7 Feb

RESIDENTIAL MARKET UPDATE

General

Posted by: Adriaan Driessen

Industry & Market Highlights 
Federal Policy Impacts on Canadian Housing Markets

Housing markets across Canada slowed significantly in 2018 as a result of higher interest rates coupled with mortgage stress tests and other policy changes that have constrained homebuying.

Mortgage Professionals Canada’s latest consumer research report, Annual State of the Residential Mortgage Market in Canada, examines the negative impacts of federal policies on housing markets across the country.

Report author and Mortgage Professionals Canada Chief Economist, Will Dunning, shares how policy changes are disqualifying potential first-time homebuyers and creating considerable pressure on the rental market, which is in turn driving rental prices higher. The reduction of activity in the housing market and extremely low rental vacancy rates have had significant consequences on homebuyers and renters, as well as employment and the overall economy.

The report illustrates that, as President and CEO Paul Taylor has discussed with policymakers, a more reasonable stress test level and lending restriction reforms are now needed to strike a better balance for borrowers and policymakers, improving housing affordability and Canada’s economy.  Read the FULL REPORT HERE.

2018 Q4 Data Now Available

Mortgage Professionals Canada and its Chief Economist Will Dunning produce monthly Housing Market Digests to provide a snapshot and trend analysis of the Canadian – and respective regional – housing markets, content that includes information around housing starts, the resale market, employment trends, interest rates, and more.

Get fourth quarter housing market information for Canada and each province including resale market data, housing stats, employment trends and interests rates from the latest Housing Market Digests here.

As goes housing, so goes the economy

The pundits have been saying for quite some time that the slowdown in Canada’s housing market is going to have a negative effect on the country’s Gross Domestic Product.  That prediction appears to have come true.

For the past several years housing has been one of the few things that has helped keep the economy afloat.  But it is now clear that rising interest rates and restrictive government policies are supressing the housing market.  The Bank of Canada estimates the slowdown in residential housing investment will represent a -0.1% hit to the overall economy.

It is not a big blow, but it crosses the line into negative territory.  Previous projections had residential housing investment continuing to make a positive contribution of +0.1%.

Many market insiders see this as proof that the federal B-20 guidelines are too heavy-handed and are having an unnecessarily harsh effect on home ownership.  They believe the market decline will take an even bigger bite out of GDP and that there is the real threat of a recession.

Now that it has been about 18 months since the BoC started raising its key interest rate, the effects of the increases are being felt in the greater economy.  Some forecasters predict other sectors are going to experience significant slowdowns as debt-laden consumers adjust to the higher cost of paying back their loans.

Housing: An early election issue 

Housing appears to be taking root as a key issue in upcoming federal election.

We got a preview of that when NDP leader Jagmeet Singh hinted at what an NDP government would do as he launched his campaign in a British Columbia by-election.

Singh was light on details but said his Party’s program would get 500,000 affordable housing units built over a 10 year period.  He also called for the elimination of the GST on the construction of affordable housing, and a doubling of the first-time buyer’s tax credit to $1,500.

In the 2015 election the current Liberal government came to power, in part, on a pledge to revamp Canada’s National Housing Strategy and entrench the “right to housing”.  It also promised to help the middle class and those working to join it.  Presumably that included making sure housing would remain affordable for those buyers.

Steps taken by the Liberals since then have fallen short according to critics and the political opposition.  More than a year ago the Liberals unveiled their $40 billion, 10-year strategy for housing and launched ongoing consultations.  But advocates say the government has gone quiet on the issue of the right to housing.  Many feel it is now too late to get legislation passed before Parliament rises in June, ahead of the October election.  The Liberals says they have spent nearly $6 billion building and repairing affordable housing, so far.

Overall housing affordability for the middle class also remains an unresolved concern.  Rising interest rates, taxes, fees and financial stress tests are seen by many as undue impediments to middle class home ownership.

A recent poll by Abacus Data suggests the price of housing is a top issue for millennials, who will outnumber baby boomers when Canadians vote in the fall.

Mortgage Professionals Canada is renewing its call for action to help millennials and other first-time buyers.  The association estimates government stress tests will have affected 200,000 families by the time the October election is held; having either reduced or completely eliminated their home purchasing power.

MPC has put forward a proposal that would make the current B-20 rules less onerous by reducing the stress test interest premium to just 0.75%, from the current 2.0%.

B-20 Guidelines for Private Mortgages  

A number of media outlets picked up a story published by Reuters that opened with:

Canada is considering subjecting private lenders to the same mortgage stress test rules faced by banks to prevent housing markets from being destabilized by the lenders’ rapid growth, three sources with direct knowledge of the matter said.

We contacted the Ministry of Finance directly for comment and were advised by a senior ministry official that these reports are unsubstantiated. The Ministry official confirmed that they are not currently considering any regulation of private lending. We were told to advise our membership that this article should not be interpreted as the ministry “sending a signal”.

The Ministry continues to monitor the mortgage marketplace, but at this time, any suggestion of the extension of B-20 Guidelines or equivalent to private lending is unsubstantiated.

Mortgage Professionals Canada continues to be in regular contact with the Ministry and government agencies and we will keep you informed should there be any change in this matter.

Economic Highlights

 

Weekly Bottom Line

Summary of recent economic events and what to expect in the weeks ahead.

U.S. Highlights

•Financial markets extended their gains this week. The re-opening of the U.S. government, the dovish FOMC statement, progress in the U.S.-China trade talks and a strong January payroll report all helped to boost sentiment.

•Global growth concerns persisted this week, but the U.S. economy continued to move along nicely. The labor market added 304k new jobs in January, and the ISM manufacturing index improved after a sharp decline in December.

•Even as domestic economic performance remains solid, global growth slowdown did not go unnoticed by the FOMC. The Committee left the fed funds rate unchanged, and went to great lengths to emphasize patience.

Canadian Highlights

•Canada’s economy contracted 0.1% in November as the energy sector weighed on growth. Real GDP is tracking a modest 1% (annualized) for the fourth quarter as a whole.

•A “patient” Federal Reserve will mean an even more patient Bank of Canada. Canada’s outlook is even cloudier than that stateside, providing numerous reasons for caution from the central bank.

•In a speech this week, Deputy Governor Wilkins noted that the oil shock is coming through not only on the unemployment rate but also the pace of wage growth. Until there is some clarity on the path of global growth, expect the Bank of Canada to remain on the sidelines.

Inflation: Just a blip on the radar  

Inflation has popped back onto the market watcher radar, but it does not appear to be much of a threat.

Statistic Canada’s headline number for December came in at 2%.  That increase was actually held in check by lower prices at the pumps.  With gasoline taken out, headline inflation jumped to 2.5%, year-over-year.  That seems like a significant increase given that November inflation clocked-in at 1.7% and the expectation for December was for the same, 1.7%.

The two big drivers of inflation were a nearly 30% increase in airfares and a 15% jump in the price of fruits and vegetables.  Both of these can be explained as seasonal variations, with the December spike in holiday travel and the usual wintertime reliance on imported produce.

The Bank of Canada is unlikely to be moved to make any interest rate adjustments though.  The average of its three measures of core inflation – which factor out volatile items like food and fuel – put the December rate at 1.9%.  That remains right in the middle of the Bank’s target range and is in line with its projections for 2019.

Of note to mortgage brokers, StatsCan also singled-out a 7.5% increase in mortgage interest rates as a factor in the jump in inflation.  However, that is proving to be something of a moot point as Canada’s big banks appear to be starting a round of cuts to their 5-year fixed rates.

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates are on hold. Some lenders are offering special promotional rates to try and take more market share.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.

Other Industry News & Insights
Roundup of the latest mortgage and housing news. 
From Mortgage Professionals Canada. 
There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.
18 Jan

RESIDENTIAL MARKET UPDATE

General

Posted by: Adriaan Driessen

Industry & Market Highlights 
CMHC
The Bank of Canada left the overnight benchmark policy rate at 1-3/4%, as expected. In another dovish statement, the Bank of Canada acknowledged a slowdown in global economic activity and highlighted that oil prices are roughly 25% lower than what they had assumed in the October Monetary Policy Report (MPR). The lower prices primarily reflected sustained increases in U.S. oil supply and increased worries about global demand, especially in light of a potential U.S.-China trade war (see oil chart below).
The Bank also commented that these worries had been mirrored in bond and stock markets. Credit spreads off Treasuries have widened, and stock markets have sold off around the world (see chart below). Equity prices and bond yields have declined in the face of market unease over global growth. Volatility has risen, and corporate credit spreads have widened sharply. A tightening of corporate credit conditions is particularly evident in the North American energy sector reflecting the decline in oil prices.
Weak oil prices negatively impact the Canadian economic outlook and “transportation constraints and rising production have combined to push up oil inventories in the west and exert even more downward pressure on Canadian benchmark prices. While price differentials have narrowed in recent weeks following announced mandatory production cuts in Alberta, investment in Canada’s oil sector is projected to weaken further.”
The Bank acknowledged that the economy is running close to potential, unemployment is at a 40-year low and trade will likely improve with the weak dollar, the trade deal with Mexico and the U.S. (now dubbed “CUSMA”) and federal tax measures to target investment. Nevertheless, consumer spending and housing investment “have been weaker than expected as housing markets adjust to to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates. Household spending will be dampened further by slow growth in oil-producing provinces.”
The contribution to average annual real economic growth from housing investment has been revised down to -0.1% this year from the +0.1% forecast in October.
The Bank of Canada revised down its forecast for real GDP growth in 2019 to 1.7%–0.4 percentage points lower than the October outlook. According to the Bank, “This will open up a modest amount of excess capacity, primarily in oil-producing regions. Nevertheless, indicators of demand should start to show renewed momentum in early 2019, leading to above-potential growth of 2.1% in 2020.”
Inflation remains close to 2%, the central bank’s target, having fallen to 1.7% in November, due to lower gasoline prices. While low gasoline prices will depress inflation this year, the weak Canadian dollar will have an offsetting impact on the CPI. On balance, the bank sees inflation returning to around 2% by late this year.
Considering all of these factors, the Governing Council continues to judge that the benchmark policy rate will need to rise over time to a neutral range to achieve the inflation target. “The appropriate pace of rate increases will depend on how the outlook evolves, with a particular focus on developments in oil markets, the Canadian housing market, and global trade policy.”
Bottom Line: The Bank of Canada for the first time admits in today’s MPR that the slowdown in the housing market has been more dramatic than the Bank’s staff had expected. The January MPR states, “provincial and municipal housing market policies, the tighter mortgage finance guidelines and higher mortgage rates continue to weigh on housing activity. Slowing of activity in some markets has been associated with less speculative activity. As a result, it is difficult to evaluate the sensitivity of non-speculative demand to the various policy changes. Monthly indicators have signalled that spending on housing likely contracted again in the fourth quarter. Weaker-than-expected housing activity in recent months and staff analysis suggest that the combined effect of tighter mortgage guidelines and higher interest rates has been larger than previously estimated. The Bank will continue to monitor developments in housing markets to assess how construction is adjusting to the shift in demand toward lower-value units.”
The Bank see less urgency to raise interest rates as the economy copes with slumping oil prices and weak housing markets. The five interest rate hikes since mid-2017 are having a more substantial impact on spending than the Bank expected. A short-term pause in rate hikes is now likely. The economy slowed considerably in the fourth quarter of last year, which will continue in the first quarter of this year owing to the decline in oil prices and the Alberta government’s implemented oil production cuts.
While it is unlikely that the Bank is finished its tightening this cycle, expect rates to remain steady until we see solid evidence of a rebound in the oil sector and in housing as interest-rate sensitivity of Canadians is at historical highs.
Real Estate Statistics for December 2018 London St. Thomas  
London and St. Thomas Association of REALTORS® (LSTAR) announced 439 homes* were sold in December, up 2.1% over December 2017 and right on par with the 10-year average. The number of home resales for the year was 9,799, down 13.3% compared to 2017, which set a record year for residential real estate.
“One of the trends that stood out in December was the sales-to-new listings ratio, which was 108.1% across the region,” said Jeff Nethercott, 2018 LSTAR President. “It’s a statistic the Canadian Real Estate Association (CREA) says represents conditions in the marketplace that favour sellers (a ratio between 40% and 60% is generally consistent with a balanced market). In London, the sales-to-new listings ratio was 119.7%, while in St. Thomas it was 100.0%.”
December also saw average home sales price make steady gains in LSTAR’s jurisdiction. In London, the average sales price was $375,782, up 13.4% from last December, while it was $304,079 in St. Thomas, an increase of 0.7% from December 2017.
“Looking at specific areas, London South (which also includes data from the west side of the city) had an average sales price of $421,044 in December, up 16.2% compared to the same period last year and achieving its highest average sales price in the last 10 years,” Nethercott said. “In London North, the average sales price was $426,831, up 16.6% from December 2017, while in London East it was $284,100, up 7.0% compared to last December.”
“Overall, it was a very solid year for home resales in London and St. Thomas,” Nethercott said. “The activity in 2018 performed well above the 10-year average, despite the record low inventory levels seen in the marketplace the entire year. As we kick off 2019, I believe home sales will continue to be strong and be a driving force to the local economy.”
The following chart is based on data taken from the CREA National MLS® Report for November 2018 (the latest CREA statistics available). It provides a snapshot of how average home prices in London and St. Thomas compare to other major Ontario and Canadian centres.
By The London and St. Thomas Association of REALTORS® (LSTAR).
CMHC 
Statistics released by the Canadian Real Estate Association (CREA) show that national home sales dipped for the fourth consecutive month, down 2.5% from November to December, capping the weakest annual sales since 2012. According to last week’s Bank of Canada Monetary Policy Report, housing activity in Canada has fallen by more than the Bank’s economists had expected owing to tighter mortgage-qualification restrictions and rising interest rates.
Monthly declines in home sales since September have fully reversed their summer rally and returned monthly sales to near their lowest level since early 2013.
Transactions declined in about 60% of all local markets in December, led by lower activity in Greater Vancouver, Vancouver Island, Ottawa, London & St. Thomas, and Halifax-Dartmouth, together with a regionally diverse mix of other large and medium-sized urban centres.
On a not seasonally adjusted basis, actual activity was down 19% year-over-year in December 2018 and stood almost 12% below the ten-year average for the month. Sales were down from year-ago levels in three-quarters of all local markets, led overwhelmingly by the Lower Mainland of British Columbia, the Okanagan Region, Calgary, Edmonton, the Greater Toronto Area and Hamilton-Burlington. Sales had been boosted in December 2017 by homebuyers rushing to purchase before the new federal mortgage stress test took effect at the beginnng of this year.
The Bank of Canada forecasts that the housing market will remain soft this year, undermining economic growth as the mortgage stress test has rendered housing unaffordable for many potential homebuyers.
New Listings
The number of newly listed homes remained little changed (+0.2%) from November to December, with declines in close to half of all local markets offset by gains in the remainder.
With sales down and new listings steady in December, the national sales-to-new listings ratio eased to 53.3% compared to 54.8% in November. This measure of market balance has remained close to its long-term average of 53.5% since the beginning of 2018.
Based on a comparison of the sales-to-new listings ratio with the long-term average, about two-thirds of all local markets were in balanced market territory in December 2018.
There were 5.6 months of inventory on a national basis at the end of December 2018. While this remains close to its long-term average of 5.3 months, the number of months of inventory has swollen far above its long-term average in Prairie provinces as well as in Newfoundland & Labrador. By contrast, the measure remains well below its long-term average in Ontario and Prince Edward Island. In other provinces, sales and inventory are more balanced.
Home Prices
The Aggregate Composite MLS® Home Price Index (MLS® HPI) was up 1.6% y/y in December 2018. The increase is smaller but still broadly in line with y/y gains posted since July.
Following a well-established pattern, condo apartment units posted the largest y/y price gains in December (+4.9%), followed by townhouse/row units (+3.1%). By comparison, two-storey single-family homes posted a small increase (+0.4%) while one-storey single-family home prices eased slightly (-0.3%).
Trends continue to vary widely among the 17 housing markets tracked by the MLS® HPI. Results were mixed in British Columbia. Prices are now down on a y/y basis in Greater Vancouver (-2.7%) but remain above year-ago levels in the Fraser Valley (+2.5%). Meanwhile, prices posted a y/y increase of 6.4% in Victoria and rose 11% elsewhere on Vancouver Island.
Among housing markets tracked by the index in the Greater Golden Horseshoe region, MLS® HPI benchmark home prices were up from year-ago levels in Guelph (+6.8%), the Niagara Region (+6.8%), Hamilton-Burlington (+6.4%), Oakville-Milton (+3.3%) and the GTA (+3%). Home prices in Barrie and District remain slightly below year-ago levels (-1.1%).
Across the Prairies where supply is historically elevated relative to sales, benchmark home prices remained below year-ago levels in Calgary (-3.2%), Edmonton (-2%), Regina (-5.2%) and Saskatoon (-1.2%). The home pricing environment is likely to remain weak in these housing markets until elevated supply reflective of the weak oil market is reduced and becomes more balanced in relation to demand.
Home prices rose 6.9% y/y in Ottawa (led by an 8.3% increase in townhouse/row unit prices), 6% in Greater Montreal (driven by a 9.1% increase in townhouse/row unit prices) and 2.5% in Greater Moncton (led by a 12.2% increase in townhouse/row unit prices). (Table 1, unfortunately, CREA did not update the table with December data as of this writing).
Bottom Line
We are likely in store for a prolonged period of modest housing gains in the Greater Golden Horseshoe, stability or softening in British Columbia and further weakening in the Prairies, Alberta, and Newfoundland & Labrador.
Sluggish sales and modestly rising prices nationally are likely in store for 2019. While there will still be some significant regional divergences, there is no need for further policy actions to affect demand.
By Dr. Sherry Cooper.  Chief Economist, Dominion Lending Centres
Economic Highlights

