Good morning everyone;
I hope your faces still have heart shaped eyes from Valentine’s day and big smiles from the family day weekend. Spring seems to be just around the corner and with that the real estate market will take full flight.
I notice that my own pace to be picking up as I meet with clients to discuss the preparation of bringing homes to markets. My buying clients have been very patient waiting for some decent inventory to become available.
A very large 900 sqft 1 bedroom and bath condo at Scartlett Rd and Edenbridge for just $289,000
Call/email me for more details!
New Mortgage rules kicked in this week.
Home sales over $500,000 now require a minimum 10% down payment for any portion of the purchase price over the 500k mark.
E.g . Home purchase price of $750,000
- 5% of the first 500k = $25,000
- 10% of the remaining 250k is an additional $25,000.
- Total down payment required is $50,000 (plus closing costs – land transfer taxes, legal fees, title insurance etc.)
- A $1 million home purchase would require $75,000 down payment plus closing cost.
I have stated before that the new lending rules are a GOOD thing. It helps put the market on a more stable footing as “fringe buyers” need to make sure that the dream of home ownership does not become a nightmare if their financial situation changes even slightly for the worse.
In my opinion the 2016 Toronto market will remain robust as there is a supply shortage. So instead of having 15 offers on any given property you may get 8 or 9 stronger buyers competing. Interest rates and resale housing stocks are low.
This is a good soft move by the federal government. I expect more slight tightening of lending rules to happen in the future.
The headline below would indicate a doom and gloom scenario…”Party’s Over” but the article is actually quite reasonable. Funny how the headline misleads.
Party’s Over For Toronto, Vancouver Housing Markets: TD
Huffington Post Canada Daniel Tencer 2016-02-11
The party will end in the Toronto and Vancouver housing markets this year, TD Bank says in a new report.
It’s a party many say has gotten too rowdy: Home prices in Toronto are up 14 per cent in a year, while in Vancouver they’re up nearly 20 per cent, leading to reports of “shadow flipping” and other harbingers of housing-market trouble.
TD Bank economist Diana Petramala says there won’t be a crash — but neither will the party continue.
Thanks to an “upward drift” in mortgage rates, home sales in Canada’s two red-hot housing markets will cool this year — albeit from very high levels seen in 2015.
“The lofty activity last year has likely left these two markets more vulnerable to even a gradual increase in interest rates and regulatory rule changes,” economist Diana Petramala wrote.
TD bank forecasts home sales in Toronto and Vancouver will decline this year from very high levels. (Chart: TD Bank)
Mortgage rates are moving upward because of “a squeeze on bank funding costs amid tighter financial conditions,” Petramala wrote, adding some banks have already raised their mortgage rates by some 0.3 percentage points since December.
That will slow the pace of home sales in Toronto and Vancouver. Home price growth will slow to 4 per cent in Toronto this year, from 14 per cent over the past year, TD predicts. Prices in Vancouver will rise 7 per cent this year, from a near 20-per-cent growth pace over the past year.
In 2017, TD sees house prices coming down in both cities, with a “moderate” decline in house prices in Toronto, and a 2-per-cent decline in Vancouver.
But those expecting a housing crash “are likely to be disappointed,” TD says, because there is still plenty holding up those housing markets.
The cities are seeing “a sharp uptick in population” as people leave regions with rising unemployment rates, such as Alberta. Additionally, the loonie’s decline has made Canadian real estate less expensive for foreigners, and foreign investment will remain strong, TD Bank says.
Homes under construction in Calgary, Thursday June 26, 2014. Alberta is building too many homes, and that will keep prices falling, TD Bank says. (Canadian Press photo)
Three Housing Markets
Petramala says Canada in essence has three housing markets right now: “The booming” (Toronto and Vancouver), “the struggling” (cities in Alberta and Saskatchewan), and “the stable” (the rest of Canada).
Alberta’s population isn’t growing like it was during the oil boom years, and the province has too much new housing coming online in the next few years, Petramala’s report says. Calgary home prices are expected to fall 10 per cent this year, with Edmonton prices falling 8 per cent.
The “rest of Canada,” as the report puts it, has seen modest sales and price growth, and isn’t as vulnerable to mortgage rate hikes.
These markets “will likely feel less of a pinch” as mortgage rates rise, Petramala wrote.
Rates Hikes May Be Further Off Than Thought
While major Canadian lenders like CIBC, Royal Bank and TD have all raised mortgage rates in recent months, some say further upward pressure on interest rates won’t come as soon as the lenders expect. With stock markets in what now looks like a prolonged slump, the U.S. Federal Reserve may hold off on further interest-rate hikes.
And some mortgage lenders are still pushing rates to record lows, such as Ontario’s Meridian Credit Union, which last week launched a 1.69-per-cent one-year fixed-rate mortgage.
Moving mortgage between banks can cost you
OTTAWA — Homebuyers tend to shop around for the best mortgage rate they can find when first purchasing a property.
But when renewal time comes around, chasing the best rate might not save enough to offset the costs of moving lenders.
Frank Napolitano of Mortgage Brokers Ottawa says the cost of moving a mortgage at renewal time will depend on the type it is.
For example, on a standard mortgage, the costs of moving may be minimal and the lender who is taking over the loan may be willing to absorb them.
However, on a collateral mortgage, the fees will be more.
A standard mortgage is registered for the actual amount of the loan, while a collateral mortgage allows a home to be used as security for more than one loan. The downside is that changing lenders with a collateral mortgage entails paying both discharge fees and new registration fees.
“With a collateral mortgage you can’t just move the mortgage from one institution to another without incurring either legal fees or title insurance fees,” Napolitano says.
“Therefore the interest rate savings have to be in place in order for you to make it worthwhile to move from one institution to another.”
