Record resales in November for Ottawa realtors: OREB

December 9, 2011 By heather

Published on December 5, 2011

OBJ Staff

 

Residential resales in November hit an all-time high for that month, according to a release from the Ottawa Real Estate Board.

Members of the board sold 1,020 properties in November, up 8.5 per cent from last year’s total of 940.

“The last time we saw sales numbers anywhere close to that number was in 2001,” stated board past president Joanne Tibbles.

“It speaks well for the stability of our market that even in the quieter months of the year, our market is still thriving.”

The average sales price was $347,795, up 7.3 per cent over 2010. It is calculated based on the total dollar volume of all properties sold.

Board members sold 244 condominiums and 776 residential properties in November, OREB added.

Filed Under: Blog

5 reasons why a fixed-rate mortgage could be your best bet

December 8, 2011 By heather

By Tom McFeat, CBC News

It’s a decision that millions of Canadian homeowners struggle with repeatedly during their time as homeowners: Do they choose the security of a fixed-rate mortgage, or opt for the flexibility (and usually lower cost) of a variable rate and hope that rates don’t spike higher? But right now, conditions in the mortgage market mean homeowners can actually get the best of both worlds, according to market-watchers.

 

Estimated ranges for posted fixed mortgage rates:
2011
  1-year: 3.4 – 3.7%
  5-year: 5.3 – 5.5%
2012
  1-year: 3.4 – 3.8%
  5-year: 5.2 – 5.7%

(Source: CMHC)

For years, we’ve seen evidence that people who opted for variable-rate mortgages ended up saving money over the fixed-rate crowd —anywhere from 77 to 90 per cent of the time, depending on the period selected and the assumptions used.

Despite that, 60 per cent of the 5.8 million mortgages out there are fixed-rate mortgages, and the five-year term is especially popular. Another 31 per cent of mortgages are variable- or adjustable-rate. The rest are hybrids that have a bit of both types of mortgages built in.

In the past year, we’ve seen evidence that people have been starting to swing more towards variables (see table). But in the past few months, two things have happened in the Canadian mortgage market that may have the “variable-is-best” crowd changing their minds … or at least re-thinking what used to be an easy decision.

Variable has a catch

First of all, the traditional discount that lenders used to apply to variable rate mortgages is fast becoming a thing of the past.

“In the last couple of months, there’s been a big shift back to fixed rates,” says mortgage broker Robert McLister, who edits the popular mortgage news site CanadianMortgageTrends.com. “The average discount went from prime minus 0.80 per cent to prime minus a quarter,” he told CBC News.

Widespread discounts

  • Average posted 5-year fixed-rate mortgage: 5.38%
  • Average discounted 5-year fixed-rate mortgage: 3.92%
  • Average discount: 1.46 percentage points

Source: CAAMP/Maritz survey, Fall 2011

That puts a typical five-year variable-rate mortgage around 2.75 per cent.

At the same time, McLister says fixed rates have dropped. Mortgage brokers can arrange a five-year fixed-rate mortgage for as little as 3.25 per cent – or about two full percentage points below the posted rates at the big banks. That rate represents a spread of just half a percentage point over the variable-rate mortgage. McLister says the spread between these two is normally 125 basis points or more (1.25 percentage points).

At this point, you may be thinking that people who have variable-rate mortgages still can’t lose, because they can always choose to lock in to a fixed-rate mortgage at any time. Very true. But McLister points out that people who do this typically don’t get the lowest rates.

That’s not too surprising. After all, you can’t change lenders when you switch from a variable to a fixed mortage without paying a penalty, and your lender knows this. “The rates that lenders give to people when locking in are always at least a quarter percentage point above what’s available elsewhere in the market,” he says.

McLister also points out that it’s never immediately clear where or when mortgage rates will bottom out. “Some people may think about getting a variable in hopes of riding down rates if they drop further,” he says. “The thing is, if you’re that good at predicting interest rates, you’d make a lot more money as a bond trader.”

What people are choosing

Mortgage type All mortgages Renewed/ refinanced in past year
Fixed-rate 60% 56%
Variable or adjustable rate 31% 37%
Combination 8% 7%

Source: CAAMP/Maritz survey, Fall 2011

Fixed-rate bargains

Of course, there are other reasons besides interest rates that can sway someone’s decision on mortgage type. If someone needs to break a five-year fixed rate mortgage early, for example, the penalty (based on what’s called the interest rate differential) can be many thousands of dollars. With a variable-rate mortgage, the penalty is never more than three months interest.

