Pending legislation may reduce minimum down payment requirements

The Canadian government has tabled legislation which, if approved, would allow consumers to purchase homes with a minimum down payment of just 20% without any requirements to purchase mortgage insurance. Currently, anyone who purchases a residence with a down payment lower than 20% is required to insure the mortgage against default with the Canadian Mortgage and Housing Corporation (CMHC) or another insurer. An unidentified federal official couldn’t estimate when the change might take effect as the bill must be passed by both the Parliament and the Senate before it becomes law.

For home buyers purchasing a $200,000 home with 20% down this proposed change would net them a savings of approximately $1,600.00, enough to cover the legal costs of the transaction in most cases.

Alan Silverstein, a Toronto-based real estate lawyer and author of several mortgage-related books said, “For people with 20% to put down this is a Godsend. You’ll save a chunk of money.” However, Silverstein went on to warn that it’s possible the cost associated with the savings could be passed on to those who have less money to put down through higher insurance premiums.

John Williamson, federal director of the Canadian Taxpayers Federation says homeowners deserve a break on insurance fees. The CMHC made over a billion dollars last year. It’s time to return some of that money to homeowners.” He said lowering down payment requirements makes more sense than “gimmicks” like 40 year amortizations and zero down mortgages with hefty fees attached.

Norm Fisher
Royal LePage Vidorra

40-year mortgages now available in Canada

Update: In 2008 the Canadian government took actions to eliminate 40-year mortgages.

Mortgage amortization periods of 40 years are now available in Canada through many of the major lenders for both conventional and high-ratio mortgages. The changes are fresh enough that some of the big ones haven’t had the opportunity to update their online mortgage calculators to work with the new terms. Some predict that 50-year mortgages will be available soon.

This will be good news for some buyers who find that increasing house prices are forcing them out of the market. On an average Saskatoon real estate purchase, financed at 5.5% a buyer would essentially qualify to borrow an additional $25,000 by stretching the amortization over 40 years, as compared to the more traditional 25-year term. Of course, that will make a significant difference in the type of home that buyer could consider purchasing.

Borrowers would be well advised to carefully consider the other side of this equation when choosing an amortization period for their new mortgage. A $160,000 mortgage, financed at 5.5% over 40 years will cost the borrower an additional $100,000 over the entire period of the loan. For anyone who cares to do the math, that’s an average of $2,500 per year over the 40 years. If you were to put $2,500 a year into an investment which generated just a 5% return you would accumulate over $300,000 with that money over the same period of time. I do understand that it’s really not so simple an equation, but I believe these things are worth thinking about before one locks in for the long term.

I can see that this type of a long term approach might make sense under the right circumstances. A young person, or a couple who can feel reasonably confident that their household income will increase, as it normally does as we get older, may take a longer amortization with the goal of shortening it up later when income is stronger. Someone with additional sources of income which the lender refuses to use in qualifying them may be able to qualify based on the longer term but still plan to pay the mortgage down quicker. There are probably a number of scenarios under which longer term financing would make sense.

One must remember that the slower you build equity in your home, the more susceptible you are to hardships, particularly if the housing market depreciates and you end up owing more on your home than you can expect to sell it for. In such a situation you are either tied to your home indefinitely or you’re forced to give it back to the bank, destroying your credit in the process.

No matter how you look at it, 40 years is a long time!

Norm Fisher
Royal LePage Vidorra

Luxury home market sees huge growth in Saskatoon and across Canada

A new Carriage Trade Luxury Properties Report released today by Royal LePage Real Estate Services finds that sales of luxury homes far outpaced the general market across Canada. Year-over-year unit sales more than doubled in Calgary, Edmonton and Halifax.

While Saskatoon is not mentioned specifically in the report, I can confirm that a similar trend is occurring here. Of course, our “luxury market” still boasts a substantially lower price point than those used in this survey. For the most part, Royal LePage looked for properties which sold in excess of $500,000. So far this year, Saskatoon real estate agents have sold 152 homes priced over $300,000. That compares with just 73 homes sold for the same period last year. It’s also worth noting that one sale of a Riverside Estates property came it at the $1,000,000 mark, a new record for a residential home sale in this area. Read on for more of this report.

TORONTO, November 24, 2006 – Canadians are embracing luxury living more than ever before – and if they are not currently living in a luxury home, many aspire to someday live in the lap of luxury. As a result, the number of unit sales of luxury homes has skyrocketed in Canada’s major markets, according to the Carriage Trade Luxury Properties Report released today by Royal LePage Real Estate Services. The report found that there has been a surge of unit sales in all markets examined, with the greatest increases occurring in Calgary, Edmonton and Halifax, which all reported sales increases of more than 125 percent, year-over-year, in the first three-quarters of 2006.

If the aspirations of Canadians play a factor, sales of luxury homes will not diminish anytime soon. The report, which includes a market analysis of trends and activity in major markets across Canada, combined with a national omnibus poll (conducted by Maritz Research Canada), found that over one-third (37%) of Canadians aged eighteen and older, currently live in a luxury home, plan to buy a luxury home soon, or aspire to one day live in a luxury home.

“The pronounced increase in the number of luxury homes sold across the country is a strong reflection of Canadians’ confidence in the economy and the real estate market,” said Phil Soper, president, and CEO, Royal LePage Real Estate Services. “For the substantial sums that these homes command, buyers have come to expect distinctive properties outfitted with luxurious amenities, where it is clear that painstaking attention has been paid to every detail.”

