Edmonton Real Estate Blog

 People walk past new homes that are for sale in Oakville, Ont. New house prices went up for the fourth straight month in October but are still down from last year, Statistics Canada said Friday.

New house prices higher in October

Statistics Canada says housing prices were on the rise in October.

The agency’s New Housing Price Index rose 0.3 per cent in October, its fourth straight monthly increase. The index rose by 0.5 per cent in September.

Prices increased the most in Quebec City, where they were up 1.1 per cent, followed by Vancouver, at 0.7 per cent. Hamilton, Sudbury and Thunder Bay, Ont., all registered 0.5 per cent increases.

Prices went up in Quebec City in part due to a scarcity of land and increased building costs, the agency noted.

Two cities recorded monthly decreases in new housing prices – Charlottetown, with a 0.7 per cent drop, and Edmonton, at 0.3. In both cities, prices were lower because builders slashed prices to remain competitive, the agency said.

Year over year, the index was down 2.1 per cent in October following a 2.7 per cent decline in September. The largest decreases continue to be in the west, Statistics Canada said.

CBC News

Record-low borrowing costs combined with the growing realization that the economic storm is passing have fuelled the remarkable recovery of the real estate market in Canada. However, it is important to understand some of the issues that have surfaced with these exceptionally low interest rates.

If you are obtaining a mortgage, you are fortunate to be obtaining some truly historically low interest rates. The decision between taking a variable rate mortgage versus a fixed rate mortgage should be evaluated with your mortgage consultant and/or your realtor to assess the pros and cons of each option. Although rates are exceptionally low, lenders are definitely exercising more caution with their lending policies.

If you are thinking of refinancing your current mortgage, you need to consider the cost of breaking your existing mortgage compared to how much you will save in interest payments.

If you break an existing mortgage you will have to pay the greater of three month’s interest or the interest rate differential (IRD). An IRD is a penalty for early prepayment of all or part of a mortgage outside of its normal prepayment terms. Usually this is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.

If for example a borrower is currently paying 6.0% interest on their home mortgage and the current rate is 3.5% the difference (6.0% – 3.5%) is 2.5%. This 2.5% will be charged for the months remaining on your mortgage. If you are carrying a $400,000 mortgage at 6.0% your monthly payment is approximately $2,559. If the current rates are 3.5% the payments would be $1,997, the difference being $562.00/month. If you have 48 months remaining on your mortgage, the penalty would be $26,976 ($562 x 48).

These numbers are astonishing and the lenders unfortunately are not easing up on these charges. It may only make sense to refinance your mortgage if the interest rate savings over the remaining life of your mortgage exceed the value of the IRD.

If you are selling your home make sure to know what your mortgage discharge penalty will be for breaking your mortgage prematurely (assuming you are not porting your mortgage).

Of course, if you port (transfer) your mortgage to another property, you will only be penalized on the portion of the mortgage you discharged. For example, if you had a $400,000 mortgage and were carrying a $300,000 mortgage over to your new home, the penalty would only be assessed on the $100,000 mortgage you discharged.

Although the market is changing and will continue to do so, this represents opportunities for buyers and sellers alike. It is extremely important to be informed as a consumer so that you can make good, sound educated choices during these most interesting of times. And please make sure you know in advance what all your closing/transactional costs will be before you enter into any agreement of purchase or sale.

 Canada Realty News

A new report will be greeted as a good news/bad news proposition for Canadians, depending on which side of the home ownership fence they currently reside. Good news for home owners, who can expect housing values to end 2009 at an average of $318,000, up five per cent from 2008; and bad news for those still waiting to break into the market, as prices are expected to rise another 2 per cent by the end of 2010 – the highest level in Canadian history. Where are home prices headed across the country? Click to find out.

Canada
Average price in 2007: $307,265
Average price in 2008: $303,594
Average price in 2009: $318,000
Change in ’09: +5%
Average price in 2010: $325,000
Change in ’10: +2%
Source: CREA, Local real estate boards, RE/MAX

Edmonton

Average price in 2007: $338,636
Average price in 2008: $332,852
Average price in 2009: $321,000
Change in ’09: -4%
Average price in 2010: $330,000
Change in ’10: +3%
Source: CREA, Local real estate boards, RE/MAX

