In short and not from an economists mouth....here's what buyers are faced with.
Do you lock in or do you stay with variable rate mortgages with tempting low prime rates.
Over the last many years emergency rates have made variable products much more attractive and even with the heighetned risk attached to variable products, historically holders of these mortgages have fared better then their fixed counterparts.
There are arguements that this may change moving forward. Its pretty certain the the government is going to be increasing short terms rates which affect variable products. Interestingly in the wake of these prime rate increases, the banks borrowing rates have been falling likely due to the avialbility of credit and the desire for Canadian banks to lend money as oppose to a few years ago. With that, though prime rates are increasing, some variable rate mortgages are still priced below prime.
On the other end, fixed rates are being pushed down according to the yield curve. Why? Likely, consumer confidence and difficulites in the U.S. and the flocking of many investors to safe havens of government bonds even with low yields.
Investors puchars mortgage securities to get returns. These vehicles carry greater default risk the a similar comparable 5 year bond. So if 5 year bonds are offering low yields, there is room for fixed 5 yr mortgages to stay low for a period and potentially move lower so long as investors in these products get a premium return relative to the spread theyd see on an investment in a 5 years fixed gvt bond.
So right about now, you and your mortgage holder may want to discuss what option suits you best. Theyll want too review your risk appetitie, time horizon for any other investments coming due or the chances that you'll have excessive cash coming to you soon to pay down a closed vs open mortgage (both carry diff weightings). If your advisor believes a double dip is inevtiable then they may feel that deflation is a concern and variable rates have further to dip.
Anyway, I like venturing out of my comfort zone every now and then. I'm pretty confident the above is sound but if you know better, write me and teach me. I'm just a realtor....with an MBA.
The inventory is low. We're 20% off sales volumes from last June. It's a slow summer but september tratditionally ramps up. So if you're contemplating getting into the market---the balanced market is always a "fair" time to shop.
If you don't have an agent and wish to learn more--pick my brain and let's chat anytime.
My best
http://www.TheSmithsBuyAHouse.com
Wednesday, July 28, 2010
Tuesday, July 20, 2010
MLS disclosure and buyer's chief complaints in Toronto
Over the years the following seem to create frustration for buyers when they're focussed on listing information readily available before they see a property:
1. Central Air Conditioning-"yes". Older homes with boilers (water heated) often have a wall mounted a/c unit in the house (or 2). This often get ticked off as "central air conditioning" though it's not really a central air conditioner. FYI...a house with a water boiler cannot run a central air conditioner. If the owners have upgraded and spent a good amount of money, there may be what is known as a "space pac" which is an air conditioning method that begins in the attic and runs thru piping from room to room.
2. Mutual driveway listing with 1 detached garage. Note, in most older homes, the mutual drives are so tight that most of today's autos won't fit. So the garage is nothing more then a storage facility---which is fine so long as you go in knowing that it's not going to house your car.
3. Pad parking spots-MLS rules are becoming stricter around agent's disclosing that the parking spot in front of the house is "not" legal. Often there will be a badge displayed on site that shows that the spot is registered with the city.
4. Transferance of pad parking--this requires the new Buyer to actually reapply for the pad park. Another means for the city to form revenue. Note, this must be done.
5. Number of bedrooms--a house is noted as a 3 plus 1. Often this means that there are 3 bedrooms on the upper floor(s) of the home and an additional room in the basement. Sometimes the room in the basement has neither a window nor a closet. It's a glorified closet.
6. Partly finished basement--most of the time you can assume this means an unfinished basement and budget to do the whole basement. Sometimes the basement is completely unfinished and in the back there is a laundry area or maybe a couch with an ikea rug on top of the poured concrete (we see this in newer homes quite a bit as the owners wait the year plus for the foundation to level before finishing).
7. No mention of asbestos. Asbestos is no where near as scary as it has been made out to be. It's often used above boilers to wrap the piping to insulate the water and keep it warmed. So long as the asbestos is not disturbed or "encapsulated" (looks like a white bandage around pipe). Sellers to date do not have to disclose the existance of asbestos. As a prospective home buyer it's of use for you to know that it exists, espectially if you were planning major renos, you'd want certified people to handle the matter.
8. Property Tax quoted on MLS. It may seem low. If the house has had a recent addition done the city may not be aware of it and is assessing house off the existing structure from 2008 assessment date. Be sure to know. Also taxes are increasing until 2012 each year by the difference of the 2008 assessed value and the prior one.
