Edmonton Real Estate Blog

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Canada Mortgage and Housing Corp. is limiting guarantees it offers banks and other lenders on mortgage-backed securities. The measure comes amid the federal government’s efforts to protect taxpayers from financial risks in the housing sector, further cool lending and add upward pressure to mortgage rates.

The Crown corporation has notified banks, credit unions and other mortgage lenders that they will each be restricted to a maximum of $350-million of new guarantees this month under its National Housing Act Mortgage-Backed Securities (NHA MBS) program. The decision comes in the wake of “unexpected demand” for the guarantees, a spokeswoman for CMHC said in an e-mailed statement.

The conversion of loans into securities with CMHC backing has become a popular way for lenders to tap funds from a broad range of investors, enabling banks to issue more mortgages and at a lower cost.

Federal Finance Minister Jim Flaherty, concerned that Canada’s housing market might overheat and infect the economy, has been taking steps to cut back the flow of mortgage credit. This spring, he went as far as to publicly chastise some banks for dropping their mortgage rates too low.

He is also taking steps to reduce the degree to which taxpayers backstop the housing market.

This year, he announced he would restrict the ability of banks to buy bulk insurance from CMHC, and he curtailed the use of government-backed insurance in securities sold by the private sector. Ottawa released a legal framework for covered bonds, another type of bond backed by pools of mortgages, last year. It said banks could not use insured mortgages in such securities.

In addition to removing fuel from the housing market, these moves force banks and other lenders to take on more of the risk of mortgage defaults, rather than offloading that risk to Ottawa.

Canada’s housing market slowed in the wake of the government’s moves, namely Mr. Flaherty’s decision last summer to tighten mortgage insurance rules. Still, prices in most areas continued to climb, and sales have begun to bounce back.

“The government is attempting to tighten credit conditions for home loans, for example the changes to CMHC’s underwriting standards last year, and this is the latest iteration of that effort,” said National Bank analyst Peter Routledge.

He said that the four largest mortgage underwriters, Royal Bank of Canada, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Bank of Nova Scotia, had made good use of the NHA MBS program “and I expect that their funding strategies will change as a consequence.”

“Given the differentials in funding costs via NHA MBS or unsecured long-term funding, I could see [an additional] 20 to 65 basis points in the cost of funding mortgages for the larger banks,” he said. “All else equal, we could see mortgage rates start to move up in unison.”

At the start of this year, after consultations with CMHC, Mr. Flaherty said the Crown corporation could guarantee a maximum of $85-billion worth of new NHA MBS this year. By the end of July, lenders had already issued $66-billion worth of the securities, compared to $76-billion during all of 2012. As a result, CMHC is imposing the $350-million cap on each issuer effective immediately, while it comes up with a formal allocation process this month that it will put in place for the final four months of the year.

The Crown corporation guarantees timely payment of interest and principal to investors in both types of securities, and charges the banks a fee for the service.

On its website, CMHC states that “MBS [have] helped to ensure a ready supply of low-cost funds for housing finance and to keep mortgage lending costs as low as possible for homeowners.”

Mr. Routledge said that smaller mortgage lenders don’t create enough NHA MBS to be materially affected by the new $350-million cap.

The amount of NHA MBS being issued shot up during the financial crisis, as banks sought cheaper sources of funds to continue lending mortgages. The securities are backed by pools of insured mortgages, and investors receive monthly principal and interest payments that stem from the payments homeowners make on the underlying mortgages. Banks sell the securities to investors, or to be used in the Canada Mortgage Bond program.

Feel free to call for questions or more information.

Source: www.cmhc-schl.gc.ca/en/co

In the first six months of the year, housing prices in the Edmonton Census Metropolitan Area (CMA) showed slow, steady increases. According to the REALTORS® Association of Edmonton, the all-residential average price was up 5.6% from the average price on December 31, 2012. Compared to June 2012, the current average price is up 4.2%.

“Economic conditions in the Edmonton area are generally positive and this is reflected in our local housing market,” said President Darrell Cook. “Prices have risen slowly through the first six months and there is nothing in our local economic trends to indicate that this period of stability will change.”

The average all-residential price for the Edmonton CMA in June was $359,631. This was up 0.8% from May 2013. The average price of a single family property in June was $412,269, up 2.3% from last June when the price was $402,840. Condominium prices followed a similar path with June prices at $261,854 compared to a year ago at $240,822.

The inventory of available residential properties on the MLS® System has increased over the past two quarters and is currently at 6,078 properties. Never-the-less, this is still lower than the inventory of 6,435 homes recorded at the end of June 2012.

“Higher prices and a shortage of inventory in some categories have limited the number of sales,” said Cook. “We are seeing some instances of multiple offers, however buyers looking at higher priced properties are taking their time to study the market with their REALTOR® before making an offer on the property that matches their needs.”

