Pete Kenney Mortgages - Dominion Lending Centres

01/17/2022

In December, home prices accelerated further in major markets in Canada amid solid demand and scarce supply. 2022 begins with record-low inventories of unsold homes, likely constraining sales in advance of interest rate hikes early in the year.
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Housing Affordability Erodes Further With Record-Low Supply
Housing affordability remains a huge political issue and with the Department of Finance working on the upcoming budget, no doubt measures to reduce home prices will be front and center. What we desperately need is dramatic increases in new housing construction, which has been woefully constrained by local zoning and city planning issues. These are not under the auspices of the federal government. So instead, bandaid measures that do not directly address the fundamental issue of a housing shortage will likely be forthcoming. More on that below.

Today the Canadian Real Estate Association (CREA) released statistics for December 2021 showing national existing-home sales rose edged higher on a month-over-month basis, constrained by limited supply. Excess demand pushed home prices up on the month by 2.5%, taking the 2021 home price index up a record 26.6% year-over-year.

Small gains in home sales in November and December followed a 9% surge in activity in October, placing sales in the final quarter of 2021between the highs and lows seen earlier and the year (see chart below). With the exception of month-over-month sales gains in Calgary and the Fraser Valley, most other large markets mirrored the national trend of little change between November and December. The actual (not seasonally adjusted) number of transactions in December 2021 came in 9.9% below the record for that month set in 2020. That said, as has been the case throughout the second half of 2021, it was still the second-highest level on record for the month.

On an annual basis, a total of 666,995 residential properties traded hands via Canadian MLS® Systems in 2021. This was a new record by a large margin, surpassing the previous annual record set in 2020 by a little more than 20%, and standing 30% above the average of the last 10 years.

New Listings

The number of newly listed homes fell 3.2% in December compared to November, with declines in Greater Vancouver, Montreal and a number of other areas in Quebec more than offsetting an increase in new supply in the GTA.

With sales little changed and new listings down in December, the sales-to-new listings ratio tightened to 79.7% compared to 77% in November. The long-term average for the national sales-to-new listings ratio is 54.9%.

Almost two-thirds of local markets were sellers’ markets based on the sales-to-new listings ratio being more than one standard deviation above its long-term mean in December 2021. The remaining one-third of local markets were in balanced market territory.

There were just 1.6 months of inventory on a national basis at the end of December 2021 — the lowest level ever recorded. The long-term average for this measure is a little more than 5 months.

Home Prices

In line with the tightest market conditions ever recorded, the Aggregate Composite MLS® Home Price Index (MLS® HPI) was up another 2.5% on a month-over-month basis in December 2021.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up by a record 26.6% on a year-over-year basis in December.

Looking across the country, year-over-year price growth has crept back above 25% in B.C., though it remains lower in Vancouver, close to on par with the provincial number in Victoria, and higher in other parts of the province.

Year-over-year price gains are still in the mid-to-high single digits in Alberta and Saskatchewan, while gains are running at about 12% in Manitoba.

Ontario saw year-over-year price growth remain above 30% in December, with the GTA continuing to surge ahead after trailing other parts of the province for most of the pandemic.

Greater Montreal’s year-over-year price growth remains at a little over 20%, while Quebec City was only about half that.

Price growth is running above 30% in New Brunswick (higher in Greater Moncton, lower in Fredericton and Saint John), while Newfoundland and Labrador is now at 11% year-over-year.

Bottom Line--We Are In The Political Season

The Bank of Canada conducted a recent study of residential mortgage originations at federally regulated financial institutions since 2014 to determine the share and financial characteristics of mortgage-financed homebuying by type of purchaser: first-time homebuyers; repeat buyers (the so-called move-up market); and investors.

First-time homebuyers are the largest group, generally accounting for roughly half of all mortgage purchases since 2014. Repeat homebuyers (those that discharged their previous mortgage when they took a new mortgage) comprised 31% of all mortgaged buyers over the same period. Investors having multiple mortgages represent 19% of purchases since 2014. Investors without mortgages are not included in the data, so foreign investors who might have borrowed money outside of Canada are not included.