9. Pets permitted in condos---you'll want to make sure if you have a pet that you get your agent to do some digging here for sure. Some agents will say "yes" under the condo listing and it may turn out to be a "no" OR the corporation of the condo may have restrictions as to what size pets permitted. Also, be sure to verify what is included under the monthly maintenance fee. Some times agent's tick off the wrong boxes and this will most certainly affect your monthly budgeting (especially first time buyers).
10. GST/HST when buying a new home. The agreement should always read that GST/HST is in addition to the purchase price. But, often the HST will be buried in the price you pay. You'll want to know for potential rebate purposes. I will defer to the accountants and lawyers here. Just bringing up the issue.
There are countless other areas of confusion for Buyers. As I continually say in these blogs...stay informed and hire someone who truly has your best interests covered.
Thanks-
http://www.TheSmithsBuyAHouse.com
1. Central Air Conditioning-"yes". Older homes with boilers (water heated) often have a wall mounted a/c unit in the house (or 2). This often get ticked off as "central air conditioning" though it's not really a central air conditioner. FYI...a house with a water boiler cannot run a central air conditioner. If the owners have upgraded and spent a good amount of money, there may be what is known as a "space pac" which is an air conditioning method that begins in the attic and runs thru piping from room to room.
2. Mutual driveway listing with 1 detached garage. Note, in most older homes, the mutual drives are so tight that most of today's autos won't fit. So the garage is nothing more then a storage facility---which is fine so long as you go in knowing that it's not going to house your car.
3. Pad parking spots-MLS rules are becoming stricter around agent's disclosing that the parking spot in front of the house is "not" legal. Often there will be a badge displayed on site that shows that the spot is registered with the city.
4. Transferance of pad parking--this requires the new Buyer to actually reapply for the pad park. Another means for the city to form revenue. Note, this must be done.
5. Number of bedrooms--a house is noted as a 3 plus 1. Often this means that there are 3 bedrooms on the upper floor(s) of the home and an additional room in the basement. Sometimes the room in the basement has neither a window nor a closet. It's a glorified closet.
6. Partly finished basement--most of the time you can assume this means an unfinished basement and budget to do the whole basement. Sometimes the basement is completely unfinished and in the back there is a laundry area or maybe a couch with an ikea rug on top of the poured concrete (we see this in newer homes quite a bit as the owners wait the year plus for the foundation to level before finishing).
7. No mention of asbestos. Asbestos is no where near as scary as it has been made out to be. It's often used above boilers to wrap the piping to insulate the water and keep it warmed. So long as the asbestos is not disturbed or "encapsulated" (looks like a white bandage around pipe). Sellers to date do not have to disclose the existance of asbestos. As a prospective home buyer it's of use for you to know that it exists, espectially if you were planning major renos, you'd want certified people to handle the matter.
8. Property Tax quoted on MLS. It may seem low. If the house has had a recent addition done the city may not be aware of it and is assessing house off the existing structure from 2008 assessment date. Be sure to know. Also taxes are increasing until 2012 each year by the difference of the 2008 assessed value and the prior one.
9. Pets permitted in condos---you'll want to make sure if you have a pet that you get your agent to do some digging here for sure. Some agents will say "yes" under the condo listing and it may turn out to be a "no" OR the corporation of the condo may have restrictions as to what size pets permitted. Also, be sure to verify what is included under the monthly maintenance fee. Some times agent's tick off the wrong boxes and this will most certainly affect your monthly budgeting (especially first time buyers).
10. GST/HST when buying a new home. The agreement should always read that GST/HST is in addition to the purchase price. But, often the HST will be buried in the price you pay. You'll want to know for potential rebate purposes. I will defer to the accountants and lawyers here. Just bringing up the issue.
There are countless other areas of confusion for Buyers. As I continually say in these blogs...stay informed and hire someone who truly has your best interests covered.
Thanks-
http://www.TheSmithsBuyAHouse.com
Thursday, July 15, 2010
Offer Strategy before you waive condition in Toronto
Here's a scenario...
John and Jill have conditionally purchased a house. Their amazing agent Michael negotiated great terms and the offer is conditional upon the results of a home inspection to the sole and absolute discretion of the buyers.
Let's suppose that the inspection revealed that there was some active water in the basement and upper ceiling in a bedroom due to some minor roof mishap (perhaps the flashing around chimney has come undone).
John and Jill are willing to take the house in "as is condition" based on the inspector advising the couple that the matter isn't a big deal, will likely not worsen in the next 60 days prior to closing and the house has to be transferred in like condition to the way they purchased it.
