Mortgage 101 – How Spring Weather Impacts the Housing Market

Dan Ahlstrand and Clinton Wilkins discussed alternative lending, emphasizing that there are multiple mortgage products available.

Dan Ahlstrand
And welcome back to Mortgage 101. I’m Dan Ahlstrand, and he is Clinton Wilkins. Clinton, that was some interesting discussion surrounding alternative mortgages.

Clinton Wilkins
Yeah, and we don’t talk that much about alternative lending here on our show. And I’ll be frank, I’ll tell you why. That is not my forte. But you know what? Alex does so much alternative lending. He really is the expert. And to be frank, if I have a file that is complex like that, it means that’s alternative lending. I often get him to do it. For me, we’re a bit we’re a good team, right?

Dan Ahlstrand
And it just goes to show you, as I said before the break, that you know, there, there’s more than one mortgage product out there, correct? And then there’s usually not 100% of the time, but usually something that fits.

Clinton Wilkins
There’s always a way to make it work. And I’ve said this before, we can get a mortgage for everyone. You know, obviously, the harder your situation is, the more skin you have in the game. Sometimes that is a limiting factor, though, right? You know, maybe we can only get you financing at 65% of the purchase, or 65% on a refinance, and people just don’t have enough resources to make it happen. Make it happen. But there’s always a way to make it happen. The challenge is that the harder the file, usually, the higher the rate. Typically, you know, by and large, if you’re getting approved for prime financing, the rate’s all the same. I hear this from customers all the time to say, Well, I have a 900 credit score, which we consider a unicorn, and they’re like, “Well, I should get a better rate than that.” That person who only has an 800 credit score, no, it’s either approve or decline. You know, you’re not getting a better rate based on the score. If you’re getting approved for prime lending, it’s the same price for everybody.

Dan Ahlstrand
What do you need to get Prime Lending? What’s the magic score?

Clinton Wilkins
Typically, the cut-off is usually 600, but it’s very challenging to get a prime file approved at 600. Typically, you know, if we’re looking at anything below 700, we need more of a kind of an explanation about why that score is low. Is it utilization? Were there any missed payments? You know, was there a consumer proposal or bankruptcy? Are people over limit? You know, what’s the reason that the score is low? And you know, we see clients anywhere from a 400 credit score to a 900 credit score to a 900 credit score and everywhere in between. And there’s always a story, but that’s our job to ask the customer the story and put the best foot forward. And that’s why we’re looking at income, we’re looking at assets, we’re looking at credit, and we’re trying to put it all together and make sure that we’re giving the best solution to the customer.

Dan Ahlstrand
We talked about it right from the beginning of the show today, about the weather and that we’re supposed to be in spring. Mother Nature has been uncooperative all the way across the country, almost including here in the Maritimes. Clinton, we know that spring is a busy time. You said that it’s already starting to pick up at your office.

Clinton Wilkins
Yes.

Dan Ahlstrand
I would imagine there will be a flux of people once the grass turns green and we start to have those warmer days that are going to be enough to push them into making the decision to either refinance or to take a look at a new house.

Clinton Wilkins
I think it’s always busier this time of year. I always say ‘Week Three March’ is when it starts getting busy. And I would really say it’s the same. It was the same this year. I think that it’s going to be even busier when the weather shifts. And even though we always feel that weather shifting, yes, it’s light out longer right now, but it’s still very cold. And I think as soon as that weather shifts from a temperature perspective, we’re going to see the temperature of the real estate market also shift. That’s from a purchase perspective, and I think also a refinance perspective. You know, people want to come out of their houses again. They want to start doing transactions. They’re feeling more positive and more optimistic. And you know, it’s the same thing in our business, I think, as it probably is in a lot of different businesses. You know, people don’t want to be out and about as much during the winter months.

Dan Ahlstrand
And you get a chance to go in and explore the property you’re looking at. If you’re buying a single-family detached, you can walk around the house. You can look at the foundations. You can see what the deck looks like.

Clinton Wilkins
The snow hides a lot of imperfections, right? Think you start seeing, you know, what you’re really dealing with once that snow has melted. Luckily, there’s no snow on the ground here, but we’re not really seeing that green grass, you know, as early as we might have seen in previous years.

Dan Ahlstrand
All right, Clinton, we’ve talked about this in the past as well. We hear the stories, right? We listen to the news. We hear the stories about the real estate markets in different parts of the country, kind of horror stories, very flat, some very scary.

Clinton Wilkins
Yes.

Dan Ahlstrand
You and I last time talked about the fact that the Maritimes in Nova Scotia are kind of insulated from that… still the case? Are we still seeing an increase in property value here?

Clinton Wilkins
Absolutely still the case. You know, I think we’re gonna see slower increases. You know, we’re not seeing double-digit increases anymore. And last year we saw, you know, two, 3% increase. I think that’s probably gonna be the story again this year. I’m okay with it even being flat. I wanna see transactions happening. I wanna see listings. I want to see more people getting into homes, but it’s a more balanced market. Sellers are not holding the power, nor are buyers holding the power, you know. And I think that’s a better place to be. You know, we’re seeing conditions, condition dates, maybe being a little bit longer. People are being a little bit more negotiable. And, you know, it’s a better experience, I think, for both sides. Divides are going through this type of transaction. And, you know, I think that there was at one point here where people were getting a little bit unrealistic with property values. I think that’s kind of shifted a little bit. And I think when we’re talking about assessments, and I know we’ve talked a little bit about assessments here in the previous segment, I think the real estate value is much closer to the assessment value today than it has been in years.

