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Canadian Housing Starts to Moderate, Resales Stable in 2013

OTTAWA, November 5, 2012 — Canada’s new home market is expected to continue to moderate in the last quarter of 2012 and into 2013. Meanwhile, activity in the existing home market is expected to hold steady, leading to house price growth in line with or slightly below inflation, according to Canada Mortgage and Housing Corporation’s (CMHC) fourth quarter 2012 Housing Market Outlook, Canada Edition. “A weaker outlook for global economic conditions and the waning of the effect of pre-sales from late 2010 and early 2011, which contributed to support multi-family starts this year, will bring moderation in housing starts next year. Nevertheless, employment growth and net migration will help support housing starts activity going forward,” said Mathieu Laberge, Deputy Chief Economist for CMHC. On an annual basis, housing starts will be in the range of 210,800 to 216,600 units in 2012, with a point forecast of 213,700 units. In 2013, housing starts will be in the range of 177,300 to 209,900

Dunning: Mortgage Rules (Round 4) Were Overkill

“...The changes to mortgage insurance criteria are unnecessarily jeopardizing the health of Canada’s housing markets and the broader economy.” That’s the conclusion from economist Will Dunning in CAAMP’s just-released State of the Residential Mortgage Market report. (Link) Dunning says his research suggests the Finance Department has created “a policy-induced housing market downturn” that could reinforce existing weakness. He calculates that the most recent (July 2012) rule changes will knock 11% of potential high-ratio homebuyers out of the market—that is, until they can come up with more net income or a bigger down payment. He lays out the following arguments: Jobs underpin the market… “Job creation is the key driver of housing demand” writes Dunning. “The ‘housing wealth’ effect (the increased confidence, and willingness to spend and invest, that results from rising house prices) is the single most important driver of job creation” What’s more, in the p

New guidelines coming for mortgage insurers

TARA PERKINS - REAL ESTATE REPORTER The Globe and Mail Published Monday, Nov. 19 2012, 6:30 AM EST Canada’s financial regulator will release new guidelines for mortgage insurers early next year, including the government’s Canada Mortgage and Housing Corp. – but they won’t drag down the housing market as much as the guidelines for banks have, says the country’s banking watchdog. The Office of the Superintendent of Financial Institutions will outline what standards it expects the country’s three mortgage insurers to follow when they underwrite a policy on a home. Ottawa has just recently given OSFI the job of overseeing CMHC, a federal Crown corporation that is the largest player in the industry; it was already regulating two private-sector rivals, Genworth MI Canada and Canada Guaranty. The mortgage guidelines that OSFI released for banks this summer are believed to have played a role in the decline in national home sales for the second half of this year. The new rules push

The hidden costs of home ownership

By Gail Johnson Read Here Kelly Gardiner In his three decades as a real-estate agent in North Vancouver, B.C., Kelly Gardiner  has seen a lot of different reactions from people buying a house for the first time . Usually, they're excited, nervous and overwhelmed. But there's another feeling that sometimes pops up -- utter shock -- not from the purchase itself, but because of all the associated costs people never even thought of. "For people who haven't moved that often, a lot of expenses can come as a surprise (money mistakes)," Gardiner says. "Or they're so focused on just signing the papers that they never stop to think about everything that's involved in owning a home and moving into one." So, if owning property is a new endeavour, here are some of the hidden costs to budget for before you close the deal: Legal fees Fees and disbursements usually cost around $1,000. You can hire a lawyer or a notary, but it's best to deal wit

Government of Canada Takes Action to Strengthen Housing Financing

Government of Canada Takes Action to Strengthen Housing Financing : The Honourable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada's housing market and continue to encourage home ownership for Canadians. 'Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals,' said Minister Flaherty. 'However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing.' The Government will therefore adjust the rules for government-backed insured mortgages as follows: Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future. Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per

Canada's recession resilience (article below)

There will be lots of information coming out today. Bank of Canada governor Mark Carney will be explaining (maybe vaguely) the reasons for the BoC rate drop and expectations we should have for the future, quantitative easing (printing money), and how this will all affect the Canadian economy. Here is an article from the Financial Post that expands on this. Keep an eye on this as it will affect bond rates/yields which could affect mortgage rates. Terence Corcoran: Quantitative schemes at the Bank of Canada Posted: April 22, 2009, 9:17 PM by Ron Nurwisah Terence Corcoran , central banks On Thursday we will learn what the Bank of Canada will do next to stimulate the economy, how it will apply the now famous “quantitative easing” phase of its ongoing effort.The bank is already giving away money, setting an overnight rate of 0.25% — “virtually zero,” as former governor John Crow says in his commentary . At the chartered banks, astute mortgage borrowers can almost lock in less than 2% for

