Market Watch – June 2010 Canada's Hot Resale Housing Market Starting to Cool

Home sales activity in Canada came up short of the record for the month of April and new listings continued to climb, according to statistics released by The Canadian Real Estate Association (CREA). “Many of the sales that would normally have occurred in May were pulled back to April, due to buyers trying to avoid the May 1st transitional implementation date for the HST, as well as new mortgage regulations that came into effect April 19th,” said Ottawa Real Estate Board President Pierre de Varennes. “Buyers knew they would be paying 8% more for all of the service costs associated with a real estate transaction if their closing date was after July 1st, and that it might be more difficult to qualify for financing, so they moved quickly to avoid either situation. In addition, by comparison May 2009 was a record-breaking month as the floodgates opened on pent-up demand following the brief downturn in the market,” he added. In general the Canadian real estate market is moving towards a balanced market where inventory is increasing well to meet demand. Buyers, sellers and REALTORS® can all relax and enter a sales transaction without pressure. The easing trend in national sales activity masks a rising trend in a number of major markets. Real estate is local, so buyers and sellers should engage the services of a REALTOR® for knowledge about housing market trends in their market. For sellers, getting specific advice about home values in their local neighbourhood is crucial in a competitive market. Ontario - Slower May after record-setting April: could it be the HST? Toronto, June 3, 2010 - Greater Toronto REALTORS® reported 9,470 sales through the Multiple Listing Service® (MLS®) in May, representing a 1% dip from May 2009. In comparison to previous years, this was the third highest May sales result on record. “The pace of transactions slowed in May following record-setting sales in February, March and April,” said Toronto Real Estate Board President Tom Lebour. “Buyers who otherwise would have been purchasing a home in May moved more quickly this year, likely to get ahead of mortgage rate hikes.” New listings were up 38% annually to 18,940. The average price for May transactions was $446,593, up 13% compared to the average of $395,609 recorded in May 2009. “The gap between listings and sales has widened, which means there is more choice for buyers,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. “The annual rate of price growth will slow in the second half of 2010, from the current double digit pace into the single digits.” Ottawa, June 3, 2010 - Members of the Ottawa Real Estate Board sold 1,694 residential properties in May through the Board’s Multiple Listing Service® system compared with 1,967 in May 2009, a decrease of 13.9%. Of those sales, 353 were in the condominium property class, while 1,341 were in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, stacked, etc.) which is registered as a condominium, as well as properties which are co-operatives, life leases and timeshares. The residential property class includes all other residential properties. The average sale price of residential properties, including condominiums, sold in May in the Ottawa area was $333,408, an increase of 6.9% over May 2009. The average sale price for a condominium-class property was $246,116, an increase of 6.4% over May 2009. The average sale price of a residential-class property was $356,387, an increase of 8.3% over May 2009. Hamilton, June 4, 2010 –  The Greater Hamilton-Burlington area resale market reported a total of 1,451 units sold in May, an increase of 8.8% over May of last year, according to the Multiple Listing Service® (MLS®) statistics released by the REALTORS® Association of Hamilton-Burlington (RAHB). When compared to April of this year, May’s total unit sales were down 5.5%.  “The market is beginning to settle a bit,” said RAHB President Joe Ferrante. "We saw big highs in both the numbers of listings and sales in March and April, and now we are seeing how things will probably be continuing for the next few months.”  Residential properties sold during May totaled 1,406, which included 1,114 freehold properties and 292 condominiums. Commercial sales for May, including industrial, farm, vacant land and business, totaled 45 units.  The average price of freehold residential properties sold in the month of May was $339,484, an increase of 8.5% over the same month last year and an increase of just under 1% over last month.  In the condominium market, the average price of condominiums in May was $224,707, a decrease of 3% compared to May, 2009 and a decrease of slightly more than 2% from last month. The average sale price reflects the dollar volume of residential sales divided by the number of total residential units sold.  May’s total average residential sale price increased 6% over the same month in 2009. The total number of units listed for sale during May was 2,370, which is almost 33% higher than were listed in the same month in 2009.   “This is still a strong market by any measure,” added Ferrante, “and is performing pretty much as we expected.”

February 2010 - New Mortgage and Purchasing Rules

The Honorable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada's housing market and continue to encourage home ownership for Canadians.
"Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."
The Government will therefore adjust the rules for government-backed insured mortgages as follows:
Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
"There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," said Minister Flaherty. "If some lenders aren't willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families."
These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.

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February 2010

Strategies For First Time Home Buyers
Getting Your Foot in the Door.

Home ownership is the cornerstone of financial independence and security. It may seem a daunting prospect to younger people or first-time buyers, but it is achievable.

Like many would-be homeowners, you may be wondering how you can possibly afford to buy your first home. Even if you think you can’t afford a home, these saving tips and financing strategies can take you there sooner than you think and turn you from a renter into an owner.

Develop a culture of saving
The first priority for you should be to develop a culture of saving. This not only helps you in budgeting and planning for the future, but also to satisfy banks and other lending institutions that you have a clear commitment to save.

Start an automatic saving plan
Saving for a down payment can be a financial challenge but it’s a step forward to owning your dream home. Make saving automatic by setting up an automatic savings plan at your bank to regularly move a specific amount of money directly from your chequing account to a savings account. You’ll be surprised at how much you can save and how quickly the “pay yourself first” approach adds up.  

Borrow from yourself
The federal government’s Home Buyer’s Plan (HBP) lets you borrow from your Registered Retirement Savings Plan (RRSP) to help purchase your first home. You and your partner can each withdraw up to $20,000, provided it’s not locked-in and the money has been in the RRSP for at least 90 days.  You have to repay the loan in installments over the next 15 years to avoid a tax hit.  

Take a holiday from tax
If you open a new Tax-Free Savings Account (TFSA), you won’t pay any tax on earnings, which will help you compound your savings. You can contribute up to $5,000 a year to a TFSA, and save for anything you like, tax-free. 

Review your mortgage options
Once you make the decision to purchase a property, the next choice is the type of loan to suit your budget. The two most common types of loans are the variable interest rate loan and the fixed interest rate loan.  

You can now choose to pay back your mortgage over 25 or 30 years, instead of the traditional 20-year amortization period. This means you will pay more interest over the long term, but you can reduce monthly payments to get into your starter home. You can always change this later, once your income rises and you can pay your mortgage down faster. 

Get into a starter house
Try to be as flexible as possible when choosing your first home. Unless you are status conscious, your first home doesn’t necessarily have to be your dream home. You could settle for a starter home, which you can afford with a small down payment and easy mortgage installments. There are plenty of lower-priced houses out there in need of repair, with some "Do-It-Yourself" projects where you can add more value to the house. Just be careful not to buy a place where the cost of repairs will eat up any profits you might make when you sell.

In just a few years you will build enough equity in your starter home to make it easier for you to sell and move into to your dream home.

Buying your first home is an exciting process. After all, your home could be the largest asset you’ll ever own. Being able to finance most of its cost will take a load off your back in the future.

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