Exploring the Impact of School Districts on Homebuying Decisions
When it comes to purchasing a new home, there are numerous factors to consider – location, size, amenities, and more. One often debated aspect that holds significant weight in the decision-making process is the school district. A home’s proximity to quality educational institutions can have far-reaching implications for a family’s present and future. In this article, we delve into why the school district is a crucial consideration when buying a house.
Educational Quality and Future Prospects
The quality of education a child receives can significantly shape their future prospects. A strong school district can provide access to exceptional teachers, well-rounded curriculums, and enriching extracurricular activities. The educational foundation laid during these formative years can greatly impact a child’s cognitive, social, and emotional development. Therefore, it’s no surprise that parents are often willing to invest more in a home located within a reputable school district.
Property Value and Investment
One of the most compelling reasons to prioritize the school district when buying a house is the potential impact on property value. Properties located in sought-after school districts tend to maintain and increase their value more effectively over time. For example, this list of Brampton high schools can help parents to choose wisely when searching for a home. A strong school district can create a competitive housing market, driving up demand and allowing homeowners to potentially earn a higher return on their investment. This phenomenon is driven by the fact that families are willing to pay a premium to secure a spot in a top-tier school district.
Stability of the Neighborhood
School districts often reflect the overall socioeconomic status of a neighborhood. Areas with well-funded schools tend to attract homeowners with higher incomes, which can contribute to a more stable and vibrant community. These neighborhoods often exhibit lower crime rates, better public services, and a greater sense of community involvement. Thus, buying a house in a reputable school district not only impacts the immediate educational environment but also influences the overall quality of life for a family.
Access to Resources and Opportunities
Beyond the classroom, school districts can offer access to a range of resources and opportunities for both children and parents. Strong school districts often collaborate with local businesses, community organizations, and cultural institutions, providing students with valuable real-world experiences and fostering a sense of civic engagement. Parents can also benefit from networking opportunities and community events, creating a supportive environment for families to thrive.
Flexibility for Resale
Life is dynamic, and circumstances can change unexpectedly. Choosing a home in a desirable school district can provide homeowners with flexibility in the future. Should they decide to sell their property, a home located within a sought-after school district can attract a larger pool of potential buyers, making the resale process smoother and potentially more profitable.
Consideration for Long-Term Planning
When purchasing a home, it’s crucial to consider not only your current needs but also your long-term plans. Families with young children may prioritize proximity to quality schools, while those without children might focus on other factors. However, even if you don’t have children, buying a house in a strong school district can still be a wise decision. Not only can it ensure a stable resale value, but it can also make the property more appealing to potential renters in the future.
Balancing Priorities
While the school district is undoubtedly important, it’s essential to strike a balance between educational considerations and other factors that influence your decision. Affordability, commute time, access to amenities, and the overall feel of the neighborhood should also be taken into account. It’s possible to find a compromise that aligns with your family’s needs and values while still prioritizing a good school district.
Researching and Gathering Information
Before making a decision, thorough research is key. Investigate the school district’s reputation, academic performance, extracurricular offerings, and available resources. Online resources, school district websites, and community forums can provide valuable insights. Additionally, speaking with local residents, parents, and real estate professionals can offer on-the-ground perspectives that may not be readily available through online research alone.
In Conclusion
The importance of schools when buying a house cannot be underestimated. From educational quality and property value to community stability and long-term planning, the impact of a strong school district can resonate throughout a family’s life. By carefully considering the educational options available in the area and conducting thorough research, homebuyers can make informed decisions that align with their aspirations and priorities. Ultimately, choosing a home within a reputable school district is an investment in both the present and the future.
Ready to start investing in real estate, but not sure where to start?
Afraid of making a HUGE mistake?
Stuck with analysis paralysis???
You are not alone! Almost every real estate investor must have spent countless hours early in their investing career researching the different strategies to try and figure out where to start.
While there isn’t a right answer for everyone, there are three key questions every potential investor should ask:
1. How much TIME should I invest?
2. How much MONEY should I invest?
3. How fast do I want my business to grow?
A great way to start a business is to have an END goal in mind and then make a plan to get there! Even if you have to make changes along the way, what you will do, “getting there” is a big part of the fun.
Investing in real estate can do it all, from learning how to quickly put an EXTRA $5,000 in your pocket (in 30 days or less) each month, to fulfilling all your financial dreams with an annual income after million dollar tax. You really have to decide in advance, whether you are pursuing billionaire status or just putting money in your pocket to pay the bills.
