It will come as no surprise that the local housing market has been on a rocket ride for the better part of two years. A large chunk of this was due to buyers from the east travelling down the 401 and 403 in search of the Canadian Dream. And they found it in Oxford County! Cheap housing compared to the markets they were leaving as well as so many of the amenities they had become accustomed to.
We noticed a significant reduction in the amount of out-of-town buyers that we were seeing in our Open Houses in August and September. There was also a steep decline in requests for home showings from this particular pool of buyers. This can be most readily attributed to uncertainty on the part of buyers and what was going to happen with the Federal governments new mortgage rules. Buyers wanted to make sure that if there was a decline in average home values, that they wouldn't be left holding the bag. What actually did happen was the return of a more balanced market. Home values held and multiple offers became more of an anomaly instead of the norm.
The Federal stress test, in very simple terms, means that a buyer with less than a 20% downpayment would need to be approved at a mortgage rate about 2% higher than what they would actually be borrowing at. Your lender offers you a mortgage rate of 3.44%, you would need to qualify at roughly 5.44%, even though you would be borrowing the money at the lower rate. The result is that buyers can borrow about 20% less than they could under previous mortgage rules. This is the governments attempt to make sure homeowners can afford the homes they are purchasing when interest rates inevitably rise.
That brings us to the Gift this December appears to be. As of January 1, 2018, the stress test described above will apply to ALL consumers borrowing money for a mortgage (except credit unions and private lenders). There is also a predicted .5% interest rate looming in 2018. To avoid the stress test, buyers just need to have a mortgage deal in place by the 31st of December.
If you are thinking of selling, now is a great time to enter the market, even though traditionally Christmas is a slow market. These looming changes have brought Eastern buyers back to Oxford County at levels not seen in several months. The other upside is sellers can be approved on the purchase of their next home with the current mortgage rules if everything comes together in December. The deals do not need to close in December, they just need to be firm sold deals and can close in 2018.
If you are a new buyer thinking of getting into the market, and you have done all the hard work of saving a 20% deposit, buying in December will allow you to purchase 20% more home than you will be able to purchase under the impending new rules. You still have an opportunity to put those hard earned savings into your new home!
If you have any questions about this article, or any other Real Estate questions, please contact a member of The Sherman Group. We are always here to answer all of your questions and concerns.