Globe and Mail News: The local market still looks sound

October 22, 2008

Probably the most important data indicator in which local real estate watchers can find solace is the arrears rate. The percentage of residential mortgages that are behind current payments by 90 days or more stands at 0.27 per cent, according to data compiled by the chartered banks and reported by the Canadian Association of Accredited Mortgage Professionals. This accounts for about 20,000 to 25,000 of residential mortgages in Canada.

To put this in perspective, at the peak of the last major recession in 1992 the arrears rate stood at 0.6 per cent. For even more perspective, consider the United States. The current arrears rate is 4 per cent for prime mortgages (meaning people who qualified for a decent interest rate and went through the rigmarole of actually depositing a substantial down payment). Subprime mortgages — those handed out with no down payment on a wing and a prayer — are in arrears at a rate of 18 per cent.

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NEWS – Banks Unprofitable Holding Discount on Variable Rate Mortgage Oct 15th 2008

October 22, 2008

Mortgage Borrowers Pushed To Lock In Variable Rates

– 15 Oct 2008 National Post-Garry Marr

Canadian banks are trying to convince consumers to lock in their mortgage rates because more than 20% of the home loans they have negotiated have become unprofitable, according to industry sources.

The push has come after the banks cut the discount they offered to consumers with variable-rate products tied to the prime lending rate. Two weeks ago a consumer could get a variable rate product at 0.60 percentage points below prime; today it is one percentage point above prime.
Anybody with a mortgage negotiated in the past two years would be out of their mind to lock in to, say, a five year term, he said. If you’ve got a mortgage rate negotiated below prime, you have a dinosaur. It doesn’t exist anywhere. You should hold onto it until the end of the term.

Last week, the Bank of Canada lowered interest rates by 50 basis points only to see the major banks cut their prime lending rate by half that amount. “At the prime minus rates we were basically earning zero or negative, said Ms. Dal Bianco, vice-president of real estate-secured lending with Toronto-Dominion Bank.

With a cost of funds generally above 4% because of the lack of liquidity in the market. For those now entering the housing market, the rate is 5.25% for a variable rate product, but Ms. Dal Bianco said that might not be high enough. “We are not making much money on those, if anything.” she said.


CREA – MLS residential listings down 3.3 per cent from peak in Q2

October 16, 2008

Third-quarter MLS residential listings down 3.3 per cent from peak in Q2

OTTAWA — New listings of homes for sale on the Multiple Listing Service in major Canadian markets edged lower in the third quarter of 2008, due primarily to easing in Edmonton and Calgary, the Canadian Real Estate Association said Wednesday.

Seasonally adjusted new listings declined by 3.3 per cent from their peak in the second quarter of 2008, causing the balance of sales to new listings in the resale home market to tighten on a quarter-over-quarter basis for the first time since the beginning of 2007.

But compared to the third quarter of 2007, new listings increased by 6.5 per cent.
There were 146,637 new residential listings on a seasonally adjusted basis in the third quarter of 2008, compared to 151,573 in the second quarter. New listings in Edmonton and Calgary eased the most, followed by declines in Vancouver and Montreal.

“Informed buyers and informed sellers look at the facts. And the facts right now indicate the real estate resale market is stabilizing in many markets,” CREA president Calvin Lindberg said in a statement.

Seasonally adjusted MLS residential home sales in Canada’s major markets declined by 1.5 per cent quarter-over-quarter to 76,391 units, due primarily to fewer sales in Vancouver. Year-over-year, home sales plunged by 10.7 per cent.

Lower sales activity in higher-priced markets pulled the overall average price for MLS residential listings in major markets down by 6.2 per cent year-over-year in September, despite average price gains in 17 of 25 major markets.

Price declines in some of Canada’s more expensive housing markets will outweigh further price gains in other markets and continue pulling the national average price lower over the rest of the year and into 2009,” CREA chief economist Gregory Klump said in a statement. But “Canadian homebuyers should not expect to see the kind of price correction that’s underway in the U.S., where overly indebted homeowners are selling into a housing market where foreclosures