I know you are contemplating whether to sell your home today, or rent it for a year in anticipation of values increasing. I just wanted to make a few comments to you so that you are aware of my thoughts on the market over the next few weeks, months and years. I want to point out a couple of my legal fiduciary duties to you which we discussed when I sat down with you. The first is "Undivided Loyalty" - "The Agent must act solely in YOUR best interests, always putting YOUR interests above their own interests and above the interests of other parties." And also "Reasonable Care and Skill", "the Agent MUST exercise reasonable care and skill in performing all assigned duties." In my own interpretation of these two aspects of my duties to you, I feel obligated to be sure you have all the information you need to move forward with your real estate holding, whether you want to sell your home or rent it out. I only have your best interests in mind when putting this note together for you.
First off let me be perfectly clear in my belief that holding a real estate property over a long period of time is absolutely one of the best long-term investments for anyone, and I truly believe that everyone should have some type of real estate holding in their investment portfolio. From the simple idea of owning your own home, to owning a rental property.
The advantage of owning real estate as a long-term investment is that not only are you gaining valuable equity as the value of your property increases, but you also have a renter assisting you with the payments of the mortgage on that investment. What I am hoping to do here is analyze what we think the market is going to do over the next little while, and address some of the issues you will need to deal with during, and after your rental experience with this home. I know you have rented properties in past, so I am not going to go over the process of collecting rent and addressing any issues that may transpire over the rental term that you will need to address and, of course, dealing with the accelerated "wear and tear" usually associated with renting out any property. I am hoping that you will look into using a professional property management company to keep an eye on things as you will be away from Calgary. Many owner/landlords look after their own properties, however, I would suggest this is an easier prospect when you are close in proximity to the property.
I have dealt with a number of clients in past that have been in a similar position to yourself. They were unable to get the sale price they needed in order to deal with their financial obligations or their perceived value of the property at the time they had it on the market. The original cost of a home, the cost to build the home and the amount owed on a mortgage to a home have little influence on the market value of a property. Even a bank appraisal and the City of Calgary Property Assessment do not necessarily reflect the true sales value of a home. What determines the value of a home is what a potential buyer is willing to pay for a home, period. If potential buyers are not willing to pay a certain price for a home and the potential seller is not willing to adjust their expectations accordingly, the home will not sell. In a "balanced market" where there is a limited amount of homes available for a buyer to purchase, they are willing to perhaps pay a bit more than they originally intended to, keeping the market "in balance" and the values stable.
If there are not a lot of homes on the market, buyers feel the pressure to negotiate for a home that they want as they feel a certain risk of losing the home to another buyer. They feel a need to get the purchase done before they lose the property to someone else. In a market where there are more buyers than sellers, the values of homes go up. If there are too many properties on the market in relation to the amount of buyers looking for a home, that pressure is eliminated. The more and more inventory there is on the market, the less motivation a buyer has to make a purchase in a specific time frame. They will often wait to "see what happens" with the market, which essentially means they expect prices to go down in the short term so they are looking for "bargains" or homes of exceptional value. That is why we need to keep an eye on the market to see what the trend is, and try and predict where the market is going. In the long term, prices tend to move upward, however, short term prices can fluctuate dramatically depending on whether there is "buying" or "selling" pressure.
The bottom line really is that real estate is a true "supply and demand" market. If fewer and fewer people are purchasing homes, builders start to decline building new homes as the profit margins also drop. In longer periods of a buyer dominated market, we see more and more builders go out of business as they are unable to make a profit on their homes. As more buyers come on the market and we see less homes available to purchase we see the opposite happen where builders come out of the woodwork and existing builders put pressure on to build even more homes. The problem with this model is that new builds are slow to react to what the market is doing. If we see a steep incline in demand as we did in 2006, it takes months for new home builds to be completed, often over eight months. By the time the new building matches the original demand we often see an inventory that we cannot move quickly enough forcing the pricing trend down, as we saw in 2008 and are still dealing with today.
Further complicating the matter is the fact that a "buyers market", or an over abundance of inventory, tends to last a lot longer that a "sellers market" which tends to happen very quickly and last a short burst of time. Interestingly enough, the buyer frenzy that we experienced in 2006 was a direct result of the population in Calgary increasing at an amazing rate, increasing around 25%. That huge immigration to the city directly fueled the huge demand for housing in a very short period of time. At that time Calgary was a very affordable city to live in with a good demand in the job market. What happened though, is that this increased demand for housing also pushed the market to almost double its value in a short period of time actually making the city much less affordable to live in. That, in combination with a waning global economy, has slowed down our growth to a halt. As a matter of fact, last year was the first time we literally saw zero population growth since 1984!
