For everyone who has ever teetered on the brink of downsizing from a house to a condo, take heart in this advice.

Our friends loved their new condo on the shore of Bedford Basin in Nova Scotia. They had sold their charming house a few miles away and, they thought, moved onward and upward. Their new home was a dream, with gleaming hardwood floors and vistas down the water toward Halifax. This was their retirement palace.

But three years later, they were gone. They bought a new house nearby, said good riddance to their erstwhile condo retirement palace and a very special good riddance to some of their neighbours in the building.

“I finally couldn’t stand having to deal with the idiots in the building,” our friend said. “It was like the lunatics were running the asylum. I even went on the condo board of directors. But it was no use. We had to leave to retain our sanity.”

Our friends’ experience is an extreme case of condophobia, where the dream turns into a nightmare. But I recalled their experience last week at the annual general meeting of our building in Toronto. These meetings are a rite of spring at condominiums across the country, a time when owners are brought up to date on the financial and physical conditions of their properties. And, yes. A time when grievances can be aired and vented.

Canada is displaying few signs of condophobia as the retired and the soon-to-be-so downsize — as our friends in Bedford did — and first-time buyers start their home-ownership lives with purchases of modest suites in downtown areas.

Thirty years ago, fewer than 4% of owner households were condo owners. By 2006, it had reached 11%. Today, the number is approaching 15%, meaning that well over one million Canadian households own a condominium. In the Greater Toronto Area this year, six in 10 new homes sold have been condos. And that trend is likely to continue.

My wife and I moved out of our house and into our modest condo almost 10 years ago and we are satisfied that it was the right move. We can lock up each winter and head to warmer climes for five months with few worries about the state of our home in what I call the “vertical village.” The building has been considerably updated in the past few years — at some extra expense, of course. We enjoy the indoor pool and little gym when we are here. And the location is unbeatable.

Yet, as our friends’ experience in Bedford underscores, condo life is not for everyone. Vertical villages can, like the non-vertical kind, have idiots. And sometimes it can seem as though they’re actually running the place.

Indeed, in a way it is a great leap of faith to commit yourself to entering an agreement whereby you are to be financial and social partners with a couple of hundred strangers for the foreseeable future. You will deal with them at the closest of quarters, trusting them to do the right thing so that your property and your well-being are secure.

Of course, you rely on neighbours when you occupy a stand-alone house, as we did for more than 30 years. But the shared ownership in a condo takes that reliance — that trust — to a far different level.

Some of the people reading this column will right now be considering selling their house and buying a condo. Here are some things to consider — beyond the usual real estate caveats — before buying and taking up residence in a vertical village:

* Those who have never lived in a condo/apartment may wish to rent out their house for a year and test-drive a condo rental unit for a year.

* Take a long, hard look at the condo building you’re thinking of buying in. You can ask for annual financial statements and the status of the reserved fund for study. (We were lucky in that a close friend had lived in our building for three years prior to our buying.)

* Take a special tour of the common elements of the building. You own a share of these places and you should know what you own. (An acquaintance in our building who has lived here for more than three years was recently surprised to learn we had a golf practice room.)

* Before committing to buying, you may want to sit in the lobby and read a newspaper or magazine while observing the comings and goings of the occupants and getting a sense of what the villagers are like.

* Likewise, you should walk (or drive) the neighbourhood for a good, long spell to get the lie of the land.

* If the building you are considering is older, there is a strong likelihood that special assessments will be coming to address the structural and decorative effects of aging. Also, some older buildings, like ours, do not have individual meters for hydro and water. So if you go away for the winter, you are in effect subsidizing your neighbours’ utility bills for months at a time. We’ve learned to live with it.

* If you opt to buy in a condo under development, be warned that these projects are rarely, if ever, finished on time. Expect delays and more delays.

This last point also underscores the need for patience in the world of the vertical village. As one friend described his condo, “It’s a funny little place with funny little people doing funny little things.”

Source: William Hanley, Financial Post

Surging real estate prices in Vancouver are pushing ownership costs into uncharted territory, putting it in the top ranks of the world’s most expensive cities and triggering fears the market is poised for a fall.

Housing costs for the average two-storey home in Vancouver today eat up the equivalent of 80 per cent of a typical family’s annual pretax income, according to new research, putting ownership out of reach for most.

