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When Is The Real Estate Market The Hottest In Vancouver? – RE/MAX News

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It’s no secret that Vancouver’s housing market is one of the highest in the country – in fact, it’s been consistently ranked as the second-highest Canadian city real estate market (or overvalued, according to the Financial Post), with Toronto dubbed as the country’s first most unaffordable housing market.

Predictions for Vancouver’s Housing Prices in 2020

A report by the British Columbia Real Estate Association (BCREA) predicts that 2020 average MLS Price will be 1 percent higher than that of 2019, translating to an average home price of $995,000. In tandem with this, the number of unit sales predicted for the upcoming year will be 30,100, a shockingly high 18.2 percent increase from the previous year.

Needless to say, Vancouver’s market is always hot. But there are times that are better than others for homebuyers.

When The Vancouver Real Estate is (Truly) Hot

As with many aspects of the economy, there is a seasonality to the housing market in any city, including Vancouver. When looking for a home to buy (or sell) the spring months are typically a common time for housing to become listed on the market. With this change in the seasons, homebuyers will find that, despite the increased number of listings to choose from, the competition amongst homebuyers so too increases.

This increase is generally a result of sellers remaining confident heading into the summer months, which affects the seller’s ability to find success in lowball offers. In some cases during this hot season, homebuyers may find themselves in a bidding war.

With springtime as the high season in terms of housing prices, once can begin to see a slight shift through the summer months. With many home buyers and sellers taking time off, many choose not to list their homes. With both parties generally taking a step back from their real estate deals, there is both less inventory and less of a competitive market amongst sellers.

Then, the fall season hits, bringing the flurry of real estate sales to a much slower pace in preparation for the extremely slow traffic that is seen in the winter. So, for sellers, mark your calendars for the spring where many homebuyers are beginning to think about their next property move. And for prospective homebuyers? Set your sights on buying a home in the much less competitive market during January and early February.

Some experts, however, look at the year 2020 as a whole with strong senses for a balanced market, meaning the homebuyers and sellers will experience a more normalized market for possibly the next two years.

Beyond the Hot Real Estate Market Periods in Vancouver

There are several factors at play that could affect the state of Vancouver’s housing market and potentially turn one of the country’s overall hottest markets into a slightly less competitive market.

Foreign Buyers Tax

One of the commonly reported contributors to the increased housing prices in Vancouver’s market is foreign buyers. As a result, British Columbia introduced a foreign buyers’ tax in 2016 that was designed to make the purchase of property by non-residents or citizens more cost-prohibitive. This tax structure imposed a 15 percent tax on foreign property buyers for housing throughout Metro Vancouver.

While there is some criticism around this tax, British Columbia isn’t the first market to implement this taxation structure. According to a news article by Jeremy Hainsworth for Vancouver Is Awesome, Hong Kong, Australia, Singapore and Israel have all introduced a form of this taxation to maintain a higher affordability rate for residents and citizens in comparison to the affordability for foreign nationals looking to purchase property.

Where Interest Rates Are Going in 2020

Canadian Mortgage Trends predicts that, in 2020, the Bank of Canada is expected to cut their mortgage rates in 2020. This follows suit with 40 banks around the world that had cut their rates in the year 2019 in response to a slower market during that same year. To be specific in their predictions, the article suggests a 30 percent chance of a rate cut by the Bank of Canada by July of this year.

Stress Tests in Vancouver’s Housing Market

In order to be approved for a mortgage for a home in Vancouver, most homebuyers are subject to a stress test. A stress test is part of a mortgage qualifier test that evaluates what mortgage amount a homebuyer is eligible for.

Essentially, a stress test is a homebuyer’s opportunity to prove that they can afford to pay the mortgage payments with the expected interest rate for the foreseeable future. A stress test is conducted by any bank lender but is not typically carried out by private lenders and credit unions.

In order to pass the mortgage stress test and secure the mortgage that you’re looking for, a prospective home buyer will need to qualify at either the contracted mortgage interest rate plus 2 percent or the Bank of Canada’s five-year benchmark rate, whichever option is higher.

Understanding a mortgage stress test is a valuable and necessary aspect of buying a home in Vancouver, hot market or not. Especially during a hot market, though, it’s important to be realistic about your ability to pay off the mortgage you are seeking.

Buying a Vancouver Residential Property in 2020

A PwC report suggests that, in conjunction with Vancouver’s mellowing economy, the market will begin to level out. Further, an increase in supply and the number of policies that are designed to reduce the volatility of the housing market will further strengthen the balance in the housing market, PwC predicts.

More Insights Into Vancouver’s Housing Market

Vancouver is the ideal place to live for many Canadians; the urban amenities, strong job market and diversity offer a lot of benefits for many residents, with the added bonus of having quick access to ample recreation. But with all these perks come the highly competitive and dynamic real estate market in the Great Vancouver area.

Stay on top of the city’s real estate market by visiting the REMAX Canada blog here.

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Real eState

What Is the Canada Mortgage and Housing Corporation (CMHC)

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The Canada Mortgage and Housing Corporation (CMHC) is a Canadian Crown Corporation that serves as the national housing agency of Canada and provides mortgage loans to prospective buyers, particularly those in need.

Understanding the Canada Mortgage and Housing Corporation (CMHC)

The Canada Mortgage and Housing Corporation (CMHC) serves as the national housing agency of Canada. CMHC is a state-owned enterprise, or a Crown corporation, that provides a range of services for home buyers, the government, and the housing industry.

