U.S.-Style Home Price Correction Unlikely in Canada

As a Realtor, the first question posed to me when I meet new people is always “How is the market?” This is often followed with “Where is the market heading?” I always enjoy these conversations with individuals who are interested in the dynamic market I am very much immersed in. The looming introduction of the GST is almost a month away and many people want to know how this is going to impact the market in the immediate term. Many fear we could be at the top of the market and heading for a correction. Below, you will find an excellent commentary from CREA on this very question.

The Canadian Real Estate Association (CREA) released a new report today indicating that home prices will stabilize, and will remain stable for some time. This means that Canadian homeowners are unlikely to experience a U.S.-style decline in the value of their homes.

“The relationship between average price and income has recently been cited as portending a U.S.-style correction in Canadian home prices,” said Gregory Klump, Chief Economist, CREA. “However, such warnings ignore the longer-term relationship between prices and income, and disregard typical Canadian housing market cycle dynamics.”

Home prices tend to rise in cycles, characterized by periods of sharp growth and periods of stability. By contrast, income generally follows an orderly upward trend over time. For home prices to keep pace with incomes, they must rise faster during housing booms to make up for periods of little or no price growth. Canadian home prices were stagnant throughout most of the 1990s, while incomes continued rising, making housing more affordable. Over the past decade, home prices have climbed sharply as mortgage interest rates declined.

Klump adds: “The Canadian housing market is now widely thought to be at, or very near, the top of a cycle, and the ratio of home prices to incomes is currently high. This ratio will revert to its long-term average as it always does as part of a normal housing market cycle. History suggests, however, that it will not do so by means of a significant correction in home prices. The more likely scenario is that home prices will stabilize, giving incomes a chance to catch up again.”

The correction in U.S. home prices has sparked fears that Canadian home prices may share a similar fate. However, according to Klump, “warnings to this effect ignore solid Canadian mortgage market trends.”

Conservative lending practices in the mortgage industry combined with prudent borrowing and accelerated payments among Canadian mortgage holders have been seen throughout the recent housing market cycle. Accelerated accumulation of home equity will provide options for the small proportion of homeowners who may face financial difficulty when their mortgage is renewed at a higher interest rate. These trends are expected to help Canada avoid a U.S.-style housing crisis.

The correction in U.S. home prices is set against a massive oversupply of homes due to distress sales, combined with a drop in housing demand due to unemployment. The unwinding of the housing boom in Canada will be more orderly, characterized by softening sales activity and stable prices.

I hope you have found this information informative and I always welcome your comments or viewpoints on this and all topics posted on 905westword.com. I can also be reached at 905-330-1241 or rdavison@trebnet.com.

Advertisements

Cancellation of Home Retrofit Program –

A lot of home sellers have reaped the rewards of the home retrofit program. The benefits were two fold in that home owners made their homes more efficient while at the same time increasing the value of their properties. The program was introduced in 2007 as the ecoEnergy program. After conducting the initial audit home owners were able to update their properties with everything from insulation to furnaces and air conditioners in order to get back as much as $5,000 in rebates. In order to obtain the rebates a follow up audit had to be performed.

This program was intended to run until March 2011. However, on March 31st at 5pm ET it was announced that the Department of Natural Resources would not be accepting any new applicants to the program. Those who have had the first audit done can complete their retrofits and then complete the second audit to get the rebates. According to the press release If you have already booked an appointment for a pre-retrofit evaluation, have completed an evaluation or applied for re-entry to the program, you remain eligible to apply for a grant.” Homeowners who have not booked an audit will not be eligible for the rebate. The Government will be administering the program until March 31, 2011.

The speed at which the program was cancelled and with little to no warming is drawing fire from the political opposition. This program was also creating many jobs in Canada.

I know that I personally have benefited from this program, as have numerous clients of mine. Hopefully the decision makers will reconsider this decision. For those of you that missed the opportunity you may want to send your opinion to Ottawa. For those that are still going to squeak in under the wire, you will want to make the most of the opportunity.

