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High Interest Rates Impacting the Market, But Population Growth Will Soon Spur Demand

  • The impact of high borrowing costs, high inflation, uncertainty surrounding future Bank of Canada decisions and slower economic growth continued to weigh on Greater Toronto Area (GTA) home sales in September.
  • Despite the market being better-supplied with listings, the average selling price was up year-over-year.The short and medium-term outlooks for the GTA housing market are very different. In the short term, the consensus view is that borrowing costs will remain elevated until mid-2024, after which they will start to trend lower.
  • This suggests that we should start to see a marked uptick in demand for ownership housing in the second half of next year, as lower rates and record population growth spur an increase in buyers.
RESIDENTIAL STATS

In September 2023, GTA REALTORS® reported 4,642 home sales through TRREB’s MLS® System in September 2023 – down 7.1% compared to September 2022.

The year-over-year dip in sales was more pronounced for ground-oriented homes, particularly semi-detached houses and townhouses. On a month-over-month seasonally-adjusted basis, sales were also down slightly.

GTA home selling prices remain above the trough experienced early in the first quarter of 2023. However, we did experience a more balanced market in the summer and early fall, with listings increasing noticeably relative to sales.

This suggests that some buyers may benefit from more negotiating power, at least in the short term. This could help offset the impact of high borrowing cost.
What is seasonal adjustment? Seasonality refers to a monthly (or quarterly) pattern that occurs in roughly the same manner from one year to the next, e.g., sales are highest in the spring and lowest in the winter each year.
COMMERCIAL STATS

The “All Leasing Activity (Sq. Ft.)” chart summarizes total industrial, commercial/retail and office square feet leased through Toronto MLS® regardless of pricing terms.
The “All Sales Activity” chart summarizes total industrial and commercial/retail and office sales through Toronto MLS® regardless of pricing terms.

In conjunction with the Toronto Regional Real Estate Board (TRREB) redistricting project, historical data may be subject to revision moving forward. This could temporarily impact per cent change comparisons to data from previous years.

Distinctive Real Estate Advisors Inc., Brokerage is pleased to present a recap of the latest market forecast release and September highlights from the Toronto Regional Real Estate Board (TRREB).

We’d welcome an opportunity to discuss the High Interest Rates Impacting the Market, but Population Growth will Soon Spur Demand. If you have any questions about our services, please contact our team.

August Sales Stall in Ottawa Resale Market

HIGH INTEREST RATES LEAD TO A SLOW END-OF-SUMMER MARKET

  • The average sale price for a freehold-class property in August was $709,739, an increase of 0.5% from 2022, and a 5.6% decrease over July 2023 prices.
  • The average sale price for a condominium-class property was $425,968 an increase of 1% from a year ago, although 1.4% lower than July 2023 prices.
  • With year-to-date average sale prices at $732,220 for freeholds and $432,571 for condos, these values represent an 8% decrease over 2022 for freehold-class properties and a 5.5% decrease for condominium-class properties, likely due to higher interest rates
  • The sales volumes year-to-date have also decreased significantly, with 10,165 sales across all property classes so far this year, down from 11,778 at the same time last year (decrease of 13.7%)
  • Days on market have increased across all property types, both from the same time last year and from July 2023 with freehold properties averaging 31 days and condos averaging 29 days

RESIDENTIAL STATS

Number of Units Ottawa August 2023

Average Sale Price Ottawa August 2023

Number of Units Year to Date Ottawa August 2023

Average Sale Price Year to Date Ottawa August 2023

OREB cautions that the average sale price can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The calculation of the average sale price is based on the total dollar volume of all properties sold. Price will vary from neighbourhood to neighbourhood.

Distinctive Real Estate Advisors Inc., Brokerage is pleased to present a recap of the latest market forecast release and August highlights from the Ottawa Real Estate Board (OREB).

We’d welcome an opportunity to discuss the August Sales Stall in Ottawa Resale Market. If you have any questions about our services, please contact our team.

Mortgage Stress Test Qualifying Rate to Rise on June 1, 2021

In an attempt to cool Canada’s very hot housing market, the Office of the Superintendent of Financial Institutions (OSFI), our banking regulator, has decided to intervene with one very specific policy change: raise the qualifying interest rate for new uninsured mortgages from 4.79% to 5.25%, or the mortgage contract rate plus 2% — whichever is higher — starting on June 1, 2021.

What is an uninsured mortgage?

  • An “Uninsured Mortgage” is any mortgage where the downpayment is 20% or more of the cost of the home.
  • An “Insured Mortgage” occurs when a buyer has downpayment of 5% – 19%. In this case, the buyer is required to purchase mortgage default insurance, which protects the bank (or lender) from default should the buyer find themselves unable to pay the mortgage.

Who does this change impact?

  • Mortgage stress testing is performed on ALL new mortgage applications, or mortgage refinance applications, not just first-time home buyers.
  • Uninsured mortgages are required for any property over $1 Million, rental properties, mortgage refinances and amortization period that exceeds 25 years.
  • MANY first-time home buyers have insured mortgages.

What is the net impact of the change?

  • The translation is a reduction in buying power of approximately 5% for the affected transactions.

When does the change occur?

  • The policy comes into place June 1, 2021.
  • Anyone who is pre-approved before that time will be grandfathered in under the current stress-test rate of 4.79%.

The idea behind the change is to cool the housing market without making it more difficult for first-time home buyers who, in many instances, will still be impacted by this change. As a result of recent dramatic price increases in the market, most first-time purchasers are obligated to put down more than 20% in order to obtain a mortgage with affordable payments. But, like anything else, only time will tell what the impact of this seemingly small change will be.

Our team has the expertise to help you through the acquisition of your next property from beginning to end. Let us connect you with the right mortgage professional to help you maximize your buying power in this competitive market.

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Rental Payments can be used to build Credit Scores for Canadians

For the past eight years Canadians have had the ability to use mortgage payments to build their credit scores. However, for a large segment of the population — including first time home buyers — building a credit score to qualify for a mortgage can be a challenge since rental payment data has not historically been factored in.

Approximately 33 per cent of Canadians pay rent, which for most is the largest single monthly expense. To date, this information has not been factored into an individual’s credit score due to the burden of collecting the data, but the Landlord Credit Bureau is working hard to change that. They have created a portal where Landlords will upload rental payment data which will be provided directly to Equifax, where Landlords will also benefit from the ability to pull a tenant’s payment history data to determine their creditworthiness.

Although this won’t replace the need to build credit in other ways, it certainly is a step in the right direction to break down barriers to entry in the Canadian housing market.

Are you currently renting and thinking about purchasing your first property? Talk to our team today and let us help you find the best path toward owning your own home.

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