Time is right for first-time homebuyers, housing experts say
Published: Tuesday, April 14, 2009 | 1:12 PM ET
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http://www.cbc.ca/cp/Money/090414/J041404AU.html
TORONTO - Low mortgage rates and more affordable homes in many markets are pushing first-time home buyers to enter the market in droves, Canadian real-estate experts say.
Phil Soper, president and chief executive of Brookfield Real Estate Services (TSX:BRE.UN), said that when the Canadian housing market was hot, bidding wars forced many buyers to put in offers without conditions to increase their chances of being accepted.
This, combined with unprecedented increases in home prices in many parts of the country, scared many first-time buyers out of the market, he said.
"When first-time buyers stop entering the market it's like sand in the gears of the housing market," said Soper, speaking Tuesday at a BMO conference on the current and future state of Canada's housing market.
But he said the economic downturn changed all that. As housing prices fell across the country and lenders lowered their mortgage rates to attract borrowers, the market became much more attractive to people looking to buy their first homes.
"The uptick in first-time home buyer purchases across the country is quite astonishing," Soper said. "Affordability in places like Vancouver has improved for the first time in a very long time."
BMO senior economist Sal Guatieri said the average mortgage payment has fallen by one-third or $600 a month from its peak, while average resale home prices have fallen 14 per cent from highs seen in mid-2007.
Guatieri said he expects resale prices to fall "moderately further" this year for a cumulative decline in prices of approximately 20 per cent, but he said the slump in prices is slowing as buyers respond to renewed affordability in the market.
"We look for the housing market to correct further this year but not crash," Guatieri said.
Brad Lamb of Toronto-based Brad J. Lamb Realty Inc. said sales in March through the industry's Multiple Listing Service fell by only seven per cent year-over-year, compared to drops of 45 to 55 per cent in previous months.
And the average time it took to sell a home in Toronto dropped from 45 days in February to 39 days in March, he added.
"There's a fair amount of evidence out there that the market has bottomed and is starting to come back," Lamb said, adding that while prices may not fall any further, they probably won't rise in the near-term either.
Donald Lawby, president and chief operating officer of Century 21 Canada, agreed that now is a good time to buy a first home, but said prospective buyers should make sure they understand their local market before they dive in.
Soper said that while "we're well through this correction," the U.S. housing slump is far from over and will continue to affect Canadian home prices.
He added that a shortage of buyers in most parts of the country means that this is a bad time to be a speculator trying to make money off rising home prices.
"I don't see a sharp recovery in home prices over the next 24 months," Soper said. "I think home prices will rise at a snail-like pace."
Soft landing seen for Canada's housing market
June 23, 2008
The real estate market appears poised for a soft landing rather than a crash, in a cooling trend the Bank of Canada says is both "expected and welcome."
Sheryl Kennedy, the central bank's deputy governor, said Canada's financial prudence has helped it sidestep the sharp home price declines being experienced in countries including the U.S., Britain and Spain.
"The Canadian housing market does not appear to be characterized by excess supply at this time," she said in the text of a speech delivered yesterday in Banff, Alta. "The proportion of unoccupied, newly built dwellings in most cities remains below historical averages, suggesting that a major widespread reversal in house prices is unlikely in the near term."
In the past decade, prices of existing homes in Canada have risen by about 55 per cent, while new-home prices have risen by about 27 per cent. As one of the country's largest housing booms loses steam, most economists are forecasting a small increase in prices this year that will keep pace with the central bank's 2-per-cent target for inflation.
It's a much different story in the U.S. market, where home prices dropped by 14.1 per cent year over year in the first quarter of 2008, according Standard & Poor's/Case Shiller national home price index.
That record price decline occurred at a pace five times faster than that of the last U.S. housing recession, according to the index's quarterly report, released last month.
Much of Canada's housing boom was the result of supply catching up with pent-up demand that followed the downturn of the late 1980s and early 1990s, according to Ms. Kennedy.
Canada's conservative mortgage culture has helped protect it from the excesses seen during the U.S. boom, which had a much larger amount of subprime mortgages, she added.
As the housing market cools, the Bank of Canada can worry less about the sector as a driver of inflation, said Michael Gregory, senior economist at BMO Nesbitt Burns Inc.
"This speech would have been a lot different if we still had double-digit price gains on new and existing homes," he said in an interview.
The central bank now has a more pressing concern on its hands in soaring commodity prices, he said. In the real estate market, the issue has shifted to how much cooling prices could put a damper on consumer confidence, he added.
Despite her fairly positive outlook, Ms. Kennedy cautioned that Canada can't afford to become complacent about the real estate market, noting it took a decade for prices and sales to rebound after the bust of the late 1980s.
To that end, the central bank is keeping an eye on "challenges," including ensuring that mortgage innovations, including 40-year amortization products and "near-prime" mortgages, don't detract from prudent lending practices.
Ms. Kennedy's comments suggest the "the jury is still out" at the Bank of Canada regarding the value of these innovations compared with their potential risks, Mr. Gregory said.
