16 Feb

Residential Market Update – February 16, 2018

General

Posted by: Adriaan Driessen

Industry & Market Highlights

New CMHC study sheds light on rising house prices

In June 2016, CMHC launched a study to better understand the causes of rapidly rising home prices in major metropolitan centers across Canada. The report represents one of the most thorough examinations of house price patterns ever completed in Canada and is the result of advanced, data-driven analyses and engagement with stakeholders and government partners.

Why undertake this kind of study in the first place?

Housing affordability challenges exist in many centres throughout Canada. Rapidly rising house prices in high priced markets have benefited existing homeowners, but have also created challenges for first-time buyers. However, this is not just an issue for first-time homebuyers. Rapidly rising house prices also tend to drive rents higher and increase the cost of rental assistance and non-market housing solutions.

What were the study’s findings?

In conducting this study, it was important to look at both supply and demand. Very briefly, we found that:

  • Strong economic and population growth, together with low mortgage rates, have been important drivers of house price growth in Canada
  • The increase in average house prices in Vancouver and Toronto is also attributable to rising income inequality in these centres — price increases have tended to be greater for more expensive single-detached housing, rather than for condominium apartments
  • Supply response to rising house prices has been weaker in Toronto and Vancouver, than in other Canadian metropolitan areas

What are the next steps?

The report represents an important step towards stimulating discussion across all levels of government, housing advocates, industry, academia, and the general public — with the full recognition that this is the beginning of a process of improving the functioning of Canadian housing market.

In Summary: Markets are, generally, behaving in accordance with fundamental economic rules like supply and demand (point 1).  However supply in the two hottest markets is not keeping up (point 3).  Point 2 speaks to the tendency of major urban centres to attract high wage jobs.

Toronto appears to be a contradiction though.  Prices there rose by 40% between 2010 and 2016.  CMHC says only about 40% of that increase can be attributed to economic fundamentals.  On the other hand Vancouver saw a 48% increase in prices, but three-quarters of that can be explained by fundamental factors such as increased population, higher wages and low mortgage rates. By First National Financial.

Read the Full Report Here.

Toronto homeowners facing nearly 3% property tax hike

Toronto homeowners are in for a nearly three per cent property tax hike, as city council approved the 2018 budget on Monday.

Councillors voted 31 to 11 in favour of the budget, which included the 2.1 per cent property tax hike.

However, residents will have to pay an extra 0.5 per cent for the city’s build fund, which supports transit and housing projects, as well as an increase of 0.31 per cent as part of the city’s business climate and reassessment impact strategy. This brings the total residential property tax hike to 2.9 per cent.

For example, a homeowner whose home is assessed by the city at $624,418 will have to pay an extra $82 in municipal property taxes for a total of $2,907 for 2018.

Since taking office Mayor John Tory has been steadfast in his refusal to raise property taxes above the rate of inflation every year, which is what city council has done again this year.

However, some councillors are critical of the mayor and his unwillingness to hike taxes a little more.

“This is an election budget, it’s a band-aid budget, but more important, it’s an unsustainable budget,” Coun. Sarah Doucette said.

Coun. Mike Layton also believes the rate needs to be higher, in order to pay for what the city needs.

“We’ve decided to build this straw house, to build the unsustainable house, to go halfway on some of these measures to investigating in a really strong city,” Layton said.

There were some motions brought forth for the property tax hike to be greater, but they were voted down.

Aside from property taxes, the city will also be making a record high investment in transit this year, with $1.98 billion in the budget allocated for the TTC — that makes TTC funding about one-fifth of the city’s operating budget this year.

Budget details

Toronto city council approved a 2018 tax supported operating budget of $11.12 billion and a 10-year capital budget and plan of $25.98 billion. Some of the details, provided by the city, are below. Click here for more information on the budget.

The 2018 operating budget includes funding for new and enhanced services including:

  • Additional 1,515 childcare subsidies, and support for the new Child and Family Centres Program
  • 700 winter respite shelter beds
  • Operation of three new permanent shelter sites
  • Implementing TTC’s recommended two-hour time-based transfer policy on Presto
  • $3 million to relieve overcrowding on TTC bus routes
  • $1.3 million to implement congestion-fighting measures such as Traffic Enforcement Officers

Some of the new investments in the 10-year capital plan include:

  • $279 million in interim capital funding to address the TCHC state-of-good-repair backlog and current revitalization projects to avoid permanent closure of its units
  • $485.8 million for the George Street Revitalization project
  • $178.6 million to acquire and construct nine shelter sites and renovate two leased sites over a three-year period that will add 1,000 new permanent shelter beds
  • $6.4 million for a feasibility study of the Rail Deck Park, $3 million for the design and development phase of determining future uses of Old City Hall and $3.5 million to complete design work for the new Etobicoke Community Centre
  • $46.7 million for critical state-of-good-repair projects such as the St. Lawrence Centre Roof project, Toronto Strong Neighbourhoods Strategy project and the Multi-Branch Renovation project of the Toronto Public Library
  • $2 million to address critical waterfront rehabilitation due to high lake-effect flooding

City council also approved a 2018-2027 tax supported capital budget and plan of $26 billion, 72 per cent of which will be allocated to transit and transportation projects such buying buses and streetcars, expanding the subway, and fixing the Gardiner Expressway.  By Toronto CityNews.

Real Estate Investment Trends to Watch Out for 2018

The latest wide-ranging market outlook released by Morguard Corporation painted a confident picture of the Canadian real estate investment segment’s robust activity this year, a trend fuelled by a healthy demand for quality assets.

“Investors remain enthusiastic about the Canadian commercial real estate market after a record volume of transactions in 2017,” Morguard director of research Keith Reading said during the release of the 2018 Canadian Economic Outlook and Market Fundamentals Research Report.

“There is a high supply of capital ready to be invested and Canadian commercial real estate is a proven performer. We are predicting another very busy and competitive market environment across the country in the coming year.”

The downtown areas of Vancouver and Toronto are projected to remain the most desired investment destinations in 2018. Suburban Toronto, Ottawa, and Montreal are also predicted to enjoy strong activity levels. And even Alberta, which had previously pulled down nationwide averages, is showing signs of renewed life.

“Intense bidding for a limited pool of downtown properties will force investors to look elsewhere for opportunity,” Reading stated. “Class A properties in suburban markets, particularly those near transit nodes, will be in high demand. Edmonton and Calgary will also see increased activity as investors look for high-quality assets in a recovering market and economy.”

“Long term, market-dominant retail centres should be able to alleviate immediate pressure on vacancy by providing prime space to new, high-growth traditional retailers and service retailers,” Reading added. “The fact remains that Canada is a country of shoppers, and recent positive economic and employment trends should drive healthy spending growth for the foreseeable future.”  By Ephraim Vecina. The full report can be accessed here.

CHMC Says Policy Should Tackle Supply, Not Demand

The Canada Mortgage and Housing Corporation has published a new report on housing affordability in Canada’s biggest cities but admits it doesn’t have all the answers.

The agency found that escalating house prices are mainly driven by strong economic and population growth, and low mortgage rates; with Toronto and Vancouver lagging on the supply side.

While the two hottest markets showed large and persistent price increases during the analysis period of 2010-2016, Montreal saw only modest growth and the oil-dependent Calgary and Edmonton markets gained slightly.

Vancouver led the gains over the 6 year period with a 48% rise in house prices with population and disposable income rises, and low mortgage rates, accounting for almost 75% of that rise.

House prices increased by 40% in Toronto over the same time period with 40% of the rise being explained by conventional economic factors.

These price increases have tended to be for single-family homes rather than condo apartments. Supply of condos has been proportionately greater than for single-family homes.

“Large Canadian centres like Toronto and Vancouver are increasingly behaving like world-class cities,” said Aled ab Iorwerth, CMHC’s deputy chief economist. “Their strong local economies and historically low interest rates make them attractive to both people and industry which drives up demand for housing. When you have weak supply responses, as you do in these markets, prices have nowhere to go but up.

Although investor demand for condos has increased the rental supply, CMHC says that they tend to be more expensive than purpose-built rentals.

The report also highlights that measures to address the supply challenges are “more likely to have positive impacts than measures focused on the demand side.”

“While it is true that the supply response in Toronto and Vancouver has been significantly weaker than in other Canadian metropolitan areas, we do not fully know why this is the case,” said Evan Siddall, CMHC’s president and CEO. There continues to be data gaps and we need to work more closely with jurisdictions at all levels to fully understand what is happening.” By Steve Randall.

Is This The Crash? Gold, Silver & Bitcoin Update from Mike Maloney

Is this the beginning of a major crash? Join Mike Maloney for his latest update where he analyzes the stock market, gold & silver, and bitcoin.  Watch the video here.

Are you a GoldSilver Insider? Mike released an earlier, Insider-only version of this video that reviews his latest investment moves and changes in his personal holdings. If you’re not an Insider, here are the details of this exclusive program.

The articles Mike references in this video:

 

Jobs Decline In January Following Blockbuster Year

Mortgage Update - Mortgage Broker London

Canada shed 88,000 jobs in January, the most significant drop in nine years, driven by a record 137,000 plunge in part-time work. Full-time employment was up 49,000 while the unemployment rate increased a tick to 5.9%–only slightly above the lowest jobless rate since 1976. January’s sharp decline brings to an end a stunning 17-month streak of gains. While the top-line loss of 88,000 jobs is striking, it still only retraced about 60% of the 146,000 jump in the past two months.

The disappointing employment report will no doubt keep the Bank of Canada on the sidelines for a while, but it follows the most robust job market in 15 years. More than 400,000 net new jobs were created in 2017. Expectations are now that the Bank will hike interest rates cautiously, taking a pass at the March meeting.

Average hourly wages jumped 3.3% year-over-year, the strongest gain since March 2016. This was boosted by the rise in the minimum wage to $14.00 an hour in Ontario at the start of this year. Ontario now has the highest minimum wage in the country.

The largest employment losses were in Ontario and Quebec. There were also decreases in New Brunswick and Manitoba. Declines were spread across some industries including educational services; finance, insurance, real estate rental and leasing; professional, scientific and technical services; construction; and healthcare and social assistance. Employment increased in business, building, and other support services.

Canada’s economy has still seen employment increase by 288,700 jobs over the past 12 months — 146,000 of which came in November and December. Full-time employment is up 558,900 over the past 18 months, which is unprecedented.

 

Mortgage Update - Mortgage Broker London

Mortgage Update - Mortgage Broker London

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres

Ontario Ministry of Financing Updates to Land Transfer Tax

Land Transfer Tax -New tax statements about the Non-Resident Speculation Tax (NRST), solicitor obligations, and transferee recordkeeping requirements are required for the registration of Instruments requiring land transfer tax statements or land transfer tax affidavit. Ministry of Finance forms and Teraview, Ontario’s electronic land registration system, have been updated.

Also, a new form is available for NRST refund or rebate applications.

