Real Estate Market Returning to Normal

At least for the condo and townhouse market.

Last month, we felt the market picking up after a quiet month in August. After school started in September, buyers also started looking and buying again.

“Fewer home sales are allowing listings to accumulate and prices to ease across the Metro Vancouver housing market,” Ashley Smith, REBGV president-elect said. “There’s more selection for home buyers to choose from today. Since spring, home listing totals have risen to levels we haven’t seen in our market in four years.”

This is good news for home buyers. Now buyers can have the proper due diligence period to do home inspections and make sure they can get financing from banks. In previous year, or even the beginning of this year, buyers often have to make subject free offers to have a chance at winning the bid. Meaning buyers have to waive home inspections and financing clauses to be even considered by the sellers.

Bob Rennie, the Vancouver Condo King, while promoting the development his company markets, remains optimistic of the real estate market. He said now buyers don’t have to rush to buy. And the number of jobs that are going to be created by companies like Stemcell Technologies and Amazon will bring more workers to the area.

Hundreds of new jobs expected as B.C. biotech firm plans new facility

Amazon expands Metro Vancouver footprint with new Deltaport warehouse

The sales-to-active listings ratio for September 2018:

From what we’ve seen in the past several months, our real estate market has been gradually returning to a balanced, normal state from a very hot market.

A new townhome development our client has been looking at has sold about one home per day for the past 3 weeks. Builders are still buying single family houses to build.

Having been a real estate agent for almost 10 years, I’ve seen market much slower than this.

The real estate market always goes up and down. Just know why you are buying and make sure you are okay with the ups and downs of the market. Generally, housing price in Vancouver go up first and go down last while price in suburbs go down first and go up last but every area is different. Feel free to contact us for a stats report specific to your local area.

Below the HPI price index for Metro Vancouver housing, all property types since 2005:

Housing Benchmark Price Continued to Decrease

The Real Estate Board of Greater Vancouver release it’s monthly stats report yesterday.

Phil Moore, the REBGV president said in the report that “With fewer buyers active in the market, benchmark prices across all three housing categories have declined for two consecutive months across the region.”

From the graph below, we can see the MLS® Home Price Index stayed flat in May and June before it began to drop in July and August.

From the graph we can see the HPI price had been climbing steadily since 2013 and peaked in August 2016 before it started to drop for 5 consecutive months from Sep 2016 to Jan 2017. In Feb 2017, the price started to increase again until several months ago. Only time will tell how long this drop in price will last this time.

The August 2018 residential home sales were:

  • Down 36.6% from August 2017
  • Down 6.8% from June 2018
  • Down 25.2% from the 10-year August sales average
The sales-to-actives-ratios continue to go down with condominiums still remained in the seller’s market:

July 2018 Real Estate Market Stats

Real estate market in the summer is generally quieter as the kids are not in school and people go away on vacations.

According to Phil Moore, REBGV president “With fewer buyers active in today’s market, we’re seeing less upward pressure on home prices across the region. This is most pronounced in the detached home market, but demand in the townhome and apartment markets is also relenting from the more frenetic pace experienced over the last few years.” and that “With increased mortgage rates and stricter lending requirements, buyers and sellers are opting to take a wait-and-see approach for the time being.”

Last month, we still see multiple offers but buyers were more firm on what price they were willing to pay.

The July 2018 residential home sales were

  • Down 30.1% from July 2017
  • Down 14.6% from June 2018
  • Down 29.3% from the 10-year July sales average
  • The lowest level for July since 2000

As for sales-to-active ratios, single family homes remain in the BUYER’S MARKET with downward pressure on price (if the ratio remains below 12% for a prolonged period of time.) Townhomes and condos are still in the SELLER’S MARKET (above 20%) but the ratios have been returning to a more balanced market (between 12 to 20%).

As the REBGV president said “With increased mortgage rates and stricter lending requirements, buyers and sellers are opting to take a wait-and-see approach for the time being.”

Bank of Canada Raises Overnight Rate

Yesterday, the Bank of Canada raised its benchmark interest rate to 1.5% (up from 1.25%). It was the first rate increase in six month but the fourth increase over the last twelve months.

Despite the trade dispute between Canada and the United States, the bank expects the higher oil prices and stronger economy will offset the blow.

For the full Bank of Canada article, click here.

How does this impact mortgage borrowers?

Canada’s big banks will likely raise their prime rates.

If you are currently in a fixed mortgage, then this will have little impact on you.

If you have other loans or lines of credit where the interest rate is based off your lender’s prime rate, this interest increase might also impact you.

If you are in a variable rate mortgage, then this might be the time to readjust your mortgage. Call your mortgage professional to review your loans.

