This won’t hurt a bit, homebuyers.

The mortgage rule changes announced Tuesday by Financial Minister Jim Flaherty will weigh a bit on real estate speculators and heavily indebted people who want to fold their high-rate credit card debt into a lower-rate mortgage. But for rank and file homebuyers, the changes will barely be perceptible when they take effect on April 19.

“This should have a limited impact on what I see daily,” mortgage broker Peter Majthenyi said in an e-mail he fired off after Mr. Flaherty’s announcement. “I believe it’s more a message that ‘Big Brother’ is watching and cares.”

Olympics aside, the favourite Canadian diversion of the moment is to debate whether there is a bubble in the housing market. Those most worried about the housing market plunging have urged Mr. Flaherty to raise the minimum down payment for a home and reduce the maximum payback period.

But the 35-year amortization, favourite of first-time buyers across this land, remains. So does the 5-per-cent down payment, which is heavily relied upon in high-cost cities like Vancouver, Calgary and Toronto.

All the measures announced by Mr. Flaherty affect mortgages covered by government-backed mortgage insurance, where the buyer puts less than 20 per cent down. The key change for typical home buyers is that, regardless of what term or type of mortgage they choose, they’ll have to be able to afford the five-year rate.

This is a sensible way of building some slack into the system as we look ahead to a cycle of rising interest rates. If someone chooses a variable-rate mortgage, where the interest rate can be as low as 2 to 2.25 per cent today, they’ll have to be able to handle the payment at the current five-year rate. Right now, the posted rate at the big banks is 5.39 per cent.

You won’t have to actually make the higher payments required by the five-year mortgage. You’ll just have to theoretically be able to carry them and still remain within the limitations lenders set out on how much of your gross income can be consumed by debt (it’s 42 to 44 per cent, just so you know).

Mortgage brokers report that a lot of lenders were already ensuring clients could afford the payments on a three-year mortgage. So bumping up that up to a five-year term will only have a marginal effect.

“Are we going to see the odd borrower have to come up with more money or not buy they house they want? Absolutely,” Mr. Majthenyi said. “But will it have a dramatic effect? No.”

Another reason why the changes won’t be jarring is that a huge number of homebuyers are actually choosing five-year mortgages these days. A study issued by the Canadian Association of Accredited Mortgage Professionals last month showed that fixed-rate mortgages accounted for 86 per cent of mortgages in set up in 2009 and, of those, 70 per cent were for a five-year term.

People who borrow to buy investment properties to either flip for a quick profit or to generate income are also affected by Tuesday’s announcement. If you buy a property you’re not going to live in, then you’ll have to put down a minimum 20 per cent to qualify for mortgage insurance. That’s up from 5 per cent.

But Mr. Majthenyi said not all lenders even require clients to have mortgage insurance if they put 20 per cent down. He also said that stiff mortgage insurance premiums already discouraged people from putting 5 per cent down on an investment property.

“In my office of 10 brokers, I don’t think I know of one client we’ve processed on a high-ratio rental property,” he said.

The final mortgage change restricts the ability of existing homeowners to refinance their mortgages to take on more debt. The new ceiling is 90 per cent of the value of your home, compared to the current 95 per cent.

Mortgage broker Jas Grewal said one group that will be affected by this is recent buyers who made a small down payment and are struggling with high credit card balances and other debts. By folding these debts into their mortgage, they can reduce their interest rate from as high as 19 per cent down to something closer to 3 or 4 per cent.

“Let’s say you put 10 per cent down – if we go from 95 to 90 per cent, you’re not going to be able refinance,” Mr. Grewal said. “You’re going to have to wait until your house value goes up and gives you some equity.”

Source: Rob Carrick of the Globe and Mail (www.TheGlobeandMail.com)

   New Mortgage Rules: The Good, The Bad, The Ugly

Early signs indicate that Canada’s hot real estate market surged again in January. Among the cities to report data, sales rose an average of more than 60 per cent, and prices more than 14 per cent, from a year earlier in Toronto, Calgary, Edmonton and Ottawa, BMO Nesbitt Burns said. In Toronto, sales jumped 87 per cent and prices 19 per cent. Earlier this week, the Real Estate Board of Greater Vancouver reported that, excluding apartment properties, sales rose 141 per cent in January from a year earlier, and prices 19.5 per cent.

www.TheGlobeandMail.com

Edmonton, February 2, 2010: Single family homes sold through the Edmonton Multiple Listing Service® System sold on average for the same amount in January as at year-end while condominium prices dipped 2%. Month-to-month sales slowed by 6.8% as compared to December but the number of new listings in January doubled the December numbers. 

