Why buy? Two out of three Canadian families own a home – that's one of the highest rates of home ownership in the world. And for good reason.
It's a great investment. And with increasing house prices over the long-run, it's all the more important for first-time buyers to get a foot on the first rung of the property ladder.
Did you know that...
• Homeownership is the single largest source of savings for Canadian households.• Unlike other investments, which can be quite volatile, the increase in the value of homes is relatively steady. The average house price in Canada has increased every year since 1998.• Homeowners can use the equity in their homes as security for other loans.• Building equity in your first home is the first step on the property ladder. It gets you into the market, keeps you in touch with increasing house prices, and puts you in a good position to trade up to bigger and better houses as your circumstances allow.
Want to know more about the first-time homebuyers market? Take a look at the Royal LePage First-time Homebuyers' Report. It's a great source of information about trends and activity in major markets across Canada.
Wednesday, January 27, 2010
Sunday, January 24, 2010
JUST SOLD! Lawn Care Business
JUST SOLD! Be your own boss, low overhead- run from home. Lawn care business in South Surrey since 1997. Serving affluent neighbourhood. Regular, loyal clients many that pre-pay for services in the winter for the following spring. They support the use of Integrated Pest Management (IPM), which incorporates mechanical and natural lawn care practises. Such as core aeration, power raking, proper cutting techniques and sufficient watering to help grow health turf. Lawn care products are biodegradable and naturally break down with the aid of sun, water and soil. Includes truck, equipment, computer software. Average sales of $95,0000. In business for over 12 years.
Retirement Properties- Part 1
What should I consider as I plan my retirement?For active older Canadians, retirement opens up a whole new world of opportunities and one of those opportunities is finding the perfect retirement home.
It's not an easy decision. For many retirees, leaving their family home is an overwhelming experience both physically and emotionally. Preparing yourself before you make your move can make all the difference in the world.
Before you start looking, here are some things to consider:
Do I want to stay in the same neighbourhood? It's been your home for years. Can you leave behind friends and acquaintances and say goodbye to your trusted doctors, friendly shopkeepers, and familiar surroundings?
Where would I really like to live? Do you want the diversity and cultural opportunities of a major metropolitan city? Is it time for that home in the country? Can you bear the Canadian winter?
How much can I afford? You have many years to look forward to, but your income is going to be relatively fixed. A good financial plan can help you decide what you can afford, not just now, but in ten or twenty years from now as well.
What sort of lifestyle do I want? Retirement living offers all sorts of possibilities, from owning your own home, to living in a community, to joining a retirement community. Which one fits your lifestyle? Is it the small bungalow so you can have your own garden or the condominium that does all the maintenance for you? Each has its benefits and each has its drawbacks.
Where will I be in ten years time? Ideally, the perfect retirement home is one that will accommodate your needs as they change over the next few years and reduce the chance of having to make another move when you may be less prepared.
Once you've determined that you're ready to take the plunge, there is an abundance of options available to you.
It's not an easy decision. For many retirees, leaving their family home is an overwhelming experience both physically and emotionally. Preparing yourself before you make your move can make all the difference in the world.
Before you start looking, here are some things to consider:
Do I want to stay in the same neighbourhood? It's been your home for years. Can you leave behind friends and acquaintances and say goodbye to your trusted doctors, friendly shopkeepers, and familiar surroundings?
Where would I really like to live? Do you want the diversity and cultural opportunities of a major metropolitan city? Is it time for that home in the country? Can you bear the Canadian winter?
How much can I afford? You have many years to look forward to, but your income is going to be relatively fixed. A good financial plan can help you decide what you can afford, not just now, but in ten or twenty years from now as well.
What sort of lifestyle do I want? Retirement living offers all sorts of possibilities, from owning your own home, to living in a community, to joining a retirement community. Which one fits your lifestyle? Is it the small bungalow so you can have your own garden or the condominium that does all the maintenance for you? Each has its benefits and each has its drawbacks.
Where will I be in ten years time? Ideally, the perfect retirement home is one that will accommodate your needs as they change over the next few years and reduce the chance of having to make another move when you may be less prepared.
Once you've determined that you're ready to take the plunge, there is an abundance of options available to you.
Monday, January 18, 2010
Viewing Homes
What should I look for when viewing a home?You pull up to the curb and there it is – the home of your dreams.
Calm down. Take a deep breath and start again. The hardest thing to do when looking for a home is to remain objective. It is easy to fall in love with a home's appearance, but it's very important to look beyond the window dressing.
