Tag Archives: covid-19

How house hunting will forever change due to the pandemic

Realtor Chris Strand is seen at a townhome he’s selling in Vancouver, on Aug. 14, 2020.DARRYL DYCK/THE GLOBE AND MAIL

Medical waivers. Masks. Virtual showings. Seven-figure purchases, sight unseen.

Home buying and selling has seen a head-snapping shift during the COVID-19 era, as both parties deal with the demands of physical distancing, virtual showings and previously unheard-of safety considerations.

One thing that hasn’t changed is the competition: Most major Canadian markets are as buoyant as ever after a brief slump and in defiance of gloomy forecasts about the impact the pandemic could have on real estate activity.

But the nuts and bolts of the process – how buyers and sellers interact and how realtors work with both – looks dramatically different than it did a few months ago, forcing years’ worth of sales innovation into just a few months.

Here are a few of the biggest changes:

Say goodbye to open houses

So much for perusing open houses as a weekend pastime. Physical distancing brought group showings to an abrupt halt this spring. As restrictions eased nationwide, open houses slowly started up again. In Ontario, for example, the province lifted its prohibition in most areas on July 17 as part of its Stage 3 reopening.

Still, open houses are nowhere near as common as they once were. Sellers remain wary of inviting large groups of people to traipse through their homes and some renters’ groups have spoken out against them as well.

Mr. Strand says a decline in open houses as we once knew them may be one of the biggest long-term changes to house hunting to emerge from the pandemic.DARRYL DYCK/THE GLOBE AND MAIL

“Before you could have upwards of two or three different agents with groups, at any given time, showing the same property,” says Darren Josephs, a Toronto Re/Max agent. “Now, the windows are 15-to-30 minutes and no overlap.”

Also, each client goes through individually, following sanitizing protocols before and after each visit. And there’s no such thing as dropping in with a moment’s notice, Mr. Josephs says.

“I think a lot of people were never entirely comfortable with open houses, especially sellers,” he says. “I think we’ll see a real long-term effect from this and more qualified showings, which tend to weed out people who aren’t serious.”

Vancouver-based independent realtor Chris Strand says there’s a “split in the realtor community” on the issue. He points out that realtors can often pick up new clients at open houses. However, he agrees that a decline in open houses – at least as we once knew them – may be one of the biggest long-term changes to emerge from the pandemic.

Better digital sales tools

The era of out-of-focus photos and sparse online listings is over, according to Patti Ross, a Royal LePage realtor in Halifax.

“You’ve always seen listings and asked, ‘Why are the photos so bad?’” she says. “We were proactive in my brokerage years ago in stepping up online marketing and building a photography and video department and it’s really paying off now.”

Mr. Strand says a rise in virtual house touring may be due to the current bull market in housing.DARRYL DYCK/THE GLOBE AND MAIL

Realtors have also long been limited in the number of photographs they can use on listings but, from coast-to-coast, those limits have been bumped up, allowing potential buyers to get a better sense of a property before arranging a viewing.

“Our real estate board just upped our photo count from 20 to 40,” Mr. Strand says, “and we’re seeing more people hiring professional videographers and using virtual walk-through tools.”

Sometimes that means 360-degree photos tours and, for high-end properties, it can mean full-blown immersive 3D renders of a property’s interior. That can help drive more selective, qualified showings, and fewer potential buyers arranging a viewing out of curiosity, only to show up and quickly realize the property isn’t right for them.

More safety protocols

When in-person viewings do take place, safety has become a top priority. In most cases, realtors will go into homes in advance, opening every door, cabinet and cupboard for clients.

“We ask that visitors treat the house like a museum,” Mr. Josephs says. “No touching.”

Potential buyers sign waivers attesting to their lack of COVID-19 symptoms and international travel. And everyone – buyers, sellers and agents – wear masks and keep the mandated two-metre distance.

Even Ms. Ross’ photographers and videographers make sure their gear is sanitized before it enters a property and they clean it thoroughly once they leave.

Some realtors hope that better safety protocols can instill more confidence in sellers to list their homes.

Major markets nationwide are currently grappling with a serious imbalance between supply and demand, as buyers return to the market in droves, but sellers remain shy. “

You definitely see people waiting or holding off on listing,” Ms. Ross says. “But once you talk to people and tell them about process, they feel better.”

More risk-taking

That imbalance between buyers and sellers has also made markets more competitive. In Halifax, Ms. Ross recently sold one suburban property listed at $229,000 for $55,000 over asking, after entertaining more than 30 offers. In Vancouver, Mr. Strand is seeing similar activity, as is Mr. Josephs in Toronto, where he recently sold one home for $350,000 over asking, after 26 offers.

More buyers are also signing off on purchases remotely. In June, Nanos Research conducted a poll for the Ontario Real Estate Association that revealed 42 per cent of buyers were open to buying a home even if they could only see it online beforehand.

Ms. Ross says she’s noticed more buyers willing to purchase places sight unseen. (Atlantic Canada’s current self-isolation restrictions for out-of-region travellers mean visiting the region to house-hunt is especially impractical).

“We’re doing virtual tours that allow people to shop from Ontario or Vancouver,” she says, “and walk through the house remotely.”

She’s also begun doing walk-through video tours of neighbourhoods. A video tour showcasing sports facilities and outdoor trails near one property recently helped seal the deal with one out-of-province family.

