Get off the fence and get into the real estate market

The top reasons anyone should purchase real estate are:

  • Equity/Capital Growth Potential
  • Financing/Ownership Is more affordable than renting
  • Leverage creates more long term or short term benefits

What is "Capital Growth" and why should you care?

The plain and simple explanation is, Capital growth is an increase in the value of your real estate purchase (asset) over time.   Essentially you're buying low and selling high in terms of price, and you keep the difference.  Knowing your investment is secure in value that it won't decline like the car that you drive every day, but in fact increases in value so you can sell for a profit aids in building wealth, and financial security in the future.

Some of the key metrics in determining if the market is displaying a positive growth trend are:

  • Year over year price growth
  • Year over year sales growth

Red Deer REal Estate Market October 2021

October is certainly displaying signs of price and volume growth over 2020.

Red Deer Real Estate Market YTD 2021

Is it cheaper to own versus rent?

For our purposes, we will assume utilities are over and above for both buying and renting.

A common starter home in Red Deer that has 3 bedrooms, 2 bathrooms, no garage will rent for $1,600/month. We're seeing homes with basement suites get $900 down and $1,200 or more up in some cases.  Rates may vary by location and age.

For our example, we will compare to a home that is built after 2000 and older than 2010. The location for that home will most likely fall in the Inglewood, or Johnstone areas with sale prices ranging from $275,000 - $300,000.

To purchase a comparable home today we will use a value of $285,000. Is the monthly payment including taxes going to be less than $1,600?

Let's break it down...

Typical taxes in Red Deer for that style of home, age and price are averaging 1% of the sale price so $2,850/ year or $238/month.

Using the Financial Calculator Page here. If we were to finance $285,000 with a 3% interest rate, amortized over 25 years, the monthly mortgage payments would be approximately $1,352.  Note we're not taking into account a down payment, and CMHC premiums., for simplicity we're financing the full amount.

For a second opinion on our calculations, we encourage you to visit your favourite mortgage professional such as https://www.wehaveamortgageforthat.com/

Mortgage + Taxes  = $1,352+ 238 = $1,590

Rent:  $1,600

Yes, it is comparable to renting.  So next question, what's the benefit of buying then?

Leverage.

Real Estate is one of the very few assets you can purchase with a 5% down payment, make payments over time and get growth. Leverage is when you use debt to multiply the potential return on your real estate investment.  A mortgage is a straightforward example of leverage in real estate. With 5% down you are using 95% leverage.  You can not walk into a bank and ask to buy a $100,000 GIC with only $5,000.  With real estate, you can borrow up to 95% of the home's value for your benefit.

Refer to our charts above as to whether or not the market is displaying positive growth signs.

Leverage reduces your RISK.  IF that $285,000 home declines in value, the bank stands to lose more than you do.

To yield a positive return on not only the selling price but your minimal initial investment and monthly payments we will have to make some assumptions on how much real estate will increase over time.

Selling in 5 years?

It's ok if your first home is not your forever home.  Families grow, and things change.  So what would happen if you bought that $285,000 home and sold it in 5 years.  Would you make any money?

Example 1:  No Growth.

Bought at $285,000 and sold for $285,000.  IS the profit $0.00?  Well not exactly.  You are still making monthly payments.  60 monthly payments.  Your mortgage balance in the future after 60 payments will roughly be $244,000 (using our previous example).

Sale price of $285,000 - Mortgage Balance of $244,000 = Equity balance of $41,000.

Example 2:  Growth of 3%

Let's pretend the market slowly goes up by 3% per year.  Hypothetically then $285,000 in 2021 would grow to $330,000 in 2026.

Sale price of $330,000 - Mortgage Balance of $244,000 = $86,000.

I would buy now versus waiting.

What are your thoughts?  Are these real-world examples?  What variables are missing from the equation besides a 5% down payment requirement of $14,250?

Ready to get started finding the right home?  Contact Us today 🙂

Red Deer Real Estate Market Update, September 2021

Is now the time to buy real estate in Red Deer?

A look at the numbers tells us the average sale price for September 2021 versus September 2020 is higher, sales volume is stronger, the days to sell is shorter, and the sale to new listings ratio is stronger.

Red Deer Real Estate Market Update

How is the market this year compared to last year overall?

A little deeper diver into the numbers shows us that year-to-date numbers echo the monthly numbers but are more pronounced.

(***Note 2020 March thru May market volume was the lowest seen in many, many years.  influencing the YTD numbers due to COVID lockdown).

Red Deer Real Estate Market Update

How strong was September 2021 compared to 2020?  

The sales volume in 2021 was the best sales volume we have seen since 2014!

An indication that the market is growing more positive, and the lowest point is behind us.  If you were trying to time the market, we are now in a gradual upward trend.

Red Deer Real Estate Market Update

What does a Balanced Real Estate Market Mean?

It’s more than an equation or ratio of 50/50 (50:50).  Where the Incoming listings (the supply) meet the demand or sales volume with respect to real estate listings.

