I wanted to give everyone a bit of an update on where the market is at present……Since November 1^st 2010, we have seen 5 year bond yields go from a low of 1.98% to yesterday’s high of 2.37%, a 0.39% increase in a very short period of time. Based on published rates (3.59%) spreads have been squeezed to 1.22% and down to 1.02% if you consider quick close specials presently at 3.39%-3.49%. Over the last 6 months spreads, based on published rates has been in the 1.65% to 1.75% range.

 If we look at historical spreads over the last 6 months, existing published rates should be at 3.99% to 4.09%. Whether the spread compression at this level is sustainable, I can’t say at this time, however, we are well below this year’s average spread.

 What does this mean for rates? Rates are artificially low for what the spreads are, and we don’t expect them to stay for much longer. Our 5 year quick close at 3.49% may not  last very much longer.

Is retirement chained to your home?

Garry Marr, Financial Post · Tuesday, Nov. 9, 2010

Canadians plan to take longer to pay off their mortgages, maybe even 35 years, but they don’t expect it to affect their retirement plans. Something in that plan just doesn’t add up.

A new study from the Canadian Association of Accredited Mortgage Professionals (CAAMP) shows consumers are taking advantage of longer amortization lengths at previously unheard of levels. Statistics released this week show 42% of mortgages originating in the last year went for an amortization period of more than 25 years.

It’s a huge jump when you consider that just five years ago, you couldn’t even get an insured mortgage backed by the government that was amortized above that period. Now the government limits insured mortgages to 35 years.

The reason for the longer amortization periods is simple: you can qualify for more mortgage when your monthly payment is lower because it is spread out over 35 years rather than 25.

Within the same survey by CAAMP, consumers were asked about their retirement expectations. Those with extended amortizations plan to retire on average at 61.9 years old. Those amortizing their mortgage for less than 25 years plan to retire on average at a surprisingly similar 61.5 years old.

“This data on expectations does not prove that actual retirement will be unaffected by recent trends in housing and mortgage markets,” CAAMP says in its study. No kidding. “But it does suggest that consumer’s evaluations of their life-cycle options have not been materially altered.”

Are consumers being entirely realistic about their future?

Will Dunning, chief economist with CAAMP, says the percentage of Canadians retiring with a mortgage is small — small enough that it is difficult to track.

“We find a lot of people taking [longer amortizations] are making additional payments,” Mr. Dunning says, adding previous studies have shown people try “aggressively” to repay their mortgages.

Victor Fiume, president of the Canadian Home Builder’s Association, says Canada is just catching up to a trend that has taken place in other jurisdictions.

“In many, many countries across the world, paying off a home is a multi-generational kind of thing. It doesn’t happen in this generation. Lots of the stuff going on in England is multi-generational because the houses are so expensive,” Mr. Fiume says.

There is no arguing the increased flexibility a longer amortization mortgage gives, but increasingly some consumers find themselves getting into financial trouble because they have bitten off too much, says Patricia White, executive director of Credit Counselling Canada.

“People will always decide what is easiest for them,” she says. “But you have to plan in advance to make accelerated payments. You need to make some conscious decisions about how to get rid of that mortgage debt faster.”

Canadians always do better when they have direct withdrawals from their bank accounts and less discretionary power about paying down debt, Ms. White adds.

Vince Gaetano, a principal broker and owner at Monster Mortgage, agrees people who choose the longer amortization and the lower payment rarely take advantage of that extra cash flow to make additional payments later on. “It’s a very small group of people who do that,” he says.

He thinks consumers going for the longer amortization are banking on the fact their homes are going to rise in value faster than any gains they get paying their mortgage off earlier.

“Real estate over time will appreciate at more than 2% to 4% per year,” Mr. Gaetano says. “People are saying, ‘It won’t affect my retirement because I plan to retire with a home that will appreciate in value [in addition to the principal you are paying down].’ It’s not a bad strategy if you are in a market that gives you consistent appreciation, but you are not going to get that in every market in Canada.”

