The Real Estate Podcast

NEW Changes in Mortgage Policies | The Real Estate Podcast EP307

In this episode, Adrian Trott and Ariel Kormendy dive into the latest updates in the mortgage industry and how they will impact the housing market. From the increase in the insured mortgage cap to the effects on first-time homebuyers, this podcast covers essential insights for anyone looking to buy or sell in 2024 and beyond. We also discuss potential market trends, our early predictions for 2025, and the broader implications for sales and pricing. ************************ 0:16 – Intro 03:47 – Discussion of New Mortgage Changes 05:18 – Insured Mortgage Cap Increase Explained 06:19 – Variable vs. Fixed Mortgage Rates 07:01 – Market Amortization Changes and Resale Impact 08:27 – Real Estate Market Forecast for 2025 10:16 – New Build Buyer Incentives 11:15 – Long-Term Market Impact of New Mortgage Policies 13:39 – Buyers’ Confidence and Market Shifts 15:05 – Real Estate Market Inventory and Spring Market 16:19 – Competition in Condos and Townhouses 17:46 – Upward Market Mobility: Buyers Upgrading 18:20 – How the Insured Mortgage Cap Affects Higher Price Ranges 19:10 – The Real Estate Chain Reaction ************************ Want more real estate podcast discussions? Watch it here: youtu.be/uLhNb8fdHt4 Listen to it here: http://www.soundcloud.com/ktrealty Catch clips and highlights of the show here: http://www.instagram.com/kormendytrott ************************ Our Social: Instagram: www.instagram.com/kormendytrott  YouTube: www.youtube.com/user/kormendytrott  Facebook: www.facebook.com/kormendytrott  Twitter: www.twitter.com/KormendyTrott Soundcloud:http://www.soundcloud.com/ktrealty  LinkedIn: www.linkedin.com/company/ktrealty  Pinterest: www.pinterest.ca/KormendyTrott  TikTok: www.tiktok.com/@kormendytrott?lang=en ************************ In 2011, Ariel Kormendy and Adrian Trott formed The Kormendy Trott Team, now often referred to as KT (thanks to our logo!). The foundation of KT is built on providing unmatched value and attention to detail in everything we do. From our ever-expanding, comprehensive list of exclusive services to our expertly trained team, you will receive the highest level of care throughout your entire real estate journey. Originally a team of two in Milton, Ontario, the KT Team has grown into a large team of exceptional REALTORS®, a client-care department, and now includes KT media, KT Commercial and KT Property Management to provide our clients with a complete lineup of genuine, professional, and proven services across Halton Region, Peel Region and the surrounding Regions within the Greater Toronto Area. We’d appreciate it if you’d subscribe and follow us for behind-the-scenes footage, real estate tips, industry secrets, exclusive listings, The Real Estate Podcast, and more!

Broadcast on:: 30 Sep 2024
Audio Format:: other

- There were some announcements pertaining to mortgages. - Yeah, perhaps we'll even discuss our forecasts and early forecasts, which we don't usually do. - Well, I was planning on talking a little bit about that. - All right. - So I might surprise you. - Maybe I'll surprise you. Hey, what's up everybody? Welcome back to the Real Estate Podcast. Today, Ariel and I are talking about the new mortgage changes, but not just the changes that are here, but how they affect you or put this in the context. So hopefully get some value out of it. Enjoy. - Welcome to the Real Estate Podcast, your go-to source for raw, unfiltered stories and expert tips. Whether you're a buyer, seller, tenant, landlord, or realtor, join us as we dive into the world of real estate. - I watched a video. There's a guy, I don't know his name, Australian guy. And he does a lot of stand-up speeches, whatever, like TED Talks and stuff like that. And he talks about changing your personality. And there's one interesting one. He's like, you can change who you are completely and become a new person. It could be your voice, your, how you dress, how you act, your mannerisms. And then people are like, well, it feels really un... It doesn't feel like me, it just feels disingenuous. And he's like, well, that's just because you're so used to you for the last 30, 40 years, but you can be anybody. So now I'm gonna... - Be a cowboy. - Be a cowboy. - Great. - Adrian went to Nashville and he's always wanted cowboy boots. So he's rocking his cowboy boots today. - Yeah, for those watching on YouTube. - Also got a hat, a cowboy hat, where's the hat? - I'm not yet comfortable wearing the hat, but... - I find that might be a little ridiculous. - Now, I think it's a good look, personally. - You see, I've known you, though. - It's very uncommon. Yeah, you have. - Since 20 years or something, whatever it is. - Over 20 years now or about 20 years. And back then, you were kind of like pop star kind of... - I used to straighten my hair with a flat iron and when I had hair. - You had a lot of hair. - I did. - Yeah. - And used to dress it in like fashionable... - Yeah, like name brand shit. - Name brand, trendy kind of clothing. - Yeah. - Oh, how the times have changed. - Yeah, but I feel this is like in my roots. Like if there was such a thing as... - Pause your comfortable men. - If there was