Should I sell my house now or later?
Given the health crisis that we're in right now, and by the way, we are still in a lockdown,
at least here in Calgary, Alberta.
I've been getting a lot of calls from people asking me should I sell my house now or later
Now even though I'm here in Calgary, Alberta, these real estate principles will apply to
most North American markets and it's going to be even more relevant if you happen to
be an oil and gas market such as, Texas.
What I hope that you'll take away from this video by the end of it is knowing what drives
real estate prices.
Because if you understand that, then you're going to know how to price your home properly.
You'll also know the factors to consider when you want to sell in uncertain times like this
right now.
I'm going to give you my honest opinion on the market and the things that you need to
be aware of and at the end I'm going to have some bonus tips for you so you don't want
to miss that.
As a realtor for the last seven years, I believe in being honest and transparent,
so I formulate a lot of my opinions based on statistics and facts, not so much the headlines
that you see out there.
If you're new to our channel, welcome.
My name is Felix Chan with the LiveInnerCity real estate team here in Calgary, Alberta.
We provide our best tips and strategies for home buyers, home sellers and investors.
We also do community highlights as well as a home and condo tour, so if you don't want
to miss any of those, make sure you hit the subscribe button down below and the notification
bell so you know when our next videos come out.
Let's get started. To provide some context.
I'm going to share a conversation I had with my client the other day.
Now he owns a condo here in Calgary.
He's moved out of town.
It's currently being rented out to a tenant.
He doesn't have to sell the property in order to buy his new one, but he wanted to ask is
it best to sell now or wait a few years?
Now before we dive into that, there's two things that we have to know about.
The first is what is the local real estate market doing and what is the economy doing
here in Canada?
So the local activity here has been picking up this week compared to the last week, we've
seen an increase of 20% in showings pending sales are also at levels pre COVID - 19
Because of these pending sales, it's going to turn into the next week and the week after
more sales.
So because it's a lagging indicator, we're not going to know the full scale of all the
sales for another few weeks.
Our team is seeing multiple offers even in this market with properties that provide value.
I am seeing prices come down and sellers are being more realistic with their list price.
They're not listing it for tens of thousands of dollars more than the home is worth.
They're pricing it right at what previous similar properties have been selling for.
So they are more realistic with market expectations.
And lastly, total inventory is low and this is kind of our saving grace because it keeps
property values steady.
The second thing I spoke with him about is the overall economy.
Now I'm not sure if you guys have seen my previous videos about COVID - 19 and the impact
on real estate, but I mentioned that sellers are facing three key elements right now.
The first key element is obviously the COVID impact.
Now there's a micro and macro impact of COVID - 19.
The micro impact is buyers still a little hesitant to come out and see properties, which
right now the trend is starting to go up.
So that's encouraging to see the macro impact is the economic impact on the entire world
because most of the world is suffering from the same thing, which is very different than
the previous recessions we've had.
The second key element is oil and gas.
Now here in Alberta at 25% of our GDP comes from oil and gas.
So there's no doubt that the oil and gas industry will affect all burns.
Even though OPEC came out saying that they're going to cut 9.7 million barrels a day, it's
going to happen over a period of two years, so we're not going to see that fully take
into effect until April of 2022 now, there's been estimates that the demand for oil on
a global scale has gotten more than 20 million barrels per day.
The third element is a recession on a global scale.
Now, this recession is very different than all the other recessions we've had.
Even in the great recession in 2007 2008 or so, there were parts of the world that weren't
affected by the recession, whereas some other parts where nearly every country is facing
the same problem and right now in Alberta for the month of April, unemployment rate
has jumped to 13 and a half percent.
Now, just to give you guys some context in the great depression in the 1930s at the peak
of the unemployment rate, it was at 25% so we're more than halfway there.
As a result, people are getting laid off because companies are doing budget cuts, they're reducing
their investment and it questions people's job security so they're not going to be so
Gung Ho to go out and purchase.
So given what's happening in the local real estate market as well as the economy, not
just here in Canada, but on a global scale, we have to ask ourselves, are you bearish
or bullish on the real estate?
For me, I don't see very strong economic fundamentals to prop up GDP, which by the way is the single
driver of real estate prices, which I'm going to get into a second here.
So the two questions you have to ask yourself is this:
Number one, what is your risk tolerance?
What is your risk tolerance to potentially losing some money now or potentially losing
even more money later?
The second question you have to ask yourself is whatever period of time you think it's
going to be until real estate prices recover.
And I've talked to people who said, you know, one year, three years, five years, 10 years,
are you able and willing to stay in your home for that period of time?
So should I sell later when the market recovers?
So what we have to understand is what drives real estate prices.
The single factor that drives real estate prices is GDP growth or gross domestic product.
Now when GDP starts growing, it means that it's creating some jobs and if jobs are being
created, then people will migrate to the city.
