Thursday, June 26, 2014

Summer cottages are hot properties

By Ross Marowits Canadian Press
Canada's summer cottage market is showing no signs of cooling off as it rebounds from a long winter and late spring, national realtor group Re/Max said Wednesday.
Sales in Ontario and Atlantic Canada were up in May after a sluggish April and Re/Max is forecasting mid to high single-digit price increase for cottages, cabins, vacation condos and camps throughout the rest of the year.
"What we're seeing is a healthy and stable real estate market supported by strong economic fundamentals that we believe are going to continue moving forward, at least in the foreseeable future," said Gurinder Sandhu, director for the Atlantic Ontario region.
An eventual increase in interest rates could modestly dampen sales, but he said there are no expectations of dramatic hikes that would threaten what Sandhu called a "healthy and balanced" market.
In its recreational property report released Wednesday, Re/Max said Canada's strong residential real estate market in urban centres has had a spillover effect on recreational property sales with homeowners using equity gains in their homes to buy a second property.
That has been happening mostly for markets within a two-hour drive of Canada's large urban centres like Toronto, Calgary and Vancouver.
Young families, along with near and recent retirees, are driving the majority of recreational property sales across the country.
Re/Max also said buyers are purchasing properties from where they can work throughout the summer and use year-round as they seek to avoid road congestion by taking advantage of technology to telecommute.
While some potential buyers may have been discouraged by the Canada Mortgage and Housing Corporation's recent decision to eliminate insurance on second mortgages, there has been little to no impact on sales from the change, it said.
Re/Max also said a weaker Canadian dollar has prompted buyers to remain in Canada rather than buying south of the border.
Sandhu said the report of 41 regions across Canada, excluding Quebec, was derived from conversations with its agents and statistical analyses from local real estate boards.
"There has been that bounce back in the warmer months and what we believe we're going to see toward the balance of the year is really a market that's on par with last year and a modest increase in prices," he said from Toronto.
Re/Max's real estate outlook is stronger than some other forecasts. CMHC predicts the average home price will rise 3.5 per cent to $396,000 on a seasonally adjusted basis this year, and 1.6 per cent to $402,200 in 2015.
David Madani of Capital Economics, who believes Canada's housing market is poised for a major correction, said summer cottages are vulnerable to a housing downturn.
"When that market turns and heads down that's probably the first thing that people are going to chop and want to sell," he said in an interview.
Madani said buyers who are concerned about rising interest rates "would only tighten the screws that much further in terms of the outlook for the cottage industry."
Prices vary widely according to location. Entry-level waterfront properties north of Toronto start at $300,000 to $400,000. But a 630-square-metre (7,000-square-foot) cottage overlooking Lake Rousseau in the Muskoka region sold for $7.4 million, the most in more than six years.
According to the Canadian Real Estate Association, the number of Muskoka area cottage properties sold in May fell 4 per cent from the prior year. However, the median price rose 7 per cent to $494,000, the second-highest level on record. The total value of cottage sales increased 30 per cent to a record $181.5 million.
The three hottest areas of the country for summer properties are Collingwood and Lake Simcoe, both north of Toronto, and parts of British Columbia, Sandhu said.
In Western Canada, high consumer confidence is motivating buyers, with some markets reporting the most activity since the recession.
The Okanagan Valley is attracting buyers from Alberta with new direct flights from Fort McMurray. The average waterfront home now sells for about $590,000, compared with $900,000 in 2007 prior to the 2008 recession.
And in Tofino, on the west coast of Vancouver Island, the most expensive sale was an ocean front property for $7.9 million.
The Whistler market is picking up after sustaining a slump following the Vancouver 2010 Olympics. Condos near Whistler Village are the most popular among buyers, but a 630-square-metre home sold for $10 million, the highest price tag since 2008.

