In spite of the limited inventory of homes for sale, the local residential real estate market continues to exceed expectations. The 328 homes sold in April is another double digit increase and home sales now stand at an increase of 23.4% for the year. And the fact that this is being done with modest sustainable price increases is most important.

We noticed that Core Logic stated that U.S home prices have increased 10.5% comparing March 2013 with March 2012. Two of the states with the highest price appreciation were Nevada 22.2% and Arizona 16.8%; the same two states that experienced double digit price increases in 2003 – 2005 followed by double digit price decreases in 2007 – 2009 and now they go again! In our market the average price was up 6.7% in the first quarter of 2013 compared to the first quarter of 2012 and in our market that is a serious increase. Thankfully we have never experienced the roller coaster ups and downs of some of our neighbors.

There are currently 1,211 homes listed for sale in the Fort Collins area but 577 of them are under contract leaving a net supply of just 634 homes. This is a 5% improvement over last month but the next few months are when the demand peaks and buyers are going to have to scramble to find the right home and get it under contract.

In the four month period of May through August last year there were 1,532 closed sales so the demand jumps considerably compared to the first four months of the year. At the end of April last year there were 1,483 homes on the market; 552 were under contract leaving 931 net active listings. The inventory this year is down 30% from last year at a time when we need more homes to meet the demand.

The resale homes that closed in April were only on the market an average of 42 days until they received an acceptable offer and the year to date figure is now down to 69 days compared to 84 last year.

In Weld County sales were up 11.9% for the month and 16.5% for the year to date. The average selling price in 2013 is $217,384, an increase of 11.2%. In the southern portion of Larimer County including Loveland and Berthoud, sales in April were 17.8% ahead of last year and are up 23.7% for the year. The average selling price of $262,273 is up just 0.4% from last year.

In this difficult market, we encourage you to use the services of a professional Realtor. If you are considering selling your home you need to be right on top of the market and if you are a buyer, you are going to need representation and assistance.

If you own property in Larimer County you should have received a postcard this week from the Larimer County Assessor with information concerning your ‘Notice of Value’. This NOV is the Assessors estimate of the value of your property which will be the basis for the 2013 property tax. Note that the Assessor is sending the basic information in post card format to save on printing and postage costs. Full size notices will be available online in ‘PDF’ format at www.larimer.org/assessor. Real property is reappraised every two years and the assessor has previously used an eighteen month period to compare market data ending in June of the previous year. However, for this assessment they have used two years of data: July 1, 2010 to June 30, 2012. In discussing this with Steve Miller, the Larimer County Assessor, he states that “the minimum 18-month period was specified in the early 1980’s because assessor offices then could not process a lot of date. The eighteen month period is not an accurate data collection period because whatever seasonality exists in the real estate markets will be misstated. Having a data collection period that includes two winters, two springs, one summer and one fall is hard to justify on analytical grounds.” In addition, Colorado property tax law allows the assessor to use up to sixty months of data and according to Miller, they did look back over the sixty month period to bring more sales into their analysis but all sales are time trended or market trended to give more weight to sales occurring during the two year period ending June 30, 2102.

According to Miller, residential values in the Fort Collins area are up about 4.5% on average and up 2.1 % in the Loveland / Berthoud area. Estes Park experienced a 5.2% decline and the values in the rest of Larimer County, including the burn areas, were down 11.2% on average. In total Larimer County was up 1.9%.

We have reported sales statistics and average selling prices to you on a regular basis so we checked the Assessors numbers against our MLS numbers. In the Fort Collins area, which includes Laporte, Timnath and Wellington, the average sales price for the two year period ending June 30, 2012 was $247,959 compared to $236,862 for the two year period ending June 30, 2010. This is an increase of 4.7%. We need to remember that these sales figures are only for properties sold through the multi-list system. The Assessor has access to additional data including building permits for new construction, renovation and improvement, for sale by owner transactions, reassessment data from protests and even drive by appraisals plus they used weighted data from a five year period instead of just the two years ending June 30, 2012. Still, it is interesting that the Assessors 4.5% average increase in assessed values is almost identical to the 4.7% increase in the MLS values.

Obviously the rate for any individual property, neighborhood, subdivision or community may vary widely from the averages. Naturally, if you think the value of your assessment is too low, that is probably the end of it. But, if you think the value is too high, you have until June 3, 2013 to file an appeal. To appeal you need to mail a protest or you can send a fax, appear in person or you can go online to www.larimer.org/assessor and complete a protest. As for the research into your appeal, you can deal with comparable sales and market information for the entire five year period ending June 30, 2012. Sales information since July 1, 2012 may not be considered in your appeal, although with the way the market is going, this should not be a handicap. To assist you there is sales information on display at the Assessors office or on line at their web site. You can also call a real estate professional to help you with comparable sales information.

