What happened, What’s Next?
Our market activity and prices were down from 10 year averages in 2016, and also from 2015, but sale prices are not off as badly as you may think. Real estate is always specific to your community and the product (type of home) you are buying or selling. City wide, apartments were off 15% in sales, but only 1.7% in median price. In other words, it took longer to sell and buyers had lots of choices. This is similar to 2008/2009, and it’s due to the over supply of new units built. Happens in every boom/bust cycle.
Attached homes were off 5.5% in sales and 0.9% in median price. Single family homes were off 2.6% in sales and 0.2% in price. It took 42 days to sell, compared to 38 in 2016. That stat really, really depends on your location. A softer market also depends on strong marketing and a realistic price. That’s where our knowledge and guidance comes in.
So that’s what happened. What’s in store for 2017? We don’t have a crystal ball either, but look for less uncertainty. Look for move-up opportunities, and more stable prices. Stability creates confidence, so buyers start to look around more. Layoffs may have peaked as well. We’ll keep you updated as we progress into the year.
One major change to the real estate landscape is the new (October 2016) insured mortgage rule changes. The government dumped this in everyone’s lap with little notice (two weeks), and they dramatically affect first time buyers, as it applies largely to those with less than 20% down payment (a conventional mortgage).
We’ve attached a link to a BNN article that explains some of the changes. Briefly, it means that buyers have significantly less buying power if applying for a mortgage through a traditional lender. Secondary lenders may step up to offer mortgages, but that will be at higher rates. Here is the link to the article:
Buyers with less than 20% down now have to qualify at the Bank of Canada Benchmark rate (currently 4.64%) instead of the lender’s posted 5 year fixed rate. In a nutshell, that reduces what they qualify for by 15-20%, no matter what rate our mortgage people can get you. The good news is that their payment is whatever rate they get at the lender.
Here are some examples of buying power before and after October 17, 2016 assuming 5% down payment and NO household debts. We have experienced, trusted mortgage advisors to assist you with specific questions you may have as there are other changes as well.
Annual Income $50,000: $266,400 reduced to $211,300
Annual Income $70,000: $384,500 reduced to $304,875
Annual Income $100,000: $561,300 reduced to $445,240
The other good news: If you own real estate already, you are grandfathered into renewals so you won’t have to come up with more money. If you’re looking to sell and buy elsewhere, you just need to make sure you have a 20% downpayment, or port your current mortgage to avoid that change. Our mortgage colleagues can advise you on your choices.
Of course, you can call us any time and we’ll help you with a plan to accomplish your real estate goals. We look forward to hearing from you. Stay warm!