Real estate market overview and current challenges
Stepping into 2017
Come join me as we learn from Jennifer Podmore-Russell of Deloitte, and her take on where is Vancouver’s real estate marketing heading as we step into 2017. This presentation brought to us courtesy of Wealthminds!
Click here for the full presentation.
I’ve also highlighted below some notable changes in our market which may affect you! Give us a call at (604) 629-7515 or fill out the form below if you’d like to learn more.
Changes in the market – BC’s Foreign Buyer Property Transfer Tax
On July 25, 2016, the BC government introduced legislative changes directed at BC’s residential housing market. The key changes include the introduction of an additional 15% property transfer tax (PTT), effective August 2, 2016, on transfers of residential properties within the Greater Vancouver Regional District (GVRD) to foreign entities or taxable trustees
Government Responses – Preventative Measures for a “Healthy, Competitive and Stable Housing Market”
Legislation release on October 3, 2016 included a “Mortgage rate stress test” for all insured borrowers and closing loopholes for the Principal Residence Exemption.
Canada Mortgage and Housing Corp.’s decision to stop insuring mortgages on second homes is not having a noticeable impact on the country’s cottage market…
Reblogged from The Globe and Mail | Tara Perkins
Canada Mortgage and Housing Corp.’s decision to stop insuring mortgages on second homes is not having a noticeable impact on the country’s cottage market, Re/Max says.
Mr. Oliver told reporters Thursday in Ottawa. “I listened to [BMO’s] explanation, his reasons. I reiterated what I’ve just stated — the government is gradually reducing its involvement in the mortgage market.”
Reblogged from The Financial Post
TORONTO • Why did Bank of Montreal risk a (verbal) slap from Finance Minister Joe Oliver for daring to chop its five-year mortgage rate below 3%?
Because they knew the mortgage war is going to be different this time.
On previous occasions when the banks publicized rates below the government’s favoured minimum, they found themselves on the receiving end of angry calls from Mr. Oliver’s predecessor, Jim Flaherty, who resigned on March 18.
Mr. Oliver seems in no mood to quarrel with Bay Street and ready to largely leave the mortgage market to its own devices.
“There’s a market and the bank made its decision, and the chief executive officer of the Bank of Montreal informed me about it,” Mr. Oliver told reporters Thursday in Ottawa. “I listened to his explanation, his reasons. I reiterated what I’ve just stated — the government is gradually reducing its involvement in the mortgage market.”
Asked if the government would take further steps if a housing bubble formed, Mr. Oliver said: “I don’t have to get into a hypothetical negative.”
It’s a big change from Mr. Flaherty who didn’t jump on the banks every time they cut rates to new lows but certainly always let them know he was a coiled spring. He also didn’t mind opining on the “hypothetical negative” of what he viewed as overpriced housing in Toronto and Vancouver.
And, without Finance calling out the banks, there is a dearth of negative voices around this high-profile plunge below 3%.
Home loans are simply products that people buy, and when demand is strong the companies that produce those products — the banks — can charge higher prices, said Peter Routledge, an analyst at National Bank Financial. When demand falls off, prices move in the opposite direction.
“What [the rate cut] tells me is that household credit growth is slowing and BMO has reacted to slowing demand in the way one would expect,” Mr. Routledge said. “It’s textbook economics.”
In fact, other lenders are already providing even lower offers for five-year mortgages, though they’re mostly going about it more quietly.
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The U.S. Federal Reserve continued to taper its quantitative easing (QE) programs last week, announcing on Wednesday that it would reduce them from $75 billion/month to $65 billion/month.
This matters to Canadian mortgage borrowers for several reasons:
- U.S. and Canadian monetary policies are tightly linked, making it highly unlikely that the Bank of Canada (BoC) will raise its overnight rate at least until the U.S. Fed hikes its equivalent Federal funds rate. Since the U.S. Fed has repeatedly said that it will not even consider raising the Fed funds rate until it has completely unwound its QE programs, the timing of this withdrawal acts as a kind of distant-early-warning system for Canadian variable-rate borrowers.
