2020 Blockbuster Year for Housing

General Toni Tosti 15 Jan

Record December Canadian Housing Market Caps Record Year.

2020 Was a Blockbuster Year for Housing

Despite the fears leading into the pandemic last Spring, 2020 marked a record number of home resales as new listings lagged and prices climbed. December housing data released by the Canadian Real Estate Association (CREA) today shows national home sales surged 7.2% month-over-month (m-o-m) at a time of the year when housing is normally slow. The chart below shows that resales were impressively above their 10-year average. The seasonally adjusted activity was running at an annualized 714,516-unit pace in December 2020 – the first time on record that monthly sales (at seasonally adjusted annual rates) have ever topped the 700,000 mark.  It was a new record for December by a margin of more than 12,000 transactions. For the sixth straight month, sales activity was up in almost all Canadian housing markets compared to the same month in 2019.

The increase in national sales activity from November to December was driven by gains of more than 20% in the Greater Toronto Area (GTA) and Greater Vancouver.

On a year-over-year basis (y-o-y), activity rocketed upward by 47.2% as interest rates hit record lows, housing needs changed owing to the pandemic, and supply was insufficient to meet demand. The housing boom occurred despite the fall in population growth, reflecting the dearth of new immigration. The yearly change in population growth in Canada nosedived in 2020 after climbing powerfully in the prior four years. Despite this headwind, for 2020 as a whole, 551,392 homes traded hands over Canadian MLS® Systems – a new annual record. This is an increase of 12.6% from 2019 and stood 2.3% above the previous record set in 2016.

New Listings

“The stat to watch in 2021 will be new listings, particularly in the spring – how many existing owners will put their homes up for sale?” said Shaun Cathcart, CREA’s Senior Economist. “We already have record-setting sales, but we know demand is much stronger than those numbers suggest because we see can see it impacting prices. On New Year’s Day, there were fewer than 100,000 residential listings on all Canadian MLS® Systems, the lowest ever based on records going back three decades. Compare that to five years ago, when there was a quarter of a million listings available for sale. So we have record-high demand and record-low supply to start the year. How that plays out in the sales and price data will depend on how many homes become available to buy in the months ahead. Ideally, we’d like for households to be able to find and acquire the homes that best suit their needs and for housing to remain affordable, but the fact is we’re facing a major supply problem in 2021.”

The number of newly listed homes climbed by 3.4% in December, led by more new listings in the GTA and B.C. Lower Mainland, the same parts of Canada that saw the biggest sales gains in December.

With sales up by more than new supply in December, the national sales-to-new listings ratio tightened to 77.4% – among the highest levels on record for the measure. The long-term average for the national sales-to-new listings ratio is 54.2%.

Based on a comparison of sales-to-new listings ratio with long-term averages, only about 30% of all local markets were in balanced market territory in December, measured as being within one standard deviation of their long-term average. The other 70% of markets were above long-term norms, in many cases well above.

There were just 2.1 months of inventory on a national basis at the end of December 2020 – the lowest reading on record for this measure. At the local market level, 29 Ontario markets were under one month of inventory at the end of December.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose by 1.5% m-o-m in December 2020. Of the 40 markets now tracked by the index, only one was down between November and December.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 13% on a y-o-y basis in December – the biggest gain since June 2017 (see chart below).

Home price activity largely reflected the desire of home purchasers to move away from city centres to a greener, less-expensive suburbs and exurbs now that telecommuting appears to be a sustainable option, at least part-time.

The largest y-o-y gains – above 30% – were recorded in Quinte & District, Simcoe & District, Woodstock-Ingersoll and the Lakelands region of the Ontario cottage country (see the table below for details).

Y-o-y price increases in the 25-30% range were seen in Bancroft and Area, Grey Bruce Owen Sound, Kawartha Lakes, North Bay, Northumberland Hills and Tillsonburg District.

This was followed by y-o-y price gains in the range of 20-25% in Barrie, Hamilton, Niagara, Brantford, Cambridge, Huron Perth, Kitchener-Waterloo, London & St. Thomas, Southern Georgian Bay and Ottawa.

Prices were up in the 15-20% range compared to last December in Oakville-Milton, Peterborough and the Kawarthas, Montreal and Greater Moncton.

Meanwhile, y-o-y price gains were in the 10-15% range in the GTA and Mississauga, Quebec City, and the 5-10% range across B.C., and in Regina, Saskatoon, Winnipeg and St. John’s NL.

Alberta still lagged owing to the still-negative oil market scene, where home prices were up only 1.5% and 2.7% in Calgary and Edmonton, respectively.

