Real Estate Market Update

Real Estate Market Update | March 2018 

What a difference a year can make. Year-over-year we are seeing significant changes throughout real estate markets across Canada. In each of the four major markets I’ve reviewed, Sales have dropped and Active Listings are on the rise, which means Beauty Contests and Price Wars will dominate the marketplace. 

Year-over-year, Vancouver is -30% in Sales, Edmonton -12%, Calgary -27% and Toronto nearly -40%. These are noteworthy changes and deserve some evaluation but I don’t think the sky is falling. Markets change but we as professionals need to be able to change with them.

Calgary, AB

Comparing March 2018 to March 2017, sales are down just over 27% and inventory is up almost 25%.  This means as of March 2018, Calgarians are working with roughly 4.6 months of inventory.  There’s no doubt you are in a shrinking market which means there are fewer sales happening for the same amount of people.

Richard Robbins

What to know if you’re considering a mortgage from an alternative lender.

Samantha Brookes has been warning Canadians to take a close look at the clauses in their mortgage contracts for years, but her refrain has become a bit more prevalent in recent months.

Since the Office of the Superintendent of Financial Institutions’ mortgage stress test was implemented in January, the founder of the Mortgages of Canada brokerage has seen “a huge influx” of Canadians who fail to qualify for a bank mortgage turning to alternative lenders that range from risky loan sharks to larger, more conventional companies like Home Trust.

While alternative lenders can provide a lifeline for Canadians who have run out of other financing options, Brookes said they come with pitfalls for those who don’t bother looking at the fine print.

“You need to read those contracts,” she said. “(With an alternative lender), the interest rates are higher, the qualifying rate is higher than if you were going with a traditional bank and they are going to charge one per cent of the mortgage amount (as a lender’s fee) for closing, so that means your closing costs increase.”

Alternative lenders tend to offer less wiggle room on their terms, so Brookes said that means you should pay special attention to another dangerous term she’s seen slipped into mortgage contracts: the sale-only clause.

It’s less common, Brookes said, but if left in, it might mean the only way you can break your mortgage is by selling your home. She usually makes sure it’s nixed from her clients contracts immediately.

She also advises mortgage-seekers to research a potential lender’s reputation, which can easily be done online. Looking up some lenders will reveal their involvement in growing strings of court cases, she said.

“If they are constantly in court fighting with consumers for money, are you willing to put yourself at risk with that kind of person?” Brookes recommended asking yourself.

Still, she said alternative lenders “that don’t end up in court every two seconds” are out there and can offer a good mortgage, if you do your research.

Broker Ron Alphonso has seen what happens when you don’t look into your lender. He recently heard from a couple who borrowed $100,000 via a paralegal posing as a broker, who then convinced the couple to give the money back to him so he could invest it on their behalf. Instead of investing it, the paralegal disappeared to Sri Lanka with the funds, leaving the couple on the hook for the money and resulting in eviction from their home.

“They got very, very poor advice,” Alphonso said. “Apparently the person that arranged the mortgage was an agent and paralegal that has since been disbarred. If they had a lawyer working for them, at least the lawyer could have said (before they signed the mortgage) maybe this isn’t right.”

Alphonso recommends seeking advice from a broker, who he said should also be questioned about how tolerant a lender will be if you were to default on one of your payments.

Some lenders quickly force their clients into a power-of-sale or foreclosure, while others will find a way to work out an arrangement that will allow them to keep their home.

“If you are already in some kind of financial problem and you go to a lender that is not flexible, you make the situation worse,” Alphonso said. “If you miss one payment, (within) 15 days you can be in power-of-sale.”

When that happens, he often sees people refuse to leave their home and try to fight the power-of-sale or foreclosure. They take the matter to court and end up spending tens of thousands of dollars in legal fees that can eclipse any remaining equity they might have in their home.

If they lose their case, which Alphonso said happens often, they end up with a massive lawyer’s bill, no equity to cover it and no place to live.

That’s part of why he said those seeking financing should have an exit strategy to get out of any mortgages they sign with an alternative or private lender with a higher interest rate.

