Newton and Mortgage rates

"For every action there is an equal and opposite reaction", so says Issac Newton in his third law of motion and so Jim Flaherty Federal Finance Minister hopes.  With the federal government fearful of what they see as an overheated housing market in Canada, Flaherty has taken a number of steps to interfere in the market in the hopes he can slow down Canadian homeowners and buyers reckless desire to own a nice home to live and prosper in.  The latest (and if you believe the Right Honorable Minister this time, the last) bit of meddling was the cap on amount of high ratio mortgages that the federal government would insure through CMHC.  Effectively telling the banks that if they want to lend more, then they will have to take on the risk themselves.

Banks, agonizing over the fact that this would mean a potential loss of millions of dollars in profits - perhaps a couple of percentage points off the hundreds of millions they annually make - see their only option as offloading the loss onto Canadians through higher interest rates, after all why should they have any risk when they lend money to anybody, especially when there are so many eager Canadians who dream of putting a roof over their families head!

Look, is it realistic to expect that the historically low interest rates that we have seen the past few years will stay there?  Of course not, interest rates are going to go up and in fact if you look at the long term rates offered by the banks this year you will notice that they have yo-yoed up and down all year.  Homeowners have got to expect and be prepared for rates in the 5% range at some point soon (HINT - pay attention to the prime lending rate NOT the long term rates offered by banks; when this starts to rise, that signals that the lending days of wine and roses are coming to an end).  What really frosts my cookies is the holier than thou attitude that the Minister and the powers that be take when they look at the housing market, they try and look at it as a national organism rather than regional animal. To use national numbers to point to an 8.4% year over year rise in house prices or a 9.4% increase in the number of transactions is more a reaction to the large market impact of the larger metropolitan markets like Toronto or Vancouver which have a disproportionate impact on the numbers than it is to  national explosion of an out of control housing market.  For the most part, as CREA (Canadian Real Estate Association) points out here, the country as a whole is impacted by a few heated markets, and in fact, had just started to see gains from the last federal interference in the housing market.

So what is my long and rambling point?  The recent angst and dismay over the latest announcement of interest rate hikes is a red herring and focuses attention in the wrong direction.  We ought to be spending more time asking why the federal government keeps creating policies that are aimed at telling Canadians what is good for them and then coming back with a new and even "better" idea.  The Right Honorable Minister has to start letting Canadians decide what is good for them and stop treating them as if they are heroin addicts in a poppy processing plant.  Karma, much like Newton's 3rd law, can have an equal and opposite reaction, so with all the attempts to slow down the Canadian real estate market, the Minister might get what he wishes for in spades.

YEG Real Estate for the 1st Half (Part three)

Well, we have looked at the South and the North so far in the last two posts and I think it is safe to say that in general, Edmonton real estate has been pretty steady in 2013.  The South market seems to be a bit more active as far as raw number go, but the North has posted slightly higher year over year gains.  Conversely, prices in the North have held relatively firm from 2012, while in the South they have had a modest increase.

Today lets focus on the three regions that stretch across the middle portions of the city.  The WEST as you can imagine are the westernmost Realtor's Association of Edmonton zones; 10, 11, 20, 22, 57 and 58.  The easiest way to describe it I guess is to take everything that is west of the river as you cross the Anthony Henday or the Whitemud up to Stony Plain Road.  DOWNTOWN is RAE zones 12 and 13, and is surprise(!) the smallest area considered as it is the area immediately around Edmonton's downtown Jasper Avenue/River Valley Core.  CENTRAL is comprised of RAE zones 5,6,8,9 and 23 and is the older, established areas west of 97 street and south of the Yellowhead, north of the River and east to the city boundary.  Let's talk about how these three areas have done so far in 2013.

West - An area that has a good mix of housing, the West region favored the single family home market so far in 2013 with an increase of just over 7.5% in the number of transactions from 2012 (811 vs 872) and about 5% in prices (average SP in 2013 ytd is $471,603).  The condo market by contrast is relatively flat in a year over year comparison with both transaction numbers and sale price increases being less than 1% -3 more homes sold in 2013 vs 2012 and sale price increase of under $900 - this isn't negative news, just very neutral a very stable environment at this time.

