Updated B.C. Home Price Forecasts
Royal Bank and the Canadian Real Estate Association (CREA) have issued updated home price forecasts for B.C. in March and their predictions conflict with each other. CREA anticipates 2018 will see a bigger drop than they had predicted in their December 2017 forecast, while RBC raised its forecast by 0.5% for 2018 but expects the tide will turn in 2019.
Everyone can agree that the number of homes sold has dropped dramatically in the first two months of 2018. There are two prime causes:
- Some home purchases were brought forward to late 2017 by buyers who wanted to avoid the new mortgage rules that would lower their budgets by as much as 20%.
- Higher rates and new mortgage rules reduced home buyer budgets by 20% but prices have continued to rise so fewer buyers are able to reach an agreeable sale price.
The first impact is temporary but the second will become a greater factor as rates are widely expected to rise by at least another 0.5% by the end of 2018. Today, home buyers would need a combined gross income of $125,000 and very little existing debt to qualify for a $500,000 mortgage.
If we look across the B.C. lower mainland the February 2018 benchmark home prices are:
Required Down Payment
A detached home is certainly out of reach for any first time buyer but the condo apartment looks difficult to reach too. If this very wealth household could save $20,000 every year toward a down payment they would be able to buy the 1 bedroom condo in 7 years. By then they may have kids and need a 2 or 3 bedroom apartment.
No doubt there is a housing supply problem in BC, but aspiring home buyers can't pay more money for a home than they have. We will have a clearer picture of the impact higher rates and new mortgage rules are having in the market in June.