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Several people have asked for my opinion on where interest rates and home prices are headed in 2012.

In 2011 we found that interest rates remained at historic lows and threats by the Bank of Canada to effectively raise the prime rate beyond 3% never materialized. Talk in the fall was that they might actually be lowered, but expect no changes for the remainder of this year, with the next review scheduled for January 17, 2012.

Moving forward we can expect much of the same for 2012. The Bank of Canada would like to raise rates as they remain at historic lows, but balancing that is the volatile economy, a worsening recession in Europe and continued housing foreclosures in the United States. There is simply no economic stimulus I can foresee for 2012 that would justify a significant increase.

So what does that mean for housing prices? I can speak best to the local London, Ontario market. Prices softened overall in 2011 simply as a function of supply and demand. At the end of November, 2011, 3414 properties were listed in the London/St. Thomas board with only 379 properties sold during the month. That works out to a 9 month inventory of homes on the market. If I was selling a home today that would make me nervous. Homes that are priced aggressively will continue to sell quickly, but those expecting top dollar may have a wait on their hands. Some niche markets will continue to do well. Quality residential investment properties remain in strong demand. I also expect newer homes to remain popular as they are equipped with the on-suite bathrooms, larger kitchens, full basements, and attached garages that seem to be the “must haves” homeowners expect today.

Overall it is always a good time to buy/sell real estate. Rates are low, and there are plenty of housing options.

We welcome your comments.