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buying real estate online

Buying a House Sight Unseen – What You Need To Know

Online Home Buying Tips For Remote Purchasers

The real estate market has changed dramatically in recent years. Due to demand for homes being higher than supply, buyer preferences and buying methods have had to change and more people are resorting to buying real estate online or sight unseen.

When demand outweighs supply and quality homes enter the market, they often sell fast. This sometimes generates bidding wars and buyers need to move as quickly as possible, otherwise, they could miss out.

In a hot real estate market, you may even have to submit an offer before you get the chance to tour the house in person. 

This is why buying a house sight unseen has become an increasingly popular choice for buyers. 

While this may be a great strategy in a competitive real estate market, buying sight unseen can have its own set of challenges. 

What Does “Buying a House Sight Unseen” Mean?

Purchasing a home sight unseen means buying it without visiting the property first. 

Typically, home buyers will have looked at pictures and videos online. They’re likely to take a virtual tour as well. 

It may sound strange to buy a home without having set foot in it, however, buying sight unseen is becoming commonplace within the real estate market

Why Buying Sight Unseen Has Become Popular

As more people are choosing to relocate to BC and Vancouver Island from out of province, more homes are getting bought sight unseen. 

We know that prospective home buyers have to move quickly in a competitive housing market, but there are a number of reasons why buying a house online has surged in recent years.

  • Physical distancing – these past couple of years have played a tremendous role in how prospective buyers make offers on properties. Why risk going into other people’s homes when it’s safer to limit physical contact?
  • Modern technology can give us higher quality photos and videos than ever before. This can give a much better sense of what the home looks like. 
  • If you are moving from out of the area, It can be costly and time-consuming to travel to view potential homes. A remote buyer can rely on an experienced real estate agent or broker to find the best property and receive their own personal virtual tour of the home via a video chat app.

Even with a trusted real estate professional on your side, you should always choose to get a professional inspection and appraisal of the home to give you peace of mind during the process. 

How To Make A Sight Unseen Home Purchase

Buying sight unseen isn’t that different in comparison to a traditional home purchase.

Instead of an in-person tour, you’re using online photos, videos, and virtual tours to help you make an informed decision. 

It’s a good idea to hire an experienced real estate agent who knows the area well. Always communicate exactly what you’re looking for, and keep your list of must-haves for your dream home as refined as possible. 

Think about the size, location, and house style you’re looking for. Leave out any minor details that can slow down the search process. 

If there are any deal-breakers, let your real estate agent know early on. This is so they don’t waste any time looking at the wrong properties. 

An experienced real estate agent will be able to deal with any issues should they arise. 

Steps to buying a property sight unseen:

  • Evaluate the property remotely using photos, videos, facetime or video tours and descriptions provided by your real estate agent
  • Get pre-approved for a mortgage to show the current owner/seller you can afford to finance the home
  • Make an official offer to purchase the property from the seller
  • If the seller likes the offer and accepts it, you and the seller (or the lawyers) prepare the contract
  • Both parties sign the contract
  • You make a non-refundable deposit on the house
  • You have the property inspected and appraised before you remove conditions (Note that buying a home sight unseen often means not even having the opportunity to do an appraisal or home inspection. This is NOT advisable in most cases!)
  • If you’re satisfied with the inspection and appraisal, the sale continues and you finalize the details with your lawyer and the bank.

As with any home purchase, you’ll schedule a closing date to sign your final loan documents.

Once the mortgage is finalized, your lender pays the home seller, and the home title transfers over to you. Congratulations! You’re now the official homeowner. 

Pros & Cons Of Buying A House Sight Unseen

Pros of buying a home sight unseen:

  • You may purchase the property for less because you moved quickly enough to avoid a bidding war
  • Virtual home tours can be helpful when buying an out-of-province home
  • Virtual home tours can save money on costly travel expenses

Cons of buying a home sight unseen:

  • You won’t have the privilege of an in-person tour
  • You’ll have to rely on photos, videos, virtual tours, and the advice of your real estate agent and (possibly) a home inspector
  • There’s a higher chance of failing to see issues with the property
  • You may offer more than you’re willing to pay just to secure a home sale

While everyone wants to save money during the home buying process, don’t be tempted to cut corners on home inspections and appraisals. 

It’s always going to be in your best interest to get a professional inspection, especially when you’re buying sight unseen. 

Keep a close eye on the inspection report and the seller disclosures so there aren’t any surprises later.

Remember to ask a lot of questions before you purchase a home. When buying sight unseen, you’ll need to ask even more. It may feel like a burden but think of questions you normally wouldn’t ask. 

Take Extra Steps To Protect Yourself  When Buying a House Online

A professional inspection and appraisal is your one chance to get the current owner to cover repair costs. Or walk away if the issue is a deal-breaker. 

