Get off the home owning fence

I’ve had the same rent-versus-own discussion with a close friend of mine for years. Every now and then she’ll see a new statistic from the Canadian Real Estate Association about where prices are headed and rethink the decision she made just months before.

My advice to her today is: it’s time to get off the fence. Although mortgage rates rose last week, money is still cheap right now. Given the slowdown in the housing market, which is also showing signs of picking up, there is a greater selection in housing stock and more time to make a decision and put an offer on a home, without the intense competition.

A combination of other factors means it is the perfect time for property virgins to make their move. The federal government’s 2009 operating budget has contributed two important ingredients to the mix: the option to withdraw as much as $25,000 from your RRSP (compared to $20,000 in 2008) and a First-Time Home Buyers’ Tax Credit that provides up to $750 in tax relief when buying a starter home.

If thinking about becoming a home owner for the first time makes you nauseous, don’t worry - that's natural. Getting into the market is a good idea, as long as you do your research, view it at a long-term investment and have the money to do so.

Let’s start with the most important element – getting the green stuff. The first step in the home-buying process is getting pre-approved by a mortgage broker.

Once you get the green light you may be compelled to open-house hop down the ritziest street in your hood. While test-driving your dreams is OK, touring too many homes beyond your budget is a waste of time. If you’re serious, search only in your approved price range and know that starting small and building equity will give you a chance to upgrade in the future.

If you’re trying to estimate how much you can reasonably afford, take this as a general rule: according to the Canada Mortgage and Housing Corporation your monthly housing costs – including mortgage principal and interest, taxes and heating expenses – shouldn't be more than 32 per cent of your gross household monthly income (for the math-weary: that’s your annual gross salary multiplied by 0.32 and divided by 12).

Equally – if not more – important is your credit score. Ranging from 300 to 900, it determines how much interest you’ll likely pay when you apply for a loan. The higher your score, the lower the risk creditors will consider you – and the less interest you'll pay. A low interest rate could translate into thousands in savings over the life of a loan.

According to myfico.com, a score of 720 or higher is ideal. You can review your score – which is calculated by a credit bureau based on personal financial information – at www.transunion.ca or www.equifax.ca for about $20.

It’s possible to buy a home for as little as 5 per cent down, but anything less than 20 per cent means you’ll need to have your mortgage insured by a third party. Insurance costs can be paid in a lump sum at the time of purchase or worked into the principal balance.

When you broach the subject of buying property with your broker or banker he or she will tell you what you can afford. Immediately aim to spend less. The last thing you need as a first-time buyer is to be house-poor. Remember, you’ll need money to pay closing fees (which can be 1.5 per cent to 4 per cent of a home’s value), as well as any unexpected costs that crop up (one leak in the roof could mean a flood of new expenses).

In terms of doing your research, don’t get wrapped up watching national housing averages or analyzing what the six o’clock news has to say about the market. The only market you should pick apart is the neighbourhood you want to move to. Using national stats to determine trends in your area is like comparing condos to townhouses. Real estate changes from district to district, sometimes from street to street.

A qualified realtor will help you with research and connect you to the right team (lawyer, inspector, mortgage broker). Always work with a realtor as a first-time buyer. There’s too much you don’t know to go it alone, plus you don’t pay commissions – the seller does. This doesn’t mean you should work with the first guy to flash his pearly whites and hand you a business card at an open house – the best place to start is with a referral. Check out www.howrealtorshelp.ca for more realtor realities.

Still hanging out on that fence? Click over to www.myhomeplanner.ca for a rent-versus-own calculator.

Emotion has no place in purchasing property, especially as a novice buyer. You’ll feel more confident in your decision if you simply stick to working the numbers, doing your research, gathering a good team.

Then you can do all the sitting around you want – as a home owner on your very own fence.

Angela Self will be writing for Globeinvestor.com weekly. She is one of the founders of the Smart Cookies, a group of five women who specialize in personal finance. They are hosts of a self-titled show on the W Network and the authors of The Smart Cookies' Guide to Making More Dough. Find out more about them at Smartcookies.com

Is it time to lock in your mortgage?

Here is a great article summarizing the latest debate as to whether it's time to lock-in or remain in a variable rate mortgage.

http://www.theglobeandmail.com/globe-investor/it-is-time-to-lock-in-your-mortgage/article1182905/

Buyer activity brings greater stability to the housing market

Monday, May 4, 2009

VANCOUVER, BC – With more buyers and fewer homes for sale in recent months, the Greater Vancouver housing market has entered a more moderate and balanced state.

For the sixth consecutive month, new listings for detached, attached and apartment properties declined in Greater Vancouver, down 33.7 per cent to 4,649 in April 2009 compared to April 2008, when 7,010 new units were listed. The total number of property listings on the Multiple Listing Service® (MLS®), while slightly down compared to last month, remains unchanged compared to the same period in 2008.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver totalled 2,963 in April 2009, a decline of eight per cent from the 3,218 sales recorded in April 2008, and an increase of 31 per cent compared to last month.

“We’re seeing greater balance in the housing market, as evidenced by a strong sales to active listings ratio of over 19 per cent,” Scott Russell, REBGV president said. “The result is a relatively stable market in which homes are being realistically priced.

“The bridge between buyer demand and housing supply is continuing to narrow, which, as we see, helps bring stability to home prices,” he said. “The trends in our housing market over the last couple of months offer a much more comfortable, historically normal set of conditions.”

Sales of detached properties declined eight per cent to 1,190 from the 1,293 detached sales recorded during the same period in 2008. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties declined 12.2 per cent from April 2008 to $675,268.

Sales of apartment properties in April 2009 declined 10.5 per cent to 1,179, compared to 1,317 sales in April 2008. The benchmark price of an apartment property declined 12.6 per cent from April 2008 to $340,203.

