National Real Estate News

Canadian National Real Estate News

This article appeared in the Financial Post on October 20th, 2014 and was written by Garry Marr. CMHC Continuing With Plans for Banks to Take on More Mortgage Risk

The head of Canada Mortgage and Housing Corp. said the Crown corporation is continuing with plans to have banks take on more risk when it comes to the housing market.

“In the insured market all of the risk is on CMHC’s balanced sheet or 90% on the government’s balanced sheet through private sector competitors. The government wants to reduce its exposure to the housing market,”  Evan Siddall, president of Canada Mortgage and Housing Corp. told the Canadian Club in Toronto in what was billed as a “conversation” with Terry Campbell, president of the Canadian Bankers Association.

Mr. Siddall said the government has asked CMHC to look at options and advise it on what to do next.

Consumers with less than a 20% downpayment must get mortgage default insurance if they are borrowing from a bank regulated by the Bank Act. The government backs loans insured by CMHC 100% and for up to 90% for private entities like Canada Guaranty.

Mr. Siddall has said there is some value to banks having some “skin in the game” which some have suggested could mean banks pay a deductible of up to 10% in the event a consumer defaults.

“It’s kind of classic perspective,” said the CMHC head. “It’s this idea of moral hazard that if you took risk away from the people who confronted it in the marketplace, it could lead to bad behaviour. The stupid example is if you insure someone who is driving a car, they won’t be a responsible car driver.”

Mr. Siddall said the banks are responsible but the idea of deductible is “good idea” and something along those lines is good economic policy.

Sources have told The Financial Post that CMHC has already been in discussions with the CBA and Office of the Superintendent of Financial Institutions about the idea which is years away from being implemented.

Mr. Campbell told the audience a lot of conversation with the industry will be needed before anything happens.

“In Canada, as you know and everybody in this audience knows, we did not have a housing crash like some other jurisdictions,” said Mr. Campbell, chalking that up to good risk management on behalf of banks when it comes it lending. “I think banks do have an awful lot of skin in the game if you look at the growth in their uninsured portfolio.”

Canada Housing Starts Top Expectations; Canada Housing Starts Came in at 198,185 Annual Rate In June 2014. This article appeared on the Wall Street Journal and was written by Don Curren.

Canadian housing starts advanced 0.6% in June from May to an annualized rate of 198,185 units, Canada Mortgage and Housing Corp. said Wednesday.

The results exceeded economists’ expectations, which were for annualized starts of about 190,000 units, according to CIBC World Markets. It said June marked the third straight month of housing starts close to 200,000 units, going “against the conventional reasoning that 2014 would bring with it the expected slowdown in the Canadian housing boom.”

Some analysts are still worried Canada’s housing market could suffer a sharp correction. Sustained strength in housing starts isn’t all positive from that point of view, because it suggests the market is not yet cooling down.

“The resiliency of the Canadian housing market has surprised expectations for a transition to lower, more sustainable levels and the latest monthly reading is no exception,” said a report from Royal Bank of Canada.

It said the recent outperformance of Canadian building permits and the persistence of low mortgage rates provide upside risk for new housing demand to remain elevated in the near term.

The recovery from earlier harsh weather distortions is expected to give way to levels of home-building activity that are closer in line with household formation in the coming months, RBC said.

“We remain of the view that recent robust levels of housing starts are unlikely to be maintained over the second half of the year and into 2015,” it added.

Last month’s results brought the six-month trend in housing starts to almost 186,000 units from slightly more than 184,000 units in May, CMHC said in Wednesday’s release.

In June, urban starts rose to 181,979 units, reflecting a decline in multiple starts but an increase in single-detached starts. Urban starts were up in Atlantic Canada and the Prairies but down in Quebec, Ontario and British Columbia, CMHC said.

National Bank Financial said the fact that June housing starts were tilted towards single-detached homes is encouraging news because it suggests a stabilization in the multiple sector–mainly condominiums– after earlier overbuilding in that category.

National Bank said single-detached units contribute more to economic growth than multiples, which bodes well for housing’s contribution to economic growth in the second quarter.

This article appeared on on February 28th, 2014 and was written by Pete Evans.  CMHC Hikes Mortgage Insurance Premiums: Housing Agency Increases Amount Homebuyers Must Pay to Insure Their Loans

CMHC Canadian Mortgage and Housing CorporationCanada’s national housing agency has increased the cost of insuring mortgages for homebuyers who make down payments of less than 20 per cent. Starting in May, the housing agency will charge an average of about 15 per cent more to insure mortgages, CMHC said in a release Friday. Prior to the announcement, the premiums ranged between 0.5 per cent and 2.75 per cent. Under the new rules, they will range from 0.6 per cent to 3.15 per cent.

MAP: House prices across Canada
Ottawa caps mortgages at 25 years

The changes are unlikely to have a major effect on the housing market, but in real-dollar terms, the move makes it incrementally more expensive to buy a home. A heavily leveraged buyer — someone with only five per cent down, and therefore borrowing 95 per cent of the home’s value — would be most affected by the hike.

Under the old system, that borrower would pay an insurance premium of $6,875 to get a $250,000 mortgage. Under the new system, the premium would jump by $1,000. On a typical 25-year mortgage at 3.5 per cent, that person would be paying about $5 more every month. “This is not designed to affect housing market activity,” CMHC vice-president Steven Mennill said.

Mandatory insurance

Homebuyers in Canada are legally required to purchase mortgage insurance if they don’t put down 20 per cent of the price of the home up front. The homeowner pays for the insurance, but the lender is the beneficiary — it covers their losses if the homeowner defaults.

