May 26, 2015
Mortgages: Looking Beyond Negative Financial Headlines
Canadian mortgages in arrears (homeowners who have gone 3 or more consecutive months without making a payment) have been and are extremely low. They are historically less than 0.5% (actually Canada’s current average sits at 0.29%, Ontario sits at 0.18%, with Alberta at 0.27%!) Even through the most recent couple of 'financial crises', there was no blip in this number.
This is a tiny fraction of the US statistic; however, common opinion leads us to believe otherwise. There are a number of fundamental differences between the two countries' banking and mortgage lending systems. One difference is that most mortgages in the US are 'non-recourse', meaning you can walk away from your house and owe nothing beyond that asset's worth. In Canada, you are liable for the entire debt, and this is a great incentive to do everything possible to make that mortgage payment.
Canadian mortgage lenders are prudent; their goal is not be stuck with a property. Banks are not in the property ownership and management business, so it is in their best interest to make sure borrowers can make their mortgage payments. Mortgage default insurance facilitates lenders to make more risk-based decisions, opening up the mortgage lending market to more consumers (including rental property, which is always viewed as more risky since it is assumed an owner will pay for their own housing first before covering the payment on a home they do not reside in). If a consumer falls into temporary financial hardship, there are assistance programs available from the mortgage insurers, with the goal of avoiding a default and lender having to take over the property.
Canadians with mortgages have significant equity in their home, averaging about 74% of the home's value. In addition to that, a 2014 survey found that 16% of mortgage holders have increased their mortgage payments, and 16% made an additional lump sum payment in the last year. From the headlines, you would think an epidemic has swept across our country with low-equity home ownership being the norm.
Canadians, in general, are conservative with their money and the statistics show many are sitting on a healthy amount of wealth. Naturally, there is the demographic at the beginning stages of their home ownership journey who have lower equity. However, there a many mortgage regulations in place designed to qualify these applicants accordingly, along with mandatory mortgage default insurance for those with low down payments.
There is much discussion today about how hard it is for first time homebuyers to qualify for a mortgage, due to these regulations which have become increasingly more strict, so it is plausible the government may realize the effects of their decisions and loosen up the reins in order to maintain balance in the housing market and economy.
Another statistic demonstrating that Canadians, overall, are conservative with their money is that 60% of Canadians pay off their credit card balance in full each month, avoiding credit card and interest payments altogether. The truth is, no matter how many rules and regulations are implemented, there will always be financially irresponsible people. The headlines like to focus on this group, and regulatory decisions appear to be swayed by these sentiments, lumping everyone into the same category, including savvy real estate investors who understand how to manage debt responsibly.
In conclusion, headlines are designed to sell. Not everything is perfect and positive all the time, but it certainly isn't the constant doom and gloom we read about. The messages in the headlines are often inconsistent; one day something is up, and the next day it is down. A savvy investor knows to look beyond the headlines, not get swept up emotionally, dig deeper, filter out the irrelevant chatter and figure out what really applies to them.
(Reference sources: Canadian Mortgage and Housing Corporation, Canadian Association of Accredited Mortgage Professionals, Canada Bankers Association, Bank of Canada)
If you are planning to buy a house in Whitby or Brooklin or other areas within Durham Region, contact me. I can help you with the buying process and refer you to a mortgage specialist that can explain the products and help you choose the right mortgage product. Let me help you every step of the way!
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby
May 19, 2015
CREA: Canadian home sales rose 2.3% from March to April
According to the Canadian Real Estate Association (CREA), the average sale price for an existing home in Canada rose 9.5 per cent, year-over-year, to $448,862 in April. Excluding the two major cities, Vancouver and Toronto, the increase was much more modest at 3.4 per cent to $339,893.
The number of home sales processed through the MLS® Systems of Canadian real estate Boards and Associations rose 2.3 per cent in April 2015 compared to March. This marks the third consecutive month-over-month increase and raises national activity back to where it was during most of the second half of last year.
