The Bower Blog

Bank Rates

Good afternoon,

As expected, the Bank of Canada kept their overnight rate unchanged at 0.25% (meaning the prime lending rate remains unchanged at 2.25%).    With the economy starting to show some signs of recovery and with the real estate market as strong as it is, the Bank of Canada would have likely raised the rate this morning if it were not for our strong Canadian dollar.   Raising rates would send our dollar higher, therefore doing damage to our economy.  As long as the Canadian dollar remains high, we can expect the prime rate to stay fairly low and there is some speculation now that the prime rate may be left unchanged beyond the BOC's commitment to hold it to mid 2010.   

With most major lenders pumping their 5 year fixed mortgage rates up by as much as 35 basis points last week, there are still many rate deals available for your clients.   It still amazes me just how many homebuyers go to their bank and accept whatever rate they are quoted without actually taking a look at other options that could save them thousands of dollars.  For example, most banks are offering a 'discounted' 5 year fixed rate of around 4.35%.  With a mortgage amount of $300,000 and an amortization of 35 years, the monthly payment would be $1,384.88 at 4.35%   Let's now compare this with the lowest available market rate for a five year fixed, which is 3.68%.  For the exact same mortgage amount, your monthly payments would only be $1,266.45 saving the client $118.43 per month or a whopping $7,105.80 over the 5 year term!    Now, this 3.68% rate is for closings within 30 days only, and comes with limited prepayment privileges of 5% per year, so it may not be for everyone, however over 90% of homeowners never take advantage of their prepayment options anyway.  With a 5% prepayment privilege, they can still pay up to $15,000 toward their mortgage without penalty using the above example, so does it really make sense for them to PAY just to have the OPTION to pay up to $60,000 more per year towards their mortgage?   While some people may have that kind of disposable income to throw around, I would say that most don't.   

Today's lowest mortgage rates:

1 year 3.68

2 year 3.20

3 year  3.50

4 year 3.85

5 year 3.68  (quick close, no frills)

5 year  3.84  (full prepayment options, 90 day close)

5 year ARM 2.15  (prime -0.10)

Per:  Paul Meredith, City Can Financial

 

 

Cheryl Bower

www.CherylBower.com

RE/MAX Hallmark Realty Ltd.

Toronto helps lead surge in existing home sales

 

Existing home sales across Canada climbed to the highest level of any third quarter on record, according to figures released today by the Canadian Real Estate Association.

Year over year increases in Toronto at 28 per cent and Vancouver at 124 per cent were the main reasons for the upswing.

The group reported 135,182 sales from July to September, up 18 per cent from the same time in 2008, and representing the largest such increase since 2002.

"Low interest rates, rebounding consumer confidence and an improving overall sense of economic security continue to draw homebuyers to the housing market," said CREA president Dale Ripplinger.

Vancouver, Toronto and Calgary were the three most active markets.

The national average price also rose by 11 per cent to $327,736 from the same quarter last year.

An increase in sales activity and fewer new listings are drawing down inventories.

However, on a seasonally adjusted basis the supply of homes edged up slightly in the third quarter after four consecutive quarterly declines.

"While the small rise in seasonally adjusted new listings suggests that the number of homes coming onto the market may soon begin to edge higher, the number of new listings remains well down from year ago levels," said the board.

The strong third quarter was capped by strong resale activity in September, up by 17 per cent, and a new record for the month.

This is the fourth consecutive increase from year-ago levels.

"Headline average price increases over the rest of the year are expected to prompt sellers to return to the market after having retreated to the sidelines late last year and earlier this year," said CREA chief economist Gregory Klump.

"An increase in new listings will help keep a lid on price increases."

thestar.com

Toronto housing market stays hot

October 8, 2009

Tony Wong
BUSINESS REPORTER

The Toronto housing market is on the way to a recovery, although an undersupply of homes is leading to bidding wars, says a report by Royal LePage released today.

The activity in the existing homes market is spilling over into the new homes sector, where housing starts surged in September by a seasonally adjusted and annualized 25 per cent from a month earlier, according to figures also released today by the Canada Mortgage and Housing Corporation.

