4 Dec

Residential Market Update

General

Posted by: Adriaan Driessen

WEEKLY RESIDENTIAL  MARKET UPDATE 

Industry & Market Highlights 

CMHC forecasts higher rates, slower housing

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

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

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

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

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

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

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

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

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

BoC takes a holiday from rate increases

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

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

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

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

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

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

Lower prices, fewer sales, more building  

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

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

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

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

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

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

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Economic Highlights

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

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

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

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

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

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

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

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

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

Implications for the Bank of Canada

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

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

Notes:

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

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

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

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

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

Mortgage Interest Rates

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

Other Industry News & Insights

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

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

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

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

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

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

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

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

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

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

WEEKLY RESIDENTIAL MARKET UPDATE

General

Posted by: Adriaan Driessen

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Industry & Market Highlights 
Market improvements as expected
Improvements in the housing market that were forecast for the second half of this year appear to be materializing.
The July numbers from the Canadian Real Estate Association show a sales increase of 1.9% in July over June.  June was up more than 4% from May.  Year-over-year, however, July sales were off 1.3%, pulled down by fewer sales in major urban centres in British Columbia.  The decline in B.C. was offset by increases in the Greater Toronto Area, which saw an 18.6% jump from a year ago.
Home prices were down compared to June, but up modestly from a year ago.  The MLS Home Price Index recorded a 2.1% increase while the national average price was up by 1%.  Condominium apartments and townhouses led the way with increases of 10.1% and 4.7% respectively.  One and two-storey single family homes saw price declines of 0.7% and 1.5% respectively.
The average price for a home in Canada stands at $481,500.  With Toronto and Vancouver taken out, the average drops to $383,000.
In the GTA home prices dipped 0.6%.  In B.C. price increases slowed but still posted remarkable gains well into the double digits in some areas. (GVA: +6.7%; Fraser Valley: +13.8%; Victoria: 8.2%; elsewhere on Vancouver Island: +13.7%)
Calgary and Edmonton recorded small year-over-year declines of 1.7% and 1.3%.  Montreal posted a moderate increase of 5.7%.
The number of new listings was down by 1.2% putting the sales-to-new listings ratio at 55.9%.  The ratio’s long-term average is 53.4%.  By First National Financial.
Stats indicate adjustment to B-20
Real estate sales in Canada are trending upward and it’s likely an indication that consumers have come to grips with B-20.
Canadian Real Estate Association sales statistics for July show  national home sales rose 1.9% over the previous month—and according to REMAX’s regional executive vice president, that means buyers have finally adjusted to stricter qualification rules.
“It certainly looks like consumers are slowly becoming accustomed to the B-20 mortgage qualification guidelines,” said Elton Ash. “It’s occurring a little later than we thought, and that seems to be the reason why inventory levels are dropping in the Toronto area.”
While a tough pill to swallow for many, Canadians are realizing that in order to become homeowners, they’ll have to settle for less house.
“What’s occurring is they’re readjusting their expectations,” he said. “In other words, where they may have qualified previously to purchase an $850,000 home, they’re now looking at a $750,000 home. It’s not that they’re seeking secondary financing—because the only lenders not bound by B-20 are credit unions and private lenders—it’s reducing their overall expectations of what they can afford in the type of home they’re looking for.”
The real estate market, it would appear, has finally balanced, and Ash expects that to last through the first quarter of 2019. He added that last year’s record sales volume and price increases were an anomaly that people should be cognizant about before making drawing comparisons.
“When you measure against a record-setting year on a year-over-year basis, what appears to be negative is actually positive,” said Ash. “The whole B-20 mortgage qualification stress test was brought in to slow the market, and that is certainly what’s occurring, and what we’re getting into is more traditional market situation where it’s balanced overall. The days on market for homes are stretching out to what they were, and multiple offer situations have disappeared across the board, although in Toronto proper they occur in certain situations.”  By Neil Sharma.
CMHC introduces enhancements that provide flexibility for self-employed borrowers effective Oct. 1, 2018
I’m sure you’ve heard by now the CMHC has made some changes to how self-employed Canadians can access financing. The CMHC have kindly provided some details on the new guidelines: 
Approximately 15% of Canadians are self-employed and may have difficulty accessing financing to buy a home, since their income sources may vary or be less predictable than employed borrowers. In line with the National Housing Strategy commitment to address the housing needs of Canadians along the housing continuum, CMHC is pleased to introduce enhancements that provide increased flexibility for satisfying income and employment requirements for self-employed borrowers.
 
