Monthly Archives: March 2014

The mortgage rate wars

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Why did Bank of Montreal risk a (verbal) slap from Finance Minister Joe Oliver for daring to chop its five-year mortgage rate below 3%?

Because they knew the mortgage war is going to be different this time.

On previous occasions when the banks publicized rates below the government’s favoured minimum, they found themselves on the receiving end of angry calls from Mr. Oliver’s predecessor, Jim Flaherty, who resigned on March 18.

Mr. Oliver seems in no mood to quarrel with Bay Street and ready to largely leave the mortgage market to its own devices.

“There’s a market and the bank made its decision, and the chief executive officer of the Bank of Montreal informed me about it,” Mr. Oliver told reporters Thursday in Ottawa. “I listened to his explanation, his reasons. I reiterated what I’ve just stated — the government is gradually reducing its involvement in the mortgage market.”

Asked if the government would take further steps if a housing bubble formed, Mr. Oliver said: “I don’t have to get i

It’s a big change from Mr. Flaherty who didn’t jump on the banks every time they cut rates to new lows but certainly always let them know he was a coiled spring. He also didn’t mind opining on the “hypothetical negative” of what he viewed as overpriced housing in Toronto and Vancouver.

And, without Finance calling out the banks, there is a dearth of negative voices around this high-profile plunge below 3%. Home loans are simply products that people buy, and when demand is strong the companies that produce those products — the banks — can charge higher prices, said Peter Routledge, an analyst at National Bank Financial. When demand falls off, prices move in the opposite direction.

“What [the rate cut] tells me is that household credit growth is slowing and BMO has reacted to slowing demand in the way one would expect,” Mr. Routledge said. “It’s textbook economics.”

In fact, other lenders are already providing even lower offers for five-year mortgages, though they’re mostly going about it more quietly.

“Were these [five-year rates below 3%] not already available in the marketplace?” said Gregory Klump, chief economist at the Canadian Real Estate Association. The site, which allows potential buyers to compare the various rates available, lists the lowest at 2.94% for that term.

In recent years Canada’s banks have enjoyed surging volumes of home loans as households took advantage of record low interest rates to enter the housing market in unprecedented numbers. As a result, real estate in many cities is the most expensive it’s ever been and consumers are sitting on a bigger debt pile than ever before.

This seemed to be no end of concern to Ottawa’s previous economic policy tandem of Mr. Flaherty and former Bank of Canada governor Mark Carney. For whatever reason, Mr. Oliver and governor Stephen Poloz appear significantly less concerned.

But it’s not like Ottawa doesn’t always have a lot of skin in the game. Canadian banks are in some ways shielded from potential problems such as a housing meltdown thanks to their use of insurance provided by the Canada Mortgage and Housing Corp. — a federal Crown corporation which protects roughly 60% of their outstanding home loans.

So while the banks to some degree share the government’s concern about over-leveraged consumers, they face huge pressure from shareholders to maintain their impressive record of growing profits. The simplest, and perhaps less overtly risky, way to stay on track is to ensure consumers keep on taking out new government-insured loans.

This is the time to do it, too. It is the start of spring, traditionally one of the hottest periods in the real estate market. “This is the time when banks have to be a little more competitive,” said Laurence Booth, a professor of finance at the University of Toronto’s Rotman School of Management.

The good news from the standpoint of the government is that consumer debt is growing less quickly than a few years ago. If the trend continues, overall debt levels will start to subside, but that hasn’t happened yet. Indeed, mortgage volumes are probably close to record levels due to a number of factors including higher house prices, new construction and a still-hot housing market, Prof. Booth said.

Yet another reason is attractive deals like BMO’s 2.99% offer, a reduction of 50 basis point from the previous rate. Higher mortgage volumes mean that lenders can charge less on individual loans but still end up with a fat profit at the end of the quarter. It’s a good deal for banks and “it’s a good deal for consumers as well,” Prof. Booth said.

For now, it also seems to be a passable deal for Ottawa.


10 Basic facts you should know about modular homes.


What is a modular home?

A modular home is one that is built indoors in a factory-like setting. The finished products are covered and transported to their new locations where they will be assembled by a builder. A modular home is not a mobile home; it is simply a home that is built off-site as opposed to on-site. These homes are often called factory-built homes, system-built  or pre-fab homes.  Modular and Manufactured homes are NOT the same. Manufactured homes are not placed on permanent foundations. Manufactured homes, sometimes referred to as mobile homes, but are not always mobile homes, can be moved from one location to another. There are specific laws and regulations regarding these relocations.  Tha

How do modular homes differ from houses built on-site?