Monday, June 23, 2014

10 Things Nobody Tells You about Buying an Older Home

Buying a ‘fixer-upper’ for a house seems like a romantic proposition. Anyone who appreciates a good antique can understand the nostalgic appeal of an ancient home whose walls are filled with history. Older homes have amazing character traits and historical features that most new homes simply do not have.
Oh! Those huge wood burning fireplaces, the wood trim and moldings, and those ceilings with rustic wood beams — these are all the amazing features that usually do not come in todays mass produced homes.  It would be easy to hastily buy one of these ancient gems before doing a little research. However, a thorough (almost forensic) investigation is needed before buying an older home. Behind the beautiful facade there can be a train wreck of crumbling concrete repairs.
How do we buy a home that is overflowing with this historic beauty and character, while not falling into a money pit full of outdated plumbing, wiring and foundation problems?
Here are ten things to think about before deciding if an older home is the right fit for your lifestyle.
1.  An Older Home Comes With Older Technology and Building Materials
The use of older technologies and building materials is not always a bad thing. The custom, hand-crafted qualities of an older home usually mean long-lasting value and a durable structure that one cannot find now-a-days.  There is a reason that older homes are still standing — they were built to last.
Most of today’s builders do not take the time to dove-tail wooden joints, or hand-scrape large wooden ceiling beams. These are the qualities that make us fall in love with a historic home.
Sadly, this nostalgic charm also comes with some issues. Technologically speaking an older home is usually filled with ancient methods of plumbing, wiring, heating, windows, roofing and insulating properties. This means a lot of costly repairs! Refitting a home with new wiring, windows, and plumbing can cost a fortune.
Hiring a plethora of contractors, engineers, foundation experts and inspectors is a must before making any life-altering decisions.
Yes, it is life-altering if you buy a centurion home. The home will become your new baby (and babies are expensive). All potential costs must be factored into the purchase of an older home. Even if it seems the home is in good standing—it’s still  old, and with age comes problems.
2.  Older Homes Have Character That’s Hard to Buy
Wide-plank wood floors, solid wood craftsman doors, wrap around front porches … the list of reasons to love an elderly home could go on forever.
To a certain extent, you can replicate these characteristics into a newly built home.  There are some amazing custom builders who can build homes that are full of character, allowing you to forgo all the unseen repairs of an older relic.
However, a new home usually comes with a young neighborhood that is still developing.  Which means no big century-old oak tree in the front yard, and unpredictable neighborhood developments.
A tree-lined street and quaint neighborhood do not happen overnight, hence the appeal of older neighborhoods where everything is already in place and established.
This debate of whether to build new and try to add new character versus buying an older, character-laden home is one that has pros and cons on both sides of the fence. Either way, there are costs involved that must be weighed heavily before making any decisions.
3.  An Older Home May Require Some Remodeling
The current aesthetic that most homeowners want in their home is a large open floor plan with big closets, bathrooms and bedrooms. Unfortunately, this was not the desire centuries ago when older homes were being designed and built.
Most older homes have one small bathroom (two if you’re lucky), a couple small bedrooms, and let’s not even discuss the lack of closet space and storage.
You may fall in love with the beauty of an older home, only to discover that your family of 5 and two dogs will quickly overfill the space. There will be little room for clothes in the closets, and you will soon be dreaming of a large jack and jill bathroom for the kids.
Buying an ancient home will most definitely require some remodeling and expansion. Yet again, this is another cost to consider before buying.
4.  How Much Will Your Home Owners Insurance Be?
This is something a lot of home buyers forget to look into — the cost of homeowners insurance. Insurance is an expensive must-have,  no matter what type of home you buy.  However, insuring an ancient home can be even pricier.
It masks sense — old homes come with more risks, and insurance companies are not willing to foot the bill for those unseen circumstances. Old wiring can be a dangerous fire hazard, old plumbing can pose major water issues, and crumbling concrete foundations can cause flooding and pricey structural problems.
While you are calling all the other experts ( builders, home inspectors etc..) remember to call around and get quotes from insurance companies.
It would be horrible to move into your dream home only to discover that your insurance policy is unaffordable or doesn’t cover all the unforeseen hazards that come with home ownership.
5. The Top Two Updates of an Old Home
Roof and windows. These are the two updates that must be done first and should be made a priority.
