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Mortgage Rates and Our Market in Coquitlam, Port Moody and Port Coquitlam

This is going to sound obvious to most but mortgage rates are really low. It looks like a recent competitive pressure on some of Canada’s largets banks have caused mortgage rates to fall. In fact BMO is offering a 2.99% 5 year mortgage. Other lenders are offering a 4% 10 year rate.

The irony as I see it is that recent comments from the heads of RBC and TD banks decry most Canadian markets as overheated. It’s rates like these that could contribute to overheating.

Anyway, not to complain. I love low rates. It’s what is keeping our market alive in my opinion.

 

By the way. The Bank of Canada just elected to hold it’s target rate at 1% for the 11th consecutive month. Analysts expect the trend setting rate to remain unchanged in 2012. Yipee!

2011 Year End Review

All in all I’d say that 2011 was a great year for the lower mainland real estate market. In general prices were up. In some markets prices were up significantly. Richmond, West Vancouver and Vancouver saw price increases that could only be called “bubble like”. That worries me.

The Tri City (Coquitlam, Port Coquitlam and Port Moody saw a more tempered increase. The number of actual homes sold in 2011 was up in the Tri City area, in some areas sigificantly. Coquitlam detached home sales were up 29%. All in, the Tri City registered a 12% increase across all home types (detached, townhome and apartment).

Here are the numbers:

Detached home sales 2011 versus 2010

Coquitlam   1039 homes sold in 2010, 1339 homes sold in 2011,  29% increase

Port Moody   230 homes sold in 2010, 234 homes sold in 2011,  2% increase

Port Coquitlam  428 homes sold in 2010, 453 homes sold in 2011, 6% increase

Attached home3 sales 2011 versus 2010

Coquitlam   1086 homes sold in 2010, 1237 homes sold in 2011, 14% increase

Port Moody   496 homes sold in 2010,  525 homes sold in 2011,  6% increase

Port Coquitlam    571 homes sold in 2010, 531 homes sold in 2011,  7% decrease

 

The MLSLINK Housing Price Index

Here is an explanation of what it is:

The Housing Price Index (HPI) is an alternative measure of real estate prices that provides a clearer picture of market trends over traditional tools such as mean or median average prices.

As of December 2011 the following benchmark prices applied:

Coquitlam $674,792

Port Moody $933,068

Port Coquitlam $555,876

I’ll be adding more to this as soon as possible.

Absorption Rates in Coquitlam, Port Moody and Port Coquitlam

One simple but interesting statistic is the ratio of homes listed to the actual number of homes selling. This gives us the number of months worth of supply on the market. You could call this the absorption rate. In other words if 100 homes are listed at any one time and 25 homes sell in the last 30 days you could say that there is 4 months worth of product on the market. By comparing different areas and home types (attached vs detached) one can determine the relative “health” of the market in the various areas. It’s even more interesting to look at the number of homes listed in the past 60 days that have actually sold. In the following tables I show these numbers for Coquitlam, Port Coquitlam and Port Moody.
 
The following table shows the overall number of homes listed, sold and the number of months supply on the market for each area:
 
 

Attached Homes (Aug 27, 2010 to Oct 27, 2010)
Area
 
Homes
listed
Homes
Sold
Number of Months
Supply on Market
Coquitlam
465
123
7.6
Port Coquitlam
249
66
7.54
Port Moody
242
54
9
 
 
 

Detached Homes (Aug 27, 2010 to Oct 27, 2010)
Area
Homes
listed
Homes
Sold
Number of Months
Supply on Market
Coquitlam
465
142
6.6
Port Coquitlam
172
42
8.2
Port Moody
115
27
8.5

 

When you look at the number of months worth of supply you can see that detached homes in Coquitlam are selling faster than homes in Port Coquitlam and Port Moody. The market for attached homes looks to be similar in all 3 areas.
 
A different picture emerges when you look at homes that were listed only in the last 60 days count the number of those homes that have sold. In other words, homes that were listed prior to 60 days ago are not counted.
 
