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Effects of COVID-19 on Real Estate Market

COVID-19 and the effect on the real estate market.

The effects of COVID-19 on the real estate market are just unfolding. Real estate boards have made changes due to the virus however, market statistics are not yet showing a negative effect to the virus. The short-term forecast for the real estate market is very uncertain however, the virus will eventually be contained and the economy will eventually get back on track.

The Effects of COVID-19

The Bank of Canada has dropped the overnight rate twice in the past two weeks as a means to stimulate the economy. The banks have yet to lower mortgage rates.

Lawyers and notaries are making changes to reduce exposure to the virus which in turn will reduce the number of files they deal with at one time. Legislation requires buyers and sellers to sign documents in person so that may hamper some closings. 

The planned change to the mortgage stress test has been put on hold. Due to the COVID-19 crisis, the benchmark rate as currently published by the Bank of Canada will remain in effect until further notice. 

The Fraser Valley Real Estate Board, along with the Greater Vancouver and Chilliwack boards, have temporarily removed the rule requiring that properties listed on MLS® be made available for showings. This change will remain in place until at least, April 30. Whether a property is available for showings will be entirely up to the discretion of the seller. 

The CMHC announced that it would be working with lenders to defer mortgage payments by up to six months if needed. 

BC Real Estate Association
Market Intelligence Report, March 17, 2020


Fraser Valley Stats

As of February 29, active listings were down in most areas of the Fraser Valley and sales were up compared to last year. This has created sellers markets throughout the Fraser Valley, with the exception of the detached market in South Surrey which is now a balanced market.  Cloverdale and Langley are currently the hottest, sellers markets for all property types, in the Fraser Valley.

As of March 17, 2020, sales in the Fraser Valley are up 30% compared to the same time last year. New listings are also up about 6% compared to this time last year.  The effects of COVID-19 on the real estate market are not yet apparent in the available statistics.

Prices for all property types in the Fraser Valley have increased over the past couple of months. This is the first time in at least 18 months that all property types have shown price increases year-over-year and month-over-month. 
  

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MLS® HPI Benchmark Price Activity

Single Family Detached: At $971,300, the Benchmark price for a single‐family detached home in the Fraser Valley increased 1.1 per cent compared to January and, also increased 1.3 per cent compared to February 2019.
Townhomes: At $523,200*, the Benchmark price for a townhome in the Fraser Valley increased 1.0 per cent compared to January and increased 1.4 per cent compared to February 2019. *Preliminary number pending further review 
Apartments: At $414,500, the Benchmark price for apartments/condos in the Fraser Valley increased 1.5 per cent compared to January and increased 1.2 per cent compared to February 2019.

Greater Vancouver Stats

Sales in February were up 45% in the Greater Vancouver areas compared with sales in February 2019 but still 15% below the 10-year sales average. Active listings, however, were 20% lower than February 2019. Increased sales and decreased listings have put many areas in Vancouver into sellers markets. 

All Vancouver areas, with the exception of West Vancouver and Tsawwassen, were in strong sellers markets for attached properties. The sales of attached properties, which include condos and townhouses, accounted for 68% of sales in February 2020. 

Vancouver, west side, Richmond, and West Vancouver are the only Vancouver areas that are still experiencing buyer markets for detached properties. Many areas have moved into seller markets because of increased sales and decreased listings. 

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Why are strata insurance rates going up?

Strata insurance premiums are rising.
Here’s why and what strata councils and unit owners can do.
Published by the Insurance Brokers Association of B.C.

What has changed?
Over the course of 2019, strata corporations across Canada either received notice of a premium and/or deductible increase on renewal of their building insurance policies, or were advised that they should budget for increases on their next renewal.

In B.C.’s Lower Mainland region, where an estimated half of its total 2.7 million residents live in strata-titled property, these increases are having a widespread impact. One real estate insurance brokerage advised its Vancouver strata corporation clients that they should budget for a 25%+
increase in insurance costs for 2019, possibly higher if the property had suffered losses. Some renewals have reportedly increased anywhere from 50% to 300% and the deductibles to cover claims have also increased substantially, from $25,000 per claim to as high as $250,000 and $500,000; at
least one building has had its deductible increased to $750,000.

What do strata insurance policies typically cover?
The owners of individual units in the strata building all own a proportionate share of the common property. To help ensure that all owners’ equity is protected, the Strata Property Act requires strata buildings to be insured for full replacement value of all common property, common assets, and fixtures. This includes the original construction, including finishing attached to the building. The insurance valuations must be based on recent appraisals.

Because of the ownership structure of stratas and their commercial-grade systems (plumbing, boilers, electrical, heating and ventilation), strata buildings are insured with a commercial property insurance policy, which is typically used for businesses but modified for strata property.
Strata unit owners insure their contents, plus upgrades made to the unit, under a “condo” homeowners’ policy. These policies include two crucial coverages:

1) liability insurance to cover damages from losses that originate in the unit and extend to the common area or other units, and
2) coverage for a portion of the strata building’s deductible in the event of a major claim.


Why are strata building insurance premiums increasing, and why is the increase so high?
For any business, when cost increases threaten to cause deficits, remedial action is needed. That is especially true for insurance: insurance companies must maintain reserves to meet the demands of future claims, and they must disclose financial information to the federal regulator, the Office of
the Superintendent of Financial Institutions, to demonstrate that they are meeting its requirements.
Like other financial instruments – interest rates, for example – insurance rates are constantly being revised in reaction to market forces and emerging trends. Such is the case now with commercial insurance in general and strata building insurance in particular. The past years of
growth in B.C.’s strata-housing market created a protracted and highly competitive market where normal-level premiums were unduly suppressed. Along with housing prices and financial products, insurance rates tend to follow market cycles.

