Thursday 30 July 2015

Hamilton home-buyers, take heart

I was looking at sales numbers for the Hamilton real estate market the other day, and while it still not a buyers' market in any way, we seem to have returned to more normal numbers at least for July.  This could be good news to home buyers if it continues, as the heated spring market made it a bit difficult to buy, with many properties selling over list price in competition.

After two record-breaking months in a row for May and June, I will be watching with interest for July's stats from the REALTORS® Association of Hamilton-Burlington.  But one has to remember that their jurisdiction also stretches from Burlington down to Dunnville - quite an area.  Looking specifically at just districts within the City of Hamilton for the month up to the 25th, sales have actually dropped slightly from the same time period last year coming in 4.7% lower, while new listings are marginally higher with a 2.8% increase.

As seen in the chart above, sales activity has also dropped a fair bit from the peak in the spring market, with the week July  19-25 coming in about 32% lower than the high seen in the week of June 7-13.  I suspect this more normal level of activity will continue through the summer.

While this is a good sign for buyers, there is still a significant listing inventory shortage to overcome before things would turn truly in their favour.  Sellers will likely continue to enjoy a strong position in the market, but if the relief on sales and improvement on listing activity continues buyers might at least find it easier to purchase without bidding wars.

Keep your fingers crossed, but for now stay diligent in your home search..

If you've been thinking about moving or buying your first home but put it off because of the hot market, give me a call and let's talk.

Sunday 19 July 2015

Standard vs Collateral Mortgages - Why it matters to you

Years ago, a house was purchased with a 25 year term mortgage at very low fixed interest rates. There were no mortgage brokers or agents because there was no need for them. Things have changed considerably since then.

Most mortgages today are for a 3 to 5 year term. Qualifying rules are always changing and it keeps getting harder to qualify for a mortgage. This is especially true for first time home buyers, self-employed individuals and retirees living on a limited pension.

But the biggest change by far was the introduction of the collateral mortgage.

Most banks register collateral mortgages at 100% to 125% of the total value of the property regardless of the amount being borrowed. That means all your present and future equity is tied up by the lender. A mortgage broker can provide you with a conventional mortgage that is registered only for the amount you borrowed.

Collateral mortgages are also typically registered at prime plus 10%. If you get sick or injured and fall in arrears, the lender can raise your interest rate by up to 10%, forcing you to sell your home.

With a conventional mortgage, your interest rate cannot be increased for any reason during the term of the mortgage.

Many lending institutions tie all your loans and credit cards together when using collateral mortgages. Even missing a few credit card payments because of being laid off or being ill could trigger the rate increase mentioned in the last section.

Benefits Of Using A Mortgage Broker

•      No cost to you for standard mortgages – lenders pay mortgage brokers
•      We can provide you with a conventional mortgage – the regular mortgage most people think they’re getting
•      We do the negotiating
•      Independent, objective advice – we don’t represent just one lender
•      More lenders to choose from – we have access to 49 different lenders
•      One-stop shopping
•      Ongoing support

Today's entry courtesy of
[Marianne Hobson]
Mortgage Agent Lic#M08004925
Dominion Lending Centres Homestead Financial (Lic#11711)

Tuesday 7 July 2015

MLTT just an opportunistic tax grab?

Tomorrow morning at 9:30am, the Audit, Finance & Administration Committee of Hamilton will be entertaining a motion to have staff examine the possibility of lobbying the provincial government for rights to a local Municipal Land Transfer Tax (MLTT).

The full [meeting agenda] is available on the city site, and the motion is item 9.1.

Currently, the only city in Ontario that has the right to their own taxation of land purchases is Toronto.  That is bad enough.. the last thing we need is this economically damaging tax brought to other municipalities, including ours.

I don't know the thinking behind it, but it's not hard to imagine that there are some at city hall looking at the hot real estate market in Hamilton and thinking how lovely it would be for the city coffers to add this tax to their revenue stream.

