HOME OF THE BRAVE

More Albertans willing to brave rising prices and purchase a home
People confident in getting into the real estate market
By Mario Toneguzzi 
Calgary Herald April 10, 2014 

CALGARY - Despite high real estate prices, Albertans have a renewed interest in buying a home, according to the 21st Annual RBC Home Ownership Poll.

The poll, which was released Thursday, said the number of those intending to buy a home in the province is up from 22 per cent in 2013 to 28 per cent this year, “showing a renewed strength in the market from last year.”

“We saw a drop in purchasing intent last year in Alberta, so this renewed intent in 2014 shows that people in the province are confident in their ability to get into the market and invest in a home,” said Don Peard, regional vice president and mortgage specialist with RBC.

“There’s a couple of key factors. Number one being, certainly we were predicting a year ago and even more than that an increase in interest rates and that really hasn't transpired. Even if it does transpire, I don’t believe it will be as severe as some people were anticipating. That’s a huge factor in affordability and certainly impacts peoples’ intent to purchase.”

Peard said discussion about the levels of consumer debt has had an impact on peoples’ savings habits with better results in recent years, which means they are able to have enough money for down-payments.

“And of course in Alberta, comparatively speaking, affordability still remains very well particularly when we compare pricing and affordability with other larger centres in Canada. Alberta still remains very affordable. There’s no question the intent to purchase has increased,” said Peard.

Recently, the Canadian Real Estate Association said Alberta will lead the country with the highest annual growth rate in prices over the next two years in the resale housing market.

It said average MLS sale prices will climb in the province by 3.9 per cent this year to $396,000 and by another 2.5 per cent in 2015 to $406,000.

The association said Alberta will see annual sales activity increase by 0.8 per cent this year to 66,600 and then lead the country in 2015 with 3.9 per cent growth to 69,200 sales.

In February, MLS sales were up by 1.8 per cent year-over-year in Alberta to 4,595 and the average MLS sale price saw a yearly increase of 7.6 per cent in the province to $407,540.

“The volatility and fluctuations in some of the other larger Canadian cities we just don’t experience that in Alberta. There’s good, solid general appreciation in home values but it’s certainly not big spikes and bubbles,” said Peard.

“Lots of fear and talk of real estate bubbles in the past two or three or four years and I think the general consensus now is that’s really probably not going to happen at all and there’s lots of good empirical data to support that and we've seen good positive changes in the Vancouver and Toronto markets and of course we’re just that much more fortunate here in Alberta with having one of the best economies in the country.”

Photo By: Danielle Nanni

MAKING GAINS

Calgary house price gain again best in Canada
By Mario Toneguzzi
Calgary Herald January 15, 2014 

CALGARY - Another day and another real estate report indicating Calgary’s housing market is showing the best year-over-year price growth in the country.

On Wednesday, the Canadian Real Estate Association released its MLS Home Price Index which indicated Calgary prices in December were up 8.74 per cent from a year ago while the aggregate across the country, encompassing 11 major markets, rose by 4.31 per cent. 

The CREA report followed Tuesday’s Teranet-National Bank National Composite House Price Index report which said Calgary led the nation with a 6.5 per cent hike in prices for repeat home sales.

In December, CREA said Calgary MLS sales were up nine per cent from last year to 1,464 transactions while the average sale price rose by 4.7 per cent to $439,389.
 For Canada, MLS sales during the month increased by 12.9 per cent to 23,215 units and the average sale price jumped by 10.4 per cent to $389,119.

In Alberta, sales of 3,135 were up 9.8 per cent from a year ago and the average sale price rose by 4.7 per cent to $380,477.

On an annual basis, the number of sales and percentage increases were: Calgary, 29,954, 12.5 per cent; Alberta, 66,080, 9.5 per cent; and Canada, 457,893, 0.8 per cent.

On an annual basis, the average sale price and percentage increases were: Calgary, $437,036, 6.0 per cent; Alberta, $380,969, 4.9 per cent; and Canada, $382,466, 5.2 per cent.

BALLOONING SALES

Calgary and Vancouver lead Canadian housing market boom
August MLS sales balloon

By Mario Toneguzzi 

Calgary Herald September 16, 2013

CALGARY — Strong sales in Calgary and Vancouver led to a Canadian housing market boom in August as MLS transactions across the country were up 11.1 per cent compared with a year ago, according to the Canadian Real Estate Association.

In releasing its national data on Monday, CREA said sales in Vancouver were up 53.1 per cent from last year to 2,557 while Calgary transactions rose by 28.8 per cent to 2,830.
In Canada, total MLS sales in August were 40,350.

