This week has been a busy week for Canadian Banks. It started with Royal Bank’s announcement that they are raising their variable rate mortgage rate by 20 basis points (1/5th of 1%). The week continued with the Bank of Montreal reporting that profit increased by 8%, followed by National Bank reporting that they increased their profit by 15%.
Typically the variable rate depends on the Bank of Canada (BoC) lending rate. The BoC lending rate is the rate that banks can borrow money from the Government. The BoC lending rate is 1% right now. That means that Canadian banks can borrow money at 1% and lend to home owners (for example at 2.5%) with a variable mortgage. This means that the Canadian Banks make 1.5% “profit” off all the money they lend for variable rates. If the BoC raises it’s lending rate to 2%, then the Canadian Banks can raise their variable rate to 3.5% and still make the same profit.
It was very curious, this week, that RBC raised their variable rate, because the BoC did not raise their rate. It’s almost like RBC simply decided to make more profit, so they raised their rate (RBC also come out with negative earnings this week). This recent move by RBC leads us to wonder what will happen to variable rates in 2012 and 2013. Will the Canadian banks all decide to raise their variable rates even if the Bank of Canada does not raise their rates? The banks are allowed to raise their variable rate if they want too. Home owners typically contract for a 5 year variable rate mortgage, with the option to lock in to a fixed rate. Contracting for 5 years, allows the bank the ability to raise rates, without too high a risk of home owners switching mortgage. Switching a mortgage before your term is over can result in a large penalty.
Variable rate mortgages have been the best mortgages to have over the past 10 years. The variable rate has always been lower than the fixed rate. Interest rates have consistently dropped over the past 10 years. For this reason, variable rate mortgages are now very popular. There are millions of Canadians with variable rate mortgages. If the banks decide that they want (or need) to make more money, it might result in banks increasing their variable rates, even though the BoC does not raise their lending rate. Banks have a large customer base with variable rate mortgages, so if they want to increase profits, a simple increase will allow them to do that.
Why do banks need to make more money? Despite the fact that banks are reporting record profit increases, many people are speculating that in the near future, Canadian banks will have difficultly increasing their profits. Financial analyst feel that, over the past 5 years, banks have grown significantly by lending out millions of mortgages. Now that 70% of Canadians own a home, there will be less homes sold, and thus, less mortgages being taken out. This will leave banks searching for new ways to make money. It seems like a very easy way to make more money is simply by increasing the variable rate. This involves no effort or labour on the banks’ part. Any increase is all profit. If a bank has one billion dollars in variable mortgages, a 20 basis point increase (like RBC did this week) adds 2 million dollars in profit. Wow. What an easy way to make 2 million dollars.
Eight times a year, the BoC makes an interest rate decision. Most people follow the Bank of Canada announcements with bated breath. They are on the edge of their seat because they know that if the lending rate is increased, then the variable mortgage rate will increase. However, in light of the RBC increase this week, it appears that people should be watching the Canadian Banks profit and loss statements. If the banks need to make more money, they have an easy way to do it.
You might have to accept apologies on this blog post because it might see somewhat like a rant. But seriously, how much money should Canadians be expected to pay for a home? How much debt should a family take on in order to have a home in a good neighbourhood in Toronto.
Perhaps some people will be able to relate to this post, perhaps some will not be able to relate. Feel free to leave your comments at the bottom. Here is the situation. A family with two children is looking for a home in a Toronto suburb. We have narrowed down our home search to a small neighbourhood that is a short walk to the train station. It’s a family friendly neighbourhood close to parks, schools and friends. This is where we want to live. This is where we have been looking for a home for sale.
In this neighbourhood, we are able to rent a small, but more than adequate home for $1,600 per month. No property tax to pay. No repairs to pay for, and the owners pay the water bill. So the costs to live in the neighbourhood we want to live in is $19,200 a year. That’s it. However, as everyone knows, Canadians have a unquenchable desire to buy a home. Seemingly, regardless of price. Us included. Despite renting, we would prefer to buy. We have been looking..
2 years ago, we bid on a “fixer upper” in this neighbourhood for $365,000. We didn’t get the home, but that price has stuck in our minds. Other houses have come on the market. We have looked at each one.
$450,000: Dismissed because there was no dishwasher, no family room, unfinished basement, and a tiny kitchen.
$575,000: Dismissed because the price was a little high, plus the home lacked a finished basement and family room (again!). Where do the children play if their is no finished basement and no family room?
$475,000: Almost perfect! A few streets away from where we wanted to be, but that was ok. What was not ok was the multiple 2cm cracks in the brink that went from room to foundation and from every window cil to the foundation. Didn’t really want to buy a home with structure issues. (especially for close to $500K!
$600,000: Perfect home. Newly renovated. Had everything we needed. Price was high. But we passed it up because it backed onto the commercial development fronting on the main street. Too much noise.
So here we are. Still renting. Still looking. Still evaluating each home that comes on the market in the neighbourhood in which we want to live. Another home just came on the market for $650,000. Lets consider it and do some ranting…
The starting place to rant is the “price”, plus this leads to the point of this blog: Housing prices are ridiculous in Toronto. Are we literally expected to buy a home for $650,000 because our friends have? Let’s assume the we have a $200,000 down payment and the mortgage on this home would be $450,000. This would include costs:
Mortgage interest @4% = 18,000 per year
Property Taxes = $4,000 per year
So immediately, this home is more expensive than renting. If renting is considering “throwing money down the drain”, then we throw $19,200 down the drain each year. But when we rent, we make interest on our $200,000 down payment. Therefore we only actually “throw away” about $15,200 per year. However, if we purchased this home, we would be “throwing money down the drain” in our interest and property tax costs of $22,000 per year. So buying this home costs us $6,800 per year more than renting. (Again that includes no mortgage principal repayment). Someone please tell me why we would buy a home for $650,000?
Who makes the kind of money that allows someone to buy a $650,000 home? Again, interest and property taxes are $22,000 a year lost. Gone. Hard earned money gone to a bank and the city. Our combined pre-tax family income is $150,000. With this we take home $8,000 a month. That means we take home $96,000 per year. Daycare is $25,000 per year. Car costs are $10,000 per year. RESP are $5,000 Monthly expenses (gas, food, entertainment, cellphone, internet, cable) are $30,000 per year. That leaves $26,000 for housing!!! I just told you that $22,000 will be thrown away in interest costs and property tax. This means that $4,000 a year can go to paying down my $450,000 mortgage? Are you kidding me? Will that not take 100 years to pay off? Saving for retirement is not accounted for in the above calculations.
I also think that that we are a frugal family and the costs outlined above would not be considered high or excessive. We don’t buy clothes. We don’t have fancy cars. This is the ridiculousness of the Toronto housing market. Who are the people buying the homes for $650,000? How big are their mortgages? Why are people paying these prices? You really can’t blame the sellers for asking, but you easily can blame the sellers for buying.
We are in our mid 30s. So to purchase a $650,000 home, we need to have a 35 year mortgage. This means that we are mortgage free at age 70 (With no retirement savings). And what is one parent loses their job? (Then we’re broke)Are you kidding me? Am I agreeing to pay more than $35,000 a year to live in this home for the next 35 years? I’m going to have a $2,500 a month mortgage payment when I’m 69 years old?
Every day there are reports from banks real estate associations, and newspapers. Some days these reports say that the Canadian home market is overvalued, some days affordable. Some days the reports say market is going to crash. Other days it’s going to slowly grow each year. Regardless of what the reports say, it’s evident from looking at the average family income and the average price of a family home, that Canadians are mortgaging themselves to the max. The above example was for a $650,000 home. This doesn’t change too much for a $600,000 or $500,000 home. Regardless these are high amounts that come with accompanying large mortgages. Does anybody else look at where their money goes? How much goes to interest costs? how much goes to banks? Taxes?
In: Real Estate News22 Aug 2011
Brampton and Mississauga are located in Peel Region. Combined, they would be the 3rd largest city in Canada, behind Toronto and Vancouver. Both Mississauga and Brampton are unique in Canada and perhaps unique in North America.
