Is Scotiabank's Lending Change A Signal for the Market?

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I wanted to tell you about some of the changes we're seeing in our lending market locally.

Over the last couple of weeks we've been talking about a cooling down shift in the North Delta real estate market, so I wanted to bring up the most timely information from the financial side of real estate, and some news coming out of Scotiabank. They are effectively backing off on lending throughout metro Vancouver.

Basically, Scotiabank is looking at our market and getting a sense that there's too much risk here in Vancouver to keep letting people borrow money to buy a home.

To quote Scotiabank CEO Brian Porter, "We're a little concerned about house prices in greater Vancouver and Toronto." They're effectively taking their foot off the gas, and scrutinizing the transactions coming out of metro Vancouver.

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Lenders are starting to send signals.

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If rates were to increase - which isn't unfathomable - at some of the values people have borrowed, it really is too much risk for the lender, and for the homeowner at that point. Porter says there is a possibility of an upside in these market, but the downside is a very real possibility. If you see money tightening by the banks, it really could have a significant impact on the Vancouver real estate market. If the Provincial and federal governments are failing to take action, then the next would be the lender, and you're starting to see that.

If TD and RBC follow and we see more lenders really clamp down on the deals, then yes, sales are going to slow, and it will have an immediate impact on North Delta real estate as well.

This is very timely info, but please understand, the market is still very healthy here in North Delta. The sky is not falling and the market is not crashing! If you have any questions, please feel free to reach out to me.

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Has the North Delta Real Estate Market Shifted?

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Last month, we talked about the market starting to shift and cool down. Listings had spiked and sales were beginning to level off, which signalled the start of this shift. So, where is the market at now?

This month, sales are still on the decline, and new listings are as well. Active listings have climbed from 158 in April to 169 in May. Meanwhile, sales have dropped from 108 sales to 83. Inventory is growing as we approach a more normalized market.

That said, 184 new homes came on the market in April. We’re not going to see that every month - last month, 137 new homes came on the market. That is a more stable number.

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The sky is not falling and the market is healthy.

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We should also look at the sales to active listings ratio. In March, 95% of active listings sold. In April, that number dropped to 68%. Recently, the ratio has declined to 55%. Don’t be alarmed; remember, as long as the ratio is over 20%, it is still a seller’s market. The sky is not falling and the market is still healthy.

In April, the benchmark price in North Delta was $797,000. Last month, we saw that number spike to $881,300 - that’s a 10% gain! It is also the highest gain in the last 30 days in any community in the entire Fraser Valley. In my opinion, this is a lagging indicator of the market shift. What happened was the inventory from the peak of the market was absorbed and home value shot up. It will be interesting to see those numbers in 30 days, although I expect that they will level off.

If you have any questions, give me a call or send me an email. I would be happy to help you!