Archive for March, 2020

Mortgage Rate Forecast

Friday, March 27th, 2020

The panic sent Canadian bond yields down sharply

BCREA

HIGHLIGHTS

  • COVID-19 sends interest rates plummeting
  • Canadian recession unavoidable
  • Bank of Canada cutting rates, but how low?

Read The Full Report HERE

Mortgage Rate OutlookThe growing fears of the potential impact of COVID-19 resulted in a full market meltdown in late February, sending equity markets into free fall and global bond yields plummeting. On top of an already volatile situation, two of the world’s largest oil producers, Saudi Arabi and Russia, have engaged in a price war that sent oil prices to levels not seen since the late 1990s.The panic sent Canadian bond yields down sharply and prompted emergency rate cutting by the Bank of Canada. Variable and 5-year fixed qualifying mortgage rates have followed bond yields lower with the 5-year fixed rate reaching 2.59 per cent, its lowest level since 2016 and very near its lowest level on record.

Landlords, renters to get help from British Columbia government

Friday, March 27th, 2020

BC government to support landlords, renters

Steve Randall
Canadian Real Estate Wealth

The British Columbia government has announced support for the province’s landlords and renters during the coronavirus crisis.

It is introducing a new rental supplement to pay up to $500 a month towards rent payments, building on provincial and federal support already announced.

The payment will be made directly to landlords for any British Columbians who are facing financial hardship.

“With lost jobs and lost wages due to COVID-19, many tenants are worried they can’t make the rent. It’s a challenging time for landlords too,” said Premier John Horgan. “Nobody should lose their home as a result of COVID-19. Our plan will give much-needed financial relief to renters and landlords. It will also provide more security for renters, who will be able to stay in their homes without fear of eviction or increasing rents during this emergency.”

The supplement will support those in low and moderate incomes who are not eligible for existing rental assistance programs.

The Province is implementing a number of additional measures to keep people housed and protect their health. The full list of immediate measures includes:

  • The new temporary rent supplement will provide up to $500 per month, paid directly to landlords.
  • Halting evictions by ensuring a landlord may not issue a new notice to end tenancy for any reason. However, in exceptional cases where it may be needed to protect health and safety or to prevent undue damage to the property, landlords will be able to apply to the Residential Tenancy Branch for a hearing.
  • Halting the enforcement of existing eviction notices issued by the Residential Tenancy Branch, except in extreme cases where there are safety concerns. The smaller number of court ordered evictions are up to the courts, which operate independently of government.
  • Freezing new annual rent increases during the state of emergency.
  • Preventing landlords from accessing rental units without the consent of the tenant (for example, for showings or routine maintenance), except in exceptional cases where it is  needed to protect health and safety or to prevent undue damage to the unit.
  • Restricting methods that renters and landlords can use to serve notices to reduce the potential transmission of COVID-19 (no personal service and allowing email).
  • Allowing landlords to restrict the use of common areas by tenants or guests to protect against the transmission of COVID-19.

“People are feeling a lot of fear and anxiety and they need to be able to depend on the comfort and stability of home right now. Our government is taking steps to help take some of the pressure off renters and landlords and protect people’s health,” said Selina Robinson, Minister of Municipal Affairs and Housing. “We’re helping renters pay rent and giving them the peace of mind that they have a stable home in these unprecedented times, and ensuring that landlords can count on some rental income right now to keep them afloat too.”

Copyright © 2020 Key Media Pty Ltd

Ethics Guy: Doing business virtually in a crisis

Friday, March 27th, 2020

Kim
REBGV

It goes without saying that we’re expected to look after our clients and not to put them in harm’s way. 

I’d think many potential buyers and sellers are sitting things out for awhile, waiting for the risk of catching or spreading COVID-19 to subside. 

If you encounter a seller or buyer who absolutely has to buy or sell for some reason, know that you’re not obligated to take their business. If you do, however, you become their agent and as such, you’re obliged to follow their lawful instructions so long as they comply with government instructions. 

First, the mea culpa, I’ve never done a virtual deal. My deals were all done with quill pens. But we’re facing strange times so let’s take this “doing business virtually” idea out for a test-drive. 

