August 30, 2010 BestWire Services Email Print Free Newsletter
Financial institutions in developed nations worldwide reeled from the effects of the financial crisis that began in September 2008. But Canada and its life insurers escaped the worst of the crisis.
Canada's financial-services regulatory framework and positive relationships between regulators and companies all played a role in insulating life insurers from the adverse effects of the recession, according to Frank Swedlove, president of the Canadian Life and Health Insurance Association.
But the nature of the Canadian economy mattered, too.
"The Canadian economy itself has proven more stalwart through the financial crisis, in part because it entered the recession in better shape fiscally, with less debt-to-gross domestic product and smaller deficits," said Dean Connor, chief operating officer of Sun Life Financial.
A primary reason for the Canada's economic strength was that the housing bubble--the centerpiece of the United States' recession--was not as big an issue in Canada, Connor said. "We have shorter-term mortgages, and mortgage interest is not tax-deductible, so you didn't see the kind of leverage in the housing market here that we did in the U.S.," he said. "And although the economy in Canada slowed last year, it has rebounded faster and is in pretty good shape."
To judge the housing markets' impact on insurers' portfolios in Canada and the United States, one need look no further than Sun Life's Canadian and American businesses. Because of mortgage-backed securities in the portfolio of Sun Life's U.S. subsidiary, the parent company in Canada had to make capital contributions to it the past two years, reducing financial flexibility for the group, according to July's A.M. Best Credit Report for Sun Life Assurance Company of Canada (U.S.).
Connor said commercial and residential mortgage-backed securities have been common and important investments for U.S. life companies, including Sun Life. Canadian life companies were invested in real estate and mortgages to a lesser extent, so their credit experience was much better, he said.
Stephen Irwin, vice president in the life/health ratings division of A.M. Best, said that the subprime and Alt-A types of mortgage securities so prevalent in the United States did not exist to the same extent in Canada because of better mortgage underwriting standards. Meanwhile, mortgage underwriting in Canada remained disciplined, said Richard McMillan, managing senior financial analyst at A.M. Best. And a few years ago, in reaction to weakening conditions in the housing market, the Canadian government refused to provide government insurance on longer amortizing loans.
"You could say there was some restraint by the regulators that helped to keep the market more reasonable than it was in the U.S.," he said.
As a result, Canada for the most part avoided a run-up in property values that occurred in many parts of the United States, McMillan said.
Other factors were also at play. One is the role played by the Office of the Superintendent of Financial Institutions, Canada's primary regulator and supervisor of federally regulated deposit-taking institutions, insurance companies and federally regulated private pension plans. Connor said OSFI oversees the operations of Canadian life insurers wherever they do business.
Monday, August 30, 2010
HST affects housing market
By Marty Hope, Calgary Herald August 28, 2010
The harmonized sales tax recently introduced into British Columbia and Ontario has had an impact, likely short-term, on the resale housing activity in those two provinces, according to an industry survey.
An online survey conducted at the end of July by Royal LePage Real Estate Services shows that residents have misconceptions about how the HST affects real estate transactions.
When respondents were asked to provide examples of comments heard from buyers and sellers regarding the tax and its effect on the housing market, almost half of the comments (46.7 per cent) indicated that confusion about it continues even more than one month after coming into effect.
Among the most common responses to the survey's open-ended questions were that many home buyers incorrectly believe the tax applies to the sale price of resale properties.
About 44 per cent of the 765 realtors polled in Ontario and B.C. said the HST that took effect in both provinces July 1 is having the greatest effect on the cooling residential real estate market, compared to just 28.4 per cent who cited rising interest rates as having the greatest effect.
In all, more than 86 per cent of respondents said the HST is affecting their business somewhat.
"While we predicted that the prospect of rising interest rates would put a damper on the housing market, our agents are finding that the HST is actually having the greater impact on buyer behaviour, at least in the short-term" says Phil Soper, president and chief executive officer of Royal LePage.
The HST applies to the purchase price of a newly-built home, and fees for services and commissions associated with any real estate transaction, but it does not apply to the purchase price of resale homes.
Resale homes comprise the bulk of transactions in the Canadian housing market, and the majority of agents surveyed by Royal LePage indicated that new home sales account for less than 10 per cent of their business.
"We wanted to understand the impact HST has had since it was introduced, and what we found is that there is a need to better educate home buyers and sellers to ensure they understand when the HST is applicable," says Soper.
"According to our realtors in B.C. and Ontario, misconceptions about the HST are having an effect on the market in both provinces."
Nearly one quarter (24.1 per cent) of respondents in the Royal LePage survey say home buyers and sellers have a low level of awareness about how the HST applies to a home sale transaction, while 44 per cent say buyers and sellers are only somewhat aware.
"Realtors are there to help guide buyers and sellers through the often complex negotiation and closing process, so our take-away from this survey is that we need to do more as an industry to educate consumers about the HST," says Soper.
© Copyright (c) The Calgary Herald
The harmonized sales tax recently introduced into British Columbia and Ontario has had an impact, likely short-term, on the resale housing activity in those two provinces, according to an industry survey.
An online survey conducted at the end of July by Royal LePage Real Estate Services shows that residents have misconceptions about how the HST affects real estate transactions.
When respondents were asked to provide examples of comments heard from buyers and sellers regarding the tax and its effect on the housing market, almost half of the comments (46.7 per cent) indicated that confusion about it continues even more than one month after coming into effect.
Among the most common responses to the survey's open-ended questions were that many home buyers incorrectly believe the tax applies to the sale price of resale properties.
About 44 per cent of the 765 realtors polled in Ontario and B.C. said the HST that took effect in both provinces July 1 is having the greatest effect on the cooling residential real estate market, compared to just 28.4 per cent who cited rising interest rates as having the greatest effect.
In all, more than 86 per cent of respondents said the HST is affecting their business somewhat.
"While we predicted that the prospect of rising interest rates would put a damper on the housing market, our agents are finding that the HST is actually having the greater impact on buyer behaviour, at least in the short-term" says Phil Soper, president and chief executive officer of Royal LePage.
The HST applies to the purchase price of a newly-built home, and fees for services and commissions associated with any real estate transaction, but it does not apply to the purchase price of resale homes.
Resale homes comprise the bulk of transactions in the Canadian housing market, and the majority of agents surveyed by Royal LePage indicated that new home sales account for less than 10 per cent of their business.
"We wanted to understand the impact HST has had since it was introduced, and what we found is that there is a need to better educate home buyers and sellers to ensure they understand when the HST is applicable," says Soper.
"According to our realtors in B.C. and Ontario, misconceptions about the HST are having an effect on the market in both provinces."
Nearly one quarter (24.1 per cent) of respondents in the Royal LePage survey say home buyers and sellers have a low level of awareness about how the HST applies to a home sale transaction, while 44 per cent say buyers and sellers are only somewhat aware.
"Realtors are there to help guide buyers and sellers through the often complex negotiation and closing process, so our take-away from this survey is that we need to do more as an industry to educate consumers about the HST," says Soper.
© Copyright (c) The Calgary Herald
Thursday, August 26, 2010
Living Under a Rock? ABC, NBC Dumbfounded by Housing Market Decline
CBS alone in questioning GSEs over the 'disaster.' Watch the live news report: http://www.eyeblast.tv/public/checker.aspx?v=hd8znznzIr
CBS alone in questioning GSEs over the 'disaster.'
By Kyle Gillis
Business & Media Institute
8/25/2010 11:04:45 AM
On August 24, all three network evening news broadcasts led with stories on the tumbling housing market. While ABC and NBC fretted over another economic apocalypse, CBS reporter Anthony Mason looked at the effect government-sponsored entities (GSE’s) Freddie Mac and Fannie Mae have on the housing market.
“The steep fall off in housing sales highlights the degree to which the government has been propping up the housing market,” said Mason, “and the two biggest pillars of that system, Fannie Mae and Freddie Mac, are facing a crisis.”
As the Business & Media Institute has documented, the GSE’s have faced a crisis for years, but Mason was the only evening news reporter to investigate the GSE’s instead of hiding from the falling sky.
“The government has already pumped nearly $150 billion into Fannie and Freddie to keep them afloat, and some say taxpayers could end up with a trillion dollar bill,” Mason reported.
Bloomberg reported the possible $1 trillion taxpayer cost over two months ago and, while Mason mentioned the Future of Housing Finance Conference panel discussion on housing solutions, CBS failed to report on the conference last week when it was actually held. Rather, CBS chose to air a story on fedora hats.
At the very end of his report, Mason returned to his liberal talking points when substitute anchor Harry Smith questioned whether the stimulus was helping the economy.
“Well in fact, the Congressional Budget Office came out with a report today that suggested the stimulus added as many as 3.3 million jobs to the economy and boosted GDP by 4.5 percent,” Mason said. “If that’s accurate, the stimulus, in fact, saved us from another recession.”
