Economic impacts hit home, but differently

Globe and Mail
Published: Monday, April 19, 2010

    From the Maritimes to the West Coast, views on the impact of the financial crisis, economic recovery, interest rate increases and regulatory changes vary. Here’s what our panel of mortgage experts offered:

VANCOUVER

In Vancouver, where the average price of a detached home topped $900,000 in the spring of 2008 and rebounded past$1 million in the spring of 2010, the impact of the financial crisis was muted and short-lived, says Gart Ellis, AMP, Verico Ellis Mortgages.
“It wasn’t a massive contraction”, he says.  “By the late fall of 2008, it had turned into a perceived buyers’ market, with many people thinking it was time to move up.  They were preparing for the deal of the century, but just as the buyers weren’t feeling any real financial pain, neither were sellers.  There were very few fire sales.”

Since last spring, he says activity has steadily increased, to the point that property values have been near pre-crisis levels for a number of months.

The anticipated end of low interest rates is driving a lot of today’s activity, he says.  “People are very serious about buying.  A lot of people are getting pre-approved in preparation for stepping up into more expensive properties.”

Mr. Ellis says he doesn’t expect the new regulatory changes to have a significant impact on market activity.  “These policies really make a difference to potential buyers on the fringes of affordability, those stretching the amortization, with minimum down payment and qualifications.  That’s a lot of stretching.  In many cases, they’re now saying, maybe instead I’ll adjust my lifestyle, spend less and accumulate more of a down payment – or buy a smaller house.”

Given all the changes in the marketplace, more people are seeking objective, qualified advice, he says.  “It’s impossible for people to keep up, so they’re seeking out professionals who have designations such as the AMP (Accredited Mortgage Professional) to help them navigate these uncertain times.  They don’t have the time, inclination or desire to get into the inner workings of CMHC or bond rate spreads.”

ST. JOHN’S

On the other side of the country, in St. John’s, Newfoundland, “there have been a lot of ups and downs,” says Keith Stapleton of Mortgagebrokers.com. “The ST. John’s economy can be somewhat different than other areas of the province and country; we’re a small market and we have some large projects really carrying us right now.  I think we’ve fared better than the national average.”

Mr. Stapleton doesn’t expect the recent mortgage increases or regulatory changes to make a difference to buying plans in St. John’s, with one exception.  “I think it will have a noticeable effect on self-employed clients.  The criteria for the CMHC Self-Employed Simplified program have been severely tightened, and in the current economy, more and more people are self-employed.”

But for all homebuyers,  it’s more important than ever to arrange a pre-approval as early in the buying process as possible, he says.  “It answers so many questions, and provides much more clarity and financial certainty.”

TORONTO

In the Greater Toronto Area, the economic downturn kept buyers “on the fence a little bit, but there hasn’t been a dramatic effect as far as prices are concerned,” says Joe Pinheiro, AMP, Mortgage Alliance.  “In the downtown Toronto area in particular, the strength of the financial sector over the past 18 months meant there wasn’t a lot of unemployment, unlike other areas, such as southwestern Ontario, that rely heavily on the manufacturing sector.”

The recent rate increases have only served to heighten activity, he says.  “We’re seeing bidding wars, which has driven overall prices up.”

The new regulatory changes are unlikely to have a significant impact on the overall GTA market, says Mr. Pinheiro.  “It will probably cool some speculative behavior, but in my view, it is pent-up demand, well-paying jobs and a lower interest rate environment that have driven activity, not speculation.

In a heated environment, professional advice can help consumers avoid regrettable decisions, he says.  “First time homebuyers in particular fear that if they don’t buy now, prices might be considerably higher later on, along with higher interest rates.  I don’t believe that to be true – I think we will see a leveling off of prices even this year, once the pent-up demand has cooled and interest rates have risen.”

Source: Globe and Mail