Can Greater Vancouver housing market go higher?

Market sustained by low interest rates

Longer amortization and low interest rates have a huge impact on home prices. With the introduction of mortgages with 35-year (from 25 years) amortization, home buyers are able to afford homes 16% higher in value. Coupled with interest rates drop from 5% range to around 3.55% for 3-year fixed rate now, home owners can afford homes 40% higher in values as compared to 10 years ago.

The above price chart for detached homes at $910,000 range shows a huge price gap between current average house value and home pricing trend line around $540,000. The above chart showed that average Greater Vancouver home price as of November/09 is 69% higher than the base-line price!

Danger of higher interest rates on home prices

If the mortgage rates are raised from current fixed 3-yr term around 3.55% to 5% or higher, home buyers will be constrained to buy homes at only around 80% of today's price. A loss of market confidence will trigger a collapse in home prices. Current rental return is generating negative cash-flow if an investor is buying a home for investment.

Rental returns as compared to home prices

From 2001 to end 2009, rental increase was in the range around 25% to 30%. On the other hand, home prices more than doubled and gained almost 135% in value.  A big jump in interest rates from current 3.0% level to higher rates of 5% to 6%, will have a major impact on many home owners.

When renting is an option, home buyers may want to wait and see how the economy and interest rates play out in the next year or two.

Homes currently listed for sale in Vancouver and Richmond can be viewed here.

Richmond townhouses for sale

Townhouses are more affordable than detached homes and offer larger living areas than condos to accommodate their families. Richmond townhouses range in built up areas from the smaller 1,200 to 2,000 square feet living. The selling prices for Richmond townhouses may be from $300,000 to $750,000, depending on the size, age and location.

A home owner who can afford to pay $500,000 to $650,000, will have little problem finding a larger and newer townhouse. You can view Richmond townhouses currently listed for sale here.

Most popular townhouse size and price range

Richmond townhouses that have 3 bedrooms with average living area between 1,450 to $1600 square feet are in great demand. Such units generally are priced between $390,000 to $450,000 for older units. Newer townhouses are now selling at higher price range between $500,000 to $650,000.

One of the most desirable Richmond neighborhoods known as Terra Nova  has many townhomes between 6 to 15 years old listed for sale on the MLS.

You can view the historical and current price information for Terra Nova townhouses at 3711 Robson Court,  3880 Westminster Hwy, and 5988 Blanshard Drive.

Click here to view townhomes listed for sale in Terra Nova, Richmond.

Older Richmond townhouses

Some of the older Richmond townhouse complexes are in demand as these are two-level townhomes with more spacious open floor plans and play areas for young kids. These strata townhouse complexes also have more shrubs, trees and landscape yards. Some of the popular west Richmond townhouses are Timberwood Village, Mariners Village, Kingfisher Road, Tiffany Blvd, Minoru Blvd, Abercrombie Drive, etc.

If you are planning to buy or sell your townhouse in Richmond, you are welcome to contact me for a discussion, or email me. 

The Globe And Mail published an article today "Federal officials told CMHC it could burden borrowers" that may have more far reaching consequences on home owners.

"Canada Mortgage and Housing Corp. officials ignored warnings from senior Finance Department and Bank of Canada officials during the past two years that its active business in high-risk mortgage insurance could overburden consumers.

According to sources familiar with the discussions, CMHC executives did not heed the warnings and continued to underwrite larger volumes of insurance policies for risky home loans with 40-year amortizations and minimal down payments.

The sources said the federal agency's executives disagreed about the potential risks and defended the creditworthiness of borrowers who were granted insurance for the riskier mortgage products".

Many critics cautioned the danger of the 40 years and 0% down payment mortgage that may hurt home owners in the event of home prices dropping significantly. These concerns are now a reality when home prices have dropped 12% to 15% in major Canadian city centers, especially places like Greater Vancouver, Victoria, Calgary and Edmonton.

Some home owners are in trouble

With home prices projecting to decline further over the next 12 months, home owners who bought with little equities will need to cover their losses if they sell their homes now. Those who could not keep up with their mortgage payments will lose their homes. When defaults start to show up, the losses suffered by Canadian banks will end up with CMHC and other mortgage insureres. CMHC will end up taking on huge mortgage default losses as over 70% of these 40 years mortgages were under-witten by CMHC the past 2 years.

