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Tag Archives: housing prices

Don’t rush into housing market just for a low mortgage rate

Rob Carrick – The Globe and Mail

The sucker’s bet on housing is to pounce on that five-year, 2.99% mortgage deal offered so controversially by Bank of Montreal.

Oh, it’s a great rate. There’s next to no chance over the next five years that you’ll kick yourself for having chosen to lock in such a historically low cost of borrowing. But the low-rate argument for getting into the housing market for the first time just isn’t compelling enough to jump in right now.

Comment: Except that rates will not go lower, they will only rise. And prices are also going to rise. Even if they stay flat, then rates stay flat or rise. The future will only even cost the same as now, at best. Most likely, with prices and rates rising, you will pay more. Heck, a $500,000 house now at 2.84% (which you can get from BMO) with 20% you are paying $1,879 or so per month, mortgage only. Say prices keep rising, but at 4% rather than the 10-year average of 6.09%. Let’s say mortgage rates rise to a not-very-high 4.09%. That means that in 3 years that same house would cost $546,363 – and now cost $2,344 per month to finance with 20% down (never mind your down payment rose $9,273). By waiting, with very minor increases, you just wound up paying $465 per month more – for the exact same thing. Never mind 3 years of rent down the toilet…

For one thing, no one expects rates to move higher any time soon. The Canadian economy, not to mention the global economy, simply can’t handle higher rates right now. They’d smother growth.

Second, there is a very real chance that housing prices could decline further. On Monday, the analysis firm Fitch Ratings said Canada’s housing market is overvalued by about 20% across Canada. Fitch isn’t saying housing prices will necessarily drop by that much, but its view does suggest caution for those who think the housing market will rise like daffodils when spring comes.

Comment: What do you mean decline further? They have not declined at all so far… And who the heck is Fitch Ratings? And why do they carry equal weight against the entire real estate industry with a different opinion.

Note that we’re talking about a pullback in prices, not a crash. The debate over the housing market is too often framed as being crash or boom. There is a middle ground possibility of price stagnation or modest declines.

Comment: Try flattening or modest increases. That is the most likely outcome for Toronto over the next few years.

The smart play for a first-time buyer right now: Start checking out what’s available in your price range in the neighbourhood or community you like. Get a sense of pricing and then wait to see what happens through the spring.

Don’t worry about missing that 2.99% rate while you’re on the sidelines. A quick survey of rates shows that it’s possible to set up a five-year mortgage for as little as 2.79% from the sort of lenders that mortgage brokers deal with. Looking ahead, rates may move around a bit, but a big surge higher from current levels seems unlikely.

Comment: Contrary to the naysayers who predict mortgage rates of 15% by this fall.

BMO’s rate isn’t quite the lowest out there, but the bank has been taking all kinds of guff over its decision to lower its five-year rate from 3.09%. Finance Minister Jim Flaherty even warned the banks to engage in “prudent lending,” which is odd because aggressively low rates are a benefit to borrowers.

Mr. Flaherty has already urged Canadians to engage in prudent borrowing, and it seems people have listened. Growth in borrowing rates has tapered way down and the numbers from late last year suggest we’re back to levels last seen in 1993. This is a big part of the reason why the housing market has slowed in some parts of the country.

First-time home buyers, this trend is your friend. Don’t rush into the market just because a big bank is stirring things up with a great mortgage rate.

Comment: But don’t wait too long and price yourself out of the market. With the price increases and mortgage increases from above, if your income stays the same, all of a sudden the houses you liked are now out of your price range range. Truly, in this market, waiting is not your friend. Any clients of mine that hve waited have either paid more, or not bought at all as they were priced out of the market.

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Contact the Jeffrey Team for more information – 416-388-1960

Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.

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Little Italy

With the city core just a quick street­car ride way, and the prices of homes still quite rea­son­able given the local ameni­ties and prox­im­ity to down­town, Lit­tle Italy is a great choice for home buy­ers look­ing to live in a down­town Toronto neigh­bour­hood that is alive with activity.

