First Monthly Canadian Home Sales Gain This Year In June

National home sales rose by 4.1% in June compared to May, the first such rise this year. Even so, June’s sales activity remains well below the monthly pace of the past five years (see chart). The sales gains were led by the Greater Toronto Area (GTA) as 60% of all local housing markets reported increased existing home sales.

According to the Toronto Real Estate Board, sales were up 17.6% in the GTA on a seasonally adjusted basis between May and June.

In contrast, sales in British Columbia continued to moderate. The Real Estate Board of Greater Vancouver reported a 14.4% decline in home sales last month compared to the month before. June’s sales for the GVA were 28.7% below the 10-year June sales average. On a year-over-year (y/y) basis, sales declined a whopping 37.7%.

National home sales activity declined almost 11% y/y. Annual sales hit a five-year low and stood nearly 7% below the 10-year average for June. Activity came in below year-ago levels in about two-thirds of all local markets, led overwhelmingly by those in the Lower Mainland of British Columbia.

“This year’s new stress-test on mortgage applicants has been weighing on homes sales activity; however, the increase in June suggests its impact may be starting to lift,” said CREA President Barb Sukkau. “The extent to which the stress-test continues to sideline home buyers varies by housing market and price range.”

B.C. was hit with a double whammy as the province raised the foreign purchase tax as well. Also, mortgage rates have risen increasing the burden of the new stress tests.

Looking ahead, home sales and price gains will likely be dampened by higher interest rates as the Bank of Canada just hiked the benchmark rate once more last week. The prime rate rose from 3.45% to 3.70% in the wake of the rate hike, while the posted 5-year fixed mortgage rate–the critical stress-test yield–remained steady at 5.34%. Nevertheless, more upward pressure on mortgage rates is likely over the next couple of years as economic activity bumps up against capacity limits and inflation edges upward. The Bank made it very clear that further interest rate hikes are on the way but reiterated that it will be taking a gradual approach to future increases, guided by incoming economic data and a recognition that the economy is more sensitive to interest rate movements now than it was in the past.

New Listings

The number of newly listed homes fell in June by 1.8% and also remained below levels for the month in recent years. New listings declined in a number of large urban markets including those in B.C.’s Lower Mainland, Calgary Edmonton, Ottawa and Montreal.

With new listings up and sales virtually unchanged, the national sales-to-new listings ratio eased to 50.6% in May compared to 53.2% in April and stayed within short reach of the long-term average of 53.4%. Based on a comparison of the sales-to-new listings ratio with its long-term average, about two-thirds of all local markets were in balanced market territory in May 2018.

There were 5.7 months of inventory on a national basis at the end of May 2018. While this marks a three-year high for the measure, it remains near the long-term average of 5.2 months.

Home Prices

On a national basis, the Aggregate Composite MLS Home Price Index (HPI) rose only 0.9% y/y in June 2018, marking the 14th consecutive month of decelerating y/y gains. It was also the smallest annual increase since September 2009.

Decelerating y/y home price gains have reflected mainly trends at play in Greater Golden Horseshoe (GGH) housing markets tracked by the index. Home prices in the region have begun to stabilize and trend higher on a month-over-month basis in recent months.

Condo apartment units again posted the most substantial y/y price gains in June (+11.3%), followed by townhouse/row units (+4.9%); However, price gains for these homes have decelerated this year. By contrast, one-storey and two-storey single-family home prices were again down in June (-1.8% and -4.1% y/y respectively).

Benchmark home prices in June were up from year-ago levels in 8 of the 15 markets tracked by the index (see Table below).

Home price growth is moderating in the Lower Mainland of British Columbia (Greater Vancouver Area: +9.5% y/y; Fraser Valley: (+18.4%), Victoria (+10.6%) and elsewhere on Vancouver Island (+16.5%).

Within the GGH region, price gains have slowed considerably on a y/y basis but remain above year-ago levels in Guelph (+3.5%). By contrast, home prices in the GTA, Oakville-Milton and Barrie were down from where they stood one year earlier (GTA: -4.8%; Oakville-Milton: -2.9%; Barrie and District: -6.5%). The declines reflect rapid price growth recorded one year ago and masks recent month-over-month price gains in these markets.

Calgary and Edmonton benchmark home prices were down slightly on a y/y basis (Calgary: -1.0%; Edmonton: -1.5%), while prices declines in Regina and Saskatoon were comparatively more substantial (-6.1% and -2.9%, respectively).

Benchmark home prices rose by 7.9% y/y in Ottawa (led by a 9.1% increase in two-storey single-family home prices), by 6.4% in Greater Montreal (driven by a 7.4% increase in townhouse/row unit prices) and by 6% in Greater Moncton (led by a 6.5% increase in one-storey single-family home prices).

The actual (not seasonally adjusted) national average price for homes sold in June 2018 was just under $496,000, down 1.3% from one year earlier. While this marked the fifth month in a row in which the national average price was down on a y/y basis, it was the smallest decline among them.

