A quarter less sales than this time last year, and a quarter less inventory. Pretty interesting to see the months of inventory tracking last year’s performance so closely. We are scraping the bottom of the barrel here, and despite increasing reports of more new listings hitting the market, the market measures are not showing any cooling down in aggregate.
It is true that individual market segments are cooling. For example, there were 1.85 months of inventory for detached homes in the core in April compared to 1.06 a year ago. This will be something to watch going forward but so far these are being counteracted by other market segments that are more active this year than last (such as condos and townhouses). At this point the market cannot get more active, but we’ll need a bit more data to determine if it is going to back off across the board or just bounce around the bottom for a while.. Continue reading →
Assuming that the majority of buyers are still local, how are people affording to buy at these significantly inflated prices?
One theory is the bank of mom and dad chipping in (or maybe digging into their own home equity) to help with the down payment. After all why not dig into that inheritance before mom and dad have the chance to blow it all on home support?
According to Genworth, 28% of first time home buyers in Canada received some money from their parents to help buy a home, and that percentage is higher in high priced markets like Vancouver and Toronto.
Sources of down payment of first time buyers
So how does it stand in Victoria? Did you receive help when buying your first or any house? Did it materially change what you could afford, or allow you to get into the market when you couldn’t have on your own? And did you have to pay it back?
Did or will your parents help with your down payment?
Nope, I/we did it all by ourselves (44%, 83 Votes)
Yes, quite a bit of help (over $50,000) (16%, 30 Votes)
Not expecting any help when I/we buy (13%, 24 Votes)
Yes, we received some help (less than $20,000) (7%, 14 Votes)
Yes, moderate amount of help ($20,000 - $50,000) (7%, 14 Votes)
In the previous blog topic, there’s been much discussion about how having a rental suite in a house can affect the resale value. Some neighbourhoods (such as Broadmead in Saanich and all of Oak Bay) do not permit legal secondary suites in Single Family Homes. Although many people would prefer not to have a suite in their home, the large quantity of illegal suites in Victoria houses suggests that many are willing to give up space and privacy in order to enjoy the benefits of a “mortgage helper”.
What “pros” and “cons” are important when considering a rental suite?
In one week the governor of the Bank of Canada (BOC), Stephen Poloz, is due to release the Interest Rate Announcement and Monetary Policy Report. Until a few weeks ago, it seemed unlikely that the rate would be adjusted – but now with Greece teetering on the edge of insolvency, the Chinese stock market collapsing, and strong hints (from Bank of America and TD Economics and others) warning Canada is already in a recession – so it seems possible that the BOC will trim it’s overnight rate again next week.
The BOC last dropped the overnight rate by 0.25% on January 21st 2015. The lenders absorbed some of the rate drop for themselves, passing on a 0.15% variable rate drop on to mortgage borrowers. In order to remain competitive, fixed rate mortgage rates have also dropped – although there is gentle upwards pressure building in the international bond market (which is how fixed rate mortgages are financed).
Of course, there’s only so much money that people can afford to spend on a mortgage – so could another drop in variable mortgage rates really affect Victoria property sales volumes and prices? Are property buyers already “tapped out” and cannot afford any more? What do you think?
Buyers often ponder what type of mortgage is best: variable rate or fixed rate. At first glance, a variable rate mortgage (VRM) look more attractive – as they are typically lower rate than a fixed mortgage. However, VRM’s fluctuate as banks adjust their prime rates to follow the Bank of Canada’s overnight rate. On the other hand, a fixed rate mortgage (FRM) offers the assurance that the rate will not change over the duration of the mortgage. A few lenders offer a hybrid mortgage, where the mortgage is a blend of VRM and FRM.
Things get even more confusing when deciding the term of the mortgage: 1, 3, 5 or more years? How about an open mortgage (which can be paid off any time) versus a closed mortgage (restrictions/penalties if paid down early)?
History has shown that over the term of the mortgage amortization, most of the time a VRM is cheaper that a FRM. However, when periods (such as now?) when the general consensus is that VRM’s and FRM’s are about to rise – locking into long-term FRM may be the better choice.
It is worth considering what happens if paying off the mortgage early, whether: renewing before the term is up (to “lock in” a lower rate), switching mortgage providers, or even selling the property. Check the fine print for each mortgage provider, but typically if the terms of a VRM are broken early, just 3 months interest are charged as a penalty. For a FRM, a hefty Interest Rate Differential (IRD) is typically charged by the lending institution. The IRD can range from a few $1000’s to $10,000’s – so if there is a chance that you will be wanting to “get out” of your mortgage early, the VRM is the better option. The following site has some good examples for comparison: http://mortgagepenalty.ca/category/bank-mortgage-penalties/.