Home prices continue upward trend

It seems that recent good news regarding the Canadian real estate market wasn't an isolated incident, as new data shows home prices are on the rise.

According to the Teranet-National Bank house price index, home prices increased 2 percent overall on a year-over-year basis during May. This comes after a 2 percent gain in home prices during April, creating a pattern of slow but steady growth.

Seven of the 11 cities across the country tracked by the index saw prices moving up above the national average. Quebec City saw a rise of 6.5 percent, while Calgary and Hamilton each saw an increase of 5.8 percent. Winnipeg saw prices rise 4.6 percent, Edmonton experienced an increase of 4 percent and Toronto showed gains of 3.9 percent. Continue reading

Creeping mortgage rates are part of housing market’s soft landing

The reports of the demise of Canada's housing sector appear to have been greatly exaggerated. According to the Royal LePage House Price Survey, housing prices across the country continue to post relatively modest gains, and home loans have been kept in check, leading to market stability. And, defying those who had predicted an imminent collapse, it doesn't appear there will be any extreme price movement either way through at least the end of 2013 and probably into 2014.

Avoiding the housing bubble
Four different sets of rules have been issued by the Department of Finance since the worldwide housing bubble collapse in 2008, all of which increased lending restrictions. Those efforts, along with the creeping rise in mortgage rates over the past few months, appear to have helped the Canadian housing sector into a soft landing, avoiding any possible catastrophe. Continue reading

Is the cooling market a blessing in disguise?

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Canada’s housing market is cooling down, which is a good thing, according to Fitch Ratings.

The global rating agency said that the cool-down will help stabilize Canada’s banking system, thereby ensuring prolonged economic growth.

In other words, what’s good for the goose is good for the gander.

“The latest sales numbers provide some initial evidence that risks of near-term overheating in the Canadian housing market may be subsiding,” the agency said. “This could be a positive development for Canadian financial institutions as long as the labour market remains relatively stable.”

And therein lies the rub. Fitch’s forecast is predicated on the labor market remaining stable, but  Capital Economics estimates that 115,000 construction jobs alone will be lost due to the cool-down. Continue reading

How the Canadian housing market is holding up this week

We're used to hearing about governmental disagreements every now and then, but nothing has come close to all the mortgage news surrounding this so-called housing bubble. Will it burst? Is it a figment of everyone's imagination? Will Finance Minister Jim Flaherty's latest mortgage rules lessen the stress the economy is feeling and do away with the bubble rumors once and for all?

The news seems to be changing from week to week, and it may be difficult for residents, homeowners and hopeful first-time buyers to keep up with the market's status. Thankfully, the news this week seems good – for the most part – and Canadians should take note.

The housing bubble – is it a real thing?
Reuters Canada recently reported that Flaherty said the property market isn't in danger of a bubble nor a hard landing, which is great considering the man knows what he's talking about. Continue reading

Fiery Canadian housing market rapidly cools, fastest drop in home sales since 2010

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Remember those government housing rules created in July by Finance Minister Jim Flaherty to cool the hotter-than-hot housing market down and prevent that supposed bubble from bursting and ruining everybody's lives? Well, it turns out those rules are doing just the trick, and changes are being seen in the Canadian housing market this month.

The Canadian Real Estate Association (CREA) recently released its measure of the country's housing market, noting that MLS home sales decreased almost 6 percent in August from July – the biggest one-month drop since June 2010. The MLS Home Price Index was also up 4 percent from this time last year, which marks the slowest industry gain in more than a year, according to an article in The Globe and Mail.

The CREA expects this trend to continue and sales drop well into 2013, approximately 1.9 percent. Although Ontario is expected to see the largest decline in home sales, Alberta and Manitoba may be immune to cooling and property sales drops. Although home price continues to rise in 2012, lower prices expected for next year may encourage first-time homebuyers to buy as properties become more affordable. Continue reading

The Toronto housing bubble: Turns out, it’s just a myth

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Remember the Toronto housing bubble? The one that was going to topple the entire Canadian housing market and led to a series of new restrictions on home loans? Funny story – it turns out, the bubble never really existed in the first place.

