Bungalows: The Great Condo Alternative!

     This week I helped a young couple purchase their first home, a detached bungalow in the Briar Hill – Belgravia area.  Without going into the specific financial details of their purchase, I'll say that they got the home for below the $325,000 price point (this includes purchase price + approx $5000.00 in reno's that they'll do prior to move-in).  We’re talking a fully detached house with a living room, separate dining room, large master bedroom, and a 2^nd bedroom on the main level... plus a family room, 2^nd bathroom and 3^rd bedroom on the lower level... plus front pad parking and a great backyard.  All for under $325,000!

Can you really find something that affordable in Toronto?  Yes, you can... but you have to know where to look and you have to be willing to invest some sweat equity and a few $$$ down the line to maintain/update the property as needed.  You’re not going find such a home in Little Italy or the Annex.  In fact, you’ll be hard pressed to find a decent freehold home under the $350,000 mark unless you’re willing to venture north of Eglinton (if you want to stay central) or into the western (generally defined as west of Dufferin) or eastern (generally defined as east of the DVP) areas of the city.

If you want something located in the downtown core then you’ll be shopping for a condo, it’s that simple.  Of course you can go the route of a condo townhouse, which offers something of a compromise between condo and house, sort of.  But here you’ll only be getting approx 800-900 sq ft and you’ll still have people living directly below and next to you.  You will get a rooftop terrace (up to a few hundred sq ft in size), but certainly nothing that compares to a real backyard.

The choice between house and condo generally boils down to two dichotomies: location vs. size and no maintenance living vs. hands on maintenance living.  I work with a number of buyers where this issue is a no-brainer – they want to be downtown where the action is and they don’t want to lift a finger when it comes to maintenance.  And they’re more than willing to give up square footage for these luxuries.  Of course, I also work with buyers where the opposite is true.

I helped another couple purchase a bungalow in the Old East York area earlier this year (note: the bungalows here are valued more in the $375,000-and-up range).  These buyers started out considering both condos and freehold homes.  After exploring what was available on the condo market in their price range they decided, for many of the reasons described above, that a bungalow home outside of the downtown core was the right choice for them.  Yes, it needed a bit of work to bring it up to a level they're happy with.  And if anything goes wrong down the line (roof repairs, plumbing issues, etc), it'll be their responsibility (as opposed to the property management company in a condo).  For them though, this trade-off was well worth it and they're very happy with their purchase.

Needless to say, each buyer has their own hierarchy of criteria and it's this ordering of wants and needs that will determine whether a condo or a bungalow is the way to go. 

If you’re thinking of making a move but aren’t sure what your budget will get you in the condo market and/or the bungalow market, feel free to contact me for more info.

Toronto Real Estate Market Report: October 2009 Mid-Month Statistics

     In the first two weeks of October, Greater Toronto REALTORS® reported 3,631 sales – up 34 per cent compared to the first two weeks of October 2008. The average price for these transactions was up 17 per cent year-over-year to $414,479.

"While demand for existing homes has remained strong, it is important to recognize the context of current statistics. We are now making comparisons to the fall of 2008 when we experienced a marked decline in sales and average price," said TREB President Tom Lebour.

Year-to-date sales, at 69,964 are up six per cent compared to 2008. Average price, at $389,687, is up by two per cent.

"Tight market conditions throughout the GTA will continue to exert upward pressure on home prices in the fourth quarter," explained Jason Mercer, TREB's Senior Manager of Market Analysis. “Expect more listings in 2010 as home owners react to the price gains experienced in the second half of 2009.”

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

For complete copies of TREB’s Monthly Market Watch Reports, visit my archives here.

"Holding-Back" On Offers

Save for those two frosty seasons of uncertainty, stagnation, and price reductions that we experienced last fall and winter, “multiple offers” have been and are now a very common occurrence in the Toronto real estate market.

In a seller’s market, which is what we’ve been in for the last four months, demand outweighs supply and there are more buyers that there are properties for sale.

As a result any attractive, well priced property is going to receive quite a bit of attention.

A recent listing of mine in the St. Lawrence Market area had a handful of showings booked within just a few hours of going on the market.

Over the course of the next few days we had almost 50 showings in total, received 3 competing offers, and sold the property for an above-asking sale price!