Let’s start with my definition of doing business virtually. 

For me, it means you’re causing something to happen without you being there in person. Think about it, we’ve been doing business virtually for quite a while now. I mean, you’ve been phoning, emailing, texting and Touchbasing your clients and each other for years. 

We’ve made your listings visible to anyone on the planet via the web for at least 20 years or more. 

Posting photographs, floor plans and virtual tours is commonplace. With access to the wealth of property information from LTSA, local government maps and now, the enterprise version of AutoProp, it’s never been easier to get the necessary information to clients and others. 

For years, you’ve been writing offers with products like Docusign and legally executing contracts. Making counter-offers and other contract changes is also a breeze, since all of the parties go to the same live document to affix their encrypted signatures. 

Some members are promoting their listings virtually and handling offers electronically. These offers are being made subject to inspection. This means that the buyer makes the offer based on the listing information, pictures and virtual tour. The deal is established by way of contract, subject only to the buyer inspecting the property in person. Again, the informed consent of the parties for that inspection, with an appropriate nod to the health risk, tenants’ rights and physical distancing, would be absolutely vital.

Most buyer agents have been emailing their buyers’ offers to sellers’ agents for ages. Perhaps less frequent, is the use of products like Facetime, WhatsApp or similar, to present and discuss contracts, documents and other things, without us having to be physically there with our clients.

See. We’re already virtual REALTORS®. 

But there’s more we can do because, the times being what they are, we’re expected to do everything we can to keep this infernal virus at bay. For us, this has now become a professional and societal obligation.

That’s why your Board relaxed Rule 3.22 regarding showing availability and continues to strongly recommend that you refrain from holding Open Houses, avoid in-person interactions as much as possible, and adhere to the most up-to-date physical-distancing requirements from our government and public health officials. 

These requirements, and they are required, are changing often. We have an obligation to know and follow them.

For example, the provincial government announced on Wednesday that, while the provincial emergency order is in place, landlords are not permitted to enter a tenant’s rental space (for showings, routine maintenance etc.) without the tenant’s consent. Exceptions were given to protect health and safety or to prevent undue damage to the unit. (Expect more details from the Residential Tenancy Branch early next week.)

Your showings, if there are to be any, must be kept to an absolute minimum, with them being arranged only with the consent of the parties, including any tenants.

Please work with your clients, and their tenants where applicable, to discuss how to responsibly achieve their housing and shelter needs amid today’s public health emergency. 

As much as possible, employ other approaches to in-person interactions, such as virtual showings and other technology-based solutions. 

We’re all in a challenging spot and we’re trying to do the best we can given the circumstances. Let’s all do our part.

We’re watching the COVID-19 situation carefully and will continue to provide you with advice as often and quickly as possible.

As I prepare to hit send on this message, I worry that a new government announcement could make my suggestions outdated by the time you read it.

That’s just the times we’re living in.

Stay safe,

Kim

Bank of Canada enacts another overnight rate cut

Friday, March 27th, 2020

For the third time this month, the Bank of Canada cut to the overnight rate

Phil Hall
Mortgage Broker News

For the third time this month, the Bank of Canada cut to the overnight rate, this time slashing off 50 basis points to a new level of .025%. The Bank Rate is correspondingly 0.50% and the deposit rate is .025% percent.

In a press statement, the central bank said this “unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic.”

The BoC also launched two programmes designed to address the economic chaos created by COVID-19: The Commercial Paper Purchase Program (CPPP) is designed to “alleviate strains in short-term funding markets and thereby preserve a key source of funding for businesses,” while the second initiative will have the BoC acquiring Government of Canada securities in the secondary market, beginning with a minimum acquisition of $5 billion per week across the yield curve.

“The program will be adjusted as conditions warrant, but will continue until the economic recovery is well underway,” the BoC said, adding that its balance sheet “will expand as a result of these purchases.”

