Keith Marshall
  • Email Keith Marshall
  • Follow Keith Marshall on Facebook
  • Catch up with Keith Marshall on Linked In
  • Follow Keith Marshall on Twitter
  • Check out Keith Marshall's Video Stream on YouTube
  • Subscribe to Kitchener-Waterloo Real Estate Updates

519.745.7000

519.729.4116

Blog Posts

Are we in a real estate bubble? Are home prices going to go down in Kitchener Waterloo?

Victoria BridgeQ: Are we in a real estate bubble?

A: No. But we might be in a tech bubble and that wouldn’t be good.

 

Q: Are home prices in Kitchener Waterloo going to up or down?

A: Home prices are going to continue to go up.

 

I was on Vancouver Island for a week last month. I was visiting my mom and my sister’s family. My sister lives in the Colwood area of Victoria and my mom lives over the Malahat in Mill Bay.

We’re not getting any younger.

They have a plan. They are looking for a new place together. They are going to sell both of their houses and buy one with an in-law suite (or one with in-law suite potential). It’s a good idea.

They knew I was coming so they had a lot of questions for this Realtor and they had a few things for me to do, to take to the dump, to fix, to paint…I’m not only a realtor, I’m a handyman too.

I was there when my mom interviewed two potential real estate agents. For me, it was a learning experience to sit in on other realtor’s listing presentations. I learned that more is better than less so I’ll be adding a few items of collateral to my presentations

But this post isn’t about listing presentations. It’s about real estate.

 

 

Q: Are we in a real estate bubble?

I learned in BC that what my mom bought five years ago for $420K is now worth $350K. My sister’s house has also seen a large drop in market price too. That sounds like they’ve both lost a lot of money. But they haven’t. My sister bought her house 20 years ago – she has seen a great leap in value. Also, because what my mom and and sister are going to buy is in the same real estate market, they are selling for less but buying for less too. What they are going to buy has seen a similar percentage drop in market value as what they are selling.

It’s a sum zero.

What you loose on the swings, you make up on the merry-go-round.

 

Both agents who gave presentations said pretty much the same things:

They both valued my mom’s condo at the same price.

And they both said that the BC market had seen the worst of it and that it has already shown signs of improvement. They both said that it had bottomed out and that it was certainly getting better. I agree. I think we are over the stock market shock of 2009. We have adjusted to a new reality.

I was surprised about how much the Vancouver Island real estate market was impacted by the recession starting in 2009. It didn’t happen like that here. Well it did, but only in terms of sales volume not prices. Home prices have continued to rise in Kitchener Waterloo.

I agree with those Vancouver Island realtors assessments of their market. I feel the same way about ours. For me 2013 got off to a slow start but picked up in the late spring and through the summer into fall. It’s slowing down again now, but I think that’s seasonal. I predict that we are going to get off to a fast start to the spring market in 2014.

Mark my words.

 

Q: Are we in a tech bubble?

A: Maybe. 

What we should be worried about in Kitchener Waterloo is if we are in a tech bubble. We worry about Blackberry and how the layoffs will impact our local real estate markets. I’ve stated many time that Blackberry will negatively affect the real estate market, but not in any huge way and not in terms of price for your average three bedroom $350,000 home.

Blackberry’s layoffs will impact the top end of the market. Blackberry paid those at the top quite well. Those VP’s and department heads making $130,000-$180,000 will have a hard time finding similar jobs and/or accepting lower salaries. They might (just might) flood the market with $700,000 homes.

Blackberry’s layoffs also solve the problem for serial home buying procrastinators. These guys have an excuse to “wait and see what happens”. They can do their armchair predictions that prices will go down 20% (like they did on Vancouver Island) and when it does they’ll be able to steal a great home. It’s nice to have dreams, isn’t it?

Of course we know that that isn’t going to happen. It could, but it won’t.

For those of us (like me) that have been reading the news over the past four years, the news that we are in a real estate bubble and that it’s going to pop, BANG, there’s a story that argues that we are in a stock market tech bubble.

The article titled “Here’s evidence that the tech sector is in a massive bubble” is a great article with lots of great examples. However I feel that the world and it’s economies are changing and we cannot rely on historical data to predict future events.

As far as I’m concerned, coders, techies, programmers, software geeks are the factory workers of our generation. They work hard, get paid well and have the transferrable skills and opportunities that will keep them employed as long as they wish to be employed.

How will Blackberry’s layoff of 4,500 affect Kitchener Waterloo real estate market?

How will Blackberry’s layoff of 4,500 affect Kitchener Waterloo real estate market?How will Blackberry’s layoff of 4,500 affect Kitchener Waterloo real estate market? That is the question of the day.