Other factors leading to strata insurance premium increases include:
The number of claims has increased. When a water failure or fire occurs in multi-unit buildings, multiple units are often affected. The result is a higher likelihood that the cost of repair will be substantial. The increasing growth in the number of strata developments, the aging of strata buildings (many date back to the 1970s and ’80s) and the natural reluctance of strata owners to undertake major system upgrades until problems occur with more frequency all add up to increased insurance claims and repair costs.

If your building has a history of claims relating to water escape from system failures and/or resident activities, or it has an aging building system with a poor record of maintenance, its increased risk profile will also add pressure to the costs and levels of deductibles.

The cost of rebuilding has increased. B.C. saw real estate property values increase a few years ago. Even though government has imposed measures to cool the market down, property values remain high and construction costs in the Metro Vancouver region have risen between 7 and 15% in the past year.

The local market is affected by global losses, which are increasing. The increase in frequency and severity of fires, floods, severe storms, and earthquakes elsewhere in the world reminds us that we face a similar escalation of risks here at home. Recent advances in technology and computer modelling are making more information available about areas that may be at higher risk of fire, flood and earthquake. This modelling technology, plus the actual insured costs of recent major Canadian losses, has allowed insurance companies (also referred to as insurers) to make more accurate evaluations of how much insurance should cost in a given area.

To keep the cost of insurance as low as possible, insurers are allowed to transfer the need to maintain reserves for catastrophic losses (those over $25 million) to other insurance companies known as reinsurance companies. While this has the benefit of keeping premiums lower, it also makes local insurance rates vulnerable to losses that occur elsewhere in the world. Catastrophic losses from weather-related incidents are a leading reason for current premium increases. As reported by the world’s largest reinsurance company, Munich Re, 2018 was the fourth-costliest year since 1980 for insured losses. And 2017, with hurricanes Harvey, Irma and Maria, was the costliest. With major weather-related payouts occurring annually, companies are incorporating that risk into pricing because it’s now the new norm. Increasingly, smaller, regional insurers are leaving the strata-building market to the larger, national insurers, which is reducing the competitive options for strata corporations.


How does this impact owners of strata units in B.C.?
Strata unit owners should be aware of impact on the building policy and their unit policy:
If your strata corporation is faced with a substantial increase in insurance rates, the cost will be reflected in your annual budget that determines your annual strata fees. If the deductible is dramatically increased to $100,000, for example, it means any claims under $100,000 are not covered by insurance and, subject to your bylaws, each owner is likely responsible for damages to their strata lot with the strata corporation responsible for the cost to repair common property. The result is many of the repair and replacement costs that have been covered by the policy of insurance taken out by the strata corporation will now be downloaded onto the affected owners in the event of a claim.
Coverage for owner liability is more important than ever. The Strata Property Act establishes building insurance deductibles as a common expense, but also allows the strata to sue an owner to recover the cost of repair or the deductible portion of a claim if the owner was responsible for the loss. To save the potential legal costs of suing an owner to prove their negligence caused the loss, many stratas have passed bylaws making owners “strictly liable” for any losses that originated from their units.

Review your strata bylaws: How does your strata approach this issue?
Condo policies can include coverage for this transfer of the deductible costs to owners. If an owner is responsible for a claim (for example, their washing machine hose fails, and escaping water causes damage to other units and common areas), the owner could be responsible for the $100,000 deductible or the full cost of repair if it is less than the deductible. Now, more than ever, unit owners will want condo homeowner insurance that covers their liability in the event of a claim for damages to their unit, as well as the cost of a deductible or the risk of being sued by other owners if they cause a claim.


What can your strata do to limit the risk?
Strata councils:

  1. Be aware that being able to demonstrate long-term stability and a proactive approach to building maintenance will put your building in the best light and the best position for risk assessment. In these current market conditions, switching insurance brokerages or insurers may not be in your strata’s long-term best interests.
  2. Review your strata’s depreciation report to ensure your strata is meeting regulatory requirements, and that the report’s recommendations are reflected in the building’s maintenance and
    repair plan for items that pose a risk such as roofing, water lines, and drainage systems.
  3. If the strata corporation is faced with a change in insurance, dramatic increases in cost and deductibles, or the possibility of no coverage, immediately give notice to all owners regarding the changes. Early disclosure will help owners understand the situation, work together toward a solution. Provide the new summary of insurance as soon as it has been renewed so that owners can amend their unit coverage accordingly in a timely manner.
  4. If your building fails to obtain insurance, contact a lawyer to identify determine the potential liabilities and risks for owners and council members and what next steps you should consider.
  5. Repair access or building issues that may risk an injury. Address broken sidewalks, or security issues.
  6. Update your bylaws: Bylaws that present a risk of human rights complaints also increase your risk. Comply with the Strata Property Act and enforce your bylaws. Failure to properly enforce bylaws or comply with any enactments of law can result in claims with the Civil Resolution Tribunal, the B.C. Supreme Court, or the B.C. Human Rights Tribunal. All of these increase your risk and ultimately the cost. Past decisions relating to stratas are available online (see links below.)
  7. Work with owners to manage risks:

a) Ensure that all owners have access to the water shut-off to their units so they can quickly shut the water off themselves in the event of a leak.
b) Verify that all units with washing machines have upgraded their hoses to braided steel. Failed rubber hoses in cramped closets and spaces are a chronic cause of water damages.
c) Remind owners that thanks to the soft water in the Lower Mainland they can reduce the amount of soap they use in dishwashers or washers. For later model appliances, use the high-efficiency soap that is recommended. Excess soap suds can build up and temporarily block pipes.
d) Owner activities, such as smoking, barbeques on balconies, balcony gas heaters, in- suite hot water tanks, and storage of flammable materials increase the risk of a fire or flood.


