| September 2011 Market Update | ||
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With the problems in the US and Europe and the resulting economic turmoil, it is hard not to think of how these factors influence our housing market. And while it’s true that consumer confidence plays a big role in the overall health of housing, it’s important to remember that Canada continues to look like an economic oasis in a desert of bad financial news.
As you know, the US housing market has been in a severe recession for the past several years. And while there’s been talk of a possible correction in the Canadian housing market, it is unlikely we will experience anything near as painful as our neighbours to the south.
There are 3 main reasons for this.
(1) Government Tax Policies (2) Loan Qualification Policies (3) Bank Lending Policies
Government Tax Policies
The US Government has long had a policy of encouraging home-ownership. Government-sponsored entities Fanny Mae and Freddy Mac have been getting most of the headlines recently for agreeing to purchase mortgage loans that encouraged unsound lending. However, the US Government’s tax policy of allowing homeowners to deduct mortgage interest payments may be more significant, as it has encouraged Americans to maximize their debt-loads in order to minimize their tax burdens.
Canada, of course, has no mortgage tax break for homeowners, with interest payment deductions only applying to investment properties.
Loan Qualification Policies
The secondary mortgage market in the US allowed the originators of mortgages to pass on the mortgage notes to investors throughout the world. Because of this, lenders and mortgage brokers were incentivized to originate as many mortgages as possible, with little-to-no regard for risk. These perverse incentives led to ‘liar loans’ – where individuals would simply lie to their mortgage broker about their income or employment knowing that there would be no incentive to conduct a background check – and ‘NINJA loans’ – where mortgage brokers offered mortgages to individuals with No Income, No Job or Assets.
In Canada, the originators of loans (typically the Big Banks) tend to hold on to them. Because of this, the correct incentives are in place to ensure that only individuals who can afford the mortgage receive them.
Bank Lending Policies
Another unintended consequence of the secondary mortgage market in the US has been the creation of extensive Adjustable-Rate Mortgage products with attractive ‘teaser’ rates. These products allowed mortgage-holders to pay an unrealistically low rate for a period of time before ‘resetting’ to a much higher, unaffordable, rate.
In addition to this, loans in the US tend to be ‘non-recourse’ meaning that the only collateral that a lender would have on a mortgage is the house itself. In Canada, mortgages tend to be ‘full-recourse’, with many banks demanding personal guarantees. This difference has resulted in people walking away from their homes in the US at a much higher rate than in Canada.
In the end, the result of all of these policy differences means that Canada is fairly well-insulated from the carnage that is occurring south of the border. Interestingly, our conservative, low-competition banking environment may have saved our housing market from a painful downturn.
If you have any questions, please do not hesitate to contact me at 604-530-4111 or rosemary@homesinlangley.ca .
Regards, Rosemary Papp 604-530-4111 |
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September 2011 Market Update
Housing Stats
Housing starts to hold steady in 2011, 2012: Canada Mortgage and Housing Corp.
The Canadian Press
OTTAWA – Construction on new homes should hold steady for the rest of 2011 and into next year, as a robust housing market is expected to remain supported by strong employment and low mortgage rates, Canada Mortgage and Housing Corp. said Wednesday.
The agency forecasts that an average 183,200 units will be built in 2011, with about 183,900 new homes built next year.
“Housing starts have been strong in the last few months, but are forecast to moderate closer in line with demographic fundamentals,” said Mathieu Laberge, deputy chief economist for CMHC.
“Despite recent financial uncertainty, factors such as employment, immigration and mortgage rates remain supportive of the Canadian housing sector.”
Wednesday’s prediction was an upward revision from its second-quarter outlook, which suggested 179,500 housing starts would go up this year, but revised next year’s units lower from the 185,300 originally expected.
The new home market tends to follow trends in the resale market — with about a six-month lag — and the strong demand will help prop up the home building industry.
The revised forecast comes a week after the Canadian Real Estate Association, which tracks the sales of previously-owned homes, revised its forecast for national home resales up for the rest of the year, citing stronger than expected sales and higher prices in the second quarter.
CREA said sales should grow less than one per cent this year to 450,800, up from an earlier forecast that called for a one per cent dip in sales. Housing demand has been more robust than expected as interest rates remain low, enticing more buyers to take on mortgages at historically low carrying costs.