“Your goal should always be to get to a lower interest rate,” he said. “If they don’t go in with a true goal of how to get out of this private mortgage, there will be a problem down the road.”

Alphonso recommended looking for an open mortgage, where you can prepay any amount at any time without a compensation charge or a prepayment limit that you would often find in a closed mortgage.

Open mortgages come with higher interest rates, but give buyers the option to switch to a cheaper lender if something happens. However, switching does often come with penalties, he said.

Because some agents and brokers don’t give enough information or fully explain penalties and clauses, he said the best way to keep out of trouble when seeking a mortgage is to ask lots of questions and understand what you’re getting into before signing on the dotted line.

-TARA DESCHAMPS, Globe & Mail

What Does Donald Trump Mean For Canada’s Housing Market?

U.S. President Donald Trump sent shockwaves through Canada’s economy this past week, first promising punishing tariffs on steel and aluminum imports, then at the last minute exempting Canada from those tariffs, at least temporarily.

It’s becoming painfully clear that Trump’s policies (or pronouncements, or whims, or whatever they are) have the potential to upend Canada’s economy, and with it, the lives of Canadians. So maybe it’s time for this real estate-obsessed nation of ours to pose a question that until recently seemed too obscure — or maybe just too weird — to ask: What does Donald Trump mean for Canada’s housing market?

It may seem counter-intuitive, but Trump’s aggressive protectionism might actually work to support house prices.

The Bank of Canada this week decided against yet another interest rate hike, and among its reasons was this statement: “Trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks.”

Analysts took that to mean the BoC is worried that Trump’s protectionist measures, such as the steel and aluminum tariffs or potential withdrawal from NAFTA, could harm Canada’s economy. And if Trump manages to scare the BoC into a more dovish outlook on the economy, it will mean fewer interest rate hikes in the months to come.

That might actually be good news for Canada’s heavily indebted mortgage borrowers, who are under increasing pressure these days. We’ve seen the BoC hike interest rates three times since last summer, and major mortgage lenders have followed suit. Meanwhile, new mortgage rules are forcing some homebuyers to scale back their ambitions.

The result is a slowing housing market, both nationally and in the two super-pricey markets of Toronto and Vancouver. And the Bank of Canada might now be getting worried about the impact of that slower housing market on Canada’s economy.

“Notably, household credit growth has decelerated for three consecutive months,” the Bank noted in its decision Wednesday.

Canada has been growing increasingly reliant on its housing market for economic growth in recent years, so a slowdown could take a real bite out of employment, and that, in turn, could mean a broader economic downturn.

The irony of it is that, if Trump were to abandon his protectionist measures and the BoC were to assume a more rosy outlook, it would likely mean more rate hikes ahead, and more downward pressure on housing.

All of which is not to say we should be hoping for Trump to slap Canada with massive tariffs or cancel NAFTA; a move like that would cause all sorts of economic damage of its own, regardless of housing. But if Trump pulls the trigger on his protectionist agenda, the Bank of Canada may well respond by freezing interest rates, and some analysts say it may even reverse course and start dropping them.

So a trade war with Trump’s America, while likely to be ugly, will at least help keep those property values from crashing. That may be the closest thing to a silver lining in this whole mess.

Daniel Tencer  Senior Business Editor, HuffPost Canada

Choosing the correct window – Many wonder which is best but there is no easy answer

There’s no simple answer to how to choose the correct windows, but here are some things you should watch for.

Windows serve three purposes: They provide light, airflow and ventilation. But they should also help keep the heat out in the summer and in during the winter. That has to do with R-value — in other words, insulation — and the air-tightness around the window itself.

Every window leaks heat. You can have the best windows on the market — triple-paned, double low-E coatings — but they will not have the same insulation value as an insulated wood or concrete wall; no matter how thermally efficient they are.

The trend today is to increase the size of your windows, not to mention the number of windows in a home. People love natural light. But at the same time we need to make sure the windows are improving the house — not working against it.

