Housonomix - 08 Mar 2024: 🌷 Spring Stands By: Watching Rates & Waiting Wisely 🕰️📊

🎥 Housonomix Highlights: Insights at a Glance 🕒 (in less than 60 seconds) ✨

For the more visually inclined 🎨 and the ones who are too busy to read the full newsletter 🏃‍♂️🏃‍♀️, we’re trying something new this edition.

A quick, less than 60 second bite-sized 🍬, video wrap 🎥 of this edition’s content. Hope you like it! 💫

📉 Rate Watch: March's Mortgage Movement - A Dive into Rates 📈

As always let’s kick things off with Rate Watch! Spring is just around the corner, and it seems that mortgage rates are reflecting the season's changeable nature. As you might have heard, Bank of Canada held rates yet again, earlier this week (more on this later). Even before the rate decions, and giving you a bit of information that hasn’t been widely reported in the media, fixed rates have dropped by over 75 bps from their peak last fall. A movement triggered by developments across the border caused our 5-year bond yield to react and banks to lower their fixed rates. Welcome news ideed!

Moving on, let's break down the current interest rate numbers and see what's blossoming and what's cooling down in this March's mortgage landscape. 🌸❄️

🏠 Insured (starting) rates:

• 3-year fixed: Slightly cooling at 5.19%, a gentle decrease of 0.05%.

• 5-year variable: Holding steady at 6.10%, with no change since our last update.

🏢 Uninsured (starting) rates:

• 3-year fixed: Warming up a bit to 5.54%, with a slight increase of 0.05%.

• 5-year variable: Consistent at 6.85%, remaining unchanged for this period.

🔍 Flexible lenders (starting) rates:

• Flexible options for 2-year terms remain at a stable 6.59%, showing no change in the current bi-weekly period.

🤝 Private lenders' (starting) rates:

• For those seeking alternative financing, the starting rate for the first mortgage (up to 80% LTV) is at 8.36%, cooling down by 0.18%.

Remember, these rates are just the starting points and may vary based on your unique situation. In fact, to add a bit of inside information here, in the last few days, for several clients we’ve been able to secure a rate well over 50 bps below what you’re seeing here, on even 3 yr fixed insurable (20% down) mortgages. Of course, it’s on a case by case exception basis, but we’re seeing increased competition among lenders resulting in big savings for clients. Want to know more? Reach out to us at www.ronmortgages.com. Until our next edition, keep your options open and your decisions informed. Happy house hunting! 🗝️🌷

🌱🏘️ Real Estate Radar: Springing Forward with GTA's Gradual Market Recovery & Balanced Outlook for 2024 💹🌼

Welcome to this edition’s Real Estate Radar 📡, where we delve into the evolving landscape of the Greater Toronto Area's housing market 🏙️ as it gently awakens from its winter slumber ❄️🌸. As we step into the rejuvenating season of spring, we're witnessing a gradual but steady recovery across the board. From the subtle uptick in benchmark prices 📈 to the more pronounced fluctuations across various housing types, the market is demonstrating resilience and adaptability 💪🏽🌿.

Here’s a quick summary:

• Benchmark Home Price: The GTA's benchmark home price for February 2024 observed a modest year-over-year increase of 0.4%, reaching $1,093,900 💲.

• Average Sold Price: The average sold price for homes in the GTA saw a slightly higher year-over-year growth of 1.2%, marking a price point of $1,108,720 💲📊.

• Property Type Analysis:

  • Detached homes experienced a minimal year-over-year price increase of 0.3%, with the average price at $1.44 million 🏠.

  • Semi-detached homes showed a more significant price increase of 5.1% year-over-year, averaging $1.12 million 🏡.

  • Freehold townhouses and condo apartments, however, saw a decline in prices year-over-year by 1.6% and 1.4%, respectively, with townhouses averaging $1.03 million and condo apartments at $695,000 🏘️📉.

• Sales Activity: Sales transactions in the GTA surged, with a notable 32.8% increase month-over-month and a 17.2% rise year-over-year 📈.

  • Detached homes saw 2,495 transactions, marking a 20.2% increase from February 2023 🏠💼.

