Is Another Rule Change for Mortgages Coming?

This is important for homeowners. Interest rates went up twice already just this summer. Is it time to 'lock-in' your mortgage if it is on variable rate? Read this article to find out more! Another rule change may be forthcoming in terms of qualifying for a mortgage - as you may already know buyers with less than 20% down payment are required to qualify not on the prevailing market rate but with the BOC 5 year qualifying rate of 4.84% right now which they have termed 'stress test'.. This may soon be extended to those with more than 20% down payment if approved. This will simply mean that it will be harder to qualify for a mortgage since more income will be required than the present way. Is this an incentive enough for buyers or up graders to act sooner than later.

After rate hikes, Canadian housing braces for 'biggest rule change of all time'.  

 by Gary Marr as excerpted from Financial Post

Interest rate hikes might be the last thing the housing market needs as sales in Toronto plunge and Ottawa considers even tougher measures for qualifying for loans.

It didn’t take long for the impact of rising rates to hit the market. People rushed to lenders Thursday to lock in contracts and get pre-approved mortgages after the Bank of Canada raised its overnight lending rate the day before.
While the short-term impact of rising rates usually means a temporary buzz of sales activity, the larger concern is what two hikes in the overnight lending rate in two months – another one is possible in October – will do to a housing industry that has seen its largest market in the Toronto area already under siege from provincial rule changes that targeted investors and foreign buyers.
On the horizon in terms of tighter credit regulations is a new rule from the Office of the Superintendent of Financial Institutions that would target home buyers with down payments of more than 20 per cent with a tough new stress test: they would have to qualify based on a rate 200 basis points above their contract.
“It could be the biggest rule change of all-time,” said Rob McLister, the founder of ratespy.com. The housing market has already been adjusting to changes in the insured market, instituted in 2016, which forced homeowners with less than a 20 per cent downpayment to qualify based on the Bank of Canada five-year qualifying rate as opposed to the one on their contract. That rate is now 4.84 per cent.

The present state of the GTA Real Estate Market

Excerpted from The Toronto Star:
This article is a recap of the state of the housing market in the GTA. After we've been thru a buying frenzy that drove prices up followed by a slow down- this article sort of says it all- that house prices will keep on going up confirming the need for every family to be a homeowner as soon as feasible.

New home sales in GTA plunge, prices soar in July

House prices rose 45% over last year and condos were up 40%.

There were 7,801 new homes on the market in July, a record low, that is down from 16,900 units last year and 28,358 10 years ago.   (Rene Johnston / Toronto Star File Photo)  

By Tess Kalinowski

Real Estate Reporter

Thu., Aug. 24, 2017

Despite a dramatic year-over-year drop in sales volumes of newly constructed home in July, prices in the Toronto region rose, with the industry association saying it expects a record year.

There were 85% fewer single-family homes sold in July compared to the same month last year, according to the Building Industry and Land Development Association (BILD).

But the cost of a detached, semi-detached or townhouse averaged about $1.32 million, a 45 per cent year-over-year increase.

Condos, which accounted for 92 per cent of new home sales in July, also rose in price by 40 per cent to an average of $665,041.

The cost per square foot of an apartment or stacked townhome averaged $764, up from $594 last July.

Article Continued Below

Condos also got bigger, averaging 871 sq. ft., compared to 801 sq. ft. a year ago.

While the number of condos sold was down 35 per cent year over year, the year-to-date sales volume has actually increased 51 per cent and is double the 10-year sales average as more consumers look to condos as an affordable way to get into the housing market.

That's a stark contrast to the 50 per cent year-to-date decline in new single-family home sales, said BILD vice-president of communications Michelle Noble.

July 2017 Resale Housing Market Data With Input From TREB President

The chart below shows the path as to how the retail housing market behaved up to last month as explained by the excerpted article below. Prices went downward from the April high to last month but it is worth noting that it will start an upward trend come September as borne by the past years data. The 2nd to the last paragraph also bears this out- prices averaged 5% higher than last year's.

GTA REALTORS® RELEASE JULY RESALE HOUSING MARKET FIGURES
 Excerpted from Treb Watch

TORONTO, ONTARIO, August 3, 2017 – Toronto Real Estate Board President Tim Syrianos announced that Greater Toronto Area REALTORS® reported 5,921 residential transactions through TREB’s MLS® System in July 2017.  This result was down by 40.4 per cent on a year-over-year basis, led by the detached market segment – both in the City of Toronto and surrounding regions.

While sales were down, the number of new listings reported were only slightly (+5.1 per cent) above last year’s level.

“A recent release from the Ontario government confirmed TREB’s own research which found that foreign buyers represented a small proportion of overall home buying activity in the GTA.  Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve,” said Mr. Syrianos.

“Summer market statistics are often not the best indicators of housing market conditions.  We generally see an uptick in sales following Labour Day, as a greater cross-section of would-be buyers and sellers start to consider listing and/or purchasing a home.  As we move through the fall, we should start to get a better sense of the impacts of the Fair Housing Plan and higher borrowing costs,” said TREB CEO John DiMichele.

The MLS® Home Price Index (HPI) Composite Benchmark price was up by 18 per cent on a year-over-year basis.  However, the Composite Benchmark was down by 4.6 per cent relative to June.  Monthly MLS® HPI declines were driven more so by single-family home types.  The average selling price for all home types combined was up by five per cent year-over-year to $746,218.