Although we still saw multiple offer situation last month, it has definitely been felt by real estate agents that the market is cooling down. As we can see from the sales-to-active ratios, the numbers have been declining since the beginning of the year, although the ratio for condos and townhouses still remained in the seller’s market. For single family house market however, this might be a good time to buy as there are more supply than demand.

 

Home Buyer Demand Continues to Decline

The Real Estate Board of Greater Vancouver released its monthly statistics package today with the following numbers:

  • May 2018 sales were 19% below the 10-year May sales average
  • May 2018 sales increased 9.8% from sales numbers in April 2018
  • May 2018 total home listings increased 38% from May 2017
  • May 2018 total home listings increased 15% from April 2018
  • Total number of home listings (homes available for sale) last month was 17% below the 10-year May average

Even though May’s sales number were below the 10-year May average, it increased almost 10% from April of this year.

Although home inventory increased 38% from the same month last year, it was still 17% below the 10-year May average.

Phil Moore, REBGV president said “The selection of homes for sale in Metro Vancouver has risen to the highest levels we’ve seen in the last two years, yet supply is still below our long-term historical averages.”

Read full article by clicking on the link below:

Reduced demand is allowing housing supply to accumulate

 

The following table shows the sales-to-active ratios for May 2018 vs April 2018:

For detached homes, the market is balanced with supply and demand. But for condos and townhomes, the market still remained in the sellers’ favor.

Although the ratios for condos and townhomes were declining, analysts say home prices often experience upward pressure when it surpasses 20% per cent over several months. Maybe we will see a slowing down of home price increase and if the ratio kept declining, maybe we’ll see a price dip if the ratio dropped below 20%.

As we can see from the 3-year graphs below, although the sales to active ratios had dippped, the price kept increasing as long as the ratio remained above 20%. We saw the ratio dropped dramatically in the later half of 2016 and the price reflected the extended decline.

Sales to Active Ratio for all property types in Greater Vancouver for the past 3 years:

MLS Home Price Index* for all property types in Greater Vancouver for the past 3 years:

Below is the MLS Home Price Index* for all property types in Greater Vancouver since 2005:

Source: Real Estate Board of Greater Vancouver

*For definition of MLS Home Price Index, please click here

More home sellers and less home buyers 

More sellers are listing their homes for sale and less buyers are looking to buy home. According to REBGV president said, “the mortgage requirements that the federal government implemented this year have, among other factors, diminished home buyers’ purchasing power and they’re being felt on the buyer side today.”

As a result, we are seeing the sales to active ratio declining except for single family homes where the ratio stayed the same. Although the demands (ratio) for townhomes and condos were lower in April than in March, they remained in the sellers markets.

The sales-to-active ratios for April 2018:

  • For all property types, the ratio was 26% (down 4%, still in seller’s market)
  • For detached home, the ratio was 14% (same ratio as last month, balanced market)
  • For townhomes, the ratio was 36% (down 4%, still in seller’s market)
  • For condos, the ratio was 47% (down 15%, still in seller’s market)

 

“Market conditions are changing. Home sales declined in our region last month to a 17-year April low and home sellers have become more active than we’ve seen in the past three years,” Phil Moore, REBGV president said.
Read full article by clicking on the link below:

Home sales down, listings up across Metro Vancouver

Real Estate Market Activity Slows

Although buyers still had to compete for condos last month, we are seeing less people coming through open houses and less number of offers in each multiple offer situation. There are signs that the market is slowing down.

“High prices, new tax announcements, rising interest rates, and stricter mortgage requirements are among the factors affecting home buyer and seller activity today.” Phil Moore, REBGV president said in the statistics report released last week.

The sales-to-active ratios for March 2018:

  • For all property types, the ratio was 30% (up 2%, still in seller’s market)
  • For detached home, the ratio was 14% (up 1%, entering balanced market)
  • For townhomes, the ratio was 40% (up 2%, still in seller’s market)
  • For condos, the ratio was 62% (up 2%, still in seller’s market)

Although there were less demand from buyers and a 30% decrease in home sales in March 2018 compared to a year ago, the Sales-to-Active Ratios were still increasing across all property types.

Phil Moore explained “Even with lower demand, upward pressure on prices will continue as long as the supply of homes for sale remains low. Last month was the quietest March for new home listings since 2009 and the total inventory, particularly in the condo and townhome segments, of homes for sale remains well below historical norms.”

Read REBGV’s March 2018 Market Highlight’s here

Changes to BC Speculation Tax

On March 26, 2018, the provincial government announced it is making some changes to the speculation tax first introduced in February as part of the BC Budget 2018.