This is why a home inspection and appraisal are so important, especially when you’re buying sight unseen. This is your best defense against any major issues the current owner may have neglected to disclose.

While sellers might not like having conditions attached to the sale, it’s a good strategy which allows you to ask for more time, negotiate repairs, or back out based on findings from your home inspection and appraisal. 

Purchasing a home sight unseen is certainly riskier than the “normal” way of buying a home (i.e. doing a walkthrough and getting a home inspection and appraisal done). This is why it’s important to hire an experienced real estate agent and get a professional inspection and appraisal.

If you need an inspection or appraisal on a home in the southern and central Vancouver Island area, Contact D. Fritz Appraisals, who can provide an expert assessment of your future dream home. 

 

victoria bc real estate market in five years

Victoria Real Estate Market 5-Year Predictions

What do Experts Think the Victoria, BC Housing Market Will Look Like by 2027?

The state of Victoria’s housing market is never far from anyone’s mind, especially for first-time home buyers, those moving to a new area or for people looking to sell.

Between 2021 and 2022, house prices in the Victoria, BC region rose by an average of 20%. This significant increase came about due to the unprecedented combination of:

  • All time low mortgage rates
  • Higher disposable household income 
  • Significantly reduced housing inventory

While low mortgage rates created higher demand, the lack of available homes led to price increases and over-bidding.

Now, many people are asking when the market will correct itself. Although accurate predictions are impossible to make, it looks possible that there will be some slowing or reduction in house prices over the next five years.

Victoria’s House Prices are Up Over 20% Year Over Year

So says a report by VictoriaBuzz.com who also noted that prices on Vancouver Island as a whole rose by a whopping 32.8% in 2022 compared to 2021, putting homeownership further out of reach for many.

At the same time, inventory of available homes dropped significantly and BCREA Chief Economist Brendon Ogmundson is quoted as saying ‘While sales are not keeping pace with the unprecedented levels seen [in 2021], demand remains strong’.

Experts seem to agree that the accumulated gains from 2020-2022 are not sustainable and at some point, housing prices will fall. In a bid to control that reduction and avoid a crash like that seen in the US in 2008, the Bank of Canada increased interest rates throughout 2022 and it is predicted there will be further increases into 2023.

So, what impact is that likely to have on the Victoria, BC housing market in the coming 1, 2 and 5 years?

Pace of Real Estate Market Steady into Spring

In the Victoria, BC housing market, low inventory has continued to result in record low sales numbers. According to the Victoria Real Estate Board statistical round up for May 2022, sales were down 26.2% from 2021 – notably low for spring. And while they say that the recent interest rate increase and inflation have cooled demand slightly, there is still a lot of competition for each home on the market – especially those in lower price ranges.

Some good news came in a June 2nd piece in the Times Colonist – Victoria real estate market finally cooling off, but too late for some, which notes that housing inventory is finally picking up, with the number of houses available at the end of May up 30% compared to a year ago.

Opinions differ on what difference this will make to house prices though.

In their March 2022 article, Bubble burst risk: Canadian home prices predicted to fall by 24%, Urbanized.com states that the accumulated gains from 2020-2022 are not sustainable. They quote UK based research group Oxford Economics as predicting Canadian house prices could fall by 24% between the summer of 2022 and 2024.

This fall in prices isn’t likely to happen in Victoria though according to Mortgage Sandbox, who report values will continue to rise in 2022 across all housing categories. Although the rate of increase in price is slowing, there will still be a modest year on year increase of 8%.

An article from livabl.com supports this claim, listing Victoria as one of Five BC housing markets forecast to see the most price growth in 2022, and predicts house price increases of around 11% in the region by the end of 2022.

One thing most commentators agree on is that a sustained increase in inventory is the biggest influence on slowing or reversing price increases.

BC House Prices Forecast to Dip 3.8% Next Year

According to CTV News, RBC economists are predicting a moderate price correction in British Columbia in 2023, with average house prices expected to drop by 3.8%. They have suggested this will happen as a result of buyers being pushed out of the market as interest and mortgage rate increases shrink their available budget by up to 15%.

In turn, this reduced purchasing capacity will dampen some of the demand for available homes and reduce competition.

In their article ‘Will housing prices ever drop! Here’s what homebuyers should expect for the rest of 2022’, the fool.ca agrees with this prediction. They quote Moody’s Analytics as saying the Canadian Market likely won’t see any price correction before the end of 2023.

What Canadian Home Buyers Can Expect in the Next 5 Years

Unsurprisingly, long or even medium-term predictions are hard to come by, as no-one really knows what the impact of increased interest rates might be over time.