Mississauga, once a commuter city adjacent to Toronto, is now a large city unto itself. Mississauga now has a strong head office corporate base and an established high density down town core. Thousands of Canada’s largest companies call Mississauga home. Purolator and Cambells Soup are just a few of the companies with head offices in Mississauga. Mississauga is a great place to find and job, and as such, it has a great real estate market.
Mayor “Hurricane Hazel” has been the driving force behind Mississauga’s development over the past 20 years. She made it enticing for Corporations to establish offices in Mississauga. Along with the employers, Hazel allowed developers to increase the density around shopping centres like Square One and Sherway Gardens. New condo developments have sprouted up all over Mississauga. These condo developments are also on the cutting edge of architectural design. The new “Marilyn Monroe” inspired condo in down town Mississauga is garnering international acclaim for its’ stunning design. Although Mississauga has run out of real estate to build new homes (development has stretched to the boarders of Mississauga and Oakville, as well as Mississauga and Brampton), Mississauga will continue to increase density by replacing homes with condos and multi-unit developments.
Brampton is not quite at the development stage of Mississauga. Although Brampton is beginning to develop condos, it is still essentially a sprawling sea of endless single family residential homes. Builders in Brampton continue to push the boundaries by building homes north to the Caledon border and West toward Milton. However, because people continue to buy new homes, the builders will keep building them.
Brampton seems to have gone through three distinct “eras” of development. The original small Brampton community was located near Hwy 10 and Steeles The older homes (most likely built in the 60s-70s) still exist. They were occupied by a mainly 2nd and 3rd generation Canadian population. The 2nd wave of development in Brampton came in the 80s as the real estate boom started in Toronto. Greenpark was the main builder and they expanded on the original Brampton suburb by building large 3 and 4 bedroom homes. These homes were bought by recent immigrants from Europe. Many were Italian immigrants. The 3rd, and continuing, wave has been built from 1997 until now. This new construction is unique in that the boom has lasted more than 15 years, and it’s still going. Many of the new homes built over this period have been purchased by new immigrants from South Asia. Brampton has one of the largest East Indian populations in North America.
This is all good news for home sellers and buyers in Brampton and Mississauga. Both cities have a very large and healthy real estate markets. Brampton and Mississauga account for approximately 30,000 home sales per year. This includes more than 60,000 new home listings per year. There are more homes sales in Brampton and Mississauga than in Toronto. These two cities are big business for real estate.
There are several reasons for the high turnover in real estate in Brampton and Mississauga. As a “family” suburb, families are constantly growing and needing bigger homes. Another reason is the influx of new immigrants. Often, one of the main goals of a new immigrant is to buy a home. Low interest rates and low down payment requirement has made it possible for many people to qualify for a new home. Of course, this has led Brampton and Mississauga to have a higher mortgage default ratio than other areas in Canada. Along with a high volume of real estate transitions, also comes the opportunity to buy a power of sale in Brampton or Mississuga, or take over a rental property that has been treated poorly by the former tenants.
The competition is fierce for real estate agents in Brampton and Mississauga. There are thousands of real estate agents trying to get customers in these cities. Many agents offer lower commissions, flat fee listings, “for sale by owner” advertising, and many other ways to advertise a property for and save money. PropertySold.ca is very popular in Brampton and Mississauga. Many home sellers in those cities want to sell For Sale By Owner, but also be on MLS.ca for a flat fee. PropertySold.ca has packages that are in high demand for sellers in Brampton and Mississauga. Because these cities have a high number of real estate listings and sales, it’s an easier place to sell a home privately and save money.
In: Real Estate News18 Aug 2011
30 years ago North York Ontario was for the middle class Torontonians who wanted a small bungalow or split level detached home. Most of the homes in North York were originally built in the 50s as mass produces new homes for the parent of baby boomers. Parents with 3-5 children needed an affordable place to live. North York was built.
Back 30-40 years ago, roads like Dufferin or Leslie were the edges of North York and they were streets that only had a few stop signs. Now they are surrounded by high density populations and these streets now have many stop lights.
North York can be defined as being North of the 401, South of Steeles Avenue and the East to the 404 and West to Highway 400. North york is a large geographic area with many different styles of homes, spread across very different demographic segments of the population. North York can contain some of the highest net worth individuals in the country, but it also has areas like Jane and Finch, one of the lower incomes areas of the country.
Mel Lastman, before he was Major of Toronto, was major of North York. Much of the credit for the development in North York can be attributed to Mel and his administration. Mel turned Yonge street between Sheppard and Find into “Condo ally”. There are approximately 50 new condo developments that have been built in the last 20 years. Not only have there been many residential condos built in North York, but there has also been commercial/office buildings built. This has allowed the population to live close to where they work.
The Toronto Yonge St. Subway has been another strong driver for development in North York. The Yonge St. Subway ends at Finch, but a stop was added at North York Centre and a new subway line was added on Sheppard Ave between Yonge and Don Mills Road. Although the Sheppard subway has been described as “the subway to nowhere”, it has results in more condo being developed along Sheppard. Menkes and Tridel built many of the condos in North York. These condos are high end buildings with amenities that include pools, tennis courts and bowling alleys. The Condos at North York Centre are built on top of a grocery store, and retail/restaurants. The Condos at Sheppard are built over a movie theatre.
Homes in North York were primarily small homes built on decent (50′ x 150′) sized lots. Many of these homes have been torn down and replaced with mini-mansions that can sell for more than 3 million each. This goes to show that North York is a very desirable area of Toronto. It’s popular with wealthy asian immigrants, as well as many Bay Street Lawyers and Bankers. Many people commute to Down Town Toronto from North York using the subways or the quick access to highway 401 and the DVP.
Real Estate in North York can easily be described as “hot”. Most homes and condos are in high demand. Remax is a popular brokerage in North York. As is selling privately on PropertySold.ca. For sale by owners are often more successful in hot real estate markets. Because buyers are already looking for homes in the area and are ready to make offers on new listings, FSBO sellers can sell without using a real estate agent if they are looking to avoid paying a real estate commission. Asian buyers in North York are also increase the demand for real estate. Many people enjoy living close to Mel Lastman square, the Douglas Snow Aquatic Centre, and the Ford Theatre. Anyone who has lived in North York for the past 30 years can marvel at the fact that a sleepy little suburb has transformed into a high density city. A city that, on its’ own, will rival most cities in North American as being the best place to live.
In: Real Estate News16 Aug 2011
Richmond Hill Ontario is a great community North of Toronto. Located North of highway 407, Richmond Hill is a very active real estate market for selling privately and selling with a real estate agent.
Richmond Hill’s borders are Highway 7 to the South, Bathurst to the West, Highway 404 to the East and Bloomington Road to the North. Within these borders lies many unique neighbourhoods with any different real estate styles and price ranges.
The South end of Richmond Hill has a large Asian community centring around the Hwy 7 and Leslie area. New Tridel condos have been built and there are many ethnic restaurants. The Richmond Hill City Hall offices are locates in this community, although the Leslie/Hwy 7 area is not considered “down town” Richmond Hill. That distinction goes to the community located at Yonge and Major Mackenzie.
“Yonge and Major Mac”, as it’s know, contains the Richmond Hill Public Library. The “down town” core of Richmond Hill also contains the Richmond Hill Centre for The Performing Arts. This recently built Theatre houses local concerts as well as musical guests and world class entertainers including Robert Munch, Art Garfunkel, and the Backyardigans! Other amenities include a Wave pool, and Police and Fire Stations. Many parades and festivals, including the Richmond Hill Santa Clause parade are run from Yonge St in Down Town Richmond Hill. The housing in the down town core includes a new Tridel and Greenpark condo, as well as “The Benson”, a new condo and retail building. The low rise housing in this area includes home built more than 100 years ago, as well as million dollar homes close to Mill Pond.
