The real estate market in 2024 was slow, with sales down 20.9% compared to the 10-year average.
Throughout most of the year, monthly sales figures hovered around 20% below the 10-year average, but activity started to pick up in October.

December followed a similar trend to November. While sales figures compared to the previous year show an impressive 30% increase, the bigger picture reveals they were still 14.9% below the 10-year average.

The sales-to-active listings ratio, a key indicator of supply and demand, stayed relatively unchanged across all property categories. This ratio reflects how balanced the market is: the lower the number, the weaker the demand. For prices to rise, the ratio generally needs to remain above 20% for several months. As shown in the chart below, detached home prices in December remained steady, while townhomes and apartments saw small declines of 0.3% to 0.4%.

Last month the Bank of Canada lowered their overnight rate by 0.50% and most believe they will cut another 0.25% on January 29th. This could give the market a boost by lowering variable-rate mortgages. However, the outlook for fixed-rate mortgages is less certain. Potential inflationary tariffs could drive bond yields higher, which would, in turn, push up fixed mortgage rates. With leadership changes coming in both the U.S. and Canada, the market is likely to face some turbulence in the months ahead.

Enjoy the rest of January,
And happy Lunar New Year to those who celebrate it!

Below, you’ll find the schedules for upcoming rate announcements in the U.S. and Canada.

The post December 2024 Vancouver Real Estate Review first appeared on John Chan Mortgages.

Sales-to-active listings ratios, which measure supply and demand, saw little change. Ratios between 12% and 20% indicate a balanced market, while higher percentages signal upward pricing pressure. Ratios below 12% suggest a weaker market.

This month the sales-to-active listings ratio for detached and apartments went down, signalling a weaker environment and you can see that the month over month price decrease for these two categories. Townhomes were the opposite. The ratio went up as well as the month over month price increase. Is this a reflection of the unaffordability of detached homes and an oversupply of condos?

It is widely expected the Bank of Canada will cut rates this week. It is a toss up between 0.25% and 0.50%. Then possibly another 1.0% through 2025. While these cuts will directly impact variable-rate mortgages, fixed-rate mortgages are expected to remain relatively stable. (See graph for details.)
Projections of the economy and the rate environment are difficult at the best of times. With the new administration coming into office in the New Year in the U.S., this task has become exponentially more difficult.

For now, let’s set those worries aside and focus on family and friends. Enjoy the holiday season, and have a wonderful New Year!

John

The post November 2024 Vancouver Real Estate Review first appeared on John Chan Mortgages.

And if you think you can sidestep this by selling the unit, think again. Unfortunately, this tax applies in that case too. Here’s why: the Canada Revenue Agency (CRA) treats long-term rentals as “residential use” and short-term rentals as “commercial use.” This means that anytime a property shifts from commercial to residential use, this tax may be triggered. So, for owners in areas where Airbnb rentals are now restricted or banned, the tax applies whether you decide to convert the unit into a long-term rental, sell it, or even move in yourself.

That said, there is a potential exception to this rule. If less than 90% of your rental activity qualifies as short-term, the property might still be considered residential, exempting it from the tax on conversion. This guideline is not well-defined, so consulting a lawyer to understand your specific situation is essential.

If you are interested in the case that brought this rule to light, click on the link: https://www.pallettvalo.com/articles/tax-court-of-canada-holds-that-the-sale-of-an-airbnb-rental-property-is-subject-to-gst-hst/.

The post AirBnB Owners – Between a Rock and a Hard Place first appeared on John Chan Mortgages.

This rebound in sales has reversed the downward trend of the sales-to-active listings ratio, which had been declining for the past six months. This ratio is a measure of relative demand. The higher it is, the greater the relative demand. This ratio increased across all property types, signaling a potential stabilization—or even the bottoming out—of falling real estate prices. For example, townhomes have already seen a modest price increase compared to last month, as reflected in the table below.

Adding to the momentum, the Bank of Canada lowered the overnight rate by 0.50% late in October, bringing it to 3.75%. This rate cut is likely to encourage further sales activity in November, though the usual holiday slowdown is expected before a resurgence in the spring market.

Looking ahead, the outlook for future rate cuts is less certain following Donald Trump’s election as the next president of the United States. The market will need time to assess how this development impacts the U.S. economy and, by extension, Canada. This outlook would affect how bonds and thus, mortgages will be priced.

In the meantime, take a well-deserved break from the election drama and focus on what truly matters this November: Remembrance Day.

