AT WAR

Calgary homebuyers return to housing market bidding wars
BMO report says Canadians willing to pay more to get what they want
BY MARIO TONEGUZZI, 
CALGARY HERALD MARCH 5, 2014

CALGARY - Prospective Canadian homebuyers are more willing to enter into a bidding war this year for properties they want to purchase, says a new report released Wednesday by BMO.

And Calgary’s hot housing market is proving to be a good example of that as nearly 20 per cent of MLS residential sales in the city in February were for above list price.

The BMO Home Buying Report said 34 per cent of Canadians are willing to enter a bidding war when it’s time to buy a home, an increase of six points, or 21 per cent, from a year ago.

The report, conducted by Pollara, said that in major city centres, the appetite for competitive bids is the highest in Toronto and Vancouver (44 per cent and 41 per cent respectively). In Calgary, it is 38 per cent and in Alberta, it is 30 per cent.

“While many suspect bidding wars are triggered by sellers who deliberately price their homes below market, the report shows that just 15 per cent of owners have that motivation, with those on the Prairies and in Toronto the most likely to pursue this strategy - but even then the numbers are modest at 24 per cent and 22 per cent respectively,” said BMO, which says average home prices across Canada continue to rise, gaining momentum in the past year, with the average transaction price up nearly 10 per cent year-over-year in January. The average home sale price in Canada is currently just over $400,000.

“Calgary’s market continues to see the strongest fundamentals; Vancouver has rebounded from a soft patch; while Toronto’s market remains relatively balanced overall, though the condo market is more amply supplied,” said Robert Kavcic, senior economist with BMO Capital Markets, in a statement. “Overall, sales are expected to hold relatively steady in the year ahead, with price growth in the low single-digit range, below the rate of income growth.”

Laura Parsons, mortgage expert with BMO Bank of Montreal, said the competition for real estate in Canada, particularly in hotter markets, can be fierce and turn into an emotional frenzy.

“A shortage of inventory is driving a lot of it,” said Parson of the Calgary market. “It’s such an emotional thing. When you see it, you get it. I remember the days when there were lineups of people behind each other. The minute you see that your heart starts to race and you want to not lose.

“Lots of people are prepared. They know what their high is . . . Calgary has the biggest income so we’re willing to spend more if we have to and hopefully we’ve been conservative before we go in and we know we have that room to bid higher.”

Parsons said many people don’t understand that they can renovate a home and build it into the purchase price.

For some people, she said, there’s a need to move before spring and they’re feeling the pressure.

Data released Monday by the Calgary Real Estate Board indicates all-time records, for any month, were set in February in the average city sale price ($482,530) and the median city price ($424,900) as well as in the single-family sale price ($550,312) and the single-family median price ($480,000).

“Calgary has been in a statistical sellers’ market since February 2013,” said Robyn Moser, a realtor with CIR Realty. “As time has passed, the sellers’ market has become increasingly aggressive. This has caused buyers to see lower and lower levels of inventory, placed into competing offers and homes selling in days if not hours. This cause is speculated to be the lack of available new home inventory due to Calgary sewer lines that are needing to be upgraded. This has placed metro Calgary real estate values into statistical unsustainable levels until the sewer line upgrade is complete.”

According to CREB, as of Tuesday, there were 2,893 active MLS listings in the city which was down 20.15 per cent from a year ago. Year-to-date, sales have increased by 11.77 per cent to 3,551 transactions.

Mike Fotiou, associate broker with First Place Realty, said Calgarians were so determined to buy a home in February that nearly one in five paid above the asking price.

“Of the 1,854 properties that sold during the month, 364 or 19.6 per cent of buyers paid higher than list price. Compare that to the 10.4 per cent of buyers from a year ago or the 6.1 per cent from February 2012 that paid above asking,” Fotiou wrote on his blog.

“As sales rise and inventory continues to decrease year-over-year, it’s to be expected that buyers will find themselves in more situations where multiple offers are involved.”

ASK NOW!

It never hurts to ask and check before buying

BY SHELL BUSEY 

THE PROVINCE NOVEMBER 3, 2013

If you are looking to purchase a strata unit in a building that has not yet been built, there are some things regarding the layout of your potential suite you should be aware of.