The North area of Richmond hill relives around Lake Wilcox and the small town feeling of Oak Ridges. Homes in this area can range from sprawling estates to small cottages. It’s easy to pay more than 2 million for a home in North Richmond Hill. Lake Wilcox is part of the Oak Ridges Morain. Many people tried to keep new home developers from building in this area. However Mcloud’s Landing and other developed sites contain hundreds of new homes built on the Oak Ridges Morain.
THe Southern area of Richmond Hill is the scene of mass development. This area of Hwy 7 and Yonge St. is planned to be one of the highest density projects in Canada. A condo development being developed along Langstaff Road from Yonge to Bayview is scheduled to coincide with a new Yonge St. Subway extension. The GO train, VIva Bus terminal, Movie Theatre, Big Box Stores, and high en restaurants all converge at Yonge and Highway 7. It’s no wonder that new home builders are tearing down older homes, on larger lots and building mansions that sell for more than 4 million dollars.
Whatever type of real estate you are looking to buy, Richmond Hill can accommodate. However, the real estate does not come cheap. Richmond Hill is an expensive place to live. The average home value is well over $500,000. But as we discussed, this be one city in Toronto that is worth the price you pay.
In: Real Estate News12 Aug 2011
The Toronto Real Estate Board released their real estate statistics for July 2011. There were 7,922 homes sold in July. This was 23% more than July 2010. This shows that the real estate market in Toronto is continuing to be very healthy. Although, despite the large increase in July, since the beginning of 2011, total home sales have decreased by 1.3%.
The average selling price for a home in Toronto was $459,122. This was up dramatically. This was almost 10% higher than 2010. The average price in July 2010 was $418,675. This is an increase of more than $40,000.
Often people compare the real estate market to the stock market. They say that people are better off in the stock market. Considering that the stock market recently lost all gains in 2011, the real estate market appears to be more stable place to keep your money. This week the stock market has increased and decreased by 5% on a daily basis. Radical stock market variations makes investors nervous. However, home owners are not nervous about their home’s value.
The return on an investment in a house can be very fruitful. When you consider how much the average Canadian is leveraged, it makes the investment appear even better. Lets consider the example of a home buyer who put 5% down on a $400,000 home last year:
The initial investment on a $400,000 home would have been $20,000. Now, one year later, the home is worth $440,000. This home owner has just tripled their money. They turned $20,000 into $60,000 ($20K + 40K increase). This is a 200% return. Compare that to a stock market that just dropped to 2010 levels.
The above example is a very simple example and it does not include all the other costs involved with real estate investment. For example, the closing costs when buying a $400,000 home in Toronto could easily be $15,000. Plus real estate costs when selling, would also be around $25,000. This makes the $40,000 increase reduced to of zero. These extra costs are often to included when people say that they “just bought a home and made $40,000″. Actually, then may have made zero.
However, if home prices continue to increase, then this reduces the affects of the closing costs. If that same home increased in value to $480,000 net year, then the increase in value would be $80,000. Once subtracting the closing costs of $40,000, the home owner made $40,000 over two years. Based on the $20,000 initial investment, this is an annual return of 50%. Not to shabby.
However, the problem with real estate market profits, is that you need to sell your home (and not buy) in order to realize the gains. When you sell your home at a high price, you often end up needing to buy a home at a high price. Unless you are considering renting, you really don’t gain financially from the increase in value in your home’s value. If you buy another home for $480,000, you still have the same amount of money in the bank…
One of the most common Real Estate questions we receive at PropertySold.ca is “How can I sell my home myself and advertise on MLS.ca/Realtor.ca?”. This is a popular real estate question because home sellers want to be able to advertise their property on MLS.ca/Realtor.ca, but also save money.
Many people these days want to do as much work as possible in order to save as much money as possible. This is true with many different industries. Many people will do their own house painting, their own landscaping, and their own online banking and online travel bookings. They have the choice to pay a professional to do this work for them, but they choose to do the work themselves because they want to save money. This is true when it comes to selling a home privately.
Some people might say that they sell privately because they enjoy the interaction with the buyers, or that they don’t trust real estate agents. However, the main reason that people sell privately is to save on the real estate commission.
However, in selling privately and saving money, sellers still want the maximum exposure for their home. They don’t want to limit the pool of buyers because less buyers sometimes means less demand for a home, and this can affect selling price. So people want to be on MLS.ca and still save money.
There are two sides to the “real estate commission” and thus two areas to potentially save money. The first side is the “listing side”. Typically the “listing side” of real estate commissions costs sellers 2.5% . This “listing side commission” is added to the other side (the 2.5% paid to the buyer’s agent) to bring the total cost to the seller to 5%. The “listing side” is usually the easiest side on which to save money. In Toronto, will allow real estate sellers to list their home on MLS.ca for only $499.95, plus the cost of a PropertySold.ca listing is included in the price.Thus, the cost to list a home on MLS.ca is now only $499.95. The seller has reduced the cost from 2.5% to $499.95.
The other “side”, as mentioned above, is the commission offered to an agent for bring a successful buyer. The cost for this, again, was typically 2.5%. This amount is slightly more difficult to save. Sellers need to ask themselves a few questions. For example, what % of buyers are using agents. The seller should also ask themselves if an agent will be less or more motivated to bring their buyer to a home that is offering 2.5% vs a home that is offering less than 2.5%. Buyers get to choose exactly how much they want to offer as commission to an agent to bring a buyer. Some buyers choose 2.5%, some choose 2%, some choose $0.
When considering using or not using an agent, you must think about some facts. In Toronto, there are approximately 30,000 real estate agents and brokers. These agents/brokers are responsible for 80,000-90,000 home sales per year. Other facts include that 85% of buyers begin their home search online. This means that although agents sell thousands of homes every year, there is a chance that a buyer will see your home for sale and bypass the real estate agent.
The difficult part about selling a home these days is that the market is becoming more fragmented. In the past, selling privately was not common. Everyone just paid 5-6% and that was the way it went. But today, there are options to save money, but there are no guarantees. People want to know “how often” a home sells privately or “how often” an agent is involved. There is really no statistics available on these questions. The large factor that drives people to try selling privately, is that they can alway switch to the more traditional method of a full service agent if needed. If you try selling privately, you might be successful and save thousands of dollars in real estate commissions. If you are not successful, then you can choose to pay commission and rely on the standard traditional real estate services.
In: Real Estate News22 Jul 2011
A recent report in the Globe and Mail, by Real Estate Reporter, Steve Ladurantaye, claims that the Canadian Real Estate Association is preparing to allow access to their database containing sold prices and days on the market information. Does this means that Canadian will soon see “Zillow” type websites?
Zillow is an American real estate website started by former Microsoft employees. This website is not linked to any specific real estate brokerage and is not registered to trade in real estate. It’s simply a real estate advertising website. Zillow access information from local real estate boards and post that information publicly to its’ website visitors. This means that, unlike Canada, anyone can see how much the home up the street sold for and how many days the home was on the market. Canadians cannot access this information unless they receive this information through a real estate agent or brokerage.
The article points out that some people thought that Zillow would change the American real estate landscape. Some people thought that if anyone had access to this information, that they would choose not to use a real estate agent. However, Zillow has not had a definite impact on American real estate business. In fact Zillow only has revenues of $30 million. And this is after many years in business and many millions invested in the company. To $30 million into perspective, the amount of agent commissions paid in Canada last year was approximately 6 Billion dollars.
Will Canada soon have a Canadian Zillow? Time will tell. Not only does CREA need to change, so do all the individual real estate boards. It will not be easy for large real estate boards, like the Toronto Real Estate Board, to give up their proprietary data.
Perhaps a first step is for the boards to allow real estate agents to provide their clients a user/password to access sold prices. However, a few years ago TREB instituted a system that blocks agents from giving away their user/password to their clients. Ultimately, real estate agents are paying to maintain a database of sold prices and they have no motivation to provide this to all the public to access for free.
If it does happen, it will most likely need to be forced upon the real estate boards by the Competition Bureau. Plus any company who wanted to access the sold information will most likely have to pay for the right to access the date.