John and Jill were going to paint anyway. So now they have a little roof work and some ceiling work. All said and done the rest of the house proved to be in good condition. With that they budget aloted for the fixups was approx 1k. This is a very manageable amount for a 0-2 year time frame post inspection.
If the final waiver is to be submitted by 8pm tonite (the waiver removing the final condition) and making this a binding agreement....John and Jill have 3 options.
1. The home inspection is to their sold and abolute discrtion so they can walk
2. The couple may just waive the condition and accept the minor defect and move on
3. The couple's agent can submit an amendment, changing the initial agreement and putting the onus on the seller to repair the roof by closing at sellers expense and offering up all documentation to show it was repaird. The Sellers then can walk from the amendmnet (not agree) or agree to it.
Here's the thing...make the amendment due by 7pm and not the 8pm that the original agreement dies at (the time the waiver is due). Here if the sellers don't agree to play ball and the buyer decides to move forward, after 7pm the deal defaults for the final hour back to the original contract ---the very one that gives the buyuers until 8pm to "waive" the condition and own the house.
This is a small tip but a good one to know. I've got plenty of these tips for you. It's all about staying on top of the game!
http://www.TheSmithsBuyAHouse.com
Cheers-
John and Jill have conditionally purchased a house. Their amazing agent Michael negotiated great terms and the offer is conditional upon the results of a home inspection to the sole and absolute discretion of the buyers.
Let's suppose that the inspection revealed that there was some active water in the basement and upper ceiling in a bedroom due to some minor roof mishap (perhaps the flashing around chimney has come undone).
John and Jill are willing to take the house in "as is condition" based on the inspector advising the couple that the matter isn't a big deal, will likely not worsen in the next 60 days prior to closing and the house has to be transferred in like condition to the way they purchased it.
John and Jill were going to paint anyway. So now they have a little roof work and some ceiling work. All said and done the rest of the house proved to be in good condition. With that they budget aloted for the fixups was approx 1k. This is a very manageable amount for a 0-2 year time frame post inspection.
If the final waiver is to be submitted by 8pm tonite (the waiver removing the final condition) and making this a binding agreement....John and Jill have 3 options.
1. The home inspection is to their sold and abolute discrtion so they can walk
2. The couple may just waive the condition and accept the minor defect and move on
3. The couple's agent can submit an amendment, changing the initial agreement and putting the onus on the seller to repair the roof by closing at sellers expense and offering up all documentation to show it was repaird. The Sellers then can walk from the amendmnet (not agree) or agree to it.
Here's the thing...make the amendment due by 7pm and not the 8pm that the original agreement dies at (the time the waiver is due). Here if the sellers don't agree to play ball and the buyer decides to move forward, after 7pm the deal defaults for the final hour back to the original contract ---the very one that gives the buyuers until 8pm to "waive" the condition and own the house.
This is a small tip but a good one to know. I've got plenty of these tips for you. It's all about staying on top of the game!
http://www.TheSmithsBuyAHouse.com
Cheers-
Monday, July 12, 2010
Buyers Market still depends on basics of supply and demand
There's no denying that there's a shift going on out there in the market.
So what does this mean?
It means no matter what we always fall back to the basic economics of supply and demand.
Yes, some buyers have had their dreams dashed for a period as they failed to qualify with stricter terms on mortgage.
But, others are noticing that the market has lost some of its competitiveness. Has it though?
Some things to be cognizant of:
1. When there's little supply in a demanded pocket---even in a so called "buyers market", you can still find multiple bids. See http://www.TheSmithsBuyAHouse.com. Look under mutliple bids and strategies.
I've run into a few circumstances of late where the price of homes were still bid up and competition exists. Not April competition, but competition.
2.June to June prices have increased. A buyers market does not neccesitate falling prices. It would be nice
3. New building permits are down, so if there are enough buyers in market then stock of resale (supply) will dictate the competition and interest.
4. Rates are still very low. The big banks all dropped rates last week on closed mortgages.
5.With the recent job #s, it looks pretty certain that the BofC will raise rates. More workers should translate into more demand for assets. If supply is plentiful, the buyer market continues.
6. Know the neighborhoods you're searching in and look at those stats to better understand what a "shift" means for you.
So what does this mean?
It means no matter what we always fall back to the basic economics of supply and demand.
Yes, some buyers have had their dreams dashed for a period as they failed to qualify with stricter terms on mortgage.
But, others are noticing that the market has lost some of its competitiveness. Has it though?
Some things to be cognizant of:
1. When there's little supply in a demanded pocket---even in a so called "buyers market", you can still find multiple bids. See http://www.TheSmithsBuyAHouse.com. Look under mutliple bids and strategies.
