Reader, television viewer, radio listener... beware!

Whether we are reading a newspaper, listening to the radio, or watching the news on television, we are thrown all sorts of information to filter through, some good, some bad, some we just have to decide on our own where to classify it. We see stuff on blogs, Facebook, Twitter, Youtube, blogs and more and it is up to each and everyone of us to decide what we are going to believe as true, and what we think is a "bunch of balogne". This past week the news has been reporting that the Canadian housing market is going to take a down turn. "There is going to be a 10% drop in housing prices over the next few years." "There is going to be a market correction, as prices have doubled in the last 10 years or so." I wonder if everyone caught the fine print in the story that this is the forecast for Toronto and Vancouver. In particular, this is going to reflect their condo market. The question then is, what about the rest of the country? Canada is the second largest country in the world. We have several different time zones, different weather climates, oceans on three sides, with prairies, mountains, rocks, trees, and more in between. It seems to me that it would be a bit of a challenge to paint the real estate market of Canada with just one brush. Here is my two cents. You can take it or leave it. I have no money back guarantee with my predictions. These are just my thoughts on my local real estate market: During the last housing boom, the smaller towns and villages lagged behind the bigger centers such as Calgary and Edmonton. We did get a boom too (on a much smaller scale of course), but it was a year or so after the cities took off. When the cities started to cool down, we cooled down too, but after the cities had already started their cool down. I will compare this to the big brother little brother scenario. Little brother wants to grow up to be like big brother, but he is still little brother and it will take time to catch up to his older sibling. The older sibling already has life experience, and other resources to move him along. The little brother will need some time to build up his resources, get his name out there, for him to catch up. The cities already have a large population base to work with, unlike the smaller towns and villages, with established businesses and room to grow. Meanwhile, small towns and villages have to fight to get businesses to come to town. I could go on and on with that predicament, but I will stop there for now. I hope you got my point. The little guys and just a couple of steps behind the big guys. That's life. That is the challenge that smaller communities face compared to the larger ones. Towns such as Vulcan and surrounding areas need to attract businesses to bring people into town. Not just shoppers, but employers and employees, families, young couples, and more. Another way to get people into town is for the larger centers, such as Calgary, to have their real estate market take off, pricing people out of the city, where they can them move to a small town, buy a decent house for a fraction of the city prices, and enjoy the small town living. It is a challenge. It has always been a challenge, and it will be a challenge in the future. Small town living has it's ups and downs. So does living in the city. And now back to the point of this little rant of mine. When you hear a story on the news, or read it somewhere, do your homework before you decide to turn on the panic button. Get the facts. Make up your own mind...and take it from there.