Don’t let the name deceive you – the days are long gone where the neigh­bour­hood was the pri­mary land­ing point for Ital­ian immi­grants com­ing to Canada. The afford­able homes in Lit­tle Italy have been attract­ing a diver­sity of cul­tures for many years. More recently how­ever, Lit­tle Italy’s Edwar­dian and Vic­to­rian row houses and semi-detached homes have been entic­ing urban pro­fes­sion­als and young hip­sters want­ing to live near what is now a hub of Toronto nightlife and shopping.

Lit­tle Italy is a lively, inter­na­tion­ally diverse neigh­bour­hood, reach­ing south from Col­lege Street to Dun­das Street West, and west from Bathurst to Oss­ing­ton. Once the land­ing point for waves of Ital­ian immi­gra­tion fol­low­ing World War Two, the area still holds a dis­tinct Ital­ian influ­ence – but now with a strong Por­tuguese pres­ence, as well as a mix of young peo­ple and urban pro­fes­sion­als want­ing a loca­tion within easy reach of the city’s centre.

Little Italy Real Estate Map

Lit­tle Italy Real Estate Map

Lit­tle Italy homes offer an eclec­tic mix of types and styles, but the most com­mon are typ­i­cal Edwar­dian and Vic­to­rian row or semi-detached houses, some with whim­si­cal touches such as round win­dows. Multi-unit res­i­dences are more promi­nent here than in the Trinity-Bellwoods neigh­bour­hood directly to the south. Homes remain rea­son­ably afford­able for a prime inner city location.

With the city core a quick street­car ride away, and the prices of homes still quite rea­son­able given the loca­tion, Lit­tle Italy homes and real estate offer a great choice for home buy­ers look­ing to live in a down­town neigh­bour­hood with won­der­ful char­ac­ter and activity.

The heart of Lit­tle Italy is the shop­ping, din­ing and enter­tain­ment strip along Col­lege street, cen­tred on the inter­sec­tion of Col­lege and Clin­ton. As might be expected, some of the city’s best-loved Ital­ian restau­rants are here, includ­ing many of the orig­i­nal eater­ies, lunch coun­ters and cafés that hark back to the neighbourhood’s roots.

Food mar­kets, tra­di­tional bak­eries and neigh­bor­hood retail­ers share the street com­fort­ably with art gal­leries, trendy bistros, bou­tiques and exclu­sive fash­ion shops — while the modern-minded shop­per may pre­fer the multi-level, glass-roofed gal­le­ria with its shops, restau­rants, cin­e­mas and a Mar­riott hotel.

Houses in Little Italy

Houses in Lit­tle Italy

Black-clad non­nas may still shuf­fle along side­walks with the day’s gro­ceries, and elab­o­rate tile shrines to the Vir­gin Mary may still bless many of the houses – but the influx of Ital­ian and Por­tuguese immi­grants from whom this neigh­bour­hood derives its soul slowed over the years. In their place came pro­fes­sion­als look­ing for a foothold in the city, and 20-somethings eager to live within stum­bling dis­tance of the bars along the Col­lege strip.

It’s a real estate ecosys­tem in which all par­ties thrive: the bar kids lend the area a cachet that attracts afflu­ent home­buy­ers, who in turn fund the retire­ments of the blue-collar immi­grants. Teem­ing with restau­rants, gelato par­lours and cafes, the area’s endur­ing pop­u­lar­ity has sparked a few new condo projects that promise to mix up the Col­lege streetscape. Brack­eted on the east and west by the million-dollar homes along Palmer­ston and Dover­court, the typ­i­cal semi-detached Vic­to­rian will still run from around $600,000 up to closer to $800,000 for larger, updated homes.

