What is Going On? – Canadian / Okanagan Markets

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The results out there seem to defy traditional economic consensus.

Global pandemic, recession, double digit unemployment, new COVID variants…record home prices?….no listings?

What a long, strange trip it has been. With infection and death rates plunging across North America as of late, Canadians are very bullish on the housing sector. Usually we’re talking about the big metropolitan markets but today it is that and much more. Satellite communities and rural properties have all seen price increases, multiple offers and low listings.

Is this trend going to continue? Can the Canadian market sustain its velocity?

Bank of Canada

The Bank of Canada boss, Tiff Macklem warns against exuberance. Don’t expect past strengths to carry on forever.

The return on 5-year G0C debt has now tripled in three months. The bond market determines 5-year Canadian mortgage rates. Growth, upward wage pressures, retail sales increases, less stimulus and more inflation.

Plus Canadian payroll employment rose by 44,200 in December after decreasing by 64,500 in November.

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President Biden

Let’s look at some statistics first.

  • 5-year mortgage rates are going to rise. Why?
  • US inflationary pressures rising.
  • 5-year Government of Canada (GOC) bond yields surged higher last week; direct connection to mortgage rates.
  • GOC bond yields move lockstep with US Treasury equivalents.
  • Why inflation? US President Biden authorized $1.9 Trillion in stimulus spending, COVID infection rates are dropping and a US economic boom is expected

What to do?

  • Lock in a fixed pre-approval if you are hunting for a mortgage
  • The variable rate may come back in style if we have a number of fixed rate hikes over the near term (variable based in BOC policy and their indication is no move until 2023 so you also have this appealing option)
  • 5-year loans at 1.5% won’t last long
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What’s the Story in the Okanagan?

  • The Okanagan is really a unique place in this cold northern country we call home. Trust me…I moved from the Prairies and will never complain about the weather in the Okanagan.
  • For seniors with travel potentially restricted long term due to variants or health conditions, the relatively warm OK climate is gold; allowing more outdoor access, fitness year round, an international airport.
  • 300,000 Hong Kong residents having to choose their citizenship may opt to retain Canadian citizenship, supporting Lower Mainland prices and the Okanagan by extension.
  • Immigration will restart once herd immunity hits and UBCO/OK College will be back in business

What are clients doing right now?

  • I am definitely seeing a fear of selling due to the difficulty in finding new accommodations.
  • Refinances are popular – never to be seen again low rates and great offers from lenders have many clients consolidating debts and adding HELOCS (home equity lines of credit) to hedge against future income/job disruptions due to COVID or its variants.
  • Also, due to the increase in work from home and the decrease in travel ability, people have been busy carrying out renovations. Increase to purchase plus improvements at possession plus refinances/HELOCs to carry out the desired work over time.

Let me know if you agree or think I’m nuts.


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