Western Canada might be happy to see the backside of Evan Siddall when he leaves his post as CEO at CMHC, as his policies continue to crush the buying power of the “little guy” while adding to the tough economic conditions brought on by lower oil prices, compounded by the advent of COVID and subsequent business closures.
Siddall brought on the “stress test” to break the possible bubble of housing inflation in Toronto and Vancouver, with his “1 standard fits” for all of Canada. The need for a stress test in Alberta, or any of the prairie provinces, was about as necessary as the world needing a 2nd wave of COVID-19.
The stress tests main function was to stop the rising property prices in Canada’s top 2 populated cities, while all it did was cripple the ability of not only first time buyers to get into ownership but many people who would like to afford a larger property, or even an investment property, everywhere. Why have prices still been steadily rising in the East where the stress test was the main target? Investors have been gobbling up Real Estate properties in droves (in Toronto, Ottawa, Montreal), and while prices are rising, they can continue to leverage the value of their properties to buy more properties, which is fantastic for investors. Don’t get me wrong, I’m an investor, I have rental properties and I’m all over that…..but what I hate to see is the first time buyers being robbed of the same opportunity that I had 23 years ago, while affordability is being eroded away all because of idiotic, government policies.
Realizing that they screwed it up with the stress test, and not willing to roll it back, CMHC, or shall we say Siddall, backed by the federal government, came out with the “First time buyers incentive program” which is somewhat complicated, helps no one, and for any takers, they will take a portion of your equity when you sell, (this would be a portion of the profit they would have made, when the home goes up in value.) Cost to tax-payers? $100 million, and conveniently rolled out a few weeks prior to the election. Simply lowering the stress test or eliminating it would have saved the taxpayer $100 Million dollars, not to mention the cost of creating the program as well as the cost of operating it.
The need for a stress test in Alberta, or any of the prairie provinces, was about as necessary as the world needing a 2nd wave of COVID-19.
Now Siddall is suggesting that we cancel the 5% down program for everyone, and the new minimum to be 10% down. Here is why this is a stupid idea:
1. Removing the ability to put down 5% as a down payment will push a huge % of buyers out of the market. What is that %? Stay tuned for that number
2. A large portion of those people, and the people that sell their current homes to first time buyers, purchase new construction properties.
3. New home construction and housing services is 15-18% of the GDP of Canada.
4. Post Covid, construction will benefit Canadians as it is a large portion of our economy. Removing 5% down will further affect pre-construction numbers negatively, affecting builder profits, affecting the number of people employed and sub-contracted to builders, less taxes being collected, more unemployment being paid out….and the ripples continue on down the line….
5. 20% down is the minimum down payment for investors. This will not affect investment down payments, so the possibility of prices to continue to trend upwards in some markets is very real.
6. More people will be forced to rent, and for years longer, trying to save enough to purchase at 10% down.
7. As time goes on, rents will increase, cutting into savings, further eroding the possibility of home ownership.
The foreclosure rate in the US for Sub-prime mortgages runs from 3% to a whopping 14% (and its still on-going). US foreclosure rates have always been faaaaar above Canada. Canada typically sits at about .35%. You heard that right and let me spell it out: point three five percent. Alberta spiked 2 times recently, in 2010 and 2019, but always under 1%.
Siddall has been tooting that home prices could fall as much as 29%. Again, his one notion fits the entire country is way off base considering that Alberta went through some tough economic times, and already saw that price erosion, so its incredibly unlikely that we will see anywhere near that dip.
So why do we suddenly, need to cancel the 5% down option? Right in the middle of the worst economic crisis, EVER, when, as he stated, homes will drop up to 29%? It’s not like foreclosures have been off the charts.
This does not sound like a time when you need to put more pressure on the housing industry.
It sounds and looks like a time when you need to push through policy’s that promote home ownership, rather than killing it, and the building industry with it.
This has all the ingredients of Canada’s wealth gap widening enormously, and, putting the dream of home ownership out of the picture for many Canadians.
