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Freedom 58? How Canadians are shaving thousands off the cost of their mortgage

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imageTORONTO — A new survey says Canadians, on average, expect to be mortgage-free by age 58, one year later than in a similar poll a year ago.

How this man plans to be mortgage free by age 31

This 29-year-old pension analyst is $130,000 away from paying off his $425,000 home in Toronto, without money from parents or the lotto. Find out how But the survey, conducted for CIBC by Angus Reid, found some big discrepancies across the country.

For example, homeowners in British Columbia thought they wouldn’t be able to pay off their mortgages until they hit 66, while those in Alberta expected to be mortgage-free more than a decade earlier at 55. The survey also found that just over half of those polled were taking advantage of the current low interest rate environment to pay down their mortgages faster.

Fifty-five percent said they were putting in extra effort into repaying their mortgages, although that was down from 68% last year.

Related Canadians’ household debt worries ease as mortgage borrowing slows in May: RBC Savings crippled by kids’ illnesses, parents in their late 50s struggle to find a way to retire and pay off $287,000 mortgage How to pay $67,000 of debt in 3 years and save for a house and retirement CIBC says even small efforts can lead to big savings for homeowners in the long run.

For example, someone paying 4.99% interest on a $250,000 mortgage with 25-year amortization can expect to save nearly $35,000 of interest if they add $147 to their $1,453 monthly payments.

The same homeowner can save as much as $30,000 on interest if they make $726 payments every two weeks, instead of waiting until the end of the month to make a payment.

The bank pointed out that even making a lump sum payment every year — for instance, putting the average $1,600 tax refund towards the mortgage — would shave off $33,103 of interest.

“Employing one or more of these strategies does take some planning and discipline,” said Barry Gollom, vice-president of secured lending and product policy at CIBC.

“If becoming mortgage-free sooner is something you want to achieve, it’s important to look at your mortgage as part of your overall financial picture and to balance your mortgage payment plan against your other goals.”

Of those paying off their mortgages quicker than necessary, 32% said they were making payments more often, 28% were increasing the amount they pay while 18% said they had made either an additional prepayment or a lump sump payment.

Beyond Alberta and British Columbia, the survey found the average age respondents expected to be mortgage-free ranged from 56 years in Quebec to 57 years in Atlantic Canada and Ontario and 58 years in Manitoba and Saskatchewan.

The online poll was conducted by Angus Reid Forum with 1,509 Canadian adults between May 21 and May 22.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error as they are not a random sample and therefore are not necessarily representative of the whole population.

Canada’s top court declines to hear Toronto realtor case appeal

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imageCanada’s top court said it won’t hear an appeal of a case on whether Toronto’s main realtor group must give wider access to their historical price data.

The Ottawa-based Supreme Court published the decision on its website Thursday.

The Toronto Real Estate Board blocks its 35,000 members from publishing sale prices on their internal websites, according to a summary of the case from the court’s website, a policy challenged by the federal Competition Commissioner.

The realtor group won its first case at a tribunal before a federal appeals court ordered a second hearing. TREB then asked the Supreme Court to review the case. Bloomberg.com

Sharp rebound in buyer confidence fuels Toronto condo recovery, says Urbanation

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The country’s largest condominium market has fully recovered and is breaking new ground, according to a Toronto research firm.

imageUrbanation Inc. says during the second quarter Toronto passed a new milestone with more than 100,000 condo dwellings in active development in the census metropolitan area. Of the 105,027 units in the pre-construction, under construction and occupancy phases, 18,744 remain unsold.

The firm notes in a release out Friday that’s “above historical averages but down 3% from a year earlier.”

The new condo market has performed well above expectations in the first half of the year Shaun Hildebrand, Urbanation’s senior vice-president, says there have been plenty of incentives in the marketplace for existing inventory and some new condo openings are proving more attractive to buyers.

“The new condo market has performed well above expectations in the first half of the year, reflecting a sharp rebound in buyer confidence,” said Mr. Hildebrand.

The 5,992 condo apartments sold in the second quarter were the third highest volume for that time of the year with only 2007 and 2011 having a better record for sales for the period. Sales were up 56% from the post-recession low reached in 2013.

Related Housing market skewed by handful of hot cities, Canada Guaranty CEO says Canadian home sales rise 0.8% to highest level in four years Ratings agency Fitch calls for more government action in ‘overvalued’ Canadian housing market The 12-month total for new condo sales was 18,463 and Urbanation says that is in line with the 10-year annual average.

