I have recently received tons of email, and not all of it favourable.
Some people wish to bet me money _ some a case of beer_ that real estate is going to go down, just wait and see.
Likely they are all the people who never bought anything. If you go to www.realestatetalks.com you can see some than 14 years about the ups and downs of Vancouver real estate.
It is always the same guys and gals that argue collapse _ and (yep) often these same people that argue that eventually, we will always be higher (because of monetary expansion creating it). So take easy.
If you had listened to the experts who were dispensing the best advice available 20 years ago, and locked yourself and your wealth into a plan which guaranteed to remit the then prevailing "safe amount" of an income stream of $500 per month (a lot back then _ pocket change today) for the rest of your life, imagine the desperate poverty that you would retire to today. Stone soup would be a luxury.
Yes, we need more money now, but who knows what this money will be worth tomorrow?
Yes , we need more income, but who can possiblyknow the state of the world three months from now... much less 20 years from now? Nobody knows for sure the "what and where" of interest rates and inflation rates and the value of money. It's just not possible.
What we do know is that the safety that was inherent in the projected big income of 20 years ago is a pitiful joke today. Yep, forecasting is never easy _ particularly when it's about the future.
Crystal balls crack, vaunted talkshow soothsayers wither and drop off the television scene, and the books that were treasure maps wind up in the remainder bin at the bookstore.
In the last three decades, stock market have surged up and crashed down. Certain mutual funds that looked like they were blue chips sprang leaks and sank while others soared like rockets only to burn out and fall back down.
Through all of this, the average folk watched their savings get chewed away by insidious inflation. However, in all the turmoil of this sound and fury, one asset has whearthered the changes.
Three decades ago, had you bought good quality real estate, you would not be concerned about your future today. That real estate would have kept up with inflation, remained secure in value, and steadily appreciated. Sure, there would have been some temporary dips. There has to be because real estate is cyclical in nature. But one things is certain _ over the years, the base values have been steadily increasing.
Back to that purchase 30 years ago. Today, it would be paid off and clear title _ which means either a mortgage-free home (no more monthly "rent" payments to the bank) and / or a steady rental income courtesy of your tenants.
Put onto perspective, if you place a good portion of your assets into real estate today, you won't have to worry about tomorrow. It doesn't mtter how wild or turbulent the economy or the marketplace. It's like riding a horse with one spur _ if half has to go along with it.
No matter how deep or tempestuous the water , you're going to be floating on top of it.
Let's review something all of us already know. The Chinese have used real estate holdings for wealth creation for 2,000 years. All huge fortunes were either started or extended with real estate.
Home ownership (the most common form of real estate holding) has been the single largest factor in the accumulation of wealth for the average North American, first because of straight appreciation due to inflation, secondly, due to the leverage involved and thirdly, real estate has a use and therefore always a value. This basic principle of appreciation holds true for pretty well any healthy major urban center.
Let's take Vancouver, BC, for an example. In 1960, the average Vancouver home sold for $13,105. Thirty eight years later in 1998 the average sale price was some $310,000.
Almost a 2,300 per cent return. But in March 2008, the average sale price was $895,000. Play with the return on down payment of $655 and you get tens of thousands per cent returns. If this kind of appreciation is going to continue, you have to be on the conveyor belt. If you are not, you are going to be left so far behind that it will be financially disastrous. And here we're only talking only fron the perspective of a place to live. This isn't even adddressing the investment aspect of those monies outside the family home.
When you ombine appreciation with leverage, you unlock the great secret of achieving the optimum result with real estate investment. And as you can see from the foregoing numbers, the "lever" can lift you up or the "appreciation", if you're on the wrong side, can crush you down.
When your gain is meausred on the capital invested, not the actual actual price of the property, some really astourding results come into focus.
GOOD: Understand goals
But the game is not as simple as it used to be. The goal posts move. The only constant is that everything is always changing. The secret of surviving and prospering is the ability to adapt to the changes. The 1980's in Vancouver were very forgiving for the amateur. Benign with a capital B.
That "B" could also represent "bucks" and "brainless." Back then, if you had a few dollars, you could buy any piece of real estate, anywhere, and you would make money.
