REDISCOVER REAL ESTATE

Tighter mortgage rules ahead, say economists.

A new poll suggests economists are increasingly convinced the government will move to ratchet down mortgage rules in 2012 – that even as the broker channel ramps up lobbying efforts to block the move.

Some 10 of 14 economists and strategists surveyed for Reuter’s first poll on the Canadian housing sector last week said Ottawa does, indeed, seem poised to tighten mortgage rules within the next 12 months. Moreover, they believe that intervention is likely to come as early as the busy spring season.
 
That opinion may be reflected in their projections for home prices this year, with respondents predicting a mere 0.1 percent climb for this year and again in 2013. That’s down from last year’s near-1 per cent price growth. The poll results may only add to broker concerns that the federal government is planning to reduce the maximum amortization for CMHC-insured mortgages to 25 years instead of the current 30.
 
Brokers are already concerned that the CMHC has effectively moved to discourage lenders from growing their business-for-self portfolios. Earlier this month, the Crown corporation warned lenders they’ll face increasingly limited access to bulk insurance for their conventional loans as the CMHC’s $600 billion fund comes within 10 per cent of its government-set ceiling. At the same time, documents from the Office of the Superintendent of Financial Institutions revealed the regulator’s concerns over mortgage lending for self-employeds and lender underwriting standards on those loans.
 
Economists polled by Reuters are suggesting more formal rule changes are in the works. Industry analysts are betting on that chop in the amortization cap and/or an increase in the cost of mortgage insurance.
 
CAAMP is now actively lobbying against any such move, with its CEO twice travelling to Ottawa this month to deliver that message to Finance committee members in person. It has also crafted a new industry report documenting what could well be at stake with further tightening of the country’s mortgage rules --  detailing the economic impact of the housing and mortgage industry.
 
“We want the government to be aware of the economic and job contribution that housing and the real estate industry provide,” said CAAMP CEO Jim Murphy, coming off a second visit to Parliament Hill. ”CAAMP, based on current data and research, sees no need to further tighten or restrict access to residential mortgages at this time.”
 
The new report by CAAMP Chief Economist Will Dunning is bringing that point home by identifying all the ways that the Canadian housing sector is a significant economic driver.
 
Housing and mortgage activities, along, “could account for more than 1.35 million direct and indirect jobs about 8 per cent of total Canadian employment,” writes Dunning. “The housing and mortgage industry has been particularly important to job creation these past five years.”
 
The report estimates that from 2006 to 2011, 18 per cent of all job creation occurred as a direct and indirect result of growth in the housing and mortgage sector.

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Home prices to rise slightly in 2012: CMHC

(Reuters) - Activity in Canada's housing sector is slowing, but the average home price is expected to rise in each of the next two years, Canada Mortgage and Housing Corp forecast on Monday.

Experts have been calling for a slowdown in the sector for months, pointing to high real estate prices at a time when household debt levels have hit record highs.

However, the government housing agency projected Canadian housing starts and sales of existing homes will be little changed over the next 24 months.

"With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales of existing homes will stay close to levels seen in 2011," Mathieu Laberge, deputy chief economist for CMHC, said in a statement.

The Bank of Canada has kept interest rates at record lows since the financial crisis began in 2008 and is widely expected to keep is main policy rate at its current 1 percent target through 2013.

Strong demand for housing helped propel Canada's economy to a quick recovery following the 2008 recession. But continued high prices and heavy borrowing amid rock-bottom mortgage rates have policymakers worried about overheating.

While some observers fear there will be a major correction in the housing market when rates start rising again, few expect a U.S.-style subprime collapse. Recent data has suggested a soft landing for the housing market.

CMHC said housing starts are expected to be around 190,000 units in 2012, down slightly from 2011's 193,950. In 2013, starts are seen bouncing back to 193,800 units.

However, the agency predicted prices would continue to rise, with the average Canadian home reaching C$368,900 ($368,900) in 2012, up about 1.5 percent from 2011's average of C$363,365. For 2013, the average price was seen at C$379,000, a 4.3 percent increase over last year's level.

CMHC said sales of existing homes will edge up to 457,300 in 2012 from 456,316 in 2011. In 2013 sales are expected to climb to 468,200.

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Toronto real estate: Average detached house $606,600

The Canadian Real Estate Association has launched a new system for tracking home and condo sales prices aimed at giving buyers and sellers a more precise picture of what’s happening right in their neighbourhoods.

The new system will track Canadian and regional home sales and price escalations based on “benchmark prices.” Those benchmarks are based on quantitative factors (the number of rooms, bathrooms, age of home) and qualitative factors (proximity to schools, parks) and are intended to shine a light on highly localized factors that may be skewing prices up or down but not necessarily reflect market conditions.

CREA has also established a new MLS Home Price Index — similar to the Consumer Price Index which measures price inflation — that tracks prices relative to January, 2005 based on house type, be it single-family homes with one or two storeys, townhouses, row homes or condo apartments.

As of January, the benchmark price of a single-family home in Toronto hit $606,600 — $100,000 more than the $499,800 benchmark price for a similar home in the rest of Canada. That Toronto home cost 50.3 per cent more than it would have in January, 2005.

Over time, far more localized data will become available for MLS districts that should paint a clearer picture of neighbourhood trends.

“One of the key goals is to take a little bit of volatility out of housing statistics,” says Jason Mercer, senior analyst for the Toronto Real Estate Board. “It’s going to provide a good tool for consumers to understand where their home fits into the market.”

CREA will continue to release its traditional Canada-wide and regional breakdowns of average and median home prices, which it claims are often “misinterpreted” and can swing significantly, as national prices did last year when there was a rush of foreign investors snapping up homes in high-end Vancouver neighbourhoods.

Right now, just five major real estate boards across Canada are part of the new system — the GTA, Greater Vancouver, the Fraser Valley, Calgary, and Greater Montreal.

Eight more boards will start using the new measures this year, and another eight boards next year.

Source -The Star

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