The average* residential price was $314,783 for January, down 1.4% from last month and down just 0.7% from a year ago. Single family home prices on average were stable increasing minutely from $366,761 in December to $367,747 in January. Condominium prices dipped just 2% in the month from $244,174 to $239,006. Duplex and rowhouse prices were up 1.5% to $300,563.

“There will be month-to-month fluctuations in prices for all types of properties,” said Larry Westergard, president of the REALTORS® Association of Edmonton. “We expect that the local market will continue to be robust and prices will trend upwards through the year.”

Compared to December, housing sales were down in January with 524 single family sales and 288 condominium sales. Total residential sales were 884 units – 154 ahead of last January. There were 2,199 residential listings added during January resulting in a 40% sales-to-listing ratio and a month-end inventory of 4,864 homes. The average days-on-market was 57 days. Total sales (including residential, commercial and rural properties) in January were valued at $315 million (up 19% from last year).

“While the low prices may have motivated some buyers, the continuing low interest rates are probably a bigger factor for first time and repeat buyers,” said Westergard. “The inventory increase shows that current owners are poised to enter the market and to offer their homes for sale. Buyers and sellers should consult their REALTOR® to work out an appropriate strategy for their situation.”

-30-

Highlights of MLS® 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.

Source: REALTORS® Association of Edmonton

It can difficult to determine or predict when interest will go up.  But a survey done by MSN money came up with these results.  These are of course the opinion of people responding to a questionnaire on a website, and has no real scientific proof of when interest rates will go up.

• 1. Spring   17%
• 2. Summer  28%
• 3. Fall  36%
• 4. Not sure  19%

5284 responses, not scientifically valid, results updated every minute.

“Less is only more where more is no good.”

Every so often, someone comes along who just makes you question every purchasing decision you’ve ever made. Like Miami-based designer Marianne Cusato, whose home design philosophy embodies living better with less.

Working with a team of designers, Cusato created the Katrina Cottages: attractive, affordable homes between 300 and 500 square feet. That’s not a typo. I don’t know how big your place is, but my kitchen and eating area is around 300 square feet, and I still trip over my dogs.

Her team’s task was to design an alternative to the FEMA trailers that housed those left homeless after hurricane Katrina. The Katrina Cottages are well-designed and apple-pie cute to boot. They won the Smithsonian Institution’s National People’s Design Award in 2006.

Of course, Cusato’s not the first build-better-not-bigger disciple. Sarah Susanka, author of The Not So Big House, also reveres architectural quality over quantity.

But regardless of whether your home is big or small, its design — far more than its size — determines how well you live. Bigger isn’t always better — though it can be.

Here are some ways Cusato says we can work around common design flaws in newer homes that may negatively affect how we enjoy our spaces.

– Mistake: Dominant garages. As people began to rely more on cars for daily living, garages started taking over the front of the house. Next, people retreated further inside their homes and became less connected with their neighbours and communities.

– Fix: Enhance your street connection. Consider how your home meets the street. It should pull you in. Punch up your home’s curb appeal. Focus on the front door and your porch if you have one. Make the path to your door say, “Welcome.”

– Mistake: Focus on size. To max out square footage, many builders have opted for bigger houses at the expense of high end finishes.

– Fix: Upgrade door handles and knobs that feel flimsy for ones that look and feel solid. Similarly, trade hollow core doors for solid ones.

– Mistake: Tacky add-ons. Among Cusato’s many peeves are tacked on architectural details that are just for looks. Specifically, she’d like to abolish fake shutters and three-foot porches.

– Fix: Use it or lose it. “A home should have nothing gratuitous,” says Cusato. “Either the shutters work or they go.” Even her 300-square-foot cottage has an eight-foot-deep front porch (not included in the square footage). “Keep it authentic.” Now think about that while I go take the fake shutters off my garage.

Marni Jameson, Calgary Herald

Average price up 19% nationally in December, but just 2.65% locally

Sales and prices of existing homes in Canada soared in December, capping a whirlwind 2009 that began weakly and then went on to set record highs for prices, and further stirring debate of a housing bubble.

The Canadian Real Estate Association said Friday that a total of 27,722 homes changed hands in December, up 72 per cent from the same month in 2008, when activity ground almost to a halt in the wake of the global financial crisis.