Unfortunately, an MLTT takes directly out of the local economy.  For starters, it makes it harder and more expensive to buy property... it's just one more expense on top of all the rest.  Some will decide not to move.  And those who still do will have less cash left in their pocket for all the spin-off business a real estate transaction usually creates - new furniture, painting, renovations and so on.  And that is a direct impact on local businesses of many kinds.
As the motion reads, I would have to acknowledge that so far this is just about "looking into it."  But I don't think there is really any need to look into it.  Toronto has had the tax and there have been studies on the impact on their economy.  In particular, the Ontario Real Estate Association (OREA) had [a study done by Altus Group Economic Consulting].

As a resident of Hamilton concerned about the local economy and the effects such a new tax could have, I urge you to visit OREA's site at [] and consider attending the committee meeting tomorrow morning to show your opposition.

Or if you're not able to attend the meeting, make sure to at least email or tweet your local councilor to express your concern.

And finally, fr those on Twitter, make sure to follow hashtag #NOToMLTT on Twitter.

Rate hikes: not if, but when... (but also if)

One headline suggests interest rates are bound to rise soon, the next suggests they may drop to new lows, and a third suggests no changes anytime soon. This has been the case since rates dropped to 50-year record lows in 2009.

Many were adamant that rates could go no lower at that point, and yet they have, with a few short-lived blips upward, in defiance of all who are calling for a return to normal... whatever normal is now.

Keep in mind that a key driver of interest rates is the economy in general. What drives interest rates down? Economic bad news. What will drive rates up? Economic good news.

Economic good news seems in short supply since 2008.

Interest rates are a very large economic lever, far too large to be used simply to cool the arguably overheated real estate markets of two particular cities (Vancouver and Toronto). Cooling of real estate is addressed not through interest rate hikes, but through policy changes. Most commentators forget that only a few short years ago there existed a 40-year amortization, 100% financing not just for owner-occupied but for investment properties, and variable-rate mortgage qualification based on the three-year fixed discounted rate.

All of those things are gone or changed radically, and reality is that borrowers in 2008 – at nearly double the current interest rates – qualified for larger, and arguably riskier, mortgages than borrowers do today.

Interest rates will not be adjusted based on the detached home frenzy of Toronto and Vancouver. Lending guidelines have already been adjusted accordingly.

Nor is it valid to argue that rates have been so low for so long. How long they remain low is a function of inflationary and deflationary forces in the general economy.

The sign on the streets? Watch for a bunch of our peers spending money like those proverbial sailors on shore leave that we mentioned last month. A brand-new truck in each of your neighbours' driveways, each unloading brand new 80" flatscreeen TV’s... that is what will give the economy a strong boost and shift inflationary numbers into the 'exceeding expectations' category.

Until that time the steady stream of lackluster economic news is likely to serve mortgage holders well. The big beneficiaries will be those in fixed rates approaching renewal dates over the next 12 - 18 months, and those enjoying the ride in their variable rate mortgages.

Be sure to start the renewal conversation with your Broker six months out from the mortgage renewal date. Your current lender may suggest that rates are about to move and locking into something early is the right move, but always consult with your Mortgage Broker first to determine if the move being suggested is right for the lender, or right for you.

Today's entry courtesy of
[Marianne Hobson]
Mortgage Agent Lic#M08004925
Dominion Lending Centres Homestead Financial (Lic#11711)

Monday 6 July 2015

Another month, another "smashed" record in Hamilton real estate

The REALTORS(R) Association of Hamilton-Burlington (RAHB) just released the local real estate market statistics for the month of June, and it has yet again set a new record for total sales.  June's new record at 2062 sales already "smashes" the 1810 sales record just set in May.

This actually doesn't really surprise me.  Besides the anecdotal evidence from working with buyers in the market and having a hard time getting into a lot of properties without them selling first or getting into a bidding war, I also watch Greater Hamilton area numbers from week to week and saw a peak in weekly sales volume higher than I remember seeing before.

If you'd like to read the full report from RAHB, I have it available for [download here].