BARRIE REAL ESTATE by GARY and CANDI GRANT - Experience the Dedication!

BARRIE & AREA REAL ESTATE MARKET CONDITIONS REPORT

Area Characteristics:

From the late '90's through 2005, Barrie was ranked as the fastest growing City in Canada... surpassed at that time by the retirement community of Kelowna, B.C. While growing at a slower rate than previously, the momentum has continued and the skyline of the City continues to change with development of new Residential, Commercial, and Industrial areas... supplemented by the planned reconfiguration of the Downtown Core into a vibrant waterfront experience. Barrie and the adjoining municipalities of Innisfil, Oro-Medonte, and Springwater continue to offer the sparkling clear waters of Lakes Simcoe, Orr, and Bass Lakes, along with local world class ski hills for recreational purposes. With today’s emphasis on environmental conservation, these assets will continue to offer safe and convenient swimming, sand beach lounging, skiing, snow boarding, and tubing for all members of the family. Come and see for yourself... we're "Just Slightly Above Toronto"!

June 30, 2010 - Market Conditions Report - Barrie and Area

The local area has continued to demonstrate a reasonably healthy residential real estate market during the course of the first six months of the year. Year to date unit volume is ahead of the prior year by approximately 10.5% at 2,376 units, and average prices are also ahead by about 6.7% at $279,565.00. This current average price is also up from December 2009 by about 5.9%, indicating that the prices being obtained by Sellers to date, have been reasonable and acceptable to Buyers.

However, the unit volume experienced during the past two months has actually been below the same period last year by about 18.5%, and while two months of activity does not make a trend, this is in line with a recent forecast by CREA (Canadian Real Estate Association), that the volume during the last half of the year would not match 2009 levels. The volume of the second half of 2009 was influenced by the release of pent up demand experienced during the earlier recessionary period. While average prices, as indicated previously, are running comfortably ahead of both June and December 2009, it is anticipated that with the softening of unit demand, prices will also experience similar pressures. We are fortunate to have a market which represents more of a “balanced” environment as opposed to a “buyer’s” or “seller’s” market, which in either case, is a precursor of roller coaster swings in market prices. In the main, I continue to believe that our area will experience moderate growth and general pricing stability throughout the balance of the year and into 2011.

The number of active residential listings on the Barrie & District Real Estate Association’s MLS® System rose four per cent on a year-over-year basis to 1,987 units at the end of June 2010. This represented 4.3 months of inventory, up from 3.3 months one year earlier. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

The introduction in Ontario of the Harmonized Sales Tax will result in additional closing costs to both buyers and sellers. It is estimated that this increase will amount to about $1,500.00 on the average home sale in the Barrie area. While this increase should, and cannot be considered an insignificant amount, it is like all taxes… “A Fact of Life”…and over time, will simply become part of the pricing equation for both buyers and sellers. This increase represents less than a half of one percent, and pales in comparison to the general market price increases which we have experienced over the past ten years (of about 5.7% per year).

The Federal Government has recently announced new home financing controls which officially took effect on April 19^th, and which must be followed by the banking sector. The intent of these changes is to ensure that Canada continues to be the “world example” to emulate in mortgage financing… avoiding the pitfalls which other nations… most notably the United States… have experienced, and which played a major role in the current world wide economic recession. Stand up and say “Hurray” for us… we have put long term “prudence” ahead of “short term profit” in our housing and financial markets.

These new changes, essentially tighten up some mandatory debt service ratios and application criteria used by the lending institutions when an application for a mortgage is processed. This will have the potential to reduce (marginally) the number of approved applications for a first mortgage, but will also have the effect of keeping these same applicants out of financial distress in the longer term, and therefore, will result in their re-application at a later date when their financial wherewithal has improved. Specifically, the following is the generalities of the main criteria announced by the Federal Government of Canada. The three big changes:

1. Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and a shorter term. This initiative will help Canadians prepare for higher interest rates in the future.

2. Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90% from 95% of the current value of their homes. This will ensure that home ownership is a more effective way to save.

3. Require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation (investments).

Minister of Finance, Jim Flaherty, stated that “there’s no clear evidence of a housing bubble, but we’re taking proactive, prudent and cautious steps to help prevent one.” (What he didn’t say was… “After all, we are Canadian!!!”)

