Indo-Canadian Voice Realty - Jan 18 2020

Saturday, Jan 18, 2020

Volume 29 Number 3

Phone: 604-502-6100

Fax: 604-501-6111 Email: voicerealtyads@gmail.com

Goodman report: Newsletter January 2020 from 1.0 to 1.1%.

Largest vacancy rate increases were experienced in Mount Pleasant, Southeast Vancouver, North Burnaby, Richmond, White Rock, West Van, Langley and Tri-Cities.

Unfortunately, options are still limited for tenants—areas still facing declining vacancy rates:

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CMHC speaks The 2019 CMHC Rental Market Report for Metro Vancouver was released today. Highly anticipated by politicians, planners, lenders, property managers, investors, developers, appraisers, building owners and realtors, the report is statistical in nature and focuses on the current state of the rental apartment market by area in the region.

We remain mystified at how this release

arrived 5 weeks later than usual! But putting aside our dissatisfaction with the delay, here are the main takeaways as seen by Goodman Commercial: Vacancy rates City of Vancouver’s vacancy rate increased for the first time since 2016. From 0.8% in 2018 to 1.0% in 2019.

Vancouver CMA also increased marginally

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CONTINUED FROM 1 0.6% in 2019).

Metrotown (from 3.2% in 2018 to 1.4% in 2019).

New Westminster (from 1.6% in 2018 to 1.2% in 2019).

City of North Van (from 0.8% in 2018 to 0.5% in 2019).

District of North Van (from 1.7% in 2018 to 1.2% in 2019).

Richmond (from 0.7% in 2018 to 0.5% in 2019).

Delta (from 1.3% in 2018 to 1.1% in 2019).

New rental supply is working!

Most areas with influxes of new purpose-built rental buildings saw a vacancy rate actually increase. Imagine that!

Southeast Vancouver – increase of almost 20% of rental stock. 125% increase in 3-bedroom units.

East Hastings – increase of almost 3% of rental stock. 18% increase in 3-bedroom units.

City of North Vancouver – increase of 0.6% of rental stock. Over 6% increase in 3-bedroom units.

New Westminster – 4% increase in rental stock. 12% increase in bachelor suites and over 6% increase in 3-bedroom units.

Langley – increase of almost 17% of rental stock. Largest increases in 1 and 2 bedroom units (21.6% and 15% respectively).

Maple Ridge / Pitt Meadows – increase of 3.4% in rental stock. 16.7% increase in 3-bedroom units.

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Tri-Cities – increase of 1.8% of rental stock. Largest increase in 2 bedroom units at almost 9%.

Looks like we will need to wait for next year’s stats to see the true impact of the large amount of new supply coming to the West End (5 high-rise purpose-built rental towers within a few block radius will complete in 2020). We forecast a change in vacancy rates within this neighbourhood but will await 2020’s report to verify it.

Rental rates continue to rise Rental rates for every suite type and in every area of Metro Vancouver increased. Only exceptions were bachelor suites in both Richmond and Mount Pleasant. Overall average rent increased 4.7% over the past year, which was more than the provincially-allowable increase of 2.5% in 2019.

Average rental rate increases range from 0.53% (bachelor suites in North Burnaby) to 54% (3-bedroom suites in Southeast Vancouver).

The highest increases (%) came in these areas: Marpole – 13% average rent increase overall Southeast Vancouver – 15.2% average rent increase overall Langley – 13.9% average increase overall If you’d like to understand how this report impacts your investment strategy for 2020, please feel free to call Cynthia Jagger (604-912-9018) or Mark Goodman (604-714-4790). We’d be pleased to discuss!

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Weekly mortgage applications soar 30% as homebuyer demand hits the highest level in 11 years Purchase application volume hit the highest level since October 2009, rising 16% for the week and 8% from a year ago, according to Mortgage Bankers Association data.

Refinance applications jumped 43% for the week and were 109% higher than one year ago.

Homebuyer demand hits highest level in 11 years It was a seriously strong start to 2020 in the mortgage business for new home loans and refinances.

Total mortgage application volume surged 30.2% last week from the previous week, according to the Mortgage Bankers Associa-

tion’s seasonally adjusted index.

Refinancing led the surge, thanks to a drop in mortgage rates. Those applications jumped 43% for the week and were 109% higher than a year ago. The refinance share of mortgage activity increased to 62.9% of total applications from 58.9% the previous week.

