17 Oct

Home affordability still declining despite softening home prices

General

Posted by: Mike Hattim

Canadians continue to have trouble affording homes because of rising interest rates even as home prices have dropped in major markets across the country, as reported by Ratehub.ca.

“Home values dropped in all 10 cities we looked at, yet still became less affordable. August to September data highlights how impactful even a minor rate increase is on affordability,” said James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender.

What did the mortgage stress test show?

Ratehub’s latest report on housing affordability in Canada showed that in 10 cities studied between August and September, the amount of income required to purchase a home had risen.

As five-year bond yields reached the 4.4% range, a peak that had not been seen since 2007, fixed mortgage rates have continued to increase on a monthly basis. The Bank of Canada’s overnight lending rate remains at 5%, causing the prime rate in Canada to stay at 7.2%.

With the average mortgage rate of 6.33%, several mortgage applicants showed a mortgage stress test at 8.3% or even higher. This was a 0.1% increase from the mortgage stress test conducted in the previous month, and resulted in a decrease in affordability for average buyers in Canada.

“The stress test is the highest it has ever been, exceeding the high watermark that was set last month,” said Laird.

Vancouver showed the largest increase in required income to fund a purchase. Even as average home prices declined by $5,100 in the city, homebuyers still needed $250,000 to buy a home, which was a $3,900 increase from the previous month.

Toronto had the largest home price decrease out of all the 10 markets, posting a decline of $14,400. However, home buyers needed an additional income of $1,800 in the city to purchase a home last month. Hamilton, which had not seen growing income requirements in the previous months, saw a decline in its affordability as the average income required to buy a home increased by $1,640 even as home prices decreased by $9,500.

Laird said borrowing costs cannot be countered by the softening market prices alone. Unless the Bank of Canada begins to cut rates, he said, home buyers will find little relief in the coming months.

“Home values are going to need to drop a lot more to offset the impact of the sharp rate increases,” said Laird.

Ratehub.ca’s analysis was based on the monthly real estate data that was released by the Canadian Real Estate Association (CREA).

Source CMP
By Abigail Adriatico

17 Oct

Increasing Mortgage Rates Weighed Heavily On Housing In September

General

Posted by: Mike Hattim

Mortgage rates continued to rise in September after BoC tightening and one of the largest bond selloffs in history. Yields have retraced some of their rise more recently, but demand for new and existing homes has slowed. According to data released by the Canadian Real Estate Association, national home sales declined 1.9% m/m in September, its third consecutive monthly decline. At least September’s drop was about half as large as in August, dominated by weakness in the Greater Vancouver and the Greater Toronto Area. Sales gains were posted in Edmonton, Montreal and the Kitchener-Waterloo region.

The actual (not seasonally adjusted) number of transactions in September 2023 came in 1.9% above September 2022, but that was far less than the growth in the Canadian population over that period.

The CREA updated its forecast for home sales activity and average home prices for the remainder of this year and next. They commented that the national sales-to-new listings ratio has fallen from nearly 70% to 50% in the past five months, slowing the price rally in April and May. The CREA has cut its forecast for sales and prices, reflecting the marked slowdown in Ontario and BC. The expected rebound in activity next year has also been muted as interest rates remain higher for longer than initially expected.
New Listings

The big news in this report was the surge in new listings as sellers finally come off the sidelines. The number of newly listed homes climbed 6.3% m/m in September, posting a 35% cumulative increase from a twenty-year low since March. New listings are trending near average levels now.

With sales continuing to trend lower and new listings posting another sizeable gain in September, the national sales-to-new listings ratio eased to 51.4% compared to 55.7% in August and a recent peak of 67.8% in April. It was the first time that this measure has fallen below its long-term average of 55.2% since January.

There were 3.7 months of inventory nationally at the end of September 2023, up from 3.5 months in August and its recent low of 3.1 months in June. That said, it remains below levels recorded through the second half of 2022 and well below its long-term average of about five months.
Home Prices

The Aggregate Composite MLS® Home Price Index (HPI) edged down 0.3% m/m in September 2023— the first decline since March.

That said, the slight dip in prices at the national level in September was entirely the result of trends in Ontario. Prices are still rising across other provinces, albeit more slowly than they were.
Incoming data over the next few months will determine whether Ontario is an outlier or just the first province to show the softening price trends expected to play out in at least some other parts of the country, given where interest rates are.

The Aggregate Composite MLS® HPI was up 1.1% y/y. While prices have generally been leveling off in recent months and even dipped nationally and in Ontario in September, year-over-year comparisons will likely continue to rise slightly in the months ahead because of the base effect of declining prices in the second half of last year.
Bottom Line

The Bank of Canada policymakers are set to meet on October 25, weighing the strong wage growth and employment gains against next Tuesday’s September inflation report. The US inflation data, released this week, was only a touch higher than expected. The Canadian information will unlikely disrupt the central bank’s pause in rate hikes.

The unexpected Israeli war will disrupt the global economy again, which could cause supply chain concerns if it lasts long enough. Oil prices and technology (semiconductor chips and other tech-related products) could be impacted. With so much uncertainty and a marked third-quarter economic data slowdown, the BoC will likely remain on the sidelines.
Dr. Sherry Cooper
11 Oct

Spooktacular Home Tips

General

Posted by: Mike Hattim

It is hard to believe it is October already!

Even though Fall has already started, there are a few things you can do still to ensure your home is well-prepared for the season.

Whatever your plans, a quick check of your home will ensure there are no surprises!

