It PAYS to shop around.
Many Canadian homeowners pay too much for their homes because they are not getting the best mortgage financing available in the market.
The mortgage process can be intimidating for homeowners, and some financial institutions don't make the process any easier.
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Keep it Simple
Keep it simple when buying a houseSpring is here, which means increased activity in the real estate market. If you are thinking of buying a house, keep these simple tips in mind.Decide whether the time is right for you to buy – “If you currently own a house, you should buy and sell at the same time, which will help ensure you don’t sell low and buy high,” explains Chartered Professional Accountant Eli Palachi, a partner with Crowe Soberman LLP in Toronto. “If you are a first-time purchaser, try to buy when you can secure low mortgage rates so that your monthly cash outflow is lower.”Determine what you can afford – “Establish a budget that includes the cost of the new house and then try living with that budget for a while to make sure you won’t become financially strapped and end up house rich and cash poor,” advises Chartered Professional Accountant Albert Yu, a sales representative with RE/MAX Hallmark Realty Ltd. in Toronto. “Mortgage rates are at historically low levels these days. But keep in mind that every one-per-cent increase in interest rates means you can buy 10-per-cent less house.” Yu says your budget should also include other costs, including a rainy day fund that covers three to six months’ worth of expenses, retirement savings and a children’s education fund. Your Chartered Accountant can help you set up a realistic budget and help with decisions on how to finance a house purchase.Don’t forget to factor in the hidden costs – “In addition to the price of the house itself, your other costs include legal fees associated with closing the sale, adjustments for property tax and utilities, the land transfer tax, mortgage fees, house appraisal fees and moving,” says Palachi. “If you are buying a bigger house, you may also have higher insurance costs.”Shop around for the best mortgage rate – “Speak to several banks to see what their rates are,” says Palachi. “It doesn’t hurt to get an idea of what competitive rates are, and banks don’t charge a fee or commission for securing financing. Your CA can also introduce you to mortgage officials at the bank.” If you are going to shop around for rates, Yu cautions against signing several applications that would result in a credit check. “Your credit score will decrease if too many checks are done at once,” he explains.Make the biggest down payment you can afford – “You must pay at least 20 per cent of the purchase price down to avoid a high-ratio mortgage and paying one-time Canada Mortgage and Housing Corporation premiums,” explains Yu. A larger down payment will also lower your monthly payments.
Canadian home sales edge down from December to January
According to statistics released today by The Canadian Real Estate Association (CREA), national home sales were down slightly in January 2017 on a month-over-month basis.
- National home sales declined 1.3% from December 2016 to January 2017
- Actual (not seasonally adjusted) activity in January was up 1.9% from a year earlier
- The number of newly listed homes dropped 6.7% from December 2016 to January 2017
- The MLSHome Price Index (HPI) in January was up 15.0% year-over-year (y-o-y)
- The national average sale price was little changed (+0.2%) y-o-y in January
Sales activity was down from the previous month in about half of all local markets, led by three of Canadas largest urban centres: the Greater Toronto Area (GTA), Greater Vancouver, and Montreal.
Actual (not seasonally adjusted) sales activity was up 1.9% compared to the same month last year. While sales were up from year-ago levels in about two-thirds of all local housing markets including in the GTA, Calgary, Edmonton, London and St Thomas, and Montreal, they were down significantly in the Lower Mainland of British Columbia.
The number of newly listed homes dropped 6.7% in January 2017, the second consecutive monthly decline. New listings were down in about two-thirds of all local markets, led by the GTA and environs across Vancouver Island.
With the monthly decline in new listings surpassing the decline in sales, the national sales-to-new listings ratio jumped to 67.7% in January compared to 64.0% in December and 60.2% in November.
The ratio was above 60% in about half of all local housing markets in January, the vast majority of which are located in British Columbia, in and around the GTA and across southwestern Ontario. A monthly decline in newly listed homes further tightened housing markets that were already in sellers market territory.
There were 4.6 months of inventory on a national basis at the end of January 2017 unchanged from December 2016 and a six-year low for the measure.
The imbalance between limited housing supply and robust demand in Ontarios Greater Golden Horseshoe region is without precedent (the region includes the GTA, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country). The number of months of inventory in January 2017 stood at or below one month in the GTA, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, Cambridge, Brantford and Guelph.
In the Fraser Valley and Greater Vancouver, prices have receded from their peaks posted in August 2016. That said, home prices in these regions nonetheless remain well above year-ago levels (+24.9% and +15.6% respectively).
Meanwhile, benchmark prices continue to climb in Victoria and elsewhere on Vancouver Island together with Greater Toronto, Oakville-Milton and Guelph. Year-over-year price gains in these five markets ranged from about 18% to 26% in January.
By comparison, home prices were down 2.9% y-o-y in Calgary and by 1.0% y-o-y in Saskatoon. Prices in these two markets now stand 5.9% and 4.3% below their respective peaks reached in 2015.
Home prices were up modestly from year-ago levels in Regina (+3.8%), Ottawa (+3.7%) and Greater Montreal (+3.1%). In Greater Moncton, home prices for the market overall held steady (-0.2%), reflecting an increase in townhouse row units prices (5.8%) that was offset by a decline in prices for one-storey single family homes (-1.0%).
The actual (not seasonally adjusted) national average price for homes sold in January 2017 was $470,253, almost unchanged (+0.2%) from where it stood one year earlier.
The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canadas tightest, most active and expensive housing markets.
That said, Greater Vancouvers share of national sales activity has diminished considerably over the past year, giving it less upward influence on the national average price. The average price is reduced by almost $120,000 to $351,998 if Greater Vancouver and Greater Toronto sales are excluded from calculations.
Canadian Housing Starts Trend Increased in January
The trend measure of housing starts in Canada was 199,834 units in January compared to 197,881 in December, according to Canada Mortgage and Housing Corporation (CMHC). The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of the state of Canadas housing market. In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.
The standalone monthly SAAR for all areas in Canada was 207,408 units in January, up from 206,305 units in December. The SAAR of urban starts increased by 1.0per cent in January to 189,688 units. Multiple urban starts increased by 4.2per cent to 125,886 units in January and single-detached urban starts decreased by 4.6 per cent, to 63,802 units.
In January, the seasonally adjusted annual rate of urban starts increased in Ontario and Atlantic Canada, but decreased in British Columbia, the Prairies and Quebec.
Rural starts were estimated at a seasonally adjusted annual rate of 17,720 units.