Because modular homes are built indoors they can be completed in a matter of a few weeks as opposed to months. These home constructions do not see the typical on-site delays that are predominantly caused by the weather. Modular homes must conform to specific rules, guidelines and building codes that often surpass those of traditional on-site homes. However, it is important to shop around. Not all companies that make factory-built homes are alike. There can be significant differences in quality, price and service.  As with purchasing or building any home, it is crucial to do your research.

Modular Home Facts:

  • Modular homes appraise the same as their on-site built counterparts do. They do not depreciate in value.
  • Modular homes can be customized.
  • Modular home designs vary in style and size.
  • Modular construction can also be used for commercial applications including office buildings.
  • Modular homes are permanent structures – “real property.”
  • Modular homes can be built on the following on crawl spaces and basements.
  • Modular homes are considered a form of “Green Building.”
  • Modular homes are faster to build than a 100% site-built home.
  • Home loans for modular are the same as if buying a 100% site-built home.
  • Insuring your modular home is the same as a 100% site-built home.
  • Taxes on a modular home are the same as 100% site-built home.
  • Modular homes can be built to withstand 175 mph winds.
  • Modular homes can be built for accessible living and designed for future conveniences.



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Best house warming gifts for friends.


So your friend is moving, which means there’s a new neighborhood and home for you and your friends to explore. But trying to find the best housewarming gifts for friends who are moving can be a tricky task. Whether they’re hosting a housewarming party or not, here are some present ideas!

Your friend has been living out of their moving boxes for quite some time now, so they’ve finally de-cluttered their home and their lives, which means you should stick to gifting them presents that will be useful (and that won’t be thrown in the donation bin).

  • Kitchen essentials like silverware, glasses, a dish set, cookware, bottle openers, a cookie jar, coffee mugs, dish towels, a table cover, and other everyday items like a centerpiece.
  • Bedroom essentials like new pillows, a closet organizer, a rug, soft blankets, drawer liners, air fresheners, candles, picture frames, a mirror, house plants, a clock, and organization bins.
  • Bathroom essentials like a fluffy towel set, cleaning supplies, shampoos, soaps, and a plunger.
  • Yard essentials like a rake, a shovel, home and gardening tools, seeds, a water hose, and gloves among othYour friend most likely threw away most of their food, so gifting them a food kit will not only make perfect sense, but also satisfy their cravings.
    • Gift cards to a nearby pizza, sushi or burger place, or a Chinese, Italian or Mexican food restaurant are also great choices. To add practicality to your gift, double check to see if each provider has at-home delivery service.
    • Bottles of wine or boxes of cookies will go great with that new bottle opener and cookie jar that you gifted your friend. Picking out a food gift that your friend will enjoy is always a great choice!
    • Try to fill their pantry closet or cupboards with canned goods, baking supplies, cereal boxes, oatmeal packets, soup and pasta noodles and other necessary items needed for a good meal.
    • Make a little food basket or kit tailored to a specific theme like that of pastries, fruits, vegetables, or other items that your friend really enjoys.
    • Spice up their new home by gifting them bottles of spices, oils and other cooking materials.

    If you know your friend has plenty of leftover boxes and items they’d like place elsewhere and has talked about storage, consider gifting them a storage unit for a couple of months until they have more time to settle down. It’s a great idea, especially if your friend is moving while trying to balance a heavy work or personal schedule.



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The benefits of having a luxurious open kitchen.

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It has not been long when kitchens were relegated to a corner of the house and were considered an unimportant place. However, with different trends of lifestyle ushering in, kitchens have also gotten rid of withdrawn space and extra walls.  Yes, you are right. The concept of open kitchen is the newest lifestyle trend.Designing a home with an open kitchen plan is getting widely popular today. Moreover, there are a lot of benefits of the same. Some of the primary advantages of an open kitchen are listed below…

More Space – When the walls of the kitchen breakdown, the area opens up to other parts of the house. The kitchen seems to be bigger, and the entire area appears spacious.  The extra space can be utilized for a counter, coffee table or a breakfast bar.

Functional Kitchen – An open kitchen quite simply offers the exceptional opportunity to be at two places at a single time and not feel isolated. For instance, you keep an eye on your children’s activities while cooking or plainly watch television while your cakes get baked.