What is also disturbing is the fact we are seeing massive new development in all sectors of our city. Drive to the outskirts of Calgary in any direction and you can see new neighbourhoods sprouting up at an astonishing rate. It is beyond my scope to address our future economy, however, I certainly wonder how we can sustain all of this development with little growth in our population. What we have been seeing over the past year or so is essentially "lateral" movement. People within the city "upsizing", "downsizing" or "rightsizing", we are moving from one home to another and selling our homes to someone else doing something similar. What is confusing then is how we going to fill up all of these new homes that are being built if we have fewer and fewer "new" citizens to our fine city?
Having said all of that I would suggest that we are in for some interesting times in the real estate market over the next few years. I would suggest we will see further decreases in value for the rest of this year. Historically the first half of the year sees the most activity in sales figures. As Canadians and Calgarians we wake from our winter blues invigorated and many look at purchasing a new home as the weather gets better. As summer approaches that excitement declines as we look forward to enjoying our short summer. As summer comes to a close we then get caught up in the new school year and getting back to work. As soon as our weather turns inclement again, we tend to cocoon back indoors avoiding the cold and snow.
With our busy time behind us and an increasing inventory, the next few months certainly points toward flat or decreasing values. At this time next year I would expect average and median values in Calgary to be lower than they are today. If you decide to hold your property in anticipation of selling your home at a higher price than you can get today, I would encourage you to look at a longer term plan than renting for a year then seeing what happens. If you are looking for increased value I would suggest you put together at least a three to five year plan to weather the coming storm.
Whether you would like to hold your beautiful home as a rental property, or sell it shortly is not what is important to me. What IS important to me is that you have all the information you need to make the decision on how to proceed with your real estate investment. If you have any questions or concerns regarding any of this information, or would like further clarification regarding any of these comments, please do not hesitate to call or drop me a line.
Friday, May 27, 2011
Friday, January 28, 2011
Investing in Real Estate in the Current Market
I recently looked through the "BMO Bad List", the list of over 200 defendants to the bank's accusation of mortgage fraud. It will be interesting to see how this all irons out. Rest assured if they see any amount of success, we will see many other financial institutions following suit. Over the past few years there was a ton of money lost and gained in the industry… when it is the "Big Banks" that are in the losing position, you can bet their pockets are deep to remediate their position!
With the real estate market in such a volatile position today, it would seem that many potential sellers will be trying a variety of things to entice a buyer. Rent to own, seller financing, "guaranteed" pricing and such. The bottom line is that we will have to be very careful as many of these schemes rare their heads. I'm not saying they will all be shady - some may be clever and well thought out - but we will certainly need to do our homework… and utilize a knowledgeable real estate lawyer in putting together any type of new or strange situation.
I believe three things are of prime importance in selling a home. The first is the property itself - how is it presented? There are many homes that are online that certainly are not at their finest. Many are full of clutter, messy, dirty and certainly not staged in the best light. A home really should look its finest when presented to a potential buyer, which leads me to the second criteria, marketing. The first line of offense is, of course, the MLS. Are you utilizing all of the tools available to you? Are all 20 photos looking their finest? Other support marketing should also pique a potential buyers curiosity, making them ask questions, and leading to a viewing of the home.
Taking these two important aspects of the listing into account, the third - and most important - aspect of the listing is the price. If the property is at its finest, and the marketing shows off the property in a fine light, one can ask a premium price for the property. Coming to this "premium" price takes into account recent sales, where the market is heading, property assessments and such. Pricing is a very pragmatic process, there is no magic involved. If the property requires updating, if it does not show well, if it is located on a busy street, if it is messy, needs paint etc etc the pricing needs to be adjusted to reflect these insufficiencies. And if the home looks bad online, or the marketing is inefficient, again, the price has to be adjusted to reflect these deficiencies.
If you are interested in a bargain in purchasing a home, they will certainly present themselves over the next few weeks and months. I would suggest we will see a variety of "handyman" specials, foreclosures, and desperate sellers that may list their homes for below the current market value. I can also ensure you that if homes come up that are truly below current market value, there will be a great many bargain hunters, investors and such also looking at those homes. Homes that are of exceptional value will sell quickly.
Having said all of that, to be sure you are in a position to pull the trigger when a home comes up that appeals to you, we should have all of our ducks in a row, starting with the financing. Chatting with a Mortgage Broker can present you with a variety of purchase and financing options.
I am certainly a huge believer in real estate as a viable investment and wealth building tool. Real Estate, however, is a long term investment. Many have been extremely fortunate in "flipping" homes over the past few years. Making a lot of money in an inclining market, or buying "fixer uppers" and renovating for profit. In the current market, however, there seems to be very little profit margin for the handyman. As a matter of fact, if we lose value in general over the time one buys, fixes up and then relists, one may actually lose money. Even worse, many have tried to invest short term and have lost their shirts. I suggest we will not see any significant equity gains over the next year, maybe two or three. That does not mean that real estate is not a good investment, one still can make a profit in the rental market. And if you are anticipating moving into a specific property in a decade and buying a "holding property", chances are pretty good that the values will be significantly higher in the long run.
