James Metcalfe
REALTOR® BROKER
Royal LePage RES Ltd.,
JOHNSTON & DANIEL
Division Brokerage
477 Mount Pleasant Road
Toronto, ON, M4S 2L9
Direct: 416-931-4161
Office: 416-489-2121
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Archive for the 'Market Stats & Trends' Category
Why rising rates haven’t hurt housing
BY: ROB CARRICK / Globe & Mail (September 9, 2010)
So much for the housing market being crushed by rising interest rates.
The Bank of Canada cranked up its trendsetting overnight rate for the third time in four months on Wednesday and the impact will be felt by a wide range of borrowers. But home buyers? Not so much.
True, the central bank’s increase of one-quarter of a percentage point has already been applied by the major banks to their prime lending rate. That in turn means variable-rate mortgages, plus lines of credit, are now a quarter-point more expensive.
But there are two trends that offset higher carrying costs for variable-rate mortgages. One is that fixed-rate mortgages, notably in the popular five-year term, have been coming down in recent weeks and are now as low as 3.59 per cent. That’s a fabulous rate, by the way.
The other trend is a return to previous levels of discounting in variable-rate mortgages. With their usual dexterity, the banks used the financial panic of 2008 and early 2009 to ram through higher lending costs on a variety of products, including variable-rate mortgages. Now, some of these rate hikes are being unwound.
MorCan Direct, a Toronto mortgage broker, notes that pricing on variable-rate mortgages has over the past 20 months fallen from prime plus a full percentage point to prime minus as much as 0.65 to 0.8 of a point. The level of competition in the mortgage market suggests to MorCan’s Travis Allinott that by next year we’ll see banks offering their best precrisis deal on variable-rate mortgages – prime minus one percentage point.
“We definitely believe it’s going to get back to prime minus 1,” Mr. Allinott said “It’s a rate war out there.”
Wherever variable-rate mortgages end up, it’s clear that pricing trends in the marketplace are offsetting the Bank of Canada’s rate moves to some extent.
On the fixed-rate side, there have been at least four rounds of rate cuts by the big banks since the end of May. Last week, Bank of Montreal lowered its special five-year rate to 3.59 per cent from 3.79 per cent (note: this rate applies only to 25-year mortgages and offers limited prepayment privileges). Back in May, discounted five-year mortgages went for something like 4.7 per cent.
Lenders price fixed-rate mortgages off the yield on Government of Canada bonds, not the Bank of Canada’s overnight rate. Bond prices have been rising lately, which means yields have fallen because the two move in opposite directions.
Things get a bit weird here because good times for bonds have lately coincided with bad times for the economy. And yet, the Bank of Canada is confident enough about the economy to have raised rates repeatedly.
Craig Alexander, chief economist at Toronto-Dominion Bank, explains that trading in Canadian bonds is heavily influenced by what’s happening in the U.S. market. Down there, of course, there’s a lot of worry about a return to recession – the dreaded double dip.
The Canadian economy has slowed, too, and nowhere more markedly than the housing market. This was widely predicted many months ago, but ironically it was rising interest rates that were supposed to drive the decline.
Mr. Alexander said rising rates have had only a very small negative impact on house prices. More important factors have been a rise in the inventory of homes for sale, a rush to buy in 2009 and early 2010 when rates were at rock bottom, and the expectation that rates would rise.
Today, he sees rates as being supportive of housing. “Rates are remarkably low by historical standards. People get so hung up on the direction of interest rates. The level matters.”
Rates will increase from here, but Mr. Alexander doesn’t seem them as a major problem for housing.
“The fact that rates are low and likely to rise at only a gradual pace in the next 18 months suggests you really aren’t going to get a major correction in the housing market,” he said. “What you’re going to get is a period of softening, some declines in sales and a modest correction in housing prices. But after such a strong run, you could expect that.”
Interested in variable-rate mortgages even though they’re captive to the Bank of Canada’s rate moves? Mr. Allinott suggested starting with a one-year closed mortgage, which you may be able to get for as little as 2.44 per cent. In a year, he suggests jumping into a variable-rate mortgage.
Variable-rate mortgages could be more costly then, but pricing pressure might just get you a prime-minus-1 deal.
The year in interest rates
| Year ago | Early 2010 | 2010 peak | Today | |||
| BoC overnight rate | 0.25% | 0.25% | 1% | 1% | ||
| Prime rate | 2.25% | 2.25% | 3% | 3% | ||
| Posted five-year fixed-rate mortgage | 5.49% | 5.49% | 6.25% | 5.39% | ||
| Source: Bank of Canada |
For the full article please visit http://v1.theglobeandmail.com/servlet/story/LAC.20100909.GICARRICK0909ATL/TPStory/TPBusiness/
Call on our services for a fully informed, strategic approach to marketing your home or finding you a new one .
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Cheers;
Jim … 416-931-4161
- September 9th, 2010
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Home Prices Up – Unit Sales Down August 2010 vs 2009
Greater Toronto REALTORS® reported 6,232 sales through the Multiple Listing Service® (MLS®) in August 2010. This represented a 22 per cent decrease compared to the 8,035 sales recorded during the same period in 2009. New listings decreased by one per cent year-over-year to 10,488.
