With the price of real estate continuing to rise year over year more than the rate of inflation, will you ever be able to get into the market? Over the last 20+ years, we have gone through several cycles with peaks and troughs. Each correction was followed by an increase which exceeded the previous high. First time buyers need to understand that the first purchase will not be the dream home. Remember when you bought your first car in high school? Expectations need to be realistic and sacrifices need to be made. Saving for the down payment may mean foregoing the daily mocha or lunches out. It may mean getting a used vehicle instead of financing or leasing a new sports car that depreciates and is not tax deductible. It may mean not replacing your smart phone every time the latest model is released. It’s a matter of controlling or determining the spending as necessary or not really required. We have helped many buyers get their financial affairs together to buy their first home and they have never looked back. They also thought that they could never afford it. It is never too late if you plan ahead. If you are tired of renting and would like a place to call home, you need to act on it today.
I’m of the generation that knows next to nothing about buying a home. In high school CAPP (career and personal planning) class we learned not to submit résumés on fluorescent pink paper (something, I’ve learned, they encourage in university co-op programs). In math class, we applied algebraic formulas to arbitrary scenarios about cement trucks or airplanes when we could have been applying them to mortgages, something we would realistically need in the future. I hear they’re changing this now and high school students are actually learning about banking and mortgages, things they’ll need later in life. For everyone in my generation, this series is for you.
I’m going to start with a potentially controversial topic: Why Realtors® are useful. I’ve said it before: using, or not using, a Realtor is your personal choice, and whichever you go with is a fine one. Personally, I use a Realtor. Here’s why.
· At one point in my life I worked two jobs and went to school full time. I don’t anymore, thank goodness, but I still work full time, have a dog and significant other to look after, have friends and family to keep track of, and play on a hockey team. I also like sleep and occasional down time. I’d rather not spend my spare hours sifting through MLS or attending open houses. This is why Realtors are great – it’s their job to sift through the pages of listings and preview the homes that may be suitable for you. Realtors save me time.
· Closely related to this is the fact that Realtors have access to other Realtors. Through this widespread Realtor network they find out about listings that haven’t gone on the market yet. This could get you a head start to investigate the details about the property and neighbourhood before writing the offer.
· When you take a day to tour homes you’re interested in, your Realtor will drive you. This gives you the opportunity to focus on the area in comfort with complete attention rather than trying to find the property on your own.
· I was recently interested in a house and asked my Realtor to take a look at it. Within the hour he responded with an email with concerns about the property for reasons I hadn’t thought of: possible oil tank in the yard, septic (the house wasn’t on the city’s sewer system), knob and tube wiring. The asking price was also high for a property with so many possible issues. It also had been listed for an extensive period in a market where houses typically sell within a week or so. An experienced Realtor can spot problems in the property you may miss, and can advise you on market value.
Common Sense: Go see the house before making any decisions.
I know. This one is pretty obvious. But there are people who see pictures on-line or read a general description and are suddenly and irrevocably convinced the house is the perfect fit. On many occasions, it's not. Chances are the staging was incredible or the description was written by a retired novelist. Go see the place for yourself. It may back onto the highway or situated beside an apartment block. Overlook the wow factor and see if the house makes sense to you. Are there sufficient rooms for your needs? Does the kitchen work for you? Are there are any obvious flaws? This is where the home inspector comes into the picture where he may find defects where you may need to spend hundreds or thousands of dollars on repairs.
More common sense to come.
The increase in foreign investment and the recent changes in mortgage qualifications have not helped first time homebuyer in Vancouver. In fact it feels more like a concerted effort on the part of the city to drive these young Canadians out of this market. Even without the weight of tens of thousands of dollars of student debt, many young people simply cannot afford the price of a home in Vancouver. Consider this fact from The Vancouver Sun’s Bob Ransford: today, the average cost of a home in Metro Vancouver is nearly ten times the median household income. And the RBC is surprised that young Canadians are waiting another year before buying their first home. Even for established two-income households, a mortgage of seven hundred thousand dollars, or more, is worthy of at least a moment’s consideration. What hope does a young, likely-single resident of Vancouver have of owning in this market?