The MLS® HPI provides the best way to gauge price trends because averages are strongly distorted by changes in sales activity mix from one month to the next.

The actual (not seasonally adjusted) national average home price was a record $607,280 in December 2020, up 17.1% from the same month last year.

Bottom Line

Housing strength is largely attributable to record-low mortgage rates and strong demand for more spacious accommodation by households that have maintained their income level during the pandemic. The hardest-hit households are low-wage earners in the accommodation, food services, non-essential retail and tourism-related sectors. These are the folks that can least afford it and typically are not homeowners.  

We end 2020 with the national average home price up 17.1%–a dramatic surge rather than the 9-18% decline forecast by CMHC last March. Moreover, 2021 is likely to be another strong year for housing.  It would not surprise me if annual sales reached a new high in 2021, especially in the first half of the year. There will, however, be cooling signs as the year progresses and especially into 2022. Firstly, supply constraints are a major factor as new listings remain low relative to demand. As well, the pandemic-induced changes in housing needs will have a waning effect over time. As vaccine injections rise across the country and we return to a new normal, interest rates will creep up moderately. This along with higher home prices will slow the pace of activity as affordability erodes.

There will be mitigating factors in 2022: the number of new immigrants is slated to rise to roughly 500,000 that year and demand for short-term Airbnb rentals will rise sharply as tourism revives.

Please Note: The source of this article is from SherryCooper.com/category/articles/

 

Get mortgage ready for a move this fall!

General Toni Tosti 2 Sep

 

Moving homes can be triggered by a variety of things, but the most common reason is space…not enough, or perhaps a little too much. At some point, the place you thought was your forever home may not meet your needs any longer.

If you are growing your family, perhaps your current digs are bursting at the seams. If you are preparing for retirement or thinking about moving cities, a smaller place may be just what you have in mind.

Regardless of if you are moving up or scaling it down, here are a few things you want to consider:

1) If you are thinking about making a move before the end of your mortgage term, keep in mind you will need to re-qualify under the current rates.

2) Moving before the end of your term means breaking your mortgage. Don’t fret, this just means you will pay a penalty. This amount is dependent on your current mortgage provider and the mortgage product/terms.

3) Factor in realtor fees, closing and moving costs

*Realtor fees can be anywhere between 2.5% and 5% depending on where you live

*For closing costs and legal fees, we suggest you budget approx. 1.5%-4% of the purchase price

*Moving costs and miscellaneous

-Put aside approx. $1,000 in moving costs

-In addition, you want to think about setting up your utilities, perhaps upgrading appliances, lighting, a fresh coat of paint, or even new furniture. If you are upsizing then the size of your couch may be too small for your new living room! Same can be said if you are downsizing from a larger home to a condo.

Advantages of Pre-Approval

General Toni Tosti 16 Aug

 

Getting pre-approved can be a vital step to the home-buying process! But don’t confuse this with pre-qualification; you can get a pre-qualification through the My Mortgage Toolbox app to determine what you might qualify for. Pre-approval, on the other hand, means that a lender has stated (in writing) that you do qualify for a mortgage and what amount, based on your current income and credit history. A pre-approval usually specifies a term, interest rate and mortgage amount and is typically valid for a brief period of time, assuming various conditions are met.

In order to get pre-approved, you must submit and verify your financial history. I can walk you through this process and assist in finding you the best mortgage to suit your needs. Not only will getting pre-approved help speed up the process when you do find that perfect home, but it also helps determine the most accurate budget to fit your needs and the actual home price you can afford.

In fact, pre-approval can help you to determine three very important things:

  1. The maximum amount you can afford to spend
  2. The monthly mortgage payment associated with your purchase price range
  3. The mortgage rate for your first term

Not only does getting pre-approved make the search easier for you, but helps your real estate agent find the best home in your price range. Temptation will always be to start looking at the very top of your budget, but it is important to remember that there will be fees, such as mandatory closing costs, which can range from 1 to 4% of the purchase price. Factoring these into your maximum budget can help you narrow down a home that is entirely affordable and ensure future financial stability and security.

While getting pre-approved doesn’t commit you to a single lender, it does guarantee the rate offered to you will be locked in from 90 to 120 days which helps if interest rates rise while you are still shopping. If interest rates actually decrease, you would still be offered the lower rate.

Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely important for competitive markets where lots of offers may be coming in.

Protecting Your Pre-Approval
Once you have gone to the trouble of getting pre-approved and determining the boundaries of your budget and mortgage payments, you will want to make sure that you take actions to protect the rate you have been offered.