The following table shows the figures:
 

Attached Homes (Aug 27, 2010 to Oct 27, 2010)
Area
Homes
listed
Homes
sold
Number of Months
Supply on Market
Coquitlam
265
48
11
Port Coquitlam
133
22
12
Port Moody
136
11
25
 

Detached Homes (Aug 27, 2010 to Oct 27, 2010)
Area
Homes
listed
Homes
sold
Number of Months
Supply on Market
Coquitlam 220 65 6.8
Port Coquitlam 96 16 12
Port Moody 49 12 8.2
 
The tables above show that sellers listed in the last 60 days are not realistically priced. Look at Port Moody attached properties. with 25 month’s supply on the market, sellers have an uphill battle. The table also shows that the market for Coquitlam detached homes is relatively healthier that Port Moody and Port Coquitlam.

I published this article in my other blog a month ago. 
 
Coquitlam, Port Moody, Port Coquitlam and Maple Ridge Real Estate Market Report
 

 

 
 
Over the past 3 months a number of people have commented to me that the market has really taken a beating. With recent news reports painting a dire picture it may seem that the market is in the tank. What is the truth? The truth is that we are in a steady market that is slightly balanced in favour of buyers. Home prices have declined over the past 3 to 4 months and this this trend will probably continue until January 2011.

 

There are 2 big questions. Firstly, is this the start of a “correction”? I don’t think so. Many people point to the downturn in US home values as a precursor to what may happen here. They see the inevitable correction around every corner. The truth is that the U.S. market is in a painful downturn after a dramatic and unsustainable run-up in values. Home value increases in BC and the US occurred for different reasons. Home price increases in BC since 2001 were due to lower interest rates, increased confidence in the economy and a build up of buying pressure as buyers stayed out of the market in the late 1990′s. Reasons for price increases in the US were probably brought on by similar conditions except that looser credit rules dramatically amplified the increases. Our conservative banking rules saved us from a similar fate. That brings us to the 2nd big question. Are current prices sustainable? I believe that they are. Demand is good, The economy is good. Interest rates will continue to be low over the next 24 months. The US economy will continue to slowly improve. We will benefit from all these factors and prices will remain high.
 

Homes Sales in 2009 and 2010

Coquitlam, Port Moody, Port Coquitlam and Maple Ridge

 
 
Number of detached

homes sold

 
Jan-Aug 2007 2,695
Jan-Aug 2008 1,916
Jan-Aug 2009  2,251
Jan-Aug 2010 2,003
 

 

You can see from the above table that year to date homes sales in our area have remained fairly constant. The way I see it, 2010 is no better or worse than 2008 or 2009. The market correction that occurred in 2008 happened after September 1st for the most part and is not reflected in the numbers above. Prices increased dramatically in 2007 and by looking at the chart one can see why. Home sales were about 25-30% higher that in the past 3 years.

I would like to point out one major factor that does not change in Metro Vancouver. That is the fact that our land supply is limited by 3 things, namely the ocean, the mountains and the Agricultural Land Reserve. The supply of land here is limited. Fly into a city like Calgary or Phoenix AZ and all you see are subdivisions being built and roads being pushed through. Land for homes is limited only by how far buyers are willing to drive. It’s conceivable that homes could be built in either of those cities in larger and larger concentric circles. It’s different here. We can only go east and great quantities of the available land is tied up in the ALR. This limited supply has the effect of pushing prices higher.

 

Thoughts about where our local real estate market goes from here.

In a recent article in BC Home Magazine, a local economist noted that population growth will likely drive the Vancouver real estate market. In the article he noted that in the final quarter of 2008, BC’s population grew by 14,440 persons. This is second only to Alberta in growth and the largest quarterly growth since 1996. Both international in-migration and inter provincial in-migration are up with the international side growing strongly and interprovincial getting weaker. The connection to house prices seems obvious, as more people move in than move out, demand for housing will increase.

What about other factors that drive the market? Surely interest rates have a major impact. In fact housing affordability has grown in the past 12 months. The article suggests that house prices are down 11% from a year ago and that the actual cost of carrying the mortgage on that average home is down 23%. With numbers like this it’s a wonder that more renters are not trying to get into the market.