By Mark Verzyl
Fixed-Rate Mortgages: What You Need to Know
Fixed-rate mortgages are the chicken soup of home loans. In an uncertain world, they stand out for their comforting reliability.
Today, a fixed-rate mortgage is nearly every borrower’s choice. In July 2017, 87% of mortgage purchase applications were for 30-year, fixed-rate loans, and 94% of all mortgage purchase applications were for fixed-rate loans, according to data from the Mortgage Bankers Association.
Until the Great Depression, most mortgages were adjustable, lasting just five years before they were refinanced or paid off. After large numbers of homeowners lost their homes to foreclosure, the federal government launched efforts to make fixed-rate mortgages available, says Susan Wachter, the Sussman professor of real estate and finance at the Wharton School at the University of Pennsylvania.
Fixed-rate mortgages are stable
Fixed-rate loans, thanks to their predictable, affordable payments, have stabilized home borrowing and protected families from being priced out of their neighborhoods, Wachter says. “It is a form of insurance, in fact, for the home, for your family, your job,” she says.
» MORE: Find the best mortgage rates
How fixed-rate mortgages work
A fixed-rate mortgage has an interest rate that’s constant for as long as you have the loan. It’s fully amortizing, meaning that the principal and interest that you owe your lender are fully paid off when the loan ends. Part of each monthly payment repays some interest. The rest pays down your principal.
In a loan’s early years, most of the payment goes to interest; eventually, most goes to principal. This simplicity contrasts with the complexity of an adjustable-rate mortgage, which features a changeable interest rate and many variations on loan terms and payments.
These days, mortgage shoppers have options for mortgages, based on:
- Interest rate. Besides fixed-rate mortgages, you’ll find adjustable-rate (or floating-rate or variable-rate) loans, although they are less common. Other types include interest-only, negative-amortization, pay-option and balloon-payment mortgages. These are used infrequently if at all.
- Term. The loan’s term is the length of time you’ll borrow the money. The most-common fixed-rate mortgage terms are 30 years and 15 years. The 20-, 10-, five- or three-year fixed-rate loans are harder to find.
Here’s what affects your mortgage rate
The interest rate on your mortgage is determined by a handful of factors. According to the Consumer Financial Protection Bureau, the factors include:
- Loan size. Mortgages smaller and larger than ordinary are more expensive.
- Location. Prices vary somewhat by region.
- Your credit score. Your score has a big impact since lenders associate a higher score with lower risk.
- Term. The term also affects a lender’s perception of risk. Longer-term loans often have higher interest rates than shorter ones.
- Type of mortgage. Rates are slightly lower on mortgages insured by the Department of Veterans Affairs and Federal Housing Administration compared with loans that are not backed by the government.
- Down payment. Lenders may reward a higher down payment with a lower interest rate.
- Type of interest rate. ARMs typically start with lower rates than fixed-rate mortgages. The rate can rise or fall after the introductory period based on market forces.
Pros of fixed-rate mortgages
- Predictable. The payment is unchanging (although if property tax and home insurance payments are included your payment may vary).
- Simple. Fixed-rate mortgages are easier to grasp, making shopping easier.
- Safe. Whether your job disappears, you get a divorce or the economy slumps, your mortgage payment stays the same.
- Buy more home. Fixed-rate loans typically lower payments by stretching the mortgage over 30 years, allowing borrowers to qualify for a bigger loan.
Cons of fixed-rate mortgages
- Inflexible. When interest rates are dropping, you can’t enjoy savings unless you refinance.
- Potentially more costly. An ARM could be cheaper if you expect to sell the home or refinance the loan before the low-rate introductory period ends.
- Higher rates. Rates are higher than in the introductory phase of an adjustable loan, but ARM costs rise later.
- Pay more interest. Long-term fixed-rate loans cost lots in total interest.
The article Fixed-Rate Mortgages: What You Need to Know originally appeared on NerdWallet.