CMHC’s stated mission is to “promote housing affordability and choice; to facilitate access to, and competition and efficiency in the provision of, housing finance; to protect the availability of adequate funding for housing, and generally to contribute to the well-being of the housing sector.”1

A primary focus of CMHC is to provide federal funding for Canadian housing programs, particularly to buyers with demonstrated needs. CMHC, headquartered in Ottawa, provides many additional services to renters and home buyers, including mortgage insurance and financial assistance programs. CMHC acts as an information hub for consumers, providing information on renting, financial planning, home buying, and mortgage management.

CMHC also provides mortgage loan insurance for public and private housing organizations and facilitates affordable, accessible, and adaptable housing in Canada.2 Additionally, CMHC provides financial assistance and housing programs to First Nations and Indigenous communities in Canada.3

Professionals and Consumers

CMHC provides services to both professionals and consumers. For professionals, CMHC aims to work in collaboration with different groups to provide affordable housing. Services include project funding and mortgage financing, providing information to understand Canada’s housing market, innovation and leadership networks to access funding and talent to spur housing innovation and increase supply, and providing speakers and hosting events for the industry.4

For consumers, CMHC seeks to provide all the tools an individual would need to either buy a home or rent a home and a variety of information and assistance for current homeowners, such as managing a mortgage, services for seniors to age in place, and financial hardship assistance.56

For financial hardship and mortgage assistance, CMHC provides tools that include payment deferrals, extending the repayment period, adding missed payments to the mortgage balance, moving from a variable-rate to a fixed-rate mortgage, and other special payment arrangements.7

Canada Mortgage and Housing Corporation (CMHC) and the National Housing Strategy

In November 2017, the Canadian government announced the National Housing Strategy.8 Rooted in the idea that housing is a human right, this 10-year, $70 billion project will largely be administered by CMHC, although some services and deliverables will be provided by third-party contractors and other Canadian federal agencies.9

Strategic initiatives of the National Housing Strategy include:

  • Building new affordable housing and renewing existing affordable housing stock
  • Providing technical assistance, tools, and resources to build capacity in the community housing sector and funds to support local organizations
  • Supporting research, capacity-building, excellence, and innovation in housing research10

History of the Canada Mortgage and Housing Corporation (CMHC)

CMHC was established in 1946 as the Central Mortgage and Housing Corporation by the federal government in Canada with the primary mission of administering the National Housing Act and the Home Improvement Loans Guarantee Act and facilitating discounts to mortgage companies. Initially, CMHC began by providing housing to returning Canadian war veterans, and toward the end of the 1940s, CMHC began to administer a program providing low-income housing across Canada.11

In 1947, CMHC was responsible for opening Regent Park, a large low-income housing project, and Toronto’s first urban renewal project. By the 1960s, CMHC introduced co-op housing and multi-unit apartment buildings throughout Canada.11

In 1979, the Central Mortgage and Housing Corporation changed its name to the Canada Mortgage and Housing Corporation

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Real eState

Canadian home price gains accelerate again in May

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Canadian home prices accelerated again in May from the previous month, posting the largest monthly rise in the history of the Teranet-National Bank Composite House Price Index, data showed on Thursday.

The index, which tracks repeat sales of single-family homes in 11 major Canadian markets, rose 2.8% on the month in May, led by strong month-over-month gains in the Ottawa-Gatineau capital region, in Halifax, Nova Scotia, and in Hamilton, Ontario.

“It was a third consecutive month in which all 11 markets of the composite index were up from the month before,” said Daren King, an economist at National Bank of Canada, in a note.

On an annual basis, the Teranet index was up 13.7% from a year earlier, the 10th consecutive acceleration and the strongest 12-month gain since July 2017.

Halifax led the year-over-year gains, up 29.9%, followed by Hamilton at 25.5% and Ottawa-Gatineau at 22.8%.

Housing price gains in smaller cities outside Toronto and its immediate suburbs again outpaced the major urban centers, with Barrie, Ontario leading the pack, up 31.4%.

On a month-over-month basis, prices rose 4.9% in Ottawa-Gatineau, 4.3% in Halifax and 3.7% in Hamilton.

The Teranet index measures price gains based on the change between the two most recent sales of properties that have been sold at least twice.

Canada‘s average home selling price, meanwhile, fell 1.1% in May from April, Canadian Real Estate Association data showed on Tuesday, but jumped 38.4% from May 2020.

 

(Reporting by Julie Gordon in Ottawa; Editing by Christopher Cushing)

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Economy

Bank of Canada seeing signs of cooling in hot housing market

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The Bank of Canada is starting to see signs that the country’s red hot housing market is cooling down, although a return to a normality will take time, Governor Tiff Macklem said on Wednesday.

The sector surged in late 2020 and early 2021, with home prices escalating sharply amid investor activity and fear of missing out. The national average selling price fell 1.1% in May from April but was still up 38.4% from May 2020.

“You are starting to see some early signs of some slowing in the housing market. We are expecting supply to improve and demand to slow down, so we are expecting the housing market to come into better balance,” Macklem said.

“But we do think it is going to take some time and it is something that we are watching closely,” he told the Canadian Senate’s banking committee.

Macklem reiterated that the central bank saw evidence people were buying houses with a view to selling them for a profit and said recent price jumps were not sustainable.

“Interest rates are unusually low, which means eventually there’s more scope for them to go up,” he said.

Last year, the central bank slashed its key interest rate to a record-low 0.25% and Macklem reiterated it would stay there at least until economic slack had been fully absorbed, which should be some time in the second half of 2022.

“The economic recovery is making good progress … (but) a complete recovery will still take some time. The third wave of the virus has been a setback,” he said.

The bank has seen some choppiness in growth in the second quarter of 2021 following a sharp economic recovery from the COVID-19 pandemic at the start of the year, he added.

(Reporting by David Ljunggren and Julie Gordon; Editing by Peter Cooney and Richard Pullin)

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