The chart below shows that since 2015, the share of first-time homebuyers has fallen from over 52% to less than 48% of all mortgaged homebuying, while the share of repeat buyers is up slightly, and the share of investors has risen from under 18% to over 20%. Most of the rise in investor activity was in 2017 and 2021.

The Bank of Canada concludes that the increased presence of investors in the housing market has augmented demand and "may reflect a belief that house prices will continue to rise in value...By exacerbating so-called boom-bust cycles in housing markets, investors could thus be a source of instability for the financial system and the economy more broadly. At the same time, investors are an important source of housing rental supply. We need to do further research to examine the delicate balance between adding to rental supply while removing new builds and resale supply in a housing market that already has supply constraints."

The Ministry of Housing and Diversity and Inclusion, in partnership with the Canada Mortgage and Housing Corporation (CMHC), according to a Financial Post article dated January 12, is concerned about "speculative investing" in housing, "prompting Canadians to overbid on properties, borrow beyond what they can afford, and push home prices even higher."

“By developing policies to curb excessive profits in investment properties, protecting small independent landlords and Canadian families, and reviewing the down payment requirements for investment properties, we are targeting the issues the market is facing from multiple angles.” Currently, investors must make a 20% down payment.

It looks like the Feds may well raise the minimum downpayments on investment property loans. They are also considering a limitation on the sources of funding for these properties.

What the Canadian housing market needs is substantial new affordable housing construction. Impeding this is the long and tortuous planning process and local government zoning rules. Actions taken to reduce housing demand in the face of nearly a million new immigrants coming to Canada in 2021 and 2022, if severe enough, could throw the whole economy into recession, particularly given that the Bank of Canada is on the precipice of hiking interest rates. The wealth and liquidity of millions of Canadian households are tied up in housing, so the government must take care not to push demand restrictions too far, especially since condo investments augment the very tight rental markets.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
[email protected]
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French translation of this email will be available by 5pm ET January 19.
La traduction de ce courriel sera disponible d’ici 17 heures, le 19 janvier.
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Housing Affordability Erodes Further With Record-Low Supply Housing affordability remains a huge political issue and with the Department of Finance working on the upcoming budget, no doubt measures to reduce home prices will be front and center. What we desperately need is dramatic increases in new....

11/09/2021

The Canadian PressThe Canadian Press
Mortgage pre-approvals, holds surge as economists foresee rate hikes

Tue., November 9, 2021, 2:48 p.m.
TORONTO — Canadians are scrambling to get mortgage pre-approvals and rate holds before the era of low interest rates comes to an end, as some economists predict.

Real estate and mortgage brokers say their clients are increasingly seeking ways to hold on to current rates because many housing markets like Toronto are facing heated conditions making it hard to keep purchase prices down.

"It's a seller's market and you barely have the opportunity to put conditions (on a purchase) because there are 400,000 people waiting for their permanent residency, 200,000 of them are already here and there's buyers lined up around the corners," said Estée Zacks, the Toronto-based owner of Strategic Mortgage Solutions Inc.

"They feel weak, and they are statistically, so they're just trying to get a leg up as much as they can."

Zacks has noticed a recent surge in requests for rate holds, which freeze mortgage rates for up to 130 days.

Mortgage rates vary across banks, but Ratehub.ca shows the country's top five banks are offering five-year fixed mortgages for as low as 2.62 per cent and as high as 2.94 per cent.

Three-year fixed mortgages range from 2.49 to 3.49 per cent, while five-year variable mortgages vary between 1.40 and 1.75 per cent.

The interest rate, which also weighs on homebuyers, has sat at 0.25 per cent since March 2020, but the Bank of Canada has hinted it could rise as the country continues to climb out of the pandemic and loosen restrictions.