  • Semi-detached homes had 463 transactions, a 16% increase from the previous year 🏡📈.

  • Freehold townhouses recorded 554 sales, up 19.7% year-over-year 🏘️💹.

  • Condo apartments reported 1,586 transactions, indicating a 9% increase from February 2023 🏢✨.

• New Listings Surge: There was also a significant increase in new listings, with 11,396 new listings in February 2024, a 36% increase from the 8,367 new listings in February 2023 📝🚀.

The numbers show a gradual but steady recovery of the GTA housing market as it enters the spring season 🌼📊, with varying performance across different housing types and an overall balanced market condition 🏠🏢. Combine that with the expectation of decreasing interest rates later in the year, it offers a hopeful outlook for prospective buyers and the real estate market as a whole 🌱💡.

Maple Pulse : 🏠💸 Holding Steady among Spring blooms: Canada's 2024 Real Estate Rollercoaster 🎢💼

In this edition of Maple Pulse, we delve into the balancing act performed by the Bank of Canada as it holds interest rates steady at 5% amidst persistent inflation concerns. With the Spring Market upon us, we explore the cautious optimism that permeates the Canadian real estate landscape.

Here’s what we’re tracking:

• Bank of Canada Maintains 5% Interest Rate Amid Inflation Concerns: Bank of Canada has maintained its policy rate at 5% for the fifth consecutive meeting as of March 6, 2024. Despite acknowledging some progress in inflation control, the Bank states it is "too early" to contemplate rate cuts. The decision reflects the Bank's cautious stance amid an economic landscape marked by gradual and uneven inflationary pressures, alongside a vigil on wage growth and economic performance indicators. With the economy showing signs of modest excess supply and inflation expectations being carefully managed, the Bank's approach aims at a balanced path to achieving a sustainable inflation target without prematurely easing monetary conditions.

• Waiting for Rate Cuts: Half of Canadian Homebuyers on Pause: A recent Royal LePage survey reveals that 51% of Canadians who have postponed their home buying plans in the last two years are waiting for the Bank of Canada to lower its key lending rate before re-entering the market. With inflation nearing the 2% target, anticipations for a rate cut later this year are growing, potentially revitalizing buyer interest. Among those poised to resume their search, a significant portion is looking for cuts ranging from 25 basis points to more than 100 basis points. Despite the slowdown, 65% of these sidelined buyers remain engaged in the market, exploring listings and securing mortgage pre-approvals, indicating a readiness to act once conditions improve.

• Tarion to Cover $90 Million in Lost Deposits Amid Builder Failures: Ontario's Tarion, the home warranty provider, faces its largest claim event, expecting to pay out $90 million to homebuyers affected by builder failures. This unprecedented situation arises from builders canceling projects or operating illegally, amidst a backdrop of high interest rates, rising construction costs, and labor shortages, leading to project abandonments or bankruptcies. Historically, Tarion's deposit refunds were much lower, but the spike in claims highlights the challenges within the homebuilding industry. The claims reflect a significant increase in builder defaults, prompting Tarion to enhance consumer protections and work closely with the Home Construction Regulatory Authority to prevent future occurrences.

• British Columbia Targets Property Speculation with New Tax: To combat housing speculation and increase affordability, the BC government will implement a tax on properties sold within two years of purchase. This tax, effective from January 1, 2025, begins at 20% for sales within the first year and decreases to zero over the next year. Announced as part of the 2024/2025 budget, it aims to deter speculative flipping, which has inflated housing prices. The tax is expected to generate $43 million in revenue for affordable housing. Exemptions are available for certain life events, with additional support for first-time homebuyers and developers of rental properties, enhancing the province's approach to a balanced housing market.

• Exploring Alternative Home Ownership Models in Canada's Affordability Crisis: A new survey reveals that one-third of Canadians are considering alternative home ownership models due to the ongoing housing affordability crisis. Conducted by Leger for Re/Max Canada, the study finds 32% of respondents exploring non-traditional paths like rent-to-own agreements, co-ownership with non-partners, and renting out portions of their homes. Despite economic hurdles, including higher interest rates and a tight housing supply, 73% of Canadians still view home ownership as a valuable investment. The interest in alternative models is particularly notable among younger Canadians and BIPOC communities, with significant regional variations in preferences and practices.