With the real estate market in such a volatile position today, it would seem that many potential sellers will be trying a variety of things to entice a buyer. Rent to own, seller financing, "guaranteed" pricing and such. The bottom line is that we will have to be very careful as many of these schemes rare their heads. I'm not saying they will all be shady - some may be clever and well thought out - but we will certainly need to do our homework… and utilize a knowledgeable real estate lawyer in putting together any type of new or strange situation.
I believe three things are of prime importance in selling a home. The first is the property itself - how is it presented? There are many homes that are online that certainly are not at their finest. Many are full of clutter, messy, dirty and certainly not staged in the best light. A home really should look its finest when presented to a potential buyer, which leads me to the second criteria, marketing. The first line of offense is, of course, the MLS. Are you utilizing all of the tools available to you? Are all 20 photos looking their finest? Other support marketing should also pique a potential buyers curiosity, making them ask questions, and leading to a viewing of the home.
Taking these two important aspects of the listing into account, the third - and most important - aspect of the listing is the price. If the property is at its finest, and the marketing shows off the property in a fine light, one can ask a premium price for the property. Coming to this "premium" price takes into account recent sales, where the market is heading, property assessments and such. Pricing is a very pragmatic process, there is no magic involved. If the property requires updating, if it does not show well, if it is located on a busy street, if it is messy, needs paint etc etc the pricing needs to be adjusted to reflect these insufficiencies. And if the home looks bad online, or the marketing is inefficient, again, the price has to be adjusted to reflect these deficiencies.
If you are interested in a bargain in purchasing a home, they will certainly present themselves over the next few weeks and months. I would suggest we will see a variety of "handyman" specials, foreclosures, and desperate sellers that may list their homes for below the current market value. I can also ensure you that if homes come up that are truly below current market value, there will be a great many bargain hunters, investors and such also looking at those homes. Homes that are of exceptional value will sell quickly.
Having said all of that, to be sure you are in a position to pull the trigger when a home comes up that appeals to you, we should have all of our ducks in a row, starting with the financing. Chatting with a Mortgage Broker can present you with a variety of purchase and financing options.
I am certainly a huge believer in real estate as a viable investment and wealth building tool. Real Estate, however, is a long term investment. Many have been extremely fortunate in "flipping" homes over the past few years. Making a lot of money in an inclining market, or buying "fixer uppers" and renovating for profit. In the current market, however, there seems to be very little profit margin for the handyman. As a matter of fact, if we lose value in general over the time one buys, fixes up and then relists, one may actually lose money. Even worse, many have tried to invest short term and have lost their shirts. I suggest we will not see any significant equity gains over the next year, maybe two or three. That does not mean that real estate is not a good investment, one still can make a profit in the rental market. And if you are anticipating moving into a specific property in a decade and buying a "holding property", chances are pretty good that the values will be significantly higher in the long run.
Wednesday, January 26, 2011
Bungalows
Bungalows may very well become the preferred house style of the future as the population grows older. Even more interesting are the "villa" either attached or detached style homes, often condo ownership or having a Home Owner Association. The owners want to be able to lock and go. Read that - not having to deal with snow removal or yard maintenance such as cutting the grass!
Bungalows with more than one bedroom upstairs are at a premium, but not necessarily the most popular of this style. They do mostly appeal to "empty nesters" (I will be one before you know it.) Typically retirees or close to retirement type folks would have - in past - moved away from the hustle and bustle of the big city (maybe to the Okanagan or Shuswap.) The trend I am seeing more and more is these folks want to stay in the city for a variety of reasons. The first is what the city has to offer such as culture, proximity to an international airport, and even sports entertainment.
The second, and most important, is that they want to be close to their offspring… and even MORE importantly, to their grandchildren. I would suggest that over time, value of this type of ownership could potentially surpass the rates of other styles of homes such as the two storey house.
As the aging population become more financially independent we also see Canadians purchasing winter homes abroad in such places as Arizona, Florida, Mexico and Costa Rica just to name a few, and the fact you can pick up properties in these areas for a mere percentage of the values in areas like Calgary make two homes more viable for more and more people. I can tell you the thought has crossed my mind this winter, especially with the brutal cold temperatures we have seen this year.
Food for thought!
Bungalows with more than one bedroom upstairs are at a premium, but not necessarily the most popular of this style. They do mostly appeal to "empty nesters" (I will be one before you know it.) Typically retirees or close to retirement type folks would have - in past - moved away from the hustle and bustle of the big city (maybe to the Okanagan or Shuswap.) The trend I am seeing more and more is these folks want to stay in the city for a variety of reasons. The first is what the city has to offer such as culture, proximity to an international airport, and even sports entertainment.
The second, and most important, is that they want to be close to their offspring… and even MORE importantly, to their grandchildren. I would suggest that over time, value of this type of ownership could potentially surpass the rates of other styles of homes such as the two storey house.