In such an active market, what’s the best strategy for a seller looking to maximize the exposure of their property?

My personal feeling is that it’s in the seller’s best interest to “hold-back” on reviewing any offers until a specified date (which is exactly what we did for the above mentioned listing in St Lawrence Market).

For example, let’s say that I list a client’s property on a Wednesday morning.

By late afternoon we may have had three or four showings and by early evening maybe even a submitted offer.

And this offer may be an attractive one - full asking price, reasonable terms, etc.

But... there have only been three or four showings at this point.

There are potentially another 20, 30, 40.... other active buyers out there that haven’t had the opportunity to see the property yet.

What if one or more of these others buyers would submit an offer if they had the chance?

What if they're willing to pay more than what the current buyer is offering?

What if they're willing to submit a firm, unconditional offer?

Not allowing any offers to be submitted until a specified future date (generally 5-7 days after the property first comes on the market) ensures that everyone who is currently in the market for such a property gets a chance to view it and potentially submit an offer.

The sellers then can rest assured that whatever happens come offer day, the property has received maximum exposure.

Holding-back on offers actually benefits the buyers in a number of ways as well.

For example, I’m often working with buyers who need a day or two’s notice to make themselves available for showings.

Or sometimes buyers are out of town for a few days and unable to view the property until they return.

In this way, leaving the property on the market for a reasonable amount of time before considering any offers ensures that more than just the handful of buyers who are able to drop everything at a moment’s notice have a shot at buying the property.

Holding-back also helps to avoid buyers feeling as though they're rushing into a decision, as it allows them plenty of time to:

• Speak with their mortgage broker about the possibility of not including a financing condition in their offer.

• Review the comparable sales figures with their Realtor to arrive at a maximum dollar amount that they’re comfortable spending.

• Review the pre-listing home inspection (in the case of a freehold home) or the status certificate (in the case of a condo/loft) if either of these is available prior to the offer date.

It's safe to say that as long as the market keeps up the current pace and there's a steady stream of motivated, qualified buyers, multiple-offers will continue to be commonplace and hold-back offer dates will remain a fixture on many calendars.

If you’re thinking of selling and would like to find out more about my marketing plan, feel free to contact me for more info.

For more info on submitting an offer, visit my website here.

Toronto Real Estate Market Report: September 2009 Statistics

     In September 2009, Greater Toronto REALTORS® reported 8,196 sales, up 28 per cent from September 2008. The average price for September transactions was $406,877 – up by 10 per cent compared to the same month last year.

"We have experienced an increasing rate of existing home price growth in the GTA as sales have continued to outpace 2008 results," said TREB President Tom Lebour. "Consumers have remained confident in ownership housing as a long-term investment."

Year-to-date sales, at 66,437 were up 4.5 per cent compared to the first nine months of 2008.  Average price, at $388,417 was up by almost 1.5 per cent.

"Existing home sales will finish strong this year, pushing through the 80,000 mark and moving in line with some of the best years on record under the current TREB market area," according to Jason Mercer, TREB's Senior Manager of Market Analysis.

If you're thinking of making a move and would like to know how I can help, feel free to contact me for more info.

For complete copies of TREB's Monthly Market Watch Reports, visit my archives here.

Haggling Over Your First Mortgage

     I work with a number of first-time buyers, so when I saw this article a few days ago I thought it would be a good idea to post it to my blog.  Following is the article by Paul Brent as it appeared in the Sept 30th edition of the Globe and Mail: You've been to the open houses, explored various neighbourhoods and perhaps even checked out local schools before settling on the home of your dreams. Now it's time to negotiate your first mortgage, a process which done right, could save you tens of thousands of dollars. 

Today's low interest rates have made buying that first home easier but it can also breed complacency. Rates will rise eventually so purchasers need to not only find a place they can afford, but ensure that they have negotiated the best mortgage terms possible and educated themselves on the document they are about to sign.

When it comes to mortgages, the first lesson is that not all mortgage lenders are created equal. That become quickly apparent to Naysan and Nahid Hariri, both 28, who are mortgage shopping for a $438,000 home now being built for them in Richmond Hill, Ont. “I found that a couple of institutions were a number of (interest) points higher than others,” he said.

