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North America's continued drive & demand for real estate | RENX – Real Estate News EXchange

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A garden-style multifamily equity investment partnership project in San Marcos, Texas (Image courtesy Trez Capital))

A garden-style multifamily equity investment partnership project in San Marcos, Texas (Image courtesy Trez Capital).

North America has experienced a boom in the real estate market across many asset classes over the course of the pandemic. In the last two years, it has been challenged with but resilient to obstacles – like supply chain issues, inflation, and rising interest rates – and because of this, Trez Capital’s outlook on the market remains bullish. We have boots-on-the-ground in both Canada and across the United States, allowing us to understand where opportunities for developers, borrowers and investors lie in 2022.

The question of affordability in Canada and money flow in 2022

Breaking into the real estate market has presented challenges for many Canadians. Although this is the reality, mainly due to the chronic undersupply of homes, we believe several factors will fuel demand for housing in the near term and for several years to come. The housing market demonstrated the continuation of strong demand with rising prices, with provinces like British Columbia reporting that annual price appreciation exceeded 25 per cent in 2021, the highest on record according to the Canadian Real Estate Association (CREA). Royal LePage’s latest House Price Survey also reported that with demand outpacing supply across real estate markets, prices will continue to be pushed higher.

Along with the increase in prices, there has been an influx of cash in the Canadian economy due to increased short-term income and credit support programs from the government. Some have been able to save and reduce spending because of pandemic-related lockdowns and restriction measures. In Canada alone, household net worth increased by more than $600 billion CAD in the first six months of the pandemic. There are more opportunities for Canadians than ever before – as of last November, there were 880,000 job openings that exceeded pre-pandemic levels, and in the following month, unemployment fell to 5.9 per cent amid rising wages.

On top of this, the generational wealth transfer is just beginning. According to RBC Wealth Management, it is expected that there will be over $150 billion CAD in inheritances by 2026 with older generations down-sizing and handing down wealth sooner rather than later to help their children break into the housing market.

Declining affordability has yet to quell demand, while the inventory of homes available for sale matched an all-time low.

The pace of the supply chain and labour markets in the U.S.

The ‘great migration’ that began pre-pandemic continues to drive population to the Sunbelt states such as Texas, Florida and the Carolinas where the cost of living and tax burden is below the national average. Despite strong migration, labour markets remain under-supplied often presenting challenges to finding adequate labour to keep pace with demand.

Major metro markets like Austin are flooded with jobs created by industry-leading employers investing in the market. It was reported that tech giant Samsung requested a billion-dollar tax incentive from Texas officials to make Austin the future home of the company’s $17 billion USD chip factory, and plans on bringing at least 1,800 permanent jobs over the first 10 years. Tesla, one of the fastest-growing brands of 2021, has also announced plans to build a $1.1 billion USD manufacturing facility in Central Texas where it could eventually hire up to 10,000 workers.

Despite the heavy commitments by corporations, pandemic-driven issues such as supply chain breakdowns are creating a slower trajectory when it comes to spending in the market. We are seeing a delay in the ability to build high-demand residential and commercial properties due to the lack of supply of materials. Developers cannot seem to build fast enough in high-demand areas like the Sunbelt in the U.S. – in markets such as Phoenix, Arizona the value of properties has increased by about 40 per cent due to the pressure of demand, outpacing the 20 per cent increase in building costs. This dynamic continues to support developers taking on new projects.

What does this mean for investors?

One of the main concerns for investors and borrowers this year is that money will become more expensive. However, despite increased interest rates, the rate of southern migration in the U.S. and immigration in Canada, and the ability to keep up with these trends will position investors to stay ahead in the markets we serve. Trez Capital is dedicated to identifying where these trends are and moves quickly to seize opportunities. We continue to see strong demand for our capital, and due to our floating rate loans, we anticipate that we will continue to create strong yield for our investors.

