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Mortgage and Real Estate Q & A | April 23 2020

Q&A | with Jenelle Cameron – Remax and Steve Garganis – Mortgage Architects

Another great Q & A between myself and Jenelle Cameron of Remax. We had a chance to discuss what’s happening with mortgages, interest rates and the real estate market in general.


Jenelle Cameron:…. What is happening with rates right now?

Steve Garganis:  Right. So, in the last four to five weeks it’s been up and down…up and then down again. When this crisis hit we saw the rates come down probably by about .8% for four days roughly. Then as the stock markets, the crash of the stock market, and I will use that word “crash” because that’s what happened (it’s recovered by the way, not fully), the rates started to go up because the investors wanted a premium on the rates, so the rates went up. This was kind of hard for most people to understand because we saw the supposed cost of funds go down; why can’t the banks offer a lower rate? Well, they couldn’t, they didn’t have the margins to do it. Their cost of funds have gone up in reality because the investors wanted a premium. Now we knew this was going to change, it was going to normalize  and so we’ve started to see that. The credit markets have actually…there’s some confidence now and  just this past week we’ve started to see the rates begin to come down by about 0.3% and listen, what are we talking about? We’re at the 3% range, now we’re under 3%. It’s still very low, the rates. They’re gonna go down a little bit more I think, if not in this sort of, you know, cycle, the next two, three, four weeks. Definitely within the next couple of months we will see some movement downward, but I think it’s important to remember that the rates are still really low.

Jenelle Cameron: You get a lot of people…it’s funny right, like right now there’s a lot of speculation about what the real estate market is actually going to be doing and I don’t think, I certainly have my opinions, I’m not sure, you know, anyone has the real answer to that, but a lot of people are now wondering right? Should I wait out this “crisis” before I buy something in the hopes that the market will go down? And it might be and that depends where you live so that’s a whole other point, but in terms of interest rates, if people are to hold off because they think they’re going to get a better deal in three or four months, do you anticipate rates going back up in the next few months, or what do you think is going to happen there?

Steve Garganis: Yeah. Good question. No, I mean I answer that very quickly and with great confidence. No, the rates are not going to go up for at least a couple of years or longer. We’re in a crisis and the governments are going to make sure that, well, they’re going to try to make sure, or do everything in their power, that we don’t have an extended recession or depression, I guess, depending on how you want to look at it.

Jenelle Cameron: That’s the fear.

Steve Garganis: Yeah, I think this is  short term, I really do, but again, I guess it depends who you ask. If you’ve lost your job, and you don’t have a job, your world is upside down understandably so. Hopefully some of these emergency measures, financial support measures, will go directly towards the consumer, the average Canadian.

Jenelle Cameron: Right. Now do you have any statistics yet on mortgage deferrals? Like, are a lot of people taking advantage of that, or… do you know?

Steve Garganis: Yes. Some rough numbers, so forgive me for not being completely accurate with these numbers. I participated in a call with Scotia Bank about two weeks ago with the Chief Economist and the President of Scotia Mortgage and first of all they were very optimistic that we’re going to come out of this, which was great news. These are two high level individuals in the bank; when they talk we should listen and they’re saying we’re gonna have a comeback in the third quarter of this year.  It’s very optimistic. The stats were, hundreds of thousands of people have applied for mortgage deferrals.  It’s taking a while. If you call your bank today, you’re gonna be on hold, trust me I’ve been doing this because I’ve had to make some personal transactions and two hours on hold.  Who I bank with? I don’t want to beat them up more than what we have, but it’s, you’re going to have to be patient. Everything is moving slower these days. Be patient, but yeah, there’s several hundreds of thousands of people that have applied for the deferral and I’m sorry I don’t have a number, but it’s quite huge.

Janelle Cameron: Yeah, I wondered.  It seems like a lot of people I’ve spoken to and a lot of my clients thought about doing it and then decided against it only because they realize they’re going to have to pay interest and I know it’s not a lot of money, but I think, for some people it’s sort of like, oh, and I’m going to have to pay it anyway eventually so I might as well just, you know, try to keep it going as long as I can, if I can, right? Pay and do my monthly payments. So it’ll be interesting to see how that goes over the next couple of months.

