Industry Update • Industry Update • September 6, 2024

Navigating the Fall Market: Opportunities for Homebuyers in Ontario

by Gerald Lawrence

As autumn approaches, Ontario’s real estate market presents promising opportunities for prospective homebuyers. Recent trends indicate a favorable shift, with property prices having softened slightly compared to last year and overnight interest rates seeing a decrease to 4.25%. Furthermore, experts suggest that rates might continue to decline throughout the rest of the year.

Why Now Is a Good Time to Buy

Favorable Interest Rates: The recent reduction in overnight rates is a positive signal for buyers. While lenders might lower their mortgage rates further if the overnight rate decreases, securing a pre-approval now is crucial. Locking in your pre-approval ensures that you can take advantage of any potential rate reductions before closing on your home. This strategic move can lead to significant savings over the life of your mortgage.
Increased Property Availability: With summer vacations coming to an end and the school year now in full swing, the market is seeing an influx of new listings. More properties are becoming available, giving buyers a broader selection to choose from. This increase in inventory, coupled with the current pricing trends, creates a favorable environment for buyers to find their ideal home.
Market Dynamics: The combination of lower prices and reduced interest rates creates a unique window of opportunity. Buyers who act now can benefit from both a more affordable purchase price and potentially lower monthly mortgage payments.

Crafting a Winning Strategy

To navigate this evolving market successfully, it’s essential to have a well-thought-out strategy. Here are a few steps to consider:

Secure Your Mortgage Pre-Approval: Even if interest rates drop further, having a pre-approval in place will give you a competitive edge. It also provides a clear understanding of your budget, allowing you to act quickly when you find the right property.
Stay Informed About Market Trends: Keep a close eye on market trends and interest rate fluctuations. This information will help you make informed decisions and adjust your strategy as needed.
Consult a Real Estate Professional: The buying and selling process involves numerous moving parts. Working with an experienced REALTOR® can ensure that all aspects of your transaction align smoothly. I am here to offer expert advice and support throughout the process, from finding the perfect property to closing the deal.

Contact Me Today

As the fall market unfolds, now is the ideal time to start planning your real estate journey. Whether you’re looking to buy or sell, having a comprehensive strategy is key to a successful transaction. Reach out today to discuss how you can take advantage of the current market conditions and secure your next home with confidence.

Together, we can navigate the complexities of the real estate market and help you achieve your homeownership goals.

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GTA Housing Market Becoming More Affordable – August Market Stats

by Gerald Lawrence

TORONTO, ONTARIO, September 5, 2024 – Greater Toronto Area (GTA) home sales were down on a year-over-year basis in August 2024. New listings were up slightly over the same period. While the region’s housing market remained well-supplied in August, average home prices only edged slightly lower compared to August 2023.

“The Bank of Canada’s rate cut announced on September 4 will lead to a further improvement in affordability, especially for those using variable rate mortgages. First-time buyers are especially sensitive to changes in borrowing costs. As mortgage rates continue to trend lower this year and next, we should experience an uptick in first-time buying activity, including in the condo market,” said Toronto Regional Real Estate Board (TRREB) President Jennifer Pearce.

GTA REALTORS® reported 4,975 home sales through TRREB’s MLS® System in August 2024 – down by 5.3 per cent compared to 5,251 sales reported in August 2023. New listings entered into the MLS® System amounted to 12,547 – up by 1.5 per cent year-over-year. On a seasonally adjusted basis, August sales edged up on a monthly basis compared to July, whereas new listings were down slightly compared to the previous month.

The MLS® Home Price Index Composite benchmark was down by 4.6 per cent year-over-year in August 2024. The average selling price was down by a lesser 0.8 per cent compared to August 2023 to $1,074,425. The different annual rates of change between the MLS® HPI Composite and the average selling price were largely due to an increase in the share of detached home sales compared to last year, impacting the average price. On a seasonally adjusted basis, the average selling price edged lower compared to July.

“As borrowing costs trend lower over the next year-and-a-half, home buyers will initially benefit from both lower monthly mortgage payments and lower home prices. Even as demand picks up, especially in 2025, it will take time for the inventory of listings to be absorbed. Ample choice in the market will help keep price growth moderate, at least in the initial phases of recovery,” said TRREB Chief Market Analyst Jason Mercer.

“Today’s elevated listing inventory will ultimately recede. We need to maintain a sustained focus on boosting home construction, especially as it relates to producing the right mix of home types to meet consumers’ needs. This new housing also has to be affordable. Municipalities can help by reducing development charges, which are ultimately passed on to home buyers. If people can’t find affordable housing in the GTA or surrounding Greater Golden Horseshoe, they will move elsewhere, and not necessarily to other parts of Ontario or Canada. Housing is a key driver of our region’s economic development,” said TRREB CEO John DiMichele.

