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Firm Real Estate Market Positive Sign
Entry level purchasers are now the engine driving home buying activity in almost every major centre throughout the country and Grand Falls-Windsor is no exception.
Real estate companies in Grand Falls-Windsor say despite the collapse of the forest products industry in central Newfoundland it's still a good time to buy or sell a home.
Improved affordability is prompting many first time buyers to get off the fence, out of rentals and into the housing market.
While a sense of caution prevails because of the world wide economic recession and the closure of the AbitibiBowater paper mill, low lending rates are presenting opportunities that have not been seen in a while.
John Locke of Royal Lepage Generation Realty says it's an excellent time to look at a new home.
"A healthy mix of first time buyers and retirees returning from Alberta are driving the housing market right now," he said. "While it's hard to predict where the market is heading new home sales are hopefully going to remain strong. While real estate generally is not as brisk as say the past two years it's not all that bad-not yet."
Mr. Locke points out that the past two years were probably above average in this region and while he admits it's probably too early to tell where things are going this year low interest rates are a big help.
"You can probably pick up a mortgage for as low as three per cent variable or lock in for five years at five and a half per cent. That's a big help, especially for first time homebuyers. I'm optimistic, despite the economy, that we will still be on track for a healthy summer market," he said.
Mr. Locke, who has over 15 years experience in real estate, says the market is still relatively solid despite the doom and gloom. He says there appears to be a strong level of consumer confidence despite the mill closure.
A real estate veteran for over 20 years, Doug Barnes of Home Finders Real Estate in Grand Falls-Windsor says the negativity of the local economy certainly hasn't impacted the real estate market here.
While he admits there are less overall transactions year to date it's still a good time to sell or purchase a home.
"The bottom certainly hasn't fallen out of the real estate market in Grand Falls-Windsor," he said. "There are a lot of out of the region inquiries, which is a positive sign. There is even a waiting list for cottage properties. While it could change overnight, so far the market is holding firm."
Mr. Barnes said that with low interest rates expected to remain reasonable, that could be what is needed to keep the housing market here solid for the immediate future. He says there is also a strong interest in land sales that indicates there are people who believe Grand Falls-Windsor has growth potential.
"It doesn't appear to be as strong as previous years, but the recession hasn't turned everything upside down either. I'm optimistic we will see positive growth by year end," he said.
Dorothy Woodd of Exit Reality On The Rock said the market isn't weak by any means. In fact, she said it's still relatively strong given the local economy has taken a severe hit with the closure of the paper mill.
"We're finding that towns that have access to services such as hospitals, schools and even close proximity to airports tend to do well. There is interest from first time buyers and seniors which is also a good sign."
The only negative, said Ms. Woodd, is that first time homebuyers still need the down payment needed to purchase a home.
"That turns out to be a catch-22 situation for potential buyers," she said. "If their employment situation is uncertain in any way it's hard to make that down payment and will tend to drive them away from a new home purchase. We will just have to wait and see what happens with the economy."
Robert MacDonald of Re/Max Real Estate in Grand Falls-Windsor declined an interview, but he told the Advertiser it's hard to speculate in light of the regional economy and the closure of the paper mill here.
An Atlantic Canada Market Trend Report published by Re/Max, however, says Alberta's red hot economy the last few years is still fuelling demand and while it has cooled considerably the spill over effect continues to drive new home purchases throughout Atlantic Canada. The report says Grand Falls-Windsor, Corner Brook and St. John's led the Newfoundland region in both unit sales and average price with the number of homes sold up close to 18 per cent and average price up almost 15 per cent.
That was over a year ago, and while things have changed, there is a feeling of confidence real estate sales will hold their own as the economy adjusts itself.
Michael Polzler, executive vice president and regional director Re/Max Ontario-Atlantic Canada said the tremendous growth opportunities in Alberta that allows commuting to and from the east coast have served to further strengthen home buying activity in the region. Just how long that trend will continue, however, isn't known.
"While the current economic crisis has caused some first time buyers to either take it slowly or apply the brakes, home ownership remains a top priority for those who are able to take advantage of reduced carrying costs, rock bottom interest rates and lower house prices," he said.
In a March 11, 2009 report released by Re/Max, Polzler said while the year got off to a slow start, February home sales were ahead of those reported in January of this year. The upward trend, the report said, is expected to continue as more first time buyers enter the market despite the weak economy.
If that trend continues it could spell good news for Grand Falls-Windsor as it attempts to recover from the blow left by AbitibiBowater.
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Housing starts to improve in 2010
Housing starts are expected to decline this year but recovery slightly in 2010 as the Canadian economy begins to recover, according to Canada Mortgage and Housing Corporation.The federal agency said Tuesday that new construction should fall to 141,900 units in 2009, but increase to 150,300 units for 2010,
"The decline in housing starts in 2009 can be attributed to several factors, including the current economic climate, increased competition from the existing home market, and the impact of strong house price growth between 2002 and 2007," Bob Dugan, CMHC's chief economist, said in agency's second-quarter outlook.
"However, housing market activity will begin to strengthen in 2010 as the Canadian economy recovers, bringing housing starts more in line with demographic fundamentals over the forecast period."
