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An interesting start to 2010

By Howard Sanders • March 17th, 2010

Pender Island real estate information and local insights into the people, community events, and unique culture that make Pender Island, BC, Canada a vibrant place to call home

It’s been an interesting start in our local real estate market so far. Since 2010 began we have had a rush of new listings (nearly one each day) but not a huge amount of sales (4 in total – 2 homes and 2 bare lots). Most of these new listings are also at the top end of the range in terms of list price. So what is going on here?

Buyers and sellers are puzzled because for many their property’s assessed value went down and in our secondary rural market there was no evidence of an obvious rebound in the local market at the end of 2009. However, there are a few circumstances which are applying upward pressure on house prices at the moment. One is the Olympics, the benefit of which is doubtful (that’s a whole other blog post). Another is the proposed introduction of the HST in July 1, 2010, that will apply to real estate commissions and new house sales. Some buyers are getting into the market now before that has an effect on new homes or makes sellers more reluctant to negotiate. Another is the tightening of mortgage rules announced today and taking effect on April 19, 2010.

According to CTV.ca;   “Finance Minister Jim Flaherty Tuesday announced tighter lending standards for mortgages, saying that while the housing market is healthy and there’s no solid evidence of a bubble, the moves are needed to “help prevent negative trends from developing.”

Under the new rules, all borrowers will need to meet standards for five-year fixed-rate mortgages regardless of whether they’re seeking a loan with a lower rate and shorter term.

Also, the government is lowering the maximum amount Canadians can withdraw when refinancing to 90 per cent of the value of their homes, from the current 95 per cent, and requiring a 20 per cent down payment for government-backed mortgage insurance on “speculative” investment properties.

“There are no definitive signs of a housing bubble,” Mr. Flaherty said. “We think we’re being proactive in the three steps we’re taking today.”

Scotia Capital economist Derek Holt said the tighter criteria for mortgages could cause the housing market to “really heat up” over the next few months as buyers try to get approved before the stricter rules come into force.

“This all leads to short-term price scrambling,” Mr. Holt said in an interview, noting that the Harmonized Sales Tax due to take effect in Ontario and British Columbia on July 1 is already causing some buyers to rush into the market in a bid to close deals in advance. “It could really heat up in the near term and then cool off in the back end of the year. With the HST in Ontario and B.C. and these changes, they have dramatically altered the home-buying decisions of Canadians.”

Private Lookout

Real Estate markets are very volatile at present and easily affected by exterior forces. The same is occurring in the stock market, with large swings up and down over very short periods of time as it reacts to daily global changes. For sellers in rural secondary markets this can mean an uncertain time as it will be easy to price yourself out of a market. My advice recently has been to position a listing strategically for a faster sale. The higher priced listings will just not sell at present, that is what the market is showing us. It is the more reasonably priced properties that are getting interest and that will, ultimately, get offers. So listen to your realtor if they advise you that your expectations for a sale price are a little high. List strategically and you will get interest that will eventually sell your house faster and for a realistic and fair price. Right now for buyers, real estate is for the long term. The new mortgage rules are being introduced to cool the market off before another bubble can form and to temper speculative borrowing. So keep an eye on the current market. In three months or so, when these higher priced listings are still sitting on the MLS, that might be a good time to come in with a reasonable offer.

Don’t wait to buy property, buy property and wait!

 

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