Here are some things to consider when looking at a home:
General upkeep: First appearances do count. Is the home dirty and cluttered? Are the lawns uncut? Are the walls chipped and in need of paint? If the owner hasn't bothered to keep the house looking clean and attractive, what problems are lurking below the surface?
Water leaks: Water can do a lot of damage to a home. It rots wood, undermines foundations, and leads to mould and mildew. Reshingling a house, or repairing a cracked foundation to stop water leaks, can be extremely expensive.It takes an expert eye to find most water leaks (which is why we recommend you have a house inspected before you buy). If you spot stains, bulges and other signs of water damage on ceilings or walls, make special note that there could be a problem.
Appliances and fixtures:Test the lights, faucets, toilets, furnace, air conditioning, and all major appliances that are to be included with the home. Make sure everything is working as it should.
Floors:Floors should be smooth, even, and solid. Soft springy sections, excessive squeaking, and unevenness are all indications that expensive repairs may be needed.
Doors and windows:Check that doors and windows fit snugly and operate smoothly. Look for flaked paint and loose caulking. Check for drafts.
Drainage:Walk around the yard looking for areas where water might collect. Soggy areas near the foundation indicate poor drainage.
Grout and caulking:If the grout and caulking around bathroom and kitchen tiles are loose and crumbling, there is a good chance water is finding its way into the wall or under the floor.
Structural:Look for deep cracks in the foundations or loose mortar and bricks.
FurnishingsIf you are not planning to replace all of your furniture (and not many people are), make sure it will fit into the rooms of the new house. Be sure to bring a measuring tape. Rooms can be deceptive.
Storage space Make sure your new house has enough storage space for all your belongings. And that means more than just your clothes. Think of all the things that need to find a home – tools, gardening equipment, old toys, sports equipment, and all those wedding presents that are still in their original boxes. Check the size of the closets, the attic, the basement, and the garage. Rule of thumb: there's never enough storage space.
InspectionYou should take a long hard look at a house before you put in an offer to protect yourself from disappointment down the road. But, nothing can replace the expert opinion of a qualified home inspector. Inspectors can spot problems that the average person would never find and they can usually advise you on how much it will cost to make the repairs.
Calm down. Take a deep breath and start again. The hardest thing to do when looking for a home is to remain objective. It is easy to fall in love with a home's appearance, but it's very important to look beyond the window dressing.
Here are some things to consider when looking at a home:
General upkeep: First appearances do count. Is the home dirty and cluttered? Are the lawns uncut? Are the walls chipped and in need of paint? If the owner hasn't bothered to keep the house looking clean and attractive, what problems are lurking below the surface?
Water leaks: Water can do a lot of damage to a home. It rots wood, undermines foundations, and leads to mould and mildew. Reshingling a house, or repairing a cracked foundation to stop water leaks, can be extremely expensive.It takes an expert eye to find most water leaks (which is why we recommend you have a house inspected before you buy). If you spot stains, bulges and other signs of water damage on ceilings or walls, make special note that there could be a problem.
Appliances and fixtures:Test the lights, faucets, toilets, furnace, air conditioning, and all major appliances that are to be included with the home. Make sure everything is working as it should.
Floors:Floors should be smooth, even, and solid. Soft springy sections, excessive squeaking, and unevenness are all indications that expensive repairs may be needed.
Doors and windows:Check that doors and windows fit snugly and operate smoothly. Look for flaked paint and loose caulking. Check for drafts.
Drainage:Walk around the yard looking for areas where water might collect. Soggy areas near the foundation indicate poor drainage.
Grout and caulking:If the grout and caulking around bathroom and kitchen tiles are loose and crumbling, there is a good chance water is finding its way into the wall or under the floor.
Structural:Look for deep cracks in the foundations or loose mortar and bricks.
FurnishingsIf you are not planning to replace all of your furniture (and not many people are), make sure it will fit into the rooms of the new house. Be sure to bring a measuring tape. Rooms can be deceptive.
Storage space Make sure your new house has enough storage space for all your belongings. And that means more than just your clothes. Think of all the things that need to find a home – tools, gardening equipment, old toys, sports equipment, and all those wedding presents that are still in their original boxes. Check the size of the closets, the attic, the basement, and the garage. Rule of thumb: there's never enough storage space.
InspectionYou should take a long hard look at a house before you put in an offer to protect yourself from disappointment down the road. But, nothing can replace the expert opinion of a qualified home inspector. Inspectors can spot problems that the average person would never find and they can usually advise you on how much it will cost to make the repairs.
Saturday, January 16, 2010
Receiving an Offer
How does my Royal LePage REALTOR® help me manage my offers?A buyer interested in purchasing your property will make an offer and, as an act of good faith, put down a deposit.