Any roof that is older than 10-15 years will need replacement sooner than later. Older roofs begin to leak and crumble, thereby loosing their insulation properties and causing more costly repairs.
Older windows are usually single pane with very low insulating properties. Ancient windows equal a drafty home in winter and sweltering home in summer.
Before buying your beloved antique home, put these two repairs at the top of your to-do list. Maybe you will get lucky and find an older home whose owners recently replaced the windows and roofing.
That would be like buying an antique oil painting whose previous owner already payed the expense of having it professionally cleaned. The value of the antique is increased and the work is already done for you!
6.  Mix the Old With the New
While on your house hunt for the perfect relic of a home, you may fall in love with the bathrooms old claw foot tub, but then think, “That’s great, but I want a stand-up shower too”.
Don’t be turned off of an old home simply because all the modern amenities are not there. Why not mix the old with the new? Why can’t you have that luxuriant claw foot tub AND your modern stand-up shower?
One of the biggest remodeling and decorating mistakes people make with older homes is getting stuck in the rut of “everything has to look old or be of that era”. Rules were meant to be broken when it comes to decorating. Just because you have an antique home does not mean it needs to be only filled with antiques.
The eclectic mix of old and new has a very appealing and unique aesthetic.
7.  You Can Remodel an Older Home to Make it Become Modern
As mentioned above, the mix of old and new can be wonderful. Maybe you can take that idea even one step farther by taking an old home and attaching a new, modern home onto it. Why not?
Throw all the rules out the window and make an amalgamation of both your dream homes —ultra modern and ultra old.
Of course, this type of design would definitely require highly skilled architects and builders who can take your modern dreams and amalgamate them properly with ancient architecture.
If you fall in love with an older home, then consider adding a modern addition that meets all your worldly needs.
However, read on to discover some obstacles you may have to hurdle if this is your plan….
8.  Contact Historical Society if You Plan to Remodel an Older Home
Before signing on the dotted line of your ancient dream home, you may want to find out if there are any historical societies or neighborhood restrictions  on remodeling.
Some older homes and neighborhoods have restrictions in terms of the type and style of remodeling that can be done. Historical societies have a sole purpose of keeping the history of homes in tact, so allowing the owner to remodel the home into a modern mecca is probably off limits.
These type of restrictions may severely inhibit your freedom to remodel the home as you please. It is best to ask your realtor to look into any of these matters and find out if  there will be certain remodels that are not permitted.
It would be awful to discover after you have already purchased the home that you are restricted and forced to keep the home back in the old days.
9.  Will Your Appliances Fit into the Older Home?
This is one that everyone seems to forget (until the movers attempt to squeeze your fridge through the front door). Older homes were built when household items were smaller than they are today.
Long ago, homes were not built to contain commercial grade double ovens or mammoth stainless steel fridges. Therefore, the doorways were built much more narrow and shorter than they are today.
Do you have a huge sectional coach? A 60-inch wide television? Again, all of these items will have trouble fitting into the small doorways of your beloved relic.
It is best to measure all the doorways and other possible entryways before falling in love with a senior home. New doorways can be built, but again this is another cost to add to your ever-growing list.
10.  Embrace the Difficulties of Owning a Old Home
You have to love the home just as it is —old.  It will consume you (and your wallet) if you try to completely modernize an aged home.
Complete modernization can be done, but are you sure you want to? The very reason that you fell in love with the house in the first place is its aged character.  Of course, getting rid of drafts via new windows, and leaking roofs are jobs that must be done.
However, there are certain quirks that you may want retain. The squeaky floors, the bedroom doors that never seem to stay closed on cold days and then get stuck shut on hot days— all are quaint characteristics of an old home that add a certain charm and lived-in feeling.
Remodel what you absolutely have to, but think about keeping some of the original historic appeal.
Buying an older home is not for the faint of heart. Living in and modernizing these homes can take years of unplanned  and costly repairs.
If you decide to take the plunge and buy one of these aged beauties, then take your time, make many to-do lists, and hire plenty of professionals along the way. It can be an amazing and fun-filled journey, but be sure to read this “Top 10 list” over many times. Do you have what it takes to ride this relic roller coaster?
If you feel ready, then go into this experience with a carefully optimistic, yet realistic attitude. Assume that everything will go wrong and need replacement, that way you will be pleasantly surprised if it doesn’t.