 

Canadian Jobs Market Remains Tight in December, but Wage Growth Disappoints
Statistics Canada released its December Labour Force Survey this morning showing modest job gains and an unemployment rate that remains at a record-low 5.6%. The economy generated 9,300 net new jobs in December, a small increase following a record 94,100 jump in the prior month. However, December’s rise beat economists’ expectations of 5,500 jobs and a jobless rate of 5.7%. All of the tepid increase last month was in part-time and self-employment, a general sign of weakness. Full-time work fell in December for the first time in three months, and wages remained sluggish.
In December, employment rose in Newfoundland and Labrador, while it fell in Alberta, New Brunswick and Prince Edward Island. There was little change in net new jobs in other provinces.
Increases were recorded in manufacturing, transportation and warehousing, as well as in health care and social assistance. There were job losses in wholesale and retail trade, especially in Ontario.
For all of 2018, the economy added 163,300 jobs, all of them full-time, for a 0.9% rise representing a significant slowdown from the pace of job growth in 2017 when the economy was much stronger. In 2017, the economy grew at a 3% rate–the strongest in the G7–compared to only about 2% last year. Employment rose by an out-sized 427,300 in 2017 and has average annualized gains of 225,000 workers since 2010.
With the unemployment rate falling to its lowest level since comparable data collection began in January 1976, it is not surprising that labour shortages are emerging and businesses are having trouble filling job openings. What is surprising is the tepid pace of wage growth. Even with the very tight labour market, December’s wage growth reading was a weak 1.49% annual rate, well below the inflation rate (see chart below). Year-over-year average hourly wage growth for permanent workers was only 1.46%, decelerating steadily since its May peak of 3.9%.
In direct contrast, today’s release of nonfarm payroll data in the U.S. for December showed a stellar 312,000 job gain, and average hourly pay improved 3.2% from a year ago–well above the inflation rate–and up from average wage growth of 2.7% at the end of 2017.
December Housing Reports Show Plummeting Home Sales in 2018 in Toronto and Vancouver
In separate releases, the local real estate boards in Canada’s largest housing markets released data this week showing home sales fell to decade lows in 2018 reflecting rising interest rates and stricter mortgage rules.
Sales in the GTA fell 16% in 2018 while the average price declined 4.3%, the Toronto Real Estate Board reported today. That is the worst year for sales in Canada’s largest city since the financial crisis in 2008. In Vancouver, full-year sales fell 32%, the lowest since 2000 and 25% below the 10-year average. Prices in Vancouver for detached homes in some areas dropped at least 10%.
Sales in both cities dived in the first half of 2018 after the federal government imposed more stringent qualifying rules for mortgages. Vancouver sales continued to suffer even while Toronto began to recover in the second half, as the British Columbia government introduced more measures to deter speculation. The BC government in its 2018 budget increased the foreign buyers’ tax and added a speculation tax, which in addition to rising interest rates dampened sales, especially for more expensive single-family homes.
New listings were down in Toronto last month as homeowners have decided to stay put for now rather than attempting to cash out.  By Dr. Sherry Cooper. Chief Economist, Dominion Lending Centres
Mortgage Interest Rates
Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates are on hold.  A few lenders are brining out special promotional lower fixed rates to try and increase market share. Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.
Other Industry News & Insights
Roundup of the latest mortgage and housing news. 
From Mortgage Professionals Canada. 
There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.
 
Adriaan Driessen
Mortgage Broker 
Dominion Lending Forest City Funding 10671
Cell:     519.777.9374
Fax:      519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3
Lori Richards Kovac
Mortgage Agent & Administrator
Dominion Lending Forest City Funding 10671
Cell:     519.852.7116
Fax:      519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3
Adriaan Driessen
Sales Representative & Senior Partner
PC275 Realty Brokerage
Cell:     519.777.9374
Fax:      519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3

 

By Dr. Sherry Cooper. Chief Economist, Dominion Lending Centres

24 Dec

Residential Market Update

General

Posted by: Adriaan Driessen

WEEKLY RESIDENTIAL  MARKET UPDATE 

Industry & Market Highlights 

Behind Us – Ahead of Us  

Thank you for a wonderful and crazy year.  It is a privilege to be part of your beautiful lives.  Wishing you and your loved ones a wonderful Christmas holiday season and a prosperous new year!

End of the year is a great time to reflect on the year behind us, to consider our victories and our losses, and to plan for what lies ahead of us.  If have not yet set you business plan for 2019, now is the time.   If you fail to plan, you plan to fail.  Plan your success, and work your plan!

 

2018 Year in Review – The Year Everything Changed

Every year, somewhat controversial economist David Collum writes a detailed “Year in Review” synopsis full of keen perspective and plenty of wit. This year’s is no exception.  It’s a long post and a very interesting read with loads of good information.  Read the full article here.  A downloadable pdf of the full article is available here.  He got one thing wrong with this statement: “We’re all doomed to burn in eternal hell, but I can only say that so many years in a row before it starts getting old.”  Here’s something way more important that he missed. The eternal lake of fire is reserved for those who oppose and reject their free gift or redemption and salvation of their eternal souls.  Then He will say to those on his left, ‘Depart from me, you who are cursed, into the eternal fire prepared for the devil and his angels.  It was also about these that Enoch, the seventh from Adam, prophesied, saying, “Behold, the Lord comes with ten thousands of his holy ones, to execute judgment on all and to convict all the ungodly of all their deeds of ungodliness that they have committed in such an ungodly way, and of all the harsh things that ungodly sinners have spoken against him.”  But to all who did receive him, who believed in his name, he gave the right to become children of God.  For God so loved the world that he gave his one and only Son, that whoever believes in him shall not perish but have eternal life.  The Roman Empire got the birth of Christ Jesus wrong when they incorporated Christ mass into traditional pagan festivals celebrated on December 25th.  His Actual birth is estimated to be in early April 4-6 BC based on historical accounts.  Reach out to me if you have questions about this.

 

A softened stance on future rates hikes

Back in October it was “clear sailing, all ahead full”.  Now the forecast is calling for headwinds and choppy seas and poor visibility.

When the Bank of Canada bumped its trend setting rate to 1.75% the economic statement spoke of full capacity, full employment, growing wages and rising inflation.  The Bank and market watchers were confident interest rates would continue their measured, upward march.

But that straight path has taken a turn, and in December the BoC did not move up, it stepped aside.

In the main, the central bank is being dictated by international developments.  Expanding trade disputes, obstructive tariffs and falling oil prices are weighing on the Canadian economy.  The uncertainty has led to a pull-back in business investment and projections for GDP growth have been reduced.

The Bank has shifted away from saying the economy is operating “at” capacity and is now being vaguer, saying the indicators show the economy is operating at “close” to capacity.  In the language of central bankers that is a very wide gap.

The Bank of Canada has also softened its stance on future rate hikes.  It had been saying rates would have to climb to their neutral level – neither stimulating nor retarding the economy.  Now it says rates will have to rise into the neutral range.  The Bank is not saying what that range is, only that we will know it when we see it.  Given the inflation forecast we may be much closer to that range than previously thought.  By First National Financial. 

 

No mandatory home energy audits  

Final nail in the coffin of mandatory home energy audits.   Mandatory home energy audits were a costly program proposed by the previous government that would have cost home sellers thousands of dollars in equity and punished REALTORS® – forcing you to post results of your clients’ energy audit on MLS® before you could list a property.

Premier Doug Ford announced at the Ontario REALTOR® Party Conference that the Ontario government has officially put an end to the program. He also called OREA a trusted advisor, complimented real estate professionals in general and sent a clear message that his Government values affordable home ownership for families across Ontario.

This is another big government relations win for REALTORS® that protects the dream of home ownership in Ontario!  By OREA Ontario Real Estate Association. 

 

Economic Highlights

 

CMHC  

Statistics released today by the Canadian Real Estate Association (CREA) show that national home sales dipped for the third consecutive month, down 2.3% from October to November and down a whopping 12.6% year-over-year. Transactions declined in just over half of all local markets, with lower activity in the Greater Toronto Area (GTA), the Greater Vancouver Area (GVA) and Hamilton-Burlington offsetting increased sales in Edmonton. Sales were down from year-ago levels in three-quarters of all local markets, including the Lower Mainland of British Columbia, Calgary, the GTA and Hamilton-Burlington.

These data suggest a double-digit national sales decline in 2018, falling to its lowest level in five years even though the economy is reaching full employment. Next year’s growth in sales and prices will likely be moderated by recent policy changes from different levels of government, in addition to upward pressure on interest rates.

Many had expected a rebound in sales in British Columbia, but so far it has not materialized. The rebound in sales in Ontario last summer has now run its course and activity in Alberta has edged lower. Housing transactions in Quebec, in contrast, were strong.

New Listings

The number of newly listed homes fell by 3.3% between October and November, with new supply declining in roughly 70% of all local markets.

With new listings having declined by more than sales in November, the national sales-to-new listings ratio tightened slightly to 54.8% compared to 54.2% in October. This measure of market balance has remained close to its long-term average of 53.4% since the beginning of 2018.

Based on a comparison of the sales-to-new listings ratio with the long-term average, about 60% of all local markets were in balanced market territory in November 2018. There were 5.4 months of inventory on a national basis at the end of November 2018. While this remains in line with its long-term average of 5.3 months, the number of months of inventory is well above its long-term average in the Prairie provinces as well as in Newfoundland & Labrador. By contrast, the measure is well below its long-term average in Ontario, New Brunswick and Prince Edward Island. In other provinces, sales and inventory are more balanced.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) was up 2.3% y/y in October 2018, down once again on a month-over-month basis.

Following a well-established pattern, condo apartment units posted the largest year-over-year price gains in November (+6%), followed by townhouse/row units (+4%). By comparison, one-storey single-family homes posted a modest increase (+0.4%) while two-storey single-family home prices held steady (+0.1%).

Trends continue to vary widely among the 17 housing markets tracked by the MLS® HPI. In British Columbia, home price gains have been steadily diminishing on a y/y basis in the Fraser Valley (+4.7%) and Victoria (+7.2%). By contrast, price gains picked up elsewhere on Vancouver Island (+12.6%) and, for the first time in five years, were down (-1.4%) from year-ago levels in the GVA. On a month-over-month basis, prices fell 1.9% in Greater Vancouver in November, the most since 2008, adding to the recent series of price declines in Canada’s most expensive housing market.