another life, I feel like it would have been more country. I used to go to a ranch when I was younger to work for a little few weeks, over a couple of years. - And they had a barn and horses and I loved it. - So... - All right, speaking of times are a changing. There were some announcements for some changes pertaining to mortgages. - Yeah. - That's what we're gonna talk about today. - Well, the next couple of podcasts revolve around things that could have a big impact on the market. And maybe in one of them, perhaps we'll even discuss our forecast, an early forecast, which we don't usually do for 2025, which I think is important for people that are on the fence. - What do you mean every year we provide a forecast? - Yeah, but usually in December. - Oh, you wanna do an early forecast? - I think it would be beneficial. - Well, I was planning on talking a little bit about that today. So I might surprise you. - Maybe I'll surprise you. - And in a couple of weeks, we actually have one of our mortgage brokers joining the podcast as well. - Yeah. - So he'll be able to provide insight from what they are seeing from the mortgage side of things and maybe even dive deeper into these topics. - And he usually sees changes before we do. - Right. - As far as applications coming through, and that's usually the first step. - Yeah. They have the first pulse on the market, really. - Yeah. - All right, you wanna talk about these changes? - Yeah, definitely. So the first one may be the most important one. - Oh, fairly substantial. - They are. The insured mortgage cap is going from a million dollars to $1.5 million of 50% increase, which now means that you can purchase a home up to $1,499,999.99 and have an insured mortgage on it, which means less than 20% down. It also generally means a lower mortgage rate, because when you have a mortgage that is insured, you can usually get a better mortgage rate because of it. - Yeah, that one, I've monitored that a little bit over the last few months, even, and it's usually minimal. It's like zero-minimal points or two. - I find the lenders right now are really, especially the big banks, are really battling for people's business. Like they're out there hungry to get your mortgage right now. - Yeah. - So I think it's a really good time to get into the market, and we'll talk about that. I think it's a good time to get into the market with a variable rate, and potentially wait until it does come down and then lock it in later. - Yeah. - I had the discussion with someone yesterday, called me an hour before he was going to his mortgage agent to ask my opinion of fixed versus variable, and I said, "Well, I'm no mortgage agent," but I think variable right now would make sense. We know the direction of rates is likely to trend downwards. It's easy to change it later at minimal cost to get out of it and lock it in. So I think that's a smart decision. - With your lower octave, you're also speaking a lot softer. Robbie's gonna have fun editing this post-dramble. - I'm not intentionally speaking deeper. - Usually you speak really loud. - Do I? - Yeah. - Well, I do when I'm, oh, you say I'm loud on the phone. - You're extremely loud on the phone. - Yeah. - Well, it's gonna go a long distance. - Yeah. - No, one thing I don't think people consider, like there's a lot of chatter about the amortization change, but I think one thing that people who aren't immersed in the industry don't take into consideration about how it could influence resale values, home values, is homes that hover around a million dollars. There's a lot of times where, let's take some examples of townhouses in our community in Milton. There's a lot that are selling at 9999 or 999,000. - We've had that with some of our listings where that was the cap because of the-- - Absolute barrier. - Yeah, so now that's obviously thrown out the window. - Yeah. - And for people that don't understand that, it's just simply because if you pay a million dollars, your deposit goes up significantly. - And a lot of people, you're new, pardon? - You're down payment. - Yes, sorry, you're down payment. And a lot of people just didn't have that money, or would rather not do it. So there's this barrier for certain segments that kept the prices under a million. And now that's gone. - Yeah. Yeah, so if you go up to 1.1, you theoretically could still put a 5% down payment. - Right. - So that, - So, you know, I wanna talk a little bit about how that's gonna affect the market, certainly for the balance of this year then going into 2025. Because my crystal ball, if you wanna talk about predictions, is that 2025 is gonna be what? - I think our balls are the same this year. - Oh yeah, are they? Yeah, well, we- - Oh, we usually have different crystal balls. - Yes, well, we're also gonna have to do a recap because going into 2024, we did our projections. - Yeah. - And they were different projections, so we'll see who's right. - We gotta wait for December. - Yes, that one will have to wait for December. So for those of you listening and watching, make sure you subscribe and follow because we're gonna see who's right and who's wrong. But this going into next year, I think, yeah, you and I are for once. - Yeah. - Our opinions are