Summer Long Weekends, Real Estate Boom or Bust?

With the somewhat cool wet weather we have been having in recent weeks it’s easy to forget we are more than halfway through June.  The Canada Day long weekend is looming on the horizon and many of those with homes to sell may be looking to their REALTORS® for open houses.

  When I first entered the real estate field many years ago, I often viewed the long weekends as ideal opportunities to hold open houses at my listings.  I’d busy myself setting a schedule of properties to show and placed ads in the local papers.  The result?  Time and time again I’d sit there, the weather outside was beautiful, no one came in and I’d say to myself what’s happening?

  After a couple of years of the same results, I came to the conclusion that when it came to long weekends in the summer, real estate was at the bottom of everyone’s agenda.  Essentially I learned that the long weekends is a time for families to enjoy the time together especially in this area where we have many recreational amenities to partake in.  Whether it’s going to the beach, hiking or biking on the area’s various trails, playing golf or whatever, real estate open houses have a lot of competition.

  As it turns out, this is not a phenomena unique to this area.  I follow the activities and blogs a couple of high profile, successful U.S. REALTORS® that I have met in recent years.  Just this past week one of them mentioned that the three slowest weekends for real estate in the U.S. are Memorial Day, the 4^th of July and Labour Day.  Having lived in the U.S. for four years I wasn’t surprised.  Memorial Day offers the Indy 500.  The 4^th of July?  Well what can I say, we all know how patriotic Americans are and the 4^th of July is typically a four day weekend.  As far as Labour Day?  It’s the end of the summer, kids are heading back to school etc. so it’s not surprising that real estate takes a back seat to these other priorities.

  If you are currently a home seller and your REALTOR® is looking to hold an open house on the upcoming July long weekend go ahead.  Far be it for me to discourage you or them but don’t be surprised if they have less than stellar attendance from the public.

Upper End Residential Property Sales

Most of us would agree that the gap between the "haves" and the "have nots" is getting larger.  Wealth seems to be getting concentrated within a smaller segment of high net worth individuals yet at the same time that segment is increasing as the middle case seemingly gets smaller.

  This social transition obviously has a profound impact on a variety of things including real estate.  Here in the southern Georgian Bay region we have witnessed over the past several years, a steady increase in the number of upper end residential properties.  Not so many years ago, a sale over $1 million was a rarity in the area that happened a couple of times a year.  More recently, the annual number of sales above $1 million is two dozen or more. 

  ReMax Canada has recently published a report on upper tier residential sales across Canada.  As with any segment of the market, upper end home sales vary greater from one area of the country to another.  Taking some of the statistics published in the ReMax data, I have prepared the attached graph which shows 1st quarter 2013 luxury home sales in major markets across the country compared to the 1st quarter of 2012.  To this I added the 1st quarter upper end property sales for the Georgian Triangle in order to see how we stack up against the rest of the nation.  In most of these centres, $750,000 and higher is the financial threshold that constitutes an "upper end" residential property and these are often properties that fall within the top 10% of that particular market's price ranges. 

  As you will note, Oakville, Hamilton/Burlington and Calgary are the current hot markets for upper end residential properties with all of these cities having 1st quarter sales that are equal to or significantly higher this year versus the 1st quarter of 2012.  Here in the Georgian Triangle, sales above $750,000 in the 1st quarter were slightly ahead of 2012 with 14 this year compared to 13 in the first three months of 2012.  Conversely, upper end 2013 residential sales activity in Toronto, Vancouver and Montreal are well off the pace of 2012, at during the 1st quarter.

  As of this posting, there are 192 properties currently listed on the MLS®

system of the Georgian Triangle Association of REALTORS® for sale in our market priced $750,000 and higher.  That represents approximately 3.5 years of inventory.  Above $1 million there are currently 117 active MLS® listings which represents 4.8 years of housing inventory in this price range.

Personally I have listed and or sold numerous properties in the upper tier segment of our market.  This is clearly a different realm of real estate and in my next posting I will summarize what I have learned when dealing with both high net worth buyers and sellers.

Area Real Estate Sales Rebound in May

  Area real estate sales in May posted some strong if not unexpected gains over May of 2012, the question remains can it be sustained?

  Unit sales for the month of May as reported through the MLS® system of the Georgian Triangle Association of REALTORS®, reflected a 7% gain over the number of properties sold one year ago. A total of 216 properties sold throughout the area in May compared to 202 in May of last year. Dollar volume for the month was $66.2 million up a healthy 20% from the $55.4 million worth of properties sold through MLS® in May 2012. The high dollar volume gain was driven by increased sales of properties priced $350,000 and higher. Four sales from $800,000 to over $1.5 million were reported in May whereas there were no sales in this price range during May of last year. 

