Mortgage 101 – Will Spring bloom a seller’s market? | April 3, 2023

The market is changing. How are these changes affecting buyers and sellers? In this episode, Clinton Wilkins and Todd Veinotte talk about the changes in the market, protection for buyers and sellers, refinancing at renewal, and the different kinds of lenders.

Todd Veinotte 00:05
All right, welcome back to Mortgage 101 your guide to homeownership with Colton Wilkins and myself, Todd Vienotte. Hopefully you’ve gotten a lot of good information out of this so far. I know that we certainly enjoyed doing it. And we’re going to talk first we got a couple things we’re gonna get to this segment, but we want to talk with the market itself. What are you hearing from your realtor friends, and you would have many of them, about the the local market right now?

What’s changing in the local market?

Clinton Wilkins 00:28
Well, there’s definitely more listings. A realtor that we’ve had on our show, James Dwyer, he put out a tweet the other day, that there were 30 new listings on Monday, which is up from like an average of like, five or six a day. That was last month.

Todd Veinotte 00:42
30. Usually there’s been 5 or 6.

Clinton Wilkins 00:43
5 or 6. So there has been a spike. His hypothesis is, it’s people that have bought homes in the last couple of years that – Can’t afford them? I don’t know if that’s 100% true. I don’t know if that’s 100% true. I don’t know if there’s enough data to back that up. I think in some cases, yes there will be. I think, in some cases, if people did shorter term fixed, if you’re in a variable if your employment changed, you’re maybe listing your home, especially if you bought this prior to 2020, you probably have some equity.

Todd Veinotte 01:13
Yeah, you know, I’ve got – I’ve visited some friends in the Spryfield area, but there’s a large subdivision off Herring Cove Road, the new construction, all new construction. And they’re nice kind of sleek, modern looking houses. It’s kind of three level type thing, the whole thing, but they’re looking and getting 7 plus $100,000 for those units. And I’m not saying that that’s overvalued, or anything like that by any stretch, but it just, it seems to me that that that’s kind of a an I don’t like to say middle income type area or whatever. But it’s not an affluent area. Let’s put it that way. And it wasn’t all that long ago, a 700,000, $750,000 home was an affluent area, that would be a bet you could live moved to Bedford for $750,000 at one time, right?

Clinton Wilkins 02:01
Like new construction.

Todd Veinotte 02:03
Right. So what do you, well obviously not now. So but so what happened I guess, you mean, you know, this market well, I’m fairly new to the city I’ve been here for five years. But what happened?

Clinton Wilkins 02:14
Things have shifted? Obviously, things have shifted. The values have gone up, Todd, over the last, you know, two and three years, we’ve seen constant growth. And is the price gonna continue going up at this level? I don’t think so. I think the price is now going to start leveling off. But are the prices going down? The realtors are saying the average sale price is down. But that doesn’t necessarily mean the price is down. We think that maybe some of the price, the homes that are selling are some of the lower end real estate. So that’s why the average sale is lower, because people can afford less due to the rates.

Todd Veinotte 02:49
What’s lower end? like 500 600,000?

Clinton Wilkins 02:51
Like 300,000. 200,000.

Todd Veinotte 02:54
But there’s not a lot of those around.

Are we entering a sellers market?

Clinton Wilkins 02:56
They exist, though. They do exist. And maybe you have to go, you know, either it’s properties that need a lot of improvement, or further out of the core. They do exist. You know, I think the average is still somewhere around that $500,000 mark. That’s what the average home price is. And coming into the spring, and this is what’s going to be interesting. Are we going to get into really a seller’s market again? Are there going to be more buyers in the market, than there are going to be sellers? People have hit the pause button. We talked about it in November or even during Financial Literacy Month. We feel things are slowing down. There are less transactions happening. There’s less sales happening. People can’t pause forever. There’s an unsatiable taste to buy real estate. But there’s a need for housing. Apartments have a 1% vacancy. Buying a home, is that cheaper than renting? In some cases yes. In some cases no. But typically homeownership is an investment. It will appreciate. Do I think it’s going to appreciate a double digit increases going forward? Likely not. In Halifax, we’ve had very steady growth over the years 1, 2, 3%. We’re gonna get back there, we’re gonna get back to that. But these new construction that you’re talking about, you know, maybe that’s the new price, you know, $700,000 for a new construction property. The cost of materials certainly have increased. And that all kind of comes into play.