The all-residential sales figures for June are down 1.5% year-to-date when compared to 2012 with 8,664 sales so far in 2013 as compared to 8,792 in 2012. There were 1,840 residential properties of all types sold in the Edmonton CMA in June and 1,800 sold in June 2012. Single family detached sales of 1,080 were off 4.9% from last year. Condominium sales were up in the first half because of a lack of lower priced single family properties. There were 470 condo sales in June compared to 536 in June 2012. There were 116 duplex/row house properties sold in June. Note: all sales numbers are estimated to reflect late reported sales.

The average days-on-market for all residential property was up to 47 days from 45 days in May and the sales-to-listing ratio was 63% in June,

up from 53% last month.

Source: REALTORS® Association of Edmonton

To View & Search All MLS Listed Houses for Sale Visit Us At:

www.EdmontonHomesforSale.biz

The average housing prices quoted by the Board are influenced by two factors. If the prices paid on particular properties are rising then it will push up the average price. But if the actual prices are constant, the average could still increase because of the product mix in the period.

Right now there is a shortage of attractive, lower priced homes in this market because the low interest rates and increased migration have created a demand for housing for entry level buyers. Existing home owners are also taking advantage of the lower interest rates and the equity gain since 2006 and are buying in more expensive neighbourhoods. With less homes sold at the low end, the average price is pushed up as current owners move up-market to find a home. The relative number of homes sold in the $450 – 650k price range increased from 12.2% to 14.5% year-over-year while the percentage of homes under $300,000 dropped from 40.7% of the market to 38.2%.

It is important that REALTORS® explain this phenomenon to their sellers so that they don’t have unrealistic pricing expectations. The increase in average price may not increase the market value of a particular property. Just because the market is rising, does not mean that buyers will pay more than the market price in a given neighbourhood for a home. The CMA will reveal if prices for comparable homes are rising with the market or are showing a more moderate rate of increase.

Source: Realtors Association of Edmonton

We are heading into a strong spring market. In the last 30 days we have seen an increase in sales. In the last 30 days we have seen 801 single family homes sold in in Edmonton proper.

Currently in Edmonton proper we have 2,164 single family dwellings for sale. which is about average for this time of year.

This now gives us a listings to sales ratio of 2.7:1 which is far below the 4:1 that creates a balance market.

With a ratio that is considerable below the 4:1 need for a balanced market is a strong indicator that their is strong upward pressure on valuations. Expect the cost of homes to be going up.

If you are thinking of buying this year buy now and save yourself potentially thousands of dollars.

If you are ready to buy call us here at Team Leading Edge 780-634-8151 or visit us at www.EdmontonHomesForSale.biz

Source: Realtors Association of Edmonton

Colby Sambrotto, who founded a website for DIY-real estate, just sold his Chelsea apartment for $2.15million

The founder of a website helping people to sell their own homes has found a buyer for his own apartment – with the help of a traditional real estate broker.
ForSaleByOwner.com creator Colby Sambrotto even paid the standard 6% commission after selling his two-bedroom New York condo for $2.15 million.

According to the Wall Street Journal, Mr Sambrotto spent six months trying to sell the apartment in trendy Chelsea through online listings and classified adverts.

But the DIY home selling guru eventually decided to turn the sale over to a professional.
Not only did broker Jesse Buckler set the price $150,000 higher than the  original asking price, he went on to lure the elusive buyer Mr Sambrotto’s self-help methods had failed to attract.

The Journal said the 2,000-square-foot apartment at The Lion’s Head building near Sixth Avenue is now under contract.

The apartment in question: Colby Sambrotto, founder of ‘For Sale by Owner’ sold his Lion’s Head Building home via a real estate broker

Practice what you preach? Mr Sambrotto couldn’t sell his house by himself – despite making a fortune by advocating for the method Mr Buckler claimed the owner wasn’t asking enough for the apartment and was consequently attracting the right buyers.

Broker Jesse Buckler encouraged Mr Sambrotto to increase the asking price of the apartment as a sales strategy

‘At first he wouldn’t let me increase the price,’ said Mr. Buckler. ‘I told him I know what I am doing—the market is picking up.’

Mr Sambrotto bought the apartment for $2 million in 2007, a year after he sold his ForSaleByOwner.com website at the height of the real estate boom.

Read more: http://www.dailymail.co.uk/news/article-2022112/For-Sale-By-Owner-founder-sells-home–using-real-estate-broker.html#ixzz2PK32xuzH
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Edmonton is the second-best market in the country to invest in housing, says real estate analyst Don Campbell.
“Population growth is strong, job growth is strong and things are supporting this market quite nicely, said Campbell, founding partner of the Real Estate Investment Network, a business that provides resources and information on real estate to members.
“It doesn’t look like it’s going to be another ‘07 where it just got into pure frenzy, but I think you’ll see late this year and early 2014 — which is a year behind Calgary as always — that the market will really start to push up.”
Home-buying demand will start taking off late this year while prices will begin rising next spring, Campbell says.
He bases that prediction on a formula where demand and prices come about 18 months after increased rents, which in turn follow decreased vacancies, increased demand for rental housing and growing population. All of those are triggered by earlier economic and job growth.

