CMHC changes rules for first-time buyer shared equity incentive program

REBGV Staff
REBGV

At a glance (2 minute read)

• Metro Vancouver first-time home buyers now qualify at a $150,000 annual income, with a borrowing amount of 4.5 times their qualifying income.
• CMHC is limiting its share in the depreciation of a home at the time of repayment up to a maximum loss of eight per cent per year.

 

On June 2, 2022, Canada Mortgage and Housing Corporation (CMHC) announced it had changed the rules for the government’s Place to Call Home First-Time Home Buyers Incentive program.

The incentive, a federal shared-equity mortgage program introduced in 2019, offers five or 10 per cent of a home’s purchase price to put toward a down payment.

This is in addition to the first-time buyer’s down payment and lowers mortgage carrying costs, making home ownership more affordable.

CMHC is limiting its share in the appreciation of a home. Home owners will now be required to pay back up to eight per cent per year on the incentive amount from the date of advance to the time of repayment.

CMHC is also limiting its share in the depreciation of a home at the time of repayment up to a maximum loss of eight per cent per year.

First-time home buyers in Metro Vancouver are now eligible for:

1. An increased qualifying annual income of $150,000 instead of the previous $120,000; and
2. An increased total borrowing amount of 4.5 instead of 4.0 times their qualifying income.

To date, only 500 first-time buyers in BC, and 15,800 Canada-wide, have received this incentive. 

•   Part 1 – What is the First-Time Home Buyer Incentive?
•   Part 2 – Am I eligible for the First-Time Home Buyer Incentive?
•   Part 3 – How does the First-Time Home Buyer Incentive work?
•   Part 4 – How do I apply to the First-Time Home Buyer Incentive?

Read CMHC’s Update announcement to the First-time Home Buyer Incentive.

Read how the federal First-time Home Buyer Incentive works.

 

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Typical mortgage payment could be 30% higher in 5 years, Bank of Canada warns

Pete Evans
CBC Radio

Inflated house prices and high household debt levels are a major vulnerability to Canada’s economy, the Bank of Canada warned in a report assessing the strength of the country’s financial system on Thursday.

 The Bank of Canada says anyone who got a mortgage recently should expect to see higher rates when they renew. (Bloomberg)

High house prices and debt loads associated with them are a major vulnerability to Canada’s economy, the Bank of Canada said Thursday, warning buyers who bought during the pandemic that the impact of even slightly higher mortgage rates could be dramatic.

In its Financial System Review, the central bank said that while the country’s financial system is strong and weathered the pandemic well, the economy remains vulnerable because of elevated debt levels tied to the country’s increasingly expensive housing market.

“Even as the average household is in better financial shape, more Canadians have stretched to buy a house during the pandemic,” Bank of Canada Governor Tiff Macklem said Thursday. “And these households are more exposed to higher interest rates and the potential for housing prices to decline.”

The bank said that assessing risks related to high household debt levels has become more complex, but overall “the vulnerability has increased.”

Roughly two thirds of Canadians are home owners, and about half of them own their homes outright while the remaining have some sort of mortgage debt attached to it.

Raising lending rates slowed housing market

Home prices increased by about 50 per cent, on average, during the pandemic, as low rates allowed buyers to qualify for larger loans while still keeping the ongoing payments relatively affordable.

Much of those inflated house prices have been built on a foundation of debt. Almost one in five Canadian households are now considered “highly indebted,” which means their debt to income ratio is 350 per cent or more, the bank says.

Prior to the pandemic, only one in every six were that much in debt. Barely 20 years ago, in 1999, only one out of every 14 households had that much debt.

“Those numbers mean that each rate hike will inflict more pain on the economy than it would have in the  past,” said Desjardins economist Royce Mendes.

WATCH | Why Canada’s economy needs higher interest rates: 

 

Bank of Canada explains why we need higher rates

Central bank governor Tiff Macklem says the economy needs higher interest rates to bring down inflation, despite the potential pain that higher rates may bring to the housing market.

