HOUSE SALES SURGE

Calgary house sales surge in March
Total MLS residential sales in the city up 12.63%
By Mario Toneguzzi
Calgary Herald April 2, 2012

CALGARY — Calgary’s housing market picked up steam in March as MLS sales surged compared with a year ago — led by stunning growth in the single-family category.

According to the Calgary Real Estate Board, total residential MLS sales in the city for the month was 2,167, up 12.63 per cent from March 2011. Also, the average MLS sale price increased by 3.69 per cent to $422,256.

In the single-family market, sales soared to 1,576, up 17.26 per cent from a year ago while the average sale price jumped by 2.36 per cent to $472,464 — that’s the highest it’s been since June 2011 when it was $479,580.

Christina Hagerty, a realtor with RE/MAX Realty Professionals in Calgary, said the market has been extremely active recently.

“Calgary seems to present the land of opportunity right now and people need homes. Renting does not seem like a reasonable option with the low interest rates. They also feel that the property values will be increasing so they want to secure an investment here,” said Hagerty.

She said employment and net migration growth in the city have boosted the real estate market. Also, a mild winter effected buyers with more of them starting to look in the market earlier in the year.

Industry officials have cited low mortgage rates as a reason for the surge in market activity in the city.

In March in Calgary, the condo apartment market saw year-over-year sales increase by 7.23 per cent to 356 while the average sale price rose by 4.56 per cent to $271,724.

The condo townhouse category experienced a year-over-year sales decline of 5.24 per cent to 235 but the average sale price increased by 1.21 per cent to $313,581.

Doug Koop, broker/owner of RE/MAX Realty Professionals in Calgary, said the market is very active due to a number of reasons.

In-migration into Calgary is a factor, creating a pool of new buyers.

“We’re expecting 20,000 new jobs in Calgary,” he said.

Other factors include low interest rates, increasing consumer confidence, a housing market that is considered very affordable, and “our average wage is higher than most other major cities,” said Koop.

Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp., said a number of factors are contributing to the sales activity in the resale market.

“Some prospective buyers are taking advantage of the favourable mortgage rates that are being offered while some other buyers, who have been on the fence, have started to move ahead with their buying decision,” he said. “A number of people have been benefiting from the economic growth in Calgary and this has put many of them in a position to buy a home.

“Sales in Calgary are forecast to rise above 2011 levels. With activity in the energy sector expected to continue moving forward, growth in employment, income and migration will support demand for housing.”

He said some price pressures are returning to the market as demand picks up and active listings trend lower but the CMHC is forecasting a modest increase in prices in 2012 and 2013.

“The rise in activity is related to the continued improvement of our economy and consumer confidence, as some concerns regarding the global economy have eased,” said Ann-Marie Lurie, CREB’s chief economist.

CREB said its benchmark price for its Home Price Index, reached $433,500 for single-family homes, up 4.53 per cent compared with last year.

The condominium apartment and townhouse benchmark prices for March were $247,800 and $293,600, respectively. While the apartment index price has remained relatively stable compared to last year with an increase of 1.39 per cent, the condominium townhouse index recorded an improvement of 4.34 per cent over last year, said the board.

CREB says its new home price index measures how typical properties are valued in the market rather than relying on average and median prices.

It is calculated using a statistical model that estimates prices based on several factors.

“The single-family market continues to lead the housing growth in both sales activity and pricing, and the condominium market appears to have turned the corner as well,” said Bob Jablonski, CREB’s president. “Overall, the Calgary real estate market continues to move in the right direction, with all indicators pointing towards stable growth and a move towards typical levels of activity.”

HOME FOR CANADIANS

CMHC backing fewer loans
By Garry Marr
National Post Jan 30, 2012

Canada Mortgage and Housing Corp. is cutting back on mortgages it insures as the Crown corporation edges closer to a $600-billion cap imposed on it by the federal government, the Financial Post has learned.

A CMHC spokesman confirmed that it had approached a number of lenders at the end of 2011 about reducing its “bulk or portfolio insurance” after third-quarter results showed the agency had committed to back $541-billion in mortgages. CMHC, which guarantees mortgages held by financial institutions, is ultimately backed by the federal government and needs approval to go over the $600-billion limit — something that would create greater risk for taxpayers should the housing market collapse.

“CMHC has recently received an unexpected level of requests for large amounts of CMHC portfolio insurance.” said Charles Sauriol, a spokesman for the Crown corporation, in an email.

“To ensure equitable access to portfolio insurance within CMHC’s annual limits, an allocation process is being established which has caused some delays. Portfolio insurance provides lenders with the ability to purchase insurance on pools of previously uninsured low ratio mortgages and does not impact CMHC’s transactional business.”