All owners:

The strata council and all owners should work closely with your insurance broker. Brokers are working tirelessly to place coverage for all strata corporations, but in some circumstances because of values and claims history, there may also be a limit to coverage. Invite your insurance broker
to attend your annual general meeting to explain the changes to the building’s insurance.

It is imperative that you as a unit owner have proper condo insurance for your unit. Your strata corporation is required to provide all owners with details of all building insurance policies and warranties in effect. Be sure you understand your strata building’s coverage, limits, and deductibles, and how the strata council and/or your strata bylaws may apportion or assign responsibility for deductible or under-the-deductible losses. Relay those conditions to your insurance broker, who will explain your coverages and options.

Further resources
Condominium Home Owners Association of BC https://www.choa.bc.ca/
Click on “Search CHOA’s 1000+ Resources and use keyword “insurance”

B.C. Housing Policy Branch Guide to Strata Housing https://www2.gov.bc.ca/gov/content/housing-tenancy/strata-housing Click on “Operating a Strata”, “Finances and Insurance”

Civil Resolution Tribunal https://civilresolutionbc.ca/ Click on Resources >

Decisions B.C. Human Rights Tribunal http://www.bchrt.bc.ca/

Rebound https://www.bcbroker.ca/rebound/ Click on “Strata” Insurance Bureau of Canada

Industry Facts Book 2019 http://assets.ibc.ca/Documents/Facts%20Book/Facts_Book/2019/IBC-2019-Facts.pdf

Condominium or Strata Coverage http://www.ibc.ca/bc/home/types-of-coverage/condominium-or-strata-coverage/

Vancouver Island Strata Owners Association http://www.visoa.bc.ca

The Insurance Brokers Association of B.C. serves as the voice of the general insurance brokerage industry in the province of British Columbia. IBABC is the primary provider of pre-licensing and continuing professional education for general insurance intermediaries in B.C. IBABC represents the interests of the public and its member brokers to government and to industry stakeholders. IBABC represents more than 900 brokerage locations employing more than 15,000 licensed brokers in approximately 140 B.C. communities, providing choice, advice and advocacy in insuring the homes, vehicles, businesses and other assets of British Columbians. For further information contact Sarah Polson, communications director, IBABC, spolson@ibabc.org, www.bcbroker.ca

5 Steps to Buying Your Next Home

Whether you’re a first-time buyer or a seasoned homeowner, shopping for a new home can over whelming. In fact, 56% of buyers said that “finding the right property” was the most difficult step in the home buying process.1

Buying a home is a significant commitment of both time and money. A home purchase has the power to improve both your current quality of life and your future financial security, so the stakes are high.

Follow these five steps to assess your priorities, streamline your search, and choose your next home with confidence.

STEP 1: Set Your Goals and Priorities

The first step to finding your ideal home is determining WHY you want to move. Do you need more space? Access to better schools? Less maintenance? Or are you tired of throwing money away on rent when you could be building equity? Pinpointing the reasons why you want to move can help you assess your priorities for your home search.

Don’t forget to think about how your circumstances might change over the next few years. Do you expect to switch jobs? Have more children? Get a pet? A good rule of thumb is to choose a house that will meet your family’s needs for at least the next five to seven years.2 Be sure to set your goals accordingly.

STEP 2: Determine Your Budget

Many financial professionals recommend following the “28/36 Rule” to determine how much you can afford to spend on a home. The rule states that you should spend no more than 28% of your gross monthly income on housing expenses (e.g., mortgage, taxes, insurance) and a maximum of 36% of your gross monthly income on your total debt obligations (i.e., housing expenses PLUS any other debt obligations, like car loans, student loans, credit card debt, etc.).3

Of course, the 28/36 rule only provides a rough guideline. Getting pre-qualified or pre-approved for a mortgage BEFORE you begin shopping for homes will give you a much more accurate idea of how much you can borrow. Add your pre-approved mortgage amount to your down payment to find out your maximum purchasing potential.

STEP 3: Choose a Location

When it comes to real estate, WHERE you choose to buy is just as important as WHAT you choose to buy.

Do you prefer a rural, urban, or suburban setting? How long of a commute are you willing to make? Which neighborhoods feed into your favorite schools? These decisions will impact your day-to-day life while you live in the home.

Another important factor to consider is how the area is likely to appreciate over time. Choosing the right neighborhood can raise the profit potential of your home when it comes time to sell. Look for communities that are well maintained with high home-ownership rates, low crime rates, and access to good schools, desired retail establishments, and top employers.4

STEP 4: Decide Which Features You Need (and Want) in a Home

Start with the basics, like your ideal number of bedrooms, bathrooms, and square footage. Do you prefer a one-story or two-story layout? Do you want a swimming pool?

Keep in mind, you may not find a home with all your “wants,” or even all your “needs” … at least not at a price you can afford. The reality is, most people have to make a few compromises when it comes to buying a home.

Some buyers will opt for a longer commute to get a larger, newer home in the suburbs. Others will sacrifice hardwood floors or an updated kitchen so that their kids can attend their desired school.

