Walk Score and the Value of Your Home: It Makes a Difference!

Walking is good for us. We all know that. We're been told over and over to get off the couch and go for a brisk, healthy walk.  It keeps the blood flowing, reduced stress and it if you have a dog, that dog would be thrilled with more walkies. BUT here's some thing you may not have known: Walking is good for the value of your home.

Huh?  I know. Sounds pretty nuts, but there are some convincing theories gaining in popularity around some thing called a walk score. So far, this research have been done mostly in the States. It suggests that there is a direct relationship between the value of a given property and if the people who live in these homes are able to walk to where they want to go. So, if you live in a neighbhourhood where locals walk to the park, the schools, the coffee shops, and nearby restaurants or transit routes, then you are more likely to own a property that will increase in value or hold its value in a down market compared to other homes with lower walk scores. Not only that, but you will likely live in a neighbourhood with a lower crime rate. With more human traffic around, there seems to be less criminals willing to commit crimes. In many cities, like Toronto, you can find out your walk score. All you need to do is go to www.walkscore.com and type in your address. Then you can find out just how well your home, or maybe the home you would like to purchase some day, stacks up against other homes. You'll find out just how walkable your property is, and in turn, get a sense of its value. 

In some ways, there's not much new here.  Suburbs score less in walkability and therefore increase less in value. And historically, prices generally seem to reflect this. This is why many new urban planner are trying to build new communities that are real communities, where people can walk to their local stores, and get to know each other a little better. 

As suspected, the cities with the highest walkability scores - New York and San Francisco - are the two most expensive cities in the U.S. to buy property.

In Toronto, if you live in a place like Leslieville, West Bend or any other neighbhourhood that is emerging in the city, you will likely live in a place where the walk score will improve over time. And in turn, up goes the value of your house. 

As a real estate salesperson, I drive every where. So, I'm not here to say you should personally walk to where you need to go. But you should take note: If you could walk to where you need to go or if your neigbhours are walking, it can have a some bearing on where you buy your next place or how much your current home is worth. 

What the Improving American Housing Market Could Mean for Canada

I don' think it's official yet. BUT it looks like the American housing market may have stopped hemorrhaging. How do I know? Well, I don't know for sure, but in some of the worst hit areas in the States, there has been a turnaround with prices in places like long-suffering Florida and sucker-punched Arizona. We know it's not the same all over the U.S. The sunniest states, with the most secondary properties, were hit the hardest whereas places like New York City remain a pricey place to live.  

Wherever they live, most Americans are good and ready for any sign that their real estate market may be improving. There has been roughly 9 million Americans who have defaulted on their mortgages. Properties in some locations are now worth less than half of what they were at the peak of the housing market. So we all know how the Yanks have suffered.  

But it's not just about stats on the States. I just returned from a trip to Europe, where the Americans I met while I was there, were downright giddy about their real estate market. I have not seen giddy Americans in a long time. I don't think they had any illusions that things will become robust and return to the heights they were at in 2006 and 2007 any time soon. After all, the banks still have quite a bit of foreclosed homes in their possession and unemployment in the U.S. is stubbornly high. Still, it's nice to see some warm and fuzzy feelings about real estate for our southern friends. 

As Canadians, who have not suffered like Americans, you might think it really doesn't matter what happens down there -whether the news is good or bad. You may believe that our housing markets and mortgage rules are so different that Canadian and American real estate really don't effect one another. After all, our housing market didn't take a nosedive when theirs did. So, what effect does an improving American housing market have on Canadians and their housing market? The truth is, quite a bit. 

We Canadians are buying up a lot of the property in those sunny American states. And who can blame us? Our strong dollar makes American homes much more affordable and prices are at an all time low. So, we invest there and not here on vacation homes. We are some of the foreign buyers who are gobbling up U.S properties and helping their housing market recover while not overheating our own vacation property market. 

But we are not the only ones. Other nations from Europe, Asia and the Middle East are now also looking to the the U.S. to buy property. There is a feeling that things are stabilizing there and ready to appreciate. So foreign investors who have invested heavily in Canada over the past 4 years, because we had one of the few stable housing markets in the world, are now looking to the Americans for deals. 

Is that such a bad thing for Canada? I would say no. Quite the opposite. There has been some concern that there is too much foreign investment in Canada in the past 4 or 5 years. Canada does not keep track of foreign investment in the housing market at the moment. They should. But they don't. The worry is that if there is too much foreign investment in one city or country, then if some thing goes wrong, those investors will pull out all at once and cause the housing market to become unstable. So, the fact that more foreign investors are considering the States means that there could be fewer in Canada. So, in turn, the worry of foreign investment overwhelming the Canadian housing market becomes less of a concern. 

