This post will cover a wide range of topics, so hang on. :)
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Teranet-National Bank House Price Index: September 2009
The Canadian index showed another increase month-over-month at 1.3% and while the year-over-year mark is still in negative territory the margin has been shrinking in the past few months:
Canadian home prices in September were down 1.8% from a year earlier, according to the Teranet-National Bank National Composite House Price Index™. It was the tenth consecutive 12-month decline, but the 12-month decline has been diminishing steadily since it peaked at 6.9% in May.
Calgary house prices also increased 1.1% from the previous month. This is down 5.4% from September 2008.
Source: www.housepriceindex.ca
Source: www.housepriceindex.ca
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Mortgages in Arrears
Residential mortgages in arrears for Alberta crept up to 0.67% in September, compared to 0.65% in August. In September of last year, that number was at 0.34%.
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In Canada overall, the % of mortgages in arrears held steady from the previous month at 0.43%
The data compiled by the CBA includes data from BMO, CIBC, HSBC Bank Canada, National Bank of Canada, RBC Royal Bank, Scotiabank, and TD Canada Trust. Mortgages in arrears means 3 months or more.
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RBC Affordability Index
The string of significant improvements in housing affordability in Canada finally came to an end in the third quarter. RBC’s affordability measures rose at the national level for the first time in six quarters for all housing types, but are still down markedly from a year ago.
The recovery in Calgary’s housing market has traction, but momentum remains relatively restrained. The pace of resale activity has even moderated a little in recent months after surging from the 14-year low reached late last year and early this year. The significant re-balancing of market conditions since the trough earlier this year – with stronger resales depleting the previous glut in properties offered for sale – has, nonetheless, succeeded in stabilizing prices and even setting a modest firming trend.Reasonable affordability levels are now prevailing following the substantial improvement since late-2007, which is a key factor supporting demand. However, persisting tough economic conditions in Calgary – with the unemployment rate hovering around a 13-year high since mid-summer – is casting a shadow. In the third quarter, the RBC affordability measures for Calgary rose between 0.3 and 2.0 percentage points, generally representing the first increases in almost two years.
Source: RBC
- New polygon tool allows you to draw on map to define your search area
- Compare View – view properties side by side to easily compare features
- Neighborhood demographics – age, income, etc.
- Mobile beta version of REALTOR.CA launching on Friday
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3 responses so far ↓
Mike Fotiou // November 26, 2009 at 11:29 pm
Robert McLister from Canadian Mortgage Trends interviewed on BNN yesterday: view clip
I read their blog regularly – great information, very knowledgeable.
The clip has a good discussion regarding fixed/variable rates, planning ahead for higher rates and risk tolerance, and what to look for in a mortgage.
However, near the beginning at around 0:45, there’s a little talk about a housing bubble. 47% of mortgages for new purchases in the past year had amortizations longer than 25 years, and of those 47%, 60% were for 35 and 40 year mortgages.
There was one part where I thought host Andrew Bell was quite lenient and didn’t push the issue.
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Robert: “Do 35 year amortizations, are they causing a problem right now? They’re definitely leading to some type of inflated price amount, I don’t know what that is, but it’s something. But they’re going be priced in at some point just like the 5% down programs where after they came out in 1998. ”
Andrew: “What do you mean priced in?”
Robert: “Priced into the market, into home prices. So it’s gonna get to a point where, ok, there’s a lot of people using 35 year ams to buy a house. It’s going to get to a point where that’s reflected in home prices. Then you’re going to have to ask yourself, ok well do I want to take 35 year amortizations away from the market at this point after prices have already gone up.”
Andrew: “And that obviously could torpedo the market or make it deflate-”
Robert: “It would make it a lot harder to buy a home for some people.”
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What do you think?
Do you think 35 year amortizations will be taken away if this trend continues? If they were taken away, would the market deflate or would it just result in less people being able to purchase homes?
Vladimir Levin // November 27, 2009 at 11:14 am
I suspect there would be a decline in prices. The big question is, of the people who are taking 35 year mortgages, how many of them wouldn’t buy the house otherwise. I do know some people who are in long-term mortgages simply because they don’t want to take cash out of their investments…
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Mike Fotiou says: It’s true, not everyone that utilizes extended amortizations do so out of necessity to qualify or afford payments. But consider how much interest is payable for an extra 10-15 years of carrying a mortgage:
Example: A $400,000 mortgage, with a 25 year amortization, with a 5% interest rate (across the entire 25 years, of course not likely, but for purposes of simplification) paid weekly would result in total interest charges of $293,446.
The same scenario above, but with a 35 year amortization would result in total interest of $434,079.
Cut it back to a 20 year amortization, and total interest would be $227,626.
Jimmy // November 27, 2009 at 6:29 pm
I think when rates get low there is a natural push to get a longer amortization. Like vlad says, a rational investor can get a better return on many investments than the current interest rates so why not take advantage of the cheap money. Of course we’ll find out who gets caught on this only when rates increase..
With 10 year bonds back to 3.2 ish that’s still aways off. It made me laugh to hear that Dubai is defaulting so people are rushing to the US dollar this morning