Friday, May 29, 2009

First Time Home Buyers Should be Prepared

Here is a good article warning first time home buyers of the extra costs involved in purchasing a home. All of the lenders that I deal with ask the borrower to prove that they have 1.5% of the purchase price in addition to their down payment. The lenders use this 1.5% as an estimate of closing costs. Lending institutions want to know that you have some money to pay for all the costs involved in closing a real estate transaction. So, when you are putting your down payment together keep in mind that you'll need to save an extra 1.5% in order to qualify for the mortgage.

First-time home buyers should be prepared, rather than surprised, by extra costs
TORONTO - First-time homebuyers are scouring the market for deals, hoping to take advantage of lower prices but real estate and mortgage experts caution that shoppers need to consider the wide array costs that come with buying a home - including ones that aren't immediately obvious.
They say it's part of a planning process that should start long before the house hunt begins.Dianne Usher, division vice-president for Royal LePage, says first-time buyers need to run through a checklist of the essential services that will add extra costs to their bottom line.
"Some of the costs that people tend to forget about, or are unaware of, are legal fees," she said."They're going to need a lawyer to search and confirm title to the property, physically close the transaction, to register and prepare any charge or mortgage documents.
"They're going to arrange for title insurance, which for some lawyers is an additional cost."Then there are other factors, like initial property deposits, which are part of down payments, Usher said. Those can increase up-front costs by as much as five per cent, she suggested.It's a confusing process for those who haven't done it before, which is why it's best to start planning early."When I get a client sitting down with me, we actually have a closing cost sheet," said Jeff Mayer, an agent at Mortgage Intelligence, a Toronto-area mortgage broker.He said making a detailed list helps potential buyers determine whether they can afford that dream home they always wanted, or if they should scale back their expectations to something more reasonably priced.
Mayer said his sheets break down monthly expenses and assess general affordability factors. He said he'll ask clients to determine their maximum, medium and "comfort level" mortgage approval."You want to look at the actual payment on that house, meaning the mortgage with mortgage insurance," he said."You want to look at what your average household costs are - meaning the heat, hydro, gas, maintenance on the property, and from there you want to see if that's something you can sleep with at night.""I always tell my clients to downgrade whatever they want to buy. So if they want to buy $500,000 buy $450,000.
"Usher said that homebuyers need to choose a knowledgeable local realtor with a good reputation."It's always good to choose a realtor that has been referred to you by somebody who has been pleased by their service," she said."In some major urban centres there is a higher level of activity than a suburb environment. Sometimes the buyers can get caught up in a frenzy and not do their homework."Once a deal is secured, and financing worked out, there can be other surprises along the way, Usher added."The physical cost of moving is often more than two cases of beer and five pizzas," she said.And "a resale unit may be untidy, so it might be necessary to arrange for some professional cleaning to be done.
"For new home buyers, the Ontario government plans to blend the federal GST with the provincial sales tax next year, which could significantly increase the final price.On new homes, where GST is already included, the tax harmonization will apply another eight per cent provincial tax to houses worth more than $500,000.
New homes worth under $400,000 will not face the additional tax, while those between $400,000 and $500,000 will pay the tax but get a rebate.However, Usher noted that there are some refunds for first-time homebuyers, including a provincial land transfer tax rebate of up to $2,000.In Toronto, where there is also a municipal land transfer tax, first-time buyers can get up to $3,725 back.Some provinces also offer "green incentive" rebates for energy efficient homes.

Friday, May 22, 2009

Regulations for Home Inspectors Near?

In an article recently posted in the Calgary Herald, the Alberta government is considering creating regulations for home inspectors. If regulation becomes a reality, Alberta will become the second province in Canada to do so. B.C. is the only province which licenses it's home inspectors.
Currently, in Alberta, there are no rules ensuring that an inspector is qualified to inspect the home. The province of Alberta is considering creating minimum training standards, liability insurance requirements and specific requirements on all inspection contracts.
Read the full article HERE.

Wednesday, May 20, 2009

CMHC sees home building decline in '09, slow rebound after

But the Crown corporation foresees no return to the lofty, pre-economic crisis level of 200,000-plus starts a year

