VANCOUVER (NEWS 1130) – Rising interest rates and new stress tests for mortgages could spell trouble for buyers hoping to break into Vancouver’s expensive housing market. That’s what we’re hearing from a local real estate analyst, who believes the region’s current housing slump could last a few more years.
Dane Eitel with Eitel Insights correctly predicted last year the average price of a detached house would drop to $1.6 million. He’s expecting another drop to $1.4 million next year.
But he has a warning about waiting too long for prices to keep falling.
“Because of the stress test, they’re not going to see the market rebound. So, it’s kind of that ‘Hmmm, you voted for something to happen and now that it’s going to happen — Can you take advantage of it?’ It doesn’t look you will unless you’re in tune with the market and act in a timely manner.”
Eitel says it’s difficult situation for first-time home buyers and those looking to move up in the market.
“For the rich, it’s not a big deal. It’s for the guys that are coming into the condo market trying to move up. They’re legitimately stress tests. To put a cap on this market and bring the prices down was for those people to be able to purchase. ”
“If you’re qualified for $1.2 million pre stress test, that has knocked you down to $960,000 post stress test. Prices haven’t come down that far yet,” he said. “Once these prices come down, that’s still effectively 94 per cent of the buyer’s purchasing power,” he added.
Eitel says those buyers need to be in tune with the market to make sure they don’t lose out before it corrects itself in the next five years.
“There are a few clean shirts in the dirty laundry, if you will… On average, B.C.’s not one of the winners overall.”
He predicts the market will correct itself by the end of 2023, when prices could again top $1.8 million. He says by 2028, they could be closer to $3 million.
There are always better times than others to enter the market.
“That’s what we’re saying for 2021. Whatever you’re looking at purchasing today, in the foreseeable future will be worth less,” Eitel predicts.
“If your outlook is a 10-year and you really want to purchase, it’s always a good idea to start paying off your own mortgage as opposed to somebody else’s… What we’re saying is the opportunity for exponential growth isn’t coming for a few years. But with long-term projections, it’s never a bad idea to buy in Vancouver.”
Eitel warns if first-time buyers don’t get in within a six to 12-month window in 2021, “they might miss this market forever. Because when prices come back up — even if they kick out the stress test — they’re still priced out of the market.
He also thinks there are now fewer people buying homes as investments. “A lot of factors are purposely driven to lower the market… They’re looking for greener pastures.”