Brady Layton, BComm, CFP

CALGARY — Calgary’s resale housing market continued to shine in April compared with the rest of the country as the city recorded the best year-over-year price growth and the biggest annual sales increase among major markets.

The Canadian Real Estate Association, in releasing its monthly MLS data on Wednesday, said Calgary saw sales of 3,003 for the month, a jump of 10.4 per cent and the association’s MLS Home Price Index, which surveys eight major markets in the country, showed Calgary leading the way with a 6.94 per cent year-over-year hike. The index tracks benchmark property sales.

In Canada, overall sales dipped by 3.1 per cent to 47,997 in April and the aggregate benchmark price was up 2.22 per cent.

“Since changes to mortgage rules made in 2012 took effect, national sales have been running nine to 10 per cent below levels posted in the first half of 2012 but they’ve been remarkably steady,” said Gregory Klump, CREA’s chief economist. “April activity was on par with where it stood last August, and month-to-month changes since then have held to within a range of plus or minus two per cent.”

The average MLS sale price in Calgary was up 3.6 per cent to $429,717 while new listings rose by 6.7 per cent to 4,664.

In Canada, the average sale price increased by 1.3 per cent to $380,588 and new listings rose by 5.6 per cent to 95,065.

For Alberta, sales were up by 5.0 per cent to 6,501; new listings rose by 5.0 per cent to 11,253; and the average price increased by 3.6 per cent to $378,892.

Sonya Gulati, senior economist with TD Economics, said we are continuing to see signs of a spring thaw in the Canadian housing market, an encouraging development especially heading into the all-important spring home-buying season.

“Just last month, home sales activity were down roughly 15 per cent, year-over-year. The same statistic this month is three per cent,” she said. “Price gains are also flirting with positive territory, albeit marginally above the zero threshold. As foreshadowed by our analysis, the impacts of the mortgage-rule induced slowdown are proving to be temporary.

“While there are signs of promise in the housing market, it is important to clarify expectations so everyone is on the same page. We do not anticipate a marked revival in the Canadian housing market in the months ahead. There simply is no economic impetus for a full-fledged comeback in the cards. In turn, the 2013 spring home-buying season should be mediocre at best.”

Douglas Porter, chief economist with BMO Capital Markets, said evidence continues to mount that the Canadian housing market seems to have pulled off the fabled soft landing.

He said surprises on the sales data in recent months have consistently been on the high side of expectations, not the low side.

“While some are highlighting the fact that prices are now rising at ‘their slowest pace since the 2009 recession’ the plain facts are that: a) they are still rising, and b) faster than inflation, and c) prices are at all-time highs. Some meltdown,” he said.

mtoneguzzi@calgaryherald.com

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The chief economist with Calgary’s real estate board is downplaying a new report by a global rating agency that estimates home prices in Alberta are overvalued by about 15 per cent.

Ann-Marie Lurie says a lot of correction occurred in Calgary after real estate prices dipped in 2007.

“Moving forward, while I don’t expect strong price growth, I do expect that we will continue to see price growth,” she said.

Employment and migration growth tend to buoy prices in Alberta, said Lurie, who expects to see modest price gains this spring.

“Those two factors have really encouraged that growth in our marketplace. And because supply levels have tightened that has caused some of these price increases that we have seen.”

The average price of a Calgary home was $457,179 in February, up seven per cent from a year earlier.

Although the Fitch agency says prices may be 20 per cent too high in some Canadian markets, in reality the rating agency says it’s unlikely for prices to suddenly drop by that amount because of price momentum and inflation.

Fitch says the actual price decline in Canada could be closer to 10 per cent, taking place over several years.

Of course, the decline could vary greatly by region. Fitch says prices in Alberta would likely fall by several per cent, while in B.C. and Quebec the correction could be as high as 15 per cent.

If you are potential homebuyer these days in the Calgary market, you’ve probably noticed the number of properties listed for sale isn’t what it was like a year ago.

Numbers by the Calgary Real Estate Board on MLS listings certainly point that out.

