Trees have property value

Plant a Tree, Boost Your Property Value

I've know it for years, but had no real proof. Trees add value to property. Trees imply permanence, continuity with nature, privacy from neighbours, and above all, shade - no pun intended.

If you doubt this, just ask someone in an older neighbourhood how upset they would be if their neighbour cuts down their trees. Answer? Not happy at all. They intuitively feel the value of the own property decline.

Nice quote:  Best time to plant a tree?  Twenty years ago.  Second best time?  Now.

What?  Did you think the natural environment was all about you?

Prices are up?

This is a difficult picture to explain. Comparing April 2008 to April 2009 it appears that prices have increased by 2%. Volume is still down 21% reflecting a market that does not believe in itself. Many are having difficulty selling their home and afraid to offer on another with a "sale of property" condition. Look how uneven it is. Prices are down 12% in Niagara-on-the-Lake, but Niagara Falls, Thorold, Pt. Colborne, and Pelham are doing well. I have no explanation.

Residential Sales	2008		2009			Comparison
	# of Listings	Average Sale Price	# of Listings	Average Sale Price	Volume Change		Price Change
NIAGARA-ON-THE-LAKE	22	355,649	18	311,667	82%		88%
NIAGARA FALLS	131	178,668	108	190,735	82%		107%
FORT ERIE	61	180,526	46	160,699	75%		89%
ST.CATHARINES	212	195,595	142	194,576	67%		99%
THOROLD	30	190,467	27	202,848	90%		107%
FONTHILL/PELHAM	23	262,696	26	284,388	113%		108%
WELLAND	87	172,190	58	168,260	67%		98%
PORT COLBORNE/WAINFLEET	35	147,817	37	170,468	106%		115%
LINCOLN/WEST LINCOLN	27	269,306	31	255,132	115%		95%
Totals	628	195,684	493	198,941	79%		102%

Formaldeyde and New Homes

This is from Green Building Elements and repeats a story that is missed over and over again. As bad as asbestos may be - and is as I have two cousins with mesothelioma - formeldehyde is much more common. It is in far to many products and is not labelled.

We recently tested several new homes for formaldehyde in the air. The newest home, advertised as a “green” home, had 300 ppb of formaldehyde. Children in homes with only 30 ppb can have decreased lung function. Between 60 ppb and 120 ppb, children are more likely to have asthma and chronic bronchitis.
At 100 ppb, most adults experience eye, nose, and throat irritation.
Of homes that were less than 2 years old, every home we tested had at least 100 ppb of formaldehyde. The newer homes had 200 - 300 ppb. The 300 ppb concentration we found in the newest home is equal to the 15-minute Short Term Exposure Limit (STEL) for occupational exposures. A worker in that home should wear a respirator to remain inside the building for more than 15 minutes. An employer that exposes workers to 300 ppb of formaldehyde should have a Hazard Communication Program to inform workers about chemical hazards and ways to avoid illness.

OREA fails the leadership test

It is sad to see my own people opposing a law that will significantly reduce green house gas emissions. This is a quote from the Ontario Real Estate Association article in their March 2009 Queens Park Plus newsletter. Get with the program folks. Show some leadership.

On February 23, the Government of Ontario introduced Bill 150 the Green Energy and Green Economy Act (GEA), 2009. Included in Bill 150 is a provision that will require all home owners to provide an energy audit report to prospective buyers. Currently, the bill is in the second reading stage of the legislative process. To read Bill 150 in full click here.

While OREA supports the principles of energy conservation and environmental stewardship that are enshrined in the GEA it opposes any policy that imposes unnecessary costs on homeowners and delays on real estate transactions. Instead, OREA supports the existing government program that encourages homeowners, through rebates, to assess the energy efficiency of their home voluntarily.

Are We Really Happier as Owners?

The great dream of all is to own your own home. It supposedly is a sign of a successful life. Now with the economic downturn, maybe its time to see if that was ever really as good as it seemed. According to the Wharton School’s Grace Wong in a study of those who own their own homes. Those who own are actually less happy than those who rent.

I find little evidence that homeowners are happier by any of the following definitions: life satisfaction, overall mood, overall feeling, general moment-to-moment emotions (i.e., affect) and affect at home… They are also more likely to be 12 pounds heavier, report lower a lower health status and poorer sleep quality. They tend to spend less time on active leisure or with friends. The average homeowner reports less joy from love and relationships… Contrary to popular belief, I do not find significant differences in family-related time use patterns, family-related affect, number of normal work hours, indicators of stress or measures of self-esteem and perceived control of life by homeownership …

Homeowners are happier on average only on an unadjusted basis. Once household income, housing quality and health are controlled for, they are no happier than renters. What’s more, they report to derive more pain from both the neighborhood and their house and home. This positive pain gap remains stable and robust when health, neighborhood characteristics and financial stress are controlled for. As for the most frequently cited channels of a positive impact by homeownership, namely self-esteem, stress, health and family life, again there is very little supporting evidence in my data… [H]omeowners spend less time on active leisure activities or with friends, which have been documented as some of the most enjoyable affective experiences.

