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The Real-Estate Game Is Changing Fast. Are You Ready to Win? – Entrepreneur

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Opinions expressed by Entrepreneur contributors are their own.

In January of this year, the Federal Reserve announced a plan to adjust its monetary policies to meet the challenge of rapidly growing inflation. As many experts and economists believe it is the greatest threat to economic recovery, that plan includes raising interest rates three times over the course of the year. Rates have remained at rock-bottom levels to meet pandemic challenges, but a quick reopening has sparked a rise in inflation that banks are eager to get under control to bring the economy back to some level of normality. 

But what does this mean for the real estate market? And more specifically, what are some of the steps a current or prospective property owner can take to navigate the volatility that remains, despite the downturn in Omicron variant cases throughout Los Angeles? 

Make no mistake, Covid-19 is still very much a part of our lives and may well continue to be for the foreseeable future. But now we must learn to adapt and adjust to new real estate market realities and make the right moves when it matters most. Here are some actions to consider: 

Refinance your mortgage

For much of last year, mortgages were available at interest rates hovering around 3%, but predictions for 2022 have that rate increasing by as much as one point. What kind of impact would a 4% rate have on your home loan? Even such a seemingly small increase could mean a significantly larger monthly payment. 

Consider how such a fluctuation could affect a 30-year loan on a $400,000 home. Raising the rate from 3% to 4% represents an extra $223 in monthly payments, so now might be a good time to put some thought into locking in a fixed-rate mortgage to reduce these costly hikes and combat the unpredictability of increasing rates, particularly if your mortgage has a variable or adjustable rate that’s stretching your dollar thin already. Be sure to perform any due diligence ahead of a refinancing effort, of course, or when shopping around for a home equity line of credit (perhaps a change from a variable to a fixed-rate alternative). 

Related: 5 Amazing Tips on Turning Real Estate Into a Real Fortune

Target reliable investment properties

Despite the many hardships that were part and parcel of the pandemic, having a roof over one’s head remained a priority for us all. A number of state and federal mandates put into place in response focused on keeping renters in their homes, even if they were unable to pay rent. When these mandates were lifted or reduced, demand for available rental options remained higher than ever on single- and multi-family properties (which were among the most in-demand during the height of the pandemic), even with a significant increase in vacancies in many markets.

Multi-family properties featured more competitive rent prices than single family properties, but both represented investment opportunities with dependable revenue streams. Some landlords might opt to make their properties more enticing to renters by including utilities and parking in the cost of rent. When a severe economic downturn hits, these are the properties that become more attractive to renters, who often need to make difficult decisions in their monthly budgetary plans.

Consistently high demand translates to increased value, which means more consistent income and a greater return on investment in the long run. The fact remains that regardless of the health of our national economy, this type of real estate continues to build wealth.

So is now the time to buy? Absolutely. With mortgage rates still low, you can expect to enjoy considerable savings on your borrowing costs, and if the Fed is indeed planning on raising rates in 2022, it’s best to strike while a palpable ambiguity remains in the economic outlook. 

Related: Deciding Between a Multifamily or Single-Family Investment? There’s an Unlikely Winner.

The Federal Reserve forecast

Higher rates are always a detriment to real estate investments, and the Fed making waves about increases this year is sure to make investors nervous. Inflation is the culprit for this change in policy, but I wonder if they aren’t conflating inflation with the current ongoing supply chain issues that are being experienced in just about all sectors of commerce. 

Those delays are being felt in the construction industry throughout the state of California (among others). Many essential building materials are sourced from Asia, and disruption in that supply chain is wreaking havoc on construction rates. Materials are getting harder to procure and the result is higher cost of goods and limited availability. This slows the pace of construction and increases costs related to the development of new residential properties. 

Inventory of completed properties has decreased dramatically, due to both lower rates and that fewer are being built as a result of supply hiccups. That, combined with a growing scarcity of available properties for sale, could drive up prices in the state, a situation that may continue if present trends endure. If the Fed ultimately decides not to implement three rate hikes this year, real estate demand will likely remain strong throughout 2022. 

Related: Best Bank Stocks to Invest in Ahead of Rising Interest Rates

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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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