Decoration – Open kitchen provides you a platform to display your expensive appliances as decoration items. You can even spruce up things by exhibiting crockery, glassware and cooking utensils.

Social Interaction – With an open kitchen, you get the chance to interact and converse with your guests while you prepare the meals. In addition, as most of the guests are likely to hang around the kitchen during casual get-togethers, the breakfast counter or coffee table provides a great space to sit and chit-chat.

Serve Hot – With an open kitchen, you can actually serve food fresh and hot as the cooking counter and dining table are closely located. Moreover, you can go back to the kitchen instantly, in case, you forget to get something.



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The benefits of buying a new home vs. a resale home

New Home

Personalized choices. You may be able to upgrade or choose certain items such as siding, flooring, cabinets, plumbing and electrical fixtures.
Up-to-date with the latest codes/standards. The latest building codes, electrical and energy-efficiency standards will be applied.
Maintenance costs. Lower maintenance costs because everything is new and many items are covered by a warranty.
Builder warranty. A homebuilder’s warranty is usually available in all provinces (except Nunavut and the Northwest Territories). This can be important if a major system such as plumbing or heating breaks down. This warranty does not apply if you build the home yourself. Neighbourhood amenities like schools, shopping malls and other services may not be complete for years.
Taxes. Such as the Goods and Services Tax (GST) will apply. However, you may qualify for a rebate of part of the GST or HST on homes that cost less than $450,000. For more information about the GST New Housing Rebate program, visit the Canada Revenue Agency website at, Extra costs. You may have to pay extra if you want to add a fireplace, plant trees and sod, or pave your driveway. Make sure you know exactly what’s included in the price of your home.

Easy access to services. Probably established in a neighbourhood with schools, shopping malls and other services.
Extras included. Landscaping… Landscaping is usually done and fencing installed. Previously owned homes may have extras like fireplaces, finished basements or swimming pools.
No GST/HST. You don’t have to pay the GST/HST unless the house has been renovated substantially, and then the taxes are applied as if it were a new house.
Possible redecorating and renovations. You may need to redecorate, renovate or do major repairs such as replacing the roof, windows and doors.

Make An Offer

When you find the perfect home, buy it.

After touring homes, you will probably instinctively know which one or two homes you would like to buy. Ask to see them again. You will see them with different eyes and notice elements that were overlooked the first go-around.

At this point, your RE/MAX agent should call the listing agent to find out more about the sellers’ motivation and to double-check that an offer hasn’t come in, making sure these homes are still available to purchase.
Your RE/MAX agent will help you through the offer process. Be very specific in your offer about any improvements or repairs you want the seller to make before closing or about any appliances or other items you expect to be included.

Counteroffer. The seller may accept your initial offer, no questions asked, but often he or she will make a counteroffer, accepting some terms but making changes or raising the price. This process goes back and forth until you either agree or the deal collapses.

Contingencies. Acceptance of the sales contract can be made contingent on (that is, dependent on) certain circumstances. As a first-time homebuyer, you should probably stipulate that the house passes an

Home Buying – Money Saving Tips

Shop for a mortgage. That ½ percentage point may not seem like much but it will save you thousands over the life of a mortgage. Get quotes from a variety of banks or enlist a mortgage broker (the bank, not you, pays his or her fee). You can always go to your own bank to see if they will match the rate.
Shop for a lawyer. Fees may vary greatly and you can often save a lot by using someone who specializes in real estate law, as they compete for this business. Costs are often less due to economies of scale, but ensure you get a full cost quote.
Get a home inspection. Not only for piece of mind but there is nothing worse than discovering cost prohibitive problems after you have moved in. If your home inspector identifies deficiencies, you may be able to renegotiate the purchase price to cover required repairs.
Decline mortgage insurance. You are farther ahead to increase your own term insurance for the amount of the mortgage. The premiums are often less and the payout greater.
Buy a home that produces revenue. If you can rent out your basement or a self contained suite it will help you pay the mortgage or offset your home expenses. Your RE/MAX sales associate can offer advise when it comes to zoning requirements and public transportation access.
Shop and get quotes on all of your major expenses including moving costs, renovations, home insurance etc. Ask lots of questions and get referrals. Your RE/MAX sales associate is a great resource.
Don’t buy your furniture on time payment plans. Make do until you can afford it. Shop garage sales or used furniture outlets.
Make a budget and stick to it. There are a number of costs that you need to take into account as we have illustrated. Put the money aside.
Remember, all of the above will save you money but the most important consideration is to buy a home you can afford to live in.