Reblogged from MoveSmartly.com | Dave Larock
- The U.S. Fed taper is expected to strengthen the U.S. dollar and if the Loonie continues to depreciate against the Greenback, this will provide additional stimulus for our economy, particularly for our export-based manufacturers (which I wrote about last week).
- The taper’s impact on our economy goes beyond monetary policy and exchange rates. For example, if QE is allowed to continue for too long it could fuel higher-than-expected U.S. inflation, which we would inevitably import over time. This would force the BoC to raise its overnight rate in response. Alternatively, if the withdrawal of QE pushes U.S. bond yields up, Government of Canada (GoC) bond yields, which move in lock step with their U.S. counterparts, would move higher and trigger a rise in our fixed-mortgage rates.
Here are the highlights from the Fed’s press release that included the most recent tapering announcement:
- The Fed acknowledged the weak December U.S. employment data but expressed confidence in the broader U.S. labour market recovery, saying that “labor market indicators were mixed but on balance showed further improvement.” This implies that the Fed saw the most recent employment data as an anomaly that was impacted largely by seasonal factors, although a poor January jobs report could quickly alter that view.
- The Fed made it clear that it will respond flexibly to changes in the U.S. economic outlook, saying that “asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.” That means that we should continue to expect bond-yield volatility as markets react to each new economic data release and try to interpret how it will affect the Fed’s QE tapering timetable.
- “The Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.” Variable-rate borrowers take note: the Fed is reiterating that it will not raise its fed funds rate until well after QE has been completely unwound, and this bolsters my view that your rates shouldn’t be going up for some time yet.
- “The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.” In other words, Fed policy is still being guided by fears over deflation, which it mitigates with loose monetary policy, as opposed to concerns about higher inflation, which it mitigates with tighter monetary policy.
- The Federal Open Market Committee (FOMC) vote to continue tapering was unanimous for the first time since June 2011. Some thought that had more to do with giving Federal Reserve Chairman Bernanke a proper send off at his last Fed meeting, as opposed to there being real convergence of FOMC committee member viewpoints. We should get a better idea of where the FOMC’s four newly minted voting stand at the next Fed meeting on March 18.
Now that the Fed has followed through with its second round of tapering, the consensus is that it will continue ratcheting down its QE programs until they are completely unwound by the end of this year. Here are a few reasons why I think that timetable is optimistic:
- In a recent article, economist and market analyst Greg Weldon estimated that the U.S. treasury will have to issue $500 billion in new debt to cover the U.S. federal government’s budget deficit for this year, to say nothing of the nearly $3 trillion in maturing U.S. government debt that will have to be rolled over in 2014. Today, the Fed buys almost all of the newly issued U.S. treasury debt so when it withdraws (tapers) its support for U.S. bonds, who will become the marginal buyer of new U.S. debt at anything close to today’s low yields? If U.S. bond yields move higher, as I think they inevitably will if the Fed continues to withdraw its support, will the Fed hold firm or will it then choose to reassess “the efficacy and costs of such purchases”?
Reblogged from Canadian press
Ottawa should consider phasing out insuring home mortgage through Canada Mortgage and Housing Corp., the International Monetary Fund said Wednesday.
The advice is contained in the IMF’s latest economic report card on Canada, which projects modest economic growth of 2.25% for the country next year.
Such a recommendation, surprising from an international financial organization, appears to side with Finance Minister Jim Flaherty, who has recently questioned whether the federal government should be in the business of insuring higher-risk mortgages at all.
Some analysts have credited the system for providing much needed confidence in Canada’s housing sector during the 2008-09 crisis, which many believe was sparked by a crisis in the U.S. mortgage market.
