Ozzie Jurock
Sun

Lots of questions in the last two weeks. I thank you and beg your indulgence. I am not directly answering any questions till the end of August. Currently I am cruising in Desolation Sound with limited access to the ‘net of the airwaves’ kind. I do have access to my ‘net of the fishing’ kind and yes …there are still salmon in ‘them thar‘ waters.

I have picked a few more commonly asked questions in this issue:

Question:

I have been told that the U.S. short sale business is booming. How can I get into that in Canada or is it only available in the U.S.?

Answer:

A short sale simply means that the lender is accepting a lower payout on the total mortgage amount that is due. If your mortgage is $200,000, but your home is worth, say, $170,000, you are $30,000 short – plus any other charges. The lender accepts the ‘short’ mortgage amount. However:

1. A lender will only accept such a ‘short sale’ if it is proven the property is worth less and he has not much hope that the homeowner will pay back to full amount.

2. Some U.S. marketers may tell you that they can negotiate with an owner in trouble, get him to agree. Fine, but that does not mean that the lender will agree.

Is it possible? Of course. Lenders all over the U.S. are likely to take less. Is it easy? No, just think through all the steps: Find a willing seller, find a willing lender, find who will sign the documents, etc.

Doing it in Canada? It probably happens from time to time, but if you ask your banker to take less on the mortgage in the generally hot Western Real Estate market he would have a good laugh.

Question:

I have a property that I would like to sell in…. Do you have any products or services that will assist me in achieving this?

Answer:

While we have advertising opportunities on our website (banner advertising), we are not a real estate company. Your best bet is to hire a professional realtor that handles your special property marketing needs.

Question:

This mortgage question has been asked in similar veins: We just used our primary residence and an investment property to finance the purchase of another home which we intend to live in. We took out two 40-year variable rate mortgages to make it happen but am now wondering if this was a smart move or not. Did we make a mistake?

Answer:

What is done is done. I do not think that taking out 40-year mortgages is a mistake, my preference however is to take a mortgage for investment purposes over a much shorter time. The sooner an investment property gets into real cash flow the better. You may however have another problem. By turning your current home into an investment property you will have to pay a proportion of your gain as capital gain when you sell. Best to see your accountant…and remember your past in no way determines your future.

Question:

We have purchased nine pre-sales. The completion dates are spread out from mid ’09 – mid 2011. Should we be trying to assign one or more of these soon, or should we hold tight and not panic? As long as rental vacancies stay low, we will probably be okay if we don’t sell. All the talk about the downturn is scaring me! Any advice or reassurance you can give would be much appreciated.

Answer:

Sorry. Can’t reassure. No one has a crystal ball and Vancouver‘s condo market’s ball is particularly cloudy. I do not know which buildings you bought in, who was the developer, nor do I know what you paid for them. It is the deal that you made, not the market that will hold you safe. You always make the most money on the day you buy. Assuming you bought them this year, you likely bought at the peak of the market, but perhaps with nine units you received a wonderful low price? Sales of new condos are sharply lower in this June (down 62 per cent) and the sales success ratio dropped from 70 per cent to 34 per cent. At the same time assignments (people trying to sell pre-sales) on Craigslist.com on July 7 stood at 410. If you have a quality developer and you bought good buildings in good areas and you bought for rental purposes you will be fine after the downturn. If you bought to flip at a profit, that profit will not be easy to achieve.

Question:

We own a two-bedroom condo which we can sell for $230,000 on the East side. We would like to buy a $500,000 house in Port Moody because our family is growing. With the changing market, we are thinking of selling, rent for a while and buy the house next year. How long do you think the downturn will last and when can we buy at a lower price?