The buyer's REALTOR® communicates the offer, sometimes known as an Offer to Purchase (a legal document specifying the offers terms and conditions) to you or your representative. The offer states how much the buyer is willing to pay and details the conditions. The offer can be firm or conditional.
Firm Offer to Purchase: Usually preferable to the seller, because it means that the buyer will purchase the home without any conditions. If the offer is accepted, the house is sold.
Conditional Offer to Purchase: Means the buyer has placed one or more conditions on the purchase, such as subject to home inspection, subject to financing, or subject to the sale of buyer's existing home. The home is not sold until all the conditions have been met. The seller can accept the offer, reject the offer, or make a counter offer.
Acceptance: The seller agrees to all the terms and conditions exactly as set forth in the Offer to Purchase.Rejection: The seller does not agree with any of the terms and conditions set forth in the Offer to Purchase.
Counter offer: The seller agrees with some of the terms and conditions of the offer, but not all of them. The seller then makes a counter offer. The counter offer may change the price, the closing date, or add or delete conditions. When the buyer receives the counter offer, he or she can accept the new terms and conditions or reject them.
A signed offer is a binding contract. Make sure you understand and agree to all of the terms before you sign. You may want to have a lawyer review the offer first.
The buyer's REALTOR® communicates the offer, sometimes known as an Offer to Purchase (a legal document specifying the offers terms and conditions) to you or your representative. The offer states how much the buyer is willing to pay and details the conditions. The offer can be firm or conditional.
Firm Offer to Purchase: Usually preferable to the seller, because it means that the buyer will purchase the home without any conditions. If the offer is accepted, the house is sold.
Conditional Offer to Purchase: Means the buyer has placed one or more conditions on the purchase, such as subject to home inspection, subject to financing, or subject to the sale of buyer's existing home. The home is not sold until all the conditions have been met. The seller can accept the offer, reject the offer, or make a counter offer.
Acceptance: The seller agrees to all the terms and conditions exactly as set forth in the Offer to Purchase.Rejection: The seller does not agree with any of the terms and conditions set forth in the Offer to Purchase.
Counter offer: The seller agrees with some of the terms and conditions of the offer, but not all of them. The seller then makes a counter offer. The counter offer may change the price, the closing date, or add or delete conditions. When the buyer receives the counter offer, he or she can accept the new terms and conditions or reject them.
A signed offer is a binding contract. Make sure you understand and agree to all of the terms before you sign. You may want to have a lawyer review the offer first.
Friday, January 15, 2010
JUST SOLD! Family Home in Surrey
JUST SOLD! Nicely decorated with warm colours with a blend of carpets, tiles and wood. Bright and open 2 level plus full walkout basement with a 2 bedroom suite, separate laundry plus a media room or recroom for the upstairs. The suite has an laminate flloring and a nice kitchen We have 9' ceilings, amazing woodwork detail, newer carpets ..nice staircase leading to 4 bedrooms up with ensuites for all, full bathroom on the main and a bedroom/office with closet. . Large fenced private backyard with garden shed. Come and take a look, you will be impressed. Not many homes out there offering these benefits.
Thursday, January 14, 2010
Residential Real Estate Legal Ffees
Legal Costs Legal costs for a purchase with a mortgage usually range from $800 – $1,100 regardless of whether the buyer retains the services of a Lawyer or Notary Public. It is important for the buyer to understand what is or is not included in a quote and what might be added as additional charges. Costs that are usually included in a quote are professional fees, land title search and registration fees and miscellaneous office disbursements. GST and PST are usually added to fees and disbursements as with other services and products.Third Party
Closing Costs These costs are usually quoted separately from “Legal Costs” as they vary from one transaction to another. For example, the lawyer or notary will need to obtain a Municipal tax certificate, the cost of which varies from $25 to $50 depending on the municipality. Similarly the lawyer or notary will obtain an insurance binder showing loss payable to the lender, the cost of which varies but usually ranges from $25 to $35. Finally, for strata title property, the lawyer or notary will require a Form F stating there are no arrears in maintenance fees, the cost of which varies but usually ranges from $25 to $35. The Strata Corporation may also charge a “Move-In” fee which usually ranges from $50 to $200.Many lenders will require the lawyer or notary to obtain on behalf of the buyer a Survey Certificate, Title Insurance or Western Law Societies Conveyancing Protocol. A Survey Certificate is used by the lender to ensure that the buildings on the property do not encroach on adjoining property or into “set backs”. If a Survey Certificate is not available lenders may accept Title Insurance or the Western Law Societies Conveyancing Protocol. Title Insurance and Western Law Societies Conveyancing Protocol provide insurance to protect the lender from any encroachments that would have been identified by a survey certificate. Title Insurance has some additional coverage that may be important to a buyer. The cost for a new Survey Certificate or Title Insurance for mortgages less than $500,000 usually ranges from $200 to $250. In the event of a subsequent refinancing an owner may need to buy a new Title Insurance policy. Most law firms will charge only a nominal fee for the Western Law Societies Conveyancing Protocol. It is important to review with your lawyer or notary the appropriateness of each product to your situation.