Meanwhile, CMHC said existing home sales would fall to 357,800 units in 2009 from 433,990 the previous year but rise to 386,100 units in 2010.
The average sales price is expected to decline to $283,100 in this year before stabilizing in 2010, it said.
Provincial housing starts (2008 / 2009 / 2010):
Newfoundland and Labrador 3,261 / 2,675 / 2,975
Prince Edward Island 712 / 575 / 625
Nova Scotia 3,982 / 3,100 / 3,425
New Brunswick 4,274 / 3,475 / 3,650
Quebec 47,901 / 40,000 / 41,350
Ontario 75,076 / 51,325 / 52,300
Manitoba 5,537 / 3,950 / 4,250
Saskatchewan 6,828 / 3,400 / 3,850
Alberta 29,164 / 13,700 / 16,200
British Columbia 34,321 / 19,725 / 21,700
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Low Interest-Rate Strategy
When interest rates are low - particularly now with the Bank of Canada benchmark rate pegged at an historic low of .25 basis points - many people automatically think they should refinance their mortgage.
This isn't surprising since a home is the largest purchase that most people ever make in their lives, usually with mostly with borrowed money.This may or may not be a good strategy.Whether you should refinance your mortgage in a period of low interest rates depends on how much it will cost you to break your existing mortgage compared to how much you will save in interest payments. If you break an existing mortgage you will have to pay the greater of three month's interest or the interest rate differential (IRD).An IRD is a penalty for early prepayment of all or part of a mortgage outside of its normal prepayment terms. Usually this is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.For example, if you had a $100,000 mortgage at nine per cent interest rate with 24 months remaining and wanted to renegotiate your mortgage at 6.5 per cent for 24 months, your IRD would be $5,000 ($100,000 x 2.5% $2,500 x 2 years $5,000).It may only make sense to refinance your mortgage if the interest rate savings over the remaining life of your mortgage exceeded the value of the IRD."The re-financing decision depends on the cost of breaking the mortgage versus how much you save," says Patricia Lovett-Reid, Senior Vice-President of TD Waterhouse. "You may find you should just stay where you are."Another strategy is to take a variable rate mortgage. If interest rates go down and you keep your mortgage payments the same, you will be paying off more of your principal with each payment and will pay down your mortgage faster.Debt is a destroyer of wealth in good times and bad, and eliminating it is a good strategy.Borrowing to invest when interest rates are low is another strategy. This is called leveraging.Leveraging has a tax advantage because you can write off the interest on the money you borrow to invest.If your investments perform well and earn a return high enough to make a profit, leveraging has great appeal. But there is some risk if your investments go down. Just as your gains are magnified with leveraging, so are your losses. "Investors should use leveraging prudently as part of an overall balanced financial plan," says Lovett-Reid.Low interest rates can affect your investment portfolio as well. Some stocks are more sensitive to interest rates than others. Lower interest rates make companies with high debt loads, such as utilities, more attractive, as well as automobile manufacturers and real estate companies, whose products become cheaper for consumers to buy when rates are low.Low rates also are affecting fixed income securities such as Guaranteed Investment Certificates (GICs), which have been yielding 1.25 per cent for one year and 2.75 per cent for three years. Lovett-Reid suggests investors who are looking for higher returns should consider high quality, investment grade corporate bonds, which are yielding around 4.50 per cent for a three-year maturity.Another way to build wealth in a low interest rate environment is simply to spend less. Review your spending and eliminate what is unnecessary. It's more money in your pocket.
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Refinance Mortgage Lenders
Finding a good lender to refinance your mortgage can be almost as important a decision as the actual mortgage you choose. In order to make a wise selection of a refinancing lender you should do four things:
1. Know the objective of your mortgage refinance
Do you want to lower your current interest rate? Generally, refinancing your mortgage can be profitable if your current mortgage is 2% higher than the prevailing rates. Do you want to move from an adjustable rate mortgage (ARM) to a fixed rate mortgage?
If interest rates are creeping up this may be a good idea. Do you want to shorten the term of your mortgage to accumulate value more quickly? Do you want to take cash out of your home’s equity? The mortgage refinance lender you pick will want to know your reason for refinancing so that the appropriate mortgage product can be chosen. You will also want to be aware of your credit score and the terms of your current mortgage.
2. Know the different types of mortgage refinance lenders and the different types of mortgage refinance products that are available
Just like when your home’s mortgage was originally financed, there are a variety of lenders who can refinance your mortgage: Banks, credit unions, mortgage companies. There are also brokers who will find a variety of lenders for you. You should be aware, however, that unless specifically contracted to do so a mortgage broker does not have to find the mortgage refinance package that might be the best for you.
Refresh your knowledge of the mortgage financing vocabulary. Be fluent with terms such as interest rate, point and prepayment penalties. Also, most newspapers publish a daily listing of current interest rates for different types of mortgages. Become familiar with these listings and check them on a daily basis.
