Some Canadian Real Estate Factoids . . . .

• In the first half of 2008, $56-billion of new mortgages in Canada (more than half of new mortgages) had 40-year amortizations. Two U.S.-based mortgage insurance companies, Genworth Financial and American International Group, are reportedly asking the Canadian federal government to raise existing government guarantees of private mortgage insurance to 100% from 90%. The federal government guarantees 100% of the mortgages insured by Canada Mortgage and Housing Corp.
   
• The TD Canada Trust Homeowner Confidence poll reports that 92% of Canadian homeowners are staying put and not considering selling their homes. Of those surveyed, 53% are going ahead with planned renovations or plan to do even more home improvements.
   
• According to the Toronto Real Estate Board, the median price of all condos sold in November, 2008, fell to $226,000 from $241,000 in November, 2007. Sales dropped to 906 from 1,837 a year earlier. In December, 2008, the number of condo suites listed for sale increased to 4,637 units from 4,366 in December, 2007. The average number of days it took to sell a unit in 2008 climbed to 43 from 33 a year earlier.
   
• According to Cushman & Wakefield LePage, the industrial vacancy rate in Canada was an estimated 5.8% at the end of 2008, much lower than the doubledigit vacancy rates in many American cities. Vacancy rates increased 0.7% in small markets and climbed even less in major markets like Toronto, Montreal and Vancouver last year. The national industrial vacancy rate is expected to rise 0.7% in 2009.
   
•  According to the Toronto Real Estate Board, sales of existing homes in Toronto fell 45% in December, 2008, from December, 2007. The average price dropped to $361,415 from $394,931 a year earlier. According to Canada Mortgage and Housing Corp., housing starts in Toronto rose 27% in December from a year ago. Total housing starts reached a record level in 2008, boosted by a 137%
  jump in condo starts, while low-rise starts fell.
   
• According to RealNet Canada Inc., the downtown core submarket in Toronto had sales of 143 condo units in November, making it the second-hottest area for condo sales in the GTA. The average price in the downtown core submarket is $745 per square foot, fourth highest among all GTA submarkets.
   
• According to the British Columbia Real Estate Association, existing home sales in the province fell by one-third to 68,923 units in 2008 from 2007. The average home price increased 3.5% to $454,599 for 2008. Prices dropped 11% from a peak of $483,291 in March to $429,210 at the end of the year. In
  December, 2008, sales were down 49% from a year earlier and the average price declined 6%.
   
• ......

  A major real estate firm, in a separate report, blamed the depressed level of consumer confidence, along with the slide into recession, for a slump in home sales and prices in the final quarter of 2008.

  "The combination of a global economy in recession and shrinking employment figures did much to dampen consumer confidence, diminish home sales and cause house prices to drop," Royal LePage Real Estate Services said in releasing details of its latest house-price survey.

  The average price of a detached bungalow dipped by 4.8 per cent from a year earlier to $319,640, standard condominiums fell 5.2 per cent to $233,230, and the standard two-storey home declined 6.3 per cent to $376,140.

  However, price trends varied dramatically across regional real estate markets, it said, noting that Regina and St. John's, N.L., posted double-digit gains, while the larger cities that have seen the greatest increase in prices this decade, including Toronto, Edmonton, Calgary and Vancouver, recorded declining house prices.

  But the real estate giant also released survey results suggesting the market could get a lift from the fiscal stimulus in the budget.

  Nearly half of Canadians — 49 per cent — agree that the economic stimulus in the budget will have a positive impact on Canada's real estate market, it said.

  "Political actions taking place south of the border are also likely to buoy the country's economic conditions," it said, citing another survey finding that 82 per cent of Canadians agree that the inauguration of U.S. President Barack Obama will have a positive impact on consumer confidence here.

  The news out of the U.S. on Monday, that home sales unexpectedly rose 6.5 per cent last month, raised hopes that the deep housing market depression there, which triggered the global recession, may be easing.

  "Though unlikely to mark the bottom of the housing downturn, the report at least suggests the market is not spiraling downwards in response to mounting job losses and tightening credit standards," said BMO Capital Markets economist Sal Guatieri. "An upward trend in home sales that gobbles up supply and stabilizes prices would be an important signpost of economic recovery, but that is likely still some ways off."

  There was also an unexpected year-end increase in the index of U.S. leading economic indicators, which tends to signal the short-term direction of the economy.

  However, analysts noted that the increase in the U.S. index was narrowly based, largely reflecting a surge in money in the U.S. economy, and that the trend in the index continues to signal recession.

  In Canada, the reports of an improvement in the mood of consumers came amid a continuing flow of announcements of the levels of spending stimulus that will be in the budget, with Infrastructure Minister John Baird saying the government will spend $7 billion over two years on new infrastructure, bringing total promised new spending to more than $13 billion.

