Market Outlook for 2013, is it as bad as they say!?

Well its no secret that there are some questions to be answered when looking at the Canadian Housing Market. The media sure does a good enough job of letting everyone know that. You've heard it before but I'm going to say it again, DON'T BELIEVE EVERYTHING YOU SEE ON TV! Good news just doesn't sell. I tend to trust the predictions of those that have consistently proven themselves in the past, CMHC(Canadian Mortgage and Housing Corporation). If you read back to my post this time last year, and their predictions you'll see they were pretty bang on(we saw a 2.3% increase). I recently sat in on a conference with CMHC for their Market Update for 2013 and this year is going to be much of the same. A slight increase with the rate of inflation, but overall the market here in Ottawa will remain level. All of you sitting back waiting to purchase hoping for prices to fall, best of luck to ya. Here are some points of interest that I noted during the Conference.

Ottawa Market:
- Ottawa median household income remained the highest amongst large cities in Canada coming in just shy of 100k/year, with average home price at $350k. To put that in perspective, Vancouver with a much higher avg home price came in closer to 60k/year!

- Ottawa saw a market stall due to the uncertainty of employment with government cuts but remember they are only cutting 1% of job force. Not a big deal. Infact, Ottawa saw a 3% employment growth attributed to service sectors and public admin. Unemployment rate for 2013 is looking to stay about the same as 2012.

- The last large decline in our market was in 95-96 where there were MANY more job cuts than we are seeing now. Sale prices only went down 2.4% then, and interest rates were at 9% and not historically low like they are now. Just think about that. More jobs, less interest, sales shouldn't be affected all that much.

- Ottawa is creating jobs! The LRT is expected to create approx. 20,000 jobs, the Landsdowne project will create a bundle and The Rideau Center will be doing a 250million dollar reno!

- We are currently sitting in a balanced market with a sales to listing ratio of 40-60%. If patterns stay the same we should be seeing some good growth come 2014.

- We expect a slight decline in sales for the first and second quarter of this year and they are expected to turn around for the 3rd and 4th.

- in 2012 Stittsville and Southeast Ottawa saw the highest increase in sales volume while Southeast saw the highest increase in price.

- New home construction in Ottawa hit over 6000 units in 2012(6026) and is expected to drop slightly for 2013 at approx. 5200. Breakdown of those units being built will be the same with 25% single homes, 25% rows and semis, and 50% apartments.

- Cheaper to get resale still! Keeps you closer to the downtown core as well. 2012 saw new home prices for singles hitting approx. 23% higher than resale homes!!!

So all in all Ottawa, we will be just fine. The worst thing you can do is just sit on your hands and do nothing.

Canadian Economy:
- GDP growth will be driven by business investment
- Housing Market expected to moderate
- Week demand globally for our exports will restrain growth slightly
- Interest rates to remain at historic lows as the states announced they shouldn't be changing until 2015.

Global Economy:
- European GDP Decline
- Italy, Spain, Portugal, Greece, still not out of the danger zone yet
- 11.7% unemployment rate
- Germany starting to show some signs of growth
- Good news for Canada is that the majority of our exports go to the states, then some to China, Japan, South Korea, and only approx. 6% go to European Countries.
- US Economy is starting to recover even though they showed a slight decline in the 4th quarter attributed to the scare of the "fiscal Cliff".


Well there you have it. If you have any questions at anytime about our current market conditions, whether you should be buying or selling at this time. Please don't hesitate to ask.

Andrew Miller

- The last large decline in our market was in 95-96 where there were MANY more job cuts than we are seeing now. Sale prices only went down 2.4% then, and interest rates were at 9% and not historically low like they are now. Just think about that. More jobs, less interest, sales shouldn't be affected all that much.

MORTGAGE CHANGES JULY 2012

Alright enough is enough. After receiving emails from several clients and even more from Mortgage specialists all over the city, I have decided that we need a nice easy to read explanation as to what new mortgage changes Canada’s Finance Minister Jim Flaherty has indicated will come into effect on July 9th, 2012.

1. Mortgage Amortization periods(length of the full mortgage) will be reduced from 30 years to 25 years. What that means for you buyers is a bit more money in terms of a monthly payment. Really this is better though. 30 and 40 year mortgages were a bit much anyways and in the long run we are better off. A family earning approx. 75k a year will be able to afford about 50k less of a mortgage however. Again, better safe than sorry.

2. The max amount that one can borrow when refinancing will be lowered to 80% from 85%. Again, good in the long term to not have more debt than people can handle. They also dropped this last year from 90% to 85%.

3. No more government back mortgage insurance on over 1million dollars.

4. Lines of Credit taken from the equity in your home will now be a maximum of 65% of your home’s value down from 80%. A home equity line of credit is similar to a standard line of credit but is secured against the equity in your home

5. The federal government will set maximum gross debt-service ratio (GDS) at 39% and lower maximum total debt-service ratio (TDS) to 44% from 45%.

