As if to help support talk that the housing market in Canada is not overheating, the CREA released data today that suggests that the home resales pace across the country is moderating. In January 2010, the number of seasonally adjusted resales dropped nearly 3% from the previous month.

Sales were up 58% from January 2009, but large double-digit sales jumps from last year are to be expected, due to the depressed level of resales at that time. Since sales started to pick up in the second half of 2009, these large jumps should get smaller over time.

Surprisingly, Ontario was responsible for half the drop in resales from December – with the HST coming in force in July, it was expected that many homeowners would rush to sell before then. BC, Alberta and Manitoba also saw sales declines. In contrast, sales activity in Quebec actually grew.

New sales listings were also relatively cool: the number of new listings was essentially flat from December. BC, Alberta and Newfoundland all saw gains in the number of new projects, while the rest of the provinces declined from December.

Dale Ripplinger, President of the CREA, thinks this is a sign the market is returning to more normal conditions. He says, The resale housing market is becoming more balanced in a number of provinces, including my own province of Saskatchewan. A more balanced market is likely to result in smaller price increases going forward, with buyers in less of a rush due to an increase in supply.”

That being said, there are still some concerns. The house market may be tightening: with a lack of new listings, there will be no room to absorb growing demand as the economy improves. The number of months the average home is on the market in January (non-seasonally adjusted) was 6.6 months. In the darkest days of the recession, the average length of time a home was on the market was 12.8 months. We are still slightly above the levels seen in the peak years of the housing market – 2004 to 2008 – but with little activity in new listings, the length of time the average home sits on the market could continue to shrink.

Heleen Jacobsen
Broker of Record with InfoMarket Group GMAC Real Estate
www.infomarketgroup.com

With the new rules announced by Finance Minister Jim Flaherty we could have thousands of home buyers, especially, the young, first time home buyer finding it harder to acquire their dream house.

The new rules are expected to go into effect as of April 19th, and mean that borrowers must have higher incomes or larger down payments, or opt for cheaper properties in order to sufficiently purchase a house.

These new rules are a counter measure that took aim at the speculation that the real estate market is/will be in a housing bubble in the near future, and any excessive refinancing being used on your home.

The biggest change that will occur is that lenders will have to use tougher criteria when assessing the borrower’s ability to carry a loan.

This rule only applies to insured loans, extended to borrowers with less than 20% as a down payment.

According to industry data, the majority of first time home buyers fall into this category.

As it stands, lenders rest a borrower’s ability to repay using the three year mortgage rate.

Flaherty has made it clear that lenders must now use the five year fixed rate as their test as of April 19th.

Change is among us, whether it is for the best is entirely up to you. What I can say is that the housing market will definitely become different as of April 19th, and you should be prepared for the time when it becomes harder to qualify for mortgages and even purchase a home.

Glen Chapman
Broker of Record with Club “100″ GMAC Real Estate
www.club100realestate.com

As was expected last week, Jim Flaherty has unveiled some new mortgage rules to help counter the fears that Canada may be experiencing a housing bubble.

The rules do not change the basics of mortgage lending very much: consumers still have to produce 5% of the property’s cost for the down payment, and the amortization period cannot be longer than 35 years.

However, for those consumers who are getting a variable rate mortgage, they will have to prove they can pay for a five-year fixed rate mortgage as well. The variable interest rate currently stands at about 2% – 2.5%, and the fixed rate sits at 5.39% for most of the big banks. The borrowers do not have to pay the fixed rate payments – they just have to show they can if they need to. This generally means that the banks won’t lend to you if your debt payments exceed 42%-44% of your monthly income.

How will this affect the property market? It will likely not have much of a huge effect. In 2009, 86% of all mortgages were fixed rate mortgages, and of those 70% were five-year fixed rate mortgages. So, the majority of borrowers are already following the rules. Since many experts felt that we weren’t experiencing a housing bubble anyway, the rules change wasn’t going to affect the market much. It will just help ensure that a bubble doesn’t occur.

Another major change is that the down payment required for investment properties has been bumped up from 5% to 20% to qualify for mortgage insurance. This may seem like a huge bump, but most investors were already hitting the 20% benchmark before the rules change anyway.

