The dizzying, bionic two years of a record-setting sales pace in Ottawa’s real estate market has certainly slowed and realtors describe a return to normal levels.
That return to normalcy though has stirred up fears and many misconceptions, says Taylor Bennett of Bennett Property Shop Realty.
Bennett is the co-host of The Bennett Real Estate and Wealth Show on Newstalk 580 CFRA and regular contributor to CTV Ottawa’s News at Noon.
“I spend a great deal of my time acting as a therapist for people who are worried about the market,” says Bennett
He says he hears many myths and misconceptions, many times a day, every day from nervous clients. He wants to correct them to help quell clients’ anxiety.
Taylor Bennett on Five Current Myths
Myth: “Sales are down, the market is crashing”
“While sales are down compared to last year, it’s important to put the last year into context – 2021 was the best year for real estate, setting both sales and price records,” Bennett says.
“So, a comparison to the best year on record is like comparing an NHLers season stats to Wayne Gretzky’s best year – it’s not going to look very successful. But when you pull back and take a broader look, we are currently on the same pace as we were in 2019 – the third best year on record.”
Myth: “There are no more multiple offers, I can low-ball sellers”
“While it’s true that there are fewer multiple offers than before, there are still some occurring on well-priced and unique homes. But even in transactions where it’s one seller vs one buyer, on average, homes are selling for $10,000 more than their list price so buyers should be prepared to pay the asking price,” Bennett said. “However, buyers do get an advantage as they now have the opportunity to perhaps work in a condition or two for added protection.”
Myth: “Homes are taking longer to sell, sellers are panicking”
“Homes are, in fact, taking 55 per cent more time to sell; but to add some context, the average days-on-market has increased by only one week from 13 days to 20. Again, we have become accustomed to seeing homes sell in less than a week, but that was extremely unusual for Ottawa,” Bennett says.
“In June 2019, on average it took over 35 days for a home to sell, and that was considered exceptionally quick at that time. Plus keep in mind, that there is a difference between the selling date and the closing date – many sellers are looking for closing dates in the 90-day range, so if a sale takes a few weeks longer they still have ample time for their desired closing date.”
Myth: “I missed the best opportunity to sell. There are no more record-setting prices”
“Since the end of 2019, prices in the Ottawa market have increased by over 64 per cent (From $441,693 to $727,556)! That type of growth would normally take almost 10 years to achieve, but it took only 30 months,” Bennett said.
“So, if you are still thinking of selling, while you may not set a record price for your neighbourhood, if you bought your home before 2019, your home has likely increased well beyond the value it would be if Ottawa had its typical increases.
“But it’s important to keep in mind that setting a record price doesn’t necessarily mean you made the most profit – even though you may sell for less than your neighbour, if you paid less and/or put less money into your home (renovations, updates, etc.) than it’s likely your return-on-investment would be far greater than your neighbour.”
Myth: “With mortgage rates on the rise, people will default on their mortgages”
“The rising interest rates have undoubtedly had an impact on the market. In fact, that was one of the major reasons why the mortgage interest rates were increased, to help stabilize the markets. But mortgage rates are roughly at the same level that they were in 2019 – again, the third best year on record. The most recent increase was announced last week at 100 basis points, or one per cent. While one per cent may seem like an insignificant number, that rise decreased buying power by 10 per cent! But these increases weren’t announced overnight, many homeowners and buyers were able to lock in at the lower rates before they increased,” Bennett said.
“More importantly, when approving a mortgage loan, banks use a qualifying rate – which is approximately two per cent higher than your actual mortgage rate. Being risk-averse, banks build in this ‘buffer room’ to protect against an increase in the mortgage rates – which is precisely what is happening now. Which means, this recent rate increase shouldn’t impact current homeowners or any buyers who are working with a full-service brokerage and have locked in a guaranteed rate with a mortgage pre-approval. However, if you are a potential buyer shopping on your own and you simply used an online mortgage calculator to get pre-approved, it’s unlikely you have a guaranteed rate and this recent increase will have an impact on your purchase.”
What would you do with an extra $5,000? Well, given our current economic straits, many of us might respond with “Pay a few bills off and buy a six-pack.” If inflation continues its current upward tilt, the person who wins the billion-dollar lottery might even say that.
It’s somewhat jarring to think that if it weren’t for Illinois’ economic climate, you’d already have that $5,000 we just talked about.
