It’s no secret that Toronto’s real estate market is rising at an alarming rate. Just in the month of March, it was announced that the average home price increased by 33.4 per cent, year-over-year.

The average price for a detached home in Toronto currently sits at $1.21 million.

In response, Toronto Mayor John Tory, Federal Finance Minister Bill Morneau, and Ontario Finance Minister Charles Sousa agreed to meet this past Tuesday to discuss how the government can intervene in this hell fire of a housing market in the Greater Toronto Area.

After the meeting, the government figures agreed not to place anymore housing measures that would further increase housing demand in Toronto, with promise of cooling measures being implemented soon.

And today, we’ve learned of those new measures.

Ontario Premier Kathleen Wynne spoke at a media event this morning in one of Toronto’s fastest-growing neighbourhoods, Liberty Village, to announce 16 official measures being placed to slow down the rapidly rising market.

Three of the most-anticipated measures included a rent cap, a vacant property tax, and a foreign buyers tax modelled after the one recently introduced in Vancouver’s red-hot market.

Premier Wynne outlined the following initiatives:

• A 15 per cent tax on home purchases by non-resident foreigners in Toronto and the Greater Golden Horseshoe. It should be noted that this new tax will not apply to new immigrants; only those who intend to just speculate and “never set foot in Ontario.”
• Giving Toronto and other municipalities the ability to introduce a vacant home tax, in hopes of pushing owners to sell or rent unoccupied units.
• A ban on flipping pre-construction units by investors and speculators.
• A review of the rules governing the conduct of real estate agents.

Some measures also placed a huge focus on increasing housing supply, most specifically rental units:

• Expanding the province’s existing rent control system to cover all tenants. Current rent control only protects those who live in buildings built before 1991 from substantial rent increases. Rent hikes will now be limited to the rate of inflation, which sat at two per cent back in February. But landlords can apply for exemption if they can prove that they’ve made considerable property amendments, therefore, increasing the value of the building and units.
• A standardized lease document for all tenants.
• A$125-million, five-year program that involves a development cost rebate to encourage builders to develop more rental housing.
• A move to identify provincially-owned surplus lands that could be used for affordable and rental housing development.

“When young people can’t afford their own apartment or can’t imagine ever owning their own home, we know we have a problem,” Wynne said this morning. “And when the rising cost of housing is making more and more people insecure about their future, and about their quality of life in Ontario, we know we have to act.”

Though the Toronto real estate market has been of most concern, Wynne says the issue extends beyond the GTA and plans to apply similar initiatives throughout the Golden Horseshoe area.

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Last month we reported that Canadian real estate sales slipped slightly, yet prices had increased. The Canadian Real Estate Association (CREA) just released their May numbers and let’s just say things have escalated quickly.

The Toronto region saw sales drop 25.3 per cent from April to May. Nationally, there was a 6.2 per cent decline – the largest month-to-month drop in five years.

Why did this drop happen? It could be that the Ontario government’s 16-point Fair Housing Plan played a role. It’s likely many sellers were looking to cash out quickly so they listed their homes, while the 15 per cent tax on foreign buyers in Ontario may have scared off some potential buyers.

The current real estate trend in Canada

You’ve likely noticed that trends can change quite quickly in the Canadian housing market. As I write this post, the real estate market across the country appears to be cooling, but prices have yet to drop. Nationally, prices were actually up 4.3 per cent compared to a year ago, as the average price of homes sold in May 2017 was $530,304.

However, the increases reported are based on year-over-year numbers. In comparison to April 2017, prices in the Toronto region, for example, were down seven per cent, from $919,614 to $863,910.

Alternative lenders increase their interest rates

Ever since the Ontario Securities Commission (OSC) claimed that brokers falsified information on mortgage loan applications submitted to Home Capital Group, we’ve started to see a snowball effect on other alternative lenders.

Home Capital has already sold off many of their mortgages, and most recently, the lender announced an agreement to sell a commercial mortgage portfolio valued at around $1.2 billion. Now, the company is accepting fewer new applicants to help balance the books, and many brokers are opting to steer clients towards other lenders. That being said, with Home Capital out of play, other alternate lenders have seen a huge boost in applications.

