I’m always looking for new tools and in

formation to help consumers in their home buying journey. Yesterday, I learned of an online seminar all about the Ontario New Home Warranty program, administered by Tarion. Tarion is just launching it’s online seminar series, with their first offer, Understanding Warranty Coverage.

This seminar will be helpful, not only to those considering buying a new home but also those of you who bought a home with a Tarion warranty still in effect.

Check out the seminar by clicking on the picture below.

Take a look, and please leave a comment with your feedback on this information.

My friend, mentor, and excellent real estate agent in Austin, Texas, Krisstina Wise originally published this piece on her blog. I have taken the general information presented and related it to our local marketplace. My commentary is in italics throughout the article.

On the fenc

e?

• If I said that Interest Rates were going to increase tomorrow?
• If I said home prices were going to increase tomorrow?
• And if I said that both interest rates and home prices were going to increase tomorrow?

According to the report released by Bank of Canada Governor Mark Carney last week, we can fully expect interest rates to rise, although it won’t be tomorrow. Likewise, according to the activity we see in real estate markets around Southern Ontario, there is a likelihood of house prices increasing. The laws of supply and demand dictate that a shortage of product and an abundance of buyers is the recipe for prices to rise, and we are most certainly in that position.

What would you do?

I wonder why people today are on the fence. The question is somewhat rhetorical because I’m pretty sure that it is because they are waiting for prices to hit bottom – but really - are we still kidding ourselves to think we can time the market? Even expert investors are kicking themselves for failing to spot the bubbles in both the housing and stock markets — Isn’t that indicator enough that we cannot?

So if we are on the fence because we are waiting for bottom – that begs the question of:

“What is the Bottom?”

I think that most people think of “The Bottom” as housing prices hitting bottom before they begin their upward climb. But, if we agree that we can’t time the market, then really, how do we assess a good time to buy? How do we know the bottom when we can’t predict the bottom?

To answer this question I use the “Housing V”

The V shows us that the “Bottom” is not solely determined by home prices hitting “Bottom”, which is what I think most people think the “Bottom” is. The V shows that the “Bottom” is where both Interest Rates & Home Prices are at, well, the bottom (of the V). So let’s take a look:

To explain, let’s look at 3 different situations.

Situation 1:         1980s:

• Where were IR’s?
• Where were prices?
• Where was your mortgage payment?

In the market crash of the 80s, prices were at an all time low. That was the good news if you were a qualified buyer. The bad news was that the Interest Rates (IR’s) were at a record high (18%).

So, despite prices being low, High IR’s limited your buying power.

Situation 2:         2000s:

• Where were IR’s?
• Where were prices?
• Where was your mortgage payment?

In the mid 2000’s, before our recent crash, IR’s were historically low, BUT prices were at record highs. Yet, buyers flooded the market pushing prices even higher.

So, despite IR’s being low, high prices limited your buying power. Most buyers could only buy because of sub-prime loan deals.

Here in Canada, we didn’t have the same kind of sub-prime mortgages that they had in the USA, but we certainly had some questionable lending practises going on. People were racking up great debt levels on the backs of low interest rates, not only with mortgages, but with easily-attainable credit for most-all purposes. Fortunately, our financial system has the checks-&-balances in place to prevent the mess like the USA experienced.

Situation 3:         2009!:

• Historically low interest rates AND Low home prices

Right now, we are in what I like to call the ‘Buying Zone’. Interest rates are at historical lows. AND, Austin (milton house prices are following the same trend as those in Austin, as of the date of writing) home prices are lower than they have been in years. This combination of low rates and prices produces the perfect storm for buyers. Never, in my career, have we experienced this situation. I have only ever seen either one or the other of the two previous situations.

So let me ask you, do you really think interest rates will continue to go lower?

Do you really think prices are going to drop much more? Really?

How likely do you think it is that both dots will drop lower on the graph?

And, what happens if either dot jumps higher on the graph?

