Tag Archives: deferred payment

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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Latest in Mortgage News: Six-Month Deferrals Could Cost You Up to $12,000

Nearly 600,000 Canadians have so far taken advantage of some form of mortgage deferral assistance due to the COVID-19 crisis, according to the Canadian Bankers Association (CBC).

With the average mortgage payment amounting to $1,326, this has freed up roughly $778 million per month, according to the Canada Mortgage and Housing Corporation.

“This keeps money in the pockets of people who need it now,” the CBA noted. “Banks have publicly reported that more than 90% of those seeking a deferral are approved.”

But, of course, taking advantage of mortgage payment deferrals naturally comes at a cost. And that has been calculated at up to $12,000 in extra interest costs for those taking the full six-month deferrals, according to math from Integrated Mortgage Planners Inc. mortgage broker Dave Larock, published recently in the Globe and Mail.

Mortgage deferral costs for someone with a mortgage rate of 3% and amortized over 25 years (and assuming they just bought a house and immediately deferred payments) would amount to $2,082 in additional interest for a one-month deferral, $6,217 for six months and $12,346 for a six-month deferral, when added back into the life of the mortgage and assuming no extra repayments.

House Sales Down 14% in March

lenders provide covid-19 updateHome sales were down 14% nationally in March on the heels of the COVID-19 pandemic, according to the Canadian Real Estate Association (CREA).

The declines in sales volumes varied by region, with drops of up to 24.9% in Hamilton-Burlington, 20.8% in the Greater Toronto Area, 26.3% in Calgary and 7.9% in Ottawa.

“March 2020 will be remembered around the planet for a long time,” said Jason Stephen, president of CREA. “Canadian home sales and listings were increasing heading into what was expected to be a busy spring [but] after Friday the 13th, everything went sideways.”

Average prices came in at $540,000, unchanged from February and up 12.5% from last year. Excluding the higher priced markets of the Greater Toronto and Vancouver Areas, the average price comes in at $410,000.

Looking ahead to April, CREA senior economist Shawn Cathcart said this: “Preliminary data from the first week of April suggest both sales and new listings were only about half of what would be normal for that time of year.”

Mortgage Rates Falling

After a recent rise in fixed mortgage rates, they have since started to fall back down, with a number of big lenders cutting rates between 5 and 20 bps.

Rates are declining due to falling bond yields (which lead fixed mortgages), as well as a decline in risk premium costs for borrowers, according to a recent post on RateSpy.com.

“…the trend implies we could see conventional 5-year fixed rates dip at least 20 more basis points (under 2.50%), if funding costs don’t shoot much higher,” the rate-comparison site noted. “Few would have expected that a month ago. At the time, spooked investors were forcing banks to pay far more for their funding. Since then, the Bank of Canada, Finance Department and CMHC have committed to buying hundreds of billions in money market instruments, bonds and mortgage securities, putting a lid on rates.”

HELOC Borrowing Down

HELOC borrowing growthHome Equity Line of Credit (HELOC) borrowing growth continued to decelerate in February, falling to a rate of 1.6% year-over-year, according to data from OSFI.

That’s down from an annual rate of more than 7% in 2018.

“Despite the overall stabilization of home prices in recent years, HELOC borrowing has been persistently slowing since the start of 2019, noted a recent Scotiabank report. “It is unclear if borrowing has been actively declining due to a change of consumer preferences or due to limited ease of accessing these funds.”

Overall mortgage growth remained strong in February, although that will certainly decline as data post-COVID-19 starts to roll in.

“Recent economic turmoil will likely lead to weaker mortgage credit growth in the months ahead,” Scotiabank noted. “In March, the Canadian labour market lost over 1 million jobs and home sales rapidly declined in the month. Mortgage credit growth is expected to stall in the coming months as the Canadian economy remains impacted by the pandemic.”

Source: Canadian Mortgage Trends – Mortgage Broker New

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Deferred Mortgage Payments: A Credit Score Gamble?