Heat loss and gain through windows accounts for about half of our heating and cooling needs. A poorly installed and/or insulated window is like having a giant hole in your home’s exterior — and you will see the proof in your energy bills.

When it comes to window choice, there are several options, which can be overwhelming for some homeowners.

It used to be that all you could get were single-paned windows — those are windows that have just one sheet of glass. Now you can get windows that are double- or triple-paned, windows with argon or krypton gas, low-E coatings in between the panes — and different combinations of each, like low-E double-paned windows or low-E triple-paned windows with argon gas.

What’s the difference? For starters, a double-paned window has two layers of glass; triple-paned has three. Multiple layers of glass allow for insulation to go in between the panes, and that boosts the R-value.

The most common types of insulation are argon or krypton gas. Both help stop heat transfer. Krypton insulates better than argon but it’s also more expensive. If you have the budget, it’s a good investment. However, argon-gas-filled windows are still very good; if a home has these windows, I wouldn’t be disappointed.

If you’re not the original owner of your home, you might not know if your windows are gas filled. When you bought the house the previous owners would have probably told you, since they do make for better windows and cost more.

But if you want to make sure you can check the window tag. It’s usually on the bottom inside track of the window.

You can also try looking for two small holes on the spacer — one hole is where the gas would have been injected, and the other hole is for air to exit.

Another feature to look for is low-E glass, or low-emissivity glass. This is a microscopic metallic-oxide coating on the glass that lets in light but also helps stop heat — and ultraviolet rays — from transferring through the window.

Sometimes heat transfer is a good thing. In the winter, we want the sun to help heat our homes. But I’ve heard some homeowners complain about turning up their furnace more often after installing triple-paned windows. That’s because some windows do an excellent job at stopping heat transfer.

However, just like they help stop heat from escaping your home, they also don’t let the natural heat from the sun come in.

One option is to have triple-paned windows on the north side of the house only, and then double-paned on the rest. This provides the extra insulation needed to help block north winds, but still allows some heat to get in on all the other sides. It’s a tricky balance, which is why you should talk to a pro.

Once you’ve decided on the type of glass you want, you have to choose the framing. The most common are wood, metal — and vinyl, which tends to last longer and is easier to clean.

Metal can get scratched and dented. Wood is nice but requires a lot of maintenance; you will need to repaint your window framing at least every five years, and that’s if it’s done really well. The natural expansion and contraction of the wood frame can crack the paint. The basic rule of thumb is that if you can see the wood, the frame needs to be re-caulked and re-painted.

What type of window is the best? Most people want an easy answer. But like most things, there is no easy answer. It depends on the house and the application.

The key to making the right choice is finding a professional who will know what type of windows will work best for your home, and who will make sure they are properly installed.

 

Original source article: Choosing the correct window

The lowdown on low down payments – Mortgage insurance a must for those with high-ratio loans

Hot markets and cold feet might keep some people out of the housing market, but a lack of upfront cash doesn’t have to be an obstacle. While it’s long been the convention in the industry to start with a 20% down payment, the availability of mortgage default insurance means ownership is still possible with as little as 5% down, as long as the buyer meets industry standards of income and creditworthiness.

“What mortgage insurance allows people to do is to get into the market with today’s prices, with today’s low interest rates, once they have determined that home ownership is right for them,” says Mary Stergiadis, principal for Ontario business development at Canada Mortgage and Housing Corp. The insurance repays lenders if a homeowner defaults on payment.

People with insured mortgages can take advantage of the same interest rates as those taking out conventional mortgages, she says. And the insurance doesn’t cost as much as some people think.

Here’s how it works: With 5% down, the insurance premium is 2.75% of the mortgage. On a $400,000 property with $20,000 down, the mortgage insurance premium would be $10,450. That would bring the total being borrowed to $390,450. Assuming a fiveyear closed at 3.75% amortized over 25 years, the monthly payment would be about $2,000, including less than $55 a month for the insurance. The same property with 20% down would have a monthly payment of $1,640.