If you’re faced with a tough choice about how or what to compromise in your home search, return to STEP 1. What were your original goals and motivations for moving? Reminding yourself of your true priorities can often provide the clarity that you need.

STEP 5: Meet with a Real Estate Agent

A good real estate agent can remove much of the stress and uncertainty from the home search process. From setting goals to securing a loan to selecting the best neighborhood to meet your needs, I will be there to assist you every step of the way.

And no one has more access to home listings, past sales data, or market statistics than a professional agent. I can set up a customized search that alerts you as soon as a new listing you might like goes live. Better yet, I get notified about many of the hottest homes even BEFORE they hit the market.

You might guess that the VIP service I provide is expensive. Well, the good news is, I can represent you throughout the entire home buying process at NO COST to you because the home seller pays the buyer’s agent fee.

Although it’s listed here as STEP 5, the reality is, it’s never too early (or too late) to contact an agent about buying a home. Whether you plan to buy today, next month, or next year, I can provide you with information and referrals to help you with your home purchase.

Call me today. I’d love to hear from you.

The above references an opinion and is for informational purposes only.  It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

Sources:

  1. NAR 2019 Home Buyers & Sellers Generational Trends Report –
    https://www.nar.realtor/sites/default/files/documents/2019-home-buyers-and-sellers-generational-trends-report-08-16-2019.pdf
  2. Architectural Digest –
    https://www.architecturaldigest.com/story/this-is-how-long-you-should-live-in-your-house-before-selling-it
  3. Investopedia –
    https://www.investopedia.com/terms/t/twenty-eight-thirty-six-rule.asp
  4. Money Talks News –
    https://www.moneytalksnews.com/20-clues-youre-buying-home-the-right-neighborhood/

It’s cold now but is the market about to heat up?

Real Estate Update Jan 2020

What is the forecast for real estate in 2020? The real estate market in the Fraser Valley ended 2019 with average sales and a mostly sellers market due to very low inventory. This was a stark contrast to the first half of 2019 where sales were well below average. Prices in many areas have stabilized over the past three months after 12 months of decreases. Typically, the spring season is where we see the greatest number of sales however, in 2019, sales were down in the spring and up during the fall months.This contrary scenario has many people wondering about the upcoming spring market.  Will this trend of increasing sales continue into the spring? Will we see prices increase over the next six months? 

2020 starts the year with very low inventory levels throughout the Fraser Valley and Vancouver area. Sales have been increasing since July 2019. If demand continue to grow, low inventory levels may push prices up. In North Delta, 45 detached homes were sold in December 2019 out of 84 properties listed on the MLS. With a 54% turnover rate in December, that put North Delta in a sellers market for detached properties. Compare this to December 2018 when only 16 detached homes sold out of 142 properties listed on the MLS. The change in supply and demand has resulted in a price increase of about 3.3% over the past three months for detached homes in North Delta. Cloverdale, Mission and Langley have also shown an increase in prices for detached homes, ranging from 1% to 1.5%. 

Vancouver area prices for detached homes have also stabilized over the past three months. Even the most expensive areas of Vancouver: West Vancouver, Richmond and Vancouver west side are experiencing stable prices. Attached properties in the Vancouver area are seeing prices increase in many areas. 

The strongest demand for housing in the Fraser Valley and Vancouver area continues to be for townhouses and condos. The Canadian Mortgage and Housing Corporation recently reported that in 2019, Vancouver (includes Fraser Valley) had a 31% increase in new construction for townhouses and condos compared to 2018. This increase in new construction may help to maintain stable prices throughout the region. 

Many economists expect the overnight bank rate to remain at 1.75% for now. The economy continues to grow at a sluggish rate but a recession is not expected to hit Canada in 2020. High immigration into Vancouver is expected to bolster demand for housing in the area. 

The Conference Board of Canada forecast in December that Canada’s economy will grow by 1.8 per cent in 2020, a modest uptick from the 1.7 per cent growth seen last year.

Regionally, British Columbia and Quebec are expected to see the strongest economic growth, according to the Business Development Bank of Canada.


Buyer Opportunities (Detached)

Prices in South Surrey remain particularly low. Compared to central Surrey, the price difference between the two areas is only 30% – the smallest gap in over 15 years.  In July 2017, the price difference between the two areas was 54%. In the past three years, South Surrey is the only area in the Fraser Valley that is showing a loss in value (down 7.5%) while all other areas have posted price gains of 8% to 18%. 


Buyer Opportunities (Attached)

South Surrey had the smallest turnover of attached properties in December compared to the rest of the Fraser Valley. The inventory is still decent and price increases over the past three years are the lowest in the Fraser Valley. 
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If you are thinking of selling in the spring, now is the time to speak with me. Preparing your home for sale takes time and you may require the help of several different trades and services. Over many years, I have put together a list of highly recommended companies to serve your needs in this regard.  Call or email, I’d be happy to send you my recommendations. 

5 Steps to Finding Your Next Home

5 Steps to Finding Your Next Home

Whether you’re a first-time buyer or a seasoned homeowner, shopping for a new home can feel daunting. In fact, 56% of buyers said that “finding the right property” was the most difficult step in the home buying process.1

Buying a home is a significant commitment of both time and money. And a home purchase has the power to improve both your current quality of life and your future financial security, so the stakes are high.

Follow these 5 steps to finding your next home to assess your priorities, streamline your search, and choose your next home with confidence.