“We’re going to see a lot of listings come on during this year as well,” Campbell said, noting a current undersupply of listings.
Investors who bought too many properties in 2007, 2008 and 2009 will see the increased buying demand as a chance to sell, he said.
“The market’s barely moved in Edmonton as far as value. It’s a good window of opportunity before it starts to heat up again to get into the market. From an investment point of view, your rents are going up.”
He said when suites go vacant, landlords will raise rents by $150 to $200 per month.
“That will make renters think twice about renting rather than buying and that will happen over the next 12 or 18 months.”
Edmonton is second only to Calgary as the best place to invest in Canada in residential real estate. Campbell rates Hamilton as third because of its diversifying economy and job growth. Campbell was in Edmonton to promote his latest book The Little Book of Real Estate Investing in Canada. Royalties from the book go to Habitat for Humanity.

By Bill Mah, Edmonton Journal
© Copyright The Edmonton Journal

CALGARY — Members of Generation Y strongly desire a house of their own but they’re pessimistic about their ability to do so, according to a new Royal LePage Real Estate survey released on Wednesday.

The survey, which was conducted by Leger Marketing, said 80.9 per cent of the Generation Y (born between 1980 and 1994) respondents said they have plans to move to another primary residence at some point in the future with 39 per cent stating a move is planned within the next two years.

However, the majority of the young generation feel pessimistic about their ability to own a home because of current house price affordability as 44.2 per cent ‘somewhat agree’ with this feeling and 28.3 per cent ‘strongly agree’.

“While Generation Y is more likely to rent their primary residence at this stage in their lives, they do not see this as desirable long-term solution,” said the real estate firm. “An overwhelming 85.7 per cent disagreed with the statement that ‘I do not desire to own a property in my lifetime as renting is preferable to me’.”

Of those who are planning a move, 55.1 per cent of Generation Y intend to purchase their next primary residence while 32.6 per cent plan to rent.

mtoneguzzi@calgaryherald.com

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Source: MARIO TONEGUZZI, CALGARY HERALD MARCH 20, 2013

Any dark clouds that are currently hanging over Alberta will clear by 2014, paving the way for strong business and consumer activity, says a report by RBC Economics.

The bank’s latest Provincial Outlook, released Tuesday, said the province’s economy will continue its “impressive boom” through 2013, after leading the country’s economic growth in 2012, despite facing challenges.

RBC forecasts a provincial real GDP growth rate of three per cent due to strong crude oil production as well as high levels of capital investment, employment and population growth. This will be second in the country behind the 5.1 per cent growth expected in Newfoundland & Labrador.

RBC is predicting Alberta will lead the country in economic growth of 4.2 per cent in 2014.

In December, RBC forecast growth of 3.5 per cent this year for the province. The forecast for 2014 has remained the same.

“Even though the province recently announced a $2 billion budget deficit, Alberta is unquestionably in the midst of an impressive economic boom – particularly with capital investment fuelling manufacturing and wholesalers’ sales. Attractive employment opportunities are also bringing new migrants to the province, boosting population growth and in turn, consumer spending,” said Craig Wright, senior vice-president and chief economist at RBC. “As the economy continues to thrive across the majority of key industries, Alberta will remain at the top-end of Canada’s economic growth rankings this year.”

Economic growth in the province in 2011 was 5.1 per cent followed by 3.5 per cent last year.

Todd Hirsch, senior economist with ATB Financial, said Alberta’s economy is moderating somewhat.

“So I think we will see probably a slower year for growth than what we saw in 2011 or 2012,” said Hirsch. “A lot of that of course prompted by those softer energy prices and maybe a little bit of pullback by the provincial government. But I think we’re still going to see kind of a nice moderate healthy level of growth of around 2.5 to three per cent.

“Going forward beyond that it gets trickier and we don’t really do forecasts beyond 2013 but I would still see 2014 as a pretty good year … It’s not going to feel quite like the boom years of 2006, 2007 either. We’re just going to have nice healthy moderate growth.”

RBC said there are a few weak spots in Alberta’s economic outlook. Investment intentions in the oil and gas sector are essentially flat for 2013. RBC said Alberta’s energy developers’ plans are being weighed down by rapidly rising energy production in the U.S., pipeline bottlenecks and the ‘bitumen bubble’, all of which contributed to lower crude oil prices in Canada relative to global benchmarks late in 2012.

“Weaker than expected oil prices put a multibillion dollar hole in Alberta government’s revenues, and led to a 2013 provincial budget that detailed renewed public sector spending restraint,” said Wright. “Still, any pullback in capital spending will be short-lived as pipeline issues are addressed and crude oil price relationships normalize.”

RBC trimmed its real GDP growth forecast for Canada to 1.8 per cent through 2013, following softer-than-expected growth in 2012. For 2014, it is forecasting 2.9 per cent growth across the country. In December, it forecast growth of 2.4 per cent this year and 2.8 per cent in 2014.

“After boasting a relatively strong economic performance over the past several years, Canada’s economy hit a speed bump in late 2012,” said Wright. “That said, financial conditions continue to support growth. As confidence recovers, business spending should accelerate, albeit at a less rapid pace than we saw in the early days of expansion.”

Source: Calgary Herald