Archive for October 28, 2007

Laurin Jeffrey | October 29, 2007
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Mortgage tolerance

Five-year mortgage remains the most popular term for Canadians

Jim Murphy, Financial Post

The Canadian Association of Accredited Mortgage Professionals (CAAMP) recently released its biannual report “Consumer Mortgage Choices in a Changing Market.” Written by CAAMP economist Will Dunning, it contains a wealth of information on Canadians’ attitudes toward their mortgage, and includes key findings based on a national telephone survey of Canadians undertaken by Maritz Research in late February, 2007.

The report indicates that even if mortgage rates were to rise by as much as one-half point, 80% of Canadians could tolerate the increase to their mortgage payments. A half-point increase in rates would translate into an average increase of $62 in monthly mortgage costs. The total cumulative impact of such an increase would be $3.66-billion, which pales in comparison to the overall size of the Canadian economy estimated at $1.2-trillion.

Since the report was written, posted rates on a five-year mortgage have increased by .20%, or a fifth of a point. Canadian consumer expectations for interest rate increases are benign, with 29% anticipating increases, 8% expecting decreases and 63% neutral. Canada’s overall economy remains strong with record-low unemployment and continued population growth.

At a time when the U.S. mortgage market has been affected by defaults in the sub-prime market, CAAMP asked Canadians if they were aware of alternative mortgage products such as longer amortizations and no-down-payment mortgages. About half of respondents had heard of these new products, with 36% responding positively to the alternatives, 27% negatively and 31% had no opinion.

Interestingly, younger Canadians, and those not owning a home, were the most positive and the most interested in these new mortgage alternatives. This corresponds to other research CAAMP has undertaken, which shows younger Canadians are also the most likely to shop their mortgage, wanting several quotes before arriving at a final decision. Those in a position to benefit the most from new mortgage products are the most positive. A further indicator of the health of the Canadian economy is that of the 4.9 million homeowners in this country, almost 300,000 will not renew their mortgages because they will have been paid off.

In terms of their mortgage, Canadians remain fairly conservative, with 73% opting for a fixed-term mortgage rate, compared to 67% a year ago. The five-year mortgage remains the most popular term for Canadians. With regard to mortgage renewal activity, almost one-quarter of respondents have yet to decide on the type of mortgage, although 44% of surveyed mortgage holders who expect to renew their mortgage in the coming half of 2007 will choose a five-year term.

Overall mortgage market growth in Canada is expected to exceed 10% in both 2007 and 2008. By the end of this year there will be more than $800-billion in outstanding mortgage credit in Canada. Canadians remain confident about the future housing market.

Finally, Canadians were also asked to comment on their local housing market and whether it was a good time to buy a home. Across Canada, only 9% of consumers surveyed expressed negative opinions about the prospects for real estate prices in their community. The most positive responses were in Atlantic Canada and Ontario while British Columbia had the most significant jump in positive responses. Albertans provided the most negative outlook, where many consumers considered their local housing market overheated. In recent months, resale prices in Calgary have increased near 50% year over year.

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Contact the Jeffrey Team for more information – 416-388-1960

Category: Ajax Real Estate, Buying Real Estate, Mortgages, Pickering Real Estate | Tags: , , ,
Laurin Jeffrey | October 29, 2007
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House prices ripe for fall

Anne Howland, CanWest News Service

Home prices across Canada are ripe for a fall, says one bank economist.

Adrienne Warren, senior economist with Scotia Economics, said a bustling real estate market has led to housing in many regions of the country being overvalued, increasing the risk of prices dipping in the longer-term.

“The fundamentals underpinning Canada’s real estate market are still quite good,” said Warren in Scotia Economics’ latest Real Estate Trends.

“Unemployment is low, immigration is high and apartment vacancy rates are tight. There is little evidence of overbuilding or speculative buying. The industry also has relatively little direct exposure to subprime lending, with these loans accounting for only about five per cent of domestic mortgages in recent years, compared with about 20 per cent in the United States.

“Yet there is little doubt that current trends are unsustainable,” added Warren. “Affordability is becoming increasingly stretched for many would-be buyers after almost a decade of rising real estate prices. More recently, economic risks have increased in the wake of the intensifying financial market turmoil stemming from the U.S. subprime mortgage problems.”

RBC Economics reported that real estate affordability in Canada in the second quarter worsened in every housing type, every province and every major city.

“In the second quarter, Canada’s housing affordability experienced one of the largest and most broadly based quarterly deteriorations since the mid-1990s,” said Derek Holt, assistant chief economist with RBC. “Higher real estate prices, mortgage rates, utilities and property taxes all combined to drive the country-wide deterioration.”

The Scotia Economics report noted that, in all 15 cities examined with the exception of St. John’s, N.L., house prices are above their long-term trend, with big regional variations, from one per cent above trend in Ottawa, to 25 per cent in Edmonton.

The average deviation at mid-year was roughly eight per cent, the report said.