By the numbers

But some people will always opt for fixed-rate mortgages simply for the security of knowing that they won’t be affected by any future upswing in interest rates – at least until their mortgage comes up for renewal.

Here’s another reason to consider fixed-rate mortgages. Some lenders have chosen to stake out some market share by offering exceptional bargains at terms other than five years.

The four-year fixed-rate mortgage – not a mainstay among the big banks – has become a battleground among some other lenders that mortgage brokers use. Brokers can arrange a four-year fixed-rate mortgage for 2.99 per cent at a few non-bank lenders, and the range generally available right now goes from 2.89 per cent to 3.09 per cent. One big bank lender – Scotiabank – offers a two-year fixed-rate mortgage for 2.49 per cent, which is even less than what lenders charge for a variable-rate mortgage.

As for the future, some mortgage experts see the variable-fixed spread continuing to narrow.

‘Variable mortgage rates will stay at current levels well into 2012′—RateSupermarket.ca

“Variable mortgage rates will stay at current levels well into 2012,” says a panel of five mortgage industry and academic experts surveyed by RateSupermarket.ca in December.

At the same time, the panel members predicted that fixed mortgage rates would stay low or drop further over the next 30 to 45 days, noting that there’s less demand for home loans over the holdays.

Still not sure what to go for? Fixed or variable? Short or long-term?

Either way, the good news is that rates are at historic lows. Rest assured that you can’t go far wrong these days, no matter which direction you go in.

“The cost of choosing the wrong term has probably never been lower,” says McLister.

Filed Under: Blog

CMHC: November 2011 Housing Starts

December 8, 2011 By heather

OTTAWA, ONTARIO, Dec 08, 2011 (MARKETWIRE via COMTEX) — The seasonally adjusted annual rate(1) of housing starts was 181,100 units in November, according to Canada Mortgage and Housing Corporation (CMHC). This is down from 208,800 units in October 2011.

“Housing starts declined in November, reaching a level which is more consistent with the rate of household formation. The decrease in housing starts was due to a moderation in the multiples segment,” said Mathieu Laberge, Deputy Chief Economist at CMHC’s Market Analysis Centre.

The seasonally adjusted annual rate of urban starts decreased by 14.4 per cent to 158,900 units in November. Urban single starts increased by 3.5 per cent in November to 63,600 units, while multiple urban starts were down by 23.3 per cent to 95,300 units.

November’s seasonally adjusted annual rate of urban starts decreased by 30.6 per cent in Ontario, 13.4 per cent in the Prairies and 3.6 per cent in British Columbia. Urban starts increased 8.3 per cent in Atlantic Canada and 3.2 per cent in Quebec.

Rural starts(2) were estimated at a seasonally adjusted annual rate of 22,200 units in November.

As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.

For more information, visit http://www.cmhc-schl.gc.ca or call 1-800-668-2642.

This release is also available on the CMHC Web site: cmhc.ca/Newsroom ( http://www.cmhc.ca/en/corp/nero/index.cfm )

(1) All starts figures in this release, other than actual starts, are seasonally adjusted annual rates (SAAR) – that is, monthly figures adjusted to remove normal seasonal variation and multiplied by 12 to reflect annual levels. By removing seasonal ups and downs, seasonal adjustment makes it possible to highlight the fundamental trends of a series. Reporting monthly figures at annual rates indicates the annual level of starts that would be obtained if the monthly pace was maintained for 12 months. This facilitates comparison of the current pace of activity to annual forecasts as well as to historical annual levels.

(2) CMHC estimates the level of starts in centres with a population of less than 10,000 for each of the three months of the quarter, at the beginning of each quarter. During the last month of the quarter, CMHC conducts the survey in these centres and revises the estimate.

The graph of “Housing Starts in Canada-All area” is available at the following link: http://media3.marketwire.com/docs/cma1207.pdf

Filed Under: Blog

Mortgage update

December 8, 2011 By heather

 

As you know, your variable rate mortgage, lines of credit and/or student loans are all based on the Prime Rate and as promised, here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.

