REDISCOVER REAL ESTATE

Time to look at the economic fundamentals?

A wide range of indicators say Canada can no longer count on a booming housing market to keep the economic blues at bay.

Watch this video on BNN, interview with Don Campbell, president, Real Estate Investment Network.

Everything from the housing bubble misconception to understanding the new agreement between the Competition Bureau and The Canadian Real Estate Association and what this means to the Real Estate industry. This guy makes sense!  [Watch video] 

 

Homebuyers' guide to overcoming fears!

Canadians are worried about rising prices and interest rates, but that’s not stopping many from entering the housing market.

What's the biggest worry among homebuyers these days? On the top of the list: an overwhelming mortgage payment, according to recent research from the Home Buying Institute.

Seven in 10 prospective homebuyers said they were worried about paying more than their house was worth or still being able to afford it should interest rates increase — a development that most economists feel is inevitable after years of historically low rates.

The numbers look something like this:

• 37% worried about ending up with a mortgage payment that's too large.
• 23% feared they might pay more for a home than it's worth.
• 16% were afraid of losing their jobs after taking on a mortgage loan.
• 10% were concerned about buying a home with major structural problems.
• 5% were afraid of choosing the wrong type of mortgage loan.
• 5% feared another housing bubble-and-bust cycle.

Sound familiar? Good. Because these are real issues, says Home Buying Institute CEO Brandon Cornett. It is, however, possible to protect yourself. Click here for some home buying tips to alleviate your fears.

Source: Home Buyers Guide MSN Money

How can I help?

Money is on sale!

This month, a client locked in a five-year mortgage at 3.49 per cent.

They could have done the same in 2001, but it would have been about 7 per cent.

In 1982 it would have been 18 per cent.

Even in the low-rate days of 1952, it would have been about 5.5 per cent.

Borrowing costs are lower than any time in modern history. This represents an incredible opportunity for those with the foresight (or fortitude) to take advantage.

Here are five strategies to consider:

1) When borrowing, lock in today’s rates. I know that at most times a variable rate is a better solution than fixed. Today is not "most times." If you are getting a new mortgage, lock it in. Even if it is only for three years, you can get a three-year mortgage today for under 3 per cent. The best three and five-year variable rates today are 2.25 per cent, but the Bank of Canada is almost certain to begin hiking rates again within six months. With such a narrow gap between a variable rate and a fixed rate, it simply isn’t worth the risk.

2) If you own a house, consolidate all your debts against your home. While credit card debt remains as high as 19 per cent in many cases, and other unsecured debts might be in the 5-per-cent to 7-per-cent range, you may have an opportunity to move those debts to your mortgage and gain significant savings. Even having a line of credit at prime + 1 per cent (4 per cent) can be consolidated into a mortgage for real savings. As an example, if your home is worth $500,000, and you have a mortgage balance of less than $400,000 (80 per cent), you will likely be able to consolidate other debts in your mortgage, up to 80 per cent of your home’s appraised value.

3) Start a business. As a business owner, I know that getting capital is not easy. The most common response I heard when I was looking many years ago was “use a line of credit secured by your house.” This might not be right for everyone, but I can assure you that you will not find a lower-cost source of capital (except those interest-free loans from family). In fact, I would look at using a fixed-rate mortgage as opposed to a line of credit if you require a larger amount of funds up front or want to secure the rate.

4) Borrow to invest. While some believe this is gambling, I can assure you that, unlike at the Las Vegas tables, the odds are tilted toward you. If you borrow to invest, the interest cost becomes tax deductible. In today’s market, you could do a five-year mortgage at 3.5 per cent, and if you are in the top tax bracket, this will effectively cost you less than 2 per cent a year. Over the past 60 years, the Toronto Stock Index has averaged annual returns of over 10 per cent. I am not saying you can count on these returns every year, but if your borrowing cost is under 2 per cent, and a dividend portfolio can pay 4 per cent a year just on the dividends, it can be a very powerful wealth-building strategy.

5) Borrow to buy more real estate. Imagine having an $800,000 house in Vancouver or Toronto and having no debt. You decide to buy a beautiful ocean-front property in Florida or California. The new property costs $300,000 – and they want cash. You can take out a mortgage on your Canadian property to possibly make the real estate purchase of a lifetime. If you are considering this, be sure to use a foreign-exchange dealer to save on exchange costs, and look into the tax issues of owning real estate in the United States.

Just for fun, you might want to file away this article and open it up in about five years. You may just wish you took the plunge when money was on sale.

Globe and Mail Fri, 15 Oct

Fall Housing Market to Improve After summer Slowdown

The company, which overseas real estate agents throughout the country, said despite some improvement in the housing sector this fall, sales in most markets are unlikely to return to the brisk pace seen late last year.

Re/Max said the threat of higher interest rates, stricter mortgage regulations and new harmonized sales taxes in Ontario and British Columbia - elements commonly cited for recent sluggishness in residential real estate - had just a "nominal impact" on the housing market.

"Economic uncertainty played a much greater role on softer housing conditions over the summer months," the company said in a statement.

But despite slower overall sales in recent months, Re/Max said demand remained high for luxury homes. It said sales of "upper end" homes were up at least 20 year cent, year-to-date, as of August in all the 19 major markets it tracks.

For this period, Re/Max said home sales are up in more than half the markets, and prices have risen in all. The highest average home prices were seen in Vancouver ($667,227), Toronto ($430,055) and Victoria ($495,993).

By Derek Abma, Financial Post

How can I help?

______________________________________________________________

b r i a n m a y e r real estate sales representative

Royal LePage Your Community Realty Brokerage

independently owned and operated

187 King St. East Toronto, ON. M5A 1J5

(416)-637-8000

Helping You is What We Do.

A referral remains the highest compliment I can receive.

www.brianmayer.ca