Whatever your dreams and desires are, how you will use real estate investing to get where you want to go in life, we believe there are three essential rules you must follow if you want to be successful. Are here:
RULE NUMBER ONE IS: FOCUS-FOCUS-FOCUS
If you’re looking for a long-term commitment to this business, you need to establish from the start that you’ll need to set aside money from each of your trades/transactions to reinvest in your education, AND it’s likely in your It’s it’s in your best interest to start with one strategy and be prepared to move on to a different strategy once those goals are achieved.
For example, let’s say you finally want to be a developer (like Donald Trump, or Sam Zell, or Trammell Crow), but today you have a job and are $50,000 in debt. Your first step might be to generate cash quickly over the next year to pay off debt, and then halfway through (say month six) begin the process of implementing a strategy to generate enough revenue to from your real estate investment. job, after building a stable base (enough to pay the bills and more) from your investing business, to start a plan to become a developer. Taken together, this may require three different strategies.
A “classic” mistake that many novice investors make is to try all three strategies AT THE SAME TIME – DON’T DO THIS! It’s best to learn one strategy to get money fast, master it, then move on, then try to learn three strategies at once.
OLD AFRICAN PROVERB: “Whoever hunts two tigers in the end gets none”
Whatever the starting strategy, history has shown that people who FOCUS their time, energy and money are more likely to succeed than those who don’t. Be patient, be focused, start small, grow. RECAP: Rule number one is: FOCUS-FOCUS-FOCUS
RULE NUMBER TWO: LEARN BY DOING! The second important thing to know about real estate investing is that you learn by doing! We know there are a lot of late night infomercials that say “Come to our FREE seminar, spend $5,000 and tomorrow you’ll wake up a millionaire”, but the problem is we never found anyone who admits it’s really Plus, there are people who spend a lot of money going to college or college and studying how to “do real estate”, and that can usually work out, if you then commit to working for 25-40 years as an employee of a real estate company, making everyone else rich – if you’re lucky enough you may learn enough (in time) and then flourish on your own.
And yes, we all know people who buy all the books, all the tapes, and attend all the seminars, and become walking “Encyclopedias” of real estate investing – BUT NEVER DO ANYTHING WITH IT – BAD IDEA! Why, because if you never practice what you read or hear, you’ll end up convincing yourself that “that real estate thing” doesn’t work. UNFORTUNATELY, history and Forbes magazine will prove him wrong.
As a real estate investor and advisor, I often see novice investors making the exact same mistakes. As a result, I decided to create the following list to help newbies understand what these common mistakes are and how to avoid them. The good news is that all of these errors can be easily fixed. The bad news is that each of these mistakes will seriously limit your potential for success. In my experience, here are the 9 most common mistakes novice real estate investors make:
1) Do not study
Getting an education is an essential part of becoming a successful real estate investor. It is much easier and cheaper to educate yourself than to make mistakes in the real world. We are fortunate to live in a country full of educational opportunities for whatever task we want to undertake. Surprisingly, however, not everyone takes the initiative to learn before they act. This exposes these people to costly (and sometimes fatal) mistakes that could have been easily avoided. Some misguided people even complain that books, courses or seminars promoted by real estate experts are too expensive. I guess it depends on where you are standing. They seem cheap to me compared to what I know there is to gain in this business. Perhaps for a novice, however, they may seem expensive. But as the saying goes, “If you think education is expensive, try ignorance.” Think about it. Is a $500 course worth it if what you learn only earns you $5,000 in one wholesale offer? What if you could save just $5,000 on just one drug rehab? Or what if it helped you create an extra $200 per month cash flow on a single property for just one year? Is it worth it? The value of an education is often not revealed until you step in and engage in the game.
2) Not being educated by the right people
The Internet is a great tool. But it’s also saturated with too much information, both good and bad. Often from less than credible sources. Do not confuse the information you find on the Internet with necessarily quality information. For example, there are a number of real estate investing discussion groups and blogs that have proliferated on the internet. Many of the so-called experts on these sites are more than willing to share enough information to get you in trouble. Are you sure you want to get your information from “rei-man-TX” or “investor-guy75”? Consider carefully if these sources of information are really reliable. I can’t believe some of the misinformation I’ve seen on these sites. Remember, anyone can post to a newsgroup and anyone can start a blog. But just because someone has a blog doesn’t necessarily mean they know what they’re talking about. The misinformation you receive can be costly… either in lost revenue or lost reputation.