To protect your pre-approval, there are a few things to keep in mind:

  1. Refrain from having additional credit reports pulled once you have been pre-approved
  2. Refrain from applying for new credit, closing off credit accounts or making large purchases until after the sale is complete
  3. Be prepared to show a paper-trail – any unusual deposits in your bank account may require explanation

Also, if your down payment comes from savings, the bank will want 90 days of statements to ensure the funds are accounted for.

New to Canada

General Toni Tosti 5 Aug

Canada has seen a surge of international migration over the last few years. With all these new faces in town wanting to plant roots in this great country, we wanted to touch base on some of the details surrounding mortgages and how new immigrants can qualify to be homeowners.

If you are already a Permanent Resident or have received confirmation of Permanent Resident Status, you are eligible for a typical mortgage with a 5% down payment – assuming you have good credit.

For Permanent Residents with limited credit, or individuals who have not yet qualified for Permanent Residency, there are still options! In fact, there are several ‘New to Canada’ mortgage programs through CMHC, Genworth Financial and Canada Guaranty Mortgage Insurance, which cater to this group of homebuyers.

To qualify for these New to Canada programs, you must have immigrated or relocated to Canada within the last 60 months and have had three months minimum full-time employment in Canada. Individuals seeking credit of 90.01-95% need to produce an international credit report (Equifax or Transunion) demonstrating a strong credit profile OR two alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months. The alternative sources must include rental payment history and another altnernative, such as hydro/utilities, telephone, cable, cell phone or auto insurance. For individuals looking for 90% credit, a letter of reference from a recognized financial institution OR six (6) months of bank statements from a primary account will be required.

Utilizing a mortgage broker will help to ensure you understand your options and they can help determine the best program and mortgage choice for you. Before you talk with a mortgage broker, there are a few things you need to know when it comes to submitting an application – and getting approved – for your first mortgage in Canada:

1) Supporting Documents: If you’re new to the country but have a weak credit, supporting documents will come in handy. These may include proof of income, 12 months worth of rental payments or letter from landlord, documented savings, bank statements and/or letter of reference from recognized financial institution. These documents all paint the picture of whether you are a safe investment for a lender.

2) Build your Credit Rating: This is one of the most important aspects to getting a mortgage as credit rating determines your reliability as a borrower and will determine your down payment rate. One of the best ways to build your credit is by getting a credit card that you use and pay off each month. Paying other bills such as utilities, cell phones and rent can also contribute to your credit score and reliability.

3) Start Saving: One of the most expensive aspects of home ownership is the down payment; an upfront cost vital to securing your future. The down payment can either be 5% or 10% depending on your status. It is important to note that if you’re paying $500,000 or more for your home, the minimum down payment will be 5% for the first $500,000 and 10% of any amount over $500,000 – regardless of your residency status.

4) Choose a Mortgage Provider: Once you are ready to get your mortgage, you need to decide where you want to borrow from. There are three key lenders: Bank, Credit Unions and Monolines, as well as the option to purchase direct or go through a mortgage broker which may be able to offer you some extra savings.

Buying a house is an exciting step for anyone, but it is especially so for individuals who are new to the country. As daunting as it may seem, purchasing a home is completely possible with a little knowledge and preparation!

 

Can you change your Financial Direction?

General Toni Tosti 31 Jul

 

If you live paycheque to paycheque, the idea of somehow having enough money to invest and eventually have financial freedom seems about the furthest thing possible. But experts in financial education like to point out, no matter your income and place in life, a few changes to the way you’re living life can make all the difference. No matter where you are in life, it’s never too late to start to learn and reverse course. If you’re still not convinced, there are a few simple ideas to get you started.

Pretend You Earn Less Than You Do

Give yourself a cut in pay. The goal is to put 10% in savings from each paycheque into your savings account. The easiest way is to do an automatic direct transfer from your chequing account to your savings.

Create a Budget

In order to stop living paycheque to paycheque, you need to know where that paycheque is going. Creating a budget is simple with Google docs, or look into other online tools and sites to get started.

Build an Emergency Fund

Once you have your budget in place, review it and break it down into non-discretionary expenses (rent, groceries, utilities, etc.) and discretionary expenses (eating out, entertainment, clothes, etc.).

See where you could cut down on eating out and put that money towards your fund. Even starting with just a little amount is great and helps you build the habit.

Consider Downsizing

It may be time to consider a lifestyle change. Consider moving to a smaller place. Replace going to that expensive gym with a trip to the local park. Think about if you really need that brand new car or if a used one would work just as well.

