Mortgage 101 – Halifax Housing Crunch

Dan Ahlstrand and Clinton Wilkins discuss the current housing market with mortgage broker Alex Lavender.

Dan Ahlstrand
Hey, and welcome back to Mortgage 101. I’m DanAhlstrand, and he’s Clinton Wilkins, and Clinton, we have a special guest in the studio.

Clinton Wilkins
Do we ever, you know? And I think Alex might have been on the show over the years, maybe once or twice. I know maybe one of our COVID shows we had Todd over in the office. I think he came on, but it’s been a long time, so I wanted to have Alex on, and Alex works with me, so maybe Alex, why don’t you introduce yourself?

Alex Lavender
Hi. My name is Alex Lavender, mortgage broker, Clinton Wilkins Mortgage Team.

Clinton Wilkins
And how long have you been with us?

Alex Lavender
Coming up on 10 years.

Clinton Wilkins
10 years is a long time.

Dan Ahlstrand
10 years of working with Clinton Wilkins.

Alex Lavender
Yeah, I know.

Dan Ahlstrand
You should get a medal.

Alex Lavender
I’m still here.

Clinton Wilkins
Yeah, he should get a medal or a watch or something.

Alex Lavender
Yeah, come on, boss!

Clinton Wilkins
Yeah, start negotiating now. While we’re live on our recording, why not?

Dan Ahlstrand
Let’s put him up against the wall. Big raise, key to the executive bathroom, and a gold watch?

Clinton Wilkins
Well, you know what? He already has that, that golden key. So he’s doing okay.

Dan Ahlstrand
All right.

<strong>Current Market Conditions</strong>

Alex Lavender
I’m doing pretty well.

Dan Ahlstrand
So it’s gonna be interesting to get a different perspective from the way that mortgage brokers in Clinton’s office work from somebody from the inside. So I’ll ask the first question: What’s the market like? Like, we hear all the stories about how busy it is out there, and all this construction that’s going on, and everything else, and we’re way ahead of where we should be with housing starts. You deal with it every day. What’s, what’s it like up there?

Alex Lavender
You know, what? It’s an interesting market, for sure. I mean, it just looks on the horizon of the sky. I mean, there’s still, I don’t know, 20, a lot, 50 cranes, like they’re building nonstop. Now, the only downside is that a lot of the stuff they’re building is rental stock, right? They’re not building condos. You know, we have very few condos here. But, you know, we’re just kind of coming out of that winter, you know, lull where there really isn’t much purchase activity. There aren’t many homes on the market. You know, who wants to move in the winter, right? No one, really. So we’re starting to see a lot more listings come on the market now, you know, sun’s out, you know, Snow’s melted. So I think that, you know, prices are probably going to remain stable this year, maybe a small increase, but I think the sales activity is going to be relatively strong this year.

Clinton Wilkins
I would agree with you, Alex, like, I’m already seeing an uptick in new listings that are hitting the marketplace, and we have a lot of customers pre-approved. a lot, a lot. And, you know, I think over the last couple of years, and you can agree with me or disagree, that’s fine. Maybe this is the battle of the minds. I’m not sure. I think people were sitting on the sidelines. People had this fatigue or, you know, analysis paralysis, or something around the interest rates, and they weren’t buying homes. But guess what? The thing that happened here in Halifax and really across Atlantic Canada is that the prices still went up, and we’re in this unique place in Canada where we don’t have enough supply. Yes, we’re building a lot of apartments, but that doesn’t meet all of the needs for housing here in Halifax. We need all types of real estate. We need single-family homes, we need multis, we need townhouses, we need condos, and we need apartments at all price points. We still don’t have enough, and we have more demand in the marketplace than we have supply.

<strong>Challenges in the Housing Market</strong>

Alex Lavender
Yeah, you know, I agree as well. I think a big challenge is that a lot of this new construction, the homes that are coming on the market, are really starting at $700,000 or higher. And you know, for the average first-time home buyer, the average income in Nova Scotia, they can’t qualify for that. And even if they could qualify for that, you know, you’re going to be house poor with a 5% down payment. You know, if your household income is $100,000 a year,

Clinton Wilkins
It’s not enough.

Alex Lavender
It’s not enough.

Clinton Wilkins
And I think that most activity, and Alex, you can agree, maybe the sub $600,000, but there are so few places for sale, whether it’s resale, whether it’s new construction, whether it’s condo, there are so few listings below that $600,000 mark, and that is the hottest part of that market. The demand is still just so high for those price points.

Alex Lavender
That’s what’s driving up the prices. Is because of the demand.

Dan Ahlstrand
Is that the case in the urban areas, in the suburban areas, or in the rural areas? Are they all really expensive? If somebody wanted to get to that dream of owning a single-family home, do they have to drive for two hours outside HRM to get it?

Alex Lavender
I think we’re seeing people go further and further, probably up to about an hour radius outside of the city. Is how far people are exploring now, because it’s like, Do you want a semi in town that’s a 15-minute drive to work, that’s $400,000, or do you want to drive 30 minutes into work, and you can get a house, maybe on five acres for $400,000 right? So people who want to have more space are going further. I think if you’re constrained to the urban areas, you’re going to get a little bit less house for your money.

Dan Ahlstrand
It creates all the problems that we’re dealing with, congestion, traffic and everything else, right?

Clinton Wilkins
Well, and they have to take into consideration the cost of fuel, you know, when you’re buying a property that’s an hour into the, you know, outside the city, and you have to work in downtown Halifax or downtown Moncton or downtown whatever, you know, province you’re living in. You have to consider that cost. You know, it’s not just your housing costs, but what about the other operating costs of your life? And I think that’s one thing. That’s one thing that sometimes people don’t think about. Maybe, if you live in the core, you only need one vehicle for a household, but you know, if you’re living 30 minutes or an hour away, you probably need two vehicles to manage your life.