“What consumers have to ask themselves is what $60,000 means to them in terms of savings,” Ms. Stergiadis says, referring to the amount needed to reach a 20% down payment for this property. “How long would it take to save that additional down payment? Where will home prices be within that time? Where will interest rates be?”

(But note that the tax on the premium – 8% in Ontario – cannot be amortized and is due on closing.) The insurance rate goes down as the down payment goes up. For buyers with 10% down, for instance, the premium is 2%; with 15% down, it’s 1.75%.

A popular misconception is that this insurance applies only to the primary residence of the borrower. But it is also available for a second property, such as a home or condo in the city to cut a commute or to house an aging parent or a student. CMHC does not, however, insure recreational properties.

Private mortgage insurers, such as Genworth Canada and Canada Guaranty, also insure high-ratio mortgages. The rates offered match those of CMHC; consumers usually aren’t aware of differences, as lenders apply directly to the insurers once an offer has been made and accepted on a property.

Genworth estimates about 30% of Canadian mortgages are insured, down from historical levels of as high as 40%. That percentage tends to be lower in the GTA, says Jason Neziol, Genworth’s regional vice-president of sales for Ontario and the GTA. That’s because higher prices mean more people make larger down payments in order to quality for mortgage loans.

Mr. Neziol says private insurers play an important role in the market by providing more choice for lenders and helping to educate the public about options. “It gives options to consumers,” he says. “It’s good for lenders to have a choice in terms of what insurance providers would do.”

You don’t have to be a first-time buyer in order to qualify. Plus, even conventional mortgages, those with 20% or more down, can be insured. This can happen if a loan is slightly outside of a lender’s usual parameters.

And there can be a rental component. A buyer can purchase a duplex with 5% down, for instance, but must live in one unit. A 10% down payment is the norm for three-and four-unit properties, where one unit is owneroccupied and the others are rented out. The point, Mr. Neziol says, is to be aware of the many options available.

© Copyright (c) National Post

Boom in resale housing market just outside Calgary Towns see nearly 40% hike in MLS sales

The resale housing market in towns just outside the City of Calgary has seen a boom in sales this year.

According to the Calgary Real Estate Board, year-to-date MLS sales in the surrounding communities market has ballooned to 4,878 up to the end of November, a hike of 39.05 per cent compared with the same period in 2011.

In comparison, year-to-date sales of 20,128 in the City of Calgary are up 15.21 per cent compared with last year.

“I think what’s happening is the buyers can’t find necessarily what they want in the city,” said Bob Jablonski, CREB’s president. “There’s less product to look at here in Calgary. And they’re finding they can find what they’re looking for in surrounding towns for the price points and getting a bigger bang for their bucks. So they don’t mind the commute.”

In the towns market, so far this year the average MLS sale price has dipped by 0.18 per cent to $354,897 while in the city it has risen by 3.16 per cent to $428,208.

According to CREB, in the country residential (acreage) market, sales so far this year are 842 with an average sale price of $793,707.

Last year there were 689 sales with an average sale price of $807,764 for the same time period.

Don Campbell, president of the Real Estate Investment Network in Canada, said places like Airdrie and Okotoks experience what’s called the Doppler effect in the real estate industry.

“It’s where a centre booms and then the smaller centres around it follow either a year or a year and a half later,” said Campbell.

“But the thing that’s really affected Okotoks, and now especially Airdrie, is the transportation change. The Ring Road (Stoney Trail). For Okotoks, of course, it was the expansion of Highway 2 a few years ago that really started to drive and bring to everyone’s attention Okotoks. Because nobody really went south of Calgary. Everybody went between Edmonton and Calgary and always knew that Airdrie was there. Okotoks is now on the radar.”

With any real estate market, it’s about affordability, said Campbell, and markets like Airdrie and Okotoks, for example, were driven by potential homebuyers who felt that they couldn’t afford to live in Calgary.

Stoney Trail has had huge impact on the Airdrie market, said Campbell. Also, many new jobs have been created in the northeast part of Calgary.

“So rather than live in the northeast, people are living in Airdrie which is almost the exact length of time to get to work,” he said.

© Copyright (c) The Calgary Herald