The vast majority of that insurance is sold through CMHC, although some private companies also offer it. Those companies, including Genworth Financial and Canada Guarantee tend to match whatever taxpayer-backed CMHC is charging.

True to form, Genworth did exactly that later on Friday, raising its insurance premiums to match CMHC’s.

“We believe this new pricing is prudent and more reflective of increased regulatory capital requirements,” Genworth chair Brian Hurley said. “These pricing actions are supportive of the long-term safety and stability of the Canadian housing market.”

Genworth shares jumped up by almost five per cent on the TSX following the news, a day after they gained more than three per cent as rumours of what CMHC was planning leaked out. Higher premiums mean more revenue for the insurer, which investors like.

CMHC charges a percentage fee for its insurance policies in the very low single-digits. Those percentages haven’t been raised since the late 1990s, and were in fact lowered from 2003 until 2005.

“The higher premiums reflect CMHC’s higher capital targets” Mennill said 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.”

The increase will only affect new policies, not mortgages already in existence.

CMHC said the new rules will apply to owner-occupied units and one-to-four-unit rental properties. It will also apply to self-employed owners. “This isn’t going to have a big impact on the mortgage market,” said Kelvin Mangaroo, the president of “It’s more about getting their capital reserves in line.”

Considering how strong the housing market has been for the last decade, it’s not surprising that the CMHC has moved to adjust the premiums it charges to insure all that pricey housing stock, he said.

This article appeared on the Globe and Mail on January 21st, 2014 and was written by Tara Perkins.

home for sale sold sign kamloops real estate mls listing kirsten masonFitch Ratings thinks that Canadian home prices will manage to stay flat or dip just a little bit this year, despite its belief that they are 20 per cent too high, because of the strength in the housing market.

The expected decline in the pace of home price growth, coupled with high consumer debts, will likely lead to a rise in mortgage delinquencies, although they will remain at relatively low levels, the rating agency added.
Fitch has been saying for roughly a year that it believes Canadian home prices are overvalued to the tune of 20 per cent. But in a report released Tuesday it suggested that it does not forecast much trouble for the market in 2014, saying that a “correction [is] not yet in sight” for Canada and a number of other countries that it has been concerned about.

While most economists agree that Canadian home prices are currently too high, estimates of the overvaluation range from 5 or 8 per cent to 60 per cent. Policy-makers here are hoping that employment and incomes will rise while home prices flatten out, helping the situation to sort itself out without any sharp drop in prices. But if the housing market keeps up its momentum – which is fuelled in large part by low interest rates – risks will continue to build up in the system. The market staged a surprisingly strong rebound in the middle of 2013, but recently has shown signs that the momentum is petering out: the number of existing homes that changed hands has slipped down month-to-month for three months in a row.

While Fitch expects rising economic growth and supportive government policies to boost mortgage lending in most countries this year, it sees lending volumes softening in Canada because of measures Ottawa has been taking to curb the housing market.

“The Canadian government is exerting a moderating influence on the market, following concerns over the long-term viability of household debt levels and high prices,” it said in the report. “This should lead to muted lending in 2014/15.”

The Canadian Association of Accredited Mortgage Professionals forecasts that mortgage credit will rise by 3.25 per cent this year and by 3 per cent in 2015, compared to an average rate of 8.6 per cent during the past decade. That would bring the total amount of residential mortgage debt that Canadians have outstanding to about $1.29-trillion by the end of 2015.

“While Canadian prices may fall this year, Fitch believes any decline would be slight due to the country’s strong macro-economic trends and cautious lending policies driven by government measures, which are expected to slow lending in 2014,” the rating agency said in its report.

But it added that affordability “is already very stretched” despite record low interest rates, and that if the Bank of Canada raises interest rates later this year that will put additional stress on the market.

While many economists don’t expect the central bank to raise rates until the middle of 2015 or even later, Fitch says it expects them to go up towards the end of 2014.

“Fitch expects mortgage rates to remain mostly steady initially in 2014, though there is likely going to be more upward pressure nearing the end of the year from both U.S. policy and Canada’s internal government,” it said.

Mortgage prices tend to follow changes in five-year government bond yields (because those impact the price that banks pay to obtain money to lend out), and Canadian bond yields tend to follow U.S. bond yields, meaning that Canadian mortgage rates depend in large part on the outlook for the U.S. economy.

Royal Bank of Canada, this country’s largest mortgage lender, cut a number of its fixed mortgage rates by 10 basis points this past weekend. Lenders such as Home Trust and First National Financial LP have also decreased their rates this month.

“Primarily due to rising home prices, household debt-to-disposable income ratios have risen dramatically over the past decade, despite a large drop in mortgage rates over the same period,” Fitch noted.

It expects the ratios to stabilize this year as home price growth slows or reverses. “Nearing the end of 2014, there may be increased risks of rising debt ratios given pressure from rising interest rates,” it said.

This article appeared on on January 15th, 2014.

The average price of a Canadian home increased 10.4 per cent to $389,119 in December, compared to the same month in 2012.

The Canadian Real Estate Association (CREA) released data Wednesday showing that a total of 457,893 homes changed hands in Canada last year, an increase of about 0.8 per cent from 2012’s level.

MAP: House prices across Canada

“Absent further mortgage rule changes,” CREA’s chief economist Gregory Klump said, “sales in 2014 may surpass the annual total for 2013 if demand holds steady near current levels as strengthening economic and better job growth offset the impact of further expected marginal mortgage interest rate increases.”

As has been the case for some time now, CREA says the large jump in prices was largely due to what was happening in Canada’s most active and expensive markets.

Broad gains

Sales activity in December 2012 in Toronto and Vancouver was abnormally low, which dropped the national average at that time.