Mr. Strand is seeing the same kind of activity in Vancouver.

“We’re using FaceTime, and I’ve had potential buyers from Ontario, Alberta, and several from Hong Kong,” he says.

Mr. Strand says some of that activity may be due to the current bull market in housing. But most industry watchers, including major banks and the Canadian Mortgage and Housing Corporation, are still forecasting at least a modest decline in home prices over the coming year. As sellers re-enter the market, spiralling prices may well simmer down – good news for buyers already struggling with deteriorating affordability.

But even if markets re-balance, there seems little doubt that COVID-19 will result in lasting changes to the way Canadians buy and sell homes.

“Anything could happen in the next few months,” Mr. Strand says. “We’re all just waiting to see what sticks as we keep going through this and what goes back to the way it was before.”

Source: Globe and Mail MATTHEW HALLIDAYSPECIAL TO THE GLOBE AND MAILPUBLISHED AUGUST 17, 2020

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Why anyone who deferred mortgage payments should check their credit score

© Provided by The Canadian Press

TORONTO — Hundreds of thousands of Canadians have been negotiating with lenders over the past few months, hoping to hold off paying debt amid the COVID-19 pandemic.

Now, those payments are beginning to filter through the credit reporting system.

“We have seen the average number of accounts that are in a payment deferral status triple since before the pandemic,” says Eva Wong, co-founder and chief operating officer of Borrowell, which offers free credit scores and reports.

“It shouldn’t impact the credit score, but it should show up on the credit report.”

The Canadian Bankers Association said that as of June 30, 760,000 account holders had negotiated mortgage deferrals or skipped payments, while 445,000 had requested deferral for credit card debt.

According to Equifax, deferred payments — many agreed to as part of COVID-19 relief programs — don’t harm borrowers’ credit scores. But the payments must be reported in a certain way, and the status of these payments may not get reported to Equifax for up to 30 days.

It’s important to make sure these deferred payments are reported correctly to credit bureaus, because even one false late payment can drop a credit score by as much as 150 points, says Wong. Credit scores are used not only by lenders, but also checked by cellphone carriers, employers and landlords, Wong says. Because it takes time to correct a credit score error, waiting until you “need” your high credit score is a risky move, she says.

“Depending on the type of error, the longer it persists, the more negative the impact,” says Wong. “If it’s showing up as a late payment and it goes to month two, then it’s two months of missed payments as opposed to just one. So I would encourage people to check their credit report and make sure that everything on there looks right.”

Anne Arbour, a financial educator at the Credit Counselling Society in Toronto, says that Canada’s two credit-reporting agencies, Equifax Canada and TransUnion Canada, are data aggregators, and it is up to the lenders to create policies on how they report the deferred payments. It’s important for consumers to get clear documentation of their agreement with their lender — such as a bank — when it comes to how they are reporting deferred payments, she says.

“Get as much detail from the lender, from the creditor, as possible about what a deferral will mean and what their practices as far as reporting it — so, whether it will impact somebody’s rating or their score or not,” says Arbour. “And if there is any issue or concern, deal with the creditor first, getting as much written information as possible.”

Arbour noted that deferrals are not an automatic license to skip payments — not only must a formal agreement be struck, but many lenders may have explicit instructions on how interest or even late fees accrues while payments are halted.

Taylor Little, chief of Vancouver-based alternative lender, Neighbourhood Holdings, says that many people skipped payments based on reading about deferral programs, without actually checking to make sure whether the lender was offering deferrals or some other type of payment plan instead. Doing that can hurt a credit score, and likely won’t be counted as an error, he says.

When checking with lenders, Arbour says people should collect a copy of the agreement, a file ID or reference number, and the name of the agent with whom they spoke, in case this information is needed to file a credit score dispute down the road.

If a consumer notices something that might be wrong on their credit score —such as a deferred payment being counted as “late” — the lender is once again the first stop, she says.

“Going back to the creditor themselves is a good first step,” she says. “[Equifax and TransUnion] have worked closely with the Canadian Bankers Association, with the lenders, everybody to try and come up with a way to report any deferrals, whether it was mortgages or credit cards, in a way that wouldn’t penalize the consumer. But the onus ultimately was on and is on the creditors to change their systems.”

In addition to requesting a fix from the lender, consumers can ask Equifax or TransUnion to investigate a mismarked payment, through a credit report update form or investigation request form. Separately, consumers can also now put a “consumer statement” to a credit report to signal to lenders that something is being disputed. Equifax Canada gives an example: “Be advised that the negative accounts on my credit report are related to the Covid-19 pandemic. I intend to make these up as soon as I can find a job.”

Keeping on top of errors — and being quick to correct them if they happen — is easier if consumers stick with a routine and understand the parts of the credit scoring process, says Arbour. For example, free services that offer credit monitoring offer more frequent updates and are different from Equifax or TransUnion’s free yearly reports. Those annual reports from Equifax or TransUnion are also different from the formal scores checked by lenders in a “hard” credit check, she says.

She advised that consumers can take advantage of both credit monitoring services and free yearly reports.

“There’s no sort of one size fits all answer — very often mortgages don’t actually appear on credit reports,” says Arbour. “[Mismarked deferrals] haven’t been brought up as a concern just yet. . . . I think come September, it might be a different story. Once deferrals are over, unless people are checking their credit report, they won’t notice it unless they’re in a situation where they’re having to renew their term or renegotiate a rate or a debt management program.”