You want to be aware of backto-back bedrooms and the level of soundproofing in the walls. This is something that is expensive - if not impossible - to change later.

One suggestion for anyone looking for a new condo or townhouse or resale unit: if you can gain access to next door or above or below suites, take a radio with you and play it in the adjoining suite. You may be amazed at how music can transfer through walls.

Also, are the strata rules and regulations in place, or is the strata formed yet? Rules and regulations can limit parking, guest parking, pets, smoking and age of residents. Keep in mind your first purchase may be the biggest capital investment you will make and you do not want it to be negative.

One question I am asked many times at seminars, home shows and in phone calls is: "How do you tell the best from the worst when buying your first piece of real estate?"

I am aware of buyers using the services of home inspectors, but that does not mean they are going to find some of the most important downsides to your potential home.

If you are looking at an apartment, old or new, you may want to monitor the building over a period of 24 hours, or better yet, a week.

For example, how many shift workers live in the building, possible smokers or even rowdies who have no respect for their neighbours? If a condo building is in an area undergoing revitalization, there may be developments under consideration that could take away views that you enjoy.

A number of the points can be important in a new singlefamily homes subdivision, as well. Due to zoning bylaws, homes can be built close to one another. Keep the following items in mind when you are house hunting. Is the property a bare-land strata, at what height can you have a fence or hedge, and are storage sheds allowed? What is the maximum allowable size of sun decks, should you want to enlarge yours? Is there outdoor play equipment such as basketball hoops and trampolines, and is there a goodneighbour policy with regards to noisy heat pumps and air conditioning compressors?

Last, but not least, consider your budget - not just for mortgage payments but yearly costs to operate the home.

You would be surprised how many homebuyers do not properly prepare and end up getting into a costly scenario.

For more home-improvement information or to send Shell an email go to www.askShell. com and become a member of Shell's HouseSmart club.

LOOKING NORTH

Demand increases for resale homes
By Josh Skapin 
Calgary Herald October 4, 2013  

Sales of single-family resale homes climbed 20 per cent in September compared to sales a year earlier, with tight market conditions creating higher prices, says the Calgary Real Estate Board.

“The impact of the floods likely boosted sales throughout July and August, and it appears as though some of that additional demand is starting to ease,” says chief economist Ann-Marie Lurie of CREB.

“Nonetheless, sales growth remains strong, in part because net migration has been stronger than anticipated and rental product is in short supply.”

Net migration describes the inflow of people to the city minus the outflow.

During September, 1,354 homes changed hands, up 20 per cent from 1,126 during the same time in 2012, says CREB.

The benchmark price of single-family homes in Calgary was $463,700 in September, a seven per cent upswing from $432,900 during the same month last year. The benchmark price is that of a typical home based on a formula that uses various factors to ensure accurate comparisons.

“While prices show strong year-over-year gains, if the level of new listings continues to improve relative to sales activity, prices should level off for the remainder of the year,” says Lurie.

Homebuyers have seen about the same selection this year compared to a year ago. There were 18,949 new listings between Jan. 1 and the end of September, a slight decline of 0.2 per cent from 18,881 during the same span in 2012.

However, the market saw a turnaround for new listings in September.

Last month, 1,975 single-family resale homes were added to the market, five per cent more than the 1,887 during this time last year.

From Jan. 1 to the end of September, 13,006 single-family homes were sold on Calgary’s resale market, a seven per cent improvement over the 12,186 transactions during the same period last year.

The quadrant with the most single-family house sales in the city during September was the northwest.

The board’s Zone A, which roughly consists of the northwest, finished the month with 467 transactions.

The next busiest quadrant was the board’s Zone C with 357 homes changing hands during September. This zone roughly consists of southwest Calgary.

At the same time, the board’s Zone D had 299 deals, while 231 homes sold in the board’s Zone B. Zone D roughly covers the southeast quadrant and Zone B is mostly the northeast side.

NORTHWEST LEADS REST

The two communities that saw the highest single-family home sales in the city in September were both in northwest Calgary.

Tuscany led the city in sales with 34 deals at an average sale price of $535,688, says the Calgary Real Estate Board. Panorama Hills had the second highest sales with 31 transactions at an average price of $487,477.

