- TD Canada Trust releases 2010 Home Buyers Report -

TORONTO, July 5 /CNW/ - Are Albertans better negotiators than the rest of Canada? More than any other province, first time home buyers in Alberta are expecting to pay less than the asking price for their home (71% vs. 65% nationally). One-quarter (26%) expect to pay asking price and only 3% expect to pay more than asking price. This is according to the first TD Canada Trust Home Buyers Report, which surveyed Canadians who have purchased their first home in the past 2 years or who intend to purchase a home in the next 2 years.

More than in any other province, Albertans report putting down as much as they can afford for a down payment (95% vs. 88% nationally). Sixty-five per cent say they saved or plan on saving for two years or less for their home purchase. Despite the majority putting down as much as they can afford, only 25% plan to have more than a 20% down payment. The remaining 75% will require their mortgage to be insured by organizations like the Canada Mortgage and Housing Corporation (CMHC). Two-thirds (65%) are worried about being able to afford their home if interest rates rise.

“It’s only natural to want your first home to be the home of your dreams, but it is important to be realistic about what you can afford as a down payment and what that will mean for both the type of home you buy and for your mortgage payments over time,” says Farhaneh Haque, Regional Sales Manager, Mobile Mortgage Specialists, TD Canada Trust. “I advise first time home owners to consider a larger down payment because a 10% or greater down payment will make a big difference. It may mean that you need to save longer before buying your first home, but it will pay off in the end. Speak with a representative at your bank about setting up an automatic savings plan to help you save.”

Seventy-three per cent of those surveyed in Alberta have or plan to have a fixed-rate mortgage. “Historically you are more likely to save interest costs with a variable rate or short-term mortgage option, so if they can handle some volatility then I recommend buyers choose a variable rate. If people are adverse to interest rate fluctuations then a fixed-rate is best,” says Haque.

Albertans are doing their homework:

Nearly all home buyers are making informed financial decisions before buying their home. Top activities before buying a home include getting pre-approved for a mortgage (94%), learning about mortgage options (93%), calculating closing costs (89%) and speaking to a mortgage lender before shopping for a home (89%). However, land transfer tax, closing costs and property taxes were the top costs that buyers felt unprepared for (53%, 51% and 48% respectively).

What type of home do Albertans want?

Fifty-nine per cent of Albertans prefer fully detached homes, followed by condominiums (17%) and semi-detached homes (14%). If two homes were at the same price point, 68% would prefer a newer home over an older home. Albertans are split about the preferred location for their home; for the same price, 55% would prefer a smaller home closer to work and 45% would prefer a larger home that requires a longer commute to work.

Home shopping process:

People in Alberta do their due diligence when searching for a home, spending almost 9 months looking for a home and viewing on average 13 homes. They spend a lot of time shopping in Alberta because they plan to live in their first home for longer than people in other provinces. In fact, only 5% of people plan to spend less than 3 years in their first home (compared to 11% nationally). Thirty-nine per cent plan to spend more than 10 years in their home or to never sell.

Homes are a long-term investment

“Ups and downs of the housing market is near-impossible, so the best time to buy is when you can afford it.”

‘You know, you’re making the biggest mistake of your life. The housing market is going to fall.”

I got this great piece of advice from another journalist at the Financial Post, who has since left the newspaper, after buying my first home. Not exactly the type of thing you want to hear after taking on huge debt and making the biggest financial decision of your life.

Lucky for me, I didn’t heed that advice about Toronto’s red-hot real estate market — in 1998. I’m not going to say I made a shrewd business decision 12 years ago, or even six years later when I bought a larger house.

For me, it wasn’t a case of not following what turned out to be bad advice from a fellow business journalist. Nor was it about trying to time the market.

I was simply following the same pattern as most Canadians: I got married and decided to stop renting and buy something. Later came the need for a bigger home when the second kid was on the way.

Which brings us to today. The supply of housing is rising fast as people try to list their homes for sale before the market “crashes.” This is happening at the same time that demand is starting to wane. Economists and even the real estate industry, are all predicting a correction — the only argument being how severe it will be.

So, the question for anyone buying is: should you wait?

