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There are signs in Canada that interest rates may not stay low for long. Eventually, the pressure to tackle higher inflation will result in higher interest rates for Canadian. With more housing inventory and slower sales, any spike up in interest rates will affect buyers sentiment.
Housing inventory and sales
The all time high building activities in the province of British Columbia ad new homes have to be absorbed at a healthy clip to avoid build up of inventory. Presently, Fraser Valley is reported to have around 5 months inventory. If inventory continue to build up, pressure for more discount or price reduction can be exoected.
Any down turn or softening of the Canadian housing market will further reduce sales and eventually put pressure on home prices.
Affordability in Greater Vancouver is a major problem for home buyers. Presently, rental income hardly covers half the monthly mortgage payment. Investors unloading their investment properties will add more inventory to the market place.
A more sensitive tracking of the market is to follow the sales and monthly average prices on a month-over-month rather than the year-over-year comparison.
