Residential Market Update – Mortgage Rates to stay low for a while.

A great summary of where we are today in relation to the economy and the housing market.

There have been a couple of highlights for the Canadian housing market in the past week:

  • the U.S. Federal Reserve announcement that it is committed to low interest rates until 2015 and
  • the latest global housing outlook that puts this country in better shape than most.

Anyone looking for a new mortgage or a mortgage renewal will likely be heartened by the American central bank’s interest rate pledge. The commitment to low rates makes it harder, but not impossible, for the Bank of Canada to move on its desire to increase rates.

However, that desire got a boost from Canada’s economic think-tank, the C.D. Howe Institute. It says the central bank needs to change the way it calculates inflation to take into account rising house prices. The institute says the current calculation keeps inflation lower than it really is and puts the Bank of Canada at risk of keeping rates too low for too long.

As for the global housing outlook, it shows Canadian prices continue to rise, albeit more slowly than a year ago. But around the world, countries showing price declines outnumbered gainers by more than two to one.

Calgary house prices to get burst of energy

House prices to get burst of energy

Where oil goes, so goes Calgary.

As much as we like to say the city isn’t as dependent on black gold for its health and prosperity, the fact is, we are.

With oil prices regaining strength and with hiring happening in the oilfields, the economy is beginning to strengthen — and it’s pulling consumer confidence along with it.

A real estate axiom says that when the economy is good, the pace of home sales at the higher end of the market increases.

People in those income brackets aren’t likely to buy if there is an indication the economy is headed south.

“That’s probably true,” says Norb Park, managing broker with Sotheby’s International Realty Canada. “The business-minded are probably saying the economy is heading in the right direction, the oilpatch is in good shape, so this isn’t a bad time to deal.”

Resale housing statistics from the Calgary Real Estate Board tend to agree.

From the start of the year to the end of August, 948 homes priced at $700,000 and more changed hands, up from 779 for the same eight-month period in 2010.

In August, sales in that price range totalled 104 compared with 67 for the same month a year ago.

“There’s a mindset that when oil is doing well, then the economy must be good,” says Park. “That, in turn, increases consumer optimism — and right now, people are feeling positive.”

But not all of us can afford homes that expensive.

Matter of fact, nearly 50 per cent of single-family homes sold this year and last were priced between $300,000 and $450,000.

“With Calgary’s energy sector slated to grow, it is expected to lift the city’s employment, income and in-migration — and in turn help contribute to growth in the resale market,” says Sano Stante, president of the Calgary Real Estate Board. In-migration refers to the migration of people to the city.

“We expect price growth to improve as we approach the end of 2011 and move into 2012,” he says, adding the market is seeing a boost in sales at both ends of the market.

“Improving economic conditions, coupled with affordability and price stability, has given Calgary a boost in buyers for upper-end homes and entry-level condos,” he says.

CREB also reports the average price for single-family resale homes reached $468,051 by the end of August, a one-per-cent increase compared to last year.

Taking a page from the RBC affordability reports, Stante says: “When looking at Canada’s major cities, Calgary is one of the most affordable regions for homeownership in the country. Buyers are benefiting from improved selection at all price ranges in the market.”

The single-family home market had 1,106 sales in August, an increase of 28 per cent when compared to the same month last year — which, by the way, was the lowest for August since 1994.

Sales of 9,485 for the start of the year to the end of August are 10-per-cent higher than the same period last year.

Condo sales totalled 468 units in August 2011, with a year-to-date total of 3,885 — similar to levels recorded in the first eight months of 2010.


Just like the sale of used single-family homes, the pace is also quickening for resale condos.

As of the end of August, 834 units sold at prices below $200,000, well up from 596 for the same eight-month period in 2010, says the Calgary Real Estate Board. But condo prices continue to remain one per cent lower than last year’s figures with an average price of $288,167 for January to August.

© Copyright (c) The Calgary Herald

Bank “mortgage specialist” tells lies about mortgage brokers

Below is the short version of a mortgage broker insider tsunami. A RBC mortgage specialist wrote and handed out a sheet of complete lies about how mortgage brokers work and what we do. She, and RBC, are in a very tight spot as we all knew that non-brokers spread lies as their only way to compete.