And those rate hikes have already started. After slashing its benchmark interest rate at the outset of the pandemic, in March of 2022 the bank began to raise its benchmark lending rate from 0.25 per cent at the start of the year to 1.5 per cent today, and the impact on the housing market has been almost immediate, with sales volumes slowing, along with average selling prices.

“Given the unsustainable strength of housing activity, moderation in housing would be healthy,” Macklem said. “But high household debt and elevated house prices are vulnerabilities.”

As part of its analysis of how resilient the financial system is in the face of various shocks, the bank examined what the impact of higher rates and lower selling prices might look like.

Mortgage costs could go up 30%

As part of that, the bank crunched the numbers on what might happen to the mortgages of recent home owners when their loans come up for renewal in five years.

The bank makes the assumption that in 2025 and 2026, variable rate loans will cost 4.4 per cent in five years, while fixed rate loans will be slightly higher at 4.5 per cent.

Those rates represent about a two-per-cent increase on where variable rates are today, and roughly equivalent to where rates are right now on the fixed-rate side.

Under that scenario, the 1.4 million Canadians who got a mortgage in 2020 or 2021 would see their median monthly cost go up by $420, or 30 per cent upon renewal.

The impact on fixed-rate borrowers would be slightly less, as they’d see their payments go from $1,260 on average when they first got their loan, to $1,560 a month at renewal, for an increase of 24 per cent.

WATCH | Rising mortgage rates could hurt people on tight budgets:  

 

Rising mortgage rates threaten people with tight budgets

Homeowners and home-seekers have their plans foiled by the long-term trend of rising interest rates.

But variable rate borrowers are even more vulnerable, under the bank’s thought exercise, as their typical monthly payments go from $1,650 a month when they got their loan to $2,370 when they renew. That’s an increase of 44 per cent.

“If those in highly indebted households lose their jobs, they would likely need to reduce their spending sharply to continue servicing their mortgage,” Macklem said.

“This is not what we expect to happen … But it is a vulnerability to watch closely and manage carefully,” Macklem said.

Other risks beyond housing

Vulnerability to the housing market was only one portion of the Financial System Review, which is the bank’s broad assessment of the health of the economy and its ability to withstand various shocks.

Some of the other vulnerabilities cited include cyber threats given the interconnected nature of the financial system and the fragile liquidity in fixed-income markets.

The bank also warned about the growth of cryptocurrencies and their volatility.

“Like other speculative assets, cryptocurrencies are vulnerable to large and sudden price declines. And recently, some stablecoins have failed to deliver on their promise of stability,” Deputy Governor Carolyn Roger said.

The bank also says Russia’s invasion of Ukraine has further complicated the transition to a low-carbon economy and assets exposed to the fossil-fuel sector, such as those found in the pensions and retirement savings of many Canadians, are in greater danger of being worth significantly less than anticipated.

ABOUT THE AUTHOR

Pete Evans

Senior Business Writer

Pete Evans is the senior business writer for CBCNews.ca. Prior to coming to the CBC, his work has appeared in the Globe & Mail, the Financial Post, the Toronto Star, and Canadian Business Magazine. Twitter: @p_evans Email: [email protected]

 

©2022 CBC/Radio-Canada. All rights reserved.

 

Prairies will lead economic growth in 2022

Frank O’Brien
Western Investor

Soaring crop and oil prices place Saskatchewan, Alberta and Manitoba No. 1, 2 and 3 among provinces, RBC says