Real Estate Agents and Boards seem to be the focus of the competition bureau. Last year, the boards were forced to change their rules and allow for “mere postings” on their boards. Now they want agents to give away information. My questions is “If information should be provided free, then why not force the land registry to release data?” The land registry has all the sold prices for private sales, agent sales, and builder sales. The sold prices in the land registry are closed sales, and are public information. Real estate agents have sold prices for deals that have not closed. These deals can fall apart, and they are not closed, so why would they be public?
If the data is available, will one real estate website rise above the rest? Will MLS.ca/Realtor.ca publish sold prices? What qualities will make a certain real estate website popular if they all have access to the same information? It’s safe to say that some of the qualities will make one real estate website stand out will be user interface, functionality, and search engine optimization. PropertySold has all these qualities. You can be sure that we will be there if (and when) this data is released to the public. Although we imagine that this will not happen as quickly as thought. Plus this will not happen without a fight from real estate brokerages.
The Bank of Canada decided not to raise interest rates on Tuesday. They kept their overnight rate at 1%. On Wednesday the BoC spoke more about the state of the Canadian economy. The newspapers and economist dissected the works of Mark Carney and determined that he removed the word “eventually” from his comments about when interest rates will rise. This leads people to believe that he will begin to raise rates very soon, starting in 2011.
Lets examine some of the scenarios that would come with rising interest rates. If interest rates do rise:
- Mortgages will cost existing home owners more (especially variable rates because their not locked in). The monthly payments will increase.
- Home’s will become less affordable. This means that if a potential buyer could afford a $400,000 home at a 3% interest rate, they would not be able to afford that same home at a 4% interest rate.
If rates rise enough, homes prices may drop because buyers will simply not be able to afford current day prices. This could means that sellers might become “trapped” in their home. Here’s why:
If a home owner bought with 5% down and home prices drop by 5%, then this person can not really move. If they sell, they will have lost their equity. This means that they will not have any money for a down payment and will not be able to buy another home. If they need more space because their family is growing, or if they find a job on the other side of the city, too bad. They are stuck. Their only option is to sell and rent or to stay put.
Interest rates have generally declined for more than 10 years. In 2005, the overnight rate was near 5%. If you consider what it would take to get back to, the already low, 2005 rates, you could say that we have very little to fear for rapid rate increases. Even if the Bank of Canada raised rates by .25 basis points at each decisions (8 per year), it would take 2 years of consistent increases to get back to 2005 levels.
Many economist point out that each increase in the over night rate will make the value of the Canadian dollar increase (it’s already at 1.05/US$) and this hurt Canadian exports. Also each increase in the overnight rate will increase variable mortgage costs making monthly payments even more expensive. If homeowners need to pay more, it will make the Canadian consumer think twice about spending money , thus hurting the economy.
It looks like that a rapid rise in interest rates could be unlikely, but only time will tell. It’s alway good to examine the “what if” scenarios and make sure that, as Canadian homeowners, we are prepared for different possibilities. I imagine that employees at the Bank of Canada were one time Boy Scouts because they like to remind us to “Always Be Prepared.
For sale by owner is alive and well in Ontario. More and more people are selling their home by themselves (many are also being listed on MLS). Let’s look at the history of For Sale By Owner and some of the top cities for private sales.
For sale by owner has always existed in Ontario. The Real Estate Council of Ontario administers the Real Estate and Business Brokers Act. In the Act, it clearly states that an owner in Ontario has the right to sell their own home. Before the internet, private sellers relied on signs, newspaper ads, and word of mouth. The big FSBO company during this time was called Pear Tree. Pear Tree was a home marketing company that had a magazine and signs.
The explosive growth of the internet in 2000′s led to a change in For Sale By Owner advertising. Realtor.ca was becoming the most popular real estate website in Canada and buyers and sellers were becoming more comfortable with shopping for their next home online. Companies that still relied on newspaper ads faded. The internet resulted in many For Sale By Owner companies being started. Some were franchises, some were websites created by one person with only one employee.
PropertySold.ca was started in 2004. We know from day one that if you wanted to be a successful For Sale By Owner website, you needed to be the 1st search result on Google, Yahoo, and MSN. Along with being the 1st real estate website on search engines, we also provided excellent customer service and professional real estate signs. Because our website receives thousands of website visitors a day, we have a great success rate for sold homes. The more homes that sold, the more people used our website. We are now the growing by leaps and bounds. The volume of our new listings is even getting hard to keep up with!
In Ontario some types of properties are more popular for private sales. Typically detached and semi-detached homes for sale in the suburbs of Toronto and Ottawa are popular for FSBO sales. Condo sales are popular in downtown Toronto.
Cities like London, Ontario and Kitchener also have a great record for private sales. People in these cities are open to the idea of buying and selling without an agent. The popularity in Kitchener also spills over to Cambridge and Guelph. In Toronto cities with a lot of new homes, like Brampton and Mississauga, can be more popular than established areas like Etobicoke. But this is mainly because new home buyers do not have the equity built up into their homes and can not afford to use a real estate agent. For example, sometime when people buy a home for $200,000 and sell 20 years later for $500,000, they don’t mind paying an agent $25,000. But when someone buys a new home for $450,000 and needs sell for $500,000 just to cover HST, legal, and real estate fees, then they are more likely not to use an agent.
Whatever city that you live in, Ontario has a great environment for selling with or without an agent. All it takes is a good home, at a fair price, and to be on the best website…PropertySold.ca!
In: Real Estate News19 Jul 2011
There is a lot of discussion these days about home affordability, record high prices, asian buyers, sellers market, and multiple offers. Real estate, especially in Toronto, has always made headlines in the newspapers and on TV. But now as the average price for a detached home in Vancouver has eclipsed $1,000,000, and in Toronto $700,000, it becomes even more important news. Let’s look at some of the reasons why Toronto is a great city to live in, and why Toronto has high home prices.
Toronto is located in Ontario, Canada’s most populated province. Toronto is made up of the metropolitan Toronto, including North York, Scarborough, and Downtown. The Greater Toronto Area also includes Halton/Peel (Brampton, Mississauga), York Region (Vaughan, Markham, Aurora, Newmarket), and Durham Region (Pickering, Ajax, Oshawa, and Whitby). The Greater Toronto Area has more than 5 million people (can is considered the 4th largest “city” in North America, behind New York, LA, and Mexico City. Toronto is a World Class city with world class real estate. This is part of the reason for high real estate prices in Toronto.
Toronto has plenty of job opportunities that range from CEOs of Canada’s largest companies (Banks, Pension Funds, Retail, and Commerical head offices). A healthy job market leads to a healthy real estate market. When you consider the opportunities for employment in Toronto, you cannot be surpassed by the high real estate prices. CEOs, CFOs, VPs all make good salaries. These people can afford million dollar homes in Yorkville, Rosedale and on streets like the Bridle Path. Even mid-level managers and administrative positions can allow for home ownership.
Toronto has a public transit system that allows people to live in the suburbs and commute into the city to work. Many people take the GO train from Oshawa, Barrie, Mississauga, Brampton (etc) into the city to work. Without the public transit, people would not be able to get to work or afford homes. However, this also drives up the price for homes in the suburbs. Most detached homes in commuter areas of Toronto sell for more than $500,000.
Other cities in Ontario such as Ottawa, London, Kitchener, and Hamilton have also seen their average home price increase significantly over the past 10 years. Although real estate in the other cities of Ontario have not increased as fast as Toronto.
Another reason for a hot real estate market in Toronto is the vast number of real estate agents. There are approximately 30,000 real estate agents in Toronto. There is 1 agent for every 4 homes sold and approximately 1 agent for every 166 people in Toronto. The high volume of agents can keep the market inflated. The real estate agent’s job is to find buyers and sellers and bring them together. When you have that many agents talking to people and convincing them that it’s a good time to buy, then the market will be active.
