Calgary Home Prices on the Rise.
Calgary region new home prices on the rise
Top contributor in March to national advance
CALGARY — The Calgary region was the top contributor in March to the increase in new home prices across the country, says Statistics Canada.
The federal agency reported Thursday that the New Housing Price Index for the Calgary census metropolitan area rose by 0.3 per cent in March from February. It was up 0.1 per cent nationally.
On a year-over-year basis, the NHPI in the Calgary region increased by 4.3 per cent while it went up 2.0 per cent across the country.
“Calgary was the top contributor to the advance in March, up 0.3 per cent from February. Builders indicated that increases in material and labour costs as well as market conditions were the main reasons for higher prices,” said Statistics Canada.
“In Calgary, annual prices rose 4.3 per cent, following an identical increase in February and several consecutive months of accelerating annual price increases.”
Study – renewing your mortgage at your bank is NOT the best option
I LOVE THIS ARTICLE! Here is the summary- talk to a high volume, full-time, professional mortgage broker before renewing your mortgage because we can often get you a better overall deal.
—————–
Loyalty doesn’t pay when it comes to mortgage renewals!
A Bank of Canada study found that loyal bank customers don’t get best deal when they renew mortgage. People who switch and first-time buyers do.
A Bank of Canada study found that loyal bank customers don’t get best deal when they renew mortgage. People who switch and first-time buyers do.
Everyone you deal with would like you to believe there are rewards for your loyalty.
They may offer a better price, a bundling discount, or less tangible things like superior customer service. Sometimes your loyalty is rewarded and sometimes it isn’t.
The best way to figure out which is which is to become better informed about your choices. Compare prices and features, read the fine print on contracts and keep an eye on developments in the news. In this respect, the Internet has been a great leveler. The products are all on display in the online shop window. You can poke around, ask questions, figure out where you want to spend your money and negotiate a price.
The biggest investment most of us make is in a home. So if you can shave just a little off the cost of a mortgage, you can save thousands in interest payments.
Here, you’d think that loyalty would work in your favour — the more services you have with a bank, the better the deal. But, that’s not true according to evidence in a Bank of Canada paper called Discounting in Mortgage Markets. The 2011 study by three economists looked at a sample of Canadian insured mortgages between 1999 and 2004 to figure out who got the best rates.
The economists found that people who switch banks get a better deal than existing customers, because new customers offer the banks an opportunity to sell more products. Existing customers assume they will automatically get a better deal because they’re loyal, but don’t. They don’t bother to shop around because they assume they’ll get the best rate so, lacking ammunition, the discount may not be much. Those least likely to shop around are affluent, possibly because they’re happy with the full service they get from a bank and are willing to accept higher rates in exchange.
The study also found that mortgage brokers find the best rates. Mortgage brokers are paid by the lender, not the customer, but aren’t confined to one lender’s products. Their business is very competitive, so the pressure to find the very best rates is high. The study noted that brokers “are a significant factor driving discounts,” reducing the cost of a mortgage on average by 17.5 basis points.
As a group, first-time buyers do well because they are more likely to have shopped around, have tight budgets and so fight for every basis point. They’re a higher risk group for a bank because they have so much debt, but over time the bank can sell them more services. So they get good deals.
“Lenders are more willing to offer discounts to younger borrowers in return for future expected profits,” the study says.
Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals, an industry group, isn’t surprised by the finding.
About a quarter of Canadian mortgages are done through a mortgage broker, but the portion of new buyers who use brokers is a much higher 40 per cent, he says. First-time buyers tend to be younger, more comfortable using the Internet and social media for research, and like shopping around, he says. They are also less loyal and happy to try new things — like a mortgage broker — if it gets them what they want.
“We don’t do as well with renewals,” Murphy says. “Your lender sends you something in the mail, you’ve paid off some principal, the new rate looks pretty good, so you say OK.
“But you should shop around. Just because a bank offers you a rate doesn’t mean it’s the best one.”
You remember when your mother said you should do your homework? She was right.
Alberta forecast to lead Canadian economic growth in 2014
More great news supporting housing prices in Alberta!
Alberta forecast to lead Canadian economic growth in 2014
Real GDP to increase 4.2 per cent
CALGARY — Alberta’s economic growth this year will be second only to Newfoundland & Labrabor, but Wild Rose Country will top the nation in 2014, according to a new forecast by RBC Economics.
