Mortgage & Real Estate Facts, Comments & Statistics
Housing price increases are expected
to soften in 2008, improving the afford-
ability of owning a home in B.C., accord-
ing to the latest housing report by RBC
the fourth quarter of 2007 and the ﬁrst
quarter of 2008 alone.
What's normal for housing prices? One Count on 25 years of experience... A publication of MANDATE National Mortgage Corporation | Summer 2008 | Volume 4 | No. 1
Economics. Slower demand will ease
key argument for a big drop in home
upward pressures on B.C. home prices.
prices is that they grew at an above-trend C A L L A N Y T I M E
The report suggested that housing prices 505 - 1195 West Broadway
will increase 8% compared with a 12% in-
rate and need to fall to get back to trend. Interesting Times Indeed...
So it’s fair to ask: How do we know what Vancouver, BC V6H 3X5
crease last year and an 18% increase in by Alan Long, President
the long-term trend really is?
2006. B.C. will still retain the title as one Alan Long, President
of the least affordable provinces in Can- As a Lender in Vancouver for 25 years, I have experienced three major real estate cycles/
ada. The average cost of pre-tax income BusinessWeek started with Yale Univer- Cell: 604-813-7532 T: 604-731-2899
corrections. While no one can predict when the slowdown or downturn will start or when
needed to service the costs of owning a sity economist Robert J. Shiller’s pioneer- Toll-Free: 1-866-432-4949 the upturn/reversal commences, the common phrase uttered by most investors/developers
home is about 67% for a bungalow, 71% ing research on the history of U.S. house
Perry Askounis F: 604-734-5546 while the bull market continues is “This time it is different”. Certainly the current up cycle is
for a two-storey home, 50% for a stan- prices going back to 1890. Shiller pieced
together data from several surveys and different in duration and strength due to factors such as demographics, strong employment
dard townhouse and 36% for a standard Cell: 604-377-4897
condo. then removed the effects of inﬂation. The and robust construction related to the 2010 Olympics. However, there is always a “Tipping
answer: 0.4% per year after inﬂation. The email@example.com Point” whereby the overall market psychology slowly begins to change and the supply and
calculation also suggested that home REAL APPROVALS, REAL FAST! demand economics once again comes into play. This can be initiated by the movement in
Residential mortgage credit is growing prices were still on their long term trend interest rates, overbuilding or prospect of inﬂation (i.e. rising food and energy prices).
by leaps and bounds. It is now a $77-bil- as recently as 2000. This estimate comes
lion-a-year industry. Canadians currently with a caveat: It assumes that the history As Buyers gradually become priced out of the market, demand slows down as they wait on
have $800 billion invested in mortgage of prices going back to 1890 remains rel- Mortgage Services the sidelines. In the meantime, developers continue to acquire land for future subdivisions,
credit and it is forecast to grow by 11.7% evant in today’s market. Choosing 1960
houses and multi-family projects. Eventually, there becomes an over supply on the market
this year and surpass $1 trillion in 2010. as the start date would raise the estimate Mandate is a full service Lender,
of trend growth to 0.8% per year. On the and the game of musical chairs begins. As of June 30, 2008, the chatter I am hearing from
The mortgage industry in Canada over Broker and source of deals for
other hand, moving the end date to leave developers and investors is the downturn or softness has begun. Initially started by the
the past 10 to 15 years has matured and Private investors.
out the bubble years would lower the es- increase in listings and reduced sales volume, some developers have begun to lower the list
grown enormously. Fifteen years ago
timate. Trend growth from 1960 to 2000 prices of their building inventory as the trafﬁc diminishes; are vacation trips and free cars to
mortgage brokers had about 5% of the We specialize in Syndication of
was just 0.2%. But no matter which of buyers soon to follow? So the downtrend commences and no one knows how much or how
market, today they have around 30%. large loans which enables various
these start and end dates chosen, home far the correction will fall or continue. Lenders now become extremely cautious and either
One of the biggest changes was extend- Lenders to participate in a loan
prices are still way above their long-term reduce their loan commitment, increase the pre-sale requirement or simply elect to cease
ing the amortization period to 40 years and lessen the risk by sharing with
trend. others. lending until they feel comfortable with the market again.
from 25. That raised the bar on affordabil-
ity and opened the door to thousands of
By the numbers...(USA) Second mortgages for any purpose If you or your clients experience difﬁculties securing ﬁnancing in this changing lending
buyers. Last year, of all mortgages taken
out in Canada, 37% had an amortization - good idea to borrow your equity environment, do not forget, Mandate has been through this over the years and is here to
49.6% - Americans’ percentage of equity and invest in real estate and mort- RESIDENTIAL help.
longer than 25 years.
in their homes in the second quarter of gages. The interest can be tax de-
ductible and the “spread” or yield
Russia suffers from a “chronic need of
2007, the ﬁrst time homeowners’ debt on
over cost of funds is attractive. AND
their houses exceeded their equity since
stock replacement” in the residential-
property sector, according to a Morgan
the Fed started tracking the data in 1945.