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Making staying in the new going out: 5 great ways to have fun without leaving the house


“I am an impoverished student”. It’s a statement heard a lot at university, and a statement I can make myself without any shame or compunction. My money goes on clothes sales, wine and vaguely green things from the supermarket that make me feel like I’m eating healthy.

Like the rest of the student population, I need to save my pennies when it comes to having a big night out, which is why in our house, we’ve begun slowly to replace them with big nights in. It’s something you’d probably expect from a much older and more sensible swathe of the population, but we’re avoiding the over-priced taxis and queuing in the rain, in favour of big nights in where the heating can go on and you don’t have to wear six-inch heels that hurt like hell.

There are a lot of good things to be said for a night in; no pricey drinks or risk of getting spiked, no girl fights on the dance floor, and absolutely no overly friendly guys who don’t understand “NO” when it’s yelled in their faces. Instead, you can enjoy a handpicked selection on your nearest and dearest, that aforementioned £2.50 wine and the opportunity to wear your pyjamas to a party. Who wouldn’t want that?

It’s also a pretty big money saver. Taxis are pricey for one, and here in Cardiff it costs at least £4 just for the honour of being picked up past midnight. Do that more than once a week, and there’s a substantial hole in your pocket already. Then there’re tickets, if you’re considering one of the classier establishments or a big night at your student union; costing you another £3-5. Then booze; pre-drinks at £5 a bottle of vodka, plus a costly mixer at your chosen club and the inevitable round (or five) of Jaegerbombs. Total that all up and we’re looking at a fair few pennies, especially if done more than once a week. And we haven’t even looked at the cost of new clothes to get all glammed up in, or the panic buying that goes with themed club nights.

Board games: Don’t ever underestimate the fun you can have with a collection of board games. Give everyone a drink and add some extra penalties (for example: down your glass if you go to jail in Monopoly) and you’re laughing (and quite possibly drunk). Even without the booze, most board games can provide a funny, competitive and essentially free night in, as everyone has a cheeky copy of Cluedo chilling out in the back of their cupboards at home.

Murder mystery: Another passtime mostly reserved for the older generation, but it can be a genuinely hilarious night in. The do-it-at-home box sets and you can entertain a group of eight with it and split the cost equally. Everyone gets a character, so they can put on their gladrags and do their hair and faces, but in a fashion that doesn’t require hours of wrestling with the dress-up collections at your local costume shop. You don’t have to follow the menu on the game rules either, just ask everyone to bring one item along, or club together and order in. Booze is optional, but an extra drink or two tends to make the questions from your fellow suspects a lot more amusing!

Movie night: Easy peasy pumpkin pie. Just pick a genre, and max out your film collection. You can go as heavy or light with the theme as you please. Either pop on a horror film and call out the clichés, or go the whole hog: dress as a wizard, make a staff from your beer cans and watch all eight Harry Potter films in the space of a day and a bit. Everyone has a film or five they brought to uni with them, or with the magic of the Internet you can watch them straight off somebody’s laptop.  Make it a sober night and hit the popcorn, or devise your own drinking game based on the film you’re watching.

Cocktail evening: We clubbed together to buy spirits and juice, got out our pots and pans and made poor man’s cocktails in great quantities in our tiny kitchen. Just to make it extra classy, we all wore our suits and dresses, and made a limo out of cardboard we’d politely asked for in local shops. You don’t have to commit to the theme as much as we did, but either way it makes for a classier twist on the standard house party. You also get the seriously cool experience of drinking your cocktail out of a wok.

Themed nights in – get creative:There is a wealth of insane and awesome ideas for a night in on the Internet, and even more are likely to be living in the mad little heads of your nearest and dearest. Go mental and make your own rules for Ring of Fire or tape a bottle of wine to each hand. Alternatively, stay sober and be a big kid for the night, make a fort out of the items lying around the house (newspapers and tape work if you’re in halls of residence, and don’t have any sofa cushions) or have an art’n'craft evening and decorate the house with your creations  You don’t have to be drinking or dressed up to the nines to have a good night in.

Average cost: anywhere from completely free to as pricey as you can afford.


