On February 19th, Carole Taylor announced the 2008 Provincial budget. Much has been made of the “green” budget. Somewhat lost in the green glare has been the fact that the Provincial government increased the threshold for First-Time Buyer’s to qualify for exemption from the Property Transfer Tax.

If you qualify under the program, you can now purchase a property valued at up to $425,000 rather than $375,000. This is very welcome news for us in Vancouver. However, I…along with many others…wonder if that is enough. $425,000 will hardly get you a one bedroom apartment in downtown Vancouver, let alone two bedrooms, or a detached house.

Personally (along with the Real Estate Board), I would like to see the Property Transfer Tax cut completely. Realistically, this will never happen. Carole Taylor was quoted recently as saying that the tax brought in more than $1 Billion annually.

Of course, I’m willing to compromise. I’m a reasonable guy. One possible solution might be for the exemption level to vary from one area to another. It makes no sense that we have the same exemption in Vancouver as in Trail or Prince George…or Skookum for that matter. Why not increase the exemption in Vancouver to something reasonable (like $600,000), and have it somewhat lower in somewhere like Skookum (say, $350,000).

One other positive regarding the PTT exemption. The government abolished the rule that you were disqualified for the exemption if you put down more than a 30% downpayment. They are no longer punishing you for saving your money.

Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside

Monday and Tuesday of next week (February 25th and 26th) is the 4th annual BC Real Estate Convention. This is a great event to stay on top of the local real estate market.

 You’ll have an opportunity to speak to a diverse group of professionals involved in real estate, from Realtors to policy makers. There are also free seminars (although I can’t find information on what those seminars will be).

 There are three reasons to come to the convention:

1. It’s a great opportunity to learn and network. 
2. Admission is free.
3. You can come and say hello to me. I’ll be at the Royal LePage booth from 2pm - 4pm on Tuesday, February 26th.

The Vancouver Sun wrote an article about the BC Real Estate Convention. You can also find the official convention website here.

Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside

Interested in learning more about the history of your home? Historian John Aitken is conducting a course on tracing the history of your Vancouver house. It will be held at the City of Vancouver Archives on February 27th from 7:30pm to 9:30pm. The cost is just $12.

 For more information, call the Vancouver Heritage Foundation at 604-264-9642.

Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside

The downturn in the US economy has some Metro Vancouver home owners and home buyers worried and asking, “Could it happen here?” In fact, I’m getting asked this question quite a bit these days.

The following article was written by the Real Estate Board of Greater Vancouver. I’ve included it here because I feel that it looks at the issue from many angles and answers many questions that most home owners in Vancouver have.

The US situation
Right now in the US, a combination of a housing slowdown and a credit crisis are heightening recession fears and slowing the economy. As a result, the economic downturn is becoming one of the most severe in decades. 

It all began in 2003 when home prices were rising at a rate of more than 10 per cent per year, the economy was growing at a good pace, employment was high and the future looked rosy for Americans. Home buyers who couldn’t afford high prices in urban centres such as San Francisco looked to other suburbs like Stockton, California, now known as the foreclosure capital of North America with 1.4 billion in bad mortgage loans. In Stockton 4,200 homes are in default or foreclosure and it’s far from over.

Depending on the mortgage lender, a home buyer with poor or no credit history could get financing to buy a home. Typically lenders offered “teaser rates” as low as two or three per cent, typically for two to three years, for 100 per cent or even more of the purchase price. These became known as sub-prime mortgage loans. 

Often the lender sold these mortgages to investors or investment firms, who re-packaged and resold them.

With strong demand for homes, prices rose to record highs. This resulted in declining affordability. For the first time in decades, this led to slowing demand and, in turn, decreasing prices.

By 2005, home owners with sub-prime mortgages began to see their mortgage rates adjusted to as high as 10 or 11 per cent.

Home price: $450,000
Mortgage loan: $450,000 (25-year amortization)
Teaser rate for first two years: 3%     Rate after two years: 11%
Monthly payment: $2,134     Payment jumps to: $4,411

The ripple effect had begun. As arrears, delinquencies and foreclosures rose, prices further declined. Home owners saw the value of their homes decrease while they scrambled to pay their sky-high payments. 

Some buyers chose or were forced to walk away. Lenders foreclosed, depressing prices and delaying the housing recovery. California, Florida and Nevada were hardest hit and housing starts declined in some areas to the lowest in 27 years. In turn, the stock markets dropped.  

Measures for recovery
To counter the housing correction, on January 21, 2008, the US Federal Reserve implemented the largest bank rate cut in decades – three-quarters of a percentage point and on January 30, 2008 they cut the rate a further half a per cent. 

As well, on January 29, 2008 the US introduced a House Bill, an economic stimulus legislation to jump start the housing market. If passed, interest rates will be temporarily frozen for troubled homeowners or will help them refinance. This will allow an estimated 200,000 homeowners to refinance and potentially keep their homes. It is expected to create half a million jobs by the end of 2008.

Could this happen here?
No. As opposed to the lax lending and easy financing practices of the US, Canada’s mortgage lending standards and practices, are rigorous and don’t encompass sub-prime loans or loans for more than the amount of the home value.

What is the impact on our real estate market?
The weak US housing market directly impacts demand for our forest products. Canfor has shut down a mill in Fort Nelson and laid off 500 workers. 

“The longer US housing starts remain at current low levels, the more likelihood that troubles in the BC forest sector will trickle down to the BC consumer,” says BC Real Estate Association Chief Economist, Cameron Muir. “The forest industry is a large component of our economy and includes a broad range of workers and professions from forest workers to truck drivers to accountants.” 

Overall, Muir is optimistic, explaining that the health of the housing market has a great deal to do with the confidence of those who live, work and raise families in our communities. “We have high employment and rising wages and the economy is growing. Barring any unexpected shocks, home sales should remain strong in 2008.”

Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside

The Real Esate Board of Greater Vancouver released the monthly stats package for the month of January 2008. The main piece of news is that listings are on the rise (as the news release was entitled “New Listings Rise to Start the New Year”), resulting in a more balanced market.

Over last January, we saw listings rise 14.9%. From two years ago (January 2006) listings rose 34.7%. This rise has been predicted by market watchers for some time now, including the CREA and CMHC. The forecast has been that we are expecting listings to rise and prices to continue to rise, but at a slower pace. Of course, can we really call an 8% annual price increase balanced?

Sales also rose slightly by 0.7%. However, if we break down the numbers we see that Attached homes were basically flat, Detached homes fell and Attached home sales rose significantly by 11.7% over last year. I suspect that we are seeing the effects of steady price increases. Consumers are purchasing what they can afford, and for many a $1.2M starter home is simply out of reach.

A more balanced market is in our future. We’ll be seeing more listings and buyers can therefore have greater selection and a little more leverage. That being said, prices are still rising. As Brian Naphtali REBGV President points out, “The result will be welcome for consumers looking for more time to undertake due diligence before making a buying or selling decision.”

Sebastian Albrecht, Vancouver Realtor with Royal LePage