Wednesday, June 18, 2014

CMHC to return to lower-risk roots

Boyd Erman and Tara Perkins The Globe and Mail Jun. 16 2014
The head of Canada Mortgage and Housing Corp. is shifting the priority of the mortgage insurer to helping Canadians buy homes they need, not the bigger, pricier homes they might want.
Chief executive officer Evan Siddall said in an exclusive interview that his first six months on the job have been focused on building an organization that will be more flexible and transparent, one that will do more to emphasize its social housing role and less to subsidize the banks. And one that will only help Canadians purchase homes they need. That will result in fewer and smaller new insurance policies, and will stem the risk to Canadian taxpayers of losses at CMHC should the housing market slump.
“We help Canadians meet their housing needs, not exceed them,” Mr. Siddall told The Globe and Mail’s editorial board, as he outlined the mandate that will guide his time at the helm of the mortgage insurer.
It’s a return in direction back CMHC’s roots, after a period in which it was accused of stoking the housing market. CMHC is the country’s dominant seller of mortgage insurance, which essentially reimburses lenders if a borrower defaults on a mortgage. The insurance is mandatory any time a federally-regulated lender sells a mortgage to someone who doesn’t have a down payment of at least 20 per cent. While the banks are technically responsible for paying the insurance fees, in practice they pass them on to home buyers.
Mortgage insurance reduces the risks to the banks, encouraging them to lend more, and making it easier and cheaper to obtain mortgages.
The Crown corporation was created in 1946 to help returning war veterans buy homes, but it has grown to become the size of one of Canada’s biggest banks. Over the past 10 years CMHC has at times dabbled in backing 40-year mortgages with no down payment, mortgages on second homes, mortgages on homes worth seven figures, and loans for condominium construction. But it has been recently scaling back amid fears of taxpayer exposure to the housing market
CMHC has an explicit government guarantee, leaving taxpayers on the hook if things go sour. Mr. Siddall said he does not believe the housing market is in dangerous territory, but even so, managing risk for taxpayers is a “sacred obligation.”
In recent months, the insurer has rolled out a string of changes that have underlined the shift in emphasis, including eliminating insurance for second homes and all individual insurance on homes over $1-million.
“The first thing we did as an executive group is we spent a lot of time thinking about our purpose,” said Mr. Siddall, a former investment banker at Bank of Montreal and Goldman Sachs & Co., who also worked as a special adviser to former Bank of Canada governor Mark Carney.
Mr. Siddall is continuing the direction that was set for the organization by former finance minister Jim Flaherty, who started pulling the government’s backing for homes priced over $1-million two years ago. But he is also putting his own stamp on CMHC at a time when current Finance Minister Joe Oliver has said he plans to take a less active role in the housing sector.
“We manage the government’s exposure to the tail risk of a housing crisis,” Mr. Siddall said. “And we do that with taxpayers’ money. That’s a sacred obligation and a core obligation of what we do.”
He added that the Crown corporation is choosing to cut its own risks. “There has been speculation that these changes have been imposed on us by Finance. That’s not true,” he said. “In fact, my first meeting with the Minister of Finance won’t be until later this week.”
That’s not to say there hasn’t been interaction with government, which recently placed the deputy minister of finance on CMHC’s board. Ottawa has been working to stem the growth of CMHC because it has racked up massive taxpayer exposure to the housing market, and some of its products have helped to fuel house prices.
Mr. Siddall said the Canadian market is “modestly overvalued” but he believes that there will be a soft landing, meaning a gradual petering out as opposed to any crash in prices.
“If prices continue to grow, all things being equal, we would be worried,” he said. “But we are not concerned right now about the level of prices or the level of activity in the housing market.”
Sales of existing homes in Canada sprang to life in May, rising 5.9 per cent from April, according to the Canadian Real Estate Association (CREA). That’s the highest month-to-month increase in almost four years, and was much higher than economists expected.
“The housing market remains remarkably resilient,” Bank of Montreal economist Benjamin Reitzes said in a research note. “As long as rates remain at rock-bottom levels, housing isn’t like to weaken much, if at all.”
While sales slumped through the cold winter months, price growth has continued to be relatively strong. CREA said Monday that it now expects the national average home price will rise 5.7 per cent this year to $404,300. In March it was forecasting a 3.8-per-cent increase to $397,000.
While the current prices don’t concern Mr. Siddall, he said the organization is worried about consumer debt levels.
“We are concerned about the elevated level of Canadian consumer indebtedness,” he said, adding that it removes consumers’ ability to withstand an unforeseen event.
During the meeting with The Globe, he emphasized the importance of CMHC’s basic role in the market, while acknowledging that more should be done to shift risk back to the banks and the private sector. His comments come amid criticism from groups such as the Organization for Economic Co-operation and Development (OECD), which argued in a report about the state of Canada’s economy last week that the government should consider privatizing CMHC’s insurance activities.
“People like the OECD, when they wonder about our model, kind of miss the memo about the role CMHC can play,” Mr. Siddall said. “Now, we [do] have a responsibility to attend to how large that should be.”
The OECD also called for changes to the system to ensure lenders take on more risk for home loans. It noted that in other countries with mortgage insurance, the insurance tends to cover 10 to 30 per cent of the losses, rather than 100 per cent, and suggested imposing a deductible.
The concept of a deductible is a “pretty good idea,” Mr. Siddall said, although it would take some time to be put into practice in Canada.
Finance Minister Oliver said Monday that the idea of having CMHC insure only a portion of mortgages, rather than the entire loan, is one that could be looked at. Mr. Oliver said he would like to see the private sector mortgage insurers take a larger share of the market and that when it comes to taking further steps to reduce risk, “the specific decisions taken by CMHC will be their decision.”
When it comes to CMHC’s large securitization arm, which essentially packages up mortgages and sells them as bonds or helps banks sell them, Mr. Siddall said he’s worried that it’s a low-cost form of wholesale funding for the institutions and “that means we’re subsidizing banks. ... And that is something that over time we should address.”
It’s too soon to say how, he added. “We’ve got to make sure we do it in a way that’s supportive of markets, that we do it in consultation with banks so that we don’t disrupt their businesses,” he said.

