9 Feb

The Top 7 Misconceptions About Reverse Mortgages.

General

Posted by: Greg Domville

The Top 7 Misconceptions About Reverse Mortgages.

How much do you really know about reverse mortgages? Maybe you know that reverse mortgages can help Canadians 55+ access the equity in their home, tax-free. Maybe you know that tens of thousands of Canadians are using a reverse mortgage as part of their financial plan. But did you know that there are 7 common misconceptions when it comes to understanding reverse mortgages in Canada. As Canada’s leading provider of reverse mortgages, HomeEquity Bank can help set the record straight.

Common Misconceptions about Reverse Mortgages

1. If you have a reverse mortgage, you no longer own your home

Nothing could be further from the truth. You always maintain title, ownership and control of your home – HomeEquity Bank simply has a first mortgage on the title.

2. You will owe more than the value of your home in the end

Also, untrue. Every CHIP Reverse Mortgage from HomeEquity Bank comes with a No Negative Equity Guarantee(1) which states that as long as you – the homeowner – have met your obligations, the amount you will have to pay on the due date will not exceed the fair market value of your home. In fact, over 99% of HomeEquity Bank’s customers retain equity in their home when they decide to sell, with over 50% of the home’s value remaining after the loan is paid back (on average).

3. Only people younger than 62 can apply for a reverse mortgage

In Canada, the CHIP Reverse Mortgage is available to Canadian homeowners aged 55 and older. In fact, as you age you are more likely to qualify for a higher amount on your loan. A reverse mortgage is a lifetime product and as long as the property taxes and insurance are in good standing, the property remains in good condition, and the homeowner is living in the home full-time, the loan won’t be called even if the house decreases in value.

4. Failure to make payments can result in eviction

This myth is one of the most common when it comes to reverse mortgages. The CHIP Reverse Mortgage does not require any monthly payments, meaning you can’t miss payments in the first place.

5. Arranging a reverse mortgage is very expensive

This is also untrue. Much like a conventional mortgage, an appraisal of your property and independent legal advice is required, and your responsibility to pay for. The only remaining cost is a one-off closing and administration fee. When you compare this to the costs of “rightsizing” to another home, you will find a much more affordable option in a reverse mortgage.

6. Reverse mortgages have much higher interest rates than conventional mortgages

While it’s generally true that interest rates are a bit higher than a traditional mortgage, the difference is not excessive. Plus, making monthly mortgage payments is simply not a viable option for many retired Canadians, and – even if it were – many would struggle to qualify for a traditional mortgage in the first place. For these reasons, many retired Canadians are choosing reverse mortgages over conventional solutions.

7. You won’t be able to pass on your home to your children

The idea that your children won’t be able to inherit your home is a complete myth. Your heirs will always have the option of keeping the property by paying off your reverse mortgage after you pass away. Plus, HomeEquity Bank’s No Negative Equity Guarantee, (1) states that if the home depreciates in value and the mortgage amount due is more than the gross proceeds from the sale of the property, HomeEquity Bank covers the difference between the sale price and the loan amount. Therefore, you will never owe more than the fair market value of the home.

To find out how much you could qualify for, try our reverse mortgage calculator, or contact your DLC Mortgage Professional.

[1] The guarantee excludes administrative expenses and interest that has accumulated after the due date.

9 Feb

6 Important Questions to Ask Before a Big Home Renovation.

General

Posted by: Greg Domville

6 Important Questions to Ask Before a Big Home Renovation.

So you want to make a major home renovation. Congratulations! Now, you’ve got to find the right contractor for the job. While doing a thorough online search or asking family and friends is an important first step, once you find a potential contractor, it’s time to start treating the process like a job interview. Being prepared with the right questions protects you from future headaches, but also ensures that you’re happy with the end result.

Hiring a contractor for your big home reno? Ask these important questions to make sure you’re picking the right contractor.

  1. What is your experience in home renovation?

This question can help you determine how long the contractor has been in the business, whether they’ve worked with similar challenges as those in your home and how they ensure that projects are completed on time. With this question, you get full insight into their methodology.

You can also find contractors in your area that might have positive Yelp reviews or other social media to see if others are happy with their work.

  1. Do you have a contracting license?

Depending on where you live, there are different requirements for what type of license a contractor has to hold. Check the laws in your region to see what might apply, and ask potential contractors directly whether they hold those licenses.

