Remax Atlantic Canada Market Trends

May 27, 2008 · Filed Under First Time Buyers, Market Trends, Remax Reports and St. John's Real Estate · Comment 

An economic engine firing on all cylinders has driven residential real estate activity in Newfoundland and Labrador to new heights. Home sales in the first quarter of 2008 climbed just over 14 per cent, rising from 624 units—and a buyer’s market—one year ago, to 713 units, and a seller’s market. Average price followed suit, with year-to-date values rising close to 14 per cent to $156,953, up from $138,167 in 2007. The momentum is even greater in St. John’s, where average price now approaches $190,000. Not since a very short-lived period in 2004 has the city seen the level of consumer confidence that exists in the marketplace today.

Fueled by export growth—in the form of crude oil—Newfoundland-Labrador’s GDP growth led the country in 2007 at a substantial 13.4 per cent. Newfoundland- Labrador has reported the largest single-decade turnaround in GDP per capita in one decade—a first in Canadian history. Out-migration has been stemmed and population growth is expected for the first time in 15 years. Premier Danny Williams has promised that the province will be a “have” within the next 11 months.

Prosperity has fueled a spending spree that includes housing, retail, and auto sales. Inventory levels are tight and multiple offers are commonplace on homes across the board.

First-time buyers are entering the market en masse, taking advantage of zero and low down payment plans and longer amortization periods. Equity gains have also played a role, prompting serious move-up activity. Home sales priced in excess of $350,000 are brisk.

Investment is a growing segment of the real estate market, spurred by purchasers from Western Canada. Lower interest rates are expected to stimulate even greater activity in the marketplace.

There are $10 billion in capital works projects on the table and the pressure is only starting to build. Natural resources are the key to success and the future has never looked brighter for St. John’s. Real estate will following lock-step, with sales and prices exceeding 2007 levels by double-digits at year-end 2008.

Read the full Remax Atlantic Canada Martket Trends Report 2008

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Canadian Economic & Financial Market Outlook

April 12, 2008 · Filed Under St. John's Real Estate · 1 Comment 

RBC Economic & Financial Market Outlook

Debt load rising, but so are asset values

Household balance sheets remain in fair condition with the ratio of debt-to assets remaining within the range of the past 40 years. Still, with debt service costs high relative to personal disposable income, the recent tightening in credit conditions does present some downside risks for the outlook for consumer spending this year. Mitigating this, however, is the strong growth in asset values — house prices have recorded gains of about 10% for six years running and the TSX posted a decent 7.2% return in 2007 despite a soggy fourth quarter. However, if the weakness in equities evident late last year and early this year persists, it would present a clear downside risk to household spending during the forecast period.

Stretched affordability to exert modest downward pressure on housing market

The rise in house prices has stretched affordability. RBC’s housing affordability index showed that conditions were the worst since early 1990 for homebuyers in last year’s fourth quarter.  Our view that the Bank of Canada will continue to lower interest rates, with attendant easing in credit market tightening, and that the pace of house price increase will slow this year both point to a modest improvement in affordability. There were 227,000 new homes started in Canada last year, marking the sixth year that starts were greater than 200,000 units. The erosion in affordability and uncertain global economic environment will likely result in slower housing market activity in 2008, although, with interest rates declining, the weakening is likely to be relatively modest.

Bank of Canada to cut rates to mitigate impact of trade drag

The Bank of Canada cut the policy rate by 25 basis points at each of its December and January fixed action dates, concluding that “further monetary stimulus is likely to be required in the near term” to mitigate the downside risks coming from the widening in credit spreads and the weakening U.S. economy. The Bank picked up the pace of easing in March to 50 basis points, sending the overnight rate down to 3.50% as concerns about the U.S. economy escalated. Continuing concerns about the downside risks to growth will send this policy rate down to 2.75% by mid-2008.

U.S Housing recession to continue in 2008; market to stabilize in 2009

The U.S. housing market is showing little sign of recovery. The stock of homes available for sale stands very close to record-high levels and, as a result, new residential construction continues to contract.  In February, the level of housing starts was 54% below the recent peak level and the pace of new and existing home sales was the slowest since the mid-1990s. The inventory overhang and slow sales pace point to construction activity contracting at a double-digit annualized pace for at least the first half of 2008. We estimate that the decline in residential construction spending will trim slightly under one percentage point from the 2008 growth rate. Weakening demand will continue to push prices lower, pointing to a mild deterioration in housing-related net worth in the quarter.

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Kirkland Balsom & Associates - Real Estate Market Overview

February 8, 2008 · Filed Under Market Trends, Real Estate Articles and St. John's Real Estate · Comment 

The fine folks at Kirkland Balsom & Associates just released their Real Estate Market Overview for 2008.

The estimations for growth may vary; nevertheless, the consensus with most local real estate players is that 2008 will be a robust year for residential real estate. Private real estate companies are predicting double digit increases while CHMC projects an increase of 7.6%. Increased job growth, higher personal incomes and continued relatively low interest rates will drive the residential real estate market in 2008. Condominium activity appears to have seen the most growth with an increase in sales activity of approximately 40% from 2006 to 2007. This increase is attributed to a growing demand due to demographics and several new condominium developments offered to the market. While purchasing a condominium for owner occupancy appears to be a wise decision, given the current attainable rents, purchasing as a pure investment is less attractive.
“Newfoundland and Labrador and a consortium led by Chevron have signed a multibillion-dollar memorandum of understanding to develop the Hebron offshore oilfield project in August 2007. Since the announcement the real estate market has spiked with tremendous optimism from buyers betting on increased values in coming years. This “need to buy now” mindset has spurred multiple offers on properties, often at above perceived market value. While demand increases it is even more important not to overpay or offer your property to the market without professional and independent advice.”

Make sure you view the complete Real Estate Market Overview here.

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Will the subprime mortgage effect St. John’s real estate?

January 28, 2008 · Filed Under Mortgages and Real Estate Articles · 1 Comment 

Last week both the United States and Canada dropped their interest rates, 0.75% and 0.25% respectively. With the recent subprime mortgage fiasco in the U.S, people have been asking was the rate reduction due to this? Will Canada follow the same fate? And most importantly….what exactly is a subprime mortgage?

Here is my interpretation of the subprime mortgage:

The Bank of Canada has it’s prime rate. Banks and lenders then offer a mortgage at competing rates to potential pre-approved home buyers.

A subprime mortgage refers to a mortgage offered to a borrower that is higher risk than the normal home buyer. They do not receive a lower interest rate. It’s actually the complete opposite. Potential home buyers who have poor credit scores make them candidates for a subprime mortgage and they typically pay much higher mortgage rates.

The problem was that the lenders offered an introductory rate which was comparable and at times lower than the prime mortgage rate to attract clients. You can begin to see the bigger picture forming.

The introductory rates were only temporary and after a year or two they expired and the interest rate on a subprime mortgage increases. This resulted in many, now home owners, who once had a low introductory mortgage rate paying interest rates in the double digits.

Remember, they were high risk from the start with “special” introductory offers. When the rates jumped to double digits, the subprime meltdown began.

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