The Credibility of Maclean's Magazine

As a follow-up to my posting of February 22nd "Is It Good News, Bad News, or Just News That Sells? I offer the following update on the "Special Report" in the March 2nd edition of Maclean's magazine pertaining to Canadian house prices.
In the subject article authored by Duncan Hood, one has to question the credibility of the story. Hood makes numerous references to the Teranet-National Bank House Price index which tracks home prices in six centres across Canada including Toronto see http://www.homepriceindex.ca/. Hood states in his article "When the Teranet market started up in December, it immediately predicted a shocking drop of 20 per cent, followed by an excruciatingly slow recovery that might not see prices return to last year's high for seven years, or longer."
For those not familiar with Teranet, it is the company that provides exclusive access to Ontario's electronic land registry system. Real estate Board's across the province are subscriber's to Teranet's data which includes sales and other information of the various municipalities across Ontario. In regards to the Maclean's article, Teranet made the following statement: "Teranet would like to take this opportunity to correct some erroneous information and misleading statements that have been made in a Maclean's article and on a BNN news segment, regarding Teranet's role in the Teranet-National Bank House Price Index (HPI)."
With reference to the above quote by Maclean's, Teranet had this to say: "To clarify, there is no Teranet market. We do not operate a housing futures market. Also, Teranet and the HPI, make no such prediction whatsoever." Further, "We do not make any predictions on future house prices nor do we make any predictions on when house prices will return to last year's numbers.
I believe that most journalists do a pretty good job of verifying their information which lends to the credibility of their reporting even if it is sometimes overly negative. The Maclean's story on the other hand appears to be based on a nunber of untrue allegations on the part of it's author Duncan Hood. The accompanying graph entitled The future of house prices in Canada was taken from the Maclean's article to which Teranet makes the following statement: One needs to understand that the Market Forecast of that graph is again the prediction of various economists and investors, not what Teranet has actually measured. The HPI is not a predictive system; it only reports on what has actually happened in the six markets it covers."
I maintain that no one has the ability to accurately predict where house prices are going to go. Why? Because prices are ultimately set by what a willing buyer is prepared to pay and that will vary dramatically from one buyer to the next, market to the next, from one neighbourhood to the next and from one house to the next. Clearly, Maclean's is the last place to be looking for any kind of accuracy with respect to what is actually taking place in today's real estate market.

How Green Is Your Home & We're Not Talking Colour

The province of Ontario appears to be committed to ensuring that we have a cleaner, greener environment and are considering a number of initiatives to further this cause that will affect homeowners. The Ontario Home Energy Saving Program, aimed at promoting home energy conservation amongst Ontario homeowners will contribute a maximum of $150 towards having a home energy audit conducted on your home in order to ascertain its energy usage and where energy may be getting leaked from both your home and financially from your pocketbook. A past client has such an audit scheduled for his home the cost of which is around $300 to $400.
Further to this, a private member's bill is being introduced in the Ontario legislature that would make it mandatory for a energy audit and Home Energy Rating Report to be prepared for all detached, semi-detached homes and low-rise multi-unit residential dwellings in the province. Any building or homeowner making application for a building permit after Janaury 1, 2010 and planning to sell or lease the property afterwards, would be required to provide an energy audit. The second phase of this legislation would require that after January 1, 2011 all homeowners intending to sell their property would also be required to have an audit conducted as part of the listing and sale process. This would essentially mean that homeowners would be required to disclose the energy efficiency or lack there of in their property prior to a sale being finalized.
From a real estate persepctive this is good news for both sellers and buyers alike but it also raises some as yet unanswered questions. When sellers are faced with replacing a furnace, windows or for those looking to improve their home's insulation etc. it's good to know that in addition to energy consumption savings, a further payback could be realized upon the sale of the home via being able to demonstrate the energy efficiency of the property as the result of any improvements that were made. On the contrary, shrewd buyers may use the absense of a favourable energy audit to drive down the price of a home unfairly during the negotiations. The other concern is that as of today, there is no recognized standard for energy audits and energy ratings can vary significantly as the result of varying assumptions used by one auditor verus another.
On an ever increasing basis, I find that more and more home buyers are asking questions about the hydro, gas and other utility usage of a particular property they may be considering purchasing. Having a formal audit and accompanying report can only further help to disclose pertinent information about a property and the energy usage or carbon footprint the property demonstrates provided it is done properly and consistently from one property to another. Eventually I can see this becoming an integral part of the Multiple Listing Service MLS® data for listings in the future.

Canadian Home Prices vs Incomes

As part of their war against positive and uplifting news stories, many in the media contiune to attack the real estate market based on a number of claims including the accusation that home prices in Canada have far outpaced the growth rate in personal incomes.

