The times they are changing!

Today's GDP numbers for Canada; the emergency level rates in the economy; the housing market valuations; decent manufacturing and employment numbers (all relative) and the loonie flying under par.....it seems pretty certain that tomorrow we'll witness our first rate hike in years. Hey, that's not a bad thing for prospective buyers. Yup, mortgages become more expensive (marginal...for now anyway) but housing prices should cool. Not from a one time hike tomorrow but over time.

I'd argue it's a great time to get that preapproval and get in the game if you've been on the sidelines.

Summer listings are not as plentiful as spring or fall for that matter, but the quality can be great and the competition can fall off some.

And...if you don't like what you see this summer, then use the summer along with your agent to learn the market so you can spring into action in the fall market.

In short, take advantage either way of the late spring/early summer market buyers!

http://www.TheSmithsBuyAHouse.com
http://www.Propertiesinthegta.ca

Stay cool!

Market Update and Commentary

CIBC found the market to be about 14 percent overvalued (residential market). Benjamin Tal would argue that a 5-10% correction is in store for the housing market. Between heightened rates and more money going to pay off mortgages from household income, the arguement is it needs to cool.

The stock markets have cooled and by definition we find ourselves in "correction mode".

Just a few weeks ago it seemed a no brainer that rates were headed up on June 1. The world picture has made that a tad more confusing. A retreat in commodities and a falling Canadian dollar as well as increased supply in the housing market for buyers to choose from has made for a confusing picture.

After a few small and quick interest rate hikes while ppl were leaving the safety of the US dollar heading into the recovering markets and now we find yields and mortgage rates falling again.

Some signs show pessimism around a recovery. Banks aren't lending to each other at bare bone rates again so a little bit of a squeeze on credit. China's market is down 25 percent since April heights. Treasury yields continue to fall and we've found our way under a few 200 day moving averages.

With all that...supply in the housing market is looking good. So if the above did little more then serve as an opportunity for me to demonstrate a tiny bit of knowledge---that's good enough for me.

And what's good enough for you....the market is a friendlier place to shop now and should continue. So get your game on!

Cheers-

3 Quick and "Clever" Games to understand Buying Property

Let's play some games today.

GAME 1:
Let's play>>>>

"Darts". I give you 3 darts and I take 20. You shoot first. I shoot second. Not fair? Of course not. I have more chances to increase my score.
In real world: Buyers going to open houses see maybe 10% of inventory available. Many don't open house.
Buyer's working thru mls.ca miss first 2 days of marketing of property-theres a lag buyers working w agents don't have.
Good agents have networks for "exclusive/non mls/no sign on property listings.
Advantage--guy with more darts and guy with Agent gets more chances to throw darts!

GAME 2:
"MARBLES"

One red marble and 10 white marbles get dropped on floor. Red marble is asking price of homes in this market that you're looking at.
White marbles are recent solds and recent asks and history of house you're interested in.
As a Buyer, you need to know the comps inside out. Have the others been reno'd? What are the reno's worth? What's the lot size? School district? What's history of house being marketed? How many times has it been marketed? How long did it take the first time around to sell? Were comps sold is similar market and how to adjust for smaller lot, mutual drives, south side of street, easements...etc.
Advantage--guy who has all his marbles together!

GAME 3:

"You're the Agent"!
Let's make up a scenario. Here it is:
House for sale. Ask 699k. Easement in back. Pool inground. Reno's done namely a family room addition. Mutual drive with pad park.
Do your best negotiating. My hunch is you're thinking price and closing date and deposit and you're gonna work you're magic to get a deal.Assuming it's not multiples (where other strategies come in)!
Hey...were you concerned at all about saving your ass here?
Did you consider the easement and the pool? Is it legal to have pool over easement?
Is family room addition legal?
Survey illustrate that?
Was the pad park legal?
So on top of the price, deposit and closing date...this scenario would call for quite a few clauses to protect you on closing or it could get costly.
Btw...if the house was assessed pre renos/additions...MPAC will msot certainly reassess and taxes will go up. But you knew that! There may be a need for a holdback here folks!!