Source: Anita Balakrishnan, The Canadian Press – August 13, 2020

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Preparing for the storm

Preparing for the storm

by Michael McWilliams, Tamara Watson 27 Jul 2020

If mortgage loans are ships at sea, they are locked on a course that’s taking them directly into a storm. Reports released since COVID-19 hit the Canadian economy tell us that that storm – a nauseating combination of rising mortgage defaults and crashing real estate prices – is coming.

This knowledge leaves mortgage lenders with three questions: What should they do to prepare? How should they navigate the situation? And will their investments survive?

Early warnings of mortgage defaults arrived shortly after COVID-19. In April, a Dart & Maru/Blue survey found that one in 10 Canadian mortgage holders believed they would soon default. A majority of Canadians also believed that housing prices would depreciate in the months to come.

In May, CMHC CEO Evan Siddall warned the country that a growing debt “deferral cliff” is looming in the fall, when borrowers will have to start paying their mortgages again after a six-month respite. When the deferred debt comes due, as much as 20% of mortgages could be in arrears. Soon after, the Bank of Canada echoed Siddall’s warning in a financial system review released on May 26.

The risk of default is compounded by falling real estate prices. According to the experts, Canadian housing prices are set to fall by between 9% and 18%. A full return to pre-COVID levels is not expected before the end of 2022.

Thanks to two decades of low unemployment and rising real estate values, many private lenders have never experienced a default. If they have, the borrower has typically been able to remedy the default or refinance the mortgage loan before enforcement became necessary.  

Mortgage lenders can take practical steps to protect their loan investments before they are lost at sea. While no amount of planning can guarantee that a determined borrower will not bring endless motions or break the locks to re-enter the property, lenders can mitigate much of the risk related to mortgage enforcement through preparation.

First, assess the likelihood that the borrower will default on the loan. Gather all available information about the borrower from the mortgage application, publicly available documents and even from the borrower themselves. If a borrower has lost a job or had to shut down a business, the lender needs to know. For corporate borrowers, obtain an updated corporation profile report to see if the corporation has been dissolved. If it has, the land securing its mortgage loan may become vested in the Crown, and the lender will face a special set of challenges.

Second, determine whether the security sufficiently ensures repayment of the loan. Factors will include an assessment of the current value of the property, the position the mortgage is in, whether the property generates income, whether an assignment of rents was provided and whether any personal guarantees were given. A lender that is not in first position should consider how much equity might be available if the property is sold and what it will do if there is a shortfall. Second and subsequent mortgagees might also wish to consider whether they have or can get enough capital to pay out prior mortgage lenders to get control of the mortgage enforcement process.

Third, work with knowledgeable legal counsel to develop a mortgage enforcement strategy. Several remedies are available; there’s no simple answer to the question of which one will be most effective. In every case, the lender must weigh the merits of all available remedies with the help of experienced legal counsel.

As housing prices fall, distressed borrowers will have limited ability to refinance a mortgage in default. Some highly leveraged borrowers will choose to walk away from real estate investments once their equity dwindles down to nothing. Compared to recent decades, we can expect more contested proceedings and difficult choices about the best remedy.

The good news is that mortgage lenders can improve the odds of reaching safe harbour with strategic preparation and sound advice. The storm is coming. The time to prepare is already here.

Source: MortgageBrokerNews.ca Michael McWilliams is a partner and head of the commercial litigation group at TK law firm Loopstra Nixon. Tamara Watson is a student-at-law at Loopstra Nixon who will be called to the bar in 2020

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Do sellers ever agree to rent-to-own deals? Yes, a few—when there’s a downturn

It’s a route to ownership that may make sense if you’re a renter who wants to buy but you’re concerned about job stability and need a way out if necessary.iStock

It’s fair to say that most New York City renters have the same real estate fantasy: Instead of throwing away their money every month—and agonizing over it—they could be applying their payments toward ownership.

That’s why rent-to-own luxury condo programs, which are rare but growing in the pandemic, have so much appeal. They help developers who are struggling to fill empty apartments and give renters who want to buy a chance to wait and test out the building—like a glide path to ownership. You can find rent-to-own condos at 100 Barclay StreetOne Manhattan Square, 196 Orchard, 298 East Second Street (Houston House) and 21-30 44th Dr. in Long Island City (Corte).

Luxury condo are nice of course, if you can afford them, but for most buyers a condo that starts at, for example, $4,485,000 at 100 Barclay or $1,395,000 at 196 Orchard is out of reach. So you might be wondering: Is it possible to approach someone selling an apartment or a house and ask if the owner will allow you to rent first and buy later—and apply your rent payments to the purchase price?

Market decline brings back rent to own

The answer is yes. Rent-to-own purchases of apartments or houses from a seller (not a condo developer) come back in fashion when sales are slow, like they are now. But it is not typically a widespread phenomenon.

“In the last downturn there was buzz about rent-to-own and very few deals happened—it was talk, talk, talk, and at the end of the day, very few happened,” says Mark Chin, CEO of real estate brokerage KWNYC.

These deals don’t end up converting many sellers, however, with more programs available from condo developers, rent-to-own may gain some more traction. And as sellers are forced to compete with developers of new condos, taking a page out of their playbook is one way to level the field.

Why would you rent to own?

