The BCREA Commercial Leading Indicator (CLI) rose for the second consecutive quarter, increasing 1.2 points from the first quarter of 2013.

The index is currently sitting at 113.4. On a year-over-year basis, the CLI is 0.2 per cent above the second quarter of 2012. The index reached an all-time high of 116.1 in the second quarter of 2007.

An increasing CLI in the first half of 2013 offset a sharp decline in the final quarter of 2012 to produce an overall flattening in the index’s underlying trend. This indicates that growth in the commercial real estate sector should continue at an average pace through the remainder of 2013.

“The second quarter saw a significant increase in the CLI as economic activity and office employment rebounded,” said Brendon Ogmundson, BCREA Economist. “However, rising long-term interest rates may present an obstacle to growth in the second half of 2013.”

Source: BCREA

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imageThe British Columbia Real Estate Association (BCREA) released its 2013 Third Quarter Housing Forecast Update recently.

BC Multiple Listing Service® (MLS®) residential sales are forecast to increase 3.9 per cent to 70,300 units this year, before increasing a further 6.1 per cent to 74,600 units in 2014.

The five-year average is 74,600 unit sales, while the ten-year average is 86,800 unit sales. A record 106,300 MLS® residential sales were recorded in 2005.

“After a marked pull back of consumer demand in 2012, the housing market is now transitioning to more elevated home buying activity,” said Cameron Muir, BCREA Chief Eonomist. “However, the effect of sluggish employment growth this year is expected to spill over into 2014, limiting housing demand to a 6 per cent increase, with total home sales matching the 5 year average.”

“The average MLS® residential price in the province has been revised from remaining unchanged to increasing 3.3 per cent to $531,700 this year. A stronger than expected decline in the inventory of homes for sale has created balanced market conditions in the Lower Mainland, causing home prices to align more closely with overall consumer price inflation,” added Muir. The average MLS® residential price in BC is forecast to increase 2.2 per cent to $543,400 in 2014.

Source: BCREA

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Long-term mortgage rates have burst higher by almost ¾ of a percentage point in the short time span of a couple months!


Are these hikes are sustainable? How will they affect the overall housing market?


TD Economics weighed in on these points in a report last week. Here’s a quick overview of the implications TD foresees, and some observations of our own…


Future Rates: TD projects a 2.25 percentage point jump in 5-year bond yields by 2017. That would peg 5-year fixed rates at roughly 5.74%. Given economists’ poor track record, take this number with a grain of salt. But it’s still worthwhile to use this number when stress testing your mortgage. That aside, one TD assertion that most would agree with is that future rate “increases are expected to be…gradual.”


Securitization: The report notes that, “…The recently-announced changes to the amount of mortgage backed securities that will be guaranteed by CMHC will…lead to somewhat higher costs in funding for financial institutions.” The impact won’t be extreme for most lenders (and consumers).


The Variable Advantage: TD concludes that even if one assumes an abnormally high variable rate like prime + 1.00%, a variable-rate mortgage has still “yielded a lower average interest rate over a five year term (than a 5-year fixed) since the late 1990s.”


The Best Rate Forward: According to TD’s analysis and rate projections, “…Locking into a 5-year mortgage rate would yield the lowest average interest rate over the next five years.” But TD analyzes only four other term scenarios including. TD’s report does not touch on options like choosing a 4-year fixed and renewing into a 1-year fixed.


The 4+1 is an alright play today with 4-year fixed terms near 3.09% (i.e., 30 bps below most five-year fixed offers). One-year rates would need to be above 4.80% at renewal for a 5-year fixed to beat the 4+1 strategy. That’s over two points higher than today, so it’s a good gamble given how modest inflation and growth have been (and are projected to be).


(Source: TD Economics)


Rate Impact on Housing: TD’s research finds that “every 1 percentage point increase in interest rates leads to an immediate increase in sales of 6 percentage points as buyers rush to take advantage of lower rates, followed by a 7% decline in the months that follow. Hence, the net impact is a 1 percentage point permanent decline in existing home sales due to every 1 percentage point increase in interest rates.” That’s about 4,500 lost sales a year per 1 point of rate hikes (based on CMHC’s sales projections). That isn’t the end of the world, but it seems like an underestimate, if anything.


Income Gains: TD expects that 3-4% income growth will “help offset much of the impact of gradually rising rates”

Mortgage Affordability: The report states, “…Affordability using the 5-year posted rate (is) at the worst it has been in almost 13 years. And, if 5-year interest rates were at more normal levels of around 7%, housing would be unaffordable to the average Canadian household.” That statement is based on posted rates (i.e. those rates that no one pays). “Using the 5-year special mortgage rate, housing affordability in this country is actually at its most favourable level since early 2000’s,” TD says. How long with it remain that way? Stress-test your mortgage! Avoid Complacency. 

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One of life's big milestones: The First Apartment. 


It's a symbol of young adult life, of freedom from your parents, of complete reign over what and when you eat for dinner! But with this beacon of independence comes a list of things to be weary of. Don't be blinded by the excitement of the experience! Here are the 7 Deadly Sins of First Time Renters.


  1. Underestimating the Cost
    • How much can you afford to spend on housing?
    • Would you need a roommate or two? 
    • Start up costs!
      • application fee
      • security deposit 
      • first month's rent
      • deposit for electricity 
      • deposit for gas
      • cable and/or telephone fees
      • parking space fee
    • Monthly bills (gas, electricity, water, garbage)
    • Set up a budget to keep it all in check! 
  2. Not Having Your Priorities Straight
    • Separate your wants from your needs
    • Know your deal breakers 
    • Understand that your first apartment won't be perfect 
    • Know what to consider for a first apartment 
  3. Not Seeing the Apartment before Moving In
    • Visualize how your furniture will fit 
    • Estimate if your couch can fit through the door way 
    • Bring a measuring tape!
    • Turn faucets/flush toilets
    • Check light switches
    • Check appliances 
    • Look at surrounding area (sights, smells, sounds)
    • Check for damage 
    • Make a list of pre-moving in dings and scratches to hand to your landlord 
  4. Failing to Read the Lease
    • Read it all the way through (regardless of how boring it is!) 
    • Underline what you don't understand
    • Keep an eye out for penalities
    • Don't be afraid to ask questions
  5. Not Asking About Utilities or Forgetting to Turn them On
    • Ask what utilities you are specifically required to pay/turn on
    • Find out what you'll have to take care of yourself
    • Know who to call and call them at least one week before moving in
  6. Going Without Renter's Insurance 
    • Very worthwhile in case of fire ect. 
    • Make a tally of valuable items in your apartment (clothes, tv, computer) 
    • Make sure you're covered 
  7. Forgetting Basic Home Items
    • Details, details, details
    • Seating, Bedding, Dressers
    • Find an apartment checklist to help you out 
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Moe Pourtaghi

"Nothing brings me more joy than seeing my buyers & sellers have success in their Real Estate endeavours. I hope you find the articles on my blog inspiring and educating in your ventures." - Moe Pourtaghi

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