Steve Garganis: Yeah, the interest cost has been blown out of proportion in my mind. I’m going to beat up on the media yet again, because I think they deserve it. They’re so quick to jump on anything that’s negative because, I guess, because bad news travels faster than good news right? Look, there’s no free lunch, but let me explain this so everybody has a good understanding. If you borrow money, you expect to pay it back and you expect to pay it back with some interest. Now if you borrow money and you don’t make your payments, I mean, normally you get foreclosed on and you lose your home, but they’re not doing that here. They’re saying, we’re gonna give you six months of no payments. This is unheard of, we’ve never seen this before. So let’s stop beating up on the banks. Yes, they make billions of dollars of profits. I don’t like it. I don’t get that money, you know, you don’t get the money, but its created a stable environment, banking environment, in our country which is a good thing. So you have to pay interest on the payment that you defer. It’s not a lot of money though. It’s, you know, it’s let’s say, your payments, I think I did the math. It was $2000. It worked out to about $30. a year.

Janelle Cameron: Right.

Steve Garganis: That’s not a lot considering, right?

Janelle Cameron: No, no. It’s definitely not a lot considering. I think, yeah, it just really depends on your situation I suppose, if, I guess then they tack on those payments at the end for the most part right? That’s what they’re doing?

Steve Garganis: You know what? Yes and no. It’s still a grey area quite frankly. This is all so new they really haven’t formulated a plan. I think at the end of your term. So let’s say your five year term, with two years into it, what happens? Are you suppose to pay out money at the end of the three years? Well, yes and no. They’re not going to come and expect you to come up with, let’s say again, $2000. a month,  x six months, $12,000. They’re not gonna come at the end of three years and say give me, give me the $12,000, that’s just not realistic. They will work with you to defer those payments for as long as necessary, but you will have to pay it back and couple of things…yeah you want to pay it back, you don’t want to be in debt, and with the rates being low it’s gonna be easier to pay it back.  That’s, I think, the message that we need to get across. So, for all you meeting a pessimist, we have a solution. There are options. It’s not free, but you know, there is hope and I think we can get through this.

Janelle Cameron:  Yeah, don’t get me started on what they’re saying about real estate prices and the real estate market. It’s enough to drive a person crazy and just if anyone’s paying attention to this right now, I will say, that, like, everybody relax. So far our prices have not dropped in the City of Toronto. Now outside and some of the suburbs, yes, and there are some pockets of the city where they’ve been a little flat, but certainly we have not seen any major decline. So far, it’s really been a huge decline in sales volume, obviously, but prices are still pretty stable, so that’s good news for all of use despite what…I read the craziest things sometimes. You know, people saying, oh yeah, prices are expected to drop 30%, 50%…like what? What’s…where’s that coming from? Maybe they will, but who knows that right now?  We can’t talk about that, right?

Steve Garganis: You bring up a good point and I wanted to ask you that question, this is your domain. I mean, if you read the newspapers, we have house prices have collapsed and people are going to lose their shirt and default. Are prices dropping right now? Have you seen that?

Janelle Cameron: No, so just, and I haven’t analyzed all markets right? So, I mean, I do a lot of work in a couple of segments I will say that in the East End, so I’m talking about in the East End of Toronto, so not outside of Toronto, but E1, 2 and 3, so for those people who understand what that means, it’s really from Broadview over to Victoria Park.  I analyzed the last 18 days where the average price of a home last year was a $1,065,000. and this year, for the same time period, so the last 17 days during Covid19, it was $1,180,000. So we are still up over a $100,000. over last year during the crisis.  

Now, I don’t know whether things will continue that way, all I know is we have to look at the data and not get all swept up and caught up in speculation, right? So, your business, my business, it’s the same kind of thing.  I haven’t seen much of a decline in Central either. The West End no decline really in price, but the inventory, like the sales volume must be down 80%, but what is there is, you know, seems to be ticking along nicely. So let’s just, you know, wait and see.  I’m trying to give those updates to people every few weeks so they have an idea of what’s really happening as opposed to, you know, just listening to what the speculators are saying, which people love to give the bad news of course.

Steve Garganis: And, it seems to be, like there’s a truce quite frankly between buyers and sellers.

