After surprising growth in 2011, Greater Vancouver real estate prices will rise just two per cent in 2102, Canada Mortgage and Housing is forecasting.

In 2011, CHMC predicted price growth of just three per cent, tempered by an expectation of higher interest rates, but interest rates stayed low and prices ultimately jumped 16 to 17 per cent.

In 2012, the market will stabilize and show modest growth in line with inflation, said Robyn Adamache, senior market analyst with CMHC in Vancouver.

“I’d say it’s a pretty stable market out there. We’re not expecting to see a lot of change going forward,” Adamache Thursday said in an interview. “We have seen the market moving to more balanced conditions over the past five or six months, and that’s expected to continue.”

She said job growth and migration, including people from within Canada and immigrants, are the factors driving the housing market, and they should continue.

“So far, for the first 11 months of 2011, we’ve seen about 30,000 additional jobs created in the Metro Vancouver area,” Adamache said. “We’re forecasting that we’ll see 35,000 to 40,000 people moving here each year, going forward.”

Not all municipalities saw this kind of growth in housing prices in 2011; the west side of Vancouver and Richmond led the way with 20-per-cent or higher increases for single family homes, while other municipalities and multi-family homes saw lower growth.

For the five years leading up to 2010, the compound annual growth rate in Greater Vancouver for all types of homes was 10 per cent, while the 20-year average was six per cent, Adamache said.

In some areas, such as Maple Ridge, prices of condominiums have not recovered to pre-recession prices, Adamache said.

The average price of a home in Greater Vancouver, including single-family and multi-family homes, for 2011 up to Nov. 30 was $796,000. CMHC is calling for that average to rise to just over $800,000 by the end of 2012.

For November only, the monthly average was down slightly to $736,000, and Adamache said that trend might continue into the first half of 2012.

“I think we will see prices staying fairly flat until later in 2012,” Adamache said.

Across the country, prices were 5.8 per cent higher in 2010, to an average $339,042.

Forty-eight per cent of households in Vancouver own their own homes, while nationally the average is 68 per cent.

In Greater Vancouver, housing starts will see growth of about five per cent in 2012, compared to 12 to 15 per cent in 2011, and the number of houses sold will also increase about nine per cent over 2011, Adamache said.

Meanwhile, CMHC released its 2011 Canadian Housing Observer Thursday, showing that Canadians owed more than a trillion dollars on their mortgages as of March, which when added to other household debt is a “serious issue.”

The CMHC reported that housing-related spending of about $330 billion a year in 2010 has risen by 67 per cent since 2001 and now comprises 20.3 per cent of Canada’s gross domestic product in 2010 — which underlines the importance of that debt load, and what might happen to the economy if for any reason Canadians crack under its burden.

CMHC figures show that mortgages made up about 68 per cent of total household debt in 2010 — up from 63 per cent in 1971 but down from the peak of 75 per cent in 1993. Consumer credit, which makes up the other 32 per cent, has been growing faster than mortgage debt over the past two decades, it says.

A breakdown of these numbers for B.C. was not available; however, the report shows that B.C. has a high percentage of mortgage-free homeowners at 47 per cent, a number second only to Cape Breton.

“The major risk in the mortgage market is impairment in a household’s ability to pay, often due to job loss. Recession or other adverse economic scenarios, such as rising interest rates, could certainly pose a challenge for some Canadian households,” the report states.

Canadians’ debt levels have been growing fairly steadily since the 1960s, the report notes, but adds that a number of more recent factors have allowed debt to grow to its current record level, including low interest rates, rising household incomes and financial product innovations, which have allowed Canadians to make lower payments on higher debt loads.

While about 6.5 per cent of Canadian households are financially vulnerable according to Bank of Canada guidelines, the CMHC says continued employment growth, increasing net worth of households and a growing population are all positive factors for housing demand.

FORECLOSURES, DISTRESSED SALES, BANK OWNED PROPERTIES & ESTATE SALES

FIND THEM HERE - http://www.distressedsaleguide.ca

It will be tougher to get a mortgage in the future, survey of economists predicts

February 23, 2012

By Louise Egan, Reuters February 22, 2012

The federal government will make it tougher for many homebuyers to get mortgages this year as it grapples with an overheated property market, according to analysts in a Reuters poll, who also ruled out the prospect that prices could suddenly crash.