If I can be of assistance to you with regard to this information, please contact me at 905-330-1241 or rdavison@trebnet.com. All the best. Ryan.

Sales, Price, Listings All up from Last Year (in Burlington)

(March 5, 2010 – Hamilton, Ontario) The Greater Hamilton-Burlington area resale market reported a total of 1114 units sold in February, an increase of 50 per cent over February of last year, according to the Multiple Listing Services® (MLS®) statistics released by the REALTORS® Association of Hamilton-Burlington (RAHB) The total unit sales, when compared to January of this year, were 50 per cent higher in February, 2010. “It is no surprise that our numbers have all increased from last year at this time,” said Joe Ferrante, RAHB President, “given there was so much uncertainty in the market in early 2009. It’s obvious that both buyers and sellers are showing confidence that the economy is recovering.” Residential properties sold during February totalled 1067 which included 866 freehold properties and 201 condominiums. Commercial sales for February, including industrial, farm, vacant land and business, totalled 47 units. The average price of freehold residential properties sold in the month of February was $331,523, an increase of 18.6 per cent over the same month last year and an increase of 9.4 per cent over last month. In the condominium market, the average price of condominiums in February was $241,987, an increase of 20.7 per cent over February, 2009 and an increase of five per cent over last month. The average sale price reflects the dollar volume of residential sales divided by the number of total residential units sold. February’s total average residential sales price increased 18.2 per cent over the same month in 2009. The total number of units listed for sale during February was 1751, which is 24 per cent higher than were listed in the same month in 2009. “We anticipate that the spring market will be strong,” added Ferrante, “as buyers and sellers look to make their home purchases and sales before the HST kicks in and increases the taxes they will pay on the services attached to the home buying process.”,br> Unit sales reflect “all property types” including residential, condominiums, commercial property, farmland and sales of businesses.

There are some amazing numbers in this hot residential resale market. If you are considering selling or buying and would like to discuss the local market conditions, please contact me at 905-330-1241 or rdavison@trebnet.com . All the Best! Ryan.

The February 2010 Real Estate Market was Golden! (Oakville & Milton)

(March 2010 – Oakville – Milton, Ontario) For the month of February 2010, The Oakville, Milton and District Real Estate Board *total sales transactions were 786, an increase of 45 per cent over February 2009. Sales have shot up sharply in the last two months, confirming an increasingly strong market. This is verified by looking at February sales from years past, compared to 2008 they are 14 per cent ahead and 47 per cent ahead when compared to those in February 2007. The total value of sales processed through the Board MLS® System also demonstrates a consistent increase. The Oakville, Milton and area resale market reported a **total dollar volume of sales for the February 2010 of 115 per cent higher than 2009 and 127 per cent year to date, according to Multiple Listing Service® (MLS®) statistics released by The Oakville, Milton and District Real Estate Board.

“Our market is very healthy and sustained low interest rates have made it a great time for buyers and sellers. I anticipate an even stronger market for the up-coming Spring,” states Oakville, Milton and District Real Estate Board President Jeff Mahannah. “Even with the government changes to the mortgages rules of limiting buyers to a mortgage of 35 years and requiring a minimum of five per cent down payment, I predict that we are going to see records set for real estate sales and prices this year.”

Residential resales in Oakville for February 2010 are up by 85 per cent over February 2009 with an average price of $586,031 and a median price of $498,000 representing a 32 per cent and 31 per cent increase respectively over the same month last year. The luxury market is very healthy in Oakville, recording 22 sales over a $1,000,000 in February 2010, compared to 4 in February 2009.

Milton’s sales were up by 67 per cent and the average sale price was $381,134, an increase of 23 per cent when compared to February 2009.

Year to date residential sales in Milton show a 72 per cent increase when compared to 2009 and Oakville demonstrates a very healthy 101 per cent increase.

