Canadian Housing Market Firming,
Government Support Remains Strong

While buyers absorb inventory and demand remains intact especially among first-time buyers, industry experts envision a continual shift to a more balanced market in the coming months. Home prices, which firmed in late winter, remained lower compared to last year but are showing clear signs of a potential rebound. With inventory levels still somewhat high, builders are proactively adjusting by slowing new residential construction starts, which now stand at their lowest level of the decade.

Spotlighting an interesting trend in the condo market, research suggests many of Canada’s older baby boomers and younger eco-boomers hold a preference for condos. The low maintenance and smaller footprint are compelling points for the older generation, while the more affordable prices serve as an entry point for an aspiring younger generation of homeowners.

In a welcome surprise, April’s employment numbers showed an unexpected addition of nearly 36,000 new jobs compared to the anticipated loss of 50,000.

While this news is encouraging, the potential for future weakening in the labour market still poses a risk to overall housing demand.

Canada’s government remains firmly focused on supporting the housing market. The Bank of Canada cut the overnight rate to a record low and has made a commitment to keep rates at this level until mid next year. A commitment of this nature is unprecedented among central banks.

The Numbers That Drive Real Estate

1. Sales
2. Prices
3. Inventory
4. Mortgage Rates

According to the most recent data, existing home sales increased for the second month in a row. Home sales increased 7%, which built on the 10% gain the month before. The number of sold transactions now stands 18% above levels reported in January, when activity fell to the lowest level in a decade.

The monthly increases in activity were the most significant in British Columbia and Ontario. Sales were also up in the Northwest Territories, Manitoba, Quebec, and Newfoundland and Labrador.

Buyers are starting to take notice of lower prices, interest rates, and rising affordability conditions.

Average Home Price (in Thousands)

The pace of home price declines is tapering which is providing some glimmer of stabilization in the housing market. Home prices increased 2% from the previous month but is down 8% from the same time last year, which is the smallest year-over-year decline in six months.

The average home price currently stands at $288,641. The national average price continues to be skewed downward by lower activity in Canada’s more expensive housing markets, i.e., British Columbia, Alberta and Ontario which accounts for 67% of national activity. 7 out of 12 provinces and territories actually saw price increases.

Home Prices by Province
7 out of 12 Saw Increases

Inventory (Sales to Listing Ratio)

Market conditions moved toward balanced conditions due to increase in demand and fewer new listings. In the first quarter of 2009, there were 6% less homes entering the market compared to the previous quarter, which represents three consecutive quarters of declines in new listings.

Mortgage Rates

Average for: 25-Year Amortization,5-Year Term

Bank of Canada lowered its overnight lending rate to the lowest rate on record. As a result, mortgage rates decreased to 5.25% last month. Mortgage rates were 1.7 percentage points lower than the same time last year.

Recent Government Action

Bank of Canada Makes Historically Unprecedented Move

In an effort to stimulate the economy, the Bank of Canada has come to yet another historic cut in its interest rate policy on April 21. The Bank cut the overnight rate from .5 to .25%. This rate cut mostly influences traditional lending institutions but should also impact pricing in open markets as well.

The Bank has committed to keep rates as is until mid-2010. No known central bank has ever committed to anything of this nature, illustrating the Bank’s firm commitment to supporting the economy.

An interesting turn this past week; the number of available properties is constant, the number of sales is down, and the number of expired listings is down. Now, you might think that this means my ongoing predictions of a market upturn are wrong, however, consider this: at our ‘Your First Home’ seminar last night, the home inspector, Gene Meandro of Lighthouse Inspections, noted that he is doing 3 & 4 inspections a day, 7 days a week. Also, it was noted that turn-around times for mortgages are more like 2 weeks, instead of the typical one week, because the lenders are so busy. If the market was not strong, why would these things be occurring?

For some video of our seminar last night, check out our YouTube page.

Here’s the Total Market Overview for the past week:

And here is the updated Annual Summary of Activity

We had a record turnout at the Millionaire Real Estate Investor seminar in Milton tonight!! Here are some comments from a couple of the attendees . . .

No, wait, that’s not it; that’s something completely different.

I wanted to write once more about the changes that are going on in the market, right before our very eyes. In our office, there were an average of 18 couple through the open houses this past weekend – that is huge. Several agents sold properties with multiple offers, and went over list price – that is huge. Numerous buyers have been on the phone and email the last 3 days, saying that now it’s time for them to look at buying.

What does all this mean?

Well, it sure looks like the reliable signs that say the market is turning. Now, sure, I’ve read some of the whiney posts by people on The Star’s bulletin boards about how the optimism is just lies because of how many more people are going to lose their jobs. And I’ve heard those prognostications too. But here’s where it gets interesting . . .

Rent for a small house = $1300 per month / Purchase price of $195,000.

Mortgage Pymt = $805
Condo Fees         = $240
Taxes                     = $175

TOTAL                   = $1,280

Well, look at that – it’s actually cheaper to buy than it is to pay rent! And, people have to live somewhere, so why not pay off your own mortgage instead of someone else’s?

Oh, the naysayers moan, those numbers aren’t real. What about the downpayment? Well, what about it; for a slightly higher mortgage rate, you can get 97% or 100% financing and still be paying off your own mortgage instead of someone else’s.

Well, I can’t buy – I’m stuck in a lease for the next 9 months! Guess what – I have a solution for that too! Give me a call to set a time for a Buyer Consultation and we can go over all the details and get you into a home before you miss out on one of the best buying markets in history!

Here’s a couple of things I’ve learned of doing this past week:

1. Get a seller to pay out a Buyer’s lease and the seller gets their home sold and the Buyer gets into the market at a great time. This is particularly timely because there are so many Buyers out there, waiting for their lease to finish. You can even structure it so that the seller doesn’t have to pay out the entire lease – just email me for more info.
2. Offer to be your client’s negotiator for them. Most people can’t / don’t want to / don’t have the time to negotiate their mortgage renewal, and end up paying 1 or 2% more than they need to – agents should provide a free negotiation service for their database.

3. We’re just launching a new program – going to HR people and offering to counsel their employees about keeping their house in this economy. 60% of the private-sector jobs in my town are vanishing – companies hate to do it to their employees – if we can get in front of those people before they get in trouble on their mortgage, maybe we can help them stay in the house, even if they sell it to an investor, rent it back with purchase option for 2 yrs down the road. The employer will look like a hero for it. The employees will love it, and we will feel good for helping keep people in their homes and maybe build our investor business and maybe grow our business. As an agent, we don’t even have to know how to do the process – just be the middleman for the whole thing and bring in the experts.