Tag Archives: real estate

HOUSE HUNTING IN THE MIDST OF A GLOBAL PANDEMIC

Raymond C. McMillan, BA., Mortgage and Real Estate Advisor – June 27, 2020

I read somewhere many years ago that “where there is a crisis, there is always opportunity”. You may be wondering where to find this opportunity. Covid 19, completely obliterated the spring housing market and will probably do the same for the summer market. These are possibly the two busiest period for homebuyers and sellers. With the recent physical and social distancing guidelines introduced and enforced by all levels of government, it has certainly crippled the real estate sector and change the way sellers and buyers engage each other. However, all is not lost as we discover new ways to house hunt and view homes.

Savvy realtors have quickly figured out how to market homes online and are doing virtual tours that allow potential home buyers to get a real life feeling of homes they are interested in viewing or purchasing. New home builders have also quickly adapted and have also made the virtual home buying experience very user friendly and interactive. Many of the floor plans can be configured by you to show the placement of furniture and appliances to get a sense of the available space. With resale homes, you can use the placement of furniture and appliances by the current owner and occupant as a guide. In the event the home is empty, it could be a bit more challenging to get a good sense of the space as a first-time home buyer, but a good realtor should be able to help you with this.

In areas where home showings are still permitted, and if you are comfortable doing them, you mayt want to exercise extreme caution when visiting homes for sale to avoid being exposed or infected by Covid 19. A few of my recommendations to keep yourself safe and reduce exposure are:

  1. Always wear a mask and gloves.
  2. If you have a pre-existing health condition, I would recommend avoid doing in-house viewings
  3. Only visit homes where the current owners or occupants have vacated the homes to allow for the viewing.
  4. Avoid touching personal items and appliances as much as possible.
  5. Do not under any circumstances view a home at the same time with another individual or family not connected to you
  6. Ensure your realtor is also wearing personal protective equipment and maintaining physical and social distancing guidelines.
  7. Practice the necessary hygiene once you have completed your viewing and returned home to eradicate any potential exposure.

If you are uncomfortable with doing in-house viewings stick to virtual viewings. There are many homes being offered that way, and you are sure to find one in your preferred neighborhood, at your desired price that you absolutely love. So be patient and enjoy the home buying journey.

The writer: Raymond McMillan is a mortgage and real estate consultant who has been in the banking, mortgage and real estate industry since 1994. He has been licensed as a mortgage broker since 1999 and has helped many people purchase their homes and invest in real estate. You can reach him at 1-866-883-0885 or visit www.TheMcMillanGroupInc.com

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Wave of homes could hit market when support programs end: RBC

Photo: James Bombales

Toronto, Vancouver and many other major markets across Canada began the year in seller’s market territory with high demand for housing and tight supply giving home sellers the upper hand in transactions.

The COVID-19 pandemic abruptly changed that, shifting the national market away from favouring sellers and into balanced territory. And more changes are coming, according to RBC, which published a housing report this week that predicted more listings will be coming online in the months ahead, potentially tilting the supply-demand balance into buyer’s market conditions.

In a note titled “Canada’s Housing Market Woke up in May,” RBC Senior Economist Robert Hogue wrote that, to date, listings supply and buyer demand have mostly ebbed in lockstep during the pandemic. This alignment has allowed the market to maintain balance and prices to remain steady, so far.

There were hints that this was shifting in national home sales data for May published by the Canadian Real Estate Association (CREA) this week. New listings spiked 69 percent in May from their April lowpoint while sales rose 57 percent. While this may not appear to be a significant mismatch, Hogue believes there’s further supply and demand “decoupling” ahead for the market.

“The delay in spring listings will likely boost supply during the summer at a time when homebuyer demand will still be soft — albeit recovering. The eventual winding down of financial support programs is also poised to bring more supply to market later this year,” Hogue wrote.

“Economic hardship is no doubt taking a toll on a number of current homeowners — including investors,” the economist continued. “Some of them could be running out of options once government support programs and mortgage payment deferrals end, and may be compelled to sell their property.”

The federal government announced this week that the Canadian Emergency Relief Benefit (CERB) would be extended for another two months, with the scheduled end date now pushed back to early September. The maximum period that one can receive CERB payments was increased from 16 weeks to 24 weeks. Mortgage deferral programs being run by Canada’s large banks are also set to end in the fall.

In commentary published yesterday, Capital Economics’ Senior Canada Economist Stephen Brown wrote that the huge sums paid out through CERB since March have seemingly offset the losses to household income suffered during the same period. This will allow for a stronger economic recovery than was previously anticipated, he wrote.

But even in his relatively upbeat take, Brown said that household income is likely to still fall eventually as employment will remain lower than its pre-pandemic level even when CERB ends in September. He went on to point out that high-earners who lost jobs during the pandemic and are now receiving CERB will have certainly taken a hit to household income, which will bode poorly for the housing market.

When it comes to the anticipated shift from balanced conditions to a buyer’s market for Canadian real estate, Hogue predicted that the timing will be different depending on the market.

“We expect the increase in supply to tip the scale in favour of buyers in many markets across Canada, some sooner than others,” Hogue wrote.

“Vancouver and other BC markets, for example, could see buyers calling the shots as early as this summer. It could take a little longer in Ontario, Quebec and parts of the Atlantic Provinces. Buyers already rule in Alberta and Newfoundland and Labrador.”

Nationally, Hogue predicted a seven percent decline in benchmark home prices from pre-pandemic levels by mid-2021. However, he wrote, “a widespread collapse in property values is unlikely.”

Source: Livabl.com – Sean MacKay Jun 17, 20200

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“We wanted to do the impossible—fit three families under one roof”: How one big brood is weathering the pandemic in their Markham home

Top from left to right: Pak Hung Ho, Roger How Cho Hee, and Christine How Cho Hee Bottom from left to right: Eric How Cho Hee, Charlotte How-Fang and Li Wen Fang

Before Covid-19, Eric How Cho Hee, an IT consultant, and Li Wen Fang, a social worker and psychotherapist, ambitiously decided to build a grand family home in Markham for themselves, their parents and an uncle. Their friends thought the well-meaning but wacky idea would never work. But as it happens, living in one giant 7,000-square-foot household bubble is smart when you need each other most.