STEP 1: Set Your Goals and Priorities

The first step to finding your ideal home is determining WHY you want to move. Do you need more space? Access to better schools? Less maintenance? Or are you tired of throwing money away on rent when you could be building equity? Pinpointing the reasons why you want to move can help you assess your priorities for your home search.

Don’t forget to think about how your circumstances might change over the next few years. Do you expect to switch jobs? Have more children? Get a pet? A good rule of thumb is to choose a house that will meet your family’s needs for at least the next five to seven years.2 Be sure to set your goals accordingly.

STEP 2: Determine Your Budget

Many financial professionals recommend following the “32/40 Rule” to determine how much you can afford to spend on a home. The rule states that you should spend no more than 32% of your gross monthly income on housing expenses (e.g., mortgage, taxes, insurance) and a maximum of 40% of your gross monthly income on your total debt obligations (i.e., housing expenses PLUS any other debt obligations, like car loans, student loans, credit card debt, etc.).3

Of course, the 32/40 rule only provides a rough guideline. Getting pre-qualified or pre-approved for a mortgage BEFORE you begin shopping for homes will give you a much more accurate idea of how much you can borrow. Add your pre-approved mortgage amount to your down payment to find out your maximum purchasing potential.

STEP 3: Choose a Location

When it comes to real estate, WHERE you choose to buy is just as important as WHAT you choose to buy.

Do you prefer a rural, urban, or suburban setting? How long of a commute are you willing to make? Which neighborhoods feed into your favorite schools? These decisions will impact your day-to-day life while you live in the home.

Another important factor to consider is how the area is likely to appreciate over time. Choosing the right neighborhood can raise the profit potential of your home when it comes time to sell. Look for communities that are well maintained with high home-ownership rates, low crime rates, and access to good schools, desired retail establishments, and top employers.4

STEP 4: Decide Which Features You Need (and Want) in a Home

Start with the basics, like your ideal number of bedrooms, bathrooms, and square footage. Do you prefer a one-story or two-story layout? Do you want a swimming pool?

Keep in mind, you may not find a home with all of your “wants,” or even all of your “needs” … at least not at a price you can afford. The reality is, most of us have to make a few compromises when it comes to buying a home.

Some buyers will opt for a longer commute to get a larger, newer home in the suburbs. Others will sacrifice hardwood floors or an updated kitchen so that their kids can attend their desired school.

If you’re faced with a tough choice about how or what to compromise in your home search, return to STEP 1. What were your original goals and motivations for moving? Reminding yourself of your true priorities can often provide the clarity that you need.

STEP 5: Meet with a Real Estate Agent

A good real estate agent can remove much of the stress and uncertainty from the home search process. From setting goals to securing a loan to selecting the best neighborhood to meet your needs, we will be there to assist you every step of the way.

And no one has more access to home listings, past sales data, or market statistics than a professional agent. We can set up a customized search that alerts you as soon as a new listing you might like goes live. Better yet, we get notified about many of the hottest homes even BEFORE they hit the market.

You might guess that the VIP service we provide is very expensive. Well, the good news is, we can represent you throughout the entire home buying process at NO COST to you. It’s true; the home seller pays a buyer agent’s fee at closing. So you can benefit from our time, experience, and expertise without paying a dime.

And although we’ve listed it here as STEP 5, the reality is, it’s never too early (or too late) to contact an agent about buying a home. Whether you plan to buy today, next month, or next year, there are steps you can (and should) be taking to prepare for your purchase.

Call us today to schedule a free consultation!

The above references an opinion and is for informational purposes only.  It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

Sources:

  1. NAR 2019 Home Buyers & Sellers Generational Trends Report –
    https://www.nar.realtor/sites/default/files/documents/2019-home-buyers-and-sellers-generational-trends-report-08-16-2019.pdf
  2. Architectural Digest –
    https://www.architecturaldigest.com/story/this-is-how-long-you-should-live-in-your-house-before-selling-it
  3. Canada Mortgage and Housing Corporation https://www.cmhc-schl.gc.ca/
  4. Money Talks News
    https://www.moneytalksnews.com/20-clues-youre-buying-home-the-right-neighborhood/

Increased sales for third month in a row. Is this a trend?

Sales across BC were up 24% compared to September 2018! This may be an indication that buyers have now adjusted to the mortgage stress test.  

Fraser Valley 

The Fraser Valley Real Estate Board processed 1,343 sales in September, a 3.5% increase compared to sales in August 2019, and a 29.8% increase compared to September 2018. These sales numbers put the Fraser Valley back to average sales for September. Last September’s numbers were one of the lowest in the past ten years.  

September is now the third month in a row that we have seen sales increase significantly over the same period last year. We are not yet seeing an increase in prices however if this trend continues, we could see prices increase in 2020. 

What’s Your Home Worth?
Click Here to Find Out
 

The attached market throughout the Fraser Valley, with the exception of Mission, continued in a sellers market in September. Over the past three months, the Benchmark price has dropped about 1% for both townhouses and condos.

The detached market continues to be varied throughout the valley. Cloverdale was in a strong sellers market in September while South Surrey remained in a buyers market. Overall, most areas experienced a balanced market. 


HPI® Benchmark Price Activity

  • Single Family Detached: At $950,000, the Benchmark price for a single‐family detached home in the Fraser Valley decreased 0.4% compared to August 2019 and decreased 3.9% compared to September 2018. 
  • Townhomes: At $520,000 the Benchmark price for a townhome in the Fraser Valley decreased 0.3% compared to August 2019 and decreased 4.8% compared to September 2018. 
  • Apartments: At $405,500, the Benchmark price for apartments/condos in the Fraser Valley decreased 0.9% compared to August 2019 and decreased 7.6% compared to September 2018.