A rise in both mortgage and interest rates would end an almost two-year period of rock-bottom borrowing costs. However, the low rates haven't done much to take the bite out of housing costs.

The Canadian Real Estate Association said the national average home price was $686,650 in September, up 13.9 per cent from $602,657 last year.

In Toronto, it was even higher. The Toronto Real Estate Board said the average price of a home sold soared by almost 20 per cent to nearly $1.2 million in October, up from $968,535 in the same month last year.

Rates hikes will make those purchases even more costly.

A one per cent increase in mortgage rates from current levels will cost an average new buyer $230 or 12 per cent more in additional monthly interest payments, CIBC Capital Markets analyst Benjamin Tal wrote in a Nov. 4 note to investors.

"Potential buyers will face a higher interest payment trajectory, leading to reduced demand for new and existing units, potentially resulting in some slowing in the important construction industry," he wrote.

"Current variable rate holders might choose to keep their principal payments untouched and thus will absorb the full impact of higher rates — potentially at the expense of other spending."

If rates stay elevated into 2025, he added "the massive borrowing undertaken during the pandemic will feel the full bite of higher rates."

Vancouver real estate broker Tirajeh Mazaheri said buyers have noticed this and are rushing to get pre-approved for a mortgage to extend any kind of relief they can.

Many, she said, spent much of the pandemic closely watching housing prices and hoping they'd decrease, but have now accepted that likely won't happen.

"People are scared and they are saying if interest rates go up, they'll never be able to afford the city," she said.

"What we're seeing is a lot of people trying to take advantage of pre-approvals right now or trying to get approved, so they can get their hands on something and not miss out on low rates."

BMO Capital Markets senior economist Robert Kavcic doesn't think those people have long.

He believes the Bank of Canada will likely hike its rates quicker and by more than most people expect, and he's already seeing signs of rising mortgage rates.

In a Nov. 3 note to investors he wrote, "Mortgage rates are already creeping higher in the five-year fixed space, but those with contracts in hand probably have another month or two to buy something."

This report by The Canadian Press was first published Nov. 9, 2021.

Companies in this story: (TSX:BMO, TSX:CM)

Tara Deschamps, The Canadian Press

11/09/2021

Jessy Bains
Mon., November 8, 2021, 12:14 p.m.
A sign of a hot housing market
A sign of a hot housing market
Even though home prices have jumped to new highs during the COVID-19 pandemic, Canadians think real estate still has room to run.

A new Yahoo/Maru poll found 68 per cent of respondents expect home prices to keep rising steadily over the next year or two.

The expectation is strongest in Québec (75 per cent), followed by those living in British Columbia (72 per cent), Ontario (68 per cent), Atlantic Canada (62 per cent), Manitoba/Saskatchewan (58 per cent), and Alberta (57 per cent).

The majority surveyed (84 per cent) say prices have gone up in their community. Of this group, 49 per cent say they have risen steeply while 35 per cent say prices have risen steadily.

A small group (15 per cent) say prices have stayed relatively the same while one per cent believe they have dropped.

Bank of Canada Governor Tiff Macklem has repeatedly said extrapolative expectations, when people expect home prices to keep going up, are a worrying signal about the housing market. He says he's seeing early signs and it isn't a major worry but has expressed concern about Canadians taking on too much mortgage debt.

"What's striking about these findings is that Canadians believe there is still a lot of horsepower to the escalating home prices and a potential bubble burst for the majority is not on the horizon any time soon," said Maru's executive vice-president John Wright.

Housing market bubble
The poll found 32 per cent believe home prices are a bubble that will burst and that when it does, prices will drop significantly.

The view is most strongly held in Alberta (43 per cent) and Manitoba/Saskatchewan (42 per cent), followed by those living in Atlantic Canada (38 per cent), Ontario (32 per cent), British Columbia (28 per cent), and Québec (25 per cent).

