June 2006

Kitchener Waterloo Housing Market Market Cooling After Red Hot May

May was a record month for Canadian real estate:

Existing-home sales in Canada smash record

Canadian existing-home sales via the Multiple Listing Service surged to a new high in May, according to statistics released today by The Canadian Real Estate Association.

Actual (unadjusted) sales activity totaled 54,184 units last month — the highest activity level for any month on record — and is an increase of 5.5 percent compared to the previous record set in May 2005. Seasonally adjusted sales activity posted a monthly increase of 2.9 percent due mainly to higher sales in Ontario and British Columbia. Transactions reached their highest monthly level on record in New Brunswick, and set a record for the month of May on a national basis and in Alberta, Saskatchewan, Quebec, Nova Scotia and Prince Edward Island.

Actual (unadjusted) new listings also reached the highest level for any month on record in May. New listings totaled 84,896 units last month, up 7.2 percent from a year ago, and are up 6 percent from the previous peak reached in March 2006. Seasonally adjusted MLS residential new listings numbered 65,884 units in May, up 1.3 percent from April, and are at the highest monthly level in more than 15 years.

May was also the fifth consecutive month in which year-over-year price growth exceeded 10 percent.

“Demand for resale homes continues to run high, despite rising interest rates and home prices,” Klump added. “This shows how additional full-time job growth, rising incomes and resilient consumer confidence are working together to keep resale housing activity buoyant. Listings are on the rise in many markets, which should help the market to become more balanced and rein in price gains in the second half of the year.”

June has seen even more single family listings come onto the housing market (1380 vs 1263 a month ago),with sales slowing slightly.  This is definately causing a cooldown in our housing market.

Housing Index Update

Hey everyone

Just wanted to post a quick update showing where the Index is now vs where it was last month at this time June 29 vs May 29).

We’ve seen our hot market continue to slow, and a clear buyers market is emerging. Total sales over a rolling 30 day period have dropped from 493 to 466 (May 29 vs June 29), while the active listings available has risen from 1263 to 1380.

As always, you can look forward to a complete market update at the end of the month!

Intentionally Creating Your Future

One of my favorite bloggers, Steve Pavlina, has a fantastic post today on how to intentionally design your future. Steve is a leading edge thinker, who is dedicated to growth. I find his blog quite informative, and he has led me to pursue more growth in myself. Here is an excerpt:

Even if you’re skeptical about the power of intention, it shouldn’t be hard to see that a disciplined mind brings benefits. Improved mental discipline is sure to be a useful skill regardless of your current model of reality. It’s hard enough to achieve goals via direct action if your mind is cluttered with negative or distracting thoughts. But with intention-manifestation, it’s nearly impossible.

I think a good solution to these problems is to build your mental discipline, your ability to stay focused on whatever it is you consciously decide to think about. We spend a lot of time thinking, but how much effort do we put into consciously managing our thoughts? How skilled are you at choosing your thoughts?

Of all the financial and money-related thoughts that go through your mind over the next 30 days, what can you do to ensure that at least 90% of them are in harmony with financial abundance?

Read the whole thing.

Endless Referals (third edition) by Bob Burg

Endless Referals (Third edition) by Bob Burg

“All things being equal, people will do business with, and refer business to, people they know, like and trust.”Endless Referrals is all about getting people to know you, like you, and trust you, so that they’ll send endless referrals your way. Bob Burg wrote the preeminent guide to effective networking years ago, and this most recent version has been updated to help entrepreneurs, professionals and salespeople deal effectively with the new realities of doing business in the age of the Internet.

Regular readers of this blog will remember a book I reviewed a few issues ago, Never Eat Alone by Keith Ferrazzi. I declared that it was ‘the definitive guide to Networking 2.0.’ In the same sense, Endless Referrals is the definitive guide to Networking.

Burg goes through how to effectively work a crowd at a typical business event – he uses the example of a Chamber of Commerce’s ‘Business After 5’ events, but the system for working any gathering of people is the same – from what you need to do before the event, to how to follow up with people after the event. Having successfully implemented many of his teachings last week at my local Chamber of Commerce, I can say that the system works.

