May 25, 2010

Hurry Up and Wait

Hurry-up-wait So the ink has just dried on your purchase contract. Now what? Most likely there are conditions on the deal - what happens next?

If you're the buyer

You will be busy with details like: getting details to the mortgage company, booking your inspection, attending your inspection, and dealing with insurance questions (should be) to name a few. If you have your stuff organized and ready to go then you will find the process goes at lot smoother, especially if your agent has prepped you for all the things you’ll need to have ready.  If you aren’t using an agent I hope you like surprises because you are going to get lots of them.

If you're the seller

You will be busy waiting and not doing much else. It may feel like everyone is sitting on their thumbs not trying to sell your property. While the buyer and their agent are busy sorting out details you probably won't get many (or any) updates until the inspection. Right now conditions tend to take 7-10 days (or if you're a private seller please allow 2 – 4 weeks for conditions).

The main thing is to keep the main thing the main thing.

The main thing is the buyer wants to buy the home, and the seller wants to sell the home. Often there are little issues that creep up and throw the "main thing" out of focus, or become bigger issues than they are in reality. For example, sellers are often surprised when an appraiser needs to get through the property: “You mean they don’t have their financing?!?!"  Often a lender will require an appraisal in order to approve financing and it's not something to loose sleep over. Similar stumbling blocks can occur with the inspection, perhaps something is not up to code, or minor repairs are needed. Hopefully your agent and the other party's agent will help take the stress out of these stumbling blocks. One key thing to keep in mind is these "stumbling blocks" are likely to occur at the last minute, so make sure you're available at the condition deadline in case something needs to be signed or communicated.

Hurry up and wait, then hurry up again...

So if you are a buyer expect to be busy, and if you’re a seller you’ll need a little patience until conditions are removed. I had one seller recently who wasn’t desperate but his personality is such that he called and emailed me several times a day while we were pending to find out what was going on. When I’d tell him I had no news he would ask “How come? Why don't you call the buyer's agent and find out what's going on?” I would spend a good deal of time talking him out of having me call the buyer's agent daily; if I called as often as he wanted they might get the impression we’re desperate, which can bring on a second round of negotiations. When everything was said and done and the conditions were removed he told me he knew I was right not to call the other agent, he just felt it very nerve racking sitting and waiting. Whether you are desperate or not, it's often perception that matters the most.
 

May 21, 2010

Edmonton Real Estate Market Weekly Update

Here is our update on the Edmonton real estate market. (Previous week's numbers are in brackets). For the past 7 days:   Weeklyupdate_2

New listings:  610 (600, 644, 612)
# Sales: 303 (292, 312, 310)
Ratio: 50% (49%, 48%, 51%)
# Price changes: 396 (346, 376, 318)
# Expired/Off Market Listings: 149 (159, 312, 99)
Net loss/gain in listings this week: 158 (149, 20, 203)
Active listings for single family homes: 2972 (2879, 2802, 2763)
Active listings for condos: 2108 (2049, 1986, 1981)

The REALTORS® Association of Edmonton is reporting 1283 sales so far this month, which should put us between 1900-2000 for the month - ahead of 2008 but behind '05, '06, '07 & '09. The average residential sale price sits at $339k (up from last week and the same as last month), single family homes at $390k (up from last week and last month) and condos at $248k (down slightly from last week and last month).

May2110Weekly

Inventory of both condos and single family homes continues to rise. It is normal to see inventory and prices rise in the spring, but I have to admit I'm surprised the average price is continuing its climb while the inventory is rising so quickly. It's tough to say if sales will be affected by this long weekend - long weekend predictions are totally hit and miss.

*We are moving to WordPress! Woohoo! We've been busy importing, exporting and reporting...that's why we haven't posted too much this week. We expect to be moved over and back up to our usual ways early next week. There could be some glitches but we're looking forward to a smooth transition and all the benefits that WordPress will bring. Thanks for your patience.

May 17, 2010

Investing in your kid's real estate

Universitygraduate It's that time of year again, when parents start looking for homes for their children to live in while attending a college or university in the Edmonton area. TD Canada Trust recently released a report showing that 10% of Canadian parents would consider buying a condo for their adult children, and our experience shows that many parents in the Edmonton area are interested in this type of investment. We've written articles on this in the past, but this time I'd like to focus on some of the financing options parents have available to them.

