The New Normal in the Real Estate Market
Every one of us has experienced the ‘new norm’ at some point throughout our lives. A new norm can happen at any time, whether we are open to it or not. It could happen when you least expect it or it could be a planned event. Planned new norm events could be getting married, starting a new job, or creating a new life in a faraway country. Unplanned new norms could be losing your job, having a significant health issue, or losing a loved one. Dictionary.com defines normal as; ‘Conforming to the standard or the common type; usual; not abnormal; regular; natural’. For me, normal means establishing deep and significant habits that bring me comfort throughout my day, week, month, or year. However, when we add “new” in front of normal, all that we knew becomes new. Many of us struggle or find it difficult when we change our normal, everyday habits or experience new life events.
What about a new norm in real estate? Are we experiencing a new norm in the Greater Vancouver and Fraser Valley markets? The market has changed significantly over the last few months and what was the norm is no longer. The new norm is a market that has become a buyer’s market, a balanced market, and a moderate seller’s market. Yes, all three types of markets depending on the location, the property type, and the price point. The old norm of a seller’s market across all locations, types, and price points is no longer reality.
Throughout the region single family home sales are down significantly with many areas in a strong buyer cycle. Is this the new norm? West Vancouver’s detached market is at a low 4% STR (Sell Through Rate), while in the Valley, White Rock is at a low 6% STR. We have not seen these low STR numbers in the detached market for years. However, the townhome and condo market continues to hold much stronger, and in most areas the strata properties are still in a seller’s market. The hot spots for September were Coquitlam condos at 42% and Chilliwack townhomes at 41%.The new norm; is it all about attached and the affordability? From the September stats it appears that single family homes are going to see a softening of price throughout the fall season.
Financing in our market place is also experiencing a new norm. The new norm has just made mortgage financing or home ownership a lot more challenging. Effective October 17th, the government of Canada is changing qualification criteria for mortgages. Currently, if you take a fixed mortgage for 5 years or longer you can qualify at the contract rate (2.39% give or take for 5 years). As of the 17th, if you are putting down less than 20% (also referred to as a high ratio mortgage) you will now have to qualify at the posted rate, which is currently 4.64%. This will greatly impact the purchase amount that you can qualify for.
This will also impact investors. Currently, if the amount of your mortgage is less than or equal to 80% of the value of the investment, you can take advantage of amortizations greater than 25 years to qualify. In fact, in many cases you can amortize up to 35 years. The government’s new amortization rule will mean that you can only amortize your mortgage for a maximum of 25 years.
If you are in the throes of buying an investment property I would encourage you to have your mortgage approval before Oct 17th. The new norm is certainly going to make it more challenging to qualify. Check out all the details in the Federal Government news release.
If you would like to receive a copy of the statistical market report contact us here.
Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com
STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales
