Thirty months ago Cal bought a rancher in a Phoenix suburb, right on the border of prestigious Scottsdale, for $289,000. Three beds, two baths, big lot, renovated, walk to the ttrendy Fashion Mall. “But it’s too damn hot here,” he tells me. So he listed it for $430,000, and sold three weeks later for $414,000.
“Best investment I ever made,” says Cal, who is heading home to Vancouver in time to see the daffodils come up. “Phoenix rocks.”
Well, not exactly. Prices have increased 8.3% in the past year, but the number of sales have gone down as busloads of bargain-hunters left town after snapping up distressed properties at rock-bottom prices. There are still as many foreclosures or bank-owned houses for sale (6,845) as there are normal listings (6,568). But the days of 70%-off in certain Zip codes are definitely over.
Cal’s note made me think once again about the disparity that’s opened between Canada and the US. That was driven home Friday with the latest jobs numbers – the States creating 175,000 positions last month (17% more than anticipated) while Canada lost 7,000 jobs (150% worse than expected). The American unemployment rate is again less than ours, which was unthinkable when Cal was down arranging to snap up that appealing rancher. In fact, there have been no net jobs created in Canada since last August, says the government.
Also Friday came news Montreal-based Bombardier is freezing the wages of 38,000 employees. And speaking of Quebec, now that a provincial election has been called, the betting is the separatist-leaning PQ will coast to a majority win. Throw in a crappy jobs report, and no wonder the Canadian dollar just deflated again. If people in Calgary or Kelowna or Richmond Hill don’t think a sovereignist government in Quebec City won’t hurt them, they’re daft.
Even more consequential is debt. US households started seriously deleveraging after the housing bubble burst, while Canadians keep on toking. At more than a trillion, we have never had as much mortgage debt, nor as much exposure to real estate. Despite almost five years of in-the-ditch interest costs, household debt levels continue to rise. In other words, people are not using cheap rates to reduce borrowing, but to add more.
This is beyond stupid. There’s a 100% chance interest rates will be higher in the years ahead (bankers actually say mortgages will cost more by Hallowe’en), which will just make debts harder to pay. Meanwhile the dollar has lost enough altitude that consumer prices are rising at the same time businesses have lost a window of opportunity to import technology and equipment with a strong loonie.
Add it up. Weak, indebted consumers. Families over-extended on real estate. Rising prices but zero job creation for the last six months. Sickly levels of business investment. And yet house prices keep going up in major markets, along with debt, meaning people have less to spend at retailers like Sears or Best Buy. No wonder they’re hurting.
It wasn’t hard to see this coming a few years ago, which is why this pathetic blog told you then to ‘sell Canada, buy America.’ Last year the Dow and S&P gained 30% while the TSX grew 9% – and that was its best performance since 2010. It’s a lesson most people here seem incapable of understanding.
Just as 70% of Canadians who have equity investments only own Canadian companies, an equal number of us have the bulk of our wealth in a single asset, at a single address. This lack of diversification is a serious impediment to actually growing wealth, and gravely increases risk. Obviously we’re a country of snowflakes – people convinced they’re unique, special, favoured and immune from the booms, busts and travails of everyone else on the planet. Good luck with that.
Yes, this is a good nation. I’m not leaving. Much opportunity left. Plus, the US isn’t nirvana.
But I sure fear for a lot of people around me. Not a clue.
While yesterday’s little hatefest towards people who sell houses was amusing, the irony should be lost on no one. This blog’s bullish on real estate agents. Yes, real estate boards still clearly massage numbers, make misleading statements and manipulate public opinion. A spanking is required. But individual agents can be your best friend when buying or selling a house.
Almost every buyer does better when they have an agent repping them. A good agent will dig out research on comparables, provide background on the hood, negotiate with the seller, line up an inspector or potential financing, plus arrange viewings and efficiently get you through a mess of properties. And it’s free. Just don’t sign a BRA.
