Toronto home prices up but rising mortgage rates could spell trouble: economists – Yahoo! Finance Canada
The average sale price of homes in Toronto continues to climb but, alongside it, so are fixed mortgage rates. According to some economists, the continued rise in mortgage rates and an oversupply of condos could potentially spell trouble for Toronto’s real estate market. Sales were down by less than one per cent in the GTA last month, compared to June 2012, but the average selling price was up by 4.7 per cent to $531,374. Fixed mortgage rates have been sub-3 per cent since June 2012, but have risen by nearly 0.5 per cent over the past two months. ”If (the current) rate of increase is sustained for another month or two, that could put a bit more stress on the housing market,” said Robert Hogue, a senior economist at RBC. “It will all depend on how quickly and dramatically bond yields rise. If those bond yields stabilize and interest rates don’t necessarily surge, then the market may take it in stride.” Continue reading
Mark Carney keeps 1% rate and bias towards hike in last policy decision – Financial Post
As expected, Mark Carney and his policy team left the overnight lending rate at 1.00 per cent in Carney’s final interest rate announcement as Governor of the Bank of Canada. Carney officially steps down on Saturday, after completing only 5 years of his 7-year term, and begins his new job at the Bank of England on July 1st. Following Carney’s final interest rate announcement, the Bank of Canada stated that, “with continued slack in the Canadian economy, the muted outlook for inflation, and the constructive evolution of imbalances in the household sector, the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time”. In March, the Bank of Canada forecasted economic growth to be 1.5 per cent this year with a rise to 2.8 per cent in 2014. Policymakers indicated during the interest rate announcement that, when the interest rate does change, it will go up and raise borrowing costs.
Home sales expected to stabilize amid steady job growth – Vancouver Sun
The Canadian housing market is safely cooling down, rather than crashing, according to a new report from BMO Economics. While sales have slowed, the effects of stricter mortgage rules is being partially offset by low mortgage rates and continued income growth. Senior economist at BMO, Sal Guatieri, indicated that nationwide housing starts have been adjusting to the reduced demand and are returning to household formation rates. Home prices have reached record highs but resale markets are largely balanced. Next year, steadier housing prices are expected with decent job growth. The BMO Housing Confidence Report found that 48 per cent of Canadian homeowners plan to buy property in the next five years. This percentage remains very similar to the 2012 figure, demonstrating that a high level of consumer confidence in the housing market is continuing into 2013. Continue reading
You’ve probably seen them before: “special” rate offers from banks listed online, in newspapers, on billboards, etc. And while the word “special” sitting next to a number may look good at first, rates of 3.99%+ are anything but. Fortunately, more and more banks are now listing their best mortgage rates up-front. TD, Scotiabank and BMO are just a few of the big banks who are now posting more reasonable rates, with CIBC and National Bank expected to follow.
In a time when mortgage consumers have more self-education options online than ever before, including mortgage rate comparison sites, the banks have no choice but to stop posting artificially high advertised rates and start posting their more competitive options. If mortgage brokers are able to offer buyers rates closer to 2.99% up-front, why would anyone choose to lock-in at 3.99% with their bank? Yes, buyers are often able to rate-match with their lenders, but not offering these rates up-front first can hurt a buyer who doesn’t know this is an option.
First-time buyers are back after 2012 slump in sales - Financial Post
A strong start to 2013 is providing hope that the overheated housing market in Toronto is, in fact, not heading for a crash. “January can be a very volatile month. I’m usually struggling for buyers. But I cannot remember having this much business coming into the new year,” says listing agent Carolyn Griffis of ReMax. Mortgage brokers are also reporting steady numbers of first-time homebuyers looking for pre-approvals, proving that many are tired of waiting for the housing market to cool or crash. Continue reading
Mark Carney to raise the key interest rate?
Not anytime soon thinks Francis Fong of TD Bank. The economist then referenced a stat by CAAMP, who estimated one in five mortgage holders would be in serious trouble with a key interest rate of 3.00% (the current rate is 1.00%). The key interest rate drives the prime rate which is important to variable rate mortgage holders (the current prime rate is 3.00%). Mr. Fong believes Mark Carney has no intention of raising rates to that level anytime soon. However, TD does anticipate a small rate hike, likely 25 to 50 basis points before the end of the year. Though the central bank will likely tread softly until the Eurozone and US economies regain their momentum. It’s not until the end of 2013 that TD forecasts the Bank of Canada moving the key interest rate to 2.0%.
Toronto Housing Market
According to an article by Troymedia, the measures of supply and demand do not indicate over-supply in the Toronto market. The ratio of completed and unoccupied homes to constructions starts actually suggest the inventory of new unsold condo housing in Toronto is normal and declining relative to the level of construction. The article then goes on to state two factors which suggest condo construction in Toronto will remain high: rental vacancy, which is just over 1 per cent, is trending downwards and Toronto mortgage rates which are widely expected to remain low for at least another year.
This is your weekly mortgage and housing news update. There were plenty of headlines covering the Toronto housing market and most of it carried a negative tone, which doesn’t reflect well for Canada’s biggest market.
Toronto Housing Market
The adjective that most people use to describe the Toronto housing market is heated. This is especially true for the condo market which continues to see the average price increase while the average unit size decreases. Plus, the glutton of new construction in the pipeline leads to fears of massive over-supply, which have many experts calling for a condo market crash.
The Financial Post believes Toronto’s overheated market is unsustainable because the rest of Canada has been experiencing home price moderation, whereas home buyers in Toronto continue to over-spend for their properties. Over the past year, only Toronto has shown price gains (%) in double-digit territory at 10.5%. TD Bank believes Canadian home prices are 10-15% above a sustainable level.
Rundown of the numbers:
- 20% The number that the Toronto market accounts for within the Canadian housing market
- 36.1% The jump in new mutli-family home construction (mostly condos) from Q1 2011 to Q1 2012
- $360,892 The average price of a condo in Downtown Toronto
- 17% Percentage of Torontonians willing to pay more than $600/month in condo fees
‘The Donald’ himself made an appearance in Hogtown (that’s Trump, not Duck) to officially cut the ribbon for his Trump International Hotel and Residences tower in downtown. The Toronto Star has reported over a dozen investors are refusing to pay the final closing costs and assume ownership of their units, claiming these investments no longer make financial sense.