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Canadian house prices overvalued by 10 per cent, IMF warns

2011-12-23T09:11:00.001-05:00

OTTAWA—A combination of high household debt, overpriced housing and external economic problems are putting Canada’s recovery at risk, the International Monetary Fund is warning.

The IMF’s annual report on the Canadian economy gives a mostly passing grade on the recovery so far, but keys in on potential trip-wires that could derail the modest expansion track.

The most serious risk is the global environment, particularly the potential for Europe’s sovereign debt issues to spiral out of control. That view is shared by Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty.

The situation may be made worse because households are carrying high loads of debt — 153 per cent of disposable income in the latest data — and, the IMF says, Canadian homes are on average 10 per cent overpriced.

“Adverse macroeconomic shocks .... could result in significant job losses, tighter lending conditions, and declines in house prices, triggering a protracted period of weak private consumption as households reduce their debt,” the Washington-based financial organization says.

If that should happen, the IMF said it would be “appropriate” for federal and provincial governments to return to temporary stimulus spending to brake the fall.

The price of Canadian real-estate has been the subject of much debate, with some arguing that there’s a potential bust in the making and others countering that most local markets, with a few exceptions, home affordability has improved.

The report stresses that a U.S.-style bust in the housing market is unlikely, but a correction would still weigh on the economy by dampening consumer spending and construction activity and jobs.

“Staff estimates that a 15 per cent decline in house prices would reduce the ratio of household net worth to disposable income by 45 percentage points, and could trigger a decline in private consumption by over 1.5 per cent,” the report states. Consumer spending represents about half of Canada’s gross domestic product.

The IMF notes that Ottawa has attempted in the past to cool the housing market by tightening conditions on mortgages.

It said it was told by “authorities” they would consider additional measures should borrowing by households, which has been slowing of late, return to unsustainable levels. Options include increasing the downpayment from the current five per cent for new mortgages, and requiring lower monthly payments as a percentage of income.

It is not the first time the IMF has flagged Canada’s hot housing market, where average prices climbed by 41 per cent in British Columbia and 29 per cent in Ontario since the recession.

Nor is the IMF alone. The Bank of Canada has repeatedly cautioned prospective new home owners to guard against being lured by record-low interest rates, which makes homebuying more affordable. The central banks warns rates, and hence mortgage payments, will eventually increase.

The IMF also recommends that the Canadian Mortgage and Housing Corp., a key backstop to the housing market, undertake a review of its risks. The CMHC, a federal Crown corporation, is the country’s main insurer of residential mortgages.

The report stresses that it is not forecasting a severe correction in the housing market, or a significant downturn in Canada’s economic performance.

The IMF’s base case for Canada still sees it on path to be near or at the top of the class in the G7 group of large, industrial economies.

Canada’s economy is projected to grow by 2.2 per cent this year and a further 1.9 per cent next year, modest expectations that are in line with other forecasters, including the Bank of Canada.

Under this most likely scenario, the unemployment rate will average 7.2 per cent next year, and seven per cent in 2013, the report predicts.

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Home values have doubled since 2000

2011-11-11T11:17:00.000-05:00

Many clients don't realise how much homes have increased over the last decade. I found this report and thought it was great to share.

Since 2000, the value of a Canadian home has doubled, rising from $163,951 to $339,030 in 2010, says a Canadian real estate organization.

According to a report released by Re/Max, billions spent in new construction, renovation, and infill over the past decade have contributed to a serious upswing in the calibre of Canada’s housing stock, propping up residential average price in the country’s major centres.
Nowhere has the upswing been better captured than in both the value of residential building permits issued nationally between 2000 and 2010—at $340 billion—and the estimated $450 billion spent in renovation. The impact of these two forces alone has fuelled the Canadian residential real estate market—as well as the construction industry—for more than 10 years.
As a result, investment in Canada’s housing stock is at an all-time high in the 16 Canadian residential real estate markets examined in the Re/Max Housing Evolution Report. Higher quality housing translated into extraordinary price appreciation across the country - with 62 per cent (10 markets) experiencing increases in excess of 100 per cent since 2000.
“While a number of external variables were also behind the exceptional gains, revitalization—amid an aging housing stock—and newer construction are largely underestimated factors supporting Canadian housing values,” said Michael Polzler, Executive Vice President, Re/Max Ontario-Atlantic Canada. “The trend is expected to continue for years to come as investment in residential real estate through renovation, infill, and redevelopment ramps up across the country. City planners, builders, developers, and homeowners have only just begun.”
The report found that the unprecedented sum funneled into housing has effectively changed the landscape of Canada’s major centres. New home construction has advanced suburban sprawl, giving rise to new sought-after pockets in virtually every centre across the board.
“Renovation has also had a tremendous impact on housing throughout the decade, so much so that it’s emerged as, arguably, Canada’s next national past time,” said Polzler. “Residential renovation spending has been gaining momentum year-over-year since the early part of the decade and now exceeds $60 billion annually.”

The future of Canada's housing market

2011-11-08T10:46:00.000-05:00

I came across this article and found it very interesting. Are Canadians really increasing their debt to a point where the housing market will no longer sustain us?

Click here to check it out.

Average Toronto house price jumps to $465,369

2011-10-19T12:00:00.000-04:00

By Susan Pigg

The average price of a house in Toronto hit $465,369 in September, up from $427,269 the same month last year. But when adjusted for seasonal fluctuations, the average price was actually down in September just slightly, 0.6 per cent, from August, according to figures released Monday by the Canadian Real Estate Association.

The numbers indicate that recent changes to mortgage regulations may also be helping ease some of the upward pressure on prices, says Gregory Klump, CREA’s chief economist.

Agents right across the city have been increasingly seeing bid dates come and go on homes with low or no offers at all.

Banks have also become more aggressive lately about trying to bring sense back to Toronto’s housing market which has been unusually heated since the spring because of low interest rates and a shortage of inventory, agents say.

In one recent case, a buyer emerged victorious from a bidding war for a loft condo on Carlaw Ave., only to be told by his bank — two days before closing — that the $335,000 property was only worth about $329,000.

The buyer had to scramble to come up with $6,000 to make up the difference between the sale price and what the bank was willing to finance. Otherwise, he would have had less a 20 per cent down payment and had to spend $6,500 just to insure the purchase through the Canada Mortgage and Housing Corp.

Condo investors making us a town of renters

2011-09-30T12:05:00.000-04:00

Toronto Councillor Adam Vaughan can tell the minute he looks at a condo building in his downtown ward if it’s full of renters or home to owners.

“The bigger the building, the higher the rate of renters,” says Vaughan.
The optics can be even more obvious when he steps inside. Even newer buildings can have the feel of university dormitories with shabby lobbies and cheap carpeting meant to keep down maintenance costs for investors who own a unit or two but may live half a world away.
With Toronto’s condo market among the hottest in the world right now — almost 68,000 new units are now in the planning stages or under construction across the GTA — investors are cashing in big time on what looks like a sure bet compared to battered stock markets.
Some 45 to 60 per cent of all new condos planned for the GTA are being snapped up by investors, says market research group Urbanation. That number is believed to be closer to 80 per cent in the downtown core where 12 new highrises, with 5,707 new units, are creeping floor by floor into the Toronto skyline right now.

That frenzy of investor activity is now being seen — and felt — as developers try to keep condo prices down by building more, and smaller, units meant to maximize investments for people who will never have to live in studios smaller than hotel rooms.
The surge of investors is part of the reason new downtown units are now averaging just 749 square feet — about half the 1,440 square feet average being built in crowded Manhattan.
While there are growing concerns about where Toronto’s condo market is heading, the activity here comes as a shock to Jonathan Miller who monitors the U.S. as president and CEO of Manhattan-based Miller Samuel Real Estate Appraisers & Consultants.
“If this isn’t a bubble, I don’t know what is,” says Miller. “This is going to end badly.
“You can’t have such a rapid influx of supply without this going too far. One thing I’ve learned is that builders will build until they can’t build anymore.”
Ben Myers disagrees. The editor and executive vice president of Urbanation has recently started tracking rental demand for those condos.
“This (condo building spree) is providing the city’s rental stock,” he says, adding that some 100,000 new people are flocking to the GTA each year.
“We are one of the only markets in the world that is catering to renters and first-time buyers by creating these smaller suites. In my view, this is absolutely the best approach. Great cities grow and expand, they have people walking around and you can only do that if you have a lot of people living downtown.”
While Vaughan has fought hard to see continued construction of larger and three-bedroom units that provide a better mix of residents, he finds older condo dwellers are gravitating to smaller buildings where the number of owner-occupants tends to be higher.
Developer Peter Cortellucci has seen what’s happening downtown and his Cortel Group made a conscious decision to head the other direction. Its five new condo towers planned for the Vaughan Metropolitan Centre at Highway 7 and Jane St. will feature bigger units and sales contracts discourage buyers just looking for units to rent out.
“We’re trying to create a sense of community and a neighbourhood where people actually live,” says Cortellucci, vice president of Cortel.
“We took a bit of a risk with large units and we’ve been quite successful so far. We wanted people to come in and say, ‘I could really live here.’ We didn’t want it to be too far a stretch from their homes.”
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Economic trends that are affecting you

2011-09-26T13:44:00.000-04:00

Home prices to stabalise

Housing prices in the Greater Toronto Area won’t be skyrocketing as much over the next few months as they did over the last year or so, says an analyst with the Toronto Real Estate Board.

That’s because more houses are being put on the market, according to Jason Mercer.
“With the prices having risen the way they did, more people are going to start listing because they think they can take advantage of the prices they’ll get,” said Mercer. If enough people list, that can drive prices down.
“There’s no question that it’s been a seller’s market recently, but as more inventory comes onto the market, things will start to become more balanced,” Mercer said.
Still, Mercer isn’t expecting prices to be slashed – he just doesn’t think they’re going to rise as quickly
“I still think there’s enough support for some price increases, but it’s not going to be what it has been,” Mercer said. The average price of a home in the Greater Toronto Area was $451,000 in August, up 10 per cent from the same time last year.

GTA home prices hit new high

2011-09-16T11:49:00.001-04:00

By Sue Pigg

Toronto home sales were up 2 per cent in August over July, outpacing the rest of the country where sales declined 0.5 per cent, according to figures from the Canadian Real Estate Association.

Average house prices were down slightly across the GTA in August, to $451,663 from July’s average of $459,122.
However, average prices recorded in August were up 10 per cent year-over-year.
An easing of demand for high-end homes in both Toronto and Vancouver, which had been putting upward pressure on average prices right across the country, saw average Canadian prices decline to $349,916 in August from $361,181 in July.
The average price of a house or condo in Canada was up 7.7 per cent in August from a year ago, said Gregory Klump, CREA’s chief economist.
The price of a detached house in Toronto hit a record $648,491 in August — compared to $531,458 in the 905 regions — largely because of a shortage of listings. But prices are expected to ease somewhat as more houses come on the market over the next few weeks.
There were a record number of balanced markets across Canada in August, which included the GTA, said Klump. That means there was, for the most part, a healthy ratio of homes for sale to people looking to buy.
While Toronto’s spring market was unusually hot, fuelling bidding wars and double-digit price increases, those are expected to ease back into the low- or mid-single digit range going into 2012, said Jason Mercer, the Toronto Real Estate Board’s senior manager of market analysis.
“Looking ahead, less favourable economic fundamentals and heightened financial uncertainty are likely to take more wind out of the market’s sails,” said TD Economics housing analyst Francis Fong.
He expects the market to continue to “oscillate alongside the rest of the economy” until the end of 2012, and predicts house prices could drop about 10 per cent from current levels when interest rates eventually start to rise, likely in early 2013, said Fong.
Some 324,030 homes have changed hands in Canada so far this year via MLS, according to CREA.
“This bumpy ride that the global economy and financial markets are on is good for the continuation of low interest rates and low interest rates are good for the housing market,” said Klump.
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Milton boom pushes Halton home sales to a high

2011-08-25T12:21:00.001-04:00

Moneyville - Wed Aug 24 2011

All that hot weather did nothing to cool buyers’ heels as new home sales surged in July across the greater Toronto region.

Halton region recorded the biggest spike: a 305.4 per cent increase in new home sales compared to July 2010 and a 214 per cent increase in condo sales. Most of these were in the Milton area.
Toronto registered an unusual 90.5 per cent gain, thanks largely to sales at The Neighbourhoods of Queen St. E., a chic townhouse development underway near Boulton Ave. and Clark St.
Across the GTA, the volume of sales rose an average 36 per cent.
Most of that increase came in the 905 region, which reported a 64 per cent spike in house sales and a 20 per cent jump in condo sales, according to statistics released Monday by the Building Industry and Land Development Association (BILD).
“It speaks to this island that the GTA has become. We are the largest new home housing market in North America, by far, right now,” said BILD president Stephen Dupuis.
Almost 27,000 new homes and condos have been built in the GTA so far this year, up 22.2 per cent from the same period last year.
“The public perception is that the economy is weaker than it is, but the real estate market is defying that. It has been for months,” said Dupuis.
Neighbouring Peel saw a significant decline in condo sales, almost 90 per cent, compared to a July 2010, when a number of new buildings opened in Mississauga and Brampton.
Dupuis noted there’s a lingering lack of supply in the new home sector across the GTA, with just a five-month backlog of new properties on the market.

Market downturn could jeopardize surprisingly strong housing market

2011-08-16T09:36:00.000-04:00

By Sunny Freeman, The Canadian Press

A stronger than expected housing market has helped propel growth in the Canadian economy this year, but economists say recent economic and market tumult could jeopardize momentum in the sector.

The Canada Mortgage and Housing Corp. said Monday that national housing starts rose to 205,100 units on a seasonally adjusted basis in July, 11.6 per cent higher than the 188,900 reported in the same month last year and 4.3 per cent more than the 196,600 recorded this June.

However, the pickup, driven by strong construction on condos and apartment buildings in urban centres, is likely due to builders catching up to robust demand last year, rather than expectations of coming growth.

Home building activity has been increasing through the first seven months of 2011, but starts are still down 4.6 per cent from a year ago.

During the first half of last year, the market was rebounding from recession and buyers were on a tear, prompting an influx of demand and the need to build more units.

Housing starts tend to lag activity in the resale market, and economists believe the recent strong construction activity is the result of increased demand last year.

But they doubt whether the pace can continue as the prospect of a double dip recession in the U.S. forces them to rethink the prospects for economic growth in Canada.

The housing market and the Canadian economy as a whole are more susceptible to an economic downturn than they were at the outset of the 2008-2009 recession, said Diana Petramala, an economist with TD Bank.

"Households aren't starting in a position where they have a strong ability to take on more debt (and) continue spending despite the economic downturn and help drive a recovery," Petramala said.

"I think at this point . . . households would start to ease on their rate of borrowing and probably cut back on purchases."

Any continuation of stock market volatility could weaken consumer and business confidence, meaning that households may hold back on big ticket purchases like home buying and developers could be jittery about new builds, she added.

"Home prices in Canada are 10 to 15 per cent overvalued, particularly in Toronto and Vancouver," she said. "That certainly leaves the market susceptible to any potential economic downturn."

TD Economics has predicted that home prices will contract by about 16 per cent in 2011-2012, but Petramala said that could now happen sooner than expected.

Stock markets — although they rebounded sharply on Tuesday — have seen severe selloffs in recent days over fears about U.S. and European debt loads and the potential for a double-dip recession south of the border.

The Canadian economy is so closely linked to the U.S. that slower American growth translates into less demand for Canadian goods, and lower employment and income growth in Canada.

Those worries could soon sour the mood of real estate investors who may not want to bet on an improving economy by the time new builds go on the market.

Buyer sentiment is "vulnerable to recent market turmoil," as the large decline on stock markets has a negative effect on consumer wealth and confidence, making them less inclined to make big purchases, said CIBC economist Peter Buchanan.

"That of course can cut both ways, it can make investors fearful of buying real estate, on the other hand it does mean the Bank of Canada won't be tightening quite as early," Buchanan said.

"The other thing is that if people are worried about putting their money into the equity market, hey real estate may not look so bad."

Many observers believe the Bank of Canada may now hold its overnight rate — which affects variable mortgage rates tied to bank prime rates — at the current low one per cent until next spring. Fixed rate mortgages could also fall as bond markets react to government debt issues.

The U.S. Federal Reserve announced Tuesday that it will likely keep interest rates at record lows near zero through mid-2013. The Fed had previously said only that it would keep it low for "an extended period" and the more explicit time frame was aimed at giving nervous investors a clearer picture of how long they will be able to obtain ultra-cheap credit.

Low mortgage rates are a big incentive for buyers to get into the market, and led to rampant activity last year.

But even with low rates that make the cost of carrying a mortgage cheaper, pent up demand in the housing market could be largely exhausted.

Many buyers rushed into the market during the closing months of 2009 and early 2010, when the Bank of Canada rate was set at an emergency low of 0.25 per cent. Others decided to buy before the implementation of the new HST in Ontario and British Colombia in July 2010, or to beat two rounds of tighter lending rules.

The trend toward much higher construction on multiple-unit dwellings, and a decline in single family starts, could indicate the housing market isn't as strong as it appears at first glance. Single family homes are usually the barometer of growth in household formation and more multiple unit homes could signal more people are looking to rent.

Multiple urban starts were 13 per cent higher at 120,200 units, while urban single starts decreased by 7.8 per cent to 65,000 units.

For the first seven months of 2011, multiple units starts are up 16.4 per cent year over year while single units are down 22.1 per cent.

CMHC overall urban starts were up 36.1 per cent in the Atlantic region, 33 per cent in British Columbia and 1.7 per cent in Ontario. Quebec posted a decrease of 7.8 per cent in July, while urban starts were off 0.3 per cent in the Prairies.

Why becoming a landlord can pay off

2011-08-04T11:41:00.000-04:00

By Rubina Ahmed-Haq
When I started my first permanent job as a journalist in 2004, I made the best financial decision of my life — I invested in two rental properties with my brother.

While many of our friends were living in chic condominiums, we were chasing tenants for rent and fixing leaky pipes.
We made mistakes that cost us time and money, but years later we're financially ahead.
Our first investment was a triplex in east Toronto. We took the lowest available five-year, fixed-rate mortgage. Considering the low interest-rate environment that followed, a variable rate would have saved us more than $20,000. But at the time, we were unwilling to take the risk.
With no time or money to renovate, we chose a house that was in move-in condition.
It closed at the beginning of the month, giving us enough time to advertise and have renters in place before the first mortgage payment was due. We moved into one unit and rented out the other two.
From the beginning we paid rent. After all, we were tenants in our investment.
Eighteen months later we took equity out of the investment and bought another property in the same area. We stuck to what we knew and we bought another turnkey triplex.
For the first three years we managed both properties, which was a lot of work. From taking calls in the middle of the night when the furnace broke to the death of a tenant, this was real work and we often thought of quitting.
We also made a lot of mistakes.
In the beginning, we didn't keep a good account of the money we spent on our investment.
Also, we missed opportunities to write off expenses; we saw our tenants as friends and were lax in collecting rent. And we often spent weekends removing snow and throwing out garbage that was piling up because we had failed to create a system for general maintenance.
And, as bad as it sounds, our biggest mistake was borrowing money to put down a responsible 20 per cent on our first property. At the time, 5 per cent would have been enough, and we could have written off the mortgage interest, saving thousands.
After a few years of managing on our own, we sought professional help. We had both moved into our own homes, so we hired a property manager to oversee the six units. His company charges 6 per cent of total rent revenue collected each month. He finds the tenants, does the credit checks and deals with the day-to-day calls.
We're not out-of-touch landlords. My brother and I meet once a month to go over our account, do the checks and balances and bring up any concerns.
We also have a line of credit against our investment. This is our business line and we pay all the bills from it. The interest on this loan is tax deductible and we pay it down with the money collected from rent.
It's also good to have one accountant looking at all the tax claims in your family. It gives them a holistic view of your financial situation and helps identify opportunities to save money. Ours is great. She's not cheap — last year I paid more than $800 in fees — but her advice has saved us thousands over the last few years.
When the time came to renew our first mortgage, I quickly learned banks offer better treatment to new customers and we could take advantage of this fact. Mortgages are banks' biggest business, and they're willing to offer huge incentives to make you a client. We moved our business from one major bank to another and collected thousands in cash-back incentives.
Both of us are in our 30s and we estimate the properties will be paid off by the time we're in our early 50s. Conservatively our real-estate agent says our houses are worth 45 per cent more than what we paid. We realize we've benefited from the housing price boom, but according to the Toronto Real Estate Board the long-term trends are still good. Even with the threat of a house price correction we're okay.
Real-estate investment is not for everyone. If you're a so-called couch-potato investor, don't become a landlord.
In the beginning it's a lot of work. But for us it was worth it and I feel good knowing our investments are growing.
Life only gets more expensive — I realize now the disposable income I had during my first job was the most I will probably ever have and investing it was the smartest move I made.

Carney warns of trouble in overheated housing market once interest rates rise

2011-06-17T09:05:00.001-04:00

Keven Drews, The Canadian Press

VANCOUVER - Canada's housing market is entering overheated territory and many Canadians could be financially hurt once interest rates begin to rise, Bank of Canada governor Mark Carney is warning.

The central banker on took his case for moderation on Wednesday to Vancouver, the epicentre of Canada's hot housing market where he says home prices are now on par with Hong Kong and Sydney, Australia, as they relate to average incomes.

And some sectors of the market, like condos in big cities, could overshoot because of speculation from foreign investors.

The housing market is still expected to moderate, he said, but recent signals have been mixed.

Carney has been cautioning Canadians for about two year against getting overextended on mortgage borrowing, but Wednesday's speech to the Vancouver Board of Trade suggested some frustration that his words have mostly fallen on deaf ears.

The governor said he has been expecting the housing market to slow, but besides some stuttering signals, it has picked up again of late along with borrowing and mortgage credit.

Once again, Carney repeated his warning to Canadians about becoming overextended.

"It is important that it's emphasized, because it can be forgotten, that we are living in extraordinary times with interest rates that are unusually low, that the outlook for the Canadian economy, the strength of the Canadian economy, the expectations both in the medium term and sooner than the medium term, is that rates are not going to stay at these unusually low levels," he said told a later news conference.

"And so Canadians in taking on debt, or Vancouverites, more specifically, in taking on debt, need to...ensure that they can continue to service those debts comfortably in a higher-rate environment."

Carney' speech came on the day the Canadian Real Estate Association released new data showing that average resale home prices rose 8.6 per cent in May from a year ago, and that in Vancouver prices were up 25.7 per cent to $831,555.

At those levels, Carney said Vancouverites are paying 11 times family household income for a home, a multiple similar to global housing hot spots Hong Kong and Sydney, Australia.

When asked if he had any advice to young people who hope to buy a house in Vancouver, Carney responded, "Well, get a good job. That would probably be a good one. Study hard, stay in school and get a good job. How's that?"

The situation is not as dramatic in the rest of the country, but it's bad enough, he said.

He noted that it took nearly 12 years for real estate investment to regain its peak after the 1990s recession. It has taken a year and a half this time and, in fact, average home prices are now 13 per cent higher than where they stood before the 2008-2009 slump.

Carney takes some of the blame for the unprecedented run-up in prices, since the key difference between the two eras is that he drove interest rates down to historic lows in order to salvage the economy. The policy succeeded, but at a cost of driving investment from more productive outlets of the economy to housing.

But he also lays some blame on home buyers, who he implies should know better. He said some Canadians are taking on mortgages as if they believe current ultra-low rates will last forever. They won't, he warns.

"Rates will not remain at their current levels forever," he said. "(And) the impact of eventual increases is likely to be greater than in previous cycles."

A four per cent real mortgage interest rate would see home affordability in Canada fall to the worst level in 16 years, he said. The current real mortgage interest rate, which excludes inflation, is about 2.4 per cent.

Other than issuing a general alert, Carney gave few hints what he can do about it and implied that the ball is in the federal government's court to tighten borrowing requirements again if necessary.

Carney refused to comment when asked whether the government should restrict home ownership to those with Canadian citizenship.

