Big Changes in Borrowing, The Real Estate Market & Society as a Whole



First off, I want to say that I truly hope that you and your family are doing well. It's hard to believe the state of the world right now and the collective grief we are experiencing, but I'm hopeful it will be followed by great change. I usually don't like to get political on here but I feel it is important to stand on the right side of history and advocate for the Black Lives Matter movement where ever possible. I have been taking a bit of time away from real estate to educate myself, show up at rally’s, donate to causes and share information with my circle of influence. Casey and I are committed to supporting local initiatives and will be donating a portion of every sale for the remainder of 2020. If you have any recommendations of organizations that you see making a direct impact, we welcome your suggestions! We are also supporting One Girl Can, an amazing organization that provides girls in marginalized regions of Kenya the opportunity to receive an education. If you would like any information I've linked their website and video below, or you can always get it in touch with me directly. It's really a time to bring our community together and collectively work towards a better future. Small acts, when multiplied, can change the world.


Now onto real estate, because big things are happening here too.

The most notable is CMHC's announcement that they are making changes to insured borrowing, decreasing purchasing power for buyers that have less than 20% down. Basically, for those looking to push their borrowing to the maximum allowable limit, they will see a reduction of approximately 10% in their buying power. These changes will come into effect on July 1st, 2020. 

** NOTE: Any clients wanting to be approved prior to these changes will need to have an accepted offer sent to CMHC before to this date ** 

In an effort to reduce the practice of borrowing money for a down payment, the agency will no longer treat unsecured personal loans and unsecured lines of credit as equity for insurance purposes. However it is the reduction in debt servicing levels is seen as having the biggest impact on home buyers.

The rule changes laid out in a recent press release are as follows: 

  1. The minimum credit score for at least one borrower must be 680 (increased from 600)
  2. Gross Debt Service Ratio (share of income that goes toward paying housing costs) will be reduced to 35% (down from 39%)
  3. Total Debt Service Ratio (share of income that goes toward paying all debt obligations) will be reduced to 42% (down from 44%)
  4. Insurance premiums will be applied based on traditional payment sources (ie. savings/gifted funds etc.). Non-traditional down payment sources will still be permitted but will not reduce your insurance premium

If you have any questions about how these changes affect you, please reach out! 


So what is the Real Estate Market doing?

We have had countless conversations with other agents in the industry that are feeling the post isolation push in the market right now. It appears that buyers and sellers are also becoming much more active. As Realtors, we have had to be creative in using digital tools to showcase homes and follow safe practices set out by provincial health officers. Showings now involve masks, gloves and the occasional waiver form but in general the adjustments have been fairly minor for us.  The biggest question is what are we seeing in the market with these changes?

For the time being, buyers that have been waiting on the side lines seem to be back in action. We saw 33% more sales in May then we did in April. Benchmark prices have remained steady, with slight increases in certain areas.  The daily number of new listings on the market has returned to seemingly normal levels after very few families listed their homes in the heart of COVID. With low interest rates and stable property prices, it definitely seems to be fueling buyers. I would anticipate that we will see another push before the CMHC rules come into effect as well. Prior to lockdown, we were in a sellers market across the board where multiple offers were commonplace. Similar to most industries COVID really put a pause on the market but that pent up activity appears to be coming back to life.

We live in a beautiful city with an amazing landscape, it will always be a sought after place to live. With all of the sadness around the world and uncertainty South of the border, Vancouver is becoming more and more desirable. We want you to know that we are here to support you and our community as much as we can.  If you have any questions about the market or just want to chat, please reach out anytime. Stay safe!

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