According to CREB, up to March 11, new listings during the month have dropped by 4.13 per cent from a year ago to 1,161. And active listings are down by a whopping 25.29 per cent to 3,755.

Year-to-date, new listings are off by 4.51 per cent from the same period a year ago to 6,325.

Combined with the decline is a trend of homes selling faster.

So far in March, days on the market for a sale are 37, down from 44 last year. Year-to-date, days on the market have declined to 42 in 2013 from 51 for the same period in 2012.

Investors rushing to BMO’s stock following its new mortgage offer might want to think twice.

BMO brought back its 2.99% five-year fixed-rate mortgage on Friday as concerns of a cooling housing market has banks becoming increasingly competitive about roping in new customers. Last year, BMO set off a price war with its competitors by offering its 2.99% rate — a record low for one of the major banks on a five-year fixed rate.

“The market will once again begin talking about pricing pressure in the domestic mortgage market,” said John Aiken, an analyst at Barclays Capital.

Last month, Canada Mortgage and Housing Corp. said new housing construction is expected to be lower this year due to moderate economic and employment growth in the second half of 2012. The Teranet-National Bank index of Canadian housing prices in January continued to show the effects of a cooling trend that has hovered over the real estate market for more than a year.

.So it’s no surprise BMO introduced the 2.99% rate, and it’s likely that other banks will follow in its footsteps. But Mr. Aiken notes that for all the talk of a new mortgage war breaking out, the past shows that it’s more likely to be a stalemate than a war.

“While similar concerns arose last year, we note that it had very little impact on the industry,” he said. “Similar to last year, we do not anticipate much market disruption (share or margins) for the group, although it could once again put BMO’s margins under pressure.”

Mr. Aiken rates BMO’s stock as underweight, with a price target of $64.00, compared with BMO’s Friday close of $64.08.

With files from the Canadian Press

Wed, 01/23/2013 – 16:31
The Bank of Canada announced on January 23rd, 2013 that it is keeping its key policy interest rate at 1 per cent, where it has been held for more than two years. In providing guidance on where interest rates are heading, the Bank said interest rate hikes are “less imminent than previously anticipated.”

The Bank acknowledged that Canadian economic growth slowed more abruptly in the second half of 2012 than it had previously anticipated. It also recognized a marked deceleration in the growth of household debt, moderation in the housing sector, and softer than expected inflation.

The Bank now expects inflation to return to its 2 per cent target sometime in the second half of 2014. That represents a significant weakening in the Bank’s outlook for inflation; in October, the Bank expected inflation to return to target by the end of 2013. Consumer Price Inflation rose by 0.8 per cent in November 2012.

The Bank said it still expects the Canadian economy to gain strength this year, but it lowered its forecast for economic growth to just 2 per cent in 2013. By contrast, its growth forecast for 2014 was raised to 2.7 per cent versus its previous forecast reading of 2.4 per cent contained in its previous Monetary Policy Report (MPR) published in October 2012.

The bottom line is that economic growth is expected to remain modest but positive, consistent with low inflation and low interest rates. At the same time, growth in household debt burdens, which the Bank has repeatedly flagged as a major risk in this low interest rate environment, is showing positive signs of topping out as housing market activity continues to stabilize at a more sustainable levels. Combined with extremely well anchored expectations for inflation, that means the Bank is in no hurry to raise interest rates anytime soon, with the first such move in that direction unlikely to be for at least another year.

As of January 23rd, 2012, the advertised five-year lending rate stood at 5.24 per cent. It has been unchanged at this level since the beginning of June 2012.

Fri, 02/15/2013 – 09:00
Ottawa, ON, February 15, 2013 – According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity edged up on a month-over-month basis in January 2013. National sales activity has held fairly steady after gearing down last August in the wake of tightened mortgage lending rules.

Highlights:

•National home sales rose 1.3% from December to January.
•Actual (not seasonally adjusted) activity came in 5.2% under levels in January 2012.
•The number of newly listed homes rose 1.6% from December to January.
•The Canadian housing market remains firmly in balanced territory.
•National average sale price was up 2% year-over-year in January.
•The MLS® HPI rose 3.1% in January, the smallest gain since April 2011.
The number of home sales processed through the MLS® Systems of real estate Boards and Associations and other cooperative listing systems in Canada edged up 1.3 per cent on a month-over-month basis in January 2013. This marks the fifth month in a row that national sales activity has shown little change from levels in the previous month.