"Obviously, if one restricts demand and takes an important element of marginal demand out of the equation there's going to be an adjustment to price," he said.

"But those type of decisions are decisions for communities to make, and they're complex decisions, and nothing should be read into our commentary about the current environment and housing, whether it’s in Vancouver or across the country."

"We're not weighing into that issue at all."

Finance Minister Jim Flaherty this week also expressed concern with household debt — now amounting to a record $1.5 trillion in the aggregate — and noted he has tightened mortgage requirements three times in the past three years.

Carney suggested in his speech that he will use monetary policy, or interest rate setting, to impact the inflation rate and not exclusively the housing market. Read More..

Recreational property markets bouncing back

2011-06-14T10:09:00.000-04:00

OTTAWA — Canada’s recreational property market appears to be bouncing back from a recessionary lull as buyers seek to capitalize on equity and stock-market gains, Re/Max says in a report Monday.

Demand rose 78% in the 46 markets across the country covered by the realtor’s Recreational Property Report, while sales had risen or were on par in 41% of those centres.

“Buyers who held off during the recession are back in recreational property markets from coast-to-coast,” says Pamela Alexander, chief executive of Re/Max for Ontario-Atlantic Canada. “Their patience has been rewarded with more affordable recreational values and greater inventory levels.”

While prices have remained stable in many markets, values could be found for higher-end properties, pushing luxury sales higher in almost half of the markets examined, Re/Max said in its report.

Opportunities were also to be found in Western Canada.

“Prices are down as much as 20% from peak levels reported in 2006-2007, bringing ownership within reach to many potential purchasers,” said Elton Ash, regional executive vice-president of Re/Max in Western Canada.

On British Columbia’s Salt Spring Island, for example, starting prices for oceanfront properties have fallen to $669,000 today from $1.3-million in 2008.

In the North Okanagan Valley, a three-bedroom, winterized recreational property on a standard-sized waterfront lot — the common measures used in Re/Max’s report — that sold for $1.5-million in 2008 now sells for $995,000.

Starting prices for similar properties on Alberta’s Sylvan Lake are now at $800,000 from $1.25-million previously and in the Rocky Mountain resort town of Canmore, a two-bedroom condo has fallen to $229,000 from $320,000.

“The strengthening oil sector has . . . brought Albertans back into mix, driving demand for both local and coastal B.C. properties,” Ash said.

Another factor influencing the recreational property market has been that Americans who bought when the Canadian dollar was at 65 U.S. cents are now cashing out, boosting inventories.

The report found that there has been some tightening for entry-level properties in about one-third of the markets covered. As well, it noted, the supply of properties has tightened considerably at the lower end in Ontario, Quebec and Atlantic Canada.

It also noted that recreational properties are moving more toward year-round homes, with fewer traditional cottages available for sale.

“These waterfront properties are disappearing from the landscape. Meanwhile, today’s average recreational getaways are truly earning the distinction as the “home away from home,” with many of the bells, whistles and comforts of their residential counterparts. Read More

Would this happen in Canada?

2011-06-10T13:56:00.001-04:00

Are you House Poor?

The great American Dream has always revolved around owning a home. Sure, having the 2.3 kids, the cushy corporate job and the stylish car to drive to work everyday are part of the myth, too, but nothing quite summed up Americana quite like the white picket fence. But if recent economic numbers are any clue, this dream is becoming a nightmare for many in the US.

According to date released by the United States Census Bureau, an increasing number of homeowners are spending a larger and larger amount of their incomes on housing than in previous years. People in 49 out of 50 states reported an increase. The only state that didn’t, Alaska, spent the same amount. The report showed that people are spending around 21 percent on their housing needs, up from 19 percent in 1999.

This is a huge problem for first-time buyers who may now be priced out of housing markets all across the country. Economists point to rises in home prices in the last 7 years, as well as higher interest rates, coupled with stagnant wages over the same period.

While everyone seems to be in agreement that the housing “bubble” is either bursting, or getting ready to burst depending on where you live, housing prices are still up a remarkable 32 percent since the beginning of the decade.

Household incomes, on the other hand, haven’t done a very good job of keeping up. The same Census report showed that income has actually dropped, not risen, over the past 7 years, down 2.8 percent.

Maybe the worst news in the report was the percent of people who allot more than 30% of their income for housing. The numbers are up almost 8%. National guidelines suggest that more than 30% of household income for housing is excessive and not financially healthy.

What does this mean in the long run?

Most experts agree that until income can catch up to housing, the real estate market will remain lifeless. And since real estate is one of the biggest drivers to the overall economy, a weak real estate market means a weak economy.

Things appear to be the worst in California. Not only do they have the most expensive real estate in the nation, 48 percent of California homeowners spend more than 30% of their income on housing related costs.

Until income can begin to grow as quickly as the real estate market, this trend shows no signs of slowing down. Which could mean that the upcoming real estate slump could last much longer than anyone predicted.

Need to know what your home is worth? Call me for a no obligation valuation of your home.

GTA housing market hotter then forecast

2011-05-31T09:07:00.000-04:00

By Tony Wong

A more robust than expected Greater Toronto Area spring real estate market has the Canada Mortgage and Housing Corporation significantly upping their sales and pricing forecasts.

The federal housing authority now says prices in the Toronto area market should increase by 4.3 per cent this year to a record $451,000 for the average home, according to a report released Monday.
The CMHC had earlier expected in their forecast released at the end of 2010 that prices would go in the opposite direction this year, falling by 0.4 per cent or $428,000.
Sales were also initially forecast to drop by 3.6 per cent, but now they are estimated to be 2.5 per cent below 2010.
“Interest rates have been much lower than expected, so that has given the market a boost for longer than we thought,” said Shaun Hildebrand, CMHC senior market analyst.
That trend may continue. The Bank of Canada meets May 31 to determine whether they should raise their key overnight rate, but a weaker than expected economy has most economists figuring that decision will come much later in the year than expected.
“Home prices have largely benefitted from the ultra-low interest rate environment on the back of the Bank of Canada’s highly accommodative monetary policy stance,” said TD Bank economist Shahrzad Mobasher Fard.
Another reason that average prices are elevated is a lack of listings, combined with the fact that more expensive homes are selling in relation to lower priced homes, skewing prices upward, said the CMHC.
Through the first four months of 2011, one in eight homes sold for above $750,000 and one in twelve condos sold for more than $500,000.
“A rising number of wealthy immigrants, a large share of high income earners, downsizing empty nesters and homeowners with substantial amounts of equity,” are factors in the market, said the CMHC.
When interest rates start to rise again, likely by September, this could eventually put a wet blanket on sales in the second half, especially for sensitive first time buyers, said Hildebrand.
“The elevated level of household indebtedness, which will be further exacerbated by the upcoming monetary policy tightening by the Bank of Canada – will put a damper on the growth rate in home prices as Canadian households become more cautious,” said TD Economist Mobasher Fard.
While Ontario led housing activity in 2010, they will lag the rest of Canada this year and into 2012, said CMHC Ontario regional economist Ted Tsiakopoulos.
“Consumer buying patterns, particularly in more expensive Ontario markets will increasingly shift to less expensive housing over the next few years,” said Tsiakopoulos. “After sharp increases early this year, Ontario home prices will grow closer to inflation as markets move to a more balanced state.”
While the CMHC sees prices still moving upward in the Toronto market, the TD Bank sees average prices coming down across Canada, particularly in cities that have seen major price climbs, such as Vancouver.

Buying A Home After Bankruptcy

2011-05-27T09:24:00.000-04:00

Experienced bankruptcy lately? You may wonder if you will still will be able to get a home loan. You may also be wondering if buying home after bankruptcy is a good idea for you.

While bankruptcy can make your mortgage loan approval difficult, it is still possible to get approved. In fact there have been more and more, bad credit loans coming out all the time.

They are called the Subprime lenders; they are focusing more on helping individuals with poor credit in buying home after bankruptcy.

This is happening mostly because bankruptcies are still on the rise and there is an increasing number of people with bad credit who are looking for home financing.

Just to give you a bit of an overview here are some very good reasons to consider after bankruptcy buying home:

Increase your credit rating. When you make your payments on a regular basis, you will be able to develop your credit rating. Once your pre-payment penalty is done, you should be able to refinance your credit loan for a much lesser interest rate.

After your bankruptcy has been for ended 2-3 years, you ought to have a much easier time qualifying for a lesser interest rate mortgage loan.

You will be able to own an asset. If you are just renting a home then you are absolutely throwing your monthly payments away. Why not just buy a home, over time, its value will increase and you are working you way towards owing an asset.

Once you have bought your house, as soon as 6 months or so later, you might be able to take out an equity loan on your home and consolidate any other debt that you might have since your bankruptcy or debt that could not be included in your bankruptcy.

Taxes and student loans will not be discharged in a bankruptcy. You may also want to use the extra cash to invest in a business venture or for needed home improvement.

It is very tempting to buy an new home, new car, do some renovations, etc., after bankruptcy discharge you have no debt left. You will probably feel like you can afford a larger house payment due to the financial experience that you have.

But it is not that easy so here are some factors to consider before committing yourself to a new house payment.

The Pre-payment penalty. This penalty is usually about 6 months worth of house payments. And usually lasts from 2-3years. Once you sign those mortgage papers you absolutely have to make those payments. If you don't have the amount of the pre-payment penalty in savings, you are locked into making the payments or losing the house.

The Two Year Mark. Keep in mind that after 2-3 years from the date of the bankruptcy discharge, mortgage loans will be much easier to get. With a small down payment, you might even be able to get a mortgage loan without a pre-payment penalty.

So, if you are within 6 months or so from the 2 year mark. It would be smart to wait it out and have more mortgage loan options.

Borrowing Too Much. This is the most common mistake that we usually get into. If you do decide to buy a house, buy one that you know you will be able to afford. Don't max yourself out on credit, living right up to the edge of your income.

If your income suddenly drops, you'll want to make sure that you can still afford your house payment. Be conservative with how much home you need to buy.

Most of us always think that bankruptcy is the end of our credit life. But don not despair because I know some people that have been in to bankruptcy but has been able to get up again and rebuild there credit quickly most of them has even been able to buy a new house.

Bankruptcy will show up on your credit report for 10 years. That means that every mortgage lender will certainly see that fact when evaluating your mortgage application.

Although it may be difficult to find a bank to give you a mortgage it's certainly not impossible. Banks want to make money and you may find one that's willing to take the risk.

Home prices continue climb

2011-05-20T09:08:00.000-04:00

Garry Marr Financial Post May 17, 2011

Canadian home prices continued their upward march in April, driven by strong investor demand in Vancouver, as cracks in the Toronto condominium market may be starting to appear.

The Canadian Real Estate Association said yesterday the average price of a home sold in April in Canada was $372,544, up 8% from a year ago. It was the third straight month that the average price rose 8% on a yea-over-year basis but the Ottawa-based group cautioned that the figure was skewed due to “surging multimillion-dollar property sales in selected areas of Greater Vancouver.”

The group also shrugged off slow April sales, which dipped 4.4% from March on a seasonally adjusted annual basis and 14.7% on an actual basis from a year earlier. The slow sales are said to have been driven by new mortgage rules that came into effect April 19 and made borrowing tougher, leading people to rush into purchases in March.
The same sort of impact was felt in April 2010. Purchases moved forward to avoid mortgage rule changes, higher interest rates were feared and the harmonized sales tax loomed in two provinces.

“This makes it difficult to compare,” said Gregory Klump, chief economist of CREA. “Changes to mortgage regulations that took effect in April 2011 likely sidelined a number of first-time homebuyers. By contrast, higher-end homes sales in Greater Vancouver and Toronto had their best April ever.”

Worries about the sustainability of the housing market could be stoked by a report from Urbanation Inc., which monitors the Toronto condominium market. The group says more than 50% of condominiums purchased in the last year were by buyers who do not intend to occupy their units and plan to rent in many instances.

Condominium rents in Toronto in the first quarter of 2011 were $2.11 per square foot compared to $2.09 a year earlier, a 0.8% increase. Condominiums being registered now and ready to be occupied are priced for sale at $450 per square foot range while newer units are going for $550 per square foot.

“What happens when these newer units hit the market?” said Ben Myers, executive vice-president of Urbanation. “At $550 per square foot a 750 square feet [condominium] is $413,000. You put 25% down and you have a mortgage of $310,000. Take a five-year variable rate mortgage at 3% with 25-year amortization and you get $1,475 a month mortgage. Your condo fee is $345, property tax is another $345 and you are up to $2,200 in carrying costs. That’s a huge [operating] loss [given the average rental rate would bring in just under $1,600/month]. People are buying these for capital appreciation.”

Don Lawby, chief executive of Century 21 Canada, says the housing market has been affected by foreign investors — notably Chinese — who have reacted to tougher tax rules in their home country by investing abroad.

“They are buying investment properties and not just in Vancouver but to some degree in Ontario and Calgary,” said Mr. Lawby, adding many of those investors are not concerned with carrying costs. “They are not afraid to offer above price and they are not afraid to get into a bidding war.”

Nevertheless, Mr. Lawby says while these investors are skewing national averages, he maintains the overall numbers are small and the impact on the larger market minimal.

Toronto-Dominion economic analyst Leslie Preston said while April numbers present a market with falling sales and rising prices, she agreed market conditions were exaggerated by some one-time issues.

“I think the effect in April was a little larger and I would expect to see a bit of bounceback in May because of the decline,” says Ms. Preston. “But we have been calling for awhile now for a mild softening in Canadian housing markets overall this year, particularly as interest rates rise.”

A Second Home: Take it or Leave it?

2011-05-17T09:49:00.000-04:00

For many, wanderlust is just a part of life. You buy a beautiful home somewhere, settle down, have a family, but there is always a part of you that’s itching to get away. Vacations are part of that wanderlust; the chance to get away someplace beautiful. And then you see it. The local newspaper at your vacation destination, and lo and behold, there is a real estate section right there. Dare you even look? You can’t afford it, can you? Two homes? Is dual home ownership for you?

A second home can work for you, but you have to go into the process knowing what to expect. If you’re looking to get rich quick, don’t count on it. According to recent data, the price of real estate in areas that are deemed “Vacation Markets” has risen twice as fast as real estate in other areas. So, not only is a second home in your destination of choice going to cost you a pretty penny, it’s no longer a well-kept secret anymore and the chances of you flipping it to make a quick buck are slim.

The best piece of advice a possible vacation home buyer can heed right now is to buy for love not for money. Recent sharp downturns in vacation markets like Naples, Florida, Lake Tahoe, Nevada and Cape Cod, Massachusetts, have shown that trying to turn a profit in a vacation market is close to impossible. But there is a bright side to all of this. With the housing bubble going poof all across the country, those that are looking to sell will be doing so at lower prices. Now could be a great time to buy a place that you’re planning on keeping for a long while.

But how do you know if you have your head on straight about the whole thing? Well, take some time and evaluate the pluses and minuses of buying another home. Once you’ve decided on an area, spend some time there to make sure you like it. If it’s going to be a vacation home, you’ll want the scenery to be relaxing (if that’s what you’re looking for) or exciting (if that’s what you go on vacation to experience). A final check should be the bottom-line cost. If the price of the two houses makes up more than one third of your total income, you’ve spent too much.

Buying property is a huge investment for everyone, even the rich. Take the time to properly evaluate the pros and cons before you decide to own a second home or you could find yourself on a permanent vacation.

Why I wouldn’t sell my home myself

2011-05-16T11:24:00.001-04:00

By Mark Weisleder - Moneyville
Since writing about whether you could create a bidding war without an agent, I have received numerous emails from sellers, real estate agents and companies that provide “for sale by owner” services on the pros and cons of selling by yourself.

Allison Philpot sold her home in Ottawa using a For Sale by Owner marketing service. She listed her home for $419,000, and was able to create a bidding war after her first open house. She received a top bid of $429,000, which she accepted.

The buyers seemed like nice people, as they lived in the community. Unfortunately, they later terminated the deal, relying on a condition in the offer, although Allison suspected that they just found a house that they liked better. The second bidder was no longer interested.

She then dealt with another buyer, who was represented by a buyer agent. Allison later admitted that she was out-matched in the negotiations, and eventually sold her home for $405,000. In addition, she agreed to pay the buyer agent a commission of approximately 2 per cent or $8,000. So her net selling price was $397,000.

After the fact, she reasoned that had she used an agent from the start, she would have probably sold for about $430,000, and that even if she paid $20,000 in commission, she would have netted $410,000, or $13,000 more, without any of the aggravation.

Still, Allison states that had she not gone through the experience herself, she would probably have felt that she had overpaid the agent.

The buyer who walked away from the first deal later told Allison that he would never try and buy a property again without an agent, as he found the process way too stressful himself.

I received many emails from real estate agents talking about their additional network of potential buyers that they bring to every sale, as well as their own experience in qualifying potential buyers in advance and protecting sellers from unusual clauses that are sometimes inserted into agreements. Many agents in Vancouver are now setting up marketing events overseas, as more and more foreigners are looking at Canadian real estate as a safe haven to invest. More buyers mean better prices for sellers.

I spoke with Patrick Sullivan, a vice-president for Com Free, a company that provides services to assist home owners selling by themselves. These tools include a guide to assist the seller in determining the sale price, staging the home for sale, conducting open houses and preparing for negotiations. He suggested that there is no real harm in a seller trying to save money selling by themselves. They can sell with an agent later if they are not successful. He also claims that Com Free listings continue to grow and that they have many success stories. However, because they have no contract with the seller, the seller is not obligated to tell them how long it took to sell and what the property sold for, so it is difficult for Com Free to state how their seller compares with sellers who use an agent.

If you plan on doing this by yourself, at a minimum either have your lawyer look at the contract before you sign it, or make the deal conditional on your lawyer’s review and approval of the agreement. In my opinion, no marketing service can properly prepare buyers or sellers to deal with the stress and emotion that will invariably be involved with any real estate negotiation. It is not easy. Every buyer, seller and property are unique and will require a successful strategy to win.

Whatever method you choose to buy or sell your next home, be prepared and fully informed before you start.

Mark Weisleder is a lawyer, author and speaker to the real estate industry.

Home buyer beware when going it alone

2011-05-09T09:23:00.000-04:00

By Mark Weisleder

Many people who go it alone when buying a home turn up at open houses or contact the seller’s agent directly, thinking they can save half of the commission and get a better deal.

I’m not so sure it’s that easy. These buyers do not understand that the seller’s agent is working solely in the best interests of the seller, not them.
If the house you like is selling for $400,000, you may assume that the commission payable is 4 to 5 per cent, or between $16,000 and $20,000. But all commissions are negotiable so this may not be true.
The buyer may get the salesperson to bring the commission down to 2 per cent, thinking that they can save between $8,000 and $12,000. What these buyers fail to understand is that rather than focus on the commission savings, they should focus on getting the house for the right price, not overpaying or finding unwelcome surprises after closing.
These things can include defects in the home, neighbours from hell, all night parties from student residences, a new development that may affect privacy or problems with water in the basement or roof leaks.
Buyers think they know how to negotiate, but most don’t. They say things to the salesperson to try and establish a rapport, thinking they can get inside information on the sellers. This can include comments on what they like about the house compared to others they have seen, whether they have already sold their own home or what they can afford. What these buyers fail to realize is that the seller agent is obliged to pass all this along to the seller. The buyer has thus weakened their bargaining position.
Professional buyer representatives usually insist that they show buyers a home without the seller or the seller agent being present, so that buyers are free to make any comments about the property. If the seller or seller agent there, the buyers are told not to say anything in their presence.
A buyer agent may check the title registry to determine whether there are any mortgages on title and will thus see whether the seller is in financial difficulty. This is information a buyer needs in order to negotiate.
In addition, buyer agents can act as an objective third party to remind you exactly how much you can afford to spend, so that you do not get carried away in any bidding war. This is the biggest mistake buyers make, which is buying with their heart instead of their head.
Buyer agents will have up to date information about government programs, whether it is using your RRSP or qualifying for a land transfer tax credit that can assist the buyer.
However, before deciding to work with a buyer agent, you need to interview them carefully. Remember, you are trusting this person with what may be the largest investment decision of your life.
Before hiring a buyer agent:
1. Get references from people you trust and then interview at least three agents.
2. Ask about the professionals they work with, including home inspectors, insurance agents, mortgage brokers and planners.
3. Find out whether they have local knowledge of the area you are interested in, which can include neighbourhood conditions.
4. Check out their websites and look at all their twitter and Facebook pages.
5. Limit the buyer agreement to 30 days and only for the local area you are interested in, so that if you are not satisfied for any reason, you do not have to wait long to exit this agreement.
By being prepared before you buy a home, you will find the right home for the right price. Shouldn’t that be the goal of every buyer?

Rate of Home Price Appreciation Stabilizes after Post-Recession Recovery

2011-05-03T12:31:00.001-04:00

Home values continue to rise, according to Royal LePage

TORONTO, April 12, 2011 – The Royal LePage House Price Survey released today showed the average price of a home in Canada increased between 3.5 and 4.3 per cent in the first quarter of 2011, compared to the previous year, as markets continued their post-recession recovery. While the rate of year-over-year price appreciation slowed slightly in the first quarter, home values continued the upward climb, which first began late in the second quarter of 2009.

Low interest rates and a recovering economy continued to fuel activity in Canada’s housing markets over the past year, which has led to country-wide increases in average home prices. In the first quarter of 2011, the national average price of a detached bungalow rose 4.3 per cent year-over-year to $341,355, while standard two-storey homes rose 3.5 per cent to $379,388 and standard condominiums rose 4 per cent to $237,919.

“The rate at which Canadian homes are appreciating may well have peaked for the next year or so,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “We expect house prices will continue to creep up, but most of the excess demand created by the initial drop in interest rates has been satisfied, and affordability continues to erode slowly, allowing the listings supply to catch up. In most markets, lower single digit percentage increases are more likely for the balance of the year.”

In the first quarter of 2011, certain markets such as Vancouver, Montreal and Halifax continued to experience significant price gains compared to the same period a year earlier, largely due to favourable regional demographic shifts and healthy local economies.

“Canada’s real estate market has maintained momentum coming out of 2010, indicating that the post-recession recovery is continuing,” Soper added. “While low interest rates continue to drive demand, the tepid pace at which employment levels are improving is tempering the rate of home price appreciation in many Canadian cities. The exception to this trend can be seen in markets like Vancouver, where foreign buyers, particularly from China, are driving demand in select mid-to-high priced markets, and driving up the regional average reported home prices at a surprising pace. In Montreal and Halifax, demand from first-time buyers and purchasers of luxury homes are creating significant year-over-year gains in home values.”

Among the best performing markets in the first quarter of 2011, Vancouver’s standard two-storey homes increased 9.7 per cent year-over-year to $1,083,750. Detached bungalows in Montreal rose 7.6 per cent year-over-year to $276,343 and standard condominiums in Halifax rose 13.1% year-over-year to $191,500.

Meanwhile, year-over-year price appreciation softened in St. John’s where the market is cooling down after an extended period of double digit price increases. In Saint John, detached bungalows dropped 6.3 per cent year-over-year to $178,000. While the medium-term prospects for the housing market in Alberta’s major cities remains very positive, the city of Calgary in particular is still adjusting to the rapid pace at which home prices appreciated in the middle of the past decade. The average price of a standard two-storey Calgary home was down 2.1 per cent year-over-year to $423,122.

REGIONAL MARKET SUMMARIES

Halifax witnessed the largest year-over-year price gains in Atlantic Canada, and some of the highest gains nationally, including the largest increase in standard condominiums rising 13.1 per cent.

Montreal continued to post strong gains as standard condominiums posted a year-over-year increase of 8.7 per cent, while detached bungalows rose 7.6 per cent.

Ottawa’s first-time buyers continue to drive the housing market as the region saw year-over-year price appreciation ranging between 5.2 to 5.9 per cent across all housing types surveyed this quarter.

Toronto’s detached bungalows and standard condominiums made healthy gains increasing 4.5 per cent and 3.7 per cent respectively. Demand for detached bungalows was driven by first-time buyers concerned with potentially rising interest rates and developers who are rebuilding or renovating the homes into larger units.

