Garry Marr, Financial Post ·  

Existing home sales dropped sharply in Canada’s two most expensive markets, a further indication that the real estate market may have peaked.

The Toronto Real Estate Board said sales in June were down 23% from a year ago, leaving activity for the quarter up 1% from the same period a year earlier.

“We experienced a record number of existing home sales during the first half of 2010 but these sales were weighted more towards the beginning of the year, said Bill Johnston, president of TREB.

“The pace of home sales has moderated from record levels over the past two months with the prospect of higher mortgage rates.”

In addition to the fear of higher mortgage rates, the housing market was impacted earlier in the year by new mortgage rules that made it tougher to borrow.

The real estate industry has said many customers simply pushed forward their purchase to beat the new rules, predicting slower sales through the spring.

The industry is also now dealing with the impact of the harmonized sales tax, which was introduced in British Columbia and Ontario on July 1. Consumers trying to beat that tax — which will be newly applied to services such as real estate commissions — are said to have pushed their purchases forward, which will deprive the summer and fall of a number of sales.

Vancouver’s market is also feeling the brunt of the new real estate reality. Sales in Canada’s most expensive market were off 30.2% in June from a year ago, the Real Estate Board of Greater Vancouver said earlier this week. President Jake Moldowan noted June 2010 sales are still up 22.6% from 2008 recession levels.

The slowing market appears to be a phenomenon right across the country with Calgary also reporting last week June sales were off about 42% from a year ago. June sales were 16% from May alone.

So far, the drop in demand has not hit prices dramatically, but coupled with increased supply, the double-digit year-over-year price increases we saw for most of 2010 have ended. The average sale price of a home in Toronto last month was $435,034, an 8% increase from a year earlier.

“With more to choose from in the second quarter, many home buyers have been making less-aggressive offers. This has resulted in less upward pressure in the average selling price,” said Jason Mercer, senior manager of market analysis for TREB, who said price increases will remain in single-digit territory for the rest of 2010.

New listings continue to put pressure on the Toronto market. New listings were up 13% in June from a year ago while total active listings climbed 28% during the same period.

In Vancouver, the total number of properties for sale is up 32% from a year ago. Prices in Vancouver were up 11.8% from a year ago with the board’s housing price index benchmark price climbing to $580,237 from $518,855. In Calgary, the average price of a home sold in June was $483,240, an increase of 8% from a year earlier.

The existing home market may get a break from the fact it looks likes builders are ramping down on construction. Statistics Canada said the value of building permits applied for in May was off 10.8% from a month earlier. Housing permits were off 4.4% from a month earlier.

“If there is hope for house prices in Canada, it lies in curtailing supply. That’s where any room for optimism lies in an otherwise bleak report that displayed widespread losses in value and volume terms within both the non-residential and residential categories,” said Derek Holt, an economist with Bank of Nova Scotia. http://www.financialpost.com/news/Drop+home+sales+sign+peak/3241780/story.html#ixzz0szmBtZcH

First-time homebuyers wasn’t new, detached homes

By Sunny Freeman, The Canadian Press

TORONTO — A majority of Canadians who just bought or are about to buy their first home expect to pay less than the asking price and prefer newer and detached homes over older and semi-detached homes or condos, according to a TD Bank survey.

But the report questioned whether the homebuyers had unreasonable expectations, considering that nine out of 10 took out or expect to take out a mortgage for their home.

“It’s only natural to want your first home to be the home of your dreams, but it is important to be realistic about what you can afford,” said Farhaneh Haque, a mortgage specialist at TD Canada Trust.

Six in 10 first-time homebuyers said they were worried about being able to afford their home should interest rates rise — a scenario that economists say is inevitable after an era of historically low rates sparked a rush into the housing market.

Only 30 per cent said they plan to or already have more than a 20 per cent down payment, and the remaining 70 per cent will require mortgage insurance. Eight of 10 buyers reported putting down as much as they can afford.

But Haque advised that prospective first-time homeowners consider a larger down payment because paying 10 per cent or more will make a big difference, bringing down the time it will take to pay off a mortgage and possibly affecting regular payment amounts.

“It may mean that you need to save longer before buying your first home, but it will pay off in the end.”

The vast majority of those surveyed said they made informed financial decisions before buying, with nine in 10 homebuyers getting pre-approved mortgages and calculating closing costs before buying.