By contrast, NBC ‘Nightly News’ host Brian Williams harped on the poor housing numbers without investigating the cause of the numbers.
“You can probably look around and see our lead story tonight. Housing, the real estate market, it’s a disaster,” Williams said.
CBS has been almost alone in challenging the GSE’s, as the networks ignore the GSEs’ role in the housing mess. The networks remained silent on the GSE’s absence in the financial reform bill and only when the housing market plummets do the networks consider questioning them.
CBS alone in questioning GSEs over the 'disaster.'
By Kyle Gillis
Business & Media Institute
8/25/2010 11:04:45 AM
On August 24, all three network evening news broadcasts led with stories on the tumbling housing market. While ABC and NBC fretted over another economic apocalypse, CBS reporter Anthony Mason looked at the effect government-sponsored entities (GSE’s) Freddie Mac and Fannie Mae have on the housing market.
“The steep fall off in housing sales highlights the degree to which the government has been propping up the housing market,” said Mason, “and the two biggest pillars of that system, Fannie Mae and Freddie Mac, are facing a crisis.”
As the Business & Media Institute has documented, the GSE’s have faced a crisis for years, but Mason was the only evening news reporter to investigate the GSE’s instead of hiding from the falling sky.
“The government has already pumped nearly $150 billion into Fannie and Freddie to keep them afloat, and some say taxpayers could end up with a trillion dollar bill,” Mason reported.
Bloomberg reported the possible $1 trillion taxpayer cost over two months ago and, while Mason mentioned the Future of Housing Finance Conference panel discussion on housing solutions, CBS failed to report on the conference last week when it was actually held. Rather, CBS chose to air a story on fedora hats.
At the very end of his report, Mason returned to his liberal talking points when substitute anchor Harry Smith questioned whether the stimulus was helping the economy.
“Well in fact, the Congressional Budget Office came out with a report today that suggested the stimulus added as many as 3.3 million jobs to the economy and boosted GDP by 4.5 percent,” Mason said. “If that’s accurate, the stimulus, in fact, saved us from another recession.”
By contrast, NBC ‘Nightly News’ host Brian Williams harped on the poor housing numbers without investigating the cause of the numbers.
“You can probably look around and see our lead story tonight. Housing, the real estate market, it’s a disaster,” Williams said.
CBS has been almost alone in challenging the GSE’s, as the networks ignore the GSEs’ role in the housing mess. The networks remained silent on the GSE’s absence in the financial reform bill and only when the housing market plummets do the networks consider questioning them.
Tuesday, August 24, 2010
Realtors launch ad campaign to buff up their image
Television ad promoting the services of real estate agents uses morphing technology to change one face into another.
By Tony Wong
Business Reporter Under the gun from the federal Competition Bureau and from consumers who say they are overpaying for commissions, Canadian realtors are pushing back with a fall advertising campaign touting the merits of professional real estate agents.
“When I was selling my place, my realtor helped with all the paperwork. You would think I had a paper allergy or something,” begins the 30-second spot that started airing on national television Monday.
The face of the woman then morphs into a man who says, “I’m not a real people person either, so my realtor helped with my negotiations, too.”
The commercial, shot in high definition, uses morphing technology to show a seamless transition of different faces, ages and races.
“All that back and forth…yuck. And when it came to finding qualified buyers or a house with a park next door, my realtor had all the answers,” says the spot.
Georges Pahud, president of the Canadian Real Estate Association which represents almost 100,000 brokers and agents across the country, says the fall campaign will cost about $2 million and will be “widely disseminated.”
With a looming Competition Bureau court case scheduled for next April, the advertising may be seen as crucial – at least in the court of public opinion.
The federal watchdog is taking CREA to the Ottawa-based Competition Tribunal, which will determine whether organized real estate is being anti-competitive by shutting out companies that would make the business of selling homes cheaper for consumers. The two sides have been locked in an acrimonious battle.
Pahud said the commercial was not created because of the court battle, but as an ongoing dialogue with consumers to inform them of the benefits of realtors.
“It gets the message across that realtors offer good value for their services,” said Pahud. “Essentially that a variety of realtors offer a variety of services to many different types of consumers.”
Key to the Competition Bureau argument is that CREA does not allow the “unbundling” of different services to consumers, which creates high prices. CREA has maintained that there is already plenty of competition in the market and realtors offer good value.
Pahud says the advertising budget for the spot is slightly higher than in the past. CREA has had an advertising campaign since 2006.
“We have increased the budget gradually,” said Pahud.
So far the spot has met with approval from some marketing experts.
Shyon Baumann, an associate professor of sociology at the University of Toronto who specializes in advertising, said the ad is “smart” and addresses the context of the image problem.
“Realtors at the moment have a legitimacy problem insofar as there are some people who feel the way they conduct business is anti-competitive and not in the best interests of their clients,” said Baumann. “This advertisement makes the case that the particular expertise that realtors bring to home buying and selling is valuable and specialized and implies that their expertise is worth paying for.”
Baumann said the use of morphing to create different demographics is effective.
“The advertisement also emphasizes that realtors are everyday people who connect with people of all ethnicities and ages and both genders and implies that they are just like all of us,” said Baumann.
The commercial was created by Toronto firm CP+B Canada, which CREA said uses “production and editing techniques developed specifically for the project and never used in Canadian television advertising.”
The association’s national ad campaign runs twice a year in the spring and fall.
The ad can be seen at at www.howrealtorshelp.ca
By Tony Wong
Business Reporter Under the gun from the federal Competition Bureau and from consumers who say they are overpaying for commissions, Canadian realtors are pushing back with a fall advertising campaign touting the merits of professional real estate agents.
“When I was selling my place, my realtor helped with all the paperwork. You would think I had a paper allergy or something,” begins the 30-second spot that started airing on national television Monday.
The face of the woman then morphs into a man who says, “I’m not a real people person either, so my realtor helped with my negotiations, too.”
The commercial, shot in high definition, uses morphing technology to show a seamless transition of different faces, ages and races.
“All that back and forth…yuck. And when it came to finding qualified buyers or a house with a park next door, my realtor had all the answers,” says the spot.
Georges Pahud, president of the Canadian Real Estate Association which represents almost 100,000 brokers and agents across the country, says the fall campaign will cost about $2 million and will be “widely disseminated.”
With a looming Competition Bureau court case scheduled for next April, the advertising may be seen as crucial – at least in the court of public opinion.
The federal watchdog is taking CREA to the Ottawa-based Competition Tribunal, which will determine whether organized real estate is being anti-competitive by shutting out companies that would make the business of selling homes cheaper for consumers. The two sides have been locked in an acrimonious battle.
Pahud said the commercial was not created because of the court battle, but as an ongoing dialogue with consumers to inform them of the benefits of realtors.
“It gets the message across that realtors offer good value for their services,” said Pahud. “Essentially that a variety of realtors offer a variety of services to many different types of consumers.”
Key to the Competition Bureau argument is that CREA does not allow the “unbundling” of different services to consumers, which creates high prices. CREA has maintained that there is already plenty of competition in the market and realtors offer good value.
Pahud says the advertising budget for the spot is slightly higher than in the past. CREA has had an advertising campaign since 2006.
“We have increased the budget gradually,” said Pahud.
So far the spot has met with approval from some marketing experts.
Shyon Baumann, an associate professor of sociology at the University of Toronto who specializes in advertising, said the ad is “smart” and addresses the context of the image problem.
“Realtors at the moment have a legitimacy problem insofar as there are some people who feel the way they conduct business is anti-competitive and not in the best interests of their clients,” said Baumann. “This advertisement makes the case that the particular expertise that realtors bring to home buying and selling is valuable and specialized and implies that their expertise is worth paying for.”
Baumann said the use of morphing to create different demographics is effective.
“The advertisement also emphasizes that realtors are everyday people who connect with people of all ethnicities and ages and both genders and implies that they are just like all of us,” said Baumann.
The commercial was created by Toronto firm CP+B Canada, which CREA said uses “production and editing techniques developed specifically for the project and never used in Canadian television advertising.”
The association’s national ad campaign runs twice a year in the spring and fall.
The ad can be seen at at www.howrealtorshelp.ca
Friday, August 20, 2010
Metro housing fares well
Published Wednesday, August 18, 2010
FREDERICTON - Despite seeing a decline in selling prices and sales, the Metro Moncton real estate market outperformed the rest of Canada in 2009, according to statistics released this week by the Canadian Real Estate Association (CREA).Robert Kavcic, an economist with BMO Capital Markets, says the Hub City's performance during the past year has been relatively stable.
"It's quite a bit better actually than both Canada as a whole and Atlantic Canada. It's definitely better performance than Canada-wide," he says.