Saskatchewan will lead Canadian provinces in economic growth in 2022, with Alberta and Manitoba ranked No. 2 and No. 3, according to provincial forecast from RBC economist, released June 7.
RBC projects growth will be strongest in Saskatchewan, 6 per cent, Alberta, up 5.7 per cent, and Manitoba, with a 4.8 per cent economic expansion compared to 2021.
British Columbia will fall “to the middle of the pack,” economists Robert Hogue and Carrie Freestone said in their report, due to a decline in the housing market.
Last year B.C. registered the highest rate of economic growth among the four largest provinces, and second in Canada only to Prince Edward Island, where the provincial economy is also highly dependent on the residential real estate.
Strong global demand and prices for commodities are significantly boosting Prairie prospects, the report notes. Saskatchewan stands to report a huge rebound in agricultural production this year, coming off an exceptionally low level in 2021.
“We expect stronger agricultural production will also drive up overall economic growth in Manitoba and Alberta,” the economist noted.
“The massive upswing in global energy markets is further benefiting Alberta’s economy. While crude production to date in the province is largely in-line with year-ago levels, the value of energy exports is up 50 per cent due to higher prices.”
As of June 8, the price of West Texas Intermediate (WTI) crude, an industry standard, was at $122.40 per barrel, the highest level since September 2008.
In British Columbia, capital investment in the natural resource sector (including the construction of a major liquefied natural gas project) will continue to play a key part of the province’s growth story, the report noted. Natural gas is now priced near $9 per million British thermal units, the highest level in eight years.
But RBC cautions that B.C.’s reliance on the residential industry leaves it exposed this year. The bank is forecasting B.C. economy will expand 4.2 per cent this year – down from 2021’s 5.9 per cent growth – and even with Canada’s projected growth.
“We expect rising interest rates will further moderate home resale activity in the period ahead and broaden the cooling effect to other regions. Rapidly deteriorating affordability – especially in Canada’s most expensive markets – will make it increasingly difficult to sustain recent property values,” the RBC economists said in their analysis.
“In fact, we believe home prices have already reached a tipping point in several markets in Ontario and British Columbia. Slower activity will tamp down the substantial contribution the housing sector made to economic growth during the pandemic.”
Multiple listing service residential sales in B.C. are projected to decline to 97,240 units this year, down 22 per cent from 2021’s record high, according to the BC Real Estate Association’s latest forecast, released May 31. Residential sales are forecast to fall an additional 12.4 per cent to 85,150 units in 2023..

© 2022 Western Investor

Atrium MIC announces June 2022 dividend

Ephraim Vecina
other

MIC also currently offers shareholders the opportunity to automatically reinvest their dividends in new shares
Atrium Mortgage Investment Corporation has announced that its board of directors has declared a dividend for the month of June 2022 to the tune of $0.075 per common share.
The dividend is scheduled to be paid on July 12, and will be available to shareholders of record as of June 30.
At present, Atrium pays monthly dividends at an annual rate of $0.90 per share, along with a special dividend to shareholders of record by year-end “in the event the dividends declared are less than taxable income for that fiscal year,” the MIC said.
Read more: Non-bank lender posts strong Q3, year-to-date results
The MIC also reminded shareholders that it currently offers a dividend reinvestment plan (DRIP), which will give them the ability to automatically reinvest their dividends in new Atrium MIC shares at a 2% discount from indicated market prices, without any commissions.
“This provides shareholders with an easy way to realize the benefits of compound growth of their investment in Atrium,” the MIC said.
Interested shareholders can enroll in Atrium’s DRIP program through their investment advisors.

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Home market slowdown: How brokers are navigating appraisal challenges

Fergal McAlinden
other

Volatile home prices are creating challenges for brokers and clients alike

 As sales activity and home price appreciation continue to slow in Canada’s housing market, a new challenge has emerged for brokers and their clients alike: the prospect of home appraisals coming in at a significantly lower value than the agreed or listed price.

That reality recently led a prominent member of Canada’s appraisal community, Home Value Inc.’s Gordon Sommerville, to advise brokers that clients who agreed a purchase price before the middle of February should prepare for the possibility of the appraised value coming in short.

While home prices in the Greater Toronto Area (GTA) continue to rise year over year, they’ve witnessed three consecutive months of decline – and in certain areas they’ve fallen dramatically. The current average price of a detached home in Kitchener-Waterloo is currently $200,000 lower than it was in February, while across the GTA as a whole, average prices in May came in $121,000 under the level of three months prior.

That’s a result of more balanced market conditions, according to the Toronto Regional Real Estate Board (TRREB), and more negotiating power for buyers.

