If the MLS® story in 2008 was about peak inventory levels, the story in 2009 was about trying to predict when the sluggish real estate market in the Kootenay’s would recover. When compared to past real estate statistics of Total MLS® Sales from 1989 to 2009, the 1st Quarter of
2009 ranked the second worst on record. The 2nd Quarter ranked dead last. It wasn’t until the 3rd Quarter of 2009 that the MLS® markets started to recover, moving up the ranking to a respectable 13. 2009 ended with Kootenay real estate markets in full recovery mode and a 4th quarter ranking showing a very respectable 4th when compared to market performance over the last 21 years.
Kootenay Real Estate Board President Jim Barber comments: “We all expected that 2009 would be an interesting year with consumers waiting for the financial markets to stabilize before making decisions on buying real estate. The very low 1st and 2nd Quarter MLS® Total Unit Sales statistics show that there was a patient buyer population out there waiting for the right combination of interest rate and real estate price adjustments. As we moved into the 3rd Quarter, affordability spiked as those adjustments occurred, and that group or buyers entered back into our markets, setting the stage for a strong end to the year.”
When asked about his predictions for real estate markets in the Kootenay’s for 2010 President Barber remarked: “Generally, I’m cautiously optimistic about Kootenay Real Estate Markets in 2010. Our Provincial and National Real Estate Association Economists are indicating we are out of the “technical recession” and they are predicting an increase in the number of MLS® Unit Sales across the province. Market conditions are still good for buyers as interest rates remain low, and the inventory of housing stock slightly higher than average. We continue to move towards a position of balance in the market as inventory levels decline and interest rates trend higher in the last half of 2010. Overall it should be another reasonably good year for the real estate buying public.”
MLS® Dollar Volume of all sales processed through the Kootenay Real Estate Board reached almost $640 Million Dollars in 2009, a drop of 17% from 2008 levels of over $768 Million Dollars of real estate changing hands. MLS® Unit Sales finished 2009 down 13% when compared to total MLS® Unit Sales in 2008. The price of the average Residential Detached house sold on the Multiple Listing Service® (MLS®) in 2009 declined 8% to $291,561 compared to the amount of $316,600 reported in 2008.
Kootenay Real Estate Board Nelson, BC January 15, 2010
Thursday, January 21, 2010
December Home Sales Second Highest on Record
Vancouver, BC – January 12, 2010. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province climbed 132 per cent to 5,703 units in December compared to the same month last year. More homes were sold last month than in any December on record except 1989 when 6,014 units were sold.
“2009 came in like a lamb and went out like a lion,” said Cameron Muir, BCREA Chief Economist. “The year began with home sales trending at a 25-year low and ended at a 20-year high. Low mortgage interest rates, pent-up demand and improving economic conditions were key drivers of consumer demand.”
A total of 85,028 residential units were sold through the MLS® in 2009, up 23 per cent from 68,923 units in 2008. The residential sales dollar volume increased 26 per cent to $39.6 billion last year, while the average MLS® residential price increased 2 per cent to $465,725.
“Considerable momentum in the housing market is expected to carry through the first quarter of 2010, before home sales begin to moderate as a result of eroding affordability and less pent-up demand,” added Muir.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
“2009 came in like a lamb and went out like a lion,” said Cameron Muir, BCREA Chief Economist. “The year began with home sales trending at a 25-year low and ended at a 20-year high. Low mortgage interest rates, pent-up demand and improving economic conditions were key drivers of consumer demand.”
A total of 85,028 residential units were sold through the MLS® in 2009, up 23 per cent from 68,923 units in 2008. The residential sales dollar volume increased 26 per cent to $39.6 billion last year, while the average MLS® residential price increased 2 per cent to $465,725.
“Considerable momentum in the housing market is expected to carry through the first quarter of 2010, before home sales begin to moderate as a result of eroding affordability and less pent-up demand,” added Muir.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
2009 resale housing market ends on a high note
Existing home sales activity reached the highest level ever for the month of December, according to statistics released by The Canadian Real Estate Association. Strong demand in the second half of 2009, especially in the fourth quarter, pushed annual sales above 2008 levels.
Residential sales activity via the Multiple Listing Service® (MLS®) of Canadian real estate boards numbered 27,744 units in December 2009. This stands 72 per cent above activity in December 2008, when activity dropped to the lowest level in a decade. New records for the month of December were reported in Ontario, Quebec, Saskatchewan, New Brunswick, and Newfoundland & Labrador.
Seasonally adjusted national home sales totalled 46,805 units in December, capping the strongest fourth quarter period ever. A total of 137,957 homes traded hands on a seasonally adjusted basis in the fourth quarter of 2009. This is up 2.6 per cent from the previous record set in the first quarter of 2007. New quarterly records were set in British Columbia, Ontario, and Quebec.