In the 1990′s Toronto had a real estate crash where prices dropped from $270,000 to $200,000. However, since then Toronto’s housing market has increased every year. Who knows what is in store for the Toronto real estate market? The market might continue to go up, it might drop, or it might remain flat. Regardless, Toronto has many great reasons to make it home, and to buy a home!
The average price for a home for sale in Toronto in June 2011 was $476,371. This might seen unattainable to the average home buyer, because a 5% down payment would be $23,000 and the mortgage amount would be $453,000. Plus the buyer of Real Estate in Toronto would need to pay two Land Transfer taxes, plus lawyers fees resulting in more than $10,000 in extra expenses, just to buy a home. But don’t worry. Toronto has many areas where the cost of home ownership is not as high.
The lowest “average price” in the city of Toronto is in the area known as C01. The June average price was $429,623. This is almost $50,000 less than the overall average for the city. C01 has a lower average price because this area of the city contains many condos. Condos typically cost less than other types of housing such as detached and semi-detached homes. Area C01 is located West of Yonge St, south of Bloor St. and East of Dufferin St. The average condo in this area in June was $409,610 and there 464 condo sales in this area of Toronto.
“That’s still too much money to pay for a place to live” you say? Where is the least expensive place to buy a property in Toronto?
The least expensive place to by a condo in Toronto is in the area known as C11. In June, the average price was $224,753. This area is located on the west side of the Don Valley Parkway (Highway 404). It is South of Eglinton and east of Bayview. This area is close to business parks that are home to businesses such as Coca-Cola, The Salvation Army, and other large employers. If you want to buy a property for sale in Toronto and you are looking for a location that is close to highways, work opportunities and centrally located, this area might be good for you. The price indicated that there might be a reason that this is the lowest priced area in Toronto, so a buyer would need to do more research to determine why.
If you are not a condo person and are looking to buy a home in Toronto for less money, the least expensive place to by a semi-detached was in C06, at $398,250. C06 is located west of the Don river and North of the 401. It is just east of Allan Rd. Also close to highways, this area can be considered North York. North York is one of four larger areas of Toronto. Scarborough, Etobicoke, and Downtown Toronto are the other areas of the city.
C06 is also the least expensive place to buy a detached home in Toronto. The average price in June was $715,124. Can you believe that? The lowest average price for a detached home in Toronto was $715 thousand dollars?
Toronto is home to many different areas. Many have a different culture, different advantages and disadvantages. The best way to determine the best area of the city to live in would be to do a lot of research. You can talk to people who live in that area of Toronto and discover their opinions on the commute, local businesses, events. You can learn more about crime in the area or schools. You can also look at the TTC or Go Transit alternatives. It’s important to know all about the area you want to live in, before buying real estate in Toronto.
A great place to start searching for real estate for sale in Toronto is on PropertySold.ca. You can also contact a Toronto real estate agent in order to have them help you buy a home. PropertySold.ca contains real estate listings from home owners, real estate agents, and builders and developers. Feel free to find the home you want to buy and call the number on the listing to find out more information about the property for sale.
All this week we will be featuring information on Real Estate for sale in Toronto. Stay tuned for more information on Real Estate for Sale in Toronto.
In: Real Estate News12 Jul 2011
The big day! If anyone has bought and sold a home on the same day, you probably do not remember specifically what happened, but you probably remember that it was stressful and a hassle. It involves real estate lawyers, banks releasing funds, registering mortgages, arranging insurance, picking up keys…and that’s just for the home. You also need to arrange moving companies, packing, and perhaps renovators, painters, contractors…
The good news is that real estate lawyers handle most of the details of the funds and title, and as a buyer or seller, all you need to do is wait. However, it pays to be onto of your lawyer. Just because you are scheduled to close on a certain day, it does not mean that you will. Lawyers can get busy, banks can get busy. You often need to be in close contact with your bank and lawyer to ensure that they know your home is scheduled to close and that everything is proceeding as you want.
On closing day the buyer’s money needs to be transferred from their bank to their lawyer and then onto the seller’s lawyer. In the case of a person selling and buying on the same day, problems often ensue when a buyer is waiting for the funds on the home they just sold (did I just lose you?). If you sell a home, you have to wait for that money from the buyer. If that money is transferred from the buyers to your lawyer at 4pm, then there will most likely be not enough time to transfer that money to the lawyer of the home you just bought. You are now homeless (even if for one night), because you have not closed on the home you just bought.
Now imagine the above scenario happening on a Friday or a Thursday of a long weekend? You could be homeless for 3 days!
Lawyers will not release the keys to your new house until they have received funds and registered title. You can also not insure a home that you have not closed on. So even if you somehow obtain the keys to your new home, you will not be insured.
Tips on Closing Day
- Always try to close on a Monday -Wednesday. This will allow Thursday and Friday.
- If possible try to close on the home you sell one day before closing on the home you bought. Bridge financing might be needed, but it’s really not that expensive. A few hundred dollars might be worth the hassle of buying and closing on the same day.
- If you plan on doing both on the same day, do not assume that you will be able to move into your home. There is a chance that you will not get the keys. Make other arrangements just in case.
Where is your real estate agent on closing day?
You real estate agent really has nothing to do with closing day. Their job was mostly completed when the offer firmed up. They were the assistance in the marketing and offer negotiation. Closing day is all about your lawyer and bank. Sometimes people expect their real estate agent to be involved in the closing process, but other than offer advice, there is nothing that they can do.
Moving is a stressful time, but eventually all the problems are solved and you move into your home. You begin to enjoy your great new home, and you forget all about the move. So whatever problems you encounter on your moving day, remember they are typically temporary. The best advice is to “Relax” and “Enjoy!”
The Greater Toronto Area has completed another spectacular month of real estate. June’s results show that their are no signs of a real estate slowdown on the horizon. There was a 21% increase in the number of homes old in June, compared to June 2010. Home prices also jumped by 9.5%. For the first 6 months of 2011, the average home price has increased by 8% (an increase of $34,000). The average price for a place to live in the Greater Toronto Area was $476,371 in June.
It appears that the recent change in mortgage rules has had no affect on the real estate market. Buyers are still borrowing a record amount of money at record low interest rates. Sellers are still receiving bidding wars and high prices for their homes. Over the past 10 years, the average price in Toronto has increased from $251,508 to $467,169. This is an increase of $215,661 or 85% (an average of 8.5% per year.)
Although the real estate market shows no sign of slowing down, if this same increase is projected over the next 10 years, the average price would be $863,000 in 2021. Some people point out that changing demographics, and higher interest rates will make it difficult for the real estate market to continue growing at the same pace it has for the past 10 years. But does that mean that you should not buy a home?
Some American friends were visiting us in Toronto. We took this opportunity to discuss the difference between the Canadian and US Real Estate Markets. We discovered some very interesting assumptions about both markets.
The American housing market has lost close to 30% of it’s value over the course of the last 3 years. The American real estate boom took place between 2000 and 2007. Home prices more than doubled. Low interest rates, high ratio mortgages, and a strong cultural demand (everyone watching HGTV and saying “I want that”) were the main reason for the boom. Then the boom turned to bust and a home bought for $300,000 in 2006 is now worth less than $210,000. When the bust came, it was largely blamed on “sub-prime” mortgages. Basically, the banks were lending to buyers with no money down or perhaps only 5% down. When the recession hit and home owners lost their jobs, home values began to drop and some people stopped paying their mortgage. Massive foreclosures forced the market down and continues to do so.
So here we are in 2011. American homes are currently at 2001 prices. Mortgage rates are at 4% and Americans can obtain mortgages for 30 years (they don’t reset after 5 or 10 years). A 4% mortgage, guaranteed for 30 years! Why are people not buying homes. This is what we asked our American friend. Here is a transcript of our conversation…
PropertySold.ca: “Why are 1st time home buyers not buying homes in the US?”
American: “Well there are a few reasons, but the main one is that banks are tight with their credit. They are demanding 15-20% down in order to buy a home. Banks don’t want do high ratio lending anymore. So I guess it’s like Canada now and you need 20% down to buy a home”.
