Real Estate Information

There seems to be a lot of misinformation around about the new CMHC rules regarding high ratio mortgages. I will clarify some things for those of you who do not know the new rules.

95% financing with a maximum of 35 years amortization is still available for principal residences.

The qualifying has changed some. Now buyers must qualify for the 5 year posted fixed rate to obtain an insured mortgage. You can take the lower interest rate options such as the variable rate, but you must qualify for the higher rate and term.

The maximum financing available for revenue properties is 80% with CMHC insurance.

These are the important changes that everyone should be aware of.

If anyone has further questions I can be reached at 306 221 4785

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I read the editorials in Friday's Saskatoon Star Phoenix this morning and ran across a comment stating that real estate in Saskatoon was not a good investment particularly your own home.

I don't agree. I felt the writer was very short sighted. He stated that if you bought a couple years ago your home was actually worth less than it is now. While this may be true in some cases, there is no doubt in my mind that over a five year window your home's value will definitely be higher. If your home is worth between $200,000. and $350,000. it is certainly worth more money today than it was 3 or 4 years ago. If you look over the past 10 years any home has more than doubled in value, even though your payments are the same, or in some cases less, if you have a variable rate mortgage. Especially if you compare to renting, where the rents have increased substantially over the  same period.

If you invested the money in mutual funds 4 years ago you are extremely fortunate if your asset has maintained its value.

For those who understand investing, as Robert Kiyosaki explains it in Rich Dad Poor Dad, your home is not an investment, but to most of us it is the highest valued asset we own. As we grow older our home is the most secure asset we will own. This security is very important to maintain stability in our later years.

I have seen times in my career where people sell their homes and decide to rent as they get older only to find that the rents have increased dramatically and in some cases their apartments are converted to condos and they are forced to move at a time when they are the least able to handle to stress of making changes.

So you can look at home ownership from a different perspective. I feel very strongly that owning your home as soon as possible in your lifetime is the best option for anyone by far. Over the decades as one goes through life, home ownership is the best choice for your future financial security. 

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A recent report from CIBC World Markets says Saskatchewan will lead other Canadian provinces in economic growth this year, thanks to a rebound in the oil, potash, agriculture and uranium sectors.  It estimates Saskatchewan’s economic output will grow 3.0% in 2010 and 4.1% in 2011, which is well ahead of the estimate for the country's overall growth, projected to be only 2.3% above last year.

“The West will reap the benefits of reinvigorated Asia-Pacific growth,” says economist Warren Lovely in CIBC’s latest Economic Insights report.

“Oil, potash, agriculture and uranium sectors are again in demand, with ongoing development paving the way for production increases.”

Even though Saskatchewan's population is less than one million, it is rich in a number of important natural resources and home to several major companies, including Cameco (uraniaum), Viterra (grain handling) and PotashCorp.

Saskatchewan entered 2010 boasting a 1.5-per-cent increase in employment, and the country's lowest jobless growth in 2009.  Job prospects will encourage in-migration, with population growth expected to be stronger than for the past 30 years.

“Expect Saskatchewan to lead all provinces in 2010, and to battle Alberta for top spot in 2011,” Lovely said.

This already reflected in the increase in the number of building pemits for new housing in Saskatoon. We can expect to see growth in our province and Saskatoon before the rest of Canada.

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Spring fever has hit Saskatoon!  Activity has increased dramatically in February. Both listings and sales are up from January, as shown by the chart below:

While the numbers show dramatic increases January to February the figures compared to last years numbers year to date are good, but not quite as rosy as the February over January appear to be.

I have noticed a wide range of activity in the different price ranges.

The greatest increases are in the $125,000-150,000 range and the $200,000-$250,000. range. There s been a drop in volume in a couple price ranges.

The $275,000-$300,000 range saw a YTD drop of 30%. I think this is largely due to a lack of houses for sale in this price range.  We are seeing lower levels of activity in the over $500,000. price range, with only one sale over the $750,000. mark. The volume in the $500,000 - $750,000 range is the same as last year.