The above changes are outlined on the following webpages:

Land Transfer Tax

Non-Resident Speculation Tax

A Guide for Real Estate Practitioners – Land Transfer Tax and the Electronic Registration of Conveyances of Land in Ontario

Refunds and Rebates of Land Transfer Tax

 

Mortgage Update - Mortgage Broker London

Economic Highlights

Canadian Data Release: Existing home sales slump in January as B20 rules bite

  • Canadian existing home sales slumped 14.5% m/m in January, ending a five month streak of increases and erasing all the gains seen during this time.
  • Only five of the twenty-six main markets experienced increases, with the group consisting of: Newfoundland & Labrador, Saguenay, Gatineau, Sudbury and Regina. On the other hand, fifteen markets experienced double digit percent declines. Ottawa (-32.6%), GTA (-26.6%) and Hamilton (-31.7%) led the pull-back with sharp declines also seen across the rest of the Greater Golden Horseshoe (GGH). Most B.C. markets also experienced significant decreases with Victoria (-17.1%), Fraser Valley (-14.8%) and GVA (-10.5%). Alberta and Manitoba markets also dipped lower, with Calgary (-15.3%), Edmonton (-14.9%) and Winnipeg (-10.8%) all down in double digits. Remaining Canadian markets were moderately lower.
  • New listings were not to be outdone, slumping an even greater 21.6% nationally. Ontario and B.C. markets led the pullback with London (-44.8%), GTA (-39.3%), Fraser Valley (-38.8%) and GVA (-33.0%) topping the list. Only four markets experienced an uptick in listings – mostly markets that have also experienced an increase in sales.
  • The outsized decline in listings led to a tightening of market conditions, with the sales to listings ratio up 5.3 points to 63.6% nationally. Most acute tightening was experienced in several GGH markets. The ratio surged in Kitchener-Waterloo (up 32.3 to 102.8%) and London (up 23.2 to 94.6%), with the GTA also up a healthy 9.7pp to 45.7%. Fraser Valley (up 26.3 to 93.6%) and GVA (up 19 to 75.7%) also tightened up sharply.
  • The average home price declined 2.4% m/m, buckling the five month trend. It was a mixed bag across markets, half the provinces experiencing declines led by N.S. (-3.9%) while P.E.I. (+9.8%) and N.B. (+6.1%) lead the gains. Prices ticked down by 1.6% in Ontario and B.C. with values 4.2% lower in the GVA, while GTA prices were slightly softer, down 0.9%.
  • The price decline was entirely due to the change in composition of properties sold, with GTA and GVA sales accounting for just 23.4% of national sales – down from 25.8% in the previous month. After seasonal adjustment, the national HPI rose 0.5%, with gains of 1.1% and 0.4% for GVA and GTA. On a year-over-year basis the national index decelerated from 9.2% to 7.7%. The trend was mirrored by the GTA HPI, which slowed to 5.3% from 7.3%, while the GVA HPI accelerated from 16% to 16.8%.

Key Implications

  • This morning’s report was a highly anticipated oneas it gave us a glimpse of how the implementation of updated B20 rules impacted the Canadian housing market and how the market is faring in light of higher interest rates.
  • On the whole, the numbers confirmed our expectations that B20 rules would pull-forward activity into late-2017, with sales slumping in January on the give-back. The pull-forward was further corroborated by the dynamics of new listings, which also increased ahead of the new rules, before properties being pulled-off. While it is too early to precisely estimate how much of the rise in late-2017 is related to the pull-forward, the report suggests that this dynamic accounted for much of it.
  • The notion that pull-forward was central to the rise in late-2017 is further confirmed by the regional dynamics. The give-back was most apparent in Ontario and (to a lesser extent) B.C. – the two markets most affected by the B20 rules owing to their high prices and relatively large share of federally-regulated lending (particularly in Ontario).
  • We expect some near-term volatility to persist in the market, as the fallout from the new rules and rising rates is absorbed by buyers and sellers, before some stabilization by mid-year. Thereafter we expect activity to remain weighed down byrising interest rates, but with markets largely in balanced territory prices should remain well supported. For our detailed forecast please click here.

By Michael Dolega, TD Economics Senior Economist

United States

  • Major U.S. stock indices entered correction territory on Thursday but remain elevated relative to where they were a year ago. The sell-off was spurred by fears of higher interest rates, as the 10-year government bond yield hit a four-year high.
  • The $300 billion increase in the spending cap over two years, laid out in the federal budget deal, could add to inflationary pressures at a time when the economy is already operating at close to full capacity, pressuring yields up further.
  • Next week, investors will turn their attention to hard data, with advanced January retail sales providing an indication of whether or not first quarter growth will be affected by the residual seasonality.

Canada

  • It was a sea of red in Canadian financial markets this week, with the S&P TSX, oil prices and the Canadian dollar all losing ground.
  • Canada’s trade deficit widened in December, suggesting that net trade will be a drag on growth in the fourth quarter.
  • Employment started the year off on a soft note, shedding 88k jobs in January. Losses were concentrated in part-time positions. The unemployment rate ticked up a point to 5.9%.
  • Housing starts topped 200k units for an 8th straight month in January, despite some unfavourable weather conditions

 

Mortgage Update - Mortgage Broker London

Mortgage Interest Rates

No change to Prime lending rate currently at 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.14%.  No change in fixed rates.  No change in adjustable variable rates.

 

Mortgage Update - Mortgage Broker London

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Open Access

Subscription May Be Required

Now’s the perfect time of year for a free mortgage check-up. With spring on its way and interest rates on the rise, it makes sense for us to revisit your mortgage and ensure it still meets your needs. Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or you simply want to take a vacation. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.

24 Jan

Residential Market Update – January 23, 2018

General

Posted by: Adriaan Driessen

Weekly Residential Market Update
Market Commentary
See attached below the latest updated change of space brochure and affordability chart for your clients and customers.
Bank of Canada Raises Rates Cautiously
As was widely expected, the Bank of Canada announced another quarter-point interest rate increase last Wednesday, saying that more hikes are ahead. According to Governor Stephen Poloz, the “big cloud” over the Canadian economy is the uncertainty associated with NAFTA and he cautioned that it would be some time before interest rates return to normal levels as some monetary stimulus remains warranted.
The Bank of Canada increased the target overnight interest rate to 1.25%, its highest level since the global financial crisis marking the third rate hike since July. The move comes in the wake of unexpected labour market tightening and strong business confidence and investment. The Canadian economy is bumping up against capacity constraints as the jobless rate has fallen to its lowest level in more than 40 years.
Inflation is just shy of the 2.0% target level and wage rates are rising, albeit at a relatively moderate pace.
Exports have been weaker than
expected. NAFTA uncertainty is “weighing increasingly” on Canada’s economic outlook as cross-border shifts in auto production are already beginning.
Consumption and housing will slow due to higher interest rates and new mortgage guidelines. According to today’s Monetary Policy Report (MPR), “growth of household credit has slowed somewhat since the first half of 2017, even though some households may have pulled forward borrowing in anticipation of the new B-20 guidelines related to mortgage underwriting from the Office of the Superintendent of Financial Institutions (OSFI). This slowing is consistent with higher borrowing costs due to the two policy rate increases in 2017.” Home sales increased considerably in the fourth quarter in advance of the tightening OSFI mortgage rules implemented beginning this year.
The MPR goes on to comment that “residential investment is now expected to be roughly flat over the two-year projection horizon. The rate of new household formation is anticipated to support a solid level of housing activity, particularly in the Greater Toronto Area, where the supply of new housing units has not kept pace with demand. However, interest rate increases, as well as macroprudential and other housing policy measures, are expected to weigh on growth in residential investment, since some prospective homebuyers may take on smaller mortgages or delay purchases.”
With higher interest rates, debt-service costs will rise, thus dampening consumption growth, particularly of durable goods, which have been a significant driver of spending in recent quarters. “Elevated levels of household debt are likely to amplify the impact of higher interest rates on consumption, since increased debt-service costs are more likely to constrain some borrowers, forcing them to moderate their expenditures.”
While global oil price benchmarks have risen in the past quarter or so, Canadian oil prices have been flat. Transportation constraints facing Canadian oil producers have held down the price of Western Canada Select oil, leaving it just below October levels. Canadian oil producers have trouble getting oil to the U.S. market, and with no East-West pipelines, they cannot export oil to markets outside of the U.S. This has been a long-standing negative for the Canadian economy.
Markets have been expecting three rate hikes this year, taking the overnight rate to 1.75% by yearend. This level is considerably below the Bank of Canada’s estimate of the so-called neutral overnight rate, which is defined as “the rate consistent with output at its potential level (approximately 1.6%) and inflation equal to the 2.0% target.” For Canada, the neutral benchmark policy rate is estimated to be between 2 .5% and 3 .5%. The need for continued monetary accommodation at full capacity suggests policymakers aren’t anticipating a return to neutral anytime soon.
The Bank’s revised forecasts for inflation and real GDP growth are in the following table. The numbers in parentheses are from the projection in the October Monetary Policy Report. Today’s MPR forecasts that inflation will edge upward while economic growth slows from the rapid 2017 pace (3.0%) to levels more consistent with long-term potential (1.7% to 1.8%).
The Bank of Canada’s future actions will continue to be data dependent. The next policy announcement is on March 7.
Dr. Sherry Cooper.  Chief Economist, Dominion Lending Centres
Bank of Canada Governor States Debt Levels Make Canada Sensitive to More Rate Hikes
Bank of Canada Governor Stephen Poloz says record high household debt has made the economy far more sensitive to the effects of interest rate hikes than in the past.
The central bank increased its overnight lending rate to 1.25 per cent on Wednesday – the highest level it’s been since 2009 – following rate hikes in July and September.
“We know in our hearts and in our models that the economy will be more sensitive to higher interest rates today than it was 10 years ago,” said Poloz, in an interview with BNN’s Amanda Lang.
“It’s about 50 per cent more sensitive at these levels of debt, we think, than it was before,” he said.
Historically lower interest rates have fueled an almost-insatiable appetite for debt amongst Canadian consumers. According to Statistics Canada, the credit market debt-to-disposable income ratio reached 171.1 per cent in the third quarter of 2017, meaning for every dollar of household disposable income, there is $1.71 worth of debt.
Poloz says the central bank is very much aware of the impact rate hikes could have on the economy and debt-burdened Canadians.
“It’s a force acting on the economy that would prevent us from getting interest rates all the way back to what people consider to be neutral,” said Poloz.
“So yes, a heavily indebted household is a concern. We can do the arithmetic, we have the micro-data, we know,” he said. “So, we’re watching for those signs and people need to be thinking about how will they deal with a higher interest rate at renewal.”
Poloz says that’s why the bank’s monetary policy must remain accommodative, “in order to keep this thing where it is.”
The central bank governor also said high household debt was a key factor in deciding to toughen the mortgage process so that homebuyers would be in a better position to absorb an increase in interest rates.
Even so, the central bank has faced calls to curb Canadians’ appetite for debt.
“When it comes to consumer debt, you know what? We tell people to pay down their debt, we tell them to stop borrowing; but they keep doing it,” said Gareth Watson, director of Richardson GMP’s investment management group, in an interview with BNN Wednesday morning prior to the central bank’s rate decision.
“And they’re going to keep doing it, ’cause if you keep offering them free money – or I should say cheaper money – they’re going to take it.”
Poloz says he doesn’t think Canadians are under any illusions when it comes to debt, and believes as long as people properly prepare themselves for the eventuality of hig
her borrowing costs, then the impact should be somewhat minimal.
“I don’t think Canadians misunderstand debt. And I rarely meet anybody that’s surprised by hearing me say ‘you know interest rates are really low.’ They know.”
He also said people should think about what a 100 or 150 basis point increase in interest rates could mean for their finances.
“If you think about it and prepare for it, then I think it will be okay.”
By Derrick McElheron, BNN.
Interest Rates Prediction 
The Bank of Canada’s decision to raise its benchmark rate to 1.25% earlier this week will make renewals a significantly more daunting prospect for mortgage holders, observers warned.
This combination of higher payments and the spectre of even more hikes for the rest of 2018 is but the latest in the apparent gradual demise of the low-rate regime that has long characterized the Canadian market: Even before the BoC decision, 5 of the largest Canadian banks have already hiked 5-year fixed rates 15 basis points to 5.14% last week.
“With the recent rise in rates, we’re now at the point where the average consumer is seeing monthly payments rise at their first renewal, something we haven’t seen on a sustained basis since the early 90s,” North Cove Advisors president Ben Rabidoux said, as quoted by Maclean’s.
Even back in July, the BoC already cautioned that even just a 1-point increase would prove to be a major burden to highly indebted borrowers. For instance, a borrower with a $360,000 mortgage and a gross income of $63,000 would need to pay an additional $180 monthly, representing around 3.5% of income.
Mortgage Professionals Canada chief economist Will Dunning noted that fortunately for those who are planning to renew this year, they are not expected to suffer steep increases in mortgage rates.
“Most renewals will be at similar or slightly higher rates than in 2013,” Dunning stated, noting that about 70% of mortgages in Canada are fixed rate, with most of those coming in 5-year terms. This is because the average rates between 2013 and 2018 so far (3.23% and 3.4%-3.6%, respectively) are not that far from each other.
However, a complicating factor that borrowers should take into account is that rates on credit cards, car loans, and home equity lines of credit could also increase in response.
“The bigger impact will be next year, rather than this year,” TD chief economist Beata Caranci said, adding that the difference between 2014-2019 rates will likely be greater than that in the 2013-2018 period, especially if the BoC tightens further.
Those who will enjoy increased incomes and home equity this year would be able to weather the worst of this, Caranci explained. “The more principle you’ve already paid down in the last five years, the more room you have to negotiate,” she said. “So it should be manageable.” By Ephraim Vecina.
LSTAR Statistics for 2017
A historic year for real estate in 2017
Home sales exceed 11,000 for the first time  
London, ON – The London and St. Thomas Association of REALTORS® (LSTAR) announced 2017 marked a historic year for residential real estate, with home sales surpassing 11,000 for the first time since LSTAR began tracking data in 1978. In 2017, a total of 11,203 homes were sold, up 8.0% from 2016.
“Residential sales across the region in 2017 is definitely one for the record books,” said Jim Smith, 2017 LSTAR President. “Looking back, we saw it all last year. London and St. Thomas achieved so many ‘firsts,’ from six consecutive months of record sales to robust out-of-town interest. The real estate activity very much echoed the positive momentum most of the country experienced throughout the year.”
In 2017, the average sales price across London and St. Thomas was $330,037 up 18.0% from 2016. By geographic area, London South was $340,793, up 21.7% from 2016. In London North, average home sales price was $407,801, up 18.1% compared to the previous year, while in London East, it was $258,734, an increase of 16.9%.  In St. Thomas, it was $261,481, up 15.2% over 2016.
“In 2018, it will be interesting to see what impact the new mortgage qualification tests will have on the housing market, here in our backyard and across Canada,” Smith said. “This is just one of the reasons why getting in touch with a REALTOR® is so helpful in selling or purchasing a home. REALTORS® are the professional source in guiding you through these changing times.”
St. Thomas saw a total of 901 homes sold in 2017, up 6.8% from 2016. In 2017, there were a total of 14,301 home listings, down 1.2% from 2016. The trend of high demand with low supply continued in 2017, with inventory (called Active Listings) down 35.6% from the previous year.
“It was a wonderful year serving as President of our real estate association,” Smith said. “As we move ahead in 2018, I firmly believe home sales will continue to be strong in our marketplace.”
The following table is based on data taken from the CREA National MLS® Report for November 2017 (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.
City
Average Sale
Vancouver
$1,081,876
Toronto
$779,693
Fraser Valley
$741,172
Victoria
$684,843
Hamilton
$545,690
Calgary
$450,700
Kitchener-Waterloo
$445,855
Niagara
$389,016
Ottawa
$385,058
Edmonton
$372,911
London St. Thomas
$332,607
Windsor-Essex
$265,565
CANADA
$513,433
   
