There has been much speculation that we are in the midst of a housing bubble which is sure to come to an abrupt end.  The question some people are asking is, WHEN will the bubble burst?

Canadian Business Magazine’s reporter Larry MacDonald says that we are in the midst of a buying frenzy.  Speculators are making purchases based on the assumption that prices will continue to increase:

… rank speculation seems to be in full bloom in the housing market. People are now signing agreements to purchase like they’re trading futures and options.

MacDonald urges caution. He thinks that Finance Minister, Jim Flaherty is making a mistake by not increasing interest rates.  In fact MacDonald is also encouraging the Bank of Canada to increase its rates in order to slow speculators down.

The Bank of Canada should also reconsider its stance on interest rates. Its policy of maintaining extremely low interest rates has been, in large part, responsible for fueling the current mania for housing.

MacDonald’s article urges caution … and he is right.   Buying a home is one of the biggest purchases most people make. You should always be cautious and know exactly what you are getting into.  We give our customers ALL the information necessary to make a good buying decision. We explain everything you need to know about getting a mortgage. If there are risks we tell you up front, what they are and what you can do to minimize them.

If you have any questions about getting into the housing market now, give us a call at 604-736-1855.

Be sure to read our previous blog post were TD Economics predicts a 14.8% decrease in Vancouver house prices.

Read Larry MacDonald’s full article,  Stop the housing bubble before it’s too late.

Here’s a market update from our friends at Macdonald Realty; Simon Clayton, Jason Low, Sandra Ens, Jason Feinstadt, and Jenny Stephanson.

August 2011 Market Update

“There are 3 kinds of lies: Lies, Damned Lies, and Statistics”

- Mark Twain

There’s no doubt that real estate is an interesting topic of conversation for the public. The media, in an attempt to feed this appetite for real estate news, often publishes interesting pieces of real estate information that help sell papers. Due to this heavy dose of constant real estate news, it’s important to understand how the data is collected and how to interpret the information.

Below are the 3 most commonly misunderstood statistics in the media:

1) Housing starts rise 1.9%!
(http://www.vancouversun.com/life/Housing+starts+cent+June/5083165/story.html)

This shouldn’t really matter to buyers or sellers out there. While this is related to the real estate market, it is more relevant for the construction industry than it is to the resale housing market.

Remember, these are new home construction figures: not sales or pricing numbers. Unless you’re a construction worker or materials’ supplier, this type of information is largely irrelevant to your real estate decision-making process.

2) Home sales drop 42%!
(http://www.cbc.ca/canada/british-columbia/story/2008/10/02/bc-real-estate-values-vancouver-september.html)

This kind of information is important for buyers and sellers to know and also helpful for realtors to use. A drop in home sales is sometimes a precursor to lower prices down the road. That said, there are a multitude of reasons that home sales could slow that wouldn’t also result in a corresponding drop in prices.

It is therefore important to remember that these are unit sale figures, not price figures. These statistics are generally also seasonally adjusted to reflect the fact that sales tend to be slower in the winter and summer as opposed to the spring and fall. You should talk to a professional to see whether a drop in sales velocity is because of a slowing market or because of some other extraneous event.

3) Average House Prices Expected to Rise 13% this year!
(http://www.vancouversun.com/business/Home+prices+rise+cent+this+year+report/5030251/story.html)

This is the most misunderstood of the media reports that come out. Yes, it is true that Average Canadian Home Prices in 2011 will likely show a significant increase over 2010; however, as we’re already half way through the year, much of the increase has already occurred.

Many real estate boards also release data that shows the Benchmark price of a home. This is a much more accurate look at the current state of the real estate market than the average price. The Benchmark price is the current price of an average home in a given market area rather than the average price of all of the homes in a given market area. The difference is subtle, but substantive. The average price simply takes the price of all units sold in a given market area and divides it by the number of units sold. It therefore can be skewed by a strong luxury market, like the one currently being experienced in many Metro Vancouver markets.

Remember to always read real estate statistics with an eye to these issues and you’ll become a more accurate analyst of the market.

August 2011 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911

If you are considering a move, it pays to be informed about the closing costs you may have to incur when completion date comes on the closing of your real estate purchase.  Many home buyers are startled to learn that after they arrange their mortgage they have to pay a range of additional fees to finalize the deal.

Your exact closing costs will depend on where you live, how much you are borrowing, how you finance your mortgage and your closing date.  The rules and regulations surrounding the various mortgage fees can be complex, and can vary from lender to lender.

Here are some of the most common closing costs you may encounter:

Lawyer’s fees – these vary across the Province,  we can refer you to a lawyer who offers a competitive “legal package.”

Mortgage appraisal fees –  some lenders require an evaluation of the mortgage lending value of a property.

 Land survey fees  – the legal written and/or mapped description of the location and dimensions of your land, obtained from an accredited land surveyor.

Title insurance – may be purchased in lieu of a land survey in some cases.  Provides protection against several defects such as problems with the property that would have been revealed by an up-to-date land survey.

Land transfer tax – buyers must pay this tax to the provincial government when the property’s title passes from the seller.