The Buying Zone

My interpretation and speculation: we are at a bottom. We are, in this moment, in a time where we can take advantage of both low interest rates and low prices meaning the ideal ‘buying zone’. What is important to note is that inflation equals higher IR’s. Interest rates are artificially low because the Fed is holding them down in order to stimulate the sluggish economy. Once the artificial hold is released, interest rates will climb. It is a matter of fundamental economics.

In addition to the perfect storm of a buying zone, in Austin (same goes in Milton) we have noticed spikes in sales activity, higher asking prices, multiple offers, shorter marketing times, more construction starts, and fewer incentives. Yes, in my interpretation, now is a time to buy and if you wait much longer – you may have missed one of the best buying opportunities we have seen in a long time. Waiting will mean a higher mortgage payment. Even if prices were to drop a little more, if interest rates spike, you will have waited too long. Another instance of “bad timing”.

Here come higher interest rates … if that is true … what will you do?

As further commentary, the Bank of Canada recently has started saying that it cannot guarantee holding off on raising interest rates until next Summer. Following is the just-released schedule of monetary policy announcement dates:

OTTAWA – The Bank of Canada today released its 2010 schedule of eight dates for announcing decisions on its key policy interest rate and confirmed the announcement dates for the remainder of this year.

That’s an interesting thought, spurred on by the number of conversations I have on this very topic every week. The number of conversations seems to be increasing the last couple of weeks, as people looking at real estate in Milton Ontario, Mississauga, and Campbellville become confused with what is happening out there.

You see, the Main-Stream Media (MSM) has spent so much time and effort fuelling the doom and gloom, and has only just started reversing their story, about 6 months behind what I have been reporting, that the public is only just beginning to catch up with the real reality. As opposed to the reality the MSM has tried to create about the real estate markets in the GTA.

You have to be careful when believing what is being reported by some media giant, and they are all equally bad, because they do no

t have specific data, relevant to your immediate area, updated weekly. Perhaps more importantly, media like The Star, National Post, and The Globe & The Sun, do not have the local expertise to provide real, on-the-ground information with local interpretations of the data.

There’s one part of the key – ‘on-the-ground with local interpretations of the data‘. On my main real estate site, AllMiltonHomes.com, I have an Internet Warning:

REAL ESTATE INTERNET WARNING: Despite advertising claims to the contrary, the Internet is not an experienced Real Estate Professional. It cannot consult, counsel, advise, have knowledge of local laws and market conditions, make judgements, ‘own’ the result, or most importantly, understand your individual goals and needs and care about you as a Client. To obtain an accurate interpretation of any information  you obtain online, please contact us.

To me, this pretty much sums it up – data is worthless in the absence of skilled interpretation.

So, on to the subject of this post – are rising house prices better for buyers or sellers? Would a better question be “are rising house prices good for anyone?”

Let’s look at it from a seller’s point of view – when prices are rising, the value of your present house goes up. That’s great if you are in the segment of the market that is down-sizing, and it’s also great if you are relocating to a less-expensive marketplace. However, it is not so great if you are moving up in the same general marketplace. Let’s suppose your present house is valued at $400,000, and prices go up by 10%; that would make your house worth $440,000, which is pretty cool. However, the other side of that is, if you are like the average move-up buyer, you will be spending 30% to 50% more on a house, which means that the $550,000 house you were thinking of buying is now going to cost you $605,000. So, your current house went up $40,000, your new house went up $55,000, with the net result that you lost $15,000. I’d say that rising prices are not so good in that situation, wouldn’t you?

What about looking at things from a buyer’s point of view? Well, that’s a pretty simple conclusion – the more prices rise, the more a house costs you, so it can’t be a good thing, right?

Hmmmmm. So, if rising prices aren’t good for sellers or buyers, why is it that the real estate buying and selling public historically act against their best interests? To understand that thought better, look at the ‘feeding frenzy’ that was the real estate markets for most of the first 2/3rds of this decade – the faster houses were selling and the faster prices were rising, the more buyers their were competing for them. Now, when prices are, in general, lower and houses are, in general, taking longer to sell, there are less buyers out there and less sellers out there. Hmmmm.

So, where are you in the real estate market? Buyer? Seller? Are you active in the market right now? Why not? Let’s talk about it.

