Tuesday 27 January 2015

Relax... The sky is probably not falling.

As a follow-up to my post yesterday about fear itself being the thing to fear most in the market, today I would like to caution you about 'scary' news headlines, and not give in to the Chicken Little effect.

I don't think it is a good idea to look at the world through rose-coloured glasses, either, but you need to be aware that there can be a very negative slant on the news we are inundated with every day.  If you glance through any daily newspaper, it can be depressing.  Unfortunately, new services love bad news because negative headlines are emotionally provocative and grab your attention.

Most of us have a general sense of this, and there is the old media saying about negative headlines,  "if it bleeds, it leads."  Meaning stories and headlines that inspire some level of fear are likely to capture your attention and get you to read the article.  And I have just come across a perfect illustration of how a headline can change the entire tone of a story.

I receive regular email updates Real Estate Professional (www.repmag.ca), and yesterday I had an email for a story titled "Lower rates set to benefit first-time buyers".  Okay, that sounds interesting.  Except at some point between the email coming and my clicking through to the article, someone at REP decided to change the title to "Lower rates doing nothing for up-sizing clients".  Well, that doesn't sound so good at all, does it?  Even though it is the same story.  But someone felt that a change in headline was necessary.  Really?

With a decline possible in some markets, especially in Alberta, watch out for media seizing the opportunity to write dramatic headlines.  And there are always the doomsayers looking for an opportunity to get into the news. Read the articles carefully and with critical thought.

If that sounds like too much effort, ignore them and focus on your own circumstances.  The national economy is not under your direct influence, but your personal economy is.

Monday 26 January 2015

Will falling oil prices kill the real estate market?

There's a lot of concern about the falling prices of oil and their potential impact on the economy.  The reality is everything is connected.  Besides the direct impact on oil-production companies and the province of Alberta, even local governments may see some impacts as their revenues from HST on gasoline sales falls with the price at the pump.  The oil market has some far-reaching impacts.

So could falling oil prices tank the real estate market?  Well, sure, they could.

And so could a giant earth-shattering meteor hitting the planet and wiping out all life.  But I'm not particularly concerned about that happening.  (I fully expect Bruce Willis to take care of it)

I'm no professional economist and I don't have a crystal ball, but here are some of my thoughts.

While there are some negatives to the dropping oil prices, everyone is saving money at the gas pumps.  Depending on what you do for a living, this might mean more or less savings.  If you commute to Toronto for work, drive a taxi, or work in a transportation business, gas prices are good for your bottom line.  I know it is reducing my costs of getting around for business.

And then there was the surprise interest rate reduction by the Bank of Canada last week.  This could mean lower interest rates on variable rate mortgages.  That is good for people already on variable rate mortgage, and maybe good for new buyers too.

If you live in Alberta or work in a business directly related to oil production, then you're more likely to see some economic effects on your own life.  But for the rest of us, the biggest thing to fear is fear itself, as the old saying goes. 

A much larger risk to the real estate market is everyone getting into a panic and killing the market.  So is there a risk from the oil?  Yes, but the risk may be in our heads more than in our wallets.

My advice?  Stay calm and make rational decisions based on your circumstances.

Tuesday 13 January 2015

Negotiation: when is enough enough?

No one wants to pay more for a house than they have to.  So as long as there is no competition, you'll probably want to go in below asking price when making an offer, unless the property is so perfect you don't want to risk missing out on it.

There is danger in making offers too low that you might offend the seller and make negotiating more difficult, but there can be some power in audacity.  I've seen low ball offers work out. 

The main thing to bear in mind is that you might miss out on the property if another offer comes in while you're still negotiating back and forth with counter-offers.  If you're not okay with that possibility, then there may be some wisdom in coming together sooner rather than later.

Not long ago, I saw a situation where the buyer was being really firm on a very low price and not coming up very much. Truth be told, it almost worked out for them.  The final difference in price was only $2500.  The seller was ready to accept just to be done with it, but another offer came in at a higher price and the new buyer was able to bump the first buyer out. 

$2500 is not much on a real estate purchase.  Even at higher interest rates than we have today - let's say 6.00% - you're talking less than $20/month difference on mortgage payments. I don't know about you, but that seems like too small an amount to miss out on the property you want to buy. 

Another thing to keep in mind when negotiating is that the sellers' position on pricing is different from the buyers'.  While the buyer certainly pays the difference in the long run, and more with interest, it is worth considering what the difference is to the monthly payments and whether it is worth struggling for more of a reduction to save a little bit on the payments and whatever the difference is on the down payment. Using the $2500 example above, you're looking at less than $20/month on the mortgage and an upfront difference of probably $125-500 on the down payment (depending on your down payment amount). But a $2500 reduction in price is a difference of over $2300 to the seller. That is something to keep in mind if the seller is being firmer than you like - it makes a bigger difference up front to them than it does to the buyer.

In any case, make sure you are working with an experienced real estate agent who can give you solid advice in negotiating, and consider carefully the market value of the property and the risks of pushing too far.

Wednesday 7 January 2015

Strong December Market

The REALTORS® Association of Hamilton-Burlington (RAHB) reported 796 property sales processed through the RAHB Multiple Listing Service® (MLS®) system in December.  This represents a 7.6 per cent increase in sales compared to December of the previous year.   

There were 695 properties listed in December, an increase of 15.4 per cent compared to the same month the year prior.  End-of-month listing inventory was 13 per cent lower.

For the full report and commentary from RAHB in PDF form, CLICK HERE.