As the aging population become more financially independent we also see Canadians purchasing winter homes abroad in such places as Arizona, Florida, Mexico and Costa Rica just to name a few, and the fact you can pick up properties in these areas for a mere percentage of the values in areas like Calgary make two homes more viable for more and more people. I can tell you the thought has crossed my mind this winter, especially with the brutal cold temperatures we have seen this year.
Food for thought!
Tuesday, September 28, 2010
Bank of Canada Rate Increase
The Bank of Canada raised its benchmark lending rate by 25 basis points to 1% in mid-September. What does that mean to the average home owner in Canada?
Variable rate mortgages that are directly effected by bank rate changes are being chipped away by this steadily increasing interest rate environment. The Bank of Canada has increased it's lending rate three times over the past five months. Late in 2008 the mortgage fiasco in the USA dramatically effected our market in Canada, Alberta and Calgary bringing sales to a standstill. Sales in Calgary were the lowest we have seen in over a decade following the huge slide in the American housing market. It is important to note that the Canadian mortgage regulations are far different than our neighbours to the south, however, the perceived potential downfall in our market pulled many potential buyers from the market taking the "wait and see" approach. The Bank of Canada reacted quickly reducing its lending rate to a mere quarter percent. This emergency measure was brought in to increase affordability and - most specifically - to kibosh a potential disaster in our real estate sector. These measures contributed to the fact that values in our city and across the country stayed relatively constant after the US market plummeted in value at the end of 2008 and early 2009. It was only a matter of time before these emergency rates needed to be reevaluated and a more realistic lending rate be implemented.
Those of us that have opted to save interest charges by utilizing the variable rate mortgage or a Home Line of Credit (HELOC) are being effected most by these increases and are now paying more for making those choices. Interestingly enough, the current economic instability and unpredictable bond market have created a small window of opportunity to lock in historically low fixed rates.
The cost of borrowing certainly effects the real estate market and we have seen our market slow over the past few months. Many factors have contributed to this trend, including the higher cost of borrowing and more stringent lending guidelines. I am not sure this is necessarily a bad thing. At the peak of our dramatic climb from 2006 to mid 2007 we saw home prices double. Was that sustainable? Absolutely not, and many home buyers over-extended themselves out of necessity during this time. We are still seeing the effects of this climb and subsequent fall in home values. It is anybodies guess as to how long we will see this decline in value... we are in the midst of a "market adjustment" and have been for the past three years.
There are many opportunities in the market today. Interest rates are still at historical lows and inventory is quite high giving buyers a great opportunity to get into the market, to move up, or to downsize. Your home is you biggest financial asset and a real estate investment, regardless of the price category, is still a great long-term financial strategy.
Variable rate mortgages that are directly effected by bank rate changes are being chipped away by this steadily increasing interest rate environment. The Bank of Canada has increased it's lending rate three times over the past five months. Late in 2008 the mortgage fiasco in the USA dramatically effected our market in Canada, Alberta and Calgary bringing sales to a standstill. Sales in Calgary were the lowest we have seen in over a decade following the huge slide in the American housing market. It is important to note that the Canadian mortgage regulations are far different than our neighbours to the south, however, the perceived potential downfall in our market pulled many potential buyers from the market taking the "wait and see" approach. The Bank of Canada reacted quickly reducing its lending rate to a mere quarter percent. This emergency measure was brought in to increase affordability and - most specifically - to kibosh a potential disaster in our real estate sector. These measures contributed to the fact that values in our city and across the country stayed relatively constant after the US market plummeted in value at the end of 2008 and early 2009. It was only a matter of time before these emergency rates needed to be reevaluated and a more realistic lending rate be implemented.
Those of us that have opted to save interest charges by utilizing the variable rate mortgage or a Home Line of Credit (HELOC) are being effected most by these increases and are now paying more for making those choices. Interestingly enough, the current economic instability and unpredictable bond market have created a small window of opportunity to lock in historically low fixed rates.
The cost of borrowing certainly effects the real estate market and we have seen our market slow over the past few months. Many factors have contributed to this trend, including the higher cost of borrowing and more stringent lending guidelines. I am not sure this is necessarily a bad thing. At the peak of our dramatic climb from 2006 to mid 2007 we saw home prices double. Was that sustainable? Absolutely not, and many home buyers over-extended themselves out of necessity during this time. We are still seeing the effects of this climb and subsequent fall in home values. It is anybodies guess as to how long we will see this decline in value... we are in the midst of a "market adjustment" and have been for the past three years.
There are many opportunities in the market today. Interest rates are still at historical lows and inventory is quite high giving buyers a great opportunity to get into the market, to move up, or to downsize. Your home is you biggest financial asset and a real estate investment, regardless of the price category, is still a great long-term financial strategy.
Thursday, September 2, 2010
Canada's Housing Bubble - An Accident Waiting to Happen
The Canadian Centre for Policy Alternatives (CCPA) has just released its study "Canada's Housing Bubble: An Accident Waiting to Happen". This paper is certainly worth the read as it runs over a variety of potential scenarios we may be facing in the next few weeks, months and years.