The best way to sum up what we really think is this reply taken from the internal comment board of the Canadian Mortgage Broker website:

ExRBC Mortgage Specialist on 19 Apr 2011 11:41 PM

Most so called RBC mortgage specialists have little in the way of any credit training, if any. They usually come from the ranks of side counter staff who are well known for their lack of knowledge. RBC Mortgage specialists have no ongoing training requirements unlike the AMP’s, and they certainly have no Ethical training.

There is an old saying in sales:”Only show what you know”. In this case (she) shows that she knows next to nothing about credit, her market or her competition.

She might as well have said: “If you want the best rate , go to a broker.”

I see this a great platform for mortgage professionals to have excellent conversations with clients and referral sources about the difference between us and the bank! There is no doubt about the advantages of using a broker, and I welcome this opportunity to talk about it!

RBC to brokers: We apologize

By Vernon Clement Jones | 19/04/2011 9:36:00 AM | 31 comments

Click here to find out more!

With multiple statements, RBC moved to distance itself from the controversial flyer of one of its mobile mortgage specialists – apologizing for its unflattering and inaccurate depiction of brokers.

“The RBC brand is defined by our clients and partners and we sincerely apologize for the inaccurate information that was presented in the document,” wrote RBC Public Affairs Advisor Nicole Fisher, in a letter to broker associations in Western Canada.
The bank was offering the same message in the east, with Ian Colvin, RBC’s senior manager for communications in British Columbia, telling Monday, “The opinions expressed in the document by the mortgage specialist do not reflect the positions, strategies or opinions of RBC. We are following up directly with this mortgage specialist to ensure future collateral accurately reflects the RBC brand.”
The crisis communication follows leak of a document written by an RBC mobile mortgage specialist in BC and trading in stereotypes about the broker channel. The flyer, in fact, purports to highlight the educational, philosophical and operational differences between brokers and bank-employed mortgage specialists. It effectively casts the former in a negative light.
“Brokers will charge set up fees and have other hidden costs you should be aware of,” reads the undated document  — “Understanding the difference between mortgage specialists and mortgage brokers.” An RBC logo and the name of one of its British Columbia mortgage specialists appear on the flyer.
It continues: “Brokers will farm out your mortgage to a number of companies and then will set you up with a financial institution based on only the lowest rate, no other factors.” And, it continues: “When selling your mortgage, the broker and the financial institutions reviewing your file may pull numerous credit bureau requests depending on their software capabilities.”
The RBC comments follow on the heels of a article exposing the document. Earlier attempts to win a comment from the bank and the author of the flyer were unsuccessful. RBC’s statements do not address what if any disciplinary steps against the mortgage specialist have been taken. Many brokers are now calling for formal censure.
“Let’s hope they do the right thing and remove this lady from their ranks,” wrote one broker commenting on the initial article Monday.
Still, others are concerned her attitudes may reflect the long-standing corporate philosophy RBC — the only big bank in this country that has never used external brokers.
“We are almost grateful that this has been put in writing because this is stuff that has been verbalized for years,” veteran B.C. broker John Ribalkin, president of Verico Nova Fiuancial Services and a CAAMP Hall of Fame recipient. “I’ve never minded competition as long as all parties maintain a fair and equitable level. The marketplace does not need demeaning comments from one party to another.”

The ‘thrill’ of buying a house

You walk into the open house, take one look and say to yourself: This is it. It’s the house I have to live in. Where do I pay? A bidding war? I’m in.

Over my years of buying houses, I never bought one that did not have that frisson moment, that thrill of finding a place so suited to my wants. Indeed, I have in the past decided that I wanted to buy a house in what seems, in retrospect, to be nanoseconds. (By contrast, I’ve taken weeks to decide on the right pair of shoes.)

It is no way to make an “investment,” to be sure. But, as I’ve previously discussed in this space, buying a house is perhaps the most uninvestment-like of investments.

Just about anyone who’s purchased a property or thought about purchasing knows that it is much about gut-feel, in which the senses can conspire to trump sense.

