Monday, July 25, 2016

Canadian new home prices grow at fastest pace in nearly 9 years

Image result for home prices go up 
Canadian new home prices in May grew at their fastest pace in almost nine years, soaring 0.7 per cent from April on strength in the booming markets of Toronto and Vancouver, Statistics Canada said on Thursday.
Analysts polled by Reuters had predicted a 0.2 per cent advance. May’s increase was the largest since the 1.0 per cent jump recorded in July 2007.
The Liberal government is concerned about rapidly rising prices in Toronto and Vancouver and is mulling more restrictions on mortgages.
The combined region of Toronto and Oshawa – which accounts for 27.92 per cent of the entire Canadian market – posted a 1.9 per cent gain, the highest in 27 years. Builders cited market conditions and the price of land.
Market conditions also helped drive up new home prices in Vancouver by 1.1 per cent.
Overall, housing prices increased by 2.7 per cent from May 2015, the largest year-on-year rise since the 2.7 per cent advance seen in September 2010.
The new housing price index excludes apartments and condominiums, which the government says are a particular cause for concern and which account for one-third of new housing.

Tuesday, July 12, 2016

Home inspections drop drastically in no-subjects market, leaving buyers with ‘horror stories'

Home inspector Vince Burnett has been in the industry for 17 years and thrived in other red-hot real estate markets. He should be run off his feet these days, but he hasn’t done a single home inspection in two weeks.
As few as 10 per cent of homes sold in Greater Vancouver and the Fraser Valley are being inspected before deals close, a number that is drastically down from about 75 per cent a year ago, and an illustration of the latest concern in a sizzling market where some realty firms and mortgage brokers were already worried about a rising number of so-called no-subject offers.
Buyers going after limited listings are lobbing these in because, with prices spiralling ever higher, they are under intense pressure to find other ways of being competitive with their bids.
The Home Inspectors Association of B.C. is calling on the B.C. government to put in place a seven-day cooling off period to temper a market where it says buyers have “tight timelines of as little as two days from open house to making an offer in a competitive situation (with) no time for proper due diligence, including a thorough inspection. Fear of losing the home in a competitive bidding situation has encouraged buyers to take the dangerous step of making subject-free offers.”
The association warns it’s a precarious situation for buyers, but the rise in subject-free offers has hit home inspectors hard, too.
“Usually in January there is quite a bit of work, other than in the first week. Then you get into the spring season, March and April, and it’s 10 or 12 inspections a week, and you are going,” said Burnett, who is also president of the HIABC.
For years, he has been doing around 325 inspections a year, but right now, heading into July with no sign that there will be any pickup, he said: “I haven’t done 100.”
Shawn Anderson, a Vancouver-based home inspector, has his own gauge: “I was refusing about 20 to 30 inspections a week a year ago. And then all of a sudden, I was down to refusing two a week. People are buying blind. Now, I am going in after they buy and looking at the horror story.”
Anderson used to do very few inspections after a sale, but now some 30 per cent of his business is on homes that have already been sold.
Recently, I had one house that was so catastrophic, it needed some $350,000 in repairs. They were not expecting that at all because it was newly renovated. But that only concealed all the issues. It was lipstick on a pig. It needs a new foundation, piping, you name it, it needs to be done,” said Anderson, who has been an inspector for six years and was a builder for 25 before that.
The HIABC is warning more of these cases will likely emerge. On Tuesday, it highlighted its point with the case of a Kevin Girard, who bought an East Vancouver home without doing an inspection.
Last October, the 40-year-old and his spouse bid $955,000 on an older home in Hastings-Sunrise. It was listed at $899,000 and “we heard there were five bids. We were in the middle. We expected this and wanted to have a differentiating factor.”
Ahead of taking possession, “we had asked if we could get in to do some measuring for our furniture, but they wouldn’t allow it,” said Girard.
On moving day, they arrived to find “an absolute disaster,” said Girard, who described the home as being “not safe for our one-year-old daughter. That was the biggest problem.”
There were also holes in the wall, exposed electrical lines, flooring that didn’t meet walls, kitchen cabinets sitting unevenly over dirt floors covered in rodent droppings. The house, when they had seen it, had been “staged. They had positioned things to cover up problems. Drywall had been ripped out. There weren’t enough circuit breakers for things like the stove to be powered. We had to MacGyver things to make them work.”
Real estate agents have come under fire for fanning the heat of multiple-offer situations with false claims that competing bidders have higher and more appealing offers.
But Girard, who described himself as a financial planner with some 550 clients, said that when it comes to managing his own affairs, “I’m a risk-taker. I probably wouldn’t have backed out. This was my shot in Vancouver.”

