As spring quickly approaches, the typical peak period housing market activity is almost here. Only this year it seems to have come early. The statistics for the first few months of 2017 have been off the charts. Bidding wars are everywhere and people are asking when will it calm down. Well today we are going to talk about some of the factors driving these bidding wars and buoyant market activity.
Low Levels of Inventory
It seems month after month the same story emerges. Sales are up 10%+ and listings are flat to down on a monthly year over year basis. As this trend continues, each month the increasing sales are eating up more and more inventory and driving down inventory. We are now at the point where we have very low inventory… not enough houses to go around to meet demand.
Continued Low Interest Rates
Interest rates have been trending down for years and have pretty much held near record low levels for the past year to 18 months. Today you would be looking at 5 year fixed rates in the 2.5% range and variable as low as 2%. These low rates make it easier for the buying public to service more debt and afford to pay more for their homes. This all leads to increased demand from buyers who are willing to pay more for what they want as it is still affordable to them on a monthly basis.
Immigration
The population is growing and a big part of that influx is coming from immigrants. The type of immigrants coming to Canada these days have much deeper pockets than previous generations and hold widely held beliefs in the concept of home ownership and hard assets (such as real estate). This is a large and growing segment of the market, and they also seem to be buying up lots of new construction.
Low Unemployment
Not that many years ago our region had among the highest unemployment rates in Canada. We have rebounded from 10%+ to as low as 5.2% recently, which is below the Federal and Provincial average. Manufacturing is booming again, the economy has become more diversified since the downturn, and now when we talk to business owners their biggest complaints are about difficulties in staffing. What a turnaround it has been and these workers have steady paycheques allowing them to buy larger homes and more of them. Demand increased!
Those are some of the straightforward factors leading to the strength in our local real estate market recently. Next week, we will continue on with some lesser known factors. What has your experience been out there this year?
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