Gord Mccallum, is a well respected mortgage broker in Edmonton whom I know who just wrote a fantastic well researched article chock full of news articles from both sides of the arguments.  I especially liked his own opinions on home ownership etc. and have to say I agree.

Well Done Gord, you can see you put a ton of effort into this one.

Give it a read here

A recent Financial Post article highlights the  latest figures released by the Teranet-National Bank home index, and according to those November 2009 numbers, national home prices strengthened year-over-year.  Okay, so maybe that’s nothing shocking, in light of recent news. But what is interesting is that certain markets are definitely affecting the overall bottom-line. And some markets haven’t recovered as much as you might think.

For instance, kind of like the way Jupiter or the Sun massively influence what’s around them, thanks to their size and gravitational pull, there are several centres that are doing their share of affecting the greater-whole. Thus, while national home prices rose by nearly 3%, from Nov ‘08 – Nov ‘09, the majority of that growth (year-over-year) was due to growth in major centres like Vancouver, Toronto & Montreal.

By conrast, Calgary home prices remained negative, year-over-year, with home prices down just over 2% from the period of Nov ‘08 to Nov ‘09. And while this statistic may suprise some of you (and make others yawn) it’s important to remember just how high home prices were – as recently of Aug ‘08, before tumbling dramatically during the economic downturn.

Now, this article in particular doesn’t address the Nov ‘08/’09 numbers for other larger centres like Edmonton, Winnipeg, Ottawa, Halifax, Hamilton etc. And as is typical with media, the article leaves a general impression that because of noticeable gains in only Vancouver, Toronto & Montreal we can assume that all of Canada can expect sustainable growth in the housing market. Well this kind of blanket statement can, as always, be a forecast at best – simply because each market is unique.

If you really think about it, the state of our national housing market is still calculated on a case-by-case basis. And while the news is definitely positive, it’s important to remember how influential (or hindering) certain markets can be when it comes to evaluating the greater whole.

And here’s more food for thought: “The Teranet-National Bank index is based on prices in land registries of homes that have been sold at least twice.” So in this case, we’re comparing data that is based on certain, specific, criteria as well. Another study may use different data altogether.

Regardless, the overall feeling is one of renewed optimism for most. And I think this will continue into the spring and summer months of 2010.

What do you think? Send me your comments.

If you’re a field-goal kicker for, say, the Calgary Stampeders, putting 23 of 28 kicks through the uprights wouldn’t be too shabby. Answering 23 out of 28, skill-testing, questions correctly on a test, exam, or quiz – nothing to be ashamed of.  Heck, if you pull out your scorecard and you’re able to (honestly) mark yourself down as 5-under, after the first 28 strokes on the golf-course, wow – that’s something to brag about.

But if your city ranks, say, 23rd out of 28 with regards to national affordability – or on a broader scale, if it ranks 188th out of 272 internationally, I wouldn’t blame you for being a little less willing to celebrate. A little less willing to shout it from the roof-tops. You get the picture.

And that’s the case in a recent study ranking the most affordable and least affordable cities in Canada, and the world, to live in right now. And this Calgary Herald article gives a quick synopsis of where Calgary ranks, in relation to other cities in this category.

Have a read through the article and it’s not surprising to find Windsor and Thunder Bay as the front-runners, ie. the most affordable cities to live, in Canada, right now. They and several other centres, in the more populace areas of Ontario and Quebec, took a significant hit when manufacturing markets sagged during the recent major economic downturn.

But perhaps what’s more startling is that Vancouver, Toronto, Victoria and (for the first time in decades) Montreal are either flirting with or considered full-blown, “severely unaffordable.” And Calgary isn’t that far behind, considering the latest number-crunching as an indicator.

Ironically, our city actually inched-up on the affordability scale, up 0.2 over 2008. So perhaps any positive news (be it even slight) is good news. But it will be very interesting to see where we end up, say, at the end of 2010 or in Q1 of 2011 if the housing market keeps it’s steady rebound pace.

Further hazing the crystal-ball, so to speak, will be how we react to any and all rising interest rates, changes to amortization periods (should the feds choose to change the rules), continued price increases in various metro-markets, employment rate changes and income rates in these centres, and the typical cycle of supply & demand for real estate. Many or all of these factors will affect future affordability with regards to home ownership.

If there is a silver-lining here for Calgarians, it’s most likely the fact that we’re still affordable compared to Vancouver – which ranked #1 out of 272 international cities as the least affordable, in case you were wondering.

