There has been much speculation that we are in the midst of a housing bubble which is sure to come to an abrupt end.  The question some people are asking is, WHEN will the bubble burst?

Canadian Business Magazine’s reporter Larry MacDonald says that we are in the midst of a buying frenzy.  Speculators are making purchases based on the assumption that prices will continue to increase:

… rank speculation seems to be in full bloom in the housing market. People are now signing agreements to purchase like they’re trading futures and options.

MacDonald urges caution. He thinks that Finance Minister, Jim Flaherty is making a mistake by not increasing interest rates.  In fact MacDonald is also encouraging the Bank of Canada to increase its rates in order to slow speculators down.

The Bank of Canada should also reconsider its stance on interest rates. Its policy of maintaining extremely low interest rates has been, in large part, responsible for fueling the current mania for housing.

MacDonald’s article urges caution … and he is right.   Buying a home is one of the biggest purchases most people make. You should always be cautious and know exactly what you are getting into.  We give our customers ALL the information necessary to make a good buying decision. We explain everything you need to know about getting a mortgage. If there are risks we tell you up front, what they are and what you can do to minimize them.

If you have any questions about getting into the housing market now, give us a call at 604-736-1855.

Be sure to read our previous blog post were TD Economics predicts a 14.8% decrease in Vancouver house prices.

Read Larry MacDonald’s full article,  Stop the housing bubble before it’s too late.

Here’s a market update from our friends at Macdonald Realty; Simon Clayton, Jason Low, Sandra Ens, Jason Feinstadt, and Jenny Stephanson.

August 2011 Market Update

“There are 3 kinds of lies: Lies, Damned Lies, and Statistics”

- Mark Twain

There’s no doubt that real estate is an interesting topic of conversation for the public. The media, in an attempt to feed this appetite for real estate news, often publishes interesting pieces of real estate information that help sell papers. Due to this heavy dose of constant real estate news, it’s important to understand how the data is collected and how to interpret the information.

Below are the 3 most commonly misunderstood statistics in the media:

1) Housing starts rise 1.9%!
(http://www.vancouversun.com/life/Housing+starts+cent+June/5083165/story.html)

This shouldn’t really matter to buyers or sellers out there. While this is related to the real estate market, it is more relevant for the construction industry than it is to the resale housing market.

Remember, these are new home construction figures: not sales or pricing numbers. Unless you’re a construction worker or materials’ supplier, this type of information is largely irrelevant to your real estate decision-making process.

2) Home sales drop 42%!
(http://www.cbc.ca/canada/british-columbia/story/2008/10/02/bc-real-estate-values-vancouver-september.html)

This kind of information is important for buyers and sellers to know and also helpful for realtors to use. A drop in home sales is sometimes a precursor to lower prices down the road. That said, there are a multitude of reasons that home sales could slow that wouldn’t also result in a corresponding drop in prices.

It is therefore important to remember that these are unit sale figures, not price figures. These statistics are generally also seasonally adjusted to reflect the fact that sales tend to be slower in the winter and summer as opposed to the spring and fall. You should talk to a professional to see whether a drop in sales velocity is because of a slowing market or because of some other extraneous event.

3) Average House Prices Expected to Rise 13% this year!
(http://www.vancouversun.com/business/Home+prices+rise+cent+this+year+report/5030251/story.html)

This is the most misunderstood of the media reports that come out. Yes, it is true that Average Canadian Home Prices in 2011 will likely show a significant increase over 2010; however, as we’re already half way through the year, much of the increase has already occurred.

Many real estate boards also release data that shows the Benchmark price of a home. This is a much more accurate look at the current state of the real estate market than the average price. The Benchmark price is the current price of an average home in a given market area rather than the average price of all of the homes in a given market area. The difference is subtle, but substantive. The average price simply takes the price of all units sold in a given market area and divides it by the number of units sold. It therefore can be skewed by a strong luxury market, like the one currently being experienced in many Metro Vancouver markets.

Remember to always read real estate statistics with an eye to these issues and you’ll become a more accurate analyst of the market.