Greater Vancouver:

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totaled 2,333 in September 2019, a 46.3% increase from the 1,595 sales recorded in September 2018. Last month’s sales were just 1.7% below the 10-year September sales average. That’s a huge change from September 2018 when sales were 36% below the 10-year average. 

The detached market in Vancouver, west side, West Vancouver, Richmond and Tsawwassen remained in a buyers market in September. The rest of the Greater Vancouver area were in a balanced market for detached properties. Sales in Maple Ridge were double that of last September. 

The attached market from East Vancouver, and east to Maple Ridge, was in a sellers market. North Vancouver and Downtown Vancouver were also in sellers markets with the remaining areas in balanced markets. 

There were 1,588 sales of condos and townhouses in September and 745 sales of detached homes. 

Real Estate Market Update September 2019

School is back in session and buyers are back in the market.

Besides some great weather over the past two months, we also saw real estate sales increase across the Lower Mainland. August is typically the second slowest month of the year in real estate sales, however, sales across the Fraser Valley and Greater Vancouver area were up about 13% over August 2018. This follows a similar increase in July. The fall is the second busiest season of the year in real estate. The increased sales of the last two months could be an indication of a stronger fall season.

One factor behind increased sales may have been the drop in the mortgage qualifying rate, from 5.34% to 5.19%. Also, the major banks all dropped their 5-year fixed-term mortgage rates over the summer and you can now find a 5-year rate lower than a variable rate. I have recently seen 5-year rates as low as 2.66%.

Another factor leading to increased sales may have been the decrease in prices over the past 12 months. We can’t deny that prices rose to extreme levels in 2018 and the decrease in prices seen over the past year was to be expected and welcomed by many.  The question now is, have we reached the bottom?

There are many factors affecting our economy and the real estate market. The Bank of Canada recently decided to hold the overnight bank rate at 1.75%. Many economists believe that a future rate cut is still coming. The Bank has said that any rate changes will depend on data available and not future projections. The latest report on jobs in Canada just came out and shows a gain of 81,100 jobs in Canada in August. The dollar is also up slightly to 76 cents U.S. and our inflation rate is 2%, right where the Bank wants it.  So while the U.S economy shows signs of struggling, Canada’s economy still looks steady.

Fraser Valley 

Over the months of July and August, condos and townhouses have been in a sellers market. For detached homes, North Delta, Cloverdale, Langley, Abbotsford and Mission all experienced strong balanced to sellers markets. South Surrey continued in a buyers market while Surrey was solidly in a balanced market. On average, prices for all property types have posted a 1.1% decrease over the past three months. 

HPI® Benchmark Price Activity
  • Single Family Detached: At $954,100, the Benchmark price for a single‐family detached home in the Fraser Valley decreased 0.3 per cent compared to July 2019 and decreased 5.4 per cent compared to August 2018.
  • Townhomes: At $521,400, the Benchmark price for a townhome in the Fraser Valley in the Fraser Valley increased 0.1 per cent compared to July 2019 and decreased 4.9 per cent compared to August 2018.
  • Apartments: At $409,200, the Benchmark price for apartments/condos in the Fraser Valley decreased 0.1 per cent compared to July 2019 and decreased 7.7 per cent compared to August 2018.

Greater Vancouver:

Sales in the Greater Vancouver area increased over the past two months to just 9.2% below the 10 year average. Compared to 40% below the 10 year average, which we saw for many months last year, this is a big improvement.

Across the Greater Vancouver area, over the past two months, townhouses have been in a balanced market, condos have been in a balanced/sellers market and detached homes have been in a buyers market.

Prices in most Vancouver areas are still slowly dropping.  In the past three years, prices for detached homes in Vancouver, west side, have dropped a whopping 20%. Maple Ridge on the other hand has seen prices increase almost 15% in the past three years. All property types, in all Vancouver areas are showing price decreases in the past 12 months.

Will Your Remodel Pay Off? The best and worst.

 

Will Your Remodel Pay Off? The Best (and Worst)
Ways to Spend Your Budget

Most new homeowners have something about their property that they want to change. And as family needs and design trends shift over time, many will eventually choose to remodel. Some homeowners make updates to their property before listing it to maximize their potential sales revenue.

Whatever your reasons are for taking on a home improvement project, it’s wise to consider how the money you invest will impact your home’s value.

We’ve taken a look at six popular home renovations and identified those that—on average—have the best and worst returns on investment. So before you lift a hammer or hire a contractor, take a look at this list and see if your remodeling efforts will reward you when it comes time to sell.

 

RENOVATIONS THAT PAY OFF

These three common home improvement projects not only add function and style to your home, but they also offer a strong return on investment. Making strategic upgrades to your property will help you increase its value over time.

Minor Kitchen Remodel

The kitchen is often referred to as the “heart of the home,” and for good reason. Traditionally used for preparing food, it has morphed into so much more. Many of us now eat our family meals in the kitchen, it serves as a favorite spot for homework and kids’ art projects, and it’s the place guests tend to gather when we host events.

Because we spend so much time in our kitchens, it’s natural that we will eventually want to make updates and upgrades to better suit our needs and changing style preferences.

