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Here we are with just one more month left in 2012 and much is on the horizon of our real estate market. With a sizable decline in sales of 7.1% as compared to the same time last year plus almost 17% more homes on the market, things are changing. The number of days on market is fairly level at just 28 days versus 26 days last year but all in all our marketplace is reasonably stable. Here are some observations that will help you in making sound real estate decisions, considering what is happening in our marketplace today:
Canadian Lending
Standards Provide Strong Foundation
Canada
has avoided repeating many of the mistakes made in the US housing market
largely because of our banking regulations. With our regulations and lending
standards much higher than in the US, we have been able to consistently prevent
prices from plummeting and spiraling completely out of control.
Despite
this positive spin in our country, some top economists though are aware of some
alarms going off in the Canadian market. Home prices in Toronto have been
higher than the long-term average and Canada is seeing a sharp decline in home
sales across the board, as evident in the year over year numbers for November.
Exceptionally
low interest rates have been the key reason for keeping affordability from
reaching dangerous levels in Canada but now it seems that may not be enough to
keep our housing market from skyrocketing.
Household
Debt-to-Disposable Income Ratio Reaching High Levels
Canada’s
subprime mortgage industry is growing with $500 billion in high-risk mortgages
in the Canadian housing market. That translates to nearly 15% of the entire
market where household debt is becoming a problem for families. In fact the
debt to disposable income ratio for Canadian households is nearly 155 to 160
percent. A good way to understand this figure is to consider that just before
the US recession hit, most American households had a debt to disposable income
ratio of 160 percent.
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Despite
all of this, the government and lending institutions are being proactive,
regulators have been changing policies and Canadian housing authorities are
doing everything they can to keep things under control. In fact, earlier this
year the Canadian Finance Ministry made important changes to the mortgage industry that have positively
impacted our marketplace. The changes include a reduction in the maximum
amortization schedule, a higher minimum equity requirement, a higher required
Gross Debt Service ratio and more.
What
this means to you today is that regardless of whether you decide to sell your
home, sell and buy or purchase your first home – it is critical that you work with
a competent, experienced professional real estate agent that understands
today’s market and can help you leverage the concerns of today.
