Wednesday, September 29, 2010

Selling your own Home not for the faint of heart

Looking to save yourself real estate commission fees by selling your home yourself?

Yeah, good luck with that.

David Hilder of Oakville tried to that with his 2,250 square foot townhouse, but after 5 months and very few offers he decided to get a real estate agent instead in September. He listed his home on a “for sale by owner“ website (for speedy typing I will refer to these as FSBO sites), but there web traffic on such websites is pathetically low.

“The problem is, without the Multiple Listing Service you’re dead in the water,” says Hilder. “That’s the first place most people look.”

So #1 in the list of problems that FSBO sites have is very low traffic.

#2. Is actually making the sale. Owners typically have no salesmanship skills, which is why real estate agents are so much better. Retaining them once they get in the door is very difficult for people with no sales experience.

The MLS accounts for 90% of sales in Canada. Limiting yourself to a For Sale sign out front and free websites (or very cheap websites) puts you at the bottom of the barrel for trying to actually sell to a buyer.

In such a scenario your best option is the safety with numbers approach. You can still try to sell your home privately, but why not have the option of a real estate agent at the same time?

For sale by owner networks in Canada have only started to realize this and are now trying to become more competitive., one of Ontario’s largest for sale by owner sites, is joining forces with 4 other commission-free FSBO sites to create the first national network and a commission free database.

The five companies include in Ontario in Ontario in Quebec in Alberta and Manitoba in Saskatchewan

HOWEVER THEY ARE NOT FREE! Getting listed on these networks still cost $500 to $700 and there is no guarantee you will sell your home that way.

Also the network is still very small and local. There is no increase in traffic because the websites are simply sharing database resources.

Plus there is a huge disadvantage when it comes to attracting sellers and buyers.

#1. Only a confident (or very cheap) person would try to sell their home privately. What does that say about their personality and the quality of their home? It implies that their home is similarly cheap and likely has structural problems with it that will be glossed over or lied about.

#2. There is no advantage to buyers to buy a home through a private listing. The risks of problems with the house, lawsuits, etc is too high. The real estate commission is a comparatively minor cost when it comes with a better guarantee that the home it will be problem free.

Right now the real estate market in Canada has slowed to a crawl. This act seems more like one of desperation in the hopes of getting free press and surviving the coming real estate bubble burst.

Right now the federal Competition Bureau is taking the Canadian Real Estate Association, which controls the MLS to court, so that people will have greater and cheaper access to the online registry of homes... but do not expect a breakthrough.

The hearing won’t be until next April and difference in price between listing yourself and listing on MLS with an agent will probably be very little.

Plus the existence of FSBO sites that don’t use the MLS shows that there is no monopoly (10% of Canadians still manage to sell privately). And FSBO sites do have the option of listing on MLS, but they have to pay the fees just like regular real estate agents do.

“Nothing tangible in this world is free, least of all real estate.”

In other news...

Real estate in Detroit is so cheap you can buy a derelict house for $100 (due to foreclosures)... for a good house expect to pay $25,000. Mind you, Detroit is quickly becoming a Ghost City so unless you are planning to retire there do not expect to find a job there.

Thursday, September 23, 2010

$68,007 for a four bedroom house?

$68,007 USD for a large four bedroom house... there's only one problem: Its in Detroit, the cheapest place in the USA to buy a home.

Looking to get more bang for your buck? Imagine living in a city where the local economy has collapsed and housing prices have dropped so much its ridiculous.

In Windsor, also hit hard by the economy, you can get a huge four-bedroom, two-bathroom home for an average of $158,242 according to a report by Coldwell Banker Canada. Its the cheapest place in Canada to buy a home.

What you don't want to do is buy a home in Vancouver... where a four bedroom home costs an average of $1,324,000. (Vancouver is definitely in a real estate bubble.)

In Kelowna B.C. a four-bedroom home costs an average of $916,697.

In Fort McMurray, Alta. a four bedroom home costs $593,390.

In the GTA a four-bedroom home costs an average of $495,398. (The GTA includes Toronto, East York, Scarborough, Etobicoke and North York.)

Toronto costs less because it has more alternatives like condos, lofts and townhomes.

Relocation for work isn’t the biggest factor in most people’s decision to move however. A study by TD Canada Trust released Wednesday says retirement (30%) is the number one choice for people to sell their home and move.

Other reasons include market conditions (16%) investment opportunities (16%) and children moving out (15%).

Meanwhile Newport Beach, California, is the most expensive place to buy a four bedroom home in North America: $1,826,348 USD.

