Residential Unit Sales for the first quarter of this year have not kept pace with the same period in 2010, and are down by about 6.9%, while prices have held steady and are up by about 2% to $277,600.00. Total unit volume of all categories of sales (residential, land, farms, commercial, etc.) recorded through the MULTIPLE LISTING SERVICE® of the Barrie and District Association of REALTORS® was similarly down by about 7.2% with average values in these other categories also indicating strength.
Power of Sale and Foreclosure activities in the local market have not been a problem of any significance, and the number of sales of this type of transaction has continued the downward trend which we saw at the end of 2010, decreasing year over year by about 24; a testament to the continuing improved health of the general economy in the area.
While interest rates have increased marginally, these rate increases are not a significant influence on current buying decisions. It is anticipated that rates will be generally stable through the immediate term with the possibility of moderate increases sometime in the last half of the year.
The Federal Government has implemented new home financing controls which officially took effect on March 18th, 2011, and which must be followed by the banking sector. The intent of these changes is to ensure that Canada continues to be the “world example” to emulate in mortgage financing… avoiding the pitfalls which other nations… most notably the United States… have experienced, and which played a major role in the recent world wide economic difficulties. Stand up and say “Hurray” for us… we have put long term “prudence” ahead of “short term profit” in our housing and financial markets.
These new changes essentially tighten up some mandatory debt service ratios and application criteria used by the lending institutions when an application for a mortgage is processed. This will have the potential to reduce (marginally) the number of approved applications for a first mortgage, but will also have the effect of keeping these same applicants out of financial distress in the longer term, and therefore, will result in their re-application at a later date when their financial wherewithal has improved. Specifically, the following is a summary of the main criteria announced by the Federal Government of Canada. The three changes will…
1. Reduce the maximum mortgage amortization period from 35 to 30 years.
2. Lower the maximum refinancing amount to 85% of the current value of the property being mortgaged.
3. Withdraw (eliminate) all government backed insurance on non-amortizing lines of credit secured by homes. This will become effective on April 19th, 2011.
These changes follow on the heels of three other controls which were introduced about one year ago with the same intentions… to preserve equity in the family home over the longer term. Those three changes…
1. Required that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and a shorter term.
2. Lowered the maximum amount Canadians can withdraw in refinancing their mortgages from 95% to 90% of the current value of their homes
3. Required a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation (investments).
Minister of Finance, Jim Flaherty, said “People need to demonstrate that good Canadian trait of prudence and reasonableness in terms of their debt assumptions. We want to make sure we don’t have the kind of medium-term problem that has been experienced elsewhere because of this tendency by some to assume large indebtedness at low interest rates.”
Forward Predictions for the Barrie Area Market:
The year ahead will continue to present challenges to the local market. Indicators from within the industry tend to be on the positive side with expectations that exceed 2010 in terms of unit volume; not a run-away year but a reasonable year with prices at least holding. Properties which are priced reasonably and present themselves well, will sell better than those which are simply relying on low prices to attract a buyer. Recreational and Specialty Properties will continue to be in demand, since they have a limited supply, but will take longer to sell and/or will be sold at values lower than previously. The introduction of the GO Service to Barrie, the general affordability of the Barrie area, and the presence of a double land transfer tax system in the Greater Toronto Market will continue to fuel unit growth in the entire area in the short and longer term.
First time buyers will continue to play an important role in fuelling the growth of the local market. As a result, there is a dependence on the continuation of low mortgage interest rates. Rates have continued to reside at the lowest levels in decades allowing more and more of this group to qualify for financing. Their influence on the market is significant since they create the initial impetus for move-up buyers to sell and then re-buy with a resulting multi-level chain of ownership changes. In addition, this move up phenomenon has the effect of strengthening market values in both the short and long terms, as well as being a boon to the renovation and building supply sectors of our economy.
The City of Barrie has been designated by the Province of Ontario as a Growth Centre, and Buyers coming to the area can still expect to find a wide range of housing options at affordable prices With average prices at least $150,000 to $175,000 below comparable metropolitan Toronto values, buyers from the greater metro area will find a refreshing negotiating environment where reasonable offers are entertained by Sellers, multiple offers are the exception, and local REALTORS® work “around the clock” to bring the Agreement together. The availability of rental housing has improved, but with mortgage interest rates at record low levels, and 95% financing available, the option to buy makes economic sense for everyone.