One broker says the current pace of the housing market is the "perfect environment"
With the red-hot nature of Canada’s housing market having cooled slightly and homebuying activity returning to less frenzied levels in recent weeks, an Ontario-based broker says the slowdown has represented a positive development for mortgage professionals and homebuyers alike.
Nick L’Ecuyer (pictured), president and principal broker at Mortgage Wellness, said that things had been “busier than ever” up until a few weeks ago, with the current pace – busy, but not overwhelmed – representing the “perfect” scenario.
“There’s only so much capacity that can exist for someone,” he said. “I think that we were all bursting at the seams, and there’s only so much that you can do. Anybody that’s levelling up their business right now, and trying to think that [previous activity levels] were the new normal is foolish.
“This new normal – this slightly slowed down, but still extremely busy time that we’re in – is what everybody wants to stay. It’s the perfect environment.”
Despite some forecasts that the decision by the Office of the Superintendent of Financial Institutions (OSFI) and federal finance ministry to raise the qualifying rate for uninsured and insured mortgages would have a significant cooling-off effect in the market, L’Ecuyer feels that those changes have made little difference.
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“Will the OSFI hike and the associated changes to the stress test have an effect on the market? Sure,” he said. “The people that were buying at the absolute height of their budget, they’ll be affected.
“However, is a 4% decrease in affordability going to slow this market? No. It’ll have some microeconomic effects on the market, but it’s not going to slow things altogether.”
Instead, L’Ecuyer said, optimism related to Canada’s gradual reopening is likely to be shifting attention away from the housing market and towards other activity that had been off-limits throughout much of the COVID-19 pandemic.
“Once people can travel, enjoy the outdoors, and spend time visiting their family and friends, their focus will be less on housing,” he said. “It’s literally one of the only things that we could seek fulfilment in during the pandemic: buying a new house, a rental property, or a cottage.”
That likely signals good news for prospective homebuyers, with both the cooling rate of activity and the prospect of an eventual reopening seeming to indicate that a degree of calm and normality could be set to return to the housing market.
“Homebuyers are now back into a situation where, if a house is listed for $699,000, they’ll have the opportunity to view the property more than once,” L’Ecuyer pointed out. “They might be able to test their hand with a different offer.
“There’s negotiation; there’s time; there’s somewhat of a cooling off period. You can get a home inspection now. There are conditions, lawyer reviews and decision making – effectively, rational thinking and rational behaviour.”
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Individuals on the other side of the deal could also benefit from the shift towards a slower market, even though the skyrocketing prices of the past 18 months may be set to level off in the coming months.
L’Ecuyer said that while sellers may no longer experience bidding wars and offers many times over their property’s original valuation, there will likely be a greater deal of predictability to the homebuying process that will ultimately help sellers, as well as buyers.
“Everybody wants top dollar for their home, but if I listed mine for $699,000 and got an offer at $900,000 – sure, I might make a ton of money, but I’m also thinking to myself: who is this person and are they going to close on this house?
“Sellers will benefit from this, and have a little bit of increased confidence. They’ll know that the deal is actually going to close.”