"The sharp recovery in housing demand is beginning to work its way into the residential construction sector in Toronto," said Shaun Hildebrand, CMHC senior market analyst.

Both single-detached homes and multiple-family homes, which includes condominiums, showed an improvement. A home is considered "started" once the concrete foundations are poured. Starts for single detached homes, considered a key segment rose to their highest level of the year.

"Residential construction will be firing on all cylinders as we head into 2010," said the CMHC.

The Toronto uptick broke the national trend, which saw starts down by 4.6 per cent across the country.

In a separate report by Royal Lepage, Toronto home prices for detached homes and bungalows are up slightly from a year ago, but condominium prices are down.

The price of an average existing bungalow increased barely, to 0.8 per cent or $436,857 compared to the same quarter last year.

A standard two-storey home is up in value to $561,725. However, average prices for a condominium dipped by 3 per cent to $300,526 according to the real estate company.

"The economic recession interrupted the flow of the real estate cycle, but it is essentially back on track," said Phil Soper, president and CEO of Royal LePage. "There is an illusion of a boom in the market, but in fact what we are experiencing is the end of a normal, short term correction."

thestar.com

 

Cheryl Bower

www.CherylBower.com

RE/MAX Hallmark Realty ltd.

Housing Rebounds 2009/2010

Housing Activity to Rebound in Second Half of 2009 and in 2010

OTTAWA, September 3, 2009 — Housing starts are expected to rebound in the second half of 2009 and will reach 141,900 for the year. Starts will increase to 150,300 for 2010, according to Canada Mortgage and Housing Corporation’s (CMHC) third quarter Housing Market Outlook, Canada Edition* report. The overall forecast totals for housing starts remain unchanged from the second quarter release.

 

"Economic uncertainty and lower levels of employment tempered new housing construction in the first half of this year", said Bob Dugan, Chief Economist for CMHC. "In the second half of 2009 and in 2010, we expect housing markets across Canada to strengthen."

Improving activity on the resale market and lower inventory levels in both the new and existing home markets are expected to prompt builders to increase residential construction.

Existing home sales, as measured by the Multiple Listing Service (MLS®)1, have rebounded strongly since January and will reach 420,700 units in 2009 and remain close to that level at 419,400 units in 2010.

CMHC Report

 

Cheryl Bower

www.CherylBower.com

RE/MAX Hallmark Realty Ltd.

Bricks and Mortar Report

Canadian housing markets buck recession and trend upwards, says RE/MAX Mississauga, Ontario (September 24, 2009) - With the worst of the recession over, residential real estate markets in major Canadian centres are poised for growth in the final quarter of 2009, according to a report released today by RE/MAX. The RE/MAX Bricks and Mortar Report found the bounce back that began in early Spring has made this recession one of the shortest on record for real estate. Low interest rates, pent-up demand, and improved affordability levels have all played a role in the recovery now well-underway. Percentage increases in sales from January to August 2009 were led by Vancouver, (up a substantial 14 per cent to 23,158), Victoria (up 7.4 per cent to 5,266), Edmonton (up 6.2 per cent to 13,691), Regina (up five per cent to 2,597), Ottawa (up 2.4 per cent to 10,830) and Toronto (up 1.8 per cent to 58,421). Housing values are already ahead of record-breaking 2008 levels in seven of the 11 markets surveyed, including Newfoundland-Labrador (18.1 per cent year to $203,584), Regina (6.4 per cent to $244,088), Halifax-Dartmouth (3.5 per cent to $239,633), Winnipeg (3.5 per cent to $207,006), Ottawa (3.3 per cent to $301,684), and Toronto (up 0.3 per cent to $385,978). Nationally, average price hovers at $312,585, up 0.5 per cent over one year ago. "Markets are heating up across the country," says Michael Polzler, Executive Vice President, RE/MAX Ontario-Atlantic Canada. "Purchasers are clearly taking advantage of affordable prices and rock bottom interest rates. Those who missed the boat in years past have found that sitting on the sidelines can be a costly move. Prices are on the upswing and inventory levels are tightening, so the push toward homeownership is expected to continue throughout the Fall and possibly into early 2010."