Eric: In early 2017, my father was diagnosed with Alzheimer’s so I thought it would be best to move in with my parents. I owned the house where they lived in Markham, and we were going back-and-forth frequently to visit each other every week, anyway.

Li Wen: We wanted to do what seemed like the impossible: fit three families under one roof. My parents spend most of their time in Australia with my brother, but they would visit Canada occasionally for long periods before the pandemic, so we wanted to include space for them, too.

Li Wen’s home office is directly across from the front door

Eric: At the time, Li Wen and I lived in an 1,800-square-foot side-split nearby for six years. We liked the area, but the house was nowhere near big enough for our new needs. In September 2017, we sold the mortgage-free house my parents were living in for more than what we paid for and used the money to raze our place and build a new multi-generational home. We rented a house while our new one was being built. The 7,000 square-foot update by Solares Architecture would have enough room for us, our two year old, Charlotte, our four parents and Li Wen’s 70-year-old uncle, Pak Hung Ho.

Li Wen: My uncle Pak took care of me when I immigrated to Canada in 2001, and now that he’s getting older, I wanted to return the favour. My friends weren’t optimistic about the idea—most people choose to live apart from their extended family. But we ignored the naysayers and plunged right in.

The dining room, living room and kitchen were designed as one large space, so the family can hang out and enjoy meals together. The quirky fireplace is by Stûv
The double-height loft space is one half floor up from the main level. It’s also Charlotte’s preferred play area

Eric: When plans were submitted to the committee of adjustment to apply for variances, one neighbour speaking against our application suggested we needed such a big home to run an Airbnb business. Our architects decided to submit a finished plan and it was available for everyone to see.

Li Wen: Our trick to making it work was to ensure everyone has their own private space carved into the plan. We wanted each area to feel like its own cushy apartment—with a staircase and elevator connecting the halves. We asked for heated floors and shower benches for the older set. And a 17-foot-long pool and sauna in the basement.

Charlotte is a regular at the basement swim spa. She’s a natural at wading in the water

Eric: Li Wen, Charlotte and I moved in in October 2019 while other areas of the house were still being worked on. The rest of the household joined us in November, once the house was in a more finished state.

Li Wen: We hired Renee Godin of Interiors by Renee, who sourced all of the furniture and oversaw the decor, which was helpful in such a large, segmented home. She suggested adding colours and patterns because the house felt too white and sterile. But the bright orange Blue Star oven in the kitchen is Eric’s doing. He’s the cook in the family and he wanted something nice.

Uncle Pak is set up to host morning tea in his section of the home

Eric: My wife and I pay for all of the utilities, housekeeping and property taxes. Before the pandemic, my parents and Li Wen’s uncle would buy the additional items or other foods they needed. But we all share. We don’t divvy up the bills and we don’t charge them any rent. I go buy all groceries, and everyone takes turns cooking the various meals. I used to browse and see what’s on sale when I went to the store. Now it’s more focused. I grab and go. I’m out in less than an hour.

Li Wen: Uncle Pak’s area is dubbed “the tea room” because that’s where the family starts the day, with a tea ritual. My parents have an amazing wing on the other side of our bedroom; they are living in Australia now but that could change. Despite the endless space to wander, we mostly kick back together in the kitchen. A wall of large patio doors bring a lot of natural light into the kitchen, and they slide open easily for the seniors to access the patio and backyard. The 17,000-square-foot backyard has allowed the seniors to get fresh air in safe surroundings as the weather has gotten better.

A floor-to-ceiling window looks out at a portion of the expansive backyard
Patio doors slide open for easy access from the main level

Eric: The house isn’t complete yet. Since November 2019, we have slowly been adding finishing touches, like window coverings and missing cranks plus drywall touch ups. But we consider ourselves very lucky to be living in our new home. The combination of common space and private space has allowed us to weather the pandemic rather well. That’s not to say there is no tension, but that’s to be expected even during the best of times.

Li Wen and Eric’s master suite has a windsor bedframe and wallcovering, which gives it a woodsy cabin vibe
A view of Eric and Li Wen’s balcony from the backyard

Li Wen: One of my friends hasn’t seen her mom in two months because they didn’t allow visitors in her long-term care facility. I feel lucky everyone is together and safe at home. Eric and I are both working from here. My home office is directly across from the front door. It doesn’t have a separate entrance, and I haven’t seen patients here, but I do talk to them over video conference. Before the nice weather, in the early days of the lockdown, Charlotte would constantly knock on my home-office door during my calls with clients. That was tricky, but despite the disturbances, I’m happy to not have to commute to Scarborough every day like I used to.

Eric: I had negotiated working from home twice a week before the pandemic, so shifting my routine to full-time at home hasn’t changed too much professionally. Our built-in babysitter brigade takes turns watching Charlotte as she sprints around the backyard, where she collects branches and plays with her new mini-kitchen. She also has a small slide and a water and sand station.

Li Wen: Charlotte has become the main source of entertainment for all the adults. Before this, she was in daycare most days and we didn’t have that much time with her.

Charlotte’s bedroom has mini midcentury-modern furniture and a toddler-size trundle bed

Eric: The different areas of the house have helped us keep our daughter entertained, too. She uses the swim spa regularly. She has become pretty good and comfortable at wading in the water.

Li Wen: Eric has nurtured a love of baking, churning out four to five loaves a week. He makes farmer bread and baguettes. We used to buy bread from Longo’s, but nothing is fresher than this.Sign up for our newsletterFor the latest on Toronto during the reopening, subscribe to This CitySign me up!

Eric: Every two weeks, we also get a box of produce and meat delivered from a farm. Still, the seniors really miss going for dim sum each Sunday. And they have a touch of cabin fever, despite all the room to move about and the indoor pool.

