STOP THE AGEIST STEREOTYPE

As a society, we are continually evolving in our acceptance of past stigmas. But while we are evolving, why is ageism still so prominent and accepted. And what can we do to shine a light on this issue?

Overrepresentation of an underrepresented cohort

A recent research study with Brainsights reveals that many of us don’t know how to properly address the Canadian 55+ demographic. In fact, since only 6% of the advertising workforce is 50+, this cohort is highly misinterpreted causing many people to completely miss the mark when advertising or communicating with them. But why is this important? Firstly, this demographic is continuing to grow and is now the largest demographic in Canada (with 11 million Canadians falling into this segment), secondly a Yale University research found that older people with positive perceptions of aging lived seven-and-a-half years longer than those with negative perceptions. Knowing how to properly engage with Canadians 55+ not only make us feel better about aging ourselves, it can also help us live longer.

We’ve heard you loud and clear

Brainsights, in partnership with HomeEquity Bank, analyzed the brain activity of more than 300 Canadians, with an equal split between Canadians under 55 and over 55. These individuals were then showed 117 pieces of video content, including ads targeted at Canadians 55+, news clips, movie trailers etc. Their brain waves were recorded, measuring levels of attention, emotional resonance, connection and encoding.
This research reveals four key actions we can all take to bust the age bias.

1) Old Age Stereotypes alienate Canadians 55+
The media portrays Canadians 55+ as frail and helpless. The reality is, Canadians are living longer and healthier lives than ever before, and Canadians over the age of 55 are just as lively and adventurous as someone in their 30s. We all need to start viewing this cohort as vibrant, educated and enthusiastic.
2) Don’t underestimate the power of nostalgia
Many of the communications targeted at the Canadian 55+ demographic tend to focus on what lies ahead. But research shows that nostalgia can be very powerful especially for Canadians 55+. In fact, ads tagged with nostalgia as a theme worked well overall for the 55+ segment, driving 11% greater attention, 9% greater emotional connection, and was 13% more memorable than the average. Canadians 55+ may be experiencing anxiety or stress of not knowing what lies ahead, but nostalgia can give a sense of comfort by providing certainty and familiarity.
3) Positive recollection
Canadians 55+ have an inherent desire to leave the world in a better place, and they do so through the transfer of knowledge to their children. Leaving a legacy for future generations leads to a 27% increase in attention, 42% increase in connection and 31% increase in encoding. Canadians 55+ like to feel like they made a difference in the world and specifically in the knowledge they leave behind to their children. It’s this type of content that they connect best with.
4) Digestible chunks can go a long way

Science proves that as we age, we require more cognitive resources to process information. So, while the 55+ group likes information, it needs to be presented in smaller chunks. This may require multiple conversations or giving older Canadians time to digest what they heard. Sometimes written in an email can be better than spoken on the phone, since it provides time to review and digest the message.

In summary
By measuring the brain waves of both Canadians over and under 55, we now understand how we can all improve the way we communicate. Through this research study, HomeEquity Bank has also raised awareness to emphasize the prevalence of ageism and that Canadians are not just looking to retire in silence, but rather, retirement is a time to live a vibrant and active lifestyle in the home they love!

Why this matters to us
HomeEquity Bank is a proud partner of Dominion Lending Centres. As a 100% Canadian company working for aging Canadians, HomeEquity Bank has been in business for over 30 years as advocates for the Canadian 55+ demographic. They have been working to not only help empower the 55+ demographic, but they are always at the forefront of pushing back against stereotypes of aging. They are passionate about our aging demographic and what is needed in order to live a well-deserved retirement. It is through this, that they commissioned this research with Brainsights to further understand our aging demographic.
HomeEquity Bank is a proud partner of CARP, a non-profit organization that advocates on behalf of Canadians as we age. Under this partnership, HomeEquity Bank is now officially endorsed and recommended by CARP as a trusted financial solution during your retirement years. As a special offer, CARP members can receive a cash rebate of up to $250 on a home appraisal. Contact your DLC mortgage broker to find out more about this special offer.
Contact your DLC Mortgage Broker to find out if the CHIP Reverse Mortgage solution is the right one for you.

