Ep 33 Did the Interest Rate Drop Affect OUR Market?

What if a single decision could reshape your financial future? Join me, Jacquie McCarnan, as I unpack the significant impacts of the Bank of Canada's recent interest rate cuts, which have brought rates down to 4.25%. We'll explore how this move aims to control inflation and spur economic growth, despite stubbornly high housing and rent costs. Whether you have a variable or fixed-rate mortgage, you'll learn how these changes could affect your payments and principal, and gain insight into the intriguing market dynamics in Vancouver, where increased property listings haven't been met with buyer activity—possibly due to seasonal trends.

Turning our focus to North Vancouver, we scrutinize current real estate trends and future predictions. Despite multiple interest rate cuts, the anticipated surge in buyer activity remains elusive. Will this trend eventually lead to a boost in sales? I offer essential advice for both sellers and buyers, stressing the importance of consulting trusted realtors. Plus, the potential for more float homes at Mosquito Creek Marina could be a game-changer for affordable housing. Stay tuned for next week's episode, where we’ll dive into how a potential change in provincial government could influence housing policies. Share your thoughts on this pressing issue—your voice matters!

Chapters

• 0:00 Impact of Lowering Interest Rates
• 8:25 Real Estate Market Trends and Predictions

Transcript

Speaker 1: 0:00

Hey everybody, welcome back to Keeping it Real, the Vancouver and area residential real estate podcast that aims to cut through all the noise that we hear about real estate here in the Lower Mainland. My name is Jackie McCarnan and I am your host for Keeping it Real. I am a North Shore residential realtor and I work all over the Lower Mainland, squamish a little bit on Whistler, not too much. I don't like to drive that far, but you know I can help you if you bit in Whistler not too much, I don't like to drive that far, but you know I can help you if you live in Whistler and you want some advice or if you're looking for a place there, because I used to live there Every week. On Keeping it Real, I like to include just a little disclaimer so that my managing broker doesn't call me and yell at me for saying something awful so, which would not be out of character at all. You know I have been known to put my foot in it on occasion. So here's the disclaimer. Everything you hear on the Keeping it Real podcast is my experience, coupled with my research and, you know, talking to other realtors. Yeah, anyway, my opinion. But there are lots of opinions in real estate and about as many opinions as there are realtors, which is gosh a lot of opinions.

Speaker 1: 1:10

On this week's episode, we are going to talk about the third straight, three times a charm drop in interest rates by the Bank of Canada. So many of you I'm sure you've I'm just going to jump right in for the sake of brevity and also you people that listen I'm sure you don't like to listen to the podcast much further along than 20 minutes and I try to keep them around that interest rates. The Bank of Canada lowered their interest rate by 0.25% again this week for the third time in a row, bringing it down to 4.25%. So while a quarter cut might not sound like a ton, it's the third one this year, which makes it what 0.75%. You guys know that I'm not good at math, you know that. So we're going to kind of dig into a little bit about why the Bank of Canada lowered the rates, and they are saying that this is an ongoing effort to manage inflation while supporting economic growth. Inflation in Canada is slowing down. It's eased to 2.5%, which is a significant drop from the highs that we saw last year, and the bank is keeping an eye on core inflation, which also sits around 2.5%, but costs like housing and rents are still rising, which is a drag for anybody trying to buy or rent, particularly in the big cities like Toronto and Vancouver. Our economy grew by 2.1% in the second quarter, but there are some signs of slowdown, especially in the job market. Globally, growth is also cooling, particularly in the US and Canada, and these factors suggest that the bank wants to create some breathing room for the economy by easing borrowing costs.

