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

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.

May 2010 saw 1,262 single family homes sold in the city of Calgary. This is a decrease of 7 per cent from 1,352 sales in April 2010. In May 2009, single family home sales totaled 1,584. The number of condominium sales for the month of May 2010 was 518. This was a decrease of 19 per cent from the 639 condominium transactions recorded in April 2010. In May 2009, condominium sales were 653.

“The first quarter of 2010 was exceptionally strong with our spring sales coming early in the wake of anticipated mortgage hikes,” says Diane Scott, president of CREB^®. “We believe there are a number of factors contributing to this marked slowdown including a declining number of first-time homebuyers in the market, a rise in monthly carrying costs as mortgage rates rise and to some extent market jitters in the wake of Greece’s financial crisis,” says Scott.

“Consumers are feeling a little nervous about the recent instability of the stock markets—and with mortgage rate hikes behind us, it’s understandable that feelings of urgency among buyers have lessened,” adds Scott.

The average price of a single family home in the city of Calgary in May 2010 was $483,240, showing an increase of 5 per cent from April 2010, when the average price was $460,378, and showing an increase of 11 per cent from May 2009, when the average price was $436,427. The average price of a condominium in the city of Calgary was $304,662, showing a 5 per cent increase from April 2010, when the average price was $289,588 and an 11 per cent increase over last year, when the average price was $275,212. Average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods, or account for price differentials between geographical areas.

“Our inventory is shifting to higher price points as move-up buyers enter the market.  This has resulted in an overall boost in average price,” says Scott.  “Nonetheless our days on market year-over-year has decreased—suggesting that competitively priced homes are selling.”

The median price of a single family home in the city of Calgary for May 2010 was $420,000, showing a 1 per cent increase from April 2010, when the median price was $417,000, and an 8 per cent increase from May 2009, when the median price was $390,000. The median price of a condominium in May 2010 was $279,900, showing a 5 per cent increase from April 2010, when the median was $267,500. That’s up 10 per cent from May 2009, when the median price was $255,000.

All city of Calgary MLS^® statistics include properties listed and sold only within Calgary’s city limits. The median price is the price that is midway between the least expensive and most expensive home sold in an area during a given period of time. During that time, half the buyers bought homes that cost more than the median price and half bought homes for less than the median price.

Single family listings in the city of Calgary added for the month of May totaled 2,966, a decrease of 4 per cent from April 2010 when 3,082 new listings were added, and showing an increase of 33 per cent from May 2009, when 2,235 new listings came to the market. Condominium new listings in the city of Calgary added for May 2010 were 1,221, down 9 per cent from April 2010, when the MLS^®saw 1,335 condo listings coming to the market. This is an increase of 22 per cent from May 2009, when new condominium listings added were 998.

“I believe this recent decline in sales is the result of an unsmooth transition from a first-time buyer market to a move-up buyer market.  And it is likely that investors who waited out 2009 are now listing second homes and condos—giving an added boost to our inventory,” says Scott.

“Nonetheless our economic fundamentals, including employment and net migration, seem to be building momentum and Canada’s overall outlook is positive.  These steady improvements should offer some stability to Calgary’s housing market as we enter the second half of 2010,” adds Scott.

CREB^® is a professional body of 5,495 licensed brokers and registered associates, representing 244 member offices and is dedicated to enhancing the value, integrity and expertise of its REALTOR^® members.

REALTORS^® are committed to a high standard of professional conduct, ongoing education, and a strict Code of Ethics and Standards of Business Practice. Using the services of a professional REALTOR^® can help consumers take full advantage of real estate opportunities while reducing their risks when buying or selling real estate. The board does not generate statistics or analysis of any individual member or company’s market share.

To access the full statistics package, please click here.

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.

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!