“Removing Greater Vancouver and Greater Toronto from national average price calculations cuts the year-over-year increase to 4.6 per cent,” CREA said.

CREA says the average price can be misleading, as it can be too easily influenced by individual factors.

The realtor group says its MLS Home Price Index “provides a better gauge of price trends because it is not affected by changes in the mix of sales activity the way that average price is.”

That index shows home prices rose 4.31 per cent over the past 12 months. Gains were seen in all housing types.

The index was led by an 8.7 per cent gain in Calgary and a 6.3 per cent gain in Toronto.

Vancouver’s market index posted a second straight increase of 2.13 per cent after declines for much of the time between late 2012 and late 2013.

Soft landing?

Economists and policy-makers have been scrutinizing the Canadian housing market for indications of weakness and warning signs of a possible crash.

However, BMO senior economist Robert Kavcic said it was hard to find evidence to suggest anything but a soft landing for the market.

“Look for current balanced conditions and somewhat higher interest rates to lead to steady sales this year, with price growth tucked neatly below the rate of income growth,” Kavcic said.

This article was posted on on January 15th, 2014 and was written by Craig Wong of The Canadian Press.

OTTAWA — Canadian home sales were up from a year ago in December, but slid lower compared with the previous month for the third consecutive time, the Canadian Real Estate Association says.

The industry association said Wednesday that the number of sales last month was up 12.9 per cent compared with December 2012, and the national average price was up 10.4 per cent to $389,119.

However the December’s sales, through the multiple listing service, were down 1.8 per cent from November, continuing a downward trend that began with CREA’s October report.

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“Activity has gradually eased back from stronger than expected levels last summer and is now roughly in line with the 10-year monthly average,” CREA president Laura Leyser said.

“We’ll likely continue getting mixed signals in the months ahead, with positive year-over-year comparisons for sales masking the recent moderation in the monthly sales trend.”

For the full year, there were 457,893 homes sold through the MLS system, up eight-tenths of a per cent from 2012.

Economists and policy-makers have been scrutinizing the Canadian housing market for indications of weakness and warning signs of a possible crash.

However, BMO senior economist Robert Kavcic said it was hard to find evidence to suggest anything by a soft landing for the market.

“Look for current balanced conditions and somewhat higher interest rates to lead to steady sales this year, with price growth tucked neatly below the rate of income growth,” Kavcic said.

TD economist Diana Petramala noted that some of the weakness in December may have been due to the freezing weather.

“However, higher mortgage interest rates appear to be taking some steam out of home demand, particularly for first time homebuyers,” Petramala wrote in a report.

“Five-year mortgage rates have risen by 70 basis points since May. Going forward, a continued increase in longer term interest rates will offset improving economic conditions, helping to keep home sales stable in 2014 and 2015.”

While home sales in December were down compared with November on a national basis, roughly 60 per cent of the local markets across the country saw lower sales.

Declines in Calgary, Edmonton and Toronto more than offset gains in Vancouver, the Fraser Valley and St. Catharines, Ont.

Meanwhile, the number of newly listed homes fell 4.3 per cent on a month-over-month basis in December.

The national sales-to-new listings ratio climbed to 55 per cent in December compared to 53.6 per cent in November.

This article was written by Julian Beltrame of The Canadian Press on October 28th, 2013.

OTTAWA – Finance Minister Jim Flaherty is taking on the responsibility of averting a housing bubble in Canada that could destabilize the economy, adding he will speak to those in the business to try and keep a lid on rising home prices.

With the Bank of Canada essentially taking itself out of the game by signalling interest rates won’t be raised for some time, Flaherty said Monday after meeting with about a dozen economists that it falls on his department to ensure the market is stabilized.

“It does fall to the Department of Finance to do anything if we’re going to do anything because there’s basically no room for the Bank of Canada to move,” he said. “Some of the economists suggested I have some conversations with people in the building industry because what we’re seeing in certain parts of the country (is) a re-acceleration of housing prices. I do speak regularly to people in the business and I’m going to do more of it now.”

Flaherty said he has no intention of acting at the moment, but said he was keeping an eye on the market to see if the current uptick in sales and prices is temporary or the beginning of another hot run.

Most economists see the market slowing after the recent resurgence, including the Bank of Canada. But the central bank also cited the “renewed momentum” as one of three domestic risks to the economy in its October monetary policy report. “This (the resurgence) would provide a temporary boost to economic activity, but could exacerbate existing imbalances and therefore increase the probability of a correction later on,” the bank said. “Such a correction could have sizable spillover effects to other parts of the economy and to inflation.”

The minister has been active in the housing market throughout his tenure, at first easing rules but more recently clamping down as Canadians took on ever-increasing debt levels to buy real estate.

The latest measure, which came in July 2012, was followed by a slump in sales and a slowdown in price gains. But the market began picking up again during the summer, particularly in Toronto and Vancouver, with the average home price hitting a new record high of almost $386,000.

Home prices are not Flaherty’s only worry.

The minister told reporters he remains focused on trying to eliminate as much as possible the price gap between the United States and Canada that one recent report pegged at about 10 per cent. Flaherty said he has been meeting with CEOs of the country’s major retailers to ask for explanations as to why prices for the same items remain elevated in Canada, adding that he is not altogether persuaded by the answers he has been given.

“There are some companies that look at Canada as a relatively small market that is relative well off, (with a) large middle class, and, ‘Let them pay a little more, and they’ll pay it.’,” he said of merchant attitudes. However, Flaherty said he will wait until the results of a study being conducted by the market research firm Nielsen before deciding if anything needs to be done.

“It becomes an interesting question of what the government can do about that … there are always persuasive techniques that can be used to nudge people in the right direction,” he said. The minister has deployed the approach before.