“Sales activity in 2009 came in like a lamb and went out like a lion,” said CREA President Dale Ripplinger.

CREA said the national average price in December rose to $337,410, up 19 per cent year-over-year. For the year as a whole, the national average price climbed five per cent from 2008 to a record $320,333.

In the Edmonton region, the average residential price in December was $319,201, up 2.65 per cent year-over-year. For the year as a whole, Edmonton’s average price for a single-family home was $364,032 while the average for a condo was $240,322.

After the slowest start since 1996, resales in the Edmonton region reached 19,139 residential sales in 2009 to beat the forecast from the Realtors Association of Edmonton.

The Canadian association reiterated that the national average price was skewed due to activity in Canada’s priciest markets.

Year-to-date activity was still trailing 2008 levels at the end of September 2009, but a 59-per-cent year-over-year gain in the fourth quarter, the best ever, pushed 2009 sales activity above annual levels for 2008, it said.

The robust figures continue to show the housing sector is leading the overall domestic economy out from a long downturn. But the housing market’s strength has also been at the centre of a debate over whether a bubble in sector is forming.

“The raft of data will do nothing to quell talk of a bubble, talk that the Bank of Canada and the Canadian Real Estate Association have studiously downplayed,” said Doug Porter, deputy chief economist at BMO Capital Markets.

“And, before we officially jump on the bubble bandwagon, we would again point out that the reported price change is skewed by the surge in Vancouver and Toronto sales.”

The Bank of Canada, ahead of its interest rate decision next Tuesday, said this week it was premature to talk about such a possibility, a view echoed by Finance Minister Jim Flaherty on Friday.

“I do not see evidence of a bubble right now, but we’re going to keep watching. There are some steps we can take, that we will take if necessary,” Flaherty said Friday.

He pointed to tools the government could use to cool the market, including raising credit requirements for insured mortgages, ensuring cautious lending practices, and reducing the maximum amortization periods of mortgages.

Record-low interest rates have helped fuel the housing boom, while low supply and pent-up demand have also driven up prices.

But Scotia Capital economists Derek Holt and Karen Cordes said “dismissing housing risks is being a tad Pollyannaish.”

They said in a report that it was likely that housing will “experience a more sudden decline in activity in the back half of the year and into 2011.

“The drivers are pointing to signifi-cant softening in both the supply and demand supports, such that downside risks to house prices by 2011-12 are material and merit caution,” the economists wrote in a report.

CREA said December sales records were reported in Ontario, Quebec, Saskatchewan, New Brunswick, and Newfoundland and Labrador.

Average prices set annual records in a majority of local markets in 2009, and in every province except Alberta, the association said.

Seasonally adjusted national home sales totalled 46,805 units in December, concluding the strongest fourth quarter ever. A total of 137,957 homes were sold on a seasonally adjusted basis in the fourth quarter of 2009.

Edmonton Journal

Lori and Cliff Burlingame, holding blueprints of their home, are owners of Silvercliff Homes. Behind them are family members, some of whom now work for the company

Photograph by: Brian Gavriloff, The Journal, Freelance

More space leads wish list given to custom builders 

Build it — with creature comforts — and they will use it.

That’s what one Edmonton-area home builder has noticed as buyers in the greater Edmonton region are opting for more luxury-like features in today’s new homes.

What are buyers looking for? In short, more space.

And here’s how they’re using it: There’s virtually a bathroom for every bedroom, they’re adding more than just the one traditional walk-in closet, they’re selecting a variety of home entertainment settings — rooms uniquely designed for fun and games — and they’re selecting imaginative ways to camouflage kitchen storage.

“A lot of our homes are being built around entertaining,” says Cliff Burlingame, who along with his wife Lori runs Silvercliff Homes, an Edmonton-area custom home builder. “That’s the lifestyle now. There are games rooms, home theatres, larger living rooms and larger, open-concept kitchens where they can entertain more.”

But while the number of bedrooms remains roughly the same compared with homes they’ve constructed before, one trend Silvercliff is noticing is that extra closet space is a hot item, as are additional bathrooms — and this includes average-size family homes, not just the executive homes, they build.

“A lot of them are doing walk-in closets in all the bedrooms; that is quite a big thing,” says Lori. “We haven’t really noticed more bedrooms; if anything, there’s more bathrooms being attached to the kids’ bedrooms.”