The forecast said Newfoundland & Labrador will lead the country in Real Gross Domestic Product growth this year at 5.1 per cent followed by Alberta at 3.0 per cent.
Across the country, growth will be 1.8 per cent.
But in 2014, RBC forecasts Alberta to lead the country with GDP growth of 4.2 per cent while the country on a whole will experience 2.9 per cent growth.
Just last week, Statistics Canada revealed that for the second year in a row, Alberta led all provinces in economic growth at 3.9 per cent in 2012 compared with 1.8 per cent across the country.
In 2011, Alberta saw economic growth of 5.3 per cent while Canada’s growth was 2.6 per cent that year.
RBC forecasts Alberta’s unemployment rate to drop from 4.6 in 2012 to 4.4 per cent this year and to 4.5 per cent in 2014. Both those years Alberta will have the second lowest unemployment rate in the country behind Saskatchewan’s 4.3 per cent for both years.
Canada is forecast to see unemployment drop from 7.2 per cent in 2012 to 7.0 per cent this year and to 6.7 per cent in 2014.
Employment growth in Alberta will remain strong as well with it staying the same as 2012 at 2.6 per cent this year followed by a dip to 1.9 per cent in 2014. This year Alberta will be behind only Saskatchewan’s nation-leading 2.7 per cent employment growth while in 2014 Alberta will lead the country in growth.
Canada is forecast to see employment increase from 1.2 per cent in 2012 to 1.5 per cent this year and 1.3 per cent in 2014.
Twitter.com/MTone123
© Copyright (c) The Calgary Herald
Calgary home price growth best in Canada at 7.72%
This is great news! Mostly the home prices are supported by the strong in-migration.
Typical price jumps 7.72% from last year
CALGARY — Home prices in Calgary grew at the fastest year-over-year pace in Canada in March, according to a report released Monday by the Canadian Real Estate Association.
The association, in its MLS Home Price Index, said Calgary’s resale market saw growth of 7.72 per cent in its benchmark price.
Nationally, of seven Canadian centres surveyed regularly in the index, price growth was only 2.20 per cent from last year.
In March, CREA said MLS sales in Canada of 39,527 fell by 15.3 per cent compared with a year ago while in Calgary the drop was only 0.6 per cent to 2,631 transactions.
New listings in Canada were down 8.5 per cent to 81,677 and they were off by 6.7 per cent in Calgary to 4,225.
The average sale price in Calgary grew by 7.7 per cent to $441,424 while in Canada it was up 2.5 per cent to $378,532.
In Alberta, sales dropped by 2.9 per cent to 5,605, new listings were off by 9.0 per cent to 9,781 and the average sale price was up 6.5 per cent to $386,330.
Doug Porter, chief economist with BMO Capital Markets, said all major home price measures are displaying unusual uniformity at present — the average and median price are both up between two per cent to three per cent.
“The main story is that home sales have taken a big step back since last spring but prices are holding up,” he said. “The market remains relatively balanced, albeit with a distinct fade. Look for the headline figures to turn less negative later this year, although we still expect a seven per cent drop in annual sales for 2013.”
Twitter.com/MTone123
© Copyright (c) The Calgary Herald
Spring Real Estate Market Underway in Edmonton
This is a GREAT article on how to look at things. Edmonton, just like Calgary, is seeing lots of in-migration which is also supporting their home prices.
Spring Real Estate Market Underway in Edmonton
Low inventory is causing rapid growth in the average price of real estate in Edmonton. The interesting thing is that the inventory is low because there are fewer new listings than we typically see at this time of year, not because of increased sales.
As you can see below, the inventory of properties for sale is significantly lower than we typically see in March. There were 4,741 properties available on the MLS® system at the end of March – down 15.4% from the same time last year.
Edmonton Real Estate Inventory
Alberta’s population expanded by 3.04% in 2012, nearly three times the national average. 46,000 Canadians move to Alberta from other provinces last year, just beneath the record levels seen in 2006, leaving many people wondering – where is our boom?
“The great mystery here is that we’ve had phenomenal employment growth, very strong income growth, very strong net in-migration, and yet it hasn’t poured over into the housing market yet,” says John Rose, chief economist for the City of Edmonton.
“These are unprecedented levels of in-migration into the province, so this (the relative stability in house prices) has kind of mystified us,” says Richard Goatcher, economic analyst with the Canadian Home Builders’ Association-Alberta.