Earlier this year he personally phoned the Bank of Montreal to “persuade” it to raise its five-year fixed mortgage rate after BMO cut it to 2.99 per cent. Flaherty said he was concerned about a race to the bottom on rates that would trigger unsustainable borrowing.

This article appeared on CBC News on October 15th, 2013.

Canadian home sales posted a small month-over-month increase in September and the national average sale price rose but the number of new listings declined, according to the Canadian Real Estate Association.

Home sales were up just 0.8 per cent from August to September, while overall activity remained on par with the 10-year average in September, CREA said.

However, last month’s sales were up 18.2 per cent compared with September 2012 and the average sale price was up 8.8 per cent to $385,906.

Robert Kavcic, senior economist at BMO Capital Markets, highlighted regional shifts as the reason for the spike from last year.

“Regionally, the big story continues to be the snap-back in Vancouver, where sales were up a towering 64.3% year over year in September,” he said in a note to investors.

However, Kavcic says that stripping out volatile markets like Vancouver and Toronto shows a balanced housing market.

“Any worry about a hard landing in Canadian housing has quickly become a faint memory, and underlying conditions are more balanced than the flashy headline results suggest.”

Looking forward, Kavcic sees a softer market by no need for alarm. “Sales in September 2012 [were] slumping in the wake of stricter mortgage rules,” he said.

The association’s MLS Price Index, which is less volatile as it adjust for the characteristics of houses sold, rose by a more modest 3.1 per cent.

“Year-over-year increases in the sales over the past couple of months highlight how activity softened across much of the country following the introduction of tighter mortgage rules last summer,” said Gregory Klump, CREA’s chief economist.

“While the momentum for sales activity began improving a few months ago, it may be losing steam after having only just climbed back in line with an average of the past 10 years,” he added.

About 340,980 homes have traded hands across the country so far this year, or 1.8 per cent below levels recorded in the first three quarters of 2012.

There were 1.4 per cent fewer newly listed homes in September compared with August, the association said, adding that while the Canadian housing market has tightened, it continues to remain balanced.

Greater Vancouver, Fraser Valley, Calgary, Greater Toronto, London, St. Thomas, Ont., Ottawa and Montreal all saw listing declines.

The Canadian Real Estate Association is one of Canada’s largest single-industry trade associations, representing more than 106,000 realtors working through more than 90 real estate boards and associations.

OTTAWA, February 22, 2013 — Moderation in economic and employment growth in the second half of 2012 has led to more modest housing demand. With continued moderation expected in the first half of 2013, total annual housing starts are expected to be lower in 2013 relative to 2012, according to Canada Mortgage and Housing Corporation’s (CMHC) first quarter 2013 Housing Market Outlook, Canada Edition1.

As fundamentals, including employment, economic growth and net migration are expected to gain momentum later in 2013 and in 2014, housing starts are expected to trend slightly higher next year.

“CMHC expects housing construction activity will trend lower in the first half of 2013, before gaining more momentum by the end of the year as economic and employment growth remain supportive of the Canadian housing market,” said Mathieu Laberge, Deputy Chief Economist for CMHC. “In 2014, improving economic conditions may be partially offset by a slight moderation in the number of first-time homebuyers, and potential small and steady increases in mortgage interest rates.”

On an annual basis, housing starts are expected to range between 178,600 to 202,000 units in 2013, with a point forecast of 190,300 units, following a level of 214,827 units in 2012. In 2014, housing starts are expected to range from 171,200 to 217,000 units, with a point forecast of 194,100 units.

Existing home sales are expected to range between 418,200 to 484,000 units in 2013, with a point forecast of 451,100 units, following a level of 453,372 in 2012. In 2014, Multiple Listing Service® (MLS®2) sales are expected to range from 439,600 to 505,000 units, with an increase in the point forecast to 472,300 units.

The average MLS® price is forecast to be between $356,500 and $378,500 in 2013 and between $363,800 and $390,800 in 2014. CMHC’s point forecast for the average MLS® price calls for a 1 per cent gain to $367,500 in 2013 and a further 2.7 per cent gain to $377,300 in 2014.

As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.


This article appeared in the Financial Post on November 9th, 2012 and was written by Andrea Hopkins (Reuters).

TORONTO — Canadian housing prices will fall 10% over the next several years and homebuilding will slow sharply in 2013, but the country’s recent property boom is not expected to end in a U.S.-style collapse, according to a Reuters poll.

The survey of 20 forecasters published on Friday showed the majority believe the Canadian government has done enough to rein in runaway prices, preventing the type of crash that has devastated the U.S. market for years.

“This isn’t a sharp correction, this isn’t a U.S.-style correction, it’s just simply an unwinding of the excess valuation that was created by artificially low interest rates for a long period of time,” said Craig Alexander, chief economist at Toronto-Dominion Bank.

“I would emphasize that while a 10% correction sounds scary, in actual fact, this would be a healthy outcome.”

U.S. house prices crashed as a mortgage crisis unraveled in 2008, triggering a financial crisis and leaving a trail of foreclosures, negative equity and financial hardship for millions of people. Housing prices in the U.S. have only begun to rise again this year.

On a national basis, Canadian house prices are expected to drop 10% over the next several years, and housing starts will fall more than 17% to 184,000 units by mid-2013, according to median results of the poll, which was conducted over the last week.

House prices have already begun to cool in some areas but nationally remain 23% higher than their trough in March 2009, according to a Canadian Real Estate Association index.

Respondents in the Reuters poll said house prices will rise 2.0% in 2012 and fall 0.1% in 2013, according to the median of 18 forecasts, putting most of the losses at least two years away.