However, since these lenders don’t have unlimited dollars to fund mortgages, they can be pickier about who they lend to. With this strong demand and limited supply, alternate lenders have recently increased their rates by up to 150 basis points (1.5 per cent). That’s a pretty significant increase considering alternate lenders already charge more than traditional lenders, at around three to five per cent for mortgages.

CREA makes forecast updates

Over in British Columbia, prices have returned to levels similar to the ones they sat at before the B.C. government introduced a foreign buyers tax. In other words, the tax appears to have only caused a minor blip.

As a result, the CREA has changed its forecast for overall sales in the province in 2017, from a 12.2 per cent decline as predicted in its first quarter forecast, to a nine per cent decline.

The measures introduced by Queen’s Park also caused the CREA to revise its annual forecast, as it’s now expecting a 2.1 per cent decline in sales for 2017 in Ontario, compared to the 2.7 per cent it reported back in January.

Nationally, the group is expecting a 1.5 per cent decline in sales for 2017.

These updates may sound like good news to consumers, but it arguably creates more confusion. The new CREA numbers are based on recent changes in the market, but as we’ve seen, the Canadian housing market can change really quickly.

All of these headlines can be a bit of a distraction at times. But, as usual, if you’re planning on buying a home, make sure the numbers in front of you (like the price and the mortgage rate) make sense and agree with your budget.

The post Canada Housing Market Update: Sales Drop, Some Mortgage Rates Increase appeared first on MoneyWise.

Over the last few months, the real estate market in Canada has seen a few changes. Recent data now shows the average selling price of a Canadian home dropped by 0.3 per cent in the past year. It may not seem like much of a difference, especially to those who have been waiting for the market to cool and stabilize, but it’s the first yearly decline since 2013.

It’s too early to determine if real estate is truly trending downwards, but it’s a significant milestone nonetheless. According to the Canadian Real Estate Association (CREA), the average price of a Canadian home sold on the multiple listing service (MLS) in July was $478,696. If you compare that number to the national average sales price of $504,458 in June, you’re looking at a five per cent drop month-over-month – a much more significant decline. This is also the third month in a row that we’ve seen a decline in national prices.

But what would the numbers be if we took out Toronto and Vancouver? If you remove Canada’s two hottest markets from the equation, national home prices would average $381,297. This is actually a five per cent increase in comparison to last year when prices averaged at $363,858.

It seems like the major cities can be to blame for upwardly skewing the national average price. Though these markets have seen a dip in prices month-over-month as well, they remain highly active and expensive.

For example, the average selling price of all homes in the Greater Toronto Area was $746,218 in July, up five per cent from a year ago. However, it was also the third consecutive monthly decline since April, when the average price was $920,791.

Why are sales decreasing?

CREA also reported a 2.1 per cent decrease in the number of national sales in July when compared to June 2017, and a 12 per cent decrease in sales year-over-year. That being said, there may be a few reasons as to why we’ve seen sales drop in comparison to last year, when prices were still increasing.

Last month, the Bank of Canada raised its key interest rate by 25 basis points (0.25 per cent).

The July rate hike would have increased carrying costs for potential homeowners and may have caused some to delay their purchasing decision. These players may find themselves sitting on the sidelines for a while since interest rates are also expected to rise again before the year ends.

The hike in July was widely expected as well, so it is possible that many people locked in their rate and made offers before the formal announcement, likely around the end of June.

In Ontario, specifically, new regulations on real estate may also explain why sales are decreasing. Back in April, the Ontario Government introduced the Ontario Fair Housing Plan, which implemented new rules – including a 15 per cent tax on foreign buyers – meant to tackle affordability for renters and buyers, and ultimately stabilize the market. Prices and sales have slowed down since April, but we’ve seen less of a decline every month, which may imply that things are starting to bottom out.