3. Shop around and find several different lenders to refinance your mortgage
The market for refinancing mortgages has become so crowded and competitive that it is fairly easy to find several lenders to compare. You might use a broker. The newspaper and the yellow pages are also good places to start. If you are comfortable negotiating the Internet, it is an excellent resource. There are many services online which will perform a preliminary search for a lender. Your current mortgage lender should also be included in this group.
4. Negotiate the mortgage refinance loan that suits your needs
Many times the compensation a lender makes on refinancing a mortgage is dependent on the terms of the mortgage so it is up to you to make sure that the loan received is the most advantageous for you.
You might want to investigate mortgage refinance lenders who offer no closing cost loans or free appraisals. It is important to make sure that you are comparing like products. In order to do this, have your lender present proposals in writing and require ample time to compare the different offers.
Prepare a list of the features of each loan. The type of loan, interest rate, points, prepayment penalties, closing costs are a few of the loan elements which should be compared. Check the rate you are being offered against the rates from the most current newspaper listings. The more organized, thorough and knowledgeable you are, the better your decision will be.
Deciding to refinance your mortgage is an important choice that should not be made lightly. Know why you are doing it. Know the possibilities for refinancing lenders and products that are available. Be willing to shop amongst the different lenders and to negotiate a beneficial deal. If you follow these steps, finding a good mortgage refinance lender will be much easier.
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Want To Buy A Condo
In a buyer's market, if you can't go it alone, find a good friend. The results of the 2009 TD Canada Trust Condo Poll show that the perceptions of the condo market have improved significantly over 2008 with 44% of urban Canadians believing the current conditions have improved for buying a condo as an investment (versus 21% in 2008).
Why? Respondents say it is a buyer's market and condo prices are declining. If they can't afford to buy one on their own, 43% are willing to consider a joint purchase with a friend or relative to make the condo purchase possible.
"For Canadians looking to purchase their first residence or make a long-term investment, condos offer a lower maintenance and lower-cost alternative to houses," says Joan Dal Bianco, Vice President, Real Estate Secured Lending, TD Canada Trust. "This is a good time to explore a condo purchase given that mortgage rates are very attractive right now and many condos have dropped significantly in price."WHY BUY A CONDO?
The 2009 TD Canada Trust Condo Poll showed that the top reason urban Canadians would consider a condo purchase is because condos require less maintenance than houses (39%). The second most popular reason is that condos are more affordable than houses (21%). Not surprisingly, in Vancouver, where housing costs have traditionally been high, the responses differed from the rest of Canada, with 35% of Vancouver respondents citing affordability as the top reason for a condo purchase.
HOW MUCH ARE CANADIANS WILLING TO SPEND?
While 44% of survey respondents believe the current conditions for buying an investment condo are better than a year ago, versus just 21% agreeing with that statement in 2008, the amount Canadians are willing to spend has remained consistent. For a two bedroom condo, 82% say that they would be willing to pay less than $400k (compared to 84% in 2008). Prospective condo buyers continue to want to keep their costs low with 83% saying they would pay less than $400 per month in condo fees (compared to 84% in 2008).
"I imagine there are many people who believed just a year ago that they would not be able to get in to the housing market -- and now current market conditions are allowing them to reconsider their options," says Dal Bianco. "Low interest rates, affordability, the range of condo options and amenities make a condo an attractive purchase for many Canadians."
WHAT DO CANADIANS WANT?
Ninety-seven per cent of survey respondents chose low condo fees as their top condo feature or amenity, followed closely by good security at 96%. An energy efficient building is also important (93%), as is attractive design (95%). A brand new condo climbed the list of important features in 2009 with 58% selecting it as very or somewhat important compared to 45% selecting it in 2008.
TD CANADA TRUST CONDO POLL - OTHER FINDINGS
- Parking is a driving force in deciding whether or not to purchase a
particular condominium. Calgarians were most likely to not want to
purchase a particular condominium because there is no parking (87%
versus 75% nationally). Torontonians were the least concerned about
parking (72%)
- Vancouver residents are more willing to raise a family in a
condominium (43%) while residents of Montreal and Halifax are least
likely to consider a condo as a family option (24% and 26%
respectively)
- Those in Halifax are more likely than other urban Canadians to
purchase a condominium because they are approaching retirement (24%
versus 17% nationally)
- Vancouver and Calgary residents are most likely to purchase a
condominium for the reason that they are more affordable (35% and 23%
respectively). People in Halifax are least likely to purchase a condo
for this reason (6%)
- Montrealers are willing to pay the least in condo fees with 60%
willing to pay less than $200 in monthly condominium fees.
Torontonians will pay the most in monthly condominium fees with 72%
willing to pay more than $200 a month
- Residents of Calgary, Toronto and Vancouver are most likely to
consider owning a condo as an investment (that is not their primary
residence) and residents of Montreal and Halifax are least likely
ABOUT THE 2009 TD CANADA TRUST CONDO POLLThe 2009 TD Canada Trust Condo Poll was conducted through interviews with 200 adult Canadians in each of Greater Vancouver, Calgary, Greater Toronto Area, Metropolitan Montreal and Halifax, to understand condominium choices among residents in Canada's urban centres. The survey was conducted by Angus Reid Strategies between March 30 and April 7, 2009. The sample size includes 1,000 men and women.
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