More Mortgage Changes To Come

It seems to be official that the Canadian government is stepping in again to tighten up regulations on the lending industries.  This year we are looking at the removal of the 35 year amortization period, a reduction in the maximum loan to value ratio for refinancing of your home from 90% to 85% and more restrictions on Home Equity Lines of Credit.  Of course these changes are only with regards to what the government is willing to insure through the CMHC and mostly effects people looking at refinancing and restructuring their personal debts.

So, how is this going to effect the real estate markets?  My gut feel is not that much.  Why?  Relative to the changes last year, these changes do not effect a large portion of home buyers and how much they can qualify to borrow with in a mortgage.  If there had been an increase in the minimum down payment required to purchase a home that would have had a significant negative effect on the markets.  Last year we saw a lot of changes that directly affected the affordability of homes.  There was the removal of the ability to get insurance for 100% financing, the increase from a 5% minimum down payment to 20% for undisclosed income financing for self-employed purchasers, and the changes that forced bank to qualify buyers based on the posted 5 year fixed rates instead of the discounted rates, unless the buyer was going to be getting  the 5 year fixed mortgage and then the discounted rate could be used for qualifying for that product only.  All of these changes directly affect the price range that buyers could qualify to purchase, especially for first time home buyers.  This combined with the, incorrect, anticipation that the H.S.T. implementation was going to drastically increase the cost of buying a home; resulting in a huge increase in spring home sales and a flat summer and fall market, averaging out to a decent year for sales volume.

It is important to note that the new changes only affect mortgages that require CMHC insurance (Genworth and any other "high ratio" mortgage insurance company are likely to follow CMHC's example if they haven't already) and does not change requirements for mortgages on homes that have 20% equity or more.  So, will we have a rush on sales in the next month or two, before the new rules take effect?  Only if people believe, or are led to believe, that these changes are going to make it harder to get the mortgage that they need.  But, as I said above these new changes don't affect most people's qualifications and definitely does not have the same scale of effect that the changes in 2010 had.
 

First Time Home Buyer Seminar

Looking for your first home?

On Saturday November 27th 2010, come join myself (Andrew Hodge- sales representative with Right At Home Realty Inc. - Brokerage), John Hum (RBC residential mortgage specialist) and Gerry Quackenbush (GTA Home Inspections and the Ontario Association of Home Inspectors) to find out what you need to know and what to expect from your home buying experience.  Come and find out how to make your search easier and more productive as well as a number of pitfalls that should be avoided.

What kind of mortgage is right for you?  What does a home inspector really do? What are the differences in buying a freehold home, condominium or a co-op? New or previously enjoyed?  How much money do you need and when?  How does a Buyer Representation Agreement effect you or protect you and what can you do about them?  These and many other questions will be discussed giving you the information to move forwards with your home buying plans with confidence; knowing that the choices that you make are the right ones for you.

Location:

Royal Bank of Canada branch at 2786 Victoria Park Ave (just south of Finch at Van Horne)
starting at 11:00 am and running until 2:00 pm (to answer all of your questions)
Space is limited so please call to register in advance at 416-481-3923.

Attending could save you thousands of dollars on your purchase through my special event offer.

Richmond Hill and Toronto Real Estate for July 2010

Real estate in the Greater Toronto Area started exceptionally strong in the early months of 2010 and we are now seeing the "give back" as a result.  There was a 34% decrease in sales volume for the month of July, relative to July 2009, but at the same time the total sales for the year are about the same as the sales in 2009 up to and including July 2009.  The Summer months often see a slight dip in sales volumes, especially in the higher end homes, and I expect to see a fairly slow August with the markets picking up again in September and the fall.  It is my opinion that a lot of this years market changes are the result of the H.S.T. implementation and the perceptions of significant increases in the cost of buying and selling homes.  Similar to when the G.S.T. was implemented, it will likely not be too long before people understand what those costs really are and then become accepting of those costs and the fact that they are not about to disappear any time soon, if ever. 

