Resale Homes
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
Resale Homes
Renovate your home now, cash in later
While it may not exactly feel like spring with the weather we've been having, spring has sprung and with it a whole host of new plans, projects and to do lists. For many, it's spring cleaning. For most, it's yard work and planting. And for others, it's time to start planning all those new projects.This year, spring has me itching to start doing things to my house. I bought an old character house almost two years ago now. And while it was lovingly restored and well taken care of by the lovely former owner, there is still much work to be done.
Priority one for me is the kitchen. It's not a bad size and it definitely has its charm with kitschy handles and charming wainscoting. But counter and cupboard space is at a premium. The original narrow cupboards don't accommodate some of my plates, my food is all crammed into another cupboard and my very limited counter space is piled high with stuff, so it always looks like a mess.
After a winter of trying to keep it tidy and searching for space saving options, I am thinking about renovating. I am in the very initial stages of my plans, but it's got me thinking. A kitchen renovation isn't a cheap thing. Friends of mine recently renovated their kitchen and while it looks absolutely beautiful, it cost a small fortune. Do I want to get into that? And if I do a renovation, will it pay me back when it comes to re-sale?
Fortunately, kitchens are one of the best things to renovate. According to a Royal LePage Renovations and Returns Survey, renovating a kitchen gives you one of the best returns on your investment (ROI). While you may spend $12,000 to $15,000 or much more depending on your budget, the approximate ROI is 75 to 100 per cent.
Renovating a bathroom is another good investment. Spend $5,000 to $8,000 or more and the return on your investment is again about 75 to 100 per cent of the cost. The biggest return is when you add a bathroom on the main floor. Invest under $5,000 to put in another bathroom on the main floor and you can recoup 80 to 100 per cent of your costs.
While those are all projects that may require some help, there are many renovations and home improvements that you can do yourself, which also pay back a good return. The top "do it yourself" renovations, which can be done for under $5,000, include replacing knobs and hardware, which can garner a return of 75 to 100 per cent and installing new light fixtures which could return 60 to 70 per cent of your costs. Painting the interior is another wise investment and can return as much as 50 to 100 per cent of your investment. Replacing carpets with affordable laminate or hardwood, updating your entryway and building a fence or deck can all generate an ROI of 50 to 75 per cent.
With the federal government's new tax incentive for home renovations, more Canadians are planning to renovate this year. According to home improvement superstore Lowe's, a U.S. company that is slowly entering the Canadian market, one in five Canadians is more likely to renovate thanks to the new Home Renovation Tax Credit.
The program provides a one-year, temporary 15 per cent income tax credit on eligible home renovation expenses for work performed, or goods acquired, from Jan. 27, 2009 to Feb. 1, 2010. The credit can be claimed on expenditures of more than $1,000 but not more than $10,000.
Remodelling a kitchen or finishing a basement, building a deck or fence, putting in new carpets or flooring, painting and installing a new furnace or hot water heater all qualify as eligible expenses under the Home Renovation Tax Credit. Talk about an incentive. Accordingly, about 47 per cent of Canadians surveyed say they plan to renovate in the next year, with two-thirds of them planning to spend up to $5,000 on home renovations.
If you're thinking about renovating and wondering what your return on investment might be, the Appraisal Institute of Canada has developed a very cool, online tool. Called RENOVA, it's an interactive web-based guide to the value of home improvements. Designed to give consumers a better idea of the return on investment they can expect for a variety of home improvements, RENOVA gives you a payback value range derived from the cost of the improvement. You can find RENOVA online at www.aicanada.ca.
So how does RENOVA work? You simply input what you're thinking about spending on a particular renovation. Then RENOVA will provide you with a payback amount in a range for that specific renovation. You can choose from one of the top 20 most popular home renovations.
I put RENOVA to the test with my own kitchen renovation idea. I would consider spending about $10,000, which may seem low but I'm only planning to replace the cupboards and countertops and add one new bank of cupboards. Using that $10,000 budget, RENOVA calculated that the return on my investment would be anywhere from 75 to 100 per cent. Spending $10,000 could give me a return of between $7,500 and $10,000.
Not bad. It's definitely worth considering, especially now when mortgage rates and other lending rates are so low. I think it's time to hit those home renovation stores and start shopping! Not that I really need more than a nudge to go shopping... Stay tuned and if I do decide to renovate, I'll keep you posted.