However, closing costs, land transfer tax, and legal fees were the top three costs buyers felt unprepared for.

Six in 10 first time home buyers said they bought or intend to buy a fully detached home and three-quarters want a new home.

Meanwhile, survey respondents were equally split between preferring a smaller home closer to work and 45 per cent would prefer a larger home with a longer commute.

Almost all respondents, 99 per cent, said price was the most important factor when considering what kind of home to buy.

The report compiled 1,000 results from an online survey between June 8 and 21 of Canadians who had purchased their first home within the past 24 months or intended to purchase their first home within the next 24 months.

First-time homebuyers in B.C. bucked a national trend and said condominiums were their No. 1 choice. They were also most concerned about being able to afford their homes if interest rates rise.

Respondents from Atlantic Canada were most likely to have their hearts set on new, large and fully detached homes. They are also most likely to prefer a larger home even if it would mean a longer commute.

Quebecers browsed through the fewest number of homes while shopping for their first, but were most likely in the country to live in their first home for their entire lifetime, the report found.

More first-time buyers in Alberta expected to pay less than asking price than those in any other province.

In Ontario, more homebuyers than the national average planned to put more than 20 per cent toward a down payment.

More than in any other provinces, people in Manitoba and Saskatchewan said they would prefer a newer home over an older home if price points were similar. http://news.therecord.com/Business/article/740718

Have a great day!

(Surrey, BC) – Sales processed on the Fraser Valley Real Estate Board’s Multiple Listing Service (MLS®) increased by 23 per cent in one month going from 1,477 sales in May to 1,815 in June. June’s numbers represent an 8 per cent decrease compared to the 1,982 sales during the same month last year.

Deanna Horn, president of the Board, says, “Historically, it’s not unusual for June sales to outperform May in the Fraser Valley. This has happened in nine of the last twenty years.

“However, a 23 per cent increase in one month is significant. We were busier than expected and it could be due to the combined effect of mortgage rates edging down, the Harmonized Sales Tax coming into effect July 1, as well as the tremendous selection of homes available in the Fraser Valley.

“Although we’re seeing a decrease in the number of new properties coming on stream, June buyers have only had this volume of homes to choose from two other times in our history, in 1995 and 2008.”

The total active inventory on Fraser Valley’s MLS® at month’s end was 11,110, 19 per cent more than was available in June 2009. The Board’s MLS® received 9 per cent fewer new listings in June compared to May, good news according to Horn.

“Listings typically do decrease in the summer, which will continue to stabilize the market.

“Over the last few months, we’ve seen residential benchmark prices leveling. Year-over-year, price increases may still appear dramatic depending on the property type and location because at this time last year, we hadn’t yet begun our recovery phase.

“In a stabilizing market, consumers know to rely on the expertise of a REALTOR® because prices are highly local and competitive.”

In June, the benchmark price for Fraser Valley detached homes was $518,355, a 9.9 per cent increase compared to $471,788 in June 2009.   

The benchmark price of Fraser Valley townhouses in June was $328,080, a 9 per cent increase compared to $301,103 in June 2009.  The benchmark price of apartments increased by 6.6 per cent year-over-year going from $231,014 in June 2009 to $246,351 in June 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 2,988 real estate professionals who live and work in the communities of North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission. 

Full package:

http://www.realtorlink.ca/portal/server.pt/document/3228131/package_201006_pdf

Weak Canadian GDP puts BoC on the spot

Eric Lam, Financial Post · Friday, Jul. 2, 2010

With Canada’s economy stumbling in April, adding fuel to speculation the country’s roaring recovery that began in September 2009 was coming to an abrupt end, economists warned Canada’s central bank will have to tread carefully on its plan to raise interest rates for the rest of the year.

Derek Holt and Gorica Djeric, economists with Scotia Capital, said the Bank of Canada “was not likely to be swayed” by Wednesday’s economic data. The pair maintain a forecasted 1.25% benchmark rate by the end of the year.

“There should be enough strength in the underlying economic momentum to dismiss the drag on GDP in April as something that does not portend the start of a new trend,” the pair say in a note.

In April, Canada’s gross domestic product neither expanded nor contracted, compared with 0.6% growth in March. Economists surveyed by Bloomberg had been forecasting 0.2% growth in GDP for April.

This is the first time in eight months Canada’s economy did not expand.

