Home sales on the rise

Sales of detached homes in April topped the same month last year. According to the London St. Thomas Association of Realtors (LSTAR), 666 detached homes sold last month, compared to 654 last April. Total units sold decreased 4.5% because only 138 condos sold compared to 188 in April 2008.

This is the third consecutive month of improvement since January when total sales were down 35% compared to the year before. Prices have also seen improvement; average price of homes sold from January to April is $207,591, down only 1.8% from the same period last year.

New tax credits and programs allowing homebuyers to draw money from their RRSP for home purchases were a big driving force in the market - attracting first-time homebuyers. And with London's diverse economy, we've been more insulated from a sharp downturn in house prices hitting some other cities such as St. Thomas. Heavily dependent on the auto industry, they're really feeling the pinch with a 27% drop in sales in April, compared to same month last year.

Home sales are important economic generators in themselves. A new national study shows each home sale generates $46,400 in additional spending on furniture, appliance, and renovation moving and legal fees. Past recessions have shown that real estate sales typically rebound before the job market and general economy.

London real estate market update

A small drop in sales is good news for London. The London area real estate market saw a decline in sales by 7.2% (detached homes).

The London St. Thomas Association of Realtors (LSTAR) reports 551 detached homes and 118 condos sold in March. The total sales of 669 units is down 10.2% compared to 745 in the same month last year.

This is a great improvement compared to the 35% drop in January, and 30% in February. And when you look at what's happening in other markets, a 7.2% decline isn't so bad.

Prices have remained stable; the average house price for the first quarter of 2009 was $206,944, which is down by only 2.7% from last year.

Active listings in March was up 20% compared to same month last year, while home sales in St. Thomas jumped 14.6%--although house prices in St. Thomas have decreased more than any other London area (down 7.2%)

The London area market is living up to its reputation as a long-term stable market.

The Good, The Bad, and The Ugly of HST

The Good

Tax experts predict the average Ontario family will be further ahead despite harmonized sales tax. Lower-income families will get hit a bit more, but the tax rebate will cushion that.

Harmonizing GST and PST is good for businesses because it lets them recover money now lost to retail sales taxes and use it for investment in new equipment and machinery. Currently, businesses receive a rebate on the GST, but not PST.

A study of Quebec, Newfoundland, Nova Scotia and New Brunswick - which harmonized their GST and sales taxes - found business investment jumped and prices (of goods & services already taxed) decreased.

In the long run, more jobs will be created (better jobs that require equipment and machinery behind them which may pay better) and increased job security.

The Bad & Ugly

We will be paying more at the checkout.

Homebuyers, especially first-time homebuyers, will find it tougher to afford a home. For a resale house priced at $360,000, a HST could add over $2,000 in new taxes to closing costs. Take a look at the table below:



In total, a HST will add $313 million annually in new taxes to resale home transactions. This will hurt the resale home market, prolonging the housing industry’s recovery from the current economic downturn.

The media never prints about planes that land safely…only the ones that crash!

The same can be said with the Media’s current comments about the Real Estate Market. Consumers lose confidence and buyers become more cautious.

What should you do, where are we headed?

The Canadian Mortgage and Housing Corporation (CMHC) predicts a fairly stable market with some sectors showing declines and others remaining stable. New homes are hit the hardest and builders will offer more incentives especially if they have an over supply of ‘spec” homes.

The Canadian Real Estate Association (CREA) predicts a decline in activity of 19.1% and a decline in value of 7% overall for the province. The hardest hit areas in the province are projected to be in Windsor, Oakville, and Oshawa where the impact from the declining auto sector will be felt the most.

If you treat your investment like a stock, put in a purchase order and buy more, your cost base goes down and as the market recovers you take advantage of the increase/spread.

If are thinking of selling then price vs. show ability vs. timing will determine the difference between success and “long time” on the market. Make sure your research is accurate and thorough for the best decision.