Last week, the President of the Canadian Bankers Association announced that all six major banks would offer deferral payments on their mortgages and other credit products. Just like many public announcements over the last couple of months, many were left with more questions than answers.

One question that still has yet to be answered is, how deferred mortgage payments might affect your credit score? Equifax recently announced, “In the event that a [lender] makes a credit relief or payment deferral program available to its consumers to opt out of making monthly payments during the pandemic, Equifax’s expectation is that the [lender] would take actions on its system to ensure that it does not report any derogatory/missed payment information to the credit bureaus that is misaligned with the program it has implemented.”

millennials in debtScott Hannah, B.C.-based CEO of the non-profit Credit Counselling Society, was quoted in the Globe and Mail as saying, “I don’t see creditors punishing consumers for being as responsible as they can under circumstances beyond their control.”

Many financial professionals have been posting messages online and sending emails to reassure the public and their clients that a deferral payment will not affect their credit score.

I agree that Canadians should not have their credit affected by deferred payments, although I predict a much different reality for consumers starting April 1. Lenders update the payment history of each credit account electronically to Equifax and TransUnion.

In order for these deferred payments to not be reported to the credit reporting agencies as late, as Equifax alluded too, the lender would need to “take actions on its system to ensure that it does not report any derogatory/missed payment information to the credit bureaus.”

Lenders big and small have been bombarded with phone calls that have put pressure on their personal and electronic systems. Are you willing to gamble your credit score and assume that every lender has updated its reporting system?

Millions of Canadians have found errors in their credit reports. For over a decade, I personally have received thousands of calls from consumers stating that a customer service rep told them one thing, only to find out that it was reported incorrect on their credit report.

In reality, it doesn’t matter what the customer service rep, the government, or what the industry experts tell you. If the lender’s internal system sees it as a late payment, that is how it will report. No one will know for sure if all these deferred payments will report correctly or not.

might a mortgage payment deferral affect your credit scoreWe can all agree that the amount of deferred payments over the coming months is unprecedented. For this reason, I expect an increase in the amount of mortgage, loan and credit card payments reporting incorrectly on Canadian credit reports.

Even with the chance that a deferred payment will show up as a late payment, many Canadians will still need to take advantage of such programs being offered by banks.

For those that don’t really need to defer their payments this month, I suggest you wait until it is necessary. A deferred payment is not free money. You will have to pay the lender back with interest.

Any delay is just going to increase the amount on future required payments. My hope is that, going forward, underwriters or those reviewing credit applications will be lenient on any late payments during the COVID-19 pandemic.

However, I am positive that the credit scoring system will not show much sympathy. On average, one late payment will drop your score 20 to 40 points.

A low credit score, regardless if it was caused by an error or not, will make it much more difficult to qualify for best-rate financing, renting, some employment opportunities and discounted insurance premiums. This is not to say your life will be over, but it will take at least 6 to 12 months for your credit to recover.

For those who have no choice but to request a deferred payment, here are some ways to protect your credit.

  1. Request electronic or written confirmation that the payment is being deferred.
  2. Ask for the employee number or service rep’s name that confirmed your deferred payment.
  3. Write down the day and time you talked to the customer service rep.
  4. Place all supporting documentation and record keeping in a safe place where you will actually remember where to find it.
  5. Track both your Equifax and TransUnion credit reports for at least the next few months
  6. If you do see an error, reach out to your lender and the credit reporting agencies to open up a dispute.

mortgage payment relief announcedI’m sure the thought of making another call might be overwhelming for the hundreds of thousands of Canadians who have already spent hours on the phone to request the deferred payment.

For anyone who has something better to do than to spend hours listening to the annoying automated voice and elevator music, I suggest you start with suggestion number three.

I don’t want to create panic or be like Chicken Little saying the sky is falling. The point I sincerely want to get across is that reporting errors are common and always have been.

It is unrealistic to think there won’t be any errors as a result of the increased demand for deferred payments. Regardless of what happens, now is the perfect time to monitor and learn how to better protect your credit.

Source: Mortgage Broker New
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