Tuesday, September 27, 2011
Mortgage Rate Outlook
The third quarter saw a stunning collapse in government bond yields as markets digested weak US economic data and an increasingly serious debt crisis in the Euro-zone. The yield on five-year Government of Canada debt fell an incredible 150 basis points from its peak in the first quarter
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to 1.35 per cent, the lowest level on record.
The current level of bond-yields would normally prompt a dramatic fall in mortgage rates. However, there are a number of factors complicating the normal arithmetic. First, some lenders are offering deeper discounts for the most creditworthy borrowers. This allows banks to provide competitive rates while also filtering out higher-risk borrowers. Second, the emerging potential of credit crisis in Europe has raised the short-term cost of funding for financial institutions worldwide, thereby squeezing profitability. Moreover, the increasing popularity of variable rate mortgages due to very low rates may be putting further strain on the profitability of mortgage portfolios. Nearly a third of mortgages in 2011 are variable rate compared with 25 per cent five years ago and just ten percent a decade ago. Since variable rate mortgages tend to carry lower profit margins, the shift in consumer
preferences to variable rate mortgages is likely cutting into profits. Shrinking profit margins have even prompted some banks to increase their offered variable rates in absence of a change in the reference prime rate.
Our forecast for the remainder of 2011 assumes that very low bond yields will persist through the end of the year and will therefore lead eventually to a cut in mortgage rates. The five-year fixed rate has the potential to decline to its previous historical low of 5.19 per cent and will likely average around 5.3 per cent in the second half of 2011. The one-year rate is expected to average 3.5 per cent. Given current economic weakness and the almost certain delay in any monetary tightening by the Bank of Canada until as late as mid-2012, both long-term and short-term rates will likely stay very low for most of 2012. We expect that rates will move higher in the second half of next year, with the five-year rate hitting 5.6 per cent and the one-year rate reaching 4 per cent.
Growth and Inflation Outlook
Canadian economic growth has sharply decelerated from the first quarter of 2011. Recent data shows that the Canadian economy actually contracted in the second quarter of the year by 0.4 per cent. While the very sluggish growth profile in the global economy means that a technical recession (two consecutive quarters of negative real GDP growth) cannot be ruled out, our baseline forecast is for slow growth in the second half of 2011 and throughout 2012. We are forecasting real GDP growth of 2.5 per cent this year, falling to 2.2 per cent in 2012 and then rising to 2.9 per cent in 2013.
We anticipate that both total and core inflation will remain muted, particularly as energy prices stabilize and the impact of the HST is no longer present in year-over-year price changes.
Interest Rate Outlook
Market volatility over the summer and incoming data indicating very weak economic growth prompted an abrupt change in the policy stance at the Bank of Canada. Whereas just a few short weeks ago it was widely expected that interest rates were set to rise this fall, those rate hikes have been pushed out, possibly to as far as next summer. The major economies of the world are dangerously close to slipping into recession over the next 12 months. High European sovereign debt combined with short-sighted stabilization policy and misguided austerity measures are threatening to destabilize world credit markets. These fears can be observed in the spike in borrowing rates of the peripheral states of the Eurozone. Meanwhile, political acrimony in the United States is only further damaging an already deeply troubled economy.
Once the economy sees its way through the current tempest, waters will calm and interest rates will need to normalize. Key to understanding the near-term path of interest rates is some idea of the destination that Bank of Canada has in mind. Economists tend to frame this question in terms of the neutral level of real (net of inflation) interest rates, or a rate that is neither stimulative nor contractionary. A popular short-hand is the level of interest rates prevailing when the economy is fully utilized.
Over the long-term, the neutral real interest rate is determined by factors such as productivity, population growth and long-term saving preferences. However, in the short-run, the neutral real interest rate may deviate from its long-run level due to various disturbances or shocks that impact the economy.
Therefore, as the Bank of Canada recently signalled, a closing of the output gap does not necessarily have to coincide with interest rates being set to their long-term equilibrium. Given the magnitude of shocks to the global economy over the past three years, the neutral rate is very likely much lower than its long-term counterpart. Therefore, the Bank of Canada may need to keep rates very low while the economy stabilizes. In light of this, we have adjusted our forecast for the Bank of Canada’s overnight rate to 1 per cent for the remainder of the year and through at least the first quarter of 2012. We then expect rates to increase, ending next year at between 1.75 and 2 per cent.
Canadian home sales hold steady in August
According to statistics1 released by The Canadian Real Estate Association (CREA), national resale housing activity in August 2011 remained stable for the second consecutive month.
Highlights:
• Sales activity was stable from July to August, but posted another big year-over-year gain reflecting weakened demand last summer.
• Year-to-date sales pulled ahead of 2010 levels for the first time this year, and remain in line with the ten-year average.
• The number of newly listed homes was also little changed from July to August.
• The national housing market stayed firmly entrenched in balanced territory.
• There were more balanced local markets in August than at any other time on record.
• The national average price posted another year-over-year gain in August, but has moderated from elevated levels earlier this year.