Financial institutions are required to have mortgage-default insurance when a consumer has less than 20% equity. However, the banks have been seeking insurance on loans with even high downpayments — something not required by law — so they can securitize those bulk lending loans, thereby getting them off their balance sheets and reducing their capital requirements. In those cases in which the loans to value is less than 80%, the bank pays the insurance charge instead of the consumer.

“One of the things that has got them [to the limit] faster than expected is they are doing a lot of conventional insurance for lenders,” said one source. Just three years ago, CMHC had $450-billion in loans it was backstopping and had to go to the government to get that increased to $600-billion.

“I think as a taxpayer you should care. The policy question is why should the Canadian taxpayer take that type of meltdown risk within CMHC,” the source said.

The risk to the taxpayer would be a collapse in the market leading to a defaults like the U.S. saw. If CMHC couldn’t cover those defaults, Ottawa is on the hook for 100% of any shortfall.

On the surface, insuring conventional loans may not appear as risky as traditional mortgage default insurance because it comes with more equity. The banks have been demanding ultra low fees on the conventional mortgages, arguing the equity position makes them a lower risk. However, lenders are skimming their portfolio to load up mortgages that are 70% to 80% debt to equity and may also have other problems, said a source.

With mortgage defaults well below 1%, some might argue the risk to CMHC is negligible. “If you look at what is backing [CMHC’s] guarantee, it should be more than enough to cover any downturn in the market,” said one banking source, who asked not to be identified, about CMHC’s cash reserves. “Besides, what will the government do, not increase their limit? This could kill the entire housing market.”

CMHC gave no indication it would seek an increase in its limit.

“CMHC’s mortgage loan insurance limit in force is $600-billion. CMHC manages its mortgage loan insurance business in accordance with this limit,” said Mr. Sauriol.

The Crown corporation would be going to the government looking for an increase in its limit at a time when both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have been casting a wary eye at the housing market.

“We watch the housing market carefully and we are prepared to intervene if necessary. Having said that, we’re not about to intervene in the housing market now,” said Mr. Flaherty this month. For his part, Mr. Carney said “we see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they’re probably overvalued. So there are risks there.”

Sources have indicated the government is already considering tough new measures for calculating how the self-employed qualify for loans and tightening regulations for condominium buyers, so there is probably little appetite for backstopping even more debt from CMHC. In addition to CMHC, the government has a $300-billion limit for private mortgage default insurers.

PAID, STAMPED, FILED!

Canadians paying off mortgages early: CMHC
Financial Post Staff  
Nov 29, 2011

OTTAWA — Canadian homeowners are doing a good job of paying off their mortgages early, according to the Canada Mortgage and Housing Corp., which released its third-quarter results Tuesday.

While mortgage repayments can be spread out over 30 years, the CMHC reports that the average amortization period for mortgages insured by the national housing agency is under 25 years, and the loan-to-value ratio of those homes was 80% or less. As of Sept. 30, the outstanding loan amount per household for all homeowner loans was $159,740, slightly above the figure for the previous year.

“CMHC analysis shows that a substantial percentage of CMHC-insured high ratio borrowers are ahead of their scheduled amortization,” the agency said in its report. “Accelerated payments shorten the overall amortization period, reduce interest costs, increase equity in the home at a faster rate and lower risk over time.”

The agency says its mortgage arrears rate is 0.42%, in line with industry trends.

Rules brought in by the federal government in March, in response to historic levels of household debt, which reduced amortization periods on certain mortgages, and limited the amount that can be borrowed when a house is refinanced, cut refinancing activity by 31% from last year, the CMHC said. The agency’s homeowner purchase mortgage insurance showed a year-over-year decrease of 12%.

“The level of household debt remains a concern but there are encouraging signals,” it says. “There has been a significant deceleration in the growth of mortgage credit since March, particularly in recent months, impacting the growth rate of total household credit. Growth in personal loans, lines of credit and credit cards has levelled off in recent months.”

The agency notes general economic conditions have been favourable in 2011, with stable mortgage rates, a healthy housing market and a declining unemployment rate.

“Overall arrears levels and arrears rates have been improving and (mortgage insurance) claims volumes have been lower than expected,” it said. “Given current economic forecasts, it is expected that trends will improve moderately going forward, although both downside and upside risks remain.”

While housing sales have slowed since January, the CMHC expects sales for the year to fall within a range of 423,600 to 470,100 units, and next year’s sales to be somewhere between 406,100 and 509,000 units. Prices should “modestly grow as market conditions are expected to remain in the balanced market range,” it said.

The agency notes it keeps an eye out for bubbles, but so far it sees “little evidence of over-valuation” in the Canadian housing market.

Photo By: *_Abhi_*