Edmonton’s healthy residential housing market was the first to emerge from the depths of the recession, with sales surpassing year-to-date figures for 2008 in June 2009. Low interest rates, greater affordability, and pent-up demand were behind the push for real estate early in the year, as consumer confidence levels slowly escalated. First-time buyers snapped up entry-level product at significant cost savings. By October, momentum had reached the top-end of the market, with sales over $750,000 moving ahead of 2008 levels. Given the solid percentage increases reported since June, the number of homes sold by year-end is expected to climb to 20,500 units, up 18 per cent over 2008, and on par with 2007 figures. Average price, after peaking in 2007 at $338,636, has since stabilized at $321,000-down just four per cent from 2008 levels. The balanced residential marketplace took both realtors and consumers by surprise in 2009, many of whom hoped for the best but prepared for the worst. However, economic performance, with a 2.8 per cent decline in GDP growth forecast for 2009, has been less than stellar. The energy sector continues to battle back in Alberta-oil prices are on the upswing and forecast to rise further next year. While challenges still lie ahead, some positive industry developments, namely the Kearl oil sands project, are hoped to return to the oil sector to a growth cycle or at least off set recent contraction.

The good news is that real GDP is expected to climb three per cent in Alberta in 2010, bolstered by housing, new construction, a recovering oil and gas sector, and consumer spending. Oil prices are expected to hover around the $80 mark-which should serve to kick-start activity in the mega sand projects. Improving global demand for commodities is forecast to place upward pressure on prices, while rising confidence and more normal crop conditions should also have a positive impact on economic performance in 2010. Retail sales at 5.6 per cent will be one of the top performers in the country, falling just behind British Columbia and Saskatchewan. Unemployment levels hover at approximately 7.1 per cent.

Building on the real estate recovery already underway, the number of homes sold in Edmonton is expected to edge slightly higher in 2010, rising to 21,000, up two per cent over 2009. Housing values, finally on the upswing, should reach an estimated $330,000 by yearend 2010-a three per cent increase over one year earlier. Inventory levels-at about 5,500-are forecast to remain stable, representing a three to four month supply. Market conditions should be balanced throughout much of the year, leaning slightly in favour of the seller. First-time buyers are expected to once again play a significant role, stimulating activity in virtually every segment of the market. It’s anticipated that demand for condominiums will be constant, given their affordable entry-point. An influx of new conversion units in months ahead should be absorbed relatively quickly but fewer multi-unit housing starts in 2010 overall may apply some pressure to the resale market.

Edmonton, December 2, 2009: Total sales through the Edmonton and area Multiple Listing Service® system to the end of November have surpassed total year end sales in 2008. The total value of all types of property sold to the end of November is $6.64 billion. The same figure at the end of December 2008 was $6.42 billion. There have been 20,355 property sales so far as compared to 19,448 at year-end 2008.

“Both sales and the value of sales have exceeded our expectations this year,” said Charlie Ponde, president of the REALTORS® Association of Edmonton. “We anticipated sales levels would be the same as last year but REALTORS® have already sold more property than last year with a month to go. This is a good indicator of the strength of our local market.”

In November, the average price of a single family dwelling went up 1.2% to $368,018, reversing a 2% drop in the previous month. Single family dwelling prices are 1.5% higher than the same month last year.

Although condominium prices are down 2.5% from last month they are just $50 higher than condo prices a year ago. The average price for a condo in November 2009 was $231,684. At $284,849, the duplex and rowhouse prices were down 4.7% from last month and down 9.5% from a year ago. Overall, the all-residential average price is down marginally from October and the previous November. It sits at $318,482.

There were 1,894 homes listed on the MLS® System in November with 1,261 sales for a sales-to-listing ratio of 67%. The total value of residential sales in November was $402 million and total available inventory was 5,226 homes which is a typical four month supply. Homes sold on average in 48 days which is up one from last month but much brighter than the 63 days it took to sell a home in November 2008.

“The market remains rock steady,” said Ponde. “Prices vary from month to month within a small range and with a slow gradual upward trend. Buyers have confidence in this market and REALTORS® are prepared to match their needs with the perfect housing option.”

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Highlights of MLS® System activity

¹. Residential includes SFD, condos and duplex/row houses.
². Single Family Dwelling
³. The middle figure in a list of all sales prices

* Average prices indicate market trends only. They do not reflect actual prices, which may vary.

Gross domestic product sees first gain in a year in Q3, signals recession’s end

OTTAWA – Canada’s real gross domestic product grew 0.1 per cent in the third quarter, the first quarterly gain since the third quarter of 2008 and a signal – if a feeble one – that the recession has ended.