Despite the boost in sales, prices have only moved up 2.8% from a year ago with Urbanation’ index showing an average sale price of $554 per square foot in the second quarter. Prices of unsold inventory climbed 1% to an average of $570 per square foot.

While sales have heated up, prices have remained in check due to competitive supply pressures “While sales have heated up, prices have remained in check due to competitive supply pressures and an absence of short-term speculation on the part of buyers,” said Mr. Hildebrand.

The market for existing condominiums has been hotter with resale sales hitting a record of 5,238 in the second quarter, up 12% from a year ago. New listings also hit a new high with 11,246 offered for sale in the second quarter, down 10% from a year ago.

Fewer new listings than sales led to tighter market conditions with the sales-to-listings ratio rising to 47% — a level Urbanation says is below the 50% characterized as a balanced market.

Prices for existing condo apartments jumped 3.4% in second quarter form a year ago but that was still good enough to set a record high of $427 per square foot for an existing condo.

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CMHC turns up scrutiny of condo investors as concerns of overheated market grow

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imageCanada’s housing agency is set to publish results of a Toronto and Vancouver condominium-owner survey as it seeks to address economist and policy maker concern that not enough is known about what’s driving price gains, documents show.

Canada Mortgage & Housing Corp. surveyed condo investors — those who purchased at least one condo that isn’t the owner’s primary residence — in August and September 2013, according to documents obtained by Bloomberg through an Access to Information request. Most of the content, including the number of people Ottawa-based CMHC contacted, the survey questions and the results, was redacted.

Calls are growing louder for more detail about who’s investing in the nation’s condo market, including how much is owned by foreigners, and what the risks are. Policy makers have warned for the past half decade a bubble may be forming in Canadian real estate, and some analysts have said prices are as much as 20% overvalued.

Related Sharp rebound in buyer confidence fuels Toronto condo recovery, says Urbanation Housing market skewed by handful of hot cities, Canada Guaranty CEO says Homebuilding rebounds quicker than expected with 35% jump in condos and apartments The lack of condo-ownership data in Canada “is a shortcoming,” Sal Guatieri, senior economist in Toronto for Bank of Montreal, said by phone July 22. “The more data, the better the quality of the data, the better the policy making.”

CMHC’s Condominium Owners Survey will be “factual and provides a descriptive profile of condominium investors,” the documents show. The agency expects to release the results of its survey, which doesn’t give an estimate of the share of foreign and corporate investors, in early August, according to a July 25 e-mail from spokesman Charles Sauriol.

Lowest Rates

National home sales reached the highest level in four years in June and prices in Toronto and Vancouver are up 12% and 29% on the year, a realtor report this month showed. Historically-low mortgage rates are adding momentum, and the Bank of Canada has kept its benchmark policy rate at 1% since 2010.

The survey to be released in August is CMHC’s second attempt. The agency conducted a telephone survey of Toronto and Vancouver condo investors in August 2012 in response to “industry concerns about the extent and nature of condominium investment and its sustainability,” according to a mostly- redacted August 2012 CMHC board presentation. The survey intended to determine what investors planned to do with their units, how long they intended to hold them, what would motivate them to sell, how much they put down and the source of the downpayment.

That survey wasn’t publicly released because it “didn’t produce results that were reliable enough,” CMHC’s Sauriol said in his July 25 e-mail.

Foreign Investment

The housing agency is monitoring foreign investment in real estate by tracking land registry data, hosting investor round tables and conducting surveys into vacancy rates and rents, according to the 2012 board presentation.

“There is no comprehensive data source of foreign investors in the Canadian housing market,” CMHC Interim Chief Executive Officer Douglas Stewart said in an Aug. 21, 2013 memo to Canada’s Employment Minister Jason Kenney. “Although some estimates can be gleaned from some municipal land registries, those estimates are not reliable.”

Stewart’s memo was in response to Kenney’s questions from a CMHC briefing about foreign investment in the Canadian housing market, the documents show. Kenney also asked about the impacts of changes to the Immigrant Investor Program in Vancouver and Australia’s foreign investment policy.

Investor Roundtable

Participants at a Toronto condo investor roundtable that CMHC hosted in March 2012 cited unidentified brokers who estimated foreigners with no ties to Toronto account for about 2% to 3% of total condo purchases in the city, according to meeting minutes that don’t include participant names or affiliations. The minutes, included with the other documents obtained by Bloomberg, had already been made public.