It’s all a far cry from what the Burlingames have noticed in years past, where houses they worked on — renovations formed a larger part of their work back then — weren’t as distinctive when it came to upgrades as they are today.

The couple have home building in their blood — Cliff has been in construction for more than 30 years, while Lori handles the interior design end of the business as she has from Day 1. They believe in a personal approach, walking their clients through the building process to provide a home — be it a starter or an executive model — that meets the buyer’s desires. As the contractor, they organize and supervise the project, simply charging a fee for their involvement. As for the materials involved, they pass on their builder pricing — with no markups — to their clients.

Popular features

“Back in the ’90s it wasn’t like it is now,” says Lori. “Today, it’s more upscale and more money is being spent; they’re doing the extras like more expensive fixtures and upgrading cabinets. The kitchens have more gadgets; there’s lots of little niches for espresso machines and instant hot water taps and every home has a garburator now — in the ’90s, it was just more in upper-end homes.”

That, however, is just the tip of the proverbial iceberg when it comes to customizing homes for current buyers, be they young or old.

“If they’re not happy, we’re not happy,” says Cliff, who now counts his son Chase and daughters Brandi and Paige as part of the Silvercliff team.

Other popular new-home items include forced walkouts, double bathrooms and elaborate coffered ceilings, examples of which can be found in the Burlingames’ current home on the southwestern outskirts of Edmonton, in Leduc County.

Their custom-designed bungalow offers 2,430 square feet on the main floor and another 2,430 square feet in the fully finished basement, which Cliff notes is also a prevalent trend.

“A lot of people want finished basements,” says Cliff. “It all depends on affordability, but it’s a popular item.”

On the main level, the Burlingames’ home has formal and informal living spaces that are defined by various ceiling types, from barrel to cross-beam to coffered, all with diverse lighting effects.

The kitchen features a massive centre island with a country-style sink, raised eating bar and lower baking centre, and is also home to an intriguingly huge hidden pantry. At first glance, no one would ever know that part of the custom cabinetry is actually a cleverly hidden door that opens to a massive out-of-sight pantry.

Just off from the kitchen is a home office, but this one comes with a distinctive and useful Silvercliff twist.

“Probably 80 per cent of our clients nowadays have some sort of home-based business or work, so we tend to have offices in almost all of our houses,” Cliff says. “But we like to build the office so it can be converted from a study into a bedroom.”

He says this is quite useful as a family’s needs can change over the years.

Silvercliff creates this dual-purpose room by recessing a pocket in the wall to accommodate part of the buyer’s office furniture, be it bookcases or a shelving unit. Initially, the recessed area takes on a customized look once the office furniture is in place. When it’s time to convert, the furniture is removed and there is minimal construction to transform that portion into a closet by finishing it off with a set of double doors.

Downstairs, the Burlingames have incorporated a forced walkout. As opposed to traditional walkouts where lots are sloped, Silvercliff is able to include a walkout on traditional flat lots with a typical below ground basement.

By erecting six-foot concrete walls to keep the dirt from falling inward, they’re able to create an area where you can walk out of from the basement onto a patio, which then has a number of steps upwards to reach ground level.

“We’re basically putting retaining walls around your walkout area,” says Cliff. “And because of the retaining walls, it gives you a lot more privacy.”

The double bathroom, meanwhile, is something that originally just made sense for Cliff and Lori, who came up with the idea to make it easier to live with three kids growing up. In actuality, the double bathroom is really one bathroom but divided into two areas by a locking door. On one side, there are double sinks while on the other side of the door, there’s a bathtub, shower and the toilet, allowing more than one of the now grown up kids to use the bathroom at a time.

“It’s become really popular and now we build it all the time. It’s really ideal,” Cliff says. “One can be showering and one can be putting on makeup and they’re in two different rooms but in one spot.”

In fact, the features in their house, including the dramatic and comfortable home theatre and the separate games room with its pool table and hockey memorabilia, are so in demand that three other clients want Silvercliff to build them the exact same house, just in different locations.

On average, Silvercliff likes to limit the number of homes it builds to about half a dozen a year. This, says Cliff, makes it easier to focus on the quality and workmanship of the homes they construct.

A home may be one of the biggest investments you ever make. Saving up a down payment is just the first step. Find out more.

What factors affect the value of a home?