Newbie investors may also get misinformation from friends or family. Maybe they dabbled in real estate at some point. They now feel empowered to tell you how little they know about real estate investing. Be very careful with people who have “touched” anything. Amateurs are rarely experts in anything. As the saying goes, “the jack of all trades, the master of none”.
3) Do nothing
If you’ve been successful in getting a good education from a good source, the next step is to take action. Knowledge is only power once you begin to apply it correctly. Simply buying a wide range of real estate investment products or attending boot camps will not earn you money. Some newbies refuse to take action because they’re still looking for that magic secret that will make the offers start rolling in. The real secret is hard work! Others are paralyzed by fear of what might happen if they get one of their offers accepted. Or, they can stop bidding if they don’t find instant success. Whatever the reason, not taking consistent action is a sure way to fail at anything. Personally, I think initial failure is the universe’s way of forcing us to make sure we really want what we’re looking for. Ultimately, perseverance is what leads to success. And the longer you persist, the closer you get to success.
The fear of bubbles comes to mind for anyone looking to buy or invest in real estate today. But without looking at the facts, one should not conclude that he is speculating on the real estate bubble in India.
India’s real estate sector is growing at a CAGR of over 30% on the back of the country’s strong economic performance. After a small recession in 2008-2009, it quickly revived and experienced phenomenal growth. The market value of projects under construction rose from $70 billion at the end of 2006 to $102 billion at the end of June 2010, or 8.2% of India’s nominal GDP for 2009. Plus government. initiatives: liberalization of the rules for foreign direct investment in real estate in 2005, introduction of the SEZ law and authorization of private equity funds in real estate, the main factors which have contributed to this tremendous growth have been the “price lower” which attracted buyers and investors not only from India, but NRIs and foreign funds also poured money into the Indian market. Moreover, the aggressive launch of new projects by manufacturers further reinforced this positive sentiment which paved the way for rapid market growth last year.
Now the question is whether a bubble is forming in the Indian property market. Let’s look at the recent housing bubble in the United States, Europe and the Middle East. In addition to economic factors, the main factors that contributed to these bubbles were rapidly rising prices beyond affordability, homeownership mania, belief that real estate is a good investment, and feelings of well-being. to be, among which the rapid rise in prices is a key cause. of any real estate bubble.
Comparing it to the Indian scenario, all these factors are at work in major cities of India, especially Tier I cities. Prices have skyrocketed and surpassed the previous 2007 pick in cities like Delhi, Mumbai, Bangaluru, Chennai, Kolkata, Hyderabad, Gurgoan, Chandigarh and Pune. Even in some cities like Mumbai, Delhi, Gurgoan and Noida, prices have increased by 25-30% compared to market selection in 2007. However, during the economic downturn of 2008-09, prices fell by 20-30%. 25% in these cities. cities. Another factor is the mania for home ownership and the belief that real estate is a good investment. Needs-based buyers and investors were attracted by the fall in prices at the end of 2009 and began to pump money into the real estate market. Tier I cities Mumbai, Delhi-NCR, Bangaluru, Chennai, Pune, Hyderabad, Kolkata showed the highest investments in real estate projects. Developers took advantage of this improved sentiment and started releasing new projects. This further boosted the confidence of buyers and investors who had failed to buy or invest before, which drove the price up unrealistically even further. And finally feel good factor which has also worked over the last few months. The key factor in any stock market bubble, whether it’s the stock market or real estate, is known as the “feel good factor”, where everyone feels good. Over the past year, the Indian property market has grown tremendously and if you have purchased a property, chances are you have made some money. This positive return for so many investors drove the market higher as more people saw it and decided to invest in real estate before they “missed out”. This feel-good factor is at the heart of any bubble and has happened many times in the past, including the stock market crash of 2008, the Japanese property bubble of the 1980s, and even the Irish property market in 2000. had completely taken over the property market until recently and this could be a key factor contributing to the bubble in the Indian property market. Even after the flow of negative news regarding the correction and/or bubble in the real estate market, people are still very positive about the growth of real estate in India.
Looking at the above factors, it is possible for bubbles to form in some cities in India, but it can only hurt buyers and investors if they burst. Bubbles usually form with artificial internal pressure and can remain for a long time if no external force acts. Similarly, in the case of the real estate market, the bubble can burst if demand and prices start to drop suddenly and drastically.
