Sunday, August 26, 2012

Housing Market Outlook Q3 2012


New Housing Market outlook is out and there are not too many changes
On a quarterly .basis, growth in the average MLS® price is expected to slow moving forward over the forecast horizon.  Nevertheless, balanced market conditions are expected in most local markets across Canada over the rest of 2012.  This forecast calls for an average price of $368,000 in 2012 (same as in Q1 report) and $377,300 in 2013.

Ontario is posting a reduction in total housing starts.

Looking ahead, balanced market conditions are expected to prevail in most local housing markets and the average MLS® price should grow at a rate close to inflation, or slightly below, through 2012.  However, 2013 will see a moderation in the quarterly price growth path.

A moderating outlook for the existing home market for the remainder of 2012 is expected to lead to moderation in the growth of renovation expenditure in 2012, when compared to 2011. This will give way to a rebound in renovation activity in 2013, supported by stronger growth in employment relative to 2011 and 2012.

Mortgage Rates 

Short-term mortgage rates and variable mortgage rates are expected to remain near historically low levels, which will help support housing demand.  The outlook’s base case also assumes that mortgage rates will remain flat in the short term.

Employment

In the 12 months to June 2012, employment grew by 1.0 per cent (+181,000), while the unemployment rate stood at 7.2 per cent. Over this period, full-time employment rose 1.6 per cent (+221,500), while part-time fell 1.2 per cent (-40,400).  Employment is forecast to grow 1.3 per cent in 2012 and 2.1 per cent in 2013, which will support Canada’s housing sector.

Vacancy Rates

Moving forward, it is expected that there will continue to be modest purposebuilt rental construction and strong rental demand due to high immigration. This, however, will be partly offset by an expanding rented condo market. As a result, vacancy rates across Canada’s metropolitan centres will remain relatively stable this year and next.

Changes to Mortage Insurance Rules

New measures announced for government-backed mortgage insurance will help ensure the sustainability of housing market activity and help stabilize house price growth.

Read full report

Wednesday, August 22, 2012

My Aunt Suzy Has Money!!


This morning I read a very inspiring story by Gary Hibbert, fellow investor and founder of SCH (Smart Home Choice). Hope it will encourage you to take one more step towards your financial freedom. 

There was a couple (Steve and Mary) that had good jobs made enough money for their family to put a roof over their heads, have some home cook meals and take their kids to see a movie from time to time. They both hated their jobs but that did not matter because Steve had an aunt that was very rich. She had told him that he was her favorite nephew out of them all and that they were going to get all of her riches. Once they heard this, they of course flowered her with presents and invited her over for dinner many times throughout the year to make sure she (aunt Suzy) kept them close to heart.
Time went on and Aunt Suzy looked better than ever. You see, Steve and his family line had some great genes. Aunt Suzy was in her sixties while Steve and his wife were in their mid 30′s. It dawned on Steve and Mary one day…. ‘what if Aunt Suzy lives for another 25 years, if she does we’ll be in our 60′s before we even see any of that money?!’

At that moment both Steve and Mary knew they had to make some drastic changes in their lives and they did. As the years went on Steve founded his own company that became very successful and Mary went back to school and landed a job in a career she always wanted. Within the next 5 to 6 years they became financially independent and no longer required the money from aunt Suzy to enjoy the riches of life. Sure enough, aunt Suzy lived until the ripe old age of 95.

When it came time for the reading of the will, Steve and his 6 other siblings sat in on the reading. At this time Steve and Mary were not concerned with any of the money that would be inherited by them since they were financial secure however, his brothers and sisters were not so well off and needed the money. Believe it or not, aunt Suzy had told each and every one of the siblings that they were her favorite niece or nephew. When the will was finally read guess what……. aunt Suzy was penny less!! She was living off the kindness of good fortune of each of the nieces and nephews up until her final day.

So what’s holding you back in life….. who is your aunt Suzy?

Don’t wait for someone to come along to help you. If you don’t design your own life and have your own plans guess what… you will fall into someone else’s plan. You have one life to live so live it to the fullest and don’t be scared to make mistakes. The more problems you have in life is a good thing. It means that you are taking more action in life. They say that God wraps your problems in the form of a gift. It’s up to you to figure out what you are suppose to learn from each of the problems God gives you. 

Saturday, August 11, 2012

HELOC Maximums Reduced to 65% LTV

Home Equity Line of Credit (HELOC) can be a very powerful tool financing your investments. It gives you access to the equity in your properties without actually selling it. Rates are very appealing, in some cases as good as mortgage.
At the moment you can finance up to 85% of your property value through HELOC and use the money to invest other projects. Benefits of HELOC include:
·         Unlike mortgage HELOC is flexible – you can use money when you need it and put it back when you don’t, no penalties or administrative fees.
·         Better yet you can use it for anything you want, like new TV, but hopefully a new investment property.
·         No principal needs to be paid on HELOC, only interest.
However this great vehicle will soon be less accessible. Office of the Superintendent of Financial Institutions Canada (OSFI) obligates federally regulated lenders to limit loan to value ratio to only 65%. Other lenders (such as credit unions) are unusually soon to follow same path.  New rules have to be applied by the end of lender’s fiscal years. That makes the official implementation deadline October 31, 2012 in most cases. But don't count on lenders waiting until then.
OSFI says that existing HELOC holders will be grandfathered. So if you need a 66%-85% LTV HELOC from a bank, get approved now.
Other key points:
  • Borrowers who modify their HELOC after the rule changes take effect will potentially be subject to the new 65% LTV limit. So make sure you have your HELOC set up exactly the way you want it.
  • Borrowers who obtain readvanceable mortgages under the new guidelines can still get them at 80% LTV, but 15% of that will need to be amortizing (i.e., various lenders will still offer you a 65% LTV secured line of credit plus a 15% LTV mortgage, for 80% total)
  • If, under the new regime, you have a readvanceable mortgage with two parts:
  1)  a secured line of credit portion, and
  2)  an additional amortizing mortgage portion
…then the mortgage portion will not bereadvanceable if the line of credit portion is greater than or equal to 65% of your home value. (Note: Different lenders may have different policies when it comes to readvancing under the new rules.)
Let us know if you have any questions on how HELOCs or new rules work!

Monday, August 6, 2012

Decline in sales continues


Greater Toronto REALTORS® reported 7,570 sales in July 2012, representing a decline of 1.5% compared to July 2011. The decline was most pronounced in the condominium apartment segment (down by 13%) and semi-detached houses (14% decline) in the City of Toronto. Total sales in the rest of the Greater Toronto Area (GTA) were up compared to the same period last year.


It’s interesting that though sales were down, new listings were up 11.9% and total active listings are up 16%. This means that supply increased while demand slightly decreased. Well normally this would result in price decrease, but not yet.  The average selling price in July 2012 was $476,947 – up by 4% compared to July 2011. But keep in mind that though prices are still up, the increase is far less than in a month before (up 7.3% vs. year ago) and average over year (7.1% ). This makes July one of the slowest (in terms of price growth month this year.  Of cause there is some effect of new mortgage lending guidelines and the additional upfront cost of the City of Toronto land transfer tax. These factors prompted some households to put their buying decision on hold. But keep an eye on this trend, it might be just summer effect or this might represent general market slowdown if the trend continues.



The only segment that showed price drop was condo apartments in 416-zone (-1%). Detached, semi-detached and townhouses all increase 4-6%. Townhouses in 905 area demonstrated highest increase in number of sales (24%), demonstrating that average price of $357K is still the most popular (i.e. affordable) for an average family.