The Hariris also found that the big banks, which tend to have higher posted rates than smaller financial institutions, were reluctant to lower their rates. “My understanding with banks is that if you have services with them, they tend to work out something better for you.” Because first-timers typically have less money parked with a particular institution, they tend not to have the leverage to demand lower rates.

The stakes and the learning curve are higher for first-timers. “Usually they are borrowing a lot more money and there is quite a lot to learn,” said Lois Volk, a 22-year mortgage broker with Invis in Toronto's trendy Beaches neighbourhood. “If they don't know, certainly we go through everything: make sure they are comfortable with the concept, what their payments are going to be, work through a budget if necessary and help them consolidate debt if necessary.”

But before couples even start house shopping, they should meet with their bank to obtain a pre-approval or, at the very least, a rate guarantee, said Martin Beaudry, head of lending underwriting at ING Direct.

Mr. Beaudry said that the difference between the big banks and independent firms is rate transparency. “The big banks start very high with their rates and you need to negotiate the rates down and sometimes they have as much as 1.5 per cent leeway on their posted rates while small institutions like ING Direct will post their lowest rate.”

ING Direct's most popular mortgage term among its customers is its 5-year fixed rate, currently sitting at 3.99 per cent. Five-year, fixed rate mortgages for the big banks range between 5.49 and 5.55 per cent, according to Globe and Mail data. The lowest rate found was 3.94 per cent offered by Meridian Credit Union.

Crunch The Numbers

Obtaining a pre-approved mortgage forces new buyers take a long, hard look at not just how much house their bank says they can afford, but how much debt they are willing to shoulder to get into home ownership, combined with whatever else they owe. Be aware that your comfort zone and the lending institution's are not necessarily the same. Banks are in the business of maximizing earnings which could translate into a mortgage which you can afford – on paper at least – but one that leaves little money left over for fun indulgences.

The Hariris, who both work for IBM Canada, decided to determine their debt threshold before sitting down with a financial institution. “The first thing you need to do is figure out your monthly budget,” said Mr. Hariri. “My wife and I sat down for months in advance to see exactly what we can afford, what is comfortable for our lifestyle.”

On their own, they also managed to say the 20 per cent of the purchase price for a down payment so that they don't have to carry the extra expense of mortgage insurance from Canada Mortgage and Housing Corporation (CMHC).

Financial institutions say that mortgage borrowers should devote no more than 30 to 32 per cent of their combined gross incomes to mortgage payments, property taxes and heat. “CMHC will also allow you to go up to 40 per cent or sometimes slightly higher if you have no other debt,” said Ms. Volk, the mortgage broker.

As ING Direct clients, the Hariris are leaning towards taking a fixed rate mortgage with that bank. While financial experts say that over the long term borrowers do better with variable rates, new buyers often opt for the peace of mind that fixed rates offer.

And while the Hariris are not using a mortgage broker to help them hammer out the best deal possible, it is an increasingly popular option. Last year 33 per cent of purchasers used mortgage brokers, up from 27 per cent the prior year, according to a CMHC survey.

Do Some Research

Mortgage brokers, who are typically paid on a commission basis by lenders, may save borrowers some money on the rates and terms they negotiate, but Ms. Volk says a large part of their role is educating people. “The main things to watch for is terms and conditions of the mortgage.”

With the recent drop in mortgage rates, Ms. Volk says many people have been dismayed to find they cannot take advantage of potentially huge interest rate savings because the “break fee” to get out of their current mortgage is prohibitive. Interest penalties for getting out of your mortgage early vary and may take the form of a three-month interest payment or interest rate differential charge. Make sure to get your lender to spell out the break fee to you, and get it on paper.

Some lenders offer “blend and extend” options which can allow some borrowers to get at least some of the benefit of lower rates. Typically, the penalties for breaking the original mortgage are included in the blended rate calculation so borrowers are not faced with an upfront charge.

Pre-payment privileges are also something first-time buyers should seek for two reasons: Because they are typically early in their careers, they can reasonably expect higher take-home earnings through promotions or switching employers for a better paying job and are able to make additional payments to the mortgage. As well, the interest on mortgages is front-end loaded, meaning that the majority of payments in the early years of 25-year amortization mortgage go to interest, not principal.

