The past 24 months have been exhausting for me as a mortgage broker. I imagine realtors feel the same way. A lot of real estates has changed hands, and prices have gone crazy. Most sales were multiple offers, and selling prices were well over asking. This was unhealthy for the consumer; sadly, many buyers paid too much. The higher costs were offset somewhat by crazy low-interest rates. Now The real estate market has cooled, and those low rates are disappearing.

The average time to sell has moved from 18 days to 33 days from Oct 2021 to Oct 2022. The sales-to-listings ratio dropped 35% in the same period. Historically, a home should be on the market for 30-60 days, allowing buyers time to decide on the most valued asset they are likely to own. Your home will take a little longer to sell today, but we are still not in a normal market. The slowdown in sales has not impacted prices as you might expect. House prices have dropped in Ontario by an average of 9%. Given the recent price increases, this is just a correction.

In 1970 mortgage rates were 5%. Mortgage rates climbed quickly and would not be that low again until 2010. We have enjoyed low rates for the past 12 years, but historically, a 5% interest rate is still a bargain. The Bank of Canada put the stress test in place, knowing that the low rates of 2021 were not sustainable. Consumers were qualified for their mortgages based on a minimum 2% hike. We have surpassed that and may be looking at higher rates still. Rates will stabilize, incomes will increase, house prices will continue to increase nominally, and a normal market will help everyone.

A variable-rate mortgage still gives the homeowner more flexibility. They have lower penalties, and there is always the possibility of interest rates moving back down. This is something I believe we will see in the next 24 months.

In a normal market, consumers can take the time to source and purchase the right home to meet their needs without the pressure of multiple offers. They also can make a conditional offer to ensure the mortgage they secure fits their budget and the home passes inspections.

I like the new normal.