Canada is now reported to be in recession with negative GDP growth. If the economy tank in Canada, many people will lose their jobs due to cut-backs and lay-offs. It is inevitable that foreclosures and bankruptcies will increase in the near future.

The loan loss for each default in the high-priced centers in Canada can easily exceed $100,000. A 20% drop in price on a $500,000 home will wipe off $100,000 value from a home. Together with interest cost, real estate/legal fees, etc, loan losses can piled up quickily.

Buying opportunities

There are many buying oppotunities for investors who have the financial resources. Home owners who could not hold on to their homes may be forced to sell at lower than market prices. Until more buyers return to the market, home prices will continue to decline. It's difficult to tell if the market will stabalize by the end of 2009 or 2010.

If you are looking for investment properties in Richmond, Vancouver or Burnaby, you can contact me at 604-721-4817 or email me.

The Greater Vancouver real estate market is fast changing. Home owners and consumers are faced with many questions on how best they can deal with the market. In a report published in the Financial Times, ” Your home may be worth more than you thought: CREA” home owners, buyers and sellers are wondering what's the real market situation in their local market. 

The Canadian Press on Dec 12, 2008 published "House prices slip 10 per cent across Canada in Nov" painted a more pessimistic view on the housing market for 2009.

Real estate is local - home owners have to deal with their local real estate markets. Presently, home prices are selling at 10% to 12% lower than comparable homes sold a year ago.

It’s Time To Get Ready

If you are buying, do your research and work with an experienced local realtor. Whether you should buy now, or wait a little longer depends on your circumstances. Home prices are now more attractive and affordable than a year ago. 

You should buy when you find the right home, and you are comfortable with your financial commitment. No one knows when home prices will reach the bottom.

Most home buyers are hesitant to buy at current market value. When your offer price is too low, the seller may not want to sell his home to you. The final price of a home is made between you as a buyer and the seller. Only when both parties can agree on a price, a deal can be done.

You can keep an eye on the Richmond market by following my monthly update posted on my website RichmondBCRealEstates.com. It is time to look around and get ready.

If you are looking to buy or sell a home in Richmond, South Vancouver and Burnaby, you are welcomed to contact me at 604-721-4817 or email me.

The subject on "writing a low ball offer" in a buyer's market is aptly described in a blog post by Vancouver's Realtors Rob Chipman and Aaron Best. 

"Lowball opportunities are now available, and their numbers will only increase in the coming months".

"Lowballs are a funny subject. They’re easy to talk about, but tough to pull off.  In the first place they take a certain amount of nerve.  In the second place, they’re a tougher offer to close than a non-lowball. There’s no reason why a buyer shouldn’t consider lowballing, however.   Its not a tactic for everyone, and it involves lots of hard work and learning, but it can pay off handsomely".

You can read the full article below:

So You Want To Write a Lowball! (part 1), and the second part of the article:

So You Want To Write a Lowball! (part 2)

If you are a homebuyer, you may find some great buying opportunities in today's market. Whether you are buying a home in Richmond BC for your own occupation, or a second or third home for investment, you can view the latest Richmond market activities here.

If you have a specific real estate need, kindly contact me at 604-721-4817 or email me.

RE/MAX recently released report reported in The Vancouver Sun, "Threat of global recession to hinder home sales in major Canadian housing markets in 2008 and 2009" cited global economic uncertainty weighed heavily on residential real estate activity in most major Canadian centres.

"The first quarter of 2009 will certainly be a continuation of the trend we're seeing now, with reduced transactions and average prices coming down in Vancouver and throughout British Columbia."

According to the report, some 440,000 homes are expected to change hands in Canada by year's end - a decrease of 15 percent from record levels reached in 2007.

Michael Polzler, Executive Vice President and Regional Director, RE/MAX Ontario-Atlantic Canada, said that "the nation's housing market performance next year will depend largely on how the country's economy fares at the local, provincial and national levels, but he remains hopeful for gains in 2009".

"The situation is not expected to be remedied until consumer confidence is restored," Polzler says. "We could see a bounce back as early as spring - if inventory levels remain stable, pent-up demand kicks into gear, and lower interest rates stimulate home-buying activity."

