Wes Smith's Real Estate Blog: Nanaimo & Vancouver Island

No housing crash coming in Canada, BMO says

Tue, 31 Jan 2012 03:42:00 GMT

'Dramatic correction is unlikely,' Bank Says

Mortgage rates dropping due to cheap bonds

The Bank of Montreal poured cold water on the idea Canada's housing market could be headed for a crash, suggesting that prices are only "moderately high across the country."

"Expect the housing boom to cool rather than crash," BMO's chief economist Sherry Cooper and senior economist Sal Guatieri said in a report published Monday.

"While the housing boom is unlikely to continue unless mortgage rates drop much further, neither is it likely to bust."

The bank says home values are indeed rising at a faster pace than they used to, but the signs are pointing to a soft landing where prices stabilize — not a hard correction where prices drop quickly by 20 per cent or more.

"In our view, the national housing market is more like a balloon than a bubble," the bank said. "While bubbles always burst, a balloon often deflates slowly in the absence of a pin."

But demographic factors, consistently low interest rates, low construction costs and an influx of foreign buyers make it likely that no such pin will materialize for the foreseeable future, the bank said.

Average prices have grown more than twice as fast as family incomes since 2001, but BMO's report argues there's no reason to panic yet.

Nationally, home prices are 4.9 times higher than the average household income. A decade ago, that ratio was at 3.2.

Some cities are hotter than others. Vancouver's ratio currently sits at 10 times higher than average household income, Toronto's is at 6.7, Montreal's is at 4.5 while Halifax is at 3.8. Those are all on the high side, but if the market cools, that will allow incomes to catch up and move the price-to-income ratio lower, the bank argues.

The latest data from the Canadian Real Estate Association shows the national average price was $347,801 in December, a 0.9 per cent increase over the previous 12 months. That was the lowest level of growth since October 2010 and well below inflation, a possible sign that the market is already cooling.

The bank does note, however, three risks to the outlook. A sudden hike in interest rates, a widespread Canadian recession, or an economic slowdown in Asia reducing the number of foreign buyers would all take the air out of Canada's housing market.

"But barring one of these triggers, however, a dramatic correction is unlikely," the bank said.

Source: CBC News

December 2011 MLS® Sales Summary

Fri, 13 Jan 2012 08:18:00 GMT

Links:

December 2011 MLS Sales Summary

Board Area Home Sales Map

Detailed info:

Nanaimo

Home Sales Map

Graphstats

Parksville - Qualicum

Cowichan Valley

Comox Valley

Port Alberni

Campbell River

North Island

2011 Vancouver Island Annual Home Sales Maps

Fri, 13 Jan 2012 07:18:00 GMT

Below are the links for the downloadable PDF files. Each file shows total 2011 Home Sales Summary, courtesy the Vancouver Island Real Estate Board.

Nanaimo (incl Lantzville)

Port Alberni (incl Tofino and Uculet)

Cowichan Valley (Duncan, Ladysmith, Chemainus, Cobble Hill, Lake Cowichan)

Parksville Qualicum (including Nanoose Bay)

Comox Valley (including Comox, Courtenay, Cumberland)

Campbell River

ALL ISLAND SUMMARY (North of Malahat)

Mortgage Rates Reduced to an ALL TIME LOW (for a limited time)

Fri, 13 Jan 2012 06:47:00 GMT

Lots of buzz today over the Bank of Montreal's reduction of their mortgage rate to 2.99% for a 5 year fixed term. The only catch - it's only available until January 25th.

Likewise, TD Canada Trust is offering teh same rate for a 4 year term.

Why is this important? Well, if you have been sitting on the fence regarding buying a house or remortgaging your current home, it won't get any cheaper than this.

To give you an example:

• Above rates are approximate and based on a 25 year ammortization. May be available as a 30 year ammortization period (resulting in smaller monthly payments) in the next week.

If you are renting and don't currently own your home, NOW is the time to buy. Owning is cheaper than renting! Especially if you are purchasing a property with a suite:

For example, there are many homes with suites in Nanaimo for $350,000. Your monthly financial committment with 5% down would be:

$1624.74 (Home payment )

- $850 (2 bedroom suite rental)

________________________

$774.74/month

That is CONSIDERABLY CHEAPER than renting a property. Plus you are putting part of that money back in your pocket every month as you pay down the mortgage.

AND . . . properties in the area generally appreciate at about 3% per year. That's $10,500 a year on a $350,000 house. $10, 500 that you could be putting back into yourown pocket outside of your mortgage payments.

Watch for other banks to introduce low rates as well in the next few days. But keep in mind that you have to apply for and be approved for the mortgage at these special rates BEFORE JANUARY 25th. I can introduce you to mortgage brokers or account managers at any of these banks to get you started.

Contact me today to start looking for a house. smith68@shaw.ca

or call me at 250-758-3700

Wes Smith, RE/MAX OCEAN POINTE

MORTGAGE INSURANCE: BEWARE!

Sun, 27 Nov 2011 06:34:00 GMT

See the full video from CBC News MARKETPLACE here:

http://www.cbc.ca/marketplace/in_denial/

Mortgage insurance: Not always a sure thing

If you have a mortgage on your home, chances are good you also have mortgage insurance. The idea is that if you should become seriously ill or die before paying off the mortgage, the coverage will kick in and pay it off for you. It’s meant to offer peace of mind and to reassure you that your family will be able to stay in your home if anything should happen to you.

The reality falls a little short of that. In this week’s Marketplace investigation, we meet two families who bought the coverage and thought they were protected, only to have their claims denied when they became sick or died. In each case, the insurer said the applicant person had lied on their initial application form.