The following table outlines enhancements to CMHC’s guidelines, which apply to transactional and portfolio insurance (1-4 unit residential properties):  Review it HERE.
The noted enhancements to CMHC’s guidelines for satisfying income and employment requirements for self-employed borrowers will become effective on October 1, 2018.
Please note that the establishment of these CMHC guidelines does not preclude Approved Lenders from observing their own lending practices.  As such, implementation of CMHC guidelines may vary among lenders.  By Dave Teixeira, Dominion Lending Centres.
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Economic Highlights

 

Canadian Data Release: Existing home sales rose for 3rd straight month in July
·       Existing home sales rose 1.9% month-on-month in July, marking the third straight monthly gain. However, sales were downwardly revised in June to show 3.4% growth (previously 4.1%). More than half of all local markets reported increased activity in July, led by a solid 7.7% gain in the GTA. Sales also rose in Saskatoon (+12.3%), Ottawa (+1.4%), London (+2.5%), Hamilton-Burlington (+2.3%), Fraser Valley (+5.6%) and Victoria (+1.5%). Conversely, activity was lower in Calgary (-3.5%) and Winnipeg (-3.2%) while being flat in the GVA.
·       New listings dropped by 1.2% in July, weighed on by declines in Calgary (-8.0%), Edmonton (-7.2%) and the GVA (-4.4%). Meanwhile, listings advanced 5.1% in the GTA.
·       With new listings dropping and sales rising, the sales-to-new listings ratio increased to 55.9 in July – still reflective of balanced market conditions though inching closer to seller’s territory. Provincially, the ratio was highest in New Brunswick (71.3), PEI (66.7) and Quebec (62.4). Conversely, the ratio was lowest in Saskatchewan (39.2), Alberta (45.6) and Newfoundland and Labrador (33.0) – indicating loose conditions in these markets. In Ontario, the ratio increased to 59.7, its highest level since January.  The ratio also increased to 52.3 in B.C., though it still sits below its 10-year average.
·       The average home price rose for the fourth straight month in July (+1.0%) and was flat on a year-over-year basis – an improvement compared to the 1.3% year-over-year drop recorded in June. 
·       The quality-adjusted MLS home price index was up 2.1% from a year-ago – also an improvement versus June’s 0.9% gain. Quality-adjusted prices were higher in most markets, with exception of the Prairies. Price growth was robust in Ottawa (7.2% y/y) and Montreal (5.7%). Prices were slightly lower in the GTA (-0.6% y/y), though this was a notable improvement from June (-4.8% y/y). In the GVA, price growth decelerated to its softest pace since 2014 (6.7% y/y).
Key Implications
·       July’s was a good month for housing markets, as sales increased for the third straight month alongside another rise in prices. This lends further credence to our view that markets have shaken off the bout of policy-induced weakness in the earlier part of the year.
·       Since April, sales have increased in 7 of 10 Provinces, with sharp gains in Ontario and New Brunswick. However, activity remains notably weak in B.C., where markets are being impacted by provincial policy measures in addition to the revised B-20 underwriting guidelines and rising borrowing costs. The imposition of a new housing speculation tax should place additional downward pressure on markets in B.C. in coming months.     
·       We expect Canadian resale activity to improve at a gradual pace going forward, buoyed by a decent economic backdrop and solid population growth, though some restraint should come from rising borrowing costs. This should help residential investment add to overall growth in the second half of the year.   By Rishi Sondhi, TD Economist.
United States
·        Concerns about Turkey drove market volatility this week, but U.S. equity markets managed a rebound.
·        Strong retail sales and historically-high small business optimism suggest a strong economic expansion in the U.S. this quarter.
·        Although concerns eased by week’s end, Turkey is not out of the woods yet. It remains in the early stages of a balance of payments crisis, and is likely to trigger further bouts of market volatility.
Canada
·        Canadian economic data continued to impress this week. A solid resale housing report, respectable manufacturing numbers and surprisingly strong inflation all paint a picture of a healthy economy.
·        Of particular note, home sales rose for a third straight month, as did average sale prices. Evidence continues to mount that, as expected, the impact of cooling measures early in the year have been short-lived, even if there remains lots of lost ground left for sales to make up.
·        Economic risks remain very real, but continued solid out-turns suggest that the next policy interest rate hike is not that far off.