  Year-to-date single family home sales continue to lag behind 2012. To the end of May, 545 single family MLS® home sales have been made which is a drop of 3% from the 561 single family homes sold in the first 5 months of 2012. Conversely, MLS® condominium sales total 137 units which represents an

increase of almost 4% over last year while vacant land sales which have been

lackluster for the past couple of years are up 27%.

 

  Notwithstanding the fact that year-to-date MLS® unit sales are up 3% and total dollar sales reflect a 5% increase from last year, most area municipalities are seeing individual residential sales in 2013 that are below those for the first five months of 2012. MLS® residential sales in the Blue Mountains are up 25% to the end of May while Wasaga Beach is showing just over a 2% increase. Other year-to-date sales results by municipality are as follows: Collingwood -2% Township of Clearview -5%, Municipality of Meaford -6% and Grey Highlands -30%.

 

  While there is still an abundance of properties listed for sale. The number of new MLS® listings that have come to market this year totals 2,961 individual properties, a drop of 5% over the same period last year. At the same time, the number of expired listings has increased by 4% with many sellers electing to take their properties off the market for the present time.  This has lead to more balanced market conditions overall which should continue for the balance of the year. 

Laws Protect Us, Restrict & Sometimes Confuse Us

Contrary to what the public often perceive, REALTORS® across Canada are held accountable to a very high standard of conduct. Here in Ontario, REALTORS® are licensed under provincial law namely the Real Estate and Business Brokers Act (REBBA 2002).


During the past 12 years in addition to my own business, I have been actively involved in the behind the scenes aspect of organized real estate having held a number of positions with our local real estate Association including that of President (2008). This year I have expanded my participation in this regard as I currently sit on the committee at the Ontario Real Estate Association that reviews and make recommendations relative to the various Provincial forms, conditions and clauses etc. that are used in the listing and sale of properties.

In addition to REBBA 2002, the activities of REALTORS® also fall under the requirements of Canada’s Privacy Act adding restrictions that protect consumers further. Then there is the federal Competition Bureau. Some of the requirements these government bodies impose complement each other while other contradict each other.

Recently a REALTOR® was fined $5,000 and ordered to take an educational course when they failed to be present at a property during a home inspection that was being performed on behalf of a buyer. In their complaint to the Real Estate Council of Ontario, the Seller(s) was concerned (and rightly so) that a home inspector had been given access to their home via the lockbox code with no REALTOR® present. The REALTOR® was found to have not acted fairly and honestly, they failed to provide conscientious, competent service and lastly exhibited unprofessional conduct. There is no question that the homeowner’s complaint should have been upheld.

So here’s the rub. Our real estate Association investigated as to whether a requirement could be implemented within our MLS® rules making it mandatory for a REALTOR® to be present for a home inspection or for one by an insurance broker, real estate appraiser etc. The answer? No. The reason being it was deemed that such a rule could be viewed or construed as being anti-competitive.

In future postings I will share additional stories that impact consumers. In the meantime here are a couple of points you may not be aware of.

- As per the Privacy Act, REALTORS® are not allowed to call sellers whose listings have expired unless the seller(s) has provided written consent allowing it.

- As per the Privacy Act, buyers, home inspectors and appraisers etc. are not allowed to take photos of a seller’s home without their written consent.

- Did you know that as a customer, you are not owed the same fiduciary duties by a REALTOR® as you would as a client?  Legally there is a difference between the two distinctions.

Sometimes laws protect us, sometimes they restrict us and sometimes they just plain confuse us.

Area Real Estate Sales A Mixed Bag in 2013

Area real estate sales continue to reflect mixed results across the various areas of our region with stable being about the only adjective I can think of to describe the “overall” market.

  Following a very soft finish to 2012, MLS® sales volume in January reflected a 14% increase over January of last year. This was followed by a decrease in MLS® dollar volume in February of 7%, an increase of 3% in March with sales in April down 4% from April 2012.

 Year-to-date dollar volume is essentially

unchanged from one year ago with MLS®

sales totaling $179.2 million to the end of April, an increase of 1%.

 

  As I have said on previous occasions, our market consists of several micro-markets which makes it difficult to sum up overall market activity in one concise phrase. MLS® unit condominium sales to the end of April are up 6% whereas MLS® single family home sales

which total 396 properties are down 6%. We are seeing

steady sales activity in the under $200,000 price

range with sales up 4% as many first time buyers are

continuing to take advantage of the low interest rates.

