Realestock Blog

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 this week's Globe and Mail, the title “B.C. Housing Market in Deep Freeze” caught my eye. To me, deep freeze is not such a terrible thing. For example, say I bake a really delicious pie, and I can’t eat it all. I might not want to eat it that evening, but I still intend to eat it sometime, so I stick it in the deep freeze and defrost it a few weeks later. Granted, it’s not quite as delicious as it was when it was fresh, but it still tastes pretty good.

According to the Globe and Mail, new developments in Vancouver, and across BC seem to be stalling, or stopping completely. Vancouver developer Ward McAllister talks about the fact that no-one appears to be beginning new projects in 2009.

The article goes on to talk about a variety of different opinions as to how this year will play out. Some say that by the end of 2009 the housing market will have returned to some kind of normality, while others are being more conservative, and saying that we have a few more years yet. Many are suggesting that there will be no upturn until a year from now around the time of the Vancouver Winter Olympics in 2010. That’s a long time if you are depending on building-related work. It is estimated that one in ten people in BC works in the construction industry, or in a job related to it. Therefore we are not just talking about obvious job losses, for people like welders, bricklayers or foremen, but factory workers who produce materials, or marketing people who work for developers, or the developers themselves. If there are not any new builds in 2009, there are a number of people who will directly suffer, and then the trickle down will indirectly affect us all.

Some solutions as to what developers and others in construction can do to are mentioned in this Globe and Mail article. They include:

· Building rental apartments

· Selling the land meant for condo developments and such to BC housing, to see if they might want to use the land for public housing projects

These are great ideas. Whether BC housing will take them up on the land offer (if everyone is trying it, then probably not) is debatable, but the idea of building rental apartments is an awesome idea. According to an article I read in Forbes a while back, housing and building supplies are coming down in price, so developers could use these now less expensive materials to build decent apartment housing (a rarity in many BC cities, I’m talking about you, Victoria) which will provide an income, and can be sold when the market upturn happens, whenever that is.

The Globe and Mail talks about some developers who have made enough money in the past to ride this out. Many of them are planning more complex, intensive sites, which require more permits and planning than regular condo developments. Planning for the future is another good way, as long as one can afford it, and still be around when it comes to building it!

In terms of terrifying headlines, in my opinion ‘deep freeze’ is better than ‘recession’ ‘downturn’ ‘crash’ and my personal favourite ‘depression’. It implies that that pie is going to be in the freezer for a long time, but eventually, we’ll be able to defrost it, and get on with things…and I for one am getting the ice cream ready.

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It's another monumental week in the real estate world. Once again, Taking 'stock supplies you with some interesting tidbits to keep you up to date on various world developments (no pun intended). If you read anything in the news that you think should be in next week’s blog, feel free to comment on the posting. Alternatively, if you want to comment on any of the stories listed here, let us know what you think!

Luxury Real Estate News/Views

Neighbor says Golf is a Sport Too Close (New York Times)

A lot of people want to be near to their favourite golf course...but how near is too near? A resident whose house is next to the 6th hole (a par 3) at the Winged Foot Golf Club is sick of golf balls hitting his property, breaking his windows, scaring his children, and making his dog sick. The hole is currently closed due to a restraining order brought against the club. You know it has to be serious when Donald Trump is offering to mediate.

It's not Easy Being Green - If You are Buying a Luxury Home...

This week's Realestock blog entry looks at how many luxury buyers are not concerned about their homes being environmentally sound. However, some developments are managing to combine good living with good style.

America's Luxury Homes, Downsized (Forbes)

On a similar theme, Forbes.com has written this interesting article about how many popular luxury properties are smaller than traditional 'luxury' housing. This is partially due to the lack of space, growth of environmentalism, worries about reselling the property in this less than buoyant market, and, more importantly, because it isn't 1987, and big doesn't necessarily mean classy. After all, is it better to have Foie Gras, or a Big Mac?

Worldwide Property News/Views

China's Homeowners Feeling Little Pain (Newsweek)

Here in North America, we are all on tenterhooks, fearful to hear what will happen to the property market next. However, in China, people are not feeling the pinch as we are. According to Newsweek, the cost of an average home has increased fourfold in the past eight years, and China's 80-million strong middle class are clambering to get on to the property ladder. Whether the market will eventually deteriorate like ours is still uncertain, but for the moment, things are looking sunny for the Chinese market.

Have I Got the Candidate For You! How the Real-Estate Market Could Turn Florida for Obama (Slate.com)

We are all now acutely aware how politics can affect house prices. However, in Florida, the real estate market could affect the choice of candidate. Voters are looking at which candidate will save them from getting into negative equity. This choice could be crucial as to who becomes the next president: because as Al Gore knows, Florida can change an election.

Rise in Property Re-structuring, Recovery and Debt Business Expected (PropertyWire.com)

According to PropertyWire.com, many international real estate groups are moving into the restructuring and recovery business - due to the large amount of real estate developments and projects that are falling through due to a lack of funding, in addition to the large amount of foreclosures and other loan difficulties that are occurring.

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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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