While foreign investment has been a noticeable factor in pushing out young and first time homebuyers in Vancouver’s real estate market, there have been other more domestic factors as well. Over the last year the government has made it systematically more difficult for people to purchase a home albeit to keep the threat of homeowners overextending themselves.
In the spring of 2010 mortgage lending rules changed, requiring all homebuyers to qualify for a standard five-year, fixed-rate mortgage. With the highest rates compared to most mortgage options, five-year fixed-rate mortgages are the most secure but also the most difficult to qualify for.
On July 1st 2010 the BC government rolled in the controversial Harmonized Sales Tax, combining the Provincial Sales Tax and Goods and Service Tax into an overall 12% tax that covered a wider scope of goods and services. What goods and services the HST actually applies to when purchasing, building, or selling a house is difficult to nail down but has increased the costs of buying a home, especially on new construction.
And finally, in March of this year, mortgage rules changed again, decreasing the maximum amortization period for a mortgage from thirty-five years to thirty, thereby increasing monthly payments.
Not only are young Canadians facing tougher mortgage qualifications from their government, but the social factors weighing down on them from their education, including property ownership – are actually proving a detriment rather than a benefit.
RBC recently released their annual Homeownership Study in which they declare, with apparent shock, that fifty-five per cent of young Canadians plan on waiting a year or more before purchasing their first home, and that forty-six per cent of young Canadians who already own their own home say their mortgage uses up too much of their income – to which I must ask: Why are you surprised?
Over the last two years there have been several economic, market-based, and social forces pushing young and first time homebuyers farther to the fringes of Vancouver’s housing market. RBC’s report doesn’t bring any new information to the table (other than definitive statistics) that most, if not all, young Vancouverites are already well aware of: You can’t buy here unless you have realistic expectations.
The most obvious of these forces is the new wave of foreign investments in Vancouver’s housing market, the second such wave to occur in the last thirty years. The first wave launched property values into the stratosphere and they didn’t seem to come down until a US housing crash brought everything else down with it, but even then prices didn’t fall as drastically as those in other markets. This second wave is elevating prices much as the first did, and to all new heights. In Burnaby’s real estate market—the current hot spot in the GVRD—residents who paid less than one hundred thousand dollars for their property less than thirty years ago are finding themselves millionaires because of the unquenchable overseas demand for housing.
As quickly as Moving Picture Video Listings are becoming a required service for real estate agents, the speed of technology and the insatiable appetite of the younger market have already pushed this video listing medium to the status of outgoing fad. The new trend of 2011, the marketing tool that is distinguishing front line real estate agents in the industry, is – for lack of a better descriptor – Live Action Listing Presentations. Getting in front of a camera and selling the listing to your audience of, potentially, hundreds offers something very rare in the online community and incredibly difficult to convey in conventional listing videos: human connection.
Facebook and YouTube and Twitter and all of the other social media sites provide an almost immeasurable exchange of information between people. However, in hosting this vast exchange of information online, these social media sites have, ironically, diminished the human interaction they were designed to promote. There is also anonymity in posting videos or opinions online. Rarely are faces put to screen names, the absence of which robs the viewer of that personal connection that real estate agents are encouraged to create.
Live Action Listing Presentations, video listings with the realtor on the screen and talking directly to the interested viewer, give back that human element that many mainstream promotional videos lack. And the public reaction has been stellar. The few real estate agents using these Live Action videos boast enthusiastic new clients and business growth that stems primarily from, not surprisingly, word of mouth. Happy clients Tweet or Like or simply pass videos on to the myriad web of friends online, and suddenly one local real estate agent with a quality camera has his name in the homes of hundreds of people across the city.