  • Examine Your Gutters: This time of year it is important to clean and inspect your gutters (replacing as needed) to ensure they are working properly as the rain and snow season hits. If they are clogged or damaged, it could result in flooding or exterior damage – so don’t wait!
  • Check for Drafts: In the Fall and Winter, many homeowners are spending extra money heating their homes due to drafts, but it doesn’t have to be that way! Do a check on all exterior doors and windows to confirm if they are properly sealed. To do this, simply close a door or window on a strip of paper. If the paper slides easily, you need to update your weatherstripping.
  • Inspect Your Furnace: In Canada, we are no strangers to chilly evenings! To ensure you are comfortable throughout the colder months, be sure to have your furnace inspected by an HVAC professional. They can check leaks, test efficiency, and change the filter. They can also conduct a carbon monoxide check to ensure air safety.
  • Manage Your Thermostat: As tempting as it is to turn your heat all the way up in the winter, proper thermostat management will help you save costs in the long run. Using a thermostat with a timer can save you even more. Turn them on earlier so the room heats up in time for use and have it turned off 30 minutes before bed or before leaving the home. If you find you are still chilly at night, a safely positioned space heater and closed door is an inexpensive solution.
  • Fix Any Concrete/Asphalt Cracks: This one is easy to ignore thinking it will be fine, but it could easily turn into a bigger issue. When water gets into existing cracks during the colder months it will freeze and expand, causing the crack to become even larger.
  • Turn Off Outdoor Plumbing: Since your garden will not need attention until the Spring, it is a good idea to shut off and drain all outdoor faucets and sprinkler systems. Depending on where you live, you might also want to cover them to prevent freezing during the Winter months.
  • Change Your Batteries: For safety, it is recommended that you check that all smoke detectors and carbon monoxide devices are working at least a couple of times throughout the year. While doing other Fall home prep, add this one to your list!
  • Create a Storm Kit: A storm kit is a handy source of essential items in the event of losing power. Consider what you and your family might need, such as a flashlight with new batteries, candles, matches, a portable radio, water, and snacks. Keep your kit somewhere easy to access.
11 Oct

Fall Market Forecast

General

Posted by: Mike Hattim

As we round the corner into October, now is a great time to touch base about what to expect in the marketplace this Fall!

As you may have heard, The Bank of Canada opted to maintain its policy rate at 5% as of September. The recent rate hikes over the spring and summer have slowed the housing and mortgage markets as potential buyers were unsurprisingly spooked by the rise in mortgage rates.

More recently, fixed-rate loans have become more expensive because of the rise in longer-term interest rates. As a result, housing affordability became a bigger hurdle and led to a slight decrease in home prices by 6% in major markets over the summer.

With The Bank of Canada currently maintaining the 5% policy rate, many hope this will be the peak in overnight rate changes. If so, homeowners and potential buyers will be granted some breathing room. We will find out more with their upcoming announcement on October 25th.

As we turn the corner into Fall and start looking ahead to the coming year, analysts are forecasting stronger housing markets. The expectation is that The Bank of Canada will gradually cut interest rates by mid-year, allowing potential buyers to better navigate their affordability.

As the housing supply shortage continues, new listings are likely to rise and provide much-needed new inventory. As we move into 2024 and start to see interest rates decrease, motivated sellers will move off the sidelines and housing demand is expected to be resilient.

For anyone who is thinking about purchasing this season, it is important to get pre-approved to guarantee your interest rate for 90-120 days while you shop the market. This way, you will avoid being impacted by potential rate changes and can properly estimate your budget for mortgage costs. Plus, pre-approval will indicate to the seller that you will not have issues obtaining financing (assuming nothing changes between now and the purchase with your job, savings, etc.), which is key during the current economic landscape.

To help you make the best decision possible, download the My Mortgage Toolbox app to determine what you can afford, and what your mortgage would look like at various interest rate levels.

I am also here to provide expert, unbiased advice to anyone with concerns, questions or wanting to get started on their pre-approval today!

2 Oct

Where in Canada are homes most affordable?

General

Posted by: Mike Hattim

Some regions are seeing much better housing affordability situations compared to others.

The erosion of housing affordability has accompanied decades-high interest rates and mounting inflation, but a new study by MetroVancouverHomeSource.com has found that some provinces are seeing their affordability situations fare much better than others, even in the current environment.

Aside from average home prices and income levels, the study took into account average food, public transport, and healthcare costs, as well as income taxes, to create what it described as a “Housing Purchase Index” that scored provinces in a 100-point scale based on the ease of saving for a home.

The report found that Newfoundland and Labrador (85.16 out of 100) was so far the easiest province to save for a new home, with a median household income of $57,410 and Canada’s second-lowest average prices of $291,806. The province also had the greatest number of private dwellings relative to its population (0.53 private homes per capita).

New Brunswick (66.48 out of 100) posted the lowest average home price of $289,785 along with the lowest medium annual income at $38,030. However, it was still considered the second most affordable housing market due to much lower living costs compared to other provinces.

Prince Edward Island (66.37 out of 100) came in close behind at third place with an average home price of $388,844 and a median annual income is $39,519. And while PEI currently has the lowest population across all Canadian provinces, it has the third highest number of private dwellings per capita at 0.49.

(source: MetroVancouverHomeSource.com)

Affordability crisis remains well entrenched

In a recent statement, Prime Minister Justin Trudeau has admitted that over the last few years, home prices have climbed “far too high” for most Canadians.

However, August data from the Canadian Real Estate Association showed that prices remain significantly elevated for most would-be buyers, with the actual non-seasonally adjusted national average home price going up by 2.1% annually to reach $650,140 last month.

The Liberal administration has begun introducing new measures that are pledging to improve affordability through the accelerated development of new housing, but the effects remain to be seen.

“House pricing cannot continue to go up,” Trudeau said. “We’re facing a shortage of housing right now and that’s why prices of homes have become far too high.”

Source CMP
By Ephraim Vecina