News Release: September 4, 2013

CONTINUED IMPROVEMENT IN FRASER VALLEY’S HOUSING MARKET   

(Surrey, BC) – Buyers and sellers continued to show greater confidence in the market last month as home sales on the Fraser Valley Real Estate Board’s Multiple Listing Service® (MLS®) edged closer to typical levels.

The Board processed 1,258 sales in August, an increase of 17 per cent compared to the 1,073 sales in August of last year however, the volume remains 13 per cent below the 10-year average for the month.

Ron Todson, President of the Board, explains, “The best way to describe our market currently is one of continued, modest improvement as buyers and sellers become more confident.

“In the last month in the Fraser Valley, we’ve seen an increase in sellers willing to accept an offer subject to another sale, we’re seeing fewer deals collapse and we’re seeing more move-up buyers, either improving on the size or quality of their existing home. These are all indicators of a return to a more typical, stable market.”

In terms of inventory, the Board received 2,353 new listings in August, a decrease of 2 per cent compared to the 2,406 new listings received during the same month last year – leaving the volume of active properties at 10,127 a decrease of 2 per cent compared to August 2012.

Todson says, “An important measure of the balance between housing supply and demand is the number of months it would take to sell our existing inventory. We’re currently sitting at eight months’ supply in the Fraser Valley, indicating a balanced market, which is also being reflected in the stability of home prices.

“Home prices generally remain unchanged or down slightly from a year ago; however, do check with your local REALTOR® if you’re in need of specific values because the range between property type and community can be sizeable.”

In August, the benchmark price of single family detached homes in the Fraser Valley was $551,000, virtually on par with $551,400 during the same month last year. For townhouses, the benchmark price was $298,200, a decrease of 1.6 per cent compared to $303,000 in August 2012 and the benchmark price of apartments was $203,900, 1.3 per cent less than in August 2012 when it was $206,600.

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The Fraser Valley Real Estate Board is an association of 2,795 real estate professionals who live and work in the BC communities of North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission.  The FVREB marked its 90-year anniversary in 2011.

Full package:

http://www.fvreb.bc.ca/statistics/Package%20201308.pdf

The rise of the variable rate?

Fixed or variable? It’s a debate brokers thought they left behind but is now coming up more and more as fixed rates climb and concerns about a Central Bank move fade into the distance.

“You’re seeing a one per cent spread between variable and fixed so it almost doesn’t make sense to go with a fixed rate right now,” James Harrison of Mortgages.ca told MortgageBrokerNews.ca. “It didn’t make sense while the fixed rates were historically low; now the discounts on variable rates are getting better and the fixed rates are increasing.”

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Ratehub.com took to its Twitter account to shed some light on the topic Monday.

“Earlier this year, 80% of our site users showed interest in fixed rates, but what will happen now with the spread b/w variable rates?” the company mused.

Not every broker is willing to turn his back on fixed rates just yet, however.

“I still think fixed rates are at all-time lows, even though we’ve seen them rise recently,” Mauro Di Cosola of Dominion Lending Centres told MortgageBrokerNews.ca. “In the overall scheme of things I still think fixed rates are the way to go. 3.59, 3.69 per cent isn’t too high. If somebody were to get a five year fixed rate at 3.59 per cent I think they’re still sitting pretty.”

Di Cosola does admit that clients are more willing to consider a variable rate, though; a trend that may be signally a change in attitude.

“I have seen clients tend to look at the variables a little bit more than they otherwise would.”

Of course, every situation is different and the type of mortgage a client depends largely on the client’s priorities.

“It depends on the client wants to have no trouble sleeping at night, I would suggest a fixed rate,” Di Cosola said. “If they want the lowest rate I would be more inclined to suggest a variable rate, in a rising (fixed) interest rate environment.

“No one has a crystal ball so the variable products could go up as well. At least you know what you’re getting when you have a fixed rate: If a client doesn’t like the gyrations of the market, fixed rates give them piece of mind.”

Brokers say they are experiencing longer than average turnaround times with the banks, suggesting it could be a result of a flooded market due to collective client fears that rates will continue to increase.

“I would divide the segment into two parts; the adjudication part with the banks in general is probably twice or three times as long because of the rush of people trying to rush deals,” Andrew Galea of The Mortgage Management Group told MortgageBrokerNews.ca. “The monolines are still adhering to much faster turnaround times.”

