Durham Region For Sale By Owner Private Real Estate Sales

How To Know When you are at the Bottom of a Real Estate Cycle...When to Start to Buy Again!!

Whether its stocks or real estate, we all heard that the time to buy is at the bottom of the market.  In real estate that would be the bottom of any current "real estate cycle". And let me say that differing cycles exist in various parts of the country. Each local area is in a different stage in their own cycle.  However the million dollar question for any real estate cycle still is... when is the "bottom" going to occur? How do we know when we are at the bottom so we can begin buying again? As real estate practitioners we are all faced with this question. Especially now where we are all witnessing unprecedented turmoil in the financial markets and we are seeing home values drop rapidly in many markets. This little essay will help answer this question for all your clients ...."when will the bottom occur and when will things get back to normal?....".  

There are 2 aspects of this analysis/answer that I want to discuss. One is the concept of rapidly rising real estate values , and the other is its relation to the local housing affordability index. These two concepts intertwine together for a more definitive answer on real estate buy and sell triggers.

First lets discuss areas of rapidly rising house values.  For the uninitiated, rapidly rising house prices  are also called ‘real estate bubbles'. Where market values rise greater then 12% a year. Real estate bubbles are areas of high volatility. They are somewhat unstable. They can change rapidly. In other words...BE CAREFUL.  But here is the point I want to drive home about bubbles; Real estate bubbles will have a greater propensity to fall as rapidly as the grew.  That is, the quicker the rise in home value, the quicker the fall in home values.  They are co-related. In the U.S. we can look at Southern CA and in Canada we can look at Alberta  as an example- more specifically Calgary. Starting 2004 up to 2007 we saw a rapid rise in house values (15-30% a year).  However starting in late 2007 to now ( late 2008), we have seen Calgary home values decrease just as rapidly as they grew ( about 30% ) Compare that with Barrie Ontario where house values have only increased marginally at 6-9% a year in that same time period.   Barrie has also seen only a small decrease ( if any at all) of about 3-5% .  Again please note that Calgary and Barrie are both in different "local" cycles. The point is this, whatever your local cycle, it is the speed of increase that will conversely affect the speed of decrease.

Now lets discuss part two of our answer; housing affordability index. This index is the "trigger" signal for our understanding of when to begin buying homes again and conversely when to begin selling in our local real estate cycles.  It is the key to understanding the Buy signal and the Sell signal in real estate. Housing affordability is the percentage of income the average person makes that is used to afford a home. It is the amount of money required to spend on housing. It's what they can afford to pay for a house.  When income is low and houses are expensive ( relatively)we will see the index around 45-50%. This is at the top of the cycle. It simply becomes too difficult for the average person to afford a home once the index reaches above 50%. Therefore people will no longer be able to buy homes because  their average incomes are too low to sustain those home market values. That's when we see the "bubble burst". And home prices will fall because there are not enough buyers to pay for those high priced homes.

Conversely when incomes are relatively high and homes are relatively low we will see the index around 25-27%. This would be considered the bottom of the cycle. They can "afford" to buy homes, their income is high relative to the local home prices. That means people can afford homes and therefore houses will increase in response to higher demand.

So now lets wrap this up and combine the two for our million dollar answer; housing affordability with rapidly rising values.  In areas that saw a rapid rise in home values ( a real estate bubble) that are now experiencing a rapid decrease in home values, the bottom will occur when the housing affordiablity index reaches below 27%. You can view that as your BUY trigger. This will happen by only one of two things. Either home values drop (relative to income) or incomes increase (relative to home values).  And the opposite is true. The SELL trigger in a rapidly rising market is when the housing affordability index reaches approximately 40-45%.

In markets that are relatively stable and the housing affordability index is in between 27-42% , then there are no real BUY or SELL signals. It is a relatively good time to buy and good time to sell. The buy and sell triggers discussed that come from the housing affordability index only apply most dramtically when we see rapidly rising or falling house values (real estate bubbles).

( please note...there are many avenues to discuss ....this analysis can also lead to other fundamentals of market analysis such average incomes, average age, school enrollment etc... for a clear picture on real estate cycles...)

I have had many conversations on when this turmoil in the market will end. The above analysis is only in a perfect world. There are many economic factors to consider when analyzing market conditions. With the current credit markets experiencing a major overhaul and consumer confidence ( fear) crashing, there is no "one" answer. Time has proven that basic economics and common sense will prevail in the long run. By applying this method to your LOCAL real estate market you will be able to advise your clients on market triggers, and help them through some tough decisions when it comes to the "right time to buy or sell".

