Housing prices cool though sales still brisk

In the mid-1970s a then-hip, but now aging, rock group named Supertramp released a breakthrough album called “Crisis? What crisis?” — a title that echoes the current state of Canadian real estate. For months, experts have been saying that spillover effects from the tough global economy will eventually hit the housing market here, as in many other international cities. Yet while that may happen, we’re still waiting.

“There was no shortage of headline news in October about global financial market volatility and economic uncertainty. But it doesn’t appear to have dampened homebuyers’ spirits,” notes Gary Morse, president of the Canadian Real Estate Association (CREA). “Interest rates are at low levels and are likely to stay that way for some time to come, [and] homebuyers clearly see opportunities.”

CREA itself was one of those experts fooled. Earlier this month the organization was forced to boost its forecast for home sales activity, via its Multiple Listing Service, for both this year and next. CREA now expects that 453,300 homes will be sold this year, up from its earlier prediction of 446,915 units. That would bring the increase in home sales up from 0.9 per cent to 1.4 per cent.

 Top 10 least expensive cities to buy a home

Continued strength in residential real estate data
The Canadian housing industry seems to be performing well all around. Home sales edged up again in October to their highest level since January. In addition, the average price of homes sold in October (actual, not seasonally adjusted) came in at $362,899, a 5.5 per cent increase since the same month last year. While this was the smallest increase this year, the momentum is in the right direction, far better than in the United States where the housing market has yet to show convincing signs of bottoming out.

With continued strong resale activity and pricing, it should come as no surprise that homebuilders have also been active. According to the Canada Mortgage and Housing Corporation, housing starts came in at 207,600 units last month on a seasonally adjusted annualized basis. While that total is down slightly from the 208,800 units started in September, the number is unusually high. That’s true compared to other western economies where construction has been seeing hard times relative to historical averages and with regard to traditional demographic trends, such as immigration and new household formation, which create annual demand for about 175,000 new units, far below current construction levels.

Affordability remains strong
As CREA’s Morse noted, part of the reason for continued demand stems from housing affordability trends, which remain positive. Just how positive was confirmed by RBC Economics earlier this month when it released its quarterly “Housing Trends and Affordability Study,” which concludes that uncertainty overseas might actually have had somewhat of a positive effect in Canada.

“Developments related to the [European sovereign debt] crisis likely provided some benefits in the form of lower interest rates,” concludes Craig Wright, the financial group’s chief economist. “For instance, fixed mortgage rates [on a five-year, posted basis] eased to 5.3 per cent during the third quarter of 2011, from an average of 5.6 per cent in the second quarter.”

Top 10 most expensive cities to buy a home

In addition, the Canadian economy continues to perform well relative to other western economies. Despite a drop last month, job growth remains positive, inflation is under control and gross domestic product remains on an upwards trajectory.

Yet despite the Canadian residential real estate sector’s continued strength, homeowners and shoppers would do well to remain vigilant, says one expert. “The combination of Europe debt crisis and the U.S. Super Committee failure [to reach a budget cut deal] has spiked financial and economic uncertainty,” notes Sherry Cooper, chief economist at BMO Capital Markets. “All businesses and households are impacted by these developments, even in stable, prudent Canada.”

For now, in Canada it seems like business as usual, with housing sector stakeholders asking themselves, “Crisis? What crisis?”

Peter Diekmeyer is Bankrate.ca’s economics columnist.

By REUTERS, , Updated: January 17, 2011 4:34 PM

By Ka Yan Ng and David Ljunggren

TORONTO/OTTAWA (Reuters) – Canada moved on Monday to tighten its mortgage rules for the second time in less than a year, citing the need to prevent the kind of housing market problems that led other countries into financial crisis.

The new rules, designed to ensure Canadians don’t take on more debt than they can handle, took aim at mortgage amortization, refinancing and the use of lines of credit secured by homes.

Many U.S. homeowners borrowed against the rising value of their houses and refinanced mortgages to fund spending in the run-up to the global recession.

