Calgary Housing Market - 2014 in Review - part one of two!

What a crazy run we have had in the Calgary housing market over the past year. Inventories in some sectors of the market were extremely low, and the average price of homes in the City increased 7% from the previous year. It is interesting to note that sales of homes over a million dollars increased by 21% and sales of all homes over $600k increased by over a third! Sales of homes under the $600k plateau, which includes entry level homes affordable to first time home buyers, increased by only 2%. As a matter of fact, homes under $400k saw a dramatic drop in sales by over 25%!

 

I believe there were a few contributing factors to all of these facts and figures…

Although the upper echelon of sales seems to have taken off this past year, looking at a good number of these sales actually show dramatic decreases in the originally anticipated value of the properties. In most of the communities I was involved with this past year, I saw some amazing price reductions. In Hanson Ranch in the NW there were two homes that were reduced over $100k with similar stories in West Springs, Mount Pleasant and Bridgeland. Although there were some high sales, many saw reductions from their original pricing by well over the $100k mark, some reductions were over 25%. Assuming the original listing prices were accurate when the homes first went to market, that is a dramatic reduction in market values. So even though we saw many high sale prices, keep in mind a good portion of these were well below their original anticipated values.

A second point to ponder would be the fact that the higher priced sales was a major factor contributing to the “average” and “median” price gains. The question remains, did we see an actual increase of value of 7% in across the board, or have the sales of high-end homes skewed the numbers?

Looking at the entry level home, - let’s say under $400k - we can actually see a decrease in sales by over a quarter year over year. Does this mean that prices are moving out of this category throughout the City? A couple of thoughts here… the first is the fact there have been some policy changes both from the federal government and the major banks. For example, it is now much tougher to purchase a second home as an income stream. Many banks require a 30% deposit by the purchaser. This has reduced the pool of first time and “Ma and Pa” investors to the market. This sector of the market is typically in that lower price category.

It is also tougher to qualify for a new mortgage, so many potential “move up” buyers from the lower priced homes may have decided to stay put for the time being, until they build a little more equity into their investment either by an increased value, reducing their mortgage, or both. A couple of months ago I was dealing with three competing offers for a lower priced home. It is interesting to note that, even though all of the bidding buyers knew there were other offers on the table, all three offers were within $5,000 of one another, even after negotiating for the final sale. Buyers (and Banks) are not like they were in 2006 where bids were many thousands above asking price… Buyers are well informed and are willing to pay only what they feel the value of the property is, perhaps a small percentage above that. They are much more patient than they were eight years ago and are more willing to wait for the next property.

Having said that, buyers have also been very quick to react to a property they feel is priced appropriately over the past year… although they don’t want to abundantly overpay, they have been willing to pull the trigger very quickly.

Another type of buyer has been formed over the past little while, that would be the middle to larger builder. Many of the major builders in the city have formed companies that are redeveloping within the city, most specifically in the city core. With the municipal policy of reducing much of the “urban sprawl” we have seen in past – largely due to the capacity of our waterworks system – builders are looking to a different income stream in redevelopment. This sector of the market is looking strictly to land value within a specific area, and whether that value sustains a new development within a community. This buyer is different than a buyer looking for their own home as there are a completely different set of perimeters. Often this past year we saw competing offers in “prime communities” specifically for this type of land.

 

Many factors have contributed to our success this year in the Calgary housing market, including my thoughts above. What are we in of in the coming year? Will we be able to sustain our growth? Will oil prices and a dampening economy change our direction? Stay tuned for my next segment, "what to expect in the coming year!"

Why Location Is Important in Selecting Property

Why Location Is Important in Selecting Property

Another good perspective by fellow Blogger Jonas Swain
http://bizcityarea.com/?p=1365

Selecting or buying a property means that you have some income on your side that you would like to invest your money into real estate that can offer you better options in the future.


Hence, you have make sure that you are buying the right kind of property that can offer you better features and options and advantages. The location of the property plays a crucial role when you are selecting any real estate because you want to make sure that there are many advantages that you get in the near future. Here we take a quick look at some of the top reasons why location is important when you are selecting commercial or residential property.

Accessibility

This is the most crucial thing that you must look out for when you are buying property for your business or even for your personal residential. It is always recommended that your property should be close to means of transport so that it does not take time for you to reach the property. If your property is not accessible you will end up having transport problems especially if you don’t have your own vehicle to reach the destination. This is important both from business and personal point of use because in both cases you will need your property in a location where you can reach easily. Similarly, your property should be close to various other important locations in the city so that you can reach those places in short time and conveniently.

