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Ten Things You Need To Know About Real Estate
Back to Real Estate: 10 things you need to know
Real Estate: 10 things you need to know
March 09, 2011
Tony Wong
It's true what they. When buying a house, location is everything.
Shutterstock/Shutterstock Next to public speaking, buying or selling a home is at the top of many people’s fear and loathing list. A home is the biggest investment you’ll ever make and while exciting, the potential for things to go wrong is pretty big.
Here are 10 things to consider when buying a home.
1. The housing market isn’t really a market
At least not in the way you might think. While housing analysts like to compare real estate returns to stock market returns, it is a misleading comparison.
The first big difference is that a stock market is a place where you can by and sell immediately. In the real estate market you can wait months for the home you want to come on the market and just as long to find someone who wants to buy yours. The price you expect may not bear any resemblance to the one you get.
The long run return on stocks is also a lot better. The average stock in the Standard & Poors 500 index, a basket of blue chip U.S. stocks, has returned about 6.3 per cent a year after inflation in each of the last 25 years. The average increase in the value of a Canadian home over the same period petty much tracks the rate of inflation which during the same period was 2.5 per cent.
A home is also more than an investment. It has all kinds of intangible qualities, including a neighbourhood you want to live in, a spot with a particular view or landscape, a type of architecture that you enjoy. So, while it’s tempting to think of your primary home as a profit centre ripe for a flip, that shouldn’t be the main purpose.
Besides, your Microsoft stock can’t keep you warm at night. (Unless you bought it when Bill Gates was still working out of his garage. In which case, you probably have your own heating company.)
2. It’s always a good time to buy
No it isn’t. People who bought at the height of the market in the 1989 real estate bubble, didn’t break even until prices bounced back in 2002. That’s 13 years. And even then they didn’t make their money back. Factoring in inflation, they actually lost money. House prices don’t go up forever. Buy when your circumstances dictate, not because your neighbor the agent says it’s a good time to.
3. Location, Location, Location.
Yah, they’re right. You’ll pay more initially, but investing in a property in the good neighborhood close to transit will pay dividends down the road when it comes time to sell
4. Buy the cheapest house on the street
Some people argue you shouldn’t, because the home will compare poorly to the other homes when you sell.
I say go for it. It may already be discounted because it looks like a shack compared with other properties and provides far more upside if you spruce it up in the future. A rising tide can also help to lift all boats. As the street gentrifies, infill housing will continue to keep property values high. Getting your foot in the right address is half the battle. Hello Park Place!
5. Do I need an agent?
No, you don’t. While a good realtor can be a huge asset, not everyone needs professional advice. If you have time, selling your own home can save you a ton of money on commissions. With the advent of the internet, and the opening up of the Multiple Listing Service there are many more services for the do it yourselfer to choose from.
6. If you want an agent…
If you don’t have the time, or would rather use professional advice, a good realtor can be a boon, because they know the neighborhood and can potentially get you top dollar. But like any other service, the results will vary. So make sure you interview several before choosing.
7. Renovating will give me huge return
Stop watching all those television shows where some fancy designer redos the entire house in a week with faucets that cost more than your BMW. Okay, I like them too, but that doesn’t mean you have to gut your kitchen to sell your home.
Most experts say you’ll get the best bang for your buck by redoing the kitchen and washrooms. But even for the most sought after features by homebuyers, the return on investment is anywhere from 75 per cent to at best 100 per cent. That means in many cases if you spend $10,000 you’ll only add that much vale at best and maybe far less.
8. It just needs a coat of paint
When it comes times to sell, you may have been living in your home for so long that you don’t notice the coffee stains on the couch and the Sponge Bob wallpaper in the washroom. Get a second pair of eyes to have a look around. This could be friend, relative or your agent and hopefully they’ll tell it like it is.
You may want professional help in the form of a home stager who can arrange your furniture and make your place look showroom ready. But you don’t need to pay big bucks. Start by asking a friend. She’ll tell you why Sponge Bob must go.
