The Canadian Mortgage and Housing Corporation (CMHC) has implemented new underwriting criteria (eligibility requirements) to apply for homeowner transactional and portfolio mortgage insurance. Introduced earlier this summer, these new adjustments from CMHC come as a precaution while the COVID-19 pandemic continues to impact consumers in the real estate market and many other aspects of day-to-day life.

The following changes have been made:

• The maximum Gross Debt Service (GDS) ratio is now 35% with no exceptions (previously, 39% GDS ratios could be approved under special circumstances).
• The maximum Total Debt Service (TDS) ratio is now 42% with no exceptions (previously, 44% TDS ratios could be approved under special circumstances).
• The minimum credit score required for at least one borrower is now 680 (previously 600).
• Non-traditional sources for down payments that increase indebtedness will no longer be treated as equity for insurance purposes.

However, not all Canadian mortgage insurers have followed suit. Canada’s other two mortgage insurers, Genworth Canada and Canada Guaranty, announced earlier this summer they would not be following CMHC’s lead.

In a statement at the time, Genworth confirmed, “it has no plans to change its underwriting policy related to debt service ratio limits, minimum credit score and down payment requirements.”

Canada Guaranty echoed this sentiment saying it “confirms that no changes to underwriting policy are contemplated as a result of recent industry announcements.”

How is mortgage insurance affected?

Mortgage insurance protects lenders in the event homeowners default on their mortgage. Home buyers purchasing a home with a down payment of less than 20% must have mortgage insurance. The following underwriting criteria are the main figures taken into consideration for mortgage insurance applications:

• GDS ratio: GDS ratio is the percentage of a buyer’s gross monthly income used for mortgage payments, taxes and heating costs and—if they are buying a condo—half of the monthly maintenance fees. 
• TDS ratio: TDS ratio is the percentage of gross monthly income required to cover monthly housing costs, plus all of a buyer’s other debt payments, such as car loans or leases, credit card payments, and lines of credit payments. A TDS calculator is available here.
• Credit score: A credit score ranges from 300 to 900 and is determined from a person’s credit report. A higher number means a person’s credit is managed responsibly. Various factors are taken into consideration to calculate credit scores. TransUnion and Equifax are Canada’s two main credit bureaus. You may also find your credit score through a private provider or your financial institution.

How does this all affect me?

While CMHC has made these slightly stricter underwriting restrictions as a precaution for the economic impact COVID-19 has had on the housing market, current trends are showing a promising rebound. Canadian home sales and prices have trended upwards through May, June and July following an initial decline in March and April, although on a year-to-date basis we remain below 2019 figures.

The Canadian housing market will see the financial and economic impact of COVID-19 unfold for months to come, and each province and territory’s recovery plan varies.

The BCREA Economics team has created the COVID-19 Reopening Dashboard to help REALTORS® monitor the evolution of the BC economy as the province gradually reopens. This dashboard focuses on the sectors and activities that have been most significantly impacted by the pandemic and the province's subsequent state of emergency.

To monitor the province's progress toward a "new normal," we benchmark each indicator to February 2020, the month before the pandemic was declared. This dashboard will be updated each month.

1. The Housing Market
   As BC households and the real estate sector adhered to physical distancing measures, home sales and new listings dropped dramatically.
2. Retail, Restaurant Reservations and Movement
   The shutdown of physical stores and restaurants in BC negatively impacted retail sales and restaurant reservations. This, combined with many people working from home, dramatically decreased movement in retail and restaurant spaces, public transit, and workplaces.
3. Jobs and Hours Worked
   The three sectors highlighted here are the sectors that have been most significantly impacted by the province's state of emergency: wholesale and retail, recreation and culture, and accommodation and food services.
4. Manufacturing and International Trade
   Manufacturing plants in BC either shutdown or operated at limited capacity due to the state of emergency. Moreover, falling energy prices and weaker global demand for goods resulted in drastic decreases in BC's exports and imports.
5. Business and Consumer Confidences
   Business confidence is measured through a survey of small businesses in BC on their expectations and operating conditions, which have been negatively impacted by physical distancing measures. Consumer confidence is measured through a survey of BC households on their optimism around current economic conditions (e.g., employment, financial, and major purchases), which has been clouded with uncertainty during the pandemic.
6. Tourism
   The closing of the border to international travel, physical distancing measures that reduced domestic travel, and the shutdown of attractions has resulted in a dramatic decline in the tourism sector in BC.