Fifteen percent of the stock managed by rental management companies is owned by foreigners, based on filings of non-resident tax forms, according to the roundtable minutes.

Demand for Toronto condominiums pushed prices to new highs in the second quarter. The average price rose 2.8% from a year earlier to a record $554 per square foot, even as the number of high-rise homes in the pre-construction, under construction and occupancy phases reached a high of 105,027 units in the city, Urbanation Inc., a Toronto-based consulting company, reported July 25.

Condominiums account for more than 1.6 million Canadian households, or about 12%, and more than half of those are located in the three largest markets Toronto, Vancouver and Montreal, according to Statistics Canada data.

“The gap between the importance of the real-estate market to the economy and the lack of publicly available information on it is mind-boggling,” Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce, wrote in an April note to clients. “What is the share of foreign investors in the condominium market?”

Mortgages & Investment Strategy – Consult with a Vancouver Mortgage Broker

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Leverage-Investing-150x150For most home buyers, a mortgage is the only path to ownership. But a recent survey reveals that mortgages are also being used as a preferred investment strategy for wealthy Canadians.

The survey commissioned by Investors Group found that 67% of high-net-worth Canadians — those with investable assets of $500,000 or more — who have a mortgage could actually pay off their home in full if they so chose.

A full one-fifth of wealthy Canadians have mortgages, with an average size of $156,890.

“There was a time when extinguishing one’s debt was of paramount importance. This was particularly the case in the past where interest rates were higher and, for many, servicing debt precluded them from investing in future goals, whether that be retirement, education or the like,” says Peter Veselinovich, vice-president of banking and mortgage operations at Investors Group.

“Today that is not necessarily the case. Individuals may wish to retain current investments rather than triggering capital gains taxes.” That means paying down the mortgage often isn’t the best plan.

Other tax-efficient uses of mortgage debt include investing in income-producing assets such as real estate, as well as businesses or investments in the common term of the word — effectively any asset that may yield a cash return, he said.

“The low interest-rate environment requires only a modest return to service the debt incurred to acquire these assets, while the normal returns available to a prudent investor would be the icing on the cake,” Veselinovich added. “Mortgages provide access to lower-cost funds than many other lending facilities because they are seen by the lender as being fully secured, and have a built-in cushion (equity portion) in the event that the value changes over time.

Other interesting facts from the survey:

  • 32% of high-net-worth Canadians own additionalcommercial or residential properties
  • 42% have investment rental properties
  • More than one-quarter of wealthy Canadians (with mortgages) do not have plans to become mortgage-free before retirement

Steve Huebl, CMT (email)

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RE-bubble_thumbNot many lenders go on record forecasting a housing bubble, but what they say in private surveys is another matter.

FICO, a consumer analytics firm, released poll results on Tuesday that show just how concerned lenders are about housing overvaluation. But its data, which was picked up by multiple media outlets, featured responses primarily from U.S. respondents. The opinions of Canadian lenders, alone, haven’t been fully reported.

Today, however, we got our hands on Canadian-specific data, and it revealed some surprising expectations.

FICO surveyed 54 risk managers in the Canadian lending industry, and asked the following questions:

1) “Looking at the industry as a whole, over the next six months, do you expect the supply of credit for residential mortgages to”

  • Fall short of demand: 35% (said yes)
  • Exceed demand: 5.5% (said yes)
  • Meet demand: 59% (said yes)

Most lenders expect credit to simply meet consumer demand. But among those risk managers who didn’t, 19 out of 22 said credit availability would be insufficient for the remainder of this year. Over the next six months, the implications are that we could see a further growing real estate market, regulatory or mortgage liquidity constraints, and/or the possibility of smaller mortgage discounts.

2) “Looking at the industry as a whole, over the next six months, do you expect the level of residential mortgage delinquencies (of 90 days or more) to”

  • Increase: 37%
  • Decrease: 5.5%
  • Stay about the same: 55%

Of those expecting a change, 20 out of 23 risk managers said delinquencies would increase. According to FICO, 60% said that a high debt-to-income ratio is its biggest concern when underwriting a mortgage/loan.

The questions are, is this concern warranted and, if so, will lenders be proactive and keep lending criteria tighter than normal?

3) “Looking at the industry as a whole, over the next six months, do you expect the level of home equity line delinquencies to”

  • Increase: 38.8%
  • Decrease: 11%
  • Stay about the same: 50%

***********

FICO also asked, “If you are involved with residential mortgage lending, are you concerned that an unsustainable real estate bubble is inflating?”