“The year 2013 has been a very strong year for the Calgary real estate market,” said Crystal Tost, a realtor with RE/MAX Realty Professionals in Calgary. “Earlier in the year we saw the market pick up as we transitioned into a sellers’ market as a direct result of low inventory levels. The market maintained strong with low inventory right through to spring. The summer months are traditionally a bit slower than spring months, but not for 2013. The market continued on with record sales without rest as inventory levels continued a downward motion into summer months.

“There is no doubt that the flood has greatly affected the housing market in Calgary not just for sales. Workers that have flocked to the city to aid in Calgary’s rebuilding and displaced people looking for temporary housing have exhausted the inventory in the rental market and in turn we are seeing rising rental prices. The raised rental market is making it sense for some first-time buyers to enter into the market. Bank interest rates are also on the rise. We are seeing many buyers out there with great interest rate holds nearing expiration so some of those buyers will be on a time crunch to save some money in interest.”

In August, Calgary had the highest growth year-over-year in the MLS Home Price Index, which tracks typical sales in nine major Canadian centres. Calgary prices rose by 7.39 per cent compared to the national aggregate of 2.92 per cent.

As for average prices, Calgary was once again a leader with an 8.1 per cent annual hike to $432,576, while Canada saw an 8.1 per cent hike as well to $378,369.

Ann-Marie Lurie, chief economist with the Calgary Real Estate Board, said the past two months have seen sales activity in the city shoot up higher than long-term trends.

“Both in July and August, those numbers were a little stronger. Part of that I think is due to the fact of the floods (in June),” said Lurie. “Because of that if you look at June we were running really in line with long-term trends — just above it. And then floods hit and in July and August we saw that activity increase. And some of that is from that demand being pulled forward.”
But other factors have also come into play in the local residential real estate market, she said, with stronger than expected migration this year.

“We still continue to have employment growth. The overall economic situation has done fairly well,” said Lurie. “That’s all the backdrop behind it as well. And wages have been increasing.”

There’s also the added possibility of increasing mortgage rates causing people to get into home ownership sooner.

In August, Alberta saw MLS sales increase by 17.8 per cent from last year to 6,124 while the average price rose by 7.1 per cent to $381,642.

On Monday, CREA also released its forecast for the rest of this year and 2014. It said Alberta MLS sales would grow by 6.2 per cent this year, the best in the country, to 64,100 and by another 2.3 per cent in 2014 to 65,600.

In Canada, sales are expected to drop by 1.0 per cent this year to 449,900 but expand by 3.5 per cent next year to $465,600.

The average sale price in Alberta is expected to rise by 4.8 per cent this year to $380,500, the second best growth rate in the country behind Newfoundland’s 6.1 per cent. Alberta is then forecast to lead the country in 2014 with 3.4 per cent growth to $393,300.

Canadian average sale prices are forecast to grow by 3.6 per cent this year to $376,300 and by another 1.7 per cent in 2014 to $382,800.

“Sales activity dropped sharply around this time last year in the wake of tightened mortgage rules and has improved since then, so a sizable year-over-year increase this August was expected,” said Gregory Klump, CREA’s chief economist, about the national August sales data.

“Buyers who put off purchase decisions or who were otherwise sidelined by tighter mortgage rules and lending guidelines implemented last year were anticipated to return to the housing market. That said, the upward trend and levels for activity in recent months has been steeper than expected, but that may not last.


“Recent increases to fixed mortgage rates caused sales to be pulled forward as buyers with pre-approved financing at lower rates jumped into the market sooner than they might have otherwise. That pool of homebuyers has largely evaporated so demand may soften over the fourth quarter. The outsized year-over-year gains may persist, however, due to weak sales toward the end of last year.”

CALGARY TOPS IN GROWTH

Calgary leads country in housing market price growth
Prices up nearly 7% from last year
By Mario Toneguzzi
Calgary Herald August 15, 2013

CALGARY — Calgary led the country in July with the best year-over-year price growth in the resale housing market.

The Canadian Real Estate Association’s MLS Home Price Index, released Thursday, indicated prices in Calgary were up 6.79 per cent — more than doubling the national aggregate of 2.66 per cent price growth.

The index measures the rate at which housing prices change over time taking into account the type of homes sold. Nine major Canadian centres are surveyed.

“Our market is trending towards a selling market. Listing inventory is 20 per cent lower than this time last year and pricing is approximately seven per cent higher overall,” said Tanya Eklund, with RE/MAX Real Estate (Central) in Calgary. “The Calgary floods created a short-term surge in house purchases in certain areas. People who could afford to buy have purchased, so their families were not displaced. Due to the very low vacancy rate, rental inflation and difficulty in finding rental accommodation, this made some consumers turn to purchasing instead of renting.