Of those in the bubble camp, 67 per cent think it will burst sometime in 2022.

Rising interest rates can negatively affect home prices. Fixed mortgage rates have been on the rise. The Bank of Canada has signalled a sooner-than-expected hike to its overnight rate, which will mean higher variable mortgage rates.

Also See: The latest real estate news for housing prices, mortgage rates, markets, luxury properties and more at Yahoo Finance Canada.

Scroll back up to restore default view.
"The real question is whether the Bank of Canada decides to start raising lending rates in the spring. If that's signalled, there may be a real rush by homebuyers to borrow cheap money and buy properties that will likely fuel demand and push prices higher," said Wright.

"It may also flush out homeowners who want to sell at a peak demand time, cash out and live somewhere else."

The survey of 1,509 Canadian adults was conducted on November 2, 2021 and has an estimated margin of error of +/- 2.5 per cent, 19 times out of 20.

11/02/2021

Welcome to the November issue of my monthly newsletter!

Hello November! It’s hard to believe the year is almost over. To help you make the most of these next few months, I have some great tips for you around the 7 steps for mortgage prep, what to know if you’re up for mortgage renewal and tips for maximizing your holiday budget!

Thank you for your continued support and introductions!

7 Steps for Mortgage Prep

Step 1 - Your Credit Score
Whether you qualify for a mortgage through a bank, credit union or other financial institution, you should be aiming for a credit score of 680 for at least one borrower (or guarantor), especially if you are putting under 20% down. If you are able to make a larger down payment of 20% or more, then a score of 680 is not required.

If your credit score does not meet the minimum requirements, there are a number of things you can do to improve it and your future financial success, including:

Paying your bills in full and on time. If you cannot afford the full amount, try paying at least the minimum required.
Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible.
Stay within the limit on your credit cards and try to keep your balances as low as possible.
Reduce the number of credit card or loan applications you submit.
Considering an Alternative Lender (or B Lender) if you are struggling with credit issues.
I can help review your credit score and provide you with options for your mortgage needs.

Step 2 - Your Budget
When considering your budget, it is important to look at the purchase price budget, as well as your cash flow budget. Being house rich and cash poor makes for a no-fun home! The home price based on your cash flow budget may be dramatically different from the budget home price you qualify for. Not only does having a budget help you to understand your purchase price range and help you to find an affordable home, but it can also help you to see any gaps or opportunities for future savings. This will be instrumental when you become responsible for mortgage payments.

Step 3 - Your Down Payment
The ideal down payment for purchasing a home is 20%. However, we understand in today’s market that is not always possible. Therefore, it is important to note that any potential home buyer with less than a 20% down payment MUST purchase default insurance on the mortgage, and they must have a minimum down payment of 5%.

The down payment on your home could come from your own savings such as a savings account or RRSPs. Thanks to the federal government’s Home Buyers’ Plan, potential first-time home owners are able to leverage up to $35,000 of your RRSP savings ($70,000 for a couple) to help finance the down payment. A gift of a down payment from an immediate relative is also acceptable. If your down payment comes from TFSA or RRSP, the bank will want 90 days of statements to ensure the funds are accounted for. Gifted funds rarely require 90 days of proof.

Step 4 - Your Mortgage Options
Rate is only ONE of the many features in selecting the best mortgage product that meets your financial goals. With access to hundreds of lending institutions, I am familiar with a variety of mortgage products allowing them to help find the best mortgage for YOU! Plus, unlike banks, mortgage agents are a third-party service focused on YOUR needs. This means that you can get the best rates and unbiased advice all for FREE from someone whose only goal is helping you achieve your dream of home ownership.

