For the first time in decades, CMHC has increased their premiums on default insurance. Should this be seen as a sign that the market is in trouble or is this just a sign that CMHC is starting to be run like a private company? More than likely the latter. CMHC has been run like a government entity for years now, however if the market were to take a bad turn, the tab would end up on the tax payers. So to reduce this risk, CMHC is now starting to be run more like its private competitors. Here are the new premiums:
95% – to 3.15%
90% – to 2.4%
85% – to 1.8%
80% – to 1.25%
75% – to .75%
65% – to .60%
Other private insurers will follow suit shortly.
Police in Ontario are warning of a new fraud being perpetrated in the real estate market. At first glance, most prospective buyers would likely walk away as things don’t add up, however for those first time buyers who may not be as seasoned, you could easily get burned.
Those involved list for sale by owner ads (of houses they do not own), at heavily discounted prices and request a down payment be wired into their account. Again, this is not normal protocol but it is something to be wary of; here is the full story here…
The Federation of Canadian Municipalities have written to the PM with a major concern; the high cost of housing in our cities. Not only are costs too high for those buying homes to live but the cost of rental properties due to diminished availability is making finding affordable housing difficult.
While the cost of housing is certainly an issue in some cities, it is not in other areas so I am not sure a national strategy is needed, however certainly a municipal strategy coupled with federal assistance would be a good starting point. Rental controls like they use in cities like New York could also be an option, however when rental properties are limited, I am not sure controls will encourage more investors into the market.
This is a difficult issue and one we will watch with great interest.
US home sales hit a 6 1/2 year high last month, in another show of strength in the US housing market. With low interest rates, and prices still low in many markets, its no surprise that things are starting to cook down south in a sign the whole economy is starting to finally turn the corner.
So what does that mean for us up here?? Well, likely not much in the near term, although anything that happens in the US economy does affect us eventually. As more and more economists come out saying that a US style crash will not happen in Canada, you have to think this bodes well for where the market is heading with the expectation being a soft landing at the very worst.
The Bank of Canada held the benchmark rate as expected today, stating the global economy is still growing too slowly and rates are not expected to change till the end of 2014. Not much surprise or information to pick apart here as this was generally expected to be the news coming from the BoC.
So what does it mean for clients on the street? Well, a variable is still a good place to keep your mortgage, although with fixed terms creeping up we do recommend keeping an eye on them if flipping into a fixed is the long term goal. It is more negative news on the overall economy however as it seems stalled and unable to get out of this rut.
A new report just released by RBC shows housing affordability is down for the average Canadian. The report took second quarter numbers into consideration when determining these results. The recent rate hikes by the banks will further decrease these numbers meaning the average home buyer is looking at less house than they could earlier this year when rates were at the bottom.
I don’t think there is any question most centers are seeing property values that are over valued and the artificially low rates are driving this however, I also believe that we will see home values flatten for the next few years allowing incomes to catch up. Buying a home is still a great investment, its just not going to make you the kind of returns we saw in the past decade.
The Financial Post had an article today which is something everyone needs to look at every now and then with regards to their personal financial situation; am I in over my head?
Here are the 5 signs:
1)After making your mortgage payment every month, are you finding it tight for the rest of your regular expenses such as spending/ food/ utilities etc?
2)You are meeting your payment obligations however you have nothing left for your savings at the end of the month?
3)Property taxes seem to be tougher to come up with every month/year?
4)Repairs to the home are being put off as there is no money to make them.
5)A change in income when things are already tight.
These are all situations that most of us will have to deal with at some point in time however if you find it to be a regular occurrence it may be time to consider some action to remedy the situation. Talk to one of our mortgage brokers about refinancing your debts or extending your amortization; it is much easier to deal with this problem before it becomes a much bigger problem.
So the spring market has come and gone, and although the new mortgage rules did keep a number of new home buyers out of the market, it seems we have avoided the cliff that the feds were worried about in the housing market. Even Toronto and Vancouver (other than the condo markets) have rebounded and we are starting to see price increases for the first time in a while. It is expected the increases will be slow, and the market will remain flat for the foreseeable future; a decent result considering the alternative we were looking at 6 months ago.
Rates have been creeping up for the past month and we are now 1/2% higher than we were a few months ago on fixed 5 year money, still an extremely attractive rate however when viewed through a historical perspective.
All said, the market seems to have stable and all is quiet on the mortgage front… mission accomplished???
In its biggest jump in 7 years, the US housing market jumped over 12% year over year in April. It is likely safe to say, the market is back! In many markets which saw over a 20% increase year over year, prices went up significantly due to a lack of inventory; what happened to all the foreclosures??
The housing market looks more sustainable, and will continue to help boost the growth in the general economy as more and more pointers seem to suggest things are looking better. Hopefully, this boost will give Canada a similar jolt and drag us out of this lull we are in right now!
Even though the government has reduced the maximum amortization for insured mortgages down to 25 years from 40 years, Canadians on average are paying their homes off in 11.7 years! So why all the regulations and driving down affordability when no one is actually taking 40 years to pay off their property??
Well, I think there is likely some common ground here that we can agree on. A shorter amortization means building equity quicker so any drops in the market do not leave new home owners under water. So where could we meet in the middle? How about a 30 year amortization for first time buyers to make it easier to get into the market?? There are plenty of ways to accomplish what the feds want to accomplish without making it so difficult for those first time buyers who have really been shut out since the most recent round of mortgage rule changes.
We see the reason for trying to avoid a housing bubble, but all these rules are hurting more than just first time buyers. New home construction is way off, costing thousands of jobs to an economy that can’t afford it. So lets take our foot off the pedal but no need to slam on the brakes; mortgage rules need to be eased up!