Narcity, in its article ‘Here’s what Canadian homebuyers can expect in the housing market over the next 5 years’ says that supply is the biggest issue affecting the housing market, and this might not change any time soon thanks to high material costs and construction labour shortages.

A recently released report by Leger and ReMax, titled– Unlocking the future, 5-year housing report, states that 61% of Canadians still see real estate as a good long-term investment, and 37% of people want to live in suburban areas, suggesting demand won’t be going away any time soon, especially for areas like greater Victoria.

It certainly seems like increasing home inventory is the only way to a market correction when it comes to price. As indicated by Storeys.com in its report, Speeding Up Development in BC Key to Calming Home Price Growth, in which it quotes a BCREA report as stating ‘If a flood of new completions (builds) were to enter the market and drive down the price of new homes, this will impact prices in the resale market (too)’

To summarize, in the short-term, Victoria, BC home prices will continue to increase but not at the same pace seen in the past year, while the chances of a longer-term correction appears to rely on more homes becoming available to buy.

Whatever the Market, Choose an Appraiser You Can Trust

At D.Fritz Appraisals Inc, we pride ourselves on staying up to date with the ever-changing housing market to ensure we offer accurate appraisals to sellers and buyers.

Based in Victoria and offering appraisal services across Vancouver Island and the Gulf Islands, we offer appraisal services to support mortgage approval, new construction valuation and inspections. Contact us today to book an appraisal.

Drones for Real Estate Photography

Drones for Real Estate Photography and Appraisals

The Rise of Drones in the Canadian Real Estate Industry

Using drones for real estate photography is a topic that drew a lot of chatter in the early 2010’s as a hotly debated topic among real estate agents. First used to highlight luxury properties with state-of-the art video listings on real estate websites, the use of aerial drone photography and videography for real estate transactions is now commonplace.

Drones used for real estate photography can provide detailed data for everyone involved in the purchase or sale of a home or business. Seeing how useful aerial photography has been in creating real estate listings, real estate appraisers are now also beginning to see the value in adding drone technology to their toolkits. 

With commercial drone use now legal in Canada, it’s worth considering whether drone photography and videography is also helpful for real estate appraisal inspections.

What is Drone Photography?

If you’re unfamiliar, drone photography is sometimes used to highlight the features of the surrounding landscape, neighbourhood and home exterior. This new perspective often helps real estate professionals show the property from a new perspective, making the most of its surroundings. Also known as UAS (Unmanned Aerial Systems), drones help build an impressive amount of information for real estate marketing and valuation. 

Drones for Real Estate Photography and Appraisals – Four Key Benefits:

  • Drones Can Capture a High Level of Detail

Drones can take sharp and clear photos, which are usually a much higher resolution than satellite images. The aerial footage allows for a higher level of detail, which lets an appraiser zero in on any potential issues to be addressed. 

Drones can also capture amazing shots that other forms of aerial photography just don’t cover. Traditional aircraft like helicopters can’t fly in unpredictable weather, which is where drones come to the rescue. They’re also not restricted by the same height limits as normal planes, allowing them to get better shots.

  • Drones Can Provide the Most Recent and Accurate View of a Property

When combined with old-fashioned boots on the ground, the use of a drone for real estate appraisals can upgrade a property inspection. Drones give you the ability to gather data that may not have been accessible before, due to conditions of the landscape, like steep or inaccessible terrain.

Land development, landscaping, paths, roads, parks, schools and other amenities nearby all contribute to a real estate appraisal. With the help of a drone, appraisers and other industry professionals can see all these features in an instant.

*What About Satellite Imagery?

Google Maps and other satellite imagery providers like Microsoft Bing only update about once every 1-3 years and sometimes 5+ years in rural areas. Plenty can happen in the development of a neighbourhood in a few short years. This is where using drones for up to date area photography comes in.

Current photos and videos let appraisers, lenders, realtors and sellers / owners get a real-time birdseye view of what exactly is happening on and around the property. This is especially useful for larger properties and acreages. 

Seeing a property from above and being able to take still photos and videos of the topography and specific features will help paint a much clearer picture for everyone involved.

  • Drones Provide Clients with Clear Evidence as to Why the Property Has Received a Particular Valuation

As a real estate appraiser, you want to be able to leave your client feeling completely confident in your findings of the valuation of their property. From time to time, clients are dissatisfied with a report and may want to contest the findings. 

When you can provide clear photographic and video evidence to support your findings, it makes it so much easier for your client to understand and accept the valuation that’s been assigned to their property. The more information and detail you include on the report and the more you can show the lender and the owner / potential buyer, the better.

  • Drones Can Be Safer for Harder to Access Areas

A high-quality drone used for real estate photography can be highly reliable for enhancing an appraisal inspection. It can access tight spots, investigate roofs, check the interior corners of an attic and more. 

