No money down for investment property raises concerns and a few red flags
TORONTO - You have to wonder what David Dodge will be thinking this time. Just over a year ago, the Bank of Canada governor met with Canada Mortgage and Housing Corp. because of his fears exotic mortgages were juicing an already robust Canadian housing market.
Now, CMHC has decided it is going to let Canadians buy investment properties with no down payment.
The Crown corporation, which controls about 70 per cent of the mortgage insurance market in Canada, has quietly introduced changes that lower the down-payment threshold for an investment property. Instead of needing 15 per cent down, Canadians will be able to buy a second property -- not to mention a third and fourth and fifth -- with no money down.
"These enhancements will ensure continued supply of affordable rental accommodations across Canada," said Pierre Serre, vice-president of insurance products with CMHC.
Critics charge CMHC once again has moved into risky territory, the last time being its decision to allow Canadians no money down on a principle residence. "Look at the fee, anytime it's that high, you know there is a lot of risk," said one senior mortgage industry observer.
The mortgage insurance fee for the new product is 7.25 per cent of the total amount of the loan. So, a $300,000 mortgage would have a $21,750 mortgage insurance fee.
Instead of paying the fee up front, CMHC will allow that fee to be added to the overall mortgage which can be amortized over as many as 40 years. Based on 5.8-per-cent interest, the current discounted rate for a five-year term, it would cost just over $1,700 a month to carry that $321,750 mortgage.
By law, any consumer with less than a 20-per-cent downpayment must buy mortgage insurance if they are borrowing money from a financial institution covered under the Bank Act.
None of CMHC's competitors are coming close to this new offer. Genworth Financial Canada -- the other dominate player with about 30 per cent of the mortgage insurance market -- requires investors to have at least 10 per cent down.
Back in July, 2006, Dodge demanded a meeting with the federal Crown corporation. He was concerned about products like interest-only mortgages which give consumers the option of not making a principle payment for the first 10 years of a mortgage.
Serre said CMHC did consider the issue of whether the changes could over-stimulate the market. "We look at those kind of considerations all the time," he said, adding that to get a loan consumers will have to meet certain criteria in terms of their overall debt load. "We're not trying to get people into situations they can't manage."
Some question whether there was any need for the latest change, given how strong the market in Canada remains.
The Building Industry and Land Development Association said this week condo sales in Toronto -- the largest market for new high rises in North America -- were up 31 per cent over the first nine months of the year from a year earlier. "I'm not sure why CMHC is relaxing the rules, the logic escapes me," said Stephen Dupuis, chief executive of BILD. "The market is strong. I look at what is happening in the United States and wonder if there is a need to be so free with credit."
The real reason for the new program, suggest some commentators, is CMHC trying to fend off competitors in the marketplace. In a constant battle with Genworth, CMHC is also facing up to four new mortgage insurers who have applied to do business in Canada or are already licensed to do so.
"There are competitors in the marketplace that didn't exist before. They are reacting to competition that hasn't even materialized yet," said Dupuis.
CIBC World Markets senior economist Benjamin Tal said the latest changes by CMHC are probably just the beginning. "The genie is out of the bottle, this mortgage market is starting to move. Over the past 16 months we've seen more changes than the past 30 years," said Tal.
Edmonton Journal
Monday, October 29, 2007
Canadian real estate sales slip
Sales in Canada's red-hot real estate market cooled in September, but average prices ticked up, according to new figures from the Canadian Real Estate Association.
Seasonally adjusted sales last month in 24 major markets fell 3.1 per cent from August to 28,591, CREA said. Sales in the four biggest markets of Toronto, Vancouver, Montreal and Calgary all declined.
But the average price of a resale home rose by almost $3,000 to $328,660 — up 11.1 per cent from September last year.
Prices were up year over year in every major market except Thunder Bay, Ont., where they were 0.9 per cent lower.