A wide majority (more than 2 out of 3, or 68%) said that, yes, they were concerned about a growing bubble, versus 32% who expressed no such worries. Canadians’ degree of unease was notably higher than that of American respondents, 48% of whom expressed concern about overvaluation in the U.S.

This poll comes as home prices sit at or near record highs in most big metro areas. That’s despite the Finance Department applying the brakes with mortgage rule after mortgage rule.

Home Prices 1999-2014


Rob McLister, CMT (email)

Condo glass panels may look great, but you’ll pay more for heat and AC

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condoPrinted with permission from Dan Barnabic, author of the Condo Bible for Canadians.

“What does the future hold for condos and how long will they last?” These are by far the questions I am asked most often by condo buyers and owners alike.

Life Span of Condo Building Components

Condo buildings consist of thousands of individual components. Over time, due to wear and tear, those components need repairs and replacements. Knowing how old the complex is and when certain components were last repaired or replaced will give you an idea of when they’ll likely need maintenance and replacements again.

The chart at the bottom of this article shows operational life expectancies of major mechanical components of a condo complex over the years. From the sea of available data and through consultation with building experts, I created this chart which I believe provides a fair reflection of maintenance and replacement costs over time to an average high-rise condo building.

The first major component that will need maintenance and replacement is the roof of the complex. It will usually last up to about 10 years, after which it will require maintenance and replacement by the time it reaches 15 to 18 years.

Plumbing/piping will probably be the last as quality and durability has improved over the years, so you can expect it to remain operational for about 50 years. From thereon, it will require maintenance and eventual replacement as well. Standard size windows may also last about 50 years, requiring occasional maintenance such as replacement of screens and sealant. Complexes built of all glass windows need to be addressed in more detail.

Bear in mind that maintenance and repairs to the inside of the individual unit are the direct responsibility of the unit owner. Monthly maintenance fees do not cover anything inside the condo unit. Appliances, heating, air-conditioning, and electrical fixtures inside the unit have to be maintained and eventually replaced by the unit owner.

All Glass Windows

Because of their appeal, facades of new condo buildings lately have been transforming into glass, often extending from floor to ceiling of each condo unit. It gives condos a more attractive look and is a great selling feature, but building experts have known for quite some time that today’s glass-walled structures are less energy efficient than the stone and concrete buildings that were put up 40 or 50 years ago.

Indeed, as energy costs climb, glass towers may become the “pariah” buildings of the future. University of Waterloo Professor John Straub (who wrote a noteworthy paper called Can highly glazed building facades be green, was quoted as saying that “With these buildings, both skin and the mechanical systems are going to have to be redone in a 25-year time frame. The concrete structure will be there for a long time but in 20, 25 years time, we are going to see a lot of scaffolding on the outside of the buildings to replace the glazing, sealants and the glass itself.”

Another scientist, Ted Kesik at the John H. Daniels Faculty of Architecture at the University of Toronto, warns that as energy costs climb, the costs of heating and cooling glass towers will increase monthly fees. He wrote a paper called The Glass Condo Conundrum, on the potential liabilities of glass towers. These experts suggest that the maintenance costs of glass skinned towers will skyrocket in 25 years time as the buildings age. With no insulation values, apart from a half inch of glass between two panels, windows will begin to fog up and the costs of replacing entire walls of glass will be prohibitive on high-rise structures that can only be accessed from swing states.

Some experts go so far as to predict that replacing the all-glass outer layers of buildings may become necessary as early as 15 to 20 years from the day that the condo is built, and cost as much as $80,000 per unit. In short, what seems very attractive and appealing to condo buyers today may come to haunt them in the not-so-distant future.

Need for Cyclical Repairs and Replacements

As seen from the chart at the bottom of the article, for the condo building to remain functional, it requires cyclical maintenance and replacement of its major components over time. By the time a condo building reaches 40 to 50 years of age it will have gone through several partial or complete retrofits, likely in stages. Properly governed and managed condo complexes maintain amortization funds – the necessary accumulation of monies over time for replacements of the common elements without undue financial hardships.

Looking into a more distant future, more frequent and repetitive replacements of the vital common elements will give rise to higher maintenance fees in older complexes. In some cases, they will rise to the point of becoming unaffordable to a majority of the unit owners. In extreme circumstances, some condo buildings may end up being wound down either voluntarily, by the unit owners, or through insolvency proceedings commenced by creditors.

The problem of not being able to maintain adequate amortization replacement funds may arise during times of economic slowdowns. Unit owners may experience employment losses rendering them incapable of contributing to necessary fiscal obligations of their condo complex.

