The sale of single family detached homes in the Fraser Valley increased by only 1 per cent in July

The area that experienced the greatest year-over-year decrease in sales – at 32 per cent – was South Surrey/White Rock where a typical single family detached home was valued at just under $880,000. “We are seeing a reduction in sales of higher-end homes. Last July was one of the busiest on record in that area, so the decrease appears sharper. South Surrey/White Rock would normally see about 100 detached homes sell in July and last month 86 sold, keeping the market competitive and prices resilient,” explains Olson.

Across the Fraser Valley, the benchmark price of a single family detached house in July was $551,400, an increase of 3.4 per cent compared to $533,400 in July 2011.

For townhouses, the benchmark price in July was $303,400, a decrease of -0.6 per cent compared to $305,200 during the same month last year. The benchmark price of apartments in Fraser Valley in July was $206,200, an increase of 2.5 per cent compared to $201,200 in July 2011.

FVREB President Scott Olson adds, “Real estate is highly local. Depending on the property type and community, prices can be up by 8 per cent or down by 5 per cent compared to a year ago. Contact your REALTOR® for accurate, detailed data about your neighbourhood.”

Know your market! Ask your favorite assistant Krista Dhaliwal for updated, current market information!!

Cell: 604-557-8647

email: alekai@shaw.ca

The Government of Canada recently introduced new mortgage rules on July 9^th. We have received many questions regarding these new rules and there seems to be some confusion out there regarding them. Most of these changes only apply to high ratio mortgages (where the borrower has less than 20% down). For borrowers with 20% down (those that have what is called a conventional mortgage) the rules remain unchanged. Below is a list of the changes and some clarification on exactly what they mean for borrowers.

The maximum amortization on a high ratio mortgage going forward is 25 years. For conventional mortgages most lenders have kept their amortization at 30 years.

Purchasers are still able to borrow with as little as 5% down. Anyone can buy with 5% down, not just first time home buyers. You could be looking to purchase the 10^th home of your life and still only need 5% down as long as it is your personal residence or a 2^nd home.

$0 Down mortgages are still available. You are allowed to borrow the 5% down that you need for the down payment or we have access to cash back mortgages where the lender will give you the 5% down that you need.

If you wish to refinance or borrow against an existing home that you own the maximum you can borrow is 80% of its value. Previously you could borrow up to 85% of its value.

The maximum value of a property that you can purchase with a high ratio mortgage is $1 million. If you want to purchase a property over $1 million then you will need to put a minimum of 20% down.

The maximum amount of your income that can go towards a mortgage payment on a high ratio mortgage has now been reduced to 39% of your income. Previously you could borrow up to 44% of your income towards your mortgage payment if you had clean credit.

Courtesy of Alex Kotai, President and Senior Mortgage Advisor

www.yourmortgagesource.org

Courtesy of the brilliant David Larock, REM Online.com

Last week federal finance minister Jim Flaherty surprised real estate market stakeholders by announcing a fourth round of changes to the rules that are used to qualify borrowers who have less than 20 per cent equity in their property (commonly referred to as high-ratio borrowers).

You would have thought that Mr. Flaherty was announcing the arrival of the Four Horsemen of the Apocalypse when reading the reactions of most mortgage industry insiders, which I find surprising given that the first three rounds of rule changes did not broadside our real estate markets, as had been predicted each time, and have in fact proven quite prescient in hindsight.

Let’s quickly review how we got to this point:

Ultra-low mortgage rates have been the primary drivers of house-price appreciation across most Canadian real estate markets over the last several years. At first this cause-and-effect helped our economy when it was otherwise vulnerable, by stimulating demand in a wide range of housing-related industries. But while emergency-level borrowing rates can provide an effective short-term economic boost, if rates are left too low for too long they can also fuel asset bubbles (history provides many precedents on this point – and those who do not learn from history are doomed to repeat it).

Here are the changes that were just announced and that will take effect on July 9 (with my comments following each bullet point):

* The maximum amortization on a high-ratio mortgage will be reduced from 30 years to 25 years.