Now, if you don't really buy any thing I'm saying here, fair enough.  These are not all foregone conclusions. These are just a few educated ( or maybe whimsical) predictions. But I can see the early buds of an American recover that I think will help to keep our our own housing market healthy and steady. 

 

To Rent or Not to Rent - Is That the Question?

To rent or not to rent? No, it's not Hamlet, but that is the question for many people. For some renters, they haven't saved up enough money to buy some thing just yet, or they simply prefer a lifestyle where the flexibility of renting feels like a better fit. Sure, you don't build equity, but you have less responsibility. Then there are those renters who follow the sales of real estate market more closely than most homeowners. They are waiting for that magical moment they believe will come, any day now, where the market tanks. Then they can rush in, snap up the deals, and laugh at all those foolish buyers who bought at the peak. Mwaaa ha ha ha! Some of these renters have been waiting for the past 20 years when a pleasant home in Toronto could be bought for a couple of nickels. Well, maybe not that cheap, but you get the idea.

Believe it or not, though, this latest blog really isn't about whether renters should buy or rent. I'm a real estate salesperson. So,  I am admittedly biased on the subject. But I do think so much attention has been given to the buying side of things and the cost of buying a home, that the residential rental market and how it works has been largely ignored. Too often, renting is considered a safe practice while you wait to buy. But here are a few things that you may want to consider when renting in Toronto:

1. SHIFTING STANDARDS: The standard for rentals are shifting. Most of Toronto's rental stock is old. We don't build very many new residential rental properties any longer. Most new rental properties are individual condo owners who rent out their unit. So, the desire for nice things like granite counter tops and front load washers and dryers have increased.  In turn, those crustier, older rentals are more and more in a rush to upgrade their facilities and throw around a little fairy dust to pretty up the lobby. Renters want nicer places with stainless steel appliances and a tub that is not 40 years old. Of course if enough renovations and upgrades take place, there usually is a big increase in the rental price as well, if the renos happen between tenants.

2.  GOVERNMENT INTERVENTION. Because the new rules from the federal government makes it more difficult to qualify for a mortgage, there are fewer first time buyers and more people staying in the rental pool longer. And this adds more renters to the the rental pool in Toronto. So, more renters means a tighter rental market and a tougher time finding a place. To be honest, I'm not sure if this government intervention has that much influence, but even the rising prices of buying property have left some renters in the rental market longer than they would like to be in it.

3. RENTS ARE GOING UP TOO. It's not just home prices that are going up. Rent is too. Maybe not quite as fast, but at a pretty healthy clip, as far as I'm concerned.  The vacancy rate is about 1% in most of Toronto. 1% is considered too low. It causes landlord to raise rents and even leads to bidding wars. Yes, I said bidding wars. They are not the sole terrain of real estate purchasers any more. Luckily, there will be a lot of newly built condo units coming to the market in the next two years. So, for your renters who believe you simply won't be able to find a rentable place in Toronto, relax, there is more supply on the way!

Do House and Condo Prices Rise and Fall in Tandem?

I love the Olympics, and when they're on, I'll pretty much watch any thing when I have the time. I even found myself watching the women's synchronized diving this weekend where Canada snapped up their first medal.

What was so impressive about these synchronized divers are their ability to move exactly in step on the diving board, twist and turn at the same height in the air, and land at the same time with an almost equal splash. Really, I don't know how they do it. Amazing.

The whole thing has led me to think about the concept of synchronicity and timing in real estate. Often buyers and sellers of Toronto look to the media for guidance on how to enter and exit the market. Right now, the media is awash with talk of the Toronto real estate market cooling off or even crashing. Of course, for ever article or TV segment announcing a crash, there is an equalizing article the next day saying every thing is just fine and dandy. 

But I'm not here today to call out TV,  newspapers and some blogs on how they use real estate for more ratings and readers. I would, however, like to point out one assumption that gets made over and over again. And this assumption is all about synchronicity. Like the bronze medal divers, many articles and stories assume that condos and houses rise and fall in tandem, like two divers springing up and tumbling down together to the pool. But do they? Or, the bigger question, will they?