Attached property sales in April 2009 are down 2.3 per cent to 594, compared with the 608 sales in April 2008. The benchmark price of an attached unit decreased 9.7 per cent between April 2008 and 2009 to $431,759.

Bright spots in Greater Vancouver in April 2009 compared to April 2008:

Detached:	Vancouver West	- up 59.5 per cent (193 units sold from 121)
Attached:	Port Coquitlam	- up 69.6 per cent (39 units sold from 23)
	Richmond	- up 17.9 per cent (132 units sold from 112)
	Vancouver West	- up 46.3 per cent (98 units sold from 67)
Apartments:	North Vancouver	- up 29.2 per cent (84 units sold from 65)

Housing Trends and Affordability

Here is the latest summary of the Canadian Housing Trends with the outlook for Canada as a whole and then broken down by Province and major city.

http://www.rbc.com/economics/market/pdf/house.pdf

Time is right for 1st-time homebuyers: experts

TORONTO - Low mortgage rates and more affordable homes in many markets are pushing first-time home buyers to enter the market in droves, Canadian real-estate experts say.

Phil Soper, president and chief executive of Brookfield Real Estate Services (TSX:BRE.UN), said that when the Canadian housing market was hot, bidding wars forced many buyers to put in offers without conditions to increase their chances of being accepted.

This, combined with unprecedented increases in home prices in many parts of the country, scared many first-time buyers out of the market, he said.

"When first-time buyers stop entering the market it's like sand in the gears of the housing market," said Soper, speaking Tuesday at a BMO conference on the current and future state of Canada's housing market.

But he said the economic downturn changed all that. As housing prices fell across the country and lenders lowered their mortgage rates to attract borrowers, the market became much more attractive to people looking to buy their first homes.

"The uptick in first-time home buyer purchases across the country is quite astonishing," Soper said. "Affordability in places like Vancouver has improved for the first time in a very long time."

BMO senior economist Sal Guatieri said the average mortgage payment has fallen by one-third or $600 a month from its peak, while average resale home prices have fallen 14 per cent from highs seen in mid-2007.

Guatieri said he expects resale prices to fall "moderately further" this year for a cumulative decline in prices of approximately 20 per cent, but he said the slump in prices is slowing as buyers respond to renewed affordability in the market.

"We look for the housing market to correct further this year but not crash," Guatieri said.

Brad Lamb of Toronto-based Brad J. Lamb Realty Inc. said sales in March through the industry's Multiple Listing Service fell by only seven per cent year-over-year, compared to drops of 45 to 55 per cent in previous months.

And the average time it took to sell a home in Toronto dropped from 45 days in February to 39 days in March, he added.

"There's a fair amount of evidence out there that the market has bottomed and is starting to come back," Lamb said, adding that while prices may not fall any further, they probably won't rise in the near-term either.

Donald Lawby, president and chief operating officer of Century 21 Canada, agreed that now is a good time to buy a first home, but said prospective buyers should make sure they understand their local market before they dive in.

Soper said that while "we're well through this correction," the U.S. housing slump is far from over and will continue to affect Canadian home prices.

He added that a shortage of buyers in most parts of the country means that this is a bad time to be a speculator trying to make money off rising home prices.

"I don't see a sharp recovery in home prices over the next 24 months," Soper said. "I think home prices will rise at a snail-like pace."

Home ownership affordable

First-time buyers boosting resale housing market

First-time buyers are helping kick-start a sputtering resale real estate market, thanks to some contributing factors, say those in the know.

The low interest rates and other government incentives have helped first-time buyers get into home ownership, says Lai Sing Louie, senior market analyst with Canada Mortgage and Housing Corp.

"There are incentives for them to buy now. The first-time buyers can, for instance, take out $25,000 in RSP money (up from the previously $20,000 limit) without consequences, and if they bought after January 27, they are able to qualify for $750 in tax relief next year," says Lai Sing Louie.

"And mortgage rates are at a very good rate right now."

In fact, they're at record lows, so homeowners can get in and have payments that are much less than they were even a year ago, he says.

"People can get a five-year fixed rate for four per cent, whereas it was 6.6 per cent last year at this time," says Louie.

Combine that with the lower prices for condos in the market, and housing affordability is much improved, he says.

The average price of resale condominiums that sold through the Calgary Real Estate Board last month was $284,056 --down nine per cent from the same month last year when the average price was $312,620, but up from the average of $268,971 posted in February.

A total of 446 condos sold in March, compared to 565 in March 2008 and just 343 last month.

Taking the average March 2008 condo price ($312,620) with 10 per cent down, the mortgage amount would be $281,358. "At last year's interest rate of 6.6 per cent and amortization of 25 years, monthly payments would be around $1,917," says Louie.

Last month, that same condo would sell for an average of $284,056. "With interest rates at four per cent, the same 10 per cent down and 25-year amortization would mean monthly payments of $1,349. That's down $568 a month--much more affordable," says Louie.

"And that gives people a degree of certainty knowing what the mortgage will cost for the next five years."

The numbers are "encouraging," says Bonnie Wegerich, president of CREB and a realtor with Century 21 Castlewood Agencies. "Two years ago, young people couldn't afford to buy. Our statistics show that our most active sales by price category in condos was the $200,000 to $299,999 range."

In fact, of the 446 condo sales last month (compared to 565 in March 2008 and 343 in February), 263 units, or 59 per cent of sales, were in that range.

Listings are coming down as well, with fewer condos for sale compared to a year ago.

As of the end of March, 2,052 condos were in the inventory, compared to 2,781 last year for the same month. It now takes an average of 56 days to sell a condo, compared to 43 days in the same month the year before.