Luckily, a minor kitchen remodel is one of the best investments you can make in your home. According to Remodeling Magazine’s annual Cost vs. Value Report, it has an average 80.5% return on investment.1

The key to making a kitchen remodel pay off is to keep it modest in scale. Spend too much on custom or high-end selections, and you are less likely to recoup your investment. Instead, make an effort to keep your existing layout if it works for you and your family. Paint or reface cabinets instead of replacing them. Update countertops with low-maintenance quartz and swap out old light fixtures with modern alternatives. Replace outdated appliances with energy-efficient models. The average cost for a minor kitchen remodel is $22,500, and it’s likely to recoup more than $18,000 at resale.1

Wood Deck Addition

A deck addition is a popular way to extend and enhance the use of your outdoor space. It’s the perfect spot for grilling, dining alfresco, and entertaining. In fact, 81% of surveyed homeowners said they have a greater desire to be home since completing a deck addition.2

For a 16 x 20-foot wood deck, you can expect to spend around $13,000. Fortunately, the money you invest offers an average return of 76%.1

Decks made of composite material are a popular alternative these days, as they don’t require the regular sanding and staining that wood decks need. However, at an average cost of $19,000 for a 16 x 20-foot composite deck, they are significantly more expensive. Plus, the expected return on investment is only 69%.1 Still, if you plan to hire someone to provide regular maintenance to a wood deck, then a composite deck may offer cost savings over time.

Siding Replacement

Everyone knows good curb appeal is important when selling your home. And while it may not be the most exciting way to spend your remodeling budget, new siding can make a big impression on buyers … and your selling price.

Your home’s exterior is one of the first things buyers see when they view your home. It sets the tone for what they are going to see inside. It also gives an impression of how well the property has been maintained. Worn, peeling, or rotted siding can be a major red flag for buyers.

Replacing 1,250 square feet of siding costs around $16,000 and will net you an average of 76% at resale.1

For an even greater impact, consider replacing a portion of your siding with manufactured stone veneer. It can have a dramatic effect on the visual appeal of your home. A 300 square foot area will run you around $8,900, but you can expect to see a nearly 95% return when it comes time to sell.1

 

RENOVATIONS WITH WEAK RETURNS

These three popular remodeling projects are homeowner favorites. However, don’t expect to see a high rate of return at resale. Instead, consider them an investment in your current quality of life. Just make sure you’ll be living in the home long enough to make them worthwhile.

Major Kitchen Remodel

If there’s one room the majority of homeowners dream about making over, it’s their kitchen. From custom cabinetry to high-end appliances, the possibilities are endless. But those dreams can come at a cost.

An upscale kitchen remodel with high-end cabinetry and countertops, commercial-grade appliances, and designer features can cost upwards of $130,000. And unfortunately, you’ll only get back around 60% at resale. Even a mid-range kitchen remodel that includes new semi-custom wood cabinets, laminate countertops, and energy-efficient appliances could run you around $66,000 and net you a mere 62% at resale.1

Of course, an outdated or non-functional kitchen could turn buyers off from your home completely …  and keep you from enjoying it yourself! So if your kitchen needs a major remodel, you shouldn’t necessarily scrap your plans. Just go in with the realization that you may only get back a fraction of what you invest. Then you can decide which upgrades are worth the splurge.

In-ground Pool

Few additions deliver more entertainment or enjoyment than an in-ground pool. It brings families and friends together, provides a break from the summer heat, and offers a fun and convenient way to stay fit. Plus, you’ll be the envy of your neighbors! But before you dive into a pool addition, consider whether the benefits outweigh the (substantial) costs.

The average expense to install a standard 18 x 36-foot in-ground pool is $57,500. And the estimated return at resale is only or 43%.2 In addition to the installation cost, plan to spend money each year on maintenance, repairs, and additional insurance.

However, 92% of surveyed homeowners said they “have a greater desire to be home” since installing a pool, and 83% have “an increased sense of enjoyment when they are at home.” For you and your family, the perks of a pool may be priceless.2

Master Suite Addition

If you own a house built before the 1980s, there’s a good chance it lacks a master suite, which is a feature that has become commonplace in most newly constructed homes.3

Master bedrooms have evolved from a simple place to sleep into a homeowner’s retreat—often featuring a sitting area, his-and-hers walk-in closets, and an attached bathroom with double vanities, a soaking tub, and a walk-in shower.

And master suite additions have become increasingly popular—both in homes that lack one as well as those with aging owners who can no longer accommodate stairs to an upper-level bedroom.

But what’s the typical return at resale? Unfortunately, a master suite addition offers one of the lowest returns of any remodeling project. With a median cost of $125,000, most sellers will only recoup around 52% of their investment. Nevertheless, in a survey of homeowners, the majority were satisfied with their decision to add a master suite, giving it a “Joy Score” of 10 out of 10.4

WEIGHING COST VS. BENEFIT

It’s always wise to enter into a remodeling project with knowledge of how it will impact your home’s value. In most cases, upscale or highly-customized upgrades are less likely to offer a high rate of return. That said, home renovations that improve your quality of life and enhance your enjoyment may be worthwhile no matter the cost.

 

GET A CUSTOMIZED ANALYSIS OF YOUR PROJECT

 

We’ve been talking averages. But the truth is, the actual return you can expect on a home improvement project will vary depending on your particular home and neighborhood. If you have plans to remodel, call or send us the details. We’d be happy to conduct a free analysis to determine how the renovations will impact the value of your home!

