Are you preparing to purchase a home?  Many people make 3 common mistakes right before applying for a mortgage.  In this video, we define these mistakes and give you tips on how to avoid them.  By avoiding these mistakes, you will make your home buying process smoother and your mortgage application stronger!

This episode of the Mortgage Minute begins to decode the language used when applying for your mortgage.  Knowing “mortgage” language gives you a leg up when trying to understand your mortgage and how to personalize your mortgage to your situation.  This video explains the difference between amortization and term as it applies to your mortgage!

The largest recovery was experienced by White Rock/South Surrey (6.5% increase in sales over May of 2009); however, this segment also experienced the smallest decline (5.2%) over the previous year.  The only two market segments that are still experiencing sale declines are Surrey (-0.3% from May 2009 to June 2009) and Mission (-2.6% from May 2009 to June 2009).

This increase in sales is a promising light at the end of a year long downward tunnel that Real Estate Sales have experienced in Greater Vancouver and the Fraser Valley.  Much of the increase in sales can be attributed to low interest rates, a slight rebound in the stock market, and a lack of product on the market.

Activity in the month of June marked the fifth consecutive month of rising sales and the highest level of activity since January 2008, on a seasonally adjusted basis.

“Housing markets around BC continued to post higher sales in June, fuelled by attractive mortgage rates and lower prices,” said Bryan Yu, BCREA Economist.

“The larger urban regions of Greater Vancouver and Victoria exhibited balanced market conditions in June, while others have recorded improved market stability. Stronger demand and a decline in home listings are stabilizing home prices in many BC markets.”

Year-to-date, MLS® residential sales dollar volume was down 20 per cent to $16.3 billion over the same period last year. A total of 36,329 units were sold in the first six months of 2009, down 15 per cent from 2008, while the average MLS® price declined 5 per cent to $448,381.

• Renovate if…you love the neighborhood, your house can be renovated to meet your needs, you can’t afford to buy the house you want or need,
• Move if… the neighborhood no longer satisfies your needs, your home cannot be renovated to suit your needs, you are not willing to live through a renovation or you do not have access to people who can renovate it

Most decisions in life have in some form or another financial ties.  In this situation the question becomes, how do I finance my decision?  If you choose to renovate, there are many home construction and renovation loans that are available to help you do this.  Another option is a home line of credit that affords you the flexibility of a line of credit that can be paid off very quickly or in an extended length of time.

If you choose to buy, you would most likely be needing a new mortgage for your new home, if you cannot port your existing mortgage to your new home.  In this instance you will be presented with many options that may suit your needs ranging from fixed rate products to variable rate products with a range of terms and amortization periods.

The bottom line is: look at your finances to see what you can afford, perhaps consult your mortgage advisor to help you figure out what your options look like on paper.  The next step, depending on your financial situation, is to evaluate your answers to the questions above to determine whether you would like to renovate or move.  Once you have completed these two steps, you are on your way to upgrading your home, either by renovating or moving!

The average sale price of a home last month in Canada was $306,366. Based on a 25% downpayment and a 25-year amortization, your monthly payment would be $962.61 at 1.35%. Convert that to a five-year fixed-rate term and you’re probably going to have to consider a 4% mortgage rate and a monthly payment of $1,289.04.

Rates are rising fast. Most major banks upped their five-year rate by 40 basis points this week, although discounters were still offering 4% this past week. “It’s not a mass rush yet, but we are starting to see … people locking in. But variable rates are still so good,” says Joan Dal Bianco, vice-president of real estate-secured lending, TD Canada Trust. She stops short of questioning why a consumer would pull out of these “deals” that are no longer available on the market.

Try to get a variable-rate mortgage today and the best you can probably hope to get is 60 basis points above prime, or 2.85%. The landscape changed dramatically in October during the credit crunch. As the Bank of Canada lowered rates, the major banks reluctantly lowered prime because of the massive amount of customers with variable-rate products negotiated under the old, higher terms. “Bonds yields are going up rapidly and people are starting to realize the rates are going to go up,” Ms. Dal Bianco says.

Throw in the fact the Bank of Canada used the weasel word “conditional”(on inflation rates)when it promised not to raise rates until June, and you can understand why some
people think today’s record-low prime rate might not hold. But if you’re someplace between 60 to 90 basis points below prime, the rate is going to have to go up pretty fast to justify locking in today at 4%, even though that is just slightly above the all-time low hit last month for a five-year term. “I don’t understand why you would lock in,” says Jim Murphy, chief executive of CAAMP. “Sure, if they start to rise, but [Bank of Canada governor Mark] Carney says they won’t rise, so you’ve got another year at that prime-minus rate.”

Don Lawby, chief executive of Century 21 Canada, says even when rates do start to increase, they are not going to jump significantly right away. You are not going to get 4% on a fixed rate again, but double-digit rates seem unlikely. “The only logic two locking in would be for someone very sensitive to any rate change and they just want to be secure,” Mr. Lawby says.