Even if you could barely hear thunder and see lightning, it was almost impossible to make a big enough mistake. If you paid too much, it only meant that you had bought a little soon. The clock and the calendar made you into a finacial wizard. Thanks to inflation, prices soon caught up to you and bailed you out.
Still, there were lots of people in Vancouver int he early 1980's who managed to lose all their money in real estate. Those were the people who put their money into the wrong syndications, limited partnerships or real estate investment trusts. But we'll talk more about that later. In the late 80's, fortunes were made. But after the 1980,s, the real estate world became less forgiving. For some investors, the times were downright terrifying. All of a sudden, there was the sudden change. Markets fluctuated area by area both as to volume of sales and prices. Different real estate categories rose or fell without any apparent linkage to each other.
You could see in one market area the average single-family detached home rise in value by 40 per cent, while in the exact same market area downtown condos slumped in value by 12 to 20 per cent (Vancouver 1990 to 1995).
The people who tried to play by the old rules found themselves playing someone else's game. And most of the time, they were handed their heads. Was it possible to avoid the dangers and yet at the same time prosper with the good stuff?
Yes, it was, but you had to pu a side location, location, location, and instead you had to read the trends, position yourself as to the timing and then implement some new techniques. To be successful real estate investors, we must understand ourselves. That means we have to understand our investment objectives in relation to the risks we are willing and able to tolerate.
But having done that, we then must understand that aspect of ourselves that is part of the "new customer." (Next week: the new consumer and the new way make money in real estate in 2008) press Day seminar on Canadian real estate on May 24 in Vancouver. Calgarians interested in participating will get $100 off the attendance fee.
To be successful at real estate, we must learn to understand ourselves.
Friday, May 23, 2008
Thursday, May 22, 2008
House prices will rise, but sales expected to slide "published the May 7, 2008"
Alberta Lls sales will decline in 2008, the Canadian Real Estate Association predicts in its latest report.
Alberta will lead falloff in MLS activity in 2008.
The Canadian Real Estate Association is forecasting Alberta Mls residential sales to experience the biggest year-over-year percentage decline in 2008 compared with the rest of the country.
In a report released Tuesday, CREA said the resale market in the province will drop by 18.9 per cent to 57,900 units this year and experience a further five per cent drop in 2009 to 55,000 Mls sales.
The report says the average sale price in Alberta will rise by 4.7 per cent to $373,000 while it will only go up by 2.8 per cent in 2009 to $383,300.
Nationally, the organization says Mls sales will fall by 11.5 per cent in 2008 to 460,900 units and another four per cent in 2009 to 442,500.
The average sale price across the country is forecast by CREA to jump 5.3 per cent this year to $323,500 and another 4.2 per cent the following year to $337,000.
"MLS home sales will remain strong, despite coming in lower than last year's breakneck pace," said CREA chief economist Gregory Klump. "After -tax income growth, strong employment and short term interest rate cuts will support housing demand, despite further home price increases and increasing economic uncertainty."
For Alberta, the number of MLS sales in 2006 was 74,350 units, an increase from the 65,866 sales in 2005, said Richard Corriveau, regional econmit for the Canada Mortgage and Housing Corp.
In 2006, Alberta recorded an average MLS sale price of $285,383, which was up from the $218,266 recorded in 2005, he added.
For 2007, total sales fell to 71,430 in the province, in the province, with the average sale jumping to $356,235, said Corriveau. Overall, sales in 2007 were down 3.9per cent from the previous year while the average price increased by 24.8 per cent.
The CMHC is expected to release next week its latest forecast for the local, regional and national real estate markets.
"As soon as the buyers who are sitting on the fence restore that confidence of upward price growth, they'll get back into the market place," said Corriveau. "And that's why we think that the decline won't be as pronounced as perhaps CREA believes. Now, that said, there's still a huge number of listings in the marketplace and we're not as optimistic on price growth. We're forecasting under four per cent and that's unchanged from what we forecast three months ago. So we're not as bearish on sales, but not as positive on price growth."
But if listings do moderate into 2009, that should pave the way for stronger rate of price growth next year, he said.
Meanwhile, in a report released Tuesday by Statistics Canada, real estate agents, brokers, appraisers and related industries reported total operating revenues of $10.6 billion in 2006, an 8.1 per cent increase from the previous year, with Alberta leading the way at a whopping 37 per cent hike.