The IMF concedes that the current system has its advantages for stability. But it says it also exposes the government, or taxpayers, to financial system risks and might distort the market as a whole in favour of mortgages over more productive uses of capital.
“We think banks lend too much to mortgages and too little to small and medium enterprises,” Roberto Cardarelli, the IMF mission chief for Canada, told reporters in a briefing in Toronto.
“We suspect the fact that banks may benefit from government-backed insurance on mortgages (…) it sort of makes it easier for banks to do mortgages than other kinds of lending which presumably, we think, is going to be more useful for the real economy.”
The Washington-based financial institutions said further measures should be considered to “encourage appropriate risk retention by private sector and increase the market share of private mortgage insurers.”
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Reblogged from Financial Post, Andrew Allentuck
Mortgage default may be rare in this country, but nearly 9% of indebted households need 40% or more of their gross income to pay their debt service charges, says the Bank of Canada Financial System Review.
If you can see problems coming, then you can take action to avoid foreclosure, which happens when lenders run out of other alternatives and borrowers can do no more to pay their debts. Here are five options to consider when you are being crushed by mortgage payments:
1. Extend amortization: If the mortgage has been paid down to 10 or 15 years, then extending it to 20 to 25 years or even to 30 years will decrease payments. In a lot of cases this will work, says Elena Jara, director of education for Credit Canada Solutions, a Toronto-based non-profit organization which offers free credit counselling.
2. Seek better terms: You can go for lower interest rates with the same or a different lender but with a potential penalty, says Bill Evans, a mortgage broker with Mortgage Architects in Winnipeg.“If you are having trouble with payments with one lender, another may not want to take you on. But if you can present a case for a new income, you can go to a so-called specialty lender such as Home Trust or Optimum Trust for a fresh look at your problem and potential solutions,” Evans says. “If you just want to alleviate the problem, timing is crucial.”
3. Renew at a floating rate: There is more risk but lower interest cost in floating rate mortgages. If you are on a fixed rate mortgage with relatively high rates and want to go to a lower floating rate, perhaps by taking the mortgage to another lender, then there may be relief when it is time for loan renewal. The present lender may add a penalty, but over time, floating rates and the often attractive rate on a one-year closed loan can offer relief, Mr. Evans says.
4. Sell it and rent: In markets with high home prices as a result of speculative building, absentee owners will often rent at relatively low cost. That makes for good deals for renters.
5. Discuss a consumer proposal: The homeowner can avoid outright bankruptcy and foreclosure of the home by talking to creditors, suggests Bruce Caplan, trustee in bankruptcy for BDO Canada Ltd. in Winnipeg. “The homeowner can make a consumer proposal in which a settlement plan is devised for the creditors. Secured creditors such as the banks or private mortgage lenders can work out new terms such as reduced payments or a payment bridge for a period of time with the homeowner,” he suggests.
Read Original and More…
Daniel Acker | Bloomberg
Reblogged from The Financial Post, Reuters
TORONTO — Canadian housing starts rose more than expected in October and September starts were revised higher, according to data released on Friday that will add to fears the property sector could be overheating.
Data from the Canada Mortgage and Housing Corp showed the seasonally adjusted annualized rate of housing starts was 198,282 units last month, up from an upwardly revised 195,929 in September and surpassing analysts’ expectations for 190,800.
Multiple urban starts registered a slight increase of 0.9% to 115,011 units in October while the single urban starts segment saw a decrease of 1.7% to 62,423 units, the federal housing agency said.
“The trend in total housing starts has gained momentum since July, which is in line with expectations that new construction would strengthen over the second half of 2013,” Mathieu Laberge, deputy chief economist at CMHC said.
Canada’s housing market has rebounded in 2013 after a sharp slowdown in the second half of 2012 when the government tightened mortgage lending rules to prevent homebuyers from taking on too much debt.
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Sean DeCory | National Post
Reblogged from The Financial Post, David Pett
Shares in three of Canada’s biggest alternative mortgage lenders look set to rise over the next year due to the ongoing resiliency of the country’s housing market.