The Math

Here is why shopping around for the best rate possible is no trifling matter. Take a half-point interest rate difference on a 5-year, $500,000 mortgage with a 25-year amortization period. With a 5.75 per cent rate, the mortgage holder would have monthly payments of $3,125.11 versus $2,979.59 at 5.25 per cent. That doesn't sound like much until you run the 5-year amortization schedule. At the higher rate, the buyers made mortgage payments of $187,506.60, with 72 per cent of that, or $135,086.29, going towards interest payments. At the 5.25 per cent rate, the mortgage holders not only pay $178,775.40 less, but 68.8 per cent or $123,032.28 less goes to interest and more to chipping away at the principal. The difference? A total of $8,731.20 less in payments - $12,054.01 in interest saved and an extra $3,322.81 to the reduction of the principal owed.

For access to a Mortgage Calculator and other financial tools, visit my website here. 

Parking (Part II): "Should I Purchase A Property That Doesn't Have It?"

     The simple answer is...  No, not if you have the option of purchasing a property that does have parking.  Of course not everyone is going to have this option and as such purchasing without parking may be the only way to go. 

“What circumstances would result in a buyer not having the option to purchase with parking?”  Well, with a house there simply may not be any parking at all, other than street permit parking.  There are a number of great, sought-after downtown neighbourhoods where owners have no other choice but to park on the street. 

As for condos/lofts, budget may be a factor.  As I mentioned in my previous blog post on parking, let's say a suite comes on the market without parking at $250,000.  The same suite may come on the market with parking at $275,000-$280,000.  If I’m working with a buyer client whose budget maxes out at $250,000, then clearly they’re only in the market for the suite without parking.

“Yes, but this buyer owns a car and needs a space to park it!”   Fair enough.  There’s still the possibility of purchasing the suite at $250,000 without parking and renting out a space from another owner in the building at approx $125-$150/month (if there’s a space available for rent).

Another thing to consider is that some new developments aren’t even allowing certain purchasers the option of obtaining a parking space, regardless of whether or not their budget allows for the extra $$$.  The restriction here has to do with the size of the suite - only those buying a two bedroom or two bedroom plus den suite have the option of purchasing a parking space.  Those who are merely purchasing a bachelor, one bedroom, or one bedroom plus den suite have to go without.

“What about the resale-ability of a property without parking?”  It's true that there are a number of buyers who will only consider properties that have parking.  It's on their short-list of deal-breaker must-haves and there's just no way around it.  This is true more so if we're talking houses.  However there’s still a significant market out there for properties without parking, especially with condos/lofts.   Essentially, these are the buyers with smaller budgets or maybe they don't have a car, don’t need parking, and are happy to spend $25,000-$30,000 less than someone who does.  I’ve worked with a number of buyers who don’t own a car and rely solely on TTC or they work in the downtown core and are close enough to walk.

Having said that, there’s arguably a greater market of buyers who are able to come up with the extra $$$ and purchase with parking.  And appealing to a larger market will certainly help you when the time comes to resell.  This is true more so if you’re selling in a “soft” market.  If you’re selling in a hot seller’s market, like the one we’re in now, then chances are you won’t have a hard time selling either way.

As for the monthly cost-to-carry, renting a parking space is generally comparable to owning one since the monthly mortgage payment on $25,000-$30,000 is approx $125-$175 (depending on your interest rate of course).  Keep in mind though that you also need to factor in any monthly maintenance fees associated with the space.

In Part III of “Parking” we’ll take a look at the different types of parking.  Stay Tuned.

If you're thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Toronto Real Estate Market Report: September 2009 Mid-Month Statistics

   In the first two weeks of September, Greater Toronto REALTORS® reported 3,361 sales – up 23 per cent compared to the first two weeks of September 2008.  The average price for these transactions was up eight per cent year-over-year to $393,818.

“An increasing number of positive reports pointing to economic recovery coupled with low interest rates have kept households confident in purchasing a home,” said TREB President Tom Lebour.

