Tan•gazine June 2011 Vol 1 Issue 9

Tan.gazine June 2011 Volume 01 Issue 09

Habitual Refinancers Facing Forced Listings >> Page 6

Sales & Prices Increase in May >> Page 7

Royal LePage

Rate of Home Price Appreciation Stabilizes after Post-Recession Recovery

Home values continue to rise

>> Page 3

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The latest CHMC consumer survey is offering eat-what-you-kill brokers a cautionary tale on customer follow-up – or the lack thereof.

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Tan.gazine

News

Rate of Home Price Appreciation Stabilizes after Post-Recession Recovery

Home values continue to rise Royal LePage

June 2011

According to the Royal LePage House Price Survey release in April, the average price of a home in Canada increased between 3.5 and 4.3 per cent in the first quarter of 2011, compared to the previous year, as markets continued their post-recession recovery. While the rate of year-over-year price appreciation slowed slightly in the first quarter, home values continued the upward climb, which first began late in the second quarter of 2009.

Low interest rates and a recovering economy continued to fuel activity in Canada's housing markets over the past year, which has led to country-wide increases in average home prices. In the first quarter of 2011, the national average price of a detached bungalow rose 4.3 per cent year-over-year to $341,355, while standard two-storey homes rose 3.5 per cent to $379,388 and standard condominiums rose 4 per cent to $237,919.

"The rate at which Canadian homes are appreciating may well have peaked for the next year or so," said Phil Soper, president and chief executive of Royal LePage Real Estate Services.

"We expect house prices will continue to creep up, but most of the excess demand created by the initial drop in interest rates has been satisfied, and affordability continues to erode slowly, allowing the listings supply to catch up. In most markets, lower single digit percentage increases are more likely for the balance of the year."

In the first quarter of 2011, certain markets such as Vancouver, Montreal and Halifax continued to experience significant price gains compared to the same period a year earlier, largely due to favourable regional demographic shifts and healthy local economies.

"Canada's real estate market has maintained momentum coming out of 2010, indicating that the post-recession recovery is continuing," Soper added. "While low interest rates continue to drive demand, the tepid pace at which employment levels are improving is tempering the rate of home price appreciation in many Canadian cities. The exception to this trend can be seen in markets like Vancouver, where foreign buyers, particularly from China, are driving demand in select mid-to-high priced markets, and driving up the regional average reported home prices at a surprising pace. In Montreal and Halifax, demand from first-time buyers and purchasers of luxury homes are creating significant year-over-year gains in home values."

Full results from the Royal LePage House Price Survey of Canadian House Prices can be found at www.royallepage.ca.

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Survey of Canadian Average House Prices in the First Quarter 2011

Average house prices are based on an average of all sub-markets examined in the area, except for the smaller markets of Charlottetown, Moncton, Fredericton, Saint John and Victoria.

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Tan.gazineNews Broker: Vernon Clement Jones June, 2011

“ ” Habitual Refinancers

facing forced listings

There's strong indication new mortgage rules have begun to cull the number of “habitual refinancers” said one 20-year veteran of the broker industry, suggesting a spike in the number of forced listings should soon follow.

“Among our team of six brokers, we’re seeing about three to four clients a month who we would identify as habitual refinancers – meaning they typically have refinanced their credit card debt back into their mortgages every two years,” Bob Smith, broker/owner for Verico K-W Mortgage, told MortgageBrokerNews.ca. “But what we’re seeing now is that those clients are now finding that they can no longer do that.”

For that group, frustration is setting in as they watch their disposable income shrink and are forced to use more of their income to service debt. Compounding that discomfort, said Smith, is “each transaction has added to their principal with an increased insurance premium, which has whittled away at their equity. It means that with a forced listing, they will have little or no equity available to downsize after legal and selling expenses.”

Smith is one for the first brokers to identify a phenomenon many saw coming when the Central Bank announced it would lower the loan-to-value ceiling on refinances to 85 per cent from 90, among other key changes.

The move took effect on March 18, exactly 11 months after Ottawa made another clawback of five percentage points, dropping the maximum LTV from 95 per cent to 90.

Finance Minister Jim Flaherty has rationalized the narrower constraints for CMHC-insured mortgages as the best way of discouraging Canadians from using their homes as ATMs. Smith largely agrees. He’s not alone, although some brokers are concerned the policy change has placed undue pressure on homeowners now vulnerable to losing their homes.

“I don’t think that the new refi rules are good, at least not across the board in that the difference between accessing a LTV of 85 instead of 90 per cent may force someone who is in a tough situation through no fault of their own out of their home,” said Curtis Cannon, a sub-mortgage broker with TMG The Mortgage Group in Prince George, B.C. Cannon would have liked to see the government afford insurers some level of discretion, making exceptions to the rule in deserving cases such as spousal buyout and injury or death.