Has the real estate bubble burst? Barry’s opinion…

While there is no way to predict what’s going to happen in the real estate market, so far we’ve just seen a soft landing. Sales have dropped a fair amount, but prices haven’t followed as much. You could say we’re looking at a standoff between buyers who are waiting for prices to drop and sellers who may still be expecting record sales prices. Who will blink first is anyone’s guess, so for the time being, we’ll just have to rely on data.

If we’re looking at things nationally, prices are actually pretty balanced. It’s the prices in Toronto and Vancouver that have kept the national average so high. It’s fair to say these two markets are incredibly hot in comparison to the rest of the country, even though we’ve seen slight changes in prices and sales there as well.

Remember, British Columbia introduced a foreign buyer’s tax in 2016 and immediately saw sales and prices drop. Many believed it was the start of a housing correction in Vancouver, however, six months later, prices were back to their historic highs. This has many wondering if Toronto will follow a similar path.

Although prices haven’t dropped very much, there’s no doubt that market conditions have changed. There hasn’t been as many bidding wars or bully offers lately, which is good news for buyers. For serious sellers, however, it’s best to price your home at fair market value to see if any offers are made. Remember, in the end, it comes down to affordability so don’t forget to check current mortgage rates so you can price your home or budget for your new home accordingly.

The post Housing Market Update: National Home Prices, Sales Fall Again appeared first on MoneyWise.

Sales stats over the last few months may indicate that the Toronto real estate market is taking a breather. The average price of a home in Toronto has fallen 19 per cent since peaking in April, before the announcement of Ontario’s Housing Plan. Since then, many homebuyers have chosen to sit on the sidelines – similar to the reaction Vancouver’s market experienced when its provincial government first introduced a foreign buyers tax back in 2016.

And with the real estate market slowing down in the GTA, it’s become a lot more common for buyers to change their minds in the midst of closing a deal. For example, let’s say you bought at the peak of the market in April, but the appraisal value from your lender came in lower than expected. You now may not have the funds to close and as a result, consider turning down the deal.

But before you decide to walk away, experts advise considering the consequences. One B.C. couple recently learned the penalties of walking away the hard way – in this case, the sellers sued the buyers for $360,000 and won.

The consequences of backing out of your offer

As a buyer, it’s imperative to remember that an offer is a legal contract. By walking away from it, you’re leaving yourself open to numerous consequences, including losing your initial down payment deposit, and even being sued.

If a buyer is unable to complete the transaction after putting in an offer, they may be liable for much more than their deposit. In the instance that the deal does not close and the home sells to another purchaser for less than the original purchase price, the seller is within their rights to sue the original purchaser for the difference in the sale prices of the two deals.

For example, if you agreed to purchase a home for $500,000 but backed out of the deal before closing, and the seller ended up getting another buyer to close for $450,000, you may be on the hook for the $50,000 difference, on top of your down payment.

“The purchaser is also responsible for any other losses or damages incurred by the seller as a result of the deal not closing,” warns Shannon Durno, a real estate lawyer at Durno & Shea. “What’s even more alarming is that a purchaser’s inability to close their transaction can cause a chain reaction that can spill over into other real estate deals.”

If the seller of a home is not able to carry out the purchase of their next home as a result of their purchaser’s inability to close, the purchaser of their current home may be liable for losses from that transaction as well.

It’s a difficult decision to make, but if you’re considering walking away from an offer, bear in mind there are options to avoid getting sued into the stone age.

How to protect yourself if your lender gave you a low appraisal value

Situation: you put in an offer on a home, but your lender’s appraisal value on your current home comes in lower than you expected and you don’t have the extra funds to carry out your offer.

“The purchaser in these cases will have to make up the shortfall out of pocket, which of course can be problematic,” says Durno.

Durno recommends making offers conditional on financing, though, in most cases, appraisals are completed long after the financing condition has been waived. Otherwise, purchasers can also try to negotiate with the seller.