The national average price is heavily skewed by sales in the Greater Vancouver and GTA, two of Canada’s most active and expensive markets. Excluding these two markets from calculations cuts almost $107,000 from the national average price, trimming it to just over $389,000.

Bottom Line

Housing markets continue to adjust to regulatory and government tightening as well as to higher mortgage rates. The speculative frenzy has cooled, and multiple bidding situations are no longer commonplace in Toronto and surrounding areas. The housing markets in the GGH appear to have bottomed, and supply constraints may well stem the decline in home prices in coming months. The slowdown in housing markets in the Lower Mainland of B.C. accelerated last month as the sector continues to reverberate from provincial actions to dampen activity, as well as the broader regulatory changes and higher interest rates.

Five-year fixed mortgage rates have already risen roughly 110 basis points, while rates for new variable mortgages rose by close to 40 basis points. Since the implementation of new mortgage standards, nonprice lending conditions for mortgages and home equity lines of credit have also tightened. Additional rate hikes by the Bank of Canada are coming, although the Bank will remain cautious particularly in light of continued trade tensions with the United States.

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres

Here is what you need to know about Reverse Mortgages…

Reverse Mortgage – Need to Know

HomeEquity Bank is the only bank in Canada that currently offers the CHIP Reverse Mortgage as well as a secondary product, Income Advantage. These two products are options for homeowners unlike anything else out there. Instead of borrowing money to purchase a house, they will lend you money if you already have purchased one (as long as you qualify).

Recently I finished a half-day seminar where I was educated on the different HomeEquity Bank offers through the CHIP Reverse mortgage and their Income Advantage products. Below I would like to share with you some of the key benefits and summarize the different ways you can potentially use these products.

CHIP Reverse Mortgage

• Loan-to-Value:

  • 55% maximum (dependent on property and applicant age)

• Mortgage Amount:

  • Min. $25,000 initial advance

  • Min. $10,000 for subsequent advance

• Terms:

  • 6 month fixed, 1-yr fixed, 3-yr fixed, 5-yr fixed

  • 5-yr variable rate

• Amortization:

  • None

• Payments:

  • No regular monthly payments required

• Debt Servicing:

  • None required (Just max. 55% LTV)

• Credit Bureau:

  • None

Now obviously there are other items such as appraisals, property taxes that need to be paid regularly, document requirements, and prepayment privileges as well as fess. However, the information listed shows you the vast differences between a traditional mortgage and a CHIP reverse mortgages.

If an applicant is over the age of 55, lives in their own home as well as owns it (at least the majority), and their property meets all the age and locations requirements, they can apply to have access to this product. Refinance, home improvements, in home medical care, gifting money to child or grand-child, supplemental income, all of these things can be achieved with a CHIP Reverse Mortgage.

Income Advantage

• Loan-to-Value:

  • 40% maximum (dependent on property and applicant age)

• Mortgage Amount:

  • Planned advances from $500/month or $1,500 a quarter

  • Min. $10,000 for subsequent advance

• Terms:

  • Planned advance: 5-yr variable rate

  • Lump-sum: 5-yr fixed, 3-yr fixed, 1-yr fixed, variable rate

• Amortization:

  • None

• Payments:

  • No regular monthly payments required

• Debt Servicing:

  • None required (Just max. 55% LTV)

• Credit Bureau:

  • None

The Income Advantage program is a lot like the CHIP Reverse Mortgage program, however, the Income Advantage is geared more towards people who want a stream of income they can rely upon every month. You can still do lump-sum advances but the main difference is it allows you to set-up planned advances.

Using HomeEquity bank can be extremely advantageous for a lot of people in Metro Vancouver. It allows people to access the cash in their home without being burdened by any lack of financial income and it can allow people to help their children or grandchildren by advancing the money and gifting it to them for their own home purchase.

When it comes down to it all, there are really two main things these two products do. One, is it allows for an income stream based on the home you live in and age, regardless of employment or credit history. Two, it allows parents or guardians to provide money from the equity in their home now, to the beneficiaries who would one day in the future be recipients if included in an estate will- an advance on an inheritance.

There are many things to consider with HomeEquity’s CHIP Reverse Mortgage and Income Advantage Program, if you or someone you know may benefit from secondary or primary income, support for medical expenses, home renovations, travel, or wanting to help family members with their financial needs, please do not hesitate to contact a Dominion Lending Centres Mortgage Broker.

Ryan Oake

Dominion Lending Centres – Accredited Mortgage Professional
Ryan is part of DLC Producers West Financial based in Langley, BC.

Toys and buying a home

In 2005, I was asked to do a pre-approval by a couple hoping to buy a home. I went through the application with them and pre-approved them for $320,000. They were astounded. They told me that their bank told them that they were qualified to a maximum of $260,000. They wanted to know how I could get them more money. I looked at their credit reports and quickly found the answer.