Most drones now have a live view available through its proprietary app on a phone, tablet or controller with video imaging. This live view lets you see exactly what the drone is shooting so you can choose the best flight path to keep it from colliding with trees, wires and people. 

In addition to the live view, many new models have advanced automation and are developed with object detection and collision avoidance.

For instance, roofs can be difficult to access and awkward to navigate in any season. While a home appraiser or real estate agent isn’t required to go onto the roof, it’s important to know what kind of condition the roof is in. Rather than being left taking the client’s word for it or assuming the roof was replaced 10 years ago, flying a drone up and around the roof can locate any issues. 

If there’s any water pooling, overhanging vegetation, excess debris and more, the drone can find it and record it instantly for the inspection report.

While the drone pilot maneuvers around the roof, appraisers and agents can be on the ground checking out the foundation.

Drones for Real Estate Photography and Property Appraisals: Things to Keep in Mind

  • Any drone operator needs to apply for a Special Flight Operations Certification (SFOC) from Transport Canada. 
  • You will need to have at least $100,000 in liability insurance coverage. This helps cover you and your agency in case there is any personal or private or public property damage caused by the drone. This could be a drone flying into a power line, a drone interfering with aerial aircraft, a drone flying into a person, etc.
  • You need to contact NAV Canada for drone flight planning 2-3 days before each flight. NAV Canada will need to know the planned coordinates, date, time, length of flight, maximum radius and maximum altitude. If the flight is in close distance to an airport, you may need to coordinate with the air control tower before and after the flight. 

At D. Fritz Appraisals, our experienced team prides itself on accurate, comprehensive and professional property appraisals. We serve Southern and Central Vancouver Island, plus the Gulf Islands. If you’re looking to buy, divide assets, re-finance or sell, or would just like to know the current value of your property in this heated Vancouver Island real estate market, order your appraisal today or call (250) 413-7319. 

 

First-Time Homebuyers

First-Time Homebuyers Incentive Changes: What You Need to Know

Exciting New Changes to the CMHC First-Time Homebuyers Program

First-time homebuyers, we have great news! As of May 3rd, 2021, new updates to the Canada Mortgage and Housing Corporation (CMHC)’s First-Time Homebuyers Incentive have come into effect. Victoria is now one of the few cities that has been given enhanced eligibility criteria to help you qualify for a lower monthly mortgage payment.

What Is the First-Time Homebuyers Incentive?

The First-Time Buyers Incentive can lower your monthly mortgage payments.

As explained by the National Housing Strategy, the First-Time Home Buyers Incentive is a program that lets you borrow 5% or 10% of the sticker price of a home. When you decide to sell your house (within a 25 year period) you pay back that same percentage of the value of your home.

How Does the First-Time Homebuyers Incentive Work?

The incentive works just like putting a second mortgage on your home. 

To qualify for the incentive, your mortgage must be greater than 80% of the value of the property subject to a real estate loan premium. Your mortgage must also be eligible for mortgage insurance through Canada Guaranty, CMHC or Sagen (previously known as Genworth.) 

The mortgage insurance premium is based on the loan-to-value ratio of the first mortgage only. So, the first mortgage amount is divided by the purchase price. The good news is you don’t pay mortgage insurance on the incentive, since it’s included with the total down payment.

What Are the Updates to the First-Time Homebuyers Incentive?

First-time homebuyers purchasing in Toronto, Vancouver, or Victoria are now eligible for an increased Qualifying Annual Income of $150,000 instead of $120,000, an increase of $30,000. This can mean the difference between being able to buy a home or having to save up for a larger down payment. 

First-time homebuyers are also eligible for an increased total borrowing amount of 4.5 rather than 4.0 times their qualifying income, meaning you can buy that bigger, better home. 

Not sure if your preferred neighbourhood is included in Victoria proper? The location maps and tools on www.placetocallhome.ca will help you be sure the home you want is in the right location to qualify for the First Time-Home Homebuyers incentive.

How Does the First-Time Homebuyers Impact My Mortgage?

There are two options, 5% or 10%, depending on what you qualify for as a buyer. Your mortgage lender can explain how the amount of your down payment, purchase price of the home, annual income and more can help influence which incentive you’re eligible for. Here are two scenarios that help to explain what happens when your home’s value increases versus what happens when your home’s value decreases after you get the incentive.

Scenario 1 – You receive a 5% incentive and your home’s value increases

As the buyer, you receive a 5% incentive of the home’s price. If you were purchasing a $200,000 home, you’d receive $10,000. If that home’s value increases to $300,000, your payback will be 5% of the current value (or $15,000.)

Scenario 2 – You receive a 10% incentive and your home’s value decreases

You receive a 10% incentive of the home’s price of $200,000, or $20,000. If your home value decreases to $150,000, your repayment value will be 10% of the present value (or $15,000.)

