Victoria Safe from "Bubble," Real Estate Board Says!!

The capital region is largely insulated from economic factors affecting housing in other parts of the country, says the head of the Victoria Real Estate Board, responding to a warning from economists that home prices are showing signs of a "classic bubble."



"The important thing to remember is that real estate is local," board president Dennis Fimrite said Monday. Not only has B.C.'s economy proven stronger than those elsewhere in Canada, the local market is bolstered by the limited amount of land for construction.



"If you look specifically at Victoria, we haven't seen any slowing of the economy here, although there's a little bit of government downsizing. There are still developers who are breaking ground on new projects."



Victoria's economy is protected because this is a retirement town, a government centre with a strong high-tech sector and an attractive place to live, he said.



A new report from Bank of America Merrill Lynch economists Ryan Bohren and Sheryl King said that in contrast to the U.S., Canadian home prices set new highs this year and are "now showing the signs of a classic bubble.



The report estimates the housing market nationwide is 10 per cent overvalued, adding the number would be higher if mortgage rates weren't at record lows. "Under more normalized interest rates, home prices would actually look 25 per cent over-valued based on current prices."



Although Canada is somewhat shielded from the fallout of Europe's debt crisis, it is not impregnable, they said. The housing market is one of the most vulnerable sectors in a weakening economic environment as Canadians head into 2012 holding record debt and the unemployment rate shows potential to rise.



Bohren and King expect housing prices will decrease by about five per cent as demand slows in the first half of next year, with prices flattening by the end of 2012 as economic activity picks up.



However, a grimmer scenario could see home prices slide by 10 per cent if unemployment rises above eight per cent and the S&P/TSX falls below 10,000, the report said.



Greater Victoria's employment rate of 6.1 per cent is better than that for Canada as a whole, at 7.4 per cent.



Last month, a total of 482 properties sold through the Victoria Real Estate Board's multiple listing service. The average price for a single-family house was $592,034 and the median was lower at $530,000. The average price of a condominium was $320,558 and the median was $296,000.

Casey Edge, executive officer with the Canadian Homebuilders Association's Victoria office, noted that Bohren and King singled out the condominium market as being vulnerable, specifically mentioning Toronto. "But if you look at B.C.'s overall housing starts for the year, condos are also driving the B.C. numbers, mostly coming from the Lower Mainland.

Single-family housing starts in most B.C. communities, including Vancouver, have seensignificantdeclines this year, said Edge, blaming the province's harmonized sales tax and transition back to the provincial sales tax. "As a result, single-family-housing starts are the lowest in 10 years."

By the end of the year, Edge expects between 616 and 626 new single-family homes will have been built in 2011 in Greater Victoria. Previously, the lowest number of starts was 629 in 2001, followed by 635 during the 2008-2009 global meltdown.

"The silver lining in this very dark cloud is a buyer's market has emerged," Edge said.

cjwilson@timescolonist.com

Pre approved or Pre qualified?

An explanation.

Both these terms are now used to describe the the action of seeking a mortgage approval before actually negotiating a property purchase. Unfortunately, in most cases, the borrower is not really fully approved for the mortgage and the lender does little or nothing to actually qualify the borrower.

What really happens is that the typical lender now provides an interest rate guarantee for a period of time, usually to a maximum of 120 days. The borrower is advised that they are pre approved and can begin shopping for a home.

At the pre approval stage, many lenders do not review credit or even determine if the client meets their guidelines for income and down payment. Lenders begin the actual qualification process when the file goes 'live' (meaning the Borrower now has an accepted Contract of Purchase). At this point the lender will begin a serious examination of the borrower's qualifications and may refuse to proceed with the pre approved mortgage for a wide variety of reasons. Because of this, it is very important for purchasers to keep their offer to purchase 'subject to mortgage approval'.

If rates have risen since the original pre approval and the lender now declines the mortgage, the client may no longer be able to get as good a rate elsewhere. Borrowers can reduce the chance of disappointment and get full approval faster by working with a professional Mortgage Broker early in the process. A broker will often recognize potential concerns and address them directly with lenders at the time the pre approval is requested. It may even be prudent to gather employment and income documentation at this stage, particularly for individuals who are self-employed or have had changes or inconsistencies in income or employment. Gathering documents early also helps reduce stress and waiting time after that hard search for the right property at the right price!

