Cowtown – Bullish

Overall Market

• Prospective sellers are waiting and prospective buyers are a bit shy
• The market right now is both slow and tentative, not really sure where things are going
• Concerns about the global economy may be another reason for the “tentative” market
• The latest Royal LePage report
  • Average housing prices were up between 2% and 4% in the fourth quarter of 2012 compared with the same time last year.
  • Average prices for Canadian residential real-estate will rise a further 1% by the end of 2013, as some owners opt to delay selling their property until conditions improve.
• Canada’s economy created far more jobs than expected in December, defying expectations amid sluggish growth and affirming the possibility of a central bank rate hike this year.
• Fewer homeowners listed their properties in the second half of the year, which kept inventory levels lower, and supported home values.
• The one thing missing from the market for those looking for a market crash is a catalyst or an event that will force people to reduce their asking prices. Before this housing market burns up in flames, it needs some type of spark. Two that come to mind are a spike in interest rates or job losses — this is not happening any time soon.
• Some financial advisors see that the long-term fall in home prices will not be reversed when the economy picks up, forecasting a smaller portion of the population, relatively speaking, is in their home-buying years calculating house values to be $100,000 less than they are now.
• If you are one of those who find their home to be their most significant retirement asset, financial advisors suggest taking the current opportunity to downsize, free up the equity, and invest in income-producing investments – bonds, preferred shares, income producing real estate or dividend-producing equities.
• Critics point out that despite the slowing mortgage growth, household debt, already at record levels, continues to rise. Bank of Canada Governor Mark Carney has repeatedly warned that elevated personal debt is one of the greatest risks facing the Canadian economy
• ING will now focus on the direct channel to consumers while the brokerage lending business will be diverted to Scotiabank
• As expected, the Bank of Canada kept a lid on borrowing costs, with its trendsetting overnight rate — the main instrument used to guide inflation toward the bank’s 2% target — remaining at a near-record low 1%, unchanged since September 2010 and now the longest dormant stretch since the early 1950
• The central bank rate has remained near historic lows for more than two years amid slowing global growth, driven by lower demand for exports from emerging economies, political turmoil in the U.S. and an unresolved debt crisis in the Euro zone.
•  Forecasts that 454,000 homes will change hands in 2013, falling one per cent from the 2012 national performance.
• Slower sales and a flattening of home prices in Vancouver and Toronto — Canada’s two largest and most-expensive real-estate markets — will have a significant impact and drag down the national averages this year.
• The real estate market is relatively solid in Canada. There has been a slowdown in sales and in mortgage demand but price levels are relatively stable.

Calgary

• Alberta and Saskatchewan where the resource-oriented economies have been vibrant, are poised for significant growth in 2013.
• Alberta is the talk of the country and is planning on leading the country in economic growth.
• The city’s 2013 property assessments reveals a record number of single-family homes valued at $1 million or more, besting the previous high set in 2008.
• There are now 9,001 single-family homes assessed at $1 million or more, compared to 7,997 in 2012 — a 13-per-cent increase.  The previous record of 8,262 homes was set during the previous boom, prior to the economic collapse in 2008.
• Calgary Housing Market is experiencing home sales that are putting a momentum of unaffordable housing.

Vancouver

• Home sales dollar volumes down
• Unit sales down (10-year average 88,000 units, 15-year average 79,000, 2012 average between 64,000 and 68,000)
• Average prices dropping in Lower Mainland
• Prices falling more noticeably in single-family homes in more expensive areas of the west side of Vancouver and Richmond
• The Real Estate Board of Greater Vancouver said in January total sales in 201 were off 22.7% from a year earlier
• Slowing residential sales means fewer jobs in construction and lower prices will cut the value of most households’ key retirement asset, the club heard.
• According to B.C. Assessment, the total change in assessed property values, as of July 1, 2012, was about five per cent in Coquitlam, Surrey and New Westminster. Changes were more notable in Vancouver, which rose just two per cent this year, and Richmond, which dipped 0.64 per cent.
• This year, for the first time in many years, a number of homeowners in some areas of B.C. will see a drop in their property assessment, B.C. Assessment said Wednesday
• There were 19,027 housing starts in Metro Vancouver for the year 2012, up more than six per cent from the year and from the 10-year average. 19,100 total housing starts forecast for the year
• Vancouver’s rental vacancy rate is 0.9 per cent, which is very low — a boon to real estate investors. A good, strong rental market, people is part of the reason we’re seeing more multiple-units.
• The year-long downtrend in sales constrained annual provincial activity to 67,640 units, a 12-per-cent drop from the previous year and the lowest annual tally since 2000.
• Chinese investors may return; based on China’s increased GDP, potential policy changes and new leadership.