August 2011 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911

We ran the following article in our newsletter the other day, but thought it was worth repeating in the blog,  since not everyone gets the newsletter.  (Click here if you want to subscribe.)

On July 13, TD Economics issued a report predicting a 10.2% decrease in the housing market over the next two years.

The economists specifically focused on Vancouver and Toronto saying that they will experience an even larger decrease …with a whopping drop of 14.8 % for Vancouver.

Among the twelve major markets profiled in this report, Vancouver and Toronto look poised for larger-than-average declines over the next few years, reflecting in part their exposure to the condominium segment, which appears particularly ripe for a correction.

The rationale for this prediction is …

A combination of more subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages and fewer first time home buyers are expected to be the chief culprits behind the slowdown. With most of these drivers expected to remain supportive to housing demand in the very near term, we anticipate that the brunt of this adjustment will take place in 2012 and into 2013.

A section of the report focused specifically on Vancouver with the title reading:

VANCOUVER – THE HOUSING MARKET THAT HAS ALL EYES WATCHING

With Vancouver consistently making all the Top 10 best city lists, it is little wonder that our housing prices are amongst the highest in Canada.

The TD predictions focus on the higher than average housing prices, condos and foreign investment factors that have driven the prices up.

Vancouver has been the poster child for those individuals worried about a real estate bubble here in Canada. We expect that Vancouver will post modest economic growth accompanied by subdued job and income gains. Interest rate hikes will be felt in Vancouver likely more than other places due to the fact that household debt levels are the highest across the country.

With this economic climate, we foresee a 25.4% peak to- trough decline in sales and 14.8% in prices over 2012-13, by far the worst fate of any urban centre. Still, the path to correction will likely transpire over seven to eight quarters. What’s more, just as some of the recent increase has reflected a shift in the composition in sales towards higher priced homes, normalization in the sales mix going forward will disproportionately weigh on average prices. At the expected trough in 2013, the average resale price is expected to sit at $675,000 – nearly double the national number and that of most other urban centres.

Another interesting tidbit about Vancouver?

Apparently our debt levels are the highest in the country.

… household debt levels in Vancouver are gauged to be the worst in the country. While the number of mortgages more than ninety days in arrears was 0.5% in May, the share has been consistently trending up since early 2008.

If you want to know how the current forecasts affect YOUR mortgage or mortgage choices, give us a call: 604-736-1855.

Here’s a market update from our friends at Macdonald Realty; Simon Clayton, Jason Low, Sandra Ens, Jason Feinstadt, and Jenny Stephanson.

July 2011 Market Update

A few months ago, we focused on Sellers, and strategies for pricing your home. This month, we’ll be turning our attention to Buyers and offer certain strategies for how you should approach the negotiation process. Remember, these are just general guidelines. Every situation is unique and you should talk to a professional Realtor about your specific circumstances.

1) Make Offers on Reasonably Priced Properties

Pricing is an art that some Realtors understand better than others. A reasonably-priced property will maximize your chance of success at a fair price.

Properties that are priced too high likely have unreasonable and/or unmotivated sellers. These properties will likely sit on the market for a good period of time before the seller’s expectations lower or their motivations increase. In the interim, it is unlikely that you will convince the seller to accept a market-priced offer.

Properties that are priced too low will likely solicit multiple offers: an unpleasant situation for most buyers. A very general rule-of-thumb is that, in a multiple offer situation, 2 offers will solicit full price, 3 offers will achieve a 5% premium, while 4 or more will see 10%+.

2) Don’t Low-Ball

As a Buyer, your goal should be to get the property you want at a reasonable price. Unless you are lucking into exceptional circumstances, low-balling decreases your chances of achieving this goal.

You will routinely see Sellers being ‘insulted’ with the low offer and simply not counter, either out of spite or out of a belief that a deal is unreachable. In this scenario, if you really like the property, your only response would be to tender a completely new offer. In this case, you’ve tipped your hand that you really like the property and your negotiating position has been compromised.