Winnipeg’s standard two-storey homes posted strong year-over-year gains rising 7.1 per cent to an average price of $297,125, second only to Vancouver in growth and tied with Halifax for this housing type.

While Saskatoon’s housing market posted modest changes, the three housing types surveyed in Regina made healthy year-over-year gains ranging from 3.2 per cent to 5.4 per cent.

Edmonton’s housing market stabilized with year-over-year price changes ranging from minus 1.8 per cent to increases of 2.3 per cent. Calgary’s house prices saw modest year-over-year depreciation across all three housing types surveyed as a result of an increase in inventory. This coupled with low interest rates has presented attractive opportunities for potential buyers.

Driven by low interest rates, single family homes in Vancouver again dominated house price gains as two-storey houses rose year-over-year by 9.7 per cent. Although inventory is down slightly from last year, listings are keeping pace with demand.

Selling house not just about highest price

2011-05-02T11:49:00.000-04:00

Garry Marr, Financial Post

The number one question you need to ask yourself if you're selling your home this spring is: How do I net the most money?

It's not how do I get the most money for my home. It's how do I keep the most money in my pocket after paying all my expenses, including commissions and fees.

Discounters are popping up everywhere now that they can access the Multiple Listing Service. Then there's still the full-service broker who promises a better price and ultimately more money in your pocket.

A settlement last year between the Competition Bureau and the Canadian Real Estate Association, which represents about 100 boards across the country and almost 100,000 agents, allows consumers to have "a mere listing" on the MLS. Being on the MLS system is key since about 90% of transactions are handled by organized real estate.

A poll commissioned by LawPro and TitlePLUS, which sells title insurance, was released Tuesday and it shows confusion still exists in the marketplace.

The poll found even though 72% of Canadians were not aware of the changes made to the MLS, 45% of Canadians would still consider selling privately or using a real estate lawyer to help them sell.

"What these findings show us is that there is an appetite among Canadians to conduct the sale of their home privately," says Ray Leclair, vice-president of TitlePLUS.

So you can be a do-it-yourself real estate agent and use the MLS. But do you want to?

Market conditions have to factor into your decision. There hasn't been a U.S.-style collapse here, but it's no longer a seller's market, meaning you don't just stick a sign in the ground and wait for the pigeons to flock. You're going to have to work.

"For the discount that you're getting, am I willing to take the gamble that my house is being shown at its optimum," says Gary Siegle, Calgary-based regional manager for mortgage broker Invis Inc., about private selling.

He says the industry has been sticking to its guns when it comes to commission rates -generally around 5% of the purchase price -so if you're using an agent, the negotiation might be on the service being provided for that commission.

"The professional service real estate agent is not going to give [commission up] just because someone has access to the MLS. They have to articulate the value more to justify their fee," Mr. Siegle says.

Phil Soper, chief executive of full-service firm Royal LePage Real Estate Services, says the industry has not moved much off commissions since the agreement with the government.

"I think the impact in the market in the first year postchanges has been in the low end of the market," says Mr. Soper, who says that narrow segment of the market is less than 15% of the overall sales volume.

He says for sale by owner or FSBO companies are now merging their operations with independent agents so customers also get an MLS listing as part of their service. "I don't think they are actually selling any more houses. The listings are just showing up on more websites than they used to," Mr. Soper says.

One of those FSBO companies is PropertyGuys.com. Walter Melanson, managing director of the Moncton-based company, says he currently has about 9,000 active listings across the country.

"I watch the comments [of the major real estate companies] and they say nothing has changed and nothing will ever change and that's the way they built their mousetrap," Mr. Melanson says.

What he and others are doing is creating a service that allows you to list with his company for as little as $399. When you sign up, his website hooks you up with a registered real estate agent who doesn't do much but put your home on the MLS, for an extra $299.

The company's Ontario representative, a licensed real estate agent, has close to 1,000 listings. She's based in Hamilton but accepts listings from as far away as Elliot Lake, so she's not doing too many showings.

"We want someone to compare how much it costs to sell your home using PropertyGuys to, say, Re/Max. You do that math and you'll see quite the difference," he says.

It's no small amount. When you consider the average home is now selling for close to $375,000, at 5%, that's $18,750 in commission.

However, consider if you do choose do it yourself on the MLS, you are forcing buyers to jump through one more hoop. In the case of Property Guys, the buyer has to click on the MLS broker's listing office and then punch in the listing number before he's directed to the seller.

"The bounce rate is amazing," Mr. Melanson says. "Who wouldn't look for their dream home and make that extra click? Our data says people will make that click. We've had to deliver magic within a narrow set of rules."

But you have to wonder whether that extra work will affect your sale price at the end of the day. If you save $20,000 in commission, what's the point if your house sells for 5% less?

Market conditions ultimately play into any decision. It comes down to whether you think your agent can earn that commission by getting you a better price or meeting a goal of selling your home in the time frame you want.

Safe as houses? That loud knocking is falling prices

2011-04-28T09:51:00.000-04:00

ROB CARRICK - Globe and Mail

The most enduring and simplistic argument for buying a house is that you’re making an investment.

What an understatement. Between your mortgage, property taxes, utility bills, maintenance, furnishings, renovations, landscaping and such, you’ll be investing non-stop in your home. But what’s the return on your money?

Looking back a decade, houses have been an excellent investment that rivalled the stock market. But the view ahead is not nearly so positive. Bear this in mind if you’re considering a jump into this high-priced and increasingly unaffordable real estate market of ours.

How did the market get where it is today? Housing economist Will Dunning says resale housing prices have grown by an average annual 4.9 per cent in Canada since March, 1988, which is the year that comprehensive real estate industry data begins.

The more recent experience with housing is even better, Mr. Dunning found. The 10-year average annual price gain for a house is 8.3 per cent, almost on par with the average 8.9-per-cent increases logged by the S&P/TSX composite index, including dividends.

What we have here is a housing market that has been rising at close to double its long-term rate in the past decade. Don’t expect this to continue.

“I’m not in the camp that says we have a big correction coming, but I think we are looking at a fairly long period of moderate changes in house prices – plus or minus 2 per cent,” Mr. Dunning said.

In its most recent update on housing affordability, Royal Bank of Canada predicted a period ahead of very modest price increases. “(The) rapid home-price appreciation of the past 10 years has likely run its course overall in Canada,” the report said.

We’ll call that the optimistic view of what’s ahead for the market. For the pessimists, the question is how far prices will fall, and for how long. Sample prediction: Toronto-based Capital Economics sees a decline in prices of up to 25 per cent in the next three years.

The negative outlooks for housing are based primarily on factors such as prices, income growth and interest rates, all of which are a function of current economic conditions and thus short-term in nature. A long-term concern for housing values is Canada’s changing demographics.

The fastest-growing component of our population comprises those who are 65 and older. In other words, people who are going to be selling houses over the decades ahead and doing very little buying, if any. That’s bound to affect demand for homes and the potential for price appreciation.

For an actual real life example of how real estate prices can fall, let’s look at what happened in Toronto between April, 1989, and February, 1996. According to Mr. Dunning’s numbers, the average resale home price in the city fell to $192,406 from $280,121, or 31 per cent.

That was an extreme plunge, fuelled in part by a level of rampant speculation that we aren’t seeing in today’s market. But prices can still fall in today’s market. Check out the Calgary market, which dipped 1.7 per cent in March.

“The fact remains that housing can decline in value, and for prolonged periods,” Moshe Milevksy, a finance professor at York University’s Schulich School of Business, wrote in his 2009 book Your Money Milestones. “It is definitely not a risk-free investment.”

Buying a house and living in it for decades can protect you from temporary market dips, just as long-term investing in stocks smoothes out the stock market’s ups and downs. Still, it’s worth noting that someone who bought an average-priced house in Toronto around the ’89 market peak and still owned it would be looking at modest annualized gains in the 2-per-cent range.

Historical changes in housing prices are just a guideline, anyway. They don’t consider things like mortgage interest, property taxes and maintenance, none of which add any value to a home.

Houses bought today have questionable investment value, but there are some other factors to consider if you’re thinking of getting into the market. First, gradually paying down the mortgage on your house is a kind of forced savings plan. Not a great savings plan, but better than nothing.

Second, there’s the best reason of all to own a house. It’s freedom: Your family, your rules, your lifestyle. That’s really what you’re investing in when you buy a home today.
Here's how the housing market compares to other investments over the 10 years to March 31.
Returns are expressed on an average annual basis.
Houses (Average resale housing price in Canada) 8.30%
Stocks (S&P/TSX composite index with dividends included) 8.90%
Bonds (DEX Universe Bond Index) 6.10%
T-bills (91-day Treasury Bill Index) 2.60%
Gold bullion (per ounce, in U.S. dollars) 19.10%

The 'thrill' of buying a house

2011-04-26T10:14:00.000-04:00

William Hanley, Financial Post

You walk into the open house, take one look and say to yourself: This is it. It’s the house I have to live in. Where do I pay? A bidding war? I’m in.
Over my years of buying houses, I never bought one that did not have that frisson moment, that thrill of finding a place so suited to my wants. Indeed, I have in the past decided that I wanted to buy a house in what seems, in retrospect, to be nanoseconds. (By contrast, I’ve taken weeks to decide on the right pair of shoes.)

It is no way to make an “investment,” to be sure. But, as I’ve previously discussed in this space, buying a house is perhaps the most uninvestment-like of investments.

Just about anyone who’s purchased a property or thought about purchasing knows that it is much about gut-feel, in which the senses can conspire to trump sense.

Now, as the major real estate selling season gets under way, along comes a survey commissioned by BMO Bank of Montreal to give statistical weight to the notion that intuition carries a particularly heavy weight in the house-buying process.

The survey by Leger Marketing found that more than two-thirds of Canadians cited a “good feeling” toward the property as a reason to buy. Meantime, though, good sense is not thrown out of that gorgeous bay window and into those manicured flower beds. More than 90% of house-hunters value affordability and location over resale value.

So, the axiom that there are three important things in real estate – location, location and location – might reasonably be replaced by the Three Ps: Price, place and personality.

Nevertheless, that resale value is not a big concern to these surveyed house-hunters – people between 25 and 45 who plan to buy a home within two years – is a telling sign of the real estate times.

With some dips here and there, Canadian house prices have been rising strongly for more than a decade. Indeed, even the recession created just a downward blip in the chart of ever-growing values, with the average national price rising 8.9% last month from the previous March (but just 4.3% excluding Vancouver).

As a result, most of the house-hunters surveyed might never have been aware of a housing market that was not rising. I suspect many in this 25-to-45 demographic believe house prices basically keep going up forever, that though they downplay resale value in the survey, the expectation for solid gains is, well, a given. (Any significant drop in prices would surely shake that belief.)

In recent times, investors have been asked if they are stocks or bonds. If you’re a stock, you are prepared to take on more investment risk. If you’re a bond, you are not.

Perhaps, though, many people are probably houses when it comes to investing. A home is both partly a stock and a bond – and somehow neither.

It is a bond because over the long term it will likely produce modest returns through the enforced savings required by paying down the mortgage. It is a stock because the gains could be outsized if the investor were to buy and sell at propitious entry and exit points for market-timing gains.

And it is neither because it is an “investment” with many moving parts and frictional costs. You don’t live in a stock or a bond, but when the house leaks, it costs money and cuts into the investment. Meantime, the costs associated with buying and selling a property are becoming more daunting in many jurisdictions, with some observers reckoning that a house is often a mediocre investment at best.

But most young first-time buyers and mover-uppers are not fazed by such commentary. Home ownership is a cornerstone of our culture, with 70% of the population owning properties and many of the other 30% looking to join the majority.

And the real estate industry has become far more adept at marketing and selling than in the days decades ago when I was in the market. Today, houses are often professionally “staged” to produce that frisson moment. Prices are sometimes set artificially low to produce that exciting bidding war and that extra frisson of “winning.”

A house, it is said, is not a home. And a home is not strictly an investment. But does a stock have granite counters? Does a bond have stainless steel appliances?

GTA new home sales slide

2011-04-20T09:16:00.000-04:00

By Tony Wong
James Bazely will build about 20 homes in the Barrie area this year. In past years the contractor would have averaged closer to 50, but a lack of available land for low rise housing has become a serious constraint.

“We’ve basically run out of land to build on in Barrie,” says Bazely, the president of Gregor Homes. “It has gotten to be a real problem.”
While local builders such as Bazely complain about the lack of serviceable lots to build large subdivisions, the problem is even more acute in the city of Toronto. Infill building is typically the norm in the 416, since it is virtually impossible to get large swaths of land for development, where a lack of land for low rise housing is being blamed for the drop in new home sales across the Greater Toronto Area in the first quarter.
The new home market cooled off rapidly in March, with sales down by 25 per cent compared with a year earlier according to a report Tuesday by Realnet Canada Inc.
There were 3,434 homes sold in March, down from 4,569 in 2010. Sales were down a total of 8.5 per cent for the first quarter.
“You can’t sell what you don’t have,” said George Carras, president of Realnet. “Active new home inventories are well below the long term average levels.”
The Building, Industry & Land Development Association blamed the “constrained low rise land supply” and lack of available lots particularly in the 905 as the reason for the lower sales. Builders have been complaining over the past year that red tape and a lack of serviceable land has constrained their businesses. Meanwhile, suburban municipalities such as Markham and Mississauga have encouraged higher densification with high rises becoming the new norm in some areas.
Builders have reported line ups at new home sites this year to buy single detached and town homes. Some buyers have been buying condominiums instead, which has resulted in condo sales up slightly by 0.5 per cent in the first quarter, with low rise sales down by 18.3 per cent.
Bazely says he is increasingly looking further afield to do his building. But a lack of serviceable lots is not the only issue. Smaller town builders in Ontario are generally in a less robust market compared with their 416 counterparts.
But while the new housing market showed signs of slowing down, the resale market remained relatively buoyant.
The Toronto Real Estate Board reported that there were 4,444 sales during the first two weeks of April, a three per cent decrease compared with the same time a year earlier, but still quite healthy, since last April was a record for that month.
“If this economic activity is sustained for the remainder of the month, we could see April transactions close to last year’s record result,” said TREB president Bill Johnston.
With lower than normal inventory levels, prices have also taken a substantial hike upward to $483,165 up 12 per cent from the same time period a year earlier.
“The number of homes listed for sale so far in 2011 has been below expectations,” said Jason Mercer, TREB’s senior manager of market analysis. “Market conditions have tightened, resulting in increased competition between home buyers and accelerating rates of average price growth.”
Mercer said the strong prices for the spring market will likely encourage more buyers to place their homes for sale, resulting in more inventory in the second quarter.
Most analysts are forecasting that prices should flat line or even come down in the second half. So far that hasn’t been the case, especially since there is less low rise product in the new home market to choose from. Builders have also complained that government levies on new home building account for as much as 30 per cent of the cost of a new home to the consumer, further inflating pricing.
“Based on a softer level of demand, we should see a deceleration and stabilization of values,” said housing economist Will Dunning. “But the limited construction inventory plus the rising government imposed costs are creating pressure for price rises.”

QR Codes - What are they?

2011-04-15T13:17:00.001-04:00

In brief, a QR code (short for Quick Response) is a specific matrix barcode (or two-dimensional code), readable by dedicated QR barcode readers and camera phones. The code consists of black modules arranged in a square pattern on a white background. The information encoded can be text, URL or other data.

It was originally created in Japan by Toyota subsidiary Denso-Wave in 1994, the QR code is one of the most popular types of two-dimensional barcodes. QR is the abbreviation for Quick Response, as the creator intended the code to allow its contents to be decoded at high speed.

The QR code is a great new tool for Realtors, (look for the QR code on my signs), and within seconds of scanning the bar code, you have all the information in the palm of your hand.

Helping you is what I do!

The high cost of rising home values

2011-04-11T09:20:00.001-04:00

By Tony Wong
Dragica Donia bought her downtown Toronto row house more than two decades ago, figuring that it would suit her well during her retirement years.

But now, at 76, she’s worried everything will have to change. High property taxes mean she might not be able to continue living in her modest residence near the popular Little Italy neighbourhood.
“This is a very real concern to me,” said the 76-year-old senior, a retired administrative assistant. “I am going to have to sell my home and rent if taxes keep going up.
According to property assessment data obtained by the Star, the value of homes in Donia’s area has increased overall by 18 per cent since 2008. That means she may be in for a higher assessment in the future.
It is a story that is being played out in neighbourhoods across the GTA, all of which have seen a remarkable surge in house prices over the past decade. But that comes with a downside.
In particular, the cost of houses in the trendy and in-demand neighbourhoods that have driven demand have soared in value. And that could mean higher taxes for some homeowners and a real crisis for those on fixed incomes, like Donia.
Leaving her house would be a difficult decision for the divorced woman, who immigrated to Canada from Yugoslavia in 1963. This is where her friends are. She walks to the doctor, the dentist and the baker. When she had a heart attack several years ago, it was her neighbour who took her to the hospital and saved her life.
“It’s very hard for me to give this up, but when your pension goes up a few bucks and your taxes go up a whole lot more, you have to make a decision what to do,” said Donia. “I shouldn’t be in this position. But I am.”
With data from the Municipal Property Assessment Corp. (MPAC), the provincial non-profit that oversees the assessments, the Star got a sneak peek into the potential impact of rising property prices across the GTA. For houses that sold in 2010, we compared the selling price to the 2008 MPAC valuation.
The average 2010 resale price compared to the average 2008 assessments shows that property prices increased by 15 per cent in the Toronto market. In the 905 area, prices have increased by 13 per cent.
But some neighbourhoods, including Donia’s, have seen more outsized increases. Among other areas that have gentrified over the years, downtown east has seen prices increase by 24 per cent and downtown west by 22 per cent.
Under provincial law, assessments are revenue-neutral to municipalities, which means municipalities get no additional gain from increased assessment values — the burden of taxation simply shifts to more highly valued areas.
The assessments are done on a four-year cycle. Property owners last received their assessment notices in the fall of 2008 for the 2009 taxation year. The next province-wide assessment will take place in 2012, for the 2013 taxation year.
The data obtained by the Star is a harbinger of things to come — although the market could conceivably change within a year.
(Some analysts are saying the market has been overvalued by as much as 20 per cent, although they are in the minority. If prices do fall, some property values could conceivably be lower next year than this year.)
“Residents have every right to question the system,” said Kristyn Wong-Tam, councillor for Ward 27, which includes Rosedale and Moore Park. “At the end of the day it impacts families in a big way and could determine anything from better food on the table to whether they should send their kids to camp.
“You have seniors who have lived there for 40 years and the neighbourhood has transitioned around them,” continued Wong-Tam. “They could have bought the property for $70,000 and now it’s worth $2 million.”
Susan Eng, vice-president of advocacy for the Canadian Association of Retired Persons (CARP), says rising taxes as a result of increased assessments has long been a worry for her members.
“The overriding goal is for people to stay at home as long as possible even if they have medical or other challenges,” said Eng. “Escalating costs like utility bills and property taxes are major concerns.”
How much a property sold for is just one tool used by MPAC to determine value. The organization also looks at the sale prices of comparable properties in the area, as well as more than 200 other factors, including recent renovations and even the quality of construction, to determine value.
And just because values may rise by 15 per cent does not mean that taxes will rise by an equal amount. It depends on what other homes in the same municipality have gone up by as well. If you are close to the average increase, you likely won’t have to pay more.
The type of dwelling also makes a difference. Bungalows were the big gainers over the past few years. This includes a 41 per cent increase for bungalows in Wong-Tam’s ward of Moore Park and Rosedale, and 22 per cent in Davisville and Lawrence Park, and a 25 per cent gain in York Mills and the Bridle Path.
“It’s really remarkable just growing up and seeing things change in your neighbourhood,” said Christine Acconcia, whose approximately 2,500-square-foot bungalow is dwarfed by far larger infill building in her area.
Acconcia’s parents moved into the exclusive enclave of Hogg’s Hollow in the York Mills neighbourhood when she was just a year old.
Since then she has lived in and out of the area and has purchased her own bungalow not far from her parent’s house.
Over the years, Hogg’s Hollow has become one of the city’s most affluent areas — as bungalows such as Acconcia’s have been turned into urban palaces by developers, with some properties going for well north of $3 million.
The shortage of buildable land in the city has meant that tear-down bungalows are in demand by developers — and prices have appreciated.
As a result, long-time residents are concerned that property tax assessments have also increased.
Acconcia, the president of the York Mills Valley Association residents group, has appealed one assessment already and received a small abatement.
“It’s a small victory, because you have to do it all over again when they come back in the next four years,” she said.
Developer Michael Chung, general manager of family-owned firm Berkfife Ltd., says prices of bungalows in some areas of the city are now so high that it’s not profitable to build on them.
Bungalows that could be purchased for $400,000 to 500,000 and severed into two lots are now costing anywhere from $750,000 and up, said Chung.
“The land value is driving prices, but there isn’t much profit at the end of the day if you have to pay that money.”
There is such a shortage of lots that Chung has had an agent do cold calls, knocking on doors of dozens of homes asking residents if they want to sell.
“We’ve gone across the city and back from Etobicoke, to Central Toronto to Scarborough. People have been sitting on their properties because they have become gold mines.”
Acconcia has had developers ask if she wants to sell. But she’s not leaving her beloved Hogg’s Hollow anytime soon.
“I grew up here and I really love the area,” she said. “I can’t think of living anywhere else.”
Whether it is in Hogg’s Hollow or in the increasingly gentrified neighbourhood that Donia lives in, residents say the assessment process can be mystifying. But that hasn’t stopped them from appealing.
Despite a heart condition and the onset of Parkinson’s disease, Donia has invested hundreds of hours trying to figure out her taxes.
She has stacks of boxes containing documents related to her battles over the years to have her taxes reduced. But this year was different. She considered an appeal, but decided against it because she wasn’t feeling well.
“I can’t fight them anymore,” she said. “I just don’t have the strength.”
Donia said she doesn’t understand why she paid $1,219 in tax in 1998, and then had to pay $3,156 in 2010 for a house that is less than 14 feet wide, with virtually no renovations since she’s owned it.
“That’s a lot of money for me. I don’t go out to eat, I cook everything, I do everything for myself. Every time I think about it I am shaking. I am so upset.”
CARP’s Eng says Donia is not alone. Her membership is also worried about how their assessments are being handled.
“Their anger is directed at not only the absolute increases, but also the manner in which the increases occur, the seeming arbitrariness of the assessment process at MPAC and the seeming lack of recourse.”
In December the Ontario Auditor General blasted MPAC for out-of-date valuations, with homeowners paying too much or too little in taxes. The selling price of one in eight of the 11,500 homes the Auditor General looked at had a 20 per cent difference compared with the market value assessment, because of outdated information.
“We always look to improve our process and we welcome any review,” said spokesperson Joe Regina. The organization intends to implement all recommendations from the Auditor General, he said.
In response to Eng’s comments, Regina said: “Our assessments are reflective of trends in the real estate market, these are not arbitrary results. If a property owner feels that his assessment is not reflective, then they have the option of filing a request for a reconsideration which is free.”
There is some relief for seniors and for property tax owners who may be blindsided by sudden tax hikes.
The provincial government implemented changes that took effect in the 2009 property tax year that phased in any increases in taxes over four years. Decreases are not phased in. And seniors who qualify are also entitled to a tax relief grant instituted by the provincial government, with a maximum rebate of $500 for the 2010 tax year.
Donia says every little bit helps. Still, if taxes go up further next year, she plans to sell and move out.
“(The government) is not doing enough for people like me to stay in their homes. That’s the problem.”