Among housing markets tracked by the index in the Greater Golden Horseshoe region, MLS® HPI benchmark home prices were up from year-ago levels in Guelph (+9.3%), the Niagara Region (+7.2%), Hamilton-Burlington (+6.3%), Oakville-Milton (+3.4%) and the GTA (+2.7%). Meanwhile, home prices in Barrie and District remain below year-ago levels (-2.1%).

Across the Prairies, benchmark home prices remained below year-ago levels in Calgary (-2.9%), Edmonton (-1.9%), Regina (-4%) and Saskatoon (-0.3%). Excess supply of listings relative to demand will continue to put downward pressure on prices until economic activity in the region strengthens.

In contrast, home prices rose 6.6% y/y in Ottawa (led by a 7.3% increase in two-storey single-family home prices), 6.2% in Greater Montreal (driven by a 9.4% increase in townhouse/row unit prices) and 4.2% in Greater Moncton (led by an 11.2% increase in townhouse/row unit prices). (Table 1)

The actual (not seasonally adjusted) national average price for homes sold in November 2018 was just over $488,000, down 2.9% from the same month last year.

Sales in Greater Vancouver and the GTA, two of Canada’s most active and expensive markets, bias upward heavily skew the national average price. Excluding these two markets from calculations cuts almost $110,000 from the national average price, trimming it to just over $378,000.

Bottom Line

We are likely in store for a prolonged period of modest housing gains in the Greater Golden Horseshoe, stability or softening in British Columbia and further weakening in the Prairies, Alberta, and Newfoundland & Labrador.

The Canadian housing market has slowed considerably since mid-2017 and is ending the year on a quiet note. Two offsetting forces are impacting housing—strong population growth and rising rates. Sluggish sales and modestly rising prices nationally are likely in store for 2019. While there will still be some significant regional divergences, there is no need for further policy actions to affect demand.  By Dr. Sherry Cooper.  Chief Economist, Dominion Lending Centres. 

 

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates are on hold.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

Adriaan Driessen

Mortgage Broker 

Dominion Lending Forest City Funding 10671

Cell:     519.777.9374

Fax:      519.518.1081

riebro@me.com

www.iMortgageBroker.ca

415 Wharncliffe Road South

London, ON, N6J 2M3

Adriaan Driessen

Sales Representative & Senior Partner

PC275 Realty Brokerage

Cell:     519.777.9374

Fax:      519.518.1081

adriaan@pc275.com

www.PC275.com

415 Wharncliffe Road South

London, ON, N6J 2M3

12 Dec

RESIDENTIAL  MARKET UPDATE 

General

Posted by: Adriaan Driessen

Industry & Market Highlights 

Bank of Canada key interest rate announcement

The Bank of Canada left its key interest rate unchanged, as expected, at 1.75 per cent.

This announcement came in the wake of a move by the Alberta government to curtail oil production in the province after Jan. 1 to try to clear a crude storage glut that has driven western Canadian oil prices to multi-year lows.

Meanwhile, the recently announced plan to close the General Motors of Canada car plant in Oshawa similarly offers a downside risk to future growth.

Bank economists say an unexpected dip in monthly gross domestic product figures in September and lower-than-expected oil prices so far in the fourth quarter have dampened growth expectations and placed in doubt forecasts for a January bank rate increase.

Lower growth prospects are expected to reinforce Bank of Canada Governor Stephen Poloz’s strategy of moving very gradually on increases to its overnight rate.

Economists say they will be closely watching Poloz’s speech on Thursday for signs of how events are affecting his view of the path forward.  By The Canadian Press.

  

LSTAR’s News Release for November 2018 – Strong Home Sales Continue in November 

London and St. Thomas Association of REALTORS® (LSTAR) announced 746 homes* were sold in November, up 6.7% over November 2017. The number of home resales was the second highest total ever for November since LSTAR began tracking data in 1978. November 2016 holds the record with 749 home resales, only three more than November 2018.

“In November, we saw more positive signs with new listings in the marketplace, which contributed to the robust sales activity,” said Jeff Nethercott, 2018 LSTAR President. “November had 898 new listings, an increase of 17.5% over the same month last year. The area of London East continues to be making healthy gains in both new listings and average sales price. It had 192 new listings, up 24.7 % from November 2017, where the average sales price was $302,737, up 18.7% from 2017 and up 58.9% compared to five years ago. Going back further, that’s up 75.0% compared to 10 years ago.”

Average sales price also made steady gains in the major geographic areas in London. In London North, the average sales price was $482,202, up 24.4% from last November and up 62.4% compared to the same month five years ago. It’s an increase of 98.7% compared to the average sales price in 2008.

“Similar to October, we saw inventory (what is called active listings) making slight gains, despite the overall record low inventory that dominated our marketplace this year,” Nethercott said. “Last month, LSTAR’s jurisdiction had 1,391 active listings, up 7.6% from November 2017. The sales-to-new listings ratio was 83.1%, which the Canadian Real Estate Association (CREA) says represents conditions in the marketplace that favour sellers (a ratio between 40% and 60% is generally consistent with a balanced market). Looking at the major centres, St. Thomas had the highest sales-to-new listings ratio at 97.0%.”

A total of 65 homes were sold in November, up 10.2% from November 2017. The average home sales price in St. Thomas was $304,618 up 13.1% from a year ago and up 43.5% compared to five years ago. It’s also up 78.6% from 10 years ago.

The following chart is based on data taken from the CREA National MLS® Report for October 2018 (the latest CREA statistics available). It provides a snapshot of how average home prices in London and St. Thomas compare to other major Ontario and Canadian centres.

According to a research report1, one job is created for every three real estate transactions and approximately $53,000 in ancillary spending is generated each time a home changes hands in Ontario. “It’s turning out to be another exceptional year for real estate across London and St. Thomas,” Nethercott said. “The business of real estate touches every layer of our regional economy, with November resale activity generating potentially more than $39 million and helping create approximately 248 jobs. The impact to economic growth is priceless.”

The London and St. Thomas Association of REALTORS® (LSTAR) exists to provide its REALTOR® Members with the support and tools they need to succeed in their profession. LSTAR is one of Canada’s 15 largest real estate associations, representing over 1,700 REALTORS® working in Middlesex and Elgin Counties, a trading area of 500,000 residents. LSTAR adheres to a Quality of Life philosophy, supporting growth that fosters economic vitality, provides housing opportunities, respects the environment and builds good communities and safe neighbourhoods and is a proud participant in the REALTORS Care Foundation’s Every REALTOR™ Campaign.

*These statistics are prepared for LSTAR by the Canadian Real Estate Association (CREA) and represent a data snapshot taken on December 1, 2018, based on processed home sales activity between November 1 and 30, 2018.

Predictions on a Cooling Down of the Real Estate Market 

For the first time since 2007 we are seeing an inverted Bond Yield Curve, and indicator that a potential bear market is ahead for stock markets and a cooling of other related markets.  Join Mike Maloney as he reveals an important factor of the partial Yield Curve inversion that is being ignored by mainstream news and media. Then stick around to the end of the video to see yet another indicator that is suggesting a huge change in markets could be upon us.  You can watch a full presentation by Mike Maloney HERE.

CMHC Announced that the cooling down of the Real Estate Market is finally here and predict that we will see house prices and mortgage rates moderate throughout 2019 into 2020.  Many economists have been claiming the prime rate increases (currently at 3.95%) are only cooling down the remainder of an extremely hot real estate housing market. Hopefully in London the pressure of having multiple offers are soon behind us.  Read more on CMHC Announcement HERE.

CIBC economist Benjamin Tal explains we are nearing comparable times to what the markets were like from 2007 to 2008 with the inverted bond. What does inverted bonds mean? This is where the 10 year fixed is almost side by side to the 5 year fixed. For example, today a 5 year conventional fixed rate is close to 3.94% and some banks have a 10 year special at 4.19% much like the fixed rates in 2007 where the 5 year was 5.65% and the 10 year fixed 5.75%. If you recall, in 2008 we saw the lower term products, 3-5 year fixed, quickly decrease.

In summary, CMHC and the economists say that everything is stabilizing and much like the past, we could even see some decreases on low term rates and also decreases to the prime rate and variable rate/Line of credit products.

Read Benjamin Tal’s market forecast HERE.

Economic Highlights

Canada’s Employment Numbers

Canada’s November employment numbers were stunning.  Economists had projected about 10,000 new jobs.  The economy created an amazing 94,000 jobs for the month, most of them full time.  The unemployment rate dropped to 5.6%, down 2 basis points from October and down 3 bps from a year ago.

Numbers like that usually set the stage for a lot of speculation about more interest rate hikes by the Bank of Canada, but not this time.

Two key details suggest the economy is not as robust as the headline employment number might suggest.

1Youth participation in the work force is down

2Wage growth continues to slow

For October and November the number of young people, aged 15 to 24, who wanted to work and who were employed sat at 62.5%.  That is the lowest level since 1998.  It is an indication that employers are not having any trouble finding the older, experienced help they want, suggesting there is still slack in the economy and labour pool.

Hourly wage growth, which is a key driver of inflation – which is, in turn, a key trigger for interest rate increases – came in at just 1.7% in November, compared to a year ago; the 6th straight monthly decline for wage growth.  It indicates the labour market is weaker than it appears and employers are not being compelled to raise wages to attract workers.

Then there is what the Bank of Canada, itself, is saying.  While the language used by central bankers can be downright cryptic, once you decipher what is in the economic statement that came with the latest interest rate decision it sounds a lot like “we’re just going to keep an eye on this for the time being.”  By First National Financial.

Bank of Canada’s Dovish Tone  

As was universally expected, the Bank of Canada’s Governing Council held overnight interest rates steady at 1-3/4% as it heralded a weaker outlook for the Canadian economy. The dovish tone in today’s Bank of Canada statement is in direct contrast to its attitude when it last met on October 24. Since that time, the global economy has moderated, and oil prices have fallen sharply. Troubling prospects for Alberta’s energy sector have weighed on the economy as the U.S. has expanded shale oil production. Benchmark prices for “western Canadian oil–both heavy and, more recently, light–have been pulled down even further by transportation constraints and a buildup of inventories”. The Notley government in Alberta ordered production cuts this week leading the Bank to conclude that Canada’s energy sector will be “materially weaker” than expected.

The Canadian economy grew at a 2% annual rate in the third quarter, mainly in line with the Bank’s expectation, however, September data suggest significantly less momentum going into Q4. The biggest disappointment was the plunge in business investment, which likely reflected trade uncertainty (see chart below). Business investment outside of the oil sector is likely to improve with the signing of the new trade agreement USMCA, the new federal tax measures to improve capital depreciation write-offs, and ongoing capacity constraints.

Household credit appears to be stabilizing following a significant slowdown in recent months. However, the rise in interest rates this year has had a more substantial impact on credit-sensitive spending than many had expected. For example, plunging car sales add to evidence that higher borrowing costs are dampening economic activity possibly to a more significant extent than the central bank expected. Light vehicle sales dropped 9.4% in November, the most since 2009. As well, Bank of Canada data show growth in residential mortgages decelerated to 1.4% in September on an annualized three-month basis, the weakest pace since 1982.

The Bank has raised borrowing costs five times since July 2017. New home building declined for the third consecutive quarter, down an annualized 5.9% in Q3. Moreover, according to the Toronto Real Estate Board (TREB), Toronto’s housing market posted its biggest monthly sales decline since March while prices remained little changed. Sales in Canada’s largest city fell 3.4% in November from the previous month TREB reported today (see chart below).

The housing market in the Toronto region has been stabilizing after a slowdown in sales and prices earlier this year amid more stringent mortgage-lending rules. The market picked up its pace through the summer, though sales have declined for the third month in a row.

The drop in sales could in part be attributed to a decline in new listings, which fell 26% year-over-year. “New listings were actually down more than sales on a year-over-year basis in November,” Garry Bhaura, the president of the board, said in a statement. “This suggests that, in many neighbourhoods, competition between buyers may have increased. Relatively tight market conditions over the past few months have provided the foundation for renewed price growth.”

Here is a sampling of other factors that highlight some of the headwinds confronting the Canadian economy:

Economic data have been coming in below expectations according to Citibank’s Surprise Index, which tracks the difference between market expectations for economic indicators and their actual values. This index has trended downward since last summer and has been below zero since mid-October–around the time of the Bank of Canada’s last Monetary Policy Report (MPR) and the most recent rate hike.

The Macdonald Laurier Institute’s Leading Indicator fell 0.1% in October. The composite gauge’s first decline since January 2016 was primarily driven by a pullback in S&P/TSX Composite Index, which fell 6.5% on the month, as well as marked decreases in commodity prices.

As well, inflation pressures have diminished. For example, gasoline prices have tumbled by about 25 Canadian cents back toward a dollar a litre since October. The latest policy statement says, “CPI inflation, at 2.4% in October, is just above target but is expected to ease in coming months by more than the Bank had previously forecast, due to lower gasoline prices. Downward historical revisions by Statistics Canada to GDP, together with recent macroeconomic developments, indicate there may be additional room for non-inflationary growth. The Bank will reassess all of these factors in its new projection for the January MPR.”

Bottom Line: “Governing Council continues to judge that the policy interest rate will need to rise into a neutral range to achieve the inflation target,” the bank said in the statement, adding the appropriate pace of increases will depend on the “effect of higher interest rates on consumption and housing, and global trade policy developments.”

“The persistence of the oil price shock, the evolution of business investment, and the Bank’s assessment of the economy’s capacity will also factor importantly into our decisions about the future stance of monetary policy,” the bank said.

As recently as October, investors were expecting at least three more rate hikes in 2019. Currently, those expectations have lessened to no more than two. The Bank had previously estimated the “neutral” range for overnight rates at between 2.5% and 3.5%. Today’s more dovish statement might well indicate that rate hikes over the next year will be to levels well below this neutral range.  By Dr. Sherry Cooper.  Chief Economist, Dominion Lending Centres.

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates are on hold.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.

