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Maria Mak - Burnaby Real Estate Agents - Mortgage rates slightly higher in 2015

    

      

Highlights Mortgage rates modestly higher in 2015 Robust growth in the Canadian economy tested by falling oil prices Bank of Canada likely on hold until late 2015

Mortgage rate outlook 

Long-term interest rates have remained near their lowest levels of the year for most the second half of 2014, even in the face of an improved outlook for economic growth and higher inflation. The five-year Government of Canada bond yield, the benchmark for the five-year mortgage-qualifying rate, has trended at or below 1.5 per cent for much of the year. Indeed, for the past several years interest rates have frustrated forecasters predicting an imminent normalization.
Persistently low long-term bond yields can be partially explained by factors such as an aging population and associated slowing of potential economic growth as well as increased demand by foreign investors for safe Canadian assets. Ultimately, what may be keeping long-term bond yields and mortgages rates near historic lows is a lack of confidence in the sustainability of economic recovery. If so, an important catalyst for an eventual normalization of interest rates is some signal to markets that the US economy has finally healed. The best candidate for such a signal is the US Federal Reserve tightening monetary policy following six years holding the federal funds rate at zero.

Most forecasters have penciled in a Fed rate hike in the spring of 2015, with the Bank of Canada following later in the fall. However, there may be ample reasons for the Fed to stay on hold in 2015. First, US economic growth forecasts have been notoriously optimistic since the end of the Global Financial Crisis. Indeed, while the US economy is currently posting its strongest growth in years, global economic growth seems to be deteriorating as Europe struggles and China slows. Any disruption in global financial markets stemming from those economies would likely delay a move by the Fed. Moreover, inflation in the United States is already running well below the Fed’s target of 2 per cent and should track lower due to falling energy prices.
That said, our baseline forecast remains tilted toward a probable rate increase by both the Fed and the Bank of Canada in 2015. Long-term interest rates will likely move modestly higher beginning in early to mid-2015 in anticipation of monetary tightening, which should put some upward pressure on mortgage rates. We expect that the five-year fixed rate will average 5.15 per cent in 2015 and the one-year rate will average 3.29 per cent.

Economic outlook

The Canadian economy was hammered by severe winter weather to start the year but has since posted average quarterly growth of over 3 per cent. Indeed, the outlook for growth in the Canadian economy is as bright as it has been in years. That said, the recent dramatic downturn in oil prices will very likely trim growth in coming quarters.

While lower prices for gas and other energy goods may be seen as positive, untangling the macroeconomic consequences of declining oil prices can be complex for an oil-producing country like Canada. The Canadian dollar is implicitly tethered to the price of oil, and has trended lower alongside oil prices. That decline will act as a shock absorber, boosting Canadian export competiveness. On the downside, dramatically lower oil prices will be felt immediately though Canada’s terms of trade as the value of Canadian exports is dragged lower by energy goods.
If low oil prices persist, investment, output and employment in the Canadian oil and gas sector could be in jeopardy as well. Fortunately, other parts of the Canadian economy continue to prosper. In particular, momentum in business investment and non-energy exports has been growing and should provide a decent handoff to 2015. Overall, we anticipate that the Canadian economy will match 2014’s estimated growth of 2.4 per cent next year before decelerating slightly to 2.3 per cent in 2016.

Interest rate outlook

In its most recent interest rate decision, the Bank of Canada emphasized that the Canadian economy is as healthy as it has been in many years. Faster than expected economic growth in 2014 has helped close much of the Canadian output gap, and the economy is on track to return to its full employment level faster than previously expected.
With inflation trending above 2 per cent and the economy accelerating, we would normally expect to see some tightening of interest rates from the Bank of Canada. However, the Bank remains reticent. One reason is that although the Canadian unemployment rate has fallen to its lowest level in six years, both total hours worked and average wages have not registered the type of gains we would normally see in a thriving economy. Indeed, the Bank of Canada cited excess slack in labour markets as the key offset to an otherwise very healthy economy.

