2023 Real Estate Market Outlook (And What It Means for You)

2023 Real Estate Market Outlook (And What It Means for You)

Last year, one factor drove the real estate market more than any other: rising mortgage rates.

 

In March 2022, the Bank of Canada began a series of interest rate hikes in an effort to pump the brakes on inflation.1 And while some market sectors have been slow to respond, the housing market has reacted accordingly.

 

Both demand and home prices have softened, as the primary challenge for buyers has shifted from availability to affordability. And although this higher-mortgage rate environment has been a painful adjustment for many Canadians, it should ultimately lead to a more stable and sustainable real estate market.

 

So what can we expect in 2023? Will mortgage rates continue to climb? Could home prices come crashing down? While no one can forecast the future with certainty, here’s what several industry experts predict will happen to the Canadian housing market in the coming year.

 

 

MORTGAGE RATES WILL EVENTUALLY STOP CLIMBING

 

Over the course of 2022, we saw the benchmark rate rise at a record pace—a whopping 400 basis points in just nine months. Fortunately, there are signs that the central bank’s series of rate hikes may be coming to an end.2

 

After last month’s half-point rate increase, Bank of Canada officials struck a noncommittal tone about future rate hikes, prompting economists to speculate that the central bank may pause hiking rates by early spring, if not sooner.3

 

According to Stephen Brown, a senior economist at Capital Economics, the central bank is likely to hike rates at least one more time before it shifts gears. “We would not rule out a final 25 basis point interest rate hike in January,” said Brown in a client note. “But the Bank is very close to the end of its tightening cycle.”3

 

What impact will this have on mortgage rates? Variable mortgage rates could finally stabilize. However, buyers hoping for a big drop later in the year may be disappointed. Although some market analysts are betting on lower rates, CIBC economist Benjamin Tal thinks that’s unlikely as long as inflation remains a factor. “I think that the Bank of Canada is determined to make sure that they will not touch interest rates in terms of cutting them before inflation is totally dead,” said Tal in an interview with Canadian Mortgage Professional.4

 

Fixed mortgage rates, on the other hand, could continue to trend lower as bond yields crumble.5 James Laird, co-CEO of Ratehub.ca, predicts that Bank of Canada’s benchmark rate will hold steady through 2023, but fixed mortgage rates may tick down because of bonds. “Bond yields will decrease throughout the year, allowing fixed rates to follow suit,” said Laird in an interview with Canadian Mortgage Professional.6 However, those rate decreases may be fairly muted as long as banks’ borrowing costs stay higher overall.

 

It’s also possible that rates on both variable and fixed-rate mortgages will climb instead. Bank of Canada Governor Tiff Macklem has made clear that the central bank is prepared to keep hiking rates aggressively if inflation fails to dissipate. “If high inflation sticks, much higher interest rates will be required to restore price stability,” said Macklem in a recent speech to business leaders.7

 

What does it mean for you?  While no one can predict the future of mortgage rates with certainty, an end to interest rate hikes could bring some much-needed relief for borrowers. If you have plans to buy a home or renew your mortgage in the coming year, you’ll want to weigh your options carefully when deciding between a variable or fixed rate. Reach out for a referral to a mortgage professional who can help.

 

 

BUYERS WILL RETURN TO THE MARKET

 

The pace of home sales fell steeply last year as higher mortgage rates priced would-be buyers out of the market. However, some industry experts predict that the Canadian housing market is poised to turn a corner.

 

Although many buyers and sellers are currently in a stalemate over housing prices, market dynamics may shift this spring as more homes go up for sale.

 

“Zooming in on demand and supply conditions, the drop in unit sales has been the steepest on record, but the pace of the decline is starting to slow,” write CIBC economists, Benjamin Tal and Katherine Judge, in a recent forecast.8 Douglas Porter, chief economist at BMO Capital Markets, projects that existing home sales will fall through the first half of 2023 and then reverse course and begin to rise in Q3.9

 

Victor Tran, mortgage expert at Ratesdotca, also speculates that a stabilization in mortgage rates will bring home buyers back out. He told the Financial Post in a December interview: “We may be seeing the bottom of the housing market trough before buyers begin to enter the market in spring of 2023.”10

 

Buyers’ purchasing power will still be constrained by higher mortgage rates, though, as well as by a stringent mortgage stress test for uninsured mortgages and a hefty monthly payment for insured ones. So a buyer’s ability to participate in the market will depend, in part, on a seller’s willingness to negotiate.

 

What does it mean for you?  If you’re a buyer who has been waiting for conditions to normalize, now may be an ideal time to start your home search. As more buyers begin to enter the market, you’ll face steeper competition and reduced negotiating power.

And if you’ve delayed selling your home, this could be the year to make a move. Reach out to schedule a free consultation and home value assessment with the JP Realty Team

 

 

HOME PRICES WILL STABILIZE LATER THIS YEAR

 

Canadian home prices have fallen roughly 10% from their peak, and analysts expect they could fall further before moderating in the second half of this year.11

 

A Reuters poll of industry experts found a wide range of predictions. But on average, the analysts surveyed project that home prices could fall another 7.5% or so. However, the majority report that the risk of a market crash is low.11

 

A nationwide housing shortage is expected to prop up prices even as sales volume falls. According to Robert Kavcic, senior economist at BMO Capital Markets, “We have a unique situation where demand has cracked and buyers can’t qualify for, or afford, early-year prices. But, outside some areas, there’s not a bounty of listings to choose from, and sellers are still able to say ‘no thanks.’”11

 

Economists at CIBC speculate that home prices will hit a floor in the coming months: “A lower 5-year rate and pent-up demand amplified by demographics will work to establish a bottom in prices by the spring of 2023,” write Benjamin Tal and Katherine Judge.8

 

RBC Assistant Chief Economist Robert Hogue offers a similar projection: “We expect prices will keep falling until a bottom [this] spring. Our forecast calls for the national benchmark price to drop 14% from (quarterly) peak to trough.”12

 

What does it mean for you?  It can feel scary to buy a home when there’s uncertainty in the market. However, real estate is a long-term investment that has been shown to appreciate over time. And keep in mind that the best bargains are often found in a slower market, like the one we’re experiencing right now. Contact us to discuss your goals and budget. We can help you make an informed decision about the right time to buy.

 

And if you’re planning to sell this year, you’ll want to chart your path carefully to maximize your profits. Contact us for recommendations and to find out your home’s market value.

 

 

RENT PRICES WILL CONTINUE TO CLIMB

 

While home prices have fallen, rent prices have surged—rising around 12% year-over-year, according to data from Rentals.ca.13

 

The average monthly cost to rent a home in Canada is now higher than ever and some analysts are growing increasingly concerned that renters won’t be able to keep up with the higher payments. “We’re getting close to a point where rents are just simply becoming unaffordable for renters,” said Urbanation president, Shaun Hildebrand, to CBC News.14

 

But that’s not stopping landlords from collecting higher rents. In 2023, affordability challenges for would-be buyers, inflationary pressures, and an overall lack of housing are expected to continue driving up rent prices in much of the country.

 

“Interest rates are actually working to elevate rent inflation because many people are not buying, so they are renting more,” CIBC Economist Benjamin Tal told CBC News.13

 

And according to Tal, the higher rates have also disincentivized builders and developers from investing in rental properties. That, in turn, has exacerbated the undersupply of available units.13

 

It’s possible rent prices could ease if Canada’s economy deteriorates, says Urbanation’s Hildebrand. “But over the medium and longer term with aggressive immigration targets and rental construction that’s been stalling recently due to high costs, it’s pretty clear that rents are going to continue to rise higher.”14

 

What does it mean for you?  Rent prices are expected to keep climbing. But you can lock in a set mortgage payment and build long-term wealth by putting that money toward a home purchase instead. Reach out for a free consultation to discuss your options.

 

 

WE’RE HERE TO GUIDE YOU

 

While national real estate forecasts can provide a “big picture” outlook, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the issues most likely to impact sales and drive home values in your particular neighbourhood.

 

If you’re considering buying or selling a home in 2023, contact us JP Realty Team now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals this year.