PropertySold.ca “umm…Actually most new mortgages in Canada are with 5% down and the mortgage rates reset depending on the mortgage (ie. 5 years)”
American: “Pardon? Oh, I thought that people were saying that the Canadian market didn’t crash because their was no sub-prime mortgages.”
PropertySold.ca: “Well typically Canadians have jobs and assets, so in that sense, we don’t do “sub-prime”, but we still do high ratio mortgages”.
American: “Well I guess that the Canadian unemployment rate is 7% and in the US, it’s around 10%. This makes a difference. But what happens when the economy starts to go south is that first people lose their salary based jobs, but then jobs like real estate agents, and home builders stop making money. If housing is a large part of your economy, then even a little shift starts the negative snowball…”
PropertySold.ca: “So basically you see the American housing market as a negative spiral and it’s stuck their because banks are demanding a higher down payment.”
American: “That’s the general picture, but also, American have seen housing drop for 3-4 years now. This also takes the heat out of the market. People don’t want something that’s going down in value. I guess it’s the exact opposite from Canada. In Canada people want homes because they are going up in value. We were the same way a few years ago. It’s amazing how quickly it can change. But I’m shocked that Canadian banks are allowing 95% mortgages and that mortgage rates reset. That sounds like a recipe for disaster”.
PropertySold.ca: “We will have to see if the Canadian market will end up like the US market. The Canadian Government is warning us to be mindful of the risks involved with accumulating “long-term” debt obligations because current rates are at all time lows and will be increasing. But despite of these warnings, Canadians have seen more than 6 years of declining interest rates and they don’t seem to be concerned. Last month, the average price of a home in Vancouver grew by close to 30% and Toronto was close to 10%. There is no sign of these types of increases slowing down yet.”
American: “Good luck. Seeing what I have seen in America, I would suggest to heed the warning from your Government”.
It has been a little more than 3 months since PropertySold.ca launched our new website, including Real Estate Agent listings and a MLS Flat Fee Package. We are glad to report that June listings will hit a new record! In addition to the real estate agent listings and For Sale By Owner listings, approximately 100 home sellers have chosen to list on MLS for a flat fee through our partner brokerage. Real Estate Agents are discovering that listing their client’s homes on PropertySold.ca leads to more buyers contacting the agent directly. This has helped many real estate agents close deals and work with new clients.
Our ultimate goal is to continue to work to make PropertySold.ca the best Canadian Real Estate Website. We set clear and precise plans for our Real Estate Website. They include continuing to dominate the online real estate search results, offer outstanding customer service, and being the Canadian source for real estate new listings and real estate news.
The real estate market is made up of home sellers, home buyers, real estate agents, and new home builders and developers. Each of these groups has their own goals. Sellers want terrific exposure for their home for sale without paying too much money in real estate commissions and fees (Our FSBO package starts at $49.95 and an MLS package is available for only $499.95). Home buyers want to be able to find their next home online (more than 5,000 properties can be found at PropertySold.ca). Buyers want to be able see private home listings as well as Realtor listings. Real estate agents want to be able to expose their listings, and themselves. Real Estate Agents want to offer excellent customer service to their client, but also have their work lead to new clients in order to keep their business running. Our website has built in Social Networking for Real Estate Agents: Facebook, Twitter, and Youtube links for Real Estate Agents. New home builders and developers are looking for a way to find buyers and stand out from the crowd. New Home Developers can advertise their model homes in order to sell inventory homes or sell from plan.
Since 2004 PropertySold.ca has dominated Online Canadian Real Estate Search Results. Because we now offer excellent value and results to the entire spectrum of real estate groups, our website listings are growing exponentially. If you are a seller, an agent, or a new home developer, you now have an opportunity to take advantage of our search engine optimization and discover want the internet can do for you.
In: Real Estate News22 Jun 2011
Toronto could easily earn the nickname “Condo City”, or perhaps “The Crane Capital of North America”. Currently there are 280 new condo developments being marketed in Toronto. Whichever area of the city you live in, you will see cranes and new condo developments. North York, Downtown Toronto, Scarborough, Vaughan, Markham…they all have new condo developments. Even smaller cities like Richmond Hill have new condos being built.
According to an article in the Toronto Star, demand for condos has also been increasing. Tony Wong reports that May’s new condo sales reached a new record with 2,433 sales. This equals close to 26,000 new condo sales per year. It is estimate that approximately 50% of these sales are bought by investors.
Condos are typically the most affordable way for 1st time home buyers to enter the housing market. Condos are also an ideal choice for retired people who are looking for a maintenance free lifestyle. Another popular reason for choosing the “condo lifestyle”, is that condos are typically situated in desirable locations. Whether it’s Downtown Toronto; close to theatres, restaurants, shopping, harbourfront, and public transit, or a condo in MIssissauga close to the grandchildren, condos can be the best choice for many people.
The trade-offs between condos and a single family home are that condos have mandatory monthly maintenance fees, whereas a home would have regular general maintenance. Many people debate on whether the maintenance fee would be close to, or equal the maintenance of a home. For example, a home might need a new roof that costs $10,000, and a condo owner would never have a similar expense. A $10,000 new roof would be equal to 4 years of condo fees of $250/month.
Condos often have many available amenities. Pools, sauna, hot tub, bowling, party rooms, restaurants, room service, billiards…there are many different options available when you purchase a condo. Typically a condo with multiple amenities would have a higher condo fee. Condos with a high number of units will have lower fees because the total common area expense is divided by the number of units.
Whatever your preference, condo or single family home, Toronto has a multitude of options available.
In: Real Estate News17 Jun 2011
This week Mark Carney gave a speech to the Vancouver Board of Trade. Whenever Mark Carney talks, people listen. Of course listening is just the first step. After listening to what he says, you need to dissect the words carefully and try to extrapolate, or infer his meaning.
Mark Carney will never say “housing bubble”. He will never say “real estate crash” or that “interest rates will go to 8% in two years”. Instead he speaks in very vague and broad terms.
Instead of saying that “Toronto and Vancouver are in a housing bubble”, he says “Some excesses may exist in certain areas and market segments”. Vancouver house prices increased more than 25% in May! Is this considered an example of “some excesses”?
While the real estate market is supposed to be driven by economic factors (interest rates, supply, demand, jobs…), when a bubble starts to take shape, generally greed drives the market. In his speech this week Mark Carney said “The risk is that expectations become extrapolative, prompting the classic market emotions of fear and greed – greed among speculators and investors, and fear among households that getting a foot on the property ladder is a now-or-never proposition,”
Perhaps he is describing the condo market in Toronto and Vancouver when he says: “The elevated level of ‘multiples’ inventories, the ample pipeline of developments under way, and heavy investor demand (much of it foreign) reinforces the possibility of an overshoot in the condo market in some major cities.”’ . Do you see how he never try to make a prediction? He always uses words like “possibility, potential risk, eventually”…
When Mark Caney talks about the eventual increase in interest rates in Canada, he describes this as “some” of the stimulus in the system will be “eventually withdrawn.” Low interest rates in his world are known as “stimulus”. Most house buyers to not consider that they are being “stimulated” into paying a lot of money for a home because of low interest rates.
Mark Carney is a very well educated person. He has access to more economic data than anyone else in the country. He might be a very smart person who is in a catch 22 situation. He needs to leave the interest rate low to help grow the economy, but this is causing house prices to escalate to dangerously hight levels. It appears that instead of increasing the rate to save buyers from overpaying and taking on too much debt, he is trying to change mortgage rules and educate the public by giving speeches.
He has been mentioning warnings about “risks” and “debt” for almost 2 years. Considering the rise in Consumer debt and house prices, one might conclude that this strategy is not working. When the Globe and Mail writes articles on Carney’s words and points out that “Vancouver home prices increased 27%, Toronto 8%, Montreal 6%” perhaps the general public think “I need to buy quickly. I’m missing out!! I could be flipping homes and make a killing”.
Perhaps more “straight talk” instead of “economist speak” would be more effective.