National sales activity began 2009 on a weak footing. Despite year-over-year increases in the second and third quarters of the year, year-to-date activity was still trailing 2008 levels at the end of September 2009. A 59 per cent year-over-year gain in the fourth quarter of 2009 pushed sales activity above annual levels for 2008.
“Sales activity in 2009 came in like a lamb and went out like a lion,” said CREA President Dale Ripplinger. “The continuation of unusually low interest rates may keep national sales activity near current levels over the coming months, as will a blip in housing demand in Ontario and British Columbia from homebuyers motivated to beat the introduction of the HST.”
Annual activity in 2009 was down 10.7 per cent from the peak reached in 2007. A total of 465,251 homes traded hands through the MLS® systems of real estate boards in Canada in 2009. This is up 7.7 per cent from 2008 levels, and represents the fourth highest level on record for annual activity.
The national residential average price was $337,410 in December, up 19 per cent year-over-year. On an annual basis, average price climbed five per cent to a record $320,333. Average prices set new annual records in a majority of local markets in 2009, and in every province except Alberta.
The large year-over-year increase in the national average price in December reflects the high degree to which it was skewed downward in late 2008 by unusually low activity in Canada’s priciest markets. The national average price was also skewed upward by rebounding activity in the spring and summer months of 2009. The national average price rose to unprecedented heights at that time, despite records having been set in only a small number of local markets.
The contribution of activity by higher priced markets toward the national average price has recently returned to more typical levels. Record level average prices in most regions are now driving the national average price to new heights.
The price trend is similar but less dramatic for the national weighted average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 3.6 per cent in 2009.
The residential average price in Canada’s major markets was up 5.5 per cent year-over-year to $348,840 in 2009. As with the national counterpart, the price trend is similar but less dramatic for the major market weighted average price, which rose 2.3 per cent from 2008 levels.
Strong demand and headline average price gains are drawing more sellers to the market. New listings coming onto Board MLS® Systems across Canada rose to the highest level on record for the month of December, with a total of 33,090 residential properties coming on stream. This is up 4.8 per cent from December 2008, the first year-over-year gain in a year. On a seasonally adjusted basis, new listings rose by 4.7 per cent in December 2009 compared to the previous month.
The recent rising trend in new listings has not yet offset the steep decline in the number of new listings during the first half of 2009. As a result, new listings in 2009 were down 12.6 per cent from the annual peak in 2008.
Despite the recent rise in new listings, strong demand for resale housing continues to draw down inventories. There were 154,264 homes listed for sale on Boards’ MLS® Systems in Canada at the end of December 2009, a decline of 22 per cent from levels reported one year ago.
Nationally, there were 4.1 months of inventory in December 2009 on a seasonally adjusted basis. This is the lowest level in more than two years.
The actual (not seasonally adjusted) number of months of inventory in December 2009 stood at 5.6 months, the lowest December figure since 2005, and well below the same month in 2008 (12.3 months). Although up slightly from November (five months), an increase is normal at this time of year since demand normally eases relative to supply over autumn and winter months. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.
“CREA’s latest statistics will no doubt spark further bubble talk amongst the usual suspects,” said CREA Chief Economist Gregory Klump. “Cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer.”
“The extraordinary decline in activity one year ago and subsequent rebound, particularly for higher-priced real estate, is stretching current year-over-year comparisons,” he said. “By the second half of 2010, price gains are likely to shrink significantly, since a year will have elapsed since the decline and rebound. Klump added that, “Further expected increases in supply will also take some steam out of the market. A more balanced market will result in smaller price increases in the second half of the year, but a massive decline in demand similar to what we saw in late 2008 and early 2009 seems as unlikely as a massive spike in supply.”
“Copyright Canadian Real Estate Association. Reprinted with permission.”
Residential sales activity via the Multiple Listing Service® (MLS®) of Canadian real estate boards numbered 27,744 units in December 2009. This stands 72 per cent above activity in December 2008, when activity dropped to the lowest level in a decade. New records for the month of December were reported in Ontario, Quebec, Saskatchewan, New Brunswick, and Newfoundland & Labrador.
Seasonally adjusted national home sales totalled 46,805 units in December, capping the strongest fourth quarter period ever. A total of 137,957 homes traded hands on a seasonally adjusted basis in the fourth quarter of 2009. This is up 2.6 per cent from the previous record set in the first quarter of 2007. New quarterly records were set in British Columbia, Ontario, and Quebec.
