This will be more of an opinion piece on the Real Estate Market in Kelowna and surrounding area along with where current mortgage rules are at.
To start, I am currently looking for another home to buy and have been for quite a while. Looking for so long and obviously being in the industry, this year is the first time in 2 to 3 years or longer where I have started to see price reductions every day. I have also started to see houses begin to be listed under $500,000 which for almost all of 2017 did not exist in this area.
I kept saying for 2016 and 2017 that we were near, if not at the top of the market and yet the market kept going up!
Well, now it seems for the time being we have reached the top and are starting to come down. I do not see the market crashing down as the economy here and in Canada is to strong and the Okanagan is too desirable for that to happen. I do, however, see a pushback from buyers combined with the significantly tougher mortgage rules and banks removing programs which help buyers qualify for tougher scenarios.
I do not know how much the market will decline but I can tell you that Spring is the busiest time of year followed by Fall being the second busiest time of year for buying and selling. With prices already declining, I would imagine in the slower parts of the year that prices will be even softer with less competition and eventually supply to build up.
This brings me to why people cannot qualify for as much of a mortgage now. Here are some of the key points that I see:
– Mortgage regulators have made it tougher to get a mortgage with changes in policies every 6 months or so for the past several years without waiting for market conditions to adjust to the previous changes.
– One of the main regulations implemented was a stress test where the lender uses a higher mortgage rate than you actually receive to calculate what you will qualify for. This effectively lowers what borrowers qualify for by about 20% to 30% depending on someone’s debt load. For the time being, if someone has 20% or more down payment they may go to a Credit Union and not be subject to the stress test.
– The Okanagan area was one of the hottest areas in Canada for buyers and sellers with sellers basically able to name their price. With a rapid rise eventually comes a cooling.
– Last point I will make is the Bank of Canada has raised its key interest rate 3 times in the last year and is forecasting to raise it several more times once it is comfortable with doing so. This makes other rates rise and with higher payment amounts, everyone qualifies for less of a mortgage.
This was a basic opinion piece of what I am seeing in the Real Estate and Mortgage market. By no means do I think the sky is falling but I do think it is getting more and more important to have great credit and lower debt.
Everyone’s definition of great credit and lower debt is different, and I am happy to meet with anyone and let them know what the banks like to see, so they know from that perspective.
Hope this helps and contact me with any questions,