December 2010 Market Update
What is the Flat Fee (Mere Posting) Model?
With the recent Canadian Real Estate Association (CREA) agreement with the competition bureau, there have been a number of questions about what Flat Fee models are and how they work.
Flat fee, or For Sale by Owner (FSBO), companies typically provide a kit to a seller that may include a sign and the ability to place a property on the MLS system, now known as a "MERE POSTING", for an up-front and non-refundable fee.
These companies allow a seller to "contract out" of other services provided by full-service agents. Of course, along with allowing sellers to contract out of these services, they also allow agents to contract out of their fiduciary responsibilities of disclosure, confidentiality, and agency. In addition, agents who merely post may not be able or willing to: qualify buyers, provide advice on the market, contracts, legal issues, questions about the house, or even how to deal with an offer. In these cases, sellers would be responsible for showing their own property, being knowledgeable about the market, understanding their legal responsibilities, and hiring a lawyer to draw up contracts, which can run thousands of dollars and are paid regardless of whether a transaction is completed. In addition, a seller, under this model, may not be covered by errors and omissions insurance, meaning that they would be fully liable for a litany of offences, many of which could potentially run hundreds of thousands of dollars.
This Flat Fee model and others such as discounted brokers, contrary to popular belief and media's reports, have always been allowed to exist in the BC real estate industry. However, the rest of the country has historically placed barriers or restrictions on alternative business models trying to use the MLS (multiple listing service) system as a selling tool. With the recent CREA agreement, the rest of Canada has adopted BC's progressive stance, which may have the effect of lowering the rest of Canada's commission rates (typically 5-6 % of the total selling price) to where they are now in BC. This is a good thing, and, as we can see from the BC example, will improve the industry's competitiveness. That said, despite having alternative models available to consumers for decades in BC, they still only represent less than 10% of the market, in part because sellers typically understand the important role a competent agent plays in effecting the successful sale of the most important asset in most people's lives.
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October 2010 Market Update
With the kids back in school and people back at work, the fall housing market is upon us. Historically, this market has resulted in an uptick in sales as people return from vacation and the threat of winter looms. As the fall drags on, and more inclement weather makes buyer tours less pleasant, the market slows down. With fewer buyers looking at properties, many sellers decide to take their properties off the market to wait for spring. Because of this, the lower demand is often offset by the lower supply.
However, statistics consistently show that house prices tend to be lower in the winter than in the summer, which is why home price stats are seasonally adjusted. There are many reasons for this seasonal disparity, but simply put, people who sell in the winter are more likely to need to sell. And because there are fewer buyers, true negotiations between buyers and sellers are more likely to occur in place of auction-type multiple offer situations.
So what does this mean if you're a buyer or seller? If you're a buyer that has the flexibility to purchase during the winter months, your selection will be limited, but if you find what you like, you could very well get a good price for your home. If you're a seller that needs to sell, the limited supply can work in your favour if you have a good realtor that can effectively communicate to the market the unique features of your home.
Every situation is different, and each year presents a new set of challenges and opportunities that require professional analysis. Feel free to contact me if you have any questions.
May 2010 Market Update
Last week, the Royal Bank boosted its mortgage rates for the third time in a month. The move increased RBC's posted 5-year closed rate to 6.25% (Note: the posted rate is rarely paid. A good mortgage broker or even your own negotiating skills will often result in a lower rate being offered by a bank) and this has come amid overtures that the Bank of Canada will be looking to raise its overnight rate starting June 1st. That said, as of this writing, there are still some very competitive rates out there.
Fixed vs. Variable
The reason that fixed-rate mortgages have moved up even though the Bank of Canada (BoC) has yet to increase their overnight rate is a function of how the Big Banks fund their mortgage products.
Fixed-rate mortgages are usually funded via the bond market, which fluctuates and is forward-looking, like most markets. Therefore, as prices for bonds increase in anticipation of the BoC's expected rate increases in the summer, fixed-rate mortgages that rely on their funding via these instruments must also increase.
Variable rates, on the other hand, are funded via the BoC's overnight rate and therefore follow its fluctuations. That's why today's variable rate has remained unchanged despite three hikes in its fixed-rate brethren.
So which instrument should you use?
This question effectively boils down to risk-aversion. Historically, since 1975, variable rate mortgages have proven to be more financially beneficial 82% of the time. Risk and reward go hand in hand, so if you are willing to take on additional risk and have the financial wherewithal to weather potentially higher interest rates, a variable mortgage may be for you.
If, however, you want cost-certainty in your life and have lower financial flexibility, it may be worthwhile to pay more in return for a full night's sleep.
To learn more, please feel free to contact me at 778-228-8600
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April 2010 Market Update
Why Now's a Good Time
If you're considering buying a home, now may be a better time than in several months.
That's because, right now, three key factors are working in the buyer's favour: the HST, interest rates, and product selection.
HST:
The HST, which comes into effect on July 1, won't have a dramatic effect on the real estate market as a whole; however, there are some areas where buyers and sellers will immediately notice its impact.
Firstly, only new housing (or substantial renovation) will have HST imposed on it, which means that existing resale properties (90% of the market) will remain exempt from this tax. That said, new homes will immediately become 7% more expensive, which will inevitably result in some upward pressure on prices for resale units.