Li Wen: To combat the boredom, my father-in-law, Roger, does weekly Zoom meetings with his geriatric day program. They exercise for 20 minutes and then talk about the news, but it’s hard because he can’t hear very well. Other seniors have attempted to boldly escape. One day, I found my mother-in-law, Christine, sneaking out. She said she was going for a walk, and that she wanted to start the car so the battery wouldn’t die. I think she might have been headed to one of her favourite spots: the supermarket. They are not as nervous as us—they’ve seen so much in their lives.

Source: Toronto Life – BY IRIS BENAROIA |

PHOTOGRAPHY BY RENEE GODIN |  JUNE 19, 2020

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Buyers Beware: 3 Things to Look Out for When Purchasing Property During a Recession

  

viewing in a magnifying glass the design of a house layout / inspection of construction objects
As we enter into a COVID-19-induced recession, many real estate investors say that this is the time to have cash ready to buy properties. Good investors understand that there are opportunities during times of panic, but wise investors know the obstacles to navigate when finding some of these properties.
This article will focus on a few aspects of investing to watch out for when buying a property in the midst of an economic downturn.

Deferred Maintenance

Let’s be honest, there is a pretty small chance that you are going to find a well-maintained property with great tenants during a recession, where the owners just couldn’t pay for it anymore. Most owners of investment real estate who take great care of their property and have reliable, well-behaved tenants in place are doing well across the board—they also understand the importance of asset reserves and protection in times like these.

caution spray painted in yellow on cement

Odds are if you find a great recession deal, you’re looking at a lemon when it comes to deferred maintenance. This isn’t necessarily bad, though. You can score some great deals on these types of properties and turn those lemons into lemonade! Just understand that you will likely have some big fixes to attend to, because the sellers probably used every last dollar they had to just keep the ship afloat in the first place.

Have an inspection done on the property and be prepared to front a little more for capital expenditures. When it comes to reserve dollars, it’s better to have them and not need them, than to need them and not have them.

 

Non-Performers

Another type of property to be aware of is the classic “non-performer.”

These properties often show characteristics of poor management. Non-performing properties may consistently have problems obtaining rent, whether it’s from irresponsible tenants or pushover management. We have commonly seen this in properties that are fully paid off and have no debt service (often self-managed).

You can spot a non-performer by identifying lazy bookkeeping and shoddy maintenance practices. These properties are frequently sold by sellers who need help making ends meet. And if they’re in a pinch, you might be able to get a good deal.

There are a host of reasons why targeting these properties is a good idea in recessionary times, but just understand that you’ll have an uphill battle when you buy one. You need to have a plan in place to recover the asset.

Evictions

Recessions can really hit hard for people who live paycheck to paycheck. This can turn into a problem for investors who are purchasing property during a recession.

Nobody really wants to evict tenants because of economic instability and job loss—but sometimes it happens. And in some places right now, you wouldn’t be able to evict a nonpaying tenant even if you wanted.

tenant-red-flag

Now, that’s not to say that all properties are going to have tenants that are unable to pay during a recession, but there might be a few non-paying tenants that go “unreported” on sellers’ books to make the property appear more attractive.

 

You need to do your due diligence and dig deep to make sure that the sellers are not offloading a property to sidestep a hefty round of upcoming evictions that will fall into YOUR lap after closing. You can negotiate these things into a contract and help avoid some serious headache and financial strain post-closing.

Review the seller’s numbers and see if they match what the leases say. If they don’t, maybe ask to see proof that the payments were submitted, such as bank deposit statements. You need to feel confident that you are getting a property that has paying tenants.

It’s a tough pill to swallow if you purchase a property and then don’t have any rent coming in to pay the mortgage—on top of already mounting eviction fees—when you were planning to use the rent to cover expenses. So be sure to do your homework!

These are just a few things to look out for when buying properties in a recession.

I personally think an economic downturn is a great time to purchase assets at a discount. By applying a little wisdom, you can begin paving your path to financial freedom.

Recession-Proof Real Estate book blog ad

Source: BiggerPockets.com – Ryan Sajdera

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Is the U.S. Hurtling Toward Another Housing Crash?

All of us have a mind-boggling range of challenges to deal with in these stressful and uncharted times of COVID-19. But for many home owners, sellers, and buyers, one concern rises to the top: Are we heading straight into another housing crash?

Little is assured these days, and our current situation is without precedent. But most housing experts believe the wave of across-the-board home-price slashing and desperate sell-offs that characterized the aftermath of the Great Recession are far less likely to materialize this time around.

Why will things be different? Because bad mortgages, rampant home flipping and speculation, and overbuilding all contributed to the last financial meltdown. This time around, the much-stronger housing market isn’t the driver of the crisis—it’s one of COVID-19’s many victims.

That could provide something of a cushion for real estate to prevent another repeat of the late aughts.

“There’s no way we get through this unscathed. But I don’t think the world will fall apart in the housing market the way it did in the last recession,” says realtor.com®’s chief economist, Danielle Hale. “We won’t see prices driven down out of necessity because people were forced to sell like before.”

In fact, the fundamentals of the housing market couldn’t be more different from the economic meltdown of 2007–09. In the lead-up to the Great Recession, it seemed like just about anyone could get a mortgage—or two or three. Today, only buyers deemed less of a risk can score a loan. Credit scores need to be higher, debt-to-income ratios need to be lower, and lenders verify incomes much more carefully.

Additionally, in the mid- to late-aughts, there was a vast oversupply of homes. So when the market crashed, there simply weren’t enough qualified buyers to purchase them. And with all of the foreclosures going up for sale, a result of bad loans, home prices plummeted.

But today, there’s a severe housing shortage that’s keeping prices high.

The biggest wildcards in this current mess are just how long it takes to get the virus under control—and then how quickly the economy takes to bounce back. About 22 million people, or 13% of the U.S. workforce, filed for unemployment in a month’s time. Experts predict unemployment could rise to 15% or even 20% before the pain subsides.

Those financial struggles have made it increasingly difficult for folks to pay their rents and mortgages—let alone purchase starter homes or trade-up residences. Roughly 6% of mortgages were in forbearance as of April 12, according to the most recent data released from the Mortgage Bankers Association.