Canadian Market Face Test of Might
Canada’s real estate market will hit a slow patch in 2018 as tighter mortgage stress tests apply pressure and the impact could be exacerbated if an expected interest rate hike drives buyers to put off their home purchases, economists said earlier this week.
Observers added that further hikes from the Bank of Canada could heap stress onto buyers already combating stricter regulations that were introduced by the Office of the Superintendent of Financial Institutions on January 1 for uninsured mortgages, and elevated 5-year fixed mortgage rates that were pushed up by the CIBC, RBC, and TD banks last week.
“This is the most significant test the market has seen in recent years,” CIBC chief deputy chief economist Benjamin Tal said, as quoted by The Canadian Press.
Tal is expecting a market slowdown to be seen as early as the first quarter as people who were hoping to scoop up homes weigh whether renting or living with family for a bit longer will pay off later in the year, when the country has grown accustomed to the new conditions.
“The big question though is to what extent investors will stop buying,” Tal stated. “That will carry a big effect, but it’s still the biggest unknown.”
The Canadian Real Estate Association slashed its sales forecast for 2018 to predict a 5.3% drop in national sales to 486,600 units this year, shaving about 8,500 units from its previous estimate due to the impact of the stricter mortgage stress tests.
Earlier this week, the association released a report revealing that national home sales rose 4.5% on a month-over-month basis in December, and that the average national home price reached just over $496,500, up 5.7% from one year earlier.
CREA noted that the bounce likely stemmed from buyers scrambling to nab homes before being forced to submit to the uninsured mortgage regulations, which requires would-be homebuyers with a more than 20% down payment to prove they can still service their uninsured mortgage at a qualifying rate of the greater of the contractual mortgage rate plus two percentage points or the five-year benchmark rate published by the Bank of Canada.
“It will be interesting to see if the monthly sales activity continues to rise despite tighter mortgage regulations,” CREA chief economist Gregory Klump said in the report.
The association also shared that the number of homes on the market increased by 3.3% in December from the month before and December home sales were up 4.1% on a year-over-year basis.
The improvements signal that the country is “fully recovering from the slump last summer” when there was a drop in sales before a set of policies introduced by the Ontario government in April produced the desired market slowdown in Toronto during the second and third quarters following a hot first quarter.
“The new OFSI measures and a shift to a rising-state environment should prevent speculative froth from building again, and contain price growth to a reasonable pace for the remainder of the cycle,” BMO Capital Markets senior economist Robert Kavcic predicted in a note. by Ephraim Vecina.
Change of Space for 2018
This week, the Bank of Canada benchmark rate moved to 5.14 from 4.99%. Please ensure you remove previous versions of the “Change of Space” New OSFI Mortgage Rules” from your website, Autopilot, etc. as those documents are showing the older benchmark rate.
In October, the Office of the Superintendent of Financial Institutions Canada (OSFI) published the final version of its Guideline B-20. The revised Guideline, which took effect January 1, 2018, applies to all federally regulated financial institutions.
Overview of Changes effective January 1, 2018:

 

A new minimum qualifying rate (stress test) for uninsured mortgages will be set
The minimum qualifying rate for uninsured mortgages will be the greater of the five-year benchmark rate published by the BoC or the contractual mortgage rate +2%.
Lenders will be required to enhance their LTV measurement and limits to ensure risk responsiveness
Federally regulated financial institutions must establish and adhere to appropriate LTV ratio limits that are reflective of risk and updated as housing markets and the economic environment evolve.
Restrictions will be placed on certain lending arrangements that are designed, or appear designed to circumvent LTV limits
A federally regulated financial institution is prohibited from arranging with another lender: a mortgage, or a combination of a mortgage and other lending products, in any form that circumvents the institution’s maximum LTV ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law.
Economic Highlights
Data Release: Poloz bumps up borrowing costs, but caution still the word
• The Bank of Canada increased its key monetary policy interest rate by 25bps this morning, to 1.25%.
• The decision was accompanied by the latest Monetary Policy Report (MPR), which provided a fresh view of the Bank’s economic outlook. The Bank estimates that growth in 2017 averaged 3.0%, while their outlook for this year has been upgraded slightly, to 2.3%, from 2.1% in October. Growth of 1.6% is projected for 2019, embodying a modest improvement from October’s 1.5% forecast.
• The pace of potential growth remained a key concern for the Bank. It is possible that strong demand may be motivating increased inputs of capital and labour, and the Bank will closely monitor developments on this front. In practical terms, although strong business investment has led the Bank to upgrade the level of potential in 2017, the output gap is judged to be in the -0.25% to +0.75% range, suggesting that economic slack has been effectively absorbed. The Bank acknowledged that labour market slack is being absorbed more quickly than previously anticipated. However, wage data and other measures suggest that, in contrast to an overall lack of spare capacity in the economy, some slack may still remain in labour markets.
• The diminishing slack has made itself felt in core inflation measures. While temporary factors such as energy price swings will generate near-term noise, inflation is expected to trend close to the midpoint of the Bank’s 1% to 3% band over the forecast horizon.
• As always, the MPR assessed the key risks to the economic outlook. Weaker exports are the top risk in light of NAFTA uncertainty and recent imposition of tariffs by the United States. Faster potential output, stronger U.S. growth and more robust consumer spending (paired with rising household debt) were also seen as risks. A “pronounced” drop in home prices in key overheated Canadian markets rounded out the list of concerns.
Key Implications
• In light of an impressive run of labour market data and their latest Business Outlook Survey painting a positive picture, the Bank of Canada was widely expected to hike rates today, and Governor Poloz and company did not disappoint. It has become increasingly clear that emergency level interest rates are no longer warranted. But, while rates look likely to continue to rise, the key question remains “at what pace?”  
• Today’s statement and MPR provided some further indication of the answer. Emergency level rates may not be needed, but that doesn’t mean that the Bank is in a rush to continue hiking. NAFTA uncertainty hangs over the outlook, with the Bank explicitly downgrading the outlook for business investment and trade to account for the impact of negotiations. What’s more, despite the positive run of labour market data, wage growth remains weaker than the Bank had expected. Most explicit was the statement that while the outlook will likely “warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed”.  
• As such, it remains our base-case view that a gradual pace of tightening is most likely, with the next hike penciled in for July. Data dependency of course means that this is not a lock. Developments in Poloz’s list of areas to watch, including interest rate sensitivity, labour market developments, and inflation dynamics could easily bring the next hike forward, or push it back.
United States
·         Not even a looming government shutdown could dampen market optimism this week. More evidence of strong momentum in the economy saw equities gain ground, while Treasuries and the U.S. Dollar continued to fall.
·         It remained a coin toss at time of writing whether Congress will reach a funding deal to avert a government shutdown at midnight. If government shuts down, many non-essential services won’t operate, and employees will not be paid.
·         For markets, shutdowns have been modest negatives in the past. However, markets rallied in the last three. All told the U.S. economy has very solid momentum heading into 2018. A closure would be a slight hit to growth, but not derail the U.S. expansion.
Canada
·         As expected, the Bank of Canada this week raised its key interest rate by 25 basis points, putting the overnight policy rate at 1.25%. However, the decision was accompanied by a dovish tone, justified by the downside risks to the outlook.
·         It appears that homebuyers pulled forward purchases into last fall, ahead of the B-20 guidelines that took hold at the start of this year. We anticipate that existing home sales will be dampened by the new guidelines, particularly as the qualifying mortgage rate rises further above 5%.
·         All told, the key message from this week’s interest rate decision is that interest rates are headed higher. However, downside risks warrant a gradual pace of increase.

Rates
The Bank of Canada increased the target overnight interest another quarter of a percent to 1.25%; this is the third rate hike since July 2017, and more increases are expected over the coming months. 
Accordingly, many lenders have increased their prime lending rates 25 bps to 3.45%.    Bank of Canada, Bench Mark Rate Increased to 5.14%.  
Most lenders have now increased their fixed rates also on average 15 basis point.
 