National sales activity began 2009 on a weak footing. Despite year-over-year increases in the second and third quarters of the year, year-to-date activity was still trailing 2008 levels at the end of September 2009. A 59 per cent year-over-year gain in the fourth quarter of 2009 pushed sales activity above annual levels for 2008.
“Sales activity in 2009 came in like a lamb and went out like a lion,” said CREA President Dale Ripplinger. “The continuation of unusually low interest rates may keep national sales activity near current levels over the coming months, as will a blip in housing demand in Ontario and British Columbia from homebuyers motivated to beat the introduction of the HST.”
Annual activity in 2009 was down 10.7 per cent from the peak reached in 2007. A total of 465,251 homes traded hands through the MLS® systems of real estate boards in Canada in 2009. This is up 7.7 per cent from 2008 levels, and represents the fourth highest level on record for annual activity.
The national residential average price was $337,410 in December, up 19 per cent year-over-year. On an annual basis, average price climbed five per cent to a record $320,333. Average prices set new annual records in a majority of local markets in 2009, and in every province except Alberta.
The large year-over-year increase in the national average price in December reflects the high degree to which it was skewed downward in late 2008 by unusually low activity in Canada’s priciest markets. The national average price was also skewed upward by rebounding activity in the spring and summer months of 2009. The national average price rose to unprecedented heights at that time, despite records having been set in only a small number of local markets.
The contribution of activity by higher priced markets toward the national average price has recently returned to more typical levels. Record level average prices in most regions are now driving the national average price to new heights.
The price trend is similar but less dramatic for the national weighted average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 3.6 per cent in 2009.
The residential average price in Canada’s major markets was up 5.5 per cent year-over-year to $348,840 in 2009. As with the national counterpart, the price trend is similar but less dramatic for the major market weighted average price, which rose 2.3 per cent from 2008 levels.
Strong demand and headline average price gains are drawing more sellers to the market. New listings coming onto Board MLS® Systems across Canada rose to the highest level on record for the month of December, with a total of 33,090 residential properties coming on stream. This is up 4.8 per cent from December 2008, the first year-over-year gain in a year. On a seasonally adjusted basis, new listings rose by 4.7 per cent in December 2009 compared to the previous month.
The recent rising trend in new listings has not yet offset the steep decline in the number of new listings during the first half of 2009. As a result, new listings in 2009 were down 12.6 per cent from the annual peak in 2008.
Despite the recent rise in new listings, strong demand for resale housing continues to draw down inventories. There were 154,264 homes listed for sale on Boards’ MLS® Systems in Canada at the end of December 2009, a decline of 22 per cent from levels reported one year ago.
Nationally, there were 4.1 months of inventory in December 2009 on a seasonally adjusted basis. This is the lowest level in more than two years.
The actual (not seasonally adjusted) number of months of inventory in December 2009 stood at 5.6 months, the lowest December figure since 2005, and well below the same month in 2008 (12.3 months). Although up slightly from November (five months), an increase is normal at this time of year since demand normally eases relative to supply over autumn and winter months. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.
“CREA’s latest statistics will no doubt spark further bubble talk amongst the usual suspects,” said CREA Chief Economist Gregory Klump. “Cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer.”
“The extraordinary decline in activity one year ago and subsequent rebound, particularly for higher-priced real estate, is stretching current year-over-year comparisons,” he said. “By the second half of 2010, price gains are likely to shrink significantly, since a year will have elapsed since the decline and rebound. Klump added that, “Further expected increases in supply will also take some steam out of the market. A more balanced market will result in smaller price increases in the second half of the year, but a massive decline in demand similar to what we saw in late 2008 and early 2009 seems as unlikely as a massive spike in supply.”
“Copyright Canadian Real Estate Association. Reprinted with permission.”
Consumer confidence ends on a stronger footing
National consumer confidence ended the year 2009 on a stronger footing compared to pre-recession levels, despite having edged down slightly the fourth quarter compared to the third quarter. According to the Conference Board of Canada’s index of consumer confidence, confidence eased slightly in the fourth quarter for the first time in three quarterly periods. The decrease in confidence reflects weakening sentiment about making major purchases.
The balance of sentiment about making major purchases, such as a home or a car, dipped slightly into negative territory in the fourth quarter. It had turned positive in the third quarter for the first time since the first quarter of 2008.
A negative balance of sentiment means more survey respondents said it was a bad time to buy a big-ticket item, such as a home or car, than said it was a good time to do so. This indicator is an important factor underlying the housing market.
The balance of sentiment about job growth prospects continued improving in the fourth quarter of 2008, staying positive for the second consecutive quarter. More survey respondents expect employment to pick up over the next six months, and fewer expect more layoffs.