Galea believes a flood of buyers are looking to take advantage of the market before rates increase.

“People who would usually sit on pre-approvals are now trying to close as soon as possible,” Galea said. “Those who wouldn’t be totally committed are now having a fire lit under them to act sooner rather than later.”

The wait times are making things dicey for brokers when client close dates fast approach while deals are still on the lender’s table.

“I have a few closings coming up on the 30^th (of August) and the lender response times have been lacking,” Deepak Bansal of Dominion Lending Centres Mortgage Village told MortgageBrokerNews.ca. “I have a feeling that they are inundated with deals because of rate increases… clients are getting in before further increases.”

Bansal currently has deals on the table with a specific lender that usually has a one day turnaround. He has been waiting on the lender for over 48 hours, though.

Buyers are getting antsy and trying to close deals quicker to accommodate current rates.

“One client of mine changed his closing date to utilize a rate hold,” Bansal said.

Toronto real estate numbers for July were the best since 2009, with total sales up 16 per cent compared to last year, according to statistics released today by the Toronto Real Estate Board.

Interest rates continue to go up – and this time, it is Scotiabank and RBC following TD Canada Trustby announcing increases to special discounted rates.

RBC’s announced rate hike Friday is a signal the big bank is laying down its weapon of choice at least for the time being, say brokers.

Here’s a story you can share with your clients who only want to talk about rate.

Majority (60%) of Canadian Homeowners Admit to Mistake Making When Buying a Home; Renovations (15%), Small Down Payments (14%), and No Home Inspection (13%) Among Top Concerns

Toronto, ON – When it comes to the purchase of a home, most Canadians admit to making some mistakes, according to the 20th Annual RBC Homeownership Poll conducted by Ipsos Reid.  The majority (60%) of Canadian homeowners indicate they’ve made some kind of mistake when buying a home, compared to two in five (40%) who say they haven’t.

Asked to list up to three mistakes, Canadian homeowners include the need for significant renovations (15%), not having a bigger down payment (14%), and not getting a home inspection (13%).  A further one in ten list purchasing too quickly (11%), failing to account for extra costs or total cost of home ownership (10%), making compromises to budget and lifestyle (9%), making an emotional purchase and paying too much (8%), not thinking about future family and space needs (8%), or waiting too long to buy (8%).

• Interestingly, younger Canadian homeowners, ages 18-34, are more likely than the national average to indicate not having a bigger down payment (21% vs. 14% national average), not thinking about future family and space needs (13% vs. 8% national average and 8% of middle-aged homeowners, ages 35-54) and choosing the wrong type of mortgage (8% vs. 5% national average and 6% of middle-aged homeowners

Affordability and Down Payments are Obstacles for First-Time Buyers

Many ‘mistakes’ admitted to by current Canadian homeowners are also seen among prospective first-time homebuyers trying to find their way in the marketplace.  Half (46%) of prospective buyers indicate they haven’t purchased until now because they weren’t able to afford it, while one in three (32%) cite saving money for a large down payment as having held them back.  Also included in  the top reasons for prospective homebuyers not being in the market until now is job security (28%).

When it comes to making the initial down payment on their first home, nearly two-thirds (62%) of prospective homebuyers believe that their initial down payment will represent up to 10% of the home’s value, while one in four (26%) believe it will represent between 11-20% of the home’s value and one in ten (12%) will make a down payment of more than 20%.

Half (53%) of prospective homebuyers say it would take up to three years to save enough for a down payment their first home purchase, while one in four (25%) say it will take between 4 and 6 years and one in five (16%) estimate 7 years or more to save for this down payment.  Just 6% of prospective homebuyers say they’re never going to save enough to buy a home.

Funding a Home for First-Time Buyers

Buying a home is a significant and life-changing investment for those purchasing for the first time.  The majority (58%) will take out a mortgage, but a significant amount of prospective first-time buyers will be putting money aside in a special savings account for the new home (48% compared to 29% national average), using RRSPs (25%), using tax-free savings accounts (TFSAs) (23% vs. 15% national average), or delaying other big purchases (17% vs. 10% national average).

