Archive for August, 2018

August 27, 2018

Helping Clients Find A Down Payment They Can Afford

One dollar isn’t that much money in the grand scheme of things, but when it comes to buying a house it can make all the difference.

Back in February of 2016, Canadian mortgage rules tightened concerning mortgages over $500,000. The Canada Mortgage and Housing Corporation (CMHC) announced changes to the required down payments.

This is how much down payment is required per house purchase price:

Purchase price of home: $500,000 or less

Minimum down payment required: 5% of the purchase price

Purchase price of home: $500,000 to $999,000

Minimum down payment required:

  • 5% of the first $500,000 of the purchase price
  • 10% for the portion of the purchase price above $500,000

Purchase price of home: $1 million or more

Minimum down payment required: 20% of the purchase price

Those who are self-employed or who have poor credit history may be required to provide a larger down payment. With new mortgage stress test rules, it may be beneficial for a client to put down a more significant down payment to pass the stress test.

This might be a miniscule difference when it is on a smaller scale, however, it can quickly increase.

Take for instance a client who wants to purchase a $400,000 house vs. a $600,000 house ($20,000 minimum down payment vs. $35,000 minimum down payment). Or a client who wants to purchase a $900,000 house vs. a $1.1 million house ($65,000 vs. $220,000 minimum down payment).

It’s possible that real estate sales professionals might not even feel this impact because people are getting declined when looking for mortgage pre-approvals, therefore they never engage a real estate agent.

How can you help a client who wants to buy, and is on the line?

  • Independently check the values of interest properties. Make sure the property values are in line with the price being advertised.
  • Look for pockets where the client could get into the market – different neighbourhoods, dwelling types, etc. One neighbourhood might be out of their range, but they could get the same-sized house a little further away.
  • Review different scenarios with the client so they set realistic expectations. For instance, while the $1.1 million house may have different features from the $900,000 house, the down payment would cost at least $155,000 more. Similarly, the $400,000 may not have all the features as the $600,000 house, the down payment would be at least $15,000 less.

GeoWarehouse has the tools that make you the property expert. Help your clients find the properties and neighbourhoods where they can make the minimum down payments with ease.

Learn more about our property reports and neighbourhood search features at www.geowarehouse.ca.

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Real estate appraisers, developers, and contractors, how do you determine property valuation?

Traditional property valuation and even automated valuation models (AVMs) have historically been geared towards estimating property value, but the digital property valuation of today is so much more.

Our FREE new eBook will walk you through how you can leverage technology to perform a digital property evaluation and reap all the valuable information therein.

This is eBook is perfect for anyone who regularly relies on unique property information, such as a sales history, property ownership information, or home appraisals.

In this eBook, you’ll learn:

  • What a digital property evaluation should include.
  • The critical components to success.
  • Ways to locate and ways to investigate a property.

By the time you’re done reading, you’ll know exactly how to use property data to both investigate properties and identify new opportunities.

This eBook is available today for free. Just click here to get started downloading.

GeoWarehouse is your source for property searches and more. All of our data comes from the Province of Ontario Land Registry Information System, meaning that it’s accurate, up-to-date, and available when you need it.

Learn more about our digital property valuation tools today. Contact John Singh at 416-360-8863 ext. 2557 or email john.singh@teranet.ca.

 

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In July the Teranet–National Bank National Composite House Price IndexTM was up 0.8% from the previous month.[1] As in June, the gain might seem large but was below the historical average for the month (1.0% for July). If the index were purged from seasonal variations, the so-called “seasonally adjusted” index would have retreated in June and would have been flat in July.

As in May and June, prices were up in 10 of the 11 metropolitan markets surveyed, led by Ottawa-Gatineau (2.3%), Winnipeg (1.9%), Montreal (1.3%), Halifax (1.2%) and Hamilton (1.1%). For Toronto the index rise matched the countrywide average of 0.8%. The index was also up for Edmonton (0.7%), Quebec City (0.6%), Vancouver (0.4%) and Victoria (0.4%). The index for Calgary was flat.

The published (non-seasonally-adjusted) Toronto index rose for a fourth straight month in July. In contrast, the seasonally adjusted index would have declined for a fourth straight month. This means that the recent monthly rises in the published index reflected only seasonal pressures instead of an underlying trend. The retreat of the seasonally adjusted index over this period was due to non-condo housing[2] (−2.1%); the seasonally adjusted condo subindex was up 1.6%. These numbers are consistent with market conditions, tighter for condos than for other housing. The monthly rise of the Vancouver and Victoria indexes has slowed markedly since last September. Seasonally adjusted, both indexes would have been down in July for a second consecutive month. The index for Montreal stands out for its advance in 17 of the 19 months since January 2017, a showing equalled only by Vancouver.

 Teranet-National Bank National Composite House Price Index™

In July the composite index was up 1.8% from a year earlier, the smallest 12-month rise since July 2013 and a 13th consecutive deceleration from the record gain of 14.2% during the year ending June 2017. The main contributor to the slowdown was Toronto, the largest metropolitan market, down 4.0% from a year earlier, followed by Hamilton (−1.5%) and Calgary (−0.1%). There were small 12-month rises in Edmonton (0.3%) and Quebec City (0.6%) and rises exceeding the countrywide average in Winnipeg (2.5%), Montreal (4.0%), Ottawa-Gatineau (5.1%), Halifax (5.5%), Victoria (6.8%) and Vancouver (10.6%).

