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The average house in Fort McMurray has lost $117,000 or 20% of its in value in one year

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A Welcome to Fort McMurray sign stands on the side of Highway 63 on the south end of Fort McMurray, Alta. on June 19, 2013.

A Welcome to Fort McMurray sign stands on the side of Highway 63 on the south end of Fort McMurray, Alta. on June 19, 2013.

The slumping oilpatch in Alberta continues to take its toll on the Fort McMurray housing market, as the average MLS sale price of a home in that northern community plunged by more than $117,000 in October.

Data obtained from the Canadian Real Estate Association indicates that the average sale price for the month of $468,199 was down 20 per cent from $585,438 in October 2014.

Sales also plunged by 41 per cent to 85 from 144 a year ago.

Year-to-date, MLS sales in Fort McMurray are down by 44.8 per cent.

The oilpatch downturn is being felt in real estate markets across the province.

In October, Lloydminster saw MLS sales dip by 54.3 per cent, falling to 43 transactions from 94 last year while the Alberta West area experienced a decline of 52.7 per cent, dropping to 70 from 148 a year ago.

Year-to-date MLS sales in Alberta are down 21.1 per cent from last year. Besides Fort McMurray, the CREA statistics show the hardest hit areas in the province are Lloydminster (down 34.1 per cent); South Central Alberta (down 31.6 per cent) and Calgary, (down 28.9 per cent).

Calgary’s resale housing market led the country in October — in a negative way.

MLS sales in the Calgary region were 1,810 for the month, down 36.4 per cent from a year ago. The rate of decline was the highest among Canada’s major housing markets, according to a report by the Canadian Real Estate Association.

In Alberta, sales fell 28.9 per cent to 4,327 transactions.

Across the country, however, MLS sales were up 0.1 per cent to 41,653. CREA said national activity stood near the peak recorded earlier this year and reached the second highest monthly level in almost six years.

Doug Porter, chief economist with BMO Capital Markets, said there are many — mostly oil-driven — cities that have softened markedly.

“The renewed sag in oil in recent months looks to have triggered a renewed weakening in housing markets across much of Alberta and Saskatchewan. Six of the 25 major markets reported double-digit declines in sales last month, and four of those were in these two provinces,” he said.

Besides Calgary’s year-over-year decline, sales from a year ago also fell in Edmonton (16.3 per cent), Saskatoon (21.4 per cent) and Regina (12.3 per cent).

Diana Petramala, economist with TD Economics, said overall Canadian home sales continued to be boosted by markets in Ontario and British Columbia.

“Markets in oil-producing provinces continue to remain incredibly weak,” she said.

Calgary saw its average MLS sale price fall by 4.4 per cent year-over-year to $444,535 in October while Alberta experienced a 3.9 per cent decline to $384,381.

However, the average sale price in Canada rose by 8.3 per cent from a year ago to $454,976.

According to CREA’s MLS Home Price Index benchmark price — which is indicative of typical properties sold in a market — Calgary experienced a 1.14 per cent annual drop to $448,400 while the national aggregate of 12 major markets was up 6.7 per cent to $505,900.

According to the Calgary Real Estate Board, month-to-date from Nov. 1-15, MLS sales in the city of Calgary are down 28.16 per cent from the same period a year ago. The median price has dropped by 3.44 per cent and the average sale price is down 2.16 per cent.

mtoneguzzi@calgaryherald.com

Even Fort McMurray’s real estate agents are leaving the oilsands town in drove

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fort-mcmurrayIt’s not just housing sales and prices that are falling fast in Fort McMurray, the ranks of realtors in the northern Alberta city seem to be plummeting too.

The defections come as realtor levels across the country have grown to new records, speaking to a growing trend of agents migrating to greener pastures and increasing competition in some of the country’s hottest markets. To compete for business in up-and-coming districts, some long-time franchises are setting up new branches, something one local agent jokingly referred to as “branchises.”

Phil Soper, chief executive of Royal LePage Real Estate Services, said some agents at his company have left Fort McMurray because market conditions are so poor in the town known for its proximity to Alberta’s oilsands. The local board said October sales were down 41 per cent from a year ago, while the average sale price of a home plunged 20 per cent during the period.

