Resale Homes
Resale Homes
Average monthly sales price hits record
Recession ... what recession?
Real-estate sales across the country set a new record last month when the national MLS average sale price reached the highest monthly level on record. Sales activity in the resale market also increased for the fourth month in a row. That's a sharp contrast to the economic downturn we keep hearing about.
With continued low interest rates and confidence that the economy will turn around, the real-estate market in Canada is on an upswing. That's a complete shift from our neighbours to the south. The housing market in the U.S. continues its downward spiral, leaving people wondering if that market will ever recover.
In May, the average sale price for a home in Canada was $319,757, up from $318,391 one year ago. In Manitoba, the average sale price rose from $203,671 in May 2008 to $204,276 in May 2009. That's despite the fact that the Canadian economy has taken a sharp downturn and we've hit a recession in the last 12 months.
The impact of the recession is easing up on the real-estate market, as sales activity across the country returned to pre-recession levels in May. According to the Canadian Real Estate Association, which represents more than 96,000 realtors working through more than 100 real estate boards and associations across Canada, the national MLS residential average price has recovered by 16.4 per cent from the low it reached at the beginning of the year.
"Sales activity is now closer to the pre-recession peak than it is to the recent low point reached last January," says Dale Ripplinger, president of CREA. "Strengthening consumer confidence, low interest rates and improved affordability are drawing buyers to the housing market across Canada."
That's certainly good news for sellers, especially in the upper brackets of the real estate market. According to CREA, the upswing in activity is being led by an increase in transactions in some of the most expensive markets in the country. With more higher-priced houses selling, that's skewing the national average price upward.
There's also a lot more activity in the real-estate market in general these days.
"Fueled by a string of monthly increases in activity, the number of transactions in May reached the highest point since July 2008," said Gregory Klump, CREA's chief economist.
That could change as we enter the summer months and move into the fall market. The spring is traditionally the busiest season for real estate sales.
According to Klump, the number of houses for sale in many markets across the country is still high, but there are fewer new listings popping up. With rising sales activity, he says the number of properties on the market may decrease as the year progresses. The number of new residential listings dropped 19 per cent in May compared to one year ago.
"The supply of homes up for sale needs to be drawn down further before average price increases become more widespread among local markets," says Klump.
Resale Homes
Welcome to Cottage Country, Gen-Xers
Now that it's officially summer, many people's thoughts have turned to lake season and cottage country.But the demographics of buying a cottage have taken a sharp turn over the last year. No longer is it the Baby Boomers who are snapping up cottage properties like they are going out of style. Rather, it's a whole new generation.
Generation Xers -- those born after the Baby Boom between 1965 and 1980 -- are replacing the Baby Boomers when it comes to buying recreational properties. According to a recent RE/MAX report, the number of Gen-Xers buying a cottage has taken a marked shift over the last year.
The 2009 RE/MAX Recreational Property Report shows that 74 per cent of the markets surveyed reported a noticeable trend towards 30-somethings buying everything from waterfront cottages to resort condominiums. In fact, demand from Gen X for recreational properties has almost doubled over the last year, growing from 40 per cent to 74 per cent this year.
"Much of the activity in the marketplace today has to do with the mindset of this particular generation," says Elton Ash, Regional Executive Vice President of RE/MAX of Western Canada.
When it comes to buying a vacation property, Ash says the commitment to lifestyle is more important than the investment aspect for Generation X buyers.
"The purchase of a waterfront home or a condominium is more than a simple transaction to Gen X purchasers," he says. "Owning a recreational property underscores their dedication to family and balance."
The recession and financial downturn has certainly impacted the cottage market over the last year. Sixty-six per cent of recreational property markets reported a decline in the number of properties sold in the first four months of 2009. Only 22 per cent of vacation markets reported that sales were up or on par with last year.
But the recession isn't stopping those Gen Xers from picking up their own piece of vacation paradise. In fact, it's almost been a boon to those 30-somethings who have the disposable income and are taking advantage of the lull in the market to get a better deal on a cottage property. The sharply escalating prices of vacation properties over the last decade had virtually driven most Gen X buyers out of the cottage market. Not anymore.
"Gen X is ideally positioned to pick up any slack in recreational property markets caused by softer demand from baby boomers and retirees," says Michael Polzier, Executive Vice President, Regional Director of RE/MAX Ontario-Atlantic Canada. "They represent the next wave of recreational property owners in Canada and they know it."
While cottage properties may have become more attainable for Gen Xers now, that's not to say that recreational properties are selling far below the list price.
According to the RE/MAX report, the sales-to-list ratio remains relatively high in most recreational property markets across the country. So while significantly lower-priced offers may be on the rise, few of those "lowball" offers meet with success. Sellers are choosing to wait out the economic lull until they get the price they want.
Take my parents, for example. They listed their Lake of the Woods island cottage last year and had interest from only one party. He came in with an offer that was almost $100,000 less than they were asking. Instead of taking the offer, they held out for another buyer and ended up selling for close to what the cottage was listed for.
That said, there are good buys to be had as people anticipate the recreational market will boom again once we get through the recession.
"The prospect of greater stability down the road is creating cautious optimism in the marketplace," says Ash. "Purchasers are seeking to buy quality product before values start to once-again edge up."
The report also found that American buyers have largely fallen out of the cottage market across the country, with the exception of a few spots, including Lake Winnipeg. And some American cottage-owners in Canada are taking advantage of the stronger dollar to cash out of the market.
