Bank of Canada Starts Year with Hold on Interest rates

The Bank of Canada announced on January 18, 2011 that interest rates will be held at their current levels.  The trend-setting overnight rate remains at 1%, which holds the Bank rate a quarter point higher at 1 1/4%.  These interest rates remain at near record lows, and that’s good news for potential homebuyers, as well as homeowners with variable rate mortgages, and those thinking of refinancing or locking in their mortgage for a longer term.

As support for the decision not to raise interest rates at this scheduled rate announcement, the fed Bank cited global economic recovery proceeding faster than anticipated in both U.S. and Europe.  Canadian recovery is proceeding, but growth over the next two years is expected to be modest as government spending winds down.  The Canadian economy expected to grow 2.4% this year, 2.8% next year.

The decision to hold interest rates at current levels is good news for the real estate industry.  Despite record or near-record home prices in markets across the country, today’s affordable mortgage rates keep the dream of home ownership within reach for most Canadians. 

For further details on the Bank’s interest rate announcement, click here. The next scheduled date for the Bank of Canada to announce interest rates is March 1, so attractive mortgage rates are expected to continue for the immediate future.

For more information about mortgage rates and financing options that can help make your dream of home ownership a reality, contact me – Your Neighbourhood REALTOR®

Why Now is the Time to Sell...Is the Real Estate Market Going to See a "Mini Boom?"

With recent mortgage rule changes set to take effect March 18th and the low interest rates predicted to start rising this summer it appears as though the stage is set for another real estate mini-boom we experienced early in 2010, with a lag to follow.

Because the interest rates are still VERY attractive to buyers (http://urneighbourhoodrealtor.blogspot.com/2011/01/why-buying-home-now-instead-of-next.html) and the mortgage rule changes to shorten the amortization period from 35 to 30 years will affect only high-ratio mortgages, this will have a direct affect on first-time homebuyers.

If you are considering selling your home this year, you may want to take advantage of this possible early Spring market as buyers rush in to beat the changes and list soon.

If you have any questions or want to know what the market value of your home is, please contact me anytime.

EVERYTHING You Wanted to Know About RRSPs

If the surveys are to be believed, the current RRSP season finds Canadians more confident and optimistic than they were a year ago.
That's not too surprising, given the continuing improvement in the economy and a stock market that delivered double-digit returns in 2010 for the second straight year.
But it remains to be seen whether the optimism will translate into more interest in RRSPs.
Figures from last year show that, as usual, most people didn't make a contribution. The number of Canadians who contributed to an RRSP in the 2009 tax year actually fell about four per cent from the previous year to 5,967,000 — about a quarter of all tax filers.

RRSP quick facts
Number of Canadians who contributed to an RRSP in 2009: 5.97 million
Total contributions: $33 billion
Median contribution (half contributed more, half less): $2,680
Average age of contributors: 45
Median income of contributors: $51,570
Source: Statistics Canada

That could be because there's growing competition for Canadians' disposable income. Household debt is at an all-time high, so debt paydown is a top priority for many. Tax-free savings accounts are entering their third year of existence and are grabbing an ever bigger share of the investing pie. And a significant group of Canadians say they've just got no cash to spare for RRSPs.
That won't stop Canada's financial industry from doing its best this year to grab your attention with its annual ad barrage about the various products they'd love you to stuff into your RRSPs.
The RRSP forces are in blitz mode, trying to persuade you that they — the financial planning firms, mutual fund companies, discount brokers, banks, insurance companies and credit unions — are the ones that can best nurture your precious retirement money (and reap some fees and commissions in the process).

How it all began
The first RRSP — then called a registered retirement annuity — was created by the federal government in 1957. Back then, Canadians could contribute up to 10 per cent of their income to a maximum of $2,500.

So what are you going to do this year? First, let's take a look at the nuts and bolts of what's become an annual rite of financial passage for millions of Canadians.

Why should I RRSP?