My critisism of this study is the fact that the author is "predicting" one of these scenarios to happen in future. The over inflated prices HAVE happened in Calgary peaking in mid-2007. The question is - are we in the midst of one of these "bubbles" or about to enter one? Without a doubt, I believe we have been in this "correcting" mode for over three years. As that is the case, the next series of questions to address would pertain to understanding where we are within this price correction. Are we in the beginning, the middle or the end?
The Canadian housing market has shown remarkable resilience through the worldwide economic downturn and the recession of 2008, quickly regaining ground over the past year creating possible price bubbles in several Canadian hot zones, including Calgary. The study points out that the recent U.S. housing crash provides a stark example of what can go horribly wrong when housing prices are outside their historical norms. Although the Canadian and American banking and mortgage situations are very different, it is important to note what happened, and how it happened south of our border, "a similar crisis could potentially occur."
Canada is experiencing, for the first time in the last 30 years, a synchronized housing bubble across its six largest residential real estate markets. The paper puts together a variety of price adjustment scenarios wondering the odds of the bubble bursting, flaming out fast or slow, versus a slow price moderation - or market correction. Regardless of the road we take, this study certainly leads to the conclusion that we WILL see adjustments, whether fast or moderate changes.
Whether the crash is orderly, protracted, or sudden, seniors and new home buyers will certainly feel the effect of the changes the most. Those who purchased homes through high-ratio mortgages while prices were at their highest will find that they owe more on their homes than the value the market permits. Seniors who will be counting on selling their homes to make their retirement plans viable and can't wait a decade or so for prices to recover will be the most effected.
While the outlook seems dim, it is pointed out that those who hold real estate through the entire boom and bust would still see their property appreciate significantly despite the declines in the final years of these various scenarios. Often the process is quite lengthy, requiring a decade or more from beginning to end. In all of the bubbles examined in the paper, the new average price after the bubble burst is always higher than the initial starting point.
My critisism of this study is the fact that the author is "predicting" one of these scenarios to happen in future. The over inflated prices HAVE happened in Calgary peaking in mid-2007. The question is - are we in the midst of one of these "bubbles" or about to enter one? Without a doubt, I believe we have been in this "correcting" mode for over three years. As that is the case, the next series of questions to address would pertain to understanding where we are within this price correction. Are we in the beginning, the middle or the end?
The Canadian housing market has shown remarkable resilience through the worldwide economic downturn and the recession of 2008, quickly regaining ground over the past year creating possible price bubbles in several Canadian hot zones, including Calgary. The study points out that the recent U.S. housing crash provides a stark example of what can go horribly wrong when housing prices are outside their historical norms. Although the Canadian and American banking and mortgage situations are very different, it is important to note what happened, and how it happened south of our border, "a similar crisis could potentially occur."
Canada is experiencing, for the first time in the last 30 years, a synchronized housing bubble across its six largest residential real estate markets. The paper puts together a variety of price adjustment scenarios wondering the odds of the bubble bursting, flaming out fast or slow, versus a slow price moderation - or market correction. Regardless of the road we take, this study certainly leads to the conclusion that we WILL see adjustments, whether fast or moderate changes.
Whether the crash is orderly, protracted, or sudden, seniors and new home buyers will certainly feel the effect of the changes the most. Those who purchased homes through high-ratio mortgages while prices were at their highest will find that they owe more on their homes than the value the market permits. Seniors who will be counting on selling their homes to make their retirement plans viable and can't wait a decade or so for prices to recover will be the most effected.
While the outlook seems dim, it is pointed out that those who hold real estate through the entire boom and bust would still see their property appreciate significantly despite the declines in the final years of these various scenarios. Often the process is quite lengthy, requiring a decade or more from beginning to end. In all of the bubbles examined in the paper, the new average price after the bubble burst is always higher than the initial starting point.
Wednesday, August 4, 2010
Sell now, or next year?
Hi Dan... I suspect that I will not be in a position to sell for at least a few months. Is it realistic to think if I hold onto it for another year that I would any further ahead?
That certainly is the billion dollar question, would you be further ahead a year from now if you were to hold onto any property? I suppose I would venture to say that there has to be a reason for everything… prices go up when demand goes up. We know that demand is at a five year low for this time of year, and that corresponds with the decline in population growth in our city. If we anticipated an influx of new Calgarians as we did in 2006, it would be a good bet that prices could potentially go up. I don't think anyone foresees such an event any time soon. I can tell you that at the beginning of this year I was involved with a few listings that were originally listed in 2008 when we had our first glut of inventory. The clients I had decided to hold off for almost two years in anticipation of selling for a higher price. I can tell you they sold well below what they originally had their home listed for then. One specific client originally listed for $509k in 2008 and were on the market for 188 days, lowered to $450k and no nibbles. In 2009 they listed again briefly for $465k.