I pointed out to them that they both had $10,000 unsecured lines of credit. They said that the bank had offered this to them several years ago but they had not used them. The zero balances confirmed their story. What they didn’t know was according to the bank’s rules, they had to consider these lines of credit as being fully utilized. The bank considered them as each carrying $300 in monthly payments that did not exist. My lenders took a zero balance as being a zero balance and I was able to get them more money and more house.

Last year I had a young man who wanted to buy a new home. He was very surprised when I told him he couldn’t afford it according to the new stress test rules. The reason being, he had a $950 a month truck payment. The only solutions available were to sell the truck, or negotiate a new payment plan by stretching out the payments for another year.

The moral of the story is that it’s important to let clients know that other debts outside of their mortgage can affect how much house they can qualify for, and that buying a vehicle or new toys like a trailer or boat before going to see their local mortgage broker, can be a costly mistake. Your Dominion Lending Centres mortgage broker can help you through the whole home buying process but you need to have them involved early in the process. Our job is to make people’s dreams come true and we do it a lot better than the banks.

David Cooke

Dominion Lending Centres – Accredited Mortgage Professional
David is part of DLC Clarity Mortgages in Calgary, AB.

GREAT article below…GREAT news for my BFS friends …. have a read of this blog below from my colleague

CMHC Changes to Assist Self-Employed Borrowers

As a self-employed person myself, I was happy to hear that CMHC is willing to make some changes that will make it easier for us to qualify for a mortgage.
In an announcement on July 19, 2018, the CMHC has said “Self-employed Canadians represent a significant part of the Canadian workforce. These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.” — Romy Bowers, Chief Commercial Officer, Canada Mortgage and Housing Corporation. These policy changes are to take effect Oct. 1, 2018.

Traditionally self-employed borrowers will write as many expenses as they can to minimize the income tax they pay each year. While this is a good tax-saving technique it means that often a realistic annual income can not be established high enough to meet mortgage qualification guidelines.
Plain speak, we don’t look good on paper.

Normally CMHC wants to see two years established business history to be able to determine an average income. But the agency said it will now make allowances for people who acquire existing businesses, can demonstrate sufficient cash reserves, who will be expecting predictable earnings and have previous training and education.
Take for example a borrower that has been an interior designer with a firm for the past eight years and in the same industry for the past 30 years, but just struck out on his own last year. His main work contract is with the firm he used to work for, but now he has the ability to pick up additional contracts from the industry in which he has vast connections.
Where previously he would have had to entertain a mortgage with an interest rate at least 1% higher than the best on the market and have to pay a fee, now he would be able to meet insurance requirements and get preferred rates.

The other change that CMHC has made is to allow for more flexible documentation of income and the ability to look at Statements of Business Professional Activity from a sole-proprietor’s income tax submission to support Add Backs of certain write-offs to support a grossing-up of income. Basically, recognizing that many write-offs are simply for tax-saving purposes and are not a reduction of actual income. This could mean a significant increase in income and buying power.

It is refreshing after years of government claw-backs and conservative policy changes to finally see the swing back in the other direction. Self-employed Canadians have taken on the burden of an often fluctuating income and responsible income tax management all for the ability to work for themselves. These measures will help them with the reward of being able to own their own home as well.

Kristin Woolard

Dominion Lending Centres – Accredited Mortgage Professional

Dominion Lending Centres launches new app My Mortgage Toolbox

For Immediate release

August 8th, 2018

Vancouver, B.C. – The nation’s leading mortgage company is making it easier for consumers to navigate the Canadian mortgage landscape.

My Mortgage Toolbox is a new mobile app from Dominion Lending Centres designed to be a pocket-sized mortgage guide for everyday Canadians.

A first-of-its-kind for the industry, the app makes it easy for consumers to find a mortgage broker nearest them and get the best mortgage product at the lowest rate available.

“We’re really excited to launch what we see as a game-changing app for the mortgage industry,” said Gary Mauris, President and CEO of Dominion Lending Centres. “The idea behind My Mortgage Toolbox was to make it simple for Canadians to manage the mortgage process by putting all the information they need in the palm of their hand.

My Mortgage Toolbox guides the users while taking away all the stress of getting a mortgage.

Some of the feature of the app include:

• Affordability Calculator
• Minimum Down Payment Calculator
• Total Monthly Ownership Calculator
• Closing Cost Calculator
• A Stress Test Tool to calculate affordability
• Beautiful graphs and illustrations

“We’ve listened to our mortgage professionals who are always looking for better ways to serve their clients, and again we are delivering industry leading tools and technology,” said Dave Teixeira, DLC’s VP of Operations.

The app has also been translated into several languages including English, French, Spanish Chinese and Hindi.

The My Mortgage Toolbox app is available for Apple and Android devices starting today, or by clicking the “My Mortgage Tool” box link on the DLC website www.dominionlending.ca.

For more information about Dominion Lending Centres visit www.dominionlending.ca.

Jeremy Deutsch

Communications Advisor