Tan.gazine July 2011 Volume 01 Issue 12
CMHC Results Show Changing Housing Market
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Client Appreciation
Rates will stay on hold...what now?
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“A Strong August” >> More on Page 7 The Risks & Rewards
of Rent-To-Own >> Page 9
Low Rates Enable Further Debt Growth
>> More on Page 10
Tan Hock
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TREB Report - 14 Days Of Increase Sales In September, 25% Over 2010 Comparable >> Page 8
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Client Appreciation
It is that time of the year again. You asked for it and its coming around again! We are proud to announce our annual 2011 Client Appreciation event on November 29th! Backed by positive responses to our last event, you can bet your last dollar this time around you’ll love it much more! Get in on the excitement with TAN and the TAN Team as we bring to you another spectacular event. Get first dibs on the action, mouth-watering foods and beverages, win prizes and go home with complimentary gifts! All this is happening on November 29, 2011 - mark this down on your calendar and RSVP with TAN and or the TAN Team to ensure your attendance! If you are an existing client and or have met with TAN, you will be receiving an official invitation. For more information visit www.penghocktan.com or www.tanteam.com
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Tan and his team can provide you with an unparalleled level of service and attention when it comes to an important decision such as buying and selling your home. Our passion and knowledge of the area and commitment to making a difference has helped us build a name for offering the highest level of customer service possible. Call Tan now if you are planning to buy or sell your next home.
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Tan.gazine
CMHC Results Show Changing Housing Market
The average Canadian mortgage had $158,894 remaining on it at the end of June, CMHC says. (Nathan Denette/Canadian Press)
CBC News
August 29, 2011
New mortgage rules implemented this past spring have stemmed the flow of new buyers and put a chill on refinancing activity, the agency that insures Canada's housing market says. The Canada Mortgage and Housing Corporation issued its second quarter results on Monday, and the numbers paint a picture of a housing market in flux. In March, Finance Minister Jim Flaherty unveiled the latest round of tweaks to Canadian mortgage rules designed to make it harder for Canadians to bite off more debt than they can withstand. Lenders typically require mortgage insurance for loans made to anyone who wants to buy a home with a down payment of less than 20 per cent of the purchase price. And the Canadian Bank Act prohibits most federally regulated lending institutions from insuring more than 80 per cent of the value of a home. Some do, but the CMHC is the ultimate backstopper of most highly-leveraged home loans. The two main rule changes implemented in March were a reduction of the maximum amortization time to 30 years from 35, and a reduction in the maximum amount a homeowner is allowed to refinance — to 85 per cent of the value of the home, down from 90. By the end of June, the impacts of those rules were already being felt, with the CMHC seeing an instant 10 per cent reduction in the number of mortgage insurance applications. That figure rebounded somewhat, but by the end of June, it was still five per cent below the level it was prior to the changes. The move to 30-year amortizations was expected to somewhat reduce the number of new buyers. But
the refinancing change has had a much more significant impact. At the end of June, refinancings were down by 40 per cent, CMHC said Monday. The agency has only recently started posting its quarterly results, because of changes to Ottawa's Financial Administration Act, which were laid out at the same time as the new mortgage rules came into play. Despite the slowdown in new applicants, the total value of CMHC's loan portfolio was $536 billion at the end of June, a 9 per cent increase from $490 billion at the same point last year. The CMHC has made it almost impossible to get a mortgage of more than 30 years, but it's interesting to note that the average amortization period actually crept slightly higher in the first six months of the year. The average CMHC-insured mortgage had an amortization period of 24.6 years at the end of June; it was 23.9 during the same period in 2010. And the average outstanding loan amount on a Canadian mortgage was $158,894 at the end of June, CMHC says. The agency saw little change in the number of people falling behind on their mortgage payments. CMHC views any home loan more than 90 days late on payment as being in arrears, and the mortgage arrears rate was steady at 0.4 per cent of all homeowners at the end of June. That figure has remained steady since May 2010, the CMHC said.
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Tan.gazineNews What To Do Now That You Know
Rates Will Stay On Hold...
