After my last column I exchanged a few emails with a reader who was querying the most recent board stats. I had heard rumours that the sky is falling (again!) in the Okanagan and look at the Board stats. On reviewing the stats, I did not see anything else other than an affordability issue and lack of inventory in the lower levels of the market place (sub $400,000) and above that, I saw an active market that was running approximately 12%-115% up on last years comparable numbers in most of the pricing categories. Well, thanks to Dan who reads the column regularly and who did a fantastic amount of research and number crunching, he came to the same opinion also. Thank you Dan!

It remains to be seen what will happen for the rest of the year, but when oil is running at $120-$130 per barrel and natural gas is now trading in the $11 range, one might expect that Alberta’s resource heavy market place might be purchasing some more real estate this year, despite the state of the housing market in some parts of Alberta.

So far we are seeing some typical spring trends with waterfront buyers starting to show up on weekends and by all accounts, the slightly increased amount of listed inventory is still not satisfying the buyers tastes very well which will buoy prices in this slightly sluggish market.

Recreational Property Financing

Two notable areas of change in the finance markets are development project financing and recreational real estate financing. In many instances, complicated title arrangements ensure that a main street bank may shy away from financing a recreational purchase. This alone is very good reason for developers to work with Realtors prior to the launch of their product since the inclusions in the disclosure statement can be restrictions to retail financing. While many recreational purchases are made with existing home equity, some purchasers prefer to actually mortgage their property. Recently we have been referring some buyers to a unique product that allows purchasers to access self directed RRSP funds to acquire recreational property.

Several years ago, I wrote an article titled “FUN-vesting”. It was published in a journal called the Canadian Rockies Resort Forecast and it talked about the ability to buy recreational property using RRSP funds. At that point in time that was no easy feat for the developer with several layers of bureaucracy and legal filings required prior to sale and complications on the back end with bank financing!

Last year I had the pleasure of meeting the President of a fund that will organize the ability for you to move self directed RRSP funds into a bond that will then lend you the money for your purchase at a reasonable mortgage interest rate while also depositing a bond level of return into your RRSP account. Our clients have so far been very happy with the results and with the stock markets continuing to be as volatile as ever, it makes sense to many people to move their investment into real estate. Once the Harper government follows through on it’s commitment to remove any capital gains on real estate investments, you can expect this very popular product to really take off.

Feel free to contact us to find out more about this innovative product.

Canadians have earned a reputation as being financially conservative, and it seems to be well deserved, at least when it comes to their mortgage debt. A recent survey by Canada Mortgage and Housing Corporation (CMHC) shows that 78% of Canadians who recently purchased a new home intend to pay off their mortgage as quickly as possible, and many have already taken steps toward that goal.

According to CMHC’s 2007 Mortgage Consumer Survey, Canadians remain fundamentally cautious when it comes to their mortgage debt. New homeowners are working to pay down the principal early and are accelerating payments, which CMHC considers a good indication that this responsible behaviour will continue throughout the life of their mortgage.

The 2007 survey focused primarily on recent purchasers and included questions on homeowner behaviour regarding mortgage debt re-payment since arranging their mortgage. More than half of recent purchasers agreed that, whenever possible, they would use extra money to pay down the principal on their mortgage. CMHC’s survey revealed recent purchasers are acting on these intentions, with one-third at some point having made a lump sum payment to their mortgage. Also, well over half reported making weekly or biweekly payments, and the majority of these (84%) are being made on an accelerated basis, which has the effect of shortening the original amortization period.

This kind of consumer behaviour creates a solid financial footing that will help to drive the Canadian real estate market forward. Forecasts are calling for the market to continue strong throughout 2008, and property values are predicted to climb to new heights in 2009, although at a somewhat slower pace than this year. Real estate remains a solid long-term investment, and it's not too late to get into the market and benefit from some of the appreciation in value that’s still to come.

Want to know more about property values in your neighbourhood and the forecast for what’s ahead? Contact your local real estate professional and take advantage of their advice. You can even learn more about how to pay down your mortgage faster and join the majority of Canadians who want to do the same!

Will our current global economy affect buying decisions this year?

Undoubtedly there will be an impact from the confusion and unpredictability in our current global economy. Coupled with temporary over-development in the Condo market in BC and Alberta, we might expect to see a slightly more reserved buyer coming to the Okanagan this year.

One thing that is evident is that with the low mortgage rates and the last few years' appreciation in property values, we see many families taking advantage of their personal net worth gain and using low interest rates to move up a little on the housing ladder. In growing resort communities like Kelowna, one of the best barometers is the local house buying and selling market. If there is confidence in the local community it is communicated outwards to visitors to Kelowna which is still where the majority of our sales come from.