Other than the ‘Notice of Value’ the other two factors that influence your property tax bill are the ‘Assessment Percentage’ and the ‘Mill Levy’. For residential property, the assessment percentage is currently 7.96% of the assessed value and the mill levy for Fort Collins is 90. The property tax calculation on a residential property with an assessed value of $280,000 would then be:

$280,000 x 7.96 / $1,000 x 90 = $2,006.

Remember that the County Assessor is only responsible for assessed values; they are not responsible for taxes and are only charged with spreading the tax burden as fairly as possible. We would like to thank Steve Miller and his staff for the information they have provided and we think you will find his department very helpful with any questions or concerns you may have.

At the end of March last year we were trumpeting a huge 26.7% increase in sales compared to the previous year and the total volume of $73M was the best March since 2005. And now we can report that the March 2013 sales exceeded last year by 8.2% and the total volume of $81M made it the best March ever! And who is to know how many homes could have been sold if we had more inventory to meet the demand.

To put the inventory of homes into perspective, during the ‘boom’ years around 2005 there were over 2,500 homes listed at the end of March. By 2010 this had dropped to 2,000 homes, then to 1,500 in 2011 and 1,352 last year. The inventory at the end of March 2013 was down to 1,131 homes of which 509 were under contract and 18 were shown as to be built for a net of just 604 net active listings, down 35% from this time last year and off 55% from the peak supply. The good news is we are on track to make a full recovery in home sales, reaching the 4,000 level for the first time since 2005. The bad news is we can’t do it with the present lack of inventory.

Home sales for the first quarter totaled 724, an increase of 26.4% over last year and putting us on a pace not seen since 2005. The average selling price of $268,634 for the first quarter is up a relatively modest 6.8%. It is a pleasant surprise that we have been able to chalk up a 26% increase in sales without prices increasing at a faster pace, particularly when coupled with the limited inventory.

The ‘days on market’ is certainly indicative of the fast paced market with those homes that closed in March averaging just 64 days from listing to offer compared to 96 days last year. This is by far the best period of time from listing to offer that we can find and well below the peak number of days recorded in 2011 when it took an average of 103 days to get an offer.

First quarter sales in the rest of the region were also up sharply, with Loveland and south Larimer county recording 428 sales, a 24% increase over last year with an average selling price of $250,203 down 3.3%. In Greeley, Windsor and Weld county sales in the first quarter totaled 818 homes, up 17.9% with an average selling price of $214,691 up 12.1%.

Typically home sales increase 80% or more from the first quarter to the second quarter meaning we could be looking at 1,300 sales in the Fort Collins area over the next three months. With 509 homes under contract at the end of March we have made a good start but we are going to have to increase the inventory to have a chance at meeting this demand.

Disclosure: We are often asked where we get the local sales information we use in our columns. The data comes from Information and Real Estate Services (IRES) which is the multi-list service (MLS) provider owned by the member real estate brokerage firms in northern Colorado. The average sales price includes all sales made through the MLS including single family detached homes and attached condos and townhomes, both new and used. This does not include properties listed as investment, business, commercial or farm and ranch. The average sales price is calculated by taking the total sales volume and dividing that by the number of homes sold. We use the average sales price for comparison purposes, as opposed to the median price, because that is how the original data was calculated going back to 1972. The local Fort Collins sales data we use includes all of the MLS Area 9 which is northern Larimer County basically from the Wyoming border on the north to County Road 32 (Hwy 392 / Carpenter Road) on the south plus several subdivisions, like Eagle Ranch that lie south of CR 32. The Loveland figures are from Area 8 which includes all of Larimer County south of CR 32 with the exception of Estes Park. Area 10 is all of Weld County. The total sales do not include sales made directly by owner (FSBO) including sales made by home builders who choose not to list their homes with the MLS and sell directly to buyers. We estimate that these sales account for anywhere from 5 to 10% of total home sales which would be in addition to the sales reported by IRES. The IRES site is for members only but they do offer a consumer web site which shows all the listings provided by the member brokerage firms. This site is at www.ColoProperty.com. If you have any questions, comments or suggestions, we would appreciate hearing from you.

