Related posts:

1. 2011 Real Estate Roundtable Update
2. Post City Magazine Fall Real Estate Round Table
3. Florida Bound – Canadians buying Real Estate in the US

Another month, and in this case, another year, is over! What does this mean? Yes, it is time to summarize. Let me start with the Greater Toronto Area housing statistics, as reported by Greater Toronto Realtors. This past month has been quite successful, with 4,718 homes sold in the GTA through the Toronto MLS® system. In comparison, in December 2010, only 4,286 sales were recorded.

Not only did the number of sold properties go up in December, selling prices also increased. The average price for a GTA home was $451,436 this past month, 4 per cent more than the average December 2010 price. In 2011 the average price of a home was $465,412. This is an increase of 8 per cent more than $431,276, the average price per transaction in 2010. It is safe to say now that when it comes to sales, the whole of 2011 was fabulous! Last year was actually the second best on record under the current Toronto Real Estate Board boundaries. Exactly 89,347 transactions were recorded over the 12 months, an increase of 4 per cent from 2010.

What can we expect for 2012? According to TREB’s Senior Manager of Market Analysis, Jason Mercer, the prices this year will not stop going up, but the increases will be more moderate. All buyers will definitely appreciate it if he turns out to be right.

Related posts:

1. GTA Housing in December
2. Housing Market in the GTA – June
3. Housing Market in the GTA – July

In early 2007, the Conference Board of Canada and Genworth Financial Canada released a joint study on the Toronto condominium market. The report concluded that the price of a resale condominium would increase an average of 4 per cent annually — from $239,816 in 2006 to $292,077 by 2011.

Over the five-year period, the Toronto condominium market has evolved at a record-setting pace, scoring one record high after another. Although the housing market experienced a brief downturn in late 2008 due to the global financial crisis, it quickly regained its momentum in the spring of 2009.

Since 2006, the average condominium value has increased roughly seven per cent, annually.

In the second quarter of 2011, the 9,455 new condo units sold surpassed the record of 6,977 set in the same period 2007 — a 35 per cent increase, according to the condominium research firm, Urbanation.

TREB reports 5,770 condominium transactions in the third quarter of 2011 — a 24 per cent increase over the same quarter of 2010.

The third quarter of 2011 numbers released by the Toronto Real Estate Board (TREB) reveal a condominium sales price for the City of Toronto of $356,182, on average. Greater Toronto Area condos had a $333,352 average sales price.

Through the end of the second quarter of 2011, 61 per cent of all sales consisted of high-rise condominiums, according to the CEO of the Building Industry & Land Development Association, Stephen Dupuis.

The Toronto Economic Development Committee states in its October 2011 report that Toronto has 132 projects under construction — more than any other city in North America. By the end of the year, its total projects will exceed 200. Mexico City and New York City follow with 88 and 86 condominium developments underway, respectively.

Based on Toronto's real estate market analysts' estimates, about 90 per cent of the new condos have buyers committed under contract before the start of construction.

With tens of thousands of new condo units scheduled to be added to the available supply, these numbers might shed some insights on the strength of the Toronto condominium market going forward.

Toronto's Condominium Buyers

Minto Midtown by Danielle Scott

As Canada's largest city, with a population of 2,720,024, Toronto rates as the number one destination for 20 per cent of the estimated 200,000 new immigrants who move to Canada each year. About 52.4 per cent of immigrants settle in the GTA, which has a population of 5,741,400, according to the last count.

A sizeable portion of this immigrant population eventually buys homes. With an average single-family home price of $465,369 in September 2011, Torontonians’ huge appetite for “affordable” home ownership undoubtedly fuels the demand for both high-rise units and town-home condominium units.

Typical condo buyers are young, single/married, and educated professionals who work downtown. They prefer to live and work close to Toronto's centre and peripheral neighbourhoods. Shopping, public transportation, cultural activities, and entertainment are available just outside their doors.

Many baby boomers will turn 65 this year. Their children have left home, so downsizing from large, single-family homes in the suburbs rates highly on their agenda. They too desire the perks of living downtown. According to TD Canada Trust’s annual condo poll, 31 per cent of baby boomers buy these units with the intent of not moving again. Furthermore, they tend to spend, on average, $10,000 in upgrades.

