More Than A Promise To Sell Your Home

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Bill Pinto

  • Mortgage Rule Changes

    Genworth is following CMHC's move; so as of Oct. 15/ 2008, there will no longer be 100% financing and 40 year amortizations available from Genworth either. CMHC and Genworth backed high ratio mortgages must have minimum 5% down and 35 year maximum. Clients who are interested in these products must have a closing date before Oct. 15th, 2008.
  • Cracks appear in the real estate market

    For several years now I have been advocating that the Canadian real estate market was not behaving in correlation with the US market and that there was no bubble to burst here.  Gloom and doom reporters have been trying their best to falsely create this situation here in Canada, to no avail.

    I believe this reporter sums up the reality of the situation quite well.

    The Canadian housing boom is ending, but there is no “major correction” in the cards – and buyers are unlikely to see anything near the bargain-basement prices that currently characterize the United States housing market, the Bank of Nova Scotia said Thursday.

    “After many false calls, there is now convincing evidence that Canada's housing market has come off the boil,” the Bank of Nova Scotia in a report on real estate trends.

    Canada Mortgage and Housing Corp., in its second-quarter outlook, reported Thursday that new home construction will begin to slow in 2008, “but remain high by historical standards.”

    Both Scotiabank and CMHC said the Canadian housing market is fundamentally strong.

    However, higher mortgage carrying costs “will be a catalyst for the decrease in residential construction to 214,650 units in 2008, from 228,343 in 2007,” CMHC said in its second quarter housing market outlook.

    Bob Dugan, CMHC's chief economist, added that most of the pent-up demand that built up during the 1990s “had now been fulfilled and residential construction activity will gradually move in line with Canadian demographic fundamentals.

    “These factors will continue to exert downward pressure on housing starts, which will decline to 199,900 units in 2009,” Mr. Dugan said.

    Scotiabank, looking at the resale market, reported that home resales – having fallen for four consecutive months – are running about 15 per cent below last summer's historic peak.

    “Average annual home price appreciation has eased back into the mid single digits, as overall market conditions come into better balance,” according to the Scotiabank report.

    “Adjusted for inflation, the average resale home price in Canada registered its first quarterly decline in seven years in the first quarter of 2008,” the bank said.

    However, senior Scotiabank economist Adrienne Warren said in an interview that the softening market is due to a “cyclical slowdown,” and the Canadian housing market is “fundamentally stronger than the situation we're seeing in the U.S.”

    The cooling could bring eventually price relief to buyers, she said.

    “The market is becoming better balanced, so there will be more homes listed, which takes a little bit of pressure off prices,” Ms. Warren said.

    “But it will take some time, and a number of years of fairly soft prices, in order to bring affordability back to the levels” that are typically seen at the beginning of an upward cycle, she said.

    CMHC forecast that existing home sales, as measured by Multiple Listing Service, will fall by 8.5 per cent in 2008 to 475,900 units, and the trend will continue in 2009, with a decrease to 465,000 units.

    “Despite a slowdown in MLS(R) sales, demand remains strong by historical standards,” CMHC wrote. Average resale prices will increase by 5.1 per cent to $323,000 in 2008, and by 3.3 per cent, to $333,500 in 2009, CMHC projected.

    In line with the CMHC report, Scotiabank noted that “cracks are appearing on the new home front as well.

    “While housing starts in early 2008 are essentially tracking last year's elevated levels, demand for new residential building permits has fallen sharply. Price increases for new homes are moderating, while inventories of unsold new homes are trending higher.”

    Ms. Warren said she expects overall sales volumes in 2008 to be about 15 per cent below last year's record levels, and home prices to increase on average by about five per cent.

    “Price gains should slow further in 2009 with the return of a balanced market for the first time in a decade. Meanwhile, housing starts are projected to gradually moderate, returning toward underlying annual household formation levels of around 180,000 by the end of the decade, from the current 225,000 unit range,” Ms. Warren said.

