Bucking the trend

LUXURY BUYER’S BUCK TREND

July 2010 - Calgary Real Estate statistics have been less than great in May and June.   May sales showed a 20% decrease and in June they showed a 42% decrease over 2009.   Yet sales of properties in the luxury or high end market show a 42% increase over 2009.   The big question is why?

The economic outlook for both Calgary and Canada continues to be positive, so consumer confidence continues to exist.  Real estate analysts across Canada agree that prices have now bottomed out.   Although, I must say I believe in a global economy I doubt if the instability in the financial markets in Greece had little impact on us. The Calgary Real Estate Board (CREB) attributes the slow down to the increase in mortgage rates in the 2^nd quarter of this year.   In the first quarter of this year prime was at 2.25% and the best 5 year rate at 3.69%.  Today prime sits at 2.50% and my best 5 year rate is 3.99%.    This may be a significant change over the first quarter but in 2009 mortgage rates were almost comparable; my best 5 year rate was 4.09%.  Basically the cost of owning a home is unchanged from the previous year.

Some “Move Up” buyers are in a difficult position.   The normal cycle would now see the first time/starter market upgrading initial purchases to a property more in line with their long term needs taking advantage of equity and appreciation.   But for those who purchased in 2007 & 2008 many are in a negative equity position unable to upgrade.  For those in a strong equity position, this is a great time to move up.   Perhaps this explains the opposite trend in the high end market.

First time buyers appear reluctant to enter the market place regardless of opportunities.   For example at the height of the market in 2008, the base price of an inner city condo was around $250,000.  Today the marketplace is flooded with units; comparable properties can be found around the $150,000 mark.   Using these two price points here is the comparison of the cost of ownership:

            2008 = $1,106 monthly (mortgage payment $756, condo fees $250, property taxes $100)

2010 = $ 813 monthly (mortgage payment $456, condo fees $250, property taxes $100)

This represents a 26.5% decrease in monthly costs.   Renters should be comparing rent versus mortgage.  This is their opportunity to get a foot hold in the Calgary marketplace and take advantage of building equity and appreciation in the next few years.  Lenders have also been responding to the lag in sales in the last few weeks, reducing fixed term rates and increasing variable rate discounts.

National Bank All in One Secured Line

I have talked about this product in previous newsletters, as its features exceed the product offering of all other lenders.  This “All in One Product” charges you on your net cash position.   It has the ability to tie into up all your bank accounts and apply cash to your line.  If for example your line of credit is at $100,000 and the sum of all cash in your accounts is $5,000, the interest charged is based on your net of $95,000.  Last week they lowered their rate to prime plus 0.5%, well be low other lenders. 

Greg Gullekson, Mortgage Broker
Dominion Lending Centres Westcor
403.244.9133
www.greggullekson

Moving Forward with Your Life

JULY 2010  – A number of years ago I spent some time trekking the Amazon Jungle in Brazil.  I felt safe probably because I had no expectation or fear of danger, a little gullible perhaps.  I was about 4 people back from our guide when I heard him scream out a few swear words.  Needless to say I jumped back expecting the worst.   He carried a stick that he swept back and forth, using it to find exactly what he did – a Coral Snake.  This is one of the most lethal snakes in the world.  Unlike vipers, this snake will bite and hold on.  It’s small (3-5 feet), very colorful, and it won’t normally bite but if scared enough it will.  Should you be on the receiving end, you’re pretty much done shortly thereafter.   Thankfully none of us were hurt.  We had a beautiful day where I saw things that today still carry a very special place in my memory.  Although I must say each step I took from that point forward was a cautious one.

I use this example to highlight how we must be in life: cautious, careful, but never fearful to step forward.   We all are given the opportunity to experience wonderful, exquisite and beautiful things.  Perhaps the thing that holds us up is a bit of fear.  Maybe we’re cautious by nature.  We may even be a bit of a follower.  We might check to see what everyone else is doing before we do it.  In real estate I’ve noticed people tend to follow what everyone else is doing.  They wait for the trend, the next article that tells them it’s safe and sound to buy or sell.  The problem with this theory is that given another day the opinions and articles will change.  A new article will come out contradicting the last one. People become fearful and in doing so they lose opportunities to live a beautiful life of NOW.  They hide much like a coral snake hides under a leaf.  It’s comfortable and it’s safe, it’s doing what it does.  This beautiful snake won’t hurt anyone unless it’s disturbed by what is around it.  Then it becomes agitated and strikes.   It has to, it’s under pressure.  It’s doing what it needs to do to make itself think it’s safe. 

I enjoy working with my clients as I find many of them like to buck the trend.  Instead of hiding under a leaf waiting for a surprise they move forward.    One of my clients said they wanted to move no matter what and they just went for it.  In doing so, they’ve succeeded in selling and buying with this ‘easy to follow and logical plan’.  They decided not to allow the ever changing statistics, the article-of-the-day, and what all their friends are saying or doing dictate their movement in life– they just did what was right for them.   I respect that about them.    A favorite quotation of mine is, "Reality doesn't bite, rather our perception of reality bites.”  So true.  Which is why I believe we must always refocus our present picture as it will create the best version of now and of our future.   I never saw that Coral Snake scurry away, I just assumed it did. Maybe it was as scared as I was.  I wasn’t about to follow it to see which direction it went in.  Instead I moved forward into one of the most beautiful days I’ve ever experienced in my life.

Jacqui Williamson, REALTOR, Certified Condo Specialist
Century 21 Bamber Realty Ltd.
403.245.0773
www.jacquiwilliamson.com