“Our offices in Edmonton are experiencing a transfer of agents from Fort McMurray and you’d expect that, because the region is experiencing the most severe change in economic fortune in Canada in years,” said Soper.

This shift in Alberta comes as the ranks of agents nationally have swelled to an all-time high, according to the Canadian Real Estate Association. The Ottawa based group said they were 113,499 realtors at the end of the third quarter of 2015, up from about 64,000 15 years ago.

Ian Burns, chief executive of the Alberta Real Estate Association said agents are abandoning Fort McMurray, but his group still has about 10,000 members and its numbers are growing.

“When the economy (in Alberta) is bad, when oil goes down, we see an increase in people hanging their own shingle and deciding to become a realtor,” Burns said.

LePage’s Soper said there’s always a group of new agents trying to barge their way into the market and the more lucrative cities and neighbourhoods get the most attention because of the potential for larger commissions. Premium brokerages, like his company’s Johnston and Daniels Division, are always in demand.

The region is experiencing the most severe change in economic fortune in Canada in years

“You look at the Toronto Real Estate Board and there are thousands of agents who do zero transactions, they are the young and the transient population,” Soper said. “There is a tendency for that group to chase business all over the Greater Toronto Area.”

Jeffrey Wagman, the broker/owner of independent firm Forest Hill Real Estate Inc., has about 75o agents and 16 offices throughout Ontario. He doesn’t think of his offices as “branchises,” but each office has its own manager who ultimately falls under his domain as the broker of record.

FP1125_Realtors_C_JR

“We allow them to create the own culture within their office,” said Wagman, adding he does see some brokerages that have agents open up what might be construed as a branch. “I think it gives the public the impression of more exposure.”

He says the problem is the real estate sector is an industry that can take decades to crack, and a new agent faces massive obstacles.

“I still see the same agents in the higher-end neighbourhoods. You just don’t see people breaking in. I understand the desire to get into those areas,” Wagman said. “They think, ‘I’m going to target the affluent areas because there is more money’ but you have to pay your dues and work your way in.”

Wagman adds that it’s unlikely someone would abandon their base in a slower selling part of the city and move lock, stock and barrel to a more lucrative section because it just takes so long to build a client base.

“You don’t give up your meat and potatoes. These are just new people trying to break in,” he said.

Michael Kalles, president of Harvey Kalles Real Estate Ltd., which dominates in some of Toronto’s priciest neighbourhoods, said there has never been so much competition to sell homes.

“The difference today is just the number of agents,” he said, pointing to the 42,000-plus current members of the Toronto Real Estate Board. TREB has added 5,000 agents in the last two years.

He said technology and information has made it easier to move across different areas and set up shop.

“Agents are more capable to work in many more areas than in the past,” said Kalles, whose own firm in the last two years has been setting up branches in more lucrative parts of the city. “It’s extremely competitive out there. Brands have become even more important. Top agents always work hard but the amount of competition is incredible.”

gmarr@nationalpost.com

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Young couple have big plans, modest savings: Where do they star

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face-lift20rb1Not long into their first real jobs, Adam and Liz want to do everything at once: Buy a house, get married, travel, pay off his student loan, have children and save for retirement.

Where to start? He is 28, she is 24. Together they bring in $139,000 a year before tax.

Both have work pensions, his a defined-benefit government plan, hers a private-sector defined-contribution plan. But we’re getting ahead of ourselves.

Weighed against their goals and aspirations, their savings look modest – $49,500 between them. The house they want to buy in the next two or three years will cost in the range of $500,000. The wedding will cost another $15,000.

Fortunately, they have kept a tight rein on their spending so they have a surplus each month. Should they use it to pay off their student loan, save for the down payment on their first home or save for retirement? they ask in an e-mail.

They also wonder how to invest their savings in the meantime – in a tax-free savings account, registered retirement savings plan, guaranteed investment certificate or bank savings account.

“Should we put all of our savings toward the house or put some to retirement?” Adam asks.

We asked Ross McShane, director of financial planning at McLarty & Co. Wealth Management Corp. in Ottawa, to look at the couple’s situation.

What the expert says

Adam and Liz are on solid footing, Mr. McShane says. They have good incomes and have been diligent in controlling expenses in favour of paying down their student loans and accumulating some savings.

