Real Talk!

I am writing this blog in response to the recent number of people who have asked me “Is the market up or down?”

The latest release from the Canadian Federation of Independent Business claims that confidence among Ontario’s small and medium business owners declined in May. My personal interaction with small and medium business owners would concur. The Federation reports that its Business Barometer Index fell to the lowest point since November 2010. The Federation interprets their results as an indication that Ontario’s economy is growing at a rate that is below normal. Their report cites major cost concerns for these business owners are fuel, energy, tax and regulatory expense.

Commercial real estate market conditions vary throughout the province. The Toronto area commercial market indicates the best market conditions, overall. Industrial real estate sectors report weak conditions that are not expected to improve this year.

Luxury home representatives report a booming market, especially in Vancouver- where foreign investment has been an important influence. Other regions point to the recovery of the stock market and improved economic performance as having boosted the finances of those who are “well-off”.

This is something I have recently discussed with my “Seller” clients. High end properties are selling well, particularly if they have acreage or water frontage. It would appear that the wealthy have not been significantly impacted by recent economic stress factors.

Bank of Montreal has recently reported that, nationwide, housing prices have “more than doubled in the past ten years”. http://www.marketwire.com/press-release/tale-three-cities-bmo-report-shows-wide-disparity-housing-market-valuations-vancouver-tsx-bmo-1523747.htm This Article says, “The report flags the possibility of lower prices in Vancouver, steadier to softer prices in Toronto and firmer prices in Calgary in the near future. In addition, Canada's real estate market is vulnerable to a correction if there is a rapid rise in interest rates due to higher inflation, an increase in unemployment because of a weak U.S. economy, or a slowing in foreign investment.” and quotes BMO’s Head of Mortgage Products as saying, “Canadians need to examine ways to reduce overall housing costs.”

Again, this is, more or less, what I’ve been telling my clients since my recent number crunching exercise and subsequent travel through the many of the United States. Through simple observations and conversations with residents, it was obvious that our neighbours to the south are experiencing financial stress.

An all too familiar sight on the Interstate highways during my May 2011 trip into the United States

Online, an article dated May 24, 2011 by Christine Dobby (http://business.financialpost.com/2011/05/24/riocan-and-calloway-race-to-open-outlet-malls/)
states that an “...April 2011 survey from the Boston Consulting Group recently found while Canadians are still optimistic about the economy in general, 90% of consumers plan to spend the same or less this year compared to last. The survey found Canadians, who did not modify their spending as dramatically as Americans during the economic downturn, are now being forced to cut back out of necessity as debt stretches households’ finances further and further.” This same article quotes a shopper who no longer makes trips to the United States, “due to time constraints and cost.” Our dollar has been near parity for some time.

A public opinion poll, conducted online by Ipsos-Reid from February 23 to March 2 of this year, for the Ontario Real Estate Association, revealed that home ownership remains the goal of 70% of renters. The results also suggest that ninety four per cent of Ontarians believe that home ownership provides a healthy and stable environment for raising a family; however, affordability for the purchase and maintenance of a home is a significant hurdle for most.

In the Greater Bancroft Area, the average sale price for a single family detached home has dropped to about $110,000. (Based on my January 1st to mid-April research) & our Board statistics indicate a drop in the number of sales, as well.

On May 20th, Ontario Real Estate statistics were reported that sales volumes and sales-to-new listings ratios were hovering around the norm in 20 of the province’s 43 real estate board areas. The other 23 board areas posted weak results indicating over-supply. These markets had unusually low sales-to-new listings ratios or unusually sharp declines in dollar sales volume.

According to the “Spring Housing Market Outlook” report from Canada Mortgage and Housing Corporation “After an active 2010, existing MLS® home sales are slowing and will fall five per cent this year and will recover only modestly next year.” Ted Tsiakopoulos, CMHC’s Ontario Regional Economist was recently quoted as saying “Consumer buying patterns, particularly in more expensive southern Ontario markets, will increasingly shift to less expensive housing over the next few years thanks to tighter mortgage market conditions. This bodes well for the apartment ownership and rental sector.”

This isn’t always the best news for those who wish to sell at this time.