Janelle Cameron:  Yes.

Steve Garganis:  Okay, is that fair? I mean…

Janelle Cameron: Yeah, it’s a funny time. I’ll just give one example. I had a little property listed this week in East York. It was a small little house and relatively inexpensive, but I listed it last Wednesday, took offers on Tuesday. I had 75 showings and 22 offers. So to say that nothing’s happening in the market is absolutely not true and I can say that from firsthand experience and even the showing data, so we’re looking at, you know, this week, over the last week, the amount of showings through the system are up quite dramatically and I’m sorry I don’t have the exact percentage, but you know people are still getting out there. There are still people that need to buy regardless of the situation, right? And there was a lull, I think, a quieter period in the first few weeks, but I think now people are saying, okay, this is going on longer, I still need to buy a house, or I still need to sell a home for whatever reason they have. So, I think that we just need to be patient, that’s the name of this whole game, just see how things go and I for one, I’m quite confident that it will be a nice healthy fall market for real estate and I think it just remains to be seen what prices will do and I don’t have a crystal ball, but I feel positive about it and I’m just basing this strictly on the numbers and the data that I’m looking at, that’s pretty much it.

Steve Garganis: I mean, it’s good to hear and I’ve seen the same thing from my end so I’m obviously at the end of that process. People come to me, you know, when they buy, well pre-approval, then they buy, but they’re telling me the same thing. There’s lack of inventory.

Janelle Cameron: Yeah.

Steve Garganis: And there’re really not much movement on price. So, I’m not seeing any drop in real estate which is, you know, I guess good and bad.  Perhaps some of us, if we’re buying for the first time we want the floor, the bottom to fall out, I get it, but that’s not happening right now, at least I haven’t see it.

Janelle Cameron: Not yet, but that brings me to another point that I wanted to ask you, is that, in terms of mortgages have you seen any, and we talked about this last time, are there any mortgages that aren’t, that are falling apart before closing day, so to speak, because people have lost their jobs, or anything like that?

Steve Garganis: Yes, so we’re now a few more weeks into it since we last talked about it and I have had situations where people have been laid off. You know, they’ve lost their jobs temporarily, well, hopefully temporarily! In most cases, by the way, it is temporary, they just, there’s no work, they can’t work so they, you know, they’re gonna be on either the $2000. emergency benefit that the Government’s providing, or on employment insurance, whichever is going to give them more money of course. If you have been approved, if you bought a house and your mortgage was approved by the lender and you get laid off, I have not seen one instance where a lender’s come back and cancelled the mortgage. They are going through with it. You’re going to be fine.

Now, if you enter into a mortgage, let’s say for purchase or refinance, or you’re transferring it from one institution to another, and they have not confirmed your income, so you remember that the steps in an approval is you have to get your income confirmed by the lender, which is giving a job letter or financial statements depending if you’re self-employed. If they haven’t  gone through the process and then they find out that your income has changed and you’re not receiving, you know, either you’ve been laid off, or something else, then, yes, you’re in jeopardy of not getting the mortgage. But, I think that’s to be expected. I don’t think that’s anything unusual.  This happens all the time, but I haven’t come across that yet, thank goodness! I’m sure I will by the way, and we’ll, as that comes up there seems to always be a solution, I guess. So, there’s a way, there’s a way.

Janelle Cameron: Okay, good. Now we were talking a little bit briefly, before we started this, about the 75% wage subsidy. You had some information about that that might be interesting for people to hear about. Do you mind sharing?

Steve Garganis: Yeah, for sure. So, just real quickly, the Government has announced all kinds of spending programs. The last crisis was the 2008/09 US subprime mortgage crisis; that’s when the US was selling, you know, being in “C” category mortgages as “A” category. It was a fraud, they basically perpetrated a fraud, a bunch of bankers and it cost the world trillions, I mean it was awful. That cost us in relief about 57 billion dollars. This time, we’re already up to about, they’ve estimated between 170 and 200 million dollars. So, a lot more money. What they’re trying to do was go quickly and that’s why, you know, attack it quickly, that’s why they’ve got these programs, the emergency money. 

