Why is Manitoba’s Housing Market Cooling Off?

Buying a home is one of the largest investments a person or household will ever embark upon. This is a great way to build equity and have a secure place to live for many years to come. The value of a home changes with time and the market. There are times when homes are in high demand and the value goes up. There are also times when the demand goes down, dropping those values.

Manitoba housing cool off

Manitoba’s housing market is cooling off, but there is still a demand for affordable housing. A combination of factors though is making it a challenge for many households to get approved for a home loan. The cost of a home has gone up and so have interest rates. When the numbers are calculated, many households can’t afford to buy right now. They would struggle every month to cover the mortgage and pay their other monthly bills.

The housing needs of a person can change with time. For example, it makes sense to buy a larger home when you plan to have children. Older couples often downsize so they sell the larger home and move into something smaller. That is hard to do though when you can’t find a buyer for your house. It is also difficult when the smaller homes are sold at a very high price right now.

Rates are expected to climb more around 2015. With consumers paying between 5% and 6% interest at that time. Right now interest rates are between 2% and 3%. That sounds like it could encourage people to buy now, but the home costs are too high. Many are holding out, hoping the prices go down. But will they be able to afford a home then if the interest rate goes up?

Lenders rely on careful calculations when someone applies for a home loan. The goal is to determine their ability to repay this loan. When that ability is a risk, the lender may increase the interest or they may deny the loan request. The amount of a home loan also plays a role in the approval. It doesn’t make sense to set someone up to default by giving them a loan they can’t reasonably repay!

Both buyers and lenders are hoping for lower interest rates and lower home prices. It typically doesn’t work like that! But it is fair to hope that the interest results in home prices staying the same or going down to help compensate for those higher interest rates on the horizon. According to Economist Magazine, hope values are inflated by about 32% already. Canada ranks #4 in the world for overvalued home prices.

The Winnipeg Realtor Association reports sales are low and homes are abundant on the market. It is taking more time for a home to be sold once it is listed than it used to. There doesn’t seem to be much job growth in Manitoba according to the Statistics Canada report. It hasn’t dropped though, staying steady with the same numbers reported two years ago.

Manitoba has the lowest wages in Canada, further creating problems for those that wish to buy or sell a home at this time. Approximately 20% of those living in Winnipeg have had to go to food banks to help them make ends meet. Those on the fence about selling their home worry that if they wait, the value will go down. They also know the grim reality is the home isn’t likely to sell very quickly. There isn’t much growth in the Manitoba home market at this time.