Calgary Real Estate Blog

Earlier this month, the Canadian Mortgage and Housing Corp. announced that it will be increasing premiums on mortgages insured on or after March 17. This applies to home buyers financing more than 65 percent of their new home’s purchase price.

Don’t freak out about this; the increase is minor, and is actually a good step for the health of the  real estate market overall. Consumers financing $245,000 would expect to pay about $5 more per month in CMHC premiums, while those with mortgages worth $350,000 and $450,000 would see increases of just $7 and $8 respectively.

Those looking to lock in at current rates need to have a full application (not just a preapproval) submitted to a lending institution by 9:59 MST on March 13, so unless you’re well on your way to making an offer, the moment has likely passed. However, given the modest level of the increase, it’s not worth rushing a decision just to get in ahead of the deadline.

To get all the specifics about CMHC insurance rates, or to strategize your next home purchase, contact me today!

Calgary’s real estate market continues steadily along, with home sales jumping more than 2 percent and average prices going up year over year. Despite the economic downturn, we have not seen a dramatic slowdown in most markets where property sales are concerned.

Potentially challenging that stability is a set of new rules around mortgages that the federal government will be phasing in starting October 17. Most noteworthy is a requirement that homeowners seeking an insured mortgage pass a ‘stress test’ to prove they can afford payments even if interest rates climb to the Bank of Canada’s posted rate (which can be nearly double what’s on offer from the banks), and that their carrying costs won’t exceed 39 percent of household income. This applies both to buyers with down payments above and below 20 percent, which is a major change from the status quo.

Other changes include a requirement that revenue coming from home sales be reported to the government at tax time; proceeds from the sale of one’s primary residence will remain tax free, but the feds are attempting to stem foreign buyers using a tax code loophole to claim flipped properties as primary residences to lower their tax bills.

It remains to be seen what the outcome of these changes will be. Some mortgage brokers are predicting that up to a third of first time homebuyers attempting to get into the market may find their pre-approval declined, while supporters see this as a positive way to address Canadians’ rising ratio of debt to income. Home prices in Toronto and Vancouver are rising rapidly, and this move by the government is surely a way to tap the brakes on that growth, but increasing indebtedness in this era of historically low interest rates is also a valid concern.

My advice in light of these rules remains the same as my outlook before they were announced: don’t try to buy more home than you can afford. While you may be pre-approved for a $700,000 mortgage, start your search a fair amount lower than that to see if there’s a property that meets your needs at a more comfortable monthly payment level. You can’t really go wrong with being conservative in this area.

So, when you contact me to line up some showings, give me a range of what you’d like to see below your pre-approval level, and I’ll help find a home that meets the needs of both your lifestyle and your pocketbook.  If you aren’t sure what your pre-approval is contact your bank or a mortgage broker, such as Canquest Mortgage, to get started.

Interesting article from the Herald recently on the growing number of first-time home buyers. You’d think the record prices would deter first-timers from jumping into this red-hot market, but increasingly low interest rates combined with a healthy amount of confidence have led to the majority of properties changing hands in 2013 going to newbies.

I expect this trend will carry forward through 2014, as mortgages can now be had for less than two percent.

It’s nice to see the ‘housing bubble’ talk die down in the media lately: for close to a decade it’s been all the rage to predict how we’re on the verge of a US-style meltdown thanks to high personal debt loads and unsustainably low interest rates. Just wait till the good times get a little less good, they said, and it’ll be foreclosure sales left and right. Well, that kind of talk might sell magazines and get people to tune in at 6:00, but it’s just not the reality, especially in Calgary.

The steady population growth, solid employment situation, and smart city planning all lead to ours being a very livable city. I mean, in Toronto or Vancouver if you work downtown but live in the ‘burbs, you’re in for a multi-hour commute each day, but here, thanks in large part to a well designed c-train system, few are en-route for more than 45 minutes. Heck, our largest community (Tuscany) buts right up against the city limits, and when the new station opens this fall transit riders will be in the core in about 25 minutes.

