Improved credit quality for CMHC loans portfolio

The latest quarterly financial results from CMHC show continued improvement in the quality of its mortgage loan portfolio.

During the first half of 2018, the overall arrears rate decreased from 0.29% to 0.27% and the average homebuyer had a credit score of 754.

A typical homebuyer bought a home costing almost $271,000 with most choosing a 25-year amortization mortgage with 80% preferring a fixed rate loan.

CMHC provided mortgage insurance for nearly 107,000 homes in the first half of 2018 with 57,781 for homebuyers and 48,885 for rental units.

Its securitization programs provided lenders with nearly $75 billion in guarantees.

Its business activities generated revenues of $2.7 billion and a net income of $681 million through the first half of 2018 and at June 30, 2018, its overall insurance-in-force was $463 billion with $13.5 billion in capital available, representing 177% of the minimum regulatory capital required. Total guarantees-in-force were $479 billion with $2.5 billion in capital held, representing 143% of the minimum required.

Helping with housing needs
CMHC also delivered nearly $1.5 billion to create and support much-needed housing units for low- and middle-income Canadians and continued to implement National Housing Strategy initiatives.

"We continued to implement initiatives under the National Housing Strategy while delivering results for Canadians and helping people from all across the country meet their housing needs," said Lisa Williams, Chief Financial Officer

source: https://www.canadianrealestatemagazine.ca/market-update/improved-credit-quality-for-cmhc-loans-portfolio-247274.aspx

Canadian housing market is bouncing back says TD Economics

Things are starting to improve in Canada’s housing markets according to a report from TD Economics.

Deputy chief economist Derek Burleton and economist Rishi Sondhi say that recent data has confirmed TD’s view that there would be some traction gained after initial sharp impact to tighter lending restrictions at the start of the year.

“Past experience has shown that markets begin to stabilize after about 4-6 months following the implementation of major changes to housing policy. True to form, sales activity and average prices have come off a floor in most major markets since May,” the economists’ report says.

The report notes recent stabilization in the GTA with increasing resales for both single-family (20% estimated) and condos (10% estimated) and prices climbing.

However, the TD Economics team say that Vancouver is not yet seeing the same rebound as the market’s low affordability. The economists say that the market has yet to find a bottom as provincial cooling measures are also in play alongside the tighter mortgage lending rules.

While the signs of stabilization and even a comeback are evident, the report warns of uneven conditions across Canada’s markets and the spectre of economic conditions, interest rate rises, and trade tensions impacting job markets.

Source: https://www.canadianrealestatemagazine.ca/market-update/canadian-housing-market-is-bouncing-back-says-td-economics-247032.aspx

Confidence in the economy, real estate is growing

Canadians are becoming more confident in the outlook for the economy, real estate prices, and their finances.

The weekly Bloomberg Nanos Canadian Confidence Index recorded a 56.58 reading last week, up from 55.87 a week earlier and 54.31 four weeks ago. The 2018 low was in mid-July (54.21).

The sub-indexes on personal finances and job security; and expectations for the economy and real estate prices; were both higher last week.

“Over the past four weeks views on the future strength of the Canadian economy have positively moved up almost four percentage points,” said Nanos Research, Chief Data Scientist, Nik Nanos. “Compared to the results four weeks ago all regions in Canada are up in consumer confidence.”

Younger Canadian adults have shown increases in confidence while those over 50 are less confident overall.

Confidence improved among both homeowners and renters.

Source: https://www.canadianrealestatemagazine.ca/market-update/confidence-in-the-economy-real-estate-is-growing-246837.aspx

Interest rate hike likely in October says TD economist

The cost of living was higher in July as energy prices and interest rates added to household expenditure.

Data from Statistics Canada show that the Consumer Price Index was up 3% on an annual basis following June’s 2.5% increase.

The largest influence on the CPI was the continued rise in energy costs, up 14.7% year-over-year, with gasoline up 25.4% and fuel oil and other fuels rising more than 28%.

The mortgage interest index was up 5.2% in the 12 months to July on the impact of the BoC’s interest rate rises.

There were also notable increases in the cost of transportation, air travel, and travel tours; and telephone services.

In all provinces, prices rose more in July on a year-over-year basis compared with the previous month.

The Bank of Canada's preferred measures of core inflation remained stable in July.

“The relative stability of core inflation measures may give the Bank of Canada some solace,” commented TD Economics’ senior economist James Marple. “Still, with an economy beating expectations and a range of indicators pointing to limited excess capacity, maintaining stable inflation is likely to require further rate hikes by the central bank with the next one likely coming in October.”

Source: https://www.canadianrealestatemagazine.ca/market-update/interest-rate-hike-likely-in-october-says-td-economist-246778.aspx

Is the impact of the stress test starting to fade?

National home sales improved in July with a 1.9% rise in sales compared to the previous month.

CREA says that although sales have been trending higher over the past three months now, they are still running below the levels seen a year earlier.

A major factor in this year’s weaker activity has been the B-20 mortgage guideline changes at the start of the year, specifically the introduction of mortgage stress tests.

"This year's new stress-test on mortgage applicants continues to weigh on home sales but its effect may be starting to fade slightly in Toronto and nearby markets," said CREA President Barb Sukkau. "The degree to which the stress-test continues to sideline home buyers varies depending on location, housing type and price range.”

Actual (not seasonally adjusted) activity was down 1.3% y-o-y. The result reflects fewer sales in major urban centres in British Columbia and an offsetting improvement in activity in the GTA.

New listings nationally dropped 1.2% to levels below the average for the past 8 years and the sales-to-new-listings ratio tightened to 55.9%.