  "This is clearly having some impact on consumer confidence as nearly half of all Canadians believe the steps the government is taking to stimulate the economy . . . will positively impact the country's real estate market," said Phil Soper, president and chief executive of Royal LePage Real Estate Services. ....... (Vancouver Sun)
   

• In the Milton area, we are seeing buyers starting to buy after delaying decisions for the past 5 to 6 months. Part of this is, I think, they have decided that the 'sky is falling' reporting of mainstream media has not proven true. Another factor is the incredible interest rates available, and a third factor is the excellent deals available on homes today. Buyers realize that they cannot time the bottom of the market, and don't want to be left thinking and waiting when the market does turn back up.

I originally read this post on ActiveRain, a real estate blog, and immediately contacted the author, Lane Bailey, for permission to 'Canadianize' it and give a link back to his site. I like the ideas in this post. Lane's site is here.

Ok, I have written about it before, but it is time again to talk about why "I bought it for 20% under list" means absolutely NOTHING in the world of real estate.  

This is a common misconception... but still a misconception.  As an agent, I hear buyers (investors or people looking for a family home) talk about how they only want to pay X% of the list price.  Their fear is that if they are paying more than X%, they might be paying too much. 

It doesn't matter.

For some, X=70, for others it is 90.  But... it still doesn't matter. Let me explain...

Imagine if you will that you are in the market for a nice car... to drive.  I happen to be selling this driveway art Jeepster.  It is listed for $45,989.00.  But I'm willing to make a serious deal.  I will sell it to you for half.  So, for $22,994.50 you can own this pretty gem.  It is one of a kind...  And it is 50% off. 

Ok, you decide that maybe you should look around.  Maybe there is another good deal out there.  And then you run across a nice Pontiac G8GT.  It looks nice and everyting, but the dealer is holding firm on their price.  Despite the fact that there are 4 on the lot that look exactly the same, they are convinced that they can get $34,090... which is within "dinner" of the full list price.  

Obviously this is a no brainer, right?  Choice "A" is rare, heavily discounted and cheaper.  Why would anyone spend another $11k+?

Right?

Hold up...  I'm obviously not being serious... and the example is extremely over the top.  But the basic premise still holds true.  List price isn't a measure of actual value.  List price is just a number.  Sure, it is a number that was reached based on the professional advice of a real estate agent, maybe an appraiser and the seller.  Right? 

Sorry, but...

Right now in Milton, ON, about 1 in 8 homes listed ends up selling within the first 4 months, at which point the seller is usually tired of it all and gives up.  That's right, there are EIGHT times as many homes coming on the market as there are getting sold out of the market (in fact, less than 5% of the homes available are sold in any given week).  The rest languish, are withdrawn or expire. Many of them are nice homes.  But here is the problem... they aren't good deals. 

Here are some examples:

• A bank owned property that needed $50,000 worth of work to make it average for the neighborhood... but it was priced about $30,000 below homes that were ready to go. 
• A property from an over-leveraged private seller that was priced $50,000 over the neighborhood comps, because that was what he needed to get in order to retire his debt. 
• A property that the seller is "testing" on the market.  They don't really need to sell, but "if they get their price" they would love to buy another home. 

How many properties like this have we seen?  In the case of the first one, a low-ball might get the property... but for the rest it would be pretty fruitless. 

On the other side of the equation:

• A bank owned property that is priced $30,000 BELOW neighborhood comps... needs NOTHING to be ready to go.  The bank knows that they need to price it astoundingly if they want to get it sold fast. 
• A property that belongs to an estate.  The previous owner had a paid off mortgage, and the heirs want it gone because they "want their money." 

Now, every once in a while these kinds of sellers will price it high because "they want negotiating room"... but it is MUCH more likely that they will price it to grab the buyers attention.  That means there isn't 20% to take out of it. 

The point is simple...

Many of us agents... as well as our clients... get caught up in the idea that there is a percentage off of the list price that can make the property a "good deal".  But, it just isn't the case.  The reality is that there are properties that are cheap... and lousy deals.  there are properties that are not cheap... and are great deals.  There are properties that are bargains at full price, and there are some that would be a rip-off at half price. 

Final example...  There are homes being sold in Detroit and Cleveland for as little as $500.  in some cases these are killer deals and the banks are perfectly willing to lose money just to make them go away.  In other cases they are over-priced.  A relative just looked at one of these homes and what he found was that the $500 property needed $40,000 in reapirs and when he was done he might be able to rent it for enough to cover the mortgage... but selling it would leave him upside-down for at least as long as it takes that market to come back... decent homes are selling for $30,000 on the same block. 

List price isn't directly tied to value, just like the truth isn't directly tied to politicians.

When they say enough, something is bound to turn out to be true.