Step 5 - Your Paperwork
When you apply for a mortgage, you will typically need to provide a standard package of documents, which almost always includes:

Your government-issued personal identification
One month of recent pay stubs from any applicants who will be listed on the loan
Letter of employment
Your most recent two years’ worth of personal CRA tax filings and financials (if incorporated)
Three months of bank account statements
Your down payment (minimum 5%)
Documentation to explain any unusual (generally non-payroll) large deposits or withdrawals
Step 6 - Your Pre-Approval
To have the best success with your mortgage, it is recommended that you get pre-approved! This can be done through your Mortgage Professional to ensure that you get the best mortgage product FOR YOU, from the best rate to the best term agreement. Pre-approval helps verify your budget and allows your real estate agent to find the best home in your price range.

Pre-approval guarantees the rate offered and locks it in for up to 120 days. This protects you from any increases in interest rates while you are shopping (phew!).
Pre-approval lets the seller know that securing financing should not be an issue, which is beneficial in competitive markets!
Quick Tip: Don’t forget about the closing costs! These range from 1 to 4% of the purchase price and should be factored into your budget.

Step 7 - You’re Ready to Shop
You made it!! Once you have your down payment and have qualified for a pre-approved mortgage (your credit score is in order and all documentation has been provided), you are ready to start searching for your perfect home. If you’re stuck, I would be happy to give you recommendations for a realtor, if you don’t have one already.

Up for Renewal??

When it comes time to renew your mortgage, most lenders will send you a renewal letter when there is around 3 months remaining on your term. While nearly 60% of borrowers simply sign and send back their renewal without ever shopping around for a more favourable interest rate, I would urge you to take a moment to check out your options.

Most standard mortgages are on a 5-year-term, meaning the market rates could be very different from the time you initially began your term to today! Despite this, lenders tend to provide higher rates on renewals versus new clients as typically the ease of renewal will prevent you from seeking out new rates. But, with my help, finding a better rate is not as difficult as it sounds - and it could end up saving you a couple hundred dollars a month!

It may turn out that your bank is offering a great rate, in which case you can simply submit the renewal! However, I urge you to take this opportunity to contact me about finding a lower rate to ensure you aren’t missing out. As your trusted mortgage advisor, I have access to dozens of lenders and hundreds of rates allowing me to narrow down the best options for you.

If your mortgage is coming up for renewal in the next four to six months, and you want to find out what lower rates may await you, contact me today! I can help you find the best option for where you are at in your life now and help you to ensure future financial success. I promise you will thank yourself for reaching out!

Maximizing Your Holiday Budget?

Along with holiday joy come holiday bills, to avoid a sleigh-size tab, plan ahead to save money and maximize the payoff. Here are a few quick tips to make the holidays less stressful on your wallet!

Order Online: Avoid getting stuck in the hustle and bustle of holiday shoppers by ordering gifts online from your laptop or phone. The time you save can be put towards spending more time with friends and family.

Be Thrifty: Start early and keep an eye out for special sales. Many retailers have Black Friday and Cyber Monday deals to help you get a jumpstart on holiday shopping. Get inspired with coupons and get into the routine of flipping through flyers delivered to your home and online.

Trust Your Budget: Your budget keeps you on track during the rest of the year, so why not lean on it now? Starting the season with a plan and a maximum spending limit will help alleviate stress while shopping. There are plenty of free budget-tracking apps that connect right to your bank accounts and can be pulled out of your pocket for reference at any time – especially when you’re feeling overwhelmed at the mall.

Get Crafty: Everyone appreciates the handmade touch in a gift, and DIY-ing this holiday can help you save money. There are wonderful options that can be found online, even for beginners. Examples include homemade wreaths, body scrubs, and fun photo scrapbooks that can be done alone or in a group, and you’ll end up with a gift that money can’t buy. If you’re not sure where to find these clever and cost-effective ideas, Pinterest is a great place to start.

Time is Money: Instead of buying gifts, spend quality time with your friends and family while you give back to others. Sharing the experience and splitting the cost of hosting a dinner for a family in need will offset the cost of spending money on each person and double the amount of joy spread during the holidays. It feels good to pay in kind.