From my perspective, there are a number reasons we are (thankfully) not seeing a repeat of 2007:
- It’s harder to get financing than it was in 2007. Back then it seemed like the banks approved just about anything, today they are being much stingier.
- Lack of speculation: in ’07 everyone and their brother wanted a piece of the action, and a lot of people bought properties (especially new homes) to flip… a lot of those people still own those properties 5 years later.
- Low vacancy rate: this situation typically leads to higher sale prices, but in this case I believe it is leading to low inventory. For years now we’ve heard “if I can’t sell it for the price I want I’ll just rent it out” and I think a lot of people have their investment properties rented out to good tenants. Why sell when you’re finally making money by renting?
- Lower consumer confidence – no matter what is happening locally, the news from Toronto, Vancouver and around the world does not encourage people to jump into the market.
Of course, as Don Campbell recently reminded us, real estate is local:
“At no other time in history has the real estate market in Canada been so regional… Alberta’s population is growing substantially, especially with that younger age cohort. They come out here to get a job and make $80,000 instead of $30,000 back home. And once they’re here, they discover Alberta is a pretty cool place to live, but it takes awhile for that to kick in, often about two years. So I’m very bullish on the direction that the market is going to be taking over the next portion of the cycle, say the next three, five or seven years.”
With all that said, we did see a significant jump in the average sale price of residential real estate in Edmonton in March. The residential average was $354,759 in March, up 4.3% from $340k last year and $343k last month. The median price did not jump as much and was $329,700 in March, up from $323k last year and $320k last month.
Edmonton Average Real Estate Price
Sales are up, but they would be up higher if there were more homes on the market. There were 1497 sales in March, up from 1480 last year and 1068 last month.
When first time buyers cannot find a house that meets their needs or are forced into a multiple offer situation, they often remain on the sidelines,” said REALTORS® Association of Edmonton President Darrell Cook. “Low interest rates and rising rental rates create the interest and desire but lack of suitable properties means they are not able to make the transition to home ownership at this time.”
Edmonton MLS® Sales
The number of new listings were significantly down from previous years – there were 2422 new listings in March compared to 2847 last year and 1995 last month.
New Listings
http://edmontonrealestateblog.com/2013/04/spring-real-estate-market-underway-in-edmonton.html
Tight market drives home prices higher
the reason for the tight market is the continuing in-migration of Canadians moving for high quality jobs. Where else would they go. IF the pipelines get approved it will only get tighter.
Tight market drives home prices higher
Real estate board reports average Calgary house sold for $518,400
CALGARY — A tighter market for resale homes led to faster sales as prices set new all-time highs in March, according to the Calgary Real Estate Board.
In Calgary, average housing unit prices including condos and townhouses were up nine per cent to $460,800 from $422,400 in March 2012. That’s more expensive than the record $457,100 in February, which upset the previous high mark of $452,600 set in July 2007.
Single-family homes sold in the city averaged $518,400, ahead by nearly 10 per cent over March 2012, while condos were up nearly 11 per cent at $300,900 and townhouses were up 13.5 per cent at $355,500.
The average MLS sale price for a single-family home in February was $518,500, beating the previous record of $506,700 in July 2007.
“Less resale product available to consumers is ultimately limiting sales growth,” said CREB president Becky Walters in a news release.
“In addition, resale homes are selling in less time and with continued upward pressure on prices.”
The average residential price in the Calgary region jumped nearly seven per cent to $451,500 in March from $422,400 in the same month of 2012, the board said in a news release.
CREB said the inventory of active homes for sale in Calgary showed the lowest March levels in more than five years, coming in at about 4,000 units, up from February’s levels but well below the number available one year ago.
New listings in March were five per cent lower than levels recorded in 2012, and five per cent lower after the first quarter, it said.
“While market conditions are a far cry from activity witnessed throughout the frenzy in 2006 and 2007, there has been a noticeable change over what became the norm over the past few years.” Walters said.
Ann-Marie Laurie, CREB’s chief economist, said new single-family listings under $500,000 are declining at double-digit rates, driving consumers at that price point to either surrounding towns, condominiums or the new home market.
A total of 1,480 single-family homes were sold in Calgary in March, down six per cent from 1,575 in March of 2012.
Condo sales were down two per cent at 347 units and 283 townhouses were sold, up by a fifth from 235 in the same month of 2012.