Home sales picked up in about half of all local markets in January from the previous month, including some of Canada’s most active. Greater Toronto and Greater Vancouver posted monthly sales increases of 5.6 per cent and 4.7 per cent respectively, while sales in Edmonton climbed by nearly 10 per cent on the month. Activity gains there were partially offset by softer sales in Ottawa, the Fraser Valley, Montreal, Regina, London and St. Thomas, and Calgary.

“There is little new to report about national sales activity, which continues to hold fairly steady at the lower levels first reached when mortgage rules were tightened in mid-2012,” said CREA President Wayne Moen. “That said, things are becoming more interesting among local markets, with improving sales in Vancouver and Toronto likely to come as something of a surprise to some. As always, all real estate is local, so buyers and sellers should speak to their REALTOR® to understand how the housing market is shaping up where they live or are considering to live.”

Actual (not seasonally adjusted) activity came in 5.2 per cent below levels reported in January 2012. About two-thirds of local markets posted year-over-year declines in sales activity in January. Notable exceptions include Calgary, Edmonton, Winnipeg, Windsor-Essex, and Guelph.

“Year-over-year declines in activity have received attention lately, and understandably so since they’re more exciting compared to the fairly steady month-over-month trend for national sales following changes made last year to mortgage regulations and lending guidelines,” said Gregory Klump, CREA’s Chief Economist. “If national sales activity remains stable near the levels we’ve been seeing since last August, then year-over-year comparisons will begin fading after the crucial spring buying season. Until then, the focus may remain on how sales were stronger in the first half of last year compared to lower but stable national activity since then.”

The number of newly listed homes rose 1.6 per cent month-over-month in January, their first monthly increase since last September.

New listings rose in a number of Canada’s most active markets, led by Greater Toronto. The monthly increase there reversed a decline of similar magnitude one month earlier. New listings also rose in Greater Vancouver, Montreal, the Fraser Valley, and Vancouver Island, which also marked a reversal in a declining trend for new listings in the final months of 2012.

With sales and new listings both having edged higher, the national sales-to-new listings ratio was little changed at 50.3 per cent in January compared to 50.4 per cent in December. Its reading has held fairly steady around this level for the past six months. Based on a sales-to-new listings ratio of between 40 to 60 per cent, about two-thirds of all local markets were in balanced market territory in January.

The number of months of inventory is another important measure of balance between housing supply and demand. It represents the number of months it would take to sell current inventories at the current rate of sales activity, and it too was little changed in January.

Nationally, there were 6.6 months of inventory at the end of January 2013, down slightly from 6.7 months reported at the end of December. The number of months of inventory nationally has held between 6.5 and 6.7 months since August last year.

The actual (not seasonally adjusted) national average price for homes sold in January 2013 was $354,754, representing an increase of two per cent from January 2012. There were fewer sales compared to year-ago levels in relatively pricey Greater Vancouver, which continues to exert a strong gravitational pull on the national average sale price. Excluding Greater Vancouver from the national average price calculation yields a year-over-year increase of 3.3 per cent.

Unlike average price, the MLS® Home Price Index (MLS® HPI) is not affected by changes in the mix of sales, so it provides the best gauge of Canadian home price trends.

The Aggregate Composite MLS® HPI rose 3.1 per cent on a year-over-year basis in January. This marks the ninth time in as many months that the year-over-year gain shrank and the slowest rate of increase since April 2011.

Year-over-year price gains decelerated for one-storey single family homes (+4.4 per cent) and two-storey single family homes (+3.6 per cent). By contrast, year-over-year growth held steady for apartment units (+1.2 per cent), and picked up in the townhouse/row segment (+2.2 per cent).