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September 4, 2024

And it happened again, Bank of Canada reduces policy rate by 25 basis points to 4¼%

by Gerald Lawrence

The Bank of Canada’s Rate Cut – Wednesday September 4, 2024

The Bank of Canada has once again adjusted its monetary policy. In a move aimed at stimulating economic growth and combating inflationary pressures, the bank has reduced its target for the overnight rate to 4¼%. This decision is part of a broader strategy to normalize the balance sheet and maintain a healthy economic equilibrium.

Globally, the economy continues to exhibit mixed signals. While the United States and Eurozone have shown signs of resilience, China’s economic growth has been hampered by weak domestic demand. Despite these regional variations, inflation rates have generally been moderating. In Canada, the economy expanded by 2.1% in the second quarter, driven primarily by government spending and business investment. However, recent data suggests a slowdown in economic activity, and the labor market has been sluggish.

Inflation in Canada has been on a downward trajectory. In July, the consumer price index rose by 2.5%, marking a significant decline from previous months. While shelter price inflation remains a contributing factor, it is showing signs of easing. The Bank of Canada’s preferred measures of core inflation have also stabilized around 2½%.

Given the ongoing moderation in inflationary pressures and the persistent excess supply in the economy, the Governing Council has decided to lower the policy interest rate by an additional 25 basis points. This decision reflects a careful assessment of the opposing forces influencing inflation and is guided by the latest economic data. The Bank remains committed to restoring price stability for Canadians.

The next announcement regarding the overnight rate target is scheduled for October 23, 2024. At that time, the Bank will also release its updated Monetary Policy Report, providing a comprehensive outlook for the economy and inflation.

September 1, 2024

The Ultimate Hedge Against Inflation

by Gerald Lawrence

Here are some stats on the benefits of home ownership. For example, let’s say you have a $500,000 30-year mortgage with an 8% interest rate. Your monthly payment would be approximately $3,700 a month. Making one extra payment of $3,700 a year would cut your mortgage by 7 years and save you up to $220,000 in interest.

Some people make their payments every two weeks, and that’s how they get the extra payment a year. If you have a larger mortgage balance than 500,000, the payment is bigger but the savings will be too. This is just one way you can create more equity in your home.

Another interesting fact is that owning a home is a hedge against inflation. For example, here’s the purchasing power of $10,000 over time.

1964: $10,000

1984: $3,072

2004: $1,663

2024: $1,002

That same 10,000 down on a 100,000 property in 1963 over time

1964: $100,000

1984: $323,163

2004: $600,249

2024: $1,029,289

That’s a million-dollar difference!

So not only is your home a great hedge against inflation, but you can also increase equity by paying an extra principal and reducing the life of your loan.

Give me a call if you’d like to learn what your next real estate steps should be.

September 1, 2024

Is Your Home the Right Size for You?

by Gerald Lawrence

It’s rare for most people to remain in the same home throughout their adult lives. Sometimes, a growing family needs a larger home. Or it could be kids moving out on their own, leaving parents with a space that’s too big for their lifestyle.

Choosing to upsize — or downsize — can be an emotional, as well as logistical, decision. If you’re at that point in your life, the information above will help you start thinking about that process and make it a little less daunting.

I belong to a large network of real estate professionals across North America so if you’re ready to move onto the next stage of your life — local or not — I can help you find the home of your dreams. Let’s set up a time to chat and start the conversation!

With the options made available through new housing legislation, municipal efforts in changing by-laws as well as advanced building technology that allows fully off-grid and semi off-grid options available to people on rural or unserviced lots, this is an opportunity however small for buyers to consider. Please reach out to me to discuss more.

August 6, 2024

GTA Home Sales Up in July, but Buyers Still Benefit from Increased Choice

by Gerald Lawrence

Get an Instant FREE Home Value Estimate in 10 seconds at QuickHomeValues.ca

TORONTO, ONTARIO, August 6, 2024 – The Greater Toronto Area (GTA) housing market saw an increase in sales compared to July 2023. While this is positive news, buyers continue to have more options due to a significant rise in new listings. As a result, average selling prices have eased slightly.

TRREB President Jennifer Pearce attributes the sales uptick to recent Bank of Canada interest rate cuts and anticipates further sales growth as borrowing costs decrease. July sales reached 5,391, a 3.3% increase year-over-year, while new listings jumped 18.5% to 16,296. Despite these increases, both sales and new listings dipped on a month-over-month basis.

Average selling prices dropped 0.9% year-over-year to $1,106,617, and the MLS® Home Price Index Composite fell by approximately 5%. However, both measures saw slight increases compared to June on a seasonally adjusted basis.

