Edmonton Realty Report – April 14th/2009

First-time buyers back in game

They are a force to be reckoned with. They are also a consumer group that needs to be wooed, maybe even pampered.

After all, without them the economic chain reaction created by housing construction — providing jobs for everyone from plumbers and electricians to furniture salespeople and interior decorators — wouldn’t get started.

We’re talking here about first-time homebuyers.

They’re no specific demographic. They range from mature, older adults to young men and women fleeing the family nest or getting out of shared accommodation, to long-term renters finally taking the plunge into home ownership, creating equity for themselves instead of a landlord.

Whoever they are, they’re coming back in the marketplace — and if they’re not, they should be.

A few years ago, before diminishing affordability sent them scurrying to the sidelines to continue to share accommodation or hang out at their parents’ homes, first-time buyers were a force to be reckoned with.

If they had full-time jobs and could muster together five per cent of the value of a home for a down payment, they were in.

They were the starting point that set the whole chain reaction in motion.

Their impact was made even greater by the fact that for those who bought a resale home, it meant a group of sellers who would move on to something else, and those sellers — well, you get the idea.

Then, prices started to jump. Homes were selling in a matter of hours at prices above what were being asked.

Multiple offers forced many potential purchasers to bail because their budgets just weren’t high enough to compete. Sellers, meanwhile, were reaping the benefit of being behind the steering wheel.

And those first-time buyers? Well, they found themselves on the housing sidelines, unable or unwilling to pay the prices being sought.

Phil Soper, president and CEO of Brookfield Real Estate Services in Toronto, said flatly that first-time buyers were scared off by prices and the economic downturn.

"When new buyers stop entering the market, it’s like sand in the gears," he said at a recent real estate conference.

Well, things have turned. First-time buyers are back in the game — if they want to be.

Sellers have had to bring their asking prices back to more realistic levels to attract an anxious, but cautious, pool of buyers who know they now have more say over what happens in the marketplace.

At the same time, though, jobs are being lost in some sectors, salaries are likely being frozen, and consumer confidence has taken a hit.

While there is some pent-up demand for homes, the buyer pool has become shallower. Sellers have to realize this.

On the other side of the coin, while zero-per-cent down payments and 40-year mortgages have gone the way of the penny match, mortgage rates and housing prices are trending down — at least for the time being.

That should be good news for those looking at home ownership for the first time.

Add to this the fact builders are focusing on giving home shoppers more for their money.

One-time extras, such as stainless steel appliances and hardwood floors, are now standard equipment in many homes, prices have been cut by many builders, and they are open to negotiation.

There also seems to be a new emphasis on quality now that the market has calmed somewhat.

Bill Bobyk, general manager of the Sterling Group of Companies, says there are two basic reasons people should be buying: "Very good" prices and attractive mortgage rates.

Another factor to consider is that "because this is not the market to be flipping homes, people should be buying with the intention of living in them for a few years," he says. "Buy them because they can be homes, not a short-term investment."

Another thing to remember are the new tax breaks for buyers and home renovators.

Under the Home Buyers Plan, first-time buyers can now with-draw up to a maximum of $25,000 –up from $20,000– from their RRSPs as a down payment.

Secondly, they can qualify for a $750 tax credit help them pay for closing costs, such as appraisal or legal fees.

– Get documentation, such as proof of income and down payment, in place. A mortgage expert can also check credit history to ensure lender’s requirements are met.

– A pre-approved mortgage can save time, so establish a price range. Mortgage rates are also guaranteed by many lenders for up to three months.

– In this type of market, there is room to negotiate with sellers on prices as well as any other terms set out in the listing, such as possession date, appliances being added, and home inspections.

There are plenty of homes to choose from, so don’t rush things.

– A mortgage is a big debt — probably the largest debt a person will incur. As a result, it’s wise to try to get it paid off as soon as possible. There are several payment acceleration options out there, so find out what they are and save money in the long run.

– Find a mortgage and a home that suits your lifestyle. The mortgage should reflect your current financial status, but also fit with long-term goals.

Don’t just buy for the sake of buying in a buyer’s market.

Find yourself a home that fits your lifestyle, as well as your future needs.

Source – Edmonton Journal

Edmonton Realty Report – April 2nd/2009

Drop in house prices driving first-time buyers to take the plunge

First-time homebuyers are being lured into the real-estate market by falling prices, lower interest rates, more selection and new government incentives, a new report shows.