Environment

The environment of the locality is also equally important when you are looking for property and therefore you have to make sure that you have the right location. If you are looking for business property you should make sure that the location of the property is ideal from business environment and similarly when you are looking for residential property you need to ensure that the property is in safe and secure environment. If the location of the property does not offer you the right kind of location you are probably buying the wrong property that will not offer you the right advantages.

 

Financial Gain

Since you are investing in property you also want to make sure that the price of the property offers you better advantage in the future. When you are buying residential or commercial property you consider location of the property because you believe that the location of the property is important and it will impact the property price positively in the future. Buyers that buy property from investment point of view focus on location because they want to see their property price grow in the future so that they can sell it at the right price and profit from it.
By Jonas Swain

15 Real Estate Myths

This is a great piece written by Lisa Ross that I had to re-post!

December 3, 2014 at 6:34 am Lisa Ross 0 Top Real Estate        
                 
In today’s business world, myths are widespread. At a first glance, everything might seem authentic, but think twice! A part of what we perceive as genuine, might turn at some point to be just the result of fiction combined with imagination and a small slice of reality, in a single word – myths. How this affects you as a seller? Well, it costs a pretty penny, indeed.
Being too naïve is without a doubt a risk for your strategy! There should always be a clear distinction between believing and putting everything into action. The key, however in the end is to know, to be aware that you might get it all wrong. Myths can deceive you and make you pick up the wrong card for your property, while misinformation can cost you real time and money. So, separate fact from fiction and you can develop your ability to get rid of preconceived notions before they’ll start affecting you. Here’s what you shouldn’t believe.

Myth 1: You don’t need to make any sort of repairs before selling your home

This is one of those myths that are wrong from the early start! Repairs made to your home means in most cases the possibility for you to sell your house at a higher price. Minor repairs are always appreciated!
One of the things you can do is to prospect the market and see some other similar listings. Do they have freshly-made repairs? Then, for sure you have to make them too, to have better chances to sell your home. This will help your home stand out from today’s crowded market.

Myth 2: The outside of my house doesn’t matter

Curb appeal makes the difference! For your buyer to be attracted to get inside your house, the outside should look mesmerizing and eye-catching too. You need to do whatever possible to make a good first impression, and the exterior of your house plays a vital role. Some specialists might even say that the exterior compensates for its shortcomings because it is the first thing a buyer will see. You need to create an inviting appearance from the start.

Myth 3: Striking colors will attract everybody

Well, striking colors are not for everyone, for sure. Think about the more traditional category of people. If you choose to paint your walls in bizarre colors you need to be aware that you eliminate a great number of possible buyers. Hint: If you plan to sell your house in the near future, avoid unusual colors and get rid of your personal touch, as much as possible.
Make improvements that appeal to a broad range of tastes and stick to details that have mass appeal.

Myth 4:  Higher prices allow you to lower it afterwards

Well, at first, prices too high will scare off your viewers, and you’ll probably won’t have the chance to make them look at your house at all. They won’t bother anymore!
Most of today’s real estate websites have search options, therefore some might just look at the houses within their price range. Your approach should be intuitive and as close to market prices as possible, unless you want to lose potential buyers.
And always have in mind – you will sell your home at the price the market will bear!

Myth 5: You can sell your home faster, without a real estate agent

Be objective, if you don’t have experience in real estate, how can you realistically sell it faster? It’s a non-sense! Of course, you might have the beginner’s luck, but why risk it? A real estate professional does it on a daily basis and therefore knows all the tips and tricks of this industry. Marketing a property requires a number of skills that you can only develop in time, as a result, why not ask the help of a person that already has a proven record of success?

Myth 6: You should make your buyer wait after he/she makes you an offer. It will make him/her accept your counter offer much easier.

NO! Don’t do this, don’t waste valuable time. You should respond to every offer immediately. Why? Because there are so many other similar listings out there, and competition is high.
Why play with your chances? When a buyer proposes a deal, be sure he/she is ready to negotiate and buy your property afterwards. So take advantage of the offer!

Myth 7: To sell my house, I only need to put a ‘For sale’ sign in my yard and wait.

Those times are over. You need to carefully market your house, in order to sell it faster. If you only put a sign in front of your house, you’ll probably wait a long time before the right buyer will pass over by chance. Buyers don’t just walk down the street and purchase whatever property that comes across, you know?!

Myth 8: You can close the deal at your initial price!

Well, there are few chances that your initial price will be the final one too. Why? Because every buyer will try to negotiate it. It’s absolutely normal! Don’t be rigid and seize every opportunity.

Myth 9: In real estate and war, everything is allowed.

