SPEED BRAKES APPLIED!

Earlier this year I, along with others, predicted that the second half of 2010 would see a slowing in the local and national real estate markets. It would appear that this prediction is now a reality.

Fearing the extra costs associated with the HST, as well as forecasts of mortgage rate increases and tougher mortgage qualifications, it was inevitable that buyers would get into the game earlier rather than later in 2010. As a result, there are now fewer buyers in the market and consequently there are more homes listed for sale for longer periods of time. Inevitably, this combination of increased supply and reduced demand will cause prices to drop or, at best, to stabilize.

If you don’t need to sell in 2010 but think the prices will be better next year, remember that prices don’t always go up in the short term. For those of us who have seen the ups and downs of the real estate cycle over the years, we know that the next upswing may be more than a year away. For example, when the boom of the late 1980s and early 1990s ended, it took more than 5 years for local real estate prices to come ‘off the bottom’.

There may also be some who believe that the influx of additional personnel to CFB Trenton will force prices up in the short term. However, keep in mind that there are always other variables at work that influence the market and affect the value of your most important investment. These could include mortgage rates, the US economy, a change in government, or another unforeseen factor. Just ask the folks on the coast of Louisiana if they could have predicted the downturn in their real estate prices!

So how much has the market slipped? Here are some national and local statistics.

The Canadian Real Estate Association (CREA), representing 99,000 REALTORS® nationwide, reported that in June 2010 national home sales via the Multiple Listing Service receded 8.2 percent from May 2010. Furthermore, sales activity was down 19.7 percent in June 2010 compared to June 2009. The President of the CREA suggested sellers should consult their REALTOR® on how to price and present their homes in these more challenging times.

The Quinte & District Real Estate Board reported more than a 12 percent drop in residential sales in June 2010 when compared to the same period in 2009. Furthermore, year to date, there are now almost 8 percent more homes on the market than there were in the first 6 months of 2009. Theoretically, you could also argue that the 5 percent drop in the number of local REALTORS® over the last year is another indicator of a turn in the market.

Are you a buyer looking to jump into the market this year? The interest rates are up slightly but the prices are coming down. Now may be the time to jump. The speed brakes won’t be applied forever!

TRENTON HOME SALES TAX aka HST

As promised in my last posting, I am here to give my "biased" opinion on the upcoming provincial Harmonized Sales Tax. In case you’ve been busy canvassing for your local provincial Liberal candidate and haven't been paying attention to other real-time events, the HST is being touted as a cost-saving initiative for business owners and a “revenue neutral" tax for the benefit of all Ontarians. If you’ve bought into this party line, you may also be interested in a piece of ‘environmentally protected almost waterfront property’ - insert smile here.

Seriously, from where I’m sitting, this tax appears to be similar to the largest tax grab in Canadian history … yes, the GST all over again. In other words, a provincial consumer tax! Hopefully it will be more effective than the eHealth tax. You remember the one … that temporary tax that helped fund huge salaries for officials, some of who were forced to resign for incompetence. This time the Queen’s Park Highwaymen are going to rob you by applying tax on items that were never taxed at the provincial level before. These include home heating fuel, legal services, real estate services, home inspections, well driller reports, amongst many additional services that will affect homeowners and other consumers!

With this in mind, is it any wonder that websites such as http://www.stophst.com/ontario-hst/ have been stood up and organizations, including the Ontario Real Estate Association and the Ontario Home Builders Association, have lobbied for months to have the tax stopped, revised, or delayed? Unfortunately, the estimated $313 million in EXTRA tax dollars lifted from Ontarians through resale home transactions looks like it will come to fruition in July of this year. The timing will undoubtedly coincide with an increase in mortgage financing which will certainly put a damper on the value of your most prized asset … presumably your house.

On the bright side, our ‘tax and spend’ officials have given new home construction a ‘break’. It seems that new homes under $400K will get a rebate on the HST. In other words, pay the tax and then apply for the ‘luxury rebate’. Yet another paper chase that will involve employing more government employees to make it all happen. We have trouble maintaining adequate health care services in this province, but we have no trouble employing more tax collectors and redundant procedures.

Before I end my rant, I have to pay homage to all the 'Timmy Regulars’ whose cry was heard on high. That is, food or beverages below $4.00 will NOT be taxed. Can you imagine the outrage if Dual Tone McGuinty had followed through and added another 8% on our morning fix? Tax on Timmy’s seems unconstitutional at any level of government, but tax on basic shelter seems to be unending and applicable at all levels. Hopefully, I stop seeing red after the 2011 election.

If you would like more information about how the HST will affect you, please drop me a line at david@davidweir.com.

TRENTON REAL ESTATE 2010

The dust has finally settled on the local 2009 Real Estate statistics and what a finish we had to the year! Here are some numbers provided by the Quinte & District Real Estate Board that will make homeowners happy about their largest investment.

In December 2009, the total dollar volume of sales (for all property types) increased by an amazing 98% over December 2008 i.e, $34.8 million vs $17.5 million respectively. This represented 182 sales last month compared to only 106 in December 2008.

Unfortunately, there are other statistics that may turn that homeowner smile upside down. There were 25% more residential listings on the market last month compared to December 2008. In other words, more competition if you are thinking of selling. As well, the average annual residential sale price was down 1% from 2008.

I could talk endlessly about statistics, but we all know that figures lie and liars figure. So what should homeowners do if they are thinking of selling this year? Sadly, Santa didn’t bring me a crystal ball for Christmas so here is my best guess for 2010.

If possible, you might think about listing early to try and be sold before July 2010 when the Harmonized Sales Tax (HST) takes affect and before mortgage interest rates begin to increase.

I’ll discuss the dreaded Horrible Sales Tax and how it impacts Real Estate sales on another occasion but, suffice it to say, this tax will steal hundreds of millions of dollars from the pockets of Ontarians who buy and sell Real Estate beyond 30 June 2010. I concede that the government’s plan to implement this unprecedented tax is not final, but we all know it’s coming despite massive lobbying efforts by groups such as the Ontario Home Builders Association and the Ontario Real Estate Association.

As for mortgage rates, the Bank of Canada has kept their overnight rate at an amazing .25% for a number of months, which, in turn, has allowed Lenders to hold prime at about 2.25%. However, there have been consistent comments from Canadian Banking authorities that suggest our “interest holiday” is going to come to an end mid-2010 or by the third quarter of the year at the latest.

Many Buyers who were keeping abreast of these two significant issues have wisely purchased a home recently or plan to do so before July. If you doubt the numbers provided by our local Real Estate board, just check out the hot markets of Toronto and Ottawa.

In conclusion, it might be that the strong 2009 year-end was a function of Buyers who jumped off the fence early, when they ordinarily would have waited to buy in 2010. Moreover, we might also want to consider that a strong start to the year may be followed by a stagnant second half to 2010, especially in view of the HST and mortgage interest scenarios discussed above.

Are you selling your most valuable asset in 2010? If so, list early and be prepared to move before 1 July 2010. Is your mortgage up for renewal or are you not yet locked into a fixed rate? If so, talk to your Lender about your long-term options. Oh, and by the way, I am looking for a crystal ball – preferably one in HD.