More than half of young adults waiting till next year to buy home: RBC survey

2011-04-08T09:47:00.000-04:00

By Sunny Freeman, The Canadian Press

TORONTO - As rising home prices continue to outpace income growth, many young Canadians have decided to delay home ownership for another year, according to a poll released Thursday by Royal Bank of Canada.
RBC's annual home ownership poll found that 55 per cent of respondents aged 18 to 34 said it made sense to delay a home purchase until next year. That's 10 percentage points more than the national average for all age groups.
Meanwhile, about half of the young people in the survey who had already delved into home ownership said their mortgage was eating up too much income — suggesting their peers may have good reason to wait.
A sharp rebound in housing market activity as Canada emerged from a recession in late 2009 and early 2010 has sent home prices soaring.
The national average home price rose 8.8 per cent year over year to a record $365,192 in February, although it was skewed upward by sales in the red hot Vancouver market where the average home price was $790,380.
Meanwhile, Canada's job market has taken longer to recover and income levels haven't grown at the same rate. A Bank of Montreal report released last month found average resale home prices compared with personal incomes are 14 per cent above the long-term trend.
That makes it more difficult to afford a home — as mortgage payments eat into a larger portion of Canadians' paycheques — especially those of young people who are just settling into careers and tend to have less money saved.
In addition, young people already struggling with student loan payments may be influenced by a steady stream of warnings over the past year about Canadian debt-to-income ratios reaching record highs, suggested Bernice Dunsby, RBC's director of client acquisition for home equity.
"Canadians are heeding some of the advice around larger debt levels and stretching themselves too thin so they're actually taking the time to pause and reflect and plan accordingly, especially when it comes to things like their down payment," Dunsby said.
Some young people watching home prices soar beyond pre-recession levels may be waiting for a widely predicted drop anticipated over the next year or so, said David Madani, Canada economist at Capital Economics.
"We've kind of reached a threshold in the sense that affordability is pretty tough," he said.
"If you're talking about a potential young home buyer who is living in Toronto or Vancouver or some other big market, it's really pricey to get into right now, so that's discouraging for some young home buyers."
First-time buyers account for a huge portion of all Canadian housing sales, making the demographic influential in determining the health of the country's housing market.
This year's survey, conducted by Ipsos Reid in mid-January, came at a cooling off period in the Canadian housing market following a spate of frenzied buying in the early months of last year.
There will be a drop in demand this year after a number of factors last year combined to drive buyers to jump into the market earlier than planned, Dunsby said.
Many first-time buyers rushed into the market in the first half of 2010 while the Bank of Canada's key interest rate — which influences commercial lending rates — was set at emergency lows of 0.25 per cent because of the recession.
Those changes affect a minority of mortgage holders who opt for variable rate mortgages linked to the commercial banks' prime rates.
"(However) they may look at interest rates as an indicator of when to jump into the market," said Dunsby.
Some buyers also wanted to enter the market before the new harmonized sales tax was implemented last July in Ontario and British Columbia, two of the country's largest real-estate markets.
Although the HST only applied to some services associated with a home purchase, such as lawyers’ fees, some buyers thought it could push closing costs up a lot more.
First-time homebuyers are also most affected by government moves to change mortgage rules that made it more difficult to qualify for a mortgage. Stricter lending rules brought in the spring of 2010 require all homebuyers to qualify for a standard five-year, fixed-rate mortgage.
More recently, new changes enacted last month shortened the maximum amortization period for a mortgage to 30 years from 35, increasing the size of monthly mortgage payments.
Demand for homes began to wane last spring in the face of rising home prices and short-term mortgage rates, along with stricter mortgage rules and the exhaustion of pent-up demand from the recession.
That has put buyers and sellers on a more even footing when they negotiate.
"In a more balanced housing market, it makes sense that younger and first-time homebuyers are waiting to assess all of their options and do their research before buying a home," Dunsby said.
"It's also important to get expert advice on what you can afford and leave yourself with a little extra wiggle room in your budget so you don't become house poor, as home maintenance and lifestyle costs can add up."
While 43 per cent of younger Canadians told Ipsos Reid they were paying off their mortgage faster than expected, two-thirds, or 66 per cent, said their mortgages were still larger than they would like.
Rising real estate prices, along with having a large enough down payment, were the biggest concerns among young people surveyed.
Still, 43 per cent of the young adults who responded to the survey said they were looking to buy in the next two years, suggesting the housing market will continue to be healthy going forward.
That's higher than the national average of 29 per cent for all age groups.
In comparison, only 29 per cent of Canadians aged 35 to 54 said they want to buy within two years and only 17 per cent of respondents over 55 were looking.
The survey also revealed that young people have different ideas about how to seek advice on home ownership than those belonging to older generations.
Most young people said they were more inclined to use websites, family or friends for advice while more than 70 per cent of Canadians over 45 said they would rely on a real estate agent.
The survey's findings are based on responses from an online panel of 2,103 Canadians, conducted Jan. 12 to 17. A survey of this size has a margin of error of plus or minus two percentage points 19 times out of 20

No simple answers for new buyers

2011-04-05T09:44:00.000-04:00

Paul Barker, Postmedia News
Do you lock in or go variable? With mortgage rates tantalizingly low it is easy to see why so many people prefer the latter, but that could change if the rates start to rise.
Maria Dominelli, a mortgage specialist with independent mortgage brokerage firm Invis in Victoria, B.C., says deciding which route to choose depends on an individual or couple's short-and long-term goals, the amount of debt being carried and their overall tolerance to risk.
"I always ask clients whether they can afford to ride the wave, because there will be waves," she says. "If you cannot afford an extra couple of hundred dollars a month if rates rise, it is not for you."
Contrary to what many might think, there is not a downside to locking in, says Laura Parsons, a mortgage expert with BMO Financial Group in Calgary.
"Do your homework and if you do lock in, do not look back," she says. "It depends on the person and what they can tolerate. Some people can't sleep at night because they're worried about what the rates are going to do. In that case, of course, a variable rate would not be suitable. You may want to just know what your mortgage rate is going to be for the next five years."
Karen Blomquist, a mortgage associate with Invis affiliate Mortgage Intelligence based in Calgary, conducts a needs analysis with her clients to "find out a little more about who they are.
"If they can't sleep at night, what's the point?" she asks. "[But] if someone has enough money and enough savings and risk, why wouldn't you go variable? But if you are a little tight, you have a fear of fixed changing and you like to look at the long term, then I would say absolutely, lock in."
For anyone who is undecided, BMO offers a service called Online MortgageMate, which involves answering six questions in order to "pick the mortgage that fits."
"This slows someone down and helps them work through the thought process and making that decision," Ms. Parsons says.
"After they answer the questions online it will automatically tell them that they should be in a fixed or a variable, based on the information they provide. You should be setting your payments higher in order to avoid payment shock. It is the payment shock that most people have a problem with. At least have an emergency fund that you can draw on and lump sum your mortgage in order to reduce your payments as well."
Ms. Dominelli says that mortgage professionals have a responsibility to make sure that consumers really understand what they are getting into.
"Not all fixed rates are equal in terms of the product and not all variables are equal," she says.
"As an example, bi-weekly does nothing for you. It gives the lender your money more often. Accelerated is when you have 26 payments. You may think you have an accelerated payment, but in reality you don't. You have to really make sure you are signing the right document."
For the purpose of this story, she calculated the difference between a $250,000 mortgage, amortized over 25 years at a five-year fixed rate of 3.69%, and a variable mortgage at prime minus 0.80%. In each case, the monthly payments were $1,273.38.
"Assuming the current prime rate of three per cent steadily increases to five per cent by the end of the term at the end the five-year period, the principal balance in the fixed term (assuming no extra payments) would be $216,444 versus $208,027 in the variable rate mortgage," Ms. Dominelli says.
"That's what makes a variable mortgage attractive, when you work out the numbers and show people the potential. However, I say that with caution because I would never show that to a highratio borrower. The reality is that this is what has happened as of late: you have had the lowest interest rate on the variable and the fixed, but going forward I don't know if we can count on history repeating itself."
Ms. Parsons says people are really paying attention to interest costs, and so they should. "As an example, taking five years off the amortization of a $300,000 mortgage can save you $53,000," she says. "It's huge.
"There is nothing wrong with requesting an amortization schedule when you get your mortgage so you know where you're at in the first five years, 10, 15 and so on. Paying weekly, rather than monthly is a great way to battle that interest cost and also, get used to having a higher payment."

For U.S. housing, a new collapse

2011-03-25T09:14:00.000-04:00

Tim Shufelt, Financial Post
Bordered to the west by idyllic Gulf of Mexico beaches and to the east by the natural bounty of the Everglades, upscale Naples is one of Florida’s premier retirement destinations.
Naples’ charms made it an epicentre for the Florida property boom, where unfettered speculation and limitless credit lifted property values to the stratosphere.
Five years ago, the housing market in Naples was pegged as the country’s most overvalued, with single-family homes estimated to cost 85% more than they should. Now, one in three of those homes sits vacant, a testament to how deep the housing crisis runs in the United States and a signal that a recovery in real estate may not be in reach after all.
“I can’t see anything positive is going to happen with housing for at least a year to a year and a half,” said Jack McCabe, a housing analyst with McCabe Research & Consulting in Deerfield Beach, Fla. “Even at that point, we may just hit the bottom and bounce along it for a while.”
Just as some positive indicators in the United States sparked speculation the economic recovery is taking root, home sales and prices plummeted last month, according to data released Wednesday by the U.S. Census Bureau.
New home sales in February fell 17% to an annualized rate of 250,000 units, the slowest pace of sales activity since the agency began tracking figures in 1963. The median sale price fell 13.9% from the previous month to $202,100, the lowest value since December 2003.
The numbers surprised all but the most pessimistic analysts.
“It’s certainly a lot messier than people had hoped for,” said Brian Bethune, chief U.S. financial economist with IHS Global Insight. It’s also creating a big drag on economic growth, one that could renew last year’s worries over a possible double-dip recession.
But these kinds of setbacks are typical of economies recovering from severe recession, Mr. Bethune said. The economy took everybody on a similar ride last year.
The early stages of 2010 also witnessed a surge in upbeat sentiment, he explained. “Then it unwound, very quickly. In the space of three or four months, the tone of the economy changed dramatically. We went into the pause mode. Now, we’re kind of doing the same thing.”
Recessionary symptoms are likely to resurface in traumatized economies, he said, making it dangerous to extrapolate signs of recovery too far into the future.
It’s possible that financial institutions in the United States did just that.
Early this year, a sense that the housing market had bottomed out and was in the midst of a gradual stabilization prompted a rise in mortgage rates. “Sure enough, banks jumped the gun,” Mr. Bethune said.
The higher rates, combined with more stringent borrowing standards and external economic shocks affecting consumer sentiment, struck directly at housing demand, already fragile and anemic.
Meanwhile, what little buying activity there was focussed on the resale of existing homes, still at bargain basement prices in the most distressed American markets.
New home construction has already fallen close to its “irreducible minimum,” the amount required to replace demolished units so that net supply remains flat, Mr. Bethune said. Home construction currently sits at an annualized pace of about 450,000 houses, one million short of normal levels.
“That’s one million units that have been taken off the market,” he said. Clearly, the foreclosure process, by which vacant and repossessed homes are resold, has yet to exhaust itself.
There are still about 1.5 million vacant homes in Florida, Mr. McCabe said. “Right now, distressed properties are dominating the marketplaces around America.”
And the so-called “shadow supply” of future foreclosed homes still looms, with almost half of Florida mortgage holders facing a property value that falls short of what they owe.
“A lot of people may be carried out feet first before the house is worth what they paid for it.” Many of the properties are even selling for less than what it cost to build them, Mr. McCabe explained.
As long as unemployment remains elevated in the United States, demand will be insufficient to get the market back on its feet, he said.
“Unless you increase demand, you’re not going to fill up these vacant units and get them off the market.”

Canadians confident about home ownership: RBC

2011-03-11T09:10:00.000-05:00

Canadians are not only confident that they are assiduously paying down their mortgages, but they also believe they have the means necessary to weather a drop in house prices, contrary to worries that household debt is out of control, a poll showed on Wednesday.

Almost three-quarters of Canadians, or 73 per cent, believe that they or their families are well-positioned in the event of tumbling home prices, according to the annual RBC Homeownership Study undertaken by Royal Bank of Canada .
Will the money last? The poll found that 85 per cent of respondents feel that they are doing a good or excellent job of paying down their mortgage, while 90 per cent of Canadians are confident that real estate in Canada is a good investment.
“There’s been a lot of noise around debt-to-income ratios,” said Marcia Moffat, RBC head of home equity financing, noting that she found it comforting that such a large segment of Canadians said they were able to handle what is typically the biggest purchase of an individual’s life.
She said confidence was drawn from stable employment and rising incomes.
The survey was released a week after the Bank of Canada left its benchmark interest rate unchanged at a low 1 per cent.

The central bank and other policymakers have flagged personal debt as a danger to the economy, although the Bank of Canada last week said household debt was less of a concern than it has been in past months. Consumer spending remains strong but is easing to levels more in line with incomes, the bank said.
Worries about personal debt have twice prompted the government to introduce stricter mortgage rules to prevent overheating in the housing market.
The survey showed that Canadians, supported by a strong banking system, still have a strong interest in purchasing a home over the next two years. Interest declined slightly in the quarter, but remains high overall with 29 per cent saying it’s likely they will buy.
That was down two points from 2010 but is higher than any other year since 2006, the report said. Compared with last year, however, fewer Canadians said it was better to buy now than wait.
Rising home prices were the No. 1 concern about purchasing a home followed by rising mortgage rates, the poll showed.
The poll found that 40 per cent of Canadians feel the current housing market is balanced equally between buyers and sellers, a rise of five points over 2010.

The survey of 2,103 people is considered accurate to within plus or minus 2.2 percentage points, 19 times out of 20.

Carnage not over in U.S. housing industry

2011-02-23T09:19:00.000-05:00

MICHAEL BABAD

Bloodied though it may already be, the U.S. housing industry is in for still more.
Tuesday, the latest reading of the widely watched S&P/Case-Shiller home price index showed house prices slipping again in December, falling a further 0.4 per cent from November despite better economic signs from the world’s largest economy.
That shows the U.S. real estate sector firmly in a double-dip, economists say, and some believe the carnage isn’t over.
“The second leg in house prices that began last year will continue throughout this year and take prices to a new cycle low, some 5 per cent below current levels,” Paul Dales, the senior U.S. economist at Capital economics, said in a new report.
“If a vicious circle of falling prices and rising foreclosures were to develop, prices would fall much further.”
Economist Alistair Bentley of Toronto-Dominion Bank, agreeing U.S. home prices will probably reach a “new cyclical low” this quarter, pointed out that a stunning 4.6 per cent of U.S. homes are in foreclosure. The record levels of foreclosed homes on the market will continue to drive down prices, he said, though he added such properties may be skewing the performance of the overall market.
“At this point in the housing cycle, declining prices are not necessarily the best gauge of the broader housing market given the disproportionate share of sales from distressed properties,” Mr. Bentley said. “These properties tend to sell at a 35-per-cent discount relative to non-distressed sales.”
In the fourth quarter, prices in the U.S. fell 2.1 per cent, following a 3.3-per-cent drop in the third quarter. That, Mr. Dales in a separate report, left prices 0.7 per cent below the previous floor, meaning the dip in the last half of the year “wiped out” the gain of 4.9 per cent in the previous six quarters. Prices, he lamented, are now at the same level as they were in 2002.
Prices are falling again because of a temporary drop after the expiry of a tax credit last April, and the pace of decline is slowing. Better news?
“The fact that prices were still falling eight months after the tax credit expired suggests that prices are now being depressed by the continued imbalance between low demand and high supply,” he said, adding he believes that there are some 850,000 too many properties for sale, with 4.5 million more in the pipeline from foreclosures.
“The fact that housing has never before been as under-valued against income limits how much further prices will fall,” Mr. Dales said. “... The bulk of the price falls are clearly behind us. But history shows that prices can still fall when housing is under-valued.”
Some, such as Ian Shepherdson of High Frequency Economics, see an end in sight. The chief U.S. economist for the group pointed out that the pace of decline was cut in half in the past two months, compared to the previous two, and he believes prices will stabilize, and maybe even rise, in the next few.
“Prices respond to movements in home sales volumes in the short-term, which is why they tanked in the fall after the summer collapse in sales, following the expiration of the homebuyer tax credit,” he said. “With volumes having rebounded in the past few months, prices will soon follow suit.”

Toronto home sales down in February

2011-02-18T09:18:00.000-05:00

Existing home sales for the first half of February were down by 13 per cent

Larilyn Bennett is looking for a condo in the competitive Toronto market. But she's in no hurry.
"I'm going to take my time. I think there is a lot of choice out there," says Bennett, 32.
When she purchased her first condo, a 634 square foot unit near St. Lawrence Market, Bennett said she felt rushed. The unit went into multiple offers. She initially was left with buyer's remorse thinking she had paid too much. But the passage of time proved that it was a good investment.
This time around there are fewer multiple offers on the market, and Bennett is looking for a larger unit to hold her expanding wardrobe and camping gear.
"I think now is a good time to move up, and I really need the extra space," says Bennett, who works as a stylist on film and television production.
According to the Toronto Real Estate Board in figures released Thursday, there were 3,084 sales during the first two weeks of February, representing a 13 per cent decrease from the same time a year earlier.
"We are on pace for a strong sales result in February, but transactions will come in lower than the record result reported last year," said TREB president Bill Johnston.
The average selling price of a home was up five per cent in February compared with the same time last year.
In the city of Toronto, prices were an average of $499,861. In the 905 region prices were $416,260.
But prices are not expected to go up significantly this year. Which is something that Bennett is banking on, since she has already sold her current property and is living with her boyfriend.
According to the Canada Mortgage and Housing Corporation in a forecast released Thursday, Ontario home prices will grow closer to inflation this year and next with markets remaining balanced.
Housing activity has “stabilized” in recent months and demand will show a modest recovery through the latter part of 2011 and into 2012, according to the federal housing agency.
“Momentum in housing activity should slow in the next year from the volatile pace in recent years as moderate economic growth, fewer first time buyers and rising mortgage carrying costs temper increases in sales and prices,” said Ted Tsiakopoulos, CMHC’s Ontario Regional Economist.
While Ontario's economy was estimated to increase by 3 per cent in 2010, slowing global demand, moderating housing activity and a high dollar will dampen momentum, says the CMHC.
"Consumers will contribute less to the economic recovery moving forward thanks to less pent up demand and slower employment growth," said Tsiakopoulos.
Nationally, prices are also expected to grow at about the pace of inflation. The forecast is in line with the Canadian Real Estate Association which said last week that it expects prices to rise by 1.3 per cent this year.
Ontario home starts will weaken from 2010 levels according to the CMHC, reaching 56,200 units in 2011 and trending up to 59,500 units in 2012.
“Housing starts will remain in line with long term demographic fundamentals,” said Bob Dugan, Chief Economist for CMHC.
In Ontario, sales are expected to range between 165,00 and 217,000 transactions in 2011 and into 2012.

Housing market will be stable next two years: RBC

2011-02-17T09:30:00.002-05:00

A stronger economy will offset the effects of higher mortgage rates and keep Canadian house prices stable over the next two years, according to the Royal Bank of Canada.

In a market update that has the bank forecasting price gains of 0.5 per cent in 2011 and 1.3 per cent in 2012, economist Robert Hogue said that after two years of “gyrating wildly,” the Going forward, we see nearly perfectly offsetting forces driving Canada’s housing market,” he said. “On the upside, the economic recovery will gather strength in 2011, continuing to boost employment and family incomes. On the downside, interest rates are expected to rise.”
The Bank of Canada will likely raise interest rates by 100 basis points this year and another 150 basis points in 2012, he said, making mortgage payments more expensive for the majority of homeowners. But real gross domestic product is expected to increase to 3.2 per cent in 2011 from 2.9 per cent in 2010.
“The net effect of these forces is expected to be close to nil, thereby leaving resale activity largely flat,” he said.
There have been a flurry of forecasts issued in the last week, as the market starts the year stronger than expected
Canadian housing market is likely to be a much less interesting place for the next several years. Capital Economics issued a cautious report that suggested higher interest rates could drive prices down as much as 25 per cent over the next three years, while the Canadian Real Estate Association raised its sales forecast for the next two years as it suggested that a stronger economic recovery and continued low interest rates would keep the market balanced.
“Even though mortgage rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity,” CREA chief economist Gregory Klump said. “Strengthening economic fundamentals will keep the housing market in balance, which will keep prices stable.”
Capital Economics economist David Madani said too many optimistic forecasts are based on too short a time frame to be useful, because many mortgages won’t reset until rates rise much higher than they are today.
“Let’s balance this discussion a bit and think longer term,” he said in a recent interview. “As far as housing prices are concerned, we think they’re overvalued and we don’t see income growth closing that gap.”

Housing prices keep edging up

2011-02-14T09:24:00.000-05:00

By Tony Wong
Prices in the new home market increased for the 12th straight month in a row, according to figures released by Statistics Canada on Thursday.

But housing market indicators released in the past few weeks have been so contradictory that builders, realtors — and vendors — are far from relaxed looking ahead to 2011.
Bob Finnigan of Heathwood Homes, for example, closed out 2010 on a high note after selling more than 300 houses across the Greater Toronto Area last year, up from about 180 the year before.
But like many Toronto builders, he’s not sure what this year will bring.
“I cringe sometimes when I see these reports because they’re all over the map,” says Finnigan. “One group says we’re in trouble, the next guy says don’t worry about it.”
Finnigan says he sees the market going “sideways” this year, as consumers digest higher rates and work through debt.
“The world and the global economy is certainly not by any stretch what you could call normal as yet,” says Finnigan, the chief operating officer of Heathwood. “We’re watching interest rates very closely. Affordability is key for consumers.”
And that could be dropping as prices rise at the same time as interest rates.
Consider the new housing price index for the Toronto market rose by 0.2 per cent in December over November. At the end of 2010, builders had increased their prices by a cumulative 2.3 per cent over the previous year.
Meanwhile, price growth in the new homes market was more modest compared with the resale market, which saw a 9 per cent jump in 2010 over the prior year.
More competition and supply has meant that builders have struggled to keep a lid on prices, even though sales have improved.
“Pricing is at the top of mind for everyone,” said Finnigan, who is also the president of the Ontario Home Builders’ Association. “There is not a lot of ability in the market to absorb further price increases.”
Winnipeg, Halifax and Toronto were the three biggest movers for the month.
Not all cities saw increases, Statistics Canada reported. The biggest hit cities included Windsor, which has been hit by a loss of manufacturing jobs, down by 0.6 per cent. Montreal and Quebec were also down by 0.3 per cent.
“In Windsor, prices declined, even as builders offered incentive packages to stimulate sales,” said Statistics Canada.
But nationally, the index rose by 0.1 per cent in December, following a 0.3 per cent advance in November.
“This reflects the continued recovery of the overall housing market in Canada, “ said Queen’s University Urban and Regional Planning professor John Andrew. “However it is tracking a bit behind inflation and significantly behind new housing starts.”
Andrew warns that developers could be vulnerable if interest rates rise later this year. According to a forecast by BMO Economics, the key overnight rate is expected to rise from 1 per cent mid year to 2 per cent at the end of 2011.
“My concern is that new house construction is being supported by unsustainably low interest rates that continue to attract first time buyers,” he said. “As soon as interest rates begin to rise significantly, residential developers could get hit hard, both in terms of lower sales and the cost of their own financing.”
In fact, this year is expected to be a muted year for housing.
A TD Economics report on Wednesday said Ontario was one of four provinces that are financially vulnerable because of high debt loads.
The Canadian Real Estate Association forecast this week that housing prices were expected to increase by 1.3 per cent — or likely below inflation — in 2011.
Still, that was better than the forecast 25 per cent drop in housing prices by Capital Economics last week. The conflicting reports have further confused consumers who are trying to figure out when to dip their toes in the market.
The job market — as well as interest rates— are important barometers to watch to see the health of the economy. Without jobs, people won’t be able to afford homes, says Finnigan.
Meanwhile, the latest housing report by the Bank of Montreal Thursday lands firmly in the “soft landing” camp.
“Like the resale market, new home prices have cooled considerably since 2008 from the unsustainable surge of the previous eight years,” said economist Sal Guatieri. “Prices are now rising more slowly than incomes, supporting affordability and reducing the risk of a correction when interest rates normalize. Simply put, Canada’s housing market appears to be landing softly rather than crashing.”

