Affordability, low interest rates, and sound economic fundamentals were the primary factors contributing to ongoing healthy home buying activity in St. John’s in 2013. These favourable underpinnings supported relatively steady demand, despite a further upswing in inventory levels. As a result, home sales in St. John’s are expected to finish the year at 3,650 units—in line with traditional levels, though off the 2012 pace by just under six per cent. While momentum has eased, average price continues to make considerable gains, propped up, in part, by new home sales and strength in the upper-end segment. By year end, average price is forecast to reach $302,500, advancing six per cent over 2012’s record of $285,529. First-time buyers led the charge once again in 2013, seeking out single-family homes and bungalows priced between $200,000 and $300,000 throughout the city and its suburbs. Activity in this segment proved brisk, while the mid-range (priced over $350,000) experienced some softening, given a greater supply of inventory and a reduced sense of urgency.
Newfoundland’s economic engine fired on all cylinders in 2013, leading the nation and driving GDP growth ahead by six per cent, as crude oil production rose and conditions improved for large-scale mining projects. While growth is expected to return to more modest levels in 2014, several major developments will serve to prop up confidence and demand in both the resale and new home sectors. These include: ramped-up work at both Muskrat Falls/Lower Churchill and the Hebron Offshore Oil Field, supporting further employment growth; a strengthening natural resources sector, marked by the completion of the Long Harbour nickel-processing facility and subsequent upswing in production; as well as increased production at the Direct Shipping iron-ore project and the Iron-Ore Company of Canada’s Phase II Expansion. Conversely, the enthusiasm of those at the entry-level price points has been re-invigorated, as buyers impacted by tightened lending restrictions last year made their return to the market in a more positive position in many respects. The upper-end segment also proved quite vibrant, as St. John’s thriving oil and gas sector continued to support high-level jobs. Actual sales over $650,000 have posted double-digit growth, and even when adjusted for year-over-year price appreciation, the momentum has held steady with 2012’s respectable performance.
Overall, Newfoundland & Labrador should see unemployment contract in 2014, falling to 11.5 per cent. Strong gains in earnings continue to support buying intentions—a significant factor behind the highest provincial homeownership rate in Canada at 77.5 per cent (2011 Census). St. John’s, in particular, remains an attractive draw. The city recorded a 5.5 per cent increase in its population from 2006 to 2011. Significant announcements continue to improve the region’s prospects—from the proposed underground mine expansion at Voisey’s Bay to the extension to White Rose, as well as promising exploration discoveries that serve to boost confidence in the area’s long term potential. There’s no question the outlook is bright. In the interim, Newfoundland is expected to post a more tepid economic gain of 1.4 per cent in 2014, on the heels of 2013’s enviable advance.
Next year, buyers and sellers in St. John’s and surrounding areas should see similar conditions to those in place at year end. An oversupply of product will place greater consequence on setting fair value, as buyers become increasingly sensitive to pricing. Purchasers will need to be realistic in their pursuits, however, as most homes continue to realize 98 per cent of list price. Unprecedented inventory of new homes will necessitate a gradual correction in prices in that segment, if absorption rates are to improve. Condominium sales are forecast to ease in 2014, as the market approaches saturation. Many new projects have been delayed, re-worked or cancelled, as builders on the multi-unit side take pause. Investors were active over the past 12 months and will continue to seek out promising opportunities. The upper end of the market is anticipated to remain stable. Regardless of price point, market conditions will underscore the timeless adage ‘location, location, location,’ as sought-after pockets post better-than-average activity. Multiple offers, for example, were still evident on well priced product in Churchill Square and Paradise, where the Outer Ring Road has driven tremendous growth. Areas around the University will also prove buoyant as the student population continues to rise, while ongoing revitalization in the downtown core bolsters its appeal. Absorption should improve moving in to the second half of 2014, although buyer’s market conditions will persist through year end. Sales are expected to remain on par at 3,650 units, while average price rises five per cent to $317,600.
Buyers are taking advantage of favourable real estate market conditions around St. John’s and areas….sellers too are reaping the rewards. Multiple offers are a factor in our marketplace once again, with well-priced listings—especially around the $200k to $260k price range. Properties priced at market value will likely sell quickly for top dollar. The overall pressure on sales and price is significant across the board – and it’s not likely to subside unless more inventory comes on-stream. The Bank of Canada released today that it will keep it’s interest rate “as is” but hinted at the fact it will most likely increase in June/July due to Canada’s higher then expect latest GDP numbers.