Answer:

That is one of the most asked questions. I am always tempted to say that I have the answer: The market will go down 17.2 per cent until February 2009 and then rise after 2 p.m. But I understand the question. With the crazy price appreciation we have had, everyone longs to get back to lower prices. I received this question also in 2005 and 2004 and people that sold then saw their prices double after they sold. Actually when you buy and sell in a down market you can often be better off. Let’s assume that prices go down by 10 per cent. You would then only get $207,000 for your suite. The house in Port Moody would also fall by 10 per cent and could then be bought for only $450,000. You would be $27,000 ahead.

Question:

This last item is a summary of a dozen versions of questions. How long will the downturn last? Will the Olympics make any difference on prices? How long have previous downturns lasted? Is this a crash like in the U.S.?

Answer:

In three previous downturns we saw markets slow for one to three years and drop in price between 5 per cent and 17 per cent from the high achieved. For instance, in April 1995 the average price clocked in at $348,000 and by 1998 it had dropped to $278,000. The Olympics have been a boon to construction, a boon to transportation and investment, but -in our view- will have little additional impact on prices (other than rental prices for a two-week period). The ‘U.S. crash’ is not country wide. Out of 150 major markets, some 72 are still rising in value. Between 1988 and 1992 prices in San Diego dropped 35 per cent -since then they rose by 410 per cent. Is it a surprise that prices there have reversed? The top locations in the U.S. – like San Diego will recover again, once the excess inventories are cleared out and the foolish lending practices are stopped. Vancouver‘s real estate market today comes after a 10 year run-up from $278,000 to $880,000 on average. Did we really expect it to rise forever?

We may have a downturn, clear out our own overbuilding in places and yes, we may see a lowering of prices. Markets become the stories people tell about them and today the nay-sayers are out in force and negative stories about Vancouver, Calgary and Edmonton abound.

But whatever the short term outcome this is still paradise – the whole world wants to be here. Living in Western Canada is being close to being in heaven on earth. The environment is majestic, the climate outstanding, the views spectacular. There is a very special flavour here. In Alberta call it the crisp mountain air, the sweeping wide open spaces, in B.C. call it the pert ocean spray, balmy sunsets, beach-roses in February and asters in October. There is a Western Canadian flavour. A flavour unlike any other.

This is the best place in the world to be….and that means that our real estate prices will always be higher than elsewhere…eventually.

– – –

Ozzie Jurock F.R.I.

Jurock’s Real Estate Insider

web: www.jurock.com

email: [email protected]

© The Vancouver Sun 2008

Developer, wife built property over three years

Derrick Penner
Sun

Developer Milan Ilich is attempting to notch a new entry in Vancouver‘s ultra high-end real estate market by listing his and his wife Maureen’s equestrian estate property, known as Ivy Manor, for $24 million.

The property, which realtor Jamie MacDougal plans to have on the Multiple Listing Service by the end of the week, comprises a 22,000-square-foot country manor-style home set on 20 acres, half of which is landscaped into a lavishly manicured English garden, and half that has been groomed for equestrian use.

An immaculate barn with stalls for five horses is one of the buildings located on the property, situated past the Steveston Highway at the bucolic end of No. 3 Road in Richmond.

The $24-million price tag is not too far off the $28.2-million Metro Vancouver record for a residential real estate sale set in January with the sale of 3330 Radcliffe Ave., a waterfront mansion in West Vancouver.

The Iliches built Ivy Manor over three years, moving in in 1991.

Besides the equestrian grounds, the house is built to suit other family pursuits such as the two-lane, five-pin bowling alley located above a six-car garage, a sprawling games and media room and a south-facing terrace and swimming pool surrounded by an immaculate garden.

In an interview, MacDougal said the Iliches decided they wanted to move to a single-level home — “a rancher,” also located in Richmond.

They are listing the Ivy with Sotheby’s International Realty Canada. While the Ivy’s 2008 property tax assessment came in at just under $9.8 million, MacDougal, who is with the Vancouver office of Sotheby’s International Ltd., said the asking price was set based on the market, which isn’t just Metro Vancouver for a property like this.