"Average" house prices don't tell the whole story - cbcnews.ca

I discovered this article on Yahoo.ca and it's a clip from cbcnews.ca. I thought it was a good one to share: When someone asks how house prices are doing in a particular neighbourhood, the question seems easily answered. The big real estate boards all issue monthly price reports that spell out what the average selling price was in the previous month and how that compares to the month, and the year, before. But there's a problem with trying to divine market direction from average price data. It's just too blunt a tool. If real estate — as the saying goes — is really about "location, location, location," then average prices frequently don’t capture the reality of what's going on in a particular city or neighbourhood. Calculating the average house price is as simple as adding up the prices realized for all home sales in a particular month and dividing by the number of sales. The problem with that metric begins to emerge, however, when one or more parts of the housing market don't act in tandem with all the other segments, as they seldom do. For instance, what happens if the percentage of really expensive homes sold drops more than it does for other types of homes? That could lead to a big drop in the average selling price, even though the price of more moderate homes may be little changed. That exact scenario played out with the release of the June sales figures from the Canadian Real Estate Association. Among the ocean of figures CREA released was the fact that the average resale price across the country that month was down 0.8 per cent from the same month a year earlier. It left the impression that prices in the Canadian housing market had dropped compared to the previous year. It turns out that the national average price dropped only because Vancouver's pricey real estate market had 28 per cent fewer sales this June than it did in June 2011. Exclude Vancouver from the national figures and CREA says the average national selling price last month actually rose 3.2 per cent. In fact, CREA reports the average home price in June was higher year-over-year in 70 per cent of the local markets it looked at. Average price data within cities are also vulnerable to a shift in the sales mix. What if a huge batch of low-priced condos are snapped up one month? That would send the average price lower, even though the resale market for other types of housing may not have budged at all. So it comes as no surprise that economists who analyze the real estate market hate averages. "Averages are a horrible place to go," says Tsur Somerville, who heads up the Centre for Urban Economics and Real Estate at the University of British Columbia. Gregory Klump, the chief economist at CREA, agrees. Using average prices is "like looking in a funhouse mirror," he warns. Finding the median price, which involves ranking all sales from top to bottom and finding the sale price that's in the middle, is a bit better, Somerville says, but it's still flawed methodology. Like average prices, the median fails to take into account changes in buying patterns. Economists say there are more sophisticated methods that give a better sense of market trends than either averages or medians. More than 15 years ago, the MLS developed its own home price index to get a clearer picture of price trends. It uses a complex statistical model to measure the rate at which housing prices change over time by tracking price changes in "typical" homes in each market. Each neighbourhood has a typical benchmark home. CREA, in addition to providing average home price data, also releases MLS home price index data for five major markets: Greater Vancouver, the Fraser Valley, Calgary, the Greater Toronto Area and Montreal. Sixteen additional markets are slated to be added in the future. "If you really want an accurate measure of what's going on with home prices, you've got to keep the quality of the homes constant," says CREA's Klump. "That's what the [MLS home price index] does. It compares apples with apples over time. It's not subject to a change in the sales mix the way average and median prices are." What difference do the different approaches make? In Vancouver, for instance, the average selling price in June was $701,141, down 13.3 per cent from last year. But using the MLS home price index methodology, Greater Vancouver prices actually rose year-over-year by 1.7 per cent. This method of tracking home prices looks at how the price of the same house changes over time, so that only properties with at least two sales are entered into the mix. The assumption underlying this process is that each selected property's overall quality remains constant. Given the high rate of renovations, that can be problematic, but the statistical models attempt to account for that. The Teranet-National Bank home price index is the best-known example of the repeat sales method in Canada. "The statistics work out the problem that not every house sells every year," says Somerville, who uses data from both the MLS and the Teranet-National Bank home price indices to track market trends. In the U.S., the widely tracked Case-Shiller home price index uses the repeat sales method, too. Somerville cites a couple of other indicators to track housing price trends. The Royal Lepage house price survey is a quarterly look at seven types of housing in dozens of neighbourhoods across Canada. The values are estimates of fair market value in each of the surveyed locations, based on local home price data and knowledge of local housing market conditions provided by Royal Lepage real estate agents and brokers. "In theory, it should be problematic, because it's a survey," says Somerville. "It's not based on actual data. But it moves very well with the higher quality statistical data." Some market watchers also look at the sales-to-new-listings ratio. Currently, it's at 51.7 per cent nationally and has been trending down. Anything over 60 per cent is considered a sellers' market, with anything below 40 per cent being a buyers' market. Somerville also looks at sales activity. "Changes in sales tend to lead market conditions," he says. "So when sales are declining, that's the best sign of a weakening market, although price declines don't have to follow. You can get prices flat-lining; they don't have to decline." Currently, the number of sales in most markets in Canada is slowing. Overall, CREA reports 4.4 per cent fewer sales in June than a year earlier. At the same time, year-over-year prices aren't retreating in most markets, at least yet. But the recent tightening in mortgage regulations could change that and it could show up as early as August, when sales and price figures for July are released. "We do anticipate that some first-time buyers will be priced out of the market," Klump says. These days, the operative words among Canadian housing market watchers seem to be "slowing" and "cooling." "The cycle of eroding affordability followed by softening home prices has begun in some regions and will be felt in many parts of the country by year-end," Royal Lepage CEO Phil Soper forecasts. "Home prices cannot grow faster than salaries and the underlying economy indefinitely." Somerville says that of all the housing markets in Canada, Toronto is the one that bears watching. "If I was concerned about a market, I'd be more concerned about Toronto, because the level of building activity has been very, very high there," he says, referring to the the boom in condo-building. "You see supply levels being very high by historic standards in terms of construction," he says. "I'm not saying things have to go sour; I'd just be more concerned [about Toronto] than elsewhere."