MacCleans magazine published an article last Monday predicting the market will go down 20% and they used Teranet as a basis for this assessment. Teranet is a company who records all property transfers within the province. My belief is that MacCleans did not analyze the Teranet information objectively.

Let me explain: Let’s say you inherit a property and there is a transfer of ownership recorded at $1 or you buy the water frontage in front your cottage from the township for closing costs totaling $700. All these transfers are recorded at Teranet including selling your property on the open market (mls system). Let’s say you sold your cottage for 60% of value to one sibling and your principal residence for 60% of value to the other sibling to be “family” fair. Those amounts are recorded in the Teranet system.

So my question is: How can anyone take all the transfer prices of all real estate and predict what the market is doing without doing the objective research to find out the “why” of a sale, which would help enable you to determine where the real market is headed.

MacCleans sold a lot of magazines this past week. However, it is this writers’ opinion that they sent out some misleading information to sell those magazines and that’s bad news; a plane crash!

The press to some extent helps control our attitudes and our knowledge. If you are hearing bad news and thinking bad thoughts then good opportunities will not present themselves.

London is generally a white collar town and the market reflects this. Health and Education are the major employers. Yes we will have a slow down and there are hiring freezes and research freezes in those sectors but not mass lay offs. Our housing market is inexpensive compared to so many other centers: for example, Calgary, Vancouver, and Toronto. Our market doesn’t and hasn’t fluctuated as other markets have.

London is a great place to invest, work and live.

"January market feels the chill"

Want to know how the London area real estate market performed in January? Click here to read this great article.

Article Highlights
- 2.5% drop in average home price compared to last January
- 35% drop in homes sold compared to last January
- downturn in Canadian real estate market still mild compared to the U.S.

Ontario November Home Starts Moderate as Expected

Ontario’s preliminary Seasonally Adjusted Annual Rate (SAAR) of urban home starts slowed in November to 54,700 starts, down from 78,900 units in October. While multi-family home construction, which includes semi detached, town home and apartment units, accounted for much of the decline in November activity, single detached construction also moderated.

The longer term trend for Ontario housing starts has been one of high start levels gradually edging lower from peak levels in 2003-04. However, actual urban Ontario home starts for the year are still 14 per cent higher compared to the same period in 2007.

Our Real Estate Market in Perspective

I came across a couple more wonderful articles discussing our real estate market.

Average housing prices have been, and continue, to decrease nationally as Canadian home prices adjust to the market. Again, we won't be seeing a crisis here as our neighbours to the South have been experiencing.

The London and St. Thomas Association of Realtors (LSTAR) cite the average price of homes sold in December dipped below $200,000, compared to $206,557 same month last year. Nonetheless 2008 was a good year overall with 8,356 homes sold. This is down 11% from 2007, which was a record-breaking year for sales. 2008 sales were well within the 10-year average.

St. Thomas recorded 632 home sales for 2008, down from 867 in 2007. However home prices are holding up well, with the average price in St. Thomas for December was $187,361, compared to $172,550 same month last year.

A big factor in the London-St. Thomas market this year has been an increase in the number of listings. 3,133 listings in December, compared to 2,241 listings last year.

To learn more, click here to read "'Modest' dip, not crash, predicted for house prices".

Click here to read "Home sales, prices fall".

Welcome back

Happy New Years! The blog will be back on schedule now that the holidays are over. To kick off our new year, I found a great article in the London Free Press for those of you worried about the economy. Click here if you would like to read it. It echoes some of my previous posts.

Although London's housing market is slowing down, we have had a traditionally stable market. The housing market will remain healthy thanks to our diverse economy. It may look dismal in the U.S., but in Canada mortgage rates are good and inflation is under control.

Some London market stats for you

I thought this would make a great post for all of you; it's a section from my newsletter "Bricks & Mortar Real Estate Reporter":

Record breaking 769 sales in September
Slower 581 sales recorded in October.
November continues to taper.
Normal slowdown as we approach Christmas.