Statistics Canada reported Monday that the economy expanded at an annualized rate of 0.4 per cent in the third quarter, compared with a 2.8 per cent increase for the U.S. economy.

The first overall economic growth in a year marks an end to the recession, which is defined as at least two back-to-back quarters of contraction.

While it is the first indication Canada’s economy is again beginning to grow after begin battered alongside the rest of the world during the economic meltdown that saw the failure of U.S. banks, ravaged corporate profits and lengthened unemployment lines, it is “not exactly a clanging endorsement of the ‘end of recession’ story,” said Douglas Porter, Bank of Montreal’s deputy economist.

“While the quarterly gain for the third quarter was a bit of a damp squib, this doesn’t alter the bigger picture that the Canadian economy is erratically grinding out of recession, led by broad-based gains in domestic spending,” Porter wrote in a note to clients.

“With the solid hand-off from the sturdy September result and mounting signs that the U.S. recovery is taking root, look for much more convincing evidence that the recession is over in fourth-quarter GDP results. Still, the broader picture of a relatively muted recovery remains the dominant theme.”

The agency says final domestic demand advanced 1.2 per cent, as capital investment and personal expenditures both increased.

Real GDP was up 0.4 per cent in September, as most major industrial sectors increased their production.

Final domestic demand was bolstered by a second consecutive quarterly gain in personal expenditures and the first expansion in business capital expenditure since the fourth quarter of 2007.

Export and import volumes both increased after many quarters of decline.

The output of services-producing industries increased 0.6 per cent, with the wholesale and retail trade sectors and real-estate agents and brokers leading the way.

Goods-producing industries slipped 1.4 per cent, continuing a downward trend that started in the third quarter of 2007.

Mining and oil-and-gas extraction contributed the most to the decrease as a result of temporary shutdowns.

Source: THE CANADIAN PRESS, cp.org, Updated: November 30, 2009 9:20 AM

Monthly MLS® home sales activity continues to run strong, with new monthly records set in July, September and October. This has prompted CREA to revise its MLS® home sales forecast for 2009 and 2010.

CREA now forecasts national activity will reach 460,200 units in 2009, up 6.6% from last year. The new sales forecast for 2009 puts activity about on par with annual activity in 2004, but below levels reported for the years 2005 through 2007. Alberta, Saskatchewan, Quebec and Prince Edward Island are also now forecast to post an annual increase in activity in 2009.

National MLS® home sales activity is forecast to rise 7% to 492,300 units in 2010. This would make 2010 the second highest year on record for sales, putting activity below the peak reached in 2007 and slightly above the 2005 and 2006 figures. The forecast increase in activity for 2010 reflects significant weakness in activity recorded in the first quarter of 2009. Monthly activity in 2010 is expected to trend downward from recent heights, but the sharp drop inactivity recorded in the in the first quarter of 2009 is not expected to repeat in 2010.

The national MLS® average home price is forecast to climb 4.2% in 2009, reaching a record $317,900. This is an upward revision from the 1.5% gain in CREA’s previous forecast and reflects the high degree to which the national average price was skewed downward last year by a significant decline in activity in Canada’s priciest markets, and then upward by the rebound in activity.

Alberta remains the only province with a forecast decline in average price in 2009 (-3.0%). Average prices are forecast to rise in all other provinces, with gains ranging from 1.5% in British Columbia to 13.1% in Newfoundland and Labrador.

Average prices are forecast to climb a further 4.7% in 2010. Much of the annual increase reflects weakness in the average price in first quarter of 2009, which is not expected to repeat in 2010. Average sale prices are forecast to rise in every province in 2010.

Source: CREA

 Job seekers at an employment office in September. The number of Canadians receiving EI benefits was up more than 7 per cent during the month. (Canadian Press)

EI recipients up 7.1% in September

The largest increases were in Ontario, Alberta and British Columbia, Statistics Canada said Tuesday.

The total number of beneficiaries reached 818,000, up 63.5 per cent from October 2008, when the agency says employment hit its peak.

The number of people receiving EI had increased sharply between October and June, before moving onto a downward trajectory.

Several cities recorded more than double the number of beneficiaries than a year ago, with the fastest year-over-year increases in Calgary and Edmonton.

OTTAWA – Canadian home resales improved 41.5 per cent year over year to 42,288 units in October, a record for the month, according to the Canadian Real Estate Association.

The national average price for homes listed on the Multiple Listing Service also reached a new high in October at $341,079. This was 20.7 per cent higher than the same month last year.

