Market Update for March 19th
Thanks to low interest rates and a desire to have more space during pandemic lockdowns, the housing market has followed up a decade of steady gains. The term bubble is starting to be used in connection with real estate. The effect of rising prices on affordability is a worry among some who feel they will never be able to afford a house.
Older generations, especially those who bought homes during the high-interest-rate era of the early 1980’s experienced affordability problems of their own. Imagine paying over 18% interest on a 30-year fixed mortgage? Affordability dropped to an all-time low and priced most Canadians out of the market. So why are current buyers unwilling to equate the challenges of previous generations to the current situation?
While some economists are warning the Toronto housing market could be approaching a bubble, others are stopping short of using that term. What’s different now? Economists believe the “fundamentals” of the Toronto market -the economy, interest rates, population growth and the sources of demand for housing are far more solid than they were in the late 1980s.