The average contract interest rate for 30year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to the lowest level since September, 3.87%, from 3.91%, with points decreasing to 0.32 from 0.34 (including the origination fee) for loans with a 20% down payment. The rate

was 87 basis points higher the same week one year ago.

“Refinances increased for both conventional and government loans, as lower rates provided a larger incentive for borrowers to act,” said Joel Kan, an MBA economist. “It remains to be seen if this strong refinancing pace is sustainable, but even with the robust activity the last two weeks, the level is still below what occurred last fall.”

This budget strategy helped a Michigan couple pay off their mortgage early Homebuyers also rushed in, sending purchase application volume up 16% for the week and up 8% from one year ago. Pur-

chase mortgage activity hit the highest level since October 2009. Demand is so strong that real estate agents offered open houses on new properties the first weekend of the new year. Usually, they wait until February.

“Homebuyers were active the first week of the year. Low rates and the solid job market continue to encourage prospective buyers to enter the market,” Kan said.

Unfortunately, buyer demand is bumping up against near record-low supply. Price gains have reaccelerated, and if supply doesn’t improve markedly, some of the tightest markets will overheat quickly, leaving less affluent buyers out in the cold.

Homebuilder optimism slips slightly to start 2020 but is still high High demand and low supply are a profitable mix for the nation’s single-family homebuilders.

Yet, sentiment in January did slip 1 point on the National Association of Home Builders/ Wells Fargo Housing Market Index to 75, but that is considerably higher than last January, when it was 58.

Last month’s reading was a 20-year high.

Anything above 50 is considered positive.

GP: PulteGroup Pulte Construction Homebuilders 181025 A contractor uses a hammer while working on townhouse under construction at the PulteGroup Metro housing development in Milpitas, California, Oct. 25, 2018.

David Paul Morris | Bloomberg | Getty Images The nation’s single-family homebuilders are feeling very confident about their business in the new year, as high demand and low supply make for a profitable mix.

Yet, sentiment in January did slip 1 point on the National Association of Home Builders/ Wells Fargo Housing Market Index to 75, but that is considerably higher than last January, when it was 58. Last month’s reading was a 20-year high. Anything above 50 is considered positive.

Low interest rates are making homebuying more affordable, despite the price premium for new construction. Builders

are also starting to pivot more to entrylevel homes, after a decade of building mostly move-up product. Prices are still rising for new and existing homes, so there may be some friction ahead if affordability worsens.

“With the Federal Reserve on pause and [with] attractive mortgage rates, the steady rise in single-family construction that began last spring will continue into 2020,” said NAHB chief economist Robert Dietz. “However, builders continue to grapple with a shortage of lots and labor while buyers are frustrated by a lack of inventory, particularly among starter homes.”

Of the HMI’s three components, buyer traffic increased 1 point to 58, the highest level since December 2017. Current sales conditions, however, fell 3 points to 81 and sales expectations in the next six months was unchanged at 79.

Regionally, on a three-month moving average, builder confidence in the Northeast rose 1 point to 62, increased 3 points in the Midwest to 66 and in the West it moved 1 point higher to 84. Sentiment in the South was unchanged at 76.

Weakness in home sales hits remodel market

Baby boomers have made a fortune on real estate here are three reasons to consider The Province Opinion Op-Ed Many boomers would highlight their home as their best historic investment, better than RRSPs in some cases.

Many boomers would highlight their home as their best historic investment, better than RRSPs in some cases. Tyler Anderson/National Post Opinion: Beware the belief that real estate prices will continue to climb at anywhere near the rate we have seen over the past 20 years Long-time Canadian homeowners have benefited from declining interest rates and increasing home prices. As baby boomers, currently aged 55 to 75, continue to transition to retirement, they will be faced with decisions about whether to and when to downsize or sell their real estate.

Many boomers would highlight their home as their best historic investment, better than RRSPs in some cases. This may be a failure of the retail mutual fund industry as much as it is a hat tip to home ownership.

Real estate appreciation over the past 20 years in each of Canada’s largest three cities — Toronto, Montreal, and Vancouver — has outpaced that of New York, Los Angeles, and Seattle, according to data from Better Dwelling.

A workplace pension could be worth three times an RRSP — yet only 37% of Canadians have one How to save for retirement at a time when most aren’t saving much at all What you need to know if you’re making the leap from land owner to landlord The most recent Royal LePage Boomer Trends Survey found that only 41 per cent of boomers intend to downsize. There are plenty of reasons to sell your real estate in retirement, and I would like to highlight three that have arisen recently in my practice as case studies. Names have been changed to protect privacy.

