Kitchener Waterloo Real Estate Prices Hot In February

Like the hilarious commercial for Kraft Habanero Heat Shredded Cheese, Kitchener Waterloo residential MLS sale prices in February were "hot as you know what.".  The average sale price climbed 7.4% to $321,947 from $299,759 in February 2012.  Let's look at what is behind rising home prices.

As noted in a previous blog, interest rates are a huge factor in affordability. In early 2008, a five year mortgage was in the range of 5.75%.  As those mortgages now come due, renewals are available at roughly 3% for 5 years.  Let's assume a young couple with a household income of $70,000 and no other debt bought their first home in 2008.  Leaving aside downpayment and assuming a 25 year amortization, they would have qualified for a maximum CMHC insured mortgage of about $300,000 with monthly payments of about $1875.  They decide to upgrade this year and their household income hasn't changed.  With rates now at 3%, they qualify for a maximum mortgage of nearly $395,000 or nearly 32% more.  It gets better - the monthly payments actually drop to about $1869!  How could you not be seduced by that?  Is that what one of the big banks mean by "You're richer than you think?"

The average residential MLS property sold for $253,409 in February 2008.  Using the figure above for February 2013 sales, the average sale price in Kitchener Waterloo rose 27% in 5 years while falling mortgage rates have borrowers qualifying for 32% more mortgage. 

Clearly, low mortgage rates are responsible for rapidly rising prices.  This begs the question - what happens when rates rise?  That is a topic for another day!

On Monday, I'll look at the rest of the February sales metrics for Kitchener Waterloo real estate. 

 

Jeff Gingerich

Sales Representative

Century 21 Home Realty Inc. Brokerage

Office:  519-570-4663

Direct:  519-505-4488

http://JeffGingerich.com

"Delivering results since 1989"

 

 

 

 

      

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Jeff Gingerich

Jeff Gingerich

Sales Representative
CENTURY 21 Home Realty Inc., Brokerage*
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