Growing volatility means it’s important to order appraisals as quickly as possible, according to mortgage broker and LowestRates.ca expert Leah Zlatkin (pictured top), who told Canadian Mortgage Professional that it was sometimes difficult to secure an appraisal in good time in the current market climate.

Read next: Appraisals: What brokers need to know as market changes

“Obviously we’re seeing across the board some decreases in values for homes, so obviously getting those appraisals in really quickly in a timely fashion is becoming more and more important,” she said.

If an appraisal comes in low for a purchase and a condition of financing is attached to the offer – and the appraisal means the client is unable to secure a large enough mortgage to cover payments on the home – it could be time to speak with the real estate lawyer and realtor to see if there’s any prospect of whittling down the house price slightly.

For clients who need an appraisal on a property that they’re refinancing, Zlatkin said there are clear steps that can be taken to ensure as positive an evaluation as possible.

“Generally, when I’m ordering an appraisal for a client that lives in the home, I’m suggesting to them to make sure [they] tidy up ahead of time, make sure the house looks really presentable,” she said. “Just make sure the home looks very approachable.

“As the appraiser is coming through the property, make sure you highlight features to them… the things that are going to help your home in terms of evaluation, if you have that opportunity. Not everyone [does], and not all appraisers actually come through your home.”

Read next: Home sales across Canada – what’s the latest?

Brokers can also trigger an automatic valuation model (AVM) – for instance, if a client is doing a refinance and requires less than the property value for the mortgage. In a case where a home might be worth $1.15 million, but a client only requires around $400,000 in mortgage money, it’s acceptable to put the value of the home at slightly under $1 million to ensure an AVM rather than having an appraiser come out – a move that can be especially useful in the current market considering there’s often a long wait for an appraiser to become available.

As new developments have taken hold in Canada’s housing and mortgage markets, some clients are turning to new strategies depending on how they view events transpiring down the line, according to Zlatkin.

“Some of these clients are suggesting taking a two- or three-year fixed rates, weathering the storm, and then at the end of the storm [they’ll] switch it back to a variable product or another product depending on where the market’s at,” she said. “That’s for clients who think that this is temporary – that rates are going to go up and then they’re going to come back down.”

For clients who are more uncertain about where things are headed, Zlatkin said a variable rate is still a strong option in the current climate.

“In that case, I’m also still recommending variable and telling people, ‘Let’s keep an eye on it’,” she said. “‘If things drop down and the spread gets better for variable rates, then we’ll switch you out of your variable product to a different one.’”

LATEST NEWS

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Canada risks housing-related recession if interest rate hikes get too aggressive

Stephanie Hughes
The Vancouver Sun

Bank of Canada’s increasingly hawkish tone on inflation could potentially set home sales into tailspin, Capital Economics says

 A sold sign in front of a house in Calgary. Photo by Azin Ghaffari/Postmedia

Canada could be at risk of a recession induced by a rapidly correcting housing market if the Bank of Canada gets too aggressive with its rate hikes, according to a report from an economist at Capital Economics.

In a Tuesday update, senior Canada economist Stephen Brown noted the central bank seemed unfazed by a double-digit drop in home sales in May — the second consecutive such monthly drop — and that it was adopting an increasingly hawkish tone on inflation.

“This raises the chance of the bank enacting a larger interest rate hike at its meeting in July and leaves us concerned that it will take a more aggressive approach to policy tightening than is ultimately required, driving house prices sharply lower and risking a major recession,” he said.

National home sales fell 12 per cent on a month-over-month basis in May, following a 14 per cent drop in April. While Brown suggested the declines would bring sales closer in-line to the pre-pandemic norm, the balancing of supply and demand gave him more reason for concern.

 

Furthermore, data from the firm found that the falling sales-to-new listings ratio in major markets such as Toronto, Montreal, Vancouver and Calgary implies home price inflation could drop from 18 per cent in April to zero by the end of the year.