Toronto

• New home sales continue to plummet in the Greater Toronto Area with the latest statistics from RealNet Canada Inc. showing a 52.1% drop in sales in December from a year ago.
• Toronto ranked as the fastest growing economy in the country last year, but a new study from CIBC suggests Canada’s biggest city will be hard pressed to maintain that growth trajectory
• December home sales in Toronto fell 19.5% compared with a year ago, but prices were still up, according to the city’s real estate association.
• The Toronto Real Estate Board said there were 3,690 sales in the Greater Toronto Area last month through the Multiple Listing Service, down from 4,585 in December 2011.
• The average price rose to $478,789 from $449,566 — an increase of 6.5% from the year before.
• Home sales dropping a precipitous 19.5 per cent year on year in December even as average prices shot up 6.5 per cent in the region.

Interest rate projections

• RBC expects The Bank of Canada could raise its trend-setting interest rate by half a percentage point before the end of this year.
• Both Scotiabank and CIBC said in December they expect rates to remain at their current level for the rest of 2013.

Momentum set for 2013

Alberta has lead housing sales in Canada for 2012, and Calgary is projected to be the hottest investment city for the next three years as per the Real Estate Investment Network (REIN) research.

However, housing prices fell in 10 out of 11 major markets for the first time since 2009, which speaks to Toronto’s condo market, having seen a 16% dip in sales and a 38% decline for the sales of detached, semi-detached and townhouses from 2011. Sales have fallen drastically for Vancouver dropping 29%, but sellers are holding close to their price or electing to take the property off the market.

The new mortgage rules implemented in the summer are having an impact on the First-time home buyers who are being pressured out of all markets across Canada. However, if prices start to dip, we might see First Time Home Buyers gain momentum while interest rates remain low. Rates are expected to stay low throughout 2013 with only marginal increases nearing the later part of the year.

Canada’s exports are not faring well, and our Q3 growth numbers were disappointing, but we are expected to rebound with 2013 forecasts of 2.3% and 2% growth by The Bank of Canada and the Finance Department respectively.

While there is still uncertainty with local market conditions and challenges facing many of our global partners, 2013 is projected to heed positive results. A necessary housing price adjustment, low interest rates, increase in growth and exports, and stable employment should keep Canada’s economy moving forward while reorganization is endured globally.

Assumable Mortgages making a comeback

What is an Assumable Mortgage?

An assumable mortgage is a mortgage that can be transferred to a third party without changing the terms of the original mortgage. The seller will need to verify that the original mortgage is assumable while the lender will require approval of the buyer prior to the assumption.

With the current market conditions as they are, there’s a strong sense that assumable mortgages will be making their return, as featured by the financial post.

Advantages of an Assumable Mortgages?

When the market has more homes for sale than potential buyers, an attractive mortgage rate can help boost the appeal of a home and even have the seller get more than the listing price. In a buyer’s market, especially when mortgage rates are rising, low-rate mortgages provide buyers a built-in interest savings until the mortgage maturity. Even though a lender may charge a fee to complete the transaction, the closing costs on an assumed mortgage are likely lower than that of a new loan.

Risks of an Assumable Mortgage?

Although the buyer takes over the remaining payments on the mortgage and becomes legally responsible for the mortgage terms, the lender can still hold the original seller personally liable for the mortgage if the buyer were to default on the loan. However, CMHC has adopted a new policy that makes a seller of an assumed mortgage no longer liable if the buyer has made 12 consecutive monthly payments.

Assumable Mortgage options:

1. The buyers assume the full mortgage and take responsibly of the mortgage fulfillment. A fee may be charged to the buyers to complete the assumption.
2.  If the buyer assumes only a portion of the mortgage, the remaining outstanding mortgage will need to be paid off by the seller possibly with a pre-payment penalty fee. A fee may be charged to the buyers to complete the assumption.
3. If the buyer requires an amount higher than the outstanding mortgage balance they can apply to add-on to the existing principal balance for a new blended rate. A fee may be charged to the buyers to complete the assumption.

To learn more or discuss your assumable mortgages options contact Irene. Learn about Vendor Take-Back Mortgages

Household Debt & Market Crash Overblown

Sales have slowed in Canada’s largest markets, Vancouver and Toronto and the blame is being pointed to the new mortgage rules that were implemented this summer.  Though sales have taken a noticeable decline, prices have corrected only marginally.  However, the Canadian Association of Accredited Mortgage Professionals (CAAMP) published a recent report stating that the real impact has not been felt yet, and it will take time for it to digest through the market.

“Our concern today is the number of growing first time buyers who are now unable to get a mortgage. We worry that this is having a dampening effect on what was an already cooling market and we hope policy makers will give some thought to addressing the needs of this key sector of the market.” says Jim Murphy, chief executive of CAAMP.