In: Real Estate News16 Jun 2011
Do Real Estate Agents Have Access To Special Real Estate Information, Hot New Listings, and Sold Prices?
Some of the comments we hear from the general public include:
“Real estate agents have access to the new listings first. You have to be working with an agent or you will lose out on ‘hot new listings’”
“Real estate agents have access to secret information. They know more than the general public so they can buy homes cheap”
“Real estate agents can access sold information. The general public can’t get this info. It’s not fair because you have to use a real estate agent.”
PropertySold.ca is Canada’s resource for real estate questions and answers. Let’s examine these common statements.
“Real estate agents have access to the new listings first. You have to be working with an agent or you will lose out on ‘hot new listings’”
Many people think that it can take days for a new listing to show up on mls.ca. For the Toronto Real Estate Board, new listings uploaded by real estate agents now typically show up on realtor.ca within 24 hours. The Toronto Real Estate board has automatic updates for agents that send emails after the system updates at midnight. So, in Toronto, real estate agents (and any client set up for automatic emails) would find out about a new listing within 24 hours as well. There is very little truth to the myth that real estate agents have access to new listings days before the general public will see them on Mls.ca/Realtor.ca
“Real estate agents have access to secret information. They know more than the general public so they can buy homes cheap”
Real estate agents have access to their boards own MLS database. Although it can be a powerful database and a great resource, it does not show builder sales or private sales. The MLS database only shows homes sold through real estate agents. Most MLS databases store photos from past listings. This can be very useful. It also shows days on the market or previous listings that were terminated or expired. MLS databases do not share “privileged” information with the general public. They do share it with clients.
There is currently a dispute between the competition bureau and real estate agents. There may be a resolution that would allow the general public access to this information. Stay tuned, but don’t hold your breath. Real estate agents are paying dues to help maintain and build these MLS databases. They might have the right to keep this information.
” Real estate agents can access sold information. The general public can’t get this info. It’s not fair because you have to use a real estate agent.”
Real estate agents do keep sold prices, recorded in their MLS databases, private. However, once a home have closed (transferred from one owner to the other), the sold price is recorded in the local land registry. This is public information and can easily obtained (although not conveniently, as the local land registry needs to be visited in person). It also makes sense for real estate agents to keep the sold information private. For one, until the home closes, this is private information. Although the home may have been “sold” because of a signed contract, the deal can still fall apart before the deal “closes”.
Real estate agents also guard this information because it helps them get customers. Because this information is not convenient for the general public, buyers and sellers are more inclined to call a real estate agent and procure their services. Buyers and Sellers who want to exclude a real estate agent from the transaction argue that real estate agents should make sold prices public. Perhaps the land registry database provider (Teranet) would be a better target for the general public who want sold prices. Real Estate agents are paying for their MLS system out of their own pockets. The land registry database is paid for by buyers and sellers.
Selling a home is a big decision. It’s a dramatic change in anyone’s life. Once you have decided to sell, the big question is usually “how much money will I take home”. However, before we get to that questions, let’s examine where you can advertise your home for sale in Canada.
The internet is the first place where home buyers look when they want to buy a home. Therefore, the internet is an extremely important factor in your home advertising. There are three important web sites to advertise your home for sale: MLS.ca/Realtor.ca, PropertySold.ca, and Kijiji.
Home Internet Advertising Costs:
The costs for each website varies. MLS.ca/Realtor.ca can cost anywhere from a few hundred dollars, up to 5-6% of your home’s value ($15K- $50K), depending on the services you want from your real estate agent. The costs to advertise on PropertySold.ca starts at $50. Extra exposure and services can be purchased. A basic listing on Kijiji is free, but to have more exposure requires you to pay more.
95% of all homes in Canada are sold online. Online real estate advertising can be very inexpensive, very effective, and it makes the entire home selling process easier and more efficient for buyers and sellers.
Newspaper and Magazine Advertising:
Really? Would anyone really consider paying money to advertise in a newspaper or a magazine? In most major markets in Canada it is completely pointless to pay to advertise your property in a newspaper or in a magazine. After all, we are no longer living in 1995.
If you asked 1,000 people how they found their home would anyone say that they saw a newspaper or magazine ad?
The only reason that you see homes advertised in newspapers and magazines is because real estate agents want to advertise themselves or their company.
Advertising a home for sale in a newspaper or magazine is the equivalent of writing letters instead of emailing. It’s the same as putting a quarter in a pay phone instead of using your cell phone. It’s like putting a VHS tape in your VCR to record your favourite TV show. Do you still put film in your 35mm camera? (We could go on like this, but I guess four examples in sufficient…perhaps just one more..)…so if you are still saving your Word Perfect files on a floppy disk, then perhaps you might consider paying to advertise your home in newspapers and magazines, but if you have heard about, or ever used, the internet, then you obviously realize how pointless print advertising has become for selling a home.
There are many factors that affect the price of housing. Supply, demand, jobs, geography, demographics, advertising, peer pressure, Government regulations (CMHC) and interest rates all affect house prices in their own way. Clearly interest rates have a definite impact on the price of homes. You could speculate that interest rates are the most important factor in the housing market (…at least in Canada).
Although housing markets in other countries have continued to decline, significantly, despite record low interest rates, Canada’s housing market has increased, significantly. Other countries (America, Ireland, Japan…), have had record low interest rates and their housing market continues to lose value. Japan has had near 0% interest rates for more than a decade and their housing market has dropped by 66%. If a declining interest rate environment can cause a dramatic increase in the price of housing, evidence shows that a sustained low interest rate can not stop a housing bubble collapse.
In Canada we have seen more than 10 years without a year over year drop in the average price of a home. This rise in house prices has come at the same time that interest rates have been declining.
The Beginning: 2000 − 2005.
The housing market began to steadily grow between 2000 and 2005. This was long before the financial crisis. From 2000 to 2005, the economies in most countries were is good shape. In 2000, interest rates were slightly lower than the historical average of 8%. However, they began moving lower and this move started the housing market boom.
When the historical average is 8% and potential home buyers saw that they could buy a home at a 7%, 6% or even 5% interest rate, they start buying. “What a deal”. People expected the low interest rate environment to be short lived. “Buy now!” while interest rates are low. Little did they know that low interest rates would become the new “normal” and would last for 8 years (and counting…). However, in hindsight, buying a home between 2000 and 2005 was a smart move. As housing prices were set to take off in Canada. The housing bubble snowball was about to start rolling down the hill and was about to start getting bigger and bigger….
2006 − 2010
The stage was now set for a real housing boom. Interest rates were sitting at 5% in 2006. CMHC was loosening the rules. People began to see a home as a “can’t lose” investment. Peopler were saying “Everyone else is buying a home, so why don’t we”. From 2006 to 2008, it seemed like the banks wanted to make it as easy as possible for someone to buy a home: Prime minus 1% mortgage rates! Prime minus 2% mortgage rates! Buyers had the ability to purchase homes with no money down, 40 year amortizations, and interest rates of 2%. This is like throwing gasoline on a fire. Combine the incredible low interest rates with the cultural phenomenon of a housing bubble and you will have rapidly rising house prices.
Despite an astoundingly short dip in housing prices during the financial crisis, the Canadian Real Estate Housing Market continued to grow from 2006 to 2010. The continued rapid rise in housing prices, over and above the previous, cause a few people to speculate that Canada was entering housing bubble territory.
2011 – ?
Despite 10 years of increasing prices, 2011 has not shown a slow down. Prices are still increasing. In Vancouver and Toronton prices are more than 5% higher than the year before. The number of homes selling has been dropping in 2011. Interest rates increased slightly in 2010, only to drop back down to record lows in 2011.
Lower interest rates make the carrying cost of a home lower. So lower declining interest rates cause home prices to increase. The important question is “Will interest rates increase, and if they will, then when?” Housing bubble predictors have been wrong so far.
In: Real Estate News7 Jun 2011
It’s the Stanley Cup Finals. The Vancouver Canucks are facing the Boston Bruins. A Canadian team vs. an American team. As these 2 teams battle for hockey supremacy, it’s a good time to look at the real estate markets in the cities of Vancouver and Boston.
