December 2010

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Once you know what kind of mortgage you want and the price of the house you can afford in Kamloops, you should add up all of the other costs involved in buying a home so that you know the true cost of buying your home.

When you buy a house, it isn’t only the cost of the house that you need to save for. Don’t forget these other costs:

Appraisal Fee
An appraisal is an estimate of the value of the home. Your bank or credit union may require that the property be appraised at your expense. This can range between $250 and $350.

Deposit
A deposit is required to ensure that the buyer is serious about purchasing the home. It can form part of your down payment, but it must be paid when you make the Offer to Purchase.

Down Payment
You will need a down payment (money paid up front) to obtain a mortgage. With a down payment of 20 per cent or more of the home’s price, you can obtain a conventional mortgage. Your down payment must be at least five per cent of a home’s price for you to benefit from a competitive interest rate.

Mortgage Loan Insurance Premium
If you have less than a 20 per cent down payment, your bank or credit union may require that you buy mortgage loan insurance. You can add the mortgage insurance premium to your mortgage or pay the full amount when you close the sale on the house.

Home Inspection Fee
A home inspection, which costs typically around $400 to $500 in Kamloops, is a report on the condition of your home. You may want to make your inspection a condition of your Offer to Purchase, to make sure you are aware of the condition of the house before you agree to buy.

Estoppel Certificate Fee
This fee costs up to $100, but applies only if you are buying a condominium in a strata unit or condominium and costs up to $100.

Property Transfer Tax
You pay Property Transfer Tax when you purchase or acquire an interest in a property. The tax must be paid when you register changes to a certificate of title with the Land Title Office. The amount of tax due depends on the fair market value of the property that is transferred:

  • If the fair market value is $200,000 or less, the tax is 1% of the fair market value.
  • If the fair market value is greater than $200,000, the tax is 1% of the fair market value up to $200,000, plus 2% on the portion of the fair market value that is greater than $200,000.

First time home buyers are often exempt from this tax.

Prepaid Property Taxes and/or Utility Bills
These charges are meant to reimburse the person who is selling the house for amounts already paid for, such as property taxes, filling the oil tank, etc.

Property Insurance
The insurance covers the cost of replacing the structure of your home and its contents. Property insurance must be in place on the day you close the sale.

Survey or Certificate of Location Cost
The bank or credit union may ask for an up-to-date survey or certificate of location prior to finalizing the mortgage loan. This can range in price from $1,000 to $2,000.

Legal Fees
These fees must be paid when the sale is completed and costs a minimum of $500.

Title Insurance
Your bank or credit union, or lawyer/notary, may suggest insurance to cover any loss caused by problems in the ownership of the property.

Water Tests
If the home has a well, you will want to test the quality and quantity of the water to ensure supply is adequate and the water is drinkable.

Septic Tank
If the house has a septic tank, you will want to have it inspected to make sure it is in good working order.

Other Costs to Consider:

  • Appliances
  • Gardening expenses
  • Snow-clearing equipment
  • Window coverings
  • Decorating materials
  • Moving expenses
  • Renovations or repairs
  • Service hook-up fees
  • Condominium fee

Click here for a printable guide. This information was provided by CMHC and the Government of British Columbia websites.

This article was written by Sunny Freeman and appeared on the Globe and Mail website Tuesday, December 14th, 2010.

Preet Bharati was nervous about plunging into home ownership this year after hearing of bidding wars and stiff competition for overpriced homes – but when she began house-hunting this summer she was relieved to find the buying spree of early 2010 had run its course.

“We ended up getting our house for under the asking price,” the 30-year-old new Mississauga, Ont. homeowner explained of her shock at securing her chosen house in June. “It was a little bit surprising because the feedback that I was getting from friends of mine, when they were looking, every offer was way above the asking price.”

As Ms. Bharati discovered, 2010 was a tale of two housing markets.  However, the year of wild twists and turns is expected to be followed up by a 2011 performance that economists sum up in one word: boring. “The housing market is going to become a lot more boring place,” says Gregory Klump, chief economist at the Canadian Real Estate Association. “Boring is something that both buyers and sellers can look forward to after the crazy roller-coaster ride that we’ve been on since the depths of the recession in 2008.”

The opening months of 2010 saw panicked buyers and overvalued homes in a market that heavily favoured sellers.  A rebound in consumer confidence and pent-up demand from the recession, combined with record low interest rates of 0.25 per cent and impending tax policy changes to condense sales into a short period when Canadian home sales and prices soared to record heights.

Sellers took longer than buyers to regain confidence, causing a delay in getting inventory on to the market.

Open houses were packed, sellers received multiple offers over asking prices and buyers engaged in bidding wars to secure a home while mortgage rates were low. That sent the average home price skyrocketing.