Closing Adjustments Closing adjustments cover a number of items including municipal taxes, municipal water and sewer fees, strata maintenance fees, rent and security deposits.Strata fees are charged and paid monthly on the first day of each month. The monthly strata fees will be pro rated between the buyer and the seller, with the buyer reimbursing the seller based on the number of days between the date of adjustments agreed to in the Contract of Purchase and Sale and the last day of the month.Rent is adjusted on a similar basis with the buyer receiving a credit for a portion of the rent. In the case of a continuing tenancy, the buyer will receive a credit for the security deposit with accrued interest as the buyer will be responsible for reimbursing the correct amount when the tenant vacates at a later date.Municipal property taxes will also be adjusted. Property taxes are based on a calendar year. Some municipalities such as Vancouver provide for an advance payment in February with the balance due and owing usually at the beginning of July. Other municipalities do not have an advance tax payment but the full years taxes are payable usually at the beginning of July.The adjustment between buyer and seller will therefore vary depending on the time of year of closing of the transaction and the municipality in which the property is located. The tax adjustment is one of the more complicated adjustments to understand but it is based on the parties being responsible for any costs associated with the property only for the period of time in which they are in possession.These adjustments are set out in a document normally referred to as the Statement of Adjustments. The Statement of Adjustments sets out the buyers total costs and identifies the sources of funds to pay these costs. The sources of funds will include the initial down payments pursuant to the Contract of Purchase and Sale, the Mortgage proceeds, any credits in terms of rent, tax or other adjustments. The final line item on the Statement of Adjustments will identify the amount of money required to complete the transaction. The balance required to complete will need to be delivered by certified cheque or bank draft payable in trust to the lawyer or notary firm.
Closing Costs These costs are usually quoted separately from “Legal Costs” as they vary from one transaction to another. For example, the lawyer or notary will need to obtain a Municipal tax certificate, the cost of which varies from $25 to $50 depending on the municipality. Similarly the lawyer or notary will obtain an insurance binder showing loss payable to the lender, the cost of which varies but usually ranges from $25 to $35. Finally, for strata title property, the lawyer or notary will require a Form F stating there are no arrears in maintenance fees, the cost of which varies but usually ranges from $25 to $35. The Strata Corporation may also charge a “Move-In” fee which usually ranges from $50 to $200.Many lenders will require the lawyer or notary to obtain on behalf of the buyer a Survey Certificate, Title Insurance or Western Law Societies Conveyancing Protocol. A Survey Certificate is used by the lender to ensure that the buildings on the property do not encroach on adjoining property or into “set backs”. If a Survey Certificate is not available lenders may accept Title Insurance or the Western Law Societies Conveyancing Protocol. Title Insurance and Western Law Societies Conveyancing Protocol provide insurance to protect the lender from any encroachments that would have been identified by a survey certificate. Title Insurance has some additional coverage that may be important to a buyer. The cost for a new Survey Certificate or Title Insurance for mortgages less than $500,000 usually ranges from $200 to $250. In the event of a subsequent refinancing an owner may need to buy a new Title Insurance policy. Most law firms will charge only a nominal fee for the Western Law Societies Conveyancing Protocol. It is important to review with your lawyer or notary the appropriateness of each product to your situation.