  1. Do you carry the appropriate insurance?

According to the Canadian Homeowner’s Association, hiring people without the proper insurance could put you at legal and financial risk should something happen in your home. Protect yourself (and the workers improving your home) by checking off this box in the beginning, and ensure they have both liability insurance and worker’s compensation.

  1. Will we get a written contract?

This should be a given if you’re working with a contractor because if the answer is no, don’t even bother moving forward with the interview. The CHBA says contracts should cover the description of the work, the materials used and the price of the job. You should also take this as an opportunity to figure out your payment schedule, as the Better Business Bureau in the U.S. says that you should never pay the full price of the job upfront, and the specific timeline for completing your project.

Contractors should also always offer a warranty in writing that informs you of what is covered and for how long.

  1. Can we get in touch with your past clients?

A contractor should be proud of their past work. Take this as an opportunity to figure out how contractors approach their work, whether they have effectively handled disputes and fact-check what contractors tell you about their working style.

  1. Will you be responsible for building permits?

If there is a chance that your building requires permits, you want to make sure that your contractor is prepared in this area. Square One Insurance says you should try to be present for a contractor’s home inspection to ensure that you fully understand their feedback, and anticipate if any changes in your home need to happen.

Published by FCT

9 Feb

What Does Canada’s Aging Population Mean for the Real Estate Market?

General

Posted by: Greg Domville

What Does Canada’s Aging Population Mean for the Real Estate Market?.

I’ve got good news and bad news. The bad news is: we’re not getting any younger. The good news is: we’re not going away anytime soon, either, as life expectancy for Canadians is higher than ever before! At least, I think that’s good news—check back with me in 2050 and let’s see how we all feel about it.

Globally, we’ve hit astoundingly high population numbers for people aged 65+, exceeding a threshold of 672 million people (about 8.9% of the total population) in 2019. That’s an increase of more than 500 million compared to 1960 when there were about 150 million people above 65+ globally (roughly 5% of the global population). Oh yes, that’s a whole lot of people.

In fact, it’s only going to get more crowded as the years go by, with the UN estimating that the number of older persons (above 60) is projected to reach 2.1 billion by 2050. And we think it’s crowded now!

This brings us to Canada’s own ageing population: according to Statistics Canada, “seniors are expected to comprise around 23% to 25% of the population by 2036, and around 24% to 28% in 2061”. With a shrinking working population supporting that ~25% segment, the precise economic implications are too varied to be certain of any firm outcome. What is certain is that the older members of our population will need a place to live, which will have a significant effect on Canada’s real estate landscape.

Effects on the Supply of Real Estate

Our ageing population affects the supply of property in the real estate market in several interesting ways. The expectation was that baby boomers would find themselves living in large homes with more space than they needed once they’d retired and their children moved out. At that point, they were supposed to sell their property and downsize to smaller (or less expensive) homes. This influx of property into the market (projected to be half a million homes) would help meet rental or purchase demand, in some cases allowing developers to re-purpose the property into larger, higher density structures (especially in cities).

However, changes to the real estate market may significantly affect how that scenario plays out in reality.

  • Small condos and detached or semi-detached townhouses used to be prime candidates for someone looking to downsize. Now, rising real estate prices (especially in cities like Toronto and Vancouver) can make this an incredibly difficult endeavour.
  • Millennials (and soon Gen Zs) have begun to move back in with their parents, as they struggle to contend with exorbitant rent prices, lack of steady work, and extremely high property prices. It’s proven economical for them to live at home rent-free (or at least, with a much lower rent) and save their money to put towards buying homes of their own later.

With more reasons to remain in their current homes (such as their kids moving back in with them), as well as high property prices and a lack of suitable options to downsize to, older homeowners are increasingly choosing to hang on to their property. This, of course, delays the timeframe in which their (usually larger) homes will be released into the housing market, which in turn will further exacerbate property shortages.

Effects on the Demand for Real Estate

Our ageing population has implications for the demand side of the real estate market as well. Accessible property, for example, will increasingly grow in demand as people get older. Fierce competition in the housing market has made it difficult for older people to acquire suitable apartments or houses that cater to their needs (such as, ground floor units or accessibility-friendly rental housing).

Affordable, smaller housing with room for live-in or part-time caregivers, especially in close proximity to essential services and infrastructure (health services, public transit, malls/grocery stores, etc.) will become much more desirable as our population ages.