 

 

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

 

 

Sources:

  1. CP24 News –
    https://www.cp24.com/news/the-bank-of-canada-has-raised-rates-again-here-s-a-timeline-of-how-we-got-here-1.6125268#
  2. Reuters –
    https://www.reuters.com/markets/bank-canada-set-hike-rates-may-signal-it-is-near-end-tightening-cycle-2022-12-07/
  3. CBC –
    https://www.cbc.ca/news/business/bank-of-canada-1.6677004
  4. Canadian Mortgage Professional – https://www.mpamag.com/ca/mortgage-industry/market-updates/bank-of-canada-could-be-done-on-hikes-for-now-cibcs-tal/430005
  5. Reuters – https://www.reuters.com/business/finance/bank-canadas-inflation-fight-made-harder-bond-yields-fall-2022-12-15/
  6. Canadian Mortgage Professional – https://www.mpamag.com/ca/news/general/whats-the-bank-of-canada-rate-likely-to-be-in-2023/430755
  7. Global News –
    https://globalnews.ca/news/9341825/bank-of-canada-tiff-macklem-speech-dec-12/
  8. CIBC Capital Markets –
    https://economics.cibccm.com/cds?id=6f402711-69b3-46a5-afc8-91ede34fe1fd&flag=E
  9. BMO Capital Markets –
    https://economics.bmo.com/media/filer_public/04/01/040155ce-0cb2-49ac-b63e-def8e66d4c05/outlookcanada.pdf
  10. Financial Post –
    https://financialpost.com/real-estate/mortgage-rates-soar-higher-interest-rate-increase
  11. Financial Post –
    https://financialpost.com/real-estate/canada-house-prices-to-tumble
  12. RBC Special Housing Reports –
    https://thoughtleadership.rbc.com/quiet-fall-housing-market-across-canada/
  13. CBC News –
    https://www.cbc.ca/news/business/rent-inflation-november-1.6650777
  14. CBC News –
    https://www.cbc.ca/news/canada/toronto/rental-costs-canada-1.6685602

 

Blog Post Image:

 

Let us refer you to a trusted mortgage pro to outline your best options.

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Contact us to find out what your home could sell for in today’s market.

Posted by Christine Pecharich in Blog Posts, Burlington, Georgetown, Guelph, Halton Hills, Milton, Mississauga, Oakville
Market Statistics

Market Statistics

2022 In Review

While the housing market in the Greater Toronto Area (GTA) experienced a shift in 2022, it also showed its resiliency in the face of rising interest rates.  The average selling price last year in the GTA was $1,189,850, representing an 8.6% increase over the 2021 average of $1,095,333.  The increase in average price growth is attributed to the strong start we saw in 2022.  The pace of growth moderated from the spring of 2022 onwards.

As interest rates increased, home sales trended lower in the spring and summer of 2022.  Transactions were down 38.2% compared to the record sales activity we saw in 2021, and home prices adjusted downward to accommodate the impact of higher interest rates.  However, in August we saw home prices start to level off, and remain steady for the remainder of the year.  Supply remained tight despite fewer transactions, and the lack of homes available for sale supported price stability and in some pockets of the GTA led to continued price increases, despite higher borrowing costs.

Lack of supply also impacted the rental market and tight rental market conditions caused rental rates to skyrocket in 2022, up 23.7% in the GTA compared to last year.


GTA Market Activity – December 2022

In December, seasonally adjusted sales activity increased 1.1% over November and prices remained flat month-over-month.

The Toronto Regional Real Estate Board reported 3,117 sales in December 2022, down 48.2% compared to last December’s unprecedented level of activity, and new listings were also down 21.3% as compared to last year.

Homes averaged 27 days on market, an average that is longer than the blistering pace we saw last December, however still shorter than the average days on market in December 2020 and December 2019.


Looking Ahead

Home prices in the GTA levelled off in the late summer and remained stable for the rest of 2022, suggesting the market adjustments seen earlier in year may be coming to an end.

While much focus has been directed at the negative impact of rising rates, there are a number of factors supporting stable home prices in the current environment.

The Royal LePage Market Survey Forecast suggests that the supply of homes for sale must exceed demand in order for prices to drop materially. Organic demand is supported by the current lifecycle of our large millennial demographic and a record number of new immigrants who need to be housed. This month, Immigration, Refugees and Citizenship Canada announced that Canada added over 431,000 new permanent residents in 2022, breaking 2021’s record of 401,000 newcomers.

 

Smaller household sizes also mean more housing units are needed per capita than in the past. Pent-up demand is growing from buyers who have the ability to transact but have chosen not to in these less certain times.

 

Based on pent-up demand and the influx of newcomers to the GTA in 2023, demand for condominiums is anticipated to increase. Homebuyers who have been sitting on the sidelines who begin to return to the market in search of more affordable housing options will be particularly drawn to this housing segment, as will investors anticipating greater returns based on the sharp rise in rental prices and the pace of people looking for housing entering Toronto and the surrounding areas.

Low unemployment, and a large buffer of unfilled job vacancies, means that few families are likely to need to sell their homes for financial reasons. Homes are modestly less expensive today than at the height of the pandemic boom, offsetting some of the impact of rising rates, and household savings remain above long-term norms, helping overcome down payment hurdles.

In terms of sales activity, the Bank of Canada has suggested that the current interest rate hiking cycle is nearing its end.  An important trend in 2023 will be the transition from a rising interest rate environment to a stable interest rate environment, which will help revive consumer confidence and begin increasing the number of annual transactions to more typical levels.

New Year, New Rules

The ringing in of the New Year also ushered in new federal regulations to assist home buyers, as well as reduce speculation.

Starting in the 2022 tax year, the First Time Home Buyers Tax Credit has doubled to $1,500.

This year, Canada is also introducing a First Home Savings Account.  Starting April 1, first-time homebuyers under 40 years old will be allowed to invest up to $40,000 total or up to $8,000 each year toward the purchase of a home with no tax on contributions or withdrawals. If funds are not used to purchase a home by the age of 40, they can be converted into RRSP savings.

 

For non-first time buyers, another Canadian savings vehicle, the Tax Free Savings Account, or TSFA, has increased its annual contribution cap to $6,500.  TSFA savings are tax free upon withdrawal.

In order to limit real estate speculation, Canada has also introduced a ‘flipping tax’.  As of January 1, 2023, profits from the sale of a property which has been owned for less than 12 months will be taxed as business income.  The new law is subject to a number of exceptions, such as death or serious illness of the homeowner and sales due to the dissolution of a marriage.

Finally, effective January 1, 2023, Canada’s two-year foreign buyer ban took effect.  Under the ban, individuals and corporations from outside of Canada can no longer purchase residential real estate.  There are exceptions to the ban for permanent residents, commercial property including multiplexes of four or more units and properties situated in certain rural areas.   Individuals in Canada on work permits may also be exempt provided they meet certain requirements including working and filing taxes within Canada for three out of the four years prior to purchasing a property.

Joe and Christine Pecharich

Posted by Christine Pecharich
Home for the Holidays: How to Stretch Your Budget in a Season of Inflation

Home for the Holidays: How to Stretch Your Budget in a Season of Inflation

You don’t have to break the bank to celebrate the holidays in style—even in this season of inflation. Prices may be higher on everything from food to gifts to decorations, but there are still plenty of opportunities to eke out extra savings.

For example, you can trim your energy bills by up to 20% just by sealing air leaks in your home.1 Other small fixes—such as swapping old light bulbs for LEDs and plugging electronics into a power-strip—can boost your yearly savings enough to pay off some of your holiday budget.

And thanks to a pandemic-era boom in online shopping, it is easier than ever to find deals on new and pre-owned furniture, thrifted gifts, DIY decor, and more. Even secondhand stalwarts like Goodwill have joined the digital fray, making it a cinch to score gently-used treasures at extra-low prices.2

You won’t be the only one bargain-hunting your way to a more financially-stable New Year. Multiple surveys have found that inflation is not only chilling people’s spending, it’s also prompting shoppers to search for better deals and creative ways to reduce their bills.3

Here are some strategies you can use to boost your holiday budget by trimming household expenses:

 

  1. Hunt for Deals on Groceries

If you’re finding it harder than it used to be to serve your family dinner on a budget, you’re not alone. With grocery prices rising at a record pace, many families are struggling to control costs on food staples, such as meat, dairy, produce, and grains.4

That’s made pulling off holiday gatherings especially stressful lately. But don’t despair: Even with inflation, retailers are still giving motivated shoppers plenty of opportunities to whittle down their bills.

The key is to pay attention to the cost of each item on your shopping list—not just the most expensive—and look for easy swaps and discounts. For example, try buying non-perishable items in bulk, especially when they’re on sale, and only in-season produce. Or trade name-brand goods for less expensive options from a store’s private label. As you tap into your inner bargain hunter, you could be surprised by what you save when you’re more mindful of your selections.

And unlike in the old days, you no longer have to clip your way through paper flyers to snag a bargain. Instead, you can save both time and money by scouting for deals online, digitally clipping coupons, and earning cash back through special apps and browsers. For example, coupon aggregation sites, like Flipp, and shopping apps—such as Checkout 51 and Rakuten—make it easy to score discounts and cash back on a variety of purchases, including groceries.