Closing Adjustments Closing adjustments cover a number of items including municipal taxes, municipal water and sewer fees, strata maintenance fees, rent and security deposits.Strata fees are charged and paid monthly on the first day of each month. The monthly strata fees will be pro rated between the buyer and the seller, with the buyer reimbursing the seller based on the number of days between the date of adjustments agreed to in the Contract of Purchase and Sale and the last day of the month.Rent is adjusted on a similar basis with the buyer receiving a credit for a portion of the rent. In the case of a continuing tenancy, the buyer will receive a credit for the security deposit with accrued interest as the buyer will be responsible for reimbursing the correct amount when the tenant vacates at a later date.Municipal property taxes will also be adjusted. Property taxes are based on a calendar year. Some municipalities such as Vancouver provide for an advance payment in February with the balance due and owing usually at the beginning of July. Other municipalities do not have an advance tax payment but the full years taxes are payable usually at the beginning of July.The adjustment between buyer and seller will therefore vary depending on the time of year of closing of the transaction and the municipality in which the property is located. The tax adjustment is one of the more complicated adjustments to understand but it is based on the parties being responsible for any costs associated with the property only for the period of time in which they are in possession.These adjustments are set out in a document normally referred to as the Statement of Adjustments. The Statement of Adjustments sets out the buyers total costs and identifies the sources of funds to pay these costs. The sources of funds will include the initial down payments pursuant to the Contract of Purchase and Sale, the Mortgage proceeds, any credits in terms of rent, tax or other adjustments. The final line item on the Statement of Adjustments will identify the amount of money required to complete the transaction. The balance required to complete will need to be delivered by certified cheque or bank draft payable in trust to the lawyer or notary firm.
Sunday, January 10, 2010
Tax Tips!
With the rush of the holiday season and New Year’s celebrations now over, many Canadians are turning their attentions to their taxes. Following are some useful tips to help simplify your 2009 tax filing process and get the most out of future returns.
While the 2009 tax filing deadline is months away, January is often the best time of year for Canadians to evaluate their overall tax strategies, especially as time will run out to realize a variety of tax-saving opportunities early this year.
Advice for homeowners and prospective homebuyers: In 2009, significant tax changes were introduced in the federal budget to benefit homeowners, prospective homeowners and even homeowners who renovated their home, cottage or condo. These include: changes made to the RRSP Home Buyers’ Plan; eligibility for the new non-refundable First-Time Home Buyer’s Tax Credit; and the Home Renovation Tax Credit (HRTC).A $5,000 increase to the RRSP Home Buyers’ Plan means that first-time homebuyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.
The First-Time Home Buyer’s Tax Credit includes a $750 tax credit for first-time homebuyers to help with closing costs, such as legal fees, disbursements and land transfer taxes.And if you’ve been thinking about doing some home renovations, keep in mind that the 15% HRTC of up to $1,350 only applies to eligible home renovation expenses undertaken before February 1st, 2010.
RRSP Contributions: A Registered Retirement Savings Plan (RRSP) continues to be one of the best tax shelters available to the average taxpayer. Eligible RRSP contributions are deducted directly from income reported on your tax return.This means that you save taxes at your marginal rate, which may be up to 50%, depending on your income level and province of residence. In addition to the initial tax savings when the contributions are deducted, all income earned inside the RRSP accumulates tax-free until the money is withdrawn.Remember that you have 60 days after the calendar year to make a contribution that qualifies for a tax deduction for that year.
RESP Contributions: Registered Education Savings Plans (RRSPs) allow people to save for the post-secondary education of children or grandchildren on a tax sheltered basis while reducing taxable income. There are, of course, other advantages to RESPs. With an RESP contribution of $2,500 per child, the federal government will contribute $500 in the form of the Canada Education Savings Grant to the RESP. If a client has prior non-contributory years, the annual grant can be as much as $1,000 in respect of a $5,000 contribution.
Do You Have a TFSA? With the introduction of Tax-Free Savings Accounts (TFSAs) on January 1st, 2009, 26 million Canadians aged 18 and older received $5,000 in tax-free contribution room from the federal government. On January 1st, 2010, an additional $5,000 in tax-free contribution room was added to each account. Now is an excellent time to discuss your options for making the most of this new contribution room.
Remember that it’s important to review your overall tax-planning strategy with a professional to ensure you’re making the most of any opportunities available to you, especially as a result of new savings and investment vehicles, credits and policy changes that came into effect for the first time in 2009.
While the 2009 tax filing deadline is months away, January is often the best time of year for Canadians to evaluate their overall tax strategies, especially as time will run out to realize a variety of tax-saving opportunities early this year.
Advice for homeowners and prospective homebuyers: In 2009, significant tax changes were introduced in the federal budget to benefit homeowners, prospective homeowners and even homeowners who renovated their home, cottage or condo. These include: changes made to the RRSP Home Buyers’ Plan; eligibility for the new non-refundable First-Time Home Buyer’s Tax Credit; and the Home Renovation Tax Credit (HRTC).A $5,000 increase to the RRSP Home Buyers’ Plan means that first-time homebuyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.