• Upward skewing of the national average price is diminishing due to fewer expensive sales and a declining share of national activity in Vancouver and Toronto.
• Sales activity was stable from July to August, but posted another big year-over-year gain reflecting weakened demand last summer.
• Year-to-date sales pulled ahead of 2010 levels for the first time this year, and remain in line with the ten-year average.
• The number of newly listed homes was also little changed from July to August.
• The national housing market stayed firmly entrenched in balanced territory.
• There were more balanced local markets in August than at any other time on record.
• The national average price posted another year-over-year gain in August, but has moderated from elevated levels earlier this year.
• Upward skewing of the national average price is diminishing due to fewer expensive sales and a declining share of national activity in Vancouver and Toronto.
For a second consecutive month, national home sales activity held steady in August 2011 when compared to the previous month.
Among major urban centres, Toronto and Ottawa posted a monthly increase in activity while Calgary, Montreal and Vancouver saw activity decline slightly.
“The housing market in Canada remained on a firm footing in August when compared to volatile financial markets,” said Gary Morse, CREA President. “Through their actions, homebuyers are showing that they remain confident about the stability of the Canadian housing market, and recognize that the continuation of low interest rates represents an excellent opportunity to buy their first home or trade up.”
Actual (not seasonally adjusted) sales activity came in 15.8 per cent above national levels reported one year earlier. This was the largest year-over-year increase since last April, but largely reflects weakened activity one year ago.
A total of 324,030 homes have traded hands via Canadian MLS® Systems so far this year. While this stands only marginally above levels in the first eight months of last year, it nevertheless marks the first time this year that year-to-date activity has pulled ahead of 2010 levels.
As has been the case for much of this year, the year-to-date sales figure continues to run in line with the ten-year average.
The number of newly listed homes nationally was also little changed from July to August. This kept the national housing market firmly planted in balanced territory. The national sales-to-new listings ratio, a measure of market balance, stood at 51.6 per cent in August, unchanged compared to July.
Based on a sales-to-new listings ratio of between 40 to 60 per cent, 70 per cent of all local markets in Canada were in balanced market territory in August – a greater percentage than at any other time on record. There were just 12 buyers’ markets in August, which was the lowest figure so far this year.
The number of months of inventory stood at 6.2 months at the end of August on a national basis, which is little changed from the end of July (6.1 months). The national months of inventory figure has been stable at about six months since April. The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and is another measure of the balance between housing supply and demand.The actual (not seasonally adjusted) national average price for homes sold in August 2011 stood at $349,916. This is 7.7 per cent above its year-ago level, which marked the low point for 2010.
The national average price has moderated compared to earlier this year, with sales activity in Vancouver, and more recently in Toronto, exerting less of an effect on the national average. Their share of provincial and national sales activity reached unusually elevated levels earlier this year, but has since receded in line with normal seasonal variations.
“Once again, economic and financial market headwinds outside Canada are keeping interest rates lower for longer,” said Gregory Klump, CREA’s Chief Economist. “Those headwinds will likely persist until, and indeed after, fiscal quagmires in the U.S. and Europe are resolved. In the meantime, the Bank of Canada will have ample reason to delay raising interest rates further, which is supportive for the Canadian housing market.”
PLEASE NOTE: The information contained in this news release combines both major market and national MLS® sales information from the previous month.
CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas.
Statistical information contained in this report includes all housing types.
MLS® is a co-operative marketing system used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.
The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 100,000 REALTORS® working through more than 100 real estate Boards and Associations.
Copyright CREA reprinted with permission
Home Sales Stable During Summer Months
The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential unit sales in the province rose 16.4 per cent to 6,504 units in August compared to the same month last year. The average MLS® residential price climbed 10.7 per cent to $539,953 last month compared to August 2010.
“BC home sales edged up one per cent in August compared to July on a seasonally adjusted basis,” said Cameron Muir, BCREA Chief Economist. “Low mortgage interest rates continued to underpin housing demand in the province last month.”
“Total active listings in the province remained elevated in August,” added Muir. “Most regional markets exhibited buyer’s market conditions, meaning little upward pressure on home prices.”
Year-to-date, BC residential sales dollar volume increased 17.7 per cent to $31.7 billion, compared to the same period last year. Residential unit sales increased 2.6 per cent to 55,132 units, while the average MLS® residential price rose 14.7 per cent to $574,962 over the same period.
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August 2011 Housing Starts
The seasonally adjusted annual rate1 of housing starts was 184,700 units in August, according to Canada Mortgage and Housing Corporation (CMHC). This is down from 204,500 units in July 2011.
“Housing starts in August were in line with current demographic fundamentals and are consistent with CMHC’s recent Housing Market Outlook,” said Mathieu Laberge, Deputy Chief Economist at CMHC’s Market Analysis Centre. “Housing starts decreased in all regions, except the Prairies with the decline being more pronounced in the multiples segment.”
The seasonally adjusted annual rate of urban starts decreased by 10.2 per cent to 165,800 units in August. Multiple urban starts were down by 15.5 per cent to 101,400 units, while urban single starts decreased by 0.3 per cent in August to 64,400 units.
