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All posts for the month June, 2017

Housing ‘Bubbles’ Expanding Around Big Cities in Canada

Published June 26, 2017 by Real Estate Leads

Rising house sales conceptThe immense disparity between supply and demand when it comes to real estate in Canada’s biggest cities is well understood, and most people are similarly aware of the potential for a bursting of the housing ‘bubble’ in both the metro regions of Vancouver and Toronto most notably. Recently, however, economists have pointed out a trend where the bubbles – and the exorbitant prices on real estate fueled by speculative purchases – are now encompassing the satellite regions of these cities as well.

Here at Real Estate Leads, our primary focus is on providing a way for realtors to get more business leads but we’re also keenly aware of the extent to which the market and its dynamics factor into the success of the very people we’re marketing our product to. Accordingly, developments like this are of interest to us, and we think this particular one is especially deserving of some note.

Big Time Heat Up Around Toronto

Average home prices in some regions surrounding Greater Toronto have jumped by 40 to 50% in the past year, and with it has come a rapidly-spreading price bubble: The fastest price growth was seen in the areas surrounding Toronto, rather than in the metro area itself. This of course is a result of prospective homeowners who’ve been priced out of the GTA now looking increasingly farther in search of more affordable housing.

Prices have been inflated due to more bidding throughout the Golden Horseshoe. and with that comes the same trend that’s always attached to such phenomena. Homes and properties that are selling for more than they are truly worth, and individuals and families assuming dangerous levels of household debt.

Insiders report prices in the areas surrounding the GTA increasing at an even faster pace than they have within the GTA. And this article from the Province in Vancouver indicates that the same super-inflated status applies to the suburban areas around Vancouver too.

In both areas, strong fundamentals are holding up the region’s housing market. Mortgage rates are low, job growth is strong and there is considerable added pressure coming from foreign buyers. Still, these fundamentals cannot readily explain the pace of the price increases seen in the satellite cities of Toronto and Vancouver over the last 18 months.

What it is, quite plainly, is a ramping up of the real estate speculation that the foreign buyer taxes were supposed to temper. There are rumours that certain provincial governments (and it’s not hard to assume that BC and Ontario are the ones in discussion) are considering a speculative buyers tax to complement the existing foreign buyers taxes brought in by each government within the last year. Each has had a positive effect in cooling the market, but those who said it would be a temporary reprieve seem to have been correct – the market is now picking up again, and particularly for condos and town homes.

Of course, the question becomes how effectively such a policy could be enforced, unless whether or not the home was lived in or rented was vigorously verified in each case.

Prices Outstripping Rents

Look no further than condo prices as signs of speculation in these cities’ housing markets. Property prices have been handily growing faster than rents, making real estate investments less lucrative. Despite this, the pace of investing has sped up immensely. This creates a potentially “destabilizing” environment and something that gives the banks considerable concern.

That concern, defined specifically, is this; when expectations reverse and prices recede, investors may quickly sell their assets, possibly leading to fire sales with adverse consequences for the rest of the market. Should a correction to Toronto’s and / or Vancouver’s housing market occur, it’s’ bound to have negative ramifications, and in particular with its connection to household indebtedness and how homeowners could find themselves disadvantaged big time with the value of their home having dropped significantly.

Banks say there is a “moderate” chance of a housing correction in Toronto and Vancouver. It would hurt the country’s economy and destabilize the financial system, and would also be a drawback for real estate agents and the vitality of the industry as a whole.

Sign up for Real Estate Leads here and have qualified online-generated buyer and seller leads delivered to you exclusively for your similarly exclusive region of the country. It’s a great way to build your business with the power of the Internet.

 

Traditional Mortgages Riskier Than Ever According to BoC

Published June 19, 2017 by Real Estate Leads

Mortgage concept. Financial agent complete wooden model of the house with last piece with text mortgage. Wide banner composition with bokeh background.Home buying has never been a particularly inviting and reassuring process for most, but recently there’s been plenty of discussion in the media about the role high-risk borrowers play in making the financial lending pillars a little too shaky for the big banks’ (and the economy in the bigger picture considering the role housing plays in it) liking.