Some of this demand will likely be met by the government, as it works to fund the construction of homes for senior citizens through the Canada Mortgage and Housing Corporation (CMHC). This will prove vital in the years to come, as increasing numbers of modest to middle-income Canadians retire and start being priced out of the normal rental market. However, with Canada’s population projected to increase at a sharp rate until the middle of the century, we’ll need more than just government intervention to address the issue.

Final Thoughts

The effects of an ageing population on Canada’s own future will be far-reaching, but impossible to predict definitively. That’s not to say we don’t have a good idea of what the likely outcomes are—we’ll need more housing, and we’ll need to be able to support older Canadians, to name two—but nothing about the upcoming decades is written in stone. The manner in which our government addresses social security issues, housing crises, and indeed, which government we even have in power will all play a role in securing stability or uncertainty.

Any speculation on the effects of projected population growth figures should be tempered with the understanding that they’re precisely that: projections. Not everyone agrees with the UN’s assessment of rampant increases, arguing that we might see a return to “normal” population levels towards the end of the century instead of endlessly spiraling into overpopulation. But whatever the outcome, it’s important that we’re paying attention.

Published by FCT

2 Feb

6 Important Questions to Ask Before a Big Home Renovation.

General

Posted by: Greg Domville

6 Important Questions to Ask Before a Big Home Renovation.

So you want to make a major home renovation. Congratulations! Now, you’ve got to find the right contractor for the job. While doing a thorough online search or asking family and friends is an important first step, once you find a potential contractor, it’s time to start treating the process like a job interview. Being prepared with the right questions protects you from future headaches, but also ensures that you’re happy with the end result.

Hiring a contractor for your big home reno? Ask these important questions to make sure you’re picking the right contractor.

  1. What is your experience in home renovation?

This question can help you determine how long the contractor has been in the business, whether they’ve worked with similar challenges as those in your home and how they ensure that projects are completed on time. With this question, you get full insight into their methodology.

You can also find contractors in your area that might have positive Yelp reviews or other social media to see if others are happy with their work.

  1. Do you have a contracting license?

Depending on where you live, there are different requirements for what type of license a contractor has to hold. Check the laws in your region to see what might apply, and ask potential contractors directly whether they hold those licenses.

  1. Do you carry the appropriate insurance?

According to the Canadian Homeowner’s Association, hiring people without the proper insurance could put you at legal and financial risk should something happen in your home. Protect yourself (and the workers improving your home) by checking off this box in the beginning, and ensure they have both liability insurance and worker’s compensation.

  1. Will we get a written contract?

This should be a given if you’re working with a contractor because if the answer is no, don’t even bother moving forward with the interview. The CHBA says contracts should cover the description of the work, the materials used and the price of the job. You should also take this as an opportunity to figure out your payment schedule, as the Better Business Bureau in the U.S. says that you should never pay the full price of the job upfront, and the specific timeline for completing your project.

Contractors should also always offer a warranty in writing that informs you of what is covered and for how long.

  1. Can we get in touch with your past clients?

A contractor should be proud of their past work. Take this as an opportunity to figure out how contractors approach their work, whether they have effectively handled disputes and fact-check what contractors tell you about their working style.

  1. Will you be responsible for building permits?

If there is a chance that your building requires permits, you want to make sure that your contractor is prepared in this area. Square One Insurance says you should try to be present for a contractor’s home inspection to ensure that you fully understand their feedback, and anticipate if any changes in your home need to happen.

Published by FCT

7 Jan

5 Expenses Most Canadians Don’t Expect in Retirement.

General

Posted by: Greg Domville

5 Expenses Most Canadians Don’t Expect in Retirement.

According to a recent CIBC poll, nearly half (48%) of retired Canadians stopped working sooner than they expected. The result is that many retirees have saved less for retirement than they planned, making unexpected expenses all the more stressful once the income tap has run dry.

But you know what they say, preparation is the best protection against the unexpected. And with that in mind, here are some unexpected expenses that many retired Canadians experience that you might want to plan for.

Home maintenance and upgrades

Just like with our own bodies, homes require ongoing care and have unexpected breakdowns. That’s why it’s important to do regular check-ups and budget for the unexpected, as well as the expected.