Additionally, the steep decline in the price of oil, if sustained, will be a significant headwind for both growth and inflation next year. Our model simulations show that a sustained drop in the price of oil will delay the closing of the Canadian output gap by several months. Given these factors, if the Bank does decide to raise its overnight rate in 2015, we expect that it would not occur until the later part of 2015.

Copyright British Columbia Real Estate Association. Reprinted with permission.

 

© 2008-2014 Real Estate Board of Greater Vancouver

 

 

*Maria Mak. Burnaby Real Estate Agents - CMHC Housing Outlook Conference: Steady as she goes for Greater Vancouver housing market

National, provincial and local economists from the Canada Mortgage and Housing Corporation (CMHC) agree: the real estate market in British Columbia, and specifically in the Lower Mainland, will remain strong and steady into 2016. That was the overall message at their 2014 Housing Outlook Conference. 

Reasons why

Presenters cited several reasons for that housing market stability. Chief Economist Bob Dugan noted that Canada’s economy should continue to improve, which in turn will continue to attract immigrants and new residents to BC. He also noted that CMHC doesn’t expect any interest or mortgage rate increases until late in 2015.

Shifting demographics will also play a role in this stability moving forward. As the baby boomer generation continues to age, we’ll see more senior-led households and more single owners in the market. They’ll either be looking to age in place (creating more jobs for home renovations) or move to smaller townhomes or condos (keeping the detached resale stock buoyant while keeping the demand for new condos and townhomes high).

Total sales in the region are forecasted to reach 32,800 this year, then slip slightly to 32,250 sales in 2015 and to 31,600 in 2016.

Senior Market Analyst Robyn Adamache pointed out that while no definitive data exists on the influence of foreign buyers on our local market, trend data can be drawn from REBGV’s monthly poll to REALTORS® who complete a sale each month. Our data indicates that foreign buyers make up approximately three per cent of home sales in any given month.

Housing affordability - steady supply

Keynote speaker and REBGV member Bob Rennie weighed in on the affordability issue. When you factor out the top 20 per cent of sales, he said, average prices become much more reasonable. Using this method, the average price of a detached home drops from the one million dollar range to around $670,000, while condos drop from $470,000 to $316,000.

He also stressed the need to assess and review zoning policies to create more opportunities for density. Today’s buyers are attracted to ‘energy centres’ where amenities like shopping, transit and schools are easily accessible. Rennie pointed specifically to strong condo sales in areas like Metrotown and the forthcoming Marine Gateway project. Keeping this supply steady while an estimated 40,000 new residents move to BC each year is key to keeping affordability in check.

“Because without supply, there’s no cure for affordability,” said Rennie.

 

Maria Mak- Real Estate Agents - how to buy a home before it's built : Pre-Sale Tips

*How to Buy a Home Before It's Built: Pre-Sale Tips*

Thinking of buying a pre-sale condo? You might be tempted by the tantalizing array of pre-sale development units available in the Lower Mainland, some with attractive incentives. (Just check out our Developments section!)

Here's how it works. When you agree to buy a pre-sale unit, you're actually entering into a contract for the right to receiveand an obligation to pay fora finished condo at a set point in the future. This forms the basis for some of the unique opportunities and risks that go along with buying pre-sale.

Advantages

There are definitely advantages to buying pre-sale. You can pay just a small deposit now, save money while it's being built, then pay the balance of your deposit when you move in. Or you can pay your deposit in bite-sized increments during the building process.

You can also customize design elements, finishes and even your layout. Because you're buying a brand-new home, you won't have to worry about doing costly repairs for at least another decade. And your unit will be covered under the BC government's 2-5-10 Year Home Warranty Insurance program, so that if something does go wrong, you won't have to pay for it.

Risks

But there are also risks and unique obligations that need to be considered before you sign on the dotted line and hand over your deposit. Here's what you need to know: your rights and responsibilities under the Real Estate Development Marketing Act(REDMA).

Though there are advantages to buying pre-sale in any market, the greatest opportunities arise in a rising or hot real estate market. That's because, by the time you move into your completed condo, it's already worth more than what you agreed to pay for it.

