Depending on who you ask, we are 1 to 3 months into the “great real estate crash of 2016.” The interesting thing is that as much talk as there’s been about how low prices are going to get, the reality on the ground hasn’t been the carnage that some have expected.
Let’s start with the stats. As a reminder, the numbers below are a ratio of the active listings (at end of month) over sales in that month. Numbers above 7 are considered to be buyers’ markets, below 5 are sellers’ and in-between are considered balanced. Beside the number, I’ve indicated the direction the market moved when compared to the previous month.
|Months Supply||Van West||Van East||North Van||Richmond||Burnaby||New West|
A look at these numbers is telling. The disconnect between detached and attached/condo has continued into another month. Certainly, the pressure that existed 3 months ago on buyers of detached homes is gone. It’s important to note that this has been more pronounced as price points rise. That is, the luxury end of the market has been most impacted by the recent slowdown. The slowdown had started before the announcement (and almost immediate implementation) of the 15% foreign buyer’s tax, but this tax helped to continue the freeze on the upper end of the market.
More interesting has been the continued strength of the attached/condo markets where multiple offers have continued to be prevalent. Certainly, the pace was less frantic than the spring, but sales were still quick and prices were reasonably stable, if not increasing still in some areas. The more recent announcement around the changes in mortgage rules helped to slow this market slightly. We’ve been monitoring closely but it’s too early to tell exactly what the impact will be. However, here’s what we’ve observed so far. Immediately (that is, in the first week) there was a distinct drop in the pace of sales – the market froze up briefly. In the last week, we’ve seen what we believe to be a return to a healthy or reasonably busy pace to the attached/condo market. We’ll have a clearer picture in two weeks when we have more numbers to analyze (we delayed this report as a result of the mortgage announcement because we wanted an opportunity to provide some analysis on it early on) and we’ll be able to better understand the immediate impact.
The impact of the mortgage rule changes has actually been poorly explained. That is, everyone has been focused on the “stress test” change (the change in qualifying rate). Certainly, this has taken an immediate stab at lowering prices that most people can afford. However, the far more sweeping change was around the rules on who does and does not qualify to access insured funds for funding mortgages. The medium term impact of this change is likely to be significantly less competition amongst lenders, a condition that will result in the big banks controlling far more market share than they currently do, which in turn will almost certainly result in mortgage rates rising in the 6 to 12 month range. It is important to understand this particular change now because it is conceivable we’ll see mortgage rates rise to significantly closer to the banks’ posted rates, which currently hover at around 4.6% instead of the 2.45% you’d likely actually be paying.