So bravo for Calgary residents realizing the great value our city holds and jumping into the housing market. Obviously, making up 55 percent of the sales means first-timers are essential to the healthy and sustainable that we enjoy, and so it’s vital for everyone’s property values that we see real estate in Calgary for what it is, and not through an alarmist, sensationalist filter.

As of May 1, CMHC – the Crown Corporation that insures homes purchased with less than a 20 percent down payment – will be raising its rates; a chart breaking down the new premiums is available here. This is a not-particularly surprising move, as the rising average home prices in Canada are increasing CMHC’s exposure to risk, which is not something an insurer likes to see happen.

And now a new announcement: self-employed workers without a means for third-party validation of their income will no longer be eligible for CMHC coverage.

While some first-time homebuyers, the group traditionally unable to come up with a 20 percent down-payment, may be discouraged by this news, it’s not at all a bad thing for the real estate market; indeed, it’s a step to help things stay healthy. As interest rates look to remain low for at least the next couple of years, it can be tempting for people to over-extend themselves financially with the hope that their property’s equity will grow fast enough to make the stretch worthwhile. CMHC’s job is to make sure mortgage lenders don’t end up on the hook for a bunch of homes their owners couldn’t actually afford, and it doesn’t have an endless pool of cash from which to draw to do this. Tightening up the rules a bit can help gently nudge potential homebuyers toward gaining a little more financial security prior to signing on the dotted line, which means a healthier market all around. Foreclosures aren’t good for anyone, and neither is CMHC having to drastically increase its premiums to cover a large amount of losses. Mild corrections like this one are just a way to keep people living relatively within their means, and I’m for it.

Apple’s marketing slogan, “There’s an app for that,” gets more true by the week – these small programs for mobile devices are becoming increasingly powerful and popular. You can find a series of apps for basically any industry you can imagine, and real estate is no exception. Here’s a list of five of the best apps for Canadian buyers and sellers.

1. Realtor.ca

This app puts the power of the MLS system in the palm of your hand, allowing you to search listings across Canada by a variety of criteria. An added value, compared to the desktop version, is the GPS functionality that can tell you about listings near your current location, making your Sunday house shopping drive a whole lot more efficient.

2. Magic Plan

Create a floorplan of a home simply by taking a series of pictures and letting the app do its magic. Great for making decorating and furnishing decisions, or just to get a sense of a property from a new perspective.

3. Canadian Mortgage

Calculate your mortgage payments, land transfer fees, CMHC premiums, and more, helping you get a grasp on how much home you can really inform. This app even includes sliders to take into account roommate income, bi-weekly vs. monthly payments, and first-time homebuyer rebates.

4. Ready Set Home

Designed especially for first-time homebuyers, from Canada’s national housing agency, CMHC. Helps determine affordability and tracks details during the homebuying process.

5. Starbucks

What would a day of house shopping be without coffee? The Starbucks app tracks your purchases (you can pay right from your phone if you load a gift card into the app), and lets you hit purchasing goals that earn perks like free refills.

Thanks to the busier than expected real estate market this year, CMHC – the government-backed outfit that offers insurance against mortgages when down payments of less than 20 percent are made – has already reached three-quarters of its cap for the year. The government had allowed for up to $85 billion in mortgage-backed securities to be issued in 2013, and we’ve already hit nearly $64 billion.

What does this mean? Well, the government will want to cool down the market a bit by implementing new rules that make it more difficult to qualify for a mortgage. Further, fixed rates on mortgages will likely be going up, with jumps of between 0.2 percent and 0.65 percent by the fall.

It’s going to become harder to be a pre-approved buyer, which means those who have pre-approval will become highly valued by sellers. Really, that’s one of the first things you should do if you’re entering the real estate market: get pre-approved, so you know what you’re working with and the seller knows you’re serious.

None of this is especially surprising or dire, but it’s well worth being aware of. As more develops, I’ll keep you posted