Year-to-date sales, at 61,676 are up three per cent compared to 59,971 in 2008. Average price, at $386,302, is up by one per cent from $383,776. “Tighter market conditions since May, as evidenced by rising sales relative to listings and declining average days on the market, have resulted in stronger average price growth,” explained Jason Mercer, TREB’s Senior Manager of Market Analysis.

If you're thinking of making a move and would like to know how I can help, feel free to contact me for more info.

For complete copies of TREB's Monthly Market Watch Reports, visit my archives here.

Parking (Part I): "What's It Worth?"

     Anyone with a car in this great city of ours knows that having a convenient, reliable space to park it is a coveted commodity.  If you live in a house, then private driveway or garage parking is king.  Mutual drive (if it's wide enough) and rear/front pad parking follow, with street permit parking rounding out the most common options. 

I've even seen people lease a driveway space from a neighbour to avoid the unpredictability of how close (or far) from the house an available street parking space will be on any given day.

What about in a condo/loft?  Having an indoor garage space is best (some would argue the closer to the elevator the better).  An outdoor surface space still does the trick, although less desirable considering that one has to deal with the elements. 

How much is parking worth though? 

Well, for a house it depends on the neighbourhood, availability of street parking if there's not sufficient driveway/garage/pad parking, etc...  For a condo the value is a bit more quantifiable.  In the downtown core the typical valuation of a parking space on the resale market is in the $20,000 - $30,000 range, although spaces can be valued lower and higher than this depending on the area, availability etc.  Pre-construction developments are generally charging $30,000 - $35,000 and even as high as $40,000+ in some of the newer luxury buildings. 

Aside from the dollar amount though, there's also an increase in the "resale-ability" of a condo if it includes parking.  For example, let’s say a 550 sq ft one-bedroom condo WITHOUT parking comes on the market and we value it at $250,000.  We might value the same suite at $270,000 - $280,000 if it were to include a parking space.  However, while there is certainly a market for the suite without parking, there's arguably an even greater market for it with parking.  This translates into a greater number of showings when the condo goes on the market, a larger pool of potential buyers, and a final sale price that is at the higher end of the $20,000 - $30,000 margin mentioned above.  This is true more so if you’re selling in a “balanced” market.  If you’re selling in a hot seller’s market, like the one we’re in now, then chances are you won’t have a hard time selling either way.  And the sale price margin might actually be narrower than $20,000 - $30,000 as buyers are fighting to get into the market and paying top dollar for whatever inventory is out there.

In Part II of "Parking" I'll address the question, "Should I purchase a property that doesn't include parking?"  Stay tuned.

If you're thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Toronto Real Estate Market Report: August 2009 Statistics

     In August 2009, Greater Toronto REALTORS® reported 8,035 sales, up 27% per cent from August 2008. The average price for August transactions was $387,921 – up by six per cent compared to the same month last year.

"The increase in demand for existing homes has been widespread across different housing types and price ranges," said TREB President Tom Lebour. "This suggests many categories of home buyers have chosen to make a long-term investment in housing, from first-time buyers to move-up buyers or buyers who are seeking a lifestyle change."

Year-to-date sales, at 58,421 were up two per cent compared to the first eight months of 2008.

Average price, at $385,978 was up by less than one-half of one per cent.

"We have heard more positive economic news lately. The improved housing market has played a key role,” explained Jason Mercer, TREB's Senior Manager of Market Analysis. "Home sales have helped other sectors of the economy through home buyers’ spending on things like financial and legal services, moving, renovations and home furnishings."

If you're thinking of making a move and would like to know how I can help, feel free to contact me for more info.

For complete copies of TREB's Monthly Market Watch Reports, visit my archives here.

What Goes Up Doesn't Always Come Down

     Following is an article by Tony Wong as it appeared in the Aug 26th edition of the Toronto Star:  What happens if you had a recession and housing prices didn't really go down?  That's the scenario Toronto could be in by the end of 2009, as economists scramble to revise forecasts. 

Toronto housing economist Will Dunning is forecasting that the average price of an existing home in the Greater Toronto Area will be $378,700 by the end of this year. His previous forecast was for prices to decline to $358,100, or about 5.6 per cent from 2008. That's in line with the estimates of about a 5 per cent decline from most major housing analysts.

"The forecast has been raised substantially," Dunning says. "For the past three months, resale activity has been much stronger than I had been anticipating."

