Spring is in the Air

As mentioned above, the typically busy Spring market has gone into over-drive this year. With new mortgage rules in effect April 19 that will make it tougher to borrow in some cases, the new harmonized sales tax (HST) in Ontario and British Columbia beginning on July 1, and the Bank of Canada likely to hike short-term interest rates, it's no surprise buyers are becoming panicked.  With inventory levels remain low across the country, even after three straight months of slowly building supply, year-over-year sales for the first two months of 2010 that were up 44.2%. Prices are also being boosted with the average home in Canada selling for 18.2% higher than just a year ago. Here in Vancouver, March sales were up 38.5% from 2009, while prices are up just over 20% from a year ago.

Doug Porter, deputy chief economist with Bank of Montreal, said last week's interest rate hikes from the banks has turned up the heat on the spring housing market. "When we first get a whiff of real mortgage rate hikes, it pushes any fence sitters," he said. "If anything, it will heighten an already strong spring market." The new federal guidelines, which kick in April 19, require anyone buying a home with less than 20% of the purchase price for a down payment to qualify based on the posted rate for a five-year mortgage, now at 5.85%. For terms longer than five years, consumers can qualify based on the actual rate on their contract. While this will not affect everyone, first time buyers and people trying to stretch their budget may discover challenges when trying to qualify for a new mortgage. Another deadline looming for home buyers is the arrival of the HST in Ontario and British Columbia on July 1, which will add about $2,500 to $3,000 to the average purchase.

All of this, of course raises the affordability issue... Is it better to buy when the market is slightly inflated but the mortgage rates are at all time lows? Or is it better to wait and see if the market turns to get a lower purchase price but pay higher borrowing costs? Ultimately, it depends on your individual financial situation and how much risk tolerance you possess. Just make sure you take the time to work through the numbers and stay within your means...Read More »

March Market Statistics