For information, visit creb.com

PREDICTING TRENDS

Don't forget to consider a new condo's palette
BY MARILYN WILSON
POSTMEDIA NEWSSEPTEMBER 7, 2013

There are many factors to consider when choosing a new condo. Competing for attention are details concerning location, site orientation, views, size, potential for resale and, often most important, cost. There is, however, another set of factors that buyers may not fully consider. These are the interior design features that come with the condo. Specifically, I want to discuss condo palettes - the hues of walls, fixtures, cabinetry and window treatments.

Let's assume you are not one of those lucky individuals who is starting with a bare-bones unit for which you will choose all spatial arrangements, appliances and finishes. In reality, most new buyers cannot boast of extensive experience in condo design and an absence of budget restrictions. Rather, they rely on pre-designed packages that include specific colour palettes and decor choices.

One way developers attract buyers is through interior design. They offer a variety of samples of flooring, cabinetry and counter-tops. Builders are always thinking forward in the rapid-paced environment of condo development, so predicting potential colour and texture trends when a condo is ready to be sold can help differentiate a builder's offerings from those of the competition.

Not only that, but as condo showrooms come out months - sometimes years - before construction, colour trends are often chosen in advance. For instance, 2014's must-have features and colours have already been established.

Builders usually enlist the expertise of the best interior designers in the country to develop their interior design palettes. Since many of these designers' fees are beyond what most individuals are willing to pay, a buyer can benefit indirectly from a designer's skills by purchasing a condo whose palette is a result of careful consideration.

In general, builders try to supply prospective purchasers with the hottest and most desirable designs, thereby outdoing their competition.

Model suites will give you your first taste of a condo's palette offerings. On show are a spectrum of colours, textures and design features that can be selected at no extra cost. The more you relate to the basic palettes offered, the more you get your money's worth.

If you have trouble picturing yourself living among this decor, it may be time to consider another development with a different designer. This will prevent you from struggling to accommodate someone else's taste. To complicate matters, the builder will offer a wide selection of extra-cost upgrades - flooring, appliances, built-ins, counter-tops and backsplashes - the list goes on and on. If you don't see an upgrade you want, just ask, as most requests can be accommodated.

If you have a clear sense of what works for you, the selection process can be relatively straightforward. Remember that a reputed designer has been working in the background on your behalf, and now the builder will supply an experienced consultant to help with the decision-making.

Despite this, you may also want to enlist the services of your own designer to help organize the palette and options to create your own unique space. If you go this route, make sure to pick a designer with similar tastes to your own. This is best done by viewing examples of their work, something most designers will be happy to arrange.

You may be wondering what the current trends are.

There is movement away from the beige-on-beige theme to more sophisticated taupes, greys, pewters, creams, almonds and cappuccinos. These rich tones add variety and interest to spaces while maintaining the virtue of not being statements in and of themselves.

Textures are evolving rapidly with many designers forgoing classic granite and tile themes in favour of composites and polished concrete set off by smooth or sandblasted glass or stainless-steel backsplashes.

It's important not to forget that seasonal views may have a strong influence on your colour palette. For instance, you may want to opt out of an all-white palette, as the decor will suffer when the city is blanketed in snow. Whatever you choose, try not to go too bold with your palette, as you may get sick of it or suffer during resale.

Otherwise, follow the instincts of your taste, and happy condo hunting.

Marilyn Wilson has been selling real estate for more than 24 years and owns Marilyn Wilson Dream Properties Inc.

2013 CALGARY REAL ESTATE BOARD FORECAST

CREB® forecasts moderate sales, price growth

 The full forecast report is available here.

Calgary, Jan. 16, 2013 – The resale housing market in Calgary and area will see moderate sales and house price growth in 2013, CREB® said today at its annual forecast.

Sales growth in the city is expected to ease to 2.2 per cent this year, with house prices rising by 2.9 per cent.

“Slower growth trends in employment combined with lower migration estimates will impact sales growth across all resale sectors, and, as listings continue to decline, this will further dampen sales growth, particularly in the single-family market,” Ann-Marie Lurie, CREB®’s chief economist, said at the 2013 CREB® Forecast Conference & Tradeshow. “However, as the overall market remains well supplied, prices will continue to grow but not at the levels seen in 2012.”

