Rays of sunlight are peeking through the clouds that have been hanging over the Canadian real estate market as of late.
According to the Canada Mortgage and Housing Corporation, the seasonally adjusted annual rate for housing starts during May was 200,178 units. This marks a significant increase from 175,922 units during April. As far as urban housing starts go, the seasonally adjusted annual rate increased 14.6 percent during May, reaching 177,234 units. This can be attributed to a 22.2 percent increase in multiple urban starts, reaching 114,346 units. Meanwhile, single urban starts rose 3 percent during this time period, reaching 62,888 units.
According to The Globe and Mail, these figures, along with positive data regarding the addition of new Canadian jobs, has led to the Canadian dollar gaining in value.
"May's increase in home building suggests overall housing construction continues to garner support from condominium-related building, although the overall levels are still off from the highs seen in mid-2012 when the market was more frothy," said Emanuella Enenajor, economist at CIBC World Markets. "Today's data could mean that homebuilding activity in Q2 could be less of a drag than seen in the prior quarter, although we continue to see this sector struggling on weak secondary market activity, the fading impact of low rates and buyer fatigue."
More construction means more choices for buyers, which could help lower the high property prices many Canadians looking to enter the market have had to contend with. A combination of low inventory and buyer demand has pushed housing prices higher in recent months, and recent reports have said that softening in prices is likely to be milder than initially expected. In fact, in areas such as Vancouver, which saw price declines after the market correction, home prices are already on the rise again.
Mortgage rates on the rise
Even with prices high and mortgage restrictions making obtaining financing more difficult, homebuyers were able to rely on ultra-low mortgage rates. However, it looks like that trend is on the wane.
According to an article from The Globe and Mail, the Royal Bank of Canada is raising its mortgage rates, and industry observers are forecasting that other banks aren't far behind.
"The special rate on RBC's four-year closed mortgages will now rise 10 basis points, to 3.09 percent, while its five-year special rate will rise 20 basis points to 3.29 percent. (A basis point is 1/100th of a percentage point.)," the article stated. "The posted rate on a one-year mortgage is going up 14 basis points to 3.14 per cent, while the posted rates on two- and three-year mortgages are each rising by 10 basis points, to 3.14 and 3.65 percent, respectively."
While this isn't exactly good news for homebuyers, keep in mind that these rate increases concern shorter length mortgages. The majority of buyers typically opt for longer mortgages, and the rates on those remain near historic lows. At the same time, it's nearly impossible to say for sure when those rates may rise as well. This is why locking in low rates now is the wisest decision for prospective homeowners looking to save.
A fixed-rate mortgage at today's low rates will save homebuyers thousands of dollars in interest over the course of their loan, meaning for buyers looking to take advantage of low mortgage rates, it's smarter to act sooner rather than later.