• Location: Real estate people always say “Location, location, location.” That’s because the area you live in will be the biggest factor affecting your home’s price. It’s smart to buy a home where housing prices are likely to increase. Also, the people who may buy your home from you one day may be willing to pay more for a home that is close to schools, sports centres, stores, services, and so on. Keep that in mind as you look.
• The condition of the home and the property it is on: Does the home need a lot of repairs? How is the roof, plumbing, and electrical wiring? A home in good repair may be worth more. Also, the condition of the outside of the home, the lawn, gardens, driveway, and trees will all affect the value of a home. These are the first things that buyers see, and are together known as curb appeal.
• Renovations and updates: An older home might need some work to keep it safe, modern, and comfortable. If you are buying at a home that has had some renovations, check the quality. When you do work on a home you own, do it as well as you can. Poor work can lower the value.
• The economy: There are some things you can’t control that affect house prices, like interest rates. Higher interest rates mean it costs more for a mortgage, so fewer people buy homes. When that happens, the prices of homes can fall. Lower interest rates, on the other hand, can boost buying and drive prices up. House prices often go up for a while, and then come down a bit. Try to find out as much as you can about how prices are changing, or may change, when deciding to buy or sell a home. Often there will be stories in the paper about housing prices.

How much is my home worth today?

If you’re considering buying a home, or you just bought one, you know how much it’s worth. But if you’ve owned your home for a while, its value has probably changed. Here’s how you can find out how much it’s worth now:

• Call a real estate agent: Ask them for an estimate of your home’s value. You may be able to get an agent to do this for free, because they hope to get your business in the future.
• Ask an appraiser: Your bank or a real estate agent should know a number of appraisers. Banks use them to estimate house values before they approve mortgages. You can also look in the yellow pages. An appraiser will charge a fee for the service.
• Check to see what other homes in your area have sold for recently: Compare your home with similar ones that have sold. Unless you keep up with what’s happening in your area, this information may be hard to get. Ask your real estate agent if you can’t find it yourself.

How much will my home be worth in the future?

To estimate a home’s future value, you will have to do some informed guessing. Start with finding out what has happened to prices in your location over several years.

Source: Canadian Real Estate Association (MLS®)

Remember: There’s no guarantee what housing prices will do

Location and the condition of the home are both important factors, as is the economy as a whole.

A home may be one of the biggest investments you ever make. Saving up a down payment is just the first step. Find out more.

A good investment in a renovation should increase the value of your home by at least the amount of money you spent, or close to it. A bad one doesn’t get you much of your money back. Here are some investments that have proven to return their value, or close to it:

• Low-cost improvements that make your home look better: Painting, new wallpaper, and items like new rugs and curtains help to brighten and improve the look of a home, and add value to your house if they are done close to the time of sale.
• New or improved kitchens and bathrooms: Improvements to your kitchen and bathroom seem most likely to increase the value of your home. Keep in mind that these improvements lose value over time.
• Improvements to the living room and the master bedroom: These are also good investments and will usually return most of the money you spent, if not more.
• Investments in more efficient use of energy: Oil, gas, and hydro costs continue to go up. That’s becoming more of a concern when people are looking to buy a home. You can make your home more energy efficient as an investment in its value. Some government programs help reduce the costs of these projects. Also, consider buying appliances that waste less energy.
• Keeping up with repairs. If you do a little at a time, you can avoid doing a lot of expensive repairs at the same time. A reasonable amount to spend yearly is 1% to 2% of the value of your home.

What are some renovations that don’t add much value to my home?

• Swimming pool: Make sure you want a pool before you invest in a pool. The cost of putting in one won’t show up in the price that you get when you sell a home.
• Costly appliances: Most people won’t want to pay an extra $4,000 for your home to pay for a $7,000 refrigerator instead of a $1,200 refrigerator. If you pay thousands of dollars for top-of-the-line appliances, enjoy them. You probably won’t get your money back if you sell them with your home.
• Costly landscaping: The way your home looks from the street can really help interest buyers. It’s called ‘curb appeal.’ But if you spend $30,000 in landscaping, don’t expect to get it all back. Most buyers probably won’t see or appreciate the value.
• Renovating in an area where homes are being torn down: Tear-down activity involves homes being sold, torn down, and replaced by bigger, more expensive homes. If someone is going to buy your home and tear it down, a renovation won’t return any of your money. The buyer will have no interest in the building, just in the land.

Remember: Don’t assume you will get all your money back from a renovation

The key to renovating is to keep the house in good repair and do the renovations you want to enjoy. If you think you might be selling in the near future, focus on renovations that are more likely to get your money back.