"I think the more important thing is there's much more stability in sales, relative to the rest of the country and new listings actually falling quite a bit, year-over-year, which helps to balance the market."
From July 2009 to July 2010, existing home sales in Moncton were down 13.8 per cent. Prices were down 0.3 per cent and the number of new listings were down 7.9 per cent
By comparison, Canadian residential sales were down 30 per cent. The average price rose one per cent during the year, but that amount was dampened by low sales in the country's biggest markets.
"It's a situation where the market is soft and if the sellers aren't getting what they had hoped for, they seem to be in a position to just pull the listing and not sell the house," Kavcic says, adding that the Canadian market is in a different position than that south of the border.
"It's a much different situation than in the U.S., where a lot of those sales are forced. Here that's simply not the case and that's probably one of the reasons we saw such strength in prices during the past year."
At five per cent, new Brunswick had the fifth-largest increase of any province from July 2009 to 2010, while Nova Scotia and Prince Edward Island were the only provinces to show a decline in average residential price.
Canadian home sales were down 6.8 per cent from June to July. About 85 per cent of July's decline can be traced to fewer sales in B.C. and Ontario - which generally account for more than half of national sales - as the new harmonized sales tax prompted many buyers to push sales into the first half of the year, CREA president Georges Pahud says.
"The soft sales figures we're seeing right now can be attributed in part to accelerated home purchases earlier in the year," he says.
Sales activity peaked in December 2009 and hovered near record levels during the first quarter of this year as buyers rushed into the housing market ahead of changes to mortgage rules, interest rate hikes and the HST.
British Columbia had the biggest drop-off at 14.1 per cent, followed by Ontario with an eight per cent decline. Meanwhile, sales in the Prairies and Quebec were on par with June levels.
The average price of homes sold through CREA's Multiple Listing Service in July was $330,351, up one per cent from a year ago - the smallest increase since prices began to rise in May 2009.
Meanwhile, July saw the steepest decline of new listings in over a decade - down 7.2 per cent from June.
* with files from the Canadian Press.
FREDERICTON - Despite seeing a decline in selling prices and sales, the Metro Moncton real estate market outperformed the rest of Canada in 2009, according to statistics released this week by the Canadian Real Estate Association (CREA).Robert Kavcic, an economist with BMO Capital Markets, says the Hub City's performance during the past year has been relatively stable.
"It's quite a bit better actually than both Canada as a whole and Atlantic Canada. It's definitely better performance than Canada-wide," he says.
"I think the more important thing is there's much more stability in sales, relative to the rest of the country and new listings actually falling quite a bit, year-over-year, which helps to balance the market."
From July 2009 to July 2010, existing home sales in Moncton were down 13.8 per cent. Prices were down 0.3 per cent and the number of new listings were down 7.9 per cent
By comparison, Canadian residential sales were down 30 per cent. The average price rose one per cent during the year, but that amount was dampened by low sales in the country's biggest markets.
"It's a situation where the market is soft and if the sellers aren't getting what they had hoped for, they seem to be in a position to just pull the listing and not sell the house," Kavcic says, adding that the Canadian market is in a different position than that south of the border.
"It's a much different situation than in the U.S., where a lot of those sales are forced. Here that's simply not the case and that's probably one of the reasons we saw such strength in prices during the past year."
At five per cent, new Brunswick had the fifth-largest increase of any province from July 2009 to 2010, while Nova Scotia and Prince Edward Island were the only provinces to show a decline in average residential price.
Canadian home sales were down 6.8 per cent from June to July. About 85 per cent of July's decline can be traced to fewer sales in B.C. and Ontario - which generally account for more than half of national sales - as the new harmonized sales tax prompted many buyers to push sales into the first half of the year, CREA president Georges Pahud says.
"The soft sales figures we're seeing right now can be attributed in part to accelerated home purchases earlier in the year," he says.
Sales activity peaked in December 2009 and hovered near record levels during the first quarter of this year as buyers rushed into the housing market ahead of changes to mortgage rules, interest rate hikes and the HST.
British Columbia had the biggest drop-off at 14.1 per cent, followed by Ontario with an eight per cent decline. Meanwhile, sales in the Prairies and Quebec were on par with June levels.
The average price of homes sold through CREA's Multiple Listing Service in July was $330,351, up one per cent from a year ago - the smallest increase since prices began to rise in May 2009.
Meanwhile, July saw the steepest decline of new listings in over a decade - down 7.2 per cent from June.
* with files from the Canadian Press.
Tuesday, August 17, 2010
Homebuyers shouldn't expect hot deals: experts
The Canadian Press
Date: Sunday Aug. 15, 2010 9:10 AM ET
TORONTO — Sellers are facing more empty open houses and fewer bids on their homes, but experts say buyers shouldn't expect to see a retreat from record-high home prices when July housing data is released Monday.
Home sales have fallen 25 per cent since reaching a peak at the beginning of the year as demand slows and more houses come onto the market.
But it will take much longer for sky-high home prices to fall and the market to enter buyer-friendly territory. And history is on the side of the seller.
"Over time, if you were to look at the last 40 years, it's much more common to see sellers' markets than buyers' markets," said Phil Soper, president of Royal LePage.
"It comes down to the different psychology that exists between buyers and sellers. Buyers are very quick to adjust to a down market and sellers are very slow to adjust to a down market. Sellers stubbornly hold onto their perception of what their home is worth, whereas buyers turn on a dime."
Soper expects to see sales decline dramatically from last July's near-record activity, but predicts there will be little change in home prices when the Canadian Real Estate Association releases its monthly sales figures Monday.
Seasonally-adjusted home sales fell 8.2 per cent in June from the month before and shrunk 19.7 per cent compared to June 2009. However, the average Canadian home price sat at $342,662 compared to $326,689 in 2009.
"You would think prices would come down more rapidly given the drop in sales," said Sal Guatieri, senior economist with BMO Capital Markets.
Guatieri expects to see as much as a 35 per cent year-over-year drop in July home sales. He projects monthly sales figures will be around 32,600 homes, which would represent the weakest July since 2001. However, he says price increases will weaken just slightly, and only because they were so high last year.
"It's only in a so-called buyers' market, where there are lot more listings on the market than sales, that buyers have some bargaining power and sellers are more willing to ease up on price, that we would see prices actually falling," he said.
But Mark Weisleder, a real estate author and lawyer, says real estate agents are beginning to notice some discernable changes as the Canadian housing market cools off.
Buyers are not as rushed to make an offer and are becoming more aggressive in negotiations, while sellers are beginning to accept less than asking price for homes as interest wanes.
"(Agents) are going to open houses, sitting there for three hours, and two people come in at the most. Right now there doesn't seem to be that level of stampede mentality to go see a house," Weisleder said.
"I do believe there is a disconnect between some of the data that people are throwing out there every day in the numbers, and slowly you're going to see prices come down."
Many buyers hurried to close in late 2009 and the first half of this year ahead of the new harmonized sales tax in B.C. and Ontario, new mortgage requirements, and to take advantage of record-low interest rates.
That pulled ahead sales that might otherwise have occurred in the second half of 2010, increasing demand and leading to bidding wars in which buyers were willing to overpay to secure a property.
As home prices crept higher and consumers became more confident about an economic recovery, more sellers put their homes on the market, which increased inventory.
Now fewer buyers are shopping for homes just as more listings flood onto the market. That has shifted the housing balance away from the seller-friendly market into neutral territory, but it's still shy of a buyers' market.
Weisleder says the market isn't poised to enter buyers' territory any time soon, as historically low interest rates and a stable economy continue to make buying a Canadian home attractive.
"Because of the interest rates being so cheap to borrow money, prices may not fall too much because people can still afford (to borrow) probably more than they should," he said.
"But it doesn't mean the house is worth that much," he said, adding that if rates go up it could be catastrophic for homeowners who have taken on more debt than they will be able to afford.
Meanwhile, sellers have become accustomed to fetching high home prices and want to hang onto their properties for as long as it takes to get those prices -- although that window has stretched from a couple of weeks to a few months.
"No seller wants to jump the gun, so a lot of people are sitting on the fence and trying to hold on," Weisleder said. "A lot of people are very upset they didn't sell six months ago."
Date: Sunday Aug. 15, 2010 9:10 AM ET
TORONTO — Sellers are facing more empty open houses and fewer bids on their homes, but experts say buyers shouldn't expect to see a retreat from record-high home prices when July housing data is released Monday.
Home sales have fallen 25 per cent since reaching a peak at the beginning of the year as demand slows and more houses come onto the market.
But it will take much longer for sky-high home prices to fall and the market to enter buyer-friendly territory. And history is on the side of the seller.
"Over time, if you were to look at the last 40 years, it's much more common to see sellers' markets than buyers' markets," said Phil Soper, president of Royal LePage.