The question here is how are traditional borrowers doing across Canada? Not so long ago, the Bank of Canada updated Canadians on how low-ratio mortgage originations did in the previous year, 2016. In their quarterly report on vulnerabilities and risks, the growth of low-ratio mortgages was called out. It would seem that well-leveraged home buyers represent a significant portion of the purchasing whole, and that mitigates much of the risk for banks. However, these buyers are – not surprisingly – taking out significantly larger loans much more often, and the way that increases amortization terms is posing risks for real estate markets.

Here at RealEstateLeads, we offer a valuable tool that provides a way for realtors to get more listings, but we understand that sharing knowledge with those agents in order for them to make buyers ever more qualified for the life-altering purchase they’re about to make is definitely beneficial as well. So let’s discuss this recent concern regarding traditional mortgages.

Low-Ratio Mortgage Borrowers
A low-ratio mortgage borrower is a buyer who has a significant down payment when buying a home. Sometimes called a “traditional” mortgage, it will typically stipulate that a 20% down payment is required. According to the BoC, a low-ratio mortgage borrowers averages a 30% down payment at this time. These are the least risky types of mortgage holders. Or in theory at least.

These types of borrowers continue to be the client of choice, but the BoC has been taking notice of the risks associated with their borrowing preferences. First off, after a 35% down payment, income documentation rules become “less stringent”, as the bank puts it. Part of that means income verification is not undertaken. That’s not a particularly pressing issue since the likelihood of a home’s value dropping by 35% is fairly unlikely, but it’s a possibility nonetheless and some would say it’s more possible than ever before and particularly in specific locales.

The average loan-to-income rate across Canada for low-ratio mortgages saw minimal growth throughout 2016. A loan-to-income rate is exactly what it sounds like – the ratio of the amount borrowed on a mortgage in comparison to the amount of income generated by the household. 3 years ago this number was 271%. One year later, it had jumped to 292%, a 7.74% change. 2016 saw it increase to 296%, a 1.36% change. This should be regarded as a positive, but it should be noted this is across Canada. In-demand markets like Toronto and Vancouver are burdened by markets that many people would figure have no correlation.

Low-Ratio Average Loan-To-Income Above 450% Is Growing
One specific risk highlighted by the BoC is the number of low-ratio mortgages with a loan-to-income ratio that stands above 450% is growing. In 2014, the number of low-ratio mortgages had a loan-to-income above 450% was only 12%. By 2015, that number leapt to 15% of all mortgages. In 2016, the total of low-ratio mortgages above that 450% loan-to-income mark was sitting at 17%. It continues to grow, fuelled in large part no doubt that Canadians have shown themselves to have little to no fear of extreme housing debt, or being ‘house poor’ as the term goes.

The BoC is quite justified in their concern about this segment, and for a pair of reasons. The first is the sheer size of loan, while the second is the documentation of income. When your loan-to-ration tops 450%, there are inevitably going to be doubts about your ability to keep up with the payments. Further, when they’re low-ratio mortgages, it’s not unlikely that income wasn’t verified as stringently as perhaps it should have been. Should the borrower haves a significant change to their income or a change in ability to withdraw income from another country, there’s a real potential for big-time problems.
The risk to the lender isn’t all that prominent in such an instance, but the issue is that it threatens the equity of neighbouring homes when it happens repeatedly. Unfortunately, the nature of the market means the stage is very much set for that to happen in specific regions.

Low-Ratio Mortgages Are Taking Longer Terms
Another growing trend is low-ratio borrowers choosing longer amortization periods. In 2014, 42% of low-ratio mortgages had terms that stretched longer than 25 years. In 2015, that number jumped to 46%. Now, the number for low-ratio mortgages with amortizations longer than 25 years is 51%. It’s a growing trend, and one that obviously would be troubling to lenders.

It has the potential to be particularly problematic because of low interest rates. Mortgage rates are already at historic lows, but any type of significant uptick could be very tough for the borrower to absorb. One could increase the length of their mortgage, but that length of amortization may not be available in the future. Should that be the case, you would have to take a shorter amortization and increase your payments dramatically. Not difficult to see where this is going, and why it could be potentially devastating for borrowers.