TRREB Chief Market Analyst Jason Mercer predicts that home prices will remain relatively flat as buyers take advantage of lower mortgage payments and the ample inventory. However, he warns that market conditions could tighten as inventory is absorbed without a substantial increase in new home completions, potentially leading to renewed price growth.

TRREB CEO John DiMichele emphasizes the need for innovation in new home construction and applauds Toronto City Council’s decision to consult on adopting single egress stair requirements for multi-residential buildings up to four storeys. He also highlights the importance of public transit and expresses enthusiasm about the upcoming Crosstown LRT opening.

Get an Instant FREE Home Value Estimate in 10 seconds at QuickHomeValues.ca

July 25, 2024

After 10 Interest Rates Increases, We now are on our 2nd decrease to 4.50%

by Gerald Lawrence

Monetary Policy Decision

The Bank of Canada today lowered its policy interest rate by 25 basis points. The overnight rate target is now 4½%, with the Bank Rate at 4¾% and the deposit rate at 4½%. The Bank will continue to normalize its balance sheet.

Global Economy

Global economic growth is projected to remain steady at around 3% through 2026. While inflation is still elevated in most advanced economies, it is gradually declining. The US economy is slowing as expected, with consumer spending moderating and inflation easing. The euro area is recovering from a weak 2023. China’s economy is growing modestly,supported by exports despite weak domestic demand. Global financial conditions have improved, with lower bond yields,higher stock prices, and strong corporate borrowing. Oil prices and the Canadian dollar have remained relatively stable compared to the Bank’s April forecast.

Canadian Economy

Canada’s economy likely grew by about 1½% in the first half of 2024. However, with strong population growth, the economy is operating below capacity, leading to excess supply. Household spending, including on housing, has been weak. The labour market is softening, with rising unemployment, slower job growth, and longer job search durations.Wage growth is moderating but remains elevated.

Looking ahead, the Canadian economy is expected to strengthen, supported by rising exports and increased business and household spending as borrowing costs decline. Housing investment will also grow significantly. However, slower population growth in 2025 will temper economic expansion. Overall, GDP is forecast to grow by 1.2% in 2024, 2.1% in 2025, and 2.4% in 2026. This gradual strengthening will help reduce excess supply in the economy.

Inflation

Inflation eased to 2.7% in June, reflecting broader price pressures declining. The Bank’s core measures of inflation have been below 3% for several months, and the overall pattern of price increases is returning to normal levels. However,shelter costs, driven by rent and mortgage interest, continue to contribute significantly to overall inflation. Inflation in services related to wages, such as restaurants and personal care, is also elevated.

The Bank expects core inflation to slow to around 2½% in the second half of 2024 and continue to decline in 2025. Total inflation is forecast to fall below core inflation later this year due to temporary factors affecting gasoline prices. As these factors dissipate, inflation may rise slightly before stabilizing around the 2% target next year.

Monetary Policy Outlook

Given the easing of broad price pressures and the expected decline in inflation towards the 2% target, the Bank has reduced the policy interest rate by 25 basis points. While excess supply is helping to reduce inflation, price pressures in some areas, particularly shelter and certain services, are persistent. The Bank will carefully monitor these opposing forces and adjust monetary policy as needed to achieve the 2% inflation target.

Information Note

The next interest rate announcement is scheduled for September 4, 2024. The Bank will release its next full economic and inflation forecast on October 23, 2024.

Impact of the Bank of Canada’s Decision on Mortgage Qualifiers in the GTA

The recent interest rate cut by the Bank of Canada is generally positive news for Canadians looking to qualify for a mortgage. Lower interest rates typically mean lower mortgage payments, making it easier for potential homebuyers to meet the qualifying criteria.

However, the situation is more complex in the GTA, where housing prices remain exceptionally high. While a lower interest rate can improve affordability, it’s essential to consider the following factors:

Positive Impacts:

Lower Mortgage Payments: With lower interest rates, monthly mortgage payments will decrease, freeing up more disposable income for potential homebuyers.
Increased Borrowing Power: Lower rates can potentially increase borrowing capacity, allowing buyers to qualify for larger mortgages.

Challenges Persisting in the GTA:

High Housing Prices: Even with lower interest rates, the overall cost of purchasing a home in the GTA remains a significant barrier for many.
Stricter Mortgage Qualification Rules: While interest rates have decreased, the stress test for mortgage qualification remains in place, which can limit borrowing capacity.
Competition: The GTA housing market is highly competitive, and even with improved affordability, securing a home can be challenging.

Overall Outlook:

While the interest rate cut is a step in the right direction, it’s unlikely to dramatically change the housing market in the GTA. Prospective homebuyers will still face significant challenges due to high prices and competition.