August’s seasonally adjusted annual rate of urban starts decreased by 41.4 per cent in the Atlantic region, by 15.3 per cent in British Columbia, by 11.8 per cent in Ontario and by 8.8 per cent in Quebec, while urban starts increased by 9.4 per cent in the Prairie region over the same time period.
CMHC
“Housing starts in August were in line with current demographic fundamentals and are consistent with CMHC’s recent Housing Market Outlook,” said Mathieu Laberge, Deputy Chief Economist at CMHC’s Market Analysis Centre. “Housing starts decreased in all regions, except the Prairies with the decline being more pronounced in the multiples segment.”
The seasonally adjusted annual rate of urban starts decreased by 10.2 per cent to 165,800 units in August. Multiple urban starts were down by 15.5 per cent to 101,400 units, while urban single starts decreased by 0.3 per cent in August to 64,400 units.
August’s seasonally adjusted annual rate of urban starts decreased by 41.4 per cent in the Atlantic region, by 15.3 per cent in British Columbia, by 11.8 per cent in Ontario and by 8.8 per cent in Quebec, while urban starts increased by 9.4 per cent in the Prairie region over the same time period.
CMHC
Wednesday, September 7, 2011
Moderate Growth in Housing Demand Through 2012
BCREA 2011 Third Quarter Housing Forecast Update
The British Columbia Real Estate Association (BCREA) released its 2011 Third Quarter Housing Forecast Update today.
BC Multiple Listing Service® (MLS®) residential sales are forecast to increase 3.8 per cent from 74,640 units in 2010 to 77,500 units this year, increasing a further 3.6 per cent to 80,300 units in 2012.
“Slower than expected employment growth is expected to keep BC home sales below their ten-year average through 2012,” said Cameron Muir, BCREA Chief Economist. “However, weaker global economic growth and recent uncertainty in the equity markets points to continued low mortgage interest rates which will help underpin housing demand.”
“Following a decade where unit sales broke all records, consumer demand over the next few years will be relatively moderate,” added Muir. The ten-year BC MLS® residential sales average is 87,600 units. A record 106,300 MLS® residential sales were recorded in 2005.
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Canadian home sales stable in July
According to statistics1 released today by The Canadian Real Estate Association (CREA), national resale housing activity was stable on a month-to-month basis in July following an uptick in June.
Highlights:
• Sales activity was stable from June to July, but posted a big year-over-year gain due to weakened demand in July 2010.
• Year-to-date sales continue to run in line with the ten-year average.
• The number of newly listed homes inched up by less than one per cent from June to July.
• The national housing market remains firmly entrenched in balanced territory.
• The national average price posted the largest year-over-year gain since April 2010, but was below where it stood in June.
• Upward skewing of the national average price is diminishing due to fewer expensive sales and a declining share of national activity in Vancouver and Toronto.
National home sales activity held steady in July 2011 compared to the previous month, with just over half of local markets posting month-over-month gains.
Major markets that saw gains compared to June include Edmonton, Montreal, as well as Newfoundland and Labrador. Activity also held steady in Toronto, while Vancouver recorded a small decline.
“The continued stability in national sales activity shows that homebuyers remain confident about the soundness of investing in a home,” said Gary Morse, CREA’s President. “Mortgage interest rates are low and keeping home affordability within reach, making it an excellent time for buyers to take advantage of very favourable financing. Prices and affordability evolve differently among local markets, so buyers and sellers should consult their local REALTOR® to better understand how the outlook for housing supply, demand, and prices is shaping up in their housing market.”
Actual (not seasonally adjusted) sales activity came in 12.3 per cent above national levels reported one year earlier. This increase reflects weakened activity in July 2010, when levels for the month reached their lowest point since 2002.
A total of 284,537 homes have traded hands via Canadian MLS® Systems so far this year. This stands just 1.6 per cent below levels in the first seven months of last year, and continues to run in line with the ten-year average.
The number of newly listed homes edged up by less than one per cent from June to July. New listings were down in 60 per cent of local markets, but increased in many large urban centres including Toronto, Vancouver, Edmonton, and Ottawa.
The national housing market remains firmly planted in balanced territory. The national sales-to-new listings ratio, a measure of market balance, stood at 51.8 per cent in July, which is little changed from 52.3 per cent in June.
Based on a sales-to-new listings ratio of between 40 to 60 percent, about three in every five local markets in Canada were balanced in July. Half of the remaining markets may be classified as sellers’ markets, with a sales-to-new listings ratio of above 60 per cent.
The number of months of inventory stood at 6.1 months at the end of July on a national basis, which is little changed from the end of June (6.0 months). The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and is another measure of the balance between housing supply and demand.
The actual (not seasonally adjusted) national average price for homes sold in July 2011 stood at $361,181, which is the lowest level since January. While up 9.3 per cent from its year-ago level, the increase reflects a short-lived decline in the average price following the introduction of the HST in B.C. and Ontario, and tighter mortgage regulations earlier in 2010.