Finance Minister Jim Flaherty, who warned that Canadian interest rates were bound to go up, said the new measures would “have some moderating effect on the (housing) market.”

“The main reason we’re taking the action is for the longer term, that we avoid even the beginning of the development of the kinds of issues that have happened in some other countries, that have been very damaging to families,” Flaherty said.

Canada’s housing market avoided the meltdowns seen in countries like the United States, Britain and Ireland during the global recession. Resale prices dropped in 2008, then rebounded sharply the following year thanks to low mortgage rates that made it easier for customers to borrow money.

This sparked a rise in borrowing that has alarmed some policymakers. Recent data from Statistics Canada shows Canadian household debt has risen to a record C$6.1 trillion, or 148 percent of disposable income.

Flaherty said the insurance had become “particularly risky” because some Canadians were using the lines of credit to buy things like boats, cars and big screen televisions.

The opposition New Democratic Party said the government should be focusing on job creation and not scolding Canadians on how to spend their money.

“Household debt is a result of the high cost of living, not big-screen TV purchases… Try paying your housing and heating bills on a precarious part-time job,” the party said in a release.

SMALL IMPACT, BUT BIG MESSAGE

The rules are the latest in a line of baby steps the government has taken to cool the housing sector, while repeatedly saying it sees no signs of a housing bubble.

The last round of changes, announced in February, included requirements that borrowers have the resources to qualify for a five-year fixed-rate mortgage even if they decide on a lower-cost variable rate mortgage.

The previous changes, combined with higher interest rates, helped cool the housing markets from its red-hot pace of a year ago. Many observers now describe the market as balanced.

Industry reaction was supportive. The Canadian Association of Accredited Mortgage Professionals said there was a “fine line” between the health of the real estate market and to make sure Canadians do not overextend themselves.

“The actual impact will likely be smaller than the message,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. He added that the amortization period change was a prudent tweak and not an overhaul.

“The real key here is that the first-time buyer wasn’t impacted negatively by this announcement. Refinancing impacts people who are in homes and it directly targets people’s indebtedness, but it shouldn’t take real estate transactions off the table.”

The measures announced to limit the maximum amortization periods will probably affect a “minority” of mortgage applicants, and a 30-year limit is “sustainable,” said Gerald Soloway, chief executive at mortgage lender Home Capital Group.

“The effect won’t be that great. I think it amounts to about C$100 (a month) on a C$300,000 mortgage,” said Soloway.

For Canadian banks, the new rules may add to a slowing of personal loan growth, but analysts said a slowdown had already been expected due to expectations of higher interest rates, more prudent lending practices on the part of banks, and the possibility of tighter mortgage standards.

“I don’t expect the new regulations to have a massive change on the trajectory of loans from the banks, largely because I think the banks knew this was coming,” said Craig Fehr, a Canadian bank analyst at Edward Jones in St. Louis.

BANK OF CANADA WATCHING

Flaherty said the timing of Monday’s announcement was not linked to Tuesday’s interest rate announcement from the Bank of Canada, which has sternly warned about the risks of growing public indebtedness.

While the Bank of Canada could also cool the housing market by raising interest rates, many analysts think it is reluctant to move too soon ahead of the U.S. Federal Reserve because this could send the Canadian dollar to fresh multiyear highs.

Market operators overwhelmingly expect the Bank of Canada to keep rates unchanged on Tuesday, although many think it will have raised them at least once by the end of May.

“There had been some talk of the Bank of Canada raising rates earlier in order to slow the growth rate of household debt, but we think that today’s announcement will help to quash that idea,” said TD Securities analyst David Tulk.

The sentiment was echoed by BMO Capital Markets economist Michael Gregory, who said the reduced amortization “should soften the demand for homes/mortgages below what they otherwise would have been.”

The adjustments to the mortgage insurance guarantee framework will come into force on March 18. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18.