This problem may escalate dramatically in poorly governed and/or mismanaged complexes. History shows that buying a condo unit with a small or no down payment presents a huge risk to financially weak unit owners who may lose their units during economic hardships. If the complex is composed of many such unit owners, the whole complex may become underfunded and unable to carry on with the repairs and replacements of its vital elements.

It is for these reasons that every condo unit owner should be fully apprised of their condo complexes’ financial well-being. The take-it-for-granted assumption that, when you buy into a condo complex, others will take (good) care of its governance and property management, is dead wrong. Every condo unit owner is strongly advised to actively participate in the day-to-day running of their condo complex by closely monitoring and contributing their time when necessary, to all the facets of its operation.

As condos have a finite life span, at least as economic factors relative to their maintenance costs are concerned, the idea is to buy into newer complexes, where their near future expenses and therefore maintenance fees are prognosticated more accurately.

The same logic applies when selling a unit. Don’t wait until maintenance fees become too high. If you do, chances are you are not going to get your unit sold.

The physical life-span

When it comes to physical longevity, the same formula applies to condos as to other high rises, including apartment buildings. The properly-funded and prudently-managed buildings may have a life-span of over a hundred years, or even more. The poorly run, neglected and mismanaged buildings usually end up going down sooner.

Their physical life span depends on quality of governance, prudence of management policies, and the ability of owners to regularly look after their expenses.

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Mortgage rules may be tighter for the self-employed, but options remain – Consult with a Vancouver Mortgage Broker

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99345955If you are self-employed, live in a rural area or don’t have the best credit, you may find it increasingly difficult to get a mortgage.

Yet while tighter lending rules are making it harder for some people get approved by a bank, going to a second or third-tier lender isn’t something everyone is comfortable with.

Real estate experts say if you are self-employed, traditional lenders like the big banks may still lend you the money – it may just come at a higher interest rate, require a bigger down payment and increased scrutiny.

Customized products for the growing number of people who are self-employed often come with a minimum 10 per cent down payment instead of the usual five per cent, while the typical five-year closed rate for most is higher than what many banks are offering, said John Andrew, a real estate expert with Queen’s University.

Your chances are also better if you can show income tax records dating back a few years that suggest a steady income.

“If you can show your income tax records and things like that going back 10 or 15 years, and your income is fairly steady or even better, rising, they’re still going to consider you to be self employed, but you’re going to be about as well off as you can possibly be,” Andrew said.

“You’ll never be as good as somebody with a non-self-employed job, which is kind of ironic because you can still lose your job, and that’s the complaint that a lot of self-employed people have. They could be doctors or dentists or lawyers and be making $400,000 and have been doing it for 20 years, but at the end of the day, they’re still consider to be self-employed, and there’s always this suspicion that doesn’t apply if you can show a pay stub from your employer.”

Jason Scott, a mortgage associate with the Mortgage Group in Edmonton, says some people who are self-employed may also have difficulty getting approved by a traditional lender because the tax breaks available to them may make their income look lower than it actually is.

“If they’re being tax efficient, they’re paying more for that mortgage but they’re saving a lot of money on income tax,” he said.

Bad credit history is trickier, although some alternative lenders will still consider backing you if you can explain what happened.

“It has to have a story. It has to (give me) some sense as to why you were bankrupt,” said Matthew Robinson, chief executive of W. A. Robinson Asset Management Ltd., which backs mortgages through its Pillar Financial Services division.

“What happened? Were you sick? Did you go a through a divorce? (I need) a story that makes sense, not just that you had bad credit because you don’t know how to pay credit cards.”

That may get you a higher interest rate, but those lenders argue the rate is justified because of the risk attached, and because of the extra work that goes into verifying information and working to understand the circumstances that led to the bad credit.

“Everybody thinks they deserve a 2.99 (per cent) mortgage. But at the end of the day, a 2.99 mortgage is zero risk. It’s the lowest end of the scale,” said Robinson, whose company works with self-employed people, rural properties and also provides bridge financing for construction projects.

“If there’s any work involved, if there’s any administration on a any level, the bank cannot afford to do a 2.99 mortgage. There’s not enough room.”

He suggests talking to a mortgage broker who will have relationships with various institutions and be able to steer you toward the best mortgage for your particular situation.

“Mortgages are becoming so complex, and there are so many options for people, they should actually be using a mortgage broker even if they think they’re best client in the world,” says Scott, who has also written a book to help homeowners titled, Approved! Mortgage Advice for All Stages of Life.