Dan Ahlstrand
So it’s smart to take the whole, the whole ball of wax into consideration when you’re making a decision on what your budget is to buy a house.

Alex Lavender
For sure. I mean, if you add another car, and let’s say that car payment is $500 a month. I mean, that’s pretty average. You barely get a car payment of $500 a month.

Clinton Wilkins
These days.

Alex Lavender
These days, like, you know, I think a Civic is, is that, but that’s the equivalent of about $100,000 of mortgage money, right? So, you know, does it make more sense to pay $100,000 more for a house to stay in the city, or does it make more sense to go out of the city, have that commute time, and you have to buy another car and gas? You know?

Clinton Wilkins
I think, I think there’s a balance,

<strong>Construction and Affordability</strong>

Dan Ahlstrand
Right. Clinton, we talk about the construction that’s going on, and earlier in the month, on my show, we were talking about the construction industry and all of these projects that are going on, but there’s, there are building some, but not a lot of single-family detached homes. That is a market that’s underserved here?

Clinton Wilkins
I think it’s completely under-serviced. And I think that’s the hot kind of piece that we’re missing right now, is the single-family detached. As Alex said, I think there is some being built, but they’re all $700,000 plus. How can we make it work to build a $500,000 new construction? $600,000 new construction, single-family homes. They don’t all need to have stainless steel appliances and a granite countertop. Why not just do basic appliances and a laminate countertop and try to get more people into these homes, and maybe it’s semi-detached, or maybe it’s rows, but we’re not building that kind of lower price point new construction. And you know, the federal government came out with the HST piece, where these buyers are gonna be able to benefit from it.

Dan Ahlstrand
Right, and we also had an interest rate change here, with regards not the industry, but the down payment change here within the province of Nova Scotia, with the first-time homebuyers plan.

Clinton Wilkins
Yeah. And you know, what I’ve had is a little bit of an inside track from some of these credit unions. I think they’re, they’re getting a lot of inquiries. I’m not sure how many applications are actually happening. The person that I spoke to only knew of one or two applications that actually happened. I think it was a really good news cycle for the Province of Nova Scotia. And I think any news that’s around mortgage lending and real estate here locally, I think it’s positive. You know, I want people talking about the industry. When we first started doing this show, Dan, you know, eight years ago, nobody was talking about mortgage lending, certainly not on the radio, and they weren’t talking that much about real estate either. So I think there certainly has been a shift. And it’s a hot topic, because housing is just so needed here in Nova Scotia.

Dan Ahlstrand
You’re a younger guy, you got a young family, right? And you’re in the in the in the trenches on this every day. I hear it on my show a lot from people who are first-time home buyers who want to achieve the dream of home ownership. It’s really hard, like, not just to find something, but to be able to save the down payment, given that your rent is so high, here, you must see it every day.

Alex Lavender
Yeah. I mean, it’s a few factors, right? You need to have the income to qualify. You need to have the credit to qualify as well. And you need to have the savings for a down payment. And, you know, savings for a down payment now is really hard. I mean, we’re seeing a lot of people who are getting early inheritances from family to help these government programs that we have, the 5% down payment assistance program, which is a 10-year no-interest loan, that is also helping out a lot of people. But programs like this, you still have to understand, like the closing costs are pretty high to purchase a house. I tell people to budget for about 3% of the house price, 2% at minimum, because we have a one-and-a-half percent deed transfer tax. You’ve got a couple of $1000 for a lawyer, you know. And some of these homes that are oil-heated, you

Clinton Wilkins
Buy a tank of oil.

Alex Lavender
Buy a tank of oil.

Dan Ahlstrand
A thousand litres.

Alex Lavender
Yeah. I mean, last month, you know, that was $1,000?

Clinton Wilkins
Yeah, $1000 for a tank of oil.

Alex Lavender
Yeah? And then, you know, this week, it’s probably $10,000!

Clinton Wilkins
Okay, joking, but still!

Alex Lavender
It’s a couple of grand. But you know, it adds up. So people don’t factor in these costs as well. You know, I’ve seen a lot of people come in and say, Hey, I have 5% down. I’m ready to go. And it’s like, well, what about the closing costs? Like this could be 10, 15, $20,000 extra money.

Dan Ahlstrand
A lot of discussion on my show. I’m plugging the heck out of my show today about the property-

<strong>Property Tax and Assessment</strong>

Clinton Wilkins
Your new show!

Dan Ahlstrand
It’s Nova Scotia Today with Dan Ahlstrand, by the way. Anyway, Clinton, a lot of talk about property tax cap assessment, or assessments, right?

Clinton Wilkins
Yes.

Dan Ahlstrand
And the cap that is that’s on a property that’s been in ownership for a year or more?

Clinton Wilkins
Yes.

Dan Ahlstrand
One of the things, and we’ve talked about this in the past, is when you’re buying a new home, and you look at while this guy’s paying a certain amount of tax, and that’s where I’m going to factor it in. That’s not necessarily the case. We only have about 15 seconds, so I think we’ll probably tackle the tax question when we come back.

Clinton Wilkins
Oh, and it’s a hot topic, so let’s get into it.

Dan Ahlstrand
It is a hot topic.

Clinton Wilkins
And we’ll hear more from Alex as well.

Dan Ahlstrand
You’re listening to Mortgage 101, he’s Clinton Wilkins. I’m Dan Ahlstrand, and we’re back in just a couple of minutes.