Realestock Blog

In the last three weeks I've covered the ground from West to East accross Europe - on the hunt for depressed economic conditions. They seem to be more rare than the sighting of the Loch Ness Monster. From London to Paris to Budapest - Picadilly to the Champs Elysees - and East to Andrássy Avenue in Budapest - the crowds fill shop floors and busienss workers I've spoken with say "...business is good..."

What struck me was the numbers of people traveling and buying. The other thing that was apparent is whether you're used to walking down (or shopping - not my favorite pass time - but I do like to walk in and see the business models) New York's 5th Avenue or Robson Street in Vancouver, the main stay stores are all broadly distributed accross these European Cities.

In my estimation, this is the "grass roots" recovery - where consumer confidence is voted by the ringing of cash registers and count of shopping bags.

What's different? US Media reported loosing $10 Billion last year - while online media companies like Google, Bing, Yahoo, Face Book all contemplate how to take on the new role of media and get "content" that is relevant.

There has never been a more clear Connected Market than what we're witnessing today. With online media and content driven by users and giants alike - and distribution channels boasting globalized brands shipping to markets all over the world, the connections are inseperable. The evolution of The Connected Market Space is obvious in the main stream retail and media - the Connected Market Space emergence for entrepreneurs is comming fast for those ready with the recovery here.

Information moves fast - the world is connected. Financing is returning to the scene. From retail to real estate - the market is on the move - I give it 18 - 24 months before the "window of opportunity" closes by the "smart money".

Heading back in a couple of days - with a lot of insight from the world scene.

Tim

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The general consensus seems to be that the Canadian Real Estate Market is still one of the least disastrous markets worldwide. However, this doesn’t mean that this is a secure market. Sale prices are declining like everywhere else, and the current semblance of stability is only related to the fact that Canadian lenders and banks were, in previous times, much more conservative than lenders in other countries.

However, the market in Canada is by no means in the same state as it was a few years ago, which is obvious than when you look at a city like Vancouver, British Columbia. Vancouver had some of the most insanely hyper-inflated prices in the last few years, and so now that are fewer buyers, there are a distinct lack of properties being sold, and those that do sell, sell low.

On Friday in the Globe and Mail, Kerry Gold wrote an article misleadingly titled ‘First Time Buyers Drive a Rebounding Market” as it also talks about buyers who are upgrading, as well as those who are first time purchasers. One interesting point about this article, is the reminder that there are certain types of buyers who will always exist in any market, and will be the ones who will stop the it from going into complete cardiac arrest. This is, of course, as long as they are not completely scared off by the onslaught of negativity that currently invades the real estate market. Just joking:

1) First Time Buyers: If you are a first time buyer, this is a great time to get on the first rung of the ladder – but only if you are brave enough to take the plunge, and can get a mortgage. Prices are low, mortgage rates are low, and now with tax advantages ahoy, this is the best opportunity that you’ll get for a while!

2) Growing Families: When one’s family starts getting bigger, the need for more space necessitates the move to a bigger place. Last time I checked, people hadn’t stopped having children, and again, if you bought a while back, you’ll have equity in your property, and upgrading in a low market will not make much of a difference

3) Empty Nesters and other ‘downgraders’: At the other end of the scale, there are people downgrading. As long as one is moving within the same or a similar market, downgrading is not a big problem, as the gap between your lower priced large home, and your lower priced small home should be pretty similar.

4) People who are Relocating: When the job market is not secure, people will move where the jobs are, so this market is almost certain to generate a good deal of relocation. As this is born out of necessity, these people buy and sell in any market!

While this is not entirely newsworthy, it is worth remembering that these kinds of buyers exist in every market, so whatever the economy situation, there will still be these kinds of buyers to keep things going. Think of them like the superman of buyers...come to save us all from certain disaster. Which in the current bad news market is a little piece of good news. Shock horror, eh?

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In the last few weeks, there have been plenty of discussions in terms of whether the new US Government financial stability plans are beneficial or yet another example of throwing away good money after bad (as my grandmother would say). Everyone has an opinion on the various stimulus packages that have been brought forward from both the current and previous administrations.

I have trouble deciding who should be bailed out, and who shouldn’t. No one wants to reward irresponsible behavior with a ton of money, but conversely, there are people who are underwater on their homes through no fault of their own. Many people make snap judgments on people who took out subprime mortgages, but frankly, these people need to get off their high horses. If someone offered you the chance to have something that you thought you could (just) afford, in a housing market that seemed to be on the up, many people would take the chance. Two or three years ago, your average Joe could not have predicted that there would be mass unemployment and an unprecedented drop in home prices.