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Change Of Space January 2018

19 Jan

Residential Market Update – January 17, 2018

General

Posted by: Adriaan Driessen

Market Commentary
CREA Stats
Home sales ended 2017 with a rise in sales ahead of the mortgage stress test which came in at the start of the New Year.
The Canadian Real Estate Association says that there was a 4.5% increase in nationwide home sales in December compared with November, marking their fifth consecutive monthly rise.
Activity increased in almost 60% of local markets with the GTA, Edmonton, Calgary, the Fraser Valley, Vancouver Island, Hamilton-Burlington and Winnipeg leading the gains.
Actual (not seasonally adjusted) activity was up 4.1% year-over-year. Annual gains were strongest in the Lower Mainland of British Columbia, Vancouver Island, Calgary, Edmonton, Ottawa and Montreal. The GTA saw a decline.
“National home sales in December were likely boosted by seasonal adjustment factors and a potential pull-forward of demand before new mortgage regulations came into effect this year,” said Gregory Klump, CREA’s Chief Economist. “It will be interesting to see if monthly sales activity continues to rise despite tighter mortgage regulations that took effect on January 1st.”
New supply of homes in the GTA pushed new listings nationwide up 3.3% but inventory remained subdued at 4.5 months of supply.
CREA’s aggregate home price index was up 9.1 year-over-year in December, the smallest increase since February 2016 and the 8th consecutive slowdown of price increases. 
Bank of Canada Rate Increase Announced
The Bank of Canada today increased its target for the overnight rate to 1 1/4 per cent. The Bank Rate is correspondingly 1 1/2 per cent and the deposit rate is 1 per cent.
Growth in the Canadian economy is projected to slow from 3 per cent in 2017 to 2.2 per cent this year and 1.6 per cent in 2019.
The Press Release and the Report are now available on the Bank of Canada’s website
Is There Another Rate Increase on the Horizon?
The Bank of Canada will make its first interest rate announcement of 2018 this week and the majority prediction is that there will be an increase.
The December employment numbers seem to have been the final switch that needed to be flipped to green-light an increase.  The creation of nearly 80,000 jobs and a 5.7% unemployment rate – the lowest since comparable records have been kept starting in 1976 – were enough to tamp-down growing uncertainty about the fate of the NAFTA renegotiations.
The bond market certainly sees the jobs picture as bright and yields on Government of Canada five-year notes jumped, triggering a round of increases in five-year fixed mortgage rates at the big banks.
Along with employment, the long-term view is focused on inflation.  At 2.1%, it is pretty much where the Bank of Canada wants it.  There are expectations that wage growth will put some upward pressure on inflation but bigger economic factors like debt, a growing number of retirees and technological efficiencies will likely temper rising prices.
If the expected rate increase comes on Wednesday most analysts anticipate a fairly long hold before the next hike.  The BoC remains very concerned about high levels of household debt and it remains to be seen how the new mortgage stress test will affect the housing market.  Economists who had been predicting three rate hikes this year are dialing that back to just a pair of increases.  By First National Financial. 
Households Struggle as Lender Hike Rates
If the Bank of Canada decides to increase interest rates this week it will pile further pressure on millions of already-struggling households, while some lenders are already making changes to rates.
A survey from insolvency firm MNP reveals that almost half of respondents are within $200 of being unable to meet their monthly financial obligations.
The report shows that a third of households are already unable to meet their monthly costs with a similar share concerned about their levels of debt, 38% regretting taking on so much debt, and 55% not expecting to have a debt-free retirement.
Four in ten Canadians are concerned that they would be in financial trouble if interest rates rise much more; a third could be facing insolvency.
The Financial Post reports that RBC, TD and CIBC have all increased mortgage rates with 5-year fixed rate loans now above 5%.
Many economists are expecting BoC Governor Stephen Poloz to announce the first interest rate rise of 2018 on Wednesday. 
December Homes Sales Surged In Advance of New Mortgage Rules

The January 1 implementation of the new OSFI B-20 regulations requires that uninsured mortgage borrowers be stress-tested at a mortgage rate 200 basis points above the contract rate at federally regulated financial institutions. It is no surprise that home sales rose in advance of the new ruling in November and December. Even so, activity remains below peak levels earlier in 2017 and prices continued to fall in the Greater Toronto Area (GTA) and in Oakville-Milton, Ontario for the eighth consecutive month. Prices also fell last month in Calgary, Regina, and Saskatoon–cities that have suffered the effects of the plunge in oil and other commodity prices beginning in mid-2014.
Mortgage Rates Are Rising
Ever since the release of exceptionally strong yearend employment data for Canada on January 5th, there has been a widespread expectation that the Bank of Canada would hike the target overnight interest rate by 25 basis points this Wednesday, taking it to 1.25 percent. Indeed, market rates have already risen in response to this expectation. The Royal Bank was the first to hike its posted 5-year fixed mortgage rate to 5.14 percent last Thursday, up from 4.99 percent. Other banks quickly followed suit.
It used to be that a hike in the posted rate was of little consequence because borrowers’ contract rates were typically much lower. However, government regulations put in place in October 2016 now force borrowers with less than a 20 percent down payment to qualify at the posted rate. And the new OSFI regulations effective this year now require even those with more than a 20 percent down payment to qualify at a rate 200 basis points above the contract mortgage rate at federally regulated financial institutions.
It has been four years since the posted five-year fixed mortgage rate exceeded 5 percent. And it has been nearly a decade since homebuyers had to qualify at contract mortgage rates that high–when government stress-testing rules didn’t exist. A decade ago, house prices in Canada’s major cities were substantially lower. Indeed, as the table below shows, house prices in the Greater Vancouver Region, Fraser Valley and the Lower Mainland of British Columbia have increased by nearly 80 percent in just the past five years. In the GTA, home prices are up over 60 percent over the same period. These price gains dwarf income increases by an enormous margin. So clearly, housing affordability has plummeted and the combination of tightening regulations and rising interest rates will no doubt dampen housing activity.
This is one factor that could weaken the case for a Bank of Canada rate hike this week. Another is the potential failure of NAFTA negotiations–a threat to three-quarters of Canada’s exports. Additionally, inflation remains low and wage gains–though rising–are still quite moderate.
Hence the case for a Bank of Canada rate hike this week is not incontestable.
U.S. market interest rates have risen significantly this year, and many bond traders are now forecasting the end of the secular bull market in bonds as the U.S. economy approaches full-employment and fiscal stimulus (the recent tax cuts) will boost the federal budget deficit.
December Home Sales Rise
The Canadian Real Estate Association (CREA) reported today that national home sales jumped 4.5% from November to December–their fifth consecutive monthly increase. Activity in December was up in close to 60% of all local markets, led by the GTA, Edmonton, Calgary, the Fraser Valley, Vancouver Island, Hamilton-Burlington and Winnipeg.
While activity remained below year-ago levels in the GTA, the decline there was more than offset by some sizeable y-o-y gains in the Lower Mainland of British Columbia, Vancouver Island, Calgary, Edmonton, Ottawa and Montreal.
New Listings Shot Up
Many sellers decided to list their properties ahead of the mortgage rule changes. The number of newly listed homes rose 3.3% in December. As in November, the national increase was overwhelmingly due to rising new supply in the GTA. New listings and sales have both trended higher since August. As a result, the national sales-to-new listings ratio has remained in the mid-to-high 50% range since then.
A national sales-to-new listings ratio of between 40% and 60% is consistent with a balanced national housing market, with readings below and above this range indicating buyers’ and sellers’ markets respectively. That said, the balanced range can vary among local markets.
Considering the degree and duration that the current market balance is above or below its long-term average is a more sophisticated way of gauging whether local housing market conditions favour buyers or sellers. Market balance measures that are within one standard deviation of the long-term average are generally consistent with balanced market conditions. Based on a comparison of the sales-to-new listings ratio with its long-term average, more than two-thirds of all local markets were in balanced-market territory in December 2017.
The number of months of inventory is another important measure of the balance between housing supply and demand. It represents how long it would take to liquidate current inventories at the current rate of sales activity.
There were 4.5 months of inventory on a national basis at the end of December 2017. The measure has been moving steadily lower in tandem with the monthly rise in sales that began last summer.
The number of months of inventory in the Greater Golden Horseshoe region (2.1 months) was up sharply from the all-time low reached in March 2017 (0.9 months). Even so, the December reading stood a full month below the regions’ long-term average (3.1 months) and reached a seven-month low.
Price Pressures Eased
The Aggregate Composite MLS® Home Price Index (HPI) rose by 9.1% year-over-year (y-o-y) in December 2017 marking a further deceleration in y-o-y gains that began in the spring of last year and the smallest increase since February 2016. The slowdown in price gains mainly reflects softening price trends in the Greater Golden Horseshoe housing markets tracked by the index, particularly for single-family homes. On an aggregate basis, only single-family price increases slowed on a y-o-y basis. By comparison, y-o-y price gains picked up for townhouse/row and apartment units.
Apartment units again posted the most substantial y-o-y price gains in December (+20.5%), followed by townhouse/row units (+13%), one-storey single family homes (+5.5%), and two-storey single family homes (+4.5%).

By Dr. Sherry Cooper. Chief Economist, Dominion Lending Centres
What Happens to Stocks When the Bull Market Ends
You undoubtedly know that 2017 was a record-setting year for the broad stock markets. And while gold was up last year despite numerous headwinds, most mainstream investors aren’t paying much attention to gold since they keep seeing so much green in their stock portfolios.
Even I was taken back by some of the data from the bull market in stocks…
  • The Dow hit a record high 71 times last year. On average, a new high was hit more frequently than once a week.
  • For the first time ever in its almost 90-year history, the S&P 500 rose every month in 2017. And historically there have only been four years with gains in 11 months of the year.
  • The S&P’s largest pullback in 2017 was 2.8%, the smallest since 1995.
  • To start 2018, the S&P 500 has risen in each of the five trading sessions, hitting a new record high every day. The last time the index opened the year with at least five straight record highs was 1964.
This all begs the question: is the bull market about to come to an end?  
• And as Mike pointed out in his 2018 predictions, the CAPE (Cyclically Adjusted Price-Earnings) ratio has now matched its 1999 level, the second highest reading in over 100 years of data. The CAPE now has a higher reading only in 1929.
This all begs the question: is the bull market about to come to an end? This is exactly the kind of frothy behavior a market sees near its apex, so it’s definitely a prudent question to ask. If last year ends up being the top of this bull market, what does history say could happen to stocks this year?
We dug up the data for all bull markets in the S&P since the year 1900, and then examined what happened in the very first year after each of those bull markets ended. In other words, what did the first year of the bear market look like after the last full year of the bull market? This could be useful data, if 2017 ends up being the peak of the bull market.
Here’s what history shows.
First Year Performance of Bear Market After Bull Market Ends

While the declines for the first year of the bear market varied greatly, you can see that on average, the S&P lost 16% the year immediately following the last year of the bull market. Also notice that in only four cases was the decline measured in single digits—all others were double digit losses.
Mike Maloney believes this is the year overvalued stocks begin their descent. If he’s right, the decline could be higher than the historical average, since this is the second longest bull market in history. 
And what is gold likely to do in that environment? We’ve shown before that gold has acted as a buffer—and gained ground—in most of the biggest stock market crashes. 
The bottom line for us is that we think a major shift is coming, not just in overpriced stock and bond and real estate markets, but in the currencies that have been abused by many central bankers the world over. Once the process gets underway, the mainstream will turn back to mankind’s oldest form of money in mass, and our patience and forethought will pay off. By Jeff Clark, Senior Precious Metals Analyst, GoldSilver.
Economic Highlights
Are the good times really over for good?
Recently, for the first time since 2012 we have seen the 5-year bond market climb back up over 2.0%. Based on amazing employment numbers and the likelihood that the Bank of Canada will raise rates on January 17, the bond market has continued a climb out of the basement and maybe running full steam uphill in response to a better economy.
Let’s look at the last 10-years of bonds and how they correlated to the 5-yr. fixed mortgage rate because it is still the choice of most Canadians as it is a stable place to build your home budgets around. In 2007 the 5-year bond was at 4.13% and the 5-year benchmark rate 6.65%. Follow the melt down that started to happen in 2008 the bond slowly but surely began to sink and by 2012 the 5-yr. bond was at 1.25% and the bench mark 5 yr. rate was at 5.29%. But wait we weren’t done; in 2015 the bond sunk all the way to .65% but the bench mark rate was still at 4.74%, if you took that rate at the branch you really paid too much as we were almost at 2.25% for standard feature 5 year fixed at that time.
So now turn the corner and we see that the bond is on its way back up. We come into 2018 with it having climbed all the way back to 2% almost an 8-year high and of course Governor Poloz has already had the bench mark at 4.99 so I don’t think it will be long before we see the bench mark reset again. Will it be long before the new qualifying numbers are 6% again, still some factors to watch, NAFTA, employment, world markets, price of tea in China, price of oil in Alberta. By Len Lane.