–SUE PIMENTO

Latest in Mortgage News: Stress-Test Rate Drops After a Year of No Change

The benchmark posted 5-year fixed rate, which is used for stress-testing Canadian mortgages, fell yesterday in its first move since May 2018.

The Bank of Canada announced the mortgage qualifying rate drop to 5.19% from 5.34%. This marks the first reduction in the rate since September 2016.

The rate change came as a surprise to most observers, since it’s based on the mode average of the Big 6 banks’ posted 5-year fixed rates. And there have been no changes among the big banks’ 5-year posted rates since June 21.

As reported by RateSpy.com, the Bank of Canada explained today’s move as follows:

“There are currently two modes at equal distance from the simple 6-bank average. Therefore, the Bank would use their assets booked in CAD to determine the mode. We use the latest M4 return data released on OSFI’s website to do so. To obtain the value of assets booked in CAD, simply do the subtraction of total assets in foreign currency from total assets in total currency.”

If that sounds convoluted, RateSpy’s Rob McLister tells us this, in laymen’s terms: “What happened here was that the total Canadian assets of the three banks posting 5.34% fell much more than the total Canadian assets of the three banks posting 5.19%. The 5.19%-ers won out this week,” McLister said.

Of the Big 6 banks, Royal Rank, Scotiabank and National Bank have posted 5-year fixed rates of 3.19%, while BMO, TD and CIBC have posted 5-year fixed rates of 5.34%.

“It’s one of the most convoluted ways to qualify a mortgage borrower one could dream up, McLister added. “It’s almost incomprehensible to think random fluctuations in bank assets could have anything to do with whether a borrower can afford his or her future payments.”

In his post, McLister noted the qualifying rate change means someone making a 5% down payment could afford:

• $2,800 (1.3%) more home if they earn $50,000 a year
• $5,900 (1.3%) more home if they earn $100,00 per year

Teranet Home Price Index Continues to Record Weakness

Without seasonal adjustments, the monthly Teranet-National Bank National Composite House Price Index would have been negative in the month of June. Thanks to a seasonal boost, however, the index rose just 0.5% from the year before.

Vancouver marked the 11th straight month of decline (down an annualized 4.9%), while Calgary recorded its 11th monthly decline (down 3.8%) in the past 12 months.

“These readings are consistent with signals from other indicators of soft resale markets in those metropolitan areas,” the report said.

But while Western Canada continues to grapple with sagging home sales and declining prices, markets in Ontario and Quebec are already posting increases following weakness in the first half of the year.

Prices in Toronto were up 2.8% vs. June 2018, while Hamilton saw an increase of 4.9% and London was up 3.3%. The biggest gains continue to be seen in Thunder Bay (up 9.2%), Ottawa-Gatineau (up 6.3%) and Montreal (up 5.4%).

Don’t Expect Housing Market to Catch Fire Again

Don’t hold your breath for another spectacular run-up in real estate as seen in recent years, say economists from RBC.

“A stable market isn’t a bad thing,” noted senior economist Robert Hogue. “This is sure to disappoint those hoping for a snapback in activity, especially out west. But it should be viewed as part of the solution to address issues of affordability and household debt in this country…It means that signs indicating we’ve passed the cyclical bottom have been sustained last month.”

Home resales in June were up marginally (0.3%) compared to the previous year, which Hague says provides “further evidence that the market has passed its cyclical bottom.”

Meanwhile, the national benchmark home price was down 0.3% year-over-year in June, “tracking very close to year-ago levels.”

Hague says these readings are good news for policy-makers, who he says want to see “generally soft but stable conditions in previously overheated markets.”

–STEVE HUEBL

QUALIFYING MORTGAGE RATE FALLS FOR FIRST TIME SINCE B-20 INTRO

The interest rate used by the federally regulated banks in mortgage stress tests has declined for the first time since 2016, making it a bit easier to get a mortgage. This is particularly important for first-time homeowners who have been struggling to pass the B-20 stress test. The benchmark posted 5-year fixed rate has fallen from 5.34% to 5.19%. It’s the first change since May 9, 2018. And it’s the first decrease since Sept. 7, 2016, despite a 106-basis-point nosedive in Canada’s 5-year bond rate since November 8 (see chart below).