April sales were up from the previous month in two-thirds of all local markets, led by the Greater Toronto Area, the surrounding Golden Horseshoe region, and Montreal.
“In recent years, the seasonal pattern for home sales and listings has become amplified in places where listings are in short supply relative to demand,” said Gregory Klump, CREA’s Chief Economist. “This particularly stands out in and around Toronto. Sellers there have increasingly delayed listing their home until spring. Once listed, it sells fairly quickly. Sales over the year as a whole in Southern Ontario are likely being constrained to some degree by a short supply of single family homes. However, the busy spring home buying and selling season has become that much busier as a result of sellers waiting until winter has faded before listing.”
Actual (not seasonally adjusted) activity in April stood 10.0 per cent above levels reported in April 2014. This marks just the third time ever that sales during the month of April topped 50,000 transactions.
Sales were up on a year-over-year basis in about 70 per cent of all local markets, led by activity in the Lower Mainland of British Columbia, Greater Toronto, and Montreal. Of the 18 local markets that set new records for the month of April, all but two are in Southern Ontario.
The number of newly listed homes was virtually unchanged (+0.1 per cent) in April compared to March. Below the surface, new supply rose in almost two thirds of all local markets, led by a big rebound in Halifax-Dartmouth following a sharp drop in March. This was offset by declines in Greater Vancouver, Victoria, and the Okanagan Region, as well as by a continuing pullback in new supply in Calgary. New listings in Calgary have dropped by one-third from their multi-year high at the end of last year to their current multi-year low.
The national sales-to-new listings ratio was 55.3 per cent in April, up from 50.4 per cent three months earlier as the ratio has steadily risen along with sales so far this year.
A sales-to-new listings ratio between 40 and 60 per cent is generally consistent with balanced housing market conditions, with readings above and below this range indicating sellers’ and buyers’ markets respectively. The ratio was within this range in the majority of local housing markets in April.
The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.
There were 5.9 months of inventory on a national basis at the end of April 2015, down from 6.1 months in March and 6.5 months at the end of January when it reached the highest level in nearly two years. While the sales-to-new listings ratio and months of inventory measures of market balance indicate that the housing market has tightened on a national basis over the past few months, both measures remain firmly entrenched in balanced market territory.
The Aggregate Composite MLS® HPI rose by 4.97 per cent on a year-over-year basis in April, on par with the 4.95 per cent year-over-year gain recorded in March.
Year-over-year price growth accelerated in April for apartment units and two-storey single family homes, while decelerating for townhouse/row units and one-storey single family homes.
Single family home sales continue to post the biggest year-over-year price gains (+5.84 per cent), led by two-storey single family homes (+6.89 per cent). By comparison, the rise in selling prices was more modest for one-storey single family homes (+4.20 per cent), townhouse/row units (+3.87 per cent), and apartment units (+2.60 per cent).
Full article & statistics: Click HERE!
Contact me for information about the housing market in Durham Region!
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby
April 30, 2015
No risk of ‘bubble,’ Poloz says of Canada’s bloated housing market
According to The Globe and Mail the Bank of Canada’s top brass assured a parliamentary committee that Canada’s bloated housing market has not become a risky asset bubble, despite the central bank’s own calculation that house prices nationwide are roughly 20 per cent overvalued.
“We don’t believe we’re in a bubble,” Bank of Canada Governor Stephen Poloz said in testimony Tuesday to the House of Commons Standing Committee on Finance. He said Canada’s long-running boom in the housing market hasn’t been underpinned by the kind of rampant speculative buying that is the hallmark of an asset bubble.
“Our housing construction has stayed very much in line with our estimates of demographic demand,” he said. “There’s no excess.”
This despite the central bank’s own estimate, published last December in its Financial System Review, that Canada’s housing market is overpriced by between 10 and 30 per cent.
Mr. Poloz indicated that he believes the overvaluation is not a symptom of runaway prices and widespread investor speculation, but rather of ongoing strength in consumer demand spurred by historically low interest rates – rates that were cut by the central bank in order to keep consumer demand buoyant to support Canada’s economy during the Great Recession.