I often tell people that becoming a real estate millionaire is an easy thing to do. They usually give me a puzzled look. I say that it is not necessary to understand all aspects of real estate to start investing. The best thing you can do is start with a basic buy-and-hold strategy by buying whatever type of property you can afford for the least amount of money. How to buy something with as little money as possible depends on your financial situation and the types of mortgages you qualify for. Since the guidelines for mortgages and government interventions change daily, it is impossible for me to tell you the best way to proceed. I can tell you how I’ve done it for years using the installment technique I described earlier in the book. But I’ll give you a quick refresher course below.
If you bought a $100,000 home through conventional means, you may need to put down a 20% down payment of $20,000 plus closing costs which will cost you around $3,000. In this example, you invested $23,000 to purchase a $100,000 investment property. Using the lump sum technique, you would buy a property for $100,000 in cash by putting down the entire $100,000 down payment plus closing costs of $3,000. At this point, you have a down payment of $103,000 on the property and you start investing an additional $5,000 to repair the property. You now have a total of $108,000 of your money in the property. You put the property up for rent and find a good tenant, so now that you’re empty, real estate investment is a money-making, profit-making business. Now you go to the bank and have the property appraised with the intention of doing a cash refinance. Because you repaired the property and it is a profitable business, the property is valued at $114,000. The bank is willing to lend you an 80% mortgage on the appraisal of $114,000, giving you a mortgage of $91,200. He initially deposited $103,000 and received a mortgage of $91,200, bringing his disbursements to $11,800.
By using the down payment technique versus buying a property through conventional methods, you save $11,200. Now, of course, you’ll have a higher mortgage and less cash flow from the property, but you’ll also have $11,200 to buy the next property.
Sometimes the houses you buy will cost you $10,000; other times you will break even. You might even be lucky enough to get paid to buy a house, which happened to me once or twice. The goal was simply to keep buying as many properties as possible until you built up a portfolio worth millions of dollars. You’ll make a profit on the cash flow, but chances are you’ll come back and do things like repairs and vacations on any other issues that arise with real estate. If you end up accumulating $10,000 over the year through cash flow from your properties, you have your start-up capital to purchase additional property and further expand your portfolio.
I have said many times that you will not find cash flow of great value to you. Cash flow will help you pay for necessary things and give you money for future transactions, but in the end you will be working hard for very little money. The real surprise will come when you’ve gone through the cycle from bottom to top and created a gap between the value of your portfolio and the amount of mortgages you owe on the building. By accumulating equity in your properties, you will slowly begin to see your net worth increase over the years.
For example, let’s say you purchased one property per year for five years valued at $100,000 per property. In the five years he bought the properties, the values went up a bit and the mortgages went down, and his net worth is the net worth in the middle. When you start to see this throughout your investing career, especially when the market is rising, it can be an exciting time.
Your expectations should be to live off the income from your job, while the profits from the property rental business are used to meet your needs.
In commercial real estate, you will make various presentations, in various circumstances. Most of them are commercial in nature and focus on the needs of the tenant, buyer or seller of the property.
Access the fundamental issues
Each of these groups has unique ownership requirements and points of focus. It is their needs that should be clearly identified and addressed in the sales pitch or presentation. Many successful commercial real estate agents will have a preliminary meeting with the client or client so they can identify key issues and concerns. This allows the sales agent to get back to the client within days with a well-structured proposal that meets the client’s needs.
It’s about THEM, not YOU!
When designing a commercial property or investment proposal to present, the document should be 90% related to the property and the client. You will often see this rule ignored or violated, as much of the proposal document is about agency and staff.
The real estate transaction is rarely a simple matter of the rental of the property, the price of the property or the physical elements of the property. In most situations, it is the combination of these things that must satisfy a basic equation of need that the client or client has. By leading them to this basic need, you will identify an element of pain the client is experiencing. That’s what you focus on.
they are experienced
Interestingly, many commercial real estate clients and clients are reasonably comfortable in commercial negotiation circumstances. This means that they may not give you an overview or all the elements of a transaction until they are ready. The conversation and connection in the introduction process should be customer or customer oriented using well-chosen questions that allow the agent to interpret the body language coming from the customer’s response.
