Retirement and Real Estate

In my previous entry, I lightly touched on the retirement and real estate connection and voila, here's an article on thestar.com that covers it a bit more in depth.

Something to keep in mind when you're thinking about a retirement home in some other area.
As we age, our medical/specialist needs are likely to increase, too. So when you're thinking "Gee, that place way out in the country would be a great, inexpensive place to retire", make sure that you also give some thought to

• how far is the medical treatment I might need?
• is that kind of specialty even available in that area?

We have friends who moved out to the countryside, but still have to drive into town to get regular medical treatments. Likewise, we also have some friends who are contemplating a retirement move out into the country but their current medical-specialist requirements are keeping them here, where these services are available, nearby.

On another consideration, while I could easily see us eventually retiring into something smaller in the country or "near-country", I could never give up high-speed Internet - that's a big factor on our own list.

So while considering your real estate-related retirement options, take a step back and look at the larger picture per your personal needs. There's more to it than just the house.

Real Estate Articles of interest

Here are some links to interesting articles and their points of view.

In GlobeInvestorGold.com, this article says "....As of August, there were more condos under construction in both Toronto and Vancouver separately than there were in all Canadian cities combined a decade ago..." and makes a connection between what's currently happening in the Canadian real estate market and the U.S. market of two years ago, in effect, a 2 year lag.

The National Post has an article that, among other things, touched having the vision of knowing when to buy and sell real estate - not wanting to sell at the bottom etc.

But guess what, if you're upsizing, you're also BUYING at the bottom - so while you may be getting less for your own house than you had hoped, you're also likely going to make a decent score on that house you're buying up into.

It's no different than buying stocks. The only reason to sell at the bottom is because you want to buy something else that's down, that has a great chance of rising higher and faster than the stock you're selling.

Otherwise, to paraphrase what one noted stock watcher says, "if you're holding a good stock, it should be a good stock at both the bottom and the top of the market - that you should only sell a stock when the company itself is no longer doing well, regardless of what the overall market is doing...good companies and their stocks will often rebound earlier and possibly higher than the rest".

And likewise, a good home in a good neighbourhood will increase in value higher and faster than homes in lesser areas.

But ultimately, if you're thinking of making a move, make it for your own reasons - because you need the upsize (or downsize), not because of what the market as a whole is doing.

Doing the math:
You're selling your $400,000 house in a market that's down 5%.
A $400,000 house is down $20,000

But you're buying a $700,000 that's also down 5% or $35,000
Well you just saved $15,000 off your new mortgage!
And when the market comes back, that's now your equity!

And if you're in a good house, with no reason to upsize or downsize, then, unless you're retiring in the next couple of years and getting out of real estate entirely, what do you care what the real estate market is doing today? It'll be higher down the road anyways. Just ride it out.

Ouch -Here it comes!

The numbers are in for the first half of October and it's not a pretty sight.

According to TREB, compared to the same period in 2007, sales are down 18%, and compared to the same period in 2006, down 10%. Within the City of Toronto, sales are actually down 21%.

Average prices are down, too. In the City of Toronto, average prices are down 15% versus an overall decrease of 11% across the GTA. In the 905 belt, prices are only down 8%.

It's important to note that there's a slightly hidden reason why Toronto's sales are down more than the 905 belt, compared to 2007.

City of Toronto Land Transfer Tax. When the city announced that this tax would take effect in early 2008, it caused an upward spike in home sales as people scrambled to buy and close before that tax kicked in. As a result, sales towards the end of 2007 actually increased instead of the usual decrease. This helped skew the sales figures for 2007 in Toronto.

Inventory-wise, it's great for buyers. Compared to a year ago, there are now 30% more homes on the market. More choices means more sellers are competing for your offer, which means more aggressive pricing and, with a sharp Realtor, more agressive negotiations on your behalf.

For sellers, there are ways to protect and justify your asking price to help put more money in your pocket. Be sure that your Realtor has a sound marketing plan for your house.

Interesting Reads
Here are some recent, interesting articles about the real estate biz.

This one in the Globe & Mail, does a nice job of comparing the default rates of mortgages in the U.S. and in Canada. In short, in Canada, it's 0.27%. In the U.S. for their prime customers it's 4% and for the sub-primes, it's 18% !!!

Time and time again, I'll advise my clients that it's really not a good idea to buy first and sell their existing house afterwards. There are numerous reasons (contact me if you want the full scoop). But here's an example (a bit extreme) in this Globe & Mail article of why it isn't advisable. Imagine being stuck with both houses?