Your Mortgage Broker is an experienced professional and will assist in reviewing and advising you in the process. You will be doing yourself a favour by reviewing your situation with a Mortgage Broker before you write that offer!

lawlessbrown.com

JUNE 1 HIKE IN QUESTION

By Claire Sibonney Reuters

The negative news has led many to question whether Bank of Canada will start raising rates from their current record lows on June 1.

Yields on overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, have fallen in recent weeks and on Wednesday indicated just a 51 percent chance of a June 1 rate increase.

On April 20, when the bank removed its conditional pledge to keep interest rates on hold until the end of June, the market priced in more than a 90 percent likelihood.

Currencies tend to strengthen as interest rates rise as higher rates often attract capital flows.

"Even with the ongoing uncertainty, the Canadian situation warrants a small move toward more normal rates so I wouldn't unwind the forecast just yet," said Craig Wright, chief economist at Royal Bank of Canada., whose bank was the last primary dealer to join the call for a June 1 move.

"We're really just looking at a 25 basis point adjustment ... tapping of the brakes rather than slamming them on."

lawlessbrown.com

Economic recovery is in eye of beholder

Vancouver Sun May 3, 2010


Economists assure us that an economic recovery is underway and have the figures to prove it. Most of the major indicators -- gross domestic product, retail sales, merchandise exports, corporate profits, manufacturing, wholesale trade and residential construction -- are up. But the latest reading of consumer confidence suggests Canadians aren't convinced.

In fact, the Conference Board of Canada's consumer confidence index plunged in April, with the number of people saying their financial situation was worse now than six months ago increasing by 4.7 points, to 24.2%. That level is little changed from the depths of the recession.

In B.C., the euphoria of the 2010 Winter Olympic Games quickly dissipated and the 26-point jump in confidence in March turned into a nosedive of 28 points in April.

The disparity between statistics and sentiment is striking.

The economy is growing. The Bank of Canada recently raised its forecast for GDP growth to 3.7% this year. And jobs are being created. Employment was up by 18,000 in March, bringing total gains since July 2009 to 176,000. Yet the confidence survey found that the number who thought there would be more jobs in their communities six months from now declined, while the number who expected fewer jobs rose.

Why the gloom? For a start, the unemployment rate remains unchanged, at 8.2%, and employment gains for youth and men aged 25 to 54 were not significant; most of the gains were among women aged 25 to 54 and men over 55. Talk of recovery is moot for those whose jobs were wiped out in the recession and haven't come back.

The threat of higher interest rates is also putting a damper on consumers' enthusiasm. In advance of an anticipated quarter-to half-point hike in the key overnight rate by the central bank in June, mortgage rates are already rising rapidly and homeowners due to renew or holding variable-rate mortgages face higher housing costs. Indeed, the high level of consumer debt, including mortgage debt, is seen by many economic pundits as a major risk to the recovery.

An even darker cloud on the global economy is sovereign debt. Greece's debt has been downgraded by Standard & Poor's to junk status, a move that sank oil prices, rattled stock markets and sliced a penny from the value of the Canadian dollar as investors fled to the relative safety of the U.S. dollar.

Portugal's credit rating has also been cut a notch, and more than a few observers are worried that the European debt crisis could spiral out of control.

Most developed countries are now running budget deficits, and their governments are counting on robust economic growth to balance the books.

And it's not only consumers who are concerned the recovery isn't all it's cracked up to be.

Export Development Canada, the Crown agency that supports Canadian exporters, said in a report this week that recovery remains elusive and still depends on government stimulus spending. Though merchandise exports were up in April, they are 23% below July 2008's peak.

"What we have going for us right now might not be enough to keep us from a possible dip in growth in the second half of this year," said Peter Hall, EDC's chief economist.

In short, there's no doubt that the technical recession is over. Whether the recovery is sustainable is the big, unanswerable question.

lawlessbrown.com

Our November Newsletter - Victoria BC

Every month we publish a newsletter with great info about the Real Estate market in British Columbia and more specifically Victoria BC. If you would like to receive our newsletter for free, contact us at Lawless Brown Mortgage Depot or more specifically at krista@lawlessbrown.com.