Many parents will fork over the down payment and have their children pay the monthly costs; this helps their children get into the real estate market and establish credit while securing an investment or retirement property for themselves. The decision many parents face is who to put on title, and how to finance the property; speaking with your accountant and lawyer prior to these decisions is a must. Here are a few pointers to keep in mind:

  • If the condo is in your name, as your secondary residence you could end up paying a lot in capital gains tax when the time comes to sell (assuming it increases in value).
  • If your kids are making the payments make sure they can actually afford them (plus taxes, condo fees, utilities etc).
  • As with all real estate make sure you look at it as a long term investment - don't expect to make a profit after a year or two.

I asked Gord McCallum at First Foundation (an Edmonton & Calgary mortgage broker) to outline some financing options for parents and he suggested three:

  1. Buy it as a rental property.  This requires a minimum of 20% down. The big advantage here is that the interest on the mortgage is fully tax deductible, as would be the interest on the down payment if you borrow it as well. Essentially you would be able to deduct 100% of your interest costs against your income. The downside is the treatment of capital gains tax. Again, your accountant should be consulted to help make this decision.
  2. Co-sign the loan. Have your kid(s) on title as the principal buyer(s) and you as a co-signor. The property is considered a principal residence and not a revenue property, so the interest is not deductible and you should not face any capital gains tax.  The main reason someone might pursue this strategy is if they prefer to be more highly leveraged and put as little as 5% down (which would also mean you have to pay CMHC insurance premiums).
  3. Purchase it yourself. The CMHC "second home mortgage" program allows you to purchase it yourself with as little as 5% down.  Your children don't need to be on title but do have to live in the property. In addition you are not allowed to generate any revenue from the property (i.e. a roommate) as per the terms of the program.

All of this brings up estate issues as well which can get quite complicated, especially if you have more than one child... one more reason to consult both your lawyer and your accountant before signing on the dotted line.

May 14, 2010

Edmonton Real Estate Market Weekly Update

Here is our update on the Edmonton real estate market. (Previous week's numbers are in brackets). For the past 7 days:   Weeklyupdate_2

New listings:  600 (644, 612, 624)
# Sales: 292 (312, 310, 325)
Ratio: 49% (48%, 51%, 52%)
# Price changes: 346 (376, 318, 303)
# Expired/Off Market Listings: 159 (312, 99, 127)
Net loss/gain in listings this week: 149 (20, 203, 172)
Active listings for single family homes: 2879 (2802, 2763, 2636)
Active listings for condos: 2049 (1986, 1981, 1908)

May1410Weekly

The number of single family homes for sale continues to rise:

May1410SF

The number of condos for sale is higher than last year for the first time this week:

May1410COndos

May 12, 2010

The Dreaded Stampede

Getrichquick Every time there is a real estate seminar in town things go nuts around here.  Investors crawl out of the wood work like a smashed ant hill.  The mortgage brokers go nuts with applications from would be future Gazillionaires. We get inundated with calls and emails: "can I get 100% financing on that?" or,  "will the seller pay me to take their property?"  Most certainly we get slammed with requests for more information on investment type properties, it never fails.  Now here comes "Rich Dad" and before him it was Ozzie Juroc, Raymond Arron and so on.

If there ever was an underside to the real estate industry beyond those that participate in mortgage fraud, it would be the investor sharks. They lurk waiting for someone who's desperate for a piece of the action and strike just when they are willing to open their cheque book to some guru to help make it happen. 

I'm not saying that the guys themselves who run the seminars are crooks. It's what happens to people who go to these seminars and then fan out into the market to make their empire. One of lowest practices I can conceive of is the old "I'm the expert and I just happen to have some excellent properties for sale" routine.  If I could vommit on my own blog I would this practice is so repulsive. If the properties were that great, why are they selling them?

Anyway, inevitably people fall for this and many other scams.  So here we go again as Rich Dad rolls into town.

