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.

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.
   Routing Number VIRGINIA COMMERCE BANK

   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.

As we move some of our blogging over to this new platform, we are discovering ways to bring you the information that we didn’t have with our previous provider, in an effort to make the information more useful to you. The chart below is one example of this – a weekly summary of activity for the last 7 months.

Milton Real Estate Market Overview

This next chart is this weeks Total Market Overview, which gives a price-range breakdown of the information contained in the corresponding row in the table above. Commentary on an -in-the-market, street-level will follow shortly.

Milton Total Market Overview

As I mentioned in the post ‘Danger Will Robinson!!’ post, things seem to be turning around in the market, judging by the number of phone calls and emails coming in, the higher level of buyer activity, and the number of sellers calling about wanting to get their house on the market. This increased activity is being fuelled in several ways – the crazy-low interest rates available (3.69% for 5 years closed – call me today for details!), the lower prices, and the pronouncement by those all-knowing (yeah, right!) people in the media that things are turning around. In talks with agents, seller’s and buyers clear across the GTA, I hear of multiple offers and of houses selling much faster than they thought would happen.

When it comes to your home buying or selling experience, don’t leave it to chance and rely on what you read in the mainstream media or what you hear from friends and so-called experts; rely on the numbers. You can get those numbers here on a weekly basis. And if you’d like them broken down more specifically for an area or a type of house, just ask and I’ll be glad to do it for you.