In 2012, Calgary’s single-family market recorded sales growth of nearly 15 per cent. With a decline in the level of new single-family listings, that is expected to ease to 1.8 per cent this year. Prices are estimated to rise by three per cent.

Becky Walters, president of CREB®’s 2013 board of directors, said the city and surrounding areas are seeing good resale activity.

“We have a nice, balanced market, and it’s expected to see some growth this year,” Walters said. “Although some big markets in Canada are stumbling, Calgary is hot on the heels of a year of recovery, with the forecast saying the market is going to stay in positive territory.”

In the condominium market, sales are expected to increase by three per cent, with a moderate price appreciation of 2.4 per cent for condo apartments and 2.8 per cent for condo townhouses.

Although the prediction is for a “balanced” resale housing market, Lurie said there are numerous risks in the market.

“The largest risk in our market is related to concerns in the oil sector,” she said. “They are facing pipeline constraints and lack of access to more diverse markets, impacting the price they receive for their oil. If the discounts on our oil persist, this clearly could impact the job sector and, ultimately, the housing market.”

OPENING UP!

How to view an open house like a real estate pro
By: Jill Krasny
Business Insider Oct 9, 2012

As the housing market slowly improves, more consumers are finding themselves in the market for a new home, or at least one worth dreaming about.

One place they start their search is an open house tour, though they can forget these are helpful for more than just checking out the kitchen’s color scheme.

Open houses are a smart way to gauge whether a listing’s catching heat and if it’s worth seeing again in a private showing.

“If you’re just getting started with the process, an open house tour is like a get-out-of-jail-free card,” says Zillow.com real estate expert Brendon DeSimone. “It’s free, you can go because there aren’t restrictions and it’s a great way to learn the market.”

To his mind, the primary thing home shoppers overlook tends to be the most obvious: the crowd. Observing other shoppers is key, he says, as that’s the best way to gauge the market’s response to the home.

“If you like the house, watch the people. Is it packed? Are they hovering around the agent?,” he says. If so and if they’re asking pointed questions as well, you can bet that there’s serious interest and the listing is going to go fast.

Another strategy is to observe the agent, he adds.

“If you go to a house and you like it but no one’s there, maybe there are issues there,” says DeSimone. “You should watch the listing agent’s reactions because he wants to see the response to the house and how crowded it is.”

But don’t miss the opportunity to make small talk with the seller.

“You should ask why he’s selling, nothing rude, just what’s the story,” DeSimone says. “What’s their motivation to sell?” That should give you a feel for the pricing and whether the listing is gathering dust.

Questions like, how many days has the home been on the market?, or Have you lived here for a long time? should get the conversation going. Perhaps there’s a looming job transfer, or the seller is just moving down the street.

“If they’re not motivated you won’t want to waste your time,” says DeSimone. But at least you’ll know where they stand.

BECAUSE KNOWLEDGE IS POWER

How to avoid home buyers’ regret
By: Julian Beltrame
Canadian Press, Aug 16, 2012

With Canadians entering the housing market in greater numbers than ever before, it wouldn’t be surprising to find that many suffer buyers’ regrets.

A recent survey commissioned by TD Canada Trust found the two biggest regrets — reported by 60 per cent of the 1,002 respondents — have to do with finances; not making a bigger down payment and not doing enough research into the costs of home ownership.

That’s not surprising, says Farhaneh Haque, director of mortgage advice with TD.

Even though buying a home is the biggest investment the vast majority of Canadians will ever make, many first time buyers still don’t do the necessary homework.

“It’s not the sticker price that shocks first-time home buyers. It’s the costs associated with the sticker,” she explains.

“We see so many home buyers that after the fact feel they could have used information, that they could have had more preparation going into home ownership.”

For instance, 29 per cent of those surveyed said they didn’t budget for ongoing costs, such as maintenance and utilities. One in eight said they overlooked some of the one-time fees associated with buying, such as inspection and legal fees, title insurance, and land transfer taxes, depending on the home price.

These are not minor omissions.

Paying the mortgage is just the most obvious cost of ownership, and not necessarily the biggest in today’s world of super-low interest rates. The combined cost for municipal taxes, fire and theft insurance, utilities, plus regular upkeep, could actually pinch household monthly budgets more.

“If you are renting, you pay that one shelter cost and that’s all you have to think about. But as a homeowner, there’s more,” says Haque, who tells clients to budget at least $500-$700 on average in additional monthly expenses.

