Vancouver Real Estate Monthly Market Update
The big news this month is the change in fixed interest rates – an increase of about .6 of a percent on five year fixed rates and climbing. As a mortgage broker friend of mine commented, that will mean about an $11,000 increase in interest costs for a $400k mortgage over 5 years. Based on recent aggregate economic data, I would also expect to see the Bank of Canada raise its rates by sometime this summer, so we can reasonably expect to see variable rates go up as well. The key thing here is that the bigger the mortgage, the larger the total costs of borrowing the money and the more significant a change in interest rates will be on monthly payments. For larger mortgage purchases qualifying at the new rates, this should have a real dampening effect on price increases. The short term effect of a sharp interest rate hike is sometimes an increase in buying to capitalize on held rates so April may be a good month for sales.
The March Months of Inventory metric for Vancouver West sits at 5.11 for apartments as new listings outpace new sales. Attached homes are at 3.95, down from January’s 5.77 but only the detached market appears to have had a substantial decrease and is now down to 2.5 months of inventory. Vancouver West average prices for apartments reached over $628k, attached homes $905k and detached homes over $1.95m. I speculate that the low inventories for detached homes are likely due the high cost of attached homes coupled with the knowledge that interest rates were set to rise. Buyers of detached homes may have opted not to purchase townhomes and half-duplexs in favour of a house. The knowledge that interest rates were set to rise likely spurred the buying on ensuring that more than 200 detached homes were sold in Vancouver West in March. I believe that the overall trend continues to point, to higher inventories and thus to lower prices over the upcoming year though I now suspect that these changes are likely to happen over the next 6 months or so, rather than immediately. We are at near all time high pricing and I continue to advocate that if you are planning to sell in the next couple of years or are holding investment property, you should likely sell now.
Remember that: “Months of Inventory” is a measure derived from the number of active listings during a given month divided by the number of sales that month. It indicates the theoretical length of time it would take to sell all of the properties on the market if nothing changed. Historically, 0-5 months of inventory has generally implied upward price pressure for the ensuing six months, 5-8 months of inventory meant a flat market with respect to pricing and over 8 months of inventory has, for the most part, precipitated downward price pressure.
By Vancouver Realtor - Sam Wyatt