A lot of Kitchener Waterloo Realtors will argue that the impending layoffs at our beloved local iconic and (tarnished) hometown hero Blackberry will have no impact on our local real estate market. They will point out that a lot of business and industries over the years have left the region: textiles, furniture, whiskey, electronics, auto parts have all been going concerns here that are all gone now. Kitchener Waterloo and Cambridge live on, thriving and growing. It’s often said that when one industry leaves town another quickly takes its place, filling the gap with well-trained hardworking workers.

Local realtors, politicians and businesspeople will argue that our economy is strong and vibrant and diversified and we are bigger than Blackberry. They will argue that we have two big and growing universities and a big and growing college, two big insurance companies and two smaller ones, Open Text, Google, EA (the games maker), Christie Digital and 700 start ups. Other industries and companies? There are a lot more.

 

Despite recent sad news about significant layoffs at Blackberry, Waterloo region’s overall economy is strong and diversified. 

Real Estate markets the size of ours, are not tied to any one employer or sector. — tweeted by the KWAR (Kitchener Waterloo Real Estate Board)

 

Another argument is that our local high tech market is always looking for engineers, programmers, computer geeks, nerds and hackers and that a great number of the former prisoners of Blackberry will seamlessly slide into new local jobs. The argument is that Blackberry’s demise is actually a great thing for our local economy. These big brained computer cowboys will finally have a chance to put their skills and knowledge to good and productive use.

And then there are the statistics. Blackberry is in 32 countries and has about 12,000 employees worldwide. How many or those layoffs will be at home? Blackberry has had large layoffs before. Our home prices did not drop as a result.

 

Amid Blackberry’s cull of 5,000 jobs last year, the average price for a home in the region increased 3.3 per cent, to $311,006. Volume was flat (down 0.7 per cent). — Global News

 

What would Garth Turner do?

These are all good arguments and I agree with all of them. They are certainly true and/or have a lot of truth embedded in them. However, we are smarter than that. We know about spin. We know about agenda. We know about Garth Turner.

Garth Turner is, of course, a contrarian. He real estate investment scaremonger, a heretic and a wit. I love how he writes but I usually disagree with what he says. I read him everyday because, for me, he acts as a counterweight to all the hype and positivity from the other side. With Garth, just like the positive side, there is always truth to be found in what he says. What is interesting about what he says about Blackberry’s impact on the Kitchener Waterloo real estate market is that it’s not very negative.

He compares Kitchener Waterloo to London. In size, we are similar. Kitchener Waterloo has been growing faster. Last year we knocked them out of the top ten. We are the 10th biggest CMA in Canada. London is 11th.

He compares our industrial base favorably to London’s but then he implies that we are, like Calgary, a one-horse city. Of course we’re not (as mentioned above). Calgary has long been a boom and bust town. It is oil. When the oil is flowing, so is the money. We are not like that.

In short, Garth Turner stirred the pot, but he didn’t stir very hard. He addressed the issue but didn’t commit. For a long time reader of Garth Turner, his lack of aggression speaks volumes.

 

How will Blackberry’s layoffs affect our real estate market?

As someone on the front line of real estate I can tell you that there will be an impact. Anyone who says that there won’t be is an idiot or has and agenda (or both). The impact will be one of perception.

 

Perception

Many people are looking for a reason not to buy real estate. It’s human nature, to be cautious about big decisions and to dither and delay. It’s harder to say “yes” than it is to say “no”. Some fence-sitters will continue to sit on the fence in the wake of this announcement from Blackberry and others may join in. The uncertainty is excuse enough for some people to want to wait. This has already been going on for the past year and a half, I expect it will continue until well after the fogs lifts and the smoke clears at Blackberry. During this time, prices and interest rates will go up and your dream house will become more dreamy.

 

Some home prices might fall

My last prediction that home prices could drop in Waterloo Region was wrong. They didn’t drop as I said they might. They actually went up. But I’ll try again with my prediction, the one some of you want to hear. Sooner or later, I might be right.

Home prices in the higher ranges $500,000 – $650,000 could fall.

As mentioned above, the local high tech industry will absorb all of the engineers, programers and other geeks. It is at the executive level that things might get dodgy. It is harder for a VP of Marketing in a failed company to find a job (in the region) at the same pay level than a real worker. If a bunch of the higher-ups living in Eastbridge or Conestogo all put their houses on the market at the same time, there will be nowhere for prices for those types of properties to go but down. It could happen, but even if it does don’t expect it to happen overnight.

Finally if home prices drop by 1%, for the average home in Kitchener Waterloo this means a change in price or $3,300. Not a lot of money in the whole scheme of things, eh?

 

My prediction

My prediction is that Blackberry the fruit is going to gets its name back.

This week in real estate

bonavistaI was in the sauna at my club when one of the other members commented that he was waiting for the home prices to go down before buying his next house. I had to tell him that housing prices are not going down. They’re going up. I think maybe his problem was that he wasn’t paying attention to the local news or even perhaps the national news. You hear a lot of news about real estate prices, but most of that news is out of the states. And much of that isn’t good.