There is no getting around the fact the people who take a longer amortization will take longer to repay their loan. The CAAMP study found consumers going longer than 25 years, were done with their mortgage at age 53 on average, compared with an average of 47 years for those going for the less than 25 years.

If you are going for a longer amortization, you better hope your home goes up in value because you are going to have fewer mortgage-free years in which to save. It’s hard to believe that won’t affect retirement plans.
Read more: http://www.financialpost.com/personal-finance/retirement+chained+your+home/3804183/story.html#ixzz154ZIAo9g

REALTORS CARE® BLANKET DRIVE GEARS UP FOR COLD, WET WINTER   VANCOUVER, BC –  With predictions for this winter to be the coldest and wettest in 50 years, and the number of homeless people on the rise in the Lower Mainland, the need for the annual REALTORS Care® Blanket Drive could be at its highest in its 16-year history.

The REALTORS Care® Blanket Drive runs November 29 to December 6 at over 100 real estate offices across the region, collecting blankets, bedding and warm and waterproof clothing for the homeless and working poor. Over 30 charities from Whistler to Chilliwack receive, on average, more than 4,000 bags of gently-used or new items donated by REALTORS®, their clients and the public.

Earlier this year, the City of Vancouver announced that the homeless count in Vancouver has increased 12 per cent since 2008. Also, meteorologists are calling for a La Niña weather cycle this winter, meaning colder-than-normal temperatures and heavier precipitation.

“Add to that, the economy is still in recovery,” said Jake Moldowan, president, Real Estate Board of Greater Vancouver. “So for all of those reasons, there’s a huge need for warm clothing and blankets for vulnerable people in our communities. Charities will need even more donations if they’re to adequately respond to the perfect storm of a recovering economy, an anticipated tough winter and increased homelessness.”

Deanna Horn, president, Fraser Valley Real Estate Board, encourages the public to donate the best quality of items that they can – both gently-used and new. “Our charities give us wish-lists,” she said. “People coming in from the streets are looking for warm winter coats, sleeping bags, hoodies, toques and gloves. Community service clients are looking for blankets, bed sheets and everyday clothing for themselves and their children that they otherwise just can’t afford.”

The president of the Chilliwack & District Real Estate Board, Kyle Hislop, is confident no matter what weather conditions REALTOR® volunteers may face during their 10 days of collecting donations, they will deliver. “During our first year in 2006, we received over a foot of snow the week before the Blanket Drive and then three days into it, we were hit with another massive snowstorm. Regardless, our volunteers were determined to collect donations for our community. There’s a tremendous amount of passion behind the REALTORS Care® Blanket Drive because of the difference it makes.”

Donations to the REALTORS Care® Blanket Drive stay within the communities in which they are donated, or if the volumes are too large, go to charities in greatest need in neighbouring communities. Again, the 2010 REALTORS Care® Blanket Drive will run from November 29 to December 6. To find a list of all drop-off locations and charitable recipients, go to www.blanketdrive.ca. 

Canadians comfortable with their mortgage debt levels; One third have made additional payments in the last 12 months

Canadian Association of Accredited Mortgage Professionals releases
Annual State of the Residential Mortgage Market in Canada report

TORONTO, Nov. 8 /CNW/ – Canadian homeowners are comfortable with their mortgage debt, have significant home equity and could withstand an increase in their mortgage interest rate, according to the sixth Annual State of the Residential Mortgage Market report from the Canadian Association of Accredited Mortgage Professionals (CAAMP), released today.

Highlights:

• The vast majority of Canadians with mortgages are able to afford at least a $300 increase in their monthly mortgage payments.
• One in three (35 per cent) mortgage holders have either increased their payments or made a lump sum payment on their mortgage in the last year.
• 89 per cent of Canadian homeowners have at least 10 per cent equity in their homes and 80 per cent have more than 20 per cent equity.
• Overall home equity is at 72 per cent of the total value of housing in Canada; for homeowners who have mortgages, equity level averages 50 per cent.
• As of August 2010, there was $1.01 trillion in outstanding residential mortgage credit in Canada, an increase of 7.6 per cent from last year.

