Housonomix - 8 Dec 2023: 🌟🏠 Market Movements & Financial Mastery: Navigating Rates, Real Estate, and Renewals in Canada's Housing Landscape 📈💰

🔍📉 Rate Watch: Dips & Stability! 🏡💰

Some good news! Lots of green as far as rates are concerned this week, meaning substantial rate drops! This is particularly true on the fixed rates. Let’s look closer.

• Insured Rates: Starting rates for purchases with less than a 20% down payment have seen a slight decrease. The 3-year fixed rate has dropped to 5.49%, down by 0.35% from the previous week. Meanwhile, the 5-year variable rate remains stable at 6.10%, with no change from last week.

• Uninsured Rates: For refinances, or purchases above the $1 million mark, the 3-year fixed rate is now starting at 6.14%, which is a 0.30% decrease from last week. The 5-year variable rate has also been reduced by 0.15%, starting now at 6.70%.

• Flexible Lender Rates: Rates from lenders with flexible income and credit requirements remain unchanged for the 2-year term, standing firm at 6.89%.

• Private Lender Rates: For those considering private lending options, the starting rates for a first mortgage (up to 80% LTV) are at 8.99%, with no weekly change. It's important to note that these rates do not include lender & broker fees.

The reason for the large drops in fixed rates is of course the substantial decrease in bond yields. As can be seen from the screengrab below, 5Y bonds have dropped by almost 25% from their recent peaks from just 2 months ago. Result = lower fixed rates. I guess we’ll all take whatever relief we get.

As always, remember the rates here are starting rates offered by lenders. As every mortgage is always custom, it’s best to reach out to us at www.ronmortgages.com to get the rates specific to you, which could be lower than the rates quoted here.

🌟🏠 Real Estate Radar: GTA Housing Market Overview

This week we’re focusing on the GTA region and on the sales data released by TRREB earlier this week. We find that November 2023 presented a nuanced real estate market in the GTA region. Let’s dive in:

📈 Average Sold Price: The overall average price in the GTA slightly increased by 0.3% year-over-year to $1,082,179.

🏡 Property Type Price Insights:

• Detached Homes: The average price rose by 1% year-over-year to $1.40M, but it was still a 3% month-over-month decrease.

• Semi-Detached Homes: Saw a 2.1% increase year-over-year to $1.06M, but dipped by 4% over last month.

• Freehold Townhouses: Dropped by 0.9% year-over-year to $984k and that was also a steep 5.5% decline from last month.

• Condo Apartments: Have been relatively flat with a slight by 0.3% to $711k over last year, and an even smaller 0.2% over last month.

📉 Sales Volume: The total transactions in the GTA were 4,236, encompassing all property types. This is a 6.8% drop over November 2022, and an 8.8% drop over last month.

🌐 Regional Insights:

• York Region: Encountered a minor 0.5% month-over-month decrease and a 2% year-over-year decline, averaging $1,286,617.

• Durham Region: Reported an average price of $883,115, a 1% year-over-year decrease.

• Oshawa: Witnessed a significant 6% monthly decrease in prices, settling at $755,926.

• Brampton: Saw a modest 0.3% monthly increase, rising above the $1 million mark to $1,002,482.

• Mississauga: Experienced a notable 10% monthly decrease, with average prices at $993,352.

🔍 Conclusion: Although Toronto’s prices and sales have dropped, other regions in GTA have shown some resilience with modest price increases and price stability over the year. Interest rates are weighing down heavily on buyers as most choose to stay on the sidelines. The GTA real estate scenario is expected to stay relatively subdued and flat through the winter as everyone waits for the spring thawing for more reasons than one.

🍁 Maple Pulse: Bank of Canada holding rates, Optional Open bidding, Continuing Renewal woes, and more 🏦🏡💰

• Bank of Canada Aiming for Inflation Progress While Holding Rates: The major story of the week is that Bank of Canada has kept its benchmark interest rate unchanged at 5%, amidst a stalling economy. Policymakers emphasize their preparedness to increase rates if needed, while expressing a desire for more sustained progress in core inflation reduction. Despite this stance, most economists believe further rate hikes are unlikely. The economy is showing signs of cooling, with unemployment rising to 5.8% from 5% in seven months and inflation decelerating to 3.1% in October. The Bank's approach indicates a cautious balance between managing inflation risks and not exacerbating economic slowdown.

