RE/MAX Hallmark Blog

Bubble or Bobble?

The GTA real estate market, or any real estate market isn’t that complicated to figure out.

Factors creating a market are easily to distinguish and monitor. We either have a sellers market (more buyers than sellers = price increases) A buyers market (fewer buyers than sellers = stable or declining prices) or a balanced market. For many years we have had a sellers market in choice locations, but not all locations.

Mortgage rates impact our market. Money supply has been plentiful and competitive. Rates are attractively low. When the money supply tightens up and rates increase dramatically the real estate market will slow down and adjust (Bobble.) Right now, buyers are confident with rates and the competitive supply of financing available. A drastic or prolonged spike in mortgage interest rates would Bobble the real estate market. Fewer buyers would venture out and shift the marketplace. Prices would either become more stable or decrease depending on the urgency of the seller. I don’t see any drastic or prolonged spikes with mortgage rates to cause a major impact in our market.

Other benchmarks for the real estate industry include the economy and immigration. If a buyer has a job, and is secure in thinking his or her job is relatively stable they would purchase with confidence, if they have the need. Take away confidence in the economy and fewer buyers venture forward. Other than having some out of our borders event change things, I see nothing to upset the real estate market from the economy window other than the occasional Bobble here and there.

Not even the upcoming Federal election.

Many don’t realize the important role immigration plays in our economy and real estate market. Roughly 100,000 new immigrants call Toronto their home each and every year. On average, an immigrate ends up buying their first home within 5 -7 years. Immigration is incredibly important for growth and our market. The more skilled immigrants equates to more consumers. Our country and city will continue to attract new immigrants

So is this a Bubble market as some will say?

Is it all about to burst right before our eyes?

To answer these questions we first have to study our past. Let’s look at what our friends to the south went through beginning in 2008. 

The real estate market in the States was humming along nicely prior to that date. A balanced market by and large. What happened to cause it to collapse?

Mortgage rates were cheap and very competitive.  Mortgage suppliers and the “rules” surrounding the mortgage industry were lax.  But the mortgage game although a key factor wasn’t the overriding factor, which lead to the bubble bursting.

The economy in the States was reasonably strong, inflation was under control and most people could find relative work according to their skill level. Check off the economy as not being the key factor in the collapse.

Housing stock was strong, most markets had properties for sale just waiting on buyers. balanced market.

Immigration, legal and illegal added a vibrant element to the real estate market.

So what happened?

Let me introduce you to Mr. Speculator and Mrs. Property Flipper. Or Mr. S and Mrs. P. 

Flippers or Speculators play the real estate game like the stock market. They get in, take a profit and get out. Their commitment is short term. They might add a coat of paint, cut the grass or do some other low cost improvements but they generally do as little as possible, sometimes they don’t even close on the deal but sell the paper. 

At the peak, 37% of all property purchases in the states involved speculators. All you had to do was grab a cab in any major US city at that time and your driver would inevitably tell you about all of the properties he had invested in and flipped. This number created an artificial market, which certainly would collapse, and it did. Once Mr. S and Mrs. P couldn’t play the market for a profit, they got out. Close to half of the market disappeared once they made their exit. Mr. S and Mrs. P took advantage of the mortgage rules and ran the tables.

We have our own history with flippers impacting our market here locally. During the Boom market of the early 80’s, I recall one home selling to Mr. S and Mrs. P with a set closing of months ahead. Before the closing date, the agreement had been sold and resold 6 times. People were selling paper. Each time for a profit and each time increasing the end price. No wonder the market collapsed. It was an artificial market fuelled by speculators.

I like to think lessons have been learned from the 80’s and from our friends in the states. Today speculators play a very small role in our marketplace, roughly accounting for less than 10% of sales.

We do have some condo’s selling before being registered, but not over and over again.

Generally our market is made up of long-term owners or investors. People who are in the market and contribute to it. Anything else is artificial and doomed to a collapse. Once Mr. S and Mrs. P play a major role in our local market, it will burst.

Our market now is more prone to Bobble along. It may stall, decrease a bit in certain markets, and increase again. But Bobble along it will

Should you be buying a house or condo now?  To answer that question I will ask you to look 20 years ahead into the future of the GTA. What do you see? Will house prices be the same, lower or higher? Will our community continue to grow overall? Will Canada and Toronto continue to be a choice world destination for new immigrants. 

As long as you are in the real estate market for the long term, it is a fantastic market to be in. I would caution you not to speculate on this market or any other real estate market – short cycles inevitably cause problems. Any Bobble could put you under.

Invest with long-term confidence in our real estate market and enjoy the Bobble.

 

 

Venting about Garth

What really makes a person an expert on real estate? Perhaps experience, knowledge, and throw in some skill for the perfect blend? I don't really know.

