Oct 04, 2022
Back on May 12th 2022, (at 6:15 am) I received one of those always-welcomed emails asking if I was willing to speak at the upcoming RE/MAX Europe Convention. Like many other worldwide organizations, its been 2 years since RE/MAX Europe had an in-person conference. The author of the email used 2 phrases that immediately caught my attention: “It’s going to be legendary” and “in Cannes France”. I didn’t even look at the dates - it could have been my kid’s graduation from medical school and I was going to be there!!!
Shift ahead to my travel date, and I totally pulled an amateur move. I packed a check-in bag with all my materials and all my clothes. Even though this wasn’t my first rodeo travelling to speaking engagements, and I admit that I was totally aware of lost luggage struggles over the last 3 months, I still went ahead and checked my bag. You see, my thought process included the fact that I would only be there for a few days, and I had extensive materials and handouts, so why lug them around on two flights there, and then have to return with 2 bags plus a personal bag for the two flights back home? The convenience of everything in one bag was so appealing.
What my plan gained in initial appeal, was lost very quickly in the reality of plane travel in the summer of 2022. When I took off from Toronto, I didn’t get a boarding pass for my connections flight. I asked and asked and they told me to get one when I land. Evidently my flight from Frankfurt to Cannes was oversold, and as a result they could not assure me a seat. At that point, I figured that if I don’t have a seat, then why would they bother to send my luggage on the plane to Cannes?
I get to the baggage claim and the luggage is circling, and people are picking up their luggage and happily leaving. At the end, I must have watched the same 6 bags go round and round, with an expectation that my phantom bag would appear. It did not!!! It’s a surreal experience when this happens to you, but when you consider that there are 4.27 billion checked bags (SITA 2019) that circle the globe every year, it is truly a miracle that only 24.8 million bags get mishandled. That is 0.6%, so we all have a less then 1% chance of losing our luggage.
As a result of these high odds, there is a company called SITA which was formed back in 1949, by 11 airlines to streamline efficiencies in air travel. One of these areas is lost baggage, and boy, have these people had their hands full in 2022! I hope you never have to be in front of a SITA terminal. It’s a very emotional time when you lose your luggage, but you must power on. You must go through screen after screen, filling out very intimate questions about your luggage, while fighing tear-filled eyes. (That wasn’t me - the woman beside me was crying.) Questions like, is your luggage soft side or hard, what shade of blue, are there any scuffs, what colour are your handles, black wheels or acrylic wheels, etc. I did not realize I had to know so much about my luggage, but I ploughed though with the help of an airport attendant who was stern, (‘keep on going!!’), yet helpful, (‘you missed a page!!!’), compassionate, (‘the more detail you can provide the better the chance we can find your luggage’), yet dismissive, (‘what do I look like - a fortune teller? I don’t know if, or when you will get your bag’).
The odds of me losing my luggage, and the well-known media images of a sea of lost luggage that bombard us via the news, social media, and clever memes, compounded by the humiliation as I left the terminal without my luggage didn’t matter. I still had my own justification for why I checked a bag in the summer of 2022.
In North America in 2021 there were a total of 6,787,000 residential real estate transactions. 667,000 of which were in Canada and 6.12 million in the US. We may be down this year in transactions but we as REALTOR®s will probably facilitate just under 6 million sales of properties in 2022. That’s a lot of real estate. And no matter what factors are at play, ie. the economic circumstances, government intervention, and the raising of interest rates, people need shelter. The housing continuum is alive and well despite what the media would have us all believe.
The Real Estate Market is Always Situational
No matter what the real estate market is doing peoples’ lives still go on. Household creation is growing in Canada fuelled by immigration, people getting married, and young adults embarking on their careers. Not to mention the fact that our population of aging Canadians is growing, and people are retiring at a voracious rate. These milestones in a person’s life lead to decisions to downside, upsize, depart or enter the real estate market.
Wait For What?
