Earlier this week, the British Columbia Real Estate Association (小蓝视频REA) on the province's real estate market.
Home sales in British Columbia dropped year over year in February, and at $941,575, the provincial average sale price in February 2023 was 14.7% lower than it was a year ago.
But what does it all mean for us in Squamish?
To get some perspective, The 小蓝视频 talked to a spokesperson for NerdWallet Canada and a real estate and financial expert.
What follows is an edited version of that conversation.
Can you give us an overview of the market in Squamish?
Squamish is hanging in there. Looking at the overall average price in February, it is still over a million bucks, which is, you know, great for homeowners, but not great for buyers.
Over the course of one month, it is down not even 4%. Over three months, it's not even down 5%. Over a year, it is down about 11%.
Over three years, the average price in Squamish is still up 27.5%, which is still kind of unheard-of growth.
What about single-detached homes in Squamish?
You are looking about just under $1.5 million for February. Keep in mind, there weren't a lot of sales in February. There were about 30 sales, so if you have one high-priced sale, that is going to alter things.
In an environment like this, where prices are high, and interest rates are high, for people to still be buying real estate in a market like that, it shows some confidence in the long-term value there. And I think that that confidence is probably justified.
So, basic question, but let's break it down. Why are the prices down at all?
I think with real estate, and it's basically how everything in the economy works, it's really the story of how much money people can borrow. And when it gets harder to borrow money, and when mortgages get more expensive, then those houses just become out of reach.
I mean, if you're taking a $1.2 million mortgage, when interest rates are 5%, it's a very different story than doing it two years ago when they were 2%. And it really just squeezes the life out of the markets. What you'll see when rates eventually start coming down is you are going to see people come right back, because when people can borrow, people will buy.
If you are a person just barely able to get into the market, should you wait then?
It would depend on what you're waiting for. Are you waiting for prices to come down further because they're not really sliding that much. If you're waiting for interest rates to come down, that makes more sense. If you're talking to lenders now, and they're trying to pre-approve you for an amount that isn't enough for the house that you want, you're either going to have to wait for those rates to come down, or you're going to have to wait till you can have a bigger down payment. So it's not necessarily that you should or shouldn't wait; it's more like you might have to wait.
If you're buying today, do you do the variable or the fixed-rate mortgage?
Well, a lot of people who went variable in the last 12 months are probably regretting their decisions.
Variables are higher than fixed rates right now. So you wouldn't necessarily want to lock into one of those and then hope that rates are going to come down.
So for right now, at least, I think short-term fixed rates look pretty good. Lock in for two years, three years; you're paying today's rates, but you're not committing to paying these rates three, five years from now when they might be considerably lower.
What if you are at a variable rate right now? What do you do?
At this point, people are not expecting the Bank of Canada to raise the overnight rate again — maybe one more bump later this year. But I don't think people are expecting it to go much higher. So, if you can afford your variable payments, now, you might want to hold out because if you switch over to a fixed, and you still have like three and a half, four years up on your mortgage, then you're stuck, and you'll be paying today's fixed rate. And again, that may be a lot lower a year from now, two years from now, and you won't really have a whole lot of room to move there.
What are your projections about what the real estate market will do?
It's going to be probably weak until we get a better interest rate situation.
We do see some seasonality returning. Especially if there are no more increases to the variable rates, or if the fixed rates start dipping, the summer will be decent.
You know, the bottom is in sight.
So, I think people are waiting for prices to drop any further, I wouldn't hold my breath.
If interest rates start coming down, you will see a pretty active fall market.
Anything else you want to tell us?
Something kind of interesting that just developed on the heels of the Silicon Valley Bank collapse in the U.S., in the following 24 hours of that, bond yields started nosediving and, and so that's for the two-year, three-year and the five-year. The reason this is important is that our fixed interest rates follow those. So as five years dip, and two years and three years dip, that means that typically, lenders will start dropping their fixed rates in concert with those. So, if buyers are considering a fixed-rate mortgage, they may want to keep their eye on the bond market or the big banks' fixed rates because they might start ticking down. That would be the one interesting thing that I would point out now — you might get some relief in the next few weeks.