Rates
Increase to prime lending rate currently at 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 4.99% but expected to increase again soon.  15 Basis point (0.15%) increase in fixed rates.  25 Basis point (0.25%) increase in variable rates.  

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6 Dec

Residential Market Update December 6, 2017

General

Posted by: Adriaan Driessen

 OSFI MORTGAGE CHANGES ARE COMING
As many of you may remember, this past October the Office of the Superintendent of Financial Institutions (OSFI) issued a revision to Guideline B-20 . The changes will go into effect on January 1, 2018 but lenders are expecting to roll this rules out to their consumers between December 7th – 15th, and will require conventional mortgage applicants to qualify at the Bank of Canada’s five-year benchmark rate or the customer’s mortgage interest rate +2%, whichever is greater.
OSFI is implementing these changes for all federally regulated financial institutions. What this means is that certain clients looking to purchase a home or refinance their current mortgage could have their borrowing power reduced.
 What to expect
It is expected that the average Canadian’s home purchasing power for any given income bracket will see their borrowing power and/or buying power reduced 15-25%. Here is an example of the impact the new rules will have on buying a home and refinancing a home.
 Purchasing a new home
When purchasing a new home with these new guidelines, borrowing power is also restricted. Using the scenario of a dual income family making a combined annual income of $85,000 the borrowing amount would be:
Up To December 31 2017
After January 1 2018
Target Rate
3.34%
3.34%
Qualifying Rate
3.34%
5.34%
Maximum Mortgage Amout
$560,000
$455,000
Available Down Payment
$100,000
$100,000
Home Purchase Price
$660,000
$555,000
Refinancing a mortgage
A dual-income family with a combined annual income of $85,000.00. The current value of their home is $700,000. They have a remaining mortgage balance of $415,000 and lenders will refinance to a maximum of 80% LTV. The maximum amount available is: $560,000 minus the existing mortgage gives you $145,000 available in the equity of the home, provided you qualify to borrow it.
Up to December 31, 2017
After January 1 2018
Target Rate
3.34%
3.34%
Qualifying Rate
3.34%
5.34%
Maximum Amount Available to Borrow
$560,000
$560,000
Remaining Mortgage Balance
$415,000
$415,000
Equity Able to Qualify For
$145,000
$40,000
In transit purchase/refinance
If you have a current purchase or refinance in motion with a federally regulated institution you can expect something similar to the below. A note, these new guidelines are not being recognized by provincially regulated lenders (i.e credit unions) but are expected to follow these new guidelines in due time.
Timeline:
Purchase Transactions or Refinances:
Before
January 1, 2018
Approved applications closing before or beyond January 1st will remain valid; no re-adjudication is required as a result of the qualifying rate update.
On and after 
January 1, 2018
Material changes to the request post January 1st may require re-adjudication using updated qualifying rate rules.
These changes are significant and they will have different implications for different people. Whether you are refinancing or purchasing, these changes could potentially impact you. We advise that if you do have any questions, concerns or want to know more that you contact your Dominion Lending Centres mortgage broker. They can advise on the best course of action for your unique situation and can help guide you through this next round of mortgage changes.
Key Opportunities for Your Clients with Mortgage Rule Changes
Reach out to your clients buying at max with 20%.
As of January 1, 2018, any uninsured pre-approvals that do not convert into a live property-specific deal will no longer be valid under old qualifying rules.
With select few lenders – your Mortgage Broker can get Pre-Approvals committed before January 1st to remain valid up to 120 days following the initial credit decision under the old rules.
Refinance applications submitted before January 1st will remain valid for 120 days from date of the original approval under current rules.
Reach out to your clients needing to refinance in the near future and create a sense of urgency for acting now before the deadline.
Market Commentary
Economy Takes a Breather, Rate Hikes Seen Sooner than Later
The Canadian economy moderated in the third quarter of the year, taking a breather from its blistering pace of earlier in the year, as exports and home construction slowed while consumer spending continued to drive growth.
Statistics Canada reported that Canada’s real gross domestic product grew at an annualized pace of 1.7 per cent in the quarter, on a seasonally adjusted basis, less than half of the growth rate that the economy posted in each of the first two quarters of the year. Economists had expected the pace to slow to more sustainable levels in the latest quarter, following a second-quarter growth spurt of 4.3 per cent. (The second-quarter figure was revised down slightly from an originally reported 4.5 per cent.)
The third-quarter growth rate was the slowest since the 2016 second quarter. Nevertheless, it marked the fifth consecutive quarter of growth for the Canadian economy, the longest streak since 2014.
“Canadian growth was always poised to cool after a monster first half,” said Canadian Imperial Bank of Commerce economist Nick Exarhos in a research note.
However, real GDP in September, the final month of the quarter, grew 0.2 per cent month over month, slightly better than economists had expected. The increase, reversing August’s 0.1-per-cent decline, marked the strongest performance since June, and indicated that the economy was regaining momentum entering the final quarter of the year.
The third-quarter slowdown was primarily due to a steep 10.2-per-cent annualized decline in exports, which reversed course after having been a key driver of growth in the second quarter. Exports look to have been weighed down by a less favourable exchange rate for the Canadian dollar, which rose more than 10 per cent against the U.S. dollar between early June and mid-September, spurred by rising interest rates from the Bank of Canada.
Meanwhile, investment in residential structures fell 1.4 per cent annualized, evidence of a cooling in key housing markets following regulatory changes designed to raise the bar on mortgage approvals and slow foreign investment.
On the other hand, household consumption remained a strong driver of the economy, up a better-than-expected 4 per cent annualized. And investment in non-residential structures, machinery and equipment rose at a 3.7-per-cent annualized pace, evidence of continued strong business investment – considered a key element in sustaining Canada’s current economic expansion.
“Aside from the drop in exports, the news was mostly good,” said David Madani, senior Canadian economist at Capital Economics, in a note to clients.
“All told, we wound up with a much more ‘normal’ pace of growth, consistent with an economy entering the mature phase of the economic cycle,” said Brian DePratto, senior economist at Toronto-Dominion Bank, in a research report.
The third-quarter growth was just slightly below the 1.8 per cent that the Bank of Canada had estimated in its most recent quarterly Monetary Policy Report, released in late October. In the same report, the central bank projected that growth in the fourth quarter would pick up to a 2.5-per-cent pace. Economists said the solid September growth rebound puts the economy on a good track to come close to the central bank’s target.
“The data is still pointing to a slowing in underlying GDP growth from the outsized pace from mid-2016 to mid-2017, but is also still fully consistent with our – and the Bank of Canada’s – view that growth will be sustained at a modestly above-trend 2 per cent pace going forward,” said Royal Bank of Canada senior economist Nathan Janzen in a research report.
The slowdown in the third quarter has fuelled considerable speculation about how long the Bank of Canada might delay its next rate increase, after raising rates twice during the second quarter. But the 1.7-per-cent growth pace is still above the central bank’s estimate of “potential output growth” – the rate at which it believes the economy can grow without triggering rising inflation, a critical concern for a central bank that relies on inflation targeting to guide its rate decisions. Expectations of a modest acceleration in growth in the fourth quarter indicates that the economy continues to perform above potential, which will add inflationary pressure and keep the central bank on track to raise interest rates further next year.
Economists said the Bank of Canada will likely take particular note of wage data in the GDP report, as rising wages are typically a key catalyst for inflation. Employment compensation grew at a brisk 5.2-per-cent annualized pace in the quarter, its strongest growth in three years.
The strong wage indicators came at the same time that Statscan also reported, in a separate release, that employment surged by 80,000 jobs in November, and unemployment fell to a nine-year low of 5.9 per cent – further indication that a strong labour market could accelerate inflation in the coming months.
Economists said that while the Bank of Canada remains unlikely to raise rates at next Wednesday’s rate announcement, the GDP and jobs report, taken together, put a January rate hike squarely on the table.
“Today’s reports all support another rate hike coming sooner rather than later,” Mr. DePratto said.  By David Parkinson.
Economic Highlights:
Data Release: Poloz holds for now with caution ruling the day
•As widely expected, the Bank of Canada held its key monetary policy interest rate at 1.00% this morning, with the accompanying statement striking a dovish tone.
•The economic backdrop appears to be evolving in line with the Bank’s expectations at the time of the October Monetary Policy Report, although ‘considerable uncertainty’ still clouds the global outlook.
•The Canadian economy is also seen as falling in line with their expectations, with ‘very strong’ employment growth noted, as well as robust consumer spending, ongoing contributions from business investment, and more evidence that public infrastructure spending is having a rising impact on growth. Although exports disappointed in the third quarter, the Bank noted that the latest trade data supports the view that exports are likely to make a positive contribution to growth going forward.
•On the inflation front, slightly higher than anticipated price pressures are seen as being helped by temporary factors (notably gas prices), but core inflation has also ticked up in line with ‘continued absorption of economic slack’.
•On the downside, the Bank continues to see “ongoing – albeit diminishing – slack in the labour market”, while noting that employment continues to rise alongside participation rates.
•The final section of the statement struck a somewhat dovish tone. It was noted that higher rates will likely be required over time, but the Governing Council will be ‘cautious, guided by incoming data”, pointing again to the key areas of the Bank’s focus in recent quarters: the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of wage growth and inflation.
Key Implications
•If it weren’t for the final section of the statement, this would have looked like a central bank getting ready to hike. With developments since their October Monetary Policy Report in line with their expectations, by their own assessment the economy is likely entering excess demand, which would typically call for a monetary policy response.
•Indeed, most, if not all of the tick-boxes that the Bank has identified appear to be getting ticked: employment growth remains robust, wages continue to accelerate by almost all measures, and consumer spending has remained healthy despite rising borrowing costs with the most recent aggregate employee compensation data reported the strongest quarterly gain since late 2014. This latter point should help reduce the sensitivity of the economy to rising rates – it’s easier to deal with a potential rise in debt service costs if you’re also making more money. It is also becoming increasingly difficult to identify the labour market slack that once again seems to be a key factor in the Bank’s decision making.
•Ultimately, it is the Bank’s risk management framework that appears to have ruled the day. Despite things seeming to line up for further near-term tightening, Governor Poloz has chosen to maintain his optionality. With economic growth appearing likely to exceed the Bank’s 2.5% expectation for the fourth quarter of this year, things continue to point to a hike sooner rather than later. However, as today’s statement shows, nothing is a done deal until the day of the decision.
Industry News
TREB Toronto Real Estate Board VS Competition Bureau
The Toronto Real Estate Board has decided to take its six year fight against the tide of technological change to the Supreme Court of Canada.
TREB will be looking to appeal a federal court ruling that upheld a Competition Tribunal decision against the board.  Back in 2011 the Competition Bureau ordered that TREB must allow its member realtors to publish detailed, home sale information online.  That information would include things like ownership and price history and realtor commissions.
The Competition Bureau ruled TREB’s ban prevents competition and stifles innovation.  TREB counters that the information is personal and the policy protects the privacy of home buyers and sellers.  It challenged the ruling at the Competition Tribunal.  The Tribunal upheld the Bureau’s decision in April 2016.  The Federal Court of Appeal, in turn, backed the Tribunal ruling last week.
Opponents of TREB’s policy say the board is really fighting to protect its monopoly as the sole provider of detailed home sales information.  They argue releasing that control will help both home buyers and sellers and allow realtors to provide more service.
A home’s sales history could help buyers determine if a newly renovated property is being flipped by showing how long the current owners have had it.  Pricing information can help determine whether a home, or a neighbourhood, is appreciating or depreciating in value.
TREB has 60 days to request a leave to appeal to the Supreme Court. By First National Financial.
Crypto Currencies and Bitcoin 
Last week, the value of a single bitcoin officially cleared $10,000, a new high point that’s over an order of magnitude greater than its price at the start of this year. Bitcoin has defied market expectations before, but in 2017, it didn’t just become more valuable. Bitcoin and other cryptocurrencies have become an acknowledged part of the financial system — albeit a nebulous one.