In its report, Statistics Canada blames the stagnant April on a “large decline” in retail trade of 1.7%, after a 1.9% gain in March. Declines in manufacturing and utilities also contributed to the underperformance while advances in mining, wholesale trade, the public sector and construction helped to offset the decreases.

Krishen Rangasamy, economist with CIBC World Markets, said it was too soon to jump to conclusions.

“It’s too early to conclude from this GDP report that the recovery is already waning,” he said in a note on Wednesday. “The excellent handoff from March means that we’re starting the second quarter from a higher base, which sets Canada up for a decent quarter despite a slow start.”

Michael Gregory, senior economist with BMO Capital Markets, said that while the 3% growth now expected is respectable, it is a bit of a letdown compared with the 5% to 6% growth figures seen earlier.

“It’s kind of like driving on the highway at 100 kilometres an hour, then getting off and going 50,” he said in an interview. “But 3% growth is still all right and where we see it for this year.”

The second half of the year will likely move quite sluggishly, however, as a lot of spending in housing, renovation and other big-ticket items was “pulled forward” due to the HST, introduced in July in Ontario and British Columbia. Mr. Gregory expects growth of about 2% on average in the fall and winter months.

Canada’s economy also faces headwinds from the sovereign debt crisis in Europe, an even worse slowdown in the United States, and possible fallout in China, he warned.

Warren Jestin, chief economist with Scotia Economics, said in a note on Wednesday that Canada’s position as a resource leader should help keep it afloat in the face of other developed countries, although “this won’t be a hard race to win.”

The situation in Europe is troubling for Mr. Gregory, but he suspects the combination of weakening housing, high unemployment and zero credit growth will hurt the United States.

“That buzz you hear about a possible double-dip recession is legitimate and will remain a worry for markets the rest of the summer and into the fall,” he said. “It’s why we think the Bank of Canada will be on hold for a while after July.”

Mr. Gregory figures the central bank will raise rates 25 basis points at its next meeting in July, then go on hold to see how things play out in Canada the rest of the year. It is likely the BoC will push rates to 1% by the end of 2010 and add another 1 percentage point to 1.5 percentage points in 2011.

“An environment of 3% growth is still something that requires higher interest rates,” he said. “Rapid buildup in household debt is a long-term risk.”

• Read more: http://www.financialpost.com/Weak+Canadian+puts+spot/3226392/story.html#ixzz0sWmoS1qa

MAJORITY OF ATTACHED HOMES IN FRASER VALLEY FALL UNDER HST THRESHOLD

SURREY, BC – The Fraser Valley will offer buyers of new homes noticeable savings after July 1 when the Harmonized Sales Tax (HST) comes into effect, according to the Fraser Valley Real Estate Board.

Deanna Horn, President of the board explains, “Since the majority of new townhomes, apartments, as well as select, new single family homes in our region sell for less than $525,000, the BC new housing rebate threshold in BC, the impact of the new HST will be lessened.”

On July 1, the seven per cent Provincial Sales Tax (PST) will join the five per cent Goods and Services Tax (GST) for a combined HST rate of 12 per cent. The HST will apply to the sale price of all new residential homes however; the BC government will provide a rebate up to a maximum amount of $26,250. According to the provincial government, homes that sell for up to $525,000 will cost the same or less than what they would have when only the GST applied.

“When the HST was first announced, we were concerned for our clients,” explains Horn, who represents nearly 3,000 REALTORS® working in the Fraser Valley.

“Although the HST impacts new home purchases more dramatically than resale, we’re pleased that through our lobbying efforts alongside other BC housing industry representatives, we were able to convince the government to increase both the threshold for the new housing rebate, and the amount of the rebate itself.

“The result is that most buyers of new, attached homes and select detached homes in the Fraser Valley will be able to maximize the benefit of the government’s rebate program. Just recently, I was recommending a lovely new, single family home in Cloverdale to one of my clients with an asking price of $519,000. A similar home in other Lower Mainland communities could be considerably higher in price and after July 1, will result in higher taxes because it is above the HST threshold.”

According to Canada Mortgage and Housing Corporation (CMHC), the average price of new townhomes in Surrey in May was $475,154 and in Abbotsford $403,469. The average price of new detached homes in Abbotsford in May was $532,129. CMHC also reports new apartments – 1,000 square feet in size – are selling currently on average for $294,860 in Surrey; $232,800 in Abbotsford; and, $273,880 in Langley.

