The Feds have announced some changes. If everyone sees them for what they are -- and what the Feds say they are -- they should be good. They should slow you down if you were about to do something silly. But they shouldn't stop you or seriously restrict you in doing what you want to do in real estate.
The first and major change requires. you to "qualify" for your mortgage at the five-year fixed rate. So you qualify by "pretending" that you are getting a mortgage at say 4.7% (whatever the 5 year rate du jour is). Then you go ahead and grab that juicy 2.5% variable rate.
This is kind of like your government protecting you against yourself. Might make our FoxNews-watching neighbours scream "socialism" and go a little crazy. But might also make you thank them if your variable rate starts up in a year or two.
Next up, is a new limit on the maximum amount you can refinance to. It's still early and I need more details on this one, but here's what I THINK they are up to. You can still go 95% mortgage when you buy a house. But, when your mortgage comes up for renewal, you have to get to at least 10% equity/90% mortgage. Why?
They are trying to encourage building up a safety cushion of equity. Presumably they are also discouraging a few folks who have lots of equity but are tempted to borrow back the whole wad in order to "buy themselves something frilly". For example, say you think it's time to buy some stocks or a snazzy cottage, etc. -- Well, fine, just don't risk absolutely everything on some delusion that interest rates will nudge zero forever and real estate will go endlessly and uninterruptibly up. ("Uninterruptibly"???)
Third is the one that I hope won't turn into one of those things that shows up in the headlines with the explanation continued on page 6. Headline: MINIMUM 20% DOWN"... page 6: "if you are buying a place for speculation/investment/rental income". In other words for 95% of you, it doesn't change anything.
First take. If I screwed it up, you can tell me. Or I'll post clarifications, corrections and apologies later.
Tuesday, February 16, 2010
Tuesday, February 9, 2010
Bubbles
Suddenly the papers are full of bubble talk. Is there or is there not a Canadian housing bubble?
If you only read the headlines, you may think there is one.
Read the entire articles and the likely conclusion is "probably not, but we're not sure".
I don't have an answer. For quite a while, I have been concerned that the boom has been based on low interest rates and not yet supported by the economy. Our thinking was that if the economy perked up before interest rates start up, we'll be ok. If not, there will be a correction of some sort.
This seems to be what the media, banks, etc are suddenly worried about.
And the question about the economic recovery seems to be a similar debate ... Have we bottomed out? On the way up? Or another dip to come?
So I don't claim to have the answer, and I do claim nobody else has the answer. Doesn't mean I wont try to tell you what to do!
Actually, I'll mostly tell you what NOT to do.
Don't set yourself up by buying at your max price with hardly any down payment with a variable mortgage and think you'll move at a big profit in two years.
If you have enough down payment to withstand a short-term price correction; AND your income can handle an increase in payments (or your current payment schedule is attached to a fixed rate); AND you can stay in the house for a few years to ride out a correction, you should be fine.
Another "don't". Don't go hide in the basement solely because there MIGHT be a correction. If you are confident that this is a top, maybe you should hold off.
But if you aren't sure, and it turns out there is no bubble, your house might be more expensive when you come up for air.
If you only read the headlines, you may think there is one.
Read the entire articles and the likely conclusion is "probably not, but we're not sure".
I don't have an answer. For quite a while, I have been concerned that the boom has been based on low interest rates and not yet supported by the economy. Our thinking was that if the economy perked up before interest rates start up, we'll be ok. If not, there will be a correction of some sort.
This seems to be what the media, banks, etc are suddenly worried about.
And the question about the economic recovery seems to be a similar debate ... Have we bottomed out? On the way up? Or another dip to come?
So I don't claim to have the answer, and I do claim nobody else has the answer. Doesn't mean I wont try to tell you what to do!
Actually, I'll mostly tell you what NOT to do.
Don't set yourself up by buying at your max price with hardly any down payment with a variable mortgage and think you'll move at a big profit in two years.
If you have enough down payment to withstand a short-term price correction; AND your income can handle an increase in payments (or your current payment schedule is attached to a fixed rate); AND you can stay in the house for a few years to ride out a correction, you should be fine.
Another "don't". Don't go hide in the basement solely because there MIGHT be a correction. If you are confident that this is a top, maybe you should hold off.
But if you aren't sure, and it turns out there is no bubble, your house might be more expensive when you come up for air.
Competition vs. MLS ... part 1
So, the government (in the form of the Competition Bureau) wants to open up access to the data on the MLS system which is the property of organized real estate via CREA (Canadian Real Estate Association).
The idea is that the MLS system, built and operated by organized real estate, is the focal point for such a huge percentage of real estate sales in Canada that it is impossible for alternative approaches or systems to establish themselves and compete.
Theoretically, easier and more open access to this data would create lots of options for people to handle much more of the buy/sell process themselves at a much lower financial cost.