It appears that we are loking to another good year overall, with unit sales in the major catigories up over last year.

I can see shortages of product in the mid to lower prices ranges (especially the $200,000.- $350,000.range) in all areas in the city.

The average sale price has moved by 1% over last year, which is what we in the industry expected. We are doing well in the economic climate in Canada.

The average sale price in Saskatoon's rural residential is up a little with unit sales being down slightly. I believe what we are going to need to see in the rural residential to bring the volumes up, is more inventory. We have an over supply of vacant land parcels and a shortage of developed properties. Prices have stablized and we now need some volume for people to feel good about purchasing in the country.

The average sale price is up 2% over 2009 in the rural areas around the city. (much the same as within the city)

So overall we are doing well in Saskatoon.  It is a great time to sell if you have been thinking about it.

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Much has been reported in the media about the Canadian Competition Bureau wanting to change the rules that the MLS system must operate under. The Competition Bureau alleges that the Multiple Listing Service provided by the Canadian Real Estate Association (CREA) has an anti-competitive or unfair advantage in the market place. The Bureau seems to think that the only thing that the Multiple Listing System offers is the MLS.ca or realtor.ca web site. The Multiple listing system is owned and controlled by the Canadian Real Estate Association, and has a membership of over 98,000 strong in Canada. As members we all pay membership dues each year and must operate within the ethical guidelines of the organization, as well as the local Associations and the Provincial Real Estate Commissions across the country.

We compete on a daily basis in the different communities across the country. They do not set the fees we charge or how we run our businesses. The media seems to think that the Competition Bureau is going to lower real estate fees charged by the brokerages across the country. If MLS.ca, or realtor.ca was only a web site that may be possible, but it is much more. We as licensed associates and brokers are responsible for the clients we represent in their real estate transactions. We are bound by CREA as well as the provincial commissions to represent and protect our clients interests in these transactions. The consumers have a choice in who they use. The brokers decide how much they will charge for these services. There are fixed rate brokerages throughout the country. The problem the discount brokerages have is the same as all businesses. If you don't charge enough you cannot offer any service, or have competent people to serve the clients.

The cooperation that takes place in organized real estate is what creates the power behind the MLS system. the member to member cooperation ensures ethical conduct and a set of rules which ensures that all the clients get a standard of service and expertise that makes this system run so well and serve the public as it does. If the Competition Bureau succeeds in weakening this system, the loser will be the public in the long run.

If you want to buy cheap service you can obtain that now. There must be a good reason the public has not chosen to go that route en-mass. To receive sound expert service and expertise it costs more, but in the end you are always better off the pay for an expert in a transaction as large as selling or buying an home.

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Finance minster, Jim Flaherty announced tighter lending standards for mortgages today.  His purpose?  To prevent homeowners from getting into financial difficulty when mortgage rates rise.

After consulting with major Canadian lenders, he unveiled the plan with three main components:

1. All borrowers will need to qualify for a five-year fixed mortgage rate, regardless of whether they choose a shorter term at a lower rate.  This will ensure borrowers can make higher payments as interest rates rise.
2. The maximum amount when refinancing a mortgage will be lowered to 90 per cent of the value of the home, from 95 per cent.
3. A minimum 20 per cent down payment is now required to qualify for CMHC insurance for non-owner-occuped properties purchased as an investment. 

These new rules will come into effect April 19, 2010

A number of large Canadian lenders already practise the first peg of Flaherty's plan.  After Tuesday's announcement, Bank of Montreal noted that it requires its high-ratio borrowers to be able to qualify using the five-year rate.  "While we do not believe that Canada faces a housing bubble, we fully support the minister's actions," the bank said in a release. "Given the prospect of higher interest rates and the recent run-up in housing prices in some markets across Canada, the measures announced today are prudent."

Canada’s average five-year mortgage rate was 5.39 percent on Feb. 10.  In May, it was 5.25 percent, the lowest since 1951, according to Bank of Canada figures.  Bank of Canada Governor Mark Carney has pledged to keep his main interest rate at a record low 0.25 percent through June unless the inflation outlook shifts.