~ from The Globe and Mail Report
Growing supply helps stabilize market conditions
VANCOUVER, B.C. - June 3, 2008 - The Greater Vancouver housing market continued its re-balance between sales and listings last month. The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver declined 30.7 per cent in May 2008 to 3,002 from the 4,331 sales recorded in May 2007.
New listings for detached, attached and apartment properties increased 20.2 per cent to 7,390 in May 2008 compared to May 2007, when 6,149 new units were listed.
"With more property listings and a decline in the number of sales, prices are not increasing as rapidly, now down to single digits overall, which is good news from an affordability standpoint," said REBGV president, Dave Watt. "The housing market is at a balanced state, sellers have more competition and buyers have more selection to choose from."
Sales of detached properties in May 2008 declined 33.4 per cent to 1,203 from the 1,805 sales recorded during the same period in 2007. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties rose 8.4 per cent from May 2007 to $771,250.
Sales of apartment properties declined 30.5 per cent last month to 1,244, compared to 1,789 sales in May 2007. The benchmark price of an apartment property increased 8.7 per cent from May 2007 to $389,668.
Attached property sales in May 2008 decreased 24.7 per cent to 555, compared with the 737 sales in May 2007. The benchmark price of an attached unit increased 9 per cent between May 2007 and 2008 to $478,931.
Bright spots in Greater Vancouver in May 2008 compared to May 2007:
Attached:
Coquitlam
Apartments:
New Westminster up 13.6 per cent (100 units sold from 88)
The Real Estate industry is a key economic driver in British Columbia. In 2007, 38,050 homes changed hands in the Board's area generating $1.065 billion in spin-offs. Total dollar volume of residential sales set a new record at $22.25 billion and total dollar volume of all sales set a record at $22.77 billion. The Real Estate Board of Greater Vancouver is an association representing more than 9,500 REALTORS®. The Real Estate Board provides a variety of membership services, including the Multiple Listing Service®.
Continue reading for charts and graphs
Risk of major housing price correction 'very low': Scotiabank
Thursday, May 15, 2008
Unmistakeable signs of cooling are appearing in the Canadian real estate market, but the chance of a big drop in prices is "very low," according to an analysis from Scotia Capital.
"After many false calls, there is now convincing evidence that Canada’s housing market has come off the boil," writes Scotia economist Adrienne Warren.
Warren cites a confluence of indicators to argue her case for cooling:
- Home sales are falling nationally.
- Demand for residential building permits has plunged.
- Average annual price increases are steadily easing back from the 10 per cent increases that marked the boom years of 2002 to 2007.
- Inventories of unsold new homes are trending higher.
But Warren does not see the same kind of price drops that followed the last two housing booms. In those booms, peak-to-trough selling prices plunged by 24 per cent and 15 per cent.
"However, we believe the current cycle has less downside risk, as it appears to be built on a stronger economic foundation than those of the 1970s and 1980s," she says.
Warren lists five main reasons why this time should be different:
- Home prices in Canada are not overvalued.
- There's little evidence of widespread speculation.
- Canada's housing market is not overbuilt.
- Households are not over-leveraged, noting that mortgage carrying costs as a share of disposable income are historically low.
- Overall mortgage quality is still sound, as Canadian lending standards are tighter than those in the U.S.
Warren predicts a "soft landing" for the Canadian housing market, with "a period of relatively flat inflation-adjusted home prices."
She acknowledges that there are risks to her forecast if the U.S. economic slump turns out to be deeper or longer-lasting than currently predicted.
"Tighter credit conditions and heightened global financial market volatility in the wake of the U.S. sub-prime mess pose additional downside risks to the sector’s overall performance."
The Scotia report came a day after the Canadian Real Estate Association released figures that showed the number of resales in Canada's major markets fell 6.1 per cent from a year earlier. Average selling prices were up by 3.2 per cent year-over-year — the slowest pace of increase in more than six years.
The number of new listings was also at a record high.
New house prices up 6.2% from December 2006: StatsCan
February 11, 2008
New housing prices rose by 6.2 per cent from December 2006 to December 2007, mainly due to a strong housing market in the Prairie provinces.
That was a slightly faster pace than the year-over-year increase of 6.1 per cent in November, Statistics Canada reported Monday.
On a monthly basis, prices rose 0.1 per cent between November and December.
Regionally, prices climbed at the fastest rate in Saskatoon, where the annual increase was 45.1 per cent.
Saskatoon prices rose a full one per cent between November and December, largely due to higher costs for concrete, drywall and land development.
For new homebuyers in Edmonton, prices were 21.5 per cent higher than in December 2006, while prices in Calgary rose six per cent.
Windsor was the only city to record year-over-year deflation, with prices falling 1.1 per cent from December 2006.
The year-over-year gain in Toronto was 3.4 per cent, while prices in Montreal rose 4.1 per cent.
In the Atlantic region, buyers in Halifax faced prices 10.4 per cent higher than December 2006, while those in St. John's saw an increase of 7.9 per cent.
Real estate continues to climb
Saskatoon, Regina prices up 50%
Canada's real estate scene is showing no sign of the weakness sweeping through the U.S. market, as sales and prices continue to rise.