Speculators represent another segment of buyers driving the Toronto condominium boom. They focus almost exclusively on the acquisition of pre-construction units. Many have made hefty profits capitalizing on the run-up in property values between pre-construction and project completion.

Investors operate with a different mindset than speculators. Instead of seeking a windfall profit by flipping the unit, they tend to enter the market for the long haul, satisfied with investing their money in a tangible asset, renting units, and profiting from the historical tendency of Toronto's condominiums to appreciate. The value of condominiums in the GTA has continued an upward trend for the last 15 years.

Depending on the source, figures on the percentage of pre-construction condominium sales to speculators/investors range from 30 to 80 per cent.

Historic Low Interest Rates

The Bank of Canada recently announced its intention to keep the overnight interest rate at 1 per cent for the near future. This rate refers to the one-day interest rate banks charge one another to ensure institutions meet mandatory reserve requirements. The overnight rate has a direct effect on mortgages and consumer loans.

The central bank tends to keep interest rates low to stimulate the economy — especially if the global economy does not perform well and overall risks are increasing.

This strategy of low borrowing costs makes it cheaper for Canadians to buy real estate, cars, and other goods and services. It also makes it easy to take on too much debt.

Is a Correction Imminent?

Whatever happened to that real estate bubble? You know, the correction many “experts” predicted would occur over the last year. Unquestionably, one of the greatest concerns for a real estate buyer is purchasing property at the height of the market, only to sit by helplessly as the value of the asset plummets.

Capital Economics says in its most recent Canada Economic Outlook report, that real estate prices could drop as much as 25 per cent over the next 36 months because of slower income and population growth. Some of the bearish analysts fear the market is already in oversupply mode, and predict as much as a 50 per cent decline in home values.

Waterfront Condos by Don Toye

Many Americans have already experienced this nightmare scenario. An estimated 25 per cent of U.S. homeowners find themselves with mortgages “underwater” — meaning the value of their homes is worth less than the outstanding balance on their mortgages.

Besides extreme valuations, when some markets rose as much as 25 per cent in one year, a multitude of other factors contributed to the carnage in the U.S. housing market. These dynamics include careless credit standards, risky mortgage products, and insufficient regulatory oversight.

In addition, endless refinancing, more debt, extreme speculation, excessive securitization of mortgages, and outright fraud played critical roles in undermining the American real estate market. The financial crisis in late 2008 served as the primary event that finally collapsed the “house of cards.”

In Nevada, Arizona, and Florida, real estate values have fallen more than 50 per cent off the market's peak, which occurred in June 2006. More than five years later, home prices in many states have failed to reach the values attained before the historic price run-up.

It is important to note the absence of many of the above elements from Canada's housing and mortgage industries, which eventually torpedoed the U.S. market.

Nonetheless, the real estate bubble that burst just south of the border offers valuable lessons applicable to the soaring Toronto condominium market — particularly as it relates to valuation, speculation, and consumer debt.

The price of Toronto condominiums has gone up five to seven per cent annually — considered reasonable in a vibrant market. When buying, proceed with caution upon hearing reports of bidding wars or rapid price increases.

Even if Toronto condominium developers only break ground for new projects after securing a minimum of 70 per cent of the units under contract and financed, as reported, speculators present the wild card here. If the market cools, some will look quickly to dump their units and lock in some measure of profit.

RBC Global Asset Management's chief economist released a report in July that revealed the income-to-debt ratio of Canadian households now surpasses that of Americans in 2011. Ten years ago, Canadians had a 120 per cent ratio; the figure has increased to 147 per cent. For each dollar of income, the average household has $1.47 in debt.

Conclusion

Inevitably, everything depends on the level of consumer confidence. When people have concerns about employment or the state of the regional, national, or global economy, they tend to spend less.

With the lowest interest rates in the history of mortgages and property values at the lowest level since 2000 (in some regions), the real estate and mortgage industries are still struggling to rebound.

Whether you are looking to buy or sell property in the current market, ultimately, only you can make the decision that is right for your circumstances. Keep your ears to the ground and avoid the emotions that typically accompany a hot market.

For sellers, now may present the best opportunity to lock in your appreciation to take advantage of the demand for Toronto condominiums and single-family homes. Consider listing your property now as opposed to in the next year or two.