It’s a route to ownership that may make sense if you’re a renter who wants to buy but you’re concerned about your job stability in this economy, for example, and want the ability to cancel the deal without penalty. Like rent-to-own condo programs, rent-to-own deals for resales give you a period of time to decide whether to buy.

So, if you are renting for one year, you may have to let the owner know by the eighth month if you intend to buy. Depending on the agreement, you can apply a portion or the full amount of your rent toward the purchase price. The deal allows you to chip away at the price of the house while giving sellers the rental payments they can use to pay their mortgage or common charges.

A rare kind of real estate deal

They’re not a straightforward path to ownership though. In fact they remind Jonathan Miller, president and CEO of appraisal firm Miller Samuel, of a reverse mortgage, another rarity for NYC. And, if you think about it, they are also somewhat mind bending when you consider what happens when a tenant ultimately decides to buy, and has their rent deducted from the sales price. “You could argue that they paid no rent,” Miller says.

It’s not necessarily a way to get a deal either. Usually, the seller is asking for a price they couldn’t get on the open market, Miller says.

To Miller, they make up a nominal, niche part of the market.

Where to find a rent-to-own property?

Rent to own can be negotiated with any type of building—townhouse, condo, or co-op, says Steve Wagner, partner at the Manhattan law firm Wagner, Berkow & Brandt, who represents co-op and condo owners (and is a Brick sponsor, FYI).

“I’ve done a couple of them,” he says, emphasizing that the deals were not new construction but apartments that were converted long ago and were rented to someone who is interested in buying.

“With a condo or co-op, it is likely you’d be approved to buy but not guaranteed. Generally with condos, the board has a right of first refusal and co-ops have the right to consent. This is handled in the contract, as well as financing, approval, representations, all the stuff you’d normally have in an agreement,” Wagner says.

To Craig L. Price, a partner at the law firm of Belkin, Burden, Goldman, this mode of buying “has become more than niche” recently. He’s seeing an uptick now because of the pandemic and in the last month worked on four such agreements (one didn’t pan out because of the complexity of the deal and became a regular rental).

These arrangements are easier to do in a condo than in a co-op, he says, which will require jumping through many hoops to gain approval from the board.

Price recommends pre-negotiating a purchase agreement before you occupy the apartment or house—you’ll have more leverage with an owner of an empty place. An attorney will need to work out protections for you to prevent the owner from selling to someone else before you exercise your option, he says.

“The downside for tenant is that they may overpay,” Price says. You are negotiating a price without knowing where the market will be in eight months or a year from now when it is time to pay up. You may be locking in a premium price for the property, he explains.

He recommends tenant buyers get a financing contingency as part of the deal (aka a mortgage contingency), which offers you a way out if you can’t get a mortgage.

Source: Brick Underground – JULY 27, 2020 – 9:30 AM

BY JENNIFER WHITE KARP

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Mortgage Deferrals ‘Buying Time’ For Canadians, Bank Of Canada Says

A view of Metro Vancouver is seen here at twilight on July 18, 2020, from Burnaby, B.C. Softening...
A view of Metro Vancouver is seen here at twilight on July 18, 2020, from Burnaby, B.C. Softening population growth from immigration could start to weaken house prices in the future.

The pause in mortgage payments are giving people a chance to get back to work.

TORONTO — A Bank of Canada economist says the current economic recovery could be different than the recovery from the financial crisis of 2008.

Mikael Khan, the Bank of Canada’s director of financial stability, said that while the employment rate has fallen due to the pandemic, house prices are recovering and keeping homeowners from filing for insolvency.

Khan said breaks from mortgage payments have bought homeowners some time to get back to work amid the COVID-19 pandemic and economic downturn.

“The fact that these deferrals have been available is really, really important,” said Khan. “Ultimately, what matters most when it comes to defaults is people having a job, having their incomes. What the deferrals are doing is they’re essentially buying time for that process to unfold.”

Khan, who spoke at the Move Smartly Toronto Real Estate Summit on Monday, has been studying mortgage defaults. He compared the COVID-19 pandemic to a natural disaster, such as the 2016 wildfires in Fort McMurray, Alta., which also involved a mortgage deferral recovery plan.

Bank of Canada research found that while the wildfires caused a bigger spike in employment insurance filings than the 2008 recession, the EI trend reversed much faster after the fires than in 2008.

The 2008 conditions set off a lengthy recession due to “an underlying fragility in the global financial system,” the research suggested. But the wildfires, like the COVID-19 pandemic, were a sudden shock.

“One thing that’s always very important when you’re facing a large negative shock is the initial conditions,” said Khan.

“In Fort McMurray, when the wildfires hit, that’s an area that had already been struggling for some time with the decline in oil prices that had occurred about a year or so prior, so financial stress was quite high,” Khan said.

“Now, at the national level, what we’ve been concerned about for many, many years is the high level of household debt. That’s the No. 1 pre-existing condition that was there when the pandemic struck.”

While there are some parallels, the rebuilding process from a pandemic remains more uncertain compared to a wildfire, the research said. Khan cited increased savings rates as an example of a fundamental shift with potential to affect how quickly the economy recovers from COVID-19.

Watch: Expect interest rates to stay low for “a long time,” the Bank of Canada says. Story continues below.

Over the past few months, some have warned that it could lead to a deferral cliff once benefits —such as Canada Emergency Response Benefit and mortgage deferrals — run out.

