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Archive for November, 2009
Homeowners Feeling Bigger Pinch
Nov 28th
Bidding wars and higher interest costs are pushing up the costs of home ownership
By Garry Marr, Financial Post
Bidding wars and higher interest costs have lead to the inevitable — a drop in housing affordability for the first time in five quarters, according to a new index produced by the Royal Bank of Canada.
The bank says home ownership costs are up, something that has not happened since the spring of 2008. Despite the increase, costs are still off the peak reached for this housing cycle.
Royal Bank says 45.8% of pre-tax household income was needed to service the cost of owning a standard detached home in the third quarter of this year. That was up 1.2% from a quarter ago but well off the high of 52.3% hit in the 2008. The all-time high was 57.1%, reached in the second quarter of 1990.
“Home affordability has deteriorated in all provinces and major markets in Canada due to a slight rise in key mortgage rates and appreciation in property values,” said Robert Hogue, senior economist with Royal Bank.
Further proof that house prices are on the rise came Wednesday from the Teranet-National Bank National Composite House Price Index which showed September house prices were up 1.3% from the month before, the fifth straight month that prices have risen.
“The vigor is consistent with an improvement in market conditions over 2009 to date — more homes have been selling and fewer have been coming on the market,” said Marc Pinsonneault, senior economist with National Bank Financial Group.
Data released this month from the Canadian Real Estate Association, which represents 100 boards across the country, shows the trend of escalating prices is not slowing down. The Ottawa-based group said existing home prices were up 20.7% last month from October, 2008, the largest year over year increase in 20 years.
Those price increases have come as interest rates have also started to rise. Mr. Hogue said the 5.4% posted rate for a five-year closed mortgage, reached in the second quarter, is the lowest since Royal Bank started doing the study in 1985. Rates climbed to 5.73% in the third quarter for a five-year closed mortgage. The posted rate is generally at least 1% higher than what consumers can get on a discounted basis.
Prices have also been impacted by a supply shortages across the country. New listings last month in the country’s 25 largest markets were off 16% from a year ago. New home construction is on the rise but has not been able to respond fast enough to meet the rising demand.
Phil Soper, chief executive of Royal LePage Real Estate Services, expects the supply side problem to improve in the spring, a traditional time when families consider selling to coincide with the end of the school year.
“It’s a much more common time for people to list their homes than this time of year,” said Mr. Soper. “I suspect the supply side of this problem will ease considerably.”
He’s also not that concerned with rising mortgage rates. “That’s what I hoped would happen,” said the chief executive. “I know policy makers are hoping they can ease their stimulative approach to monetary policy at the same time as consumer confidence and the economy overall start to improve and not cause a sharp negative downturn in housing activity. So far, this is unfolding in not a bad fashion.”
GTA Realtors Report Mid-Month Housing Market Figures
Nov 28th
In the first two weeks of November, Greater Toronto REALTORS® reported 3,666 sales – up 84 per cent compared to the first two weeks of November 2008. The average price for these transactions was up 10 per cent year-overyear to $415,066.
Increased interest in ownership housing has been widespread throughout the GTA and across all housing types,” said Toronto Real Estate Board President Tom Lebour. “However, it is important to point out that we are now making comparisons to the fall of 2008 when we experienced a marked decline in sales and average price” Year-to-date sales, at 78,233 are up 11 per cent compared to 2008. Average price, at $393,180, is up by three per cent.
“Sales and average price in the GTA this winter will be well above levels reported throughout the fourth quarter of 2008 and the first quarter of 2009,” according to Jason Mercer, TREB’s Senior Manager of Market Analysis.
n the first two weeks of November, Greater Toronto REALTORS® reported 3,666 sales – up 84 per cent compared to the first two weeks of November 2008. The average price for these transactions was up 10 per cent year-overyear to $415,066.
Increased interest in ownership housing has been widespread throughout the GTA and across all housing types,” said Toronto Real Estate Board President Tom Lebour. “However, it is important to point out that we are now making comparisons to the fall of 2008 when we experienced a marked decline in sales and average price” Year-to-date sales, at 78,233 are up 11 per cent compared to 2008. Average price, at $393,180, is up by three per cent.
“Sales and average price in the GTA this winter will be well above levels reported throughout the fourth quarter of 2008 and the first quarter of 2009,” according to Jason Mercer, TREB’s Senior Manager of Market Analysis.
Download: Full Toronto Real Estate Board Report
Vacation Properties Don’t Have to be a Burden
Nov 27th
At first glance, vacation properties might seem an unnecessary luxury during a recession … but actually, buying or keeping a second home can be a good investment – if you’re OK with renting it out in the short term. That’s because most people don’t stop taking time off in bad economic times. They do, however, seek out cheaper vacation spots, often closer to home. That could be your lakeside cottage, cabin in the woods, or waterfront condo.
