Monday, January 25, 2010

Affordability is a Personal Thing

One of the most difficult things about buying a home - especially a first home - is the temptation to spend more than your income will comfortably allow.

It doesn't help that lenders tend to approve potential buyers on the premise that they don't have any expenses beyond those that revolve around their household - i.e., heating and electricity - and any outstanding debts. It also doesn't help that, the more money you spend, the higher your real estate agent's commission.

As a result, a homeowner's maximum prequalified loan amount tends to be much higher than what they can comfortably afford - and there are often a lot of forces working against them (sales pressure, bidding wars, emotions) encouraging them to spend the extra money.

In a recent episode of HGTV's Property Virgins, this scenario was played out in front of the rolling cameras. The show's host and real estate "guru", Sandra Rinomato, frequently encourages her first time buyers to purchase "as much house as they can afford" - and scoffs at those who cautiously don't want to spend their fully-approved amount.

In this particular episode, a young Toronto couple - both elementary school teachers - were approved for $450,000 with a $20,000 down payment. It's unlikely that either of these teachers were making more than $50,000 a year max, bringing their total income to somewhere around $100,000 before taxes. They were looking at homes between $350,000 and $400,000, but when they found a condo for $440,000, they - meaning the wife - fell in love with it. While the husband wasn't certain it could fit into their finances, a quick bat of his wife's eyelashes convinced him that they could, and they ended up going for it.

I have no idea when this particular episode was filmed (although it seems to be before the minimum down payment was raised to 5%), or what the interest rates were at the time, but even if they landed a mortgage at 4%, their monthly mortgage payment would be around $2,209.28 - plus condo fees ($220), property taxes ($200), and hydro ($100). Factor in an extra parking space ($150), that takes us to $2,879.28 a month - a fair chunk of the couple's after-tax income of approximately $6,029/month - and we haven't even addressed groceries, entertainment, take-out dinners, car payments, car insurance and all the other expenses that accompany living in an expensive city.

To leave yourself some breathing room, make sure you're well aware of your monthly spending habits before heading out to hunt for a home. Once you know where your money goes, work backwards and determine what monthly mortgage amount you can afford - and what that translates into in terms of a house price. Settling for a smaller home may not seem like a sacrifice when you can afford that extra vacation, or renovation, or fine dining experience that your house-poor neighbours can only dream about.

This article is provided courtesy of Axiom Mortgage Partners.

Thursday, January 14, 2010

Edmonton Housing Market Forescast 2010

Hi everyone!

Happy New Year and all that jazz! It’s been a while since my last post so I figured it was about time I posted an article.
Yesterday I attended the 2010 Housing Forecast Seminar along with approximately 1,000 other industry members. It was very informative, and as always, I come back with a lot of helpful information.
Here are some of the highlights!

Hot Design Trends for 2010: presented by Guy St. Germain of the CHBA Edmonton Region
• Going green to save green is still very popular! I’m really glad to hear this as I am a strong believer in looking after our environment. Sustainable wood flooring is still very popular along with Energy Efficient appliances.
• Wide hardwood floorboards are still popular, especially patterned woods like oak and ash.
• Grey is the new neutral! But, not the yucky ‘80’s grey...more spa-like grey’s such as slate and charcoal.
• Wallpaper continues to be popular but there has been a shift away from big, bold patterns to more nature inspired designs that include textured finishes.
• Glass tiles in kitchens and bathrooms are an inexpensive way to add colour. A lot of the glass comes from recycled sources and metallic and glossy finishes are very common.
• High tech kitchens continue to be in demand. There are more built in gadgets such as flat screen TV’s and computers. Stainless steel appliances are now standard so watch for brass and copper finishes on appliances.
• Bathrooms continue to become more spa-like and important to new buyers. Watch for master bathrooms to become even larger and more spa-inspired with a greater emphasis on his and her spaces.
• Dog showers continue to be popular! When they first began to emerge they were seen as a novelty item but may be here to stay since they have become very popular with canine loving home owners. http://www.apartmenttherapy.com/chicago/pets-dogs-cats-snakes-etc/dog-shower-inspiration-061935

Market Forecast: presented by Larry Westergard, President (2010) Realtors Association of Edmonton• 2009 was a year of recovery. Prices were at their peak in May of 2007 and declined into 2008.
• The market is starting to rebalance itself and we are a lot better of in Alberta than in other parts of Canada and the United States.
• As of November 2009 Edmonton home prices ranked 5th compared to other Canadian cities.
• The residential sales forecast is that there will be a balanced and active market for single family homes while the market for higher end homes will be softer. The condo market is not expected to increase.
• In summary: buyers will have choice and sales will be steady. Prices will vary seasonally and will trend upwards throughout the year. Interest rates will remain low in the first half of the year.
• If you would like more information on the market, please contact a licensed real estate agent!