Copyright © 2020 Key Media

Local real estate market frozen over COVID-19 uncertainty

Friday, March 27th, 2020

Real estate market mostly frozen over COVID-19 uncertainty

Joanne Lee-Young
The Province

The local real estate market is mostly frozen as fears about the spread of COVID-19 have halted most home showings and there is uncertainty in the market for buyers and sellers.

The list of causes for this uncertainty is long, from personal health well-being to job security to newly announced policies such as the B.C. government’s ban on rental evictions, according to real estate agents.

B.C. Premier John Horgan said Wednesday that a temporary renters’ supplement of $500 a month will be paid to landlords and that it should be used by renters who have seen a drop in their work hours or layoff notices.

This will help renters who have lost jobs and wages, but it will also squeeze some mom-and-pop investors, said Vancouver real estate agent Steve Saretsky.

Saretsky is worried that the ban on evicting tenants might “green-light renters into thinking, ‘I don’t have to bother paying.’

“To me, it’ll be a bit of relying on the honour system,” he said.

Saretsky thinks small, individual landlords will have trouble making their mortgage payments if rent payments, even with the government supplement, are forced to be smaller.

Meanwhile, since earlier this week, there is no longer an option on the Multiple Listing Service to register an open house, so Vancouver real estate agent Justin Smith has been offering quick walkabouts via his Instagram live video. He’s offering it as an option and there have been times in the past when sales were easily sealed with a video tour, but “not right now.”

“No one is eager to buy. They (buyers) just are seeing what comes of it,” Smith said.

In recent weeks “there had been a small bounce in sentiment (in sales), depending on how you were priced and what you offered,” said Smith, but word of sales that have closed this week are being seen as the last for a while.

On the flip side, Saretsky said there are still some private showings that are happening, even though most real estate agents aren’t doing them to cut down on social interactions that could spread COVID-19.

The ones that are still happening, he said, come as real estate agents are being pressured by sellers to meet with potential buyers. He explained that as these sellers see a fast-closing window for getting out of the market they’re telling agents that if they don’t show a property, then they’ll take it to another agent.

© 2020 Postmedia Network Inc.

COVID-19 Market Activity Update – March 27, 2020

Friday, March 27th, 2020

How has coronavirus changed the real estate market so far?

REW

COVID-19 is having a dramatic impact on every market and industry, and real estate is no exception. Though we’re still in the early stages and it’s difficult to predict how long coronavirus and the current self-isolation measures will last, REW is committed to supporting you every step of the way. 

To start, let’s take a look at how the market has changed during the COVID-19 crisis. In the graphs below, you’ll see data showing the trajectory and drop in market activity since the pandemic began. 

How has COVID-19 impacted real estate activity?

Pageviews – the raw number of pages viewed by visitors – are a strong indicator of audience volume and engagement on REW. Below, you can see the week over week page view trend line, generally moving up and to the right on the year so far – until the week of March 8th.

REW was seeing nearly 20 million monthly page views prior to the COVID-19 crisis, with the number increasing month over month since the beginning of 2020. Based on this, it was clear that interest in properties was growing, a clear indicator of strong demand in the residential market. After some brief dips in 2019, 2020 was initially predicted to be a return to form for the real estate market. 

As people have had to adjust their regular routines to stay home and self-isolate, we’ve seen a corresponding and immediate impact on engagement with property listings. Due to the COVID-19 crisis, we’ve seen a 21% reduction in audience activity compared to the beginning of March. Comparing the site traffic to the same period in 2019, we see a total of 25% fewer page views overall. However, there is some cause for optimism – the decline is starting to show a small rebound in recent days.

REW is by no means representative of the entire real estate market, but as the number one property site in British Columbia (with regular traffic of over three million visitors per month), it is certainly a clear indicator of the shift in market behaviour at this time. 

How has coronavirus affected leads and property enquiries?

Leads and enquiries generated by property shoppers on REW have also seen a decline in recent weeks due to the COVID-19 crisis. Though it’s a small sample size, In the last few days, we’ve seen a decline of nearly 45% in the total amount of property enquiries generated.