Old Age Security payments and Canada Pension Plan benefits will together provide only a bare bones retirement income. In the absence of a company pension or other savings, the gap between a basic and a more comfortable retirement can often be made up with an RRSP.
Since RRSP contributions are tax-deductible, significant upfront tax savings can result. For instance, a $5,000 contribution from someone with a taxable income of $60,000 generates tax savings of $1,450 to $1,919, depending on the province of residence.
CIBC tax expert Jamie Golombek, in a January 2011 report entitled "Blinded by the Refund," points out that the RRSP refund "should not be considered a windfall but rather the present value of the future tax payments that will have to be made on the ultimate RRSP withdrawal."

Starting early
Amount in an RRSP at age 65, assuming an initial contribution of $2,000, subsequent annual contributions of $2,000 and compound annual growth of six per cent:
— If started at age 25: $330.095
— If started at age 35: $169.603
— If started at age 45: $79,985
Source: Fiscal Agents

Because funds in an RRSP grow in a tax-sheltered environment, they can balloon to an impressive figure without the nuisance of having to pay tax every year on all that growth. For instance, depositing $5,000 a year each year for 25 years into an RRSP will eventually yield an account worth almost $300,000, assuming six per cent annual compounded growth. Make it eight per cent, and your nest egg grows to almost $400,000.
Of course, the effects of 25 years of inflation will mean that the nest egg's buying power in 2035 won't be as dramatic as it was in 2011. And when it comes to time to convert that RRSP into a RRIF or annuity, those payouts will be taxable.
That's why RRSPs are really appropriate for people who want to defer income (and, therefore, taxes) from a period of higher income (during one's working life) to a period of expected lower income (in retirement).
And while there seems to be enormous pressure for everyone to contribute to RRSPs, keep in mind there may well be better ways to use your money. For younger workers just starting out or for low-income seniors, it may make more sense to have contributed to a tax-free savings account. For those with a lot of high-interest credit-card debt, it may be better to pay that off first. For young families with mortgages, it may just be too difficult to come up with RRSP money. Don't fret. After all, unused RRSP contribution room can be carried forward indefinitely.

Types of plans

Individual RRSP — As the name implies, this account is registered in the name of the contributor.
Self-directed RRSP — Do-it-yourself investors set up self-directed plans that can hold a wide range of investments together in one plan. Annual trustee fees of up to $150 are often waived for those with at least $25,000 in plan assets, but transaction costs are the holder's responsibility.
Group RRSP — These are set up at work. The employee and/or the employer contribute money to individual RRSP accounts. Contributions are deducted from paycheques so the tax savings are immediate. Investment choices may be limited.
Spousal RRSP — With spousal RRSPs, the higher-income spouse makes a contribution to the other spouse's RRSP. The contributor gets the tax deduction, but the money is now owned by the other spouse. So when the money is withdrawn from the spousal RRSP, it's taxed at the lower-income spouse's rate. This is a form of income-splitting that is especially useful when one spouse has a significantly higher retirement income than the other.

How much can I contribute?

For the 2010 tax year, people can contribute up to 18 per cent of their earned income in 2009, up to a maximum of $22,000.
But the contribution calculation isn't that simple. From that figure, you must subtract your pension adjustment amount (PA). If you're a member of a pension plan at work, you'll have a pension adjustment. This takes into account the money you and/or your company contributed to an employer-sponsored pension plan. Your T4 slip records the pension adjustment figure.

RRSPs: By the numbers
Percentage of families with RRSPs: 60
Median value: $25,000
Median value for families earning over $85,000: $80,000
Source: Statistics Canada Survey of Financial Security (2005)

To this figure, you must then add the total carry-forward of unused RRSP contribution room since 1991. For some taxpayers who haven't been stuffing their RRSPs, this can amount to more than $100,000.
There's an easy way to find this figure without doing all the calculations. Just check the Notice of Assessment you received from the Canada Revenue Agency last year, or phone the tax department's T.I.P.S. line at 1-800-267-6999. You will be asked to provide your social insurance number, your month and year of birth, and the total income you reported on line 150 of your 2009 return.

What can I invest in?

