Despite what all the real estate market pessimists might say in my opinion there is no condominium bubble in Canada.  All signs point to Canada’s real estate market remaining strong for this year and well into the rest of the decade. But that doesn’t mean home prices are falling. In most major urban centers the average resale price is at historic highs.  This indicates an even greater need for condominiums, which are often seen as a more cost effective alternative to single family homes. The dense makeup of multi family dwellings also allows more people to live in the core of Canada’s biggest cities.

Here are the major reasons that debunk any theory that Canadian condominium prices are bubbling.

Higher costs

The average cost of a resale home in Canada was $363,900 in 2011. Economists at the Canada Housing and Mortgage Corporation, estimate that cost will rise to $368,200 this year.

These costs are much higher in bigger centers like Toronto and Calgary. Where home prices on average are more than $400,000.   In Vancouver the average cost of a resale home is expected to climb above $800,000 this year.

This is drawing more attention to smaller family dwellings like condominiums. Especially for the homeowner who’s main factors are location and affordability.  For example, the average price of a condominium in Toronto is $234,680. Condominiums create a good alternative for anyone looking for a more cost affective alternative to a single-family home.

In its latest Housing Outlook the Canadian Housing and Mortgage Corporation says, “demand for denser house types, particularly condominiums, will reflect demographic trends such as an aging population. There are also affordability concerns and transportation considerations, as condominiums tend to be priced lower than single-detached homes, are located near major transportation routes, and can require less home maintenance.”

Immigration

According to Canada Citizenship and Immigration Canada more than 280,000 people immigrated to Canada in 2010 alone. Many of these people went to major centers such as Toronto, Vancouver and Calgary because of better job prospects and family connections.

There is an influx of a quarter of million people every year that need to find a place to live. For many new immigrants starting a new life in Canada a condominium is the first place they could land because of the affordability factor.

Low rental vacancy and ownership affordability

Rental vacancies in Canada are extremely low.  The average rental apartment vacancy rate in Canada’s 35 major centers decreased slightly to 2.2 per cent in October 2011, from 2.6 per cent in October 2010, according to a recent Rental Market Survey by CMHC. In Toronto vacancy rates are at a mind blowing 1.4 per cent.

In the meantime, mortgage rates remain near historic lows, making home ownership possible for more people.

CMHC says in its forecast for 2012 that more affordable condominium projects are now competing with the resale market and enticing some renters to move into new condominium units. It adds in 2012 demand is expected to improve with rising incomes and new household formation.

Final thoughts and observations

Anyone driving down the main highways in Canada’s major cities can see lines of cranes indicating more buildings are coming up. The forecast is that despite the high level of construction, inventory levels will remain in check, as units are absorbed quickly in both the rental and condominium markets.

As long as immigration rates and interest rates remain where they are, and every indication says they will, the notion that Canada’s condominium market is in a bubble is simply fear mongering.

Although real estate has been on a bull run for the better part of the last decade, prices are not inflated as they were in the U.S before the housing crash. As well, Canadians are still carrying significant equity in homes giving options if interest rates were to rise to sell their home and downsize.

Don’t expect to make a quick profit by buying a condominium today to sell next year, but as a homeowner planning to live in the dwelling those homes in the sky are still a valuable alternative to higher home prices on the ground.

It’s the time of year when we shake off the old year and look ahead to guess what the new one will bring. 2011 was a mixed bag of economic drama: real estate, stock market, jobs and other indicators seemed down as often as they were up. It was an uncertain year money wise.

What about 2012? The verdict is mixed, the debt crisis in Europe being the pivotal factor. If these nations can get a grip on their monetary problems, the rest of the world should see gradual growth. If things slip into meltdown, we could be looking at a global double-dip recession.

In Canada, the numbers over the last month or so look promising and predictors seem to be leaning towards the former, more positive, scenario — with the debt crisis worsening in early 2012 but improving by mid-year. Here’s what’s up for the year:

Economic Growth

Our economy is going to grow this year, but not by leaps and bounds. Expect about 1.9% growth in GDP, according to the Bank of Canada. RBC is forecasting as much as 2.5% growth.