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Canada’s real market is changing


Like many Torontonians, Dave Pearce and his wife Jennine Profeta are struggling to find an affordable home. They currently live in a one-bedroom apartment with their infant son and it’s getting cramped. “We need more room, and soon,” Pearce says. In the city’s highly competitive real estate market, where bidding wars are still common, home ownership has so far been unfeasible for the couple. But after a decade of staggering growth, the housing market in many Canadian cities is starting to cool—a trend economists and real estate experts suggest will continue through 2014. Prospective buyers like Pearce and Profeta are smelling opportunity, but they’re not sure how to take advantage. “If there’s a downturn coming, what’s our best strategy?” Pearce wonders.

Let’s be clear: despite what some in the media would have you believe, Canada’s housing market is not at the edge of a cliff, ready to plunge into free fall. “There are articles saying we’re going to have the same kind of crash we had in the United States, but that’s not going to happen,” says Jane Londerville, a real estate and housing adviser at the University of Guelph.

James McKellar, academic director of the Real Property Program at York University’s Schulich School of Business, is even more blunt. “First of all, there never was a housing bubble. So it hasn’t burst, because it never existed.”

But even if we’re not headed for an implosion, pundits generally agree we’re returning to a balanced market in which the interests of buyers and sellers are aligning—especially in Toronto and Vancouver where homes cost 4.3 to 7.1 times the average family income, respectively. By comparison, averages for other major real estate markets like Calgary, Edmonton and Ottawa-Gatineau are 2.9 and 3.4, respectively.

Prior to the 2008 global financial crisis, a strong economy, low interest rates and looser lending criteria sparked a rapid appreciation in the value of homes. But recent government interventions have returned some of the rules to normal, says Toronto real estate lawyer Alan Silverstein. Buyers can’t borrow 100% any more, and the maximum amortization is back at 25 years, down from 35. “It’s taken out the people who shouldn’t have been in the market. It’s brought a degree of sanity back but it hasn’t killed the golden goose.”

Like many Canadians, you’re probably wondering what all this means if you’re looking to enter the housing market, sell your home, trade up to a bigger residence, or downsize to a condo. MoneySense will help you navigate all of these scenarios and show you how to profit from the changing nature of Canada’s housing market.

Feels like the first time

The most obvious consequence of a decline in house prices is greater opportunity for first-time buyers like Pearce and Profeta. “Young people are having a tough enough time with getting jobs and earning money, but to see home prices going up at such a rapid clip has been really disconcerting,” says Toronto fee-for-service adviser Jason Heath. “Now, young people will feel like they’re getting less and less behind, and that it’s not an impossible dream to own a home.”

Sonya Gulati, a senior economist with Toronto-Dominion Bank, says we could see a slow 10% decline in house prices in Toronto, Vancouver and Montreal by the end of 2014. “We think those cities are the ones most overvalued.” As of September, year-over-year housing prices were already down 3.8% in the Greater Vancouver Area, according to Gulati. Toronto is now starting the same downward trajectory, she says, despite roughly an 8% increase in sales over the same period. Montreal is following the same pattern, too.

But first-time buyers shouldn’t be overly optimistic, especially outside Canada’s three largest cities. Sylvia Lewis-Havard and her husband are still renting, hoping the changing market might enable them to purchase a home in Ottawa. “I don’t expect a complete crash we can take advantage of,” says Lewis-Havard, but she hopes to find something for 15% less than the current average of $354,000. Gulati says that’s not likely to happen—in fact, she doesn’t expect real estate prices outside Toronto, Vancouver and Montreal to decline much at all. Her opinion is in line with a recent report by RBC Economics predicting “both resale activity and home prices in Canada to be flat or slightly negative in 2013.”

A housing slowdown in Toronto and Vancouver could affect consumer confidence in regions with strong economic fundamentals like Calgary, Edmonton and Halifax, adds Don Campbell, best-selling author of Real Investing in Canada. But rather than a sharp decline, you’re more likely to see slower rates of price appreciation and home sales, says McKellar. “Overall the economy of Canada compared to other countries is still doing very well,” he says. “Housing markets are a function of the economy. Not the other way around.”

In Toronto, it’s the condo market that may be most vulnerable to a fall in prices, says Gulati. “The most recent statistics show there are more than 100 condos being built in the Greater Toronto Area. By comparison, there are 59 being built in New York City and 22 in Chicago.” Campbell agrees this large supply coming into Toronto in 2013 will outstrip demand, and feels first-time buyers in Toronto may soon find big opportunities in the condo market.