This edition of the Weekly Rate Minder shows the latest rates available for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the best possible mortgage to suit your needs.

Explore mortgage scenarios using helpful calculators on my website: http://www.iMortgageBroker.ca

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Canada’s new construction housing market could be hit a wall, thanks to higher interest rates: TD (Livabl)

The Ford government wants to develop the Ontario Greenbelt. Here’s why one expert thinks that’s a bad idea (Livabl)

Consumer Insolvency Filings Spike In Canada, And It’s Likely Just The Beginning (Huffington Post)

Here’s how the final quarter of 2018 is shaping up for the Canadian housing market (Livabl)

Will changes to rent control mean more Toronto rental buildings? This expert says probably not (Livabl)

Not too hot, not too cold: Vancouver’s new home market to remain stable in 2019 (Livabl)

A ‘grey tsunami’ and the precariousness of aging for Vancouver renters (Vancouver Sun)

These Canadian Housing Markets Took A Beating In 2018. What Does 2019 Have In Store? (Huffington Post)

Once on top, the Canadian housing market has fallen to the bottom of this global price ranking (Livabl)

New data shows how active foreign-homebuyers are in Metro Vancouver after big policy changes (Livabl)

How migration impacts Vancouver’s housing prices (Vancouver Sun)

The next Canadian interest rate hike may have just been pushed back all the way to next spring (Livabl)

Bank of Canada holds key interest rate steady at 1.75% (CBC)

Investors have little to fear of a housing meltdown (Canadian Real Estate Wealth)

Here’s how Canadian household debt levels could affect the housing market in 2019 (Livabl)

Vancouver real estate: sales and prices down to more ‘historical’ levels, says board (Vancouver Sun)

Toronto home prices stable in November amid sharp drop in listings (BNN Bloomberg)

There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

Adriaan Driessen
Mortgage Broker
Dominion Lending Forest City Funding 10671
Cell:     519.777.9374
Fax:      519.518.1081
riebro@me.com
www.iMortgageBroker.ca
415 Wharncliffe Road South
London, ON, N6J 2M3

Lori Richards Kovac
Mortgage Agent & Administrator
Dominion Lending Forest City Funding 10671
Cell:     519.852.7116
Fax:      519.518.1081
loriakovac@icloud.com
415 Wharncliffe Road South
London, ON, N6J 2M3

Adriaan Driessen
Sales Representative & Senior Partner
PC275 Realty Brokerage
Cell:     519.777.9374
Fax:      519.518.1081
adriaan@pc275.com
www.PC275.com
415 Wharncliffe Road South
London, ON, N6J 2M3

4 Dec

Residential Market Update

General

Posted by: Adriaan Driessen

WEEKLY RESIDENTIAL  MARKET UPDATE 

Industry & Market Highlights 

CMHC forecasts higher rates, slower housing

The conditions are right for further interest rate increases and that will blunt home sales and slow price acceleration.

The Canada Mortgage and Housing Corporation predicts the economy will continue to grow at a moderate pace well into next year.  The housing agency expects that will keep pressure on the Bank of Canada to raise rates which will, in turn, increase the debt service costs for mortgages and other borrowing.

CMHC says households will likely be forced to put a larger portion of their income into debt service payments.  The agency expects wage gains – which have not been keeping pace with economic growth – will also not keep pace with increasing debt costs and consumer spending will contract.

Combined with tougher borrowing rules, tighter money for consumers will be reflected in a drop in demand for housing, with a consequent softening of real estate prices.

The CMHC report covers the period from July through September of this year.  It predates the signing of the new NAFTA deal, the collapse of Canadian oil prices and the announcement that General Motors is closing its largest Canadian manufacturing operation.

The Bank of Canada is not expected to raise its benchmark interest rate at its setting later this week.  By First National Financial.

Mortgage Professionals Canada – Housing Market Digest – Rental Market in Canada – Fall 2018

Published annually, CMHC provides a comprehensive review of rental markets across Canada, through their Rental Market Report. Over the past year, a number of factors have caused demand for rental housing to rise and outpace supply.

Mortgage Professionals Canada Chief Economist, Will Dunning has summarized the data in a special Housing Market Digest which provides a condensed, yet detailed overview. Read the Report Here.

BoC takes a holiday from rate increases

The Bank of Canada gets one more chance to raise interest rates before the end of the year but market watchers are betting against a Christmas increase.

The October inflation numbers, which came in above expectations, would normally be seen as green light for the Bank to go ahead with another quarter-point increase.  Headline inflation for October came in at 2.4%, with analysts having called for a flat reading of 2.2%.

However, core inflation – which is what the central bank really cares about – came in pretty much on target, at 2%, across all three of the measurements used by the Bank.  The core inflation calculations strip out volatile items like food and fuel to give a truer picture of the underlying economy.

In an example of how interrelated the components of our economy are, market watchers – and the BoC – are also keeping a very close eye of the price of oil.  Canada’s benchmark crude price has been taking a serious hit lately, selling at less than US$20 a barrel (U.S. benchmark crude is selling for more than US$40 a barrel.)

The plunge in oil prices is expected to take a significant bite out of November’s inflation numbers and the Bank of Canada is expected to wait for better stability in the market before imposing any more rate increases.

Look to January for the next move.  By First National Financial.

Lower prices, fewer sales, more building  

Canada’s housing market seemed to be heading in two different directions at once in October.  While prices and sales declined, starts increased.

The latest numbers from the Canadian Real Estate Association show a 3.7% drop in sales compared to a year ago, with a 1.6% decline from September to October.  The association says the Greater Vancouver Area and Fraser Valley led the slide which offset sales increases in the Greater Toronto Area and Montreal.

CREA also reports a 1.1% drop in the number of new listings between September and October.  The sales-to-new-listings ratio sits at 54.2% for October which is in line with the long term average and is deemed to be in “balanced” territory.  At the same time there has been an unexpected surge in the number of housing starts.

The October report from Canada Mortgage and Housing Corporation shows a seasonally adjusted annual increase of 8.5% over September, topping analysts’ estimates.  The increase was led by urban starts in multi-unit construction.  Single-detached urban starts fell nearly 11%.

CREA’s MLS Home Price Index shows a 2.3% increase from a year ago while the national average price of a home in Canada actually fell 1.5% over the same period to just under $497,000.  That number is heavily skewed by pricing in Vancouver and Toronto.  With those markets taken out of the calculation the price comes in at just under $383,000 – up from about $335,000 in September.

The Teranet Home Price Index shows an October decline of 0.4% compared to September.  It is the first index decline in eight months, and just the fourth time in 20-years there has been a drop in October.  Year-over-year the index rose 2.8%.  That number is more pronounced than usual because of an abrupt drop in the index a year ago.  By First National Financial. 

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Economic Highlights

Q3 Canadian GDP Growth Slowed On The Back of Weak Housing and Business Investment

Stats Canada released the third quarter GDP figures indicating an expected slowdown to 2.0% growth (all figures quoted in annual rates), compared to a 2.9% pace in Q2. Over the first three quarters of this year, quarterly growth has averaged 2.2% which is down from the 3.0% annual growth recorded in 2017. The Canadian economy is at or near full capacity, so slower growth is not a bad thing.

However, while the headline growth of 2.0% was on trend, the details of the report are troubling. The bulk of the growth last quarter came from a contraction in imports–hardly a sign of a robust economy–leaving final domestic demand–which excludes trade–negative for the first time since early 2016. The softness in imports reflected a contraction in refined energy products as well as aircraft and other transportation equipment.

The NAFTA trade battle over the summer took its toll on the economy as households and businesses sharply curtailed their spending. Consumer spending grew at its slowest pace in more than two years, while businesses posted an unexpected drop in investment and trimmed inventories. Consumer spending moderated, as overall household consumption rose just 1.2%, held back by durable goods spending (-2.7%) as Canadians bought fewer vehicles for a third straight quarter.

The biggest surprise in the report was the sharp decline in non-residential business investment (-7.1%). Spending on non-residential structures fell 5.2%, while machinery and equipment spending, which includes computer software and hardware, plunged at a 9.8% annual rate. Business spending was weighed down by softer oil and gas investment.

Though residential investment was expected to decline, the reported 5.9% drop in Q3 was more significant than expected. Despite an uptick in home sales activity, residential investment weakened as both new construction of housing and renovation activity pulled back (see Note below). Investment in new residential construction posted its largest decline since the second quarter of 2009 when the financial crisis was hammering the global economy. The uptick in home sales was reflected in a sharp uptick in ownership transfer costs, which includes real estate commissions, land transfer taxes, legal fees and file review costs (inspection and surveying).

On the income side, compensation of employees rose 2.7% (4.0% on a year-on-year basis), leaving overall wage gains over the quarter at a modest 2.2% year-on-year. The household savings rate rose to 4.0% from an upwardly revised 3.4% in Q1.

Looking at the monthly data for September, there was not much momentum going into the final quarter of this year. Monthly GDP in September declined -0.1% as just half of major industries expanded. It was mainly down in goods production (-0.7%) as oil and gas extraction pulled back, hit in part by maintenance work. Substantial gains in services (+0.2%) were not enough to keep the headline in positive territory.

The projected further weakening in Q4 will be abetted by the transitory downward impact from the recent postal strike. The risks are on the downside for the Bank of Canada’s forecast of 2.3% growth in the final quarter of this year. Currently, it appears that growth in Q4 will be closer to 1% than 2%.

Implications for the Bank of Canada

The headline 2% growth rate was spot on the Bank of Canada’s expectation, but certainly, the Bank will note the weakness in the underlying data. Potentially more important is the deep reduction in the price of oil for Canadian producers already struggling with transportation bottlenecks that have been pummelling the energy sector and depressing growth in Alberta. Cuts in oil production are likely to hit economic activity in the current quarter, with a full recovery not expected until at least mid-2019.

As well, the GM shutdown in Oshawa, Ontario raises concerns about the viability of the Canadian auto industry and adds to the weakness in the economic outlook. The two largest export sectors in Canada are energy and autos, so weakness in these sectors will keep the Bank of Canada on the sidelines in December, notably as consumers may well be tapped out. Markets had been expecting a rate hike in January, but the latest data suggest that the prospects of such a move have dropped significantly.

Notes:

*Housing investment in the GDP accounts is technically called “Gross fixed capital formation in residential structures”. It includes three major elements:

  • new residential construction;
  • renovations; and
  • ownership transfer costs.

New residential construction is the most significant component. Renovations to existing residential structures are the second largest element of housing investment. Ownership transfer costs include all costs associated with the transfer of a residential asset from one owner to another. These costs are as follows:

  • real estate commissions;
  • land transfer taxes;
  • legal costs (fees paid to notaries, surveyors, experts, etc.); and
  • file review costs (inspection and surveying).

By Dr. Sherry Cooper.  Chief Economist, Dominion Lending Centres

Mortgage Interest Rates

Prime lending rate increased to 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates are slowly increasing.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.

Other Industry News & Insights

$1 billion money laundered by crime networks in BC real estate? 

Criminal networks could have used British Columbia’s real estate market for more than $1 billion of money laundering.

A secret police report, obtained by Global News, reveals that crime networks are linked to 10% of the 1,200 luxury real estate purchases in the Lower Mainland included in a police study in 2016.

These include a $17 million Shaughnessy mansion owned by a suspected importer of the potent drug Fentanyl.

Of around 120 properties linked to crime, 95% are believed to have Chinese crime network origins.

Global News own analysis says that the crime networks may have laundered more than $5 billion in Vancouver-area homes since 2012.

The extent of the money laundering issue and the findings of the police study are discussed on the Simi Sara Show from 980 CKNW.  By Steve Randall.

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

Adriaan Driessen
Mortgage Broker 
Dominion Lending Forest City Funding 10671
Cell:     519.777.9374
Fax:      519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3
Lori Richards Kovac
Mortgage Agent & Administrator
Dominion Lending Forest City Funding 10671
Cell:     519.852.7116
Fax:      519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3
Adriaan Driessen
Sales Representative & Senior Partner
PC275 Realty Brokerage
Cell:     519.777.9374
Fax:      519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3
28 Nov

WEEKLY RESIDENTIAL  MARKET UPDATE 

General

Posted by: Adriaan Driessen

Industry & Market Highlights 

The short break in interest rate increases may be over

Over the past few months rates have held steady and gave home owners a reprieve in the increasing mortgage interest rate market.  After the official announcement of a trilateral trade agreement with Canada, the U.S. and Mexico, and the US Federal Reserve Bank raising interest Rates – most Economists agree that the Bank of Canada is next to make a rate announcement, and we may start to see some slow, but steady interest rate increases again. Of course no one can say for sure, but the signs seem to point in that direction. If you’re feeling nervous about rates increasing contact your broker to review your options to look out for your best interest.

If you are currently in a variable rate mortgage with a lower risk tolerance, this may be the time to consider locking in.  If you have a high risk tolerance and are used to the ebb and flow of markets, it’s business as usual.

Increases in the U.S. and the potential ripple effect

Market watchers who are forecasting another Bank of Canada rate increase next month have been handed more backing for their prediction.

Last week the U.S. Federal Reserve pushed up its policy rate for the eighth time since December of 2015.  The Fed increased its benchmark rate by 25 basis points (a quarter of a percent) to a range of 2% to 2.25%, the same level it was at in April 2008, before the height of the global financial crisis.  The U.S. central bank also made it clear it intends to continue along that path.

The Fed says it expects one more increase this year and is projecting at least three hikes in 2019.  It has also changed some of the language in the accompanying statement, eliminating the phrase “the stance of monetary policy remains accommodative.”

The effects of U.S. rate increases routinely ripple across the border influencing bond rates and the value of the Canadian dollar.  A declining loonie could trigger further inflation, as the cost of imported goods increase.

The Bank of Canada is already facing an inflation rate that is running on the high side of its 1% to 3% target range.  Unemployment is at generationally low levels in Canada, and working people exercising their spending power can also fuel inflation.

Given these pressures and the BoC’s stated desire to normalize interest rates another quarter-point increase seems very likely on October 24th.  By First National Financial.