There were 5.3 months of inventory on a national basis at the end of July 2018, down from 5.4 months in June and near the long-term average of 5.2 months.

Prices rise, first HPI acceleration since April 2017
CREA’s aggregate HPI increased 2.1% year-over-year in July, the first y-o-y growth in prices since April 2017.

The price rises were led by apartments, up 10.1%, with townhouses up 4.7% and single-family prices declining 0.7% for one storey and 1.5% for two storey homes.

"Improving national home sales activity in recent months obscures significant differences in regional trends for home sales and prices," said Gregory Klump, CREA's Chief Economist. "Regardless, rising interest rates and this year's stress test on mortgage applicants will likely prove to be difficult hurdles to overcome for many would-be first time and move-up homebuyers, heading into the second half of the year and beyond."

Source: https://www.canadianrealestatemagazine.ca/market-update/is-the-impact-of-the-stress-test-starting-to-fade-246635.aspx

Stand by for a boomers homebuying boom

Baby boomers are set to play a key role in Canada’s housing market as they plan to buy but consider their current markets unaffordable.

Royal le Page says that 1.4 million boomers plan to buy over the next five years but 56% believe their local housing market is unaffordable for retirement.

"Don't count them out yet – baby boomers will impact Canada's housing market in a big way in the coming years, as another 1.4 million of this large demographic are expected to sell and buy real estate between now and 2023," said Phil Soper, president and CEO, Royal LePage. "While the wave of older consumers will increase competition for condominium property in particular, there is no single type of home that boomers will be investing in."

The study conducted by Leger found that 59% of retirees plan to renovate their current home rather than buy.

Where the boomers live, plan to live
Over three-quarters of respondents own a home, 19% rent, while 1% live with family. Most boomers (61%) nationwide live in a detached home, 21% in condos and 12% in semi-detached/townhomes.

Among those planning to purchase a home in the next five years, 45% are most likely to purchase a detached home, 32% prefer a condominium, and 10% noted the strongest interest in a semi-detached/townhome. Just 5% would opt for a recreational property. Most (51%) boomers are not planning on downsizing.

A minority (10%) plan to buy a secondary property, while 15% plan to sell their primary residence and move into their currently owned secondary property full-time. Nearing or during retirement, nearly one-quarter of boomers nationally plan to live in another city (24%) or country (23%) for at least three months of the year.

If they were to make a property purchase, 54% would have a budget of under $450,000, while 25% have a budget of $450,000 or higher.

Helping their kids
Almost half of baby boomers said that they would help fund their children’s home purchases with 41% saying they would contribute less than a quarter of the home’s total value.

"Baby boomers are the most affluent generation in Canadian history, yet the journey has not been without challenge and adversity. Through several difficult economic recessions, the equity in their homes has proven to be wealth bedrock. This is a generation that deeply values home ownership and very much wants their children to have the same opportunity," concluded Soper.

Source: https://www.canadianrealestatemagazine.ca/market-update/stand-by-for-a-boomers-homebuying-boom-246312.aspx

Consumer confidence continues rebound

The Canadian Consumer Confidence Index has halted its multi-week decline and posted a second week of growth.

Bloomberg and Nanos Research’s weekly telephone poll shows that consumers have become more confident overall, as positive responses gain for the economy, job security, and real estate price expectation.

But the element that tracks positive sentiment about personal finances including mortgages declined slightly.

“The biggest gain in consumer confidence in Canada was driven by perceptions related to job security which realized an eight-point gain in the last four weeks,” said Nanos Research, Chief Data Scientist, Nik Nanos. “Concerns about job security rose in the wake of the US President Donald Trump comment right after the G7 ‘Canada will pay’ for the comments of Canadian PM Trudeau.”

The overall index was up to 55.40 compared with 54.46 four weeks ago. The twelve month high stands at 62.17.

Source: https://www.canadianrealestatemagazine.ca/market-update/consumer-confidence-continues-rebound-246309.aspx

Realtor.ca adds schools data to listings

For many Canadian homebuyers, local schools are a key part of the homebuying decision and now they will have better access to information.

CREA has announced that schools-related data will be added to the leading listings site Realtor.ca over the next few months with 80% coverage expected by September.

The rollout has already started with homebuyers being able to access catchment area information. Later in the fall it will be possible to search for homes within a selected school catchment area.

Coverage currently includes Toronto, Montreal, Vancouver, Calgary, Ottawa-Gatineau, Edmonton, Quebec, Winnipeg, Hamilton, Kitchener-Waterloo, London, St Catharines – Niagara, Halifax, Oshawa, Victoria, Windsor, Saskatoon, Regina.

By September, coverage will be expanded to St. John’s, Barrie, Kelowna, Abbotsford-Mission, Sudbury, Kingston, Saguenay, Trois-Rivières, Guelph, Moncton, Brantford, Saint John, Peterborough, Thunder Bay, Lethbridge, Nanaimo, Kamloops, Belleville, Chatham-Kent, Fredericton, Chilliwack, Sherbrooke.

“When searching for a home, having supplementary school catchment areas available will help homebuyers make better, more informed decisions when it comes to selecting a home that meets their families’ needs,” said James Mabey, a Realtor from Edmonton. “Consumers look beyond pricing, or the number of bedrooms and bathrooms, and expect REALTOR.ca to have the latest information on a property.”

The addition of school data is part of CREA’s partnership with Local Logic which began in the spring.

Source: https://www.canadianrealestatemagazine.ca/market-update/realtor-ca-adds-schools-data-to-listings-246058.aspx