Elephant in the Room: Mortgage Renewals for 2024 & 2025

If you really want to know what’s happening in Pemberton’s real estate market – and more importantly – where it’s headed – it’s important to go beyond the headlines and the pretty infographics you see on social media. Below, you’ll find our in-depth analysis – including a really, really important risk that every homeowner needs to understand.

What the October 2023 Stats Tell Us

Average Home Prices Are Up a Bit

  • The average Year to date price of a home in Pemberton was $– 1,424,188 year to date that’s up 9 % from October 2022 and essentially a flat . October 2023.
  • in Whistler it went up 8% , where the average price in October 2023 was $4,974,400 up from $4,176,700 in 2022.

So that’s good news, right?Not so fast. 

Volume of Sales DOWN, New Listings UP, Active Listings AY UP 

  • There was  6% up in sales for Whistler year over year  October 2023 vs October 2022 – The number of NEW listings was up 60% (‘new listings’ means homes listed for sale during the month) 
  • The number of ACTIVE listings was up 70% (‘active listings’ means the total number of homes for sale on the last day of the month)
  • Months of inventory in Whistler is 6 months
  • Days to sell your house in whistler is 176.
  • New house  listings in Pemberton,is down 8 % over 2022.
  • Months of inventory in Pemberton is currently 18 months .
  • Days to sell a house in Pemberton is 49.

What does this mean? More properties are sitting on the market – in fact, at the current volume of sales, it would take over 6 months in whistler and 18 months in Pemberton to sell everything that’s listed for sale if no other homes came on the market. This indicator is called ‘Months of Inventory’ – a signal of who’s in charge and where the market is headed. When ‘months of inventory’ rises above four months, REALTORS consider this a ‘buyer’s market’ – meaning the buyers hold the negotiating power. A buyer’s market can also signal lower prices on the horizon. Caveat: I’ve been selling real estate in Pemberton for a loooong time and can tell you that Pemberton homeowners don’t always follow predictable patterns. I can think of at least four times in the last 15 years where listings were up and sales were down – and rather than the higher inventory driving prices lower, we saw home sellers take their properties off the market and choose to wait….and within in, 2017, 2020 and 2022, the buying opportunity was short. Of course, the market conditions right now are VERY different, so it’s hard to know what will happen. 

It’s Taking Longer to Sell a Home

In October 2023, it took the average Whistler home seller 60 days to sell a home –Correctly Priced Homes are Still SellingThe homes that are selling right now are the ones that are priced to reflect the current market conditions. Pemberton buyers (and their agents) traditionally don’t love to negotiate, so if your home is listed for sale and not getting any showings, it might be time for a price reduction. While the strategy of pricing high and planning to negotiate is successful in many other cities and provinces, it’s not usually a great strategy if you’re selling to Pemberton buyers.

All Things Are Not Created Equal

The real estate market is hyper-local and we see different trends when we dig deeper by geography and type of property. While a neighbourhood analysis is beyond the scope of this blog, it’s the most important factor if you’re a buyer or seller, so make sure to get detailed data from your agent. Here’s how prices fared in Pemberton  and how prices were impacted depending on the type of home. 

% Price Change Oct 2023 vs Oct 2022

What the Economic Indicators Are Signalling

The unemployment rate is down to 5.8% (from 5.9% in September)… this is because there are more part time jobs than full time .  October's inflation rate fell to 3.5% (from 4% in August). It’s going in the right direction but is still far from the government’s target of 2%. The Bank of Canada overnight rate (the interest rate used when banks borrow money) remained unchanged at 5% in October. That compares to an overnight rate of 3.8% in Oct 2022 and 0.25% in Oct 2021. The prime rate (the interest rate set by Canada’s large banks and used to set variable interest rates) in October 2023 was 7.2% (up from 5.5% in Oct 2022 and 2.45% in Oct 2021). To put that in perspective, let’s look at how monthly payments for an $800,000 mortgage (amortised over 25 years) changed if a lender was charging the prime rate: October 2021: $3,564October 2022: $4,883October 2023: $5,702

The Elephant in the Room: Mortgage Renewals

As interest rates have increased over the last 18 months, every homeowner with a mortgage has been affected…though some may not realise it yet – and that’s one of the biggest risks to the Pemberton & Real estate  real estate market.Homeowners with variable-rate mortgages have seen their borrowing costs increase with every interest rate hike.Mortgagees with variable-rate, fluctuating payment mortgages (common with lenders like Scotiabank) have already felt the brunt of the interest rate hikes, as their mortgage payments have regularly increased over the last 18 months. The chart below shows how payments changed for someone who took out a variable mortgage in March 2021 at a rate of Prime + 0.95%: (source: Moneysense)

