There’s been a lot of talk about real estate in the news in recent months. We’ve heard about declining housing starts, falling existing home sales, double-digit price depreciation, subprime fallout and foreclosures – in the United States. Fortunately, we live in Canada. And Canadian real estate markets are far-better positioned than their American counterparts for a good number of reasons.
- Subprime mortgages represent less than five per cent of our market nationally.
Foreclosures occur in about one quarter of one per cent of mortgage transactions in this country.
- Canadians have more equity in their homes.
- We have less debt than our neighbours south of the border.
- Speculation has played little or no role in existing home sales in Ontario.
- The fundamentals of our economy are relatively solid. Of the G8 countries, only Canada is expected to show growth in 2008 and 2009.
- The Canadian banking system is one of the best in the world, relying more on old-fashioned lending than innovative financial products geared toward profit.
- The Canadian job market is stronger than the US, adding more than 200,000 jobs so far this year.
- Interest rates remain favourable.
- Housing values in Ontario major centres did not experience serious, double-digit price appreciation year-after-year for an extended period. Our markets were characterized by stable, healthy growth.
- Immigration continues to play a key role in housing markets. Between 2001 and 2006, more than 1.1 million immigrants came to this country, with about half settling in the province of Ontario. Immigrants tend to purchase a home within the first five years of living in Canada.
There is no question that market conditions have moderated from 2007’s record pace. More listings, softer housing values, longer days on market – but most centres are relatively solid. While some buyers and sellers will adopt a wait-and-see attitude, there are those that will continue to venture forward.
They’ll need the services of a knowledgeable, experienced real estate professional to navigate the storm. They will look to you for information in today’s complex real estate environment. Understanding market conditions will be of paramount importance to today’s buyers and sellers, especially as conditions change in markets across the country.
That said, sellers will need to be realistic in setting a selling price. Listing a property at fair-market value will ensure that it will sell in a reasonable amount of time. This is not the time to test the market. Those that are truly interested in selling their properties know that over-priced homes risk stagnation. Buyers in today’s market will need to be careful not to overextend themselves. They should know exactly what they can afford. Pre-approval for a mortgage loan is ideal because it lets buyers know exactly how much they can spend on their new home.
Once educated, your clients will come to rely on your expertise. Make sure your follow-up skills are honed and your customer service is par excellence.
Looking forward, we anticipate a continuation of stable market activity, minus the urgency present in past. Gone are the multiple offers that left both buyers and sellers dissatisfied. The increase in the number of homes listed for sale are a definite advantage for purchasers who now have the luxury of time in making one of the most important decisions of a lifetime. For sellers, the time to trade-up has never been better.
Canadians are great believers in homeownership – a fact underscored by the close to 70 per cent who own homes in this country. History has proven time and time again that real estate is a solid, long-term investment that appreciates at a rate of about five per cent annually. You can’t live in your mutual fund, and after the last month in the financial markets, quite frankly, we’re not sure you’d want to.
New market realities may impact your business in the months ahead. That’s when the RE/MAX Brand and toolbox come into play. There are a wide variety of products and services that will give you an edge in today’s marketplace and a definite advantage when it comes to the competition. Ensuring you incorporate both a buyers and sellers presentation into your marketing materials is a great first step. Rather than focus on what you see or hear in the news, consider opportunities as they present themselves.
Executive Vice President and Regional Director
RE/MAX Ontario-Atlantic Canada Inc.
This email tailors very nicely into some tidbits I have been hearing from mortgage brokers I actively deal with. They have commented that the credit approval process is much more stringent and exacting on new purchasers. Verification of data, ie employment and earnings that previously passed are now being examined with pay stubs, letters of employment and REV Can's Statement of Assesment.
Appraisals in a declining market are growing more crucial in that a purchase at $300K with 20% down required a mortgage of $ 240K to close. If the property appraises at $290 the bank will only finance the 80% of the APPRAISED AMOUNT being $232k requiring you to come up with an additional $8,000 on closing.
This is why I perform a Market Evaluation on Purchase's to ensure that the buyer is making a sound financial decision.