    The report also notes that the cooling in overall activity is most pronounced in many of Canada's hottest urban housing markets in recent years, including Calgary and Edmonton.

    “Both centres have officially moved into buyers' territory as soaring prices weaken demand and fuel new listings. More generally, however, economic conditions continue to favour the resource-rich markets in the West over manufacturing-dominated centres in Central Canada. Regina and Saskatoon are currently in the strongest sellers' position nationally, supported by good affordability, rising population inflows and tight supply,” according to the report.

    However, risk of a major correction is low, Ms. Warren said.

    “Home prices in Canada are not substantially overvalued. Our long-term housing price model puts average home prices in 2007 at about eight per cent above their long-term trend, compared with a premium of 12 per cent and 18 per cent, respectively, at the 1976 and 1989 housing cycle peaks. Recent International Monetary Fund (IMF) estimates placed Canada at the bottom rungs of international home price overvaluation.”

    Scotiabank also said in its report that Canada's real estate market is not overbuilt.

    “While inventories of unsold homes are trending higher, the number of unabsorbed units, including condominiums, remains well below prior cyclical peaks in most major centres. Tighter lending guidelines and high construction costs have likely contributed to a more cautious approach among builders.

    Overall mortgage quality is still sound, Scotiabank said.

    “Canada does not have ultra-low teaser rate mortgages that have contributed heavily to U.S. defaults as they reset. Adjustable-rate mortgages, sub-prime lending, borrowing against home equity, and insured investor mortgages all account for a much smaller share of the Canadian mortgage market than in the United States,” the report said.

    At the end of the day, we predict a soft landing for the Canadian housing market, with somewhat lower sales and construction, and a period of relatively flat inflation-adjusted home prices,” added Ms. Warren. “While underlying domestic housing fundamentals remain healthy, a major risk to the outlook would be a deeper and more protracted downturn in the U.S. economy, with more serious repercussions for domestic output, employment and income growth.”

    © The Globe and Mail


  • Property owners to get a fairer assessment appeal system

    A fairer property tax appeal system is expected with changes announced by the provincial government. The changes mean the onus of proof on property assessment appeals is reversed so that, when a property owner appeals an assessment, the Municipal Property Assessment Corporation (MPAC) would be required to prove the accuracy of the new assessment. The government move follows the Ombudsman’s recommendation that this measure would enhance the fairness of the appeal process. The legislation would place the onus on MPAC to prove the accuracy of property assessments that are appealed to the Assessment Review Board (ARB).

    The government also intends to introduce legislation to implement changes to the assessment appeal system announced in the 2007 Budget — changes designed to create a more streamlined and transparent appeal system. A key proposed change would make the Request for Reconsideration (RFR) program the first stage of the appeal process for property owners. The RFR, which is free of charge, encourages the sharing of information between MPAC and the property owner, and provides taxpayers with the opportunity to resolve their concerns directly with MPAC in an informal setting.

    The Ministry of Finance is also working with MPAC and the ARB to disclose valuation information to taxpayers about their property assessment in a timely way. This will help property owners review the accuracy of their assessment, decide whether to engage in the RFR process, and prepare for their hearing if they decide to appeal to the ARB.

    These measures are proposed to take effect for the 2009 taxation year. Details about the proposed new appeal procedures and deadlines will be communicated to property owners in the coming months, prior to the 2009 implementation date.

  • Rising Interest Rates In 2009?

    CIBC Work Markets released a report this week forecasting 100 bps of Bank of Canada rate increases by the end of next year, which would essentially take back most of the rate cuts we have seen this year. 

    This has implications for potential borrowers who may be less willing to take on risk or a little stretched in their debt coverage ratios, as now may be the time for them to consider a fixed rate mortgage.  CIBC World Markets is forecasting GOC 10 –year Bond yields to be 66 bps higher than today by the end of next year.  If we aren’t already at the bottom of the interest rate cycle for fixed terms, we’re fairly close.

  • Will Interest Rates Be Rising In 2009?

