Michael Cowling

Michael has enjoyed helping more than 2,900 families buy and sell single family homes, townhomes, and apartments in the Richmond, Vancouver West, Ladner and Tsawwassen area ranging from $50,000 to over $10,000,000. As a lifetime resident, he knows the nuances of our market and is extremely good at matching buyers and sellers for their mutual benefit. Michael has been recognized by the Greater Vancouver Real Estate Board for achievement in the top one per cent of over 10,000 Realtors for ten years, in the same period he has been in the top five Richmond sales, and has achieved a top RE/MAX Annual Award 22 times, some years having over one hundred resale transactions and has been inducted into the RE/MAX Hall of Fame and received the RE/MAX Lifetime Achievement Award. Contact Michael at 604-276-2335 or info@michaelcowling.com for information on exciting opportunities in our area.
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Condominium Sales Drive August Activity

VANCOUVER, BC – September 5, 2017

Competition for condominiums and townhomes pushed Metro Vancouver home sales above typical levels in August.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in the region totalled 3,043 in August 2017, a 22.3 per cent increase from the 2,489 sales recorded in August 2016, and a 2.8 per cent increase compared to July 2017 when 2,960 homes sold.  Last month’s sales were 19.6 per cent above the 10-year August sales average.

“First-time home buyers have led a surge this summer in demand in our condominium and townhome markets,” Jill Oudil, REBGV president said. “Homes priced between $350,000 and $750,000 have been subject to intense competition and multiple offers across the region.”

There were 4,245 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in August 2017. This represents a 1.1 per cent decrease compared to the 4,293 homes listed in August 2016 and a 19.2 per cent decrease compared to July 2017 when 5,256 homes were listed.  The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 8,807, a 3.5 per cent increase compared to August 2016 (8,506) and a 4.2 per cent decrease compared to July 2017 (9,194).

For all property types, the sales-to-active listings ratio for August 2017 is 34.6 per cent. By property type, the ratio is 16.3 per cent for detached homes, 44.8 per cent for townhomes, and 76.3 per cent for condominiums.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“Conditions in our detached home market are distinct today from the dynamic in our condominium and townhome markets,” Oudil said. “Detached homes have entered a balanced market. This means there’s less upward pressure on prices and that buyers have more selection to choose from and more time to make their decisions.”

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,029,700. This represents a 9.4 per cent increase over August 2016 and a one per cent increase compared to July 2017.

Sales of detached properties in August 2017 reached 901, a 26 per cent increase from the 715 detached sales recorded in August 2016. The benchmark price for detached properties is $1,615,100. This represents a 2.2 per cent increase from August 2016 and a 0.2 per cent increase compared to July 2017.

Sales of apartment properties reached 1,613 in August 2017, a 20.1 per cent increase compared to the 1,343 sales in August 2016. The benchmark price of an apartment property is $626,800. This represents a 19.4 per cent increase from August 2016 and a 1.7 per cent increase compared to July 2017.

Attached property sales in August 2017 totalled 529, a 22.7 per cent increase compared to the 431 sales in August 2016. The benchmark price of an attached unit is $778,300. This represents a 12.8 per cent increase from August 2016 and a 1.9 per cent increase compared to July 2017. -30*Editor’s Note: Areas covered by the Real Estate Board of Greater Vancouver include: Whistler, Sunshine Coast, Squamish, West Vancouver, North Vancouver, Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam, Coquitlam, Pitt Meadows, Maple Ridge, and South Delta.

The real estate industry is a key economic driver in British Columbia. In 2016, 39,943 homes changed ownership in the Board’s area, generating $2.5 billion in economic spin-off activity and an estimated 17,600 jobs. The total dollar value of residential sales transacted through the MLS® system in Greater Vancouver totalled $40 billion in 2016.

Source:  REW.ca

62% of Homes Sold Above Asking, Despite Market Slowdown

New weekly #REWCAP roundup of latest Greater Vancouver market stats reveals prices remain robust

Although July so far seems to be seeing a further slowing in sales activity, with 420 homes registered as sold in the Greater Vancouver region between July 10 and 16, the majority of those deals -260 of them – were made at over list price.  Just 119 of the 420 sales went for under asking, with a mere 41 sold for exactly the sticker price.

The property that sold for most over asking was a 2.5-acre parcel of land in Maple Ridge with two homes including a three-bedroom house, listed at $620,000 but sold for 37% more than that at $851,000.

