The Sleep Factor

Few would argue with the perspective that real estate ownership is a keystone of growing personal wealth. In today’s market, we are seeing a stabilization of pricing and the pattern of interest rates is a hot question from week to week. As rates came down slightly over the past week, many young people are wondering when to get into the market and what kind of rates to consider. When buying a home to live in, I don’t believe there is a bad time to buy. I say this because owning a home is always better than renting. Why pay someone else’s mortgage? And the interest rate question is a personal choice. I work by a philosophy I call “The Sleep Factor”. When deciding between a fixed and variable rate mortgage consider how you feel about your monthly payment potentially changing with interest rate changes. Consider if you will be more comfortable knowing your payments will be the same each month or if you are willing to take a lower payment with the chance the payment may rise. Will you be up a night worrying about your interest rate? If the answer is yes, a variable rate is not worth the loss of sleep. Buy now, lock in and get some rest!

Housing update

I had the esteemed pleasure of hearing Charles King, Regional Manager, Market Analysis and Research & Information Transfer of the BC Region for Canada Mortgage and Housing Corporation speak for the Greater Vancouver Home Builders’ Association last week. He has some wonderful insights I would like to share. In the recent years we have seen the Lower Mainland develop into an international rather than a regional market, and as such, we saw an escalation of prices in the housing market. In 2009, however, immigration laws tightened and the threshold for entrepreneurial immigrant increased from $800,000 to $1.6 million. This decreased immigration and had a hand in the market stabilization.

In BC, 70 percent of residents are home owners and only 42% of them require mortgage financing. On average, BCers make more lump sum payments to their mortgage than the average Canadian and as such, use housing as a system of “forced savings”. Many home buyers see real estate as a viable investment strategy and according to CMHC, 46% of downtown Vancouver properties and 17%- 25% of Fraser Valley properties are held as investments.

Through 2011 we are expecting a moderate increase in the housing market of just 2%, and in 2012 CMHC foresees a 3% increase. Thankfully, the market in the Lower Mainland has stabilized or even improved over the last year. This is proven by the City of Vancouver approving laneway homes, similar to the coach home concept popular in the Valley. The US remains in a state of recession as over 18 million homes are vacant. Until this trend shifts, the housing market will see little recovery.