Also, check to see if your neighbourhood grocer posts their weekly flyers online or if Save.ca has published flyers from other nearby stores. If you’re hosting a holiday party, the markdowns you find can help you narrow your food and recipe choices, based on what’s currently on sale.

 

  1.  Prep Your Home for Holiday Guests With Pre-Owned Finds

You don’t have to sacrifice style for the sake of preserving your holiday budget either. If you’re expecting company this year and would like to add some festive flair to your home, you can do so inexpensively—especially if you’re willing to decorate with items that are secondhand.

Thrifting is back in vogue, with an increasing number of shoppers preferring pre-owned furniture and home goods. The number of Canadians who shop secondhand has grown.5 In fact, one study found that nearly three-quarters of Canadians now buy pre-owned goods of some type. 6 Plus, buying used isn’t just a great way to save money, it also helps the environment by keeping reusable items out of landfills.

Fortunately, it’s become easier to score secondhand deals online. For example, you can scout consumer marketplaces on Facebook and Kijiji. Or you can take advantage of neighbourhood freecycles and “Buy Nothing” groups. And a number of thrift shops now have e-commerce sites, including major chains, like Goodwill.

If you’re handy with a paintbrush or have some basic carpentry skills, you can also modernize some of your existing furniture by upcycling it yourself. Or, if you enjoy crafting, search through your own recycling or sewing bin for raw material to make one-of-a-kind decorations.

Don’t stress yourself out, though, if you don’t have the time or money to dress your home the way you hoped. Your house can still feel festive and inviting, even if it’s not completely done up.

 

  1. Forgo Major Renovations in Favor of DIY Home Improvements

Holidays are always a tricky time to undergo big renovations. But with ongoing worker and material shortages, now is an especially bad time to commit. Inflated costs can add thousands to your reno budget—and unnecessary stress to your holiday.

Instead of suffering through an ill-timed remodel, you’re better off saving this time of year for simpler, less expensive projects you can do yourself.

One winter-perfect upgrade to consider: Build a DIY fire pit so that you and your guests can roast marshmallows and relax in the cozy comfort of your backyard. You can also add some extra ambiance by hanging energy-efficient LED outdoor string lights that change from white to colourful. These are festive enough for the holidays, but also versatile enough to use year-round.

Or, if you’d rather curl up by an indoor fire, channel your DIY energy into a fireplace upgrade. Adding a wooden beam to the top of your mantel can add an extra layer of coziness. Alternatively, re-tiling or painting your fireplace surround can lend contemporary flair.

Just be sure to stick to DIY projects that you know you can do a quality job on—especially if your changes will be difficult to reverse. Feel free to reach out for a free assessment to find out how your planned renovations could impact your home’s resale value.

 

  1. Invest in Home Maintenance Projects That Cut Your Utility Bills

You can save money by completing basic home maintenance tasks, such as swapping your furnace filter and updating your lightbulbs. But if you really want to lower your bills this winter, consider projects that make your home more energy efficient.

Research by the trade group NAIMA found that most homes in Canada are under-insulated, which wastes energy and money.7 The group estimates that Canadians can potentially save hundreds of dollars per year just by retrofitting their homes. Luckily, there are plenty of DIY insulation projects that you can complete in just a few days. For example, some projects you can do relatively quickly include:

  • Insulating your attic or basement crawl space
  • Weatherstripping doors and windows
  • Sealing areas around the house that may be leaking air, including electrical outlets and fireplaces

The savings you get from these projects can really add up. Natural Resources Canada estimates that walls alone account for roughly 20% of heat loss in homes, so they’re a rich target for tackling costly sources of air leakage.8 And thanks to the Canada Greener Homes Initiative, you can also save a bundle this year by investing in certain energy-efficient upgrades and claiming a tax rebate.9 Be sure to check with us about any municipal or provincial rebates and incentives that may be available, too, before getting started on a project.

 

  1. Use Expense Tracking to Boost Your Holiday Budget

To avoid overextending yourself during the holidays, one of the best things you can do is track your income and expenses. If your monthly budget is usually tight, you may need to make some adjustments to free up cash for holiday expenditures.

For example, here’s a sample budget worksheet that we created. Start by adding in your expenses: Under the “Typical” column, you can list your standard expenses, and under the “Adjusted” column, list any areas where you could cut back on spending.

Then consider how your standard wages may be adjusted this month by extra shifts, additional tips, or an end-of-year bonus. By decreasing your spending and/or increasing your income, you can build room in your budget for holiday gifts and gatherings.

 

HOUSEHOLD BUDGET WORKSHEET
  Typical Adjusted Difference (+/-)
HOUSING
Mortgage/taxes/insurance or Rent      
Utilities (hydro, water, gas, trash)      
Phone, internet, cable      
Home maintenance and repairs      
FOOD
Groceries      
Restaurants      
TRANSPORTATION
Car payment/insurance      
Gas, maintenance, repairs      
OTHER
Health insurance      
Clothing and personal care      
Childcare      
Entertainment      
Charitable contributions      
Savings, retirement, college fund      
INCOME
Salary/wages      
Bonus, tips, other      
MONTHLY TOTALS
Total Adjusted Income  
Total Adjusted Expenses
EXTRA SAVINGS FOR YOUR HOLIDAY BUDGET  

Feel free to utilize this worksheet as a template that you can customize to your needs or ask us for a PDF copy that you can print out and use right away.

 

WE’RE HERE TO HELP

We would love to help you meet your financial goals now and, in the year, ahead. Whether you want to find lower-cost alternatives for home renovations, maintenance, or services, we are happy to provide our insights and referrals.

And if you’re saving up to buy a new home, we can help with that, too. This is the perfect time to score a great deal because only the most motivated homebuyers and sellers are active in the market right now. So reach out to schedule a free consultation with the JP Realty Team. We can fill you in on some of the exciting programs and incentives we’re seeing that help make homeownership more affordable.

 

The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

 

Sources:

  1. CTV News –
    https://www.ctvnews.ca/lifestyle/8-tips-for-saving-on-your-home-heating-this-winter-1.6116384
  2. CBC News –
    https://www.cbc.ca/news/world/goodwill-online-store-1.6605808
  3. MoneyWise –

https://moneywise.ca/news/economy/canadians-plan-to-spend-less-as-retailers-brace-for-shopping-season

  1. Statistics Canada –
    https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2022014-eng.htm
  2. Statista –
    https://www.statista.com/statistics/998634/consumers-who-have-shopped-at-thrift-stores-canada/-​​
  3. Retail Insider – https://retail-insider.com/retail-insider/2022/08/resale-going-mainstream-in-canada-with-consumers-particularly-valuing-brand-owned-resale-report/
  4. NAIMA Canada – https://www.globenewswire.com/en/news-release/2016/10/27/1263857/0/en/New-Study-Reveals-Most-Homes-in-Canada-Are-Significantly-Under-Insulated.html
  5. Natural Resources Canada – https://www.nrcan.gc.ca/energy-efficiency/homes/make-your-home-more-energy-efficient/keeping-the-heat/chapter-7-insulating-walls/15641
  6. Government of Canada – https://www.nrcan.gc.ca/energy-efficiency/homes/canada-greener-homes-grant/start-your-energy-efficient-retrofits/plan-document-and-complete-your-home-retrofits/eligible-grants-for-my-home-retrofit/23504

 

 

Posted by Christine Pecharich in Blog Posts
October 2022 Market Statistics

October 2022 Market Statistics

GTA REALTORS® Release October Stats

Despite the continued housing market transition to a higher borrowing cost environment, the average selling price in the Greater Toronto Area (GTA) found some support near $1.1 million since the late summer. GTA home sales continued to adjust to substantially higher interest rates in October 2022, both on an annual and monthly basis. However, new listings are also down year-over-year and month-over-month. The persistent lack of inventory helps explain why the downward trend in home prices experienced in the spring has flattened over the past three months.

GTA REALTORS® reported 4,961 sales through the Toronto Regional Real Estate Board’s (TRREB) MLS® System in October 2022 – a similar number to September 2022 but down by 49.1 per cent compared to October 2021. Yearover-year sales declines were similar across major market segments.

New listings were down by 11.6 per cent year-over-year and reached an October level not seen since 2010. New listings were down on an annual basis more so for mid-density and high-density home types, which helps to explain why prices have held up better in these categories compared to detached houses.

“With new listings at or near historic lows, a moderate uptick in demand from current levels would result in a noticeable tightening in the resale housing market in short order. Obviously, there is still a lot of short-term economic uncertainty. In the medium-to-long-term, however, the demand for housing will rebound. Public policy initiatives like the recently introduced provincial More Homes Built Faster Act and strong mayor provisions will help ensure we see more homes being built to affordably meet the needs of new households,” said TRREB President Kevin Crigger.