“The purchaser can try to negotiate a release of all or part of their deposit in exchange for a full and final mutual release to avoid being sued,” says Durno. “Often times, a purchaser will also make a request to the seller to extend the timeline of their deal to allow them to arrange for alternative financing options, possibly from a private lender. Private lenders will charge much higher interest rates than a bank but this is often times much less expensive than being sued for the deal not closing. However, in granting an extension the seller will often require a further deposit and their costs covered for the delay.”

Durno also mentions that “Vendor Take-Back” mortgages are also making a comeback. So if you’re a buyer, it doesn’t hurt to ask. Under this arrangement, the sellers would lend you the funds to help facilitate the purchase of the property in the event that you can’t afford it yourself.

As a last resort you can try to negotiate a lower purchase price with the sellers. Durno has seen a few instances over the past few months where buyers have successfully negotiated lower prices.

How to protect yourself if your property sells for less

It’s common to purchase prior to selling your existing property, but if it sells for less than anticipated or even worse, not at all, you can find yourself in a predicament.

One way to handle this type of situation is through bridge financing, but you can only do this if you have a firm sale on your current property, and this can lead to other issues.

“Often times, clients that expected to have a 20 per cent down payment from their own home sale, now require an insured mortgage,” says Fred Babbie, a mortgage broker at Safebridge Financial Group.

Homebuyers who put less than 20 per cent down usually require mortgage insurance. Their loan would also be subjected to qualification rules based on the higher-posted rate, which could make getting qualified for a mortgage harder for some.

Another solution to having two properties on your hands would be to turn one into a rental property. In this scenario, you could refinance your current property to obtain down payment funds for the new purchase. However, this is really just an option if you have the capacity to carry both properties.

Finally, private financing solutions are available as a last resort, but this will depend on your ability to support this debt.

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The housing market can be a hard thing to predict. But if you’ve found yourself in a predicament that requires you to withdraw your offer, it’s best to consider all your options before making a final decision. Speak to a financial advisor to avoid problems that could carry on a lot longer than you expected.

The post Walking Away from Your Offer on a Home? Know the Consequences appeared first on MoneyWise.

After a slowdown earlier in the year, real estate is seemingly on the rise, if only slightly. According to the Canadian Real Estate Association (CREA), there was an increase in the number of homes sold in September. This is the second month in a row where sales have increased month-over-month. However, when you look at sales year-over-year, there was an 11 per cent decline. Notably, home sales in the Greater Toronto Area were down 35 per cent in September compared to this time last year.

Despite the overall sales decline, prices continue to slowly rise. The national average price for homes sold in September was just over $487,000 – a 2.8 per cent increase in comparison to last year.

This price increase was led by Vancouver and Toronto, where the average selling prices were $1,046,982 and $775,546 respectively. However, if you remove those two markets from equation, the national average drops down to $374,500.

Recent interest rate hike had no affect… yet

In case you missed it, the Bank of Canada announced another interest rate increase of 25 basis points on Sept. 6. The overnight rate now sits at one per cent. Although another rate increase was somewhat expected, it was a bit surprising that it came so soon, considering there was an increase in July as well.

The July increase was possibly responsible in part for the dip in sales over the summer. And while potential buyers may be on the watch for how this increase will affect the market, they’ll likely have to wait a few more weeks to see.

The rate increase was announced at the beginning of September, but it is unlikely it would have affected the recent sales numbers as most buyers would have likely already locked in their rates with a pre-approval.

Personally, I don’t believe we will face another rate hike anytime soon, but in the event of such, it’s safe to say another rate increase could price more Canadians out of the housing market.

Though sales numbers have gone down, the demand for real estate still seems to be thriving, and the number of listed homes has increased nationally. Following three consecutive monthly declines, the number of newly listed homes rebounded by almost five per cent in September, mainly due to a jump in new supply in the GTA.

Canadians willing to overspend for housing

In the face of rising home prices, it seems most Canadian home buyers are willing to overshoot their budget. According to a new home buyer survey from TD, 56 per cent of respondents would be willing to go over their budget by up to $50,000.

Ironically, 57 per cent of homeowners surveyed said they were confident about what they could afford, yet 97 per cent admitted they wish they had factored in other costs associated with owning a home before purchasing.

