Mattamy Limits Over-Eager New Home Buyers

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Wow! We’ve never seen this before in the new home industry. A marketing email from Mattamy Homes that recently landed in my inbox caught my attention. The email was about a new release of homes for sale at Mattamy’s Hawthorne South Village community at Sixteen Mile Creek in Milton. In the list of rules and information about the new release and registration for it, this item was included:

“Previous Buyers With Pending Agreements Of Purchase & Sale With Mattamy Homes Are Not Eligible To Purchase. We Thank You For Your Interest.”

Mattamy Homes is not allowing existing buyers of unclosed Mattamy homes to buy any more new homes.

Mattamy has historically been a price leader. They have attracted more than their share of investors. Their main concern now is that buyers of multiple homes may not be able to close – the buyers may be able to come up with a deposit, but they need/want price to be up at closing. Mattamy sees that prices are not going up these days, so the likelihood of the homes they sold appreciating before closing is small. Therefore, buyers of multiple homes may be biting off more than they can chew, which will ultimately affect Mattamy.

This is a statement by Mattamy that they see market staying flat and/or their buyers not being financially able to close on multiple homes.

(Read my recent blog post, 2019 Toronto Housing Market: A Year of Opportunity?, for more info on the current state of the market.)

What are your thoughts? Comment below or find me on Facebook or LinkedIn to join the conversation!

Mortgage Stress Test Overreaction

I mentioned in a recent blog post of mine how rising interest rates are scaring prospective buyers and reducing affordability. However, interest rates have only gone up a tiny bit, and we recently saw a big stock market correction – and now economists are forecasting a recession at the end of 2019 or in 2020. Now that it’s clear that we are not facing inflationary pressures which necessitate rate increases to moderate, the federal government should reevaluate its mortgage stress test parameters.

I’m a big advocate of less government intervention. With the new mortgage rules, the government got involved in Canadians’ finances and made a mess. The mortgage stress test was initially introduced by the federal government in October 2016 and was revised in October 2017, requiring potential homebuyers to qualify for a mortgage using the higher of their contracted mortgage rate plus 2% or the 5-year benchmark fixed rate published by the Bank of Canada. Last year, in January 2018, the rules were changed again and got even tougher – the stress test began applying even to uninsured mortgages, i.e. to people paying 20%+ of their home’s price in their down payment. The banks were in favour of the stress test as they wanted to protect themselves, and the rules were introduced with the expectation that interest rates would rise and with an aim of limiting the amount of debt that Canadians and financial institutions would take on.

But we’ve now seeing that the interest rates aren’t going up that much, certainly not by a considerable 2%. The Bank of Canada announced last week that it was maintaining its rate at 1.75%.

If the rates aren’t increasing as high as expected, why do people need to continue qualifying at 2% higher? We don’t need this 2% buffer. Although the rules are supposed to be protecting the Canadian housing industry and buyers (ensuring that they’re spending within their means), the rules are in fact hurting potential buyers. They effectively lower the amount that banks can lend potential home buyers, and many people are qualifying for 15-20% less than before – forcing many completely out of the market. These rules are disproportionately hurting first-time buyers, making it harder for young people and new immigrants to buy homes. Why is the government punishing millennials and newcomers who are trying to get into the market, and putting the Canadian dream farther out of reach? I’m calling for the government to roll back the mortgage stress test. A 2% rate increase for qualification purposes is completely unnecessary given today’s market. I suggest lowering it to 1% (or 0.75%, as Mortgage Professionals Canada is calling for) or eliminating it completely.

The stress test is hampering affordability, which is the main barrier to home ownership. It is greatly contributing to the real estate decline we’re having now, and it is artificially suppressing the demand for housing and preventing first-time homebuyers from getting into the market. This is only going to hurt our market and economy in the long run.

This is a federal election year. Perhaps a change to the rules could help the Liberals?

What are your thoughts? Comment below or find me on Facebook or LinkedIn to join the conversation!

2019 Toronto Housing Market: A Year of Opportunity?

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GTA real estate has entered a new era. Gone is easy money. Gone are many investors, including foreign ones, with the new 15% non-resident speculation tax imposed by Ontario’s Fair Housing Plan. Tighter lending conditions and new mortgage rules including a new mortgage stress test are producing fewer prospective buyers, while rising interest rates are scaring prospective buyers and reducing affordability.

The resulting benefits to prospective buyers haven’t been seen in over a decade!