The MLS® Home Price Index (HPI) Composite Benchmark was down by 1.3 per cent year-over-year in October 2022. The average selling price for all home types combined, at $1,089,428, was down by 5.7 per cent compared to October 2021. The monthly trends for both the MLS® HPI Composite and the average selling price have flattened in recent months following steeper declines in the spring and early summer.

“Home prices in the GTA have found support in recent months because price declines in the spring and summer mitigated the impact of higher borrowing costs on average monthly mortgage payments. The Bank of Canada’s most recent messaging suggests that they are reaching the end of their tightening cycle. Bond yields dipped as a result, suggesting that fixed mortgage rates may trend lower moving forward, which would help affordability,” said TRREB Chief Market Analyst Jason Mercer.

Milton Summary:

Average Sale Price over this time last year:  + 12.3%

Number of Sales over this time last year:  +37.8 %

 

Oakville Summary:

Average Sale Price over this time last year:  + 12.0%

Number of Sales over this time last year:  -39.9 %

 

Burlington Summary:

Average Sale Price over this time last year:  + 15.2%

Number of Sales over this time last year:  -25.3 %

 

Halton Hills Summary:

Average Sale Price over this time last year:  + 13.6%

Number of Sales over this time last year:  -27.8 %

 

Mississauga Summary:

Average Sale Price over this time last year:  + 12.0%

Number of Sales over this time last year:  -38.0 %

 

Guelph October Statistics

Summary all of HALTON combined

 

 

Posted by Christine Pecharich in Blog Posts, Brampton, Burlington, Georgetown, Guelph, Halton Hills, Market Reports, Milton, Mississauga, Oakville
7 Tips to Maximize Your Home’s Sale Price

7 Tips to Maximize Your Home’s Sale Price

Over the past few years, a real estate buying frenzy bid up home prices to eye-popping amounts. However, as mortgage rates have risen, buyer demand has cooled.1 Consequently, home sellers who enter the market today may need to reset their expectations.

The reality is, it’s no longer enough to stick a “for sale” sign in the yard and wait for buyers to bang down the door. If you want to net the most money possible for your property in today’s market, you’ll need an effective game plan and a skilled team of professionals to implement it.

Fortunately, we’ve developed a listing strategy that combines our proven approach to preparation, pricing, and promotion—all designed to help you get top dollar for your home. But you will play an important role in the selling process, as well.

Here are some crucial steps you can take to set yourself up for success as a home seller in this market:

 

  1. Make Strategic Repairs and Improvements

When you sell something, it’s important to consider what your customer wants to buy. And according to a recent survey, 83% of Canadians view “affording necessary renovations” as a major hurdle to buying a home.2 If you can present buyers with a move-in-ready option, they will feel more confident in making an offer.

Before your home goes on the market, we’ll conduct a thorough walk-through to identify any problems that could prevent it from selling. In some cases, we may recommend a professional pre-listing inspection. Finding and addressing issues like leaks, rot, and foundation problems up front can pay off in the final sale price. Plus, it prevents sales from falling through because of a red flag on the home inspection, a scenario no seller wants to face.

Beyond repairs, we’ll also help you identify the simple upgrades that offer the highest return on your investment. For example, new paint can give your home a fresh look at a reasonable cost. And according to a recent report, it’s one of the top renovations for return at resale.3 Similarly, minor landscaping improvements can pay off in a major way. A healthy lawn offers an estimated 256% ROI.4

 

  1. Declutter and Depersonalize

When buyers look at a home for sale, they’re trying to envision themselves living there. That’s hard to do if it’s chock-full of the current owner’s family photos, children’s artwork, and souvenir collections. Plus, cluttered homes look smaller, and older items can make them feel dated.

Decluttering before you put your home up for sale will help you in the long run—after all, you’ll need to move all your things to your new home eventually. Now is the time to shred, digitize, or organize old documents, donate old clothes, or move bulky furniture into storage. At a minimum, you’ll want to pack away excess items neatly before potential buyers view the home. Remove personal photos and other trinkets to create a blank slate that viewers can imagine decorating with their own prized possessions.

If you feel overwhelmed by this process, we’d be happy to make recommendations or refer you to a local service provider who can help.

 

  1. Stage Your Home for Success

Just as you take care to dress professionally for a job interview, you should always ensure your home looks its best for potential buyers. Home shoppers today are used to scrolling through Instagram and Pinterest, and they want to see the same wow factor when touring a home.

The process of making your home look its best and appeal to potential buyers is called staging, and it can be a game changer. According to the International Association of Home Staging Professionals, an average priced staged home sells 5 to 11 times faster than its unstaged counterpart. Even better, the majority of staged homes sell for 4% to 20% over list price!5

 Some sellers hire a professional stager, who may bring in furniture and decor to increase the home’s appeal. Others choose to stage their homes themselves. We can help advise you on which route to choose and how much to invest in the process.

It’s also important to consider what buyers in your neighbourhood are likely to be looking for in a home. We can help guide your staging choices with our local market insights. For example, in neighbourhoods where a large share of residents work from home, it may be effective to stage one room as an office space so potential buyers can envision their day-to-day routine.

 

  1. Prep for Each Showing

Most of us don’t live picture-perfect lives, and our homes reflect that (sometimes messy) reality. But when your home is on the market, it’s important to ensure that it is always ready for viewers, even on short notice. A missed showing is a missed opportunity to sell your home!

Before your home hits the market, it may be worth hiring professional cleaners to get in all the nooks and crannies. After, try your best to keep things spic and span. Just a few minutes a day wiping down counters, sweeping the floors, and vacuuming can make a big difference.

It’s also worth noting that most buyers will open cabinets, drawers, and closets—so try to make sure everything is as neat and organized as possible. Keep toiletries and small appliances off countertops, and secure valuables and sensitive documents in a safe or off-site.

Want help finding a cleaning service to make your home shine for buyers? Reach out for a referral!

 

  1. Price Your Home Correctly From the Start

In the past few years, you may have seen homes in your neighbourhood sell for shocking amounts and wondered if you could get a similar price for your property. The temptation to list your home on the high side can be strong, but it’s best to be realistic from the start. Even in a strong market, some homes will sit for months. And the longer a property is listed, the more buyers worry that something is wrong with it.

Of course, you also don’t want to set your price too low and lose out on potential profit. That’s why it’s essential to work with real estate agents (like us!) who know the ins and outs of our local market and what buyers are willing to pay today. In a quickly-evolving market, comparable sales from a few months ago can lag the current market reality.

Fortunately, if you’ve owned your home for several years, chances are good that it’s worth much more today than you paid for it. That means you stand to walk away with a handsome profit.

  

  1. Avoid Acting on Emotion

The past few years of over-asking-price offers with few conditions have set certain expectations for many sellers. It’s only natural to feel hurt or even offended if an offer comes in lower than what you think your home is worth.

However, it’s important to keep in mind that those market conditions were unprecedented, and we are now returning to a more typical market. Home sellers who act rationally, rather than emotionally, are going to get the best results.

Remember: You can always counter a low offer. The same goes for repair requests and conditions—everything is negotiable. However, it’s important to accept that the market is adjusting and flexibility is key. Keep your expectations reasonable, and remain open-minded. And you can rest assured knowing that we’ll be by your side every step of the way to help you navigate the process and negotiate a great deal.

 

  1. Work With a Local Market Expert

The economics impacting mortgage rates may be national, but real estate markets are hyperlocal. That’s why working with a professional agent who understands your neighbourhood’s dynamics is essential. Through our experience, we’ve gathered insights that can help us position your home for success in this market. Plus, we have the resources to connect with qualified buyers searching for a home like yours.

Working with a knowledgeable agent is also the secret to getting as much money as possible for your home. We have access to extensive data on recent sales in your neighbourhood, which we will use to price and promote your property. That’s one reason why homes sold by agents draw much higher prices than those sold by their owners alone. The U.S.-based National Association of Realtors found that for-sale-by-owner homes went for a median price of $260,000 in 2020, while the median for homes sold by agents was $318,000.6 That’s a difference of $58,000—and money you don’t want to leave on the table.

 

YOUR AGENT AND ADVOCATE

Selling a home in a fast-changing market can be stressful. You’re likely to hear conflicting advice and opinions from people in your life, and decisions like what colour to paint your front door or how much to list your home for can be overwhelming.

That’s where we come in. The market may be adjusting, but we’re here to help you make the most of it. We’re listing experts in our area, and we know what steps you need to take for a smooth, profitable transaction.

If you’re considering buying or selling a home, we invite you to reach out to schedule a free consultation. We’re happy to talk through your specific situation and goals and help you identify your next steps.