When selling, the dumbest thing you can do is turn into a FSBO. Do-it-yourself sellers are invariably cheap (because they don’t want to pay commission) and at the same time greedy (because they won’t lower a price to reflect no commission’s being paid). Most experienced buyers want nothing to do with a FSBO, who has no legal reason not to misrepresent the property, and probably is.
Sellers using a respected agent get more viewings, see more competition for the property and usually enjoy a higher sale price and in a shorter period of time. The marketing is far more extensive and far-reaching than the rinkydink web site the DIYers huddle inside (even when they have exposure here) because of relationships and networks an experienced agent brings to the table. I have never regretted paying commission (which, by the way, is always negotiable).
Now there’s one more reason you should use an agent when selling a property, especially a termite-infested, leaning, condemned piece of urban crap, preferably a semi beside a rendering plan in an up-and-coming area just being discovered by hormonal yuppies. And that, of course, is the bidding war.
It’s interesting a major mortgage-issuing bank that shall remain nameless (BeeMo) just released a survey showing an astonishing number of people are totally willing to join a feverish auction for a house. It found that 34% are ready to go to war over a listing – up substantially from last year. In poor Vancouver that number swells to 41% and in Toronto it’s now at 44%.
By the way, in the godless GTA, only 24% of buyers in the last five years say they were actually successful in getting a house on their first bid. Yikes. And this is the reason we see those stories about 33 couples battling over a beater house that sells for 154% of list.
What does this have to do with using an agent? Just everything.
If you’re a buyer, your smart agent should guide you away from any bidding war because this is the only conflict in which the victor is slaughtered. Concentrate on unloved listings with hair on them, places with big DOMs, houses which were priced too high and now languish, and also go shopping when other people aren’t – statutory holidays, January or July.
If you’re a seller, you might want an agent who can actually create a bidding war. I mean, if 44% of the people shopping for a house in Toronto at this very moment are idiots, why not play them? In that case, here are three things a killer agent can do to excite the morons at the gate.
First, stage it. In Van or 416 this is pretty much de rigeur. Houses have to look like nobody lives there, but are voluptuously appealing. Like me, minus the ankle. The more uncluttered, neutral and depersonalized, the more people can imagine their own stuff there, and the more potential bidders will be attracted. No empty rooms. Most folks can’t visualize beds or couches. You have to show them.
A good agent will know who to call. In fact, many of them now have their own staging crews. For a few grand you can rent sexy furniture for a month, along with carpets the dog didn’t upchuck on and wall art above your pay grade. Some people even stage their homes then move out for a week of intensive open houses and showings. The cost and bother is absolutely worth it if you snare a few hot ones.
Second, your killer agent will create buzz, plus a deadline. Hipsters with pre-approvals apparently love both. This is why developers of new condo projects, especially in the bizarre suburbs of Vancouver, have been known to hire people to stand in line then call in the media to film the hungry hordes. So, your realtor will have an open house immediately after the listing comes out, and make sure it’s brief and intense by sending notices up and down the street to attract gawking neighbours. The yuppies think they’re all potential buyers, and start shallow breathing.
A good agent will also try to schedule showings so people fall over each other, with one group having to wait a few minutes while the previous one finishes wandering around. It’s incredible what the spirit of competition will do. And then there’s that deadline – establishing a day and time when offers will be accepted, further whipping up emotion.
Finally, price. It means everything to sales success. Price too high and the place will languish, then go for less. Price it with the market and you’ll sell a little below asking. Price it cheap, and it may command a huge premium.
Killer agents know that in an environment like this – low inventory, cheap rates, frustrated buyers – that inexperienced purchasers will flock to what looks like a bargain, resulting in heavy viewing traffic and multiple bids. Soon the idiots forget they came for a deal and start adding zeroes to their offers. And we all know where that leads.
So, there you go. A few good uses for a real estate agent.
Who says this pathetic blog lacks balance?