Comparing the US and Canadian Real Estate Markets: Canada Coming Out On Top!
What is so surprising is the real estate market in Canada sprung back faster than expected. The decrease reversed throughout the spring of 2009, and the sales numbers escalated through to summer. In the winter of 2009/2010, realtors were announcing sales multiplying in excess of 100%. At the same time the real estate prices even overtook the pre-crash prices. There are several reasons, why the Canadian market did (and and is still doing) better than most of the world's real estate markets. Speaking to the experts, the majority say that this recovery is for the most part due to the low interest rates put in place by the Bank of Canada. US rates were similarly low as well, but there are reasons why the low-rate plan assisted in Canada but not so much in the States: High risk loans to borrowers for mortgages was commonplace in the US the opposite toCanada. Canada gave these subprime loans to between 5 and 10% of the population, unlike the US who's subprime loan market was a colossal 22%. The Canadian banks also have consistently good reviews, according to the World Economic Forum, Canadian banks are the soundest in the world. In addition, the solid financial stance has also helped Canada avoid the subsequent credit crunch. Our unemployment rate has risen, as it has in the US; however, the increase wasn't as bad, and our economy has been slowly adding jobs again since last summer. The personal bankruptcy position has been helped by the sound social system that Canada has in place. To sum up, the Canadian real estate market is on a solid footing. Where there is good news, some of us look to the negatives and say that a real estate bubble completely separate from what has gone on, is getting ready to hit us. I don't believe this is the way forward, for a few reasons. Interest rates are being kept steady until at the summer, said the Bank of Canada. Rates will grow as summer approaches and we have already seen some mortgage rates increasing a little. We are also coming closer to the removal of the First-Time Home Buyers' Tax Credit, which is in all likelihood going to have an impact on the real estate market. At last the number of houses entering the real estate market is gradually growing since the fall figures were published. As Jay Banks from Vancouver Lofts, adds: "There has been an increasing influx of new listings over the last 2-3 months, which has helped to steady the inventory level."
These points will inevitably cause the Canadian market to slow down in the second half of 2010, with more settled prices and levelled sales.
Banks See A 2.75% Rate Increase In 19 Months
April 10, 2010
Economists at the Big 5 banks worked overtime this week, polishing their rate forecasts and fielding calls from reporters.
It seemed every major media outlet in the country ran stories on where interest rates are headed.
Here's what the "prophets'" predict rates will do by the end of next year (2011):
The next question is: Once rates start rising, how fast will they run up? According to BMO, "The Bank (of Canada) probably has a predilection to raise policy rates expeditiously."
The average economist polled by Bloomberg expects a one percentage point increase by the end of this year. In turn, that suggests a 175 bps hike in 2011…if the bank consensus is correct.
If prime rate jumps 2.75%, that could mean a 35% payment increase for certain floating-rate mortgage holders. (e.g., payments could jump $284 on a regular $200,000, 1.75% variable mortgage amortized over 25-years). This assumes the banks don't "give back" the 1/4% they withheld when prime rate dropped 3/4 of a percentage point in December 2008.
As for fixed mortgage rates, the bond market will plot their destiny as usual. CIBC economist, Avery Shenfeld, suggests bond yields could run up more than some people expect—at least initially:
"Once the first hike is in place, the bond market is likely to become even more aggressive in its expectations for subsequent moves. The first hike could also prompt more Canadians to fix their variable rate mortgages, putting even more pressure on five-year yields. Still, hikes in 2011 won't end up being as steep as what the bond market will, at some point, fear."
The big banks see the 5-year bond yield hitting 3.75% to 4.10% one year from now. Based on historicalspreads, that would put typical discounted 5-year fixed mortgage rates at roughly 5.13% in 12 months—an 88 basis point increase from today.
Sidebar: As always, take any rate prediction with a dose of scepticism. Rate forecasters attempt to see through very muddy waters and the economy can change considerably between now and the end of this year.