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

 

 

Sources:

  1. Global News –

https://globalnews.ca/news/8833692/canada-housing-prices-bidding-offers/

  1. Chartered Professional Accountants Canada –

https://www.cpacanada.ca/en/news/canada/housing-survey

  1. RE/MAX Blog –

https://blog.remax.ca/renovations-that-pay-off-on-resale-according-to-re-max-brokers/

  1. Angi –

https://www.angi.com/articles/smart-landscaping-tips-can-increase-home-value.htm

  1. International Association of Home Staging Professionals –

https://pages.iahsp.com/home-staging-statistics/

National Association of Realtors – https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers#purchased

Posted by Christine Pecharich in Blog Posts
September Market Statistics

September Market Statistics

Market Watch

GTA REALTORS® Release September Stats

The Greater Toronto Area (GTA) housing market continued its adjustment to higher borrowing costs in September 2022. Sales for the month reached 5,038, but were down by 44.1 per cent compared to September 2021. New listings were also down on a year-over-year basis by 16.7 per cent to 11,237. This was the lowest number of new listings reported for the month of September since 2002. This is especially troublesome given that the stock of homes in the GTA increased markedly over the last 20 years.

We must ensure that the temporary dip in housing demand is not allowed to mask the critical shortage of homes available for sale in the GTA. Candidates running in the upcoming Ontario municipal elections must ensure home buyers and renters have adequate housing options in the years to come. Municipal council decisions have a direct impact on housing affordability, in terms of the protracted development approval processes, high development fees and other related policies that preclude timely housing development,= said TRREB President Kevin Crigger.

Elected councils must also reconsider existing policies that preclude homeowners from listing their homes for sale, including significant added upfront costs like the land transfer tax. Potential new policies like mandatory home energy audits could also create unnecessary interference and delays in the home selling process and dissuade some homeowners from listing their homes for sale,= said TRREB CEO John DiMichele. The MLS® Home Price Index (HPI) Composite benchmark was up on a year-over-year basis by 4.3 per cent. Over the same period of time, the average price dipped by 4.3 per cent to $1,086,762. The average price was up compared to August 2022.

Hovering just below $1.1 million, the average selling price may have found some support during the last couple months of summer. With new listings down quite substantially year-over-year and well-below historic norms, some home buyers are quite possibly experiencing tighter market conditions in some GTA neighbourhoods. October generally represents the peak of the fall market, so it will be important to see where price trends head over the next month,= said TRREB Chief Market Analyst Jason Mercer.

 

Milton Summary:

Average Sale Price over this time last year:  + 14.1%

Number of Sales over this time last year:  -36.5%

Oakville Summary:

Average Sale Price over this time last year:  +13.1 %

Number of Sales over this time last year:  -39.4 %

Burlington Summary:

Average Sale Price over this time last year:  + 16.6%

Number of Sales over this time last year:  -24.8 %

Halton Hills Summary:

Average Sale Price over this time last year:  + 17.8%

Number of Sales over this time last year:  -25.0 %

Mississauga Summary:

Average Sale Price over this time last year:  + 13.0%

Number of Sales over this time last year:  -36.3%

Guelph

Posted by Christine Pecharich in Blog Posts, Burlington, Georgetown, Guelph, Halton Hills, Market Reports, Milton, Mississauga, Oakville
Buy Now or Rent Longer? 5 Questions to Answer Before Purchasing Your First Home

Buy Now or Rent Longer? 5 Questions to Answer Before Purchasing Your First Home

Deciding whether to jump into the housing market or rent instead is rarely an easy decision – especially if you’re a first-time homebuyer. But in today’s whirlwind market, you may find it particularly challenging to pinpoint the best time to start exploring homeownership.

A real estate boom during the pandemic pushed home prices to an all-time high.1 Add higher mortgage rates to the mix, and some would-be buyers are wondering if they should wait to see if prices or rates come down.

But is renting a better alternative? Rents have also soared along with inflation – and are likely to continue climbing due to a persistent housing shortage.2 And while homebuyers can lock in a set mortgage payment, renters are at the mercy of these rising costs for the foreseeable future.

So, what’s the better choice for you? There’s a lot to consider when it comes to buying versus renting. Luckily, you don’t have to do it alone. Reach out to schedule a free consultation and we’ll help walk you through your options. You may also find it helpful to ask yourself the following questions:

 

  1. How long do I plan to stay in the home?

You’ll get the most financial benefit from a home purchase if you own the property for at least five years.3 If you plan to sell in a shorter period of time, a home purchase may not be the best choice for you.

There are costs associated with buying and selling a home, and it may take time for the property’s value to rise enough to offset those expenditures.

Even though housing markets can shift from one year to the next, you’ll typically find that a home’s value will ride out a market’s ups and downs and appreciate with time.4 The longer you own a property, the more you are likely to benefit from its appreciation.

Once you’ve found a community that you’d like to stay in for several years, then buying over renting can really pay off. You’ll not only benefit from appreciation, but you’ll also build equity as you pay down your mortgage – and you’ll have more security and stability overall.

Also important: If you plan to stay in the home for the life of the mortgage, there will come a time when you no longer have to make those payments. As a result, your housing costs will drop dramatically, while your equity (and net worth) continue to grow.

 

  1. Is it a better value to buy or rent in my area?

If you know you plan to stay put for at least five years, you should consider whether buying or renting is the better bargain in your area.

One helpful tool for deciding is a neighbourhood’s price-to-rent ratio: just divide the median home price by the median yearly rent price. The higher the price-to-rent ratio is, the more expensive it is to buy compared to rent.5 Keep in mind, though, that this equation provides only a snapshot of where the market stands today. As such, it may not accurately account for the full impact of rising home values and rent increases over the long term.

According to data from the Canadian Real Estate Association, a homeowner who purchased an average-priced Canadian home 10 years ago would have gained roughly $285,000 in equity — all while maintaining a steady mortgage payment.6,7

In contrast, someone who chose to rent during that same period would have not only missed out on those equity gains, but they would have also seen average Canadian rental prices increase by around 34%.8

So even if renting seems like a better bargain today, buying could be the better long-term financial play.

Ready to compare your options? Then reach out to schedule a free consultation. As local market experts, we at the JP Realty Team can help you interpret the numbers to determine if buying or renting is a better value in your particular neighbourhood.

 

  1. Can I afford to be a homeowner?

If you determine that buying a home is the better value, you’ll want to evaluate your financial readiness.

Start by examining how much you have in savings. After committing a down payment and closing costs, will you still have enough money left over for ancillary expenses and emergencies? If not, that’s a sign you may be better off waiting until you’ve built a larger rainy-day fund.

Then consider how your monthly budget will be impacted. Remember, your monthly mortgage payment won’t be your only expense going forward. You may also need to factor in property taxes, insurance, association fees, maintenance, and repairs.

Still, you could find that the monthly cost of homeownership is comparable to renting, especially if you make a sizable down payment. Landlords often pass the extra costs of homeowning onto tenants, so it’s not always the cheaper option.

Plus, even though you’ll be in charge of financing your home’s upkeep if you buy, you’ll also be the one who stands to benefit from the fruits of your investment. Every major upgrade, for example, not only makes your home a nicer place to live; it also helps boost your home’s market value.

If you want to buy a home but aren’t sure you can afford it, give us a call to discuss your goals and budget. We can give you a realistic assessment of your options and help you determine if your homeowning dreams are within reach.

 

  1. Can I qualify for a mortgage?

If you’re prepared to handle the costs of homeownership, you’ll next want to look into how likely you are to pass Canada’s mortgage stress test and get approved for a mortgage.

Every borrower who applies for a mortgage from a federally-regulated lender, such as a bank, must pass a mortgage stress test – even if you have an ample down payment. (Some smaller lenders that aren’t federally regulated, such as credit unions, may also put your mortgage application through a stress test, but they aren’t required to do so.)9

To conduct the test, a lender will consider your qualifying income, estimated expenses (such as condo fees or non-mortgage-related debt), and prospective mortgage amount and calculate whether you’d still be able to afford the mortgage if your rate rose by a certain amount. You can also conduct your own mock stress test by inputting some income and expense estimates into the Government of Canada’s Mortgage Qualifier Tool.10 However, be aware the government’s minimum qualifying interest rate could change by the time you’re ready to buy.

Every lender will also have its own approval criteria separate from the feds’ minimum. But, in general, you can expect a creditor to scrutinize your job stability, credit history, and savings to make sure you can handle a monthly mortgage payment.

For example, lenders like to see evidence that your income is stable and predictable. So if you’re self-employed, you may need to provide additional documentation proving that your earnings are dependable. A lender will also compare your monthly debt payments to your income to make sure you aren’t at risk of becoming financially overextended.