By TD Economics.  Read the full report Here.
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Mortgage Interest Rates
Prime lending rate is 3.7%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.34%.  Fixed rates are holding steady, no change in fixed rates.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.
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Terms
Posted
Rates
Payment
  Per $100k
Our Rates
Payment
  Per $100k
Savings
6 Months
3.14%
$480.46
3.10%
$478.39
$2.07
1 Year
3.04%
$475.30
2.99%
$472.73
$2.57
2 Years
3.44%
$496.11
3.24%
$485.65
$10.46
3 Years
3.59%
$504.03
3.39%
$493.48
$10.55
4 Years
3.89%
$520.07
3.54%
$501.38
$18.69
5 Years
5.59%
$615.64
3.29%
$488.25
$127.39
7 Years
5.80%
$627.97
3.94%
$522.77
$105.19
10 Years
6.10%
$645.76
3.99%
$525.48
$120.28
Variable
2.70%
$457.99
2.41%
$443.50
$14.49
Prime Rate
3.70%
Please Note: Payment per $100K and possible savings shown above are based on a 25-year ammortization. Rates are subject to change without notice and the rate you receive may vary depending on your personal financial situation. *OAC E&OE. Please reply to this email and I will be happy to provide you with greater detail and determine the best rate available for you.
This edition of the Weekly Rate Minder shows the latest rates available for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the best possible mortgage to suit your needs.
Explore mortgage scenarios using helpful calculators on my website: http://www.iMortgageBroker.ca
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Other Industry News & Insights
Why were so many borrowers renewing with the same lender last year?
According to a Canada Mortgage and Housing Corporation analysis, mortgage renewals with different lenders in Toronto declined dramatically in 2017 compared to the year before.
Tania Bourassa-Ochoa, a senior economic researcher with CMHC, theorizes that the 25.7% decline can be attributed to the B-20 rule changes in 2016.
“One of the reasons that could partially explain this is the mortgage rule changes in 2016,” Bourassa-Ochoa told MortgageBrokerNews.ca. “There was the stress test mortgages had to go through, but the problem is we’re not able to confirm this because we’re unable to observe the number of renewals with the same lenders. It’s hard to know if it’s really because of that.
“When you look at all of the major markets and you see the two most expensive markets in Toronto and Vancouver, that’s where the largest declines of renewals with different lenders was observed.”
While it is difficult to discount the role stress testing mortgages play in cooling activity—as well as the fact that lenders aren’t competitive with renewal rates to begin with—there could be another explanation for why so many borrowers decided to remain with their lenders.
“Historically speaking, lenders aren’t that competitive on renewal, especially if you look at 2016 to 2017 when they would come out with a subpar rate at best,” said Benjamin Sammut, a Mortgage Architectsbroker. “The only thing I can think of is they’re upping their game and starting to be a little more competitive in what they’re offering in terms of rate, and they’re probably contacting their clients a little earlier. What used to be 90 days out has turned into a 180 days out. We’ve even heard of instances where clients are being told a year in advance that they could do an early renewal.”
The decline in renewals with different lenders is confounding, though, because lenders don’t incent borrowers to stay with them.
“If they’re incentivized somewhere else and they can get the exact same product somewhere else, then they’re usually more inclined to do that,” said Sammut. “It’s like looking at Bell and Rogers: They’re the exact same product, but it’s a question of who’s going to screw you less.”
The CMHC analysis of Equifax data also determined that refinances declined in 2017 compared with a year earlier, and it’s likely because fewer homeowners were willing to leverage their properties, which is consistent with the decelerated price growth in some of the country’s major markets at the time.
“The only explanation I can think of is you have borrowers seeing a stricter environment,” said Bourassa-Ochoa. “People wanted to see what would happen because of the threat of rate increases and stricter and stricter regulation. They probably just wanted to hold off, and that included refinances for debt consolidation, renovations to their home or changing lenders and increasing the amount borrowed.”  By Neil Sharma.
Roundup of the latest mortgage and housing news. 
From Mortgage Professionals Canada. 
There is never a better time than now for a free mortgage check-up.  It makes sense for us to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.