At the end of 2011, the BOC had expected GDP growth in Canada for Q3 to hit 2.0%.  Actual growth turned out to be 3.5%. And in Q4 they expect 0.8% growth, while most analysts think Q4 growth in Canada was about 2%.

Only time will tell if we will once again surpass the forecasts.  And if so, for how long can  it go on?

Interest Rates

Low, low, low! With all this uncertainty, and inflation numbers looking very low, there are few plans here or south of the border to raise rates. Some are saying we won’t see a rise in the overnight rate of 1% until 2013.

Until the worldwide economy has truly stabilized, you’ll be able to get those dirt-cheap mortgage rates and loans, so enjoy them a little longer.  Experts predict that once rates start to raise at the end of 2012 or in 2013, the increase will be slow and steady, going up 1-3% by the end of 2013.

To keep on top of interest rate changes, check out the Mortgage Rate Outlook Panel for a monthly prediction on whether or not rates will go up, down or stay the same in the short term.

Real estate

The predictions, of course, depend on where you live. Experts are saying the high-flying Vancouver and Toronto markets are overvalued and we should see a correction. But with high gas prices and job growth focusing on cities, there’s still a lot of interest in living in our biggest centres.

One thing the experts seem to agree on is the oversupply of condos in these cities. They’re expecting a dip in prices and buyers getting pickier about location, square footage and outdoor space.

Check out Melanie’s post from yesterday to find out more about what’s in store for Canadian’s when it come to home prices, home sales and housing starts in 2012.

Currency

With ongoing problems in the US and overseas, economists are predicting weakness in the US dollar and the Euro throughout the year. As a result, the Canadian dollar is expected to stay high in 2012.

Employment

The jobs story has been much worse in the US than it has been here. Already in late 2011 the US jobless rate moved down and is around 8.6% right now. Experts are predicting a modest descent through 2013 to around 8%.

Here, our situation is better, and we’re hovering around 7.4% unemployment right now. It’s predicted Canada will see a jobless rate of about 6.9% by mid 2013. Better news still: those experts think wages will start to rise and skills shortages will make looking for a well-paying job easier for some.

Regions

The prairies are so hot right now. Alberta and Saskatchewan have low employment rates and high growth, and those are expected to continue into 2012.

All in all, I’d say it’s not quite time to break out the champagne over the economy. 2012 promises to be another roller coaster ride of ups and downs, but those who can manage their money wisely and keep their debt to income levels in check, will come out on top.

It’s the beginning of a new year and everyone’s dying to know; how will the real estate market fare in 2012? Will home prices continue to escalate? Will housing starts continue to rise, or will they slow this year? And what will home sales be like this year?

To answer these questions, I’ve done extensive research, gathered the thoughts of some of Canada’s top economists and compiled them here. Please feel free to share your thoughts on our real estate market for the upcoming year in the comment space provided at the bottom.

Home Prices

As of November 2011, the average selling price of a Canadian home sat at $360,396, a 4.6% increase from November 2010. Canadian home prices might be currently overvalued by as much as 15 per cent, says CIBC economist Avery Shenfield. He doesn’t expect to see a major correction this year, though, especially since Canada’s economy and the job market both remain fairly strong.

“The catalyst for correction just isn’t there,” he says. “We’ve largely lent to those who have the income and ability to pay.”

It is said that home prices are rising much faster than income. Shenfield hopes to see zero growth in 2012. Zero growth could effectively give the market an opportunity to let off a little steam, allowing incomes to catch up to overinflated prices.

Low mortgage rates, employment opportunities and immigration will continue to support Canada’s housing market. But It is expected that home prices will stabilize in 2012.

Housing Starts

Last year, housing starts (the number of new homes being built) showed an annualized reading of approximately 190,000 units, says the Globe and Mail. CIBC World Markets economists Emanuella Enenajor says, “Analysts in recent months had been expecting housing construction to slow, led by weaker multiples construction – with the heated condo market losing its affordability edge over detached properties.”

