Insurers Push to Keep Zero Down Loans

July 16, 2008


Private mortgage insurers are pushing for ways to keep no-money-down mortgages alive and are set to meet with Department of Finance officials in the next two weeks to discuss possible options, sources indicate.

The move comes after Ottawa cracked down on mortgage practices that allowed consumers to enter the housing market with no money down and amortize their loans over 40 years. New rules that come into effect on Oct. 15 would demand a 5% repayment and shorten the length of amortization from 40 years to 35 years.

Sources indicate the country’s major private insurers, which control about 30% of the market, have told mortgage brokers they are working on a solution which would keep the zero-down option alive and even the 40-year amortization. One insurer, PMI Canada, which has been in the market for about a year, indicated it hopes to come up with some alternatives.

“PMI Canada is still in the process of reviewing and analyzing the new mortgage insurance measures for industry and market impact. PMI Canada looks forward to meeting with the Department of Finance at the end of the month to better understand the new measures, after which we will be better able to make an informed strategic business decision as to whether or not we are able to continue to offer the 40-year mortgage insurance option,” said Janet Martin, chief executive of PMI Canada, in an email to the Financial Post.

An industry source said the private mortgage insurers are looking into creating a product in which the first 95% of a mortgage is backed by the government with the last 5% securitized independently by the private mortgage insurers.

The new rules from Finance appear aimed as much at Canada Mortgage and Housing Corp., a Crown corporation that controls 70% of the mortgage-insurance market.In the hotly competitive mortgage-insurance market, CMHC has often been the aggressor in the marketplace. For years, the entire market was CMHC and Genworth Financial Canada, which has controlled the other 30% of the multi-billion mortgage industry. In the past two years, AIG United Guaranty, a subsidiary of and PMI have been trying to crack the market.

CMHC and Genworth both responded to the intrusion by insuring products with longer amortizations. CMHC’s decision to insure mortgages with zero money down ended up incurring the wrath of David Dodge, the former governor of the Bank of Canada, two years ago.
Mr. Dodge feared interest only mortgages were fuelling the housing market and demanded a meeting with CMHC. Some industry observers say new rules put in place last week are the long-awaited response to Mr. Dodge’s concerns, coming after months of consultation.

Now, the private sector is suggesting it wants to be excluded from the new rules. The Private firms are looking at trying to do the 100% insurance themselves. Brokers have been told to wait a week for nore news before they can find out how to proceed.


Ottawa housing prices up 7 per cent

July 9, 2008

Ottawa housing prices up 7 per cent
The Ottawa Citizen

The average price of a home in Ottawa is inching closer to $300,000.

According to the Ottawa Real Estate Board, the average price of residential properties, including condominiums, was $298,484 last month, an increase of seven per cent over June 2007.
The average price is calculated based on the total dollar volume of all properties sold.
The average cost of a bungalow last month was $281,171, compared to $265,032 the same month last year. A split-level sold for $299,022 in June, compared to $285,423 in June 2007.

The board said average price information can be useful in establishing trends over time, but should not be used as an indicator that specific properties have increased or decreased in value.
Meanwhile, Residential building permits issued in Ottawa increased by 28.8 per cent in May compared to one month earlier.

However, non-residential, including industrial, commercial and institutional building permits, have decreased by 51.6 per cent in May compared to April, according to Statistics Canada.
In Gatineau, residential permits decreased slightly by 0.4 per cent — and non-residential permits decreased by 23.2 per cent in May, compared to April.

B.C. housing hits affordability limit

July 9, 2008

B.C. housing hits affordability limit
By Tom Fletcher – Arrow Lakes News – July 08, 2008

VICTORIA – B.C.’s four-year real estate boom has finally cooled, but there are few signs that property values will lose significant ground as they have in the United States.

What the government now markets as “the best place on Earth” remains an attractive place to move for work or retirement, and that is expected to help soften the blow of the forest industry downturn and a continuing decline in U.S. tourism. But more B.C. sellers continue to try to cash in while fewer people are buying as prices have moved out of their affordable range.

