Richmond Housing Market Update

October 14, 2013

Richmond’s housing market is stabalizing

Richmond experienced one of the highest run-up in home prices the past 10 years. The fear of a impending collapse in home prices in 2013 did not happen. The built up in the supply of homes in the second half of 2012 slowed down through 2013, aided by improved sales since March, 2013.

It’s the time of the year that home sales in the Autumn and Winter months will slow down considerably. The MOIs for detached homes, townhomes and condos are now at more balanced levels as shown below:

Richmond MOIs for detached homes, townhomes and condos 

The double digits MOIs for detached homes, townhomes and condos a year ago declined gradually to around 7, 5 and 6 respectively towards the end of September, 2013. View homes for sale in Vancouver, Richmond and Burnaby.

What to expect of 2014?

The 5-year mortgage rate jumped moderately, and currently it is about 0.5% higher than 6 months ago.  Home prices in Richmond managed to hold at current level after suffering around 12% drop in values compared to their peaks in the middle of 2011.

Home sales and prices are supported by low interest rates

Vancouver price index

When home ownership is reported to be at 70% level, and average annual household income in Vancouver as reported by Statistics Canada at $81,000, home prices cannot be sustained at current level.  

Un-affordable  housing in Vancouver

The current housing market is fragile, as it is dependent on market confidence and interest rates remaining low for extended period of time. When average price in the city is at $882,000, the pool of qualified home buyers is small. There is a vast gap between current home prices and what an average home buyer can afford as illustrated above.

Based on average family income of $81,000 a year, a family seeking CMHC high ratio financing, can only qualify for $330,000 at qualifying rate of 5.34%. Conventional financing can only support a loan of $389,000 at 3.59% rate.  In spite of the many measures by the Government to engineer an orderly decline in home prices the past 2 years, such measures have not been successful so far. 

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