Thoughts? Tell me if you’re surprised by these results.

The Calgary Real Estate Board (CREB) recently held their annual market forecast, for 2010, and with it there are certainly reasons to be optimistic.  Have a look at the full report for yourself, including the latest stats, figures & analysis, and here are a few of the highlights and topics discussed:

- Calgary remains tied to a global economic recovery.
- Emerging economies will lead economic upturn
- India and China will power ahead.
- Rising demand for commodities will be a boon for resource-rich Canada.
- A measure of volatility will persist.
- A lagging US economy and a rising loonie will temper growth in the first half of 2010.
- Calgary employment will depend on energy sector investment.
- Affordability and low interest rates will support a balanced housing market.
- 2010 housing demand will build momentum as the year progresses.
- Single family homes will show modest price increases – condo price growth will lag.
- Smaller homes and lower priced segments will lead in sales and price growth.
- Low interest rates will offset price increases & ensure affordability in the short term.

So, have a read and send me your thoughts.

For many, the new year might mean it’s soon time to renew an existing mortgage. And even though interest rates continue to hover at remarkably low levels, there are still instances where a lender’s version of its ‘best‘ interest rate is a far-cry from the truth.

Take the face-rate of what any given financial institution is offering for a particular mortgage product. Then peel away the layers of the onion (so to speak) and often times that face-rate is significantly different than the actual best rate that can be obtained – especially on a renewal.

So when I came across this online article, it reminded me about the need to be aware of whether or not your best interests are truly being served by your lender…

Some great tips and basic insights in this article, worth noting:

1) Don’t be so quick to ‘bite’ on the rate ‘carrot’ that some lenders offer in their renewal letters. In fact, continue to do your homework, check out what they’re also offering online, or at their branch (if possible) and simply cut to the chase. Ask them to provide you with, “their very best terms up front, with no games.”

2) Knowledge is power. More and more of us now use online websites, blog sites, social media, etc to access current information on rates, products, and to compare and shop around. This is profoundly effective when it comes to assessing whether your lender actually has your best interests in mind. If they do – they should be more than willing to compete with the best rates you can find out there. Period.

3) Don’t be afraid to use a mortgage specialist to help you find the best rate. Remember – it’s their job to shop around for the best rate and product to meet your needs. And by doing so, they can also often provide a more personal level of service, because they’re usually more accessible and less biased when it comes to the competition.

Of course, the final decision is up to you. And surely there are some traditional lenders which do an excellent job of giving their customers the best rate, terms and service possible (depending on who you talk to). But I’ve also heard from countless consumers who admit they’re downright angry when, for instance, after 20 years of being with the same bank or financial institution – their calls are ignored, communication is terrible, and they realize they actually weren’t given the best rate, like they were told they got.

Something to chew on, the next time your lender tries to get you to ‘bite’ on their supposed best rate.

Comments?

Finally some positive news, south of the border, where the numbers from Nov of ‘09 show that several American real estate markets appear to be on the rebound.

A recent RISMedia article points out that below average prices (or at least below what was considered the norm just several years ago), coupled with the Obama government’s buyer tax-credit incentive, led to a surge in home sales in areas like Nevada, Ohio, the Midwest and upstate New York.

Perhaps one of the most interesting stats worth noting is the actual number of registered foreclosures in some areas. Take Las Vegas for example – as Sin City was one of several markets hit hard by the latest recession.  While the market drop took it’s toll, Vegas is in it’s 5th month (and counting) of steadily declining numbers of foreclosures.

Head east to Ohio and the Midwest, and there’s suddenly a feeling of cautious optimism, thanks to above average gains in sales and average home price, as buyers made a mad dash to beat the federally legislated tax-credit deadline. Collectively, home sales are up nearly 60% over November of ‘08 (when the ripple-effect from the economic meltdown was beginning to fully take shape).

Here we are in the dawn of 2010, and many real estate markets appear to have bounced-back rather nicely.  Glance at the latest national numbers, and at some of the major markets across Canada, and the numbers are far less bleak than we thought they would be back in, say, Nov ‘08 or Jan ‘09.

Then all of a sudden the rumor-mill begins to churn. The media-machine drums up the latest ‘what-if’ scenario, and starts making us fear anything seemingly too good to be true (which is ironic considering how often too good to be true is, in fact, actually just life being what it is).

And now, after threats of a pre-emptive strike by the feds, to kybosh any sort of building real estate bubble, now the talk seems to have shifted to government and financial officials thinking twice about cracking the whip, when it comes to imposing measures aimed at putting the squeeze on any further positive real estate gains.