I’m going to rattle on for a post or two with some thoughts and perspective that I don’t expect to see very clearly expressed in the media. I might even be right about some of it.
And I’m actually still thinking some of it through. I understand the value of competition and I know that real estate commissions represent a lot of money, and there are probably changes that should be made to the MLS system.
But I think that I’m going to conclude that what the competition folks are after is wrong-headed and will leave homebuyers and sellers with weaker service, more risk, more confusion and will not ultimately save them any money.
So, if this interests you, follow the blog or subscribe or whatever. I’ll try to get at least one piece on this topic up daily for a week or so. And I would love it if you got in on the conversation.
Final thing today … here’s the official Royal LePage thought for the day:
Royal LePage Position
Royal LePage Real Estate Services believes that CREA and the MLS system are important components in Canada's real estate market. It is important to note:
1. The real estate market in Canada is highly competitive, and includes a wide variety of companies with diverse and innovative business models and price structures
2. There are other channels through which buyers and sellers can participate in the market, including online and do-it-yourself options
3. The organized structure and efficient attributes of the Canadian real estate industry are recognized globally, and many emerging markets would like to adopt a similar system.
Consumer protection and trust are the hallmarks of our business, and we will advocate strongly for our business, our partners, and our customers.
The idea is that the MLS system, built and operated by organized real estate, is the focal point for such a huge percentage of real estate sales in Canada that it is impossible for alternative approaches or systems to establish themselves and compete.
Theoretically, easier and more open access to this data would create lots of options for people to handle much more of the buy/sell process themselves at a much lower financial cost.
I’m going to rattle on for a post or two with some thoughts and perspective that I don’t expect to see very clearly expressed in the media. I might even be right about some of it.
And I’m actually still thinking some of it through. I understand the value of competition and I know that real estate commissions represent a lot of money, and there are probably changes that should be made to the MLS system.
But I think that I’m going to conclude that what the competition folks are after is wrong-headed and will leave homebuyers and sellers with weaker service, more risk, more confusion and will not ultimately save them any money.
So, if this interests you, follow the blog or subscribe or whatever. I’ll try to get at least one piece on this topic up daily for a week or so. And I would love it if you got in on the conversation.
Final thing today … here’s the official Royal LePage thought for the day:
Royal LePage Position
Royal LePage Real Estate Services believes that CREA and the MLS system are important components in Canada's real estate market. It is important to note:
1. The real estate market in Canada is highly competitive, and includes a wide variety of companies with diverse and innovative business models and price structures
2. There are other channels through which buyers and sellers can participate in the market, including online and do-it-yourself options
3. The organized structure and efficient attributes of the Canadian real estate industry are recognized globally, and many emerging markets would like to adopt a similar system.
Consumer protection and trust are the hallmarks of our business, and we will advocate strongly for our business, our partners, and our customers.
I'm back!!!
Time flies. Got a little busy. Then took a holiday. Got busy again, and well ... here we are.
I was determined to kick this off again with a post next week. But the headlines of the last couple of days got my attention.
Which headlines? Well, the Olympics and the Suberbowl stuff are certainly interesting. But for this little corner of the world I think we'll have a go at the "housing bubble" headlines, and the business of the Competition Bureau taking on organized Real Estate.
Stay tuned for a post on each sometime today.
And if you're thinking a newer, large-ish home would be nice but you want to stay in the Beach vicinity and don't want to break the bank, check out our little goodie at www.drop.io/enroutes (MLS E1781422)
By the way, the return of this blog is going to take a modified approach. Its main focus is still our take on the real estate market. It will still be largely non-promotional (except for mention of our new listings and the like). But it's going to be more fun and interesting.
Not that real estate isn't often interesting. But if this means I occasionally can't figure out any way to tie an interesting tidbit to real estate ... it gets posted anyway.
Talk soon.
I was determined to kick this off again with a post next week. But the headlines of the last couple of days got my attention.
Which headlines? Well, the Olympics and the Suberbowl stuff are certainly interesting. But for this little corner of the world I think we'll have a go at the "housing bubble" headlines, and the business of the Competition Bureau taking on organized Real Estate.
Stay tuned for a post on each sometime today.
And if you're thinking a newer, large-ish home would be nice but you want to stay in the Beach vicinity and don't want to break the bank, check out our little goodie at www.drop.io/enroutes (MLS E1781422)
By the way, the return of this blog is going to take a modified approach. Its main focus is still our take on the real estate market. It will still be largely non-promotional (except for mention of our new listings and the like). But it's going to be more fun and interesting.
Not that real estate isn't often interesting. But if this means I occasionally can't figure out any way to tie an interesting tidbit to real estate ... it gets posted anyway.
Talk soon.