The balance of sentiment about households’ budgetary outlook softened marginally in the fourth quarter, but remains upbeat. A positive balance of opinion means more households said they expect their household budget to improve in the next six months than said they think it will worsen.
British Columbia
Consumer confidence in British Columbia eased slightly in the fourth quarter of 2009, according to the Conference Board of Canada’s index of consumer confidence. Moderating confidence in the fourth quarter reflects softening sentiment about households’ budgetary outlooks, job prospects, and major purchases.
The balance of sentiment about making a major purchase, such as a home or a car, fell sharply and again turned negative in the fourth quarter. It had turned positive in the third quarter for the first time in two years.
A negative balance of opinion means more survey respondents said that it was a bad time to buy a big-ticket item, such as a home or car, than said it was a good time to do so. This indicator is an important factor underlying the housing market.
Sentiment about job growth prospects deteriorated in the fourth quarter. Although the balance of sentiment about near term job growth remained negative for the seventh consecutive quarter, it remained significantly less negative compared to where it stood at the height of the economic recession.
The balance of sentiment about households’ budgetary outlook stayed upbeat for the third consecutive quarter.
Prairie region
Consumer sentiment in the Prairie region improved for the third consecutive quarter in the fourth quarter of 2009, returning to the pre-recession level recorded in the second quarter of 2008.
Sentiment about making major purchases, such as a home or a car, improved for the fourth consecutive quarter. The balance of sentiment about making major purchases has stayed positive for two consecutive quarters, returning to levels on par with the third quarter of 2007.
A positive balance of sentiment means more survey respondents said it was a good time to buy a big-ticket item, such as a home or car, than said it was a bad time to do so. This indicator is an important factor underlying the housing market.
Sentiment about job growth prospects continued improving, building on significant increases recorded in the previous two quarters. The balance of opinion about job growth has stayed positive for three consecutive quarters, and is also back on par with pre-recession levels.
The balance of sentiment about the outlook for household budgets edged down only marginally in the fourth quarter on 2009 compared to the previous quarter.
Ontario
Consumer confidence in Ontario dipped slightly in the fourth quarter of 2009 after having risen in each of the three previous quarters, according to the Conference Board of Canada’s index of consumer confidence. The slight decline in confidence reflects weakened sentiment about households’ budgetary outlooks and about making major purchases.
The balance of sentiment about making major purchases, such as a home or a car, turned negative in the fourth quarter. In the third quarter, it had turned positive for the first time since the fourth quarter of 2007.
A negative balance of opinion means more households said it was a bad time to buy a big-ticket item, such as a home or car, than said it was a good time to do so. This is an important factor underlying the housing market.
The balance of sentiment about job growth prospects improved compared to the previous quarter, turning positive for the first time since the second quarter of 2006.
The balance of sentiment about the outlook for household budgets stayed positive for the third consecutive quarter in the fourth quarter of 2009, despite having softened slightly.
Quebec
Consumer confidence in Quebec eased in the fourth quarter of 2009 but remains well above levels recorded at the height of the economic recession, according to the Conference Board of Canada’s index of consumer confidence. The decrease in confidence reflects weaker sentiment about household budgets and about making major purchases.
Despite having softened compared to the previous quarter, the balance of sentiment about making major purchases, such as a home or a car, remained positive in the fourth quarter. This represents the third consecutive quarter in which the balance of sentiment about making major purchases stayed positive.
A positive balance of opinion means more households said it was a good time to buy a big-ticket item, such as a home or car, than said it was a bad time to do so. This indicator is an important factor underlying the housing market.
The balance of sentiment about job growth prospects turned positive for the first time since the beginning of 2008.
The balance of sentiment about the outlook for household budgets for the next six months eased in the fourth quarter, but nevertheless remained positive.
Atlantic region
Consumer sentiment improved significantly in the fourth quarter of 2009, continuing its rise above pre-recession levels according to the Conference Board of Canada’s index of consumer confidence for the region. This marked the fourth consecutive increase in confidence.
Sentiment about making major purchases, such as a home or a car, held steady. The balance of sentiment about big-ticket purchases remained positive for the second consecutive quarter.
A positive balance of sentiment means more survey respondents said it was a good time to buy a big-ticket item, such as a home or car, than said it was a bad time to do so. This indicator is an important factor underlying the housing market.
After improving for a fourth consecutive quarter, the balance of sentiment about job growth became positive in the fourth quarter of 2009. This is its first positive reading since the second quarter of 2008.
The balance of sentiment about the outlook for household budgets over the next six months also improved in the fourth quarter. This marks the fourth consecutive quarter in which the balance of sentiment about the outlook for household budgets stayed upbeat.