Home prices are already dropping, according to Capital Economics data, sliding 0.6 per cent month over month across the country. Toronto saw its prices fall even faster by over three per cent for the second month in a row in May.

Brown noted Canada’s housing sector took up little space in the bank’s policy statement accompanying its decision to raise interest rates by 50 basis points on June 1, saying only that “housing market activity is moderating from exceptionally high levels.”

 

The bank will be delivering its 2022 Financial System Review on June 9, where it may go into more details about the moderating housing market.

As inflation runs at multi-decade highs — the Canadian price index surged 6.8 per cent in April — the bank has signalled it was ready get tough on rising consumer prices with stronger rate hikes. Bank of Canada governor Tiff Macklem suggested in April that the central bank could temporarily move the overnight rate above the neutral range of two to three per cent, which would neither help nor hinder economic growth.

Deputy Governor Paul Beaudry echoed this sentiment in a June 2 speech a day after the latest policy rate decision, saying the bank would need to lift its benchmark interest rate to at least three per cent to tame inflation.

However, Brown argued the danger is the bank will misjudge the impact of its aggressive policy tightening and potentially send home sales into a tailspin.

“If the bank raised its policy rate to 3.5 per cent … then the housing market would face the most dramatic hit to affordability since the early 1980s Volcker Shock,” Brown said, referring to the period when Federal Reserve Chair Paul Volcker aggressively raised rates.

Brown added that by his firm’s estimates, a policy rate of 3.5 per cent would bring the average five-year fixed rate mortgage rate up to 4.5 per cent and the average variable rate to 4.9 per cent. Despite the accelerated wage growth this year, Capital Economics estimates these mortgage rates would reduce the maximum home price buyers could afford by 23 per cent, which Brown estimates to have four timez as large an impact as the prior three tightening cycles.

• Email: [email protected] | Twitter: StephHughes95

 

© 2022 Vancouver Sun

Vancouver penthouse owner sues strata for vacancy tax in fight over common area

Joanne Lee-Young
The Vancouver Sun

Concord Pacific CEO and Erickson penthouse owner Terry Hui alleges the strata council has delayed completion of penthouse during the fight over the common area, leading to the City of Vancouver charging a vacancy tax
Terry Hui has been battling other owners over the use of a 6,000-square-foot space that is on the second floor of The Erickson. Photo by NICK PROCAYLO /PNG
Penthouse owner Terry Hui is suing the other strata owners at a luxury Yaletown condo in a continuing fight over a common area of the building.
Hui, president and CEO of development company Concord Pacific, filed the lawsuit demanding repayment of what he has been paying for a few years in vacancy taxes.
Hui has been battling other owners over the use of a 6,000-square-foot space that is on the second floor of The Erickson, a 17-storey building with 60 units on northern False Creek’s seawall.
After the City of Vancouver issued an order last fall saying all residents in the building should have access to the space rather than only Hui, “several unauthorized video cameras were installed (presumably by agents working on behalf of the penthouse owner) and the locks were changed yet again,” according to the strata president’s report at a recent annual general meeting.
The original development permit submitted by Concord and approved by the city for The Erickson in 2005 showed the vast area on the second floor as a common amenity area.
But when the strata plan was later filed with the land title office after the building was finished in 2010, the same space was shown as designated for the sole use of the penthouse owner, who has always been Hui.
The plans also showed a private elevator that could run from the parkade to the penthouse with a stop on this second-floor, which has a reception area, spaces for a theatre and other rooms.
Postmedia reported in mid April 2022 that the City refused an application by developer Concord Pacific to amend the development permit so Hui could retain the area for his own use.
After this, Hui’s lawyer informed the strata that “Concord is in the process of preparing a revised application to the city to amend the development permit.”
In a notice of claim filed in March with the Supreme Court of B.C., Hui alleges the strata “delayed consent for a building permit for (his) unfinished penthouse, which has purportedly delayed him in being able to build out and complete his unfinished two-storey unit,” said the president’s recent AGM report.
Hui is seeking the amount he paid to the City of Vancouver for its empty homes tax as assessed on his penthouse unit in the building for the 2018, 2019 and 2020 tax years, plus interest at a commercial rate.
Earlier, Hui’s lawyer had sent a letter to the strata saying he had proposed “a tolling agreement” that would charge owners for use of the second-floor space.
“It would have permitted litigation to be deferred while the parties worked out their differences. The strata council refused,” said lawyer Hein Poulus in the letter. “The consequence is that the legal costs of defending the litigation will fall either on the owners (except my client) or an insurance underwriter (which will drive up the owners’ insurance costs.”
The strata council said in its report that it “continues to trust that the City of Vancouver will not enter into any more development agreements with Concord Pacific for the Erickson, until the president of Concord, Mr. Hui, honours the conditions of the development permit for the Erickson.”

