January- 16th 2023
To start, let’s look at the predictions made in January 2022.
In January 2022, the big banks were predicting that:
  • Real estate prices were going to increase throughout the year. (TD called for a 7% increase in Real Estate prices by the end of 2022)
  • Interest rates would hit a high of only 2%
  • Many mortgage professionals were advising their clients to take out variable-rate mortgages.

In Jan 2022, I predicted:

  • Interest rates would go up at least 8 times in 2 years.
  • He Real Estate market would crash.

Also, in Jan 2022, my advice was:

  • Take out fixed-rate mortgages (I had been advising my clients to do that for the previous two years as well)

Here is what we can expect in 2023. 

My predictions for 2023 are:

  • There will be at least 2 more rate increases in 2023 of about .25% or more.
  • Real Estate prices will continue to fall until spring, and we should see a stabling off. 

And now, my advice is:

  • Variable-rate mortgages are the way to go, sometimes. I would suggest that if a person can handle an increase in their mortgage payments, they take out a variable-rate mortgage. However, if they can’t or are buying an investment property, then fixed-rate mortgages are the way to go.
  • I suggest that this is the time to buy. Buy now while prices are low and there is very little competition and lots of selection. (Not like in January 2022 when prices were high, and people were lining up to compete to buy houses)

The reasoning for my predictions is simple.

As Warren Buffett said, “What we learn about history is that people don’t learn from history.” 

  • I got to see the mess in the early 1980s, and I got to live the downturn in Real Estate in the early 1990s. From 1986 through to 1989, Real Estate went up 104%. In 1989 people were lining up to buy houses. So much so that I remember hearing about people getting in fights while in line to buy a newly built home.
  • Then things changed. Through the following 7 years, real estate values dropped in price by 31%. The high real estate prices we saw in 1989 didn’t come back for another 13 years! 
  • Interest rates are higher right now than in January 2022, but houses are now tens to hundreds of thousands of dollars cheaper than at the beginning of 2022, and because houses are so much cheaper to buy right now, the monthly mortgage payments are also close to what they were at the beginning of 2022

I don’t believe this downturn will be anywhere near as bad as previous downturns for several reasons.

  • The government has different tools to fight inflation; they have to use them.
  • Demand is not going to go away.

Reach out to me anytime to get assistance with mortgage financing. You can Text or phone (519-217-3484) or email at geoff@mortgagemenow.ca 

Geoff Del Grande.