 

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

Residential Market Update

General

Posted by: Adriaan Driessen

WEEKLY RESIDENTIAL  MARKET UPDATE 

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Industry & Market Highlights 

Market improvements as expected

Improvements in the housing market that were forecast for the second half of this year appear to be materializing.

The July numbers from the Canadian Real Estate Association show a sales increase of 1.9% in July over June.  June was up more than 4% from May.  Year-over-year, however, July sales were off 1.3%, pulled down by fewer sales in major urban centres in British Columbia.  The decline in B.C. was offset by increases in the Greater Toronto Area, which saw an 18.6% jump from a year ago.

Home prices were down compared to June, but up modestly from a year ago.  The MLS Home Price Index recorded a 2.1% increase while the national average price was up by 1%.  Condominium apartments and townhouses led the way with increases of 10.1% and 4.7% respectively.  One and two-storey single family homes saw price declines of 0.7% and 1.5% respectively.

The average price for a home in Canada stands at $481,500.  With Toronto and Vancouver taken out, the average drops to $383,000.

In the GTA home prices dipped 0.6%.  In B.C. price increases slowed but still posted remarkable gains well into the double digits in some areas. (GVA: +6.7%; Fraser Valley: +13.8%; Victoria: 8.2%; elsewhere on Vancouver Island: +13.7%)

Calgary and Edmonton recorded small year-over-year declines of 1.7% and 1.3%.  Montreal posted a moderate increase of 5.7%.

The number of new listings was down by 1.2% putting the sales-to-new listings ratio at 55.9%.  The ratio’s long-term average is 53.4%.  By First National Financial.

Stats indicate adjustment to B-20

Real estate sales in Canada are trending upward and it’s likely an indication that consumers have come to grips with B-20.

Canadian Real Estate Association sales statistics for July show  national home sales rose 1.9% over the previous month—and according to REMAX’s regional executive vice president, that means buyers have finally adjusted to stricter qualification rules.

“It certainly looks like consumers are slowly becoming accustomed to the B-20 mortgage qualification guidelines,” said Elton Ash. “It’s occurring a little later than we thought, and that seems to be the reason why inventory levels are dropping in the Toronto area.”

While a tough pill to swallow for many, Canadians are realizing that in order to become homeowners, they’ll have to settle for less house.

“What’s occurring is they’re readjusting their expectations,” he said. “In other words, where they may have qualified previously to purchase an $850,000 home, they’re now looking at a $750,000 home. It’s not that they’re seeking secondary financing—because the only lenders not bound by B-20 are credit unions and private lenders—it’s reducing their overall expectations of what they can afford in the type of home they’re looking for.”

The real estate market, it would appear, has finally balanced, and Ash expects that to last through the first quarter of 2019. He added that last year’s record sales volume and price increases were an anomaly that people should be cognizant about before making drawing comparisons.

“When you measure against a record-setting year on a year-over-year basis, what appears to be negative is actually positive,” said Ash. “The whole B-20 mortgage qualification stress test was brought in to slow the market, and that is certainly what’s occurring, and what we’re getting into is more traditional market situation where it’s balanced overall. The days on market for homes are stretching out to what they were, and multiple offer situations have disappeared across the board, although in Toronto proper they occur in certain situations.”  By Neil Sharma.

CMHC introduces enhancements that provide flexibility for self-employed borrowers effective Oct. 1, 2018

I’m sure you’ve heard by now the CMHC has made some changes to how self-employed Canadians can access financing. The CMHC have kindly provided some details on the new guidelines:

Approximately 15% of Canadians are self-employed and may have difficulty accessing financing to buy a home, since their income sources may vary or be less predictable than employed borrowers. In line with the National Housing Strategy commitment to address the housing needs of Canadians along the housing continuum, CMHC is pleased to introduce enhancements that provide increased flexibility for satisfying income and employment requirements for self-employed borrowers.

 

The following table outlines enhancements to CMHC’s guidelines, which apply to transactional and portfolio insurance (1-4 unit residential properties):  Review it HERE.

The noted enhancements to CMHC’s guidelines for satisfying income and employment requirements for self-employed borrowers will become effective on October 1, 2018.