Five-Year Canadian Bond Yield

The benchmark qualifying mortgage rate is announced each week by the banks and “posted” by the Bank of Canada every Thursday as the “conventional 5-year mortgage rate.” The Bank of Canada surveys the six major banks’ posted 5-year fixed rates every Wednesday and uses a mode average of those rates to set the official benchmark. Over the past 18-months, since the revised B-20 stress test was implemented, posted rates have been almost 200 basis points above the rates banks are willing to offer, and the banks expect the borrower to negotiate the interest rate down. Less savvy homebuyers can find themselves paying mortgages rates well above the rates more experienced homebuyers do. Mortgage brokers do not use posted rates, instead offering the best rates from the start.
The benchmark rate (also known as, stress test rate or “mortgage qualifying rate”) is what federally regulated lenders use to calculate borrowers’ theoretical mortgage payments. A mortgage applicant must then prove they can afford such a payment. In other words, prove that amount doesn’t cause them to exceed the lender’s standard debt-ratio limits.

The rate is purposely inflated to ensure people can afford higher rates in the future.

The impact of the B-20 stress test has been very significant and continues to be felt in all corners of the housing market. As expected, the new mortgage rules distorted sales activity both before and after implementation. According to TD Bank economists in a recent report, “The B-20 has lowered Canadian home sales by about 40k between 2017Q4 and 2018Q4, with disproportionate impacts on the overvalued Toronto and Vancouver markets and first-time homebuyers…All else equal, if the B-20 regulation was removed immediately, home sales and prices could be 8% and 6% higher, respectively, by the end of 2020, compared to current projections.”

According to Rate Spy, for a borrower buying a home with 5% down, today’s drop in the stress-test rate means:

• Someone making $50,000 a year can afford $2,800 (1.3%) more home
• Someone making $100,000 a year can afford $5,900 (1.3%) more home
  (Assumes no other debts and a 25-year amortization. Figures are rounded and approximate.)

For a borrower buying a home with 20% down, today’s drop in the stress-test rate means:

• Someone making $50,000 a year can afford $4,000 (1.4%) more home
• Someone making $100,000 a year can afford $8,300 (1.4%) more home
  (Assumes no other debts and a 30-year amortization. Figures are rounded and approximate.)

Bottom Line: Almost no one saw this coming due to the stress test rate’s obscure and arcane calculation method (see Note below). This 15 basis point drop in in the qualifying rate will not turn the housing market around in the hardest-hit regions, but it will be an incremental positive psychological boost for buyers. It should also counter, in some small part, what’s been the slowest lending growth in five years.

Note: Here’s the scoop on why the qualifying rate fell. According to the Bank of Canada:
“There are currently two modes at equal distance from the simple 6-bank average. Therefore, the Bank would use its assets booked in CAD to determine the mode. We use the latest M4 return data released on OSFI’s website to do so. To obtain the value of assets booked in CAD, simply do the subtraction of total assets in foreign currency from total assets in total currency.”

The BoC explains further:

“Prior to July 15th, we were using April’s asset data to determine the typical rate as that was what was published on OSFI’s website. On July 15th, OSFI published the asset data for May, and that is what we used yesterday to determine the 5-year mortgage rate. As a result, the rate changed from 5.34% to 5.19%.”

–DR. SHERRY COOPER

WHAT’S INCLUDED IN A HOME PURCHASE AGREEMENT

While a home purchase agreement may seem simple and straight forward, there are many differences that you can encounter that can be a big surprise to first-time homebuyers. While you expect the date of possession and the full purchase price to be outlined in the agreement, there are items that you may not be aware should be included.

New builds vs existing homes

If you are buying a newly constructed home, there are quite a few differences between what you get in an existing home.
Legal fees – often home builders will include the legal fees in the purchase price. You should be aware that the law firm that will provide the service is the builder’s lawyer. Should a legal dispute develop, they will take the side of the builder and you will have to find your own independent legal counsel. In fact, if you can afford it, you should consider getting your own lawyer. The $1,200 savings could end up costing you more in the long run.
You should be aware that the show home that you have visited usually has numerous upgrades. I know that when I purchased my first new home I assumed that the bathroom rough-ins in the basement were standard, only to find out later that this was an upgrade. Retro fitting plumbing pipes is a costly venture.
You should also be aware that landscaping, fences and window coverings are not usually not included in the purchase price. Double check to see if the triple-pane windows on the show home are standard or an upgrade. Hardwood floors and basement development are usually an upgrade as well.