Small price drops have been seen in the Fraser Valley and Metro Vancouver in the last two months, but year-over-year prices are still up by single-digit amounts. As in other regions of B.C., new listings are up while sales are down, although prices continued upward outside of the Lower Mainland.“Price declines in Vancouver and the Fraser Valley look to continue in the near term,” according to Credit Union Central B.C.’s latest weekly economic briefing. “The long-awaited and much-anticipated price cycle peak probably occurred in February.”

Credit Union economists say the Bank of Canada’s next interest rate move will be upward, to counteract inflation, and could come as soon as October. That expectation, along with more listings to choose from, should motivate more buyers in the second half of this year.

Province-wide, home sales were down 14 per cent in the first quarter of 2008 while new listings were up 24 per cent. The B.C. Real Estate Association (BCREA) forecast this spring that the average residential price will still climb nine per cent this year and another four per cent in 2009, based on in-migration and continued strong economic growth in B.C.

Sales in the Victoria region were stronger than the Lower Mainland in June, and while slowing may not have peaked yet. New listings began to fall in both the Lower Mainland and Victoria regions in June after the biggest real estate run-up in B.C. history.

The Kootenays, which recorded the biggest price jump in B.C. last year, expects to see less pressure as the overheated Calgary and Alberta property markets have stabilized. The BCREA forecasts that Kootenay prices should go up another 13 per cent in 2008 and six per cent in 2009. The average Kootenay home price shot up 30 per cent in 2007 to more than $270,000, in some cases pricing local residents out of their own market.

In the Okanagan, May home sales were down by half from the same time last year, with the average house price up 10 per cent since May 2007 and closing in on $400,000. Despite fewer sales, the number of new Okanagan listings surged by 27 per cent in May, with no sign yet of a decline in prices.

Northern B.C. has seen about a 25 per cent reduction in sales in the first half of the year, and more homes on the market. The average home price in Prince George is up slightly over last year to more than $242,000.

Calgary News – Prices rising faster within inner city

July 7, 2008

Calgary Herald

Prices rising faster within inner city
Fuel costs and convenience are factors

Despite new subdivisions constantly sprouting up on the outskirts of Calgary, buyers continue to mostly favour an urban address in the inner city during the last decade, says a recent national report.

Prices in Canada’s urban neighbourhoods — including those in Calgary — slightly outgained those found in suburban areas between 1998 and 2008, says a price appreciation report by Royal LePage Real Estate Services.

An average two-storey house in an urban setting appreciated by 129 per cent from March 1998 to March 2008, while a similar property in the suburbs saw its price rise by 110 per cent.
The price of an average urban bungalow grew by 122 per cent, compared to 115 per cent for its suburban counterpart — while urban condos rose 132 per cent compared to 104 per cent in the suburbs

The difference reflects what people are looking for in their next home, especially considering increasing transportation costs linked with energy prices, says Phil Soper, president and CEO of Royal LePage.

“If you step back and look at the economic principles, why people are buying is based on what they put value on for a home,” he says. Canadians are putting increasing emphasis on the rising cost of long commutes, as well as the convenience and saving time of living in the inner city, he says.

“Over the course of the year, that cost of gas is going to be tangible (for a longer commute),” says Soper. “Now, fewer people will actually sit down and map it all out, but they do know that there’s an expense tied to that.”

In Calgary, the bungalow market bucked the national urban-suburban appreciation trend, with those further from the city centre appreciating by 157 per cent in the last decade compared with 136 per cent for inner-city units. But for homes (two-storey, single-family dwellings) and condos, the relative strength of the local urban market was even more sharply demonstrated than in the national numbers.

Urban two-storey homes in Calgary outgained suburban ones 207 per cent to 170 per cent — and the urban condos followed suit at 364 per cent for urban and 108 per cent for suburban.

Calgary also claims two of the five neighbourhoods with the higher appreciation rate, with Mount Royal second and Scarboro fourth. Both are part of Calgary’s inner city core. The sharp contrast in appreciation may be explained by Calgary’s geography, which isn’t shared by the likes of Toronto or Vancouver, says Soper. Both had smaller gaps between their urban and suburban markets, he says.