10/27/2021

In an aggressive response to the rise in inflation, the Bank of Canada issues a hawkish press release affirming it is ending its bond-buying program (quantitative easing--QE) and accelerating its plans for the first hike in the overnight rate to Q2 or Q3 of next year. This would be the Bank's first rate hike since September 2018--well before the pandemic began.
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Bank of Canada RespondsTo Mounting Inflation: Ends QE and Hastens Timing of Rate Hike

The Bank of Canada surprised markets today with a more hawkish stance on inflation and the economy. The Bank released its widely anticipated October Monetary Policy Report (MPR) in which its key messages were:
• The Canadian economy has accelerated robustly in the second half.
• Labour markets have improved, especially in the hard-to-distance sectors. Despite continuing slack, many businesses can't find appropriate workers quickly enough to meet demand.
• Disruptions to global supply chains have worsened, limiting production and leading to both higher costs and higher prices.
• The output gap is narrower than projected in July. The Bank now expects slack to be absorbed in Q2 or Q3 of next year, one quarter sooner than earlier projected.
• Given persistent supply constraints and the increase in energy prices, the Bank expects inflation to stay above the control range for longer than previously anticipated before easing back to close to the 2 percent target by late 2022.
• The Bank views the risks around this inflation outlook as roughly balanced.
In response to the Bank's revised view, it announced that it is ending quantitative easing, shifting to the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds. The Bank now owns about 45% of all outstanding GoC bonds.
The Bank today held its target for the overnight rate at the effective lower bound of 1/4 percent. While this was widely expected, the Bank adjusted its forward guidance. It moved up its guidance for the first hike in the overnight rate target by three months, from the second half of 2022 to the middle quarters--sometime between April and September.



Canadian bond traders had already bet a rate hike would occur in Q1 or Q2. Nevertheless, bond yields spiked at 10 AM today when the Bank released its policy decision (see chart below).



Bottom Line
Since the Bank last met in early September, the Government of Canada five-year bond yield has spiked from .80% by a whopping 60 basis points to a 1.40%. That is an incredible 75% rise. A year ago, the five-year bond yield was only .37%.
The Bank believes the surge in inflation is transitory, but that does not mean it will be brief. CPI inflation was 4.4% y/y in September and is expected to rise and average around 4.75% over the remainder of this year. Macklem now believes inflation will remain above the Bank's 1%-to-3% target band until late next year.
There is also a good deal of uncertainty about the size of the slack in the economy. This is always hard to measure, especially now when unemployment remains elevated at 6.9%, while sectors such as restaurants and retail are fraught with labour shortages. Structural changes in the labour force are afoot. Many former restaurant employees have moved on or are reluctant to return to jobs where virus contagion risks and poor working conditions. There was also a surge in early retirements during the pandemic and a dearth of new immigrants.
Concerning housing, the MPR says the following: "Housing market activity is anticipated to remain elevated over 2022 and 2023 after having moderated from recent record-high levels. Increased immigration, solid income levels and favourable financing conditions will support ongoing strength. New construction will add to the supply of houses and should help soften house price growth".

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
[email protected]

This script is also available in Autopilot.

French translation of this email will be available by 5pm ET October 29.
La traduction de ce courriel sera disponible d’ici 17 heures, le 29 octobre.

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Hawkish Bank of Canada Decision from Chief Economist https://dominionlending.ca/economic-insights/hawkish-bank-of-canada-decision

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Bank of Canada Responds To Mounting Inflation: Ends QE and Hastens Timing of Rate Hike The Bank of Canada surprised markets today with a more hawkish stance on inflation and the economy. The Bank released its widely anticipated October Monetary Policy Report (MPR) in which its key messages were: The...

10/26/2021

https://ca.yahoo.com/finance/news/how-much-canadian-parents-giving-children-real-estate-161742679.html

Canadians have been given $10 billion dollars by their parents to help buy homes in the last year, says CIBC economist, and the average amount per buyer is going up.