In fact, the opposite is actually true in Canada. All the news about the Canadian economy and our housing market is positive. Here’s what happened this week in real estate:

 

Canada’s AAA rating

Earlier this month Canada’s AAA credit rating was overwhelmingly endorsed by all of the rating agencies. This means, foreign governments see Canada as a solid investment – a great country to lend money too. Money is flowing into Canada.

 

Canadian home prices continue to rise.

Although home prices were suppose to soften in 2011, it was reported in Property Wire last week, that the average price increase in Q4 2011 was at least 3.6% over 2010. Furthermore, they predict a further increase of 2.8% through 2012. And, now the experts are saying don’t expect any market correction until 2013.

 

Mortgage war breaks out. Finance Minister ready to intervene

A mortgage price war broke out among Canada’s major banks when The Bank of Montreal posted the lowest mortgage rate in Canadian history. The other big banks all followed suit. Our federal Finance Minister, Jim Flaherty said he stands ready to intervene in the housing market again. He does not want it to overheat. So much for a cooling market and prices going down, eh?

 

RIM and local real estate

On a local level, The Waterloo Region Record reported that the Kitchener Waterloo real estate industry is still keen on the local market despite RIM’s woes. The article was talking about commercial real estate but I think it’s safe to say our real estate market in KW is not impacted by what happens at RIM.

 

Share

Share this article if you know someone who is going to be buying or selling a home in the next year to 18 months. And if you’re thinking of buying or selling real estate yourself, please give me and Alasdair a call. We like to share.

 

Open House

Visit us at our open house this Saturday and Sunday 2-4pm 639 Bonavista Drive, Waterloo.

 

banner

A bad year ending for RIM

The slide continues at RIM.

Earlier this week, after releasing financial figures that fell well short of expectations, our co-CEOs Jim Balsillie and Mike Lazaridis announced they were cutting their salaries to $1 a year as they work to turn the company around. It’s a nice gesture but it’s just that, and something to soothe the investors who are not at all happy.

Things have to change, and fast, if RIM hope to regain traction and start competing again. They had to heavily discount the Playbook after it failed to excite the general public and corporate business users. The next generation is due to be released early next year. But will anyone care? Dumping the product on the market doesn’t send a great message. The fact is that the ipad gained an early lead in the tablet market and widens that gap every day. Just pay a visit to the apple store in the Conestoga Mall. Everyone loves the ipad. Everyone except the other tablet makers, toy makers, pc makers, ereader makers.

But back to RIM, the number of Blackberry’s it ships in the quarter including Christmas is expected to drop by about 26% compared to the last year. It looks like 2011 will be remembered as the year that everything seemed to go wrong for our local hero.

The current problems involve ongoing confidence issues. The third-quarter net profit was well below expectations. Net profit for the quarter was only $265 million US. Last year for the same quarter is was $911 million. As a result, share prices are down to their lowest levels in almost eight years.

Stock values continue to fall and investors are calling for a major shake up at RIM. There is talk about breaking it up and selling it for its parts. There is talk about opening up its secure and highly respected network to rival smartphone providers and concentrate on that business while getting out of the hardware game altogether.

BlackBerry’s share of the lucrative American smartphone market is down to about 10% this year. Advanced wireless networks in the United States are ideal for video streaming and other data services of which the next generation of BlackBerry is perfect for. But the next generation Blackberry has been delayed until late 2012 due to a delay in getting a chipset that will give the smartphones long battery life and allow them to run on these faster networks.

I really hope RIM finds it’s way. It’s been great for our local economy and for our pride. It’s helped Waterloo Region attract and retain so much talent. It’s put us on the map.

So what does this mean for 2012?

RIM is still making lots of money. (They’re not making as much as they want to but they’re making a lot.) There is no way they are going out of business – their network and intellectual property is worth too much. They might have to restructure, refocus and certainly retool their management style.

Which brings us to real estate.

How important is RIM to the KW real estate market? Except for the confidence issue, if and when RIM does something major, it will cause barely a ripple in our market. We are not a one industry town. We have too many other high tech, insurance, university and other major employers. We have thousands of smaller employers.

If you’re waiting for or worried that the local real estate market will drop by 30% overnight, it wont happen. Don’t wait and don’t worry.

Another bad week for RIM

RIMAccording to a report in the Waterloo Region Record, the two drunken RIM executives who disrupted the flight to China two weeks ago were completely out of control. They were hammered when they got on the plane, were abusive and disruptive to the flight crew and the other passengers and eventually had to be restrained by several flight attendants and a couple of passengers after they chewed through their restraints.

And to think they were going to China not Indonesia.

Outside of North America, Indonesia is the largest market for Blackberry. Last week a Rim executive was accused of instigating a riot. This week Indonesia is threatening to shutdown Blackberry’s data service because the government says that RIM reneged on its promise to set up a regional data centre in the country.

Looks like another bad week for RIM