Closing our Maple Pulse segment, it appears the prevailing theme in the broader market is a cautious stance of wait-and-watch 🕰️👀. Despite witnessing a surge in listings, an uptick in mortgage activity, and increased sales, many Canadians are still embracing a strategy of patience 🏠📈. Similarly, the Bank of Canada maintains a vigilant posture, allowing its previous decisions to unfold over time, carefully observing the market's response before taking further action 🔍💼.

However, it's crucial to remember, especially for those eyeing the market for new properties, that anticipation of lower interest rates may not always lead to the expected savings 💡💸. The market often anticipates such moves, adjusting property prices accordingly, well ahead of any official announcements 📊🔮. This means that any potential benefits from a drop in rates could be quickly negated by rising property prices for the very assets you're aiming to acquire 🏡➕💲.

Therefore, it's important to weigh the wisdom of waiting in these dynamic markets. While patience can be a virtue, in the fast-paced realm of real estate, it may not always serve your best interests. Sometimes, seizing the moment with informed decisiveness can be the key to navigating these turbulent waters 🌊🔑. And this coming from a guy whose clients and realtor partners complain that he’s too conservative when it comes to real estate! 😄

🏠 Mortgage Mastery: Vendor Take Back (VTB) Mortgages: A Simple Guide 🏡

In this edition’s mortgage mastery we’re talking about Vendor Take Back (VTB) mortgages. VTB mortgages can sound complicated, but they're a great tool in the real estate world, making buying and selling smoother for everyone involved. This is one of those advanced mortgage concepts that is good for you to understand if you’re a buyer or a seller as it can benefit both parties. Let's break it down and hopefully make it easy to understand!

What is a Vendor Take-Back Mortgage (VTB)?

• Definition: It's a financing arrangement where the seller of a property acts like a mortgage lender to help the buyer make the purchase 🏠 🤝 💰

• When Used: Typically used when a buyer cannot secure the full purchase price through a traditional mortgage 🏦.

• Seller's Role: The seller becomes a partial or full financier of the sale 💵.

• Requirement: The seller must have full ownership (equity) of the property 🎉.

How Does a VTB Mortgage Work?

• Partial Funding: The seller covers the difference between what a bank will lend and the total purchase price 🏦🔼. The buyer makes payments directly to the seller 💸.

• Full Funding: The seller finances the entire purchase price, often for buyers who cannot obtain any traditional mortgage 💰.

• Security: The home itself serves as collateral 🏡🔒. The seller registers a lien on the property 📝.

• Risk: In the event of buyer default, the seller (and the primary lender, if applicable) can pursue foreclosure or power of sale ⚠️.

Examples:

• Partially Funded VTB (most often the case):

  • Home price: $750,000

  • Bank mortgage: $600,000

  • Buyer’s own downpayment: $50,000

  • VTB from seller (to be used as buyer downpayment): $100,000

• Fully Funded VTB:

  • Home price: $500,000

  • No bank mortgage, no buyer down payment

  • VTB from seller: $500,000

Benefits of VTB Mortgages

• For Buyers: Allows purchase of properties they might not otherwise qualify for 🔑.

• For Sellers: Helps attract buyers and potentially earns interest income 📈.

• Tax Deferral (Commercial/Investment Properties): Sellers can defer capital gains tax over five years ✨.

Risks and Considerations

• Increased Risk for Seller: The seller takes on more risk ⚠️

• High Interest Rates: VTB mortgages usually have higher rates 💸🔼

• Buyer Affordability: Sellers need to consider if the buyer can handle multiple payments 🤔

• Second Lien Position: The VTB is often a second mortgage 🥈

Important Notes

• VTBs are complex! Get advice from mortgage experts (such as yours truly) and lawyers 💼⚖️

• Capital gains tax deferral has specific legal and tax implications, so you better also have a good accountant! 🧐

Facade & Serenity: The Unfiltered Edition 😄🧘‍♂️