One such party is Garth Turner, the self proclaimed financial guru who in a recent blog posting claimed that "How can values rise 81%, when incomes didn’t budge?" In the same posting Garth attacks the real estate profession and takes a shot at our local real estate Board claiming that we are "...the voices of real estate desperation, as some people in this business try anything they can to battle back the dragons of reality." Conversely, Garth makes a living by his selling books such as "After the Crash" which propogate the "dragons of reality."

Well it would appear that the Canadian Imperial Bank of Commerce (CIBC) for one doesn't share Garth's opinion on Canadian home prices versus income any more that I share his opinions on real estate and REALTORS®, a profession that I work hard at and am proud to be a part of.

The accompanying graph prepared by CIBC clearly reflects that home prices compared to the disposable income of Canadians had remained largely in balance. Except for a brief period in the late 1980's and again from 2005 or so onward, disposable incomes have remained above the resale home price index. Even when the trend was reversed and Canadian home prices overshot personal incomes, it was nowhere near what has happened in the U.S. Numerous news stories have persisted wherein American consumers took on mortgages that were 105% or more of their home's value which was already inflated. Further, I have read countless stories of individuals in the U.S. with modest incomes that were now in foreclosure as they could no longer afford their $300,000 or $400,000 mortgage, a mortage they undoubtedly should have never been granted in the first place.

Real estate has always proven in the long run, to be the safest and soundest investment. Even if as stated in the current issue of Macleans home prices were top drop 20% that pales in comparision to drop in the stock prices and market capitalization of companies such as GM, Nortel and others. Canadian consumers have long had most of their equity tied up in real estate. With Nortel shares trading at 10¢ compared to their one time high of $124 and General Motors at $1.85 versus even their 52-week high of $25, I'd take a 20% drop in my house price any day.

Is it Good News, Bad News or Just News That Sells?

It's certainly a good thing that there is so much negative news to report on these days otherwise the media might have a tough time scrambling for some stories.
Macleans's magazine has done it again with their March 2nd edition due to hit newstands this week with a cover story labelled as a "Special Report" on house prices. They're taking the age-old good news/bad news position stating that "Canadian real estate will soon be much more affordable" and "The value of your home is about to drop another 20%." Further, they go one step further by claiming that what they are reporting in is "The shocking truth about the value of your home."
Much of their story revolves around the trials and tribulations of a 42 year old computer analyst who purchased a $1.5 million penthouse condo in Vancouver. Sounds like your typcial Canadian homeowner to me.....not! Anyway the poor chap can't fulfill his purchase obligation on the penthouse as according to the story, he has been unable to sell his current condo and his bank "wouldn't even consider" giving him a $1.5 million mortgage for his new place. Gee I wonder why?
Further, the article critcizes the real estate profession stating that the MLS® information we provide is biased and that the Canadian Real Estate Association (CREA) who owns the rights to MLS® would not respond to a request for an interview. First of all MLS® information is what it is. A home is listed for a price and sold for a price both of which get reported for what they are. It's pretty hard to be biased when you are obligated to report the facts. Secondly, CREA was never contacted by Macleans and they will formally issue a repsonse to the article next week. Macleans is quick to point out however, numerous comments made by CREA's equivalent in the U.S., the National Association of Realtors (NAR) yet isn't Macleans slogan: "Canada's news magazine?"
As I stated in a prior posting (Don't Believe Everything You Read) the meltdown in the U.S. real estate market is anything but reflective on what conditions are in Canada. Has the Canadian real estate market slowed? Yes. Was it due for a correction? Yes and rightly so in over-heated markets like Vancouver and Calgary. Have prices dropped? Well the guy with the unsaleable condo in Vancouver has dropped his but it also hasn't sold yet. Maybe he dropped it from a list price it should have never been at to start with. Reading the article it sounds as though it was priced where he needed it to be in order to afford the $1.5 million penthouse. What someone needs financially out of their current property in order to move-up has absolutely no bearing on market value.
Most people I have been dealing with echo my sentiments about the media these days. They propogate negative, sensationalistic stories trying to lure in readers. Perhaps this is done in a desperate attempt to stem the loss of advertisers which are fleeing print media in droves or maybe they all have shares in pharmaceutical companies selling anti-depressants? Maclean's has once again sunk into the muck and mire of tabloid jounalism, what's next a cover story about "alien octuplets?" Be sure to look for a copy next to the Star and the Enquirer at the grocery checkout.

Now's The Time to Buy!

