The first quarter of 2020 saw a steep decline in employment rates within the Edmonton area, as 24,000 positions were lost in February 2020. COVID-19 layoffs thawed after the winter, and in February 2021, 12,000 of those 24,000 positions were regained as employment started to rise. (Via Statistics Canada.)
The market has been heavily influenced by COVID-19, but has since begun to slow down. A few things could cause this to happen. For one, the prospect of international travel and the ability to spend money elsewhere for buyers appeared on the horizon after the deliverance of vaccines to Canada.
Most importantly however, the slowdown in affordability is being caused by the sanctioning of mortgage stress tests, implemented by the Finance Minister of Canada. The stress test increases mortgage interest rates up to 5.25 %, to slow down the amount of buyers who were buying before the increase due to lower interest rates. During COVID-19, people were housebound and thus more willing to spend their money to purchase a home if it was where they had to spend their time.
The intention of the mortgage stress test was to slow this process down, and to decrease people from getting mortgages that they could not afford in the long term.
In the short term however, this makes it much more difficult for first time home buyers, or people who have less cash on hand to afford higher interest rates.
Another factor that has recently slowed the supply of homes available was the surge in lumber costs, which as of only recently has started to decline. With the decline of lumber prices, building projects will become more affordable, and the supply of houses will eventually increase. This is something to look forward to, as newer homes could potentially see a decrease in price throughout the summer.
Despite the overall federal slowdown we are seeing in the second quarter (likely due to the stress test), we can still see that we are high above where we were last year, and the market is not by any means at an all-time low.
Despite the increase in mortgage rates, you may still be able to qualify for a mortgage. Want to find out if you qualify under the new stress test? Use the Mortgage Qualifier Tool online to find out if you are eligible.
For more upcoming information on Edmonton's housing market, stay tuned for our review of the second 2021 quarterly, where you can stay informed on the latest real estate trends and extrapolations on the Edmonton market.