Market continues to be robust

Not sure if we lower mainlanders are particularly resilient to the world economic situation or if our heads are simply “in the sand” but our local real estate market continues to be busy. We are seeing sales happening and plenty of showings on our listings. My thoughts are that perhaps as many buyers are out there looking as there were one year ago when the market was hopping. The difference is that only half of them are actually buying. The other half are waiting for the bottom of this trend to be signalled.

One thing is for sure, it’s a great time to buy a home. Why? All the usual reasons; prices are down to relatively affordable levels; there’s no hurry, buyers can take their time; selection is good and most importantly financing rates are down significantly. 5 years rates are as low as 3.6%. That’s pretty low. About 6 months ago, with rates at 5.5%, you would have paid $610 per month to borrow $100,000. Today, at 3.6% that $100,000 will cost you just $504 per month, a savings of $106. That’s a savings of 17% on  your largest expense. Couple that with the fact that home prices are down 20%-25% and the savings just pile up.

How many homes sold in February?

These are the unofficial number for the past 3 months in terms of homes sold In Coquitlam, Port Coquitlam and Port Moody.

Detached Sales in:

February 70 homes sold

January   58 homes sold

December 39 homes sold

 

You can see that the numbers are up up up.

 

Here are the attached numbers:

February: 74 homes sold

January:   115 homes sold

December: 53 homes sold

As you can see, the number of attached homes sold peaked in January. Interesting.

Evergreen Line

I noticed that Translink has almost completed their display trailer for the Evergreen line on Coquitlam’s Park and Ride site across from Coquitlam Center Mall. The elaborate trailer has been under construction for a few months which means that the recent funding announcement by Prime Minister Stephen Harper has been a foregone conclusion for a while now.

Looking at the route map available on line it looks like there will be relatively little elevated track except the parts from Lougheed Mall to the top of Clarke hill and then the part that runs up Pinetree Way. That’s good. I think that Skytrain is for the most part quite ugly.

The question is how will it effect real estate. Well one thing I can say for sure is if you own a property anywhere near the elevated portion you should look at selling now. Of course every buyer will know that Skytrain is being built and of course it all has to be disclosed. My point is this. Once the elevated guideway is built, your chances of selling for the same price as without the guideway sitting there is nil. Even a month before construction starts is better than selling while skytrains are whizzing past.

As for Coquitlam, Port Coquitlam and Port Moody’s real estate prices in general my prediction is that the Evergreen line will not hurt prices. Prices may not increase due to the line but they will firm up some.

Vancouver Sun article

Brian Morton wrote an interesting article in the Feb 17th Vancouver Sun. In it he claims that the cost of home buying and home ownership has dropped significantly in the past 12 months. He cites a 15%-20%  decrease in home prices coupled with lower interest rates. An average condo now costs $600 less per month to own than it did one year ago. That is a significant increase in affordability. Rental rates are also a factor. Apparently the cost of renting has increased 5% in the past year. This adds to the case that home buying is a better option than renting.

The article also points to a recent survey by Ipsos Reid. The poll shows that 71% of respondents said it a very good or somewhat good time to buy now compared with just 60% last November. The poll also found that the number of people expecting prices to drop in the next 12 months fell to 42% from 57% in November. These shifting attitudes are going ot be the drivers in any recovery in this current market.

When will this all end?

Ok you read it here first. This “economic melt down” or recession  will end when the the US housing market bottoms out. Actually when you think about it it’s pretty simple. The economic boom of the past 7 or 8 years was driven in large part by US households who accounted for most of the spending growth. As real estate prices were driven up, households had more room to borrow on equity which further drove spending. The house of cards began to fall when dodgy borrowers began to default in ever increasing numbers. This brought on the subprime mess. So now a large number of US household are “upside down” in terms of home equity. They owe more than there homes are worth. The result is: no more spending power and a drastic decline in economic activity. It stands to reason that the way out of this mess will only begin take shape when this massive amount of bad debt is “unwound” . The banks will have to feel the pain of it. The government can’t keep postponing that pain. Once that is done there will be some sort of signal such as a decline in foreclosures for 3  straight months. When you read about this or some similar article you’ll know that there is light at the end of the tunnel. And you read it here first.

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