High prices, Low rates, Covid, When will this all end?

My apologies for not updating my page for soo long. In fairness you probably didnt want to read someone elses frustrations when it comes to politics, monetary policy, mortgage rules, rates and all the real estate craziness, not to mention Covid. 

Who would have thought a little virus could change our lives so drastically? Covid has decimated parts of our economy and changed so many aspects of our day to day lives. It has changed how we work, learn, interact and live, and it sparked a real estate buying frenzy that has driven house prices and demand to ridiculous levels.

Apparently this is because Canadians now have more savings than ever before, thanks to spending way less during the pandemic, combined with the Govt support programs. On average the savings rate per person has jumped from 1.3% of disposable income to 14.9%, which equates to Canadians saving
$212 Billion in 2020, as compared to only $18 Billion in 2019, or about an extra $5,5000 each. Consumer debt has also been paid down/reduced and loan and mortgage delinquencies are way down as well. Being stuck at home has made many Canadians eager to upgrade and upsize their current living arrangements, which is understandable, the only problem is Canada doesnt have enough houses for people to buy.......

Now CMHC (Canada Mortgage & Housing Corp) has issued its "Highest Risk Rating ever" for the housing  market..saying it is "Overheated & Highly Vulnerable"........But dont be misled by the headlines...as you read further they are only really concerned about areas in Ontario & Eastern Canada. They say market vulnerability was considered "moderate" in Victoria, Edmonton & Calgary, and even dropped to "low" in Vancouver.... Go figure? Once again the East dictates Canada wide housing fears, when things dont look all that bad here in the West.  

What does this mean to you, and our local Okanagan markets? Well, housing prices are still high due to limited supply and lots of demand, and in my opinion that isnt going to change anytime soon. The Okanagan has always been a desireable location to live, and even more so to retire, so demand for housing will continue. Even in a worst case scenario I dont ever see our house prices dropping much, if at all, compared to other locations. Quite simply, buying and owning a home in Okanagan will likely always be a good investment. Rates eventually have to increase, and experts have been saying that for the past few years, but then Covid came along and put a big dent in our economy, postponing any rate increases for the  forseeable future. 

So I think we are in for a prolonged period of stable but high house prices, very limited housing and rental home supply, and continued low rates, for at least another 6 months, probably longer. The Liberals (and all parties) promised increased housing in the recent election, but that is many years in the making, and any silly litttle mortgage and housing incentives they promised certainly wont fix the problem either.

The biggest problem still facing potential homebuyers is the Liberals silly "Stress Test" rule. This rule requires all lenders to qualify home buyers/borrowers using a 5.25% "Stress Test" rate, (recently increased from 4.79%) as compared to the actual 5 year term mortgage rate, which is anywhere from 2.04%-2.34% right now. That higher qualifying rate effectively reduces your buying/borrowing power by about 35%, which is absolutely ridiculous, especially during a time of record home prices and limited supply. Sure, I understand the reasoning behind the "Stress Test", supposedly protecting Canadians from not being able to afford their homes should mortgage rates increase substancially, but I still think it is far too heavy handed handed. Didn't the experts just say that the average Canadian's consumer debt has decreased and their savings have increased? Hmmm, maybe I should have been an economist??  

Arent you glad you just read my insights and little rant? Now we just have to get rid of Covid..... 😉