Housing market gets sunnier outlook

2011-02-09T09:35:00.000-05:00

Tony Wong and Allison Cross - Business Reporters
Like many Toronto-based realtors, Rashida Dhalla had expected a quiet January.
“That’s the time I normally book off for vacation and do paperwork,” said the ReMax agent.
So when she listed a home under power of sale for $233,000 last month, she didn’t expect much activity, especially given the healthy dump of snow in the city.
And there was another thing: The property was a dog. No showings were allowed inside due to “potential mould and safety reasons.”
Instead, she received 49 offers on the house. It sold for $355,000, or 152 per cent above the listing price.
“It’s just about impossible to predict this market,” says Dhalla. “Just when you think it might be slowing down, it starts back up again.”
The market was supposed to be much slower this year. But on Tuesday, the Canadian Real Estate Association significantly upgraded its housing forecast, citing greater consumer confidence and an improved economic outlook.
Its previous forecast called for a 0.8 per cent drop in prices this year.
The CREA, which represents realtors, predicts average home prices nationally will rise by 1.3 per cent in 2011 to $343,300, and another 1.3 per cent in 2012 to $347,900.
That’s not what it said in November, after it had downgraded its forecasts four times in a row. The previous prediction of a 0.8 per cent drop in prices would have made 2011 the first time after 15 years that home prices went into negative territory.
Now it says the winning streak will continue. But not everyone agrees. Trying to read the market has been difficult at best for economists, who seem to be chasing a moving target. Forecasts have been so divergent that consumers might be forgiven if they think some analysts are not even looking at the same country.
The CREA forecast comes on the heels of a controversial report by Capital Economics last week that said Canadian home prices were 25 per cent overvalued, and due for a fall over the next several years.
Others say the market is due for a downward correction of anywhere from 5 per cent to 25 per cent.
But the Toronto Real Estate Board is even more bullish than the CREA for 2011, forecasting price increases of anywhere from 3 per cent to 5 per cent.
Other economists say prices in Toronto are likely to remain flat this year. One reason, they argue, is that there is a greater supply of new housing stock coming on the market, which should help temper price increases.
Another reason might be higher interest rates due in the second half of the year, which will crimp affordability.
Meanwhile, the Royal Bank announced Tuesday it is increasing some of its fixed-rate mortgages by as much as 0.25 percentage points.
Canada’s biggest bank was following in the footsteps of CIBC and TD Canada Trust, which announced their own interest rate increases on Monday.
RBC’s five-year fixed-rate mortgage increased by 0.25 per cent to 5.44 per cent. The bank increased its one-year fixed-rate mortgage 0.15 per cent to 3.5 per cent.
The new rates come into effect on Wednesday.
“A quarter-point jump in the rates does have a bit of an effect,” said Jim Rawson, a Toronto-based regional manger for Invis, a mortgage brokerage firm. “Say on a $250,000 mortgage, you’re probably talking about a $34-a-month difference.”
The other lever that may have a damping effect on the market is an increase in the supply of homes.
Toronto housing starts in January were up by a solid 37 per cent compared with December in seasonally adjusted numbers, the Canada Mortgage and Housing Corporation said in a report released Tuesday. On an unadjusted basis, starts were up 39 per cent in January compared with a year earlier. A home is considered “started” when the concrete foundations are poured.
ReMax is forecasting that the first quarter of the year will show slightly strong sales in Toronto, as tighter listings prevail and buyers try to beat stricter mortgage regulations.
In March, new rules will shorten amortization periods on government-backed mortgages to 30 years from 35.
The CREA also expects second-quarter sales to dip as a result, before they pick up steam in the second half of the year.
Condominiums will remain popular with buyers, and as the economy improves, so will luxury property sales priced above $1.5 million, ReMax forecasts. Properties priced between $400,000 and $900,000 in Toronto’s central core are forecast to be in most demand.
But everyone agrees the Canadian housing market, despite a recession and global financial uncertainty, has had a remarkable run.
Residential real estate in the Greater Toronto Area posted one of the “healthiest decades on record” from 2000 to 2010, according to a report released Tuesday by ReMax Canada.
Over an 11-year period, seller’s market conditions dominated.
The average price of a home increased to $431,463 at the end of 2010, from $243,255 in 2000. That works out to an annual compounded return of 5.35 per cent before inflation.
Nationally, the average annual return was 6.82 per cent, so the Toronto market actually underperformed compared with the country as a whole.

GTA condo sales near record high

2011-02-03T10:40:00.000-05:00

Condo sales in the Greater Toronto Area hit near-record levels in the fourth quarter of 2010.
There were 37,041 new and resale condominium units sold in 2010, enough to make it the second best year on record, and just 3 per cent shy of the all-time record of 38,306 units sold in 2007, according to figures from Toronto-based market research firm Urbanation Inc.
A strong rebound in the new condo sector was partly responsible, according to Urbanation vice-president Ben Myers.
“It was a surprise to see the market come back so strongly,” he said. “New unit sales were much higher than expected, spurred by tremendous results at a number of new project openings in the city of Toronto.”
Last year’s total condo sales represent a 20 per cent gain over 2009 figures.
A Toronto record of 18,221 highrise condos were started last year, more than twice as many as in 2009.
Those kinds of figures give pause to some buyers who fear a repeat of the 1989 crash in Toronto, which saw condo prices slashed in half at some projects.
There are 286 active projects in the GTA, representing 73,953 units — the most of any city in North America. The sheer number of units has had some analysts warning for years that a correction is imminent in the highrise market.
So far, that hasn’t happened. One reason is that interest rates have remained much lower than most had forecast. Pricing has also flattened over the past two quarters.
In the GTA, the average asking price for newly built condos rose by 8 per cent to $530 in the fourth quarter of 2010, from $493 in the fourth quarter of 2009.
In the former city of Toronto, new construction averaged $643 per square foot. In the downtown core, it was a lofty $723 per square foot.
Resale condominium pricing was much more affordable, with existing units selling for $374 per square foot on average in the GTA. In the city of Toronto it was $487, and in the downtown core it hit $518.
“Prices have held on in the new condo market, but have flattened in the resale market,” said Myers.
The new construction market is typically supported by investors, while resale condos have a higher end-user component.
“At some point the investor is going to have to sell to an end user, so the price trend will follow the resale market,” said Myers.
Highrises accounted for more than half the new home sales in the GTA for the first time, according to a separate report by RealNet Canada Inc. Ten years ago, they made up about a quarter of all new home sales. But that has changed as single-detached homes become out of reach for many buyers.
Foreign investors looking to the relative safe haven of Canada have also piled into the condo market. Many of the investors are from Asia and the Middle East.

Strengthening Economic Recovery and Low Interest Rates Point to a Stronger Than Anticipated 2011 for Housing Market

2011-01-24T14:11:00.001-05:00

Prospect of rising mortgage rates may prompt heightened buyer activity early in the year, according to Royal LePage forecast

TORONTO, January 6, 2011 – The average price of a home in Canada increased between 3.9 and 4.6 per cent in the fourth quarter of 2010, compared to the previous year, as markets shrugged off a lackluster third quarter and returned to a post-recession growth profile. Home values are forecast to continue a moderate and steady climb in many of the country’s key housing markets through 2011 with sales activity skewed to the first half of the year, according to the Royal LePage House Price Survey and Market Survey Forecast released today.
The low cost of borrowing stimulated the housing market in 2010, and this trend is predicted to continue in the first half of 2011. The widely held consumer belief that rates will rise in the latter part of 2011 may prompt an increase in buying activity early in the year.
“Trends in the housing market continue to be driven by the lingering after-effects of the recession,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Canadians realize that interest rates are unsustainably low and that homes will become effectively more expensive when mortgage rates return to normal levels. We will likely see more price appreciation early in 2011 as some buyers complete transactions in advance of anticipated higher borrowing costs.”
Soper added, “2011 is expected to unfold much like 2010, when close to 60 per cent of sales volume occurred in the first half of the year in anticipation of interest rate increases that never materialized. However, housing market activity in the first half of 2011 will be modestly closer to the norm, as last year’s phenomenon was exacerbated by mid-year tightening of mortgage accessibility and the introduction of HST in Ontario and British Columbia.”
Regionally, the strongest price appreciation of the cities studied is expected in mid-sized urban centers where affordability is better than the national average. For example, in Winnipeg, St. John’s and Fredericton, two-storey homes below $300,000 are still widely available. Demand in these cities is expected to be strong, putting upward pressure on home values.
Cities in Alberta are expected to be among Canada’s strongest performing markets in 2011. Woes in the historically volatile region’s housing market stretch approximately five years, when the Alberta housing market suffered a sharp correction following several years of double-digit price increases. The province’s energy-driven economy staged a comeback in 2010, recovering from the recession-led plunge in oil and gas prices. Major employers are expected to steadily increase hiring in 2011 which should attract new residents to the province and put upward pressure on the limited supply of housing. Royal LePage forecasts the average price of a home in Calgary will increase 5.4 per cent through 2011 while Edmonton home prices will increase 3.3 per cent. Home sale transactions are predicted to rise 6.7 per cent in Calgary and 9.1 per cent in Edmonton over the same period.
Across Canada, the average price of a home is forecast to rise 3 per cent over the coming year to $348,600 while the number of transactions is expected to drop 2 per cent.
During the fourth quarter of 2010, average home prices either increased or stabilized year-over-year, with Winnipeg, Ottawa, Montreal and St. John’s seeing the biggest gains. Nationally, the average price of detached bungalows rose to $324,531 (up 4.6 per cent), the price of standard two-storey homes rose to $360,329 (up 4.4 per cent), and the price of standard condominiums rose to $226,746 (up 3.9 per cent), compared to the fourth quarter of 2009.
Mr. Soper continued, “Like many Canadians, we anticipated an end to the ultra-low interest rate era before year-end 2010. Paradoxically, global economic weakness, particularly in the United States, allowed policy makers and financial institutions to keep borrowing costs low, resulting in a stronger Canadian housing market and a better than forecast fourth quarter.”
REGIONAL MARKET SUMMARIES
The residential real estate in market in St. John’s, Newfoundland saw strong year-over-year price gains across all three housing types surveyed every quarter this year. However, market has showed signs of cooling as inventory starts to rise.
Detached bungalows and two-storey houses in Montreal saw an 8.7 per cent year-over-year increase in the fourth quarter, while standard condominiums jumped 11.3 per cent. Average prices in Montreal are forecast to increase by a more modest 3 per cent in 2011 as a more balanced market emerges.
Ottawa’s housing market saw year-over-year price appreciation ranging between 6.3 and 10 per cent across all housing types surveyed this quarter. However, as inventory grows, Ottawa can expect price increases to be closer to 4 percent in 2011.
House prices surveyed in Toronto increased modestly year-over-year. Standard two-storey homes witnessed the largest increases at 5.6 per cent. Market activity slowed in the second half of the year as buyers rushed to the market in the first half of the year in anticipation of interest rate hikes and HST. For 2011, price increases are expected to be very modest at approximately 1 per cent.
Detached bungalows, standard two-storey homes, and standard condominiums in Winnipeg witnessed strong year-over-year price gains this quarter. Detached bungalows performed the strongest, increasing 10.3 per cent compared to the fourth quarter of 2009. Although the market is showing signs of cooling, sellers are still seeing multiple offers and are often receiving higher than their asking price. Winnipeg is expected to maintain its momentum throughout 2011 with prices rising around 7 per cent.
Single family homes performed best in Regina, which saw standard two-storey homes increase 9.1 per cent, while detached bungalows rose 8.4% and standard condominiums increased 2.4 per cent. Prices in Regina are expected to increase an overall average of 5 percent in 2011.
Both Calgary and Edmonton are positioned for house price increases in 2011 with a rebounding energy sector. In 2010, Calgary witnessed moderate year-over-year price depreciation across all housing types surveyed. Edmonton saw more modest price depreciation for two-storey houses, while condominiums decreased 5.7 per cent. Detached bungalows witnessed the only price increase among housing types surveyed at 1.2 per cent.
Single family homes in Vancouver dominated house price gains as two-storey houses rose year-over-year by 9.8 per cent in 2010. Condominiums on the East Side performed particularly well and, on average, Vancouver’s standard condominium market rose 7 per cent. Vancouver prices are expected to increase 3.7 per cent in 2011.
Royal LePage’s quarterly House Price Survey shows the annual change of prices for key housing segments in select national markets. Click here to view the chart .
About the Royal LePage House Price Survey
The Royal LePage House Price Survey is the largest, most comprehensive study of its kind in Canada, with information on seven types of housing in over 250 neighbourhoods from coast to coast. This release references an abbreviated version of the survey, which highlights house price trends for the three most common types of housing in Canada in 80 communities across the country. A complete database of past and present surveys is available on the Royal LePage Web site at www.royallepage.ca. Current figures will be updated following the complete tabulation of the data for the fourth quarter 2010. A printable version of the fourth quarter 2010 survey will be available online on February 4th, 2011.
Housing values in the Royal LePage House Price Survey are Royal LePage opinions of fair market value in each location, based on local data and market knowledge provided by Royal LePage residential real estate experts. Historical data is available for some areas back to the early 1970s.

The Harper Government Takes Prudent Action to Support the Long-Term Stability of Canada’s Housing Market

2011-01-17T10:32:00.000-05:00

The Honourable Jim Flaherty, Minister of Finance, and the Honourable Christian Paradis, Minister of Natural Resources, today announced prudent adjustments to the rules for government-backed insured mortgages to support the long-term stability of Canada’s housing market and support hard-working Canadian families saving through home ownership.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”
“The economy continues to be our Government’s top priority,” continued Minister Paradis. “Our Government will continue to take the necessary actions to ensure stability and economic certainty in Canada’s housing market.”
The new measures:
· Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
· Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
· Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.
Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.
The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.

You can buy a house with no money down

2011-01-10T09:51:00.000-05:00

If you have a good job and want to buy a first home, but don’t have a down payment, can it be done? The answer is maybe and depends on how you answer these questions.

How's you credit score? In order to qualify for a mortgage you must have a good credit rating. Try and reduce or eliminate all outstanding credit card debt first. Cancel credit cards that you are not using.
Do not change jobs just before applying for a mortgage. The lender will want to see that you have a stable employment history. You can go to Equifax.ca to obtain a free copy of your credit score. If any information in your credit file is incorrect, take the time to get it fixed before applying for any mortgage loan.
Do you qualify for an insured mortgage? With an insured mortgage, you are able to finance up to 95 per cent of the purchase price, either through CMHC or a private mortgage insurer. You will need to have at least the remaining 5 per cent down payment, as well as approximately an additional 1.5 per cent to cover the land transfer tax, legal, moving and other closing fees.
You may also want to set some money aside to do some work on your new home before you move in. To obtain the insured mortgage, you will have to demonstrate that you have enough monthly household income to pay your mortgage as well as your household expenses. It is a good idea to try and get pre approval for a mortgage, so you know before looking how much you can afford, based on the down payment that you have.
Is a mortgage with no down payment possible? Some lenders offer qualified buyers the entire down payment on the day of closing, if the buyer has good credit, stable employment and qualifies for the lender’s closed-mortgage rate over 5 years. This can allow you to buy a home worth up to $400,000 in most cases.
The disadvantages with these mortgages are that if you want to discharge them early, you will have to pay back a pro-rated portion of the money received. And you will probably be paying 3 per cent more interest on a monthly basis than you would if you were using a variable rate mortgage, which is popular today among most home buyers.
This extra interest will amount to more than the imputed value of the down payment over a five year period, yet it will be offset by the fact that you get to close your purchase now, with a down payment that you currently don’t have. Other lenders offer similar “cash back” mortgages, which may cover your 1.5 per cent closing costs or more, on similar terms and conditions.
What about the agent’s commission? Most buyers use a real estate agent to find the right home and negotiate the best price. They provide advice on how to handle a bidding war, make sure your home is professionally inspected, and arrange the proper insurance. They may introduce you to a mortgage lender. Most buyer agents will try and obtain their commission from the seller. But if the seller refuses to pay them, it is expected that the buyer will pay the agent.
Let’s say the buyer agrees to pay their agent 2.5 per cent commission for their efforts. The agent finds a house and the buyer wishes to pay $400,000, with the understanding that the seller will pay the buyer agent the 2.5 per cent commission, or $10,000, plus HST.
Now let’s say the seller refuses to pay the commission. The buyer will then offer $390,000 to the seller and will pay the agent directly. The difficulty with this example is if you are a buyer with very little down payment, you do not have this extra $10,000 plus HST to pay the agent.
CMHC has indicated that in the above example, they will only finance the commission if it is included in the $400,000 sale price. This to me is wrong and needs to be changed. CMHC should permit a buyer such as the one in this example who pays $390,000 plus $10,000 directly to the buyer agent, to be able to finance this entire amount with an insured mortgage.
Hopefully, this will change, once CMHC sees the impact of all the recent changes to real estate brokerage models as a result of the settlement between the Competition Bureau and the Canadian Real Estate Association.
Until that happens, buyers need to be up-front and honest with their buyer agents. If you know you do not have the money to pay the buyer agent yourself, as in the above example, explain to the agent that every offer you submit must be on the understanding that the seller will be paying the commission directly.
Other stuff. If you are contemplating a home with a basement apartment to help carry your expenses, be careful to make sure that the unit has legal zoning and complies with the local Fire Code. In addition, make sure that you notify your insurance company about this.
Finally, always have a professional home inspection done. You do not want to find, after closing, that the house requires repairs that you can’t afford.
Even if you have a low down payment, by being properly prepared, your dream of home ownership can come true in 2011.

Christmas is a homebuyer's market

2010-12-20T10:17:00.001-05:00

Garry Marr, Financial Post

Don’t over do it this Christmas, if you want to sell your house, that is.
Royal LePage Real Estate Services says it’s time to start thinking about a smaller tree this year if you plan to list your home for sale over the holiday season. Those large, decorated trees can take over a room and make it appear smaller to potential customers.
The week between Christmas and New Year’s is a slow period for real estate transactions, meaning sellers need any advantage they can muster.
“When people are selling their houses at Christmas time, they are selling under some other stress. They are usually highly motived to sell,” says Dianne Usher, a vice-president with Royal LePage. “You’ve got the euphoria of the holiday season and, oops we have to sell. It’s a great time to buy.”
The real estate company is not being a total Scrooge about the season, it’s just calling for less of everything.
Among its other suggestions are avoiding too many lights and opting for white lights instead of multi-colored flashing bulbs to give your home a neutral glow.
Forget the stacks of presents under the tree too, they just give your home a cluttered look. And those holidays meals may smell great to you, but they are a strange odour to a potential buyer.
“You want to try to tone it down a bit. Take the personal aspect of your home out of it,” says Ms. Usher, adding Christmas marks your home more than usual. “It just adds too much of a distraction to the room.”
But should you have no Christmas decorations? Would that be a turn off to buyers?
“Not in major urban centres because we are so multicultural today,” says Ms. Usher, adding in some rural and suburban centres, a touch of Christmas can be important to selling.
Mary Helen Rosenberg, a partner in Stage To Sell, says the whole idea behind staging is to keep your home as neutral as possible, so it appeals to the widest audience of buyers.
“No, I wouldn’t get rid of the tree all together, but I wouldn’t overdo it with decorations, too,” Ms. Rosenberg says. “You can’t rob the family of traditions. I wouldn’t put the tree up Dec. 1 and take it down Jan. 20. I might close that window and keep it fairly short and allow the family to enjoy its regular traditions. If it’s serious and we need to sell your house, you bring the tree down a little earlier.”
Even the guys who grow the trees say it’s probably not a good idea to have a giant one in the middle of your living room during an open house.
“When it comes to selling a house, it is important to not fill the room with a large and wide tree loaded with decorations. The eyes of the buyer will look at how big a tree is and how small the room is, even if it’s in the basement,” said Lewis Downey, executive director of Canadian Christmas Tree Growers Association.
“I think you do need a tree though. It’s Christmas time and it’s natural to have a tree. If you don’t have a tree, it can have reverse effect and people may say, ‘What’s the matter, there’s no tree. They’re not happy to live there.’”
Thinking of buying or selling over the holidays? I'd be happy to help. http://www.firstchoicehomes.ca/

Analysts fret over housing, want to hear from Carney

2010-12-17T12:51:00.000-05:00

MICHAEL BABAD

At least some economists want Bank of Canada Governor Mark Carney to elaborate today on his views on housing and household debt.
Having flagged the issue for months now, Mr. Carney speaks today to the Economic Club of Toronto on "Reflections on the Economic Outlook." Given Mr. Carney's repeated warnings on the high levels of household debts, economists Derek Holt and Gorica Djeric want the central bank chief to update markets on the outlook for housing.
"Our concerns have not gone away," the economists said in a research note. "We always argued that there would not be a U.S.-style housing bust principally because of work we've done on the vast differences between Canadian and U.S. mortgage and banking markets, but we still subscribe to the view that house prices face downside risks although the exact timing is uncertain."
Most economists don't expect a U.S.-style meltdown, but continued low interest rates, which Mr. Carney used to fight the recession, have helped lead to a continued build-up in personal debt.
And as The Globe and Mail's Tara Perkins reports today, the situation has become so worrisome that federal officials are studying the possibility of new measures to curb that increase. Many of the country's bankers support such a move, which could come in the next federal budget, Ms. Perkins writes.
The Scotia Capital economists noted that the home ownership rate in Canada is at a record high of about 70 per cent - that's a bit more than the peak in the United States. Home prices are also at record levels and the market is overvalued, while the debt-to-income ratio sits at 145 per cent, which is "not terribly lower than a properly defined U.S. comparison." The ratio of debt to assets, meanwhile, is the second-highest in the G7.
Real estate, they said, may be getting a temporary boost because fixed rates have been kept low as the Federal Reserve's low policy rate ties Mr. Carney's hands from going much higher.
"But the [Bank of Canada] is right to flag the risks of low rates for a long period," said Mr. Holt and Ms. Djeric. "In our view, low rates for a long time translate into concerns about transferring even greater volumes of homebuyers out of the future into the present. When that future comes, Canada's outperformance on GDP growth compared to the G7 average over the past decade that owed itself significantly to the unleashing of pent-up demand in housing and consumption from the 1990s into the past decade will have run its course and a softer demand environment for housing will be unleashed."

Top 10 Things To Avoid When Selling Your Home Over The Holidays, According To Royal LePage

2010-12-16T10:55:00.000-05:00

Vacation time and slower work schedules create an ideal time for open houses. However, as homes fill up with presents, decorations and visitors, sellers are often faced with the challenge of striking the right balance between cozy and crammed. Keeping your home tidy and sparingly-decorated doesn't mean sellers can't celebrate the season in style, but remember that buyers are looking for just the right amount of sparkle.

"Potential buyers expect that there may be some decorations, but when they arrive they are trying to envision how they would spend their day-to-day lives in the home," says Phil Soper, president and chief executive, Royal LePage Real Estate Services. "Keeping the holiday decorations to the right level will be easier if you remember the goal is to bring out the home's structural charm," Soper adds.
We know that potential buyers can be put off by a home that has too many personal items. So while trying to manage the Christmas clutter, sellers should also remove items that remind buyers that the home belongs to someone else. To assist sellers, Royal LePage compiled a top ten list of things to avoid when selling a home during the holiday season.
Too many lights: A home will dazzle more if lights are kept to a tasteful minimum. Sellers should opt for white lights instead of multi-coloured flashing bulbs to provide a more neutral glow to a home.
Forgetting to clear the snow: Snow can look beautiful on trees, but driveways and walkways should be cleared as soon as the flakes fall. Buyers should be able to move freely during an open house so it's important to remember all the outdoor paths and patios around your home.
No life or landscape: Give buyers a chance to imagine the potential in your landscape. Frost-resistant plants like flowering kale or miniature trees allow sellers to liven up walkways without taking away the buyer's ability to envision his or her dream outdoor spaces
Not cozy: Everyone appreciates a warm, cozy home - especially in the winter. Set the thermostat at a warm temperature for the whole day, and be mindful that some thermostats have low temperature pre-sets during the day when no one is at home. When the home is attended, fireplaces and candles could also be lit to create a comfortable environment throughout the day.
Engage the senses: Simmering a pot of cider with cinnamon during open houses or showings will create a warm and festive feeling.
Lingering odours: Be aware of those holiday dishes that may leave a strong odour. If possible, wait until showings are completed before cooking those traditional favorites -- potential buyers will appreciate a neutral environment.
Hiding a home's seasonal bests: Photos of the home's back and front yards, gardens and patios in spring and summer will show potential buyers what the house looks like when it is not buried under snow and when the leaves are still on trees.
Don't let the tree take over: A smaller Christmas tree, with minimal decorations, will create the appearance of more space. A huge tree, on the other hand, will make the room look smaller, and busy decorations can intensify clutter.
Presents should not be present: It is important to cut back on clutter when showing a home; hide the wrapped presents to keep them out of eyesight.
Too many decorations: Remember, when selling a home during the holidays, less is always more. Whimsical ornaments can be great accents during the holidays, but be mindful not to go overboard. When it doubt, remove it!

