Real Estate & Mortgage Rates - looking ahead to 2021
The Year 2020 will be remembered for many concerning things. For many, not a year to remember and most folks I have talked to lately are happy and looking forward to the turn of the calendar and positive news in 2021. When it comes to the Metro Vancouver housing market and mortgage rates, many were actually caught off-guard with an increase in home prices and mortgage rates that are at historic lows and look to stay that way for the near future.
Here’s a few highlights that will actually be remembered for my industry colleagues:
• The average home price remains at historic highs as of November 2020
• Less home inventory created more competition amongst buyers
• Working from home created a demand for homes East of the Downtown core
• All-time record lows for mortgage rates
The average home price in Metro Vancouver versus rest of Canada
Back in November, the Canadian Real Estate Association reported that the average home price in Canada was $603k. However, our very own Metro Vancouver region ranks in the number one spot with the average home price in November coming in at $1M plus. These numbers represent over 14% price growth for single-family homes year-over-year. Home buyers took a break with the first wave of the pandemic news but then came out in full force as we have seen many months in succession of year-over-year growth.
Less home inventory in Metro Vancouver is creating competition and increasing home prices
Another phenomenon I got to witness first hand was the fierce competition amongst local buyers. My Realtor friends shared many stories of how they sold a home the same day or week it went on the market and over asking price. I asked one Realtor to sum it up during the summer months and I remember him saying; “Sukh, it’s like the Wild West and the one to draw first wins!” This made me think of my clients who won offers because they had a mortgage pre-approval to draw. When your financing plan is in order, you could be the one to “draw first” and win that home.
Increase in home sales activity East of the Vancouver core neighbourhoods
With more and more businesses adapting to a work from home model, we see the reduction of commute times for many members of the workforce. Some younger individuals or families may have previously bought or rented less home for the dollar just to be closer to the Vancouver core. With the work from home movement looking like it’s here to stay, we see many of these folks investing and purchasing residential homes in areas such as Surrey, Langley, Maple Ridge and even further East. They can finally get more home for the dollar and still get their job done. That extra commuting and vehicle expense can now be applied towards that mortgage payment which just happened be at an all-time low!
Mortgages being offered at all-time low rates
In early 2020, The Bank of Canada had reduced the lending rate to only 0.25% and it has stayed there. From all market and pandemic indications, it looks like it will stay there for a good part of 2021. As a result, we are seeing mortgage rates as low as 1.5% for variable and 1.6% range for fixed mortgage rate. With mortgage rates being this low, many of my Realtor friends are predicting that home prices could potentially increase another 4% to 8% in 2021. One opportunity to watch for is the pricing for condo units that are in near the Downtown Vancouver core. As many people have purchased homes further out East, there is condo inventory available closer to Downtown that could see price drops in the early parts of 2021.
We will see many lasting effects of the year that was and opportunities for those that are in a position to spot them and act upon quickly. Having a solid financing plan with a pre-approved mortgage in your back pocket will definitely help you win in the “Wild West”. Feel free to connect with me at anytime for more industry insights.
Wishing all of you the best for 2021.
Cheers,
Sukh Sangha