Sales figures for residential real estate for March and the first quarter of 2013 will be published next week in this column but in the meantime we wanted to review the housing inventory. Based on the first two months of local sales and with all the positive national news about the housing recovery, it looks like this could be a very good year for sales, both in terms of homes sold and the improving selling prices. The only roadblock out there would seem to be the lack of inventory.

Traditionally, a six month supply of homes is considered a balanced market between supply and demand. Anything more than six months and the market is deemed to be a buyers market and selling prices tend to fall. As supply slips below the six month level, the market advantage shifts to the seller and selling prices go up.

On a national basis there were 1.94 million existing homes for sale at the end of February, 19.2% below a year ago. Based on the previous twelve month sales, this represented a 4.7 month supply, up from a 4.2 month supply at the end of January but down from the 6.4 month supply a year ago. The January inventory was the lowest since May 2005.

In the Denver metro area, there were 6,786 unsold homes on the market at the end of February compared to 10,086 a year ago. In 2012 there were 46,299 homes sold in metro Denver so the current supply is equivalent to less than two months of demand. This supply is the lowest since inventory figures were first tracked in 1980. The CEO of Kentwood Real Estate in Denver, Peter Niederman stated; “It is absolutely crazy that a marketplace of 2.9 million people has fewer than 7,000 homes on the market”.

We have a similar situation in our local market. At the end of March there were a total of 1,131 homes listed but 509 were under contract and 18 were shown as ‘to be built’. This leaves a net of 604 active listings. With 3,491 homes sold last year the demand is for 291 per month so there is a net supply of 2.1 months. However, this is not the entire story. The demand over the next six months is normally higher that the average for the year and we estimate a market demand for at least 360 homes per month for the next six months. On that basis the supply is the equivalent of just 1.7 months and as you can see from the table, in the price range under $300,000 which is 75% of the market, the supply is measured in weeks not months.

Fort Collins (Area 9) Source IRES

In the higher price ranges we are finally seeing something approaching a balanced market. In the last few years there has been a surplus of homes priced above $500,000 that has reached as high as a five year supply priced above $1M. With an increasing number of sales the net active listings priced above $500,000 has dropped 25% from 184 to 136 homes in just the last seven months putting the supply at less than eight months.

While this is all good news for sellers, the tight market is making it very difficult for buyers. The best advice, get pre-qualified for a mortgage loan, work with an experienced real estate professional, have a good idea of what you are looking for and when you find it be prepared to act quickly.

In the Fort Collins area we have about 200,000 people, which is about 7% of the metro Denver market and to paraphrase Peter Niederma;, to have 600 homes on the market for 200,000 people is absolutely crazy!

Low mortgage interest rates + limited inventory + tight rental market + improving economy + buyer demand = CRAZY!

The local residential real estate market ended last year with a 20.5% increase in home sales and a 3.5% increase in the average selling price. This year started off with a 34.2% increase in January sales and a 13.4% increase in price. But we were just getting started as February followed with a 44.4% increase in home sales and a 16.0% increase in the selling price. This puts the year to date at 408 closed sales, up 39.7% from last year with an average selling price of $271,078, an increase of 14.5%. And it is not just a few high priced homes skewing the figures; the median price is up 11% to $233,125 for the year to date.

Sales did start off slow last year so the figures for both homes and pricing were modest compared to the breakthrough that began in March 2012 when home sales almost doubled from the previous month and the average selling price took a 14.4% jump from February to March and the years sales took off from there.

The scary thing is the inventory of homes for sale, which increased slightly from 1,012 at the end of January to 1,083 at the end of February but the number of homes under contract jumped in one month from 374 to 480 leaving just 603 net active homes for sale. We are entering the period of peak demand and a conservative estimate would be the need for 1,500 homes over the next four months. This means we have just a six week supply of homes when a six month supply is considered a balanced market.

For those buyers who are trying to buy in this market, you need to make sure you are pre-qualified for the mortgage loan and ready, willing and able to write an offer. We would encourage you to work with an experienced real estate professional to help find the home and prepare an acceptable offer and get it presented quickly. We are hearing a lot of stories of multiple offers getting made within days or even hours of a new listing coming on the market so you have to be ready.