CMHC also expects housing starts to decrease this year. They estimate that new housing starts will fall to 186,750 units from an estimated 191,000 in 2011 – a 2.2 per cent decline.

Some cities, such as Montreal, Regina and Saskatoon, already have a high inventory of new homes, which will definitely limit new starts there. In Manitoba, however, housing demand continues to be fuelled by strong levels of migration, according to one report.

Home Sales

The Globe and Mail reports that economists think that the Canadian housing market will lose steam overall in 2012. Although they don’t predict a bust, they do predict that valuations will be a main concern. In particular, TD predicts that both B.C. and Ontario could see real estate troubles over the coming years.

According to senior analyst Jacques Marcil, B.C. could have it worse. He says that the Vancouver housing market likely reached its peak, and predicts that they will probably see “a significant correction” this year.

The TD report suggests that home resales in B.C. will fall by 3.7 per cent, and prices will decline by 3.5 per cent. In B.C. last year, sales rose by 5.9 per cent from 2010. This December, sales were down by 12.7 per cent. Prices, on the other hand, were up by 7.6 per cent – but still down from June’s highs.

Thanks to an overabundant supply of condos, buyer confidence and an unstable economy, Ontario’s housing market is expected to be sluggish as well, especially where Toronto’s condo market is concerned.

In a separate report, Sal Guatieri of BMO Nesbitt Burns says, “Outside of Toronto and Saskatchewan, home sales have moderated since new mortgage rules were introduced in March (for the third time in four years).”

“Markets are balanced in over half the country,” he continues, “But sellers still rule in Toronto, Saskatchewan and Manitoba.”

Guatieri projections: “’Modest gains’ in Canadian home sales this year, steady prices, a dip in housing starts and a moderation in mortgage growth from its pace of almost 8 per cent.”

Meanwhile, the Canadian Mortgage and Housing Corporation predicts slight gains in 2012. “Sales of existing homes will edge up to 458,500 in 2012 from an estimated 450,100 this year, a 1.9% gain, while the average price is forecast to rise by a moderate 1.2% to $368,200 in 2012 from $363,900 in 2011.”

It is their belief that buyers will likely continue to be encouraged by record low interest rates.

In conclusion

Overall, many economists see Canada’s real estate market stabilizing in 2012, especially due to slow job growth, waning consumer confidence and tighter mortgage rules. As Canadian households rack up record high debt, the allure of low interest rates is thought to be waning. For these reasons, we can expect a cooler pace in real estate this year.

More than ever in 2011 Canadians were faced with choices when picking a reward option on their credit card, from free groceries, to gas station points to travel reward miles, there was something for everyone.

Cash is King

The card that grew the most in popularity in 2011 was definitely the cash back reward credit card. Card companies including MBNA, Desjardin, HSBC along with Canada’s big five banks, all offer their version of a cash back card with refund rewards ranging from 1-5%. Here customers get a monetary reward for each dollar they spend on their credit cards.

MBNA, for example, offers 5% cash back on qualifying net retail gas and grocery purchases for the first 6 months and 3% after that. It also gives 1% cash back on all other qualifying net retail purchases. Recently we did a bit of research and found that the average Canadian household can save $562 in the first year by using a cash back credit card for their purchases. Over 5 years, that savings builds to $2,382. (Check out our handy Cash Is King Infographic)

Changing Rules for Credit Card Providers

Looking back this year, the credit card landscape has changed dramatically. Particularly since late 2010 when new credit card rules fully came into affect.

The new rules attempt to make the credit card industry more transparent by mandating that a minimum 21-day interest-free grace period be given on all new credit card purchases when a customer pays the outstanding balance in full. Also, credit card providers have to provide information on the cardholder’s monthly statement on the time it would take to fully repay the balance, if only the minimum payment is made every month. For example, a balance of $1,000 on a credit card that charges 18% could take more than 10 years to pay off. And companies must give customers more notice if their interest rate will be rising.

Also, during the application process companies must provide a summary box on credit contracts and application forms that sets out key features, such as interest rates and fees. All these rule are good for a consumer who is conscious of their financially situation.

