete renovations – as the costs continue to climb and the cost of borrowing on a HELOC per $25,000 went from $61.46 a month @ prime plus 0.50% in early 2022 to $123.96.
- This happened at the same time as material, labour, accessibility and transportation costs were skyrocketing as well – so a kitchen that would of cost $25,000, cost $35,000 or $40,000 and your borrowing costs on that jumped from $98 to $198.33… Which keep tallying up the costs of lumber, new basement suites, flooring, windows and doors – the list goes on – all of this has reached a standstill as buyers ride out the storm of intensified carrying costs.
- What happens when people stop spending? Or are unwilling to sell at a price below what they believe is “fair market” in their own minds – whether consumers are able to pay it or not?
- Inflation falls as demand begins to ease across sectors
- Inventory rises – allowing opportunity and options to potential buyers/investors across the nation
- The nation takes a “deep breath” and allows things to settle out to determine our next steps into 2023 and beyond
- Savings rise as people hold onto their cash and take careful consideration before spending
- What happens in the in-between?
- Rates have risen – people are feeling the hurt, and it isn’t over many economists think before the federal tightening stops – a large majority of Canadian Key Economists including TD, CIBC, BMO & RBC all anticipate a further 50point hike before year end to continue to taper off demand
- Once the dust settles and the nation takes stock of the additional jobs lost, economic impact & inflationary indicators are determined – we should see a softening in their policy decisions based on historical trends and data – but this will most likely lie ahead in 2023
- The days of multiple offers & subject free are at bay, the bidding significantly over ask has stepped to the sidelines and open houses, browsing and having the ability to negotiate in your favour are back on the playing field.
If you are considering locking in, restructuring your mortgage, buying an investment – purchasing your first home or making a move – let’s talk. I think every situation is different & every decision should be made to best align with your financial goals, and personal and family needs in mind. Having security in homeownership can be pivotal in your financial journey, and provide you pride of ownership, a safe sanctuary, peace of mind & the opportunity to grow real-estate portfolio over time. If you want to make a quick profit on a property now may not be the time, but some markets are proving more favourable then others. Speak to a local real-estate professional in your area, get guidance from a Mortgage Professional and get your financial advisor involved in the discussion. Let’s talk.