Mathematically, this change has the same impact on mortgage affordability as a .95 per cent rise in interest rates. That said, while 40 per cent of high-ratio borrowers opted for a 30-year amortization over the last year, the vast majority of these borrowers could have qualified using a 25-year amortization anyway, so this change should only affect marginal borrowers who would have been the most vulnerable to rate rises in future. (If Mr. Flaherty had asked me, I would have suggested lowering the maximum amortization on the rate used to qualify borrowers instead. This tweak would have allowed high-ratio borrowers to set their minimum mortgage payment using a 30-year amortization as long as they could qualify using a 25-year amortization…but I digress.)

* Mortgage refinancings will now be limited to a maximum of 80 per cent of the value of a property (down from 85 per cent).

Rapidly rising house prices create a wealth effect that allows homeowners to live beyond their means. While only a minority succumb to this temptation, at the margin these home owners form a large enough group to threaten the stability of our real estate markets and, left unchecked, even our overall financial system.

These borrowers typically rack up high-interest unsecured debt and when it becomes unmanageable, they roll it into their mortgage at today’s record-low rates. They wash, rinse and repeat until house prices stop rising and then when they can no longer access new money this way…boom goes the dynamite.

The decision to stop offering high-ratio mortgage insurance on refinance transactions is an attempt to reign in the conversion of credit-card debt into mortgage debt. This practice was commonplace during the U.S. housing bubble run-up and exponentially increased the long-term damage done to the U.S. economy when real estate prices corrected. Home equity extraction has been steadily rising in Canada over the last decade and the federal government is wise to take steps to limit the potential damage it can cause.

The overwhelming majority of my mortgage industry colleagues feel that credit-card debt, not mortgage debt, is the real problem that the federal government must address. This view is either naïve, blindly self-interested or both. Our industry has been abetting the growth of credit-card debt by converting it to mortgage debt.

High-ratio mortgages are subject to greater regulation because the risk on these instruments is taken by the federal government and ultimately, by Canadian taxpayers. The risk on credit-card debt, on the other hand, is taken by individual credit-granting institutions. That means that if over-consuming borrowers default on their credit-card debt the negative impact is essentially limited to the borrower and the lender, while a material increase in mortgage defaults can send shock waves throughout the economy (see the current U.S. example, where it is mortgage defaults, not credit-card write-offs, that have created Depression-like conditions).

Put another way, if you ask any regulator whether they would rather have credit-card defaults or mortgage defaults, you won’t have to wait long for the answer.

* High-ratio mortgage insurance will no longer be offered on properties valued at over $1 million.

History has shown that high-value properties are subject to greater price fluctuations when real estate markets soften and as such, highly leveraged high-end properties come with an inherently higher level of risk. Requiring a minimum down payment of 20 per cent is a way to help mitigate this increased marginal risk.

From a mortgage-industry perspective, this change gives balance-sheet lenders (large banks) an increased competitive advantage over lenders who need mortgage default insurance to securitize their loans. That means that high-end borrowers (and the mortgage planners who work with them) will now have fewer lenders to choose from. In spite of this, it is still seems to be the right thing to do in an environment where many inter-related risks appear elevated.

* The maximum gross debt service ratio will be limited to 39 per cent and the maximum total debt service ratios will remain at 44 per cent.

Until now, high-ratio borrowers with excellent credit scores could have their gross debt service ratios waived altogether. This has meant that their mortgage and other basic property costs could total 44 per cent of their gross income if they had no other debt. Now their mortgage and other basic property costs will be capped at 39 per cent, regardless of whether they have any other debt, and that slightly reduces the maximum mortgage amount for the relatively small sub-group of borrowers who have no other debt.

The two most common questions being asked regarding the coming changes are:

* How will this affect my existing mortgage at renewal?

Answer: Not at all. As long as you don’t need to borrow more money, your existing mortgage terms will remain in place, even if you switch lenders at renewal.

* How does this affect my existing pre-approval?

Answer: Pre-approvals that do not become live deals before July 9 will be subject to the new rules beyond that date; if, on the other hand, you have an accepted offer to purchase and you convert your pre-approval to a live deal before July 9, your high-ratio mortgage will not be subject to the most recent changes.

If you have other questions, you can check out this question and answer page on the Department of Finance website, or email me for more details.