The most expensive listing to be snapped up last week was also a property where the value was all in the land. This was a $4.6 million probable-teardown on Vancouver’s West Side neighbourhood Southlands, which is described as a “91.5-by-200-foot private park-like lot close to golf courses, UBC, transit and great schools.” After 52 days on the market, it sold for nearly $400K under its original price of $4,999,888 (and note the no-doubt-deliberate use of Chinese lucky number 8 in that price).

At the other end of the scale, the least expensive home thus far registered as sold last week is a $150,000, one-bedroom, 634-square-foot, ground-level condo in a 1970s Richmond building. It took just six days to sell, although for only $200 above its $149,800 list price.

There were 1,291 homes newly listed on the market July 10-16, a little higher than the previous week’s 1,255 properties and the same week in June (1,241).

Source: REW.ca

Highest strata fees are found in tallest buildings, finds CMHC study – but what’s the average cost?

Do you ever wonder whether the fees on the condo you’re living in – or thinking of buying – are typical for the type of building?
A new report released July 4 by Canada Mortgage and Housing Corporation reveals the average condo fee in Canada, across all building types and ages, to be $302 a month. The report uses the most recent available nationwide census and survey data up to 2011.
The average condo fee varied significantly between high- and low-rise buildings, and the age of the building. Households living in high-rise towers paid significantly more than those living in low-rise buildings and town homes or row houses.

Condo fees were also found to get progressively higher, the older the building.
The CHMC said, “In 2011, this trend was consistent among fee payers living in high-rise buildings and row houses, and somewhat consistent in other dwelling types.
It added, “Fee payers living in older dwellings were more likely to occupy units with more bedrooms than fee payers living in newer dwellings.”

The report also broke the results down by province and city, with average condos fees in Vancouver standing at slightly lower than the national averages, at $265 a month for a low-rise apartment, $320 a month for a high-rise and $238 for a row home/townhouse.

The CMHC found that across Canada, an increasing percentage of homeowners pay condo fees, as condo ownership gradually increases compared with single-family home ownership. The proportion of households in owner-occupied dwellings who said they pay strata fees increased from 7.5% in 1996 to 12.7% in 2011.

Unsurprisingly, households paying strata fees were found to have lower average incomes than other homeowners. The inflation-adjusted average pre-tax income of households paying condo fees was 10% lower than households not paying strata fees in 1995, and this income gap increased to 25% in 2010.

Source: REW.ca

5 Sizzling Reasons to Buy a Home During Housing’s Hottest Season

 

The days are getting longer. Ice cream truck jingles echo up and down the block. But the surest sign that summer is here? It just might be those “For Sale” signs popping up like dandelions in your neighborhood.

Yep, we’re smack dab in the middle of the most popular time of the year to buy and sell a home. If you’re thinking of starting your home search, your first instinct as a savvy shopper might be to stay away and wait for the weather—and the market—to cool down. Why battle the crowds and bidding wars if you’re in no rush to move?

But there’s no reason to sweat the idea of buying in the summer. In fact, there are some distinct advantages to making your way into the marketplace during housing’s hottest season—as long as you can stand the heat of a little competition.

  1. Prices aren’t necessarily higher

A huge myth about the real estate market is that homes sell for more in the summer and less in the winter. This is simply not true.  Let’s be clear: Home prices do usually peak in June–August. And it’s a seller’s market in most areas. But other forces beyond the summer sun play a major role in a home’s asking price. They include the number of similar homes also for sale in a given area, interest rates, and the job market.

What is true, however, is that there are more homes on the market in summer than in the winter, and there is also a higher number of sales in the summer than the winter.

Which leads us to our next summer-buying advantage.

  1. Inventory is broader

You wouldn’t buy a car from a dealer with only two models for sale, so why limit your options when it comes to picking a house? The open-plan kitchen you’ve been yearning for or a home in a stellar school district is much more likely to pop up in a busier marketplace.

The large inventory offers significantly more opportunities for purchasers to identify specific floor plans, amenities, and locations, feel more confident in their search because additional properties hit the market every week.

In some less competitive markets, knowing that there are plenty of homes for sale can give you more leverage for price negotiation, and peace of mind knowing that if you have to walk to away, another home will be just around the corner.

  1. Buying and selling at the same time could be easier

If you need to sell your current home before you can buy another, you’ll likely have an easier time with the balancing act during the summer. Rather than getting trapped with two mortgages, you could have a more seamless transition in a busier market.