“In Calgary, the vast majority of commerce is conducted in the central part of the city,” he says.
“There are no geographical barriers like Vancouver, or Toronto with the lake. For those cities, because of the expensive downtown costs, white-collar jobs are sometimes outside of the city centre.

“But Calgary is so centralized that people can really see on a map the value of time as they see the distance to the city.” Ted Zaharko, owner and broker at Royal LePage Foothills in Calgary, says the study results did not surprise him. There may be a more important reason than commuting distance when it comes to Calgary’s preference for urban properties, he says.
“Not looking at an Airdrie or a Cochrane, Calgary isn’t a very big city, and the driving times from the inner core and the outer core aren’t really that different,” he says. “But that’s not the only factor. There’s also prestige and convenience. It’s a matter of status.”

The redevelopment of waterfront neighbourhoods like Eau Claire has drawn significant numbers of empty-nesters and those approaching retirement age, who are usually associated with the suburban markets, into the urban core, says Zaharko. There’s also the factor of limited supply. While developers can continue to build outwards for more suburbs, Zaharko says inner-city property are, by nature, limited in number.
“It’s like having a lakefront cottage,” he says. “There’s only so many of them. The inner core will always be in high demand.

“My guess is, it will grow at a greater percentage (in the next 10 years) than what we saw in the last 10 years, since as the city grows larger, it’ll become even more of a preferred location.”
But while prices should continue to appreciate, it may do so at a slower pace for the next decade than what was seen in the last 10, says Soper. “The typical, long-term appreciation rate in Canada is five per cent (per year),” he says.

“If you look at that compounded for 10 years, you have about 60 to
70 per cent. (The rate in the last 10 years) is considerably higher, and it’s because of the unusually long continuous price appreciation we’ve seen. It would be unusual and entirely unexpected to see appreciation this decade like we saw the last decade.”
In order for urban properties to maintain growth in value, municipal governments need to make sure that their downtowns are balanced commercially, with shopping and nightlife countering office towers, says Soper.

“All things being equal, yes, this will continue,” he says of the urban appreciation advantage.
“But public policy does matter. Downtown cores are not a place just for work, especially for young people. It has to be a place for play, as well.”

Zaharko says that Calgary’s inner city neighbourhoods should do just fine, even if the price run-up in the last two years has created a lull in the market. “There’s no evidence of anything to the contrary,” he says of Calgary’s demand leaning urban. “As I said, it may be even more so. I wish they took out 2006 and 2007, because those two years were huge years. But there will always be huge demand closer to downtown.”

© The Calgary Herald 2008

Market activity offers awaited relief for homebuyers

July 6, 2008

FOR IMMEDIATE RELEASE: Real Estate Board of Greater Vancouver
Market activity offers awaited relief for homebuyers

VANCOUVER, B.C. – Increased property listings and moderating home prices have eased the Greater Vancouver housing market into a buyer’s phase. The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver declined 42.9 per cent in June 2008 to 2,425 from the 4,244 sales recorded in June 2007.

New listings for detached, attached and apartment properties increased 18.3 per cent to 6,546 in June 2008 compared to June 2007, when 5,533 new units were listed.

“Although housing prices, on a year-over-year comparison, continue to show single-digit percentage increases, we are beginning to see more price reductions in properties listed on the market today,” said REBGV president, Dave Watt. “Homes priced at a competitive level continue to sell quickly, but it is important for people to accurately identify their home’s value when putting it on the market.”

Sales of detached properties in June 2008 declined 43.4 per cent to 918 from the 1,623 units sold during the same period in 2007. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties rose 7 per cent from June 2007 to $765,654.

Sales of apartment properties declined 42.7 per cent last month to 1,057, compared to 1,846 sales in June 2007. The benchmark price of an apartment property increased 7.8 per cent from June 2007 to $388,722.

Attached property sales in June 2008 decreased 41.9 per cent to 450, compared with the 775 sales in June 2007. The benchmark price of an attached unit increased 7.6 per cent between June 2007 and 2008 to $476,585.