In a softening market, on the other hand, by the time you complete the sale, you might already have lost money. If you're relying on a mortgage, lenders may only cover the market value of the property at the time of completion, leaving you scrambling to raise more cash for the difference.

The mortgage climate can change without warning as well. Many people who purchased before the federal government administered tighter mortgage rules found they no longer qualified for the amount they were pre-approved for by the time they had to pay up.

So what happens if you can't raise the cash you need to complete the sale, or your unit is worth less than what you owe when it's time to pay up? Unless the developer violates the terms of your agreement, you are legally obligated to complete the saleor forfeit your deposit.

Besides market changes, there are other unknowns, from unexpected construction delays to condos that don't get built at all.

So how can you mitigate some of the potential risks?

Lay the groundwork

Long before you're ready to sign anything, find out everything you can about the builder of each development you're considering. Do they have a reputation of building on time? Talk to your Realtor and to homeowners who've purchased from them in the past. And if you're a first-time buyer with a small down payment, consider sticking with pre-sale units that are already close to completion to eliminate some of the unknowns.

Talk to an independent mortgage broker as well, to find out what you can afford and to make sure your credit is in shape before you go in. That way you'll be financially ready.

Review the developer's Disclosure Statement

Before you sign a purchase contract, you have the right to review a Disclosure Statement prepared by the developer, according to Section 21.2 of REDMA. The Disclosure Statement lays out everything you will be buyingincluding proposed and filed bylaws, common property and storage allocations, and descriptions of appliances, furnishing, and finishes.

Under REDMA, it also has to include an estimated construction start and end date, as well as any "material facts" that could "reasonably be expected to affect, the value, price, or use of the development unit or development property."

The developer is obligated to keep you up-to-date on amendments to estimated dates and material facts. This is important because building a new development is a long and complex process, and things often morph as it progresses.

Take time to review the statement carefully and make sure you understand all the terms set out in it. This step is best tackled with an experienced lawyer specializing in residential real estate and, of course, your Realtor (not the developer's).

Check the small print before you sign

Check the Pre-sale Contract

After you've thoroughly reviewed the Disclosure Statement, look over the Pre-sale Contract with a fine toothcomb. Here are a few things to look for:

Deposit Besides the obvious (how much, when it's due, and how it should be paid), look to see who gets the accrued interest during the construction process. It can be either the buyer or developer, and this should be stipulated in the contract. Generally your deposit is held in trust until it becomes part of the purchase price at completion, but REDMA allows the developer to get insurance allowing them to use your deposit in the interim. This should also be stated in the contract.

Forfeiture clause This clause gives the developer the right to claim your deposit if you breach your contract. It usually includes the wording that the deposit will be considered a genuine pre-estimate of damages and not a penalty, giving them a better chance of hanging on to your deposit if you try to back out and end up in court.

Right to terminate the contract Developers may need to walk away from a project for various reasons, including being unable to get skilled trades or permits. The contract will usually outline this right to cancel the project, at which point your deposit plus interest would be returned to you.

Right of rescission The contract will also cover when you can terminate the contract without losing your deposit. Under REDMA s. 21.2, once you sign the pre-sale contract, or a receipt acknowledging you've had time to review the Disclosure Statement (whichever comes later), you are given a 7-day "rescission period" where you can serve written notice to the developer to terminate the contract. Also, if you receive an amended Disclosure Statement outlining material changes to be made to the layout and size of your unit or to the common facility because of the issuance of a building permit, you're entitled to another 7 days to rescind your contract ( REDMA Policy Statement 5).

Allowable unit changes Contracts usually give the builder the right to change the size, certain design features, or substitute comparable materials. The contract should also outline any adjustments to the purchase price that would be made if the finished size varies by more or less than 5% than planned, say. The contract should also allow you to cancel the contract if the difference is extreme.

Assignments This section covers whether or not you can sell and assign your contract to a third party before completion, what fees would be involved, and what would happen to your deposit.

Buying pre-sale has some unique rewards, but the process can be far from simple. REDMA legislation leaves room for interpretation and is being shaped by a number of ongoing court cases. So it's a wise move to enlist an experienced Realtor, mortgage broker and lawyer to help safely guide you through the processand into your swanky, custom home.