Probably easier to figure out who exactly isn't an expert in the field.  In any case, I don't consider myself an expert, just someone who relies on experience and a sense of the market. Which brings me to Garth Turner.

Garth Turner is the real estate "expert" journalist for the North Toronto Post. For those in the know, Garth was a member of parliament, cabinet member and has a history of being outspoken and usually wrong about real estate.

The article I read this morning which was written by Garth advised buyers never to get into a bidding war, never to sign a buyers contract and to search out stale listings. Of course, being an expert, Garth should know what he is talking about. He doesn't.

In fact, Garth Turner has been so offside with the real estate industry he is actually dangerous for the public. Garth is the classic example of a person who constantly cries wolf (falling market) and eventually and inevitably will be proven right over time. 

For their benefit, buyers need to be professionally represented by a realtor when buying a property. Buyers need to be clear on the property and bid the price they want - bidding war or not. As for stale listings, there is a valid reason they are stale. Overpriced and usually in rough condition or in undesirable areas. 

Garth Turner has no first hand experience in our industry, he is simply paid to express his opinion and has little creditability - just check out this link to follow the path of his off side real estate thinking.

Just my opinion...

 

 

A great place to call home - Aurora

Quite a day yesterday! 

Our company expanded into York Region. For some time now, we have been in discussions with the previous owners of RE/MAX York group about our industry, their company, our company. Things along that line. Bill and Brenda have been amazing owners of RE/MAX York in Aurora for 3 decades and more. There are the original pioneers of our brand and real estate in the region. They have done an incredible job.

We couldn't be happier to be associated with them and to have the opportunity of picking up where they have left off.

So why Aurora and York region for RE/MAX Hallmark?

Frankly, we get a lot of opportunities to expand our brand. Not many suit our culture and are of benefit to our existing company. When we look at expanding, we first ask ourselves the question, "will this location add value to our existing company?" If and only if the answer is yes, we dig in further.

Many of our existing agents are connecting more and more with York region. Either through referrals or working the region as their primarily area. We thought providing a presence in York would be a great benefit to our agents. Next we took a look at the culture of RE/MAX York. Most of the realtors are long term professionals, high integrity, really dedicated to providing exceptional client service. It wasn't a company made up of part time realtors, they are engaged in the industry and very proud of what they do.  It was a great fit for RE/MAX Hallmark.

Barbara Brindle will head up the leadership team in Aurora, as well as leading training programs for the entire company. I couldn't be prouder to be working with Barbara.

So, what are our plans for York Region and Aurora? 

RE/MAX Hallmark York Group will take time to evolve. Our hopes are to make a difference in many levels. We are intent on helping our agents build their business. We consider ourselves as stewarts of our industry - raising the bar - more professionalism, more integrity, better ethics and better agents. We are not bystanders in the communities in which we work, we want to make a difference by being engaged.

We are extremely proud to be in York Region and more specifically Aurora. It is a fantastic community, a great place to call home.

Thoughts about today's resale condo market.....

Our markets can be very specific and every realtor should make an determined effort to thoroughly analyze particular segments of their markets. Take as an example the resale condo market.

Talking to realtors as I do throughout my work day, my sense is that the resale condo market is suffering through some challenges as of late. Too much product, too few buyers and perhaps a lack of market confidence. Lets face it, prospective purchasers are now faced with an abundance of choice when considering a condo purchase. In certain areas, not all, the inventory for condos is strong and competitive.

So if you are a realtor working the condo market, what do you do? First of all, you need to know your facts. How many comparable properties are now on the market in the vicinity of your listing - what is their price point - amenities - services - and presentation? How does your condo listing stack up against the competition?

Next I would analyze recent sales - by recent I mean 30-60 days, no longer. Units that have sold 6 months ago have very little bearing on today's market. 

Perhaps most important, I would establish the need of the seller - is your seller in a position that they must sell? Is a rental option a better alternative?

Finally, I would suggest an aggressive price - don't chase a market - have the market find your listing.

Whenever a market is in transition, as the resale condo market is right now - finding the right market price can be difficult and time consuming. Manage the expectations of your condo sellers and help them make informed decisions.

 

 

The "need" to own real estate is strong

I have never been one to be a "big" investor in stocks and bonds. Don't really know much about this sort of investing, although I do realize the importance it plays in the scheme of things. I suppose I look at the stock market as an quick reference indicator to how things are doing out there in our country and abroad. For me the stock market is so fickle, reacting to so many triggers - it's hard for me to get a handle on it. That's why I primarily stick to real estate investing - preferring long term holds (real estate) over short term. Real estate is something I know and something everyone needs.

Today's stock market is a bit concerning. It seems collectively the markets have decided that the US is headed for a double dip recession. This way of thinking is fueled by terrible job creation rates, the sorry state of the US economy and the continual lack of a plan to get things in financial shape. Europe is in a mess for the most part with talk now of Italy, Spain and Portugal soon needing a Greece like bailout. It doesn't seem good for the short term, BUT what can we - the average consumer and investor do about it all?