In the wake of the recently announced plan by lawmakers to assist homeowners in the U.S., Larry King last night hosted a variety of real estate and investment types to gain their perspective on the current state of the U.S. housing market. Overwhelmingly most, including opportunists like Donald Trump agreed that now is the time to buy.
Althought they were referencing the real estate market south of the border, much of their philosophy applies here in Canada as well. Currently there is a great selection of properties available for buyers to choose including both resale and new construction, making this clearly a "buyer's" market. With so much competition amongst sellers to attract a willing purchaser, buyers are in a great position to be able to negotiate a price and terms in their best interests. Interest rates continue to remain at near record low rates for qualified buyers, many of which in our market do not need financiaing anyway. So what's holding people back?
Well, right now consumer confidence is hardly going through the roof. More importantly however, buyers appear to be waiting for significant price reductions which may or may not happen. Suppose prices in our market area were to drop 5% or 10%. Most buyers, unless they are investors looking to "flip" the property for a profit are not buying for the short-term. Many in this market are buying for their long-terms needs especially that of retirement. Does the possibility of a 5% or 10% price reduction really matter if you are going to own a property for years? As a panelist on Larry King last night further pointed out, it makes no sense to loose out on a great property in a good location, one that represents good value in today's market on the pretense or under the fear that it might go down in value a few percent in the short-term.
What really needs to happen as many of my colleagues and others point out is to stop listening to the media. They by and large propogate doom and gloom. Whether you are looking to buy a home, car or any other major purchase, there are some great deals out their to be had and borrowed money is still available for most.
If you are considering a real estate purchase, there is no better time than now. Enlist the help of a qualified REALTOR® that is a strong negotiator and will work diligently on your behalf. A buyer client I am working with asked if I would put in a lower offer for him on a property and I said "absolutely." After all it's his money and we are by-and-large bound ethically to follow a client's instructions. Being a creative negotiator is going to be the name of the game in this year's real estate market and no one for certain knows what price and terms are going to be accepted by a seller until you ask.

Another Reason to "Google"

I recently read a book entitled "Planet Google: One Companies Plan to Organize Everything We Know" by Randall Stross. In the spirit of the book's title, Google appears to have advanced one step further in fulfilling their goal. A real estate contact in the U.S. recently made me aware of a new service soon to be officially launched by Google called GOOG-411.
As the name implies this is a 411 directory assistance tool with a different twist. Simply dial 1-800-GOOG-411 (1-800-466-4411). You will be asked to provide the name of the city/town and state/province, along with either the company or product you are looking for after which you will be instantly connected. At first I was skeptical as to whether it would work in Canada but it does and best of all it's FREE. So the next time you are working late and decide on the spur of the moment to pick up a pizza all you need to do is dial GOOG-411 from your cell phone, say Collingwood, Ontario, then the name of your favourite pizza joint and you will be immediately connected. That's both convenient and pretty cool as well.
So the question is with online 411 directory assistance available via the Internet and now this new technology allowing you to find things even easier, how long will it be before the printed Yellow Pages directory as we know it is gone?

Calm Seas Don't Create Good Sailors

I read a quote recently which essentially said that "calm seas don't create good sailors." As we plow through the turbulent waters of today's economic times and market conditions it gives those of us in business the opportunity to hone our skills and to be creative in serving our clients and customers thus advancing our respective businesses.
Today while drafting up an agreement of purchase and sale, I had the opportunity to exercise my creativity to the agreement in principle of both the buyer and seller. My client is the buyer whom had purchased a lot on which to someday build a home. As many do, they somewhat lost their enthusiasm to build and in the meantime saw a new home they took a liking to. The solution which has yet to be finalized, was to have the home's builder/seller, take the buyer's lot in on trade plus cash to complete the purchase of the home. This sounds simple and in principle is but executing the transaction in an orderly fashion takes a bit of fitnesse. Obviously the seller doesn't want to be committed to owning a lot if the buyer reneges on the house purchase and vice-versa but that is easily handled and both parties protected if the right steps are taken.
I suspect as the year progresses we will see more real estate transactions of this type take place. Many potential buyers may be looking to make a purchase and either can't or won't until their current property is sold or somehow othrwise disposed of. By getting a little creative, it can be a win win for both a buyer and seller and thus faciltates a transfer(s) of ownership that may have otherwise not happened. It may not exactly constitute smooth sailing but the waters can indeed be calmed by plotting and taking the right course.