When asked, “If you were purchasing a luxury home, what would be the most important criteria you would consider when choosing this type of home?” Canadians cited: investment potential (25%), proximity to excellent schools (19%), the prestige of the neighbourhood (17%), luxurious amenities throughout the house and the size of the house (11%) and the prominent neighbours (8%).

Added Soper: “House values have appreciated much more quickly than the underlying economy for much of this decade. The Carriage Trade brand is a unique way for Royal LePage Realtors to raise the profile of special homes which are not only priced in the upper end but also exhibit unique features and amenities that set them apart from other properties. Realtors using the Carriage Trade brand are experienced working with exceptional homes and have access to proprietary tools enabling them to succeed in this segment.”

In terms of the feature that would be the most important to Canadians if they were purchasing a luxury home, a commercial style kitchen assumed top rank (21%) in the poll. Interestingly, a gender divide was evident when it came to cooking as 26 percent of women cited the commercial style kitchen as the most important feature, compared to 15 percent of men. The men’s den prevails with 11 per cent of males citing the luxury in-home movie-viewing theatre as the feature that would be most important to them if they were purchasing a luxury home, compared to only five percent of females.

The poll also found additional features that would be of most importance to Canadians if purchasing a luxury home to include an indoor or outdoor pool (14%), smart wiring (12%), heated floors and driveway (11%) and a fitness centre/pilates/yoga studio and luxury in-home movie theatre (both at 8%).

Norm Fisher
Royal LePage Vidorra

I’m bullish on Saskatoon real estate for 2007

The Saskatoon Star Phoenix ran a story today on the front page of the Business section with the headline, “City house prices stable.” The story, written by Murray Lyons, Star Phoenix Business Editor references the National Century 21 fall house price survey and suggests that Saskatoon house prices will see substantially less appreciation in 2007.

Rob Friesen, broker for Century 21 Conexus Realty Ltd. in Saskatoon is quoted as saying, “I don’t think we’re going to see increases such as 13 or 15 percent as we’ve seen lately. I think we’re going to start seeing some more normal appreciation now, something more like three to six percent.”

Rob Friesen is a man I respect and his opinion on real estate matters carries some weight with me, but in this particular instance, I do think his prediction underestimates the factors which will affect our market in 2007. He’s not the only one in this camp. Remax recently released its “2007 Housing Market Outlook” for Canada. While they predicted Saskatoon will lead the country for growth in unit sales, they predicted price growth of only 4%.

Why am I feeling bullish, you ask?

First of all, several things are going on in mortgage financing which I believe will have a positive effect on the market.

  • Mortgage rates are expected to drop in the range of .5-1% over the next few quarters.
  • Many of the major lenders are now offering 40-year amortizations. That reduces the monthly carrying costs on a $160,000 at 5.5% from $956.79 to $801.79 and opens the market up to lots more buyers.
  • Mainstream lenders are breaking into the “b” lender market offering the opportunity for credit-worthy buyers to buy a home with no money down and they’re offering these kinds of arrangements at attractive and competitive mortgage rates. Again, more people will qualify to buy a home as a result.

 Add to those factors, the fact that Saskatchewan seems to be on a roll. Business owners are feeling good and employment is up. Earnings are up and taxes are down for both individuals and businesses. There’s a growing demand for skilled workers throughout the province. Affordability and quality of life issues will bring a continuing flow of people migrating to this province in 2007. Saskatoon will be the largest benefactor in the province.

Finally, active residential listings are at an all time low. Today, there are fewer than 400 active residential listings of all types (single-family, condos, etc) listed for sale on the Multiple Listing Service of the Saskatoon Real Estate Board. Last year, at this time we had closer to 650 homes in the market. Again, low supply and high demand create upward pressure.

In a nutshell, here’s what the various camps are saying will happen next year.

Century 21 sees prices increasing three to six percent.

Remax is predicting price increases of four percent.

CHMC is predicting prices will rise by seven percent.

Count me in for eight percent, or better!

I’ve played my cards and now, we’ll just have to wait and see what actually happens.

Norm Fisher
Royal LePage Vidorra

Sleepless in Briarwood

You might say that some residents of Briarwood in Saskatoon are getting a little “tired” of the racket that seems to be prevalent in this prestigious area at all hours of the night.

Topping the list of noisy culprits was the city of Saskatoon who thought it was okay to run bobcats around the clock at a snow dump located just outside of the area. The trains which run along the East side of the area aren’t exactly singing a sweet lullaby either as they rip along the area’s border three to four times a night, blowing their whistles at full blast.

One can hardly blame Darryl Gerwing, one of Briarwood’s newest residents for being a little testy. He’s been awoken by the incessant noise every night, several times a night since he moved to Briarwood about three months ago. “If you have your windows open, you can get the train whistle two, three times a night,” Gerwing recently told a Star Phoenix reporter. “All hours of the night. It’s really loud.”

Gerwing has been in touch with Canadian Pacific Railways and has requested a “whistle cessation” for the crossing located at Eight Street and Zimmerman Road. Apparently, the city of Regina has such a policy in place and Gerwing obviously feels that there’s no good reason Saskatoon shouldn’t do the same. He’s right!

Gerwing has also been in touch with and expressed his concern surrounding activity at the snow dump to his city Councillor, Tiffany Paulsen who confirmed that the city has ceased operating at night as a result of the complaints and will relocate the snow dump to an area outside of city limits soon.

Mr. Gerwing, thank you for your efforts to bring about some peace and quiet in your area. Train noises are not new to the area and I’m sure your willingness to take this issue on is appreciated by your neighbours.

Briarwood is located along the South East border of Saskatoon. Primarily developed after 1990, the area had the highest average selling price in Saskatoon through 2005.

Norm Fisher

Royal LePage Vidorra