“We are seeing many inner-city communities flourish with sales, however I am seeing certain suburb markets higher in inventory in the plus $1 million, so sales have not been as abundant as other communities closer to the interior of the city. Overall, it appears to be a great time to sell. Buyers have less time to think about their purchases with hopes of not losing out on their ideal home. I am confident we will continue to see a stable real estate market as we enter into the fall.”

CREA stats indicated Calgary MLS sales in July of 2,976 were up 18.9 per cent from last year while the average sale price jumped by 7.0 per cent to $438,192.

Across Canada, sales were up by 9.4 per cent to 44,829 units and the average price rose by 8.4 per cent to $382,373.

In Alberta, transactions increased by 17.8 per cent to 6,853 units while the average price was up by 4.3 per cent to $379,696.

“Canadian home sales have staged a bit of a recovery in recent months after having declined in the wake of tightened mortgage rules and lending guidelines last year, but the numbers for July suggest that national activity is levelling off at what might best be described as average levels,” said Gregory Klump, CREA’s chief economist. “Sales dropped sharply in August last year, so we may see some year-over-year increases in sales and average prices next month that would reflect weakness in the rear view mirror.”

Sales and prices in Calgary are continuing their upward trend in August. According to the Calgary Real Estate Board, month-to-date until Wednesday, total MLS sales of 945 were 32.17 per cent higher than the same period last year and the average sale price was up 13 per cent to $455,688.
In another report released Thursday, Canada Mortgage and Housing Corp. forecast MLS sales in the Calgary census metropolitan area to rise to 27,800 transactions this year from 26,634 in 2012. Sales are expected to jump to 28,300 in 2014.

The agency forecast the average MLS sale price in the Calgary region to rise from $412,315 in 2012 to $435,000 in 2013 and to $445,000 in 2014.

Nationally, the CMHC’s point forecast is for MLS sales across Canada to decline from 453,372 in 2012 to 448,900 this year and then rise to 467,600 in 2014.

The national average sale price is expected to see year-over-year growth of 2.7 per cent this year to $374,800 followed by an increase of 2.1 per cent in 2014 to $382,800.

BEST IN SHOW

Calgary year-over-year housing sales growth best in Canada
Near 15% hike in MLS transactions
By Mario Toneguzzi
Calgary Herald October 15, 2012

CALGARY — While most of Canada’s major centres recorded year-over-year MLS sales declines in September, Calgary went against the tide with the highest annual growth rate in the country.

According to the Canadian Real Estate Association, MLS sales in Calgary rose by 14.8 per cent from September 2011 to 2,054 transactions.

In contrast, sales across the country fell by 15.1 per cent to 32,192.

But the average MLS sale price in Calgary dipped by 0.9 per cent in September to $402,756.

Nationally, the average price rose by 1.1 per cent to $355,777.

CREA said Monday that more than half of all local markets in the country posted sales declines of at least 10 per cent on an annual basis.

“New mortgage rules continue to keep a lid on national sales activity,” said Wayne Moen, CREA’s president.

The organization’s chief economist, Gregory Klump, said national activity is likely to remain down from year-ago levels over the fourth quarter of this year.

“In the shadow of the latest mortgage rule changes, activity has ratcheted down from higher levels seen during the fourth quarter last year,” he said. “While some first-time homebuyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do.”

In Alberta, MLS sales rose by 7.7 per cent from last year to 4,714 while the average price increased slightly by 0.2 per cent to $355,127.

“While the 15 per cent year-over-year drop in sales suggests Canadian housing is making like Felix Baumgartner, falling past the speed of sound, the details are not nearly as weak, and still suggest that the housing market is simply gliding to a lower altitude,” said Douglas Porter, deputy chief economist with BMO Capital Markets.

On Monday, CREA also released its MLS Home Price Index. The national index rose 3.9 per cent year-over-year in September. This was the fifth time in as many months that the annual gain shrank and marks the slowest rate of increase since May 2011.

Regina led the country with a 14.2 per cent hike followed by Calgary at 6.5 per cent.

BALANCE IN JUNE

Fewer home resales in June in a more balanced market: real estate association
By LuAnn LaSalle
The Canadian Press July 16, 2012

The number of Canadian homes sold last month dropped more than four per cent from the level in June 2011, the first year-over-year decline in sales volume since April 2011, the Canadian Real Estate Association said Monday.

Resales of homes were also down 1.3 per cent in June from May — the second month-to-month decline — with a total of 46,444 transactions through CREA members. That was down from 48,591 in June 2011, the association said.

"Canada's housing market lost a little altitude in June, but it's still flying pretty high," association president Wayne Moen said in a news release.

"That said, sales activity and average prices bucked the national easing trend in a number of markets, which underscores that all real estate is local," Moen said.

The national average home price in June was $369,339, down 0.8 per cent from the same month last year, CREA said.