What hasn't changed is, you can still buy a home with a 5 per cent down payment.

If you have any questions or would like to discuss this in relation to your real estate plans, please feel free to give me a call.

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I recently spent some time in Phoenix, Arizona (holidays in the sun). While there, I checked out the real estate enviroment in the Phoenix area. One of the more popular areas for Canadian's is Sun City (which is on the North West corner of Pheonix.)

Prices there are much different than here in Saskatoon. Anyone living here who complains about a price drop will feel wonderful if he/she compares price changes here at home to those in the Pheonix area. Houses that sold for $260,000.00 in 2007 are now selling for $140,000. - $170,000. in the good areas. Houses in some working class areas have dropped to as low as $80,000.00. (This is for an 8-12 year old bungalow, 1300-1600 sq. ft., with a double attached garage.)

The real estate environment is varied in different parts of the US. Some areas are hit harder than others. They are still reeling from a tough economy while we are stablilizing and starting to see some upwards movement in the lower to medium priced homes. Overall, we are much better off here in Saskatchewan.

Canadians that have money are a major buying force in the Phoenix market.

I came home feeling good about things back here other than the weather. The thing that I noticed even more than the weather are the bumpy streets.

It's still great to be home and among friends and my clients (who have become my friends).  Real estate is a great business to create friends for life.

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January was a great month for Saskatoon weather for most of the month, but not so great for real estate sales. We have seen unit sales decline in most of the categories. Dollar volume was down by 18% in the city. Unit sales were down by 16%. I believe this was due to low inventories in the lower to mid price ranges, where the demand is highest. I noticed this developing over the past 6 months, with the largest part of our sales under $400,000.00. I noticed an incease in unit sales in the $450-$500 range. This is encouraging. This price range has seen lower activity over the past year. While this was great, we saw lower activity in the above $500,000. range in January. Volumes were lower in most ranges. This may be good news for the sellers that have been waiting for prices to move up before selling their house. Now may be a good time to sell and get a better price than last year.

The average sale price dropped 3% from last January. I expect this is because of the short supply of the lower priced product available. We are now waiting for the break that will bring more product on the market at a little higher prices in the $200,000. - $350,000. range.

It seems to be more of a challenge to find the buyers for the higher priced houses.

With only 3 unit sales over the $500,000.00 in January we should be careful not to measure the expectations for the coming year on one month. I expect we will see an increase over the next few months.

Overall our economy is postive and the buyers are calling to check things out. When that senario is happening it is positive.

As shown by this chart, the market over the last 3 years has been quite a ride. We saw prices rise dramatically from 2007 through 2008. The average price rose to about $310,000. then drop back down to just above the early prices of 2008. This led people to feel that they waited too long to sell. You had to be just lucky as a seller to hit the market at the very highest.  If you look at the long term, the price was still above 2007 at the end of 2008, even though it was quite a bit higher in July of 2008.  In 2009 we have moved back up to the higher range of 2008. We are above the average price of 2008. We have to be careful how we view these averages. These are the average sale prices. This may not be very relevant to your price range. the higher price ranges have not followed this pattern to the same extent.

I will publish comments on the higher price ranges next week. Please check back later next week for information on the $400,000. plus price ranges

Our Saskatoon market continues to correct, as our inventory declines toward the end of the year. I expect the lower inventories will cause the market under $350,000 to begin to rise again, or at least stabilize.  It will take longer for the higher end market to see any rise in prices.                                                

Unit sales were up 31% this December at 211 homes, compared to 161 sales in December of 2008.  The year began quite soft in terms of unit sales. This has been more than offset by the increase in unit sales in the middle part of the year. The year ended with a net increase in unit sales of 9% overall. This however does not accurately reflect the higher priced properties. There has been declines in the higher priced properties unit sales for 2009.  As the lower and mid range properties stablize, I expect we will see this move into the higher price ranges as well.