“When it comes to bumpiness in the recovery … this question that has been in the background of most of our discussions is, ‘To what extent will we see defaults or insolvencies?’” said Khan. “I think it’s reasonable to expect some sort of increase. What we’d be concerned about, there, is a very large-scale increase.”

Khan said that when a mortgage is in default, it can be caused by a “dual trigger” of both unemployment and large decline in house prices. Home prices in many areas have recovered since the start of the pandemic, Khan said. The job market’s recovery will be key to determining the impact of mortgage deferrals, said Bank of Canada research cited by Khan.

Softening population growth from immigration could start to weaken house prices in the future. But for now, Khan said, it wouldn’t make sense for homeowners with healthy home equity to file for insolvency.

“Even in cases where a homeowner simply can’t make their mortgage payments anymore — as long as they have equity in their homes and the housing market is relatively stable — there’s always the option to simply sell without kind of resorting to those sorts of measures,” said Khan.

Source: This report by The Canadian Press was first published July 20, 2020.

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The worst is yet to come for renters, apartment owners

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Apartment landlords across the U.S. spent the last days of March holding their collective breath while waiting for rent checks to come in.

For the most part, they did, thanks to the $2 trillion in emergency relief authorized by Congress to blunt the economic blow of the pandemic. Now, expanded unemployment benefits are expiring and eviction bans are set to lift, leaving tenants and building owners wondering again what will happen when the bills are due.

It’s not going to be good.

One in three renters failed to make their full payment in the first week of July, an Apartment List survey showed. Nearly 12 million renters could be served with eviction notices in the next four months, according to an analysis by advisory firm Stout Risius Ross. And in some cities, like New York and Houston, more than a fifth of renters say they have “no confidence” in their ability to pay next month.

“You’d have to go back to the Great Depression to find the kind of numbers we’re looking at right now,” said John Pollock, staff attorney at the Public Justice Center, a Baltimore nonprofit that uses legal tools to fight poverty. “There’s almost no precedent for this, which is why it’s so scary.”

The pandemic spurred mass layoffs beginning in March, and renters have been scraping by on a combination of savings, credit card debt, unemployment benefits and federal stimulus. Roughly 11 million renters spend at least half of their income to keep a roof over their heads in normal times, and the first wave of job cuts skewed toward lower-paying retail and hospitality workers who are less likely to have emergency savings.

One-time stimulus payments of $1,200 helped, as did eviction moratoriums passed by local, state and federal governments. And Congress authorized an additional $600 a week in unemployment insurance on top of what states provide, offering a lifeline to millions. In some cases, the benefits exceed what workers were bringing home while employed.

That extra boost will expire at the end of the month without action by Congress. The Trump administration and Senate Republicans have yet to release their $1 trillion plan for another round of virus relief, which Treasury Secretary Steven Mnuchin and others have described as an extension of portions of the last stimulus. The proposal would be their opening bid in talks with Democrats, who’ve already offered a $3.5 trillion package.

Continuing the extra unemployment benefits would provide a measure of relief to people like Brooke Martin, 33, who lost her job at a dive bar in Seattle in March. Even though the business has since reopened, she’s hesitant to go back, fearing for her own safety. The bar doesn’t have good ventilation and people aren’t wearing masks when they aren’t drinking, she said.

Martin and her husband have been living off her unemployment alone, because he was unable to collect benefits himself. After her student loan payments, utilities and other expenses, the money is barely enough to cover their $1,800-a-month apartment.

“As of the end of the month, we’re screwed,” she said. “There’s just no two ways about it.”

The U.S. had a pretty “stingy” safety net when it came to housing before the pandemic, said Mary Cunningham, vice president of the Metropolitan Housing and Communities Policy Center at the Urban Institute.

But Congress’s quick action to give aid this spring has shown the upside of being more generous. Adults who received unemployment benefits were far less likely to report they were worried about making rent or mortgage payments, compared to those who hadn’t gotten the relief, according to a survey the institute conducted in May.

“This has been an important part of the safety net,” said Cunningham. “If Congress doesn’t do anything, I think we are in for a dark fall and winter.”

John Pawlowski, a senior analyst at real estate research firm Green Street Advisors, said he doubts the apartment industry would see an immediate crash if the additional unemployment benefits aren’t extended. People will skip things like auto and credit card payments to cobble together enough for rent.

“People still need a place to live,” he said.

But over the long-term, rental revenue will decline because of missed payments and lower occupancy as tenants look to save money by doubling up with others, Pawlowski said. Landlords could end up missing more than $22 billion in rent over the next four months, according to the Stout analysis.

Chuck Sheldon manages about 1,650 apartments in Albuquerque, New Mexico, about half of which he owns. Rent collections have been far better than he had feared in late March, when several states were going into lockdown.

Sheldon’s T&C Management tends to rent to more blue-collar and service workers who have been disproportionately hit by job losses. Most have tried to stay current, he said, and the $600 unemployment boost has been a “huge” part of that.

“When it drops off, that’s going to be painful,” he said.