Globally, Shanghai is most expensive at $1,494,072 USD and Dubai is 2nd at $1,413,750 USD.

Saturday, September 18, 2010

How Safe is your Condo?

When you buy a condo, you expect it to be safe right?

You expect everything to be built properly, that it isn't going to fall apart or suddenly become a dangerous death trap.

Recently a pane of glass shattered and rained to the ground from the 31st floor of the Murano building at 37 Grosvenor St. in downtown Toronto. It was the second time in the past week that glass panels from the building had broken and nearly hit people below.

The falling glass did not cause any injuries from falling approx. 100 meters. The condo tower had been inspired by the legendary Murano glassworks of Italy.

The owner of the condo in question didn't even know the glass had suddenly shattered. They simply noticed the breeze and was confused by how the glass had disappeared.

Some of the glass hit the balconies of residents below. If someone had been outside enjoying the weather they could have been hit with little warning.

“I looked out my window and there were little pieces of glass all over my balcony,” said one resident who described the noise as sounding like crashing marble. “I was kind of annoyed.”

“It’s not safe. Somebody could be down (there) and a big piece of glass could fall on them.”

On ground level a lawn-care worker with Lawn 911 vacuumed chunks of glass from the grounds near the corner of Grosvenor St. and Bay St. The panel had been approx. 1.2 metres tall and a metre wide.

They believe the wind rattled the window and shattered it. The fact this has happened twice in the past week suggests the windows were either cheaply made or weren't installed properly.

The property manager says engineers are working to see how and why the two panes shattered. The manager is planning to test every panel (which is wise because the last thing they need is a lawsuit from someone being injured).

The panels were made of tempered glass, which is usually stronger than regular glass and is supposed to shatter into small fragments instead of shards when broken. This one appears to have shattered into shards suggesting it wasn't tempered properly.

Nevertheless this makes me think... what else could go wrong in faulty condo construction?

Faulty elevator.

Faulty fire alarms.

Faulty smoke detectors.

Faulty water sprinklers.

Faulty electrical wiring.

Old asbestos that was never removed.

Structural supports failing.

Stone or concrete breaking from higher floors.

Lack of earthquake reinforcement.

But at the same time it should be noted that regular houses (faulty construction or renovations) could be just as dangerous, or even more dangerous because many houses are not subject to regular maintenance, repairs or safety checks.

Wednesday, September 15, 2010

Rosedale Toronto... Mmm pretty...

Photography by Charles Moffat.

Rosedale is an idyllic neighbourhood smack dab in the middle of Toronto. I live right near it so I like to go cycling and for walks there, and who wouldn't when you see the rows of old trees and the often unique architecture of the homes (both old and new) in Rosedale.

Rosedale was once considered a suburb 100 years ago, but is now really more uptown or midtown Toronto as the city has spread and is now a megacity metropolis. It is now the 2nd wealthiest neighbourhood in Toronto (Forest Hill, where Conrad Black lives when he is not in prison is #1).

Bordering on the CPR railway tracks, Yonge Street and Bloor Street, and Bayview Avenue Rosedale is conveniently near no less than 5 subway stations and also the Don Valley Parkway. A ravine running east and west divides Rosedale into sections, the south end and the north end.

I admit I get lost in Rosedale almost every time I go there. The streets are rather confusing to an outsider (a bit like visiting Kitchener-Waterloo where my cousins live). Still the mystery and feeling of exploration never leaves me because I always feel like I am discovering a new part of the city I never knew about.

Historically South Rosedale was first settled by Sheriff William Jarvis (whom Jarvis Street is named after) and his wife, Mary, in 1820. Mary Jarvis' walks and horseback rides blazed the trails which would later become Rosedale's streets and forested paths that are still used today. It was Mary who gave Rosedale its name, after the wild roses that used to grow there. (Many Rosedale residents still have roses, but they're usually of the tamer variety.)

The Jarvis Family sold their Rosedale property in 1864 and it became a residential development.

(Note: You may have noticed a lot of the buildings or trees in Rosedale have ivy growing on them. I LOVE IVY. I'd pay extra just to own a house covered in ivy. Or Wisteria. I love Wisteria too. I recommend that people trying to planning to sell their home eventually to plant ivy and Wisteria around the sides of the building. It looks beautiful and it should help jack up the price.)

North Rosedale was home to St. Andrew's College (1899-1924), an all-boys boarding school. The place was also known for the Rosedale Golf Club, a lacrosse field (Rosedale Field) and was the site of the first Grey Cup Canadian football game. When a bridge (Glen Road Bridge) was built across the ravine (now known as Park Drive Ravine) in 1909 it led to residential development both in Rosedale and other neighbourhoods north of the ravine.

