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
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
Peel Region will ask Ottawa and Queen’s Park to extend for another year a home ownership program that’s geared to low-income residents.
In May 2008, Peel received $2.85 million under the Canada-Ontario Affordable Housing program (AHP).
Dubbed “Home in Peel,” the initiative set out to provide 282 applicants with up to $10,000 of forgivable down payment assistance towards the purchase of a resale home.
Peel received 807 applications since the program’s startup. Some 282 applications have been approved with 80 offers of purchase completed.
However, with the program set to expire on March 31, officials say Peel needs more time to ensure the remaining applicants secure homes.
“This program was administratively heavy in its start up and the time involved in obtaining financing approval, house hunting, sale negotiation and closing times (added) to the process,” stated a report handed to councilors recently.
Home in Peel is designed to give low- to moderate-income residents, who are currently renting, a chance to enter the housing market.
Of the 80 homes purchased, 39 have been purchased in Mississauga, 41 in Brampton and zero in Caledon.
The average annual income of purchasers who submitted an offer of purchase is $43,405 and the average sale price for homes bought is $196,882, staff reported.
The homes purchased include five detached homes, seven semi-detached, 44 townhouses, five town houses and 19 high-rise condominiums. Condos Mississauga.
Initially, the program was restricted to people with a household income of less than $62,600, and the home could cost no more than $208,000.
However, regional councilors joined other municipal politicians in asking senior levels of government to improve the criteria in order to “increase the pool of eligible recipients.”
As such, both the federal and provincial governments raised the maximum household income to $75,800 and the maximum resale purchase price for a home to $247,500.
The government also decided to hike up the down payment assistance amount to $10,000, up from the $8,500 initially set out.
Region officials have deemed the program a success. According to region staff, 30 of the 80 new homeowners previously lived in social housing projects paying market rent.
~Torstar Network