“Alt-A lenders should continue to see enviable growth,” said Shubha Khan, an analyst at National Bank Financial. “We believe that near-term housing market risks have moderated, particularly in view of more dovish comments on interest rate policy from the Bank of Canada.”
Mr. Khan said credit quality also remains sound with mortgage delinquency rates near historical lows. He increased his price targets on Equitable Trust Inc., MCAN Mortgage Corp. and Home Capital Group Inc. and reaffirmed his outperform rating on all three names.
Equitable Trust can be expected to rise 30% over the next 12 months to $64, while MCAN will jump 22% to $16 over the same period, he said.
Home Capital Group, meanwhile, is set to climb as high as $95 – a 17% gain – after reporting solid third-quarter earnings on Wednesday after market close.
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Matthew Sherwood for National Post
Reblogged from The Financial Post, Andrea Hopkins
TORONTO — Canada’s federal housing agency has bumped up its forecast for housing starts in 2013 but trimmed its forecast for 2014, setting an essentially flat outlook for a once-roaring market.
The Canada Mortgage and Housing Corp said on Thursday housing starts will be in a range of 179,300 to 190,600 units in 2013, with a point forecast, or most likely outcome, of 185,000. That is up from its August estimate of 182,800.
The agency said there will be 163,700 to 205,700 units started in 2014, with a point forecast of 184,700. That is down from CMHC’s August estimate of 186,600.
Both forecasts represent a sharp slowdown from the 214,827 starts of 2012.
Canada sidestepped the worst of the financial crisis of the last decade because it avoided the real estate excesses of its U.S. neighbour, and a post-recession housing boom helped it recover more quickly than its Group of Seven peers.
But the housing market began to cool last year after the country’s Conservative government, worried about a potential property bubble, tightened mortgage rules.
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Nick Ut/Associated Press
My initial thoughts on the US mortgage market are always envy of their 30 year fixed mortgage. Hovering at the mid-to-high 4% range, how can you go wrong? Upon closer look, the disparity and inconsistency in the entire banking and regulatory system leaves me scratching my head. Where is the common sense? Isn’t it against all logic to give lower rates to non-conforming, non-guaranteed, larger mortgages? OK so the down payment comes to play, but isn’t it baffling that there is no set rules or requirements on the amount down payment required? And the final gigantic red flag – that general banking practices (not regulations mind you!) can potentially influence government standards which in turn influence banking practices? (That’s a circle for those of you who didn’t catch it!) Banks who don’t trust the government (backed securities), governments who don’t control the banks, and people who are stuck in the middle wary of both but left with no choices.
Reblogged from The New York Times, Peter Eavis
The vast system that provides home loans to millions of Americans has long been a strange place. A surprising development has made it even stranger.
Recently, interest rates on mortgages for expensive homes have fallen below those for smaller mortgages that the government promises to repay if the borrower defaults.
On Thursday, for instance, Wells Fargo, the nation’s largest mortgage lender, was offering to make the larger so-called jumbo loans at a fixed rate of 4.625 percent for 30 years. That compared with the 4.875 percent that the bank was charging on fixed 30-year loans that qualify for government backing.
On the surface, these moves in rates make little sense. The jumbo mortgages do not have a taxpayer guarantee of repayment. Anyone holding such loans relies solely on the creditworthiness of the borrowers to be repaid. Most of the jumbo borrowers are wealthy and have good credit scores, so they are not that high a risk right now. Still, their credit probably isn’t as strong as that of the federal government, which guarantees the smaller loans. As a result, those loans, often called conforming mortgages, should have lower rates than those on jumbo mortgages. Indeed, as far back as industry participants can remember, that has been the case.
The fact that jumbos are now cheaper points to dysfunctions in the mortgage market, which is going through a jarring adjustment that appears to be influencing guaranteed mortgages more than jumbo loans.
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