“Canadians are being smart and responsible with their mortgages,” said Jim Murphy, AMP, President and CEO of CAAMP. “They are building equity in their homes and making informed, long-term mortgage decisions. The survey results speak to the strength of our mortgage market, especially when compared to the United States.”

Homeownership is a good long-term investment
Most Canadians agree that buying a home is a good long-term investment and are focused on their mortgages to support that investment.

Many mortgage holders are making voluntary additional payments: 16 per cent have increased monthly payments during the past year, 12 per cent have made lump sum payments, and 7 per cent did both.

Canadians are exercising caution when taking out their mortgages, with a majority choosing a fixed-rate (66 per cent). A five-year fixed-rate mortgage remains the most popular option in Canada. Despite the fact that variable rate mortgages have become much less expensive compared to fixed rates, the majority choice is still fixed rates: this decision is based on people’s individual assessments of risk, not just the cost difference.

Potential rate increases won’t be a problem
The CAAMP study found that a vast majority of Canadians have significant capabilities to afford higher payments if and when mortgage interest rates rise. 84 per cent report that they could weather an increase of $300 or more on their monthly payments.

Most of the people who have low tolerances for increased payments have fixed rate mortgages, by the time their mortgages are due for renewal, their financial capacity will have expanded and their mortgage principal will have been reduced.

Also, Canadians have been able to negotiate better than posted mortgage interest rates. For five year fixed rate mortgages arranged in the past year, the average rate is 4.23%, which is 1.42 points lower than typical, advertised rates.

Of the 1.4 million Canadians who renewed their mortgage in the past year, 72 per cent were able to renegotiate a decreased rate: on average, rates are 1.09 percentage points less than the rates prior to renegotiating.

Canadians have significant equity in their homes, strengthening the housing market
Canadians’ home equity is impressively high. Among homeowners who have mortgages, the average amount of equity is about $146,000, or 50 per cent of the average value of their homes.

The amount of equity take-out in the past year is unchanged from last year with around one in five homeowners, or 18 per cent, taking equity out of their home, at an average of $46,000. The most common purpose for equity take-out is debt consolidation and repayment (45 per cent) followed by home renovations (43 per cent), purchases and education (19 per cent) and then investments (16 per cent).

The report is authored by CAAMP Chief Economist Will Dunning and based on information gathered by Maritz Research Canada in a survey of Canadian consumers conducted in October 2010.

The CAAMP survey report contains a wealth of industry information, including consumer choices and borrowing behavior, opinions on current “hot topics” related to housing and mortgages, regional breakdowns of responses, and an outlook on residential mortgage lending.

For a copy of the report, please visit www.caamp.org, ‘Mortgage Industry’, under ‘Resources’.

Have a great day!

News Release: November 2, 2010

Fraser Valley housing market “getting back to normal”       

(Surrey, BC) – Fraser Valley’s real estate market moved towards balance in October as inventory continued to decrease and sales and prices remained stable.

A total of 1,014 sales were processed on the Fraser Valley Real Estate Board’s Multiple Listing Service® in October, a decrease of 3 per cent compared to 1,044 sales in September and a decrease of 40 per cent compared to 1,704 sales in October of last year.

Deanna Horn, FVREB President, says, “With help from near record low mortgage rates and a steady decrease in the supply of homes, we’re getting back to what I call a ‘normal’, balanced market.

“However, sellers should be aware that demand for homes is strong, yet selective. Buyers in the Fraser Valley recognize that selection, although dropping is still generous and they’re looking for properties priced competitively. Even with carrying costs remaining stable, the affordability threshold is a factor.”

The Board received 2,125 new listings last month, a 12 per cent decrease from September and a 25 per cent decrease compared to October 2009. The Board finished October with 9,561 active listings, 4 per cent fewer than in September and an increase of 9 per cent compared to the 8,807 properties available in October 2009.

Horn adds, “When supply and demand move into balance, prices can become a real ‘sticking point’ underlining the importance of hiring a professional REALTOR® who knows your local market and can provide detailed comparisons to ensure your home is priced competitively.”

