Fall 2011
Mississauga Home Prices Show No Sign of Cooling Off!
The temperatures outside may be cooling off but the home prices and sales in the Greater Toronto area including homes for sale in Mississauga, Oakville, Etobicoke and beyond continue to heat up! Throughout most of 2011 the inventory of homes available for sale have not kept up with the demand for housing. In spite of this lack of inventory the overall sales of homes is up 2.6% year over year. During September, the first month of the fall season, sales were up 25% while the number of listings on the market was only up 15%. These numbers are consistent with sales figures for the first eight months of 2011.. The bottom line is that this lack of inventory has resulted in a year over year price increase averaging 10%. Areas of Mississauga fared better then the average posting increases of 15– 21%.
The strong activity of home sales can in part be attributed to low interest rates and increasing incomes which continue to make home ownership an affordable option for many.
The first two weeks of October seem to be pointing towards more balanced market conditions as we move toward 2012. Growth in new listings outstripped growth in sales, meaning more choice for buyers. Recent publications pertaining to the increase in home prices has encouraged more home owners to put their home on the market to take advantage of the prices.
The average selling price during the first two weeks of October was $475,743 – up 7.5 per cent compared to the same period in 2010.
The average resale home price is expected to grow at a slower pace in the months ahead because the market is becoming better supplied. There will be less competition between home buyers as we move through the fall and winter. With a more balanced market in 2012, the average rate of annual price growth is expected to be in the mid single digits.
Compare these results with gains on your stocks and bank accounts and the answer is clear; real estate is your best bet for positive investment results!
Spring/Summer 2011
Canada’s housing market is having another great year. With very few homes available on the market, homes that are reasonably priced are selling very quickly. The doom and gloom of last year and this years unrest has not dampened the sales. Experts are predicting a 3 to 5% growth rate in 2011. In January 2010, the median price was $360,000, from the $350,000 recorded during January of 2010. The average selling price for January 2011 sales was $427,037, representing an increase of over four per cent compared to the average of $409,058 reported in January 2010. Home sales were up 12.3 per cent in July from July 2010 and are expected to grow slightly the rest of this year as interest rates remain low, according to the Canadian Real Estate Association.
"While off the record pace experienced a year ago, the GTA resale market is on solid footing. Home buyers in Toronto and surrounding areas continue to benefit from a diversity of housing types for sale at many different price points," said TREB President Bill Johnston.
Topic of the Season
New Mortgage Rules as of March 18, 2011
The Minister of Finance recently announced changes to CMHC mortgage rules, coming into affect March 18, 2011, which could have a significant impact on your mortgage strategy. CMHC (Canada Mortgage and Housing Corporation) insures mortgages that require more than 80% financing, so these changes will mostly affect first time home buyers and those who leverage their home equity for debt consolidation or investment purposes.
Essentially, these changes will reduce the overall amount for which borrowers can qualify, as well as restrict the refinancing flexibility of current homeowners with less than 15% equity in their homes. The exact changes are as follows:
The first change reduced the maximum allowable amortization period for insured high-ratio mortgages from 35 years to 30 years, effective March 18, 2011. (Put another way, this means that the longest you can take to pay back your high-ratio mortgage loan is now 30 years.) In real numbers, the change from 35 years to 30 years means an additional payment of about $100/month on a $300,000 mortgage at a 4% interest rate.
The second change reduced the maximum loan-to-value allowed on high-ratio refinance transactions from 90% to 85%, also effective on March 18, 2011. (In simple terms, this means that if you want to refinance your current mortgage, the most you can borrow is 85% of the current value of your property). Here, the government is trying to pre-empt a refinancing binge where low interest rates cause people to use their homes as ATM machines, which was commonplace in the U.S. during their housing bubble. The more equity a home owner has in their property, the bigger their buffer if house prices fall (and by extension, the safer the lender’s loan and the tax-payer’s money that guarantees it through CMHC
So what does this mean exactly? For a potential home buyer, if you have an annual household income of $60,000 you can currently qualify for a $312,000 purchase, using the 35 year amortization and 5% down payment. Under the new rules, because of the reduced amortization to 30 years, you will only be able to purchase a $289,000 property (a drop of $23,000 in purchasing power).
To afford that $312,000 property your annual household income will have to be $64,000 or higher.
For those who already own their home, these changes are going to impact your refinancing flexibility, reducing your ability to borrow equity back out of your home to consolidate other debts at a lower interest rate or use that equity for investing.
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