With a self-directed RRSP, you can put money into a wide variety of investments — all inside a single plan. These can include guaranteed investment certificates (GICs), mutual funds, government and corporate bonds, exchange-traded funds (which track market benchmarks like the S&P/TSX 60 composite index), mortgage-backed securities, gold and silver bullion and stocks. You can even invest in your own mortgage.
Or you can just stick your cash in an interest-bearing account while you figure out what to do. The old foreign-content rule, which used to limit the amount of money you could put into foreign investments, has been scrapped.

What's the deadline?

Well, that's a bit of a trick question. You can make a contribution at any time. The only RRSP deadline you face is if you want the tax break applied to your 2010 income. In that case, the deadline is midnight, Tuesday, March 1, 2011. But you can carry forward unused RRSP contribution room to next year, or the year after that, and so on.

What are the age limits?

There's no minimum age to set up an RRSP, but it's better to contribute early and often to maximize growth. You can continue to contribute to an RRSP until the end of the year in which you turn 71, provided you still have earned income (or the end of the year in which your spouse turns 71 in the case of spousal plans).
Once you hit that deadline, you have three choices: 1) convert your RRSP into a registered retirement income fund (the most popular option), 2) buy an annuity (best payout when interest rates are higher), or 3) withdraw it in cash (generally not a good idea as you'll pay tax on the whole amount and won't have a retirement income). You can also opt for some combination of the above choices.

Are RRSPs only for retirement?

While RRSP stands for registered retirement savings plan, the federal government has brought in two provisions that allow Canadians to get access to RRSP money for reasons other than their golden years.
The Home Buyers Plan (HBP) has been enormously popular in Canada, with almost 1.4 million people taking advantage of it as of 2004, the latest available figures. The plan allows individuals to withdraw up to $25,000 from RRSPs to buy or build their first home (the limit was raised from $20,000 in the 2009 federal budget). Since 1992, more than $14 billion has been withdrawn. As long as the money is used to buy a qualifying home, no tax is paid on the withdrawal. The catch is that the money must be repaid to your RRSP over the next 15 years or the minimum annual payment will be added to your income and you will pay tax on that. And the repayment is not tax-deductible because you got the tax break the first time you put in the money.
The Lifelong Learning Plan (LLP) allows Canadians to pull up to $20,000 from their RRSPs to head back to school. The withdrawals can be a maximum of $10,000 in any one year and can be spread over four years. Repayment is on a 10-year schedule. About 49,000 people have withdrawn $363 million since the LLP began in 1999.
Financial experts also point out that by raiding your RRSP for either of these plans, you lose much of the tax-free compound growth you could have made on that money, so you might want to repay the money quicker than the prescribed schedules.
Of course, you can withdraw money from an RRSP for any reason, like taking a year off to have a child or travel. But that kind of early raid will result in having to pay tax on every penny withdrawn and the contribution room will be lost forever. In most cases, it would make more sense to use a tax-free savings account for such short-term cash needs as there are no tax consequences when making withdrawals.

This article is from CBC.ca, written by Tom McFeat

The Pros, Cons and Facts of Home Equity Lines of Credit (HELOCs)

With recent mortgage rule changes announced, Home Equity Lines of Credit have once again been thrust into the limelight.  Assuming much of the blame for the U.S. housing crisis, many people incorrectly believe that HELOCs are simply a bad thing.....It involves using the equity in your home as security for a low-interest line of credit.

Below is a great article published in the Globe and Mail on January 19th, 2011 that provides a great overview of a borrowing strategy that can work if used correctly.

"Borrowing is bad – we all get that.

Now, can we adults in the room have a conversation about debt? We’re the people who recognize that well-managed borrowing is part of everyday life, and thus have set up a home equity line of credit.

Home equity credit lines are the smartest, cheapest way to borrow money, and you should definitely have one in your back pocket if you have the discipline to manage it.

Some people don’t, and so the federal government included home equity credit lines in the campaign against household debt growth announced earlier this week. The Bank of Canada has also expressed concerns about the role of these loans in propelling debt to alarming levels, and so has Peter Aceto, chief executive officer at online bank ING Direct.