To improve your chances of qualifying for a mortgage in the GTA:

Increase Your Down Payment: A larger down payment can significantly improve your mortgage affordability.
Improve Your Credit Score: A good credit score can help you secure better interest rates.
Shop Around for Mortgage Rates: Compare offers from different lenders to find the best deal.
Consider Alternative Housing Options: Explore options like condos or townhouses, which may be more affordable than detached homes.

It’s crucial to consult with a mortgage broker to assess your specific financial situation and explore your options. They can help you understand the impact of the interest rate change on your ability to qualify for a mortgage in the GTA.

July 4, 2024

June 2024 Market Statistics – GGH (Greater Golden Horseshoe)

by Gerald Lawrence

Greater Golden Horseshoe Real Estate Report by Gerald Lawrence

Industry Update • Industry Update • June 21, 2024

Changes To The Canadian Capital Gains Tax

by Gerald Lawrence

This summary is for informational purposes only and should not be considered tax or legal advice. Always consult a qualified professional before making financial decisions based on this information.

Key Federal Budget Capital Gains Measures

Change:
- Effective June 25, 2024, the capital gains inclusion rate will increase from 50% to 66.67% for trusts and corporations. For individuals, this higher inclusion rate applies only to annual capital gains exceeding $250,000. The 50% inclusion rate will continue for gains below this threshold.
Current Law:
- Currently, half of a capital gain is included in computing a taxpayer’s income, which also applies to capital losses.
Impact:
- A higher portion of capital gains will be subject to income tax, increasing the tax burden on real estate investments, property sales, and capital gains within corporations (e.g., personal real estate corporations).
- Gains on Canadian residential property held for less than one year may be deemed business income (100% taxable) under the residential property flipping rule, unless an exception is met.

Increase to Lifetime Capital Gains Exemption (LCGE) for Entrepreneurs

Change:
- The LCGE will rise to $1.25 million (from $1.016 million) for eligible capital gains, effective June 25, 2024.
Impact:
- For those selling shares of qualified small business corporations (QSBC) or qualified farm and fishing property (QFFP), the increase in LCGE to $1.25 million will be beneficial.

Alternative Minimum Tax (AMT) Adjustments

Change:
- Continued adjustments to AMT rules to align with changes in regular income tax calculations.
- The AMT allows fewer tax credits, deductions, and exemptions than ordinary personal income tax rules.
- Taxpayers pay the higher of regular tax or AMT.
Impact:
- AMT considerations become crucial for planning capital gains realization and charitable contributions, influencing tax planning strategies.

Canadian Entrepreneurs’ Incentive

Introduction:
- A new initiative beginning in 2025 reduces the capital gains tax rate to one-third on up to $2 million of qualifying shares.
- This incentive provides a capital gains inclusion rate of half the prevailing rate on up to $2 million in capital gains per individual over their lifetime.
- Impact:
  While not applicable to professional corporations, this incentive promotes entrepreneurship by lowering the tax burden on qualifying share sales.

Strategic Planning Considerations

Immediate Action: Evaluate the potential benefits of realizing capital gains before June 25, 2024, to optimize tax efficiency under current rates.
Consultation: Engage with a tax advisor to navigate these changes effectively and tailor strategies to your specific financial situation.
Long-term Planning: Assess the implications for retirement planning, estate management, and future investment decisions in light of these regulatory adjustments.

As Budget 2024 reshapes tax policies affecting real estate professionals and their clients, proactive planning becomes paramount. This overview is a high-level summary, and TRREB strongly encourages all members to seek expert professional advice to safeguard their financial interests amidst these evolving fiscal landscapes.

See More Information at the Government of Canada Website!

Market Update • June 6, 2024

Home Buyers Experience Less Competition in May

by Gerald Lawrence

The Toronto real estate market continued to see lower home sales in May 2024 compared to the previous year. This comes after a brief market upswing in the spring of 2023. Potential buyers are waiting for mortgage rates to come down before entering the market.

There’s some optimism, however. The number of new listings has increased significantly compared to last year. This suggests that existing homeowners are anticipating a future rise in demand, perhaps due to lower borrowing costs. With more properties available, buyers have more negotiating power when it comes to price.

The data confirms this. The average selling price in May 2024 was slightly lower than in May 2023. The MLS Home Price Index Composite benchmark also showed a year-over-year decrease. However, there was a small increase in average selling price compared to April 2024.

Experts believe that housing affordability will improve as mortgage rates go down. This will likely lead to more buyers entering the market, which could put upward pressure on prices again due to increased competition.

The Toronto Regional Real Estate Board (TRREB) is calling on all levels of government to work together to address the housing shortage in the Greater Toronto Area. They also emphasize the importance of timely completion of infrastructure projects to support population growth.