Little bit of a problem, not to beat up on the Government, but the big one for business owners, you know people that have employees, is they haven’t gotten a cent. There was a $40,000. loan that they had “fast tracked”, people just got that money this week by the way, just so you know. $40,000., in case you don’t know they don’t have to repay it for two years, if they do repay it no interest and $10,000. is forgiven. It’s nice, it helps out. If you have a business where you are paying $10,000. a month rent it’s not that helpful. So the Government also came out with a 75% wage subsidy program. So, what that means is you  can apply to the Government to get 75% of your employees’ wages covered up to I believe $800., I’m just looking here at the screen, $847. a week, which is significant.

That amount is great news when we heard it. Not to let everybody down, but there’s some challenges with that. To qualify,  well I’m not an accountant so this is, I’m getting this from my accountant by the way, what I’m reading to you. It’s a bit ambiguous, you have to show a 15% loss in your gross revenue, but the measuring stick is a bit confusing in that how do you, what period are you measuring it from? They’ve given some options, I won’t get into all the technicalities, but effectively, your gross revenue has to have fallen by 15% either month to month, like month of March through month of March of 2019, etc., or January, February, March average and then April’s average and if your April is down by 15% again, you get the wage subsidy so you can cover, keep your employees employed and they cover 75%. And the idea of that is that you’re gonna keep your employees working, it’s not costing you the same amount and it’s only costing you 25%. They expect employers to honor that and, by the way, most of them will be happy to do that. I mean, that’s a pretty good start.

The challenge with that, if you don’t mind me getting a little negative about that, is that there are penalties if you’re proven to not have qualified for this. The penalties are interest, there’s an actual fine for it. It can be, I think, it was either $100,000. or $500,000., forgive me, this is all kind of still coming through to me right now. Regardless, it’s a big number, and a prison term. They can actually put you in jail. Now the other thing that maybe is worse than that, I know you might be thinking what’s worse than jail and $100,000., is the shame game.  So the Government can actually post your name. They said this, they’re going to post the name of the people that have been “cheating” the system. So cheating the system, yes, anybody that cheats they should have to pay the price. Should we track their…take their name and, you know,  through mud and put it on everybody’s, you know, Twitter, Facebook, and newspapers? You know, probably not because again, if you go through the qualifying process for that, the documentation to qualify you just need to fill out a form, it’s an online form, and it’s just a questionnaire and if you get it wrong you could be in big trouble. Hence, what we’ve seen already is some companies that could qualify have actually opted to not even bother. They’re just going to close their doors for the four months and either come back or close altogether because they’re afraid of the fine, the penalty, you know, jail time and of course, your reputation. Very strange….

Janelle Cameron: It seems like such ambiguous terms right? So I can see why people would even make a mistake and then all of sudden they’re accused of cheating, like, it could be…it could be ugly.

Steve Garganis: Yeah, if you go the that website on CRA and it’s only a handful of questions.

Janelle Cameron:  Right.

Steve Garganis:  Yeah, you can get it wrong pretty easily.  And you better not because it’s CRA, Revenue Canada.

Janelle Cameron: Okay, that’s great to know and thanks for sharing that. Anything else we should know from a lending standpoint right now that, you know, that you think people should know in the next couple of weeks even before we chat again, any differences, or changes, you see coming down?

Steve Garganis: I guess the only thing to mention is, you know, where rates are, where we expect them to be heading, access to money.  So, I’ll just touch upon that. Access to money is there, there’s no shortage. The banks have money and they need to and want to lend it out so that’s a good thing. As far as rates go, as I mentioned earlier, they’re low and they are on the decline and that’s to be expected because the credit market is normalizing. In other words, they’re feeling more confident about where we’re going, that we’re going to come out of this or meet, and very soon by the way, so these are all positive things. You know, the thought is that, you know we are flattening the curve, I don’t’ want to jinx it, but if that’s the case then there’s a light right now at the end of the tunnel and that’s what we’re seeing in the market. So, both in the stock market, as you know there’s some positive news and also in the credit market. We’re seeing a lot of, what’s the word? A lot of interest by the financial institutions to put money out. So, I’m not seeing any problems for people getting money, qualifying. Somehow they’re able to buy homes still as you mentioned, even with this you know you have to fill out… I was going to ask you actually Janelle, the Covid questionnaire, what’s that all about?