Many Buyers are sitting on the sidelines waiting for home prices to hit rock bottom. Predicting the bottom of the market is as easy as predicting the top of the market. For the last 15 years, economists have been trying to peg the top of the market, to no avail. It took a mere quarter point increase in rates to ignite the largest housing price correction in 30 years. Prices in some areas have already begun to level off, and sales to new listings have been hovering in balanced territory over the last several weeks. New construction has slowed down considerably, putting pressure on re-sale properties. As a result, Buyers who wait too long will see prices rebound, while interest rates continue to climb or hold at higher levels.
Is It Time to Re-Visit the Stress Test?
Recently there have been calls for a softening of the stress test. Currently the lowest possible stress test rate is 6.69, 2 points greater then the lowest national rate of 4.69. Many proponents of this relaxed stress test are asking for a more flexible stress test that is more responsive to the interest rate cycle. The Office of the Superintendent of Financial Institutions (OSFI), stands behind their stress test, and strongly puts forth the statement, ‘that the stress test was put in place to help Canadians weather the storm of escalating interest rates’. This is the current situation we now are in, and I believe if there is to be any easing on the stress test, it might come to those who lock into a five year fixed-term or longer mortgage.
Should You Rent or Buy?
As interest rates rise, the voices around whether it is better to buy or rent become louder on the tenancy route. Besides many of the intangibles of home ownership - that you control your own environment, or you make yourself richer than your landlord, the financial argument on home ownership gets put to the test. One thing we all can agree on is that this cycle of high interest rates are not here to stay. We don’t know how long they will be here, but there are many pundits who say it could be as long as 2 years or as short as 15 months. To proclaim victory on rental due to a short interest rate cycle is ludicrous, especially when we see annual rental percentage rates, as of September in Toronto up 17.1% and in Hamilton up 15.5%.
Let’s Get Creative About Home Ownership
A recent Ipsos study from earlier this year said that 75% of Canadian home owners said their home became most important to them during the pandemic, with 65% saying they felt a stronger emotional connection to their home overall. Canadians have had a long love affair with their homes and this further proves it. Now is time we get creative with home ownership - buying a home together with extended family, friends buying homes together, buying duplexes to live in one unit and rent out the other. These are all growing in popularity.
Owning a Home is Your Best Hedge Against Inflation
Over the last 40 years, real estate has been your best hedge against inflation. Some naysayers point to the recent flattening and/or decline in average home prices, and proclaim that a myth. There is no question that home prices rose rapidly in Q1 of 2022, and rapidly declined in Q2. However, when you look at average home prices in Ontario, from January 1st, to August 31st, 2022, most cities have shown increases from 8% to over 20%, currently outpacing the current year over year inflation rate of 7%.
The Rise of the Stink Bid
As the real estate market faces some temporary headwinds, the vultures begin to circle, and so does the emergence of the ‘stink bid’. What’s a stink bid? It’s a lowball offer which is given to a Seller, whose property has been on the market for several months. It’s a way for Buyers to test Sellers to discover their level of motivation. In this transitional market time, it does not pay to be emotional about a stink bid. WORK IT. Sellers just like you are trying to navigate this new normal in pricing, so are the Buyers. Do not be offended by the stink bid, just like Buyers shouldn’t have been offended when you priced your home 100’s of thousands below market value, and you didn’t except their full price offer. NEGOTIATIONS ARE BAAACK!!! It’s time to sharpen your skills, and bring back the win-win negotiation, which is the most referable skill that we as REALTOR®s have. The day after I arrived in Cannes, I went down for breakfast early in the morning, as I crossed through the lobby I saw my bag being delivered. For a moment I could hear music, the kind of music you hear in the background of a Hallmark movie. I was reunited with my bag!!! The 24 hours without my luggage proved to be a bit stressful, but I sprung into action and went shopping. I may have had some minor pain, but I ended up with new clothes out of it, and got tons of sympathy from everyone I told my story to. Sometimes the real estate market can be stressful, but in the medium and long term it can be very very rewarding.