The First-Time Home Buyer’s Tax Credit includes a $750 tax credit for first-time homebuyers to help with closing costs, such as legal fees, disbursements and land transfer taxes.And if you’ve been thinking about doing some home renovations, keep in mind that the 15% HRTC of up to $1,350 only applies to eligible home renovation expenses undertaken before February 1st, 2010.
RRSP Contributions: A Registered Retirement Savings Plan (RRSP) continues to be one of the best tax shelters available to the average taxpayer. Eligible RRSP contributions are deducted directly from income reported on your tax return.This means that you save taxes at your marginal rate, which may be up to 50%, depending on your income level and province of residence. In addition to the initial tax savings when the contributions are deducted, all income earned inside the RRSP accumulates tax-free until the money is withdrawn.Remember that you have 60 days after the calendar year to make a contribution that qualifies for a tax deduction for that year.
RESP Contributions: Registered Education Savings Plans (RRSPs) allow people to save for the post-secondary education of children or grandchildren on a tax sheltered basis while reducing taxable income. There are, of course, other advantages to RESPs. With an RESP contribution of $2,500 per child, the federal government will contribute $500 in the form of the Canada Education Savings Grant to the RESP. If a client has prior non-contributory years, the annual grant can be as much as $1,000 in respect of a $5,000 contribution.
Do You Have a TFSA? With the introduction of Tax-Free Savings Accounts (TFSAs) on January 1st, 2009, 26 million Canadians aged 18 and older received $5,000 in tax-free contribution room from the federal government. On January 1st, 2010, an additional $5,000 in tax-free contribution room was added to each account. Now is an excellent time to discuss your options for making the most of this new contribution room.
Remember that it’s important to review your overall tax-planning strategy with a professional to ensure you’re making the most of any opportunities available to you, especially as a result of new savings and investment vehicles, credits and policy changes that came into effect for the first time in 2009.
Friday, January 8, 2010
Home Tips: ceiling fans
Ceiling Fan Tips:
Some ceiling fans can turn either clockwise or counter-clockwise. In the summer, you want the air to blow directly downward, to create a cooling effect. Reverse the ceiling fan in the winter so it blows upward. This will help move the warm air from the ceiling, down the edges of the walls for more even comfort, without a draft.
Some ceiling fans can turn either clockwise or counter-clockwise. In the summer, you want the air to blow directly downward, to create a cooling effect. Reverse the ceiling fan in the winter so it blows upward. This will help move the warm air from the ceiling, down the edges of the walls for more even comfort, without a draft.
Wednesday, January 6, 2010
Canadian Mortgages
Newspaper editorials have been overflowing lately with speculation on how rising rates may lead to a surge in mortgage defaults. In response to this issue, CIBC Economist Benjamin Tal released a report that took a closer look at the facts and determined history doesn’t support this premise.
Below is a summary of Tal’s report.House Prices – Some Overshooting:
Over the past two years, the degree of volatility observed in the Canadian housing market has been unprecedented. Within this short timeframe, house prices fell by almost 13%, only to rebound by an impressive 21%.Meanwhile, resale activity is now rising by close to 67% on a year-over-year basis after falling by close to 40% in 2008. Housing starts are presently 33% higher than in April 2009 despite dropping by more than 50% earlier in the recession.
In fact, no other segment of the economy has rebounded as fast as the housing market, making it one of the real surprises of this recession. This rapid uptick in housing activity, in the face of recessionary conditions elsewhere in the economy, raises concerns about its sustainability, and is causing some to wonder whether house prices are, in fact, rising too quickly given current economic fundamentals.
Tal estimates that the Canadian housing market as a whole is indeed beginning to overshoot its “fair value”. At just under $350,000, the current average price of a home is estimated to be roughly 7% over what would be consistent with current housing market fundamentals such as interest rates, income growth, rents and demographics.
But this modest overshooting is far from uniform across the country. Those figures are skewed to western Canada, which has seen the most dramatic swings in house prices over the past 24 months. That market now appears to be overvalued by roughly 10-15%, suggesting that the imbalance in the rest of the country is much more modest.Note, however, that overvaluation does not necessarily mean a bubble or a dramatic price correction. Given that the current overvaluation is occurring in a context of historically low interest rates, what we are most likely witnessing is a temporary period of exuberance that is “borrowing” activity from the future, as households take advantage of lower rates and accelerate their borrowing and home purchasing activities.
To the extent that current activity is simply a redistribution of sales from the future to the present, the housing market of tomorrow may be in store for a more muted level of activity. Housing starts will also catch up with the sudden spurt in demand, with the increase in supply helping to moderate price trends. Rather than plunging, house prices are more likely to stagnate in coming years (or fall modestly in the most overheated markets) as fundamentals catch up with a market that has gotten ahead of itself.
