Markets - A Slight Chill

May Sales Remain High

June 3, 2010 -- Greater Toronto REALTORS® reported 9,470 sales through the Multiple Listing Service® (MLS®) in May, representing a one per cent dip from May 2009. In comparison to previous years, this was the third highest May sales result on record.

“The pace of transactions slowed in May following record-setting sales in February, March and April,” said Toronto Real Estate Board President Tom Lebour. “Buyers who otherwise would have been purchasing a home in May moved more quickly this year, likely to get ahead of mortgage rate hikes.”

New listings were up 38 per cent annually to 18,940. The average price for May transactions was $446,593 – up 13 per cent compared to the average of $395,609 recorded in May 2009.

“The gap between listings and sales has widened, which means there is more choice for buyers,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. “The annual rate of price growth will slow in the second half of 2010, from the current double digit pace into the single digits.”

Median Price
In May, the median price was $376,750, from the $337,000 recorded during May of 2009.

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Mortgages - Answers in June!

Scott's Perspective

by Scott Westlake
Mobile Mortgage Specialist - Royal Bank of Canada
Cell: 416.436.1135
scott.westlake@rbc.com

June is becoming a very exiting month for real estate in Toronto/GTA. It seems like everyone has been waiting to see where the market is going in terms of interest rates, which I comment on below, how HST will affect the average home buyer. How government changes will affect clients purchasing real estate and lastly how the market will react to the above noted changes.

June has finally brought some answers. The seemingly “never ending” interest changes in the fixed market has slowed down, and in fact, on some terms slightly decreased since the initial hike on all fixed products.

The seemly unsettling feeling for all variable clients was at least for the time being put at ease with only a 25bps interest rate increase. HST publications are everywhere and a simple internet search will easily provide more than enough information to understand the potential impacts on the real estate industry.

The government changes have not seemed to impact the average client and/or slow down those purchasing real estate. The new standards have just seemed, at least initially, to ensure Canadians are purchasing within their means and ideally this will lead to a more solid real estate market, keeping prices in line and creating a better economic landscape protecting all of our investments.

This month I read a bunch of articles as always to keep myself informed and have attached two that I find a good read. Please see, “Canadians purchasing recreational properties,” which I find a good read. This really shows the strength of Canadian real estate and how we are reacting to adversity.

Purchasing recreational properties tends to be something you only do in a “great market,” or when times are perfect. Despite some set backs in our market, Canadians are purchasing real estate for recreational use. The second article is a market update from CMHC. Please visit their website for additional information, http://www.cmhc-schl.gc.ca/en/

As always, I am here to help all my clients, contacts and friends alike. If you or anyone you know is looking for the right advise and help either getting into their dream home, investment property or even is looking to switch their mortgage, please email or call me anytime! Scott.westlake@rbc.com

Sincerely and happy home buying,

W. Scott Westlake

RBC Mortgage Specialist

Canada becomes first country in G7 to hike rates

A report from the Canadian Real Estate Association talks about the bank rate increases from a global perspective...

For the first time since 2007, the Bank of Canada raised its target for the overnight rate by one quarter of one percentage point to 0.5 per cent on June 1, 2010. The Bank rate was raised to 0.75 per cent and the deposit rate was unchanged at 0.25 per cent, thereby re-establishing the normal operating band of 50 basis points.

The Bank had been keeping its benchmark interest rate at the lowest possible level for more than a year to stimulate the fragile economic recovery.

The Bank noted that while that global economic recovery is well under way, it is unfolding unevenly on a global basis. It characterized the ongoing imbalances as “strong momentum in emerging market economies,” and “some consolidation of the recovery in… industrialized economies,” counterbalanced by the “possibility of renewed weakness in Europe.”

The Bank keyed in on current volatility in the European markets as the largest downside risk to global economic growth saying, “Recent tensions in Europe are likely to result in higher borrowing costs and more rapid tightening of fiscal policy in some countries.”
The Bank noted that spillover into Canada from events in Europe has resulted in a modest decline in commodity prices and some tightening in financial conditions.

The Bank downplayed slightly stronger than expected inflation and economic growth saying, “CPI inflation has been in line with the Bank’s April projections,” and “activity in Canada is unfolding largely as expected.” It also played up the idea that consumer spending would soon subside: “Going forward, household spending is expected to decelerate to a pace more consistent with income growth.”

As of June 1st, the advertised five-year conventional mortgage rate stood at 5.99 per cent. This is down 0.66 per cent from one year earlier, but stands 0.14 per cent above where it stood when the Bank made its previous interest rate announcement on April 20, 2010. It is also one half of a percentage point above where it stood at the beginning of the year.

“The Bank left its options open as to whether it will raise rates again when it makes its next interest rate announcement on July 20th,” said CREA Chief Economist Gregory Klump. “I expect it will raise rates by another quarter of a percentage point at that time, but will take a pause at some point later this year, especially since interest rates in the U.S. are likely on hold until next year.”

“Even though they are on the rise, mortgage rates will still be at low levels that are housing market friendly, with home financing remaining within reach for many homebuyers,” he added.

The Bank will make its next scheduled announcement on July 20th.

http://creastats.crea.ca/natl/interest_rate_trends.htm

(CREA 06/01/2010)