9. Don’t try to time the market
I know people who sold their home at the peak of the market, and rented a condo while riding out the crash.
After the crash, they repurchased near the same neighborhood for substantially less. This is the dream of every home investor. I also have friends who thought the market was going to crash, so they waited for four years to buy a home. Prices kept going up and they finally threw in the towel and bought at a higher price than they expected. Then the market crashed. Housing is a long term investment, and sometimes you just have to commit.
10. Keep your perspective
My friends think think their 1,500 square foot semi is worth a bundle, because they spent hours building the deck and hand painting the cute gold cherubs on the walls.
Being emotionally attached to your home means that when it comes time to sell, your objectivity is compromised. In a down market, with more competing listings, your home is going to be difficult to sell and the price less than you expect. Can you accept that?
Toronto Star business reporter Tony Wong has been writing about real estate for the past 10 years.
Real Estate: 10 things you need to know
March 09, 2011
Tony Wong
It's true what they. When buying a house, location is everything.
Shutterstock/Shutterstock Next to public speaking, buying or selling a home is at the top of many people’s fear and loathing list. A home is the biggest investment you’ll ever make and while exciting, the potential for things to go wrong is pretty big.
Here are 10 things to consider when buying a home.
1. The housing market isn’t really a market
At least not in the way you might think. While housing analysts like to compare real estate returns to stock market returns, it is a misleading comparison.
The first big difference is that a stock market is a place where you can by and sell immediately. In the real estate market you can wait months for the home you want to come on the market and just as long to find someone who wants to buy yours. The price you expect may not bear any resemblance to the one you get.
The long run return on stocks is also a lot better. The average stock in the Standard & Poors 500 index, a basket of blue chip U.S. stocks, has returned about 6.3 per cent a year after inflation in each of the last 25 years. The average increase in the value of a Canadian home over the same period petty much tracks the rate of inflation which during the same period was 2.5 per cent.
A home is also more than an investment. It has all kinds of intangible qualities, including a neighbourhood you want to live in, a spot with a particular view or landscape, a type of architecture that you enjoy. So, while it’s tempting to think of your primary home as a profit centre ripe for a flip, that shouldn’t be the main purpose.
Besides, your Microsoft stock can’t keep you warm at night. (Unless you bought it when Bill Gates was still working out of his garage. In which case, you probably have your own heating company.)
2. It’s always a good time to buy
No it isn’t. People who bought at the height of the market in the 1989 real estate bubble, didn’t break even until prices bounced back in 2002. That’s 13 years. And even then they didn’t make their money back. Factoring in inflation, they actually lost money. House prices don’t go up forever. Buy when your circumstances dictate, not because your neighbor the agent says it’s a good time to.
3. Location, Location, Location.
Yah, they’re right. You’ll pay more initially, but investing in a property in the good neighborhood close to transit will pay dividends down the road when it comes time to sell
4. Buy the cheapest house on the street
Some people argue you shouldn’t, because the home will compare poorly to the other homes when you sell.
I say go for it. It may already be discounted because it looks like a shack compared with other properties and provides far more upside if you spruce it up in the future. A rising tide can also help to lift all boats. As the street gentrifies, infill housing will continue to keep property values high. Getting your foot in the right address is half the battle. Hello Park Place!
5. Do I need an agent?
No, you don’t. While a good realtor can be a huge asset, not everyone needs professional advice. If you have time, selling your own home can save you a ton of money on commissions. With the advent of the internet, and the opening up of the Multiple Listing Service there are many more services for the do it yourselfer to choose from.
6. If you want an agent…
If you don’t have the time, or would rather use professional advice, a good realtor can be a boon, because they know the neighborhood and can potentially get you top dollar. But like any other service, the results will vary. So make sure you interview several before choosing.
7. Renovating will give me huge return
Stop watching all those television shows where some fancy designer redos the entire house in a week with faucets that cost more than your BMW. Okay, I like them too, but that doesn’t mean you have to gut your kitchen to sell your home.