CMHC Drops 100% Financing and 40 Year Amortizations- By Oct 15th, 2008

• 100% financing (5% will now be the minimum down payment on an insured mortgage) • 40 year amortizations (35 years will be the new maximum on insured mortgages) The government will also require the following with all new mortgages it insures: • A new 620 minimum credit score requirement • New loan documentation standards The new rules will take effect October 15, 2008. This affects CMHC insured mortgages as well as mortgages insured by Genworth, AIG, etc. Insured mortgages are generally those with less than 20% down. Certain conventional mortgages are also insured, however, in a statement from the Department of Finance said, "Today’s announcement marks a responsible and measured approach by the Government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada. "These new rules pertain only to new, government-backed insured mortgages. This will not affect existing mortgages."

Canadian housing starts rebound: CMHC

Housing starts were up for January to a seasonally adjusted annual rate of 222,700 units, compared to 184,700 units in December, according to Canada Mortgage and Housing Corporation figures released Friday. A seasonally adjusted annual rate measures monthly figures adjusted to remove normal seasonal variation and multiplied by 12 to reflect annual levels. "Historically low mortgage rates, solid employment and income growth as well as a high level of consumer confidence continue to underpin the high level of housing starts," chief economist Bob Dugan said in a news release. "Housing starts in January returned to a level more consistent with our expectation that housing starts will total 211,700 units in 2008, remaining above the 200,000 mark for the seventh consecutive year." Continue Article

Mortgage rates going downward

TORONTO — Most of the country’s big banks are cutting long-term mortgage rates by up to a tenth of a point, thanks to the lower cost of borrowing in the bond market. Royal Bank of Canada, the biggest bank, announced Tuesday it is reducing the posted rate on three-year to 10-year loans by a tenth of a point. The reductions are effective Wednesday. The rate on a three-year closed term loan falls to 6.5 per cent, to 6.75 per cent on a five-year loan and to 7.25 per cent on a seven-year loan. The Bank of Montreal also made changes to its residential mortgage rates, lowering the three-year to 18-year rates a tenth of a point. Effective Wednesday, the two-year rate falls by a fifth of a point, down to 6.40 per cent. TD Canada Trust brought its three-year to six-year closed mortgage rates down by a tenth of a point — to 6.55 per cent and 6.85 per cent — while National Bank of Canada reduced its three-year to 10-year rates by 0.10 per cent. Desjardins Group also reduced its three-year to 10-ye

MPs pay mortgages with meal allowances

The secret board of MPs that manages internal House of Commons affairs is allowing MPs who own a house or condo in Ottawa as their second home to pay down their mortgages with a $75 per diem intended for meals, the Citizen has learned. The per diem is in addition to a $25 daily accommodation allowance MPs receive year-round if they own a second house or condominium in the capital, and using it to buy a home is allowed despite a rule forbidding mortgage payments from a separate $24,000 expense allowance. Combined, the per diem and the accommodation allowance could add up to $17,225 a year for house costs and mortgage payments if an MP spends only four days a week in Ottawa while Parliament is sitting. The $25 daily accommodation allowance is available without receipts throughout the year as long as the MP does not rent out the residence. The move outraged John Williamson, head of the Canadian Taxpayers Federation, who noted parliamentarians last week defended a $4,000 hike to the genera

Condo living is not for everybody

MONEY 401 Those who want to be left alone to follow their own desires should look elsewhere, Condo living requires flexibility, co-operation and compromise... words you don't see often in developers' ads. It's not the right place for you if you want to be left alone to follow your own desires. Moving into a condominium development means obeying its rules, even if you disagree with them. You may have to leave your cat or dog behind. You may be restricted from putting decorations on your front door. You may be prohibited from renting out your unit for short periods. These rules make sense in terms of avoiding conflicts among people trying to live closely and peacefully together. Short-term rentals, for example, can be disruptive to long-term owners. 'If tenancies of under six months are permissible, you risk buying into a building that is really just a disguised hotel,' says Keith Bricknell, a condo owner in downtown Toronto. 'You will never really get to know o