Source: Bloomberg News 26 Jul 2020

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HOUSE HUNTING IN THE MIDST OF A GLOBAL PANDEMIC

Raymond C. McMillan, BA., Mortgage and Real Estate Advisor – June 27, 2020

I read somewhere many years ago that “where there is a crisis, there is always opportunity”. You may be wondering where to find this opportunity. Covid 19, completely obliterated the spring housing market and will probably do the same for the summer market. These are possibly the two busiest period for homebuyers and sellers. With the recent physical and social distancing guidelines introduced and enforced by all levels of government, it has certainly crippled the real estate sector and change the way sellers and buyers engage each other. However, all is not lost as we discover new ways to house hunt and view homes.

Savvy realtors have quickly figured out how to market homes online and are doing virtual tours that allow potential home buyers to get a real life feeling of homes they are interested in viewing or purchasing. New home builders have also quickly adapted and have also made the virtual home buying experience very user friendly and interactive. Many of the floor plans can be configured by you to show the placement of furniture and appliances to get a sense of the available space. With resale homes, you can use the placement of furniture and appliances by the current owner and occupant as a guide. In the event the home is empty, it could be a bit more challenging to get a good sense of the space as a first-time home buyer, but a good realtor should be able to help you with this.

In areas where home showings are still permitted, and if you are comfortable doing them, you mayt want to exercise extreme caution when visiting homes for sale to avoid being exposed or infected by Covid 19. A few of my recommendations to keep yourself safe and reduce exposure are:

  1. Always wear a mask and gloves.
  2. If you have a pre-existing health condition, I would recommend avoid doing in-house viewings
  3. Only visit homes where the current owners or occupants have vacated the homes to allow for the viewing.
  4. Avoid touching personal items and appliances as much as possible.
  5. Do not under any circumstances view a home at the same time with another individual or family not connected to you
  6. Ensure your realtor is also wearing personal protective equipment and maintaining physical and social distancing guidelines.
  7. Practice the necessary hygiene once you have completed your viewing and returned home to eradicate any potential exposure.

If you are uncomfortable with doing in-house viewings stick to virtual viewings. There are many homes being offered that way, and you are sure to find one in your preferred neighborhood, at your desired price that you absolutely love. So be patient and enjoy the home buying journey.

The writer: Raymond McMillan is a mortgage and real estate consultant who has been in the banking, mortgage and real estate industry since 1994. He has been licensed as a mortgage broker since 1999 and has helped many people purchase their homes and invest in real estate. You can reach him at 1-866-883-0885 or visit www.TheMcMillanGroupInc.com

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HOUSE HUNTING IN THE MIDST OF A GLOBAL PANDEMIC

Raymond C. McMillan, BA., Mortgage and Real Estate Advisor – June 27, 2020

I read somewhere many years ago that “where there is a crisis, there is always opportunity”. You may be wondering where to find this opportunity. Covid 19, completely obliterated the spring housing market and will probably do the same for the summer market. These are possibly the two busiest period for homebuyers and sellers. With the recent physical and social distancing guidelines introduced and enforced by all levels of government, it has certainly crippled the real estate sector and change the way sellers and buyers engage each other. However, all is not lost as we discover new ways to house hunt and view homes.

Savvy realtors have quickly figured out how to market homes online and are doing virtual tours that allow potential home buyers to get a real life feeling of homes they are interested in viewing or purchasing. New home builders have also quickly adapted and have also made the virtual home buying experience very user friendly and interactive. Many of the floor plans can be configured by you to show the placement of furniture and appliances to get a sense of the available space. With resale homes, you can use the placement of furniture and appliances by the current owner and occupant as a guide. In the event the home is empty, it could be a bit more challenging to get a good sense of the space as a first-time home buyer, but a good realtor should be able to help you with this.

In areas where home showings are still permitted, and if you are comfortable doing them, you mayt want to exercise extreme caution when visiting homes for sale to avoid being exposed or infected by Covid 19. A few of my recommendations to keep yourself safe and reduce exposure are:

  1. Always wear a mask and gloves.
  2. If you have a pre-existing health condition, I would recommend avoid doing in-house viewings
  3. Only visit homes where the current owners or occupants have vacated the homes to allow for the viewing.
  4. Avoid touching personal items and appliances as much as possible.
  5. Do not under any circumstances view a home at the same time with another individual or family not connected to you
  6. Ensure your realtor is also wearing personal protective equipment and maintaining physical and social distancing guidelines.
  7. Practice the necessary hygiene once you have completed your viewing and returned home to eradicate any potential exposure.

If you are uncomfortable with doing in-house viewings stick to virtual viewings. There are many homes being offered that way, and you are sure to find one in your preferred neighborhood, at your desired price that you absolutely love. So be patient and enjoy the home buying journey.

The writer: Raymond McMillan is a mortgage broker and real estate consultant who has been in the banking, mortgage and real estate industry since 1994. He has been licensed as a mortgage broker since 1999 and has helped many people purchase their homes and invest in real estate. You can reach him at 1-866-883-0885 or visit www.TheMcMillanGroupInc.com

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How Much Toronto Condo Apartment Prices Dropped Since COVID-19 Measures: 35 Neighbourhoods in Review

In February 2020, Toronto real estate was gearing up for what may have been a record-breaking spring season, with home sales up a staggering 45 per cent year-over-year (y-o-y), and home prices forecasted to grow 10 per cent in 2020.

Fast-forward to April 2020, at which point COVID-19 public health and safety measures had been in effect for a full month and a number of home buyers and sellers opted to remain on the sidelines. Home sale activity slowed considerably, with double digit sales declines in the City of Toronto in April. For the condo apartment segment in particular, the dip in y-o-y sales in April was a steep 70 per cent.