COMMERCIAL Understand Your Deal...
The number fell further to 47.9% in the Loans rescued from foreclosure.
Stanley research report. The Russian fourth quarter. by Perry Askounis
housing market is less vulnerable to the MORTGAGE
credit crunch because mortgage penetra-
10.3% - Percentage of U.S. homes (about
Financing to Bridge a sale or
C ll us In every mortgage lending situation, it is important to understand the
tion in Russia is still low, with only 10% to
8.8 million) that will have zero or negative
FINANCING deal. Lending funds is one thing, getting them back to the Lender is
15% of Russian real estate bought with a
bank loan. Alfa Bank estimates that the equity at the end of March 2008.
Fast closings, often within 48 for all your another. Being able to properly structure the mortgage will not only
beneﬁt and be important to the borrower but to the lender as well. In
$30 billion mortgage market will grow an hours. Conventional and the ever changing lending environment, it is important to look and see
additional $20 billion this year, although
“the main risk to this market in the future
15.9% - Percentage of U.S. Homes (about
13.8 million) that will have zero or nega- Inventory loans.
Un-conventional mortgage how viable the mortgage application is and what we can do to make
is that real-estate prices will fall,” the re- it work. Understanding the desired end result for the borrower helps
tive equity if house prices fall 20% from
us structure the mortgage properly and achieve this outcome. Many
port says. their peak. The latest Standard & Poor’s/
Case-Shiller index showed U.S. home Cost over-runs.
ﬁnancing! times we see deals where clients feel that the pricing is out of line and
prices plunging 8.9% in the ﬁnal quarter perhaps expensive - but, is it really?
Property prices in the Persian Gulf sheik-
dom of Dubai soared 78% in the ﬁrst of 2007, compared with a year ago. Need help structuring your deal?
quarter of 2008 from a year earlier, as for- Depending on the use of proceeds, the cost of funds may be mar-
Vancouver’s Direct ginal and this needs to be explained to borrowers. For builder’s, this is
eigners tapped the emirate’s real estate 5.29% - The percentage of adjustable- We accept applications for loans
boom, Colliers International said. The rate mortgages to borrowers with risky throughout BC known as the cost of doing business and is usually passed on to the
cost of property rose to more than $400 a
credit that entered the foreclosure pro- consumer. The structure and understanding of the deal will create a
square foot, while apartment prices rose cess in the ﬁnal quarter of 2007. win-win situation for the borrower and the lender. Let us help you do
82%; villas rose 85% and townhouses Call us today, we can help! Lender Since 1982
your next deal.
rose 29%. Prices rose by 42% between
MM2008Summer.indd Spread 1 of 2 - Pages(4, 1) 7/8/08 4:58:43 PM
Development Financing Residential and Commercial Financing
MANDATE recently funded or arranged ﬁnancing for these projects. Why not call for your next MANDATE provides and/or arranges 1st, 2nd and 3rd mortgages for any purpose, such as, inventory loans, reﬁnance,
land acquisition, subdivision/servicing, single family or multi-family construction or commercial development loan. bridge loans until your property sells, buyout partner, paydown business loans or debt consolidation.
23 Unit Condo Development (Nanaimo, B.C.) Single Family Construction Loan (Vancouver, B.C.) Medical/Dental Building (New Westminster, B.C.) New Mansion (Vancouver, B.C.)
2nd mortgage provided by MANDATE 2nd mortgage provided by MANDATE 1st & 2nd mortgage arranged by MANDATE 2nd & 3rd mortgage arranged by MANDATE
Senior Care Home Site (Pitt Meadows, B.C.) Condo Development Site (Kelowna B.C.) Winery Acquisition (Langley, B.C.) 22 Unit Condo Site & Marina (Ladysmith, B.C.)
1st mortgage provided by MANDATE 1st & 2nd mortgage arranged by MANDATE 2nd mortgage provided by MANDATE 1st & 2nd mortgage provided by MANDATE
8 Lot Subdivision (Sunshine Coast, B.C.) Waterfront Recreational Development (Kelowna, B.C.) Single Family Home Purchase (Richmond, B.C.) Commercial Strata Purchase (Vancouver, B.C.)
1st mortgage provided by MANDATE 1st & 2nd mortgage provided by MANDATE 1st mortgage arranged by MANDATE 1st mortgage provided by MANDATE
MM2008Summer.indd Spread 2 of 2 - Pages(2, 3) 7/8/08 4:58:44 PM