If you are a current homeowner like Colin and I or looking to sell and buy a home in the near future you may be asking yourself … “when will this market madness end? “ …
According to the CREA our national real estate board, due to ultra low borrowing rates and ongoing foreign demand playing an inflationary role Vancouver and Toronto have officially detached from the rest of the country with skyrocketing home prices.
November was an abnormally busy month with no decline in demand. Housing inventory in Surrey, Cloverdale, South Surrey and Langley hasn’t been this low since 2006; the lion’s share of demand focused on ground oriented homes and townhomes. (current sales to active ratios: 1 of every 2 ground homes selling in comparison to 1 in every 5 condos)
Furthermore there are more buyers entering the market with 5% down putting many in a vulnerable position in terms of debt level, this has led the federal government to change mortgage lending rules for CMHC insured borrowers. As of Feb 15th the minimum down payment is being raised from 5% to 10% on the portion of the house priced between 500,000 – 1,000,000. This policy does not change the 5% minimum down payment for properties listed up to 500,000. This move is part of a series of moves taken by the feds since 2008 hoping to encourage home buyers to save more of a down payment before entering the market.
Sadly, the general sentiment among our clients this year has been stress and panic. Our first time buyers worry if they don’t get in the market now they will be locked out forever. Our 2nd time buyers who are looking to take advantage of their new equity wealth feel locked out of the market due to real concerns over low inventory. Although this hyper pace makes for a great year selling real estate we long for more stable market conditions for our clients.
How effective these new lending minimums will be is not clear (expected to affect 1% or less of borrowers). Benchmark qualifying rates for Canadian mortgages have not changed for several months but discounted rates at banks and other lenders have recently moved higher. Similarly, despite stable inflation and moderate economic growth in the Canadian economy the feds are expected to raise rates very slowly in the new year due to pressure from rising US rates. The BCREA .. our provincial real estate board … predicts 5 year qualifying rates to increase to 4.79% in early 2016 – gradually rising to 5.11% by the end of next year.
Adjusting to a slight increase in mortgage rates would likely temper the pace of residential construction ( good news to those of us in the Sullivan, Panorama and South Surrey areas! ) and inevitably, homes sales in the new year but what about inventory levels? We anticipate an influx of homes on the market early in the new year in response to home owners pent up demand to make a move paired with their recent rapid equity growth …
If you have been thinking about buying up and capitalizing on your equity … maybe 2016 could be your year? If so, we would love to be the realtor to help you navigate the madness.