Many buyers might think they can do whatever to get the deal closed. And by saying this they mean everything – being aggressive, manipulative and pushy too! Hmm, well no, by doing this you’ll probably scare off your possible buyers and lose them forever. Real Estate is one of those industries where if you are too avid you’ll push your luck away. Be flexible and know HOW to sell your property.

Myth 10: Every real estate agent will do the same job, there’s no difference between them.

It matters which agent you chose to sell your house with. You need to be on the same page with your real estate agent. He/she needs to fully understand your needs and wishes. So, not every agent is good for you. Choose your agent wisely, he/she is your lucky clover. Appreciate real estate agents for their work and efforts, they all struggle to get you the result you want!

Myth 11: Anyone can do real estate, it’s easy!

No! This is not true! If it were that easy to be a real estate agent, everyone would become one and get rich too. Being a successful real estate agent requires passion, knowledge and a lot of hard work. This is why you must have a professional to help you, without one you’ll just lose time and money too!

Myth 12: You must wait for the perfect season to sell your home.

Well, this is not quite true. If you decide to sell your home, you must put it online as fast as you can. There is no such thing as the best season for real estate. Buyers search for homes all year round. The need for a new home doesn’t wait till summer or spring. Home sellers are not driven by seasons anymore, so put your house on the market now!

Myth 13: Don’t accept the first offer you get.

Another misconception among buyers is not to accept their first offer, because they think they can get a higher price for their house. But, why reject an offer if it works for you. You may never get an offer that good. So, if it’s suitable for you, don’t lose more time for nothing, you might only push your luck away.

Myth 14: I only need a week to sell my home.

Ha-ha, who can ever believe this? Selling a home takes time and patience. You cannot hope to sell your home after the first minutes you listed it. Statistics show that a usual property stays a couple of months on the market before having a new owner. Indeed, this myth may happen, but it’s just an exception to the rule.

Myth 15: Every property doubles in value every ten years

Not every property and the word ‘to double’ is exaggerated! Some might even decrease in value. The reality is unpredictable, no one can know for sure what the real estate market will be in ten years’ time, let’s say!

All in all, the endless list of real estate myths is amazing! It’s fair enough that so many of us get to believe them, due to the fact that they are incredibly common and widespread. However, the trick is to find the perfect balance between reality and fiction. It’s critically important to make the distinction properly, in order to get the best results.
Even though some of these myths might have gotten your attention easily, get over and start perceiving reality as it is, if you don’t want to live a fairytale that’ll convert itself into a nightmare after all!

Calgary Real Estate Forecast for 2014

The Calgary Real Estate Board has put together an extensive Forecast for 2014 and is cautiously optimistic expecting further growth as we are positioned well going into the year.

Undoubtedly 2013 was an interesting year in the real estate industry in Calgary with incredible growth in pricing and sales. Our net "in-migration" was certainly a contributing factor to the flurry of activity, the number of people entering the city far exceeded expectations. As a matter of fact, the past two years have been the two strongest years of in-migration since our heyday of 2006.

Much of the influx of new Calgarians has been due to the poor world economy in relationship to the robust economic and employment of our own micro-economy. This year, improving global economic conditions are expected to make it harder to attract similar numbers to our city, the City of Calgary predicts that we will see a much slower growth rate this year.

The second contributing factor to our growth was the extremely low vacancy rate in the residential rental market. Prior to the great flood, our vacancy rate was already at a dangerously low 1.7%. The short supply of rental product combined with the increased migration to the city and many displaced citizens due to the flood further affected the vacancy rate, CMHC reported that in October the apartment vacancy rates in Calgary fell to 1.0%.  The undersupplied rental market has placed upward pressure on rental rates, encouraging many would-be renters to consider purchasing a new home sooner than they had planned. Interestingly enough, the lack of rental properties has created a niche for new rental building including the proposed behemoth 58 storey Telus Sky.

What I personally find interesting and feel is somewhat overlooked in analyzing the market over the coming year are the many "micro-markets" within the city and surrounding areas. Last year there was a decrease in single family home sales under $400k of -16%, whereas homes over a million dollars increased by a whopping 30%. Both price categories contribute to the overall year-by-year increase of 8%, however, the buyers and sellers from each category certainly experienced a completely different set of pressures and strategies.

