First an apology to readers of this blog; it’s been a month since I’ve posted an update – the explanation for that will quickly become apparent;

Sales of real estate for the month of June have proven to be the 2nd-best in the history of the Real Estate Board of Greater Vancouver. I have been busy!

So have many of you first-time buyers out there.

Sales of detached, attached and apartment properties increased 75.6% in June 2009 to 4,259, from the 2,425 sales recorded in June 2008. The figure is just short of the record-breaking 4,333 sales which occurred in June 2005.

New listings for detached, attached and apartment properties declined 17.9% to 5,372 in June 2009 compared to June 2008, when 6,546 new units were listed. However, new listings increased 13.5 per cent from May to June of this year. Total active listings in Greater Vancouver currently sit at 13,252, down 27 per cent from June 2008 and 2.9 per cent below the active listings count at the end of May 2009.

“Price reductions and low interest rates have created an improvement in affordability, which is causing the number of sales to rise to levels comparable to 2003 to 2007,” Scott Russell, REBGV president said.

“Many people who were reluctant to purchase a home last fall and earlier this year are returning to the market because they see conditions that appeal to their personal and financial needs,” Russell said. “However, the current marketplace is such that buyers are more inclined to walk if they don’t like the terms of an offer.”

Even price is showing signs of recovery – while market prices in Greater Vancouver fell approximately 15% from the peak last Spring, they appaer to have recovered by almost 5%.

The driver of this upswing is without a doubt first-time homebuyers getting in with low rates. As I said in an earlier entry of this blog, rates hit their lowest in the mid 3.5’s-3′6s and those rates are in fact, now gone. Currently, the best rate shoppers can shoot for is about 4.39%.

All of those buyers holding onto their pre-approved rates at 3.49%, 3.59% and 3.69% are out there making deals happen to buy property at record-low mortgage rates.

That also means that this won’t last forever. Rates are already on the upswing. If you are looking to sell, now is the time.

When I say better, remember that prices are still down by 15% over last year – but volume, the number of sales, or transactions of property – is up. Way up.

In May 2008, right around the absolute peak of the market, there were 3,002 sales. This May, an increase of 17.4% driven by low rates of financing, saw sales reach 3,524!

North Vancouver actually outpaced the rest of the Lower Mainland, with 134 detached homes sold this May over the 102 homes sold last May, an increase of a staggering 31.4%. Attached townhomes and condominiums rose in similar numbers.

This increased demand has completely stopped the bleeding of price – for now. In fact, prices are technically up 4.5% since January – but that is still a very slight increase given the total 15% decline since last year, and also given how much cheaper money has become even since January. Rates were still hovering around 5% early in the year, although now rates under 3.75% are commonplace.

With that said, rates have probably hit their bottom of 3.54% – those prices came off the table this week, with the lowest rate available now hovering around 3.64%. If you’re looking to buy in the next four months, getting that pre-approval and accompanying rate-hold is a good idea – now!

Despite assurances from the Bank of Canada that they would hold the overnight lending rate to 0.25% until early 2010, as loyal followers of this blog know, mortgage rates are determined moreso by bond yields than by the overnight lending rate.

If you were one of the many who couldn’t sell in the past year – this is the time to get back on the market, before it’s too late.

For buyers, the market is getting very hot…along with our current heat wave. Almost too hot…along with our current heat wave! I strongly urge all buyers to get a rate hold and sit back a little. Typically the market cools off a little in the summer, and I believe prudent buyers who want to take advantage of low rates are best off easing back with a cool drink until some of this heat blows over.

In tougher economic times, it should come as no surprise that one symptom is typically an increase in property crime. Vancouver residents experience 1,100 break-ins per 100,000 residents. That is almost four times the level experienced in New York! (source: CBC)

So in times like these, you should consider whether or not it might be prudent for you to install an alarm system. Besides the obvious benefit of it acting as a deterrent to burglars, most insurance carriers will give you a credit for it off your contents insurance.

I have worked in the past with a representative from ADT – one of the oldest and most trusted brands in home alarm systems, and recently he made a special $150 cash-back offer available to my clients.