"It comes down to the different psychology that exists between buyers and sellers. Buyers are very quick to adjust to a down market and sellers are very slow to adjust to a down market. Sellers stubbornly hold onto their perception of what their home is worth, whereas buyers turn on a dime."
Soper expects to see sales decline dramatically from last July's near-record activity, but predicts there will be little change in home prices when the Canadian Real Estate Association releases its monthly sales figures Monday.
Seasonally-adjusted home sales fell 8.2 per cent in June from the month before and shrunk 19.7 per cent compared to June 2009. However, the average Canadian home price sat at $342,662 compared to $326,689 in 2009.
"You would think prices would come down more rapidly given the drop in sales," said Sal Guatieri, senior economist with BMO Capital Markets.
Guatieri expects to see as much as a 35 per cent year-over-year drop in July home sales. He projects monthly sales figures will be around 32,600 homes, which would represent the weakest July since 2001. However, he says price increases will weaken just slightly, and only because they were so high last year.
"It's only in a so-called buyers' market, where there are lot more listings on the market than sales, that buyers have some bargaining power and sellers are more willing to ease up on price, that we would see prices actually falling," he said.
But Mark Weisleder, a real estate author and lawyer, says real estate agents are beginning to notice some discernable changes as the Canadian housing market cools off.
Buyers are not as rushed to make an offer and are becoming more aggressive in negotiations, while sellers are beginning to accept less than asking price for homes as interest wanes.
"(Agents) are going to open houses, sitting there for three hours, and two people come in at the most. Right now there doesn't seem to be that level of stampede mentality to go see a house," Weisleder said.
"I do believe there is a disconnect between some of the data that people are throwing out there every day in the numbers, and slowly you're going to see prices come down."
Many buyers hurried to close in late 2009 and the first half of this year ahead of the new harmonized sales tax in B.C. and Ontario, new mortgage requirements, and to take advantage of record-low interest rates.
That pulled ahead sales that might otherwise have occurred in the second half of 2010, increasing demand and leading to bidding wars in which buyers were willing to overpay to secure a property.
As home prices crept higher and consumers became more confident about an economic recovery, more sellers put their homes on the market, which increased inventory.
Now fewer buyers are shopping for homes just as more listings flood onto the market. That has shifted the housing balance away from the seller-friendly market into neutral territory, but it's still shy of a buyers' market.
Weisleder says the market isn't poised to enter buyers' territory any time soon, as historically low interest rates and a stable economy continue to make buying a Canadian home attractive.
"Because of the interest rates being so cheap to borrow money, prices may not fall too much because people can still afford (to borrow) probably more than they should," he said.
"But it doesn't mean the house is worth that much," he said, adding that if rates go up it could be catastrophic for homeowners who have taken on more debt than they will be able to afford.
Meanwhile, sellers have become accustomed to fetching high home prices and want to hang onto their properties for as long as it takes to get those prices -- although that window has stretched from a couple of weeks to a few months.
"No seller wants to jump the gun, so a lot of people are sitting on the fence and trying to hold on," Weisleder said. "A lot of people are very upset they didn't sell six months ago."
Monday, August 16, 2010
Housing market feels impact of HST introduction
TORONTO -- The new harmonized sales tax introduced in British Columbia and Ontario last month had an immediate impact on the housing market, according to the Canadian Real Estate Association.
The Ottawa-based group, which represents 100 boards across the country, said July sales plunged 6.8% on a seasonally adjusted basis from a month ago, a decline “almost entirely the result of fewer sales in British Columbia and Ontario.”
The slowdown had been expected as consumers rushed to buy homes ahead of the July 1 implementation in those provinces. The HST only applies to services used in purchasing and selling an existing home, such as real estate commission, and not the actual sale price.
In British Columbia sales dropped 14.1% from a month ago on a seasonally adjusted basis and Ontario the decline was 8%. The two provinces accounted for 85% of the the change in national activity.
“The soft sales figures we’re seeing right now can be attributed in part to accelerated home purchases earlier in the year,” said Georges Pahud, CREA president.
The group noted the drops in sales was smaller than in previous months with the Prairie provinces and Quebec staying even with June levels.
However, sales are showing they cannot keep pace with the blistering activity of the second half of 2009. Actual July sales dropped 30% from a year ago when activity set a record for the month. Still, for the first seven months of this year sales remain up 5.6% from a year ago. CREA warned activity will be off for the rest of of 2010 on a year-over-year basis.
“Activity may remain at lower levels for some time, but ultimately we expect a more stable market to emerge, with demand coming back into line with economic fundamentals, said Mr. Pahud. “While the outlook for economic and job growth remains generally positive nationally and in all provinces, the pace of the recovery will vary by region.”
The housing market continues to get a boost from supply dropping which is expected to keep prices stable. The seasonally adjusted number of new residential listings fell 7.2% in July from June — the third consecutive month-over-month decrease and the steepest drop in more than a decade.
But the impact on prices, which are the now relatively flat, was minimal. The average price of a homes sold in July was $330,351, just a 1% increase from a year. Again, CREA said the lack of activity in B.C. and Ontario, which included two of the country’s most expensive marketed, likely skewed average prices down.
On province-by-province basis, prices also dropped in Nova Scotia and Prince Edward Island but every other province had gains above the national average.
Overall inventory is climbing. The number of months of inventory, which represents the number of months it would take to sell current inventories at the current rate of sales activity, was seven month in July. A year ago the number was 4.4 months.
© Copyright (c) National Post
The Ottawa-based group, which represents 100 boards across the country, said July sales plunged 6.8% on a seasonally adjusted basis from a month ago, a decline “almost entirely the result of fewer sales in British Columbia and Ontario.”
The slowdown had been expected as consumers rushed to buy homes ahead of the July 1 implementation in those provinces. The HST only applies to services used in purchasing and selling an existing home, such as real estate commission, and not the actual sale price.
In British Columbia sales dropped 14.1% from a month ago on a seasonally adjusted basis and Ontario the decline was 8%. The two provinces accounted for 85% of the the change in national activity.
“The soft sales figures we’re seeing right now can be attributed in part to accelerated home purchases earlier in the year,” said Georges Pahud, CREA president.
The group noted the drops in sales was smaller than in previous months with the Prairie provinces and Quebec staying even with June levels.
However, sales are showing they cannot keep pace with the blistering activity of the second half of 2009. Actual July sales dropped 30% from a year ago when activity set a record for the month. Still, for the first seven months of this year sales remain up 5.6% from a year ago. CREA warned activity will be off for the rest of of 2010 on a year-over-year basis.
“Activity may remain at lower levels for some time, but ultimately we expect a more stable market to emerge, with demand coming back into line with economic fundamentals, said Mr. Pahud. “While the outlook for economic and job growth remains generally positive nationally and in all provinces, the pace of the recovery will vary by region.”
The housing market continues to get a boost from supply dropping which is expected to keep prices stable. The seasonally adjusted number of new residential listings fell 7.2% in July from June — the third consecutive month-over-month decrease and the steepest drop in more than a decade.
But the impact on prices, which are the now relatively flat, was minimal. The average price of a homes sold in July was $330,351, just a 1% increase from a year. Again, CREA said the lack of activity in B.C. and Ontario, which included two of the country’s most expensive marketed, likely skewed average prices down.
On province-by-province basis, prices also dropped in Nova Scotia and Prince Edward Island but every other province had gains above the national average.
Overall inventory is climbing. The number of months of inventory, which represents the number of months it would take to sell current inventories at the current rate of sales activity, was seven month in July. A year ago the number was 4.4 months.
© Copyright (c) National Post
Monday, August 9, 2010
Title Insurance for Real Estate in Canada
Title insurance is becoming more popular in Canada with many lenders demanding it and many lawyers advising real estate buyers purchase it. If you're unfamiliar with title insurance this article will break it down for ease of understanding.
Title insurance is becoming more popular in Canada with many lenders demanding it and many lawyers advising real estate buyers purchase it. If you’re unfamiliar with title insurance this article will break it down for ease of understanding.
However, if you are thinking about buying real estate in Canada for investment purposes, as a retirement home or for vacations you should discuss your own personal need for title insurance with the lawyer you employ to look after your interests throughout the purchase process.
You may already be familiar with the term ‘title deed’ and understand that the holder of a title deed is the legal owner of the property the deed relates to. ‘Title’ is actually the legal term for property ownership. When you purchase a property in Canada searches and surveys are carried out on your behalf against the property and also the title of the home you’re interested in. The searches look at whether the title is clean or whether the property to which it relates has outstanding debts or issues against it.
