Royal LePage - Your Community Realty, Independently Owned and Operated, (905) 731-2000
Jim Reid, Broker, (905) 731-2000
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INSIDE THIS ISSUE: |
MARKET FACTS: |
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1. SELLING IN A BUYER'S MARKET? 2. SETTING MORTGAGE RATES? 3. MARKET REPORT 4. ECONOMIC REPORT |
1. GTA UNITS SALES SLIP 6.9% in March. 2. GTA AVG. PRICE nudges up .2% in March 3. Pent up demand since June 2008 releases with lots of property showings in March. |
1. SELLING IN A BUYER'S MARKET?
If there aren't many Buyer's, is it still a "Buyer's Market"?
For most of us, we consider it a "Buyer's Market" when there are so many properties "For Sale", that Vendors must accept lower offers or lose the Buyer to a competing property. Since April 2008, Vendors may have sensed the extra competition because active listings available were running 10% to 50% higher than the previous year.
CMHC defines "Buyers' Market" as when unit sales slip below 40% of new listings. This occurred Sept. thru Nov. in 2008, and in Jan. of 2009.
We can have "Buyer's Markets" occurring all over the GTA in the 86 sub-markets for short periods. It is what's happening in the local market that will influence how you should market and price your property.
The fact is that prices have been falling since April 2008 in most markets. But, if you bought before January 2007, you shouldn't lose any money if you sell now.
But, to find a buyer in this buyers' market is another matter!
Of course, if you lower your price enough, you'll sell even when there are very few active buyers. Some buyers are unrealistic in expecting Vendor's to be desperate for a sale. I just show them the door!
I'm not going to mislead you by saying that I've mastered the art of selling in this market. But, I have re-invented how I market my listings.
Those of you who know me, understand my passion for getting top dollar for my Vendors, and the best deals for my buyers. But, the real key for selling is to make sure that the property is presented in its' best light. Buyers have to feel they are getting very good value.
To achieve these objectives I've had to create some new and innovative techniques in my Internet presentation of my listings. I've discovered how to stop real estate browsers from clicking onto the next listing. They are having a close look at my listings. This is working as I'm getting many more showings for my listings than my competitors.
For my buyers, I need to search more properties, get the financing locked-in, and then I have to do the local research to out-negotiate the other agent. Buyers who are renters, or have already sold, are in good shape to make very good deals.
This market has more complexities than usual. Call me to get started.
2. SETTING MORTGAGE RATES?
So how come mortgage rates don't fall each time the Bank of Canada reduces their "Target Rate"? How do Banks set mortgage rates?
Actually, variable rate mortgages do follow changes in the Bank of Canada's "Bank Rate/ Target Rate/ Overnight Rate", whatever term they call it nowadays. But, all the other mortgage rates are linked to the Government of Canada Bond market.
Since government bonds are considered to represent zero risk by the banks, their interest rate values are the benchmarks for the banks to help set their mortgage rates.
For example, when government bond rates begin to trend upwards, the banks will adjust their mortgage rates upwards. One-year bond rates affect one-year mortgage rates, and five-year bond rates affect five-year mortgage rates, etc.
The "spread", or difference between the rates on government bonds and bank mortgages is the amount the banks feel they must assess to cover their costs to manage the mortgages, the costs of default risk, and their profit margin.
The other factor that affects the "spread" is the level of competition by other banks and other lenders of mortgages in the market.
The competition in the banking business is about the same as in the pricing of gasoline at the gas pumps. But, because they are regulated more closely than the oil companies, they are forced to appear to be competitive at the retail level. They will publish mortgage rates that are slightly different from each other.
To get the actual current lowest rate that they have likely agreed to amongst themselves, you have to negotiate with their local mortgage representatives and the people they report to at head office. Watch out for the myriad of "cash back" deals and other terms they use to boost their effective interest rates. To get the lowest rates, call Jim Reid.
3. MARKET REPORT
With nice weather in March, we have seen a dramatic increase in property showings. Also, mortgage rates have been falling, so lots of people in smaller homes and condos are hoping to trade up this Spring.
For those who can afford to invest in these smaller sized, lower cost properties for future rental income purposes, they can be attractive investments. (see the one on page 3 below.)
March appeared to demonstrate somewhat less fear in the resale market as Spring arrives. New listings are down only 0.2% vs. March 2008, unit sales are down 6.9% from March 2008. Average selling prices nudged up .2% in March, but remain 10.3% below the market peak 11 month's ago. Active listings have increased 15.1% above last March, so Vendors have much more competition than this time last year.
Unit sales in Heritage Estates fell sharply in 2008, so few Vendors benefited from that 9.1% price rise. Also, the 7.5% rise in 2007 has mostly been lost, as local properties will trade this year in the range of prices experienced in 2006, i.e. $180/2 for well maintained and updated homes. (Note: Per Sq. Ft. prices may vary from $1602 to over $2002 )
I'll address the Condo market next month, but early data suggests a drop in volume of 30% with re-sale prices holding at last year's levels. There are thousands of units under construction and many planned buildings on the market. There will likely be some excellent short-term opportunities for great deals during the recession in both new and re-sale condos.
4. ECONOMIC REPORT
Just like the federal budget, Premier McGuinty's provincial budget is another "Civil Servant's" budget. It pumps up departmental spending with a "spin" that says it will help the economy.
Neither political party has the knowledge, expertise or guts to create a budget that will put private taxpayers first in the economic feed chain. It is scary how many policies emulate the failed government policies that led up to the major financial meltdowns of the past three hundred years, i.e. lower interest rates, increase the money supply, bail-out the speculative financial players, and create massive deficits.
These deficits are really scary! The Feds are (under?)- estimating $80 billion and the province $56 billion through 2012. All of this extra dough is being spent by government bureaucrats. How much do you think is really going to get into your household, and whom do you think will be forced to pay it all back?
The real estate industry, (It makes the auto industry look like a financial gnat.), is taking another government hit. The 8% PST will now be assessed on real estate legal fees, home inspections, appraisals, and commissions. These used to be exempt from PST.
Also, there is a tax assessment and refund "shell game" on new homes that will stimulate new home sales until July 2010. After that, the high HST will hurt new home sales and make resale homes more attractive.
I just don't seem to get it? Real Estate is where individuals and families have stashed their wealth. It is our real estate that gives us the confidence to buy stuff and stimulate our economy. It is our spending and incomes that is the real core of the Canadian economy. So, how can the government improve our economy by raising the costs of our real estate and by creating more government borrowings and expenditures?
Even John Law, whose economic policies created the French Revolution with its guillotines, had a better understanding of economics than these politicians. Hopefully, the "New Economy" that emerges during the next decade will focus upon sound fiscal and market intelligence.
OUR GOVERNMENT'S MOTTO SHOULD BE:
"NO YOU CAN'T!" VS. THE USA'S "YES WE CAN!"