Technically there is three ravines that run through Rosedale. Building on the edge of a ravine is risky so its served to create natural parkland all around Rosedale, creating physical boundaries to the neighbourhood. These ravines and the wonderful old buildings / architecture is why I think its such a nice neighbourhood to cycle in and live in.

Plus there's almost ZERO traffic. For a cyclist or even someone just walking this is important because it means you can wander the neighbourhood with little worry of being struck by a car (less worry if you have children who run amok too).

Most of the homes in Rosedale are single detached.

For the family minded Rosedale also has a specialty arts school, an exclusive all-girls school, Branksome Hall and Rosedale Elementary Public School and there is the community centre Mooredale House, which is also home to the Mooredale Orchestra.

Rosedale Park hosts a Mayfair annual party usually on the first Saturday in May, which includes rides, games, flea market and carnival-like activities. The event is run and funded by Mooredale House.

According to Statistics Canada (2006) the average income of Rosedale Residents is $213,941.

So yeah... if you go shopping for a home in Rosedale expect to pay over $1 million for it. I doubt I will ever be able to afford a home in such a beautiful part of Toronto, but that doesn't stop me from dreaming right?

See Also:
Rosedale Real Estate Blog
Search Rosedale Homes by Map

Moore Park is a tiny section just north of Rosedale on the north side of the railway line. I consider it to be part of Rosedale itself, although some people will doubtlessly disagree with me.

Mooredale Real Estate Blog
Search Moore Park Homes by Map

Canadian housing overpriced says OECD

According to the Organization for Economic Co-operation and Development (OECD) Canadian housing looks “overpriced” and they believe the Canadian government should take measures to deliberately slow the mortgage market. The Paris based think tank monitors the economics of 33 wealthy member nations, including Canada.

“Canadian house prices, or at least some regional or local housing markets, notably those of Toronto and Vancouver may still reflect excess demand conditions,” says the OECD's annual review of the Canadian economy. “Housing looks overpriced on the basis of both price-to-rent and price-to-income measures.”

The average Canadian in 2010 makes LESS than what they made in 2007 and our disposable income is dwindling. Meanwhile household debt in Canada has skyrocketed 250% from 1989 levels to $42,000 in debt (from $16,800 in 1989). Simultaneously housing prices in Canada have continued to soar, so that the average price of a home in Canada is now approx. $330,000, but the average Canadian only makes $38,000 / year.

Affordable homes, according to economists should be in the range of 3 to 5 times the cost of annual income, after taxes. In Canada its 9 times that of income which means Canadian homes are overpriced.

According to the OECD the cost of Canadian homes is now 35% higher than long term averages.

The OECD also predicts about 7.5% of Canadians are so in debt they could find themselves financially vulnerable by 2012 if interest rates rise while borrowing stays at the current pace. “High household indebtedness also implies a growing vulnerability to any future adverse shocks,” says the OECD. “Household credit growth needs to slow down.”

The Canadian government currently provides financial guarantees for default insurance on risky mortgages, but this is basically just endorsing/ensuring risky mortgages instead of trying to slow them down. The OECD has noticed this.

“Rules to qualify for government backed insurance have been tightened, but more measures should be taken if needed to cool down the market.”

The OECD report suggests the government should require larger down payments on all federally insured mortgages. They also suggest the government force banks to disclose how “sensitive” their mortgage revenues are to rate hikes so that homebuyers aren't getting caught in the middle later on.

“Lending standards and the framework for mortgage insurance are the right tools to contain this cycle,” says the OECD.

The OECD notes that subprime mortgages make up 5% of mortgages in Canada. In 2007 before the recession hit the % of subprime mortgages in the USA was 33%.

As such when home prices in Canada drop or collapse, it should be in the range of 15 to 18% instead of the 45% range it was in the USA. The drop was the biggest in large cities like L.A., Miami and New York. Canada should expect the largest drops in Vancouver, Toronto and Montreal.

Furthermore the big drops were usually in the suburbs or parts of the cities which were more financially woeful. Housing prices stay relatively stable in older / more wealthy communities.

Sunday, September 12, 2010

Housing bubble to burst says Jarislowsky

Stephen Jarislowsky has been warning people for years that the Canadian housing market is in a bubble and he is "convinced" its going to burst eventually. Jarislowsky is chairman of Montreal-based investment adviser firm Jarislowsky Fraser Ltd. He says the housing bubble is fueled by Canadian government measures that encouraged consumers to take on debt and mortgages they can't afford.