When you think you have identified the element of customer pain related to the real estate transaction, you begin to amplify the problem in today’s market conditions, and then you come up with stable and logical solutions that your real estate agency business can provide to customer. Invariably, the commercial real estate transaction in today’s market focuses on financial matters such as:
High vacancy factors
Other ownership options and possibilities are available
Poorly performing leases
Unstable cash
Unstable maintenance mix
tenant dispute
Increased building operating costs
A demographic shift that exposes property to an unstable future
Mortgage payment pressures
asset age
Reform or expansion needs
Competing properties driving tenants away from the property in question
This type of information and interpretation requires your intimate knowledge of the local area. This is both by property type and by location. It is the highest value you bring to the client or customer. Being able to clearly define local market knowledge is a tremendous asset in any commercial real estate presentation or sales pitch. It should be seen as the most informed solution to the problem.
By experiment
After many years working exclusively in the commercial real estate industry, I discovered that my unique skill set was knowing the market and flaunting it in any formal presentation to a client. Being able to speak about market trends and financial performance in a loud and solid manner will help the client understand that they need your services. Combining this with its extensive and relevant query database, it clearly shows the customer that they need it.
A good real estate business presentation is a function and balance of many things. Things like:
A well-established pre-planning process is a strategic advantage for any commercial real estate file. Strategy is everything in commercial real estate. Every property presentation requires planning.
Make sure you ask the right questions of the customer or prospect. Plan your questions related to the property in question so that they help the client think about the opportunity and possible changes.
Romana King is an award-winning personal finance writer, a real estate expert and speaker. She is the current Director of Content at Zolo.ca, where this article originally appeared.
real estate market Canada
The real estate market is never dull. Last year started off with a big nervous question: Will the Canadian housing market crash? In 2018, the new year started off with more of a sigh. Analysts across North America came out with various pronouncements of deceleration in activity and pricing, but the overwhelming consensus was that the nation’s real estate landscape would flatten out, even in the hot Toronto and Vancouver markets.
It wasn’t too bold of a prediction. Activity was way down in the summer months of 2017, even as the number of listings was finally growing. This prompted only incremental increases in pricing and a nation-wide expectation of a soft-landing for Canada’s property markets.
This flattening out of the market was happening well before the latest splash of cold water hit the fast-accelerating housing markets. That splash came in the form of amendments to mortgage regulations. Now lenders must qualify new borrowers —and those renewing or renegotiating with a new lender to qualify for a mortgage— using new guidelines. Borrowers are qualified now based on the posted rates, which are typically 200 basis points higher than discounted mortgage rates. These new regulations were announced in October and were officially implemented on January 1, 2018.
What does all this mean for the real estate market in 2018? It means a possible return to the norm —a reemergence of a more boring, stable Canadian real estate market.
Canada’s real estate is actually balanced
According to Robert Hogue, senior economist with RBC Economics, there is “limited downside risks to prices in the near term in Canada” as the majority of housing markets, including Toronto, are “in balance.”
Based on the sales-to-new listings ratio—where 50% is a balanced market—the overall Canadian market appears to be balanced, according to RBC Economics December Monthly Housing Market report. Toronto and Calgary are also in balanced territory while Montreal and Vancouver are still leaning towards a seller’s market.
Source: RBC Economics Monthly Housing Market Update, December 14, 2017
Another way to determine if Canada’s housing markets are levelling off is to examine months of inventory. The number of months of inventory represents how long it would take to liquidate current inventories at the current rate of sales activity. In November 2017, there were 4.8 months of inventory in Canada, down slightly from 4.9 months in October 2017 and the four months of inventory that was recorded in the summer months in 2017. Given that the long-term average is 5.2 months, analysts are predicting that most Canadian market segments are cooling off and returning to a more balanced market where supply meets demand.
Some markets still sizzle
Despite the incremental rise in interest rates in 2017 and the recent mortgage regulation changes—both factors that are expected to cool activity across Canada—some markets are still quite hot.
The Greater Golden Horseshoe area, which includes Toronto, had only 2.4 months of inventory at the end of December 2017. While this is much better than the all-time lows experienced in February and March 2017—when inventory dropped to just 0.8 months—it’s still below the region’s long-term average of 3.1 months.
A surge in deadline activity in Toronto accounted for most of the increase in the last few months of 2017, explains Hogue in his December economic report. “More stringent mortgage lending rules coming into effect in January no doubt prompted many buyers to advance their purchasing decisions.”