If you are interested in protecting your assets – and above all your most important asset (being your home) from vandalism, you ought to consider installing an alarm system.

To take advantage of this special offer, just call 1-888-395-5465 and cite promotion code A36475.

Stay safe!

Home to North Vancouver is the first building ever to be LEED platinum certified! (For more on that check this out http://www.cagbc.org/leed/what/index.php)

I’m talking about “The Brook” located just off Delbrook at Evergreen Place. You might know it as the little mini-mall that’s home to Bob’s Fruit Stand and Woon Lee Chinese Food.

Now, the new kid on the block is a 24-unit strata by Streamline Properties called The Brook.

LEED (Leadership in Energy and Environmental Design) awards different levels of certification to different building projects based on their zeal for sustainability. North Vancouver first made history last year with the completion of the Envy (or NV – like North Vancouver, get it?) building at 160 W. 3rd street, which was LEED Gold certified.

The Brook gets the first ever platinum certification for its enviro-friendly design which includes:
*Geothermal Heating & Cooling
*Roof-mounted Solar UV thermal collectors providing domestic hot water
*Greywater recycling
*Eneready heat recovery ventilation unit
*Innotech windows

The building by itself is a good quality build, and the units have very much a “loft” flavour which is uncommon to North Vancouver – and particularly to the upper Delbrook neighbourhood!

With so little in the way of multifamily in the Upper Delbrook neighbourhood, as the population of the neighbourhood ages, I predict this building will be a popular choice for local down-sizers who don’t want to give up on their Delbrook neighbourhood.

However, with one-bedrooms starting from $569,000, (plus GST) whether or not people can see the value in this product remains to be seen.

At any rate, this building will be setting the trend for environmentally sustainable building, so if you want to have a look at the future of condo development, then check out the open houses: Tuesdays & Thursdays 3-6PM, or Saturdays & Sundays 1-4PM.

Keep an eyeball on the bond market. Five-year government bond yields rose to a 70-day high yesterday.

Today they’re up again to 2.14%, after breaking a 4-month high this morning.
Yields have been steadily climbing for five weeks.

As savvy readers are aware, bond yields influence fixed mortgage rates. One capital markets expert told us that rates have reached an “important threshold.” Based on current 5-year yields, “lenders should be thinking of moving rates up.” he said.

“Keep an eye on lenders’ rates–especially quick close offers”. The “increase in bond yield (and the decrease in spread–down 10 today) is something to watch. If the bond yield continues to go up, this could be a trigger for interest rates to rise.”

Mortgage shoppers (and variable-rate holders thinking of locking in) should take note. Bond yields are pushing up lenders’ funding costs. On a 5-year fixed, many lenders are paying a base cost of roughly 55 to 100 basis points over 5-year Canada bond yields to raise capital. This is capital they lend out as 5-year fixed mortgages. That equals a base funding cost of roughly 2.69% to 3.14%. If the “average” lender wants to offer a discounted 5-year fixed rate of 3.85%, that leaves a gross spread of 0.71% to 1.06%.

That’s near or below the minimum that some lenders need to operate, given all their other operational costs.

If we see bond yields continue up, lenders may have little choice but to adjust rates higher. The rise in yields is being fueled further by the stock market rally and recent better-than-expected economic activity. Today’s employment reports are case in point. Coupled with the technical and
supply/demand forces now affecting bonds, all of this is bearish for bond prices and bullish for bond yields.

When Will Fixed Rates Increase?

We can only guess. Different lenders have different cost structures. Some lenders will be able to hold out longer than others. Scotiabank, for example, might have a 25 basis point cost advantage (or more) over a small mortgage-only lender.

That, the spring market, and vicious rate competition, will likely keep rates lower than at other historical turning points. We’re in the biggest volume quarter of the year, which is prime time for lenders to build market share. No one will want to be the first to hike rates.

Regarding non-bank lenders, they will probably try to avoid exceeding 3.95% for the time being. 3.95% is a benchmark rate because it’s the discounted 5-year fixed rate advertised by the big banks.

Once again, the stats don’t lie.

While benchmark prices still show an overall decline from last year – which appears to be holding at a total fall of 15% from the peak of the market last year – sales volume has actually improved.