Prices increased in Calgary, remained strong in Toronto and continued to slow in Vancouver.

However, CREA said its MLS Home Price Index — which the association says is a better measure because it adjusts for different types of properties sold — increased 5.1 per cent between May and June 2012.

There have been several reports saying some real estate markets and some types of housing are over valued, although there's a range of opinions about how much and how quickly prices will decline.

Economists and consumers have been closely watching for signs that demand has softened to the point where prices will start going down.

But the association, which represents real-estate boards and associations that handle most of the country's property transactions through the MLS system, said Monday the decline in sales activity and an increase in new listings resulted in a "more balanced" national housing market in June.

The number of newly listed homes rose 1.4 per cent in June compared to May, led by the Toronto market. Some 42 local markets, out of 100 markets across the country, registered a monthly increase in new listings of at least one per cent, the association said.

RBC senior economist Robert Hogue noted the resale market eased again in June but the number of homes newly listed for sale rose 1.4 per cent last month.

"Market conditions, therefore, eased a little, providing more breathing room for Canadian buyers," Hogue said in a research note.

"Despite this easing, the demand-supply equation continued to be balanced in the majority of markets in Canada. The previously tight Toronto market became much more balanced, whereas the Vancouver market inched closer to conditions favouring buyers," Hogue said.

In the first half of 2012, a total of 257,193 homes traded hands over Canadian MLS Systems, up 4.7 per cent from the same period in 2011.

Gregory Klump, CREA's chief economist, said home buyers didn't rush to make purchases before the latest restrictions on mortgage regulations came into effect in July.

"That's a big change compared to what we saw as a response to previously announced changes," Klump said.

"It will take some time before the compound effect of previous and recent changes to regulations on Canada's housing market becomes apparent."

Hogue also said that going forward this year he expects home resales to ease in light of the latest mortgage restrictions.

"This moderation trend will become more entrenched next year when we expect the Bank of Canada to begin normalizing its interest rate policy."

Under new mortgage rules announced in June by Finance Minister Jim Flaherty, borrowers will be allowed to use up to 80 per cent of their property's value as collateral for home-equity loans, down from 85 per cent.

In addition, the maximum amortization period dropped to 25 years from 30 years for government insured mortgages.

Flaherty also said government-backed mortgage insurance will be limited to homes with a purchase price of less than $1 million.

Photo By: the past tends to disappear

YOU'RE HOT & YOU'RE COLD!

Hot Toronto, cold Vancouver have competing effects on Canadian housing market
By Sunny Freeman
CANADIAN PRESS May 15, 2012

TORONTO – The Canadian housing market gained momentum in April as strong sales in the Toronto offset weakness in Vancouver, the Canadian Real Estate Association said Tuesday.

April seasonally adjusted home sales on CREA’s Multiple Listing Service gained 0.8 per cent compared with March.

On a year-over-year basis, the association said there were 49,480 homes sold in April, up 11.5 per cent from 44,370 a year ago, when sales slowed following a tightening of mortgage lending rules including the elimination of 35-year amortizations came into effect in March 2011.

Two of Canada’s largest markets are having opposite effects on the national average, with slowing sales and falling prices in Vancouver dragging, and soaring sales and prices in Toronto exerting upward pressure.

The average home price in Canada in April was up 0.9 per cent from a year ago at $375,810.

“It bears repeating that the national average price was skewed higher last spring by record level high-end home sales in Vancouver’s priciest neighbourhoods, and that a replay of this phenomenon was not expected this year,” said Gregory Klump, CREA’s chief economist.

The average selling price in Vancouver was down 9.8 per cent compared with a year ago at $735,315, while the average price in Toronto was up 8.4 per cent at $517,556. April sales in Vancouver slid 13.2 per cent while Toronto sales picked up 14.5 per cent compared to a year ago.

“Trends in Vancouver and Toronto continue to diverge. These two housing markets have an obvious influence on national statistics and a high profile, but Canada is a big place,” said Wayne Moen, CREA President.

Excluding Toronto and Vancouver, the average price in Canada was up 3.1 per cent from a year ago.

Gains in Montreal, Winnipeg, Edmonton, as well as London and St. Thomas, Ont., also contributed to the increased sales, offsetting declines in Ottawa, Windsor-Essex, Quebec City, the Fraser Valley, and Vancouver.

Continued strength in the housing market, largely due to the staying power of low interest rates, has led some economists to warn the market is overvalued. That could make homeowners vulnerable to a downturn, especially those who have used low interest rates to borrow more than they could otherwise afford.

TD Bank estimates Canadian home prices are 10 to 15 per cent overvalued, with the excess most evident in Toronto and Vancouver, said TD economist Diana Petramala.

“With mortgage rates still at rock bottom through the early part of this year and job creation heating up through March and April, it’s not that surprising to see continued growth in Canadian home sales,” she said.