The federal agency said "Canada's real estate industry has benefited from sustained high demand for real estate that resulted in increased sales and higher real estate prices."
And no province fared better than Alberta, where the real estate market " continued to flourish in 2006" said statistic Canada. For the second straight year, the province led national growth in operating revenues for that industry.
In 2005, its annual growth rate was 20 per cent compared with the previous year.
According to Statistics Canada, in 2006, the real estate agents and brokers industry in Alberta had operating revenues of $1.22 billion, up from $0.89 billion in 2005.
In that year, real estate agents, brokers, apraisers and other related activities industries in Alberta had operating revenues of $1.40 billion, up from $1.02 billion in 2005.
Alberta will lead falloff in MLS activity in 2008.
The Canadian Real Estate Association is forecasting Alberta Mls residential sales to experience the biggest year-over-year percentage decline in 2008 compared with the rest of the country.
In a report released Tuesday, CREA said the resale market in the province will drop by 18.9 per cent to 57,900 units this year and experience a further five per cent drop in 2009 to 55,000 Mls sales.
The report says the average sale price in Alberta will rise by 4.7 per cent to $373,000 while it will only go up by 2.8 per cent in 2009 to $383,300.
Nationally, the organization says Mls sales will fall by 11.5 per cent in 2008 to 460,900 units and another four per cent in 2009 to 442,500.
The average sale price across the country is forecast by CREA to jump 5.3 per cent this year to $323,500 and another 4.2 per cent the following year to $337,000.
"MLS home sales will remain strong, despite coming in lower than last year's breakneck pace," said CREA chief economist Gregory Klump. "After -tax income growth, strong employment and short term interest rate cuts will support housing demand, despite further home price increases and increasing economic uncertainty."
For Alberta, the number of MLS sales in 2006 was 74,350 units, an increase from the 65,866 sales in 2005, said Richard Corriveau, regional econmit for the Canada Mortgage and Housing Corp.
In 2006, Alberta recorded an average MLS sale price of $285,383, which was up from the $218,266 recorded in 2005, he added.
For 2007, total sales fell to 71,430 in the province, in the province, with the average sale jumping to $356,235, said Corriveau. Overall, sales in 2007 were down 3.9per cent from the previous year while the average price increased by 24.8 per cent.
The CMHC is expected to release next week its latest forecast for the local, regional and national real estate markets.
"As soon as the buyers who are sitting on the fence restore that confidence of upward price growth, they'll get back into the market place," said Corriveau. "And that's why we think that the decline won't be as pronounced as perhaps CREA believes. Now, that said, there's still a huge number of listings in the marketplace and we're not as optimistic on price growth. We're forecasting under four per cent and that's unchanged from what we forecast three months ago. So we're not as bearish on sales, but not as positive on price growth."
But if listings do moderate into 2009, that should pave the way for stronger rate of price growth next year, he said.
Meanwhile, in a report released Tuesday by Statistics Canada, real estate agents, brokers, appraisers and related industries reported total operating revenues of $10.6 billion in 2006, an 8.1 per cent increase from the previous year, with Alberta leading the way at a whopping 37 per cent hike.
The federal agency said "Canada's real estate industry has benefited from sustained high demand for real estate that resulted in increased sales and higher real estate prices."
And no province fared better than Alberta, where the real estate market " continued to flourish in 2006" said statistic Canada. For the second straight year, the province led national growth in operating revenues for that industry.
In 2005, its annual growth rate was 20 per cent compared with the previous year.
According to Statistics Canada, in 2006, the real estate agents and brokers industry in Alberta had operating revenues of $1.22 billion, up from $0.89 billion in 2005.
In that year, real estate agents, brokers, apraisers and other related activities industries in Alberta had operating revenues of $1.40 billion, up from $1.02 billion in 2005.
Thursday, May 8, 2008
Alberta ar head of housing slowdown, "published April 30, 2008"
Alberta led the country with the biggest drop in resale housing activity in the first quarter of this year while at the same time outpacing the other provinces in new MLS listings.
A report released Tuesday by the Canadian Real Estate Association says MLS sales in the province were down 30.5 per cent compared with the first quareter of 2007, new listings increased by 36.2 per cent, total dollar volume of all transactions dropped by 26.7 per cent but the average sale price increased by 5.4 per cent to $361.544.