Median forecasts had Toronto prices rising 5.1% in 2012 and falling 1.3% in 2013. But respondents saw an eventual 5% fall from current levels. Vancouver prices were forecast to fall 2.7% in 2012 and 3.8% in 2013, with an eventual decline of 12.5%.

As sales decline and prices fall, homebuilders will ratchet back on construction starts, the poll showed.

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Housing starts, which notched a seasonally-adjusted annual rate of 222,945 units in the third quarter, will decline to 200,500 in the fourth quarter, 186,900 in the first quarter of 2013, and 184,000 in the second quarter of next year.


That 17.5% drop in new homebuilding will take a bite out of Canada’s economic growth, fuelled by the housing sector, consumer spending and government stimulus since growth slowed in 2009. But a strengthening global economy should help pick up the slack, Alexander said.

Not everyone is as sanguine. While economists at Canada’s major banks have consistently predicted a softening in prices and a slowing in housing starts, some independent analysts see a very hard landing ahead.

“The housing market is something to be very worried about,” said David Madani, Canada economist at consultancy Capital Economics in Toronto.

Madani, whose forecasts are included in the Reuters poll, has consistently predicted a 25% drop in prices and a plunge in housing starts to just 150,000 next year as builders grapple with too many homes and falling demand.

“The one symptom that housing bubbles always have in common is the over building, and I feel the banks play this down a bit,” said Madani, pointing to recent housing starts well above the 175,000 to 185,000 pace economists say is needed to keep up with population growth.

“We’ve been building above 200,0000 for several years. And we know we’ve been building above demographic requirements because the evidence is in the inventory data – it’s high, it’s not low,” said Madani.

“The excesses are there, it’s plain and clear to see.”

Still, all 15 respondents who answered an additional question said they believe the Canadian government has done enough to slow the housing market and prevent a U.S.-style crash, as Finance Minister Jim Flaherty has argued.


Mindful of the U.S. boom and bust, the federal government tightened mortgage lending rules four times in the last four years to make it harder for home buyers to take on too much debt in their quest for a home.

The rule changes gradually shorted the maximum mortgage length from 40 years to 25 and also put limits on how much homeowners could borrow against their house, among other measures.

While interest rates are not expected to rise until mid-2013, the stiffer lending rules and government warnings about the high debt loads of Canadian households have helped cool the ardor of home buyers, with the hottest markets, including Vancouver and Toronto, already feeling a chill.

Sales of existing homes were down 15.1% in September from a year earlier, and were 6.5% lower in the third quarter from the previous three months, according to data from the Canadian Real Estate Association.

Prices, which lag sales, have started to come down as well. Prices for existing homes dipped 0.4% in September from August, according the Teranet-National Bank Composite House Price Index, but remain 3.6% higher than a year earlier.

Prices of new homes rose 0.2% in the month, the 18th straight monthly gain, and were up 2.4% on the year, according to Statistics Canada.

This article appeared on the Global BC website on November 8th, 2012.

New Construction Kamloops BC Real EstateOTTAWA – The pace of home building slowed in October to a softer reading than economists expected in a report by the federal mortgage insurer, providing yet more evidence of a cooling housing market.

Canada Mortgage and Housing Corp. said Thursday there were 17,507 actual housing starts last month. That translates into a seasonally-adjusted annual rate of 204,107 starts, down almost nine per cent from an annual rate of 223,995 recorded in September.

CMHC said there were drops in both single- and multiple-unit starts in urban areas last month.

Declines were recorded in all regions, with Quebec reporting the biggest drop at 16.9 per cent.

“The monthly decrease in total housing starts posted in October was mostly due to a decrease in both single and multiple starts in urban centres in Quebec and the Prairies,” Mathieu Laberge, deputy chief economist at CMHC, said in a release.

“Multiple starts also declined in many urban centres in Ontario, more than offsetting an increase in such starts in Toronto.”

Seasonally-adjusted urban starts decreased 1.5 per cent in British Columbia, 6.4 per cent in Ontario, 12.3 per cent in the Prairies, and 16.8 per cent in Atlantic Canada.

The agency, which provides mortgage insurance to home buyers and market intelligence to the real-estate industry, estimates rural starts came in at a seasonally-adjusted annual rate of 21,973 units in October.

Earlier this week, the federal Crown corporation predicted 177,300 to 209,900 of housing units will be started next year — substantially less than the forecast of 210,800 to 216,600 for 2012.

Bank of Canada governor Mark Carney said the slowdown is consistent with the bank’s expectations.

“We view household formation around 190,000 annualized and the starts are a little north of 200,000, so they’ve slowed from a very rapid pace to a pace that’s still above household formation,” Carney said in Montreal.

“We’re expecting this decreased contribution from housing relative to GDP… We’re starting to see some things that are consistent with that, so it’s entirely consistent with expectations.”

Emanuella Enenajor of CIBC WM Economics noted that “despite low (interest) rates and surprisingly resilient investor demand, housing construction looks to be struggling to attain new heights in recent months.”

“Although the housing starts data tend to be volatile month-to-month, we expect to see a trend in softening starts through 2013, as a slowdown in secondary market activity weights on homebuilding.”

The CMHC data suggests housing starts — where trends tend to lag those in the home resale market — are falling in line with home sales figures released in the last few months, which points to a broader slowdown in Canada’s housing market.

The latest figures from Canadian Real Estate Association found sales in September fell 15.1 per cent from a year earlier, due in large part to a further tightening of mortgage rules and a slowdown in Vancouver.

A real estate expert at Queen’s University called the drop in housing starts in October “significant” and said it’s “clear evidence” that the housing market is slowing down.