DISCLAIMER:  I have not attended a Rich Dad seminar and do not attribute the practices above to his seminars.  Never the less the fall out is the same.  All I know about Rich Dad I learned from CBC.

http://www.cbc.ca/marketplace/2010/road_to_rich_dad/main.html

May 10, 2010

Edmonton Home Builders Ramp Up Production Again

New-home-construction CMHC released their housing starts report today showing that Edmonton home builders are very busy once again... There were 1047 starts in April compared with 355 last April. After four months Edmonton builders have started 3439 units compared to 1116 last year. Construction started on three times as many single family homes (620) in April 2010 compared to 2009 and 5 times as many condo units (787). This is the first time in quite awhile that more condos were started than single family homes. With resale inventory on a steady rise, and new home inventory about to jump significantly, we are going to see increased pressure on prices in the near future.

May 07, 2010

Edmonton Real Estate Market Weekly Update

Here is our update on the Edmonton real estate market. (Previous week's numbers are in brackets). For the past 7 days:   Weeklyupdate_2

New listings:  644 (612, 624, 652)
# Sales: 312 (310, 325, 295)
Ratio: 48% (51%, 52%, 45%)
# Price changes: 376 (318, 303, 283)
# Expired/Off Market Listings: 312 (99, 127, 148)
Net loss/gain in listings this week: 20 (203, 172, 209)
Active listings for single family homes: 2802 (2763, 2636, 2491)
Active listings for condos: 1986 (1981, 1908, 1868)

For the second week in a row sales are lower than the same week last year, while new listings continue to come in well above last year. Is the spring market already over? It seems to me that sellers are far more optimistic than buyers right now.

May810Weekly

May 04, 2010

Edmonton Real Estate Inventory on the Rise

The REALTORS® Association of Edmonton released their report on the Edmonton real estate market today showing the lowest residential sales since 2003. For the first time this year sales are lower than last year, and seem likely to follow the trend set in 2008:

April10Sales

The average residential sale price dropped 1.25% from last month to $339,314 but is still ahead of last April ($312k):

April10Avg

New listings and inventory are the real story though with steep increases in both categories. Unless demand increases significantly prices should come down in the near future:


April10Listings

April10Inventory
As everyone knows mortgage rates have risen significantly and many buyers are trying to get into the market before their rate holds expire. One thing to keep in mind is that as of April 19 buyers have to qualify for the 5 year rate even if they are taking advantage of a lower rate; this typically means that they qualify for less than they would have on April 18 even with their rate hold. We expect sales and prices will slip once all the buyer's rate holds expire and over confident sellers will find themselves sitting on the market for a long time. The rise in inventory should also slow down once sellers realize this isn't the "second coming" of the peak.

PS...Happy Star Wars Day - May the 4th be with you!

May 03, 2010

Hail Caesar! And other things to remove from your bedroom while selling your home

RomanBed Today I showed a property with what could only be described  by Conn Igulden as being “The Julius Caesar tribute bed." Complete with ginormous posts with massive gold leafing at the top of each post, it was obviously built to commemorate Caesar's victory over Gaul. However, instead of being in a Roman museum this monument resides in a bedroom in South Edmonton that is barely big enough to hold a bed half its size. It did make me think about my last trip to Rome, and it did the same for my clients, totally distracting them from the task at hand.

Another big distraction I've seen numerous times in the bedroom is "risky photography." It certainly is an uncomfortable distraction when you walk into the master bedroom and you're greeted by a photo of the home owners in a compromising position. Depending on how well you know your clients this can be something you laugh off or something that causes you to quietly and quickly leave. We always tell people to take down personal photos before having buyers look at the home, photos from the "boudoir" certainly fall under the personal category.

A few months ago I was showing in the west end, and sitting on the night stand in the master bedroom was a large stack of self help books. I never would've noticed except the books had very large titles like "The sexless marriage" and "Improving your libido." My clients noticed too and left that home thinking they should wait for the divorce before making an offer. 

The master bedroom is one of the most personal spaces in a home - buyers want to be able to picture it as their personal space. If you're trying to sell, remember to remove your personal touches from the bedroom.

May 01, 2010

Condos Perform Better than Single Family Homes in Edmonton in April

After strong sales and price increases in March, the housing market in Edmonton in April slowed down considerably. At a time when sales and prices are typically steadily rising, sales of single family homes were not typical. In April, single family home sales were about the same as March, and April 2009.

April10EdmSFSales

There were 452 condo sales in April compared to 376 in March and 414 last April. With interest rates on the rise we believe many first time buyers have responded, buying affordable condos and taking advantage of historically low mortgage rates while they're still available. At this time of year we also see an increase in the number parents buying condos for their children to stay in while at the U of A.