Let’s get something out of the way right up front. ING will introduce a new home equity line of credit product at some point this year. No, Mr. Aceto is not a hypocrite. He’s a realist on the matter of Canadians borrowing too much and his views are worth hearing if you have a home equity credit line yourself.
“I don’t think there’s anything sick, wrong or dirty with the invention of the home equity line of credit,” Mr. Aceto said in a conversation he initiated to get his concerns about national debt levels on the record.

His take on when to use a home equity credit line? “If you have a home and you want to use some of your equity so you can do renovations, or so you can pay down more expensive debt. If you’re doing the responsible thing.”
Growth in credit line usage suggests people aren’t that discriminating. According to the Bank of Canada, the volume of home equity lines of credit and loans has risen by as much as 170 per cent in the past decade, almost twice as fast as mortgage debt.

Why They're Popular
Home equity credit lines are popular because they allow the average person to borrow at the lowest possible rate because their house is used as security. These credit lines used to be available at the prime rate, currently 3 per cent, but since the financial crisis the banks have been padding their profits by charging a markup of half to a full percentage point.

If you have credit card debt, probably pegged at something close to 19 per cent, it’s beyond smart to pay off the balance with a home equity line of credit to take advantage of the much lower rate. In fact, it’s almost essential.

A case can also be made for using credit lines to build or protect personal wealth. An example would be to redo your worn-out kitchen or invest in stocks, funds or property.

Credit lines can also be useful for bridging a short period between the purchase of something and the arrival of money to pay for it. Where they’re a menace is when people fall into the habit of what Mr. Aceto calls “using your home as an ATM machine.” Can’t quite afford something you want right now? You can buy it using your home equity credit line and then pat yourself on the back for not being a sucker paying credit card interest.

The ATM Syndrome
It’s ATM-style borrowing that Ottawa has targeted through the largely symbolic decision to stop offering government-backed insurance to banks for home equity credit lines sold to clients.

There isn’t a lot of this type of insuring going on, especially at the big banks. So while there may be instances of lenders charging more to clients who set up new home equity credit lines or requiring better credit scores from applicants, the status quo should rule in many cases. Example: Bank of Nova Scotia and Canadian Imperial Bank of Commerce said Wednesday there would be no changes to their home equity credit lines related to the government announcement.

Meanwhile, ING continues building a line of credit that could easily makes it debut just as interest rates are starting a sustained move higher. Mr. Aceto said ING plans to be cautious about who gets a credit line, a reflection of its belief that banks must help clients borrow intelligently.

“Banks have a role to play in being responsible and in making sure customers understand the choices they’re making,” he said. “And even if [customers] do understand their choice and they want to make a mistake, we have an obligation to say, ‘No, I don’t really think that’s the right thing to do.’ ”

Some supervision by banks and governments is fine, but adults look after their own debt levels. Those non-stop warnings that debt is bad? They’re for the financial children out there.

The HELOC option

Facts on home equity lines of credit (HELOCs), as supplied by Vancouver-based mortgage planner Robert McLister:

What's the maximum you can borrow?
80 per cent of your home equity.
How much of your home do you need to own to qualify?
The minimum is 20 per cent.
What are the rates?
“The average is probably prime plus 0.75 [of a percentage point], but you can find at least six or seven lenders to do it at prime plus 0.5.”
How easy is it to qualify for a HELOC?
“It is notably tougher to get a HELOC than a regular mortgage.”
What are the setup fees?
“Generally it's about $250 for an appraisal plus $500-$800 for legal fees and disbursements. In some cases, the appraisal fee is covered by the broker or lender.”
What are the rules for monthly payments?
“Interest only, or interest plus principal like a regular mortgage payment, or you can pay a specific payment. The interest is the least you can pay.”
What if I fall behind on payments?
“After 90 days, things get hairy for the homeowner. But if you miss a payment, they'll call you up within two weeks.” "

Why Buying A Home Now Instead of Next Year Could Save You $15,000

Waiting a year to buy could cost you $15,000 in extra interest payments  over five years if interest rates continue to rise as expected.