“Still, growth in home prices and sales will likely be limited as the overvaluation has led to a deterioration in affordability. Overall, we anticipate the Canadian housing market to remain relatively flat in the coming year with home prices to rise just another two per cent this year, following gains of seven per cent in each of the last two years.”

The number of newly listed homes pared back 0.2 per cent from March to April, which, combined with slightly higher sales resulted in a tighter national housing market, but remains firmly entrenched in balanced market territory,” CREA said in a release.

A total of 157,804 homes have traded hands so far this year, up 6.4 per cent from levels reported in the first four months of 2011.

That’s also about four per cent higher than both the five- and 10-year averages for sales during the first third of the year.

Sales on CREA’s Multiple Listing Service was either up or held steady in half of all local markets, with Toronto and Calgary posting the biggest monthly increases for the second consecutive month.

Toronto home sales in 2012 have been particularly strong, up 9.5 per cent from year ago levels at 31,639 homes sold so far this year. But sales in Vancouver, a market that was bustling with high-end home purchases last year, are down 19.9 per cent so far this year at 9,935 homes sold.

“While these two cities are garnering most of the attention, Calgary is quietly becoming a market to watch,” said BMO economist Robert Kavcic, adding that sales in the city jumped 30 per cent year-over-year in April.

“If oil prices remain high enough to continue supporting strong economic growth and migration flows, Calgary could again become Canada’s real estate hot spot in short order.”

ON THE RISE...NATIONALLY

Canada’s home sales back on the rise
Postmedia News
Mar 15, 2012

Following a rough start to 2012, home sales in Canada rebounded in February with a modest increase from the previous month.

The Canadian Real Estate Association (CREA) said Thursday that home sale rose by 1.4% between January and February, which helped recover roughly one-third of the 4.5% drop recorded the previous month.

Compared with the same reporting period the previous year, activity was 8.6% higher than February 2011. Over the first two months of 2012, some 61,772 homes were sold, which represents a 6.7% hike from the same period in 2011.

“The national rise in both sales activity and the number of newly listed homes beyond the normal seasonal increase provides clear evidence that Canadians are confident in housing market prospects,” CREA president Gary Morse said in a new release.

New home listings also jumped 1.9% in February, representing the highest level since May 2010. The association said a spike in new listings in Canada’s two busiest markets — Toronto and Montreal — helped counterbalance a decrease in listings in Vancouver, which is the country’s third-largest market.

CREA said that the balance between sales and new listings remains fairly equal.

On a year-over-year basis, average home sale prices were up fully two% in February 2012. The average price of all homes sold that month was $372,763.

The association said that the increase was partly due to a rise in high-end home sales in the Vancouver area, which was not anticipated. Single detached residences in the Toronto area also continue to fuel home gains.

RISING DEMAND IN ALBERTA

House prices expected to ease
Financial Post Staff
Mar 5, 2012

OTTAWA — Home resales are expected to rise by 0.3% this year in Canada, with low interest rates continuing to support the market, the Canadian Real Estate Association said Monday.

National sales are forecast to reach 458,800 units in 2012, up from 457,305 in the previous year. “Rising demand in Alberta, Saskatchewan, and Nova Scotia, is expected to offset softer activity in British Columbia, Ontario, and New Brunswick,” CREA said.

In 2013, CREA said, sales are expected ease back to 457,200 units, with modest gains in all provinces except Ontario “as economic and job growth picks up later this year and builds into 2013,” it said.

Meanwhile, the national average price is likely to decline by 1.1% this year to $359,100, followed by a slight increase of 0.9% to $362,300 in 2013.

“Risks to the Canadian economic outlook remain elevated owing to the European sovereign debt quagmire, but the continuation of low interest rates is the silver lining,” said Gregory Klump, CREA’s chief economist.

“So long as the European debt crisis is contained and a global economic recession avoided, low interest rates will support Canadian home sales and prices. Recent trends are reassuring, but interest rates remaining low for longer will doubtless keep the Canadian housing market under scrutiny for signs of overheating.”

A TOAST WITH 7UP

Calgary MLS sales in 2011 beat Canadian average
Up 7.0% from the previous year
By Mario Toneguzzi
Calgary Herald January 17, 2012

Calgary MLS sales in 2011 bested the Canadian average for year-over-year growth, according to the Canadian Real Estate Association.

In releasing its year-end data on Monday, the association said sales of 22,466 units last year were up 7.0 per cent from the previous year while in Canada sales grew by 2.2 per cent to 456,749 transactions.

Sales across Alberta jumped by 6.9 per cent to 53,146 units.

However, Calgary and Alberta were behind the national average when it came to the annual price hike.

