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Real Estate on Pender and the wisdom of the two Jo(h)ns

By Howard Sanders • November 5th, 2010

Since March 2009 when the current economic meltdown caught most of us with our pants down, millions of words have been written about the global housing market.

Thousands of ‘experts’ on hundreds of cable shows have scared the living daylights out of us by warning of another “Great ‘Depression’, the ‘The Big One’ from which modern civilisation will never recover.

Jon Stewart

I consider myself a bi-partisan optimist. I choose to be one, so agree with Jon Stewart who so succinctly summed up how I feel during his recent Washington rally speech that….. “we live now in hard times, not end times.”

What’s happening at the moment is an economic downturn, and we have to start looking at it rationally to make a strategy moving forward. Rationally, it’s clear that on Pender Island sales volumes are down, sold prices are down and listings volumes are up. It’s what is called a buyer’s market, the rational result of the real estate bubble which began in this region soon after the new millennium. Many property owners saw the value of their homes soar during that period, with some increasing yearly by more than 20%! Few questioned it at the time, but that is the definition of a real estate bubble. In a normal market that yearly figure of increase should be only be between 4 – 6%.

Buyers will return to Pender. In fact they’ve been here all year, just more cautious and in fewer numbers. But remember, we live in the Gulf Islands! People move here as part of a lifestyle choice. Increasingly, as cities get larger and louder, the need for the tranquility this area offers will increase and  the value of its real estate along with it. I would say this is even inevitable. People want to move here now, and mostly likely always will. As the global economy gets better it will exert an upward pressure on prices. There will be good times and bad times but these will stabilise and eventually increase. It may take five years from now or even ten, but it will happen.

But this is a long term strategy. For current sellers, now may be the time to seriously question whether you have to sell your property. Instead, could you rent it and cover your expenses until the market rebounds? That way, you could retain your asset and hopefully capitalise it better in the future. If you have no option but to sell, make sure you listen to your Realtor and price it well within the market. That way you’ll get a fair price and can move forward with your plans in a timely manner. Bear in mind you may sell your property for a little less right now, but you will be able to buy another property in a similar market for less too.

For buyers, now’s a great opportunity. Prices have fallen, choices are up, and interest rates are at some of the lowest levels ever. I’m puzzled that those with a little extra cash aren’t more active in the market right now, not to flip for a quick profit necessarily (although it can still be done), but rather to hold and generate revenue until a market recovery. Possibly it goes back to the fear, and a lingering sense that this downturn is the “Big One.”

John Paulson

John Paulson sums it up best for the more bullish of us, I think. He’s a bit slimier than the other Jon above, but he has made billions of dollars predicting the current economic downturn and its negative effect on the real estate market. He’s into hedge funds, a professional gambler in other words, and feels the real estate market in the US is at bottom right now. So he’s now buying on the gamble that the value of real property and gold will increase in the long term.

On Sept. 27, 2010, this is what he said to those thinking of jumping into the real estate market:

“If you don’t own a home, buy one. If you own one home, buy another one. And if you own two homes, buy a third and lend your relatives the money to buy one.”

I think that’s clear enough. How about you?

 

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