Lest we forget.

The post October 2024 Vancouver Real Estate Review first appeared on John Chan Mortgages.

Right now, many people aren’t buying what’s being built, and some projects are being pulled entirely. Developers are feeling the strain, with some even facing foreclosure. A recent survey by the Canadian Home Builders’ Association showed negative sentiment for eight consecutive quarters, with most members attributing it to high interest rates. In fact, 61% of builders plan to construct fewer homes in 2024 than in 2023, with many slashing their estimates by half.

At the same time, report after report highlights the number of housing units that must be built to “restore housing affordability.” Canada Mortgage and Housing Corporation (CMHC), the Parliamentary Budget Officer (PBO), and Oxford Economics have all released projections. Oxford Economics estimates we need to build 420,000 homes annually for the next decade. The PBO projects 436,000 homes per year until 2030, which is 80% more than the total number of homes completed in 2023. And CMHC? They estimate 637,000 homes are needed annually until 2030. As you can see from the graph below, historically, up until 2021, we have never built more than 260,000 homes a year.

But here’s the issue: when the cost of raw materials, labor, and fees are already sky-high, how does building more help? Meanwhile, the cost of everything continues to rise. Just last year, Metro Vancouver increased development cost charges for a typical residential lot to $34,133 (from $10,027) and to $20,906 (from $6,249) for each apartment unit. This is not helping.

Other factors are also worsening housing affordability—migration to big cities, wage suppression, increased immigration, and opening housing markets to the global wealthy. Unless the government does a massive restructuring of the budget and divert a large portion to build subsidized housing, affordable housing is a dream.

Currently, high interest rates, restrictive rental regulations, and the foreign buyer ban have dried up demand for new condos. This has put immense pressure on developers, especially smaller ones or those with high levels of debt. For many, the carrying costs have become unsustainable, and some developers will go out of business. As the economy slows, we may see some discounted deals as builders try to recoup costs or cut losses.

Larger developers can afford to rent out units or keep them vacant for now. However, it won’t take long for this slowdown in construction to cause a housing shortage, driving prices upward once again. Builders will continue to pull back until they see a clear path to profitability—and affordable prices won’t be part of that equation.

The post When Will We Get Affordable Housing? first appeared on John Chan Mortgages.

Despite alarming headlines about rising credit delinquencies, the actual numbers remain low compared to other countries and our own historical standards. This may not pose a serious threat to the overall economy, but for those affected, it’s a personal crisis. Unmanaged debt can quickly erode your financial well-being, so addressing it early makes it more manageable.

The first step is to review your spending and cut unnecessary expenses. Next, explore additional sources of income, whether it’s taking on a part-time job or other opportunities. If you own a home with some equity built up, there’s an additional option: consolidating your debt by refinancing your mortgage. Reach out to a mortgage broker to help you assess the options. They can compare the potential benefits of paying a penalty to get a new mortgage versus taking on a second mortgage. Keep in mind, to qualify for refinancing, you’ll need sufficient income and a healthy credit score.

This underscores the importance of acting sooner rather than later when managing your finances. By the time you’ve maxed out credit cards or started missing payments, your credit score may be too low to qualify for low-rate borrowing. Debt consolidation can help reduce interest costs, lower your monthly expenses, and get you on track to paying off your debt faster. Click on the icon below to find out more.

The post Lower Rate = Slowing Economy = Rising Unemployment = Trouble first appeared on John Chan Mortgages.

The sales-to-active listings ratio for all categories dropped again month over month. The sales-to-active listings ratio is a measure of supply and demand. Falling ratios indicate downward pressure on prices. As you can see from the table below, prices have been decreasing in all categories over the past few months, though the decline seems to be slowing compared to the previous month.

The Bank of Canada recently lowered its overnight rate by 0.25%, which means that banks’ variable-rate mortgages will also decrease by the same amount. In response, bond yields have fallen, and since fixed mortgage rates are closely tied to bond yields, fixed-rate mortgages may also decline in the near future.

Typically, September sees an uptick in sales activity, so this could help boost sales. However, the impact may be limited, as many are anticipating further rate cuts in the coming months and may decide to wait.

Have a great month!

The post September 2024 Vancouver Real Estate Review first appeared on John Chan Mortgages.

This increase in inventory has led to a drop in both the sales-to-active listings ratio and the benchmark price in all categories on a month-over-month basis. The sales-to-active listings ratio is a measure of supply and demand, with lower numbers indicating a weaker market and an increased likelihood of price decreases. A weakening trend in the sales-to-active listings ratio began four months ago, and the impact is now visible in the price drops.

