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Valley realtors hear reassuring words from U.S. expert
2009-06-09
The founder and chairman of the board of Re/Max International had nothing but praise for the Canadian government and its lending policies on Monday.
Dave Liniger from Colorado also had reassuring words for 100-plus realtors at a broker, owner and manager retreat in Kelowna hosted by Re/Max Western Canada, despite dismal news on housing starts from Canada Mortgage and Housing Corp. the same day.
“Canada is much more fortunate than we are,†Liniger told The Daily Courier in an interview. “You‘ve got some sanity in your government, a lot of common sense, and some good government regulations in your mortgage lending market that, unfortunately, we threw away for a few years. It will never happen again in our lifetime, I promise you.
“Your foreclosure rate is minuscule compared to what we‘re finding. Basically, the problem you are having in Canada in residential real estate is your market was just overheated.â€
On Monday, CMHC reported that housing starts in Kelowna fell 90 per cent in May, from 397 in May 2008 to 38. Penticton was down 79 per cent, 43 to nine, and Vernon was down 56 per cent, 48 to 21.
“Demand for new homes has since cooled off in response to strong price competition from a well-supplied existing home market,†CMHC analyst Paul Fabri said.
Liniger said the statistics aren‘t a cause for concern.
“Despite what the realtors think here, you‘re having a moderate and a very light correction that will probably last for maybe another six months or a year, depending on what happens with your employment,†he said.
“But, for the most part, this should be a welcome correction so that you don‘t get so superheated like we did in the U.S.â€
U.S. owner-brokers have learned a lot from their Canadian counterparts, he admitted.
“You had adjustable-rate mortgages and short-term mortgages 20 years before the U.S. did. And so we have learned an awful lot from Canadians and our Canadian operation for Re/Max.â€
CMHC also said Kelowna starts were down 91 per cent (1,631 to 138) for the first five months of the year compared to 2008.
Nationally, starts increased to 126,400 units in May from 117,600 in April while in B.C., they slipped to 9,400 from 9,900 due to volatility in the multi-family sector.
Source: http://www.kelownadailycourier.ca/stories_local.php?id=191079
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Canada’s biggest banks are hiking key mortgage rates at time when the bond market is worried about risk and the longer-term threat of inflation.
Royal Bank of Canada, Bank of Montreal, Toronto-Dominion Bank, the Bank of Nova Scotia and Canadian Imperial Bank of Commerce are all increasing their posted rates on five-year, fixed-rate mortgages by 0.2 per cent to 5.45 per cent. The changes at RBC and BMO take effect today, while new rates at TD, Scotiabank and CIBC will be available as of tomorrow.
RBC, BMO and Scotiabank, however, also have “special offers” on five-year closed mortgages at 4.15 per cent. Those promotional rates, subject to change without notice, also reflect a 0.2 per cent increase.
Paula Roberts, a mortgage broker with Mortgage Intelligence, says rates are rising from “abnormally low” levels. Consumers, she added, still have plenty of opportunity to take advantage of lower borrowing costs because not all lenders have re-priced those loans.
“Even lenders that we were told were going to increase still haven’t,” Roberts said. “On a quick close (within 30 days) we can still get 3.69 (per cent). On a 120-day rate hold, we can still get 3.79 (per cent).”
Five-year, fixed-rate mortgages are traditionally the most popular option for homeowners. Borrowing costs on the bond market largely influence consumer rates.
Yields on longer-term bonds have soared in recent weeks, driving up the cost of borrowing for lenders. Experts say yields are rising because the bond market is focusing on risk and the future prospects for inflation.
Central banks usually try to control inflation by raising interest rates. The Bank of Canada’s overnight rate is currently sitting at 0.25 per cent and it has signalled plans to hold it there into 2010 depending on inflation.
The bond market, though, sees a risk that interest rates may change down the road, said TD economist Grant Bishop. “Certainly there is the recognition that interest rates are going to have to go up both because of the need to rein some of this monetary stimulus in once the economy gains traction and the level of debt that is being issued by governments.”
Yields are also climbing because the market is “a little less pessimistic” about the economic outlook, said David Power, a vice-president in RBC’s corporate treasury department. If bond yields continue to rise, that will impact the industry’s pricing of both mortgages and deposits, he said.
Statistics Canada, meanwhile, reported yesterday that household demand for credit dropped in the first quarter from the previous quarter. “Despite the decrease in the five-year mortgage rate, net new mortgage borrowing also contracted during the first three months of 2009, as investment in residential construction and activity in the resale housing market continued to decline,” its report said.
Bank of Canada data, meanwhile, suggests that household credit rose by 1.1 per cent in April over March, mostly because of growth in mortgages and lines of credit. “Even through these uncertain economic times, falling house prices and favourable mortgage rates appear to have successful attracted new homebuyers,” said a recent TD report.
Source: TheStar.com
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