Janelle Cameron: Yeah, it depends on the brokerage, but basically most brokerages are asking anybody who is showing a property to fill out a questionnaire that asks the basic stuff like, you know, have you been in contact with anyone that’s had Covid-19? Do you have Covid-19? Do you have a cough, or fever or any symptoms of Covid-19, etc. So, most people are filling those out, returning them to the listing agent before we actually, you know, show the property and then there’s lots of protocols in place at each particular home if you are going to see it in person.

So, for example, you know, no double bookings and you know, you can only have one person in at the same time. Everybody must sanitize everything they touch. As a listing agent, you know, people are leaving all the lights on and the cupboards open and things so people go in they don’t actually have to touch anything, they can just look around. So, I mean the important thing I think, is it really can be safe the way we do that if I have taken people through for showings it’s been, you know, I open the door, I let them walk through, they come out, I go through, I come out and we leave right? Nobody touches anything. We wear our mask and gloves and we’re very safe and so I think that’s following those protocols that are put in place and you know most people are feeling comfortable with that. If people are not feeling comfortable, which is totally fine, then a lot of properties have really great 3D virtual tours and so people can really feel like they’re there, in the home, looking around.  You know, you’ve seen those virtual tours before and that makes it easy as well I think to really get a sense of what a space is like. So, there are a lot of people who may not want to go in person but may want to look at that, put an offer in on the property, just seeing it virtually and maybe have a clause in there that before it’s finalized that they would like to go in and actually walk through the property, you know, to see if they do indeed like it. So, there’s lots  of ways to go about it. I mean we’re adapting as an industry. We’re working hard to find ways to satisfy everybody and I think actually it’s working because there are, you know, we’ve got options; you can go in person, you don’t have to go in person. You know, you can, if you want to list a property, you don’t have to have anybody in your home if you don’t want to, but you can if you feel comfortable. So, you know, it’s just a bit of a…everybody is different and you have to look at each situation independently and just try to do what’s best for a client. Long answer….

Steve Garganis:  That’s good to know. I mean, that was something that I get asked because sometimes the client comes to me before they’ve spoken to you or to a realtor. They ask how do we see a home and I was… I kind of knew but I wasn’t quite sure, you know, what the ins and outs were.

Janelle Cameron:  You know, the reality is from a condo perspective, we’ve been buying condos off of  piece of paper for years, right? That’s how all pre-construction is done. So, I think for condo buyers, I think it makes it pretty easy to do it virtually. You’ve already got maybe a sense of the building, you can pretty much see everything you want to in a 3D tour. You know, homes are maybe a little bit more difficult, but some people are doing it and then other people, like I say, are going out themselves. We have another option which I have exercised a couple of times now, where if my client doesn’t feel comfortable to see the home then I’ll go FaceTime them from there, do a video walk-through for that, give them a sense of the space and then if they like it they could, same thing, they could come and take a look later, or you know, we can eliminate it right there.  Of course, I don’t mind doing that; no realtor would mind doing that in these times, that’s something we’re happy to be there, you know, satisfy our client’s needs for sure.

Steve Garganis: It’s a good idea. I guess technology makes it a little easier.

Janelle Cameron: Yeah, and we’ll have to figure it out right? So, I think, I don’t know how long this will last. I mean if it’s a few more months, whatever it is, real estate transactions are still gonna happen. So, you know, the important thing for people to know is that there are options, right? Whichever way you want to do it, if you have to buy or sell we’ll figure it out. We’ll all figure it out and don’t let, you know, don’t let all of this get in the way of doing what you need to do, I think is the important part.

Steve Garganis: Got it. Good!

Janelle Cameron: Alright, good. Okay, thank you so much and I think we’ll wrap it up and if anybody’s interest, Steve’s information is on our page. Reach out to any of us on my team, or Steve, any time if you have questions. And Steve, if you agree, we’d love to have you back in a couple of weeks.

Steve Garganis: For sure, if you’ll have me back. Thank you! This has been fun. I hope that it’s informative.

Janelle Cameron: Oh so informative! Thank you so much.

Your best interest is my only interest.

As always, I welcome your comments, calls and questions.

Steve Garganis 416 224 0114

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

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