Andre Smit's Real Estate Round-up

Hi Folks,

So, the Bank of Canada, (BOC), once again reduced the overnight lending rate by another .5% to 3.25% p.a. this week. This is an effort by the BOC to stimulate our economy which is now in a recessionary mode. Although the current annual inflation rate is now within an acceptable BOC range, our federal government still continues to spend money like a drunken sailor, and thereby having to print more money with our deficit now in the expected $60 billion range, up from $40 billion, earlier this year! This is definitely not sustainable, and may have a negative affect on any future BOC interest rate reductions. I expect this irresponsible spending spree to continue until our next federal election, due in the 4^th quarter of 2025.

There is now market talk of the main banks getting into a mortgage interest rate war, in order to gain market share in the spring. This is good news for buyers and mortgage customers who have to renew their mortgages soon.

There have also been some important mortgage rule changes announced by the federal government recently. The purchase limit for insured mortgages has now been raised to $1.5 million from $1 million. However, the minimum down payment has also been increased. For the first $500,000 of the purchase, the minimum down payment remains 5%, but then increases to 10% for any purchase price above $500,000. All first time home buyers and buyers of new construction homes can now enjoy a 30 year mortgage amortization term, irrespective of down payment size. This is up from the previous maximum 25 year term and will reduce the monthly mortgage payments for these buyers. The final change, is that the stress test has now been removed for all borrowers renewing their mortgage with another federally regulated lender, provided that they do not increase the size of the loan or the remaining contractual mortgage amortization term.

The actual sales to new listings ratio has jumped up from 43% in October, to 51% in November. Remember that if the ratio is above 40% and lower than 60%, then it indicates a balanced market. We are definitely on our way to a sellers' market in the first quarter of 2025.

Total physical sales increased by 38% from the same month a year ago. However, total new listings, which drive the sales, only increased by 10% over the same period. This resulted in the total average price increasing by 2.4% for the same period, and the average days that homes stayed on the market before selling, increased by 28% to 31 days.

For detached homes, physical sales were 54.5% higher for November, 2024 compared to November, 2023, with new listings being up by 12% over the same period. This resulted in an average price increase for detached homes of 3.5% for the same period and the average days on market before selling, increased by 26% to 29 days.

For condo apartments, physical sales were up by 52% while new listings were only up by 1.6%. This resulted in the average price in this category decreasing by 3%, while the average days on market before selling, increased by 29% to 36 days.

All the above points to a very busy real estate market in the spring, with upward price pressure, especially in the detached home and freehold town home markets.

I am often asked, “What affects my credit score?” The credit score is a mathematical formula created by the Fair Isaac Company, and is used by most companies to see if you are a good credit risk or not. The numbers are anywhere between 300 and 900, with a score of over 680 being considered as excellent. A credit score below 600, is considered very poor, and the range is: 600-620 (poor), 621-650 (good), 651-680 (very good), + 680 (excellent).

The next question is: “How is my credit score calculated?” Payment history, which is affected by late payments, past due accounts, garnishee orders, collections, judgements and bankruptcies, has a weighting of 35%. Amounts owed on accounts, calculated as the proportion of outstanding balance to the total account credit limit, has a weighting of 30%. The length of credit history, which is calculated as both time since accounts opened, and time since last activity, has a weighting of 15%. The number of recent inquiries from companies for your credit score, and the number of recently opened accounts have a combined weighting of 10%. The number of various types of accounts, make up the remaining weighting of 10%.

The final question is: “How do I improve my credit score?” This normally takes time and discipline, but can be sped up by doing the following:

• • Pay your bills on time

  • You should open a few new accounts, use them responsibly and pay them off on time

  • Don't open accounts and then not use them. Having 6 or 7 of the same type of credit account will actually reduce your score

  • Having a credit card or installment loan, can help boost your score, as long as you don't have a high balance

  • Keep balances low in relation to the available credit. Your score will actually improve if you keep your outstanding balance below 25% of your available credit. That is why it is always a good idea to accept larger credit limits, when offered to you. The trick is, to not use the additional credit limit

  • Never go over your credit limit. This has a very negative affect on your score

  • Pay off credit card debt, instead of moving it around to lower rate cards

It is also a good idea to order a copy of your credit report annually, in order to review it carefully, and correct any significant errors, by reporting them to the credit report company. Credit reports can be purchased on line, at the following companies: www.equifax.ca and www.transunion.ca. However now, most of the major banks offer free credit reports to their clients.

SMIT'S TIP OF THE MONTH

This is a good time to clean lint from the clothes dryer venting hose, in order to prevent any risk of fire. Make sure that all outside holiday lights are safe in terms of any possible electrical hazards.

If you, your family or friends have any questions regarding real estate, please do not hesitate to call me at 416-898-2852, at anytime.

I would like to take this opportunity to wish you all a very peaceful and safe Christmas period, and may the bluebird of happiness, health and wealth, nest in your home next year!

Kind regards,

André