Todd Veinotte 04:30
It’s just interesting, though, how areas that were – the gentrification I guess use that term of areas and how that elevates everybody. And that’s great for me, by the way in the Spryfield arera.

Clinton Wilkins 04:41
Well, you’ve done it. You’ve done it. Right. And it was the same thing kike when you bought your property, it needs some work. You did the work. And guess what, now it’s doubled in value.

Todd Veinotte 04:52
That’s right yeah. Yeah, exactly.

Protecting buyers and sellers

Clinton Wilkins 04:54
Right. And a lot of people are in a very similar situation. Some people have done a lot work to their property, some people have done zero work to their property. But the market plays a piece here in terms of how properties appreciate. But we can’t always just be relying on the market. Right. Because now that the market I think is going to be more turbulent IE, are we gonna have as many listings in the spring? I hope, I hope there’s a lot of selection. And I hope the market is more balanced for buyers and sellers. It was very fast and furious for a long time, where there were so many offers, people were bidding way, way over like $100,000 over the asking price. I think Realtors were listing properties very low with the intention that they were going to get those bidding wars. And I don’t think it’s good for the market. I think having a balanced market makes it easier for everyone. People can put in their standard conditions, we can ensure everyone is protected. We want to protect the buyers and and the sellers. And for me, I’m in mortgage finance, I want to make sure it goes smoothly. And I want to make sure our client, who is the buyer, is going to be protected and getting good advice.

Renewal is an opportunity for refinance

Todd Veinotte 06:04
Alright, let’s talk refinance. When’s the environment good to refinance for people and as individuals?

Clinton Wilkins 06:09
I can tell you, we are seeing a ton of refinance at renewal right now, Todd. And a lot are coming out of the Big Five. And I’m not saying that we’re not going back, I’m not saying that we’re not taking those back to another bank of the big five. I’m not saying that.

Todd Veinotte 06:22
Yeah. You’re saying they’re leaving the big five?

Clinton Wilkins 06:26
Alot of people that are coming up for renewal are leaving the Big Five, because the rates at renewal are insane.

Todd Veinotte 06:34
Really? What’s insane?

Clinton Wilkins 06:37
Like 1% higher than what’s available in the marketplace. In some cases, more. In some cases less.

Todd Veinotte 06:43
What number are you talking?

Clinton Wilkins 06:44
Like above 6% in many cases.

Todd Veinotte 06:46
And they would have been what going in to the refinance? 3? 3 and a half?

Clinton Wilkins 06:51
Yeah, and many cases people are seeing rates at on the renewal about double what they are coming out of well. So I think a when you’re at renewal, great time, yeah. Regardless, if you want to refinance, or do a renewal, we can get involved in a renewal, which we call a transfer or switch to another lender with no new funds. That’s a transaction that we do as well. But I think we need our renewal. Definitely at least check things out. Yeah. If your income and the credit and everything’s good, check it out. Check it out.

Todd Veinotte 07:23
So if it’s doubled, what does that mean for your payment?

Clinton Wilkins 07:28
Your payments, not doubling?

Todd Veinotte 07:29
No, it’s not doubling.

Clinton Wilkins 07:30
But the interest cost is doubling. And your amortization is not getting longer. Right. So I think that’s something that can have a significant impact to our households monthly finances. And I can tell you, I’m getting a ton of calls. And I just think the pricing scheme with the Big Five, they took on so many mortgages in the last three years. Their appetite is going down. They want some of these mortgages getting paid out. So that’s why they’re not getting super aggressive. Different lenders have different appetites for mortgage lending. The interesting thing is, there is some legislation changing with the federal government, which means these lenders have to have more funds on deposit to lend out money for mortgages, which means that mortgages are going to become a little bit more expensive, down the road when this actually happens. What’s the time horizon for that? This is like this year. And now we’re talking like a margin of like, is it five basis points, 10 basis points, 50 basis points.

