This week’s top stories include how there are two sides to the Canadian real estate market, how U.S. home buyers are being analyzed by builders to become qualified applicants, how the new mortgage regulations are slowing sales in the housing market, how housing sales have declined but home prices continue to rise, how Canada holds four spots in the priciest cities to park in North America, how the Bank of Canada argues the myths of its job creation and how the real estate industry continues to try and put a positive spin the negative housing numbers that are released.
Canada may be one country but it seems that the real estate market doesn’t understand that. The demand for housing in western Canada continues to grow as resource rich markets help make a push towards housing. On the east coast, things are not so rosy as many vacancies take their toll on housing.
Despite gains in Western Canada, the real estate sector as whole for the country continues to be a disappointment. Many analysts are saying that we have borrowed sales last year from what could have been a solid year this year. Waterloo, Edmonton and Montreal lead the way for commercial spaces with those cities handling the majority of commercial sales for all of Canada. There are talks that Toronto may see a flat year this year and I have to agree.
Toronto and the Greater Toronto Area had a great 2011 and maybe a substantial amount of people renewed their leases last year but that does nothing for us this year in 2012. It seems that investments are continuing to slow and commercial properties are now coming under a microscope. What do you think? Please comment below.
There is a new housing rehab program being offered by builders in the U.S. but no one is sure if it is for the good of the consumer or for the good of the builder. Builders are offering financial advise to prospective buyers who wouldn’t normally qualify for a loan. People are buying properties with no money down, again, in the U.S.
Washington bankruptcy attorney Brett Weiss commented, “You have people applying for loans that there’s no way they can pay, but it doesn’t matter because the ability to repay isn’t the basis of the loan. It’s the ability to pass underwriting so the loan can be sold.” It seems that the builders are helping clients budget and cut spending. Some are even helping with credit repair to increase beacon scores as quickly as possible.
One builder is signing up clients for credit cards to re-establish credit and doing whatever it takes to get the clients qualified, even if it means a 10 month turnaround. They are offering zero down mortgages that are government backed loans and pushing clients into homes today. This is helping builders boost loans south of the border. What do you think of this? Please comment below.
The average price of a home in Canada was up 1.8% and 4.8% in the third quarter (Q3) of this year when compared to the same time last year, according to a recent survey released by Royal LePage. According to them, the average cost of a two story home in Canada rose by 4% to $403,747 and the average price of a detached bungalow increased 4.8% to $366,733.
The condo market also witnessed increases of 1.8% to $243,607 as did properties in most cities across Canada. The catch is that less homes were sold this year when compared to the same period last year. Volume of home sales across Toronto were down 21% for the month of September when compared to the same period last year according to the Toronto Real Estate Board (TREB). The number of homes that sold in the Greater Toronto Area (GTA) were also down 20.7% from 7,422 sales to just 5,879 home sales with the average price increasing more than 8.5% to $503,662.
Ann Hannah, president of TREB stated, “While sales have been lower due to stricter mortgage lending guidelines, we continue to see substantial competition between buyers. The months of inventory trend remains low from a historic perspective, which explains the strong price increases we are experiencing.” Historically fewer homes being sold is normal right before a period where prices decline. This also can be noted by a reduced demand for homes as well as sellers lowering the asking price to create interest. Changes to the mortgage regulations are also accelerating the market correction. What do you think? Please comment below.
Tighter lending guidelines and mortgage rules have taken their toll on home sales for the month of September with sales declining 21% year over year in the Greater Toronto Area (GTA). Luckily, we are not living in Vancouver where home prices are down and sales even worse with a 33% decline in sales for the month of September.
The condo market, which was extremely hot for the last little bit, has begun to cool considerably this summer and detached homes have increased to amounts that are considered unaffordable. Detached homes now average $627,111 across the GTA and $781,826 in Toronto. This is usually the point where sales are strong with summer vacations coming to an end and home buyers making their way to every open house available but this is not the case this year. Jason Mercer, Toronto Real Estate Board’s (TREB) senior manager of market analysis commented, “Barring a major change to the consensus economic outlook, home price growth is expected to continue through 2013. Based on inventory levels, price growth will be strongest for low-rise home types, including single-detached and semi-detached houses and town homes.”
The condo sector will not see this as it’s highly unlikely that gains in the sector will continue. The growing inventory of condo’s is of concern for many and the fact that majority of high end condo’s remain unsold has become worrisome. Condo’s are outpacing the construction of high demand family homes with high inventory in the condo sector and minimal inventory in the family homes sector. Condo realtor Mark Savel commented, “It’s still a seller’s market for houses, but condos have slowed down a lot.” What do you think? Please comment below.