Not surprisingly, the COVID-19 pandemic had a devastating impact on the number of transactions in the Metro Vancouver housing market.

This morning, the Real Estate Board of Greater Vancouver announced a 56.1 percent decline in sales in April compared to the previous month.

Sure, you can afford your home now, but what if mortgage rates go up?

Low interest rates and mortgages have been a fact of life in Canada for some time now. At the time of publication, the 5-year average mortgage rate has hovered around 5% for nearly a decade. This is a far cry from late 1981 when mortgage rates were as much as 21%.

New mortgage rules

In 2017, the Office of the Superintendent of Financial Institutions (OSFI) took steps to help protect lenders and home buyers alike against future interest rate increases. Since January 1, 2018, new mortgages are subject to comparison with higher interest rates than the one issued at the time of the mortgage. Homeowners must be able to afford a mortgage at the Bank of Canada’s current five-year average posted rate or at an interest rate that’s 2% above what they’re currently applying for, whichever rate is highest.

For free Real Estate Advice please call/text me at (604) 537-9791 

Summary Findings: 

• While it’s unknown how the unfolding COVID-19 outbreak will impact the economy in the long-term, BC is facing a sudden stop in economic activity with little guidance to when things may return to normal. 
• Based on our scenario analysis, BC home sales and prices will likely face declines in the spring and early summer but should recover along with the wider economy in the second half of the year, contingent on the outbreak resolving. 
• The postponed change to the mortgage stress test rate, originally slated for April 6, 2020, will mute the impact of falling interest rates for the BC housing market. 

How will the COVID-19 outbreak impact the BC economy and, more specifically, the BC Housing market? The correct answer is a rather unsatisfying “nobody knows.” 

We have already seen a steep decline in interest rates, however it’s unknown how severe the impact will be on economic activity. Global supply chains will be impacted, as well as tourism and travel. The magnitude of impact is expected to vary by province but may be significant for the BC economy given the importance of tourism to our economy and our strong trade linkages with China. The additional shock to the Canadian economy due to a collapse in oil prices – itself the by-product of a price war between the world’s largest oil producers due to COVID-19 – makes the probability of a recession in Canada that much higher. 

An unfortunate but unavoidable product of recessions is losses in employment and incomes, which may put some financially vulnerable families in an even more precarious position. The CMHC announced that it would be working with lenders to defer mortgage payments by up to six months if needed, which should stem potential mortgage defaults and foreclosures. However, there is still a need to address lost income for those who cannot afford to practice social distancing by staying home from work and for those who have to make monthly rent payments and can’t take advantage of payment deferrals. For those individuals and families, cash is king. That means these households will need government cash transfers to meet their financial priorities during this time, and we hope this will be part of the yet-to-be-announced stimulus package from the Canadian government.

On the positive side, governments and central banks seem to be taking lessons from the last crisis and have implemented measures to ensure small businesses and the financial system have ample liquidity and access to credit. The Bank of Canada has reduced its overnight rate to 0.75 per cent and we expect they will follow the US Federal Reserve down to near zero in short order. This should help prevent a 2008 scenario of spiking borrowing costs due to rising risk premiums and credit rationing. 

These measures should help to dampen the impact of the COVID-19 outbreak on the economy. However, faced with an almost unprecedented paralysis of economic and social activity, monetary and fiscal policy can only safeguard against a worst-case scenario and hope the outbreak resolves in the coming months so we can all get back to normal. 

Of note, the Canadian government has postponed changes to the mortgage stress test. The qualifying rate for insured mortgages was set to change from the 5-year posted mortgage rate to the average 5-year fixed rate plus 200 basis points on April 6, with the B-20 stress test for uninsured mortgages to follow suit. By postponing that change, the government has muted the passthrough from monetary policy to the housing market, particularly since the 5-year posted rate has maintained at 5.19 per cent, despite the average 5-year contract rate falling to near historical lows. The impact of dramatically lower rates will still help those renewing or refinancing mortgages at lower rates by freeing up monthly cash-flow due to lower mortgage payments. 