As of the writing of this blog, a 5-year term (for which everyone who applies for a mortgage must qualify, even if they want a shorter term) mortgage rate is around 3.74%.  Many experts predict interest rates will rise again this Summer and, if the economy continues it's steady recovery, will continue to rise.

Let's face it, there is nowhere else for rates to go but up!

It is not inconceivable that next Spring (pretty much a year from now) rates could be 1.5% higher....so, from 3.74% to 5.25%.

If you crunch the numbers, that means at the end of your first 5-year term on a $200,000 mortgage, you will have spent $15,000 more in INTEREST if you wait a year to buy.

Think of what you could do with that money.....buy a larger/nicer home with an unfinished basement and finish it later.  Maybe put in a pool. Get a good price on a home that needs work and use the money to replace the roof, furnace and install central air....the possibilities are only limited by your particular circumstances.

I'm not saying you should rush out and buy...BUT, if you are secure in your job and home-ownership is your goal (2/3 of Canadians own their home), then now IS the time to buy.

Lenders have lots of different programs to help with a down payment, which is generally the main reason people wait to buy. 
Interest rates are the determining factor of affordability - they are still historically low but are rising.

Please contact me if you want to know how much you qualify for and a pre-approval.

If you want to check the numbers I've quoted, go to http://www.fcac-acfc.gc.ca/iTools-iOutils/MortgageCalculator-eng.aspx.

By the way, this is a great link as the site has many financial calculators and financial advice and is unbiased.

 

House Values Remain Stable Despite Poor Economy - Local Housing Starts up 22% in 2010

A Statistics Canada report shows that Canada's new housing price index rose 0.3 per cent in November after a 0.1 per cent advance in October.

Statistics Canada said prices increased the most in St. John's, N.L. (up 4.2 per cent), followed by Ottawa-Gatineau (1.6) and Halifax (1.2).

Year-over-year, the new housing price index was up 2.3 per cent in November after a 2.5 per cent increase in October.

With the annual inflation rate for 2010 sitting at 2%, we see that, overall, home values have remained consistent and even slightly outpaced inflation - proving once again that real estate is a good hedge against inflation.

We are still early on in our economic recovery, but the "housing bubble" everyone was concerned about failed to materialize...if anything, home values consistently justify why Canada has such a high rate of home ownership (nearly 70%).

Locally, CMHC reported that housing starts in Waterloo Region increased 22.5% in 2010 over the total in 2009.

How Much of Your Internet Data Plan are You Using? Monitor Your Netflix Usage...

With Netflix and You Tube, video streaming is becoming a major pastime for many of us.

Many people I know, including myself, have taken advantage of the free month of Netflix.  However, keep in mind that our internet service providers (usually Rogers or Bell) charge us a monthly internet plan fee that includes a pre-set maximum data usage.

For example, Rogers Light Highspeed is set at 15 GB.  This is a LOT if all you are doing is email, surfing and dowloading songs and pictures.  However, factor in that one hour of Netflix programming in HD is around 1.5 GB and you can understand that Netflix accounts for around 20% of the entire bandwith world wide during peak times!

Also, considering that number, most people who watch 5 HD movies or more who are on Rogers Light Internet would be paying an extra $4 per GB, especially considering all the other internet usage.

I'm not saying Netflix is bad (I'm signed up), just watch your usage carefully and purchase the appropriate internet plan so you aren't paying extra.

Here is a chart below to help you figure out what you need.  The last two columns show "total data usage" for the adjacent task (email, etc....) and the other column shows the "number of times" you have to perform that task to reach 5 GB, respectively.