So for example if someone buys a home in a Toronto suburb for $600,000, but can't afford it they eventually renege on their mortgage its the government which takes the hit because they've basically written banks a blank cheque by insuring mortgages. If a thousand such mortgages go bust, the bank then has to sell the homes at a reduced price during a bad real estate year (ie. they sell the homes for an average of $500,000) and the government ends up with $100,000 times 1,000 in losses = $100 million. And that is just for a thousand houses if the bubble bursts and people renege on mortgages... what if 50,000 people lose their homes? Or 100,000? And what if prices slide a lot more than 15%? In the worst case scenario, lets say 100,000 people lose their homes and the average value lost is $200,000... that is $20 billion that the banks/government are on the hook for.

When the bubble burst in the USA over a million Americans lost their homes in 2008.

“They have basically encouraged people to buy houses based on cheap mortgages,” says 84-year-old Jarislowsky. “That has created the opposite effect of what was desirable.”

While Canadian home prices and resales grew during the Spring this year, the sudden drop in sales during the Summer shows Jarislowsky is probably right about the bubble bursting. The big Canadian banks are also in panic mode and they know there is an economic roller coaster coming. Even Canadian Prime Minister Stephen Harper is running for cover, trying to blame other people for his economic failings.

“I am convinced there is a housing bubble in Canada,” said Mr. Jarislowsky in February. His investment fund owns shares in Canada’s four biggest banks and they stand to lose tens of millions when the bubble bursts.

Jarislowsky is one of Canada’s wealthiest investors with a personal fortune worth $1.85-billion according to Canadian Business magazine.

Meanwhile Canadian Finance Minister Jim Flaherty claims there is “no clear evidence” of a housing bubble in Canada, according to Flaherty's spokesman Chisholm Pothier.

Jarislowsky says the government should have put more stimulus money into boosting infrastructure, not household spending. Stephen Harper's temporary tax credit for home renovations was limited to first-time home buyers and encouraged cheap mortgages from banks, but this only inflates the housing bubble even more by making too much available credit for home buyers. Worse that tax credit has already run out and the bubble bursting could potentially rob anyone who bought a home in the last 8 months and can't afford it

“I conclude that the prices of housing today in the U.S. are cheaper than they should be, and that the prices in Canada are far more expensive than they should be,” says Jarislowsky. “Excess spending by the consumer and going further into debt was the worst thing that they could do, and that is what has happened in Canada.”

Jarislowsky isn't the only one predicting a bubble bursting. See Also: Tea Leaves for Toronto Real Estate

Burying your head in the sand isn't going to change the earthquake happening around you.

Thursday, September 09, 2010

Bank of Canada raises rates again

The Bank of Canada has raised interest rates again, the third time in 2010, up another 25 basis points from 0.75% and bringing the total to 1%.

People with variable mortgage rates or lines of credit will notice the effect immediately...

However the good news is that banks are becoming more competitive with their mortgage rates... the slumping Canadian real estate market is dragging its knuckles and looking like its going to get punched out for the count... and as a result the Canadian banks are becoming super competitive about trying to get your mortgage.

However I am worried the Bank of Canada increase of mortgage rates will just scare homebuyers even more, worsening the bursting real estate bubble that has started.

When you consider that Canada might fall into a double dip recession the Bank of Canada seems to be playing it fast and loose... and taking far too many risks in their efforts to curb spending and household debt.

Friday, September 03, 2010

Home sales drop in August

Sales of existing Toronto homes fell 23% in August compared to 2009. New figures released today show sales dropped to 6,222 (compared to 8,035 in 2009). This is the fourth month for a drop in sales.

The average price is still up 6% compared to last year, despite the lack of bidding wars. Realtors were hoping for a 10% increase but that didn't happen since the Toronto real estate market is shifting to a buyers market. On average prices this year are still up 8%.

“The prospect of interest rate hikes and new mortgage lending rules prompted some households to purchase a home sooner than they otherwise would have this year,” says TREB president Bill Johnston. “The result has been a larger than normal dip over the summer months.”

Analysts keep repeatedly that prices are due for a fall in 2011. It is now taking longer to sell a home, 36 days on average compared with 30 last year, up by 20%. Listings are also up by 20% as the market becomes more flooded.

Homes in the area around Mount Pleasant are considered to be the hot commodities. Ie. Lawrence Park, Leaside, Davisville Village, Moore Park and Rosedale.

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