“(The numbers) provide sound evidence reinforcing the idea that housing markets in most regions and cities are cooling off rapidly,” John Andrew, director of the Queen’s real estate roundtable, said in a release.

“Housing starts are clearly responding to the decrease in new and existing home sales that we’ve seen in most markets over the past few months, especially for condos. I expect this trend to deepen over the remainder of 2012 and likely into 2013.”

In a global outlook released last month, the International Monetary Fund singled out housing and household debt, which currently sits at a near-record 163 per cent of income, as the key areas of concerns for Canada.

Those concerns have been voiced before, including by Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty, who has moved four times in as many years to reduce mortgage lending.

Over-saturation, high prices, high debt levels and recent tightening of mortgage rules are impacting the resale market, economists have noted, particularly in the previously torrid markets of Toronto and Vancouver.

Read it on Global News: Global BC | Housing starts fall in October with drops in all regions, CMHC says

This article appeared on the website on September 17th, 2012 and was written by Darren Calabrese.

Home sales declined by almost nine per cent in August even as prices ticked slightly higher, data from the Canadian Real Estate Association showed today.

The 8.9 per cent decline in activity is the largest annual drop since April 2011, CREA said, and was led by declines in major markets such as Vancouver, Toronto, Calgary, Edmonton and Ottawa.

While the number of sales declined, prices held up. CREA says the average price of a Canadian home sold in August was $350,192, up 0.3 per cent from where it was a year ago.

As it has several times in the past year, CREA warned that the national average price is being skewed by a several factors, most notably fewer sales in Vancouver this year compared with 2011.

If Vancouver activity is stripped out of the equation, the national average price has increased 3.3 per cent in the year up to the end of August.

In a separate release, the real estate group updated its housing forecast for the year. CREA now expects fewer home sales this year and next, and it predicts the average home price for 2012 as a whole will come in at $365,000, a 0.6 per cent rise from 2011’s average.

For 2013, CREA predicts a slight pullback, with prices ticking down 0.1 per cent to $364,500.

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Canada Mortgage and Housing Corp presented its latest forecast for Canada Housing market on Tuesday 11th August. The report focuses on market trend and condition for the rest of 2012 and 2013. The CHMC’s outlook for the third quarter of this year proves that the market is cooling all across the country and the slowdown will continue throughout 2012 and 2013.

The forecast is largely based on statistics and data collected and compiled by Canada Real Estate Association CREA.

Mortgage Expert, Marcus Arkan, CEO of Syndicate mortgages has said that CHMC’s report confirms what analysts and economists have been saying ever since new mortgage rules were announced. He said, “Since the very day new mortgage rules were announced, the tabloids are filled with speculations and expectations. Most of experts including CHMC itself were warning about a slowdown. Now with the latest stats and figures before us, CMHC has finally confirmed our worst fears.”

According to CHMC, the slowdown will not create a major economic threat but send the market in a more balanced situation for a year or so. The report indicates that the market has shown sustained activity levels for the first two quarters of this year. Due to this sustained growth, there will be a definite slowdown in price growth.

Mr. Arkan highlighted how the latest forecast is slightly different than what CHMC has predicted in June. “The point forecast regarding housing starts in the latest report is higher than what has been predicted in June and the range is slightly wider. This may be because the data and stats from July have provided a far more clear idea of where the market is heading now.”

For 2012, CHMC’s numbers predict that the range of housing starts will remain 96,800 to 217,000, with a point forecast of 207,200 units. For the next year, starts are expected to be in the range of 73,000 to 207,400 units. Similarly, existing home sales will also remain within a moderate range of 442,300 to 485,200 units in 2012, with a point forecast of 466,600 units this year. For 2013, these sales are expected to increase up to 487,600 units.

One thing that Mr. Arkan pointed out as the most interesting part of the CHMC’s latest report is the prediction regarding prices for property sales. The report suggests that the slowdown will not lead to price decline. However, the rate of price growth will slow down to some extent.

According to CHMC’s report from last month, the point forecast for average price was $372,700 for 2012 and $383,600 for 2013. Now according to the latest forecast, the average price shall remain lower at $368,000 for 2012 and $377,300 for 2013.

To view CMHC’s market forecasts, reports and analysis click here.

This article appeared in the Financial Post on July 3rd, 2012.

TORONTO — The Bank of Montreal predicted Tuesday that the Bank of Canada will keep interests rates lower for longer than it expected.

Economists at the bank now believe the central bank will not raise its key rate until July 2013, six months later than their earlier prediction of January 2013.

Senior economist Michael Gregory said the change stems from the easing policy of the U.S. Federal Reserve, a downgraded Canadian economic outlook and tightened mortgage rules.

The changes, which include a cut to the maximum amortization period for government insured mortgages cut to 25 years from 30, should stem some fears around growing household debt that would otherwise push the Bank of Canada to increase rates sooner.

“The tightening of the government’s mortgage insurance rules does serve to act like higher interest rates specifically for that sector,” Gregory said. “So that takes some of the urgency away from the Bank of Canada to adjust rates any time soon.”

The Bank of Canada has kept its key interest rate at one per cent since September 2010.

The rate affects the prime lending rates at Canada’s major banks and in turn influences all kinds of interest rates including those charged to variable rate mortgages and lines of credit.

Gregory said he expects that the Bank of Canada will change its projections for economic growth when it releases its new monetary policy report on July 18.

“I suspect it will show softer growth in Canada, partly because of global factors and in part because of what’s going on in the U.S,” said Gregory.

This article appeared in the Financial Post on June 21st, 2012.

OTTAWA — Without the tool of interest rates to temper the housing craze and with the threat of Europe still overhanging the sector, Ottawa had to use other means to slow things down and, at same time, lessen consumers’ exposure to the market.

