Low Interest Rates + More Negotiating Power = More Affordable Real Estate!

What usually happens, as interest rates decline, real estate buying power increases. Currently interest rates are at the lowest they have been in years. The lower interest rates coupled with the current buyer’s market makes buying a home more appealing. Buyers find that when the interest rates are very low, they qualify for more of a loan than when rates are high.

This shift in the market has created a great opportunity for first time home buyers, buyers and renters looking to get back into the Kamloops market. The savings on home buying are in both the purchase price of the home and interest charges. Buyers are able to negotiate more aggressively on a contract now than years in the past. I have found that lately more first time home buyers have begun their search for the first time. Buyers who are also looking to get back into the market or have been renting for a number of years are also beginning to see the value in the lower home prices and low interest rates. Homes in Kamloops are finally beginning to be priced in a range where buyers can justify purchasing a home. Plus, for first time home buyers, they receive further savings because first time home buyers don’t have to pay property transfer tax.

All these factors make buying your first home, getting back into the real estate market, moving up to a larger home or downsizing your home more of a reality!

CMHC And The First Time Home Buyer

As the Government of Canada’s national housing agency, Canada Mortgage and Housing Corporation (CMHC), plays a major role in Canada’s housing industry. The agency offers numerous housing services including research services, market evaluations, and access to affordable financing choices. Programs include aboriginal housing, residential rehabilitation assistance, home adaptation for seniors independence, public and private partnerships and numerous grants and awards.

For many people, especially first time home buyers, saving the necessary down payment is a challenge. Additionally, with less than 25% of the purchase price to put down, a lender requires mortgage insurance for protection against any payment defaults. CMHC makes it easier for Canadians to obtain a home, by providing mortgage loan insurance. By providing this insurance, CMHC limits the lenders’ risk, allowing the lender to finance up to 95% of the purchase price of a new home. You can purchase a property with as little as 5% down. If the cost is $150,000, you only need a down payment of $7,500.

You can become a homeowner, even if you don’t have a large down payment put aside. You just need to meet the following conditions and home ownership can be within your reach.

* The home must be located in Canada and considered your principal residence.
* You must have a down payment of at least 5% of the purchase price.
* Your home-related expenses must not exceed 32% of gross household income
* Your total monthly debt load must not exceed 40% of gross monthly household income
* You must be able to pay closing costs equal to at least 1.5% of the purchase price.

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My Opinion On The Kamloops Real Estate Market

Over the past couple days I have been through a whole variety of single family homes in Kamloops; upwards of 25 or so listings. I have found that in today’s market the pricing of these properties is all over the place. It appears that there is no consistency in the pricing of listed properties and I think this is because of either the home seller or agent confusion.

First, in my opinion, since the market has dropped some sellers are stuck at 2007 values, where homes were 10% or so higher than today’s market value. We were living in a real estate bubble where housing prices “would never go down” or “buy now or be priced out forever”. It is a fact that when we are in the midst of a housing bubble, people feel like it will never end, probably because of human nature. It is easy to get caught up in the euphoria of it all. I have to admit, that was the feeling I got from a lot of people around me, but I personally felt the change coming. We are now getting back to reality and working towards  a balanced market, but are still far from it. Sellers have to price their homes competitively to sell, there are far more homes rejected from the market because of price in comparison to the number of homes that sell. To get your home sold, price your home right from the beginning. If you as a seller want to reduce, approach your agent, they should welcome the idea.

Secondly, there is this belief out there that prices will return to previous levels in the spring. This is felt by some sellers and Realtors alike. I have a very hard time believing that this could be remotely true. With the incredible uncertainty in today’s economy from job losses to a lack of confidence in the markets, there are no indicators out there that show that the market will return to previous levels anytime soon. This is my opinion of course.

The encouraging news to sellers is that over the past couple weeks I have seen an increase in the number of buyers looking to purchase a home. There are always people that have to sell their home and buy another. The Kamloops Real Estate Board has been reporting more sales lately than we saw last month. The statistics will come out in early February and I will include them here.

If you are thinking about selling your home, my suggestion would be, get it on the market sooner rather than later. There are a number of sellers wanting to go on the market in the spring. Beat the rush and get your property on the market and advertised to the public before the spring rush and  increased competition.

Understanding Market Conditions

real-estate-market

Numerous factors affect the real estate market. There may be more buyers than sellers. There could be more sellers than buyers. Interest rates, employment statistics and pricing. The supply of resale and new homes are also considerations when selling a home. Generally speaking, there are three types of markets that affect the sale of your home. Understanding each of these can make a difference to your bottom line.

Buyers’ Market
Description: There is an abundance of homes on the market. Supply exceeds demand.
Characteristics: Many homes available for sale. Fewer buyers than homes. Homes remain on the market longer. Stable prices. Prices may also drop.
Impact: Less panic in buying. Buyers shop longer for homes. Upon negotiation, they often have more leverage.

Sellers’ Market
Description: There are more buyers than homes available.
Characteristics: Few homes on the market. Many buyers. Homes are sold quickly. Prices often rise.
Impact: Home prices are higher. Homes prices often rise. Buyers purchase quickly, and tend not to shop as much. Multiple offers are common. Sellers may prefer offers with no-conditions.

Balanced Market
Description: There are roughly the same amount of buyers, sellers and number of homes on the market. Supply equals demand.
Characteristics: Demand equals supply. Sellers accept reasonable offers. Homes sell within a reasonable time period. Prices generally remain stable.
Implications: There is less tension among buyers and sellers. There is a reasonable number of homes to choose from.

We have seen exponential growth in the Kamloops real estate market over the past five plus years. Often buyers would have little time to place an offer to purchase a property because of the sense of urgency in the market. Multiple offers was commonplace at that time. This fortunately for buyers has changed recently with the economic downturn. Buyers have time on their side and an abundance of homes to chose from. Today in the Kamloops real estate market we are seeing a strong buyers market. It will not be a buyers market forever, but it is expected that it will be this way for a while. Eventually, the market will cycle into a balanced market, which we have not seen in quite a number of years.

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