Whether it’s replacing the roof, furnace, or appliances, or upgrading your home to be more accessible as you age, it’s important to plan ahead for how you will cover the costs of keeping the home you love safe, beautiful, and suited to your needs. Luckily, there are options like the CHIP Reverse Mortgage that can provide the funds to help you take care of your home without making monthly payments or affecting your OAS or CPP.

Personal and family emergencies

It’s sad to say, but most people at some point in their lives will have to deal with a sudden emergency. Whether it is needing to travel to see a family member who has had an accident or become ill, or people you love who may need some financial assistance during a trying time. The costs of dealing with such an emergency can be as draining on your finances as they are on your emotions.

Many financial institutions and advisors recommend setting up an emergency fund with 3-6 months salary. Of course, this means you would need to plan ahead and set up the fund before retiring and adding to it when possible in retirement. You can use the emergency fund calculator from Practical Money Skills Canada if you need to get started.

Frauds and scams

Between January 2014 and December 2017, Canadians lost more than $405 million to fraudsters. What’s more, these criminals largely target elderly citizens, with $94 million of that sum coming from Canadians aged 60 to 79. And with the growth of the digital age since then, there are now more opportunities for fraudsters than ever before.

No one expects to get scammed, but many retirees experience significant financial hardship due to fraudulent crimes. To help you avoid, detect, and report fraud, HomeEquity Bank has recently launched Catch the Scam, a series of online classes led by Frank Abagnale, the former conman whose life inspired the Leonardo DiCaprio film Catch Me If You Can. Frank now works as a consultant with organizations including the FBI to help tackle fraud, forgery, and embezzlement. Watch Frank’s Catch the Scam video series to see how you can avoid Canada’s most common scams.

Living longer than expected

While a long life is truly a blessing and something to celebrate, Canadians are living longer than they ever have. One result of this is that some of the financial advice being given today may not account for the realities of tomorrow. Of course, any retirement plan needs to begin with when you plan to retire, and end with how long you can realistically expect to stay retired.

Many Canadians are realizing that they will live longer and experience higher health costs toward the end of their lives. In order to be fully prepared, it’s important to over-plan to ensure you are fully covered for the (extra) long term.

Investment losses

While everyone understands that investments have a cycle with peaks and valleys, toward retirement most people tend to shift towards safer assets such as government bonds and Guaranteed Income Certificates (GICs) – but there is always a level of risk for any investment. Make sure your investments align with the risk you’re willing to tolerate, and that you have a way to get extra funds if needed. For instance, a reverse mortgage is an ideal option for many 55+ Canadians, since it’s tax-free, unlocks up to 55% of their home equity, and requires no monthly mortgage payments.

Contact your DLC Mortgage Broker to find out more about how the CHIP Reverse Mortgage can help you prepare for the unexpected in retirement.

Written By: Agostino Tuzi
Post Sponsored by HomeEquity Bank

7 Jan

Ultimate Checklist for Selling Your Home.

General

Posted by: Greg Domville

Ultimate Checklist for Selling Your Home.

Selling your home can be an extremely stressful experience. Between thinking about moving logistics and financials, it’s easy to miss the small details in between the process.

With that in mind, we’ve built this checklist for selling your home to help you keep track of the things that will get a potential buyer interested. Turns out, it’s not as simple as just fluffing pillows or doing a light dusting. “Put your buyer’s hat on and walk through your home like it is the first time,” Marilou Young, an Accredited Staging Professional and an Associate Broker with Virtual Properties Realty in the metropolitan Atlanta area, told Forbes.

Below is the ultimate checklist for selling your home.

Get familiar with the paperwork

For home sellers interested in the history of the house, make sure you’ve got all the information handy; this can include paperwork on renovations, property tax receipts, deeds and transferable warranties.

Getting the price right

According to HGTV, it can be helpful to do some market research on what homes in your area are selling for- then shave 15 to 20 percent off that. This way, you attract multiple buyers who can end up outbidding each other and bringing up the price. While that can seem like a risky move, it could work in the competitive markets of big Canadian cities.

Depersonalize and declutter

You want potential buyers to see themselves in the space, which is hard to do if you have family photos on the wall or personal items around. This would be a good time to start putting items in storage or try to keep your personal items out of sight. At the same time, you’re also ensuring that you’re keeping your house tidy—a must if you want to make your home sellable. Check around the house for dirt, stains or small cracks you might be able to fix. And if you have pets, make sure their litter boxes and play areas are also clean and odour-free.