They ended up renting the home out, and I can assure you the renter left the home in atrocious condition that cost them a lot of money to remediate. Would they have been better off getting the house off their plate back in 2008? I'd say it's safe to say in this particular example they would have had a lot less stress in their lives.
As I mentioned before, if you do anticipate waiting past 2010 you should put together a longer term plan, maybe three or four years minimum. If we lose 10% by the end of the year, why would prices increase in 2011? If gas and oil prices increase significantly, absolutely! Will it happen? If we have a massive influx of new citizens to Calgary, prices of real estate will most probably increase. Will significant population growth happen? Probably not - unless the oil and gas prices move up significantly. I believe we will see further drops in average and median sale prices by the end of this year. We will then probably have a period of flat growth where we will see prices remain steady for a significant period of time, then we will see slow, sustainable growth.
Also take into account that every year you do not sell your home, you should be decreasing the balance of your mortgage. That will certainly influence your bottom line when you do finally sell. You also need to analyze what your other options are. If you do not own a home, you will be paying someone else rent. That may not seem significant over the next 12 months, but in the long run, putting your rent toward paying down your own investment, in my opinion, is a much wiser decision.
If you are thinking of downsizing both your home and your monthly carrying costs your affordability is certainly an important consideration. You are right, there are some excellent opportunities in other areas of the city. For example, I have a beautiful property listed in Evanston for $369,900.
Assuming a Buyer puts down 20%, interest at 4.5%, amortization 25 years and it sells for full list price, monthly mortgage would be around $1,638. Assuming all the same for a house priced at $468k, mortgage payment would be around $2,072, a savings of around $434 per month. Also take into account taxes, utilities and insurance would all be lower, bringing your savings to over $500 per month.
When you are ready to sit down and discuss your options and your plans, I would be happy to do so.
All the best,
Dan
That certainly is the billion dollar question, would you be further ahead a year from now if you were to hold onto any property? I suppose I would venture to say that there has to be a reason for everything… prices go up when demand goes up. We know that demand is at a five year low for this time of year, and that corresponds with the decline in population growth in our city. If we anticipated an influx of new Calgarians as we did in 2006, it would be a good bet that prices could potentially go up. I don't think anyone foresees such an event any time soon. I can tell you that at the beginning of this year I was involved with a few listings that were originally listed in 2008 when we had our first glut of inventory. The clients I had decided to hold off for almost two years in anticipation of selling for a higher price. I can tell you they sold well below what they originally had their home listed for then. One specific client originally listed for $509k in 2008 and were on the market for 188 days, lowered to $450k and no nibbles. In 2009 they listed again briefly for $465k.
They ended up renting the home out, and I can assure you the renter left the home in atrocious condition that cost them a lot of money to remediate. Would they have been better off getting the house off their plate back in 2008? I'd say it's safe to say in this particular example they would have had a lot less stress in their lives.
As I mentioned before, if you do anticipate waiting past 2010 you should put together a longer term plan, maybe three or four years minimum. If we lose 10% by the end of the year, why would prices increase in 2011? If gas and oil prices increase significantly, absolutely! Will it happen? If we have a massive influx of new citizens to Calgary, prices of real estate will most probably increase. Will significant population growth happen? Probably not - unless the oil and gas prices move up significantly. I believe we will see further drops in average and median sale prices by the end of this year. We will then probably have a period of flat growth where we will see prices remain steady for a significant period of time, then we will see slow, sustainable growth.
Also take into account that every year you do not sell your home, you should be decreasing the balance of your mortgage. That will certainly influence your bottom line when you do finally sell. You also need to analyze what your other options are. If you do not own a home, you will be paying someone else rent. That may not seem significant over the next 12 months, but in the long run, putting your rent toward paying down your own investment, in my opinion, is a much wiser decision.
If you are thinking of downsizing both your home and your monthly carrying costs your affordability is certainly an important consideration. You are right, there are some excellent opportunities in other areas of the city. For example, I have a beautiful property listed in Evanston for $369,900.
Assuming a Buyer puts down 20%, interest at 4.5%, amortization 25 years and it sells for full list price, monthly mortgage would be around $1,638. Assuming all the same for a house priced at $468k, mortgage payment would be around $2,072, a savings of around $434 per month. Also take into account taxes, utilities and insurance would all be lower, bringing your savings to over $500 per month.
When you are ready to sit down and discuss your options and your plans, I would be happy to do so.
All the best,
Dan
Tuesday, August 3, 2010
Real Estate July Statistics in Calgary
The Calgary Real Estate Board has released the latest statistics and the news is not good, but it is nothing we were not expecting. Last year, July saw 2,853 sales in Calgary and the surrounding area, which was actually quite high. July 2008 had 2,336 sales, July 2007 had 2,677 sales, July 2006 had 2,710 sales and in July 2005 - prior to our huge escalation in pricing - there were 2,723 sales. Regardless of how we look at it, we are extremely and dangerously low this year with only 1,683 sales in July. May and June also saw the lowest sales figures in comparison to May and June sales in the past five years.
