Ottawa Housing Market - Mid-Year Status Check for 2007

Typically, however, as the trend has swung in favour of resales, Ottawa sellers of used homes have begun raising their prices - 6.7% so far this year. But - unlike with new home builders, there is generally room to negotiate.

There are some significant advantages to buying some resales, but new homes have the edge in other ways, or new home builders wouldn't be in business. The biggest advantage resales have at the moment is a large inventory to choose from. On the other hand, the new homes market in Ottawa presently offers a choice from over 2,500 different designs from more than 20 different home builders, all available to be reviewed through our HomesExplorer™ database.

But, despite lower prices, there appears still to be resistance to a Quebec move on the part of Anglophones, due, according to one of our informal polls, to language issues and perceptions of higher taxes.

The US Bank rate, instead of increasing as anticipated, has also held firm, due to their housing market and mortgage foreclosure crisis and rumours of an impending recession. Some consider that the current rate of 5.25% will decrease to 5.00% by the end of the year.

Mortgage rates have reflected the movement of the bank rate, or in this case, the lack of movement, as they generally do. Our interest rate indicator has fluctuated from 5.39% up to 5.40% and then down to 5.38% over the course of the year thus far. The indicator is composed of the average rate from 29 different Financial Institutions for a Closed, Variable Rate Mortgage.

As a consequence of these new economic data, we are revising our prediction to reflect a 0.5% Mortgage Rate increase over the course of 2007, rather than one of 0.75%.

Ottawa's home buyers are therefore caught in a predicament. If they don't buy now, it appears as if they may soon be priced out of the market, as has happened in London. But if they do buy now, at current high prices, it appears as if they may get trapped in a declining market with an expensive house, as has happened in the US.

As for the other awful example, that of the US, Canadian conservatism - on the part of both buyers and lenders, generally precludes the type of over-exuberance that is the root cause of the current US housing crisis.

Builders, lenders, and the CMHC are aware of the decrease in affordability, and are coming up with novel ways to enable buyers to get a new home. Whether through design innovations or new lending policies, they are as interested in ensuring that something is available for as many prospective buyers as possible.

Essentially, if you buy a home for $300k now, with 10% down, rather than at the end of the year, you could save approximately $75 per month, if our prediction of a 0.5% rate increase by year's end holds. Add to that the possible price increase of 3.2% between now and the end of the year, (based on the New Housing Price Index increases for the first quarter of 2007), and you could save approximately $139.00 per month, or $1668 over the next year!

However, if the Bank of Canada follows the US, for which a decrease is predicted, and new housing prices don't increase, due to people switching to the resale market, it would obviously be better to wait.

But that's the risk of predicting a future that can never be anything other than uncertain. To cut to the chase - if you find the home you love, that meets your needs and that you can afford, then buy it. If not, then wait until you do.

We wish you the best for the rest of 2007!