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John Thomson  

Thomson report

REAL ESTATE REPORT – September 2010
Provided by: Rob Marak 250-470-1311

Excellent Opportunities Still Exist

Printed from The Financial Post
Provided by Lendingmax


At 2.05%, a variable-rate product today may look as attractive as ever, but the five-year fixed-rate closed mortgage is falling fast. It can now be had for a shade under 4%, says Rob McLister, editor of Canadian Mortgage Trends. “Bond yields have fallen out of bed and nobody expected that," said Mr. McLister, adding the spread between the five-year Government of Canada bonds and five-year mortgages is still large enough that the banks may reduce long-term rates even more. However, at about 4%, the five-year closed fixed-rate mortgage isn’t far off its record low. Bank of Montreal senior economist Sal Guatieri does agree that variable-rate products have worked out better than fixed-rate mortgages throughout history, but says the tide may be turning. “Given that the central bank has already raised rates a couple of times now and will likely continue to raise rates, it probably is a correct assumption to make,” says Mr. Guatieri, noting variable usually works in a declining interest-rate environment. “The next five years might not quite follow the past. You could probably argue it’s wiser to lock in now. It’s a close call."

Bank of Montreal is forecasting another 25 basis point move in September and says rates will climb another 1.5 percentage points by the end of 2011. If Mr. Guatieri and others are right, by 2012, the variable-rate products out today would clock in at just above 3.75%, if the discounting remains the same.

“If you are still in that variable-rate product then, you’d have to sweat out the next three years because there would still be possibly more increases,” says Mr. Guatieri, who adds his bank sees the overnight rate eventually going to 4% in the following three years. Based on the present gap between the Bank of Canada and prime, that would place the variable-rate product you get today at 6% by around 2015. Fears of such a scenario are driving people into fixed-rate products again. That, plus new mortgage rules that make it easier to qualify for a mortgage if you go for a fixed-rate product with a term of five years or longer. It makes sense, but with variable rate still at around 2%, it’s easy to see why people wouldn’t want to lock in. Even Mr. Guatieri says if you are secure in your financial situation and don’t need to fix your mortgage payments, “you might just want to let it ride. “There just never seems to be a clear answer on whether to lock in or stay variable.”One thing is crystal clear — affordability of, and qualifying for a mortgage is definitely easier with housing prices staying somewhat flat, or even softening a little, Real Estate Opportunities Do Exist!

Residential Sales by Price – Year to Date

Price Range 2010 2009

$0 to $200,000 7 5
$200,001 to $240,00 9 21
$240,001 to $280,000 30 25
$280,001 to $320,000 58 80
$320,001 to $360,000 134 175
$360,001 to $400,000 181 205
$400,001 to $440,000 193 171
$440,001 to $480,000 163 142
$480,001 to $520,000 131 132
$520,001 to $560,000 101 76
$560,001 to $600,000 66 65
$600,001 to $999,999 178 131
$1 Million and over 29 11

Summary of Residential Sales – Year to Date

Type 2010 2009


Acreage 27 10
Acreage/House 64 49
Acreage (Waterfront) 4 1
Business 12 10
Townhouse 371 365
Condo 503 492
Duplex 60 68
Farms 9 10
IC & I 51 17
IC & Lands 5 1
Lots 127 56
Leases 23 37
Lots (Waterfront) 1 0
Multi-Family 2 3
Multi Plex 3 7
Mobile Homes 150 117
Recreational 7 7
Residential 1279 1239
Residential (waterfront) 24 18
Timeshares 1 0

TOTAL 2723 2507

A Few more Real Estate Stats

Average House Price in Aug 2010 $ 496,077
Median House Price in Aug 2010 $ 449,400
Number of houses listed last month: 352
Number of lakeshore homes sold last month: 4
Average Mobile Home Price: $ 99,161
Dollar value of sales in Aug 2010 : $113,088,593
Dollar value of sales in Aug 2009: $156,387,334


More John Thomson articles

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About the Author

John Thomson is the Okanagan's pre-eminent business columnist writing his column, Rumours and Things, for over 24 years. Plugged in to the valley's who's who, John keeps his readers coming back for more with his straight talk and optimistic perspective on where we are headed next.

When John is not writing his column, he runs a sixteen year old think tank called the Executive Roundtable and holds his popular "Thomson Presents" quarterly business speaker seminars.

Have a comment, question, or tip for John? 

E-mail John at
[email protected]
or send him a fax at 250-764-8255.

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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