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.”

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.

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.

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.

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.

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.

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.

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.

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.

 By Madhavi Acharya-Tom Yew |the Toronto Star Mon Jul 25 2011

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

Choosing the best mortgage

Selecting the mortgage term that’s right for you can be a challenging proposition for even the savviest of homebuyers, as terms typically range from six months up to 10 years.

By understanding mortgage terms and what they mean in dollars and sense, you can save the most money and choose the term that is best suited to your specific needs.

The first consideration when comparing various mortgage terms is to understand that a longer term generally means a higher corresponding interest rate. And, a shorter term generally means a lower corresponding interest rate. While this generalization may lead you to believe that a shorter term is always the preferred option, this isn’t always the case. Sometimes there are other factors – either in the financial markets or in your own life – that you will also have to take into consideration when selecting the length of your mortgage term.

If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer mortgage term, such as five or 10 years, so that you can ensure that you will be able to afford your mortgage payments should interest rates increase.

By the end of a five- or 10-year mortgage term, most buyers are in a better financial situation, have a lower outstanding principal balance and, should interest rates have risen throughout the course of your term, will be able to afford higher mortgage payments.

If you’re shopping for a mortgage for an investment property, you will likely want to consider choosing a longer mortgage term – depending, of course, on your overall plan. This will allow you to know that the mortgage payments on the property will be steady for a long time and enable you to more accurately project your future income from the property.

As well, if you know you will not be staying in the same home for the next five or 10 years, opting for a shorter term can save you significant fees when it comes to early payout penalties.

Choosing the right mortgage term is a unique decision for each individual. By understanding your personal financial situation and your tolerance for risk, your mortgage broker or lender can assist you in choosing the mortgage term that will work best for your situation.

Avoid overpricing your home

It’s essential that you price your home as accurately as possible in any market to help ensure it sells at a reasonable price within your desired timeframe.

Sellers can often be reluctant to price their home in line with the marketplace as they feel they may be giving away too much of their home equity. The reality is, however, that pricing your home correctly from the start will benefit any seller in the long run.

Here are some of the reasons why pricing your home at the current market value is extremely important:

• Potential buyers may not look at your home if they believe it’s out of their price range.

Buyers comparison shop when considering a home purchase. When a buyer compares an overpriced home versus one that is priced at market value, it will likely convince them to place an offer on the well-priced property instead of yours.

• Properties that have been on the market for extended periods often come under scrutiny from buyers who question why the properties have yet to sell. Perception is a key factor in how a seller’s home is viewed by the average homebuyer.

• Real estate agents may skip over showing an over-priced home as they may believe the seller has little motivation to actually sell the property. Buyers’ agents are always keen on getting their clients through the doors of a well-priced home first in order to give their clients first crack at getting the home of their dreams.

• The longer a listing stagnates on the market, the more likely it will sell for less than had it been priced right in the first place.

The key to pricing your home to sell for the most amount of money in the shortest period of time is to work with a local real estate professional. We know how to do an accurate market comparison and arrive at an asking price that will offer some room for negotiation, but not scare off potential buyers.

As always, if you have any questions about buying or selling a home, your answers are just a phone call or e-mail away!

Bank of Canada holds key rate at 1%

July 19, 2011

Signals rate hike may be on the horizon

The Bank of Canada held its trend-setting Bank Rate at 1.25 per cent on June 19th, 2011. This marks the seventh consecutive policy decision in which interest rates have been kept on hold.

The Bank has been warning for some time that interest rates will ultimately have to rise, but hinted more strongly in this most recent announcement that a hike was coming by removing the word “eventually” as to when that might happen.

The Bank said, “To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn, consistent with achieving the 2 per cent inflation target.”

The Bank noted, however, that downside risks to the outlook remain elevated, with debt woes on both sides of the Atlantic, and that the outlook for a gradually improving domestic picture assumes these issues will be contained. As regards the European situation the Bank said, “The Bank’s projection assumes that authorities are able to contain the ongoing European sovereign debt crisis, although there are clear risks around this outcome.”

The Bank’s forcast for economic growth in Canada was little changed from its April forecast. The Bank now expects the economy will grow 2.8 per cent this year. This was revised slightly from the previous forecast of 2.9 per cent. The Bank kept its 2012 and 2013 growth forecasts unchanged at 2.6per cent and 2.1 per cent respectively.

Also unchanged were expectations that the output gap, a measure the spare capacity in the economy, would be closed by the middle of next year, and that headline inflation would remain above 3 per cent in the near term due to temporary factors, namely higher food and energy prices.