Thursday, October 22, 2009
229 Bain Avenue
We have a new listing. It's a beauty, in the heart of Riverdale. You can read all about it here, or better yet, come and see it. Open Houses this weekend (Sat./Sun. 2-4 pm, Oct.24 &25)
Monday, October 12, 2009
The Other Hand: Staging, Stats, and Skipped Bits
Here I go again with my lectures about looking reasonably carefully before jumping to conclusions and "answers".
A good agent who is also a great marketer dropped a card in our mailbox the other day with a two-sided pitch on the benefits of home staging. We absolutely believe that staging has become almost essential for most homes in today's market.
I have a pet rant about staging, but it's pointless to bore you with it -- whether I "like" universal staging doesn't matter; it usually works if done right; and since everybody else is going to do it, you pretty much have to do it as well.
But the amount and type of staging depends on the market, the particular home and other circumstances.
Like selecting an agent and nearly everything else in real estate, staging has a whole bunch of "art" and "situation" about it.
A nice survey-based table showing how much you will "make" on a given staging activity looks very scientific and "factual". If only it were that simple. The piece in my mailbox gives examples such as "Update kitchen and bathrooms" at a cost of $1404-$1828 yielding a price increase of $3216-$3934. To the author's credit, a source is noted: "HomeGain survey of 2000 sales representatives nationwide..."
My bank account seems to drop more than $1828 by just speaking to a contractor, let alone actually doing a kitchen reno. Note it says "updating". They are probably talking about a countertop and sink, some paint and a few other bits. Now if you have to deal with solidly laid out-of-fashion ceramic tile on the floor, a nice 70's era "Florida ceiling" and avocado appliances ... well, start by adding another zero to the cost.
Then there's that HomeGain survey itself. HomeGain is an American real estate marketing firm. Their survey was of sales representatives in the U.S. and appears to have come out in 2007 as the market was beginning to badly misbehave down there. Not sure how big a difference any of those things make, but they give me pause.
[The HomeGain survey results can be found in a very useful HomeGain guide that you can download here ]
On the other side of the card, another survey result: professionally staged homes sell 80% faster!
Again, all credit to the agent for noting the source. StagedHomes.com is an organization involved in the training, accreditation and promotion of stagers.
The data was gathered during the period when BOTH Canadian and American markets were slumping. The bit not mentioned in the source-credit: 55% of the homes were vacant!
And the 80% differential is between 37 days to sell for the staged home vs. 6 months for the others! The average days-on-market for the entire Toronto area in September was a very-low 27 days.
To summarize, I'm not dissing staging. It's important and works when done right in the right situation. But the "proof" in these statistics and surveys is far from conclusive. Really I'm just illustrating a caveat for many things in real estate ... and life, for that matter:
Wiser people than I have warned about the tendency to try to make decisions and issues as simple as we want them to be, rather than dealing with the complexity that truly comprises them.
"If a string has one end, then it has another end"
"Policy [or rules] are for the guidance of wise men, and the strict adherence of fools".
A good agent who is also a great marketer dropped a card in our mailbox the other day with a two-sided pitch on the benefits of home staging. We absolutely believe that staging has become almost essential for most homes in today's market.
I have a pet rant about staging, but it's pointless to bore you with it -- whether I "like" universal staging doesn't matter; it usually works if done right; and since everybody else is going to do it, you pretty much have to do it as well.
But the amount and type of staging depends on the market, the particular home and other circumstances.
Like selecting an agent and nearly everything else in real estate, staging has a whole bunch of "art" and "situation" about it.
A nice survey-based table showing how much you will "make" on a given staging activity looks very scientific and "factual". If only it were that simple. The piece in my mailbox gives examples such as "Update kitchen and bathrooms" at a cost of $1404-$1828 yielding a price increase of $3216-$3934. To the author's credit, a source is noted: "HomeGain survey of 2000 sales representatives nationwide..."
My bank account seems to drop more than $1828 by just speaking to a contractor, let alone actually doing a kitchen reno. Note it says "updating". They are probably talking about a countertop and sink, some paint and a few other bits. Now if you have to deal with solidly laid out-of-fashion ceramic tile on the floor, a nice 70's era "Florida ceiling" and avocado appliances ... well, start by adding another zero to the cost.
Then there's that HomeGain survey itself. HomeGain is an American real estate marketing firm. Their survey was of sales representatives in the U.S. and appears to have come out in 2007 as the market was beginning to badly misbehave down there. Not sure how big a difference any of those things make, but they give me pause.
[The HomeGain survey results can be found in a very useful HomeGain guide that you can download here ]
On the other side of the card, another survey result: professionally staged homes sell 80% faster!
Again, all credit to the agent for noting the source. StagedHomes.com is an organization involved in the training, accreditation and promotion of stagers.
The data was gathered during the period when BOTH Canadian and American markets were slumping. The bit not mentioned in the source-credit: 55% of the homes were vacant!