* Related: Canada’s hottest housing markets | Coolest markets

New sales records for the month were reported in one-fifth of local markets, including Toronto, Montreal and Ottawa.

On a seasonally adjusted basis, MLS home sales totalled 45,818 units in October, two per cent higher than the previous record set in May 2007 and 74 per cent above the recent low in January.

“Low interest rates and upbeat consumer confidence continue to release the pent-up demand that built late last year and earlier this year,” stated CREA president Dale Ripplinger.

“The release of that pent-up demand has boosted national sales activity to new heights and is drawing down inventories.”

* Tell us: Is Canada experiencing a housing bubble?

The sharp rise in demand for homes has shrunk inventories to 194,994 or a seasonally adjusted 4.1 months worth, the lowest level in more than two years and 20.8 per cent below the peak reached a year ago. This is the sixth month in a row in which inventories are down from year-ago levels.

Seasonally adjusted new listings on MLS were slightly higher in October compared to September at 65,148 units. New listings peaked in May 2008, then declined until March 2009, and have remained relatively steady since then.

“New listings are still expected to rise in the coming months in response to headline average price increases,” stated CREA chief economist Gregory Klump.

“New supply dropped dramatically in December last year and earlier this year in response to a difficult pricing environment. Sellers who moved to the sidelines should be drawn back to the market as prices rise further over the rest of the year and in early 2010.”

Source: The Canadian Press, cp.org, November 16, 2009

When it comes to making tradeoffs and sacrifices to achieve the dream of home ownership, homebuyers are willing to give up quite a lot, but they draw the line at their cars, so much so that they would rather live with their parents longer than do without their wheels.

According to the recently released Genworth Mortgage Insurance First-Time Homebuyer’s Monitor, 68 per cent of renters said they would be willing to delay major purchases and more than half would give up vacations in order to own their own home while just 25 per cent said they would give up their cars.

The national opinion poll provides insight into the concessions Canadians would make not only to fulfill their dream of home ownership, but also to stay in a home they have purchased when times are tough.

With respect to that first purchase, the tradeoffs ranged from delaying major purchases (68 per cent) to giving up vacations (51 per cent) to buying a more expensive home further away from work (47 per cent). This latter option is sometimes referred to as “driving ’til you qualify.”

Other tradeoffs included taking a second job (41 per cent), putting off having children (39 per cent), living with one’s parents longer while saving for a down payment (33 per cent), buying a home with a friend (31 per cent) and lastly, giving up one’s car (25 per cent).

In many ways, these findings are not at all surprising unless, like me, you were thinking that delaying major purchases or giving up vacations were more givens than tradeoffs.

The rankings change a little when the question posed becomes what sacrifices are homeowners prepared to make if they find themselves unable to keep up with their mortgage payments. Eight-two per cent of current owners would forego vacations in order to keep up with mortgage payments, while 65 per cent would take on a second job, 57 per cent would take on a second mortgage or refinance, and 44 per cent would take on a renter to maintain homeownership.

Amazingly, the car remains way down the list of tradeoffs at 38 per cent, just above asking family and friends for help at 37 per cent.

“It’s not surprising what lengths people would take to keep their homes,” said Peter Vukanovich, president and COO of Genworth Financial Canada. “When faced with financial difficulties, staying in a home they own is a priority.”

I concur with Vukanovich although I’m surprised that even 18 per cent of homeowners wouldn’t be prepared to give up their vacations to save their homes.

In any event, these survey results confirm something that home builders consistently witness at the point of sale, namely the intense desire of Canadians, particularly first-time homebuyers, to achieve the dream of home ownership.

Canadian homebuyers know they need to make big sacrifices but they are also willing to do the little things as well, from packing a lunch to foregoing non-essential purchases to simply doing without – whatever it takes to get their foot in the door.

Once they are in their new home, most buyers never look back, although those that experience difficulty keeping up with the mortgage payments will make all the sacrifices that initial buyers would to protect their most cherished asset.

The fact that 31 per cent of respondents own their homes mortgage-free confirms that the good habits that Canadians take into the buying process are paying off in long-term financial security, not to mention all the other benefits of home ownership.

The complete Genworth Financial Canada First-Time Homebuyer’s Monitor is available at www.genworth.ca.

Stephen Dupuis is president and CEO of the Building Industry and Land Development Association. The views expressed are those of the president. Email: president@bildgta.ca.