Vancouver – The most expensive city.
The average family income in Vancouver is less than $90,000. Yet the average home value in Vancouver is more than $600,000. That amount is the average for ALL housing, including condos, townhouses, semidetached…If you don’t want to be connected to your neighbours, the average single family detached is close to one million dollars. This basically means that “the average family” cannot afford a single detached home in Vancouver.
Vancouver’s real estate has always been the most expensive in Canada. Yet, at no point in time has the gap between Vancouver and the rest of Canada been so wide. At no point in time has the average price been so much more than the average income. Vancouver has a great hockey team, but for average hockey fans, it’s a very expensive city to live in.
Aside from a very brief drop in housing prices during the financial crisis of 2008, Vancouver’s real estate market has increased for the past 20 years. Many are speculating that the recent spike in Vancouver’s real estate market is due to Asian buyers. “Chinese” money is now being blamed for the high prices. As housing prices increase in Vancouver, most average Canadians are not participating the real estate bubble. Who can afford to? A family making $90,000 a year will take home less than $70,000. $5,000 a month in take home pay if fine if your housing costs are $2,000 a month. But when it costs $600,000 to buy a home, then the housing costs come close to $4,000 a month. This leaves very little money for daycare, cars, gas, food, internet, savings, retirement…This is why average Canadians are not able to afford buying a home in Vancouver.
On the other side of the arena is Boston.
The average price in Boston has dropped from a high of $379K in 2005 to a current average price of $320K. This is a $60,000 drop in real estate prices. This drop would be considered “good” compared to other homes in America. Some cities in the USA have seen home prices drop by 50%!
There are very few bidding wars in Boston and when you buy a home for 1 million dollars, you don’t get a dilapidated shaq. You get a mansion.
This contrast leads to many questions. What truly is the difference between real estate in Canada and America? Is it the job market? Incomes? Better location? Lower taxes? Why is that a Canadian will pay 6-12 times earnings for a home, but an American will no longer pay these amounts…but enough about real estate…
Go Vancouver Go.
Everyone wants to know “how much is my home worth?”. Everyone also thinks that they know “how much their home is worth”. But when it comes to selling a home, it is better to look from the buyer’s point of view and ask the question “how much would I pay to buy that home?”.
Home values are very important. They play a very key factor in obtaining home equity lines of credit. When home values are high, they can lead to a consumer spending more discretionary income (for example, when you think you have made an extra $100,000 on your house, you tend to spend more.) So high home values actually help the economy. The reverse can also be true as we are seeing in the USA. In America, many home owners are underwater (in a negative equity position: mortgages larger than the home is worth). This has led to the American consumer choosing to save more money and spend less.
The important qualities of home values are that they are not static, or guaranteed. They can change from month to month and they can change very quickly. They are also not guaranteed, in that, just because someone paid $400,000 for the home up the street, does not necessarily mean that another buyer will pay $400,000 for your home. Each home is unique and each buyer is unique. However, most people will say that their home is worth “X” because a home down the street sold for “X”. Most people will have an inflated value of their home’s worth. The dangerous aspect of an inflated value is when home owners withdraw equity from their homes based on this inflated worth. It’s only when they need to sell, that they realize their home is worth $50,000 less than they thought, plus they need to pay another $20,000 in realtor fees when they sell.
How to know the real value of my home?
The real value of your home will only be known when you actually sell your home. Before that, you can only estimate the value of your home.
If you are considering re-financing your home, the bank will usually perform an appraisal. We have found that the value that a bank put’s on the home for re-financing tends to be high. In one instance, a home was listed for sale for $520K and did not sell. After not selling, the owner refinanced and the bank appraised the value at $570K. How can a home that could not sell at $520K, be worth $570K? So even if a bank tells you your home is worth “X”, it does not mean that your home is worth “X”.
Real Estate Fair Market Analysis:
Nearly all real estate agents will offer “Free Market Analysis” to consumers. This tag line “Free Market Analysis” is used in many real estate agent advertising (bus benches, newspaper ads, billboards). Real estate agents use this offer to “get their foot in the door”. They want to meet as many people as possible in hopes of landing a new client.
A real estate agent’s “Free fair market analysis” comprises of printing comparable listings in order to come to an approximate value. There is a significant “room for error” in all Free Fair Market Analyisis completed by real estate agents who are trying to gain you as a customer. There is a high probability that the “analysis” will be bias. For example, if you had 3 real estate agents providing you with an analysis in hopes of getting your listings, most likely they would show you “selective” comparables with high selling prices. Potential sellers tend to use the real estate agent whom they think will get them the most money when they sell. “But wouldn’t the agent just be waisting their time by over pricing the home?” Of course they would, but what typically happens is that the seller’s get fed up, reduces their price and sells. Experienced agents know that this is just a part of the real estate business.
Do your own “Comparative Market Analysis”.
This is the best suggestion for knowing what your home is worth. First find the sold prices by calling a real estate agent. Tell them that you want all the recent sold prices from your neighbourhood. After you
obtain the sold prices, you can make your own mathematical and rational decisions. If there is an exactly similar home sold, in the same neighbourhood, then it will be easy to determine your value. If there is a slightly similar home, then add or subtract the differences. You can find the price of an upgraded bathroom kitchen or floors at Renova.ca. For example if the home that sold has a new kitchen, then you would subtract the price of a new kitchen from the sold price.
Always compare apples to apples. You should always take important factors into consideration when finding the value of real estate. Backing onto railway tracks will reduce value. Fronting on a major street will reduce the value. Living next to a gas station will reduce the value. So make sure that the home you are comparing your home to has similar interior and exterior features.
PropertySold.ca is Canada’s top independent real estate advertising website for selling a home. With more than 10,000 daily visitors and top results on all search engines, PropertySold.ca is “the” place to advertise a home for sale.
Our new and improved website platform launched approximately 2 months ago. Our new real estate advertising website has many new home advertising packages available.
Our website has options for real estate agents to post their client’s homes for sale. This allows real estate agents to access buyers, that they would not traditionally find through MLS. PropertySold.ca’s listing show up at the top of Google search results. Agents can access these buyers with an advertisement on PropertySold.ca
Agents are finding new buyers for their homes for sale. Agents can also connect their PropertySold.ca listings to their MLS listings, plus provide Social Networking for their listings through twitter, Facebook, youtube and more!
Our new real estate advertising website’s interface includes the option for private sellers, or people who want to take more control of their home sale and save money, to post an advertisement on PropertySold.ca and have the option to post their home on MLS.ca/Reator.ca though a licences real estate brokerage.
This package let’s homeowners advertise on MLS (through our partner brokerage) so that buyers who find the home on MLS.ca/Realtor.ca are able to visit the Real Estate Agent’s website to obtain more photos and information about the home, plus contact the seller directly. This MLS option has become very popular for our customers. They want to sell their home and save money. Plus they want the largest advertising exposure possible.
Builders and developers can also advertise their properties on PropertySold.ca. A new home builder wants to expose their properties to the most buyers and this is why they choose PropertySold.ca. There are approximately 180,000 new homes built in Canada each year. Developers often do not place the home for sale or the home to be built on MLS, but they still need exposure in order to find buyers for their homes. PropertySold.ca’s website attracts buyers to our website.
ProeprtySold.ca is no longer a standard For Sale By Owner website. Where there are hundreds of FSBO websites appealing to people who want to sell their home with no commission and no agents. We have differentiated, and distanced, ourselves from those outdated business models. We provide more, and offer more, because it takes more to sell a home. Real estate agents and home sellers need to be connected to social networks. They need access to MLS. They need top search engine ranking for their listings, their home, and themselves. PropertySold.ca provides all this to our customers and they love it!
If you are looking to find buyers, be connected, get offers, and sell your home, then the first place to start is PropertySold.ca!
Real estate news in Canada including buy and sell information, local market updates, guides, tips for Canadians in the real estate market.