We’ve all heard the fresh baked cookies trick, but the truth of the matter is, potential buyers really are paying attention to things like the smell of your home. A few days before your open house, you should literally open your house. To really air out your home, you’ll need to do this for at least a couple of hours for a few days leading up to the open house. Burning a candle can be potentially off putting, depending on the scent you choose, but sprigs of fresh herbs, like lavender, basil or mint, can be incredibly energizing, and hyacinths smell heavenly.
Keep in mind, you’re selling a lifestyle, along with your home. People don’t want to envision themselves living amongst your smelly cats and hockey bag. Create an aura for your house that instills a sense of good health and wellness, and your house will be sold in no time.
First impressions are critical when it comes to real estate, so to ensure potential buyers get a good feel for your house as soon as they roll up, pay special attention to your curb appeal by cleaning up your yard and adding a touch of decor. Depending on the season, that could mean cutting the grass, trimming any wayward hedges and making sure the all the garbage cans are tucked away. Fix any broken stairs or porch railings and consider adding a pop of colour with flowers to spruce up the existing flowerbeds. You don’t have to spend a lot, or redesign your landscaping, a few pots (try three in different sizes arranged in a cluster) can make a strong enough impact when placed beside your front door
When prepping your home for an open house, narrow down your possessions by packing away as much as you can or store packed boxes neatly in a garage or basement. When a room is left with just the necessities, it looks larger and won’t be as distracting to potential buyers. Sure, your decades-long collection of fashion magazines is impressive, but buyers don’t want to be reminded of the hoarder—or, “collector”—who’s been living in the home. Think of a hotel room, albeit a stylish one, and follow that template: bed, bedside table, lamp, phone, artwork over the bed. The end
Cleaning your home before an open house may sound like an obvious tip, but you can’t underestimate the level of cleaning required. Buyers will inspect your home with a fine-tooth comb, they’ll open every cupboard, wipe their fingers across every baseboard and turn their noses at every smudge on your light switches. Unless you actually enjoy cleaning, consider hiring a service to come in and scour the place. If you decide to tackle the job yourself, pay extra attention to the two most important areas of the house: the kitchen and the bathrooms. Countertops should be clear of all items and sparkling clean, while appliance fronts should be spotless. Remove any photos, art or calendars from the fridge door and sweep and mop the floors. In the bathroom, remove all personal items from the vanity and make sure the sinks, toilets and bathtubs are gleam-ing. If you have a glass-front shower, make sure it’s free of soap scum or water marks. Light a candle and replace any threadbare towels with one or two new fluffy white ones. Buyers will inspect your home with a fine-tooth comb, they’ll open every cupboard, wipe their fingers across every baseboard and turn their noses at every smudge on your light switches. Un-less you actually enjoy cleaning, consider hiring a service to come in and scour the place. If you do decide to tackle the job yourself, pay extra attention to the the two most important areas of the house: the kitchen and the bathrooms. Countertops should be clear of all items and sparkling clean, while appliance fronts should be spotless. Remove any photos, art or calendars from the fridge door and sweep and mop the floors. In the bathroom, remove all personal items from the vanity and make sure the sinks, toilets and bathtubs are gleaming. If you’ve got a glass-front shower, make sure it’s free of soap scum or water marks. Light a candle and replace any threadbare towels with one or two new fluffy white ones.
A top-down paint job may not be in the budget, but if your walls or baseboards have seen better days, it may be worth a quick paint job. Any walls that make a major statement, like your daughter’s multi-coloured bedroom, or your bright green dining room, might be better served in a neutral white or grey.
CONSIDER THE LIGHTING
Replace any burnt out light bulbs and turn on all of the lights to make your home feel warm and inviting. If you’ve got any areas of the house that don’t have adequate lighting or that lack natural light, consider adding a floor or table lamp to help brighten it up or even replace the light fixture altogether. feel warm and inviting. If you’ve got any areas of the house that don’t have adequate lighting or that lack natural light, consider adding a floor or table lamp to help brighten it up or even replace the light fixture altogether.