And the report also showed a similar real estate scenario for March, with the province experiencing the biggest yearly drop in sales across the country, at 34.3 per cent compared with March 2007, and a 25.1 per cent hike in new listings for the Month _ again the provincial leader.
The average MLS sale price in Alberta increased by 3.7 per cent in March from a year ago to $365.888 but total dollar volume of all transactions was down by 31.9 per cent.
At a national level, MLS sales in the first quarter of 2008 were down 13.2 per cent compared with the same period last year and new listings were up six per cent. The average resale price in Canada increased by 6.4 per cent to $312.583.
"This is the smallest year-over year price increase since the fourth quarter of 2001, reflecting a more balanced market" said the CREA report.
On a monthly basis, MLS sales dropped by 19.1 per cent compared with March 2007 and new listings decreased by 0.6 per cent.
The average national resale price in March was up 4.8 per cent to $314.279 _ the smallest increase since October 2001.
"Resale housing activity is trending lower in the four most active provinces:, said CREA chief economist Gregory Klump.
"Housing markets are becoming more balanced and price gains are becoming more modest as a result. This trend is forecast to continue as rising mortgage carrying costs and property taxes erode affordability."
At the national level, the CREA report said new listings reached their highest quarterly level ever.
As for sales, the data show it was the third consecutive quarterly decline since activity peaked in the second quarter last year.
CREA president Cal Lindberg said it's important to remember 2007 was a record year for MLS sales in Canada.
The declining MLS numbers have raised concerns about a possible housing crash similar to what has happened in the United States in the past few years.
But a recent analysis by Marc Pinsonneault, senior economist with National Bank of Canada, said: " We do not believe that the Canadian market is vulnerable to a major correction akin to the one that has been underway in the United States for the past two years."
The report concurs with an IMF report, "which found that the home prices in Canada are not overvalued."
Over the past three quarters the number of homes sales has fallen in Calgary while the number of new listings on the market has increased steadily," said Pinsonneault.
"The upshot is that the seller's market that had prevailed until the first half of 2007 has since clearly turned into a buyer's market."
Writen by Mario Toneguzzi
A report released Tuesday by the Canadian Real Estate Association says MLS sales in the province were down 30.5 per cent compared with the first quareter of 2007, new listings increased by 36.2 per cent, total dollar volume of all transactions dropped by 26.7 per cent but the average sale price increased by 5.4 per cent to $361.544.
And the report also showed a similar real estate scenario for March, with the province experiencing the biggest yearly drop in sales across the country, at 34.3 per cent compared with March 2007, and a 25.1 per cent hike in new listings for the Month _ again the provincial leader.
The average MLS sale price in Alberta increased by 3.7 per cent in March from a year ago to $365.888 but total dollar volume of all transactions was down by 31.9 per cent.
At a national level, MLS sales in the first quarter of 2008 were down 13.2 per cent compared with the same period last year and new listings were up six per cent. The average resale price in Canada increased by 6.4 per cent to $312.583.
"This is the smallest year-over year price increase since the fourth quarter of 2001, reflecting a more balanced market" said the CREA report.
On a monthly basis, MLS sales dropped by 19.1 per cent compared with March 2007 and new listings decreased by 0.6 per cent.
The average national resale price in March was up 4.8 per cent to $314.279 _ the smallest increase since October 2001.
"Resale housing activity is trending lower in the four most active provinces:, said CREA chief economist Gregory Klump.
"Housing markets are becoming more balanced and price gains are becoming more modest as a result. This trend is forecast to continue as rising mortgage carrying costs and property taxes erode affordability."
At the national level, the CREA report said new listings reached their highest quarterly level ever.
As for sales, the data show it was the third consecutive quarterly decline since activity peaked in the second quarter last year.
CREA president Cal Lindberg said it's important to remember 2007 was a record year for MLS sales in Canada.
The declining MLS numbers have raised concerns about a possible housing crash similar to what has happened in the United States in the past few years.
But a recent analysis by Marc Pinsonneault, senior economist with National Bank of Canada, said: " We do not believe that the Canadian market is vulnerable to a major correction akin to the one that has been underway in the United States for the past two years."
The report concurs with an IMF report, "which found that the home prices in Canada are not overvalued."