According to the Real Estate Board of Greater Vancouver, last year 308 homes changed hands on the North Shore last April – while this April that number rose slightly to 317 homes sold for the month of April.

Let’s put this in perspective from the beginning of the year. January was the slowest month in Real Estate sales of the past 25 years. On the North Shore, that translated into just 65 sales – and we’re talking everything – condos, townhomes, duplexes and houses, from Deep Cove to Lions Bay.

In February, that number improved to 128 transactions.

In March, the number rose again, this time to 213.

A total of 317 in April represents almost another 50% gain in sales volume.

The easiest factor we can attribute this to continues to be low financing.

“We’re seeing greater balance in the housing market,” said Board president Scott Russell. “The trends…over the last couple of months offer a much more comfortable, historically normal set of conditions.”

With the Bank of Canada predicting economic recovery beginning next year leading to 2.5% growth of the economy projected for next year, these are good signs of a jumpstart to the housing market which many self-professed experts declared legally dead as recently as January. Then of course, there’s the to-be-determined Olympics factor on the horizon as well.

Ladies and Gentlemen, put down your shovels for the time being. It would appear that we have reached the bottom of the market.

Overall, the market on average has fallen up to 15% since last year – and even as high as 30% in some neighbourhoods which have been particularly overpriced, such as West Vancouver.

On top of that, mortgages of a historically-low 3.69% are providing an opportunity for a lot of buyers to get into the market – cheap.

But suppose you already own your own home. Have you considered buying a revenue property? What could be better than making a long-term investment which you then, essentially, get someone else to pay for?

I just finished writing an offer for a client on a revenue property in the Spectrum complex. You may have seen it; built in 2007 by Concord Pacific – it’s right next to GM Place and BC Place.

Can you say “Olympics”? This building is right next to the two main venues! In fact, VANOC is
placing the Olympics rings on the side of this building! (For which the Strata will be very nicely
recompensed.) It will rent out for $1,200 a night – that’s $25,000 over three weeks.

This 2bd/ 2bath would have sold last year for $475,000. Now it’s listed for $415,000. With a good offer, that’s a property you can pick up for a number in the high 300s and earn approximately $2,000 rent per month – plus the advantage of a one-time windfall of up to $25,000 in Olympics rent.

Just think – if you are 40 years old today, and you purchased a property like this with a 25-year mortgage – it would be paid off in time for retirement, for you to either live off the revenue, or cash out and move on. It’s the single best investment you can make!

Wow!

That was my reaction to the March 2009 sales stats when they came out.

The year is continuing to pick up speed – while February was up 92% over January, March is up another 31% over February.

Home sales in March 2009 returned to levels witnessed at the beginning of the decade, with 2,265 sales recorded across Metro Vancouver for the month, a 53 per cent increase over February but a 24.4 per cent decrease over March 2008, when 2,997 sales were recorded.

So while sales are still down from last March – we have to bear in mind that March/April of 2008 was the peak of the market in the history of real estate in Greater Vancouver. To be down just shy of a quarter from those types of numbers with all the predictions of economic doom and gloom is nothing short of extraordinary.

As I’ve been saying on this blog – the driver of this is cheap money. Prices are down 10-20% depending on the product from last year’s sale prices, and mortgage rates are routinely being handed out below 4% – coupled with new incentives such as the first time buyer’s closing costs credit, and old ones like the up to $425,000 first time buyer’s Property Purchase tax exemption – that’s spurning a lot of buyers – particularly first time buyers – to get out of the still high-priced rental market and into a property.

New residential listings on the MLS® declined 22 per cent in March 2009 to 4,385 compared to March 2008. This is the fifth month in a row that new listings have decreased year-over-year and the third consecutive month where those declines exceeded 20 per cent. This is also helping the stability we’re now seeing by keeping supply-and-demand factors in check.

Even the news media is beginning to change its tune. There are opportunities out there for buyers right now that we haven’t seen in five years when it comes to price – and opportunities we have never seen before at all when it comes to lending rates.

Some are still calling for doom and gloom – but the stats don’t lie.