Historically, August sees lower sales figures than May, June and July. We should also anticipate that sales will typically decrease the last third of the year due to the change in seasons. As a Seller, we need to pay very close attention to the sales figures over the next few months. The real estate market is one of the most pure forms of supply and demand, and as we see demand drop further, prices may also adjust suddenly and dramatically. Average sale prices have dropped 4% in the past month, which is quite concerning. Some economists have been predicting dramatic changes in pricing (see my blog) by the end of the year.
The question is… when can we expect the market to level out and start to increase again? Typically our "spring" market picks up the pace from the winter doldrums, however, we need to keep a close watch on some worrisome trends that will certainly effect our market. Most specifically, Calgary has seen a dramatic change in its growth. The Calgary Herald reported that our growth has slowed to a 26 year low (see the July 23rd edition.) More people left the city than arrived for the first time since 1992. Without a doubt, the fact our population growth is the lowest since 1984 is having a huge impact on our market right now. We are certainly in for some interesting months ahead.
If you have any questions or would like further clarification on any of this information, please do not hesitate to drop me a line.
________________________________________
News Release
Summer Cool Down Continues in Calgary Housing Market
Calgary, August 3, 2010 – The summer cool down in Calgary’s housing market continued in the month of July, according to figures released today by the Calgary Real Estate Board (CREB®).
The number of single family homes sold in July 2010 in the city of Calgary was down 42 per cent from the same time a year ago, and condominium sales saw a decrease of 44 per cent from the same time a year ago.
July 2010 saw 915 single family homes sold in the city of Calgary. This is a decrease of 14 per cent from 1,061 sales in June 2010. In July 2009, single family home sales totalled 1,585. The number of condominium sales for the month of July 2010 was 396. This was a decrease of 11 per cent from the 445 condominium transactions recorded in June 2010. In July 2009, condominium sales were 702.
“Calgary’s housing market is cooling off after its record-setting pace in the post-recession period. This slow-down is not all that surprising in the face of tighter mortgage regulations and rising interest rates. The post-recession rally we saw in the summer of 2009 was unique and that pace couldn’t be sustained,” says Sano Stante, president-elect of CREB®.
“The sense of urgency seen last summer, fall and winter in the lead-up to tighter mortgage-lending measures has diminished,” says Stante. “Rising mortgage rates and increased inventories will be the primary head-wind facing Calgary’s housing market, but improving job prospects will offer some tail winds in the latter half of 2010 and into 2011.”
The average price of a single family home in the city of Calgary in July 2010 was $464,655, showing a 4 per cent decrease from June 2010, when the average price was $481,964, and showing an increase of 6 per cent from July 2009, when the average price was $436,782. The average price of a condominium in the city of Calgary was $291,168, showing no significant change from June 2010, when the average price was $292,238 and a 2 per cent increase over last year, when the average price was $285,032. Average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods, or account for price differentials between geographical areas.
“We are seeing relative stability in our average and median prices for the Calgary market,” says Stante. “A gradual return to moderate interest rates will not trigger any kind of steep decline in prices in our housing market. Prices may soften in select markets where inventory has bulked up, but for the most part they will remain relatively sticky as the economy improves.”
“Nonetheless with the combination of historically low interest rates and a large inventory of homes, there are some great buys out there—particularly in areas where comparable stock is ample such as the condominium and multi-family market. This presents a great opportunity to get into the market or to trade up,” adds Stante.
The median price of a single family home in the city of Calgary for July 2010 was $400,000, showing a 5 per cent decrease from June 2010, when the median price was $418,900, and a 3 per cent increase from July 2009, when the median price was $390,000. The median price of a condominium in July 2010 was $268,000, showing a 1 per cent decrease from June 2010, when the median was $269,900. That’s up 2 per cent from July 2009, when the median price was $263,000.
All city of Calgary MLS® statistics include properties listed and sold only within Calgary’s city limits. The median price is the price that is midway between the least expensive and most expensive home sold in an area during a given period of time. During that time, half the buyers bought homes that cost more than the median price and half bought homes for less than the median price.
There was a slowdown in the number of Calgarians putting homes up for sale in the month of July. Single family listings in the city of Calgary added for the month of July totalled 1,942, a decrease of 29 per cent from June 2010 when 2,733 new listings were added, and showing a decrease of 7 per cent from July 2009, when 2,089 new listings came to the market.
Condominium new listings in the city of Calgary added for July 2010 were 890, down 18 per cent from June 2010, when the MLS® saw 1,084 condo listings coming to the market. This is a decrease of 3 per cent from July 2009, when new condominium listings added were 918.
“Indeed Alberta and Calgary’s economic recovery is lagging behind the rest of the country right now. But on the bright side we see this trend reversing itself as we move into 2011. We expect Alberta to lead in economic growth and recovery—outperforming much of the country in 2011,” says Stante.