Existing homes

When you are buying an existing home, you will find that the window coverings, fences and landscaping are included in most cases. The window coverings should be included in the offer to purchase contract.
Something that may look like it’s supposed to be there but the seller may want to take with them is the hot tub and storage shed. Don’t assume that these items are included. The legal fees are never covered in an existing home sale.

Finally, from a mortgage standpoint, you should be aware that if you are purchasing an acreage or a large property with several outbuildings, your mortgage lender will cover the cost of the home plus one out building and up to three acres of land. If there’s a garage , barn and workshop usually the garage will be included in what the mortgage company will cover but not the smaller out buildings. Check with your Dominion Lending Centres mortgage professional before you make an offer on a property like this.

–DAVID COOKE

FORECLOSURE, BANKRUPTCY, CONSUMER PROPOSAL & CREDIT COUNSELING

The Canadian Bankers Association’s latest reporton mortgage delinquency shows that Saskatchewan has the highest per capita of all the provinces. The national average shows that .24% of home owners are having difficulty paying their mortgage. Saskatchewan is more than triple that at .80% with next in line Atlantic Canada at .51% and then Alberta at .46%. At first glance these numbers seem relatively small until you note the fine print that “delinquency” in this report only represents those homeowners that are more than 3 months behind.

I thought that I would take the time to go over the mortgage ramifications of foreclosure, bankruptcy, consumer proposal and credit counseling.

Foreclosure
This is when the mortgage has gone unpaid to the point that the bank is forced to take back the security for the mortgage which is the home. First of all, the bank doesn’t want to have to do this. Non-payment of the mortgage for an extended period of time forces their hand. The foreclosure process is different in every province. Saskatchewan has the most difficult foreclosure process for the bank and gives the homeowner many chances to catch up and stop it. This process can take months to work through for the bank to take possession of the home to be able to sell it to recover their losses. The long-term effect on a client that goes through foreclosure is permanent. A record of the foreclosure is placed on each clients’ credit report. Unlike a bankruptcy or consumer proposal that are eventually removed, the foreclosure stays on their credit report for life. What that will mean is that when they want to eventually purchase a home again, they will more than likely require at least 20% down payment.

Bankruptcy & Consumer Proposal
Both bankruptcy and consumer proposal are administered through a licensed insolvency trustee. Typically, every creditor that you have debt with will participate in the process. This includes student loans and arrears with Canada Revenue Agency.
If you have gone through either of these insolvency actions, the mortgage industry sees them as them as the same thing. What is most important after either of those is to get back up on the credit horse and walk before you run. Canadians that swear off debt of any kind after insolvency are better known as lifelong renters. Never having a credit card or loan again is certainly fine until you apply for a mortgage to buy a home. Banks and mortgage lenders want to see that you can walk with small amounts of credit before running with hundreds of thousands in a mortgage. Once discharged from either a bankruptcy or consumer proposal obtaining a credit card should be your very first step. The next thing to do is advise both Canadian credit reporting agencies that you were discharged. You may be required to send documents related to the insolvency. It is a good idea to keep all your paper work from this process in a safe place for at least 10 years.

Credit Counseling
Credit counselling could be a viable option for those that are keeping up with their debt payments but need help in making a household budget to get out of debt faster. For those that have fallen behind on their debts and 1 or more have gone into collection status, credit counselling may not be the answer. There are 2 distinct differences between working with a credit counselor and a licensed insolvency trustee.
1. Student loans and debts to Canada Revenue Agency cannot be addressed within credit counseling.
2. If the credit counseling requires debt negotiations and/or payment arrangements, some of your creditors may decline to participate. This leaves debts outside of the credit counseling arrangement that you must address on your own. It’s a little like having 2 flat tires on your car and only 1 spare. The spare may work well to fix one flat but your car still isn’t roadworthy.