This has sparked fears of another foreclosure crisis—one of the hallmarks of the Great Recession and its aftermath.

“We’re [not going to] get through this recession without any challenges for the housing market,” says Hale.

Will there be another housing fire sale? Probably not

Deep price cuts are the dream of many cash-strapped buyers—and dread of home sellers. They may not happen this time around, but a slowdown in the price hikes of the past decade are likely, most housing experts say. Home prices may dip—but just slightly, says Hale. (The median home price was $320,000 in March, according to the most recent realtor.com data.)

Prices are driven by the rules of supply and demand. On the supply side there is a record-low inventory of homes on the market, as sellers have been steadily yanking them off. Many don’t want potentially infected strangers walking through their homes and want to wait for the economy to improve so they can fetch top dollar for their properties. Others don’t want their homes to linger on the market unsold during a time when fewer transactions are taking place.

Still, demand for new homes hasn’t evaporated. There are simply too many would-be buyers out there: millennials eager to put down roots and start families, folks who lost their homes during the last recession and want to buy another property, and boomers looking to downsize.

“People need a place to live, and at some point we’re going to get past the virus,” says Robert Dietz, chief economist of the National Association of Home Builders.

And while many potential buyers will grapple with job losses or the prospect of them, others will be lured in by the prospect of superlow mortgage interest rates. Rates were just 3.31% for 30-year fixed-rate loans as of the week ending April 16, according to Freddie Mac.

“I don’t think we’ll see significant price cuts,” says Dietz. “There’s a lot of young people who want to attain homeownership.”

There will likely be a “sharp decline” in home sales until the threat of the virus and its economic toll have waned, says Lawrence Yun, chief economist of the National Association of Realtors®. But he anticipates sales will pick right back up as soon as things return to some semblance of normalcy. That will also keep prices high.

The luxury market could take the biggest blows, however.

Even in the best of times, these ultraexpensive homes can be harder to unload. But it will likely be harder to find buyers willing to pay top dollar with the economy and stock market in shambles. Wealthier buyers often have more invested in financial markets, which are being buffeted by wild fluctuations.

“The higher-priced homes are the ones that are being withdrawn [from the market] more often,” says Frank Nothaft, chief economist of the real estate data firm CoreLogic. “The lower-priced homes continue to be in really strong demand.”

But not everyone has such confidence that home prices will remain strong.

Ken Johnson, a real estate economist at Florida Atlantic University in Boca Raton, FL, expects that prices will fall much more along the lines of what many bargain-hunting buyers have been hoping to see.

If the economy reopens quickly, prices may decrease only by 5% to 10% nationally, says Johnson. They could be more or less depending on the individual market. But if the crisis and stay-at-home orders go on for another 60 to 90 days, he anticipates prices will plummet up to 50% as there won’t be many folks shopping for homes.

“I expect sales to dry up. I expect listings to dry up. I expect showings to dry up,” says Johnson. “I hope for the best and fear the worst.”

We’ve underbuilt rather than overbuilt in the run-up to this crisis

The glut of new construction was a calling card of the Great Recession. Newly built homes and communities sat vacant, or mostly empty, after the crash. Cities and suburbs were pocked with stalled construction sites. There were too many homes for too few buyers.

But things are quite different now.  Last year, builders put up just under 900,000 single-family homes, shy of the nearly 1.1 million homes considered necessary to alleviate the housing shortage and accommodate the growing population.

“We entered this [new] recession underbuilt rather than overbuilt,” says NAHB’s Dietz.

But a reduced demand from buyers will likely translate to fewer homes being erected in the near future. And the financial crisis is already making it more difficult for builders to secure the financing needed to put up new homes and developments.

Housing starts, construction that’s begun but not completed, were down 22.3% from February to March, according to the seasonally adjusted numbers in the most recent U.S. Census Bureau and the U.S. Department of Housing and Urban Development report. Traditionally, this is a time when construction generally picks up alongside the warmer weather heading into the busy spring and summer season.

“Building has been far below average for 10 consecutive years, which is the reason why we’ve faced housing shortages,” says NAR’s Yun. “Today during the pandemic, there are even fewer listings.”

Bad mortgages are largely a thing of the past

One of the biggest culprits of the last economic downturn were riskier subprime mortgages and “liar loans.” Since the housing bubble popped, these loans have largely ceased to exist.

Subprime loans were doled out to less qualified and often uninformed buyers, typically lower-income minorities with lower credit scores. After a set period of time, the interest rates on these loans ballooned higher—well out of reach of the borrowers. They defaulted on their mortgages, which set off the housing bust resulting in scores of foreclosures and short sales.

Liar loans were those given to folks whose lenders didn’t verify their income. That slipshod practice has largely vanished.

“The mortgages made today have much lower risk. Lenders have tightened up their standards for making loans,” says CoreLogic’s Nothaft. “They verify income, they verify employment. Subprime lending and liar loans are gone from the market.”

Of course, it’s still likely to be difficult for even the most qualified homeowners to make their mortgage payments if they’ve lost their jobs or a portion of income to the coronavirus. So the federal government is stepping in.

Mortgage forbearance, as well as loan modifications in many cases, are being offered on government-backed mortgages for up to 12 months for those affected by the coronavirus. Many lenders are offering similar assistance to those who don’t have a Fannie Mae or Freddie Mac loan.

“The mortgage forbearance is going to prevent foreclosures,” says Yun.

But that doesn’t mean there won’t be some down the line.

“We will probably see some delinquencies rise,” says realtor.com’s Hale. “And once the moratoriums are lifted, some people are going to struggle to pay their mortgages.”

In addition, investors aren’t running rampant like they were in the aughts. Instead of buying properties to hold them and jack up the prices, they’ve been investing in and upgrading the properties they’re buying. And they’ve had a tougher time of it as the number of foreclosures, short sales, and other cheap and auctioned-off homes have become harder to find as the economy had rebounded.

What does the future of the housing market look like?

