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Are the Canmore and Cochrane Housing Markets being effected by higher interest rates?

a report on interest rates - are they affecting the canmore housing market?

What affects are we seeing in the Canmore and Cochrane housing markets as interest rates have risen from 2022 and into the start of 2023?

This is a question I’m getting from so many Seller and Buyer clients lately in the Bow Valley.

As inflation runs rampant throughout Canada and much of the world, central banks have fought hard to slow the economy by tightening the purse strings. This means increasing interest rates at some of the highest paces not seen in decades, and the Bank of Canada has set an overnight rate of 4.5% – a height not seen since 2007. The Bank has announced a “pause” for the time being, as they wait to see the effects of their rate hikes towards taming inflation back down to the target of 2%.

What does this mean for housing markets in Canmore and Cochrane? How about the rest of Canada? Today, let’s explore some of the market dynamics I’m seeing and questions I’m getting from clients in the field.

  • How do interest rates effect the economy & housing in Canada?
  • Canmore housing market effects of interest rate hikes
  • Cochrane housing market effects of interest rate hikes

How do interest rates effect the economy & housing in Canada?

This is a question that most people haven’t had to ask in a while! Since the Global Financial Crisis, central banks have actually been trying to prevent deflation and stir economic growth by keeping interest rates low. This has spurred a steady rise in housing prices as debtors can stretch themselves to further limits as low interest rates make debt more affordable.

In terms of the economy, when interest rates are low, companies can invest in technology today with the promise of earnings growth in the future. For investors, they see this growth as a better opportunity to gain returns compared to safer investments (ie. Bonds), which are less attractive at lower interest rates. Low rates incentivize people and companies to invest in future growth (bringing returns forward), rather than saving and investing in debt.

Canmore Housing Market Effected by Interest Rates

So how is the Canmore Housing Market faring in these uncertain and challenging economic times? Not too bad, it turns out. While some markets have seen large decreases in home prices as Sellers struggle to find Buyers, Canmore is still benefitting from then protective factors which make it such a special place. Extremely low inventory has been helping to maintain prices as options remain scarce.

The thing about Canmore is that it isn’t really tied to one industry (ie. the coal mine that once was). Of course, tourism is a large part of the economic picture in Canmore, but many of the workers in this industry are seasonal and tend to rent. Most home owners tend to be long-term residents with lots of equity, or recent purchasers happy with their low-rate mortgage secured in past years. Much of the makeup of this mountain town today is people working from home, enjoying happy retirement, or vacation properties for the economically secure from across the country.

Interest rates tend to have the largest impact on first time homebuyers. This is because they are just entering the “property ladder”, and don’t have the equity that more mature buyers may be able to bring. Higher prices and higher rates can have a significant impact on what they can afford.

Many of the buyers considering Canmore don’t fit this profile, as they seek their mountain dream home or investment property. Sadly, many local first time homebuyers must still compete which makes it difficult for families just starting out. This puts further pressure onto young people and often they are forced to choose between a place where they love to live, and better housing opportunities.

Cochrane Housing Market Effected by Interest Rates

Cochrane as as housing market faces different challenges, but has so many more opportunities for buyers of all stripes. This market is more focused on residential homes, and has seen some of the highest growth of any city in Canada in the past 10 years.

Many of the buyers in this area are first-time homeowners, retirees from the City, or folks coming from elsewhere in Canada looking for an excellent place to call home with affordable prices. Moving to Cochrane is a no-brainer for many commuters to Calgary or to jobs elsewhere in Alberta, as the proximity to the mountains makes it a great place to set out on endless adventures. I’ve helped many families relocate from Canmore and Banff for the exact same reasons!

Cochrane has a much higher amount of supply compared to a place like Canmore. This means Sellers need to compete against more options, keeping prices lower than in tighter markets. This wider field of options also comes with more depth, as housing styles vary from attached to detached, with garage, row, condo… the list goes on! This means that buyers facing higher prices and higher rates can opt for a compromise on their purchase.

While prices have risen here in the past 24 months, it still remains one of the more affordable marketplaces in Canada, as supply continues to grow more in step with demand.

Are the Canmore and Cochrane Housing Markets being effected by higher interest rates?

So to answer this question: Yes – but in different ways. And for different folks.

In any housing market, Buyers will not only be competing against themselves (what they can afford), but also what other Buyers can afford. Even if you’re looking for a starter home or condo, you could be swimming in the same pool as wealthy retirees looking to downsize. – and paying cash.

Sellers will find they are effected by interest rate rises in different ways as well. Many who have pushed themselves to their limit on a variable rate mortgage are feeling the pinch. As fixed-rate renewals start to roll in, those owners will feel the tightening as well. For some, this could spur a forced-sale as they need to reassess their needs. Others may be able to hold on. But in real estate, regardless of the environment, sometimes Sellers simply need to sell. Plans change, families change, life changes.

If you’re a Buyer or a Seller in today’s marketplace and your considering a home in Cochrane or Canmore Alberta, feel free to reach out to me via text, call or email. I’m always happy to provide insights into any listings you see or further information on our beautiful communities.