The benchmark price for Fraser Valley detached homes in October was $505,759, down 0.3 per cent compared to September and 3 per cent higher compared to $491,128 in October 2009.   

The benchmark price of Fraser Valley townhouses in October was $319,058, a 0.9 per cent decrease compared to September and a 2.2 per cent increase compared to October 2009 when it was $312,339.

Year-over-year, the benchmark price of apartments increased 0.2 per cent going from $240,048 in October 2009 to $240,542 last month and 0.4 per cent higher compared to September 2010.   

Information and photos of all Fraser Valley Real Estate Board listings can be found on the national, public web site www.REALTOR.ca. Further market statistics can be found on the Board’s web page at www.fvreb.bc.ca. The Fraser Valley Real Estate Board is an association of 2,925 real estate professionals who live and work in the communities of North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission.

Full package:

http://www.fvreb.bc.ca/statistics/Package%20201010.pdf

Renovated real estate

Garry Marr, Financial Post · 

It’s akin to a land rush. But instead of land up for grabs, it’s the right to sell land that is about to attract prospective real estate agents from far and wide.

And why not? Total sales activity through the Canadian Real Estate Association’s Multiple Listing Service was $150-billion in 2009. Even at a modest 4% commission — I sure didn’t get a rate that low last time I sold my house — that’s $6-billion in fees for the taking.

The only problem until this month was that CREA had built a wall around the MLS system, restricting how real estate could be bought and sold. In March, the group, which represents about 100 boards across the country, reversed course and changed its bylaws to allow all types of buying and selling models through the MLS.

The move brought change almost immediately with agents jumping into the field with offers to list property on the MLS for a flat fee and let the consumer do everything from showing houses to negotiating themselves. But CREA still reserved the right to change its rules and put in new restrictions.

This month, the group approved a 10-year agreement which the Competition Bureau, setting changes to the MLS in stone, and ensuring a slew of new options become available to consumers.

The floodgates are about to open and home buyers are going to being facing business models that incorporate everything from hourly rates to retainers to the good-old fashioned commission structure the real estate industry maintains has worked so well for years.

One-man real estate show Tyler Ross, the broker of record at Toronto-based Synergy Real Estate Consulting Ltd., is an example of the new wave. Armed with two technical support guys, he’s raring to go with a model that offers a flat fee based on an hourly rate.

“We can say ‘Pay us what you would a lawyer, an accountant or any other professional service’ and when it comes time to get a commission, we’ll wave it,” Mr. Ross says. “We couldn’t do this before March.”

His next step, and the one everybody is now eyeing, is the buy side of the transaction. Offering a flat fee on the listing side via the MLS is one thing, but how are you going to get agents to come visit the property if you offer no commission? Even private for-sale-by-owner sites are prone to offering fees to the buyer’s agent.

The typical commission for the buyer’s agent is about 2.5% of the value of the property — a rate most assume is not going anywhere. But even that is coming under attack.

Lawrence Dale, the lawyer who helped start failed discounter Realtysellers in 2001 and has battled CREA for years, announced this week he’s back in business.

His new company, Realtysellers Real Estate Inc., is offering to post your home for sale for free on the MLS–with no service. Go for the full-service model and the commission is 0.5%. How can he do it?

“That’s still $2,000 [on a $400,000] home, four times what you pay your lawyer,” Mr. Dale says, referring to a typical real estate transaction.

While no fee is obviously tough to compete against, Mr. Dale’s real challenge to the industry is his offer to rebate the 2.5% commission he would get as a buyer’s agent. He is willing to give back up to 75% of his commission to the customer.

He’s not going to be alone. “There are going to be people who get into this because they couldn’t cut it as full-service agents,” says Mr. Dale, in a gentle shot at the competitors who want to mine the same real estate gold as him. He maintains his new company will employ experienced realtors who just happen to work at a fraction of the price.

Where does that leave the full-service agent? Up until now, when you started looking for a house, you usually picked up an agent. That agent would act for you under the premise that they would get paid when you eventually bought a home. What happens if the home you eventually buy is from a seller offering a commission that can now be as low as 1¢?