High ratio mortgage insurance – this will be needed if you are buying a home for less than 20% down.

Home inspection fee – an objective visual examination of the physical structure and systems of a house.

We can advise you on what fees to expect before you sign your mortgage and save you from some big surprizes once you’ve closed the deal.

If you are considering the purchase of your first home, an interesting survey conducted by TD Canada Trust found some interesting tidbits about first time home owners in BC.

Contrary to the popular belief that the housing market in BC is too pricey to afford on your own, the report found that many first time home buyers ARE doing it alone!

In B.C., 47% of first time buyers plan to purchase their first home on their own (rather than with a copurchaser).  Nationally, nearly six-in-ten men (57%) will buy on their own, along with 33% of women.

Collecting some rent may make financing your first home more affordable.

After years of paying rent, first time homebuyers in B.C. say it’s time they started collecting it. According to the 2011 TD Canada Trust First Time Homebuyers Report, 56% of first time homebuyers in B.C. are looking for a home with a rental unit. Eighty-five percent think the unit will generate between $500 – $1,000 per month and seven-in-ten (67%) say the extra income will go towards paying their mortgage.

And though BC home buyers may want to go it on their own, or with the help of some rent … they also are saving for their initial down payment longer than the rest of Canada.

The survey also found B.C. buyers to be saving up the longest for their first home and putting down the
largest down payment. Nearly six-in-ten say that they have been saving for their first home for three
years or more (57% versus 47% nationally) and they are twice as likely to be putting down a down
payment of more than 25% (17% versus 10% nationally). Not surprisingly, given B.C.’s infamously
expensive real estate, buyers in B.C. are most likely to need a mortgage to finance their purchase (93%
versus 87% nationally).

If you are in the market for your first home … let us help.  In a hot market, it makes a big difference if you prequalify for a mortgage and how you present your case (rental income) to the financing company.

Give us a call and we will walk you through the entire process step-by-step. Averbach Mortgages is about simplifying the mortgage application process, no matter what your circumstances!  604-736-1855

Be sure to check out this additional  information:

Options and Resources for First Time Home Buyers

Fixed-rate mortgage better for first-timers

Read the Report:  2011 TD Canada Trust First Time Homebuyers Report

If you can’t decide whether a fixed or variable rate mortgage is better, you are not alone.

According to a recent poll undertaken by CIBC /Harris Decima

“Canadians are split in their views on whether a fixed rate or variable rate mortgage is the right way to go in the current rate environment, even as they anticipate higher interest rates over the next year.”

The poll shows:

• 39 per cent of respondents said they would choose a fixed mortgage if they had to choose between a fixed or variable mortgage today.
• 32 per cent said they would choose a variable rate mortgage.
• One-quarter (25 per cent) were undecided as to which would be the better choice.
• 61 per cent of respondents believe interest rates will be higher a year from now, while 24 per cent believe that rates will remain the same over the next 12 months.
• Only 3 per cent of respondents believe rates will be lower a year from now than they are today.

The poll results also highlight that views on choosing a fixed or variable mortgage can change depending on your stage of life. For example:

• Among 25-34 year olds, who are more likely to be first time buyers or new homeowners, only 27 per cent would choose a variable mortgage
• That climbs to 42 per cent among respondents 45-54 years of age, who are more likely to be near the end of their mortgage and have greater tolerance for rate changes within their mortgage payment

Choosing a fixed or variable rate mortgage is what we help our clients with every day. The “best choice” depends on YOUR financial circumstances and goals. Every time you purchase a property, your circumstances are different. Whether you are purchasing your first home, purchasing your first rental home, or want to move into your “retirement” home, the best mortgage for you depends on the current market, the current mortgage rates and your financial situation.  We work with you to get the best mortgage, each and every time!

Give us a call and let us help you determine the best mortgage for today’s market.  604-736-1855

In my last Blog post, I talked about how some people just assume they will not qualify for a mortgage.  The Big Banks are pretty inflexible and many of them don’t look beyond your credit history and current income.

As Mortgage Professionals, we deal with dozens of other Financial Institutions … ones who DO look beyond the obvious and will consider other lending criteria.

Here are five of the factors they look at and what it may mean to you:

Capability: Are you able to make your mortgage payments after all your other debts and obligations are taken care of.

Down Payment: The amount of down payment you have accumulated shows a commitment to your goals of owning a property. It is also factored into the “risk” the lender is taking with you.

Collateral: Does the value of the property you are considering cover the debt? Is the property easily marketable if you or the Finance company has to sell it.

Reputation: Your education, employment history, and history as a renter will be considered.

Credit: Your credit history for the past six years will be examined.  If you can explain problems or inconsistencies you may have an opportunity to do so.

If everything is not perfect, the Banks will simply not consider you. However there are Financial Institutions that may be a match for you. You may be able to point out your positive qualities, so that non-traditional Financial Institutions will view you as an acceptable “credit risk.”

Each mortgage company has its own set of requirements. Our job as Mortgage Professionals is to help you find a financing company that is a good match for your circumstances.

Don’t disqualify yourself without even trying.  Give us a call and we will see if there is a lender who would be thrilled to have you as a customer!  604-736-1855