Recent weak US employment data has accelerated predictions of rate cuts. In mid-July, a Bloomberg survey of economists expected the Bank of Canada’s overnight rate to decrease from the current 4.5% to 3% by the end of 2025. Now, that timeline has been pushed up by six months. If the survey is correct, the Bank of Canada will drop the rate by 0.25% in each of the next four meetings, resulting in a 1% decrease by January 2025, reaching 3% by mid-2025.

This is great news for people with variable-rate mortgages, especially those with variable payments. Whether this will revitalize the real estate market is less certain.

Possibly, but a weak economy, higher unemployment, and rules against flipping, foreign ownership, and short-term rentals will continue to pose challenges.

Have a great the month.

The post July 2024 Vancouver Real Estate Review first appeared on John Chan Mortgages.

Insured mortgages allow buyers to put down less than 20% of the purchase price by paying an insurance premium that covers losses in case of mortgage default.

Will This New Program Impact the Market and Help You Qualify?
This new program is specifically designed for certain buyers and sellers. To qualify, the property’s price must be under one million dollars, which can be limiting in markets like Vancouver. Additionally, pre-sale condo purchases typically require a 15% to 20% down payment, meaning this program is unlikely to impact the pre-sale market. People who already have a 20% down payment won’t need this program.
However, for vacant, move-in-ready condos, this program could be beneficial. Let’s look at an example to understand how it might help:

• Condo Price: $800,000
• Without Mortgage Default Insurance: Requires a down payment of $160,000.
• With Insurance: Minimum down payment is $55,000, calculated as 5% of the first $500,000 and 10% of the remaining purchase price.

Financial Breakdown
Assuming the following:

• Property Tax: $2,500 annually
• Condo Fee: $500 per month
• Interest Rate: 4.64%
• Amortization Period: 25 years
• Down Payment: $55,000

You would need a family income of $180,000 to afford this home. The insurance premium is 4%, adding an additional $29,800 to your mortgage. This results in monthly payments of approximately $4,370.
Impact of a 30-Year Amortization
If you apply for a 30-year amortization instead:

• Monthly Payment: Decreases to $3,990
• Alternative Benefit: You could keep the monthly payment around $4,370 and qualify for a property that is about $50,000 more expensive.

Conclusion
Given the narrow target audience and the marginal increase in purchasing power, the overall impact on the market is expected to be small. However, for those who qualify, the 30-year amortization can offer some financial flexibility and make homeownership more accessible.

The post What is the Impact of the New 30 Year Amortization? first appeared on John Chan Mortgages.

The seller can sue for losses based on the original selling price of your purchase agreement. If the seller sells the property for less than the price on the original contract, they can sue the would-be buyer for the price difference.

In a recent case, the would-be buyers submitted an unconditional offer, only to later claim they could not secure a mortgage from the bank. Often, this is merely an excuse. Regardless, this situation could easily have been avoided by consulting with a mortgage broker before making any offers, especially unconditional ones.

The seller eventually sold the property for $375,000 less than the original agreement. The defendants argued that the seller should have renegotiated with them and reduced the price or waited until the market improved. These arguments are flawed. The buyers should have completed the sale and waited for the market to improve before selling the property themselves. Ultimately, the judge ordered the would-be buyers to pay the $375,000 difference.

In another case, a would-be buyer falsely claimed they couldn’t obtain a mortgage but later purchased two other properties. The buyer believed that because the contract was a one-page document handwritten in Chinese, it would be unenforceable in court. However, the judge found the contract enforceable and awarded the seller $408,000.

The lesson here is that you must do your due diligence before signing any purchase agreement. Once you sign, you are committed, whether the market price goes up or down. It is crucial to understand the binding nature of contracts and the responsibility involved in honoring your agreements. While market fluctuations can be unsettling, backing out of a signed purchase agreement is financially unwise. Buyers should ensure they are fully prepared and committed before signing a contract to avoid costly legal battles.

If you want more details of these cases you can find them here:

https://bc.ctvnews.ca/b-c-buyers-who-backed-out-of-home-purchase-ordered-to-pay-more-than-350k-in-damages-1.6955911

https://bc.ctvnews.ca/buyer-who-moved-into-b-c-home-before-sale-was-complete-ordered-to-pay-408k-1.6854823

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