There is a vehicle already in place called the buyer agency agreement, which ties a prospective home buyer to an agent for a specified period of a time. Those agreements, rarely signed these days, can include a guaranteed minimum payment for your realtor.

“It’s a guarantee if the realtor spends the time finding a perspective home owner a place to live and negotiates the agreement, they’ll get paid,” says Phil Soper, chief executive of Royal LePage Real Estate Services. “There is no structure set in stone. Every deal has the ability for a certain amount of negotiation on the way the agent involved is going to be paid.”

Given the new competition about to enter the field, even if you do go with a full-service model, something many people will always want to do, there is no saying you can’t use these discounters to knock your selling fee down and grab a bit of a rebate on your purchase.

As Mr. Soper and others maintain, the real estate community was always willing to negotiate fees. Why not take the industry at its word?
Read more: http://www.financialpost.com/Renovated+real+estate/3751380/story.html#ixzz13sHNP2Ic

Read more: http://www.montrealgazette.com/business/Good+real+estate+agent+make+difference/3732187/story.html#ixzz13lNbH0eY

Bank vs. budget: How much house can you afford?

Tim Parker Investopedia

We hear it all the time. The housing market is still in a slump and there are dozens of houses just a short drive from where you live that really need an owner and you may be that person.

It’s fate, right? Not so fast! If you noticed that a certain (expensive) home calls out for you each time you drive by, the obvious but most important questions must be asked: Can you really afford it?

Who Decides?

Your bank or lending institution decides. They will look at your application and based on a predefined set of criteria and decide if you can afford the home. You’ve probably heard that it’s much more difficult to get a loan following the mortgage crisis. That’s true! No longer is there a wealth of 0 per cent down mortgages or other types of loans that cater to those higher risk borrowers.

What Do They Look for?

Sometimes we think that our mortgage applications are judged by a person who uses a gut feeling rather than objective criteria. That’s not the case. In fact, even if your mortgage lender was having a bad day, you can rest assured that there is a predefined set of criteria that not only tell the lender if you’re approved or not but also what your interest rate will be. Wouldn’t you like to know what those criteria are?

Credit History

No secret here, right? For most, a home is the largest purchase they will ever make and, in turn, the largest loan they will ever need. This is when your flawless credit that you’ve worked so hard to establish and maintain is going to pay you back. The better your credit, the lower your rate. 

We should mention this now: If you know that you’re going to be looking for a home in the future, work on your credit score now. There isn’t a lot that you can do to remove accurate entries but you must keep a close eye on your reports. If there are inaccurate entries, it will take time to get them removed and you don’t want to miss out on that dream home because of something that is not your fault.

Down Payment

What are you giving them? If somebody asked you to lend them a large amount of money, wouldn’t it make you feel better if they gave you something that you could keep if they don’t pay you back? The banks feel the same way! The more they get from you upfront, the safer they feel. A higher down payment can also help offset negative entries in your credit report.

Banks want more money down than they used to so plan for a 10 per cent down payment. Also remember that if you can put at least 20 per cent down, you will avoid mortgage insurance.

Debt to Income Ratio

Before we look at this, you have some homework: You have to total up the amount of monthly payments you make. Then, total up your gross pay, the amount of money you make before taxes and other deductions which are subtracted from your paycheque.

Do you have it now? This is a vital metric that banks use to determine your eligibility. The debt to income ratio (DTI) looks at the amount of money you owe on a monthly basis and compares it to the money you make each month. The number is shown as a percentage of your gross income.

In other words if you pay $2,000 each month in expenses and you make $4,000 each month, your debt to income ratio is 50 per cent. (50 per cent of your monthly income is being used to pay debt.) Here’s the bad news, a 50 per cent debt to income ratio isn’t going to get you that dream home.

If you’re over 36 per cent, you will be considered a higher risk borrower. Each institution will have slightly different DTI requirements.

Your Income

If your DTI (debt to income ratio) is 25 per cent, but you only make $10,000 per year, you aren’t going to get that home. We won’t spend too much time on this because the obvious guideline is that the more you make, the better you look to the bank.

