REDISCOVER REAL ESTATE

Will Canada's real estate bubble eventually burst?

The thing about bubbles is that you can almost always tell when they're about to pop. There's an extra shiny, bright quality to the surface and the edges start to pull up into the middle. And then, it bubbles over.

There's not much question that Canada's residential real estate market has displayed all the classic symptoms of a bubble that's about to burst for some time now. And yet, every time it looks almost certain to burst, it stabilizes and puffs up a little more.

Sure enough, the latest data released from the Canadian Real Estate Association indicates that the resale of existing homes was up by 1.2 per cent in October over September (which posted a 2.5 per cent gain from August levels) and overall, by 8.5 per cent over October 2010.

In a month crammed with bad economic news on every front, Canadian residential real estate went and posted its best performance since January.

Even more remarkably, the strength of the market in Ontario — a province that has been ravaged by its battered manufacturing sector and a jobless rate that climbed to 8.1 per cent that same month from 7.6 per cent a month earlier — strongly propelled the national housing market forward.

The same data scoop shows that the national inventory of homes for sale is well balanced, allowing residential housing prices to increase by 5.5 per cent.

On average, residential real estate prices in Canada are 10 per cent higher now than they were before the recession — when they were at an all-time high.

Not too shabby — especially if you consider the rate of return available from stocks or bonds these days. But at a time of profound financial uncertainty (globally, continentally and nationally), rising unemployment (Canada unexpectedly lost 54,000 jobs in October, pushing the unemployment rate up to 7.3 per cent), record household debt and flagging consumer confidence, how shiny and tight is this all going to get before there's a loud — and familiar — popping noise?

An equally important question is what are the implications of a loud popping noise for the all-important rate of consumer spending (homeowners buy furniture, appliances and services in spades) and a number of economic sectors that have been fuelled by the real estate cycle.

As we face another economic downturn, it's important to remember what an important role real estate-related spending played in the recovery — however short-lived. After a brief slump, the Bank of Canada's decision to cut interest rates fuelled growth and the relatively healthy condition of the Big Banks kept mortgage lending alive.

By Deirdre McMurdy November 21, 2011

Looking to sell or buy? Need some professional advice? What are your real estate options?

How may I help you today? Direct line: 416-219-6662

First-Time Buyers Have Lots Of Options

If you are considering the purchase of your first home you’re probably aware that like many of life’s milestones, there are many things you must consider.

Understanding conditions in the real estate market is a good first step.  Current conditions in the Greater Toronto Area resale market remain quite favourable for people looking to take the first step onto the property ladder.

The housing market in the GTA continues to be supported by improving economic conditions which have led to sustained job creation, a lower unemployment rate and accelerating income growth.  Financing remains affordable as well.  The average interest rate for a five-year fixed rate mortgage is very low from a historic perspective.

While it’s important to consider these fundamentals, it is also crucial to closely examine your individual circumstances, especially when determining what you can afford. Financial institutions will help you determine what you can afford by calculating your Gross Debt Service (GDS) ratio, an amount that includes monthly mortgage, tax, and utilities payments and a portion of condominium fees (if applicable). Your GDS ratio normally should not exceed 32 per cent of your gross monthly income. A lender will also look at your total debt picture by calculating your Total Debt Service (TDS) ratio, taking into account all obligations such as your monthly mortgage, car loan, line of credit and credit card obligations.  As a rule of thumb, your TDS ratio should not exceed 40 per cent of your gross monthly income. Be sure to explore of the financing options available through different financial institutions.

When determining a price range it’s important to realistically consider miscellaneous monthly expenses, and to account for costs associated with the transaction including home inspection, survey and legal fees.

Once you’re ready to begin your search, enlist a REALTOR® who will commit to representing your interests in writing using a Buyer Representation Agreement. More information on this important document can be found at www.BRAFirst.com.

To find a home suited to your lifestyle, be sure to explore a number of different housing types and neighbourhoods with your REALTOR® before narrowing your search. REALTORS® have access to information on market conditions in individual neighbourhoods, on future development plans and on a range of local amenities.

Your REALTOR® may also provide information on a number of available government programs to help make your purchase more affordable like the Five Per Cent Down Payment Program, the RRSP Homebuyers’ Plan, the First Time Home Buyers’ Credit, Land Transfer Tax rebates and more.

Once you have found the right fit, your REALTOR® can use their expert negotiation skills to help you achieve a favourable agreement. Specialized skills and knowledge make your REALTOR® an invaluable resource, buoying your efforts as you navigate through one of life’s most important decisions.

Looking to sell or buy this fall? Need some profesional advice? What are your real estate options?

How may I help you today? Direct line: 416-219-6662