I would also say that although overall "general" inventory is down across the board, if we look at many specific communities we see that we actually have a very unbalanced inventory and over abundance of listings in some micro-categories. For example, looking at the corridor on the NW side of Calgary along highway 1A, we can see that there were three sales over $2 million last year. There are over 42 listings above $2 million today. I question what will become of some of these listings and the home owners... if some of these sellers absolutely have to sell their homes, they may opt to lower their pricing to increase their potential pool of buyers putting downward pressure on the market in this area. As pricing becomes more affordable to a new pool of buyers, they may move away from their original search areas. There certainly is a potential for some major downward pressure on the higher priced homes throughout Calgary and the surrounding communities as we see more choices become available.

If we look at specific price pockets within an area we also see some disturbing trends. In Panorama Hills - a community I often refer to in my Blogs as it is the largest community in Calgary - we see can see that the gap between price categories is getting larger and larger.  Last year 12% of the sales were over $600k, today half of the listings are in that price range. Last year 85% of the sales were under $550k, today only 35% of the listings fall within this range.

The gap between what a buyer is willing to pay - or perhaps what they can pay - in a specific community compared to the value sellers are asking for is getting wider and wider. I am not saying that the properties are not worth the price they are asking for, however, the pool of potential buyers is not anywhere near where it should be to have these properties trade hands. There are many contributing factors to this fact, including tightening guidelines from financial institutions and government policy. If we see this trend continue throughout the year, we may certainly see a slowing of the market.

We may see average and benchmark pricing increase at a slower rate compared to 2013, however, I would suggest a lot of that will be contributed to sales over $600k. I would also say that many of those high priced sales may be lower than the sellers originally anticipated. I would also suggest that if you have a large budget to purchase a home, you will likely get more bang for your buck this year. A great example of that is a beautiful estate home purchased in Church Ranches in 2012 for $3,650,000 (last year the highest price in the area was $2.8 million.) This sounds like a spectacular sale and certainly contributed to increased value in the community... this same property was purchased in 2007 for $6,350,000. Although it seems fantastic at the outset, the value of this property actually DECREASED $2.7 million from 2007 to 2012. We may not see this extreme in the coming year, I would suggest we will see similar scenarios though.

All in all I would agree that we are heading into an interesting time in our market. There will be some great value and both buyers and sellers will have the opportunity to do well. Being a savvy buyer and seller will be the key. Be sure you have ALL the information you need to make sound, informative decisions.

I would be happy to join your team of professionals as your real estate advisor and Realtor. Please do not hesitate to contact me if you have questions or concerns pertaining to real estate.

Wishing you continued growth throughout the year!

CMHC's First-Time Homebuyers Survey

The Canadian Mortgage and Housing Corporation (CMHC) has just released their first time Buyer survey. Certainly some interesting thoughts and findings in there further to my Blog regarding the slowing process of mortgage financing!

The survey points out that first-time homebuyers typically have lower incomes than other homebuyers. As a matter of fact, 65% of new buyers have household incomes of less than $90k and one in five of those have a total household income of under $45k. This would strengthen my position regarding the fact that the vanishing inventory of more affordable homes (under $400k) will be a major contributor of how the market proceeds over the next few weeks, months and years. If there are fewer homes available in the range these new homebuyers can afford, it will certainly slow the market significantly. If homes are not affordable for these buyers, the opportunity for other homebuyers to sell their homes and move up will also slow down.

Another finding within the survey points toward the fact that new homebuyers typically take about three months longer to plan their purchase than repeat buyers. The median time frame for planning is about ten months. If we see further spread between what these new home buyers can afford and the actual pricing of homes, we could see that planning time period expand further as new homebuyers have to save longer for a significant down payment.

What I found especially interesting in the survey is the fact that 70% of first time homebuyers purchase single family homes, whereas only 28% purchased apartment or townhouse styled condos. Perhaps there will be a shift in this trend as single family homes become further out of reach financially and new homebuyers will need to lower their expectations as to what they want in a new home. This will certainly affect the quantity of sales of single family detached homes, possibly dragging prices downward.

We certainly need to keep a close eye on this spread between affordability and market value for new home buyers and repeat buyers alike. Keep in mind that half of repeat buyers have a household income of $90k or less as well. As financiers and Government initiatives tighten the process for obtaining mortgages further, this will put additional pressure on the market where affordable homes are becoming further and farther between.

City Centre or the Suburbs?

We are thinking we might like to move closer to the inner city ,of course, prices are generally higher there and we don't want to dip into our retirement savings too much but what are your thoughts on that sort of move? Do you expect values to increase more rapidly in the inner city versus the suburbs?

Thanks for the note and your questions, it is always good to hear from you!