Scenario Analysis: COVID-19, the BC Economy and the BC Housing Market 

The Canadian economy has endured three recessions since 1980. During those times, the BC economy has experienced an annual contraction of GDP or growth falling to near zero. In each of those periods, BC homes sales have experienced sharp declines that have lasted between 12 and 14 months. We will not begin to see the impact of COVID-19 in economic data until later in the spring due to lags in processing data, but we know based on our own tracking that the BC economy was growing slowly even before the outbreak, with estimated real GDP growth under 2 per cent for the last several months.

The COVID-19 outbreak is occurring at a time in which BC housing markets are recovering from a two-year slowdown in activity. Home sales are currently trending at a healthy pace, close to their long-term average, and growth in home prices has been strong due to a lack of inventory. 

With those initial conditions and historical precedents in mind, we have sketched out how the rapidly changing financial and economic environment may impact the BC housing market. 

Given the level of uncertainty, we limit our analysis of the impacts of COVID-19 to 2020, to concentrate on immediate short-run impacts and abstract from any potential supply-side impacts such as changes to residential construction that may occur over a longer time frame. To model the possible impacts for home sales and prices, we concentrate on how COVID-19 impacts factors that shift short-term housing demand. In particular, we are interested in whether lower interest rates will dominate the impact of slower, or even negative, economic growth. 

Real estate is a face-to-face business, so practices that are necessary to prevent the spread of the virus are at odds with buying and selling homes. This may produce stronger impacts than we can model using standard frameworks. As guidance, and reflecting on the immense uncertainty surrounding the economic outlook, we based our simulations on several scenarios: 

Results 

Unsurprisingly, the results of our simulations show a steep decline in home sales in the second quarter of this year as economic activity becomes eerily quiet. From there, home sales slowly recover, though remain below baseline for 2020. In the event of a deeper and more prolonged recession, home sales remain depressed for the remainder of the year, falling about 20 per cent below baseline. In contrast, in Scenario #1, where the fall in interest rates is passed through to the qualifying rate, home sales rise above baseline after an initial steep drop.  

As for home prices, the growth slowdown and associated decline in transactions will likely cause a temporary but modest swoon in home prices, which are then expected to recover to baseline over the next year as growth recovers. Again, the pass-through of falling interest rates to the qualifying rate makes a large difference in outcomes. Our simulations show that a much lower qualifying rate would lead to home prices in some BC markets ending the year higher than our pre-COVID-19 baseline. This result is likely why the Federal Government has opted to postpone the change. However, given the uncertainty surrounding the outlook, this may ultimately be a mistake. If the growth outlook deteriorates, the housing market may need a lower qualifying rate to fully recover. 

The results of these simulations are far from definitive, but they provide a framework for thinking through the potential magnitude of the impacts of the COVID-19 outbreak. Most important to remember is that this period, no matter how unusual and anxious it is now, will pass and the economy and housing market will return to health.

For free Real Estate Advice please call/text me at (604) 537-9791 

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The commercial real estate market in the Lower Mainland saw fewer sales and lower dollar volumes in 2018 compared to recent years.

There were 2,266 commercial real estate sales in the Lower Mainland in 2018, a 13.6 per cent decrease from 2,624 sales in 2017, according to data from Commercial Edge, a commercial real estate system operated by the Real Estate Board of Greater Vancouver (REBGV).

The total dollar value of commercial real estate sales in the Lower Mainland reached $15.622 billion in 2018, a 5.2 per cent decrease from $16.483 billion in 2017.

“Demand in the Lower Mainland’s commercial real estate market changed pace in 2018,” said Ashley Smith, REBGV president. “While dollar volumes remained up near the highs we’ve experienced in recent years, we’ve seen reduced demand in line with slower economic growth and rising interest rates.”

2018 activity by category

Land: There were 861 commercial land sales in 2018, which is a 20 per cent decrease from the 1,076 land sales in 2017. The dollar value of land sales was $8.281 billion in 2018, an 8 per cent decrease from $9 billion in 2017.

Office and Retail: There were 815 office and retail sales in the Lower Mainland in 2018, which is down 9.2 per cent from the 898 sales in 2017. The dollar value of office and retail sales was $4.647 billion in 2018, a 2.8 per cent decrease from $4.781 billion in 2017.

Industrial: There were 489 industrial land sales in the Lower Mainland in 2018, which is down 7.7 per cent from the 530 sales in 2017. The dollar value of industrial sales was $1.441 billion in 2018, an 11.7 per cent increase from $1.290 billion in 2017.