For more info: (705)-812-1033

Email: mark(at) manainvestments com

Mana Investments - www.manainvestments.com - We invest in real estate investing as well as buy houses in the Barrie, Orillia, Innisfil, Collingwood, Midland areas.  We can show you how to use your  RRSP's as a 2^nd mortgage for real estate investing in Ontario

Homes by The Owner - www.homesbytheowner.ca  Helping Buyers and Sellers in the FSBO real estate market in Simcoe County and surrounding Oro-medonte areas

The Six Steps to Success - www.sixstepstosuccess.com - Get to your financial goal quicker...Helping you achieve success in goal planning.

These Questions will help clarify your first steps to investing.

What a time to be in real estate! Some areas up, some areas down. What is an investor supposed to do?. Yes I know many agents will say its tough out there but I am a "cup half full kinda guy" and I see nothing but opportunity out there. Here are 5 things you should ask yourself (and your agent) before buying an investment property in this market.

•1-      Where are we in the Real Estate Cycle? It is good to talk to an expert to find out what the market is doing. Every local market is in a cycle or trend. Find out where that cycle is and base your investment on that i.e. what the market is doing (upswing, flat or downswing).  

•2-      Negotiate, Negotiate!  In any real estate transaction be prepared to negotiate. If your buying in Barrie or Orillia areas, look at all factors that will affect the "future" value of your investment. Always have a "plan B" ( a back up) when you negotiate

•3-      Educate....NOT Speculate. Do the research necessary on all aspects of your investment. Look at transportation developments, shopping mall growth, employment and vacancy statistics ( among others)

•4-      Take a Breather.  In real estate it is best to always have a cool off period to think things through. In home buying as in real estate investing it is good to take time to ensure that this is what you want. Buying can be a very emotional time

•5-        Set Goals...Write a Business Plan. Investing in real estate is just like any other start up business. Write a plan that is realistic and takes you from where you are today to where you want to be 5 years from now. The best advice here is talk to someone who has done it. Get there story and see if your plan is realistic.

•6-      Check your FICO Score. That is...check your credit rating. Investing in real estate will require that you have a healthy FICO score ( the rating that banks use to see how credit worthy you are).

Mana Investments can walk you through all the complexities of investing in real estate for the first time. We have developed tried and true options to help you find, buy, and manage your investment. We focus on Barrie, Orillia, Collingwood, Innisfil and Midland because from our economic research we believe that these towns have massive growth potential over the next 10-15 years.  

For more info: (705)-812-1033

Email: mark(at) manainvestments com

Mana Investments - www.manainvestments.com - We believe in Education not Speculation. We invest in real estate in the Barrie, Orillia, Angus, Innisfil, Collingwood, and Midland areas.  We can show you how to use your RRSP's as a 2^nd mortgage for real estate investing in Ontario

Homes by The Owner - www.homesbytheowner.ca  Helping Buyers and Sellers in the FSBO real estate market in Simcoe County and surrounding Oro-medonte areas

The Six Steps to Success - www.sixstepstosuccess.com - Goal Setting for real estate Agents. Get to your financial goal quicker...Helping you achieve success in goal planning.

Three times this month Toronto-Dominion Bank, Canada's second-largest bank, has been first to lower its prime rate following decisions by the Bank of Canada (the central bank) to lower its overnight rate. Toronto-Dominion's biggest rivals followed suit the same day.

For example, on Oct.8, TD Bank was the first to announce a cut that day with a statement at 1 p.m., followed by Canadian Imperial Bank of Commerce (CIBC) 43 minutes later. Royal Bank of Canada, the country's largest bank, was next at 2:32 p.m., followed by Bank of Nova Scotia and Bank of Montreal.

Two days later, the banks reduced their rates again following the federal government agreement to buy as much as C$25 billion of bank mortgages. TD was first, announcing a 15 basis-point cut at 12:31 p.m., followed by Scotiabank at 1:23 p.m.

The Canadian Banks broke with tradition on Oct. 8, lowering their prime rate by 0.25%, short of the Bank of Canada's 0.50% cut.

TD Bank led again on Oct. 21. following a 9 a.m. Bank of Canada announcement of a 25 basis-point cut. TD cut its prime rate 35 basis points at 4:15 p.m. Canada's five other largest banks followed over the next 48 minutes.

What does all this mean for the consumer? At the end of the day, none of these banks gain much advantage by cutting first because new rates don't go into effect until the next day.

Canada's six largest banks are now offering the same prime rate of 4 percent.

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Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Here are some updated statistics on what is happening in the GTA Market as compared to last year.

Average Days on the Market:

The number of days that homes are on the market are definitely increasing.  This is allowing buyers more time to consider their choices.

Along with this the number of units sold was down 10% from last September.

With the longer time on the market and less units selling there is downwward pressure on prices which are down 4% from last September.

What does this mean for Sellers?  They are going to have to be realistic when pricing their home at or below market value to get the price they want in a short period of time.

What does it mean for Buyers? Sellers may consider offers lower than they would have a year or 2 ago and conditions that they would have rejected not so long ago.