How the housing market will fare over the coming months and years is still a mystery, since no one knows just how long this public health pandemic will last and how long the economy will take to rebound. Real estate is likely to suffer until the economy improves and folks feel more confident in buying and selling homes again.

The stimulus bill and extra $600 a week in additional unemployment funding are likely to buoy the economy and “relieve some of the anxiety,” says Yun.

Even in a worst-case scenario, the majority of Americans are still employed. And mortgage interest rates are at record lows. They’re hovering around 3%, unlike the more than 6% they were at at the beginning of the Great Recession.

“This [crisis] is short-term,” says Yun. “We will come out of this.”

Even those with less rosy views believe that a strong rebound for housing may be in the cards.

“If we go for an extended period where we’re under stay-at-home orders, then we can expect a crash on par with the previous one,” says real estate economist Johnson. “But the comeback could be quicker.”

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Should I Buy a House During the Coronavirus Crisis? An Essential Guide

Spring is upon us, which typically involves a big peak of home buyers checking out properties, negotiating, and closing on new places. But the coronavirus outbreak—with its quarantine measures and economic uncertainties—has many a real estate shopper wondering: Should I buy a home now, or wait?

We’re here to help you navigate this confusing new normal with this series, “Home Buying in the Age of Coronavirus.”

This first installment aims to help you figure out whether you can—and should—shop for a home right now, or hold off until this crisis blows over. Read on for some honest answers that will help you decide what to do.

The impact of the coronavirus on the housing market

So what state is the housing market in right now, anyway? While that depends on how bad an outbreak an area is suffering, most markets are feeling some sort of hit.

“The coronavirus is leading to fewer home buyers searching in the marketplace, as well as some listings being delayed,” says Lawrence Yun, chief economist for the National Association of Realtors®.

The latest NAR Flash Survey: Economic Pulse, conducted on March 16 and 17, found that 48% of real estate agents have noticed a decrease in buyer interest attributable to the coronavirus outbreak.

However, nearly an equal number of members (45%) said that they believe lower-than-average mortgage rates are tempting buyers to shop around anyway, without any significant overall change in buyer behavior.

For those who are determined to buy a home, there is opportunity out there.

“This is the best buyer’s market I have ever seen in my career,” says Ryan Serhant of Nest Seekers and Bravo’s “Million Dollar Listing New York.”

“Sellers are nervous, there’s excess supply, and interest rates have been hovering at historic lows. You can own a home for less per month than you can rent an equivalent property in most areas,” he adds.

With fewer home buyers out there looking, you have less competition in your way.

“Unmotivated and uncommitted buyers have dropped off,” adds Maggie Wells, a real estate professional in Lexington, KY. “Less competition is a huge leg up in this market.”

The window of opportunity for buyers won’t stay open wide forever. NAR data shows that there was a housing shortage prior to the outbreak.

“The temporary softening of the real estate market will likely be followed by a strong rebound, once the quarantine is lifted,” says Yun.

This pent-up demand could eventually push home prices higher. That could mean that the time to strike for bargains is now.

Bottom line: If social distancing has made you realize you don’t love the place where you’re currently spending most of your time, it’s a good time to consider buying.

How the housing industry has adapted to keep buyers safe

Although it’s a scary time to be out and about checking out real estate, it is still possible to do so and stay relatively safe. The industry has rapidly adapted, introducing approaches that minimize exposure to the virus.

For instance, many agents are now working remotely and conducting most of their business virtually.

“Buyer and seller consultations have transitioned to virtual meetings with success,” says Kate Ziegler, a real estate agent with Arborview Realty in Boston.

While open houses or showings may not be easy to arrange because of quarantine or other safety issues, real estate listings have stepped up to the plate by offering virtual tours.

“We can send clients videos of whatever properties they want to see, or we are happy to have our agents FaceTime from a property,” says Leslie Turner of Maison Real Estate in Charleston, SC.

While those who are immunocompromised may want to stay home, if you’re otherwise healthy, it is also still possible to see some homes in person in some parts of the country. You’ll want to take some precautions before you go.

“Hand sanitizer at the door has become the norm, as well as shoe covers, even on sunny days,” says Ziegler.

During the tour, it’s also now customary for the listing agent to open all doors, so that home buyers can explore closets and other enclosed spaces without touching anything as they look.

If you do make an offer that’s accepted and you head to the closing table, real estate agents and attorneys are also adapting to remote closings, to keep you out of a crowded conference room. (We’ll provide more information about virtual tours and remote closings in later installments.)

How to weigh economic concerns

Coronavirus aside, anyone thinking about buying a home is also likely to be weighing whether it’s a smart idea when the economy is in a downward spiral. But in the same way you can’t easily time a stock purchase to make a profit, you can’t easily time a home purchase, either.

“Recession or not, it’s impossible to time the market, whether for buying stock or buying real estate,” says Roger Ma, a New York–based financial planner and owner of lifelaidout.

Just keep in mind that while current market conditions offer an incredible opportunity for home buyers to lock in historically low interest rates for a mortgage, rates are actually going up quickly, because so many people are refinancing.

If you wait too long to buy, you may miss the money-saving boat. So make sure to read up on the latest mortgage rates first.

Besides mortgage rates, home buyers are probably wondering about the stability of their income, as fear of layoffs loom.

“We are entering uncharted territory,” says Michael Zschunke, a real estate agent in Scottsdale, AZ.

On the flip side, putting a property under contract now and locking in a low interest rate gives a buyer some control at a time of relative uncertainty, adds Turner.

The takeaway from all this? It matters more than ever to get pre-approved for a mortgage, to calculate your home-buying budget accurately.

If you’re worried about layoffs, you should buy a home well under budget so you have enough money left over for closing costs, home maintenance, and a rainy day fund. Now is the time to crunch your numbers more carefully than ever before. Below is what you need to consider.

  • Research ways to reduce your closing costs. For instance, many loans allow sellers to contribute up to 6% of the sale price to the buyer as a closing-cost credit.
  • Figure out how much you need to set aside for yearly home maintenance and repairs. A smart budget is to have between 1% and 4% of the purchase price of your home.
  • Be sure to put aside an emergency nest egg for unexpected repairs. On average, it’s a good idea to sock away 1% to 3% of a home’s value in cash reserves.