Related posts:

1. Market Update – Mid November 2009
2. Sky-High Toronto: Condominium Facts
3. Housing Affordability Improved

The fall months seem to have been a greatly successful with regard to the housing market in the Greater Toronto Area. November did not disappoint. On the contrary, it was all about increases! Not only did the number of homes sold through the Toronto MLS® system go up by more than 10 per cent over the year, but also new listings and, once again, prices did not fall behind.

Home sales rose from the November 2010 levels of 6,384 to 7,092 last month, showing an increase of a very solid 11 per cent. The number of new listings increased even more rapidly, rising to 14 per cent higher than in November of 2010. Prices also went up at a slightly less strong, but noticeable, pace, growing from the $437,494 seen last November to the $480,421 reported this past month.

Even though ever-increasing prices do not quite fit into the ideal housing scheme for buyers, as Jason Mercer, TREB’s Senior Manager of Market Analysis, pointed out, in spite of all that, “the housing market remains affordable in the GTA.”

Related posts:

1. Market Update – Mid November 2009
2. Housing Market in the GTA – December
3. Housing Market in the GTA – October

Over the past 10 to 15 years, the average residential real estate sale transaction has gone from a relatively straightforward deal to a more sophisticated business transaction. The basic mechanics remain the same: list the property, find a buyer, and close the deal. However, other requirements have made the sales process more convoluted, including disclosure statements, home inspections, environmental issues, and the Internet.

In addition, successful home sale transactions require a blend of marketing, financing, negotiation, and closing skills. To avoid the hassles and emotions of the business of “selling their home,” most home sellers work with seller's agent.

Once you sign the listing agreement, the seller's agent has the authorization to take action — presenting your property for sale. The agent has a legal obligation to represent your interest on the sale side of the transaction. Consider the following information as part of the preparation process.

Agent or REALTOR®

Make sure you understand the two types of agents: a real estate agent/Broker practitioner or an agent practitioner who has earned the REALTOR® designation. According to the Canadian Real Estate Association (CREA), more than 100,000 real estate Broker/agents and salespeople and 100 real estate Boards and Associations have CREA memberships.

Members of the CREA agree to a stringent code of ethics and standards of practice and take an oath to treat all parties to the transaction with fairness. The designation comes with a guarantee of the best professional conduct.

Many agents have the skills and the highest integrity required to sell your home; however, they do not have the backing of the industry-recognized guarantee made to customers of REALTORS®

Seller's Agent Responsibilities

Your real estate agent must protect your best interest. This person executes many tasks and oversees a range of responsibilities on the path to getting your home sold. Take a look at some of the duties a seller's agent performs:

• Acts as a buffer between seller and callers or “lookers”
• Possesses knowledge of the local market and homes sales in your neighbourhood
• Provides data and guidance on proper pricing
• Networks with other brokers
• Negotiates the price
• Manages the necessary paperwork

In addition, between the initial listing, sales agreement, and settlement activities, expect many questions to surface. A dedicated, knowledgeable agent provides answers, solves problems, and helps guide you through the maze of selling your home.

Think about the sort of personality you want to represent you: warm and outgoing, cool and reserved, or somewhere in between? Take the time to interview several candidates before making your choice.

Prepare For the Interviews

Interviews by David Davies

Start the process at least 60 days before you intend to make the listing active. Gather the names of real estate agents used by neighbours, friends, or family members. You can also get leads from signs posted in your neighbourhood or from online directories. Real estate associations such as the British Columbia Real Estate Association, Ontario Real Estate Association, or Alberta Real Estate Association have a database of REALTORS®.

Select three or four names. Make sure the agents sell houses in your neighbourhood. Now, prep yourself for the interviews by completing some research on the agents. Find out their license status. Go to the local enforcement board to search for complaints or ethics violations. In Ontario, RECO handles these matters. Other provinces have similar organizations. Get the address of any web sites the agent uses to market homes.

Obtain as much information as you can about each seller’s agent before the interview. Assemble all the documents about the home, including surveys, tax information, the title deed, and mortgage paperwork. Have some idea of the market value of your home.