Now, as the major real estate selling season gets under way, along comes a survey commissioned by BMO Bank of Montreal to give statistical weight to the notion that intuition carries a particularly heavy weight in the house-buying process.

The survey by Leger Marketing found that more than two-thirds of Canadians cited a “good feeling” toward the property as a reason to buy. Meantime, though, good sense is not thrown out of that gorgeous bay window and into those manicured flower beds. More than 90% of house-hunters value affordability and location over resale value.

So, the axiom that there are three important things in real estate – location, location and location – might reasonably be replaced by the Three Ps: Price, place and personality.

Nevertheless, that resale value is not a big concern to these surveyed house-hunters – people between 25 and 45 who plan to buy a home within two years – is a telling sign of the real estate times.

With some dips here and there, Canadian house prices have been rising strongly for more than a decade. Indeed, even the recession created just a downward blip in the chart of ever-growing values, with the average national price rising 8.9% last month from the previous March (but just 4.3% excluding Vancouver).

As a result, most of the house-hunters surveyed might never have been aware of a housing market that was not rising. I suspect many in this 25-to-45 demographic believe house prices basically keep going up forever, that though they downplay resale value in the survey, the expectation for solid gains is, well, a given. (Any significant drop in prices would surely shake that belief.)

In recent times, investors have been asked if they are stocks or bonds. If you’re a stock, you are prepared to take on more investment risk. If you’re a bond, you are not.

Perhaps, though, many people are probably houses when it comes to investing. A home is both partly a stock and a bond – and somehow neither.

It is a bond because over the long term it will likely produce modest returns through the enforced savings required by paying down the mortgage. It is a stock because the gains could be outsized if the investor were to buy and sell at propitious entry and exit points for market-timing gains.

And it is neither because it is an “investment” with many moving parts and frictional costs. You don’t live in a stock or a bond, but when the house leaks, it costs money and cuts into the investment. Meantime, the costs associated with buying and selling a property are becoming more daunting in many jurisdictions, with some observers reckoning that a house is often a mediocre investment at best.

But most young first-time buyers and mover-uppers are not fazed by such commentary. Home ownership is a cornerstone of our culture, with 70% of the population owning properties and many of the other 30% looking to join the majority.

And the real estate industry has become far more adept at marketing and selling than in the days decades ago when I was in the market. Today, houses are often professionally “staged” to produce that frisson moment. Prices are sometimes set artificially low to produce that exciting bidding war and that extra frisson of “winning.”

A house, it is said, is not a home. And a home is not strictly an investment. But does a stock have granite counters? Does a bond have stainless steel appliances?

Financial Post

Calgary is 1 of North America’s Fastest Growing Cities

North America’s fastest-growing Cities

Forbes has indicated a bright future for Alberta’s premier city, naming Calgary one of North America’s fastest-growing metropolises. According to Forbes, with Canada’s and the US’ major land mass, the area is expected to develop more than 100 million by the year 2050.

The following article discusses North America’s growing cities, and highlights that easy-to-manage cities that are less crowded and more affordable can expect to be driven in large part by continued migration.

Article Source (Financial Post – Calgary, Alberta) – The U.S. and Canada’s emerging cities are not experiencing the kind of super-charged growth one sees in urban areas of the developing world, notably China and India. But unlike Europe, this huge land mass’ population is slated to expand by well over 100 million people by 2050, driven in large part by continued immigration.In the course of the next 40 years, the biggest gainers won’t be behemoths like New York, Chicago, Toronto and Los Angeles, but less populous, easier-to-manage cities that are both affordable and economically vibrant.

Americans may not be headed to small towns or back to the farms, but they are migrating to smaller cities. Over the past decade, the biggest migration of Americans has been to cities with between 100,000 and 1 million residents. In contrast, notes demographer Wendell Cox, regions with more than 10 million residents suffered a 10% rate of net outmigration, and those between 5 million and 10 million lost a net 2.4%.