Business foundation

As the industry has grown over the last several years at unprecedented rates, our team has also grown. Trez Capital has become one of the strongest providers of capital in North American real estate. Thanks to our dedicated, driven team, we have built a 25-year track record of success that borrowers and investors alike rely on.

Trez Capital has surpassed $4 billion CAD in assets under management and has funded over 1,600 transactions totalling more than $14.5 billion CAD since inception. Approximately half of the loans since 2009 have been to repeat borrowers and Trez Capital’s first borrower and first investor still do business with us today.

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Canada real estate: When the appraisal falls short – CTV News

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The red-hot housing market over the last several months pushed many buyers fighting through bidding wars to put in unconditional offers at high prices.

But now that the market is cooling, some are ending up with mortgages that can’t cover the full cost of their home following an appraisal.

Toronto-based mortgage broker Mary Sialtsis says there are “very few options” for these buyers.

“In the last couple of years, but especially in the last couple of months, I’ve had a few different clients that have dealt with this situation,” she told CTV’s Your Morning on Friday. “Unfortunately, there are very few options when you’ve purchased a property with no conditions and no financing conditions.”

Nationally, home prices fell 6.26 per cent between March and April 2022 after peaking in February, according to the Canadian Real Estate Association. That’s meant some buyers are ending up with mortgages that are more than $100,000 shy of what they need.

In some cases, especially when the down payment from the buy is 50 per cent more, Sialtsis says the lender may just move forward with the mortgage based on the original price of the home, even if the appraisal is a lot lower.

“It’s a case-by-case situation,” she said.

Another option may be to get a second mortgage from a private or alternative lender. But if no other option works, buyers can try and negotiate a mutual release, which usually means forfeiting the deposit.

“For most, they end up going to the bank of mum and dad,” said Sialtsis. “I highly recommend if anyone is in this situation, reach out to your mortgage professional immediately.”

Sialtsis warns that putting in offers without any financing conditions puts buyers at a huge risk, as the buyer is legally bound to close the deal regardless of whether they’re able to get a sufficient mortgage.

“I really don’t think buyers fully understand the impact of those unconditional offers when they submit an offer to purchase a property,” she said. “It becomes a legally binding contract and that buyer is expected to close on the closing date. So, that’s one of the reasons why there’s very few options for this.”

But the cooling housing market isn’t all bad news. For those looking to buy a home, Sialtsis says now is a good time to jump in as buyers have a lot more leverage to negotiate.

“For many Toronto-area buyers, where often we’re dealing with multiple offers… it might be a good chance for you to get in and get a decent property with less competition or no competition and the opportunity to actually include a financing condition,” she said.

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Edmonton real estate resales fall after months of high demand – Edmonton Journal

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Slowing sales and more inventory coming on sees the market leaning toward balanced conditions.

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Edmonton real estate sales are falling — at least from the all-time highs set earlier this year.

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April saw 2,919 resales in the Greater Edmonton Area, down almost 11 per cent from March, based on the latest statistics from Realtors Association of Edmonton.

Still, sales last month were up, year over year, by two per cent from the previous April.

The moderation in pace from the all-time record set in March with 3,283 sales is not surprising, says Paul Gravelle, chair of RAE.

“You can only keep breaking records for so long,” Gravelle says. “We’re starting to see the market cool with spring inventory rising, leading to more balance between supply and demand.”

April saw new listings grow by almost nine per cent from the same month last year and expand by nearly 12 per cent from March to more than 4,700.

Prices continued to climb, however, with the average price rising by seven per cent in April over the same month last year to about $417,000. Yet the average price only gained about one per cent from March, reflecting better conditions for buyers who have faced continually tight supply, particularly among affordable price ranges for single-family detached homes, Gravelle says.

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“Supply in the $300,000 to $400,000 range still remains tight, but the higher end of the market has slowed down a little bit,” he says.

Continuing high demand pushed prices for single-family detached homes more than 11 per cent higher to $510,988 last month compared with April 2021. The city and surrounding area saw 1,704 sales for single-family detached homes in April.