Am I A First-Time Homebuyer?

You are considered a first-time homebuyer if:

  • You have never purchased a home before.
  • You didn’t live in a home that you (or your current spouse or common-law partner) owned within the last 4 calendar years. Note: the 4-year period begins on January 1 of the fourth year. 
  • Your marriage or common-law relationship has recently ended and you’re going through a separation or divorce requiring a division of assets.

Other eligibility requirements for the First-Time Homebuyers Incentive:

When determining whether you are eligible for the First-Time Home Buyer Incentive in Victoria:

  • Your total annual qualifying income will not exceed $150,000.  
  • You’re borrowing no more than 4.5 times your qualifying income.
  • You or your spouse / partner are first-time homebuyers.
  • You are a Canadian citizen, permanent resident or non-permanent resident authorized to purchase a property in Canada.
  • You meet the minimum down payment requirements with traditional funds—this could be savings, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP), or a non-repayable financial gift from a relative/immediate family member.

What else should you know?

If you’re considering applying for the incentive, you should be prepared for some potential additional costs. These can include:

  • Additional legal fees- Since you will be closing on two mortgages, your fees may increase.
  • Appraisal fees – To repay your incentive, you’ll need to have an appraisal done to work out the fair market price of your home. (Need some pointers? We’ve curated a pre-appraisal checklist just for you.)
  • Property insurance premiums – Extra costs may factor in since there is an additional mortgage registered on the property. Talk to your insurance agent or insurance provider for more details on these types of fees and premiums.
  • Other fees – Additional documentation or admin fees could also be incurred if you switch your mortgage to a replacement lender or if you refinance the mortgage.

Lastly, the type of home / property that you are looking to purchase is going to play a factor in the incentive amount that you are given. A new construction home may qualify for an incentive amount of 5% or 10%. An existing home or a mobile/manufactured home will be a flat 5%. 

Also, any residential property with 1 to 4 units can qualify, which means the options are endless: You are eligible with anything from a single-family home, a semi-detached home, a duplex, triplex, fourplex, townhouse, condominium unit, or a mobile home. The caveat is that this must be your residential property that you live in, year-round. Income properties will not qualify.

Applying for The First-Time Home Buyers Incentive is Simple

Once you’ve been preapproved for a mortgage, you can fill out the two forms found on A Place to Call Home. Under “How Do I Apply” you’ll find these forms.

  1. The First-Time Home Buyers (FTHBI) SEM Information package
  2. The SEM (Shared Equity Mortgage) Consent form

These PDFs can be printed and filled out, or filled out digitally. Once they are complete, give them to your lender. They will submit the application for you. If you need any help with the forms, just let your lender know. They’ll be able to help you dot the i’s and cross the t’s. 

The final signed copy of the SEM package will go to your lawyer or notary. Once you’re accepted for the Incentive program, you just need to activate your incentive. It’s as easy as a phone call. Just call Fidelity National Financial Canada at 1 (855) 844-4535 and give them the name of your lawyer or notary. The sooner you can do this, the better, since you’ll need to activate your incentive at least 2 weeks before the sale of your home closes.

The First-Time Homebuyers Incentive changes make purchasing a home in Victoria a little bit easier. With this new eligibility criteria now in place, it may just be the perfect time to consider becoming a homeowner. At D. Fritz Appraisals Inc., we can help you with that. Whether you are thinking of buying or selling, or just looking to get that appraisal done, our experienced and professional team of appraisers offer the most accurate and comprehensive residential real estate appraisal service around Victoria, central Vancouver Island, and the Gulf Islands. To order an appraisal, call us at (250) 413-7319. You can also send us an email and we’ll respond as soon as possible.

New mortgage stress test for Canadians

New Increase in Mortgage Stress Test

Rate Hike Will Affect a Large Number of Borrowers

The Mortgage Stress Test will be increasing as of June 1, 2021. Under the new requirements set by the Office of the Superintendent of Financial Institutions (OSFI), uninsured mortgages will increase to a qualifying benchmark rate of 5.25%.

The Mortgage Stress Test Rollercoaster

If you were refinancing or purchasing last year, you probably noticed that the stress test decreased in 2020, to 4.79%, just 15 basis points above the record low of 4.64%. In finance, especially real estate, a bit of a rollercoaster is common. That said, the general consensus within the industry is that no one really expected to see such a drastic change in Canadian housing market conditions in a one-year time period. 

Real Estate and financial speculators have been predicting everything from catastrophe to smooth sailing as more investors purchase luxury homes. Now experts say that increasing the mortgage stress test requirements for potentially riskier, uninsured mortgages can help to smooth the curve. They also say it can help rebalance supply and demand in the residential real estate market as well as overall economic conditions.