If the client needs to sell a home before buying, the home will be more likely to sell, and potentially at a good price, allowing the client to purchase their new home sooner.

But remember, these transactions take time, so if you’re planning on pulling off a double act, get ready as soon as possible so you can capture as much of that golden season as you can.

  1. School’s out for summer

Any beleaguered parent can tell you why this factor is crucial. By waiting until summer to make your move, you can minimize disruption to your kids’ lives. Plus, their schedule is clear to bring them along to showings. (Beware, though, not all agents appreciate young kids underfoot.)

House hunting during the summer break from school means that kids can more readily attend showings— important when offer time is of the essence and parents want each member to approve of the new family home.

And if the sellers have kids, they might also be trying to cement a sale in time for the new school year—and will likely be more motivated toward the end of the season.

Sellers who find their properties still on the market as summer draws to a close and the ranks of buyers thin out may be more open to price negotiation.  In addition, those buyers who were unable to secure a home after months of looking and making offers may become fatigued and drop out of the hunt.”

  1. You’ll get to know the lay of the land

It’s easier to do a little detective work on your potential home when the weather’s nice and the days are longer. Trees and flowers are in full bloom, so you’ll get a better idea of your prospective new yard. You can step out on that back porch and envision what it will really, truly be like to live there and host your long-anticipated Margarita Mondays. Plus, everyone’s more active, so you’ll get a better feel for the community.

Summer brings people out of their homes, so while you are home shopping with your agent, you will get the chance to take the pulse of the neighborhood and see your potential neighbors.  Families can often get a feel for the neighborhood’s kid population during the day in the summer.  But beware! Sometimes the romance of summer can distract you from some red flags.

It is fine to stop and smell the roses, but also pay attention to what lurks behind them.  The eyesore of a junk pile in your neighbor’s yard. Or the giant cellphone tower you didn’t see through those beautifully full trees—that now you can’t unsee. And make sure that foliage isn’t blocking any potential problems with the home, such as foundation issues or peeling roof tiles.

You should also use this opportunity to test how the property holds up in warm weather. See how well the air conditioning works when it’s pushing 100 degrees outside, and open all the windows to see if any stick or simply won’t open. Of course, your home inspector will check these things, but it never hurts to get a jump-start.

Source:  Realtor.com

8 Rookie Mistakes That Keep People From Selling Their Home

If your home is struggling to catch the eye of a buyer, it could be for an entirely valid reason. Maybe you’re stuck in a sluggish market or have the poshest place on the block (always a tough sell). But there’s another possibility, too—your home could be sitting on the market because of a rookie selling mistake. All of us can make ’em, even those of us who actually have a few home sales under our belts.

The good news? These basic slip-ups can be easily corrected or avoided. To help you out, we spoke to real estate agents to identify some of the most common mistakes people make in trying to sell their home. Sidestep these flubs to avoid sabotaging your own sale.

Rookie mistake No. 1: Overpricing your home

All sellers want to get top dollar for their house. Unfortunately, says Michael Cowling, a real estate agent in Richmond BC with RE/MAX, “many people overestimate the value of their home.” For example, she says, “if a neighbor sells their house for $1,200,000, you might automatically assume that your house is worth at least that much money, but that’s not necessarily the case.”

“Price is typically the reason why a house doesn’t sell. And the last thing you want to do is list too high right from the start, because it could cause your house to sit on the market—which might require you to make a serious price reduction in order to sell it.

“If a home is on the market for more than four weeks, prospective buyers are going to assume that there is something wrong with it,” says Michael.

Your best approach: Listen to your agent’s listing price recommendation, and try not to get too emotional if your agent’s suggestion isn’t as high as you’d hoped.

Rookie mistake No. 2: Not budging on price

Even if the price is right, you might need to be flexible—especially if you’re in a buyer’s market. So, if you receive an offer that’s below list price, you should at least consider making a counteroffer. After all, receiving $5,000 or $10,000 less for your house than what you wanted is a small concession in the long term.

Rookie mistake No. 3: Doing a lousy job of cleaning

Let’s make this clear: Your home needs to be spotless. That might mean hiring a professional cleaner to do a deep and thorough cleaning of the entire place. You might want to consider renting a storage locker to make the process of cleaning out the garage, closets, and attic less onerous. But it will likely be worth it, because clutter distract buyers in a big way.