• Ontario Real Estate Introduces New Rules Including Optional Open Bidding: New Ontario real estate rules have come into effect, aiming to enhance clarity and choice for buyers and sellers. These rules include the option for sellers to use open bidding, improved broker and brokerage disclosures, and measures to prevent conflicts in multiple representation situations. Open bidding allows sellers to disclose bid prices, potentially reducing overbidding, but it remains optional. Advocates believe it could help lower housing prices, but critics argue it may have negative consequences for sellers. The rules also allow for designated representatives to advocate more actively on behalf of buyers and sellers, freeing them from multiple representation constraints.

• Canadians Bracing for Mortgage Renewal Challenges: A recent survey by Angus Reid Institute reveals that over half of Canadians plan to spend less this holiday season due to financial concerns. This trend correlates with the upcoming mortgage renewal cliff, where some borrowers could face up to a 70% increase in their monthly payments. Canadians, already tightening their belts due to inflation, face a stark contrast to their U.S. counterparts, who have locked in low rates for longer terms. Consumer credit, adjusted for inflation, fell by 1% in the year to September, a scenario last witnessed during the 1990s recession. Royal LePage estimates that over three million Canadians will face mortgage renewals in the next 18 months, most at higher rates.

• Toronto Condo Market Dominated by Investors: Over 50% of Toronto's new condos are now owned by investors, a trend that is significantly driving up housing prices. Investors now own 57% of newly built condos in the city, and 80% of pre-construction condo sales in Ontario. Nearly 40% of homes constructed in Toronto since 2016 are investor-owned. Reasons for this shift are attributed to ineffective rent control, readily available cheap capital, and govt. policies sch as termination of federal co-operative housing program in 1992 has created a challenging environment for regular families to afford homes in Toronto.

• Short-Term Rentals Worsen Canada's Housing Crisis: A recent report by Desjardins highlights how short-term rentals, like those on Airbnb and Vrbo, are exacerbating Canada's housing crisis, with 235,000 listings accounting for 1.4% of the nation's housing stock. These rentals are linked to rising rents, lower long-term rental availability, and higher home prices, contributing to the country's housing affordability woes. Despite government efforts to address the issue, experts remain skeptical about the impact of recent tax deductions on short-term rental income, and concerns arise about reporting income.

Mortgage Mastery: Harnessing the Power of Mortgage Financing for Debt Consolidation 🏡💼

Today, we're exploring an often-overlooked advantage of mortgage financing: its role in effective debt consolidation.

Understanding Debt Consolidation through Mortgage Financing 🔍

Debt consolidation using mortgage financing is a strategy where homeowners leverage the equity in their homes to pay off high-interest debts such as credit cards, personal loans, or car loans. This is done by refinancing an existing mortgage or taking out a home equity line of credit (HELOC).

Key Advantages 🌟

• Lower Interest Rates: Typically, mortgage rates are significantly lower compared to other forms of debt. Consolidating your debts under a mortgage can drastically reduce the amount of interest you pay over time. 💰

• Simplified Finances: Managing multiple debt payments can be overwhelming. Consolidating them into one mortgage payment can simplify your financial management, reducing stress and the risk of missed payments. 📊

• Improved Credit Score: By paying off high-interest debts, you may see an improvement in your credit score over time, as you reduce your credit utilization ratio and diversify the types of credit in your profile. 📈

• Tax Benefits: In some cases, the interest paid on a mortgage used for debt consolidation can be tax-deductible, offering additional financial benefits (though it's important to consult with a tax advisor for personalized advice). 🧾

Considerations Before Consolidating 🤔

While the advantages are clear, it’s crucial to consider the following:

• Long-term Costs: Extending short-term debts over the lifespan of a mortgage could mean paying more in interest over the long haul, despite the lower rate. ⏳

• Home Equity Requirements: You need sufficient equity in your home to qualify for debt consolidation through mortgage refinancing or a HELOC. 🏠

• Discipline is Key: It's important to avoid accruing new debts after consolidation, as this can lead to a precarious financial situation. 🔐

Conclusion 🎬

Mortgage financing for debt consolidation can be a powerful tool in your financial arsenal, offering lower interest rates and simplified payments. However, it requires careful consideration and disciplined financial management. As always, it's advisable to consult with a financial advisor to understand the full implications for your unique situation.

Giggles & Goals 🤣🎯