If people migrate to the city, then they're going to rent.
And if they rent, vacancy rates are gonna drop and about 18 months later, that's when
real estate prices start seeing an appreciation.
So the question now becomes, if you think the market will take about two years to recover,
then it's going to be about three and a half years until you start seeing real estate prices
go up.
Is that period of time okay with you to stay in the current home that you're living in
or keep your rental property.
We also had to get really dialed in on exactly what you want to sell your home for.
In all my conversations, people say, yep, I'm going to wait a few years until it goes
back up.
Well, what does that exactly mean?
Does it mean that you're looking for a $10,000 increase from today?
A 30, a $50,000 increase?
It's very important for you to know exactly what your exit costs and strategy would be.
As an example, if my client were to sell his condo today, he would lose about $60,000 from
the purchase price that he had bought the condo for.
So his thoughts were the market's gonna recover in about two years.
So, okay, we're probably looking at about three and a half years until the market starts
recovering.
But is it realistic that it's gonna go up $60,000 in one year?
From the time that GDP starts growing two years down the road, chances are it's not
going to, that's a 19% increase given his specific situation, those days of seeing double
digit growth are long gone, at least for the short term.
So is it realistic?
No.
And maybe your situation isn't, you know, a $60,000 gap, maybe it's a $20,000 gap or
a $30,000 gap.
Well, whatever that get me beat, you have to know what your exit strategy is so you
can reverse engineer it and say, okay, given the timeframe that I think the market will
recover, is it realistic for prices to hit that level?
Is this information helpful for you guys?
Did I give you guys some key questions to ask yourselves and things to consider?
I hope so.
And if you want to rewatch this video later, hit the like and the save button so you can
come back to it when you go back into your YouTube account.
All right, bonus tips.
Okay, so here are the other things that you want to consider if you decide to keep your
property and in this case, if it's a condo, the first thing you want to find out is if
you were to rent it out, is it going to cashflow?
Cashflow meaning the rental income that you get minus your expenses, so your mortgage,
condo fees, property taxes and insurance.
Most of the time the tenants pay for the utilities.
Are the tenants cooperative in this pandemic?
Some tenants don't want you to show and there's a law here in Alberta that prevents showings
in a property, if the tenant has been feeling sick or is in self-isolation.
Another interesting tip I have for you is in a situation if you are selling and you
are going to buy a new place, then pay attention o your pail penalty.
Now in this situation, his mortgage renews in three more years and it's a variable at
prime minus 1% that means his net rate is 1.45% now he's moving into a property that
is going to be a much more expensive, so the mortgage is going to be much higher if he
were to get a new variable rate mortgage.
Right now the rate on that is only prime minus 0.2 versus prime minus 1% so it's an 80 point
difference, which is massive.
If your mortgage is going to be hundreds of thousands of dollars more.
So it's in his best interest to sell the property so he can keep his current mortgage terms
and port it to his new home so he can see those interests savings for the next three
years.
And another factor are the risks that comes with owning a condominium.
And I'm talking specifically about special assessments.
There could also be wear and tear and normal repairs that you'll have to make to the condo
or the home over the next few years.
And lastly, how much energy do you want to put into managing your condo?
Even if you have a property manager, I haven't really ran into one that has amazing communication,
great service and is on the ball and won't charge you an arm and a leg for some of their
services.
So sometimes you have to manage your property manager as well too.
So what is the advice I'm giving my sellers?
Now, before I get to that, I want to ask you guys, are you finding this information valuable?
If so, hit the subscribe button and the notification bell because we'll be coming out with more
videos to help you with your real estate journey.
We also come up with videos every single week and if there's anything that you guys want
us to cover, throw it in the comments below and we would love can make a video for you
guys.
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at LiveInnerCity
So here is my advice for sellers.
Given what's happening in the economy and in the world.
I believe it's better to sell sooner than later.
Right now in our local market activity is picking up.
Sales are going up, people are coming out and showing more properties.
So you want to take advantage of the pent up demand that has been growing from the last
few months and sell your home for top dollar.
The truth is we don't know what's going to happen in the future.
There's so much uncertainty.
What if there's a second wave of COVID?
What if the lockdowns happen for a lot longer than we expect?
And if you're a buyer, it's a great time to buy right now.
Now, my one biggest piece of advice for you is don't try and time the bottom because the
truth is you're not going to be able to time it.
It's kind of like timing the bottom of the stock market.
You'll never know you've hit the bottom until you've started coming out from that.
And you'll see that through the trends and the statistics.
So if you find something that fits your criteria and your budget, then it doesn't hurt to write
an offer and purchase a property today.
That is all I had for you guys today.
So thanks for tuning in.
Hope you learned something today.
My name is Felix Chan with the LiveInnerCity real estate team helping you keep real
estate simple and we'll see you in the next video.