Activity/Download	File Size	X*
1 email	10 KB	500,000
1 webpage visit to EVDOinfo.com	150 KB	33,333
1 Hr of Online Poker	2 MB	2,560 Hrs
1 downloaded song from iTunes	4 MB	1,250
1 digital photo (point & shoot digital camera)	3 MB	1,666
1 digital photo (pro / prosumer digital camera)	10 MB	500
1 typical 3 minute video on YouTube/Google	5 MB	1,000
1 hour of 56k audio stream	25 MB	200 hrs
1 typical 5 minute video on iTunes	30 MB	167
1 typical 45-minute TV show from iTunes	200 MB	25
1 hour of MagicJack phone call @ 128kb/s	56 MB	89 hrs
1 hour of Skype phone call @ 64kb/s	28 MB	178 hrs
1 hour of Skype video chat @ 384kb/s	169 MB	30 hrs
1 hour of World of Warcraft online gaming	32 MB	156 hrs
1 hour of Netflix Standard Definition stream	660 MB	7.5 hrs
1 hour of Netflix High Definition stream	1.67 GB	3 hrs
1 Full-length (2 hours) movie MPEG4 download	1.5 GB	3
1 entire DVD (MPEG-2) disk image	4.5GB	1
1 hour of Hulu Standard Definition stream	350 MB	14 hrs
1 hour of Slingbox Standard Definition stream	444 MB	11 hrs
1 hour of Ustream Viewing	192 MB	26 hrs
1hour of Ustream Broadcasting	102 MB	49 hrs
1 hour of Xbox/PS3/Wii Online Gaming [Average]	50 MB	100 hrs
1 hour of Microsoft Remote Desktop Connection	60 MB	83 hrs
1 iBook download for iPad [Average]	0.5 MB	10,000
1 episode on ABC Player for iPad [1hr episode]	183 MB	27
1 hour of Pandora Radio streaming	27 MB	185 hrs
1 hour of AOL Radio streaming	50 MB	100 hrs
1 hour of Facetime 2-way video calling on iPhone 4	90 MB	55.5 hrs

How to Get Your Credit Report Free and Protect Your Rating

As most people have heard, it is very important to monitor your credit rating and know what is in your report.  This is vitally important when you plan on purchasing a home and require  a mortgage.

A poor credit score may prevent you from aquiring a mortgage or, even if you are able to get a mortgage, cause you to pay a higher interest rate which may end up costing you thousands of dollars.

It is important to review your credit report because you want to know if someone is using your identity to apply for credit and you also want to ensure that your credit report is accurate and that errors are not negatively affecting your rating.

In Canada there are two reporting companies, Equifax and Trans Union.  Both WILL provide your credit report for free, but good luck finding your way through the maze to find their phone numbers and required forms....so I will provide them here.

Equifax: 1-800-465-7166 
PDF mail-in request form: http://canadian-creditreport.com/equifax_credit_report_request.pdf

Trans Union: 1-800-663-9980
PDF mail-in request form: http://canadian-creditreport.com/transunion_credit_report_request.pdf

Keep in mind, only the report is free - you will have to pay to receive your credit score (FICO score) which is between 399 (lowest) to 862 (highest) which most lenders use as part of the requirements before extending credit.  That purchase can be made on-line.

If you choose to order your report by phone, have your social insurance number ready.

Once you have your report, carefully review it to make sure all the items are correct.  If you find any discrepancies be sure to contact the reporting company as soon as possible.  It is important to regularly review your report, at least once a year.

I hope this helps answer any questions you might have - if not, feel free to contact me any time to help you obtain a mortgage pre-approval or answer any other real estate questions you might have.

2010 Marks second highest year for sales in K-W and area

This press release was sent out today and shows the strength and resilience of the real estate market in K-W and area.

KITCHENER-WATERLOO, ON (January 6, 2010) –The 6,388 homes sold by REALTORS® through the Multiple Listing System (MLS®) of the Kitchener-Waterloo Real Estate Board (KWREB) last year marked the second highest total annual sales in the association’s history.
Last year’s activity was strongest in the first half of the year, particularly March and April when the sale of residential properties were setting monthly records.  According to George Patton, President of the KWREB, a number of factors contributed to the early spring surge.  “The federal government announced tighter mortgage rules, buyers were rushing to beat the introduction of the HST, and the central bank was forecasting higher interest rates.”

Dollar volume of all residential real estate sold last year jumped 9.3 percent to $1.8 billion compared with 2009, reflecting continued confidence in the local real estate market.

The year finished on a strong note, with 326 home sales last month, a 4.1 percent decrease compared to December 2009, but still well above the previous 10 year average of 225.