Canada holds four spots in the top 10 priciest cities in North America when it comes to parking. Colliers International did their 12th annual survey recently and four major urban centers of Canada made the list. Toronto, Edmonton, Montreal and Calgary all made the list.
Calgary actually came in at number two overall in the continent, only falling behind New York as the priciest city in North America for parking. Ian MacCullock, national director for Colliers International in Canada stated, “Improving economic conditions, a strong office market and limited future supply of new parking spots are all contributing to the continued increase of parking rates in all categories and across the country. Currently, only Calgary, Ottawa, Saskatoon, Waterloo Region and Winnipeg are expecting to add new parking spots over the next year and in limited numbers. This shortage of new supply will continue to put upward pressure on parking rates.”
There is a shortage of parking supply in the major urban centers of Canada and has now become an average eight month wait for a spot to up to one or two years in places like Victoria, Regina and Halifax. Calgary leads the pack for Canada with an average monthly parking rate of $456.75, which is an increase of 2% from last year. Montreal’s average parking spot costs $330.96 and Toronto parking averages $316.40 monthly for a spot. Toronto actually witnessed a decline in the cost of parking with rates dropping 4.8% from last year. What do you think about the cost of parking? Please comment below.
Tiff Macklem, a top official with the Bank of Canada (BoC) made a braisen statement yesterday that recent job creation at the cost of high paying full time positions is not a myth. In her speech yesterday to the Winnipeg Chamber of Commerce, he commented that “much of the slack in the labour market has been taken up” and stated again that interest rates will be going up.
He was further noted as saying, “Some commentators have suggested that while the Canadian economy has created more jobs, fewer manufacturing jobs and more service sector jobs have meant fewer high-paying full-time jobs. True, the share of service sector jobs has risen while manufacturing has declined. But the rest of the argument is myth. Since the trough, the vast majority of the new jobs created are full-time and in the private sector. And more than 90% of them are in industries that pay average or above-average wages. Much of the slack in the labour market has been taken up, and firms are increasingly facing difficulty in finding suitable labour. Nevertheless, some slack remains and can be expected to persist in the near term.”
He went further by stating, “But looking ahead, as the slack is taken up and demographic trends slow the growth of the labour force, continued labour market health will depend increasingly on reducing barriers to work, connecting workers with jobs, and facilitating a more mobile and more productive workforce. To the extent that the economic expansion continues and the excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2% inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.” What do you think of his statements? Please comment below.
It seems that the Canadian real estate market may have its best days behind it now as sales continue to decline in major markets across the country. The industry is scrambling to come up with new explanations for the decline and is pushing for the media to put a positive spin on things. The Toronto Real Estate Board (TREB) even went as far as stating that Septembers slow down is due to the month having too many weekends and not enough working days.
TREB’s release was as follows, “The number of transactions was down 21% in comparison to September 2011, however, it is important to note that there were two fewer working days in September 2012.” Utilizing this analysis to their own benefit, TREB states that home sales have only declined 12.5%, rather than 21%, from a year ago on a “working day basis”. This has many believing that the benchmark indices that are produced by organized real estate are not accurate and may be covering up an even larger decline than we are being told.
Vancouver’s real estate board uses the MLS HPI (Multiple Listing Service Home Price Index) composite benchmark price for its residential properties. The index had declined 0.8% to $606,100 in the month of September from last year and was down 2.3% in the past three months. But when we look at actual sales data, year over year prices were down 6.9% with prices falling 7.3% in during the first 8 months of the year. It seems that a decline is happening but that the severity of the decline is under dispute. Vancouver’s real estate board commented on their website, “The HPI takes into consideration what averages and medians do not — items such as lot size, age, number of rooms, etc. These features become the composite of the ‘typical house’ in a given area,” says Vancouver’s board on its website.
Capital Economics economist David Madani commented, “It’s a bit lame. The answer is to ignore what they are saying. Sales are plummeting in Toronto and Vancouver. I say get used to this because this is going to go on for a couple of years. Our view is a 25% price decline. The normal course in any cycle is for sales to correct first and then for prices to follow. There is a time lag, that’s what happened in the United States. There’s a time lag as sellers hold on, refusing to drop their asking price, eventually they acknowledge the market has shifted under them.” Mortgage regulation changes and changes to amortization may have had a greater impact than originally anticipated. Self employed buyers are finding it harder to obtain loans at competitive mortgage interest rates. Now we just have to wait and see what happens. What do you think? Please comment below.
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