But at what price? If you’re using the “feeling secure” logic, why not go for the 10-year fixed-rate product? Rates on that product can be locked at 5.25%, ridiculously low by historical standards. Yet fewer than 10% of Canadians consider a 10-year product.

There are some compromises you can make. For starters, there is nothing to prevent consumers from having a blended mortgage at most Canadian banks. Some banks will let you take half your outstanding debt and lock it in. Diversity is preached for stock portfolios, but few people seem to adhere to the same philosophy when managing their debt. Consumers might want to take their cue from business. Few companies would want all of their debt coming due at the same time — it presents too much risk. The other option is knocking down principal: Make payments based on a 4% rate and have that extra $300 go straight to your principal every month.

The bottom line is if you’ve got a deal on your mortgage, why would you give it back? Dusty wallet Double check your credit card statements. DW is in a bit of a skirmish with Visa over a taxi cab bill. Of course, DW is too cheap to use cabs, but does succumb to them to get to and from airports on vacation. Last trip, the family took an airport limousine and paid the $56 charge. Guess what? The same amount was billed a month later. So far, the taxi cab company has yet to produce a second receipt. In the interim, DW had to pay the second $56 charge.

Gary Marr, Financial Post Published: Saturday, June 13, 2009

BC Real Estate Association chief economist, Cameron Muir says, “The imbalance between supply and demand was putting significant downward pressure on home prices, on the demand side, we’ve now seen three consecutive months (seasonally adjusted) of double-digit increases in home sales. And on the supply side, the number of homes for sale in Vancouver has declined for six consecutive months.”

The forecasted decrease in pricing is also being revisited.  Originally BCREA forecasted a 13% decline in housing prices; they have now revised this number to between 5% and 8%, depending on the location.

This stabilization in pricing is beneficial for both buyers and sellers.  Buyers are still able to purchase houses and fairer values than they were even  2 years ago; while sellers are able to sell their home more quickly.

CMHC’s economist, Bob Dugan points at the number of factors causing this decline, “The decline in housing starts in 2009 can be attributed to several factors, including the current economic climate, increased competition from the existing home market, and the impact of strong house price growth between 2002 and 2007.”

Compounding the new home start declines, sales of existing homes have also and will continue to decline through 2009.  Although not as severe as new home starts, sales are expected to see about an 18% drop from 2008 figures, and a small rebound in 2010, from about 433,990 units in 2008 to 357,800 in 2009 and a rebound to 386,100 units in 2010.

As with the new home starts and the sales, prices are also expected to continue to decrease through 2009 and only stabilize in 2010.  Prices will remain well below 2008 and previous years levels.

Although we are seeing declines through 2009, Canada is in no way mirroring the US housing market.  The declines have not been as sharp and the activity in Canada is now seeing a more sustainable level of building and more affordable housing prices than Canada has seen in the past 5-7 years.

With real estate prices throughout Vancouver and the Fraser Valley down in the neighbourhood of 10-15% in the past year, this can be a great benefit to those wishing to upgrade to a bigger and better home. How does this help? Perhaps an example will illustrate this best.

Let’s say for simplicity that the market for all homes was down 10% from the peak of a year ago. If the current home that you live in was valued at $400,000 1 year ago, this would mean that with a 10% drop in value, it would be worth $360,000 today – a drop of $40,000. If the bigger, better home that you are now wanting to buy was worth $800,000 last year, with our simplified example of a 10% drop, it would be worth $720,000 today – a drop of $80,000. As you can see, your house dropped $40k but the house you want to buy is now $80K cheaper.

And now the even better part. One thing that our simplified 10% example doesn’t take into account is the fact that in general, higher priced/luxury properties have taken the biggest hit and in a real life example would probably be down more than 10% – probably more like 15-20% depending on the area.

I won’t even get into the details of the further benefit realized by the historically low mortgage rates that are available right now. I’ll leave that up to Zach to explain!

Now IS a GREAT time to buy!

Although we are still falling short from this time last year, April has seen an increase in sales of 31% over March 2009.  “We’re seeing greater balance in the housing market, as evidenced by strong sales to active listings ratio of over 19%” says REBGV President Scott Russell  The trend in the market is now more realistically priced homes that are on the market with the intention to sell, not fish for an overpriced sale.

Coming off an all-time high in real estate prices, too high in fact to sustain, the current conditions are seeing conditions in the market normalize.  

The greater number of buyers together with less housing is creating a better balance between supply and demand which typically brings with it stability in pricing.  Overall buyers and sellers should both be optimistic in light of this stabilizing trend: for buyers prices are normalizing, and for sellers, their properties are now starting to move after a tough fall, winter, and spring!  

Below are the bright spots in Greater Vancouver, where sales are up compared to April of 2008:

Detached:

Vancouver West            up 59.5 per cent (193 units sold from 121)

Attached:

Port Coquitlam               up 69.6 per cent (39 units sold from 23)

Richmond                       up 17.9 per cent (132 units sold from 112)

Vancouver West             up 46.3 per cent (98 units sold from 67)

Apartments:

North Vancouver             up 29.2 per cent (84 units sold from 65)