Given the current economic uncertainty, most buyers and sellers are likely taking a more cautious ‘wait and see’ approach. However, it’s telling that people are still reaching out to agents. The more serious buyers and sellers – likely those looking for a long-term home rather than a short-term investment opportunity – are still in the market.

Another indicator of behavioural change is the Bounce Rate (how many people leave the site immediately after arriving). This rate usually hovers around 30% for property websites like REW, but has now dropped well below 10%. People that are still in the market and coming to our site are more likely to be serious home seekers, and are spending more time evaluating property listings.his is going to be an interesting part of the property purchase process to observe, as people spend longer in an evaluation phase before moving to make a purchase. 

Current Market Takeaways

These are unprecedented times, and it’s impossible to predict exactly how things will play out in the coming weeks and months. Like other industries in North America, the real estate market has never dealt with a true pandemic. However, as Canada continues to take steps to “flatten the curve” and gain more information on how to combat the spread of COVID-19, we will, eventually, see a market rebound. The actual demand for property buying and selling is still very much present – it’s just likely operating on a longer consideration-to-purchase timeline than we’ve seen before.

© 2020 REW. A Division of Glacier Media

Bank of Canada battles coronavirus fallout with third rate cut

Friday, March 27th, 2020

Canada’s central bank cut its market-shaping overnight rate by 50 basis points to 0.25 percent

Sean MacKay
Livabl

In an emergency announcement today, Canada’s central bank cut its market-shaping overnight rate by 50 basis points to 0.25 percent in response to the coronavirus pandemic’s dramatic impact on the Canadian economy and financial system.

This move was the third rate cut in the span of a month and the second emergency announcement the Bank of Canada has made within two weeks. While the cut is technically viewed as an “emergency” measure since it falls outside the Bank’s regularly scheduled rate announcements, it came as no surprise to economists who had widely anticipated the move.

Just earlier this week, the RBC Economics team noted that while the Bank of Canada had been quick to respond to the coronavirus pandemic, additional measures would be necessary and a further rate cut was all but inevitable.

Today’s cut brings the overnight rate to a level that matches the depths of the financial crisis of 2008-2009, down from 1.25 percent after just a few short weeks. While the Bank is working on a number of initiatives to support the Canadian economy during these volatile times, experts believe this will be its final rate cut in response to the pandemic and it will stop short of slashing the rate into negative territory.

“[Bank of Canada] Governor Poloz views this as the effective lower bound and is not likely to employ negative rates that the Bank thinks are harmful to financial markets,” wrote Oxford Economics’ Tony Stillo.

“This extraordinary monetary stimulus, in tandem with a still growing number of fiscal measures, are an absolute necessity to help offset the worst-case impacts from the pandemic shock on the economy,” he added.

The Canadian housing market is expected to see a significant slowdown in activity in the coming months with the first signs of the pandemic’s impact anticipated to be visible in the March sales data from markets across the country. That being said, the diminished number of those who do purchase homes during this time will likely see historically low mortgage rates being offered by lenders.

“Think of the [Bank of Canada’s] Overnight Lending Rate as a benchmark – it is a basis used by consumer lenders, such as TD, RBC, etc. when setting their Prime Rate-priced products. This means whatever the BoC does will have a direct impact on variable-rate products, such as variable mortgages and lines of credit,” wrote Zoocasa’s Managing Editor Penelope Graham in a blog post.

“As a result, those with variable-rate mortgages will see either their monthly payments drop in tandem, or more of their payment going toward their principal debt and less towards interest.”

© 2019 BuzzBuzzHome Corp.

Vancouver luxury condo sales drop 46% in early March data

Friday, March 27th, 2020

Market conditions were less than stellar for Vancouver

Michelle McNally
Livabl

Vancouver’s housing market can’t seem to catch a break these days.

Market conditions were less than stellar for the West Coast city for most of 2019. The demand for new construction condominiums plummeted, with the number of units launched dropping by 60 percent compared to 2018. Then, there was the federal stress test and other government interventions, which, despite being implemented in early 2018, continued to have profound impacts on sales well into 2019.

Now with COVID-19 taking the world by storm, market conditions across the country are heading into uncharted territory.

