Mississauga, ON (March 11, 2009) ‐‐ A report released today by RE/MAX confirms that entry‐level purchasers are now the engine driving home‐buying activity in almost every major centre in Canada. The 2009 RE/MAX First‐Time Buyers Report, highlighting first‐time buying activity in 32 residential housing markets across Canada, found that improved affordability is prompting many first‐time buyers to get off the fence, out of the rental, and into the market. While a sense of caution still prevails, more and more firsttimers are finding it hard to pass up the chance to become homeowners in today’s buyer‐centric real estate climate. Increased inventory and longer days on market coupled with the lowest lending rates ever are presenting opportunities that have not been seen in almost a decade. “While the current economic crisis has caused some first‐time buyers to either take it slowly or apply the brakes, home ownership remains a top priority for those who are able to take advantage of reduced carrying costs, rock bottom interest rates and lower house prices,” explains Michael Polzler, Executive Vice President and Regional Director, RE/MAX Ontario‐Atlantic Canada. “Affordability has greatly improved and buyers are firmly in the drivers’ seat in just about every market we surveyed. The new reality is that homeownership remains well within reach for most first‐time buyers.”
Although the year got off to a slow start, February home sales were well ahead of those reported in January.
The upward trending is expected to continue as more and more first‐time buyers enter the market in the weeks ahead. The flurry of activity in the lower‐end may also serve to kick‐start sales in the mid‐to‐upper end of the market, which have, as expected, been relatively sluggish in recent months. While inventory and days on market was up virtually across the board, it’s noteworthy that several markets reported tighter conditions in the lower end of the market, where demand and buyer activity remains quite healthy.
“Canadian markets from coast‐to‐coast are ripe for a reawakening as the weather warms up,” says Elton Ash, regional Executive Vice President, RE/MAX of Western Canada. “First‐time buyers seem more acclimatized to economic factors, even though the barrage of bad news continues to flow. Those who are secure in their jobs, have accumulated good down payments, and have acceptable credit ratings are continuing to venture forward, undeterred by tighter lending criteria.” According to the RE/MAX Report, buyers are clearly in control in most Canadian markets. Of the 32 markets surveyed, 22 (69 per cent) remain firmly in buyer’s market territory. These include Vancouver, Surrey, Port
Coquitlam, Chilliwack, Kelowna, Victoria, Edmonton, Calgary, Saskatoon, Regina, Ottawa, Peterborough, London‐St. Thomas, Niagara Falls, Mississauga, Metro Toronto, Northern GTA, Kingston, Windsor, Hamilton‐Burlington. Barrie, and Halifax‐Dartmouth. Ten (31 per cent) report more balanced conditions: Winnipeg, Kitchener‐Waterloo, Sudbury, North Bay, St. Catharines, Saint John, Moncton, Fredericton, St. John’s, and Charlottetown.
Forty per cent of markets offered single‐detached homes priced under $200,000, including Charlottetown, Saint John, Moncton, Peterborough, Niagara Falls, St. Catharines, Windsor, Fredericton, Halifax‐Dartmouth, London, North Bay, Kingston, Saskatoon and Winnipeg. More than two‐thirds (71 per cent) offered condominiums starting under $200,000, (Moncton, Fredericton, Halifax‐Dartmouth, Sudbury, North Bay, Peterborough, Mississauga, Burlington, Niagara Falls, St. Catharines, Kitchener‐Waterloo, London, Windsor, Surrey, Chilliwack, Victoria, Kelowna, Edmonton, Saskatoon, Regina, and Winnipeg). The most affordable markets for detached homes, based on starting prices are: Moncton ($115,000), Charlottetown ($120,000), and Saint John ($130,000) in Eastern Canada; Windsor ($75,000), Niagara Falls ($119,000), and St. Catharines ($125,000) in Ontario; Winnipeg ($185,000), Saskatoon ($190,000), and Regina ($210,000) in Western Canada. RE/MAX is Canada’s leading real estate organization with over 17,000 sales associates situated throughout its more than 670 independently‐owned and operated offices across the country. The RE/MAX franchise
network, now in its 36th year, is a global real estate system operating in more than 70 countries. Over 6,800 independently‐owned offices engage nearly 100,000 member sales associates who lead the industry in professional designations, experience and production while providing real estate services in resident, commercial, referral, and asset management. For more information, visit: www.remax.ca
It is recommended that during the evening hours, at least until you
go to bed, that you leave your outside lights on. Don’t forget to
leave a light on in the living room inside the house as well so the
house looks inviting. Use timers.