Not everyone agrees with this assessment, however. Many of Vancouver’s condos were bought by Asian investors and remain unoccupied, says McKellar, whereas Toronto’s condos are being bought by non-occupants who immediately rent them out. “Rental vacancy in Toronto is just 1.2%, so all of this stock is not glutting that market.” The long-term growth of Toronto’s condo market is also secured by immigration, adds Silverstein. “A lot of new immigrants come to the GTA,” he says, “and a lot of investors are banking on renting these condos out to young couples or new immigrants.”

The biggest advantage Canada’s changing housing market will offer first-time buyers is the luxury of time. “In places like Toronto you might have a bit more breathing room to look at a place and think about it for 24 hours without having to shove an offer in with six other people and hope you win,” says Jane Londerville. “So it gives you a little time to do some careful thinking.” Even in her town of Guelph, Ont., bids can be aggressive for downtown properties, so buyers in smaller centres can expect to benefit from less competition, too.

Buying newbies should also bear in mind that sellers may be more open to negotiation now, says Marc Lamontagne, a fee-for-service adviser with Ryan Lamontagne in Ottawa. Lamontagne believes there will be opportunities for savings in any region of Canada, provided you’re a patient, aggressive bidder. “A lot of homes that will be staying on the market longer were purchased by developers or flippers. These people are going to be desperate and motivated to sell.”

Just don’t stall too long if you’re interested in buying a home. “Money will remain inexpensive for a few years to come, but it won’t last forever,” says Campbell. Prepare for a rise of at least 1% in interest rates and factor that into your budget. Londerville concurs: “It’s another reason not to delay buying if you’re borrowing. You can get a five-year mortgage at such low rates now that it’s a good time to enter the market if you’re not in it already.”

If buying is still out of your reach in a cooling market, focus on building up a sizable down payment, suggests Heather Franklin, a fee-only planner in Toronto. A 20% down payment will save you thousands in reduced mortgage payments, lower interest rates and mortgage insurance premiums. “For those first-time buyers, just wait it out and build up your payments,” she says.

Another option for those struggling to enter the market is to buy a property and rent out part of it to help you pay the mortgage, says Londerville. “You have to find creative ways to get into the bigger markets.”

The hard sell

Even if the evolving housing market is likely to move the pendulum in buyers’ favour, real estate experts don’t believe sellers are at a disadvantage right now. But they do need to be realistic, says Alan Silverstein. “The house that went for quite a high price a year ago might not get that price nowadays. But you shouldn’t be giving it away either. It just may take longer to sell.”

It helps to understand what type of seller you are: willing, anxious or desperate. “The willing are the ones who are testing the market,” says Silverstein. He advises against anyone doing that now, especially as we head into winter, the slowest season for real estate. “Only the real sellers are in the marketplace right now: the anxious who have a greater need to sell and may have to put the house on the market; and the desperate who have to sell, whether it’s due to divorce, job loss or whatever.” Desperate sellers may be forced to accept a low price, but Londerville notes that if they’re moving to a market that is also down, things could balance out.

“If you really wanted to protect yourself you would sell your property and rent,” adds Lamontagne. Although house prices have risen substantially in the last decade, rents have not. “If home prices do come down quite a bit, that’s an opportunity for you to go back. The issue is the transaction costs. Every time you buy and sell there’s quite a bit of cost involved.”

Don Campbell’s advice for those selling is simple: “Marketing, marketing, marketing.” In this environment it will no longer be enough to just hand your listing to a realtor and expect a bidding war, he says. Sellers must get involved at all levels of marketing as competition increases thanks to more property choices and fewer desperate buyers. “Learn about staging a property, and visit other properties in your price category to see what the competition is offering,” he advises. “Make sure your realtor has a marketing plan to generate a lot of interest before you list.”

Movin’ on up

If house prices do end up declining in your area, it’s not just first-time buyers who will benefit. “Buying up in a down market” is a strategy in which homeowners sell their smaller property and buy a larger one—the idea being they will come out ahead because the price reduction on the new purchase will be greater than the loss on the sale of the former home.

For example, if prices decline 10% across the board, a house that was formerly valued at $300,000 will fall to $270,000, while one valued at $500,000 will fall to $450,000. That shrinks the price difference from $200,000 to $180,000.

Just be sure to determine how different segments of your market are affected by a price decline, Londerville cautions. “It could be that larger homes are still selling, whereas starter homes are not because new people coming into the market can buy a bigger house than they could before. But as long as both markets are slowing down you can take advantage.”