SOLD Date Coming to Realtor.ca

CREA’s Board of Directors has voted to add sold and historical data to the property listings on Realtor.ca without the need for a login.

In a message to real estate boards across the country, CREA says the move comes “in order to meet consumer demand and at the request of Realtors and boards.”

It says, “In addition to responding to requests from members, this will ensure we continue to offer leading edge services on the best real estate website in Canada.”

A Competition Tribunal decision in July 2016 found that by not including sold and other data in its VOW feed to members, TREB had engaged in anti-competitive acts. An appeal court upheld the decision and on Aug. 23 of this year, the Supreme Court of Canada announced that it would not hear TREB’s appeal. CREA supported TREB at the tribunal and had intervenor status in the proceedings.

TREB is now supplying the disputed data to its member VOWs.

CREA media relations officer Pierre Leduc says that before the sold data can be displayed on Realtor.ca, each real estate board must request that the information be added. CREA will then work with the boards, the provincial associations and the regulators to ensure that it complies with all laws and regulations.

“We’ll have to check with the boards to see what historic sold data they have access to, and how far back that data will go,” says Leduc.

Only historic sold prices will be posted and not pending solds, he says. Pending solds were part of the Competition Tribunal order for VOWs, but consumers and Realtors are concerned about privacy issues on deals that have yet to close.

Leduc says CREA hopes to have the sold data rolled out on Realtor.ca as soon as possible.  By REMonline.com

CREA: National home sales post modest sales gain

Growth in Canada’s housing market in August was modest as the effects of the mortgage stress test continues, although is beginning to fade.

The latest sales data and forecast from the Canadian Real Estate Association released Monday shows a small rise for sales in August, a 0.9% increase month-over-month.

Actual (not seasonally-adjusted) activity was down 3.8% year-over-year while prices nationally increased 1% from a year earlier. Sales activity is weaker than most months over the last 4 years.

“The new stress-test on mortgage applicants implemented earlier this year continues to weigh on national home sales,” said CREA President Barb Sukkau. “The degree to which the stress-test continues to sideline home buyers varies depending on location, housing type and price range.”

There were 5.2 months of inventory on a national basis at the end of August 2018, right in line with the long-term average for the measure.

The Aggregate Composite MLS® Home Price Index (MLS® HPI) was up 2.5% y-o-y in August 2018.

The largest y-o-y price gains in August were for apartments (+9.5%), followed by townhouse/row units (+4.3%). But prices for one-storey and two-storey single family homes were little changed on a y-o-y basis in August (+0.4% and -0.4% respectively).

Where the gains were

Around half of all local markets recorded an increase in sales from July to August, led again by the GTA.

TD Economics’ analysis of the data shows the largest gains were in Toronto (+2.2%), Montreal (+2.8%) and Edmonton (+5.4%) while sales were lower in Halifax (-8.2%), London (-1.2%) and Winnipeg (-1.0%).

Activity picked up in several markets in B.C. including 2.9% in Vancouver – the first gain this year – along with the Fraser Valley (+0.6%), Okanagan-Mainline (+1.7%), and Victoria (+2.7%).

“Our view is that sales and prices will continue to grow, but that rising borrowing costs will restrain the pace of expansion. This is particularly true for more expensive markets in Ontario and B.C. where affordability pressures are acute,” TD economist Rishi Sondhi says.

Activity had fallen too far

In his assessment of the CREA data, RBC Economics’ senior economist Robert Hogue says that the figures show that the recent drop in activity was part of the market finding its normal level following B-20.

“The fact that home resales snapped back by 8.1% in the four months since reaching a seven-year low in April tells us that activity had fallen too far. This is typical following a major policy change that pulled some activity forward,” he said.

He added that the latest figures reflect a new, slower phase of recovery.  By Steve Randall.

Decreasing certainty for an increase in rates

Market watchers have now fixed their gaze on October 24th as the most likely date for the next rate move by the Bank of Canada.  As of the setting last week, that saw no change, the betting was about 75% in favour of a hike in October, but that certainty seems to be slipping.

The latest employment numbers from Statistics Canada will likely have the Bank carefully considering any move toward an increase.  The August unemployment rate popped-up 0.2 of a percentage point to 6.0%, on a net loss of 51,600 jobs in August.

The August jobs report is sending mixed messages though.  Most of the losses came in part-time positions, which fell by 92,000.  Full-time jobs actually increased by 40,400.  Year-over-year employment in Canada is up 0.9%.  While 155,000 part-time positions have disappeared, there has been a gain of 326,000 full-time jobs for a net gain of 171,000 positions.

Another factor that could hold back an October rate increase is a softening of wage growth.  The rate of increase in hourly pay slowed to 2.9% in August, down from 3.2% – year-over-year – in July and a 3.6% in June.

The bigger issue, though, remains the NAFTA re-negotiations.  Uncertainty about the outcome of the talks is a drag on the Canadian economy.  It is hampering the Bank of Canada’s efforts to move economic growth away from debt-fueled consumer spending to business investment and export growth.

The Bank continues to use words like cautious and gradual to describe its approach and with inflation remaining well inside the Bank’s target range there is no urgency for a rate increase.  By First National Financial.

Canadian Mortgage Credit Growth Grinds To A Halt, Worst Growth In 18 Years

The Canadian real estate market is slowing down, and it’s hitting mortgages. Bank of Canada (BoC) numbers show mortgage credit grinded to a halt in July. The annual rate of mortgage growth fell to the lowest level in nearly 18 years, and is set up to go lower.

Canadians Owe Over $1.52 Trillion In Mortgage Debt

Canadians set a new dollar record for outstanding mortgage credit at institutional lenders. The outstanding balance stood at $1.52 trillion in July, up $4.95 billion from the month before. Households sent the total $54.22 billion higher than the same time last year. On the upside, lenders are primed to receive a whole lot of interest payments. On the other hand, if we look closely – we see the rate of growth is actually shrinking very quickly.

Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Mortgage Debt (in millions)

 

Source: Bank of Canada, Better Dwelling.

Canadian Mortgage Credit Falls To Lowest Growth Since July 2001

The growth of mortgage credit fell to its lowest levels in almost two decades. The $54.22 billion increase from last year comes in at just 3.7% growth. That still sounds pretty decent, until you realize it’s only 0.68% in real terms. The annual pace of growth is now the lowest it’s been since July 2001. For historical context, a then new artist named Shaggy topped the charts with It Wasn’t Me when mortgage growth was last this low. Of course most of you have no idea who he is, so ask your mom for the best explanation. Then tell her mortgage levels fell to Shaggy-era levels of growth, and email us her take.

Canadian Outstanding Mortgage Credit Change

The 12 month percent change, and 3 month annualized change, of outstanding mortgage credit. 

Source: Bank of Canada, Better Dwelling.

Mortgage Growth Likely To Head Lower

Looking at the short-term trend, these numbers will likely come in lower for at least a few more months. Annualizing growth over the past 3 months, we get just 1.7% – lower than inflation. This means if the annual growth rate came in at the same pace as the past 3 months, the rate would fall to 1.7%. Until this number rises above the annual pace for a while, expect the rate to continue to fall.

Canada is coming off of record sales years, and interest rates are quickly climbing. That’s dropping demand for new loans, and tightening credit requirements. It shouldn’t be a huge surprise that mortgage growth is on the decline, and likely to slide further.  By betterdwelling.com

Reviewing the Stress Test and B-20 Lending rules hindering the Canadian Housing Market

Back in 2013, the B-20 rules as underwriting guidelines for residential mortgages came into effect. The rules were put in place as a direct response to the financial issues in the United States caused by “poor mortgage lending practices” (mortgagebrokernews.ca).

 

Now, 5 years after these rules have come into effect, Canada’s housing market is said to be facing affordability issues. It is widely believed that it is become increasingly more difficult for first time home buyers to purchase a property. To deal with the affordability issues and the stress test, some young people are borrowing from parents to help with a down payment.

 

Recently, it has been reported that there is a decrease in mortgage originations from the Millennial and Generation Z cohort and a rise amongst the Pre-War Generation (those between the ages of 73-93). Findings have shown an increase of mortgage originations of 63% in the last quarter from the Pre-War Generation (theglobeandmail.com).

 

This begs the questions: are those who are trying to get into the housing market seeking help from their grandparents and asking them to take out mortgages for their grandchildren? Is the current generation asking and receiving help from their aging grandparents? If so, what else are they willing to do to achieve their goal of home ownership?

 

The Conservative party as made a motion to the House of Commons to institute a subcommittee to review the stress test and B-20 rules to determine if it is helping or hindering the Canadian housing market.  By CMBA, Canadian Mortgage Brokers Association.

Economic Highlights

Canadian Jobs Plunge in August As Unemployment Rises

In a real shocker, Statistics Canada announced this morning that employment dropped by 51,600, retracing most of the 54,100 gain in July. Economists had been expecting a much stronger number, but the Labour Force Survey is notoriously volatile, and job gains continue to average 14,000 per month over the past year. Full-time employment growth has run at about twice the pace at an average monthly increase of 27,000. Labour markets remain very tight across the country.

The unemployment rate returned to its June level of 6.0%, ticking up from 5.8% in July. July’s jobless figure matched a more than four-decade klow. At 6.0%, the unemployment rate is 0.2 percentage points below the level one year ago.

All of the job loss last month was in part-time work, down 92,000, while full-time employment rose by 40,400. The strength in full-time jobs is a sign that the labour market is stronger than the headline numbers for August suggest.

On a year-over-year basis, employment grew by 172,000 or 0.9%. Full-time employment increased (+326,000 or +2.2%), while the number of people working part-time declined (-154,000 or -4.3%). Over the same period, total hours worked were up 1.6%.

Statistics Canada commented that monthly shifts in part-time employment could result from movements between part-time and full-time work, the flux of younger and older workers in and out of the labour force, changes in employment in industries where part-time work is relatively common, or deviations from typical seasonal patterns.

By industry, the decline was broadly based and included a loss of 16,400 jobs in construction and 22,100 in the professional services sector. The number of people working in wholesale and retail trade declined by 20,000, driven by Quebec and Ontario.

Job losses were huge in Ontario as employment increased in Alberta and Manitoba. Employment was little changed in the other provinces.

After two consecutive monthly increases, employment in Ontario fell by 80,000 in August, which was the province’s most significant job loss since 2009. All of the decline was in part-time work. On a year-over-year basis, Ontario employment increased by 79,000 (+1.1%). The Ontario unemployment rate rose 0.3 percentage points in August, to 5.7% (see table below).

In Ontario, full-time employment held steady compared with the previous month, with year-over-year gains totalling 172,000 (+3.0%). Part-time jobs fell by 80,000 in August, following a roughly equivalent rise in July. In the 12 months to August, part-time work decreased by 93,000 (-6.7%).

Employment in Alberta rose by 16,000, and the unemployment rate remained at 6.7% as more people participated in the labour market. Compared with August 2017, employment grew by 53,000 (+2.3%), mostly in full-time work.

In Manitoba, employment rose by 2,600, driven by gains in part-time work, and the unemployment rate was 5.8%. On a year-over-year basis, employment in the province was unchanged, while the unemployment rate increased 0.8 percentage points as more people looked for work.

In British Columbia, employment edged up and the unemployment rate increased 0.3 percentage points to 5.3% as more people searched for work. Compared with a year earlier, employment was virtually unchanged.

Wage gains decelerated to their lowest level this year as average hourly earnings were up 2.9% y/y, the slowest pace since December.

There is no real urgency for the Bank of Canada to hike interest rates as the economy shows little risk of overheating. So far in 2018, the economy has shed 14,600 jobs, but the number masks a 97,300 gain in full-time work. Part-time employment is down by 111,900 this year.

The economy is running at or near full-employment as job vacancies continue to mount. If a NAFTA agreement comes to fruition, it is still likely the Bank of Canada will raise interest rates once again at the policy meeting in October. The Bank of Canada guided in that direction yesterday when Senior Deputy Governor Carolyn Wilkins said the central bank’s top officials debated this week whether to accelerate the pace of potential interest rate hikes, before finally choosing to stick to their current “gradual” path.

By Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres.

Mortgage Interest Rates

Prime lending rate is 3.7%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.34%.  Fixed rates are starting to creep up again.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.

This edition of the Weekly Rate Minder shows the latest rates available for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the best possible mortgage to suit your needs.

Explore mortgage scenarios using helpful calculators on my website: http://www.iMortgageBroker.ca

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Other Industry News & Insights

The benefits of flexibility – Interest Only Mortgage

Merix financial recently launched a brand-new product, the Interest-Only Flex Mortgage, geared toward homeowners and investors looking to purchase or refinance up to 80% of the value of the home and take advantage of lower monthly payments during the term. The product offers clients an interest-only payment or a combination of an interest-only payment and an amortizing (principal and interest) payment with either fixed and ARM rates, giving clients choice and flexibility with their finances.

Boris Bozic, founder and CEO of MERIX Financial, sat down with CMP to share more about this significant opportunity for brokers and homeowners.

CMP: Why did MERIX Financial develop this product?

Boris Bozic: We felt there was a need for it. Affordability of homes is an issue, and cash flow is increasingly important. With the increased cost of carrying homes and interest rates on the rise, there was an opportunity to innovate and offer something new to the industry.

CMP: How do you see this meeting the needs of mortgage brokers and their clients?

BB: Brokers will have choice – or, at the very least, have more choice. It’s no longer required of them to just support one of the Big Five, and they can offer solutions where they may not have been able to previously.

For borrowers, it’s primarily about providing additional cash flow for those with other liabilities – for example, student loans. The monthly mortgage payments are comparatively lower than they would typically pay; therefore, they can dedicate those excess funds to other outstanding debts. It also speaks to borrowers whose circumstances may change over the next few years – for example, for maternity/paternity leaves, etc.

CMP: What other types of clients would this mortgage be suitable for?

BB: Well, in my estimation, it’s suitable to all borrowers. However, it could be for clients with seasonal work who would like to pay down their mortgage using the 20% repayment feature on a schedule that fits their irregular cash flow; clients who are living in markets with high real estate prices who want to purchase a home in their desired neighbourhood with manageable monthly payments; investors looking to improve wealth over the long-term, who can put that extra cash to better use through investment opportunities, rather than repaying the principal on a mortgage; clients looking for lower monthly payments to save for home renovations to improve property value; and property investors who own multiple rentals and want to keep mortgage expenses low.

