Some great articles that I came across that you all will find useful. Remember that the market is getting better and once it does the current mortgage rates will be gone. Get the mortgage you want and need now!
Homeownership gets more costly
Homeownership costs in Canada grew in all housing segments late last year, driven by rising home prices.
Costs rose in the fourth quarter of 2009 and will likely continue to climb, Royal Bank of Canada’s quarterly housing report said Monday.
Homeownership costs will keep rising as strong demand and a limited supply of homes put pressure on prices, the bank cautioned.
As well, “the anticipated and gradual rise in interest rates indicates that affordability is likely to gradually get worse as rates return to normal levels,” said Robert Hogue, RBC’s senior economist.
Historically low mortgage rates, a race to buy before a new sales tax is introduced in B.C. and Ontario, and anticipated interest rate increases starting mid-year are driving demand, prompting speculation a housing bubble has been forming in recent months.
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The federal government moved last month to dampen the market by tightening rules for some people, particularly first-time buyers and speculators. These changes to the mortgage market could reduce demand when they take effect in April. However, the precise impact on the market is unknown, RBC said.
The bank’s housing affordability measure captures the portion of pretax household income needed to service the costs of owning a home. Those costs rose “slightly” across all housing types in the fourth quarter.
“The effect of higher prices was largely mitigated by a small decline in mortgage rates and continued gains in household income,” Mr. Hogue said.
Despite the fourth-quarter increase, all affordability measures remain well below their levels from a year ago, the report said. Affordability improved in the past year due to a big drop in mortgage rates.
The Bank of Canada has said interest rates will likely remain at a record low through to June, and most economists expect swift increases after that as the economy recovers.
In the fourth quarter, RBC’s detached bungalow benchmark rose 0.3 per cent to 40.6 per cent and the standard two-storey home increased 0.3 per cent to 46.7 per cent. The standard townhouse rose 0.2 per cent to 32.9 per cent. The standard condominium climbed 0.1 per cent to 28 per cent.
Vancouver remains the most costly market in the country. Housing affordability for a detached bungalow shows Vancouver in the top spot, at 69 per cent, followed by Toronto, Ottawa, Montreal, Calgary and Edmonton.
Frantic housing market ready for calm
Supply shortages still expected in big centres, but wave of new listings elsewhere will be boon to buyers
After a historic runup in prices, the Canadian resale housing market is set to cool down as a wave of new listings hits the market, providing badly needed inventory for hungry buyers.
The number of homes on the market nationally increased for the third consecutive month in February on a seasonally adjusted basis, according to the Canadian Real Estate Association. The industry group said yesterday there were 4.7 months of inventory available in Canada in February, up from 4.5 months in January.
That trend has put buyers and sellers in an equilibrium not seen since before the market downturn began about two years ago. The ratio of new listings to sales, an indicator used by analysts to gauge the health of the resale housing market, left the “favourable to sellers” range to the “balanced market” range in February, according to National Bank Financial.
It’s a sign of stability for a sector that has seen wild price appreciations as buyers competed ferociously for the few homes on the market.
“Further expected supply increases will continue to take the steam out of housing markets as the year progresses,” said Gregory Klump, chief economist at the Canadian Real Estate Association. “There are still a number of major markets where sales negotiations favour the seller due to a shortage of inventory, but supply has begun rising.”
More listings help prevent bidding wars and could slow house-price gains this year. The association expects prices nationally to decline slightly next year.
Still, some major markets such as Toronto and Vancouver will be slower to add listings this year, industry officials said.
“You still see a supply shortage in the big centres because the people who need to sell and move up just don’t see anything they want to buy,” said Phil Soper, president of Royal LePage. “But we’re ahead of the curve on new listings in February, and March will be absolutely critical if that trend is to continue.”
The Monday following Ontario’s March Break is traditionally the busiest listing day in Canada, as the weather turns favourable and parents who will need to relocate their children realize the school year is coming to an end.
“That’s the day everyone puts on their game face and gets chopping,” Mr. Soper said. “It happens every year – it’s like the summer blockbuster season.”
The busy spring will have consequences, however. Many of the homes will be put on the market earlier than in other years as owners look to cash in on the hot market. The flurry of activity is expected to dampen sales in the last half of 2010.
“I think we’ll see a sharp up-tick in sales, followed by a massive pullback,” said TD Bank economist Millan Mulraine. “We’re taking sales from the end of the year and moving them up. Then you should see a market that is more in line with fundamentals.”
In the meantime, the number of home sales continued on a tear in February with a 44 per cent year-over-year gain from recessionary lows a year ago, CREA figures showed.
The average price of all homes sold on the Multiple Listings Service in February was $335,655, up 18.2 per cent from a year ago. The relentlessly strong price gains since last year’s lows have fuelled worry about the formation of an asset bubble.
Finance Minister Jim Flaherty is watching the country’s mortgage market carefully but does not believe there is a housing bubble, he said in an interview with Bloomberg.
Anything that helps prices stabilize would be a welcome development for policy makers, who are taking steps to make it more difficult to qualify for a mortgage in a bid to cool off the market.
While more listings are expected this year, buyers are expected to be out in full force for the foreseeable future.
Buyers are expected to rush into the market in the coming months to avoid changes to mortgage application rules in April, anticipated higher interest rates by midsummer and the introduction of harmonized sales taxes in Ontario and British Columbia in July.
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