Enjoy!

Click Here for Our OUR NOVEMBER NEWSLETTER!

Victoria-area house sales take off

Multiple offers are starting to return as buyers flock back to the market

By Carla Wilson, Times Colonist July 3, 2009

Victoria area house sales are taking off.

Buyers returned to the market in droves last month, as the total number of property sales in Greater Victoria hit the fifth-highest monthly level since 1991.

June saw 946 sales through the Greater Victoria Real Estate Board's Multiple Listing Service. The sales represented mostly capital region residential properties, but also included some out-of-town properties and a dozen commercial sales.

Everything from single-family homes to lots and manufactured homes is included.

"I was quite astounded," Michael Holmes, Pemberton Holmes managing broker, said yesterday.

The robust market, where multiple offers are showing up again, likely reflects pent-up demand and low interest rates, Holmes said, adding strong sales in other parts of the country translate into sales in the capital region when people move to Greater Victoria.

In the capital region's most recent real estate boom, in May 2007, sales hit 963, followed by June of that year at 949.

The previous high was set in May 1991 with 1,083 sales, while April 1991 saw 1,003 sales, said Chris Markham, Victoria Real Estate Board president.

"We're on fire," Markham said.

The total value of all June sales was $447.6 million.

"This takes me right back to 2006-2007," he said, referring to years when the local market was hot.

June sales reflect a 31 per cent increase from 723 in June 2008, and are up by seven per cent from May 2009, when 879 properties changed hands.

Markham said the market has been growing stronger for the past couple of months as many people who were waiting to see which direction the market would move have decided it's time to buy.

"Housing that we didn't sell last year, we are seeing multiples [offers] at the same price level."

This isn't a market of speculators, Markham said. Normally, 75 per cent of buyers are from within the region, but he believes that number is higher now.

After a "brutal" January and February, sales numbers have been steadily climbing.

The strongest part of the market is in the $600,000-and-lower price range, Markham said.

Many condominium projects were built in the capital region and inventory is "clearing out nicely," Markham said.

The average price of a single-family house sold through the board's Multiple Listing Service increased to $588,186 last month, up from $573,442 in May. The median in June was $529,900.

Saanich East led the region in the number of total single-family sales, at 94, followed by Langford at 60, and Victoria at 42.

The average price for condominiums edged down to $298,200 in June. May's average was $306,971. The median in June was $275,000.

Victoria had the highest number of condo sales, at 99, followed by Langford at 40.

Townhomes saw an average price increase, rising to $413,218 in June, up from $400,788 in May. The median remained the same month-over-month at $375,000.

Last month brought 26 sales of more than $1 million, including one Uplands home sold for more than $5 million, the board said.

Inventory has tightened up since June of last year, helping drive demand. Last month, there were 3,794 properties for sale, a decrease of 16 per cent from the 4,513 on the market in June 2008.

"The drop in available inventory is also reflected in the price increases for single-family homes and townhomes that we saw

last month," Markham said.

cjwilson@tc.canwest.com

BC Housing Market Stabilizes

A year-long buyers’ market in B.C. real estate came to an end in May, according to Central 1 Credit Union’s analysis of the lastest market activity.

Tumbling prices have kept many sellers off the market, and new listings are now at their lowest level in six years, but sales have now climbed for five consecutive months. For the first time in more than a year there is now one sale for each two new listings, an indicator of a market where neither buyers nor sellers have a distinct advantage.

“Record low mortgage rates together with last year’s price declines have driven up affordability and demand, while supply has come down from the highs of 2008,” Central 1 says in its weekly economic briefing.

But credit union economists say the the stronger MLS housing market is likely to cool off again by this fall, before the B.C. economy is expected to begin growing again by early 2010.

“Pent-up demand left over from last year’s slowdown will ease, likely within a few months. Two- to five-year fixed mortgage rates are forecast to rise 30 to 40 basis points by year-end, disqualifying some low-equity buyers.”

Tri-City News

Respectfully,

Krista and Sherri
Lawless Brown Mortgage Team