Multi-Family: There were 101 multi-family land sales in the Lower Mainland in 2018, which is down 15.8 per cent from 120 sales in 2017. The dollar value of multi-family sales was $1.253 billion in 2018, a 11.2 per cent decrease from $1.411 billion in 2017.

Housing Starts

The annual pace of housing starts – new housing construction projects – slowed, according to Canada Mortgage and Housing Corporation (CMHC), but dropped less than what was expected for the beginning of the year.

It’s too early to say where the Canadian housing market is heading. But we can start tracking its direction by looking at some significant January figures.

Compared with 213,630 units in December, the seasonally adjusted annual rate came in at 207,968 last month. This is slightly higher than the expected annualized pace of 205,000 for January.

The annual pace of urban starts slowed by 2.1% to 190,912 units as single-detached urban starts slumped by 10.4% to 44,559 units. The annual pace of multiple-unit projects such as condos, apartments and townhouses, however, rose by 0.7% to 146,353 units.

In Vancouver, the housing starts were holding steady after trending lower in the second half of last year.

In Toronto, housing starts saw little change, although increasing borrowing costs meant pre-construction sales of new homes remained low. CMHC expects this to result in even fewer units breaking ground this year.

Looking at other regions, CMHC observed housing starts falling in Quebec and rising in Alberta from low levels. Meanwhile, New Brunswick experienced a 33% increase compared to last year. The increase, according to CMHC, largely stemmed from multiple-unit starts.

Home Prices

The Teranet-National Bank National Composite House Price Index slowed by 0.1% last month from December.

Prices declined the most in western Canada’s three biggest housing markets. Slumping oil prices have taken a toll on Alberta home prices, with Edmonton down by 0.8% and Calgary down by 0.5%. Meanwhile, Vancouver home prices dipped by 0.3% – but prices are still not far off from historic highs.

While prices rose in Quebec City (1.3%), Halifax (0.7%), Montreal (0.2%), Toronto (0.1%) and Winnipeg (0.1%), these increases are not enough to swing the national average into positive territory, according to Yahoo Finance.

Home Sales

The number of national home sales rose 3.6% last month from December, but this figure was still below the level seen in January of last year. The Canadian Real Estate Association (CREA) said 23,968 properties were sold through the Multiple Listing Service (MLS) last month, down from 24,977 a year earlier.

CREA also reported that the sales-to-new-listings ratio (SNLR) dropped across most parts of the country last month. SNLR measures the ratio of home sales to the number of new listings on MLS.

Real estate markets in western Canada showed further drops. Fraser Valley experienced the biggest drop with an SNLR of 48.5%, down by 24.2% from last year. Vancouver was second at 43.3%, down by 22.9%. Calgary came in third with an SNLR of 45.9%, down by 8.5%.

Meanwhile, eastern Canadian real estate markets showed annual improvements. Montreal showed the largest gain with an SNLR of 70.1%, up by 6.6% from last year. Ottawa came in second at 70.2%, up by 5.3%. Quebec City rose to 52.6%, up by 0.8%. These three markets outperformed the national average of 54.3%, down by 4.3% from last year.

Original Article from : Zoocasa

Luxury condo previously listed at $17.3 million was just put back on the market for $12,995,000

View full listing details here. 

The penthouse of this iconic co-op building right on the beach of Vancouver's English Bay features  2,740-square-foot, two-bedroom-plus-den home was originally listed at a jaw-dropping $17.3 million in October 2018, ranking in as Vancouver's second most expensive condo sale. Has been relisted on February 15 for $12,995,000 – a discount of $4.3 million, or just shy of 25 per cent.

With the original price working out to $6,314 per interior square foot, take into consideration the additional 3,000 sq ft of outdoor space with breathtaking 360-degree views, with the new $4,743 per square foot price for this one of a kind property. 

Back in October, Glacier Media was exclusively invited to take a tour of the home, which has a long, open-concept living/dining/kitchen room, with multiple sliding doors to the terrace that stretches across the front of the building to take in incredible ocean views. Renovation of the outdoor space cost the owners $3 million. 

Because the building is a co-op, the buyer will be purchasing shares in a co-operative rather than a freehold. Their purchase will also have to get approval from the co-op board – which includes sitting down for an in-person interview. 

The purchase would also be subject to a minimum down payment of at least 30 per cent, depending on the lender.

Check out more photos and details of this jaw-dropping penthouse, here. 

From: Vancouver Courier