Concept of Inflation. Rising chart on the background with the text inflation.
Conceptual of unhappy bankrupt woman.
To Keep Up With Rising Costs Since June Of Last Year, The Average Illinois Worker Would’ve Had To Have A Pay Raise Of At Least $5,920
But instead, according to a report up at IllinoisPolicy.org, that pay increase totaled a little more than $3,057 (show of hands–how many of you even got that?).
When you add up all the price increases from inflation in our state, Illinoisans are paying $4,675 more for the same goods and services this year when you run a year-to-year comparison with 2021.
Getty Images
“Dollar bills held in hands, isolated on white with clipping path”
As I’m Sure You’re Painfully Aware, Illinoisans Are Dealing With The Highest Inflation Rates In 40 Years
Illinois Policy’s Bryce Hill, crunching numbers from the U.S. Bureau of Labor Statistics, points out how much extra cost has been added to the budget of the average Illinois worker over the last year:
- Gasoline: $1,483
- Housing: $929
- Groceries: $522
- Utilities: $387
- Household furnishings: $206
- Food Away From Home: $202
- And, the dreaded “Other” category: $947
The U.S. Bureau of Labor Statistics projects average prices rose 9.1% from June 2021 to June 2022, and are showing no signs of leveling off.
LOOK: Here are 25 ways you could start saving money today
These money-saving tips—from finding discounts to simple changes to your daily habits—can come in handy whether you have a specific savings goal, want to stash away cash for retirement, or just want to pinch pennies. It’s never too late to be more financially savvy. Read on to learn more about how you can start saving now. [From: 25 ways you could be saving money today]
KEEP READING: Here are the best places to retire in America
If a resident approaches First Ward Councilperson Pat Fowler on the street, they will be handed a pamphlet that reads “22 Ways to Step Into the Housing Crisis in 2022.”
Fowler said she will ask those who take the pamphlet to do three things.
“You read it today, in its entirety. You read it tomorrow in its entirety. And then one more time,” Fowler said. “Because then you will truly understand that you and everybody else you know can do one small thing to make a difference.”
This should not come as a surprise to city residents, as Fowler told members of the public during the April 4 City Council meeting that she was actively looking for housing options around Columbia. Fowler also noted that she would be distributing the pamphlets and encouraged other members of the Council to do the same.
“If you see me wandering about, that is what I am doing most of the time,” Fowler said during the meeting.
The pamphlet gives 22 different examples and actions Columbia’s citizens can do to help with the affordable housing crisis. The options range from donating furniture to Love Columbia all the way to asking developers to consider building affordable housing units.
Fowler’s passion for affordable housing comes from her own life experience. When she brings up her childhood she makes a point to express gratitude to the cooperative housing community her divorced mom and her siblings were a part of in Greenbelt, Maryland.
“I grew up with this idea that we all lived really close together. We knew that our parents owned an ownership interest in our housing and that ownership interest helped define who we were,” she said.
First Ward Councilperson Pat Fowler takes a photo of a house available to lease on April 30 in Columbia. Fowler sends this information to Love Columbia, a local resource center, so that the organization can contact the landlord, find out if it is an affordable housing option, and share it with the community on their website.
The community land trust that was in Greenbelt gave a way for members of the community to buy their homes, but not in the traditional sense. The owners would buy the physical home but not the lot it was on or exterior walls as they were owned by the Greenbelt Homes Inc.
“If you wanted to increase the value of your house and sort of the features of your house, you went from frame to cinder block to brick,” Fowler said.
Fowler’s mother owned a 99-year lease on one of the row houses in Greenbelt, and while it appreciated in value there were some controls on how much the owner could sell the lease for within a certain number of years after purchase.
Upon her mother’s death in 1984, both Fowler and her sister managed the sale of her mother’s lease in addition to the sale of her other assets.
Greenbelt Homes Inc. was started in the late 1930s, with its goal to address the housing shortage in addition to providing more affordable housing.
Columbia has a similar scale of this exact housing model. The Lynn Street Cottages are located in the First Ward, and are a part of the Columbia Community Land Trust.
The homes on Lynn Street have separated the ownership of the land from the physical structure. This separation allows the homes on Lynn Street to have a lower price than other homes in the neighborhood.
“The family buys the house, the land trust maintains the land, and you pay a ground lease of a very small amount of money every month,” Fowler said.