Calgary ranked top Canadian city in which to live
Thanks to this kind of press Calgary has a high in-migration rate. All those people moving here need to live somewhere. Rents are high and that causes people to buy, supporting home prices. High quality jobs and high employment will keep this trend going.
Calgary is ranked as the top city in Canada to live.
CALGARY — Calgary has overtaken Ottawa as the best place to live in Canada, according to an annual survey by MoneySense magazine in a ranking based on hard data such as employment, housing prices, crime, weather and household income.
In releasing its results of 200 Canadian cities on Wednesday, the magazine said “high incomes and an abundance of jobs fuelled by the boom in the energy sector are among the reasons it jumped from No. 14 last year to No. 1 this year.”
In addition to being the top city, it was also named the top city in which to raise kids.
Alberta has five places listed in the top 10 this year.
St. Albert is second with Strathcona County fourth, Lacombe eighth, and Lethbridge ninth.
Other top 10 places are Burlington third, Oakville fifth, Ottawa sixth, Saanich seventh, and Newmarket 10th.
In a list of the top large cities in Canada, Calgary is first followed by Ottawa and Edmonton.
In a list of top small cities in Canada, St. Albert was first followed by Strathcona County as second and Lacombe third.
It is cheaper to buy than rent in Okotoks!
This is my guest blog post for Karen Salmon, a superstar realtor in Okotoks. The numbers are surprising. Also note the tax savings at the bottom apply to ALL those who have a roommate!
Is it Cheaper to Rent or Buy in Okotoks?
March 19, 2013
Have you ever wondered if maybe you’d be better off buying than renting? I had Mark Herman of Mortgage Alliance run the numbers on buying either a starter home in Cimarron or a two bedroom condo in the Mesa.
Payments on a 2 story home at $305,000 would be $1,392 a month … that is lower than rent of $1,800 for the same home. Add in other costs of owning: property tax of $146, utilities of $250, and fire / home insurance at $40 a month, your monthly total would be $1828 a month! Only a difference of $28 a month ALL IN between renting and owing the same home! And now you can paint, hang pictures and make it your own place without a land lord getting fussed, or selling it on you and causing you to move again.
Payments on a condo at $220,000 would be $1,020 a month for the mortgage plus $318 condo fees, $125 property tax and say $150 for other utilities not covered by condo fees (totally realistic) then payments would be $1613 a month vs. renting at $1450. AND you own it and have stopped throwing rent funds out the window and are building equity. All this for only $163 more a month to own and not rent BUT ADD in this data below:
Tax Breaks on a Roommate: This condo is a 2 bedroom. If you have a renter then you can deduct ½ of the mortgage interest for the year and ½ of the condo fees and utilities as it is the cost of running an “investment property” that you just happen to live in. So in the end that would save you:
Half of the total yearly mortgage interest of $6183 /2 = $3091 + half the condo fees ($318 x 12 months /2 = 1908) = $4999 tax refund at the end of the year! Just for having a roommate. $4999/12 months = $416 in tax savings a month so then $1,613 a month, all in, to run the condo – $416 in tax savings = a total cost of $1,196 a month ALL IN or $250 / month LESS than renting the same place!
If you’d like more information about a mortgage, feel free to email mark at mark.herman(at)shaw.ca . If you’d like help buying a home in Okotoks, contact me!
Self-Employed Income Qualifying Guide
This is a super handy guide for the self-employed to see what they can use for their their income to qualify for a mortgage.
This is not the final option though so ensure you call to discuss your specific situation as everyone is different.
|
4 Years Track Record
If the client shows 4 consecutive years of positive earnings, then we can use the most recent year’s earnings to qualify the file. |
2 Years’ Average NOAs
Fully qualify the client’s last two years’ NOAs. We can take the average of their last 2 years’ Line 150 income as long as the recent year shows the higher income.
If the recent year shows the lower income, then we will rely on the recent year’s NOA to qualify the file. |
15% Gross-Up
We can take the average of the client’s last two years’ NOAs to qualify and in addition, we can then gross-up the average by 15%.
If recent year shows the lower income, then we may gross-up the recent year’s income by 15%. |
Add Backs
IF the 15% gross-up does not qualify the file, then we can include the below add backs.
|
What Rates Could Do to Affordability
Here is a great article on rates and what is expected for the year ahead.
Remember the 10 year term is at the all time low of 3.69% right now!
What Rates Could Do to Affordability
When it comes to home values, mortgage payment affordability acts like a giant lever.
