Canadian Home sales rise in January! New rules to curb growth?
Feb 15, 2011
February 15, 2011
The federal government introduced new rules in January aimed at cooling Canada’s too-hot-to-handle housing market. And while in the long-run, it will have the desired effect, they definitely bolstered January home sales which rose 4.5% from December. That’s the highest level since April 2010.
But our Finance Minister, Jim Flaherty, admits that the implications of these changes are very difficult to quantify.
Hence, CREA suggested some very prudent advice: Don’t mess around with anything else in the mortgage market until the effects of these changes are clear.
Sounds pretty reasonable to me. It’s the same idea as tasting your coffee a bit before pouring another spoonful of sugar. It’s easier to decide not to do it rather than attempting to reverse it.
I think the changes were necessary– and the unpredictability is par for the course with economic policy initiatives. The Feds had to take aim at the potential housing market bubble. And that’s exactly what they did.
Market watchers have expressed varying degrees of concern over the amortization changes, with some suggesting it will have a minimal effect even as it pushes some first time buyers out of the market, and others suggesting price drops of up to 10 per cent as the markets adjust.
Worried? Here’s a couple of things to keep an eye on…
Housing numbers in the few months after the new rules are introduced. Don’t panic if sales drop off for a little bit. Purchasers rushing to get insured 35-year mortgages before it’s too late are stealing sales from subsequent months. So take those numbers with a grain of salt.
Indications that interest rates are going to rise. Rising rates are the biggest worry for exacerbating debt burdens.