A $378,700 price is spitting distance of the $379,347 average price recorded at the end of 2008. Dunning says this year's average price could surpass last year's.

Under that scenario, prices would have increased every year since 1996 – a total of 13 straight years.

Not bad, considering that consumers have been repeatedly told this is the biggest economic downturn in North America since the Great Depression.

"These kinds of price increases are not what we expected at all," says Sal Guatieri, senior economist with BMO Capital Markets. "Given the economic backdrop, no one expected housing to bounce back the way it has."

Those who remember the previous recession won't soon forget a housing downturn that lasted for seven years. Average prices plummeted from $273,698 in 1989 to $198,150 at the bottom in 1996.

It is almost inconceivable to think this recession may not see even one year of retreating prices. But it's possible.

"I guess if you make things affordable enough, it will generate demand.

"And all that impact on affordability has been on the backs of lower mortgage rates," says Guatieri.

According to a Desjardins Bank report released yesterday, affordability is deteriorating as average prices rise in Ontario.

Still, the provincial market remained affordable despite the increase in prices. The bank warns, however, that "if this trend holds, the market's journey into affordable territory will be short lived."

Guatieri calls the housing climate "bizarre" and worries that some consumers may be stretching themselves to get into the market.

"You have to wonder (if) in two or three years mortgage rates go back to normal levels whether they will still be able to afford the properties," says Guatieri.

The rebound's strength is even more surprising, since the year began with sales down by 50 per cent in January. The market started to show positive territory in May, with a 2 per cent increase, then posted two consecutive records, a 27 per cent increase in June and 28 per cent in July.

Data for the first two weeks of August show that this year's cumulative existing home sales have surpassed last year's sales at the same time.

Guatieri says the bubble of the 1980s was driven partly by speculators, while affordability with double-digit interest rates was "stretched to ridiculous levels."

This time housing prices are still growing faster than income levels, but affordability was not as stretched thanks to a low-interest-rate policy by the central bank.

Most economists think the party will have to slow at some point.

"Over longer periods, growth of employment is the critical factor, as it generates a need to expand the housing stock," says Dunning. "With employment having fallen since last fall, there is limited need for new housing activity."

If you're thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Toronto Real Estate Market Report: August 2009 Mid-Month Statistics

     In the first two weeks of August, Greater Toronto REALTORS® reported 3,832 sales – up 27 per cent compared to the first two weeks of August 2008. The average price for these transactions was up three per cent year-over-year to $383,796.

"The results for the first half of August indicate that many households in the GTA remain confident in their ability to purchase and pay for a home over the long term," said TREB President Tom Lebour.

Year-to-date sales, at 54,303 are up slightly compared to 54,138 in 2008. Average price, at $385,603 is down by less than one half of one per cent.

"Strong resale housing demand will contribute to broader economic recovery as each transaction results in substantial spin-off benefits to other sectors of the economy," explained Jason Mercer, TREB's Senior Manager of Market Analysis.

If you're thinking of making a move and would like to know how I can help, feel free to contact me for more info.

For complete copies of TREB's Monthly Market Watch Reports, visit my archives here.

Toronto Real Estate Market Report: July 2009 Statistics

     In July 2009, Greater Toronto REALTORS® reported a record 9,967 sales, up 28 per cent from July 2008. The average price for July transactions was $395,414 – up by six per cent compared to the same month last year.

"Households confident in their positioning within the current economic environment have taken advantage of housing affordability in the GTA," said TREB President Tom Lebour. "The real estate sector has been one of the sectors making a positive contribution to economic growth in the GTA, not to mention Ontario and Canada more broadly."

Year-to-date sales, at 50,632 are down 1.2 per cent compared to the first seven months of 2008.

Average price, at $385,808 is down by less than one-half of one per cent.

"The steep drop-off in sales experienced at the beginning of the year has all but dissipated," explained Jason Mercer, TREB's Senior Manager of Market Analysis. "With five months left to go in the year, it is probable that total existing home sales in 2009 will be at or above last year’s level." 

If you're thinking of making a move and would like to know how I can help, feel free to contact me for more info.

For complete copies of TREB's Monthly Market Watch Reports, visit my archives here.