HOw much Does it cost to break a mortgage ….
HOw much Does it cost to break a mortgage ….
Real estate agent Chander Chaddah thought that the Toronto real estate market was fairly subdued in the opening days of February.
He worked with two sets of clients who were able to buy houses in High Park and Little India respectively after fending off only a couple of other bidders.
Then he heard about 75 Wilson Park Rd.
“Forget what I said about people being measured in the new year,” he laughed.
The renovated Parkdale semi had an asking price of $869,000 and an offer deadline set for Monday night. After eight parties came to the table, the sellers accepted $1,150,000.
“I’m still reeling from that one,” said listing agent Valerie Cowie on Tuesday afternoon.
Ms. Cowie, with Chestnut Park Real Estate Ltd., says the house has a nice open-floor plan, four decent-sized bedrooms and offers a huge yard of 24 by 148 feet.
“It’s very much a family house,” she says.
She figured that offer night would likely see some spirited bidding after she booked 60 appointments in a six-day listing period.
She held two open houses on the weekend and saw a steady stream of people both days, even with a snowstorm on Sunday.
She also had the impression that most of the people coming through were serious potential buyers and not just curious neighbours.
She thinks the sellers were fortunate with their timing. There were no comparable houses around.
“In February, while the weather can affect people, there’s never anything to sell. Nothing came out that was our direct competition.”
Ms. Cowie says the property had “remnants of rooming house” when the current owners bought it a few years ago. They’d done lots of improvements but made a sudden decision just before Christmas to move out of Toronto to be closer to family.
“Some people think so much about real estate they end up doing nothing,” she says. “These people are doers.”
Mr. Chaddah, of Sutton Group-Associates Realty Inc., worked with one set of clients who paid $847,000 for a two-storey semi north of High Park. The house, listed at $799,000, had two other offers.
In the east end, another client outbid competitors with an offer of $802,000 for a house with an asking price of $699,000. The detached house is in excellent condition and nicely fixed-up, he says.
In both cases he feels satisfied that the clients paid a reasonable amount.
“If you get a fair deal you should feel pretty good.”
Mr. Chaddah says the market in Toronto seemed to go to sleep in mid-November but he’s been getting steady calls from buyers and sellers in recent days. He has one condo listed for sale in Roncesvalles Village and another coming in a few days. He also has a couple of homeowners currently getting their houses ready for sale in six weeks or so.
He’s recommending to clients planning to sell that they aim for the first quarter of 2015 if they can. He points out that Target’s withdrawal from Canada is leading to the loss of more than 17,000 jobs and Mars Inc. is shutting down its Toronto Wrigley plant.
“From one week to the next you never know,” he says of the real estate market in the Greater Toronto Area.
Mr. Chaddah hasn’t heard clients talking about the softness in the Calgary real estate market but he cautions that a downturn there could eventually undermine confidence in Toronto.
At Toronto-Dominion Bank, senior economist Randall Bartlett said in a report he expects last month’s interest rate cut by the Bank of Canada will likely keep the country’s housing market buoyant. In his view another cut by the central bank is imminent, “thereby adding additional fuel to an otherwise hot market.”
Ricky Chadha, an agent with Royal LePage Estate Realty, says he hasn’t seen any sign yet that the market will slow down here because of any fallout from the economic woes in Alberta.
He’s still weighing the impact of the Bank of Canada’s recent cut.
“I’m kind of thrown for a loop with the interest rate dropping. It just kind of came out of the blue. It’s really hard to gauge what’s going to happen.”
These are stories Report on Business is following Wednesday, Oct. 22, 2014.
Central bank cites housing
The Bank of Canada is raising red flags about the Toronto, Calgary and Vancouver housing markets.
Those are, of course, key markets in Canada, where real estate values differ widely across the country.
However, it highlighted big regional divergences colouring this picture.
Housing markets in eastern Canada “appear to show signs consistent with a soft landing,” given slower price increases and sales volumes.
“This contrasts with major cities in Ontario, Alberta and British Columbia, where housing markets are generally robust and much tighter,” it said.
“While a good part of the strength can be explained by favourable demographics and strong employment gains in parts of the country, it nonetheless suggests that household imbalances could increase further,” the central bank warned.