Her advice to prospective buyers is get advice, which is easily available to them. Most first-timers know existing homeowners who have acquired wisdom through experience.

And financial institutions, real estate agencies and other market players regularly stage seminars with experts that can offer sage counsel.

Michele Rowe, a sales representative with Keller Willams VIP Realty in Ottawa, tries to arrange one seminar every month, and she typically invites an inspector and a mortgage broker for their input.

She tells attendees the first thing they should do is to get a buyer’s agent to steer them through the process.

“Most first-time buyers don’t know where to start and don’t know the importance of using their buyer agent,” she says.

The other key advice she gives them is that they need to get pre-approval for a mortgage, so buyers know how much they can spend on a home.

“They need to know how much of house they can afford, based on their income, their GDS (gross debt service) and TDS (total debt) ratios, because they might think they can afford $300,000 when they can’t,” she explained.

The ratios calculate monthly home costs, and other debt charges, as a percentage of household income to determine affordability. A ratio of 40 per cent on all commitments (TDS) is usually acceptable to mortgage lenders.

The survey, which was conducted in the spring, found that 54 per cent of first-time buyers want a single, detached home, but Rowe says that is often impractical. That’s because although interest rates may be low, house prices have been rising steadily — the average resale home in Canada now costs close to $370,000.

In Ottawa, most first-time buyers Rowe sees can only qualify for a home of about $250,000. That price range will most likely mean a condo or townhouse, she said.

Which comes to another key finding in the TD Canada Trust survey — Canadians don’t start saving up for a home soon enough.

Haque said it’s critical for Canadians thinking they will want to own a home one day to get informed about what is involved and how much money they will need. The bigger the down payment, the more flexible a household’s ongoing finances will be.

“A bigger down payment reduces monthly payments, but it also gives owner options for a mortgage that is more flexible,” she explains. “For instance, with more than 20 per cent down payment, an owner can obtain a mortgage with a 30 year amortization period, rather than 25 years, which further reduces monthly payment.”

Photo By: Alexandredrachmann

LOOKING FOR A GOOD TIME?

Why it’s a good time to buy a home
By Mark Weisleder
Toronto Star  Jan 27 2012

I believe there has never been a better time to buy a home. I’ve been in the industry for 28 years as a lawyer and I haven’t seen so many positive signs for housing, whether you are thinking or buying or locking in a mortgage.

Here’s why:

Mortgage rates at historic lows: They can’t get any lower. Four to five-year fixed mortgages at 3 per cent are unheard of. It is lower than the variable rate that most Canadians have been paying for years. Rates have nowhere to go but up, either later this year or next. If you are paying a variable interest rate, lock in now.

Canada’s appeal: This country has everything going for it — a stable banking and political environment, steady real estate market, the natural resources people want and few social tensions. That makes us a safe haven in a volatile world.

Our immigrant draw: Because of the above, we’re a draw for immigrants, often wealthy ones. When they get here, they need a home. So in my view while the real estate market may level off in some areas of Ontario, it should stay strong in most of the GTA and likely Canada’s other large urban centres as well.

Mortgage defaults: According to CMHC, over 99 per cent of Canadians pay their mortgages on time. It quite a different picture in the U.S. where 7 million homes are in foreclosure and perhaps another 7 million homeowners are under water. This represents almost 15 per cent of all homes. So while the American housing market will likely be weak for the next few years, this should not occur in Canada. Our banks are not dumping homes onto the market, so there is no downward pressure on prices.

Recourse Mortgages: In many U.S. states, if you can’t pay your mortgage, the only thing the bank can do is foreclose; they cannot sue you for any shortfall. So when homes go under water, owners give the keys back to the bank. In Canada, loans are almost all Recourse, meaning if you don’t pay and there is a shortfall, the lender can sue you for the difference. This is another reason why, in my opinion, even if times do get tough, Canadian homeowners will find a way to make the payments until things improve.

Income-to-price ratio: Another misleading statistic is that in major markets, like Toronto, the average price of a home is now 4.6 times the income of the average Canadian. This same statistic was found just before the U.S. and UK markets went into the tank. However, if you look at median incomes of Canadians against the median cost of homes, this average comes down to around 3.5, which is not dangerous. Using averages are wrong. A person receiving social assistance will not buy a home, and should not be included in any relevant statistic.