By Glenn Curtis

Many people assume that they can simply 1) buy a house, 2) apply a fresh coat of paint, 3) trim some bushes, and then 4) resell the home at a profit. Unfortunately, this process, called “flipping” is not that easy. After all, if it were, everyone would be doing it. There are several skills and people that every potential investor/flipper should have in place before even considering entering into a real estate transaction of this nature.

(If you’ve ever watched shows on HTGV or TLC on flipping houses, some of them make it look so easy, and it is just an unfair portrait to paint. First of all, you have to remember that the shows are filmed in the USA, where banking laws are much different, thus allowing for lower costs to the flipper. Also, building supplies are often much cheaper, thus allowing the flipper to make more money. Want a laugh? Google some of the ‘stars’ of those shows and see the trouble they are in.)

Here are the top five “must-haves” you’ll need to succeed in this endeavor.

1. A Group of Experts

While a house flipper can certainly go it alone, it will certainly help to retain individuals that are familiar with the legal, accounting and construction ramifications of flipping houses.

Flippers typically work against the clock, so they must renovate a home on budget and then turn it around and sell it before the financing costs eat up their profits. In any case, a bevy of experts including a real estate agent, a lawyer, a contractor or renovator, an accountant, a home inspector and an insurance agent can ensure that the work is completed in a timely and efficient manner.

2. A Handyman or Knack for Home Improvement

The house flippers that make the most money buying and selling homes tend to be handy people. That is, they have the ability to step in and lend a helping hand when time or money constraints kick in. Most flippers can do things like change a sink, install a countertop, do basic electrical or plumbing work, and/or shingle a roof.

Why is being handy so important?

The obvious answer is that if you can do the work yourself, you won’t have to pay someone to come in and do it. However, there are other advantages to being handy as well. For example, there are times when it will be impossible to get an electrician to install an attic fan on short notice. There are also times when a job must be completed without warning at the last second in order to obtain a certificate of occupancy. In these instances, having the ability to navigate your way around a tool box is very valuable.

3. A Good Lay of the Land

The buyer should know about the area in which they are buying property. A buyer should know, for example, what characteristics (acreage, number of rooms, type of home, etc) are the most desirable in the area in which they are looking to buy. Equally important is knowing what houses in the general vicinity have sold for and if there is likely to be any future development in the community (such as a new school, condominium or shopping center) as this could affect supply and demand.

4. A Good Estimator

By definition, house flippers attempt to buy a property and then resell it at a profit in relatively short order. In order to do this, however, the flipper must typically make some structural and/or cosmetic changes to make the property more appealing to the next buyer.

If the flipper underestimates the costs associated with the refurbishment he or she may be exposed to large monetary losses. Therefore, a flipper should be familiar with construction materials (their use and their cost), as well as local construction codes, the cost of local labor and the time it should take to do a given job.

This is no small feat. In fact, it takes even the most seasoned construction professional many years before he or she is aware of all the nuances that exist. In any case, before becoming involved in “flipping”, be certain of your abilities to estimate a job in terms of both cost and time.

5. A Dose of Patience

One of the biggest obstacles to making money in the real estate market is that buyers tend to overpay for a given property.

Why do buyers overpay?

Typically, buyers become emotionally attached to a property or develop some other bond with it, which in turn forces them to enter into a contract on less than favorable terms.

However, savvy flippers have the ability to avoid emotional purchases, and the desire to find diamonds in the rough and properties on the cheap. They also understand that if they aren’t buying a property at a favorable price and with favorable terms, it makes sense to simply move on to greener pastures.

The bad news is that patience is a difficult virtue to teach and hone. In general, either you have it or you’ll lose a lot of money trying to learn it.

The Bottom Line

While quitting your job and becoming a full-time house flipper may sound like an attractive proposition, be sure that you have these five “musts” before investing in a real estate project.

(There are many better and easier ways to make money through real estate investing – come to one of our FREE Millionaire Real Estate Investor workshops to learn about them. Click the link at the top-right of this blog to get information about when the next workshop is being held.)