But this last-minute year-end activity in 2017 is not likely to continue into 2018. Hogue’s outlook for the New Year suggests that further moderation of home sales activity across Canada will cool any price increases in the upcoming year. “Near-term volatility will be followed by a generalized softening in 2018.”
The least optimistic outlook regarding Canada’s real estate market in 2018 comes from the most unexpected place: The Canadian Real Estate Association. CREA, is the trade association that represents more than 100,000 real estate brokers, agents and salespeople across Canada. In December, CREA cut its home sales forecast for 2018. The association’s analysts cite the impact of tighter mortgage rules, the chill from the Toronto and Vancouver foreign buyers’ tax, as well as on-going affordability issues in the country’s biggest markets.
CREA predicts that activity (that is, the number of actual home sales) will fall 5.3% in 2018. This continued decrease in buying activity, combined with the 4% decline in activity in 2017, prompted CREA to anticipate a 1.4% drop in national average housing prices in 2018. The expected national average housing price for 2017 was $503,400.
If CREA’s prediction turns out to be true, 2018 will be the first year the national housing price will have fallen in Canada since the start of the global recession in 2008.
But the impact of a slowing real estate market will not be felt uniformly across the country. According to CREA estimates sales activity will decline across Canada (by 5.3%), as a well as in B.C. (by 3.7%), in Alberta (by 2.8%), in Saskatchewan and Manitoba (3.8% and 3.9%, respectively) and in New Brunswick and Nova Scotia (by 0.5% and 2.8%, respectively). The two hardest hit provinces will be Ontario, with an almost 10% decline in activity (9.6%) and Prince Edward Island, with a 7.4% decrease in sales activity.
The only provinces predicted to have increased sales activity in 2018—albeit at anemic rates—are Quebec (0.9%) and Newfoundland (1.3%).
What do these predictions mean for average home prices? Volatility. While Newfoundland is expected to have increased sales activity in 2018, its annual price change is expected to drop by 1.9% in 2018. Other provinces with price drop forecasts include Alberta (0.3%) and Ontario (2.2%). The prices in the remaining provinces will either flat-line—like in B.C. and Saskatchewan where 0% price appreciation is expected in 2018—or move up incrementally, like in Manitoba with a 1% average price increase, PEI (0.9%), Nova Scotia (2%) and New Brunswick (1.8%). Only Quebec average prices are expected to beat the national anemic rates, with a 4.2% increase in average sales prices.
What does this mean for buyers?
There are two strong headwinds when it comes to buying activity in 2018: Tighter mortgage lending rules and the threat of higher interest rates.
Because of tighter mortgage lending rules, buyers simply can’t afford to buy the same house as they would have in 2017. This could mean shaving anywhere from 5% to 25% off your maximum house-price budget—although consensus shows it will mean an 18% reduction in your maximum purchase price for one in six borrowers, who put down less than 20%.
One unintended consequence of this forced fiscal responsibility is that more buyers will end up competing for cheaper properties—possibly driving up the prices of condos and townhomes, properties previously considered more affordable.
This push for more affordable housing opportunities could be exasperated as potential buyers try to get into the market before mortgage rates rise. It’s expected that the Bank of Canada will continue with incremental increases to its overnight rate in 2018. While no one anticipates discounted mortgage rates to shoot up to 6%, the posted rates will hit this mark relatively quickly. The increase in mortgage rates will further erode a buyer’s possible house-buying budget, prompting more buyers to pull the trigger before being potentially locked out.
Based on all these factors, we shouldn’t be surprised by an active spring market, particularly in the condo and townhouse market segments.
As a buyer, you’d be wise to secure a mortgage pre-approval before shopping for a home. Don’t just do a quick, online calculation — talk to a mortgage broker. For those buyers struggling to get a loan, consider going through non-prime mortgage lenders. These alternative lenders specialize in buyers turned down by banks, as they allow for more non-traditional income and permit higher debt ratios (up to 50% total debt service ratio, versus the 42% guideline used by the banks). Another option is to increase the length of amortization on the mortgage, which lowers the debt service ratio used to qualify for the loan.
Just don’t expect to get all this help without paying for it. In the past, non-prime lenders have charged higher mortgage rates (to reflect the higher risk of the borrower). Going forward these non-prime lenders may opt to cut the rate but make up the lost revenue by tacking on a fee. The result: Higher risk buyers will end up paying more with fees for amortization periods longer than 25 years, as well as fees for holding less than 20% equity in the house and fees to get access to rates low enough to allow them to qualify for the mortgage.