Vacation property rental can be a great source of income for you right now – if you can bear the thought of sharing it with others – whether you are working or retired. In fact, renting out your holiday spot could end up being a great financial boon; real estate journalist Broderick Perkins writes on Realty Times, “When your monthly mortgage payment is less than or equal to 1 peak week rental, 12 weeks of rental will cover your mortgage payments for the entire year.”
Rental Choices for your Vacation Place
- Run a Bed and Breakfast - either managing operations yourself, or hiring someone to do so
- Work with a vacation rental property management company to list/book your place for you
- Rent the place yourself without a middle man. The proliferation of websites marketing vacation properties makes this easier now than ever
- Make a charitable donation: rent your vacation property for use by a non-profit organization (church retreat, for example) and get a tax deduction
Good Time to Buy that Second Home
You don’t have to already own a vacation property to benefit from this stream of revenue generation. Now is a great time to buy a cottage or other type of second home – what with low interest rates and lower prices and less competition looking. You could even consider buying a vacation property with another family; the same rules of caution apply as to any form of co-buying a home with someone who isn’t your spouse/partner in life.
Recreational Mortgages
Whether you already have a vacation property, or you’re thinking of buying one, there are several options for Canadian recreational mortgages.
According to Scotiabank, “Most financial institutions offer financing programs for vacation properties and/or second homes. Depending on the type of property you buy, you may be eligible to obtain financing for up to 95% of its value.” (The small print adds: “Subject to approval by a mortgage default insurer. All Scotiabank mortgages are subject to applicable credit approval, Scotiabank residential mortgage standards and maximum permitted loan amounts.”)
Do you have a vacation property and are renting it out? Considering buying a second home/vacation property? Please leave your stories below.
Does Landscaping Add Value to your Home?
Nov 27th
I know a woman who told her real estate agent, “Let’s make an offer” as soon as she saw the 75-year-old copper beech tree in the backyard.
Her passion for nature aside, the mature tree’s foliage spread – covering the entire width of the lot – would ensure lower heating and cooling costs. And as a majestic centerpiece in the yard, that beech might increase the selling value of the house – though likely only if some decking or other landscaping feature was added to enhance the outdoor experience.
A study has found that 98% of realtors believe that mature trees have a ’strong or moderate impact’ on the saleability of homes listed for over $250,000; about 83% of realtors thought the trees helped sell homes listed under $150,000.
While mature trees may move home sales, most buyers will not pay extra for trees and lawn, flowers and shrubs, says Chad Tameling of Century 21 Conexus Realty Ltd. However, you can almost always get a return on your investment from decks and patios, he adds. ” As decks have become more desirable, their resale value has continued to increase.”
Leave it to the Pros
Sunrooms, gazebos, patios and decks – and their integration with their natural setting – are best handled by landscape architects and designers. Landscaping professionals have four-year degreed training in botany, horticulture, engineering, and design, and are experts in irrigation, soils, and property grading.
Hiring that kind of expertise isn’t cheap, of course, but some people say that professional landscaping can add up to 20% to the value of your property, as much as the return on a new kitchen or bathroom. Vila also notes that lush landscaping can save you up to 25% in energy costs; mature trees provide shelter from the cold winds of winter and shade during the summer’s heat.
Of course, not even a professional landscaper can wave a wand and get mature trees! Some other tried and true trends in landscaping include:
- Outdoor room or terrace extension that links the house and the yard
- Low-maintenance landscaping
- Artificial ponds, fountains, and waterfalls
Keep in mind that not everyone may share your personal tastes in landscaping – so try not to go with custom patio stones that are too customized, or unusual shrubbery, if you’re looking to sell your property someday.
Have you invested in landscaping and seen it pay off when you went to sell your home? Leave your comments below.
5 Tips for First-time Homebuyers
Nov 27th
The Realtor’s Image
Nov 27th
The public’s perception of real estate sales representatives might be better than that of, say, a lawyer – but could the realtor’s image use some more polishing?
Ken MacKenzie, the former head of the Fraser Valley Real Estate Board recently told REM Magazine what he thinks should be the focus for realtors in the near future: “The emphasis will be on… ethics and professionalism and promoting the image of realtors.”
Finding an ethical real estate sale agent – one who willl truly listen to the buyer or seller’s needs – isn’t that hard… but changing the stereotype of self-serving salesperson might be a bit tougher.