Resale Homes
Face it: the market is more realistic now
While it may not exactly have felt like spring, the spring market in real estate is almost coming to an end. With next weekend marking the official start to summer -- which I hope DOES come along -- just how has the real estate market fared during the traditionally busiest season for selling houses?
According to WinnipegREALTORS, sales in May were "more restrained" than in the last few years. For example, last year, 57 per cent of residential detached properties sold for above the list price. A year later, only 37 per cent of listings sold for over the list price. Above-list-price sales for condominiums were also down. And the number of days that houses are on the market have increased. In 2008, the average home was listed for under three weeks. In 2009, that number has edged up to 27 days.
The real estate market has certainly tempered from 2008 to 2009. That's evidenced by the fact that 80 per cent of listings were sold last May, compared to only 53 per cent in May 2009. Housing unit sales were down 13 per cent from last year and dollar volume also declined 13 per cent compared to May 2008. Interestingly, the number of MLS listings has increased by three per cent, which is proof that the market has become more balanced over the last year.
WinnipegREALTORS president Deborah Goodfellow says these spring results are nothing to be discouraged about, but are indicative of the type of market we are now experiencing.
"Sellers have to be more realistic about their price expectations, while buyers are less inclined to jump at the first available opportunity to place an offer on a property," said Goodfellow. "It is also a market that is quite varied in demand depending on the neighbourhood and price range of the homes you are in."
Many realtors are looking at the changed market as a positive. Rachel Gendron, of Century 21 Jefferson & Associates, says buyers can afford to be discerning again. She says there is more inventory to choose from and buyers are savvy again, being able to take time to make the right decision when it comes to buying a home.
"For sellers and buyers, equilibrium is in vogue again," she says. "A home priced properly and marketed properly is selling."
The fact that the frenetic pace of the market has somewhat subsided is welcome news to buyers, Gendron notes. She says the biggest proportion of people buying a home today are those in the entry-level range looking for houses up to about $215,000. They are still taking advantage of the relatively low interest rates. For those entry level buyers, not having to compete in a multiple-offer setting is a welcome change.
"It is the largest purchase most of us will make, and should be done with planning, and time to have at least one sleep on the decision," says Gendron. "There has even been time for a home inspection now and then!"
While some houses are selling for over the list price, Gendron is quick to point out that is not the norm anymore. As the WinnipegREALTORS figures show, only 37 per cent of the houses on the market in May sold for over the list price. That's far from the many multiple offers we used to hear about with houses selling for far more than the asking price.
"The buyer who is really smitten will offer over asking," she says. "Having multiple offers to chose from is not the norm or the multiples may only be two to three rather than 10 to 14."
Fellow realtor Karolyn Ryback of Royal LePage Dynamic Real Estate says it's important for buyers to understand that the market has calmed down a bit.
"Thirty-seven per cent are selling over list, but the bottom-line is that 63 per cent aren't," says Ryback. "It's basically one in three now."
She says the market has tempered a bit and even with some multiple offers, the market isn't going as crazy as it was. But she says the danger is that some people still think it's a crazy seller's market and they are reluctant to put in an offer, thinking they will get into a bidding war. Just a few weeks ago, Ryback had a house listed that several different parties were interested in. But she said they assumed the house would sell for well over the asking price, so no one put in an offer. The end result was that the house, which was well priced and in excellent condition, went unsold.
"People are not bidding because of the perception that it's a crazy market," says Ryback. "People are walking away from houses they might be able to afford for fear of multiple offers."
Ryback stresses that not every house is selling for over the list price and that houses with major problems are not selling at all now, where they might have sold last year. While there are still lots of buyers out there, she says the market is not as frenetic as it was a few years ago.
"The sky isn't falling, but buyers are bit more tempered now," she points out. "We're not seeing the line ups we used to."
Resale Homes
Real estate is not a faith-based sector
The elevation of real estate to another faith-based topic best not discussed in good company was probably inevitable, if an American scholar of investor behaviour is right.
A couple of years ago, Robert Shiller circulated a paper that says an unprecedented number of property buyers and sellers in the first years of this decade shared a certainty about the inevitability of price appreciation supported by neither evidence nor experience.
"While home-price booms have been known for centuries, the recent boom is unique in its pervasiveness," the Yale University professor of economics and finance wrote.
"Dramatic home-price booms have been in evidence since the late 1990s in Australia, Canada, China, France, India, Ireland, Italy, Korea, Russia, Spain, the United Kingdom and the United States, among other countries.
"There appears to be no prior example of such dramatic booms occurring in so many places at the same time."
Shiller is the developer, with Karl Case, of a widely circulated index of American real-estate values.
The "Case Shiller" index's inaugural value was 100, for January 2000. Its highest value was 206.5, reached in July 2006. Its lowest value, 140, is also its current value.
The index records 78 months of increasing U.S. prices followed by 32 months of decline. On the way up, the average monthly change in the index was almost 1.4 per cent; on the way down, almost 1.9 per cent.
No "fundamentals" -- monetary policy, for example -- drove international real estate prices up, Shiller says.
Instead, "extravagant expectations for future price increases" lifted them, an extravagance he attributes to an apprehension that "a new era of capitalism . . . is producing phenomenal economic growth, and . . . both extreme winners and unfortunate losers."
Further, "fundamentals" will not reverse, by themselves, "large real-price declines extending over many years in major cities that have seen large increases."
Shiller doesn't say a change in certainties is required, but it clearly is, from faith-based to experience-informed.
-- Canwest News Service