CMHC’s prediction for sales of resale homes Wednesday was slightly lower, forecasting an average of 446,700 homes, essentially the same number as in 2010. In 2012, it believes sales will rise to 458,000 units.
Both organizations say an unexpected increase in sales of high-end homes, especially in the Vancouver area, pushed average prices higher than expected in the first half of the year and expect prices to moderate slightly for the rest of 2011.
Still, both predict that prices will end the year higher than in 2010. But as the existing home market moves into a more balanced territory as the number of new listings increases, growth in the average home price on CREA’s multiple listing service is expected to be more modest in 2012, CMHC said.
Economists have said they expect home prices to fall between five and ten per cent as the real estate market cools off in 2012 once mortgage interest rates rise again.
But CMHC has revised average prices in the hot British Columbia real estate market higher for this year, due to a surge in the sale of multimillion dollar homes in the Vancouver area.
Meanwhile, Ontario will see existing home sales slow before growing modestly next year, due to economic uncertainty. http://ca.finance.yahoo.com/news/Housing-starts-hold-steady-capress-2273077208.html?x=0
What you need to know about water damage
This info comes from our friend Bjron Rygg Certified Home Inspector.
Water damage can come from a variety of sources: storms, flooding, broken water pipes and lines, leaking washing machines, and more. This can lead to mold and odor problems, and worse. If left unmitigated, water damage can eventually cause structural damage, which can entail significant costs to repair and can even affect a home’s value.
Prevention is the first defense against water damage. Here are some basics on preventing water damage and its effects:
- Water supply lines to and from washing machines and dishwashers should be regularly checked for leaks. Both the hoses themselves and the connections should be examined. Even a small leak can cause water damage over time, so any leaks should be repaired immediately. If the laundry room is located on the main floor or above, damage to the floor and ceiling below can be especially problematic.
- Tank-style water heaters are prone to leaking, especially after several years of use. Over time, the bottom of the tank can rust out, causing a serious leak. Ideally, an overflow valve should be installed that will conduct leaking water to a pipe that will drain either outside or to an appropriate interior drain.
- Another common source of water leaks is the icemaker supply line; this should be checked as well.
- Be aware that pipe leakage can occur inside the walls or ceiling and may be impossible to detect visually before damage has already occurred.
- Gutters and downspouts should be checked to ensure that water is flowing away from the home’s foundation. Make any adjustments, and check the flow again using water from a garden hose.
- Water leak detectors can be installed at floor level near water heaters and interior air conditioning units. Simple, inexpensive wireless models are widely available and will sound an alarm when water is detected on the floor near these appliances.
August 2011 Market Update
August 2011 Market Update
“There are 3 kinds of lies: Lies, Damned Lies, and Statistics”
- Mark Twain
There’s no doubt that real estate is an interesting topic of conversation for the public. The media, in an attempt to feed this appetite for real estate news,often publishes interesting pieces of real estate information that help sell papers. Due to this heavy dose of constant real estate news, it’s important to understand how the data is collected and how to interpret the information.
Below are the 3 most commonly misunderstood statistics in the media:
1) Housing starts rise 1.9%!
(http://www.vancouversun.com/life/Housing+starts+cent+June/5083165/story.html)
This shouldn’t really matter to buyers or sellers out there. While this is related to the real estate market, it is more relevant for the construction industry
than it is to the resale housing market. Remember, these are new home construction figures: not sales or pricing numbers. Unless you’re a construction
worker or materials’ supplier, this type of information is largely irrelevant to your real estate decision-making process.
2) Home sales drop 42%!
This kind of information is important for buyers and sellers to know and also helpful for realtors to use. A drop in home sales is sometimes a precursor to lower prices down the road. That said, there are a multitude of reasons that home sales could slow that wouldn’t also result in a corresponding drop in prices.
It is therefore important to remember that these are unit sale figures, not price figures. These statistics are generally also seasonally adjusted to reflect the fact that sales tend
to be slower in the winter and summer as opposed to the spring and fall. You should talk to a professional to see whether a drop in sales velocity is because of a slowing market or because of some other extraneous event.
3) Average House Prices Expected to Rise 13% this year!
(http://www.vancouversun.com/business/Home+prices+rise+cent+this+year+report/5030251/story.html)
This is the most misunderstood of the media reports that come out. Yes, it is true that Average Canadian Home Prices in 2011 will likely show a significant increase over 2010;
however, as we’re already half way through the year, much of the increase has already occurred.