The ReMax real estate company said preliminary figures show sales were up in February, after a terrible January, driven by more first-time buyers entering the market.

The report comes alongside new Statistics Canada figures showing the first year-over-year decrease in new-home prices in more than a decade.

ReMax said lower prices and record low lending rates are prompting many first time buyers to "get off the fence, out of the rental, and into the market."

"While a sense of caution still prevails, more and more first-timers are finding it hard to pass up the chance to become homeowners in today’s buyer-centric real-estate climate," ReMax said in its report released Wednesday.

"Buyers are clearly in control in most Canadian markets."

Wendell Collier said he and his girlfriend have finally waded into the market in Toronto after waiting it out for years.

"There is less pressure now," said Collier. "There are no bidding wars, you see houses sitting on the market a lot longer. It’s a buyer’s market again."

Collier also said low interest rates have been an incentive.

"You start saying ’Okay, now it’s looking very possible.’ Before we would have handled it, but we would have been stretched thin for a couple of years. Now we can have our cake and eat it too."

After years of renting, Tyler Backus recently bought his first house in the Haldimand-Norfolk region of Ontario, inspired by falling prices and the new federal renovation tax credit.

"It seemed that everything was going down in price and it was the right time to buy," said Backus.

Ottawa recently announced new tax credits of up to $1,350 for homebuyers to renovate their house or cottage. It also increased the amount first-time homebuyers can withdraw from their RRSPs from $20,000 to $25,000, and implemented a tax credit for first-timers of up to $750 to help cover closing costs.

ReMax said 22 of the 32 markets in the survey, or 69 per cent, "remain firmly in buyer’s market territory."

Some of these spots include Vancouver and Victoria, Edmonton and Calgary, Saskatoon and Regina, Ottawa and Toronto, and Halifax.

Cities such as Winnipeg, Kitchener-Waterloo, Ont., Sudbury, Ont. St. John’s, N.L., and Charlottetown had what ReMax called "more balanced conditions" between buyers and sellers.

It said 40 per cent of the 32 markets had single-detached homes priced under $200,000.

The most affordable markets for detached homes, based on starting prices were Moncton, N.B. in Eastern Canada at $115,000, Windsor at $75,000 in Ontario and Winnipeg at $185,000 in Western Canada.

In its report released Wednesday, StatsCan said new home prices fell 0.8 per cent in January compared with the same month a year earlier.

It was the first year-over-year decrease across the country since January 1997, led by a steep drop in Western Canada.

New home prices in Edmonton fell the most by 10.4 per cent, followed by a 6.5 per cent drop in Calgary, 4.2 per cent drop in Victoria and 3.2 per cent dip in Vancouver.

Regina was the rare Western Canadian city that saw a large increase in new home prices, a lift of 21.7 per cent. Only St. John’s, N.L. saw new home prices rise more, by 24.1 per cent in January compared to the same month in 2008.

Earlier this week, Canada Mortgage and Housing Corp. said housing starts fell for the sixth straight month in February, down 12.3 per cent to a seasonally adjusted annual rate of 134,600 units. That’s after falling 10.9 per cent in January.

February’s figures are a 30 per cent drop from the same period last year, and were lower than most economists expected

Scotiabank economist Adrienne Warren said new home sales respond to what happens in the larger resale market, which has seen a reversal in recent months after nearly a decade of constant growth.

Resale home activity fell 37.3 per cent across Canada in January compared to the same time last year, while average prices fell 11.3 per cent. National figures for February are due in the coming days.

Warren said early indications are that February sales activity has picked up compared to a dismal January, but she predicts a turnaround will not be quick.

Housing sales will continue to be weak this year and there will be "a sluggish recovery" starting in 2010, she said. That’s because a lot of buyers are still concerned about losing their jobs in the current recession.

As for first-time home buyers, Warren said they can be an indicator of a market recovery.

"In any recovery you need to have first-time buyers because other buyers are just shuffling around housing. For a buyer than wants to move up, you need that first-time buyer to come in and buy from them," Warren said.

Vancouver real-estate agent Shelly Smee said she has a handful of clients who are preparing to move up in the market now that house prices have fallen in Canada’s most expensive city. She said some couples are looking at moving out of their condominiums and into a house.

"Some people are thinking now is a good time to move up and they can finally afford it," Smee said.

