Will rising interest rates impact the sale of my home? You may have heard that interest rates have gone up and are predicted to continue to rise, but what does this really mean for you as a home buyer or seller.
If we take a step back and look at interest rates over the last 30 years you can see that the low rates that we saw over the past couple of years were really unprecedented. The bank of Canada lowered interest rates to stimulate the economy during the pandemic. And now the Bank of Canada has started to raise interest rates to help reduce high inInflation in the Canadian economy.
We have now seen five consecutive rate hikes, pushing borrowing costs to the highest they have been since 2008. And we will continue to see more increases until inflation starts to level off.
What does this mean for home buyers?
So, if you are a home buyer the increase in interest rates will mean that you now qualify for a lesser mortgage, therefore your max purchase price would have decreased. So your payments have gone up but your affordability and buying power is going down. But this doesn’t mean that it is not a good time to buy, especially if you plan to live in the house for a number of years. You just have to find out the amount that you can comfortably afford and shop within your budget.
What does this mean for home sellers?
And what does this mean if you are a home seller in St. John’s right now? Real estate is local and right now the average home price for a single family home in the greater St. John’s area is about $340,000 and if you look at the data over the past ten years we are up significantly.
As the market continues to shift and decreases buyer demand, we should be paying attention to average sale price as an indicator of market strength as opposed to only days on market. A home may take a few weeks or longer to sell, but the average sale price may still indicate tremendous value.