What’s Going On During & After Olympics
Prior to the opening of the Olympics, there were numerous speculations as to what would happen to the Vancouver housing market. One of such being during Olympics time, sellers would not be able to sell their condos due to traffic control and the various Olympics events that would cause major inconvenience. While this may to be accurate to certain extend, it did not restrain Vancouver real estate market to continue to grow.
According to the recent statistical report from Greater Vancouver Real Estate Board, Greater Vancouver totaled a sale of 2473 during February 2010. This is a 28.6% increase in sales volume. In term of where we are in price increase, we are 2.4% above the high price point in 2008.
At a glance, Vancouver Olympics may have catalyzed the housing market. However, before home buyers start to get concerned, they should also realize that it is still too soon to predict the impact of the Olympics. This is just a normal sales trend/growth like what we have always experience during late winter.
“In February, for example, 110 sales were recorded on the MLS® in downtown Vancouver. That’s higher than 2009 and slightly lower than the mid-2000s, which is consistent with data from the overall market. It’s too soon to say whether that’s an Olympic effect,” Scott Russell, REBGV president said.
I will stop the suspense right here and start mapping out some insights as to what may happen now that the Olympics is over. Let us first lay down the ground work and list all the facts.
Fact: CTV reported that the Bank of Canada announced that bank prime will be adjusted after June of 2010.
Fact: the Olympics attracted visitors that were in Vancouver for a fun vacation.
Fact: Century 21 In Town Realty witnessed more sellers than buyers after the Olympics.
To sum up these seemly unrelated points, both home buyers and sellers should start linking logical clues together. We have heard from various mortgage brokers that our current mortgage rate is at an all time low. Due to this low interest rate, we have witness a house price increase everywhere in Greater Vancouver, especially Downtown area & Burnaby area. (Burnaby south area in particular increased over 10.1% throughout the last 12 months.) This is neither what buyers have had hoped for nor what the government has had intended (in a political point of view). For the government to readjust the rate means that they are likely to increase the interest rate. At this point and time, none of the mortgage brokers know when and how much it would be increased by.
During the encounters that I have with visitors that came here for the Olympics, their interests at Vancouver real estate is very minimal. Don’t get me wrong, they too are interested in what Vancouver home market is like, but that’s equivalent of us watching daily news. Usually followed by a “ah” and an “I see”. To transfer that to a “let’s buy something”, is not an immediate transformation. That’s why Russell commented that it is too early to tell the effect of Olympics.
The above two points together form the main analysis to the post Olympics market condition. Our primary determinant for the ongoing price increase is likely to be mortgage rate. The increase in the number of sellers (or increase in housing inventory) is a normal trend that leads to a strong spring and summer market. First we will see more and more condos for sale. This would attract more home buyers because there are more to choose from now. Then the summer craze restarts again.
In order to save extra cash, home buyers should consult mortgage broker to lock down the interest rate, which in return potentially guarantees a low rate for a certain period without any additional cost. Therefore, the unexpected monthly payment increase would not ruin your home buying plan when the interest rate increases in the future.
This may sound dull for buyers that have been waiting for a home price readjustment, but it is indeed a fact. The other major factor that could possibly lead to a price readjustment is the bank’s prime readjustment after June. However, do keep in mind that there are at least 3 months for the current home market to grow. Would the bank prime be adjusted to a certain extend that could lead to a major house price drop?
The main reason to have the current low interest rate is to stimulate our economy. It may be meaningless for the government to reverse everything back to the way it was when we are trying to recover. If they increased it too much, then it’d be like late 2008 restarting all over again. The ideal situation is to have the interest rate increase to counter-act the usual summer time price increase and balance house price. This way we would still have a healthy amount of house inventory to choose from and buyers would be less nervous about the non-stopping home price.
For any concern or question that blog viewers may have, feel free to give me a call at 604.782.1964. I would be more than glad to answer your inquiries, for free :)
Stay tuned for tomorrow’s blog, it will be on why are people willing to pay for the seemly high home price.
Andrew Wang written on March 19, 2010.