Vancouver Real Estate Blog

Mortgage Rate Outlook For British Columbia

The third quarter saw a stunning collapse in government bond yields as markets digested weak US economic data and an increasingly serious debt crisis in the Euro-zone. The yield on five-year Government of Canada debt fell an incredible 150 basis points from its peak in the first quarter to 1.35 per cent, the lowest level on record.

The current level of bond yields would normally prompt a dramatic fall in mortgage rates. However, there are a number of factors complicating the normal arithmetic. First, some lenders are offering deeper discounts for the most creditworthy borrowers. This allows banks to provide competitive rates while also filtering out higher-risk borrowers. Second, the short-term cost of funding for financial institutions worldwide, thereby squeezing profitability.

Moreover, the increasing popularity of variable rate mortgages due to very low rates may be putting further strain on the profitability of mortgage portfolios. Nearly a third of mortgages in 2011 are variable rate compared with 25 per cent five years ago and just ten per cent a decade ago.

Since variable rate mortgages tend to carry lower profit margins, the shift in consumer preferences to variable rate mortgages is likely cutting into profits. Shrinking profit margins have even prompted some banks to increase their offered variable rates in absence of a change in the reference prime rate.

Our forecast for the remainder of 2011 assumes that very low bond yields will persist through the end of the year and will therefore lead eventually to a cut in mortgage rates.

The five-year fixed rate has the potential to decline to its previous historical low of 5.19 per cent and will likely average around 5.3 per cent in the second half of 2011. The one-year rate is expected to average 3.5 per cent.

Given current economic weakness and the almost certain delay in any monetary tightening by the Bank of Canada until as late as mid-2012, both long-term and short-term rates will likely stay very low for most of 2012.

We expect that rates will move higher in the second half of next year, with the five-year rate hitting 5.6 per cent and the one-year rate reaching 4 per cent.

You can read BCREA’s full mortgage rate outlook at www.bcrea.bc.ca/economics

Home Sales In The United States - A Profile of International Home Buyers

The total U.S. Existing Home Sales market was approximately $1.07 trillion in the 12 months ending in March 2011 based on a recent National Association of Realtors (NAR) survey.

 

 Foreign clients purchased an approximate $41 billion share of homes, the same as the previous year. In addition, recent immigrants (who have moved to the U.S. within the past 2 years) and individuals with visas for more than 6 months purchased an additional $41 billion, for total internationally oriented sales of $82 billion, up from $66 billion reported in 2010.

 International buyers came from a total of 70 countries, the top 5 were Canada, Mexico, China, U.K. and India. These 5 countries accounted for 53% of the transactions in America. Most States of the United States, had at least one international transaction. The top 4 states - Arizona, California, Florida, and Texas accounted for 58% of all the transactions.

  

 

 

 

 

Homes In American - Sales & Prices Rising Reports Re/Max

American Home sales are increasing and prices are rising in many American markets said Margaret Kelly, RE/MAX CEO. "We're going to bump along the bottom, but I think the worse is over".

Margaret Kelly, The  March RE/MAX Housing Report  surveyed 54 metro area's. 53 of the 54 markets saw home sales of March over February increase by double digit percentages, Margaret Kelly mentioned. Also 35 out of 54 cities showed price increases, continuing the trend that has been established since 2011.

"That's very encouraging" Said Kelly. "Kelly cited heavy investor activity as a sign that price bottoms have been reached in many places"

"I'm cautiously optimistic" she said.

To put a Canadian perspective to this picture, Mitchell Mingie of Re/Max Crest(Westside) of Vancouver feels that the US market is slowly starting to change towards the positive side. "It has been a long time coming. This will be a gradual start, but when this American Real Estate Machine starts to roll and it will Mingie added, this will have a huge affect on our local market and across Canada". For example, our forestry and manufacturing sectors will be kicked into full auto drive. Even area's like Whistler which has see a slow down in real estate will start seeing more American sales which have been sluggish over the years. Overall it will be a good thing for both economies. Maybe then, our governments will start to look at reducing our national debts. 

You can watch a   3-minute video of the Bloomberg TV interview of Margaret Kelly or access a PDF of the March RE/MAX Housing Report





Manufacturing Sales in Canada

Manufacturing Sales in Canada are up 10.3% from August 2009 and was recorded ad 45.1 Billion.

British Columbia manufacturing sales gained 8.4% from the low from August 2009. All of these  indicators are good signs for a diverse economy which strengthens public confidence which translates into a stronger housing market.