High taxes hamper real estate investment in Canada: Study

2010-12-14T13:47:00.000-05:00

By Tony Wong

High taxes are an impediment to commercial real estate investors looking to invest in Canada, says a new global study.
“I think it’s clear that the system is broken and no one has the fortitude to step up to fix it,” said Gerry Divaris, vice president of Cushman & Wakefield property tax services.
Commercial property owners in Canada pay the highest taxes globally, according to a report by Luxemburg-based tax advisory service Taxand.
Taxes are a “massive” 53 per cent of commercial property rents, according to Taxand in the report released Monday.
The U.S. has the second highest tax rate at 41 per cent, but that’s still a healthy 12 points below Canada’s, according to Taxand.
“The alarmingly high total tax rate for Canada is largely the combined result of high levels of tax, “which includes income and real estate taxes, said Keith O’Donnell, head of real estate for Taxand.
Norway is in third place globally at 36 per cent. Finland charges the least tax on commercial rental income at a mere 8.99 per cent.
Divaris said investors are turned off by the high taxes in Canada. In the Toronto market, for example, annual property taxes are at 1 per cent while commercial properties are taxed at 4 per cent, said Divaris.
“Home owners are the sacred cow,” said Divaris. “And people are worried that they can’t afford to pay for their property if taxes go up. The problem is, if you chase away all the businesses, who will provide for those jobs that you will need to pay for your home in the first place?”
Divaris says the Taxand study is no surprise, since investors have been complaining loud and hard that Canada is an expensive place to do businesses.
“Fortunately we have a lot of other things going for us that make us an attractive place to do business, but taxes are not one of them.”
However, the Taxand study has attracted some backlash from the industry, including from their Canada-based associates at tax law firm Gowlings, who say the 53 per cent figure may be overstated.
“That figure may be high and we’ve asked for clarification on how they came at those numbers,” said David Stevens, a partner with Gowlings specializing in business law.
Vince Imerti, a partner with Gowlings national tax group, said clients may typically complain about high taxes, but Canadian corporate tax has actually been falling over the years.
One thing that may have skewed the figure upwards is that the city of Toronto has a second land transfer tax that is in addition to the provincial land transfer tax. That tax was approved in 2007.
“As far as I know, Toronto is unique among municipalities in Canada to have such a tax,” said Stevens.
Because federal and provincial governments have over the years downloaded more responsibility on municipalities, property taxes are virtually the only way they can get revenue, said Divaris.
The City of Toronto Act was supposed to address that issue by allowing Toronto to charge fees such as the unpopular $60 vehicle registration tax. Incoming mayor Rob Ford says he already plans to scrap it.
“The problem is, if you’re not able to raise money any other way, then commercial property owners will continue to get hit until someone figures out a way. Right now it’s just politically unpalatable.”
contact me for all your real estate needs

Canadian new home prices rise again

2010-12-09T13:03:00.000-05:00

09/12/2010 - CBC News
New home prices in October rose across Canada for the third month in a row, Statistics Canada said Thursday.
The agency's national new housing price index climbed 0.1 per cent in the month, down from the 0.2 per cent gain new home values increased in September. But October was still the third consecutive month in which the index headed north.
"The top contributors to the monthly increase ... were Toronto and Oshawa, as well as Vancouver," Statistics Canada said in a press release.
The index is designed to measure home prices for similar abodes and uses 1997 values as the base.
Thus, the index value for an average Canadian home in October stood at 158, or 58 per cent higher than the price of the same home in 1997.
Saskatoon experienced the biggest price jump, at 0.8 per cent in the month. Statistics Canada said rising labour costs in the city led to the higher new home prices.
Saskatchewan enjoyed the second lowest unemployment rate among provinces at 5.5 per cent in November, more than two percentage points below the national average of 7.6 per cent in the same month.
A low jobless rate indicates the potential for higher labour costs as companies hike wages to attract increasingly fewer available workers.
Interestingly, new home prices in Calgary dropped by 0.6 per cent in October despite the fact Alberta's unemployment decreased to six per cent from 6.2 per cent in September.

Housing affordability improves in GTA

2010-11-30T10:48:00.000-05:00

Housing affordability is improving in the Greater Toronto Area, thanks to lower mortgage rates and softening price appreciation.

According to a Royal Bank of Canada report to be released Monday after four consecutive quarters of steep decline, housing affordability gained traction in the third quarter of 2010, thanks to bottoming mortgage rates and a slowing demand.
“The improvement in affordability has reduced some of the stress that had been mounting in housing markets during the past year,” said Robert Hogue, senior economist with RBC.
Housing affordability measures improved for the first time since the second quarter of 2009, when sales and prices of homes started to surge in the Toronto market coming out of the recession.
Many of those sales were buyers rushing in to avoid a new Harmonized Sales Tax and to buy before more stringent mortgage regulations. This led to fears that the market was in an unsustainable bubble.
“Although triggering a fair amount of anxiety while it unfolded, the Toronto area market’s return to earth this spring was, in retrospect, a mostly benign affair,” said Hogue. “The fears were that the payback for the clearly unsustainable record high levels of existing home sales at the start of this year would be an all out rout.”
So far that hasn’t happened, as the Toronto market seems to be in for a generally soft landing.
However, affordability is not expected to improve moving into next year with the spectre of increased interest rates, says Hogue.
“The recent decline in mortgage rates, however, is not expected to be sustained much beyond the coming months of this year,” said Houge.
RBC expects the Bank of Canada to start hiking rates in the second quarter of 2011.
“Higher mortgage rates will be the dominant factor raising homeownership costs over the medium term,” said RBC. “We expect housing demand and supply to remain mostly in balance.”
Some of the increases in mortgage rates will be offset by increasing household income as a mitigating factor, says RBC.
The price of an average two-storey home was $554,700 in the third quarter. But it would take a household income of $120,400 to afford that.
Some banks raised five-year fixed mortgage rates slightly last week by a quarter percentage point, as turmoil in Europe spilled over into the bond markets. However, variable rates can still be had as low as 2.15 per cent from some lenders. A five year fixed rate is going as low as 3.45 per cent.
The RBC affordability index for a standard two-storey home has fallen to at 56.1, down significantly from the 60 points recorded in the second quarter of the year. (the lower the number, the more affordable the home)
A rise in the index means homes are less affordable. The study measures the proportion of pre-tax median income needed to service the costs of owning a home such as mortgage, utilities and property taxes. A measure of 56.1 means that it takes more than half of average pre-tax income in Ontario to pay the monthly costs of owning a home.
The long term average since 1985 has been 53.4, meaning that affordability is getting closer to a normal range.
Nationally, the RBC index is slightly above long term averages, suggesting that “some greater than usual tensions persist for Canadian homebuyers,” according to the bank.
“These tensions are unlikely to derail demand for housing in the near term, but will act as a restraint on growth and market activity going forward.”
The Toronto market, meanwhile, looks reasonable when compared to Vancouver. There it takes 78.1 per cent of pre-tax income to afford a two-storey home. But that’s down already by 4.7 points from the earlier quarter.
An average two-storey home in Vancouver goes for $766,300. To afford that, you need to be earning $149,400 annually.

Father doesn't know best

2010-11-23T09:41:00.000-05:00

Suzanne Wintrob, National Post
Looking for your first home? Then do your homework before hitting the open houses.

"A first-time homebuyer can save a lot of time by knowing in advance how much they would qualify for and what they can afford," says Marcia Moffat, RBC's VP, Home Equity Financing, Canadian Banking.
RBC recently surveyed 1,050 Canadians, half who bought their first home in the past two years and half who intend to do so within the next two years. While two-thirds of future buyers said they hoped to purchase a single detached home, those who had already bought ended up in a townhouse or a condominium. The difference, suggests Ms. Moffat, comes down to dollars and sense.
"Affordability isn't just the house price -- it's thinking about maintenance of the home, taxes, legal feels on top of it and, if it's a young family, factoring in childcare costs," she says. "Sometimes when someone is in the market of intending to buy, they haven't thought through all those elements. Then, when they actually come down to buying, it's part of the whole approval process. Yet if they get pre-approval, it strengthens their credibility with the realtor and means they're not spending all of their time looking at homes that they can't reasonably afford."
Apparently, getting advice is all in the family. While one-third of current homeowners turned to the bank as their primary source of mortgage advice, those planning to buy turn to Mom, Dad and other family members to better understand mortgages. That's not always smart, says Ms. Moffat, since what was right for your parents when you were a kid might not be right for you now.
"I've heard parents say, 'You should go into a 10-year fixed,' but those were parents who lived through the late '80s at a time of very high interest rates and uncertainty," she says.
Of course, managing cash flow becomes a much more pressing concern once the sale is final. According to the survey, those planning to buy fret most about three things: being approved for a mortgage, affording the downpayment, and rising housing prices. Once in the market, though, they get cash-flow anxiety, worrying considerably about rising mortgage rates, being able to make their regular monthly mortgage payments, and declining housing prices. With all that stress, it's not surprising that 85% of first-time buyers said they intend to stay in their new home for the long-term.
As for mortgages, the study reveals that first-time homeowners are more likely to opt for fixed or variable rate mortgages -- though older first-timers are more comfortable with variable rates than their younger counterparts. Future buyers go for a combination of the two, which RBC concludes may reflect their uncertainty.
Ms. Moffat says there are many simple ways for first-time homebuyers and those planning to buy to make the experience more soothing. For those unsure if they're ready to buy, mortgage specialists can offer budgeting advice while online mortgage calculators can compare monthly rental payments to mortgage payments.
Ms. Moffat also suggests setting mortgage payments for the highest amount possible.
"If you are concerned about rising rates, a good rule of thumb is to plan for the worst case scenario for the next five years and build your financial plan around that number," she says. "If things turn out better, you'll be ahead of the game because you've already paid down a good chunk of your principal and you've tested your budget for higher payments."

Canadians are on the move

2010-11-16T12:44:00.000-05:00

There is no place like home, but for many Canadians, buying a home doesn’t mean they plan to stay for long, says a recent TD Canada Trust report. It found one-in-five repeat buyers have owned more than five homes. Twenty-three per cent of those surveyed plan to move again within six years, and less than one-third say their next move will be their last.

Canadians are split on whether their next home will be larger (49 per cent) or smaller, but there is consensus that in their next house-hunt, they intend to find a fully detached home. Seven-in-10 repeat home buyers are looking for a fully detached home – even those currently living in condos, townhouses or semi-detached homes are looking for fully detached homes for their next purchase.
Half of Canadians say the proceeds from the sale of their current home will be less than the value of their new home, meaning that they will need to take out a mortgage.
The top factor that influences the decision to move is retirement (29 per cent). Other factors include being bored of their current home (16 per cent), investment opportunities (15 per cent) and market conditions (15 per cent). Fourteen per cent say they had always planned to move but were waiting to save enough money.
The top considerations for Canadians’ next home are the layout of the home (98 per cent), the size of the home (97 per cent) – though they are divided on whether to go smaller or bigger – and price (96 per cent).
The majority of home buyers plan to sell their current property before purchasing another one (84 per cent). Of the remaining 16 per cent who will keep both properties, 39 per cent will use one as a rental property or investment property.
Fifty-five per cent of Canadian home buyers are cautious, saying they wouldn’t buy a new home until their current home is sold – but 45 per cent say they would put in an offer if the perfect home came up for sale and hope that their house sells.

Canada’s housing market ‘pricey, not dicey,’ BMO says

2010-11-08T09:59:00.000-05:00

Michael Babad

Housing pricey but no bubble seen
Canada's housing market is moderately overvalued but not a bubble waiting to be burst, BMO Nesbitt Burns says.
“All things considered, the Canadian housing market does not appear to be in a bubble, and is unlikely to suffer a U.S.-style collapse,” economists Earl Sweet and Sal Guatieri said in a research note.
“A key and overriding difference is the quality of loan origination in the past decade, as well as other institutional factors such as mortgage insurance and recourse against defaulters,” they wrote in the report titled “Canadian housing: Pricey, not dicey.”
The Economist published a report recently that indicated Canada's real estate market is overvalued to the tune of 24 per cent. The magazine used a measure that compares home prices and rent, whereas comparing prices with personal income is a “superior methodology,” Mr. Sweet and Mr. Guatieri said.
Using their method, they found prices peaked, in terms of overvaluation, at 18 per cent late last year. But a 3-per-cent drop in prices so far this year, along with moderate income growth, cut that to “a less worrisome” 11 per cent in the third quarter.
“Though overpriced, the absence of widespread speculation and egregiously loose credit standards suggests the market is not in a bubble,” They wrote. “Instead, Canada’s housing market remains reasonably affordable because of exceptionally low interest rates. Barring a sharp spike in mortgage rates or a relapse into recession, a substantial price correction is unlikely to occur. The greater risk could be that sustained low interest rates might recharge the housing market and inflate a true bubble that ultimately bursts when rates normalize.”
The BMO study comes as Canada’s mortgage market tops $1-trillion for the first time, Globe and Mail real estate reporter Steve Ladurantaye writes today.

Real estate association members ratify deal giving consumers wider choice

2010-10-25T10:22:00.000-04:00

The Canadian Press

ST. JOHN’S, N.L. — Delegates from Canada’s 101 local real estate boards Sunday ratified a deal worked out by the federal Competition Bureau and the real-estate industry.
It would allow consumers to choose what services they want from their agent when selling their homes, and to pay for only those services.
The deal was reached after months of negotiations between the competition watchdog and the Canadian Real Estate Association that represents some 100,000 realtors.
The bureau chief was quick to praise the ratification.
“I am pleased that CREA members have voted in favour of this agreement,” said commissioner Melanie Aitken. “For Canadian homeowners, it ensures that they will have the freedom to choose which services they want from a real-estate agent and to pay for only those services.”
Association president Georges Pahud also welcomed the vote.
“We are pleased that after careful consideration and reflection, real-estate boards and associations from across Canada have endorsed the agreement,” Pahud said.
Under the deal, the Canadian Real Estate Association has agreed that its rules as well as those of its members should not deny or discriminate against realtors wishing to offer mere posting services.
The Competition Bureau has been pressuring the association to change rules it calls “anti-competitive” on behalf of realtors and consumers who want more flexible services.
“This 10-year agreement brings a close to a long process of negotiation with the Competition Bureau and will allow CREA and realtors to do what they do best — help people with the biggest financial decision of their lives, buying and selling a home in these challenging economic times,” said Pahud.
But experts say the doors to lower-cost services won’t be thrust open overnight because the industry is dominated by traditional agents who are reluctant to change their business models.
Realtors currently operate on the principle that selling agents will split the standard five per cent commission with the buyer’s agent.
Canadian Real Estate Association members voted on amendments to the organization’s rules in March that were expected to appease the Competition Bureau, but the watchdog took issue with a clause in the amendments that said the changes are subject to the rules of local boards.
The watchdog said it would settle for nothing less than a legally binding agreement so that the association couldn’t change its rules back on a whim.
With Sunday’s ratification, the deal will be legally binding as of today and will remain in effect for 10 years, with hefty penalties for any violation.

Housing boom blamed on subsidies

2010-10-20T11:07:00.000-04:00

Garry Marr, Financial Post ·

The federal finance committee got an earful Tuesday from one group not too thrilled with the housing boom — Canadian landlords.
John Dickie, president of the Canadian Federation of Apartment Associations, said at least part of the housing boom over the past decade can be attributed to the government favouring housing over rental accommodation by providing a much larger subsidy.
“There are a number of rules in the current tax system that amount to massive favoritism towards homeowners as opposed to renters,” said Mr. Dickie Tuesday, adding it’s true for all three levels of government.
In Ontario, the group estimates, municipal, provincial and federal governments provide a subsidy of $2,629 per owner-occupied house, compared to $395 per renter.
“There is a perception among politicians that homeowners vote more frequently than tenants,” said Mr. Dickie. “There is perception in society that homeownership is good and should be encouraged.”
Homeownership rates in Canada have climbed steadily over the past decade and are now closing in on about 70% of households, something Mr. Dickie said “pushes it further than it should.”
Federal subsidies include such things as a rebate on the goods and services tax on new homes and the home-renovation tax credit. Capital gains on the sale of a principal residence are also exempt from federal and provincial taxes.
Though it varies by city, homeowners generally pay less property taxes than landlords. In Ottawa, Mr. Dickie said, landlords pay property tax of 1.7% of the value of the home, compared to 1% of the value for homeowners. Condominium owners, who rent out their space, get the residential rate in most municipalities.
He said renters should be concerned about the disparity. “They don’t know they are getting ripped because it’s the owners that cut the cheques.”
Craig Alexander, chief economist with TD Bank Financial Group, said homeownership has long been a goal of Western society.
“There is no question the policy environment provides incentives and support to homeowners,” he said.
But there is a risk subsidizing the sector, he said. “In the case of the United States, one could make the argument that part of what fuelled the housing bubble was oversubsidization of the housing market or maybe just excessive public-policy support for homeownership.

September home sales off 20% year-over year

2010-10-18T12:55:00.000-04:00

By Tony Wong

The weather is turning cooler – and so are sales in the Canadian housing market.
Canadian home sales were up a seasonally adjusted 3 per cent in September over August, according to the Canadian Real Estate Association in figures released Friday.
However, actual year over year activity in September fell by 19.8 per cent compared with 2009.
And unlike the strong increases in past months, prices are flat lining and back to where they were a year ago. Average prices are now at $331,089, down 0.4 per cent from September 2009.
“Supply and demand are rebalancing, and that’s keeping prices steady in many markets,” said CREA president Georges Pahud.
One thing that’s keeping pricing from dropping further is that new listings remain 15 per cent below the peak reached in April, as some vendors have decided to take their homes off the market.
The seasonally adjusted number of months of inventory, representing the time it would take to sell current stock, is at 6.6 months at the end of September, down from 6.9 months in August.
In the Toronto market, sales are down by 22 per cent in August compared with last year.
One moderating factor is that some banks have eased off on mortgage lending rates, said CREA economist Gregory Klump.
“Interest rates are going nowhere fast, so home ownership will remain within reach for many homebuyers.”
Still, CREA does not expect the latest round of low rates to ignite market demand.
“The continuation of low and stable interest rates is unlikely to cause housing demand to take off, especially since the hangover from accelerated home purchases earlier this year is expected to persist for some time.”

GTA resale home prices up in September

2010-10-13T12:36:00.000-04:00

John Spears, Business Reporter

The number of existing homes sold in September in Greater Toronto dipped 23 per cent in September, compared with September a year ago, says the Toronto Real Estate Board.
Board members recorded 6,310 sales in September, down from 8,196 a year ago.
But prices rose despite the softer sales, with the median price of a home rising to $360,325 from $347,000 a year ago. The median price marks the point where half the homes sold for more, half for less.
The average price also climbed, to $427,329 from $406,877 a year ago.
Softer sales volume isn’t surprising after the record sales chalked up by the market in the second half of 2009 and early 2010, said Bill Johnston, president of the real estate board.
Meanwhile in a national survey, Re/Max says the outlook for Canada's home resale market looks healthy going into the final three months of 2010, after a summer "pause."
The national real-estate sales organization says it anticipates fewer sales than in the surprisingly strong fourth quarter of 2009 but prices are expected to hold up.
Re/Max says there hasn't been a big influx of listings, while demand has normalized after a very hot period in late 2009 and early this year.
It also says there was a good sign from the number of higher-end properties sold this summer in both smaller and larger centres.

Real estate group reaches tentative agreement on MLS listings

2010-10-12T13:10:00.000-04:00

JOHN IBBITSON AND STEVE LADURANTAYE - Globe and Mail
It will become easier and cheaper for Canadians to sell their homes after peace was declared on Thursday in the war between the Competition Bureau and the organization representing Canada’s real estate agents.
The bureau and the Canadian Real Estate Association (CREA) reached a tentative agreement that will allow sellers to hire an agent to post their property on the all-important Multiple Listing Service and then conduct the rest of the sale on their own, if they choose.
39% 189 votes - Yes
61% 296 votes - No
“It’s better to negotiate something than go to court,” Don Lawby, chief executive officer of Century 21, said in reaction to the agreement. “Bad press is bad press, and whatever the fee structure, people will always think it’s unfair.”
News of the agreement caught industry leaders flat-footed. The heads of several of the country’s largest brokerage firms were unaware of it until contacted by The Globe and Mail.
If ratified by CREA’s membership at the end of October, the agreement will end a challenge from the bureau in which the two sides are scheduled to appear before the Competition Tribunal in April. Once ratified, the new rules will take effect immediately and be in effect for 10 years.
Traditionally, sellers hire an agent in an all-or-nothing agreement, in which the agent lists their homes on the Multiple Listing Service – on which about 90 per cent of residential properties are bought and sold – negotiates the sale with the buyer and handles much of the paperwork. In return, the agent receives a commission that is typically a percentage of the sale price.
Energized by a new commissioner, Melanie Aitken, and an expanded mandate, the Competition Bureau went to the Competition Tribunal in February demanding that CREA allow consumers more choice on what services to use.
The association, which represents nearly 100,000 real estate agents across Canada, loosened some of its rules in the spring. Nonetheless, the bureau decided the measures were insufficient.
But while both sides appeared intransigent in public, negotiations quietly paved the way to Thursday’s agreement after association representatives approached the bureau earlier this month.
The agreement is a major victory for the Competition Bureau, which was determined to force the real estate industry to become more competitive.
“The agreement is welcome news for Canadians,” Ms. Aitken said in an interview. “Consumers are going to have the ability to choose what services they want from a real estate agent, and pay only for those services, and at the same time, it gives much-needed flexibility for the agents to offer the variety of services and prices that meet the needs of consumers.”
CREA president Georges Pahud said in a statement that that the agreement “would avoid unnecessary and expensive litigation proceedings.”
The long-term impact on the country’s real-estate market is far from certain. The cost of buying or selling a home could come down as competitors seek to offer different packages and undercut each others’ prices.
But agents have warned that changes could lead to shoddy service or fraud. The agreement seeks to strike a balance, increasing consumer choice while leaving agents as the only portal to the MLS.

Things you think add value to your home - but really don't

2010-10-07T14:59:00.001-04:00

Jean Folger, Investopedia.com
Every homeowner must pay for routine home maintenance, such as replacing worn-out plumbing components or staining the deck, but some choose to make improvements with the intention of increasing the home's value.

Certain projects, such as adding a well thought-out family room - or other functional space - can be a wise investment, as they do add to the value of the home. Other projects, however, allow little opportunity to recover the costs when it's time to sell.
Even though the current homeowner may greatly appreciate the improvement, a buyer could be unimpressed and unwilling to factor the upgrade into the purchase price. Homeowners, therefore, need to be careful with how they choose to spend their money if they are expecting the investment to pay off. Here are six things you think add value to your home, but really don't.