“This is one of the by-products of what we’ve been through. It’s not something that happened simply by itself,” he said. “It would be very unusual to have that and not have a degree of overvaluation.”
Mr. Poloz added that the overvaluation doesn’t necessarily mean the market is in need of a 10-to-30-per-cent downturn to bring it back into balance. He said that rising incomes as the economy gains momentum could help close the affordability gap, without a sharp drop in home values.
“We believe that as the fundamentals catch up with it, it will be sustained,” he said.
Senior Deputy Governor Carolyn Wilkins added that the central bank still believes Canada’s overall housing market is “headed for a soft landing,” despite the sudden oil-shock upheaval that threatens considerable instability in Alberta’s until-recently booming housing sector.
“We’re not expecting whatever transpires in Alberta to create spillovers that, from a financial stability standpoint, would be worrisome for the rest of Canada.”
Mr. Poloz also defended the Bank of Canada’s surprise cut of its key interest rate in January, which critics fear may exacerbate Canadian households’ already hyper-extended mortgage and debt loads.
“On the surface, lower interest rates would be expected to promote more borrowing, which would increase this vulnerability,” he said in his opening statement to the committee. “However, in the near term, lower borrowing rates will actually mitigate this risk, by reducing payments for mortgage holders and giving us more economic growth and employment gains.”
“We believe that the best contribution the Bank can make to lowering financial stability risks through time is to help the economy return to full capacity and stable inflation sooner, rather than later.”
Mr. Poloz added that he believes the January rate cut, which reduced the bank’s key rate to 0.75 per cent from 1.00 per cent, is doing its job in helping the Canadian economy weather the effects of the oil shock – although he admitted that the evidence of the cut’s impact “is thin at this stage.”
“The evidence we have at present would be primarily in the export sector,” he said, where the resulting decline in the Canadian dollar has been boosting exporters’ Canadian-dollar cash flow and improving their price competitiveness in export markets.
Source: Bank of Canada's Poloz dispels speculation of housing bubble by DAVID PARKINSON, The Globe and Mail
For more insight into the housing market within Durham Region, the Whitby real estate market, or the Brooklin real estate market, contact me. If you are an existing homeowner and are thinking about a, move, I can tell you what your house or condo is worth in today’s marketplace.
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby
January 15, 2015
Be Careful What You Sign: Disclosure and Latent Defect
I found an article by Christopher Seepe on REMonline.com that might interest you:
"On the issue of disclosure and latent defects, an Ontario Small Claims Court judge recently awarded a ruling in favour of a buyer who alleged that the seller had not disclosed a defect that had repeatedly occurred over many years prior to the seller selling the property.
The buyer purchased a three-storey 40-year-old apartment building in Durham Region in April 2011 from the seller. In January 2014, tenants reported substantial deterioration of in-suite walls. Water had entered into the plaster walls and swelled like boils.
The buyer also found several areas of uncharacteristic white stains on the external brick walls. As water moves through brick, it can pick up salt that is not bound as part of the brick. The salty water that evaporates at the brick’s surface leaves behind a white flakey-looking deposit called efflorescence.
Specialists determined that the cause was condensation forming between the walls, a problem common with buildings built before vapour barriers were mandated in the building code. The buyer then learned from a long-term tenant that the wall problems were a regularly recurring event. The tenant swore an affidavit that was admitted into evidence in the trial.
The Agreement of Purchase and Sale (APS) included a clause, “The seller states that, to the best of the seller’s knowledge and belief, there is no known damage to the basement, roof, or elsewhere in or on the property caused by water seepage or flooding.”
The Ontario Limitations Act (2002) generally states caveat emptor – “buyer beware.” A buyer can only file a claim of defect within two years from the date of purchase, with generally no recourse after that. However, the act differentiates between two types of defects:
A “patent” defect is one that can be discovered by observation (“obviousness”) or inspection using generally accepted industry-standard practices.