  • Better choice
  • Better value
  • More time to evaluate and analyze
  • Better terms

Even last spring, most of the residential and investment properties I looked at were not interested in conditional offers. But that’s already changing.

On the other hand, supply of new low-rise housing remains constrained. Immigration levels are high and Canada plans to increase them even further in the next few years, with up to 350,000 new foreign nationals expected to arrive each year in 2019, 2020 and 2021. Rental demand far exceeds supply. Fewer people can afford to buy, which means there’s an increased demand for rentals. Furthermore, Ontario’s Fair Housing Plan expanded rent controls to all private rental units across the province, which will likely result in fewer rental properties on the market as developers move away from purpose-built rental projects for more profitable returns (despite the plan also including a five-year, $125-million program that’s aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges).

With the number of units available for rent expected to decrease and immigration rates set to increase, we can expect that in the long-term, the fundamentals underlying the real estate market’s strength and growth will still be very good. Demand will increase and prices will rise again, especially since we’re not significantly increasing the supply of low-rise homes and are not building enough high-rise units to keep up.

To me, this means opportunity! 2019 will be a good time to buy property in the GTA, as the market goes through this micro-adjustment. The long years of the GTA real estate boom are over and there are way more opportunities available for buyers now. But as we saw above, this opportunity may not be around forever – long-term, I expect the market to stabilize and grow again.

Personally, I’m looking around for opportunities, but taking my time. I’ll post my findings in the future.

Goodbye BAM, Hello New Opportunities

After an incredible 17+ years in business, I’ve decided to step away from my company, BAM Builder Advertising & Marketing Inc. I retired so that I could have more time to do the things I enjoy in life and have earned the ability to enjoy – spending time with my wife Karen and at my cottage in Muskoka, racing my car, skiing, and travelling. I’m also open to new opportunities in the real estate market.

Since my retirement, BAM has seen a major transformation with a new owner, name and brand. The agency now goes by Coolaid Studios and will be led by Rob Nicolucci. Rob is a longtime friend of mine as well as the President of RN Design, an architectural design firm in Vaughan, which he founded in 1991.

With BAM’s strength in digital marketing, its acquisition will help Rob Nicolucci and RN Design continue to expand in that direction. I’ve worked with Rob and his team for years, and am thrilled to be a part of this exciting change and to contribute to Coolaid’s growth as a Consultant.

I had a great run at BAM. The company was known as a key player in the new home industry. We worked with dozens of innovative builders and developers on groundbreaking, interesting projects that at times helped to change the face of the industry. We won many exciting awards over the years, and created countless inspired experiences for new home buyers across Ontario and beyond. Most importantly, I built a strong and strategic team that was the backbone of BAM, leading the company to success again and again. I’ve built relationships that will last a lifetime. After nearly 18 years, though, it’s time to move on.

Going forward, I’m open to new real estate opportunities and business ventures. Want to connect? Please don’t hesitate to get in touch.

The Changing Face of the GTA Housing Market

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The headlines across local and national media outlets all agree. “The market has changed.” “One of the country’s hottest real estate markets might be cooling down.” “Toronto home sales drop most since recession.” The GTA housing market is finally cooling.

After years of extraordinary home sales and incredible price jumps in the GTA, we might finally be seeing the market even out. Potential GTA home buyers had got to be relieved when the Toronto Real Estate Board (TREB) reported the GTA housing market’s declining numbers last month. For years, the red-hot housing market has favoured sellers (and new home and condo builders). It’s been a tough go for buyers, who have had to compete with investors and deal with rising prices and limited availability, and has contributed to the GTA market’s vast expansion. Now, with more homes on the market and prices going down, the market is starting to look more balanced.

These changes are being partially attributed to new rules put in place by the Ontario government to cool down the housing market – the Ontario Fair Housing Plan. The new rules include a 15 percent foreign buyers’ tax, rent controls that limit annual increases, and several other measures. Coupled with changes last year from the federal government to tighten up mortgage lending regulations, which restricted the amount of debt Canadians can take on, it’s natural to see demand for homes declining. There are many factors at play.

It’s too early to tell the long-term effects of this recent dip. It has definitely made an impact, and will make it easier for buyer demand to be met. But as Jason Mercer, TREB’s Director of Market Analysis, reports, “the actual, or normalized, effect of the Ontario Fair Housing Plan remains to be seen.”

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