Rental Income For Qualifying Buyers
April 07, 2010
By Derek Scott, The Canadian Press
VANCOUVER, B.C
- Buying a house in the hot housing markets of Victoria, Vancouver, Toronto and other major cities in recent years has been a possible dream for some first-time homebuyers only because many of those houses had suites they could rent out.But new rules coming into effect April 19 will all but wipe out that advantage in the eyes of banks handing out mortgages. "It makes it much more difficult for people with rental properties to qualify for their own mortgage on their personal residence," said Vancouver mortgage specialist Patrick Mulhern.
The new regulations are designed to prevent speculation in the market, said Jack Aubrey, of the Canada Mortgage and Housing Corporation. But Vancouver mortgage agent Mike Averbach said the new rules will do little to prevent investors from gambling in the housing market. "They haven't decreased risk," he said. "They're just not allowing you to use the income." Currently, landlords can use 80 per cent of their rental income to offset monthly mortgage payments. That means, if they receive $1,000 per month in rental income, they can use $800 to offset a $1,200 mortgage payment, leaving only $400 to be debt financed.
But under the new rule, only 50 per cent of a landlord's rental income will be used. Even then, that money will not be used to offset their monthly mortgage payment. It will be added to their total income, forcing them to qualify for the entire monthly mortgage. For instance, a person earning $100,000 per year in regular income plus $12,000 per year in rental income will have a total income of $106,000 with which to qualify for a mortgage on their own home. Rental income is essential for many of his clients, Averbach said.In cities like Vancouver, where the average home price in February was more than $662,000, rental offset is the only way many people can qualify for a mortgage and the new rules will keep many of his clients in condos rather than houses, he said. "Putting a renter in your basement is not speculative, it's reality," he said. "It helps you pay your mortgage."
The rule changes also make it more difficult for people to buy a property separate property to use as a revenue generator.CMHC will no longer offer high-ratio financing on rental property not lived in by the owner. That means someone looking to buy a house as a rental investment will have to come up with a 20-per-cent down payment on the property, as opposed to five per cent before the rules changed. The changes haven't worried groups advocating for tenants. Jeordie Dent, of the Federation of Metro Tenants' Association in Toronto, where vacancy and availability rates have dropped over the last year, said he doesn't see a negative impact on renters. Instead, he said his group welcomes the changes. Dent said too many people become landlords without the financial or intellectual wherewithal to properly manage their properties. "Anything that strengthens mortgage rules, from our perspective, is a good thing."
February Home Sales Strong Despite Olympic Fervor
February 2010
The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province climbed 63 per cent to 5,955 units in February compared to the same month last year. On a seasonally adjusted basis, MLS® residential unit sales in the province declined 13 per cent compared to January 2010."
Home sales continued to moderate in February after the record pace of the fourth quarter." said Cameron Muir, BCREA Chief Economist. "However, February's performance was better than expected considering many households were preoccupied with Olympic gold."The BC residential sales dollar volume increased 91 per cent to $2.96 billion in February compared to the same period last year.
The average MLS® residential price climbed 17 per cent to $497,807 over the same period."Low mortgage interest rates are continuing to underpin consumer demand and fuel first-time homebuyer activity," added Muir. "Improving economic conditions are expected to bolster consumer confidence over the coming months."
2010 Olympics: REALTOR S® Involved
As the province welcomes the 2010 Olympic and Paralympic Games, many British Columbians are preparing to take part in the festivities by attending events or watching the games in the comfort of their own homes. At this year's epic event, a few Canadian REALTORS® will be maximizing the experience by also volunteering and one licensee will even take a first hand approach as a competitor in the Olympic Games while being watched around the world. As a volunteer member of the hill decorating crew for the ski jumping event at the Olympics and a member of the range crew for the biathlon at the Paralympics, Vancouver REALTOR®Jim Woolsey knew that this was a once in a lifetime opportunity. Jim has relished the opportunity to be a volunteer and connect with people from across Canada and around the world at such an incredible celebration. Jim stated that hosting the games will be an experience which will leave a long lasting legacy for BC. Richmond licensee, Larry Tavener, is also volunteering in many ways including acting as Vice Chair of a program in partnership with the Province of BC, called Spirit of BC, to promote community innovation, pride and excellence. In an effort to leave a lasting memory of the games for British Columbians, Larry has helped organize "spiritboards". These panels, on which the public has written their feelings of what the games means to them, will be housed at skytrain stations acrossVancouver. Larry noted that given the opportunity to help promote and showcase Vancouver, who better tobe involved than REALTORS® whoknow the area so well.