The big price increases in Saskatoon, Edmonton and Calgary showed some signs of easing. Saskatoon's average resale home sold for $242,091 in September — still up 49.3 per cent from last year's average.
But the number of new listings in those hot western markets also rose dramatically year over year, CREA said, helping to bring more balance to those markets.
"Buyers in [Alberta] will likely take more time to shop and remove some of the steam from price increases," said CREA chief economist Gregory Klump.
He said resale housing activity across the country "remains strong," but it's "beginning to ease back from its breakneck pace recorded in the first half of the year."
Vancouver's real estate market once again topped the country's most expensive. The average home sold for $582,354. That's down by about $5,000 from August, but still represents a better than 10 per cent hike in the past year.
Average resale prices in the Toronto real estate market showed a $19,000 gain from August. The September average of $380,132 was up 8.9 per cent from September 2006.
In the July to September quarter, CREA said sales broke records in London, Ont., Ottawa and St. John's, N.L.
"The underlying economic conditions in Canada that affect real estate are still very strong," said CREA president Ann Bosley in a statement. She attributed lower overall sales to the "volume of new listings."
CREA's report is based on sales through the MLS system.
CBC News
Seasonally adjusted sales last month in 24 major markets fell 3.1 per cent from August to 28,591, CREA said. Sales in the four biggest markets of Toronto, Vancouver, Montreal and Calgary all declined.
But the average price of a resale home rose by almost $3,000 to $328,660 — up 11.1 per cent from September last year.
Prices were up year over year in every major market except Thunder Bay, Ont., where they were 0.9 per cent lower.
The big price increases in Saskatoon, Edmonton and Calgary showed some signs of easing. Saskatoon's average resale home sold for $242,091 in September — still up 49.3 per cent from last year's average.
But the number of new listings in those hot western markets also rose dramatically year over year, CREA said, helping to bring more balance to those markets.
"Buyers in [Alberta] will likely take more time to shop and remove some of the steam from price increases," said CREA chief economist Gregory Klump.
He said resale housing activity across the country "remains strong," but it's "beginning to ease back from its breakneck pace recorded in the first half of the year."
Vancouver's real estate market once again topped the country's most expensive. The average home sold for $582,354. That's down by about $5,000 from August, but still represents a better than 10 per cent hike in the past year.
Average resale prices in the Toronto real estate market showed a $19,000 gain from August. The September average of $380,132 was up 8.9 per cent from September 2006.
In the July to September quarter, CREA said sales broke records in London, Ont., Ottawa and St. John's, N.L.
"The underlying economic conditions in Canada that affect real estate are still very strong," said CREA president Ann Bosley in a statement. She attributed lower overall sales to the "volume of new listings."
CREA's report is based on sales through the MLS system.
CBC News
Tuesday, October 16, 2007
Condos still king among builders
Edmonton-area apartment and condo builders are experiencing their strongest year since 1982.
This September, 1,3069 multiple units were started, compared to 522 in September 2006.
For the full year, builders “are poised to exceed 6,000 units for the first time since 1982,” said market analyst Richard Goatcher at Canada Mortgage and Housing Corp., which released the figures, Tuesday.
“The lion’s share are condominiums,” Gaotcher said.
For the year to date, Edmonton has captured 72 per cent of the area’s multiple starts.
“A lot of people who look at condos are young professionals without children or empty-nesters who work downtown and want to talk to work or to the Winspear,” Goatcher said.
SINGLE STARTS FALL
The area’s single family starts fell 24 per cent in September, from last September.
They also had fallen in July and August.
“The single detached builders have been throttling back for a while now, similar to the pullback in the resale market, caused by a consumer reaction to the price increases,” Goatcher said.
“And there has been a run-up in inventory.”
“The single-detached house building industry is still expected to achieve the second-best year on record,” he said.
For the year to date, Edmonton city has captured only 49 per cent of the area’s single-family starts.
“Single-family housing goes where the land is cheaper,” Goatcher says.
“Younger families want to be in the suburbs,” he added.