Bonus: A clean house will also enable you to take great photographs for your listing (see our next point).

Rookie mistake No. 4: Using crummy photographs

Unless you’re an artist with the camera, you’ll want to hire a professional photographer to take pictures of the house, because nearly half of home buyers start their search online, a recent survey by the National Association of Realtors® found.

“You can write a beautiful description, but people aren’t initially focusing on the description, they’re looking at the pictures.”

A good photographer is worth the investment by your agent.

Rookie mistake No. 5: Leaving religious or political belongings in plain sight

“You never know what type of buyer is going to look at your house,” says Michael, so put away all personal belongings—specifically, religious or political items, which can be awfully polarizing. “You don’t want anything that’s going to distract buyers.”

Rookie mistake No. 6: Lurking around at your own open house

This is a huge mistake for several reasons.

“If the buyer knows that the seller is there, they might feel uncomfortable asking the listing agent honest questions about the home,” says Michael. Buyers might also feel like they’re intruding if you’re present, which is kind of crazy.

“People like to open closet doors and look closely at the home without someone hovering over their shoulder”.

Rookie mistake No. 7: Making it difficult for agents to show your home

When selling your house, “be prepared for little privacy,” says Michael. Translation: You’ll need to be flexible when buyers ask to see your home on short notice. To make it easy for buyer’s agents to show the property while you’re away (see No. 6), let your agent install a lockbox with keys to the house.

Rookie mistake No. 8: Leaving pets at home during showings

Some people are simply scared of pets, (yes, even your cute little pug), or they might have allergies that will make them want to steer clear. So don’t just crate your dog or cat during showings; instead, take them with you or drop them off with a neighbor while buyers are viewing the house. And because pets, like humans, tend to accumulate lots of stuff—leashes, collars, toys, water bowls, and the like—make sure you stow their paraphernalia in a cupboard or closet. And do a quick vacuum of pet hair before you go!

Federal Interest Rate Decision Announced

Federal Reserve officials forged ahead with an interest-rate increase and additional plans to tighten monetary policy despite growing concerns over weak inflation.

Policy makers agreed to raise their benchmark lending rate for the third time in six months, maintained their outlook for one more hike in 2017 and set out some details for how they intend to shrink their $4.5 trillion balance sheet this year.

Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely, the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington. The committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.

Policy makers also issued forecasts showing another three quarter-point rate increases in 2018, similar to the previous projections in March.

The Feds actions and words struck a careful balance between showing resolve to continue tightening in response to falling unemployment while acknowledging the persistence of unexpectedly low inflation this year.

Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the committees 2 percent objective over the medium term, the statement said.

The committee had previously described inflation as close to their goal.

Economic Data
Data released earlier Wednesday showed that, on a year-over-year basis, the core version of consumer price inflation, which strips out food and energy components, slowed for the fourth straight month, to 1.7 percent in May. Following that news, the probability that the June hike would be followed by another increase this year dropped to about 28 percent from 48 percent, according to pricing in fed funds futures contracts.

In a separate statement on Wednesday, the Fed spelled out the details of its plan to allow the balance sheet to shrink by gradually rolling off a fixed amount of assets on a monthly basis. The initial cap will be set at $10 billion a month: $6 billion from Treasuries and $4 billion from mortgage-backed securities.

The caps will increase every three months by $6 billion for Treasuries and $4 billion for MBS until they reach $30 billion and $20 billion, respectively.

Officials didn’t reveal the exact timing of when the process will begin this year, as well as specifically how large the portfolio might be when finished.

The FOMC retained language that it expects to keep raising interest rates at a gradual pace if economic data play out in line with forecasts.

Yellen Remarks
Yellen is scheduled to hold a press conference at 2:30 p.m. where reporters are likely to ask, among other topics, about her outlook for rates and the balance sheet.

Wednesday’s decision brings the Feds target for the federal funds rate, which covers overnight loans between banks, to a range of 1 percent to 1.25 percent.

The vote was 8-1, with Minneapolis Fed President Neel Kashkari dissenting from a rate increase for the second time this year, preferring no change.

Quarterly projections for 2018 and 2019 showed Fed policy makers largely maintained their expected path for borrowing costs. The median forecast still has the central bank making three quarter-point increases in 2018; the end-2019 rate is seen at 2.9 percent, a slight change from 3 percent in the March projections.

