MLS® Residential Sales Post Record Fourth Quarter

- MLS® sales surged 43 per cent to a record 1,326 units compared to last year’s fourth quarter sales of 926 units
- October, November and December MLS® sales were 475, 497 and 354, respectively
- Fourth quarter average MLS® residential house price jumped 11.4 per cent to a record $153,196 compared to $137,478 during the
fourth quarter of 2006

Resale Market Returned to Balanced Classification

- The current sales-to-active listings ratio trend and other factors combined, suggest the Market is heading quickly to a sellers classification and already has in some neighbourhoods
- Average time-on-market trended lower during the quarter and price growth was very strong
- A further firm reclassification to sellers will depend on first quarter 2008 results, but likely to occur based on current market trends

Active Listings Decline

- After climbing since 2003 and hitting a record high in July, active listings declined during the fourth quarter for the first time since the second quarter of 2004
- The supply of both new and active residential listings averaged 2,070 during the quarter compared to 2,216 a year ago
- New listings decreased 15 per cent, while active listings retreated 7 per cent compared to the fourth quarter of 2006

Click here for the full St. John’s MLS Trends Q4 2007 including graphs.

National MLS® resale housing activity, new listings, average price and dollar volume all reached their highest annual levels ever in 2007, according to statistics released by The Canadian Real Estate Association (CREA).

Annual sales activity totaled 520,747 units in 2007, up 7.6 per cent from 2006 levels. This was the largest annual sales growth since 2002, and the first time transactions via the MLS® systems of real estate boards in Canada have surpassed 500,000 units sold in one year.

MLS® sales activity set new annual records in Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. Saskatchewan posted the biggest annual increases in activity, up 31.9 per cent from 2006. Activity also rose 26.4 per cent in Newfoundland and Labrador, and climbed 18.6 per cent in Prince Edward Island.

The national MLS® residential average price continues to climb. It set a new annual record in 2007, rising 11.0 per cent. In the fourth quarter, it rose 12.1 per cent year-over-year to $314,591. On a monthly basis, average price rose 14.1 per cent year-over-year to $317,825 in December – a new record, and the largest year-over-year price increase in almost 20 years.

Last week both the United States and Canada dropped their interest rates, 0.75% and 0.25% respectively. With the recent subprime mortgage fiasco in the U.S, people have been asking was the rate reduction due to this? Will Canada follow the same fate? And most importantly….what exactly is a subprime mortgage?

Here is my interpretation of the subprime mortgage:

The Bank of Canada has it’s prime rate. Banks and lenders then offer a mortgage at competing rates to potential pre-approved home buyers.

A subprime mortgage refers to a mortgage offered to a borrower that is higher risk than the normal home buyer. They do not receive a lower interest rate. It’s actually the complete opposite. Potential home buyers who have poor credit scores make them candidates for a subprime mortgage and they typically pay much higher mortgage rates.

The problem was that the lenders offered an introductory rate which was comparable and at times lower than the prime mortgage rate to attract clients. You can begin to see the bigger picture forming.

The introductory rates were only temporary and after a year or two they expired and the interest rate on a subprime mortgage increases. This resulted in many, now home owners, who once had a low introductory mortgage rate paying interest rates in the double digits.

Remember, they were high risk from the start with “special” introductory offers. When the rates jumped to double digits, the subprime meltdown began.

Facebook is a social utility that connects people with friends, acquaintances and past school mates. The latest addition to this trendy website, it can now connect you with Facebook Real Estate Listings. Whether you are looking for rentals, leases or to purchase real estate, Facebook is becoming a hot spot for advertising.  The best part, most are posted here BEFORE they are seen on MLS.ca

To test it out I recently added a listing for a condo on 117 Queens Road, the number of emails received from posting on Facebook was over whelming.

Along with finding your long lost friend from high school, you can now find that 3 bedroom home in downtown St. John’s to rent or a 2-apartment home in East End St. John’s as an investment.

While new home construction in Newfoundland and Labrador is booming, it is not uncommon now to see a six month closing date on new home construction. With a good percentage of the trades people presently working in Western Canada, some contractors are finding it difficult to recruit enough local trades people.