A meaningful rise in mortgage payments (relative to income), would bear down on home prices, and vice versa.
Given this relationship and today’s towering home values, mortgage affordability is centre stage. That has inspired a stream of articles about whether swarms of people will default when rates “normalize.”
But how worrisome is that threat really? For insights, we turned to BMO Capital Markets Senior Economist Sal Guatieri.
To preface everything, here are some data points to consider…
…On Affordability
- According to BMO, home ownership is “affordable” (for the median buyer) when mortgage carrying costs—monthly payments, property taxes, heat, etc.—don’t exceed 39% of family income.
- Nationwide, we’re at about 31.6% today.1
…On Mortgage Payments
- If we look specifically at mortgage payments, BMO says the average-priced house currently consumes 28% of median household income, based on non-discounted mortgage rates.2
- That puts us right at the long-term average (see chart below)
- This 28% falls to 23% for people living outside Vancouver and Toronto.
- Compare these numbers to the peaks of 44% in 1989 and 36% in 2007.
What if rates normalize?
The first step is to define “normal.” We can be reasonably confident that the new normal is less than the old normal. Reasons for that include the long-term downtrend in our domestic growth rate (see chart) and proactive inflation control by the Bank of Canada.
To pump life into the economy, the BoC has kept Canada’s overnight rate at just 1.00% for 902 straight days. According to Guatieri, “A normalized overnight rate would be closer to 3.50% given the inflation target of about 2.00%.”
This implies that short-term rates should theoretically jump by about 2.5 percentage points…someday. In turn, long-term rates (such as 5-year fixed rates) should rise less, maybe 200 basis points says Guatieri. That would push 5-year fixed mortgages somewhere near 4.99%.
Other things equal, these new “normalized” rates would drive up mortgage carrying costs (assuming 10% down) from 31.6% of gross income today to 37.2%. That would still fall below BMO’s threshold of unaffordability, which is 39%. But keep in mind, these affordability metrics don’t include other personal debt like car payments and credit cards.
How will borrowers be affected?
RBC Economics writes, “Residential property values are elevated in Canada and, for many households, ownership remains accessible only because of rock-bottom mortgage rates.”
(Higher incomes have also helped affordability, notes BMO.)
But escalating interest rates aren’t necessarily a death knell. Reason being, “the eventual rise in rates will take place at a time when the Canadian economy is on a stronger footing, thereby generating solid household income gains,” says RBC. That, in turn, “would provide some offset to any negative effects from rising rates.”
The key word there is “some.” Guatieri estimates that, “To fully (our emphasis) offset a two percentage point increase in rates, household income would need to rise 19%, which could take six years if average income grows at the 3% average pace of the past decade.”
Incidentally, for major affordability damage to be done, we’d need something equivalent to a rate shock and/or serious unemployment. A rate shock is a fairly rapid increase in mortgage rates of “more than two percentage points,” Guatieri explains.
How far off is the threat?
It’s difficult to estimate the probability of a rate shock, Guatieri acknowledges. “The debt market is even pricing in a small probability of a BoC rate cut later this year.”
RBC notes, “We expect the Bank of Canada to leave its overnight rate unchanged at 1% throughout 2013 and raise it only gradually starting in early 2014—a scenario posing little in the way of imminent threat.”
Take that rate forecast for what it’s worth, but regardless, “affordability is not a major problem and should not become one even when rates normalize,” Guatieri writes in this report.
That’s true even in three of the fastest growing provinces—Newfoundland, Alberta and Saskatchewan.
The affordability exceptions, not surprisingly, are detached homes in Vancouver, Toronto and Victoria. Not coincidentally, these three markets are among the most prone to the one thing that helps affordability the most: a material price correction.
Footnotes:
1 Based on a 2.99% 5-year fixed rate, property taxes equalling 1% of home value, $150 per month for heating cost, a 25-year amortization, plus fourth-quarter 2012 data provided by BMO, including: Q4 household income estimated at $75,300, an average seasonally adjusted home price of $361,523 and a down payment equalling half of personal income (i.e., $37,600 or ~10%).
2 Same assumptions as above, save for the mortgage rate. BMO uses an interest rate of 4.1% for its analysis. This higher rate makes comparisons easier over the long-run, since discounts were smaller in the past and since discounted rate data from the 1980’s is scarce.
Rob McLister, CMT