This past few weeks, we have learned more about the depth and breadth of the "sub-prime" lending fiasco in the US that has some serious ripples globally, and while we see impacts in Canada, once those impacts are overlaid on solid economic data (with the exception of the manufacturing sector) we are seeing very minimal reaction to the crisis.

The Okanagan Mainline Board stats for February indicate a slight decline in volume of sales month over month last year. However, March has shown serious signs of a more frenetic pace of sales as we get into spring months. The decline is likely attributable to a slowdown in housing markets in Calgary and Edmonton. While retirees (as we have stated in the past) are less sensitive to unsystematic risk such as global economic impacts of exchange rates and interest rates, they still require to sell their primary residence in Alberta and board stats from that region are showing increased inventories of properties for sale and sales prices that are lower than the most recent government "market assessments"!

On the whole, while the first two months of the year are likely on par with last year's sales (January being another record month) we maintain a very bullish outlook for the Okanagan. What we will see is more creative offerings, including an increase in fractional real estate to offset the carrying costs of a recreational property and rental guarantees as an option at some resort locations.

As we look forward, one of the areas to keep an eye is the oil and gas markets that, while we feel may have been out of control, have only recently surpassed the inflation adjusted 1981 values. However, the net pump price will have an impact on the decision of travellers to come to the Okanagan in their vehicles. In a recent article, Peter Yesawich of the famed Yesawich, Peppardine and Brown consultancy quoted a survey on traveler's appetites for vacations in this era of high gas prices:

As revealed in the results of this national survey of 1,546 active leisure travelers:

Nine out of 10 travelers (87 percent) expect gas prices to rise this year.
The price per gallon at which the slight majority of American travelers said they would change their vacation plans is $3.50. Six out of 10 (61 percent) travelers said they would change their vacation plans if the price at the pump reached $3.75 per gallon.

When asked how their plans would change, the most frequently mentioned responses were "take fewer trips" (35 percent) and "cancel my trip" (31 percent). One out of four (26 percent) travelers said "drive a shorter distance" or "postpone my trip until the price of gas comes down."

Interpretation? Americans clearly are concerned about the price of gas. But their desire to travel remains robust.

Whilst this survey is relative to the US, I would expect it to mirror Canadian intents very closely.

Even with the headline grabbing statements in the media, relative to a weakening global economy, most senior real estate agencies are reporting projected increases in property values in BC to be in the 7%-10% range, our feeling is that overall, we would expect to see 12%-15% in the Okanagan with some sectors of the real estate economy lagging behind that a little.

Enjoy the spring, and don't forget to take advantage of a great time in the season to list your property and gain valuable exposure before the summer holidays.

There's a new name for those thirty-something individuals who are stressed out from providing care for both children and aging parents. They're called the "sandwich" generation, and millions of Canadians are currently in or approaching this demographic group. It's tough trying to find enough hours in the day to meet all their commitments. Many are responding to this situation by arranging for live-in help to assist with childcare and household chores, either from another family member or a paid employee. If you're one of the many who plans to go this route, then it probably means you'll need a nanny suite, granny flat, or even an in-law apartment.

Sometimes, the needs for live-in help are most easily accommodated by moving to a new, more suitable home. But a great many homeowners try to manage with some modest renovations. If you're trying to decide, here are a few things to keep in mind as you make your decision.

An effective nanny suite will be appealing to its resident, while at the same time giving you some privacy, but without putting too much strain on your budget. A good benchmark in determining what improvements are worth doing, is to measure the cost against the expected lifespan of the expense. For example, putting in a new 3-piece bathroom can be relatively expensive. Its cost probably won't be warranted if you only see it being needed for three or four years until the kids are in school and a live-in nanny is no longer required. In a case like that, you might consider a compromise, like adding a sink and counter to a bed-sitting room, that could later evolve into a den with a wet bar. On the other hand, if you can see the nanny suite being used later on as an in-law suite or a more private room as your children get older, then you'll probably feel the cost is well worth it.

You should also consider that the number and location of both bedrooms and bathrooms are important factors when determining the resale value and buyer appeal of your home. If your renovations are professional looking, you have an excellent chance of recouping some or all of their expense when it's time to sell. Your real estate professional will be glad to advise you on how such improvements may impact the value of your home. They can also help you crunch the numbers to see how much home you can afford, and show you examples of what other homes are available in your price range that can accommodate your needs. You may find that, instead of renovating your existing home, it's in your best interests both functionally, and financially to choose a new home that's more suited to your current lifestyle.

Whatever your needs, your local real estate sales professional will be glad to help you evaluate your options and come to a sound decision that's right for you and your family. Why not call and get some helpful advice?