Real estate HeadlinesReal estate is always a hot topic. Speculation on potential housing bubbles and red hot housing markets are always good for an eye catching headline. Many people have asked me recently about my thoughts regarding two recent headlines, the Ontario government’s housing plan and the trouble at Home Capital Group. Will we see significant change in Guelph’s hot housing market as a result of these headlines?

The Ontario government’s answer to cooling a “runaway housing market” is to slap a 15-per-cent tax on foreign home buyers and cap rent increases across the province. The new foreign home-buyers’ tax is at the centre of Kathleen Wynne’s housing plan, which includes 15 additional measures aimed at easing the pressure on an increasingly unaffordable housing market

The new non-resident speculation tax, will be imposed on buyers in an area spanning from the Niagara region to Peterborough. The tax will need to be paid by non-residents and companies not based in Canada. The additional 15 measures will also change the Ontario’s rental housing market by imposing rent controls on all units. The new rule would cap rent increases at inflation, up to a maximum of 2.5 per cent annually. Among the other measures is the introduction of a new standard lease for tenants in Ontario, ending a practice in which many landlords ask for detailed personal information from prospective tenants.

Trying to improve Ms. Wynne’s dismal approval rating has likely more to do with this knee jerk reaction than actually making homes more affordable and will have little to no affect on a housing market that responds to the forces of supply and demand. This was simply a PR move for a government who wants to look like they are doing something constructive for it’s citizens. The percentage of Ontario homes that are purchased by foreign buyers is minimal and typical foreign buyers have deep enough pockets to not be bothered by a 15% tax anyway. Capping rents will just make the rental housing market less attractive to investors and therefore result in fewer rental units being available for tenants.

Alternative mortgage lender Home Capital Group Inc’s shares fell over 60% in a single day’s trading recently. Investors were wondering about the greater implications for Canadian homeowners. Claims alleging that mortgage brokers working with Home Capital Group had falsified information on loan documents, and that the company did not take sufficient action to remedy the problem were the cause of the panic. Spooked deposit holders of Home Capital Group were concerned that the bank had made irresponsible loans and feared they would not get their money back.

Home Capital Group is a marginal lender, offering mortgages to Canadians that aren’t able to obtain financing through traditional means. If Home Capital Group ceases to exist, it means there will be one less agent acting to prop up Canada’s housing market. So, what does it mean? The good news for Canadians is that Home Capital Group only accounts for less than 1% of the residential mortgage market, and among the company’s existing book of mortgages, less than 0.3% are delinquent. This means that there is no evidence of a pending real estate correction.

For Guelph and surrounding area, the busy spring real estate market continues. As you would expect, many homes are attracting multiple offers and selling way over asking price. Gone are the days when a home selling $100k or more over asking price was a rare occurrence in Guelph. It now seems to happen a daily basis. Sellers should not take the busy market for granted however. Not every home is selling in a week and for well over asking price. It’s still important to make repairs and properly stage your home if you want buyers lining up to buy it.

Dean Manton is your Guelph and area real estate expert!

 

Guelph Home ShortageAccording to statistics recently released by The Canadian Real Estate Association (CREA), national home sales were up in February 2017. While February sales were up from the previous month in about 70% of all local markets in Canada, the national increase was overwhelmingly driven by the Greater Toronto Area (GTA) causing a Guelph home shortage. “In and around Toronto, many potential move-up buyers find themselves outbid in multiple-offer situations amid a short supply of listings,” said Gregory Klump, CREA’s Chief Economist. “As a result, they aren’t putting their current home on the market. It’s something of a vicious circle from the standpoint of a supply shortage and a challenge for first-time and move-up home buyers alike. By contrast, housing markets in urban markets elsewhere in Canada are either balanced or are amply supplied. Because housing market conditions vary by region, further tightening of mortgage regulations aimed at cooling the housing market in one region may destabilize it elsewhere.” The number of newly listed homes rose 4.8% in February 2017, led by the GTA and nearby markets following a sharp drop in January.

Months of Inventory

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents how long it would take to completely liquidate current inventories at the current rate of sales activity. There were 4.2 months of inventory on a national basis at the end of February 2017, down from 4.5 months in January and the lowest level for this measure in almost a decade. The imbalance between limited housing supply and robust demand in Ontario’s Greater Golden Horseshoe region is without precedent (the region includes the GTA, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country). The number of months of inventory in February 2017 stood below one month in the GTA, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, Cambridge, Brantford, Guelph, Barrie & District and the Kawartha Lakes region.