(Additional reporting by Cameron French in Toronto, Editing by Janet Guttsman, Jeffrey Hodgson and Rob Wilson)

Rebecca Barton, Vernon
11/4/2010

Sales activity has remained slow in the Shuswap. However OMREB is reporting a decline in the number of new listings showing a correction in units available for sale. Overall sales were down just over 45% in October compared to the same month last year. However sales activity year-to-date is just off the mark compared to the first ten months of the previous year. OMREB Director Karen Singbeil says the Shuswap continues to be affected by the loss of recreational and investment buyers. She says current conditions are very ripe for buyers for a variety of reasons including attractive pricing and flexible conditions by sellers.

Issue No. 101 “Representing Your Best Interest!!”
August 26, 2010

Bank of Canada To Raise Rates a Third Time in a Row?

It is widely expected the Bank of Canada will raise it’s prime lending rate by .25% again September 8 bringing the Bank Prime Rate to 3.00%. While the Variable Product is still very attractive, the reduction in 5 year rates to 3.69%, puts the “what product to take question” once again the million dollar answer:) I say fixed, in case anybody wants my vote!

Stay tuned for rate updates as they occur!

Managing Broker, Rod Minnes

Rates as of August 26, 2010

Fixed Rate Mortgages

6 month convertible 4.65%
1 year open 6.70%
1 year closed 2.44%
2 year closed 3.20%
3 year closed 3.65%
4 year closed 3.89%
5 year closed 3.69%

Variable Rate Mortgages
5 year closed – Prime* – .65% ****
5 year open – Prime* + .80%

Home Equity Line Of Credit

Please call for product availability and rates.

Information from sources deemed to be reliable. Product availability and borrower qualification apply.

*Prime = 2.75%

Getting Real

Garry Marr, Financial Post; With Files From Paul Vieira · Saturday, Aug. 7, 2010

Erica and Jeff Manger never thought the price of their house could drop.

The Alberta couple bought a condominium in the Rockies resort town of Canmore three years ago and when they decided to move in 2008 to Sylvan Lake in Alberta, where they could afford a detached home, they kept the condo as an investment.

“It never occurred to us that we wouldn’t be able to sell for what we paid,” says Ms. Manger. “People were making $100,000 [on paper] a year on their condos.”

Now they’d be lucky to get the $315,000 they paid for their condo, even though it may have fetched $345,000 in 2008 when they were thinking about selling it to help pay for their new home. Instead, they’re getting $1,100 a month in rent for an investment that costs them $1,800 a month to carry and isn’t going up in value.

It gets worse. They have to sell the house in Sylvan Lake because Jeff, who is a helicopter pilot, is looking for a better location for work. They paid $375,000 for the house and fixed it up. Not even counting Jeff’s labour, the couple spent another $30,000 on supplies.

“We tried to sell it and put it up for $409,000. We lowered it to $385,000 when we hired a realtor, but that didn’t work,” says Ms. Manger.

“We lowered it again and now we are down to $374,900,” she says about the home that has now been on the market for two months. “We’ve lost all of our down payment, which was almost $30,000.”

Their tale is one not often heard over the past decade, the longest bull run in Canadian housing history. People have been competing wildly for homes and double-digit annual price increases have been the norm. The market corrected slightly in 2008, but the correction was short-lived. Average prices in Canada dropped 10.2% in the first quarter of 2009 from the previous year, but rebounded dramatically. By the fourth quarter of last year, prices had jumped 19.1% from a year earlier.

But the market appears to be slowing again. Last quarter, prices were up just 5.2% from a year ago and July sales dropped as much as 40% from last year in some major markets. Even if there is no U.S.-style collapse, everybody from the consumer to the mortgage broker to the real agent may have to accept a new real estate reality: For the first time in a decade, housing might become boring, with flat sales and price increases just ahead of inflation.

John Andrew, director of the executive seminars on corporate and investment real estate at Queen’s University in Kingston, understands why people have been accustomed to a booming market. “It is all they’ve ever known,” he says. “There are a lot of people who, for their whole adult life, there has been the perception that residential real estate does nothing but go up.”

Don Lawby, chief executive of Century 21 Canada, who has been in the business since 1974, says no other time beats this past decade for housing. “We’ve had up and down, but this has been very good.”

