Market Watch November 2012

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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.

Call me today at 416-918-5979 or email eden4realestate@gmail.com.