© 2022 Vancouver Sun

Housing market slowdown: How have things changed for buyers?

Fergal McAlinden
other

Possibilities and challenges have emerged from the cooldown, says mortgage executive

 The housing and mortgage markets may have cooled off substantially in recent weeks – but that’s bringing opportunity for buyers including greater choice and less competition from rival bidders, according to a prominent industry figure.

Shubha Dasgupta (pictured), president and CEO of the Pineapple broker network, told Canadian Mortgage Professional that the recent slowdown, which has seen home sales activity drop off across many markets, has removed some of the intensity from the purchasing process and provided some welcome respite for buyers and brokers alike – not least because supply is becoming available at last.

“We’re seeing growing inventory in this market, which means that buyers no longer have to make a decision in 15 minutes on whether to buy a home or not and have that fear of missing out on an opportunity,” he explained.

“I think buyers are going to have a more comfortable shopping experience and the opportunity to shop around and make a well-thought-out offer and decision on that property.”

The easing of that supply shortage, coupled with rising interest rates and fewer buyers, has resulted in fewer bidding wars, more reasonable purchase amounts and the opportunity for Canadians to make a more rational decision on buying a home, Dasgupta said.

That can only be good news for brokers, with Dasgupta – who also serves as president of the Canadian Mortgage Brokers Association – Ontario (CMBA-ON) – highlighting the peace of mind the current climate can provide mortgage professionals.

Read next: Are buyers turning their back on Canada’s housing market?

“When you look at the market as it’s been for the last few months and last few years, it’s been heavily focused on the seller’s market,” he said. “That’s very disadvantageous to a lot of our clients in the broker community because our clients are purchasing homes, and that very heavily focused seller’s market was not doing them any benefits.

“So I think having a more balanced market, as we’re seeing today, is certainly more suitable for accommodating our industry and our clients.”

Opportunities, challenges for first-time buyers

Indeed, the cooldown may be long overdue for a segment of the market that’s faced a steep uphill climb to purchase a property over the past couple of years: first-time buyers, who’ve found themselves frequently squeezed out due to affordability challenges and intensive competition.

New entrants to the market who have solid income, employment and can afford a down payment will be well positioned in the current environment, Dasgupta said – although he also emphasized that current mortgage qualifying rules remain a significant obstacle for that cohort.

“The stress test is certainly holding a lot of people back and I know that something is going to need to be done as we continue to see what happens in the interest rate landscape of Canada over the coming months ahead,” he noted. “We’re going to need the government to keep a close eye on this and re-evaluate the current stress test.”

Read next: How Canada’s market shift is affecting purchases and renewals

Those problems are especially pronounced for borrowers who choose a fixed-rate mortgage, Dasgupta said. That’s because of new rules introduced last year meaning that borrowers must qualify at the higher of 5.25% or the contract rate plus 2%: under those criteria, borrowers who choose a fixed option are having to prove they can afford a rate between 6% and 7% as fixed rates creep upwards.

“That’s just too hard,” Dasgupta said. “The other thing that’s doing is creating what I’m calling a five-year variable rate funnel, where more and more Canadian homebuyers – specifically first-time homebuyers – are getting pushed into a variable rate because that allows them to qualify for more money, even though they may not be best suited for the risk of a variable rate mortgage.”