For that, it chose once again to tighten the screws on mortgage lending, a move that surprised many, but one that Canada’s finance minister characterizes as the government’s role in providing a “prophylactic function” — helping average Canadians save themselves from themselves.

Jim Flaherty, who had insisted it was up to commercial banks to take the lead on mortgage lending, on Thursday took that action himself ­— reducing the amortization period for government-backed mortgages and limiting home equity loans, among other measures.

“The government doesn’t necessarily need to be, at the end of the day, in the mortgage-insurance business,” Mr. Flaherty told reporters. “But we are in the business, so we have to ensure that the exposure to the taxpayers of Canada is reasonable.”

Mr. Flaherty said he wanted to “avoid the kind of issues that have happened in other countries in recent years. And I’m satisfied we are and our market is OK.

“But I think there’s a prophylactic function for government on this with respect to insured mortgages and it’s our job to try to be ahead of things and act — and act in a measured way, listening to the market. And I have been listening to the market and, quite frankly, I don’t like what I hear, particularly in the condo market.”

Thursday’s announcement marked the third time in four years that Ottawa has gone this route to head off over-zealous borrowing by homeowners, many of whom might not be able to carry their debt load.

The new rules, which take effect July 9, will see the maximum amortization period for government-insured mortgages fall to 25 years from 30 years. The limit for borrowing against the value of a home drops to 80% from 85%, while the maximum gross-debt ratio is fixed at 39% and the total debt-service ratio will be 44%.

The biggest surprise, however, was a new rule to limit government-backed mortgages to homes purchased for less than $1-million.

“At long last, the Canadian government is coming to the realization that the ball was in its camp all along,” said Louis Gagnon, a finance professor Queen’s University.

Mr. Flaherty has been “reluctant over the past several weeks to further tighten these rules, arguing it was up to the banks to stop people at the gate,” he said.

“In fact, what we’re dealing with is a systemic issue. It’s really in the government’s hands,” Mr. Gagnon said. “It’s always going to be important for the government to be pro-active on this front.”

Mr. Gagnon added: “These new rules are long over due. We know the pace of growth of consumer loans is not growing, it has actually come down a bit, but not on the mortgage side.”

The Bank of Canada has reluctantly been waiting on the sidelines — even as household debt ballooned — waiting to see how the European fiscal crisis plays out, and what impact that will have on the Canadian economy and that of its struggling neighbour to the south.

The central bank’s trendsetting lending rate, its lever for guiding monetary policy, has been stuck at a near-record low of 1% since September 2010.

The initial intention was to get consumers and businesses spending again as Canada edged out of recession. That indeed worked — too well, as it turns out.

Debt-to-income ratio of Canadian households has reached a record high of 152%, once again raising alarm bells that consumers were getting in way over their heads.

Just last week, the Bank of Canada warned consumers to brace for a possible shock wave from a worst-case scenario — a European banking collapse followed a housing crash and a jump in unemployment.

For his part, Bank of Canada governor Mark Carney also welcomed the tighter mortgage-lending rules, calling them “prudent and timely measures” in a speech in Halifax on Thursday.

Mr. Carney said the measures “support the long-term stability” of the housing market and “mitigate the risk of financial excesses.”

And while Canada’s “favourable economic performance” has relied on strong household spending, growth cannot “depend indefinitely on debt-fuelled household expenditures, particularly in an environment of modest income growth.”

Speaking later to reporters, Mr. Carney once again stressed the “No. 1 domestic risk to the Canadian economy is the potential for household finances to evolve in an unsustainable fashion.”

“These measures reduce the No. 1 domestic risk.”

This article appeared on the CBC on June 18th, 2012.

Kamloops Water Front Homes PropertyLower prices are powering a large increase in cottage sales across the country, one of Canada’s largest real estate companies said in a report Monday.

Re/Max said sales of recreational properties such as cottages are higher in 70 per cent of 33 markets the agency tracks.

Forty-nine per cent of markets showing “downward trending” in prices, and 33 per cent showing no change. Only 19 per cent of markets that Re/Max tracks showed higher prices this year compared to last.

“Affordability has provided some serious stimulus,” Re/Max Atlantic region vice-president Michael Polzler said.

Activity is especially strong on the low end of the market, the report said, with many markets showing inventory shortages for properties priced at $400,000 and under.

“While buyers are still cautious, they’re motivated,” Re/Max’s Western Canadian vice-president Elton Ash said. “Current market conditions have placed them firmly in the driver’s seat.”

The mild winter weather brought purchasers out earlier in the year in many parts of the country, Re/Max said.

The recreational property market is also witnessing a demographic shift. Sales among baby boomers are much weaker compared to previous years, in part because lower prices for vacation homes in the southern U.S. are enticing some older Canadians to become snowbirds.

But younger families and first-time buyers have stepped in to fill the void in most markets, Re/Max’s report says.

The company singled out several markets as being “value markets” at the moment. They include:

Atlantic Canada, the Laurentians and Eastern Townships in Quebec,
More than half of Ontario — including the iconic Muskoka area
Lake Winnipeg, Canmore, Harrison Lake and Comox Valley/Mt. Washington in Western Canada.

“Opportunity does exist,” Ash said. “Canadians love a good deal, and there’s no question that there are still some to be had in recreational property markets across the country.”

TORONTO (Reuters) – Canadian housing starts slowed as expected in May after a red-hot April, retreating to the average of the last six months, Canada Mortgage and Housing Corp said on Friday.

The seasonally adjusted annualized rate of housing starts was 211,400 units, compared with 243,800 units in April. The April figure was revised down from 244,900 units reported previously.