Swimming Pools - Swimming pools are one of those things that may be nice to enjoy at your friend's or neighbour's house, but that can be a hassle to have at your own home. Many potential homebuyers view swimming pools as dangerous, expensive to maintain and a lawsuit waiting to happen. Families with young children in particular may turn down an otherwise perfect house because of the pool (and the fear of a child going in the pool unsupervised). In fact, a would-be buyer's offer may be contingent on the home seller dismantling an above-ground pool or filling in an in-ground pool. An in-ground pool costs anywhere from $10,000 to more than $100,000, and additional yearly maintenance expenses need to be considered. That's a significant amount of money that might never be recouped if and when the house is sold.

Overbuilding for the Neighbourhood - Homeowners may, in an attempt to increase the value of a home, make improvements to the property that unintentionally make the home fall outside of the norm for the neighbourhood. While a large, expensive remodel, such as adding a second story with two bedrooms and a full bath, might make the home more appealing, it will not add significantly to the resale value if the house is in the midst of a neighbourhood of small, one-storey homes. In general, homebuyers do not want to pay $250,000 for a house that sits in a neighbourhood with an average sales price of $150,000; the house will seem overpriced even if it is more desirable than the surrounding properties. The buyer will instead look to spend the $250,000 in a $250,000 neighbourhood. The house might be beautiful, but any money spent on overbuilding might be difficult to recover unless the other homes in the neighborhood follow suit.

Extensive Landscaping - Homebuyers may appreciate well-maintained or mature landscaping, but don't expect the home's value to increase because of it. A beautiful yard may encourage potential buyers to take a closer look at the property, but will probably not add to the selling price. If a buyer is unable or unwilling to put in the effort to maintain a garden, it will quickly become an eyesore, or the new homeowner might need to pay a qualified gardener to take charge. Either way, many buyers view elaborate landscaping as a burden (even though it might be attractive) and, as a result, are not likely to consider it when placing value on the home.

High-End Upgrades - Putting stainless steel appliances in your kitchen or imported tiles in your entryway may do little to increase the value of your home if the bathrooms are still vinyl-floored and the shag carpeting in the bedrooms is leftover from the '60s. Upgrades should be consistent to maintain a similar style and quality throughout the home. A home that has a beautifully remodeled and modern kitchen can be viewed as a work in project if the bathrooms remain functionally obsolete. The remodel, therefore, might not fetch as high a return as if the rest of the home were brought up to the same level. High-quality upgrades generally increase the value of high-end homes, but not necessarily mid-range houses where the upgrade may be inconsistent with the rest of the home. In addition, specific high-end features such as media rooms with specialized audio, visual or gaming equipment may be appealing to a few prospective buyers, but many potential homebuyers would not consider paying more for the home simply because of this additional feature. Chances are that the room would be re-tasked to a more generic living space.

Wall-to-Wall Carpeting - While real estate listings may still boast "new carpeting throughout" as a selling point, potential homebuyers today may cringe at the idea of having wall-to-wall carpeting. Carpeting is expensive to purchase and install. In addition, there is growing concern over the healthfulness of carpeting due to the amount of chemicals used in its processing and the potential for allergens (a serious concern for families with children). Add to that the probability that the carpet style and colour that you thought was absolutely perfect might not be what someone else had in mind. Because of these hurdles, wall-to-wall carpet is something on which it's difficult to recoup the costs. Removing carpeting and restoring wood floors is usually a more profitable investment.

Invisible Improvements - Invisible improvements are those costly projects that you know make your house a better place to live in, but that nobody else would notice - or likely care about. A new plumbing system or HVAC unit (heating, venting and air conditioning) might be necessary, but don't expect it to recover these costs when it comes time to sell. Many homebuyers simply expect these systems to be in good working order and will not pay extra just because you recently installed a new heater. It may be better to think of these improvements in terms of regular maintenance, and not an investment in your home's value.
The Bottom Line - It is difficult to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home's value when it comes time to sell. There is no simple equation for determining which projects will garner the highest return, or the most bang for your buck. Some of this depends on the local market and even the age and style of the house. Homeowners frequently must choose between an improvement that they would really love to have (the in-ground swimming pool) and one that would prove to be a better investment. A bit of research, or the advice of a qualified real estate professional, can help homeowners avoid costly projects that don't really add value to a home.

Housing market makes strides

2010-10-05T09:57:00.000-04:00

STEVE LADURANTAYE

The Canadian housing market “vastly improved” over the last three months, ReMax Canada said Tuesday, but sales are expected to remain sluggish for the rest of the year.
The real estate brokerage firm said in its “Market Trends Report” that sales should return to average levels this fall after a slow summer, but that the pace set in 2009 was unsustainable.
“With the diminished risk of a W recession occurring, rebounding commodity and equity markets, and more positive economic data emerging daily, the outlook for the residential housing market has vastly improved over the past three months,” the brokerage stated.
Not everyone would agree with the cheery assessment – sales slowed markedly across the country over the summer, with Vancouver and Toronto seeing drops of more than 30 per cent. Monday, the Real Estate Board of Greater Vancouver said sales were 37.6 per cent lower in September than a year ago, and were only 0.8 per cent higher than August's figures.
Meanwhile, Finance Minister Jim Flaherty warned Monday that the economy was struggling, singling out the housing market as a source of concern. Housing's portion of the economy has grown steadily for the past 10 years, but Bank of Canada Governor Mark Carney warned Thursday that declining affordability and subdued income growth will dampen further growth.
Prices have been moving lower across the country since the spring, but ReMax said the 19 markets it tracks are still seeing higher prices when compared to a year ago.
The brokerage said “by far the most interesting statistic reported” from its agents was an increase in the number of upper-end sales between January and August. ReMax's definition of a luxury home varies by market, from $350,000 in St. John's to $1.5-million in Greater Vancouver. It is difficult to make comparisons to the last market update, released in April, however, because luxury comes cheaper in Tuesday's report – the bar was lowered by $500,000 in Vancouver and Toronto, for example.
“As overall economic performance improves, so too will housing activity,” says Sylvain Dansereau, executive vice-president of ReMax Quebec. “History will show sound market fundamentals supported another healthy year of residential real estate activity in 2010.”
From the report: * “All markets reported a surge of 20 per cent or more in upper end home sales. Sixty-eight per cent of markets saw upscale home sales climb in excess of 40 per cent, while 21 per cent boasted triple-digit gains.
Sudbury led the country in sales appreciation, rising a significant 17 per cent year-to-date (1,876 units in 2010 vs. 1,599 in 2009).
*While virtually all markets reported softened activity over the summer months, Winnipeg, saw 32 per cent of all homes sell in multiple offers in August.
* Montreal was the sole market still experiencing seller's market conditions, while Greater Toronto and Winnipeg were balanced, slightly favouring the seller.
*First-time buyers led the charge in 58 per cent of markets, while move-up purchasers dominated in 21 per cent of markets. The remainder reported all segments working in tandem.
*Buyers were decidedly taking more time to make their decisions in recent months, with many delaying their home-buying intentions. It is expected that many purchasers sitting on the fence will make their way back into the market on the heels of more positive economic news.”

Best bang for real estate buck is in Windsor

2010-09-28T15:02:00.000-04:00

By Tony Wong - Business Reporter
Executives looking to relocate in Canada will likely get the best bang for their buck in Windsor, Ont.
At $158,242, economically hard-hit Windsor scores as the cheapest place nationally to buy a four- bedroom, two-bathroom home, according to Coldwell Banker Canada in a report released Wednesday.
The four-bedroom detached home is considered a baseline property preferred by most executives with families. The report is used by corporations to get a gauge of living costs in cities globally.
“Windsor has been working to diversify their industries, but the market value of the homes reflect the economic conditions,” said John Geha, president of Coldwell Banker Canada.
Windsor is across the border from Detroit, which has also been hit hard by jobs lost in the auto industry. Detroit is the cheapest place in the U.S. for a four-bedroom home at a mere $68,007 (U.S.).
Vancouver, on the other hand, is at the opposite end of the Canadian spectrum, and seemingly on another planet, where a similar four-bedroom home will cost a wallet crunching $1,324,000.
Vancouver was the only Canadian city to be in the North American top ten, settling at number 5, just below San Francisco.
“Vancouver has obviously been a very desirable location, but it comes at a cost. If you’re moving from a less expensive market you might have to move outside the core,” said Geha.
Four-bedroom homes were most expensive generally in western Canada, where a comparable property in Kelowna B.C. is $916,697.
In Fort McMurray, Alta., a heady job market means a four bedroom home costs $593,390.
Toronto comes out somewhere in the middle, where a four-bedroom home will cost an average of $495,398.
A four-bedroom home purchased in the old city of Toronto would be much higher, but the average goes down when the former neighbourhoods of East York, Scarborough, Etobicoke and North York are added in.
Toronto also has four-bedroom alternatives such as lofts and townhomes that give buyers choice, keeping the average prices of detached homes down in comparison to other areas of Canada that don’t have the same variety, says Geha.
Relocation for work isn’t the biggest factor in most people’s decision to move. A study by TD Canada Trust also released Wednesday says retirement (30 per cent) is the number one choice of people polled in Ontario.
That’s followed by market conditions (16 per cent) investment opportunities (16 per cent) and children moving out (15 per cent).
In the United States, Newport Beach, Calif., was the most expensive place to relocate, where a four bedroom home will cost $1,826,348 (U.S.)
Globally, Shanghai was among the top most expensive places to live coming in at $1,494,072 (U.S.) Dubai came in a close second at $1,413,750.

Home sales grow in August, prices remain flat in sign of housing market health

2010-09-27T13:29:00.000-04:00

By Sunny Freeman, The Canadian Press

TORONTO - Home sales rose in August on a monthly basis for the first time since March but prices remained flat — signs of health in Canada's real estate market that should deflate fears of a housing bubble.
There were about 32,800 transactions in August, up 4.1 per cent from July on a seasonally adjusted basis, the Canadian Real Estate Association said in a report Wednesday.
However, the number of units sold was down 22 per cent from 42,350 units in August 2009.
“High sales activity late last year and earlier this year borrowed from sales this summer and will continue do so over the coming months,” Gregory Klump, CREA’s chief economist said in the report.
“This makes the return to more normal levels of sales activity look like a steep downward trend.”
Many potential buyers raced into the market while mortgage rates were at historic lows and before changes to mortgage qualification standards in April.
In addition, buyers in the hot housing markets of British Columbia and Ontario rushed to buy before the new harmonized sales tax, which applies to real estate services and some home purchases that had previously been exempt, took effect July 1.
In July, sales fell 30 per cent from the year before, when the strong housing market led Canada's economy out of recession.
Sales have been falling steadily in recent months as demand moderates and more owners put their houses on the market. But until last month, home prices had continued to rise on a monthly basis, leading some economists to question whether the market could experience a sharp downturn.
The average price of homes sold through the Multiple Listing Service last month was $324,928, little changed from $324,843 in August 2009.
Douglas Porter, deputy chief economist at the Bank of Montreal (TSX: BMO.TO), said the flat year-over-year numbers suggest home prices have finally started to moderate in line with falling sales.
"Average home prices were officially unchanged from year-ago levels in August," Porter wrote in a report, adding that "we still expect that average prices will post some modest year-on-year declines by the end of this year."
Before the August numbers were announced, there had been some renewed debate amongst economists as to whether Canada's housing market was teetering on the edge of a U.S.-style collapse as prices continued to rise even as sales fell.
That led some industry watchers to warn that home prices could be artificially inflated and might soon see a drastic downturn.
Klump said the hangover from accelerated home purchases earlier this year were likely to persist into 2011, but won't push the market to the brink of crisis mode.
And Porter said a renewed slide in longer-term mortgage rates in recent weeks will help to offset a slow but steady increase in the Bank of Canada's overnight interest rate, which climbed to one per cent last week, sending banks' prime rates and variable rate mortgages higher.
"While home sales are still nursing a bit of a hangover from the real estate party in the first half of the year, it looks like conditions are stabilizing," he said.
"Looking ahead, sales are expected to remain on the soggy side with consumer confidence dimming, but should find support in still-low rates and steady job growth."
In another sign of housing market health, the number of new listings was more than double the number of sales, a clear indication the market is now considered balanced, Porter said.
As a result, it would take nearly seven months for all the listings to be sold at the current pace — a slight improvement from July but still relatively high.

Rough patch ahead for housing market

2010-09-17T12:36:00.000-04:00

John Morrissy, Financial Post
OTTAWA — Canada’s weakening real estate market is headed for a rough patch in the months ahead, analysts said after data released Thursday showed housing starts slowing for the fourth consecutive month in August.
Canada Mortgage and Housing said in its monthly report that the seasonally adjusted rate of housing starts slipped three per cent in August to 183,300 units from a downwardly revised 188,900 starts in July.
At the same time, Statistics Canada said the country’s new housing price index fell 0.1% in July, the first such decrease in 13 months.
The decline in housing starts was essentially in line with the 185,000 that analysts had forecast, and follows four straight months of declines in the value of building permits, reported Wednesday.
It was felt across both major components of the housing industry, with single urban starts dropping 3.6% to 65,000 units and urban multiple starts falling 3.7% to 97,800 units, CMHC said.
“The report shows that despite a litany of headwinds, there is still a fair degree of forward momentum in Canada’s housing market,” said David Tulk, senior micro strategist at TD Securities.
Nevertheless, he cautioned, “markets should be prepared for a volatile couple of months ahead before the tone of the data improves.”
But none of the commentaries that followed CHMC’s data suggested Canada’s market is a bubble about to burst, the subject of heated debate in recent weeks.
“The risk of a 1990’s-style housing market correction are minimal,” wrote RBC economist David Onyett-Jeffries.
The current decline, he said, resulted from home buyers getting ahead of the implementation of the harmonized sales tax in Ontario and B.C., as well as rate hikes by the Bank of Canada.
“Much of this slowing represents a payback from earlier unsustainable strength.”
As a result, the housing market will continue to soften for the remainder of 2010 and into possibly well into 2011, analysts said.
“Over the next few quarters, we forecast housing starts to continue to ease, down near 170,000 units in the fourth quarter, and bottoming in the 150,000-160,000 range by mid-2011,” said Pascal Gauthier, senior economist at TD Economics.
Considering the housing market’s importance to the overall economy, Mr. Gauthier expects residential investment to be a drag on the economy for the next five to six quarters, before picking up again in 2012.
The housing market will get no immediate help from declining mortgage rates, pushed down recently by a rally in bonds and other fixed income instruments, thanks to the front-loading of housing activity into the first part of the year, Tulk said.
On a regional basis, CMHC’s August report showed sharp declines in the Atlantic region (down 29%), the Prairies (down 19.9%), and Quebec (down 17.7%). Starts surprised to the upside in the provinces that introduced the HST, with B.C. up 26.4% and Ontario up 15.6%.
At the same time, the month-over-month decline in Statistics Canada’s New Home Price Index was driven almost entirely by weakness in B.C. and Ontario, according to BMO Capital Markets economist Robert Kavcic.
On an annual basis, prices remained 2.9% higher than a year ago, Onyett-Jeffries pointed out.

'If ever there was a time to buy, it is now,'

2010-09-14T10:57:00.000-04:00

John Greenwood, Financial Post · Thursday, Sept. 2, 2010

Bank of Montreal has chopped its benchmark five-year mortgage rate, aggressively throwing its weight behind what many are calling an increasingly wobbly housing market.
"It's a great time to buy a home," Martin Nel, a senior BMO official, said in news release announcing the change. He added that people who take advantage of the offer will benefit.
"If ever there was a time to buy, it is now," Mr. Nel said.
The move, which takes effect today, brings the bank's key five-year rate to 3.59%, down from 3.79%, making it one of the lowest five-year rates ever offered by a Canadian bank, says industry newsletter CanadianMortgage Trends.
But some experts are already scratching their heads because of the aggressive tone of the announcement as well as the timing, given the recent spate of warnings about the uncertain state of the market, including one earlier this week from the Canadian Centre for Policy alternatives predicting an imminent collapse.
When the big banks make mortgage rate changes, they generally just disclose the new numbers without commenting on housing market conditions. If pressed, bank officials are usually quick to explain that the changes in these consumer lending rates are merely a function of fluctuations in their own borrowing costs.
"It's a bit puzzling to me," John Andrew, a professor at Queen's University's School of Urban and Regional Planning, said of the BMO announcement. "Perhaps they are concerned that the number of new customers will fall off precipitously."
Residential real estate prices have been in free-fall in the United States as well as many European countries, in contrast to the Canadian market, which has been on a tear for a good part of the past decade with prices in many cities at record levels.
But analysts worry that it's only a matter of time before the Canadian housing market moves in the same direction, and they point to warning signs that have already appeared.
Earlier this year, Moody's reported that debt-to-income levels of Canadian households are the highest ever and close to where they were in the United States before that market started to fall apart in 2007.
The Bank of Canada has raised concerns that the high debt loads of Canadian consumers have made them vulnerable to changes in interest rates and potential deterioration of the economy.
In a bid to crack down on what some described as reckless real-estate speculation, the federal government brought in new regulations in the spring to make it harder for first-time buyers to qualify for government-backed mortgage insurance.
Borrowers must now meet standards for a five-year fixed-rate mortgage, even if they want a shorter-term, variable-rate product. As the key measuring stick for many homebuyers, a lower five-year mortgage rate will mean that more people will qualify to buy more expensive homes than with a higher mortgage rate.
The tougher rules had the desired effect. The recent imposition of the new harmonized sales tax in Ontario and British Columbia also affected demand, and as a result the market cooled so much that industry insiders became worried it had gone too far.
The Canadian housing market is important to the banks because residential mortgages make up the single biggest asset class on their balance sheets.
There are nearly $1-trillion of home loans outstanding, to the Bank of Canada says. About half of these loans are held by the chartered banks.

Seven must-have real estate contract conditions

2010-08-24T09:19:00.001-04:00

It's a good idea to educate yourself on the not-so-obvious parts of a real estate contract

Amy Fontinelle
When you formally make an offer on a home you want to buy, you'll fill out a lot of paperwork specifying the terms of your offer. Aside from such obvious things as the address and purchase price of the property on which you're making an offer, there are some items you should be sure to include in your real estate purchase contract.
1. Finance Terms
If you are like most people and you won't be able to buy the home without obtaining a mortgage, your purchase offer should state that your offer is contingent upon obtaining financing at a specified interest rate. If you know you can't afford the monthly payment on the house if the interest rate is higher than 6 per cent, don't put 6.5 per cent in your offer. If you do that and you are only able to obtain financing at 6.5 per cent, the seller will get to keep your earnest money deposit when you have to back out of the offer.
If you need to obtain a certain type of loan in order to complete the deal, you should also specify this in your contract. If you are paying all cash for the property, you should state this as well because it makes your offer more attractive to sellers. Why? If you don't have to get a mortgage, the deal is more likely to go through and closing is more likely to happen on time. (Learn more in 6 Ways To Come Up With A Down Payment On A Home.)
2. Seller Assist
If you want the seller to pay part or all of your closing costs, you must ask for it in your offer. The offer should state the amount of closing costs you are requesting as a dollar amount (e.g., $6,000) or as a percentage of the home's purchase price (e.g., 3 per cent).
3. Who Pays Specific Closing Costs
The agreement should specify whether the buyer or seller will pay for each of the common fees associated with the home purchase, such as escrow fees, title search fees, title insurance, notary fees, recording fees, transfer tax and so on. Your real estate agent can advise you as to whether it is the buyer or seller who customarily pays each of these fees in your area.
4. Home Inspection
Unless you are buying a tear-down, you should include a home inspection contingency in your offer. This clause allows you to walk away from the deal if a home inspection reveals significant and/or expensive-to-repair flaws in the structure's condition. For example, if the home inspection reveals that the home needs a new roof at a cost of $15,000, the home inspection contingency would give you the option to walk away from the deal.
5. Fixtures and Appliances
If you want the refrigerator, dishwasher, stove, oven, washing machine or any other fixtures and appliances, do not rely on a verbal agreement with the seller and do not assume anything. Specify in the contract any fixtures and appliances that are to be included in the purchase.
6. Closing Date
How much time do you need to complete the purchase transaction? Common time frames are 30 days, 45 days and 60 days. Issues that can affect this time frame might include the seller's need to find a new home, the remaining term on your lease if you are currently renting, the amount of time you have to relocate if you are moving from a job, and so on. Occasionally, the buyer or seller might want a closing as short as two weeks, but it's difficult to remove all the contingencies and obtain all the necessary paperwork and funding in such a short time period. (Learn more in 10 Hurdles To Closing On A New Home.)
7. Sale of Existing Home
If you are an existing homeowner and you will need the funds from the sale of that home to buy the home you are making an offer on, you should make your purchase offer contingent upon the sale of your current home. You should also provide a reasonable time frame for you to sell your home, such as 30 or 60 days. The seller of the property you're interested in is not going to want to take his property off the market indefinitely while you search for a buyer.
There are many other things that go into a thorough real estate contract, but for the most part, you shouldn't have to worry about them. Real estate agents will commonly use standardized, fill-in-the-blank forms that cover all the bases, including the ones described in this article.
If you want to familiarize yourself with the details of the purchase agreement form you're likely to use before you write your offer, ask your real estate agent for a sample agreement, or search online for the standard form that is common in your locality. (If you are looking for a good deal and have time to wait, a short-sale house may be for you. To learn more, read Purchasing A Short-Sale Property.)
The Bottom Line
Even though these forms are common and standardized and a good real estate agent would not let you leave anything important out of your contract, it is still a good idea to educate yourself about the key components of a real estate purchase agreement.

Home sales tumble

2010-08-18T09:34:00.000-04:00

Garry Marr, Financial Post
Housing sales were down 30% in July from a year ago, and the Canadian Real Estate Association is blaming the drop on the new harmonized sales tax in Ontario and British Columbia.

The Ottawa-based group, which represents 100 real estate boards across the country, said July sales plunged 6.8% on a seasonally adjusted basis from the previous month, a decline “almost entirely the result of fewer sales in British Columbia and Ontario,” where the HST went into effect on July 1.
The slowdown had been expected as consumers rushed to buy homes ahead of the July 1 implementation in those provinces. The HST only applies to services used in purchasing and selling an existing home, such as real estate commission, and not the actual sale price.
Phil Soper, chief executive of Royal LePage Real Estate Services Ltd., said the HST, combined with tougher mortgage rules, expectations of higher interest rates and the bounceback from the recession, drove the market earlier this year. “You take those four things and add them together and you get a highly front-ended year, which we forecast,” he said.
The housing market did get some good news from Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Bank of Montreal, which all lowered interest rates Monday. The five-year, fixed-rate closed mortgage is down to 5.49%, which means that on a discounted basis, consumers can likely lock in a rate of less than 4% for five years.
But John Andrew, a professor of real estate at Queen’s University in Kingston, Ont., doubts the cut in bank rates will be enough to reverse a declining housing market.
“With homes sales down 30%, that’s surprising. I was expecting a drop, but nothing that big. I think prices are next [to decline] although they are holding their own now,” Prof. Andrew said.
“Thank goodness rates are as low as they are. If we were seeing significant increases in interest rates, it would disastrous for real estate prices,” Prof. Andrew said.
The average price of a home sold in July was $330,351, just a 1% increase from a year ago. However, the average price of a home sold in June was $342,662, so prices are off 3.6% from a month ago.
CREA said the lack of activity in British Columbia and Ontario — two of the country’s most expensive markets — likely skewed average prices down. In B.C., sales dropped 14.1% from a month ago on a seasonally adjusted annual basis. In Ontario, the decline was 8%.
The two provinces accounted for 85% of the change in national activity.
“The soft sales figures we’re seeing right now can be attributed in part to accelerated home purchases earlier in the year,” said Georges Pahud, CREA’s president.
He warned activity will be off for the rest of 2010.
“Activity may remain at lower levels for some time, but ultimately we expect a more stable market to emerge, with demand coming back into line with economic fundamentals,” Mr. Pahud said.
Prices are getting a boost from a drop in supply. The seasonally adjusted annual number of new residential listings fell 7.2% in July from the previous month, the third consecutive monthly decrease and the steepest drop in more than a decade.
However, the overall inventory rate, which reflects all housing on the market, is climbing. The number of months of inventory, which represents the number of months it would take to sell current inventories at the current rate of sales activity, was seven month in July. A year ago the number was 4.4 months.
Douglas Porter, deputy chief economist of BMO Capital Markets, said most consumers who were sitting on the sidelines already pushed their purchase ahead in the spring, so he’s also expecting a soft market for the next few months.
"Although with long-term mortgage rates dropping, employment improved and prices stabilized, the longer-term outlook is far from dire,” Mr. Porter said.