It did not cite specific cities. Nor did it say they were headed for trouble. Indeed, in an interview with The Globe and Mail’s Carrie Tait, senior economist Randall Bartlett of Toronto-Dominion Bank said the sky’s not falling.
Thus, I took it as a warning sign.
“Simply, this is the main reason the bank would be extremely reluctant to consider cutting rates (in a stress situation),” said chief economist Douglas Porter of BMO Nesbitt Burns.
“They have frankly been surprised at the underlying strength in housing and consumer spending, and now explicitly tie that to low interest rates,” Mr. Porter said.
“There is no more brave talk about a soft landing for housing.”
Over all, Bank of Canada Governor Stephen Poloz and his colleagues noted “renewed vigour” in residential real estate. They also noted stronger car sales.
“Housing activity has been more robust than anticipated, buoyed by continued very low mortgage rates and exhibiting strength beyond a rebound from weather-depressed levels earlier in the year,” it said in the report.
“Housing starts have remained broadly in line with demographic demand in recent months,” it added.
“However, sales of existing homes have picked up noticeable since the beginning of the year, to a four-year high … This is contributing to sizable increases in house prices, although the national picture continues to mask important regional divergences.”
According to the Teranet-National house price index, home prices in Canada rose 0.3 per cent in September from August and 4.9 per cent from a year earlier.
Notably, Calgary, Toronto and Vancouver were well above the national average, at 9.5 per cent, 7.4 per cent and 6.5 per cent, respectively.
Just this week, Moody’s Investor Service also flagged concerns of Canadian home prices, warning the housing market and swollen household debt levels are a risk.
Mr. Porter noted the shift in the central bank’s tone over the past six months where housing is concerned.
“Earlier they were convinced (perhaps bravely so) that the housing market was on course for a soft landing,” Mr. Porter said.
“Now, they are openly suggesting that it has been stronger than they expected, and thus the associated risks with household debt ‘are edging higher,’” he added.
“The focal point of that ‘stronger than expected’ housing market has been in Calgary, Toronto and Vancouver, as we (and others) have noted. Most of the rest of the country is not seeing particular strength in housing.”
What’s important here is that the strength in various housing markets is “localized,” as Mr. Porter put it, and thus “broad” policy measures are not necessarily the best way to deal with it.
As in, “higher interest rates would hit all markets, including many cities that don’t need cooling.”
Remember that former Bank of Canada chief Mark Carney and the late Jim Flaherty, Canada’s finance minister at the time, each took measures as household debts got out of hand.
Mr. Carney threatened to raise interest rates, and Mr. Flaherty brought in a series of measures.
As The Globe and Mail’s Barrie McKenna reports, the Bank of Canada also held its benchmark overnight rate at 1 per cent today, bringing to more than four years its longest rate freeze since the 1950s.
The sudden drop in the price of crude has become a new wild card for the Bank of Canada, our Ottawa correspondent writes, knocking the wind out of inflation and delaying any move to hike interest rates.
The central bank said inflation risks remain “roughly balanced,” but it pointedly dropped the word “neutral,” a hallmark of its monetary statements for the past year. This comes after Mr. Poloz indicated he wants to move away from an explicit commitment on future changes to its key rate.
The most significant shift in the bank’s latest economic forecast centered on inflation, where the bank said that patchy global economy is pushing some prices up, while depressing others. There is strong growth in the U.S. and weakness virtually everywhere else in the world.
A news conference by Mr. Poloz, which was to have come later in the morning. was cancelled, as was a scheduled appearance before a parliamentary committee by Mr. Poloz and senior deputy Carolyn Wilkins.
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The share of Canadians who are predicting higher home prices in their neighborhood remained above 40% for a fifth week in the latest weekly polling by Bloomberg and Nanos Research. That’s kept consumer confidence levels at near the highest in four years, the data show.
Improving views on housing follow a recent acceleration in the real estate market in recent months that reflects a shift by policy makers at the Bank of Canada to dim expectations for rate increases as it plays down concerns over rising household debt to focus on stimulating the economy.
“The crux of it is the rates environment,” said David Tulk, chief macro strategist at TD Securities. “It’s that combined impact of seeing your own asset increase but also realizing that no one is going to take away the punch bowl.”
