Luxury Insights

Luxury sales in major Canadian cities - First Quarter 2013 (compared to previous years)

What’s happening in the Canadian upper-tier market?  RE/MAX has released their Upper-Tier market report for the first quarter of 2013.  It shows that high-end home sales are down in many major Canadian markets, as compared to first quarter of 2012.  The price points identified in the charts are the starting prices for what RE/MAX defines as luxury for each market.

As you can see, Alberta cites like Calgary and Edmonton are the hottest markets.  Energy industry growth is fueling high home demand in the province.  British Columbia’s markets, by contrast, are going through major downward adjustment after a boom which was driven by a big influx of international buyers and uncertainty created by pending provincial elections.

“Luxury sales were slow out of the gate in 2013, but momentum is clearly starting to build,” says Gurinder Sandhu, Executive Vice President and Regional Director, RE/MAX Ontario-Atlantic Canada.  “A growing number of purchasers are moving off the sidelines and into the market—even in centres that reported a dip in first-quarter sales.  All the indicators are pointing to a traditional spring market poised for considerable growth.”

Sandu also indicated that the top-end represented a greater percentage of overall residential sales in many markets in Q1 2013 in comparison to Q1 2012.  In some cases, the upper-end is still outperforming the overall market in terms of residential real estate activity.  Affluent purchasers remain committed to homeownership, with many taking advantage of historically attractive interest rates, and in some instances, lower housing values, to make their moves.  Equity gains have also factored into the equation, given substantial increases in housing values over the past decade.

Read the complete report.

They’re back… Sunken living rooms are on the rise

Those who remember the “conversation pit” living areas of decades ago may be surprised that sunken indoor and outdoor rooms are on U.S. and Canadian designers’ lists of hot new housing trends – along with tented rooms...

and chevron patterened floors.

For a look at these trends and more, check out this website.  And may we add, some “trends” catch on, others may not. 

Canadian market slowing but prospects better for 2014

Recently released statistics from the Canadian Real Estate Association show that April 2013 home sales activity in Canada slipped 3.1 per cent, compared to April of last year.  The number of Real Buyers (closed transactions) was down for the month in 60 per cent of local markets.  This compares to a sales decline of more than 15 per cent in March, with 90 per cent of local markets dropping year-over-year.

Changes in mortgage rules one factor in decline

Gregory Clump, CREA’s Chief Economist, said, “Since changes to mortgage rules made in 2012 took effect, national sales have been running nine to ten per cent below levels posted in the first half of 2012 but they’ve been remarkably steady. April activity was on par with where it stood last August, and month-to-month changes since then have held to within a range of plus or minus two per cent.”

Prices inch up nationally

Despite fewer sales in the high price markets of metro Vancouver and greater Toronto, the national average price still clicked up 1.3 per cent in April, compared to same time last year.

The number of newly listed homes is also edging down, resulting in a sales- to-new-listings ratio of 50.4 per cent in April.  Total inventory levels are at 6.6 months, close to a balanced market. 

Sales down this year, up next year

CREA forecasts for 2013 indicate national sales activity will reach 441,500 units in 2013.  This represents a 2.9 per cent decline from 454,573 sales in 2012, and is five per cent below the 10-year average.

Since there is no such thing as a national housing market, provincial differences are expected,  Alberta and Manitoba are the only provinces where sales are expected to rise in 2013, although modestly. The percentage decline in sales in Saskatchewan, Ontario, Quebec, and Nova Scotia is forecast to exceed the national result this year.  The percentage decline in sales in British Columbia, New Brunswick, and Newfoundland and Labrador is forecast to be less than the national result. The smaller annual decline being forecast for British Columbia and New Brunswick reflects a weakening trend in these provinces during the first half of 2012 that was not apparent elsewhere.

In 2014, CREA forecasts that national activity will rebound by 4.5 per cent to 461,200 units, a slow but steady improvement in activity. This would still leave national sales about one per cent below their 10-year-average, with activity not expected to return to levels recorded in the first half of 2012 at any point in the forecast horizon.

The rich get richer as U.S . income gap widens

Take a look at the Census Bureau’s just released information on household income for 2011 and you will see that the wealth gap is widening.  The highest earners are earning more relative to everyone else.  In the accompanying chart you’ll see dollar incomes across a 44-year period based on actual dollars received at the time — not adjusted for inflation.

The nation’s most expensive listing – $190 million estate

The most expensive residential property currently on the U.S. market debuted this month in Greenwich (CT).  The $190 million property not only occupies 50 acres on Long Island Sound, it includes two offshore islands.  On the market for the first time since 1904, this classic 12-bedroom estate – Copper Beech Farm – features a long list of amenities.  The property is zoned two-acre residential and the mainland is subdivided into two tax lots of 20 and 30.6 acres, both of which are suitable for further subdivision.  The listing broker is David Ogilvy & Associates, Christies International Real Estate.

Should the property sell for list price, it will exceed the standing record for most expensive U.S. residence sold by almost 62%.  The previous record was set in 2012, with the sale of private-equity chief Tully Friedman's nearly 9,000-square-foot home in Woodside (CA) to SV Projects LLC for $117.5 million.

Current homeowners leading home purchase activity

Which homebuyer group is leading the recovering market nationally?  Despite buzz to the contrary, it is not investors.  New research suggests that first-time homebuyers and current homeowners are in fact the major players in this year’s marketplace.

The nationwide Campbell/Inside Mortgage Finance HousingPulse Tracking Survey data for March shows that current homeowners continue to dominate the overall home purchase market with a 42.2% national market share in March (based on a 90-day rolling average).  While that was down from the levels seen last fall, it was still up on a year-over-year basis.

