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Northern BC home sales decline in May as higher mortgage rates slow activity

Home sales in the north are plunging at the same rate as the rest of the province according to the BC Real Estate Association.

In May, 427 units sales were made – a 35% year-over-year decrease from the same time last year when 653 homes changed hands.

Chief Economist, Brendon Ogmundson told MyPGNow.com our region has seen an average of 350 sales over the past few months, a slight drop from earlier in the year – but it’s nothing to worry about.

“That’s normal. 350 sales is a normal level for the north but the real question is, given how high the rates are and they are the highest we’ve seen since 2009, are we going to continue to see sales decline over the next six months.”

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Ogmundson added the average price for a home in the north is over 453-grand, a 19% spike from a year ago.

“The north has still seen average prices rising and again, it has nothing to do with supply and demand. Demand is pretty normal in the north and supply remains pretty close to historical lows. It’s also one of the areas where listings haven’t really budged that much.”

In Prince George, the average price for a single-family home is a little bit higher at 533-thousand dollars.

The average residential price in BC was one million dollars, an increase of just over 9% from $915,392 recorded in May of 2021.

However, homeownership in the north could get more difficult if interest rates keep rising.

A new survey from Manulife Bank of Canada suggests one in four Canadians will have to sell if interest rates reach higher levels.

It also shows that 18 percent of those surveyed are already at a point where they can’t afford their homes.

Ogmundson noted the five-year fixed rate is now at 4.69% and it may only get higher.

“Rates are going up really fast and I expect we are going to get to a five-percent, five-year fixed rate by probably early next year but with the way things are going, it could be this year. That is a really different interest rate environment.”

“And it also means that because of the stress test, borrowers are going to have to qualify at seven percent. That is going to have a big impact on the market. I would expect sales to continue to fall well below historical average levels over the next year.”

Currently, the Bank of Canada’s (BOC) prime rate sits at 3.7%, an increase of 50 basis points from April.

However, the central bank stated people who borrowed heavily to buy a home when mortgage rates were low last year could see their monthly payments increase by up to 45 percent when their mortgages come up for renewal in 2026.

It’s forecasting rates of around 4.5 percent in four years’ time.

This would push up payments by between 25 percent for those with fixed mortgages, to as much as 45 percent for those holding variable-rate mortgages.

Ogmundson is of the opinion though that the aggressive rate hikes from the B-O-C could be short-lived if we head into a recession.

“We could see a scenario where the Bank of Canada raises rates aggressively over the next eight months and then starts to cut rates either late next year or in 2024 in reaction to the impact those rates are having on the economy.”

with files from Vista Radio newswire

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