“You use other [comparable] properties as much as possible,” he added, “and you come up with a number that is based on the lifestyle, the demand and the supply of these properties.”

For the size of the estate and quality of craftsmanship in Ivy Manor, from the grand entrance that soars above a spiral staircase to the master suite that boasts his-and-hers walk-in closets, the price is “bang on” compared with other properties in the same range.

“What differentiates [Ivy Manor] from a lot of other big listings in Vancouver is the space,” he added. “There’s 20 acres, and [it has] that feeling of open space.”

MacDougal said Sotheby’s didn’t just look at comparable properties in B.C., but across Canada and sales within its 420-office network that spans the globe.

A $24-million price wouldn’t be out of the question for an estate property the size of Ivy Manor, according to Malcolm Hasman, one of Vancouver‘s leading realtors in the luxury market.

Hasman, who is with Angell & Hasman Associates in West Vancouver, wasn’t yet aware of this specific listing, but noted “there are so few large estate properties for sale in the Lower Mainland, it would not surprise me if an out-of-country buyer purchased it.”

While Vancouver‘s overall real estate market is slowing down, the upper echelon he operates in, and where the Ivy Manor is situated, remains brisk, Hasman added.

“There’s no question the real estate market is going through a change,” he said, with sales slowing and prices “set too high at unrealistic levels” being readjusted.

However, he still sees significant numbers of high-net-worth buyers being drawn to Vancouver, many of them from Mainland China.

“They still see incredible value in [Vancouver] properties at current prices compared to other cities in North America,” Hasman explained.

Currently, there are 65 homes in B.C. listed at prices above $7.5 million, the most expensive a $29-million waterfront mansion in Oak Bay near Victoria.

Just in the last week, Hasman said, Vancouver has seen two sales in the $10-million-or-over range.

MacDougal said he expects it will take about a month to properly expose Ivy Manor to the market and get better feedback on where potential buyers lie.

However, he expects it will be someone in the equestrian set, perhaps from the United Kingdom.

“I would not discount the local market as well,” he added. “There is a [local] market for this type of property.”

© The Vancouver Sun 2008

Country healthy despite ‘turbulent times’

Carrie Tait
Sun

CALGARY – Federal Finance Minister Jim Flaherty shrugged off housing worries in Canada Wednesday, saying there is no bubble and that the subprime-mortgage woes crippling financial institutions in the United States are not threatening banks north of the border.

“There is no bubble in the Canadian housing sector,” he told reporters after speaking to roughly 400 people at a Calgary Chamber of Commerce event.

“That’s not been our concern. Our concern has been a tendency for longer amortization periods, like 40 years, and for purchasers putting very little money down. We’ve seen nothing in Canada like the U.S. subprime situation.”

The comments came a day after the Canadian Real Estate Association said the average June resale price for homes was down 0.4 per cent from a year earlier, the first decline in almost 10 years.

Flaherty reminded the audience that the government last week introduced plans to ditch government-backed mortgages with amortization periods longer than 35 years, and require that down payments total at least five per cent of the purchase price on these types of mortgages.

Despite tightening the rules on mortgage lending, Flaherty said he is not fretting about the health of Canada‘s banks, even as subprime-mortgage problems hammer U.S. financial institutions.

Canadian analysts, however, continue to speculate on what may happen if the crisis continues to pinch banks — particularly Canadian Imperial Bank of Commerce — in this country.

“Our banks are well capitalized in Canada,” Flaherty said. “I’m satisfied they are well capitalized in accordance with the requirements.”

He said he has been in contact with bank CEOs and regulators since the subprime problems began to sweep the market last August.

This comes as California-based IndyMac Bancorp Inc. customers have been lining up to yank their money out of the bank, prompting U.S. regulators to take it over last week. And Fannie Mae and Freddie Mac, two major U.S. mortgage institutions, are now being backstopped by the government there.

