McClelland Minute - May 23, 2010

There is Gold in Those Hills

It looks like Canada is slowly recovering from one of the worst downturns in the last 70 years.  Many of us were caught unprepared, I know I was.  It took me several months to adjust spending patterns to the new reality.  When you are self-employed that is not always easy to do particularly when you have several families depending on the success of your business. I won’t be so slow to make necessary changes next time. 

One veteran investor said to me last summer “there is no time to waste in a recession; it is when I lay the foundation for my next profitable run”.  And that is the truth of it; during any economic slowdown those with money are in the position to make more by preparing for the inevitable upturn.  And recover it will; it always does.

A frustrating fact of life for Realtors these days is to receive unrealistic super low offers on listed properties, most of which turn into no agreement at all.  What the prospective buyer doesn’t realize is that they are wasting a real opportunity to get a “good” deal.  Respectful negotiations may reveal a motivated seller, and a purchase price well below appraised or replacement values.  There are many reasons that people need to sell, some being more urgent than others.

Wise buyers do their research.  If the home they are interested in was worth $350,000  at the peak three years ago, but can be had for $300,000 today, and real estate tends to cycle every seven years, then how much do you think it will be worth four years from now?  An upturn of 15% would make them $45,000.  Tax free!

What if the solid home owner decided that this was the perfect time to trade up?  In effect, they will be using the bottom or near bottom timing of the cycle, to make their move to a bigger, newer home.  The same upturn on a $400,000 house now makes them $60,000 plus they can take advantage of some historically attractive mortgage rates.

We see a number of people who are also spending this time to do one of two things.  They are buying investment property, including bare land, as a stable asset in their portfolio.  Or they are downsizing their large residence in favour of the great deals available on new built condominiums and duplexes, and then applying the surplus to other investment vehicles.

The simple reality is the Lloydminster region currently has a ten to eleven month roster of residential properties based on the present rate of completed sales.  This is about twice as much inventory that is needed for a “balanced” market.  In any commodity, when supply exceeds demand, there is downward pressure on pricing and increasing length of time on market.  Great choice, excellent value – two very good reasons to get involved today, in my opinion.

Vern McClelland is associate broker with RE/MAX of Lloydminster.  If you have questions or comments on this article or other real estate matters, he can be reached at 780.808.2700 or through the McClelland Group website www.mcclelland.ca

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