At 9:00 am EST, December 6th, 2011, the Bank of Canada again did what we expected them to do… they maintained their overnight rate.  What this means to you is that the prime rate on your mortgage or line of credit will not change and remains at 3.00%.  This is great news as you still have a great low rate and so continue to make the most of the low payments you will still have and maybe chat with a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund next year!  If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“Uncertainty around the global economic outlook has increased.  The recession in Europe is now expected to be more pronounced than the Bank had anticipated in October.  Recent economic data suggest that growth in the US has been slightly more robust than anticipated… Nonetheless, household deleveraging, fiscal consolidation and negative spillover effects from the European crisis are all expected to weigh on U.S. growth.  On balance, recent economic indicators in Canada suggest that growth in the second half of this year is slightly stronger than the Bank projected in October. The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar”.

The outlook hasn’t really changed that much since the last announcement… they expect that growth will slowly continue but will be impacted by global economic conditions.   Based on this repeated message, it is anticipated that prime rate might not actually increase until well into 2012 maybe even 2013.  When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally.  Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.

We have only seen some minor fluctuations to the fixed term rates since the last announcement and are still very low at around 3.39% on a five year fixed term. 

Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is very much lower than a fixed term rate right now.  However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is January 17th, 2012 at which time I’ll be in touch again.

I wonder if I can ask a favour – rates are so low right now and so it is a great time to buy a property or consider refinancing especially as I can hold rates for up to six months, if you know of someone that is looking for advice on their mortgage options, with no obligation, would you mind passing my contact information on to them – this is very much appreciated.

Yours truly,

 The Wilson Team

Filed Under: Blog

Housing market to continue to defy logic

December 6, 2011 By heather

  Dec 6, 2011 – 6:00 AM ET | Last Updated: Dec 5, 2011 11:33 PM ET

The Financial Post

Even one of Canada’s leading real estate companies agrees the rising housing market may not appear to make much sense.

But appearances are deceiving and Re/Max says both sales and average prices will continue to climb in 2012.

“Canadian residential real estate defied conventional logic and outperformed expectations in 2011,” the company said in its year-end report on the market.

Re/Max expects 2011 to finish with prices up 7% and the average home across the country selling for $363,000. The market won’t be as robust in 2012 but consumers can still expect another 2% jump in prices.

Sales figure for 2011 are forecast to climb by 3% from a year earlier with 460,000 homes having changed hands by year end. For 2012, expect less than a 1% increase in activity with only an additional 4,500 sales.

“The Canadian housing market has demonstrated tremendous resilience in recent years but 2011 stands out,” said Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. “Instead of responding to economic concerns both here and abroad with a retreat in sales and prices, residential real estate markets actually experienced an upswing in the volatile third and fourth quarter.”

Re/Max looked at 26 markets across the country  and predicts 23 will show an increase in average price for the year. Sales were up in 22 of those 26 markets. The company says 81% of markets studied will see price increases in 2012.

Among the reasons cited for the Canadian housing market’s continued strength against the odds has been population growth which has gone up by 11% since 2000. Re/Max notes by 2031, the country will have 42 million people.

“Population growth and immigration are major factors expected to prop-up housing demand and household formation in the coming years,” says the company.

Condominiums are expected to continue to garner a growing share of the housing market with investment and income-producing properties in high demand. Low vacancy rates are said to have driven those markets in 2011 and those conditions are expected to continue.

Filed Under: Blog, News and Events

Canadian home sales top expectations

November 15, 2011 By heather
OTTAWA— The Canadian Press
Published Tuesday, Nov. 15, 2011 9:56AM EST
Last updated Tuesday, Nov. 15, 2011 10:20AM EST

 

The Canadian Real Estate Association says home sales in Ontario were stronger than anticipated during the third quarter — resulting in a slightly brighter outlook for CREA’s 2011 and 2012 national forecasts.

The industry association is now projecting sales this year will be up 1.4 per cent from 2010, half a percentage point better than the previous forecast.

CREA expects there will be slightly fewer units sold next year than in 2011, but the 0.5 per cent decline is an upward revision.

October’s sales activity through CREA members was the highest since January and the national average price was up 5.5 per cent from October 2010.