I don’t want to pigeonhole this product – the possibilities really are endless. Adaptations are being provided by our customers, too; they are utilizing this product in ways and in scenarios that we didn’t even contemplate.

CMP: What are the main advantages of the Interest-Only Flex?

BB: The biggest one, of course, would be the monthly payments. That’s why someone would want this over a traditional mortgage – the cash flow. It’s extremely customizable and flexible to be exactly what you need in your financial situation.

Other advantages would be things like LTV up to 80% – maximum 65% in interest-only, and the remaining 15% can be in an amortizing loan. It also applies to all mortgages: purchases, refinances, switches and rentals.

CMP: How do you position this mortgage’s higher interest rate to brokers and borrowers?

BB: That is a challenge. Both brokers and borrowers are hardwired to look at interest rate only. This is not an interest rate mortgage. This is a cash flow mortgage. Therefore, sometime is required to educate the broker base as well as the borrower – but numbers speak for themselves, and the math should guide brokers and borrowers alike.

One of the education tools we’ve created is an Interest-Only Flex calculator that will demonstrate to your client which product mix will provide the best cash flow option for their specific situation.

CMP: Does it meet B-20 requirements?

BB: Absolutely. Obviously great effort was made to ensure that the mortgage features were B-20 compliant.

Also, the product speaks to the concerns that regulators and government officials had that a large portion of borrowers’ disposable income went towards mortgage payments. Because Canadians are predisposed to ensuring that their mortgage payments are up to date, the greater economy doesn’t benefit – those are the government’s words, not ours. Therefore, we created a product that allows Canadian borrowers to still provide shelter for their families, but with lower payments so that the excess funds can be applied to other market sectors.

CMP: Will this product be launched in Quebec in the future?

BB: Not for the foreseeable future, but we plan on other innovative products and launches solely for the Quebec marketplace.

CMP: How does the compensation on this mortgage work?

BB: It’s identical to our existing commission structure, whether it be trailer fees through MERIX or upfront compensation with our Lendwise model. Nothing changes.

CMP: What has the initial reaction to Interest-Only Flex been like?

BB: Extremely positive. We’ve received significant kudos for launching something new and being innovative. The response in larger urban centres – i.e. GTA and GVA – has been very positive, given that our loan limits can now be up to $2 million on an uninsured basis.

CMP: Are there any future innovations in the pipeline from MERIX Financial? What’s next?

BB: There’s always something that’s next. It’s what we do. A lot of our focus and attention is geared towards the digital experience for the broker and the borrower. Stay tuned.  By CMP.

Some Ontario Realtors may need to become licensed travel agents

Real estate brokerages in Ontario that work with consumers to arrange short-term accommodations are being told they must become licensed as travel agents.

The Travel Industry Council of Ontario (TICO) has begun a campaign targeting real estate brokerages with threats of legal action because they work with consumers arranging short-term accommodations, says the Ontario Real Estate Association (OREA). TICO is sending “compliance letters” to Realtors demanding that they become registered as travel agents.

In a letter to Jim Wilson, Ontario’s Minister of Economic Development, OREA CEO Tim Hudak says, “As you know, Realtors are registered under the Real Estate & Business Brokers Act, 2002 (REBBA). This double registration requirement is a needless piece of red tape that costs real estate small businesses thousands of dollars, considerable time and much aggravation with no discernable benefit to consumers.”

To register under TIA, a real estate brokerage must take a nine-module TICO administered course and exam. In addition, brokerages are required to pay a $3,000 registration fee, a

$10,000 security deposit and maintain at least $5,000 of working capital, says OREA.

The brokerages being targeted are operating in Georgian Bay, Prince Edward County, Muskoka and Haliburton, where recreational properties are in high demand, it says.

“According to TICO, real estate professionals are not permitted to transact short term rental properties because these properties do not fall under the Residential Tenancies Act, 2006 (RSA). TICO defines short-term rental properties as accommodations offered to ‘travelers’ for 30 days or less. The term ‘travelers’ is not defined under the Travel Industry Act, 2002. TICO maintains that a real estate registrant is only permitted to transact residential leases covered by the RSA,” says the OREA letter.

“OREA opposes TICO’s arbitrary double registration requirement. Our position is based on the following:

“Real estate registrants in Ontario are licensed to trade in all types of real estate with very limited exceptions.

“Based on our preliminary analysis, there is no basis for TICO’s ruling that real estate registrants can only transact RSA defined rental leases.

“Real estate registrants are subject to strong ethical requirements under REBBA, making the registration requirement redundant from a consumer protection point of view; and,

“Real estate registrants are required to carry robust errors and omissions insurance that is designed to protect consumers.”

Hudak’s letter continues: “This piece of red tape is a money grab, which is costing real estate brokerages thousands of dollars. These funds should be repaid to our member real estate brokerages.”

The association is asking that TICO put its compliance campaign on hold until all parties can meet to try and work out a solution that “protects consumers and minimizes unnecessary overlap and duplication.”  By REMonline.com

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Toronto home prices steady as short supply offsets mortgage woes (BNN Bloomberg)

Vancouver home sales sink in September as listings hit multi-year highs (BNN Bloomberg)

Here’s how mid-density housing could become a reality for GTA cities (Livabl)

Despite affordability concerns, Millennials are surprisingly optimistic about the GTA housing market (Livabl)

Vancouver Housing Demand Drops Like A Rock, And Prices Are Now Falling (Huffington Post)

Here’s one way the new USMCA deal will affect the Canadian housing market (Livabl)

Starting today, self-employed Canadians have a better shot of qualifying for a mortgage (Livabl)

Housing affordability is more important to BC Millennials than fighting climate change, childcare: poll (Livabl)

A jump in sales marks the start of the GTA fall housing market, according to experts (Livabl)

Housing Affordability In Canada At Worst Levels In Almost 30 Years: RBC Economics (Huffington Post)

Toronto, Vancouver Have World’s 3rd And 4th Largest Housing Bubbles: UBS (Huffington Post)

According to this expert, there’s going to be a surge of GTA new home sales this fall (Livabl)

This website reveals what your neighbours paid for their Vancouver homes — whether real estate boards like it or not (Livabl)

Priced out of Toronto? Here are Ontario’s most affordable housing markets (Livabl)

GTA luxury real estate rebounds heading into the fall: Sotheby’s (Livabl)

•Toronto Isn’t Ontario’s Least Affordable Housing Market: Zoocasa Report (Huffington Post)

Benefits of Homeownership Reaffirmed in New Study (Canadian Mortgage Trends)

Home sales increase for 4th straight month, but prices still flat nationally (CBC)

Canadian Home Sales Rise for a Fourth Straight Month (Bloomberg)

The Canadian housing market will be kept “in check” for the rest of the year: CREA (Livabl)

There is never a better time than now for a free mortgage check-up.  It makes sense for us to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.

Adriaan Driessen
Mortgage Broker
Dominion Lending Forest City Funding 10671
Cell:     519.777.9374
Fax:      519.518.1081
riebro@me.com
www.iMortgageBroker.ca
415 Wharncliffe Road South
London, ON, N6J 2M3

Lori Richards Kovac
Mortgage Agent & Administrator
Dominion Lending Forest City Funding 10671
Cell:     519.852.7116
Fax:      519.518.1081
loriakovac@icloud.com
415 Wharncliffe Road South
London, ON, N6J 2M3

Adriaan Driessen
Sales Representative & Senior Partner
PC275 Realty Brokerage
Cell:     519.777.9374
Fax:      519.518.1081
adriaan@pc275.com
www.PC275.com
415 Wharncliffe Road South
London, ON, N6J 2M3

20 Nov

WEEKLY RESIDENTIAL MARKET UPDATE

General

Posted by: Adriaan Driessen

Industry & Market Highlights 

CMHC 2018 Consumer Survey

CMHC’s 2018 Consumer survey provides insights to what consumers are doing in the mortgage and real estate industry.

Link here.

MPC Mortgage Professionals Canada Q3 Housing Market Digest

Get third quarter housing market information for Canada and each region including resale market data, housing stats, employment trends and interests rates from the latest Housing Market Digests.

Link here.

CMHC issues forecast for next two years

The Canada Mortgage and Housing Corporation forecasts a balanced market in the GTA through 2020, with fewer sales expected because of rising interest rates.

“As much as sales are going to come down slightly, we’ll see house price growth be more or less in line with inflation, not the double-digit kind we were accustomed to a few months ago,” said CMHC’s Manager of Market Analysis (Toronto) Dana Senagama. “We’ll likely see higher price growth in the downtown cores of some major GTA areas, like Toronto, Markham and Mississauga, where there are higher concentrations of condominiums.”

Resales will also dip through the end of 2020, added Senagama, due to rising mortgage rates.

The region’s low-rise housing market is forecasted to see a downturn primarily because of land scarcity. However, in suburban areas, like Peel, Durham and York Regions, there will be higher concentrations of single-family detached sales and listings, and that will slow price appreciation.

“There’s not enough serviceable land out there for low-rise homes for singles and townhomes,” said Senagama. “The vast majority of units under construction—about 55,000 of 71,000 units—are high-rise, and that means there are only a finite number of resources, both in terms of machinery and skilled labour. That’s going to affect delivery; the logistics won’t allow it.

“In terms of new construction, the story is going to be more and more condos, and that seems to be where the push is both in terms of policy shift in government and higher house prices dictating demand towards high-rise construction because low-rise is out of reach for first-time buyers, and when the average price is over $1 million, it’s not an easy entry point for any buyer.”

Through this year, Vancouver has born witness to softening home prices across all market segments, and that trend is expected to continue, according to CMHC.

“Over the next two years, we expect the resale market will be characterized by lower sales, higher inventories of homes for sale, and lower home prices compared with the recent market highs in the last two years,” said Eric Bond, CMHC’s principal market analyst for Vancouver. “With the resale market,

expect housing starts to decline in the Vancouver CMA over the next two years, and the majority of the decline will be in the multi-family segment, and specifically in high-rise.” By Neil Sharma.

Interest rate signs point up

As expected the Bank of Canada has boosted its trend-setting overnight rate by a quarter of a percent to 1.75%.  It is the 5th hike since rate increases began in mid-2017.  The bank rate is now above 1.5% for the first time since December 2008.

The central bank has also signalled its intention to continue raising rates.  In the statement that accompanied the October 24th setting the Bank dropped the word “gradually” from its description of the pace of future increases.

That change has some market watchers forecasting that the BoC is planning a string of consecutive increases, which could start as early as December.  The Bank also says its rate will have to rise to its “neutral stance” in order to keep inflation in check.  Right now the Bank estimates “neutral” as being 3%.  A “neutral” rate is one that is neither stimulating nor suppressing the economy.

The central bank also addressed one of its key concerns about the Canadian economy: the imbalance in the household debt-to-income ratio.  It still stands at about 170%, or $1.70 of debt for every $1.00 of take-home pay.  However, the Bank says those imbalances – while still elevated – are edging lower as Canadians make adjustments to earlier interest rate increases and tougher mortgage rules.

The Bank expects consumer spending to remain strong, but says it will be supported by rising wages and confidence rather than low interest rates and debt.  By First National Financial.

Canadian Home Sales Weakened In October

Statistics released today by the Canadian Real Estate Association (CREA) show that national home sales declined for the second consecutive month in October, edging back by 1.6% month-over-month (m/m) and down 3.7% from year-ago levels. Year-over-year sales in October are now about in line with their 10-year monthly average (see chart below). Existing home sales activity has picked up from levels early this year, but it is still considerably below the boom days of 2016 and early-2017 before the foreign purchase tax was introduced in Ontario (in April 2017), the new OSFI rules were implemented (in January 2018), and Bank of Canada tightening gained momentum.

Home transactions last month declined in more than half of all local markets, led by Hamilton-Burlington, Montreal and Edmonton. Although activity did improve modestly in many markets, it was offset by a decline in sales elsewhere by a factor of two. On a year-over-year (y/y) basis, sales were down in slightly more than half of all local markets as lower sales in Greater Vancouver and the Fraser Valley more than offset the rise in sales in the Greater Toronto Area (GTA) and Montreal by a wide margin.

New Listings

The number of newly listed homes edged down 1.1% between September and October, led by the GTA, Calgary and Victoria. The decline in new supply among these markets more than offset an increase in new supply in Edmonton and Greater Vancouver.

As for the balance between sales and listings, the national sales-to-new listings ratio in October came in at 54.2% — close to September’s reading of 54.4% and its long-term average of 53.4%. Based on a comparison of the sales-to-new listings ratio with the long-term average, about two-thirds of all local markets were in balanced market territory in October 2018.

There were 5.3 months of unsold inventory on a national basis at the end of October 2018. While this remains in line with its long-term national average, the number of months of inventory is well above its long-term average in the Prairie provinces and in Newfoundland & Labrador, where downward pressure on home prices is likely to continue. By contrast, Ontario and Prince Edward Island are the two provinces where the measure remains more than one standard deviation below its long-term average pointing to stable prices or modest gains. In other provinces, the number of months of inventory is closer to its long-term average and suggests that sales and inventory are well balanced.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) was up 2.3% y/y in October 2018 with similar gains posted in each of the three previous months.

Following a well-established pattern, condo apartment units posted the largest y/y price gains in October (+7.4%), followed by townhouse/row units (+3.9%). By comparison, one-storey single-family homes posted a modest increase (+0.6%) while two-storey single-family home prices held steady.

Trends continue to vary widely among the 17 housing markets tracked by the MLS® HPI. In British Columbia, home price gains have been diminishing on a y/y basis (Greater Vancouver: +1%; Fraser Valley: +6.8%; Victoria +8.5%; elsewhere on Vancouver Island: +11.8%). Vancouver’s market balance is the weakest in almost six years, and prices for both condos and single-detached homes are now falling outright (the former were previously sturdy).

