Flaherty ‘happy’ about slowing market_{By            Vernon Clement Jones            |            04/12/2012 6:00:00 PM            |                 2                comments}

Jim Flaherty’s reaction to a cooling real estate market may be the polar opposite of most brokers, with the finance head suggesting he’s “happy” about the slowdown.

“Less demand, lower prices, modestly, in the housing market are much better for Canadians than a boom followed by a bust,” he said early this week. “The housing market has softened somewhat in part because of steps that I’ve taken and I’m happy about that.”

The reaction is to news of a 3.5 per cent annualized drop in the housing sector. Activity across many of the country’s major markets has also seen dramatic year-over-year declines – what Flaherty sees as the kind of controlled slowing needed to overt a more-pronounced and severe correction.

Brokers have been much less enthused about the falloff and the promise of a slower winter season relative to last year’s boom.

The decline in their business is also reflected in the broader economy, with StatsCan reporting growth in the third quarter rose 0.6 per cent – well off of projections and representing the third quarterly decline for 2012.

The mortgage rules revamp in July is largely to blame for that housing retraction, say brokers. They point to the effects a new, lower amortization ceiling for insured mortgages has had on first-time buyers.

Far from blaming those tighter rules, Flaherty is “crediting” them for reining in a sector helping drive Canadian household debt to historic highs.

“I’m all for a soft landing,” he said.

For more information, please contact: 

BCREA represents 11 member real estate boards and their approximately 18,000 REALTORS® on all provincial issues, providing an extensive communications network, standard forms, economic research and analysis, government relations, applied practice courses and continuing professional education (cpe).

Real estate boards, real estate associations and REALTORS® may reprint this content, provided that credit is given to BCREA by including the following statement: “Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information.

News Release: October 2, 2012

BUYERS TAKE ‘WAIT AND SEE’ APPROACH FOR SINGLE FAMILY HOMES; CONDOS HOLDING THEIR OWN

(Surrey, BC) – For the second month in a row, property sales on the Fraser Valley Real Estate Board’s Multiple Listing Service® (MLS®) have decreased to historically low levels. In September, a total of 857 sales were processed on the MLS®, a decrease of 26 per cent compared to 1,165 sales in September 2011 and 20 per cent fewer than in August.

Scott Olson is the president of the Board. “Our market was very stable up until July and then within two months it changed.

“The federal government’s tightening of mortgage rules this past spring may be having an effect. We’ve seen this pattern before when rules have changed and hopefully given the strength of our local economy and stability of interest rates, this slowdown will be short term.”

Olson adds that properties offering more affordability remain in demand. “Sales of more expensive homes – single family detached – have decreased disproportionately more than the sales of townhomes and apartments. In fact, apartment sales last month in Surrey, Langley and White Rock were higher or comparable to September of last year keeping prices across the Fraser Valley resilient.”

Over the last three months, prices for all three residential property types combined have decreased by 0.4 per cent while year over year they’ve increased by 2.1 per cent. For single family detached homes, the benchmark price increased by 3 per cent in one year, going from $533,400 in September 2011 to $549,500 last month.

For townhouses, the benchmark price in September was $300,500, a decrease of 1.7 per cent compared to $305,700 during the same month last year. The benchmark price of apartments in Fraser Valley in September was $207,000, an increase of 4.1 per cent compared to $198,800 in September 2011.

Last month, the Board received 4 per cent fewer listings than it did one year ago, 2,544 in September 2012 compared to the 2,651 in September 2011. The number of active listings finished at 10,348 in September, 2 per cent higher than the same month last year, yet on par with the number available on the market in August.

It took four days longer on average to sell a detached home last month compared to September 2011 – 49 days compared to 45. Townhouses sold in an average of 57 days in September compared to 52 last year and last month, apartments took 69.5 days on average to sell compared to 63 during September of last year.

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The Fraser Valley Real Estate Board is an association of 2,884 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%20201209.pdf

Mortgage insurance is typically mandatory for homebuyers without 20% equity.

Putting down 10% on the average $350,152 home, for example, means you’ll cough up a $6,302 insurance premium (given fully documented income and decent credit). Since insurance premiums are tacked on to your mortgage, that adds up to $9,000+ if you amortize it over 25 years.

Of course, you can avoid insurance altogether by plopping down 20% or more. The challenge is, only a minority of buyers has that sort of equity.

According to the latest data from Will Dunning, Chief Economist of CAAMP, less than four in 10 buyers have 20% down payments.

Click here for more details from CanadianMortgageTrends.com.

Hope for housing market

Two recent independent reports cite demographics, interest rates and employment growth as significant factors that will cushion the expected downturn in the Lower Mainland’s housing market next year and through the next decade.

In a report issued on August 28, CIBC senior economist, Benjamin Tal, predicts an increased demand from baby boomers’ children (the 25–34 age group) and immigrants “might limit the degree and duration of the projected correction in housing activity in BC.”