But there is still mounting evidence that Canadians are getting into more debt than they can handle.

Consumer Debt Levels Soar

A new Statistics Canada survey shows as Canadians struggle in these tough economic times they are taking on more debt. The latest survey released in December 2011 shows the average household debt in Canada hit a new record high of almost 153% of disposable income in the third quarter, a sizable jump from 150.7% the previous quarter.

According to Stats Can, the ratio of household credit-market debt – which includes mortgages, consumer credit and loans – to personal disposable income has climbed to 153% in the third quarter from 147% in the first quarter. That’s the highest level since Statscan started gathering figures in this category in 1990. Economists predict the number for the Q4 could be even higher as Canadians have shown no sign they are paying debt off.

A Plea for 2012

Rewards are great but at what cost? One of the bi-products of these attractive credit cards is Canadians are more likely to put more purchases on them.  This coupled with lower interest rates is creating the perfect storm for debt addicted Canadians.  Going into 2012 it’s important to understand the rewards being offered on our cards and if they are worth it.

The best way to tackle our debt problems is to start paying off our loans.  Start with the highest interest loans, like credit cards and store cards. Work your way down to the line of credit and your mortgage.  Its a simple message that we have all heard before.

Also, Canadians have to stop spending. This week skip the Boxing Day sales, focus on how you’re going to tackle your debt in 2012, make a financial plan or a budget and start putting it to work right away.  Make a small commitment to yourself to save money, such as I’m going to take my lunch to work, I’ll take the bus rather than drive or instead of that luxury Caribbean holiday this year the family is taking a road trip somewhere in Canada. The beauty of getting yourself on the path to financial freedom is you can start right now.

This was a tough year for me.

I was laid off abruptly in April 2011 from a job that I thought was solid and found myself in a situation I had never been in before. I was worried I hadn’t saved for a rainy day and all I had was my RRSP that I was unable to dip into without paying a huge penalty.

After a few months of soul searching (which I recommend to anyone that has been laid off), I decided the right thing to do was to get back to what I was best at, financial journalism. I also realized that once I started making money I would have to put more away to plan for the next rainy day that came into my life.

Like a religious promise, I’ve been putting 10% of my after tax income away into a long-term savings account, this is not my retirement saving or my holiday fund. This is money that I will be able to rely on if my financial situation goes south again. I realized this year that although I have set myself up very well for later in life, I own investment properties that will be paid off when I turn 55 and I have a sizable amount in my RRSP, but I have nothing for the emergency situations that can happen at any time.

My New Year’s promise is to increase the amount of after tax income I put away from 10% to 15%.

The World Has Changed a lot in 2011

If I learned anything from this year, it’s that anything is possible.  Just look at how the world has changed in the last 365 days.

The debt problems in Europe are worse.  Whereas last year we thought it was a few countries dealing with their debt crisis now the future of the Euro is in peril.

The Occupy Movements proved a large proportion of people around the globe are frustrated with the economy and their own financial situations.

The Bank of Canada did not budge the interest rate all year, scared out of its mind that it would bring Canada’s economy to a standstill. Subsequently our household debt continues to rise and hit new record levels.

But the most surprising is that for the first time in history the debt rating of what everyone thought was the world’s most powerful economy the United States of America, was downgraded and remains lower even today.

My Promise for 2012

Here is my take away for 2011 and what I want to do different in 2012. Nothing is forever, always plan for when times may not be as good as they are right now. Save more money and if you’re in debt pay it off before you do anything else.  Don’t live your life a slave to your debt payments. Also take a good holistic look at what you spend your money on annually. Add up how much you spent on clothes, going out for dinner and vacations this year and see if that number makes you nervous.

If you’re spending more than 40% of your after tax income to service your debt you need to take a hard look at how to get those numbers lower. For example if you make $3000 a month but your minimum variable rate mortgage payment is $1,200 a month  you’re over extending yourself and are vulnerable to financial problems when interest rates start to rise.

Ask yourself if you could live with one less car, or are you wasting money by throwing away food that goes bad in the fridge or do you really need to go the spa every second week?