“Some deviation from underlying trends is to be expected at the late stage of a real estate boom,” said Warren. “At the peak of the prior two housing cycles in 1976 and 1989, national home prices were 12 per cent and 18 per cent, respectively, above their long-term trend. The smaller degree of overshooting this time around, and the sustainability of price appreciation, may reflect in part an undervaluation of Canadian real estate prices in the late 1990s and into the early part of this decade.”

The Canadian Real Estate Association said last month that the national average price of a home sold in July was $311,495, a 12.6 per cent increase from a year earlier.

Warren estimated that average real home prices in the United States carried a near-record 14 per cent premium in 2005, but have since slipped below trend due to increased supply of housing and weakening demand.

In Canada, she added, most major markets are still sellers’ territory, where prices rise faster than inflation. Cities enjoying the biggest price increases have the tightest supply-demand conditions, including Regina and Saskatoon.

“The further domestic home prices climb above underlying economic fundamentals, the greater the risk of an eventual correction,” said Warren.

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Contact the Jeffrey Team for more information – 416-388-1960

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Category: Ajax Real Estate, Buying Real Estate, Detached Homes, General Real Estate, New Homes, Pickering Real Estate, Scarborough Real Estate, Selling Real Estate, Semi-Detached Homes, Townhouses | Tags: , , ,
Laurin Jeffrey | October 28, 2007
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10 steps to profitable real estate investing

Rakshande Italia, National Post; CanWest News Service

So, you want to invest in real estate and get rich fast? You’re living in an infomercial. Experts say the secret to successful real estate investing is research, research, research. Review your moves, get good advice and look for clues in sources such as the new Canadian census data. The payoff is two-fold: Ongoing cash flow and capital appreciation.

Here are 10 steps to becoming a real estate mini-mogul:

1. Evaluate your existing exposure. “People who already own a house should make sure they evaluate the percentage of real estate exposure already in their investment portfolio and then decide if they want to invest more,” says BMO economist Michael Gregory. “Evaluate whether the benefits you earn from tax breaks on your second house are worth the risks associated with investing more.”

2. Identify what is it you really want from the property. “Do you want to make a quick $30,000 in a very short period of time or would you be happy with earning $800 to $1,000 a month for the rest of your life?” asks Ozzie Jurock, a Vancouver-based real estate author and TV personality. Jurock says investing in smaller towns is a good bet because even if the property does not substantially appreciate, one can always be assured of a fixed income for life through manageable rents.

3. Ignore national statistics. Focus on the numbers and trends that directly affect your market. Check if population growth, average income and job creation are faster than the provincial average, say experts. Also key is whether a major transportation improvement is occurring nearby. And don’t let a single booming industry (such as automotive) or one high-growth sector (such as oil) influence long-term investing decisions.

Is the area affordable?

4. Is the area’s affordability index in the hot zone (between 25 and 39 per cent)? RBC puts up a free affordability index chart on its website that can help investors. Experts say you don’t want the property to be too expensive or too cheap: Too cheap and the renters become buyers; too expensive and property values may stall.

5. Buyer beware is still the golden rule says Maria Britto, former president of the Brampton Board of Trade. Keep on top of real estate rules by contacting the governing bodies in the industry, such as the Canadian Real Estate Association, says Britto. For example, recent rule changes mean agents now need to sign contracts with buyers in an arrangement similar to what they do with sellers.

6. Use an experienced real estate agent. Once you get your research done, use a real estate agent who specializes in buying and selling houses for real estate investing.

7. Start small. For the first-time investor, Britto recommends trying a free-hold townhome (which doesn’t have maintenance fees). “These are not only affordable, but there’s always a good supply and demand for them and they can give you an affordable income,” she says. This holds true in bigger cities such as Toronto, Vancouver, Montreal and Calgary, where immigrant populations are high. New immigrants prefer to rent for their first few years in the country and they tend to choose locations close to transportation systems, malls and grocery stores.

8. Is the location forward looking? Don Campbell, author of 97 Tips for Canadian Real Estate Investors, says it is crucial to determine whether the provincial and local political leadership creates a “growth atmosphere.” One way to tell is by looking at whether the region’s economic development office is helpful. If they are difficult to deal with, you can assume they will be the same in their dealings with potential employers looking to move to the area, says Campbell. Also, check to see whether the area’s infrastructure — sewers, commercial and industrial space — is being built to handle future growth.

Are baby boomers moving in?

9. Is the area attractive to baby boomers? Check whether there are lifestyle options such as parks, recreation or water facilities nearby. The 2006 Statistics Canada census data shows that places such as British Columbia’s Okanagan region has seen a significant increase in population since the last census as baby boomers look for attractive retirement locations.

10. Think suburban. The 2006 census report talks of the suburbanization of Canada. Larger lots and lower real estate prices are drawing more people to the suburbs and bedroom communities that are mushrooming across the country. For example, Chestermere, outside Calgary, has grown by 148 per cent.

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Contact the Jeffrey Team for more information – 416-388-1960

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Category: Ajax Real Estate, Buying Real Estate, General Real Estate, Miscellaneous, Pickering Real Estate, Scarborough Real Estate, Selling Real Estate, Townhouses | Tags: , , ,
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