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.

Click here for the complete current issue of Market Watch in pdf file format.

Check out the housing market charts for historic comparison...

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)

HST Confusion...and Clarification

When exactly does HST come into effect for real estate transactions?

That's the problem. This is not exact science.

To clarify...

For Resale Homes

As of July 1st, buyers and sellers will pay 8 per cent more on legal fees, appraisals, real estate commissions, home inspection fees, and moving costs.

That's about $2,500 extra if you are selling a $600,000 home. And just over $4,000 on a $1 million dollar home.

Someone once told me not to take any money for granted, and a good way to look at things was by figuring out how much careless use of money was costing you in terms of wine.

THAT's a lot of wine folks.

And the government will still keep cutting...The HST will also apply to utility bills, such as gas, electricity and home heating fuel, on home renovation labour, the cost of lawn upkeep or landscaping and the cost of snow removal, which were all previously exempt from PST.

For New Homes

Before, new homes were exempt from PST. As of July 1st, new homes worth less than $400,000 will qualify for a 6% tax rebate, but new homes worth more than $500,000 will be subject to an additional 8% tax. Ouch. That's $40,000. Way to go Ontario for effectively squashing new home sales and development.

But wait! There's still time!

For those of you trying to take advantage of the 42 days or so before it applies, you have a bit more time on your side.

As per our broker, "If 90% or more of the services are performed before July 1st, HST will NOT apply. Most transactions written and firm before July 1st, 2010 can be assumed to be HST free."

Meaning, if you have a firm sale or purchase before July 1st, but the close date falls after July 1st, you can assume you will be HST free.

So if you are currently in the market to sell or buy, make sure you not only have an accepted offer, but make sure any conditions are removed prior to June 30th!!

I, for one will be planning not to sleep for the last week of June.

Cheers,
Mark

Get Dirty

With somewhat more permanently good weather, now is the time to get in the garden and get dirty.

To kick things off, check out some great plant sales in Toronto. Click the link for details...

Black Creek Pioneer Village - Doors Open Toronto Plant Sale
Saturday, May 29th to Sunday, May 30th

Sheridan Nurseries
Tuesday, May 18th to Monday, May 31st

Humber Nurseries
Monday, May 17th to Sunday, May 23rd


Once you've tackled the garden, don't forget the rest of your house. Here is our checklist for spring maintenance on your home.

- Check and clean or replace furnace, humidifier and air conditioning filters.

- Check air conditioning system and have serviced every two or three years.

- Check smoke, carbon monoxide and security alarms and replace batteries.

- Clean windows, screens and hardware, and replace storm windows with screens.

- Open valve to outside hose connection.

- Check your foundation walls for cracks, leaks or signs of moisture, and repair as required.

- Get your eaves troughs and downspouts cleaned and check for loose joints and secure attachment to your home and ensure water flows away from your foundation.

- Fertilize any young trees and plants that need encouragement.

- Get your front yard planters done - a sure sign spring is here.

And do what I do....leave for work when it's time to do the weeding :)

Cheers,
Mark

Crack Shack vs. Mansion

It's funny bit kind of scary. My wife scored 12 out of 16, but she is a ringer since she's from Vancouver. Comment below if you beat her!

CRACK SHACK VS. MANSION

April Market Watch

No matter how much the media tries to blow up the situation, the numbers are showing that the there is no bubble to burst, just a return to a more balanced market with greater inventory and movement.


There is no doubt that things will slow down in the latter half of 2010 but not the frightening cliff dive that the papers would have you believe, at least not in Toronto.

Again, caution to buyers who are shopping in the frenzy of multiple offers. I have pulled back many of my buyers from over-paying for properties.

We have a saying in our business that "someone just got buried" when we hear of multiples resulting in a price way over value.

Meaning, they won't be able to sell it for close the amount they paid if the market slows down even a touch and they won't see the typical gains in equity and value if the market rises. Net, net - they'll never get out of it...at least for a long time.

Not to mentioned the previously discussed major issue of not having the house appraise out.

The other saying is that "a home is worth what the market is willing to pay". I disagree.

Just because someone got silly and overpaid does not mean that is what the home is worth. They were just able to take advantage of buyers caught up in the frenzy, or buyers not doing their homework on the home's actual value.

The value proposition of a home is based on a careful evaluation of comparable properties that have sold in the same area in a recent period of time, i.e. 0-12 months, depending on the market conditions.

Do your home work and be patient - the right home will come :)

Cheers,
Mark

May 5, 2010 -- Greater Toronto REALTORS® reported 10,898 sales through the Multiple Listing Service® (MLS®) in April, representing a 34 per cent increase compared to April 2009. There were also 20,683 new listings in April – a 59 per cent annual increase. Both the sales and new listings results amounted to new records for the month of April under the current Toronto Real Estate Board (TREB) boundaries.

“The GTA resale market is functioning properly. Sales were high as buyers continued to take advantage of affordable home ownership opportunities. Listings grew as home owners reacted to strong sales and price growth,” said Toronto Real Estate Board President Tom Lebour. “More balanced market conditions will result in sustainable rates of annual price growth in the second half of 2010.”

The average price for April transactions was $437,600 – up 13 per cent compared to the average of $385,641 recorded in April 2009.

“Home sales continue to be driven by many different segments of the market, with sales growth for all major home types in both the City of Toronto and surrounding 905 regions,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. “Home sales will remain strong in the second half of 2010, but will slip from the current record pace as borrowing costs rise.”

Click here for the full April Toronto Real Estate Market Watch.