MLS Listings, News & Statistics
The BC Real Estate Association released it’s latest video report on the real estate market in British Columbia. BCREA Chief Economist Cameron Muir discusses the residential sales numbers and activity.
Click here to go to the BCREA Youtube Channel.
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Vancouver, BC – November 14, 2012. The British Columbia Real Estate Association (BCREA) reports that the dollar volume of homes sold through the Multiple Listing Service® (MLS®) in BC declined 14.6 per cent to $2.7 billion in October compared to the same month last year. A total of 5,276 MLS® residential unit sales were recorded over the same period, down 10 per cent from October 2011. The average MLS® residential price was $508,292, down 5.1 per cent from a year ago.
“While consumer demand was stronger in October on a provincial basis, home sales continue to trend below last year’s level,” said Cameron Muir, BCREA Chief Economist. “Tighter mortgage credit regulation has moderated housing demand on the South Coast.”
“However, an increase in residential sales was recorded in the Okanagan, Kootenay, Chilliwack and BC Northern board areas,” added Muir.
Year-to-date, BC residential sales dollar volume declined 18.2 per cent to $31.1 billion, compared to the same period last year. Residential unit sales declined 10.5 per cent to 59,946 units, while the average MLS® residential price was 8.6 per cent lower at $518,321.
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.
BITE OUT OF GROWTH
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.
RULE CHANGES HURT
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 in the Globe and Mail on November 11th, 2012 and was written by Robert McLister.
Just a few decades back, many thought it unthinkable to still be paying a mortgage during retirement. But a growing minority are now doing just that.
Whereas our parents paid off their mortgage in roughly 12 years on average, about one in four homeowners are now carrying a mortgage into retirement. In fact, retirees are accumulating debt at three times the average pace.
Aversion to debt has clearly waned. Almost one-quarter of baby boomers say paying off their mortgage by retirement is “not very important” or “not at all important.” And more than half of Canadians expect to carry a mortgage into their golden years.
“My philosophy is to not carry any debt into retirement,” says retirement expert Gordon Pape. “But people today have a very casual attitude about it.”
So, just how big of a problem are mortgages in retirement? After all, places like Switzerland – which rivals Canada for the world’s strongest banking system – have 100-year “generational” mortgages. (What a way to get back at your kids!) And in a number of other prosperous European countries, interest-only mortgages – with theoretically infinite amortizations – are commonplace.
The threat posed by having a mortgage in retirement depends, not surprisingly, on the borrower’s income, savings, debt and other living expenses.
Statistically speaking, if you’re a typical married couple over 65, the latest government figures show that you take home about $46,000 combined each year. The median retiree’s mortgage is about $87,000. That implies a $411 monthly payment on a standard five-year fixed rate mortgage. That’s about 11 per cent of the typical retiree’s after-tax income, something that is easily tolerable.
On average, mortgages in retirement aren’t sending people to the poor house. Where it could get dicey, Mr. Pape says, is when interest rates rise. For a sizable minority without financial breathing room, “There is potential for real trouble down the road.”
For many single or lower income seniors, carrying a mortgage can be like walking in a minefield. All it takes is one misstep or personal crisis to explode your budget and fall behind on debt payments.
A couple relying 100 per cent on Old Age Security, for example, will earn a maximum of $26,800 annually in Ontario. In this case, that “typical” $411 mortgage payment would account for 18 per cent of their income. While unlikely anytime soon, a three percentage point interest rate hike would bump that to 25 per cent. Then you have to add in the property taxes, maintenance and all the other home ownership costs.
It’s bad enough assuming they just have the average-sized retiree mortgage. If they’re closer to the average Canadian mortgage of $170,000 and their income is in the lower third of the population, then well over half of their income would be consumed by home ownership costs. That is simply unmanageable and unfortunately there is no data on how many people are in this boat.
Apart from the cost, it’s often tougher to get approved for a decent mortgage in retirement. If your earning power has waned and you’re carrying even an average debt load, your ability to tap home equity for cash could be limited. Qualification challenges could even reduce your options to switch lenders or port your mortgage to a different house.
Even the “mortgage of last resort,” a reverse mortgage, could be off the table if you’re not old enough and/or you have an existing mortgage that’s more than 25-40 per cent of your home value.
So that brings us to the next question: what solutions do seniors have?
One is to work longer. Our neighbourhood butcher is still employed at 89 and that may not be so unusual going forward. Many Canadians expect to work past 65. They’re working 3.5 years longer than a decade ago and only 30 per cent anticipate being fully retired at age 66.
“If you have to work a few years past your retirement target date, do it and get rid of debt,” says Mr. Pape.
Another option for mortgage-holders is to get a fixed rate with a five-year term or longer. That protects those on fixed incomes from payment hikes. If you’re facing an underfunded retirement and you have a mortgage, “I would lock in a low rate while you still can,” he recommends.
You could also extend your amortization to 30 years. That maximizes cash flow in retirement and lets you make extra payments when you’re able. Couple this strategy with a home equity line of credit (HELOC) and you’ll get an emergency source of cash for unforeseen events like medical expenses or income loss. A “readvanceable” HELOC also lets you re-borrow any extra pre-payments if absolutely necessary, which lessens the cash flow risk of making them.
Despite these tips, the goal isn’t to manage a mortgage in retirement. It’s to avoid a retirement mortgage altogether. And to do that, you’ll need to start young.
The chilling truth is that there are just over 9.3 million Canadians age 55 and over and 43 per cent of them say they haven’t saved enough for retirement. But by 55, time is running out. A Statistics Canada study in 2009 found that people in their 70s spend only five per cent less than they did in their 40s. It takes years of saving to replace that kind of income and dispose of a mortgage.
By now, you’ve probably sensed that being pro-active is key. But many people haven’t been. As many as one in three say they plan to live off the equity in their homes. That’s a gamble in any real estate market. But if you’re retiring in the next decade and relying on uncertain home price appreciation, it’s especially risky. You need diversified savings and you need that mortgage out of the way.