When you buy real estate in Canada you should employ an independent lawyer to undertake these searches for you, however when a sale is closed not all searches may necessarily have been completed, and the results of some searches may be contested at a later date. It is in circumstances like this that issues can arise. A purchaser may find out at a date after the sale has been closed that the property they thought had clean title actually has debts or outstanding legal claims against it. In its most basic form, title insurance protects the home owner and/or mortgage lender against such occurrences.
If the purchaser takes out title insurance they are usually covered for any ‘loss or damage’ sustained if a claim that is covered under the terms of the policy is made. The terms of the policy usually cover search and survey irregularities, claims which may lead to the removal of pre-existing structures such as outbuildings, extensions, garages etc., a claim that arises due to fraud, forgery or duress, problems relating to rights of-way, pedestrian or car access etc., etc. The insurance company cover pre-existing but undiscovered risks and as with all insurance policies there are certain exemptions and excesses that you will need to understand and be happy with before you take out the policy.
If a lender requires insurance be taken out it is usually only required for the duration of the loan. If the purchaser takes out title insurance they can have it for any term and even extend it so that the policy remains in place if the insured wills the property to children after his/her death or so that it covers the new owner if the property is transferred following a sale - this usually incurs a small extra fee however.
In Canada the premium for title insurance is usually calculated at the time of the sale of the house and it is payable once by the purchaser. Certain cases exist where the vendor pays for it, certain cases exist where both the lender and the purchaser are covered by the same policy.
If you’re about to venture into the Canadian real estate market make sure you speak to a lawyer or trusted individual about your need to take out this type of insurance policy.
Taken from http://www.shelteroffshore.com/
Title insurance is becoming more popular in Canada with many lenders demanding it and many lawyers advising real estate buyers purchase it. If you’re unfamiliar with title insurance this article will break it down for ease of understanding.
However, if you are thinking about buying real estate in Canada for investment purposes, as a retirement home or for vacations you should discuss your own personal need for title insurance with the lawyer you employ to look after your interests throughout the purchase process.
You may already be familiar with the term ‘title deed’ and understand that the holder of a title deed is the legal owner of the property the deed relates to. ‘Title’ is actually the legal term for property ownership. When you purchase a property in Canada searches and surveys are carried out on your behalf against the property and also the title of the home you’re interested in. The searches look at whether the title is clean or whether the property to which it relates has outstanding debts or issues against it.
When you buy real estate in Canada you should employ an independent lawyer to undertake these searches for you, however when a sale is closed not all searches may necessarily have been completed, and the results of some searches may be contested at a later date. It is in circumstances like this that issues can arise. A purchaser may find out at a date after the sale has been closed that the property they thought had clean title actually has debts or outstanding legal claims against it. In its most basic form, title insurance protects the home owner and/or mortgage lender against such occurrences.
If the purchaser takes out title insurance they are usually covered for any ‘loss or damage’ sustained if a claim that is covered under the terms of the policy is made. The terms of the policy usually cover search and survey irregularities, claims which may lead to the removal of pre-existing structures such as outbuildings, extensions, garages etc., a claim that arises due to fraud, forgery or duress, problems relating to rights of-way, pedestrian or car access etc., etc. The insurance company cover pre-existing but undiscovered risks and as with all insurance policies there are certain exemptions and excesses that you will need to understand and be happy with before you take out the policy.
If a lender requires insurance be taken out it is usually only required for the duration of the loan. If the purchaser takes out title insurance they can have it for any term and even extend it so that the policy remains in place if the insured wills the property to children after his/her death or so that it covers the new owner if the property is transferred following a sale - this usually incurs a small extra fee however.
In Canada the premium for title insurance is usually calculated at the time of the sale of the house and it is payable once by the purchaser. Certain cases exist where the vendor pays for it, certain cases exist where both the lender and the purchaser are covered by the same policy.
If you’re about to venture into the Canadian real estate market make sure you speak to a lawyer or trusted individual about your need to take out this type of insurance policy.
Taken from http://www.shelteroffshore.com/
Misconceptions about HST slowing home sales: poll
Realtors say the new tax -- which does not apply to the purchase price of resale homes -- is a bigger threat than rising interest rates
By Garry Marr, Postmedia News August 6, 2010
Royal LePage Real Estate Services says almost half of its agents believe the main reason for the cooling housing market is a public misconception about how the harmonized sales tax affects home sales.
The company conducted an online-only poll of its realtors at the end of July -- almost a month after the HST went into effect in British Columbia and Ontario -- and found that 43.9 per cent of the 769 respondents in those provinces blamed the new tax for the downturn. The HST was considered a bigger threat than rising interest rates despite two recent quarter-point hikes, Royal LePage said.
Even before the HST was introduced in B.C. and Ontario, sales in the second quarter of this year were down 13.3 per cent from the first quarter, on a seasonally adjusted basis, according to the Canadian Real Estate Association. June sales dropped 8.2 per cent from May.
CREA said the national average sales price rose just 4.9 per cent from a year ago to $342,662 in June.
"We wanted to understand the impact HST has had since it was introduced, and what we found is that there is a need to better educate home buyers and sellers to ensure they understand when the HST is applicable," said Phil Soper, chief executive of Royal LePage. "According to our realtors who work in B.C. and Ontario communities every day, misconceptions about the HST are having an effect on the market in both provinces."
The HST applies to newly built homes with exemptions up to a certain amount in both provinces. But it does not apply to the purchase price of resale homes. It does apply to the fees for services and commissions associated with any real estate transaction. New homes represent less than 10 per cent of business, says Royal LePage.
Agents indicated consumers don't seem to understand how the tax works. When asked to provide examples of comments heard from buyers and sellers regarding the HST and its effect on the housing market, 46.7 per cent of agents indicated that confusion about HST remains more than one month after its introduction.
"Among the most common responses to the survey's open-ended questions were that many home buyers incorrectly believe HST applies to the sale price of resale properties," says LePage.
Interest rates were only cited by 28.4 per cent of agents as the biggest threat to the housing market. Overall, 86 per cent of agents reported the HST is affecting their business some way.
"While we predicted that the prospect of rising interest rates would put a damper on the housing market, our agents are finding that the HST is actually having the greater impact on buyer behaviour, at least in the short-term," said Soper. "Our take-away from this survey is that we need to do more as an industry to educate consumers about the HST."
The Vancouver Sun
By Garry Marr, Postmedia News August 6, 2010
Royal LePage Real Estate Services says almost half of its agents believe the main reason for the cooling housing market is a public misconception about how the harmonized sales tax affects home sales.
The company conducted an online-only poll of its realtors at the end of July -- almost a month after the HST went into effect in British Columbia and Ontario -- and found that 43.9 per cent of the 769 respondents in those provinces blamed the new tax for the downturn. The HST was considered a bigger threat than rising interest rates despite two recent quarter-point hikes, Royal LePage said.
Even before the HST was introduced in B.C. and Ontario, sales in the second quarter of this year were down 13.3 per cent from the first quarter, on a seasonally adjusted basis, according to the Canadian Real Estate Association. June sales dropped 8.2 per cent from May.
CREA said the national average sales price rose just 4.9 per cent from a year ago to $342,662 in June.
"We wanted to understand the impact HST has had since it was introduced, and what we found is that there is a need to better educate home buyers and sellers to ensure they understand when the HST is applicable," said Phil Soper, chief executive of Royal LePage. "According to our realtors who work in B.C. and Ontario communities every day, misconceptions about the HST are having an effect on the market in both provinces."
The HST applies to newly built homes with exemptions up to a certain amount in both provinces. But it does not apply to the purchase price of resale homes. It does apply to the fees for services and commissions associated with any real estate transaction. New homes represent less than 10 per cent of business, says Royal LePage.
Agents indicated consumers don't seem to understand how the tax works. When asked to provide examples of comments heard from buyers and sellers regarding the HST and its effect on the housing market, 46.7 per cent of agents indicated that confusion about HST remains more than one month after its introduction.
"Among the most common responses to the survey's open-ended questions were that many home buyers incorrectly believe HST applies to the sale price of resale properties," says LePage.
Interest rates were only cited by 28.4 per cent of agents as the biggest threat to the housing market. Overall, 86 per cent of agents reported the HST is affecting their business some way.
"While we predicted that the prospect of rising interest rates would put a damper on the housing market, our agents are finding that the HST is actually having the greater impact on buyer behaviour, at least in the short-term," said Soper. "Our take-away from this survey is that we need to do more as an industry to educate consumers about the HST."
The Vancouver Sun
Thursday, August 5, 2010
Psychology of Home Investing
By Lois A. Vitt, Ph.D.
A major principle to keep in mind when considering whether to become an investor in housing is risk tolerance. To answer the question of your risk tolerance level in home investing consider the factual information: Your age, income, experience, savings, future need for cash, and investing time horizon. They are important considerations to realize about yourself.