This shortage of Guelph homes for sale has buyers lining up to bid on the homes that are hitting the market. When a home sells, only one buyer is removed from the pool of buyers in that price range. The remaining buyers move on to compete for the next similar home that becomes available. This activity is putting unprecedented pressure on home prices as frustrated buyers offer more and more until they’re successful. Many Guelph homes, as a result, are selling well over asking price.

Guelph and area home buyers are well advised to base their offers not on the asking price of a property but what amount they feel comfortable paying. Researching what similar properties are selling for is always a good idea. Selling prices seem to increase based on how many offers there are for a certain property. If there are only two or three, prices offered may be relatively close to asking. If there are six, ten or even more offers, chances are that at least one of those buyers will make a big offer.

Spring market conditions should continue until the end of June when the market usually cools slightly for the summer months. However, buyers who were unsuccessful in purchasing in April, May and June may keep the market cooking for the foreseeable future.


10 ways to win a bidding warMultiple offer scenarios or “bidding wars” are becoming common in Guelph’s hot real estate market. Here are 10 proven strategies that will help to get your next offer accepted. 

  1. Get pre-approved.

-Get a pre-approval letter from your lender before you start shopping for homes.

-You won’t waste time looking at homes that aren’t in your price range.

-Include your pre-approval letter with your offer.

-You stand a better chance of having a financing condition accepted.

 

  1. Be ready to act fast and first.

-In a busy market you must keep an eye out for new listings on a daily or even hourly basis.

-Keep your Realtor on speed dial and book showings as soon as possible.

-Try to be the first offer registered on a property. Buyers who don’t want to compete may be turned off

 

  1. Offer the most money.

-obvious but it’s important to offer the maximum price that you feel comfortable paying because you rarely get a second chance.

-The fact that there are multiple offers for a property is a good indication that it may be under-priced.

-even when offering $30,000-$50,000 over the asking price, you still may be buying at market value

-Buyers often think they are only getting a good deal if they pay below the list price but sometimes listings are undervalued intentionally to attract multiple offers. Also, in a hot market property values will quickly catch up to selling prices.

 

  1. Offer a Large Deposit.

-A large deposit can make your offer look more solid.

-If you have the funds available, why not offer a deposit that will get the seller’s attention.

-Offers with smaller deposits will look shaky in comparison.

 

  1. Cash Offer.

-From the seller’s point of view, the fewer conditions, the better.

-Offers with no financing condition or “cash offers” are preferred because the seller doesn’t have to wait to see if the buyer’s financing is approved.

-If the seller is holding off looking at offers for a period of time, use this time to get your financing approved.

-Caution! Make sure you are approved by your lender.

 

  1. Add an escalation Clause.

-If you are determined to win you might consider an escalation clause.

-For example, if you made an offer at $500,000, the clause could offer $5,000 over the highest offered price but to no more than $550,000. If another buyer offered $525,000, your offer would automatically become $530,000.

-This is a good way to win without overpaying for the property.

 

  1. Waive Inspections.

-In some situations you may be comfortable with the condition of the home and feel that a home inspection isn’t necessary.

-You might also have experience in home construction.

-either way a personal inspection may be enough to satisfy you.

-Fewer conditions can make the difference between your offer being accepted

 

  1. Write a letter.

-Writing a personal letter can help to set your offer apart from the crowd.

-Explain your situation as a buyer, and how much you love the house and will take care of it.

-It sounds corny but it can help. This worked for me in 2016. Our offer was accepted even though we offered less money than another buyer. The seller’s agent said that our letter made all the difference.

 

  1. Find out seller’s terms.

-Before putting your offer down on paper, find out what closing date the seller is looking for, what chattels are included or excluded and what other terms the seller would like.

-If you give them exactly what they want your offer will be hard to turn down.

-While you’re at it tighten up the timelines on your conditions if you have any.

-Conditions like financing and inspection are easier to accept if they’re only for a few days.

 

  1. Turn a loss into a win.

-If you come in second place in a bidding war, try to get your offer accepted as a backup offer.

The winning buyer might get cold feet from fear of over paying, or have an inspection issue which is too costly.

-Make your offer conditional upon the seller being released from the previous offer.

-If the winning offer falls through, your offer will automatically be accepted and you won’t have to compete again.

 

Having an experienced agent in your corner is probably the most important strategy of all. Call me today and let’s talk about your next home!