The Bank of Canada announced yesterday that they were holding their overnight rate steady. This means prime rate will remain at the ultra low level of 2.25% for a while yet.
What is more important is the bank’s commentary. They reiterated their commitment to hold rates at the current level until the end of the 2nd quarter in 2010 (July 2010 approximately). This is good news for anyone that opted for a variable rate mortgage in the past few months as they can be assured that their rate will remain at current levels, but will also allow them the right to convert to fixed rates if the fixed rates remain low or fall lower.
I’d like to share with my readers some of the “off the record” commentary I hear from lenders and market insiders.
One of my lenders was in SHOCK at what people were paying for houses in East Vancouver. Almost on cue, the local paper published an article saying that the East Vancouver market was the hottest in BC. While this sounds great, history has shown that by the time the mass media gets hold of what market is “hottest” it’s far too late to consider getting into that market. We’ve seen a massive run up in prices in East Vancouver in the past 4 months, and I would be very conscious of this fact if I were considering buying in this market.
My top realtor referral source and I were having a discussion a few days ago and I was saying that I couldn’t see the market continuing at this meteoric pace upward pace for long because EVENTUALLY there won’t be anyone else willing to pay more than the past buyer. This is the “greater fool” theory of markets, and Garth Turner does a great job blogging about the troubles that are becoming evident in our market. Look him up online. He has an amazing following and I agree with darned near everything he says.
Is this hard evidence that the market is slowing down or turning? No.
It’s purely anecdotal. However, I started hearing these rumblings in May of 2008, and that was just before a MAJOR pullback in the market. This isn’t conclusive evidence that would hold up in court, but it’s just an example of what market insiders are thinking. Again, by the time you hear it on the front page of the Vancouver Sun, you are about 6 months behind the market.
There are several people out there that claim I avoid talking about the “supply side” of the real estate market, and that it is just as important as rate and demand in the market. They are correct in this assumption, and I feel this way because I find that demand is far more prevalent right now in terms of what is determining sale prices of homes. Supply of homes for sale hasn’t vacillated as much as people like to think. The number of prices of sale rises at roughly the rate of population increase. It’s close enough to say that people aren’t RUSHING to sell their homes to get the maximum sale price.
Can deals still be found? Of course.
Will they be in North Vancouver, Coquitlam, Port Moody, or especially, East Vancouver?
My personal opinion is “No.”
If you think buying and flipping (even if you renovate a LOT) is a good financial move, you are assuming a VERY high amount of risk in thismarket. This isn’t a buy and flip market. It is likely a buy and hold market. I’m putting my money where my mouth is, and I’ve bought a property myself (in Langley) that I consider my “dream home.” In other words, I intend to live there for 20+ years, and for this reason, I don’t care what the market does or if I a paying a bit too much because ultimately, I need to have a home, and with the current historically low rates, I can do so and own the home I’ve always wanted.
If you feel similar about a home you are considering buying for your family, then you SHOULD buy and hold on, as real estate prices will always go up in the long term. If you are buying and thinking you’ll upgrade in next 1-2 years, then you should reconsider your purchase.
This is my opinion, and I’m sticking to it.
Please, I beg, someone post a comment.