Five-year Government of Canada bond yields rose 12 basis points last week, closing at 1.31 per cent on Friday. Despite this rise, lenders are still enjoying healthy gross spreads on five-year fixed-rate mortgages in the 3.09 per cent range. We also saw the launch of some new promotions on shorter-term fixed rates and this wider-than-normal variance at the short end of the interest-rate curve means that borrowers who shop around will be well rewarded for their effort.

Five-year variable rates are still being offered at only a shade below fixed rates (2.80 per cent vs. 3.09 per cent) and as such, I don’t think they offer borrowers enough of a margin of safety to justify their inherent risk.

The bottom line: There is an understandable fear that over-tightening mortgage rules will engineer the very house-price correction we seek to avoid but under tightening could eventually prove even more disastrous (and no one has more to lose than people who depend on a healthy real estate market to make their living).

The first three rounds of changes were initially unpopular but all have thus far proven to be prudent with the passage of time. While I am instinctively skeptical of government intervention in the market, Flaherty has so far consistently earned my respect where changing mortgage regulations are concerned. If this short-term pain helps to preserve our long-term gains, then I’m all for it.

Single women are saying "I do" to mortgages.

"No man. No dual income. No problem," is the tag line of the new HGTV show Buy Herself, which documents the increasing trend of women buying homes solo.

Host Sandra Rinomato, a certified real estate broker, author of Realty Check: The Real Scoop on Real Estate and award-winning Canadian entrepreneur, says women are investing in property with or without a partner.

"Women are buying real estate because they equate it with financial security," says Rinomato.

Growing up, she didn't think of her financial future.

"I was raised as a young, Italian girl to think that the man was going to take care of all that stuff."

But after her first marriage ended, she became a certified real estate agent and realized owning her own house was a realistic goal. "I didn't think that a failed marriage was something that I had to use as a road block. I didn't want it to stop me from carrying on with my life."

So she made a bold decision to buy a house by herself. Now, years later, Rinomato owns four houses with her new husband and one on her own.

"I think you really need to analyse truthfully what your lifestyle is; what property will suit your need 99 per cent of the time."

And there is one thing a buyer should never sacrifice, she says - location.

"Location affects your lifestyle so much and people sometimes underestimate it for the sake of getting that extra bedroom or a den. Sacrifices should come in space on the interior, because people always overestimate what they really need."

It's a Great Time to Buy - And To Sell

The Canadian economy – including the housing market – seems to have been weathering these world setbacks with remarkable grace. It’s certainly true that housing markets have softened slightly in some regions, but most financial authorities don’t foresee anything like the “bubble” so many Canadians feared.

Tracking the intricacies of the B.C. housing market is no simple task, and it’s often a matter of “who do you believe,” when it comes to forecasting. There’s certainly a hint of prices easing off in some areas of the province such as the Okanagan/Interior and Vancouver Island, but the coast is likely to remain strong – especially in “hot” areas like Vancouver West Side, Richmond, South Surrey and parts of the North Shore.

The condo market is very brisk with strong sales and lots of exciting new developments to choose from in most Lower Mainland locales. Some bankers believe that condo prices are unlikely to leap because of a strong supply situation. The Canadian Real Estate Association reported that home sales across Canada in December – traditionally a slow month – rose 4.6 per cent over the same period in 2010, so the overall picture isn’t too daunting.

Sales are likely to be boosted by the Bank of Canada’s recent announcement that it has no plan to raise the interest rate from its historic low and some analysts believe that rates are unlikely to be hiked much before 2014. One worry bankers have is that household debt levels are too high and this could affect the home-buying decisions of many.

Royal LePage predicts that house prices in Canada will climb by 2.8 per cent by the end of this year (2.3 per cent in Vancouver) and hinted that predictions of “doom and gloom” in the housing market are unfounded. Said Royal LePage Real Estate Services President Phil Soper: “Widespread calls for a major real estate correction in 2012 simply can’t be justified. The industry has significant momentum entering the year and buoyed by the stimulative effect of very low interest rates, we can expect the market to continue to expand – albeit at a slower pace.” Vancouver continues to experience some of Canada’s largest year-over-year price increases and according to Royal LePage, standard condo prices rose by 10.7 per cent and detached bungalows by 14.1 per cent.