“Earlier this year, the national average price was being skewed upward by sales in some expensive Vancouver neighbourhoods, but this factor is now diminishing,” said Gregory Klump, CREA’s Chief Economist. “Upward skewing of the national average price is also shrinking due to overall sales trends in Vancouver, and most recently in Toronto. Their market shares as a percentage of provincial and national sales activity are declining from the elevated levels seen in the first half of the year.”
“Changes in the national average home price are open to being misinterpreted,” added Klump. “They often signify changes in the mix of sales activity across and within local markets, rather than a rising or falling price trend for typical homes in a specific market.”
“The national share of sales activity in some of Canada’s more expensive urban centres may retreat further from elevated levels recorded earlier this year, resulting in an easing trend for the national average home price,” he added. “Even so, the stability of Canada’s housing market will likely continue to stand in stark contrast to further expected volatility in financial markets.”
Highlights:
• Sales activity was stable from June to July, but posted a big year-over-year gain due to weakened demand in July 2010.
• Year-to-date sales continue to run in line with the ten-year average.
• The number of newly listed homes inched up by less than one per cent from June to July.
• The national housing market remains firmly entrenched in balanced territory.
• The national average price posted the largest year-over-year gain since April 2010, but was below where it stood in June.
• Upward skewing of the national average price is diminishing due to fewer expensive sales and a declining share of national activity in Vancouver and Toronto.
National home sales activity held steady in July 2011 compared to the previous month, with just over half of local markets posting month-over-month gains.
Major markets that saw gains compared to June include Edmonton, Montreal, as well as Newfoundland and Labrador. Activity also held steady in Toronto, while Vancouver recorded a small decline.
“The continued stability in national sales activity shows that homebuyers remain confident about the soundness of investing in a home,” said Gary Morse, CREA’s President. “Mortgage interest rates are low and keeping home affordability within reach, making it an excellent time for buyers to take advantage of very favourable financing. Prices and affordability evolve differently among local markets, so buyers and sellers should consult their local REALTOR® to better understand how the outlook for housing supply, demand, and prices is shaping up in their housing market.”
Actual (not seasonally adjusted) sales activity came in 12.3 per cent above national levels reported one year earlier. This increase reflects weakened activity in July 2010, when levels for the month reached their lowest point since 2002.
A total of 284,537 homes have traded hands via Canadian MLS® Systems so far this year. This stands just 1.6 per cent below levels in the first seven months of last year, and continues to run in line with the ten-year average.
The number of newly listed homes edged up by less than one per cent from June to July. New listings were down in 60 per cent of local markets, but increased in many large urban centres including Toronto, Vancouver, Edmonton, and Ottawa.
The national housing market remains firmly planted in balanced territory. The national sales-to-new listings ratio, a measure of market balance, stood at 51.8 per cent in July, which is little changed from 52.3 per cent in June.
Based on a sales-to-new listings ratio of between 40 to 60 percent, about three in every five local markets in Canada were balanced in July. Half of the remaining markets may be classified as sellers’ markets, with a sales-to-new listings ratio of above 60 per cent.
The number of months of inventory stood at 6.1 months at the end of July on a national basis, which is little changed from the end of June (6.0 months). The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and is another measure of the balance between housing supply and demand.
The actual (not seasonally adjusted) national average price for homes sold in July 2011 stood at $361,181, which is the lowest level since January. While up 9.3 per cent from its year-ago level, the increase reflects a short-lived decline in the average price following the introduction of the HST in B.C. and Ontario, and tighter mortgage regulations earlier in 2010.
“Earlier this year, the national average price was being skewed upward by sales in some expensive Vancouver neighbourhoods, but this factor is now diminishing,” said Gregory Klump, CREA’s Chief Economist. “Upward skewing of the national average price is also shrinking due to overall sales trends in Vancouver, and most recently in Toronto. Their market shares as a percentage of provincial and national sales activity are declining from the elevated levels seen in the first half of the year.”
“Changes in the national average home price are open to being misinterpreted,” added Klump. “They often signify changes in the mix of sales activity across and within local markets, rather than a rising or falling price trend for typical homes in a specific market.”
“The national share of sales activity in some of Canada’s more expensive urban centres may retreat further from elevated levels recorded earlier this year, resulting in an easing trend for the national average home price,” he added. “Even so, the stability of Canada’s housing market will likely continue to stand in stark contrast to further expected volatility in financial markets.”
Copyright CREA reprinted with permission
CREA Updates Resale Housing Forecast
The Canadian Real Estate Association (CREA) has revised its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations for 2011 and 2012.
Overall, sales activity and prices remained stronger than expected in the second quarter. Sales momentum was also better than expected heading into the third quarter. As a result, the 2011 national forecasts for sales activity and average price have been raised slightly.
National sales activity is forecast to reach 450,800 units in 2011, up less than one per cent from levels in 2010. CREA had previously forecast a decline of about one per cent for activity in 2011. Erosion in affordability due to higher prices has prompted a small downward revision to the outlook for sales in 2012.