Find a qualified realtor

Realtors can be helpful to take some of the processes off your plate, including marketing your home and arranging open houses. If you do go this route, none of this list will matter if you decide to work with a realtor that doesn’t know the market inside out. You can search their name on the Real Estate Institute of Canada to ensure that they’re qualified, and meet with them to see if you mesh and understand how they price your unit. At Proptalk, we also have this handy guide for more details.

Don’t skip the home inspection

While presenting an unconditional offer may win you the home of your dreams, it can also end up costing you more than you expected. If you’re mortgaged to the max, you can’t afford surprises like repairs or replacements that you haven’t already budgeted for. Consider a Home Protection Plan that includes an 18-month warranty and up to $20,000 in warranty coverage for major household features such as foundation, roof, heating and cooling.

Published by FCT

26 Jun

Housing prices in Calgary likely to drop by tens of thousands over next two years, says CMHC

General

Posted by: Greg Domville

Housing prices in Calgary likely to drop by tens of thousands over next two years, says CMHC

Average house price in Calgary could drop as much as 110K by 2022

A sign advertises a house for sale in Calgary in this file photo. The pandemic has greatly affected sale volumes and prices in the city. (Robson Fletcher/CBC)

The Canada Mortgage and Housing Corporation (CMHC) says the average price of a house in Calgary could drop by tens of thousands of dollars over the next two years.

Last year, the average house price in Calgary was around $443,000.

The CMHC’s latest Housing Market Outlook, which focuses exclusively on urban areas, says that the price is expected to drop to at least $399,800 by 2022, due to a combination of a sluggish economy and the effects of COVID-19.

However, that’s the high end of the forecasted range. The low end is $335,000.

“In the past few months, we’ve seen a significant shock to the economy and a shock to people’s incomes,” said Taylor Pardy, senior analyst of economics for the CMHC.

He said everything from a stall in migration to a near shutdown of the economy has impacted the housing market.

“That’s going to take a bit of a toll. We haven’t really had sort of those two factors come together in the past,” he said.

Slowing the pace of new construction

Pardy said the unprecedented measures taken to address the pandemic will be reflected in the slower pace of new construction over the next year.

“In 2020, we are projecting a 43 to 64 per cent decline in the pace of housing starts. That would likely be the worst of it,” he said.

Looking forward to 2021 and 2022, Pardy said the pace of new construction is anticipated to improve gradually as pandemic restrictions ease and economic activity improves.

“The other thing to remember is that with restrictions in place, typical sources of population growth in Calgary have been either significantly slowed or halted,” said Pardy.

“International migration as well as inter-provincial migration is likely not happening anywhere near the pace that it was pre-COVID.”

He said this will result in a significantly reduced rental demand at the same time a large number of rental units are anticipated to be completed and brought to market. Pardy said some existing units previously used as short-term rentals might be added to the supply of long-term rental units as well.

“The combined effect of a decline in demand and increase in supply could be a higher vacancy rate in Calgary over the next two years.”

Home Prices in Canada's Urban Areas

Sales prices expected to drop significantly

Pardy said Calgarians can expect resale activity to slow significantly this year, too, with a projected decline in sales between 12 and 27 per cent.

“In addition to a decline in MLS average prices of about 2.5 to 12 per cent,” he added.

Speaking on the Calgary Eyeopener on Wednesday, local realtor Len T. Wong said Calgary’s housing market has definitely taken a hit lately.

According to Wong, local sales volumes in April dropped by about 60 per cent compared with last year.

“Which put pressure on prices a little bit, by about five per cent,” he said. “And what we noticed with everybody psychology-wise is that they were panicking adjusting to the times.”

Wong said things looked a little better in May, with sales volumes down only 40 per cent from last year.

“We’ve seen a little bit of a hold and wait, and now we’re starting to see a little bit more activity,” he said.

“But long term, I think you know the fourth quarter will really tell us where we’re headed, and I don’t disagree that prices could go down like CMHC is saying,” he said.

Impacts of subsidies and mortgage deferral

Wong said government subsidies and mortgage deferral programs are likely also playing a role, and are helping prevent distress sales from people who aren’t bringing in their usual income.

“My concern is, of course, once [that funding] runs out … when we don’t have the subsidies and all the deferrals are done,” he said. “That’s when you’re going to really start to see the pinch.”

Wong said people who continue to buy right now haven’t been impacted much financially by the pandemic.