Filed Under: Blog, News and Events

Ottawa Housing Market to Remain Steady in 2012

November 10, 2011 By heather

OTTAWA, ONTARIO–(Marketwire – Nov. 10, 2011) Housing demand in the Ottawa Census Metropolitan Area (CMA) will remain steady in 2012 despite slower economic growth and uncertainty in global financial markets, according to Sandra Pérez Torres, Canada Mortgage and Housing Corporation’s (CMHC) Senior Market Analyst for Ottawa. CMHC presented its latest forecast for the Ottawa CMA today at the annual CMHC Housing Outlook Conference.

This year’s conference focused on ‘The Numbers Behind the Stories’. Market analysts used local CMHC data to answer questions housing-industry professionals hear every day – addressing Ottawa residents’ housing-related concerns.

“Ottawa’s housing market activity will moderate but remain stable going into 2012, supported by low financing rates, slightly improving labour market conditions and a positive migration outlook. Given the headwinds weighing on the economic outlook, as well as the increasing significance of an ageing population trend, our forecast for dwellings in Ottawa favours more affordable housing choices,” said Sandra Pérez Torres.

Highlights from today’s conference include:

  • Ottawa’s economy will grow at a slower rate.
  • Demand for new housing will favour more affordable homes, with condominium apartments outperforming other dwelling categories.
  • The resale market in Ottawa will stabilize in the balanced territory.
  • Over 80 per cent of Ottawa’s growth will continue taking place outside the Greenbelt.

“Housing demand in Ontario will continue shifting to less expensive, higher density housing in 2012 due to slower economic growth and a diminishing appetite for big ticket spending. This will support demand for resale homes, apartment ownership and rental accommodation,” said Ted Tsiakopoulos, CMHC’s Ontario Regional Economist. “However, demand for more expensive single detached housing will hold up better in Northern Ontario and in urban markets bordering the GTA.”

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 homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.

For more information, visit www.cmhc.ca or call 1-800-668-2642.

Filed Under: Blog, News and Events

Ottawa resales rise 2.3% in October

November 7, 2011 By heather

Published on November 3, 2011

OBJ Staff  RSS Feed
Ottawa Business Journal

 

Members of the Ottawa Real Estate board sold 1,062 properties in October, a rise of 2.3 per cent from the year before.

The sales were slightly below the five-year average for October, at 1,071.

OREB said 253 of October’s sales were in condos – up nearly 15 per cent from the same month last year – and 809 in residential properties.

While noting that condos were the main driver of resales that month, OREB president Joanne Tibbles pointed out it was “just one piece of the steady resale market.”

“Sales (are) very near the five-year average for October. Also, listing inventory and days on market are both up slightly,” she stated.

The average sale price of residential properties was $337,797, up two per cent from last year. It is calculated based on the total dollar volume of all properties sold.

Filed Under: Blog

Now is the time for a fixed-rate mortgage

October 31, 2011 By heather
Ted Rechtshaffen
Globe and Mail Update
Published Tuesday, Oct. 11, 2011 6:00AM EDT
Last updated Tuesday, Oct. 11, 2011 2:08PM EDT

 

A recent Bank of Montreal study says that variable-rate mortgages have worked out to be better than fixed-rate mortgages 83 per cent of the time since 1975.

I believe we are now in the 17-per-cent zone.

Here are three key reasons:

  • Protect yourself from interest rates you can’t afford
    Today, Canada’s debt-to-income ratio has reached 150 per cent – an all-time high. To me, this is rational. If you can borrow money at 2 per cent or 3 per cent, it can make financial sense to borrow a lot.

The big issue is whether these same borrowers would have borrowed as much if interest rates were 5 per cent or 6 per cent. Based on the history of five-year mortgage rates since 1950, it is rare to get a 5-year fixed mortgage for under 6 per cent.

We don’t know where interest rates will be over the next five to 10 years, but what percentage of borrowers today will have financial difficulty paying their debt at 6 per cent? For those that will be in rough shape in that scenario, a variable-rate mortgage today is a real risk.

The only way someone can eliminate that risk is to lock in their mortgage rate. Today, you can get a five-year fixed mortgage for as low as 3.2 per cent. While you still need to worry about where interest rates will be in five years, you will be protected from any interest rate increases until late 2016.

For those who are truly risk averse, you can get a 10-year mortgage today for 4.69 per cent. While a 10-year mortgage is not the right solution for many people, for some stable and risk-averse people, this could be an ideal solution to avoid any interest rate risks for a decade. Keep in mind that for most of the last half century, a mortgage rate of 4.69 per cent would have been a blessing.