My point...these are 3 quick games. In our world of buying and selling, there's a lot more. A dedicated and knowledgable buyer agent is a must and commission is priced into the house regardless--sunk cost so you might as well get the help you likely need!!

cheers----

Keep your head up...in hockey and in buying a house!

We've all heard the cliche..keep your head up. The translation seems to mean that by looking up you stay positive and open yourself up to better experiences and expand your horizon to grab this fortune.

I've had a few experiences in the last day or so that for more logistical reasons have had me thinking again about keeping my head up.

Watching hockey over the last few weeks, Ive seen some ugly open ice hits. A guy trying to do too much with the puck gets absolutely run over in a clean hit (albeit a painful as shit looking one). What could this player have done different? "Keep your head up" so you can see the hit coming and make a move. Making a move can have a domino effect as the puck gets brought down the ice---maybe even leading to a goal?

My second experience was this morning when I went out to my yard to see the landscaping coming to bloom. I'm fixated on the grass. We get patches of funny looking weeds maybe on the periphery of the lawn in an otherwise handsome looking lawn.

My wife thinks I'm nuts (as she should) cuz when she sits and sips her coffee from the patio she admires the green carpet with nice trees. I on the other hand have a compulsion that requires me to drink my coffee too quickly and seek out these pesky weeds. Hey...if I modelled my wife's behavior and sat and enjoyed the coffee and the backyard for what it is (our little muskoka in the city)...I'd actually be keeping my head up!

So, I'm going to work on keeping my head up.

Now, bringing this home to real estate. Many buyers have been feeling down about the market and multiple offers and inventory and the new rules, etc. Here's an idea. While your competition is getting roughed up (like an open ice hit they didn't see coming)...why don't you just keep your head up and keep going! (with the help of the right Agent)!!

Enjoy a much deserved nice day out there.

Cheers-

Hard to get a Pulse right now on Toronto Residential Market

Look, I'd be lying to you if I said that this market in central Toronto is pretty easy to follow rigth about now. It's not. Too many factors happening at the same time. I've blogged about them but maybe a recap and summation in of value to some of you.

1. On April 19th mortgage qualification grew more stringent. Now first time buyers had to be qualified at the heightened posted 5 year fixed rate and not the low low variable rate. That took some buyers out of the market

2. HST is coming to town July 1st. Not such a big affair for resale properties but a big deal for buyers of new construction as their price point goes up.

3. Mortgage rates have steadily risen on the fixed end. The pullback in government stimulus and the need for the private sector to step in has created an environment where the private sectors demand higher returns then the gvt did at the emergency levels. Hence we saw the 10 year Treasury yield rise.

4. As rates are increasing, so too is the inventory of homes available. The two may counteract each other.

5. Some homes are missing offers. Others are selling 300k above in multiples the same night. Really depends on home and inventory surrounding that home. We just saw a house in the upper village go last night for approx 300k with a bully offer above list price

6. The Canadian economy is showing some signs of strength in terms of GDP growth and employment which may serve to keep housing prices at current levels

7. Conversely, many Canadians are heavily indebted through their mortgages picked up at emergency loan levels. Decent increases in these rates and the upcoming increases to follow in the variable market may push some homeowners into foreclosure. It is a concern that economists are looking into. Though we've had a strong track record of banking in Canada, theres no doubt that when rates rise systematically some will be pushed to the brink. This may serve to stop the escalation of housing prices depending on the volume of this occurence.

8. With the US dollar again the safety currency and people buying it up, yields are falling and hence mortgage rates may fall for a period. Still a great time to go qualify and lock in.

9. Building permits are up so there is confidence in the marketplace.

10. Many Buyers are out shopping and taking the added value steps that a strong Buyer Agent can offer. Don't be fooled into getting a deal by avoiding a Buyer agent. Unless you do this for a living and know all the "games" that get played...get some help!!

I'd be an idiot, if I didnt end off saying to call me for such help!

Cheers-

Whose a Seller Today??

It's that time of year. The spring/early summer market. Some guy is sitting at home with a thougt. He tells his wife (or vice versa) that he can't get over what some of the neighbouring homes are getting. So, the home owners decide on a whim to call an agent they know and list their property for sale at "top buck". No harm done. It's within their consitituitonal right.

