Friday, September 29, 2023

Bankers Think Some Rate Relief is Coming

According to US News and World Report the trend for the next few months is a softening in rate pressure. Rates should start to ease a bit providing some relief for weary buyers that have been priced out of mortgages over the last couple years. Locally rates have been running at nearly 8% well above the national average. The chart below shows the national trend and the rates on the chart or prior to any fees or points that banks are in fact charging. Rates that borrowers are actually seeing or will see based on this chart would be 0.5% to 1% higher. Rates also vary based on the lending program, down payment amount, credit profile and other important financial details of the borrower. The good news is they seem to think it is starting to trend favorably for borrowers.

Well let's hope they are right. I do not expect a return to the ridiculously low rates of a few years ago. That was unprecedented. The 50 year average has been around 6.5% and I find that the market responds well to rates under 6%. If we can get rates back into the mid 6s the real estate market will come around. Right now we are in a stalemate as we have neither allot of buyers nor allot of sellers. Pricing is stable but softening and transactions are way down as a result of inactivity. Sellers are holding on to the low rate they have now and buyers can't afford the high rates currently available. 

This trend if it materializes could be good for current buyers. Sellers are getting motivated and that means a negotiating edge for buyers. Buyers may find themselves able to refinance their 8% purchase not in a year or so at a more comfortable rate in the 6s.  

If that chart holds up, things should perk up a bit next spring.

Friday, September 22, 2023

Vancouver's City Center Continues its Crazy Growth

Downtown Vancouver started on an epic journey of urban renewal some 25 years ago with the restoration of Esther Short Park and surrounding redevelopment of nearby blocks that were dilapidated. The plan was highly successful and Vancouver continued uninterrupted until about 2010 when the height of the recession slowed things to a crawl everywhere. After the recovery things picked up where they left off and began to accelerate to the frenzied pace we have seen over the last five years. Vancouver's skyline has had at least one tower crane up continuously since 2015. We have had as many as seven simultaneously during this nearly seven year stretch. Vancouver's built up skyline has tripled in size and there is no end in sight.

All of this development has brought a tremendous amount of revenue both public and private into the area. This has helped make Downtown Vancouver one of the most popular destinations in the metro area. For real estate it has opened up opportunities for urban living by making Vancouver's city center more electric and exciting as well as more walkable and bike able with increased services for residents and workers alike.

Condos in high rise and mid rise buildings remain strong in the market and neighborhoods in uptown that were previously struggling are now thriving. This economic revival has spread all over Vancouver and we have become the hot spot for the region. Below is a video showing the Downtown and Waterfront areas. Vancouver has plenty of room to grow Downtown as many blocks remain underdeveloped. With good leadership the boom can continue and even weather a recession well. That's up to the peeps we elect on the city council and the mayor.

Friday, September 15, 2023

What to do in a tightening market?

Our real estate market has been in this weird funk the last few years since we saw the interest rates pop up back in mid 2021. Prior to that we had a combination of low inventory and screaming demand for housing that had prices shooting up at near record pace in the double figures annually. 

Now we find ourselves two years post Fed meddling and rates are around 8% and most of the buyer demand is now gone because so many buyers are priced out. As is typical with the Fed, they tend to be behind the market and as such they often overcorrect. They have in fact over corrected. Markets will only rise to the point that consumers can afford or still desire the product. Had the Fed left rates where they were demand would eventually fall off when the prices got too high for the local economy to support. That however tends to lead to drastic market corrections and we don't those either. 

The only thing keeping our market from hitting a substantial correction is that sellers are parked in their homes sitting on 2.5-3.5% mortgages and they don't want to sell. We literally have a horse and carriage market right now. There is very little for sale and there is very little demand. That means flat prices and a fairly neutral market. If lots of sellers decide to list all of the sudden we will see prices fall. If sellers remain stubborn and rates drop back down to around the 50 year average say mid 6's we will see prices jump again. 

I believe the Fed has effectively achieved what they wanted to achieve, frankly they achieved it when rates hit 7% they were just too far behind the market to realize it. Those guys at the Federal Reserve are not the sharpest knives in the drawer.

So what do we do in this type of market. Well if you are a seller and you are planing on leaving the area for a job change, to retire somewhere, or whatever, you need to recognize neutral market requirements. You can't just post a sign and expect 10 offers, unless you are giving the place away for a stupid low price. Now why would you want to do that? You have to make the property presentable. Even in a hot market, curb appeal, a little cleaning and staging go a longs ways. But in the boom times you can get away with out those things. In this market they are mandatory. You need a good experienced agent that knows how to sell house in a flat or down market without you giving away the farm. 

Buyers need to be patient but when an opportunity arises they need to act quickly. opportunities will not go unnoticed by other buyers and other agents in the area. When you see it, buy it! Interest rates eventually will come back down and refinance will become an option, rates could rise more before that happens, so now is a good time. In a volatile interest rate market it is hard to make a bad decision because if rates go higher, you are ahead of the game, if they drop back down to 6% in two years you refi. Buyers have become afraid of the rates, and as I guy who has lived on this wet rock for nearly 60 years, people bought lots of houses back in the days of double digit mortgage rates. Owning your house is one of the easiest ways to build wealth over time. I purchased my personal residence in 2002 it has tripled in value since I bought it, I could rent it easily for double what my mortgage is. In fact I pay less for my large spacious house than most people pay for a basic two bedroom apartment. Buying a house hurts your wallet for several years and then if you avoid taking the equity out you quickly discover you're getting a bargain relative to renting and building equity and wealth along the way.

Don't let higher interest rates scare you off, if the bank says you're good to go, you are good to go. Just don't get yourself into finical trouble elsewhere. 

The market is fine a bit slowish for us Realtors® but it is still a good time to buy or sell. We have that classic neutral market. You need a good agent in these types of conditions.