Most experts say you’ll get the best bang for your buck by redoing the kitchen and washrooms. But even for the most sought after features by homebuyers, the return on investment is anywhere from 75 per cent to at best 100 per cent. That means in many cases if you spend $10,000 you’ll only add that much vale at best and maybe far less.
8. It just needs a coat of paint
When it comes times to sell, you may have been living in your home for so long that you don’t notice the coffee stains on the couch and the Sponge Bob wallpaper in the washroom. Get a second pair of eyes to have a look around. This could be friend, relative or your agent and hopefully they’ll tell it like it is.
You may want professional help in the form of a home stager who can arrange your furniture and make your place look showroom ready. But you don’t need to pay big bucks. Start by asking a friend. She’ll tell you why Sponge Bob must go.
9. Don’t try to time the market
I know people who sold their home at the peak of the market, and rented a condo while riding out the crash.
After the crash, they repurchased near the same neighborhood for substantially less. This is the dream of every home investor. I also have friends who thought the market was going to crash, so they waited for four years to buy a home. Prices kept going up and they finally threw in the towel and bought at a higher price than they expected. Then the market crashed. Housing is a long term investment, and sometimes you just have to commit.
10. Keep your perspective
My friends think think their 1,500 square foot semi is worth a bundle, because they spent hours building the deck and hand painting the cute gold cherubs on the walls.
Being emotionally attached to your home means that when it comes time to sell, your objectivity is compromised. In a down market, with more competing listings, your home is going to be difficult to sell and the price less than you expect. Can you accept that?
Toronto Star business reporter Tony Wong has been writing about real estate for the past 10 years.
Friday, January 14, 2011
TD Overhauls Mortgage Program
GLOBE AND MAIL
October 11, 2010
TD overhauls mortgage program as housing market slows
By STEVE LADURANTAYE
From Tuesday's Globe and Mail
Collateral mortgages designed to make borrowing easier, switching to rival lender more difficult
TD Bank TD-T is revamping its mortgage program, making it easier for homeowners to tap into their equity and harder for them to switch to another lender when their mortgages come up for renewal.
At the heart of the overhaul is a switch to collateral-charge mortgages, which are similar to lines of credit. The bank is encouraging employees to approve customers at 125 per cent of a home's actual value under certain circumstances, so the homeowner can easily borrow more money if their property increases in value.
Unlike traditional mortgages, the collateral mortgages are difficult to transfer from one lender to another, because they must be paid in full to be cancelled. That means if someone wants to change lenders, they need to renegotiate from scratch.
While other banks offer variations on the collateral mortgage, TD is the first to switch exclusively as of Oct. 18. Existing mortgages aren't affected by the change.
The bank's move comes as the housing market cools and fewer Canadians apply for mortgages. It's an attempt to entice buyers who expect to tap into rising values and don't plan to shop around for better rates in the future.
Competition for new business is intensifying; record low mortgage rates weren't enough to stop a slowdown of new buyers in the market during the summer. Sales fell by more than 30 per cent in Toronto and Vancouver, sending lenders scrambling to secure new business with innovative products and even lower rates.
Bank of Montreal currently offers the least expensive five-year fixed term at 3.59 per cent, although only its best applicants are likely to qualify at the special rate. Bank of Nova Scotia offers its customers the ability to split mortgages into two or three different components, each with its own terms.
TD said its new offering will ensure customers don't pay additional charges to tap into their rising equity, which it called "great news for both you and your customer" in an internal memo to its mortgage brokers.
"Customers may under many circumstances choose to register their collateral charge for more than the approved principal amount of the mortgage, up to 125 per cent of the property value," the e-mail stated. "This will allow them to borrow additional funds in the future without having to re-register ... eliminating any solicitor and in-house registration fees."
A homeowner can't simply call the bank and access the extra money they were approved for, however. The deal is dependent on values rising, and in each instance the bank said it would need to inspect the home.