Also notable are the Days on the Market Activity for both Milton and Oakville. For Milton in February buyers had to move quickly and make decisions fast as the average time period was 13 days. Oakville also had a very short time period of 25 days, indicating we are in a seller’s market. Consumers should note that the comparisons to 2009 to 2010 will continue to be extreme through to the beginning of the second quarter due to the low sales activity during that period in 2009.

*The total sales are comprised of all sales by OMDREB Members, regardless of jurisdiction.
**Total dollar volume of sales reflects “all property types” including residential, condominiums,
commercial property, farmland and sale of businesses.

Source: The Oakville, Milton and District Real Estate Board

These are some exciting sales figures. If I can be of assistance with any of your Real Estate needs please do not hesitate to contact me at 905-330-1241 or rdavison@trebnet.com .

Save the Pineland English Program…It’s Saved!

Elizabeth Gardens truly is a fantastic neighbourhood to live and raise a family in. I am biased of course, as I live and work in Elizabeth Gardens. However, any sceptics need only look to the front lawns of vocal residents for evidence of their community involvement. Signs reading “Save the Pineland English Program” have caught the eye of many a motorist.

In mid-December it was announced to Pineland parents that due to declining enrolments in Grades 1-6 English programs at Pineland Public School, the Halton District School Board was considering a Program Review. JK – 5 English stream students attending Pineland and future JK registrants for the 2010-2011 school year would have been impacted.

Some Background Information:

– 85% of SK students attend Grade 1 French Immersion at Pineland while only 10% go into the English Program for Grade 1. In 2009, there were no Grade 1 students in the English Program.

– In order to maintain funding teachers need to have a 20: 1 Students to Teacher ratio in the classrooms. Dwindling English program attendance could have resulted in triple and quadruple grade classes in order to maintain the 20:1 ratio. This would create educational, social and financial challenges.

– The staff recommendation was to make Pineland Public School the French Immersion Centre for Grade 1-8 students. JK-Grade 6 English Program students in the Pineland catchment area were to be sent to Mohawk Gardens. Pineland would also remain the receiving school for Grade 7-8 English students returning from Mowhawk Gardens.

These suggestions were not received well by the parents in the Pineland catchment area. As a result of the efforts of the Pineland parents the following has transpired:

1. JK – SK – Grade 6 English program remains at Pineland.

2. Grade 1- 6 English classes will be staffed for blended classes (not triple graded)

3. Pineland will be open to optional attendance for Grades 1- 6 English programs as per Board policy for September 2010.

4. Students accepted into Pineland for optional attendance will be allowed to complete their English program pathway at Pineland.

5. Pineland will continue to offer Grade 1-8 French Immersion.

6. Pineland will continue to be the receiving school for Grade 7 – 8 English students from Mohawk Gardens.

7. If optional attendance does not generate sufficient English program enrolment over the 2010 – 2011 school year, effective September 2011, students choosing English program for Grade One would be directed to Mohawk Gardens for their English program. Students currently in
the English program could complete their English program pathway at Pineland

Note: The final decision from staff does not require approval by the Board of Trustees.

It is great to live and work in such an involved community. Great job everyone!

Low inventory levels set stage for heated Spring market in most major Canadian centres, says RE/MAX

Active listings down in 81 per cent of markets in January

Lack of inventory will be the greatest challenge facing housing markets across the country this Spring, according to a report released by RE/MAX.

The RE/MAX Market Trends Report 2010, which examined real estate trends and developments in 16 markets across the country, found that unusually strong activity during one of the traditionally quietest months of the year has led to a sharp decline in active listings in 81 per cent of markets surveyed. The threat of higher interest rates, tighter lending criteria, and in British Columbia and Ontario, the introduction of the new Harmonized Sales Tax (HST) have clearly served to kick-start real estate activity from coast-to-coast, prompting an unprecedented influx of purchasers. As a result, 87.5 per cent of markets posted an increase in sales in January. Average price appreciated in 81 per cent of markets surveyed.