The new forecasts may in part reflect changes in the FOMC since the last meeting, including the departures of Governor Daniel Tarullo and Richmond Fed President Jeffrey Lacker, and the arrival of new Atlanta Fed President Raphael Bostic.

In any event, interest-rate projections for 2018 and 2019 are becoming less reliable guides to future policy amid the likelihood that the Feds Board of Governors will see a major makeover in the next year.

The Fed has in recent weeks wrestled with contradictory signals from unemployment and inflation. Joblessness in the U.S. dropped to a 16-year low at 4.3 percent in May. Despite that, the Feds favorite measure of price pressures, excluding food and energy components, rose just 1.5 percent in the 12 months through April, down from 1.8 percent in February. The Feds target for inflation is 2 percent.

Inflation Projections
The recent economic developments prompted FOMC members to drop their median projection for inflation to 1.6 percent in 2017, from 1.9 percent forecast in March. The median forecasts for 2018 and 2019, however, were unchanged at 2 percent.

They also reduced slightly their estimate for the lowest sustainable level of long-run unemployment to 4.6 percent from 4.7 percent. That change, and the reduction in the 2017 inflation forecast, could reduce the urgency policy makers feel to hike rates again in coming months, especially if inflation remains soft.

Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined, the FOMC statement said.

Economic-growth projections were little changed, with the median forecast for 2017 moving to 2.2 percent from 2.1 percent.

The FOMC next meets in six weeks, on July 25-26. A Bloomberg survey of 43 economists conducted June 5-8 showed a median expectation for rate hikes in June and September, followed by the start of balance-sheet unwinding in the fourth quarter.

Copyright Bloomberg 2017

Market Activity Picks Up in May

Home buyer activity returned to near record levels across the Metro Vancouver* housing market in May.
Residential property sales in the region totalled 4,364 in May 2017, a decrease of 8.5 per cent from the 4,769 sales in May 2016, an all-time record, and an increase of 22.8 per cent compared to April 2017 when 3,553 homes sold.
Last month’s sales were 23.7 per cent above the 10-year May sales average and is the third highest selling May on record.
“Demand for condominiums and townhomes is driving today’s activity,” Jill Oudil, Real Estate Board of Greater Vancouver (REBGV) president said. “First-time buyers and people looking to downsize from their single-family homes are both competing for these two types of housing.”
New listings for detached, attached and apartment properties in Metro Vancouver totalled 6,044 in May 2017. This represents a 3.9 per cent decrease compared to the 6,289 units listed in May 2016 and a 23.2 per cent increase compared to April 2017 when 4,907 homes were listed.
The month-over-month increase in new listings was led by detached homes at 27.1 per cent, followed by apartments at 22.7 per cent and townhomes at 14.1 per cent.
The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 8,168, a 5.7 per cent increase compared to May 2016 (7,726) and a 4.5 per cent increase compared to April 2017 (7,813).
“Home buyers are beginning to have more selection to choose from in the detached market, but the number of condominiums for sale continues to decline,” Oudil said.
The sales-to-active listings ratio across all residential categories is 53.4 per cent. By property type, the ratio is 31 per cent for detached homes, 76.1 per cent for townhomes, and 94.6 per cent for condominiums.
Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.
“While sales are inching closer to the record-breaking pace of 2016, the market itself looks different. Sales last year were driven by demand for single-family homes. This year, it’s clear that townhomes and condominiums are leading the way,” said Oudil. Contact me to understand the different factors affecting the market today.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $967,500. This represents an 8.8 per cent increase over May 2016 and a 2.8 per cent increase compared to April 2017.
Sales of detached properties in May 2017 reached 1,548, a decrease of 17 per cent from the 1,865 detached sales recorded in May 2016. The benchmark price for a detached property is $1,561,000. This represents a 3.1 per cent increase over May 2016 and a 2.9 per cent increase compared to April 2017.
Sales of apartment properties reached 2,025 in May 2017, a decrease of 5.8 per cent compared to the 2,150 sales in May 2016.The benchmark price for an apartment property is $571,300. This represents a 17.8 per cent increase over May 2016 and a 3.1 per cent increase compared to April 2017.
Attached property sales in May 2017 totalled 791, an increase of 4.9 per cent compared to the 754 sales in May 2016. The benchmark price for an attached property is $715,400. This represents a 13.1 per cent increase over May 2016 and a 1.9 per cent increase compared to April 2017.