Cheryl Bower

www.CherylBower.com

RE/MAX Hallmark Realty Ltd.

New Harmonized Sales Tax

The new harmonized sales tax being proposed in British Columbia and Ontario may end up being an overall wash for some consumers but anyone buying a new house is about to get dinged.
The HST met with some resistance from the real-estate sector in Canada's largest province when it was first proposed earlier this year but the government agreed to some concessions.

New homes in Ontario currently just face a 5% goods-and-services tax, which builders have buried in the price of the home since the tax was introduced 19 years ago. Starting on July 1 of next year, new houses would face a combined HST which would be 13% in Ontario.
With new-home sales slowing after a seven-year bull run, the last thing the industry needed was something that would curtail activity further.
There was a sigh of relief when the government agreed to grandfather from the tax any deals signed prior to the date the announcement was made - June 18, 2009. Deals closed before July 1, 2010 would also not face the tax.
Everybody else was in trouble. So the government came up with an exemption from the added tax on the first $400,000 of any new home, meaning consumers outside of Toronto were for the most part unaffected.
Despite the government's "generosity," about 40% of people buying a new home in Toronto are going to face a major tax hit. That's the percentage of new homes that sell for more than $400,000.

On a $500,000 home in Toronto, the HST will mean $6,000 in new taxes. Here's how it works. The HST means an additional $40,000 in new taxes on that home, based on 8%. Builders get an estimated 2% tax credit on supplies, lowering the bill to $30,000. Minus a $24,000 tax break on the first $400,000 and you get to $6,000.
So who is going to pay for that $6,000? As the price goes up, the tax bill gets higher. It's $36,000 for a $1-million home.

"I don't know this for a fact but I don't think any builder will make [the HST] an extra closing cost because they imbedded the GST for so long," says Stephen Dupuis, chief executive of the Toronto-based Building & Industry Land Development Association.
Maybe that extra tax is not added on to the sticker price, but at some point the consumer is going to pay. Maybe through a higher price, cheaper materials or fewer finishing’s thrown in.

"A tax like this is going to be passed on to the consumer over time and the consumer is going to lose," says Brian Johnston, president of Monarch Corp., one of Toronto's largest home builders.

Economist Benjamin Tal, of CIBC World Markets, predicts the tax will have an impact on housing sales. "It's not like something you can brush under the carpet," says Mr. Tal. "There will be reduced demand."
He predicts the industry will build more houses without all the finishing’s. That will leave the consumer to do work on the black market with contractors to avoid the HST. That's what happened in the Maritimes, where the HST has been in play for years, said Mr. Tal.
"This will give a boost to the under-the-table transactions. Is that an optimum thing?" says Mr. Tal.

It's no wonder British Columbia's housing industry is fighting the HST tooth and nail. It's not interested in the Ontario compromise of an exemption on the first $400,000 of a home. B.C will provide a $20,000 tax break on the first $400,000 of a purchase, the amount being lower because the province has a 7% sales tax.
"There is no single family home here you can buy at that price," says Peter Simpson, chief executive of the Greater Vancouver Home Builders' Association. "They've taken what happened in Ontario and thought it would fly here. They underestimated the pushback on HST out here."
The provincial budget released this past week gave few hints the province might back down on taxing the industry, other than a throwaway line that it would work with industry groups to minimize the impact of the HST.
Mr. Simpson says he's not interested in any compromise, including any compromise that might grandfather housing now under construction from the new tax.
"I won't even talk about that. It will mean we've given in and we're not," says Mr. Simpson.
Good luck. Something tells me the cost of housing in B.C. is going to rise.

(excert from Kelowna newspaper)

 Cheryl Bower

www.CherylBower.com

RE/MAX Hallmark Realty Ltd.

REAL ESTATE

Housing market on 'robust' rebound

 

 The penthouse at the Prince Arthur building in Toronto's upscale Yorkville neighbourhood is a coveted spot.