In our next installment, we’ll explore all the ways to conduct a house hunt safely. Stay tuned! In the meantime, here’s more on buying a home during a recession.

Source: Realtor.com –  | Apr 6, 2020
Margaret Heidenry is a writer living in Brooklyn, NY. Her work has appeared in the New York Times Magazine, Vanity Fair, and Boston Magazine.
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The real estate game in Canada has new rules

COVID-19 has changed the way Canadians shop for homes and that may not change, says Phil Soper, president and CEO of Royal LePage.

“The impact of COVID-19 on the Canadian economy has been swift and violent, with layoffs driving high levels of unemployment across the country. While is it sad that these people skewed strongly to young and to part-time workers, for the housing industry, the impact of these presumably temporary job losses will be limited as these groups are much less likely to buy and sell real estate,” says Soper. “From our experience with past recessions and real estate downturns, we are not expecting significant year-over-year price changes in 2020. Home price declines occur when the market experiences sustained low sales volume while inventory builds. Currently, the inventory of homes for sale in this country is very low, matching low sales volumes as people respect government mandates to stay at home.

“It is easy to mistakenly equate a handful of transactions at lower prices to a reset in the value of the nation’s housing stock. Distressed sales that occur during an economic crisis are a poor proxy for real estate values.”

The Royal LePage House Price Survey and Market Survey Forecast released this week says the aggregate price of a home in Canada is expected to remain remarkably stable through the COVID-19 pandemic.

“If the strict, stay-at-home restrictions characterizing the fight against COVID-19 are eased during the second quarter, prices are expected to end 2020 relatively flat, with the aggregate value of a Canadian home up a modest one percent year over year, to $653,800,” says Soper. “If the current tight restrictions on personal movement are sustained through the summer, the negative economic impact is expected to drive home prices down by three percent to $627,900.

“In December 2019, Royal LePage forecast the national aggregate price to increase 3.2 percent by the end of 2020. Due to COVID-19, expected price growth has been revised down almost 70 percent compared to Royal LePage’s base scenario.”

The market will return looking different, says Soper.

“As we ease out of strict stay-at-home regimens, sales volumes will return; traditional home sales practices will not,” he says. “The popular open house gathering of buyers on a spring afternoon is gone, and it won’t be coming back any time soon. The industry is leveraging technologies that allow a home to be shown remotely and social distancing protocols, where we restrict client interaction with our realtors to limited one-on-one or two meetings, will continue for months and months. This process is inherently safer than a trip to the grocery store.”

Soper presents two scenarios

• “If the fight against the coronavirus requires today’s tight stay-at-home mandates to remain in place for several months more, with no semblance of normal business activity allowed, temporary job losses will become permanent and consumer confidence will be harder to repair,” he says. “This would place downward pressure on both home sales volumes and prices.”

• “Equally, if the collective efforts of Canadians slow the spread of the disease to manageable levels, and if promising science and therapeutic drugs are announced, people will return to their jobs, market confidence will bounce back quickly, and we could see Canada’s real markets roar back to life, with 2020 transactions delayed but not eliminated.”

Source: thesudburystar April 18, 2020 12:12 PM
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COVID-19 Fallout Spreads to Mortgage Refinances in Canada

Mortgage refinancing in Canada is the latest domino to topple in the wake of the COVID-19 pandemic’s impact on our economy.

In fact, all forms of mortgage financing have been increasingly more challenging the past several weeks. Fortunately, most purchase transactions already committed to during these early transition stages are still going through.

Refinances are another matter though. They are uninsurable, so the lending risk sits squarely with the lenders; whereas purchase transactions facilitate changes of ownership, and the associated mortgages are a necessary and essential part of that process. Mortgage refinances are arguably a non-essential process.

COVID-19 impact on refinancesWhen people refinance their mortgage, it is quite simply to get to a better place financially. For some, it is to reduce the mortgage interest rate, lower the monthly payment, and extend the term. For others, it is to extract equity from the home, often for one of the following reasons:

  • consolidating high-cost consumer debt
  • combining a second and first mortgage
  • financing home renovation projects
  • funding post-secondary education
  • assisting with a down payment for children buying their first home
  • paying off a consumer proposal early
  • funds to pay CRA tax arrears
  • tapping into home equity to help  children with the down payment or closing costs on their first home

Market uncertainties have rendered most of these more difficult than a month ago, and in some cases impossible.

Three Reasons Why Mortgage Refinances Are Tougher For Canadians

The other day one major chartered bank announced:

“In view of the ongoing COVID-19 situation, the following changes are being made to lending policies affecting new applications submitted to us on or after Thursday, April 9, 2020. These changes are required due to declining employment, energy sector impacts, unstable property values, and restrictions on appraisers being able to access properties for appraisal reports.”

But as a result of COVID-19, there are three main reasons why mortgage refinances have become much tougher for Canadians…

  1. More Stringent Scrutiny of Applicants’ Income and Employment
  2. Lower Appraisal Valuations Than Expected
  3. Lender Cutbacks in Maximum Loan-to-Value Ratio

1.     Tougher Scrutiny on Applicants’ Income and Employment

Lenders are understandably skittish about income stability in the current market. They aren’t just worried about whether you have sufficient income today, but also whether your employment is safe and you will continue to have an income in the months ahead.

income verificationCanada lost a record one million jobs in March 2020 according to BBC News, and you can expect more layoffs and job losses as the full impact of COVID-19 becomes known. The Conference Board of Canada said on April 6th that a combined 2.8 million jobs could be lost during March and April, equal to nearly 15% of total employment.

Even though many of these job losses may prove to be temporary, no one knows.

And if you are in the business of lending money to people, you are going to be looking very carefully at all applicants’ employment income – both for what it is now, and what it might become when the current stay-at-home policy runs well past the month of April, as many experts feel it will.

Prime Minister Trudeau said recently [there will be] “No return to ‘normality’ until a coronavirus vaccine is available.” And that might not be till 2021!