A recent CBC News article hints the Bank of Canada (BOC) is now, quote, “backing away from recent warnings about a housing bubble in Canada.” And, in turn, that means that a knee-jerk by the central bank would be premature as it would quite likely mean muffling the momentum currently being experienced by the Canadian economy.

So the debate continues. There are still many who feel housing prices are still over-inflated and and they’re waiting for the other shoe to fall when it comes to the market. And there’s the other side of the equation which includes those whom are insistent that factors like pent-up demand, record-low mortgage rates, and a steadily declining inventory of homes to choose from (in most markets) are what is actually creating the sales activity and consumer spending (on real estate) that we’re currently experiencing.

Who’s right? Well, as usual, we won’t know until we get there. What’s more interesting to me is the idea that Canadians need to think about other factors which might affect them – in the not too distant future. For example, we will most certainly see a change in market conditions, sales activity, and prices if the feds decide to raise the downpayment requirement to something above the current 5% minimum, or if they decide to change the maximum amortization period to 25 years, down from the current 35 year maximum.

And as I mentioned in an earlier post, combine the two above proposed changes, with inflation and with predicted rise in interest rates in Q3 or Q4 of this year and suddenly the warning-bells for some Canadians should be going off regarding how much these measures could increase their already tight ability to service and qualify for their debt.

“The bank’s worry is that homeowners with large mortgages that are manageable now with interest rates at record lows won’t be able to afford their monthly payments once interest rates start rising, as is expected later this year.”

A legitimate concern but one that shouldn’t instill widespread panic, remembering that the fate of Canada’s recovery shouldn’t rely (and historically has never relied) on the housing market alone.

“On the economy as a whole … recovery is still dependent on government support and that growth driven by the private sector has yet to materialize.”

So we shouldn’t be surprised that the answer isn’t a simple one. And we also shouldn’t be surprised we can’t come up with the answer right away, today, this minute.  Hindsight is 20-20, so hopefully we’ll know what to watch out for this time. But even still, a lot of other factors will have to play out, organically, before we’ll know for certain whether any sort of bubble builds or bursts.

Thoughts Bubbling? Bursting? Send me your comments.

CIBC World Markets economist Benjamin Tal recently released a report outlining several different facts, forecasts, and concerns about the amount many Canadians have borrowed (and currently are borrowing) with regards to their homes and their total debt.

At a time when many (including myself) are predicting interest rates to rise by the coming spring or summer, talk is suddenly shifting to whether or not many Canadians will be stuck servicing debt loads they can’t handle – due to rising rates. Sure many can handle it now – but what about the future? And does this suddenly mean we can expect an influx of mortgage defaults on the market in the next 8-12 months?

Well, whether your glance toward the horizon involves a primarily pessimistic peer, or more optomistic ogling, a posting on canadianmortgagetrends.com is worth checking out, with regards to highlighting some of the more probable outcomes related to rising interest rates, and the effect this rise will have on the number of mortgage defaults in our country.

I think the most important point to consider (and both the website and Tal allude to this) is the idea that ‘biting off more than you can chew’ when it comes to debt-servicing your mortgage, and other debt, will hit a lot closer to home when inflation kicks-in and interest rates rise. I think a lot of us have grown very comfortable with the current, historically low, rates. And that’s dangerous if you’re relying on those rates to stay where they are – since it will surely cost you more to service that debt if you’re suddenly required to pay multiple basis-points above what you’re used to.

Perhaps the best thing many of us can do right now is, in fact, pay down as much debt as possible – instead of taking too much on. A calculated risk to be sure, as I’ve often also said sitting on the fence and refraining from actually getting into the market (for fear of rising rates, and increased expenses) isn’t necessarily helpful either.

Keep your eye on the prize, watch where you’re spending, and remember to seek out expert advice when you need it. That way it should be easier to weather any future storm, and also reap the benefits when times are good.

Comments?

I’m often asked how closely the U.S. housing market mirrors our situation here in Canada. From fluctuating home prices to the effect of federal interest rates on both fixed-rate and variable mortgage products, there are some comparisons to be drawn between both countries.

The holiday season is upon us, and with it many Canadians might be hoping they awaken to a magical, crystal-ball in their stockings this month.  Since that’s wishful thinking, the real estate analysts at RISMedia think a recent Chicago Tribune article might be the next-best thing.

