A Deeper Dive into Interest Rates and their Impact on the Winnipeg Real Estate Market

I’ve given predictions here already, and historical data.  But there are still many questions that come up when discussing interest rates that I would like to address.  Keeping in mind that I am a Realtor that sees the benefits of real estate on a daily basis - this blog will obviously be a bit slanted to that end.  I hope you can forgive me!

My feelings on real estate, regardless of high or low interest rates, remain unchanged. You will NEVER convince me that real estate is a bad investment, so long as you can comfortably make the payments on your mortgage. 

There Are A Few Reasons For This.

1. People Buy Houses Because Of Lifestyle Changes, Not Because Of Interest Rates.

I should preface this by saying most people. Some investors, do buy and hold properties based purely on the economics, but they are not the norm. Remember, people buy and sell houses for life changes, which can be characterized with the big D’s: Diamonds, Diapers, Diplomas/Degrees, Death, Difficulties, Divorce, Dogs, Downsizing. Sure, an interest rate change could have people delay their decision for a little while, but at the end of the day, if their current house no longer works for them, they tend to accept the pain of a higher interest rate and move forward.

2. Expectations Adjust

Statistical fact: In 1971, the interest rate for a mortgage was 7.33%.  If you had waited for this interest rate to go down before buying a home, you wouldn’t have purchased a home until 1993.  Can you imagine waiting 22 years for rates to go down? The average home price in Winnipeg, 22 years ago was $104,202.  Now, we are reporting an average selling price in late 2023 of $369,325.  A 254% increase in home values.  I assure you, that very few individuals decided to wait from 1971 until 1993 to buy. Despite the scary high rates of the time (particularly in the 80’s and 90’s), people got used to the rates and would ultimately move, based on their personal situation. Everyone's adjustment period is different, some adjust in a matter of days, others take a couple of years to regain their confidence - but once that new normal has set in, we see people taking action again regardless of interest rates.

3. History Is The Best Predictor

Similar to how we can look to the 80’s and 90’s as rates were rocketing upwards, we can also look at what is a perceived “acceptable interest rate” over time.  That number actually hovers around 6-8%.  We have had strong, Seller’s markets here in Winnipeg (and Canada) when those rates were hovering right in that range.

4. The Law Of Economics

Supply and demand – the two drivers for both price and time. We continue to see positive population growth in Manitoba.  However, looking at housing starts in more recent months indicates that we are not keeping up with the supply necessary, to meet this demand. While the Federal Government aims to level out immigration targets in 2026, we are still far behind the required level of housing starts to hit current targets.

5. Timing Is Everything!

This headline is a bit misleading, and for that I do apologize.  It may appear that I think you can time the market. But that is not what I mean at all.  I sell real estate day in and day out.  I can tell you there are deals to be had in any market.  BUT you can NEVER time when the perfect time is to buy or sell a property.  Rather, look at time in the market vs. time on the market.  Anytime you are buying Real Estate, it should truly be viewed as a long-term investment.  If you came here to learn about flips, I apologize.  That is not my wheelhouse nor will it ever be.  Yes, I buy properties and renovate them to improve their value.  However, I keep those properties as rentals.  I plan to hold them for the long-term.

6. People Will Always Get Creative

If somebody truly desires to get a home, but it’s not an option via conventional methods – they get creative.  We are seeing more house hacks (owners living in a portion of a home and renting out another to offset their costs), we are seeing more “Tenants in Common” ownership arrangements – so perhaps not a husband and wife buying a home together but rather friends, that then both own portions of the home. I’ve even learned recently of some investment companies that are “pairing” buyers with one another to allow them to buy homes together.  I’ve also experienced people getting side hustles to make the numbers work. Let’s remember that owning a home is a huge dream and motivating factor for many.

7. Adjusting Expectations

Akin to getting creative, we are also seeing people adjusting their expectations. Perhaps they are okay with a bit less house than they originally planned, and that’s okay too.  At least then you are in the market and properly hedged against market fluctuations.

8. Understanding Micro Markets

Winnipeg is a relatively small City.  But even so, there are micro markets within it.  There are areas that are more heavily impacted during market downturns or high-interest rate environments.  Then there are areas that are completely unaffected.  Knowing the market and it’s sensitivities, is key!

9. The Rental Argument

If you’ve seen much of my other work, you will know I often say “You pay a mortgage either way.  Would you rather it be yours, or your landlords?”.  But let’s also look at this from the perspective of a landlord – when rates are higher, we do see rents increase as landlords attempt to cover their expenses.  I’ve also noticed, that vacancy rates are very low in Winnipeg.  You are going to pay those rates one way or another (unless you have parents that let you move in…)

10. This Is A Season

Just as the historically and unprecedented low rates of 2020 were there for a season, so too, are the higher rates. This is simply a chapter of the interest rate changes and does not mean you are trapped in this particular situation for forever.  If your concern is that a home might decrease in value in Winnipeg, and that is what is holding you back, look again at history. Over 50 years of data, Winnipeg values have gone up every year except for 3.  The 3 years it didn’t go up were 1982 (Average price went from $55,231 to $53,994), then 1990 (Average price went from 87,021 to $85,018), then 1995 (Average price went from $89,352 to $87,387).  In the worst year, we are talking about a 2.3% decrease. However, a strong rebound followed the next year – including in 1983 when property values increased by 8%... far making up for the decline. However, had you have panicked sold or elected to wait until interest rates came down in 1982… you would have lost those gains.

11. Cost Of Action Vs. Inaction

Which brings me to my next point.  There is always a cost of action, but there is also a cost of inaction.  We need to look not only at the financial needs, but at all needs such as mental, and psychological costs involved with taking action or not taking action.  There is no right or wrong answer for all.  This is a case-by-case analysis.

At the end of the day, the focus should always be on what is best for you and your situation.  However, what I will caution you on is not taking action simply because you are scared of what you hear on the news about the market or the current interest rates. Every market is local, and every family is unique.  Get the information you need from your lender, from your Realtor, and set yourself up for success – when the time is right!

#AgentJen

Jennifer Queen

Phone: (204) 797-7945
Email: Jennifer@JenniferQueen.com