A Buyers Multiple Offer!?

For years many buyers participated in Multiple Offers aka Bidding Wars. In some locations bidding wars were widely accepted as the normal course of purchasing Real Estate. With the shift into a buyers market, buyers now have the upper hand.

How? It's Simple...


Markets with low inventory coupled with continuously high demand caused bidding wars in favour of the Seller.

Buyers can benefit from markets with continuously high inventory and low demand! If you want to tap into those markets and get a great Real Estate deal then contact me and find out how to have Sellers come to you!

Arm yourself with the information you need before you start your house hunt. A must have for anyone thinking of making a move now or in the near future. Click here to order your copy.

US vs. Canada - Some Differences in Lending Practices

Much of this valuable and interesting information is from a course I recently took titled.
The U.S. Housing Crisis: Why it Won't Happen Here. These are some key points.

• A very small percentage of mortgages in Canada are subprime
• Canadian 'subprime' is similar in risk to US 'Alternative A'
• In the US, those unable to have 20% down had little alternative but to turn to subprime lenders.
• In Canada, mortgage insurance is mandatory for those unable to meet the 20% downpayment requirement.
• Because of Mortgage insurance, borrowers in Canada who are unable to meet the 20% downpayment requirement have access to prime market lenders rather than turning to subprime lenders.
• Subprime lenders in the US used borrower evaluation criterea that has been characterized as suspect.
• Canadian banks tend to be more conservative in the type and variety of products they offer.

Other key facts:

• Maximum Loan to Value in the US 125%!!! (hence the stories of the house + new furniture + SUV) Canada had just started down the 100% Loan to Value path but it really never took off.
• Interest only mortgages readily available in the US.
• Stated income mortgages accunted for 10% in Canada and 40% in the US. (Literally a letter signed by the borrower stating how much income they made!)
• Teaser rates were common in the US but very few lenders practiced this in Canada.

The big one "Exploding Adjustible Rate Mortgages' This is a product where the first 2-3 years carried extremely low rates only to jump to 2-3 times that amount when the intro period ended. This 'explosion' was available to homeowners who put 0% or less down. Suddenly faced with a mortgage they could not afford to pay for, falling house prices, and poor job prospects...they simply walked away from the home.

Since most Canadians put 5% or more down, even in a pinch and facing job loss there is enough equity in our homes to merit fighting to ensure payments are made. Or if payments cannot be made, a sale can be initiated to sell the house, pay down debt and rent, with little or no financial loss.

Course: The U.S. Housing Crisis: Why it Won't Happen Here
Subject Expert/Author: Written with the assistance of Instructor Aron Gottesman Ph.D., M.B.A., B.A

Making a Real Estate move in our current economic climate

You planned a move, were finally ready to proceed and now the housing market is suddenly unstable. You got laid off or took a pay cut and need to downsize. You waited for the peak of the market to cash in on your investment property. Whatever the circumstances are, the question on many people’s minds is: Should I hold off or proceed with the sale?

There are several factors to consider in answering this question; however a key determinant is the following. How is the market for what you are selling faring versus the market you want to buy into?

For example: You are selling an entry level detached home in North West Brampton and intend to purchase an entry to mid level home in High Park. At this time there is an oversupply of entry level detached homes in NW Brampton. Prices have been driven down and selling times up in NW Brampton. Meanwhile in High Park there are still reports of multiple offers. If you are selling and relying on the sale of your home as the main source of equity towards the next purchase and happen to be faced with the above scenario, then obviously the best advice would be to hold off for the moment.

The above is an extreme example; however each trade scenario in this unstable market needs to be examined in detail. In doing so you may find that for some segments of the market there is the potential for savings and gains at this time. Take my neighbourhood as an example. The prices of 2000sqft + four bedroom detached homes has declined versus smaller three bedroom detached and larger 3 bedroom semi-detached. Our circumstances dictate that we want to remain in the area but need more space; this is a good purchase opportunity for someone in my situation.