We expect the increase in selling prices will flush out a few more sellers but if those sellers are simply trading up or down the net effect is no additional inventory. This is a difficult situation and it has been developing for the last few years. We have done a lot of research on new home construction in the northern Colorado area and the results are amazing. New home construction peaked at 3,514 homes in 2002 which was 30% of the total market. From 2000 to 2005 there were 18,584 new homes built in this market area, an average of over 3,000 per year. This declined steadily and reached bottom in 2010 when just 802 new homes were built, 10.4% of the total market. In the most recent six year period from 2007 to 2012 there were 6,795 new homes built, an average of just over 1,100 per year compared to the average of 3,000 in the previous six year period. In round numbers this is a total of 12,000 new homes that were not built and at some point this had to become a problem and it would seem that is now.

Given the economic downturn and recession, we obviously could not have absorbed 12,000 more homes over the last six years but we are now behind the curve and playing catch up and it is going to take a good long while to get back to a balance between supply and demand. In the meantime, it is going to be a bit of a scramble!

Pam & Dave Pettigrew, Certified Residential Specialists, are available to answer your questions on real estate. Write to them at Prudential Rocky Mountain REALTORS, 2700 S. College, Fort Collins, 80525, call them directly at 970-282-9305, email FCRealtor@msn.com or visit their award winning web site at www.FortCollinsRelocation.com for an archive of all their columns

Maybe too high! The average selling price in January was a record breaking $272,370, up 13% from a year ago and a 5.5% increase from the average for all of 2012. And it wasn’t just the average price; the median price, which may be a better indicator, was up 15.9% to $239,000. The 196 closed sales for the month was also a big jump, up 31.5% from a year earlier. This volume puts us on a pace going back to 2005 when there were 201 homes sold in January and 4,100 for the year.

This is almost a perfect storm with a big demand for homes encountering a very low inventory of homes for sale. At the present time, there are 1,018 homes listed for sale but 378 of them are under contract leaving a net supply of just 640 homes. And of these 640 homes, 86 are new construction that is either not built or not complete. With a projected demand over the next six months for perhaps 2,000 homes we have less than a two month supply on a net basis.

By price range it is worse, since 75% of home sales are priced under $300,000 and the present net supply is 325 homes. With a demand for 1,500 homes over the next six months there is just a 40 day supply when a balanced market is considered to be six months. No wonder we are hearing stories of multiple offers as homes in this price range hit the market. In the higher price ranges there is just a three month supply of homes priced from $300,000 to $500,000 and six months above $500,000. To compare, just eighteen months ago the supply under $300,000 was equivalent to 5.5 months with 8.7 months supply between $300,000 and $500,000 and a 19 month supply above $500,000. It should be noted that these are not based on net inventory so if we are to assume that 20% of the inventory was under contract, the net figures would be 4.4 months, 7 months and 15 months. No matter how we calculate it the inventory compared to demand today is less than half of what it was in 2011.

This also shows up in the days on market. The home sales that closed in January were on the market for 61 days to offer and 98 days to close. This compares to 105 days and 142 days in January last year, a drop of over 40% in marketing for sale time.

We are already being warned of a ‘new bubble in the housing market’. Ten years ago, national home prices were increasing around 7% a year then hit 8% in 2004 and 12% in 2006. This was unsustainable and by 2007 prices started falling, losing almost 50% in some markets. Our local market never had the big run up in selling prices; in fact we have always been a little contrarian. When national prices were on a tear from 2003 to 2006 our market gained just 10%. When prices started to fall nationally, the local selling price increased 2% from 2006 to 2007 and over the next five years it dropped a minimal 5% before coming back 8% to end the full ten year period up 21% which was a pretty steady and sustainable growth rate.

Double digit price increases are temporary at best and we have seen the havoc created when housing prices take double digit drops. In order to maintain sustainable growth, we need to balance the supply and demand. Since we don’t want to reduce the demand we are going to have to figure out how to increase the supply. Don’t want to sound like a broken record (anyone remember those?) but we need to find a way to build more homes.

For those old enough to remember, that was the title of the song that won Frank Sinatra a 1966 Grammy for Best Vocal Performance. But for us, it is a fitting heading for a review of the 2012 local residential real estate market.

In the Fort Collins area, sales surpassed all expectations posting a 20.5% increase over the previous year along with a 3.5% increase in average selling price resulting in a 24.6% increase in total volume.

To put it into perspective, since reaching a peak in 2004, annual home sales had dropped almost 30% by 2010 and the 20.5% 2012 increase certainly puts a stop to that. And as we have stated in the past, most of the drop has been due to the sharp decline in new home construction. If we look at just resale homes, sales totaled 3,258 in 2004 and 3,063 this past year, a drop of just 6%. New home construction reached a peak in 2004 with 842 sales accounting for over 20% of the market. In comparison, new home sales totaled 428 last year, a big improvement over 2011 but still just 50% of the peak and 12% of total sales.

