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Cariboo Real Estate News

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May, 2010

In this issue...

• The new CMHC rules for self-employed borrowers
  
  
• Housing Market Cooling, Interest Rate Hikes Coming
  
  
• BC Home Sales Moderate in First Quarter
  
  
• First Quarter Report from the BC Northern Real Estate Board

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New CMHC Rules for Self-Employed Borrowers

from Andrea Cass, Mortgage Broker

The new CMHC rules for self-employed borrowers took effect April 9 and pose new challenges for this category of borrower.

First off, self-employed borrowers with more than three years in the same business who apply for a mortgage using stated income, as well as commissioned-income borrowers, are now required to provide to provide traditional proof of income (or "third party validation") through documents like financial statements, contracts and T4s.

Those who have recently become self-employed and don't have third-party validation can still apply for a mortgage, but have to come up with a 10 per cent down payment instead of five per cent. Refinancing will also be cut to 85 per cent loan to value instead of the previous 90 per cent.

Housing Market Cooling, Interest Rate Hikes Coming: BOC Governor Mark Carney

Updated: Wed Apr. 28 2010, The Canadian Press

OTTAWA — Canada's hot housing market will likely start cooling off this quarter and continue at a lower level over the next few years, Bank of Canada governor Mark Carney says.

Carney told the House of Commons finance committee Tuesday that economic activity, particularly the housing market, has rebounded strongly from recession -- perhaps too strongly in the case of housing.

And he warned that Canadians should think carefully about taking on more debt, giving that current "extraordinary" low interest rates are likely to rise.

"We see a marked weakening in housing over the course of our projection (into 2012), starting from the second quarter of this year and over the balance," he said.

"We share concerns there are groups of Canadian who run the risk of being overextended on their finances."

The comments were not new for Carney. He has been warning about the record level of debt being held by Canadians for almost a year.

According to the latest data, Canadian households on average owe $1.47 for every dollar of disposal income, an all-time high that is supported by the fact interest rates are at an all-time low.

On Monday, Re/Max reported that luxury home sales soared in the first quarter of 2010 - the January-March period-with Canada's three largest cities recording increases of 300 per cent (Montreal), 263 per cent (Toronto) and in the Vancouver region, 184 per cent. Home prices have largely returned and surpassed pre-recession levels as well.

Carney says much of the spending on housing, which includes spending on home renovations, has been pushed forward by super-low rates and by the home renovation tax credit.

That level of investment won't be sustained, he said, adding that fixed-term rates on mortgages have already begun to rise.

He was more coy on when the Bank of Canada will begin to tighten its stimulative monetary policy, however.

Last week, Carney dropped his conditional pledge to keep the bank's policy rate at 0.25 per cent until at least July, leading many economists to predict a quarter-point or even half-point hike was coming at the next opportunity, June 1.

Carney described the dropping of the commitment as the bank already moving to tightening because markets now don't know when he will act.

As for more direct monetary tightening, Carney appeared to perturbed that markets had interpreted his words as having signalled an early interest rate hike.

"Nothing is pre-ordained," he said.

"Those who are trying to divine what we might do, should spend their time not parsing words but thinking about the level of economic activity, the outlook for inflation and where rates should appropriately be."

But he also made clear that rates will rise, if not on June 1, then possibly in July because the Canadian economy no longer needs an emergency monetary policy.

"Our message is that those extraordinary times ... have passed or are passing," Carney said.

Much of Carney's two-hour testimony was spent re-iterrating the bank's latest economic outlook, which it unveiled last week. In the bank's view, the Canadian economy will beat the G7 advanced economies with a 3.7 per cent growth rate this year, but will slow to 1.9 per cent by 2012, near the bottom of the pack among the G7.

That's partly because of Canada's aging demographics, but also Canada's woeful productivity growth record, he said.

The governor called on the country's corporations to invest more in machinery and equipment to improve productivity, saying that is the only way the economy can expand faster.

On the global recovery, Carney said the biggest risk involved exit strategies as governments move from pumping money into the system to taking action to control their mounting debt problems.

The governor also defended Finance Minister Jim Flaherty's opposition to a bank tax, which Canada helped derail in the meeting of G20 nations in Washington last week.

Carney said such a tax would lead to riskier behaviour on the part of financial institutions and would likely not be available in the next crisis since most governments would likely not set the proceeds aside for a rainy day, but pocket the new revenues.

BC Home Sales Moderate in First Quarter

from the BC Real Estate Association

Vancouver, BC – April 13, 2010. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province climbed 43 per cent to 7,110 units in March compared to the same month last year. On a seasonally adjusted basis, MLS® residential unit sales in the province increased 6 per cent compared to February 2010. However, home sales in March were 20 per cent lower than December 2009 on a seasonally adjusted basis.

"Home sales have moderated since the beginning of the year," said Cameron Muir, BCREA Chief Economist. Waning pent-up demand and eroding affordability were key factors in the market. "Despite an improving provincial economy, higher mortgage interest rates and tighter credit conditions for low-equity homebuyers and investors will squeeze some prospective buyers out of the market this spring," added Muir.

The BC residential sales dollar volume increased 95 per cent to $9.22 billion in the first quarter of 2010 compared to the same period last year. Residential units sales rose 64 per cent to 18,284 units, while the average MLS® residential price climbed 19 per cent to $504,312 over the same period.

First Quarter Report

News Release from the BC Northern Real Estate Board

April 6, 2010 - In the first quarter of 2010 sales of properties of all types through the Multiple Listing Service® (MLS®) of the BC Northern Real Estate Board (BCNREB) were significantly higher than a year ago. To the end of March, 887 properties with a value of $180.8 million changed hands in the area served by the members of the BCNREB, compared to 589 properties worth $117 million in the first 3 months of 2009. As of March 31st, 2010 there were 4347 properties of all types available for purchase through the MLS®, compared to 4018 at this time last year.

President Claudia Holland comments, "The overall market is picking up tentatively with more homes being listed and more buyers purchasing as spring comes upon us. With the first quarter of 2009 being a time most people would like to forget, the statistics are showing a cautious recovery. With expanded resource exploration and development, the north is seeing positive growth and that is reflected in the real estate industry."

Cariboo Region 100 Mile House and area: A total of 71 properties of all types, worth $13 million have been sold by REALTORS® in the area since the beginning of the year. This compares with 40 properties worth $8.2 million sold in the same time period last year. In addition to the 21 single family homes that sold, 22 parcels of vacant land and 17 homes on acreage changed hands so far this year. At the end of the quarter there were 701 properties of all kinds available for purchase through the MLS® - up from 537 at this time last year.

Williams Lake: 85 properties have sold so far this year through MLS® in the Williams Lake area, compared with 39 properties in the first quarter of 2010. The value of these properties was $16.6 million ($8.6 million in 2009). In addition to the 27 single family homes that sold, 19 parcels of vacant land, 19 homes on acreage, 8 manufactured homes in parks and 7 on land have changed hands in the first quarter. As of March 31st there were 385 properties listed on the MLS® in the Williams Lake area, compared with 381 a year ago.

Quesnel: In the Quesnel area, REALTORS® reported 44 sales worth $6.8 million in the first 3 months of 2010, compared to 30 sales worth $4.9 million to March 31st of last year. In addition to the 18 single family homes that sold, 3 parcels of land, 10 homes on acreage, 4 manufactured homes in parks and 3 manufactured homes on land have sold so far this year. There were 259 properties of all types available for purchase through the MLS® in the Quesnel area at the end of March, compared to 222 properties on the market at this time last year.