Bailing out the big banks, mortgage companies, and other corporations leaves a bad taste in everyone’s mouth. Who could forget seeing the CEOs of the big three squirm in their seat when asked whether they would be selling their private jets and returning home via a commercial airline? However, as time goes on, jobs are being lost, houses are being foreclosed, and stock prices are shooting down, something needs to be done.

President Obama’s current packages seem to be taking a different technique from the last administration. While the Republicans’ strategy was more to encourage consumer spending and the growth of businesses, the Obama administration seems more aimed at directly helping consumers, particularly homebuyers.

In the last month, three new strategies have been launched by the administration: The $8,000 tax credit for first time buyers, and the Making Home Affordable Refinance and Modification options. These are available to the following buyers, and are summarized as follows (more in depth information can be found at http://www.recovery.gov) :

$8,000 First Time Buyer Credit. You may be eligible if:

- You are a first time buyer.

- if you have a single income of up to $75,000, or a combined income of up to $150,000 (this will mean you receive the full tax credit of $8,000)

- You bought your home on or after the 1^st of January, 2009, up to the 1^st December, 2009.

Home Affordable Refinance. You may be eligible if:

- The mortgage is on your primary residence

- The loan on your home is a conforming loan, controlled by either Fannie Mae or Freddie Mac

- You are current on your mortgage payments (meaning you haven’t missed a payment by more than 30 days in 12 months)

- You are not ‘underwater’ on your mortgage –(meaning you cannot owe more than 105% of the cost of your home. (But 80% - 105% is OK))

For those not eligible for this plan, there is also the Home Affordable Modification. You may be eligible if:

- The home is your primary residence

- You owe less than $729,750 on your mortgage

- You are in some kind of trouble with your mortgage that is beyond your control at this point: e.g

1) Your mortgage rates were increased significantly

2) Your income has been significantly reduced since you got your current loan

3) You have suffered a hardship that has increased your expenses (e.g. medical bills)

- You began your mortgage before January 1, 2009

What is your view on these packages? Will they help? Will they benefit the economy as a whole, or are they just a temporary band aid over the real issues? What do you think? Will the cost of these measures be more or less than the cost of many, many foreclosures? Feel free to comment below.

The views expressed on the blog portion of this site represent only the opinions of the author and may not necessarily be the opinions of Realestock.com

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Many people incorrectly believe that all of the bad news about homeowners defaulting on their mortgages mostly relates to the United States. Although there are obviously a lot of people who are losing their homes in the US, other countries are not immune to similar problems. The United Kingdom for one, is looking a number of house repossessions (as we Brits call it) and possibly even a longer recession period than the US. Problems in the UK have been partially exacerbated by scary mortgages like the Northern Rock’s ‘together’ mortgage where you can borrow 125% of your home’s value.

Here in Canada we have been lucky that our banks and mortgage lenders have been more conservative. However, this does not mean that here in Canada we are immune to these problems. Although foreclosure rates are much lower, the country as a whole is experiencing higher unemployment, which means that many, through no fault of their own, are losing their homes.

In the Globe and Mail this week, it was announced that Canada Mortgage and Housing Corporation, in partnership with a number of major Canadian banks, will be bringing forward measures to help homeowners BEFORE they get into trouble or behind on payments. Banks will be calling, mailing, and emailing customers to let them know about various ways that they can help them manage their mortgages better. These include:

· Converting a variable rate mortgage to a fixed rate one, so to avoid sudden interest rate increases

· Offering a temporary short-term deferment of payments

· Offering payment flexibility

· Extended the term or amortization period of the loan. While the 40 year loan was gotten rid of months ago, there is still an option to have 30 or 35 years, and if you have a 25 year mortgage, that’s quite the monthly savings (although much more expensive in the long run…)

· Negotiating special payment options on a client to client basis

· Adding any missed payments to the balance of the mortgage

I think this is a fabulous idea. All of the riskier 5% or less down loans (and I use the term risky loosely, because plenty of young, first time buyers could only afford to put 5% down , and pay their mortgage perfectly well – myself included) are insured and backed by CMHC, and so the fact that they are taking action to prevent the terrible situations that we have seen in the US is great. However, will most homeowners be able to admit that they are in trouble? Your mortgage should only be approximately 30%/35% of your gross income, so if you are having an issue keeping your mortgage, insurance, heating and hydro bills in check, then you might want to talk to your mortgage advisor. If you work in a high risk industry like auto or construction, and finding it hard to make payments due to a decrease in work, this might be a good time to refinance or extend amortization just in case.

What do you think? Is this too little too late? Or is this something that may help Canadians from losing their homes?

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