We need to think long term rather than reacting to daily news bursts about economies. What little confidence we have in various economies would be shattered if we followed our various news sources with their spin on the negative. Sure we must be aware of how things are, but in the long run - there is nothing much we can do about it.

Keep going about our business. The real estate market will have its ups and down and quite possibly we are heading into a "down period." The down period will consist of fewer sales and a softening on price acceleration. But the need to "own" real estate is strong locally.

In the fall, our real estate markets will continue to be fueled by low mortgage rates, immigration, the local economy, and supply. When the housing supply picks up, turnover will slow down and price acceleration will ease. 

So buy those investment properties, people need a place to rent. Buy a principal residence, in the long term your asset will grow, and if you have the need, buy a recreational property - your choices are great.

One other thing - quit watching and listening to negative news spins - it's all done with a purpose.

House party

How do you prep for a big party - say a christmas gathering ? Most go out and buy all kind of food at the supermarket, cart loads for the big gathering. Then it's off to the liquor store to stock up on fine wines and brews for the many guests coming over. It's a big party so lots of supplies are needed. 

Than the big event happens. Everyone enjoys the day - a great meal is prepared from all the ingredients and supplies recently purchased and every last drop of bubbly is consumed. Within a few days, more supplies are needed to maintain the household, so off to the various stores we go again, only this time - we don't need as much. Not as many mouths to feed.

In a strange way, this is what has happened in our housing market. In the previous months, our clients stocked up. People that were "invited" to the housing party - either because they came of age to party or because they were coaxed by the threat of higher interest rates, changing rules on mortgage financing or the HST decided to party. It was a great party. Lots of activity for everyone. People who didn't really want to go to the real estate party went anyway - they didn't want to be left out.

The real estate party of the last year or so had many people getting involved who weren't planning on doing so at the time. They jumped into the party because of the excitement of it and the peer pressure I suppose. The steady flow of buyers spiked for the real estate party, and now it's time to replenish the buyer stock. Sure, there are still many many buyers out there, but not as many as before. People selling their homes have to be more inviting to their party guests - the fewer buyers out there, which means more aggressive pricing and a better quality product.

What we are experiencing now is just the aftermath of a great party. It's all good. Read what our Bank of Canada Governor has to say about it.

Not undecided anymore

We have municipal elections happening all around Canada. Usually I don't get involved or connected to the process. But this time it is different for me. I am about to do something I have never done in all my years of leading a real estate company - break a golden rule. Never talk about politics or religion. The religion part is a no go zone for me and will remain there. However, I can't sit back and not comment on the upcoming election for Mayor in Toronto.

Basically, the election has boiled down to two main opponents. Rob Ford and George Smitherman. They both have my respect. Most anyone running for any political position has my admiration. Low paying job, and lots of headaches. Takes  a special bred. That said, I want to comment on Ford and Smitherman.

I'm not entirely sure if one is better than the other or how much damage or how much of  a positive impact they can individually have on our city. I guess it remains to be seen. However, I have jumped off the undecided platform to come out in support for George Smitherman. For one reason only.

Rob Ford's platform includes the removal of the municipal land transfer tax in the City. Initially Ford indicated the tax would be removed immediately, now he is backtracking to say sometime in his second year - the delay because of the upcoming provincial election. I don't want the tax. Our consumers don't want the tax and I support anyone who is in favour of getting rid of the tax - in a constructive manner which wouldn't be harmful to our industry. Ford's flipflop on the issue scares me. If elected, he could cause great harm to our industry by his lack of clarity on the issue. Buyers may just hold off for a year waiting for this tax change and we don't need that. Ford would damage our industry.

Smitherman says he would get rid of the tax as well, but not until it works in the budget. For that reason alone I am supporting Smitherman in the upcoming election and I urge you to do the same. 

 

Realtor.ca does not sell properties - realtors do

There are about 32,000 realtors who are registered with the Toronto Real Estate Board. That's a lot of realtors out there trying to define themselves in their trade. Lots of competition. There are many different brokerage models all trying to find their uniqueness to attract these many realtors. Some brokerages offer a model which serve clients by offering Limited Service to the public. Usually Limited Skilled realtors are attracted to this model. There have always been a segment of the public who will be drawn to limited service brokerages. The public has a wide and big appetite. 

Recently CREA and the Competition Tribunal entered into  an agreement to alter the scope of our industry nationwide. Moving forward, brokerage models will be able to allow realtors to attract sellers by not providing what I call full agency. Sellers can choose to make their own appointments and negotiate their own deals directly with co-op brokers. And that is a good thing if you are a seller who doesn't want to pay for a full service broker and who think they can handle the entire process and still get good value for their property. There are some car garages around which allow car owners to fix their own cars aren't there, having the right tools to do so is a drag tho.