Forward Predictions for the Barrie Area Market:

Unit volume in 2010 will likely be marginally less than the prior year level of 4,310 units, and prices will increase by about 1 to 2 percent. Properties which are priced reasonably and present themselves well, will sell better than those which are simply relying on low prices to attract a buyer. Recreational and Specialty Properties will continue to be in demand, since they have a limited supply, but will take longer to sell and/or will be sold at values lower than previously. The introduction of the GO Service to Barrie, the general affordability of the Barrie area, and the presence of a double land transfer tax system in the Greater Toronto Market will continue to fuel unit growth in the entire area in the short and longer term.

First time buyers will continue to play an important role in fuelling the growth of the local market. As a result, there is a dependence on the continuation of low mortgage interest rates. Rates do continue to reside at the lowest levels in decades allowing more and more of this group to qualify for financing. Their influence on the market is significant since they create the initial impetus for move-up buyers to sell and then re-buy with a resulting multi-level chain of ownership changes. In addition, this move up phenomenon has the effect of strengthening market values in both the short and long terms, as well as being a boon to the renovation and building supply sectors of our economy.

The City of Barrie has been designated by the Province of Ontario as a Growth Centre, and Buyers coming to the area can still expect to find a wide range of housing options at affordable prices With average prices at least $175,000 below comparable metropolitan Toronto values, buyers from the greater metro area will find a refreshing negotiating environment where reasonable offers are entertained by Sellers, multiple offers are the exception, and local REALTORS® work “around the clock” to bring the Agreement together. The availability of rental housing has improved, but with mortgage interest rates at record low levels, and 95% financing available, the option to buy makes economic sense for everyone.

The following is a reprint of an article from the Canadian Real Estate Association (CREA) dated May 26, 2010.

U.S.-Style Home Price Correction Unlikely in Canada

The Canadian Real Estate Association (CREA) released a new report today indicating that home prices will stabilize, and will remain stable for some time. This means that Canadian homeowners are unlikely to experience a U.S.-style decline in the value of their homes.

“The relationship between average price and income has recently been cited as portending a U.S.-style correction in Canadian home prices,” said Gregory Klump, Chief Economist, CREA. “However, such warnings ignore the longer-term relationship between prices and income, and disregard typical Canadian housing market cycle dynamics.”

Home prices tend to rise in cycles, characterized by periods of sharp growth and periods of stability. By contrast, income generally follows an orderly upward trend over time. For home prices to keep pace with incomes, they must rise faster during housing booms to make up for periods of little or no price growth. Canadian home prices were stagnant throughout most of the 1990s, while incomes continued rising, making housing more affordable. Over the past decade, home prices have climbed sharply as mortgage interest rates declined.

Klump adds: “The Canadian housing market is now widely thought to be at, or very near, the top of a cycle, and the ratio of home prices to incomes is currently high. This ratio will revert to its long-term average as it always does as part of a normal housing market cycle. History suggests, however, that it will not do so by means of a significant correction in home prices. The more likely scenario is that home prices will stabilize, giving incomes a chance to catch up again.”

The bursting of the U.S. housing market bubble has sparked fears that Canadian home prices may share a similar fate. However, according to Klump, “warnings to this effect ignore solid Canadian mortgage market trends.”

Conservative lending practices in the mortgage industry combined with prudent borrowing and accelerated payments among Canadian mortgage holders have been seen throughout the recent housing market cycle. Accelerated accumulation of home equity will provide options for the small proportion of homeowners who may face financial difficulty when their mortgage is renewed at a higher interest rate. These trends are expected to help Canada avoid a U.S.-style housing crisis.

The correction in U.S. home prices is set against a massive oversupply of homes due to distress sales, combined with a drop in housing demand due to unemployment. The unwinding of the housing boom in Canada will be more orderly, characterized by softening sales activity and stable prices.

The City of Barrie Investment Profile (2009)

A Pictorial Tour of the Barrie Area

Current CREA (Canadian Real Estate Association) Market Forecast

Canadian Association of Accredited Mortgage Professionals-Statistics

Top Investment Locations-Barrie/Orillia-The Real Estate Investment Network

Simcoe County-Area Growth Plan-"Places to Grow"