2007 average house price $202,256.00
2008 average house price $212,034.00

That’s a whopping increase of 4.85%.
Some segments have tapered a bit…
Declines from 2007 YTD

Ranches, St. Thomas down 2.5%
Bungalow, south London down 0.9%
Ranches, south London down 0.2%
Condos, east London down 1.3%
Townhouse, east London down 0.1%
Bungalow, Strathroy down 3.2%
Townhouse, Strathroy down 15.7%

Overall positive growth.

Have you read the December edition yet? Click here for a copy.

Also, I would like to hear what you want to see in my next newsletter. Leave some comments in what you want to read in the March edition of Bricks & Mortar Real Estate Reporter.

Is the market slowing down?

CMHC forecasted this slow down over a year ago, kudos to them! If you want more info click or paste http://www.charitylinkrealty.ca/cityprofiles/london/index.jsp. On the right hand side click on the CMHC links, lots of good valuable information.

The good news is we will continue to move to a balanced market, that’s right no buyers market in sight. That means an equal number of buyers and sellers out there. Yahoo the strong survive! Prices won’t increase as quickly as in the recent past and sellers might have to negotiate a few more extras (yeah) such as appliances. The forecast does call for a moderate price increase. All in all we are headed into a nice steady market. I love these markets.

Too bad the papers are reporting negative news, it hurts us all. Take Stirling in St. Thomas as an example. The papers reported a job loss at the plant of 2,300 +- when there are actually only 700 +- jobs. Yes Stirling at one time employed 2,300 but not for a long time now. The plant closing will have a slow down effect as St. Thomas and the surrounding businesses adjust but I don’t think it has to be the doom and gloom we hear about. A lot of people employed at Stirling don’t even live there!

The 10 year average for home sales in London/St. Thomas for the month of September is 6,597; 5 year average is 7,269; this year 7,113 sales. Not as bad as you think.

As we approach Christmas our market naturally slows year after year after year. Mortgage rates are still great. If you are thinking of buying now is a fantastic time especially if you find a motivated seller whose house meets your wants and needs. If you are serious about selling call me for up to date market info that will help you achieve your plans. If we know what the market is doing we know how to price to stay ahead of the market. More on pricing next week.

What are your thoughts?

Someone said...

Someone said you should not invest now because history will repeat itself; the recession in the U.S. is expected to hit Canada really hard, putting us in a recession by the next year. The unemployment rate in the U.S. is at an all-time high, Canada has reported that 50,000 jobs were lost in July alone, the biggest number since February 1991.

What does this mean for London? If there is a recession, mortgage rates increase and loans are more difficult to obtain. For people who have over extended, they will start selling assets—typically investment property, then cottage, then home. As a result, real estate prices fall.

However, the London economy is slightly different. A majority of the Canadian job losses were in the manufacturing sector; London is a service economy. The 2 largest employers in London are the London Health Sciences Centre and the University of Western Ontario. 269,000 jobs were created last quarter alone (LEDC).

Student enrollment in a recession rises with funding through student loans. With over 30,000 students at UWO, London is known to be a “University Town”. Investments in student rental properties are essentially recession-proof.

Can we expect real estate prices to crash in the next year? No. It is possible that prices will decrease in some segments. Since London is a service economy and a “University Town”, we won’t get hit as hard as cities with a manufacturing economy, in fact there will be a greater need for student rental properties.

So, is it really a bad time to invest in student rental property? No. With an economy like ours, now is the time to buy.

Interest rates remain low. Average mortgage rate for the past 10 years is 10%, anytime you are below the average you have to be ahead of the game. Take advantage of the present market!

slow down

The market has slowed as normal during our summer. People are on holidays, spending time with their children or just enjoying the hazy days of summer. Not to worry our market will pick up in the fall as usual. Reminder, October is fast approaching and CMHC will no longer approve the 100% finance "fully insured" mortgage feature. if you were considering using this option time to get serious and buy:).
CMHC predicted a balanced market and they are right, yeah.