But like many, he’s forecasting a more balanced market and that means people’s mind-sets will have to change. They might have to wait a little longer for a sale, or price their homes a little lower.

“In the 1990s, it wasn’t abnormal to see a home sit on the market 30, 45, 60 days,” says Mr. Lawby. “People have more of an opportunity to look now. Houses that are priced right will get an offer and won’t sit. But if you have 25 homes sitting on the market at $400,000, people will look around because they know they are not all going to sell overnight.”

Sellers may have to get used to the fact price increases will go back to the historical norm — a few steps ahead of inflation. “You’ll get cost of living and a bit,” says Mr. Lawby.

What to expect next from the housing market has become a major guessing game among economists, consumers and those in the real estate community. There is little doubt that the spring market this year got an extra push from the one-time impact of tighter mortgage rules and the new harmonized sales tax in British Columbia and Ontario, which pushed people into buying.

“What is going to be the new norm is the $64,000 question and it’s still a very real debate,” says Douglas Porter, deputy chief economist with the Bank of Montreal. “Did the market wildly overshoot or was it really just responding to the steep decline in interest rates?”

Mr. Porter doesn’t see housing continuing at the same pace. “It’s tough to see big further gains on top of what we’ve already gone through,” he says. “I do think people have to get used to a more subdued reality. There is a feast-or-famine reality to the Canadian housing market and it’s been mostly feast for the last 10 years.”

Traditionally, the real estate industry sold the safety and stability of housing compared with investing in the stock market. But over the past decade, the story has been capital appreciation. Statistics from the Canadian Real Estate Association (CREA) say the average house price has climbed 110% over the past 10 years. During the same period, the S&P/TSX composite index had a total return of about 40%.

During this last cycle the ranks of brokers and agents swelled enormously. There are about 18,000 to 20,000 mortgage brokers in Canada, including agents called sub-brokers in British Columbia and associates in Alberta, says Jim Murphy, chief executive of Canadian Association of Accredited Mortgage Professionals. Although it is hard to compare the numbers with a decade ago, since many provinces did not have the licensing requirements, Mr. Murphy estimates the ranks have more than doubled in 10 years.

The number of real estate agents has also climbed — CREA says there are now 100,000 realtors in Canada compared with 63,950 a decade ago.

Rod’s Musings

Credit Score – How It Is Determined and What You Should Know About It!

As I sit across from a client, retrieving their credit score, and letting them know it is good at 700 or bad at 450, the blank stares coming back tell me that outside of we who work in the industry, many do not have the slightest idea of what their score is, how it is determined, and in some cases how to fix it!

Most lenders today have a benchmark score of 600, under this score, good luck, higher rates, more downpayment, tougher to get financing, simple as that!

600-680, believe it or not, still in doubt for approval as far as a mortgage is concerned, even with a credit score in this range there could be items that are negative enough to lead a lender to decline your application. 680 and over (highest I have seen is 820) and you are probably a shoe in for financing of some type depending on your income.

People, however, are curious to find out how the credit score works, because the bottom line is, the better your credit score, the less money will usually have to come out of your pocket when it comes to finances.

The credit bureau is a detailed description of your credit records, past and present., previous employers, and home addresses, even previous names (married etc.) For each credit facility, the report shows the date the credit was opened and closed, the most recent date it was used, the limit, the balance, the minimum or regular payments, and whether the payments are or were made on time.

On another note, the credit score is only a snapshot of your credit history at a particular point in time – a numerical summary of how you are using or have used your credits. The two major Canadian credit bureaus, Equifax and Trans Union Canada, call this credit score a Beacon Score and Emperica, respectively. This score is used as a reference by lenders to determine the risk that you pose to them.

Although the full analysis of factors that affect your credit score is beyond the scope of this article, here are some of the most important points that you should be aware of.

Past Payment Performance
The less late payments you have on your credit facilities, the better your credit score will be. When you’re making a payment on your credit card, it doesn’t really matter if you’re making a minimum payment or paying it out in full. As long as you make the minimum payment by the “due date” your credit will not be negatively affected. And if you’re forgetful in making your payments by the due date, you can arrange the minimum payment to be automatically taken out of your personal account – this way you won’t have to think about it.