“It becomes a case of you don’t know what you don’t know. There are so many strings and such fine print on mortgages these days that it really does pay to use a broker.”

Whatever approach you take, experts say there is always room to negotiate – whether on the mortgage rate or on the quality of your documentation.

And you would also be wise to put any mortgage documents you get from alternative lenders in front of a lawyer to make sure you are comfortable with the terms.

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Canadian home sales rise 0.8% to highest level in four years – Ask a Vancouver Mortgage Broker

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housesale_gettyCanadian existing home sales in June reached their highest monthly level in more than four years as prices continued to rise in some of the country’s hotter markets.

But the housing market is becoming an increasingly local story with the disparity between hot and cold markets growing across Canada, something the Canadian Real Estate Association emphasized in its monthly report on the market

“Sales have improved compared to their slower start earlier this year. That said, there are still important differences in how housing markets are faring depending on location,” said Beth Crosbie, president of CREA, in a release Tuesday.

In the country’s largest market, Toronto, there are few signs of a slowdown. The average sales price clocked in at $568,953 in June, a 7.1% jump from a year ago. Toronto sales were also up 12.3% from a year ago.

Check into Montreal and the average sales price climbed a tiny 0.9% from a year ago to $332,462 with sales activity up 3.4% from a year earlier. In the nation’s capital, Ottawa saw a 1.7% increase from a year ago to reach an average sale price $365,366. Sales in the capital climbed 4.4% from a year ago.

Western Canada continues to be red hot. Calgary June sales climbed 18.9% from a year ago, while the average sale price of a home jumped 5.5% during the same period, reaching $466,994. The country’s most expensive market saw a 29.4% increase in sales from a year ago as the average sale price reached $796,714 last month in Vancouver, a 4.4% increase from a year ago.

The better performing large markets continue to drive the overall housing numbers with sales up 11.2% from a year ago on a national basis and the average sale price climbing 6.9% during the same period, reaching $413,215.

Actual sales were up 0.8% in June from May, marking the fifth straight month that sales have climbed nationally. Sales rose in about half of all markets led by Vancouver where activity reached its highest level in almost three years.

Gregory Klump, chief economist with CREA, said there has been a burst in new supply, which reflects the slow start to the year caused by the harsh winter which led many sellers to delay listing their homes.

“In markets with tight supply and strong demand, the strength of sales in recent months reflects how many properties were snapped up once they finally hit the market,” said Mr. Klump. “Because the impact of deferred listings and sales has likely run its course, activity over the second half of the year may not be able to maintain the kind of pace we’ve seen over the past couple of months.”

Toronto-Dominion bank economist Diana Petramala said rising interest rates are likely to put downward pressure on prices.

“There are currently a record number of new homes under construction in many markets and history shows that a significant share of these units will end up on the market. In fact, we are already starting to market pressures easing in Edmonton, Regina, Saskatoon, Montreal, Quebec City, Ottawa and the Toronto condo market — where overbuilding was most prominent,” she said in a research note.

However, some economists remain worried markets may be overheating. “Canada’s housing market continues to look balanced overall, with stark disparities persisting at the regional level. That said, it is a tad concerning that prices are running firmly ahead of income growth in a few major cities. Calgary is understandable and Vancouver is shaking off a mild correction, but Toronto might be getting too hot for its own good,” said Robert Kavcic, senior economist with Bank of Montreal.

Household debt worries ease as pace of mortgage borrowing slows in May

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homesRoyal Bank says Canadians have been slowing down the amount of debt they are taking on to buy real estate, easing concerns about household vulnerability.

The RBC paper notes that overall household debt accumulation remained flat-lined at 4.2 per cent growth in May, about the same level as the previous three months.

Outstanding mortgage debt stood at $1.23-trillion as the annualized growth slowed slightly to five per cent from 5.1 per cent in April.

But households increased their pace of non-mortgage borrowing, the bank says, to 2.2 per cent from two per cent in April.

RBC says the steady pace of debt accumulation overall should give some comfort to the Bank of Canada, which has called household debt the No. 1 risk to the financial system and economy.

With the housing market expected to moderate further, the vulnerability posed by overly indebted households is easing, RBC says, clearing the way for the Bank of Canada to move toward higher interest rates by mid-2015.

Meanwhile, business borrowing continued to strengthen in May, with short-term debt rising to 10.6 per cent from 9.6 in April.

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