–KEVIN CARLSON

Mortgage Growth Slows, Alt-Lender Share Grows: CMHC

Canada’s mortgage market grew by its slowest pace in more than 25 years in 2018, according to new data released by the Canada Mortgage and Housing Corporation.

At the same time, the share of the market controlled by alternative lenders—which typically lend to riskier clients and charge higher interest rates—grew from the previous year.

“This decline in new mortgage activity is due to a combination of factors, including tighter underwriting criteria and non-underwriting criteria, increased borrowing costs, modest economic conditions and to some extent changes in behavioural factors, which resulted in softer housing demand in some major centres in Canada such as Toronto and Vancouver,” reads CMHC’s inaugural Residential Mortgage Industry Report.

The data shows new mortgages for the purchase of property were down 19% in 2018 compared to the previous year and that refinances were down 12%.

The report also found renewals with the same lender were up 16% compared to the previous year and now account for 41% of all mortgages.

“…the approval rate for same-lender renewals remained stable at approximately 99%, showing almost all renewal applications are approved,” the report said. “Renewals are not specifically subject to the new stress test and are more likely to meet current lender criteria.”

The report failed to mention, however, that renewals with other lenders (switches) are subject to the stress test rules, which likely had an impact on the higher lender retention rates.

Use of Alternative Lenders Increasing

The data also showed an increase in market share for alternative lenders, which rose to 1% of the Canadian mortgage market.

That translates into $13–14 billion worth of outstanding mortgages held by between 200 and 300 active alternative lenders, CMHC said. That’s up from $11–12 billion in 2017 and $8–10 billion in 2016.

The report also pointed out that while alternative lenders operate across the country, they are more concentrated in Ontario and B.C., with the far majority (78%) operating in Toronto and Vancouver.

Comparatively, Mortgage Investment Corporations (MICs) held 1% of outstanding mortgages, mortgage finance companies held 6%, credit unions held 14%, and federally regulated financial institutions (which includes banks), held the remaining 78% of outstanding mortgages.

Rise in Uninsured Mortgages

CMHC reported that more Canadians are taking uninsured mortgages, with their share rising to 35% in 2018 from 29% in 2016. At the same time, the share of insured mortgages has dropped to 41% in 2019 from 57% in 2015.

“The increasing shift to uninsured mortgages is partly a result of lenders and borrowers adjusting to regulatory changes, notably the 2016 stress testing for high-ratio mortgages, as well as changing economic conditions,” CMHC noted. “Homebuyers must meet stricter conditions in order to qualify for mortgage insurance. Changes to the portfolio insurance program have also impacted the relative size of the insured mortgage space.”

Other Key Stats

The report contained a treasure trove of additional data. Here are some of the highlights:

• $488,699: The average home price in 2018
  • Down 4.1% from the previous year

Interest Rates

• 3.30%: The average 5-year fixed rate secured in 2018
  • 29.2%: The share of new mortgages that were 5-year fixeds
• 3.15%: The average variable rate secured in 2018
  • 27.6%: The share of new mortgages that were 5-year variables (this increased to 29% as of the first quarter of 2019)
  • 44%: The share of overall mortgages that were 5-year variables (well above any other point in the past five years)
• 29 bps: The discount on variable rates vs. 5-year fixed rates originated at the same period (2018)
  • In 2016, the rates for 5-year fixed and 5-year variables were practically the same. Similarly, as of February 2019 the discount narrowed again to just 2 bps.
• “The larger discount offered on variable rates in 2018 partly reflected both expectations of rising interest rates and increasing efforts to attract new borrowers as the housing market began to slow down,” CMHC noted.

Mortgage Default Insurance

• 42%: Percentage of mortgages that were insured as of Q1 2019
  • Of these, 58% were high ratio, 9% were low ratio and 33% were portfolio insured

Share of Loan-to-Value

• 65% or less LTV: 49% of residential mortgages
• 65.01–75% LTV: 19%
• 75.01–80% LTV: 16%
• 80.01–85% LTV: 4%
• 85.01–90% LTV: 4%
• 90.01–95% LTV: 8%

Mortgage Values at Origination

• 35%: Percentage of uninsured mortgage originations with values of $500,000 and over (2016)
• 34%: Percentage of mortgage originations with values of $250,000 or less (2016)
  • Now 28% in 2019

WHAT IS A MORTGAGE “REFINANCE” AND HOW DOES IT AFFECT ME?