  • The premium on fixed mortgage is very small
    For most of the past year, Canadians have leaned very heavily to variable-rate mortgages. Earlier this year, five-year variable mortgages were being offered at rates as low as prime minus 0.95 per cent (2.05 per cent at current prime rates). With the latest financial worries, lenders have raised variable rates. It is now difficult to find better than prime minus 0.5 per cent on a five-year variable mortgage. At today’s prime rate, this translates into 2.50 per cent.

Traditionally, a five-year fixed-rate mortgage would be 1 per cent to 2 per cent higher than the five-year variable rate, depending on the prevailing yield curve. The yield curve shows the difference between short-term rates and longer term rates.

Today, if you can get a variable rate mortgage for 2.50 per cent, and a five-year fixed at 3.2 per cent that is just a 0.7-per-cent premium. That is a steal on a historical basis.

Now factor in the fact that today’s prime rate is among the lowest in history and there are very few people who believe that interest rates will be the same or lower three years from now. If ever there was a time to take a hit of 0.7 per cent (on the front end) for the benefit of having a locked in rate for five years, today might be the day.

  • Peace of mind
    There are a lot of things to worry about in life. For those with a large variable-rate mortgage, I know from our clients, that every Bank of Canada interest-rate announcement brings some anxiety. Having a fixed-rate mortgage simply eliminates that extra worry for at least a few years.

On its own, peace of mind is not a strong enough reason for most people to go fixed versus variable, but in combination with interest-rate history and the exceptionally low premium for a five-year fixed-rate mortgage, I believe now is the right time to lock into a fixed-rate mortgage.

Even if you are currently in a variable rate mortgage that doesn’t come due for a while, now might be a good time to consider moving to a fixed-rate mortgage and locking in the lowest rates in history.

We may just look back at today’s fixed rates and wonder how we could have ever considered not locking in.

Ted Rechtshaffen is president and CEO of TriDelta Financial Partners, a firm that provides independent financial planning advice. He has an MBA from the Schulich School of Business and is a certified financial planner. He was vice-president of business strategy at a major Canadian brokerage firm.

Filed Under: Blog

September 2011 Housing Starts

October 12, 2011 By heather

OTTAWA, ONTARIO–(Marketwire – Oct. 11, 2011) - The seasonally adjusted annual rate(1) of housing starts was 205,900 units in September, according to Canada Mortgage and Housing Corporation (CMHC). This is up from 191,900 units in August 2011.

“Housing starts picked up in September due to an increase in multiple starts in the Atlantic region, Quebec and in British Columbia,” said Mathieu Laberge, Deputy Chief Economist at CMHC’s Market Analysis Centre. “Multiple housing starts are expected to move back towards levels consistent with demographic fundamentals in the near term.”

The seasonally adjusted annual rate of urban starts increased by 8.0 per cent to 185,900 units in September. Multiple urban starts were up by 14.2 per cent to 118,000 units, while urban single starts decreased by 1.5 per cent in September to 67,900 units.

September’s seasonally adjusted annual rate of urban starts increased by 47.0 per cent in the Atlantic region, 32.0 per cent in Quebec and by 18.6 per cent in British Columbia, while urban starts decreased by 3.5 per cent in Ontario and by 12.1 per cent in the Prairie region.

Rural starts(2) were estimated at a seasonally adjusted annual rate of 20,000 units in September.

As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.

For more information, visit http://www.cmhc-schl.gc.ca or call 1-800-668-2642.

(1) All starts figures in this release, other than actual starts, are seasonally adjusted annual rates (SAAR) — that is, monthly figures adjusted to remove normal seasonal variation and multiplied by 12 to reflect annual levels. By removing seasonal ups and downs, seasonal adjustment makes it possible to highlight the fundamental trends of a series. Reporting monthly figures at annual rates indicates the annual level of starts that would be obtained if the monthly pace was maintained for 12 months. This facilitates comparison of the current pace of activity to annual forecasts as well as to historical annual levels.

(2) CMHC estimates the level of starts in centres with a population of less than 10,000 for each of the three months of the quarter, at the beginning of each quarter. During the last month of the quarter, CMHC conducts the survey in these centres and revises the estimate.

A graph and a table are available at the following link: http://media3.marketwire.com/docs/chmc1011.pdf

Filed Under: Blog, News and Events