From a macro perspective, the short answer is yes. If there was a sudden rise in unemployment, for example, or a huge spike in interest rates, houses and condos would both be hit hard and would likely slow down or even fall in value.  The change in value would be different, though, depending on where you live in the city and just want kind of condo or house you live in.  To see the effects from the macro perspective, all we have to do is look south the the U.S. where the entire country lost value in their homes, albeit the effect varied widely from state to state. 

From a more local perspective, I think condos and houses do not move in tandem at all. We would certainly not receive a bronze medal for synchronicity, that's for sure. As I've mentioned in many previous blogs, there are very few homes that are currently under construction in the GTA, but our population is increasing. So, there are more homebuyers, but very few houses being built. A pretty good recipe for an increase in the value of houses over the long term based on simple supply and demand data. As for condos, there many condos being built.  And the really, there needs to be. There is a huge rental demand and a huge buyer demand. Supply is keeping up with demand, though some say exceeding it. So, on local level, houses and condos are not moving in sync at all. Houses are set up to increase more in value than condos. 

Now, this is a  HUGE generalization. There are better condos than house and better condo locations then house locations. There are certain condos that I would say are better investments than houses. But, all in all, condos do not increase in value as much as houses do across the GTA. 

Does that mean every one should rush out and buy a house? Absolutely not! Some houses require a lot of renovations off the top that could really put a dent in your budget, and houses require a lot more labour - namely shoveling snow, cutting grass and cleaning out your eavestroughs.  You really have to dig deep and figure out if you're a house person or a condo person. I mean, in the end, you have to live there or be the landlord. I would never buy a house if you're a condo person. I would be the right condo!

Phantom Bids: Just How Scary are They?

No, it's not the undead, up from the grave to make an offer on a Toronto condo, and no, it's got nothing to do with the "Phantom of the Opera" or Star War's "The Phantom Menace". But yes, the term "phantom bid" is as scary as it sounds.

Since last week, a lot more of Toronto's sellers, buyers, and real estate enthusiasts have come to learn of the term "phantom bid" because of a real-life incident that was written up in the Toronto Star's Moneyville.  (For the Moneyville article click here). In a nutshell, a buyer's agent put in an offer on a property for her clients $90,000 over the asking price.  The buyers and their agent believed they were in competition with other buyers in a bidding war. As it turns out, there were no other offers on the table. Those bids that really didn't exist are the "phantom bids". A buyer has either been lied to, mislead or misunderstood some thing.

 Since this article has come out, many people I have come across in my real estate sphere have been full of questions. The biggest one: How common is this phantom bid phenomenon?  I can say that this has never happened in any of the deals I have worked on or any other agent I know. And I do not know any of the agents referenced in the Moneyville article. According to that piece, there has only been 4 official complaints lodged with the Real Estate Council of Ontario (RECO) in the past 10 years. So officially, not very common at all.

The next biggest question: Why do phantom bids happen? Well, to be clear, it shouldn't happen. When a buyer's agent makes an offer on a house, that agent needs to know how many offers have been registered, if there are any other buyers interested. And the key word here is "registered". Many agents will tell you that they are pretty sure there is an offer coming in or they are expecting an offer to come in or they are 99.999999999% sure an offer is coming in, but if it is not registered, it is not an offer. Even if there is a registered offer, that offer can be withdrawn if the actual written offer has not reached the seller and the selling agent. And if that happens, that listing agent has to let you know that offer has been withdrawn. So, when you hand in your offer, the selling agent should let you know exactly how many offers you are working against, if any.

It is up to the selling agent to be very clear about how many offers are being presented to the buyer,  especially since that can affect the offer price. If a seller agent misleads a buyer agent into thinking there have been more bids than are being offered, they could lose their license. Though there are some very responsible and professional agents out there, there are a few that are not as keen to stick to the rules or who are just not as familiar with the rules as they should be.

Many real estate salespersons have asked to have clearer rules set up around phantom bids, and I think the day is coming when we will see it. Until then, I don't think every day is going to feel like Halloween in the real estate world. Yes, phantom bids do exist, but they are in direct violation of the rules and regulations set up by the Real Estate Council of Ontario.

Are All Heritage Homes Worth Preserving?

Toronto likes to take pride in its historical heritage. Cabbagetown, for example, boasts "the largest continuous area of preserved Victorian housing in all of North America". The Distillery District takes the claim of "the largest collection of Victorian architecture in North America." 

So, you would think that Toronto's preservation efforts have been a smashing success.  But the truth is heritage preservation is a relatively new thing for this city. And really, no one really started caring about preserving much in Toronto until about the 1970s. Before then, it was out with the old and in with the new. Highways ruled supreme and no one had any idea who Jane Jacobs was.  Cabbagetown and the Distillery District were largely feral before the 1970s. So, they were just flat-out ignored. And strangely, that may have been the recipe to their current success. 

