First-time Vancouver home buyers attracted to low mortgage rates
The real estate market across Canada is starting to heat up again mostly as a result of low mortgage rates which are attracting first-time buyers. As these low rates are too good to pass on for many first-time home buyers we see prices increasing and sales strengthening in the Lower Mainland's strongest real estate markets.
Take Vancouver as an example where home sales continued to rise in September as evidenced by the Multiple Listing Service figures of 3,559 sales in September, representing a 3.4 per cent improvement compared to the 3,441 sales in August of this year. The Real Estate Board of Greater Vancouver released these figures on Friday but few seemed surprised.
As a direct consequence of stronger sales figures, prices and benchmark prices (the average price of the standard home in any given market) have also risen. In fact, prices were about 1.6 per cent higher in September compared to earlier this year and main of the losses seen since the peak prices of the summer of 2008 have been recovered. Experts are pointing to low interest rates as the key motivating factor for market recovery as rates reached record lows this May. Despite small increases in mortgage rates since May, figures are still low which is prompting many first-time buyers to enter the market.
Speaking specifically about mortgage rates, there are numerous examples of impressive figures being offered to home buyers. In May, Coast Capital Savings offered 3.79 per cent on a 5 year fixed mortgage which has increased only slightly to date. In fact, they are offering an attractive rate of 3.85 per cent until November according to credit union representatives. This has lead to a staggering rise in new mortgages. This most recent quarter has seen the number of mortgages over $100,000 triple compared to the first quarter of 2009. Likewise, BMO Bank of Montreal has also offered enticing low mortgage rates such as their five-year variable rate at prime which is down more than 2 per cent down from prime plus 0.3 per cent which works out to 2.55 per cent. Rates like these make homes much more affordable which is likely why the stream of first-time buyers has been so strong. Indeed, in Surrey, Abbotsford and Mission, first-time buyers were responsible for almost a third of sales.
Renewed real estate interest has been spurred by these low rates and while housing prices are increasing they're still down overall. The modest drop in prices currently seen in the market hovers around 2.9 per cent which isn't likely to explain increasing sales. The combined effect of low rates and discounted prices is certainly a motivating force for many buyers. Affordability cannot be explained by low prices alone and some markets are still struggling. The Fraser Valley saw an 11 per cent drop in sales from August to September which is likely due to a sales cooling trend which is normal after the summer months. Nevertheless, there is some concern that lower sales in the next few months may signify that the real estate market is not out of trouble, yet.
While sales were down in the Fraser Valley prices increased slightly which may partly explain why sales were down. On the other hand, both Greater Vancouver and the Fraser Valley saw impressive sales improvements this September compared to a year ago. Banks and businesses were in turmoil in September 2008, the stock market began plummeting, and real estate suffered severely. This year, things appear much better. In Vancouver, sales in September 2009 were almost double those figures in 2008. Similarly in the Fraser Valley, sales figures for September 2008 show 980 sales while September 2009 sales drastically improved to 1,590. These are shocking figures indeed but as a point of note, September of last year was a particularly difficult month across all sectors. Experts seem to agree that the market is showing strong, steady, and healthy recovery. Some may argue that the market is overheated, but this strong pace can be explained by a number of factors that will remain stable for the foreseeable future. Economic improvements along with an improved jobs scene and low mortgage rates are all combining to boost real estate figures. In addition, some factors are helping to prevent the market from overheating. For example, inventories in the Vancouver area are on the rise which keeps pricing wars from impacting sales figures.
Nevertheless, benchmarks are also beginning to rise in some markets and in Greater Vancouver the September 2009 benchmark price for a detached home was up 2.1 per cent from last September at $741,632 and $726,331 respectively. On the other hand the benchmark price for a detached home in the Fraser Valley was $491,404 this September which is a 1.5 per cent drop from the same figure of $498,822 last year.
Take Vancouver as an example where home sales continued to rise in September as evidenced by the Multiple Listing Service figures of 3,559 sales in September, representing a 3.4 per cent improvement compared to the 3,441 sales in August of this year. The Real Estate Board of Greater Vancouver released these figures on Friday but few seemed surprised.
As a direct consequence of stronger sales figures, prices and benchmark prices (the average price of the standard home in any given market) have also risen. In fact, prices were about 1.6 per cent higher in September compared to earlier this year and main of the losses seen since the peak prices of the summer of 2008 have been recovered. Experts are pointing to low interest rates as the key motivating factor for market recovery as rates reached record lows this May. Despite small increases in mortgage rates since May, figures are still low which is prompting many first-time buyers to enter the market.
Speaking specifically about mortgage rates, there are numerous examples of impressive figures being offered to home buyers. In May, Coast Capital Savings offered 3.79 per cent on a 5 year fixed mortgage which has increased only slightly to date. In fact, they are offering an attractive rate of 3.85 per cent until November according to credit union representatives. This has lead to a staggering rise in new mortgages. This most recent quarter has seen the number of mortgages over $100,000 triple compared to the first quarter of 2009. Likewise, BMO Bank of Montreal has also offered enticing low mortgage rates such as their five-year variable rate at prime which is down more than 2 per cent down from prime plus 0.3 per cent which works out to 2.55 per cent. Rates like these make homes much more affordable which is likely why the stream of first-time buyers has been so strong. Indeed, in Surrey, Abbotsford and Mission, first-time buyers were responsible for almost a third of sales.
Renewed real estate interest has been spurred by these low rates and while housing prices are increasing they're still down overall. The modest drop in prices currently seen in the market hovers around 2.9 per cent which isn't likely to explain increasing sales. The combined effect of low rates and discounted prices is certainly a motivating force for many buyers. Affordability cannot be explained by low prices alone and some markets are still struggling. The Fraser Valley saw an 11 per cent drop in sales from August to September which is likely due to a sales cooling trend which is normal after the summer months. Nevertheless, there is some concern that lower sales in the next few months may signify that the real estate market is not out of trouble, yet.
While sales were down in the Fraser Valley prices increased slightly which may partly explain why sales were down. On the other hand, both Greater Vancouver and the Fraser Valley saw impressive sales improvements this September compared to a year ago. Banks and businesses were in turmoil in September 2008, the stock market began plummeting, and real estate suffered severely. This year, things appear much better. In Vancouver, sales in September 2009 were almost double those figures in 2008. Similarly in the Fraser Valley, sales figures for September 2008 show 980 sales while September 2009 sales drastically improved to 1,590. These are shocking figures indeed but as a point of note, September of last year was a particularly difficult month across all sectors. Experts seem to agree that the market is showing strong, steady, and healthy recovery. Some may argue that the market is overheated, but this strong pace can be explained by a number of factors that will remain stable for the foreseeable future. Economic improvements along with an improved jobs scene and low mortgage rates are all combining to boost real estate figures. In addition, some factors are helping to prevent the market from overheating. For example, inventories in the Vancouver area are on the rise which keeps pricing wars from impacting sales figures.
Nevertheless, benchmarks are also beginning to rise in some markets and in Greater Vancouver the September 2009 benchmark price for a detached home was up 2.1 per cent from last September at $741,632 and $726,331 respectively. On the other hand the benchmark price for a detached home in the Fraser Valley was $491,404 this September which is a 1.5 per cent drop from the same figure of $498,822 last year.
Labels: Vancouver Real Estate
posted by VancouverResidence
