Many would-be home-buyers are waiting until housing prices bottom out before getting into the market, whether as outright buyers or rent 2 own clients.

If that’s what you’re waiting for, you may already be too late.

First, let’s look at the big picture. During the over-heated market that developed during the pandemic (due to several factors, the largest likely the drop in interest rates to historic lows), housing prices appreciated in Canada by around 50%. To curb this rapid escalation, as well as control the inflation that followed the massive economic shutdown from the pandemic (also exacerbated by the war in Ukraine), interest rates have been moving up at a record pace, starting last March. From a Bank of Canada historic low of 0.25%, the rate has now risen to 4.5% in eight stages. The Bank of Canada has signalled that this is likely the peak.

Of course, the rising interest rates put a damper on home sales as fewer and fewer people qualified for the mortgages they would need, and those whose mortgages were due faced much steeper payments. There was a sharp drop in housing values.

About 10%.

Note that. A steep increase is 50%. A sharp drop is 10%. That’s the way it tends to be in Canada.

Most everyone now realizes that the BOC policies were a bit out of touch. Maybe they never should have dropped by that much in the first place. But, in any case, the rise started too late and was too steep over such a short period. While they may have had the desired effect, it created a jarring shift that never needed to be that jarring.

Two weeks ago, in an article titled “BC’s housing market nears ‘cyclical bottom,’” an RBC report suggested that we were at or near the bottom. “Recent declines have slowed quite considerably, and we’re probably not that far off from the bottom,” stated assistant chief economist Robert Hogue. That was two weeks ago.

In a report by Dr. Sherry Cooper, chief economist at Dominion Lending Centres, written about the same time as the RBC report, she says “with hindsight, we now see that policymakers have made severe errors—taking interest rates to unprecedented lows and flooding the system with massive fiscal stimulus has precipitated global inflation.”

In this context, she says, “Predicting where the economy goes from here risks taking comfort in spurious accuracy. We’ve never experienced a similar set of circumstances. . . . We hope for the best but must prepare for a slow return to 2% inflation. Home prices have fallen but are still up more than 35% from pre-pandemic levels.”

The policies of the Bank of Canada have had an effect, though a 10% drop hardly counters a 50% increase.

Add at least two other factors that are countering the downward price pressure of these policies. One is the shortage of housing supply in this country. Until that problem is solved, or at least mitigated, there will remain upward pressure on housing prices. And that won’t happen anytime soon.

A second is the new legislation in BC removing rental restrictions from all strata properties. Prior to this sudden shift in November, many strata properties disallowed rentals. Properties that allowed rentals had a significantly higher market value than those that had such restrictions.

While this policy change is intended to increase the housing options available for renters, it has already had (perhaps unintended) counter consequences. Anticipating that these property values will rise to meet those of the formerly unrestricted rental units, investors are stepping in quickly to buy up these formerly non-rentable properties before their values jump too much.

These two factors are moderating, or offsetting, the downward pressure of the Bank of Canada’s policies. They’ve contributed towards the “bottoming out.”

My realtor, searching for a property for a new client, tells me that we’re again beginning to see multiple competing offers on properties. Yesterday, five of the eight properties he wanted to show a client already had accepted offers.

The market is back. It’s safe to say that waiting for prices to fall further, at last by any substantial amount, will be a futile wait.

Those who await a huge reversal of interest rate hikes will likely also be disappointed. Though rates will surely moderate from their current highs, that process will be slow, they will surely never get back to their pandemic lows and likely won’t even reach their pre-pandemic levels, which were already well below their historic averages. Even now, they’re only slightly above historic averages; it’s likely they’ll eventually settle somewhere between those historic averages and the pre-pandemic rates.

We need to accept the new reality. The return to a more active housing market, after less than a year of depressed prices and sales, will leave out those whose misplaced optimism keeps them waiting.

There may not be a better time coming, to get into the housing market.

Especially if you’re contemplating rent 2 own, because, in that case, you secure your buyout price at the end of the deal based on only modest appreciation from the current “bottom”, but get the benefit of waiting until the end of the deal, to secure an interest rate that is somewhat lower than today’s. It’s the best of both worlds.

At least, that’s how I see it . . .