Putting things into perspective

May 2006

Putting things into perspective

Row of houses. Original image at http://www.rics.org/NR/rdonlyres/276F8789-7D1B-46F1-BCF6-B8EAFE7E76FD/0/1930s_houses.jpg

The ongoing attention paid by the media to the real estate business tends to gladden the hearts of most agents. Publicity of this sort can't be bought for thousands of dollars.
Yet there are conflicting statements and judgements and the true picture is often hard to discern, even assuming there is such a thing!
However, I do think there are several points that are worth making and, needless to say, I'm not afraid to stick my neck out regarding them.
So then, allow me to run through them, as follows ....

Rising prices
I've a habit of assuring people that -- other than sometimes on my Niagara-on-the-Lake doorstep -- the Niagara market isn't plagued with the soaring price increases that apply to the likes of Toronto and Vancouver (not to mention the bidding wars that often accompany them). Nevertheless, I do have to admit that the past five years have seen a decided increase in housing values in a great many locations. In fact, although I'll argue strenuously against the percentages that the MPAC people like to insist upon, a report released this month by Century 21 Canada lends unquestionable support to the view that housing values have risen steadily across our country since the year 2001.
Drawing on a great number of sources, the report is a fine example of objective analysis. It's notably free from hype, even though it isn't afraid to mention that houses aren't the only items to have become more expensive than they were.
For example, it points out that the prices of homes in British Columbia's Okanagan Valley have increased by 129% -- which suggests, ahem, that few young men can now afford to Go West, regardless of how often they're advised to do so. But it also admits that Thunder Bay homes have managed to rise no more than 12% during the five years in question. And, in making some comparisons, it mentions that milk has become 20% dearer, a Hondo Civic now costs 10% more than it did, and the price of a ticket to the Grey Cup game has gone up 29%.
In the last little while, too, we've seen the oil companies begin to charge us an arm and a leg for fill-ups that, not all that long ago, were half the price, haven't we?
Without doubt, though, house prices have gone up in provinces from coast to coast and people who bought a home five years ago are certainly now, at the very least, somewhat the richer for it.

Will it continue?
The people who worrywart about a housing bubble keep predicting a sudden crash in values, or at least a decidedly downward turn in prices. Yet most people in the industry or close enough to it foresee little likelihood of either.
The consensus is that supply is being constantly outstripped by demand, which is itself being driven by a strong economy in most Canadian communities. There are fewer fears of pending unemployment or, where they do exist, most people expect to move into other kinds of work easily enough. The upheavals of the 90's are now behind us and the future appears to be an encouragingly stable one.
So will the next five years be like the last five?
Well, probably so.
The "Mulroney error" took the the steam out of things in the 90s, but it did bring double digit inflation to an end and the fiscal authorities now seem fully committed to stop it from returning. Interest rates are holding steady, despite the small percentage ups and downs we keep seeing. Affordability isn't perhaps as good as it was, but houses are still selling and no one expects them to stop doing so.
There's in fact a general air of confidence in where we are and where we're headed. The future is likely to hold few surprises and, while not being particularly boring, will be more of the same old, same old instead of unexpected lurches or unanticipated major corrections.
And I have little doubt that our local real estate market is going to follow suit.

But should you wait to buy?
Within some of the current forecasts of a soft landing for the real estate market, there are thoughts that prices may in fact begin to drop down. However, few experts expect this to happen. Where it does, the cause is almost certainly going to be no more than a reduction in what has been an unrealistic asking price.
In fact, the Seller's market that has contributed to annual price hikes -- and in some cases even monthly ones -- isn't being met with buyers who'll readily pay whatever needs to be paid. Or certainly not when they have a buyer agent working for them. Indeed, it isn't unreasonable to say that there's a Buyer's market out there as well.
But should you wait?
Well, probably not.
A year from now, you could be faced with a higher price for what presently appeals to you. Hereabouts it isn't, I'm sure, going to be an unmanagable one. My guess is another five percent, which is what our average increase has been over the past five years, despite some exceptions (as, again, in NotL).
Yet the more relative question hinges on the time that suits you better/best.
There's really no right or wrong time to buy in a market that, on the whole, isn't moving up/down in any pronounced fashion. If you have the money and the need today, you'll be ahead a shade or two if you don't hang on until tomorrow. On the other hand, if you don't have one of them -- or even both -- right now, you won't come out a great deal the worse for it.
Whatever the case, though, all you need to do at any time is to make sure you're getting value for what you're paying.

How about the alternatives?
A decided hotspot in many market locations -- and the Niagara Region is no exception -- is the popularity of townhouses, whether freehold or run by a condominium corporation.
Traditionally, they've been the choice of buyers who've retired or are shortly expecting to leave the workaday world behind. One obvious attraction is the absence of yardwork. The freedom to Go South during the winter months without any worries is another.
However, it's becoming apparent that price is also a factor. There's good value in a townhouse and, especially in the older ones, the asking prices are more affordable for first time buyers or people who don't want -- or lack the qualifying income -- to take on a hefty mortgage. No doubt it's an oversimplification, but you can buy something worthwhile for a good $50,000 less than you'll pay for a detached home of the same size -- and you'll have more chance to enjoy it, as in, ahem, there's only a small patch of grass to cut.
But trust the Brits, as the saying goes.
The U.K. has witnessed ravaging house price increases to no less a degree than we've seen in certain parts of Canada -- and overall the upward spiral has been a whole lot more severe.
However, necessity being the mother of invention (another saying, of course), two intriguing ideas have recently been introduced to my erstwhile countrymen.
One is manufactured homes.
The other is the London Double Decker bus.

Where do you want us to put it?
Manufactured in Europe, what is called the m-house and pronounced 'mouse' is now being marketed in the U.K. It's a 1000 square foot house or office that can be delivered in two ten foot halves or, if you prefer, simply shipped to you in a couple of forty foot containers.
It's modern, comes in a ready-to-move-in condition, and can be fully erected on a wide variety of sites in a single day.
You can see -- and browse through -- the details in the pages at http://www.m-house.org/
They make for some interesting reading and viewing.

More room(s) on top
What began around Christmas last year as a temporary accommodation idea follows a longtime practice of converting old railway carriages into compact but well equipped living places. Now, though, attention has turned to seeing what can be done with a number of London's double decker buses that have outlived their usefulness.
The details can be found in a BBC news story at http://news.bbc.co.uk/1/hi/england/london/4507072.stm .
You can also read more about the concept by visiting the page at http://www.doubledeckerliving.com/about-us.php

Did I ever mention that there's never a dull moment in the real estate business?

With my usual warmest regards to all my readers.