Other trends

Despite the recent slowdown, house prices remain prohibitively high for many borrowers, a continuing trend that could see options like co-ownership become more prevalent in the Canadian housing market, according to Dasgupta.

“I think that’s a trend that’s slowly becoming more [under] consideration in the North American market, specifically here in Canada as we’re seeing more first-time homebuyers struggle to purchase in different geographic areas and different pockets of the country as prices become higher,” he said.

That would likely represent more of a short-term solution, he added, because of the fact that most Canadians interested in the housing market ultimately want a property of their own.

Other initiatives, such as in-law suites and laneway housing, are also becoming increasingly common, he said, as Canadians search for new ways to purchase a home amid those affordability struggles.

“We’re seeing more and more Canadians entering into laneway housings and opportunities for them to add a co-unit to support these higher living costs,” he said, “or in-law suites that do the same and offset some of the higher costs that they’re seeing.”

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Finally, market for detached homes in Greater Vancouver enters balanced territory

Carlito Pablo
The Georgia Straight

 Statistically speaking, the market for detached homes in Greater Vancouver has balanced.

Based on the recent report by the real-estate board, the sales-to-active-listings ratio for single-family homes in May 2022 shifted to 18.3 percent.

The general rule is that a market is balanced when the ratio is between 12 percent and 20 percent.

The market favours sellers when the ratio is more than 20 percent, which means prices are hot.

Buyers get the upper hand when the ratio is less than 12 percent, which translates to prices getting cold.

The Greater Vancouver market covers Vancouver, Burnaby, Coquitlam, Maple Ridge, New Westminster, North Vancouver, Pitt Meadows, Port Coquitlam, Port Moody, Richmond, South Delta, Squamish, Sunshine Coast, West Vancouver, and Whistler.

The 18.3 percent sales-to-active-listings ratio in May 2022 marks a significant change from previous months.

In April, the ratio was 25.3 percent; March, 38.8 percent; February, 34.9 percent; and January, 28 percent.

The real-estate board has reported that sales of detached homes in the region in May 2022 totalled 793.

The number represents a 44.1 percent decline from the 1,419 detached sales in May 2021.

The benchmark price for a detached home last month was $2,093,600.

The price marks a 0.4 percent decrease from April 2022, and a 15 percent increase from May 2021.

Meanwhile, the sales-to-active-listings ratio for townhomes was still in favour of sellers at 35.5 percent.

For condos, it was 38.1 percent, meaning sellers have the upperhand.

For all property types, the board reported that the sales-to-active-listings ratio for May 2022 was 29.2 percent, still a seller’s market.

As for the Fraser Valley market, the ratio for all property types in May was 22 percent.

Meanwhile, the benchmark price for a detached home in the region was $1,712,500.

This May 2022 price marks a 2.4 percent decrease from April 2022, and a 26.2 percent increase over May 2021.

The Fraser Valley market covers Abbotsford, Langley, Mission, North Delta, Surrey, and White Rock.

The real-estate markets have calmed in the face of rising interest rates.

The Bank of Canada has increased its interest-setting rates three times this year, and it has indicated more increases through this year.

Vancouver-based Dexter Realty released its monthly report about the housing market on Monday (June 6).“We are not statistically into a buyer’s market in Metro Vancouver but, for all the right reasons, this is when smart buyers are becoming active,” states the report prepared by company partner and managing broker Kevin Skipworth.

Skipworth noted that the situation is “not technically” a buyer’s market because of the current overall sales-to-active-listing ratio of 29.2 percent and 22 percent in Greater Vancouver and Fraser Valley, respectively.

But “for those with their eyes wide open are seeing the best buyer conditions in at least three years”.

“For all buyers, however, the increased supply of resale listings, flatlining prices and a lack of new housing starts means that right now is the time to be seriously shopping the market and negotiating the best deal possible,” Skipworth wrote.

The realty executive added, “Buyers are not yet in the driver’s seat, but the market is steering in that direction.” 