In the Richmond Hill real estate markets (TorontoMLS® districts N03, N04 and N05) there was a decrease in volume of close to 50% but the average sale price increased significantly in both N03 and N04 with only a slight decrease in the average sale price in the North end of Richmond Hill (N05).

Overall the supply of available homes has started to rise to levels that would be good for a balanced market if the volume of sales was closer to the "norm" for this time of year.  So if you are looking to buy now is a great time to be looking.  As a buyer you have a large selection to choose from, but don't expect to see huge reductions on prices.  Of the 662 freehold listings that are currently available (as of my search a few minutes ago while writing this) only 131 have had any price changes, which is quite reasonable under even the best market times, and the average sale price is still around 97% of the asking price in the Richmond Hill, Ontario, districts.  It is very important to know what is a reasonable price for a given home in a given area as some sellers will always over price there homes, with big hopes for an uneducated buyer.  For that you do need a good REALTOR® who will show you the comparable home sales as well a show you enough homes so that you can feel comfortable that the home you are buying is really worth what you are paying for it.  Granted that when you are buying a home for the long term a particular home may be worth more to you than to others but you need to know what is a reasonable asking price so that you can decide if any extra costs are acceptable when balanced with you personal needs.  For that you need good information and a REALTOR® who doesn't try to push you in a direction that you do not feel is right.  A good REALTOR® helps you to remember what you have stated are your goals and helps you to focus on the pro's and con's of any decision that you are trying to make without imparting their own biased views, or their desire to have a sale, on to you.

Please feel free to contact me if you are looking for information on real estate in the Greater Toronto Area or if you are looking to buy or sell your home in Richmond Hill, Aurora, York Region or anywhere in the GTA.

Toronto and York Region Real Estate in June

The real estate markets so far this year have been exceptionally active, with near all time record monthly sales volumes and fairly significant increases in average home sale prices.  In June we saw a drop in sales to, a still reasonable, 8,442 home sales, with an average home sale price of $435,034.

The big news is that this year the "normal" pattern has changed.  With May and June showing progressive decreases in volume when in most years they would be the most active sales months.  As far as the Toronto real estate markets are concerned; it is like we are 2 months ahead of normal, peaking in April instead of June.  So, why?  Well a big part of this is probably related to the perceived expenses related to the now active HST.  The idea of avoiding the HST, by closing before July 1st 2010, and paying 8% less for all related services has made home buyers extra eager to move this spring.

The people who have benefited the most from this strong spring has been the Sellers, since they are the ones that usually pay for the real estate agents commissions, which account for the biggest part of the increased expenses.  Yes, a REALTOR®'s services are not cheap, although I would argue that they are very often worth what you pay.... but I am a little biased on that one.

So what does this mean for the real estate markets over the nest few months.  Well, if you are a buyer it is a great time to get very active in your search.  The main reason for that is that there is a fairly good sized supply of homes and a fair number of the general public are still thinking that the HST makes buying a house a lot more expensive, so they may postpone their searches for a while.  That combined with the usual summer market conditions that often cause a slight dip in sales volumes in the summer may add up to some great deals with less buying competition.  A great opportunity to find a motivated Seller for the cost of around $160 in taxes on your closing costs.  That's it, only $160, since the Buyer's agent is most often paid for by the Sellers through the Seller's agent.

In the long term, being later this year and on, we will probably see that people become apathetic with the HST, taking it for granted, just like we all did with the GST shortly after it was introduced.  At that time it will be business as usual.  As for the potential for reductions in the costs of services; I think that is unlikely, based also on the experiences of the GST.

The GST was supposed to take the "hidden taxes" that were paid throughout the production and distribution process and give them transparency, for the consumer, buy summing them up at the end point of sale so that everyone knew how much tax they were really paying.  By allowing the businesses to claim the tax credits, as they purchased materials and other business expenses, the end price of products and services were supposed to go down at least relative to the savings the companies would get.  However, I doubt that many people can say that they saw any significant decrease in retail prices that could be contributed to the GST system instead of improvements in efficiencies, cheaper imported materials or foreign labour markets and the aspects of competition related them.  This is also likely to be the case in the real estate markets.