That unsustainable surge in sales, and the ensuing sharp turnaround, led to a “whiplash effect” around the middle of the year – a rare phenomenon that won’t be repeated in subdued 2011, says Phil Soper, president and CEO of Royal LePage. “The big story would have been the dramatic surge in activity level and we’re paying for it now,” Soper says. “It was a highly front-end loaded year,” he says, adding that 60 per cent of activity took place in the first half of the year, compared to an average 55 per cent.

As home prices continued their upward trajectory despite faltering sales, economists, including the head of the central bank, asked questions about home affordability and how consumers would fare when interest rates inevitably rise.

Canada’s overheated housing market caused debate about whether the foreclosure crisis that has caused so much grief for homeowners south of the border could happen in Canada. However, most Canadian real estate experts dismissed the notion of a Canadian housing bubble. “It shouldn’t have gotten the kind of attention it did,” Mr. Soper says. “There was nothing to fear in terms of a sustained double digit price increase, it really just lasted a couple of months and settled back down.”

In the end, the effects of policy changes were minimal and interest rates will end the year at a still low one per cent, but the anticipation of bigger changes caused buyers to panic, says Adrienne Warren, a senior Scotiabank economist. “There was a large degree of perception of people wanting to get in at the right time in the market. But unfortunately in some cases it was not the right time in the market when everyone’s rushing to get in and it leads to bidding wars,” she says.

The upward momentum reversed in April when demand that pulled sales ahead began to dwindle just as Bank of Canada governor Mark Carney lifted a pledge to keep interest rates at rock bottom. April also ushered in more stringent mortgage qualification rules aimed at discouraging homeowners from taking out mortgages on homes they might not be able to afford down the road.

By early spring, inventories returned as homeowners saw the high prices sellers were fetching for their homes and started listing their homes. The market balanced out between buyers and sellers and prices peaked at $346,881 in May.

Monthly sales declined in the summer, usually the busiest time of year, after Mr. Carney raised interest rates for the first time in a year in June, albeit by a modest 0.25 per cent. He followed up with incremental raises in subsequent announcements in July and September.

Sales reached a trough in July, the month the harmonized sales tax regime took effect in the country’s hottest housing markets, Ontario and B.C. Existing home sales tumbled nearly 30 per cent from a peak of 521,148 in January to 378,258 in July. By comparison, sales in an average year are much flatter on a monthly basis and tend to hover between 450,000 and 500,000 consistently.

Construction and pricing on new homes followed a similar pattern, but lagged the resale market as contractors adjusted new building to the reduced level of demand to avoid a glut of empty homes on the market.

The market has stabilized after bottoming out in July with the most recent data showing three consecutive monthly increases since. Still, the first half of 2010 is going to cast a long shadow over the next year, says Mr. Klump, making it difficult for sales in the first half of 2011 to outpace year-on-year comparisons.

CREA projects a 4.9 per cent slide in sales this year and nine per cent next year. The drop is tied to lacklustre economic and job growth, weak consumer confidence and interest rate hikes that are expected to resume next year. However, it said average home prices are expected to rise by 3.1 per cent across the country this year, reaching $330,200. Next year, prices are projected to fall by 1.3 per cent to a national average of $326,000, tied to weakness in British Columbia and Ontario.

 

This article, written by Jeremy Deutsch of Kamloops This Week appeared in the Wednesday, December 15th, 2010 newspaper and online.

For Rent Sign Kamloops Real EstateAfter years of slim pickings for rental accommodations, the vacancy rate in Kamloops has finally risen to a healthier level. According to new figures from the Canadian Mortgage and Housing Corporation, the apartment vacancy rate in the city during October increased to 2.6 per cent, up from 1.5 per cent the previous year.

Two years ago, finding a place to rent was a far more daunting task as the vacancy rate plunged to just 0.4 per cent. Paul Fabri, a market analyst with the CMHC, suggested there are a couple of factors for the increase, including a jump in the number of renters turning into homeowners in the past 18 months. He said people have been drawn to ownership by low interest rates and dropping prices in the real-estate market.

Fabri also noted an increase in the number of investor-owned condos and secondary suites in town. However, the vacancy rate in Kamloops still remains one of the lowest in the province, with communities like Prince George, Kelowna and Nanaimo all above the three per cent mark.

According to the CHMC’s numbers, there’s more than just a river that separates the north and south shores. The biggest increase in available units came on the North Shore, as the vacancy rate rose to 3.9 per cent from 1.9 per cent the previous year. The vacancy rate on the South Shore sits at 1.5 per cent. Fabri said greater employment opportunities are drawing people to the South Shore.

