Hello out there! It’s Spring 2021. Do yourself a favour and skip to the last paragraph. Haha! or read the full context if you have a few mins.
The Covid19 vaccines are making their rounds and I think we are all very hopeful we can return to normal very soon. The housing market has been red hot despite the pandemic. Had you told me a global pandemic where job losses were many, and multiple industries were in a tail spin would trigger a national home buying frenzy, I would have said “no way” and yet here we are. To say first time home buyers are frustrated is an under statement. Prices have risen at a rapid pace over the past year and has caused many to rethink what home ownership looks like and are now considering a condo or apartment over a detached home. On the other hand there is very little vacancy in the rental market and rents have been on the rise as well.
In the Okanagan here, the supply of homes listed for sale has not kept up with demand, and ultra low interest rates have kept the demand for homes high despite rising prices. Looking forward, 2021 looks to be offering more of the same. I think the last time The housing market was this hot was 2016. At that time the public was lobbying the government to take action to cool the market, some reports called it “outrage” due to rising prices. This brought about a foreign buyers tax that managed to cool the market temporarily but it came back with a vengeance roughly 1 year later, which then brought in the speculation tax which did seem to slow the markets that looked to be finally cooling in 2020. Then Covid19 quickly changed that and we did a 180 to begin the ascent at a rapid pace.
This time public outrage hasn’t been mentioned and there hasn’t been any talk of government stepping in to cool the market. Likely because this time the problem can not be blamed on foreign buyers or investors. This time the problem is all ours. Likely attributed to millennials getting into the market as first time buyers with Mom and dad leveraging their savings to help them make it happen. Politicians likely have little interest in cooling things down, as real estate is likely the one bright light in an otherwise devastated economy. Further to that any action to cool the market could cause a sharp correction and I don’t think there’s a politician out there that wants to be known as “that guy”.
The above is really just a long way of saying we need more housing. Not just more housing but affordable housing. Until then we’ll see more of the same.
On the interest rate side of things. Variable rates are becoming more attractive and don’t look to be feeling any pressure to be on the rise any time soon. Fixed rates will be on a bit of a roller coaster ride as the bond markets rise and fall as they react to changing market conditions coming out of the pandemic. I don’t think they will be rising at a pace or to a level that should be concerning. I’m thinking the 5 year fixed remains below 3% for some time. I know that sounds high from where we just came but it is still historically very low.
In the mean time. Home ownership is still beneficial. For all the same reasons it has always been. Consider the entry level homes, condos and apartments are still affordable with average wages, and resulting mortgage payments are cheaper than average rent. It’s still a good time to be buying. It’s a change in perspective. Is your first home going to be your dream home? Maybe not “right now”. But your first home can go a long way in providing you a warm safe place to live and work and double as a solid investment that will help propel you into your dream home in the future. Isn’t that what your first home has always been?
The weather is warming up and we’re all here in the Okanagan to soak up some of that Sun. Let’s get out there and enjoy it.