Red Deer Real Estate Market 2021

In June the number of “new listings” that came on the market as new, this also would include “relists”, was 326 residential real estate listings in Red Deer.   The demand or sales volume for June 2021 was 205.  As a percentage one could say that 62% of the”new” listings sold.  A little higher than 62% we would start entering into a seller’s market more so.  However when we include the active inventory total the supply swells to 696 residential listings in Red Deer, and the demand of 205 sales would be just 30% of the listing inventory.  In other words, 70% of the listings do NOT sell.  Which was the case in June.

Despite all the media attention regarding a heated real estate market, this is a limited view of what actually is going on.  In the slides, you will notice that the June sales volume for 2021 was the highest since 2014.  Which is a very positive reflection of buyer confidence, and overall economic strength in the area.  Things are looking up.

The typical “spring” market bump is more elongated this year.  We’ve seen a strong April and May, and June is following that same trend.  As buyers, you will notice some product types and price ranges are selling faster than others.  This is due to the number of listings in that particular price range.  Most likely the “hot market” is actually a sweet spot near the average price for the area or month.  In this case, the average single-family home sale price was $376,207.

Red Deer Real Estate Market Update

The Red Deer MLS® real estate market continues to roll and is a balanced market.  Some properties are experiencing multiple offers and very “hot” demand, but this is not widespread across all property types or even all price ranges.  The overall real estate market in Red Deer has recovered substantially from 2020 and earlier.

Looking at the number of listings sold this year over 2020, the sales volume is up 164%.  This is deceiving or skewed.  Last May we like everyone else was knee-deep into our first lockdown and it was a heavy-duty one.  Everyone was nervous and scared about their job, business and health.  Very few people were contemplating a move.

Now, we’re almost back to normal in many respects.  With that in mind, the real measure is comparing May to the previous year’s month of May.

May real estate in Red Deer

Yes, May 2021 is very good.  One of the best in the last 6 years for sure.  A positive result for Red Deer real estate and a confidence builder to buyers getting into the market or moving up, as well as those sellers that have been concerned about the previous decline.

If you have questions about selling or buying now, please feel free to reach out to one of our associates.  Contact Us Today

 

The Red Deer real estate market was on fire in April and is showing steady signs to continue this trend into May as well. Here is a detailed look at the inventory levels in Red Deer for detached homes, townhouses, apartments as well as half duplexes. If you are thinking of selling you will also see the average sold prices as well as the average days on the market per property type.

Inforgraphic of deatched homes in Red Deer April

Detached homes remain strong as the dominant property type moving in Red Deer, with 169 being sold in April while 229 new listing’s arrived on the market bringing the total inventory at the time to 363 properties.

The next biggest seller in Red Deer are townhomes. 22 townhomes sold while 42 more hit the market bringing the total number of townhouses available in Red Deer to 89.

Half Duplex’s remain very popular in Red Deer, seeing a slight month to month incline of sales, having 17 sold in April. Although new listings of half duplex’s slowed down a bit with only 29 joining the market last month. With the average days to sell for half duplex’s being only 54 days, now is the ideal time to take advantage of our hot market!

Apartments are beginning to move quite a bit more in Red Deer as 30 new listings hit the market in April bringing the total count of apartments on the market to 107.

If you are thinking of selling, now is definitely the time to get your house listed and take advantage of the heating up sellers market.

What a change it has been in the last year!

Mid-March, April and May we were pretty much CLOSED for business it seemed.  That was the beginning of COVID lockdowns, and there was a ton of apprehension and angst in the air about how are we all going to make it with our work, businesses and well everything closed.

No need to dwell on what you’ve already lived through.  You know all that.  Where are we know and is it Red HOT?  Yes and No.  It is certainly a better market than last year.  In many instances, 2021 in real estate is the most robust year we have seen in Red Deer MLS since 2014!

Here are the numbers…

Red Deer Real Estate Market 2021

Red Deer remains a predominantly Single Family Detached House Market.   The sales volume looks like it is through the roof, however, keep in mind 2020 was terrible in April.    It is therefore very important to look at things a little broader if we can

 

Red Deer Real Estate Market April versus previous years April (2014 - 2021) MLS Stats from Century 21 Advantage

Sales Volume for April was the strongest we have seen since 2014.  However NOT Red Hot super sky-high as one might expect to listen or reading the news reports.  It’s way better than the previous 5 years but closer to being on par with 2014 levels.

Red Deer Real Estate Market March 2021 versus April 2021 MLS Stats from Century 21 Advantage

The market is trending up when looking at where the numbers were in March 2021 versus April 😃

 

Red Deer Real Estate Market 2020 YTD versus 2021 YTD MLS Stats from Century 21 Advantage

 

What a difference a year makes.  See the MASSIVE change from total lockdown to our current environment..

Red Deer Real Estate Market April versus April MLS Stats from Century 21 Advantage