Tag Archives: pre-approved mortgage
Carolyn Ireland – Globe and Mail
The full intensity of the spring market will be upon us soon. Can bidding wars for Toronto houses get any more zany?
Lots of people watching the eruption of extreme bidding in the city’s real estate market this spring are wondering who the victors are in these contests.
Real estate agent Wilfred Veinot says the winning bidders are often educated couples or single professionals in their early 30s who have watched their peers prosper from buying real estate.
“They see their friends’ houses and say ‘I want a piece of that’,” says Mr. Veinot of Sutton City Realty Inc.
The age of the new buyers doesn’t seem much different from the past but their fearlessness does.
“Everything’s got to be instant,” says the agent.
In one recent deal in the east end, a cute bungalow within walking distance of the subway was listed for $499,000. The winning bid was $610,000.
Mr. Veinot has queried clients about their decision to offer $100,000 over the asking price, which is not an unusual figure these days for even a modest detached house.
“Are you putting yourself in jeopardy?” Mr. Veinot asks. “Oh no, we can afford it,” the clients will assure him.
With interest rates so low and house prices so high, they look at the added monthly cost of another $100,000 it seems like nothing.
Comment: Not likely. Probably their budget was $600,000 to begin with. No one pushes there price up 20% that quickly and easily. They can’t. People forget that bidding wars are caused by pricing houses way under market value. The try value of the house was likely $600k, but they priced it $100k less to spark the frenzy. In the end, they could have priced it at $629,000 and got the same.
If a couple’s friends bought three years ago, they’ve seen a healthy return on a 15% down payment, to use an example. The potential buyers out there today feel that they are three years farther behind. There is a sense of urgency.
Comment: Which is try. And they are more like 20-25% behind. A house that was $500,000 in early 2009 is now going for $600,000. And in another year or two it will be $650,000. And when mortgage rates rise, that price will be felt even more. So yes, there is certainly a sense of urgency – or should be.
Do they fret that if they don’t buy now they will never get into the market?
“I hear it on a daily basis,” agrees Mr. Veinot.
Mr. Veinot concentrates on Riverdale, which is a neighbourhood perennially popular with young parents searching for a detached house with a well-regarded school nearby.
Whether they are purchasing for the first time or moving up, the potential buyers are doing extensive research online, lining up a pre-approved mortgage, and then looking only at the houses that suit them, he says.
“No one can waste time.”
Of 10 people who pass through an open house, he estimates that eight or nine are qualified buyers.
It’s notable that he’s not seeing the same people endlessly tramping around the circuit; every weekend, he says, new faces appear at the open houses. And while the condominium units in downtown high-rises may attract investors, he adds, the singles and couples Mr. Veinot sees in his pocket – east Toronto houses – almost always intend to live in the house.
“None of these are investors. These are end-users.”
One recent buyer he dealt with was a young doctor on her own; in another case a couple wanted to be within walking distance of the subway.
At Capital Economics, economist David Madani is forecasting a deceleration in house price increases in this country, though he cautions that we will have to wait until the spring season is well under way to judge the trend in housing demand and prospects for prices.
Comment: And so far the market is on fire – if possible, price appreciation is accelerating!
But Mr. Madani notes that household borrowing continues to expand at a rapid pace. Even though the debt-to-income ratio may have edged down in the fourth quarter of last year, the debt-to-asset ratio hit a record high. The indicators he watches suggest household borrowing and spending remain high in this quarter.
Last week was March break for Ontario schools, which is typically quiet for both new listings and sales, says Mr. Veinot. But with that hiatus out of the way and spring bulbs starting to appear, the market will hit maximum velocity in the coming weeks.
Mr. Veinot thinks that the lower interest rates the big banks have offered recently don’t have a huge impact.
“The people who are looking now don’t know anything but low interest rates.”
He thinks they’re more likely to be influenced by how their family homestead has appreciated over the decades. A house that the parental units paid $75,000 for might be worth $600,000 today.
At the same time, the cost to rent a decent two-bedroom apartment in Toronto is often in the neighbourhood of $2,000.
“Two thousand carries a lot of mortgage,” says Mr. Veinot.
Comment: A little over $485,000 worth at 2.99% to be exact. So people can buy a $600,000 house with 20% down for the same monthly amount as renting a crappy old 2-bedroom apartment. That is what is fueling the market.
And a stream of television shows about home ownership and renovation makes everything seem so exciting, he adds.
“The desire to own real estate is stronger with these younger people than I’ve ever seen it.”
Besides, when the “sold” sticker goes on, ask the winners of a bidding war how they feel, and they are usually joyous.
“People say ‘I can’t believe that house went for that’. But you go up to the people who beat nine other people to get it and they’re ecstatic. They say, ‘I can’t believe we got the house’.”
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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Sunny Freeman, The Canadian Press
A majority of Canadians who just bought or are about to buy their first home expect to pay less than the asking price and prefer newer and detached homes over older and semi-detached homes or condos, according to a TD Bank survey.
But the report questioned whether the homebuyers had unreasonable expectations, considering that nine out of 10 took out or expect to take out a mortgage for their home.
“It’s only natural to want your first home to be the home of your dreams, but it is important to be realistic about what you can afford,” said Farhaneh Haque, a mortgage specialist at TD Canada Trust.
Six in 10 first-time homebuyers said they were worried about being able to afford their home should interest rates rise — a scenario that economists say is inevitable after an era of historically low rates sparked a rush into the housing market.
Only 30 per cent said they plan to or already have more than a 20% down payment, and the remaining 70% will require mortgage insurance. Eight of 10 buyers reported putting down as much as they can afford.