There is a formula at which the price of the home can appreciate at; if a family wants to sell their home they have to share the appreciated value up to a certain dollar amount. This system makes sure the homes stay affordable.
“So really, you need to stay here seven years before you start to see the appreciation,” Fowler said. “But for that seven years, you’re not paying rent, you’re paying your mortgage. You own it. It’s your space.”
Organizations like the Columbia Community Land Trust are a key part of the expansion of affordable housing in Columbia. The other piece of this is maintaining the small homes within the First Ward.
Fowler spends her Saturdays walking through the First Ward and looking for affordable housing units. This ranges from looking at abandoned homes, homes for sale and rental properties being advertised.
First Ward Councilperson Pat Fowler hands out informational pamphlets about Love Columbia to anyone she comes across. She urges people to “read it once today, read it once tomorrow, and read it one more time after that” to remember there’s at least one way they can help alleviate Columbia’s housing crisis.
When Fowler sees a home that is either vacant or being advertised as for rent, she will take a picture of it and make a note of the address and any noticeable issues of the home.
“So if there’s something like the roof has, you know, sloped, looks like it’s in disrepair, then we know that it’s probably not the best,” Fowler said.
Fowler sends this information to Love Columbia, and from there the organization handles the details. She calls herself the “bird dog” within this operation.
“They’ll call them and say, ‘Hey, I have an address that I understand that you have on a for lease, would you be willing to do X? Would you be willing to do Y?’,” Fowler said.
Conrad Hake, Side-By-Side Coaching program manager at Love Columbia said that when Love Columbia receives that information, the operations director at Love Columbia along with contractors and interested landlords would review the information. Once they review the information, they will determine if it is a viable option for a unit.
“If it’s a situation where the property would need to be knocked down, it doesn’t really make financial sense to get into to purchasing that property and doing the development as necessary,” Hake said.
Hake said that these interested parties work on a case-by-case basis. Hake also noted that the information that Fowler gives to them is handled differently depending on the situation.
“We have kind of a small informal group that includes Councilman Fowler, ourselves, a couple of contacts with industry, legal services and a couple of other community members that really has an interest in addressing black land loss and vacant properties,” Hake said.
Depending on the circumstances, different interested parties will aid in what needs the property has. This could mean having a legal team step in to ensure they possess ownership in the event of a death in the family.
“Our goal really is to either help a family as they navigate the probate issues that they’re facing and members of Legal Services works alongside them to to help keep that property and that wealth within the family,” Hake said.
The viability of the affordable housing located in the First Ward lies on many different things — quantity, condition of the structure and most surprisingly the storm sewer system.
The storm sewer is something many might overlook but Fowler made a point to stop and point out multiple issues with storm sewer drainage problems during her walk.
Jefferson Middle School, located in the First Ward, is currently constructing a new gymnasium on the property, which is only a few steps from Fowler’s home. Fowler said that this space is filled land and CPS decided to use the property as the athletic fields for the junior high.
When the land was filled, it shifted the direction of the underground stream that ran through Fowler’s neighborhood, which moved the flow of the water underground. This change led to problems with the infrastructure of the houses as the stream started to run into the basements and crawl spaces.
“That’s when the flooding began. And the people that lived in my house at the time said they came down the cellar stairs to 18 inches of water,” Fowler said.
A shed door appears to suffer water damage on April 30 in Columbia. Fowler warned that flooding and standing water issues are especially harmful for the many houses in her ward without a full basement.
Since most of the houses in the First Ward do not have a basement, they instead have small crawl spaces. This means that during heavy rainfall, the physical structure is not far off the ground.
This, combined with the poor drainage from the storm sewers, residents could have standing water in their living spaces if the water cannot drain properly.
“If you’re on either a tiny crawlspace, or you’re on a slab, that water is in your first floor,” Fowler said.
Fowler said the issue of flooding is huge for the houses located in the First Ward because individuals who have young children or respiratory conditions cannot live in a home that is prone to mold.
The First Ward has the largest concentration of affordable housing in Columbia, and Fowler said that this is a key part of the continuation of affordable housing in Columbia.
In order to preserve the housing in the First Ward, Fowler said, investments need to be made to make sure that the current structures do not go into disrepair. This includes maintaining the current homes and preventing further damage from flooding.
“All of this is important, and you can’t have this kind of stuff happening and expect these houses to stay,” Fowler said.