Real eState

A sinking real estate market requires fast appraisals – The Globe and Mail

Published

2 years ago

July 7, 2022

Homes in Vancouver in 2019. For homebuyers needing a mortgage, appraisal risk creates anxiety, Robert McLister writes.JONATHAN HAYWARD/The Canadian Press

Welcome to Mortgage Rundown, a quick take on Canada’s home financing landscape from mortgage strategist Robert McLister.

You can’t get a mortgage without an appraisal and in most regions, appraisal values are dropping like a brick.

For homebuyers needing a mortgage, appraisal risk creates anxiety.

When home prices dive, people wonder about things like, what happens if I apply for a mortgage and get my appraisal today, but don’t close for three or four months? Will the lender still honour today’s value if prices nosedive before I close?

Soaring rates or diving home prices: which will affect your mortgage approval more?

After all, the last thing you’d want is to go firm on a purchase agreement and have a lender pull your mortgage approval because the home value plunges.

Some welcomed certainty

Usually, the appraisal is done at time of application, notes Olympia Baldrich, vice-president, real estate secured lending, at Toronto-Dominion Bank. Banks generally honour that appraisal for the duration of a customer’s rate hold, she says. And lenders typically hold (guarantee) mortgage rates for up to 90 to 130 days after you apply.

Having said that, with the national average home value dropping almost 1 per cent a week, time is of the essence when ordering appraisals. That’s especially true if you need a loan for up to 80 per cent of the current property value, the maximum allowed for a conventional mortgage.

“Get the appraisal done the day after you buy a home,” says Shawn Stillman, Mortgage Broker and co-founder of Mortgage Outlet. Ordering an appraisal as soon as possible eliminates the mortgage risk of prices deprecating before closing.

By the way, this is also imperative if you’re refinancing and want the maximum 80 per cent loan-to-value. If you need a $400,000 mortgage on a $500,000 property, for example, and a few panic sales in your neighbourhood push down its value 2 per cent before the appraisal, that lowers the maximum refinance amount to $392,000.

Remember, appraisers base their value estimates on sales of comparable properties. “With so many listings not selling, you just need one neighbour who’s getting divorced to drag down your comparables,” Mr. Stillman notes.

A parting tip: If you have a far-off closing and you’re using a more obscure lender (e.g., a small non-prime lender), be safe. Verify in advance that they won’t reappraise the property or ask for more equity if home values dive before your mortgage closes.

HELOC confusion

Almost four in 10 existing mortgagors (38 per cent) are not sure how a home equity line of credit differs from a mortgage, according to TD’s 2022 Real Estate survey.

But unawareness doesn’t imply risk, the bank notes.

“What gets them is the wording,” says Ms. Baldrich of TD. People believe they have a mortgage when they actually have a HELOC. At many large banks, the majority of conventional mortgages they sell are linked to a HELOC.

“I don’t see a direct link between default rates and understanding the product,” she says. Clearly, with only one in 1,000 HELOC borrowers 90-plus days behind on their payments, there’s virtually no connection between the two.

Slight near-term hope for mortgage rates

The country’s lowest mortgage rates didn’t budge one iota this week.

Some less competitive lenders followed bond yields lower and trimmed their longer-term fixed rates by five to 10 basis points. But so far, that’s it. (There are 100 basis points in a percentage point.)

Canada’s five-year yield dove 55 basis points in the past three weeks as recession fear (normally bearish for rates) overtakes inflation fear (normally bullish for rates). Most competitive lenders are now in a holding pattern, waiting to see what yields do after next Wednesday’s Bank of Canada meeting.

Speaking of the Bank of Canada, the market is pricing in an 85 per cent chance of an oversized 75 basis point rate hike at its July 13 rate meeting. That would take the prime rate to 4.45 per cent, its highest in 14 years.

An escalating prime rate will also stiffen the mortgage stress test. To date, borrowers have been able to qualify for a mortgage using the 5.25 minimum qualifying rate (MQR), if they choose a variable rate.

If the lowest conventional variable rate of 2.9 per cent jumps 75 bps next week to 3.65 per cent, that means its stress test rate will climb to 5.65 per cent. For borrowers on the borderline of getting approved – owing to high debt ratios – this could knock them out of qualifying range, further weighing on home prices.

For that reason, we may see a disproportionate number of fringe borrowers applying for mortgages in the next six days.

Lowest nationally available mortgage rates

TERM	UNINSURED	PROVIDER	INSURED	PROVIDER
1-year fixed	4.29%	RBC Royal Bank	3.99%	True North
2-year fixed	4.54%	RBC Royal Bank	4.39%	True North
3-year fixed	4.99%	Tangerine	4.49%	True North
4-year fixed	5.09%	National Bank	4.59%	True North
5-year fixed	5.09%	HSBC	4.84%	Nesto
10-year fixed	5.84%	HSBC	5.75%	First National
Variable	2.90%	Alterna Bank	2.45%	Nesto
5-year hybrid	4.09%	HSBC	4.16%	Scotia eHOME
HELOC	3.55%	HSBC	N/A	N/A

Robert McLister is an interest rate analyst, mortgage strategist and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

Published

3 days ago

November 6, 2024

Anne Joseph

TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

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Homelessness: Tiny home village to open next week in Halifax suburb

Published

2 weeks ago

October 24, 2024

Anne Joseph

HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

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Here are some facts about British Columbia’s housing market

Published

3 weeks ago

October 17, 2024

Anne Joseph

Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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