Many factors continue to buffet Vancouver real estate. Indirectly, strong reported inflation (never mind the unreported inflation); a downturn in the equity markets; talk of recession; the Ukrainian war; currency fluctuations, etc. Directly, large and continuing interest rate increases (perhaps stabilizing at much higher rates now?); stress tests; foreign buyer restrictions and taxes; vacancy and speculation taxes; recent changes to the offer process; bank appraisal challenges as values adjust, and the list keeps going.
Two of the largest factors at play are today’s much higher interest rates and stress test rates. A first time purchase, or a next purchase with substantial financing, requires much more consideration and compromise. Interest rates are now several times higher than a couple of years ago. Whether they remain at these levels, decline, or rise is unknown. Some current homeowners may be unable to re-finance at these new rates. And those hopeful first time buyers or those hoping to move up will be very purchase price constrained, with payments for a given finance amount being much higher than in the recent past. Another point to consider is the increased ratio of interest vs. principal in a monthly payment. Tough decisions will need to be made.
Many factors are creating downward pressure on prices. The federal immigration target of close to 500k new permanent residents yearly may however temper this downward pressure. Add to this several hundred thousand visa holders and foreign st6udents coming back to Canada after some years of absence, and you have yet another significant variable.
You’ve no doubt heard of varying price declines throughout the Vancouver real estate market over the past few months. Another factor that may come into play later this year if prices continue to decline is the psychological impact of reported year-over-year and month-over-month price declines. How this plays out combined and looped in with all the other factors above is a guessing game.
Much of what's happening is and will continue to make selling or buying a home more challenging in the coming months. And once you interrelate the various factors and begin to see feedback loops happening, well, it’s difficult to predict anything other than continuing volatility. It's enough to make any person just pull back and wait and see, which is another factor currently in play that then loops in with the rest.
Indeed, sellers as well as buyers seem to be taking a “wait and see” attitude. The inventory levels of virtually every home category throughout Greater Vancouver are at multi-decade lows, although with some very recent uptick, beyond seasonal norms, in some areas. This lack of inventory serves somewhat as a price support; if inventory rises, with everything else being equal (e.g., current demand) we may see further price declines. However, if buyer demand increases (e.g., due to a drop in interest rates), and the supply inventory stays the same (or takes some time to catch up), we may see upward pressure on prices once again. It’s a classic supply/demand equation.
Suffice to say, much to consider. Whether you're looking to sell or buy, or both, contact me anytime for help in strategizing your next move.