Benefits to using a Realtor
In reality, realtors are hard-working professionals, says Sophie Wagner at Century 21 Immo-Plus in Montreal, in her blog post, “136 Things that a REALTOR Does” for a client.
To be sure your realtor is working for you, when you are buying a home, you are best served by getting a buyer’s agent, whose commission is paid by the seller. The buyer’s agent helps you find suitable listings, set up showings, offer counsel throughout, and represent your interests.
Get educated and understand what you’re doing. Get a buyer agency agreement that sets it out as accurately as possible. Will it be perfect? Likely not, but it will probably be better than the verbal agreement.
The Canadian real estate profession has worked to put its stamp of professionalism out there for you to see easily – such as the trademark REALTOR® that identifies only those real estate professionals who are members of the Canadian Real Estate Association. The CREA has established a mandatory federal licensing program for real estate practitioners, who are required to follow a strict code of ethics.
What has been your experience dealing with realtors? Leave your comments here.
Condos Past, Present and Future
Nov 27th
Condominiums – like so much else in our economy today – are going through a transition. Here we take a look at recent past, present, and near/distant future scenarios in condo developments.
Good-Times Glitter of the Past
During the boom of recent years, the condo market reflected the lives of the rich and urbane: sleek fitness studios, pools, steam rooms, spa services, concierge, imported counter tops, mouldings and other drippings of fine living were standard in many condo developments.
Condo living was for the wealthy, rarely attainable for first-time home buyers or young families. Loaded with non-optional amenities that constituted the equivalent of the cost of country-club membership on top of the condo’s selling price.
Today’s Condo Chic – Basic, Affordable
But an interesting trend has been born of the recession, when sales came screeching to a virtual halt starting last summer: the Practical, Affordable Condo. Starting at about $380 per square foot, recession-friendly condos are broken up into smaller, plainer units with pared-down amenities in both the apartments themselves and those shared in the building.
Not the traditional condo owners’ cup of tea… but these new ‘light’ condos are selling – and they’re pretty much the only ones in the country doing so right now.
Builders are starting to see the need to redesing condos to:
• Suit younger, first time buyers
• Drop prices significantly
• Offer incentives to save condo buyers even more money
For example, Empire Communities’ new downtown Toronto development, Fly Condos, redesigned their condo apartments to be smaller, more basic and dropped the price significantly – and units that weren’t moving at all started selling like hotcakes.
The condo resale market remains more brisk than the new condo market. Looking-to-start-a-family types who had chosen a condo as their entry into home ownership are now taking their profit from selling their unit and putting it towards a house (having lined up a low interest mortgage.)
Builders are also offering incentive packages to entice buyers into new condos, such as Toronto’s Cresford Condos, which recently offered buyers 1 year free maintenance.
The Future of Condo Living
Now, imagine a condo with no maintenance fees … ever! Yes, it’s in the works – at a eco-friendly condo development in Milton, Ontario – the first of its kind in Canada.
The 150-unit GreenLife building can afford to offer fee-free living to buyers because the building, owned by developer Del Ridge Homes Inc., will produce enough renewable energy to cover all operating costs – including wind turbines, ground-source heating and cooling, hollow-core concrete floors, rooftop solar panels, R50 roof insulation,, insulated-concrete-form walls, motion-activated common area lighting and solar-powered parking lot lights. Marketing of GreenLife begins next month; units average 1,000 square feet, with prices starting at $190,000.
Other eco-leading condo developments in Canada include a Vancouver development that next year will offer 220 volt plug-in capability in some of the parking spaces for residents’ electric cars.
For those of you who don’t snag a spot in a fee-free development, think about buying a condo now vs. later – when repair and maintenance companies start charging harmonized sales tax (HST), thereby driving up condo fees.
Way-Out Future.. or Not so Far?
Running out of land space (and not yet ready to populate Mars), condo builders are starting to visualize building developments underwater – specifically, at the bottom of Lake Ontario!
A Toronto native who is VP of engineering at U.S. Submarines thinks it will be less than 30 years before people live there, with “breakthroughs in both building and air cleansing technologies allowing submerged condos. ” Maybe even condos located near “lake-bottom attractions” such as shipwreck, The Sligo, near Toronto’s shoreline.
Michael Schutte, now based in Oregon, is managing the construction of an underwater five-star hotel to open by the end of this year on the edge of a coral cliff on the lagoon floor 12 metres down, near Fiji.
Twenty-four undersea hotel suites and apartments will cover 51 square metres of ocean floor. The cost will be US $15,000 per person for a week. OK, not necessarily in your snack-bracket!
Are you considering buying a condo?