Still waiting for mortgage rates to come down? I’ll be blunt: in the big picture, they won’t.

Big picture! , I’m not saying they couldn’t come down another 0.1% – maybe even slightly more - but the difference we are talking about is anywhere between $8 and $40 a month. Big picture! You’re comparing rates of 3.85-5.25% against historical rates of as high as 21%. That translates into hundreds’ of dollars a month difference.  

I bring it up because I just spent the weekend doing open houses and speaking with dozens of people who want a fixed-rate mortgage but are waiting to see if rates can fall still further.

This kind of thinking is typical of variable-rate shoppers, but not with those seeking fixed rates.  As such, let’s take a look at how the Bank of Canada, and specifically it’s overnight target rate, affects fixed mortgage rates.

The Bank of Canada sets Canada’s overnight target rate.  Every time the Bank adjusts this rate, this affects the prime rate - which directly affects variable rates.

Contrary to popular belief, however, fixed rates are actually guided by bond yields, which is outside of the purview of the Bank.

Current rates available include 3.89-3.99% for a 5-year term – and remarkably, 5.25% for a 10-year term.

I think a lot of smart money will opt for the 10-year term. In a time of uncertainty, a decade’s worth piece of mind is as good as gold. What’s more, 10 years on a 25 year mortgage gets you into what I call the “meaty curve” of the amortization – that tipping point where your payments start really doing some damage on the principal as opposed to just servicing the interest.

And remember also, as I so often like to point out – there has never in the history of Greater Vancouver been a home purchased which a decade later sold for less. Never. 

A cautionary note – You are best off to consult with a qualified mortgage broker regarding which mortgage options work best for you. Depending on how you make your money, your age, the anticipated length of ownership – maybe a 10-year term isn’t for you. But my point is this: don’t snap up the lowest rate because it’s the lowest. The advantage to being secure in a higher rate (still historically low) for double the period of time has its own advantages as well. Discuss this with your mortgage broker!

Laurence

With an increase in the number of foreclosures on the market in Greater Vancouver, come questions from the public about whether or not a foreclosure is a good deal.

There have been innumerable books published telling you how to make a fortune in this - and for those of us who will confess to having watched some late night infomercials, we’ve seen Donald Trump and a whole cabbal of his wannabes barking at us to buy up foreclosures for pennies on the dollar and make a killing.

However, here in Canada these types of transactions are, to a great degree, a myth. At least as far as paying $500,000 for that defaulted-on Edgemont Village home bought last year for $1-million.

The way a Court-Ordered sale generally works in Canada is that the lender, often the bank, lists the home through a Realtor. Upon receiving an offer, a court date is set for two to three weeks later. The Buying party attaches a “Schedule A” to the offer which essentially discharges the bank from any responsibility should something go wrong with the home down the line, as opposed to typical situations where the previous owner may still be liable for any undisclosed defects in the house.

Just from that standpoint, you must be very, very careful to properly protect yourself buying property in this way as your avenues for compensation in the event that there is a problem down the line are extremely limited.

However, with the court date set, other offers can come forward at any time, right up until and including the court date itself! A would-be buyer looking for a “deal” out of a court-ordered sale could find him or herself walking unwittingly into a multiple offer situation!

The other reality is that lenders and especially courts don’t price property at any kind of a “discount”. In fact, they put a great deal of effort into putting the fairest market value on the property as possible.

You may hear of these “Cinderella stories” about foreclosures in the States, but the reality is they don’t happen here.

Even estate sales, very often the follow-up question to this line of discussion, aren’t the “deal” you might assume them to be. Especially when the “Sellers” are the five different children of the deceased who may each have vastly different opinions on what their fraction of this inheritance is worth!

The reality is, there are all kinds of motivated sellers in this market – including builders in New Construction who have lots of inventory they need to liquidate, sellers who have to sell in order to take a job in another city, and a whole myriad of other possibilities.

And having considered those possibilities, make a court-ordered or foreclosure sale in Canada look not all that appealing from the price perspective – as the courts and lenders are concerned only with the cold-hard cash and are completely removed from any other emotions or motivations which can  land you a great deal in this market.