John Aiken, an analyst at Dundee Capital Markets, speculated this week on what may happen to CIBC should its slide, fuelled by credit exposure, continue to inflict pain.

“Should the regulator become concerned with its capital position and the bank is unwilling or unable to tap the market for incremental equity, CIBC could be forced into the hands of another financial institution as the best solvency alternative,” he wrote in a note to clients.

“We believe that the possibility of financial services consolidation is closer than most investors would allow and significantly closer than it was even three months ago.”

Flaherty, however, reiterated the Conservatives’ stance on reopening the bank merger debate.

“Bank mergers have not been a priority for our government and that remains the case,” he said.

Further, while he acknowledged that the economy is going through “turbulent times,” it remains healthy.

“Our economy is strong,” he told the audience.

© The Vancouver Sun 2008

 

Just don’t hold your breath for a steal of a deal, experts say

Gillian Shaw
Sun

While British Columbia bucked a trend that saw Canadian home prices fall for the first time this decade, the province’s real estate market is squarely in the buyer’s court with inventory up and the volume of sales dropping by 36 per cent in June compared to the same period last year.

Despite B.C.’s strong economy that has so far helped it stay ahead in the real estate market, buyers here can expect to see prices flatten or even decline slightly, according to Cameron Muir, chief economist for the B.C.Real Estate Association.

But if you’re waiting to pick up a Vancouver home at rock-bottom prices, you’ll be disappointed.

“We don’t expect to see a substantial price correction,” said Muir. “It is perfectly reasonable to expect home prices will stay fairly flat or even decline a couple of per cent a year until affordability picks up.”

The average selling price of a Canadian home in June was down 0.4 per cent from a year earlier at $341,096, the Canadian Real Estate Association reported Tuesday, the first year-over-year monthly decline in prices since January 1999.

Meanwhile, sales of existing homes in the first half of this year were down more than 13 per cent from a year earlier, while the number being put on the market hit an all-time high.

B.C. numbers being released today show that the province has largely dodged the price rollback, with the average B.C. residential price for June up 3.9 per cent from the same month last year, to $463,458.

For the first six months of the year, seasonally adjusted unit sales for the province were down almost 22 per cent to 42,907 units, while the average price was up 9.6 per cent to $473,536 compared to the first six months of 2007.

“We certainly see a large increase in the number of listings out there,” said Muir. “In June, the number of active listings was almost 54-per-cent higher than it was a year ago.

“In Greater Vancouver, it is 53-per-cent higher.”

Muir said market conditions favour the buyer in all parts of of the province except for Victoria and northeastern B.C.

Elsewhere, worried consumers are putting the brakes on big purchases.

“Obviously, market forces have realigned,” Muir said. “Eroding affordability is certainly having an impact, but more importantly I think weaker consumer confidence is having an impact, not only on the real estate market, but we are seeing it in car sales as well.

“Many households are putting off those major purchases because of eroding confidence, as well as perceptions of risk going forward.”

Rising costs for basic items are also impacting household budgets, Muir said.

“There is some concern about the economy being weaker,” he said. “Inflationary concerns around gas and food prices have households re-evaluating their monthly budgets. That doesn’t bode well for large purchases.”

The eroding confidence, combined with economic woes south of the border and a drop in the number of Alberta buyers as the housing market there has already cooled, are putting downward pressure on real estate prices.

“We see demand coming off its record levels and we are seeing inventory levels beginning to swell,” Muir said. “Some home sellers are going to need to sharpen their pencils in terms of pricing; no longer can you price your home in relation to the accelerating market conditions of the past and expect to sell it in a reasonable period of time.

“With little upward pressure on home prices, the market now is tilted in favour of home buyers instead of sellers. In B.C. and Vancouver, it is a buyer’s market.”

Muir said recreational real estate purchases are also feeling the pressure as potential buyers find the equity in their homes not climbing as fast as in the past.

© The Vancouver Sun 2008