The Bloomberg Nanos Confidence Index measured 59.6 in the week ended May 16, little changed from the previous reading of 59.5. The survey-based index hit a four-year high of 60.1 on April 25. The index is calculated on scores derived from weekly polls on the outlook for real estate prices, personal finances, job security and the Canadian economy.
The proportion of survey respondents who believe home values in their neighborhood will rise over the next six months was at 40.7% last week. While down from 42.8% two weeks ago, the score has averaged 41.9% over the past five weeks, up from an average 37.3% over the past year. The share of Canadians who expect a decrease in real estate prices fell to 9.7% last week, the lowest since January.
The Nanos data are based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points.
Last week’s poll coincided with Canadian Real Estate Association data that showed home sales in April rose 2.7%, the fastest pace since August, largely on a surge in transactions in Vancouver and Toronto. April’s sales gain was the third consecutive increase after a four-month winter skid.
The national average price of a home sold in April was up 0.8% from March and 7.6% from a year earlier. There is also evidence construction is holding up better than expected; Canada’s housing agency reported this month work on new homes accelerated to 194,809 units at a adjusted annual pace in April, a 24% increase from the previous month.
Over the past year, Bank of Canada Governor Stephen Poloz has turned the central bank’s focus away from rising housing debt toward concerns that inflation is persistently low amid excess economic capacity. Poloz removed the central bank’s rate- rise bias in October.
Canadian inflation hasn’t exceeded the central bank’s 2% target since February 2012. Statistics Canada will report April inflation data on May 23. Economists are forecasting a 2% pace for the first time in two years.
The impact of the Bank of Canada’s policy shift has prompted commercial banks to lower mortgage rates, even as the federal government and other financial regulators have tightened mortgage rules to shield households that would be most vulnerable to a home-price correction.
Canada Mortgage & Housing Agency this year restricted the availability of mortgage insurance for individuals purchasing a second home and increased premiums on its products. The federal government has recently shortened the maximum amortization period on mortgages.
The regulations “are not targeting the average homeowner, they are trying to limit the most vulnerable of borrowers of entering a fairly stretched market,” said Tulk.
Economists surveyed by Bloomberg News forecast the 1% overnight policy rate won’t rise before the middle of 2015 at the earliest. Poloz reiterated last month he is neutral on the direction of the next move.
Bloomberg Nanos’s confidence index has two sub-indexes: the Expectations Index, based on responses on the outlook for the economy and real-estate prices, and the Pocketbook Index, based on survey responses to questions about personal finances and job security. The Pocketbook Index rose to 60.2 last week from 59.2, while the Expectations Index fell to 59 from 59.7.
Both gauges are above their 12 month averages.
Bloomberg News | May 20, 2014 | Last Updated: May 20 12:01 PM ET
Canadian home prices continued their ascent in April, while the number of existing homes that changed hands came in slightly lower than a year ago.
The average sales price across the country rose 7.6 per cent from a year earlier, to $409,708.
Averages can be distorted by changes in the types or locations of homes that are selling. If you take the Vancouver and Toronto areas out of the mix, the average price in the rest of the country was up 4.8 per cent. The MLS Home Price Index, which attempts to give a more apples-to-apples comparison of price increases, rose 5 per cent. That’s a slightly slower pace of home price growth than the 5.19 per cent gain in March.
ut at an annual growth rate of around 5 per cent, Canadian home prices are continuing to rise faster than incomes are, something that is worrying to some economists.
“With home prices already estimated to be 10 per cent overvalued, the risk is for more froth to gather in the Canadian housing market,” Toronto-Dominion Bank economist Diana Petramala wrote in a research note Wednesday.
The price gains came even as sales of homes over the Multiple Listing Service last month were 0.3 per cent below those in April 2013, according to data released by the Canadian Real Estate Association (CREA) on Thursday.
Last month’s sales were also slightly lower than the average number of sales that have occurred in April over the past decade. Sales were up from a year ago in Greater Vancouver, Calgary and Edmonton, but down in areas like Ottawa, Montreal, and rural Quebec, said CREA, which represents the country’s realtors.
The number of homes that are selling is running below the 10-year average in more than 60 per cent of the markets across Canada, it added. The realtors, many of whom have argued that Ottawa has gone too far in its efforts to curb growth in the housing market, suggested that that statistic means the government should not take any more steps in that regard.