Sotheby’s International Realty Canada struck an optimistic tone in a new report on the city’s luxury housing market, noting that Vancouver’s luxury condo market could still rise above the coronavirus crisis. The brokerage published their Top-Tier Spring Outlook Report for 2020 this week, highlighting recent sales activity in Canada’s luxury markets, along with predictions for what may be to come when the pandemic subsides.

Housing Market News Alerts

Sotheby’s refrains from attributing any sales declines directly to the coronavirus’s spread, but disruptions caused by the pandemic may have had an impact on the first half of March’s sales performance in Vancouver, judging by preliminary data. For the first 15 days of March, Sotheby’s found that sales on all property types over the $1 million mark dropped by 19 percent, from 116 residences sold during this time in 2019, down to 94 in 2020.

In the condominium segment, sales over $1 million decreased by 46 percent, with only 20 units sold. Still, the report is confident that activity should pick up momentum once again once the pandemic passes, given that buyer demand will likely have just remained dormant, rather being erased entirely.

“As one of the world’s most coveted regions in terms of livability, the city is positioned to see continued activity through the spring and to regain significant momentum once the disruption passes,” Sotheby’s stated in the report.

During the first two months of 2020, Vancouver’s luxury market saw rising consumer demand as sellers and buyers, previously kept to the sidelines due to market uncertainty, jumped in. Bidding wars for condominiums and other property types returned, especially for properties below the $2 million mark, according to the report. Property sales for the $1 million-plus benchmark increased by 80 percent in January and February, for a total of 501 properties sold.

Condo sales activity and traffic overall saw a boost, particularly in the lower tier of the luxury market. Properties priced over $1 million saw a sales surge of 65 percent year-over-year, with 142 units sold in the first two months of 2020. Suites priced between the $1 million to $2 million range saw a 75 percent sales increase and a total of 121 units sold. Meanwhile, condos in the price bracket above — $2 million to $4 million — witnessed a modest 6 percent gain. Quadrupling last year’s numbers, four luxury condominiums sold for over $4 million in January and February in 2020, compared to only one unit during the same period in 2019.

In the new construction segment, there are currently 139 active condo developments, according to data from BuzzBuzzHome. With a median list sales price of $1,249,950, new Vancouver condos are typically going for $1,392 per square foot.

“The Toronto, Vancouver and Montreal real estate markets experienced bold gains in the first months of 2020,” said Don Kottick, President and CEO of Sotheby’s International Realty Canada in the report. “A shortage of listings inventory, pent-up consumer demand, and regional economic fundamentals position these markets for resilience in the months ahead.”

© 2019 BuzzBuzzHome Corp.

COVID-19 is Impacting the Market – Here’s What the Bank of Canada is Doing About It

Friday, March 27th, 2020

BoC is adding a third emergency rate cut, bringing it to 0.25%

Catherine Musgrove
REW

In a bold move on Wednesday (March 4, 2020), the Bank of Canada slashed its key interest rate by 50 basis points to 1.25%, in an attempt to keep the economy moving. But it didn’t stop there. On March 13, 2020, the BoC announced it will cut its overnight rate target by half a percentage point to 0.75%. And surprisingly enough, today (March 27, 2020) the Bank of Canada announced a new cut by 50 basis points in a press release, bringing it to 0.25%. It cited COVID-19 as the primary reason for its decision.

This is the third time the Bank of Canada decides to cut its rate in a matter of a few weeks, as an attempt to help Canada’s economy during the COVID-19 crisis.

Although winter weather, the rail blockades, and the political climate have also played a role in the first drop. This time, lower oil prices are weighing heavy and contributed to the decision. The Central Bank said the unscheduled rate cut was due to the pandemic and its impact on the economy.

As the country braces for economic impact, the Bank of Canada is attempting to curb anxiety and ease the concern of a possible recession.