Why is the Mortgage Stress Test Increasing?

The OSFI hopes that imposing a higher mortgage stress test rate will help to cool down an overheated real estate market. Throughout the pandemic, supply and demand have become extremely unbalanced, with much less supply of residential homes than in past years. Those homes that are listed are often sold for well over asking, driving the average home prices higher and higher as a result.

According to stats from the Victoria Real Estate Board (VREB) In April 2021, median house prices in Greater Victoria increased to $996,500, up from $884,600 in April 2020.

“We’ve seen an imbalance in our market for quite a few months, says VREB President David Langlois. We continue to see huge pressure on single-family homes,” he adds. “New listings are snapped up as soon as they are listed.”

The good news is that the mortgage stress test increase will not be implemented across the board for all house hunters. Only those trying to qualify for an uninsured mortgage will be subjected to the new, higher mortgage qualification rate as of June 1, 2021.

What is an Uninsured Mortgage?

Canada has three default mortgage insurers, CMHC, Sagen (previously Genworth) and Canada Guaranty. Bank of Canada guidelines dictate that these insurers can not insure specific types of mortgages.
These are:

  1. Refinanced mortgages – Increasing the existing mortgage for access to additional funds is called refinancing. Mortgages are often refinanced when the homeowners want to renovate, access the equity in their mortgage to pay for schooling, a secondary property or finance a small business. Of course, the rules and regulations vary per borrower and lender, the type of mortgage, the amortization period and more.
  2. Purchases with a 20% or higher down payment, on 30-year amortizations (terms)
  3. Purchases of $1,000,000 or higher, with any amortization period
  4. Purchases of a rental / income property

What Does this Mortgage Stress Test Rate Increase Mean for Homeowners?

The stress test rate increases will make it more difficult to refinance, since homeowners who wish to increase their mortgage loan must be able to qualify with these new, higher interest rates. It could also mean the difference between finally being able to purchase your first home or needing to wait a little while longer until you can meet the new 5.25% requirement.

Also, because uninsured mortgages account for approximately 70-75% of all mortgages issued by Canadian Financial Institutions (CFI), a huge chunk of mortgage applications will potentially be rejected due to their higher financial risk to lenders.

For example, after the changes take place on June 1, your mortgage qualification of x amount will decrease. A $400,000 mortgage qualification will slip down $15,000 to $385,000. The higher the home price reaches, the larger the difference. That $15,000 difference in the $400,000 mortgage can mean the difference between lenders being able to provide the loan or not. It could also mean the difference between the homeowner being able to refinance their existing home or purchase an income property, which for many, can be a great way to increase their investment portfolio. 

The Mortgage Stress Test Increase Will Not Affect Everyone

Rest assured, the increase won’t affect first-time homebuyers with less than 20% down, since their mortgages will be insured (usually with CMHC). It also won’t affect buyers who put more than 20% down AND who amortize over 25 years. The maximum mortgage term will be 25 years for insured mortgages and 30 years for uninsured mortgages. Also, the stress test will stay at 4.79% for insured mortgages, preventing any additional mortgage debt.

 

The mortgage stress test increase is just around the corner. If you’ve been considering refinancing to access funds for the renovation you’ve been dreaming about, now is the perfect time. Give our team at D. Fritz Appraisals Inc. a call to book your residential appraisal. We’ll help you uncover the value in your home with our comprehensive and accurate evaluations. Whether you’re looking to buy, sell or refinance or just have an up to date appraisal for your records, our property value estimations can help you get ready for the next step in your real estate journey. Located on Royal Oak Ave in Victoria, BC, we’re open Monday to Friday, 9 AM to 5 PM. Give us a call at (250) 413-7319 or contact us via email.

canadian real estate trends 2020

Cost Comparison and Trends in Canadian Real Estate

2020 has been a year of highs and lows for the Canadian Real Estate Market

Fitting with the times we’re in, the CREA (Canadian Real Estate Association) couldn’t even publish a quarterly trend forecast in June. Instead, a notice on the webpage stated that “as providers of the most accurate and timely housing data and statistics, CREA believes the outlook to still be too uncertain to release a forecast at this time.”

However, there are still monthly forecasts. As of August 2020, the CREA’s monthly stats and forecast was quite positive, showing home prices and sales increasing across Canada (on average).

Canada’s Real Estate Market is Still Hot

July 2020 was a record-breaking month for many markets, which otherwise floundered during April and May. In fact, according to the CREA monthly stats report, home sales rebounded by 26% in July 2020. Transactions increased country-wide on a month over month basis.

At this point, supply has exceeded demand in many markets, creating a competitive and busy market as we close out summer 2020. Major markets like London-St Thomas, Montreal, Ottawa and Vancouver have seen large jumps in average home prices in the past year.