Millennials take note – here’s how to enter the housing market

Rob Carrick The Globe and Mail, Jul. 06, 2016

If housing stays hot, we’re going to have to start counselling our young people to help them deal with the disappointment of not being able to afford to buy.
Millennials are playing along with rising house prices so far. Poll results consistently show they’re eager to buy, and they seem okay with having their anxiety about declining affordability trivialized as an example of the social media phenomenon of FOMO, or fear of missing out.
But how long will it be until their fear about missing out turns to anger at being shut out? My sense from following social media is that this sentiment is starting to bubble up in Vancouver and Toronto, at least. And that was before reports this week that average resale prices were up 16.8 per cent in Toronto in June over the same month last year and up 32 per cent in Vancouver.
Now is the time for an early intervention to help aspiring first-time buyers prepare for disappointment ahead. To start with, let’s recognize that feelings of resentment are natural when you’re excluded from the housing market. There’s a sense of being a have-not and of having missed out on a lottery win shared by others. If you always wanted to have kids and pets running around a house with a yard, you’ve got even more reason to be bitter.
Young buyers, don’t lose hope entirely. Price gains are steep in some cities, but in no way are they permanent. We have not created a permanent floor for housing at current prices. Prices will fall at some point because all financial assets have their ups and downs over the decades.
The timing and magnitude of the decline ahead are not known, so don’t expect immediate results. Meantime, start thinking about Plan B in case prices never find their way into your personal affordability zone. Would a condo work for you instead of a house? Could you share a house with family members or friends? Are far-flung suburbs and their mega-commutes an acceptable alternative? Might the freedom of renting work for you?
Do not expect the government to rescue your home ownership dream with dramatic measures to contain prices. Municipal, provincial and federal leaders understand that young people are being priced out of home ownership in some cities, but they’re constrained by two things. One, housing is a huge support for our under-achieving economy. Two, triggering a big decline in housing prices will anger the key voting block of boomers who are sitting on a fortune in house price gains.
Rules to curb the purchase of homes by foreign buyers are possible, but the biggest reason why house prices keep rising is low interest rates. Raise rates, cool housing. The only thing stopping the Bank of Canada from doing this is that the overall economy is too weak to bear it right now.
The sense of a lost financial windfall is right up there with frustrated lifestyle aspirations in making millennials resentful about missing out on home ownership. Wealth seems to be piling up day by day in Toronto and Vancouver. The average Toronto resale home price increased by $107,237 on a year-over-year basis last month to $746,546.
But these numbers have no real-life application unless you sell a house and either rent or move somewhere with much cheaper housing. Otherwise, you end up selling your own expensive home and buying someone else’s.
Millennials who bought homes in the past few years have made out quite well in a few cities if you judge by price increases alone. But if you want the full picture on ownership, ask your friends who own homes these three questions: What financial sacrifices have you had to make, what debts have you taken on in addition to your mortgage and how much have you been able to save?
Renting is a sound financial alternative to ownership if you diligently save and invest the savings you realize by not owning a house. But for lifestyle reasons, as well as family and peer pressure, a lot of young people will find it hard to give up their home ownership aspirations.
Here’s how to keep the ownership dream alive, even if the market seems to be pulling away from you. Start a down-payment savings plan so aggressive it hurts. That will train you well for home ownership. Keep saving until you can either afford to buy something that suits you, or you give up on ownership. Either way, the money you put away will set you up well for what’s ahead.