Pot, Meet Kettle
To rent or to buy is the age old question that ultimately has no one size fits all answer. It depends on a person’s circumstances, finances, motivation, and where they are in their lives.
This week a client contacted me asking whether I thought it would be a good idea for him to rent a while longer in order save up for a larger down payment. Knowing his situation, I told him saving up for a larger down payment was a great idea. Yes, agents do recommend renting when it befits their client.
So I was annoyed when I read what I think is cliched and cheap trash-talk from this IA in the Financial Post:
Just ask any real estate agent and they’ll tell you, “Don’t pay your landlord’s mortgage for him,” or “Build equity for yourself instead of flushing your money down the toilet,” and our favourite, “There has never been a better time to buy.”
Instead of making classless generalizations, the author should have done some more research into his main points. He would have discovered:
- There is no land transfer tax in Alberta.
- A common commission charged in Calgary is nowhere near 5% and there are many different service options including going the FSBO route.
Those two counterpoints alone harpoon a third of his argument and his statement that the “total cost of buying and selling a home approaches 10% of the purchase price” is absurd.
Sometimes renting is better than buying. Sometimes it’s not. And some investment advisors are just as biased as the real estate agents they criticize.
Lights Out In Edmonton
A lawyer I contacted called the changes the Edmonton Real Estate Board (EREB) has planned “ridiculous.” EREB wants to withhold sale prices until the buyer actually takes possession. This can be anywhere from a few weeks to many months down the road.
It’s not just the public who would be shut out. It would be everyone: homebuyers, sellers, appraisers and Realtors themselves.
Can you imagine this change being adopted in Calgary? The real estate market here changes as quickly as the weather does. How would you know what to offer for a home or how much to list it for?
One agent says, “In my 48 years of experience, I have never heard of any seller or buyer making a claim or complaint to the Edmonton Real Estate Board in respect of a collapsed sale – Why, suddenly, is there such a foofaraw about something that has never been a problem.”
+1 for “foofaraw.”
I’ve never been involved in a case whether the deal collapses after all conditions have been waived either. It’s rare. And to withhold timely data because of the minute chance it might happen? Silly.
Greg Steele, vice-president and co-chair of the association’s arbitration and professional standards committee, says the new policy is intended to address privacy and liability issues.
In particular, he says Realtors could face potential lawsuits in cases where deals collapse after the sales price has been disclosed, thus “stigmatizing” or impairing a property’s future value if or when it comes back on the market. (Source)
Gimme a break. Market conditions fluctuate, no offer is ever identical in conditions and terms and there’s more than just sales price that motivates a seller. Yes, it’s a “ridiculous” change and utterly confounding how it ever made it past the brain-storm session.
I contacted CREB but haven’t heard back whether they are considering a similar change to EREB’s.
One thing I would change with the sales reporting is to remove presales from the statistics until those buyers take possession. While the majority of new units aren’t listed on MLS, occasionally they are even if occupancy isn’t expected for a couple years – such as the multi-million dollar sales at The River. Then there’s the off chance that the condominium might not even get off the ground, be delayed indefinitely, or in the case of the Gala in Applewood, be converted to rentals and all deposits returned.
From Scotiabank’s Global Real Estate Trends report (Sept 14, 2012)
Canadian housing activity remains relatively buoyant, but has shifted to a slower growth trajectory. Adjusted for inflation, national average prices fell 2% y/y in Q2, matching the first quarter decline. Housing demand has been tempered by a slower pace of job growth and the cumulative effects of tighter mortgage insurance rules over the past several years, while more balanced supply conditions in most parts of the country have restrained price increases. The latest mortgage rule changes, including a reduction in the maximum amortization period from 30 years to 25, which took effect in early July, are expected to lead to a further moderation in sales volumes and average prices through the fall.
Jim Flaherty on the Canadian housing market:
“We were concerned about the level of indebtedness related to residential housing, including condominiums, [so] four times we intervened in the mortgage insurance market in the last four years. And it is working. Even the Toronto and Vancouver markets have calmed. This is a good thing. There is a tranquillity in the market now that is desirable.” (Source)