“They’re nurses, policemen, firemen — public sector type folks who have stable jobs — they’re the ones who have been buying during this COVID period,” he said.

‘Year 6 of a buyer’s market’

For homeowners who are thinking of selling right now, Wong said they should look to take advantage of the market when there has been an increase in volume.

“But people have to realize that they have to price it right,” he said.

“We’re in year six of a buyer’s market, and so people have to recognize that you’ve got to be in front of people to see them because if you get too many houses in that area, it’s not going to sell.”

CMHC’s forecast for Calgary housing prices over next two years. (CMHC)

For buyers, Wong said they could take advantage of  things like lowered lending requirements and lower than normal interest rates — currently down from nearly 3.5 per cent to some as low as 2.5 per cent.

“Buyers should take advantage of it to a degree because if interest rates start to go up or down, you can make up that differential. I think there’s good opportunities,” he said.

Pardy said lower interest rates would contribute to what people might be able to afford in the short run, but when you look at things like the unemployment rate, and the fact that roughly 15 per cent of mortgages are being deferred by the six big banks — it paints a less optimistic picture.

“There is certainly some financial stress on the system right now that needs to work itself out,” he said.

‘Difficult to predict’

Wong also predicted that the $300,000 to $500,000 market isn’t going to shift a ton.

“I think it’s the upper-end stuff that [will see] some of the heavy losses,” he said.

But Pardy said that’s hard to know for sure.

He said areas of the economy that have been hit hardest include retail, transportation, education and industries related to tourism, as well as accommodation and food services.

“How this translates into, you know, other segments of the economy and potential job losses … is yet to come,” he said.

A hurting energy industry will also have an impact, according to Pardy.

“We haven’t really seen that too much in the job numbers yet but that’s likely to come as well,” he said.

“Given the uncertainty around the distribution of unemployment, as well as the distribution of who’s lost out on income and how that’s translated into lost household income makes it very, very difficult to predict what segments are going to fare better versus others.”


With files from the Calgary Eyeopener.

About the Author

Lucie Edwardson

Journalist

Lucie Edwardson is a reporter with CBC Calgary, currently focused on bringing you stories related to education in Alberta. In 2018 she headed a pop-up bureau in Lethbridge, Alta,. Her experience includes newspaper, online, TV and radio. Follow her on Twitter @LucieEdwardson

26 Jun

Home prices in Vancouver haven’t gone down because people affected by COVID couldn’t afford them to start with

General

Posted by: Greg Domville

Home prices in Vancouver haven’t gone down because people affected by COVID couldn’t afford them to start with

Benchmark price for homes has stayed static; though rents have decreased

Vancouver’s real estate market has seen virtually no change in the average price of homes over the last 12 months. (Darryl Dyck/Canadian Press)

COVID-19 has changed elements of living in Metro Vancouver in so many ways, from transportation to the economy to drug and liquor policy.

But the price of buying a home? Well, some things stay the same.

“There is a little bit of disconnect right now,” said Central 1 deputy chief economist Bryan Yu.

Even with unemployment in B.C. at 13 per cent and a forecast GDP reduction of 7.8 per cent this year, the benchmark price of a property in Greater Vancouver has essentially remained constant — going from $1.02 million in February to $1.03 million in May.

While there’s evidence on sites like Craigslist that the price of rentals has dropped in the last three months, Yu said that the ownership market has stayed static and could even see a slight uptick when official numbers are released next week for June.

He believes one key reason is that people most impacted by the economic downturn weren’t players in Vancouver’s housing market to begin with.

“Whether it’s the accommodation sector or restaurant services … the economic impact has predominantly hit the lower end of the income spectrum,” said Yu.

“For higher income individuals still in the market, it’s likely they were still in the market. They were able to work or stay at home, in some cases able to save money.”

Troubles on horizon?

At the same time, Yu said Vancouver’s real estate sector couldn’t stay impervious to COVID-19 forever.

“As we move forward into the fall, there’s going to be a little more pressure,” he said, adding that lower immigration would also have an affect.

“The economy itself is not strong. It’s going to be quite weak as we go forward.”

On Monday, the Canada Mortgage and Housing Corporation released a housing outlook, forecasting the lower range for the average home price in Metro Vancouver would fall from $892,790 in 2020 to $809,215 by 2022.

“Average house prices will decline with weaker household budgets and the uncertain nature of the economic reopening,” wrote CHMC senior analyst Braden Batch and senior specialist Eric Bond.