“Copyright Canadian Real Estate Association. Reprinted with permission.”
The balance of sentiment about making major purchases, such as a home or a car, dipped slightly into negative territory in the fourth quarter. It had turned positive in the third quarter for the first time since the first quarter of 2008.
A negative balance of sentiment means more survey respondents said it was a bad time to buy a big-ticket item, such as a home or car, than said it was a good time to do so. This indicator is an important factor underlying the housing market.
The balance of sentiment about job growth prospects continued improving in the fourth quarter of 2008, staying positive for the second consecutive quarter. More survey respondents expect employment to pick up over the next six months, and fewer expect more layoffs.
The balance of sentiment about households’ budgetary outlook softened marginally in the fourth quarter, but remains upbeat. A positive balance of opinion means more households said they expect their household budget to improve in the next six months than said they think it will worsen.
British Columbia
Consumer confidence in British Columbia eased slightly in the fourth quarter of 2009, according to the Conference Board of Canada’s index of consumer confidence. Moderating confidence in the fourth quarter reflects softening sentiment about households’ budgetary outlooks, job prospects, and major purchases.
The balance of sentiment about making a major purchase, such as a home or a car, fell sharply and again turned negative in the fourth quarter. It had turned positive in the third quarter for the first time in two years.
A negative balance of opinion means more survey respondents said that it was a bad time to buy a big-ticket item, such as a home or car, than said it was a good time to do so. This indicator is an important factor underlying the housing market.
Sentiment about job growth prospects deteriorated in the fourth quarter. Although the balance of sentiment about near term job growth remained negative for the seventh consecutive quarter, it remained significantly less negative compared to where it stood at the height of the economic recession.
The balance of sentiment about households’ budgetary outlook stayed upbeat for the third consecutive quarter.
Prairie region
Consumer sentiment in the Prairie region improved for the third consecutive quarter in the fourth quarter of 2009, returning to the pre-recession level recorded in the second quarter of 2008.
Sentiment about making major purchases, such as a home or a car, improved for the fourth consecutive quarter. The balance of sentiment about making major purchases has stayed positive for two consecutive quarters, returning to levels on par with the third quarter of 2007.
A positive balance of sentiment means more survey respondents said it was a good time to buy a big-ticket item, such as a home or car, than said it was a bad time to do so. This indicator is an important factor underlying the housing market.
Sentiment about job growth prospects continued improving, building on significant increases recorded in the previous two quarters. The balance of opinion about job growth has stayed positive for three consecutive quarters, and is also back on par with pre-recession levels.
The balance of sentiment about the outlook for household budgets edged down only marginally in the fourth quarter on 2009 compared to the previous quarter.
Ontario
Consumer confidence in Ontario dipped slightly in the fourth quarter of 2009 after having risen in each of the three previous quarters, according to the Conference Board of Canada’s index of consumer confidence. The slight decline in confidence reflects weakened sentiment about households’ budgetary outlooks and about making major purchases.
The balance of sentiment about making major purchases, such as a home or a car, turned negative in the fourth quarter. In the third quarter, it had turned positive for the first time since the fourth quarter of 2007.
A negative balance of opinion means more households said it was a bad time to buy a big-ticket item, such as a home or car, than said it was a good time to do so. This is an important factor underlying the housing market.
The balance of sentiment about job growth prospects improved compared to the previous quarter, turning positive for the first time since the second quarter of 2006.
The balance of sentiment about the outlook for household budgets stayed positive for the third consecutive quarter in the fourth quarter of 2009, despite having softened slightly.
Quebec
Consumer confidence in Quebec eased in the fourth quarter of 2009 but remains well above levels recorded at the height of the economic recession, according to the Conference Board of Canada’s index of consumer confidence. The decrease in confidence reflects weaker sentiment about household budgets and about making major purchases.
Despite having softened compared to the previous quarter, the balance of sentiment about making major purchases, such as a home or a car, remained positive in the fourth quarter. This represents the third consecutive quarter in which the balance of sentiment about making major purchases stayed positive.
A positive balance of opinion means more households said it was a good time to buy a big-ticket item, such as a home or car, than said it was a bad time to do so. This indicator is an important factor underlying the housing market.
The balance of sentiment about job growth prospects turned positive for the first time since the beginning of 2008.
The balance of sentiment about the outlook for household budgets for the next six months eased in the fourth quarter, but nevertheless remained positive.
Atlantic region
Consumer sentiment improved significantly in the fourth quarter of 2009, continuing its rise above pre-recession levels according to the Conference Board of Canada’s index of consumer confidence for the region. This marked the fourth consecutive increase in confidence.
