However, the current situation is far from being a housing collapse
The effects of the most recent rate hikes have not yet fully manifested, although the current situation is far from being a housing crash, according to economist Sherry Cooper.
“There are many unusual aspects to the current housing correction, but fundamentally the most noteworthy is how orderly and non-chaotic it has been,” Cooper said in a new analysis.
“Home sales have slowed, but so have new listings, so the price declines are more muted than we might have expected. This is not a housing collapse. It is a housing correction. We’ve seen little distressed selling, as most would-be sellers have lots of home equity and low mortgage rates – not anxious to buy new properties immediately.”
Mounting costs in the rental market are also helping keep a crash at bay.
“With rents surging, most potential down-sizers aren’t keen to make that trade-off,” Cooper said.
With the Bank of Canada slated to make its next policy announcement on Oct. 26, the possibility of a 50-basis-point increase to 3.75% remains strong – although updated inflation figures to be released this week could further inflame the central bank’s hikes.
“If the data disappoint on the high side, we can’t rule out a 75bps rate hike the following week,” Cooper said. “I believe both the Bank of Canada and the Fed will hike overnight rates further later this year and into next year. They are also not likely to begin to reverse these rate hikes until 2024.”