Utilization of Your Credit Facilities
It’s better to have a few cards with lower balances than a couple of cards with near-to-limit balances. Having near-to-limit balances on your credit cards suggests that you might be in a financial difficulty, which could affect lenders’ decision in granting you additional credit. On another hand, having too many cards with high limits could also affect you negatively as you technically have access to a vast amount of credit, which, if drawn, would be subject to high minimum payments.

How Often Your Credit is Checked
You are allowed a couple of inquiries a year, after which your credit score is affected! If your credit is verified several times over a short period of time, your score could be severely affected. For example, if you’re shopping for a mortgage and submit pre-approval requests at several banks, chances are each bank will check your credit history, which could negatively affect your credit score.

How Long You Have Had a Credit History
The longer you’ve been taking proper care of your credit obligations, the better your credit score will be. Credit building is an ongoing process and the sooner you start, the better for you. Even if you have to put up a security against your first credit card, I strongly advise you to do it, as it will be worthwhile in the long run. Use your credit card as often as possible and make your payments on time – this will help you build your credit faster. You will be surprised how fast you will start receiving offers from other lenders once they see how diligently you’re using your credit.

In order to maintain a good credit score, it is advisable that you monitor your credit history on a regular basis. Several experts in the field suggest that you check your credit history annually to verify no inaccurate information has mistakenly been attached to your personal credit file. For a small fee you can obtain a personal credit bureau report from Equifax (www.equifax.ca) or Trans Union (www.tcu.ca) web sites. Things can appear that we have no knowledge of, we see it daily. If you find collections or judgements against you, clear them asap, as these will significantly decrease your score and your chances of obtaining a mortgage, even one item!

Have a look to see WHO IS pulling your bureau, make sure they are or have been authorized to do so! There is a lot more identity fraud going on these days, check the addresses and employment information on the bureau as well to make sure it all fits. False information on these lines may give rise to suspicion that someone else is using your name and credit.

A customer is the most important visitor to our business.
They are not dependent on us. We are dependent on them.

They are not an interruption in our work.

They are the purpose of it.
They are not an outsider in our business.

They are part of it.
We are not doing them a favor by serving them.

They are doing us a favor by giving us an opportunity to do so☺

By Garry Marr, Financial Post June 10, 2010

‘You know, you’re making the biggest mistake of your life. The housing market is going to fall.”

I got this great piece of advice from another journalist at the Financial Post, who has since left the newspaper, after buying my first home. Not exactly the type of thing you want to hear after taking on huge debt and making the biggest financial decision of your life.

Lucky for me, I didn’t heed that advice about Toronto’s red-hot real estate market — in 1998. I’m not going to say I made a shrewd business decision 12 years ago, or even six years later when I bought a larger house.

For me, it wasn’t a case of not following what turned out to be bad advice from a fellow business journalist. Nor was it about trying to time the market.

I was simply following the same pattern as most Canadians: I got married and decided to stop renting and buy something. Later came the need for a bigger home when the second kid was on the way.

Which brings us to today. The supply of housing is rising fast as people try to list their homes for sale before the market “crashes.” This is happening at the same time that demand is starting to wane. Economists and even the real estate industry, are all predicting a correction — the only argument being how severe it will be.

So, the question for anyone buying is: should you wait?

Don Lawby, chief executive of Century 21 Canada, thinks the strategy of waiting for a crash is not going to work during this economic cycle. “For a market to crash, you have to have people who are desperate to sell,” says Mr. Lawby. “People will [only sell] if they can’t afford their mortgage or they don’t have a job.” He doesn’t see a decline in prices, “unless you are predicting that mortgages will renew at a hefty premium — which is not the case — or a whole bunch of people are going to lose their jobs.” Mr. Lawby believes neither will happen.