In addition, a lender will check your credit report to verify that you have a history of on-time payments and can be trusted to pay your bills. Generally, the higher your credit score, the better your odds of securing a competitive rate.

Whatever your circumstances, it’s always a good idea to get preapproved for a mortgage before you start house hunting. Let us know if you’re interested, and we’ll give you a referral to a loan officer or mortgage broker who can help.

 

Want to learn more about applying for a mortgage? Reach out to request a copy of our report: “8 Strategies to Secure a Lower Mortgage Rate”

 

  1. How would owning a home change my life?

Before you begin the preapproval process, however, it’s important to consider how homeownership would affect your life, aside from the long-term financial gains.

In general, you should be prepared to invest more time and energy in owning a home than you do renting. There can be a fair amount of upkeep involved, especially if you buy a fixer-upper or overcommit yourself to a lot of DIY projects. If you’ve only lived in an apartment, for example, you could be surprised by the amount of time you spend maintaining a lawn.

On the other hand, you might relish the chance to tinker in your very own garden, make HGTV-inspired improvements, or play with your dog in a big backyard. Or, if you’re more social, you might enjoy hosting family gatherings or attending block parties with other committed homeowners.

The great thing about owning a home is that you can generally do what you want with it – even if that means painting your walls fiesta red one month and eggplant purple the next.

The choice – like the home – is all yours.

 

 HAVE MORE QUESTIONS? WE’VE GOT ANSWERS

The decision to buy or rent a home is among the most consequential you will make in your lifetime. We can make the process easier by helping you compare your options using real-time local market data. So don’t hesitate to reach out for a personalized consultation, regardless of where you are in your deliberations. We’d be happy to answer your questions and identify actionable steps you can take now to reach your long-term goals.  Give us a call at 905-878-5595, we can answer any of your questions and help you decide when the time is right for you.  Or send us an email at [email protected]

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

 

Sources:

  1. Canadian Real Estate Association (CREA) –
    https://stats.crea.ca/en-CA/
  2. Financial Post – https://financialpost.com/real-estate/nowhere-to-live-rents-in-canada-surge-as-home-prices-fall
  3. Wealthsimple –
    https://www.wealthsimple.com/en-ca/magazine/buying-vs-renting-your-home
  4. Trading Economics –
    https://tradingeconomics.com/canada/housing-index
  5. Investopedia –
    https://www.investopedia.com/terms/p/price-to-rent-ratio.asp
  6. CBC –
    https://www.cbc.ca/news/business/average-home-price-ticked-2-lower-in-july-1.1281984
  7. Canadian Real Estate Association (CREA) –
    https://stats.crea.ca/en-CA/
  8. CMHC –
    https://www03.cmhc-schl.gc.ca/hmip-pimh/en/TableMapChart/TableMatchingCriteria?GeographyType=Country&GeographyId=1&CategoryLevel1=Primary%20Rental%20Market&CategoryLevel2=Average%20Rent%20%28%24%29&ColumnField=2&RowField=TIMESERIES#timeperiod
  9. Government of Canada – https://www.canada.ca/en/financial-consumer-agency/services/mortgages/preparing-mortgage.html
  10. Financial Consumer Agency of Canada –
    https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQ-EAPH-eng.aspx

 

 

Posted by Christine Pecharich in Blog Posts, Brampton, Burlington, Georgetown, Guelph, Halton Hills, Milton, Mississauga, Oakville, Toronto
August 2022 Market Statistics

August 2022 Market Statistics

GTA REALTORS® Release August Stats

There were 5,627 home sales reported through the Toronto Regional Real Estate Board9s (TRREB) MLS® System in August 2022, representing a year-over-year dip of 34.2 per cent 3 a lesser annual rate of decline compared to the previous four months. The August sales result also represented a month-over-month increase compared to July.

Sales represented a higher share of new listings compared to the previous three months. If this trend continues, it could indicate some support for selling prices in the months ahead. On a year-over-year basis, the MLS® Home Price Index (HPI) was up by 8.9 per cent and the average selling price for all home types combined was up by 0.9 per cent to $1,079,500. The average selling price was also up slightly month-over-month, while the HPI Composite was lower compared to July. Monthly growth in the average price versus a dip in the HPI Composite suggests a greater share of more expensive home types sold in August.

While higher borrowing costs have impacted home purchase decisions, existing homeowners nearing mortgage renewal are also facing higher costs. There is room for the federal government to provide for greater housing affordability for existing homeowners by removing the stress test when existing mortgages are switched to a new lender, allowing for greater competition in the mortgage market. Further, allowing for longer amortization periods on mortgage renewals would assist current homeowners in an inflationary environment where everyday costs have risen dramatically,= said TRREB President Kevin Crigger.

The Office of the Superintendent of Financial Institutions (OSFI) should weigh in on whether the current stress test remains applicable. Is it reasonable to test home buyers at two percentage points above the current elevated rates, or should a more flexible test be applied that follows the interest rate cycle? In addition, OSFI should consider removing the stress test for existing mortgage holders who want to shop for the best possible rate at renewal rather than forcing them to stay with their existing lender to avoid the stress test. This is especially the case when no additional funds are being requested,= said TRREB CEO John DiMichele.

There are other issues beyond borrowing costs impacting housing affordability in the Greater Golden Horseshoe. The ability to bring on more supply is the longer-term challenge. However, we are moving in the right direction on this front. The strong mayor proposal from the province coupled with the recent commitment from Toronto Mayor John Tory to expand ownership and rental housing options are examples of this. TRREB looks forward to hearing additional initiatives from candidates vying for office in the upcoming municipal elections,= said TRREB Chief Market Analyst Jason Mercer.

Milton Summary:

Average Sale Price over this time last year:  + 15.9%

Number of Sales over this time last year:  -37.0 %

Oakville Summary:

Average Sale Price over this time last year:  + 14.1%

Number of Sales over this time last year:  -39.7 %

Burlington Summary:

Average Sale Price over this time last year:  + 18.5%

Number of Sales over this time last year:  -23.6 %

Halton Hills (Georgetown) Summary:

Average Sale Price over this time last year:  + 19.9%

Number of Sales over this time last year:  -25.1 %

Mississauga Summary:

Average Sale Price over this time last year:  + 14.3%

Number of Sales over this time last year:   -35.3 %

 

 

Posted by Christine Pecharich in Blog Posts, Burlington, Georgetown, Guelph, Halton Hills, Market Reports, Milton, Mississauga, Oakville, Toronto
8 Strategies to Secure a Lower Mortgage Rate

8 Strategies to Secure a Lower Mortgage Rate

Interest rates have risen rapidly this year, triggered by the Bank of Canada’s efforts to curb inflation. And the July MNP Consumer Debt Index found that 59% of Canadians “are already feeling the effects of interest rate increases.”1

Why has the impact been so widespread? In part, due to the rising popularity of variable rate mortgages. According to the Canada Mortgage and Housing Corporation, in the latter half of last year, the majority of mortgage borrowers opted for a variable over a fixed interest rate.2

Variable mortgages are typically pegged to the lender’s prime rate, which means they are immediately affected by rising interest rates. Homeowners with fixed mortgages aren’t impacted as quickly because their interest rate is locked in, but they will face higher rates, as well, when their mortgages are up for renewal. And many homebuyers are finding it increasingly difficult to afford or even qualify for a mortgage at today’s elevated rates.

Fortunately, there are steps you can take to strengthen your position if you have plans to buy a home or renew an existing mortgage. Try these eight strategies to help secure the best available rate:

 

  1. Raise your credit score.

Borrowers with higher credit scores are viewed as “less risky” to lenders, so they are offered lower interest rates. A “good” credit score typically starts at 660 and can move up into the 800s.3 If you don’t know your score, you can access it online from Canada’s two primary credit bureaus, Equifax and Transunion.4

Then, if your credit score is low, you can take steps to improve it, including:5

  • Correct any errors on your credit reports, which can bring down your score. You can request free copies of your reports through the Equifax and Transunion websites.
  • Pay down revolving debt. This includes credit card balances and home equity lines of credit.
  • Avoid closing old credit card accounts in good standing. It could lower your score by shortening your credit history and shrinking your total available credit.
  • Make all future payments on time. Payment history is a primary factor in determining your credit score, so make it a priority.
  • Limit your credit applications to avoid having your score dinged by too many inquiries. If you’re shopping around for a car loan or mortgage, minimize the impact by limiting your applications to a two-week period.

Over time, you should start to see your credit score climb — which will help you qualify for a lower mortgage rate.

 

  1. Keep steady employment.

If you are preparing to purchase a home, it might not be the best time to make a major career change. Unfortunately, frequent job moves or gaps in your résumé could hurt your borrower eligibility.