Of course, homeowners looking to move into larger properties have the same advantage as new homebuyers in a cooling market: less competition. “I’ve got clients who have been looking to move into bigger homes in certain neighbourhoods, but the frenzy of competition has made it almost impossible despite low interest rates,” says Jason Heath. “These buyers are no longer going to be in a position where they’re dealing with multiple bids.”

McKellar warns, however, that those looking to sell their homes and move to a larger property should think carefully. Often, when you consider the costs of moving, your agent’s commission, lawyers and so on, it might be more cost-effective to build an addition or renovate.

Polly Chow and Wilson Luk are contemplating an upward move from their two-bedroom condo in Vancouver, which they purchased in June 2011. “We would like the opportunity to upgrade within the next few years if the housing market cools, and we have saved up a down payment,” says Chow. They’re considering looking at a townhouse or a duplex that could provide a steady rental income to help pay a bigger mortgage. Heath recommends anyone thinking about renting out part of their home or purchasing should keep in mind that any financial rewards will be tempered by the time and energy you devote to your tenants.

Doubling down

It’s been 10 years since Dearl and Sharon Alexander’s two adult children finished university and moved out their mortgage-free home in the Ottawa suburb of Orleans. Now the couple wants to downsize and they’re wondering what to do in the current environment. Should they buy or rent a smaller home or condo? They also wonder whether they should keep their current property and rent it out, which would require repairing the back patio, redoing the kitchen and getting rid of the carpet and linoleum floors. “Is it worth the money and the trouble?” asks Dearl.

If you’re in a situation like the Alexanders’, your first priority should be doing what’s right for your lifestyle, not trying to pick the perfect time to move. “It’s very hard to time the market,” says Jane Londerville. If couples are committed to selling their homes, they shouldn’t hold off for long, she says. If house prices do start to fall, it may be years before they rebound.

Something else homeowners like the Alexanders need to consider is the demographics of their neighbourhood. Is it a bedroom community filled with retirees and empty nesters on the verge of selling? “If there was a potential downsize in my future,” says Heath, “I’d rather be one of the first ones out rather than being in a neighbourhood with a lot of downward pressure because lots of boomers are selling. Likewise, homes in certain neighbourhoods that are close to amenities or public transportation can have upward pressure because they’re very palatable to baby boomers downsizing. So be cognizant of the neighbourhood you’re living in as well as the neighbourhood you want to move to.”

Should the Alexanders rent out their current home instead of selling it? Heath says turning larger family homes into an investment property often means maintenance headaches: the lawn, the roof, a pool in the backyard. “Maybe that’s not a good rental property because there’s so much that can go wrong with it,” he says. “Strictly from a rental point of view, the best kind of property is the simplest and easiest. More often than not that’s a condo.”

When it comes to choosing whether to buy or rent after downsizing, the Alexanders have a lot to think about, too. “There really is no carte blanche answer to that,” says Heather Franklin. For instance, if the couple downsizes in a neighbourhood where rents have stayed consistent, they may want to get out of the housing market altogether, she says. At the same time, they may find renting more costly because they are no longer making mortgage payments on their home. As well, downsizers need to be aware they’ll likely end up buying a smaller property equal in value to the home they’re selling. “For the most part, the people I know who are downsizing are moving into condos that are equally expensive and just have less space. They want the convenience of just walking out the door. So it’s not purely financial.”

Downsizing and renting is also a smart idea if you’re considering moving to a different neighbourhood, says Heath. “Rent for a year or a couple of years and figure out whether that’s really where you want to be.”

As to whether the Alexanders should drop a bundle on upgrading their current home prior to downsizing, that’s something real estate agents typically advise because it makes a house easier to sell, says Heath. Don’t, however, expect to get back every dollar you spend. In particular, upgrades to kitchens or bathroom can backfire because new buyers may have different tastes. Generally speaking, if something is falling apart you fix it, says Heath, but think hard about doing anything else.

However you’re navigating Canada’s housing market—be it as a buyer or seller—take a deep breath if dips or slowdowns are causing you anxiety. “There’s a tremendous misunderstanding of the housing market,” says McKellar. “It’s a long-term market that will always go through short-term adjustments.”

It helps to remember your house should  primarily be a place to live, not an investment. That doesn’t change when a hot market starts to cool. “If people can afford the fundamentals, they’ll be fine,” says Silverstein. “A balanced market is the best situation: when you have a balance, buyers and sellers should both be happy at the end of the day.”



