Are we at the very beginning of a significant housing correction in the Lower Mainland? You have been watching the news, you have been reading the newspaper and you have likely been hearing all about what is happening in the real estate market locally in Surrey and surrounding areas.
The question that you and so many others are asking, “Are we at the start of a significant housing correction?”
And what is likely going to happen with housing prices in the Lower Mainland? If you found yourself asking that question, you're not alone. And this post today is all about what is really happening out there and some things for you to consider as the summer gets a little more near. And progresses about whether we are at the start of a housing correction.
What's good everybody? It's Darin Germyn from the Germyn Group. Where we know you've only got one chance to either buy or sell your next home. So we're here to help you get it right.
So there is battling opinions about what is really happening in the market and a lot of people think that we may be at the start of a housing correction. There is some stuff that is playing completely into that narrative about whether we really are or not. Interest rates have gone up quite a bit since the extreme lows just months ago, really related to the COVID-19 pandemic.
So we know that money is more expensive. We also know that the market was a little crazy, maybe a little too crazy for a little too long. So we know that can't last forever and sales are going to eventually start to slow down. Now, how much have sales slowed down is maybe a better question. And they've slowed down a lot. So year over year, as an example. Sales are down almost 54%, which is pretty significant. Now, we were coming off again some pretty high times. This is more in line with closer to being where the ten year average is. However, that's a big change for what the market conditions would have been like about a year ago.
We also have started to see prices soften a little bit now, not crazy amounts in some areas. Some areas are being hit maybe a little more than others as well. But overall, across the Fraser Valley, detached. Homes are down just over 2%, townhomes. Are down
just over 1% and condos are down just over 1%. But we haven't seen these numbers come down since times before the start of the pandemic. You mix all this in with a war going on on the other side of the world, inflation crazy high. And we also have a stress test. Where people that want to buy a home have to qualify to pay higher payments before they can actually get the real payment that they're going to be paying.
So there's a lot of factors pointing to the conditions might not be that good. However, there are many factors at play that suggests that everything is also going to be just fine while the market might be coming back to more normalized conditions, there are some factors at play that you'll definitely want to consider if you've been holding off on wanting to buy a home. Now, I did a post all about these kind of conditions a few months ago, but it's good to have a refresher.
We've got things like record amounts of Immigration planned to come to Canada over the next two years, and it's looking. Like a pretty good place to live as it always does, especially with what’s going on in the world right now. We still have a housing shortage. We have had a housing shortage for a long time. There has been many reports are reporting about how many homes we need to build and folks, it's a lot. So we need to get more homes built so people can live in them. And that just doesn't change overnight because interest rates are going up or the market starts to normalize a little bit. Also thinking about the fact that the Lower mainland is completely landlocked for adding additional property, we've got mountains to the North, the Sea or the Pacific Ocean out to the west, and we've got the border siding onto our good friends in the United States to the south. So we don't really have a lot Of room to expand like some other areas might.
And lastly, our rates are still, by historical standards, incredibly low. This is very important because that's easy to forget. We're coming out of a very kind of very cautionary interest rate timeframe and rates are starting to normalize, probably where they should be. The bank of Canada is working really hard to get them to a neutral area, not an area where it's designed to inflate or bump up the economy.
You take all that and add in that our mortgages are stress tested. I had said earlier that could be a bad thing but the reason that is also a good thing is when rates go up, we know that people can afford their payments. That means that we're not going to see a whole slew of foreclosures coming to the market because we know people can comfortably make their payments.
So you've got all these factors at play and what is going to make sense. Well, I've got a couple of predictions for everyone, and these are, of course, my own opinion. I'm not speaking for anybody else in these, but these are my opinion on what I think is going to happen over the course of the next few months and kind of into the end of this year.
Prediction number one, sales have been way down year over year, but they're starting to level out kind of month over month I think we will finish this year with sales just right around the ten year average where they normally should be. And they're not going to be anywhere near like what they were in both 2021 and 2022.
I also predict that the next few months are probably going to be a little quieter than what they normally would be, which is normal coming out of what we're coming out of. But by the time fall hits, the real estate market is going to start feeling a lot more normal than it has been both in 2021 and all of the chaos that has been in the first half of 2022. I also predict that prices will continue to soften. Now, don't let that give anybody out there a heart attack. Nobody loves to hear that unless you’re a would be home buyer. But when I say soften, I'm not talking about crazy, aggressive numbers. I'm talking about very comfortable, slow, almost methodical adjustments in value.
This range is likely just a few simple percentage points, kind of generally for properties all across the lower mainland, and different communities will experience different things, but certainly nothing to get too excited about the reason that I also predict that you shouldn't get too excited about it. Is because I do think the rates are going to continue to go up. And the bank of Canada has been very forthcoming about that. I think that anybody that does wait to buy a property is going to offset whatever minimal change in the price that they may incur. They're actually going to offset that because. They're going to buy a much higher mortgage rate or a much higher loan amount based on waiting. A quick example is a discounted variable.
Rate mortgage is about 3.3% right now. And I think it's pretty safe to say by the end of the year it could probably be about 1% higher. At 4.4% on a $500,000 mortgage over the course of five years, that's almost an additional $25,000 just in payments if the rates are to go up so you want to be a little careful about being short sighted.
So those are some predictions for the remainder of the year. But I would love to hear in the comments below what you think is going to happen what do you think is going to happen with the housing market What do you think is going to happen with mortgage rates? Or if you want more information generally on what's going on or anything, real estate related, let me know and I'm happy to make a video about it when I can and we'll look forward to seeing you all on the next post
Again, I'm DarIn with the Germyn group. You've only got one chance to buy or sell your next home, so make sure you get it right.
Talk to you soon. Bye