Monday, June 9, 2014

CMHC stops offering mortgage insurance to condo developers

Andrea Hopkins, Reuters | June 6, 2014
TORONTO — Canada’s federal housing agency will no longer offer mortgage insurance for condo construction, it said on Friday as it made further changes to its programs with the aim of cutting risks amid the country’s housing boom.
Canada Mortgage and Housing Corp (CMHC) also said it will no longer offer mortgage insurance for homes that cost $1 million or more, starting July 31, even if the buyer has made a deposit of 20% or more.
It’s a step further than rules introduced two years ago when then finance minister Jim Flaherty announced that CMHC would stop insuring mortgages on homes worth $1 million or more if the buyer borrowed more than 80% of the value.
The Crown corporation says the changes announced Friday would have affected only about 3% of the mortgage insurance it provided last year for individual homes.
The changes are the latest made by the federal government and its agencies to tighten mortgage lending and mortgage insurance rules to make it harder for homebuyers, builders and developers to take on too much housing-related debt.
The changes are designed to increase market discipline in residential lending while reducing taxpayers’ exposure
“The changes are a business decision designed to increase market discipline in residential lending while reducing taxpayers’ exposure to the housing sector through CMHC,” the agency said in a statement.
“They also support the government’s continued efforts to adjust the housing finance framework to restrain growth of taxpayer-backed mortgage insurance.”
The shift is not expected to have a material impact on the mortgage market, said Geoffrey Kwan, a banking analyst at RBC Dominion Securities.
CMHC introduced its multi-unit condo construction mortgage insurance in 2010 to help developers get financing as they built their projects, but the agency said it has not provided any such insurance since 2011. Its total outstanding insurance-in-force for condominium construction was about $378 million as of March 31, a fraction of the agency’s total $557 billion insurance in force in 2013.
On the second change, CMHC said low-ratio insurance that falls outside the revised parameters accounted for about 3% of its total homeowner business volumes in 2013, and thus should not have much of an impact on the market. Mortgage insurance is not required when borrowers have a down payment of 20% or more, but lenders often buy insurance on low-ratio loans anyway as part of the approval process.
Under the changes, the low-ratio insurance product will be aligned with CMHC’s high-ratio product, with the maximum house purchase price of $1 million, the amortization period capped at 25 years, and the total debt service ratio limited to 44%, effective July 31.
Insurers who compete with CMHC include Genworth MI Canada and privately owned Canada Guaranty Mortgage Insurance Co.