Garry Marr has covered Canadian housing for the Financial Post for more than 25 years, and in his latest column he says he can’t remember the mood being worse. What struck him was where the gloom came from: a panel of real estate people at a conference hosted by the research firm Veritas.
Steve Saretsky, the Vancouver market analyst, said he expects prices a decade from now to be only slightly higher than today, short of inflation. Then he named my city. Someone who bought a Surrey presale condo in 2022, he said, could be “waiting a long time to get back to your cost basis.”
The numbers behind the mood are real. CREA put the national average price at $666,538 in September, down 1.6 per cent in a year and well below the $824,192 peak in February 2022. Sales are running at about 450,000 a year, against 775,000 at the top in early 2021. CREA now represents a little over 155,000 realtors, down from 160,000 a year earlier.
Ron Butler, a veteran mortgage broker who remembers the 1990s, reminded the room that after that downturn it took until about 2012 for prices to recover in real terms. I don’t know if this cycle will be as long. Nobody does. But I do know who feels it first: people who bought near the peak and now have to deal with a lender.
If you bought in 2022, check your equity before your renewal
Many 2022 buyers will renew in 2027 on a five-year term, or sooner on a three-year term. If your home is worth less than you paid, your loan-to-value is higher than it was at purchase, and that changes your options.
If you put 20 per cent or more down, your mortgage is probably uninsured, and lenders can’t lend more than 80 per cent of value on an uninsured mortgage. If the value has dropped enough to push you over that line, moving to a cheaper lender at renewal gets hard, and refinancing to pull out equity may be off the table. You could end up renewing with the lender you have, on their offer.
If you put less than 20 per cent down, your mortgage is insured. You can usually move it to another lender at renewal as a straight switch, as long as you don’t add to the balance.
So start early. Four to six months before your renewal, get a realistic value range, not the assessment or the peak price, and look at all your options while there’s still time to act.
Borrowing against your home in a cautious market
Appraisers work from recent sales, and in a slow market many of those are sales by owners who had to move. Values come in conservative. Lenders tighten too. A refinance that would have worked in 2022 may now come up short.
If you’re planning to consolidate debt or take out equity next year, work the numbers on a conservative value. If the plan only works at the top of your estimate, it’s too tight.
And if you’re on the sidelines
Saretsky also said a market this gloomy is a good time to make low offers. Marr ended his column with an old editor’s advice: when everyone says it’s the best time to buy, get out. Right now, everyone says it’s the worst time to get in.
If you bought in Surrey in 2021 or 2022 and your renewal is coming, call me. I’ll give you a realistic value range and show you which lenders could take your file at renewal.