         Although many homebuyers and current owners may not realize it, the commercial market is something of a bellwether for the real estate picture in general. Bentall Kennedy is Canada’s largest real estate investment advisory and service organization and Executive Vice-President Tony Astles told Westcoast Homes that the downtown Vancouver commercial sector is “very strong, with very high occupancy and a healthy tenant base.” Astles explained that although it might be thought that businesses may be moving from the downtown area due to high rents, taxes, the cost of parking and other factors, this is not the case. “People usually have solid business reasons for maintaining offices downtown,” Astles said.

“We have substantial institutional ownership that doesn’t rely on high levels of debt… ‘Balanced’ is the word to describe our market.” Tony Astles, Executive V.P., Bentall Kennedy

Whether you’re a single or double income household busting at the seems trying to balance a cheque book and a nocturnal infant, or trying to figure out new ways to toss your alarm across the room everyday at 6 am, our lifestyle choice is a determining factor as to what purpose purchasing a second home would satisfy. 

 A second home can be utilized as an income earner throughout the year.

Most of us rent for many years before owning our first “standard home” and after some time may wish to sell it in order to purchase a second one. 

Assuming that the kids aren’t piled into one room and the roof isn’t leaking, why wouldn’t we consider

purchasing a rental property and adding to our portfolio? Think about this:

With the extra income you can jet set around the world. Ok,  maybe not the world… but it may just allow you the financial freedom to take your friends to the movies and spend $62 on popcorn and Twizzlers.

Real Estate is one of the smartest long term

investments you can make with your hard earned

cash and current equity.

So as you look at all your financial options for the upcoming year, ask yourself first and foremost; what results do I need from the investments I plan to make? Then analyze your options in the context of your goals. If you choose real estate, simply stick to the fundamentals, take action while others worry over headlines of global chaos, take advantage of the low rate environment and use leverage wisely. Invest and don’t speculate and both you and your children will be glad you did in the years to come.

Don’t pay for another hotel room.

We tend to leave the vacation home owners alone in their pleasures because we just can’t grasp how to incorporate that luxury into our own lives. But having a little cottage getaway where alarm clocks lay dormant may not just be the daydream we have during these gloomy West Coast winters.

Vacation properties can come complete with groundskeepers and maintenance men. From Cultus Lake to Whistler, Ucuelet to the Okanagan, B.C. has some of the most beautiful vacation spots on the planet to choose from .

Here's a superbly written article written by Peter Kinch who is the author of The Canadian Real Estate Action Plan and co-author of the Canadian Bestseller - 97 Tips for Canadian Real Estate Investors.

MORTGAGE MINUTE: Looking ahead to investing in real estate for 2012

http://www.bclocalnews.com/business/132558663.html

While I can’t promise that it will get you that Ferrari or put your kids through Yale, owning a second home-whether it is for vacation or to generate a rental income-is an upgrade in lifestyle.  The good with the bad and the bitter with the sweet is indeed the plague of many second home owners, but the satisfaction and pride in owning two homes for these very same home owners, is priceles

Happy Investing!!

Realtor's don't decide how much your home is worth. The price your home will realize should be determined by market conditions, which is ultimately a direct reflection of supply and demand.

What's the difference between a “Buyer's Market” and a “Seller's Market” and how does it affect the price of your home?

In a Seller's Market, inventory is lower in comparision, therefore Seller's often have the benefit of pricing power. There are fewer purchases which result in properties staying on the market longer and median sales are on the downward slope. Buyer's tend to find themselves in competition with eachother, therefore putting pressure on home prices.

On the other end of the spectrum, the opposite is true in a Buyer's Market where Buyer's have an unambiguous advantage due to the higher volume of inventory available.

During a phase such as this, homes stay on the market for longer periods of time and Seller's feel the heat to price their home more competatively with the waning levels of urgency for Buyer's to purchase.

Selling your home in today's Buyer's Market is not a matter of perception but a matter of how realtistic you are at pricing your home.

" The agency that governs realtors in Canada expected the average price of a home to fall in 2011, the result of slowdowns in B.C. and Ontario."

(M. Spencer Green/Associated Press)

HST was the number one reasoning behind people's uncertainty about dealing with their real estate needs.  Now that a decision has been made regarding the HST, overall activity in the real estate market has picked up.

The Fall market looks to be a busy one!