Bitcoin traded at around $960 at the beginning of the year, and it’s risen steadily since then, with a steep jump in the past two months. There are multiple, complementary explanations for this, but this latest boom was sparked partly by the CME Group, a futures marketplace that announced its intent to start listing bitcoin by the end of the year. It’s a stamp of approval that could help cement bitcoins’ position at other major financial institutions, many of which are already handling bitcoin-related trading in some capacity. Even JPMorgan Chase, whose CEO Jamie Dimon has said he would fire anyone who traded bitcoin, is reportedly considering a plan to let its clients access CME’s futures.
Not everyone believes that bitcoin is ready to enter the futures market. Themis Trading principal Joe Saluzzi warned that the currency is dangerously unregulated: “It reminds me of the financial crisis all over again,” he told CNBC. And bitcoin is so volatile that spending it doesn’t make sense. Nobody knows how valuable a single bitcoin might BECOME — while Thomas Glucksmann of currency exchange Gatecoin said $10,000 was still “cheap in my opinion,” bitcoin has also suffered extended catastrophic crashes, including a long slump after passing $1,000 in 2013. As an example of just how surreal bitcoin fluctuations can be, Gizmodo writer Kashmir Hill tweeted about buying a sushi dinner in 2013 for the equivalent of $99,000 today.
There are still places where bitcoin payments make sense, although they’re sometimes unsavory: far-right groups have used them after being dropped by payment processors, for instance. And the underlying blockchain technology has myriad uses that aren’t cryptocurrency-focused — from quickly processing international money transfers to tracking legal marijuana.
But people have also found uses for cryptocurrency that go beyond replacing cash. The best-known example of 2017 might be initial coin offerings or ICOs, in which companies sell digital tokens based on cryptocurrencies like Ethereum. ICOs range from serious fundraising efforts to absurd but startlingly successful jokes, and some have earned endorsements from the likes of Paris Hilton and Ghostface Killah of Wu-Tang Clan. And unlike Dogecoin or other earlier novelty currencies, they’ve attracted serious regulatory attention.
Some countries have outright banned ICOs — China barred the offerings as a form of “illegal public financing,” and South Korea announced “stern penalties” for running them. But other countries have attempted to clarify how existing rules apply to them. The US Securities and Exchange Commission ruled that some ICOs fell under securities law, setting them apart from general crowdfunding efforts. Japanese regulators also outlined how ICOs may fall under existing financial rules. In the US, the SEC has even issued guidance for how celebrities can hawk them.
Cryptocurrencies’ overall legal status is still complicated, but several countries have made major policy decisions around them in 2017. Some of these are negative: China shut down currency exchanges earlier this year, although traders have moved to other platforms, and the SEC rejected a high-profile application for a bitcoin stock fund. Many other countries have given more ambiguous signals. Russian president Vladimir Putin ordered regulators to develop a wide-ranging set of rules for miners and traders, even as officials have signalled a crackdown. India’s government launched a committee earlier this year to study digital currency regulation, and the Supreme Court recently urged it to speed up its work.
People have been prosecuted for cryptocurrency-related crimes like Ponzi schemes in past years, and governments have issued guidance about bitcoin. Some of these new decisions just raise new questions: the SEC, for instance, didn’t address how it would punish a decentralized network for violating securities rules. Likewise, getting attention from investors and regulators doesn’t tell us whether bitcoin will succeed in the long run, or whether cryptocurrencies will play a major role in most people’s lives. But even if cryptocurrencies aren’t directly competing with their traditional counterparts, the past year shows how serious they’ve become to both regulators and investors.
The Most Dangerous Event In Cryptos & Digital Currencies
Mike Maloney explores the events and evidence leading up to what he believes will be the most dangerous event the world will see in the coming years — the potential for governments to enforce their own centralized digital currencies. THIS LINK
Rates
Bank of Canada holding it’s overnight lending rate, no change to Prime rate currently at 3.2%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 4.99%.  No change in fixed rates.  No change in variable rates.
Other Newsworthy
CBC’s O’Reilly on the World of Real Estate Marketing.
Why do real estate agents often use their photos on business cards? Are attractive agents more successful? And how did a hot air balloon end up as the Re/Max logo? Adman Terry O’Reilly answers these questions and more as he investigates the world of real estate advertising in a recent episode of his hugely successful and entertaining CBC radio documentary series Under the Influence.REM caught up with the multi-award-winning radio host for an email interview.
You’ve covered many topics in Under the Influence, from gender marketing to the “crazy world of trademarks” and brands that go political. What prompted you to explore real estate advertising for one of your episodes? (The episode is called Selling the Dream: Real Estate Advertising.)
O’Reilly:  I have always thought that real estate marketing is a world unto itself. It involves personalities, lots of advertising and the biggest purchases in our lives. There are a lot of staples in the real estate world – like using agent’s faces in lawn signage, billboards and print ads, employing the MLS, evaluating pricing, judging neighbourhoods…It is also an industry with intense competition. All of this was interesting to me and I wanted to go back in history to see how it all started – and why.
Why do real estate agents, perhaps more than people in any other service industry, so often use their photos on business cards and other advertisements?
O’Reilly: My research told me that this practice started in the late 1800s/early 1900s. People were moving to cities from the country and unscrupulous conmen would meet these people at train stations and sell them non-existent property. These land sellers were called “land sharks” and took advantage of good people looking to start a new life. The term “swampland in Florida” was coined in this period.
Legitimate real estate agents wanted to distance themselves from these scam artists, so they began to organize by creating real estate boards and they established standards of practice. Using a face in their marketing and opening offices with fixed addresses suggested accountability. No conman would ever advertise his face and they certainly didn’t want offices where they could be tracked down. In other words, the use of a face in real estate marketing was the ultimate sign of trust.
You say that real estate has its own rules, techniques and own breed of salespeople. How so? How is it different than other industries in terms of advertising and marketing?
O’Reilly: Generally speaking, a real estate transaction is the biggest purchase a person makes in their lifetime. So, the price tag is great. Real estate agents try to bring two parties together: a willing seller and a willing buyer. That middleman position is somewhat unique in marketing. Agents must be power listeners to understand what a client really wants. Virtually every transaction is a negotiation, and negotiating is an art. Agents love to use their faces in their marketing, as I mentioned earlier. Not many service industries do that. The advertising industry – which is to say, my industry – is a service business but we never use our faces to win clients. Real estate agents are not selling houses, they are selling homes. That makes it an extremely emotional purchase. Navigating that much emotion requires a unique skill set.
In your show you mention a fascinating study done by three American universities that looked at physical attractiveness as it relates to a real estate professional’s success. Could you elaborate?
O’Reilly: It was an interesting study because this is an industry that relies on faces. Essentially, it said that attractive agents had listings with higher selling prices and higher commissions. The study confirmed that physical attractiveness is an asset. But, there was an interesting side note: Less attractive agents had lower selling prices but more listings and more sales. Which I interpret to mean, they worked harder. Attractive people use their beauty in place of other work skills. Less attractive people must work harder and they do.
You discovered that real estate played an important role in the evolution of the advertising business. How so?
O’Reilly: To begin with, the very first advertising agency in North America was started by a Philadelphia real estate agent named Volney Palmer around 1837. Second, the very first radio commercial ever aired was for a real estate development. It was broadcast in 1922 on radio station WEAF in New York. Close to $14 billion is spent on real estate advertising in North America annually, so it is a powerful marketing sector.
What are some offbeat ways real estate agents or homeowners have used to gain attention, and do any of them work?
O’Reilly: I was very interested to see what novel techniques real estate agents are using these days. Many are employing humour. Signs that say, “Free pizza with house” and “zombie free” are examples of that. Remember, attention is the oxygen of any business, and more so in real estate marketing.
Some home sellers are offering potential buyers an Airbnb night in their home to give buyers a real sense of what it would be like to live in the house. That’s a smart insight – we sometimes spend more time buying socks than we spend in the homes we’re buying. Some Realtors are producing very creative videos. Some are creating songs! I have to say I like the fact agents are starting to break the traditional rules of real estate selling. Do all of these ideas work? Hard to say but standing out is job one in marketing. Fortune favours the bold.
You say that few real estate companies have readily identifiable logos, but Re/Max is a notable exception. How did it get a hot air balloon as its logo, which on the face of it doesn’t have much of a connection to real estate?
O’Reilly: Brokers sell agents. Agents sell property. I believe that real estate companies should be doing more branding to distinguish their businesses in the marketplace. When they do, they give their agents a powerful calling card. Most real estate companies have weak brand personalities.
Re/Max is an exception because it is one of the few companies that has a powerful brand and a memorable brand icon. The Re/Max balloon is instantly recognizable, as is their slogan, “Above the Crowd.” Many years ago, two Re/Max franchisees in New Mexico approached head office with a drawing of a red, white and blue hot air balloon and said, “This should be our logo.” Management said a hot air balloon had nothing to do with real estate and turned them down. A year later, those same two franchisees came back with an 8mm film of a Re/Max hot air balloon they had flown the day before at a hot air balloon festival and said, “This should be our logo!” Again, management gave them a hard pass.
A year after that, Re/Max hired a consultant to gauge how well-known the company was in its hometown of Denver. The survey showed they ranked number eight. Clearly, they were in desperate need of some branding. Then somebody remembered the Re/Max balloon. So, they hired a plane, got some footage of the balloon floating in sky and created a TV commercial with it.
At the end of the eight-week campaign, the consultant came in with his annual survey and told Re/Max they were now the number one real estate company in the city. Re/Max said that’s great. Wait, the consultant said, you don’t understand, 66 per cent of the people surveyed said Re/Max has a red, white and blue balloon, and 36 per cent said your theme is “Above the Crowd.” After only eight weeks, this kind of feedback is unheard of. This balloon should be your logo! So, Re/Max took another vote and this time the unanimous response was… yes! And that’s how one of the most recognized logos in the real estate business took flight over 40 years ago.
As someone with extensive experience in the advertising business, what would you do today if you were a real estate agent in a tough market?
O’Reilly: Stand out. Amateurs think marketing is all about selling stuff. But the pros know marketing is all about differentiating your business. Once you can do that, once you become top-of-mind in your town or your industry, the real selling starts. I would analyze what other smart agents are doing in other markets. Other countries. I would look beyond real estate and see how other smart service-based industries are marketing themselves.
There is a reason most real estate advertising all looks the same – Realtors are inhaling their own fumes. But those boundaries are artificial. Push the guardrails back. Deliver above and beyond the services that your competitors aren’t offering. Identify the friction points in real estate transactions and eliminate them. Think big. When was the last time you wowed your clients?
Adriaan Driessen

Dominion Lending Centres Forest City Funding
Phone: 519-777-9374
Cell: 519-777-9374
Email: adriessen@dominionlending.ca
http://www.iMortgageBroker.ca


M08003142
10671 

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 3.04% $475.30 2.89% $467.62 $7.68
2 Years 3.24% $485.65 2.54% $449.96 $35.68
3 Years 3.44% $496.11 2.89% $467.62 $28.49
4 Years 3.89% $520.07 2.89% $467.62 $52.45
5 Years 4.99% $581.04 2.94% $470.17 $110.86
7 Years 5.30% $598.80 3.69% $509.35 $89.45
10 Years 6.10% $645.76 3.74% $512.02 $133.74
 Variable   2.70% $457.99 2.21% $433.65 $24.33
Prime Rate 3.20%

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
  • We are Canada’s largest and fastest-growing mortgage brokerage!
  • We have more than 2,600 Mortgage Professionals from more than 350 locations across the country!
  • Our Mortgage Professionals are Experts in their field and many are ranked among the best nationally.
  • We work for you, not the lenders, so your best interests will always be our number one priority.
  • We have more than 100 mortgage programs, making it easy to choose the best fit for your unique situation.
  • We close loans in all 10 provinces and 3 territories.
  • We can process your mortgage in as few as 7 days.
  • We are the preferred mortgage lender for several of Canada’s top companies.
  • Dominion Lending Centres’ Mortgage Professionals are available anytime, anywhere, evenings and weekends – and we’ll even come to you!