While I have never had a chance to ask all ten of them, Burg has provided a list of questions you should ask anyone you meet. These are ‘feel good questions,’ designed to get your new acquaintance talking about themselves and what they do. I mention that I’ve never been able to ask all 10, because they’re the type of questions that people will spend a half hour answering! Here is a sampling of them:

‘How did you get started in the Widget business?’
‘What do you see as the coming trends in the Widget business’
‘What sets you or your company apart from your competition?’

When you ask these questions (rather than answer their polite questions about what you do) people will go on and on. Ask how they get started, and prepare to listen for the next 45 minutes about their undergraduate experience, no matter their age. Who doesn’t love to write and direct their life story?

When you ask what sets them apart from their competition, you’ve given them permission to brag. Who else let’s them do that? The positive emotions they feel while recounting their stories to you will be associated with you, since you asked the ‘feel good questions.’ They will leave the conversation thinking about how charming you were, even though they spoke for most of it. Its not insignificant that you’ll also learn from their stories.

Burg also suggests that everyone design personalized note cards, which can be used as thank you cards or for any notes you might send prospects and peers. I designed my own, including my picture and my Enduring Purpose, and I always send them after an event, or whenever I meet a new prospect. I get an unbelievable response, because very few people ever take the time to send a handwritten note. To have a look at my card, you can email me at benjamin@benjaminbach.com.

Endless Referrals is a must read for anyone who is in the service business, depends on referrals and word of mouth advertising, looking to build their network or for people who want to become better at listening to others.

New Blog Server

You may have noticed that the site has been redesigned… I moved our hosting from blogger to wordpress. Please let me know what you think of the redesign.

State of the Student Housing (investment) Market

I recently completed a comparative market analysis for a client who will be listing their investment property shortly. The property happens to be in the hot 'student housing' segment, so I thought I'd share some information I learnt on the investment market with y'all.

Unlike residential properties, calculating the approximate value of an investment property is fairly straightforward. If you know the revenue it generates, and a few expenses (maintenance, insurance, annual tax, who pays utilities etc), you can decide what price is right. The ratio of a property's income to it's list (or sale) price is called it's capitalization rate (or cap rate). If you are looking at a property that is listed at $1,000,000, and it generates $120,000 per year in income, the cap rate would be $120,000:$1,000,000, which is 12%. Pretty good!

In 2006, the average cap rate for investment properties that have sold around campus, under $500,000, is 10.9%. That means if your investment property generates $24,000 per year in income, you can expect it to sell for $220,183.

Right now, average cap rate for investment properties that are actively listed around campus, under $500,000, is 10.0%. That means if your investment property generates $24,000, the average list price (the price you offer your home on the market at) would be $240,000.

If the price you list your property at gives you a lower cap rate (6-8%), you might have a tough time liquidating the asset. When investors can find 10% and 11% cap rates, why buy a multiplex that underperforms the market?

Often, people will have a number stuck in there head, that they 'need to get' for the property. Unfortunately, unless you come across a very sympathetic buyer, this number doesn't mean much in the marketplace. Your property is worth what a buyer is willing to pay for it in a reasonable amount of time. If you price your property where you think it should sell, instead of where similar properties have sold, you may be stuck with a property that won't sell.

As I tell my clients, it's much better to price your home right and turn down low offers (or let my team work to negotiate them up) than to price the property too high and not see any action.

‘Soft Landing’ predicted for Real Estate market

USC experts predict 'soft landing' in real estate

By Glenn Roberts Jr.

Higher interest rates and energy costs, and reduced refinancing activity are also taking a toll on consumer spending, which has sunk from about 3.9 percent in 2004 to a current level of about 3 percent.

"We don't believe the housing market is going to fall off a cliff. We don't really subscribe to the hard-landing story," said Stuart Gabriel, Lusk Center director, during a presentation Thursday at the annual PCBC event, a conference for home builders held at San Francisco's Moscone Center.

This is, however, a time of "stagflation," or economic stagnation coupled with inflation, Gabriel said, and the real estate market is losing steam — with a general slowing in price-appreciation and sales.

Despite this, Gabriel said it's unlikely that there will be a major shrinkage in house prices, given the strength of employment numbers. Interest rates, though marching up, are not high by historic standards, he said.