In the hopes of winning an Olympic gold medal, Alberta REALTOR®, Lyndon Rush, will test his metal bypiloting the Canadian bobsled team.Born in Saskatoon, Saskatchewan, this Canadian licensee has taken the pastyear off of real estate, carrying withhim the dream of competing at this level on a world platform. As a hardworking REALTOR® and athlete,Lyndon hopes to use the teamwork, drive and competitive edge that he'sacquired from years in the real estate industry to achieve this fantastic goal.While hosting the 2010 OlympicGames in Vancouver was not welcomed by everyone, it seems to be a natural fit for REALTORS®, who are already so active in their communities.BCREA hopes that the Olympic benefits will continue well after the Games and that they will, without a doubt, forever impact the pride that British Columbian's have for this incredible province. BCREA is proud to report REALTORS®' involvement in the 2010 Olympicand Paralympic Games and wishesCanada's competing REALTOR® great success at the bobsledding event. REALTORS®' involvement and participation at the Games demonstrates not only the versatility of the profession but also the direct bond that licensees have with their communities, theirprovince and the country as a whole.
March 31, 2010
March 1st, 2010
Here's a promotional video that sums up what I firmly believe: Greater Victoria is the best place in the world to live!
The new regulations are designed to prevent speculation in the market, said Jack Aubrey, of the Canada Mortgage and Housing Corporation. But Vancouver mortgage agent Mike Averbach said the new rules will do little to prevent investors from gambling in the housing market. "They haven't decreased risk," he said. "They're just not allowing you to use the income." Currently, landlords can use 80 per cent of their rental income to offset monthly mortgage payments. That means, if they receive $1,000 per month in rental income, they can use $800 to offset a $1,200 mortgage payment, leaving only $400 to be debt financed. 
Home sales continued to moderate in February after the record pace of the fourth quarter." said Cameron Muir, BCREA Chief Economist. "However, February's performance was better than expected considering many households were preoccupied with Olympic gold."The BC residential sales dollar volume increased 91 per cent to $2.96 billion in February compared to the same period last year. 
As the province welcomes the 2010 Olympic and Paralympic Games, many British Columbians are preparing to take part in the festivities by attending events or watching the games in the comfort of their own homes. At this year's epic event, a few Canadian REALTORS® will be maximizing the experience by also volunteering and one licensee will even take a first hand approach as a competitor in the Olympic Games while being watched around the world. As a volunteer member of the hill decorating crew for the ski jumping event at the Olympics and a member of the range crew for the biathlon at the Paralympics, Vancouver REALTOR®Jim Woolsey knew that this was a once in a lifetime opportunity. Jim has relished the opportunity to be a volunteer and connect with people from across Canada and around the world at such an incredible celebration. Jim stated that hosting the games will be an experience which will leave a long lasting legacy for BC. Richmond licensee, Larry Tavener, is also volunteering in many ways including acting as Vice Chair of a program in partnership with the Province of BC, called Spirit of BC, to promote community innovation, pride and excellence. In an effort to leave a lasting memory of the games for British Columbians, Larry has helped organize "spiritboards". These panels, on which the public has written their feelings of what the games means to them, will be housed at skytrain stations acrossVancouver. Larry noted that given the opportunity to help promote and showcase Vancouver, who better tobe involved than REALTORS® whoknow the area so well. 