Speaker 1: 3:04

The impact is going to have on mortgage holders and I don't often talk about mortgages because that is not my area of expertise but obviously when the interest rates started to go up, I had many people call me, worried that they would not be able to make their payments, and many more calling saying that they would have to sell their homes. So when these rates go down, it has an effect on mortgage holders. So let's look at variable rate mortgage holders. These people they're the biggest beneficiaries of a rate cut, obviously because variable rates are tied to the bank's prime rate, so their interest payments will decrease and more of their monthly payments are going to go toward the principal. Generally, the payment itself doesn't change and you can talk to a mortgage broker about this, as far as I know, the payment doesn't change, but the percentage of that payment that goes into your paying down the actual cost of the home, that portion increases and the amount going to pay interest on the loan, that portion decreases. Okay, so then there's adjustable rate mortgage holders. They're also going to see some payment relief, with scheduled payments going down in response to the lower rates. There are static variable rate mortgage holders. I'm learning this as I go, you guys. While their payments remain the same, more of their payments will now go to reducing the principal rather than covering interest. So that's like the variable people and they'll be able to pay off their mortgage faster over time. And then we have the fixed rate people. So the cut won't have an immediate effect on their current payments, but it could impact the decision when the term comes to an end. So let's say somebody got into a mortgage in 2022, or actually let's say 2023, when the rates were going up. They're really not going to get a break at all in their mortgage payments because they're locked in for three years. So that sucks a bit. But again, talk to a mortgage broker. Figure out how you can benefit from the interest rate drops if you have a fixed term mortgage. That's all I'm going to say about mortgages Again, not really my purview, but what I do want to talk about is what usually happens when mortgage rates go down.

Speaker 1: 5:28

What happens to the real estate industry, and normally what we will see is that we get a lot more activity from buyers when interest rates go down. But what's happened and if anybody has listened to my podcast in the last couple of weeks or months, even what happened was that, instead of a bunch of buyers starting to buy up the listings, sellers got antsy and started listing their home for sale, anticipating that there would be more buyers because of the lower interest rates. And what we ended up in as you all know from listening to previous podcasts because you have right, we all know that what happened instead is that we ended up with just a ton of listings on the market and nobody buying them. Now and I've mentioned this again before it's very possible that just the nature of the time of year, which July and August, are very slow for real estate, particularly here in Vancouver. So it's very possible that those people that we were expecting to buy we're just on vacation, you know, hanging out with the kids, I don't know on an island, somewhere at the cabin cottage, as we call it in Ontario, and maybe they're coming back now Hopefully, she says optimistically.

Speaker 1: 6:49

I just want to mention a couple of things about what happened last time our mortgage rates started to go down. Couple of things about what happened last time our mortgage rates started to go down. So first of all, I grew up in. I was born in the sixties, raised in the seventies, kind of mostly an adult in the eighties, well, high school in the eighties and then university, and then adulting toward the end of the eighties. When I bought my first car I got it at 18% interest. So when somebody says that four and a half percent interest is high, I laugh Because to me that doesn't sound that high. I think anything under 10% is probably great, but what happened last time we had interest rates fall was that people started to purchase homes that were right at the very edge of their affordability. And this is probably a good time to remind you that if you do get a mortgage in Canada, you have to pass the stress test. So even though the mortgage rate might be four and a half percent, you're going to have to show that you can afford a mortgage that is a six and a half percent, I believe. I think it's two points, but a mortgage broker can correct me on that. Anyway, if you buy something that is right at the very edge of your affordability and the rates start to go up, you could get caught, and that's what happened a lot to a lot of people last year and it's rough to watch that.

Speaker 1: 8:25

No-transcript. Stay within your, stay in your lane, right, if you can afford a million, look at houses that are nine hundred thousand. Well, ok, condos, not houses, because we're in Vancouver. One of the reasons that we expected the market to heat up during the first round of cuts is because we had had increase, increase, increase, increase, increase. And then, when we had the decrease, everybody kind of went oh yeah, the buyers are going to go crazy and that's market psychology. So that's what usually happens is that with every decrease we get a change in the market. That really has not happened. So we are thinking that now, since this is three in a row, that really shows a trend in trending down interest rates, which should encourage buyers to start buying.

Speaker 1: 9:20

Now the problem is, in my opinion and again, this is my opinion we currently have quite a lot of product on the market. So we're going to have to sell through that before. It's a spectacular time for somebody to sell their home, because even if buyers start buying now, they're buying those listings that have been on the market for quite some time, sometimes all summer or even longer. So if it were me, I would still say I would caution my seller clients to wait just a little bit longer. Let's see if we start selling through the inventory. There were no sales in North Vancouver last week on the books. That doesn't mean that there were no deals signed and sales pending, but it's hard to look that up. But anyway, I just think that we should watch this cautiously.

