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As the novel coronavirus pandemic forces parts of the economy to shut down, the snow is melting in areas of Canada in what’s normally a prelude to the busiest weeks of the year in real estate.

But will the health emergency freeze the spring housing market?

So far, it’s hard to tell. Real estate is what economists call a “lagging indicator,” notes Romana King of Zolo.ca, meaning that, usually, it takes a while for economic trends to be reflected in housing market data.

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“The numbers won’t show up for anywhere from a week to three months from now,” King said.

Still, there’s little doubt that COVID-19 has already brought about seismic changes in the industry.

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In February, the housing market in many parts of Canada seemed headed for red-hot season. Home sales were up nearly 27 per cent compared to the same month in 2019 and the national average home price had climbed 15 per cent.

Now, real estate agents are doing client meetings and home tours online or carrying hand sanitizers and gloves when showing properties in person.

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At Zoocasa.com, new company policies include sanitizing doorknobs, cabinets, countertops and other high-contact areas before and after each visit.

Also, handshakes are out.

“We keep at least six feet away from each other,” reads an online memo. The rule holds for both agents and clients.

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Still, despite the industry’s efforts, the biggest change King has noticed is “the hyper reluctance of buyers to go visit sellers’ home.”

Others, unnerved about the uncertainty over the economy, are pressing the pause button on home-purchasing, King said.

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Others yet are seeing lenders press the pause button for them.

That’s what happened recently to a client of Ron Butler of Butler Mortgage, which offers services in the Greater Toronto Area, Ottawa, Vancouver and Calgary.

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When the lender conducted a routine check on the person’s employment status two weeks before the closing date, it discovered the client, who works in the hotel sector, had been temporarily laid off with no set return date.

The mortgage was cancelled, Butler said.

Butler sounded optimistic about the possibility of finding a solution for his client — possible alternatives included finding a co-signer or signing up with a different lender willing to take on more risk for a high mortgage rate, he said.

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Still, buyers who find themselves in that situation face the possibility of losing thousands of dollars in deposit, Butler said. And if the seller has to re-list the property and eventually sells for a lower price, the original buyer may be on the hook for the difference, although they may be able to challenge that through litigation, he added.

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In the current circumstances, some lawyers will take the view that “a contract is a contract — until there’s a plague,” Butler said.

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For now, since the virus hit, Butler has had only one case of a lender pulling out. Nor has he seen prospective buyers getting cold feet as the closing date approaches, he said. But that may change.

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The bulk of the layoffs in the hotel and restaurant industries have only come over the past two or three weeks, while home deals, on average, take 48 days to close, said Butler.

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The news this week doesn’t bode well. Air Canada is set to temporarily lay off more than 5,000 employees, according to the union representing the airline’s flight attendants. And on Friday Ottawa said over half a million Canadians have recently filed for employment insurance, a volume Prime Minister Justin Trudeau called “historic.”

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Still, the market hasn’t dried out yet, King said.

Even before COVID-19, virtual tours were becoming more and more popular. Some buyers are comfortable purchasing without seeing properties in person. Others, who have plenty of cash at hand, are undeterred by the economic outlook, she said.

No doubt, low mortgage rates are helping.

Well-qualified buyers can now get a five-year fixed rate for below 2.5 per cent and variable rates below two per cent.

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But mortgage rates have been climbing somewhat, noted Robert McLister, a mortgage broker and founder of rates-comparisons site RateSpy.com. For weeks, a slowing global economy pushed borrowing costs lower. But now that Canada’s economy is staring down the barrel of a recession, banks are facing both higher funding costs from jittery investors who help fund their mortgages and a higher likelihood of loan losses as borrowers struggle to keep up with payments.

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“Both funding costs and credit risk (expected losses) have surged. When that happens, banks protect their profitability and increase margins by lifting rates,” McLister said via email. Some lenders are lifting variable mortgage rates even after the Bank of Canada lowered its trend-setting policy rate by one percentage point in the span of less than two weeks.

Banks can’t lower the interest they pay on deposits as much as mortgage rates, McLister said. This squeezes their margins and creates upward pressure on mortgage rates.

That should stop when people get back to work and mortgage arrears have topped out, McLister said.

How soon that actually happens will be key in determining whether the housing market is headed for a temporary blip or something more serious, King said.

“We talk about interest rates and we talk about supply and demand levels,” King said. “But the primary indicator when we talk about real estate is job security.”