Did January'23 give a bounce back and some 'hope' to the residential real estate market? - Metro Vancouver - Real Estate Review
Also, financial details that are influencing the market and insight
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CURRENT EVENT! Let us HOPE that interest rate hikes will stop in Q2, creating some predictability and confidence
Did January give a bounce back and some hope to the residential real estate market?
The not so Short, yet Easy summary
I am ALWAYS excited for January sales! The month of renewal, new health commitments, plans for the upcoming year, and demand forwarding from an always sluggish December. This January did NOT produce significant bounce back sales results :(. In fact, January sales were down 55% from Jan'22, and 23% below the 10-year January sales average. This is the same message as the last 6 months. Benchmark price for all residential properties is down 6.6% from Jan'22.
What has changed?
1) Interest rates were increased again by .25 to 4.5% overnight rate in Q1 2023.
GOOD NEWS: 'Expectations' from the BOC (Bank of Canada) are that rates will plateau in Q2 (see table below), and then begin decreasing in Q3 & Q4.
BAD NEWS: The Bank of Canada and other economists are often mentioning the inflation decrease in December due to a few factors including lower gas and energy prices.
So what happens when gas prices spike this year as we are being told?
2) Inventory continues to be low. Its an incredible 'sandwich' the REBGV describes of low inventory (less supply) and higher borrowing costs (less demand).
The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,111,400. This represents a 6.6 per cent decrease over January 2022 and a 0.3 per cent decrease compared to December 2022.
Currently its a balanced market in Metro Vancouver for all property types
More Financial and Lending insight
What Does This Mean for Qualifying for a Mortgage?
Stress test rates for variable and fixed-rate mortgages are going to increase, which means fewer people are going to qualify.
To pass the stress test, you will have to qualify for a 7.5% - 8% mortgage. This means that it will price some people entirely out of the market and reduce the buying power for everyone else.
Realtor Comment: THIS NEEDS TO CHANGE... STOP! unless the Bank of Canada foresees this % rate as a possibility. Yes, scary thought. Low probability?
What Does This Mean for Potential Mortgages?
Best options for borrowers:
A short-term fixed-rate mortgage – This is a similar strategy to the variable mortgage, betting that the rates will go down over the next year or two.
5-year fixed rate mortgage – If you think inflation is going to be sticking around for a while or if your finances are tight, this would be the best choice.
5-year variable rate mortgage – If you think that the BoC is finished raising their rates and that they might even go down sometime in 2023 or 2024, then this would be a good choice.
INVESTMENT PROPERTY RECOMMENDATION OF THE MONTH!
4 Townhouses - $104k NOI - additional development
The opportunity is in Squamish to purchase 4 townhouses with their own independent forced air, laundry and full kitchens. The RM-2 zoned site also has ample space for further (5) townhouse development (approx 5 x 1,000sf).
Fraser Valley real estate sales record slowest annual start in ten years; January new listings lowest in over thirty years.
In January, the Fraser Valley Real Estate Board (FVREB) processed 626 sales on its Multiple Listing Service® (MLS®), a 12.6 per cent decrease compared to December'22 and a decrease of 52.2 per cent compared to January 2022.
“Buyers are understandably cautious, which explains the slow start to the year,” said Sandra Benz, President of the Fraser Valley Real Estate Board. “That said, the pent-up demand that has been building since the last quarter of 2022 will likely give rise to a sales uptick, especially if rate hikes subside, which we expect will be the case.”
MLS® HPI Benchmark Price Activity
• Single Family Detached: At $1,357,800, the Benchmark price for an FVREB single-family detached home decreased 1.4 per cent compared to Dec'22 and decreased 17.6 per cent compared to January'21. • Townhomes: At $773,100, the Benchmark price for an FVREB townhome decreased 1.8 per cent compared to December'22 and decreased 8.8 per cent compared to January'21. • Condos: At $503,700, the Benchmark price for an FVREB apartment/condo decreased 0.2 per cent compared to December 2022 and decreased 5.9 per cent compared to January 2022.
At $942,200, the composite Benchmark home price continued to edge downward, slipping by 1.4 per cent from December and off by 15.1 per cent compared to January 2022.
- FVREB sourced summary
Now that you have decided you want to get involved in a real estate purchase, what do you do first?
If you are planning to buy... get started ASAP. Have your financing in place and be ready to pounce when the opportunity presents itself - Interest rates are rising! Prices are not expected to rise for some time, so you have time! A short-term fixed-rate mortgage is the financial strategy.
Know your listing/sales ratios as a Buyer. Detached homes are currently at 13% list-to-sales ratio, which is on the border of balanced and Buyer market. This is currently the most vulnerable asset class.
If you are thinking of Buying in 2022, reach out to me, and lets talk about TECHNOLOGY, INVENTORY and TIMING!
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Metro Vancouver - Get ready to compete! Detached sales to listing ratios are nearly in Buyer market. Townhouses are still very strong with much more demand than supply. Condo Homeowner Price Index saw the lowest decrease in the market month-to-month.
Fraser Valley - Detached housing has seen a 24% decrease in prices, Townhouses 18.5% decrease, Condos 11% decrease in prices.
If you are thinking of selling in 2020, reach out to me, and lets talk about COMPETITION, INVENTORY and TIMING!
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Shaun T. Carson - Investment Realtor, eXp Realty, 1500, 701 W Georgia St, Vancouver, BC V7Y 1G5, Canada, 236.888.8898