The MLS® HPI rose fastest in Regina (+8.8% year-over-year), although the increase was the smallest since December 2011. Price growth also moderated in Greater Toronto (+3.8% year-over-year) and in Greater Montreal (+2.6% year-over-year).

By contrast, the MLS® HPI saw year-on-year growth accelerate in Calgary (+8.0%) and the Fraser Valley (+0.7%). In Greater Vancouver, the MLS® HPI posted a 2.8 per cent year-over-year decline in January.

- 30 -

PLEASE NOTE: The information contained in this news release combines both major market and national MLS® sales information from the previous month.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® is a co-operative marketing system used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 106,000 REALTORS® working through more than 100 real estate Boards and Associations.

Further information can be found at http://crea.ca/statistics.

It’s the first choice you have to make when you decide to move and one that just might define the state of the housing market.

Do you start the process by selling or buying? Buy something and the clock starts ticking on selling your current home because you likely need that money to close the house you just purchased. In markets where sales are plummeting that could be a scary proposition.

So you sell first. But what do you do if you can’t find something you like in the neighbourhood you want. Remember, your kids need to go to that local school and be in the district. Are you prepared to rent for awhile?

People in the industry say the tradition historically has been to sell your home and then start shopping for the new one. But in this housing market, with multiple offers the norm and time on the market dropping in many cities, the process reversed and people starting buying, knowing their home would sell with ease.

Could the tide be turning in another sign of a slowdown for housing?

There are drawbacks to both selling first or buying first but the decision is very much based on your view of the market.

Contractor Paul Donadio, own of Terracon Inc., is facing that decision and the 37-year-old married Toronto homeowner has some trepidation about the market in Canada’s largest city.

“I’m going to sell my house first,” says Mr. Donadio. “What if I don’t hit my numbers? I could be stuck with two houses and how do you pay for it all?”

One option is to demand a closing date on your purchase a little further out, increasing your odds of selling. At the end of the day, you might need an escape clause and Mr. Donadio has one in his income property he’s prepared to move into should he have trouble buying. Renting is an option, but that market can be tight too.
“You have to live somewhere,” says Mr. Donadio. “You don’t want to end up buying the wrong house. I want to buy a house that I can fix up. Selling is more stressful than buying.”

His real estate agent David Batori says he’s telling his clients to sell first because he believes more listings will come to market in the spring. But he points out that, for a young family, selling first comes with the risk of not finding something in the right neighborhood.

“If you are too picky, you’re in trouble,” said Mr. Batori, who adds if you can carry two properties you should buy the home that is perfect for you with that long closing date.

You are going to need a lot of capital to pull that off because bridge financing at the banks is difficult to obtain without a buyer commitment for your existing home. The banks will provide bridge financing about two percentage points above prime if the closing date for the sale of your home comes after your purchase date, but you have to have a committed buyer.

Ultimately, if you buy first you can reduce the price of the home you are selling to move it.

Forget about trying to walk away from your purchase though, you’ve made a commitment to buy and left a deposit. “You can’t just walk away, you’ll be sued, you are in breach of contract,” says Mr. Batori, adding he has only seen someone try to walk away because of a death.

You can try to buy a home with a condition that says the purchase is subject to the sale of your existing home but you are going up against people with no conditions.

“Sellers will laugh at you, “ says Mr. Batori, adding before anybody agrees to that type of offer they’ll have an escape clause in case a firm bid comes in. That clause might give you a right of first refusal but you’ll have to come back with a clean offer with no conditions.

Farhaneh Haque, director of mortgage advice and real estate-secured lending at Toronto-Dominion Bank, cautions against buying without having a firm seller for your existing home.

“You can have the equity for two properties but you also need to have the income to carry both properties,” said Ms. Haque, adding the bank probably won’t extend credit to you for two homes without a high enough income. “It would put you in a situation that is uncomfortable and maybe not even affordable. Do you want to sell a property because you are desperate?”

Doug Porter, chief economist at BMO Capital Markets, said any shift in the trend to buy or sell first will depend on the city because some cities are still sellers’ markets.

“In a sellers’ market you can [buy first],” said Mr. Porter. “In most major cities, we are shifting. Personally, I would sell first.”