Competition in the real estate markets already means that commissions have become much more flexible in the past seven, plus, years that I have been a full time real estate sales representative.  It have changed the face of many of the real estate brokerages throughout the Greater Toronto Area giving rise to brokerages like Right At Home Realty Inc., who focus on providing their representatives with the services that are required without having to charge for extra "brick and mortar" office space that the REALTORS® are, very often, not using.  This allows the individual REALTOR® to be more competitive and quicker to respond to clients needs that in many traditional brokerages, which is the main reason that I, and many more, moved ( for me it was from a Century 21 franchise to Right At Home almost 4 years ago).

But I digress... The real estate markets are likely to see a slight dip in sales over the next couple of months to be followed by a small surge, as buyer's realize that they still need to have a home to live in and that the costs are still just as affordable as they were in the spring.  This would be similar, although smaller in effect, to the market reaction at the end of 2008 and the beginning of 2009 when the perception of the world coming to an end, through world recession and the U.S.A.'s election uncertainties.  In the end life had to go on and people still needed to buy and sell homes and, statistically speaking, they were still affordable even as they do today.

So, If you are thinking of buying a home now is a great time to get actively searching with the help of someone like myself.  If you are looking to sell you can still expect a fairly good price, but the higher your urgency to sell is the more likely you will have to be prepared to negotiate with offers that have lower initial offerings. At the end of the day both the Buyers and the Sellers have to agree to the value of the property in order to get a sale and everyone involved needs to be realistic in order for that to happen (with the exception that all parties have equally unrealistic expectations that lean in the same direction and nobody, like a REALTOR®, educates the parties [particularly their Client if a REALTOR® is involved] to the true value of the current real estate values).  The Greater Toronto Area'a real estate markets are not about to stall completely and we are still likely to see healthy sales throughout the rest of the year so there is no need to panic in either direction, but it is always wise to get representation and know what are realistic expectations for your needs.

More in depth statistical reviews for Richmond Hill, Aurora and York Region's real estate markets will be posted soon.

Please feel free to call or email me if you are considering buying or selling a home, in York Region or the Toronto area, to get insightful representation and the results that we all want.  

Fairwell to investigative journalism

Everyday we are bombarded with information from a wide variety of sources.  Some we have become accustom to ignoring, like advertising, and others we are told should be seen as authorities on facts about our world and how it effects us.  News media is generally believed to be trustworthy and yet I keep hearing and reading fearmongering and out of context facts or at least without perspective.

I thoroughly agitated today while listening to the a news radio station today.  They had a story on the Toronto area real estate markets, or it could have been all of Ontario, and were questioning whether we were heading into "another bubble".   They were talking about the increase sales of something around 70%  "year over year for the month of December" and the huge increase in average sale price.  The only thing I could think of is "Why are they not asking WHY" because if they did the numbers would not be nearly so surprising or indicative of a potential problem.

So what really happened?  First of all "Year over Year", for December, just means the change for the month of December from 2008 to 2009 ( in this instance) and does not take into consideration any previous Decembers or whatever else has happened in any other month.  Fortunately the Toronto area real estate markets are bigger than just one month per year and they affect and are affected by many different events and factors.

In this case the "news" station was not noting the simple fact that last December the real estate markets were very slow, due to a general perception of uncertainty and economic risk.  There was an election in the States and the world economy was heading down rather quickly.  This meant that fewer people were willing to commit to a large mortgage and fewer were willing to buy the very expensive homes.  For freehold homes on the resale market only 125 out of 1692 homes sold, in December 2008, were sold for $700,000.  That is only 7.39% were as in 2007 it was over 11%.  This caused the Average price to drop dramatically, for which the news people were reporting a crash in prices, even though an individual home really only decreased in value by about 3%.  This year the volume of sales is back up and at a historically hight level, with an increase of 19% over 2007 (for December on the Toronto Real Estate Board's MLS® system).  However, that means that the increase in home sold, compared to December 2008, was 215% which would be alarming if it had not been for the drop in volume last year.  Overall 2009 saw 87,308 homes sold in the Greater Toronto Area on the TREB MLS® system which was less then the number of sales in 2007.   