High consumer debt: The warnings about rising debt ratios must be examined carefully. The Governor of the Bank of Canada is worried that the average personal debt ratio is now 156 per cent in Canada. This means a household making $100,000 per year, owes $156,000, two-thirds of which is mortgage debt. Why is this so bad? At an interest rate of 3 or even 5 per cent, the amount needed to service the debt is manageable. Most people do not pay off their mortgages in one year. Still, this is another good reason to consolidate your debt now, at these low interest rates, and lock in.

No guarantees: Nobody can predict the future and there’s always the possibility of a major economic shock. Yet, in a U.S. presidential election year, politicians will do whatever is necessary to prevent it. If the economy goes into the tank, so do re-election chances. The U.S. is already showing signs of economic recovery.

No matter what, do not take on a monthly payment higher than what you can afford. Meet with your lender or mortgage broker in advance to figure out what you can afford before you start looking for a home. It may be the best time to buy, but you need to buy smart.

Photo By: alykat

RESALE NEWS

Calgary sees more home resales as average price drops
By Mario Toneguzzi
Calgary Herald  November 30, 2011

Calgary's resale housing sales grew in October, but the average price dipped, according to the Conference Board of Canada.

In a report published Tuesday, the board said the seasonally adjusted annualized rate of sales in Calgary was 22,572 during the month, up from 22,344 in September and an increase from 19,524 in October 2010.

But the average price fell in October to $402,561 from $408,466 in September. A year ago it was $396,041.

As for new listings, the annualized rate in October decreased to 43,656 from 44,664 the previous month, but up from 42,960 in October 2010.

In October, the sales-to-new listings ratio in Calgary was 0.512. It was 0.471 in September and 0.455 a year ago. The conference board said Calgary can expect short-term year-over-year annual price growth of between five and seven per cent.

According to the latest Canada Mortgage and Housing Corp. market outlook report, MLS sales in the Calgary region are forecast to increase by 2.3 per cent in 2012 to 22,700, while new listings are expected to decrease by 1.1. per cent to 43,700. The average MLS sales price is forecast to jump by 2.2 per cent in 2012 to $411,000 in the Calgary census metropolitan area.

The CMHC housing market outlook says despite many positive factors for real estate, "competing factors such as uncertainty in the global economy has kept some prospective buyers on the fence and will continue to temper any large increases in sales."

Photo By: Where To Willie

YOU KNOW IT'S THRILLER

The 'thrill' of buying a house
William Hanley, Financial Post
Apr. 21, 2011

You walk into the open house, take one look and say to yourself: This is it. It’s the house I have to live in. Where do I pay? A bidding war? I’m in.

Over my years of buying houses, I never bought one that did not have that frisson moment, that thrill of finding a place so suited to my wants. Indeed, I have in the past decided that I wanted to buy a house in what seems, in retrospect, to be nanoseconds. (By contrast, I’ve taken weeks to decide on the right pair of shoes.)

It is no way to make an “investment,” to be sure. But, as I’ve previously discussed in this space, buying a house is perhaps the most uninvestment-like of investments.

Just about anyone who’s purchased a property or thought about purchasing knows that it is much about gut-feel, in which the senses can conspire to trump sense.

Now, as the major real estate selling season gets under way, along comes a survey commissioned by BMO Bank of Montreal to give statistical weight to the notion that intuition carries a particularly heavy weight in the house-buying process.

The survey by Leger Marketing found that more than two-thirds of Canadians cited a “good feeling” toward the property as a reason to buy. Meantime, though, good sense is not thrown out of that gorgeous bay window and into those manicured flower beds. More than 90% of house-hunters value affordability and location over resale value.

So, the axiom that there are three important things in real estate – location, location and location – might reasonably be replaced by the Three Ps: Price, place and personality.

Nevertheless, that resale value is not a big concern to these surveyed house-hunters – people between 25 and 45 who plan to buy a home within two years – is a telling sign of the real estate times.

With some dips here and there, Canadian house prices have been rising strongly for more than a decade. Indeed, even the recession created just a downward blip in the chart of ever-growing values, with the average national price rising 8.9% last month from the previous March (but just 4.3% excluding Vancouver).