And, he adds, you are really into a risky game if you are timing the market. “A house is a home. If all you are doing is looking at it as an investment — that’s what happened the last 15 years — it’s not just that. It’s a place to live and a place to raise a family,” says Mr. Lawby. Even Benjamin Tal, a senior economist with CIBC World Markets, who, last month, said in a report that Canadian housing is 14% overvalued, has doubts about playing the market. But he suspects that’s exactly what some Canadians will do.

“Is there a sense that prices will go down and people will wait? I think it might be an issue,” says Mr. Tal. “It won’t be the main reason [people don't buy], but it will happen at the margins. The fact that people sell at the peak and wait to buy is a normally functioning market.”

But even if you do make the right call on housing prices, it could end up backfiring on you in other ways. For example, if interest rates rise fast enough, any gains you make on price could be erased by interest charges, says Mr. Tal. Edmonton certified financial planner Al Nagy says you need to think of your house the way you think about any long-term investment. “Whether it’s an investment for use in your retirement or a house to live in, it’s a long-term thing. The timing becomes less critical than it would be if it is a speculative [investment].”

And he says making a call on the housing market is as tricky as any other investment call. “It’s very rare you catch the bottom. You can’t let the market dictate when it’s time to buy. The time to buy is when you can afford it,” says Mr. Nagy.

I’m not sure that philosophy would fly with my former colleague, but the problem with timing the market is: what if your timing is off ?

gmarr@nationalpost.com

© Copyright (c) National Post

Dedication, skill, and professionalism earned RE/MAX realtors the designation of Most Trusted Residential REALTOR in Canada by Reader’s Digest magazine. Reader’s Digest will unveil its “Most Trusted Brands” list in its May 2010 issue. The magazine commissioned independent third party Harris/Decima to conduct 1,500 online surveys among a random sample of its panel members from October 2 – 15, 2009.

“The results of the survey are proof positive that our sales associates are the best in the business,” says Michael Polzler, Executive Vice President, RE/MAX Ontario-Atlantic Canada. “We’ve built a solid reputation based on consistent results. RE/MAX associates sell one in every three homes in Canada and carry more professional designations than any other realtor in Canada.

We’re specialists in all niches from residential, recreational, and commercial properties to luxury homes. Our focus has always been service excellence, which includes a serious emphasis on professional development and education.

The status quo may work for some, but after almost 40 years in the business, we’re not content to rest on our laurels.”

Reader’s Digest looked at 28 different product categories – ranging from cereal to residential real estate – and allowed consumers to select the brands that they trusted the most. RE/MAX joins leading brands such as RBC Royal Bank, TD Canada Trust, Air Canada, and Blackberry.

“Our commitment to the communities in which we live and work also runs deep,” says Polzler. “I think that’s something that has always set RE/MAX apart. We’ve been involved in charitable giving long before the terms ‘corporate philanthropy’ and ’cause marketing’ were common. RE/MAX realtors participate in countless vital programs and causes each year that help the most vulnerable members of our society and strengthen the foundation of neighbourhoods from coast to coast. Their enthusiasm, spirit and dedication to others never fails to inspire.”

Charitable giving is woven into the fabric of the RE/MAX organization.

The company and its sales force has demonstrated a strong desire to give back, exceptionally active in both corporate and local charities. Close to $40 million has been raised in support of Children’s Miracle Network since 1992 – which funds research and development, outreach programs and upgrades to equipment and facilities at children’s hospitals and foundations across the country. The Canadian Breast Cancer Foundation is also a cause close to the hearts of RE/MAX associates – one that RE/MAX continues to support through its popular Sold on a Cure Program and the annual Yard Sale for the Cure.

RE/MAX is Canada’s leading real estate organization with over 17,500 sales associates situated throughout its more than 680 independently-owned and operated offices across the country. The RE/MAX franchise network, now in its 37th year, is a global real estate system operating in 80 countries. Over 6,450 independently-owned offices engage over 92,000 member sales associates who lead the industry in professional designations, experience, and production, while providing real estate services in residential, commercial, referral, and asset management. For more information, visit: www.remax.ca.

RE/MAX Real Estate Outlook 2010 in PDF format