Yes, the risk associated with these types of loans are likely exclusive to overheated markets like Toronto and Vancouver. They don’t present much of a concern to banks, on account of the cushion applied to down payments.

The concern should rest exclusively with the homeowners, and those prospective homeowners may be your clients. Be sure to have a reputable mortgage broker / advisor on tap to recommend to your clients, and do consider signing up for RealEstateLeads here to get qualified online-generated buyer and seller leads delivered to you exclusively for your specific region of the country.

Best Promotional ‘Swag’ Choices for Real Estate Professionals

Published June 13, 2017 by Real Estate Leads

Home keyIn today’s super competitive market for real estate agents, you need to make every effort and really strive to get your name and brand front and center for prospective clients. Here at Real Estate Leads, we are enthusiastic about providing realtors to have success with our online real estate lead generating system, but we’re also keen to help you make smarter choices on your own.

Today, we’re going to discuss which promotional items are best for getting increased exposure and how you can allocate your marketing and promotion budget more judiciously as a result of having the understanding. No matter how you tend to disperse this ‘swag’ as these types of promotional items have come to be referred to, there is plenty of it out there to choose from.

The key is to find products that will generate buzz and leave a lasting impression.

Pens, keychains, notepads, business-card holders, USB sticks and more. But does distributing your promotional materials really pay off, and if so – how much, and which items are your best choice?

Well, for starters, research has indicated quite clearly that they absolutely do pay off. Now how much and which are best will vary, but let’s move now to discussing the types and then we’ll discuss some of the variances in how swag can contribute to you generating greater numbers of new clients.

Putting Your Name & Agency In Front of Buyers & Sellers

Swag used for marketing purposes falls into one of two categories. Promotional products include useful or decorative items imprinted with the real estate agent’s name, logo or message and then distributed free to would-be clients. Imprinted items that are offered as an incentive for a specific action are known as premiums.

Manufactures of promotional products like those listed above report a consistently strong demand for these types of products from real estate agents, and that’s true of every region in the country.

Here are some interesting findings regarding how effective it is for realtors to distribute promotional materials to prospective clients:

84% of people remember the advertiser shown on a product they’ve received
42% develop a more favourable impression of an advertiser after they’ve received a specialty advertising product
24 % report being more likely to do business with an advertiser they’ve been reminded of via items they’ve received
62% of respondents have done business with the advertiser listed on a product after they’ve received it and it’s been in their possession for more than 2 weeks

And this last one is HUGE. Take especial note:

The average cost-per-impression attached to an advertising specialty item is $0.004, making it less expensive per impression than nearly any other medium

Other research has indicated that 58% of those responding to a survey said they kept these types of promotional products from anywhere between one to four years. Consider that even if the recipient only uses the item once per week, that adds up to a minimum of 52 impressions over the course of a year plus the possibility of more than 208 over the next five years.

Further, promotional products foster positive regarding of a business by:

Increasing in positive overall image;
Increasing the positive perception of that business;
Creating a higher likelihood of recommending that business
Creating a higher likelihood of their patronizing that business

The Importance of Useful

Promotional products that actually add value to a customer’s life in some way are light years more effective than any type of impractical stuff they will likely end up throwing out before long.

Useful promotional swag items for realtors should improve the prospective clients’ life in some way, while still being relatively affordable for you to buy it in quantity. In addition, it should be personalized with your real estate info so you will be the first tome come to mind when they think of acquiring the aid of a qualified real estate professional.

Best Ideas for Promotional Items

Two particularly smart choices for real estate agent swag are a branded tissue box sleeve and a branded pocket hand sanitizer sprayer. The tissue box sleeve will slide over a store-bought square issue box, and for most people that box will sit somewhere in regular view for months upon months. The cost per sleeve shouldn’t be much more than $3, if that.