The Real Decider of Your Loan

The real person who should decide if you can afford a home is you and you have to put your emotions aside. Dave Ramsey, best selling consumer finance author and speaker believes that you shouldn’t use any more than 25 per cent of your take-home pay (net pay) on your mortgage payment. This is different than the bank formula which uses your gross pay.

The problem with using gross pay is simple: How much of your cheque is deducted before you get your money? Thirty per cent? Why would you factor in money, most of which you won’t ever see? Even if you get it back on your tax return, that doesn’t help you now – and how much will you really get back?

What can you realistically afford? That dream home may be everything you’ve wanted at a great price but is it worth overextending yourself and your family? Is it worth potential bankruptcy if you lose your job?

The Bottom Line

The bank may tell you that you can afford a huge estate making you look like a Hollywood celebrity, but can you? Be real with yourself and when you make your calculations, plan for the worst case scenario. Murphy’s law states that if it can go wrong, it will. As Dave Ramsey says, if you leave your front door open to Murphy, Murphy will move in.

http://ca.finance.yahoo.com/personal-finance/article/yfinance/1879/bank-vs-budget-how-much-house-can-you-afford

Your options in the brave new real estate world

Garry Marr, Financial Post · Saturday, Oct. 16, 2010

How would you sell your house today if it was on the market? Would you use a real estate agent or go it alone?

It’s no small issue given the typical commission paid by the seller in this country is about $15,000 based on the latest average sale price of an existing home. When you consider most home sales are for principal residences — and profits are not subject to capital gains taxes–that $15,000 looms larger because it is after-tax money.

The truth is not much has changed since the Canadian Real Estate Association updated its rules in March to make its Multiple Listing Service more flexible, thus allowing agents to simply list a home with the consumer handling all other aspects of a transaction. Those changes are about to be made permanent because of a consent agreement with the Competition Bureau reached last month.

So, what’s the difference today? On a practical level, it’s hard to argue against listing your home on the MLS, which controls about 90% of transactions in Canada. And while you may pay as little as $109 for that listing, you can almost be sure to pay a commission of 2% to 2.5% to any agent bringing his or her customer to your door.

The option to use one of the dozen or so for-sale-by-owner, or FSBO sites, exists, but you can expect to pay a fee for the service. Plus, you can also assume any customer who buys a house through a FSBO site wants a discount on the market price because they know you are saving commission.

I tried it myself for two weeks before listing my own home on the MLS six years ago. My agent encouraged me. What happened is people who did show interest immediately started to talk about a discount. I was back to an agent and the MLS system.

But maybe there is a compromise solution, where I list on the MLS using an agent who helps me with part of a transaction. After all, there are people who paint their own homes but are reluctant to dabble in electrical wiring.

“Commissions are flexible,” says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. “There is [a middle ground] and people have to look for it. Many agents will offer a menu of services and that is out there already. Most people will choose to list with an agent who manages an entire transaction.”

But now that that choice is part of the game within the confines of the MLS, expect consumers to take advantage of it to save some cash.

“I’d still use an agent. My life is too busy,” says Craig Alexander, chief economist with TD Bank Financial Group. “But there are going to be people who only want an agent for some things.”

Mr. Alexander thinks changes are coming, but couldn’t put a timetable on it. He says it is basic economic theory that once you introduce elements of competition to a system, it will start to become more efficient.

Robert McLister, editor of Canadian Mortgage Trends, says many realtors will start offering a la carte services such as document preparation, showings, valuation and offer negotiations. He believes high-end real estate will be less affected by the changes and the industry might gear its efforts more to that end of the market.

And, he adds, FSBO sites that charge listing fees could be devastated by a bargain-basement MLS.

“Removal of listing barriers will allow efficient markets to take over. That will put obvious pressure on realtor fees. The era of 5% commissions in Ontario [other jurisdictions vary] could become a distant memory in three to four years,” says Mr. McLister.
Read more: http://www.financialpost.com/personal-finance/Your+options+brave+real+estate+world/3680721/story.html#ixzz135MK523U