What the rate cut means for the housing market?

April 24, 2009

Good news, bad news for the housing market

“The latest rate cut means consumers buying a house can borrow for as little as 3% interest on their loan if they are willing to buy into the Bank of Canada’s statement Tuesday that it won’t be changing rates until June, 2010.”

Will low rates help to stop the slide in home prices?

With such bold statement from the Bank of Canada expecting to keep the current low interest rate until June, 201o more home buyers may be prompted to get off sitting on the fence. Although interest rates are at historical low, home affordability is still beyond the reach of many prospective home buyers.

There may be more downside risk for home prices drifting lower for a protracted period of time. Home buyers are holding off making major financial commitments in view of the poor economy and projected increase in job loss in the manufacturing and export sectors of the Canada.

Home prices at 2006 level 

The current inventory of homes for sale at over 10 months supply is till in favour of home buyers. Until the supply demand ratio is more balanced at around 6 months inventory, home sellers are under pressure to response by lowering their prices.

We will continue to monitor the supply/demand or list/sale ratio and report on the housing market activities.


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