Todd Veinotte 08:27
This isn’t necessarily a bad thing that that they have that on? Yeah, we want liquidity,

Differences between lenders in the mortgage market

Clinton Wilkins 08:33
We want the banks to be liquid, we want the banks to continue lending. And we want them to have the ability to continue lending. And we need them. I’m not, you know, saying that the Big Five don’t play a very important role with what we do. We deal with many of the banks in the Big Five every day. And also, some of the trust companies that we deal with, they get their funds from the Big Five. So all of these banks are participating in the mortgage market. If they’re debiting, your account or not. Your funds are coming from depositors, from all of these big five institutions.

Todd Veinotte 09:08
Alright so where do people go if they’re not going to the big banks? You’ve got a lot of other lenders?

Clinton Wilkins 09:11
Yeah we have about 40 lenders. You know, there’s trust companies. There’s banks that don’t have branches. There’s credit unions. Yeah, I hear it everyday.

Todd Veinotte 09:19
Let me ask you this question. Are some people almost snobs about this to them? Like, I need a bank. I’m sorry. I can’t go with it It’s like, why do you care once you have their money funded into your accout.

Clinton Wilkins 09:31
Everyday I hear it.

Todd Veinotte 09:32
Is that right?

Clinton Wilkins 09:33
And I say, and honestly, a couple of our biggest lenders that we do business with every day are the big five. I’ll tell you why. We really need them in more rural areas, because some of these smaller lenders want to lend in Metro. Okay? So we do a lot of business with traditional lenders a lot. But that doesn’t mean that they have the best price and the best terms. Typically if you have a fixed rate with a Big Five bank. If you break that mortgage early, you will pay a bigger penalty than you will if you have a mortgage from a moto line lender. The reason being is, you’re not just paying back an interest rate differential. In many cases, you’re paying back the spread in terms of what the discount is. So that penalty is typically much more. So you need to know that going in. Some people want to deal with a bank, because they’re like, if I have a problem, I can just walk into the bank, right? Well, if you have a problem, you can come to us. Or you can call servicing. But you don’t normally touch your mortgage that much. What would you do is you touch your chequeing account alot. But yes, guess what? People deal with chequeing accounts at simply financial and all this stuff, and they deal with non non bank lenders. So although I understand maybe the rationale of feeling more safe with the Big Five, it’s all the same. They’re all federally regulated. All these banks, the money’s really coming from the same place. And sometimes, I’m not saying the rate is the most important piece. But there’s a factor between rate and terms, and policy, and approval and appetite that all factor in to where we potentially will fund someone’s mortgage. And relationships change over time. And bank lender’s appetites change over time. I’m thinking some of some of the banks in the Big Five right now, that basically almost have exited the mortgage market. Not that they’re not doing mortgages, but their rates are just that much higher than other lenders, that their attitude is we don’t want new mortgages. We want our mortgages paid out, because they want more liquidity.

Todd Veinotte 11:36
But some people are just just straight up traditional, simple as that, right?

Clinton Wilkins 11:40
Yeah, they certainly are. And that’s okay. And we’ll do those mortgages, Todd. We’ll do them with with the Big Five. But you just need to understand sometimes that comes with an additional cost.

Todd Veinotte 11:50
Yeah, absolutely. Alright. So we got one more segment. Big, exciting segment coming up. What do you want to talk about?

Clinton Wilkins 11:55
I think we’re definitely going to talk about what is actually going on with rates. People are asking me every day.

Todd Veinotte 12:00
Okay, we’ll be right back.

Clinton Wilkins 12:10
If you’ve liked what you’ve heard, and you want to learn more, feel free to visit us online at Tim clinton.ca.