What this means is that even if you had sufficient income to qualify for the desired mortgage amount two months ago, that might not be the case now, and as such, lenders have become more conservative and risk averse.

Mortgage Lenders Now Want to See All Income Documents Upfront.

If the borrower’s income and employment cannot stand up to scrutiny, there is no point going further. Here is what lenders are saying right now:

One Chartered Bank Says:

For any application using self-employed (BFS) income, in addition to standard income documents, the broker must provide us with a description of the business, when established, number of employees, and its current status (e.g., operating, shut down).

Note: we may request additional income documents or conduct additional due diligence at our discretion to verify current income/employment status.

Additional due diligence will be required to assess the viability of the business post COVID-19. To assist in the assessment, please consider asking your client for their most recent financial reporting, i.e., interim tax reporting.

One Monoline Lender Says:

If a borrower has been laid off, we will not use their income to service the file unless an exception is granted by us and the mortgage insurer (if required). Neither EI nor the Government of Canada Emergency Response Benefit are eligible for inclusion in qualifying income.

One Credit Union Says:

As we all work through this challenging time together, we will be reviewing the income sources of all applicants in relation to the Essential Service workplace published by the Ontario Government. https://www.ontario.ca/page/list-essential-workplaces

As you would expect, if your applicants do not work in one of these essential service sectors, we will require additional confirmation of their employer’s commitment for continued pay during the COVID lockdown.

We will not utilize any temporary Canada Emergency Response Benefits in qualifying calculations.

2.     Appraisal Valuations Are Coming In Lower Than Expected

Appraisers rely on recent sales data to come up with comparable properties for their appraisal reports. But sales are down so much since mid March there are fewer to compare to. As reported in the Globe and Mail, Carolyn Ireland on March 31, 2020, wrote:

COVID-19 impact on home appraisals“Ontario remains under a state of emergency, and while the provincial government deemed most of the real estate industry “essential,” it did so in order to permit transactions to close – not to allow the industry to carry on with business as usual.”

And there is no incentive for appraisers to go high on their estimates – in the teeth of so much pessimism and conservatism. I think we will start to see more and more transactions fall off the rails because of low appraisal values.

Anecdotally, I’m seeing behavioural changes among appraisers that will lead to more values coming in lower than would have been expected a short while ago.

For example, some appraisal values are being submitted with a low, medium and high value. The other day a colleague had a mortgage amount cut back with a major chartered bank. The low was $1.5 million; the medium value was $1.6 million and the high value was $1.7 million. The bank had to take the medium value and the loan was cut back by 130k.

And, Actual Resale Values Are Starting to Drop

Rob McLister over at RateSpy notes, “If HouseSigma is in the ballpark, median GTA home prices are sliding hard in April. It estimates the median GTA home value is down to $740,000. That’s a 6% drop from the February peak of $789,000. Of course, these are just estimates and the data for April is volatile and incomplete.

We’ll check HouseSigma numbers against official real estate board data in early May. Realtor quote of the day:

“A couple of my sellers are nervous that things are going to get worse, so they’re taking what they can get.”

The fact is listings are down dramatically, and there are no open houses anymore. Buying a home for many is a luxury to be deferred till things settle down.

So the net is, it appears appraisers are being more cautious today, and there is nothing on the horizon that’s likely to change this. No one knows how fast buying activity will pick up when the dust settles from COVID-19, so cautious valuations are probably the new normal.

3.     Lower Loan-to-Value Ratio Lending Maximums

Before COVID-19, only private mortgage lenders could refinance higher than 80% of the appraised value of a property. It’s against the rules for institutional lenders. Mind you, there are not many brave souls who want to lend over 80% these days.

One small bank has quietly announced they will only refinance to 75% of the appraised value. And many B-lenders, on their own volition, have already cut their maximum loan to value (LTV) to 75%, and that is in densely populated urban areas.

Their maximum LTV is less in rural areas and smaller cities. This percentage will face further downward pressure in the coming months.

And right now, private lenders are also exercising more caution than usual, pulling back on their maximum LTV. The individual retail lender has already gotten cold feet and isn’t at all happy over 50% LTV. Mortgage Investment Corporations (MICs) remain open for business at decent LTVs, but many are expecting higher overall returns on their capital.

These lower loan-to-value ratios, coupled with declining appraisal values, are shrinking the number of fundable mortgage refinance transactions.

Is There a Bright Spot for Refinances?

There’s an old adage that lenders like to give loans to people that don’t need it. That is probably more true today than ever, including for refinances.

In the United States, mortgage rates have already begun to fall quickly, especially for terms of 10 and 15 years, and there is rising interest among many to take advantage of a once-in-a-lifetime opportunity to refinance for a lower rate and radically reduce the remaining term of their mortgage. If you have sufficient equity that a light valuation doesn’t matter, and secure income, this could be a really great time to refinance.

This hasn’t happened yet in Canada, but could be the next phase for us as well. And, in general, if you have good enough income, have lived in your home for a while, and haven’t borrowed against your growth in equity, you may still be a good candidate for refinancing. (I’ll write more about this in a future article).

The Takeaway

It’s a completely different world for mortgage refinancing than just a month ago.

Factoring together loss of income, lower real estate values, tougher appraisals, and lower loan-to-value ratios, it’s not hard to understand why the landscape for mortgage refinances has cooled considerably. Some refinances for specific types of borrowers will still be possible, but most of the typical cash-out deals we’ve seen for the last several years using home equity to solve debt problems, or large cash needs, are going to be fewer, and much harder to do.

Final word on this topic comes from respected industry veteran Ron Butler, who says, “Nothing will be the same for maybe the next two years. The old world of lending is gone.”

Source: Mortgage Broker News
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I’ll be right back. How to protect your energy during Zoom meetings

 

I’ll be right back. How to protect your energy during Zoom meetings
[Photo: Prostock-Studio/iStock]

I knew that working from home would be a massive shift, especially as spouses and kids became new “coworkers” for many individuals.

A problem I didn’t anticipate, which is coming up frequently for my time management clients with heavy meeting schedules, is Zoom fatigue.