British Columbia’s 2011 sales forecast has been revised slightly higher, in recognition that home sales there appear to have bottomed out sooner than previously anticipated. Stronger than expected activity in Ontario offset slightly softer than anticipated demand in Quebec, Manitoba, and Newfoundland in the second quarter of 2011. Accordingly, the Ontario sales forecast for 2011 has been raised, while the outlook for activity in Quebec, Manitoba, and Newfoundland has been revised lower.
National sales activity in 2012 is forecast to ease seven tenths of a percentage point to 447,700 units, which is roughly on par with its ten-year average.
“While there had been some talk of potential interest rate increases, that hasn’t happened,” said Gary Morse, CREA President. “In fact, mortgage interest rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012. It’s a great opportunity to purchase a property with financing at very favourable rates.”
The national average home price is forecast to rise 7.2 per cent in 2011 to $363,500. This is an increase from the previous forecast, reflecting continued strong price growth in Vancouver in the second quarter of 2011 and acceleration in prices elsewhere, particularly Toronto. These two markets exert an outsized influence on the national average due to their relatively high level of activity and average price.
The national average home price is expected to moderate in the second half of 2011, returning to normal following a heavily skewed start to the year. In the first half of 2011, the national average home price was pushed upward by a surge in multi-million dollar sales in selected areas of Greater Vancouver and a higher than normal share of overall sales in more expensive markets.
“Some of the expected moderation in the national average price is seasonal, with average price peaking in many local markets during the second quarter of any year,” said Gregory Klump, CREA’s Chief Economist. “Elevated shares of provincial and national sales activity in Vancouver and Toronto are also expected to return to more normal levels, contributing to an anticipated moderation in average price in British Columbia, Ontario, and nationally.”
“Additional new listings are anticipated to result in a more balanced resale housing market in most provinces,” said Klump. “The national average price is forecast to stabilize in 2012, although at a slightly higher level than previously expected.”
Overall, sales activity and prices remained stronger than expected in the second quarter. Sales momentum was also better than expected heading into the third quarter. As a result, the 2011 national forecasts for sales activity and average price have been raised slightly.
National sales activity is forecast to reach 450,800 units in 2011, up less than one per cent from levels in 2010. CREA had previously forecast a decline of about one per cent for activity in 2011. Erosion in affordability due to higher prices has prompted a small downward revision to the outlook for sales in 2012.
British Columbia’s 2011 sales forecast has been revised slightly higher, in recognition that home sales there appear to have bottomed out sooner than previously anticipated. Stronger than expected activity in Ontario offset slightly softer than anticipated demand in Quebec, Manitoba, and Newfoundland in the second quarter of 2011. Accordingly, the Ontario sales forecast for 2011 has been raised, while the outlook for activity in Quebec, Manitoba, and Newfoundland has been revised lower.
National sales activity in 2012 is forecast to ease seven tenths of a percentage point to 447,700 units, which is roughly on par with its ten-year average.
“While there had been some talk of potential interest rate increases, that hasn’t happened,” said Gary Morse, CREA President. “In fact, mortgage interest rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012. It’s a great opportunity to purchase a property with financing at very favourable rates.”
The national average home price is forecast to rise 7.2 per cent in 2011 to $363,500. This is an increase from the previous forecast, reflecting continued strong price growth in Vancouver in the second quarter of 2011 and acceleration in prices elsewhere, particularly Toronto. These two markets exert an outsized influence on the national average due to their relatively high level of activity and average price.
The national average home price is expected to moderate in the second half of 2011, returning to normal following a heavily skewed start to the year. In the first half of 2011, the national average home price was pushed upward by a surge in multi-million dollar sales in selected areas of Greater Vancouver and a higher than normal share of overall sales in more expensive markets.
“Some of the expected moderation in the national average price is seasonal, with average price peaking in many local markets during the second quarter of any year,” said Gregory Klump, CREA’s Chief Economist. “Elevated shares of provincial and national sales activity in Vancouver and Toronto are also expected to return to more normal levels, contributing to an anticipated moderation in average price in British Columbia, Ontario, and nationally.”
“Additional new listings are anticipated to result in a more balanced resale housing market in most provinces,” said Klump. “The national average price is forecast to stabilize in 2012, although at a slightly higher level than previously expected.”
Copyright CREA reprinted with permission
Canadian Housing Market to Remain Steady in 2011
CMHC OTTAWA, August 24, 2011 — Housing starts are forecast to remain steady in 2011 and 2012, according to Canada Mortgage and Housing Corporation’s (CMHC) third quarter Housing Market Outlook, Canada Edition.
“Housing starts have been strong in the last few months, but are forecast to moderate closer in line with demographic fundamentals,” said Mathieu Laberge, Deputy Chief Economist for CMHC. “Despite recent financial uncertainty, factors such as employment, immigration and mortgage rates remain supportive of the Canadian housing sector.”
Housing starts will be in the range of 166,300 to 197,200 units in 2011, with a point forecast of 183,200 units. In 2012, housing starts will be in the range of 161,700 to 207,200 units, with a point forecast of 183,900 units.
