Market & Mortgage Trends, Rental Regulations, Pre-Offer Period

As we enter the Spring housing market, sellers are returning, offering buyers more options. Regionally, sales dropped by 4.7% from March 2023, well below the 10-year seasonal average by 31%. Although sales activity isn't as robust as last year, the number of homes listed for sale increased by 23%, with just over 4 months of supply. Despite the welcomed increase, demand remains strong for well-positioned properties, while others are in a standoff. Greater Vancouver saw a 15.9% rise in newly listed properties, totalling 5,002, and total listings reaching 10,522. The sales-to-active listings ratio stands at 23.8%, with 18.2% for detached homes, 31.3% for attached, and 25.8% for apartments.
MLS® HPI Price March 2024

We're still seeing modest month-over-month price gains at the aggregate level, even as borrowing costs remain elevated. As per mortgage expert Rob McLister, Canada's lowest nationally-advertised mortgage rates are in a rut. There's been no changes for three weeks as markets wait for the next economic shoe to drop. With HSBC now gone, the lowest nationally advertised uninsured variable rate jumped from 6.55% to 6.69%. Qualified borrowers can find lower discretionary rates through brokers & banks—but it was useful to have HSBC's low advertised rates as a benchmark.

A trend observed by the Green Mortgage Team highlights the 3-year fixed mortgage as the most popular choice among 80% of their clients, offering a balance between rate stability and financial flexibility. This preference is underpinned by a relatively lower qualifying rate and the implementation of a stress test, which assesses a borrower's ability to repay at higher interest rates. Opting for a term beyond three years may yield diminishing returns, as it entails locking in rates that might not favour the borrower in a shifting economic landscape. Especially for first-time homebuyers, securing a 5-year fixed insured mortgage at rates below 5% presents an achievable pathway to homeownership.
TD Forecast

Is now a good time to buy?

Given the inflationary pressures and the projected decrease in interest rates, the current market conditions favour buying sooner rather than later. Anticipated to be more challenging in 2025/26, the market dynamics suggest a future upswing in housing prices as interest rates start to decline. This potential increase is grounded in the expectation of a shift in economic conditions, making the near future an opportune time for securing a home.

As we navigate through 2024 and beyond, it’s pivotal for potential buyers to monitor the market closely, especially with a wave of mortgage renewals anticipated between the second half of 2025 and the first half of 2027. The evolving landscape suggests that maintaining flexibility in mortgage choices and being strategic about timing can leverage market conditions for favourable outcomes.

The global financial landscape, marked by significant money printing and heightened government spending, casts a long shadow over the real estate market. Such fiscal activities contribute to inflationary pressures, notably affecting the rental market. This can inadvertently push renters towards homeownership due to escalating rents, despite the financial hurdles of acquiring a mortgage.

OSFI limits lending amount at 4.5X income

A minority of mortgage shoppers will face higher leverage costs as Canada's banking regulator, OSFI, confirms new restrictions on mortgage borrowing. Unlike the borrower-specific stress test, OSFI's loan-to-income (LTI) measure is a portfolio test, allowing lenders flexibility in setting LTI limits, subject to underwriting guidelines. Institutions can only have a limited percentage of mortgages exceeding a 4.5x LTI, with allowances determined on a case-by-case basis by lenders.

New rental regulations

Housing Minister Ravi Kahlon introduced tenancy act changes that would prevent renters from facing rent hikes when they have a baby or add anyone to the rental unit under the age of 18. It also adds new restrictions for when landlords can evict tenants for personal use.

Pre-offer period

The Home Buyer Rescission Period came into effect January 3, 2023, which allowed buyers to rescind a contract within 3 days, by paying 0.25% of the accepted price. It was intended as a reactionary move during an overheated market but turned out to be too little too late as the market cooled off. The British Columbia Real Estate Association is advocating to replace the rescission period in place of a pre-offer period, as the rescission period has only been used by 7% of buyers, and only caused confusion, exposure, and negative unintended consequences for buyers and sellers alike. 

A pre-offer period would allow buyers to complete their due diligence prior to making an offer rather than after an offer has been accepted. Sellers would grant access to their listed property available for viewings and inspections, and all documents related to the property would be made available at the time of listing. The pre-offer period would last for 5 days, commencing on the date of the listing, where the seller cannot view or accept any offers on the property during this time.
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