What Worries the Bank of Canada?Rather than house prices, it is the accelerated pace of borrowing at very low rates that is beginning to raise some concerns at the Bank of Canada. For the first time in the post-war era, real household credit continued to expand through a recession. In fact, mortgage credit is now rising at a year-over-year rate of more than 7%.
This strong performance is a clear reflection of an extremely effective monetary policy in Canada. With Canadian consumer confidence only 10 points below its pre-recession level (versus a 50% decline in the US), Canada is benefiting not only from properly functioning credit channels, but also from a household sector that is willing and able to take on new credit.Remember that low rates only work as an economic stimulus if Canadians take advantage of them. The wave of borrowing does, however, have consequences in terms of consumer debt levels. The household debt-to-income ratio is now at a new all-time high of more than 140%.
Despite a record low 4.4% effective mortgage rate, overall mortgage interest payments as a share of after-tax income are now at levels that in the past were consistent with a 6% effective mortgage rate. Since rates will no doubt at some point return to those higher levels, the Bank of Canada is worried that Canadians are making themselves increasingly more vulnerable in terms of their ability to continue to service these new, higher debt loads.
How Big is the Problem?The relevant question, however, is just how serious a problem it is becoming, and here we have to dig a bit deeper to get the answers. Aside from an unlikely scenario of a 1970s-type stagflation, any future increase in interest rates will be in response to an improving economy. As such, any analysis of the potential impact of higher rates on the household sector in general, and the housing market in particular, should be done with tomorrow’s healthier economy in mind.After all, the reality is that, in the past, interest rates have played only a minor role in driving mortgage default rates. Historically, it’s clear that mortgage arrear rates are highly correlated with the unemployment rate, with little or no correlation with changes in interest rates. The same goes for the economy in general. Over the past three decades, personal bankruptcies have risen twice as fast in an environment of falling interest rates than in an environment of rising rates.
And the logic here is obvious – interest rates rise when the economy recovers, and the benefits to employment and incomes of an improving economy easily offset the sting of higher interest rates on debt service costs
Below is a summary of Tal’s report.House Prices – Some Overshooting:
Over the past two years, the degree of volatility observed in the Canadian housing market has been unprecedented. Within this short timeframe, house prices fell by almost 13%, only to rebound by an impressive 21%.Meanwhile, resale activity is now rising by close to 67% on a year-over-year basis after falling by close to 40% in 2008. Housing starts are presently 33% higher than in April 2009 despite dropping by more than 50% earlier in the recession.
In fact, no other segment of the economy has rebounded as fast as the housing market, making it one of the real surprises of this recession. This rapid uptick in housing activity, in the face of recessionary conditions elsewhere in the economy, raises concerns about its sustainability, and is causing some to wonder whether house prices are, in fact, rising too quickly given current economic fundamentals.
Tal estimates that the Canadian housing market as a whole is indeed beginning to overshoot its “fair value”. At just under $350,000, the current average price of a home is estimated to be roughly 7% over what would be consistent with current housing market fundamentals such as interest rates, income growth, rents and demographics.
But this modest overshooting is far from uniform across the country. Those figures are skewed to western Canada, which has seen the most dramatic swings in house prices over the past 24 months. That market now appears to be overvalued by roughly 10-15%, suggesting that the imbalance in the rest of the country is much more modest.Note, however, that overvaluation does not necessarily mean a bubble or a dramatic price correction. Given that the current overvaluation is occurring in a context of historically low interest rates, what we are most likely witnessing is a temporary period of exuberance that is “borrowing” activity from the future, as households take advantage of lower rates and accelerate their borrowing and home purchasing activities.
To the extent that current activity is simply a redistribution of sales from the future to the present, the housing market of tomorrow may be in store for a more muted level of activity. Housing starts will also catch up with the sudden spurt in demand, with the increase in supply helping to moderate price trends. Rather than plunging, house prices are more likely to stagnate in coming years (or fall modestly in the most overheated markets) as fundamentals catch up with a market that has gotten ahead of itself.
What Worries the Bank of Canada?Rather than house prices, it is the accelerated pace of borrowing at very low rates that is beginning to raise some concerns at the Bank of Canada. For the first time in the post-war era, real household credit continued to expand through a recession. In fact, mortgage credit is now rising at a year-over-year rate of more than 7%.
