Wow what a crazy week!
Like many of you I had to shop vac my basement on Tuesday morning. Luckily we looking at the next 5 days of wonderful weather to help dry us out.
In addition to black outs, internal MLS system was out for 3 days this week that actually began before the storm on Monday morning. Toronto MLS is now running properly.
The summer market is upon us and I expect to see a relative slow down on both transactions and new inventory coming out on market. Choice properties are still very much going into multiple offers and fetching new price highs.
Also, in my own business I am noticing condos are still moving at a good pace. Like most market drivers, good pricing, location, and product are also attracting competing offers. Well priced downtown units are moving quicker. Yonge and Eglinton still remains quite hot!
In the GTA Market (Download the full report)
Low-Rise Market Conditions Remain Tight in June
July 4, 2013 — Greater Toronto Area REALTORS® reported 9,061 sales through the TorontoMLS system in June 2013 – down by less than one per cent compared to June 2012. Over the same period, new listings were down by a greater rate than sales, suggesting market conditions became tighter.
“The sales picture in the GTA improved markedly in the second quarter of 2013. While the number of transactions was still down compared to 2012, rates of decline were substantially improved compared to the first quarter,” said Toronto Real Estate Board President Dianne Usher.
“As a growing number of homebuyers, many of whom put their purchase on hold due to stricter lending guidelines, now reactivate their search, the expectation is for renewed growth in home sales in the second half of 2013,” added Ms. Usher
The average selling price in June was up by 4.7 per cent year-over-year to $531,374. In line with the 2013 norm, June price growth was driven by the single-detached and semi-detached market segments, particularly in the City of Toronto. Over the same time period, average condominium apartment selling prices remained in line with 2012 levels.
“The short supply of low-rise home types in many parts of the GTA relative to the number of households looking to buy continued to prompt strong upward pressure on selling prices of singles and semis,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. “We have also seen enough buyers in the better-supplied condo apartment market to provide support for selling prices at current levels.”
More Mortgage Rule Changes (Provided by Lee Wellbanks)
It started a year ago July with an announcement by the Minister of Finance that mortgage rules were about to change immediately to cool off what was thought to be an overheated housing market with stricter mortgage rules.
Last November additional changes took effect. Today, another wave of regulations are about to grip the mortgage market with the recent tabling of new guidelines from Canada Mortgage and Housing Corporation (CMHC) that could take effect later this year.
The most significant issue targets personal debt which will take primacy over the amount of equity in a deal. Regardless of down payment, debt ratios must adhere to the rules or the deal will not pass muster. For a typical borrower debt ratios will be a key indicator to determine if the mortgage is approved.
The surgical focus on debt is meant to reinforce the importance of the borrower’s ability to service the mortgage, together with pre-existing debt and carrying costs, which is the new direction from CMHC. As well, if and when mortgage rates increase, these conservative changes will ensure that mortgage renewals will not create an overwhelming burden due to higher mortgage payments.
The new guidelines include:
- Variable Income: cannot exceed average of past two years for items like bonuses, investment income, tips or seasonal employment.
- Guarantor’s Income: cannot be used to qualify a mortgage unless the guarantor occupies the home and is a spouse or common-law partner of the borrower.
- Unsecured Lines of Credit and Credit Cards: no less than 3% of outstanding balance must be included in monthly debt payments with interest-only payments in a line of credit no longer considered acceptable.
- Secured Line of Credit: for debt calculations, must use ‘the equivalent’ of a payment based on the outstanding balance, amortized over 25-years.
- Heating Costs: as a critical carrying cost, new rules require actual heating cost records to be used which will double or triple the heating cost calculations in the past.
- Rental Income: if borrower owns other non-owner occupied rental property, the principal, interest, property taxes and heat must either be (a) deducted from gross rent to establish net rental income or (b) included in ‘other debt obligations’ in the Total Debt Service calculation.
These changes will definitely make mortgage approvals more difficult and, based on the direction from CMHC, the policies from all lenders will have to be adjusted accordingly. I’d expect the changes to both secured and unsecured lines of credit to have the biggest impact as we can often use much lower payments for qualifying. Most likely to hurt first time buyer’s that are carrying a lot debt on interest only lines of credit.
At present, Genworth has commented that they don’t plan to follow these changes but there is talk of the government enforcing these changes across all the insurers.
Have an amazing sunny weekend!