It is estimated that as much as10,000 Newfoundlanders and Labradorians are working out west for companies such as Syncrude, Suncor and Flint Energy, to name a few.

An estimated 4,000 are working on a rotational basis commuting to and from the province, bringing millions of dollars to local communities throughout Newfoundland and Labrador. Some of these commuters are staying in camps, where food, lodging and travel to and from the province are all fully paid.

Workers are drawn to jobs that often start above $100,000 per year and lots of overtime.

While it all may seem wonderful, it has to be a burden on the family structure with 20 days away and back home for 8 days of rest in a repeat cycle.

Can it last? What kind of wages would be required to keep at least some of our trades people home, and what affect will this have on the price of new construction?

The outlook for Newfoundland Real Estate for 2008 will be positively supported by a strong provincial economy, with the average MLS® price forecast to increase 6.4% to $157,500. REMAX is suggesting a 12% increase which would put the average price around the $170,000 mark. The expected increase in single detached and two apartment homes can be seen already, and it’s very early in the new year.
Currently we are experiencing low housing inventory and a high number of buyers. Now is the right time to sell your house for maximum value.

I recently read a review of average St. John’s House prices from 2002 - 2008 (forecasted) from CMHC. Good to see the St. John’s real estate market on the rise in recent years.

2002 - $113,081 2003 - $119,822 2004 - $131,499
2005 - $141,167 2006 - $139,542 2007 - $148,000
And forcasted for 2008 - $157,500

January Newsletter Fraser and Stephen Winters - Remax

Investing in a rental property can be a great way to build wealth. Done right, you get someone else to pay your mortgage, then pocket a big payoff when you sell. With today’s St. John’s surging real estate prices, the prospect of making a fortune in the property market is luring many first-time landlords into the business.

What should you know before you take the plunge in the real estate market? Firstly, keep in mind is that property prices don’t always go up by double-digit amounts every year. (CMHC is estimating 6% increase for 2008, REMAX is estimating 12%) Restraining your enthusiasm can be difficult when prices are jumping all around you. Successful landlords base their investment decisions upon a property’s ability to put money in their pocket right now. Any capital gains when the time comes to sell are a bonus.

Before agreeing to buy a property, you should scan the classified ads to determine what you can reasonably charge in rent. This rental income should be enough to cover all of your operating costs — including mortgage payments, utilities, maintenance and property taxes — and generate income as well. Aim for an annual return of 6% to 9% of the amount you have invested.

Example: you plan to buy a house for $150,000 and you put down $50,000 as a down payment. Your goal should be to pocket $3,000 to $4,500 a year — that’s $250 to $375 a month — after the mortgage, taxes and maintenance are covered.

Be realistic: Will the rental market allow you to charge enough to cover that return? Don’t forget to build in a “rainy day fund” for the weeks or months the unit may be vacant.

True, in addition to your monthly income you’ll also be building equity in the property, but if the market turns down, your equity may evaporate. Many landlords go wrong by assuming their property’s value will inevitably go up. We have been seeing increases for quite a while in St. John’s, but that doesn’t mean we always will.

Even if the numbers look good, you have to ask yourself if you’re prepared for the day-to-day headaches of looking after a property. It’s not for everybody. The biggest difficulty is finding the right tenants. Dealing with tenants can be quite cumbersome. Familiarizer yourself with the Newfoundland Landlord Tenancy Act.

Incase you’re wondering, you have to claim your rental income to Canada Revenue. You can however deduct from the income any expenses related to the property, including property taxes, mortgage interest , house insurance, and any maintenance or fees for professional services. When the time comes to sell your property, you enjoy a bit of a tax break. Only 50% of any capital gain is added to your taxable income.

Most successful landlords regard real estate as a long-term investment. If you’ve bought at the right price, you enjoy a steady steam of rental income while watching your tenants pay off your property over a couple of decades. Then, if the market is good, you sell — or continue to enjoy your steady rental income.

If you require more information on investment properties in St. John’s please call or email Fraser or Stephen Winters and we’ll be happy to assist you.