The average resale price in 24 major markets jumped $5,000 from September to October, to $333,544, according to figures from the Canadian Real Estate Association (CREA).
That's a rise of 10.6 per cent from last October - the sixth month in a row of double-digit year-over-year price gains.
The country's priciest real estate continued to be found in Vancouver, where the average resale price jumped $8,000 from September to reach $590,577 in October - up 7.8 per cent from a year earlier.
Alberta's cities used to post the biggest percentage price gains. But recently, it's been Saskatchewan that's been doing the booming.
Saskatoon's average resale home sold for $255,614 in October - up a whopping 53.3 per cent from October 2006. Regina's increase was just behind - up 50.3 per cent to $190,657.
Average resale prices hit record highs in the two Saskatchewan cities, as well as in Montreal and Toronto.
Toronto's average price jumped $14,000 in a month to $394,583. A similar price rise took place in the Hamilton-Burlington, Ont. region.
Prices in every market except Windsor were up over last year. Windsor's real estate market remains weak, with prices down four per cent year-over-year.
On a seasonally adjusted basis, sales rose 1.3 per cent from September's level, with more than half the markets reporting an increase in activity.
"Negotiations still favour the seller in nearly all major markets," CREA chief economist Gregory Klump said in a release. "This suggests resale housing demand remains on a strong footing, and that price increases will continue to exceed overall consumer price inflation."
CREA forecasts that average prices in 2008 will set new records in every province, despite a slowdown in sales activity.
CREA's figures are based on sales through the Multiple Listing Service system.
~ from the CBC
Real estate not about to burst
Published: Wednesday, November 14, 2007 | 10:45 AM ET Canadian Press: Talbot Boggs
(Special) - Canadian investors and homeowners worried about a meltdown in the real estate market here in Canada can relax.
The subprime mortgage crisis in the U.S. isn't like to happen up here in the cooler, more fiscally conservative north. The Canadian housing market is not a bubble waiting to burst and owning a home is still a good investment and wealth management strategy, financial experts believe.
"You have a bubble situation when there is a lot of speculation and leverage in the market," says Patricia Lovett-Reid, senior vice-president with TD Waterhouse. "We are not seeing that in Canada now."
Lovett-Reid says Canadians don't need to be worried about the sub-prime mortgage crisis in the United States spilling across the border.
An August forecast by the Canadian Real Estate Association shows that the average price of a residential home in Canada is expected to rise 10.4 percent during this year and national home sales will increase 8.1 per cent, setting new annual records in most provinces. In the U.S., however, the National Association of Realtors in its September outlook projected a drop of 8.6 per cent in existing home sales and 1.7 per cent in home prices during the year.
Many of the conditions that led to the sub-prime mortgage situation in the U.S. don't exist here in Canada.
Interest rates in Canada have not gone up as much as they have in the United States and mortgage financing here is much more conservative than it is south of the border.
Americans can get a tax write off of their mortgage interest payments, which encourages them to borrow and assume larger mortgages to buy a home.
"The deductibility of mortgage interest payments in the U.S. causes people to take on more debt because of the tax break," says Paul Taylor, chief investment officer of BMO Harris Investment Management Inc. "Canadian homeowners are generally less indebted than Americans."
At the peak of the housing mania in the U.S., sub-prime lenders were offering homeowners "dubious" instruments such as NINJA (No verification of Income, Job status, or Assets) loans, Lovett-Reid says.
"As the mania for home ownership grew in the U.S., sub-prime lenders made homes seem affordable to a section of the population which would hot have qualified under conventional mortgage terms," Lovett-Reid says.
Overall, the real estate market in Canada looks healthy although a correction might be coming.
A TD Economics report says the sales of existing homes in Canada could decline by four per cent next year compared to its projection for this year.
"The probability of the market busting is small," says Lovett-Reid. "A cooling of the Canadian housing market (likely will) proceed in an orderly fashion."
Taylor says housing prices and starts will flatten out over the next few years, but real estate should continue to be a good investment strategy as part of a diversified portfolio.
Canadians can invest in real estate in several ways - by owning real estate that is their primary residence, owning rental property, land, or investing in real estate company stocks or Real Estate Investment Trusts (REITs).
REITs were exempted from the controversial tax on income trusts announced by federal Finance Minister Jim Flaherty in October last year.
REITs make up about 11 per cent of the S&P/TSX Income Trust Index. The S&P/TSX REIT Index rose 24.7 per cent in 2006 and the popular investment vehicle has not had a down year since 199, says the Guardian Group of Funds.
Another positive omen for real estate remaining a good, long-term investment is that the market is being driven by fundamentals, not speculation. Commercial real estate developments such as condominiums and housing subdivisions, for example, are being done a pre-sold basis, Lovett-Reid says.
And TD Economics expects national average home prices will rise by an average annual rate of four per cent over the next 25 years.
"While real estate purchased for speculative or income-generating purposes is a financial investment, home ownership offers the opportunity for capital gains through rising prices over time," Lovett-Reid says. "There could be considerable variation at the individual city or neighbourhood level and volatility from year to year, but as one of, if not your largest asset, a home should be a part of your financial plan," she says.