Sales Increases in the 11 Largest Markets

  • 49.5% in the Greater Toronto Area (GTA)
  • 43.9% in Greater Vancouver
  • 39.1% in Montreal
  • 36.6% in the Fraser Valley
  • 31.8% in Hamilton-Burlington
  • 28.7% in Ottawa
  • 16.9% in London and St. Thomas
  • 15.7% in Calgary
  • 12.1% in Winnipeg
  • 9.7% in Edmonton
  • 5.4% in Quebec City

Housing Prices Across Canada

Note that this statistical information includes all housing types. This average price information is used for determining trends over time and doesn’t account for price ranges between dramatically different neighbourhoods or geographic areas.

  • Home prices have been rising nearly constantly for the past 17 years and between 2016 and 2019, pricing rose by 27.8% (18.5% adjusted for inflation).
  • Across Canada, the average home price rose to $571,471 in July 2020, compared to $500,164 in July 2019. B.C and Ontario are currently the most expensive markets, with average pricing of $699,300 and $606,400.
  • During 2019, Ottawa’s home prices rose the most at 7.38% (on average). Next was Halifax at 7.35%, Montreal at 6.37% and Toronto at 4.48%
  • There were also smaller increases in Quebec at 1.49%, Victoria at 1.13% and Winnipeg at 1.02%
  • Pricing fell in Vancouver at -4.05% and in two of Alberta’s major markets: Edmonton at -1.49% and Calgary at -0.94%

Average Housing Prices in Major Canadian Cities

East of Saskatchewan, most markets have seen strong sales and increasing prices. While prices have also risen in B.C. and Alberta, they haven’t been as distinctive. According to the CREA’s monthly statistical report, the actual (not seasonally adjusted) national average price for homes sold in July 2020 was $571,500, up a record-setting 14.3% from July 2019.

This number is influenced by the increases in Canada’s two hottest and most expensive markets- Greater Toronto (GTA) and Greater Vancouver. Without the increases in these markets, the national average home price would be around $117,000 less.

View CREA’s National Price Map

Greater Vancouver

Average Price- $1,031,400 in July 2020 compared to $987,200 in July 2019

Fraser Valley

Average Price- $858,300 in July 2020 compared to $824,500 in July 2019

Victoria

Average Price- $724,600 in July 2020 compared to $700,300 in July 2019

Edmonton

Average Price- $319,000 in July 2020 compared to $323,800 in July 2019

Calgary

Average Price- $411,200 in July 2020 compared to $417,200 in July 2019

Regina

Average Price- $272,200 in July 2020 compared to $269,000 in July 2019

Saskatoon

Average Price- $296,900 in July 2020 compared to $291,300 in July 2019

Winnipeg

Average Price- $284,000 in July 2020 compared to $270,500 in July 2019

Hamilton-Burlington

Average Price- $687,000 in July 2020 compared to $608,600 in July 2019

London-St Thomas

Average Price- $485,802 in July 2020 compared to $406,125 in July 2019

Montreal

Average Price- $401,300 in July 2020 compared to $351,700 in July 2019

Greater Toronto

Average Price- $880,400 in July 2020 compared to $800,200 in July 2019

Ottawa

Average Price- $506,700 in July 2020 compared to $428,100 in July 2019

Quebec City

Average Price- $258,000 in July 2020 compared to $244,800 in July 2019

Halifax- Dartmouth

Average Price- $363,692 in July 2020 compared to $310,251 in July 2019

St John

Average Price- $202,297 in July 2020 compared to $185,632 in July 2019

The Price Gap Between Condos and Single-Family Homes is Shrinking

The mortgage stress test is potentially making it tougher for home buyers to get into single family and more expensive types of homes (particularly in major cities). First time buyers in major markets may opt to purchase a condo over a single-family home. Condo prices are rising due to increased demand (4.2% year over year) and single-family home prices remain relatively similar – the gap between condo pricing and single-family home pricing is narrowing.

Single Family Homes Under Development

In 2018, there were 46,747 units under construction, according to the Canada Mortgage and Housing Corporation (CMHC). This was down from 55,000 units in 2017. As people move further away from the larger cities (Toronto and Vancouver) there are more opportunities for development and more affordable housing prices.  Within pricier markets, home buyers may often look for properties with rental income potential to offset the cost of the mortgage.