"Part of our credit approval includes an assessment of the current value of the property - an appraisal of the property - to ensure the existing value can support the increased borrowing," said spokesperson Kelly Hechler.
The move has sparked anger among the country's independent mortgage brokers, who see the change as a direct shot at an industry that has been gaining market share from the big banks by competing fiercely on mortgage rates.
"Credit unions have always gone this route so it's not like they are reinventing the wheel," said Mike Averbach of Vancouver's Averbach Mortgages. "People literally have to cash out if they want to change over, so it's just another way for them to be handcuffed to the bank."
Thursday, January 13, 2011
Monday, January 10, 2011
The 2010 Housing Market! Will house prices fall? Hard to predict-
January 06, 2011
These are excerpts taken from The Toronto Star
Tony Wong
After three decades in the business, Toronto real estate broker Paul Swartz is still trying to figure out the market.
“I really don’t know what to tell clients. It’s just been about impossible to predict. We all know the ride is going to end, but nobody knows when.”
Swartz figured, like many analysts did, that 2010 would be slower because of a recovering economy. But despite the predictions of economic gloom, the Toronto existing home market rang out 2010 with the third best year for sales on record.
“I can’t tell you how many times I’ve gotten in trouble counseling first time buyers to wait because prices may fall. And then four years later they’re still going up.”
Make that 14 years. Prices have been appreciating since 1996, despite stock market crashes and global economic meltdowns along the way.
Some analysts have said the market is overvalued by as much as 25 per cent. But that hasn’t spooked buyers.
The Toronto Real Estate Board reported Thursday that 86,170 homes changed hands last year, down by only one per cent from 2009, which was the second best year recorded.
However, that number did not come close to the peak year of 2007, when 93,193 homes sold. But most realtors, expecting a far tougher year will likely say third place isn’t bad at all.
“Expectations of a depression were so dire that when we merely had a recession there was a kind of euphoria, people voted with their pocketbooks and with larger sized mortgages,” said Phil Soper, president and CEO of Royal LePage Real Estate Services.
After a pause in the third quarter as many had anticipated, the fourth quarter of the year was stronger than expected, buoyed by continuing low interest rates.
“The low cost of money has been the dominant driver in the valuation of property,” said Soper. “When people saw that rates remained low and that it wasn’t going to be a double dip recession that seemed to prompt a surge back into the market.”
The average selling price of a home in 2010 was $431,463, up by 9 per cent from 2009.
Two storey homes showed the strongest price appreciation, followed by condominiums and then bungalows, according to a separate report released Thursday by Royal LePage.
House price appreciation eased off in the second half of the year after a strong start, when figures were in the double digits.
“At the outset of 2010 we were experiencing annual rate of price growth at or near 20 per cent,” said Jason Mercer, TREB’s senior manager of market analysis. “This was the result of extremely tight market conditions coupled with the fact that we were comparing prices to the trough of the recession.”
Price appreciation declined rapidly in the second half of the year, but the strong start out of the gate meant that prices were firmly in positive territory in 2010.
The Toronto Real Estate Board still expects prices to go 5 per cent higher in 2011. But that is the optimistic end of most predictions. Royal LePage is forecasting a 1 per cent increase for 2011.
Soper said six weeks earlier his analysts would likely have forecast a flat or negative return for home price appreciation in 2011.
“We didn’t expect the fourth quarter to be as strong and we were expecting better economic news out of the U.S. But affordability ended up being much better than expected.”
The Bank of Canada paused in their hikes to the key overnight rate in October and December, leaving it at 1 per cent because of continuing economic weakness.
Affordability has improved as a result. The quarterly RBC affordability index shows that it now takes 56 per cent of pre-tax income to afford a detached home in Toronto. That’s down six percentage points, a significant drop from the second quarter.
Still, sales are expected to be down by 5.9 per cent next year, according to Royal LePage.
“Like 2010, we expect a strong start to the year because of continuing low interest rates, before tapering off at the second half,” said Soper.