What does this mean for sellers?
For sellers across Canada, it’s time to reset expectations. Gone are the days when you could expect to sell your home in a week or less (for more money than your neighbour, who only sold a month ago). Buyers are struggling to afford what’s out there and the result is a rise in inventory and a drop in sales activity.
In the last few years, a potential buyer ended up having to compete against other interests, such as investors, speculators and foreign buyers. Those in the market to make money have been pulling out—waiting for more certainty. That means fewer buyers in the market and fewer sales. The drop in sales activity will prompt price corrections and eventually, the market should stabilize in balanced territory. The investors and speculators may come back, at this point, but until then sellers need to readjust their expectations. The upside is that even a 10% to 15% drop in prices won’t reset a home’s value to pre-2016 price levels.
To stay competitive, consider scrutinizing current sales data for your street and neighbourhood. Walk through all open houses in your community, to get an idea of what homes look like before they sold (you can still get this sold data from your real estate agent). Finally, discuss with your real estate agent competitive pricing strategies.
What does this mean for current homeowners?
If you already own a home it’s time to do a little jig just don’t spend too long celebrating because it’s not all smooth sailing for current homeowners in 2018.
The biggest hurdle will be mortgage renewal. According to Bank of Canada analysis, half of all current mortgages will “reset” in 2018. What does this mean? It means 47% of mortgage holders will need to renew their mortgages; by 2021 another 31% of mortgages will need to renew and another 22% of that.
This surge of renewals will mean that these homeowners will have to make some tough decisions: Renew with your current lender and skip the mortgage stress test or shop around for a better rate and be subjected to the mortgage stress test.
For those homeowners who were proactive about paying off their mortgage debt and building up the equity in their home, this decision will be easy. You will qualify for a great rate whether you stay with your current lender or shop around.
But homeowners who refinanced and added more debt to their mortgage loans, or those that weren’t proactive about building up the equity in their home, may feel the pinch. Those that choose to stay with their current lender may find the rates are not as competitive, but may not have options elsewhere, as they’ll be subject to the new mortgage stress test.
Homeowners looking to obtain a Home Equity Line of Credit (HELOC) may be surprised at how much smaller this revolving loan will be in 2018. In 2017, anyone applying for a HELOC was stress-tested using the posted 4.89%. As of January 1, 2018, this rate increased to 5.7% (and will continue to increase as rate rise).
It’s worse if you’re a homeowner looking to refinance. Those looking to consolidate their debt through a refinance in 2018, may be surprised by the less than attractive mortgage rates offered to them, or the inability to qualify for the loan amount needed. Typically, those that need to refinance have debt ratios that are above average and this will be very problematic when trying to qualify under the new mortgage rules.
What does this mean for investors?
If you’re still in the market to buy a rental property, hats off to you. Many real estate investors were scared away in 2017, partly because of the crazy spring market and partly because of market uncertainty due to regulatory changes. But with the real estate market rebalancing and prices starting to level off of slowly come down, many investors may get back into the market.
While single-family detached homes are still golden gooses, it’s hard for small landlords and large institutional investors to earn a profit on this building type. The purchase price is often too high to make rental numbers work, unless you can secure more than one rental in the home and this comes with its own costs and headaches.
For those investors choosing to skip the single-family home and look at condos and townhomes, keep in mind that competition may increase in these segments quite substantially in 2018. More first-time buyers may be pushed into this pricing segment and this would mean even more competition for these units.
Old rules of thumb remain, however. Try to find units that are well capitalized (lower purchase price, higher rental yield) and, where possible, look for neighbourhoods that support renters, such as urban centres, university and hospital communities as well as commercial complexes that offer newly built retail and office space.
Any investor thinking of buying in 2018, should first start with a financial plan and a budget. Then talk to your accountant and mortgage broker to make sure the numbers work. If all this checks out and you’re lucky enough to find a property, then 2018 may be the year for you to become a landlord (and the real work begins).
Foreign home buyers scooped up a record number of residential properties in the United States in the last year, despite a rising dollar and political uncertainty, according to recent surveys.
The National Assn. of Realtors said foreigners bought 284,455 properties in the 12 months that ended March 31, about a third more than a year earlier. Dollar volume surged nearly 50% to $153 billion, also a record for the survey first taken in 2009.
Chinese nationals were the biggest foreign home buyers, purchasing $31.7 billion worth of property, up from $27.3 billion a year earlier and more than ever before, the Realtors said.