Don Lawby, chief executive of Century 21 Canada, thinks the strategy of waiting for a crash is not going to work during this economic cycle. “For a market to crash, you have to have people who are desperate to sell,” says Mr. Lawby. “People will [only sell] if they can’t afford their mortgage or they don’t have a job.” He doesn’t see a decline in prices, “unless you are predicting that mortgages will renew at a hefty premium — which is not the case — or a whole bunch of people are going to lose their jobs.” Mr. Lawby believes neither will happen.

And, he adds, you are really into a risky game if you are timing the market. “A house is a home. If all you are doing is looking at it as an investment — that’s what happened the last 15 years — it’s not just that. It’s a place to live and a place to raise a family,” says Mr. Lawby. Even Benjamin Tal, a senior economist with CIBC World Markets, who, last month, said in a report that Canadian housing is 14% overvalued, has doubts about playing the market. But he suspects that’s exactly what some Canadians will do.

“Is there a sense that prices will go down and people will wait? I think it might be an issue,” says Mr. Tal. “It won’t be the main reason [people don't buy], but it will happen at the margins. The fact that people sell at the peak and wait to buy is a normally functioning market.”

But even if you do make the right call on housing prices, it could end up backfiring on you in other ways. For example, if interest rates rise fast enough, any gains you make on price could be erased by interest charges, says Mr. Tal. Edmonton certified financial planner Al Nagy says you need to think of your house the way you think about any long-term investment. “Whether it’s an investment for use in your retirement or a house to live in, it’s a long-term thing. The timing becomes less critical than it would be if it is a speculative [investment].”

And he says making a call on the housing market is as tricky as any other investment call. “It’s very rare you catch the bottom. You can’t let the market dictate when it’s time to buy. The time to buy is when you can afford it,” says Mr. Nagy.

I’m not sure that philosophy would fly with my former colleague, but the problem with timing the market is: what if your timing is off ?

gmarr@nationalpost.com

CALGARY - In residential real estate, there’s an old saying about how location is an important factor in any purchase - besides the price of course.

A BMO Bank of Montreal survey, released today, says that among current and future first-time home owners, location is the main reason they would consider offering more than the asking price for a home.

The survey found that:

• 70 per cent of current home owners would consider offering more for a home based on its location

• 63 per cent of future first-time home owners would consider offering more for a home based on its location.

• Future first-time home owners who are men are more likely (70 per cent) than their female counterparts (57 per cent) to consider offering more for a home based on its location.

“Especially in today’s heated market, it’s easy to get caught up in the emotions of a home purchase,” said Jane Yuen, Senior Manager of Mortgages, BMO Bank of Montreal. “It’s hard to walk away from a home you believe is ‘the one’ but homebuyers need to avoid getting caught in a bidding war that pushes their mortgage payments outside their comfort zone. In short, you need to know your limit and stay within it.”

Among future first time home owners the study found some notable gender differences:

• Men are more likely than women to agree that talk of rising interest rates has influenced their decision to enter the housing market (39 per cent vs. 26 per cent).

• Twice the number of men compared to women report that they have been caught up in a bidding war (16 per cent vs. eight per cent)

• Females are more likely than their male counterparts to say they are being overwhelmed by the choices/decisions involved in the home buying process (44 per cent vs. 28 per cent)

The Harris/Decima online poll was conducted from February 16-22 2010 and is based on a sample of 1,000 Canadians between the ages of 25-45 years, who are either current home owners (who currently have a mortgage on their home and needed one when they purchased their home) or are planning on purchasing their first home in the next 12 months, and at least share in their household’s financial decisions.

mtoneguzzi@theherald.canwest.com

CALGARY - Calgary’s housing market in March was fueled by an expected rise in interest rates with MLS single-family home sales up by 29 per cent compared with a year ago and condo sales soaring by 37 per cent, according to data released today by the Calgary Real Estate Board.

There were 1,396 single-family home sales last month for an average price of $471,269, up just over 12 per cent from March 2009.

The 609 condo sales averaged $296,660, an increase of just over four per cent from a year ago.

“The spring market has come early to Calgary,” said Diane Scott, CREB president. “Improved economic

conditions, better employment prospects, and an earlier than expected rise in mortgage rates are all contributing

to this early boost in sales this year.

“Undoubtedly the recent announcements by all our major banks to raise mortgage rates are motivating

buyers to take the plunge. But Calgary’s market remains in a healthy position and our sales are not outstripping supply. The rise in demand will also motivate sellers to consider listing this spring.”