However, they also said Vancouver’s “ownership markets are less exposed” to COVID-19, compared to the rental market.

“Real estate buyers tend to be older than renters. Therefore, they are less likely to have lost their employment as a result of the economic shutdown,” they wrote.

Government response?

The provincial government announced a host of housing policies in 2018 and 2019 — and have put in emergency COVID-19 measures to help protect renters — they have no immediate intention to make further changes.

Finance Minister Carole James says the government will be closely monitoring the situation.

“We’re going to watch the housing market,” said James.

“With COVID, there have been mixed results … but still a great challenge, so we’re continuing on with our measures, and not letting up from making sure we look at affordable housing for people.”

As COVID-19 dramatically slowed down public hearings and new staff reports, municipalities saw their housing plans effectively frozen, but that is beginning to change. The City of Vancouver is considering a new policy that would create rental tenure zoning in arterial streets across the city, in exchange for six-storey buildings for stratas, instead of the current four.

A public hearing is expected in July, and Housing Minister Selina Robinson is excited by the development.

“Local governments have been cautious, but we’re starting to see more pick up,” she said.

“During COVID, things changed in terms of acting on new things, but I’m really pleased to see the activity pick up. It means that local governments recognize we still need to be recognizing housing affordability.”

25 Jun

The CHIP Reverse Mortgage as your Debt Consolidation Solution

General

Posted by: Greg Domville

The CHIP Reverse Mortgage as your Debt Consolidation Solution

Canadians are choosing to carry more and more debt

For many Canadians, borrowing money has become an increasingly necessary means of keeping up with ongoing expenses. Whether it’s a traditional mortgage to get into a home, a line of credit to cover a major purchase or unexpected expense, or credit cards to pay monthly bills, many Canadians find themselves plagued by a high debt load at one time or another.

A high debt load is often caused by more than just spending or saving habits. Climbing costs of living combined with a slowing economy have further tightened many Canadians’ cash flows. The reality of the COVID-19 situation is that many Canadians will need to increase their debt to cover their monthly expenses, but there are no-payment options available to help them manage and consolidate these debts while increasing their cash flow at the same time.

Why consolidate your debts?

It can be a stressful experience to manage debt from multiple sources. With varying interest rates, due dates, and payment methods, many Canadians become overwhelmed by the sheer effort of keeping up with their debt’s demands. That’s why debt consolidation is such a popular strategy: It makes paying down the debt much more efficient and manageable by rolling multiple high-interest debts into a single sum with lower interest and reduced minimum payments. It helps you get out of debt faster and protect your credit score.

But with so many different debt consolidation solutions available, it can be difficult to decide which option is best for you.

The reverse mortgage advantage

For 55+ Canadian homeowners, a reverse mortgage is a great option to consolidate debt, especially during retirement. In these uncertain times, where investments and the economy have taken a major hit, many retirees will experience a monthly “income gap” where taking on additional debt is the most accessible option to cover the difference. And while retirees may have trouble increasing their income in retirement, the equity held in their home can be leveraged to consolidate their debts into one loan.

If you are a Canadian 55+ and own your home, the CHIP Reverse Mortgage® from HomeEquity Bank could be an excellent option for you. You can get up to 55% of the value of your home in tax-free cash (either lump sum or planned advances), and with a reverse mortgage, the interest rates are a fraction of what you pay with the average credit card. For these reasons, a CHIP Reverse Mortgage presents a fantastic debt consolidation opportunity – but there’s another major benefit to the reverse mortgage you may want to consider…

Say “So long” to making monthly payments

The CHIP Reverse Mortgage frees you from the burden of having to make monthly payments or interest payments until you decide to sell your home (or if you and your spouse pass away). Without these ongoing monthly payments, you’ll be free to focus on what really matters in retirement: Making the most of your daily life by doing what you love, with those you love.

For 55+ Canadian retirees, there’s only one debt consolidation solution that minimizes accumulating debt, reduces financial stress, and increases disposable income without having to make monthly payments or sell or lose ownership of your home: The reverse mortgage.

Want to know more about using the CHIP reverse mortgage as a debt consolidation tool? Contact your DLC Mortgage Broker for more information.

Posted by: Agostino Tuzi
National Partnership Director, Mortgage Brokers
HomeEquity Bank

Agostino Tuzi

Agostino Tuzi

Agostino Tuzi is the National Partnership Director, Mortgage Brokers at HomeEquity Bank.