Refinancing a Home is one of those things where people understand what it is but have trouble explaining How it works. To put it simply, refinancing your Home allows you to access the equity you have built up, by changing the mortgage amount.

Let’s say you bought a $300,000 condo and you paid 20% ($60,000) as your down payment and had a mortgage of $240,000. Over the next 4 years, you continue making payments to pay down the $240,000 you owed and now that amount is only $230,000. Your mortgage is up for renewal in one year however, you want to do some renovations and you need to access the equity in your Home—this is where a refinance could come into play.

What this means is you will get an appraisal, or in simpler terms an evaluation, of your current Home and submit that information to a lender. Let’s say your $300,000 condo is now worth $350,000 and you owe $230,000. You have built up an additional $60,000 in equity ($350,000 – $230,000 owing – $60,000 initial down payment= $60,000). You have a mortgage of $230,000 on a Home worth $350,000, therefore your equity in the Home is $120,000.

To access that $120,000, you can refinance your mortgage. So let’s say you want to go back and take $50,000 from the $120,000 you have built up. Your new mortgage would go from $230,000 to $280,000, and that $50,000 will be transferred from the lender to you. You are essentially borrowing money from the lender while also adding money back on top of your mortgage.

This is why people will refinance their Home to make larger purchases. The bank will lend you the money now and get it back in the future, plus interest, because it is being added to the mortgage.

This is just one way people are able to use their Home to access cash. Other ways people can do this, especially if they are looking to complete renovations, is through home equity, lines of credit, collateral charges and purchase plus mortgages.

Knowing this information before you buy can be extremely beneficial. That is why it is important to work with a qualified HomeHow mortgage specialist. Contact a Dominion Lending Centres mortgage professional today for more questions about refinancing!

–CHRIS CABEL

JUNE HOME SALES STOPPED DETERIORATING IN THREE WESTERN PROVINCES

Statistics released late last week by the Canadian Real Estate Association (CREA) show that national home sales were little changed in June following gains in the prior three months. Housing activity remains well below levels recorded over much of 2015-2017–the boom years. As the chart below shows, national sales have moved up to close to their 10-year average and are up nearly 10% from the six-year low touched in February of this year.

Underlying the flat national sales performance, was an even split between the number of local markets that posted sales gains and losses. More considerable monthly increases were generally focused in Quebec and Southern Ontario. They were offset by declines in Greater Vancouver, Calgary, Halifax-Dartmouth and the province of Newfoundland and Labrador.

Year-over-year, sales edged up 0.3%, with gains in Greater Toronto and Montreal offsetting declines in BC. According to Gregory Klump, CREA’s Chief Economist, “There’s a growing divergence in Canadian housing market trends between eastern and western Canada. While sales activity in Canada’s three westernmost provinces appears to have stopped deteriorating, it will be sometime before supply and demand there become better balanced, and the outlook for home prices improves.”

New Listings
The number of newly listed homes edged up 0.8% in June. Stable sales and a slight increase in new listings caused the national sales-to-new listings ratio to ease marginally to 57.1% in June from 57.7% posted in May. This measure remains within close reach of its long-term average of 53.5%. Based on a comparison of the sales-to-new listings ratio with the long-term average, over 80% of all local markets were in balanced market territory in last month, the largest share in more three years.

The number of months of inventory has swollen far beyond long-term averages in the Prairie provinces and Newfoundland & Labrador, giving homebuyers an ample choice in these regions. By contrast, the measure remains well below long-term averages in Ontario and the Maritime provinces, resulting in increased competition among buyers for listings and fertile ground for price gains.

Home Prices
Although the seasonally adjusted Aggregate Composite MLS® Home Price Index rose 0.3% in June from the month before, it was still running 1.1% below the peak reached in December 2018. The overall trend has remained stable since March amid divergent regional trends. Seasonally adjusted MLS® HPI readings in June were up from the previous month in 9 of the 18 markets tracked by the index, with virtually all of the gains recorded in housing markets east of the Prairie region.