As far as the average price, it increased by 14% over December 2008, but only 4.3% over December 2007. Horror of horrors that's just over a 2% per year increases when annualized.  The reason for most of this increase in average sale price is the same reason why we had an inflated decrease in 2008, the composition of what is selling has changed again.  Those $700,000 plus homes that were harder to sell in 2008 are selling again and account for 11.8% of the freehold resale real estate transactions.

There was also a statement that the markets are expected to cool down later this year and have smaller year over year increases.  Well that's a no brainer.  Seeing as the sales volumes were in a slump last year for the first 3 months it makes sense that as this market carries on stably the difference will decrease as we approach the months were last years sales were more normal and not affected by the uncertainty that people were feeling at the end of 2008 and early 2009.

They were commenting on how the HST is likely to cool down the real estate markets.  This is very true about the new home markets as most new homes will cost an extra 8% due to the added tax.  Especially for freehold homes that are less likely to be under the $400,000 price range where there are rebates available.  On the resale side the HST only affects the the fees related to buying or selling and not the price of the home itself.  For resale homes there may be an increase in value and demand as an 8% gap in prices between new and resale is instantly created on July 1st.

The facts are that the economy is doing fairly well, all things considering, our lending markets are fairly secure and interest rates are still very low and are likely to stay "historically low" for a while even if they do rise as the year goes on.  Most importantly, there are a lot of people that want to buy homes, either upgrading, downsizing or buying their first home.  We have not been in a "bubble" in this millennium, as the economics behind the real estate market (in the GTA) are still very sound with high demand and reasonable affordability. I really hope that there will be a resurgence in the "investigative" side of journalism very soon, people who ask "Why" before parroting statistics that they don't understand, solely to meet a deadline or cause panic. 

The important thing to note is "Don't Panic" last years dip was entirely related to people putting their plans on hold because they were nervous.  Now the prices are higher and likely to continue in that direction, preferably in a sustainable manner, and the best way to keep homes in your realm of affordability, if it is currently borderline, is to be in the market by owning.  Not irresponsibly so, but that is were having the right agent comes into play, one that listens to your needs and helps you find the balance of what you need and want to keep your investment as safe as possible.

Richmond Hill homes are selling fast

It has been a very busy week.  It started off with a great client finding the perfect house which meant that they had to sell their current home.  So we listed their home Monday night and by Thursday we had multiple offers.  Things were going so fast I didn't even get a chance to blog about their home.  To top it off several other clients have been looking and every time I make a list of 5 or 6 places to see, by the time I get the showings booked 2 will be sold conditionally and another is likely to have a registered offer. 

There are still some very nice homes available and prices are still good, but buyers must be prepared to make quick decisions about whether a given house is the right home for them in order not to miss out.

As for sellers, this fall the real estate markets seem to be heating up as the weather cools off.  So, don't worry about waiting until spring if you really want to move now.  I think this year is going to beat most of the expectations from the real estate industries forcasters.

Richmond Hill Real Estate in September 2009

The Greater Toronto Area real estate markets are finishing off the year with a boom.  September 2009 had 8,196 homes ( both freehold and condominium) through the Toronto Real Estate Board's (TREB's) MLS® system with an average sale price of  $406,877.

In the Richmond Hill MLS® districts there were 225 detached homes sold out of 403 available homes with an average sale price, for the three districts, of $627,700.  This is a huge jump up from last years 126 homes sold in the Richmond Hill districts and a mere 6,424 homes sold in the GTA in 2008.

Now is a great time to buy or sell a home in Richmond Hill, Aurora or anywhere in the Greater Toronto Area.