  • The new Speculation Tax will now be limited to Nanaimo and Greater Victoria, exempting Parksville, Qualicum Beach, the Gulf Islands and Juan de Fuca areas
  • The original Fraser Valley location will be reduced to Mission, Abbotsford and Chilliwack, exempting Kent, Hope and Harrison Hot Springs
  • Bowen Island and Whistler which is suffering a rental crisis are exempted.

The government unveiled three rate structures for the tax as well:

  • 2% full rate for foreign property owners
  • 1% for out-of-province owners
  • 0.5% for British Columbians who own multiple properties but don’t rent them out for at least 6 months of the year.

Read more about BC Speculation Tax here

Taxes and other policy changes in real estate

BC’s Speculation Tax

  • It will be levied on empty homes owned by people who do not pay income tax in the province.
  • It is an annual property tax.
  • It will be applied in Metro Vancouver, the Fraser Valley, Kelowna, Victoria and Nanaimo.

Already people are saying the speculation tax is more like the empty homes tax. It does not really affect people flipping (buying and selling homes for profit in a short period of time) but people with vacation homes, satellite families or snow birds will be affected.

In an article by First National Financial LP, BCsays it does not know if the plan will actually make housing more affordable but it does expect to collect $1.3 billion in new revenue over the next three years. Read more here.

More articles about the Speculation Tax:

Why B.C.’s new real estate speculation tax is not a speculation tax

 

Vaughn Palmer: Speculation tax caveat makes B.C. property owners antsy

Foreign Buyers Tax

  • The foreign buyers tax that was put in place in 2016 will be increased from 15% to 20%.
  • It will be expanded to apply in Metro Vancouver, the Fraser Valley, Kelowna, Victoria and Nanaimo.

Real estate groups question expansion of foreign buyers’ tax to Okanagan, Vancouver Island

Property Transfer Tax Changes

The property transfer tax rate is:

  • 1% on the first $200,000,
  • 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
  • 3% on the portion of the fair market value greater than $2,000,000, and
  • if the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000 (effective February 21, 2018).

You can find information about these changes at gov.bc.ca/propertytransfertax

Condo market still hot despite new mortgage rules

REBGV president Jill Oudil said “Demand remains elevated and listings scarce in the attached and apartment markets across Metro Vancouver,” in the Feb 2, 2018 stats report. Read full report here: Home buyer demand depends on property type

We can see the buyer demand and seller supply from the sales-to-active ratios:

  • Sales-to-active listings ratio for Jan2018 was 26.2% for all property types (upward pressure on price if ratio remained 20% for sustained period – which has been the case since March 2015)
  • Sales-to-active listings ratio for different property types in November:
    • 11.6% for detached homes (downward pressure on price if remained below 12% for sustained period of time)
    • 32.8% for townhomes (seller’s market – upward pressure on price)
    • 57.2% for apartments (seller’s market – upward pressure on price)

In today’s market, if you are buying single family houses, there are less competition and more selection in homes. House buyers have more luxury to pick and choose and negotiate the price. If you are in the market today to buy condos, get ready for multiple offers! For condo buyers, you have to have your financing and emotions ready.

So all this talks about statistics and ratios, what most people want to know is still the price. Will it go up or will it come down? Sellers want the price to go up and buyers want the price to go down.  So here’s a comparison of two charts, the first chart is the Sales to Actives ratio that tells the supply and demand of homes. The second chart is the MLS HPI price that measures typical, pure price change.

Both charts started with data in 2005. Thirteen years of data is a long enough time frame to see the general trend. Looking at the charts we can see ups and downs in the ratios or supply and demand over the years. But when we look at the home price, there trend is generally an upward trend. Although there was a dip around 2009 when the financial market crashed in the US, the price recovered the next year. Then we see several years of flattening or slowly increasing in price before the price shot up again.

No wonder people say, don’t wait to buy real estate, buy real estate and wait.

In January, typically a slow month, we sold a condo for $54,000 over asking price in a multiple offers situation. The unit sold for $29,000 more than a similar unit which was sold just one week ago. The condo market is still hot depsite the new mortgage rule with more stringent stress test for borrowers that came into effect this January.

According to Residential Mortgage Quarterly Review by First national Financial LP, the new rules have the Canadian Real Estate Association forecasting a slowdown in home sales in Canada. None the less, it expects to see prices rise in Quebec, New Brunswick and Nova Scotia. The energy dependent provinces Alberta, Saskatchewan and Newfoundland and Labrador are expected to see no movement or slight declines.

But for British Columbia, the price are expected to hold steady. Read full article here.