Durham Region Real Estate Update

The Durham Region resale housing market is still breaking records with 1110 sales of single family homes in Durham Region in June reported Lloyd Elliott, President of the Durham Region Association of REALTORS® (formerly the Durham Region Real Estate Board). Even though this is an 8% decrease from 1194 sales in May, these numbers represent the best June performance ever in the history of the Association and also reflect a 16% increase over 955 sales in June of last year. “Regardless of the June numbers,” suggested President Elliott, “significant as these ratios may be in terms of housing market trends and establishing market value, the Durham resale market continues to attract new families (both immigrant and migrant) to the area. Buyers, whether purchasing a new home, or a resale are attracted by affordability, unlimited design features, award winning neighbourhoods, schools, assembly plants as well as economic viability and sustained growth.”

With the average selling price decreasing slightly to $271,394 from $275,695 last month, this is still 2% higher than last June’s average of $265,839. “ Even slight increases in year over year housing prices (comparable to cost of living) is a positive indicator suggesting the market, while exhibiting signs of cooling, remains resilient and indeed continues to move in a favourable direction,” stated President Elliott.

The total number of active listings on the MLS® system is down this month by 8% to 2583 from 2792 in May and shows a further 19% decrease from 3088 homes for sales in June of 2006. “ To date, 2007 has been an interesting year,” mused President Elliott, “ what began as the continuation of a strong buyers market of 2006 has morphed into a balanced market, and now appears to be on the threshold of a new sellers market.”

In the short term, (one year) what can buyers and sellers expect in the housing market? “The short answer is, (replay from most financial journals), mortgage interest rates will rise, perhaps twice by 2008. New home starts will trend slightly downward. And, a new fund-raising wrinkle, open to municipalities may infect the already onerous land transfer tax,” suggested Elliott.

The 1110 homes sold in June represent a $301,247,545 dollar volume, an 18.6% increase over $253,875,895 in June 2006.

Rising mortgage debt rendering ‘Canadian households stretched thin’: DBRS

DBRS, the Canadian headquartered credit rating agency, has joined a long list of organizations that have weighed in on the matter of the Canadian residential housing market.

Like many of those previous studies and against the background of concerns being raised by the federal government and the Bank of Canada, DBRS found some positive — and negative — aspects about the sector that seems to consume Canadians. And with good reason: in many cases, the family home is the largest source of household wealth.

For instance, despite record high levels of household debt, DBRS argued that Canadian households have net worth that could withstand a property value decline of 40%.

But “rising household financial leverage and reduced affordability are of concern, rendering Canadian households stretched thin and vulnerable to liquidity shock or cash flow shortage, such as loss of income or unexpected expenses,” wrote DBRS.


At the end of 2011, Canadian mortgage lending amounted to $1.1-trillion — or more than double what it was a decade earlier. Add in home equity lines of credit and outstanding mortgage-related debt was about $1.3-trillion.

Along with rising mortgage and consumer debt, average house prices are now 4.9 times average gross family income — a level that would require Canadian household to allocate 37% of its pre-tax income to housing-related costs — the so-called “housing affordability ratio.” (House prices have risen faster than average household income.)

DBRS noted that the 37% ratio “is aided by the low interest rate environment and is only slightly worse than the long-term average.” But if interest rates were to jump by 2% the ratio could rise to 43% or more of pre-tax income. “Adding in other household expenses and payments, the average household is left with little residual cash flow or savings,” it said.

Affordability measurements based on national average values “are misleading and do not consider regional or market-specific preferences, differences or even property types,” DBRS said.

Accordingly and “barring a nationwide economic contraction, the real estate market for most Canadian cities appears balanced based on sales activities or housing inventory supply, but moderately overvalued based on the price-to-average income or affordability ratio, with potential overvaluations or pockets of vulnerability in certain markets and segments.”

So what are the big levers?

DBRS said that “a combination of higher interest rates, lower property values and a drastic increase in unemployment would be of great concern as mortgage defaults are closely related to employment and individual family situations.”



Flaherty on Rates: How Low Can’t You Go?

How low is too low when it comes to mortgage rates?

Apparently the answer to that question is 2.99% on a 5-year fixed.

Finance Minister Jim Flaherty wasn’t too happy that banks broke the 3% barrier on 4- and 5-year rates back in January and March. He implied that those rate promotions were essentially irresponsible with Ottawa trying to temper credit growth.

“I think they’ve moved away from offering sales on mortgage interest rates. That was something we discouraged,” he told the Globe & Mail recently.