Total housing starts in September were up 54 per cent in Red Deer, 40 per cent in greater Edmonton, 34 per cent in greater Calgary, 34 per cent in Wood Buffalo, and 20 per cent across Canada.
Edmonton Journal – Wednesday, October 10, 2007
This September, 1,3069 multiple units were started, compared to 522 in September 2006.
For the full year, builders “are poised to exceed 6,000 units for the first time since 1982,” said market analyst Richard Goatcher at Canada Mortgage and Housing Corp., which released the figures, Tuesday.
“The lion’s share are condominiums,” Gaotcher said.
For the year to date, Edmonton has captured 72 per cent of the area’s multiple starts.
“A lot of people who look at condos are young professionals without children or empty-nesters who work downtown and want to talk to work or to the Winspear,” Goatcher said.
SINGLE STARTS FALL
The area’s single family starts fell 24 per cent in September, from last September.
They also had fallen in July and August.
“The single detached builders have been throttling back for a while now, similar to the pullback in the resale market, caused by a consumer reaction to the price increases,” Goatcher said.
“And there has been a run-up in inventory.”
“The single-detached house building industry is still expected to achieve the second-best year on record,” he said.
For the year to date, Edmonton city has captured only 49 per cent of the area’s single-family starts.
“Single-family housing goes where the land is cheaper,” Goatcher says.
“Younger families want to be in the suburbs,” he added.
Total housing starts in September were up 54 per cent in Red Deer, 40 per cent in greater Edmonton, 34 per cent in greater Calgary, 34 per cent in Wood Buffalo, and 20 per cent across Canada.
Edmonton Journal – Wednesday, October 10, 2007
Edmonton’s ever-changing housing market continues to fluctuate
Reports from September indicate it is a buyers’ market out there
Prices of homes sold through Edmonton's Multiple Listing Service (MLS) continued to soften last month while housing inventory bulged once again.
According to the Realtors Association of Edmonton, single family dwellings listed on the MLS sold on average for $399,555 in the Edmonton area for the month of September down one per cent from an August average of $403,757. This is down just 0.99% from last month.
MARKET CORRECTING ITSELF
“Every market has fluctuations and this market is still correcting after a dramatic upswing,” said Carolyn Pratt, president of the Realtors Association. “Right now buyers can take advantage of prices that are below the peak of last May. Sellers, on the other hand, are still realizing significant equity gains from prices that are still 23.5% above this time last year.”
Condominium sale prices rallied in September, selling on average for $270,745 up 0.6% from Augusts’ average condo selling price of $269,139 duplex/rowhouses were down six per cent over the month, selling for $310,110 on average. The average residential sales price was nearly a wash thanks to the gains made by condo sales, dipping just 0.15% from last month to $344,286.
“Condos are still affordable for a lot of people and that’s why that end of the market is holding up,” said Pratt. “It wasn’t that long ago that $270,000 was a lot of money for a house. A lot of first-time home buyers do not have the income to spend $400,000 on a home, so they put their emphasis on buying a condo to build up equity.”
From January 2006 to May 2007, the average price of single family dwellings rose 74%, setting back just six per cent since then. This cooling trend may be the cause of an industry inventory explosion that saw the month’s sales-to-listing ratio hit 26% with 3,952 residential listings.
With only 1,042 sales, September’s homes sales represent the lowest number in almost 10 years, registering a drop of 43.5% over September 2006. As a result, the residential inventory increased to 9,918 from 9,185 over the past 30 days. The average days-on-market in Septembers increased from 36 to 43 days.
“I think buyers are sitting on the sidelines because they have a lot to choose from,” said Pratt. “They’re taking their time making decisions and deciding if the market is sustaining itself yet.”
RECORD AMOUNT OF CHOICE
At the end of the third quarter, year-to-date sales were down slightly compared to last year. Total residential sales were 17,188 units, down 1.5% from the same time last year with a year-to-date sales-to-listings ratio of 52%.
