30 year amortization mortgage. Now what?

Hi there, my name is Shannon Lorenz. If you have seen the rest of our website you know we are a family business and my husband is the founder of LDL. Jason is an amazing contractor/craftsman and I am the organizer/number cruncher and I love real estate (which leads us to tonight’s post!). As a side note,  I am the one who does most of the blogging here on LDL, however, we also have guest bloggers and the posts are written about renovation, new home build and investing tips!

With all of the media hype about Vancouver’s real estate market, I wanted to talk about the changes in the mortgage industry and what this means to us in Vancouver and surrounding communities. I have been apart of the Real Estate Action Group led by Ozzie Jurock & Ralph Case off and on for 4 years now.  I love real estate and this is a super efficient way of being in the know of what is currently happening.

As many of us know, the last 5 years of being an owner in real estate has been a bit of a roller coaster ride in BC. If you were an owner in 2007, you could sell your house at a premium and even apply for a 40 year mortgage.  Now, in 2012 we are seeing 30 year mortgages (a reduction of 10 years!) and still have record low interest rates.

According to my latest Jurock’s Facts by Email , the newsletter quotes:

“There’s been a clear reduction in buyer demand in the three months since the federal government eliminated the availability of a 30-year amortization on government-insured mortgages,” Eugen Klein, REBGV president said. “This makes homes less affordable for the people of the region.” Well, yes, but clearly that cannot be the only reason.

New listings for detached, attached and apartment properties in Greater Vancouver totalled 5,321 in September up by 31.6 per cent compared to the 4,044 new listings in August 2012.

At 18,350, the total number of active listings on the MLS increased 14 per cent from this time last year.

“Today, our sales-to-active-listings ratio sits at 8 per cent, which puts us in a buyer’s market. This ratio has been declining in our market since March when it was 19 per cent,” Klein said. Indeed!

So what does this mean?! Is my house going down in value now?

Jurock goes on to explain his major points:

1. A quick look shows only a 3% decline in the overall price average (all properties between Lions Bay and Mission), yet when you look at February 2012 ($806,000) and May 2011 ($834,000) prices in September 2012 ($724,600) are down by 11% and 13.5% respectively.

2. New home sales (several over $3 million) distort the price average further.

3. The 30% decline in new condo prices likely reflects only the fact that developers are creating smaller units

4. There is a wide discrepancy between areas. Some area sales are down as much as 50% others much less so. Same with prices.

As we have said all year … no need to rush to buy but maybe a good time to make some offers is coming up. What to offer on? Watch your preferred area closely. Understand what is for sale, watch for price reductions, select a good realtor, make low ball offers. The ‘deal of a lifetime’ comes mostly in down markets.

Shannon says:

Being apart of this group has given me the ability to understand what a good or bad deal is when you analyze real estate investments.  Its given me the confidence to know how to properly ask questions and to understand what to look for when analyzing cash flows.  Its important not to panic and not to  get excited by hype, buy the deal because it makes sense to.  You can buy a good deal in a hot or dead market, its truly all about the deal you buy….don’t forget, negotiation is key. Good luck!

Do you have a real estate investing group that you attend to, and what has it taught you?

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