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WINTER 2022: The BEST time to buy a home?

For the first time ever, all levels of government are actually talking about housing. You've got the federal, the provincial, and the municipal finally realizing how much of a problem the housing supply issue is for would-be home buyers out there. Prices have come down almost 17.2% in the Fraser Valley, and this is for all property types according to the Fraser Valley Real Estate Board's home price index information. And buyers have been waiting for forever for prices to correct to the levels that they have come to today. They have been sidelined for almost two to three years, just waiting for the perfect opportunity to snap up some real estate.

So they waited and they waited. Today's post is to answer a question that so many home buyers out there might have right now and is it the perfect time to buy? If you're curious about what's really going on out there, today's post is just for you because we're going to talk all about mortgage rate forecasts, we're going to jump into the inventory and what's going on with that. And we're also going to chat about the demand for homes in the Fraser Valley. So if you're a would be home buyer, today's post is definitely for you.

Let's get into it. 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 here's the deal. We saw prices in the Fraser Valley go up by quite a bit during the course of the pandemic, probably largely fueled by interest rates. And why is the Fraser Valley experiencing these price declines that Vancouver is kind of they're still experiencing price declines, but they're certainly not having them to the same regard that we are. I was fortunate enough to watch a British Columbia Real Estate Association economics update and report just yesterday and what was interesting was the comment that was made by the economist from BCREA and he suggested that traditionally prices in the Fraser Valley have usually been in around the 25% difference mark from that of Vancouver and when we were in the peak of the market back in the spring of 2022 for the first time, we were so close to par with the Vancouver Real Estate Board that it was crazy.

The numbers all across the board are showing the closer you are to downtown Vancouver, for the most part, your prices have been much less effective than areas that are much further out. A great example of this is Chilliwack, British Columbia, where Chilliwack saw some of the fastest price increases in Canada and unfortunately now for anybody that had purchased is now seeing some of the fastest price decreases. Probably also fueled by the pandemic a lot of the bigger decreases and really kind of weighing in on a lot of these numbers and weighing on a lot of these numbers is detached homes, which, of course, saw the biggest jumps over the course of the boom market.

So is it a good time to buy? Does it make sense, if you've been waiting, if you're a buyer that's been just waiting and watching to see what's going on, does it make sense to jump into the market? Now, there's no doubt that every buyer wants to buy as low as possible and they want to try and time the market likely to be at the very bottom of what's going on. Anybody that's been selling real estate over the course of their time or has been around for a little bit will tell you it's very, very hard to time the bottom of the market, but sometimes you just get lucky. Today's post has got lots of stats in it about some of the major things that really contribute to what's going on with our home pricing, and I'm going to jump into those right now.

The first one I want to jump into is the rate forecast and where are we today and where do we really expect things to go over the course of the next year or so? The bank of Canada's overnight rate is now in the neutral territory, which is a really good thing for them. This is the policy rate level of where they think it needs to be for the economy to run at approximately a 2% inflation rate. You've been watching the news, so you know inflation has been pretty wild as of late and has also progressively been going down, largely due to the rate increases that we've seen in the last few months.

So where does it really go from here and the Bank of Canada's messaging is largely that it really depends on what inflation does. The rate hikes have certainly had an impact on the economy and definitely slowed down the home buying process. We've even seen inflation softened over the course of the last few months, which is positive that we will get back to that 2%. Mark BCREA economics department forecasts that we will start to see mortgage rate decreases start to happen somewhere in the second or third quarter of 2023.

The Bank of Canada likely isn't done upping their interest rates just quite yet, but we're probably close to the end of that as well, as long as inflation keeps trending the way it's been trending. So that's what's going on with mortgage rates. If you're a home buyer out there, who knows where they're going to be in three to five years from now? Because, again, we're at a neutral level, not a stimulatory or a level that is meant to slow the economy. I don't know that I would plan on seeing rates back in the 2% and 3% mark.

So we might just be where it normally should be when it comes to the rate forecast. Does it make sense for a buyer right now? Well, maybe. The next thing I want to talk to you about is the inventory of homes available in the Fraser Valley and inventory is at a level that we haven't really seen in quite a long time.

