Archive for October, 2009

I often get messages from people asking for my opinion on the local housing market. Recently I received a letter from a local resident which I decided to post in the event that someone else out there had the same question. A special thanks to the resident who sent me the question. Hopefully you don’t mind my reposting it here…

QUESTION:
Why are contractors building so many large and luxurious houses when the real estate market is depressed? I feel there is something odd and illogical about the enthusiastic construction of these houses during a slump. What do you think?

ANSWER:
Thanks for your email. I am guessing you contacted me for my advice as a local realtor. I have to admit I’m not entirely sure the context of your question but I will assume you are looking for information to satisfy your own personal interest on the matter. With that said, here are my thoughts…

The housing market in Oakville has changed dramatically over the past year. My personal opinion is that the reasons for the change are threefold. First, reduction of mortgage rates to historically low levels has enticed many people (particularly first time buyers) to enter into the market, driving the demand for housing up. Second, it is also more affordable for owners of lower end housing (condo’s, semi’s, towns and smaller detached homes) to move into a larger home given the low mortgage rates. These homeowners are seeing their neighbours successfully sell their homes for strong prices and have now gained the confidence to move themselves. Consider this the ripple effect. Third, some home owners who planned to move in winter 2008/spring 2009 held off due to uncertainty with their own jobs and investments. Many of these people, particularly young, employed professionals have come out relatively unscathed from the recession and are now feeling confident about their ability to take on a larger mortgage/more expensive home. As their family grows, their housing needs change, thus the interest in larger/more expensive homes.

For the most part, demand for Oakville housing is now outpacing supply. This is all seen in recent real estate board statistics which show that housing prices are on the rise and days on market (average time it takes to sell a home) is on the decline. September saw a 15.5% increase in average housing prices and a 6.9% increase in median sale prices proving that a fair portion of this increase is attributable to high end housing. This differs from the market in the winter when high end housing was hit the hardest. Realtors are sending more and more messages to each other to try to generate listings for their firm buyers. The scales are now tipped in favour of sellers with many buyers frustrated with the lack of inventory on the market. Homes that represent good value are selling quickly; multiple offers are not uncommon. New home construction helps fill the current supply gap.

The truth is that no one has a crystal ball to determine what will happen in the future. I personally believe that Oakville is and will remain a very desirable place to live for years to come. Oakville is also very fortunate to be part of Canada’s largest and most diverse economy which protects housing prices to a degree. People are willing to pay more to be a part of the Oakville community. With a good reputation for safety, education levels, parks, services, etc, I believe Oakville can support higher than average housing prices and a luxury housing market.

There were people lining up overnight at the last two new housing releases in Bronte Creek as well as the Waterlilies release on Dundas so the demand for new housing is definitely strong in Oakville right now. I also continue to meet prospective buyers who are interested in buying in the area that is yet to be developed North of Dundas. Given what I’ve been seeing in the market, I don’t think the enthusiasm of construction is illogical. That said, I think much of the housing boom right now is based on mortgage affordibility so demand and prices will be determined by the pace with which mortgage rates change. The other major factor to consider are investors. I have no evidence to support or repute this but there is a possibility that part of the demand for new housing in particular is with investors who see real estate as a better alternative to traditional forms of stock market investing. Even so, the most popular housing investments are new condo/semidetached/townhomes so it doesn’t explain the quick sales of more expensive homes in Bronte Creek.

Hopefully this gives you some food for thought. Thanks for the message. If you have any other questions, please don’t hesitate to ask.

Regards,
Lindsay

If you have a question or comment about the local real estate market, send me an email at lindsay@remaxaboutowne.com or call me at 905.338.9000.

My husband and I recently bought a new house. While we had no intention of buying from a developer, after many conversations and much investigation it was clearly the right choice for us. My wonderful husband Chris is used to me talking about houses and the real estate market non-stop so he was not surprised when I asked him one day if we could stop by a builder’s sales office on our way out of town to spend the day with our nephews. Truth be told, I think he was actually warming up to the idea that it was time to move although you would be hard pressed to catch him admitting it. My intentions were really just to understand the new phase being developed by the builder as I do with all the new developments in Oakville. I wasn’t serious about buying for ourselves and yet there we were 6 days later, standing in line overnight waiting to purchase a new home.