At just under 3,200 square feet, it rivals the size of some houses and comes with panoramic views of the city.

A local Toronto buyer obviously thought it was special enough to pay $3.2 million for the property last month in one of the biggest condominium deals this year.

"Everyone is really surprised at how strong this market is," said Sultan Realty Inc. broker Ken Ho, who listed the home.

Earlier this year, Ho worried that the housing market would be dismal.

"The phone didn't ring," he said. "There were no sales. It was dead, dead, dead. Now I'm selling $3 million condos."

Yesterday the Toronto Real Estate Board reported 8,035 sales in August, up 27 per cent from last year.

Thanks to some outsized sales such as Ho's listing, average prices were also up by 6 per cent to $387,921.

After four months of plummeting sales, the market started to flatten and turn around in May, resulting in four straight months of increases.

"Those are very robust numbers," said Toronto housing analyst Will Dunning. "Part of this seems to be fuelled by the fact that some buyers fear interest rates will go higher next year and are buying now rather than taking a chance on next year."

Interest rates at historical lows have resulted in greater affordability for buyers. Consumer confidence has also bounced back from the lows of last winter as stock markets came back to life.

The August sales total came close to toppling the record of 8,059 set at the peak of the market in 2007. Year-to-date sales were also up 2 per cent over sales of homes for the first eight months of last year.

Most of that spike is due to first-time home buyers. But Ho's luxury condo sale has raised some eyebrows.

"Is the luxury market back? No, I don't think so," Ho said. "But there is still a market out there for special properties, and there is still a lot of money out there if you give them a reason to buy."

Ho said the property was on the market for about a week before the buyer decided to put in an offer. The property was originally listed at $3.5 million.

The sale price of $3.2 million means the buyer paid $1,000 per square foot for his new home. That's a price level that not many existing condo properties have broken this year. Average resale condo prices in the Toronto area are $326 per square foot. New condo prices are typically higher, at $474 per square foot.

The remarkable turnaround has some analysts going back to their spreadsheets and rewriting their forecasts upward for the year.

Today the Canada Mortgage and Housing Corp. is expected to release upgraded forecasts for the year. Last week the Canadian Real Estate Association said it now expects prices nationally to increase this year. Previous forecasts were for a 5 per cent decline.

One reason has been a lack of active listings. Listings were down by 37 per cent in the Toronto market compared to the same time last year.

However, some analysts feel that the strong sales this year are pulling buyers forward and are forecasting a slower market in 2010.

Analysts also warn that higher interest rates in the future could put a damper on demand.

Unemployment rates remain high, which will put a crimp in demand.

But so far, none of those arguments have managed to convince buyers to stay out of the market.

Toronto Star

 

Cheryl Bower

www.CherylBower.com

RE/MAX Hallmark Realty Ltd.

Recession hit homebuyers where they live

August 13, 2009 Tony Wong
BUSINESS REPORTER

 

The recession has had a significant impact on customer satisfaction when it comes to buying a new home in the Greater Toronto Area, a real estate specialist for J.D. Power and Associates says.

And that means developers must dramatically improve customer service – or risk losing customers in the future, he warns.

"Market conditions have been tough for builders and many of them have tightened up their staffing levels, which has had an impact on customer satisfaction," Marc Thibault says.

For the first time since 2005, when J.D. Power first implemented its new-home survey, overall satisfaction with home builders saw a decline – and a significant one – in 2009. The study found that the number of construction problems increased to 27 problems per home from 21 in 2008.

"That's huge," Thibault says. "The biggest complaint is when customers move into their new home that they waited a year or more for and find that it's incomplete."

Similar to their popular car-buying surveys, the J.D.Power new-home study looks at areas such as home readiness, service and warranty staff, home quality, physical design, value, sales staff, design and construction team.

Before this year's decline in ratings, home buyer satisfaction had improved every year until 2008 by a measure of 16 per cent.

The overall decline is due to a decrease in "home readiness" and service and warranty issues, Thibault says.