But Haque advised that prospective first-time homeowners consider a larger down payment because paying 10% or more will make a big difference, bringing down the time it will take to pay off a mortgage and possibly affecting regular payment amounts.
“It may mean that you need to save longer before buying your first home, but it will pay off in the end.”
The vast majority of those surveyed said they made informed financial decisions before buying, with nine in 10 homebuyers getting pre-approved mortgages and calculating closing costs before buying.
However, closing costs, land transfer tax, and legal fees were the top three costs buyers felt unprepared for.
Six in 10 first time home buyers said they bought or intend to buy a fully detached home and three-quarters want a new home.
Meanwhile, survey respondents were equally split between preferring a smaller home closer to work and 45 per cent would prefer a larger home with a longer commute.
Almost all respondents, 99%, said price was the most important factor when considering what kind of home to buy.
The report compiled 1,000 results from an online survey between June 8 and 21 of Canadians who had purchased their first home within the past 24 months or intended to purchase their first home within the next 24 months.
First-time homebuyers in B.C. bucked a national trend and said condominiums were their No. 1 choice. They were also most concerned about being able to afford their homes if interest rates rise.
Respondents from Atlantic Canada were most likely to have their hearts set on new, large and fully detached homes. They are also most likely to prefer a larger home even if it would mean a longer commute.
Quebecers browsed through the fewest number of homes while shopping for their first, but were most likely in the country to live in their first home for their entire lifetime, the report found.
More first-time buyers in Alberta expected to pay less than asking price than those in any other province.
In Ontario, more homebuyers than the national average planned to put more than 20% toward a down payment.
More than in any other provinces, people in Manitoba and Saskatchewan said they would prefer a newer home over an older home if price points were similar.
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As sale signs mushroom, buyers have more choice, while sellers are adapting
Carolyn Ireland – Globe and Mail
Some homeowners who were waiting for their gardens to spring to life before they listed their houses for sale are wondering if they would have been better off planting a sign on the lawn in the barren days of February and March. The answer, most likely, is yes.
Toronto’s real estate landscape has shifted in the past few weeks with a burgeoning number of houses listed for sale.
For prospective buyers, the change means they are facing a phenomenon they haven’t encountered in quite some time: choice.
Real-estate broker Patrick Rocca of Bosley Real Estate Ltd. says the Toronto market has become quirky since listings began ramping up immediately after Easter.
Now, some houses are selling in bidding contests at premiums above the asking price that Mr. Rocca deems “crazy,” while in other cases agents anticipated a quick sale and the property is just sitting.
“A month or six weeks ago, everything was a slam dunk.”
Mr. Rocca says every spring brings a rush of new listings when the freshness of new leaves makes houses and tree-lined streets look their best, but in 2010 that seasonal trend is even more exaggerated.
Some sellers have recently gone with the strategy of holding off buyers until a specified hour so that all of the bids can be considered at once, only to see the night pass by without receiving a single offer. Other sellers are trimming their asking price as the competition increases.
As for new houses, Robert Kavcic, economist at BMO Nesbitt Burns, says developers are ramping up their building at a pace that may be too quick compared with the rate at which households are forming. “One could argue that the short-lived construction recession didn’t last long enough to work off the overbuilding seen during the 2000s, and therefore starts will moderate in the coming year if demand trails off as expected,” Mr. Kavcic said in a note to clients.
Mr. Rocca recently listed two semi-detached houses on one popular street. Another listed a third on the same street, which rarely has any houses for sale, let alone three almost at the same time.
Along with the rise in listings, mortgage rates have edged up and some first-time buyers may have been priced out of the market, Mr. Rocca says. Meanwhile, many prospective buyers who secured a pre-approved mortgage with lenders are anxious to buy a house before the financing offer expires.
With market dynamics changing, Mr. Rocca says that sellers are beginning to realize they may not fetch the same price for a property that their neighbour received two months ago when listings were scarce.
He turns down listings when the sellers press to set an asking price that is too unrealistically high.
“I don’t need an overpriced listing just sitting there.”
Mr. Rocca is also less likely to recommend that sellers hold off buyers until a specified time – particularly when the asking price is more than $1-million.
Paul Johnston of Right at Home Realty is also increasingly likely to recommend that sellers consider an offer as soon as a buyer is willing to make one.
Last week he listed a house on Ridley Boulevard which sold within two days.
“We didn’t even hold the open house.”
Mr. Johnston says that buyers who have long been frustrated by the shortage of appealing properties on the market are finally feeling more hopeful.
“If someone wants it they can come and get it without having to play the game,” he says. “There’s optimism among buyers that they may finally get a property that doesn’t have 13 offers on it.”
Buyers who are committed to the search, he says, are active on a daily basis. Many have their finances in line and they will move quickly.
“They’ll be on your listing faster than you can blink.”
Also, listings are mushrooming so quickly that sellers who list a house and then decline to look at offers for a week are risking the chance that competing properties will arrive and siphon off bidders.
Single-family houses that are nicely renovated and located in a good neighbourhood are still selling briskly, he says. Investment properties that have been kept in top shape and which provide a steady income are also selling quickly.
“These are still two beasts where buyers are willing to extend themselves.”
Looking out to the fall, many market watchers are expecting a slower pace of sales.
Mr. Rocca, who is still hearing from lots of homeowners who are asking him to evaluate their property, expects the next six weeks to be hectic. He says the market may be slower in the fall, but it should remain fairly strong.
In between, he hopes to catch up on some rest if the typical summer slowdown arrives.
“I’m looking forward to July.”
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