The inrush to the city centre and popularity to more urban living is very interesting and certainly a diversion from the way things have been in past.  As people became more affluent over the past few decades, there seemed to be an exodus to the surrounding areas of Calgary and great homes were built on acreages that surrounded the city. I remember when I first moved to Calgary in the mid-80's, places such as Artist Point on the West side of Calgary were the envy of many. Although there still is this type of growth and development today, there has been a major shift in this paradigm and more and more of these affluent - and pretty well folks from all walks of life - have been flocking to the city centre and areas of great walkability. The hustle and bustle of the downtown, walking access to shopping and services, and easy access to public transit are of great interest and importance to more people than ever.

I do not think this is a flash in the pan movement and believe we will see more and more of this over the next few years. Without a doubt we will see a further impodus in the city core and developers will see this trend and come up with many creative styles of homes and developments in these areas.

Just looking at many of the micro markets within the Calgary real estate market certainly is proof to this change. Communities in the suburbs seem to be declining in popularity relative to more central communities and homes are taking longer to sell in the outskirts of the city. The suburbs are a great choice for many families and offers a completely different lifestyle than inner city living, and that is totally a personal choice.

If I was looking to invest in new properties today, I would certainly be taking a serious look at the inner city myself and the potential for particular communities to fall within a great walking score. I was visiting friends in a beautiful condo complex in Spruce Cliff a couple of weeks ago and thinking what a great investment they made in the area. I absolutely believe that values close to the city core will accelerate faster that the outlying areas, and retain their value as other areas within the city may falter.

 

I can certainly keep you in the loop with a customized market report for you so that you can keep an eye on some of these communities yourself. I would also be happy to sit with you to come up with a strategy together in anticipation of making this new move.

Have a great Movember! 

Is the Process of Securing Financing Slowing?

There have been some serious shifts in the process of qualifying for a mortgage when considering buying a new home. The catalyst for this change in the mortgage rules really started back in 2006 when the markets across Canada - and specifically in Calgary - shot up in an unprecedented hurry and then descended almost as quickly in 2007-2009.  Since 2008, the Government has lowered the maximum amortization period from 40 to 25 years, reduced the gross and total debt service ratios and late last year regulated a higher qualification mortgage rate. Many of these restrictions appear to be aimed at cooling the housing market and limiting Ottawa's exposure in the case that house prices slump. "If we don't get the softness we are expecting, quite frankly I think they are already talking about more restrictions." Benjamin Tal, CIBC Deputy Chief Economist

The Federal Housing Agency has served notice that it is limiting guarantees it offers financial institutions to $350 million per lender under its National Housing Act Mortgage-Backed Securities program. Earlier this year, CMHC was given the okay by Ottawa to guarantee up to $85 billion for 2013 and those commitments reached $66 billion by the end of July. Even with the restrictions that these policies have spurred, Ottawa may feel they need to implement further policy to cool a market that has remained surprisingly resilient. "The consistent policy of this government has been to restrict or curtail its exposure - I would even say involvement - in the overall mortgage market." Jim Murphy, Chief Executive of the Canadian Association of Accredited Mortgage Professionals.

Getting financing certainly has become more rigorous over the past few weeks, months and years, and for the 15% of self-employed Canadians (and even higher ratio in Calgary) it's harder still. In past there have been programs for entrepreneurs that used "stated income" and a more relaxed qualification process that has recently been tightened. Changing attitudes among lenders make it more difficult for the self-employed to deal with top-tier banks, and the trade off is often higher interest rates. Lenders care more than ever about up-front equity, meaning they are requiring a larger down payment to soften their risk. 

There have been signs this year that the housing market is in recovery mode. Many analysts consider this a short term blip caused by consumers rushing to buy in order to take advantage of pre-approved mortgages signed 120 days ago when long-term rates were lower. But with the Bank of Canada signaling last week that it won't be raising rates, consumers can potentially take their foot off the gas. With no panic to buy, the question is whether people will be encouraged to continue to take on more debt or slow down their spending, especially if the economy wanes.

A major concern for Finance Minister Jim Flaherty has been the ever increasing debt load of Canadians. That, in combination with the recent downgrades to the Bank of Canada's growth forecasts, may give the government no choice but to further tighten lending rules.

It is difficult to understand fully how all of this will affect the real estate market, and many economists and analysts in the field are hesitant to make predictions on the housing market as so many experts have been so wrong for so long! I would suggest that we should pay close attention to the micro-markets within our area for indicators of a slowing or heated market. However, from all indicators up to now, I would expect the probability of a simmering market a very good possibility.

If you are considering buying or selling real estate, it would be prudent to align yourself with a real estate professional with a good understanding of these variables and with experience in the industry. I would be happy to chat with you about your real estate intentions and assist you in putting together a well researched strategy to help you achieve your goals!