The article first draws attention to the results of nearly a year’s worth of mortgage-backed securities (mbs) purchases by the U.S. Federal Reserve (a staggering number worth over $1.25 trillion and counting).  And that outcome has resulted in the U.S.’s 30-year fixed-rate mortgage hitting a nearly 40-year low. Not surprisingly, that’s gotten a lot of Americans thinking about whether or not to purchase or refinance, when it comes to their most valuable assets – their homes.

With mortgage rates in the States also at historic lows (like in Canada) combined with deflated home prices and an “expanded federal tax-credit that will expire in spring,” some residents there are wondering whether they should take advantage of these factors now – before it’s too late.

The article goes onto explain how each case and each homeowner’s situation is unique and should be essentially approached on a case-by-case basis, so proper, due-diligence needs to be exercised in every case. But if we are to continue learning from our U.S. counterparts, it may cost you more to wait.

On both sides of the border, the general feeling is that interest rates won’t stay this low much past spring of 2010. If that’s the case, we may very well be at that supposed ‘bottom’ that most of the ‘herd’ was and is still waiting to act upon – at least when it comes to interest rates.

Now, granted, U.S. home prices may still have further to fall, over the next several months, in which case the article suggests those Americans who bank on making a move in Q1 or Q2 of 2010 may see “the value of their investment initially depreciate.”

Here in Canada, home prices are expected to remain much more balanced in most provincial markets – and in some markets they may actually see moderate increases – meaning borrowing for something new or refinancing for what you already have will cost you more, whether it’s due to rising interest rates, rising prices for real estate, or perhaps both (beware the double-whammy). In the end, it’s up to you to decide whether it pays to wait or make a move.

What do you think? Send me your two-cents.

Ever heard of an ‘orphaned’ mortgage? If you haven’t, you’re not alone. But estimates from at least one predominant lobby group suggest there could be more than 30,000 Canadians facing foreclosure, from orphaned mortgages.

A recent article in The Globe and Mail breaks this issue down in much more detail, but long story, short: the article hints there’s a significantly large number of Canadians who suddenly face being ‘abandoned’ by their respective alternative lenders. And that’s because these alternative lenders can no longer lend to those customers, based on more challenging critera like poor credit scores, lower-paying jobs, or minimal home equity (criteria upon which a traditional lender,  such as a bank, wouldn’t normally approve).

The article goes on to explain that, upon renewal, these customers who’ve borrowed from non-traditional lenders and whom appear to have diligently paid their mortgage payments on time, every time,  will be ‘orphaned,’ and expected to either pay the balance of their mortgage – or face foreclosure.

Top-level execs with these alternative mortgage companies, like XCeed and Ontario-based N-Brook Mortgage Group Inc., say they cannot renew the stranded mortgages because, quote, “the once-thriving securitization market that attracted investors to these risky – and lucrative – mortgages collapsed in the wake of the U.S. subprime mortgage crisis. To replace the lost pool of capital, lenders are asking the federal government to back a special billion-dollar fund that would renew the healthy mortgages of borrowers who do not qualify for loans from traditional lenders.”

And these execs, along with lobbyists, are asking the feds for a $1-billion dollar bailout program, as a solution to offset the potentially sky-rocketing costs associated with these possible foreclosures.

At the risk of seeming insensitive to these peoples’ plight, I think this is not our government’s responsibility. Ultimately and sadly, these people have to take responsibility for their decisions. Albeit, while these decisions they’ve made may have been a result of misguided advice from some of my colleagues in the Mortgage Brokerage business, they still have to face their brutal realities.

Most of these people will be able to re-qualify, and for those who can’t, they will have to move into a rental and yes they will likely face foreclosure as they will not be able to just sell their house. Also, I fear their closing costs (mortgage balance, payout penalties, and commissions) will exceed their sale price and they likely will not have the money to absorb these losses.

Which brings me back to the very lenders who loaned these people these mortgages and are now trying to look like “Robin-Hoods” and lobby the government to help these poor people.  Make no mistake here – these lenders are not asking for the handout, out of concern for their borrowers. Rather, it is strictly out of concern for themselves.  Who will be left holding the bag when these uninsured mortgages go into default and foreclosure?  Yup, the lender.  Shame on you guys. Nice try using the media and “wolf in sheep’s clothing” tactics.  Fact is, you were paid a healthy risk premium to take on this risk, so put some ketchup on it and eat it. Don’t ask us (taxpayers) to bail you out of the mess you created.

What do you think? Send me your comments.