I've run into a few circumstances of late where the price of homes were still bid up and competition exists. Not April competition, but competition.
2.June to June prices have increased. A buyers market does not neccesitate falling prices. It would be nice
3. New building permits are down, so if there are enough buyers in market then stock of resale (supply) will dictate the competition and interest.
4. Rates are still very low. The big banks all dropped rates last week on closed mortgages.
5.With the recent job #s, it looks pretty certain that the BofC will raise rates. More workers should translate into more demand for assets. If supply is plentiful, the buyer market continues.
6. Know the neighborhoods you're searching in and look at those stats to better understand what a "shift" means for you.
Wednesday, July 7, 2010
Deposit, Mortgage, Downpayment, Adjustments, Interest--Tracing your Buyer Money Thru the process of buying a home.
Tracing your $$$ as a buyer
When you locate the house you decide to make an offer on, this is what will transpire:
1. If after negotiating an offer is accepted (conditionally or firm), the buyer has 24 hrs to certify a deposit to "hold" the house until closing.
As a benchmark we use 5 percent of the purchase price. In unsteady economies the seller may request more.
Note: if the buyer does not close/make good down the road on bringing the money...the sellers doesn't automatically get the deposit money. It typically would go to court where the seller will sue fore deposit money, plus interest plus damages plus legal fees.
This can also be taken care of outside of court.
The deposit money given at this stage by the buyer sits in an interest bearing account typically with the listing brokerage where it will earn a laughable amount of interest in most cases depending on brokerage.
The deposit money is part of the downpayment--all monies calculated by buyer (outside of land transfer taxes, moving costs, legal fees, adjustments and net of mortgage buyer is taking).
On closing, there may be adjustments. Ex: seller has paid taxes for the month or quarter and buyer owes back some money. These adjustments are taken care of at closing. Also, a buyer may opt for title insurance approx 300-400 dollars as a one time fee.
On the date of closing, the bank will forward the mortgage to the buyers solicitor and the buyer will forward all other monies needed to pay seller.
The buyers solicitor will pay out the sellers solicitor and in return the buyer will earn the keys to their new home.
Commissions are stripped out from purchase price and seller is issued cheque net of all borne expenses.
Hopefully this clarifies when and how your money is spent.
Of course depending on where your downpayment is coming from ie RSPs, there are a few further complexities that you're mortgagor will catch you up to speed on.
Today, it was announced that sales in Toronto in June were off nearly 10 percent from last year. The average price of a detached is approx 435k and that the second half of the year we will see a slowdown. Prices may stabilize if new construction stays soft, reducing supply to mostly the resale market.
Cheers-
Michael Gruenstein MBA CSC Sales Representative Re/Max Realtron http://www.TheSmithsBuyAHouse.com http://www.Propertiesinthegta.ca Blog:mgruenstein.blogspot.com O:416.782.8882 C:416.271.2066 mgruenstein@trebnet.com
When you locate the house you decide to make an offer on, this is what will transpire:
1. If after negotiating an offer is accepted (conditionally or firm), the buyer has 24 hrs to certify a deposit to "hold" the house until closing.
As a benchmark we use 5 percent of the purchase price. In unsteady economies the seller may request more.
Note: if the buyer does not close/make good down the road on bringing the money...the sellers doesn't automatically get the deposit money. It typically would go to court where the seller will sue fore deposit money, plus interest plus damages plus legal fees.
This can also be taken care of outside of court.
The deposit money given at this stage by the buyer sits in an interest bearing account typically with the listing brokerage where it will earn a laughable amount of interest in most cases depending on brokerage.
The deposit money is part of the downpayment--all monies calculated by buyer (outside of land transfer taxes, moving costs, legal fees, adjustments and net of mortgage buyer is taking).
On closing, there may be adjustments. Ex: seller has paid taxes for the month or quarter and buyer owes back some money. These adjustments are taken care of at closing. Also, a buyer may opt for title insurance approx 300-400 dollars as a one time fee.
On the date of closing, the bank will forward the mortgage to the buyers solicitor and the buyer will forward all other monies needed to pay seller.
The buyers solicitor will pay out the sellers solicitor and in return the buyer will earn the keys to their new home.
Commissions are stripped out from purchase price and seller is issued cheque net of all borne expenses.
Hopefully this clarifies when and how your money is spent.
Of course depending on where your downpayment is coming from ie RSPs, there are a few further complexities that you're mortgagor will catch you up to speed on.