I don’t believe saving money means cutting out all the joy in your life, but it means putting the way we spend money into perspective.

I’m an optimist and I believe we all have the ability to make a change to save more and pay off more debt. Make 2012 the year you get yourself on the track to financial freedom and by this time next year you will see how it’s paying off.

Happy New Year!

For a while now we’ve been reading headlines about how interest rates are at “historic lows.” Which is great news for anyone with a variable-rate mortgage, line of credit debt, or who is looking to negotiate for things like car loans or fixed-rate mortgages.

But what’s the other extreme? How high have – and could – interest rates go, and what would it mean to your savings if they did?

Here’s a quick walk through the history of interest rates in Canada and abroad.

Interest Rates – High Times

If you’re not old enough to remember the recession of the early 1980s, your parents certainly will. In 1981, mortgage rates peaked at more than 20 percent. (That’s not a typo.)

Many people whose mortgages were up for renewal during that period found themselves signing up for mortgage rates that were twice as high as they were just five years prior. Some resorted to paying hefty upfront fees to get private lenders to offer them rates in the mid-teens.

The rates stayed in the double digits until the mid-1990s, when they began their gradual, more or less downward decent to today’s posted rates. (You can take a look at the history of how Bank of Canada’s trend-setting Bank Rate has risen and fallen here.)

Sounds bad, doesn’t it. Well it was. Here’s how those numbers add up in terms of monthly payments. Let’s say you have $200,000 outstanding on your mortgage, and you’ve opted for a five-fixed rate, payable once a month. Look how significantly your payments increase as the interest rate escalates.

• Based on a 5.29 percent mortgage (which is the 5 year fixed posted rate for most of the big banks) you’re looking at $1,196.45/month.
• Double that to 10.5 percent and you’ll pay $1,856.66/month.
• Double-down again to an interest rate of 21 percent, the high back in 1981, and your monthly payment jumps to $3,378.97.

Although it’s unlikely that rates will hit the likes of 15-20 percent again, we may very well see 5-7 percent in the long run.  That type of a jump may still be 2-3 times higher than your current mortgage rate.  Do you think you could afford paying nearly three times as much as you do today for your mortgage, and still afford those other essentials like heat and groceries?

What to do Today?

First off, don’t stretch yourself too thin. If you are house shopping, don’t forgot that mortgages are long-term commitments and lots of things can change over the duration.

While we can all hope and pray mortgage rates don’t climb into double-digits again, it’s a safe bet they will rise at least a few percentage points above where they are right now. So factor that in when calculating all your carrying costs so you don’t find yourself facing an eviction notice soon after your policy comes up for renewal.

Many mortgage professionals are now advising that people signing up or renewing mortgages today should opt for the fixed rate products. The logic being that since the Bank of Canada’s prime rate (that the other banks base their mortgage rates on) is pretty much guaranteed to rise, it may push variable rates much higher than the best fixed rates currently available.

Ultimately, that’s a call for you to make based on your guess on how high the rates could climb and your comfort level with risk. Truly risk-averse borrowers may even want to lock in to a 10-year term (there are some currently posted 10-year rates below 5 percent) and buy themselves a decade of stability.

Regardless of the type of product you choose, here are two ways to minimize your risk, and the total cost of borrowing over the life of the mortgage.

1. Make bi-weekly instead of monthly payments. Instead of paying $1,196.45 once a month as in the scenario above, change your payment schedule to a bi-weekly payment of $552.21 and save yourself thousands of dollars in interest over the life of the mortgage. (The bi-weekly payment is slightly less than half of a monthly payment, but you end up making an extra payment each year – 26 bi-weekly payments version 12 month ones – so you’re paying down the principal sooner.)
2. Make lump-sum overpayments. Most (though not all) mortgages allow you to overpay up to 20 percent of the original mortgage amount every year. This money is applied directly to the principal (unlike your monthly payments which are divided between paying interest and principal). So taking your bonus or some other unexpected windfall and applying it to your mortgage can lead to significant long-term savings and help you pay off the mortgage earlier.