The market is already slowing down. December had 21 per cent fewer sales than in 2009. Active listings are also up by 9 per cent. And it took 37 days to sell a home in December of 2010 than it did a year earlier.
Interest rates meanwhile, have nowhere to go but up. Analysts expect the hikes to continue as early as May of this year with the key rate doubling to 2 per cent by the end of 2011, which will further chill the market.
These are excerpts taken from The Toronto Star
Tony Wong
After three decades in the business, Toronto real estate broker Paul Swartz is still trying to figure out the market.
“I really don’t know what to tell clients. It’s just been about impossible to predict. We all know the ride is going to end, but nobody knows when.”
Swartz figured, like many analysts did, that 2010 would be slower because of a recovering economy. But despite the predictions of economic gloom, the Toronto existing home market rang out 2010 with the third best year for sales on record.
“I can’t tell you how many times I’ve gotten in trouble counseling first time buyers to wait because prices may fall. And then four years later they’re still going up.”
Make that 14 years. Prices have been appreciating since 1996, despite stock market crashes and global economic meltdowns along the way.
Some analysts have said the market is overvalued by as much as 25 per cent. But that hasn’t spooked buyers.
The Toronto Real Estate Board reported Thursday that 86,170 homes changed hands last year, down by only one per cent from 2009, which was the second best year recorded.
However, that number did not come close to the peak year of 2007, when 93,193 homes sold. But most realtors, expecting a far tougher year will likely say third place isn’t bad at all.
“Expectations of a depression were so dire that when we merely had a recession there was a kind of euphoria, people voted with their pocketbooks and with larger sized mortgages,” said Phil Soper, president and CEO of Royal LePage Real Estate Services.
After a pause in the third quarter as many had anticipated, the fourth quarter of the year was stronger than expected, buoyed by continuing low interest rates.
“The low cost of money has been the dominant driver in the valuation of property,” said Soper. “When people saw that rates remained low and that it wasn’t going to be a double dip recession that seemed to prompt a surge back into the market.”
The average selling price of a home in 2010 was $431,463, up by 9 per cent from 2009.
Two storey homes showed the strongest price appreciation, followed by condominiums and then bungalows, according to a separate report released Thursday by Royal LePage.
House price appreciation eased off in the second half of the year after a strong start, when figures were in the double digits.
“At the outset of 2010 we were experiencing annual rate of price growth at or near 20 per cent,” said Jason Mercer, TREB’s senior manager of market analysis. “This was the result of extremely tight market conditions coupled with the fact that we were comparing prices to the trough of the recession.”
Price appreciation declined rapidly in the second half of the year, but the strong start out of the gate meant that prices were firmly in positive territory in 2010.
The Toronto Real Estate Board still expects prices to go 5 per cent higher in 2011. But that is the optimistic end of most predictions. Royal LePage is forecasting a 1 per cent increase for 2011.
Soper said six weeks earlier his analysts would likely have forecast a flat or negative return for home price appreciation in 2011.
“We didn’t expect the fourth quarter to be as strong and we were expecting better economic news out of the U.S. But affordability ended up being much better than expected.”
The Bank of Canada paused in their hikes to the key overnight rate in October and December, leaving it at 1 per cent because of continuing economic weakness.
Affordability has improved as a result. The quarterly RBC affordability index shows that it now takes 56 per cent of pre-tax income to afford a detached home in Toronto. That’s down six percentage points, a significant drop from the second quarter.
Still, sales are expected to be down by 5.9 per cent next year, according to Royal LePage.
“Like 2010, we expect a strong start to the year because of continuing low interest rates, before tapering off at the second half,” said Soper.
The market is already slowing down. December had 21 per cent fewer sales than in 2009. Active listings are also up by 9 per cent. And it took 37 days to sell a home in December of 2010 than it did a year earlier.
Interest rates meanwhile, have nowhere to go but up. Analysts expect the hikes to continue as early as May of this year with the key rate doubling to 2 per cent by the end of 2011, which will further chill the market.
Wednesday, January 5, 2011
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