Ten of 14 economists and strategists surveyed last week in Reuters’ first poll on the Canadian housing sector answered “yes” when asked if they thought Ottawa would tighten mortgage rules within the next 12 months.

They expect home prices to climb just 0.1 per cent in the year to December 2012, and the same in 2013. That is down from a 0.9-per-cent year-on-year increase in December 2011.

If Finance Minister Jim Flaherty tightens requirements for government-backed insured mortgages it would be his fourth intervention in the real estate market since 2008.

Flaherty could raise the minimum down-payment to buy a home from the current 5 per cent or reduce the maximum amortization period from 30 years.

Any move would likely come before the prime spring real estate season, analysts said. “Sometime between now and the next budget,” said Benoit Durocher, senior economist at Desjardins in Montreal, on the timing of such a move.

The federal budget is expected in late March.

The poll respondents see the housing market as moderately overvalued, particularly in Toronto and Vancouver.

“There is some genuine concern that the housing market and households have been overstretched,” said Mazen Issa, economist at TD Securities.

“But in the absence of several triggers for a housing market decline, which are not likely to be forthcoming until at least the middle of next year, the underlying theme is of gradual moderation,” he said.

Possible triggers would be a rise in mortgage rates or a sharp rise in unemployment.

Canada’s robust housing market helped pull the economy out of the 2008 recession. Prices dipped briefly during the downturn, but quickly resumed the climb that characterized the previous decade.

But that effervescence is now a headache for policy-makers, as historically low interest rates tempt more and more people to take out mortgages for increasingly unaffordable homes.

Household debt levels are approaching those in the United States before the 2008-09 housing meltdown there. Canada’s debt-to-income ratio hit a record 153 per cent last year and is expected to rise.

The Bank of Canada, which has fanned the flames by holding its benchmark lending rate at 1 per cent for an unprecedented 17 months, has made it clear that rates are likely to stay unchanged for at least this year.

Of the nine forecasters who answered a question on how far prices would fall before stabilizing, the median decline was 5 per cent, with four predicting price stabilizing beyond 2013.

The economists see a moderation in housing starts to 190,000 units in the first quarter of 2012 compared with a seasonally-adjusted annualized rate of 197,900 units in January. Housing starts should ease to 181,000 by the second quarter.

Analysts said housing prices have strayed from fundamentals but not in an extreme way, placing them as a “seven” on a scale of one to 10, with five being fairly valued and 10 being extremely overvalued.

But the national average is skewed by extremes in Toronto and Vancouver, where foreign investment has helped push up prices. Excluding these centres, Durocher rated prices as a “five” on the scale.

Doug Porter, deputy chief economist at BMO Capital Markets, agreed. “I would say aside from those two cities, there’s really little evidence whatsoever that the market has got ahead of itself,” Porter said.

“Whatever strength we’ve seen in most cities has simply been the flip side of the decline in borrowing costs. Provided we don’t get hit with an interest rate shock, then I think the market can adjust to a moderate backup in rates over time.”

More mortgage rules planned

 if housing market 

gets  too hot

Garry Marr  Jan 23, 2012 – National Post

A new round of mortgage rules from Ottawa could include tough new measures for calculating how the self-employed qualify for loans and tighten regulations for condominium buyers, according to two separate sources.

Ottawa remains concerned about the possibility of an inflated housing market and wants to crack down on the practice where consumers self-disclose what they make when applying for a loan. In the case of the condominium buyer, the government continues to consider a proposal that would have 100% of condo fees count when assessing how much debt a consumer could afford.

“None of this is happening just yet. The housing market has slowed down and the government wants to see what will happen next,” said one source. “If the spring market picks up, then we will see more changes to the rules.”

Bank of Canada Governor Mark Carney said Sunday that some parts of the Canadian real estate market are “probably overvalued” and policymakers are monitoring to see if further steps are needed to cool it.

“We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they’re probably overvalued. So there are risks there. We’re watching it closely. We’re working with our partners, the federal government, the superintendent of financial institutions,” he said in an interview broadcast on Sunday on CTV.