Thinking about mortgages, specifically, prospective first-time buyers are considering combination/hybrid mortgages (42% vs. 29% national average) over fixed (38%) or variable (14%) rate mortgages.  Among prospective first-time buyers who prefer a fixed or combination rate mortgage, two in five (39%) are most likely to choose a term length of more than 5 years, while a similar proportion (38%) prefer a 5 year term and one in four (23%) would prefer a term of less than 5 years.

These are some of the findings of an Ipsos Reid poll conducted between January 31st and February 8th, 2013 on behalf of RBC. For this survey, a sample of 3,005 Canadian adults from Ipsos’ Canadian online panel was interviewed online. Weighting was then employed to balance demographics to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval.  In this case, the poll is accurate to within +/- 2 percentage points had all Canadians adults been polled. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

For more information on this news release, please contact:

Sean Simpson Associate Vice President Ipsos Reid Public Affairs   416.572.4474 sean.simpson@ipsos.com

About Ipsos Reid

Ipsos Reid is Canada’s market intelligence leader, the country’s leading provider of public opinion research, and research partner for loyalty and forecasting and modelling insights. With operations in eight cities, Ipsos Reid employs more than 600 research professionals and support staff in Canada. The company has the biggest network of telephone call centres in the country, as well as the largest pre-recruited household and online panels. Ipsos Reid’s marketing research and public affairs practices offer the premier suite of research vehicles in Canada, all of which provide clients with actionable and relevant information. Staffed with seasoned research consultants with extensive industry-specific backgrounds, Ipsos Reid offers syndicated information or custom solutions across key sectors of the Canadian economy, including consumer packaged goods, financial services, automotive, retail, and technology & telecommunications. Ipsos Reid is an Ipsos company, a leading global survey-based market research group.

To learn more, please visit www.ipsos.ca.

News Release: April 3, 2013

LOWER INVENTORY KEEPS HOME PRICES IN CHECK AS ‘SLOW BUT STEADY’ MARKET CONTINUES

(Surrey, BC) – In March, the Fraser Valley Real Estate Board processed 1,128 sales on its Multiple Listing Service® (MLS®), a 20 per cent decrease compared to the 1,412 sales during the same month last year, and a 24 per cent increase compared to February’s 913 sales.

The Board also received 11 per cent fewer new listings in March compared to last year – 2,736 compared to 3,066 – keeping inventory in check. March finished with 9,503 active listings, 1.5 per cent fewer than March of last year and 3.5 per cent fewer than the 9,832 available during March of 2009; the highest volume of active listings for that month in the last decade.

Ron Todson, President of the Board, explains, “Although we saw a typical spring uptick in activity from February to March, our sales remained at about 70 per cent of the norm for March and our new listings came in at 90 per cent of what the Board would typically receive.

“Because inventory levels are in check, prices are staying in check.”

In March, the benchmark price of single family detached homes in the Fraser Valley was $544,300, an increase of 0.6 per cent compared to $541,300 during the same month last year. For townhouses, the benchmark price was $298,200, a decrease of 1.7 per cent compared to $303,400 in March 2012 and the benchmark price of apartments was $204,200, an increase of 0.8 per cent compared to $202,500 in March 2012.

Todson adds, “Inventory levels are not as high as they need to be to put significant downward pressure on prices of the benchmark, or ‘typical’ home. These are homes that have characteristics most common to houses in a given community.

“In fact, we’re seeing the reverse happen. Benchmark prices for all three main property types in the Fraser Valley increased in value during the first quarter of 2013. Since January, detached homes are up by 1 per cent, townhomes by 0.6 per cent; and apartments by 2 per cent.”

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The Fraser Valley Real Estate Board is an association of 2,787 real estate professionals who live and work in the BC communities of North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission. The FVREB marked its 90-year anniversary in 2011.

Full package:
http://www.fvreb.bc.ca/statistics/Package%20201303.pdf

Lost decade predicted for Canadian housing market 7

Home prices boom is now a bust; future increases will mirror rate of infl ation

Think of it like an elastic ( being stretched). The snap back is going to be a lot harder.
GRANT CONNOR
NATIONAL BANK FINANCIAL

After years of growth, economists say the real estate boom is over and predict Canadian housing prices to flatline over the next decade.