very much aligned that it's going to be a good, very good year in real estate in terms of sales volume and in terms of average sale price. So why does that happen? We'll talk about that. I wanna go over the other changes that's gonna affect the market. So one of them being amortizations now have been loosened up a little bit with longer amortizations available for first-time home buyers and for buyers of new builds. - I don't understand the reason. I haven't put a lot of thought into it, but I don't understand the reasoning for doing that and excluding resale for second-time buyers or whomever's that's not a first-time buyer. - I tend to believe we might see that change and it being right across the board versus specifically segmented to those two types of buyers. - So the only thing-- - But I can tell you why they've focused on those twos because better affordability for first-time buyers, younger people, younger-- - First-time buyers, I get it for sure. - First-time buyers, you know, so new immigrants, younger people, whatever, they wanna get them, help them get into the market. So they've increased the insured mortgage cap to 1.5 million and now extended amortization. So your barrier of entry is lower and your monthly carrying cost is lower. So essentially making it more affordable to get into the market with the new builds, they're just trying to spur more activity because the more new construction that is sold, the more applications that will go in. And I think in our next podcast, we're gonna dive into the applications and what's happening behind the scenes, but they're trying to spur activity. So I think it's a very, very strong move to help the real estate market really bounce back because over the last 18 to 24 months now, since we started seeing some of the activity dip off in terms of sales volume, started seeing the interest rates rising to bring the inflation down. Now inflation is at what's considered an acceptable level. Sales and pricing right across the GTA have been pretty stable. So I think this is gonna spur a lot of activity. - Well, I think it not only encourage and provide support to developers to encourage more new construction, but also potentially take away or discourage or slow down investors that are buying resale and doing Reynolds and flipping and stuff like that. - So how do you think, and I'll give you my opinion, but I'll ask you first, how do you think this is actually, why is it gonna affect the market and how do you think it's gonna affect the market in the next 30, 60, 90 days? - Well, I mean, it's made it more affordable. I mean, the still the biggest issue is still supply and demand, always is. I mean, there's obviously other factors as we've seen with the interest rate hike sort of the last several, a couple of years and how that's impacted things 'cause people always said, oh, it's only supply and demand. Well, obviously that's not the case. Affordability is the factor and the interest rate changes just made it not feasible for many people to buy. So everybody put things on hold. So this will change that. So rates have come down. They will probably continue to come down. The extended amortization, the lower down payments and there's a lot of changes that are now gonna bring buyers into the market. And I think buyers are a lot more confident now than they ever have been over the last couple of years. And I'm hearing that in conversations with people. We're getting a lot of calls with people that are now contemplating moving. And these are all indications that kind of give us insight into what's to come before we start reading about it in the paper or online. Yeah. So that's, yeah, so I think we're heading to a busy spring. I don't think things will go crazy like we've seen in the past, but it'll be significantly more activity and I don't know what numbers I'd throw right now, but higher, the prices will go up significantly more than they have over the last year or two. It depends on supply. Yeah. So there's enough inventory on the market right now that it's a pretty balanced market, right? It's not a buyer's market. It's not a seller's market. It's relatively balanced. And I'm talking about our trade area, Halton and Peel region and immediately surrounding areas. I can't speak to what's happening in Whitby as an example. I don't know. I don't follow that market. But if the supply, over the next 30, 60, 90 days, isn't keeping up with the sales, that means the inventory levels are going to go down and it typically goes down going into the winter months. And that's why we see oftentimes an early, quote unquote, spring market. Last year, it was a little bit softer than normal, but it... We still saw it. If you look at it from a graph perspective, you would still see a spike run at the same time. Right. So what I think it's going to do right now, because again, with this insured mortgage cap now being increased 50%, we are going to see a lot of activity in the under $1.5 million price range, which obvious reasons. First time home buyers, new immigrants, people trying to keep their budgets down like, there's going to be a group of the population that all of a sudden finds themselves in the real estate market again or now. So