“Home buyers benefitted from more choice in the market this July compared to the same time last year.  This was reflected in home prices and home price growth.  Looking forward, if we do see some would-be home buyers move off the sidelines and back into the market without a similar increase in new listings, we could see some of this newfound choice erode.  The recent changes in the sales and price trends have masked the fact that housing supply remains an issue in the GTA,” said Jason Mercer, TREB’s Director of Market Analysis.

Is 'under construction' buying in real estate the IN thing now?

New home condo sales mainly condo apartments and townhouses dominated the GTA sales last month. The buying frenzy we just experienced has since subsided and builders marketing strategies may just be working. Read the following article as 'Excerpted from The Toronto Star'.

New home sales soar in June, as condos dominate market

Condos accounted for 91 per cent of the new homes sold in the Toronto area last month.

BILD statistics show there were only about 11,000 new homes on the market in June, compared to about 18,000 in the same month last year.  (Vince Talotta / Toronto Star File Photo)  

By Tess Kalinowski

Real Estate Reporter

Tues., July 25, 2017

New construction home sales, especially condos, are rising even as the re-sale property market continues to slump in the Toronto region.

The gains in the newly-built home market are almost entirely due to apartments and stacked townhouses, which accounted for 91 per cent of the 6,046 homes sold in June, according to the latest numbers from the Building Industry and Land Development Association (BILD) on Tuesday.

New condo sales were up 89 per cent year over year, compared to a 72 per cent year-over-year drop in the sale of single family homes.

The strong condo performance was due in part to the large number of new projects that hit the market in May and June, said Patricia Arsenault, of Altus Group, which tracks new home statistics.

But their more affordable entry-point prices appealed to many consumers, who might have otherwise preferred a ground-level home and to investors who have noted the escalating price of condos, she said.

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"With condo prices continuing to escalate, this segment of the market is becoming out of reach for many consumers," warned BILD CEO Bryan Tuckey in a press release.

The price of new apartments rose $22,000 to $627,000 in June, compared to May — a 34 per cent year-over-year increase.

The price per square foot, considered one of the most accurate gauges to compare condos, rose to $742, compared to $587 a year ago.

Were Warnings About Canadian Hosehold Debt Overblown?

Excerpted from Toronto Sun:
We've read about several warnings about Canadian household debt being at a critical stage. This article suggests that homeowners who took money from the equity of their house to buy appreciating assets such as rental condo apartments or townhomes may have done the right thing. More so it was the correct move with low interest rates.

Canadian household debt warnings overblown: Report

POSTMEDIA NETWORK

First posted: Tuesday, July 18, 2017 07:27 AM EDT | Updated: Tuesday, July 18, 2017 07:41 AM EDT

A real estate sold sign hangs in front of a west-end Toronto property, Friday, Nov. 4, 2016. (THE CANADIAN PRESS)

Recent warnings of Canadians running their household debt to record levels are blown out of proportion, according to a new study.
While household debt continues to climb, most Canadians are using it to invest in appreciating assets, according to the Fraser Institute.
“Despite alarmist headlines, concerns about Canadian household debt levels can be overblown,” said Livio Di Matteo, author of the Fraser Institute report and professor of economics at Lakehead University.
“When looking at debt levels it’s important to consider the degree to which Canadians are also using it to increase their net worth.”
While Canadian household debt is at a record high $2 trillion, up from $357 billion in 1990, household assets have increased from $2.2 trillion to $12.3 trillion over the same period, the study found.
The bulk of Canadian household debt was on mortgages (65.5%), followed by consumer credit (29%) and other loans (5%).
The study also said taking on more debt was a “rational response” to falling interest rates.
While interest rates in 1990 was nothing like the whopping 18% in the 1980s, it was still considerably high - at nearly 13% - compared to 0.75% at the end of last year.
The low rates reduced the burden on debt payments for Canadians, while making it less attractive to set aside savings in the bank.
While the study paints a positive picture for Canadians carrying debt, the same cannot be said about government debt.
“Governments across Canada have been racking up debt, particularly since 2007, but the net worth of governments in Canada has actually decreased,”Di Matteo said.
“It’s somewhat hypocritical for governments to warn Canadians about rising household debt levels given the state of their own finances,” Di Matteo said.

Should I Delay on Buying As House Prices Are Dropping?

This article says it all. I was asked if it is okay to hold off on buying as prices are coming down. It is noteworthy that prices are still rising in the traditional 'year over year' way. What has come down are the number of transactions and the month to month prices. June average prices was lower by 8% than May's but was still higher by 6.3% than a year ago. So analyze your needs.

Read about it here:
A Toronto Star article

June 2017 TREB Chart Showing Average Resale Home Prices

The above bar chart shows the average home resale prices up to last month June for 2017 as well as for the full year for 3 years to 2014.
 I dashed a red line at the top of each bar for 2017 and a blue line for 2016 so that a seasonal trend can be readily seen. Now note this:

• Red line- the sharp rise from January to past May is indicative of the unusual buying frenzy we just experienced where prices rose as high as 20% monthly where bidding was the norm frustrating a lot of buyers. Then the curve turns downward indicating a drop in prices.
• Blue line- follows the seasonal price trend for 2016. Note that the curve closely matches those of the previous years.

The downward red curve past May to date is more likely a market correction of the sharp rise starting from the beginning of the year to mid-May when government imposed more stringent regulations on buying and the realization by buyers that such a sharp rise is not really sustainable . The red dotted line is a more likely prediction of what the future months will be like price wise as borne by top of each bar in previous years but higher.

Should you delay buying as prices are going down? I won't count on it is my guess. Even with the recent monthly drop in prices, the dollar values of homes are still higher than last years.