When budgeting for a home, it’s important for potential homeowners to look at more than just the monthly mortgage payment, and take other expenses into account such as property taxes and maintenance fees. These costs can drastically change how much one can actually afford.

The TD survey also found that those surveyed were worried about rising interest rates (58 per cent), hidden costs of home ownership (50 per cent), being house poor (49 per cent), and the ability to afford monthly mortgage payments (30 per cent).

Indeed, there are worries about affordability and rising interest rates, and housing prices have yet to fall in any significant manner. But keep in mind that the September results are a very small sample size and we’re yet to see notable variances in the market – if any – due to recent rate hikes.

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Three months into 2018, it seems like the Canadian housing market is down again with sales volume dropping 16.9 per cent in February compared to this time last year. According to the Canadian Real Estate Association (CREA), there was also a 6.5 per cent drop compared to January, which is the biggest decline in nearly five years.

This shouldn’t be a huge surprise since the Office of the Superintendent of Financial Institutions (OSFI) introduced tighter mortgage rules effective January 2018. As a result, some homeowners rushed to make their purchase before the new rules took effect, which is why there was a lot of sales activity leading to the end of 2017.

National prices on the decline

When looking across the country, the average price of homes sold fell five per cent from one year ago to $494,000. If you remove the hot markets of the Greater Vancouver and Greater Toronto, then prices would fall another $112,000 – averaging at $382,000.

“Sales activity is down in many, but not all, housing markets compared to the end of last year, and varies depending on price range, location and property type. All real estate is local” said CREA President Andrew Peck in the CREA’s monthly housing stats announcement.

Despite the decline in sales, the MLS Home Price Index still rose by 6.9 per cent year-over-year, which means Canadian real estate prices are still seeing gains; they’ve just been moving at a much slower pace compared to recent years.

Amount of available homes for sale is up

In the Greater Toronto and Vancouver areas, there’s definitely still a supply issue, but overall, the CREA reports that home listings were up 8.1 per cent in February compared to the 20 per cent drop we saw in January. Although this news is positive, the numbers are still down compared to every month in 2017 with the exception of January 2017.

Still, three quarters of the Canadian market is still relatively balanced. Inventory available is currently sitting at 5.3 months – this refers to how long it would take to for all available homes to be sold. In addition, housing stock is still at its highest level in over two years.

Whether you’re a first time home buyer or buying your second, third or fourth home, it pays to compare mortgage rates with RateSupermarket.ca. With prices on the decline and more homes on the market, now is the time to look into getting the best rate for your dream home.

The market sees mixed numbers across the country

Trends across the country appear to be varied. Montreal has seen growth of 6.1 per cent while the GTA saw a modest 3.2 per cent gain. Sales in the Vancouver area saw a continued decline since 2016, but there were also small drops in Regina and Saskatoon at 4.8 and 3.8 per cent, respectively.

“Momentum for home sales activity going into the second quarter is also likely to weighed down by housing market uncertainty in BC, where new housing policies were introduced toward the end of February” said Gregory Klump, CREA’s Chief Economist in the announcement.

Recent announcements may have affected sales

As mentioned earlier, new mortgage rules introduced by OSFI came into play on Jan. 1. Borrowers that have an uninsured mortgage must now pass the stress test at the Bank of Canada’s five-year benchmark rate which is currently sitting at 5.15 per cent or 200 basis points above their current contracted mortgage rate.

This change effectively reduces the amount of mortgage you would qualify for, and in knowing that, it seems as if people moved up their home purchase before the end of 2017, which likely explains the slowing in sales during the first two months of 2018.

In addition, the Bank of Canada increased its key interest rate to 1.25 per cent back in January which further reduced affordability. This was the third hike since last summer, which has effectively priced some people out of the market, though the Bank maintained rates at its last announcement on March 7.

When the next Bank of Canada announcement comes out on April 18, we’ll get a better picture of how the Canadian economy is performing.

The post National Housing Update: Why Prices are Declining and What to Expect for 2018 appeared first on MoneyWise.