Good advice before buying summer home

By Douglas Hunter (Cottage Life Books, $35) Never having owned a summer home, but having enjoyed many visits to cottages owned by friends and relatives, I didn't realize all the possible pitfalls. This book explains them. Heavy emphasis is placed on the income tax aspects for both buyers and sellers. If the book has a flaw, it is that author Douglas Hunter is Canadian and he constantly over-emphasizes the Canadian taxation and ownership laws. However, most of the book applies to buyers and sellers of virtually all vacation cottages. Approximately half of the book is devoted to locating a suitable area for acquiring a cottage. After the search narrows, Hunter explains details of what to look for because buying such a property is much different than purchasing an urban house or condominium. Unique methods of financing the purchase of a vacation cottage are explained, but without great detail. Hunter suggests contacting local mortgage lenders. He explains the tax consequences of deduc

Mortgaged Dreams

Owning your own home is the great Canadian dream, and a wide range of mortgages means almost everyone can choose the debt that suits them best Attitudes to debt have changed over the generations as real estate prices have skyrocketed in Greater Vancouver and the rest of B.C. While survivors of the Great Depression worked to be mortgage-free, many younger people have been anything but reluctant to borrow money to finance the home they have always dreamed about. Lindsey McDonald bought her first real estate in Cloverdale two years ago when she was 22. The ambitious student sees her mortgage as an opportunity to build wealth and expects to sign up for more and bigger loans in the years to come. In contrast, John and Joan Ross bought their first home in 1959 and 'survived and sufficed' to become the mortgage-free owners of a bigger home on Vancouver's west side by the end of the 1970s. As children of the Great Depression, the two seniors have avoided significant debt ever since

CMHC mortgage moves may be on shaky ground

Canada Mortgage and Housing Corp. recently announced moves that critics say will drive many home buyers to the poor house, as it were, and could leave Canadian taxpayers on the hook. CMHC is offering mortgage insurance for interest-only loans and on amortizations up to 35 years, while also scrapping the typical $165 application fee on high-ratio loan products for people with less than 25-per-cent down payment. With an interest-only loan, a borrower can pay interest only for the first 10 years, then pay both interest and principal. Payments are initially low, but since the entire loan must still be paid off within the original amortization period, payments balloon as the principal starts being paid down, and again if interest rates rise. The first issue is whether a government agency like CMHC should be competing with private companies like Genworth Financial in the business of offering mortgage insurance on interest-only loans. If CMHC has to pay out a rash of defaults, the money will

Condo market bubble?

A correction in the red-hot Toronto area condominium market 'cannot be far away,' says a leading housing economist. Buying for investment purposes in the Toronto market has been 'far in excess of market needs' and buyers face 'very high risks,' said economist Will Dunning in his most strongly worded analysis yet of the Toronto market, released yesterday. Nearly a decade into a robust housing cycle, high-rise sales remain extremely strong, with second quarter sales at an annual rate of 20,800, a record high, said Dunning." While other housing economists have expressed concern over what they see as a potentially frothy condo market, Dunning, a former Canada Mortgage and Housing Corp. economist, has been among the most conservative. Price appreciation for condos continues at a good clip — 5.9 per cent year over year — and the average condo rent has increased 2.1 per cent. But this won't last long, according to the gloomy forecast. "An onslaught of con

Title fraud can happen to anyone, cost can be enormous

(Jul 28, 2006) It happened to Susan Lawrence. While going through proceedings to sell her home earlier this year, the area woman learned that she had become the victim of fraud, joining a growing number of Canadians who have been victimized by real estate title fraud. "I went to the bank to discuss my mortgage because of the pending sale," says Lawrence, who has lived in her home for almost 30 years. "I found out my mortgage had been discharged and a new fraudulent mortgage assigned to my house at another bank without my knowledge. I couldn't believe it. I had heard of mortgage and real estate fraud, but never thought it could happen to me." The scam occurred as follows: someone unknown to her forged her signature, discharged her existing mortgage, took out a new mortgage for almost $300,000, pocketed the money, then defaulted on the mortgage and disappeared. Ms. Lawrence believes her nightmare started when a For Sale sign went up on her front lawn, giving fraud