There have never been so many motivating factors in play at once. We’re in for a heated Spring market that will, in all probability, spill over into the summer months, as the window of opportunity draws to a close. The supply of homes listed for sale has been drastically reduced, housing values are once again on the upswing, and banks and governments are moving in unison toward stricter lending policies.

Markets experiencing the tightest inventory levels include Toronto (- 41 per cent); Kitchener-Waterloo
(-33 per cent); Ottawa (- 30 per cent); Victoria (- 30 per cent); Greater Vancouver (- 27 per cent); Halifax-Dartmouth (- 19 per cent); London-St. Thomas (- 18 per cent); Regina (- 16 per cent); and Winnipeg (- 13 per cent). Conditions were still balanced, but starting to tighten in Calgary, Edmonton and Saskatoon, particularly in the single-family detached category.

The highest year-over-year sales gains were reported in Greater Vancouver (152 per cent), Kelowna (121 per cent), Greater Toronto (87 per cent), Victoria (69 per cent), Hamilton-Burlington (58 per cent), London-St. Thomas (55 per cent) and Calgary (47 per cent). Western Canadian cities dominated the list of centres with the highest increases in price appreciation. These included Victoria at 25.5 per cent, Kelowna at 22 per cent, Greater Vancouver at 19.5 per cent, and Winnipeg at 17 per cent. St. John’s (23 per cent) and Toronto (19 per cent) were also among the frontrunners for price growth.

Affordability is the catalyst for the vast majority of purchasers in today’s housing market. While homeownership is still within reach in many major centres, levels are slipping. There is a growing sense, on both sides of the fence, that the time to act is now.

While buyers are taking advantage of favourable conditions, sellers too are reaping the rewards. Competing bids are a factor in the marketplace once again, with well-priced listings—especially at the entry-level price point—experiencing multiple offers. Properties priced at fair-market value will likely sell quickly for top dollar. The overall pressure on sales and price is significant across the board – and it’s not likely to subside unless more inventory comes on-stream.

The level of frustration is growing, as pent-up demand builds. For every successful offer, there are those that will walk away empty-handed. They’re thrust back into the buyer pool and the process starts all over again. Some buyers are upping the ante, while others are considering alternate housing options. Still, purchasers remain cautious in their bids, with most careful not to max out debt service ratios.

Recent revisions to lending criteria will add fuel to the fire in the short term. Buyers considering a variable rate mortgage will step up their plans for homeownership in the next month or so just to get in under the wire. In the longer term, buyers will adjust, but move forward. Compromise has long been a reality—particularly in the larger centres. This simply means they may go smaller or further in their pursuits.

It’s been a 180 degree turnaround from this time last year. It’s clear that real estate from coast to coast has roared back to life and markets are once again firing on all cylinders. The vast majority of markets are now recovered and fully-evolved, with all segments working in tandem. At the luxury price point, activity was brisk in seventy-three per cent of centres surveyed, with momentum ramping up in the remainder. Opportunity exists in some areas, but the question is for how much longer?

The local real estate market is quite active at the moment. Should you wish to discuss how the information above might impact the value of your current home or the price of a home you might be considering, please feel free to contact me at rdavison@trebnet.com or 905-330-1241. Exciting times!

Jim Flaherty’s Changes to Mortgage Qualification Rules

Finance Minister Jim Flaherty announced three changes to Canadian mortgage rules on February the 16th. These are important changes, but less important that what Mr. Flaherty did not change. There had been industry talk of increasing the minimum down payment from 5% to 10% and shortening the maximum amortization period from the available 35 years. Thankfully Jim Flaherty understood that increasing the down payment rules and shortening the amortization would potentially put the brakes on higher priced markets like Toronto, Vancouver and Calgary.