” Measures have been taken. They’ve been effective. We’ll keep up that vigilance. If more needs to be done, I’m sure the appropriate authorities will take those measures.”

Stated-income products have become very popular during this housing boom, allowing more banks to get involved in loaning to the selfemployed.

“These are individuals that are self-employed, have great credit and won’t be able to validate their ability to pay if they are not showing their income on their notice of assessment,” said one source.

He says those people with stated income could have to make an even higher down payment than the normal 20% that exempts consumers from buying expensive mortgage default insurance.

The source said some self-employed are qualifying for loans based on the assumption they have a lot of write offs, like car payments and housing costs associated with home office costs.

“They get to include that based on the assumption that self-employed people have an advantage from a tax perspective,” said the source. “The government is trying to figure how they would present this.”

A source with one of the banks said the government is trying “zoom in” on marginal borrowers so it doesn’t get into a U.S. type of situation where they were not verifying income.

“What banks are doing usually when it comes with self-employment is not dealing with declared income because nobody believes it. What they do is look at their behavior and put more weight on it,” said the source, referring to how those consumers handle their debt. “With an employer, you can call and verify their income.”

The labour market is roughly about 13% self-employed so new rules could have a major impact but the source indicated it does not mean those people would be shut out of the loan market. “It will be just more difficult for them. You are going to have to prove income in a more precise way,” he said.

The suggestion the government might crack down on condo buyers is not new, having been scrapped last year in favour of tougher new rules on amortization lengths and re financings. Most people in the real estate sector now believe amortizations will be reduced to 25 years after having been as long as 40 just three years ago.

Brad Lamb, a Toronto real estate broker and condo developer, has heard the government is again considering including 100% of condo fees in calculating debt levels but doesn’t think it will happen.

“The 25 year amortization is a no brainer, they should do it,” said Mr. Lamb. “It’s not smart to have loose lending rules. But the condo market is hot because of investors not speculators. These investors are coming [from around the globe]. This silly [condo fee] change will do nothing. These people are buying with cash.”

Fraser Valley market update: Steady as she goes

CMHC is predicting Fraser Valley’s housing market overall will remain balanced for the remainder of 2011 with communities closest to Vancouver continuing to fare better than those further down the Valley.

Richard Sam, Market Analyst with the Canada Mortgage and Housing Corporation (CMHC), says Fraser Valley’s market this year has been fuelled by “a combination of lower interest rates and a desire for more affordable single family detached homes as close as possible to Vancouver.”

“It’s why we’ve seen sales of single family homes do well in Delta, South Surrey/White Rock and Langley, in addition to home prices in those communities remaining firm or rising.”

According to MLS® sales data from FVREB, sales of single family homes during the first half of 2011 compared to 2010 remained on par in North Delta, increased by 14 per cent in Langley and increased by 71 per cent in South Surrey/White Rock. Sam says Langley is still attracting first-time homebuyers; however it is high-end buyers who have been influencing the White Rock area.

In Abbotsford and Mission however, sales of single family homes from January to June in 2011 decreased by 23 per cent and 10 per cent respectively compared to the same time frame last year. Sam attributes the decreases in sales and prices in Abbotsford and Mission to higher unemployment in that region, tighter mortgage rules affecting first-time home buyers and higher inventory.

Overall, CMHC predicts Fraser Valley’s market will remain stable for the remainder of 2011 supported by positive net migration, job growth and economic diversity in the region. It forecasts MLS® sales will increase by seven per cent in 2011 compared to last year, to just over 15,000 transactions and a further three per cent in 2012, to approximately 15,500. In addition, it’s forecasting the average MLS® price in the Fraser Valley will increase by five per cent in 2011 and a further three per cent in 2012.

For the Abbotsford central metropolitan area, CMHC anticipates demand for homes will be offset by higher levels of homes listed for sale. With more selection, buyers will have more choice. As a result, there will be little movement in Abbotsford prices during the forecast period. Also, it says higher resale levels will be located in neighbourhoods within easy access to transportation routes, employment centres and retail and service amenities.

All in all - The Fraser Valley, south of the Fraser is still more affordable than Vancouver.