Today, many people move because of work transfers. The husband is
working in the city where they are going to relocate to, and the wife
and children are still at the old house waiting for it to sell.
The couple looks on the internet to find houses in the right size and price
range. After work, when it is often dark, the husband drives by these houses,
to take a look at then, their location, their curb appeal, the neighborhood, the
location, and the amenities close by.
Turn on the outside lights in the evening, stand in front of your house.
If some one is driving by in the evening hours, how does it look? Is there
anything you can do to improve its evening curb appeal?
You never know who that one buyer for your house is going to be, and you
never know when they will drive by, make it easy for buyers to see your house.
The bad news is that US fourth quarter GDP was revised downward to show a dazzling 6.2% decline (annual rate). This was the sharpest decline since the 1982 recession. The good news is that this quarter is behind us. The main contributors to the revision were lower investment in inventories, lower exports, and weaker consumer spending on non-durable goods. From the data we have to date regarding the current quarter, it appears that real US GDP will fall by an additional 5% (annual rate). So this is as bad as it gets. In fact, we can make the point that while the US economy will remain in negative territory for the next 4-5 months, the rate at which it is declining is slowing. The 10-year US Treasury yield is just under 3%, up about a full percentage point from its December low. Back then, the 10-year yield plunged following the Fed’s announcement that it was exploring the idea of purchasing longer-term treasury securities. The recent increase in long-term rates was largely due to increased supply and a daunting federal budget deficit which will clearly be dealt with by the Fed. Rising treasury yields are complicating matters for the Federal Reserves; since higher long-term rates restrict growth. At this stage of the game, the Fed will probably look into buying these securities in order to lock-in the improvement in long-term
mortgage rates.
The issue of a de facto nationalism of American banks is clearly impacting markets. Following two injections of capital, the US Treasury will convert up to $27.5 billion of preferred Citigroup shares into common stock issued under the Capital Purchase Program. This is on top of the $45 billion allocated to Citigroup in 2008 to shore it up. The move increases the bank’s tangible common equity from $29.7 billion to $81 billion and is intended to strengthen its capital structure. This means that the government has increased its ownership of close to 36% of Citigroup’s outstanding common stock. And this is before the stress test the government will conduct on banks with over $100 billion in assets. So potentially the government can control even a larger portion of the bank.
The main point made by the White House, Treasury and the Fed regarding this issue has been that nationalization is not the issue since the government will still be a minority shareholder. With the financial system still impaired, policymakers have few choices. In Canada, the market is currently discounting only a 25 basis points rate cut by the Bank of Canada next week. The thinking here is that with the Bank being so optimistic about a robust growth in 2010 (3.8%) and given the lagged impact of monetary policy, why cut by more? But given the weakness in the US and the clear deterioration in the Canadian labour and housing markets, we might see the Bank cutting by 50 basis points. The first quarter results from Canadian banks were generally better than expected, reflecting the strength of this sector in comparison to virtually any other financial sectors worldwide. This does not mean that Canadian banks will not face challenges in the coming six months. Retail banking activity is slowing, reflecting a significant softening in demand for credit as well as rising delinquency rates. The mortgage market will probably remain flat in the coming twelve months following a 14% increase last year. And the cumulative number of personal bankruptcies will probably rise by 20% or so in the coming twelve months.
Benjamin Tal
Senior Economist