Multi-Family Homes Under Development

Condos are the leader for new home construction. In 2018, inventory still under construction reached almost 121,000 units (54% of new builds). Condos also eclipsed single family and rental homes (apartments) at 46,747 units and 56,394 units, respectively. Condos purchased by investors also supplement and supply the rental market. Thinking about getting into the market this fall? Whether you’re considering buying or selling or just want to know what your home is truly worth, our team offers accurate, comprehensive and professional residential real estate appraisal services. D. Fritz Appraisals serves clients from South to Central Vancouver Island (Victoria to Nanaimo) as well as the Gulf Islands. For any questions or to order an appraisal, contact us today.

real estate market trends 2020

Current Real Estate Industry Trends

COVID-19 Halts the Vancouver Island Real Estate Marketplace

At the start of the COVID-19 pandemic, no aspect of the Canadian economy was left untouched and the real estate market felt this acutely with a major slump during March and April. During this period, many British Columbians experienced layoffs, placed themselves in social isolation and were hesitant to open their homes to strangers. For many, listing their homes or searching for a new home took a backseat to navigating the “new normal” during this very odd time in history when schools, workplaces, and all public spaces shut down, seemingly overnight. Also, as restrictions on rental properties were put into place to protect tenants from eviction during the lockdown period, owners of these properties were unable to list these homes. With realtors also self-isolating and avoiding in-person meetings, the market in the Victoria Real Estate (VREB) region was uncharacteristically quiet during what would normally be peak season. Live-streamed open houses, virtual walkthroughs, masks and sanitizer waiting at listed homes became common as the first weeks wore on.

The Vancouver Island Real Estate Market Bounces Back

The market experienced a stronger than expected bounce-back in late May and June, closely timed with the start of Phase 2 of the BC Restart Plan. As a result, in June the number of homes on the market was much closer to 2019 numbers and sales in June 2020 in the VREB region surpassed sales from June 2019. Despite a slow spring, home prices continued to rise. The sale price of an average single-family home in Victoria topped $1 million in June. Competitive/ multiple offers have also become common due to limited inventory. The BCREA, VREB, and VIREB, Real Estate professionals and other industry experts report this is likely due to a pent-up demand from buyers and sellers having to wait throughout the spring (normally the ideal time to buy and sell) to make their move.

real estate market trends 2020

Changes by the Canadian Mortgage and Housing Corporation (CMHC) may also have played a role in demand with new changes resulting in reduced borrowing power. The eligibility rules for a mortgage have now changed to include an inability to use borrowed funds for a down payment, requirements for a higher credit score, and a lower amount of debt that an applicant is allowed carry. Some buyers, particularly first-time buyers, may have felt a push to purchase a home before those changes came into effect July 1. “COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,” says Evan Siddall, CMHC’s President and CEO, of the changed eligibility rules for borrowers requiring mortgage insurance.

Changes in Pricing Could Lead to New Opportunities

Rising home prices are believed to be a result of limited inventory and more competitive/multiple offers seen through May and June as the market began to recover. Despite this initial rise, lower valuations may come into play as the COVID-19 pandemic continues, and as we experience a potential second wave.

The Vancouver Island Market Moving Forward

The Real Estate market on Vancouver Island is a mixed bag and it remains to be seen how it will fare long-term, particularly after Canadian Emergency Response Benefit (CERB) and other government assistance programs wind down during the next few months. The CERB benefit, for example, is available from March 15 to October 3, 2020 but can be applied for retroactively up until December 2, 2020. These programs have temporarily taken the pressure off to pay the mortgages and bills and even defer taxes Industry professionals believe it’s possible there may be a surge in sales as these programs phase out, forcing homeowners to list their properties.

A bit of good news: in the most recent market intelligence report by the British Columbia Real Estate Association (BCCREA), it is “anticipated that while the economic impact of the COVID-19 outbreak will be deeply felt, the bounce-back will be faster than in previous recessions. As the protection measures are lifted, as we have already seen in parts of the Province, the pent-up demand will return to local markets with buyers keen to take advantage of low interest rates.” The long-term effects remain to be seen, but on the positive side, a combination of lower interest rates, increased inventory and a drop in valuation have the potential to create an ideal buyer’s market and faster sales.

 

The Numbers:

  • In April 2020, sales in the VREB dropped by 58.8 percent compared to April 2019
  • Condo sales are down 3.2% with 209 units sold in June 2020- believed to be at least partly a result of rising Strata insurance costs.
  • Single family home sales are up 16.8% with 460 homes sold in June 2020
  • Sales in the VREB region were up in June at 808 properties sold, compared to 740 properties sold in June 2019
  • There are currently 2,698 active listings on the VREB Multiple Listing Service (MLS) as of the end of June 2020

Full VREB Stats

 

As one of Victoria’s longest-standing appraisal firms, rely on our years of expertise if you are considering buying, selling, or re-financing. At D. Fritz Appraisals Inc. located in Victoria BC, our expert team understands that these are uncertain times and its of utmost importance to have the most accurate and comprehensive valuations possible. To get the full picture of the value of your property, contact us today.