Conversely, very low offers are often countered with very little movement on the Seller’s side. Like in the first case, your only option at that point is to move even further on your next counter. Once again, you’ve compromised your negotiating position while also making the Seller an adversary rather than a partner.

3) Pay to the Point of Indifference

If you do happen to get into a multiple offer situation, your bargaining position is limited to your best offer. In this case, your realtor should provide you a Comparative Market Analysis (CMA) for you to make an informed decision and you should come in with your best offer. In this case, your offer should be to the point of indifference, which means that you’re paying up to the point you believe the property is worth to you, and if you lose to a competing bid that is $100 higher than your offer, you will not regret your bid.

July 2011 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911

Here’s a market update from our friends at Macdonald Realty; Simon Clayton, Jason Low, Sandra Ens, Jason Feinstadt, and Jenny Stephanson.

June 2011 Market Update

With the recent election of a majority Conservative government, what does this mean for the housing sector?

Most financial analysts agree that the business-friendly Conservatives will continue to prioritize the health of the overall economy, a message that will be well-received by the investment community. This, combined with the first majority government that Canada has seen in over half a decade, provides a platform of stability that financial markets crave. These two factors will amplify Canada’s already strong economic reputation and will give us the best chance of having a strong, stable economic base in the near- and mid-term.

“The more stable government is good news for foreign investors, particularly as balancing the budget remains high on the agenda,” says Jennifer Lee, senior economist with BMO Capital Markets. “With its majority hold, the Conservatives will likely blunt the impact of the new official opposition, the NDP. And with the Bloc Quebecois losing official party status, separatist issues will retreat to the back.”

Policy-wise, the Conservatives did not outline any new housing-related initiatives during the election. However, in their last term, they moved to increase the insurance requirements of the Canada Housing and Mortgage Corporation (CMHC) in order to cool off the run-up in real estate prices in certain jurisdictions. These new rules effectively tighten lending requirements, which is seen by many as a necessity during this low-rate environment to deter boom-and-bust real estate cycles.

The rapid appreciation in prices over the past year, especially in some areas of the Lower Mainland, is getting the attention of government officials. It is believed that these prices have been driven up by Chinese investment, as these neighborhoods represent the areas where investor class Chinese immigrants tend to settle. That said, the Conservatives worked very hard to court the new Canadian vote in the previous election and their platform seems to indicate that they will increase the number of economic immigrants – at the expense of other immigration categories – rather than reduce them.

So while it is unlikely that this government will do anything other than encourage economic immigration, there is a growing concern that locals are being priced out of the market. Whether government policy is put in place to rectify this is something to watch, although, given that it really only affects Vancouver, it seems unlikely.

Overall, it seems as though this new Conservative majority government is positive for the housing market. That said, government policy and leadership only plays a small role in the economy. When things go well, they tend to get too much credit. And when things go poorly, they receive a disproportionate amount of the blame.

June 2011 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911

Here’s a market update from our friends at Macdonald Realty; Simon Clayton, Jason Low, Sandra Ens, Jason Feinstadt, and Jenny Stephanson.

May 2011 Market Update

The Spring Market is underway. For those of you thinking about selling, it is important to realize how vital the Art of Pricing is to the sale of your home.

All sellers want the highest price possible for their homes, but the strategies to get there are not always intuitive. In certain circumstances, pricing low can be more effective than pricing high, while in others, pricing above market value can be a winning strategy. In most cases, however, the optimum pricing strategy is to price within 10% of market value and let the market decide. After all, the ‘list price’ comes with a caveat: Or Best Offer.

Top 5 Reasons for NOT Pricing High:

• 1. You lose out on potential buyers who put a price cap on their property searches.
• 2. Serious buyers question the motivation of a seller with an overpriced listing.
• 3. You provide a strong comparable for your neighbours who are properly priced. You are effectively selling other people’s well-priced homes.
• 4. Buyers assume that properties which remain on the market for long periods of time have something inherently wrong with them.
• 5. Other agents will be more hesitant to show your home.

May 2011 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911