Also give some time to consider other realities like market timing, mortgage interest rates, inflation, credit availability and rental and selling markets, over which an aspiring investor has no direct control. Like buying stocks “on sale” in a down market, a savvy real estate investor can decide whether a fluctuating marketplace in housing offers investment opportunities that are simply unavailable in a marketplace that is roaring upward.
If we listen to the experts in real estate investing, emotion should be locked out for investors in second homes. “Gee that is a gorgeous home—just look at that view,” is not appropriate, they might say, until after you’ve run the numbers and made an informed investment decision. In other words, don’t “fall in love” with your investment real estate until it has earned its way into your affections. Love of a home or other residential housing, however, does sway many second home purchasers and this type of emotion can lead to serious mistakes.
The same excitement, anticipation, and anxieties are often present when buying a second home, especially if its purpose in our lives is to bring relaxation, recreation, and social enjoyment as a place for vacationing. Still, the cautions that exist in our primary home purchases must also be present when considering a second home. In addition, lessons from the psychology of investing in the capital markets also apply to investing in real estate as written about by David Dreman in his book “Investor Overreaction,” and Richard A. Geist in “The Emotions of Risk.”
People in general are over-confident when it comes to their estimates of the earnings potential of their investments. Of course there are always nice surprises, but chances are that you will be overoptimistic about the investment potential of your second home.
In real estate, like the stock market, people forget. Not only are homeowners overoptimistic about the prospective price appreciation of their homes, analysts and other experts are overoptimistic about general market trends.
The evaluation of risk, by definition, contains important subjective elements and considerations. It is not purely rational, nor can it be if we are to be helped in our investment evaluations and decisions by our “emotional intelligence.”
Fear and greed are the psychological concepts that drive the markets it is often said, but psychologist Lola Lopes insists that most investors react less to greed and more to hope. Nowhere is that more visible than in both primary and second home investment.
“Fear induces an investor to focus on events that are especially unfavorable, while hope induces him or her to focus on events that are favorable,” writes Hersh Shefrin in discussing the theories of Dr. Lopes. The fact that a homeowner will insist that his or her home is still worth its full value, despite a decline in neighborhood prices or even the overall economy, isn’t based in greed. But is a hope as Dr. Lopes knows well. Only if and when it becomes absolutely necessary to sell a home in a down market will a homeowner finally, reluctantly, accept the fact that the value of his or her home is less than it was before.
Second Homes as Rentals
Homes held strictly for rental, and not for personal use, are diverse and defy categorizing. A rental home can be a cooperative in a big city, a duplex in an aging neighborhood, a bungalow in a suburb, farmland in a rural area, or a condo unit in a coast resort.
The owners of these properties can live anywhere. Although many investors prefer to own property they can access easily, many people who relocate choose to rent the home they are leaving rather than sell it. With enough cash flow, price appreciation and/or property management, this can be a good investment decision.
Rental property investing is a small business that can help owners gain financial independence. If you choose to hold or purchase one or more investment homes to rent, you are your own boss. You can set your own goals, make your own decisions, and work at your own pace. The return from a rented home can be in cash flow or in price appreciation or both. As long as the home is cared for and your carrying and maintenance costs are covered, you have little to worry about, except a steep decline in the housing market just when you want to sell.
Published August 5, 2010
About the Author
Lois A. Vitt is a housing expert and financial sociologist, and is the author of "10 Secrets to Successful Home Buying and Selling", the first book to demystify the psychological forces behind our housing decisions. To learn more about Lois and this book, visit www.RealtyStudies.com.
A major principle to keep in mind when considering whether to become an investor in housing is risk tolerance. To answer the question of your risk tolerance level in home investing consider the factual information: Your age, income, experience, savings, future need for cash, and investing time horizon. They are important considerations to realize about yourself.
Also give some time to consider other realities like market timing, mortgage interest rates, inflation, credit availability and rental and selling markets, over which an aspiring investor has no direct control. Like buying stocks “on sale” in a down market, a savvy real estate investor can decide whether a fluctuating marketplace in housing offers investment opportunities that are simply unavailable in a marketplace that is roaring upward.
If we listen to the experts in real estate investing, emotion should be locked out for investors in second homes. “Gee that is a gorgeous home—just look at that view,” is not appropriate, they might say, until after you’ve run the numbers and made an informed investment decision. In other words, don’t “fall in love” with your investment real estate until it has earned its way into your affections. Love of a home or other residential housing, however, does sway many second home purchasers and this type of emotion can lead to serious mistakes.
The same excitement, anticipation, and anxieties are often present when buying a second home, especially if its purpose in our lives is to bring relaxation, recreation, and social enjoyment as a place for vacationing. Still, the cautions that exist in our primary home purchases must also be present when considering a second home. In addition, lessons from the psychology of investing in the capital markets also apply to investing in real estate as written about by David Dreman in his book “Investor Overreaction,” and Richard A. Geist in “The Emotions of Risk.”
People in general are over-confident when it comes to their estimates of the earnings potential of their investments. Of course there are always nice surprises, but chances are that you will be overoptimistic about the investment potential of your second home.
In real estate, like the stock market, people forget. Not only are homeowners overoptimistic about the prospective price appreciation of their homes, analysts and other experts are overoptimistic about general market trends.
The evaluation of risk, by definition, contains important subjective elements and considerations. It is not purely rational, nor can it be if we are to be helped in our investment evaluations and decisions by our “emotional intelligence.”
Fear and greed are the psychological concepts that drive the markets it is often said, but psychologist Lola Lopes insists that most investors react less to greed and more to hope. Nowhere is that more visible than in both primary and second home investment.
“Fear induces an investor to focus on events that are especially unfavorable, while hope induces him or her to focus on events that are favorable,” writes Hersh Shefrin in discussing the theories of Dr. Lopes. The fact that a homeowner will insist that his or her home is still worth its full value, despite a decline in neighborhood prices or even the overall economy, isn’t based in greed. But is a hope as Dr. Lopes knows well. Only if and when it becomes absolutely necessary to sell a home in a down market will a homeowner finally, reluctantly, accept the fact that the value of his or her home is less than it was before.
Second Homes as Rentals
Homes held strictly for rental, and not for personal use, are diverse and defy categorizing. A rental home can be a cooperative in a big city, a duplex in an aging neighborhood, a bungalow in a suburb, farmland in a rural area, or a condo unit in a coast resort.
The owners of these properties can live anywhere. Although many investors prefer to own property they can access easily, many people who relocate choose to rent the home they are leaving rather than sell it. With enough cash flow, price appreciation and/or property management, this can be a good investment decision.
Rental property investing is a small business that can help owners gain financial independence. If you choose to hold or purchase one or more investment homes to rent, you are your own boss. You can set your own goals, make your own decisions, and work at your own pace. The return from a rented home can be in cash flow or in price appreciation or both. As long as the home is cared for and your carrying and maintenance costs are covered, you have little to worry about, except a steep decline in the housing market just when you want to sell.
Published August 5, 2010
About the Author
Lois A. Vitt is a housing expert and financial sociologist, and is the author of "10 Secrets to Successful Home Buying and Selling", the first book to demystify the psychological forces behind our housing decisions. To learn more about Lois and this book, visit www.RealtyStudies.com.
Understanding house prices
A home may be one of the biggest investments you ever make. Saving up a down payment is just the first step. Find out more.
What factors affect the value of a home?
•Location: Real estate people always say “Location, location, location.” That’s because the area you live in will be the biggest factor affecting your home’s price. It’s smart to buy a home where housing prices are likely to increase. Also, the people who may buy your home from you one day may be willing to pay more for a home that is close to schools, sports centres, stores, services, and so on. Keep that in mind as you look.
•The condition of the home and the property it is on: Does the home need a lot of repairs? How is the roof, plumbing, and electrical wiring? A home in good repair may be worth more. Also, the condition of the outside of the home, the lawn, gardens, driveway, and trees will all affect the value of a home. These are the first things that buyers see, and are together known as curb appeal.
•Renovations and updates: An older home might need some work to keep it safe, modern, and comfortable. If you are buying at a home that has had some renovations, check the quality. When you do work on a home you own, do it as well as you can. Poor work can lower the value.
•The economy: There are some things you can’t control that affect house prices, like interest rates. Higher interest rates mean it costs more for a mortgage, so fewer people buy homes. When that happens, the prices of homes can fall. Lower interest rates, on the other hand, can boost buying and drive prices up. House prices often go up for a while, and then come down a bit. Try to find out as much as you can about how prices are changing, or may change, when deciding to buy or sell a home. Often there will be stories in the paper about housing prices.
How much is my home worth today?
If you’re considering buying a home, or you just bought one, you know how much it’s worth. But if you’ve owned your home for a while, its value has probably changed. Here’s how you can find out how much it’s worth now:
•Call a real estate agent: Ask them for an estimate of your home’s value. You may be able to get an agent to do this for free, because they hope to get your business in the future.
