Kirsten Mason, Author at Kamloops Real Estate Blog

Kamloops Real Estate Optimism Builds According To The Kamloops and District Real Estate Association’s President

February 11, 2011 Kirsten Mason Kamloops Real Estate News

This article appeared in Kamloops this Week on February 11th, 2011 and was written by Jeremy Deutsch.

Though many of the real-estate conditions in Canada appear to be bipolar, the Tournament Capital is expected to be the bastion of stability in the market. The Kamloops and District Real Estate Association (KDREA) is predicting no major swings in the market — up or down — in 2011.

“It’s certainly not a hot market,” said Dick Pemberton, KDREA president. “Stable is the best term to describe it.” He makes his prediction despite a dip in sales last month.

Residential sales in the area fell by 18 per cent in January to 93 units, from 114 the previous January in 2010. The majority of the sales still falling in between the $200,000- to $400,000-price range.

However, Pemberton said real-estate agents in the region have noticed a dramatic increase in the number of people stopping in at open houses in the last few weeks, leading to a more optimistic forecast for the spring and summer.

Some real-estate experts are predicting house prices across Canada will fall by as much as 25 per cent in coming years, while other reports have the Vancouver housing market heating up, similar to last decade. But, tighter mortgage rules recently introduced by the federal government will no doubt keep some buyers out of the market.

Ottawa has lowered the maximum amortization period for a government-insured mortgage to 30 years from 35. The change is meant to help lower consumer debt. It’s a move applauded by the KADREA members, which sees it as a positive change in the long term. “Given the economy right now, we felt it was a prudent move and won’t have a significant impact on the market place,” Pemberton said. He added it takes borderline buyers out of the picture until they’re in a better position to purchase a home.

With no major increase in interest rates in the horizon, Pemberton suggested it’s still a good time to get into the market. Homes sales weren’t the only stats to take a dip last month.

The number of single-family permits issued by the city also dropped to just four in January, from 13 the previous year. The city also issued $5.4 million in commercial-building permits for the month, but the combined total of the two sectors failed to match the $13 million in overall permit activity from January 2010. It’s a slow start for the city’s building-permit department, which handed out $191 million worth of permits in 2010.

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Sun Peaks Property Values are Slightly Down While Most Of Kamloops Property Values are Up According to 2011 BC Assessment

February 10, 2011 Kirsten Mason Kamloops Real Estate News

This article appeared in Kamloops This Week on January 27th, 2011 and was written by Jeremy Deutsch.

As homeowners in much of the province, including Kamloops, saw their property values rise in 2010, there is at least one real-estate sector that wasn’t quite as fortunate. Many recreational properties were down in value last year — and Sun Peaks Resort was not spared.

According to BC Assessment, residential properties in the resort municipality dropped in value by an average of 2.5 per cent. Whistler, the only other resort municipality in B.C., also saw similar decreases in residential-property values.

Graham Held, a deputy assessor with BC Assessment, noted the values are based on the market and incorporation wouldn’t have had any effect on assessments. “It’s just what the sales are telling us,” he said. There are 1,600 properties at Sun Peaks on BC Assessment’s rolls, including 425 single-family homes.

The resort became a municipality last summer and 2010 marks the first year it is on the tax rolls as a municipality. But the drop in value is neither a surprise nor major concern for Sun Peaks Mayor Al Raine. He feels the two per cent decline isn’t unreasonable considering the economic environment.

Raine noted recreational properties tend to take a bigger hit in value than residential properties when there is a downturn in the economy, adding some units in the village were sold for very low prices.

He also suggested a couple of other factors for the decline, including the harmonized sales tax, in which an HST credit isn’t offered on recreational properties, and that units were being built faster in the resort than the demand supported. “Quite frankly, I’m happy with stable prices for these days,” Raine said. He said real-estate agents have told him they expect demand to pick up in the spring. Raine said he still considers Sun Peaks “a good place to invest and live.”

Last year, a home in Sun Peaks sold for $2.2 million, besting the previous most-expensive house by $700,000. Another home was recently listed for $4.3 million, which will be a new record if sold. For the second year in a row, the majority of Kamloops homeowners saw a modest increase in their property assessments.

According to BC Assessment, the property owner of an average single-family dwelling — assessed at $309,000 — likely noticed their property value increase by 4.7 per cent.

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Canadian Banks Unlikely to Jeopardize Economy by Raising Interest Rates in 2011

February 9, 2011 Kirsten Mason Mortgage Information, National Real Estate News

This article appeared on The Record on February 9, 2011 and was written by Chuck Howitt.

While mortgage and interest rates are inching higher, the major banks aren’t likely to keep pushing them up if they sense household debt is too high, an economist told local real estate agents Wednesday.

Two large banks announced mortgage rate increases this week, but the banks will likely refrain from further increases if they jeopardize the economic recovery, said Paul Ferley, assistant chief economist for RBC.

The Bank of Canada became alarmed when debt-to-income ratios, fuelled by a long period of low mortgage rates, continued to rise in Canada during the recession while dropping in the U.S., Ferley said.

Traditionally those ratios have been lower in Canada, but now they are about equal in both countries, he told about 150 agents at Coldwell Banker Peter Benninger Realty.

While mortgage debt continues to be worrisome, Ferley doubted Canada is on the verge of a housing-price correction. In the late 1980s, when the last housing bubble burst, mortgage payments were growing much more quickly than incomes, he said.

The same trend has not been occurring in recent years, Ferley said.