April10EdmCondoSales

The average sale price of single family homes dropped from $395621 in March to $388392 in April but is still significantly higher than last April's $355440 and well below the peak price of $449095 in May 2007. Condos on the other hand only dropped slightly from March ($251263) to $248505. While we don't have the final inventory numbers yet it is safe to say if sales are increasing and prices decreasing inventory should be up substantially in April.

April10EdmAvg

The average price per square foot of single family homes dropped $2 to $269 while condos increased from $231 to $236:

April10EdmSqFt
 
So it's safe to say that condos performed better than single family homes in April, for the first time in quite a while. Meanwhile home builders in Edmonton continue to ramp up construction of single family homes (according to a report from CMHC yesterday single family construction in Edmonton is nearly 5 times that of last year). Perhaps we will see them slow down in coming months. As always, when the final numbers are released by the REALTORS® Association of Edmonton we'll have a full report here (should be on Tuesday).

April 30, 2010

Edmonton Real Estate Market Weekly Update

Here is our update on the Edmonton real estate market. (Previous week's numbers are in brackets). For the past 7 days:   Weeklyupdate_2

New listings:  612 (624, 652, 540)
# Sales: 310 (325, 295, 216)
Ratio: 51% (52%, 45%, 40%)
# Price changes: 318 (303, 283, 235)
# Expired/Off Market Listings: 99 (127, 148, 106)
Net loss/gain in listings this week: 203 (172, 209, 218)
Active listings for single family homes: 2763 (2636, 2491, 2388)
Active listings for condos: 1981 (1908, 1868, 1801)

Preliminary monthly numbers come out tomorrow and official numbers should be on Tuesday so I will keep this short and sweet today. The inventory of single family homes is still on the rise, well ahead of last year but still far below what we saw in 2008. 

April3010Inventory 

April3010Weekly
The REALTORS® Association of Edmonton is reporting 1748 sales so far this month. The overall average residential sale price currently sits at $338k (up slightly from last week), single family homes at $384k (down from last month) and condos at $253k (up slightly from last week and last month). Happy weekend!

April 29, 2010

Canadian Housing Bubble Does Not Include Edmonton

As fears of a housing bubble rise again in Canada The Edmonton Journal set us straight the other day in an article commented about by "RoadRager" on this blog. The author, Gary Lampier took stats from a number of different reports and concluded that there is no bubble in Edmonton, although there very well may be one in Toronto, Vancouver and Victoria.

Here are a few of the most telling stats he posted:

  • Average prices: In Toronto, the average bungalow price in the first quarter jumped 13.3% to $459,000, and condo prices rose 10 per cent to $317,500 compared to a year earlier. In Edmonton, the average residential price is $12,000 below the national average at $330,000
  • Trends: Toronto's average house prices continued to climb through 2008 and 2009, even as prices in Alberta's major cities declined from the all-time highs set in 2007. In Edmonton, the average price of a single-detached home spiked to a record high of more than $420,000 in mid-2007. Last month, it sat at $388,500.
  • Afffordability: 32.9% of median pre-tax household income was needed to service the mortgage on a typical detached bungalow in Edmonton (Calgary 37.1%, National 40.6% - Ottawa and Montreal the same, Toronto 49.1%, Vancouver 69%). For 2-stories Calgary and Edmonton were below 40 per cent, while Toronto and Vancouver were at 58% and 77% respectively.
  • Average household incomes: Calgary $113,000, Edmonton $90,000, Vancouver $82,300 (about $2000 higher than Windsor), Toronto $101,400.
  • In the U.S. at the peak the ratio of average household income levels to average local house prices got to 10 times or more in overheated markets like Los Angeles and Phoenix. In Vancouver, the average detached bungalow now costs roughly 11 times the typical average local household income level. Yikes!
Well put Gary!