For Buyers entering this market who own a home, list and sell yours first, just so you do not have to bridge finance between two homes.  Owning two homes at the same time is a costly proposition and one you don't want to make in tough economic times.

A potential virus!

 

I checked Snopes and it is for real !! Get this message sent around to your contacts ASAP PLEASE FORWARD THIS WARNING AMONG FRIENDS, FAMILY AND CONTACTS!

You should be alert during the next few days. Do not open any message with an attachment entitled 'POSTCARD FROM HALLMARK,' regardless of who sent it to you.  It is a virus which opens A POSTCARD IMAGE, which 'burns' the whole hard disc C of your computer.

This virus will be received from someone who has your e-mail address in his/her co ntact list. This is the reason why you need to send this information to all your contacts.  It is better to receive this message 25 times than to receive the virus and open it.

If you receive a mail called' POSTCARD,' even though sent to you by a friend, do not open it!

Shut down your computer immediately.
It has been classified by Microsoft as the most destructive virus ever. This virus was discovered by McAfee yesterday, and there is no repair yet for this kind of virus. This virus simply destroys the Zero Sector of the Hard Disc, where the vital information is kept.

COPY THIS INFORMATION AND SEND IT TO YOUR FRIENDS. REMEMBER: IF YOU SEND IT TO THEM, YOU WILL BENEFIT ALL OF US.

Snopes lists all the names it could come in.

PLEASE READ, COPY & FORWARD!!! 

Knowledge is power!

 

 

Ann Sabbagh

Vice-President

Seacoast Mortgage

508-243-1190 (cell)

www.annsabbagh.com

 

Licenses in RI, MA, CT and FL

 

"When you choose me as your mortgage consultant, you also choose a financial planner who has YOUR financial strength as the PRIMARY concern"

In this example I would like to show Realtors and Homeowner's the importance of creating a neutral dining room to allow buyers to see themselves entertaining their family in the home. 

Before Staging, the dining room was a real conversation starter with the purple walls and the pink dining room set. The beautiful crystal chandelier was lost in the room and was not even noticed.

After Staging, the dining room is painted a calm, neutral colour and the floral draperies have been removed to add to the serene effect. The chandelier is now a focal point. A simple floral arrangement has been placed on a new dining room set to allow the buyer to see how they could entertain in this room.

Investment minimal.

Impact priceless.

 

Many people were wondering last week why the Canadian Dollar started to lose value against the US Dollar, when it appears that the USA was in greater crisis mode in comparison to Canada.

Well here is why....

Canada is one of the world's largest producers of oil and holds oil reserves second only to Saudi Arabia, which makes Canada very reliant on its most prized commodity.  It is also the largest supplier to the world's biggest oil consumer - the United States.  Therfore, rising oil prices tend to be good for Canada/bad for the U.S., while falling oil prices tend to be bad for Canada/good for the U.S.

As you can see from the chart above, price movements USD/CAD and Oil are inversely correlated from each other - meaning as oil trends higher, USD/CAD tends to trend lower and vice versa.

Since January 1988, USD/CAD and Oil have had about a 68% inverse correlation to each other. This is a pretty strong correlation.

 

 

 

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com

Each VERICO Broker is an independent owner operator.

  

 

 

The Canadian Central Bank cut rates today by a quarter point to 2.25%.

This rate cut today by the Bank of Canada was left than the half point cut expected by some economists.  The reaction to this was also seen by the Canadian Dollar... falling to a three-year low following today's announcement.

It will be interesting to see how various Canadian financial institutions react today to the news... in terms of their prime rates and mortgage rates.

The Central Bank commented however that it would likely have to lower rates further to combat the effects of the global financial crisis.  "In line with the new outlook, some further monetary stimulus will likely be required to achieve the 2 percent inflation target over the medium term," the central bank said in a statement announcing the lowest overnight lending rate since September 2004.

The Bank of Canada also commented on the US Recession, stating, "The global economy appears to be heading into a mild recession, led by a US economy already in recession."

 

 

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com

Each VERICO Broker is an independent owner operator.

Many economists in Canada are expecting the Canadian Banks to hold their Prime Rates, despite the Bank of Canada decision today to drop the overnight lending rate by a quarter point to 2.25%. 

The Canadian Banks earlier this month followed a similar trend when the Bank of Canada lowered their rate to 2.50% and the Banks did not pass on the full extent of the cut when the Banks lowered their Prime Rates at that time.

Some economists forecast that the Bank of Canada will lower their overnight lending rate to 2.00% by year-end.

Prime Rates are used as a benchmark to set most consumer loan rates in Canada, such as mortgages and lines of credit.  Unlike Canada, many US banks peg mortgage rates off LIBOR, the rate on inter-bank borrowing. That means US banks can match a central bank cut and drop prime rate with little impact on the profitability of their consumer loan portfolios.

 

 

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.