This strong performance is a clear reflection of an extremely effective monetary policy in Canada. With Canadian consumer confidence only 10 points below its pre-recession level (versus a 50% decline in the US), Canada is benefiting not only from properly functioning credit channels, but also from a household sector that is willing and able to take on new credit.Remember that low rates only work as an economic stimulus if Canadians take advantage of them. The wave of borrowing does, however, have consequences in terms of consumer debt levels. The household debt-to-income ratio is now at a new all-time high of more than 140%.
Despite a record low 4.4% effective mortgage rate, overall mortgage interest payments as a share of after-tax income are now at levels that in the past were consistent with a 6% effective mortgage rate. Since rates will no doubt at some point return to those higher levels, the Bank of Canada is worried that Canadians are making themselves increasingly more vulnerable in terms of their ability to continue to service these new, higher debt loads.
How Big is the Problem?The relevant question, however, is just how serious a problem it is becoming, and here we have to dig a bit deeper to get the answers. Aside from an unlikely scenario of a 1970s-type stagflation, any future increase in interest rates will be in response to an improving economy. As such, any analysis of the potential impact of higher rates on the household sector in general, and the housing market in particular, should be done with tomorrow’s healthier economy in mind.After all, the reality is that, in the past, interest rates have played only a minor role in driving mortgage default rates. Historically, it’s clear that mortgage arrear rates are highly correlated with the unemployment rate, with little or no correlation with changes in interest rates. The same goes for the economy in general. Over the past three decades, personal bankruptcies have risen twice as fast in an environment of falling interest rates than in an environment of rising rates.
And the logic here is obvious – interest rates rise when the economy recovers, and the benefits to employment and incomes of an improving economy easily offset the sting of higher interest rates on debt service costs
Saturday, January 2, 2010
Your credit part 2- access your Credit Report
Because a credit report contains information about you, you have a right to inspect a copy of it. Equifax, one of Canada’s largest credit bureaus, offers you three ways to obtain your credit report:
1. Online. Order your credit report online quickly and easily with a credit card. You will get your report in real time, provided you authenticate yourself. There are three products that you can purchase online:
Equifax Credit Report A personalized credit report including details on credit cards and loans opened in your name, companies accessing your credit file, delinquent payments and more. See example report.
Equifax Score Power™ Credit ScoreA personalized credit report as well as your FICO® credit score and analysis. See example report. You will receive:
A full explanation of your score and how lenders view your credit risk.
Tips on how you can improve your credit score over time.
Custom graphs showing how you rank nationally among other consumers.
Specific factors that most heavily affect your credit score.
Equifax Credit Watch™ Credit MonitoringMonitoring your credit report for changes is one of the best ways to combat identity theft and ensure the accuracy of what’s being reported about you. Equifax Credit Watch™ will automatically alert you of certain key changes in your Equifax Credit Report and Score – such as when someone tries to open credit in your name – so you can act before damage is done.
2. By Phone. Call in your request to 1-800-465-7166. The credit report will be mailed to you in approximately two weeks. This request method is free of charge. However, the FICO® credit score is not included with this report.
3. By Fax. Fill in this form (.PDF) and send it to the fax number indicated. You must include two pieces of ID, including a valid driver's license and a recent utility bill. The report will be mailed to you in approximately two weeks. This request method is free of charge. However, the FICO® credit score is not included with this report.
Source : Royal Lepage
1. Online. Order your credit report online quickly and easily with a credit card. You will get your report in real time, provided you authenticate yourself. There are three products that you can purchase online:
Equifax Credit Report A personalized credit report including details on credit cards and loans opened in your name, companies accessing your credit file, delinquent payments and more. See example report.
Equifax Score Power™ Credit ScoreA personalized credit report as well as your FICO® credit score and analysis. See example report. You will receive:
A full explanation of your score and how lenders view your credit risk.
Tips on how you can improve your credit score over time.
Custom graphs showing how you rank nationally among other consumers.
Specific factors that most heavily affect your credit score.
Equifax Credit Watch™ Credit MonitoringMonitoring your credit report for changes is one of the best ways to combat identity theft and ensure the accuracy of what’s being reported about you. Equifax Credit Watch™ will automatically alert you of certain key changes in your Equifax Credit Report and Score – such as when someone tries to open credit in your name – so you can act before damage is done.
2. By Phone. Call in your request to 1-800-465-7166. The credit report will be mailed to you in approximately two weeks. This request method is free of charge. However, the FICO® credit score is not included with this report.
3. By Fax. Fill in this form (.PDF) and send it to the fax number indicated. You must include two pieces of ID, including a valid driver's license and a recent utility bill. The report will be mailed to you in approximately two weeks. This request method is free of charge. However, the FICO® credit score is not included with this report.
Source : Royal Lepage
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