•Ask an appraiser: Your bank or a real estate agent should know a number of appraisers. Banks use them to estimate house values before they approve mortgages. You can also look in the yellow pages. An appraiser will charge a fee for the service.
•Check to see what other homes in your area have sold for recently: Compare your home with similar ones that have sold. Unless you keep up with what’s happening in your area, this information may be hard to get. Ask your real estate agent if you can’t find it yourself.
How much will my home be worth in the future?
To estimate a home’s future value, you will have to do some informed guessing. Start with finding out what has happened to prices in your location over several years.
This chart shows how house and condo prices in several Canadian cities changed from 1990 to 2010. Note that real estate prices in Toronto went down a lot between 1990 and 1996 and took a number of years to climb back. Still, the average growth for these cities since 1990 was almost 8 per cent, almost double the historical average of 5 per cent a year.
What factors affect the value of a home?
•Location: Real estate people always say “Location, location, location.” That’s because the area you live in will be the biggest factor affecting your home’s price. It’s smart to buy a home where housing prices are likely to increase. Also, the people who may buy your home from you one day may be willing to pay more for a home that is close to schools, sports centres, stores, services, and so on. Keep that in mind as you look.
•The condition of the home and the property it is on: Does the home need a lot of repairs? How is the roof, plumbing, and electrical wiring? A home in good repair may be worth more. Also, the condition of the outside of the home, the lawn, gardens, driveway, and trees will all affect the value of a home. These are the first things that buyers see, and are together known as curb appeal.
•Renovations and updates: An older home might need some work to keep it safe, modern, and comfortable. If you are buying at a home that has had some renovations, check the quality. When you do work on a home you own, do it as well as you can. Poor work can lower the value.
•The economy: There are some things you can’t control that affect house prices, like interest rates. Higher interest rates mean it costs more for a mortgage, so fewer people buy homes. When that happens, the prices of homes can fall. Lower interest rates, on the other hand, can boost buying and drive prices up. House prices often go up for a while, and then come down a bit. Try to find out as much as you can about how prices are changing, or may change, when deciding to buy or sell a home. Often there will be stories in the paper about housing prices.
How much is my home worth today?
If you’re considering buying a home, or you just bought one, you know how much it’s worth. But if you’ve owned your home for a while, its value has probably changed. Here’s how you can find out how much it’s worth now:
•Call a real estate agent: Ask them for an estimate of your home’s value. You may be able to get an agent to do this for free, because they hope to get your business in the future.
•Ask an appraiser: Your bank or a real estate agent should know a number of appraisers. Banks use them to estimate house values before they approve mortgages. You can also look in the yellow pages. An appraiser will charge a fee for the service.
•Check to see what other homes in your area have sold for recently: Compare your home with similar ones that have sold. Unless you keep up with what’s happening in your area, this information may be hard to get. Ask your real estate agent if you can’t find it yourself.
How much will my home be worth in the future?
To estimate a home’s future value, you will have to do some informed guessing. Start with finding out what has happened to prices in your location over several years.
This chart shows how house and condo prices in several Canadian cities changed from 1990 to 2010. Note that real estate prices in Toronto went down a lot between 1990 and 1996 and took a number of years to climb back. Still, the average growth for these cities since 1990 was almost 8 per cent, almost double the historical average of 5 per cent a year.
More signs the Toronto housing market is cooling off
The Toronto Star
Published On Thu Aug 5 2010
By Tony Wong
Business Reporter Home sales in the Toronto market are cooling rapidly off in the second half of the year, with a 34 per cent drop in July compared to a year earlier.
This is the third consecutive month of falling sales, according to figures released by the Toronto Real Estate Board today.
In June, sales had dipped by 23 per cent. But this has been the steepest drop yet, with sales dipping to 6,564 in July compared with 9,967 a year earlier.
“The level of July sales remained below the expected long term trend. The market has become more balanced,” said TREB president Bill Johnston.
Total sales through the first seven months are still up by 12 per cent, thanks to record sales during the first half of the year.
The average price for July transactions was $420,482, representing a six per cent increase over last year.
Meanwhile, building permit figures for Toronto released by Statistics Canada today also show that developers are less bullish about the housing market moving forward.
Building permits in the Toronto area fell by 15.3 per cent in June over May thanks to a drop in residential building intentions in both the single detached and high rise segments. Non-residential buildings such as commercial and industrial projects showed an increase, but not enough to offset the drop in residential permits.
Published On Thu Aug 5 2010
By Tony Wong
Business Reporter Home sales in the Toronto market are cooling rapidly off in the second half of the year, with a 34 per cent drop in July compared to a year earlier.
This is the third consecutive month of falling sales, according to figures released by the Toronto Real Estate Board today.
In June, sales had dipped by 23 per cent. But this has been the steepest drop yet, with sales dipping to 6,564 in July compared with 9,967 a year earlier.
“The level of July sales remained below the expected long term trend. The market has become more balanced,” said TREB president Bill Johnston.
Total sales through the first seven months are still up by 12 per cent, thanks to record sales during the first half of the year.
The average price for July transactions was $420,482, representing a six per cent increase over last year.
Meanwhile, building permit figures for Toronto released by Statistics Canada today also show that developers are less bullish about the housing market moving forward.
Building permits in the Toronto area fell by 15.3 per cent in June over May thanks to a drop in residential building intentions in both the single detached and high rise segments. Non-residential buildings such as commercial and industrial projects showed an increase, but not enough to offset the drop in residential permits.
Wednesday, August 4, 2010
Mortgages can have downside
Published: August 03, 2010 3:00 PM in the Comox Valley Record
“Beware of more than just the rates when you’re shopping for a mortgage,” say mortgage brokers Paul Healey and Karen Ewing, partners at Invis in Comox Valley.
With rates near all-time lows, many people are now seeking mortgages for a home purchase, to help with debt consolidation through a home equity loan, or even for an investment property purchased during this buyer’s real estate market.
Unfortunately, too many people are wooed by low rates and don’t realize there are huge differences between one company’s mortgage and another — differences that can be costly if a consumer is not careful.
Consumers should talk with a mortgage broker who will ask the right questions before researching the best mortgage products available for each individual’s unique situation.
For instance, the terms of some loans include huge penalties for pre-payment, even if someone is selling the property.
Most mortgages charge the borrower the greater of three months’ interest or the “interest differential,” which is the difference between what the borrower would have paid in interest and what the lender can get by relending the money to a new borrower for that time period.
These penalties can be substantial and truly blind-side a borrower. For example, when a borrower wants to sell his house two years into a five-year mortgage, the company can charge the difference between the rate on the mortgage and the rate being offered on new mortgages. This calculation can differ dramatically from lender to lender.
So, if prepayment or a future move may be in the picture, the broker will look for a mortgage that allows pre-pays or does not have an interest-differential penalty.
Pre-payment penalties are not the only mortgage trap. Some people are sadly surprised when they want to refinance for some reason, but the mortgage won’t allow it.
Another important term to consider is “portability.” That simply means that a borrower can take his or her mortgage with him upon selling the property, which is a significant perk if rates go up.
The rate and terms of the mortgage are simply moved over to the new property and carry on as it was. An experienced broker can review these with a borrower to be sure the loan fits the borrower’s needs.
Even when a mortgage is portable, there may be limitations. For instance, some lenders will only lend for a home in a certain geographic area. If the borrower has any thought of moving during the time of the loan, portability should be discussed with the broker to avoid being shocked when that is not allowed.
“Beware of more than just the rates when you’re shopping for a mortgage,” say mortgage brokers Paul Healey and Karen Ewing, partners at Invis in Comox Valley.
With rates near all-time lows, many people are now seeking mortgages for a home purchase, to help with debt consolidation through a home equity loan, or even for an investment property purchased during this buyer’s real estate market.
Unfortunately, too many people are wooed by low rates and don’t realize there are huge differences between one company’s mortgage and another — differences that can be costly if a consumer is not careful.
Consumers should talk with a mortgage broker who will ask the right questions before researching the best mortgage products available for each individual’s unique situation.
For instance, the terms of some loans include huge penalties for pre-payment, even if someone is selling the property.
Most mortgages charge the borrower the greater of three months’ interest or the “interest differential,” which is the difference between what the borrower would have paid in interest and what the lender can get by relending the money to a new borrower for that time period.
These penalties can be substantial and truly blind-side a borrower. For example, when a borrower wants to sell his house two years into a five-year mortgage, the company can charge the difference between the rate on the mortgage and the rate being offered on new mortgages. This calculation can differ dramatically from lender to lender.
So, if prepayment or a future move may be in the picture, the broker will look for a mortgage that allows pre-pays or does not have an interest-differential penalty.