 

2022 VANCOUVER FREE PRESS.

Home sales across Canada – whats the latest?

Fergal McAlinden
other

Still, the news indicates a “correction” rather than a crash is taking place, says prominent industry member

 After the homebuying blitz of the past two years, Canada’s housing market continues to cool with major cities continuing to post declining monthly and year-over-year home sales.

The Greater Toronto Area (GTA), which witnessed some of the most intense bidding wars and price increases across the country during the housing market surge, posted a 39% decline in May sales compared with the same time last year, according to the Toronto Regional Real Estate Board (TRREB).

In Greater Vancouver, meanwhile, sales were down around 32% year-over-year last month – and nearly 10% lower than in April, said the Real Estate Board of Greater Vancouver (REBGV), as the sizzling market finally subsided.

Ottawa registered a 20.5% drop in residential property sales in May compared with the same month last year, while Calgary saw home sales climb about 3% last month over May 2021 – although sales have fallen for two consecutive months in that city.

Montreal, Edmonton, and Halifax have also seen sales activity cool in recent weeks, with each of those cities registering year-over-year sales declines in April.

While sales figures across most of Canada are significantly lower than previous months, the corresponding decline in house prices has been far less noticeable – and hasn’t taken place at all in some markets.

The GTA’s average home price fell slightly in May, coming in at around $1.21 million compared with about $1.25 million in April, although that figure was still more than 9% higher than the average price in May 2021.

The Greater Vancouver Area (GVA) posted a negligible drop in its composite benchmark price for residential properties, which fell month over month by 0.3% to $1.26 million – a figure that’s still 14.7% higher than last May.

Read next: Bank of Canada “cranks up warning meter” on inflation: BMO economist

Ottawa’s average home price ticked up 7.7% over the same month last year, and Calgary prices shot up 14% over May 2021.

The housing market cooldown has arrived amid ballooning inflation and a higher-borrowing-cost environment that’s seen both major lenders and the Bank of Canada hike interest rates.

At the beginning of June, the Bank announced a half-point increase to its trendsetting interest rate, bringing it up to 1.5% and signalling that further hikes were on the way to curb inflation that’s rocketed to a 31-year high.

Still, there’s little prospect of the bottom falling out of Canada’s housing market, according to a Toronto-based mortgage agent who told Canadian Mortgage Professional that things were merely returning to more normal levels of activity.

“I think the market is starting to balance itself. It’s not a market crash that we’re going to be experiencing – we’re just experiencing a market correction,” said Christelle Mwamba (pictured top) of Mortgage Scout.

The unprecedented events of the COVID-19 pandemic fuelled both rock-bottom interest rates and that purchasing boom, Mwamba said, with the recent cooldown and higher rates an inevitable consequence of a return to a degree of normality.

Read next: ‘Aggressive’ BoC could be readying even larger rate hikes, says CIBC economist

Even despite the slower market, interest in homebuying remains strong among first-time buyers, according to Mwamba, who said that prices in the city are still impelling many new entrants to the market to consider a property further afield.

“A lot of the first-time homebuyers are looking outside of the city because in Toronto, the prices are still really high,” she said. “I’m still seeing that shift where first-time homebuyers are looking for houses. A lot of condo buyers are real-estate investors that are looking to buy an investment property – they’re buying condos in downtown Toronto or uptown.

“[Real estate investors] have more of a risk tolerance in lending. First-time homebuyers are still looking for the picket fence, semi-detached house.”

Sellers have also become more tolerant toward bidders attaching conditions of financing to their offer, said Mwamba, and while prices remain prohibitively high for many buyers, there’s a lower chance of clients having to offer many times over list prices.

“Now you’re buying what the property is worth,” she explained. “A year ago, you were buying because rates were so cheap and there were 10 people [submitting offers] – so you just overbid. Now you’re buying the actual value of the home, it’s not inflated anymore.

“It’s more attractive to buyers right now because you’re buying the value and you’re not going to see a lot of overbidding pressure.”

 

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