After 22 years in the Calgary office of a global commercial real estate firm, Steve Vesuwalla started his own company, Clearview Commercial Realty, in 2019. A year ago, he established Clearview Industrial Fund, with all capital raised though Alberta investors.
What are real estate professionals seeing on the ground?
Seana Smith of Yahoo Finance Live recently sat down with Kathy Casey, a Coldwell Banker residential brokerage realtor in Denver, Indianapolis-based Dan O’Brien, a realtor at Trueblood Real Estate, and Sir Ashley Harrison, real estate broker at the Harrison Group with Fathom Realty in Charlotte, North Carolina (video above).
The bottom line: a pronounced drop in consumer demand.
“We’re seeing more inventory, but [fewer] new listings, and buyer demand has fallen off. And we are getting a lot more seller concessions, but pricing has remained very sticky,” said Casey.
Added O’Brien: “So, things are lasting a little bit longer on the market. Days on the market is up. But the median sales price is still up 9% or so year over year. But buyer demand has certainly slowed down with those rising interest rates.”
The trio also noted the rising prevalence of buyer’s concessions — nearly 42% of home sellers gave such incentives during the last three months of 2022, according to Redfin. Such concessions include lower closing costs, money toward repairs, and an increase in mortgage-rate buy-downs. For instance: an increase of “2-1 buy-downs,” an agreement that allows homebuyers to pay lower interest rates on the first two years of their mortgage loans.
“That’s what’s really helping buyers … get into the houses that they want, too, because affordability is key here in Colorado,” said Casey. “Just to give you some perspective, our home prices have doubled in the last 10 years. And so wages just can’t keep up with that. So, anything to help the buyers get into the house is what sellers are doing right now.”
O’Brien said the same thing is happening in Indianapolis. “People are getting creative with the mortgage lending. Different banks are offering different types of mortgage products to help with that increased mortgage rate,” said O’Brien.
Time to buy?
Despite softer demand, North Carolina remains one most popular markets. (Zillow recently ranked Charlotte the number one hottest housing market.) Harrison said now might be the time to buy. “If you have been on the margins and could not get your offer accepted in the past two years, now is the time to move. Although interest rates are a little higher, you’re not competing with as many people.”
All three experts ultimately predicted that mortgage rates would fall by the end of the year along with an increase in buyer activity. Mortgage rates currently sit at 6.33% for a 30-year conventional loan, according to Freddie Mac’s Primary Mortgage Market Survey. That’s compared to the 3.45% during the same time last year.
“So, if you’re looking to buy, don’t wait because you want to get out there before the rest of the market jumps back in that’s been on the sidelines,” Casey said.
Dylan Croll is a reporter and researcher at Yahoo Finance. Follow him on Twitter at @CrollonPatrol.
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Bank of Canada comments offer light at the end of the tunnel for real estate, mortgage markets, experts say
Canada’s struggling real estate sector is breathing a sigh of relief, but it wasn’t so much the size of the Bank of Canada’s Jan. 25 rate hike as the language that came with it that was cause for optimism.
That’s because while the central bank boosted its benchmark overnight interest rate by 0.25 basis points to 4.5 per cent, its eighth consecutive increase, it also signalled it would put the hiking cycle on pause — at least for now.
“A 25-basis-point increase or no increase was what we needed, along with the kind of language … that indicated we were essentially where we needed to be” Royal LePage CEO Phil Soper said in an interview. “What’s important at this stage is that we’ve clearly come to a point where interest rates aren’t going to be in the news.”
Soper said the realization that rate hikes will be stopping or slowing should draw what he called the “missing transactions” — those with the capacity to buy but who have remained on the sidelines — back into the market, though it may take some time.
Those buyers, he said, have been reluctant because they understand the link between rising rates and prices, and “they don’t want to buy a house today that will be worth less tomorrow.”
Having some price certainty will make it easier for them to enter the market, but they’ll still need to be comfortable knowing they are paying five or six per cent on their mortgages while others are locked in at two per cent.
“There’s still many, many people out there with two per cent mortgage rates. Your sister or your cousin might have a two per cent mortgage rate but you’re going to have to pay five,” Soper said. “This will harm consumer confidence until the market has more time to adjust to it.”
As a result, he said he saw a “muted recovery” in the cards for the spring.
The pause also signals a light at the end of the tunnel for variable-rate holders, according to James Laird, Co-CEO of Ratehub.ca and president of mortgage lender CanWise, even if it means another dose of short-term pain.
Clearview Commercial Realty’s investment funds help expand portfolio
Mission 19 is a luxury 67-unit apartment block that will welcome tenants this fall, designed by Gravity Architect and being built by Triumph Construction in the trendy Mission District at 320 19th Avenue S.W.
Last month, Vesuwalla embarked on a fourth — the Clearview Alberta Opportunity Fund — with a goal of raising a pool of equity that will allow his company to act quickly when commercial real estate opportunities arise.
Acumen Capital Partners handled the equity raise and the first round of financing closed last month. A second round is scheduled to close at the end of this month.
The first purchase — in cash — by the new fund is the former Economy Glass building at the corner of 17th Avenue and Centre Street S.W. in the Beltline district.
The 11,500-square-foot building on a .33-acre site has drive-in overhead/roll-up doors, existing office and retail showroom improvements, and highly usable and accessible lower level space.
Vesuwalla is working with a restaurant group and fitness operator to take over the spaces, but the location is ideal for future development as a multi-storey commercial-residential building. That will be planned on the completion of the extension of 17th Avenue across Macleod Trail, giving direct pedestrian and vehicular link access into the Stampede grounds, the BMO Convention Centre expansion and the Victoria Park/Stampede LRT station redevelopment.
Doug Johannson, executive vice-president at Clearview who joined the company in 2021, has also been busy completing some commercial real estate deals.
Explosive growth in development of commercial real estate in the Balzac area has continued with the sale of 33.85 acres on the south side of Highway 566.
Located between the successful developments of High Plains and Wagon Wheel industrial parks, it was sold by Johannson on behalf of the Abbotsford, B.C., owner to a local developer for $8.8 million.
He was also the broker for the sale of a 17-acre parcel in Frontier Park to Remington Development, and has an unconditional contract to close on the sale of a 43,500-square-foot building on Enterprise Way, between Stoney Trail and the eastern city limits.
Vesuwalla and Johannson continue to look for interesting value-added opportunities to increase Clearview’s rewarding portfolio.
President and CEO of Bow Valley College, Dr. Misheck Mwaba, has been appointed to the board of the Calgary Chamber of Commerce for a three-year term. “I look forward to working closely with the board on strategic initiatives to address the evolving needs of the Calgary business community,” says Mwaba. “I am acutely aware of the urgent need to develop and retain a world-class talented workforce, nurture a diversified economy and grow our digital ecosystem. Mwaba is a champion of Workforce Integrated Learning (WIL), re-skilling and up-skilling, and takes pride in liaising with Calgary businesses to understand their labour demands.
David Parker appears regularly in the Herald. Read online at calgaryherald.com/business. He can be reached at 403-830-4622 or by email at email@example.com.
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