5 great tips! RT @globemoney http://tgam.ca/CWeq

That’s how it can sometimes feel, when predicting what the real estate market may do in 2011. So perhaps a good place to start, is with some thoughts that came from speakers and presenters at the recent ‘Forecast Day’ for the real estate industry…..
The key to market recovery in 2011 will be permanent job creation sufficient to stimulate in-migration. With little pent up demand from renters, recovery in the first half of the year will be more modest, picking up pace in the latter half. Recovery of sales will come to single family homes closer to the downtown core, followed by condos and single family homes in the outlying towns.
Affordability will be key to market expansion and price increases are not likely until the latter half of 2011, when inventories have eased and demand has recovered. With interest rates not expected to increase, there is little urgency for buyers to move into the market in the first half of the year. Nonetheless, 2011 will offer buyers unprecedented affordability, low interest rates and a large selection of inventory.
For the first time since 2008, oil patch employees are expecting bonuses and profit share at the end of March 2011, which may translate into a flurry of demand in the mid priced homes. This confidence in the oil patch and improvements in the overall global economy may trigger sales of larger and higher priced homes, prior to an overall rebound in more average-priced property.
This will put upward pressure on average prices, but actual price appreciation will require a resurgence of sales in the entry level homes to fuel a sustainable recovery and create a more balanced market. On the upside, better than expected employment numbers in central Canada may prompt an early boost to interest rates and this may spur buyers who are waiting on the sidelines to jump back into the housing market earlier than anticipated.

©2011 CREB® 2011 economic outlook & calgary regional market forecast

As anticipated in CREA’s recent call to action, the government announced this week three loan financing changes designed to address concerns about increasing levels of household debt.

First, the government will reduce the maximum mortgage amortization period from 35 to 30 years. Second, the maximum amount of the value of a home that can be re-financed will drop from 90 per cent to 85 per cent. And finally, government insurance will no longer be available to financial institutions wishing to insure home equity lines of credit.

Together, these three measures are designed to ensure homebuyers invest responsibly in home ownership and don’t risk their financial security by buying too much home for their income or the country’s economic circumstance.

It is important to note, the government did not increase the minimum down payment, which was under consideration. And the reduction of five years to the amortization period is understood, given there was a possibility of a larger reduction.

News Release

May Brings Marked Decline in Home Sales

Average price rises as move-up buyers enter market

Calgary, June 1, 2010 – Calgary home sales showed a marked decline in the month of May, according to figures released today by the Calgary Real Estate Board (CREB^®).

The number of single family homes sold in May 2010 in the city of Calgary was down 20 per cent from the same time a year ago, and condominium sales saw a decrease of 21 per cent from the same time a year ago. Read the rest of this entry »

As of Monday April 19, buyers of Calgary houses or condominiums will be faced with restrictions on the amount of money they may borrow.

Federal government lending guidelines dictate that purchasers who would like to have an adjustable rate mortgage OR any term shorter than five years (and be putting a down payment of less than 20% of the purchase price) MUST use the Bank of Canada mandated benchmark rate when getting qualified for their mortgage. 

That rate currently is 5.85% and this will vary, perhaps weekly or monthly as the bond market moves.

However if as a Calgary home buyer you’re happy taking a 5-year fixed mortgage regardless of the size of your down payment (currently available at a ‘discounted rate’ of approx 4.4% say), then the banks and mortgage lenders are allowed to take that rate and use it to qualify you.
Why are they doing this? Actually it’s good, prudent country-wide policy to forestall any Canadian mortgage borrowers from getting into trouble in the next couple of years when interest rates do rise.

Buyers will now qualify for lower mortgage amounts!

The government feels that if they dissuade you from taking a variable or a short-term mortgage at the present ultra-low interest rates, or at least force you to qualify income-wise based on a higher rate, then they’re protecting you from future rate hikes.

Here’s the current mentality. It’s not IF interest rates will rise. It’s WHEN will they rise and by HOW MUCH.

So what’s the net effect of this? Let’s look at an example.

With a combined income of $100,000 for either a couple or a single person, under the new system (which would allow them to choose between a variable or a 1-, 2-, 3- or 4-year mortgage term), a Calgary condo or house buyer would qualify for a maximum mortgage of $368,000 @ 25-year amortization and $418,000 with a 35-year amortization.

With that same income but taking the 5-year fixed mortgage now at 4.49%, they would qualify for a maximum mortgage of $421,000 @ 25-year amortization and $495,000 with a 35-year amortization.

Thus a buyer would be limited to purchasing a Calgary home for $53,000 less when using a 25-year mortgage amortization and for $77,000 less if using a 35-year amortization IF they wanted the variable or ’shorter-than-5-year’ mortgage option and they had less than 20% down payment.

Let’s meet to discuss your mortgage and home buying options over a cup of coffee.

According to the Calgary Real Board, “Calgary’s housing market enjoyed a healthy boost in March as home buyers anticipate an earlier than expected rise in interest rates.”

Spring is always a good time to both buy or sell and in Calgary the the spring market has come early. During the month of March, “1396 single family homes sold in the city of Calgary. This is an increase of 35 percent from 1,035 sales in February 2010″

Interesting in learning more about how the market is shaping up? Contact me, Colin Kennedy!

Welcome to the Calgary Home Seekers Blog. Stay tuned for continued news and updates!