Interest Rates – Around the World

Think moving out of country would help? Not likely. While you may find cheaper digs in some of the more rural parts of the U.S. or U.K. – both of which offer interest rates comparable to our own, urban centres like New York, San Francisco, and London have some of the highest real estate prices and cost of living in the world.

Head down under to Australia and you’re looking at posted rates around 7 to 8 percent, which seems downright cheap compared to the 11 to 13 percent going rates in South Africa.

And while Hong Kong’s 2 to 3 percent mortgage rates might seem enticing, you have to remember that you’d be buying in a city where real estate can cost up to $10,000 a square foot. (Again, not a typo.)

RateSupermarket.ca’s Expert Panel Expects higher Variable Mortgage Rates as Discounts Shrink

TORONTO, Nov 4, 2011… … Variable mortgage rate discounts have dropped 45 basis points in under two months, despite no change to Bank of Canada interest rates.
The disappearing act isn’t over yet, says RateSupermarket.ca’s Mortgage Rate Outlook Panel for November 2011.

It’s expected that variable rate mortgages could increase as discounts to prime shrink even more in the short term.  The Panel also believes fixed mortgage rates will stay constant; lenders are unlikely to make any hasty decisions given the recent job loss numbers for October and the fluctuating bond market.

Fixed mortgage rates: Unchanged

The financial issues in Europe are continuing to affect Canadian bond yields, which have fluctuated by over 50bps in the last month alone.  Indecision in Greece and throughout the continent is causing people to flock to the safety of Canadian bonds, driving yields down.

With all this action, our Mortgage Rate Outlook Panel members believe the banks are likely to employ a ‘sit and wait’ approach, meaning fixed mortgage rates are expected to stay constant in the short term.

Variable mortgage rates: Up

The Bank of Canada made no change to interest rates at their last meeting. This is expected to be the norm well into the New Year as the likelihood of a double-dip recession continues, especially given the recent increase in the unemployment rate.  This means bank prime rates won’t change anytime soon.

However, our panel members can’t say the same about discounts off Prime.  Disappearing discounts will continue as banks aim for greater profitability.  As a result, the Panel believes Canadians can expect variable mortgage rates to inch up in the short term.

To read all the detailed commentary from our Panel Members, please visit:

http://www.ratesupermarket.ca/mortgage_rate_outlook_panel/

About the Mortgage Rate Outlook Panel

The Panel includes some of the country’s top mortgage experts, and helps Canadian consumers make informed decisions by offering a short-term outlook for fixed and variable mortgage rates.

This month’s panel members:

• Mark Kocaurek, Senior Vice President, Treasury & Lending (Chief Lending Officer) of ING DIRECT Canada
• Dr. Ian Lee, Director of MBA Program, Sprott School of Business, Carleton University
• Dan Eisner, MBA. AMP. President,  Verico True North Mortgage
• Elisseos Iriotakis, President, Safebridge Financial Group
• Wayne Spinney, Mortgage Agent, Centum Mortgage Professional

About RateSupermarket.ca (www.ratesupermarket.ca)

RateSupermarket.ca is the largest impartial rate comparison service for personal finance products in Canada.  Founded in May of 2008, their easy to use comparison engine provides much needed transparency to the Canadian financial market and allows visitors to quickly find the best mortgage rates.  Their new Mortgage Tool App for the iPhone also allows house hunters to compare mortgage rates using their Smartphone. Over 1.5M Canadians have turned to RateSupermarket.ca to save money on their mortgage, insurance, credit cards and GICs.

As expected the Bank of Canada has held rates at 1 per cent. In fact some economists believe the bank will leave rates unchanged until 2013. That means cheap money is here to stay longer than first thought.

Bank of Canada Governor Mark Carney continues to use the slowdown in the global economy as a crutch to leaving rates near historic lows.  He’s again pointing the finger firmly at the European debt crisis indicating he can’t raise rates until the continent is able to gets its issues under control. For the first time he is using the R-word and hinting we could see a “brief recession” in Europe.

In light of declining commodity prices, financial market volatility and the sluggish growth in the U.S economy,  he can’t raise rates and hurt any economic growth prospects in Canada. What is more interesting, the Central Bank is downgrading its growth forecast and warning of rising inflation.