What does the change mean for full service brokerage realtors?

Opportunity to my way of thinking.

I don't think the public really gets what we do as full service realtors. We haven't done a good job of defining it. 

What we do as full service realtors is needed for consumers. The process is complicated, delicate and important. More than other, we have to get better at our trade in establishing value for our service. The strong market of the past many years has led many to believe what we do is centred around MLS access. Realtor.ca does not sell properties - full service realtors do. The nationwide real estate site is simply an advertising tool. The real work of selling properties begins when realtors connect with buyers and sellers. If a realtor is good at what he or she does, they are able to help many - if they aren't good at what they do - they perhaps will by default join the ranks of the Limited Service and Limited Skilled brokerages out there. It's all about choice isn't it?

RE/MAX Hallmark is proudly a full service brokerage

 

Ask a realtor.......

Have you ever noticed that the "press" is usually a month or more behind what is happening in the real estate market? Not many a day goes by when something isn't written about the bottom falling out of the market, with the usual slanted stats to support the written words. 

Sure our market has changed, and thankfully for the better. No longer are multiple offers the norm - buyers most often do not have to bid and re bid on homes only to be frustrated. In most cases buyers now have more choice and more time to make their decisions. Realtors now can really do what they are best at - guiding, helping, advising and negotiating for their clients for their long term decisions. 

Sellers will have to change their way of thinking as well. They will require the services of a professional realtor more and more as the months go on. Listing their property simply on MLS won't be enough of a marketing edge - the experience of a realtor will be needed and valued.

Want to know what to expect in the next few months. Don't read the press, ask a realtor how much "pent up" business he or she has coming. Buyers and sellers who are just waiting for after labour day to get in the house buying or selling mode. Most realtors have a great deal of business just waiting to happen, and that is the true forecast of the market - not what some press guy will write.

I'm looking forward to our Fall Market and all it has to bring. This market change is good. A more balanced market was and is needed to maintain the health of the real estate industry. For buyers, sellers and realtors alike.

Real Estate is NOT the Stock Market by Robert Ede

The Canadian Real Estate Association released a report August 16, 2010 that drew interpretative comments from news outlets Globe&Mail& BNN plus the Royal Bank and TD Economics on the state and future of the Canadian Realty market.

I wish to make observations on the stock-market style of behaviour and price-trend analysis being applied to 'my' industry and begin by stating that, this time, the phrase "the new normal" means little more than, nobody can use the data and prediction methods of the past with any reliability about the future (has an idea as radical as "quantitative easing" ever before been so unquestionably accepted .... by everyone?)

Real Estate is NOT the stock market. We do not experience 'corrections' or other "technical analysis" terms, we DO have 'on the bandwagon' rallies when 1) prices (or prices and interest rates) relative to incomes are low, 2) interest rates relative to history are low, 3) consumers feel confident and 4) tangible assets (that also provide shelter and/or income) are in short supply and we experience the opposite - 'off the bandwagon' dips when one or all of those characteristics are absent and of course the 2 in-between markets, that weused-to call "normal".

Real Estate is NOT the stock market. We do not think in terms of 2 quarters of positive results and optimistic "guidance" for the next 6-12 months (and fancy accounting to make up for miscalculations). Real Estate is 2 decades - over 20 years the debt principal has been nearly paid off by the owner or tenant(s) and the market value of the property greatly enhanced - and the real value in addition to the nominal value of the 'leveraged investment' aspect of the property can be appreciated.

Real Estate is NOT the stock market. We don't measure performance and trends by the second, we don't have in & out arbitrage traders fiddling with 8ths of a dollar on huge volumes, nor stock promoters 'distributing' their own stock after goosing up the price, nor web/TV/radio opinion-movers touting stocks and shorts for the day.

Overwhelmingly we have ordinary people buying a home to satisfy a family need for stable shelter, their own choice of community and a long-term investment.

Real Estate is defined as Location, Demographics and Time. Blue collar and industrial locations can gentrify (all the time in Toronto), many factors can cause an area's demographics to change (most every time to the upside $$ in Toronto) and "in Time" every purchase is a "Great Buy".

Real Estate doesn't need insider knowledge - everyone knows what they like and the bank tells us what we can afford. In contrast, 20 years ago would you have bought IBM or Google in that shark-infested, zero-sum casino called the stock market?

Next time one of the "expert economists" from the Stock/Bond Houses wants to comment on Canadian or Toronto real estate ask them to compare the stock market of 20 years ago to Real Estate and then ask them for a prediction of which stock or sector will be a better investment for the "average Canuck" (while providing that family shelter) in the 5-10-20 years AFTER the upcoming dip?

Robert Ede  is a realtor with RE/MAX Hallmark Realty Ltd, a professional beginning his career in the 1970's.