Dan Ahlstrand
How about the competition? And the reason I asked that is that we all heard the stories about somebody putting a for sale sign, if it even got to that point, and have 20 offers and people lined up for open houses. What’s that like now? I do not

Clinton Wilkins
I do not think that’s the case. At all. I think only on these properties that are really listed below the market value, I think maybe then there’s more competition. And I also think the properties under $600,000 have more competition. Anything above $700,000 seems to be sitting longer, not that it’s bad real estate, not that people cannot qualify, but I think people are being more conservative with how much they want to spend, because they’re taking into consideration the operating costs of these homes. How much is the mortgage payment going to be? Well, now they’re thinking about fuel. They’re taught. They’re thinking about food, and I think they’re using their taxes. They’re thinking of using a smaller percentage of their household income for housing. I would say in 2020, people were all good to spend, you know, 42% of their income on housing. Now, I think they’re willing to spend a little bit less because they want to have more of a buffer in place.

Dan Ahlstrand
And they have to pass the stress test. Right?

Clinton Wilkins
Absolutely. Stress Test. Every transaction, you know, especially if you’re doing a purchase or refinance, every transaction goes through a stress test. We’re qualifying you at 2% above your contract rate currently.

Dan Ahlstrand
And there are also some additional pressures being added. Right? We saw in HRM itself, the council passing an increase of seven or nine and a half percent on the average house value. Nova Scotia Power is going to bring us some rate hikes. We know they’re going up, just don’t know about how much, yet, could be up to 8% over two years. Water rates are going up. Nothing’s getting cheaper, is what I’m getting at.

Clinton Wilkins
Nothing is getting cheaper. And I would venture to say things overall are getting more expensive faster than people are making more money, Dan.

Dan Ahlstrand
Right.

Clinton Wilkins
Overall. Yes, there are some big groups that are starting to make more money, like DND. So happy because we have such a huge client base of military folks here, I would venture to say probably almost 30% of our clients are DND, which is a big percentage. I mean, think about where we are geographically. We have an office at 99 Wyse Road. Well, we’re very close to Shearwater. We have an office at 5151 George Street in Halifax. We’re very close to the dockyard. People are passing these offices every single day. So a lot of our customers are our military. So very positive, seeing military members making more money.

Dan Ahlstrand
And all that money that’s coming in, $3 billion to Nova Scotia.

Clinton Wilkins
Certainly, and a lot of spending that’s happening here. So very, very positive. When I first started doing this 20 years ago, folks who were in the military, they were getting paid. These were above-average jobs. But then all of the private sector started going up and going up and going up, and the military jobs didn’t look as rosy as they did, but I think things have reset a little bit here now, and I think it’s kind of levelled that playing field more.

Dan Ahlstrand
And it’s tough. I’m a former military guy myself, and when posting season comes and you’re you’re going on a house hunting trip and and you’re trying to get all that stuff organized, you know, knowing that that in a place like Halifax, where it’s very competitive in the housing market, that you can, you know, walk by those offices, and they’re right there, and you’re there, certainly with some expertise to lend them a hand.

Clinton Wilkins
And we’re here to help, you know, we deal with the Bank of Montreal. Bank of Montreal is a huge, you know, involvement with the military, and we, you know, deal with BMO every single day. We also deal with other bank lenders and a variety of different lenders that can help all kinds of consumers. You know, one thing that we obviously take into consideration, especially around DND, and we’re basically our posting season now, is what happens if that military member gets posted again. We want to ensure that they’re in a product where either there’s going to be a penalty waiver or it’ll be a very low-cost penalty if they need to get posted midterm. So that’s one thing that we take into consideration. Taking into consideration everybody who’s in the military.

Dan Ahlstrand
Clinton, we’ve only got about a minute left. We talked about some of the world events that are impacting prices. We know the Bank of Canada is going to make a decision in the coming months.

Clinton Wilkins
Correct. Dun dun dun!

Dan Ahlstrand
What’s the prediction this time around? Flat, are they going to lower rates, or is it dependent on what happens in the war?

Clinton Wilkins
I think the war is a huge factor. If that was not a factor. Dan, I would venture to say the Bank of Canada would lower the key overnight rate because inflation is low, outside of the cost of oil, and GDP was low. Job numbers were really terrible. I would say the Bank of Canada would lower the key overnight rate if it weren’t for the concern around oil and this war. So that’s one thing that we’re obviously very closely watching. And you know, I’m optimistic that eventually we’re gonna have a lower cost of boring. But there’s gonna be some things that are outside of our control here in Canada.

Dan Ahlstrand
Well, that’s just about gonna do it! It goes quickly when we’re having fun, right? Our thanks to Alex for joining us. Give him a raise, will ya?

Clinton Wilkins
Oh, of course. And you know, especially his 10-year anniversary, what do we have to do now!

Dan Ahlstrand
Have a fantastic month, everybody. We’ll be back in May.

Clinton Wilkins
We’ll be back in May.

Dan Ahlstrand
Have a great day. We’re back in a month.