Know the rules when it comes to insuring secondary suites

Secondary suites continue to be an affordable housing option for Metro Vancouver area residents, benefitting home owners as mortgage helpers and tenants as a less expensive roof over their heads. Secondary suites are so prevalent that Canada Mortgage and Housing Corporation estimates there are now about 101,808 accessory suites in the Metro Vancouver region.

With so many suites in our area, it’s important to remind home owners to let their insurer know about a suite and to buy insurance to cover the suite. “Whether the suite is legal or illegal, having insurance coverage is vital. There is a misconception among home owners that their existing policy will cover a suite.
A home owner who doesn’t tell their insurer about a suite and that there are two households living in the home, opens themselves up to significant risk.

An unreported and uninsured suite could potentially void the existing insurance contract on the primary residence if there is a flood or a fire. Some home owners may not properly insure their property because of fear that their insurer will report the suite to the local municipality. This isn’t true, however its always good advice to comply with local bylaws and report and register the suite with the local municipality. How much will insurance cost? “About 10% of the cost of your total home insurance. So if you’re paying $1,200, it will cost you an additional $120.
Home owners who rent their secondary suite can also buy separate comprehensive rental insurance. Depending on the insurer and on the policy, this can cover vandalism and damage by tenants, typically up to a payout maximum limit of $5,000. This insurance doesn’t cover the tenant’s belongings. The tenant has to buy their own insurance for their possessions.

Home owners with laneway homes, coach homes above garages and other authorized or unauthorized accommodation on their property should also let their insurer know and should buy appropriate coverage. When buying a property with a suite it’s a good idea to find out beforehand whether the property is insurable.
Based on the official community plans for Metro Vancouver municipalities, there is room for an additional 215,000 suites in the region.

Source: Greater Vancouver Real Estate Board

The Misleading Math Behind the Rent vs. Buy Calculation

Article originally published on www.realtor.com

| Feb 17, 2017

 

There’s about $13.1 trillion stashed away in the United States, in plain sight. Where? In our homes!

Do we have your attention yet?

That’s the total value of the equity held by over 75 million U.S. homeowners, according to the latest estimates from the Federal Reserve Board. And that works out to almost $175,000 per owning household.

This is unmistakable evidence that homeownership is a critical building block of household wealth. Owning a home is a key reason why the median net worth of a homeowner is almost $200,000 while the median net worth of a renting household is just over $5,000.

Sure, part of that is because owners were able to pony up a chunk of money to put down on a house, and to qualify for a mortgage. But the act of paying for a mortgage actually helps produce more wealth, by freezing payment amounts and building equity through forced savings.

The traditional rent versus buy argument compares the total monthly costs of buying a home with a mortgage with the corresponding rent. So that comparison is relevant when it comes to representing  the housing choice trade-off in clear cost terms.

Two years ago, that head-to-head heavily favored buying, thanks to very low mortgage rates and lower prices. Back then, more than three-quarters of the counties in the country saw lower buying costs than renting costs.

With prices and rates higher now, less than half of the counties in the country see math that favors buying.

But those raw numbers hide the fact that unlike a rent check, a percentage of every monthly mortgage payment—after the lender is paid interest—goes toward the owner’s home equity. That means it’s really a forced savings plan.

Over time, less of the mortgage payments go toward interest and more go toward equity, so the savings power is enhanced further.

Here’s how that works out for a median-price home of $250,000 bought in January with 20% down with a monthly payment of $976.

Before their first payment, the proud new homeowners had $50,000 in equity thanks to their down payment. (Actually, 20% down isn’t always typical or necessary, but, hey, it keeps this illustration simple.)

In the first year, an average of 29% of the monthly payments builds equity. After 12 payments, the homeowners have just over $3,400 in added equity.

By year 14, 50% of the monthly $976 payment goes toward equity. Don’t forget that the monthly payment hasn’t changed, because the interest rate was fixed.

At the end of the 14th year, just shy of $64,000 has been added to the initial $50,000 in equity.

In the final year of the 30-year mortgage, while the monthly payment remains $976, 98% of the monthly payments builds equity until that magic day when the home is owned free and clear.

Think you can beat that with rents? Researchers at Harvard put it this way:

“While studies simulating the financial returns to owning and renting find that renting is often more likely to be beneficial, in practice renters rarely accumulate any wealth. In no small part this seems traceable to the difficulties households face in trying to save absent either a clear goal or an automatic savings mechanism.”