Today, it was announced that sales in Toronto in June were off nearly 10 percent from last year. The average price of a detached is approx 435k and that the second half of the year we will see a slowdown. Prices may stabilize if new construction stays soft, reducing supply to mostly the resale market.
Cheers-
Michael Gruenstein MBA CSC Sales Representative Re/Max Realtron http://www.TheSmithsBuyAHouse.com http://www.Propertiesinthegta.ca Blog:mgruenstein.blogspot.com O:416.782.8882 C:416.271.2066 mgruenstein@trebnet.com
Monday, July 5, 2010
GTA Housing Market 2015
I'm curious how the housing market will shape up in say 5 years from today?
We've enacted the HST and made some stringent qualifications for first time buyers.
That group used to walk into the bank, apply at a variable rate based off prime rate (very low as a percentage), ammortize the heck out of the mortgage, put 5 percent down and go house shopping.
Now, we have the same group qualifying at the 5 year posted rate as of April. This distinction has surely dropped many buyers first time buyers out of the market.
One could argue that that's not a bad thing. After all, with emergency rate loans and giving these guys mortgages...it could set up for a tough run when rates go up during their 5 year term (most popular term). And unless their incomes go up, it takes a bigger bite of household debt (which is already at all time highs here in Canada).
My concern is that I've always seen the first time buyer as the foundation of the pyramid. Less then 1 percent own 1 million plus homes. The bread and butter or sweet spot is 200-450k (just under and just above the average price for a detached in the GTA). In the past, we've seen first time buyers enter the market and begin the process of leveraging and increasing their networth. They get the keys to their basic semi that they paid 400k for. They do some renos; follow the rule of location and in an up market they see the value of the larger detached in area increase year over year by double digits thus pulling the value of their smaller home up by leaps and bounds. 5 years down the road, their semi has gone from 400k to 650k. Welcome to Avenue and Lawrence and Leaside folks. Now they paid down some of their mortgage and saved a little and their ready to upsize. So the guy sitting with the detached a few doors down is waiting for the semi owner to buy his house.
Taking more buyers out of the market shrinks the size of the buyer pool down the road for the second and third level homes. True, it only takes 1 buyer and theyll be enough one-off buyers out there but we've loved having 16 buyers bid up a house for the better part of the decade. Will the market not be so interesting then? So much damn fun for buyers (I really mean sellers).
Anyway, just a thought. I agree it's important to make sure a buyer can afford a house. So I'm not anti the new regulations. Just, every action seems to have a reaction. With that, buyers who train hard and do their work will be as okay as ever.
Enjoy the heat?
http://www.TheSmithsBuyAHouse.com
We've enacted the HST and made some stringent qualifications for first time buyers.
That group used to walk into the bank, apply at a variable rate based off prime rate (very low as a percentage), ammortize the heck out of the mortgage, put 5 percent down and go house shopping.
Now, we have the same group qualifying at the 5 year posted rate as of April. This distinction has surely dropped many buyers first time buyers out of the market.
One could argue that that's not a bad thing. After all, with emergency rate loans and giving these guys mortgages...it could set up for a tough run when rates go up during their 5 year term (most popular term). And unless their incomes go up, it takes a bigger bite of household debt (which is already at all time highs here in Canada).
My concern is that I've always seen the first time buyer as the foundation of the pyramid. Less then 1 percent own 1 million plus homes. The bread and butter or sweet spot is 200-450k (just under and just above the average price for a detached in the GTA). In the past, we've seen first time buyers enter the market and begin the process of leveraging and increasing their networth. They get the keys to their basic semi that they paid 400k for. They do some renos; follow the rule of location and in an up market they see the value of the larger detached in area increase year over year by double digits thus pulling the value of their smaller home up by leaps and bounds. 5 years down the road, their semi has gone from 400k to 650k. Welcome to Avenue and Lawrence and Leaside folks. Now they paid down some of their mortgage and saved a little and their ready to upsize. So the guy sitting with the detached a few doors down is waiting for the semi owner to buy his house.
Taking more buyers out of the market shrinks the size of the buyer pool down the road for the second and third level homes. True, it only takes 1 buyer and theyll be enough one-off buyers out there but we've loved having 16 buyers bid up a house for the better part of the decade. Will the market not be so interesting then? So much damn fun for buyers (I really mean sellers).
Anyway, just a thought. I agree it's important to make sure a buyer can afford a house. So I'm not anti the new regulations. Just, every action seems to have a reaction. With that, buyers who train hard and do their work will be as okay as ever.
Enjoy the heat?
http://www.TheSmithsBuyAHouse.com
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