Over the past three quarters the number of homes sales has fallen in Calgary while the number of new listings on the market has increased steadily," said Pinsonneault.
"The upshot is that the seller's market that had prevailed until the first half of 2007 has since clearly turned into a buyer's market."
Writen by Mario Toneguzzi
Wednesday, May 7, 2008
Alberta communities tell own real estate stories
Calgary, Edmonton markets experience "price correction"
The provincewide boom in housing prices gripping Alberta for the last several years has been replaced this spring with price variations tied to local economies. They now range from increases of 23 per cent to declines of 15 per cent, according to a national survey by Century 21 Canada brokers.
The report says prices of homes in Alberta commubities this spring are determined by the strength of the local econmy and the supply of new housing built during the boom.
"The metro areas around Calgary and Edmonton are experiencing some price corrections," said Don Lawby, president of Century 21. In Calgary and nearby communities High River and Airdrie, for example, prices in 12 neighbourhoods surveyed varied from increases of nine per cent to decreases of 13 per cent.
"It's a reflection of what actually happened over about a two-and-a half-year period where prices just sort of skyrocketed. And all of a sudden the reality has to come back and we had lots od builders out building all of that," said Lawby. "So we have good supply, which has brought prices down a bit _ probably back to more of a stable environment."
The Century 21 Canada 2008 Spring National House Price Survey reflects the price of a typical home in 197 neighboorhoods in 66 communities across Canada. The real estate firm defines a typical home as the type that occurs most frequently in any given neighboorhood or community. The homes selected for inclusion in the survey were by the company's brokers in those communities.
Across Canada, the survey found price increases in 167 neighbourhoods, flat prices in nine neighbourhoods and price declines in 21 neighbourhoods.
The Calgary Real Estate Board's monthly MLS sales data for March had the average sales data for March had the average sale price for a single-family home in Calgary metro at $475,513. It was a slight drop from the $479.914 figure registered in March 2007. In the condominium market, the average sale price in Calgary metro was $312.620 in March, up slightly from $312.280 in March 2007.
" You continue to have a great economy. Ther's lots of employment opportunity," said Lawby of real estate situation in Alberta. "If you have that, that's what causes a stable real estate market. Eventually the oversupply of development will get picked up".
written by Mario Toneguzzi (Calgary Herald)
The provincewide boom in housing prices gripping Alberta for the last several years has been replaced this spring with price variations tied to local economies. They now range from increases of 23 per cent to declines of 15 per cent, according to a national survey by Century 21 Canada brokers.
The report says prices of homes in Alberta commubities this spring are determined by the strength of the local econmy and the supply of new housing built during the boom.
"The metro areas around Calgary and Edmonton are experiencing some price corrections," said Don Lawby, president of Century 21. In Calgary and nearby communities High River and Airdrie, for example, prices in 12 neighbourhoods surveyed varied from increases of nine per cent to decreases of 13 per cent.
"It's a reflection of what actually happened over about a two-and-a half-year period where prices just sort of skyrocketed. And all of a sudden the reality has to come back and we had lots od builders out building all of that," said Lawby. "So we have good supply, which has brought prices down a bit _ probably back to more of a stable environment."
The Century 21 Canada 2008 Spring National House Price Survey reflects the price of a typical home in 197 neighboorhoods in 66 communities across Canada. The real estate firm defines a typical home as the type that occurs most frequently in any given neighboorhood or community. The homes selected for inclusion in the survey were by the company's brokers in those communities.
Across Canada, the survey found price increases in 167 neighbourhoods, flat prices in nine neighbourhoods and price declines in 21 neighbourhoods.
The Calgary Real Estate Board's monthly MLS sales data for March had the average sales data for March had the average sale price for a single-family home in Calgary metro at $475,513. It was a slight drop from the $479.914 figure registered in March 2007. In the condominium market, the average sale price in Calgary metro was $312.620 in March, up slightly from $312.280 in March 2007.
" You continue to have a great economy. Ther's lots of employment opportunity," said Lawby of real estate situation in Alberta. "If you have that, that's what causes a stable real estate market. Eventually the oversupply of development will get picked up".
written by Mario Toneguzzi (Calgary Herald)
Subscribe to:
Posts (Atom)