    CIBC Work Markets released a report this week forecasting 100 bps of Bank of Canada rate increases by the end of next year, which would essentially take back most of the rate cuts we have seen this year. 

    This has implications for potential borrowers who may be less willing to take on risk or a little stretched in their debt coverage ratios, as now may be the time for them to consider a fixed rate mortgage.  CIBC World Markets is forecasting GOC 10 –year Bond yields to be 66 bps higher than today by the end of next year.  If we aren’t already at the bottom of the interest rate cycle for fixed terms, we’re fairly close.

  • Credit crisis may be fading: Paulson

    Some positive news from south of the border that may calm some of the unfounded fears of a real estate related crash that the Canadian media has been implanting in Canadian consumers for months now.  

      

    JEANNINE AVERSA and MARTIN CRUTSINGER

     

    Wednesday, May 07, 2008

    WASHINGTON — The worst of the credit crisis may have passed, Treasury Secretary Henry Paulson said Wednesday, while acknowledging that rising gas prices will blunt the effect of 130 million economic stimulus checks. He ruled out a second stimulus package for now.

    In an interview with The Associated Press, Mr. Paulson said that the turmoil that has gripped Wall Street and took a turn for the worse again in March has eased somewhat. “There's progress,” he said. “I think we're closer to the end of this than the beginning.”

  • Stretched buyers fuel boom in housing?

    Engine behind the country's housing boom has been increasingly leveraged first-time buyers

     

    Wednesday, April 23, 2008

    Canada may not have the sizable subprime market of the U.S., but the engine behind the country's housing boom has been increasingly leveraged first-time buyers.

    Legions of first-timers are adding years of extra mortgage payments so they can buy a house, or putting little or no money into a down payment, a Re/Max survey revealed yesterday. Nearly two-thirds of buyers in major centres now favour extended amortization periods of up to 40 years, while putting little or no money down was prevalent in 38 per cent of regional markets surveyed across Canada.

    The country's real estate industry has played down any similarities to the U.S. when it comes to subprime borrowers. But as new segments of the Canadian population enter the market, the findings raise questions about what's been driving soaring house prices in recent years.

    "The reason we think the market has been staying hotter much longer than anyone anticipated was because of these newer amortization mortgages," said Craig Alexander at Toronto-Dominion Bank.

    "Because it really does change the affordability equation," Mr. Alexander said.

    Canada's housing market has for years defied predictions of a slowdown. From 2002 to 2007, average home prices rose at about 10 per cent a year nationally, Mr. Alexander figures. A willingness to buy now and pay later explains much of the recent heat. Longer amortization mortgages "have had a very profound impact on the Canadian housing market since they were introduced" in 2006, he added.

    Buying a house has become increasingly accessible. The flip side, though, is that more home buyers are now susceptible should the housing or labour markets weaken, or if interest rates change direction.

    "We're more vulnerable than we were in the past, and I think that's just a factor of financial and mortgage innovation," said Adrienne Warren at Bank of Nova Scotia. "At the same time, it's a trade-off - more people are getting into home ownership earlier."

    Like other economists, she doesn't see a major downturn in Canada's housing market. "I don't think there's a huge risk here ... these are new products and we don't have a track record yet, but I wouldn't be surprised if you see people paying down their debt far sooner than these 40-year amortization would suggest."

    New home buyers are subject to the same credit criteria as any other buyer, she adds, a key factor that differentiates Canadian mortgage lending from U.S.-style subprime loans. Re/Max, for its part, says this new type of financing is driving the market.

    "Innovative financing has become key to home ownership in today's environment," yesterday's report said. "Entry-level purchasers are adjusting their expectations by sacrificing size, location, and even long-term financial freedom to overcome challenges such as rising prices and serious supply issues."

    Policy changes help explain why so many people have been entering the market. Ottawa extended the maximum amortization period to up to 40 years from 25 years in 2006. In the same year, Canada Mortgage and Housing Corp. began providing insurance to lenders for interest-only mortgages.