29 Nov

Residential Market Update November 29, 2017

General

Posted by: Adriaan Driessen

Market Commentary
Climbing home sales suggest a soft landing. The October read on home sales and prices has returned words like “balance” and “soft landing” to the conversations of market watchers.
The Canadian Real Estate Association reports home sales edged up 0.9% in October compared to September, for a third straight month of gains.  But sales were down 4.3% from a year ago.  The national average price of a home was up 5% to just shy of $506,000 y/y.  Once again the Toronto and Vancouver areas skewed prices higher.  Factoring out those markets brought the average price down to $383,000.
The Teranet Home Price Index recorded a 1% drop in October, the 2nd monthly decline in a row.  Toronto led the way in the Teranet report with a 2.8% drop.  Five of 11 markets monitored for the index recorded declines.
The CREA figures show new listings in October were down 0.8% from September while the sales-to-new-listings ratio was up 1% to 56.7%.  That falls inside the 40% to 60% range that is considered balanced.  The national inventory of housing stands at five months, which is in line with long term averages.  By First National Financial LP.
New National Housing Strategy
The federal Liberals’ all new National Housing Strategy was unveiled with great fanfare on National Housing Day (Nov. 22) last week.  It is big on promises and grand numbers.  But that kind of political flash and glitter make it hard to see the dull, but important, details of how the strategy will actually work.
The first-of-its-kind strategy formally makes housing a human right in Canada and is slated to cost $40 billion over 10 years.  Among its grand goals:
–         Construction of up to 100,000 new affordable housing units
–         The repair of 300,000 affordable housing units
–         Cutting “chronic homelessness” by 50%
There are several other pledges, each with its own impressively big number.
It is all very laudable and it is deemed necessary right across the political spectrum.  The problem, though, is the lack of detail.  One veteran Parliament Hill reporter who attended the technical briefing prior to the announcement has commented that technical questions were often answered with “details to be determined”.
There have also been warnings that Ottawa has not laid out any clear measures of success for the strategy.  Former Parliamentary Budget Officer Kevin Page says cities, which will actually spend the money, will be reporting results based on their own criteria and without any context.  He says Ottawa has to get the right information in order to make sure the strategy is working.
And in a particularly cynical move a key component of the strategy – a rent subsidy called the Canada Housing Benefit – will not kick-in until 2020, after the next federal election.
Market Statistics by CMHC
CMHC has just published the latest Rental Market Report for Canada. In the Report, we use data from our Rental Market Survey to identify current trends on Canada’s rental markets. We also identify differences observed between data from October 2016 and data from October 2017.
Results from this year’s Survey show:
•a 0.7 percentage point decrease in the overall vacancy rate for purpose-built rental units (dwellings that were built with the intention of supplying the rental market); and
•a 0.3 percentage point decrease in the overall vacancy rate for rental apartment condominiums in the secondary rental market (dwellings that were initially built to supply the owner-occupant sector, but whose owners rent them out).
Here are some key findings:
Vacancy rate for purpose-built rental units
Data for this group are drawn from all centres with a population of at least 10,000 individuals, including major urban centres across Canada.
Overall, the vacancy rate for this group decreased from 3.7% to 3.0%. An increase in supply of only 1.2% represented a significant decrease in growth compared to the previous year. At the same time, demand remained steady. Key factors sustaining demand included high levels of net international migration, improving employment conditions for younger households, and the ongoing aging of the population.
 
Change in Vacancy Rates for Purpose-Built Rentals, by Province, from 2016 to 2017
Province
2016 (%)
2017 (%)
Change (%)
New Brunswick
6.6
4.1
-2.5
Quebec
4.4
3.4
-1.0
Prince Edward Island
2.1
1.2
-0.9
Alberta
8.1
7.5
-0.6
Ontario
2.1
1.6
-0.5
Nova Scotia
3.0
2.6
-0.4
Manitoba
2.8
2.7
-0.1
Saskatchewan
9.4
9.3
-0.1
British Columbia
1.3
1.3
0.0
Newfoundland and Labrador
6.5
6.6
0.1
 
Vacancy rate for secondary rental units
The secondary rental market consists largely of rented condominium apartments. Data for this group are drawn from 17 major centres across Canada.
The overall condominium vacancy rate declined from 1.9% to 1.6%. Just like for the purpose-built rental market, this reflected stronger growth in demand than in supply. On the secondary market, however, these dynamics were true everywhere except in Saskatoon, Ottawa and Vancouver, where supply exceeded demand.
Rents increased
In terms of rental costs, low vacancy rates tended to correlate with higher rental costs.
As well, we compared the average rent for two-bedroom rental condominiums and two-bedroom purpose-built apartments (in the same 17 centres in which we surveyed rental condominiums). This average rent was lower for purpose-built apartments ($1,044) than for rental condominiums ($1,421). No doubt a key factor is that rental condominiums are typically newer and tend to offer a greater range of amenities.
Economic Highlights:
United States
·         It was an eventful week across financial markets, with a plethora of economic data, Fed speeches, and political developments keeping investors busy.
·         Domestic economic data was robust and beat expectations. Following on hurricane-induced weakness previously retail sales, housing starts and industrial production get a significant boost from rebuilding efforts in October. Recent data suggests that GDP growth was over 3% in Q3 and is tracking near 3% during Q4 — helping reduce economic slack.
·         Diminishing slack should provide comfort for the Fed to raise rates in December — a view highlighted by several FOMC members this week. The hike is further supported by recent CPI and PPI data which was stronger than expected.
Canada
·         Economic indicators this week remained consistent with our view that economic activity is holding at an above trend pace in the second half of 2017.
·         Headline inflation weakened in October as energy prices reversed previous gains. Underlying inflation indicators were little changed. Nevertheless, strong economic activity and rising wage growth all suggest that inflation will trend higher.
·         Downwardly revised estimates of the Canadian neutral policy rate released by the Bank of Canada suggest less room for conventional policy to offset future economic shocks or increases in financial stability risks.
Rates
No change to primer lending rate currently at 3.2%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at4.99%. No change in fixed rates.  No change in variable rates.
Other Newsworthy
Tips on Using Social Media Successfully 
A large part of a real estate agent’s job is to keep in touch with clients. The best real estate agents I have seen in my 40 years of experience do a fabulous job at this. With the growth of technology, social media is a great tool that allows agents to engage with clients. However, most agents are using it incorrectly in their strategy. They don’t understand why people use social media. Let me show you what they’re doing wrong and how you can improve to boost your earnings.
Most real estate agents don’t know why they’re on social media! They believe that it is a big microphone where they scream at their clients to get attention for their business. These agents constantly post content to try and show how much they know about the industry. If this is what you are doing, you must stop using social media immediately.
Now, you’re probably thinking, how could this be? Why isn’t posting and sharing content our main priority on social media? This is because the key to using social media is to engage with your clients. Most agents are doing the total opposite. I am not saying that posting isn’t important but what you should focus on is responding to clients. As you build your network on social media, you will need to spend more time engaging.
Think of social media as a big networking party. No one wants to talk to the person who is constantly ranting and raving about how great they are. Instead, you gravitate towards someone who is genuinely interested in what’s going on in your life. On social media you must engage your clients the same way. You should like their photos, comment on their posts and try to engage in conversation with them. For example, if you see your client post a picture of their son’s basketball game, you can comment and ask what the score was. These small touch-points add up and it will help you grow your relationships with clients.
Every time someone comments, likes or shares your post it releases dopamine. This is the chemical in your brain that makes you happy, like when you sell a listing! Engaging with the clients and making them happy is important. Now that I have explained all of this, let’s revisit our original question. Why are we on social media? The answer is we want to stay top of mind with our clients.
The key to having a long-term, great career is to create and maintain a client database. Within that database, every client knows about three to five people who are going to buy and sell real estate. Are these people thinking of you when they are buying or selling real estate? If not, you will be losing a ton of business and they will go with another agent. Staying top of mind keeps you relevant and gives you the opportunity to get referrals.
Now that you understand social media, you need to develop a plan on how to use it. What works for me is I set up four sessions in the day when I check my social media. Every session consists of 10 minutes where I engage with clients. I focus my efforts on using just two social media platforms. This allows me to achieve my goals of interacting with clients while not spending too much time online. The platforms that work best for agents are Facebook and Instagram. If you are just starting to use social media now, begin with these two.
The real estate industry is about keeping in touch and staying top of mind. Use the tactics that I have shown you and you will see a difference in your returns. Social media is a complex tool, but in the technology age you must adapt, or you will be left behind. By Alex Pilarski
Adriaan Driessen

Dominion Lending Centres Forest City Funding
Phone: 519-777-9374
Cell: 519-777-9374
Email: adriessen@dominionlending.ca
http://www.iMortgageBroker.ca


M08003142
10671 

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 3.04% $475.30 2.89% $467.62 $7.68
2 Years 3.24% $485.65 2.54% $449.96 $35.68
3 Years 3.44% $496.11 2.89% $467.62 $28.49
4 Years 3.89% $520.07 2.89% $467.62 $52.45
5 Years 4.99% $581.04 2.94% $470.17 $110.86
7 Years 5.30% $598.80 3.69% $509.35 $89.45
10 Years 6.10% $645.76 3.74% $512.02 $133.74
 Variable   2.70% $457.99 2.21% $433.65 $24.33
Prime Rate 3.20%

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
  • We are Canada’s largest and fastest-growing mortgage brokerage!
  • We have more than 2,600 Mortgage Professionals from more than 350 locations across the country!
  • Our Mortgage Professionals are Experts in their field and many are ranked among the best nationally.
  • We work for you, not the lenders, so your best interests will always be our number one priority.
  • We have more than 100 mortgage programs, making it easy to choose the best fit for your unique situation.
  • We close loans in all 10 provinces and 3 territories.
  • We can process your mortgage in as few as 7 days.
  • We are the preferred mortgage lender for several of Canada’s top companies.
  • Dominion Lending Centres’ Mortgage Professionals are available anytime, anywhere, evenings and weekends – and we’ll even come to you!

15 Nov

Residential Market Update November 15, 2017

General

Posted by: Adriaan Driessen

Update to the OSFI New Mortgage Rule Changes Effective January 1, 2018

The Qualifying Rate for all Conventional/ Uninsured Mortgages:
 
•The Highest contract rate + 2%
Or
•The Bank of Canada benchmark rate
 
For all High Ratio Applications, qualification will remains unchanged, the greater of the Contract Rate or Bank of Canada Benchmark Rate currently at 4.99%.
 