Ottawa-Globe and Mail
September 7, 2011
Wrong, wrong and wrong. Can I be any clearer about all the forecasts you read not too many months ago about rising interest rates? Bank of Canada governor Mark Carney indicated Wednesday that rates will stay right where they are for quite a while as a result of global economic uncertainty. That means it’s time to strategize about your borrowing and investing. Here are six things to think about: 1.) The big reprieve: Canadians owe too much – that’s a fact, Jack. Now, the Bank of Canada has indefinitely postponed the reckoning that will come when interest rates march higher. You can handle your debts now, but what happens when rates returns to levels that are closer to historical averages? Make it a priority to owe less when rates rise. 2.) Variable-rate mortgages look good: The major banks’ prime rate is now 3 per cent – apply a discount ranging from 0.45 to 0.70 of a percentage point and you get much cheaper interest costs than you would with a fully discounted five-year fixed rate of 3.45 per cent. Sure, the prime rate will rise once the central bank starts to move again on rates. But in the meantime, you’ll be saving big time. 3.) Unending hell for savers: Rates on high interest savings accounts and money market funds are stuck in low gear. It’s a complete drag, but you have to live with it. Do not take
on more risk to get higher returns on money you cannot afford to lose. 4.) Unending hell for conservative investors: Rates on guaranteed investment certificates and bonds are not directly affected by what the Bank of Canada does. But the central bank’s concern about the global economy signals a broader trend of low interest rates that will flow into bonds and GICs. Dividends paid by blue chip stocks are an alternative, but only if you can live with shares that fluctuate in price even as they reliably churn out quarterly cash. In non-registered accounts, those dividends will be taxed much more favorably than interest, by the way. 5.) Lines of credit look good for smart borrowers: If you must borrow, a home-equity line of credit remains the best way. Expect to pay prime plus as much as half to a full percentage point. Mind the danger with credit lines, though. They are not a supplement to your pay cheque to help you afford fun stuff. They’re for strategic borrowing to bridge a short period between the time you buy something and the time you can afford to pay it off in full. 6.) Credit cards are a borrowing disaster: Card rates are unaffected by what the Bank of Canada does, so don’t waste your energy getting angry about 19 per cent rates on unpaid balances. Get a credit line or a consumer loan and pay off your credit card balance as soon as possible.
In August, the median price was $451,663 from the $409,564 recorded during August of 2010. TORONTO - September 7, 2011
Greater Toronto REALTORS® reported 7,542 sales through the TorontoMLS® system in August – a 24 per cent increase over 6,083 sales in August 2010. New listings, at 12,509, were up by 20 per cent compared to August 2010. Market conditions remained tight as sales growth outstripped growth in new listings. "Home sales in the GTA have stood up well despite a less certain economic outlook," said Toronto Real Estate Board President Richard Silver. "Home sales will be bolstered by low mortgage rates moving forward. The Bank of Canada is expected to be on the sidelines until the second half of 2012 or even into 2013. However, home ownership affordability in the City of Toronto could be further improved with the removal of the City’s land transfer tax. This tax currently represents a substantial upfront cost for home buyers.”
With market conditions remaining tight in the GTA, the average selling price continued to grow strongly in August – up by more than 10 per cent year-over-year to $451,663. "We remain on pace for the second best year on record for sales. Approximately 90,000 transactions are expected by the end of December," said TREB's Senior Manager of Market Analysis Jason Mercer. "Major home ownership costs, including the average monthly mortgage payment, remain affordable despite the strong price growth experienced so far this year."
Tan.gazineNews
Strong August Home Sales in the GTA
June, 2011
Tan.gazineNews
Greater Toronto REALTORS® Report
Mid-Month Resale Market Figures TORONTO, September 16, 2011 - Greater Toronto REALTORS® reported 3,149 transactions during the first 14 days of September, representing an increase of more than 25 per cent in comparison to the first two weeks of September 2010. New listings over the same period, at 6,890, were up by 14 per cent compared to last year. “Purchasing and paying for a home over the long term represents the single largest financial commitment most households will make over a lifetime. To make this commitment, households must be confident in their economic prospects,” said Toronto Real Estate Board President Richard Silver. “The fact that sales continued to grow through the first half of September suggests that GTA households remain confident that the economy will remain buoyant.” The average selling price in the first half of September was $454,194 - an increase of 11 per cent compared to the same period in September 2010. “Strong price growth in the GTA continues to be mitigated by a solid affordability picture. Mortgage rates will remain at or near current levels until the second half of 2012 if not into 2013,” said Jason Mercer, the Toronto Real Estate Board’s Senior Manager of Market Analysis. “In response to strong price growth, more households chose to list their homes for sale in comparison to last August. Growth in listings is expected to continue. Increased choice will result in more sustainable rates of price growth,” continued Mercer.
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Summary of September Sales & Average Price September 1st to September 14th
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The Risks & Rewards Of Rent-To-Own
For some people, securing a mortgage is the only thing that stands in the way of homeownership. While they have money in the bank for the deposit and a regular monthly income, there are a number of issues that could still make them a less than desirable candidate for a loan.
Melanie Epp
September 2, 2011 Newcomers to Canada often have a difficult time with lenders, as do those who are newly self-employed. Other hindrances include a recent divorce, a past bankruptcy or an unattractive credit score. For those in this situation, the dream of homeownership can still be a reality – albeit, by a less than traditional route.