Property values holding their own

These are the latest average sales prices using MLS data. It is clear we are not facing the same difficulties that we hear about in the US. So many buyers and sellers think our economy behaves like our neighbour to the south. No so, at least not now. Look at Niagara Falls and Pelham. Values have not move much at all. For the entire region there is only a 2% drop.

Month = Last November and This November
YTD =November to November

Negative Equity

The practice has largely ended now, except for those being scammed. But the 40 year mortgage and no money down plan sold on the belief that real estate can only go up has some scary consequences. So, what happens when the real estate market softens?
For someone who put no money down on a $300,000 house with a 40-year amortization rate, the mortgage would be $311,100.
-$11,100
Amount of negative equity from Day 1.
-26,000
Amount of negative equity if house values drop 5 per cent.
-$41,100
Amount of negative equity if house values drop 10 per cent.
For someone who put 5 per cent down on a $300,000 house with a 35-year amortization rate, the mortgage would be $293,977, including CMHC premium.
-$8,977
Amount of negative equity if house values drop 5 per cent.
-$23,977
Amount of negative equity if house values drop 10 per cent.
Source: GreedyMortgage.com

Pricing in a Bad Market

It always has been hard for Realtors to get some sellers to realize their home is not valued as high as the owner believes. Now, it its getting VERY hard. From MSNBC …..

It took John Cicero and his wife an appraisal, some convincing by their real estate agent and some hard-to-swallow facts to get them to lower the $525,000 listing price on their five-bedroom home in Valrico, Fla. They closed two weeks ago for about $380,000.

"We didn't really understand the severity of the market," Cicero said. "We lost close to $100,000 in equity so we were walking away from real money."

They built the stucco home four years ago for $380,000 and poured more than $80,000 into it, putting in hardwood floors, granite countertops, ceiling fans, blinds, drapes and a built-in surround-sound stereo system. They also expanded the deck by the pool, turning it into what Cicero called an "executive entertainment area."

"You think you have this wonderful home and people will want to buy it," he said, "but you're wrong."

Dan Ariely, a behavioral Economics professor at Duke University's Fuqua School of Business and author of "Predictably Irrational," said the "better-than-average" effect is at play. And knowing your next-door neighbors sold their house for $500,000 makes it even more imperative for a homeowner to top that price.

"We feel that we're better than other people. We're unique. We're special," he said. "It stands to reason that our houses are also special." The attachment to a house only intensifies the more a homeowner personalizes it, creating an extension of themselves.
"The moment we invest in something, we fall in love with it," Ariely said, which applies to something as sentimental as children or as trivial as origami.

That puts real estate agents in a precarious position of pricing a house to sell, but not insulting the homeowner by recommending a lower asking price. To a homeowner, a low, but realistic, listing price is "like someone calling your kids ugly," Ariely said with a laugh.

Paying to be Green

Being Green has intrinsic moral value. It is a requirement needed to sustain the basic needs of life and now we are not talking about doing this the next generation. The need to be Green is now for us too. Sustainability of basic needs hangs in the balance for us. So what is it going to take? Self-interest for many, even most, also works. Being Green pays off in a big way. This from the June Builder Magazine:

Energy-efficient homes, for example, sell faster because of their lower operating costs and higher value over time, said Mark Fischer, senior vice president of Stockton, Calif.-based Grupe Construction Co. "We think it's a financial thing right now. Most buyers are not buying these homes just to be green. They're doing it for the financial benefits."

Grupe's Carsten Crossings is a 144-unit community in which each home uses 50% less energy than a standard house through energy-efficient products and features such as a SunPower Sun Tile solar electric system; high-efficiency windows, furnaces, and air conditioning systems; tankless water heaters; and more.

Each home costs about $18,000 more, equating to about $1,391 more in annual mortgage payments. But they provide about $1,400 in annual energy savings (at current prices!). With a $2,000 tax rebate in the first year, homeowners are "cash-flow positive on day one," Fischer said. He added that studies show that the homes also increase in value by up to 20 times their annual energy savings each year.

If the homes make sense for the buyer, what about the builder? "This project outsold almost all its competitors almost two to one" in the community in which it was built, Fischer said. If the dwellings sold at the competitors' rate, it would have taken 37 additional months to sell them. Fischer estimated his company saved $11.5 million by going green because it would have cost $311,000 per month to carry the unsold homes.