Canadian housing market cools

2010-08-16T12:41:00.000-04:00

Steve Ladurantaye Real Estate Reporter

The malaise in Canada's housing market is deepening, as record-low interest rates and a vast selection of homes prove to be insufficient incentives to draw new buyers into the market.

Just days after the Canadian Real Estate Association downgraded its sales forecast for the rest of the year, data from British Columbia and Alberta show sharp double-digit decreases in the number of homes sold in July compared to a year ago.
The resale housing market has been at the forefront of Canada's economic recovery, with prices rebounding sharply from recessionary lows. But the market seems to have peaked, and signs of stress are showing across the country.
In Vancouver and Calgary, sales were down 45 and 42 per cent, respectively, compared to last July. In Toronto, new condo sales showed a quarter-over-quarter contraction for the first time in 16 years.
While the CREA typically aggregates information from each of the country's 101 real estate boards in the middle of each month, the boards can release sales data on their own sooner.
Vancouver and Calgary reported Wednesday, Toronto is expected to report Thursday.
All of this slippage is happening while mortgage rates remain at record lows, despite constant warnings from economists that they are bound to rise as the Bank of Canada moves its lending rate higher.
Competition among the banks for new business along with falling bond yields have meant mortgage rates have been largely unaffected by any Bank of Canada moves.

Condo sales in Toronto drop for first time in 16 years

2010-08-04T14:12:00.000-04:00

Steve Ladurantaye - Globe and Mail Update Published on Tuesday, Aug. 03, 2010

New condo sales in Toronto decreased for the first time in 16 years in the second quarter, as the market cooled along with the broader housing market.

Sales of new condos have posted quarter-over-quarter sales gains since 1994, said Urbanation Inc, an information gathering company that tracks sales in the Toronto area. There were 4,991 sales in the second quarter, an eight per cent decline from the first quarter’s 5,415.
“Despite the quarter-over-quarter decrease, sales during the past four quarters were near record highs,” said Ben Myers, Urbanation’s executive vice-president. “When we consider the rapid sales pace of the six months prior to Q2/10, the new sales market is softening. Expect a slightly slower sales pace for the remaining two quarters of 2010.”
The amount of time units are sitting on the market has also increased, to 25 days in the second quarter from 22 days in the first quarter. There were 12,638 unsold units available at the end of the second quarter, an increase of 12 per cent over the same time last year.
The resale market held up far better, setting a new quarterly record of 5,076 sales, beating the previous high of 4,854 set in the third quarter of 2009. It’s an 18 per cent increase over the first quarter, and five per cent over a year ago.
Prices held steady, however, with the average selling price rising less than one per cent in the second quarter to $331,000 as buyers had a record 10,997 units to choose from.
“A flush resale supply coming kept resale pricing in check,” Mr. Meyers said. “Many of these resale listings were absorbed during the quarter, bringing the number of resale listings down to 8,714 units, which allowed the strong demand during the spring months to be met without further impacting affordability due to rising resale prices.”
He said prices should remain stagnant in the coming months because of a flood of new supply.
"With almost 6,000 occupied and not yet registered units in the CMA at the end of Q2/10, and the potential for as many as 12,000 completions over the remaining quarters of 2010, it’s possible the addition of that many units to the market will force resale prices to remain relatively flat,” he said.

CREA lowers home sale expectations

2010-08-03T12:43:00.000-04:00

By QMI Agency

There will be fewer homes sold this year, but for more money than initially thought, the Canadian Real Estate Association said Friday.
CREA downward revised its 2010 housing market forecast after a weak spring buying season in four of Canada’s most crucial markets.
National sales activity via the Multiple Listing Service is now expected to reach just 459,600 units this year, representing an annual decline of 1.2%.
That’s because the pent-up demand resulting from the recession is now running out and further interest rate hikes will keep homebuyers in a cautious mood, CREA said.
As new listings shrink to adjust to fewer buyers, home prices are now forecast to jump 3.5% in 2010 to reach a national average of $331,600.
"Slowing first-time home buying activity means lower- and mid-priced homes are making a smaller contribution to the average price calculation, causing the average price to be skewed upward as a result," said Gregory Klump, CREA Chief Economist.
Prices are expected to ease off by 0.9% again in 2011, though some provinces could see modestly higher price tags.
"The hangover from accelerated home purchases earlier this year is expected to persist over the rest of the year, but positive economic and job market trends bode well for home price stability," Klump said.
Big swings in the market could finally be behind us, he said.
"Homebuyers will no doubt welcome a more relaxed housing market in places where there was a shortage of supply earlier in the year."
CREA expects that in 2011, slower economic growth and consumer spending will contribute to a 7.3% decline in home sale activity.
"While the jump in national sales activity earlier this year likely borrowed from the future, local markets trends are not necessarily in sync with national trends, so buyers and sellers would do well to consult with their local realtor to best understand the outlook in their market,” said CREA President Georges Pahud.

Home resale prices up 13.6% over year

2010-07-29T13:56:00.000-04:00

Canadian home resale prices in six cities were up 13.6 per cent in May compared to a year earlier, according to a report issued Wednesday.

The Teranet-National Bank National Composite House Price Index measured resale prices in Ottawa, Toronto, Calgary, Vancouver, Montreal and Halifax.
It found the biggest gains were in Vancouver, where prices rose 17.1 per cent, and Toronto, where they are up 16.0 per cent.
The 12-month rise ranged from 5.6 per cent in Halifax to 11.4 per cent in Ottawa. In Calgary, it was 7.8 per cent and in Montreal, 8.5 per cent.
And for the second consecutive month, prices rose in May over April in all six metropolitan areas surveyed.
The monthly rise of the composite index, at 1.3 per cent, was the largest since last September.
Ottawa led the cities with the largest monthly rise, at 2.3 per cent.
Prices rose 1.8 per cent in Montreal, 1.2 per cent in Vancouver and Calgary, 1.1 per cent in Toronto and 0.7 per cent in Halifax.
The index tracks prices for homes that have been sold at least twice, using data collected from public land registries.

Home sales continue to drop

2010-07-15T15:26:00.000-04:00

Garry Marr, Financial Post · Thursday, Jul. 15, 2010
Existing home sales continued their rapid decline last month with 70% of markets showing a drop in sales in June from May, according to the Canadian Real Estate Association.
The Ottawa-based group, which has 100 boards across the country, said sales were off 8.2% from a month ago on a seasonally adjusted basis. Toronto and Calgary led the decline.
CREA said tighter mortgage rules and rising rates are slowing the market which declined 13.3% from first quarter which had close to record sales.
"As expected, these two national factors contributed to a widespread decline in activity, with transactions down in all but a dozen or so smaller markets," said CREA.
Actual sales activity was down 19.7% in June 2010 from a year ago when there was a record amount of sales. Sales activity for the second quarter is actually down 2.8% from a year ago but for the year to date sales are still up 13.6%.
The number of Canadians putting their homes up for sale is declining which should be good for the market. The number of new listings on the market in June dropped 6.8% from May.
Price increases are also starting to slow. CREA said the national average sales price rose just 4.9% from a year ago to $342,662.
CREA chief economist Gregory Klump said there could be help on the way for prices in the coming months. "With interest rates on the rise, housing affordability and home sales activity are expected to continue to erode over the second half of 2010. While the pricing environment is becoming more challenging, a recovering economy and job market will provide support for housing activity and prices," he said
The number of months of inventory in the market, which represents the number of months it would take to sell current inventories at the current rate of sales activity, is also rising fast. It was 5.7 months at the end of June 2010 nationally, up from 4.2 months a year ago.
"The housing market is becoming more challenging for sellers," said Georges Pahud, CREA president. "Buyers are in less of a hurry."

‘Moderate decline’ forecast for Toronto house prices

2010-07-09T13:01:00.000-04:00

Tony Wong, BUSINESS REPORTER

Average house prices in the Toronto market are forecast to start trending down in the second half of 2010, according to a house price survey by Royal LePage.

The real estate services company said Wednesday that house prices are expected to increase by 7 per cent by the end of this year compared with 2009. But those increases were frontloaded to the first six months of the year as buyers tried to take advantage of low interest rates and lower taxes.

“This growth has already been accounted for in the first half,” said Gino Romanese, senior vice president of Royal lePage. “Average prices are expected to decline moderately for the remainder of the year.”

The first six months of the year have seen double digit gains, a torrid pace at which analysts have consistently warned is unsustainable.

Some economists have said the market is overvalued by as much as 30 per cent in some parts of the country. Others have revised their forecasts downward because of the surprising strength of the market in the last year which has pulled sales forward.

Meanwhile volatility in the stock markets has some analysts worried that this will impact the housing sector.

“Economic indicators have improved, but my tone is becoming more grumpy,” said Toronto housing economist Will Dunning. “Recent volatility in the stock market it leads to a substantial correction could also set off a correction for the housing market.”

Volatility in the stock markets creates uncertainty for buyers who may have much of their wealth and retirement income tied up in equities. Concerns over whether the global economy is in for a W shaped recession is high on the list after problems with debt in the Euro-zone.

“There is a high degree of uncertainty, but it seems to me that economic risks are bigger on the downside than on the upside,” said Dunning.

In the second quarter of 2010, standard two storey homes in Toronto increased 10.5 per cent year over year to $589,857 according to Royal LePage.

Detached bungalows increased by 11.5 per cent to $481,933. Standard condominiums were up by 7.7 per cent to $326,913.

“I’m not convinced that recent strength in the stock market or in housing values are sustainable,” said Dunning in his most pessimistic report released this year.

Sales agents are already reporting that homes are sitting longer on the market as buyers have much more choice.

Existing home activity for June was down by 23 per cent from a year earlier, according to a report by the Toronto Real Estate Board released Tuesday.

“Some moderation of activity in the second half will be welcome news to Toronto’s potential buyers who have been frustrated by the frenetic market,” said Royal LePage.

While other analysts have been using the “bubble” word to describe the Toronto market, Royal LePage characterized the market as stable.

“This should not be interpreted as a severe correction but rather a natural reaction to the market having peaked earlier this year,” said CEO and President Phil Soper. “An increase in the supply of homes on the market will now bring stabilization in prices and in some cities we will see both prices and unit sales decline towards the end of the year.”

Seeing through home sellers' camouflage

2010-06-21T12:27:00.000-04:00

by Stephanie Farrington, Bankrate.com

Mortgage rates have started to climb again. While that's probably a good sign for the economy, it may also be a wake-up call for people who have been hitting the snooze button on the time in which they hoped to buy a house.
If you're one of the many Canadians just entering the buyer's market, it's easy to get caught up in the critical aspects of home buying and forget some of the details. The clock is ticking, rates are rising and what matters in a house is location, location, location, right?
Yes and no. Location matters, but if you're not careful and observant when making your choice, you could get a great location and still end up with a money pit.
In some cases, people anxious to sell their home have been known to make a few cosmetic adjustments to hide the areas where their house might need a little extra care or even some serious repairs. Here's what to watch out for.
A fresh coat of paint in the basement
Dean Langner, a Canadian Residential Appraiser, or CRA, with Kors & Associates, in Victoria, has worked for 15 years as an appraiser and home inspector. During that time, he's seen a lot.
"One thing I find suspicious is a recently painted concrete floor and two or three feet of foundation in an unfinished basement," he says. "A lot of times, basements will leak, and they'll get that mineral stain around the concrete. Before they sell, some owners will cover it up with a coat of paint."
Langner says if you suspect a problem, go back for a second visit. "The only way to tell is to wait for a good heavy rain and visit again to check for moisture. If you're still uncertain, you can hire a plumber with a camera, and they can look down the pipes."
Checking pipes like this is not done in the course of a usual inspection, but Langner says it's worth making it a condition of the sale if you're really worried, because drainage problems can be very difficult to fix.
New sewage or drainage pipes
Around the foundation of every house is a permanent, porous piping system, called weeping tile, that acts as a drain and keeps water from entering your basement. "Over time, this pipe can fail. It can fill with debris and mud and stuff, and it is not easily fixed," says Langner.
In older houses, weeping tile isn't even made of pipes -- it's a series of half-round, clay tiles placed next to each other. So, if the house or the land shifts, you could be in for trouble.
The money you spend to have a plumber look at your drains could end up saving you thousands of dollars, to say nothing of the time and inconvenience of digging a trench around the perimeter of your house to replace the draining system.
A recently pumped septic tank
Jeffrey D. Leiser, author of "The Home Buying Inspection Guide" and "You Can Sell Your House: For Sale By Owner," has his own cautionary tales about plumbing. "The worst is when a home owner is hiding problems with a septic or sewer system. Having the septic tank pumped out prior to an inspection can give the appearance of a well working system," he says. "A failed septic system can cost well over $20,000 in replacement costs."
He says sewer systems can also be bladed -- which involves using a long tube with a rotating blade at one end to clean pipes and cut out blockages -- so that they appear to be working without backups. But, again, this is a short-term solution to an expensive, long-term problem.
Unusual smells
Your senses are your first and one of your best methods of avoiding deception. Mould smells like mould. It's easy to hide the visual signs of mould with paint, but it's a hard smell to mask. Don't be afraid to sniff around any area that makes you feel uneasy.
Suspicious piles and large plants
If something looks out of place, ask about it. A pile of bricks stacked against the side of the house could just be a pile of bricks, but it could also be a way of hiding a cracked foundation.
That newly planted yet mature tree in the back yard, the one in front of the retaining wall? Look behind it. Just as people will paint over stains, they sometimes landscape over cracked retaining walls or other problem areas.
Protect yourself
Follow your gut. If you think someone is lying to you, ask more questions and use your written offer as a means to get the truth. Contracts are there to protect you, and conditions of sale are a good way to ensure you're covered. If you're unsure about how to do this, ask your real estate agent or your lawyer, but do not go in unprotected. It's usually easier to avoid buying a problem than it is to fix it.
If, in the end, you find yourself left holding the bag despite your best efforts, where can you turn?
Danny Berehula, director of the Saskatchewan branch of the Better Business Bureau, or BBB, says the BBB will try to help, but the help they can offer is limited because the transaction does not typically take place between a business and an individual but rather between two individuals.
"We're another resource for them, but most people, when this happens, would probably want to call their lawyer," he says. "There are laws in place, and if it's a serious matter, then it will become a legal matter. They can use us as a mediation service, but once it becomes a legal issue, we stand out of it."
So, take your time and think through your purchase carefully. All of the experts agree on one point -- sometimes you have to accept a few problems to get your dream house, but it's best to understand how much the trouble your home might cost you before you sign on the bottom line.

Home sales sputter in May

2010-06-18T10:11:00.000-04:00

Steve Ladurantaye Real Estate Reporter Globe and Mail

Buyers backed away from Canada’s housing market in May, driving sales lower in what is traditionally the busiest month of the year for the country’s real estate agents.

The housing market has been key to Canada’s economic recovery, as low interest rates and pent-up demand drove buyers into the market after months of stagnation in 2008. But with interest rates likely heading higher in the second half of the year, many buyers who would have preferred to buy in the fall or early winter chose to buy sooner.

Tougher mortgage rules imposed by the federal government in mid-April also prompted buyers to act sooner, the Canadian Real Estate Association said. Meanwhile, tens of thousands of homeowners have seen the rampant demand and listed their houses for sale to take advantage of high prices.

Sales fell to 8.5 per cent to 40,393 units in May compared with April. Sales remain elevated by historical markers, but are 15 per lower than last fall’s peak.

Prices were essentially flat in May, gaining 0.5 per cent to an average national resale price of $346,881 – the highest on record.

HST and Real Estate

2010-06-17T10:22:00.000-04:00

Do I have to pay Tax?

The Harmonized Sales Tax replaced the Federal Sales Tax in 1991. Although tax is collected at a rate of 15% on the sale price of good and services, it doesn't apply to every type of home or every type or real estate.
New Home purchases are subject to HST but may qualify for an HST rebate. Resale homes are sold without HST. Land may be exempt from tax, but realtors and other professionals must charge HST on the purchase price. However, if the home ids going to be your primary place of residence, it may qualify for a partial HST rebate, depending on sale price.
You do not have to pay HST on the purchase price of a used residential home. Revenue Canada defines "used residential property" to include a previously occupied house, condominium, summer cottage, vacation property or non-commercial hobby farm.
HST applies to most of the services provided in completing the real estate transaction. For example, 15% HST is applied to the commission a realtor charges for facilitating a sale. The tax is paid by the person responsible for paying the commission - generally the seller. HST also applies to many of the other services involved in the real estate transaction, including appraisal feed, referrals, surveys and legal assistance. HST is charge on these fees regardless of whether the house purchase is itself HST exempt or not.
One exception is that mortgage broker fees are HST exempt if the fees are charged separately from any taxable real estate commissions. As well, mortgages and interest on mortgages are HST exempt.
HST is not normally due and payable when the real estate transaction is completed - generally the "closing date". In some cases, HST could be payable on transfer of possession. Your realtor can answer your questions about closing dates and HST payments. For additional information contact you local Revenue Canada Tax Services Office.

Canadian new home prices rise in April

2010-06-11T10:58:00.000-04:00

June 10, 2010 Tony Wong BUSINESS REPORTER

Don Pugh is putting the finishing touches on 150 affordably priced new homes in Brampton. But he doesn’t want to announce what day he intends to put them on the market. At least not yet.
“We’re worried that people might start lining up too early,” said Pugh, the vice president of builder Daniels Corp.
That isn’t an idle boast. The last time Daniels sold homes aimed at first time buyers in March, almost 300 people lined up at their Mississauga development. Some customers camped out for three weeks.
Pugh had to order food and portable washrooms for the site. The local pizza delivery guy was overwhelmed.
So when Pugh says he’s “confident in the market” he’s not kidding. The developer is building everything on “spec” meaning that he is so sure that the homes will sell, he hasn’t bothered to sell off plans – but has gone straight to digging a hole in the ground.
Despite the uncertainty in the market, where some analysts have said the housing market is overpriced and is due for a fall, there will always be a need for housing aimed at first time buyers, said Pugh.
The Mississauga properties went from $159,000 to $335,000 and sold out in just over five hours.
“I think that sends a clear message there is a tremendous need for affordable housing that people would wait that long,” said Pugh.
New home developers like Pugh have been riding a solid economic wave this year.
The prices of new homes in Canada rose by 0.3 per cent in April, following a similar increase in March, according to figures released by Statistics Canada Thursday.
From March to April, prices increased the most in St. John’s, Nfld., followed by Regina and Saskatoon.
“Builders reported higher material and labour costs as key factors in the price increases,” said Statistics Canada.
The Toronto and Oshawa markets had a moderate increase of 0.1 per cent month-over-month. The new housing market continues to be impacted by an upswing of new listings in the resale homes market, as consumers find more choice available.
Year over year, prices are up by 2.1 per cent in Toronto. While that is a healthy increase, it is far behind the 13 per cent year over year increase that the resale market is experiencing.
Demand is strongest for homes that are under the $500,000 mark, where first time buyers are having a hard time finding product.
Daniels is not the only housing site that has seen line-ups across the Greater Toronto Area.
Analysts say new homes over the half a million dollar mark will take longer to sell as the market slows.
The largest year over year increases were in Vancouver, up a healthy 6 per cent, followed by St. John’s at 5.9 per cent and Winnipeg at 4.9 per cent.
The biggest annual decrease was in Victoria, B.C., where prices were down by 3.8 per cent.
As of July 1, a new harmonized sales tax comes into effect in Ontario and in British Columbia.
Statistics Canada says some builders in Ontario and B.C. are already including the HST in the prices of their new homes.
Although prices may still be increasing, Canadian housing starts fell in May as evidence mounts that the market is due for a slowdown.
Starts fell by 6.3 per cent or an annualized 189,100 units last month that were below market expectations according to figures released by the Canada Mortgage and Housing Corporation this week.
The Toronto market however, bucked the national trend by holding steady with a 0.9 per cent increase in starts to a seasonally adjusted and annualized rate of 33,400 units. The increase in starts was mainly due to condominium building.

House prices have peaked for the year

2010-06-03T14:46:00.000-04:00

By Sunny Freeman

TORONTO — Skyrocketing home prices appear to have reached their height and are expected to stabilize for the rest of the year and into 2011 as the real estate market cools significantly, economists say.
Gregory Klump, chief economist at the Canadian Real Estate Association, foresees a slight decline in year-over-year prices in the latter half of 2010 before they flatten in 2011. This will happen as new listings come onto the market faster than anticipated and balance out the dynamics between buyers and sellers.
On Wednesday, the real estate association revised its projected housing price increase for this year down from 5.4 per cent to just 1.6 per cent over 2009.
The association predicted that the national average housing price will decline by 1.5 per cent by 2011, driven down by lower prices in the strong markets of B.C. and Ontario, while prices in the rest of the country will remain stable.
Will Dunning, chief economist at the Canadian Association of Accredited Mortgage Professionals, said this year’s prices have likely peaked, and should remain flat for the rest of the year before falling in 2011.
“Last year there was a pattern during the year — slow at the start, strong at the finish, and it’s going to be the opposite this year, almost a mirror image,” he said.
“Somebody who’s in a position to buy can take the time to make sure they get the property they want at a price they’re comfortable with,” he added.
The real estate association also lowered its 2010 national forecast for resale transactions by nearly 40,000 from its previous forecast of 527,300 due to a weaker-than-expected start to the year in British Columbia, Ontario and Alberta.
“The biggest contributor to the downward revision in annual sales activity would be British Columbia, where affordability has begun to bite into sales activity. Their first quarter came in weaker than expected and that’s expected to carry throughout the year,” Klump said.
The association now expects 490,600 units will be resold nationally this year through the Multiple Listing Service. This is still up 5.5 per cent from 2009.
A number of temporary factors pulled sales forward to the latter part of 2009 and the first part of this year, including anticipation of higher mortgage rates, tougher mortgage lending regulations and new taxes in Ontario and B.C. that will add thousands of dollars to the final price tag of many houses starting July 1.
The association’s revision came a day after the Bank of Canada announced it was hiking its key lending rate from an emergency low of 0.25 per cent to 0.5 per cent. Many economists predict that the era of historically low interest rates has come to an end and that rates are now on an upward trend.
Although mortgage rates have gone up and are expected to rise further, the association says the higher cost of borrowing will have a minimal impact on the market this year. Instead, sharp price increases earlier in the year appear to have been the main factor for the expected decrease in demand in British Columbia and Ontario.
Dunning said while some buyers “could drive themselves crazy” trying to calculate whether it’s better to get into the market now while mortgage rates are low but prices are high, or to wait until the opposite is true, it’s so difficult to get it right that homebuyers should just buy when the time is right for them.
Rob Hafer, regional manager at Invis mortgage brokerage, agreed that market timing is tough, and generally not worth the headache since a house is such a long-term investment.
“If you’re going to buy real estate, it’s a long-term investment, so if you can afford the home now … no matter when you bought within a couple years you’re probably ahead of the game anyway,” he said.
“If you can get in now and you can hold it long term, it’s always a good time to buy,” he added.
Klump said the market adjustment will stop short of venturing into a buyers’ market as “a more challenging pricing environment” will deter some potential sellers and limit the supply of available homes.
“A lot of people who were thinking they were going to clean up on their asking price are going to be faced with a lot of competition from other sellers out there, and ultimately will take their house off the market and try again when the pricing environment becomes more to their liking,” he said
But Dunning said balanced markets don’t last very long and said he believes market conditions will soon favour buyers.
“It’s usually always one way or the other, and we’ve had this immensely powerful sellers’ market and …there could be a very rapid transition so that it now becomes a buyers’ market."