25 Jun

Canadian Home Sales and New Listings Recover One-Third of Pandemic Loss in May

General

Posted by: Greg Domville

Canadian Home Sales and New Listings Recover One-Third of Pandemic Loss in May


Record Gains in Canadian Home
Sales and Listings in May

There was good news today on the housing front. Home sales surged by a record 56.9% in May from April’s unprecedented collapse. Data released this morning from the Canadian Real Estate Association (CREA) showed national home sales recovered roughly one-third of the COVID-induced loss between February and April (see chart below). On a year-over-year (y-o-y) basis, sales activity was still down almost 40%, but the jump in sales and an even larger surge in new listings shows pent-up demand remains for housing as buyers wish to take advantage of historically low mortgage rates.

Transactions were up on a month-over-month (m-o-m) basis across the country. Among Canada’s largest markets, sales rose by 53% in the Greater Toronto Area (GTA), 92.3% in Montreal, 31.5% in Greater Vancouver, 20.5% in the Fraser Valley, 68.7% in Calgary, 46.5% in Edmonton, 45.6% in Winnipeg, 69.4% in Hamilton-Burlington and 30.5% in Ottawa. Not surprisingly, the cities with the smallest gains posted the smallest declines in prior months.

More importantly, anecdotal data suggest that housing activity has been steadily rising from the middle of April until the first week in June.

New Listings

The number of newly listed homes shot up by a record 69% in May compared to the prior month with gains recorded across the country.

With new listings having recovered by more than sales in May, the national sales-to-new listings ratio fell to 58.8% compared to 63.3% posted in April. While this statistic has moved lower, the bigger picture is that this measure of market balance has been remarkably stable considering the extent to which current economic and social conditions are impacting both buyers and sellers.

There were 5.6 months of inventory on a national basis at the end of May 2020, down from 9 months in April. The temporary jump in this measure recorded in April reflected the fact that sales were expected to fall right away amid lockdowns; whereas, other variables like active listings would be expected to fall at a much slower pace. The CREA report suggests many sellers who already had homes on the market before mid-March may have left the listings up for now but drastically curtailed the extent to which they were showing their homes during the lockdown. With many of those now coming off the market, overall active listings have fallen by about a quarter as of the end of May, bringing them down among the lowest levels on record for that time of the year.

Home Prices

Home prices were little changed in May compared to April across Canada. Of the 19 markets tracked by the MLS Home Price Index (HPI), 18 recorded either m-o-m increases or smaller decreases than in April. Five markets posted price gains in May following a decline in April (see the table below for local details).

In general, since the pandemic crisis began small declines in prices have been posted in British Columbia while declining trends already in place in Alberta have accelerated. With the recent surge in oil prices, however, sales activity has actually improved across the Prairies and price trends have been stabilizing.

Despite the pandemic, home prices in the Greater Golden Horsehoe area around and including Toronto have fallen very little and remain well above year-ago levels. In Ottawa, Montreal and Moncton, prices have continued to climb, albeit at a slower pace than before.

Bottom Line

CMHC has recently forecast that national average sales prices will fall 9%-to-18% in 2020 and not return to yearend-2019 levels until as late as 2022. I continue to believe that this forecast is overly pessimistic. Firstly, average sales prices are highly misleading, especially on a national basis because they vary so much depending on the location of the activity, as well as the types of property sold.

There is no national housing market. All housing markets are local. A glance at Table 1 above shows a wide variation in regional sales price action, but if anything, trends appear to be converging on moderate positive pressure on prices. Today’s economic recession is like no other. The record stimulus introduced by the Bank of Canada and the federal government will assure that the housing markets will continue to function, even with social-distancing measures in place, and those who enjoy steady employment will proceed in due course with regular housing decisions.

Those who permanently lose their jobs are the real concern. Many of those people will be in the hardest hit and slowest-to-recover sectors of our economy, such as hospitality (accommodation and food), non-essential retail trade, and the leisure industry (arts, entertainment and recreation). Statistics Canada census data for 2016 in the table below, shows that the homeownership rate in these sectors is relatively low. Unfortunately, most of those who will be hardest hit by the pandemic can least afford it. This is an issue that fiscal policy must address, investing in retraining programs and universal income guarantees.

Dr. Sherry Cooper

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.