 

Advantages Risks

Greater customization:Choose your preferred design, layout, décor upgrades, and even parking configuration.

Terms of contract may change:You might not get exactly what you wanted. Check the fine print with your Realtor and lawyer.

Warranties:

1-year developer's warranty to cover issues before building is complete but after you've put down a deposit.

2-5-10-year warranty program covered by the BC Government.

No mortgage guarantee:Not all banks will fund pre-sales. Some lenders will only cover the value at completion, which could be less depending on market conditions. And if your financial picture changes, you may not qualify even if you were pre-approved.

Low hassle:Minimal replacements or repair costs and work for 1015 years. No way to back out:Once you're all in with a signed contract, you're in for the long haulor you forfeit that deposit.

Low cost of ownership:New energy-efficient homes mean lower utility costs, lower maintenance fees, and minimal chance of paying special assessments for repairs.

Must have patience:Properties can take up to several years to build. And unexpected delays may have you hunting for temporary living situations until move-in day.

In a rising market:The value of your unit can be higher upon completion than when purchased, giving you instant equity.

In a soft/falling market:By the time you move in, you already owe more than your condo's worth.

© Copyright 2014 - See more at: http://www.rew.ca/news/buying/how-to-buy-a-home-before-it-s-built-pre-sale-tips-1.1341873#sthash.KJ87klkL.dpuf*How to Buy a Home Before It's Built: Pre-Sale Tips*

     

Thinking of buying a pre-sale condo? You might be tempted by the tantalizing array of pre-sale development units available in the Lower Mainland, some with attractive incentives. (Just check out our Developments section!)

Here's how it works. When you agree to buy a pre-sale unit, you're actually entering into a contract for the right to receiveand an obligation to pay fora finished condo at a set point in the future. This forms the basis for some of the unique opportunities and risks that go along with buying pre-sale.

Advantages

There are definitely advantages to buying pre-sale. You can pay just a small deposit now, save money while it's being built, then pay the balance of your deposit when you move in. Or you can pay your deposit in bite-sized increments during the building process.

You can also customize design elements, finishes and even your layout. Because you're buying a brand-new home, you won't have to worry about doing costly repairs for at least another decade. And your unit will be covered under the BC government's 2-5-10 Year Home Warranty Insurance program, so that if something does go wrong, you won't have to pay for it.

Risks

But there are also risks and unique obligations that need to be considered before you sign on the dotted line and hand over your deposit. Here's what you need to know: your rights and responsibilities under the Real Estate Development Marketing Act(REDMA).

Though there are advantages to buying pre-sale in any market, the greatest opportunities arise in a rising or hot real estate market. That's because, by the time you move into your completed condo, it's already worth more than what you agreed to pay for it.

In a softening market, on the other hand, by the time you complete the sale, you might already have lost money. If you're relying on a mortgage, lenders may only cover the market value of the property at the time of completion, leaving you scrambling to raise more cash for the difference.

The mortgage climate can change without warning as well. Many people who purchased before the federal government administered tighter mortgage rules found they no longer qualified for the amount they were pre-approved for by the time they had to pay up.

So what happens if you can't raise the cash you need to complete the sale, or your unit is worth less than what you owe when it's time to pay up? Unless the developer violates the terms of your agreement, you are legally obligated to complete the saleor forfeit your deposit.

Besides market changes, there are other unknowns, from unexpected construction delays to condos that don't get built at all.

So how can you mitigate some of the potential risks?

Lay the groundwork

Long before you're ready to sign anything, find out everything you can about the builder of each development you're considering. Do they have a reputation of building on time? Talk to your Realtor and to homeowners who've purchased from them in the past. And if you're a first-time buyer with a small down payment, consider sticking with pre-sale units that are already close to completion to eliminate some of the unknowns.

Talk to an independent mortgage broker as well, to find out what you can afford and to make sure your credit is in shape before you go in. That way you'll be financially ready.