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The Latest real estate market report in Edmonton


Edmonton 2014: The residential home inventory on the Edmonton Multiple Listing Service® (MLS® System) rose 16% in January. Typically just over 1,800 homes in the Edmonton CMA (census metropolitan area) come onto the market in January. Last month’s listings of 1,842 were higher than the 783 listed in December. Sales figures (adjusted) of 885 properties (820 reported) were higher than a typical January and higher than sales in December and January 2013. The increased inventory of 3,537 (up from 3,049 in December), kept prices stable in all housing categories.

Compared to December, the all-residential average3 price of $347,847 was down just $1,226 or     -0.16%. Single family detached (SFD) home prices were down 1.5% at $416,344. Condominiums were priced on average3 at $230,463 (down 1.5%) and duplex/rowhouses showed the biggest movement and were down 5.3% at $336,220.

“Price stability and more property available for sale results in a balanced market,” said REALTORS® Association of Edmonton, President Greg Steele. “Right now both buyers and sellers have time to consider all their options and housing needs. More homes are listed every day and your REALTOR® can advise you of a suitable property as soon as it comes available.”

The residential sales-to-listing ratio was 45% and the average days-on-market was 61 days in January compared to 73 days in January 2013. There have been four property sales over a $1 million already this year but half of the SFDs sold in January were sold at or below the median price of $385,000.

“Strong economic indicators such as low unemployment, higher hourly wages and positive in-migration all support an optimistic view of the Edmonton and area housing market,” said Steele. “Consumers are confident in their economic future and prepared to risk a first-time or move-up purchase. Low rental vacancies and the potential for higher rental rates are also attracting investors into the market.”

Source: Realtors Association


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CMHC Move to hike mortgage insurance premiums prompts competitors to follow




The cost of mortgage default insurance is about to go up for most consumers after competitors moved quickly to follow Canada Mortgage and Housing Corp.’s decision to raise premiums.

The federal agency announced Friday it is increasing premiums across the board, effective May 1. The change does not impact existing homeowners and is expected to raise up to $175-million for CMHC.

“The higher premiums reflect CMHC’s higher capital targets,” said Steven Mennill, CMHC’s vice-president of insurance operations, in a release. “CMHC’s capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long term stability of the financial system.”

CMHC said in a conference call with journalists to discuss the premium change that it should cost the average Canadian about $5 per month on their mortgage.

Canadians must buy mortgage default insurance if they have less than a 20% downpayment and are borrowing from a financial institution covered by the Bank Act. The insurance covers banks in the event of default and is ultimately backstopped by the federal government. There is close to $1-trillion backed by Ottawa, including private players.

At the top end of the market for someone with a mortgage for 95% of the value of their home, the premium CMHC charges will go from 2.75% to 3.15%. On a $450,000 mortgage, the fee — it is charged up front and often tacked onto the mortgage, would rise from $12,375 to $14,175.

CMHC controls about 70% of the mortgage default insurance market in Canada with private players Genworth Canada and Canada Guaranty holding the rest.

Genworth announced it too would raise premiums across the board by an average of 15%. Its increases will take effect May 1 too.

“All three insurers have the same standard premiums today. By the time CMHC hikes its fees in May, I suspect the privates will have announced matching increases,” said Rob McLister, editor of Canadian Mortgage Trends, before Genworth matched the hike.

A key issue will be whether the hike, it’s only 10 basis points for mortgages that are 65% loan to value, leads to people trying to buy ahead of the increase.

On the call with journalists, CMHC officials indicated they didn’t expect any of this so-called front-running to happen. However, when mortgage rates were set to climb, consumers did try to buy early to beat the increase — albeit interest increases have a far greater impact on consumer costs.

Finn Poschmann, vice President, research with the C.D. Howe Institute, said he thinks the increase will lead to a jump in sales ahead of the May 1 price change. “As a share of closing costs, it is a pretty big hit,” said Mr. Poschmann. “On a monthly basis it’s not that much. The change goes by the application date not the closing date so even if you are going to be closing a couple of months later, you are facing an incentive to get the mortgage application in.”

He applauded the change because it means CMHC is operating in a more professional manner.

“This is much better risk management and risk pricing,” said Mr. Poschmann. “And it is a sensible, scaled increase in premiums for rising loan to value ratios.”

Last year, the federal government announced that CMHC would fall under control of the Office of the Superintendent of Financial Institutions. Then in late 2013 it announced it had brought in a former investment banker, Evan Siddall, to run the Crown corporation.



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