In North America it’s all about expanding options. A half-century ago, the bright and ambitious had relatively few choices: Toronto and Montreal for Canadians or New York, Chicago or Los Angeles for Americans. In the 1990s a series of other, fast-growing cities — San Jose, Calif.; Miami; San Diego; Houston; Dallas-Fort Worth, Texas; and Phoenix — emerged with the capacity to accommodate national and even global businesses.

Now several relatively small-scale urban regions are reaching the big leagues. These include at least two cities in Texas: Austin and San Antonio. Economic vibrancy and growing populations drive these cities, which ranked first and second, respectively, among large cities on Forbes’ “Best Places For Jobs” list.

Austin and San Antonio are increasingly attractive to both companies and skilled workers seeking opportunity in a lower-cost, high-growth environment. Much the same can be said about the Raleigh-Durham area of North Carolina, and Salt Lake City, two other U.S. cities that have been growing rapidly and enjoy excellent prospects.

One key advantage for these areas is housing prices. Even after the real estate bust, according to the National Association of Homebuilders, barely one-third of median-income households in Los Angeles can afford to own a median-priced home; in New York only one-fourth can. In the four American cities on our list, between two-thirds and four-fifths of the median-income households can afford the American Dream.

Advocates of dense megacities often point out that many poorer places, including old Rust Belt cities, enjoy high levels of affordability, while more prosperous regions, such as New York, do not. But lack of affordability itself is a problem; areas with the lowest affordability, including New York, also have suffered from high rates of domestic outmigration. The true success formula for a dynamic region mixes affordability with a growing economy.

Our future cities also are often easier for workers and entrepreneurs alike. Despite the presence of the nation’s best-developed mass transit systems, the longest commutes can be found in the New York area; the worst are for people living in the boroughs of Queens and Staten Island. As a general rule, commuting times tend to be longer than average in some other biggest cities, including Chicago and Washington.

In contrast, the average commutes in places like Raleigh or San Antonio are as little as 22 minutes on average — roughly one-third of the biggest-city commutes. Figure over a year, and moving to these smaller cities can add 120 hours or more a year for the average commuter to do productive work or spend time with the family.

Similar dynamics — convenience, less congestion, rapid job growth and affordability — also are at work in Canada, where two cities, Ottawa (which stretches from Ontario into Quebec) and Calgary, stand out with the best prospects. Many Canadians, particularly from Vancouver, would dispute this assertion. But Vancouver, the beloved poster child of urban planners, also suffers extraordinarily high housing prices–by some measurements the highest in the English-speaking world. This can be traced in part to the presence of buyers from other parts of Canada and abroad, particularly from East Asia, but also to land-use controls that keep suburban properties off the market.

Calgary, located on the Canadian plains, not much more than an hour from the Rockies, retains plenty of room to grow, and its housing price-to-income ratio is roughly half that of Vancouver’s. Calgary is also the center of the country’s powerful energy industry, which seems likely to expand during the next few decades, and its future is largely assured by soaring demand from China and other developing countries.

The other Canadian candidate, the capital city of Ottawa and its surrounding region, has developed a strong high-tech sector to go along with steady government employment. Remy Tremblay, a professor at the University of Quebec at Montreal, notes that Ottawa “is changing very rapidly” from a mere administrative center to a high-tech hotshot. Yet for all its growth, it remains remarkably affordable in comparison with rival Toronto, not to mention Vancouver.

In developing this list we have focused on many criteria — affordability, ease of transport and doing business–that are often ignored on present and future “best places” lists. Yet ultimately it is these often mundane things, not grandiose projects or hyped revivals of small downtown districts, that drive talented people and companies to emerging places.

RBC housing report

This is very interesting. Investors are still buying in Alberta as we see all the details. They seem to know that Alberta is still the place to invest in real estate.

TORONTO, May 25 /CNW/ – Alberta was the only province to experience an improvement in housing affordability in the first quarter of 2010, according to the latest housing report released today by RBC Economics Research.

The RBC Housing Affordability measures for Alberta eased between 0.1 and 0.6 of a percentage point, further extending the significant drop in the measures since the end of 2007, a trend that was only briefly halted last summer (a drop in the measure means homes are more affordable).