Smee also said some clients have also built up equity in their homes in recent years and are now considering upgrading thanks to record-low borrowing rates.

Interest rates have fallen dramatically in recent months as the central banks and federal government seek to ease the credit conditions in order to jump-start the flagging economy.

Last week, the Bank of Canada did its part by dropping the overnight rate down to an unheard of half per cent. Canada’s chartered banks then lowered their prime rate to 2.5 per cent and having been lowering other lending rates including mortgages.

Source – The Canadian Press

Edmonton Realty Report – March 18th/2009

Local housing prices continue to stumble while sales rise

The average price of most types of residential property slipped down a notch in February after a short rally in January. Sales numbers climbed across the 1,000-unit threshold for the first time since October but are still below the same month sales for last year.

“It is a typical pattern that sales activity picks up as we move into spring,” said Charlie Ponde, president of the REALTORS® Association of Edmonton. “Listing activity also rises as homeowners enter the market in anticipation of spring activity.” There were 1,075 residential sales in February with 2,667 listings added to the MLS®. The sales-to-listing ratio was 40% and there were 7,097 homes in the inventory on February 28.

The average* price of a single family home in February was $347,309 – down 1.5 percent (-$5,380) as compared to January. Condo prices were down 4.9% (-$11,678) to $226,857 and duplex/rowhouses sold on average for $309,180 (a 3.3% price increase). Total residential sales through the MLS® for the month were $332 million – down 24% from the previous February. When all residential property sales are averaged the average all-residential price dropped 2.55% from January and 8.7% from a year ago. It is now $308,970 as compared to $338,347 in February 2008.

Consumers continue to be confused by housing figures originating from American or Canadian sources that do not reflect the condition in local markets. “I urge people to consider national trend figures carefully” said Ponde. “Sales and listing figures produced by the REALTORS® Association of Edmonton track local sales that may not be included in so-called national housing indexes such as the National Bank/Teranet House Price Index.” Teranet only includes figures from six Canadian cities (not including Edmonton) and Toronto figures carry a weight of 42% according to their web site.

Ponde explained that REALTOR® Association numbers are calculated by summing all residential sales in the greater Edmonton area that were made through the Multiple Listing Service®. The total value of all sales is divided by the number of transactions to determine the average residential price. Other averages are calculated by housing type or by geographical criteria to provide more refined analysis of the local market. REALTOR® figures do not include new home or private sales. Sales figures are double checked by brokers and cooperating REALTORS® and are also subject to review by the REALTORS® Association.

Edmonton Realty Report – March 2nd/2009

Edmonton still No. 1 for real-estate investing, author says

Economic slump seen as temporary setback

It was last August when real estate author and consultant Don Campbell crowned Edmonton the best place in North America to invest in residential real estate.

Since then, the price of oil has plunged, the Alberta government has predicted a billion-dollar deficit and the city’s housing market has seen starts, prices and sales fall.

So is Edmonton still the best place to invest in residential real estate?

"Absolutely, it is," he said Monday during a visit to Edmonton from Vancouver. "There’s no way the world can continue to afford $30 and $40 oil. … Eventually, within 18 or 24 months, we’re going to see the market come back to something that’s more normal."

Campbell is author of Real Estate Investing in Canada 2.0 and president of the Real Estate Investment Network (REIN), a business that offers training to its members on real estate investing.

Last summer, a REIN report ranked Edmonton as the best place to invest in residential real estate, followed by Calgary, Red Deer, St. Albert and Grande Prairie. Devon placed ninth and Sturgeon and Strathcona counties tied at 10th. The list was compiled from a survey of statistical and demographic data from Statistics Canada, Canada Mortgage and Housing Corp., Multiple Listing Service and other sources.

"That being said, we were so superhot here that the pendulum moved so quickly and has gone too far the other way. Like all economic pendulums, it comes back towards the norm and we’ll start to see that pendulum start to swing a little bit more for Edmonton’s sake. Right now, if you’re focusing on yields, it’s still the best place."

He said that Edmonton will top the list for the next five to 10 years, and with mortgage rates "ridiculously low" and likely to drop further, savvy investors could look like geniuses several years from now.

Campbell cautioned against trying to predict when the market will hit bottom "because you’ll never hit it," especially when he’s predicting up to two years of roller-coaster economic news.

He said investors should realize that certain parts of Edmonton’s housing market will do better than others because of improvements to transportation.