When we arrived at the sales office for the first time we were practically laughed at for being so naive as to think that the homes being advertised were still available (how silly of us!). We were promptly told that they were released a month earlier and already sold out for weeks. All I will say is that it was truly an interesting experience to be sitting on the client side of the fence. Even though I live and breathe the local market and knew all the reasons why this was a great investment, my emotions ran high throughout the whole experience. To be honest, if it wasn’t for my knowledge of real estate, I’m not sure I would have been prepared enough to actually purchase new. New home buyers tell me all the time that they wish they had done more research before they bought and I couldn’t agree more. Remember, that while the builder’s sales representatives are available to help, they ultimately represent the interests of the developer NOT you as a buyer. The only way to really know whether or not you are making a wise decision is to do your homework. Below is a list of steps that my husband and I undertook prior to the purchase of our home. As a realtor, I highly encourage anyone thinking of buying from a developer to do the same. Without further adieu, here they are…

Before You Buy From a Developer:

1. Compare the builder’s price to comparable homes in the resale market – how else are you able to determine whether or not the home you are about to purchase is a wise investment? The market has seen several years of steady growth so most new home buyers have enjoyed significant gains when they’ve sold but this upward trend isn’t a guarantee. New homes should ALWAYS be compared to resale homes to determine their value. Don’t just take the builder’s price for granted without doing your research first. Some new home values are much more attractive than others. The best way to compare homes is to look at recent comparables that have sold in similar areas.
2. Confirm the local schools, than expect them to change – Even if you are not planning on having children, it is important to understand your new home’s local school. The majority of new developments attract families with children and this can play a significant factor in resale. Remember that your local school boundaries are likely to change as your neighbourhood continues to experience rapid population growth. Do your homework to understand not only current but also expected future local schools. If you have school age children, the possibility is strong that they will have to switch schools due to changing boundaries so be prepared.
3. Choose your builder wisely – Understand that picking your builder is equally as important as picking your home’s location and layout. You want a builder who has a good track record of customer care both during and post build. I would look at JD Power and Associates New Home Builder Customer Satisfaction Survey in addition to speaking with friends and searching for new builder forums and chat rooms on-line.
4. Talk to people who own a home from the builder you are considering – I personally think this is an essential step. You will never get a truer picture of the quality of a builder than from the people that have already gone through the experience. I strongly encourage you to knock on some doors of older homes built by the same builder and ask the owners what they think of the quality of the home and their experience with the builder. If you aren’t sure which areas are built by the same builder, call a local realtor. I for one am happy to answer people’s questions.
5. Review the zoning and zoning applications of neighbouring areas – The future development plans of the areas surrounding the lot you are interested in is really important. If you don’t want to live next door to a warehouse, major throughway or strip mall, then it is important to review the zoning around your neighbourhood. That vast field next to your lot may not remain that way forever. You can check zoning by visiting the Town of Oakville’s Planning office.
6. Ask lots of questions – Don’t feel pressured to buy just because everyone else tells you it’s a great deal. Instead of just dropping by the sales office, book an appointment with one of the sales representatives for some one on one time and use this time to ask questions about the developer, development, floor plans, etc. Do not leave until you get answers to all your questions.
7. Visit homes still in the building phase - This isn’t possible for every development but if you should be lucky enough to purchase from a developer who has other homes still in the construction phase, try to visit the site after hours. Walk around the properties and pear through windows to check the quality of workmanship and take note of things such as electrical outlets and structural walls as well as the home’s flow and layout – basically all the things you can’t be sure of from a floor plan. My experience has been that you will often find other snoopy home buyers on the sites after hours that can all provide valuable tips about the builder and model you are interested in.
8. Factor In Upgrade Costs BEFORE you buy – Everyone knows that builders often have hefty mark-ups on upgrade costs however these costs vary significantly from builder to builder. A purchase price of $500,000 can easily turn into a final price of $600,000 from one builder and $550,000 from another. It all depends on what the builder includes as standard features and what they charge for each upgrade. If you can’t get your hands on a complete upgrade price list, at least ask your sales rep or design centre for price lists on popular upgrades (ie: staircases, cabinets, granite, etc). This will at least give you an idea of how much you will spend and how big the builder’s mark-up is.
9. Be ready to visit the site often and expect errors – there are literally thousands of components that go into building a home. As a former project manager, I know that not even the best run projects run perfectly. Mistakes should not be large and should not be commonplace but they do occur. Best to be prepared for some mistakes and check in with your builder and home while it’s under construction to make sure things are ticking along as planned. How a builder handles mistakes is very telling so ask other people who have bought through the builder how their issues were resolved.
10. Don’t expect a custom home – There is a huge difference between buying a common floorplan from a major builder and building a custom home. While there is nothing wrong with customizing certain aspects of your home, you must realize that to do so will 1) cost you money 2) result in a larger margin for error and 3) may not turn out the way you expect. My personal take is that it is okay to make some modifications to a home but if you need to change too many structural elements, you are probably better off picking a different floor plan altogether.
11. Understand that the early bird gets the worm – If you decide that the home is right for you, ask the builder’s sales rep when they expect people to start lining up. Our sales rep told us that people started to line up at 5 am for an 11am opening during the last phase they released. We showed up at 12:45am and were 4^th in line. It sounds crazy and it is but it is not uncommon in today’s market for people to start lining up 2 days in advance of a release of homes. Find out what is reasonable for the development you are interested in and be prepared to show up even earlier for choice lots and layouts.
12. Talk to a local realtor before you buy – realtors speak to home buyers for a living. There is no one better to advise you on layouts, lots, colour choices and features that are attractive to buyers. Why not take the time to review your thoughts with a local realtor for a second opinion? You don’t have to follow their advice but it’s better to know before you buy whether or not your home’s features will appeal to resale buyers. I believe most realtors will be happy to discuss your options with you if for no other reason than to build customer relationships and goodwill in the community.