But he added that the financial benefits to the consumer were more important to them than the green message."If it didn't save them money, I don't think it would have been as powerful of a sales feature," he said.

Note that energy rebates are not available in Ontario for new home construction. However this may change in the near future as energy prices continue to rise. Currently grants and rebates are for renovations and apartments.

Devaluing Suburbs

This from the U.S. Environmental and Energy Study Institute and the Urban Land Institute and reported on NPR. Living in urban centres may not be just fashionable. It is clear that rising fuel prices will make suburban life less tolerable. Some cities, like Portland, Oregon, have people spending 10% of their discretionary income on transportation. Other cities, like Los Angeles require residents to pay on average 35%. Guess where Policy Analyst Jan Mueller says people are likely headed?

For a long time, cheap energy did allow people to make a choice to save money to live in a place that was less expensive further out. It's becoming less competitive from a financial and a time standpoint to live further out. Congress needs to encourage cities to invest more in existing infrastructure and less in new roads and developments. These changes will help reduce global warming and preserve home values in a down market. Houses closer in to cities have appreciated more than homes that require a long commute to urban centers.

Less roads (hear that Niagara Region?) and better downtowns. That is the future. It is also the future of where property values will increase.

Green Mortgages - Real Deal

TD Bank is offering a green mortgage. Is this of real help or is this another example of "greenwashing" (calling a normal product 'green' but not actually delivering)? In this case, it looks real. A 1% reduction, a rebate, and a donation to a good cause. Congratulations TD. Let's see more of this.

We are committed to helping protect the environment, so we want to support our customers as they make environmentally friendly choices. That's why we're introducing the Green Mortgage and the Green Home Equity Line of Credit (HELOC).

• Save money and help protect the environment with your green home improvement
• Rate discount – you will receive 1% off the posted interest rate on a five-year fixed rate mortgage or on a five-year fixed rate portion of a HELOC
• Cash rebate – we will rebate up to 1% of the amount of the mortgage or the fixed rate portion of the HELOC when you make ENERGY STAR® qualified purchases1.
• And at the time you receive your rebate, TD Canada Trust will donate $100 to the TD Friends of the Environment Foundation
  

Flexibility – this offer is available to new or existing customers. If you have an existing TD Canada Trust mortgage or HELOC fixed rate portion, you can renew or refinance it into this offer3. If you have an existing TD Canada Trust HELOC, you can choose to lock-in all or a portion of the balance into the five-year Fixed Rate Advantage Option

Conservation 1st, “Toys” 2nd

In the late 70's I built my first solar collector, a box with pop cans with insulated tubes to the house. It was awful and I think took more heat out of the house than it supplied. It was the typical mistake made by the young attracted by of the 'gee whiz' factor of solar energy. The motive was right, but the order of priority was, well misguided. The house had more holes in it than the barn out back and a little caulking would have helped much more.

The advice given by architect and building scientist Peter Pfeiffer at the Feb. 13 at the International Builders' Show in Orlando, Florida holds true today.

Renewable-energy appliances such as photovoltaic panels, solar hot water heaters, and geothermal pumps are often viewed as fundamentals of green building when in fact they really are just "the icing on the cake."

He urged attendees not to repeat the "toy" fixation that dominated the early green movement of the 1970s, Pfeiffer outlined a whole-house approach to sustainable building that advocates energy conservation as a necessary first step before energy production can even be considered.

Prices are up! So?

(click on graph to enlarge)

So, prices are continuing to go up across Canada. The question is, should we be happy or concerned. Well if you are selling right now, be happy. If you buying right now, I suggest you should be worried. We are likely at the end of the cycle and unless your are planning on staying where you are for 10 years, there may be the possibility that you will lose money.

Furthermore, there is no compensation in these numbers for the energy prices that everyone will be paying in the near future. What will be the impacts? Likely lower prices compared to the inflation factor. Your house may go up, but not in pace with the price of gasoline and all good dependent on gasoline. That will include all goods delivered over large distances as well as goods that have energy intensive production.

So, where are we now does not mean a lot for 10 years from now. So where are we?

The two main series on house prices in Canada are: (1) Statistics Canada's measure for new homes based on contractors' selling prices; and (2) the Canadian Real Estate Association's (CREA) figures on average existing home sales prices, for homes sold through its Multiple Listing Service®. The Canada-wide index of new home prices increased 6.5% in January 2008 versus January 2007. For the same time period, existing home prices, as estimated by CREA, were up 9.6%.

The results may give you optimism to buy now, but I don't believe this can be sustained. Remember, the real winners buy low and sell high.

Trapped in Suburbia

Cary Tennis in Salon Magazine recently expressed well the profound sense of uneasiness that many feel after buying a McMansion in the suburbs.