Days on market (DOM) is another indication of how the market is performing and the homes sold in 2012 averaged just 65 days from listing date to being under contract compared to 84 days in 2011. We reviewed the inventory situation last week and suffice to say that the limited number of homes for sale is going to be a problem as we move forward.

The other areas of northern Colorado also performed well during 2012 with the Loveland / south Larimer County area closing 2,008 home sales, a 25.3% increase over 2011 with an average selling price up 5.7% to $264,035. There were 3,777 homes sold in the Greeley, Windsor and Weld County area, up 11.1% with the average selling price up 10.7% to $204,806. Combining the northern Colorado market, sales totaled 9,276 homes, a 17.5% increase and the average price was $237,668, an increase of 7.2%. This was a total market volume of $2.2 billion, a 25.9% increase from 2011. Resale homes are actually back to where they were during the peak markets of 2004 – 2005 totaling 7,879 in 2012 compared to 7,927 in 2005. Again, the decline in new home construction is what is holding back the market. In 2005 there were 2,836 new homes sold in northern Colorado. This compares to 933 in 2011 and 1,397 in 2012. This year over year increase of 50% is certainly on the right track but new home construction is still just 50% of what it was during the ‘boom’.

It is certainly very difficult to predict where we go from here. There are a lot of positive signs and we expect there to be a very good demand for homes. The question is going to be where do the homes come from and what is going to happen to the selling prices? Stay tuned.

This is fun! A 29.5% increase in local home sales for November moves the year to date increase to 22.0%. It now seems safe to say that we will end 2012 with a 20% + sales increase compared to 2011. This type of increase has only happened four times in the thirty seven years we have figures for, dating back to 1976. The last time was a 21% increase in 1998 and prior to that, a 23% increase in 1992. Obviously we have had a bit of a perfect storm fueled by pent up demand as a lot of people chose not to buy a home during the four previous years. Coupled with seriously low mortgage interest rates and improving consumer confidence in the economy home sales have made this year a real head turner. However, before we get too giddy, we have to remember that local home sales averaged 3,847 homes per year for ten years from 1998 to 2007 and this current 22% increase only looks good because home sales for the last four years limped along, averaging just 2,955 closings per year.

It is also good for the market that this 22% year to date increase in home sales has been accomplished with a modest 3.5% increase in the average selling price. But perhaps another warning sign; that 21% increase in 1998 home sales was accomplished with a 4% price increase but the selling price increased 10% the next year and 11% the following year. The 23% increase in 1992 sales was done at the cost of a 9% price increase followed by a 13% increase the next year.

At the end of November there were 1,139 active listings but 336 were under contract leaving a net of just 803 homes for sale. This is down from 890 homes at the end of October and is 14% less than at this time last year in spite of the demand which is up 20%. Even with a lower demand over the next two or three months, we have probably less than a four month supply on a net basis when typically a six month supply is considered a balanced market. Further evidence of the tight supply is the average days on market for the sold listings. In November the sold homes were on the market an average of 64 days to offer and 101 days to closing. This compares to 79 days to offer and 116 days to closing for November sales last year.

About the only way to improve the supply is to build new homes and we have made a good start in this direction. To the end of November, new home sales are up 70% to 12% of the total market but still below the 15 to 20% share that new homes had ten years ago. If we are ever going to get back to the robust markets on the previous decade, we will have to build at least 700 to 800 new homes each year. We believe the demand will be there, now we just need the product.

Home sales were up again in October and we have now exceeded the total for all of last year…with two months still to go. The 28.4% October increase on Fort Collins closed home sales is the biggest month over month gain this year and moves the year to date increase to 21.1%. If we can post similar increases in the final two months we could hit 3,500 total sales which would be the best year since the 3,623 homes that sold in 2007.

Prices also took a significant jump, up 6.9% for the month and the average selling price for the year to date is $257,487, a 3.6% increase compared to last year. This is the highest average sales price on record, ahead of the previous high of $253,406 in 2007. The total volume of sales is now at $775M and we should break the $900M mark, a level not seen since 2007.