Total # of new MLS Listings [Feb] =567 (based on residential stats)
Total # of Sales [Feb] = 259
Number of Active Listings in the NLAR MLS System (ALL of Newfoundland) = 2650 (residential only)
Here is a break down by area for the month of February
St. John’s Real Estate: Listings = 117 Sales = 66 Sales/Listings Ratio = 56%
Average Sale Price is St. John’s: $270,742 for the month of February and the 12 month average $240,470
Mount Pearl Real Estate: Listings = 13 Sales = 7 Sales/Listings Ratio = 54%
Average Sale Price (12 month average): $218,063
Paradise Real Estate: Listings =64 Sales = 18 Sales/Listings Ratio =28%
Average Sale Price (12 month average): $268,980
East Extern Real Estate: Listings = 37 Sales = 14 Sales/Listings Ratio = 38%
Average Sale Price (12 month average): $259,371
Conception Bay South Real Estate: Listings = 48 Sales = 19 Sales/Listings Ratio = 40%
Average Sale Price (12 month average): $225,728
Canadians who have recently purchased real estate plan on paying off the mortgage as quickly as possible according to an annual mortgage consumer survey released Wednesday by Canada Mortgage and Housing Corp.
Seventy-eight per cent of respondents said they wanted to pay their mortgages off as fast as possible and one-third said they had made a lump-sum payment toward that end.
Eighty-four per cent of homeowners who are making weekly or biweekly payments on their mortgages are doing so at an accelerated rate in order help to shorten their amortization period, according to the mortgage insurer.
The fact that new homeowners are working to pay down principal early and are accelerating payments is a good indication that this responsible behavior will continue throughout the life of their mortgage.
More Canadians are becoming aware that, since mortgage interest is not tax-deductible in Canada, (as it is in the US), you are making mortgage payments of both principal and interest with money that you’ve already paid tax on “after tax dollars”. This makes it even more important to pay down your mortgage as soon as possible!
How much of a house you can afford depends on a number of factors. The most important are your gross household income, your down payment and the mortgage interest rate. Lenders will also consider your assets and liabilities. Your own lifestyle and debt comfort zone also come into play.
This calculation is based on two simple rules that lenders use to determine how much of a mortgage you can afford. The first rule is that your monthly housing costs should not exceed 32% of your gross monthly household income. Housing costs include monthly mortgage payments, taxes and heating expenses. If applicable, this sum should also include half of monthly condominium fees.
Secondly, your entire monthly debt load s hould not be any more than 40% of your gross monthly income. This includes housing costs, and other debts such as car payments, personal loans, and credit card payments.
Feel free to use the mortgage calculator on our website for a quick calculation. For a more in depth assessment CanEquity will display an entire payment schedule for the life of a mortgage along with a summary of payments, interest, and balances within the mortgage term.
The average price in the current St. John’s Real Estate market for a single family home is about $150,000. Assuming a 5% ($7500) down payment. Interest rate of 5.79%
- The amount you will need to mortgage is $146,418.75. This is amount has CMHC insurance fees included. The calculation is as follows: Purchase Price ($150,000) subtract Down Payment ($7,500) equals $142,500. To this amount we add a 2.75% insurance premium based on your Loan to Value (LTV) ratio of 95%. Therefore, 2.75% of $142,500 is $3,918.75 (cost of your insurance), plus $142,500 equals $146,418.75.
- You will have 549 payments of $459.30 every 2 weeks for 21 years and 2 months, plus one final payment of $158.58 to payout a $146,418.75 loan with a rate of 5.79%.
- Choosing biweekly accelerated payments will pay off your mortgage 46 months sooner, with a total of $23,264.48 in interest savings.
- Mortgage balance remaining at end of term is $125,752.66.
- By increasing your Down Payment you could lower your LTV ratio, therefore lowering your CMHC insurance premium of 2.75%.
The St. John’s real estate market is booming! Having your pre-approval in place will certainly work in YOUR favor.
A pre-approved mortgage is a mortgage for a set maximum amount and interest rate that is arranged by a lender (ie bank) prior to the purchaser finding a house.
With a pre-approved mortgage you will:
- Know how much you can afford and what your payments will be
- Lock in your interest rate at today’s rate (or lower if rates drop), usually guaranteed for 90 – 120 days
- Demonstrate that you are a serious buyer, which can help in your negotiations with sellers and their agents
The key to choosing a mortgage is to know your options. The more you know, the more likely you’ll save money now and in the future. There are numerous types of mortgage options available, fixed rate, open rate, variable rate – they can even blend 2 different types to sort your needs.Payments can be set up on a monthly, bi-monthly, bi-weekly and even weekly basis. As well, you get to choose the date of the month to make the payment. By changing from monthly to a bi-weekly payments, a typical 25 year mortgage can be reduced to 21 years. Thats a LOT of interest saved.
A great way to save on interest costs and reduce the life of your mortgage is by making annual principal payments. $2000 extra a year on a 25 year mortgage will reduced the amortization period to 15 years.
There are lots of mortgage calculators on the internet. Play around with them. Try different scenarios.
Jeff Burton with RBC is a great resource when it comes to mortgages. Speak with your mortgage specialist today and determine the right options for you.