PEI

Rising mortgage rates cooling summer housing market, at least a bit

There are signs P.E.I.'s hot housing market is starting to cool off this summer, as mortgage rates continue to rise.

P.E.I. not seeing drop in house prices like some other markets

A real estate sign in front of a house that reads 'FOR SALE'.
According to P.E.I.'s real estate association, while prices haven't come down, there are signs the market is starting to cool slightly this summer. (Jonathan Hayward/The Canadian Press)

There are signs P.E.I.'s hot housing market is starting to cool this summer, as mortgage rates continue to rise. But at least so far, it hasn't cooled enough to drive prices down, like in some other Canadian markets. 

"We've definitely seen a slow down in the frenzied market that we saw earlier in the spring," said Kim Reddin, a mortgage broker in Charlottetown. "Not as many multiple offer situations. Not as many over-ask situations ... The pricing is stabilizing I think."

Canada's two largest and most expensive markets — Toronto and Vancouver — have seen average house prices decline steadily since March, when the Bank of Canada started hiking interest rates. 

Kim Reddin, a mortgage broker in Charlottetown, said rising mortgage rates mean her clients can't qualify for as pricey a home as they could previously. (Steve Bruce/CBC)

But according to the latest statistics from the P.E.I. Real Estate Association, while prices here dropped slightly through late winter and spring, they rebounded in June, with the average sales price hitting a record $416,000. That's 25 per cent higher than a year ago. 

"I think it has to do with our average price still being more affordable in P.E.I. compared to [larger markets]," said James Marjerrison, the association's president. "You are still seeing that, especially in the starter home price ... there are still a lot of buyers in that price range" of the high $300,000s to low $400,000s.

More open houses, more days on market 

However, realtors are starting to see signs of "a softening in demand," he added. 

For one, while the number of new June listings was up over the previous year, sales were down 12 per cent. 

"And you are seeing more open houses happening, and maybe the number of days a house is on the market increasing a little bit," said Marjerrison. 

James Marjerrison, president of the P.E.I. Real Estate Association, said while there are signs of a "softening in demand," it hasn't had much of an impact on home prices. (Submitted by James Marjerrison)

But even if P.E.I. house prices start to level off or even drop slightly, Reddin said that won't make affording a home any easier for many Islanders hoping to get into the market. 

She said rising mortgage rates since March have shrunk the maximum home price her clients can qualify for by about 20 per cent. 

"It's definitely a tough time. People are a little bit nervous, maybe backing away a little bit from the market, just to wait and see what happens with rates and prices," she said. 

Experts predict another Bank of Canada rate hike will be coming before the end of the month, which could translate to another jump in mortgage rates. 

"If interest rates continue to rise, it could have a bit more of an effect on housing prices, and we could see prices levelling off or even reduced a little bit," said Marjerrison. "It's a bit of a wait and see."

ABOUT THE AUTHOR

Steve Bruce

Video journalist

Steve Bruce is a video journalist with CBC P.E.I. He landed on the Island in 2009, after stints with CBC in Fredericton, St. John's, Toronto and Vancouver. He grew up in Corner Brook, N.L.

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