The final change – and the one that might directly affect you the most is the ceiling on refinancing your mortgage. Previously, if you wanted to fold some of your credit card debt into your mortgage, you could refinance your mortgage to 95% of your home’s value. This has been lowered to 90%. Since mortgage rates are much lower than credit card rates, this is actually making it more difficult for some borrowers to save money.

The bottom line is that these rules changes are just tweaks, and will not cause major changes in the market. If you are planning on buying or selling this year, you are likely already set up so that none of them will have any effect on you.

Heleen Jacobsen
Broker of Record with InfoMarket Group GMAC Real Estate
www.infomarketgroup.com

You have often heard that the most important factor in determining cost in real estate is “Location, Location, Location.” Although the location of a property is always an important consideration to buyers, many people don’t understand their real estate agent’s singular obsession with the topic.

The reason why real estate agents are obsessed with the topic is because location is very important, and it is usually the number one influence on a house’s price.

Think about it this way. Imagine that you are buying a home in a city. You have an option between two identical homes: one is on the centre of a block and one is near a corner. Do you think they should have a different price? Which one is more expensive? The answer is that the one in the middle of the block will be worth more, because it is more secluded from traffic.

Identical houses may sound like an unreal situation. However, in most cities, since houses on a block were likely built at the same time, and owned and maintained by similar people, they will be largely identical. That’s why, when there are differences in price, it is usually due to location.

Cost will also be affected by the homogeneity of the surrounding neighbourhood. A detached home on a street with other similar homes will cost more than an identical home that is surrounded by businesses or apartment buildings. This is not because the other properties will produce negative effects – it is simply because the homogeneity of the tract improves its value. It makes the tract look more residential, which will improve its appeal to buyers.

And then there are more obvious factors: a home next to a good school on a quiet residential street will go for more than a similar house in a rundown part of town where there is a lack of jobs and the schools are not as well-run.

In the long run, then, if you are considering purchasing a home, you should keep in mind its location – no matter how desirable you find a property. Its location will help determine how much you get for the property when you decide to resell.

A great way to take advantage of the fact that location is such a strong determiner of price is by using a Comparative Market Analysis (CMA). A CMA report will give you an idea of how much similar homes in the neighbourhood went for. If you are a buyer, this can be invaluable information, particularly if you are looking for a deal. A home that is high-priced compared to its neighbours will likely not last at that price point, and the sellers will likely be responsive to low-ball bids.

If that isn’t a great reason to be obsessed about location, I don’t know what is.

Nelson Goulart
Broker of Record with Signature Service GMAC Real Estate
www.ssgmac.ca

Harmonized Sales Tax:
Implication for Owning Real Estate in Ontario
Resource:
Ontario Real Estate Association Political Affairs Conference

What Is Happening:
HST will replace the 5% GST and the 8% Retail Sales Tax
HST will apply at a 13%rate effective July 1, 2010.

Harmonized Sales Tax (HST) – A Bit of History …

January 1991 – Federal Government introduces GST at 7% replacing the Federal Manufacturer’s Sales Tax
April, 1997 – Three Atlantic Provinces eliminate sales taxes and replaces GST with 15% HST

Then .. More Changes
July 1, 2006 GST rate was reduced from 7% to 6%. The HST was reduced from 15% to 14%.
January 1, 2008 the GST rate was reduced from 6% to 5% and the HST rate was reduced from 14% to 13%
The Future – On July 1, 2010 Ontario will eliminate the 8% retail sales tax and replae the GST with a 13% Harmonized Sales Tax (HST).
On July 1, 2010 British Columbia will eliminate the 7% sales tax and replace the GST with a 12% Harmonized Sales Tax (HST).

HST by Province  on July 1, 2010

Alberta                                    5% GST
British Columbia               12% GST
Manitoba                                5% GST + 7% Sales Tax
New Brunswick                   13% HST
North West Territories      5% GST
Nova Scotia                          13% HST
Nunavut                                   5% GST
Ontario                                   13% HST
Quebec                                     5% GST + 7.5% QST
Saskatchewan                        5% GST + 5% Sales Tax
Yukon                                       5% GST

GST vs. HST – What’s The Difference?
There is not much difference, other than:
- HST applies at a (much) higher rate
- Extra tax revenues to the Province

Implications for Buying Used Homes
Many previously tax-free services will be HST taxable, including:
- home inspection fees
- real estate commissions
- legal fees
- home appraisals
- moving costs
- mandatory home energy audits

OREA estimates HST will add $1,449.00 in tax to acquiring an existing home.

