Brady Layton, BComm, CFP

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.

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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?