Pre-payment penalties are not the only mortgage trap. Some people are sadly surprised when they want to refinance for some reason, but the mortgage won’t allow it.
Another important term to consider is “portability.” That simply means that a borrower can take his or her mortgage with him upon selling the property, which is a significant perk if rates go up.
The rate and terms of the mortgage are simply moved over to the new property and carry on as it was. An experienced broker can review these with a borrower to be sure the loan fits the borrower’s needs.
Even when a mortgage is portable, there may be limitations. For instance, some lenders will only lend for a home in a certain geographic area. If the borrower has any thought of moving during the time of the loan, portability should be discussed with the broker to avoid being shocked when that is not allowed.
House prices now 4.2% over peak: A regional breakdown
John WoodsTHE GLOBE AND MAIL
House prices still strong
Canadian house prices rose 1.3 per cent in May from a month earlier, and now stand 4.2 per cent above their pre-recession peak, according to a Teranet-National Bank composite house price index. It marked the 13th straight month of increases and the second that prices rose in each of the six regions it covers. National Bank economist Marc Pinsonneault contrasted that to the real estate market in the United States, where prices are down almost 30 per cent from their peak. In Canada, year over year, the index is up 13.6 per cent. The index differs from the measure used by the Canadian Real Estate Association.
"But we do not believe that acceleration in the Teranet-National Bank index will be sustained," he said in a research note. "... The number of existing homes sold has declined in each of the three months ending last June, and it did so to a much larger extent than the number of new listings. This heralds a deceleration in home price inflation, especially since a harmonized sales tax (HST) was introduced on July 1 in Ontario and B.C."
Among the gains:
•Ottawa, 2.3 per cent month over month, 11.4 per cent year over year
•Montreal, 1.8 per cent and 8.5 per cent
•Vancouver, 1.2 per cent and 17.1 per cent
•Calgary, 1.2 per cent and 7.8 per cent
•Toronto, 1.1 per cent and 16 per cent
•Halifax, 0.7 per cent and 5.6 per cent
•Ottawa, 2.3 per cent month over month, 11.4 per cent year over year
•Montreal, 1.8 per cent and 8.5 per cent
•Vancouver, 1.2 per cent and 17.1 per cent
•Calgary, 1.2 per cent and 7.8 per cent
•Toronto, 1.1 per cent and 16 per cent
•Halifax, 0.7 per cent and 5.6 per cent
Monday, August 2, 2010
Why Canadians aren’t pumped about saving
Study finds a disconnect between our beliefs and behaviours when it comes to retirement planning
Dianne Nice
Globe and Mail
Published on Sunday, Aug. 01, 2010 12:00AM EDT
Dianne Nice
Globe and Mail
Published on Sunday, Aug. 01, 2010 12:00AM EDT
Saving for retirement can be a bit like trying to get in shape: You need to start slowly, work at it regularly and don’t expect to see immediate results.
But like those fad-diet articles that line the checkout aisles, with their countless tips for losing weight, retirement savings options can be overwhelming. And when your tummy’s rumbling, it’s tempting to just buy a chocolate bar today and put off the diet – or the saving – until tomorrow.
The same psychological barriers that prevent us from shaping up may also be keeping Canadians from bulking up their retirement savings, according to a new report by the BMO Retirement Institute. The report, based on a Strategic Counsel survey of 2,034 Canadians 35 years of age or older, suggests certain behavioural roadblocks, including “paralysis of choice” and “immediate gratification,” are creating a disconnect between what Canadians believe they should be doing to prepare for retirement and what they are actually doing.
Almost 90 per cent of Canadians believe retirement planning should begin before the age of 35, according to the poll. Yet 40 per cent of non-retirees admit they have done no retirement planning at all. The problem isn’t ignorance, says Tina Di Vito, head of BMO’s Retirement Institute. “We know what we need to do, we know when we should do it, we just don’t make it a priority.”
More than eight in 10 non-retirees who have not started saving said they are more concerned about current needs, such as their mortgages and other debts, than their retirement.
This is particularly true for those aged 35 to 44, who are more likely to say they overspend (53 per cent), have debt (88 per cent) and worry about it (25 per cent). Of that group, half said they felt they had fallen behind in their retirement planning, and 44 per cent said they were dissatisfied with the amount they had saved.
“Clearly, this age bracket represents a period when people are buying houses, paying mortgages and raising children, and the thought of diverting funds to retirement takes a back seat,” the report states. “Yet it is also a crucial period of wealth accumulation – a stage of life still far enough away from retirement to permit the magic of compound interest to play its role.”
More than 40 per cent of non-retirees admitted they spend more than they should, saying they wanted the “good things in life.” And more than a quarter said they felt they should “eat, drink and be merry” because they may not live to old age.
Lower-income respondents were more likely to report that they felt overwhelmed by too much information, yet they also said they find pension plans, RRSPs and other retirement savings accounts confusing.
“The idea of starting a regular retirement savings program can be overwhelming for many people,” Ms. Di Vito said.
As with exercising, however, no pain, no gain. Once you establish a routine, your healthy habit can become second nature.
“The psychology of doing something puts you in the right frame of mind and helps to establish discipline,” Ms. Di Vito said. “When you can, increase the amount you set aside. The chances are, if you start something, like contributing to an RRSP, you’re going to keep doing it.”
But like those fad-diet articles that line the checkout aisles, with their countless tips for losing weight, retirement savings options can be overwhelming. And when your tummy’s rumbling, it’s tempting to just buy a chocolate bar today and put off the diet – or the saving – until tomorrow.
The same psychological barriers that prevent us from shaping up may also be keeping Canadians from bulking up their retirement savings, according to a new report by the BMO Retirement Institute. The report, based on a Strategic Counsel survey of 2,034 Canadians 35 years of age or older, suggests certain behavioural roadblocks, including “paralysis of choice” and “immediate gratification,” are creating a disconnect between what Canadians believe they should be doing to prepare for retirement and what they are actually doing.
Almost 90 per cent of Canadians believe retirement planning should begin before the age of 35, according to the poll. Yet 40 per cent of non-retirees admit they have done no retirement planning at all. The problem isn’t ignorance, says Tina Di Vito, head of BMO’s Retirement Institute. “We know what we need to do, we know when we should do it, we just don’t make it a priority.”
More than eight in 10 non-retirees who have not started saving said they are more concerned about current needs, such as their mortgages and other debts, than their retirement.
This is particularly true for those aged 35 to 44, who are more likely to say they overspend (53 per cent), have debt (88 per cent) and worry about it (25 per cent). Of that group, half said they felt they had fallen behind in their retirement planning, and 44 per cent said they were dissatisfied with the amount they had saved.
“Clearly, this age bracket represents a period when people are buying houses, paying mortgages and raising children, and the thought of diverting funds to retirement takes a back seat,” the report states. “Yet it is also a crucial period of wealth accumulation – a stage of life still far enough away from retirement to permit the magic of compound interest to play its role.”
More than 40 per cent of non-retirees admitted they spend more than they should, saying they wanted the “good things in life.” And more than a quarter said they felt they should “eat, drink and be merry” because they may not live to old age.
Lower-income respondents were more likely to report that they felt overwhelmed by too much information, yet they also said they find pension plans, RRSPs and other retirement savings accounts confusing.
“The idea of starting a regular retirement savings program can be overwhelming for many people,” Ms. Di Vito said.
As with exercising, however, no pain, no gain. Once you establish a routine, your healthy habit can become second nature.
“The psychology of doing something puts you in the right frame of mind and helps to establish discipline,” Ms. Di Vito said. “When you can, increase the amount you set aside. The chances are, if you start something, like contributing to an RRSP, you’re going to keep doing it.”
CREA lowers housing forecast again
Last Updated: Friday, July 30, 2010 12:04 PM ETCBC News
The number of resale homes sold in Canada is forecast to hit 459,600 in 2010, a 1.2 per cent decline from 2009.
A real estate agent puts up a sold sign in front of a house in Toronto in April. The Canadian Real Estate Association expects home prices to decrease in 2011. (Darren Calabrese/Canadian Press)
In its latest housing forecast Friday, the Canadian Real Estate Association said weaker sales activity in the key spring homebuying season in Canada's four most populous provinces prompted the downgrade.
"The jump in national sales activity earlier this year likely borrowed from the future," CREA president George Pahud said.
And expected interest rate increases to come will do nothing to stoke the real estate fire that burned brightly during the tail end of the recession.
Sales are projected to drop even further, by 7.3 per cent, to 426,100 units in 2011.
The national average home price is forecast to rise 3.5 per cent in 2010 to $331,600, with increases in all provinces. The national average price is then forecast to ease by 0.9 per cent to $328,600 in 2011.
The agency already lowered its 2010 sales forecast at the start of June. At that time, the agency was expecting 490,600 units to be sold this year.
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