Up goes the For Sale sign. Up goes the listing on MLS. Pretty pictures, a nice write-up, an agent willing to do the work at this price and let the marketing machine rev its engine. Lots of showings (even at this price) and what do you know...an offer! The offer is brought in under the ask price and reflects in a very transparent market the fair value. Not rocket science...our sellers used the immediate sales on their street to price their home and buyers and agents alike can do the math pretty easily. The Sellers decline the offer without a signback.

The Buyers knowing with certainty that the house is priced above market value want it so badly they return with the asking price on their offer. TURNED DOWN. What?? It's the price they want. Ya, but our friends, the Sellers, haven't begun looking for a house and remember this is all a knee-jerk reaction to seeing some great sales on their street. Now its a reality for the Sellers and now their dialogue shifts dramatically. They're now saying to themselves....if we get a ridiculous price we'd (probably-still not guaranteed) move! And this ask price, good as it is, isn't gonna make our neighbors heads spin if we sell.

So, the Sellers decline and in fact don't even signback. What to do? Walk away. No don't walk...that's crazy...RUN away.

Some agents like signage. They like seeing their sign on a nice house. Our Sellers provided that. Also, the dialogue may have been..."Hey if you get something out of this Mr. Agent...perhaps a sign call....and we decide not to sell...its not a complete loss for you. Just don't kill yourself with the marketing cuz were not entirely comited to this process." Now, the Agent figures out his/her self serving interest with this particular listing and the Sellers haven't paid a dime to play.

This is an unfortunate part of selling in this kind of market. You get the "Sellers" and then you get the "Prospectors". Your Agent should be able with little effort distinguish for you who is serious and where to maxmize your efforts!

Btw...to all those Sellers who woke up this morning and decided that they'd put on a sign on their lawn for something to do......here's a suggestion. Go golfing?!

Uplifting Friday (not talking about the stock market)

After a very unsettling day yesterday on the markets and mass confusion in England and the Eurozone...I came across this and thought it was a good story and inspirational. So I figured I'd post and relax from the housing blogs.

Karoly Takacs. You've probably never heard of him. However, in Hungary he's a national hero-everybody there knows his name and his incredible story. After reading his story, you'll never forget him...

In 1938, Karoly Takacs of the Hungarian Army was the top pistol shooter in the world. He was expected to win the gold in the 1940 Olympic Games scheduled for Tokyo.

Those expectations vanished one terrible day just months before the Olympics. While training with his army squad, a hand grenade exploded in Takacs' right hand, and Takacs' shooting hand was blown off.

Takacs spent a month in the hospital depressed at both the loss of his hand, and the end to his Olympic dream. At that point most people would have quit. And they would have proably spent the rest of their life feeling sorry for themselves. Most people would have quit but not Takacs. Takacs was a winner. Winners know that they can't let circumstances keep them down. They understand that life is hard and that they can't let life beat them down. Winners know in their heart that quitting is not an option.

Takacs did the unthinkable; he picked himself up, dusted himself off, and decided to learn how to shoot with his left hand! His reasoning was simple. He simply asked himself, "Why not?"

Instead of focusing on what he didn't have-a world class right shooting hand, he decided to focus on what he did have-incredible mental toughness, and a healthy left hand that with time, could be developed to shoot like a champion. For months Takacs practiced by himself. No one knew what he was doing. Maybe he didn't want to subject himself to people who most certainly would have discouraged him from his rekindled dream.

In the spring of 1939 he showed up at the Hungarian National Pistol Shooting Championship. Other shooters approached Takacs to give him their condolonces and to congratulate him on having the strength to come watch them shoot. They were surprised when he said, "I didn't come to watch, I came to compete." They were even more surprised when Takacs won!

Cheers-

What's in a house price?

January-April of 2010 was if not painful for buyers...it was predictable. A shortage of supply; pent-up demand from buyers hiding during the recession; emergency loan rate levels all created the perfect storm for Toronto's buyers. Homes that took the time to show themselves well would most likely create a bidding war and sell above the ask price.

I've talked about the changing or shifting winds in a few blogs of late. Now, I think my pulse is correct. Because shifting implies some of the old is still in play as we move to some of the "new".