Now, arrange the interviews. Avoid revealing to the candidates during the interview any information you would not want buyers to know. Use the following questions as a framework for the interviews, separate the candidates based on the responses, and make your final selection:

1. How many years have you been in the real estate business?

Sometimes, you will probably have a good idea of the agent's breadth of experience. Keep in mind that all agents must start somewhere after they obtain their license and training. New agents, equipped with the proper training and mentoring, may have the necessary skills and time to concentrate on selling your home. If the agent receives the proper mentoring and guidance along the way, they can do a good job.

Many home sellers feel better about working with someone with an established record of accomplishments. An experienced real estate agent has the confidence to stay on top of lawyers, mortgage offices, and home inspectors. Some ten-year “veterans,” however, have one-year experience ten times over.

2. What is your average list-price-to-sales-price ratio?

The Average List-Price-to-Sales-Price Ratio reveals the percentage of the original list price buyers paid for homes listed by the agent. Obtain the ratio by adding the list prices together and dividing by the number of properties to obtain the average list price (ALP). Use the same calculation to get the average sale price (ASP) for the properties. Divide the ALP by ASP-ALP/ASP to obtain the ratio.

The ratio provides insight into the real estate agent's pricing approach and negotiating the best price for properties listed. With the possible exclusion of a hot seller's market, competent listing agents can negotiate a sales price close to the listing price. The listing agent ratio should be close to 100 per cent. Conversely, an agent that represents buyers should have a ratio below 99 percent.

3. What is your marketing strategy for selling my home?

In most markets, about half of the sales consist of cooperative transactions, which means another agent brings the buyer. The agent must expose your property to the buying public by continually employing a multitude of marketing methods.

Remember: not all real estate agents follow the same steps when it comes to marketing and selling your home. Find out how each agent plans to sell your property quickly, and at the right price.

Here are some areas to investigate:

• Use of social media — Facebook, Twitter
• Plans for direct mail campaign
• Sample flyers or brochures
• Personal real estate website for marketing homes
• Other Internet marketing methods

Pay attention to marketing material such as brochures or flyers. Does the marketing material promote the agent or the seller's home? Does the flyer motivate you to want to know more about the home? Does the agent use virtual tours or use many quality photographs to display homes? How do the images look online?

Even with a solid marketing campaigns, keep in mind that studies show that 82 per cent of real estate sales result from an agent's contacts — referrals, friends, long-time clients, family members, or personal acquaintances.

4. May I check your references?

Sold by Thomas Widmann

Obtain from the candidate the names and phone numbers of clients for the last three homes sold. Find out if the agent has a family relationship with any of the references and replace if necessary. Get permission from the real estate agent to call the references and ask questions about how the agent serviced and managed the home sale.

If you learn of an ethics violation or disciplinary action, ask the agent to explain what occurred. This alone should not eliminate a candidate. If the other information you have about the agent impresses you, interrogate the candidate about the incident.

5. Can you help me locate other professionals?

A good agent can supply you with other professionals, including trades persons, mortgage brokers, title companies, home inspectors, or real estate attorneys. Find out if the agent has an affiliation with any recommended vendor. If yes, ask the agent to explain how the association works.

If the agent receives compensation from the vendor, does that mean you pay a premium for the services?

6. How much do you charge?

The real estate commission is negotiable. Typically, agents charge a percentage of the sales price, which ranges from 1 to 4 per cent, for each side of the transaction. The average real estate commission is 6 per cent.

7. What kind of guarantee do you offer?

Choose a seller's agent who guarantees and stands behind everything they say to get the listing. Some agents try to lock sellers into ironclad contracts. If you find the level of service unsatisfactory or find you did not make certain of all the things you want in a listing agent, are you stuck or will your agent allow you to cancel the agreement? Ask if anyone has ever cancelled an agreement with him or her. Know the agent's policy for cancelled agreements.

Conclusion

You can ask other questions as well. “Is there anything else I should know?” “How many times have you renewed your license?” “What separates you from your competitors?” As you can see, the questions are endless. The point: get enough information to help you make the best choice.

Choose an agent with a solid reputation. Be careful of anyone who speaks in negative terms about the competition or tries to get your business by inflating the value of your home. Peers in the real estate industry often go the extra mile for a seller's agent they know who does superior work and who is a pleasure to do business with.

On executing the listing agreement, provide any confidential information to the seller’s agent you deem important to achieving your objectives.

Related posts:

1. Realtor or For Sale by Owner?
2. Myths About Real Estate Agents