Sentiment about making major purchases, such as a home or a car, held steady. The balance of sentiment about big-ticket purchases remained positive for the second consecutive quarter.
A positive balance of sentiment means more survey respondents said it was a good time to buy a big-ticket item, such as a home or car, than said it was a bad time to do so. This indicator is an important factor underlying the housing market.
After improving for a fourth consecutive quarter, the balance of sentiment about job growth became positive in the fourth quarter of 2009. This is its first positive reading since the second quarter of 2008.
The balance of sentiment about the outlook for household budgets over the next six months also improved in the fourth quarter. This marks the fourth consecutive quarter in which the balance of sentiment about the outlook for household budgets stayed upbeat.
“Copyright Canadian Real Estate Association. Reprinted with permission.”
Average Price and Your Home
While being “average” is nothing to brag about, it does have its place in the world of real estate. It shows us the big picture and helps us understand where we stand in terms of the potential value of our homes.
Market statistics help us establish broad market trends. These figures convey the lay of the land, and help homeowners compare the overall market at-a-glance in any given province, region or city.
But, these sweeping generalizations often lose relevance the moment you try relating them to the largest single asset you will likely ever own: your home.
Many homeowners would like to know how well their properties are holding their value these days, while others, lured by historically low interest rates, are thinking about getting into the market for the first time.
In either case, the average prices of a given city or region – the ones we see so widely reported because they intrigue the widest range of people – likely have little bearing on your own situation in your own neighbourhood.
Think “Comparable” or “Typical”
A more useful measure of your home’s value is the selling price of homes that are similar to yours and located nearby – in other words, “typical” or “comparable” homes in your neighbourhood.
Any given neighbourhood will consist of houses of different ages, sizes and types, with varying proximity to parks, schools, transit, shopping and other amenities. That means the typical home in your neighbourhood will be different from prices of typical homes in other neighbourhoods – and also different from the average price of all homes in your town/city.
That said, it is difficult for homeowners to do their own surveys because only listing prices – not selling prices – are available to the general public on the local MLS. The best course is to ask your real estate professional or team to show you statistics of selling prices of homes in your neighbourhood that are similar to your home.
As always, if you have any questions about pricing your home accordingly, answers are just a phone call or e-mail away!
Market statistics help us establish broad market trends. These figures convey the lay of the land, and help homeowners compare the overall market at-a-glance in any given province, region or city.
But, these sweeping generalizations often lose relevance the moment you try relating them to the largest single asset you will likely ever own: your home.
Many homeowners would like to know how well their properties are holding their value these days, while others, lured by historically low interest rates, are thinking about getting into the market for the first time.
In either case, the average prices of a given city or region – the ones we see so widely reported because they intrigue the widest range of people – likely have little bearing on your own situation in your own neighbourhood.
Think “Comparable” or “Typical”
A more useful measure of your home’s value is the selling price of homes that are similar to yours and located nearby – in other words, “typical” or “comparable” homes in your neighbourhood.
Any given neighbourhood will consist of houses of different ages, sizes and types, with varying proximity to parks, schools, transit, shopping and other amenities. That means the typical home in your neighbourhood will be different from prices of typical homes in other neighbourhoods – and also different from the average price of all homes in your town/city.
That said, it is difficult for homeowners to do their own surveys because only listing prices – not selling prices – are available to the general public on the local MLS. The best course is to ask your real estate professional or team to show you statistics of selling prices of homes in your neighbourhood that are similar to your home.
As always, if you have any questions about pricing your home accordingly, answers are just a phone call or e-mail away!
MORTGAGE MATTERS
While most Canadians spend a lot of time, and expend a lot of effort, in shopping for an initial mortgage, the same is generally not the case when looking at mortgage term renewals. Omitting proper consideration at the time of renewal costs Canadians thousands of extra dollars every year. Homeowners should never accept the first rate offer from their existing lender. Without any negotiation, simply signing up for the market rate on a renewal is unnecessarily costing the homeowner a lot of money on their mortgage. Speak to your mortgage professional or lender prior to signing your next renewal form.
Borrowers are coping with their debts better than expected in the wake of the recession, 2009 third-quarter results from Canada’s major banks suggest.
There are signs that the number of consumers struggling with payments is stabilizing, and businesses are increasingly able to pay off their loans. For Canada’s banks, this suggests the total toll the economic downturn inflicts will not be nearly as bad as suspected when the slump first hit.
The first wave of the crisis, caused by a sudden lack of liquidity, did less damage to Canadian banks than it did to their global competitors, many of whom were crippled by writedowns and toxic exposure in their capital markets businesses.