Nowadays, things are very different. Cabbagetown has one of the most notorious and rabid heritage preservation group in the city. This group deservers their credit. I mean, Cabbagetown homes are a joy to look at. Of course, this group has also been known to be on fussy side. I have heard they (and the City) blocked some pretty exciting modern-design ideas because they didn't look like the Victorian houses around them. 

One of the latest Cabbagetown crusades has to do with the Toronto Community Housing Corp (TCHC) and all of the public housing they own in Cabbagetown. Before Cabbagetown transformed into its bastion of Victorian preservation, it was not exactly the best part of town. The city owned a great deal of the houses as public housing. Nowadays, this collection of City-owned houses, sprinkled in between all the reno'd Victorians, do stand out because they are essentially falling apart inside and out. And to fix them, especially to blend in nicely with their tarted-up Victorian counter-parts, would require a substantial pile of cash.  And we all know that the City does not have any money to fix them. Still, the locals are leaning on them to make sure that fixing them is a priority. Even without local pressure, it sure seems that these homes are in need of some attention if they are going to remain upright. 

What surprises me is that the focus seems to be around the City providing an influx of money to upgrade these houses that are verging on substandard or have already passed that point. But I have a better idea. Sell em! Now, I know that doesn't sound terribly surprising coming from a real estate salesperson, but I think doing so would benefit everyone. The buyers would likely be some one who wants in Cabbagetown to renovate and upgrade a house to their own liking, making the heritage group happy. The City saves money. In fact, it would make money off the sale of the house. Because there is a public housing shortage, the City can use this money to build more high-density or mixed-use housing for those who need public housing. A low-density house in Cabbagetown, or any where else for that matter,  is not exactly a cost-effective way to provide public housing, especially in a bastion of historic preservation. Let's face it, preservation looks great, but it ain't cheap. 

The Manhattanization of Toronto: A good thing?

Have you noticed the term "Manhattanization" being thrown around a lot these days? Well I have, especially when it has to do with Toronto.  Not only in last week's Huffington Post, but even in real life, when I'm out at a restaurant or overhearing idle chit chat in line at Loblaws. And for the most part, I think Torontonians like this term because it aligns them with New York. Ever since Peter Ustinov famously said that "Toronto is New York run by the Swiss", we have had a fascination with being New York or at least we like the comparison.

But despite its New York sounding name, Manhattanization is not really about New York at all. The term itself actually has a pretty negative beginning. It was used to describe all the skyscrapers invading the San Francisco skyline, blocking the view to the bay in the 60s and 70s. It was no compliment.

Nowadays, it feels a little more positive. It's like bragging about the skyline of your city, though the benefits of it depends whether you own property or not. Vancouver is actually a great example of Manhattanization. Like Manhattan, Vancouver's downtown became landlocked with the help of the mountains and the ocean. Buildings became higher when there was not a lot less space left to expand out. In Toronto, it's the green-belt policy that is causing this Manhattanization effect. You cannot build outside of the GTA on protected forests and farmland. 

So now, there's simply no denying it. Toronto really does have a full love-on for skyscrapers. In fact, for buildings over 100m, Toronto ranks 14th in the world for the number of high rises it has. That's ahead of cities with five times the population like London and Mexico City. And a lot of these new skyscrapers are recent additions or still in the works. In fact the tallest condo in Toronto, the Ritz Carlton is a relatively new addition. And the second largest, Aura, is still under construction. In fact, out of the top 10 condos in terms of height, 9 out of the 10 Toronto condos have been constructed in the last two year or are still under construction. So there's no doubt Toronto is quickly becoming much more of a vertical city, definitely compared to other same sized cities in the world. But what does this mean? 

Well,  condo towers will continue to blossom, taking on a much bigger role than it does now. Some say the increase in the value of houses will rise 30 - 50% in the next decade making houses only accessible to the wealthy. So, that puts pressure on the condo market to pick up that middle class slack. As families are no longer able to afford a house, they will start looking to buy a condo instead. Interestingly, right now, bigger, family sized condos are the last to sell, but in the future, they may be much more in demand.  And since rental apartment buildings are rarely built these days, condos will have to take up the slack in that sector as well. So, love em or hate em, condos will continue to gobble up parking lots  and become a bigger portion of the homes available in the future.