Sales of homes in all price categories above $250,000 were up in 2010 compared to 2009, with the greatest rise occurring in the number of homes selling above $750,000, which experienced triple-digit increases.

“The explosion of sales in the highest price ranges was reflected by the 9.3% increase in the average sale prices of detached homes,” says Patton. The average sale price of detached homes was $329,797 last year, whereas the average sale price of all residential real estate sold for $289,338, an increase of 8.6 percent.
The 2010 year was marked by continued consumer demand for condominium style homes, with a total of 1,221 sales, an increase of 8.6 percent relative to year-end results in 2009, and representing nearly 20 percent of the overall residential market share in terms of unit sales by type.

Other housing types showed small decreases relative to the previous year:  4,127 detached homes (down 0.3 percent from 2009), 506 semis (down 1.9 percent from 2009), and 474 townhouses (down 6.1 percent from 2009).

Does Moving Up Make Sense? Five Questions Move-Up Home Buyers Should Consider

Is now a good time to buy?  Only you can decide that ... answer the questions and figure out if you should be taking advantage of the current market conditions.

Today’s housing market presents considerable opportunities for potential home buyers with the right lifestyle reasons and job security. Prices are stabilizing across much of Canada, interest rates are still at historic lows and inventory levels remain consistent.

Even amid such incentives, many move-up home buyers remain on the fence about making the lifestyle change they desire due to the concern over selling their current property.  

Consumers today are benefitting from the price corrections many markets have seen over the last few quarters.  So while they may have seen the value of their current home decline, they are also finding that the “move up” home has also seen a beneficial price reduction. 

For example, the difference in a 20 percent price decline for a $300,000 to $400,000 home is $20,000.  And, when the market improves and price appreciation returns, the more expensive home will see a higher dollar increase.

While potential home buyers are likely aware of the positive impact of record-low interest rates, inventory, tax benefits, and affordability of purchasing today, many are confused and concerned if now is indeed the right time for them to buy. Below are five questions to help “move-up buyers” decide if now is the right time to make a move:

1.      Have you built substantial equity in your current home? Home equity can be defined as the value of a home, minus the amount of outstanding debt.  Although equity does not generally develop in the first few years of home ownership, five or more years of home payments may create significant unrealized gains.  

2.      Has your income or financial situation improved? Homeowners should consider their overall financial situation including current and future expenses in order to make an educated decision on price range for a new home. For example, an increase in salary may allow for an increased mortgage.

3.      Has your lifestyle changed? Lifestyle changes are one of the most common reasons people choose to move. Starting or adding to a family may require an extra bedroom or additional square footage, as well as a desire to live closer to work or family may provide the impetus for a move to a larger home.

4.      Is your current residence one that could potentially be rented out? For those homeowners who are ready to make a move but are concerned about purchasing a new home before the current property is sold, renting out the current residence may be a viable option. 

5.      Are interest rates attractive? A low interest rate means lower mortgage payments on homes of the same price.

If you need more information or have any real estate questions feel free to contact me directly.

The State of Canada's Economy - The Year in Review

The number of opinions supporting the steady but slow recovery of the Canadian economy certainly indicates that we are headed in the right direction.

This CBC article uses 5 key indicators as measures of where the recovery stands and uses those trends to predict where we will end up.

Real estate roller coaster

Canada's resale housing market eased off the torrid pace of sales and price increases it saw in 2009. Analysts had expected a strong first half of the year followed by a much weaker second half, due a tepid economic recovery and the introduction of the HST in British Columbia and in Ontario.
By late summer, it began to look as though the final months of the year might be a sales season to forget, but things started to pick up again. Not take off, but pick up.
Nationally, the average price for a resale home in November 2010 was $344,268, up about two per cent from the same month a year ago.
But markets varied across the country. In Vancouver, November's average selling price was just under $700,000 compared to around $622,000 a year earlier. Back in March 2009, the average price of a Vancouver home was $530,763.
Calgary's market hasn't shown the same strength. In November 2010, the average resale price was $398,699, about $3,000 less than for the same month in 2009, and around $18,000 below 2010's high, which was recorded in May.
The Canadian Real Estate Association says while the number of sales did drop off from 2009's heady levels, there was also a reduction in the number of new listings, which helped bring the market into "balance."