A “latent” defect is one that is present but is not obvious, visible, apparent or actualized and can’t be discovered by industry-standard inspection practices.
A seller has no obligation to disclose a defect that is obvious, such as a clearly-visible water-soaked crack in a foundation wall. The buyer must also be able to prove that the seller knew about the latent defect. If the defect is proved to have existed prior to selling the property but the seller didn’t know about it (perhaps the defect didn’t appear while the seller owned the property), then the seller can’t be held liable, even innocently.
In the trial discussed above, the tenant’s affidavit strengthened the buyer’s case. The judge determined the seller knew, or ought to have known, that there was recurring water damage caused by an untreated defect in the property. The judge stated he “sympathized with the defendant” but the defendant clearly breached the “no water damage” clause in the fully-executed APS.
The small claims court can’t award punitive damages, and “betterment” costs are excluded – that is, repairs that improved the property. For example, if the original roof was 10 years old with a 20-year life expectancy, the court might rule that the buyer received a betterment of 10 years and then award only half the new roof’s cost. The buyer was also not permitted to recover personal expenses related to attending meetings, overseeing repairs and travel. Presumably this is because the value of one’s time is highly subjective and would inevitably be contested. It could also be a source of considerable abuse in inflating costs.
There are several cases in law regarding the responsibility of disclosure and latent defects: McGrath v. MacLean (1979), Krawchuck v. Scherbak (2011) and Dennis v. Gray (2011).
In Krawchuck v. Scherbak, the real estate agent was found to be 50 per cent at fault for their lack of diligence in reconciling misleading statements made by their client, failing to inform their client of the implications of their false statements and failing to bring these issues to the attention of the purchaser.
In a decision released in May 2014, a deputy Judge of the Barrie (Ontario) Small Claims Court said in his judgement that a seller must disclose to the buyer anything they know about a defect that has caused any loss of use or enjoyment of a meaningful part of the premises.
Since the case of McLean v. MacGrath, and in light of Dennis v. Gray, the principle of caveat emptor appears to be either becoming more specifically defined or more exceptions are occurring. The evolving principle appears to be that if a seller properly discloses an actual or perceived defect in a property, then this should protect them from the risk of litigation and the accusation that the seller didn’t comply with their duty to disclose. Perhaps this will mean the seller has to provide a price discount or perhaps it will lead to sellers pricing their properties as they should have been in the first place. Either way, it’ll still likely be less expensive that settling a court action."
Purchasing or selling real estate is a complex process and every element of the transaction is best handled by an experienced professional. Don’t take chances, go with proven results and experience. With 25 years of full-time local service in Whitby, Brooklin, Ajax, Pickering, Oshawa, Courtice and Bowmanville, I can make your purchase or selling worry-free. Contact me today!
Broker of Record
Royal Heritage Realty Ltd.
Offices in Pickering and in Whitby
December 2, 2014
5 things to know about disclosure and disclaimer clauses
The basement floods after closing. Can the buyer sue the seller? The agreement contained wrong information about the property dimensions but also included a disclaimer clause. Can the buyer sue if there is a problem after closing? Do you need to disclose a murder that occurred in a home? These are not simple questions, but if you remember the following principles, you should be able to understand the law.
Here are 5 key lessons to remember:
1. When there is a flood after closing, the buyer will have to prove that the seller knew about this defect and that it was serious or else that the seller actively concealed the defect from the buyer. It will also depend on whether the buyer conducted a home inspection and in the case of basement water, whether the seller actually finished the basement themselves. A buyer will have to prove that the seller must have known about the problem during their ownership. Buyers will have to take pictures of the damage and bring in an experienced contractor who will be able to look at the damage and then give an expert opinion, in court if necessary, that the seller either must have known about the problem or did work behind the walls to conceal the problem. If the buyer cannot prove this, they will likely not be successful.