Globe and Mail Update
May 19, 2009 at 2:57 PM EDT

OTTAWA — The days of Canadians clamouring for new houses won't return even after the economy resumes growth, according to the latest long-term forecast from the federal housing agency.
Canada Mortgage and Housing Corp. says housing starts are expected to decline to 141,900 this year – down from 211,056 last year, and a distinct contrast to several years seeing more than 200,000 new homes spring up.
Next year, building activity will rebound somewhat, with 150,300 new homes predicted to be going up.
“The outlook for the housing market is uncertain for the near term due, in large part, to continuing economic volatility,” CMHC says.
CMHC says housing starts are expected to decline to 141,900 this year – down from 211,056 last year.
But even when the economy turns positive again, housing starts will climb back only slowly, to reach 176,800 units by 2013.
“We do not expect housing starts to return to the 200,000-plus-unit pace of recent years,” the long-term outlook states. “Rather, housing starts will remain in a range that is consistent with demographic fundamentals over the 2010 to 2013 levels.”
That's not bad news, however. The frantic building of the past few years won't return because the downturn Canada's housing market is experiencing right now won't be so long and deep as to build up significant demand, CMHC explained. So when the economy improves, home builders won't have to jump into overdrive to meet the demand of hungry buyers.
Home prices and volume sales of existing homes are likely to follow similar trends, CMHC says.
The national average price for a home is projected to fall 6.8 per cent this year to $283,100 before stabilizing next year, CMHC predicted.
It sees the number of houses resold through the Multiple Listing Service declining to 357,800 units this year, from 433,990 in 2008, but increasing slightly next year to 386,100 units.
The CMHC forecasts are actually the midpoint of a wide range of expectations from the Crown corporation, reflecting the huge uncertainty about the direction of the Canadian economy, mortgage rates, employment and income.
CMHC's expectations for average home prices and the volume sales of existing homes are somewhat more pessimistic than projections made by the Canadian Real Estate Association last week.
CREA sees a 5.2-per-cent decline in the average home price in 2009. The association expects the number of homes sold to total 370,500 this year and 397,000 next year.
The CMHC projections are generally in line with forecasts from the private sector. While some economists see a deeper downturn in the housing market this year, most agree with CMHC that the market will stabilize by next year, and only gradually move back to housing activity that is consistent with long-term demographics.
Canada's growing population demands about 170,000 new homes a year. Given deterioration of old homes, the Canadian economy can sustain about 180,000 housing starts a year over the long term, said Pascal Gauthier, economist at Toronto-Dominion Bank.
He sees a much steeper drop in average home prices this year than CMHC because TD's outlook on the Canadian economy is gloomier than most. Like CMHC, however, he sees a slow recovery, but not a return to the days of more than 200,000 housing starts a year.
Housing market dynamics vary considerably by region.
Part of the reason for the feverish pace of home building in recent years was rampant demand in booming Western Canada, CMHC notes. Now, the West faces deeper declines in home construction than the rest of the country – although Ontario is also facing steep drops.
Across the country, housing starts are expected to decline 32.8 per cent this year, with a 53-per-cent drop in Alberta, a 42.5-per-cent slide in British Columbia and a 50.2-per-cent decline in Saskatchewan. Ontario's home construction activity is expected to be 31.6-per-cent lower this year than in 2008.
Next year, all provinces should see at least some increase in building activity, CMHC predicted, and nationally, home construction activity will pick up by a moderate 5.9 per cent.
For single detached homes, Saskatchewan and Ontario will see the biggest declines this year, while British Columbia and Alberta are expected to lead the rebound next year.
As for home prices, they will likely be stable in Atlantic Canada this year, but in decline everywhere else, especially in British Columbia and Alberta – where prices had risen the most in previous years.

Friday, May 8, 2009

Bond Rates

Have you been watching the bond market? If so, you might have noticed that the bond yield was at 1.82% last Friday and today it is 2.09%. The increase in bond yield is something to watch to get an indication of where rates are heading. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise.
Check the following link

Tuesday, May 5, 2009

April Market Stats

The Realtors Association of Edmonton just released their April market statistics. By the sound of it, things are sitting pretty here in Edmonton. There were more properties sold in Edmonton this April than April of 2008. Not to mention, the average sale price is only down by 7.40% when compared to April of 2008. I'm happy to see that Edmontonians aren't buying into all the doom and gloom projected by the media!

Here's an excerpt from today's news release:
The average* price of single family homes in the Edmonton area was up 1% from March but, at $353,386, was still 8.5% below the last April price of $386,033. Condo prices were up 2.4% from last month to $236,020 while duplex/rowhouse prices were up 5.2% at $291,068.
“Increased sales activity is evident in most real estate offices and some REALTORS® are reporting multiple offers on select properties,” said Charlie Ponde, president of the REALTORS® Association of Edmonton. “However, inventory is still relatively high and sellers should price their properties aggressively to attract offers.”
“REALTORS® are optimistic about the Edmonton market,” said Ponde. “In-migration figures are positive, retail sales in Alberta are still higher than the rest of the country and unemployment figures are lower than other parts of Canada. First-time buyers are entering the market because of historically low interest rates and renovation incentives are encouraging move-up buyers to consider relocation.”

Friday, May 1, 2009

CAAMP's May Statistics

Here's the May 2009 edition of the CAAMP statistics. CAAMP (Canadian Association of Accredited Mortgage Professionals) is a national association and publishes this great statistics page every month which shows a quick overview of the real estate market across Canada. The stats include a one year history of the Bank of Canada rate announcements, Government of Canada bond rates, total new housing starts across the country (compared to one year ago) as well as the change in Canadian house prices in each major city over the last year.If you want to stay on top of the real estate market this is a great resource!Review CAAMP's statistics HERE.