“The prospect of interest rate hikes and new mortgage lending rules prompted some households to purchase a home sooner than they otherwise would have this year. The result has been a larger than normal dip in sales over the summer months. With this said, it is important to recognize that sales on the year were eight per cent higher than in 2009,” said Toronto Real Estate Board President Bill Johnston.
The average price for August transactions was $411,012 – up six per cent compared to the average of $387,921 reported in August 2009.
“Market conditions have remained tight enough to support higher home prices in comparison to last year. Under current mortgage lending standards, a household earning the average income in the GTA can comfortably afford the mortgage payments on an average priced home. Market conditions and the affordability picture would have to change dramatically before a sustained drop in the average selling price would take place,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.
MEDIAN PRICE
In August, the median price was up $358,000, from the $338,000 recorded during August of 2009.
- September 3rd, 2010
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Toronto Real Estate Board Market Watch Trends – July, 2010
Market Watch statistics and reports are provided by the Toronto Real Estate Board. Each neighbourhood district in Toronto is broken down showing sales, listings activity & ratios … all subdivided by Freehold and Condominiums.
We follow these market statistics closely in order to be as current as possible while preparing Comparative Market Analysis and Opinions of Value. The market is of course driven by what buyers are willing to pay for any given home compared to what other properties are offered for. It’s is all about supply and demand and finding the best possible value from all the buyer has to choose from.
Buyers simply don’t pay tens of thousands more if they don’t have to. I recommend to all sellers that they acknowledge the market trends but even more importantly they see first hand at least 6 properties that compare to their own. Only by seeing what other buyers see can they truely understand the market value that their home may command.
Good Realtors spend a great deal of time staying ahead of their competion by knowing how to read the market. Coming up with a recommended Opinion of Value is more than filling a sellers head with great promise. Our job is not to tell you what you want to hear but on many occasion to tell you what you need to hear. Accepting reality will sell one’s home much faster, with fewer conditions and for the best possible price.
JAMES R. METCALFE REALTOR® BROKER // Character + Competence = Trust
- August 2nd, 2010
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Market Trends / July / Toronto Real Estate Board
The charts are in … Year to date home sales in numbers and dollars in Toronto are up. Yes July was down some 35% over last July but when compared to July 2008 (a more relevant comparison) all is even. Our Toronto Real Estate market is somewhat insulated from other Canadian and World markets. Demand is still very strong for land, homes and condos in OurHomeToronto. We are in a balanced market with both buyers and sellers / supply and demand even. Pundits are forecasting an active Fall with more listings coming to market. Mortgage brokers and financial institutions indicate that Fall interest rates will remain very attractive and may even go down slightly.
Buying or Selling this Fall is a good time to come to market.
These statistics come directly from the Toronto Real Estate Board every month for your convenience.
Thank you for subscribing … Jim
- August 2nd, 2010
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Canadian household net worth climbs to $6.0 trillion in the first quarter … says RBC
The Canadian housing market continued to show strength in the first quarter of 2010 Real Estate Holdings make up 85.5% of all Canadian non-financial assets. (Up 24.9 Billion vs previous quarter)
Canadian household net worth increased by 1.3% ($74 billion) in the first quarter of 2010 to $6.0 trillion, which marks the fourth consecutive quarterly improvement in household net worth and reflects a 96% recovery off of the net worth lost during the recent economic downturn.
Increases in both financial and non-financial assets drove the improvement in household balance sheets. Canadian stock markets continued the positive trend that started in the second quarter of 2009 with the S&P/TSX composite index up a modest 2.5% in the first quarter of 2010, pushing the value of household financial assets (which include equities, mutual funds and pension assets) up by 1.8% ($71.3 billion).
Household liabilities grew 1.5% ($21.7 billion) in first quarter to $1.4 trillion, led by a $16.4 billion increase in mortgage debt reflecting the continued strength in the real estate market. Consumer credit growth eased to $3.9 billion (from $8.3 billion in the previous quarter) reflecting a slowdown in demand for durable goods. The growth in liabilities matched the growth in net worth, keeping the household debt-to-net worth ratio at 24.4% for the third consecutive quarter, slightly below the all-time high of 24.9% seen in the first quarter of 2009. The household debt-to-personal disposable income ratio edged up to a new record of 148.9% from 147.0% in the final quarter of 2009. (Credit market debt, which includes only consumer credit and mortgages, edged up to 22.2% of household net worth from 22.1% in the previous quarter and up to 135.7% of personal disposable income from 133.7%.)
The increase of household net worth continues to help repair the cumulative $552 billion decline that resulted from the economic downturn, and balances now stand at 96% of their pre-recession levels. Low interest rates have encouraged the expansion of household borrowings that has led to strengthening in demand and asset prices, particularly in housing. The strength of the recovery during the first quarter of 2010, along with firmer than expected core inflation, led the Bank of Canada to begin its gradual removal of its stimulative monetary policy and raise the overnight rate 25 basis points to 0.50% earlier this month. Because economic activity is expected to continue to improve, the Bank will likely continue to withdraw monetary stimulus, although we expect the pace of tightening to remain moderate with the policy rate expected to finish 2010 at a still stimulative 1.50%.
David Onyett-Jeffries, Economist, RBC Economics
- June 21st, 2010
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