It now appears the second wave, caused by the recession, will have less of an impact on Canadian banks’ bread-and-butter lending businesses than it is having on many institutions, especially in the US. Many bankers now predict the amount of soured loans will peak by April 2010, the halfway point of the current fiscal year.
Borrowers are coping with their debts better than expected in the wake of the recession, 2009 third-quarter results from Canada’s major banks suggest.
There are signs that the number of consumers struggling with payments is stabilizing, and businesses are increasingly able to pay off their loans. For Canada’s banks, this suggests the total toll the economic downturn inflicts will not be nearly as bad as suspected when the slump first hit.
The first wave of the crisis, caused by a sudden lack of liquidity, did less damage to Canadian banks than it did to their global competitors, many of whom were crippled by writedowns and toxic exposure in their capital markets businesses.
It now appears the second wave, caused by the recession, will have less of an impact on Canadian banks’ bread-and-butter lending businesses than it is having on many institutions, especially in the US. Many bankers now predict the amount of soured loans will peak by April 2010, the halfway point of the current fiscal year.
Canadian Mortgage Debt – A Closer Look
Newspaper editorials have been overflowing lately with speculation on how rising rates may lead to a surge in mortgage defaults. In response to this issue, CIBC Economist Benjamin Tal released a report that took a closer look at the facts and determined history doesn’t support this premise. Below is a summary of Tal’s report.
House Prices – Some Overshooting
Over the past two years, the degree of volatility observed in the Canadian housing market has been unprecedented. Within this short timeframe, house prices fell by almost 13%, only to rebound by an impressive 21%.
Meanwhile, resale activity is now rising by close to 67% on a year-over-year basis after falling by close to 40% in 2008. Housing starts are presently 33% higher than in April 2009 despite dropping by more than 50% earlier in the recession.
In fact, no other segment of the economy has rebounded as fast as the housing market, making it one of the real surprises of this recession. This rapid uptick in housing activity, in the face of recessionary conditions elsewhere in the economy, raises concerns about its sustainability, and is causing some to wonder whether house prices are, in fact, rising too quickly given current economic fundamentals.
Tal estimates that the Canadian housing market as a whole is indeed beginning to overshoot its “fair value”. At just under $350,000, the current average price of a home is estimated to be roughly 7% over what would be consistent with current housing market fundamentals such as interest rates, income growth, rents and demographics.
But this modest overshooting is far from uniform across the country. Those figures are skewed to western Canada, which has seen the most dramatic swings in house prices over the past 24 months. That market now appears to be overvalued by roughly 10-15%, suggesting that the imbalance in the rest of the country is much more modest.
Note, however, that overvaluation does not necessarily mean a bubble or a dramatic price correction. Given that the current overvaluation is occurring in a context of historically low interest rates, what we are most likely witnessing is a temporary period of exuberance that is “borrowing” activity from the future, as households take advantage of lower rates and accelerate their borrowing and home purchasing activities.
To the extent that current activity is simply a redistribution of sales from the future to the present, the housing market of tomorrow may be in store for a more muted level of activity. Housing starts will also catch up with the sudden spurt in demand, with the increase in supply helping to moderate price trends. Rather than plunging, house prices are more likely to stagnate in coming years (or fall modestly in the most overheated markets) as fundamentals catch up with a market that has gotten ahead of itself.
What Worries the Bank of Canada?
Rather than house prices, it is the accelerated pace of borrowing at very low rates that is beginning to raise some concerns at the Bank of Canada. For the first time in the post-war era, real household credit continued to expand through a recession. In fact, mortgage credit is now rising at a year-over-year rate of more than 7%.
This strong performance is a clear reflection of an extremely effective monetary policy in Canada. With Canadian consumer confidence only 10 points below its pre-recession level (versus a 50% decline in the US), Canada is benefiting not only from properly functioning credit channels, but also from a household sector that is willing and able to take on new credit.
Remember that low rates only work as an economic stimulus if Canadians take advantage of them. The wave of borrowing does, however, have consequences in terms of consumer debt levels. The household debt-to-income ratio is now at a new all-time high of more than 140%.
Despite a record low 4.4% effective mortgage rate, overall mortgage interest payments as a share of after-tax income are now at levels that in the past were consistent with a 6% effective mortgage rate. Since rates will no doubt at some point return to those higher levels, the Bank of Canada is worried that Canadians are making themselves increasingly more vulnerable in terms of their ability to continue to service these new, higher debt loads.
How Big is the Problem?
The relevant question, however, is just how serious a problem it is becoming, and here we have to dig a bit deeper to get the answers. Aside from an unlikely scenario of a 1970s-type stagflation, any future increase in interest rates will be in response to an improving economy. As such, any analysis of the potential impact of higher rates on the household sector in general, and the housing market in particular, should be done with tomorrow’s healthier economy in mind.
