A recent report from Canada’s National Housing Agency, the CMHC, opens a very interesting discussion on why our Vancouver housing market is so strong and why we expect it to continue on.

Statistically-backed reasons are given as to why our economy is improving –  currently up 3.3% this year and expected to reach a further 2.8% next year.

As well as job growth, Vancouver is still very much attracting immigration with 16000-18000 new households anticipated – all of these will naturally need homes. Of course they will be spread around all the area municipalities, but could be visualized as approximately 100 new downtown highrises with 200 new homes each.

In addition, home buying in Vancouver (at whatever the price) is still relatively affordable because the mortgage rates are anticipated to remain in the 2.7-3.7 % range in 2011 (1 year posted rate.)These are historically low mortgage rates that haven’t been seen since the 1960s!

The main points this article brings up are

• MLS®1 sales will remain stable until mid-2011, due to steady population growth and favourable mortgage rates.

• Improving economic conditions will further support job growth resulting in a moderate increase in new and resale housing sales.

• Home price appreciation will slow as the recently established balance between sales and listings continues in 2011.

• New home construction will increase modestly in 2011, approaching the ten-year average level as demand for new housing strengthens.

We include this information as education for our offshore and out of province clients who continually ask us what is going on in the Vancouver housing market, and why it is flourishing when other areas are flat.

Economy
As the local economy continues to add jobs, demand for both new and resale housing will remain firm. The Metro Vancouver economy is expected to grow at a pace slightly above the provincial economy given the more diversified local economy. CMHC is forecasting that the B.C. economy will expand by 3.3 per cent in 2010, and by a further 2.8 per cent next year.

For full details, or to discuss these issues further, please contact Nic Meyer – nic@downtownsuites.com

Source: CMHC, Housing Market Outlook, Vancouver and Abbotsford CMAs, Fall 2010

Today’s message from our friend Zamir at Ratehold

Just when you thought that rates couldn’t get any lower….

They did.  5 year fixed rates are as low as 3.45%.  Can you believe it?  I locked in my mortgage at the 3.89% range, thinking that I was at the lowest of the low.  And then they got lower.  I feel like the bonds yields are pointing and laughing in my face.  The finance minister also threw an empty beer can at the back of my head as I cried in my kitchen; talk about insult to injury.

And I have just received word that the rates are planning to climb back up.  Now would be a good time to lock in your mortgage or consolidate some debts.

Interesting analysis of the mortgage market and the different terms from Graham Connor

Variable Rates:

Current forecasts call for no rate hikes until next year. Clients with existing variable rate contracts are unlikely to consider locking in at this time.

Here’s an example of what clients might be considering for new contracts. Assuming a 30 year amortization, the monthly payment per $100k borrowed for a five year fixed rate at 3.49% stands at $447.09. The variable rate of 2.2% means a monthly payment of $379.70 per $100k. Using a $400,000- mortgage example, the incentive to take the variable rate is the savings of $269.56 per month. The precise savings also requires an outstanding balance calculation, as the lower the interest rate in the terms, the lower is the balance at the end of the term.

My advice to those contemplating a new variable rate mortgage:

• voluntarily set payments as if you are paying rates at 5% or higher so pre-adjust to the inevitable rate increases. Increased payment all go to reduce the loan balance.
• plan your budget to see if you can manage rates above 5%
• watch my rate bulletins not only for the Prime rate increases, but for the fixed rate increases to see what you may be locking into. Set a tolerance level – I’m happy to assist in any mortgage reviews and payment plans
• variable rates best suit those with more equity in their home and those who easily qualify by the strict debt service guidelines set by mortgage lenders
• consider the hybrid mortgages to mitigate the effect of the possibility of interest rate shock
• Since April 19th, expect to qualify for less on a variable rate if you have less than 20% down payment compared to a five year fixed rate

Fixed Rates

The aim of this newsletter is to provide direction on interest rate movements. For the first time in nearly three years, there are no changes since last month. Fixed rates are pretty much at the floor and not expected to fall further. My rates shown below are for owner-occupied mortgages with clients qualifying on the basis of proving income. As not all lenders offer mortgages for rental properties, or to those applying in the basis of equity, please ask for specific assessments.

The current spread between the best discounted five year variable and fixed rates edges closer to 1%. That 1% represents the premium paid for security against future rate increases and is reduced from 1.75% in February this year. First-time buyers, those on a limited budget, the risk-averse or those who believe fixed rates offer best value can now access the lowest rates ever seen.

We recently recorded comments on the June market for both rentals and real estate in Vancouver BC.
Rentals:

Real Estate:

Nicholas Meyer of Downtown Suites in Vancouver BC outlines the company’s rates and fees.