Bright spots in Greater Vancouver in June 2008 compared to June 2007:

New Westminster up 46.2 per cent (19 units sold from 13)

Marketplace Higher Listings Weaker Demand (BC)

July 3, 2008

Marketplace Higher Listings Weaker Demand (BC)
Number and value of sales are down but industry says not to panic

Monday, June 30, 2008

According to Landcor Data’s first-quarter residential home sales summary, the economic malaise in the U.S. fuelled by the subprime mortgage crisis is having an effect on B.C. and Vancouver Island. The Island, Fraser Valley and northern B.C. have all seen the total value of sales in the first quarter drop compared with the first quarter of 2007, the first time all three regions have seen a quarterly decrease in the past four years.

“The cooling-off period is not unique to this region, and not to the province of B.C. — the North American economy as a whole has seen a dramatic change in market value in the past year,” said Landcor president Rudy Nielsen. “It not only affected the housing prices in certain American markets, but it has been trickling into the demand for homes, the job market and commodity markets around the globe over the past year.”

Over the first quarter of this year there were 4,661 sales of homes on the Island, a drop of 11 per cent, while the total value of those sales dropped 1.95 per cent to $1.7 billion.

“Speculation, both from investors and homeowners expecting a major financial payoff, makes housing more volatile than other economic sectors,” said Nielsen. “Recently consumer confidence has dwindled, causing the market to correct. This is the normal real estate cycle and this is what we’re seeing throughout B.C.”
The boom is also over across the country, particularly in Alberta with prices continuing to fall this year by eight to 10 per cent from their peak, says a national real-estate report.

Evidence of the national downturn is evident in year-over-year price growth for existing homes in Canada’s major markets, which fell to only 1.1 per cent in May, down from 8.6 per cent just four months earlier, the report said. “The combination of significantly higher listings … and weaker demand, due to the past erosion in affordability, are leading to declining sales and softer price performance across the country, particularly in the West,” said the report.

While year-to-date sales have fallen by 12.5 per cent, sales are only returning to levels typically experienced in the three year (2004-2006) prior to the 2007 sales boom, the report said. Nevertheless, “sales are also weaker in other parts of the country, with British Columbia and Ontario sales down by more than 10 per cent.”

Growth, sales slow for recreational property Potential oversupply looms in province, CMHC warns – Vancouver Sun

July 3, 2008

Growth, sales slow for recreational property Potential oversupply looms in province, CMHC warns – Vancouver Sun

British Columbia’s recreational property markets, mirroring primary-residence markets, are experiencing moderation with fewer sales, more listings and slower price growth, realty firm Royal LePage found in its latest analysis of leisure real estate.

Also, fewer Alberta buyers are coming into the Okanagan because some of them in Edmonton and Calgary have witnessed the equity in their primary homes shrink as their markets cool, leaving them with less leverage to take on second homes.
Riley Twyford, broker-owner of Royal LePage Downtown Realty in Vernon, said overall sales in his area are down about 29 per cent from the previous year.

“When markets are active in Vancouver, Calgary, we get the spinoff. When it’s less active [in those cities] it’s going to be less active for our marketplace as well.”
In Kelowna, the most popular properties are resort-style condominiums, said Royal LePage broker-owner Wade Webb. Philip Jones of Royal LePage East Kootenay said sales of recreational properties have slowed around his area in Cranbrook, but the frenzied pace of recent years was unsustainable.

On the survey side of the Royal LePage report, the poll found young professionals made up the largest group considering a recreational-property purchase. A majority of them felt a cottage was a better long-term investment than stocks or bonds.
The rising price of gasoline was a factor in a growing minority of decisions about purchasing or cutting back on summer trips to the cottage. Some 19 per cent of cottage-owning respondents said they would consider selling their properties if gas prices rise any higher. About one-third said high fuel costs will cause them to reduce trips they make to their summer retreats.

Cranbrook $300,000 — $1 million
Vernon $350,000 — $4 million
Kelowna $795,000 — $1.5 million
100 Mile House $364,500
Source: Royal LePage Real Estate Services

* Standard cottage is defined as having three bedrooms, about 1,000 square feet on a 100-foot-frontage lot.