But mortgagees with fixed-payment variable mortgages (like at the Royal Bank) haven’t yet felt the pain in their monthly payments – but, and this is VERY important – the percentage of their payment that went towards paying interest vs principal increased, which means they paid off less of the principal, effectively increasing how long it will take to pay off their mortgage (the amortization). Instead of 25 years, their amortization may now be 30, 40, 50, 60 years or more – which, of course, isn’t technically possible and will have to be adjusted when the mortgage renews.Mortgagees with fixed-rate mortgages will also face pain at renewal time, as the new interest rates dramatically increase their payments. Any significant change to the terms (for example, moving to a new lender) will also mean homeowners need to requalify at the stress mortgage rates (equal to the current rate +2%).Lenders predict that 60% of Canadian mortgages are coming up for renewal in the next three years – mortgages taken out during the once-in-a-lifetime-COVID-era low-interest rates. A lot of homeowners will be in for a big shock.
  • In 2024, $186 billion of mortgages will be up for renewals and will experience a weighted average payment shock of 32% – meaning that the variable mortgagee will be paying up to 32% higher mortgage payments than they were before.
  • In 2025, $315 billion of mortgages are up for renewal.
If the average Canadian renewing a mortgage in the next two years is facing a 32% increase in mortgage payments, the real estate market will certainly be impacted. We’ll see more people unable to make their payments, leading to more distressed sales – and we’ll see fewer people upsizing, as people focus on affording the current house instead of the next one.If this sounds scary, it’s because it is – too few homeowners are ready for what’s coming.Of course, none of us can predict the future. Interest rates might decrease and new mortgage amortization rules might help ease the burden. Neither the government nor the banks want to see the housing market collapse – but the short-term risk is real.

Advice for Sellers

Despite the turbulence in Pemberton’s real estate market, homes are still selling – but you need to be patient and have ALL the critical elements in place. That means:
  • Strategically setting the right asking price – at or below the last comparable sale. Price for where the market is going, not where it’s been. You won’t get March 2023 prices in October, so when looking at sold prices, focus on what happened in the last 30 days. 
  • Optimising the look and feel of your home – With more inventory sitting on the market and buyers hesitant to make moves, your home needs to be clean, tidy and professionally staged to stand out from the rest. Work with your REALTOR to reduce the likely objections and make your home look its absolute best.  
  • Stunning photography and marketing beyond the MLS if you don’t want to get overlooked. While marketing won’t fix a pricing problem, it’s important to be exposed to as many potential buyers as possible.
  • If you aren’t motivated to sell, consider pulling your home from the market. If you’re ‘testing the market’ or hoping to get an above-market price, now is not the time. The economic indicators don’t point to a quick recovery in a few months, so if you terminate your listing, be prepared to hold onto your property for an extended period vs. just planning to re-list in the new year.
  • If you are motivated to sell, make sure the buyers know it – Use price, language and marketing to signal that you are serious about selling. Price beneath your competitors and listen to the market. 
  • Be patient. We know that selling your home is inconvenient, but the average home in Pemberton is taking 32 days to sell right now – and that number is expected to increase – so try not to panic until you’ve been listed for longer than average. And when you cross that threshold, work with your agent to make strategic decisions instead of emotional ones. 

Advice for Buyers

  • You’ve got choices! With a 50% increase in the number of homes on the market right now, there are plenty of good options to choose from in most neighbourhoods. This isn’t a luxury we often get in Pemberton, so enjoy it while it lasts.
  • Have your ducks in a row – Get pre-approved for a mortgage so you know exactly how much you can afford and what your payments will be.
  • If you aren’t a first-time buyer, consider selling before buying. Knowing with certainty that your current home is sold – and for how much – will make the upgrade/downgrade decision that much easier.
  • Don’t be afraid to negotiate – there are some motivated sellers out there, and the list price might not be reflective of the price they are prepared to accept.
  • You aren’t alone – there are plenty of other buyers out there right now, watching and waiting just like you. If the right property for you comes along and you can make the $$ work, seize the opportunity to buy a property without a bidding war.
  • Think long-term and remember that your home is just that – a home. If it serves an investment goal too, consider that a bonus.