Prices were flat on a month-over-month basis on Vancouver Island and in Calgary, Edmonton, Regina, Saskatoon and Moncton. Material declines were limited to the GVA (-1.3%), the Fraser Valley (0.8%) and the Okanagan Valley (-0.5%). (see Table below)

By contrast, monthly gains were posted in Barrie (+1.4%), Hamilton (+1.3%), Niagara (+1.2%), Guelph (+1.1%), Ottawa (+0.7%), Greater Montreal (+0.7%), the GTA (+0.6%) and Oakville (0.3%).

The actual (not seasonally adjusted) Aggregate Composite MLS® Home Price Index edged down by -0.3% y/y in June 2019. For the second month in a row, all benchmark property categories tracked by the index posted y/y declines.

On a national basis, two-storey single-family home prices were little changed from last June, edging back 0.1%. By comparison, one-storey single-family home prices posted the most substantial y/y decline (-0.8%) among benchmark property categories. Meanwhile, townhouse/row prices were down by 0.7% y/y and apartment unit prices edged back by 0.4%.

Year-over-year trends continue to vary widely across the country, with the central theme being a growing divergence in trends between eastern and western Canada.

Results remain mixed in British Columbia, with prices down on a y/y basis in Greater Vancouver (-9.6%), the Fraser Valley (-6.6%) and the Okanagan Valley (-0.8%). Meanwhile, prices edged up 0.5% in Victoria and climbed 4.2% elsewhere on Vancouver Island.

Among Greater Golden Horseshoe housing markets tracked by the index, MLS® HPI benchmark home prices were up from year-ago levels in Guelph (+6.8%), the Niagara Region (+6.7%), Hamilton-Burlington (+5.4%), the GTA (+3.6%) and Oakville-Milton (+3%). By contrast, home prices in Barrie held below year-ago levels (-2.4%).

Across the Prairies, supply remains historically elevated relative to sales and home prices remain below year-ago levels. Benchmark prices were down by 3.9% in Calgary, 3.2% in Edmonton, 4% in Regina and 1.1% in Saskatoon. The home pricing environment will likely remain weak in these cities until demand and supply return to better balance.

Home prices rose 8.3% y/y in Ottawa (led by a 13.2% increase in townhouse/row unit prices), 6.7% in
Greater Montreal (driven by an 8% increase in condo apartment unit prices), and 1.3% in Greater Moncton (led by an 18.4% increase in condo apartment unit prices).

Bottom Line: The Bank of Canada is getting its predicted rebound in economic activity in the current quarter and believes growth will accelerate further in Q4 and 2020. That should keep the Bank on the sidelines for some time. Currently, the markets are expecting the Federal Reserve to cut interest rates later this month and to continue to do so in 2020. Indeed, President Trump is lobbying hard for rate cuts.
It is unlikely that the Bank of Canada will follow the Fed unless the trade war with China worsens. The White House has succumbed to political pressure to reduce trade tensions. Trade uncertainty is the only thing right now that would derail the Canadian recovery.

–DR. SHERRY COOPER

National Home Sales Flatten Out in June: CREA

The national housing market appears to be taking a breath after three consecutive months of improvement, according to the Canadian Real Estate Association (CREA). The June data reveals sales, prices and listings remained flat both on a monthly and annual basis.

Overall, home sales edged up just 0.3% from the same time in 2018 and slipped 0.2% from May’s activity. That’s up 10% from the six-year low recorded in February, but still below the market’s climb between 2015 and 2017.

The number of newly listed homes edged slightly higher than sales by 0.8%, which eased buying conditions somewhat for buyers, with a sales-to-new-listings ratio of 57.1%—well within balanced territory. That’s resulted in fairly flat price growth, with the national average up by just 1.7% to $505,000 (though closer to $400,000 when excluding the Greater Vancouver and Greater Toronto markets). The national Home Price Index, which measures the overall value of homes sold, fell by 0.3% from 2018, though rose by the same amount from May.

All home types saw their benchmark values fall for the second month in a row; two-storey single-family homes saw values slip -0.1%, while one-storey single-family homes dropped the most, by -0.8%. Townhouse and rowhouse prices were down -0.7%, while apartments—typically the strongest-performing housing segment—saw values dip by -0.4%.