Existing home sales will be in the range of 425,000 to 472,500 units in 2011, with a point forecast of 446,700 units, essentially the same level as in 2010. In 2012, MLS®2 sales are expected to move up modestly in the range of 407,500 to 510,000 units, with a point forecast of 458,000 units.
The average MLS® price increased in the first half of 2011 partly as a result of more higher-end homes sold during that period. For the remainder of 2011, the average MLS® price is expected to moderate. Nevertheless, the annual average MLS® price will experience an overall increase in 2011 compared to last year. As the existing home market moves to more balanced markets, growth in the average MLS® price in 2012 is expected to be more modest.
“Housing starts have been strong in the last few months, but are forecast to moderate closer in line with demographic fundamentals,” said Mathieu Laberge, Deputy Chief Economist for CMHC. “Despite recent financial uncertainty, factors such as employment, immigration and mortgage rates remain supportive of the Canadian housing sector.”
Housing starts will be in the range of 166,300 to 197,200 units in 2011, with a point forecast of 183,200 units. In 2012, housing starts will be in the range of 161,700 to 207,200 units, with a point forecast of 183,900 units.
Existing home sales will be in the range of 425,000 to 472,500 units in 2011, with a point forecast of 446,700 units, essentially the same level as in 2010. In 2012, MLS®2 sales are expected to move up modestly in the range of 407,500 to 510,000 units, with a point forecast of 458,000 units.
The average MLS® price increased in the first half of 2011 partly as a result of more higher-end homes sold during that period. For the remainder of 2011, the average MLS® price is expected to moderate. Nevertheless, the annual average MLS® price will experience an overall increase in 2011 compared to last year. As the existing home market moves to more balanced markets, growth in the average MLS® price in 2012 is expected to be more modest.
Top 5 reasons to use a REALTOR®
Thanks to resources such as the Internet, many people believe they can tackle virtually any project on their own – everything from renovating a kitchen to buying or selling a home. And while it’s true that the Internet has helped consumers become more informed on a number of topics, seeking the expertise of a professional is often a wise investment. Whether you’re a first-time homebuyer, upgrading to a new home, purchasing vacation or rental property or looking to sell, you really need a real estate expert to ensure the transaction is seamless – someone to walk you through the multiple steps involved with buying or selling real estate.
Following are five top reasons why it’s smart to enlist an expert the next time you’re buying or selling a home:
1. Local Expertise
Purchasing a home is the largest investment most people make throughout their lives and having a professional to guide you through the experience can make a huge difference in the choices you make throughout the buying or selling process. A real estate expert will assist you with creating a financial plan so you know what homes to seriously consider in your neighbourhood of choice. And because real estate professionals focus on local marketplaces, they can evaluate whether a home is a smart investment and how the price compares to other properties in the neighbourhood. Experts also have access to the Multiple Listing Service (MLS), which offers the latest information on every home listed by an agent in your market, including how long a home has been on the market and what special features the property may have. And when you’re looking to sell, the MLS is the number one reference agents use to help buyers look for homes. Having your home in the MLS puts every agent in the area on alert that your home is for sale. Real estate agents know how to market a home, attract prospective buyers and hold successful open houses.
Purchasing a home is the largest investment most people make throughout their lives and having a professional to guide you through the experience can make a huge difference in the choices you make throughout the buying or selling process. A real estate expert will assist you with creating a financial plan so you know what homes to seriously consider in your neighbourhood of choice. And because real estate professionals focus on local marketplaces, they can evaluate whether a home is a smart investment and how the price compares to other properties in the neighbourhood. Experts also have access to the Multiple Listing Service (MLS), which offers the latest information on every home listed by an agent in your market, including how long a home has been on the market and what special features the property may have. And when you’re looking to sell, the MLS is the number one reference agents use to help buyers look for homes. Having your home in the MLS puts every agent in the area on alert that your home is for sale. Real estate agents know how to market a home, attract prospective buyers and hold successful open houses.
2. Time is Money
Working with home sellers or buyers and their agents can be extremely time-consuming. If you have a full-time job, meeting with buyers or sellers – or even talking on the phone – may wreak havoc on your already full schedule. A real estate agent will save you time by providing answers to all of your questions and take care of the leg work involved in eliminating prospects that don’t meet your needs, which means you’re not wasting time touring homes that you’ll never buy.
Working with home sellers or buyers and their agents can be extremely time-consuming. If you have a full-time job, meeting with buyers or sellers – or even talking on the phone – may wreak havoc on your already full schedule. A real estate agent will save you time by providing answers to all of your questions and take care of the leg work involved in eliminating prospects that don’t meet your needs, which means you’re not wasting time touring homes that you’ll never buy.
3. A Professional Negotiator
Negotiating is definitely an aspect of the buying and selling process that many people simply aren’t comfortable with. A real estate agent handles the negotiation process on your behalf and ensures you receive the best possible price. A professional will have a firm grasp of your local market and neighbourhoods, know when you have room to negotiate with the seller, and understand which aspects of the house are desirable and which ones may lower the possibility of sale.