Whether it is a fast market or a slow market these scenarios are always at play in Real Estate. However in a slower market they are more apparent. This may result in a positive gain for some buyers and investors. For example: statistics show that many would be first time buyers are deciding to rent, as a result there is an overabundance of first time buyer condo’s in Mississauga. Condo prices have diminished and there has been an increase in rental prices! I would say this is a good time to purchase an investment condo as a part of your portfolio.

Plan for the worst case scenario

Entry level detached homes in North West Brampton may be the in oversupply today, but that situation can reverse itself as buyers seeking lower priced detached accommodation will migrate and purchase at lower prices being offered in NW Brampton. As such, the opposite could happen if the home you are planning on selling is currently in demand and fetching higher prices - others will seize the opportunity to sell high and perhaps saturate the market driving down prices. Examination of these basic economic principles versus the history of actual house sales in the markets in question is how Realtors help buyers and sellers plan their sale.



Part of the decision making process for trade in Real Estate in this market is getting to the worst case scenario, laying it all out, and deciding if you are willing to take that risk. By defining in advance how and how reasonably the worse case scenario will be handled, the decision on whether to proceed or not can be made wisely. Every Realtor should make this part of the analysis. (This is not always the case, but a worthy Topic of a discussion in a future post)

Now vs. Later (the spring market)

One other major question I have been asked is whether selling now or waiting for the spring is the best course of action. With the steadily increasing market of the last 10 years the answer was invariably yes. The only caveat being that too many of your neighbours may have decided to wait until spring also.

This year the other factor to consider is that the market may continue to decline. Combine that with too many of your neighbours deciding to wait until spring and you may be faced with an oversupply of housing in a declining market; not the ideal situation.

We cannot predict the future; however a frank discussion of your particular needs and an analysis of your home, its current value, as well as its value as a commodity in the potential marketplace, is the first step to consider.


Again - we can never predict the future, however no matter what market you face when you list (or rolls into when longer selling times are in play), preparing your house to stand above the crowd is now more important than ever (see article below).

I welcome your inquiries regarding your potential Real Estate move. Advice is pro bono!
David Smeriglio

Latest CMHC outlook for 2008/9

Hello:

For your reference, please find attached the latest Housing Market Outlookdata for GTA (Fall 2008 edition).

Here are some high-lights fromthe nine page report:

New Home Market: High rise sales will dominate new home market...-New home sales in the Greater Toronto Area (GTA) will continue to moderate in 2009.- High rise sales have accounted for more than 50 per cent of the totalshare of sales since the end of 2007. This trend will continue and the share of high-rise sales will increase in 2009.

• i) New home sales will trend lower as choice increases in the resale market. The low-rise housing sector will experience moderating sales much more sothan the high-rise sector.- Strong immigration into the GTA has also played a role in increaseddemand for condominium apartments, due to their lower price point.-
• Changing demographics in the GTA also explain the heightened interest inthe high rise market. The average household size is shrinking with anincrease in lone-parent and childless family households.- The luxury high-rise market is also a growing niche that is catering toan increasing number of aging baby boomers and empty nesters.ii) Starts to edge down.
• Softer local economic conditions and elevated home prices will push thedemand for home ownership lower.- Following a healthy increase for 2008, total housing starts will edgelower by 21 percent in 2009.- Low-rise home starts will decline at a greater rate than apartmentstarts.
• Condominium apartment completions have begun to trend higher and willgrow at a stronger rate in 2009. For this reason, condominium apartmentconstruction will remain at high levels through the end of next year.2. Existing Home Market in Existing home sales off the peak...
• Over the next two years, the number of home sales under the MLS® system in the GTA will trend lower off the 2007 record high.
• Sales will moderate due to softer economic conditions domestically and elevated home prices. While home sales will be off record levels, continued steady net migration and low borrowing rates will keep home buying activity in the GTA in line with the average over the past ten years.
• ii) More supply, moderate price growth. New listings will continue to grow to reach a record-high level in 2008.The trend will flatten out in 2009. The trend in listings growth will eventually slow and then change direction, however, as fewer home owners are able to sell their homes for the anticipated values for their properties. This will begin to happen toward the end of 2009. While the sales-to-new listings ratio will continue to decline, it will do so at a diminishing rate. The resale market will remain balanced, with prices growing in line with inflation. The average home price in 2008 will be up 2.6 per cent to $387,000. Bythe end of 2009, the average price of home will reach $394,000 - up 1.8 percent. Not all housing types will experience the same moderation in price growth over the next year. Condominium apartments in the central Toronto area area good example of this. The central Toronto area remains a tighter market than the region as a whole.
• iii) First time buyer niche gets smaller. Over the long term, first-time buyers will remain the most important factor driving sustained demand for home ownership in the GTA. In the short-term, however, the level of first-time buying activity is subject to the economic cycle. The number of households purchasing their first home will be trending lower in 2009. Softer labour market conditions along with elevated homeprices will be the primary reasons. Based on CMHC's Renovation and HomePurchase Survey, the percentage of intended home purchases accounted for by first-time buyers declined to 40 per cent for 2008 compared to 47 per centin 2007. This share will decline further in 2009.

