Real Talk

REAL TALK

Aaron Krausert with RE/MAX

Let’s talk “REAL” real estate with Kamloops’ very own, Aaron Krausert with RE/MAX.

It’s easy to get caught up with all of the “SOLD” signs, the rumours of scarce housing inventory and the tales of bids well over asking. What is the state of our local real estate market? What is true and what is hearsay? 

I had the great pleasure of sitting down with Aaron. If you haven’t had the chance to meet him, you will want to after reading this.

Aaron’s approach to real estate is that of an analytical view, as it should be. Emotions can run high with the purchase of a new home and having a realtor that makes sure you view things from all perspectives is a realtor worth having.

If you are just entering the market, it’s overwhelming to see ”Sold” sign after “Sold” sign on your house hunting journeys. At the current rate of sales, as of Thursday April 14, 2022, there were enough properties on the market to allow for 60 days absorption if no other properties were listed.

With great attention to detail, Aaron presented graphs to educate me, something I am certain he does with all of his clients. The current absorption rate has not been this low since the BC Real Estate Association (BCREA) started recording absorption statistics in 2004.

What does all of this mean for the consumer?

With data to back him, Aaron presents some significant facts:

With inventory as low as it is, it can be challenging for home buyers to purchase a home that fits their needs in price, size and area.

Appraisers are finding it challenging to match the ever-changing market, making it a challenge for a buyer if an appraisal comes in lower than the purchased price.

With such a low inventory on the market, frustrated buyers can blame investors from the coast. Yes, even though we have a high volume of investors from the coast, Aaron has data to show that these investors are not to blame here. A larger percentage of purchasers are coming from Vancouver and the Fraser Valley –  37% to be exact – and many of these purchasers are buying single-family houses with yards. These are families looking for a different lifestyle than what the larger urban areas offer, with a better price tag. Can you blame them?

With housing inventory low and housing prices increasing at an alarming rate, the federal and provincial governments have decided it was time to step in.

With the most recent federal budget release on April 07,2022, the government has taken steps to steady the rise in housing prices and provide security and options to the consumer.

The federal government plans to dedicate a total price tag of $10 billion over the next five years to tackle soaring housing prices. Of that $10 billion, they will dedicate $ 4 billion to the “New Housing Accelerator Fund,” where a total of 100,000 new homes will be built in urban areas by 2025.

The creation of the “Tax-Free First Home Savings Account” will give prospective first-time home buyers the ability to save up to $40,000. Like an RRSP, contributions would be tax deductible and withdrawals to purchase a first home–including investment income–would be non-taxable; like a TFSA – tax free in, tax free out.

The federal budget proposes doubling the “First-Time Home Buyers’ Tax Credit” to $10,000, retroactive for homes purchased after January 1, 2022. Home buyers would get up to $1,500 in direct support from the enhanced credit. The federal government says it’s exploring options to make the program “more flexible and responsive” to the needs of prospective homebuyers. Additionally,  the First-Time Home Buyer Incentive will be extended to March 31, 2025. 

The establishment of an “Anti-Flipping Tax on Residential Properties” requires properties not to be sold for at least 12 months. The aim of this is to reduce speculative demand in the marketplace and help cool excessive price growth. As they introduce the tax, rules will ensure that sellers subject to the tax can deduct legitimate investments in refurbishment.

With the “Ban on Foreign Investment in Canadian Housing,” the government intends to propose restrictions that would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada for two years.

With the “Home Buyers’ Bill of Rights,” there will be the ban on blind bidding, allowing bidders to be aware of surrounding bids, which may help stem the increase in housing prices. The establishment of the legal right to a home inspection will give buyers peace of mind on their investment. In addition, there will be requirements from banks and lenders to offer mortgage deferrals for up to 6 months in the event of job loss or a major life event. 

I asked Aaron for his opinion on the federal government budget release; he presented some valid points:

The federal and provincial governments want to give purchasers the option of having time to “cool down” during the offer process. There is a lack of information for those in a position to educate their clients and to protect their clients’ best interests regarding this entire process. Right now, the time to “cool down” is vague. Is it 2 business days or is it 5 business days? When the BCREA approached the Financial Services Authority with concerns about what the “cool down” time is, they did not get any definitive answers. This is a major concern for anyone looking to purchase or sell a home when the word “penalty” is attached for failing to follow the mandated “cool down.”

Aaron believes the “Anti-Flipping Tax on Residential Properties” will help buyers, especially in hot markets. Investors quickly snapping up properties just to flip them a few weeks later at tens of thousands of dollars in profit, drives values up unnecessarily and only adds to the low inventory dilemma. 

Aaron believes that the end to “Blind Bidding” is difficult  to determine. It could go either way. With a pilot launch of Openn Offers, an Ausralian-owned property technology company in Ontario, Canadians are about to learn all about transparent bidding.

With multiple offer scenarios becoming more common, Openn Offers aims to give buyers and sellers more confidence, while helping realtors manage these situations with easily accessible tools. Aaron believes that there may be some challenges with an online platform like Openn that we need to be aware of. Some of these challenges involve our senior population because their capability with online programs may be limited. Poor access to the internet and the possibility that transparent bidding may not influence the way prices are going are also significant challenges.

I asked Aaron for his best advice for anyone purchasing a home.  His response: 

“Get pre-approved. With a proper pre-approval, you will know your rate and you will have a document from your lender.” 

Pre-approval in any market is the way to go. It allows you to become an educated purchaser with a plan.

Come work with a qualified and knowledgeable broker so that you can have an enjoyable and stress-free home buying experience.

Tara Sales - Mortgage West The Right Advice at the Right Time