Despite what many people will talk about at the coffee shops or hockey rinks the housing market in 2009 will be stable.  We do expect a slower start to the market that will keep activity low but by the latter half od the year we will see more steam come back into the market.Buyers are out there and the deals are getting better, eventually they need to surface.  In fact I believe especially in Calgary that we could see a resurgence of first time home buyers as the affordability index has improved by approximately 35%  over the past 90 days alone.  When you look at continued flatter prices, and the prospects of lower payments due to reduced interest rates in Q1 2009 then first time home buyers need to get out there.Why?  Because interest rates will go back up when the economy recovers by mid next year, and as we mentioned earlier the market will heat up in the latter half of the year which will see less choice, and potentially higher prices as the housing market stabilizes in it’s own recovery.

What will the Bank of Canada do tomorrow with respect to interest rates…It likely doesn’t matter much what they do tomorrow but rather what is the outlook over the next couple of rate setting dates?  For the record the conventional wisdom is that they will drop .50% and the market is likely already priced that in.  As such it would be nice I think if they did .75% to be a nice welcome surprise for the market.  Regardless I think we could expect that the rates will be at least another 1% lower over the next two rate setting dates to come in at 1.25% (which provided the retail banks match the cuts would put Prime at 2.25%)  There is an outside chance we could see the bank rate go to 1% and consequently Prime to go to 2%.Could you imagine what effect that will have on consumers who have Prime minus .90% mortgages that were offered as early as this year?  1.10% mortgage rate…it is things like this that make us all wonder what is the new normal?