The #1 Question!

Ryan Coffey
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“How’s the market?” or some similar variation comes from a friend, acquaintance, or someone I just met after my being introduced as a Realtor.

It might just be an ice breaker or maybe they really want to know. If it’s the former, the goal is conversation and that is easily achieved. If it’s the latter, their understanding is easily achieved if I can learn enough about them and their situation to give an answer that is better than generic. First I have to get them to listen to everything I say for a few minutes. I think most people expect good answers to be cut and dried like the ones they used to get while growing up at school, or fit into a ten second soundbite like they do on TV, or something that fits into a few lines of text. Dealing with something that is real, constantly evolving and different for each person deserves more attention than that, especially when hundreds of thousands of dollars and the course of one’s financial life is involved.

I alluded to this in a recent post here, but I didn’t explore examples. I think some people prefer that things be illustrated in some form of story or case study. Each and every client, each and every property,  each and every financial situation, each and every negotiation and each and every moment in the market is unique. This is why any ‘recipe’ for a successful real estate transaction is very loose indeed and rarely followed exactly.

So I will give a couple of examples. To reduce complexity, they will all occur in the context of our current real estate market in Nanaimo. That is, one that has been more or less flat price wise for the past three years after a bit of a media induced scare where things dropped (not half as dramatically as you probably heard on TV) briefly but then came back price wise a year or so later. There has been some softness in condos recently due to some condo projects that were being finished just as the boom ended resulting in more inventory than builders/investors could profitably sell. This is starting to change now though. Some bylaw changes at the city are making it easier and more profitable for builders to build, particularly along main corridors so they can make larger buildings more easily and I presume affordably than before. (Cost per square foot goes down when you build bigger.) Mortgage rates are still super low but starting to increase and people are just starting to understand that for most people the HST won’t really affect their purchase of a home much.

So, that last paragraph is in a nutshell how I think the market is doing today. It will change in a few weeks or months. You will notice in my example situations below that it doesn’t get brought up a whole lot. I could spoon feed the answer as to why, but I think that readers will be able to figure that part out.

“How’s the Market?” for Mr. A:

Mr. A is a first time home buyer. He has roughly ten thousand dollars saved (or perhaps his parents have offered it to help him get that down payment). He has an ok job with modest pay but it’s steady and although he has a bit of debt left over from student loans he is able to make a modest life for himself. He’s planning on sticking around for the forseable future and he is sick of the idea of paying rent knowing that the money is simply gone every month and he has nothing to show for it. He has been thinking about buying a place but with all the news on TV he fears it’s a bad idea. They keep talking about the next bubble that’s going to pop any day now.

Mr. A is at a party and via a mutual friend he meets Ryan Coffey. He asks Ryan, “How’s the market?” hoping that maybe he will hear inside info that prices are about to go up which in his eyes means it’s a good time to buy.

After some conversation, Ryan suggests that he speak to a Mortgage Broker. To him, it sounds like Mr. A is likely to qualify for a mortgage on a modest home but not knowing all the details or being a Mortgage Broker he can’t say for sure. What Ryan does know is that mortgage rates are super low right now and that regardless of whether the average price of a home is going up or down this month/year that it is a safe bet that it will go up in a few years. Patience of five to ten years is his rule of thumb based on his research, knowledge and experience. Ryan thinks that Mr. A needs to think more about  his own financial situation and ability to make payments over the next few years than he needs to think about what the market is doing at this moment. If he is unsure about how long he wants to stay in Nanaimo, he might consider properties that he can rent out in his absence. Property values increase eventually and so do the prices you can charge for renting them.

In short, Mr. A should focus more on his own finances and long term goals for his decision.

“How’s the Market?” for Mr. and Mrs. B:

Mr. and Mrs. B have a starter home that they are beginning to outgrow now that they’ve had their second kid. Mr. and Mrs. B both work full time and although they’re far from well off, they are able to make ends meet. They don’t, however, have much in the way of savings. Just a few thousand which as they remember from when they bought their existing home seven or eight years ago, is barely enough to cover a deposit, property inspector and Lawyer fees. They’re thinking that as they’ve done some maintenance on the house that maybe it has held on to enough value so that they can sell it and get some money out of their equity to use as a down payment for their next place. However, they bought during the boom and there has apparently been a bubble so they’re not sure.

They look around the internet for Realtors in Nanaimo and they see Ryan Coffey’s site and blog. They email him and ask him “How’s the market?”

After some emailing back and forth, and Ryan comes out to see their property and tells them what he thinks it is roughly worth. They are pleased to know that it has gone up in value and that it is in fact worth more than what the property assessment from the city says. Ryan tells Mr. and Mrs. B that they should talk to their Mortgage Broker to see what their financial options would be based on a sale price that is a bit under the listing price suggested. (Ryan suggests using slightly pessimistic numbers for safety.) He suggests that Mr. and Mrs. B also consider holding on to the property and not selling it but rather renting it out and using the existing equity and income to help them hold on to both properties. This way, they will make more money long term. Ryan’s business is based on selling more properties, especially listings, so he hopes that they appreciate his honesty in this matter because he knows most of his competition wouldn’t so willingly give that advice.

In short, Mr. and Mrs. B are richer than they think and could get richer still if they play their cards right although it may mean that the next home will be more modest than it would be were they to sell their existing home. Either route should offer opportunity if they pay attention to the details that will surely come up after a good discussion or two with their Mortgage Broker and having a thorough look at what is happening in the market with Ryan. All is well so long as they have planned well financially.

“How’s the market?” for Mr. C:

Mr. C bought his home two years ago. He has just been transferred to Victoria where he knows that the property values are higher than here and he wants a house and not a condo when he moves there so he is insistent on getting every last penny out of his existing home. He speaks to a number of Realtors hoping that one of them will tell him what he wants to hear, that one of them will tell them that it is possible to sell the home in time and for more money than anyone else because that particular Realtor has sales superpowers. One of the Realtors he speaks to is Ryan Coffey. Ryan tells him that the value of the property is about what he paid for it and after the various fees and such he will not be making any money off the property. Ryan suggests looking into whether he can afford something very modest in Victoria while he rents his current home out and waits for it to increase in value at which time he could sell it for equity or maybe the rental income will increase his income enough to enable him to buy something he likes.

In short, the market is not so great for Mr. C at the moment but some patience and planning might turn things around in time. The other option being to bite the bullet and go through with the sale and minimize any potential losses by pricing it right from the get go.

 

So, “How’s the market?” Well, it depends on who you are and what you want to do. Generally speaking it is always a good time to buy real estate if you can afford it. Selling is more case by case. In the end, no matter what market you are in there is opportunity for those people holding the right cards who know how to play them. There is a lot to know and consider and that’s part of what Realtors help you do.

For more on this start reading this section of the blog, especially starting with this post and the series that follows.

Ryan Coffey

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