The importance of a walk through

Purchasing a property can be a very exciting time, especially as the possession date draws near. One important process to complete before money exchanges hands and the keys are turned over from the seller to the new owners is a "walk through". A walk through is a process that takes place when the new owners get a chance to go through the property and make sure that it is in the same, if not better, condition than when they priviously viewed the property. For example, if upgrading the electrical panel, or having the rugs cleaned were part of the terms of the contract, the buyers will want to see for themselves that this was completed. Perhaps when the sellers moved out, the movers did some damage, like putting a hole in the wall. They buyers will want to make sure that this issue is addressed. If there are concerns, the time to deal with them is before money exchanges hands. In my experience, most times everything goes smoothly and there are no issues to worry about. However, it can happen and you want to make sure that you are protected. What happens if there is an issue? There can be a holdback of funds, until the problem is rectified. This is why you do this before the funds are transferred. If the funds have already transferred and then a problem is discovered, well that's something that could get messy and costly as legal issues may come into play. Basically, my point is that a walk through is a must when you are purchasing a property. You are already spending the money. Make sure you get what you paid for.

Large inventory of properties for sale. Good or bad?

Vulcan has a large inventory of properties for sale right now. Actually, it's been like this for quite some time. Is this a good thing, or a bad thing? Well the coffee shop talk will tell you that it's horrible and that the sky is falling. Personally, I do not like the high amount of inventory. There needs to be more of a balance of supply and demand. Some markets are getting closer to a balance, but others, such as Vulcan and other areas of southern Alberta, there balance is not there yet. As a seller, it makes it tough. You really have to have an attractive price and even better looking curb appeal to get people to look closer at your property. There ARE buyers out there, but there is no competition between buyers. The properties that are moving are the bargains. For example, the lower end properties (under $150,000) have been picked over in town. The "good ones" are being picked up, leaving "rougher" type properties sitting idol on the market. Higher end properties do not have as many buyers looking at them, and these buyers do not seem to be much in a rush to buy. Really it's the sellers that are competing, not the buyers. As a result, this advantageous if you are the buyer. A good selection of properties are available and the prices are not as high as they have been. These along with low interest rates certainly favour the buyer. If you have been sitting on the fence about buying real estate, perhaps now would be a good time to take some action. I can see what happened with sellers a few years ago happening to buyers in a year or two - "We should have bought (or sold in the case of the sellers) when the market was favourable to do so. We would have saved (or made as a seller) thousands!"

What renovations give the best return on investment?

Are you thinking about increasing the value of your home, but are not quite sure what you should be doing? What is going to give you the best return on your time and money investment? Here are a couple of ideas that I have found in my years in real estate, and also from doing my homework: 1. Painting - this is one of the renovations that you are going to realize a profit with. Tasteful, neutral colours inside and out will help increase the value of the property with a small amount of investment, especially if you do the painting yourself. However, make sure that the job looks professional. Estimated payback up to 300%. 2. Kitchen remodeling - the kitchen is one of the main rooms in the house. Remodeling can be expense so careful planning and shopping are a must. Estimated payback 60% and up. Careful not to get too carried away as it can be costly and your return on investment could decrease. 3. Bathroom remodeling - the bathroom is another busy place in the house. Check the medicine cabinet. How does it look on the outside? How about the inside? Is there rust? Cracked mirror? Once again, some careful planning and shopping helps out here. Just replacing your medicine cabinet to one that is new and clean can make a big difference. Also, how many bathrooms are in your house? Compare that number to the number of bedrooms. 4 bedrooms and 1 bathroom can make for an unhappy household. If you have roughed in plumbing, it might be worth finishing it off and getting that extra bathroom installed. You do not need to go overboard, but having that extra bathroom could be that extra selling feature that a buyer is looking for.

Fire ban lifted

Just in time for the long weekend, the fire ban has been lifted. So if you are out at Lake McGregor, Little Bow, Badger Lake, or wherever, be careful and enjoy your fresh s'mores and hotdogs with friends and family!

Housing Bubble?

So I hear on the news that Canada may be on the verge of a housing bubble. "Could this mean that Canada's housing market is going to tank like our friends to the south?" Well for one thing, the housing market in Vancouver is different than the housing market in Regina, which is different than Toronto, which is different than Halifax. Let's get that straight. Now, as a whole, the Canadian housing market is inline with the 10 year average for sales. This is based on national statistics and this is one of the messages that the Canadian Real Estate Association representatives took to our Members of Parliament this past week in Ottawa. I am a Political Action Committee representative for my local real estate board. We talked to our MPs about indexing the Home Buyers' Plan and issues about Capital Gains Tax. I must say that we were well received at Parliament Hill. Plus the weather in Ottawa was beautiful, and hanging around our nation's capital helps build up that patriotism!