While Vancouver area home sales are still posting year-over-year declines, signs are appearing in the Greater Toronto Area that the worst of the housing correction is now over.
Experts say that likely won’t be enough to stave off a slowdown in national GDP growth, however, which in part will be impacted by the housing market’s weak performance over the first half of the year.
Is the Housing Market Turning a Corner?
Following weak home sales activity for the first half of the year, recent data is suggesting the housing market may be adapting to new mortgage rules and higher rates and turning a corner for H2.
“Early data for the month of July reported this week was mixed, but overall suggest that the worst of the housing correction is in the rear-view mirror,” senior TD economist James Marple wrote in a research note.
GTA home sales were up 6.6% year-over-year in July, with the sales-to-new-listings ratio rising to 50%, up from a trough of 44 per cent in March. Prices are also up 3.1% from June.
“All told, there are still some soft spots on the landscape, and temporary factors appear likely to return in the third quarter (shutdowns in the Alberta oil patch),” he added. “Still, for the year as a whole, the Canadian economy looks to maintain above-trend growth.”
Last month TD economist Ksenia Bushmeneva also predicted a turnaround for the second half of 2018. “Historically, the impact of policy changes is swift but short-lived, and it seems that the housing market is once again finding its footing. We expect that resale activity hit its trough in Q2 and will begin to gradually recover thereafter,” Bushmeneva wrote.
Marple added that with inflation above 2% and unemployment “close to a historical nadir, the case for continued increases in interest rates remains solid.” OIS markets are currently 32% priced in for a rate hike at the BoC’s next meeting on September 5.
GVA, GTA Housing Slowdowns Affecting National Growth
Lower home sales in Canada’s two largest housing markets this year are causing a ripple effect throughout the Canadian economy, the Globe and Mail reported.
Residential real estate activity accounts for roughly 7% of this country’s GDP, the article noted, and quoted economists who say a drop in resale activity is causing many to revise down growth forecasts.
National resale activity in the first half of 2018 fell 14% from 2017, while Greater Vancouver and the Greater Toronto Area saw drops of 25.5% and 27%, respectively. While activity in the GTA picked up in June and July, Vancouver activity is still down 30% from last year.
Although resale activity has less of an impact on GDP compared to new home construction, RBC senior economist Robert Hogue said it’s still enough to reduce the rate of GDP growth.
“That slowdown is having an effect,” Hogue noted in a research note. “It may not have the effect we might think intuitively, like it is going to take GDP [growth] down to negative. But not contributing to growth, I would say, is a pretty significant development.”
Hogue forecasts national GDP growth will slow to 1.9% in 2018 from 3% last year, and growth in Ontario to fall to 2% from 2.7% last year.
Vancouver Residents Continue to Blame Foreign Buyers for Housing Crisis
An overwhelming majority of Vancouver residents believe foreign buyers are responsible for the city’s housing crisis, despite studies showing that they play a relatively small role in house price appreciation.
A new poll from Insights West found that 90% of Metro Vancouverites believe the city is in the midst of a housing crisis, with 84% believing foreign homebuyers are responsible for the current situation.
Other factors residents cite include:
- Population growth (80%)
- Shadow flipping (76%)
- Money laundering (73%)
- City and municipal zoning bylaw (63%)
- Immigration (58%)
- Lack of available land due to geography (53%)
- Interprovincial migration (46%)
“There is no doubt that Metro Vancouver residents believe that we are in a major crisis when it comes to housing, and the issue is dominating public opinion and the public agenda,” Insights West President Steve Mossop said in a release. “What is surprising though are the misconceptions that exist with respect to the culprits and causes of this crisis.”
This article was written by Steve Huebl and originally published on Canadian Mortgage Trends on August 8th 2018.
Along with employment stability, and downpayment/equity, your credit score and how you manage your credit is a huge factor in qualifying for a mortgage. If you want the best interest rates available on the market, the higher your credit score the better.
However, if you’ve had credit mishaps in the past, don’t let it stop you from improving your score now. Everyone has a credit score, and regardless of where it is on the scale of 300-900, there is always room for improvement. So here are some things to consider that will help boost your credit score.
Make all your payments on time. This is so important. Probably the most important factor. When any lender extends credit to you, you agree to make payments on a schedule. When you break that schedule, you show the lender you can’t be trusted. The lender reports the missed payments to the credit reporting agencies, and your credit score is lowered. It’s that simple. So what if you miss a payment? The second you realize it, or have the money, make the payment. It’s also a good idea to contact the lender, let them know what happened and tell them that the payment has been made. Although lenders only report after payments have been missed for 30 days, don’t let that stop you from making all your payments on time.
Stop acquiring new credit. Assuming you have at least 2 different trade lines with a minimum $2500 balance each, you shouldn’t just go out and acquire new credit. Now, if you need a car loan, that’s fine, make an application, but having more credit available to you just for the sake of it doesn’t help your credit score. In fact, each time a lender looks at your credit report, it will lower your credit score a little bit.
Keep a reasonable balance. The more credit you use compared to the limit, the less credit worthy you will appear. So it’s better to carry a minimal balance compared to maxing out your credit cards, and just making the minimum payments. It’s a good idea to keep your spending to 20%-30% of the limit of the card or line of credit. That shows good utilization.
Check your credit report periodically. Did you know that roughly 20% of credit reports have misinformation on them? Mistakes happen all the time, lenders misreport information, people with the same names get merged reports, you miss a final bill from a utility and it gets sent to collection without you knowing. By checking your credit periodically, you can stay on top of everything and correct any errors before they become a problem. Equifax Canada has a great program. As does Transunion.