Ultimately, it comes down to your view of the market. You want to buy first, you have to be pretty confident you can sell. Are you?

OTTAWA — While the Bank of Canada acknowledges the economic outlook here and elsewhere “is slightly weaker” than thought, policymakers are also offering up some hope for the near future.

In a nutshell, Canada’s economy is growing at a slower pace than expected — although a pickup is likely later this year —and inflation remains weak at near recession levels, for now, while consumer debt and the housing market appear to be stabilizing, if not cooling. At the same time, the global outlook has also slowed, while fiscal and debt concerns in the United States and Europe have dissipated slightly.

The bottom line for Canada: Interest rates aren’t going anywhere soon.

Related

On Wednesday, for the first time, policymakers combined their regular-rate decision announcement with the bank’s Monetary Policy Report, a closely-watched quarterly reading on domestic and global factors affecting the economy.

As expected, the Bank of Canada kept a lid on borrowing costs, with its trendsetting overnight rate — the main instrument used to guide inflation toward the bank’s 2% target — remaining at a near-record low 1%, unchanged since September 2010 and now the longest dormant stretch since the early 1950s.

The only wrinkle in its usually pact statement accompanying a rate announcement was to highlight “the more muted inflation outlook and the beginning of a more constructive evolution of imbalances in the household sector,” adding that “the timing of any such withdrawal is less imminent than previously anticipated.”

That represent presents a slightly more dovish view of current monetary policy than previously. Given the still-hesitant outlook for Canada and other countries, most forecasters now see little chance the bank can begin raising rates again until late this year or early 2014.

By the numbers, the Bank of Canada on Wednesday pegged global economic growth slowed in 2012 to 3% from 3.9% the previous year. In 2013, that growth will slow to 2.9%, before picking up next year at a rate of 3.5%.

For Canada, growth will be limited to about 2% this year, down from the bank’s October forecast of 2.4%, following estimated growth of 1.9% in 2012, which is below the previous outlook of 2.3%. The bank is calling for a 2.7% advance in 2014, with full economic capacity kicking in in the second half of next year, later than previously thought.

“External demand for Canada’s manufacturing exports remain quite modest relative to its pre-recession level, largely because of the still-low level of activity in the U.S. housing sector,” the bank said.

As for the U.S. economy overall, the bank’s outlook is for growth of 2.1% this year and 3.1% in 2014. “The economic expansion in the United States is continuing at a gradual pace, restrained by ongoing public and private deleveraging, global weakness and uncertainty related to fiscal negotiations.”

The eurozone will likely remain in negative growth this year, down 0.3%, after a contraction of 0.4% in 2012. However, the currency region is forecast to post a positive performance in 2014, with growth of 0.8%

“The economic expansion in the United States is continuing at a gradual pace, restrained by ongoing public and private deleveraging, global weakness and, more recently, by uncertainty related to fiscal negotiations,” the bank said.

“Europe remains in recession, and recent indicators point to a somewhat more protracted downturn than expected in October,” it said. “While growth in China is improving, economic activity has been slowing further in some other major emerging economies.

Still, those estimates assume the eurozone debt crisis “will remain contained and that a severe tightening of U.S. fiscal policy will be avoided,” the bank said. “Overall, recent developments support these assumptions.”

Also in its report, the bank said near-historic low lending rates has slowed the growth in household credit to 5.5% last year to slightly more than 3% in the first quarter of 2013.

“This is the lowest rate of growth since 1999, and reflects a slowdown in the growth of both residential mortgage and consumer credit,” it said. “Even with the recent slowing, household credit still grew slightly faster than disposable income in the third quarter.”

The latest reading by the bank puts the ratio of household debt to income at 165%.

Bank of Canada governor Mark Carney — who steps down on June 1 to take the top position at the Bank of England — will hold a news conference later on Wednesday to provide more insight into the bank’s most recent domestic and global outlooks.

© Copyright (c) National Post

CALGARY — Calgary was the only major Canadian market to see a year-over-year rise in MLS residential sales in December as the national market plunged and the city finished 2012 with the best annual sales growth in the country, according to the Canadian Real Estate Association.