To understand how COVID-19 measures impacted real estate market dynamics, particularly condo apartment prices in the City of Toronto, Zoocasa used data from the Toronto Regional Real Estate Board (TRREB) to compare how median prices changed between February and April 2020 for 35 city neighbourhoods. For neighbourhoods with at least 10 condo apartment sales in April, Zoocasa calculated the dollar and percentage change in the median sold price to get a snapshot of how the market evolved one month after COVID-19 measures were introduced.

The median condo apartment price is defined as the price at which half the condo apartments in an area sold at a higher price than the median, and the other half sold at a price lower than the median price.

City of Toronto Median Condo Price Fell by $65,000 Since February 2020

For the City of Toronto as a whole, the median condo apartment price declined a steep $65,000 (-10 per cent) between February and April 2020 to $574,000. In a true reflection of economic and healthcare measures in place for COVID-19, condo apartment sales dropped 64 per cent since February, with just 482 transactions taking place across the city in April compared to 1,335 in February.

A closer look at all 35 City of Toronto neighbourhoods revealed that 21 city neighbourhoods had fewer than 10 sales during the month of April, which is three times the number of neighbourhoods with a low sales volume in February. In the 14 neighbourhoods with at least 10 sales, the median condo price rose in just one neighbourhood, and fell in all the others. More specifically, the median condo apartment price:

  • Dropped more than $100,000 in two neighbourhoods
  • Fell between $50,000 – $100,000 in four neighbourhoods
  • Declined between $1 – $50,000 in seven neighbourhoods
  • Rose $34,000 in one neighbourhood to $506,500

Toronto Centre Neighbourhoods Saw Largest Price Declines 

Condo apartment prices were significantly impacted in Toronto Centre, with the top five neighbourhoods with the greatest price declines (and at least 10 sales) located in this part of the city. C10 (Mount Pleasant East) topped the list with the median condo apartment price declining $131,500 (-18 per cent) to $617,500.

This was followed by C08 (Regent ParkSt. James Town, and Corktown), where the median price dropped $103,400 (-14 per cent) to $611,600. In C14 (Newtonbrooke East, Willowdale East), the median condo apartment price declined 12 per cent to $597,950, marking an $85,050 drop since February. C07 (Willowdale West, Lansing-Wesrgate) and C01 (Downtown, CityPlace, Trinity-Bellwoods, and Harbord Village) rounded out the top five neighbourhoods with price declines of $70,000 and $60,500 respectively.

Emma Pace, a Zoocasa agent in the City of Toronto, noted that new market conditions since COVID-19 have created opportunities for buyers who may have previously remained on the sidelines. Pace said, “due to the competitive nature of the market subsiding, qualified buyers who may have otherwise forgone an attempt at a home search even four to eight weeks ago are now reviewing how they can participate and starting to enter the market.”

Median Condo Apartment Price Rose in One Toronto East Neighbourhood; Prices Fell in Two

When considering neighbourhoods with at least 10 condo apartment sales in April, Toronto East neighbourhoods fall in the middle of the pack when it comes to price declines. The median condo apartment price in E09 (Morningside, Woburn, Bendale) declined exactly $50,000 (-10 per cent) since February to $465,000, and dropped $47,750 (-10 per cent) in E04 (Dorset Park, Kennedy Park).

In E07 (Milliken, Agincourt North) on the other hand, the median price rose by $34,500 (+7 per cent) to $506,000. Of all City of Toronto neighbourhoods with at least 10 condo apartment sales in April, this was the only area that experienced a median price increase. Here, condo apartment sales were down 49 per cent compared to February, representing a less severe sales drop when compared to the City of Toronto’s overall sales decline of 64 per cent for condo apartments.

According to Jelani Smith, a Toronto Zoocasa agent with experience working in Scarborough, showings began to pick up toward the end of April as more buyers started to return to the market. “Properties that were sitting on the market for almost a month started to get sold relatively faster, since showings started to pick up. In some cases, I’ve been involved in bidding wars similar to what we saw before COVID-19,” said Smith.

Median Condo Apartment Prices in Toronto West Neighbourhoods Declined Between $15,000-$45,000 

In Toronto West, median condo apartment prices dropped between four per cent and 10 percent since February 2020 in the following neighborhoods with at least 10 sales:

  • W10 (Rexdale-Kipling, West Humber-Claireville) prices declined $44,500 (-10 per cent) to $418,000
  • W06 (Mimico, Alderwood) prices dropped $35,500 (-6 per cent) to $577,500
  • W08 (Islington-City Centre West, Eringate-Centennial-West Deane) prices fell by $25,500 (-4 per cent) to $570,000
  • W04 (Yorkdale-Glen Park, Weston) prices declined $18,450 (-4 per cent) to $479,000
  • W05 (Black Creek, York University Heights) prices fell $15,451 (-4 per cent) to $409,999

Carlos Moniz, a Zoocasa agent with Etobicoke and Toronto West expertise noted that when COVID-19 hit, many buyers in the very early stages of their home searches took a step back and slowed down their searches to get a better sense of the impact on the market. According to Moniz, buyers who were further along in their home search recognized this as an opportunity to regain some negotiating power in these new market conditions where there were fewer buyers and less competition.

