Happy day after the new mortgage rules come into effect!
Even before these rules were announced we saw a ‘softening’ in the Vancouver real estate market.
Prices have drifted down as of late and sales are at an all-time-low and inventory keeps growing.
..Yet there are still those that believe ‘it’s different here’.
We saw housing bubbles grow all around the world and pop one by one, but we went through the same steps of pumping up cheap credit to build the house of cards higher.
Check out this post on Alphahunt about Why a Crash in Canadian House Prices is Certain.
What’s amplified our current RE cycle is that credit was steadily made cheaper & easier throughout the boom period – and especially when the RE market suffered in 2008. After finally waking up and seeing the monster they helped create, the Gov’t is making lending rules stricter. Lending practices should not have been made so loose to begin with. And their meddling in 2008 only delayed the inevitable bust.
Today, we’re still at extreme unaffordability and there is no such thing as a ‘soft landing’ or ‘small correction’ for Vancouver RE. Any asset that has seen a price rise of at least two standard deviations above long-term valuation ratios has always mean reverted. If the Vancouver RE market did not return to the normal multiple of income and rent, it will be the first time in history. You can’t binge drink and avoid the hangover. Timing the start of the hangover is always challenging, but what we know with high probability is that there will be a hangover.
What does ‘Buyers market’ mean to you?
Is it a market in which the buyer has lots of choice or gets a reasonable price?
..because they aren’t the same thing.
Now that prices are dropping from their record highs on Vancouver real estate, we’re seeing the term ‘buyers market’ bandied about in the media a lot. And with a huge number of places for sale and actual transactions falling to a 10 year low there’s lots of choice.
But prices are still near record highs!
Real estate is a slow illiquid market, it takes LOTS of time for trends to move through. Just take a look at the USA, there are some people thinking they’ve hit bottom in some markets after SIX YEARS of falling prices. Don’t expect deals within a few months, or even a few years.
Real estate marketers will use the term ‘buyers market’ a lot in the coming years, because they make money off transactions. If it’s not a good time to sell it must be a good time to buy right?
There is one nice thing happening with the shift in the local market though: the Vancouver Sun is starting to publish a bit more variety when it comes to RE market opinion:
Investors in stocks wouldn’t consider a drop in volume to be a buyer’s market in the absence of price changes. The adage that volume precedes price instructs investors to be patient. There’s no compelling reason for real estate buyers to act differently.
Bravo Vancouver Sun, Bravo.
The June news release from the REBGV has been released and it looks like the market has turned a corner.
As all of you regular readers here know, sales have plunged to a 10 year low.
The HPI benchmark price has also dropped from the previous month in some areas. Oddly enough it’s houses in the desirable west side and Richmond which have both dropped about 2% from May.
Best Place on Meth summarizes the total changes for all areas:
Summary of June HPI:
I was expecting no change for June and declines to start next month so this is a bit of a bonus.
Yes the hot summer market has turned out to be anything but. As prices drop a few percentage points from their all time highs some are calling this a ‘buyers market‘.
Meanwhile at least one local realtor has sold his own house and says it’s time to cash out.
Hey all, This is my first submission, mostly I lurk in the forum but read this site daily.
I just want to send out a big thank you to everyone who shares otherwise unavailable Vancouver housing market data here.
Watching the stats roll in day after day has been fascinating.
It’s amazing to watch the market change day by day, and the aggregate data provides an even clearer picture.
First of all of course there’s Paulb who’s been providing daily numbers for a long while. It’s thanks to Paul that we see the daily number of new listings, sold properties and have a total inventory count. Pauls website is here.
Then there’s VHB, who consistently posts analysis tracking the numbers through the month. Here’s his most recent post.
We have a new commenter going by the name of HFHC who has been providing other great stats including listing data for the entire lower mainland and a break down of sales by category.
Then there’s Inventory, who’s provided excellent number breakdowns for specific markets as seen in yesterdays post about the low June sales numbers.
And of course everyone else who provides such amazing data, analysis and comments. I started listing your handles, but the list went on and on and I knew I’d leave out some the best so I’m opting to just send out a big general thanks to ALL of you, you’re amazing.
..well that headline is a little misleading, you’ll still be able to get a 30 year mortgage but you better have a big down payment. No more 30 year mortgages for CMHC insured mortgages.
The country’s biggest banks were caught off guard on Wednesday night as the Department of Finance prepared to clamp down on mortgages by reducing the maximum amortization for a government-insured mortgage to 25 years from 30.
Ottawa will also limit the amount of equity that can be borrowed against a home to 80 per cent of the property’s value, down from 85 per cent.
The moves are designed to cool the housing market and limit the record levels of personal debt Canadians have amassed in recent years. Figures from Statistics Canada show the average ratio of debt-to-disposable income climbed to 152 per cent, up from 150.6 per cent at the end of 2011. A rise in interest rates or further job losses could put some households at financial risk, endangering any economic recovery.
So we’ve come circle with mortgages going from 25 year, cranked all the way up to US bubble style zero-down 40 year mortgages and then ramped back down over the last few years to a maximum 25 year amort. It will be very interesting to see what this does to some of Canadas overpriced markets.