Hot housing market in Edmonton cooling off

At the start of the year, the housing market in Edmonton was booming. Many homes sold for over the asking price as soon as they hit the market.

Four interest rate hikes later, it’s starting to level out.

“What we’re seeing now is our market actually normalizing,” Remax realtor Morgan Taylor said.

“Over the last month, we’ve had a nine per cent decrease in sales, and that’s down 4.6 per cent from last June.”

Taylor said Edmonton is in a declining market, but it needed an adjustment.

“People were overextending themselves,” she explained.

The Bank of Canada’s interest rate hike this week has changed the game.

“A full per cent is a little bit higher than normal,” Taylor said.

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“Buyers are qualifying for a lower amount for their mortgage, so they’re going to need time to get used to that new amount — to shopping in a new budget.”

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The chair of the Realtors Association of Edmonton said consumers are used to those one or two per cent interest rates, and now they’re looking at around five per cent.

“It makes a big difference in your payment,” Paul Gravelle said. “It’s the consumer confidence that’s shaken a little right now.

“Just brace yourself and understand that the cost of borrowing money has doubled essentially, since the beginning of the year.”

If you’re selling, you’ll want to stay competitive, according to Gravelle.

“It’s about pricing it right and knowing that your home is going to take a little bit longer to sell over the next couple of months,” he said.

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Gravelle noted right now a house is on the market for an average of about 30 days, but that’s expected to go up to around 40 days.

He said inventory is a bit higher than previous months and new listings have decreased by about eight per cent.

“If homes were selling at, say, $400,000 two months ago, you’re going to want to be a little bit below that — show some value.”

Despite the market decline, the economy is still strong.

“I think the most important thing for people to remember is not to panic,” Taylor said.

“The average price of a single family home is still 4.5 per cent higher than it was last year.”

In 2016 the federal government introduced a stress test to help ensure home buyers could afford their payments if interest rates went up.