Real Talk!

Ontario Regional Economist Ted Tsiakopoulos recently interviewed by Vaughan Today, provided information that gave the writer (Alexis Dobranowski) reason to state, “The recent gloomy real estate picture has rays of hope around it.”

Dobranowski also quoted a local Realtor who explained, “Buyers certainly seem to be shopping for value. Sellers, by the same token, need to ensure homes are properly presented and effectively marketed in this type of environment.”

Yesterday’s Toronto Sun included an optimistic article written by Antonella Artuso who said, “Seasoned observers are seeing some faint signs of spring in the economy. A just-released Bank of Canada business outlook survey revealed that the relentless negativity is starting to lighten up a bit. Ontario's real estate market last month showed a 10.5% increase in sales activity over February -- one of the strongest in the country, according to the Canadian Real Estate Association (CREA).”

In an interview on Canada AM on April 13, Toronto’s Condo Expert (John Lamb) said: "Statistics are showing us now that the bottom of Ontario's real estate market was probably December, at the peak of pessimism. It's clawed its way back. Each month since then, it's gotten better and better."

Jason Mercer, senior manager of market analysis with the Toronto Real Estate Board agreed with Lamb, calling March numbers a "marked improvement" over the first months of 2009.

A Globe & Mail article on Friday April 17th (by Carolyn Ireland) told of one Muskoka Realtor who recently said, “The market reality is chasing away the two extremes: the sellers who live in "fantasyland" and the buyers who hope the market has plummeted.”

This same Realtor went on to explain that all of the economic uncertainty is making the art of recommending an asking price even more delicate than usual. "It's like skiing — if you don't commit to the turn, you'll fall," she was quoted as saying. "A lot of people goof around the first year or the second year. By the time they get serious, they're stale."

Another Realtor, also quoted in Ireland’s article, explained that in some cases, cottage owners prefer to try their luck by listing at the most optimistic price possible. They figure they can always reduce the asking price later if it doesn't sell. "It's human nature," he said, "but it's tricky in the cottage market because we have a relatively short selling season."

A Canadian Press article from the 17th stated that new RBC survey suggested that mortgages are eating up less Canadian household income thanks to historically low borrowing rates and a drop in house prices, a trend that is expected to continue in the near term.

Across Canada, RBC said, affordability improved across all housing segments with detached bungalows accounting for an average of 43.7 per cent of pre-tax family income, the standard townhouse to 35.4 per cent, and the standard condo to 30.1 per cent, and the standard two-story home to 50 per cent.

RBC economist Robert Hogue was quoted as saying, “We are in the part of the cycle where affordability is going to continue to improve.”

The same article quoted a Hamilton-Burlington Realtor as stating, “Generally speaking, capable buyers have a higher degree of affordability today than they did six-to-eight months ago."

BMO senior economist Sal Guatieri says the average mortgage payment has fallen by one-third or $600 a month from its peak, while average resale home prices have fallen 14 per cent from highs seen in mid-2007.

From my humble perspective, the phones are ringing wildly... email is abundant... yes, there are lots of "first time buyers" out looking...
and prices have stabilized.

I am concerned (and this isn't new) that people are going to their banks to be "pre-qualified" and confusing it as "pre-approval"... I know that I've been over this before, but it bears repeating:

Pre-approved and pre-qualified are not the same thing!

Pre-qualification is a simple process, generally a chit-chat with your Bank where you provide them with an overall financial picture, including your debt, income and assets. After evaluating this information, the lender will give you an idea of the mortgage amount for which you qualify. This process is far from being in-depth and does not include an analysis of your credit.

Pre-Approval includes completing a mortgage application (there is usually an application fee), and then supplying the lender with the necessary documentation to perform an extensive check on your financial background and current credit rating. From this, the lender will give you a specific mortgage amount for which you are approved and a better idea of the interest rate you will be charged on the loan. You might even be able to lock-in a specific rate.

With pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a property at or below that price level.

REMEMBER: even with a pre-approval, the property will also have to "qualify"... so once you've selected one, the lender will have a professional appraiser evaluate the property to ensure it meets the requirements. Once the value is confirmed, your lender will provide you with a commitment... and you may proceed to remove financing conditions from your Offer.