SET THE MOOD
We’ve all heard the fresh baked cookies trick, but the truth of the matter is, potential buyers really are paying attention to things like the smell of your home. A few days before your open house, you should literally open your house. To really air out your house, you’ll need to do this for at least a couple hours for a few days leading up to the open house. Burning a candle can be potentially off putting, depending on the scent you choose, but sprigs of fresh herbs, like lavender, basil or mint, can be incredibly energizing, and hyacinths, which you’ll currently find in bloom, smell heavenly.potential buyers really are paying attention to things like the smell of your home. A few days be-fore your open house, you should literally open your house. To really air out your house, you’ll need to do this for at least a couple hours for a few days leading up to the open house. Burning a candle can be potentially off putting, depending on the scent you choose, but sprigs of fresh herbs, like lavender, basil or mint, can be incredibly energizing, and hyacinths, which you’ll currently find in bloom, smell heavenly.
In the past ten years, home prices in Canada have changed a lot. This interactive chart shows how prices have appreciated in some of the largest cities in Canada, sorted by commute time.
Mark Verzyl & Associates
Selling your home? Consider hiring a professional to stage it. The relatively small initial cost is outweighed by an average of 8-10% value added!
Mark Verzyl & Associates
When you're ready to upgrade to home ownership, don't hesitate to reach out!
Mark Verzyl & Associates
Your Real Estate Agent Checklist
How to find the right agent for you!
Not all real estate agents are created equally — and even if they were, not all would be a great fit for you and your unique search. If you haven’t used an agent before, or if you did and it was less than pleasant, you might not be sure what to look for before signing. At ABODO, we help people find their perfect apartment every day, so we have some insights about what to look for in the person helping you find your dream home. Whether you found them on Google, passed a yard sign, or had them recommended by your best friend, be sure to vet your almost-agent properly:
[ ] Meet with more than one
This isn’t technically “something to look for,” but it’s a crucial part of making sure you find the right agent. The more agents you talk to, the more opportunities you’ll have to find the right fit. Plus, those additional conversations will help you learn more about the homebuying process and be able to ask more pointed questions about how different agents can benefit your search.
[ ] Check their specialty
Some real estate agents shine when it comes to selling homes, others prefer to help homeseekers buy. Ask about their experience and track record as well — if they insist they specialize in buying but haven’t closed a deal in recent history, you might be wise to look elsewhere.
[ ] Ask about affiliations
Not all real estate agents are REALTORS®, and the difference could matter to you. Both are licensed to sell property, but only REALTORS® are additionally trained and backed by the National Association of Realtors, which enforces a strict code of ethics to put clients’ needs first. That said, ethics are found outside the NAR as well.
[ ] Test communication
Imagine putting in an offer on a house and then not being able to get in your real estate agent to answer your calls. Communication is crucial, especially in the time-dependent search for a house. Depending on your market, properties can list and sell quickly, so you have to be able to rely on your agent’s ability to act and communicate quickly. When setting up your initial meeting, how long did it take them to respond to your inquiry? Did they have time to meet with you soon, or did you have to schedule out a week or two? Also consider your preferred method of communication — email, call, or text — and ask if they’re willing to use it.
[ ] Ask about neighborhood nuances
If your agent is supposed to be working for you to track down the house you want in the area you want, it’s important that they are well-acquainted with your target neighborhood. Good and bad neighborhoods can mean the difference of a block or two, so ask a few questions to ensure your prospective real estate agent is prepared for the job.
[ ] Talk fees
Naturally, your real estate agent isn’t a volunteer. And with your house budget in mind, you can get a realistic quote of what the agent would cost you. Some combine fees into the commission (which many buyers don’t have to pay), while others list expenses separately. Do the math for a few different agencies and weigh the best deal with the best service.
Imagine spending crisp evenings here with a fire and some hot chocolate. Always nice to have an area in the backyard where you can spend some time with the family.