–30–

The Fraser Valley Real Estate Board is a professional association of 2,989 real estate professionals who live and work in the communities of North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission.

Steve Ladurantaye Real Estate Reporter  Globe and Mail

Buyers backed away from Canada’s housing market in May, driving sales lower in what is traditionally the busiest month of the year for the country’s real estate agents.

The housing market has been key to Canada’s economic recovery, as low  interest rates and pent-up demand drove buyers into the market after months of stagnation in 2008. But with interest rates likely heading higher in the second half of the year, many buyers who would have preferred to buy in the fall or early winter chose to buy sooner.

Tougher mortgage rules imposed by the federal government in mid-April also prompted buyers to act sooner, the Canadian Real Estate Association said. Meanwhile, tens of thousands of homeowners have seen the rampant demand and listed their houses for sale to take advantage of high prices.

Sales fell to 8.5 per cent to 40,393 units in May compared with April. Sales remain elevated by historical markers, but are 15 per lower than last fall’s peak.

Prices were essentially flat in May, gaining 0.5 per cent to an average national resale price of $346,881 – the highest on record.

Over $300,000 in renovations, see video tour: http://homesite.obeo.com/viewer/default.aspx?tourid=610351

 For immediate release

The federal privacy commissioner’s report on unsecure mortgage broker practices for protecting client information has further exposed the industry to potential fraud crimes. “If I was a professional criminal, a mortgage broker would be my main target,” said Greg Viger, accredited mortgage professional with Dominion Lending Centres Financial Ltd. in Burnaby, B.C.

“Bad press like this can dramatically change our business and destroy confidences,” remarked Viger. “Consumers who may not have realized before will suddenly become afraid of mortgage brokers, and say I’m going to a big bank where they have vaults for information. But we have to be careful about painting the entire industry with one brush.”

CMP staff writer Heather Li talks further to Greg Viger about how mortgage brokers should protect their clients’ information.

Wal-Mart Stores Inc. changed the face of retail in North America by making life easier for the little guy through its simple formula of cutting prices and cranking up volumes.

Is banking next?

This week the retailing giant won final approval to open a bank in Canada, providing entry to an industry that has been much criticized for perceived high prices and lack of competition.

Andrew Pelletier, a spokesman for Wal-Mart Canada, said the company plans to provide “convenient and value-focused financial products and services” for its customers.

He declined to discuss details of the company’s plans in advance of the official lunch of the new bank, set for June 15.

While the rise of Wal-Mart has been a boon for consumers, it has been devastating for competitors, many of whom ended up being bought out or going out of business.

In the United States, fierce resistance from the banking industry forced the retailer to abandon a bid to buy a bank early in the decade, though it continues to offer services such as cheque cashing and money transfer.

Wal-Mart applied for the licence to the Office of the Superintendent of Financial Institutions, the Canadian banking regulator, nearly two years ago. Mr. Pelletier declined to discuss why the process has taken so long.

If Wal-Mart saw opportunities south of the border where there are more than 1,000 banks fighting it out for customer deposits, there would likely be an even bigger prize waiting in this country, where the industry is dominated by a oligopoly of just six major players.

Consumer groups regularly complain about credit card fees and low interest rates on savings accounts available to bank customers in Canada. Management fees on Canadian mutual funds, most of which are controlled by the big banks, are similarly out of whack compared with the United States and other developed countries.

In the United States, Wal-Mart is a significant player in the money-transfer business, partly because many of its customers are recent immigrants still with family in other parts of the world. Additional services, such as the ability to offer deposits and make loans, would provide further opportunity to the company at a time when profits from its bread-and-butter retail business have come under pressure from the recession.

Wal-Mart would not be the first non-bank to try to break into financial services in Canada. Other retailers such as Canadian Tire Corp. and Loblaw Cos. are also working to establish themselves.

One of Wal-Mart’s main advantages may be its reputation for low prices, which may help it get the word out to potential customers that it can offer a better deal than the competition at a time when Canadian consumers are scrambling for all the savings they can get.

The federal government has recently taken steps to shake up the banking sector, including the decision to make it easier for credit unions to expand across the country and the move to prohibit banks from using their websites to sell insurance.

Opening a bank is a costly undertaking for Wal-Mart and the company will likely move carefully as it plots its moves over the next few years, but it clearly believes the investment will pay off. http://www.financialpost.com/news/financials/Mart+bank+block/3115350/story.html