To view the CREB statistics page, please visit the media page here:
Calgary Real Estate Statistics
Historically, August sees lower sales figures than May, June and July. We should also anticipate that sales will typically decrease the last third of the year due to the change in seasons. As a Seller, we need to pay very close attention to the sales figures over the next few months. The real estate market is one of the most pure forms of supply and demand, and as we see demand drop further, prices may also adjust suddenly and dramatically. Average sale prices have dropped 4% in the past month, which is quite concerning. Some economists have been predicting dramatic changes in pricing (see my blog) by the end of the year.
The question is… when can we expect the market to level out and start to increase again? Typically our "spring" market picks up the pace from the winter doldrums, however, we need to keep a close watch on some worrisome trends that will certainly effect our market. Most specifically, Calgary has seen a dramatic change in its growth. The Calgary Herald reported that our growth has slowed to a 26 year low (see the July 23rd edition.) More people left the city than arrived for the first time since 1992. Without a doubt, the fact our population growth is the lowest since 1984 is having a huge impact on our market right now. We are certainly in for some interesting months ahead.
If you have any questions or would like further clarification on any of this information, please do not hesitate to drop me a line.
________________________________________
News Release
Summer Cool Down Continues in Calgary Housing Market
Calgary, August 3, 2010 – The summer cool down in Calgary’s housing market continued in the month of July, according to figures released today by the Calgary Real Estate Board (CREB®).
The number of single family homes sold in July 2010 in the city of Calgary was down 42 per cent from the same time a year ago, and condominium sales saw a decrease of 44 per cent from the same time a year ago.
July 2010 saw 915 single family homes sold in the city of Calgary. This is a decrease of 14 per cent from 1,061 sales in June 2010. In July 2009, single family home sales totalled 1,585. The number of condominium sales for the month of July 2010 was 396. This was a decrease of 11 per cent from the 445 condominium transactions recorded in June 2010. In July 2009, condominium sales were 702.
“Calgary’s housing market is cooling off after its record-setting pace in the post-recession period. This slow-down is not all that surprising in the face of tighter mortgage regulations and rising interest rates. The post-recession rally we saw in the summer of 2009 was unique and that pace couldn’t be sustained,” says Sano Stante, president-elect of CREB®.
“The sense of urgency seen last summer, fall and winter in the lead-up to tighter mortgage-lending measures has diminished,” says Stante. “Rising mortgage rates and increased inventories will be the primary head-wind facing Calgary’s housing market, but improving job prospects will offer some tail winds in the latter half of 2010 and into 2011.”
The average price of a single family home in the city of Calgary in July 2010 was $464,655, showing a 4 per cent decrease from June 2010, when the average price was $481,964, and showing an increase of 6 per cent from July 2009, when the average price was $436,782. The average price of a condominium in the city of Calgary was $291,168, showing no significant change from June 2010, when the average price was $292,238 and a 2 per cent increase over last year, when the average price was $285,032. Average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods, or account for price differentials between geographical areas.
“We are seeing relative stability in our average and median prices for the Calgary market,” says Stante. “A gradual return to moderate interest rates will not trigger any kind of steep decline in prices in our housing market. Prices may soften in select markets where inventory has bulked up, but for the most part they will remain relatively sticky as the economy improves.”
“Nonetheless with the combination of historically low interest rates and a large inventory of homes, there are some great buys out there—particularly in areas where comparable stock is ample such as the condominium and multi-family market. This presents a great opportunity to get into the market or to trade up,” adds Stante.
The median price of a single family home in the city of Calgary for July 2010 was $400,000, showing a 5 per cent decrease from June 2010, when the median price was $418,900, and a 3 per cent increase from July 2009, when the median price was $390,000. The median price of a condominium in July 2010 was $268,000, showing a 1 per cent decrease from June 2010, when the median was $269,900. That’s up 2 per cent from July 2009, when the median price was $263,000.
All city of Calgary MLS® statistics include properties listed and sold only within Calgary’s city limits. The median price is the price that is midway between the least expensive and most expensive home sold in an area during a given period of time. During that time, half the buyers bought homes that cost more than the median price and half bought homes for less than the median price.
There was a slowdown in the number of Calgarians putting homes up for sale in the month of July. Single family listings in the city of Calgary added for the month of July totalled 1,942, a decrease of 29 per cent from June 2010 when 2,733 new listings were added, and showing a decrease of 7 per cent from July 2009, when 2,089 new listings came to the market.
Condominium new listings in the city of Calgary added for July 2010 were 890, down 18 per cent from June 2010, when the MLS® saw 1,084 condo listings coming to the market. This is a decrease of 3 per cent from July 2009, when new condominium listings added were 918.
“Indeed Alberta and Calgary’s economic recovery is lagging behind the rest of the country right now. But on the bright side we see this trend reversing itself as we move into 2011. We expect Alberta to lead in economic growth and recovery—outperforming much of the country in 2011,” says Stante.
To view the CREB statistics page, please visit the media page here:
Calgary Real Estate Statistics
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