Market looks up just as government changes mortgages | Toronto Real Estate Trends

Market looks up just as government changes mortgages

By Dan Chalcraft


Looking to buy a house and not sure what the real estate market is doing? The real estate market is starting to balance out changing from last year, when it was more a buyer’s than a seller’s market.

“It was an increase of 15 per cent of houses sold but a decrease in value of about 5 per cent as the economy was still hurting us; it was a buyers market,” said Heather Malin, owner/broker of Drayton Valley’s ReMax Vision Realty. She stated that this past year there were 123 houses sold by ReMax in Drayton Valley and the average price of a home came to $271,913 according to the statistics from Remax. This was an increase from 2009, as they sold 104 houses and the average price of a home came to $285,111.

Malin stated that the Canadian economy was still trying to turn around in the early part of 2010, however she indicated that sales were picking up in the latter part of the year and looking optimistically towards the future.

In Brazeau County, the number of homes sold was 40 in 2010 and the average home was going for $329,375 which was up from 2009 where there only 32 homes sold but the average cost for a home was more expensive priced at $341,531.

“There are a lot of the middle of the road houses are selling and some more expensive homes, we had one sell for more than $500,000” she said.

She pointed to the fact that it’s a lot of younger people buying with it being hard to sell adult condo.

According to Malin, 40 per cent of houses sold by Remax were under $250,000 in 2010, the other 40 per cent were purchased between $250,000 to $350,000, then there was another 15 per cent that sold for between $350,000 to $400,000 and then only 5 per cent that bought a property over $400,000.

In Brazeau County, there were up to 40 per cent of the homes sold in the range of $250,000, where between the $250,000 to $300,000 there were 23 per cent of the homes sold.

Seventeen per cent of the homes sold in the $350,000 to $500,000 range and 20 per cent of the homes sold were over $500,000 with the most expensive property being a newer home in Parview Estates in the $600,000 range.

On Jan. 17, the Federal Finance Minister Jim Flaherty announced that beginning March 18, the maximum amortization period for a mortgage will drop to 30 years from 35, effectively reducing the maximum Canadians can borrow for their home.

Canadians will also be able to borrow less when they refinance mortgages and the government will stop insuring home equity lines of credit.

“The Canadian Housing Mortgage Association are doing this for the good of Canadians as they don’t want them too far in debt”, said Malin. “We don’t want to see the mistakes that have taken place down in the United States.”

She believes that the shift in the amortization period will not have much of an affect, believing it really doesn’t make a lot of difference in your monthly mortgage payment and depending on the size of the mortgage it could only mean a difference of $50.

Dawn Konelsky, owner/broker at Kastle Real Estate feels that the switch from 35 down to 30 years amortization rate change will affect home buyers who cannot qualify at the monthly payment because it will be higher.

Konelsky noted people already struggling with getting a down payment or people with high consumer debt will be affected as the 5 per cent on a new mortgage remains the same along with 10 per cent down on a new home for the self employed.

“I believe that this [the government stop insuring home equity lines of credit] will have little impact as the banks lowered the refinancing rate back last April from 95 per cent – 90 per cent equity,” said Konelsky. “Now they have dropped it again to 85 per cent but most banks were not allowing any higher of a rate anyway.”

Roger Coles, a broker at Century 21 in Drayton Valley stated that he’s never sold a house in his 20 years in real estate with a 35 year mortgage and at Century 21 they prefer people to take a lower amortization to save on interest payments and to own your house sooner. He added that people would be saving between $13,000 to $15,000 on a 30-year mortgage by taking five years off that amortization.

Joseph Doucet, Enbridge Professor of Energy Policy in the School of Business at the University of Alberta who specializes in Alberta and Canadian economies said; “changes in mortgage rules are designed to reduce the risk of default in the market, so obviously they target buyers who would be at risk of default if interest rates rise.” “Overall [it] will make home purchases more difficult for some, but that may not be a bad thing if the affected parties are not able to bear the risk of rates rising,” he said.

The Bank of Canada on Jan. 18 left its key policy rate unchanged at one per cent while slightly boosting its outlook for economic growth this year and next year due to a pickup in U.S. demand and an anticipated strong rebound in business investment.

Doucet stated the very low interest rates provide stimulus for the economy, which is good overall as the county is coming out of a recession, and the economy is still relatively fragile. Society can’t lose sight of the fact that we depend a lot on US economy and the global rebound as for homeowners and those who owe money such as mortgages, and a line of credit low interest rates are obviously good, lower cost of borrowing, he said.

The Canadian Real Estate Association stated activity will drop nine per cent to 402,500 units in 2011 due to lack economic and job growth, muted consumer confidence and the resumption of interest rate increases are expected in 2011.

Kevin Sommerville, Bank of Montreal branch manager in Drayton Valley stated that the amortization change isn’t going to have much of an affect on homeowners, but it will for first time home buyers mainly because they are mostly in a low-income bracket.

“The main problem that people run into when buying a home is saving up money for the down payment,” he said. Sommerville added that it wouldn’t have much of an affect in Drayton Valley since many people here have such a high income and they can afford it.

“It’s a small town with a lot of money” said Sommerville. “Lots of young guys are working in the oil patch making like $7,000 a month.”

A survey unveiled by the Canada Mortgage and Housing Corporation revealed that most home buyers are between 25 and 34 years of age, plan to purchase a home within a year and will be buying with a spouse or partner. They prefer a two-bed apartment or townhouse between 800 to 1,199 square feet, a target price between $300,000 to $399,000, with down payments of at least 10 per cent of the purchase price.

These statistics doesn’t surprise Sommerville. “

People around here that are that age are planning to buy a home as in most cases they are married and they have a joint income.”

He stated that in Drayton Valley people, on average are looking at a three bedroom and 1,200 square feet with a garage.






About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

2 Responses to Market looks up just as government changes mortgages | Toronto Real Estate Trends

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