Pay out collections immediately. It happens more than you would think. Closed cell phone contracts with a small balance owing, or a utility final billing that got missed, parking tickets, or wage garnishments, or spousal support payments. They can all show up on your credit bureau, and they won’t drop off until they are handled. So if you have any of these on your credit report, you should consider taking care of them as soon as possible. Then make sure to follow up, and ensure they have been removed.
Use your credit card. On the other side of the coin, you want to make sure that you at least periodically use your credit at least every three months. Loan payments are great in that they come out of your account on a schedule, if you only have credit cards, and never use them, there is a chance the lender might not report your usage, and that won’t help your credit score. A simple way to go is to use a credit card for gas and groceries, and pay it off every month.
So there you have it, regardless of what your credit looks like now, if you follow the points outlined above, you will continue to increase your credit score.
If you would like to work through your credit report with us, and put together a plan so you can qualify for a mortgage, please don’t hesitate to contact us anytime!
This should come as no surprise, but sometimes life throws you a financial curveball. Bankruptcy and consumer proposals happen. It doesn’t mean your life is over, and it doesn’t mean you won’t ever qualify for a mortgage again. The key here is to get a plan in place and show that you’ve got things under control. You must be able demonstrate to anyone considering you for financing that what happened in the past won’t happen again in the future.
Mortgage financing post bankruptcy is possible, it’s just different than your standard mortgage financing in that the following considerations must be taken into account.
- Firstly, financing will be dependent on how long it has been since you were discharged from your bankruptcy, or how long since you completed your consumer proposal. Most lenders consider the discharge date on both to be your new ground zero.
- Secondly, financing will be dependent on how you have been re-establishing your credit since your discharge date. Also, how in depth that credit is. A $700 Visa is nice, but a $5000 Line of Credit carries a little more weight.
In order to qualify for mortgage financing with a mainstream lender, they will want to see a minimum of the following before they will give you a mortgage. You must be discharged for at least 2 years, have at least a 5% downpayment from your own resources (although 10% is a safer bet), 2 years of credit established through 2 trade lines with a minimum credit amount of $2500 each, and no late or missed payments. This would be the bare minimum to qualify.
As mortgage professionals, our job is to provide solutions and strategies for our clients. As such we have access to lenders who aren’t mainstream. These alternative lenders will consider extending mortgage financing when clients have a larger downpayment. You’re looking at 20%-25% downpayment minimum, and the interest rates will be a little higher than mainstream lending. Alternative lending isn’t for everyone, but it’s a great solution for some, especially those who have gone through a bankruptcy or consumer proposal.
So whether you’re looking for a plan to help you qualify for a mortgage with the most favourable terms, or if you need something more immediate. Please don’t hesitate to contact us anytime. We would love to help outline your financing options and give you a plan so that you can get a mortgage post bankruptcy.
Over the last few years, it’s been more a story about tightening rules and regulations, mitigating risk, and restricting lending practices than anything. However the Canadian Mortgage and Housing Corporation (CMHC) just announced that it looks like mortgage financing for self-employed Canadians might just be getting a little more flexible.
Although changes won’t come into effect until October of 2018, any news about increased flexibility in mortgage qualification is welcome! Included below is the original press release posted on the CMHC website on July 19th 2018.
If you’re self-employed and have been considering buying a property, please don’t hesitate to reach out to discuss what these new changes might look like for you! Contact us anytime!
CMHC Introduces Changes to Help Self-Employed Canadians Own Their Own Home
Self-employed Canadians are key contributors to strong and vibrant communities and make up about 15% of Canada’s population. However, they may have difficulty qualifying for a mortgage as their incomes may vary or be less predictable.
In line with the National Housing Strategy’s mission to address the housing needs of all Canadians, Canada Mortgage and Housing Corporation (CMHC) is making a number of changes aimed at giving lenders more guidance and flexibility to help self-employed borrowers:
- Providing examples of factors that can be used to support the lender’s decision to lend to self-employed borrowers who have been operating their business for less than 24 months, or in the same line of work for less than 24 months such as acquiring an established business, sufficient cash reserves, predictable earnings and previous training and education; and
- Providing a broader range of documentation options to increase flexibility for satisfying income and employment requirements when qualifying self-employed borrowers such as the Notice of Assessment (NOA) accompanied by the T1 General, the CRA Proof of Income Statement and the Statement of Business or Professional Activities (T2125) to support an “add back” approach for grossing up income for sole proprietorship and partnerships.
These enhancements, which apply to both transactional and portfolio insurance, will take effect October 1, 2018.
As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers objective housing research and information to Canadian governments, consumers and the housing industry.
Canada’s self-employed workforce are already an important part of the Canadian economy and it is growing, driven partly by an increase in the on-demand economy.
Housing is a vehicle for social inclusion and, through the lens of the National Housing Strategy, CMHC is increasing flexibility for self-employed Canadians.
If you’ve ever wondered about what motivating factors are considered by Canadians, driving them to buy homes, here is a recent report released by the Canadian Mortgage and Housing Corporation (CMHC) that takes a look at our major metropolitan centres. Here are some of the summary results, followed by the survey itself.
- In both Vancouver and Toronto, 48% of homebuyers respectively spent more than they budgeted on their home purchase while only 24% of homebuyers in Montreal exceeded their budget.
- About 55% of buyers experienced a bidding war in Toronto and Vancouver, which is much larger than the 17% recorded in Montreal.
- 68% of respondents in Vancouver believe foreign investors have a lot of influence in driving up home prices while 48% of respondents in Toronto believe foreign investors have a lot of influence driving up home prices.
- Statistics Canada reported the share of non-resident ownership across all properties is 4.8% in Vancouver and 3.4% in Toronto.
- In Vancouver the influence of investors is perceived to be stronger than conventional factors such as supply constraints and demand side factors.
If you are considering getting into the housing market, or climbing the property ladder, please don’t hesitate to contact us anytime!
Here is the full report from CMHC.