Individuals that could make it through a day of in-person meetings with minimal issues have found themselves incredibly drained by a full docket of video calls. Many of us have been problem-solving for solutions to reduce the fatigue  that can hit hard at the end of the day. Here are some of the most common culprits of the remote-work energy drain, as well as ways you can combat it.

A “ZERO BREAK” SCHEDULE

Even if it felt like you had no breaks between meetings before the coronavirus—you did. In order to get from one room to another, you had at least a few minutes of physical movement and a quick mental break. Now, with videoconferencing, you literally have no time between meetings and to go from one call to the next.

This marginless schedule saps your mental batteries. To avoid this issue, schedule your meetings with some short gaps in between, or make it a rule to wrap up one call 5-10 minutes before the next one begins. This gives your brain a short span of time to process the meeting’s substance, make note of next steps, and prepare for the next conversation.

ONE POSITION FOR ONE SCREEN

Another reason that video calls can be exceptionally tiring is that you need to physically hold yourself in one position. In an in-person meeting, you’d likely shift from side to side, tilt back in your chair, swivel from looking one way to another depending on who is speaking, and lean over to take notes. Unfortunately in a video call, you’re stuck in one place trying to stay in the center of the screen, and moving in any other direction can cause your face to become awkwardly cropped. Furthermore, if you move backward and have a virtual background on Zoom, your face will literally disappear into the ether.

There aren’t a whole lot of ways you can overcome this challenge during your calls unless you shut off your camera for a while. But you can work on intentionally moving your body more. One small shift is to alternate between standing and sitting during your video calls. You can do this using a standing desk or simply place your computer on a bureau to elevate it. Also in between calls, walk around and do some gentle stretching of your back, neck, shoulders, and arms. This will get your blood flowing and reduce mental fatigue caused by the physical fatigue of your muscles.

EYESTRAIN INCREASE

With the shift to virtual, you’re all of a sudden receiving a double dose of time in front of the computer. Not only are your work meetings shifted to all virtual meetings, but your personal time may be filled with video calls, as well.

Research says we blink half as often when we watch things on screens as we normally would with face-to-face interactions. This means our eyes have a higher probability of getting dry, irritated, and tired. A few suggestions seem to help. One is to practice the “20-20-20” rule where every 20 minutes you take 20 seconds to look at something 20 feet away. Another recommended tip is to take a break every two hours for 15 minutes so your eyes can have a rest.

VISUAL OVERLOAD FROM CONSTANT STARING (EVEN AT YOURSELF)

Unless you’re watching a panel discussion, it’s usually impossible to look at everyone in a group during in-person interactions. Typically, your gaze rests on the one main speaker and then everyone else is in the periphery or even behind you. But thanks to the glories (and more concerning attributes) of Zoom, you can see everyone all at once, along with one person you never usually observe—yourself.

This creates visual overload because when we look at a screen, whether it’s a computer or a TV screen, our minds are accustomed to processing what is in front of us as a unified whole. But a Zoom meeting in gallery view isn’t one unified whole. It’s the equivalent of trying to watch 5, 10, 20, or more different TV shows, side-by-side, meanwhile checking a mirror to see how you look. This is incredibly exhausting.

To overcome this visual fatigue, you can start by putting your Zoom into speaker view instead of gallery view. That way you’ll have the more “natural” sensation of having your focus on one main person at a time.

Another step you can take, depending on the meeting and your role within in it, is to stop your video camera for part or all of the call. This can give you the ability to change position in your chair like you normally would in a meeting and reduce the visual overload from looking in a tiny mirror throughout the call.

Finally, if it’s possible, do a phone call. When you’re looking to connect, video calls help a great deal. But when you just need to work through some practical items, oftentimes a phone call suffices and takes much less energy. With a phone call, you automatically eliminate three of these four issues. You’re not stuck in one place; instead you can at least shift in your chair or at times walk around the room while you talk. You don’t need to look at a screen. Most importantly, you don’t need to take in anything visually.

Until we can go back to in-person interactions, the increased fatigue from video calls won’t be fully eliminated. But by paying attention to these top drains to our reserves and appropriately addressing them, you can end your day on a higher, more productive energy level.

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Home sales fell 14% in March as COVID-19 settled in, CREA says


A pedestrian wearing a mask walks past a real estate sign in Toronto. The coronavirus pandemic put a chill on home sales across the country in March. (Michael Wilson/CBC)

Home sales fell by 14 per cent in March as COVID-19 lockdowns slowed the market to a crawl, the Canadian Real Estate Association says.

The group that represents 130,000 realtors across the country said Wednesday that the month started out strong but slowed dramatically in the second half, “as the economic turmoil and physical distancing rules surrounding the COVID-19 pandemic caused both buyers and sellers to increasingly retreat to the sidelines.”

Sales were down just about everywhere from February’s level, including in the following cities:

  • Greater Toronto Area, down 20.8 per cent.
  • Montreal, down 13.3 per cent.
  • Greater Vancouver area, down 2.9 per cent.
  • The Fraser Valley, down 13.6 per cent.
  • Calgary, down 26.3 per cent.
  • Edmonton, down 13.2 per cent.
  • Winnipeg, down 7.3 per cent.
  • Hamilton-Burlington, down 24.9 per cent.
  • Ottawa, down 7.9 per cent.

“March 2020 will be remembered around the planet for a long time,” CREA president Jason Stephen said. “Canadian home sales and listings were increasing heading into what was expected to be a busy spring [but] after Friday the 13th, everything went sideways.”

CREA’s senior economist Shaun Cathcart said the month started out strong and then completely froze in the second half, which threw the overall monthly figure out of whack.

“Preliminary data from the first week of April suggest both sales and new listings were only about half of what would be normal for that time of year,” he said.

On the price side, the average sale price for a home that sold during the month was just over $540,000. That’s basically unchanged from the average selling price in February, but it is up by 12.5 per cent compared to the average seen in March of last year.

Source: CBC.ca – Apr 15, 2020 9:47 AM ET 
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