“In contrast to most other provinces, house prices remained relatively tame in Alberta during the past year or so and this has kept the cost of homeownership in check,” said Robert Hogue, senior economist, RBC. “In the first quarter, all RBC measures were at or below their long-term average, suggesting that affordability remains at favourable levels.”

The RBC Housing Affordability measures for Alberta, which capture the province’s proportion of pre-tax household income needed to service the costs of owning a home, declined across all housing types in the first quarter of the year. The measure for the benchmark detached bungalow moved down to 33.0 per cent (a drop of 0.4 of a percentage point over the previous quarter), the standard townhouse to 25.4 per cent (down 0.1 of a percentage point), the standard condominium to 21.9 per cent (down 0.4 of a percentage point) and the standard two-story home to 36.9 per cent (down 0.6 of a percentage point).

The report found that home prices in Calgary have maintained an upward trend, although the overall pace has fallen short of the national average. In the first quarter, the increase in the costs of homeownership in Calgary was roughly equal to or slightly smaller than household income growth, leaving the RBC affordability measures hovering around the zero mark. Two-story homes were down 0.5 percentage points, while a standard townhouse was up 0.2 percentage points. Affordability continues to be attractive in the city with RBC measures close to long-term averages.

“The housing market rebound turned out to be a much more restrained in Calgary, compared to most of the other major markets in Canada,” added Hogue. “After posting strong gains in the early stages of the rebound, resale activity has slowed considerably since the fall, which likely reflects challenges in the city’s job market.”

The report also looked at mortgage carrying costs relative to incomes for a broader sampling of cities across the country, including Calgary and Edmonton. For these cities, RBC has used a narrower measure of housing affordability that only takes mortgage payments relative to income into account.

RBC’s Housing Affordability measure for a detached bungalow in Canada’s largest cities is as follows: Vancouver 73.4 per cent (up 4.8 percentage points over the last quarter), Toronto 49.1 per cent (up 0.4 of a percentage point), Ottawa 40.3 per cent (up 0.3 of a percentage point), Montreal 39.7 per cent (up 0.9 of a percentage point), Calgary 36.5 per cent (down 0.3 of a percentage point) and Edmonton 32.0 (down 0.5 of a percentage point).

The RBC Housing Affordability measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow, a reasonable property benchmark for the housing market. Alternative housing types are also presented including a standard two-storey home, a standard townhouse and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

Highlights from across Canada:

–   British Columbia: Homeownership become significantly more expensive,

as housing costs rose in B.C. to the highest level among all

provinces. Continued momentum in the province’s housing market has

brought affordability measures close to the all-time highs reached in

early-2008. This trend represents a risk that could weigh on the

province’s economy in the near term.

–   Saskatchewan: Real estate activity picked up in the province as home

affordability measures rose significantly in the first quarter of the

year, which reflect rising house prices. This is a change from

previous quarters, which showed an improvement in affordability.

Despite this increase, affordability measures still remain below the

peak levels reached in early-2008.

–   Manitoba: Manitoba’s housing market surged ahead in the first quarter

of 2010, with affordability measures moving above the long-term

average for the province. Home prices became more expensive for

condominiums, townhouses and bungalows. Additional increases in

provincial housing costs may become more difficult for Manitobans to

manage in the near-term.

–   Ontario: Home prices in the province continued to rise, with property

values reaching record highs in many parts of the province. This has

led to a decline in housing affordability, after showing consistent

improvement since the middle of last year. With escalating prices,

affordability measures are now above the long-term average but below

peak levels, for most housing types. This suggests that housing costs

are becoming more difficult for Ontario residents to handle.

–   Quebec: Quebec’s housing market rally continued in the first quarter

of the year, with record-levels of buying activity and rising

property values. This escalation in home prices, while more moderate

than in the previous two quarters, exceeds the long-term average in

the province.

–   Atlantic Canada: Resale activity on the East Coast remained solid,

with an increase in sales balanced by an increased supply of

available homes. These stable conditions have limited the pace of

price increases in the region. Overall housing affordability in

Atlantic Canada continues to be among the most attractive in the

country, with affordability measures still below long-term averages.

The full RBC Housing Affordability report is available online, as of 8 a.m. E.D.T. today at