The number of starts in May was just below the forecasts of analysts in a Reuters poll, who had expected 212,000 starts.

“As anticipated, the pace of housing starts observed in April was not sustained in May. In fact, the pace in May was more in line with the average over the last six months,” said Mathieu Laberge, deputy chief economist at CMHC.

“Although some ups and downs are likely to continue in the months ahead, the pace of housing starts should trend lower as the year progresses,” Laberge said in a statement.

The slowdown was led by a decline in multiple family urban starts, which fell 20.7 percent to 125,300 units, while urban single starts decreased 4.2 percent to 64,300 units.

The seasonally adjusted annual rate of urban starts decreased by 15.8 percent to 189,600 units in May.

Canada’s hot housing market has sparked fears of a bubble, particularly in Toronto, Canada’s largest city, where low interest rates have driven a condominium building boom and double-digit annual price increases in existing home sales.

May’s seasonally adjusted annual rate of urban starts decreased by 35.8 percent in Québec, by 18.3 percent in Ontario, and by 7.7 percent in the Prairies. Urban starts increased by 6.4 percent in Atlantic Canada and by 20.9 percent in British Columbia. In each region, the decrease or increase was mainly due to changes in multiple starts.

(Reporting By Andrea Hopkins; Editing by Chizu Nomiyama)

This article appeared in the Globe and Mail on April 12th, 2012 and was written by Steve Ladurantaye.

Canada’s finance minister sees signs of cooling in Canada’s housing market, and that’s fine by him.

Economists and market watchers have been arguing for two years about whether the Canadian housing market, which has been among the hottest in the world coming out of the recession. But spring data shows sales in most centres have slowed considerably from the same time last year, and price gains appear to be moderating.

“I’m actually encouraged that the market itself is showing some correction,” Finance Minister Jim Flaherty said while visiting Alberta Thursday. “We’re not seeing so much of that in Toronto, but in Vancouver, yes. And overall we’ve seen some moderations, some softening in the residential market and I think that is a good thing.”

There was some speculation that the federal government would step in to further cool the market with its budget, but it resisted calls to make it more difficult for Canadians to qualify for mortgages.

It wouldn’t have been the first time – Mr. Flaherty previously intervened by ending 35-year amortizations on mortgages and forcing Canadians who choose variable mortgages to qualify using a higher interest rate than they’d actually be paying.

Record low interest rates have made it less expensive for Canadians to borrow a lot of money, which has led some to worry that they won’t be able to afford their homes when interest rates move higher in response to an improving economy.

Mr. Flaherty has opted to issue warnings to Canadians rather than enact new policy, mirroring the approach taken by the Bank of Canada. In January, he said “we have been cautioning Canadians for some time that they need to be prepared to have higher interest rates in the future and be aware of the affordability issue that that may create for some Canadians, not to assume that mortgage interest rates will remain low for a long period of time. So we all have to be cautious in our financial planning.”

Canadians will have a better idea of how homes have been selling when the Canadian real estate association releases its data for March early next week.

This article appeared on the CBC News website on March 22nd, 2012.

Major Canadian housing markets have continued to show “exceptional resiliency” so far this year, setting the stage for a busy spring, according to a major Canadian real estate organization.

In its market trends reports, Re/Max said its survey has found that 12 of 15 Canadian centres, or 80 per cent, reported sales activity in January and February that was ahead of last year’s levels.

More than half of the cities reported double-digit increases, “with the strong demand and diminished supply setting the stage for a heated spring 2012.”

Re/Max said low interest rates, coupled with strong consumer confidence levels and a mild winter played a significant role in the upswing, ushering in an early start to the spring market.

Average prices climbed in 14 of 15 markets, although price appreciation was more tempered, with only three markets — Toronto, Winnipeg and St. John’s, N.L. — posting gains in excess of 10 per cent.

However, tighter inventory levels at entry-level prices have sparked bidding wars — particularly in the Winnipeg and the Greater Toronto Area — with similar conditions starting to emerge in Saskatoon, Regina, London-St. Thomas, Hamilton-Burlington, Ottawa, St. John’s and Halifax-Dartmouth.

“Given the current economic climate, the strength of the country’s housing market clearly reflects the value Canadians place on home ownership,” said Michael Polzler, executive vice-president of Re/Max.

In terms of sales volumes, the best performing markets heading into the traditionally busy spring period were Halifax-Dartmouth, up 35 per cent, Saskatoon (21 per cent), Saint John, N.B., (20 per cent), Regina (16 per cent), St. John’s (12.5 per cent), Greater Toronto Area (12 per cent) London-St. Thomas (11 per cent) and Edmonton (11 per cent).

Only Vancouver, Kitchener-Waterloo, and Winnipeg have experienced softening in housing activity so far this year. Sales are down 16 per cent in the Greater Vancouver, 4.5 per cent in Kitchener-Waterloo, and Winnipeg down 0.2 per cent.

Meanwhile, despite expectations of continuing strong sales, price gains are likely to be “much more moderate that in years past,” said Elton Ash, regional -vice-president for Re/Max in Western Canada.

“We expect this will remain the trend moving forward, in line with the Canadian economy, as GDP growth also moves ahead at a more subdued pace.”

However, Ash said local conditions vary, with inventory shortages driving prices in some markets while others, such as in the case of Saskatchewan and Newfoundland, the local economy has shown extraordinary strength.

“On the whole, this is a very stable and healthy housing market in line with traditional norms, with few exceptions,” he said.

Re/Max said first-time buyers have been driving demand in both the smaller and major markets, in turn sparking strong sales activity among move-up purchasers at higher prices.

“As a result, the upper-end of the market has also held up well. There’s no question that the spring 2012 market will see all segments working in tandem.”

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