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Many BC homeowners reportedly planning to leave province soon – CMP – REMAX

-Many BC homeowners reportedly planning to leave province soon-

Pandemic impacts and affordability concerns rank high among the reasons for moving out…

A significant share of British Columbian homeowners are planning to leave the province within the next five years, raising the possibility of even more supply entering the red-hot market during that period, according to RE/MAX.

Citing data from Insights West, RE/MAX said that 17% of the province’s homeowners are thinking of selling their home in the next two years, while 29% are considering doing so in the next five years.

Of those planning to sell their homes, 10% are considering downsizing, 11% want to relocate somewhere else in BC, and 9% are planning to move to another province altogether in search of more affordable housing.

“The relentless climb of real-estate prices in BC, and in Metro Vancouver in particular, has resulted in many homeowners weighing their options for cashing out,” said Steve Mossop, president of Insights West. “The option to downsize or move to a different location… in order to take advantage of the equity in their existing home has many weighing the alternatives.”

For 36% of BC’s homeowners, a major driver of the decision to move out was the financial impact of the pandemic. Affordability concerns ranked high on the list as well, with 72% of respondents saying that housing prices will likely continue rising over the next 12 months and lasting well into the next two to five years.

Anxiety surrounding “the likelihood of higher interest rates is also prevalent among BC residents,” RE/MAX said.

Low Rates Help Borrowers Pay Mortgage at Record Pace – Canadian Mortgage Trends

Home prices may be astronomical in certain parts of the country, but historically low mortgage rates are allowing borrowers to pay off their mortgages faster than ever.

At today’s average rates, 61% of a new homebuyer’s very first mortgage payment is going towards principal repayment, according to data from Edge Realty Analytics.

In the early 2000s, that percentage was 26.5%. The change is even more drastic when looking back at the 1990s, where just 11.9% of a homebuyer’s first payment went towards paying down the principal, or the 1980s, when that percentage was a minuscule 4.6%.

The result is a much faster build-up of equity over a short period of time, so long as interest rates remain low.

After the first five years of mortgage payments, today’s homebuyers borrowing at today’s prevailing rates will have paid back more than a fifth of their mortgage (16.5%). Here’s a look at how that compares to past decades:

 

Mortgage payments

(Courtesy: Edge Realty Analytics)

 

“Homeownership represents a very aggressive forced saving program,” Mortgage Professionals Canada noted in its annual consumer report.

As a result (and even before we consider the impact of price growth) housing equity is built very rapidly,” the report noted. “This excellent ‘net affordability’ goes a long way to explaining why homebuying activity has remained strong in Canada and why a large majority of Canadians see homeownership as financially better than rentingdespite the rapid runup in house prices and the higher burden of mortgage (principal plus interest) payments.”

(Source: Mortgage Professionals Canada)

 

Not only have low interest rates allowed borrowers to repay their mortgages more quickly, but it’s also kept housing moderately “affordable” despite the 38.4% run-up in average home price in the past 12 months.

“If it were not for the extremely low interest rate, most cities in Canada, especially Toronto, Ottawa, Vancouver and Montreal, would be in overvalued territory,” Alberta Central chief economist Charles St-Arnaud wrote in a recent analysis. “It means that the main driver for affordability is the record low level of interest rates.”

But Rates Won’t Stay Low Forever

All good things must come to an end, and that goes for ultra-low mortgage rates.

The Bank of Canada has made it abundantly clear that it expects to start raising interest rates by late next year.

How much rates will increase in the Bank’s next rate-hike cycle is anyone’s guess. But for what it’s worth, markets are pricing in at least eight 25-bps hikes over the next five years, which would bring Canada’s overnight rate to 2.25%, up two percentage points from its current record-low of 0.25%.

But even a more modest rise in rates of as little as 100-150 basis points could “push the valuation metrics into overvalued territory,” St-Arnaud noted, making today’s still somewhat “affordable” housing market patently unaffordable for most.

“Our simulations show that many cities in Canada will struggle with housing affordability as interest rates increase,” he added. “A 150-bps increase in mortgage rates could be enough to generate significant headwinds on some housing markets and house prices.”

Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

 

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We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

CANADA’S HOUSING MARKET – 2021 FORECASTS – CANADIAN MORTGAGE TRENDS

CANADA’S HOUSING MARKET – 2021 FORECASTS – CANADIAN MORTGAGE TRENDS

The Canadian real estate market defied gravity last year in spite of a global pandemic and nationwide lockdowns.

The year ended with the seasonally adjusted MLS Home Price Index up 13% year-over-year and the average house price surpassing the $600,000 mark.

“It’s official, despite all the challenges, 2020 was a record year for Canadian resale housing activity,” Costa Poulopoulos, Chair of the Canadian Real Estate Association (CREA), declared.

But where do prices go from here?

Will prices finally fall, as many have been predicting since early last year? Will they moderate and return to more sustainable growth, or is it still full-steam ahead?

Nobody knows for sure, of course. But we’ve compiled a rundown of some of the many (and varied) 2021 house price forecasts to get an idea of what some of the smart minds in the industry think.

We’ve also included some previous 2020 forecasts, where possible, to illustrate the fallibility of forecasting.