Calgary and Alberta registered 1.0 per cent year-over-year gains in the average MLS sale price to $402,851 and $355,808 respectively.

The national average was a 7.2 per cent hike to $363,346.

"The momentum in sales activity provides clear evidence that low interest rates continue to draw homebuyers to the housing market," Gary Morse, CREA's president, said in a statement. "While buyers have become increasingly cautious, the hand-off for sales activity going into the New Year suggests that Canada's housing market will continue to benefit from low interest rates in 2012, and continue making a significant contribution to Canadian economic activity."

Momentum for national sales activity and average price remains positive but is slowing, which suggests that the continuation of low interest rates is not causing the Canadian housing market to overheat, said Gregory Klump, CREA's chief economist.

"High-end home sales seem unlikely to spike again in the first quarter like they did at the beginning of 2011, so national average price momentum may wane further over the next few months," he said. "With interest rates widely expected to remain low throughout 2012, home ownership will remain affordable, and continue to support home sales activity."

Douglas Porter, deputy chief economist with BMO Capital Markets, said the Canadian housing market showed distinct signs of moderation in late 2011, with even some of the hottest of the hot cities simmering down.

LOCK IT OR FLOAT IT? THAT IS THE QUESTION.

Is it time to lock in mortgage?
Garry Marr
Financial Post · Aug. 31, 2011

The gap between short-term and long-term rates has shrunk enough that it might be time for anyone renewing a mortgage to consider locking in.

Moves last week by the major banks to reduce the discount on variable-rate mortgages comes as the discounts for long-term mortgages have gotten as steep as they have ever been.

"What seems to be happening is they are focusing their attention on fixed rates. We are starting to see some aggressive competition on four-and five-year products," says Gary Siegle, a mortgage broker and Invis Inc. regional manager in Calgary.

How aggressive? Try as much as 190 basis points. A five-year, fixed-rate mortgage with a posted rate of 5.39% is now being offered for 3.49%.

For whatever reason, the four-year, fixed-rate mortgages are being priced even more aggressively.

Mr. Siegle says he can lock consumers into a four-year, fixed mortgage for as low as 3.09%.

The discounting comes as variable-rate products, linked to prime, have become more expensive. Short-term money has become more expensive in the bond market, forcing banks to reduce discounts.

The banks traditionally move their prime rate with the Bank of Canada rate. With no flexibility there and existing customers getting huge discounts based on old deals, banks are forced to raise rates for new loans as short-term money gets more expensive.

The trend began in April when FirstLine Mortgages, a subsidiary of Canadian Imperial Bank of Commerce known for its low rates, cut its discount on variable rates.

Others banks were slow to follow, hoping to make money on volume. But refinancings have dried up under tougher mortgage rules and sales have slowed, creating the need to tighten profit margins on variable-rate products.

Today, the discount on a variable-rate mortgage is about 55 basis points off the prime rate of 3% - in other words, 2.45%. Compare that to 3.09% on a four-year mortgage and the premium to lock in is not that much.

"This gap is about as narrow as it goes," says CIBC deputy chief economist Benjamin Tal. "It reflects a flat yield curve, which makes it difficult to make money in this business."

Mr. Tal says variable-rate mortgages tend to be more attractive when there are inflation expectations not yet expressed in short-term rates. This time, he says, the bond market is depressed, anticipating recession, and that has shrunk spreads dramatically.

The one thing keeping people in short-term money is the sense that there is no urgency to move because the U.S. Federal Reserve Board has pledged not to raise rates for two years, which also effectively ties the hands of the Bank of Canada.

"We know the five-year rate is attractive, but we also know short-term rates are not raising," Mr. Tal says.

What does that mean on a practical, dollars-and-cents basis?

Let's use the Canadian Real Estate Association's 2011 average sale price forecast of about $360,000 and assume a 20% down payment and a $288,000 mortgage.

At 2.45%, your monthly mortgage payment based on a 25-year amortization would be $1,282.98. At 3.09%, your monthly payment rises to $1,376.28.

But even at the gap, you would pay about an extra $7,000 in interest to lock in over four years.

Ultimately, the $7,000 amounts to an insurance policy. You get payment certainty for four years, but at a price.

If rates climb 200 basis points on your variable-rate mortgage, it could cost you $22,000 more in interest over four years. The reality is that rates wouldn't jump at once and, therefore, increases would likely be gradual.

Moshe Milevsky, the York University finance professor who wrote the oft-quoted study that variable-rate mortgages do better than fixedrate mortgages 88% of the time, said if you start thinking about it like insurance, it comes down to your risk tolerance.

"There are people who pay a lot for protection on their portfolio; there are people who pay a lot for life insurance," Prof. Mr. Milevsky says. "If the premiums are low enough, you might say, 'Sure, I'll pay.' But if you have a tight budget, every basis point counts, and it might not be worth it."