The changes that the Finance Minister did make are designed to impact real estate speculators and heavily indebted people looking to roll higher priced debt into their mortgages. The every day home purchaser should not notice much of a difference following the implementation of the changes as of April 19th, 2010. These changes impact mortgages with less than 20 per cent down that are covered by government backed mortgage insurance, in the following ways:

– Increased mortgage term used for mortgage qualification calculations. Regardless of the term or type of mortgage the consumer selects, they must qualify against the 5 year fixed rate. This is up from the 3 year fixed rate that is currently used for qualification. Once qualified against the 5 year fixed rate, the consumer can select whichever type and term of mortgage they wish. This approach will insulate borrowers from the shock of the rising rates in the future.

– Increased down payment requirements for income properties when the property is not the owner’s principal residence. Investors that purchase these investment properties will have to come up with a 20% down payment to qualify for mortgage insurance as of April 19th, 2010, instead of the 5% down payment required at the moment. Currently, very few investors would purchase a rental property with 5% down payment.

– Mortgage refinance restrictions. Home owners that are looking to roll higher priced consumer debt into their longer term, lower cost mortgage debt through refinancing will face limited access to their equity. Currently, home owners are able to take up to 95% of the equity out of their homes. As of April 19, 2010 refinancing will only be allowed to a limit of 90% of the equity of the home.

Jim Flaherty’s changes to mortgage qualification rules are slightly more restrictive than what was in place prior to his February 16th, 2010 announcement. However, he has not implemented any changes that will put healthy Canadian real estate markets in shackles. These are responsible restrictions that will help the real estate market avoid over heating and heading toward bubble territory.

Should you have any questions about this or any other piece on the 905 West Word blog please feel free to contact me at rdavison@trebnet.com or 905-330-1241.

Are You Fit To Sell? – Curb Appeal

The exterior of your home says a lot about how well your home is maintained both inside and out. When a buyer drives by your home or views photos on line this will create a lasting impression, so show them that your property is well cared for. When buyers see an attractive exterior they will be eager to stop and excited to view the interior as well. Curb appeal is the sizzle that helps to sell the steak.

Preparing your home for sale can be a daunting task. A check list can help focus your efforts in the most productive manner. Please review the list below and be as objective and realistic about the current condition of your home.

Things to consider:

[] What major repairs are needed?

[] What minor repairs are needed?

[] Make a list of what needs to be done

[] Sweep walkways, driveways, patios and decks

[] Maintain front, back and side yards

[] Add flower arrangements on your front porch, in front of your garage and on your decks and patios

[] Is your lawn lush and green?

[] What shape are your flower beds in?

[] Are there any visual distractions?

[] Are the kids toys stored neatly away?

[] What condition is your drive way in?

Committing twenty minutes to honestly review and answer each of the points above will help you increase the curb appeal of your home. Should you wish to discuss any of the points above I am always available at 905-330-1241 or by email at rdavison@trebnet.com . Best of luck!

The Regional Municipality of Halton Basement Flood Prevention Subsidy Program

A flooded basement is one of the worst surprises a homeowner can come home to realize. Water can find its way in to your home in a number of different ways. I am always an advocate of being proactive to keep your home tight and dry. As such, I feel it is important to share the news that the Regional Municipality of Halton is currently offering a Basement Flood Prevention Subsidy, for as much as $2,725.

This Subsidy is available to:

• Halton residents who have a history of basement floods caused by a backup or surcharge of the sanitary sewer system.

and

• Halton residents who have not experienced flooding but would like to correct improper storm water connections and install a backwater valve.

A surcharge is an overloaded sewer as a result of severe rainstorms. The sewers become overloaded due to excessive water flow from downspouts, weeping tiles/Foundation Drains and sump pumps that are connected to lines designated for sanitary sewer flows.

A backwater valve is a valve installed where the main-sewer clean out is located. The Mainline Fullport backwater valve is the only one that can be used in Ontario. It allows the sewer line to still vent gasses caused by positive or negative pressure, but will close to protect the home in the event of a surcharge.