“This shows that tightened mortgage rules and guidelines are working as intended to keep activity in check despite mortgage interest rates remaining extraordinarily low,” CREA’s chief economist, Gregory Klump, stated in a press release. The Canadian government has made a number of moves in recent years to stem the growth of consumer debt levels and house prices, as it has sought to prevent a bubble from forming in the market. Many economists were in favour of those moves.
On a seasonally-adjusted basis, sales were up 2.7 per cent from March, CREA said. That marks the third month in a row of rising month-over-month sales, following a string of declines through the winter months. Greater Vancouver and Greater Toronto led the charge, while smaller markets faced challenges.
Close your home purchase on a Wednesday: Weisleder
Why Friday is the worst day to take possession, and other tips on making your real estate deal go more smoothly.
The last Friday of the month is typically the busiest day for real estate lawyers, which means deals may not close until late in the day — or may get pushed into the following week.
The last Friday of the month is typically the busiest day for real estate lawyers, which means deals may not close until late in the day — or may get pushed into the following week.
By: Mark Weisleder Real Estate, Published on Fri Apr 25 2014
As the spring housing market heats up, it’s a busy time for closing deals. The price you pay is very important, but you also have to think carefully about your closing date, so that everything goes smoothly.
Here are seven things to remember:
Any day but Friday: The last Friday of a month is typically the busiest day in most real estate law offices, especially in the summer. This mean many deals won’t be able to close until late in the day. Worse, if the deal has to be extended, you don’t get keys until the following Monday, or maybe Tuesday if it is over a long weekend.
Wednesday is good: If there are delays, it is much easier to manage a one-day extension than an extension over a weekend.
When sellers must move: You should be out of your home by 3 p.m. on closing day. Most real estate contracts stipulate that sellers must turn over possession as soon as the deal is registered electronically. Usually — assuming it is not the last Friday of the month — that happens by 2 to 3 p.m. Vacant possession must be given to the buyer at that time.
Try to close early: If you are buying and selling in the same time period, close two days early and get bridge financing. You will close your deal without pressure and have a few days to move in while you wait until your sale closes. This will also make it much easier to negotiate an extension, if you have to, as you will not be dependent on the money from your sale to close your purchase.
Clean up after yourself: You must turn the house over in broom-swept condition, which means no garbage. Buyers should make a final visit two days before closing to make sure the seller is properly cleaning up.
When to move: Buyers should not plan to move in until late in the day or the day after closing, to avoid paying extra to movers if things get backed up or the deal has to be extended.
Do an inspection: Even if you are not moving in that day, buyers should check the condition of the home on the day of closing, to make sure that nothing has been broken or damaged. The seller typically guarantees everything will be working on the closing date, not afterwards, so find out right away if you need to make a claim about anything after closing.
By doing your homework before choosing a closing date, you should be able to avoid pitfalls later.
Related:Think carefully before suing your neighbour
More from Mark Weisleder
Mark Weisleder is a Toronto real estate lawyer. Contact him at firstname.lastname@example.org .
Canada Mortgage and Housing Corp., the Crown corporation that controls the vast majority of mortgage default insurance in the country, says it plans to get out of the market for second homes and is adding restrictions for self-employed Canadians.
Effective May 30, CMHC said it will discontinue insuring second homes and will require self-employed Canadians to have third party income income validation.
The Crown corporation said the changes are being made as part of its review of its mortgage loan business. The organization has already said it is raising rates across the board May 1, a move that comes after the federal government last year appointed a new chair for CMHC and brought in a new chief executive.
“CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system” said Steven Mennill, senior vice-president, insurance, in a release. “As part of the review of its mortgage loan insurance business, CMHC is evaluating its products and services to ensure they are aligned with these objectives.”
The changes announced Friday affect a small portion of the market. CMHC said its second home and self-employed without third party income validation business account for less than 3% of CMHC’s insured business volumes in units.
“Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market,” the agency said in a release.
CMHC first introduced the program for self employed people in 2007 in response to “industry competition” which at its peak saw some U.S. players enter the market and encourage changes that created amortization lengths as long as 40 years. The government has since restricted loans to 25-year amortizations.
The second home product was introduced in 2005 and applied when purchasing an owner-occupied second home anywhere in Canada.
CMHC said it will limit the availability of homeowner mortgage loan insurance to only one property (one to four units) per borrower/co-borrower at any given time.