April 26, 2010

Canadians Paying off Mortgages Quickly

A new study by Canada Mortgage and Housing Corporation (CMHC) shows that Canadians are well informed about mortgage options and intend to pay down their mortgages quickly. A recent survey polled 2500 active mortgage users in Canada and turned up some interesting results:

  • 89% looked online for mortgage info
  • 84% researched mortgage terms and conditions before deciding on a mortgage option
  • 69% of first time buyers used a mortgage calculator and 85% said they had a good understanding of the size of mortgage they could afford before buying a home
  • The average home buyer took 12 months to plan their purchase
  • 81% of recent home buyers are comfortable with their current level of mortgage debt
  • 68% feel there is a strong chance they will pay off their mortgage sooner than required
  • 27% have already taken steps to pay down their mortgage through lump sum payments or increased regular payments

Frequently there is discussion on this blog about long amortizations, and increasing interest rates and whether Canada will see a mortgage melt down like we've witnessed in the US. Of course, our position has always been that we are in a far better position than our neighbours to the south. This survey shows me (again) that Canadians tend to be very well informed and take time to make home buying decisions. In large part it comes down to the tax system - mortgage interest is tax deductible in the US but not in Canada. I would say that Canadians see more benefit to paying off their mortgages quickly than Americans.

This study comes out the same day that RBC announced the third increase to mortgage rates in a month - further encouragement to pay off your mortgage quickly!

April 23, 2010

Edmonton Real Estate Market Weekly Update

Here is our update on the Edmonton real estate market. (Previous week's numbers are in brackets). For the past 7 days:   Weeklyupdate_2

New listings:  624 (652, 540, 548)
# Sales: 325 (295, 216, 276)
Ratio: 52% (45%, 40%, 50%)
# Price changes: 303 (283, 235, 248)
# Expired/Off Market Listings: 127 (148, 106, 205)
Net loss/gain in listings this week: 172 (209, 218, 67)
Active listings for single family homes: 2636 (2491, 2388, 2214)
Active listings for condos: 1908 (1868, 1801, 1719)

Sales continue to come in slightly ahead of last year but are still below average overall. Inventory of single family homes in Edmonton is now officially higher than last year and condos are about to catch up.

April2310Weekly 

April2310Inventory

Sales have picked up in the last week; the REALTORS® Association of Edmonton is reporting 1292 sales so far this month, which should put us around 1700-1800 sales for the month which would be similar to '05, '08 and '09. Those that read our quarterly report know that sales were looking quite sluggish when we ran the numbers last week. The overall average residential sale price currently sits at $336k, single family homes at $383k (both down from last month) and condos at $250k (the same as last month).

With one week left to go in April it will be interesting to see if sales continue to improve and where the inventory will sit at the end of the month. The predictions at the beginning of the year were for a strong first half of the year, and slow second half; so far we are only slightly ahead of last year and behind most other years... could make for an interesting "fall."

Have a great weekend!

April 21, 2010

What can a buyer's agent do for you?

I was chatting with a blog reader last night, and he was wondering what buyer's agents do other than show houses and write up offers, so I thought I'd share my answers with everyone. First off, not all agents offer the same services, so if you're thinking of buying a home you should interview a number of agents and see how they work. If you're expecting a particular service make sure it's something they offer or you might be disappointed.

Here are some of the services our agents offer when working with buyers:

  • Home buying consultations - during our one-on-one consultations we explain the entire buying process. This includes topics like agency relationships, mortgages and pre-approvals, the purchase contract (deposits, downpayments, conditions, inspections, insurance, warranties, contract law etc)., costs - how much $$ and when, closing and more. It is meant to help our clients avoid costly mistakes and go into their purchase with their eyes wide open. We know from experience that our clients will face far few issues and surprises if we explain the buying process to them before they find their dream home.
  • Help finding the best home for you whether it is listed for sale on the MLS®, privately, or not listed at all. He have helped many clients purchase homes for sale by owner (FSBO) and the seller has paid our fee every time. We can also represent buyers interested in purchasing new homes (ie new construction).
  • Showing you the MLS® history on any property and interpreting the data.
  • Obtaining and interpreting the title for any property.
  • Preparing marketing evaluations on properties of interest to assist in negotiations.
  • Sharing demographic information on different areas of the city.
  • Advice about the resale potential of each home in regards to its layout, zoning, location and more.
  • Advice on renovations and improvements. Recommending service providers and contractors.
  • Preparing the purchase contract - we will advise you of your different negotiating options and arm you with vital information for a successful and smooth transaction.
  • Negotiating with the listing agent (or private seller or builder as the case may be) - the most important step. Things can happen very quickly and we can give you the advice that's best for your situation.