In an interview with BNNBloomberg, the Chief Economist with Manulife Investment Management Frances Donald says,  “We are living through history that will end up in textbooks and case studies as we analyze central bank policy, how effective it is, how quickly central banks should be reacting, and whether or not we look back and say: ‘They acted too late,’ ‘too early,’ or ‘right on time.’ This is a very strong message from the Bank of Canada. They are concerned about downside risks. But, I suspect that this is in conjunction with globally-coordinated rate cuts.”

What does all this mean for the real estate market? Here is what we know.

Savings for Home Buyers

The cut could mean significant savings for home buyers. The lower rate will potentially translate into lower mortgage rates. 

“According to Ratehub.ca’s mortgage payment calculator, a homeowner who put a 10% down payment on a $500,000* home with a 5-year variable rate of 2.60% amortized over 25 years (total mortgage amount of: $ 463,950) has a monthly mortgage payment of $2,102.”

Banks may choose not to pass on the additional savings because it means more profit for them. However, the BoC is hoping the major banks will cut their prime lending rates.

Stimulate the Real Estate Market

Lower rates could stimulate the real estate market in slower growth areas like Newfoundland and the Prairies. 

An Imbalance

This interest rate drop might create a further imbalance in the Victoria, Toronto, Southern Ontario, Ottawa, and Montreal markets that are already facing hotter markets. Homes are in shorter supply, creating more demand and increased pricing. Economists say this is short term pain for the long term good of the economy and will help keep us out of a recession.

Higher Prices

Home prices may start to rise. As buyers are increasing the amounts they can borrow, supply might begin to drop, driving home prices up. Something to watch!

Global Considerations

Economists are predicting the international markets will slow due to the global impact of COVID-19. Why is this important? There is an anticipated slowing of the global economy, which will impact foreign investments and the supply chain in Canada.

Existing Mortgages

As explained by the Educators Financial group, if you have a mortgage already, how much – and when –you’ll feel the impact of the rate decrease will depend on whether your mortgage is variable or fixed rate, open or closed.* 

If you have a variable rate mortgage, the amount of interest is contingent on the overnight rate. Financial institutions pass on any decrease in the rate to consumers almost immediately.* 

If you have a fixed-rate mortgage, nothing will change until the fixed term ends, and it’s time to renew. * 

The New Mortgage Stress Test  

With new changes were suspended until further notice, but they would be coming to the Mortgage Stress test in April, and it would be interesting to see how the Bank of Canada rate drop might impact the qualifying rate in case they stay like this once the new stress test does come into effect.

Under the new stress test, the rate will be the weekly median five-year fixed insured mortgage rate plus 2%. A few percentage points can translate into thousands of dollars in savings for the borrower.  

Overall, it’s a great time to cash in on a lower mortgage rate if you were on the fence about purchasing. It is also a great time to sell, supply may drive housing prices up in some areas. Consult with your real estate professional for a complete view of market conditions in your area.  

© 2020 REW. A Division of Glacier Media

Mortgage rates to go upward until the market reaches a ‘new normal’

Friday, March 27th, 2020

Canadian mortgages will reach a new normal plateau

Ephraim Vecina
Mortgage Broker News

Canadian mortgage rates will likely climb higher until the market achieves relative stability amid the global COVID-19 outbreak, according to James Laird of Ratehub.ca.

“With Canadians losing their jobs, lenders are building a bit higher of a risk premium into their mortgage rate,” Laird told the Financial Post.

“While this stuff is so fresh, and so uncertain, I think you can expect to see the upward pressure on mortgage rates until mortgage lenders feel like they have an understanding of what the new normal is going to be.”

Laird noted that in the past few days, the lowest rates for a five-year fixed-rate home loan have crawled up from the 2%-2.5% range to roughly 2.5%-3%. The increases came shortly after the major banks’ decisions to cut their prime lending rates.

The banks acted “forcefully to reduce the impact of the coronavirus on the economy,” Laird said just last week. “It is in these uncertain times that Federal institutions acting quickly and intelligently can reduce the negative impact of unforeseen events.

A significant driver of the progressively higher rates is the pandemic-induced economic slowdown, with the Conference Board of Canada warning that the GDP will shrink by 1.1% if lockdowns and travel restrictions last until the end of August.

Copyright © 2020 Key Media