Economic Trends

• i) Toronto will continue to create jobs. Employers in the GTA have persevered in 2008. The rate of job growth will be 1.8 per cent in 2008 - above the average for Ontario. In 2009, job growth will remain positive, but the rate of growth will moderate to one per cent. Job growth will come from the service sector.
• ii) Mortgage Rates. Mortgage rates are expected to be relatively stable throughout the last quarter of this year. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

LIFE STILL GOES ON....DON'T PANIC

Make Your House Stand Out above the Crowd: Are Agents failing to advise their clients?

Recently the quality of listings that I have visited seems to be trending lower and lower. Perhaps the recent corresponding surge in Realtors has something to do with it? (Recent numbers pegged membership at TREB nearing 29,000. Only four years ago it was 21,000) But I digress…

Let me give you an example. This spring/summer I worked with 4 individual buyers looking for condo's in the centre of Mississauga. Between the four of them we saw upwards of 60 properties. Within the price range of $160,000 and $260,000 there were no less than 250 properties available for sale!!! This is fierce competition. I was stunned to find that of all the properties we saw none yes ZERO were staged or had feature sheets. Some did not have online photos; few had video/visual tours.




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Fortunately the late spring/early summer market was relatively good; Properties we're selling 'anyway' so I could see why some agents may not have seen the value in promotional materials. Just Dump it on the market it will sell …………….. eventually.

I recently toured many of the same buildings and condos and I can tell you that inventory is even higher now, and sales are down. But guess what… still no promotion or extra marketing! What is the rational now?

Would you consider selling your car without first detailing and cleaning it? I liken some properties out there like placing your minivan for sale after getting home from a week long road trip with the family, without bothering to clean it up. Stick a for sale sign on it and dump it on the auto trader. Yikes!

The reality is to succeed in today's market you not only need to price properly, but you need to stand out above every other property that has been properly priced.

Our instinct when faced with smaller margins is to save money: Less bottom line means less money to pay agents and less money to promote the property. Unfortunately this strategy is probably the worse thing you can possibly do in times of increased competition.

It is important that together with your Realtor you work out an effective and cost efficient promotion and marketing regimen. I know that both myself and members of my team have been firm believers in promotion and marketing of our properties. Even in the best of times we used

• Staging
• professionally photography and virtual tours
• professional feature sheets
• professional signage, directional signs
• employed handymen and painters
• extensive web presence (facebook, kijiji, craigslist, websites: personal, company and corporate, mls.ca, stratus, matrix [Oakville/Milton], mlxchange [Hamilton/Burlington]

We did this knowing that it would sell anyway because we wanted to cast the property in its best light and give it the best opportunity to achieve maximum market value. Now in less favourable times when these steps are needed more than ever we can cost effectively offer these to our clients. Also professional means professional - not your agent's best shot at using their new digital camera, microsoft word and printing it at home!