Implications for Maintaining Homes
Many previously tax-free services for maintaining a home will be HST taxable:
- utilities
- home renovation labour
- lawn upkeep or landscaping
- snow removal
OREA estimates HST will add $480 in annual tax (budgeting $500 per month for such costs).

Implications for (Expensive) New Homes
GST/HST applies on the first sale of a new home
HST rebate intended to limit additional HST cost to Retail Sales Tax equivalent, estimated at 2%
But, full 8% Provincial component of HST applies to new homes above $400,000, which is an additional $24,000 for an $800,000 home.

Gloria Valvasori
Sales Representative with Signature Service GMAC Real Estate
gloriavalvasori.com

In the last few years, we’ve seen a number of new technologies develop to help prospective buyers in their real estate transactions. From websites for realtors, to blogs (like this one!), to online listings, buyers now have a wealth of information to find out about their potential new home. If you haven’t already, you should add one more to the mix: Google Street View.

Google Street View is a service offered by Google that lets you see 360 degree views of streets in most of the populated areas of Canada, including all of the major cities. A full map of what is available is here. The Google Street View car is on the move, and more views are being offered all of the time.

The benefits are obvious: without driving around, you can get a quick idea of what your potential new property looks like. You can also get a feel for the neighbourhood, and get a quick idea of what amenities are nearby. It also takes some of the bias out of the exterior shots you sometimes get from real estate listings. For example, some exterior shots on real estate sites might try to hide the factory next door, but Google Street View easily lets you see this sort of thing. And because the photos on Google Street View are slightly old, they can give you an idea if the property has been recently fixed up.

Another benefit is when you are looking for properties that are not in your immediate neighbourhood. P.E.I. is almost entirely covered by Google Street View, and realtors there find it is helpful in showing the properties to people who are off-island. Joel Ives, a P.E.I. real estate agent says, “You’re able to look at the houses on each side, across the street, and what the full neighbourhood offers. Parks, and other things, and also the quality of housing that could be your new neighbours.”

A company in the U.S., Trulia, has gone even a step further, and has incorporated Google Street View into its web pages. Trulia is not yet available in Canada, but those looking for a U.S. home might find it helpful.

In any case, you can easily access Google Street View by typing the address you are looking for into Google Maps. When you find the place you are looking for, pull the little man off the left-hand zoom bar, and put him down at the appropriate place.

Have fun!

Heleen Jacobsen
Broker of Record with InfoMarket Group GMAC Real Estate
www.infomarketgroup.com

You might have heard about augmented reality. The basic idea behind this technology is that through the use of a camera phone or other similar device (such as an iphone), you can see a view of whatever it is you are looking at, with a computer-generated overlay of icons and graphics that provide additional information. The example below shows an iphone app that overlays directions to the London subway over your view of the streets – enabling you to find the nearest subway entrance faster.

The benefits for real estate are clear. Augmented reality apps could give you all of the basics for a home as you approach it. As you tour the home, it could provide you with the details of each room, such as its square footage, or point out features that you might appreciate. To this end, there have already been a few real estate apps created.

Meilleur Agents, a French company, has created an app that presents property valuations in augmented reality. When a user points it at any Parisian building, the user can get an estimated valuation of the property in euros per square foot. It’s currently available for Google Android cellphones in France, but there will soon be an Apple iphone version (also only in France.) To see what it looks like when it works, go here.

Another app that is being launched in the U.S. is Trulia. It also shows users information on a property’s sales price. However, it crucially also offers you views of the interior, and a contact number for the appropriate real estate agent. This app is also for use with a Google Android phone.

None of these are currently available in Canada yet, but since the Layar – the augmented reality browser these apps are built off – was only released last year, the fact there are any products is amazing. It will likely be in the next one to two years that we’ll start to see their release in Canada.

Of course, the question is: will these apps be simply toys, or will they actually be an effective way for users to find real estate? The answer is likely a mixture of both. Most people will likely not be interested in pointing their camera phone at every house in a neighbourhood, and having a real estate agent look for you is much faster. However, if the apps can provide real estate information when users are not expecting it, these apps could help users find homes they never even knew were on the market.

Nelson Goulart
Broker of Record with Signature Service GMAC Real Estate
www.ssgmac.ca