Downtown - As you might expect, the downtown market is dominated by condo sales which traditionally represents about 90% of the sales for the region.  Because of the small number of sales that normally happen in single family homes here (43 vs 48) you can get some disparities when you look at price swings - nonetheless, we can point to a 15% increase in year to date sale prices for the area.  The Condo was a tad less robust with modest activity increases (407 vs 426) but a healthy 7.75% increase in sale prices ($294,581).  With the introduction of new projects downtown and river valley it may be an indication that prices in this area might breach the $300,000 level and stay there.  The end of year will be an interesting point to look to for this.

Central - Without trying to "pile on", the Central region remains a challenge.  Mostly comprised of some of the older, well worn areas of the city, the area tends to be an area that is always a place to find income properties at value.  More recently, we have seen some enterprising people start to consider more and more infill or redevelopment projects, but this remains a challenge due to some of the socio-economic factors that still offer challenges to many districts within the area.  Year over year the news is mixed; transaction wise numbers are down - over 10% for SFD (439 vs 395) and over 8% for condos (147 vs 138).  SFD prices though have risen 6.3% while condo prices have remained flat with a .1% increase.  There remains a great many opportunities for Buyers in the area looking for a low cost entry in to the housing market, or for investors looking for cost effective income homes.

We looked at a real "Bridge Mixture" of regions today that runs the gamut of the Edmonton home market so it is hard to offer a summary for the areas as we did in previous posts.  Rather, let me touch on something that is important to realize.  The city market is cyclical.  What we have talked about the last three posts is the year to date market and for Edmonton, this typically means we are looking at the high water mark for prices.  For the balance of the year we normally see prices trend downwards as the months and the seasons change.  In many of the areas we might see a small "bump" for a fall buyer spurt, but the bulk of the buying and selling is done.  The caveat to this, and the cautionary note, is years such as 2006 and 2007 where the activity did not tail off and things continue to press upwards due to economic and job growth.  I don't think we will see this but things have been slightly more robust than they have been in years past.  It is important when you start to look at making a real estate decision that you call in an expert to look at what the market is doing and what part of the cycle you are in.  Coincidentally, I can do that! :-)

For any questions about your real estate needs give me a call at 780-919-7653 or send me an email!

Once again thanks for reading!

YEG Real Estate for the 1st Half (Part two)

Yesterday I took a look at how the south side of the city did for the first half of 2013; all in all, it did pretty good posting reasonable price gains in most areas with condo transaction numbers being particularly brisk posting double digit gains in all three regions.

Today, I am going to turn our focus to the Northside - again we shall be looking at three areas; the NORTHEAST which is comprised of Realtors Association of Edmonton zones, 2,3 35, 50 and 5, picture the area that is roughly north of the Yellowhead east of 97 Street but with the area north of 153 Ave taken away.  It includes Clareview, Londonderry, Hollick Kenyon as points of reference.  The NORTH will include RAE zone 1, 27 and 28; so north of the Yellowhead and west of 97 Street but also that area north of 153 Avenue - so areas such as Calder, Castledowns and Ozerna.  The NORTHWEST is RAE zone 4, 7, 21, 40 and 59; a smaller residential zone, it includes such areas as Glenora, Westmount, Mayfield and northwest to the St. Albert boundary.   Let's see how they fared so far in 2013.

Northeast - A real mixed bag area as it has a little of everything for every type of homeowner.  Whether you are looking for an older home on a larger lot, investment properties, upper end homes, or a condo this region will have it.  It has been a very stable year so far for the area with minimal gains in the single family market.  Only 11 more homes were sold in 2013 and the asking price actually dropped by a few hundred dollars, the fact that sale prices rose marginally (.5%) suggests that Sellers are very realistic about their home's value.  The Condo market is somewhat perplexing, as we see a similar story to the South side with the number of transactions increasing in 2013, but conversely we also see an almost 7% drop in sale price and a whopping 16 day increase in the time it takes for condos to sell - this might indicate there are some bargains to be had in this area.

North - Very similar to the Northeast as far as residential make-up, this region is dominated by the neighborhoods that make up Castledowns.  It remains in the midst of a major rebuild with the continued redevelopment of the Greisbach base which will continue to add a mix of housing options.  While we see activity up in this area (8% for SFD and 13% for Condos), prices took a slight dip for both (.5% for SFD and 1% for Condos), this could be a factor of the influence of new home builds in the area offering direct competition to the resale market.