The Cottage Owners Carol and Ted are in their 60s and Carol is about to retire. She has a defined-benefit pension plan, and Ted has a RRSP he has

contributed to diligently. He expects to work for a couple more years.

They rent a condo in the city and own a valuable cottage on a lake. They enjoy their time at the cottage but acknowledge they will not use or keep the property forever. They feel like it has been a good investment and want to continue to benefit from further growth in the value. However, they still have a mortgage outstanding on it.

In many cities across the country, young people are having a tough time affording homes, let alone second properties like cottages. Airbnb has also made it easier to find cottages to rent for a day, a week, or a month at a time.

About 5,000 baby boomers retire each week according to Statistics Canada. As they age, many will be selling their cottages. As they die, their children will be inheriting those cottages. Will children of boomers maintain two properties, in some cases co-owning cottages with siblings, or sell those cottages to pay down their own home mortgages? My guess is much more of the latter than the former.

I know there is only so much waterfront real estate to go around, but there are also only so many potential buyers to purchase the coming flood of vacation properties.

My advice to Carol and Ted was to beware the belief that real estate prices will continue to climb at anywhere near the same rate we have seen over the past 20 years.

Selling their cottage would allow them to pay off their mortgage, supplement their retirement savings, and simplify life as they transition to retirement.

The World Travelers Albert and Laura moved to Canada 30 years ago and have lived in a few cities where Albert has worked with different companies. Now that Albert plans to retire next year, they expect to spend half of the year sailing around the world and half of the year back in Canada.

Their plan was to rent out their house and visit friends and family or stay on their boat while back home. They do not want to stay in their house long-term but want

to stay invested in the local real estate market. They also like the appeal of rental income to complement their investments and generate pension-like monthly payments and ongoing inflation protection.

The annual rent they expect to receive for their house is equal to about three per cent of the market value per year. The dollar value of the rental income is appealing to them, but when I pointed out how low three per cent is as a percentage, and how much of their net worth is tied to their house value, they were open to alternatives.

Their realtor found them a condo for less than half the value of their house that could generate about five per cent annual rental income relative to the market value. It was much more rentable than their house, with less potential maintenance or repairs, and more likely to be a place they would like to live than their house after several years of planned travel.

Albert and Laura are considering selling their house to buy two condos, renting them both out for now, with a plan to move into one in the future.

The Unhealthy Shortly after Andrea and Brian retired, Andrea developed a progressive health issue. Her mobility has declined, and she has developed mild cognitive impairment. Brian is doing his best but needs help. They have a caregiver who is with them eight hours per day and seven days per week at a significant ongoing cost.

A big problem Andrea and Brian are now facing is that their house is a five-level backsplit with several rooms and stairs between levels. It has fallen into disrepair and has a pool and gardens that require maintenance. Andrea is limited to living in a single room, and Brian is having trouble going up and down the stairs to do laundry and household chores due to a knee problem.

They could use some of the proceeds from selling their house to replenish their retirement savings, which have been depleted to pay for Andrea’s care. Brian

would like to move to a bungalow for a couple years and is not quite ready to move into a retirement home.

My concern for them is the cost of moving twice in the next few years — real estate commissions, land-transfer tax, legal fees and movers — will further deplete their savings. The financial cost aside, it has been a difficult process for them emotionally to consider leaving their long-time home. The stress of one move let alone a second has proven significant, and change will no doubt become more difficult as they age.

I have encouraged them to consider renting in a retirement community with onsite long-term care assistance. Living on one level instead of five and having a social life onsite instead of being housebound could be really life changing for them both.

Summary Baby boomers who have benefited from the run-up in real estate prices preceding their retirement may be that much more biased to think that the good times will never end.

Boomers with cottages — or any home for that matter — need to question whether subsequent generations of homeowners are going to want to buy that particular property someday as tastes, priorities, and trends continue to change.

Health problems are often sudden and unexpected, and it can be easier to transition from the home that was right in the past to the home that is right for the future well ahead of time.

I am surprised by how few retirees downsize or sell despite the potential benefits, and this highlights the personal nature of money and financial decisions. There is not just one right approach to real estate in retirement, but it can help to consider what other people are doing as you try to make the choice that is best for you.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.

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