“What may have been more effective as for the government to place limits on credit card interest and force the credit card companies to do better underwriting to minimize default,” Cannon told MortgageBrokerNews.ca.

Still, Smith is convinced brokers will see more forced listings across most markets, even in his relatively buoyant Kitchener-Waterloo.

“I’ve lived through five recessions,” he told MortgageBrokerNews.ca. “The one in the early 90s was the worst, this time around, at least, interest rates were low.”

CMHC: Clients harder to pry loose of the banks June, 2011

“Over two-thirds of mortgage consumers, who had been contacted by their lender or broker since their most recent mortgage transaction, completely agreed that they would contact the same lender or broker for advice on future mortgage needs,” reads the 2011 Mortgage Consumer Survey, released by the Crown corporation this week. That’s compared to the less than 50 per cent of those who had not been contacted.

government this spring in an attempt to discourage Canadians from using their “homes like ATMs.” Broker efforts to help borrowers renew outside their bank in order to access better rates and terms have also been frustrated as banks become increasingly aggressive. Some, especially in the hyper-competitive Vancouver market, are now willing to eat penalties for clients threatening premature closings in order to go with a broker-arranged mortgage.

It’s a similar story for clients deciding whether to use the same broker or lender for their next mortgage, and for the likelihood of referring that mortgage professional or lender to a family member or friend.

The CMHC survey is backing up broker complaints about how tough it is to win over those clients as well as new homebuyers increasingly inclined to stay with their banks.

The message, the result of a February polling of more than 2,000 recent mortgage consumers, comes as an increasing number of brokers are falling back on refis and other secondary mortgage transactions to make up for a decreasing number of new purchases across key Canadian markets. But accessing even that business is being challenged by new loan-to-value maximums of 85 per cent, brought in by the federal

“An increase in loyalty among the purchaser segments was observed this year,” reads the report. “Just over half (57 per cent) of first-time buyers took out their mortgage with the institution they were dealing with at the time (up from 46 per cent last year), while 69 per cent of repeat buyers did not change lenders when obtaining their most recent mortgage (up from 58 per cent last year).”

Sales and Price Increase in May In May, the median price was $400,000, from the $376,750 recorded during May of 2010 TORONTO - June 3, 2011 Greater Toronto REALTORS® reported 10,046 sales in May 2011 – up six per cent compared to May 2010. This result was the second best on record for May under the current Toronto Real Estate Board service area. The number of new listings in May, at 16,076, was down 15 per cent compared to last year.

“Positive economic news and low borrowing costs led to strong sales through the first five months of the year, including the increase in May,” said Toronto Real Estate Board President Bill Johnston. “At the same time, the market has become much tighter compared to last year, due to a substantial dip in new listings.”

Homes were on the market for an average of 23 days and sold for an average price of $485,520 up nine per cent compared to $446,593 in May 2010. The strongest rate of price growth was experienced for single-detached homes sold in the City of Toronto.

“We have seen clear-cut seller’s market conditions emerge over the past two to three months,” explained Jason Mercer, TREB’s Senior Manager of Market Analysis. “The robust price appreciation that we have seen will hopefully prompt more households to list, resulting in a more balanced market later this year,” continued Mercer.

Tan.gazineNews

The latest CHMC consumer survey is offering eat-what-you-kill brokers a cautionary tale on customer follow-up – or the lack thereof.

Tan.gazineNews

June, 2011

Greater Toronto REALTORS® Report June Mid-Month Resale Housing Market Figures Greater Toronto REALTORS® Report June Mid-Month Resale Housing Market Figures TORONTO, June 16, 2011 – The number of sales and the average selling price reported by Greater Toronto REALTORS® were both up during the first 14 days of June 2011. Sales through the first two weeks of June amounted to 4,787 – up 16 per cent over the same period in 2010. The average selling price for these transactions, at $477,853, was up nine per cent.

“The spring has always been the busiest time in the resale market, but the results for May and the first two weeks of June represented a marked improvement over last year. Low mortgage rates have kept affordability in check and buyers have felt confident in paying for a home over the long term,” said Toronto Real Estate Board (TREB) President Bill Johnston.

The number of new listings on the TorontoMLS® between June 1st and June 14th was down by eight per cent compared to 2010.

“Listings have been in short supply this year, while a lot of people have been looking to buy. The result has been enhanced competition between buyers and more upward pressure on price,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. “Strong price growth will prompt more home owners to list as we move toward 2012.”

Peng

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Summary of June Sales & Average Price June 1st to June 14th

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Happy Canada Day!

CanaTan 2011 Cancellation Notice It is our regret that we will be passing this year's CanaTan and resuming once again in 2012. In lieu of the situation however, Tan and the Tan Team will be making a donation on the behalf of their valued clients and in spirit of Canada day to the Royal LePage Shelter Foundation. A Foundation that helps woman and children each and every day sheltering them from abuse and violence.

Friday, July 01, 2011

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