Those branded hand sanitizers typically go for about $2.00 each and also will last for a good long while. Further, they show you care about the recipient and by that they are intended to create a more personal, authentic connection

Other good ideas for realtor swag are:

Credit card RFID protectors
Jar openers
Fridge magnets
Calendars
Keychains
Fly swatters
Tape measures
Smartphone desk stands

While all of these above are good choices, we’ll conclude today by saying that when you are considering any of them you should go through a series of questions regarding the specifics of your relationship with the prospective client. You should ask yourself

What is the potential return on investment?
What season of the year is it?
Is it more likely to be left at the office, or taken home?
Is it a novelty item, or useful item with some practical value?
What are your competitors doing similarly?
What have you yourself received that made an impact on you?
What will the cost of distribution be?
How long is this particular item likely to last / be retained?
Is it too overtly ‘saying’ that you are trying to buy their business?

And the most important question for any marketing strategy – can you measure its effectiveness?

We hope this communication is helpful for any of you who’ve been wondering where to best spend your marketing budget funds when it comes to promotional swag items. Whatever you can do to make you visible as a realtor is beneficial, in much the same way that signing up for Real Estate Leads here is a huge plus too, with qualified online-generated leads delivered to you exclusively each month and for your exclusive region of the country. Make sure you get your locale by signing up without delay!

New Report: 102 Weeks of Saving for a Down Payment – Canadian Average

Published June 6, 2017 by Real Estate Leads

realestateleads_house and piggy bankIf it wasn’t already immediately apparent, there’s new figures confirming what most of us have known for some time – it is increasingly difficult for young Canadians to save for the purchase of a first home.

Here at Real Estate Leads, we understand that we provide a valuable service in helping realtors build their business, but we know that there needs to be a health housing market in place for realtors to have the successes they have for both themselves and their clients. It’s for this reason that news stories like this should be of some concern for all.

According to a new report from Mortgage Professionals Canada, it now takes about twice as long for the average Canadian worker to save for a down payment as compared to what it did 15 years ago.

The survey from the fall of last year indicated that the rapid rise in house prices have resulted in down payments on the average home increasing significantly compared to the average income. The Canadian Real Estate Association confirms this, reporting that the time required to build up a down payment is equivalent to 102 weeks when working with the average wage in Canada. 15 years ago, it wasn’t even half that.

The widespread understanding amongst those in the industry is that incomes have not risen at all in comparison to house prices. Those first-time buyers are taking significantly longer to amass the means for a down payment. Keep in mind also that first-time home buyers can’t simply save every paycheque towards their down payment, and others still may even be working with an income that’s below the national average, which of course means it will take even longer for those folks to save for their down payment.

Naturally, that could be even longer still in Toronto and Vancouver where home prices have risen more drastically over the last decade plus. In other areas where house prices are more in line with average incomes, it could be shorter. It seems also that down payments for first-time homebuyers have continued steadily at about 20 % of purchase prices.

Loss of Purchasing Power

With this understood, it’s easy to sympathize when you learn next that saving up for a down payment is but one of a few hurdles first-time buyers may face in today’s market.

October of 2016 saw new mortgage rules requiring buyers with a down payment of less than 20 % to qualify for the Bank of Canada’s 5-year fixed rate of 4.64%. This examples a more robust mortgage “stress test” that is designed to ensure a borrower can still make their mortgage payments if interest rates increase – or their income decreases.

All in all, it does make for a more expensive loan, and that’s still true even when they don’t have to make higher payments. Do these new rules hit first-time buyers the hardest? Most seem to thinks so, and specifically in that it strips them of a good portion of their purchasing power. Some buyers need every dollar the banks will give them, and even the slightest inadequacy may squeeze some of them out of qualifying for home ownership.

While it always comes back to the simple economics of supply and demand, the reason that this trend is troubling is that it seems a good number of the people who are being affected by this are the same ones being chronicled in the news for their moving away from cities because they simply can’t afford to house the families at an acceptable level there. Oftentimes these are young professionals who have long-term value to the overall prosperity of the community, and those communities don’t want to lose those people.

Here’s a way of putting it in perspective for you. If, say, a buyer with 10% down and who currently is eligible for a $527,000 mortgage will only qualify for $420,000 under the new rules. That computes to a roughly 20% drop in purchasing power

That statistic there really sums up the potential stumbling point that many otherwise fully-qualified buyers may have in Canada in the future. We hope that Federal initiatives will be undertaken to maintain the affordability of housing for all Canadians, and believe that there will be a positive correlation between that and the real estate industry we all work within.