Goooooooddd Afternoooooon! This is the first Toronto real estate newsletter that’s as dramatic as the Bank of Canada trying to bail out our real estate market. Get ready to dive into these top headlines because - unlike landlords wallets right now… these ones are heavy!
Here’s what we got for you today:
✍️ Government expands 30-year amortizations for first time home buyers
💰 Insured mortgage cap moves up to $1.5 million
📉 Canadian inflation drops to 2%
Toronto
Overall
Inventory
9,946 (5.52%)
Sold
315 (43.18%)
Toronto
Detached
Inventory
2,316 (8.89%)
Sold
123 (86.36%)
Toronto
Condos
Inventory
6,308 (4.30%)
Sold
131 (19.09%)
Stats as of 9:30am EST September 16, 2024. Compared week over week.
CANADIAN GOVERNMENT EXPANDS 30-YEAR AMORTIZATIONS & RAISES INSURED MORTGAGE CAP
What Does This Means for First-Time Buyers?
The federal government recently announced significant changes aimed at making homeownership more accessible for first-time buyers. These changes, which take effect on December 15th, 2024, are expected to shake up the real estate market in both the short and long term.
Key Changes:
30-Year Amortizations:
First-time home buyers can now spread their mortgage payments over 30 years for all home types, including resale properties, lowering monthly payments and boosting affordability.
Increased Insured Mortgage Cap:
The insured mortgage cap has been raised from $1 million to $1.5 million, allowing buyers to purchase higher-value homes with less than 20% down.
For more in-depth analysis, check out the following videos 👇
Market Reactions:
Freehold Market Surge:
These changes are expected to bring a wave of new demand to the freehold market, especially in regions where affordability was previously a challenge due to down payment requirements.
Condo Market Less Affected:
The condo market, particularly properties under $1 million, is less likely to see major changes since buyers were already able to purchase these homes with smaller down payments.
What to Watch For:
Short-Term Buzz:
Expect a rush of activity as buyers try to take advantage of these new rules before the changes potentially lead to price increases in popular markets.
Long-Term Debt Concerns:
While the 30-year amortization lowers monthly payments, it increases the total interest paid over the loan term, potentially leading to higher long-term debt.
Some Talking Points For Your Calls:
Focus on Buying Power:
Before calling, pull up specific data on the client's current buying range. When speaking with them, explain how the new 30-year amortization and the increased insured mortgage cap could allow them to stretch their budget and qualify for homes they couldn't previously afford. Have examples ready—show how a client with $75,000 saved could now afford a $1.5M home. Make it actionable by suggesting a new price range to explore or a home you know they’d be interested in.
Leverage Freehold Market Timing:
Explain that with the increased demand expected in the freehold market, early action could help them avoid higher prices later. Tailor this message to clients who were previously priced out of townhomes or detached homes. Encourage them to consider moving sooner before competition drives up prices, and offer to schedule viewings for relevant properties in their area of interest. Mention specific listings or upcoming open houses to make the conversation more relevant.
Tailored Strategy for First-Time Buyers:
For first-time buyers, highlight how these changes can give them a competitive edge. Talk about how the new rules allow them to put down less than 20% and still get into higher-value homes with lower monthly payments. Use specific numbers—like how the 30-year amortization lowers payments by $300 to $800 per month. Invite them to a consultation where you can review their options and see what they qualify for under the new rules.
CANADA’S INFLATION HITS 2%
What Does This Mean for Rate Cuts and the Toronto Housing Market?
Key Takeaway:
Canada’s inflation has dropped to the Bank of Canada’s 2% target for the first time in over three years. While this signals progress on inflation control, it also raises expectations for Jumbo Rate Cuts in the coming months, which could impact mortgage rates and the real estate market.
What's Driving the Inflation Decline:
Lower Gas Prices:
A major contributor to the inflation slowdown was a 5.1% drop in gas prices, along with reductions in telephone services and clothing/footwear.
Shelter Costs Still High:
Mortgage interest and rent remain the biggest drivers of inflation. While mortgage interest costs eased slightly from 21% in July to 18.8% in August, rents continued to rise, now up 8.9%. These costs are still the largest contributors to inflation increases.
For more in-depth analysis, check out the following videos 👇
Market Reactions
Rate Cut Expectations Soar:
With inflation at 2%, analysts are predicting 50-basis-point rate cuts as soon as October, with additional cuts likely by the end of the year. The BoC is expected to reduce the policy rate to around 3%, possibly lower, to stimulate economic growth. This will likely lead to lower mortgage rates, making financing more affordable for buyers.
Economic Warning Signs:
While lower rates are good for borrowers, large cuts historically signal economic struggles. Previous Jumbo Rate Cuts occurred during crises like the 2008 financial meltdown and the COVID-19 pandemic. With slowing economic growth and rising unemployment, these cuts could indicate deeper economic concerns.
Some Talking Points:
Reignite Buyer Interest:
Inform your clients that mortgage rates are likely to fall, making homeownership more affordable in the coming months. Reach out to buyers who were priced out by high rates and explain how upcoming cuts could significantly improve their purchasing power.
Encourage Pre-Approvals:
Advise clients to get pre-approved now, so they’re ready to take advantage of lower rates as soon as they come into effect. Being prepared will give them a competitive edge in a potentially busy market.
Contextualize for Sellers:
For clients looking to sell, explain how lower rates could increase buyer demand, making it easier to sell their property. Encourage them to act while the market is still adjusting to the upcoming rate cuts.
👇 Get the full breakdown of our Toronto inventory statistics 👇
*Updated every week