She said there has been some speculation that mortgage rate hikes will adversely affect housing demand in the longterm, but it should be noted that a rise in rates was fully expected.

The towns outside Calgary saw 423 sales during the month, up nearly 63 per cent from last year, for an average price of $360,805. That was up by nearly 10 per cent from March 2009.

The country residential (acreages) market experienced a whopping more than 78 per cent increase in sales to 66 transactions for an average price of $970,295, up more than 28 per cent from last year.

“Our average price has edged upwards as more move-up buyers enter the market and overall demand

strengthens,” says Scott. “But this is not an unusual trend during a spring market. We expect this modest price growth to continue, but a rise in listings will likely curb this trend.”

© Copyright (c) The Calgary Herald

Read more: http://www.calgaryherald.com/business/Interest+rates+fuel+Calgary+housing+market/2754209/story.html#ixzz0kKghoid1

I’d like to discuss an important issue that has been leering over the shoulders of banks, lenders, and brokers.  All of these parties have a responsibility to perform their due diligence with every valued client.  There is one step that is overlooked by many, but should probably be held in the highest of interests - and that would be placing our clients into a mortgage that will be serviceable in the FUTURE.  Tough?  Yes and no.  You see, really all it takes to do this is an estimation of your balance at the end of the first term, and wager against what the future rates might look like.  What do we know right now?  Rates will go up…of course.  How much - we don’t know exactly.  If we wager a bet that rates will be up 3% - 5% in the next 5 years, it stands to reason that we’re doing our best to limit your risk into entering into a “said” mortgage for today.  We can take your opinion on what your expected salary will look like in 5 years from now (or whatever initial term you’re partial to).  From that perspective, we can harness a ‘likelihood’ of what your future mortgage will look like.  At the very least you’re going in with your eyes open to what may happen to be the biggest investment of your life.  Could we be off in suggesting 3% - 5%?  YES!  Perhaps they’ll be up 6% - 8%.  When we’re providing a looking glass towards the future, nothing is set in stone.  The important factor here is that we want you to go into this investment with both eyes open and strategize in various ways towards different scenarios.

When a bank or broker tells you what you can qualify for on paper as a MAXIMUM mortgage…I highly recommend that you consider letting us play the scenarios - first!  It’s easy to get starry eyed with how much you can afford on paper…today.  If we can protect your risks today, for tomorrows uncertainties…wouldn’t that be worth the time it takes to figure out a scenario or two?  That’s our job

CALGARY - Affordability and low interest rates will drive modest growth in sales and prices of resale homes in Calgary this year, the Calgary Real Estate Board predicts in its 2010 forecast report released Wednesday morning.

The board followed the lead of several Calgary economists in predicting only a continuation of the gradual recovery experienced in the second half of 2009.

“MLS sales are seasonal, so we anticipate seeing higher year-over-year monthly sales in the beginning of 2010, mainly as a result of the low levels of sales experienced in the first quarter of 2009,” said Diane Scott, the new president of CREB., who takes over from Bonnie Wegerich.

“New housing starts are also expected to be relatively high in comparison to a very weak first quarter of 2009,” she said in a news release.

The report estimates single-family home sales will climb to 17,000 from 14,440 in 2009 and 7,000 condominium units will change hands, versus 6,328 last year.

In 2007, single-family sales in Calgary metro added up to 18,438 and there were 8,236 condos sold. In 2008, the numbers were 13,455 and 5,661, respectively, with the single-family number the lowest since 1996.

The board predicts the average price for a single-family home in Calgary in 2009 will jump six per cent to $470,000 from $442,327 last year and the average condo price will rise 4.3 per cent to $296,000 from $283,734 in 2009.

The average single-family home price peaked at $505,920 in July 2007 and condo prices hit a record $332,237 in May 2007.

The board said the downtown apartment condo market will be particularly slow this year and that smaller single-family homes and lower priced segments will lead in sales and price growth.

“Single-family resale prices will again outpace condos in 2010, as equity gains from pre-2006 will enable move-up buyers to afford more,” said Scott. “Consequently, the gap between single-family homes and condominium prices will continue to widen in the short term.”

© Copyright (c) The Calgary Herald