    Mr. Alexander figures that as many as 70 per cent of first-time buyers are opting for longer amortizations. "It's a double-edged sword. It brings down your monthly payments. But it will actually double the amount of interest you pay over the lifetime of the loan."

    The result is that people could pay tens of thousands more for their home when they could be saving for retirement or paying for their children's education, an independent financial adviser said. "I don't approve of it at all," said John DeGoey of Burgeonvest Securities in Toronto. "There are very, very few people who make the payments work in 40 years who could not, with a modest alteration of their lifestyle, make the payments in 25 years." Instead, many people are setting themselves back "massively" by still paying mortgages in the last 15 years of their working life.

    "It's not just the young people and the first-time buyers that are coming to the banks asking for it. It might very well be the banks actively trying to foist it upon the first-time buyers," he added.

  • Bank Of Canada Cuts Interest Rate

     

    The Bank of Canada cut its benchmark interest rate on Tuesday by a half-percentage point to 3 percent, as expected, and signaled that further easing was required but suggested it might pause before cutting again.

    First time buyer's, those re-mortgaging and those still considering adding to their mortgage amounts will all feel some ease this morning.

    More cuts (believe it or not) are expected by BOC after a short pause to see the end affect of this current stimulus to consumer and corporate spending.

  • Is Your Mortgage Tax Deductible? The SMITH Manoeuvre

    Many of you would have at some point come across the theory of transferring your mortgage debt to investment debt.  For those of you not quite sure what's involved in this strategy feel free to read on.

    If you are like most Canadians the answer is NO. The interest you pay on your home mortgage is not tax deductible in Canada. But if you do some smart planning, the interest paid on a mortgage can become tax deductible, even when the mortgage is on your principal residence.

    Our American friends already enjoy the luxury of claiming their mortgage interest. So is there a way for you as a Canadian homeowner to make your mortgage interest payments tax deductible? Well, according to Fraser Smith, the author of the best seller book "Is your Mortgage Tax Deductible - The SMITH Manoeuvre", you can by implementing the Smith Manoeuvre.

    But before we start to explain how the "Smith Manoeuvre" works let us discuss a couple of background issues:

    "Good debt" vs. "bad debt"
    When you borrow money to make money, it is an investment. The interest you pay to service that debt can be deducted from your income before you pay your taxes. That’s "good" debt!  On the other side, borrowing money to buy depreciating items (car, television, or to pay for vacations) will always be considered as "bad" debt.

    How to convert bad debt to good debt?

    The real trick is to convert "bad" debt to "good" debt. The concept of converting your debt from non-tax deductible to deductible debt is gaining popularity in Canada. Many outspoken proponents of the concept believes that every Canadian should be aware of their ability to convert their debt – more specifically, the ability to convert their mortgage into a tax deductible debt.

    What is the Smith Manoeuvre?
    The Smith Manoeuvre is a financial strategy pioneered by Fraser Smith, a veteran BC-based financial consultant. It is designed to convert the non-tax deductible interest debt of a residential mortgage to the tax deductible debt of an investment loan – generating annual tax deductions.

    Most Canadians are unaware of the real cost of their mortgage, or underestimate the amount of interest they would pay on a mortgage and have no idea of the total cost. For example, a $150,000 mortgage at seven per cent paid over a 25-year period would cost the homeowner more than the original mortgage amount ($165,000) just in interest alone. At a 40 per cent tax bracket, the mortgage holder would need to have earned $525,000 to pay off that $150,000 debt. That’s why more and more Canadians are investigating tax-deductibility as an alternative option.

    To summarize, the Smith Manoeuvre in a nutshell, is where you borrow against the equity in your home, invest it in income producing entities, and use the tax return to further pay down the mortgage. Repeat until your mortgage is completely paid off, this will leave you with a large portfolio and an investment loan. Your mortgage is now an investment loan, which is tax deductible and hopefully your portfolio is larger than your loan.

    As an example, a $200,000 mortgage at seven per cent would cost the homeowner about $1,400 a month. In the first month, roughly $1,150 would go towards interest and $250 towards the principal. According to Smith, To convert that debt to tax deductible borrowings, the homeowner should then take that $250 back out of their home equity and invest it.