Benjamin Tal, deputy chief economist with CIBC, said the announcement was not “a big surprise given the mandate of providing more stability. That might not be the end of it. We might see more coming from CMHC.”
Finn Poschmann, vice-president of research at the C.D. Howe Institute, said the requirement for validation seems reasonable.
“What is interesting is the question of whether the change will tend to shift risk away from CMHC and toward the private insurers. Whether that is the outcome will be determined by the private insurers’ responses,” he said, in an email.
As bidding wars go, it was the ultimate battle and a warning for frantic buyers bracing for spring market: A five-bedroom detached house in the Yonge and Lawrence area has sold for almost double its $699,000 list price with a record 72 offers.
“We expected in the $1.1 million range, but the market pushed it,” said listing agent Bradley Hutton, who sold the Glencairn Ave. house for $1.366 million, about 195 per cent of list price.
“There are a lot of buyers out there desperate to find a house. It’s definitely a sellers’ market.”
And there appears to be no let up in sight after what realtors say is now the worst spring on record for a shortage of listings coupled with intense pent-up demand.
More than 1,000 people booked appointments or toured the 1930s Glencairn Ave. fixer-upper over the last 10 days before the offer deluge Sunday night. About 80 per cent of the offers were for over $1 million, even though the house, on a 30 by 127.66 foot lot in prime Lawrence Park, was being sold in “as is” condition.
“Attention renovators & builders,” said the MLS listing which attracted dozens of callers, many asking if the extremely lowball $699,000 list price was a “typo.” “House is full of knob and tube (wiring), fireplace has not been used in years.”
Hutton openly acknowledges that nothing has sold on the prime, tree-lined street, just steps from Yonge St. and the subway station, for $699,000 for at least 10 to 15 years.
He priced it so extraordinarily low, he says, “mainly to create buzz” and force realtors to realize that their buyers weren’t walking into their dream home but, rather, a place needing $300,000 or more in renovations.
“Surprisingly enough, that’s how it works — it gets the agents calling,” said Hutton.
Even then, Hutton said he was shocked by the number of offers — so many that he insisted on having realtors just email them in or drop them off to his office for the 7 p.m. Sunday deadline.
Usually he prefers to meet face-to-face with bidding agents for 15 minutes or so to enable them time to make their spiel on behalf of their buyers.
“This house required a special buyer,” said Hutton, who has enraged many agents, because the winning bidder ended up being his client, a practice known in the real estate industry as “double ending.”
That’s because the listing realtor is paid commission by both the seller and buyer.
Hutton insisted he had a third party, an independent broker from his office, handle all the bids with the exception of the winning bid, which he brought to the table himself.
It belonged to an area resident who just saw the listing online last week and has lived in the area for years. They are planning to renovate and live in the house, he said.
OTTAWA, April 25, 2014 – As part of the review of its mortgage loan insurance business, CMHC is discontinuing its Second Home and Self-Employed Without 3rd Party Income Validation mortgage insurance products effective May 30, 2014. Self-employed Canadians can still qualify for CMHC insured financing through CMHC homeowner products with a validation of their income using traditional methods.
“CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system” said Steven Mennill, Senior Vice-President, Insurance. “As part of the review of its mortgage loan insurance business, CMHC is evaluating its products and services to ensure they are aligned with these objectives.”
As a result of changes to CMHC’s mandate to contribute to the stability of the housing market, benefitting all Canadians, while effectively managing and reducing taxpayers’ exposure to risk, CMHC is undertaking a review of its mortgage loan insurance business. This is the first set of changes resulting from this review.
CMHC Second Home and Self-Employed Without 3rd Party Income Validation will remain available for new mortgage loan insurance requests submitted to CMHC before May 30, 2014, regardless of the closing date of the home purchase. As is normal practice, complete borrower and property details must be submitted by a lender to CMHC when requesting mortgage loan insurance.
Combined, CMHC Second Home and Self-Employed Without 3rd Party Income Validation account for less than 3% of CMHC’s insured business volumes in units. Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market.
As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable housing solutions that will continue to create vibrant and healthy communities and cities across the country.
For additional highlights please see attached backgrounder and key fact sheet.
Information on this release:
Follow CMHC on Twitter @CMHC_ca.