Review the developer's Disclosure Statement

Before you sign a purchase contract, you have the right to review a Disclosure Statement prepared by the developer, according to Section 21.2 of REDMA. The Disclosure Statement lays out everything you will be buyingincluding proposed and filed bylaws, common property and storage allocations, and descriptions of appliances, furnishing, and finishes.

Under REDMA, it also has to include an estimated construction start and end date, as well as any "material facts" that could "reasonably be expected to affect, the value, price, or use of the development unit or development property."

The developer is obligated to keep you up-to-date on amendments to estimated dates and material facts. This is important because building a new development is a long and complex process, and things often morph as it progresses.

Take time to review the statement carefully and make sure you understand all the terms set out in it. This step is best tackled with an experienced lawyer specializing in residential real estate and, of course, your Realtor (not the developer's).

Check the small print before you sign

Check the Pre-sale Contract

After you've thoroughly reviewed the Disclosure Statement, look over the Pre-sale Contract with a fine toothcomb. Here are a few things to look for:

Deposit Besides the obvious (how much, when it's due, and how it should be paid), look to see who gets the accrued interest during the construction process. It can be either the buyer or developer, and this should be stipulated in the contract. Generally your deposit is held in trust until it becomes part of the purchase price at completion, but REDMA allows the developer to get insurance allowing them to use your deposit in the interim. This should also be stated in the contract.

Forfeiture clause This clause gives the developer the right to claim your deposit if you breach your contract. It usually includes the wording that the deposit will be considered a genuine pre-estimate of damages and not a penalty, giving them a better chance of hanging on to your deposit if you try to back out and end up in court.

Right to terminate the contract Developers may need to walk away from a project for various reasons, including being unable to get skilled trades or permits. The contract will usually outline this right to cancel the project, at which point your deposit plus interest would be returned to you.

Right of rescission The contract will also cover when you can terminate the contract without losing your deposit. Under REDMA s. 21.2, once you sign the pre-sale contract, or a receipt acknowledging you've had time to review the Disclosure Statement (whichever comes later), you are given a 7-day "rescission period" where you can serve written notice to the developer to terminate the contract. Also, if you receive an amended Disclosure Statement outlining material changes to be made to the layout and size of your unit or to the common facility because of the issuance of a building permit, you're entitled to another 7 days to rescind your contract ( REDMA Policy Statement 5).

Allowable unit changes Contracts usually give the builder the right to change the size, certain design features, or substitute comparable materials. The contract should also outline any adjustments to the purchase price that would be made if the finished size varies by more or less than 5% than planned, say. The contract should also allow you to cancel the contract if the difference is extreme.

Assignments This section covers whether or not you can sell and assign your contract to a third party before completion, what fees would be involved, and what would happen to your deposit.

Buying pre-sale has some unique rewards, but the process can be far from simple. REDMA legislation leaves room for interpretation and is being shaped by a number of ongoing court cases. So it's a wise move to enlist an experienced Realtor, mortgage broker and lawyer to help safely guide you through the processand into your swanky, custom home.

 

Advantages Risks

Greater customization:Choose your preferred design, layout, décor upgrades, and even parking configuration. Terms of contract may change:You might not get exactly what you wanted. Check the fine print with your Realtor and lawyer.

Warranties:

1-year developer's warranty to cover issues before building is complete but after you've put down a deposit.

2-5-10-year warranty program covered by the BC Government.

No mortgage guarantee:Not all banks will fund pre-sales. Some lenders will only cover the value at completion, which could be less depending on market conditions. And if your financial picture changes, you may not qualify even if you were pre-approved.

Low hassle:Minimal replacements or repair costs and work for 1015 years. No way to back out:Once you're all in with a signed contract, you're in for the long haulor you forfeit that deposit.

Low cost of ownership:New energy-efficient homes mean lower utility costs, lower maintenance fees, and minimal chance of paying special assessments for repairs. Must have patience:Properties can take up to several years to build. And unexpected delays may have you hunting for temporary living situations until move-in day.

In a rising market:The value of your unit can be higher upon completion than when purchased, giving you instant equity. In a soft/falling market:By the time you move in, you already owe more than your condo's worth.

© Copyright 2014 - See more at: http://www.rew.ca