Montreal real estate and household incomes

Rob Carrick from the Globe & Mail is back at with an article entitled "Can you afford a home in these cities?" I love how Rob keeps it real and puts things in a comparative perspective. Rob again applies his Real Life Ratio indicator when looking at home affordability in various Canadian cities. According to him, "Montreal's a trouble spot, with actual household income well below the estimated income required to carry the average home." I would agree with him that "Falling prices would help some prospective home buyers, but its not a big factor as you'd expect." I also agree that if the Real Life Ratio, i.e. the common sense calculation for owning a home doesn't work then it's okay to rent or save on building a large down payment.

Reviewing Mike Holmes on renovations and creating value

Mike Holmes is back at with another article that I enjoyed reading entitled, "Fix-ups to push up your property value." In the article, Mike shares how to create value or increase value in your home, which I would add is also applicable to investment properties.

Mike poses the most fundamental question: What does valuable mean? Not every renovation adds value to your property. Sometimes renovations solely make the property more durable or energy efficient (new windows, doors, insulation). I agree with Mike, that these make for a happy homeowner because energy costs can decrease. I think that when it comes to renovations it all depends what your goals are. Perhaps your goal is an income goal or you want to flip the property or perhaps you'd like to renovate, rent and refinance the property to buy more.

Mike's tips are awesome:
1. Don't curb curb appeal
2. Fix roof problems
3. Clean the property before listing

I have some clients that realized that the the cost of renovations don't always translate into 100% market value. This is especially applicable with a purchase plus renovations or refinance plus renovation project financing. Depending on the size of the renovations you're looking at it's worth to have a proper home evaluation to determine present and future value post-renos.

At the moment the vibe I am feeling in the Montreal market is: renovate, maintain and hold your properties. It's a good time the weather a bit of the market storm.Your thoughts?

Conference Board of Canada says no to housing crash

Lately, I've focused a lot of energy the past few blog entries about real estate market prices. This month the Conference Board of Canada released a report entitled, "Housing Briefing: Bubble Fears Overblown." The Conference Board (CBOC) is an Ottawa based think thank that is comprised by the heads of the largest public and private organizations in Canada. The CBOC provides analytical services to the public and private sectors. In the report, the CBOC states that Canadian real estate market is not over-built and overvalued (apart from Toronto being overbuilt). They argue that the market the past tree years is in line with the 20 year average. 

I do agree that I don't foresee a crash either but I still do think that the average Canadian is financially stretched. Yes, I agree with the CBOC report that defaults still remain relatively low but in Canada the homeowner or real estate investors has a few options at their disposal in refinancing and transferring properties that may skew default stats. If people are stretched now then perhaps we haven't fully seen the pricing adjustment? Just a thought...

The CBOC states that Montreal is "Flirting with buyer's market conditions with sales and average prices having dropped somewhat last year." We shall see how 2014 continues to evolve especially post-Quebec election. Stay tuned folks. 

Canadian mortgage changes

As a mortgage broker, when it comes to my client's finances I try to remain genuinely objective and look out for their best interest. Frankly, I don't agree with all the changes but I am glad to see that the Federal Government has finally introduced a couple mortgage changes such as reducing home equity lines of credit (aka HELOCs) to 65%.

I can appreciate that housing prices are outrageous in many parts of Canada but I think Quebec pricing remains fairly reasonable. For the most part I think appraisers in the Montreal area are "conservative" for the better. I'm curious to see the impact of the new rules here in the Montreal-area especially with the condo market.

By dropping amortization from 30 to 25 years it seems lower income earners will be eliminated from buying in the short term to medium term. This may not be entirely bad. On the other hand, I am most concerned about recent home buyers that put 5% down, took 30 year amortizations, fixed shorter terms (1 to 3 years) and incorporated lots of over-time and bonus income as part of their income calculations. I've blogged that repossessions in Montreal remains fairly low however I think in the coming years bank repossessions will grow.