So, you want a better rent versus buy illustration? First, find a place to rent for no more than $976—the same as our mortgage payment example above. If you can rent for less, great. Will you be able to save that difference amounting to at least $3,400 in the first year? That would imply you can really pay only about $700 in rent to get the same savings effect.

If you can’t save $3,400 yourself by paying less in rent, ask the landlord if he’ll take a portion of your rent payments and set it aside for your rainy day fund.

Then ask the landlord if he’ll set your rent payment at today’s rate for the next 30 years. And before you close the deal, ask him to raise the rainy day share each year by 1% to 2% until year 30, when he’ll get only 2% of the rent payment.

Clearly, this would not be easy to do.

Even if the house only keeps pace with inflation over 30 years, which is a very conservative assumption, the forced savings inherent in a mortgage guarantees a homeowner is building wealth. A renter household has to be extremely diligent to amass the same savings that the good ol’ 30-year mortgage does automatically.

Home Sales, Average Sale Prices Down “Significantly” Across BC: BCREA

January home sales across BC fell 23 per cent year-over-year to 4,487 units – a decline of just under five per cent compared with December 2016’s 4,721 transactions.

“Housing demand across the province returned to long-term average levels last month,” said Cameron Muir, BCREA chief economist. “However, regional variations persist, with Victoria posting above-average performance and Vancouver falling below the average.”

The total sales dollar volume across the province in January was $2.79 billion, a drop of 36.5 per cent compared with the same month the previous year, reflecting not only lower sales numbers but also a reduced average sale price.

The average BC MLS® residential price in December was $621,093, a drop of 17.5 per cent since one year ago. It’s also a slide of nearly five per cent month over month, bucking the previous five months’ trend of price increases since August’s dip.

Muir added, “A marked decrease in the average MLS® residential price is largely the result of relatively more home sales occurring outside of the Lower Mainland.”

Looking at the individual real estate boards across BC, Greater Vancouver was once again the area to see the biggest annual decline in sales and average sale prices, followed by the Fraser Valley – despite both areas still seeing board-defined benchmark prices well above year-ago levels.

The best-performing regional markets in January (excluding Powell River and Northern Lights, which are very small markets that see widely varying percentage changes) were the Kootenay, BC Northern, Okanagan Mainline and South Okanagan boards, which all saw year-over-year increases in home sales and average prices.

Although Chilliwack saw a smaller increase in transactions, it posted the province’s biggest rise in average sale price, up 38.3 per cent year over year. Of the large markets, Victoria and Vancouver Island also reported an increase in average sale prices since the previous January, up 12.3 and 5.7 per cent respectively.

National Picture

Home sales and prices across the whole country fared a little better than BC, but the Lower Mainland’s “significant” decline is pulling down the national trend, according to figures released February 15 by the Canadian Real Estate Association (CREA).

The CREA reported 25,282 Canadian homes exchanging hands in January, which is up 1.9 per cent year over year but down 1.3 per cent since December.

The association’s monthly report said, “While sales were up from year-ago levels in about two-thirds of all local housing markets including in the Greater Toronto Area, Calgary, Edmonton, London and St Thomas, and Montreal, they were down significantly in the Lower Mainland of British Columbia.”

CREA added that national sales were only slightly above that of November 2016, when new mortgage rules are introduced, which the association believes could negatively affect buyers this year.

“Canadian homebuyers face some challenges this year, including new mortgage rules that make it harder to qualify for a mortgage and regulatory changes that will push up mortgage financing costs,” said Cliff Iverson, CREA president. “It will take some time to gauge the extent to which these challenges will weigh on home buyers in different housing markets across Canada.”

January’s average sale price in Canada was $470,253, almost flat with one year ago, up just 0.2 per cent. However, the CREA warns against using averages as an indicator of real home values, as they can be easily skewed by high and low outliers. The MLS® benchmark home price in January, aggregated across Canada’s real estate boards, was $551.400 – up 15 per cent year over year.

“The shortage of homes available for sale has become more severe in some cities, particularly in and around Toronto and in parts of BC,” said Gregory Klump, CREA’s Chief Economist. “Unless sales activity drops dramatically, the outlook for home prices remains strong in places that face a continuing supply shortage.”

 

Article originally published on www.rew.ca

Contact Michael Cowling at 604-241-7653 or info@michaelcowling.com for your neighbourhood market update.

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