Here’s a snapshot of how median condo apartment prices changed in Toronto’s 35 neighbourhoods between February and April 2020, including a list of the neighbourhoods with the largest declines. Note: the percentage change in median price is only calculated for neighbourhoods with at least 10 condo apartment sales.

COVID-19 and Toronto condo prices, April vs. Feb 2020

Toronto Neighbourhoods with the Largest Declines in Median Condo Apartment Prices

Based on neighbourhoods with at least 10 condo apartment sales in April 2020.

1. C10 – Mount Pleasant East

  • Condo apt median price, Apr 2020: $617,500
  • Condo apt median price change from Feb 2020: -$131,500 (-18%)
  • Condo apt sales, Apr vs. Feb 2020: 16 vs. 37 (-57%)

2. C08 – Regent Park, St. James Town, Corktown

  • Condo apt median price, Apr 2020: $611,600
  • Condo apt median price change from Feb 2020: -$103,400 (-14%)
  • Condo apt sales, Apr vs. Feb 2020: 74 vs. 127 (-42%)

3. C14 – Newtonbrooke East, Willowdale East

  • Condo apt median price, Apr 2020: $597,950
  • Condo apt median price change from Feb 2020: -$85,050 (-12%)
  • Condo apt sales, Apr vs. Feb 2020: 28 vs. 70 (-60%)

4. C07 – Willowdale West, Lansing-Westgate

  • Condo apt median price, Apr 2020: $580,000
  • Condo apt median price change from Feb 2020: -$70,000 (-11%)
  • Condo apt sales, Apr vs. Feb 2020: 11 vs. 57 (-81%)

5. C01 – Downtown, Entertainment District, CityPlace, Trinity-Bellwoods

  • Condo apt median price, Apr 2020: $677,500
  • Condo apt median price change from Feb 2020: -$60,500 (-8%)
  • Condo apt sales, Apr vs. Feb 2020: 106 vs. 330 (-68%)

Methodology

Median condo apartment prices and sales for April 2020 and February 2020 were sourced from the Toronto Regional Real Estate Board.

The median price is the price at which half the homes in an area were sold at a higher price and half the homes were sold at a lower price.

The percentage change in median price is only calculated for areas with 10 or more condo apartment sales.

Source:

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Thinking about deferring your mortgage?

Payment due

News that Canadian financial institutions were offering some mortgage deferrals sent investors running to the banks in early April, asking for a stay on their payments as personal incomes and investment portfolios were being wiped out by the coronavirus pandemic. Those deferrals seem like a lifeline for investors facing a liquidity crisis, but one leading mortgage broker thinks the impacts of a deferral need to be considered closely.

Dalia Barsoum, president and principal broker at Streetwise Mortgages, says that investors should consider alternatives to mortgage deferrals. She explained that these deferrals aren’t gifts or grants, as they come with a cost, a likely increase to future payments, an impact on future financing availability and a wider implication for an investor’s credit. Barsoum says despite the pain investors are feeling, they shouldn’t just take mortgage deferment as their first line of support.

“We look at mortgage deferrals as a last resort tool for investors to utilize to help ease financial destress,” Barsoum says.

Barsoum outlined what some of those sources of financial distress are. The primary pressure on real estate investors stems from unemployment, both the loss of their own job or, if they own a rental property, the loss of a tenant’s income. The temporary collapse of Airbnb, too, has resulted in an increase to rental stock in some Canadian markets, putting downward pressure on rents. Further, softening property valuations in some markets, have made it more challenging to extract equity when it is needed most. Even committed deals, not yet closed, might be torpedoed by a borrower’s inability to get a mortgage. The financial pressures on a real estate investor are widespread, perhaps enough to make mortgage deferral seem like the right option. Barsoum says investors need to look at the long-term implications of that short-term fix.

Her first concern is cost, explaining that interest will accrue on the deferred amount for the duration of the period. Each lender, too, applies its only methodology of repayment for the accrued amount after the deferral period. Investors need to know what that post-deferral arrangement will look like before they sign off on anything.

That methodology could also result in an increase to future monthly payments. That increase will vary based on the mortgage size, interest, and duration of the deferral. An increase in the debt load will, as well, likely impact an investor’s ability to qualify for future financing, especially if their new  payments are higher across several properties within the portfolio.

Though a deferral is different from a default, and should not have any negative impact on credit, that requires an adjustment to lenders’ systems allowing them to report deferrals in the right way. Barsoum thinks that the sheer volume of deferral requests has increased the risk of reporting errors.

“If you are considering a deferral and can wait on it another month, then please do so to allow time for the first round of deferrals to go through the systems and see how that turns out,” Barsoum says. “Further, if you have chosen to defer by now, then please monitor your credit report for the next 3 months.”

Current financing arrangements, too, could prove challenging to obtain for investors with an active deferred payment. The logic, as Barsoum sees it, is that in taking a deferment an investor has told the lender whether they “can or can’t” afford the payment. In such a binary situation, taking the deferment puts you in the “can’t pay” camp, which carried long-term implications.

“My suggestion is to first examine your finances, challenges and plans with your current mortgage advisor,” Barsoum says. “Come up with an action plan before jumping on mortgage deferrals as the first line of support because of panic, fear of the unknown, or fear of missing out on this support tool.”

Source: Canadian Real Estate News – by David Kitai 06 May 2020

 

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