Negotiating is definitely an aspect of the buying and selling process that many people simply aren’t comfortable with. A real estate agent handles the negotiation process on your behalf and ensures you receive the best possible price. A professional will have a firm grasp of your local market and neighbourhoods, know when you have room to negotiate with the seller, and understand which aspects of the house are desirable and which ones may lower the possibility of sale.
4. Professional Connections
There is more to buying a house than just negotiating the sale. You will often be best served by working with a mortgage broker, home inspector, lawyer, escrow company and many more professionals. A real estate agent can suggest a reputable choice for any professional you must hire in order to ensure your home and financing needs are well taken care of. After all, agents deal with a wide assortment of professionals on a daily basis – and will only suggest you work with the best.
There is more to buying a house than just negotiating the sale. You will often be best served by working with a mortgage broker, home inspector, lawyer, escrow company and many more professionals. A real estate agent can suggest a reputable choice for any professional you must hire in order to ensure your home and financing needs are well taken care of. After all, agents deal with a wide assortment of professionals on a daily basis – and will only suggest you work with the best.
5. Expertise & Knowledge
Real estate agents understand more than merely the market and financial aspects involved with buying and selling homes. They also know what people want and need, and how to hone in on fine details. There may be a myriad of small things that you don’t think to consider when buying or selling a home that an expert will quickly point out to you.
Real estate agents understand more than merely the market and financial aspects involved with buying and selling homes. They also know what people want and need, and how to hone in on fine details. There may be a myriad of small things that you don’t think to consider when buying or selling a home that an expert will quickly point out to you.
Even if you have purchased and sold a few homes in the past, chances are you aren’t an expert. Real estate agents are familiar with the trends in the neighbourhoods in which you wish to buy or sell a home, and in all of the various changes in regulations and technology. Because we help people buy and sell homes every day, we understand all of the nuances involved in these processes. From the purchase agreement to closing, our job is to make sure you get the best possible deal.
BC Commercial Leading Indicator Edges Lower
The British Columbia Real Estate Association (BCREA) Commercial Leading Indicator (CLI) edged down 0.4 points to 108.1 in the second quarter of 2011. After posting a strong performance in 2010, the index has trended lower since the beginning of the year.
The CLI peaked at a level of 115.5 in the second quarter of 2007 before the onset of the financial crisis pushed it to a low of 97.7 in the first half of 2009.
The downward pressure in the CLI over the past two quarters is mostly a product of weak growth in both retail sales and employment. In addition, provincial manufacturing sales have deteriorated alongside the global economy.
“Tepid job creation and deteriorating global economic growth represent significant headwinds for the BC economy and could lead to softer commercial activity in coming quarters,” said Brendon Ogmundson, BCREA Economist. “However, an almost unprecedented decline in long-term interest rates may help to stimulate investment activity and soften the impact of slower economic growth.”
“The nuance is the Big Five are fighting but is it really competitive? There have always been questions about the competitiveness of the Canadian market when we pay the highest account fees and highest mutual fund fees in the world.”
ING Direct has opened about 70,000 new chequing accounts since Thrive launched seven months ago. Currently, it is opening 300 to 400 new accounts each day, Aceto said.
Peter Routledge, a bank analyst at National Bank Financial in Toronto, pointed out that while the industry is perhaps more competitive than it was a year ago, Canadian banks still enjoy very healthy profits in the domestic market.
“Within a price regime established by an oligopoly, there’s more competition, but the regime is still pretty attractive for the banks,” he said. “They make very attractive returns.”
Still, consumers can find good deals. Even if they want to stick with their financial institution, competing offers can be used as leverage when sitting across the table from the banker.
“My advice is to negotiate with your primary bank,” McVay said.
“There are few lives that go without setbacks. If you’re dealing with your primary bank, it’s more likely they will be accommodative than if all they have is your mortgage or a line of credit.”
Copyright CREA reprinted with permission
Here’s how to get a better rate from your bank
Walter Schlegl of Mississauga cut the interest rate on his line of credit nearly in half.
By Madhavi Acharya-Tom Yew |the Toronto Star Mon Jul 25 2011
In Calgary, Shawn Kearns will save more than $100 a year with his new no-fee chequing account.
How did they do it? They switched banks to get a better deal.
Canada’s big banks are being squeezed by low interest rates and slowing demand for loans and mortgages. That means they’re more willing to compete for your business.
And that means consumers can come out ahead.
Now is the time to shop around for the best interest rate on loans and mortgages, or a better rate on a GIC or savings account. Or maybe you’re after a no-fee chequing account.
Will you ask your longtime banker to match the offer or take your business elsewhere?
“If you’re paying fees at a bank, by all means, it’s a great time to look at no-fee alternatives. It can be a significant savings,” said banking industry consultant David McVay.
Don’t be shy when it comes to asking your banker to match a competing offer on a loan or mortgage, McVay added.
“The market is very competitive and you will be successful in getting a rate match most of the time from your primary financial institution.”