To me, he still has the ultimate answer for the tough decision whether or not to lock in.

"I still don't get why more Canadians don't split their mortgage," Prof. Milevsky says. In other words, locking in half of the mortgage and floating with prime on the other half.

"When is a bank going to come to the realization Canadians hate making this choice?"

He's right. Even with rates this low and the gap between short-term and long-term rates this narrow, it is still a tough call.

Photo By: Accretion

OH, CANADA!

Housing market defies expectations

Garry Marr, Financial Post
Aug. 17, 2011

July proved to be a another strong month for Canadian home sales with the Canadian Real Estate Association now predicting 2011 will see an increase in sales as opposed to a previous forecast for a drop.

Actual sales last month were up 12.3% from a year ago while year-to-date sales are 1.6% lower than the same period for 2010.

Prices also continue to have some upward movement, al-beit some of the increase year over year being attributed to the introduction of the HST in British Columbia and Ontario, and tighter mortgage regulations in 2010.

The national average price for homes sold in July 2011 was $361,181 - the lowest level since January - but rep-resented a 9.3% increase from a year ago.

Greg Klump, chief economist at CREA, cautioned not to read too much into the average price statistics.

"Changes in the national average home price are open to being misinterpreted," Mr. Klump said. "They often signify changes in the mix of sales activity across and within local markets, rather than a rising or falling price trend for typical homes in a specific market."

However, the Ottawa-based group, which represents 100 boards across the country, says the scales have now tipped modestly in favour of 2011 outpacing 2010.

CREA is predicting 450,800 sales in 2011, just under a 1% increase from a year ago. The group had been forecasting a decline of 1%. Sales are expected to drop less than 1% in 2012.

Prices in Vancouver continue to affect the country, as they helped push CREA's forecast for the average sale price in 2011 to $363,500, a 7.2% increase from a year ago. This was also an increase from a previous forecast. Next year, prices are expected to be flat.

The group noted longtalked-about increases in interest rates have failed to materialize in the market.

"While there had been some talk of potential interest-rate increases, that hasn't happened," said Gary Morse, president of CREA. "In fact, rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012."

Douglas Porter, deputy chief economist at Bank of Montreal, said the housing market just seems to keep surprising everybody.

"In a world seemingly awash in negative economic surprises in 2011, one positive surprise has been the resiliency of Canada's housing market," said Mr. Porter, adding few analysts were predicting the kind of price increases the market has seen.

"Canadian housing remains surprisingly robust, thanks to still-low interest rates and solid job growth. While the recent financial market turmoil may temporarily weigh on activity, sales should ultimately find support from continued exceptionally low borrowing costs."

Phil Soper, chief executive of Royal LePage Real Estate Services, said his company's recent forecast was for a 2% decline in sales and 3% increase in price for 2011. He doesn't anticipate that changing.

"I think we're going to start to see it's not so much the strength of the market but the weakness last year. The market had run out of steam at this point last year," Mr. Soper said. "I think we are seeing a more normal curve to the market, with the exception of the Vancouver market."

THE SHORTEST MONTH SHOWS GROWTH

Calgary MLS sales rise in February
Prices up 3% from last year
By Mario Toneguzzi,
Calgary Herald March 15, 2011

CALGARY - Overall residential MLS sales and average prices rose in Calgary in February, according to the Canadian Real Estate Association.

In data released Tuesday, CREA said Calgary sales, which included all residential properties, were 1,917 for the month, up by 0.2 per cent from a year ago.

The average MLS sale price was $400,879, an increase of three per cent from February 2010.

Nationally, CREA said sales dropped by 5.9 per cent to 34,093 transactions but the average sale price rose 8.8 per cent year-over-year to $365,192.

"The average price has been skewed higher nationally and in British Columbia recently by a record number of multi-million dollar sales in a couple of areas in Greater Vancouver," said Gregory Klump, CREA's Chief Economist.

"When you take Vancouver out of the equation, the year-over-year increase in the national average price drops to 3.4 per cent. While that's still stronger than in the past six months or so, national average price gains may recede after tighter mortgage regulations take effect in March."

SAMPLE MENU OR FULL MENU?

TO LISTEN TO CHRISTINA'S FEEDBACK ON THIS DEAL, LISTEN TO CBC RADIO ON OCTOBER 2 @ 7:30a.m.

Landmark deal to transform how Canadians buy, sell real estate
Limiting agent services may save sellers thousands
By Tim Shufelt And Theresa Tedesco,
National Post, with files from Garry Marr

In a development that could drastically change the way Canadians buy and sell their homes, the real estate industry has reached a landmark agreement with federal competition authorities.