The core rate of inflation, which strips out those volatile items, hit 1.8 per cent in May owing to “persistent strength in the prices of some services.” The Bank now expects the core rate to “remain around 2 per cent over the projection horizon.”

As of July 19th, 2011, the advertised five-year lending rate stood at 5.54 per cent. This is down 0.05 percentage points from 5.59 per cent on May 31st, when the Bank made its previous policy interest rate announcement.

The Bank will make its next scheduled rate announcement on September 7, 2011, and many experts had already been forecasting a rate hike at that time. Given the slight change in tone in this most recent announcement, bets for a September hike will likely be increased further. That said, a lot could happen between then and now, particularly given the magnitude of current downside risks.

Copyright CREA reprinted with permission

Canadian Home Sales Pick Up In June

According to statistics released today by The Canadian Real Estate Association (CREA), home sales activity over MLS® Systems of Canadian real estate Boards climbed in June 2011 compared to May.

Highlights:

• Sales activity climbed from May to June, with a big year-over-year gain reflecting falling demand in June 2010.

• Year-to-date sales remain in line with the ten-year average.

• The number of newly listed homes also rose from May to June.

• National housing market remains firmly entrenched in balanced territory.

• National average price still being skewed upward by the value of sales in expensive Vancouver neighbourhoods, with price gains in other markets providing additional loft.

Seasonally adjusted national home sales activity rose 2.6 per cent in June 2011 compared to the previous month. Two-thirds of local markets posted month-over-month gains in June.

Activity remained stable in Toronto while declining slightly in Vancouver and the Fraser Valley. Major markets that saw gains compared to May included Calgary, Montreal, Ottawa, London, Hamilton, and Victoria.

“Canadian housing demand remains resilient, thanks to low interest rates, job growth, and home buyer confidence in the economy,” said Gary Morse, CREA’s President. “That said, local housing market trends often differ from national trends, so buyers and sellers should consult their local REALTOR® to understand how the housing market is shaping up where they live.”

Actual (not seasonally adjusted) activity came in 10.8 per cent above June 2010 levels, but this largely reflects falling sales activity last June. This was also the case for the year-over-year increase in activity in May. Year-over-year comparisons in July may also be stretched by falling activity one year ago, since July 2010 marked the low point for activity last year.

“The Canadian housing sector remains on a solid footing,” said Gregory Klump, CREA’s Chief Economist. “The rise in monthly home sales activity at the end of the second quarter, upbeat business sentiment and hiring intentions, and signs that the Bank of Canada is in no rush to raise interest rates bode well for home sales activity and prices going into the second half of 2011.”

National sales activity was down 4.7 per cent in the second quarter compared to levels in the first quarter. This in part reflects how new mortgage rules announced in January and implemented at the end of March pulled sales forward into the first quarter at the expense of sales activity in April and May. Mortgage interest rates also rose in April and May, which may have moved some home buyers to the sidelines.

A total of 245,170 homes have traded hands via Canadian MLS® Systems in the first half of 2011. Year-to-date sales activity is running in line with the ten-year average, with monthly sales activity having come close to the ten-year average from January to June this year (Chart A). This highlights the relative stability of demand this year compared to the past three years, when activity swung significantly above and below average monthly levels.

The number of newly listed homes also rose nationally by 1.8 per cent from May to June. Gains in Toronto, Vancouver, and Ottawa contributed most to the national increase. The rise in new listings will be especially welcome news for home buyers in Toronto, where listings have been in short supply relative to demand this year.

The national housing market remains firmly planted in balanced territory. The national sales-to-new listings ratio, a measure of market balance, stood at 52.6 per cent in June, little changed from 52.2 per cent in May.

About 60 per cent of local housing markets in Canada were balanced in June. Almost half of the remainder can be classified as sellers’ markets, based on a sales-to-new listings ratio above 60 per cent.

The seasonally adjusted number of months of inventory stood at six months at the end of June on a national basis, holding steady compared to May. 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 national average price for homes sold in June 2011 was $372,700, up 8.7 per cent from the same month last year. The national average price is becoming less affected by the overall number of sales in some expensive Vancouver neighbourhoods, but is still being pitched higher by the value of those sales. Activity in these neighbourhoods has eased from levels reported in February and March, while sales elsewhere across Canada have risen in line with normal seasonal trends. As a result, property sales above $1 million in Vancouver West, West Vancouver, and Richmond now account for a smaller but still elevated share of national activity.

While the effect of Vancouver activity on the national average price has begun to wane, broadly based price gains in other housing markets are holding the national average price aloft. Close to 80 per cent of local markets posted year-over-year average price gains in June. This includes Toronto, where price gains reflect a tight balance between supply and demand.

Copyright BCREA reprinted with permission