Deals are great — but current home’s fallen worth is a problem
Kim Pemberton
Sun
For Rosey Saroya and Anup Manhas, here in a Burke Mountain show home in Coquitlam, an accumulated 13 years of separate home ownership is the foundation of a joint new-home purchase. Photograph by: Stuart Davis, Vancouver Sun
Housing prices may be falling but there’s still a psychological hesitation by move-up buyers willing to take the plunge because their current homes have depreciated, says housing experts.
A buyer’s market may be the “perfect time to move up” because your dollar will buy you more but few homeowners are doing it despite the great deals out there, says Cameron McNeil, of Mac Marketing Solutions.
“The problem is psychologically it’s hard for them [the move-up buyer] to see the condo that was worth $400,000 six months ago now at $320,000,” he says.
“But if they’ve owned it three years-plus they probably have equity built up. The bottom line is if you can get a great price on a quality asset and you’ll be in the home for the medium to long term it’s worthwhile.”
Still, it appears many of these would-be buyers are waiting until the prospects of selling their own homes improve. To help try and overcome buyer reluctance many in the house building industry have begun to introduce incentives to try and sell completed new home products.
Morningstar Homes for instance just reduced prices for two projects in Coquitlam and North Delta by 15 per cent, for an estimated savings of $100,000 on large single family detached homes, while Polygon for a Richmond project is throwing in a new Mercedes Benz to help sweeten the deal.
Peter Simpson, of the Greater Vancouver Home Builders’ Association, is one of those who is finding it tempting to move up to a more expensive home in this softening market.
“My wife and I were out there looking. Prices are very attractive. We looked at a house almost twice the size and the difference in price was $60,000 to move up,” says Simpson.
But in the end, the Simpson have opted not to leave their established neighbourhood for the new home because the couple didn’t need the extra space.
“A lot of families need to move up because they have kids. Our kids are grown.”
As Jennifer Podmore of MPC Intelligence points out, while the company has noticed more people visiting open houses, there hasn’t been a corresponding increase in sales. “MPC has been doing daily monitoring and we’ve seen a huge level in traffic to sites. We’re definitely seeing more people looking,” she says.
“What we tell people is you’ll never be able to see the bottom [in this buyers’ market] but as soon as you see something you like that you can afford then buy it.”
In the case of the move-up demographic, Podmore points out most have owned their existing home for more than five years so should have enough equity built up in it to make a move to a larger home worthwhile.
“The couple who had resigned themselves to believing a single family home was out of reach is now realizing it’s possible,” she says. “Their money is buying them more.”
Rosey Saroya and Anup Manhas are typical of this demographic. They were able to get their dream home — a four bedroom, two-and-a-half-bath home in Coquitlam for $100,000 less than the original price. The couple is selling a condo and a townhome in order to complete the move to their single family house which sold for $640,000.
Likewise, Gail Tachiyama and her husband Matt were also able to move up in this current housing market from a Burnaby condo to a townhome in South Surrey.
Their condo, which they only owned for one year, sold within two weeks for their asking price.
“The realtor said we should have asked for $10,000 less than what we got but we though we would give it a try. It was a new building and we kept everything in good condition,” says Tachiyama, who adds they were able to make a slight profit.
The big benefit was buying the three-bedroom, two-bath condo and doubling the square footage of their old home –especially necessary for the couple who are now parents of 10-month-old Jamieson.
And while there are sales happening it appears those who aren’t pressed to sell are opting not to put their home on the market.
Statistics from January in the Greater Vancouver region show a continued reduction in the number of homes listed for sale, while sales volumes hit the lowest for that month since the early 1980s.
The Real Estate Board of Greater Vancouver reports that sales of detached, attached and apartment properties declined 58.1 per cent in January 2009 to 762 from the 1,819 sales recorded in January 2008. New listings for detached, attached and apartment properties declined 20.9 per cent to 3,700 in January 2009 compared to January 2008, when 4,675 new units were listed. Total active listings in Greater Vancouver currently sit at 13,966, down nearly 6,000 listings from October 2008. REBGV president David Watt says his advice to homeowners is to time the market to their life.
“If your jobs or income are vulnerable I’d stay away from it [home buying],” says Watt.
But, he adds, if you are in a position to buy the “overall drop in prices is favouring the buyer moving up.”
Home prices in Vancouver have dropped an estimated 10 per cent in less than one year.
For move-up buyers, property equity is power
Couple brings combined 13 years of ownership to new-home purchase in Coquitlam
Rosey Saroya and Anup Manhas are in an enviable position, with falling house prices. They are move-up buyers with enough equity in their current homes, to make a profit after selling at a reduced price and be able to buy more home for their buck in the current buyer’s market.
The couple recently bought an under-construction four-bedroom home in Coquitlam’s Burke Mountain neighbourhood for $640,000, after the builder slashed about $100,000 from the original price. Rosey Saroya, 33, has owned a townhouse in New Westminster for seven years. Anup Manhas, 36, has owned an apartment in Coquitlam for six years. “This (the Coquitlam detached house) is going to be our dream house. I’m not a mover. I’m the kind of person who wants to do it only once,” Rosey Saroya says.
Yes, the couple will probably start and raise a family in their Burke Mountain residence. They are scheduled to move into their home together in July; they will wed in September.
Anecdotally most buyers right now in this declining housing market are first-time purchasers who recognize low interest rates and declining house prices has finally given them the opportunity to mount the first rung of the property-ownership ladder.
But what about move-up buyers?
These buyers already own a home, but either need or want something else, something typically more expensive. As Jennifer Podmore of MPC Intelligence — a real estate information and consultancy company — points out, move-ups are typically in their 30s and 40s; if single are typically seeking a larger apartment; and if a (new) couple want to merge their accrued equity to buy together.
With interest rates at the lowest level seen in a long time they are now in the position of having purchasing power for homes that were previously unavailable, she says.
But the question is do they wait until the market returns to a seller’s market in order to gain more profit from their existing home or take advantage of lower house prices happening now. “We’ve never seen interest rates so low coupled with declining house prices,” says Podmore.
She points out last year when interest rates for a five-year fixed term were at 5.5 per cent compared to today’s interest rate of 4.5 per cent for the same term a person with $15,000 down and an average income of $79,000 would qualify for a maximum mortgage of $285,000.
The lower interest rate the person qualifies for the same mortgage but instead of a monthly payment of $1,740 would now be required to pay $1,577 monthly.
As Saroya points out although they will not get as much money for their current homes they are not too worried because both the apartment and the townhouse have doubled in value since they purchased them.
“Even if we take a bit of a hit it’s still a bonus. The lower housing price is enabling us to get a lot more house,” she says.
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