That tally is actually down by more than six per cent from last year, likely reflecting reduced selection among more affordable ranges, Gravelle notes.

In contrast, sales grew in the row/semi-detached and apartment segments last month, along with price gains.

Duplex/row sales were up slightly, year over year, by about two per cent with the average price hitting almost $409,000, an increase of about 17 per cent.

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Apartment condominiums saw the fastest pace of sales increases, growing by 27 per cent, year over year. In turn, the average price reached about $237,000 in April. That’s up about three per cent from the same month last year.

“There is still a significant amount of inventory for condos, so buyers still have options,” says local realtor Bev Hasinoff with Liv Real Estate.

While sales and prices are picking up for the segment, it has still not fully recovered like the single-family detached homes, she adds.

The busiest segment of the market continues to be single-family detached homes in the $400,000 to $500,000 range, especially in surrounding communities like Sherwood Park and St. Albert. Yet Hasinoff sees demand even easing slightly in the hottest corners of the market.

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“Right now, we are still in a sellers’ market, but the frenzied pace is slowing,” she says.

Furthermore, moderating demand is not a bad sign overall for the market, Gravelle says.

“It’s great that home prices jump up, but it’s only truly beneficial for people selling and not buying a home.” Otherwise, sellers still need to buy a home, facing tight supply and rising prices, he explains.

While the pace of sales is expected to moderate further, the remainder of the busy spring market is likely to stay strong by historical norms, Gravelle predicts.

“But with the amount of inventory coming on, it’s likely buyers will not be facing multiple bids as often as in recent months.”

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Edmonton could be headed toward housing supply shortage, real estate industry leaders warn – CBC.ca

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Supply chain problems, rising interest rates and more people moving to Alberta could contribute to a housing supply shortage in Edmonton, according to multiple industry leaders.

These trends, plus the rising cost of construction, were front and centre during multiple panel discussions at the Edmonton Real Estate Forum — a large industry conference held at the Edmonton Convention Centre — on Wednesday.

“All things are lining up for there to be a housing shortage in Edmonton in 12 months,” said Rohit Gupta, president of Rohit Group of Companies.

Following a panel discussion on the multi-residential market, Gupta told CBC News that real estate developers may not be able to build houses fast enough to meet rising demand.

Supply chain snags

Multiple commercial real estate industry leaders, participating in a panel discussion on retail trends, said supply chain problems keep them up at night.

There are long lead times on mechanical items, including refrigeration, gas coolers and transformers — perhaps because of pent-up demand during the COVID-19 pandemic, said Jarrett Thompson, chief operating officer at Cameron Corporation.

The delays are resulting in more time-consuming and expensive commercial and residential projects, he added.

“Despite there being a market right now, a lot of the builders are pulling back, which is creating some major challenges,” he said.

Among the many challenges is a lack of nails, linked to the war in Ukraine, said Gupta, of Rohit Group of Companies.

“It’s everything,” he said. 

“At some point, we’re so numb to the pain.”

Few executives predict these problems will disappear any time soon.

Darren Quayle, vice president of Alberta client services for Oberfeld Snowcap, expects supply chains to get back to normal in 18 months to two years.

Population pressures

Statistics Canada data shows Alberta saw the most interprovincial migration during the last three months of 2021, marking the first time since 2015 that the province led the country in that metric.

Most of those people came from Ontario.

Gupta said most of the people moving from Ontario to Alberta have settled in Calgary, but Ontarians’ interest in the Edmonton market has been accelerating.

The relative affordability of real estate in Alberta is a key part of their decisions to move, he said.

“We’re seeing people [from Ontario] buying houses sight-unseen.”

During Wednesday’s multi-residential housing panel, Strachan Jarvis, managing partner of real estate investments for Toronto-based Hazelview Investments, pointed out that Canada welcomed a record number of immigrants last year but housing supply has not caught up.

“We simply are not building enough,” he said.

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