Stock market's steady gains

It was a fairly tame year for North American stock markets in 2010 — at least compared to the previous two. The S&P/TSX Composite Index ended 2009 at 11,746.11. The index climbed steadily through the year, surpassing the 13,000 mark, for a gain of around 12 per cent.
Traders react positively to trading data on the floor of the New York Stock Exchange. (Richard Drew/Associated Press)That's still more than 2,000 points under the peak close of 15,073.13 reached on June 18, 2008. In the months that followed, financial markets melted down. By Nov. 20, 2008, the TSX bottomed out at 7,724.76.
Global stock markets weathered a few storms, including European debt problems, hanging on to healthy gains for investors.
However, analysts are suggesting that a lacklustre economic recovery should mean more modest returns in the years to come.

Dollar hovers around parity

It was a pretty good year for the Canadian dollar — if parity is your benchmark. The dollar spent most of the year in a narrow range within a few cents of the U.S. dollar.
At the end of 2009, the dollar was at 95.15 cents US. Its 2010 low point came on Feb. 8, when it closed at 93.07 cents US. Just over two months later, the dollar had shot up by more than seven cents to close at $1.0012 US, as the Bank of Canada suggested that interest rates would soon be rising.
There were predictions then that the dollar would keep rising and perhaps hit $1.15 sometime in 2011. The dollar did slip back to 93 cents US a month later.
However, by October, the dollar was once again testing parity.
In 2009, the dollar traded in a much wider range, hitting a low of 76.98 cents US on March 9, 2009, and a high of 97.48 cents US on Oct. 14, 2009.

Interest rates creep north, then stall

At the end of 2010, the Bank of Canada rate is right where it was at the beginning of 2009: 1.25 per cent. But in between, the rate hit a historic low of 0.50 per cent.
The bank cut its rate to that level in April 2009 and held it there until June 2010, in an attempt to coax the economy out of recession and into recovery. Bank of Canada governor Mark Carney warned that Canadians shouldn't get too used to ultra-low interest rates: they'd have to go up eventually to keep a lid on inflation.
So the bank raised its rate by a quarter point in June, July and September, bringing it back to 1.25 per cent, leading to the prime lending rate at the chartered banks of three per cent.
But with the recovery stalling in the second half of the year, Carney signaled in October that the bank would hold off for now on rate hikes.
However, two months later, he suggested that — at some point — rates would again head higher and that the repercussions may be swift and fierce and have the potential to catch many with debt loads they can no longer afford.
When will rates resume their upward course? The next date for the setting of the bank rate is Jan. 18, 2011, followed by March 1, April 12, May 31, July 19, Sept. 7, Oct. 25 and Dec. 6.

Inflation's benign year

In 2009, the Consumer Price Index (CPI) — the number the government of Canada uses to measure inflation - rose by a mere 0.3 per cent, as the world struggled to emerge from the worst recession since the Great Depression. The inflation rate hadn't been that since 1994, when it was 0.1 per cent.
The Bank of Canada has set a target for inflation of between one and three per cent. Financial analysts had spent much of the year wondering whether government stimulus projects, which injected billions of dollars into the economy, would lead to a new round of inflation — or whether the economy would head into another recession and spark a round of deflation.
The Canadian economy had grown at a rate of 5.8 per cent in the first quarter of the year, but by the third quarter, economic output had tailed off dramatically. Statistics Canada reported that Gross Domestic Product had declined by 0.1 per cent in July. The Bank of Canada subsequently revised downwards its outlook for the economy.
While inflation did pick up a bit in 2010 — the CPI was 2.4% per cent higher in October 2010 than it was in October 2009 — some of the increase was attributed to the introduction of the Harmonized Sales Tax in British Columbia and Ontario.
Still, the inflation rate is easily within the Bank of Canada's target range, suggesting that any further interest rate hikes likely won't happen until well into 2011.