What You Need to Know

Real estate always seems to be a popular topic of discussion at dinner parties and in other circles so for the past 8 years I have issued a quarterly real estate newsletter in order to keep clients and other interested parties aware of the "facts." In addition to this, during my tenure as President of the Georgian Triangle Real Estate Board (GTREB) in 2008, I regularly issued press releases summarizing statistics relative to local market activity.
Recently I issued a press release summarizing overall market results for 2008 versus 2007 to the local media. This time, my press release was not as President of GTREB but was done on my own as a Broker with Royal LePage in Collingwood. The Enterprise-Bulletin ran this story under the title "Real estate sales drop 23 percent." in the February 3rd issue of the paper. In their story, I was mistakenly referred to as "President" of GTREB and one of the major statistics was incorrectly quoted. Both of these errors were duly corrected by the paper in their February 6th edition.
REALTORS® are no longer the gatekeepers of information. We do not control it nor should we attempt to manipulate it for our own gain especially when market conditions may not be in our favour. Consumers, through the Internet and other sources have greater access to more information that ever before. As real estate professionals, we must render a degree of service and expertise to consumers that represents a clear "value" proposition for the role we provide and the fees we receive and that includes providing factual and relevent information whatever state the market might be in.
Via my quarterly "Georgian Triangle Real Estate News" and "Condo Communiqué©" as well as through this blog, I will continue to provide consumers with the facts regarding local real estate market condtions and trends. In addtion I have made presentations to Rotary Clubs, the Chamber of Commerce, condominium corporations and other groups all seeking to obtain an insight into area real estate matters. No matter whether the conditions are good or bad, today's real estate consumer more than ever before, needs to make fact based decisions with respect to their buying and selling initiatives.
As the saying goes, "an educated consumer is your best customer" and one of our most important roles as REALTORS® is to provide the knowledge and expertise consumers have come to expect and deserve.
For further information on local market conditions or if you wish to have me address your particular group or organization please do not hesitate to contact me. rickcrouch@propertycollingwood.com

Oops, the Elvis Festival Lost Us $41 Grand More Than We Thought!

In my January 22nd posting entitled "Is It Time for "ELvis to Leave the Building...?" I mentioned a report in the Connection, that indicated last years Elvis Festival was anticiapted to loose somewhere around $23,000. Now, less than a month later, we have learned the loss has unexpectantly ballooned to $64,000. The reasons cited were significantly lower sponsorships and advertising revenues along with reduced ticket sales. Once again, it's taken over six months to ascertain this situation with some lingering uncertainty as according to organizers, ticket sales from last year are "...still under investigation." Why?
Clearly after over 10 years, the momentum for this event has faded and may erode even further this year given overall economic conditions. For Council to consider a "down-sized" festival for 2009 as is being promoted is questionnable in the wake of this latest financial revelation. I urge them to stand-up and as with any fiscally repsonsible organization make a sound business decision. No one has the luxury these days of operating money loosing entities especially with your money and mine. Council needs to shutdown this financial boondoggle and focus their attention on what's really inportant to the community as a whole rather than just a select few business segments that benefit from this venue.

Collingwood Makes News in the U.K.

A recent newspaper article in the U.K. edition of the Financial Times highlights some of the history and growth taking place in Collingwood and the surrounding area. I was contacted by their reporter some weeks back and was asked to provide some material for this story. A newspaper article about Collingwood and published in the U.K. further serves to strengthen the attraction this area has not only domestically but on the international front as well. Notwithstanding the fact that area real estate activity has slowed significantly in recent months, we are in fact in a time of year wherein listing and sales activity has typically been seasonally slow. Softer sales periods have historically served to create a pent-up demand and articles like the one published in the Financial Times highlights the unique nature of our area and how we are at least partially insulated from the longer-term downturn in activity that other real estate markets may ultimately experience in the months ahead.

Feberal Budget Offers Something for Homeowners

The recent federal budget offered a small handout to homeowners in the form of a "home renovation tax credit." Homeowners can claim a 15% non-refundable tax credit for eligible renovation expenditures over $1,000 but not more than $10,000. The maximum credit under the program is $1,350 and is available on eligible costs for renovation work and or materials acquired after January 27, 2009 and before February 1, 2010. This credit is only available for renovations to a dwelling that is eligible to be the family's principal residence or that of one or more of their other family members including spouses, common-law partners and their children. Typical examples of eligible expenses include new windows, decks, heating systems etc. The credit covers the cost of labour, materials, professional fees, building permit expenses as well as things such as equipment rentals to perform the work etc.
First-time home buyers also gained some relief in the budget aimed at making home ownership more affordable. First-time home buyers can now withdraw up to $25,000 from their RRSP to be used as a down payment on a residential property. The previous limit had been $20,000 which was established back in 1992 and had not been adjusted for inflation. In 1992, a $20,000 down payment represented just over 13% of the average home price in Canada whereas today, $20,000 represents approximately 6.5% of the national average home price.
Studies have shown that every residential sale transaction generates on average, $32,000 in ancillary spending during the three years following a sale. This includes the purchase of appliances, home furnishings, renovations, landscaping and other home related products and or services. In 2007, these purchases represented $7.1 billion to the Canadian economy and with their latest budget; the federal government has acknowledged the significant home ownership has on the economy as a whole.