This dovish report from the Bank of Canada is understated to put it mildly. All fingers point to another global recession much deeper than the one we experienced in 2008. Economies around the world continue to take on more debt, suffer from higher unemployment and low economic growth.

The fact that Carney’s hands are tied with interest rates at 1 per cent is a clear indication Canada’s future remains uncertain.  He wants rates to rise. As a responsible Central Banker he knows overnight lending rates should be closer to 4 per cent.  But right now he can’t, making it harder for Canadians to afford their day-to-day expenses as their salaries plateau but prices trend higher.

What Carney should be doing is better preparing Canadians for what is inevitable, another global slow down. Leaving rates where they are is making life more expensive. The proof is in the data. Statistics Canada announced last week Canadians are paying more for goods and services at a rate that is out of step with normal inflation.

So as Canada’s economy hobbles along, we continue to be in a wait-and-see mode and this is what makes the officials in our country nervous. We are not the masters of our own destiny, our economic future hinges on the success of other nations. The U.S unlike Canada is still able to make decisions that can change their fortune. They have the ability to implement QE3, they can still help European nations and the Greenback remains the world reserve currency.

So the crutch that I referred to at the beginning, it’s not an excuse that Carney has made up. It’s a reliance that Canada has on the rest of world. If one thing is to change in this next global slowdown it’s that Canada should emerge with its own identify. The ability to make decisions on it own merit. I agree we are not an island and Carney is doing the right thing by looking at the rest of the world before he makes a decision for our country. But the decisions have to be based more on if this will better Canadians lives not if it will protect us from the mistakes of the rest of world.

Are you planning on buying a home any time soon?  Is the thought of the big move freaking you out?

It’s no wonder given everything that goes along with a change in address… you need to find the right neighbourhood, the perfect house with all of the bells and whistles on your ‘must have’ list, and then you need to make sure it’s in your price range… honestly – what are the chances?

Hold on.  Before you even get to that stage there are a few things you need to consider first.

When should you sell?

There is no easy answer to this question, but the importance of understanding the market cannot be understated. Cycles in the market, which are strongly influenced by the economy, can create either a shortage or a surplus of housing. Economic influence can be widespread (as we are seeing now), or it can occur in regional pockets, where sudden changes can affect stability.

In a seller’s market there are many buyers competing for fewer homes. This shortage has the effect of raising housing prices. Conversely, in a buyer’s market, buyers can take their time since there is an abundance of housing to choose from. The down side, however, is that this surplus can result in a slowdown of rising prices, and once you move into your new home, the last thing you want is for the value to drop.  This instability often makes people afraid of the market, when they need not be.

What you need to remember is that you’ll be purchasing your home in the exact same market that you sell it in. If you sell your home at a reduced rate, likely you’ll purchase one at a reduced rate as well. In this case, knowing how the market works can be to your advantage. 

Understanding the Economy

During periods of economic growth, unemployment is low, resulting in high confidence in the future. During these ‘high times,’ demand for housing increases. During an economic downturn, employment opportunities are scarce and demand for housing drops. Other things that can affect the market include changing interest rates, seasons and weather.

Rates, which are set by the Bank of Canada, tend to be influenced by global forces. In turn, these rates affect the interest that is charged on loans, including mortgages. If interest rates rise too high, fewer people qualify for mortgage loans and the demand for housing drops. This makes it more difficult to sell your home at the price you want. Alternatively, when interest rates are low, as they are now, more people can afford to purchase real estate.

Most popular moving months

For obvious reasons, June, July and August are the most popular moving months. The kids are out of school, the weather’s nicer and friends are more likely to lend a helping hand (especially if pizza and beer is thrown in). Parents tend to wait until school is out so as not to disrupt their children’s studies. In fact, twice as many people move in the summer months as they do in the colder months of November to February. While the number of moves in May and October are slightly higher, March and April are still pretty unpopular moving months. In university towns, the most popular moving months are April (mid to end of month) and September.

