Housing Market Recovering!

November 4, 2009

Metro Vancouver housing market regained most of the lost ground over the past 7 months.

“While home prices have been rising in 2009, they have not eclipsed the peaks reached in early 2008,” Scott Russell, Real Estate Board of Greater Vancouver (REBGV) president said. “We’re coming off several months of unseasonably high sales levels, which has allowed for a gradual increase in home values this year,”

The recovery in home prices can be viewed here as shown on the Real Estate Board of Greater Vancouver’s October price graph (click on the graph for larger picture).oct09-copy.jpg

Reasons for the recovery

There are 2 main reasons for the strong rebounce in home prices. Firstly, demand for homes picked up considerably when the credit crunch problem eased-up and buyers confidence returned. The current market with only around 60% as many homes available for sale compared to last year, limits the supply of homes.

Secondly, the surge in demand from home buyers due to current low interest rates at 2.25% to 4.00% had resulted in more buyers chasing limited supply of homes, resulting in rapid housing price recovery.

CMHC fueling home prices

CMHC plays a key role in fueling the demand for homes. Increasingly, first time home buyers are relying on 30 to 35 years mortgages to be purchase their homes. Coupled with ultra-low interest rates, home buyers who manage to get into the market today, may be setting themselves up for long-term financially obligations that they may not be able to handle.

A $300,000 mortgage at 3.85% presently when increased to 5.5% when the mortgage is renewed, will result in $286 more in mortgage payment. This will be at the expense of other family and living expenses. A larger loan at $375,000 will result in $358 less a month in spending on other essential expenditures. Diana Francis recently published an article that high-lighted the danger of home owners who might have to deal with such a situation.

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