How low home prices and interest rates cuts are creating great opportunities in Vancouver's real estate market
The Vancouver real estate market, after 5 years of unprecedented growth, is now clearly a Buyer's market. Price reductions began in May 2008, and over the past 12 months home prices in Greater Vancouver as calculated by the MLS Housing Price Index have declined 14 percent for detached and condominium properties while town homes have come down 9 percent in price. On top of lower home prices the Bank of Canada has cut its key lending rate 7 times over the past 15 months, with many of the major banks following suit. What does this mean to home Buyer's entering Vancouver's real estate market or people looking refinance their mortgages? Significantly lower monthly mortgage payments than compared to a year ago.
Mortgage rates have been cut from approximately 5 percent to 4 percent over the past 15 months. This does not simply represent a 1 percent decline, but a 20 percent reduction in interest paid over the course of the mortgage. To put this in better perspective let's look at an example.
A typical detached home in Greater Vancouver in March 2008 according to MLS statistics at that time cost $764,000. Using a 25 percent down payment, a 5.7 percent interest rate (the 5 year fixed rate that was being offered in March 2008) and a 30 year mortgage we get a monthly payment of $3,301.58. Today a typical detached home in Greater Vancouver costs only $653,000 and the five year fixed rate has been reduced to 4.29 percent. Using today's figures with a 25 percent down payment and 30 year mortgage you get a monthly payment of $2409.90. This equals a savings of $891.68 a month over the past year due to the changes in the Vancouver real estate market.
Great time to move up into a bigger home
A lot of emphasis has been put in the media about how current Vancouver real estate market conditions have created great opportunities for first time home Buyer`s. This is true as prices are at affordability levels not seen since 2006. What we don‘t hear a lot about is how this market is also great for those people looking to ¨upsize¨ into a larger property. This is because the cost difference between say an apartment and a townhouse, or a townhouse and a detached home have become smaller in the 12 months. According to the MLS housing price index the cost difference between a typical detached home and a town home in Greater Vancouver is $55,000 less today compared to March 2008. We must also take into account that the average price for a detached home is approximately $100,000 less than when the market peaked in March 2008. A 14 percent price reduction of a detached home priced at $653,000 is significantly more than a 14 percent price reduction of a $350,000 condominium.
Deciding to buy or sell a home should be a historic moment in one‘s life based upon your financial and personal circumstances, and the market conditions within the neighbourhood of your choice. For those people whose finances allow it, there are excellent long term opportunities in today‘s housing market.
Contact Vancouver Realtor Dean Wegman of Royal LePage Westside to learn more about today‘s real estate market by calling 604.261.9311 or by visiting www.deanwegman.com.