After all, the reality is that, in the past, interest rates have played only a minor role in driving mortgage default rates. Historically, it’s clear that mortgage arrear rates are highly correlated with the unemployment rate, with little or no correlation with changes in interest rates. The same goes for the economy in general. Over the past three decades, personal bankruptcies have risen twice as fast in an environment of falling interest rates than in an environment of rising rates.
And the logic here is obvious – interest rates rise when the economy recovers, and the benefits to employment and incomes of an improving economy easily offset the sting of higher interest rates on debt service costs.
House Prices – Some Overshooting
Over the past two years, the degree of volatility observed in the Canadian housing market has been unprecedented. Within this short timeframe, house prices fell by almost 13%, only to rebound by an impressive 21%.
Meanwhile, resale activity is now rising by close to 67% on a year-over-year basis after falling by close to 40% in 2008. Housing starts are presently 33% higher than in April 2009 despite dropping by more than 50% earlier in the recession.
In fact, no other segment of the economy has rebounded as fast as the housing market, making it one of the real surprises of this recession. This rapid uptick in housing activity, in the face of recessionary conditions elsewhere in the economy, raises concerns about its sustainability, and is causing some to wonder whether house prices are, in fact, rising too quickly given current economic fundamentals.
Tal estimates that the Canadian housing market as a whole is indeed beginning to overshoot its “fair value”. At just under $350,000, the current average price of a home is estimated to be roughly 7% over what would be consistent with current housing market fundamentals such as interest rates, income growth, rents and demographics.
But this modest overshooting is far from uniform across the country. Those figures are skewed to western Canada, which has seen the most dramatic swings in house prices over the past 24 months. That market now appears to be overvalued by roughly 10-15%, suggesting that the imbalance in the rest of the country is much more modest.
Note, however, that overvaluation does not necessarily mean a bubble or a dramatic price correction. Given that the current overvaluation is occurring in a context of historically low interest rates, what we are most likely witnessing is a temporary period of exuberance that is “borrowing” activity from the future, as households take advantage of lower rates and accelerate their borrowing and home purchasing activities.
To the extent that current activity is simply a redistribution of sales from the future to the present, the housing market of tomorrow may be in store for a more muted level of activity. Housing starts will also catch up with the sudden spurt in demand, with the increase in supply helping to moderate price trends. Rather than plunging, house prices are more likely to stagnate in coming years (or fall modestly in the most overheated markets) as fundamentals catch up with a market that has gotten ahead of itself.
What Worries the Bank of Canada?
Rather than house prices, it is the accelerated pace of borrowing at very low rates that is beginning to raise some concerns at the Bank of Canada. For the first time in the post-war era, real household credit continued to expand through a recession. In fact, mortgage credit is now rising at a year-over-year rate of more than 7%.
This strong performance is a clear reflection of an extremely effective monetary policy in Canada. With Canadian consumer confidence only 10 points below its pre-recession level (versus a 50% decline in the US), Canada is benefiting not only from properly functioning credit channels, but also from a household sector that is willing and able to take on new credit.
Remember that low rates only work as an economic stimulus if Canadians take advantage of them. The wave of borrowing does, however, have consequences in terms of consumer debt levels. The household debt-to-income ratio is now at a new all-time high of more than 140%.
Despite a record low 4.4% effective mortgage rate, overall mortgage interest payments as a share of after-tax income are now at levels that in the past were consistent with a 6% effective mortgage rate. Since rates will no doubt at some point return to those higher levels, the Bank of Canada is worried that Canadians are making themselves increasingly more vulnerable in terms of their ability to continue to service these new, higher debt loads.
How Big is the Problem?
The relevant question, however, is just how serious a problem it is becoming, and here we have to dig a bit deeper to get the answers. Aside from an unlikely scenario of a 1970s-type stagflation, any future increase in interest rates will be in response to an improving economy. As such, any analysis of the potential impact of higher rates on the household sector in general, and the housing market in particular, should be done with tomorrow’s healthier economy in mind.
After all, the reality is that, in the past, interest rates have played only a minor role in driving mortgage default rates. Historically, it’s clear that mortgage arrear rates are highly correlated with the unemployment rate, with little or no correlation with changes in interest rates. The same goes for the economy in general. Over the past three decades, personal bankruptcies have risen twice as fast in an environment of falling interest rates than in an environment of rising rates.
And the logic here is obvious – interest rates rise when the economy recovers, and the benefits to employment and incomes of an improving economy easily offset the sting of higher interest rates on debt service costs.
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