Generally speaking, this substantial increase in home sales has been achieved in a very orderly fashion without a big run up in prices and with very little head to head competition among buyers. The inventory of homes for sale continues to drop with 1,260 active listings at the end of October compared to 1,341 the previous month. Homes under contract stayed strong with 370 currently compared to 375 last month. This means the net active listings are down from 966 to just 890 homes. This would normally be pretty slim pickings but the next few months will bring slower sales so we probably have enough inventory to get through but the crunch will come in the spring when buyer activity will increase substantially.

Lawrence Yun, the Chief Economist for the National Association of Realtors is concerned stating “The inventory of existing homes is at its lowest level in seven years, while newly constructed home inventory has hit a 50-year low mark. Distressed home listings will continue to fall because fewer borrowers are now seriously delinquent. Home construction is up, but only reaching half the historic average of housing starts. Even the many pent-up sellers – those home owners who have been holding back waiting for better market conditions – will not help the net inventory because most of them will be selling to buy a trade-up property.”

With an improving demand for housing fueled by historically low mortgage rates, record high rental rates and a growing economy we need to be concerned about the increasing possibility of a housing shortage. This will cause home prices to rise which will markedly cut into housing affordability. In this market, the last time demand exceeded supply was during the three year period 1999 through 2001 when housing prices increased 29.6%. Obviously the best way to counteract the shortage is to build more homes. Let’s do it!

We were married in Vancouver, British Columbia, lived there for a few years and still enjoy visiting there very much. Naturally we follow the real estate market and are amazed at the activity and pricing. Twenty seven years ago, when we lived there, the average selling price of a single family detached home in the greater Vancouver area was around $140,000 and last month when we visited, the average selling price was $935,000, down from a peak of $987,500 in 2010. This 600% increase in selling price compares to the Fort Collins area where the average price in 1987 was $80,839 and is $255,000 today, an increase of just over 200%. Wow!

Granted Vancouver is a wonderful place to live and from 2007 to 2011 has topped ‘The Economist’ rankings of the world’s most livable cities. This ranking scores 140 cities around the world on thirty factors spread across five areas: stability, health care, culture and environment, education and infrastructure. In contrast, Forbes magazine says that Vancouver has the 6th most overpriced real estate in the world and the second highest in North America. In 2010 Canada’s Frontier Center for Public Policy calculated that Vancouver had the third highest housing costs among English speaking cities worldwide and the highest in North America.

In addition to the (almost) $1 million price of detached homes, the average selling price of an attached condo is close to $500,000 and high rise condo prices in downtown Vancouver have topped $2,000 per sq. ft. Apartment properties are at an average selling price of $368,800, the vacancy rate is 1.1% and the average one bedroom apartment rents for over $1,000 per month. Anticipated appreciation, low vacancies, high rents and cheap money have combined to drop capitalization rates as low as 2.5% on some deals. Compare this to buyers still looking for 8 CAP’s in the local real estate investment market.

The Greater Vancouver area occupies 1,000 square miles of land, has a population of 2.3 million and this population is very diverse. Starting in the 1980’s immigration dramatically increased and today 52% do not speak English as their first language. Almost 30% of the population is of Chinese heritage and many arrived from Hong Kong in anticipation of the transfer of sovereignty from the United Kingdom to China. In addition to the resident Chinese population, the real estate market has been fueled by Chinese investors who are diversifying their assets out of China. One Vancouver real estate agent who deals extensively with Chinese buyers and who has averaged around $150 million of home sales per year employs eight full time assistants and travels to China twice a year to meet potential clients. To put this amount of business into perspective, the average agent in the Fort Collins area does about $1 million per year and a top agent will do $10 million. Another agent told the story of a Chinese buyer who paid $1.7 million for a five bedroom, three bath house and intends to tear it down and build a new home.

Naturally all of this activity is making it difficult for many residents to own a home. In addition, the Canadian Government is cracking down on the overheated housing market, recently reducing the maximum amortization rate for government insured mortgages from thirty to twenty five years. Mortgage financing in Canada is typically limited to ten year terms with five year fixed rate loans being the most popular. Two of the major Canadian banks just ended a promotional 2.99% four-year mortgage rate, three weeks before it was set to expire. Another change for government backed mortgages is the home equity loan which is now limited to 80% of the homes value.

This appears to be having some effect with September sales down 32.5% compared to a year ago and the average selling price down 0.8%. The president of the Real Estate Board of Greater Vancouver said “There’s been a clear reduction in buyer demand in the three months since the federal government eliminated the 30-year amortization on government insured mortgages”.

These changes are not going to stop the foreign investment in the market and will just make it more difficult for the average home buyer. We just wish we had invested more – twenty five years ago.