They have a surplus of about $25,000 a year, which will accumulate to $75,000 over the next three years. That, plus their existing savings, would give them close to $125,000, enough to cover a $100,000 down payment and a $15,000 wedding.

Because Liz and Adam will need the money before long, the planner suggests they leave existing TFSA monies in a daily-interest savings account.

In the meantime, they should take some of that cash they have in the bank to pay down the student loan. “The loan is costing 5.2 per cent, and even though they receive a tax credit, the after-tax cost well exceeds the return they could achieve (at least on a guaranteed basis) if the funds were invested,” Mr. McShane says.

With a lump-sum payment of $15,000 to $20,000 and regular monthly payments of $700, the loan would be paid off in less than three years.

Liz and Adam could put less than $100,000 or 20 per cent down on their house, but they would have to pay mortgage insurance. With 5 per cent down, for example, they would pay 3.6 per cent of the purchase price for insurance, an amount that would be added to the principal, the planner notes. “Keep in mind there will be closing costs and maybe some additional costs for blinds and appliances and so on,” Mr. McShane says. “Given that many expect housing prices to retrench somewhat, I am inclined to play it conservatively by waiting until they have 20 per cent saved up,” he adds.

The planner does not suggest the couple add to their RRSPs at this stage unless Adam’s income (now $76,000 a year) surpasses $82,000, in which case a contribution would be prudent in order to put him back below that $82,000 mark (bottom of the 35-per-cent marginal tax bracket), he says. Otherwise, they’d be better off carrying forward their RRSP contribution room to when their incomes are significantly higher and they enjoy a larger tax savings per dollar contributed.

“Existing RRSP funds can be withdrawn tax-free under the federal Home Buyers Plan for a down payment if required.”

As for retirement saving, “one step at a time here,” Mr. McShane says. “They should focus on short term goals first, and besides, they are already contributing to pension plans …”

They might consider buying a less expensive house. “They will have mortgage payments, repairs and maintenance, property taxes and utilities, so a house can eat up a chunk of their cash flow.” A $500,000 home with a $400,000 mortgage amortized over 25 years at 3 per cent a year would cost $1,895 a month, or $22,740 a year. Taxes, maintenance and utilities could add another $800 to $1,000 a month “and before you know it, your cost to carry the house is over $32,000 a year,” the planner says.

As it is, they are paying $17,220 a year in rent, so while they would be building equity if they bought, their cash outflow would rise by $15,000 and cut into their surplus.

“Perhaps a less expensive home to start should be considered to give them some extra breathing room – especially important should they start to raise a family,” Mr. McShane says. A $400,000 house with a 20-per-cent down payment of $80,000 would lower the mortgage to $320,000, “which translates into a monthly payment of $1,517 and likely has lower property taxes.” To be safe, the couple should also budget for rising interest rates in future, he adds.

Once they buy the house, they will have to decide whether to pay down their mortgage first or contribute some of their surplus to the RRSPs and TFSAs, the planner says.

“If and when they decide to have children, they will come at a cost (day care, activities, education). All of this needs to be factored into the big picture and their long-term plan.”

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Client situation

The people: Adam, 28, and Liz, 24.

The problem: How to set priorities for the use of their earnings given their competing goals.

The plan: Pay off the student loan, save up a 20 per cent down payment for a house and don’t be too concerned about saving for retirement yet.

The payoff: A clear financial road map for the next few years, to be revisited in future.

Monthly net income: $8,868

Assets: His TFSA $10,400; her TFSA $6,500; his cash in bank $6,400; her cash $16,200; RRSPs $10,000; her DC pension plan $288 (she just started contributing to it). Commuted value of his DB pension plan $35,743. Total: $85,531

Monthly disbursements: Rent $1,435; home insurance $40; food $770; clothing $150; group benefits $76; health care $82; professional $62; TV, cellphones, Internet $210; miscellaneous personal $186; entertainment, dining out $760; hobbies, activities $350; gifts, donations $50; travel $556; miscellaneous discretionary $190; transportation $600; loan $700; pension contributions $548. Total $6,765 Surplus available for savings $2,103

Liabilities: His student loan $43,000

Want a free financial facelift? E-mail finfacelift@gmail.com. Some details may be changed to protect the privacy of the persons profiled.

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