Once the agreement term comes to an end, the tenant is given the option to purchase the property for the pre-determined price. They do have the right to walk away at the end of the term, but in doing so they risk losing the amount saved for the down payment. The Pros and Cons of Rent-to-Own
What is meant by rent-to-own and how does it work? Think of rent-to-own as the bridge between life as a tenant and life as a homeowner. The investor or landlord owns a property that they want to sell/lease to a potential homeowner. Once the new tenant is chosen, the investor sets up a Purchase Option or Lease Agreement Option with a term that lasts anywhere from 1-5 years. Together the investor/landlord and the buyer/tenant draw up an agreement, which usually includes a pre-determined purchase price. Each month, the tenant pays an extra amount on top of the monthly rent. This extra amount acts as forced savings, a sum of money that is later applied as the down payment. The investor, in the meantime, is allowed to use the money however they see fit, as long as they are able to rebate the tenant in full at the end of the term. No two agreements are the same, but tenants are quite often responsible for the maintenance and repairs of the home. While this might seem unfair at first, it does give them an authentic picture of what homeownership is really like. In July, Canadian Real Estate magazine published an article on rent-to-own. A list of what to expect in the final agreement was provided. It included: • The amount of the pre-determined price • The roles and responsibilities of the buyer/tenant and landlord/investor • Influence of property appreciation • Terms of default • Extensions, if necessary • Inspection clauses • Assignment right
Just like most decisions, there are pros and cons that come with rent-to-own investments. The idea is to make sure that the pros outweigh the cons. Cons • If you choose to walk away, you lose the money you put in • Sometimes investors charge a fee upfront, which can amount to thousands • Your credit can be voided if you’re late on rent in any given month • The house could foreclose if the investor doesn’t pay the mortgage (in this case, you would lose your investment and be forced to move) • You still may not be able to afford the home at the end of the term Pros • Renting to own gives you extra time to save money • If you’re bad at saving, rent-to-own is like a regimented savings plan • If you’re self-employed, you have time to establish your business financially • If the home is not to your liking, you can walk away • You can try out homeownership in a very realistic manner Rent-to-own is certainly a less than traditional route to homeownership, but for some people it bridges a difficult gap. The best rent-to-own scenario would be between a buyer and seller who trust one another implicitly and who understand the risks involved. Be realistic; if you choose rent-to-own, make sure it is something you want and something you can afford to do.
News
Tan.gazine
Canada - Low Rates Enable Further Debt Growth TD Economics - Diana Petramala, Economist
September 16, 2011
Through the last three and a half years of global eco¬nomic gloom, the strength of the Canadian housing market has been a symbol of Canada’s relative outperformance. While many other advanced economies were bogged down by a large scale housing correction, the Canadian housing market continued to surprise on the upside. Amid fears that the housing market was overheating in a highly stimulative interest rate environment, the federal government announced stricter CMHC mortgage insurance rules in early 2011. Indeed, tighter government regulation has since skimmed some of the froth off existing home sales and price growth. The number of homes sold in August was down 5.5% from levels at the start of the year, while home price pressures have begun to ease. However, the impact has not been overly dramatic and the level of housing activity remains healthy, with 70% of Canadian markets in balanced territory. Meanwhile, certain segments of the market, such as Toronto and Vancouver, remain hot relative to domestic fundamentals. Overall, TD still judges that Canadian home prices are roughly 10 to 15% overvalued. Going forward, TD Economics expects an orderly cool¬ing to continue through the second half of 2011 as recent financial market turbulence and growing unease over the economic outlook likely weigh on households’ decisions to spend on big-ticket items, such as the purchase of a home. But, a housing slowdown will likely prove shortlived. With a myriad of global economic risks expected to also keep the Bank of Canada from raising rates until early 2013, the inter¬est rate environment is likely to remain extremely supportive of housing demand over the next two years. As
such, once confidence starts to firm up by early 2012, we expect hous¬ing activity to pick up modestly. TD Economics continues to believe a 10% correction in Canadian home prices will occur, but this will likely be a story for 2013, when interest rates start to normalize. A consequence of a strong housing demand has been ex¬cessive household debt accumulation. This week we learned that household debt rose to a new high of 149% of personal disposable income in the second quarter of 2011, well above the 140% we deem to be consistent with underlying house-hold fundamentals. The ratio may flatten out in the near term as households borrow cautiously amid economic concerns. However, the key implication of a lower-for-longer interest rate environment, and the resulting elevated level of hous¬ing demand is that the Canadian household debt-to-income ratio is likely to rise above 150%. For now, low interest rates will allow households to comfortably carry high debt levels. In fact, the interest costs of carrying debt as a share of income remain low. But, further debt accumulation will only increase households’ vulnerability to the future rise in interest rates. As such, once interest rates begin to rise in early 2013, the level of debt will act as a significant con¬straint to household spending. In sum, we expect the household sector to continue to help propel economic growth amid slowing global demand in 2012. However, the consequence is that high household debt levels will weigh on growth beyond that in an environment where interest rates return to more normal levels.
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“
The Fallason e BuyingoSng Us m Is A
”
Market Shortage of Houses For Sale!
Moregs n Listid ! d e e Ne
Home Inventory Levels At An All Time Low
The best time to list your home is NOW! Call TAN now for a free property evaluation!
Contrary to popular belief, now is the best time to list your property. Get the best bang for the buck!
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