Besides the Toronto and Hamilton indexes included in the composite index, indexes exist for the seven other urban areas of the Golden Horseshoe. In July, two of these (Barrie and Oshawa) were, like Toronto and Hamilton, below their peaks of Q3 2017. Indexes not included in the composite index also exist for seven markets outside the Golden Horseshoe, five of them in Ontario and two in B.C. The 12-month rise of these indexes varied widely, from 2.4% for Thunder Bay to 17.6% for Abbotsford-Mission.

For the full report including historical data, please visit: www.housepriceindex.ca

 

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A recent Huffington Post Canada article reported on a compelling phenomenon: “recycled” real estate listings that could be skewing Canadian housing market data.

According to the Huffington Post, a subscriber-only-access article in the Globe and Mail first revealed this trend. Real estate agents in Vancouver are “recycling” listings — i.e. pulling homes that aren’t selling off the market, and then bringing them back as “new” listings at a lower price.

In turn, these “recycled” listings could be skewing some real estate data. For instance, there are some real estate market data reports that rely on MLS listings and sales for their findings. The issue with doing this is, there can be discrepancies between the MLS data, and what is actually happening in the housing market.

For instance, MLS sold data might show that a sale has closed, but that data is taken weeks before the transfer. Something could change in those critical weeks, meaning the data would no longer be accurate.

The ‘recycled’ real estate listing trend could be skewing data the same way. It makes it seem as if houses are selling quickly, when they’re not. It also makes it appear as though houses aren’t seeing price cuts, when they are.

“Because they are recycling listings, the data consistently paint a prettier picture,” Mortgage Sandbox CEO David Stroud told the Globe.

Huffington Post also said this could have a problematic effect on homeowners, who have no way of knowing how often a home has been listed, so they might think it’s a new listing that will sell quickly. This data manipulation could be pushing people to spend more on a home than they otherwise would have.

What do you think — is this part and parcel of the real estate industry? Or is it an unethical practice that should be stopped?

Whether your opinion of the practice is positive or negative, there is still the real risk that it could be skewing reported real estate data. If you are relying on Canadian housing market trends, the information you’re looking at might be inaccurate and could lead you down the wrong path.

With GeoWarehouse, we have real estate data you can trust. Our data is driven by definite sales registered in land registries. In Ontario, for instance, it’s the Province of Ontario Land Registration Information System (POLARIS). This is the most accurate data available.

You can also access the Teranet-National Bank House Price Index, which uses POLARIS data for the most accurate housing numbers. See the latest HPI report here.

Read the Huffington Post Canada article in full here.

Want access to GeoWarehouse’s real estate data? Become a subscriber. It’s easy — just give us a call at 1-866-237-5937 or visit www.geowarehouse.ca.

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July 11 and July 12, 2018 were busy days for the Canadian real estate market.

On July 11, 2018 news broke of a Bank of Canada interest rate increase to 1.5% — the highest interest rates have been since December of 2008.

Then, on July 12, 2018, the Teranet-National Bank House Price Index came out showing that house prices are making up lost ground in the second half of 2017.

While unrelated, both announcements share a commonality: they indicate what could be on the horizon for the Canadian housing market.

In its July 11 announcement, the Bank of Canada (BOC) referenced Canadian housing trends.

The BOC stated that household spending is being dampened by higher interest rates and tighter mortgage lending guidelines. It referenced recent data suggesting housing markets are beginning to stabilize following a weak start to 2018.

The following day, the House Price Index released, showing the same stabilization. The composite index in June 2018 was up 0.9% from May 2018, indicating that some of the ground lost in the second half of 2017 is being recovered.

However, even though the numbers are showing recovery, the index increase is still weak for this time of the year. According to the June 2018 report, written by National Bank of Canada senior economist Marc Pinsonneault, if the Index were purged from seasonal patterns, it would have been flat over the past three months.

Different types of dwellings are also affecting the Index. For instance, condo prices have risen rapidly in Toronto and Vancouver since the beginning of 2018 (after seasonal adjustment, up 7.8% and 16.3% annualized respectively).

Prices for other types of dwellings have held their ground, which could be reassuring in the wake of higher interest rates and stricter mortgage rules, such as the B20 lending guidelines.

In summary, the good news is that:

  • Canadian household debt levels are going down. This is also good for lenders who are stress testing mortgages and looking at other components, such as the Gross Debt Service Ratio (GDS) – the amount of total housing-related debt a person carries – and the Total Debt Service Ratio (TDS) – amount of total debt a person carries.
  • Even as interest rates rise, and mortgage regulations become stricter, house prices for more traditional dwelling types are holding steady.
  • Condo prices are still on the rise, indicating that they continue to be a popular and affordable.
  • While not at a record high, the House Price Index has shown stabilization. Only time will tell if this trend continues, but many economists are predicting it will.

The next BOC rate announcement is set for September 5, 2018. It is appears unlikely, however not impossible, for there to be another increase at that. The Royal Bank of Canada predicted in July of 2018 that the BOC will continue to raise interest rates to 2.25% by the first half of 2019, but growing household income will provide some offset.

GeoWarehouse’s tools can help you continue to assess property information in a changing real estate market. A neighbourhood search can tell you the property values of a certain area. You can also find condo buildings, demographics, property information, and more.

Even as uncertainty remains, our real estate technology will help you stay agile and provide your clients with their best options.

Learn more today about how we can help. Visit www.geowarehouse.ca.

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