The report determined that 17% of the high ratio mortgages funded in 2010 would not qualify today, including 11% of prospective high ratio homebuyers who wouldn’t qualify under the new 25-year amortization rule.

“The changes to the mortgage insurance criteria are unnecessarily jeopardizing the health of Canada’s housing markets and the broader economy.” says the report.

Though the rules may have been excessive and untimely, GluskinSheff economist David Rosenberg predicts we are going through a market correction rather than the over exaggerated market collapse that is being heavily publicized in the media.

Rosenberg has also provided 5 reasons why the Canadian household debt panic is overblown. For one, our debt ratio is closer to 118% than the recent data showing 165%, a percentage that surpassed the American ratio of the US 2008 bust. Rosenberg explains the percentage discrepancy is a simple healthcare equation. The remaining four reasons include our relative assets to debt, the amount of equity in our homes, wage growth, and better ability to handle debt round out the list.

It is obvious that doom and gloom sells, however, Canada as a whole is in a strong position relative to the rest of the world. Rates will remain low until other economic regions including Europe, US and Japan start to regain momentum. Our unemployment remains low with some markets experiencing exceptional activity such as Calgary, Edmonton, and Winnipeg.

It will remain important for Canadians to monitor their debt levels as rates will eventually increase. However, while interest rates remain low, retirees will need to source effective ways to grow their savings for the future.

Mortgage Forum 2012: Worth Tweeting About

I attended the annual Mortgage Forum hosted by the Canadian Association of Accredited Mortgage Professionals (CAAMP) this past Monday and Tuesday; I know what you’re thinking…“bor-ring.” On the contrary, I would say anybody, from anywhere or from any industry, could have taken something valuable from this conference.

Most of the good stuff came on day two. I was shocked that our 600 or so group was blended with another 1200+ general attendees for The Art of Marketing conference. With the likes of David Usher, Singer/Song Writer from Moist; Randi Zuckrberg, (yes, she is related to Mark Zuckerberg), his Marketing-guru sister; Biz Stone, Co-founder of Twitter; Scott Stratten, President of Un-Marketing and an expert in social applications; and Mitch Joel, a digital visionary. Ron Tite was also an exceptional host and masterfully conducted the flow perfectly. There were many amazing quotes from the day and I urge you to discover the #tao or #caamp2012 hashtags on twitter to discover some of the brilliance that was shared that day.

Day one covered the mortgage-specific topics. I was looking forward to seeing Kevin O’Leary from CBC’s Dragon’s Den, however, he was cancelled after announcement of his new mortgage product hit the newsstands last week. Dominion Lending Centers, the session’s sponsors, didn’t want their investment promoting someone they now considered a direct competitor. There’s some exciting mortgage-biz drama, at the expense of my ticket value and personal disappointment.

There was just one thing more disappointing than O’Leary’s absence. I feel it necessary to address, as it’s too explicit to not mention. Within 5 minutes of sitting in my seat at our opening ceremonies, I realized something was lacking. Between the opening speeches, the structured sponsor advertisements, introduction to our next year’s Board of Directors and our entire speaker list, women were sparsely accounted for to the point of almost non-existence. Not one women speaker, except for the moderator, CBC business correspondent Amanda Lang, would be seen on stage. Only two women sit on our 18-person Board of Directors, both from the province of Ontario. And to a lesser extent, but still noticeable, the marketing components of the conference had a strong male directive.

I understand my industry is heavily male-dominated, especially in the higher ranks, however, when I looked around the room I noticed an attendance ratio closer to 50/50. It could have even tipped in favor of the females.

There is a powerful new force to add to the industry’s assets that I feel is currently being left untapped; women. Not only are women more involved from a business perspective, but more women are in the market of buying real estate. This generation’s buying habits are strongly determined by the women and children of the household and a larger purchase such as a home should not be discounted. If we ever hope break the near-decade stagnant levels of 25% market penetration, then I think we need to rethink the way we communicate externally as well as internally. It’s time to hang up the old boys club and make room for the unisex boardroom!

In addition to investing in women, we need to consider the strength of our human-power. The industry leaders were asking for the broker community to be the champions and the voice; to consider more investment in the promotion of what we do as a whole and help encourage the support of stronger, more recognized training amongst our colleagues. If the industry association is looking to the individual brokers, competitors or not, to join forces to increase our market share, I feel the interaction in at the conference will need to shift from a full “we talk, you listen” agenda to hybrid of speeches and “interactive” breakouts sessions or brainstorms that encourage our members to collaborate and develop concepts that CAAMP can help implement into action through it’s membership. More women, more involvement, more ideas, more opportunity…it’s just a thought.