In fact, we are quite below the ten year average for where new listings should be without new listings being available for would be home buyers out there. And really, without those new listings starting to pile up, the impact on pricing is minimal. It's really simple supply and demand. If you do not have the supply and you do have the demand, homes are going to sell and there's not going to be a lot of choice out there for people. The interesting thing is too is why are listings not piling up?

Like normally when this happens, when we see interest rates go up, we see listings really pile up, adding a ton of choice for a buyer and also putting a lot of pressure on sellers to reduce their prices. In fact, in this graph you can see for every month in October over the course of the last ten years, we finished the month of October in 2022, again below the ten year average for new listings that are available. When you factor in what the interest rates are doing, I want you to notice that there is an inverse reaction, which means when the interest rate is low, the listings tend to go higher. When the interest rate gets higher, the listings tend to pile up. But check out 2021 and into 2022.

Interest rates are the highest they've been in almost 15 years. Oddly enough though, the inventory is not piling up like it should be, or at least how it traditionally has in the past. So this is a little odd and this is going to carry me into the next section of this post, but if you're a home buyer when it comes to inventory piling up, that's just not happening. Does it make sense to buy a home right now based on the inventory? The answer is yes.

Now the last piece of this puzzle that I think is really quite important is the demand. And the demand really means how many people are out there wanting to buy homes and what the shortterm and long term future demand for these homes might look like. There's a mind boggling stat that I'm going to share with you right now and the Canadian Mortgage and Housing Corporation, or CMHC, they estimate that British Columbia needs to add 570,000 more new homes by 2030 in addition to what is estimated that will already be built. This is all to achieve what they are calling "affordability." And that is not a number to scoff at, that is a big number

and a lot of homes that need to be added in British Columbia. Let's bring it more on a local scale here and put things into a little bit of perspective for you. In January of 2022, it was estimated in the three months prior to that, just over 25,000 people had moved into British Columbia. Here's the problem, though. In the entire course of 2021, over 53,000 homes were built in BC.

If you do the math on this, one quarter added 25,000 people. So let's say there was, over the course of a year, 100,000 people that relocated to BC, but only 53,000 new homes were built. And we know we're in the middle of a housing shortage. Immigration is something that is quite a big deal. And if you've been watching the news in the last few days, you also know that the federal government has actually upped its immigration targets and they want to hit about 1.45 million newcomers into Canada by 2025.

This is a massive number and some record immigration into our country. This is almost half a million people per year that they're trying to bring in and really during the middle of a housing shortage. So we got to build homes, of course. Right. And again, like I said at the start of the post, all levels of government are really, really focused on how to do this.

But it ain't quick and it ain't easy. Immigrants make up about 29% of BC's population. That's a lot of people. I mean, you can see that when you look around. We've got incredibly diverse communities all over the place. This is much higher than the national average as well, at 23%. So people love BC. And of course, why would they not? It's awesome. In the last five years, Stats Canada reported that there was just shy of 200,000 people that moved into British Columbia.

For the folks that are watching in Surrey or the Lower Mainland, 78% of those chose to call the Lower Mainland home. So we got a lot of people that want to live in the Lower Mainland and a lot of people on the way. So if you're a new buyer and you're wondering what the demand is like to live here for new homes, because really, look, everybody, whether you rent or own, you still need a roof over your head and we need houses for these people. When it comes to demand and whether it makes sense to buy, the answer is yes. So there's some information that I thought would be really useful for anybody out there considering to buy a home today.

And I'm curious of what you think. Do you think we're at the bottom of the real estate market? Do you think you can successfully time the real estate market? And do you think long term it's a good decision to get into the market if you're someone looking to buy a home? Leave your comment below.

And while you are looking around down there, don't forget there is a link directly to my calendar. So if you are someone that's looking to either buy or sell a home, you can easily book a time to speak directly with me and we'll give you all the information you need to be successful in whatever your individual endeavor is. Hey look everybody, I want to thank you for reading, I want to thank you for subscribing and I want to thank you for your comments. I appreciate you all and I'll definitely look forward to seeing you on the next post. I hope this one was useful for you.

Chat with you soon. Take care.

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The Germyn Group
Darin Germyn PREC* & Adam Howsam
Macdonald Realty LTD
homes@germyn.ca | 604-542-2444 | germyn.ca
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