When you apply for a new mortgage, lenders will typically review your employment and income history and look for evidence that you’ve been financially stable for at least two years.6 If you’ve earned a steady paycheck, you could qualify for a better interest rate. A stable employment history gives lenders more confidence in your ability to repay the loan.

That doesn’t mean a job change will automatically disqualify you from purchasing a home. But certain moves, like switching from corporate employment to freelance or self-employment status, could force you to delay your purchase, since lenders will want to see proof of steady, long-term earnings.6

  1. Lower your debt service ratios.

Even with a high credit score and a great job, lenders will be concerned if your debt payments are consuming too much of your income. That’s where your debt service ratios will come into play.

There are two types of debt service ratios:7

  1. Gross debt service (GDS) — What percentage of your gross monthly income will go towards covering housing expenses (mortgage, property taxes, utilities, and 50% of condo maintenance fees)?
  2. Total debt service (TDS) — What percentage of your gross monthly income will go towards covering ALL debt obligations (housing expenses, credit cards, student loans, and other debt)?

What’s considered a good debt service ratio? Lenders typically want to see a GDS ratio that’s no higher than 32% and a TDS ratio that’s 40% or less.7

Low debt service ratios will also help you pass a mortgage stress test, which is required by all Canadian banks and some other types of lenders. The stress test is designed to help ensure you can continue to afford your mortgage payments even if interest rates rise. You can use the government of Canada’s Mortgage Qualifier Tool to calculate how much you can afford to borrow.

If your debt service ratios are too high, or you can’t pass a mortgage stress test, you may need to consider purchasing a less expensive home, increasing your down payment, or paying down your existing debt. A bump in your monthly income will also help.

 

  1. Increase your down payment.

Minimum down payment requirements vary by loan size and property type. But, in some cases, you can qualify for a lower mortgage rate if you make a larger down payment.

Why do lenders care about your down payment size? Because borrowers with significant equity in their homes are less likely to default on their mortgages. That’s why you will be required to purchase mortgage default insurance if you put down less than 20%.8

It’s important to note that some lenders offer discount rates for borrowers who put down less than 20% – because the required default insurance protects them from any potential loss. However, the cost of CMHC or private mortgage default insurance will typically exceed any interest savings. You’ll also have to pay interest on that insurance if you add it to your mortgage.9 The bottom line: you’ll save money in borrowing costs if you can afford a larger down payment.

Fortunately, there are a couple of government-initiated resources designed to help eligible first-time home buyers with a down payment, including:9

  • Home Buyers’ Plan (HBP) – Buyers may withdraw up to $35,000 (tax-free) from their Registered Retirement Savings Plan (RRSP). The money must be used to build or purchase a qualifying home and repaid to the RRSP within 15 years.
  • First-Time Home Buyer Incentive – Buyers can take advantage of a shared-equity mortgage with the Government of Canada. Essentially, the Government will put 5% or 10% towards your down payment, interest-free, in exchange for a limited equity share of your property. The repayment is due in 25 years or when you sell your home.

We’d be happy to discuss these and other programs, tax rebates, and incentives that might help you increase your down payment.

 

  1. Weigh interest rate options.

All mortgages are not created equal, and some may be a better fit than others, depending on your priorities and risk tolerance. For starters, there are several interest rate options to choose from:10

  • Fixed — You’re guaranteed to keep the same interest rate for the entire length of the loan. Many buyers prefer a fixed rate because it offers them predictability and stability. However, you’ll pay a premium for it, as these mortgages typically have a higher interest rate to start. And if rates fall, you’ll be locked into that higher rate.
  • Variable — Your interest rate will rise or fall along with your lender’s prime rate. You can choose either an adjustable or a fixed monthly payment. However, if you opt for a fixed payment, the amount that goes towards principal and interest each month will fluctuate depending on the current rate. Variable-rate mortgages typically offer lower interest rates to start but run the risk of increasing.
  • Hybrid – Can’t decide between a fixed or variable rate? Hybrid mortgages attempt to address that dilemma. A portion of the mortgage will have a fixed rate and the remainder will have a variable rate. The fixed gives you some protection if rates go up, while the variable offers some benefit if rates fall.

What’s the best choice if you’re looking for the lowest mortgage rate? The answer is…it depends. If mortgage rates don’t rise much higher, or drop back down in a couple of years, you could win by opting for a variable rate. However, if they continue to climb, you may be better off with a fixed rate.

Keep in mind that the spread between variable and fixed rates has narrowed as rates rise.11  However, it’s still easier to meet the stress-test requirements for a variable mortgage, since the threshold is lower.12 So, your choice may be limited by your ability to qualify.

 

  1. Compare loan terms.

A mortgage term is the length of time your mortgage agreement is in effect. At the end of the term, a mortgage holder will need to either pay off their mortgage or renew for another term.

There are three major types of mortgage terms:13

  • Shorter-term – These can range from 6 months to 5 years, and they are the most popular type in Canada. Borrowers can choose between a fixed or variable interest rate.
  • Longer-term – These are longer than 5 years but generally no more than 10 years in length. Longer-term mortgages are more likely to feature fixed-interest rates and hefty prepayment penalties.
  • Convertible – Offers the option to extend a shorter-term mortgage to a longer-term mortgage, typically at a different interest rate.

Which loan term offers the lowest rate? A shorter-term mortgage will typically feature a lower interest rate than a longer-term mortgage. However, the rate on a 1-year or a 3-year mortgage could be higher or lower than a 5-year mortgage depending on the current economic climate and whether it’s fixed or variable.

Many lenders offer especially attractive rates for 5-year mortgages due to their popularity.14 But to find the best rate, you’ll need to compare your options at the time of purchase or renewal.

 

  1. Get quotes from multiple lenders.

When shopping for a mortgage, be sure to solicit quotes from several different lenders and lender types to compare the interest rates and fees. Depending upon your situation, you could find that one institution offers a better deal for the type of loan and term length you want.

Ideally, you should begin this process before you start looking for a home. If you get preapproved for a mortgage, in most cases, you can lock in the mortgage rate for 90 to 120 days. This is especially important when interest rates are rising.15Some borrowers choose to work with a mortgage broker. Like an insurance broker, they can help you gather quotes and find the best rate.

They’re paid a commission by the lender, so it won’t cost you anything out of pocket to use a broker. However, make sure you find out which lenders they work with and contact more than one so you can compare their recommendations.16

Don’t forget that we can be a valuable resource in finding a lender, especially if you are new to the home buying process. After a consultation, we can discuss your financing needs and connect you with loan officers or brokers best suited for your situation.

 

  1. Ask for a discount.

When shopping for a mortgage, don’t be afraid to negotiate. In Canada, it’s commonplace for lenders to discount their advertised interest rates, which are called posted rates. And in many cases, all you have to do is ask. Of course, the strength of your application will come into play here – so don’t neglect strategies 1 through 4 above.17

Keep in mind that interest rates aren’t the only thing on the table. You can negotiate other contract terms, as well, like prepayment options and rebates. And if you get a great offer from one lender, you can leverage it by asking your preferred institution to match or beat it.17

 

Getting Started

Unfortunately, the rock-bottom mortgage rates we saw during the height of the pandemic are behind us. However, today’s 5-year fixed rates still fall beneath the historical average — and are well below the all-time peak of 20.75% in 1981.18

And although higher mortgage rates have made it more expensive to finance a home purchase, they have also ushered in a more balanced market. Consequently, today’s buyers are finding more homes to choose from, a better value for their investment, and sellers who are willing to negotiate.

If you have questions or would like more information about buying or selling a home, reach out to schedule a free consultation. We at the JP Realty team would love to help you weigh your options, navigate this shifting market, and reach your real estate goals!

