Edmonton Journal – Saturday, June 9, 2007
Wendy McLellan - Vancouver Province
Buyers urged to ask themselves what sacrifices they are willing to make
Looking to get into the housing market? Before you start scanning the weekend open house listings, consider how much house you can afford.
“You might technically qualify for a certain mortgage payment, but the lender’s calculations won’t take your personal budget and lifestyle into account,” said Paul Siemens, a mortgage broker with Invis. “You have to look at all your expenses, then figure out how much you’re comfortable paying in housing costs.”
Mortgage lenders use standard calculations, called debt-service ratios, to determine how much borrows can afford to pay. Under these ratios, housing costs-principal, interest, property taxes and maintenance-cannot exceed 32 per cent of gross income and total debt can’t exceed 40 per cent. For people with strong credit records and low debt, lenders may consider a 44 per cent total debt ratio rather than using two separate calculations.
The ratios often suggest you can afford a whopping mortgage payment and buy the house of your dreams, but house-hunters need to take a harder look at their financial picture.
“Anything that is not a loan payment isn’t factored into those ratios. Gym memberships, life-insurance premiums, RRSP deductions – all of these should be considered to figure out what you can afford. It’s not how much you qualify for, but how much you are comfortable paying.”
For James DeBoer, the toughest part of his job is talking to clients about the financial reality of the dream house.
“It’s really hard to coach people who are determined to get into a particular home and they’re willing to take risks,” said DeBoer, a certified Financial planner with Investors Group. “They are ready to scrape together anything to live in a beautiful home they can’t afford, and it’s hard to bring their expectations down.”
DeBoer works with clients to calculate their monthly income and how much their current lifestyle costs. From there, clients can see how much disposable income they have, and how much they are willing to pay for mortgage.
“Maybe you can qualify for a high mortgage payment, but what are the sacrifices you will have to make?”
Vancouver money coach Sheila Walkington suggests people practice being homeowners before deciding they can afford to get into the house market. For example, if they think they can pay $2,000 a month in mortgage and housing expenses, save that amount, less rent costs, for a few months. They should also plan to put aside about $200 a month to deal with inevitable home maintenance costs.
“It’s always good to practice for a few months beforehand, so it’s not such a shock when you do start paying a big mortgage payment – and the more time you have to practice, the better,” said Walkington, a certified financial planner.
Thursday, June 14, 2007
May home sales hit $1.2B
Edmonton Journal – Tuesday, June 5, 2007.
Ron Chalmers-Journal Business Writer
Interest rate hike fears make businesses and buyers edgy
Edmonton-area real estate sales hit $1.2 billion in May and $4.3 billion for the first five months of 2007.
That’s more than the entire year of 2005 and up to 37.4 per cent over the first five months of 2006.
Sales through the multiple-listings service had been constrained by a tight supply. But realtors listed 4.850 homes in May compared to 3,151 in April.
With more inventory, sales rose to 2,839 units in May from 2,441 in April.
Buyers enjoyed more choice, said Carolyn Pratt, president of the Realtors Association of Edmonton, in a new release issued Monday.
But the extra supply did not relieve prices, which rose about $400 per day.
They climbed three percent from April to an average of $354,410 for all forms of housing. Single-family houses averaged $426,028 while condos averaged $266,100.
ComFree, which sells services to support sales by owner, reported 1,212 new listings in May.
“Never before has any for-sale-by-owner company in the world listed that many houses in one month,” presidents Travis and Erin Holowach stated in a new release.
ComFree reported 556 sales in May at an average price of $369,400 for a total of $207.5 million.
Both REA and Comfree reported average listing periods of 22 days for homes that sold.
But fears of higher interest rates have hurt confidence among Alberta business leaders and consumers – especially about home buying – in a new survey for PricewaterhouseCoopers, released Monday.
“The majority of indices stayed relatively stable, but people are less optimistic than in February,” said Marc Tremblay, vice-president of Leger Marketing in Calgary.