Meanwhile, first-time homebuyers stepped up their buying activity, reaching an eight-month market share high of 36.1% in March, according to survey results.  Athough investors have been getting a lot of media attention recently in terms of driving – if not dominating – home purchase activity, their share of the national housing market was just 21.8% in March.  HousingPulse survey findings show the investor market share nationwide hovering between 19% and 23% for much of the past year.

If you look at just non-distressed properties -- the largest segment of the housing market -- the investor share was only 13.3% in March.  Current homeowners had a 50% market share and first-time homebuyers a 36.8 percent of the non-distressed housing market last month.  More information on the study.

Up in the Air?

There has been discussion lately (and some enthusiasm) about the use of drones to photograph and video real estate properties for sale. According to Wikipedia, a drone is an unmanned aerial vehicle (UAV) without a human pilot on board. Its flight is controlled either autonomously by computers in the vehicle, or under the remote control of a pilot on the ground or in another vehicle. As recently as January of 2012, drones were said to violate Federal Aviation Administration (FAA) rules and were banned from U.S. public airspace. However, the FAA was instructed by Congress late last year to open the nation's airspace to routine commercial drone use and the FAA is in charge of issuing permits for drones that operate at 400 feet or higher.

The FAA says drones that operate below 400 feet are subject to the same rules that govern model aircraft. Those rules essentially say the drones cannot be flown near populated areas, must stay within eyesight of the user, and cannot be used for commercial purposes; at least until the rules are finalized, which is not expected until 2015. With real estate agents and journalists using drones, it appears those rules are being put to the test. An FAA spokesman said the agency "has investigated operations that appear to be commercial in nature,” and at least one drone photography business has been shut down.

Outside the U.S., some photographers are legally making a living by utilizing drones for real-estate photography. Accredited Australian drone photographer Saul Goodwin is considered a pioneer in real estate drone photography. He uses an I-Phone app to setup interval shots on his drone.

While aerial photography can be quite pricey, drone photography is considerably less expensive. The drones themselves are extremely versatile, and can go out in almost any weather. Though high-flying drone photography may set Realtors’ marketing apart from their competition, it remains to be seen what guidelines for their use will be authorized by the FAA and if this practice will “upset” affluent consumers and communities, who feel that drones create privacy issues.

The FAA is still currently debating drone regulations and privacy concerns. How do you think drones may impact the real estate market if allowed for commercial use?

Do You Smell a Sale?

What if you found out that your staple of a freshly baked cookie smell at an open-house may actually be hindering your chances of making a sale? According to an article in The Wall Street Journal, there is new research which suggests that chocolate-chip cookies and other baked goods are among the worst aromas to help you obtain an offer on a property.

Dr. Eric Spangenberg, dean of the college of business at Washington State University, conducted a study in which he and his associates evaluated how certain scents affected peoples’ spending in home-décor stores. On average, they found that shoppers spent more when a store had one simple scent, like orange, than when complex scents were introduced. The research behind this study suggests that complex scents distract people, and instead of determining at an open-house or showing whether or not this is the place they want to live, they are subconsciously trying to figure out what exact aroma they smell.

Along with keeping open-house scents simple, Spangenberg also suggests that they be congruent with the home that is being shown. A cedar smell may work in a cabin or mountain home, while lemon or green tea may work for a beach home. So in keeping with the WSJ’s article, in order to make a fast sale for top dollar, put down the cookie dough and pick up the basil!

As reported by The Wall Street Journal:

Worst Scents: potpourri, gourmet foods, chocolate-chip cookies, and other baked goods

Best Scents: lemon, green tea, cedar, pine, basil, vanilla

Putin tells Russian officials, “Close foreign accounts, justify foreign real estate purchases”

The Associated Press reports that President Vladimir Putin has given Russian officials a three-month deadline to close their foreign bank accounts or face dismissal. In addition, those who have real estate abroad will be required to explain how they could make the purchase, and those who fail will face being ousted.

Putin's decree -- released by the Kremlin on April 2^nd -- obliges officials to file their income declarations by July 1. Putin's chief of staff, Sergei Ivanov, said they will have to close their bank accounts by that time. Putin spokesman Dmitry Peskov emphasized there will be "no untouchables."

Putin first announced the measure in his state-of-the nation address in December as part of efforts to fight corruption, but the corresponding bills got bogged down in the Kremlin-controlled lower house, so Putin ended up ordering the move by decree.

Editor’s Note: It will be interesting to see what impact this decree has on Russian purchases of U.S. real estate and sales of currently owned homes. 

California’s High-end Home Buyers Create Luxury Boom

Consistent with other recent signs of recovery in the luxury market, the number of California homes which sold for a million dollars or more last year rose to its highest level since 2007. A total of 26,993 homes changed hands for $1 million-plus last year, up 26.9 percent from 21,267 in 2011. It was the most sold since 42,502 homes crossed the million-dollar threshold in 2007.  At the same time, the number of transactions for more than $5 million rose to an all-time high.  Statistics are from San Diego based DataQuick, a real estate reporting company. 

Last year's 26.9 percent year-over-year sales gain in the million dollar and above market outpaced the state's residential market as a whole. Sales across all price ranges totaled 447,573, up 8.2 percent from 413,479 in 2011. Clearly, the luxury market is leading other price points in terms of sales.

See the chart below which breaks out high end sales by price.  Note that we prefer calling closed sales “Real Buyers” and we define a real buyer as someone who not only contracted to buy the home, they showed up at closing and walked away owning it.