Sources:

  1. 2019 Cost vs. Value Report –
    https://www.remodeling.hw.net/cost-vs-value/2019/
  2. NAR’ Remodeling Impact Report – https://www.nar.realtor/sites/default/files/documents/2018-05-remodeling-impact-outdoor-features-05-23-2018.pdf
  3. Zillow –
    https://www.zillow.com/blog/evolution-of-the-master-bedroom-48286/
  4. House Logic –
    https://www.houselogic.com/by-room/bedroom-closet/master-suite-addition-return-investment/

SALES ARE UP – Market Review June 2019

Sales are up. Prices are stable in the Fraser Valley but continue to fall in many areas of the Greater Vancouver.
The real estate market in the Lower Mainland started off 2019 with decreasing prices and lower than average sales. High prices and the mortgage stress test were named as the causes for keeping buyers on the side lines. Buyers were also concerned about further decreasing prices and rising interest rates.  In the past few months, many economic factors have changed and the Bank of Canada has indicated their overnight rate may remain at 1.75% for the rest of 2019. Banks have also decreased their mortgage rates in the past few months. While Spring is typically the busiest season for real estate transactions, the changes in the lending rates may have added to the increased sales in the past two months. Sales were up significantly in May compared with April, in both the Fraser Valley and Greater Vancouver markets.

Price point remains the significant factor in determining activity in a market. That price point is different in each area. In Vancouver, west side, detached homes priced under $3.5M were selling at a rate of 24% (which is a sellers market) but in Richmond, Surrey and South Surrey, you only saw a sellers market for detached homes priced under $1,250,000.  In North Delta and Abbotsford, detached homes under $900,000 experienced a sellers market in May.

Fraser Valley 

The Spring season began with March posting 26% fewer sales than March 2018, sales picked up in April and posted only 19% fewer sales than April 2018. May sales were higher again with only 13.7% fewer sales than May 2018. There were more active listings on the market because of the fewer sales and listings taking longer to sell. In May, there were 26% more active listings on the market than in May 2018.

In the past three months, prices have been stable with some small gains. Detached homes and townhouses are generally 5.9% less than May 2018 while condos have been hit a little harder and are about 8% less than May 2018.

The market for townhouses and condos were in sellers markets in May while the market for detached homes was generally balanced with Cloverdale experiencing a sellers market in May and South Surrey in a buyers market for May.

HPI® Benchmark Price Activity
  • Single Family Detached: At $964,200, the Benchmark price for a single family detached home in the Fraser Valley remained unchanged compared to April 2019 and decreased 5.9 per cent compared to May 2018.
  • Townhomes: At $522,500, the Benchmark price for a townhome in the Fraser Valley in the Fraser Valley increased 0.1 per cent compared to April 2019 and decreased 5.9 per cent compared to May 2018.
  • Apartments: At $416,800, the Benchmark price for apartments/condos in the Fraser Valley decreased 0.9 per cent compared to April 2019 and decreased 8.0 per cent compared to May 2018.

Greater Vancouver:

Sales for May increased 44.2% compared to sales in April. Overall, sales were 22.9% below the 10-year average for the month of May which is a marked improvement from what we have seen in previous months. From Burnaby to Maple Ridge, the market for attached properties was in a sellers market for May. The detached market from Burnaby to Maple Ridge was generally balanced. Moving into Metro Vancouver, North Vancouver experienced a sellers market in May in both the detached and attached market. The rest of the area remains very mixed. Ladner and East Vancouver experienced sellers markets for attached properties while West Vancouver experienced a buyers market for both detached and attached properties. Prices in some areas have continued to drop in the past three months while other areas have shown price increases.

Greater Vancouver Area Stats May 2019

HPI® Benchmark Price Activity

  • Single Family Detached: At $1,421,900, the Benchmark price for a single familydetached home decreased 11.5% compared to May 2018 and decreased 0.5% compared to April 2019.
  • Townhomes: At $779,400 the Benchmark price for a townhome decreased 7.6% compared to May 2018 and decreased 0.5% compared to April 2019.
  • Apartments: At $664,200, the Benchmark price for apartments/condos decreased 7.3% compared to May 2018 and decreased 0.6% compared to April 2019.

Staging a Vacant Home

 

Redfin, a U.S based real estate brokerage, recently published the results of their in-house study which showed that across the U.S., vacant homes sell for less money and spend six more days on the market than comparable occupied homes. The study compared the sale prices and time spent on the market for home listings that were marked vacant at the time they were sold with those that were not. Only metro areas where the listings for at least 70 percent of homes sold in 2018 were clearly marked as either vacant or not vacant were included in the study.

“Although vacant homes are easy for buyers to tour at their convenience, the fact that the sellers have already moved on is often a signal to buyers that they can take their time

making an offer,” said Redfin chief economist Daryl Fairweather.

Many buyers find it difficult to visualize the full potential of a home when it is vacant. Staging or virtually staging a vacant home will help many buyers see how layout and rooms may function for their own needs.  Staging involves hiring a company to bring and arrange furniture in the home to showcase its potential to buyers. Staging can be particularly beneficial for homes with open spaces or unusual layouts, where buyers most often need help to see how furniture could be arranged. Professional staging can cost several thousand dollars, depending on the number of rooms staged and the length of time. Virtual staging can provide a cost-effective option for vacant homes and provides a realistic view of what the vacant home can look like fully furnished. With over 90% of buyers looking online before setting foot into a house, virtual staging can increase the number of buyers who choose to view the home in person.

Staging a home also provides a certain ambiance that can not be achieved in a vacant home. Staging can be targeted to specific buyers most likely to purchase that particular home. Staging a home for sale has become standard business in the real estate market and for good reason.

Before staging:

After staging: