Edmonton Real Estate Blog

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)

The Honourable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada’s housing market and continue to encourage home ownership for Canadians.

“Canada’s housing market is healthy, stable and supported by our country’s solid economic fundamentals,” said Minister Flaherty. “However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing.”

The Government will therefore adjust the rules for government-backed insured mortgages as follows:

• Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
• Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
• Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

“There’s no clear evidence of a housing bubble, but we’re taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it,” said Minister Flaherty. “If some lenders aren’t willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families.”

These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.

Source: Department of Finance Canada

If you are thinking of buying you need to buy now.  Call us today to get pre-approved for a mortgage and help you find that perfect home for you today. 780-634-8151

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

Well this weekend was the Western Canada Conference and awards presentation.  This year it was in Edmonton which made it easy for me to attend to receive my award.  But the best part was in those 3 days the people in attendance raise over $60,000 for the Children’s Miracle Network.  Not a bad feat since there were only between 450 – 500 people registered for the conference.  That works out to $120 per person.  Last year in total Re/Max contributed over 3.7 million to the Children’s Miracle Network.

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.

Weekly rate minder provided by: Souchita Rattanarasy Dominion Lending Centres Optimum 780-932-2225. Explore Mortgage Scenarios with Helpful Calculators on http://www.souchita.com/

Homebuyers want smaller houses and they are willing to strip some of yesterday’s most popular rooms-such as home theatres-from them in order to accommodate changing lifestyles, consumer experts told audiences at the International Builders Show here this week.

“This is a traumatic time in (the United States) and the future isn’t something we’re 100 per cent sure about now either. What’s left? The answer for most home buyers is authenticity,” said Heather McCune, director of marketing for Bassenian Lagoni Architects in Park Ridge, Ill.

Buyers today want cost-effective architecture, plans that focus on spaces and not rooms and homes that are designed ‘green’ from the outset,” she said. The key for homebuilders is “finding the balance between what buyers want and the price point.”

For many buyers, their next house will be smaller than their current one, said Carol Lavender, president of the Lavender Design Group in San Antonio, Texas. Large kitchens that are open to the main family living area, old-fashioned bathrooms with claw foot tubs and small spaces such as wine grottos are design features that will resonate today, she said.

“What we’re hearing is ‘harvest’ as a home theme-the feeling of Thanksgiving. It’s all about family togetherness-casual living, entertaining and flexible spaces,” Lavender said.

Paul Cardis, CEO of AVID Ratings Co., which conducts an annual survey of homebuyer preferences, said there are 10 “must” features in new homes:

1. Large kitchens, with an island. “If you’re going to spend design dollars, spend them where people want them-spend them in the kitchen,” McCune said. Granite countertops are a must for move-up buyers and buyers of custom homes, but for others “they are on the bubble,” Cardis said.

2. Energy-efficient appliances, high-efficiency insulation and high window efficiency. Among the “green” features touted in homes, these are the ones buyers value most, he said. While large windows had been a major draw, energy concerns are giving customers pause on those, he said. The use of recycled or synthetic materials is only borderline desirable.

3. Home office/study. People would much rather have this space rather than, say, a formal dining room. “People are feeling like they can dine out again and so the dining room has become tradable,” Cardis said. And the home theatre may also be headed for the scrap heap, a casualty of the “shift from boom to correction,” Cardis said.

4. Main-floor master suite. This is a must feature for empty-nesters and certain other buyers, and appears to be getting more popular in general, he said. That could help explain why demand for upstairs laundries is declining after several years of popularity gains.

5. Outdoor living room. The popularity of outdoor spaces continues to grow, even in Canada, Cardis said. And the idea of an outdoor room is even more popular than an outdoor cooking area, meaning people are willing to spend more time outside.

6. Ceiling fans.

7. Master suite soaker tubs. Whirlpools are still desirable for many home buyers, Cardis said, but “they clearly went down a notch,” in the latest survey. Oversize showers with seating areas are also moving up in popularity.