Many real estate boards also release data that shows the Benchmark price of a home. This is a much more accurate look at the current state of the real estate market than the
average price. The Benchmark price is the current price of an average home in a given market area rather than the average price of all of the homes in a given market area.
The difference is subtle, but substantive. The average price simply takes the price of all units sold in a given market area and divides it by the number of units sold.
It therefore can be skewed by a strong luxury market, like the one currently being experienced in many Metro Vancouver markets.
Remember to always read real estate statistics with an eye to these issues and you’ll become a more accurate analyst of the market.
For a more complete analysis of these statistics, please feel free to contact me at the email address or phone number below.
If you have any questions, please do not hesitate to contact me at 604-530-4111 or rosemary@homesinlangley.ca .
Regards,
Rosemary Papp
What you need to know about Mortgages
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Selecting the mortgage term that’s right for you can be a challenging proposition for even the savviest of homebuyers, as terms typically range from six months up to 10 years. By understanding mortgage terms and what they mean in dollars and sense, you can save the most money and choose the term that is best suited to your specific needs. The first consideration when comparing various mortgage terms is to understand that a longer term generally means a higher corresponding interest rate. And, a shorter term generally means a lower corresponding interest rate. While this generalization may lead you to believe that a shorter term is always the preferred option, this isn’t always the case. Sometimes there are other factors – either in the financial markets or in your own life – that you will also have to take into consideration when selecting the length of your mortgage term. If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer mortgage term, such as five or 10 years, so that you can ensure that you will be able to afford your mortgage payments should interest rates increase. |
By the end of a five- or 10-year mortgage term, most buyers are in a better financial situation, have a lower outstanding principal balance and, should interest rates have risen throughout the course of your term, will be able to afford higher mortgage payments.
If you’re shopping for a mortgage for an investment property, you will likely want to consider choosing a longer mortgage term – depending, of course, on your overall plan. This will allow you to know that the mortgage payments on the property will be steady for a long time and enable you to more accurately project your future income from the property. As well, if you know you will not be staying in the same home for the next five or 10 years, opting for a shorter term can save you significant fees when it comes to early payout penalties. Choosing the right mortgage term is a unique decision for each individual. By understanding your personal financial situation and your tolerance for risk, I can assist you in choosing the mortgage term that will work best for your situation. As always, if you have any questions about mortgage terms or your mortgage in general, I’m here to help! |
| Both an appraisal and a home inspection are important steps of the home-buying process, so it’s well worth your effort to distinguish the differences between them and how they can uncover detailed information about the home’s value and condition.
Appraisal The essential elements of a home appraisal report include information and data related to the overall condition of the property, the neighbourhood, variables that contribute to the sale of similar homes and the time spent in selling similar properties. The appraisal report |
may be presented as a comparable sales analysis or a cost assessment of value.
Home Inspection While an appraisal is intended to provide the lender with sufficient information to decide on mortgage financing, a home inspection will hopefully reveal to a potential homebuyer whether the building and its systems are in sound working order. If there are outstanding issues, a good inspector will provide the potential purchaser with a schedule outlining the estimated costs and a timeline detailing when these repairs will need to be completed. |
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*Thank you to our friend Lori Watson from Dominion Lending Centres for providing the above information!
Give your interiors a facelift
One thing to always keep in mind when searching for a new home is to see the potential. Interiors can always be changed. If the home has good bones but bad wallpaper and carpet don’t cross it off the list. Just because the present owners love carpeting in the bathroom and avocado green countertops doesn’t mean that you have to. And it doesn’t have to cost a fortune to change them.
Let’s start with kitchen cabinets. There is a lot of options to update those tired cabinets. A few simple coats of paint will do wonders. Don’t believe me?
http://www.diynetwork.com/how-to/repainting-kitchen-cabinets/index.html
If your cabinets are stock size you may also want to consider purchasing some new cabinet fronts or mixing in a few glass fronted cabinets with the ones that you already have.
http://www.ikea.com/ms/en_CA/rooms_ideas/kitchen_howto/NA/renew_your_kitchen.html#lnk-2-2
Now for countertops. If a new one isn’t in your budget consider painting the one you have. Now this is no ordinary paint. This will wear well, be inexpensive and look like granite! too good to be true? nope!. Giani Granite paint for countertops really is that good. Check it out
http://www.gianigranite.com/photogallery.html
On to flooring. If you love the look of wood but don’t want to worry about spilling water (which always happens in a kitchen, at least it does in mine!) check out some Vinyl flooring that looks like wood
http://www.homedepot.ca/product/allure-plank-mellow-wood/915967
It’s easy to install and extremely cost effective.
