These are not normal times for Canadian real estate and especially not for residential homes in the Fraser Valley. We are witnessing extremely low inventory levels. There is unbelievably high demand. Many potential buyers are pre-approved with rate holds of very low mortgage rates. Nearly half of all buyers in the past year have taken variable rate mortgages, because of the exceptionally low rates in and around 1.5% currently.
The fear of missing out (FOMO) is palpable. The average days on market for homes to sell is exceptionally low, by historical standards. Price increases have been incredible recently. Gains of 30, 40 or even 50% have been common over the past year. Such rapid escalation of prices is unprecedented in Fraser Valley real estate history. Especially, when it's across all markets and all property types, all at the same time.
Given the backdrop noted, it's easy for new or first-time buyers to get caught up in the craze. I fear, however, that some young or inexperienced buyers may make some regretable purchasing choices in this frenzied market. I advise great caution on the part of prospective buyers. Especially young people and first-time buyers. The buying decisions you make now can have life-altering consequences later on.
Please ensure that you have stress-tested yourself thoroughly against a future higher mortgage rate environment. Will you be able to comfortably live a balanced and secure life, if mortgage payments eat up a greater proportion of your household income? Rates are all but guaranteed set to rise in 2022, barring any unforeseen black swan event (God forbid). It's important to factor in housing related expenses, beyond just your mortgage payment. Rising property taxes, home insurance costs, maintenance expenses, utility bills etc. can all quickly eat up most or all of your income. Especially at today's extremely high prices.
I advise that all buyers properly take a big picture view of their financial structure. Please ensure that you can maintain a balanced and sustainable financial footing if you are choosing to take on a huge mortgage. Can you comfortably save for an emergency fund, retirement, schooling, vacations and leisure activities etc.? If not, you should really revisit what type of housing (if any) you can honestly afford to carry.
Recency bias can be dangerous. Recent market extremes in terms of low inventory, high demand, low mortgage rates and rapid price gains are unlikely to be sustainable for long. The limits of demand and affordability will eventually be reached. The market will reset and rebalance. The pendulum will swing back into balance. It always does.