Purchases approved prior to January 1, 2018 will be honoured based on the old rules provided there is no change in the property and/or borrowers
If there is a legally binding Purchase and Sale Agreement that is dated prior to January 1, 2018, regardless of closing date, the customer will qualify under the old lending rules

Pre-approvals:  if they are not converted into property specific deal before January 1, 2018, they will no longer be valid under old rules and need to be re-qualified under the new lending rules.

Refinances approved before January 1, 2018 must close within 120 days of the application dateto qualify under the old rules.

Market Commentary
London LSTAR stats released for October 2017.  The London and St. Thomas Association of REALTORS® (LSTAR) announced 757 homes exchanged hands last month, slightly down 10.2% from the same time a year ago. Year-to-date sales are up 10.6%, with a total of 10,111 homes sold, marking the second consecutive year residential sales have surpassed 10,000 across the region.

In October, the average sales price across London and St. Thomas was $325,331 up 14.2% from the same time a year ago. The average year-to-date sales price was $330,497 up 18.3% from October 2016.

“When looking at the region, home sales in London East, London South and London North have posted healthy gains in year-to-date activity,” Smith said. “In London East, home sales are up 21.2% compared to a year ago, while in London South, sales are up 13.9% and in London North, sales are up 6.5% compared to this time last year.”

In October, there were 847 listings, down 17% from the same time in 2016. St. Thomas saw a total of 67 homes sold, down 21.2% from the same time last year. The average home price in St. Thomas was $284,344 up 25.7% from October 2016.
Complete details can be found here: http://www.lstar.ca/market-updates .

While Vancouver and Toronto produce home sales and price numbers that seem to show they are shrugging-off government attempts to cool them, Montreal has quietly become one to watch.
Home sales in Montreal jumped 7% in October led by a 13% increase in condo sales.  Single-family detached homes saw a 3% increase.  Prices rose 9.2%.  Homes in the region remain a relative bargain though, with an average price of $387,000.  Toronto saw a 2.3% increase to $780,000.  Vancouver climbed 12.4% to $1.1 million.
Homes are selling more quickly in Montreal.  Singles were on the market for an average of 78 days, almost two weeks shorter than a year ago.  “Plexs” (2 to 5 units) spent an average of 81 days on the market, three days shorter than last October.  Condos continue to have the longest hang time, 103 days.  But that is 17 days faster than last year.
Strong job creation, consumer confidence and immigration get the credit, but upcoming changes in mortgage qualification rules have likely played a role in moving buyers off the sidelines. By First National Financial.

Market Showing Signs of Rebounding
October sales indicate the housing market is bouncing back, and the Greater Toronto and Vancouver areas are leading the way.

Sales last month were up 0.9% over September, even though listings declined 0.8%, which is in stark contrast to the August-to-September increase of 5%.

The Canadian Real Estate Association compiled the data, and another key finding was that October’s sales-to-new-listings ratio of 56.7% was up 1% from September, indicating the market is balancing.

Year-over-year sales in October decreased 4.3%, but the national average sale price of $505,937 was up 5%. However, the average sale price dropped to $383,000 when the GTA and GVA were removed from the equation.

REMAX Integra CEO Pamela Alexander says inventory is still tight in Canada’s two largest housing markets, but that signifies a return to a stable and predictable market. Fortunately, she says, it will be nothing like the beginning of 2016, when there was unusually high activity and homes sold well over value.

“It looks like it’s heading back to a normal market, like the one we’ve been experiencing for the last 10 years,” she said. “The market is trying to find its balance across the country, especially in its two biggest markets.”

Looking ahead through the remainder of 2017 and into next year’s first quarter, Alexander expects stable and healthy price growth, which she pegs in the five to 10% range, in accordance with robust market fundamentals, like immigration, strong employment and end-user consumer mentality.

However, inventory is below normal levels and will stay that way for the foreseeable future.

“Inventory is tightening up a little bit, but there’s still a bit more inventory than there was through the beginning of 2016,” she said. “We believe inventory will remain pretty tight. Right now we’re at two month’s supply, approximately, which is pretty tight by international standards. Inventory will continue to be in demand, and many markets are going to be driven by demand.”

Alexander doesn’t expect the B20 rule changes to have a major impact on the market, either. She believes consumers will adjust to the new rules, as they always do, and that the market always finds a way to adjust to the needs of supply and demand. As an example, she cited the land transfer tax, which is largely considered the price of doing business now in Toronto.

“There is still going to be price appreciation at the beginning of 2018, even with the mortgage rules,” said Alexander. “People are going to have to adjust to the new rules, but I think they’re going to do so. The stress test is giving people opportunities also to extend amortization periods, to offer variable rate mortgages—there are a lot of products out there and the banks don’t seem overly concerned. It will be a little bit different, but I believe that consumers will find a way to make it work.”  By The Canadian Press.

Economic Highlights:
United States
·         With little to digest on the data front, significant attention was devoted to political developments this week. Stock mar­kets remained upbeat through Wednesday, given optimistic expectations on tax reform, supportive earnings reports and gains among energy stocks.
·         However, market sentiment turned down thereafter, as developments on tax reform failed to meet expectations, given key differences between the House bill and the newly-released Senate bill.
·         While tax reform will remain top of mind in the days ahead, a number of important data releases next week will help tilt the narrative back toward economic fundamentals, with emphasis placed on the upcoming CPI report.
Canada
·         The WTI crude oil benchmark jumped to over $57 per barrel, reaching the highest level seen since mid-2015.
·         In a speech this week, Governor Poloz maintained a dovish tone, focusing on the softness in inflation. Further rate hikes remain highly data dependent.
·         Housing starts increased in October, erasing some of September’s decline. However, with higher interest rates and new B20 measures weighing on demand, starts are likely to gradually slide in the coming quarters.

Rates
We have seen a some lenders come out with more competitive high ratio insured 4 and 5 year fixed rates int the past week.  We pride ourselves in originating the best available deals and lowest rates for our clients for any term or rate type.

Other Newsworthy

Housing is No Longer a Canadian Growth Leader
OSFI has announced steps to reduce risks in the uninsured mortgage space. Siddall pointed out that these measures apply only to the federally-regulated financial institutions. He is concerned about the increasing levels of riskier mortgage activity by non-federally-regulated financial institutions.
The measures introduced by the federal government in October of last year to tighten insured mortgage lending qualifications mainly by stress-testing applicants at the 5-year posted mortgage rate, rather than the contract rate, has slowed insured mortgage lending volumes by 25%, which is in line with CMHC expectations. Average property selling prices have fallen commensurately as well.
But with so much attention paid to the imprudent borrower, I think it is important to note that the vast majority of Canadians manage their finances in a responsible manner. For example, roughly 40% of homeowners are mortgage-free and one-third of all households are totally debt-free. Another 25% of households have less than $25,000 in debt, so 58% of Canadian households are nearly debt free. Hence, mortgage delinquency rates are extremely low. In addition, two-thirds of outstanding mortgages are fixed rate, which mitigates the risk of rising mortgage rates over the near term.
So here we are in the lead-up to the January 1, 2018 implementation of the new OSFI B-20 regulations requiring that uninsured borrowers be stress-tested at a mortgage rate 200 basis points above the contract rate. It has been widely expected that home sales would jump before yearend in advance of the new ruling and indeed they have. Even so, activity remains well below peak levels earlier this year and prices continue to fall in the Greater Toronto Area (GTA) for the sixth consecutive month. Indeed, national home sales were down 8.6% year-over-year in October, led by a whopping 18.4% plunge in Ontario (see chart below).

Toronto single-family house prices were down 10.7% over the past six months ending October 31 (see chart below). GTA condo prices have fared better, up 2.6% since late April, but the rise is minuscule in comparison to the booming price gains evidenced before the Ontario government’s ‘Fair Housing Plan’ that introduced, among other things, a 15% tax on non-resident foreign purchases of homes.

According to statistics released today by the Canadian Real Estate Association (CREA), national home sales rose 0.9% from September to October–the third such monthly uptick–but remained almost 11% below the record set in March. Activity in October was up from the previous month in about half of all local markets, led by the Greater Toronto Area (GTA) and the Fraser Valley, together with some housing markets in the Greater Golden Horseshoe region.
On a year-over-year basis, sales were down 4.3% last month, extending the year-over-year declines to seven consecutive months. The decrease in sales from year-ago levels occurred in slightly more than half of all local markets, led overwhelmingly by the GTA and nearby cities.
“Newly introduced mortgage regulations mean that starting January 1st, all home buyers applying for a new mortgage will need to pass a stress test to qualify for mortgage financing,” said CREA President Andrew Peck. “This will likely influence some home buyers to purchase before the stress test comes into effect, especially in Canada’s pricier housing markets.”
“National sales momentum is positive heading toward year-end,” said Gregory Klump, CREA’s Chief Economist. “It remains to be seen whether that momentum can continue once the recently announced stress test takes effect beginning on New Year’s day. The stress test is designed to curtail growth in mortgage debt. If it works as intended, Canadian economic growth may slow by more than currently expected.”
Balanced Markets Though New Listings Fall
The number of newly listed homes eased by 0.8% in October following a jump of more than 5% in September. The national result was influenced most by declines in new supply in London-St. Thomas, Calgary and Greater Vancouver.
With sales up slightly and new listings having eased, the national sales-to-new listings ratio rose to 56.7% in October from 55.7% in September. A national sales-to-new listings ratio of between 40% and 60% is consistent with a balanced national housing market, with readings below and above this range indicating buyers’ and sellers’ markets respectively. According to the sales-to-new listings measure, housing markets in both Toronto and Vancouver remain balanced. As the charts below show, the Toronto market shifted dramatically from a seller’s market following the April provincial housing measures.
The number of months of inventory is another measure of the balance between housing market supply and demand, representing how long it would take to liquidate current stocks of unsold homes at the current rate of sales activity. There were five months of inventory on a national basis at the end of October, unchanged from the previous two months and roughly at par with the long-term average.
In the Greater Golden Horseshoe region including and surrounding Toronto, the number of months of inventory was 2.5 months, up sharply from the all-time low of 0.8 months in February and March. However, it remains below the region’s long-term average of 3.1 months.


Price Gains Diminish Nationally
Price appreciation continued to moderate year-over-year. The Aggregate Composite MLS® Home Price Index (HPI) rose by 9.7% year-over-year (y-o-y) in October 2017, representing a further deceleration in y-o-y gains since April and the smallest increase since March 2016. The slowdown in price gains mainly reflects softening price trends in Greater Golden Horseshoe housing markets tracked by the index. Price appreciation was strongest in condos and weakest in single-family benchmark homes, which continues the trend in place since May 2017.
In October, apartment units again posted the most substantial y-o-y gains (+19.7%), followed by townhouse/row units (+13.2%), one-storey single family homes (+6.3%), and two-storey single family homes (+5.8%). The price appreciation in single-family homes was at its lowest level since March 2015.
The MLS® Home Price Index provides the best way of gauging price trends because average price trends are prone to be strongly distorted by changes in the mix of sales activity from one month to the next.


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

Adriaan Driessen

Dominion Lending Centres Forest City Funding
Phone: 519-777-9374
Cell: 519-777-9374
Email: adriessen@dominionlending.ca
http://www.iMortgageBroker.ca


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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 3.04% $475.30 2.89% $467.62 $7.68
2 Years 3.24% $485.65 2.54% $449.96 $35.68
3 Years 3.44% $496.11 2.89% $467.62 $28.49
4 Years 3.89% $520.07 2.89% $467.62 $52.45
5 Years 4.99% $581.04 2.94% $470.17 $110.86
7 Years 5.30% $598.80 3.69% $509.35 $89.45
10 Years 6.10% $645.76 3.74% $512.02 $133.74
 Variable   2.70% $457.99 2.21% $433.65 $24.33
Prime Rate 3.20%

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.
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