And the 80% differential is between 37 days to sell for the staged home vs. 6 months for the others! The average days-on-market for the entire Toronto area in September was a very-low 27 days.
To summarize, I'm not dissing staging. It's important and works when done right in the right situation. But the "proof" in these statistics and surveys is far from conclusive. Really I'm just illustrating a caveat for many things in real estate ... and life, for that matter:
Wiser people than I have warned about the tendency to try to make decisions and issues as simple as we want them to be, rather than dealing with the complexity that truly comprises them.
"If a string has one end, then it has another end"
"Policy [or rules] are for the guidance of wise men, and the strict adherence of fools".
Saturday, October 3, 2009
Some things we still don't know...
We read the stories, we study the numbers, we talk to colleagues, we think (even when it hurts). We would love to just keep quoting the monthly amazing news out of the recent real estate market ... most sales ever for the month ... prices up ... recession bottomed out . But ... you knew there would be a "but" didn't you? . Back in the Fall of 2008, the headlines read "It's all going away ... hide in the basement ... the sky is falling". Down a couple of paragraphs, the story usually said something like "well, actually we're not in nearly as bad shape as the U.S., and even with the 6-10% price slippage we're still way ahead historically, and even that slippage is deceptive as it only applies to some market segments, and ...".
And if it didn't qualify the bad news, there would be a whole article a couple of pages on saying everything was going to be fine.
Nothing much happened early in 2009, even when it SHOULD have been happening ... Spring market and all that.
And then away we went. Maybe people just couldn't resist the low rates. Maybe they looked around and decided they were ok and could move ahead. For whatever reason, the buyers came back. Sellers were a little slower and that magnified the return to rising prices.
Traditionally it all slows down in the summer. Not this year. That led to the screaming headlines about some summer month having umpteen percent more sales than a year ago ... a new record!
Well yeah, July and August sales were way ahead of last year because hardly anything ever sells in the summer, but it did this year. What wasn't in the headline was that year-to-date roughly the same number of houses have sold in 2009 and 2008. Not very many in Feb., tons in August, in total up only 1.2%
And the standard two paragraphs into the articles about the end of the recession comes the comments about how long and hard the recovery will be and how jobs come back last.
Our own financial analyst, who I am beginning to hate despite what a good job he does, is pretty sure the hurtin' isn't over.
So?
So, if you think the trouble is over and everything is cheery you are probably wrong. And if you think it's all insanity, everybody is drinking the KoolAid and we're doomed you are probably wrong.
The market IS currently healthy and active. Interest rates ARE amazingly low. So if you are thinking of a move and are reasonably secure with decent credit, go for it.
But don't forget how you swore you were going to be more sensible about spending, and you weren't going to step quite so close to the financial edge anymore, etc.
Take advantage of cheap money, reasonable prices and your personal stability. But leave a little wiggle room in case ... well, just in case.
If that made sense and you are looking, and you're looking for a great bright excellently-maintained 4 bedroom home in our part of the world, wander over to www.drop.io/AmsterdamAve and have a look at our newest listing.
And if it didn't qualify the bad news, there would be a whole article a couple of pages on saying everything was going to be fine.
Nothing much happened early in 2009, even when it SHOULD have been happening ... Spring market and all that.
And then away we went. Maybe people just couldn't resist the low rates. Maybe they looked around and decided they were ok and could move ahead. For whatever reason, the buyers came back. Sellers were a little slower and that magnified the return to rising prices.
Traditionally it all slows down in the summer. Not this year. That led to the screaming headlines about some summer month having umpteen percent more sales than a year ago ... a new record!
Well yeah, July and August sales were way ahead of last year because hardly anything ever sells in the summer, but it did this year. What wasn't in the headline was that year-to-date roughly the same number of houses have sold in 2009 and 2008. Not very many in Feb., tons in August, in total up only 1.2%
And the standard two paragraphs into the articles about the end of the recession comes the comments about how long and hard the recovery will be and how jobs come back last.
Our own financial analyst, who I am beginning to hate despite what a good job he does, is pretty sure the hurtin' isn't over.
So?
So, if you think the trouble is over and everything is cheery you are probably wrong. And if you think it's all insanity, everybody is drinking the KoolAid and we're doomed you are probably wrong.
The market IS currently healthy and active. Interest rates ARE amazingly low. So if you are thinking of a move and are reasonably secure with decent credit, go for it.
But don't forget how you swore you were going to be more sensible about spending, and you weren't going to step quite so close to the financial edge anymore, etc.
Take advantage of cheap money, reasonable prices and your personal stability. But leave a little wiggle room in case ... well, just in case.
If that made sense and you are looking, and you're looking for a great bright excellently-maintained 4 bedroom home in our part of the world, wander over to www.drop.io/AmsterdamAve and have a look at our newest listing.
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