Housing prices jumped about 20 per cent coming off the recession, but they have since begun to follow the historical pattern of more gradual increases. He expects that flattening trend to continue.

Looking at the North American economy as a whole, economists no longer fear a double-dip recession, Ferley said. The economic recovery “will be gradual, but sustained,” he said.

While a sudden eruption in the Egyptian crisis could send oil prices soaring and destabilize the world economy, the U.S. economy is gaining steam, he said. But the private sector needs to pick up the slack now that government stimulus is being turned off, he added.

The Canadian economy, while still closely tethered to the U.S. economy, is well positioned because commodity prices, particularly oil prices, remain at historically high levels, he said. He expects oil to remain at the robust price of around $90 a barrel because of demand from countries such as China and India.

High commodity prices are not necessarily good news for Ontario’s economy, which relies more on manufacturing and a healthy U.S. economy, Ferley said.

On the positive side, auto sales have climbed past 12 million units a year in the U.S. after dropping to about nine million during the recession and manufacturing has picked up, though just modestly, he noted.

In Waterloo Region, manufacturing accounts for 22 per cent of the labour force, higher than the provincial average of 14 per cent, he noted.

This is a concern, but strong building-permit activity particularly in the commercial and institutional sectors and the rebound in housing starts and employment have brightened the outlook for the local economy, he said.

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TD Economics Special Report on Financial Vulnerability of Canadian Households: BC Most Vulnerable

February 9, 2011 Kirsten Mason National Real Estate News

TD Economics released a special report on February 9th, 2011. This report assesses the financial vulnerability of households across Canada. Below, I have included British Columbia specific information from the report. Click on the images below to enlarge.

The main highlights of the report are:

The focus nationally on household debt has raised questions about which regions of the country face the most significant challenge.
TD Economics has constructed an index of financial vulnerability, which takes into account six key metrics of household financial position.
Household Financial Vulnerability Index
The index is not a predictor but is aimed at capturing which regions are more vulnerable in the event of an unexpected adverse economic shock, such as a housing market downturn, a rise in the unemployment rate, or a spike in interest rates.
We find that households in British Columbia, Alberta, Ontario and Saskatchewan are the most vulnerable, followed by the Quebec and the Atlantic Region. Meanwhile, Manitoba is the least vulnerable.
Despite growing vulnerability across regions, we do not think that a household debt crisis is in the making in any region.

Based on our analysis, we find that households in British Columbia, Alberta, Ontario and Saskatchewan are the most vulnerable. Following next are the Atlantic region and Quebec, while Manitoba is the least vulnerable. That being said, risks related to household finances have been rising broadly across all regions over the past few years, as households have responded to extremely favourable borrowing conditions. With higher interest rates on the horizon set to boost the cost of servicing debt, this upward trend in vulnerability is almost certain to continue over the next 1-2 years.

All regions increasingly vulnerable

Some of the common trends:

Vulnerability has been increasing from coast to coast over the past two years– prior to 2009, trends in the vulnerability index were mixed across the country, with some regions experiencing sharp increases while others registered declines. However, over the past two years, vulnerability has headed higher right across the board, and for the majority of regions, increases in the index began to accelerate in 2007.
Snapshot of Canadian Household Debt Indicators by Region - click to enlarge
Rising household debt-to-income and home price to- income ratios have been the major catalysts driving up vulnerability – the debt-to-income ratio has followed an upward track in all regions since the mid-part of the 2000’s, reflecting in large part the strength of housing markets and the significant easing in mortgage insurance rules in late 2006. These home price increases supported the asset side of the ledger and mitigated the upward trend in the debt-to asset ratios over the past half decade.
Debt-service ratios have been falling and remain in a comfortable range – despite rising indebtedness, the falling cost of borrowing has been pulling down the share of income households have been shelling out to service obligations. Low interest rates have also helped to keep a lid on the share of vulnerable households in recent years.
All regions will experience a substantial increase in vulnerability over the next few years – our adjusted index shows that even assuming that the debt-to-income ratio holds constant at current levels, which would seem unlikely, vulnerability is set to rise across the board in lockstep with short-term interest rates.

Most vulnerable

Household Debt to Income Ratio: BC vs. Canada

Reflecting the lofty costs of home ownership, households in British Columbia record the highest vulnerability. In particular, B.C. residents on average register the highest debt-to-income ratio, debt-service cost, and greatest sensitivity to rising interest rates. What’s more, B.C. is the only province where the average savings rate is negative.

None of this is new, however, as the province has systematically been the most vulnerable since the start of our data series in 1999. The structural nature of this challenge suggests that there maybe factors at play that are not being captured in the aggregate data. For example, the province’s relatively large economic reliance on its service sector and self-employment – two areas that tend to have higher-than-average incidences of non-reported income – might be superficially driving down income and driving up the various sub-index readings.

In addition, B.C. households appear to have adopted coping mechanisms, such as renting out basement suites, which might not be fully factored into the income side. Even if these factors are part of the story, they don’t address the fact that British Columbia’s index level has recorded the second fastest rate of increase among the provinces over the past half decade.

Higher interest rates over the next few years threaten to leave as many as one in ten households in B.C. in a position of financial stress. On the plus side, rapidly-appreciating home prices in the province has left the debt-to-asset ratio – a metric of household leverage – below the Canadian average. Still, with the home price-to-income ratio pointing to some ongoing over-valuation in the housing market, stable B.C. home values are far from assured.

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