townhomes. I don't know that condos, because there's a lot of inventory for condos, especially if you go to the Toronto areas, even you look at Milton now, the condos that are on the market, a lot of speculative buyers that bought a few years ago and now they've listed the place for sale because if they rented it, they'd be in the red still. I got tons of them closing now as we're going to occupancy now as we speak. Yeah, and quite a few buildings being built. So the competition for condos in Milton, Oakville is not as intense, but same thing in Oakville and Burlington, see a lot of condos, but townhomes, smaller detached homes or less costly detached homes, we'll say, I think they're going to see a big spike. So what happens with the sellers of those homes? Well, oftentimes if they bought their home five to 10 years ago, which the average seller usually falls within that range, they've got equity in it. Yeah. So now they're going to take that equity, they're going to see the rates are coming down and they're going to upgrade, which it takes time for that upward trickle effect to happen, but it's going to happen. So now all of a sudden, if you have a townhome and you sold it for 1.1 million, now you might be in the market for something that's 1.5, 1.6, 1.7, and then that person sells, well, now they want to upgrade 'cause rates are coming down. So now they're looking at 1.9, 2 million and so on and so forth. So it takes a while for that to snowball, but it's going to happen. Well, and with the change in the insured mortgages going up to 1.5, I think when it was at 1 million and we had that threshold for townhouses, who are often first-time home buyers, we saw that barrier because of the limited down payment. Now that it's up to 1.5, I don't think it'll affect that segment so much because most people spending in that range are likely selling a property and have more equity to cover the 20% down anyways because not many people can afford a mortgage with 5% down to 1.5 million. So I think that will now become a thing of the past, essentially. There's certainly going to be exceptions, but I don't think we'll see that so much. So I'm just thinking like my house and your house are kind of in that range. - Right now. - Right now. But I don't think that will hold houses to that number because of, for the same reason that did townhouses. - No, and again, I'm speaking in terms of Milton because the numbers change if you go into Oakville. Burlington and Milton, very similar. But if you go into Oakville, a town home still falls into that $1.5 million category versus Milton where it's kind of like 1.1, 1.2 would be your cap. - Yeah. - So you take a 2,000 square foot detached double car garage home. Today, you can buy something between 1.2 and 1.4 million dollars pretty easily. Will that be the case going into 2025? I don't know, I don't think so. I think that those type of homes are going to see a lot of activity and it makes sense. So good news for buyers, good news for sellers. Is it a good time to sell? Is it a good time to buy? Yes, there's reasons to believe that the, and I'm not a big fan of saying, oh, this is a great time to buy because, you know, and there's lots of quotes out there. I think Sherry posted one the other week about the best time to buy real estate was five years ago. And that's the case, right? It's the best time to buy the Facebook stock was five years ago, like whatever. - There are certain exceptions. Like right now, I have a couple of people that have been on the fence about upgrading and upgrading your home. If you're going to a more expensive home, it's better to do it in a down market because the, you know, as a percentage the gap is less. So it's cheaper for you to make that change. I'm encouraging a couple of people right now to, and investors who got one particular couple that want to buy their first rental property. I'm really encouraging these people to buy certainly in the next couple of months because, you know, their money is going to be harder to upgrade, not as feasible for a lot of people and because the gap's going to be bigger and for investors your money's just not going to get you as far. - Right. - Anything else you want to add to this? - So the amortization, going from 25 years to 30 years, again, for first time buyers and buyers of new builds, all this is going to do is keep your payments a little bit lower, more attractive on a monthly basis, carrying costs. - Yeah, the one other thing that I either wasn't, don't even know if I knew about, but I pulled it up today is that if you are coming up to renewal and you want to renew your mortgage, currently you have to go through the approval process if you want to go to a new lender and go through the stress test. They're removing that. - Oh, right. So right now it's really easy to renew your mortgage. - On your principal residence. - It's really easy to renew your mortgage with the existing lender. You basically don't have to do anything. You just, you know, they'll give you whatever rate and you try to negotiate with them and whatnot, but the negotiation factor hasn't really been very strong for people because they, sometimes they can't go elsewhere. - They can't go elsewhere or