Meanwhile sales above $1 million which total 7 sales

year-to-date are down 46% from one year ago when

13 MLS® sales have been reported.

The number of new MLS® listings hitting the market is down from the first four months of last year. To the end

of April there have been 2,268 new MLS® listings, a

 decrease of 5% from one year ago. At the same time,

expired listings have increased by 4% as many sellers

elect

to take their properties off the market or have chosen to

rent them out until such time as they perceive market

conditions have improved allowing them to realize their

selling price expectations.

While sales in Collingwood and Wasaga Beach are

essentially equal to last year at this time, sales in the

Blue Mountains are up 8%. Conversely, MLS® sales

in Clearview Township, Grey Highlands and the

Municipality of Meaford are all showing year-to-date

 ranging from 6% to 32% below the first four months

of 2012.

The month of May has brought with it near summertime temperatures, we’ll see if the change in weather serves to

heat up the slower segments of our real estate market in

the months ahead.

Changes May Be Forthcoming to Ontario's Real Estate Industry

  Although it's not a significant problem in this market, phantom offers aimed at increasing the hype and subsequently the number of offers relative to a property are now said to be the focus of changes being considered by Ontario's Consumer Services Ministry according to a recent article in the Toronto Star.

  Also mentioned in article are further considerations by the Ministry that will provide consumers with easier access to a variety of unbundled real estate services now being offered by non-traditional real estate brokerages or service providers.

  At this point in time there is no formal means by which real estate brokerages are required by law to handle multiple offers, most brokerages however do have their own in-house policy in this regard to protect both their clients and themselves.  In the GTA, multiple offers on a highly desirable property are commonplace.  REALTORS® are obviously not allowed to disclose the terms of various offers to other REALTORS®, only the sellers are privy to the information contained in various offers.  It has happened however where a buyer submitted an offer on a property with the understanding there was more than one offer only to find out there was not. At times this may be an innocent situation where another buyer simply decided not to get into a bidding war and withdrew their offer.  There have been times however when a REALTOR® alleged there was another offer on a property in order to induce multiple offers and or to force other buyers to pay closer or even more than the asking price.  New legislation is in the works to prevent what Ontario’s Consumer Services Ministry sees as misleading and abusive practices in the marketplace.

  Another change being considered pertains to commissions.  At this point in time it is illegal for REALTORS® to charge a commission based on multiple facets ie: a set fee (dollar amount or percentage) plus a secondary fee in addition to the base amount.  Example: A flat fee of $2,500 plus a percentage commission of the sale price is not allowed.  This too may change under any pending new legislation.

  REALTORS® licensed in Ontario operate under strict guidelines stipulated in the Real Estate and Business Brokers Act 2002.  The Real Estate Council of Ontario enforces the act on behalf of the Provincial government and further imposes any penalties against REALTORS® that are deemed to have failed to meet the Act's requirements.

  Watch for further postings wherein I will keep you updated as to any changes that may get legislated in the future.  

Wind Turbines Reduce Property Values

 Across the Province there has been widespread opposition to proposed wind turbine installations which has given new meaning to the term “not in my backyard.”

  Earlier this week an Ontario court ruled that property owners located near established or proposed wind farms have suffered diminished property values.  A lawyer for such landowners say that this recent decision will open the door for legal action against both wind farm developers as well as those parties that lease their properties out to such developers.  This of course has drawn criticism from wind power proponents claiming that the evidence heard was speculative.

  The decision was in fact made relative to a proposed wind farm development here in the Collingwood area.  A group of local landowners had sued WPD Canada Corp as well as a farm corporation that had signed a lease agreement with WPD for a proposed wind farm along County Road 91 west of Stayner in Clearview Township.

  The claim against the defendants was dismissed given the fact the wind farm has not yet received environmental approval nor has it been built.  However, the Judge presiding over the case ruled that damage to the plaintiffs had already been done in that diminished property values had resulted by the mere fact the wind farm project was announced.

  Just how much a neighbouring wind farm diminishes property values remains to be seen.  Some estimates put the number at 20% to 50%.  As a REALTOR® in direct contact with Buyers, I would argue that the  acceptance of and or the willingness by a Buyer to purchase a property near a wind farm is a far greater issue than price.  Some Buyers would not even remotely entertain purchasing a property next to or perhaps even within sight of a wind farm no matter how good a deal it was.  As a Market Value Appraiser I believe it may prove impossible to put a number on how much a property’s value diminishes with a wind farm close by.  This is certainly a subjective question and one that will vary from Buyer to Buyer.
  Needless-to-say, this will not be the last we hear on the controversial issue of wind turbines and I invite you to take my poll on the matter.