Northwest - While it is made up of mostly older established neighbourhoods, the Northwest is poised for redevelopment as it contains the potential of the municipal airport redevelopment project and we are already seeing infill projects in such areas as Glenora, McQueen and Westmount. The area actually experienced some very good growth so far in 2013 with both SFD and Condo transaction increases in high single or double digits (18.5% for SFD and 8% for Condos), prices all so good increases (4 and 8% respectively). I expect that this will continue to be a popular area for people looking to find affordable projects to take on, or move in to homes that have already been redone.

All in all, the northside continues to put up blue collar numbers.  It is slow and steady and a very reliable place when it comes to solid stable long term growth.  For investors or first time buyers it offers some very attractive long term benefits for home ownership.  Remember though that these are just broad strokes, for a more in depth look at your home or to talk about your personal real estate needs, give me a call at 780-919-7653 or send me an email!

Thanks for reading!

YEG Real Estate for the 1st half (Part one)

Hi!

Wanted to take a look at how real estate is doing in various parts of the city for 2013 so far (til end of July) since traditionally, we have left the bulk of the market activity behind.

Today I want to focus in on the south and do it by sections ... okay I don't mean to make this too complicated but I divide the city into different areas from what the Realtors Association of Edmonton do.  For me, the South of Edmonton is three areas: SOUTHEAST which is RAE zones 29, 30, 53 and 54 - think of the area of the city from Whitemud Freeway South and Calgary Trail East.  SOUTHWEST which is RAE zones 14, 16, 55 and 56 - so Whitemud Freeway South and Calgary Trail West to the river.  SOUTH which is RAE zones 15,17,18,19 and 41 - that band in south central Edmonton that follows the river from UofA to refinery row and Whitemud north to river.

Anyways,  how are these areas doing compared to last year?  As a homeowner is your home worth more or less?  How much activity is happening out there and how long is it taking to sell?

You can find the Realtor's Associations July news release here and President Darrel Cook is very positive about the overall Edmonton real estate market. So let's take a little bit of a closer look at these three southside markets ..

Southeast - The brightest news to report in the southeast is the CONDO market.  With 17% more sales than 2012 and a 5.8% increase in prices condos in the southeast remain a great entry level option for many first time home buyers (average sale price $219,575).  The single family market has remained pretty stable in 2013.  A slight decrease in homes sold (910 vs 915) has been offset by a 3% increase in prices ($375,908) and a quickening of time on market (38 days) from 2012.

Southwest - Traditionally the southwest has been a more upscale market encompassing some of the southside's more prestigious neighbourhoods - Riverbend,  Twin Brooks, Windemere etc.  Because of the upper end market the time frame for many sales pushes up the days on market for the area slightly (45 days for SFD and 55 days for Condos) and these numbers are pretty consistent year over year.  Single family sales have increased 2% year to date and this has bee mirrored by 2.6% increase in price as well. Condo sales have increased a staggering 29% but prices have actually seen an adjustment down somewhat by about a quarter percent.  Looking at the inventory I would attribute this to an influx of new product on the market rather than a flood of resale units.

South - this remains one of the more desirable regions of the city to move to, whether you are a looking to be part of the Whyte Avenue lifestyle, needing a place near the university, or taking advantage of the established neighbourhoods around the Bonnie Doon or Capilano shops, there is always a reason to look in the south.  This popularity is recognized in the year over year increases across the board.  Both SFD and Condos have seen over 10% increases in activity (10.8 and 11.7% respectively) while prices are both up over 5% year over year.  Properties are also selling faster than 2012 3 days faster for SFD and 2 days for Condos.  Keep in mind that the popularity means that it is going to cost you more to live here - with average sale prices ytd of $432,700 for SFD and $296,450 for condos.

So there is a quick update for the south of Edmonton; a little bit of something is available for pretty much any homebuyer and Sellers have a lot of good news when it comes to how their home has made out over the course of the year.  Remember though that these are just broad strokes, and for a better understanding as to how your real estate needs can be best served in the Edmonton market it is best to sit down and have a one on one conversation about your specific needs and wants and how they relate to the areas you are interested in - give me a call 780-919-7653 or drop me a line and we can get started!

Thanks for reading!

Larry