Dean Garrett

Ottawa, ON, November 15, 2018 Statistics released today by the Canadian Real Estate Association (CREA) show national home sales declined between September and October 2018. Highlights: National home sales fell 1.6% from September to October. Actual (not seasonally adjusted) activity was down by 3.7% from one year ago. The number of newly listed homes eased 1.1% from September to October. The MLS Home Price Index (HPI) was up 2.3% year-over-year (y-o-y) in October. The national average sale price slipped by 1.5% y-o-y in October. Home sales via Canadian MLS Systems edged back by 1.6% in October 2018. While activity is still stronger compared to the first half of 2018, it remains below monthly levels recorded from early 2014 through 2017. (Chart A) Transactions declined in more than half of all local markets, led by Hamilton-Burlington, Montreal and Edmonton. Although activity did improve modestly in many markets, it was offset by a decline in sales elsewhere by a factor of two. Actual (not seasonally adjusted) activity was down 3.7% compared to October 2017 and in line with the 10-year average for the month. While sales were down y-o-y in slightly more than half of all local markets in October, lower sales in Greater Vancouver and the Fraser Valley more than offset the rise in sales in the Greater Toronto Area (GTA) and Montreal by a wide margin. This years new mortgage stress-test has lowered how much mortgage home buyers can qualify for across Canada, but its effect on sales has varied somewhat depending on location, housing type and price range, said CREA President Barb Sukkau. All real estate is local. A professional REALTOR is your best source for information and guidance in negotiating a purchase or sale of a home during these changing times, added Sukkau. National sales activity lost momentum in October, said Gregory Klump, CREAs Chief Economist. In part, this reflects waning activity among some urban centers in Ontarios Greater Golden Horseshoe region and the absence of an offsetting rise in sales in the Lower Mainland of British Columbia. Even so, the balance between sales and listings in these regions points to stable prices or modest gains. By contrast, the balance between sales and listings for housing markets in Alberta, Saskatchewan and Newfoundland indicates a weak pricing environment for homeowners who are looking to sell. The number of newly listed homes edged down 1.1% between September and October, led by the GTA, Calgary and Victoria. The decline in new supply among these markets more than offset an increase in new supply in Edmonton and Greater Vancouver. As for the balance between sales and listings, the national sales-to-new listings ratio in October came in at 54.2% close to Septembers reading of 54.4% and its long-term average of 53.4%. Considering the degree and duration to which market balance readings are above or below their long-term average is the best way of gauging whether local housing market conditions favour buyers or sellers. As a rule of thumb, measures of market balance that are within one standard deviation of their long-term average are generally consistent with balanced market conditions. Based on a comparison of the sales-to-new listings ratio with the long-term average, about two-thirds of all local markets were in balanced market territory in October 2018.

Fixed Vs Variable To Lock In or Not? The above video applies 100% if you are taking a new mortgage, whether a purchase, refinance, or renewal. The variable is the main contender. But what about all the economists saying if you are in a variable rate mortgage current then lock in? You mean the economists that are employed by profit driven shareholder owned institutions that directly benefit from your locking-in (banks) via instantly increased profit margins and massively higher (up to 900% higher) prepayment penalties that 2/3 mortgage holders will trigger? A bit biased, that crowd. Also they are generalists, the are not specialists. But what about independent real estate experts? While these experts may have their finger on the pulse of many facets of the real estate market, many remain totally unaware of how exactly mortgage prepayment penalties are calculated, and just how likely you are to trigger them. Also generalists, unaware of many nuances of mortgage products. So whats my game? Ive never really had game. so to speak. And I dont stand to profit from your locking in, or from your staying variable. In fact as I type this on a stunning day Im wondering just what Im doing in my office at all. Im just a Mortgage Broker offering an opinion. An opinion that reflects my personal policy, an opinion shaped through 25 years of experience with my own mortgages, an opinion based on 11 years of experience with 1,673 clients mortgages. Ive seen a few things, mortgage specific things. Ive watched 2/3 of my clients break their mortgages and trigger penalties. Almost every single one of them a small and relatively painless penalty thanks to staying variable. But what about these rising rates? If you are currently in a Prime -.65% to Prime -1.00% variable then to lock-in would be to inflict an immediate rate hike on yourself that might take the government another 12-18 months to pull off... if they pull it off. Stay variable. If you are in a Prime -.35 or shallower mortgage, we should discuss restructuring that into a Prime -1.00% mortgage and reducing your rate by .65% or more. Staying variable. My crystal ball says yes, perhaps another two or three 0.25% hikes through 2019, but at that point the odds favour (heavily) an economic contraction that will in turn trigger a corresponding reduction in interest rates. It is my theory, and that of others smarter than I, that the fed is pushing rates up aggressively to beat said economic contraction, because they want to have the tool of reducing interest rates back in their toolbox when the rainy days come. And we are overdue for stormy economic times. In short, life is variable - your mortgage should be as well. The above is credit to Dustan Woodhouse.