2. The defect must make the property uninhabitable or dangerous. This means that the defect must be so serious that the buyer may not be able to continue living in the property. This would include a foundation problem. It is not clear if this would include a disclosure that the property was previously used as a grow op, as it would depend on the extent of the operation and whether it was actually remedied according to accepted industry standards. It would also depend on whether the buyer could obtain insurance for the property. Suffice to say that if the seller does not disclose a minor basement leak, the buyer will not be successful suing about it after closing.
3. The law is not settled as to whether a seller needs to disclose a property stigma, whether it is a murder, suicide or neighbourhood condition, such as a pedophile who lives next door. Most appraisers will tell you that this will affect a property's value. However, it will still be hard to prove that this stigma would make the home uninhabitable and this is why many lawyers will tell you that you do not have to disclose property stigmas.
4. If you advertise the boundaries of a property in a listing, can the buyer get damages or get out of the deal if it turns out the boundaries are incorrect? Will it make a difference if there is a disclaimer clause in the offer itself, saying that the information, while believed to be correct, is not guaranteed and should not be relied upon without independent verification? In most cases, if the disclaimer is there, the buyer will not be able to sue the seller for any damages and will need to make sure that they do their own proper due diligence in advance. The lesson for any buyer is to make sure that if there is a disclaimer present, that you check a survey of the property or make the deal conditional on your own independent verification of all boundary lines.
5. If you have any concerns about disclosure, ask the sellers point blank if they have had any water in the basement, murders or grow houses on the property in the past, or insert a clause to this effect in your offer. The sellers then have to respond truthfully. Speak to the neighbours and ask if any repairs were done at the property during the past year or whether there are any other issues with the property that you should know about. Also ask the neighbours about anything peculiar going on in the neighbourhood, including asking about the neighbours on either side of the property you are interested in buying. A major reason sellers sell a home is simply to get away from a neighbour.
When you understand the rules about disclosure and properly protect yourself, you should be able to minimize any problems that could arise after closing.
By Mark Weisleder, a Toronto lawyer, author, course developer and public speaker for the real estate industry
Broker of Record
Royal Heritage Realty Ltd., Brokerage
November 4, 2014
Canadian Market News: From west to east, a look at projected house price gains across Canada
Home sales, prices to rise
Canada Mortgage and Housing Corp. has released a new report with everything you could possibly want to know about projected sales and prices across the country, forecasting a “steady” showing nationwide next year, followed by “some moderation” in 2016.
Housing starts in Canada, it predicted today, will range next year from 172,800 to 204,000, and in 2016 from 168,000 to 205,800.
Resales next year will come in between 457,000 and 507,300, and in 2016 between 448,000 and 508,000.
Prices are particularly interesting.
Average prices this year, which, of course, differ widely across Canada, are expected to range from $401,600 to $405,400, which means a so-called point forecast of $404,800.
Next year, according to CMHC, prices will be between $403,600 and $417,800, for an increase in the point measure to $410,600.
Then in 2016, expect prices to range between $407,300 and $424,500, or a point forecast of $417,300.
West to east, here’s what CMHC forecasts in terms of average prices:
- British Columbia: Average resale price to rise to $566,300 in 2015 and $573,000 in 2016.
- Alberta: Average to rise to $407,800 and $417,500.
- Saskatchewan: Average to rise to $303,000 and $309,300.
- Manitoba: Average to rise to $272,600 and $278,800.
- Ontario: Average to rise to $435,900 and $443,800.
- Quebec: Average to rise $270,800 and $276,600.
- New Brunswick: Average to dip to $161,500 and $161,000.
- Nova Scotia: Average to rise to $216,000 and $217,000.
- Prince Edward Island: Average to slip to $157,000 in both years.
- Newfoundland and Labrador: Average to rise to $294,000 and $298,000.
These findings, of course, mask the wide ranges from city to city, which CMHC also looked at.
For example, the average in Calgary, forecast to jump 5 per cent this year to $459,000, should rise further, to $472,000 in 2015 and $483,000 a year later.
Source: By MICHAEL BABAD, The Globe and Mail,
Re/Max Rouge River Realty Ltd., Brokerage
905-668-1800 or 905-427-1400