“There is a record amount of inventory and there are a number of factors,” said Pratt, listing investors rushing to dump rentals, spec homes coming due, families who build new, putting their previous homes for sale, builders continuing to build to meet forecasted demand all added on top of normal MLS activity.
“The fundamentals are still good for a growing market. Edmonton has high employment, a lot of people are still moving into the city, low interest rates, I think we’re going through a correction and in the new year we see the market stabilizing and starting to increase gradually again.”
The north central quadrant of the city was the most active with 83 single family dwelling sales while the central and northwest regions were the least active with just 18 sales each.
Central also offered the most affordable single family homes with median sales below $300,000. An average priced house in the southwest was priced at $517,106.
Outside the City of Edmonton, St. Albert was the most active community with 387 single family dwelling sales and the highest average price of $497,380. Six homes sold in Morinville where the average price was just $327,333.
Edmonton Sun – Sunday, October 7, 2007
Prices of homes sold through Edmonton's Multiple Listing Service (MLS) continued to soften last month while housing inventory bulged once again.
According to the Realtors Association of Edmonton, single family dwellings listed on the MLS sold on average for $399,555 in the Edmonton area for the month of September down one per cent from an August average of $403,757. This is down just 0.99% from last month.
MARKET CORRECTING ITSELF
“Every market has fluctuations and this market is still correcting after a dramatic upswing,” said Carolyn Pratt, president of the Realtors Association. “Right now buyers can take advantage of prices that are below the peak of last May. Sellers, on the other hand, are still realizing significant equity gains from prices that are still 23.5% above this time last year.”
Condominium sale prices rallied in September, selling on average for $270,745 up 0.6% from Augusts’ average condo selling price of $269,139 duplex/rowhouses were down six per cent over the month, selling for $310,110 on average. The average residential sales price was nearly a wash thanks to the gains made by condo sales, dipping just 0.15% from last month to $344,286.
“Condos are still affordable for a lot of people and that’s why that end of the market is holding up,” said Pratt. “It wasn’t that long ago that $270,000 was a lot of money for a house. A lot of first-time home buyers do not have the income to spend $400,000 on a home, so they put their emphasis on buying a condo to build up equity.”
From January 2006 to May 2007, the average price of single family dwellings rose 74%, setting back just six per cent since then. This cooling trend may be the cause of an industry inventory explosion that saw the month’s sales-to-listing ratio hit 26% with 3,952 residential listings.
With only 1,042 sales, September’s homes sales represent the lowest number in almost 10 years, registering a drop of 43.5% over September 2006. As a result, the residential inventory increased to 9,918 from 9,185 over the past 30 days. The average days-on-market in Septembers increased from 36 to 43 days.
“I think buyers are sitting on the sidelines because they have a lot to choose from,” said Pratt. “They’re taking their time making decisions and deciding if the market is sustaining itself yet.”
RECORD AMOUNT OF CHOICE
At the end of the third quarter, year-to-date sales were down slightly compared to last year. Total residential sales were 17,188 units, down 1.5% from the same time last year with a year-to-date sales-to-listings ratio of 52%.
“There is a record amount of inventory and there are a number of factors,” said Pratt, listing investors rushing to dump rentals, spec homes coming due, families who build new, putting their previous homes for sale, builders continuing to build to meet forecasted demand all added on top of normal MLS activity.
“The fundamentals are still good for a growing market. Edmonton has high employment, a lot of people are still moving into the city, low interest rates, I think we’re going through a correction and in the new year we see the market stabilizing and starting to increase gradually again.”
The north central quadrant of the city was the most active with 83 single family dwelling sales while the central and northwest regions were the least active with just 18 sales each.
Central also offered the most affordable single family homes with median sales below $300,000. An average priced house in the southwest was priced at $517,106.
Outside the City of Edmonton, St. Albert was the most active community with 387 single family dwelling sales and the highest average price of $497,380. Six homes sold in Morinville where the average price was just $327,333.