"It's actually better to delay a home and ensure it's fully complete than meet the move-in date and have 27 things wrong with it."

Home builders have had a rough six months since the economy started to slow last fall.

Sales of new homes in the Toronto area are down by 32 per cent in the first six months of the year compared to the same time last year. However, June figures were encouraging, with sales up by 16 per cent compared to June 2008.

The price of new homes in the Toronto and Oshawa area stabilized in June, according to figures released by Statistics Canada yesterday.

However, new home prices in the Toronto and Oshawa market are still down 1.1 per cent from a year ago at the same time. That compares to the national average, where prices are down 3.3 per cent.

In the Toronto area, prices did not go up as quickly, and consequently did not fall as dramatically. But the new home market continues to lag the resale market, where prices went up 6 per cent year over year in July in the Toronto area.

Developers reported more traffic and sales at their sites in June and July as the resale market tightened up because of fewer listings.

Some developers saw more increases than others. Brookfield Homes came out in top spot in the J.D. Power survey, followed by Mattamy Homes, Tribute Homes and Monarch Corp.

The lowest-ranked builder was Vaughan-based Century Grove Homes. A spokesperson was not available for comment yesterday.

New home prices declined the most in Western Canada, with Vancouver down 0.9 per cent month over month, followed by Edmonton at 0.8 per cent and Victoria at 0.5 per cent. However, not all cities saw price decreases.

The largest year-over-year increase in new housing prices was in St. John's, Nfld., where a strong economy pushed prices up by 10.3 per cent.

Toronto Star

 

 

Home Sale Stats

The prices of new homes in the Toronto and Oshawa area stabilized in June as the market may have found a bottom, according to figures released by Statistics Canada today.

Prices remain unchanged in June compared to May, bucking the national trend, which saw contractor selling prices decrease by 0.2 per cent nationally.

However, new home prices in the Toronto and Oshawa market are still down 1.1 per cent from a year ago at the same time. That compares to the national average where prices are down 3.3 per cent.

Developers in the Toronto area report more traffic and sales at their sites as the resale market has tightened up because of fewer listings.

Prices declined the most in Western Canada, with Vancouver down 0.9 per cent month over month, followed by Edmonton at 0.8 per cent and Victoria at 0.5 per cent.

Builders lowered their prices to stimulate sales while others offered free upgrades to move inventory, according to Statistics Canada.

The sharp decreases in Western Canadian cities follow a period of significant highs in new housing prices at the end of 2007 and the beginning of 2008, said Statistics Canada.

In the Toronto area, prices did not go up as quickly, and consequently did not fall as dramatically.

However, not all cities saw price decreases.

The largest year over year increase in new housing prices was recorded in St. John's, Nfld., where prices are up by a significant 10.3 per cent due to a strong economy.

In Quebec the annual growth rate was 6.8 per cent, followed by Montreal where prices increased by 1.9 per cent.

thestar.com

 

 

Canadian Housing Starts 2009

Canadian Housing Starts, July 2009 Results

 

Source: Canada Mortgage and Housing Corporation (CMHC)

 

 

Summary: Canadian housing starts declined in July, in comparison to
both June (on a seasonally-adjusted basis) and July 2008. Similarly,
builders in the Toronto CMA started construction on fewer homes in July.
In the Toronto area, the decline in starts was driven by the high-rise
segment of the market.

 

Analysis: While housing starts remained on the downward trend, both
Canada-wide and in the GTA, CMHC suggested that residential
construction activity will increase in the second half of this year. There are
indicators that support this view. The resale market in the GTA and many
other centres across the country has tightened up, with sales rising
relative to listings. Generally, when this happens, traffic increases at new
home sales centres. According to figures provided by RealNet Canada
Inc., which TREB members have access to, new home sales activity has
picked up in recent months, including a year-over-year increase in June. If
this trend continues, it makes sense that new home construction will pick
up moving forward.

 

 
 Cheryl Bower

www.CherylBower.com

RE/MAX Hallmark Realty Ltd.