Over the last few weeks, I've seen some homes that months ago would have garnered much attention and hence a few offers..miss out on their offer date. Last night I was involved in a multiple offer that felt a lot like it was a few months ago. 5 agents and buyers wrestling for home ownership.

I do believe that the subtle rate increases combined with growing inventory is going to steady this marketplace in the months to come. In short, it should be a kinder time to be a Buyer. So, if you've been bruised and battered, dust yourself off and get back in the game. And if you're just making your way into the market---your timing is pretty good overall and go grab a strong agent and see property timely. Remember, just because the listing says offers are next week, doesn't mean that a "bully" offer won't land prematurely (see previous blog on this topic). And for crying out loud, stop going to Open Houses and using Mls.ca as your strategy for getting into the market. A good agent doesn't expect you to buy overnight and part of their role is to educate you at the very introductory stage of the buying curve.

I had a nice couple come into one of my open houses this past weekend. They were so upset with the buying process. They were agonizing over the process. When I inquired how they're seeking out homes they mentioned the Open House route, mls.ca (48 hour lag from when clients working with agents see homes) and calling the listing agents. All losing strategies. I promised to give them a "trial run" with me and show them the difference. Things are already looking up for my new friends.

Cheers---

Are Condos a good investment?

You'll get many different answers here, depending on which economist you ask, which builder you ask, which renter you pole, which realtor you interview and which condo owner you ask and finally which building you are focussing on when you ask this question.

Look, in the perfect world, one would buy a condo off spec from the builder and pay entry level prices. Then the condo would be built and owners absorb their units. If the market is participating with low interest rates and a large buyer pool (particularly first time buyers)--you're going to likely be happy with your investment should you decide to sell.

That game is old. Where it gets tricky is when you factor in economic realities. So for those who bought say 5 years ago and moved in a year ago and decided to sell...it may not be quite so simple. Whats going for them is, 1) interest rates are low 2) strong pent up demand 3)prices have increased.

Now the tough part. If everyone decides to do the same at leverage this strong market, multiple units hit the market at the same time. So now a buyer is left scratching their head at the numbers and whats going on in this building that everyone wants out. For some it has been drilled into their heads that home is where you lay your hat and if you bought and immersed yourself in the purchase of your condo, you'd likely live there upon completion. Often not the case. With that many units for sale, naturally the supply outstripping demand, buyers have the upper hand on negotiations but still may not feel great about moving into what feels like an "empty" building.

Another issue with new construction that you just won't know until down the road is the mix of renters versus owners. Renters dont have the same vested interest in the upkeep of the building and have little interest in talking the building up and continuing the marketing job after the developer has left the building, the same way that the owners will.

That said, we also run into a square footage issue in Toronto development. At 500-600 dollar a sq ft and little new inventory being built in the 1000 plus sq ft range (for obvious reasons...a developer can squeeze more units in and there are more buyers in lower range then higher range). So new construction is often built with open concept and light colors and big windows and tall ceilings to create a larger feel. The good news is that the finishes often rival those of detached homes. And if youre lucky and do your homework, you can find a good split plan open concept building that suits your needs. Layout in this ftg is everything in my opinion.

Finally, its the age old arguement of fees. It's true that the sexier buildings are often sold with the pool, gym, billiards room, concierge, spa, dining room, movie room, etc. All those amenities clearly increase the fees. If you're going to use the amenities-wonderful. If you're not, think twice.

Often older buildings have stronger reserve funds/savings for rainy day stuff. But...older buildings may soon need replacement of windows, furnaces, roofing, refurbishing of units and common areas and this can result in a special assesment (temp increase in fees for a period of time to top up the reserve fund after the fixes are complete.)

Look, at the end of the day, I strongly believe you want to build equity. Renting does not achieve that. Detached homes are quite expensive for many buyers and condos can offer a great simplified lifestyle.

Theres pros and cons to the condo lifestyle for sure. Often money decides quickly which direction you will go. Now if you edge towards condo shopping...there's lots to know!

Thanks and enjoy the beautiful day.

As always, I'd love to hear from you. Email anytime. And thanks for all the questions thru the website http://www.TheSmithsBuyAHouse.com

cheers-