But the largest increase came from a surge in buyers from Canada, where prices have skyrocketed in recent years, partially due to Chinese investment there.
Canadians purchased $19 billion worth of residential property, compared with $8.9 billion in the 12 months ended March 2016, NAR said in its annual report on international investment.
Lawrence Yun, the association’s chief economist, said sky-high home prices in Canada, especially in the big cities of Toronto and Vancouver, were behind the surge.
The provincial governments overseeing those two cities have even instituted additional property taxes on foreign buyers, after complaints Chinese investors there were causing the market to spiral out of control.
Local Toronto real estate experts are saying that buyers are cashing out and using the money to buy smaller homes in Canada and second houses to vacation in the United States, usually in Florida.
The dramatic jumps come despite a higher U.S. dollar that has made properties more expensive for many foreigners.
In addition, the survey period includes the U.S. presidential campaign and the beginning of the administration of President Trump, who has a history of divisive rhetoric against immigrants and has called for restricting both legal and illegal immigration.
“The political and economic uncertainty both here and abroad did not deter foreigners from exponentially ramping up their purchases of U.S. property over the past year,” Yun said. “Foreigners increasingly acted on their beliefs that the U.S. is a safe and secure place to live, work and invest.”
Yun said buyers may have been motivated because of a rising dollar, eager to get into the U.S. market before their own currencies could buy even less.
Still, even with all that growth, foreign buyers only accounted for 5% of all previously owned home sales during the 12-month period, up from 4% in the prior survey.
California made up 12% of foreign-purchased homes by dollar volume, tied with Texas and second only to Florida, which accounted for 22% and where most foreign buyers are from Latin America and Europe.
Foreign buyers in California purchased $35 billion worth of properties, up from $27 billion a year earlier.
The national association could not provide data on the number of foreign sales in the state. But the increase in dollar value far exceeds gains in the median home price, which would indicate there were more sales as well.
Buyers from Asia and Oceania represented 71% of foreign home buyers in California compared with 51% a year earlier, said NAR in their report.
The survey results run counter to observations from real estate agents in Southern California, who said they have noticed a slowdown in Chinese buyers.
Agents have said luxury properties in the San Gabriel Valley marketed toward Chinese buyers are taking longer to sell, as Beijing has cracked down on the amount of capital that can taken out of the country for foreign investments.
“It’s not easy to move funds from China,” said Helen Chen Marston, a San Gabriel Valley real estate agent. “The luxury home market stopped.”
She said there are far more Chinese buyers for properties under $1 million, but even that market is a bit slower than last year.
“You are facing the same problem” of stricter controls, she said.
However, William Yu, an economist with the UCLA Anderson Forecast, wasn’t particularly surprised over the increase in Asian buyers in California.
He said the most restrictive measure to stem outflows from China came at the end of 2016, meaning a good portion of the survey covered a time with less-strict regulations. As home prices have risen in California and capital restrictions increased, he said foreign home buyers from China might simply be casting a wider net for cheaper properties.
“California is big, and Los Angeles is big,” said Yu, who studies the effect of the Chinese economy on the U.S. “We are probably seeing more and more Chinese buying across the region than in the past.”
Still others were surprised over the report.
Leslie Appleton-Young, chief economist with the California Assn. of Realtors, said in addition to reports over fewer Chinese buyers, some agents in the Palm Springs area had Canadian clients looking to sell after the election, given the uncertainty over U.S. immigration policy.
Yun, in a news release, acknowledged Realtors in some markets have seen less interest from Chinese buyers this year and that foreign investment overall may not keep increasing.
“Stricter foreign government regulations and the current uncertainty on policy surrounding U.S. immigration and international trade policy could very well lead to a slowdown in foreign investment,” he said.
Nearly 6,000 Realtors responded to the survey, which the association said has a margin of error of plus or minus 1 percentage point. The number of homes sold and dollar volume are extrapolated from those answers.
The survey defines foreign home buyers to be non-U.S. citizens with permanent residences outside the country, as well as noncitizens who have lived here for more than six months on temporary visas or immigrants who have lived here less than two years.
The majority of properties purchased, 64%, were single-family houses, followed by condos, town homes, other miscellaneous properties and other residential land.
The median price of homes purchased by foreign home buyers was $302,290, compared with $235,792 for all homes sales. The difference is in part because foreign buyers tend to purchase in large, pricey metropolitan areas.