Please note that the establishment of these CMHC guidelines does not preclude Approved Lenders from observing their own lending practices.  As such, implementation of CMHC guidelines may vary among lenders.  By Dave Teixeira, Dominion Lending Centres.

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Economic Highlights

 

Canadian Data Release: Existing home sales rose for 3rd straight month in July

·       Existing home sales rose 1.9% month-on-month in July, marking the third straight monthly gain. However, sales were downwardly revised in June to show 3.4% growth (previously 4.1%). More than half of all local markets reported increased activity in July, led by a solid 7.7% gain in the GTA. Sales also rose in Saskatoon (+12.3%), Ottawa (+1.4%), London (+2.5%), Hamilton-Burlington (+2.3%), Fraser Valley (+5.6%) and Victoria (+1.5%). Conversely, activity was lower in Calgary (-3.5%) and Winnipeg (-3.2%) while being flat in the GVA.

·       New listings dropped by 1.2% in July, weighed on by declines in Calgary (-8.0%), Edmonton (-7.2%) and the GVA (-4.4%). Meanwhile, listings advanced 5.1% in the GTA.

·       With new listings dropping and sales rising, the sales-to-new listings ratio increased to 55.9 in July – still reflective of balanced market conditions though inching closer to seller’s territory. Provincially, the ratio was highest in New Brunswick (71.3), PEI (66.7) and Quebec (62.4). Conversely, the ratio was lowest in Saskatchewan (39.2), Alberta (45.6) and Newfoundland and Labrador (33.0) – indicating loose conditions in these markets. In Ontario, the ratio increased to 59.7, its highest level since January.  The ratio also increased to 52.3 in B.C., though it still sits below its 10-year average.

·       The average home price rose for the fourth straight month in July (+1.0%) and was flat on a year-over-year basis – an improvement compared to the 1.3% year-over-year drop recorded in June.

·       The quality-adjusted MLS home price index was up 2.1% from a year-ago – also an improvement versus June’s 0.9% gain. Quality-adjusted prices were higher in most markets, with exception of the Prairies. Price growth was robust in Ottawa (7.2% y/y) and Montreal (5.7%). Prices were slightly lower in the GTA (-0.6% y/y), though this was a notable improvement from June (-4.8% y/y). In the GVA, price growth decelerated to its softest pace since 2014 (6.7% y/y).

Key Implications

·       July’s was a good month for housing markets, as sales increased for the third straight month alongside another rise in prices. This lends further credence to our view that markets have shaken off the bout of policy-induced weakness in the earlier part of the year.

·       Since April, sales have increased in 7 of 10 Provinces, with sharp gains in Ontario and New Brunswick. However, activity remains notably weak in B.C., where markets are being impacted by provincial policy measures in addition to the revised B-20 underwriting guidelines and rising borrowing costs. The imposition of a new housing speculation tax should place additional downward pressure on markets in B.C. in coming months.

·       We expect Canadian resale activity to improve at a gradual pace going forward, buoyed by a decent economic backdrop and solid population growth, though some restraint should come from rising borrowing costs. This should help residential investment add to overall growth in the second half of the year.   By Rishi Sondhi, TD Economist.

United States

·        Concerns about Turkey drove market volatility this week, but U.S. equity markets managed a rebound.

·        Strong retail sales and historically-high small business optimism suggest a strong economic expansion in the U.S. this quarter.

·        Although concerns eased by week’s end, Turkey is not out of the woods yet. It remains in the early stages of a balance of payments crisis, and is likely to trigger further bouts of market volatility.

Canada

·        Canadian economic data continued to impress this week. A solid resale housing report, respectable manufacturing numbers and surprisingly strong inflation all paint a picture of a healthy economy.

·        Of particular note, home sales rose for a third straight month, as did average sale prices. Evidence continues to mount that, as expected, the impact of cooling measures early in the year have been short-lived, even if there remains lots of lost ground left for sales to make up.

·        Economic risks remain very real, but continued solid out-turns suggest that the next policy interest rate hike is not that far off.

By TD Economics.  Read the full report Here.

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Mortgage Interest Rates

Prime lending rate is 3.7%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.34%.  Fixed rates are holding steady, no change in fixed rates.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.