Best of luck to those of you buying a new home. Chris and I are excited to see the progress on our own home and will keep you updated as things progress. If you have any questions or comments about buying new, please let me know. I can be reached at www.lindsaywalls.com, lindsay@remaxaboutowne.com or 905.338.9000.

All the best,

Lindsay

It’s hard to believe but Thanksgiving and Halloween are just around the corner. Where has the year gone? The real estate market certainly out-performed the weather, sweeping aside the dark economic clouds despite a forecast of doom and gloom in the media at the beginning of the year.

Throughout this year, buyers and sellers obviously focused on neighbourhood and chose to ignore negative national and provincial headlines on market conditions. The simple fact is that the only meaningful real estate marketplace is the one you are in, so it is important to look closely at your own community’s real estate activity. The road to good real estate buying and selling decisions is via a market analysis provided by a local Realtor who knows the ins and outs of the neighbourhoods you are most interested in. Just like our weather, there will always be some hot real estate markets and others that will be cold as we have seen across the GTA this year. Pricing trends that have emerged in 2009 are likely to continue for the balance of this year if, as predicated, interest rates remain low. While interest rates do remain low the simple facts are that buyers who want to buy will buy and sellers who want to sell will sell.

According to the sales data for September the average time for homes that sold, to be on the market in Oakville was 26 days and in Milton 18 days. The current resale housing stock in Milton tends to be mainly in the newer sub-divisions and is attracting first-time buyers looking for a newer home with almost immediate occupancy.

Oakville continues to offer a wide range of properties and prices. Most activity (nearly 50%) in recent months has occurred in the $300,000 to $600,000 price range. If you are looking to buy or sell, I would love to hear from you. I can be reached at 905.338.9000 or lindsay@remaxaboutowne.com.

Regards,

Lindsay