Tag Archives: interest rate increases
First Time Buyers Are Opting For Condominiums
First-time buyers will increasingly favour condominiums with the rate of condo purchases projected to double among this group in the next three years. Of those who bought their first property in the past five years, 10% bought condominiums, while 21% of potential buyers intend to purchase one. Detached homes are expected to account for a smaller proportion of sales among potential buyers than they have in the past five years.
According to Scotiabank, who participated in the report, strong economic fundamentals, low interest rates and flexible finance programs have made home ownership an attractive prospect for a diverse group of entry-level buyers. First-time buyers tend to be well informed on most aspects of buying a home, however the survey found that they demonstrated a need to focus more on long term planning.
New homebuyers and potential buyers were asked: “If you have a $150,000 mortgage and the interest rate increases from 5% to 6%, approximately how much more would you pay over the next ten years?” The majority of respondents (39%) said they did not know how much they would pay. Only 18% of respondents estimated correctly ($10,000 to $15,000).
Today’s first-time buyers have a large volume of information and educational tools available to them. They are an incredibly savvy demographic when it comes to using the internet to research the real estate market, neighborhoods and properties. While they are more knowledgeable than first- time buyers in previous years, they are still largely inexperienced in the complexities of a real estate transaction.
First-time buyers are well aware of the possibility of interest rate increases and factor them into their decision to buy, but their awareness on how an interest rate increase could affect their future finances is surprisingly low. We encourage first-time buyers to take both current and future financial needs into account.
“Despite the steady rise in home and condo prices in recent years, Canadians’ mortgage servicing costs have remained close to record low levels – thanks to low interest rates and healthy income gains,” said Charles Lambert, Managing Director, Mortgages at Scotiabank. “Nonetheless, with interest rates expected to drift modestly higher over the coming year, it’s important that first-time homebuyers have a strategy in place to properly structure their borrowing.”
Lambert advises potential homeowners to “do your homework – crunch some numbers and know what you can afford when you go out shopping for that house or condominium.”
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Contact the Jeffrey Team for more information
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National real estate association adjusts its outlook, says sales will rise
By Kim Covert, Postmedia News
Stable interest rates and rising prices in Vancouver have proved to be positive factors for Canada’s housing industry, according to the Canadian Real Estate Association, which had forecast declining sales but now expects them to increase overall in 2011.
Sales and housing prices actually dropped in July from the previous month – sales edged down by 0.1%, and the national average price of a home during the month was $361,181 – the lowest it’s been since January, CREA said, though it’s 9.3% higher than in July 2010. While year-to-date sales are 1.6% below last year’s figures, transactions are up 12.3% from the same month last year.
“This increase reflects weakened activity in July 2010, when levels for the month reached their lowest point since 2002,” CREA said.
The Ottawa-based industry group represents about 100 boards across the country.
While it had been forecasting a slowdown, it now says there will be 450,800 sales in 2011 – a 1% increase from a year ago. It says rising prices in Vancouver have helped push its forecast for the average sale price in 2011 to $363,500, a 7.2-per-cent increase from a year ago.
“While there had been some talk of potential interest rate increases, that hasn’t happened,” said CREA president Gary Morse. “In fact, rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012.”
CREA expects sales to fall less than one% in 2012, while prices will flatten.
“Canadian housing remains surprisingly robust, thanks to still-low interest rates and solid job growth,” Douglas Porter, deputy chief economist at BMO Capital Markets wrote in a note responding to CREA’s data.
“While the recent financial market turmoil may temporarily weigh on activity, sales should ultimately find support from continued exceptionally low borrowing costs.”
Sonya Gulati, an economist with TD Economics, says while low interest rates will continue to support sales, the bank is still forecasting a slowdown in housing market activity.
“With uncertainty permeating markets regarding the state of the global economic recovery, we continue to expect that real estate activity with temper over the next 18 to 24 months,” Gulati wrote in a note. Prices in Toronto rose 0.8% in July over June’s figures – though sales declined 0.8% – and while prices and sales both declined in Vancouver, by 2.5% and 3.2%, respectively, “going forward, a correction is ripe for these cities in order to bring both markets in line with balanced territory,” Gulati said, though pricing declines will be gradual, with the biggest cuts coming in late 2012 and early 2013.
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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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CREA Updates Resale Housing Forecast
The Canadian Real Estate Association (CREA) has revised its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations for 2011 and 2012.
Overall, sales activity and prices remained stronger than expected in the second quarter. Sales momentum was also better than expected heading into the third quarter. As a result, the 2011 national forecasts for sales activity and average price have been raised slightly.
National sales activity is forecast to reach 450,800 units in 2011, up less than 1% from levels in 2010. CREA had previously forecast a decline of about 1% for activity in 2011. Erosion in affordability due to higher prices has prompted a small downward revision to the outlook for sales in 2012.
British Columbia’s 2011 sales forecast has been revised slightly higher, in recognition that home sales there appear to have bottomed out sooner than previously anticipated. Stronger than expected activity in Ontario offset slightly softer than anticipated demand in Quebec, Manitoba, and Newfoundland in the second quarter of 2011. Accordingly, the Ontario sales forecast for 2011 has been raised, while the outlook for activity in Quebec, Manitoba, and Newfoundland has been revised lower.
National sales activity in 2012 is forecast to ease 0.7% to 447,700 units, which is roughly on par with its ten-year average.
“While there had been some talk of potential interest rate increases, that hasn’t happened,” said Gary Morse, CREA President. “In fact, rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012. It’s a great opportunity to purchase a property with financing at very favourable rates.”
The national average home price is forecast to rise 7.2% in 2011 to $363,500. This is an increase from the previous forecast, reflecting continued strong price growth in Vancouver in the second quarter of 2011 and acceleration in prices elsewhere, particularly Toronto. These two markets exert an outsized influence on the national average due to their relatively high level of activity and average price.
The national average home price is expected to moderate in the second half of 2011, returning to normal following a heavily skewed start to the year. In the first half of 2011, the national average home price was pushed upward by a surge in multi-million dollar sales in selected areas of Greater Vancouver and a higher than normal share of overall sales in more expensive markets.
“Some of the expected moderation in the national average price is seasonal, with average price peaking in many local markets during the second quarter of any year,” said Gregory Klump, CREA’s Chief Economist. “Elevated shares of provincial and national sales activity in Vancouver and Toronto are also expected to return to more normal levels, contributing to an anticipated moderation in average price in British Columbia, Ontario, and nationally.”
“Additional new listings are anticipated to result in a more balanced resale housing market in most provinces,” said Klump. “The national average price is forecast to stabilize in 2012, although at a slightly higher level than previously expected.”
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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.
———————————————————————————————————————
Related posts:
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