It turns out a routine test at the doctor could be reason to deny your claim, if you don't mention it. Had a cuff inflated on your bicep? That counts as being tested for high blood pressure.

As Erica Johnson reports, the bank staffers selling mortgage insurance are unlicenced and rarely trained to explain the details and legalities of those insurance products. The result is people who pay premiums and think they are covered, only to realize later that they are not.

How to buy insurance that really will protect you

Be sure you qualify.

There are many terms and exclusions associated with credit insurance policies. Learn what they mean and how they apply to you.
Call the insurance company directly (NOT the bank that sold you the coverage) for clarification about pre-existing medical conditions.
Call your doctor to clarify details of any pre-existing medical conditions you may be concerned about.

Know that you can get out.

You usually have 10-30 days to review your policy after the initial purchase (this is known as a "cool-down" or "free look" period).
If you have already purchased your credit insurance you can cancel anytime. Keep in mind, however, that you may lose premiums already paid.

Shop around.

Consider buying from a licensed insurance broker who will explore any medical issues upfront.
Consider buying or topping up an individual life insurance policy to cover your mortgage.

Know your coverage.

You may already have adequate insurance coverage through your work or other policies. Insurance experts say it's better to buy one traditional insurance policy than purchase a number of small policies for a variety of products.

Be sure you need it.

The purpose of credit life mortgage insurance is to protect your loved ones from making mortgage payments if something were to happen to you. This type of insurance may not be applicable if you do not have any dependents who would need to keep your home if something happened.

Alberta Insurance Council vs. the banks

Alberta is the only province in Canada that requires anyone selling credit insurance, including banks, to be licensed. Under the Alberta regulations, banks are required to follow set requirements for training staff and disclosure to customers. When the Alberta Insurance Council first implemented this regulation in 2001, the banks fought back, pursuing the matter all the way to the Supreme Court of Canada. In May 2007 the Supreme Court ruled against the banks and said the province of Alberta was within its rights to regulate the sale of this insurance and protect the consumer.

A copy of the judgment in the case, Canadian Western Bank v. Alberta, is available online.

To date, no other province requires banks selling insurance to be licensed. This page offers a list of the provincial and territorial regulators who would have that power, if enabling legislation were passed in their respective jurisdictions.

Mortgage life insurance vs. traditional individual life insurance

According to insurance and financial experts we spoke with, an individual life insurance policy may be preferable to a credit insurance policy. Here are the key differences between the two types of insurance.

CREDIT MORTGAGE INSURANCE	INDIVIDUAL LIFE INSURANCE
Post-Claim Underwriting: Unlike individual life insurance, credit insurance sold through the bank is usually not underwritten until a claim is made. This means the insurance company may determine you are not eligible for a payout even though you have been paying premiums. For instance, a claim may be denied because an investigation of your medical records indicates you once had high blood pressure or high cholesterol that you did not disclose.	Underwriting: When you apply for individual insurance through a licensed insurance broker your medical history will be examined before a policy is issued and you start paying premiums. The insurance broker will ask detailed questions and may arrange for a nurse to conduct a physical. You will know upfront whether or not you are covered.
Standard premiums: The mortgage insurance policy sold at the bank is a one size fits all policy. This means everyone who qualifies is considered to be of equal risk. The premiums you pay on mortgage insurance are a fixed amount based on your age and the amount of your mortgage. There is no discount for non-smokers or for women. The premium does not reduce as the mortgage is paid down.	Individual premiums: With an individual life insurance policy, the premiums you pay are based on your individual risk. Your health history and exam will help to determine how high or low your premiums are. Non-smokers and women pay a lower premium. The face amount of the coverage remains level.
Decreasing payout: The Mortgage insurance sold at the bank covers a decreasing amount. While your premiums remain the same the amount left on your mortgage decreases. Mortgage insurance will only pay off the balance of your mortgage when you make a claim.	Fixed payout: When you purchase an individual insurance policy you pay premiums for a pre-determined amount of coverage. Therefore, if you pay premiums for $100,000 of coverage your beneficiary will receive $100,000.
The bank gets the payout: Mortgage insurance is designed to pay off the bank if anything happens to you. Therefore the insurance payout will be made directly to the bank.	You choose who gets the payout: With an individual policy you are free to choose the beneficiary or beneficiaries. If something happens to you, it is up to your beneficiaries to decide what to do with the insurance proceeds.

The application forms

The mortgage insurance application forms are similar across all the big five banks. In each, there are relatively few health questions, but each question covers a large range of medical conditions, as well as a wide range of situations (ranging from consulting a doctor, to receiving advice, to actual diagnosis.)

Click on a bank's logo to see its mortgage insurance application form. (These will open in a new browser window.)

Who to call

Several bureaus are set up to receive complaints from and offer advice to consumers about banking and insurance issues.

The Canadian Life and Health Insurance OmbudService (CLHIO) is an independent service set up to assist consumers with concerns and complaints about life and health insurance products and services.
www.clhio.ca
1-888-295-8112

The Ombudsman for Banking Services was set up to resolve disputes between participating banking services and investment firms and their customers if they can’t solve them on their own.
www.obsi.ca
1-888-422-2865

The Financial Consumer Agency of Canada (FCAC) provides consumers with information about financial products and services, and informs Canadians of their rights and responsibilities when dealing with financial institutions. FCAC also ensures compliance with the federal consumer protection laws that apply to banks and federally incorporated trust, loan and insurance. If you are having difficulty finding out about your institution's complaint-handling process or if you are experiencing delays when using it, call FCAC. However, FCAC does not provide redress or compensation and does not get involved in individual disputes.
www.fcac-acfc.gc.ca
1-866-461-3222