The situation was a lot different in the early 1990s, when job losses contributed to a major downturn in the real estate market. Gabriel said that the impact of job losses in the aerospace sector hit Southern California's real estate market hard during that period.

"Barring that sort of event we don't expect significant falloff in house prices," he said.

While the prices in Kitchener Waterloo are nowhere near the astronomic numbers they have in San Francisco, the markets are behaving in similar ways.

While many of my colleagues are still adamant that we have a red hot seller's market, here at The Home Team, we track the markets using our exclusive Housing Index.

Seen the last Housing Index was published (the 19th I believe), we've seen the rolling 30-day closed sales jump from 417 to 499, but at the same time the active listing inventory increased from 1296 to 1350.

While a good number of homes are selling every month, there are more and more homes available on the market, Make sure you're Realtor knows how to make your home stand out.

Interview with Richard Robbins, Founder and CEO of RRi

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KW Housing Index update

June 19, 2006 by Benjamin Bach · Leave a Comment 

We have not seen much movement since the last Housing Index update was published. The Overall Index and the under-$300,000 Index stayed constant, while the Index for homes between $300,000 – $600,000 fell .01 to .26, and the Index for homes over $600,000 fell .02 to .12. This reflects the general trend of a fast paced market which is gradually slowing to more reasonable growth. KW's economy is one of the hottest around, and this will continue to drive our market.

NAR Sees Markets Stabilizing in 2006:

David Lereah, NAR’s chief economist, said home sales are settling into a slower pace. In recent years we were occasionally challenged to find appropriate superlatives to describe surprisingly high home sales,” he said. “Now the housing market has cooled, but 2006 is still expected to be the third strongest on record. In this case, experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-taffordablelity. But this is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable.”

NAR President Thomas M. Stevens from Vienna, Va., said rising interest rates have slowed home sales in many high cost markets, while job growth has boosted sales in some moderately priced areas. “Broadly speaking, rising inventories have taken the pressure off of unsustainable home price growth,” said Stevens, senior vice president of NRT Inc. “For most of the nation, this means future home price gains will be much closer to the normal returns we expect from housing.”

The 30-year fixed-rate mortgage should average 6.9 percent during the second half of the year, and the unemployment rate is expected to average 4.8 percent in 2006.

“Historically, home prices rise 1.5 to 2 percentage points faster than the rate of inflation, so the rise we anticipate in existing home prices this year is actually a little above the high end of historic norms,” Lereah said. “The double-digit home price gains we saw in 2005 underscore what a superlative year it was.”

(hat tip: The Real Estate Blog)

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Average house price in a big city tops $300K

June 14, 2006 by Benjamin Bach · Leave a Comment 

CTV.ca is reporting that for the first time ever, the average price for a residential home in a major market is over $300,000:

The average national price of a big city home in Canada surpassed $300,000 for the first time ever in May with sales numbers hitting record levels.

"May marks the fourth consecutive month in which the major market average residential price broke all previous records," CREA Chief Economist Gregory Klump said.

As well, the average house price broke all previous monthly records in a number of major markets including Vancouver, Calgary, Edmonton, Regina, Saskatoon, London, Hamilton, Montreal, and Saint John.

Klump said that full-time job growth, rising incomes and resilient consumer confidence are contributing to keep the housing demand strong.

"Recent price increases are resulting in a growing shortage of lower priced resale home listings in a number of markets," which are pushing up the average price, he said.

The key phrase for market watchers is this:

New listings in May hit the highest level on record, leaving the market tighter.

Yes, the market and economy is hot. Many homes are selling each month, and owners are getting good money for them. The problem is that more and more homes are coming onto the market, without a corresponding rise in the number of home sales, and because of that we're seeing the KW Housing Index continue to go down.

At the beginning of June, the Housing Index for all single family residential homes stood at 0.54. Now, two weeks later, it is at 0.48. This means that when you list a home now, you must price it competitively, and prepare it to sell.

If you have a Realtor with a strong marketing and home selling system, you'll 'beat the market.' If you don't, call us*!

For tips on how to get the most for your home, visit our new comprehensive Real Estate Resource site www.MyKWHomeTeam.com.

*Not meant to solicit properties currently under contract.

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