By contrast, MLS® HPI benchmark price comparisons are improving on a y/y basis among housing markets in the Greater Golden Horseshoe (GGH) region of Ontario that are tracked by the index. Home prices were up from year-ago levels in Guelph (+9.3%), Hamilton-Burlington (+6.8%), the Niagara Region (+6.3%), the GTA (+2.6%) and Oakville-Milton (+2.2%). While home prices in Barrie and District remain slightly below year-ago levels (-0.9%), declines there are shrinking; if current price momentum persists, home prices in December are on track to turn positive compared to December 2017.

Across the Prairies, benchmark home prices remained below year-ago levels in Calgary (-2.6%), Edmonton (-2.4%), Regina (-3.6%) and Saskatoon (-0.9%).

Home prices rose by 6.6% y/y in Ottawa (led by a 7.4% increase in two-storey single-family home prices), by 6.3% in Greater Montreal (driven by a 9.8% increase in townhouse/row unit prices) and by 4.2% in Greater Moncton (led by a 12.4% increase in townhouse/row unit prices) (see table below).

Bottom Line

Housing markets continue to adjust to regulatory and government tightening as well as to higher mortgage rates. The speculative frenzy has cooled, and multiple bidding situations are no longer commonplace in Toronto and surrounding areas. The housing markets in the GGH appear to have bottomed. However, prices still look soggy at the higher end of the single-family home market.

The slowdown in housing markets in the Lower Mainland of BC accelerated last month as the sector continues to reverberate from provincial actions to dampen activity, as well as the broader regulatory changes and higher interest rates.

We are likely in store for a prolonged period of modest housing gains in the Greater Golden Horseshoe, stability or softening in British Columbia and further weakening in the Prairies, Albert, and Newfoundland & Labrador.

Montreal and Ottawa remain the areas of relative strength among the biggest cities. Sales dipped in both cities month-over-month in October, but they are both up a solid 11% from a year ago. In Montreal, we’ve seen some evidence that increased foreign buying activity is mixing with strong domestic fundamentals, pushing benchmark prices up 6.3% y/y. Ottawa has been boosted by a wave a federal government spending and hiring, with price growth similarly running at 6.6% y/y, though now softening from its recent high.

The Bank of Canada is expected to continue gradually tightening monetary policy. Residential mortgage credit growth has slowed to a 17-year low and, for the first time in a decade, borrowers will be refinancing 5-year fixed rate mortgages at higher interest rates.

Bank Of Canada Reports Dramatic Drop in Highly Indebted Borrowers

In a separate report, the Bank of Canada announced this week that the quality of new mortgage lending in Canada had improved markedly owing to tighter mortgage qualification rules and higher interest rates, both of which have pushed marginal buyers out of the market. This was Ottawa’s intention all along in its multiple initiatives to dampen the housing market over the past several years.

The share of new mortgages going to highly indebted borrowers–those with loan-to-income ratios of above 450%–dropped to 13% in the second quarter of this year, down from more than 18% last year. Hence, the Bank believes that there is strengthening resiliency in the financial system, aided in part by an improving economy that has prompted five rate increases since the middle of last year.

The Bank of Canada report on the mortgage market found that not only are the number of new mortgage borrowers declining, but the riskiest ones are being weeded out. The number of new uninsured borrowers considered highly-indebted fell by 39% in the second quarter from year-ago levels, with Toronto posting the most significant declines.

The Bank also commented that the tighter regulations have had one side effect–shifting market share away from the country’s six biggest banks to other institutions such as credit unions and private lenders, which they see as a potential new source of risk. The overall riskiness of new mortgages has decreased “because the proportion of risky borrowers has declined across cities,” the report found. “As well, the regional composition has shifted, with a somewhat larger share of new mortgages recently coming from areas outside Toronto and Vancouver.”

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

 

Economic Highlights

CMHC issues forecast for next two years

The Canada Mortgage and Housing Corporation forecasts a balanced market in the GTA through 2020, with fewer sales expected because of rising interest rates.

“As much as sales are going to come down slightly, we’ll see house price growth be more or less in line with inflation, not the double-digit kind we were accustomed to a few months ago,” said CMHC’s Manager of Market Analysis (Toronto) Dana Senagama. “We’ll likely see higher price growth in the downtown cores of some major GTA areas, like Toronto, Markham and Mississauga, where there are higher concentrations of condominiums.”

Resales will also dip through the end of 2020, added Senagama, due to rising mortgage rates.

The region’s low-rise housing market is forecasted to see a downturn primarily because of land scarcity. However, in suburban areas, like Peel, Durham and York Regions, there will be higher concentrations of single-family detached sales and listings, and that will slow price appreciation.

“There’s not enough serviceable land out there for low-rise homes for singles and townhomes,” said Senagama. “The vast majority of units under construction—about 55,000 of 71,000 units—are high-rise, and that means there are only a finite number of resources, both in terms of machinery and skilled labour. That’s going to affect delivery; the logistics won’t allow it.

“In terms of new construction, the story is going to be more and more condos, and that seems to be where the push is both in terms of policy shift in government and higher house prices dictating demand towards high-rise construction because low-rise is out of reach for first-time buyers, and when the average price is over $1 million, it’s not an easy entry point for any buyer.”

Through this year, Vancouver has born witness to softening home prices across all market segments, and that trend is expected to continue, according to CMHC.

“Over the next two years, we expect the resale market will be characterized by lower sales, higher inventories of homes for sale, and lower home prices compared with the recent market highs in the last two years,” said Eric Bond, CMHC’s principal market analyst for Vancouver. “With the resale market,

expect housing starts to decline in the Vancouver CMA over the next two years, and the majority of the decline will be in the multi-family segment, and specifically in high-rise.”  By Neil Sharma

Mortgage Interest Rates

Prime lending rate increased to 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates are slowly increasing.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.

 

Terms
Posted
Rates
Payment
  Per $100k
Our Rates
Payment
  Per $100k
Savings
6 Months
3.34%
$490.86
3.30%
$488.77
$2.09
1 Year
3.59%
$504.03
3.49%
$490.86
$13.17
2 Years
3.74%
$512.02
3.54%
$496.11
$15.91
3 Years
3.89%
$520.07
3.65%
$501.38
$18.69
4 Years
3.94%
$522.77
3.64%
$506.69
$16.08
5 Years
5.59%
$615.64
3.50%
$499.27
$116.37
7 Years
5.80%
$627.97
4.04%
$528.19
$99.78
10 Years
6.10%
$645.76
4.14%
$533.64
$112.13
Variable
2.95%
$470.68
2.85%
$465.58
$5.10
Prime Rate
3.95%
Please Note: Payment per $100K and possible savings shown above are based on a 25-year ammortization. Rates are subject to change without notice and the rate you receive may vary depending on your personal financial situation. *OAC E&OE. Please reply to this email and I will be happy to provide you with greater detail and determine the best rate available for you.

 

Please Note: Payment per $100K and possible savings shown above are based on a 25-year ammortization. Rates are subject to change without notice and the rate you receive may vary depending on your personal financial situation. *OAC E&OE. Please reply to this email and I will be happy to provide you with greater detail and determine the best rate available for you.

This edition of the Weekly Rate Minder shows the latest rates available for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the best possible mortgage to suit your needs.

Explore mortgage scenarios using helpful calculators on my website: http://www.iMortgageBroker.ca

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Toronto rental boom drives record-breaking sales in apartments (BNN Bloomberg)

Homeowners worried about paying down debt as interest rates go up (CBC)

The average detached Vancouver house for $2.8 million? An analyst sees it happening, and maybe sooner than you think (Livabl)

Majority of first-time home buyers maxed out budgets: CMHC (BNN Bloomberg)

A rise in Canadian home listings is finally giving buyers some choice (Livabl)

First half of October brings rising home sales to the GTA: Report (Livabl)

Home search giant Zillow adds Canadian listings to online marketplace (CBC)

B.C. government moves ahead with speculation tax on vacant homes (CBC)

Canadian home prices no longer among the fastest growing in the world: Knight Frank (Livabl)

National Housing Market Flat in September, CREA Data Shows (Canadian Mortgage Trends)

85% of Canadians won’t grow pot at home as property value concerns weigh, survey finds (BNN Bloomberg)

Forget home sales — this metric foreshadows where the Canadian housing market is headed (Livabl)

52% Of Canadians Less Likely To Buy Homes Where Legal Pot Was Grown: Zoocasa Study (Huffington Post)

There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

Adriaan Driessen
Mortgage Broker
Dominion Lending Forest City Funding 10671
Cell:     519.777.9374
Fax:      519.518.1081
riebro@me.com
www.iMortgageBroker.ca
415 Wharncliffe Road South
London, ON, N6J 2M3

Lori Richards Kovac
Mortgage Agent & Administrator
Dominion Lending Forest City Funding 10671
Cell:     519.852.7116
Fax:      519.518.1081
loriakovac@icloud.com
415 Wharncliffe Road South
London, ON, N6J 2M3

Adriaan Driessen
Sales Representative & Senior Partner
PC275 Realty Brokerage
Cell:     519.777.9374
Fax:      519.518.1081
adriaan@pc275.com
www.PC275.com
415 Wharncliffe Road South
London, ON, N6J 2M3

23 Oct

Residential Market Update

General

Posted by: Adriaan Driessen

WEEKLY RESIDENTIAL  MARKET UPDATE 

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Industry & Market Highlights 

CMHC releases Sept. housing starts data

The annual pace of Canadian housing starts fell to their lowest level in nearly two years in September.

Canada Mortgage and Housing Corp. says the seasonally adjusted annual rate came in at 188,683 units last month, down from 198,843 in August.

Thomson Reuters Eikon says economists had expected an annual rate of 210,000 for September.

September marks the third straight monthly decline.

The slowdown in the pace of housing starts comes amid rising interest rates from the Bank of Canada, and more restrictive mortgage rules.

“The September housing starts report fits with the relative calm and return to normality in sales, market balance and price growth that we are seeing across most of the country this year, in particular Toronto, following speculative excesses in Southern Ontario earlier last year and a moderate correction in response to policy measures earlier this year,” wrote Sal Guatieri, a senior economist with BMO Capital Markets, in a note.

“Demand continues to be supported by the fastest population growth in 27 years and new millennial-led households. A calmer housing market is just what the doctor ordered, and won’t discourage the Bank of Canada from raising rates on Oct. 24.”

CMHC says the pace of urban starts fell by 5.9 per cent to 175,653 units. The slowdown was dragged down by an 8.9 per cent drop to 122,656 units in urban multiple-unit projects such as condos, apartments and townhouses. Single-detached urban starts increased by two per cent to 52,997.

Rural starts were estimated at a seasonally adjusted annual rate of 13,030 units, while the six-month moving average of the monthly seasonally adjusted annual rates was 207,768 for September, down from 213,966 in August.

British Columbia led the declines with a drop of 43.3 per cent due to stiffer mortgage rules and growing lack of affordability, particularly in the Greater Vancouver area. Alberta also saw a drop of 34.8 per cent, amid a weakening in the oil-producing economies.

Meanwhile, Ontario housing starts increased 21.3 per cent, led by Toronto condos and Quebec was up 15.4 per cent.  By The Canadian Press.

First-time homebuyers are maxed out, but confident

Canadians are not holding back when it comes to buying their first home.  The annual mortgage consumer study by Canada Mortgage and Housing Corporation finds that 85% of first-time buyers are maxing-out their home-buying budgets.

The CMHC study indicates that affordability is the most important factor for both first-timers and repeat buyers, ahead of things like the condition of the home, the neighbourhood and distance to work.

More than half of recent homebuyers say other key concerns include unforeseen costs, paying too much for their property and rising interest rates.  Still, 76% of first-time buyers are confident they will be able to meet their mortgage payments.  Sixty percent of first-time buyers and 69% of repeat buyers claim to have sufficient assets, such as investments or other properties, which they could use to fund their mortgage if they needed to.

There is some support for this consumer confidence.  Recent reports by the credit monitoring firms Equifax and TransUnion indicate the growth of consumer debt (non-mortgage) is slowing and delinquency rates are declining.  At the same time the Office of the Superintendent of Financial Institutions reports the quality of mortgage loans is improving.

Rising interest rates, foreign buyer taxes and tougher mortgage qualification rules appear to be cooling real estate sales and prices across the country but the Canadian Real Estate Association is maintaining a positive forecast.

The Bank of Canada is expected to bump-up its benchmark interest rate by a quarter-point – to 1.75% – on Wednesday.  By First National Financial.

The temperature may be dropping, but Montreal is heating up

Never mind Vancouver.  Do not bother with Toronto.  Canada’s hot housing market du jour is Montreal.

While Toronto and Vancouver have been getting all the attention as the busiest, most expensive and most volatile markets in the country, Montreal has been on a sales and price appreciation roll for 43 consecutive months.

In September, Montreal home sales hit a nine year high; 3,220 units (led by 1,206 condominium transactions), up 8% compared to a year ago.  Year-over-year prices climbed 7% for single-family homes ($336,000), 6% for plexes ($504,000) and 4% for condos ($263,000).

In Vancouver, year-over-year sales declined from February through August.  In Toronto, gains have been modest.  September sales were up just 1.9% compared to 2017.  Prices were up about 2%.

High prices, rising interest rates and foreign buyer taxes appear to be weighing down the two top markets.  Montreal, meanwhile, is enjoying the benefits of good immigration, economic growth, consumer confidence and public infrastructure projects, according to the local real estate board.  By First National Financial. 

 

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Economic Highlights

 

Interest rate rise “a done deal” but impact is showing says TD

There is little dispute among economists that the Bank of Canada will increase interest rates again this week.

Wednesday’s hike will be accompanied by explanation as to why this is necessary in the context of better-than-expected economic growth in the third quarter and core inflation is on target.

TD Economics senior economist Fotios Raptis says the hike is “a done deal” but notes in a report that the impact of rising interest rates is starting to bite.

He highlights weaker retail and consumer spending data with nominal spending declining in Saskatchewan, Quebec, Alberta, and British Columbia.

National home sales were also weaker in September and growth in home prices was weaker. TD is forecasting a slower pace of home activity in the months ahead as mortgage costs and affordability weigh.