Napolitano estimates the costs to move a collateral mortgage can be close to $1,000 after they are all added up.
If you have a home equity line of credit in addition to your mortgage, you very likely have a collateral mortgage.
But even those who don’t may still have one and it may be necessary to read the fine print on the mortgage or to call the lender to find out and determine what the costs of moving may be.
To know if it is worthwhile to move lenders, you need to calculate what the savings might be compared with the cost of moving.
“If its five or 10 basis points, the savings may not be there,” Napolitano says.
“If we’re talking a quarter of a percentage point, the likelihood is there that you’re better off to move it from one institution to another.”
Barry Gollom, vice-president for mortgages and lending at CIBC, says while collateral mortgages can be more expensive to switch between lenders they offer flexibility in other ways.
Collateral charges allow you to use the home as the basis for more than one loan and borrow more in the future more easily.
“But what you can’t do, as rule, is do an assignment or transfer of a collateral charge from one institution to another institution,” Gollom said.
Gollom adds that whatever a mortgage borrower does has to make sense in the context of their overall financial plan.
“In the months leading up to the renewal or maturity date, it is a great opportunity for the client, for the individual to meet with their financial adviser and look at their whole financial plan,” he said.
Real estate concerns grow in Toronto, Vancouver
OTTAWA — The Canadian Real Estate Association says sales of existing homes rose by eight per cent last month compared to a year ago, while the national average home price soared 17 per cent.
CREA says the national average home price was $470,297 in January, fuelled largely by price gains in greater Vancouver and greater Toronto.
However, excluding the piping hot markets of Ontario and British Columbia, the average sale price actually edged lower by 0.3 per cent from a year ago to $286,911.
“Canada’s housing market continued to exhibit some radical regional differences in January, consistent with the underlying economic picture,” BMO senior economist Robert Kavcic wrote.
“Vancouver’s market is drum tight, with an almost unheard of 91 per cent sales-to-new listings ratio (in other words, almost every new listing is getting absorbed within the month as record sales meet average growth in new listings).
“On the flip side, sales and prices continue to retrench in markets exposed to oil prices. Sales in Calgary are now down more than 40 per cent from their 2014 high, but prices have corrected a modest 3 per cent to date.”
On a month-to-month, seasonally adjusted basis, CREA says national home sales rose 0.5 per cent in January, compared to December of last year.
Meanwhile, the number of new listings on the Multiple Listing Service declined by 4.9 per cent in January, compared to December.
Though he expects the market to be “more of the same” for the rest of this year, Kavcic noted that “the explosion in price gains since the Bank of Canada began cutting rates last year might warrant some real concern down the road.”
TD economist Diana Petramala said Toronto and Vancouver “are expected to be well supported by foreign investment and positive net interprovincial migration flows this year, but still ease off their currently elevated levels.”
Petramala predicts house prices will decline in those two hot markets next year. And “every month of double-digit home price growth raises the risk of a deeper home price correction down the road,” she added in a client note Tuesday.
CREA chief economist Gregory Klump said single-family homes remained in high demand in Toronto and Vancouver last month, while a number of Alberta markets continued to see ample supply while potential buyers sat on the sidelines.
“Tighter mortgage regulations that take effect in February may shrink the pool of prospective homebuyers who qualify for mortgage financing and cause national sales activity to ease in the months ahead,” Klump said.
New federal rules requiring Canadians to put down larger down payments on homes that cost between $500,000 and $1 million took effect Monday.
— The Canadian Press, with files from The Huffington Post Canada.
Home Construction Blog # 14 – Inside Job
Well, work is progressing slowly but it is progressing. The cold weather makes things difficult as I do not have continuous heat running in the home. For the last few bone chilling days I have had to rent propane tanks and salamanders (burners) to run in the basement to protect the footings from freezing and buckling. The next 7 day forecast seems to be downright balmy in comparison to the -23 degrees we just went through.
Where are we at?
Currently The HVAC duct work system has been installed and the plumbing is about 40% complete. The venting is almost complete and today we began running the supply lines for the hot and cold water. When the time comes we will be installing tankless water heaters as opposed to the the traditional tank system. We hope to gain some efficiencies and cost savings in the long run.
Last week we had to dig up another 2’ wide, 4’ deep trench (about 130 feet long) in the front to run yard to run the hydro service underground and bring it to the house. Over the next 10-15 days I should have electrical power in the home (Energized). Next week the inside electrical wiring will commence and we will be running wire to all the rooms in the home. I expect this to take about 3-4 weeks. This will also include the running of audio wire, video cables, Category 5 wiring for internet, video and security.
While the work progresses inside both Lara and I are running around (physically and online) sourcing out the finishes. I hope to finalize the order of our stair cases over the next 2 days as it takes about 6-8 weeks to make them and have them installed.
We still need a front door and by next week this should be ordered as well (6-8 weeks).
We have already selected all of our bathroom fixtures, tubs, vanities. We went to one retailer (Gingers – which I’m told happens to be the most expensive place in the city) and tried to select lower cost fixtures that we still liked. I asked the salesperson to give me a total and without hesitation (and with a straight face) he said “About $45,000” – I literally laughed! Keep in mind that’s 45k for faucets, shower heads/handles and such. NOPE can’t do that! I joked with Lara that we can get nicer spray bottles and just squirt each other. We ended up sourcing out a nicer plumbing fixture line that was significantly less expensive. All the fixtures are – Solid brass construction, nice finishes yada yada yada – for around 8k (That’s for the whole house). Not inexpensive for us but have been told by many that we did well without sacrificing quality, form or function.
In my next communication I will include some interior pics of the work progression . Still a long way to go!
Cheers and have an amazing weekend and following week,