In releasing a report Tuesday, the association’s data indicated Calgary MLS sales in December of 1,343 were up 7.2 per cent from December 2011 while Canada saw a decline of 17.4 per cent to 20,538 sales.

The average sale price in Calgary in December rose by 6.9 per cent from last year to $419,811 while Canada’s average jumped by 1.6 per cent to $352,787.

On an annual basis, Calgary sales of 26,634 were up 18.6 per cent year-over-year while they fell by 1.1 per cent throughout the country to 453,372.

The average annual sale price in Calgary rose by 2.3 per cent to $412,315 in 2012. It was up by 0.3 per cent in Canada to $363,740.

“Calgary bucked the national trend in 2012 as the market began to come alive, while others began to enter a long sleep. This occurred because of two main influences,” said Don Campbell, senior analyst and founding partner of the Real Estate Investment Network. “Over the previous three years, Calgary had not over-performed its underlying economic fundamentals like many other major markets across the country, especially Toronto and Vancouver. A lack of new housing being poured into the market also helped to keep the average sale price in check.

“Population growth in Alberta neared a record high in 2012 as many moved here to take advantage of the job growth. This expansion of the number of citizens who call Calgary home, whether temporarily or permanently, put upward pressure on the rental market in the city. This increase in (rents) pushed many into the purchase market and therefore began the upward demand on the home-purchase market. This trend will continue, and inevitably get stronger, in 2013.”

Calgary’s market is showing no signs of letting up in January. According to the Calgary Real Estate Board, month-to-date from January 1-14, there have been 375 MLS sales in the city, up 9.97 per cent from the same period last year while the average sale price has jumped by 11.75 per cent to $428,063.

In December, sales in Alberta fell by 1.9 per cent to 2,855 transactions and the average sale price went up by 4.8 per cent to $363,340. Over the year, sales in Alberta in 2012 rose by 12.3 per cent, the highest of any province, and the average sale price increased by 2.8 per cent to $363,208.

CREA’s Home Price Index in December, of seven major Canadian markets, saw the average benchmark price increase by 3.32 per cent in Canada. Regina led the country with 10.53 per cent growth followed by Calgary at 7.37 per cent.

“Similar to what we saw in September, December sales had fewer business days compared to the same month last year and most other years,” said Gregory Klump, CREA’s chief economist, about the national picture. “It factored into December’s year-over-year decline in sales activity.”

But he also said that “successive rounds of tightening mortgage regulations have kept the housing market in check during what has become an extended low interest rate environment.”

Sonya Gulati, senior economist with TD Economics, described 2012 as a lacklustre year for the Canadian housing market.

“With the whopping 17.4 per cent year-over-year change in sales seen in December, we suspect that the impacts from the mortgage rule tightening in July are now fully priced in,” she said. “We expect the Canadian housing market to stabilize at current levels over the next few months. When looking at previous mortgage rule tightening episodes, the housing market impacts have been temporary in nature. There is no reason to think that this time will be any different.”

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© Copyright (c) The Calgary Herald

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With RRSP season upon us, some financial advisors have some words of caution when it comes to real estate.

Don’t count on your home to bankroll your retirement.

Laura Parsons, a mortgage expert with the Bank of Montreal, says many of her clients tend to think of real estate as a sure bet in retirement.

The bank recently put out a report with advice on saving for your golden years.

“There’s a lot more weight on the value of our homes, so a lot of in fact, 41 per cent are considering that the equity on their home is really going to be the supplement for their retirement. So, that’s a little bit concerning,” Parsons said.

Calgary financial planner Tim Faunt agrees it’s a dangerous assumption considering the impact retiring baby boomers could have on the real estate market.

“There’s all of these folks looking to downsize and at the same time, there isn’t another group of similar size coming up through the demography to purchase those properties — well then, those folks have a problem,” Faunt explained.

The housing market in Calgary may be in good shape now, but Faunt says it’s always wise to diversify.

“They need to be developing their own retirement savings and not be counting on the vagaries of the real estate market to provide for their retirement income.”