Paint is one of the easiest ways to update and personalize a space. When shopping for paint I really believe in going with a good quality paint. Although the price per gallon may be higher, a quality paint will go on in one to two coats which will save you time and energy. One paint that works every time is Benjamin Moore.
Check out their site for some really great tips on how to change the look of your space with colour.
Of course what really makes a house a home is the people in it. Give them each a paintbrush and put them to work! 
Happy July!
Summer Home Maintenance
This comes from our friend Bjorn Rigg from Pillar to Post Registered and Certified Home Inspector
Welcome Summer! Here is some great ideas for keeping your home in top shape during the hot months.
OUTDOORS
- Inspect siding for cracks and make any needed repairs.
- If paint is peeling, cracking, or chipped, repair and repaint now to limit damage to the underlying materials.
- Repair any damaged caulking around windows and doors.
- Remove window screens and clean with a soft brush and soapy water. Repair any holes or tears before reinstalling.
- Have air conditioning units serviced to ensure good operation. Promote good air circulation around the unit by keeping shrubs and plants trimmed.
- Clear debris from gutters and eaves to allow rainwater to drain properly
- Seal cracks in the driveway and keep walkways clear of debris and overgrown plants
- Test irrigation/sprinkler systems and replace any broken sprinkler heads or emitters. Check for proper water coverage and adjust if necessary.
- Power wash decks and patios and seal surfaces as appropriate.
INDOORS
- Vacuum refrigerator coils to help maintain energy efficiency.
- Empty dehumidifier pans and clean hoses according to the manufacturer’s instructions.
- If possible, take area rugs outside and hang them over a deck or porch rail to air out.
- Adjust ceiling fans for proper balance.
- Change filters in window-mounted air conditioning units.
- Switch heavy bedding out for lightweight summer fabrics. Have the winter bedding cleaned before storing.
- Close the chimney flue to prevent insects from entering and to help keep cool air in.
- Repot houseplants to give their roots a fresh start for the summer.
- Check door and cabinet hinges and lubricate any that stick or squeak.
- Open windows on cooler days to keep fresh air flowing throughout the home.
For more ideas on how to keep your home in tip top shape visit me on Facebook www.facebook/homesinlangley.com
-Rosemary
The ultimate staycation
Ahhhhh Summer. Kids out of school, long days and nights, bbq and of course, Summer Vacation.
If the idea of Airline strikes and overbooked theme parks don’t get you excited why not vacation close to home. I’m not talking a Ferry ride to Victoria, i’m talking an adventure. Close to home.
British Columbia has some of the most beautiful Mountains and Ocean in the world. You’ve probably spent time exploring lot’s of them but here are a few that you might not be aware of.
Outa-the-Woods
This is the Treehouse that you could only dream about as a child. 2 stories tall with kitchen, bedrooms, bathrooms and every other comfort of home this is a truly unforgetable escape in the East Kootenays.
http://www.outathewoods.com/
Ghost Town
Yep we got ‘em. Located near Quesnel Forks, this abandoned town was once the largest city on the BC Mainland. Today it’s being restored piece by piece and offers a glimpse of days gone by.
http://en.wikipedia.org/wiki/Quesnel_Forks,_British_Columbia
3 Valley Gap
Surely one of the most beautiful spots. 3 Valley Gap is not only a stunning resort but also plays host to a fully restored Ghost Town next door. There is something for every member of the family here.
http://www.3valley.com/
For Adults Only (Hey, we get one too!)
Swollow Tail Tours
All inclusive Okanagan Culinary Tour. Imagine a 3 day trip where your every need is seen to by your wine expert and personal chef! your days are spent visiting exclusive Okanagan Winery’s and your nights enjoying 4 course meals.
http://www.swallowtailtours.com/culinary-ok-3day.php
Of course this list comes no where close to all the many amazing things that our Province has to offer. If you want to share your favorite getaway with me I would love to hear it!
Happy Summer!
Weekly Rate Minder
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Weekly Rate Minder
These rates come courtesy of Lori Watson of Dominion Lending Centres
Email: LWatson@MyMortgageSpecialist.ca
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