Secondly, real estate commissions will now be subjected to 7% higher tax, as the currently exempt PST portion expires and the GST merges into the HST. Fortunately for consumers, commissions in BC are among the lowest in any jurisdiction in North America, averaging roughly 3% in this province as compared to 5.1% in the US and 5% in Ontario.
To beat these changes, transactions should be completed by July 1st.
Interest Rates:
With interest rates at an all-time low, now's the best time to get pre-approved and lock into an attractive rate. And with TD and RBC recently announcing that they are increasing their 5-year benchmark rates by 60 basis points, there's renewed urgency to get pre-approved immediately.
Remember: with a pre-approval, you will generally get a guaranteed rate for up to 120-days. You DO NOT need to exercise this right, which means that you only need to borrow the money if you find the right property.
Please feel free to contact me for a referral to a good mortgage broker.
Product Selection:
With the onset of spring, an abundance of new product is set to hit the market, meaning that now is a great time to find a property that fits more of your criteria. While the winter months may prove to be a good opportunity to negotiate with a seller, the spring is the best time to find your dream home. Act quickly though, good product doesn't stay around forever!
To learn more, please feel free to contact me at 778-228-8600
March 2010 Market Update
As the Olympics wind down and the Paralympics start up, BC's momentary pause from the world's premiere sporting spectacle is being replaced by a relatively hot economy. According to the Conference Board of Canada, BC's economy is expected to lead the country in growth for 2010, fueled by Olympic spending and better fortunes for forestry and manufacturing.
(http://www.globalnational.com/money/Strong+growth+expected/2602719/story.html)
In many places across the province, the spring market is expected to be hotter than usual, with the housing sector continuing its upward trajectory from 2009's lows. This will be supplemented with an increase in both buyers and sellers, who put their intentions on hold during the Olympics, leading to both greater inventory and more sales in the months ahead.
This month, Macdonald Realty will be introducing the MacBlog, an up to date information source for all things property-related. The MacBlog will feature contributions from both managers and sales associates from all of our offices across British Columbia, and will cover a wide variety of topics, including:
- Common issues encountered by buyers and sellers;
- City and neighbourhood profiles;
- Interest rate updates;
- Unique property listings;
- Effects of government policies and legislation on real estate;
- and much more
To find the MacBlog, please visit us at: http://www.macrealty.com.
To learn more, please feel free to contact me at 778-228-8600
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Janaury 2010 Market Update
Welcome to 2010!
Last year at this time, uncertainty from the financial sector spilled over into every facet of the economy. The housing market was hardest hit as buyers and sellers froze in fear of whatever bad news lurked around the corner. However, by April, it looked as though the worst of the crisis was over, and pent-up demand, especially amongst first-time buyers, began to thaw the frozen housing market.
Fast-forward to today and it's almost as though the crisis never happened. In many areas, prices are back up to pre-financial crisis levels, and multiple offer situations have been occurring throughout the winter months - traditionally the real estate market's coolest period.
This year, we are expecting that momentum to continue as the strength of the winter selling season moves into the traditionally stronger spring. The continued ascension from this most recent recession is expected to be a positive factor in the market, as will Canada's new Approved Destination Status with China. In addition, there is mild optimism that the seven-year build-up to the Olympics will translate into greater economic activity throughout Western Canada, although the jury is still out on whether this will affect house sales activity or prices.
December 2009 Market Update
Last month, we described how, traditionally, the winter months led to a slow-down in the industry and how you could best take advantage of your specific situation. We had one caveat: every situation is different.
Well, it seems as though 2009 may be different.
Sales in October were up 41.5% year-over-year across Canada as low interest rates and greater consumer confidence spurred higher home sales. Prices across Canada have also increased year-over-year to an average of $341,079, up 20.7% from a year ago.
When the financial crisis hit, home-buying effectively froze as buyers sat on the fence waiting to see what would happen. Now that it seems the worst is over, six months of pent-up demand has been unleashed on the market. Given low interest rates, relatively high absorption rates, and, in some areas, increased overseas activity, we expect the market to remain strong - on a seasonally-adjusted basis - for the short-term.
Have a wonderful Holiday Season!
November 2009 Market Update
Since the market correction last winter, the market has bounced back nicely to test previous highs, both in the number of sales and in benchmark prices. The summer of 2009 surprised many analysts and market-watchers with both its resiliency and fervour, and clients have asked what will happen in the fall and winter.
No one really knows what the market will do, but traditionally, the winter season has resulted in a slow-down in the market as families buckle down for the school year, weather patterns make buyer tours less pleasant, and holiday planning begins. Because there are fewer buyers, some sellers will decide that they can wait until these buyers return, which results in less supply to offset the drop in demand.
However, statistics show that house prices tend to be lower in the winter than in the summer which is why home price stats are seasonally adjusted. People who sell in the winter are more likely to be ready to sell and realistic rather than curious and unmotivated. Also, because there are fewer buyers, true negotiations between buyers and sellers are more likely to occur in place of auction-type multiple offer situations.
So what does this mean if you're a buyer or seller? If you're a buyer that has the flexibility to purchase during the winter months, your selection may become more limited, but if you find what you like, you will likely have a better opportunity to negotiate for your home rather than bid for it. If you're a seller, a limited supply can work in your favour if you have a good realtor that can outline the unique features of your home.
Every situation is different, and each year presents a new set of challenges and opportunities that require professional analysis.
To learn more, please feel free to contact me at 778-228-8600