Lit­tle Italy real estate is afford­able and an attrac­tive bar­gain for young buy­ers. In the 1980s, the neigh­bour­hood began to see an increase in young pro­fes­sion­als mov­ing in to take advan­tage of the hous­ing prices. Most houses are semi-detached two sto­ries and in Edwar­dian and Vic­to­rian row house styles. They have spa­cious rooms, but, with­out their orig­i­nal mould­ings and wood­work­ing. Most Lit­tle Italy real estate make great fixer-uppers and are per­fect for indi­vid­u­als look­ing for a down­town res­i­dence at a rea­son­able price.

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.

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  • Toronto and Canada Housing Forecasts Getting Rosier

    Each month, our local home builders’ association receives several market intelligence reports from the Canadian Home Builders’ Association. This month’s newsletter contained a number of items that I thought would be of interest to new-home buyers in the GTA.

    Economic Update

    Dr. Peter Andersen, CHBA’s consulting economist, notes that this year will be much busier than expected for construction activity of all types. Housing starts have surged and residential construction has picked-up again. Non-residential construction, always a second-half cyclical performer, is in a solid expansion. A strong office leasing market and a declining office vacancy rate are signaling the onset of an office tower construction cycle.

    Housing starts averaged 248,000 at annual rates in the first quarter – an increase of 17% from the same period a year earlier. This is far above the 2005 housing starts total of 225,481 units and also the annual cyclical peak of 233,431 units set in 2004.

    The March starts figures were striking – 252,300 at seasonally adjusted annual rates. The first-quarter surge reflected both single-detached and multiple-unit starts. Housing start forecasts for 2006 are being revised upwards as a result of the monthly performance through the first three months of the year.

    The resale market is always a good indicator for new-home demand. It is still hot and shows no sign yet of affordability stress. First-quarter sales were at an all-time record high, after adjusting for seasonality. Sales of existing homes and condos in March continued at close to record levels. This is also good news for renovation demand as the stimulus to renovation from resale housing activity, which works with a lag, shows no sign of slowing down. The national average resale price in March in major markets was up by 11.5% year over year.

    RBC affordability index

    High home prices and utility costs in the last three months of 2005 pushed home affordability to its highest level in 10 years, according to the Royal Bank of Canada.

    RBC’s affordability index measures the proportion of pre-tax household income it takes to service the costs of owning a home. Despite the fact that incomes continue to rise, this increase does not match the hikes in mortgage rates, house prices and utility costs.

    Income growth in Canada is starting to accelerate, wages are rising, but the increase in house prices has been faster. Add to it higher interest rates and overall size of rising mortgages, so affordability is going down.

    Vancouver and Calgary were hit the hardest as housing prices soared in the last quarter of 2005. Affordability is expected to get worse in the first half of this year, but should level off by year’s end.

    Labour shortage

    The construction industry is concerned after hundreds of construction workers from Portugal and other countries have been deported as the new Conservative government moved away from Liberal government promises of an amnesty plan.

    Promises of an amnesty gave hope to underground workers who came forward to file refugee claims as a result. Their attempts to stay in the country legally ended up getting many of them deported. Canada’s current immigration system is tailored to educated immigrants, and blue-collar workers often do not qualify.

    “This is insanity,” says immigration lawyer Lorne Waldman. “We have an immigration system that is supposed to supply workers for jobs, but these blue-collar workers who are needed cannot qualify to get in.”

    There is a major labour shortage in the construction industry – an industry that accounts for 9.5% of Canada’s total gross domestic product and 7.5% of Ontario’s alone. It is estimated that there are between 10,000 and 15,000 illegal immigrants working in southern Ontario’s construction and hospitality industries, and 200,000 undocumented workers across the country. Deportations are therefore a major threat to the construction industry.

    The Canadian Home Builders’ Association wrote a letter to Immigration Minister Monte Solberg, supporting the work foreign workers do in the homebuilding industry and urging him to resolve the labour shortage.

    Solberg says the government is working with the provinces to ensure labour needs are met. “We understand the process doesn’t work well for a lot of people. We’re trying to fix that. The ideal situation is for people to go through the process.” He ruled out an amnesty, he said, because he doesn’t want to encourage people to come to Canada illegally.

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    Contact the Jeffrey Team for more information – 416-388-1960


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