He explains that immigration will provide the most population growth in Canada and BC gets proportionately more immigrants adding that after immigrants pass the three-year mark in Canada, there is a significant jump in their home ownership rate.

Demographic projections suggest there will be fewer Canadians under the age of 25 and between the ages of 45 and 54, but Tal notes in his report that those groups account for a small portion of home buyers. He says the group aged between 25 and 34 — the age group that makes up the vast majority of first-time buyers — will continue to grow.

In an interview after his report was published Tal said, “This demographically driven fear is much ado about nothing. Many of those young people, they’re lucky, they have wealthy parents.”

In its July 2012 Housing Forecast, Altus Group Economic Consulting predicts fewer housing starts and softer prices for most regions in Canada next year, however in BC specifically, the market will continue to benefit from strong employment growth and along with the rest of Canada low interest rates.

For more information and to subscribe to Altus Group’s forecast reports, click here.

Please be advised, effective July 9, 2012, the following changes mandated by the Department of Finance – Canada will be implemented:

Maximum Amortization Available for Default Insured Mortgages

• The maximum amortization for      default insured mortgages will be reduced to 25 years (previously 30      years)

Maximum Amortization Available for Uninsured Mortgages

• The maximum amortization for      uninsured mortgages remains 30 years

Maximum Purchase Price for Default Insured Mortgages

• In order to qualify for a      default insured mortgage, the purchase price must be less than $1 Million

Maximum Loan-to-Value Ratio (LVR) for Refinances

• The maximum LVR for the      refinance of an owner occupied property will be reduced to 80% (previously      85%)

Pre-approvals for Default Insured Mortgages

• A mortgage pre-approval      without an agreement of purchase and sale is not sufficient to qualify for      a 30-year amortization. In order to qualify for a 30 year      amortization, the purchase and sale agreement must be dated before July 9,      2012 and the mortgage insurance application submitted before July 9, 2012.

News Release: July 4, 2012

FRASER VALLEY’S HOUSING MARKET ‘STEADY AS SHE GOES’

(Surrey, BC) – For the fifth consecutive month, the ratio of property sales in the Fraser Valley compared to the number of listings on the market has remained stable. In June, it was 14 per cent – the same as it was in February and April of this year. In March and May of 2012, it was 15 per cent.

Scott Olson, President of the Fraser Valley Real Estate Board explains, “Our market last month remained consistent. Our sales were down compared to May, however the number of new listings we received dropped as well, which seasonally is typical for June in the Fraser Valley.”

Last month, the Board posted 1,463 sales, a decrease of 9 per cent compared to May and 8 per cent fewer than the 1,588 sales processed on the Board’s Multiple Listing Service (MLS®) during June of 2011. At the same time, the Board received 2,898 new listings, a decrease of 12 per cent compared to May and an increase of 5 per cent compared to those received during the same month last year. The decrease in new listings pushed the number of active listings down slightly in June – by 1 per cent – compared to the previous month, however still 9 per cent more than were available in June of 2011. 

“Although our inventory is trending at historically high levels, sales have remained steady so we’re not seeing significant downward pressure on residential prices overall.

“There are individual property types and areas with their unique trends, which consumers can ask their local REALTOR® about directly, however across the Fraser Valley in June, both average and benchmark prices, the price of a ‘typical’ home, for detached properties remained on par month-over-month and showed positive gains year-over-year.”

The composite benchmark price as determined by the MLS® Home Price Index (MLS®HPI) of a single family detached home in Fraser Valley increased 3.6 per cent in one year. It went from $548,000 in June 2011 to $551,000 last month.  

In June, the MLS®HPI composite benchmark price of a Fraser Valley townhouse was $305,000, on par with 2011 and the composite benchmark price of an apartment increased by 0.7 per cent year-over-year; going from $202,100 in June of last year to $203,600 last month. 

Olson adds, “Another market gauge we monitor closely is the average number of days it’s taking to sell properties. In June, it took on average 44 days to sell a detached home in the Fraser Valley and give or take a day this has stayed the same for four months, another sign of stability.”

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The Fraser Valley Real Estate Board is an association of 2,908 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%20201206.pdf

Where’s the market heading?

According to both BCREA and CREA, home sales are forecast to decrease in 2012 compared to last year, but not enough to destabilize prices. Both indicate the outlook for 2013 is a slight improvement over 2012.

For Fraser Valley, BCREA is projecting residential home sales overall to decrease by 3.2 per cent (with a 5.5 per cent decrease for detached) this year compared to last, while average prices overall will dip by 1.5 per cent (detached will remain on par with 2011).

“Consumer demand in the Fraser Valley is expected to continue trending at the 10 to 15 year average both this year and in 2013,”  BCREA announced in it’s June 2012 Housing Forecast, attributing its Fraser Valley forecast for moderation to modest demand and plenty of inventory.