A new report from the Royal Bank of Canada indicated that, rather than being a wildly out of control market locked in a death-spiral hurtling toward imminent doom, the Toronto condo rush was actually a reasonable case of supply and demand.

"Based on market activity to date, the total number of new housing units (condos, single-family homes, and others) completed by builders has not exceeded the [Greater Toronto Area]'s demographic requirements and is unlikely to do so by any significant magnitude in the next few years," according to the report. "The strong presence of investors in the condo market raises the risk of a mismatch among the types of units supplied and ultimately demanded for occupancy, but, at this point, we do not equate this risk with a bubble." Continue reading

Home sales up, but one expert warns of possible collapse

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Existing home sales in Canada inched up in April, piggybacking on the Toronto and Calgary markets, which handily outpaced the rest of the country, according to the Canadian Real Estate Association.

From March to April, home sales climbed 0.8 percent. In year-over-year numbers, the market was up 11.5 percent from the same period in 2011. The CREA speculates that tighter mortgage rules implemented in March of last year caused the market to stall, contributing to the big difference.

So far this year, Canadians have bought and/or sold 157,804 homes, 49,480 of which were sold last month. On the whole, according to the CREA, the market is balanced. The sales-to-new listings ratio, which signifies market health, is currently roughly 55.9 percent. Ratios of between 40 and 60 percent are considered balanced. Continue reading

Bubble fears could prompt refinancing discussions

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Home prices across Canada continued to rise this month, prompting a fresh wave of concern over a possible housing bubble, according to a recent analysis in the Financial Post.

Statistics Canada recently released a report showing home prices in March went up 0.3 percent, marking the 12th consecutive month of increases, according to the Post. Coupled with a report from the Canadian Mortgage and Housing Corporation that showed new home starts up 14 percent in April, the news has some politicians warning – again – of a potentially detrimental housing bubble.

The two most notable doomsayers, Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty, have been clamoring for consumers to reign in borrowing to prevent a collapse. According to Carney, consumer debt in Canada poses the greatest domestic threat to the economy. Despite their dire rhetoric, neither man has used his position to implement measures that might slow the market. Continue reading

Is someone creating a Canadian housing bubble?

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As home prices across the country rise, so do fears over a possible market collapse. This has left a number of analysts casting about for someone or something to blame for the current trend, and the theories range from foreign entities to the Canadian government.

The economy in Toronto, the site of the biggest surge in housing development and the fastest rising home prices in the country, has been comparatively flat in recent months, a fact that should coincide with less homebuilding, not more, according to Financial Post columnist Diane Francis. The market is being artificially inflated by a "deluge of hot money from abroad," she argued.

"This artificially corrupts the housing sector, presents a great risk to taxpayers in future and inflates housing in the afflicted areas to unaffordable, unnecessary levels for Canadian buyers," Francis wrote. She went on to note that "Canada’s vulnerability to mortgage defaults has soared beyond U.S. levels at the time of the sub-prime frenzy." Continue reading

Most Canadians won’t pay above asking price for a home

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A number of Canadian financial experts, most notably Toronto-Dominion Bank Chief Economist Craig Alexander, have argued in recent weeks that house prices across the country are over inflated. By some estimates, homes are overvalued by 10 to 15 percent. Consumers appear to have reached their threshold when it comes to paying for homes, however: A new study from BMO Financial Group found that 75 percent of Canadians are unwilling to pay more than the asking price for a new home.

The housing boom has been spurred on by an extended period of near record low mortgage rates, but Canadians aren't just looking to save money on interest payments. Just 25 percent of respondents said they would be willing to enter into a bidding war over property, but even among that cohort, few were willing to up the ante too much. Slightly more than half of those who would pay more than the asking price reported they might be willing to put down up to 110 percent of the cost of a home, while roughly one in four would pay up to 120 percent of asking price. Continue reading