What Subsidy Amounts Are Available to Homeowners?

Disconnection of Downspouts that used to tie in to the weeping system then into the sewer: ½ of all costs up to a maximum $250.

Weeping Tile Disconnection/Sump Pump Installation: ½ of the invoiced total by the contractor up to a maximum of $1,800.

Backwater Valve purchase and installation: ½ of the invoiced total by contractor up to a maximum of $675. In order to qualify for the Backwater Valve portion for the subsidy homeowners must demonstrate they do not have any downspout or weeping tile/foundation drain connections to the sanitary sewer.

The funding available for the Basement Flood Prevention Subsidy is limited and will only be distributed while funds last. This funding is also on a first come, first-served basis so be expedient in the process if you wish to take part. Would be participants start with a Household Drainage Survey to evaluate the extent of the work to be done and eligible subsidy amounts. It is worth mentioning that if you do proceed with the program reimbursement is not provided for interior finishes such as drywall, paint or flooring or exterior restoration such as landscaping, gardening, porches, decks concrete or asphalt etc;

Should you wish to proceed with this process you should contact the Program Coordinator Matt Stefanik at 905-825-6000 ext. 7918. The link below will provide all of the specific details on the Basement Flood Prevention Subsidy program. This generous offer from the Regional Municipality of Halton is time sensitive. Should you have concern about your basement flooding, call soon.

CLICK HERE for Basement Flood Prevention Subsidy Program Details Specifics

The New HST: What It Means To You.

July 1, 2010: Be sure to note that date in your Blackberry, iPhone or gadget du jour. This is the date that the new provincial harmonized sales tax (HST) is set to come into effect. In the simplest sense the HST combines the 8% PST and the 5% GST into one 13% HST. This extra 8% will apply to a list of goods and services that were previously exempt from PST.

One large item of interest will be new construction homes. New construction homes have been subject to GST since its introduction in the early 1990’s. The government did create a GST Rebate to first time home buyers of new construction to help ease the burden. With the introduction of the HST, there is an additional 8% tax added onto the price of a new construction home.

To help offset this cost, the government has created the New Housing Rebate. The rebate will be 75% of the provincial portion of the HST payable on the purchase of a new home, up to a maximum rebate of $24,000 (i.e., $400,000 purchase price × 8% provincial component = $32,000 ×75% rebate = $24,000). This results in a maximum rebate of $24,000 if a vendor spends $400,000. A recent update in legislation has made the rebate available to homes of any sale price, to a maximum of $24,000.

What will the HST mean to Ontario resale home purchasers and sellers?
Should you be purchasing or selling a home on or after July 1, 2010, it makes sense to budget an additional 8% more for legal fees, moving costs, real estate commissions, appraisals and home inspection fees to name but a few. The Ontario Real Estate Association estimates that an additional $1,449 in new taxes would be added to a transaction for a home valued at $302,354. This is estimated to add $262 million in new taxation of resale homes annually in Ontario. Even if you are not planning a move in the next couple of years, all homeowners need to take note.

The 8% PST increase in taxation will apply to services required to maintain your home as well. Many of these services would have previously been exempt from PST including utilities, home renovation labour, landscaping, snow removal and more. Should you be renting, you may think that the HST increase would not apply to you. Please take a step back and think about whether your landlord will be willing to take an 8% increase in operating costs or whether he or she might pass as much of that along to you as possible. In fact, condominium residents will experience a similar effect with maintenance fees as these 8% cost increases will need to be passed along or eventually eat away at reserve funds.

Love it or Hate it, the HST is going to be a Canadian reality as of July 1, 2010. (I have an idea which way you might be leaning.) Be aware of the looming increased costs and make smart decisions with the money you have in hand.

Please feel free to call me direct if I can be of any further assistance: 905-330-1241.