 

Sources:

 

  1. MNP Consumer Debt Index –
    https://mnpdebt.ca/en/resources/mnp-consumer-debt-index
  2. Global News –
    https://globalnews.ca/news/8970237/canada-mortgages-variable-fixed-cmhc/
  3. Loans Canada –
    https://loanscanada.ca/mortgage/minimum-credit-score-required-for-mortgage-approval/
  4. Government of Canada –
    https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/order-credit-report.html
  5. Government of Canada – https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/improve-credit-score.html
  6. RATESDOTCA –
    https://rates.ca/resources/how-long-at-job-before-applying-mortgage
  7. NerdWallet –
    https://www.nerdwallet.com/ca/mortgages/what-are-debt-service-ratios
  8. Royal Bank of Canada –
    https://www.rbcroyalbank.com/mortgages/mortgage-default-insurance.html
  9. Government of Canada – https://www.canada.ca/en/financial-consumer-agency/services/mortgages/down-payment.html#toc2
  10. Government of Canada –
    https://www.canada.ca/en/financial-consumer-agency/services/mortgages/choose-mortgage.html
  11. Canada Mortgage Professional –
    https://www.mpamag.com/ca/mortgage-industry/industry-trends/what-do-falling-bond-yields-mean-for-fixed-rates/416463
  12. The Globe and Mail –
    https://www.theglobeandmail.com/business/article-the-best-mortgage-strategies-for-a-rising-interest-rate-environment/
  13. Government of Canada –
    https://www.canada.ca/en/financial-consumer-agency/services/mortgages/mortgage-terms-amortization.html
  14. ca –
    https://wowa.ca/mortgage-rates
  15. NerdWallet –
    https://www.nerdwallet.com/ca/mortgages/what-is-mortgage-pre-approval
  16. Government of Canada –https://www.canada.ca/en/financial-consumer-agency/services/mortgages/preapproval-qualify-mortgage.html
  17. NerdWallet –
    https://www.nerdwallet.com/ca/mortgages/negotiating-mortgage-fees
  18. ca –
    https://www.ratehub.ca/5-year-fixed-mortgage-rate-history
Posted by Christine Pecharich in Blog Posts
10 Pro Tips for a Smooth Home Move

10 Pro Tips for a Smooth Home Move

The process of buying a new home can be both exhilarating and exhausting. But the journey doesn’t stop when you close on your property. On the contrary, you still have quite a bit to do before you can begin the process of settling into your new place.

Fortunately, you don’t have to do everything in a day. You don’t have to do it all alone, either. When you work with our team (JP Realty Team) to sell or purchase a home, you’ll have an ally by your side long after your transaction has closed. We’ll continue to be a resource, offering advice and referrals whenever you need them on packing, hiring movers and contractors, and acclimating to your new home and neighbourhood.

When it comes to a life event as stressful as moving, it pays to have a professional by your side. Here are some of our favourite pro tips to share with clients as they prepare for an upcoming move.

  1. Watch out for moving scams.

Maybe you receive a flyer for a moving company in the mail. Perhaps you find a mover online. Either way, never assume that you’re getting accurate information. According to The Canadian Association of Movers, moving scams are on the rise — with seniors, in particular, being targeted.1

How can you tell if a moving deal is too good to be true? Trust your instincts. If the price appears too low or you can’t pin down the mover’s physical business address, try someone else. The same goes for any moving company representative who dodges questions. Reputable movers should offer transparent pricing, conduct in-home estimates, and provide referrals and copies of their insurance documents upon request.1 For help finding trustworthy movers, reach out. We’d be happy to share our recommendations.

  1. Insure your belongings.

Your moving company promises to take care of your custom piano or your antique furniture. But don’t just take their word for it. Ask to see how much insurance they carry and talk about how the claims process works. That way, you’ll know what is (and isn’t) covered in case of loss or damage. If needed, consider paying extra to upgrade to full replacement value protection.2

Of course, some items are priceless because they’re irreplaceable. You might want to move your more sensitive valuables (jewellery, documents, family heirlooms, etc.) in your own vehicle just to be safe. For added peace of mind, call your home insurance provider if you’re moving anything yourself. In many cases, your personal property will be covered while in transit for a limited period of time.

  1. Start packing when you start looking for a new home.

As soon as your house hunting begins in earnest, think about packing away things you won’t need for the next few months. These could include seasonal or holiday decor, clothing, and books. Tackling just one or two boxes a day will give you a head start.

If you’re going to put your current home on the market, you’ll want to declutter anyway. Decluttering will make your home seem larger, and depersonalizing helps buyers envision their own items in the space. Consider selling, donating, or throwing out possessions you no longer need. The things you want to keep can be placed in storage until you officially start moving to a new place.

  1. Pack to make unpacking easier.

Have you ever opened a packed box only to find that it’s filled with an assortment of items that don’t belong together? This isn’t efficient and will only make unpacking harder. A better way to pack is to bundle items from a single room in a labelled box. Labels can let movers know (and remind you) where to place each box, whether it’s fragile, and which side needs to be up. Some people like to assign colours to each room in their new home to make distributing colour-coded boxes a breeze.

Feel free to unleash your inner organizer with this project. For example, you could create a spreadsheet and assign each box a number. As boxes are packed, simply fill in the spreadsheet with a list of contents. Anyone with access to the spreadsheet can log in and quickly find a desired item.

  1. Think outside the box when transporting clothes.

Who wants to worry about boxing up clothes? If you plan on hiring professional movers, ask if you can leave clothing in your dressers. In many cases, they will use plastic to wrap the dresser so the drawers don’t fall out during transport. If keeping your clothes in your furniture makes it too heavy, the movers might be able to wrap and move drawers by themselves.

Another easy transport trick involves turning clean garbage bags into garment bags. Poke a hole in the bottom of a garbage bag, turn the bag upside down, slide it over five to seven garments on hangers, and lay the items flat in the back seat or trunk of your vehicle. The bags will help prevent wrinkling, and your clothes will be ready to hang up when you get to your new home.

  1. Document prior to disassembling appliances and furnishings.

Few things are as confusing as looking at a plastic baggie filled with nuts, bolts, and screws from your disassembled dining room table or sorting through a box of electrical wires and cords to see which ones fit your TV.

The best workaround to easier reassembly is to document the disassembly process. Take photos and videos or thorough notes as you go. Whether it’s your headboard or treadmill, be very precise. And just a tip: Construct your beds first when you get to your new home. After a long moving day, the very last thing you want is to be assembling beds into the wee hours of the morning.

  1. Prioritize unpacking kids’ rooms.

Children can become very stressed by a big move. To ease their transition, consider prioritizing unpacking their rooms as their “safe zones.”3 You aren’t obligated to unpack everything, certainly. However, set up your children’s rooms to be functional. That way, your kids can hang out in a private oasis away from the chaos while you’re running around and moving everything else.

Depending upon how old your youngsters are, you might want to give them decorating leeway, too. Even if it’s just letting them choose where furniture goes, it gives them a sense of buy-in. This can help ease the blues of leaving a former home they loved.

  1. Be a thoughtful pet parent.

Many types of pets can’t handle the commotion of moving day. Knowing this, be considerate and seek ways to give your pets breaks from the action. You might ask a friend to pet-sit your pooch or keep your kitty in a quieter room, like a guest bathroom.

Be sure to check in on your pet frequently. Pets like to know that you’re around. Give them treats, food, and water throughout the day. When it’s time to transport your pet, do it calmly. At your new property, give your pet access to just a room or two at first. Pets typically prefer to acclimate themselves slowly to unfamiliar environments.4

  1. Plan for your move like you’re planning for an exciting vacation.

When you plan vacations, you probably look up local restaurants, shops, and recreational areas. Who says you can’t do the same thing when moving? Create a list of all the places you want to go and things you want to do around your newly purchased home. Having a to-explore list keeps everyone’s spirits high and gives you starting points to settle into the neighbourhood.

And don’t feel that you have to cook that first night. Once the moving trucks are gone, you can always pop over to a local eatery or order SkipTheDishes for major convenience. The first meal in your new home should be a happy, welcoming treat. And if you’re relocating to our neck of the woods, we would love to introduce you to the hot spots in town and recommend our local favourites.

  1. Pack an “Open Me First!” box.

You won’t be able to unpack all your boxes in one day, but you shouldn’t go without your sheets, pillows, or toothbrush. Designate some boxes with “Open Me First!” labels. (Pro tip: Keep a tool kit front and centre for all that reassembling.)

Along these lines, use luggage and duffel bags to transport everyone’s personal must-have items and enough clothing for a couple of days. That way, you won’t have to rummage through everything in the middle of your move looking for sneakers or snacks.

When packing your “Open Me First!” boxes, think about which items you’ll need in those first 24 hours. For example, toilet paper and hand soap are musts. A box cutter will make unpacking a lot easier, and paper towels and trash bags are sure to come in handy. Reach out for a complete, printable list of “Open Me First!” box essentials to keep on hand for your next move!

LET’S GET MOVING

Getting the phone call from us at the JP Realty Team that your offer was accepted is a thrilling moment. Make sure you keep the positivity flowing during the following weeks by mapping out a streamlined, efficient move. Feel free to get in touch with us today to help make your big move your best move.

 

 

Sources:

  1. net –
    https://www.mover.net/planning-a-move/consumer-alerts/moving-fraud
  2. net –
    https://www.mover.net/planning-a-move/info-about-moving/moving-protection
  3. Aha! Parenting –
    https://www.ahaparenting.com/read/moving-help-child-adjust
  4. Ontario SPCA –
    https://ontariospca.ca/blog/how-to-successfully-move-homes-with-your-pet/
Posted by Christine Pecharich