    By the end of the first year, the homeowner will have re-advanced and invested about $3,100. Borrowing back the money and investing it creates an "investment loan", the interest on which may now be tax-deductible. This process is repeated year after year.

    Although the debt level remains at the original $200,000, more and more of it is being systematically converted to tax-deductible debt. In addition, ever-increasing tax refunds received by the happy homeowner could also be applied against their mortgage, and then re-borrowed and invested. Also, the homeowner could take any non-registered investments and apply those dollars against their mortgage, enabling them to borrow the money back for tax-deductible investing (assuming the costs and potential capital gains triggered by selling the non-registered investment to pay down the mortgage are not prohibitive).

    Does this works for you?
    It is good to remember that as with any investment program there are risks involved, the program is based on current Canada Revenue Agency (CRA) rulings, which can change over time.

    Borrowing to invest is suitable only for investors with higher risk tolerance. You should be fully aware of the risks and benefits associated with investment loans since losses as well as gains may be amplified. The value of your investment will vary and is not necessarily guaranteed, however, you must meet your loan and income tax obligations and repay your loan in full.

    As a homeowners you should consult your financial advisor. Advisors understand risk tolerance and can assess the appropriateness of the strategy to your specific situation and most importantly, will be able to implement the necessary investment component of the program. 

  • Open House in Hawthorne Village on Sunday

    April 2008
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    Hawthorne Village, Milton  -  We invite everyone to visit our open house at 819 Biggar Heights on April 20 from 2:00 PM to 4:00 PM.

    Property information

  • Open House in Hawthorne Village on Saturday

    April 2008
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    303112345
    6789101112
    13141516171819
    20212223242526
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    Hawthorne Village, Milton  -  We invite everyone to visit our open house at 819 Biggar Heights on April 19 from 2:00 PM to 4:00 PM.

    Property information

  • Market Update

    Further to the local real estate market statistics posted here yesterday, a Royal LePage Real Estate Services' House Price Survey reports that home-price increases moderated in the first quarter, but remained solid due to a strong economy, high immigration levels, and relatively low interest rates.

    In Toronto, Canada's largest city, the price increase was 11.3 percent to C$432,679, year-over-year. Yes

  • March MLS Statistics For Oakville/Milton

    March statistics are now published for the Oakville/Milton real estate market.  With a full quarter of 2008 statistics now available for analysis it would appear that to date we could safely say the Oakville/Milton real estate market remains healthy, perhaps not frothy, but certainly healthy.  Units sold are up slightly from this time a year ago however of potential concern is the growing gap between the number of units listed for sale and those actually sold.

    Have a look ... 