Speaker 1: 10:07

And if you are interested in selling again, great time to prep. Maybe not the perfect time to list, but again, we have to just. We have to take it case by case and obviously I'm available to help with that. But if you have a trusted realtor, I would always suggest that you speak to them Again. They're going to have a different opinion than I do and mine is not super popular among my colleagues. So you'll have to just. You'll have to just decide what's right for you, and that's what I do too. When I come in, I talk to you and see what your goals are, and then we figure out what's right for you, and it's not always going to be my suggestion.

Speaker 1: 10:49

So I think the next two announcements are October and December, and so far, the economists and people that know stuff like this, that study the economy all the time, are expecting this trend to continue. But if you're waiting as a buyer to buy, I think it's probably not the smartest move, because if you got a variable rate mortgage, you could ride that wave down and you would be able to buy now, when there's still quite a bit of stock on the market that has been sitting for a while, so you might even get a great deal. Again, individual it's all going to be taken on individual basis, all right. So that's the state of the market, and I think this podcast is becoming a little bit about the state of the market in North Vancouver, because I mean I am going to do some more true crime stuff and I am going to do some more public interest stuff. But it seems that this is the thing that people really want to listen to and these are the sort of podcasts that get the most amount of listeners. So I am going to continue to do them. I love doing them. Obviously it makes it's fun for me and it keeps me super on top of the market.

Speaker 1: 12:02

That said, so many people tuned in for the Mosquito Creek episode last week and it was very interesting. Since that episode I've had several conversations with people, some people that live there, two people that live there and then a whole bunch of other people that know the reputation of Mosquito Creek or just in general marinas around town, and the general consensus and please don't come for me, mosquito Creek the general consensus is that they're probably going to build some more float homes there because that is incredibly lucrative. I talked to a couple of people about what marinas normally do when they have to upgrade their, their docks and their fingers and that sort of thing, and usually what they do is they move the boats to, uh, locate. They move the boats on one of the docks to a specific location, fix that dock, bring those boats back, move the like, move the other boats to a specific location. They don't boot everybody out. So it's really going to be interesting to see what happens in that space over time and if you have any opinions about that, I'm super keen to hear, because now it's kind of becoming a bit of a pet project to see what does happen there at the Mosquito Creek Marina. In the same vein of keeping track of what is going on with housing and affordability. That's because lots of people that lived at Mosquito Creek that was the only place they could live in boat jets there because it was affordable.

Speaker 1: 13:38

Anyway, in that same vein, I am going to dedicate next week's podcast to what might happen if we see a change in provincial government on October 19th. Normally I don't like to talk too much about politics because my politics is my personal politics are very, very, very left, but I don't want to. I don't want to discount other opinions on those subjects, but I think that we are going to see something really interesting over the next month and a half in the debates that are happening around housing, in particular with regard to the current NDP government and the possible new party, the conservative government of BC. Anyway, I'm going to talk about it next week. I'm going to spend the week researching and I'm interested to have any of your opinions about one how you think David Eby is doing with his reforms, which are tons and tons and very, very quickly, and what you think a different government might do differently to help with the housing crisis. So if you would like to comment on those things, please send me an email at info at North Van Home Sales dot com. I am looking forward to having that discussion and I am very excited to be doing that particular podcast next week. Well, it'll be boring to some people, but not to me, so then that's all that matters.

Speaker 1: 15:15

Hey, you guys, thanks so much for listening to Keeping it Real. Every week I'm growing a following, which is super fun. I love knowing that you're out there listening to the podcast. You can get Keeping it Real anywhere. You get your podcasts and you can also get it at northvanhomesalescom slash podcasts. Enjoy the last few dregs of summer. I can't wait for the rain, but I'm weird. So I will see you guys next week for our very political conversation. Have a wonderful week.