In case we need a reminder of how “off” forecasts can sometimes be, one need not look further than CMHC’s prediction of a 9% to 18% decline from pre-COVID prices by the end of 2020. That was a forecast that, at least so far, hasn’t aged well.

CREA

·         2021 forecast: +9.1%

·         2020 forecast: +6.2%

·         Commentary: “(We are) anticipating healthy housing price growth in 2021, with move-up and move-over buyers continuing to drive activity in many regions across the Canadian housing market. An ongoing housing supply shortage is likely to continue, presenting challenges for homebuyers and putting upward pressure on prices.”

CMHC

·         2021 forecast: -9% to -18% (pre-COVID peak-to-trough decline)

·         The agency first released this forecast last spring at the height of the first wave of the pandemic. While the timeframe has been been pushed out, CMHC continues to stand by this forecast.

·         2020 forecast: an average MLS Price of between $506,200 and $531,000

·         Commentary: “When I say I stand by our forecasts, it’s really with respect to what are the broad trends we expect moving forward,” CMHC Chief Economist Bob told reporters in September. “When I look at the housing market there are a tremendous number of risks.”

Real Estate Firms

Royal LePage

·         2021 forecast: +5.5%

·         2020 forecast: +3.2%

·         Commentary: “Across the country, a large number of hopeful buyers intent on improving their housing situation were not able to find the home they were looking for this year, as the inventory of properties for sale came nowhere near to meeting surging demand. With policy-makers all but promising record-low, industry-supportive interest rates to continue, we do not see this imbalance improving (this) year. The upward pressure on home prices will continue.”

RE/MAX

·         2021 forecast: +4% to 6%

·         2020 forecast: +3.7%

·         Commentary: “(We are) anticipating healthy housing price growth in 2021, with move-up and move-over buyers continuing to drive activity in many regions across the Canadian housing market. An ongoing housing supply shortage is likely to continue, presenting challenges for homebuyers and putting upward pressure on prices.”

The Banks

RBC

·         2021 forecast: +8.4%

·         Commentary: “We see little that will stop activity or prices from reaching new heights in the year ahead…Yet we also expect cooling signs to emerge, which will come into fuller display in 2022. The main restraining factors will be a lack of supply, waning pandemic-induced market churn, a modest creep-up in interest rates and an erosion of affordability. Call it a 2022 soft landing.”

TD

·         2021 forecast: +5.8%

·         TD is calling for an initial plunge in home prices of 7% in early 2021, before recovering in the latter part of the year to post an overall year-over-year price gain.

·         Commentary: “Canadian prices will likely drop through the first half of 2021 by around 7%, before regaining some traction later (in the) year. While this sounds like a big hit, it would still leave the upward trend in prices, established prior to the pandemic, in place. Some added pressure on prices could emerge on the supply side. Case in point, the end of mortgage deferral programs is likely to spark some additional supply on the market.”

CIBC

·         2021 forecast: +2.4%

·         This is based on an average of the bank’s upside case of an 11.2% price gain vs. its downside case of a 6.9% decline over the next 12 months.

National Bank of Canada

·         2021 forecast: -5.2%

·         This is based on an average of the bank’s upside case of a 1.5% price decline in 2021 vs. its downside case of a 9.9% decline.

·         Commentary: “We were pleasantly surprised by the performance and house prices so far during the pandemic. Although in our forecasts, particularly in the pessimistic case, we don’t assume strength in the housing market. I think for the macroeconomic scenarios, and that which goes into generating our allowances, you can consider those scenarios quite prudent.”

BMO

·         2021 forecast: +6.6%

·         This is based on an average of the bank’s quarterly MLS Home Price Index forecasts, ranging from +11.6% in Q1 to +0.5% by Q4.

·         Commentary: “We expect the market to lose some momentum in the months ahead, as tighter mobility restrictions, the small back-up in long-term yields, the ongoing absence of immigration, and still-soft employment conditions will weigh. To be clear, we don’t look for a reversal in the broader (housing) market, just some moderation from (December’s) extraordinary results. After all, ‘stay at home’ doesn’t translate to ‘don’t buy a home.’

Scotiabank

·         2021 forecast: +0.4%

·         Commentary: “The delay of some activity into H2-2021, when we had already expected widespread inoculation to lift economic growth, likely means stronger second-half activity than we previously anticipated. Rock-bottom interest rates, ongoing federal and provincial fiscal supports, and the current supply-demand tightness should also contribute to home price gains over the medium-term.”

Credit Rating Agencies

Moody’s Analytics

·         2021 forecast: -7% (peak-to-trough decline)

·         Commentary: “The housing market will no longer be able to escape the poor condition of the labour market as vacancy and delinquency rates rise in 2021…Fortunately, the declines will be brief and the restoration of robust job growth in 2022 along with Canada’s strong demographics will put a floor under the housing market.”

Fitch Ratings

·         2021 forecast: -5%

·         Commentary: “We attribute the expected decline to lower demand caused by elevated levels of unemployment and increasing affordability issues…Although we expect delinquencies to increase in 2021, we do not expect the level of delinquencies, distressed sales or foreclosures to increase to the levels seen in the U.S. during the financial crisis.”

 

Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

 

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

 

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

 

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.