Should you buy now or wait a little longer? Home prices in Greater Vancouver are now down 12% to 15% from the peak towards the end of 2007. As home owners, real estate is local and there are challenges when you are buying or selling in today's market:

- as a seller, you want to know how much lower home values will go down.
- as a buyer, you wonder if you should wait for further price reductions.
- as a homeowner, you may be concerned how the present market impacts on your home equity.
- when trading-up or down, how do you manage 2 transactions in today's market.
- as an investors, you wonder whether it is a good time to buy, renovate, and re-sell for a profit.
- as a first-time buyer, you want to know if you can get financing in these uncertain times.

There is no easy answer to the above questions. You have to evaluate you options and find out what is the best action for you. If you like to discuss your needs, you are welcome to contact me at 604-721-4817 or email me with your questions.

Should you buy now or wait a little longer? Home prices in Greater Vancouver are now down 12% to 15% from the peak towards the end of 2007.

People are asking what is happeing to the housing market:

 - Sellers want to know how much lower their home values will go down.
 - Buyers want to know if they should wait for further price reductions.
 - Homeowners want to understand the impact on their equity.
 - Investors are asking whether it is a good time to buy, renovate, and re-sell for a profit.
 - First-time buyers want to know if they can get financing in these uncertain times.

There are no easy answers to the above questions. Each person will have to assess their own individual situation. In a buyer's market like today, if you are trading-up buying and selling at the same time, you benefit with better choices.  

Circumstances cause each of us to make decisions despite uncertainties related to global economies and politics. There are many great buying oppotunities and good selections of homes now. If you are comfortable with your finances, you now have a better chance of finding the home that's right for you.

If you like to find out where you can find the great deals, your are welcome to call me at 604-721-4817 or email me.

The sales of older homes in Richmond Seafair  follow the market trend for Richmond. Home prices in the area reached the peak around the end of 2008. The soft housing market in Richmond in early 2009 had resulted in home prices in the Richmond Seafair area declining significantly.

Click here for the latest Richmond housing market update.

The homes selected for the above study were based on homes that were over 25 years old and with lot sizes between 7,000 to $9,000 sq ft. During the period form 2001 to end Nov/2008, the monthly average sale for old homes in prime locations was around 36 a month.

Home Prices Declining Since May/2008

The drop in demand for these older homes since May, 2008 had resulted in significant price reductions by home sellers. Homes similar to those previously sold at $600,000 to $650,000 are priced much lower now.

There are some homes in the Seafair area being priced at the $500,000 range now. There were 2 recent sales in this area that were done at $450,000 to $488,000. The soft housing market is expected to continue into next year, and home prices are likely to continue the decline.

Rental Income & Cap Rates

Buyers interest is epected to improve when home prices become more attractive. An acceptable price range is when investors are able to buy revenue properties at 4.5% to 5% cp rates. Current gross yearly rental income for these homes is around $21,600.

Based on investors expectation of 4.5% to 5.0% cap rates, buyers will become more active when the selling prices for these homes are in the $432,000 to $480,000 range.

If you like to have more information on homes for sale around Richmond Seafair area, you can contact me at 604-721-4817 or email me.

This could be the best time buying your ideal home. The current real market is adjusting  to the uncertainty in the market place. The market has changed from the go go years to an unusually slow buyer's market. Seller expectations are now tempered, and more willing to look at your offer.

In the two previous downturns, one in the 1980s and the second one in 1994 to 2000 the market factors affecting sales were different. We now have low interest rates, and reasonably positive economy and low unemployment rate. Home prices are now 10% to 12% lower than those at the end of last year.

More Chocies

We have much more inventory on the market now than we have had in the past and sales have drop off a cliff. Now, may be a great time to invest in real estate because of the low interest rates, lower prices and a low vacancy rate.

For home sellers whose home prices had doubled in price over the past 7 years, the recent price adjustment of 10% to 12% is not such a big deal. If you are buying and selling in the same market, it doesn't matter if you sell at the absolute peak or purchase at the absolute bottom.

Home Ownership

The reasons for buying and selling houses continue, and home owners will continue to sell or buy depending on their circumstances. The market goes up and it goes down. It's up to each of us to take advantage of each swing.

The market now has a lot more choices for home buyers. You have a better chance of finding the home you like and at a price you can afford. If you are comfortable with your own finances and the home is the right one for you, then buy it. It is your home you live in and enjoy with your family. It does not matter if home prices go up or go down as over a time period you build equity through home ownership.

If you are looking for the latest Metro Vancouver housing market information or like to view homes for sale on the MLS system, visit my website at www.james-wong.net. Or, search for homes listed for sale using the Google MLS Listing Search below: