Nanaimo Real Estate Blog
This week, there has been a series of reports in the media concerning real estate companies on the Mainland that encouraged agents to engage in the practice called “shadow flipping” and to think about the commissions involved rather than the best interests of their clients. Shadow flipping is real estate practice that has not been seen in Nanaimo and area, but has become quite common in parts of Vancouver as prices skyrocket beyond the income levels of residents, creating a schism between those who live and work in Vancouver and those who invest and safeguard their money in real estate, and then allow properties to sit vacant and literally rot until they are no longer livable. When a seller lists a home for sale, a buyer will immediately make an offer to purchase the home and then sell the contract of purchase to another buyer, often with the services of real estate agents willing to garner additional commissions.
Earlier this week, Nanaimo suffered a tragic fire in the downtown core which affected several local businesses. As the smoke and flames subsided and the valiant firefighters packed up after valiantly battling this terrible blaze, I thought it might be interesting to share the history of this heritage building that likely will now be torn down due to the amount of damage caused by the fire. Jean Burns was an beloved resident of Nanaimo and spearheaded the construction of the Jean Burns Building built in 1955 by local architect, Thomas McAvarravy. A particularly interesting design feature of this building located on the corner of Commercial Street and Terminal Avenue was that the second floor stairway was exposed to the street by a paneled glass wall. This building was the location for the Jean Burns Ladies and Children’s Wear Shop for over 40 years. The clothing was quite upscale and sold the latest fashions and was a reflection of Jean’s experience as a seamstress.
Many ideas about this week’s newsletter filled my brain. Would I write about the history of the Easter egg? What about Spring clean-up tips? However, after the tragedy that took place in Belgium this week, it feels as though none of these ideas really matter. I can recall with sadness the events in France and the despair felt by so many for not being able to do more to help those who had been affected. As stories from the Belgium bombings unfold, it is hard not to catch your breath as the faceless and nameless victims suddenly come sharply into focus as the news media begins to share with all of us the personal stories, photos and names of those injured, killed or traumatized by these attacks. Whether at the hands of evil, or out of a sick and perverse sense of duty to a religion, it does not alleviate the pain and suffering of those who have been impacted by this tragedy.
The VIREB stats prove that we have moved from a buyer's market to a seller's market and buyers need a set of tools to combat this change in the real estate market. However, our society seems to have embraced a frantic and impatient model of behavior that can prove costly for a home buyer. According to clinical psychologist Szana E Flores, author of Facehooked: How Facebook Affects Our Emptions, Relationships and Lives, she lays blames solely on technology and social media. "The millennial generation grew up on a whole lot of technology, more so than other generations, and they feel the fallout of that," she says. "But most of us are becoming less comfortable with delayed gratification." The main problem with impatience is that once we focus on a singular goal, we often are prevented from enjoying other activities. Much like climbing a mountain, we often will know roughly how long it will take to hike the mountain and set off eager to race up the hill. The longer we hike, the more impatient we become. We then consider setting a new goal – which may be to simply stop climbing as we may fear impending pain if we continue. This mindset can often apply to home buying in a busy market.
It's true. With the surge of social media and other ways of connecting to buyers, your home should not be marketed the same way it would have been if it was 2000 (once referred to as "Y2K"). We still remember cautious talk in the board room that our computers would crash, client lists would be deleted and our bank accounts would be frozen as we moved into the new millennium. Hindsight is always 20/20 and we know that none of these fears came to be. What was technology like back in 2000 and why are some agents still using the same tactics to market properties today? Let's take a closer look. Internet speed. In 2000, only 6% of American internet users were using broadband internet, compared with 80% by 2010. Many home buyers would still rely on realtors to print out listings to drive by and check out the area before arranging a showing. Not only was the information stale-dated by the time buyers received the listing info, many times, buyers would lose out on a property if they did not access information before other buyers. Yes, dial-up internet was still commonplace during this time, but it was cumbersome to access information online due to the slow speed of the internet and websites that provided information that was not relevant or you had to submit your contact details just to view a page.
There is actually a term to describe the "condition" that many misinformed home buyers can experience that is deemed a "cognitive bias". Buyer's Stockholm Syndrome is also known as post-purchase rationalization according to Wikipedia, and is described as being a cognitive bias "whereby someone who has purchased an expensive product or service overlooks any faults or defects in order to justify their purchase". This sounds like many people who find and marry their partner after a few match.com emails or a home buyer who is so desperate to own that they fail to ensure that they can afford their purchase or that they perform the necessary inspections on the home to avoid facing thousands of dollars in repairs later on.