    DOLLAR VOLUME OF SALES

    Month of March 2008 - - - - - - - - - - - - - - - - - $265,144,442

    Month of March 2007 - - - - - - - - - - - - - - - - - $253,961,377

    Cumulative – Year to Date 2008 - - - - - - - - -$746,515,256

    Cumulative – Year to Date 2007 - - - - - - - - -$606,575,808

    NUMBER OF LISTINGS

    Month of March 2008  - - - - - - - - - - - - - - - - - - - 1259

    Month of March 2007- - - - - - - - - - - - - - - - - - - - 1030

    Cumulative - Year to Date 2008 - - - - - - - - - - - - 3750

    Cumulative - Year to Date 2007 - - - - - - - - - - - - 2830

    NUMBER OF SALES

    Month of March 2008 - - - - - - - - - - - - - - - - - - - - 674

    Month of March 2007 - - - - - - - - - - - - - - - - - - - - 658

    Cumulative - Year to Date 2008 - - - - - - - - - - - -1862

    Cumulative - Year to Date 2007 - - - - - - - - - - - -1598

    PERCENTAGE OF SALES TO LISTINGS

    Month of March 2008 - - - - - - - - - - - - - - - - - - - -19.26 %

    Month of March 2007 - - - - - - - - - - - - - - - - - - - - 24.43 %

    Cumulative - Year to Date 2008 - - - - - - - - - - - - 34.30 %

    Cumulative - Year to Date 2007 - - - - - - - - - - - - 35.45 %

    TOTAL # ACTIVE LISTINGS FOR SALE 

    Month of March 2008 - - - - - - - - - - - - - - - - - - - - 2,178

    Month of March 2007 - - - - - - - - - - - - - - - - - - - - 1,828

  • Canadian households dodge U.S.- style credit woes

    “So far the credit crunch did not impact the Canadian household credit market in any significant way,” CIBC senior economist Benjamin Tal wrote in the report, released Wednesday.

    In fact, Canada's mortgage market remains defiantly healthy, with the pace of growth in overall residential mortgages outstanding rising by 13 per cent last year, up from 10 per cent growth in 2006, the report said. Furthermore, data suggest that activity levels remain “very strong” in the first two months of 2008, a direct contrast to the sharp downturn in the United States.

    Mr. Tal does foresee see some slowing in Canada, saying, “It is difficult to see how the mortgage market will continue to grow at this pace.” With economic growth and the housing market set to cool, he expects that the overall growth in mortgages outstanding in 2008 will be roughly 8 to 9 per cent.

    The arrears rate on mortgages in Canada, which is still “extremely low” at 0.26 per cent, is also forecast to trend higher in the next year although a strong jobs market will likely keep the rate low, Mr. Tal said.

    There has been a rebound in both direct loans and personal lines of credit recently. Overall growth in consumer credit remains strong, rising nearly 11 per cent in 2007, with personal lines of credit dominating growth, the report said. It noted, however, that delinquency rates in the direct loans portfolio are starting to show a “modest” tick higher.

    “When adjusted for inflation, credit growth during this cycle was not as strong as in previous cycles,” Mr. Tal said. “This means that any softening in the pace of household borrowing in 2008 will not be as dramatic as in the past.”

    Canadian households are juggling higher levels of debt. Overall debt rose 3 per cent in the fourth quarter of 2007 while personal disposable income climbed 1.6 per cent.

    The recent drop in stock markets, combined with a slower pace of increase in home valuations, led the debt-to-asset ratio to climb in the fourth quarter of 2007 to 17.1 per cent, its first increase since early 2006, the CIBC report said. Over the past year, the debt-to-income ratio in Canada edged up from 122 per cent to 130 per cent.

    “At the same time, the debt service ratio, as measured by debt interest payments as a share of disposable income is still about 30 basis points higher than it was in 2006,” Mr. Tal said. “With widening credit spreads offsetting the declines in both prime and government bond rates, debt interest payment will remain relatively stable over the next few months.”

    The number of consumer bankruptcies, which climbed by a mere 1 per cent during the year ending January 2008, is forecast to pick up to as much as 5 per cent this year as the slowing U.S. economy impacts growth in Canada, according to the CIBC report.

    The Globe

  • Oakville Real Estate Market Conditions

    Today's market may not appear to present the same level of sizzle as demonstrated a year or so ago however the froth has not disappeared altogether . We’ve been involved in several multiple offer situations since the new year, particularily in the $300K to $400K price range and strange enough in the $1M+ price range. So the multiple offers aren’t dead and gone, in fact they seem to have made a comeback since last October. 

    There’s definitely a difference between multiple offers now and multiple offers at the peak of the market.  Firstly, they no longer automatically come over list price or without conditions. In our case some have come just over list price, some under or right at list price.  Second, the timing has changed... at the peak you'd have multiple offers on a good listing within hours of hitting the market, now you never know when the situation might arise - it could be only a few days into the listing or a few weeks.

    The first question that comes to mind is why, with all the inventory would anyone go into competition?  One reason might be the price - in particular those properties priced extremely well.  It may also be the exact property that buyer is looking for, in the area or building that they really want to be in. In any case there’s no question that multiple offers aren’t dead and gone. Confused

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