It surveyed 306 business leaders through an online questionnaire and 931 representative Albertans by telephone in May.
Responses to each of give questions were aggregated to produce scores between zero and 200. A score of 100 would be neutral with higher scores revealing degrees of optimism or confidence, and lower scores showing pessimism.
The two samples were equally pessimistic about future interest rates, with the business sample scoring 40, and consumers scoring 39.
“This may not be surprising given the fact that the Canadian dollar recently reached a 30-year high at 93 cents US,” prompting predictions of higher interest rates to prevent higher inflation, said the Leger report.
The business and consumer samples were optimistic about falling unemployment, scoring 128 and 121 respectively.
The consumer sample was overwhelmingly positive about future household income and about the timing for buying major household items, with scores of 139 and 151 respectively.
But it scored a pessimistic 66 on the timing of buying a house.
On balance, consumer attitudes toward interest rates and home buying depressed their overall index score to 103-barely optimistic. Three months earlier, it was 113, “indicating that consumers in Alberta are a bit less optimistic about the economy than they were in February,” the Leger report commented.
The purpose of the Leger study was to “provide a barometer on how things may change in the future,” Tremblay said. “It could be used by business people as a tool to help them make business decisions.”
Ron Chalmers-Journal Business Writer
Interest rate hike fears make businesses and buyers edgy
Edmonton-area real estate sales hit $1.2 billion in May and $4.3 billion for the first five months of 2007.
That’s more than the entire year of 2005 and up to 37.4 per cent over the first five months of 2006.
Sales through the multiple-listings service had been constrained by a tight supply. But realtors listed 4.850 homes in May compared to 3,151 in April.
With more inventory, sales rose to 2,839 units in May from 2,441 in April.
Buyers enjoyed more choice, said Carolyn Pratt, president of the Realtors Association of Edmonton, in a new release issued Monday.
But the extra supply did not relieve prices, which rose about $400 per day.
They climbed three percent from April to an average of $354,410 for all forms of housing. Single-family houses averaged $426,028 while condos averaged $266,100.
ComFree, which sells services to support sales by owner, reported 1,212 new listings in May.
“Never before has any for-sale-by-owner company in the world listed that many houses in one month,” presidents Travis and Erin Holowach stated in a new release.
ComFree reported 556 sales in May at an average price of $369,400 for a total of $207.5 million.
Both REA and Comfree reported average listing periods of 22 days for homes that sold.
But fears of higher interest rates have hurt confidence among Alberta business leaders and consumers – especially about home buying – in a new survey for PricewaterhouseCoopers, released Monday.
“The majority of indices stayed relatively stable, but people are less optimistic than in February,” said Marc Tremblay, vice-president of Leger Marketing in Calgary.
It surveyed 306 business leaders through an online questionnaire and 931 representative Albertans by telephone in May.
Responses to each of give questions were aggregated to produce scores between zero and 200. A score of 100 would be neutral with higher scores revealing degrees of optimism or confidence, and lower scores showing pessimism.
The two samples were equally pessimistic about future interest rates, with the business sample scoring 40, and consumers scoring 39.
“This may not be surprising given the fact that the Canadian dollar recently reached a 30-year high at 93 cents US,” prompting predictions of higher interest rates to prevent higher inflation, said the Leger report.
The business and consumer samples were optimistic about falling unemployment, scoring 128 and 121 respectively.
The consumer sample was overwhelmingly positive about future household income and about the timing for buying major household items, with scores of 139 and 151 respectively.
But it scored a pessimistic 66 on the timing of buying a house.
On balance, consumer attitudes toward interest rates and home buying depressed their overall index score to 103-barely optimistic. Three months earlier, it was 113, “indicating that consumers in Alberta are a bit less optimistic about the economy than they were in February,” the Leger report commented.
The purpose of the Leger study was to “provide a barometer on how things may change in the future,” Tremblay said. “It could be used by business people as a tool to help them make business decisions.”
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