With Vancouver seeing skyrocketing prices with an average home sale price of $1.8 million, Victoria has seen the impact of this dramatic rise in real estate activity. Many home owners are selling their Vancouver homes and moving to Victoria, where the average sale price is a lowly $618,600 (per VREB for January 2016). This represents an increase of 10%. Only 4 homes remain on MLS priced at less than $400,000. How does this compare with Nanaimo? Nanaimo's real estate market has remained quite balanced compared to its larger city neighbours. Over the past 12 months, VIREB (Vancouver Island Real Estate Board) states that prices have risen 5% - from an average price of $372,048 to $392,157. To put this into perspective, there are currently 171 single family homes listed on MLS for less than $400,000! Even more interesting, these homes aren't just older homes in need of TLC or tear down homes. In fact, 39 homes listed under the $400k threshold are less than 15 YEARS OLD! No wonder there has been a lot of news reports this week about home buyers considering living on Vancouver Island and commuting for work to Vancouver so that they can afford to own a home.
An interesting fact about the property purchase tax (PPT) that is gaining a lot of attention in the BC budget just released this week is that it was created in 1987 – the SAME year that the Loonie began its entrance into the Canadian currency! According to CTV News, home prices in greater Vancouver were only $147,000 at that time. Bill Vander Zalm introduced BC residents to this new real estate tax and was met with as much support as the dreaded HST. In fact, the Real Estate Board of Greater Vancouver took out a full page newspaper ad encouraging residents to write letters of protest to their MLA's! Today, it is estimated that the property purchase tax generates annual revenues for the BC government (2014-2015) of $1.15 BILLION DOLLARS!
How do we see ourselves? Valentine's Day can elicit a number of feelings for people – whether it be passion, love, lust, longing, sadness, or loneliness. For me, Valentine's Day is the day that I have the opportunity to celebrate my wedding anniversary with my beautiful wife, Johanna. Yes, writing a weekly newsletter and being able to mention my anniversary has its benefits! It seems that many of us see ourselves from the viewpoint of how we think others view us. The same can be said for how we determine our sense of wealth and success. I recently read a fascinating book "The Self Illusion" by Bruce Hood that discusses how the social brain creates identity. William James, a prodigal psychologist, once wrote, "A man's Self is the sum total of all that he CAN call his, not only his body and his psychic powers, but his clothes and his house, his wife and children, his ancestors and friends, his reputation and works, his lands and horses, and yacht and bank account."
An interesting book that I recently read titled "Smart is the New Rich" by Christine Romans, describes the recession as having a pivotal effect on the American family. In 2007, real estate was at all-time highs in Canada and the US. As Romans points out "this country went from flat-screens for Christmas in 2007 to foreclosures for Christmas just 12 months later". Romans compares money to nutrition. She recommends asking yourself if you will feel great (like a sugar rush or glass of wine) once you buy a product, but since you don't need it, it may hurt you (and your financial health) in the long run as it was an unnecessary purchase. I found the book extremely fascinating as it stated that Americans on average have 13 credit obligations on record with their credit bureau! What is the breakdown? 9 are for credit cards, department stores, gas, and 4 are car loans and mortgages! Take a quick look in your wallet. You can earn less, but save and invest more if you are smart when it comes to your finances. It is estimated that there are 75 million Americans who have not even saved $1 towards their retirement. If you have any type of savings plan, you are doing better than MILLIONS of others, regardless of your income. If you earn a high income but make poor choices when it comes to budgeting, you might find yourself being described as "dumb rich". Many ex-oil workers have seen their huge paycheques from working up north in Fort McMurray disappear since last year and many saved NOTHING to plan for a rainy day (or unemployment). Just as the recession caught many people by surprise, these individuals believed that their income stream would never end. As you browse the Craigslist ads, you will often spot a newer RV, truck with specialized parts that has oversized tires and rims, boats, quads and other "toys" that are now for sale. It may seem that I am making light of this situation, but that is absolutely not the case. Many of these people become depressed, see their health deteriorate, and face struggles in their relationships as a result of the economic situation they find themselves in. This is why I am a huge advocate of teaching kids in school about money and budgeting as only 6% of schoolchildren will receive even a basic overview of credit and finance, and so it is not surprising that these kids become adults without the insight into saving and managing credit.