Thursday, September 27, 2007

BC Home Sales to Surpass 100,000

BC Home Sales to Surpass 100,000
BCREA Fall Housing Forecast

Vancouver, BC – September 27, 2007. The British Columbia Real Estate Association (BCREA) released its fall 2007 Housing Forecast today.

BC Multiple Listing Service® (MLS®) home sales are forecast to break the 100,000 unit mark for only the second time in history. BCREA forecasts that BC MLS® residential sales will hit 101,000 units this year, up 4 per cent from 2006. The highest number of MLS® sales in the province was recorded in 2005, when a total of 106,310 homes were sold. The ten-year average is just under 78,000 units.

“Exceptionally strong consumer demand over the summer months has changed the outlook for this year from declining home sales to the second highest on record,” said Cameron Muir, Chief Economist. “While eroding affordability is squeezing some potential buyers out of the market, the housing stock is increasingly diverse, providing a mix of home types that appeal to a wide consumer market.”

BC home prices are also on the rise. The average MLS® residential price is forecast to climb 12 per cent to 7,000 this year. “While home prices continue to face upward pressure, the rate of growth is expected to moderate,” added Muir. The BC average MLS® price increased 18 per cent last year, and is forecast to rise at a more modest 8 per cent in 2008.

BC housing starts are forecast to decline 7 per cent to 33,900 units in this year and a further 4 per cent to 33,000 units in 2008. While single detached housing starts are trending down, multiple housing starts are holding firm at 21,000 units this year. Multiple housing starts now comprise 62 per cent of all new residential construction activity in the province.

The BCREA Housing Forecast is a semi-annual publication produced in the spring and fall of each year. The report contains forecasts and analysis of the BC economy and housing markets, including detailed forecasts by home type of the province’s 12 real estate board areas. End of Article. More details of the release is available from BCREA

MyMortgageBC.com is a mortgage broker that services all of the Lower Mainland including Vancouver, Surrey, Richmond, Langley and White Rock.

Sub Prime Market in BC

Many people think that the Sub Prime Mortgages will effect our British Columbia Real Estate Market. A recent article by British Columbia Real Estate Association (BCREA) sheds some light on the Sub-prime issue.

At MyMortgageBC.com only a very small percentage of the business that we do is ever considered a candidate for sub-prime. As mortgage brokers we always try obtain a mortgage for our clients through a conventional lender.

Sub-prime primer

  • Sub-prime mortgages are mortgage loans to borrowers who have tainted or bad credit histories. While the terms and conditions of sub-prime mortgages can vary widely, one common form offers an introductory two-year term interest rate before resetting to a much higher interest rate (the combination of the index rate plus a margin).
  • In Canada, a prime mortgage is known as a conventional mortgage; Canadian prime mortgages are comparable to US prime mortgages. A home-buyer with a down payment less than 20 per cent (high ratio mortgage) needs to secure mortgage insurance like the kind provided by Canada Mortgage and Housing Corporation (CMHC). Conventional and high ratio mortgages in Canada and the United States use similar underwriting practices. However, sub-prime underwriting is far less comprehensive south of the border, creating a higher risk. US sub-primes don’t require mortgage insurance.
  • The benefit to the borrower is that the initial two-year period allows them to build credit and, as long as home prices rise quickly enough, the increase in equity allows them to refinance with a prime mortgage instead of suffering the consequences of the interest rate reset.
  • Mortgage funds for sub-primes are typically raised from investors. Sub-prime portfolios are often repackaged according to risk and resold. The so-called credit crunch is a result of the inability to raise funds from investors in light of sharply rising defaults. The most popular mortgage-backed securities in Canada are pooled mortgages that are fully backed by mortgage insurance from CMHC.
  • Approximately 20 per cent of US mortgage origination’s are of the sub-prime variety. Falling home prices combined with a wave of interest rate resets have dramatically increased the number of American borrowers in arrears and facing foreclosure.
  • The US mortgage industry is different than Canada’s when it comes to sub-primes. Canadian sub-prime mortgages represent less than 5 per cent of mortgage origination’s, and less than one in four of them have more risky variable rates. While US home prices are falling on average, home prices in Canada continue to rise. The economic fundamentals in Canada remain strong.
  • The impact of the US sub-prime problem likely won’t directly impact BC home-buyers. Prime or conventional mortgage funds in Canada are not facing problems with liquidity. US sub-prime defaults are expected to peak in the first quarter of 2008, as the largest number of interest rate resets will occur at that time. Longer term, lower US consumer confidence has the potential to indirectly impact BC households through a possible reduction in the quantity of BC’s exports and slow growth in tourism.
If you any questions regarding obtaining a mortgage don't hesitate to contact Brent Irving at 604-764-6336.

Thursday, September 20, 2007

Housing starts in Metro Vancouver are down five per cent

VANCOUVER BC, Sep 22, 2007 - According to the Canadian Mortgage and Housing Corp. (CMHC) housing starts in Metro Vancouver are down five per cent so far this year compared to 2006.

Construction of multi-family units, however, were up about five per cent in the seven months to the end of August, offsetting a 30 per cent drop so far in starts of single detached houses.

Total new units started in the region was 12,723 in the first eight months of the year, compared to 13,437 in the same 2006 period.

Multi-family units made up more than three-quarters of the new starts.

Vancouver starts are down by one third so far this year to 2,051, and Surrey’s are down 22 per cent to 2,466. Multifamily units made up more than 80 per cent of Vancouver units and more than 60 per cent of Surrey’s.

MyMortgageBC.com note: We are a mortgage broker serving Vancouver and Surrey BC and the rest of the Lower Mainland. Please contact us if you have any questions regarding property financing or mortgages.

Friday, September 7, 2007

How Does an Appraisal Work?

MyMortgageBC.com note: The most common approach for estimating residential values for mortgage purposes is the comparison approach.

An appraisal is an estimate of the current value of the property (the 'subject property'), using one or both of the following techniques;

  1. The majority of residential appraisals use the market value comparison approach, comparing recent sales of similar properties ('comparables' or 'comps' in real estate jargon) and adding and subtracting the differences in value of the same features in the subject property. For example, if a house of the same size on the same street and in the same condition as the subject property recently sold for $200,000, but this 'comparable' had a triple garage and a finished basement and the 'subject' does not; the appraiser calculates the market value of these features (say, $12,000 in total) and deducts this amount from $200,000, giving an 'adjusted value' of $188,000. This is usually done with at least three 'comparables' and either averaged or the middle ('median') value used.
  2. A supporting measurement of value used by many appraisers is the "depreciated cost" approach, whereby the land value is estimated and added to an estimate of the depreciated building value. Where there are few comparables available, relatively more weight might be given to this method.
MyMortgageBC.com is a mortgage broker located in the Vancouver, Surrey area serving all of the lower mainland of British Columbia.