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JRGC1 | 4 years ago
Interest rates are at historic lows https://wowa.ca/bank-of-canada-interest-rate
Interest Rates and House values are strongly correlated. https://investfourmore.com/interest-rates-housing-prices/
When rates go up, prices will come down.
The average house in my small town is $799,999. 2 hours from Toronto. A small 1 bedroom, 1 bath, built prewar with no basement, is going for $300,000 in a bad part of town with a tiny lot. The house across the street sold for $240,000 three years before the pandemic. Today, it's quite possibly would go for $600,000+. This all might make sense in a high density area but...
When looking at a satellite image, 95% of the land around my immediate area is farms/forests. The average price of that land is $10,000 per acre. That's a 100% increase since the beginning of the pandemic(Avg. 5k before).
omarhaneef|4 years ago
"As you can see there are some points where it appears interest rates may have correlated with a price drop, like in the late 2000s. Those of us who were in real estate at the time know there were many other issues as well. Lending was horrible, there was record new building and tons of foreclosures, basically the opposite of what is happening now. I think most people in the industry would say increasing interest rates were not the main factor that caused the crash.
I think the more telling sign is from the 1980s and 1970s where interest rates rose to astronomical highs! The prime rates were more than 20% at one time. It is important to know that the first graph is not what mortgage rates were. Mortgage rates that people get on their houses are not directly tied to the prime rate. The chart below shows what mortgage rates were."
granshaw|4 years ago