One popular moving company reported that they’re seeing a slight shift in their numbers. In recent years, there have been substantial increases in the less popular months, probably due to moves by thriftier homeowners who want to save a dollar.

Are rates higher in more popular months?

Unfortunately, if you choose to move when everyone else does, be prepared to pay quite a bit more. Truck rental and moving company rates vary by season and day of the week. Although not all moving companies raise their rates during the busy season, most of them do. Truck rental companies, for instance, will rent in increments for the same rate, rather than by the day, but you have less time to move. By choosing to move in the off-season you could save a substantial amount of money.

During the summer months, you’ll need to be more organized as moving companies will be on tighter schedules and less likely to accommodate a disorganized move. If your move requires extra special attention, you might want to consider moving in early spring or late fall when student movers are back in school. You’ll be more likely to get a team of professional movers who will handle your valuables with greater care.

In conclusion

No two moves are alike. But even a small understanding of the housing market will go a long way when it comes to buying and selling a home.  If you have the luxury of time, monitor the market and the economy before you plan to buy.

When you own your own business, you still might want to do things like own your own home. Imagine that! Or,  purchase a location for your business instead of renting. But having an unstable income makes property ownership a lot more complicated.

Here we take a look at the major issues facing business owners when it comes to getting a mortgage and ways you can get around them.

Issue number one: Landing a Mortgage

Getting a lender interested in granting you a mortgage can be a challenge when you’re self employed. That’s mainly because lenders look to pay stubs to confirm your income. As a self employed person myself, I have no pay stubs!

Instead, companies look to your Notice of Assessment from Revenue Canada. These often come in the summer, months after you’ve filed your previous year’s taxes. Bottom line: if you’re behind on your taxes, you haven’t been self employed for three years, or you dramatically underpay yourself to keep the business afloat, or you have many business expenses that dramatically lower your taxable income, this could be a problem.

Many entrepreneurs, as a result, need to work with a mortgage broker who can secure them a mortgage as a higher risk borrower, which comes with corresponding higher interest rates.

Solution

• Check out Melanie’s post from Monday for some great ideas on how to lower your risk to become a more ‘desirable’ mortgage customer.
• Get your taxes in order and collect your Notices of Assessment for 2-3 years back.

Issue number two: Getting Insurance

When I bought my first home more than a decade ago, we didn’t even bother applying for mortgage insurance — as our down payment was less than 20 per cent of the house’s value — through the Canadian Mortgage and Housing Corporation (CMHC). Instead, my partner and I had to get a personal loan with a family member to make up that down payment difference!

Times have changed. CMHC introduced a self employment insurance program in 2007. You still need to have two years of proven income, and the insurance rate is higher than that paid by traditionally employed people. (In the end, it might be cheaper to get that family loan!) Not everyone qualifies for this, but it helps if you have a good credit rating and can demonstrate years of solid income.

Solution

• Deal with outstanding credit card and other debt and make sure your credit rating is in good shape.
• Check out these ideas on how to improve your credit score.

Issue number three: What Mortgage is Right?

The perennial debate between fixed and variable rate mortgages is even more pressing for entrepreneurs.

Over time, and certainly in the short term, variable rates will save you money. Having a low rate particularly early on in a mortgage, when you owe the most, will save you big bucks.

However, when rates rise, so do your payments. If you’re tight for cash and operating on a precise budget, this could throw things way off. And since rates are so very low right now, we know that eventually they will rise. Depending on the world economic climate, that could be in just a few months, or it could take years for rates to climb a notable amount.

Meanwhile, when you have a fixed rate mortgage, you’re often paying a higher interest rate.  But that higher rate acts like an insurance policy: when you sign on for a set term, say five years, you know you’re not going to have to pay more. Many are saying at these low rates, locking in now is a great idea. This is attractive for entrepreneurs who want to know how much their expenses are: no surprises.

Solution

• Crunch some numbers and see how much risk you can tolerate with regards to a variable rate mortgage.
• If you do consider variable, choose a higher monthly payment so when the rates do inevitably rise, your payments won’t change (plus you’ll have paid down extra on your principle in the meantime).