it's just a lot of work, but now if you don't have to go through the stress test, it makes it so that banks need to be more competitive. - It's kind of, I relate that to, you remember when you had a cell phone and it was locked in with your company and then they remove that. Now all phones in Canada are unlocked, so you can call up, tell us and say, "Hey, I'm just switching over to Rogers." - Yeah, it's great for competition for sure. - Yeah, so I think adding that into the mix, I think it'll be, it'll make a point actually because there's a lot of mortgages that are coming up for renewal this year, next year, certainly next year. Those people are probably, you know, thanking their gods because of the rates coming down and now you add that into the mix. So you got competition rates coming down. So there's all these different angles that are aligning the stars to increase volume and increase the price in-- - You know why this is all happening? - Tell me, Adrian. - There's an election next year. - Yeah, yeah, there's an election. And, you know, the US, if we look at what's happening in there, well, they just reduce their interest rate, half a percent. So interesting what's gonna happen in October. We often follow suit. Although we have, and there's a couple of times, I think recently where they didn't change it. - In the US? - That we still did. - And we did, yes. Yeah, but could we see a half point reduction in October? - Bum, bum, bum. Stay tuned for more. - Yeah, well, on my recent trip to Nashville, we went with a couple friends we met on vacation a couple of years ago from the UK and he owns a construction company. And he said it's been a relatively slower year, but he's got a lot of quotes out for next year, more than usual. - Yeah. - So, if you start looking at all these different industries, you're hearing a lot of the same thing. - Which, unrelated. But if real estate activity picks up, which we are projecting, contractor work picks up. So if you're thinking of doing something in your existing home, yeah, I'm looking at you 'cause you're getting quotes for doing some things around your house. But if you need a contractor to do something in your house, you might wanna be talking to them now because we will see a lot of unavailability due to demand. - Yeah, we're gonna go through a period of time where it's gonna be really hard to get people in. - Yeah, it is. - And the cause, it already is, and the, well, not so much now, like the guys I've had coming through, some of them are saying that it's really slow. - Yeah. - But that's gonna change as the rates come down. - As soon as people have more money available to them at a cheaper cost. - But not only-- - They're gonna go back to spending. - Not only the funds. - Canadians are good at spending too. - But not only that they're gonna go back to feeling comfortable spending or being able to spend, but that half of the workforce have gone back to the, like, the one guy I often go to for floors and stairs, he had, I don't know, half a dozen guys working from him. They all moved back to Poland, right? - Yeah, I think you mentioned that in a recent cast. - Yeah, so there's gonna be a huge shortage of trades, people, certainly good ones. Combine that with an influx of customers, people wanting to spend money, it's gonna be a challenge, so book it in soon. - Yep, so we'll wrap up this episode. And next week we're going to talk about what? - I think what we're talking about next week is changes to the vacant property tax in Toronto. - Oh, right. - And how that will influence things in the market as well. - Yep. - Maybe the same, maybe different. You're gonna have to tune in to find out. - There you go. Well, if you're thinking about buying, selling, leasing, investing, we haven't talked about investors. - No. - This is a great time. We saw investors just, again, we're gonna end it, but side note, we saw investors bailing on a lot of rental properties over the last couple of years. I think there's gonna be a bunch getting back into the market now and over the next few months and certainly into 2025, rates coming down, prices are low, prices have bottomed out, rates are coming down, like the stars are aligning for investors. - Well, I have a couple who are customers of our property management company, Renty, that were contemplating selling this year because it wasn't really feasible to carry it 'cause they were out of pocket a lot of money. And I convinced them not to because I think if they can weather the storm for a year, if that, they'll be in a really good position. - Yep, something to consider. If you have any questions, comments, you need some help buying, selling, you need a consultation. - Free consultation. - Free, free consultation with one of our Realtors, call today at the number below. We'll see you next week, Joe. - Or maybe I should come up with a new thing. - Cut. - Thanks for watching. Hopefully you got some value out of this week's episode of the Real Estate Podcast. And if you agree with us, get the ball rolling, start the process, get your mortgage approval because 2025 is gonna be a big year compared to the most recent. Thanks for watching and subscribe so you don't miss out on next week's episode.