Basically they are putting things back to normal. Since 2008 there have been 4 main changes done to tighten up lending policies. We are going back now to how things were before 2004. It's not to say they are making purchasing a home harder, they are more ensuring that those that are getting mortgages will be able to handle the debt more easily. This is a good thing, we do not want to end up like the states and have our market collapse and since the beginning of the changes in 2008 we are moving in the right direction to ensure that doesn't happen.

If you need anymore information please don't hesitate to ask.

Breakdown of Closing Costs in a Purchase

This blog is from one of my fantastic Mortgage Specialists Nick Bachusky over at Mortgage Specialist Direct, a new branch of Dominion Lending. Be sure to check out his website for other great information at www.mortageinottawa.com

Estimating your closing costs after the excitement of buying your home is about as appealing as sorting out travel insurance after you’ve booked your dream vacation. That said, closing costs are unavoidable so the best approach is to prepare for them ahead of time. The old rule of thumb for closing costs was to conservatively assume that they would account for approximately 2% of your purchase price but with HST being applied to some new home purchases, that approach is somewhat dated. Today’s post will give you a brief explanation of closing costs and then I’ll close with a couple of insights that I think every home buyer should hear.

Closing Costs for Every Buyer

Land Transfer Tax:

This is usually the largest single charge. It is calculated by taking your purchase price and multiplying it by a table of rates that rise with the purchase price. The top rate of 2% kicks in after $400,000, which means you pay 2% in tax on every dollar that you spend over $400,000. I know. Ouch. At least first-time home buyers get a rebate of up to $2,000.

The tax rate has not changed since June 1, 1989.

• 0.5% of the value of the consideration up to and including $55,000,
• 1% of the value of the consideration which exceeds $55,000 up to and including $250,000, and
• 1.5% of the value of the consideration which exceeds $250,000, and
• 2% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single family residences.

Legal Fees and Disbursements:

The lawyer’s fee for his/her time can only be estimated until you get a quote. Don’t be shy to ask for one. If you need a great real estate lawyer, let me know, I work closely with a few excellent ones that will be in great contact with you. I know a lot that are not very good at communication. Fees vary widely from lawyer to lawyer and they are often based more on law firm policy than on difference in service. Standard disbursements include registering the deed and mortgage charge, performing a title search and preparing your tax certificate. Each disbursement includes a standard administration fee with the lawyer’s time added on top.

Closing Adjustments:

These are reimbursements to the seller for any payments that were made for a period extending beyond the closing date. Put another way, you are reimbursing the seller for the portion of each charge that applies to the time when you are the owner. Examples include property taxes and condo maintenance fees. Interest Adjustment: Lenders like to start mortgage contracts on the first of the month, but buyers and sellers aren’t as regimented. Your interest adjustment cost covers the period between your closing date and your first scheduled payment (which if you choose to pay monthly is the first day of the following month). It works out to a little less than you would be paying if your mortgage term started on the same day you bought your house because it doesn’t include any principle repayment (it’s an interest only charge).

Fire Insurance:

If you need a mortgage, your lender will insist that you have fire insurance. This isn’t a big upfront cost because you can pay it monthly, but you have to prove you’re covered before the lender will advance funds on your behalf.

Closing Costs for Sub-groups of Buyers
Mortgage Default Insurance:

If you have a down payment of less than 20% you have to pay for mortgage default insurance so that if you default on your loan, the lender gets reimbursed. It’s based on a sliding scale where the smaller your down payment, the higher your insurance fee (CMHC is the largest provider). The fee is calculated as a percentage of your purchase price and you can add it to your mortgage balance, but you have to pay PST (8%) on the fee at closing. This is commonly forgotten by many financial advisors at banks.

HST for New Home Buyers:

If you buy a new house after July 1, 2010, you have to pay HST. All buyers get a rebate of $24,000 regardless of the purchase price, which is the same as paying no tax on the first $185,000. Some builders are including the HST in their sale price, so be sure to check. Go to the government for always up to date information here!

New Home Warranty Program:

New home buyers are required to enroll in the Tarion New Home Warranty program. Most builders also include this cost in the sale price but otherwise you will have to pay the fee at closing. Your new home warranty begins before you even move in. Once you provide the down payment for your new home, it’s protected. You also have a right to compensation if your builder delays the closing of the sale without giving you proper notice. Before you take possession of your new home or condominium, your builder will walk you through a pre-delivery inspection (PDI). For freehold homes, the builder pays the warranty enrolment fee to Tarion on or before the date the building permit for the home is issued. Condominiums are enrolled at least 30 days before construction begins. Tarion then gives the builder an enrolment number for the home. Some builders will include the warranty enrolment fee in the purchase price of the home, while others show it as an item on the Statement of Adjustments. You can find out more here!

Status Certificate:

Condo buyers need to pay for a status certificate, which their lawyer will review at closing. It includes the condo corporation’s financial statements and bylaws and it will give you a sense of the overall financial health of the partnership you are about to join. Your lawyer will use this document to gauge the probability of a significant increase in your condo fees. The good news is that the fee for this certificate is capped at $100. Want more information, go here!

Lastly, estimate your closing costs upfront and include them in your purchasing budget. Too many people wait until they’ve signed a purchase and sale agreement and then the money has to come out of their budget for new carpets and curtains. If you need to work out the costs, I can do that for you!