Headline inflation, Raptis points out, was also down sharply in September with the CPI rising 2.2% year-over-year, well below the expected 2.7%.

However, with a strong business outlook, tight labour market, and rising wages, he believes that the BoC has reason to believe the economy can withstand another rate rise.

Rate rises will remain gradual

Meanwhile, CIBC Economics’ Avery Shenfeld says the BoC will remain cautious on rate rises following this week’s near-certain hike.

Apart from the NAFTA-replacement USMCA trade deal, not much has changed since the central bank last spoke of gradual rate rises.

Although Shenfeld expects Governor Poloz to avoid too much forward guidance although there should be positive talk regarding growth in 2018 and 2019.  By Steve Randall.

Did the new USMCA effect rates?

It’s been rough week for bonds. Since we closed the books last Friday, 2 year yields are up 10 basis points to 2.31%, 5 year yields are up 15 basis points to 2.48%, and 10 year yields are up 16 basis points to 2.58%.

Of course the question isn’t where rates are, but rather WHY are rates here?  The most obvious answer was Canada’s agreement to join the US-Mexico trade agreement (now the “USMCA”) last weekend.  Canada made some key concessions on dairy but the US agreed to protect Canada from potential tariffs on autos.  The reduction of uncertainty and de-escalation of a possible trade war was bullish for Canadian economic growth expectations and rates move higher.  The initial down trade (prices) was highlighted by momentum/negative gamma type selling (or put another way, more sellers than buyers).  Easy peasy.

The selling is presently being punctuated by a stronger than expected jobs report this morning.  Canadian employment popped by 63,300 jobs in September, more than reversing the drop reported last month.  The unemployment rate dropped a tick to 5.9%.  We also can’t underestimate the impact of the new NHL season kicking off with a potentially historic run in the cards for the Leafs.  With the removal of trade overhang (and two goals by Auston Matthews in the season opener) the market has now priced in two 25 basis point hikes by the BoC by January.

Commercial Break

We’ll pause here to highlight First National’s excellent early rate lock program for all your commercial mortgage borrowing needs.  If you’ve already hedged your fixed rate borrowing, congratulations.  If you haven’t, it’s not too late.  Help me help you.  Call your favourite First National underwriter, lock-in, and sleep better!  Two sure things in life are the benefits of sunscreen and hedging your fixed rate mortgages.  By Jason Ellis, Senior Vice President and Managing Director, Capital Markets, First National Financial.

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Mortgage Interest Rates

Prime lending rate is 3.7%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.34%.  Fixed rate increased across the board on average 25 basis points.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.

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Terms Posted

Rates

Payment

  Per $100k

Our Rates Payment

  Per $100k

Savings
6 Months 3.14% $480.46 3.10% $478.39 $2.07
1 Year 3.34% $490.86 3.29% $488.25 $2.61
2 Years 3.74% $512.02 3.44% $496.11 $15.91
3 Years 3.89% $520.07 3.54% $501.38 $18.69
4 Years 3.94% $522.77 3.64% $506.69 $16.08
5 Years 5.59% $615.64 3.54% $493.48 $122.16
7 Years 5.80% $627.97 4.04% $528.19 $99.78
10 Years 6.10% $645.76 4.14% $533.64 $112.13
Variable 2.70% $457.99 2.70% $457.99 $0.00
Prime Rate 3.70%
Please Note: Payment per $100K and possible savings shown above are based on a 25-year ammortization. Rates are subject to change without notice and the rate you receive may vary depending on your personal financial situation. *OAC E&OE. Please reply to this email and I will be happy to provide you with greater detail and determine the best rate available for you.
This edition of the Weekly Rate Minder shows the latest rates available for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the best possible mortgage to suit your needs.

Explore mortgage scenarios using helpful calculators on my website: http://www.iMortgageBroker.ca

 

 

5 Oct

Residential Market Update

General

Posted by: Adriaan Driessen

WEEKLY RESIDENTIAL  MARKET UPDATE 

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Industry & Market Highlights 

The short break in interest rate increases may be over

Over the past few months rates have held steady and gave home owners a reprieve in the increasing mortgage interest rate market.  After the official announcement of a trilateral trade agreement with Canada, the U.S. and Mexico, and the US Federal Reserve Bank raising interest Rates – most Economists agree that the Bank of Canada is next to make a rate announcement, and we may start to see some slow, but steady interest rate increases again. Of course no one can say for sure, but the signs seem to point in that direction. If you’re feeling nervous about rates increasing contact your broker to review your options to look out for your best interest.

If you are currently in a variable rate mortgage with a lower risk tolerance, this may be the time to consider locking in.  If you have a high risk tolerance and are used to the ebb and flow of markets, it’s business as usual. 

Increases in the U.S. and the potential ripple effect

Market watchers who are forecasting another Bank of Canada rate increase next month have been handed more backing for their prediction.

Last week the U.S. Federal Reserve pushed up its policy rate for the eighth time since December of 2015.  The Fed increased its benchmark rate by 25 basis points (a quarter of a percent) to a range of 2% to 2.25%, the same level it was at in April 2008, before the height of the global financial crisis.  The U.S. central bank also made it clear it intends to continue along that path.

The Fed says it expects one more increase this year and is projecting at least three hikes in 2019.  It has also changed some of the language in the accompanying statement, eliminating the phrase “the stance of monetary policy remains accommodative.”

The effects of U.S. rate increases routinely ripple across the border influencing bond rates and the value of the Canadian dollar.  A declining loonie could trigger further inflation, as the cost of imported goods increase.

The Bank of Canada is already facing an inflation rate that is running on the high side of its 1% to 3% target range.  Unemployment is at generationally low levels in Canada, and working people exercising their spending power can also fuel inflation.

Given these pressures and the BoC’s stated desire to normalize interest rates another quarter-point increase seems very likely on October 24th.  By First National Financial.

SOLD Date Coming to Realtor.ca

CREA’s Board of Directors has voted to add sold and historical data to the property listings on Realtor.ca without the need for a login.

In a message to real estate boards across the country, CREA says the move comes “in order to meet consumer demand and at the request of Realtors and boards.”

It says, “In addition to responding to requests from members, this will ensure we continue to offer leading edge services on the best real estate website in Canada.”

A Competition Tribunal decision in July 2016 found that by not including sold and other data in its VOW feed to members, TREB had engaged in anti-competitive acts. An appeal court upheld the decision and on Aug. 23 of this year, the Supreme Court of Canada announced that it would not hear TREB’s appeal. CREA supported TREB at the tribunal and had intervenor status in the proceedings.

TREB is now supplying the disputed data to its member VOWs.

CREA media relations officer Pierre Leduc says that before the sold data can be displayed on Realtor.ca, each real estate board must request that the information be added. CREA will then work with the boards, the provincial associations and the regulators to ensure that it complies with all laws and regulations.

“We’ll have to check with the boards to see what historic sold data they have access to, and how far back that data will go,” says Leduc.

Only historic sold prices will be posted and not pending solds, he says. Pending solds were part of the Competition Tribunal order for VOWs, but consumers and Realtors are concerned about privacy issues on deals that have yet to close.

Leduc says CREA hopes to have the sold data rolled out on Realtor.ca as soon as possible.  By REMonline.com

CREA: National home sales post modest sales gain

Growth in Canada’s housing market in August was modest as the effects of the mortgage stress test continues, although is beginning to fade.

The latest sales data and forecast from the Canadian Real Estate Association released Monday shows a small rise for sales in August, a 0.9% increase month-over-month.

Actual (not seasonally-adjusted) activity was down 3.8% year-over-year while prices nationally increased 1% from a year earlier. Sales activity is weaker than most months over the last 4 years.

“The new stress-test on mortgage applicants implemented earlier this year continues to weigh on national home sales,” said CREA President Barb Sukkau. “The degree to which the stress-test continues to sideline home buyers varies depending on location, housing type and price range.”

There were 5.2 months of inventory on a national basis at the end of August 2018, right in line with the long-term average for the measure.

The Aggregate Composite MLS® Home Price Index (MLS® HPI) was up 2.5% y-o-y in August 2018.

The largest y-o-y price gains in August were for apartments (+9.5%), followed by townhouse/row units (+4.3%). But prices for one-storey and two-storey single family homes were little changed on a y-o-y basis in August (+0.4% and -0.4% respectively).

Where the gains were

Around half of all local markets recorded an increase in sales from July to August, led again by the GTA.

TD Economics’ analysis of the data shows the largest gains were in Toronto (+2.2%), Montreal (+2.8%) and Edmonton (+5.4%) while sales were lower in Halifax (-8.2%), London (-1.2%) and Winnipeg (-1.0%).

Activity picked up in several markets in B.C. including 2.9% in Vancouver – the first gain this year – along with the Fraser Valley (+0.6%), Okanagan-Mainline (+1.7%), and Victoria (+2.7%).

“Our view is that sales and prices will continue to grow, but that rising borrowing costs will restrain the pace of expansion. This is particularly true for more expensive markets in Ontario and B.C. where affordability pressures are acute,” TD economist Rishi Sondhi says.

Activity had fallen too far

In his assessment of the CREA data, RBC Economics’ senior economist Robert Hogue says that the figures show that the recent drop in activity was part of the market finding its normal level following B-20.

“The fact that home resales snapped back by 8.1% in the four months since reaching a seven-year low in April tells us that activity had fallen too far. This is typical following a major policy change that pulled some activity forward,” he said.

He added that the latest figures reflect a new, slower phase of recovery.  By Steve Randall.

Decreasing certainty for an increase in rates

Market watchers have now fixed their gaze on October 24th as the most likely date for the next rate move by the Bank of Canada.  As of the setting last week, that saw no change, the betting was about 75% in favour of a hike in October, but that certainty seems to be slipping.

The latest employment numbers from Statistics Canada will likely have the Bank carefully considering any move toward an increase.  The August unemployment rate popped-up 0.2 of a percentage point to 6.0%, on a net loss of 51,600 jobs in August.

The August jobs report is sending mixed messages though.  Most of the losses came in part-time positions, which fell by 92,000.  Full-time jobs actually increased by 40,400.  Year-over-year employment in Canada is up 0.9%.  While 155,000 part-time positions have disappeared, there has been a gain of 326,000 full-time jobs for a net gain of 171,000 positions.

Another factor that could hold back an October rate increase is a softening of wage growth.  The rate of increase in hourly pay slowed to 2.9% in August, down from 3.2% – year-over-year – in July and a 3.6% in June.

The bigger issue, though, remains the NAFTA re-negotiations.  Uncertainty about the outcome of the talks is a drag on the Canadian economy.  It is hampering the Bank of Canada’s efforts to move economic growth away from debt-fueled consumer spending to business investment and export growth.

The Bank continues to use words like cautious and gradual to describe its approach and with inflation remaining well inside the Bank’s target range there is no urgency for a rate increase.  By First National Financial. 

Canadian Mortgage Credit Growth Grinds To A Halt, Worst Growth In 18 Years

The Canadian real estate market is slowing down, and it’s hitting mortgages. Bank of Canada (BoC) numbers show mortgage credit grinded to a halt in July. The annual rate of mortgage growth fell to the lowest level in nearly 18 years, and is set up to go lower.

Canadians Owe Over $1.52 Trillion In Mortgage Debt

Canadians set a new dollar record for outstanding mortgage credit at institutional lenders. The outstanding balance stood at $1.52 trillion in July, up $4.95 billion from the month before. Households sent the total $54.22 billion higher than the same time last year. On the upside, lenders are primed to receive a whole lot of interest payments. On the other  hand, if we look closely – we see the rate of growth is actually shrinking very quickly.

Canadian Mortgage Credit Falls To Lowest Growth Since July 2001

The growth of mortgage credit fell to its lowest levels in almost two decades. The $54.22 billion increase from last year comes in at just 3.7% growth. That still sounds pretty decent, until you realize it’s only 0.68% in real terms. The annual pace of growth is now the lowest it’s been since July 2001. For historical context, a then new artist named Shaggy topped the charts with It Wasn’t Me when mortgage growth was last this low. Of course most of you have no idea who he is, so ask your mom for the best explanation. Then tell her mortgage levels fell to Shaggy-era levels of growth, and email us her take.

Mortgage Growth Likely To Head Lower

Looking at the short-term trend, these numbers will likely come in lower for at least a few more months. Annualizing growth over the past 3 months, we get just 1.7% – lower than inflation. This means if the annual growth rate came in at the same pace as the past 3 months, the rate would fall to 1.7%. Until this number rises above the annual pace for a while, expect the rate to continue to fall.

Canada is coming off of record sales years, and interest rates are quickly climbing. That’s dropping demand for new loans, and tightening credit requirements. It shouldn’t be a huge surprise that mortgage growth is on the decline, and likely to slide further.  By betterdwelling.com

Reviewing the Stress Test and B-20 Lending rules hindering the Canadian Housing Market

Back in 2013, the B-20 rules as underwriting guidelines for residential mortgages came into effect. The rules were put in place as a direct response to the financial issues in the United States caused by “poor mortgage lending practices” (mortgagebrokernews.ca).

Now, 5 years after these rules have come into effect, Canada’s housing market is said to be facing affordability issues. It is widely believed that it is become increasingly more difficult for first time home buyers to purchase a property. To deal with the affordability issues and the stress test, some young people are borrowing from parents to help with a down payment.

Recently, it has been reported that there is a decrease in mortgage originations from the Millennial and Generation Z cohort and a rise amongst the Pre-War Generation (those between the ages of 73-93). Findings have shown an increase of mortgage originations of 63% in the last quarter from the Pre-War Generation (theglobeandmail.com).

This begs the questions: are those who are trying to get into the housing market seeking help from their grandparents and asking them to take out mortgages for their grandchildren? Is the current generation asking and receiving help from their aging grandparents? If so, what else are they willing to do to achieve their goal of home ownership

The Conservative party as made a motion to the House of Commons to institute a subcommittee to review the stress test and B-20 rules to determine if it is helping or hindering the Canadian housing market.  By CMBA, Canadian Mortgage Brokers Association.