Wednesday, June 7, 2017
Real Estate Market
What a Crazy Year 2017 has been so far. Rapid Price Acceleration, Heated Bidding Wars, Tight Inventory Levels, the “GTA Effect”, and Buyer Speculation fueled a very “frothy” market in Ancaster. Buyers were exhibiting what Alan Greenspan described as “Irrational Exuberance” bidding home prices beyond levels supported by economic fundamentals. Well it looks like the “buyer frenzy” may finally be over as the Ancaster Real Estate Market moves into more balanced territory. In May, inventory levels started to flood the market giving buyers some reprieve from the chaos with more time and choice.
Increased inventory levels are possibly due to Seller’s looking to take advantage of the price increases and cash out as concerns over what effect the Ontario governments new housing measures, including a 15% non-resident speculation tax to be imposed on buyers in the Great Golden Horseshoe area, may have on the market. In the Greater Toronto area, it appears these measures have already cooled the red hot housing market where the average sale price was down 6.2% in May 2017 from the previous month and the number of sales was down 12 % during that period however overall prices are still up 15% since last May according to TREB statistics.
Keep in mind that this data can be somewhat misleading because of the many variables in average sale price from month-to-month so a short term change does not necessarily indicate a long term trend. In Ancaster, for example, the monthly average sale price was $841,736 in April 2017 and $797,167 in May 2017 which is a drop of 5.2%. However, when comparing year-to-date sales from the end of December 2016 to year-to-date sales to the end of May 2017 the average sale price in Ancaster has actually increased 20.0% overall since the beginning of the year. Further, when comparing the year-to-date average sale price from May 2016 to May 2017 Ancaster has seen a staggering 29% price gain according to Real Estate Association Hamilton Burlington RAHB MLS Statistics.
So where is the market heading now? Of course it’s difficult to predict with any certainty where average home prices are heading in the long term. Will there be a correction in home prices? My own personal opinion is that price appreciation—growth—will stagnate in the short to medium term, and there is evidence that this is already happening, with the possibility of a slight correction. However, even if there is a slight pricing correction the overall net gain in values since last year will likely remain quite positive.
Saturday, November 12, 2016
Real Estate Market
By now you are likely familiar with the Government of Canada’s most recent intervention in the housing market through new mortgage lending rules effective as of October 17th, 2016. According to a Ministry of Finance (MOF) backgrounder 2016, these measures were taken in an effort to ensure a strong and stable housing market and prevent rapidly growing household debt and lack of affordability in some major cities including Vancouver and Toronto.
The mortgage rules will require “that lenders stress test a borrower’s ability to make their payments at a higher interest rate” and that this will apply to “all insured mortgages”. (MOF, 2016). Typically insured mortgages are those that are high-ratio (less than 20% down payment) but these could also include low-ratio (more than 20% down payment) insured mortgages as well.
How will these new lending rules impact our Local Hamilton Real Estate Market? Interestingly, the new lending rules may have a potential upside on Hamilton’s Housing Market.
1. Continued Strong Demand for Housing in Hamilton—as first time home buyers are priced out of more expensive markets in the GTA including Toronto we likely see a continued intra-provincial migration of buyers to the Hamilton region. According to a Canadian Mortgage and Housing Corporation (CMHC) Market Outlook Report Fall 2016, “about a third of first-time buyers are coming from out-of-town”. As chief CREA economist Gregory Clump states “First-time home buyers, particularly in housing markets with a lack of affordable inventory of single-family homes, may be priced out of the market by the new regulations”.
2. Increase in Home Values—Appreciation—an increase in demand in our area could continue fuel price growth particularly if inventory levels remain low. “The number of new listings is anticipated to remain at a historically low level, holding the Sales-to-New Listings Ratio (SNLR) in the range of 68 to 75 per cent during the forecast period. In line with strong sellers’ market conditions, the average existing home price in the Hamilton CMA will be in the $456,000 to $504,000 range in 2016, $479,000 to $551,000 range in 2017 and $493,200 to $602,800 range in 2018” (CMHC, 2016).
3. An Increase in Demand for Rental Properties—According to CMHC, 2016 “from 5 to 10% of all prospective home buyers could be affected during the first year of implementation” of the new housing rules. They (buyers) “may delay their purchase in order to save for additional funds”. In addition, some first time buyers may be removed from the market altogether as a result of the new rules. Consequently, real estate investors may see increased demand for their rental properties as a result of a projected decreased vacancy rate.