8. Stone and brick exteriors. Stucco and vinyl don’t make the cut.

9. Community landscaping, with walking paths and playgrounds. Forget about golf courses, swimming pools and clubhouses. Buyers in large planned developments prefer hiking among lush greenery.

10. Two-car garages. A given at all levels; three-car garages, in which the third bay is more often than not used for additional storage and not automobiles, is desirable in the move-up and custom categories, Cardis said.

Source: Steve Kerch of Marktwatch (Yourhome.ca)

Breakthroughs in technology mean homeowners in older houses can now enjoy the same advantages in home automation formerly available only in new homes.

The heart of home automation is the ability for a homeowner to control or monitor, sometimes remotely, electrical devices in a home. Practical applications include the control of lighting, draperies, audio systems, the monitoring of home security and the adjustment of heating, ventilation and air-conditioning.

It used to be that only new homes being built were connected digital homes, sometimes referred to as Smart Homes. The systems were typically controlled and interconnected by wire; installation was easy to do only before the drywall was put up in the construction of new homes. Retrofitting an existing house was theoretically possible, but the added labour drove up costs.

“The availability of wireless systems has made a big difference when updating and retrofitting older, frequently heritage, structures,” says Paul Titterton, general manager of Lenius Osborne, an electrical contractor who specializes in home automation systems. “While you just can’t beat wire in some applications, wireless systems are usually cheaper. Jobs that now cost $10,000 used to be in the triple digits.”

Home automation systems are popular with security-minded people. Titterton recalls one client who installed a home system with cameras so he could make sure his 17 year-old son didn’t drive his Porsche when he wasn’t home.

Owners have the ability to monitor and control their home system or view images from video cameras, from anywhere in the world via a personal computer or iPhone over the Internet. Sensors can detect movement and alert a user by phone or an e-mail message. “With these systems, you can turn off your house lights from beside your bed or from anywhere in the world,” says Titterton.

Systems can be programmed to do just about anything, he says. Sensors can warn of fire, water leaks and sudden temperature drops.

A hard-of-hearing owner can program the system to flash lights in the house instead of having an audio alarm to warn of any impending emergency. It can turn down the audio or shut off the home theatre automatically to warn of a fire or burglary in progress.

People with pre-existing medical conditions, such as a patient hooked up to a portable EKG machine, can program the home system to monitor signals and automatically summon medical personnel if pre-established limits are exceeded. Patients can also carry a panic button with them in case of emergency.

The applications run from life-saving to lifestyle.

“The whole industry is moving to automation,” says Nigel Brown, co-owner of Ruffel & Brown, a window-covering store. “Twenty-five years ago you had to get out of the car to open the garage door. Now there is a greater expectation … that pretty much anything can be automated.”

Curtains, window blinds and shades all can be tied into smart homes. With a touch of a button, curtains close, lights dim, the TV turns on and a DVD loads in a home-theatre system. Window coverings are the latest items to join programmable indoor and outdoor lights to give a house a “lived-in” look, even if owners are away.

A remotely controlled 10-foot motorized track for a curtain, wired into a home

automation system, can cost $1,000 to $1,500. Stand-alone systems, some solar-powered, are also available. Smaller blinds and shades in difficult-to-reach spots with no existing wiring can be powered by batteries.

Brown says sun sensors let you program drapes to close either at night or in strong sunlight.

Smart Home systems are ideal for video and music lovers. By connecting an iPod dock to the system by hardwire, tunes can be played in any room of the house or even outside. A central hard-drive and signal distribution allows video to be viewed on multiple televisions. If somebody comes to the door while a television program is in progress, an image from the front door camera can be displayed on the television.

“Just about anything can be integratable (into the system),” says Titterton. “It doesn’t take more than programming for anything with an integrated circuit.”

Victoria Times Colonist