Pay Down Debt

If you have a lot of credit card or unsecured debt, try paying the minimum on all but one of them and aggressively pay down that one card. Once it’s paid off, attack the next one. If you’re so deep in debt that you can’t fight your way out, consider consulting with a company who specializes in debt consolidation. They will help you negotiate your debt into smaller amounts that you can begin to pay off.

Don’t Forget Your Future

Putting at least 3% of your paycheque into a retirement fund is a great idea, or maybe when you get your first raise instead of thinking of it as free money, simply put it into a fund and forget about it. You’ll be glad it’s there when you need it in the future.

Toni Tosti & the DLC Team

 

Things to Know Before you Renovate

General Toni Tosti 21 Jul

 

Renovating your space can be a big project! Before you get started, we have put together a list of the 5 most important things you need to know before you renovate:

1. Know Your End Goal
Before starting your renovation, it is important to know what your end goal will be for the project. How extensively are you renovating? Are you doing so to improve the resale value of your home, or are you doing it to improve your own daily environment? Knowing the reason for the renovation can help you determine a plan for how to proceed and how in depth you want to go.

2. Set a Budget – and Stick to it!
Once you determine the scope of your renovation project, you need to determine your budget. Determining your budget – and sticking to it – is one of the most important parts of any renovation. Renovations can easily spiral out of control or become much bigger than anticipated, if proper budgets and goals are not in place. However, even with the strictest budget there could be unexpected costs, so be sure to add in a contingency fund. While it is easy to want a top of the line renovation, it is important to look at alternative products or substitutes that may be just as sturdy but save you some money upfront.

3. Obtain Permits
Many homeowners forget about this one, but it is extremely vital to your renovation project – especially those that are on a larger scale. While you may consider obtaining a building permit to be an

 

unnecessary headache, it is necessary and will ensure the changes you make today won’t come back to haunt you tomorrow. These permits are necessary to ensure your house remodel meets structural and fire safety requirements. If you ever do put your house up for sale, code inspectors in most jurisdictions can enforce the removal of any non-conforming work if not up to snuff – creating a further (and more expensive headache) down the road.

4. Ask for References
It is important to be sure that the work you are having done to your house will be done in a manner that ensures it remains safe and structurally sound. This is what makes asking for references so important! Don’t rely solely on client testimonials, seek out customers that can give you a firsthand account and answer any questions you may have. It is also important to see before and after images of a contractor’s prior work. Take the time to gather the information and determine which questions to ask!

5. Consider Your Routine
My parents were always  DIYers when it came to home renovations.  So, when it came to considering our routine this was a non-issue. However, for those of you like me (absolutely not a DIYer) who are planning on hiring a contractor, be clear about your daily routine! Work with the contractor to come up with start and end times that cause the least disruption to your daily schedule and help everyone remain comfortable.

Good luck with your renovations from Toni Tosti and the DLC Team.

 

 

5 Tips to Stay Cool & Save This Summer

General Toni Tosti 4 Jul

Summer is just around the corner and doesn’t stick around for long, so make sure you enjoy it! We have some great tips for staying cool AND saving money while you do.

  1. Use portable and ceiling fans – Instead of cranking the A/C (and your electricity bill) consider cooling down with portable and ceiling fans. not only are these great options if your A/C unit is on the brink, but they can help ease the stress on your unit when used together or help eliminate the need for it all together. Portable fans work by creating a breeze, helping to circulate the air and causing a wind-chill effect that hits your skin and helps keep you cool. For an extra blast of coolness, place a bowl of ice in front of the fan to create a refreshing mist of air!
  2. Avoid Cooking On The Stove – While cooking indoors can be a great way to warm up the house in the winter, it will create unnecessary heat in the summertime. Instead, consider cold meals such as salads or breaking out the BBQ for grilled chicken or steaks.
  3. Keep the curtains drawn – As nice as it is to let the sun in, this can increase the heat in your house and cause extra stress on your A/C unit and fans. Instead, keep the curtains drawn (at least on very hot days) to help your home stay cool.
  4. Maintain the air filters – As always, the change of the season is a good time to check the air filters in your home. Dirty filters slow airflow and make the system work harder, which can lead to expensive repairs down the road. Replacing your air filters every three months is ideal to keep dirt and dust out of your system.
  5. Swap to Energy Efficient Lighting – You have probably heard some of the reasons why LED lights have become so popular, but did you know that they also produce 75 percent less heat than incandescent bulbs, and can help keep room temperature down? This can help reduce monthly bills and keep your home more comfortable during the summer season.

Have a great summer!

Toni Tosti and the DLC team