One note of caution: as always, keep an eye on the fine print and ask plenty of questions. If you’re taking advantage of a special offer, when does it expire? Is the interest rate an introductory one, and when might it change? Is it tied to the Bank of Canada’s prime rate, which is expected to start moving up later this year? If there’s a cashback incentive involved, are there any instances when you would be required to pay it back?
Bank profits depend heavily on what’s known as the interest rate spread. These institutions take deposits in the form of chequing and savings accounts that pay little interest and lend out those funds for a longer term, at a higher interest rate, typically a loan or mortgage.
But when the Bank of Canada, like other central banks around the world, brought in historic low interest rates to quell the financial crisis, it changed the equation.
Mortgage rates are at the lowest levels in decades and consumers are clamouring for the best deal they can get, opting for variable-rate mortgages, rather than fixed-rate mortgages that carry a higher interest rate and are more profitable for the bank.
At the same time, the housing market is expected to slow and heavily indebted consumers are focused on paying down their existing debt, rather than taking out new loans.
That has banks trying to win over more customers and make up in volume what they are losing on the spread.
Royal Bank of Canada, for instance, has been running a splashy advertising campaign on its RBC Homeline Plan, which combines a mortgage and home equity line of credit. Right now, the posted rate for the five-year variable-rate mortgage is 2.8 per cent (the posted five-year fixed rate is 5.39 per cent) and the rate on the line of credit would be 3.5 per cent (RBC’s prime rate of 3 per cent plus one-half of a percentage point.)
Walter Schlegl had less than $100,000 on his mortgage when he moved it over to RBC a few weeks ago.
He had been paying 4 per cent on a line of credit at his other bank, about $400 a month in interest. When he found out he qualified for the Homeline Plan, he was able to negotiate an even better deal than the posted rate and fold the entire amount into a new, much lower mortgage rate of 2.3 per cent.
“It was like Christmas came early,” Schlegl said. “You can’t say no to that.”
Schlegl had to pay a $750 penalty to break the other mortgage, but he readily agreed, knowing the savings on his new lower interest rate would quickly make up the difference.
Soon after Schlegl switched, his previous banker called, asking what it would take to win back his business.
“I said it’s too late now. It’s something you should have considered earlier.”
RBC has been offering this interest rate for nearly two years, but recently formalized the campaign, said Marcia Moffat, vice-president of home equity financing at RBC.
“I think we’ve done a better job of telling our story with this campaign than we have in the past,” Moffat said. “The reaction of people who have taken advantage of this has been tremendous.”
The interest rate on the home equity line of credit can change at any time, though there are no plans right now to do so, Moffat said.
At Canadian Imperial Bank of Commerce, the Mortgage Switch Offer combines a five-year fixed mortgage rate of 3.99 per cent along with 2 per cent cash back, which consumers can use to offset mortgage penalties they incur by breaking their current mortgage. The cash can also be used for home improvements or savings, but it must be paid back if a customer breaks his or her CIBC mortgage early.
The mortgage switch was designed to address consumer concerns of reducing their debt load and mitigating the charges that come with breaking mortgage terms, said Colette Delaney, senior vice-president, mortgages and lending, at CIBC Retail Markets.
“We encourage clients to come in and have a conversation with our advisers, look at the competitive offers and how they can leverage those offers to really build the financial plan that’s best for them,” Delaney said.
Tired of paying service fees at one of Canada’s big banks, Shawn Kearns switched to ING Direct Canada’s new online no-fee daily chequing account, dubbed Thrive, about two months ago.
On top of saving the $12 monthly fee from his bank and other fees, he received a $100 bonus for switching his regular payroll deposit to his new account.
Now, he’s moving his savings account, Registered Retirement Savings Plan and Tax-Free Savings Account to ING as well.
“It’s a lot of work to switch banks but it seems worth it,” Kearns said.
“I think Canadians in general need to stop accepting poor service because that’s what we’re used to. You need to just stand up and say, ‘I’m going to take my business elsewhere, where I’m appreciated.’”
ING Direct president and chief executive officer Peter Aceto is skeptical about whether Canada’s banking market is becoming more competitive.
BC Home Sales Edge Lower in July
The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential unit sales in the province rose 12.9 per cent to 6,533 units in July compared to the same month last year. The average MLS® residential price climbed 10 per cent to $540,877 last month compared to July 2010.
"BC home sales edged down 4 per cent from June to July, on a seasonally adjusted basis,” said Cameron Muir, BCREA Chief Economist. “Less frenetic buying activity in Vancouver operated to pull total provincial sales lower."
"The silver lining in the recent global economic uncertainty is that mortgage rates have the potential to reach record lows in the coming weeks as investors flock into bond markets,” added Muir. “The increased affordability and added purchasing power from lower mortgage rates will help bolster housing demand."
Year-to-date, BC residential sales dollar volume increased 16.5 per cent to $28.2 billion, compared to the same period last year. Residential unit sales increased 1 per cent to 48,628 units, while the average MLS® residential price rose 15.3 per cent to $579,645 over the same period.
Copyright BCREA reprinted with permission
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