The legally binding deal will allow for home sellers to pay for only those services they want from their real estate agents. Previously, under the rules established by the Canadian Real Estate Association (CREA), consumers had to opt for an entire slate of services, a practice the Competition Bureau deemed anti-competitive.

One of the most significant victories for the competition watchdog in the past decade, the settlement could save millions of Canadians thousands of dollars when they sell their homes. Instead of paying a full-service real estate agent up to 5% of the total sale value, a home seller can now pay a nominal fee for an agent to list the property on the Multiple Listing Service (MLS). According to Derek Holt, an economist with the Bank of Nova Scotia, the difference could mean $15,000 in pocketed savings for the owner of an average-priced Canadian home.

The deal caps more than four years of feuding between the industry and the federal watchdog. In February, the Competition Bureau formally challenged CREA's practices, claiming they "limit consumer choice" and prevent real estate agents from offering lower cost services to customers.

At the heart of the complaint was the MLS, which is owned by CREA and is responsible for about 90% of home sales in the country. The real estate group fired back, accusing the commissioner of tarnishing the reputation of the profession with unfounded condemnations of its practices. But many industry observers said the public relations war was unwinnable for CREA and that its days of rejecting "a la carte" services were numbered.

"Since challenging CREA's rules, the Bureau's goal has always been to achieve a long-term solution that would strengthen competition in the residential real estate brokerage services market," Melanie Aitken, commissioner of competition, said in a release.

Ms. Aitken said the agreement, which has yet to be ratified, will allow real estate agents to "offer the variety of services and prices that meet the needs of consumers."

Meanwhile, CREA maintained that, despite the agreement, its rules did not "prevent or restrict a broad range of business models," the association said in a release. "In CREA's view, the consent agreement reflects this reality and would avoid unnecessary and expensive litigation proceedings."

Lawrence Dale, a Toronto-based real estate lawyer who sued CREA, told the Post the industry association buckled in signing the consent agreement.

"It's a complete capitulation and acknowledgment that what was being done in the past was improper and that they've now agreed in a legally binding document that they won't do it again," he said late yesterday.

Mr. Dale, who launched a discount brokerage RealtySellers, claimed he was forced out of business in 2006 as a result of new rules implemented by CREA.

"This is precisely what I've been fighting for for the last decade," he said. "That the consumer and real estate agent get to decide the framework of their relationship without having CREA and their local boards say certain arrangements are not appropriate for MLS."

The consent agreement is an important victory for the regulator because it provides the bureau with a legally binding settlement that can be used against CREA if the association fails to act on the agreed terms.

The bureau had previously rejected CREA's proposed rule changes, insisting that a consent agreement is necessary to ensure a permanent solution.

Don Lawby, chief executive of Century 21 Ltd. conceded the real estate industry "looked like we were tying to hold onto a monopoly" but argued that was not the case.

Photo By: Razvan Marescu

2 MONTHS OF A CHILL

Home resales cool for second straight month
Reuters
Published: Monday, March 15, 2010

TORONTO -- Sales of existing homes in Canada dipped for a second straight month in February, but remained high on a year-over-year basis, as the market may be moving into more balanced conditions, data showed on Monday.

The Canadian Real Estate Association (CREA) said a total of 42,799 homes changed hands last month, down 1.5% from January, as a large gain in sales in Toronto were offset by declines in Vancouver and other British Columbia housing markets.

The real estate group said the Winter Olympics, which were held in the host city of Vancouver and nearby areas, may have played a factor in lower sales in the province last month.

Unit sales in British Columbia were down 13.3% in February from January, compared with a 3.3% advance in Ontario.

Across Canada, sales rose 44% from the same month last year, a smaller gain in national activity from the previous three months. This was in line with economists' views that year-over-year comparisons are likely to shrink in coming months because the recovery of the housing market started in February 2009.

"Housing markets are becoming more balanced," said Gregory Klump," CREA's chief economist.

After a relatively short spell of low consumer confidence during the global financial crisis, Canadian homebuyers were quickly back in the market and have made the housing sector one of the cornerstones of the domestic economic recovery. The pace of the rebound has encouraged debate about a housing bubble.

But with rising supply -- new listings rose for a fifth straight month, up 2.4% -- it could take the steam out of the housing markets as the year goes on, said Mr. Klump.

Ultralow interest rates could further prompt home resales this spring before the arrival of new mortgage rules in April and changes to provincial sales tax regimes in British Columbia and Ontario, before cooling in the second half of the year.

"We should see the Canadian housing market move slowly back into a balanced-market position as higher mortgage rates and prices begin to temper demand," said Millan Mulraine, economics strategist at TD Securities.

CREA said the national average home price in February rose 18.2% from a year earlier to $335,655 (US$329,074)

Photo By: cjhart10