Home Ownership More Affordable: RBC Report States

An RBC report last week found that homes were more affordable in the last quarter.

This article, from Propertywire.ca, outlines the details.

Home affordability continued to improve for Canadians in the last quarter, according to the Housing Trends and Affordability report released by RBC Economics Research.  Slight rises in home price appreciation, coupled with a modest dip in five-year mortgage rates are the most likely factors.

"Some of the stress that had been building in the housing market between 2009 and the first half of 2010 has been relieved, but tensions persist overall and the recent improvement in affordability is likely to be short-lived," said Robert Hogue, senior economist, RBC, speaking with PropertyWire.Ca. "We expect that the Bank of Canada will resume its rate hike campaign this spring and with borrowing costs set to climb further in the next two years, housing affordability will erode across the country. That said, we don't expect this to derail the housing market because of rising household income and job creation from the sustained economic recovery."

Says Hogue, there are additional elements leading to an expectation of balance.  “There is also expected balance between supply and demand. Prices will also likely stay flat, with small increases. In that context- the market is calm and moving sideways in the likely outcome. There is no real rush to buy, and no rush to sell.”

“Across the country, markets by and large are in balanced range.”

Price appreciation has fallen back to more manageable levels, in the face of this new balance in the market. The expectation is that price appreciation will continue, but a much slower, and more sustainable pace than had been seen in recent years.

"We expect affordability measures will rise gradually in the next three years or so while monetary policy is readjusted, but will land softly thereafter once interest rates stabilize at higher levels," added Hogue. "This pattern would be consistent with moderate yet sustained stress on Canada's housing market. Overall, the era of rapid home price appreciation of the past 10 years has likely run its course and we believe that Canada has entered a period of very modest increases."

Looking at different housing types across the country, the detached bungalow benchmark measure fell back slightly to 39.9 %; Standard condominium measure fell to 27.6 %; the standard two-storey home fell to 46. %.

Most provinces reported forward movement in terms of affordability- most notably in Alberta. Decreases continued in Alberta- this time declining by “1.0 to 2.4 percentage points.”  This builds on top of consistent declines since 2007. The combination of lower interest rates, and steadily decreasing home prices, have both contributed to the increase in affordability.

According to the report, the days for this may be numbered in Alberta,” The significant improvement in affordability is near the end of its line, however, as demand has shown more vigour in recent months - alongside a provincial economy that is gaining more traction - and the market has become better balanced. RBC expects that this will stem price declines this year, thereby removing a potential offset to the negative effect of projected rise in interest rates on affordability.”

Flaherty Warns of Even Higher Mortgage Rates After Last Week's Jump

As predicted, another major bank increased it's posted mortgage rates to fall in line with competitor's rates.

Interest rates are going up, and the federal finance minister says he expects them to rise even more.  To see what the effect has on the actual cost of borrowing, check out this blog by clicking here.

The Royal Bank increased several of its posted and special mortgage rates on Tuesday, joining TD Bank and CIBC.

All three banks have increased the posted rate for a five-year closed mortgage by a quarter of a percentage point, to 5.44 per cent.

RBC also raised its special fixed rate offer for a five-year closed mortgage by the same percentage amount, to 4.39 per cent.

Finance Minister Jim Flaherty said he's not surprised in the Canadian Press story.

And more increases should be coming, Flaherty predicted, since lending rates have been hovering close to historic lows.

"We're likely to see higher interest rates as we go forward because interest rates are still very low."

Real Estate Forecast for 2011 Revised Upward This Week

Sales expected to rebound in 2012; prices continue to rise.

There are good things on the horizon for the Canadian real estate market.  At least, so say the latest industry forecasts, which have just been revised upward.  The Canadian Real Estate Association (CREA) has just boosted its 2011 national forecast for MLS® sales.  What’s more, CREA has now also issued a very positive forecast for 2012.

The new forecast, issued February 8^th, represents an upward revision to CREA’s earlier national forecast for 2011.  National MLS® sales activity is now expected to reach 439,900 units in 2011.  This solid showing represents only a modest annual decline in the number of transactions of 1.6% below the previous year's active pace. In 2012, CREA forecasts that national sales activity will rebound by 3% to 453,300 units (which is roughly on par with the ten-year average for resale homes trading hands in Canada). CREA cites recent improvements in economic outlook, along with further expected improvement in consumer confidence as reasons for the upward forecast.

There’s good news for homeowners and home sellers too, as property values are expected to continue their upward climb, although at a much more moderate pace.  According to CREA, the national average home price is expected to rise 1.3% in both 2011 and 2012, to $343,300 and $347,900 respectively.  The average price is expected to rise modestly in most provinces, reflecting the continuation of a healthy balance between supply of, and demand for, homes listed for sale.

If you would like more information about your particular area or even your specific street, contact me anytime.  I strive to be Your Neighbourhood REALTOR.

Light Rail Transit in K-W is NOT a Done Deal - Good or Bad?

At time this blog was first published, the materal below was accurate, however, since then there has been much debate and it appears as though the Region of Waterloo is re-examining the transit options.  Click here to see more information.

It appears as though Light Rail Transit is coming to a theatre near you - well, not really: but the Region of Waterloo hopes to have the mass transit system in full operation sometime by 2016.

After much debate and study, the decision appears to have been made the Regional Council (it IS a  regional decision and not a local council decision) to implement they system to help control urban sprawl and create and maintain a "transit corridor".

The ramifications are many, so here are some facts.  Further information can be found by clicking this link http://rapidtransit.region.waterloo.on.ca/.

- Population growth is expected to increase by nearly 200,000 people and 80,000
   jobs by 2031 (which is about the current size of Kitchener).  Considering cities
   have a finite boundry, this is critical.  Increasing city size and creating urban   
   sprawl would create MORE traffic congetions due to commuting.

-The Region estimates that the cost of road expansion would be about $1.4 to $1.5
  BILLION  if no mass transit system is added , in order to accomodate the
  increased population.

The main objections raised by those who oppose the LRT system include the cost and changes to the streets along the transit corridor.

Personally, I believe the figures shown by the Region in that the cost of NOT creating such a transit system would outweigh the investment of building the LRT system.  As pointed out, where would we be if the heavily debated issue of investing in the Expressway (HWY 85) ended up with council not building it?

Secondly, Kitchener-Waterloo and Waterloo Region in general is all about change.  We are changing over our employment for manufacturing (still over 30%) to tech and financial.  We have major learning institutions which are world renowned.  We have tech and financial companies which are breaking new ground in their respective fields.

In my opinion, this is a necessary investment in a community and a region that is one of the fastest growing in Ontario and which is quickly headed to become a metropolitan area.