But then, after all your hard work and some measure of feeling deprived of the good things in life, you get a job with a big salary and someone who sells real estate puts you in her car and drives you around and some person inside you -- not the careful-planning you but this other more spontaneous and sensuous you, a you who always wanted to live in a big house with a yard -- sees a big, pretty house with a lawn and goes, "Wow!" And you buy it.

And as soon as you move in you feel a profound sense of loss. You can't put your finger on it but the place you are in does not make you happy. The place you are in is big and pretty. So that makes it hard to explain. Why does big and pretty not make you happy?

It doesn't make you happy because it's not made for humans. It's made for cars. These suburban houses are basically huge garages with attached living quarters for servants -- meaning us. We are the servants. We work for the cars who live there. The cars have a very good life. We make sure of that. But our lives are not so good there.

These are slums of the future. They can be saved, but it will take converting some of the bigger homes in to shops, pubs, and schools that can be in walking distance. (Oil hit $110/barrel today, double what it was a year ago.)

The Resale Value of Renovations

Every year Remodelling Magazine releases its "Cost vs. Value Report". It is a US report, but you can get a sense of what works here – we are not that different. Renovation projects ranging from a deck addition to bathroom remodelling. The report provides you with an estimate of the job cost along with the added value on resale and continues by calculating the percentage of the cost recouped.

One wonders why there are not environmentally considered renovation projects along with the subsequent improvement in resale value. Maybe it is too early, but it will be coming. Just wait until gas hits $2 a litre with a similar rise in heating oil and natural gas.

76% Willing to Spend More on Green

An overwhelming 82 per cent of Canadians plan to change their behaviour and adopt green practices, according to the findings of a new poll commission by the Investors Group. They are especially interested in “going green” if it will save them money. “Canadians are looking at the cost of going green and realizing that a financial investment in lifestyle and behaviour changes can have positive impact on both the environment and their pocketbooks,” said Dan McClure, co-manager with Keith McLean, of Investors Group Summa. Winnipeg, MB – October 4, 2007:

What is interesting is the strong trend toward seeing value in responding to environmental issues – as a matter of personal responsibility and self-interest.
The following shows what a person was will to spend on their homes to reduce energy costs by 25%, either in a renovation or in the cost of a new home.

63% - Willing to spend up to $10,000
8% - Willing to spend up to $25,000
5% - Whatever it costs.
76% - Total willing to spend $10,000 or more

Clearly it is time for builders to respond to this willingness to spend more. This willingness, along with current government incentives to builders and new home purchasers should be making a difference soon in the nature of the market.

It will be important to remember that every home purchased will also be a home that is eventually sold. The inherent value of energy conservation measures will sustain the equity value. Not having this status will mean a substantially lower future value.

Canadian Real Estate Association Reacts to Rate Drop

OTTAWA – March 4th, 2008 – The interest rate cut announced today by the Bank of Canada will help Canadian home owners and buyers, according to The Canadian Real Estate Association. The Bank of Canada cut its benchmark overnight lending rate by one-half of one percentage point to 3 1/2 per cent on March 4th, and signaled further cuts in the near future. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, now stands at 3.75 per cent.

"The threat of inflation is being eclipsed by concerns about slower economic growth, so the Bank of Canada cut its trend-setting bank rate to boost growth," said CREA Chief Economist Gregory Klump. "Financial market turmoil will remain a downside risk to growth for some time. This means the Bank will probably continue lowering interest rates."

"The Bank of Canada today acknowledged that the U.S. economic slowdown was likely to be deeper and more prolonged than it projected less than six weeks ago," said CREA President Ann Bosley. "When the Bank decided to lower interest rates today, the advertised five-year conventional mortgage rate stood at 7.29 per cent.

This is less than one per cent above where it stood at the beginning of last year. Competition among mortgage lenders remains stiff, which continues to help many borrowers negotiate discounts from advertised rates."

Declining interest rates and a rebound in economic growth are factored into the CREA MLS® 2008 market forecast. "MLS® sales activity will stay strong and reach the second highest level on record this year. Residential MLS® prices are also expected to continue rising. Additional cuts to mortgage interest rates are good news for housing affordability and Canadian housing demand," Klump added.

(My take on it? Get out there and spend. Every patriot needs to support the economy. BUY NOW! Have a look at Opus.....)

Suburbia – Slums of the Future

It is difficult to think of suburban communities being the slums of tomorrow, but demographics, fuel prices, the end of easy oil, and global warming will have an impact that will force people to live closer together and, oddly enough, be glad of it. This is from Atlantic Monthly:

Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that's roughly 40 percent of the large-lot homes in existence today.

For 60 years, Americans have pushed steadily into the
suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and '70s—slums characterized by poverty, crime, and decay.