CREA also revised its 2012 and 2013 forecast for home sales in Canada, predicting generally stable resale housing activity this year, with sales declines in BC and Ontario and growth in Alberta and Saskatchewan.

CREA is projecting sales across BC will decrease by 4.5 per cent in 2012 and by 2013 that decrease will shrink to 0.8 per cent. Similarly with prices, CREA is forecasting home prices in BC will decrease by 3.4 per cent this year and by only 0.5 per cent next year.

In its June statement, Gregory Klump, Chief Economist said, “CREA’s forecast for annual activity this year has been boosted by what’s already in the rearview mirror.

“Activity is still expected to recede, but from a higher level than previously anticipated. The pace for interest rate increases next year is expected to be very slow and gradual, so combined with further job growth, Canada’s housing market should remain resilient.”

Because of overall economic conditions improving, BCREA says the outlook for Fraser Valley in 2013 is more optimistic than this year, while still being offset by gradually rising interest rates. It’s projecting sales in the valley will rebound by 3.1 per cent with average prices remaining effectively unchanged with an increase of 0.2 per cent from 2012 to 2013.

If you’re considering buying a new home or refinancing/renewing your current mortgage, it would be a wise move to act before July 9th!

The Federal Government announced this morning four new clampdowns on insured mortgages that will quickly come into effect on Monday, July 9th, 2012.

These changes include: 

• Reducing      the maximum amortization period to 25 years from 30 years 
• Reducing      the maximum amount of equity homeowners can take out of their homes when      refinancing to 80% from the current 85% 
• Limiting      the availability of government-backed mortgages to homes with a purchase      price of less than $1 million 
• Fixing      the maximum gross debt service ratio at 39% and the maximum total debt      service ratio at 44%

The first two changes will have the biggest impact on Canadian borrowers.

If you’d like to review your options or if you have any questions, please give me a call or send me an email, and I’ll be happy to discuss how these changes may affect your mortgage situation. It’s my job to ensure you have the best options and strategies available at all times!! 

News Release: June 4, 2012

WARMER WEATHER GENERATES ACTIVITY IN FRASER VALLEY’S HOUSING MARKET   

(Surrey, BC) – Home sellers and buyers in the Fraser Valley took advantage of the first warm spell of the year triggering an increase in new listings and keeping sales steady last month.

The Fraser Valley Real Estate Board posted 1,616 sales in May, an increase of 13 per cent compared to April and on par with the 1,608 sales processed on the Board’s Multiple Listing Service (MLS®) during May 2011. At the same time, the Board received 3,305 new listings, an increase of 5 per cent compared to April and 8 per cent more than were received during the same month last year. The new inventory took the number of active listings in Fraser Valley to 10,826, an increase of 8 per cent compared to the volume available in May 2011.

Scott Olson, President of the Board, says “Fraser Valley’s market is at an even keel. Since February, the ratio of sales compared to the number of active listings has stayed at 14 or 15 per cent, which means for every 100 properties available to purchase, 15 sold.

“It’s a healthy, competitive market. It gives buyers excellent selection and the time to negotiate, but not too much time. The average number of days to sell a detached home or a townhome is still only a month and a half and for condos a little over two months, which is why we’re seeing benchmark prices in most communities holding steady.”

The benchmark price* as determined by the MLS® Home Price Index (MLS®HPI) of a single family detached home in Fraser Valley increased 3.6 per cent in one year. It went from $528,900 in May 2011 to $548,000 last month.  

In May, the MLS®HPI benchmark price of a Fraser Valley townhouse was $306,800, an increase of 0.8 per cent compared to $304,500 in 2011. The benchmark price of an apartment increased by 0.7 per cent year-over-year; going from $202,100 in May of last year to $203,600 in May 2012. 

Olson adds, “We encourage buyers and sellers to talk to their REALTOR® about the difference between benchmark and average prices to better understand how we establish a recommended list price or an offer.

“A benchmark is the value of a home with characteristics “typical” to your neighbourhood, whereas the average is the dollar volume divided by the number of sales – so, if a significant number of higher priced homes sell in a given month it will skew the average high. This happened last spring when a number of communities in the Lower Mainland experienced higher than normal sales of luxury homes, which is why we’re still seeing average prices recovering while the benchmark has gone up.”

*Note: Benchmark prices underwent a recalculation this month in order to more accurately reflect trends measured by the MLS® Home Price Index (MLS® HPI.) There were no changes to the calculation of index values.This recalculation involved aggregating benchmark prices using the sales weighted approach for the reference period (i.e. January 2005) and thereafter linking movements in aggregate benchmark prices to their corresponding MLS® HPI.

The methodology can be viewed in greater detail at:
www.homepriceindex.ca/docs/mls_home_price_index_methodology_en.pdf#View=FitV  

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The Fraser Valley Real Estate Board is an association of 2,896 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%20201205.pdf