The CMHC only surveys purpose-built rental accommodations — such as apartment buildings — and not suites or condos rented out by owners.

Though it may be easier to find a place to live in Kamloops, it won’t necessarily be any cheaper. The average rent in the Tournament Capital has remained steady at $742, down slightly from $747 the previous year.

It would be no surprise a greater demand for units on the South Shore comes with a higher cost of rent. The average rent is $784, compared to $694 on the North Shore.

The CMHC is predicting vacancy rates to remain steady in the short term, but creep lower in the coming years as the province’s economy rebounds from the recession.

The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province climbed 20 per cent in November from October 2010, on a seasonally adjusted basis. Compared to November of last year, MLS® residential unit sales were down 21 per cent to 5,647 units. The average MLS® residential price rose 9 per cent to $523,394 in November compared to the same month last year.

BC MLS Residential Sales To November 2010

Click to enlarge

“Improved economic conditions and low mortgage interest rates have contributed to a 46 per cent increase in home sales since July,” said Cameron Muir, BCREA Chief Economist. Employment in BC eclipsed the July 2008 record by 2,600 jobs last month, while the unemployment rate dipped to 6.9 per cent, the lowest recorded since January 2009.

“The inventory of homes for sale has trended lower since last spring, improving market conditions in many areas of the province,” added Muir. Vancouver and Victoria climbed back into balanced market conditions in last month.

Year-to-date, BC residential sales dollar volume declined 4 per cent $35.5 billion, compared to the same period last year. Residential unit sales declined 11 per cent to 70,382 year-to-date, while the average MLS® residential price climbed 9 per cent to $504,042 over the same period.

Click on the images below to enlarge.

November 2010 Residential Average Price Active Listings, Sales to active listings data by bc board copy

November 2010 BC Residential MLS

November 2010 Year to date Residential MLS

 

This article appeared on the CBC News website on December 13, 2010.

Bank of Canada Kamloops Real Estate Mortgage Interest RatesBank of Canada governor Mark Carney repeated warnings Monday to Canadian households and businesses: don’t be caught off guard by current low interest rates and that repercussions from a hike could be swift.

In a speech to the Economic Club of Canada in Toronto, Carney said efforts by various governments to stimulate the economic recovery are keeping borrowing rates low. But when rates do begin to rise again, Carney said, the repercussions may be swift and fierce and have the potential to catch many with debt loads they can no longer afford.

Finance Minister Jim Flaherty said he talks with bankers about loan default rates, and “there is reason for concern,” but not “extreme concern.” The government has no plans to take immediate action, he added

Flaherty pointed out that the government has twice tightened mortgage rules, in 2008 and early 2010, and will do so again if it becomes necessary. But he said the government has to balance the availability of credit, and the impact on employment in the housing sector if rule tightening led to a construction slowdown.

Carney’s warning came the same day Statistics Canada released data showing the ratio of Canadian household debt to disposable income rose to a record high in the three months ending in September. “Cheap money is not a long-term growth strategy,” he warned. “Experience suggests that prolonged periods of unusually low rates can cloud assessments of financial risks.”

Hike Expected May 31

Flaherty said Canadians should assume rates will rise, “and they should be cautious.” The Bank of Canada will set interest rates based on inflation, not on whether a large swath of Canadians have taken on too much debt, Carney added. He suggested the bank may raise interest rates even in a low-inflation environment to discourage risky borrowing. “While the bar for further changes remains high,” he said, “the bank has the responsibility to draw the appropriate lessons from the experience of others who, in an environment of price stability, reaped financial disaster.”

On Dec. 9, the Bank of Canada warned that the risks of another recession are growing, given Europe’s debt crisis, widening gaps between exports and imports among countries, and that Canadians, with their high levels of debt, may not be prepared for it.

Japan’s lost decade

Twice in the speech, he raised the spectre of Japan’s lost decade and even the Great Depression, suggesting some of the problems faced today are as formidable. “The crisis is not over, but has merely entered a new phase,” he said. “In a world awash with debt, repairing the balance sheets of banks, households and countries will take years.” “As a consequence,” he said, “the pace, pattern and viability of global economic growth is changing, and Canada must adapt.”

Carney said with currency tensions rising, there is a concern about protectionist measures as occurred during the Great Depression because of the “death grip” of the U.S. dollar as the world’s preferred currency for foreign exchange reserves. “Over a dozen countries are now accumulating reserves at double-digit annual rates,” he pointed out, “and countries representing over 40 per cent of the U.S.-dollar trade weight are now managing their currencies,” or subtly manipulating them.

The global adjustment means Canadian exports will remain weak, he said, urging firms to improve their competitiveness to meet the challenge.

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