                        IAN LINDSAY/ PNG FILESEconomists say the party is over for large returns on real estate investment in Canada. While residential home prices increased by an average of 5.4 per cent a year between 1980 and 2012, they see annual returns of between two and 3.5 per cent over the next few years.

TD Economics study, LongRun Rate of Return for Canadian Home Prices, predicts a “string of lacklustre performances” over the next few years. The annual rate of return for real estate will be about two per cent over the next decade, meaning that prices will simply match the pace of inflation.

Meanwhile, another report warns that a severe economic shock, such as the kind that hit Japan in the early 1990s and California and Nevada in 2006, could knock Canadian housing prices down by 44 per cent. While not predicting the extent or cause of a large- scale house price depreciation in Canada, Moody’s Investors Service included the figure in a report on its proposed approach to analyzing the credit risk of noninsured mortgage pools.

“There is some overvaluation in the housing market — home prices have moved away from their underlying economic fundamentals — and that overvaluation has to unwind,” said Sonya Gulati, senior economist at TD.

This adjustment, however, will be gradual, she added. “With the U. S., it was a housing market bubble and all of a sudden, a pin came and pricked it. It completely burst. The way you want to think about the Canadian housing market is that there’s a balloon that’s been inflated but instead of a pin coming and pricking the balloon, the air is going to be slowly let out.”

Canadian residential home prices grew by an average of 5.4 per cent a year between 1980 and 2012, climbing about seven per cent per year in the last decade.

The market has cooled over the last six months and will continue its slide over the next few years as tighter mortgage rules, modest economic growth and higher interest rates push prices downward. The economists project a 3.5 per cent annual rate of return on real estate beyond 2015, a low rate that has not been seen since 1980.

However, Moody’s Investors Service analyzed housing prices in the event of a pin coming along. A 44 per cent decline would be driven primarily by the phenomenal upswing in Canadian home prices over the past decade, Moody’s said.

While house prices in Spain could plummet by a more severe 52 per cent, Canada joins Spain, as well as the United Kingdom and Australia, in the ratings agency’s assessment of countries where growth in housing prices over the past 10 years has driven their values away from sustainable market fundamentals and into “overheated” territory.

“As with Australia, Spain and the U. K., we expect house prices in Canada to suffer the most due to the misalignment of current house prices with historic fundamentals,” Moody’s said.

The ratings agency released the report Monday that included its housing market analysis, along with request for comment on its proposed approach to analyzing the credit risk of non- insured mortgage pools.

“Moody’s Investors Service is in no way predicting the extent nor the causes of a large- scale house price depreciation in Canada,” spokesman Thomas Lemmon said in an emailed statement.

Moody’s is the second ratings agency in as many weeks to seek input on a proposal to change the methodology used to analyze securities linked to mortgages.

Last week, London and New York- based Fitch Ratings unveiled a proposed a two- step model that reduces home prices to a “sustainable” value based on a number of factors including data provided by Canadian banks. It then further subjects the homes to a “stressed market” value decline assumption.

Fitch said Canadian home prices are overvalued by about 20 per cent.

Ratings agencies came under harsh criticism in the aftermath of the financial crisis of 2008 for what was perceived as a failure to predict the U. S. housing market meltdown that precipitated it.

Since then, there has been an attempt to strike a balance of thorough analysis with timely analysis, according to Grant Connor, an associate in equity research at National Bank Financial who previously worked on structured finance at Moody’s.

The model proposed by Moody’s on Monday determines house price “stress” rates by looking at variable factors such as house price and income growth over 10 years, and fixed factors such as monetary policy.

The analysis of housing prices in the event of economic shocks includes data from Finland in 1989, Japan in 1991, and Hong Kong in 1997, as well as Ireland, Nevada, and California in 2006.

The “variable” analysis assesses how much current house prices have departed from “sustainable” market fundamentals. The assumption is that, in the event of a severe economic shock, expected demand that has been baked into current house prices will not materialize.

“Think of it like an elastic ( being stretched),” explains Connor of National Bank Financial. “The snap back is going to be a lot harder.”

Moody’s assesses the “fixed” factor, which rates how vulnerable the consumer is to economic shocks, whether there is a large oversupply of houses, how effectively monetary policy can alleviate the shock, and how dependent the economy is on the real estate sector.

Canada scores better in this area, says Connor, because the stability of the country and its monetary policy is taken into consideration.

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