As a result, most of the house-hunters surveyed might never have been aware of a housing market that was not rising. I suspect many in this 25-to-45 demographic believe house prices basically keep going up forever, that though they downplay resale value in the survey, the expectation for solid gains is, well, a given. (Any significant drop in prices would surely shake that belief.)

In recent times, investors have been asked if they are stocks or bonds. If you’re a stock, you are prepared to take on more investment risk. If you’re a bond, you are not.

Perhaps, though, many people are probably houses when it comes to investing. A home is both partly a stock and a bond – and somehow neither.

It is a bond because over the long term it will likely produce modest returns through the enforced savings required by paying down the mortgage. It is a stock because the gains could be outsized if the investor were to buy and sell at propitious entry and exit points for market-timing gains.

And it is neither because it is an “investment” with many moving parts and frictional costs. You don’t live in a stock or a bond, but when the house leaks, it costs money and cuts into the investment. Meantime, the costs associated with buying and selling a property are becoming more daunting in many jurisdictions, with some observers reckoning that a house is often a mediocre investment at best.

But most young first-time buyers and mover-uppers are not fazed by such commentary. Home ownership is a cornerstone of our culture, with 70% of the population owning properties and many of the other 30% looking to join the majority.

And the real estate industry has become far more adept at marketing and selling than in the days decades ago when I was in the market. Today, houses are often professionally “staged” to produce that frisson moment. Prices are sometimes set artificially low to produce that exciting bidding war and that extra frisson of “winning.”

A house, it is said, is not a home. And a home is not strictly an investment. But does a stock have granite counters? Does a bond have stainless steel appliances?

ADVICE TO SURF THE WAVES OF MORTGAGES

Brokering the best mortgage deal
Experts able to navigate through choppy waters
By Denise Deveau
For Postmedia News March 30, 2011

Cheryl Hutton and Aaron Coates always thought getting a mortgage would be a challenge.

But within 18 days of visiting a mortgage broker, they were able to close a deal on a new townhouse in Calgary without a hitch.

Now in their early 30s, both have careers in the theatre, something Hutton says has been a bit of a sticking point with banks.

"In our industry, we never fit the paperwork guidelines (for the banks). For some reason people don't think we pay our bills."

Although it was their first home purchase, Hutton says it was surprising how easy the whole process was once they had someone who could walk them through it.

"He sat us down, told us what our options were, showed us that it was possible, and explained all the steps we needed to take. If it wasn't for him, we may not have made the leap," she says.

Sorting through a mortgage process and negotiating rates can be overwhelming for first-time and seasoned homebuyers alike.

That's why people such as Hutton and Coates turn to brokers to do the legwork for them.

Yet mortgage brokers will tell you that a good number of homebuyers out there don't really understand what they do.

"Part of the challenge we have in our world is that people aren't really sure what a mortgage broker is," says Gary Siegle, regional manager for Invis Inc., a mortgage brokerage firm in Calgary.

Brokers should not be confused with "rovers" -mortgage specialists attached to a specific financial institution who visit customers outside of banking hours, he explains.

"They only deal with that bank's product. A broker, however, is an intermediary whose job is to make a match between a lender and a borrower. We represent the individual, not the bank."

About 30 per cent of mortgages in Canada are done through a broker, says Perry Quinton, vice-president of marketing for Investor Education Fund, a Toronto-based, non-profit financial information service.

"The reason more people don't know about them is because the banks are so visible," he says.

"It's easy to gravitate to them when you have your savings accounts, credit cards and investments there already."

Going for the comfort factor could cost you though, she adds.

"A broker has access to different lenders including banks, and can shop rates and features. A half per cent may not sound like much, but that could make a difference of about $20,000 for a $250,000 mortgage amortized over 25 years. Any little bit helps."

For anyone considering a broker, Quinton advises people to do a bit of groundwork first if they have the time.

"It helps to educate yourself about options and what you can afford. Look at all your living expenses, including student loans and credit card debt. Chances are you are understating those."

Another thing to look into is the different types of available mortgages and features, including interest rates, payment frequency, amortization, cash back programs, and the ability to make lump sum payments.

"Knowing these things before you go in can save you a lot of money," she adds.

Photo By: alfcfishing