Home Sales and Price Growth Uneven Across Canada

As has been the developing trend, sales activity has been lopsided across the country; some markets are experiencing a searing pace, while others remain in a supply-demand slump. Conditions remain slow in several major urban centres including Greater Vancouver, Calgary and Halifax-Dartmouth, though this has largely been offset by strong performance in Quebec and Southern Ontario markets.

“There’s a growing divergence in Canadian housing market trends between eastern and western Canada,” stated Gregory Klump, CREA’s chief economist. “While sales activity in Canada’s three westernmost provinces appears to have stopped deteriorating, it will be some time before supply and demand there becomes better balanced and the outlook for home prices improves.”

A Mix of Buyers’ and Sellers’ Markets

CREA finds 80% of all local housing markets to be considered balanced, and that the level of national inventory sits at five months—the lowest since January 2018, but still well aligned with the long-term average of 5.3 months.

However, as is the case with uneven sales, supply remains widely inconsistent in markets across the country, well above typical levels in B.C. and the Prairie markets. However, it’s the opposite scenario in Ontario and the Maritimes where scant available listings are putting the squeeze on buyers and driving average home prices higher.

Check out the infographic below to see how home prices performed in major Canadian markets in June:

–PENELOPE GRAHAM

SHOULD YOU PAY DOWN YOUR MORTGAGE ASAP?

One of the top questions we get asked: Should I pay down my mortgage as fast as possible? In theory, this makes sense. The faster you pay it down, the faster you get out of debt, right? For many people that is the case and it does make sense often times to take this route. After all—your home is truly an asset and can be used as an investment piece itself!

However, in certain situations, there are some cases where paying off your mortgage right away doesn’t make sense. Every person’s circumstances are different, and, in many cases, it DOES make sense to pay down your mortgage when you have funds available.

We cannot emphasize enough that there are numerous factors to consider before paying down any sizable debt (your mortgage included). Each person must make the choice that is right for them and consult with professionals who can help them make the right choice based on their current circumstances. With that in mind, today, we are going to highlight some considerations as to why you may consider not paying down mortgage:

You have a super low mortgage Rate
If you locked in at a great rate and have low interest on your mortgage, take advantage of it! Pay it back as you can but do not feel pressure to go above and beyond your monthly mortgage payment if it is not an option for you. We would advise in this instance, to speak with your financial planner or accountant to find out what your strategy is for debt repayment.

Having a solid plan can help set you up for future success and help you focus on paying down debts that have the highest interest amount first, thereby lowering the overall debt load you are carrying and paying out each month. We can definitely recommend some fantastic accountants and financial planners if you are on the lookout for one!

The Property is a rental or investment property or houses a home-based business
This may be a consideration for some people as a portion of the interest (on rental properties and homes with home offices) are tax deductibles. In these cases, aggressive payback could have a downside in relation to your tax right offs.

Again, this is an instance where an accountant’s guidance can direct you towards the best option. For some, the tax break is significant and for the circumstances, it makes sense to keep the payments as they are. For others, it would make more sense to increase the payment as the interest is minimal Talk to a professional to get the best advice on this particular area and consider all your options.

You have a better investment opportunity
If you have an opportunity that will give you a higher return on your investment, consider taking that avenue vs. paying down your mortgage. For example, if you put $100,000 into your 3.00% mortgage, you save $3,000 next year but if you made a 5% return on that $100,000 instead, you could put that $3,000 towards your mortgage next year and still have $2,000 left over.

With that said, there are many instances when an investment may seem excellent on paper, but in reality, is not ideal. Always seek advice from a professional first before making a financial decision.

These are just 3 examples of times it doesn’t make sense to pay down your mortgage right away. Ultimately though, you should consider what choice will be the right one for you. There are many instances where paying down your mortgage does make sense. As a Dominion Lending Centres mortgage broker, we are here to inform you of every option available to you and advise you on what we feel is the best course of action. We can work with you and your financial advisors/accountants to determine when and if paying down your mortgage is a good option for you—but at the end of the day, the decision is yours!

–GEOFF LEE