Edmonton Sun – Sunday, October 7, 2007
Housing Market Correcting After Temporary High
Average home prices fell one per cent in September after peaking in May
Fall home prices are forcing Edmonton-area realtors to market more aggressively.
Average prices for single family houses slipped another on per cent in September to $399,555 from $403,757 in August. They peaked in May at $426,028.
“This market is still correcting after a dramatic upswing,” Carolyn Pratt, president of the Realtors Association of Edmonton, said Wednesday.
Average prices for all homes, including condos, duplexes and row houses, fell $506 to $344,286.
During September, 3,952 homes were newly listed with the Multiple Listing Service while only 1,042 were sold-for the slowest sales month since December, 2005.
MLS residential inventory rose, for the ninth consecutive month, to 9,918 units.
The excess of supply over demand means more choices and less pressure for buyers, Pratt said-but it pushes sellers and realtors to market homes more effectively.
During the past two hears, she said, “we rarely had to do an open house,” because homes sold so quickly.
“Now, with a lot more competition, you have to really step up your marketing,” she said.
“It’s important to expose your property and attract people into the property.”
Most realtors have returned to holding weekend open houses for shoppers, she said.
But the practice of realtors-only open houses, on weekday morning, has been largely overtaken by the Internet, she said, Now, realtors scan new listings online.
More and more realtors use “virtual tours” on their listed homes, with websites including video clips rather than just still photos, Pratt said.
Increasing numbers also are using software that links to Google Earth, so online shoppers can located listed homes within the city, and see surrounding features such as roads, parks and schools, she said.
Pratt noted that professional “home staging” also is becoming more popular, to show properties at their best.
Despite the current “correction,” Pratt pointed out that Edmonton prices are up 24 per cent from 12 months ago, so sellers are still earning good returns on their investments.
Greater Edmonton’s population is forecast to grow by 83,000 in the next five years, Pratt said.
With a strong economic outlook, the ear’s real estate should do well over the next several years, she said-while refusing to predict when prices will rise again.
Edmonton Journal
Fall home prices are forcing Edmonton-area realtors to market more aggressively.
Average prices for single family houses slipped another on per cent in September to $399,555 from $403,757 in August. They peaked in May at $426,028.
“This market is still correcting after a dramatic upswing,” Carolyn Pratt, president of the Realtors Association of Edmonton, said Wednesday.
Average prices for all homes, including condos, duplexes and row houses, fell $506 to $344,286.
During September, 3,952 homes were newly listed with the Multiple Listing Service while only 1,042 were sold-for the slowest sales month since December, 2005.
MLS residential inventory rose, for the ninth consecutive month, to 9,918 units.
The excess of supply over demand means more choices and less pressure for buyers, Pratt said-but it pushes sellers and realtors to market homes more effectively.
During the past two hears, she said, “we rarely had to do an open house,” because homes sold so quickly.
“Now, with a lot more competition, you have to really step up your marketing,” she said.
“It’s important to expose your property and attract people into the property.”
Most realtors have returned to holding weekend open houses for shoppers, she said.
But the practice of realtors-only open houses, on weekday morning, has been largely overtaken by the Internet, she said, Now, realtors scan new listings online.
More and more realtors use “virtual tours” on their listed homes, with websites including video clips rather than just still photos, Pratt said.
Increasing numbers also are using software that links to Google Earth, so online shoppers can located listed homes within the city, and see surrounding features such as roads, parks and schools, she said.
Pratt noted that professional “home staging” also is becoming more popular, to show properties at their best.
Despite the current “correction,” Pratt pointed out that Edmonton prices are up 24 per cent from 12 months ago, so sellers are still earning good returns on their investments.
Greater Edmonton’s population is forecast to grow by 83,000 in the next five years, Pratt said.
With a strong economic outlook, the ear’s real estate should do well over the next several years, she said-while refusing to predict when prices will rise again.
Edmonton Journal
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