Homes in areas that will benefit from the ongoing extension to the LRT line along 111th Street could outperform the market by 10 to 20 per cent, he said.

In other studies, Campbell said, values rose for properties within 800 metres of new rapid-transit stations or access to major highway improvements.

Plans to extend the Anthony Henday ring road will also improve the demand for nearby homes, he said. Another REIN report lists Parkallen, Belgravia, McKernan, Twin Brooks, Ermineskin and Sky Rattler as neighbourhoods that will gain the most — both from the LRT extension and from the Henday. But other areas also stand to benefit in the future, Campbell said.

"We’ve seen what (the Anthony Henday) has done in the southwest. We’ve started to see what it’s done in the southeast and it’s now starting up northwest — and that’s going to positively affect St. Albert and Castle Downs."

For investors with a 10-year window, Campbell says the northeast quadrant is "going to be the biggest winner" from the ring road because prices in that area are relatively low.

"Once the ring road opens, the demand will increase, and even if one of those upgraders goes ahead in the Fort Saskatchewan region, that’s equivalent to the number of jobs that it took to build the Hoover Dam and we saw what that did to the southwest United States during the Depression."

In a note of caution, Campbell said condo buyers should be wary of rushing to buy a piece of undeveloped property.

"We need to be cognizant that there are an awful lot of new condos coming onto the market, not just in Edmonton, but in Calgary and Vancouver.

"Please don’t line up to buy a piece of property," Campbell said.

Source – Edmonton Journal

Edmonton Realty Report – February 20th/2009

How will resale prices react to Alberta’s new recession status

Many reports you see in the media these days are focusing on drops in real estate prices Canada wide, recessionary fears abound.  I don’t really expect that the market will shift too much this year, Alberta’s economy seems to be very sturdy and more than able to handle 15,000 job losses.  One thing to remember is that most of the 15,000 job losses will be within the oil industry and these job cuts tend to affect junior staff.  Most of the junior staff in local unions tend to be new albertans, who will probably choose to go home as the Alberta boom is over.

The great equaliser right now is the tremendous mortgage rates available to consumers.  When you can get into a mortgage at 4.5% (or lower in some cases), this is the definition of free money.  It’s a great time to be re-negotiating your mortgage if you can, and for first time buyers there hasn’t been a better time to be getting active in the market. 

All should remember, 8 months ago oil was at $140 a barrel.  Every indication is it could return to those numbers before we know it.  And for that reason, the Edmonton Real Estate market is still the safest and most secure in the entire world.  This recession will be short lived and we will emerge out of it in a stronger real estate market than before.

Edmonton Realty Report – February 8th/2009

REALTORS® report that residential sales were positive in January

Residential sales in January are always slow as buyers recover from their holiday excesses and stay bundled up from the cold. January sales were slow at the beginning of the month but picked up steam as the days grew longer. REALTORS® sold 730 residential properties in January compared to 608 in December (sales up 20%). Sales prices were also up in all categories as compared to the previous month.

“Nobody rings a bell when prices hit the bottom,” said Charlie Ponde, president of the REALTORS® Association of Edmonton. “The bottom is evident only after several months of rising prices. One month does not make a trend but the market is certainly welcoming to home buyers.” He pointed to the lowest interest rates in years, the large selection of homes available and recently announced economic stimulus packages as reasons for the increasing market activity. The amount of RRSP savings that can be applied to a first-time home purchase was increased from $20,000 to $25,000 and a tax rebate for home renovation expenses were announced in the recent federal budget. Both measures will encourage home buyers.

The average* price of a single family home in January was $352,689 – up a quarter of a percent as compared to December. Condo prices were up 1.8% to $238,535 and duplex/rowhouses sold on average for $299,222 (a 2.2% price increase). Total residential sales through the MLS® for the month were $231 million – down 43% from the previous January.

Listing activity also increased in January. There were 2,443 residential properties listed in January – an 85% increase over December listings. With 730 residential sales the sales-to-listing ratio was just 30%. At the end of January there were 6,573 properties available on the residential MLS®. At current sales rates this is a nine month supply. Time to sell was up from 65 days-on-market in December to 68 days in January.

“The housing market changes every day and consumers need to work with a REALTOR® who can advise on pricing, sales and negotiation strategies,” said Ponde. “REALTORS® are the only professionals with current sales prices (as compared to asking prices) and can do up-to-date comparisons for properties similar to the one you are attempting to buy or sell.”

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