The last time housing accounted for such a high percentage of household income in the city was in 2008, just before prices tumbled in a recessionary swoon. The city’s real estate market has since recovered and gone on to set new records, but the recent climb has market watchers worried that the gains are unsustainable.

Across the country, homeowners are putting a larger portion of their earnings toward their homes, and interest-rate increases are likely to put further pressure on homeowners in the coming months, the Royal Bank of Canada said in its quarterly affordability index.

The problem is especially pronounced in Vancouver, where the bank estimated families must now dedicate 72 per cent of their household income to pay the mortgage, property taxes and utilities on a bungalow. In Toronto, it would take 47.5 per cent.

With so much income tied to housing costs and some homeowners forced to take out home equity to cover living expenses or utilize other forms of credit, Royal Bank of Canada warned the Vancouver market is “becoming increasingly disconnected from local demand conditions and vulnerable to a painful correction.”

“What’s happened this year in British Columbia is puzzling,” said Robert Hogue, an economist at the RBC. “The increases we are seeing just aren’t justified by market fundamentals. I feel like this is something we have to flag.”

The average home price in the Vancouver area was $622,991 in April. That’s 5-per-cent higher than April, 2010, as the sale of multimillion-dollar homes boosted the average.

The city now has the third-highest housing costs in English-speaking cities worldwide, according to the Frontier Centre for Public Policy, with only Hong Kong and Sydney more expensive. That means people in Vancouver direct more of their money to housing costs than people in cities such as London or New York.

“This is money that households do not have for purchasing other goods and services, the result of which can be to diminish job creation and growth in commercial sectors, such as retailing,” said Joel Kotkin, who authored the study for the organization.

But even as economists worry, houses continue to sell briskly in the Vancouver area.

When Terry Vato listed a two-storey house in Burnaby late last month, he knew the sticker price would attract hundreds of prospective buyers.

At just under a million dollars, the 87-year-old, four-bedroom home was a bargain compared to houses 20 minutes away in Vancouver, the ReMax Central agent said. He was right. A week and one open house later, the property sold for $1.5-million – 50-per-cent more than the owners were asking.

“Some people hear this and say ‘Wow, what a crazy price,’” he said. “But I think the new buyers will do very well in coming years. This area has been undervalued.”

The bank’s affordability index shows the proportion of median pre-tax household income required to pay the principal and interest on a mortgage, property taxes and utilities. The figures assume a 25-per-cent down payment and a 25-year loan at a five-year fixed rate.

Affordability had been improving in the previous two surveys, but prices posted strong gains at the start of the year. There are signs that things are cooling off, however.

Sales decreased 14 per cent across the country in April, as new mortgage rules that eliminated 35-year amortizations as a financing option left buyers with the prospect of bigger payments. But the Canadian Real Estate Association said prices managed to eke out a small 0.3-per-cent gain compared to March, driving the national average resale price to a record $372,544.

Source: Steve Ladurantaye, Globe and Mail

Demand for luxury homes across Canada – especially in Metro Vancouver – is rising, with the improved financial standing of wealthy Canadians the main factor, according to a report released Wednesday by Re/Max.

“The strength of the upper-end segment continues to defy expectations,” Elton Ash, regional executive vice-president, Re/Max of Western Canada, said in a statement.

“That demand remains largely domestic speaks to the solid underpinnings of the market, while underscoring the appeal of Canadian real estate on an international stage. Western Canada, in particular, will continue to see the upside benefit of investment from abroad.”

According to the report, the improved financial standing among high net worth people is the major factor driving strong sales activity at the top end of Canada’s housing markets.

Re/Max examined 12 major centres and found that luxury sales have surged in close to two-thirds of housing markets between January 1 and April 30 of this year, compared to the same period in 2010.

In terms of percentage increases over the four-month period, Metro Vancouver – where foreign investment has also played a major role – lead the way with a 118-per-cent increase, from 343 $2 million-plus homes sold in 2010 to 747 $2 million-plus homes sold in 2011.

That was followed by Ottawa (59 per cent), Calgary (51 per cent), Halifax-Dartmouth (27 per cent), Winnipeg (24 per cent), Hamilton-Burlington (13 per cent) and Greater Toronto (nine per cent).

Six of the seven major cities – except Calgary – are poised to set new records in top-end activity by year-end.

Price points were lower in the other markets, with a luxury home in Winnipeg, for example, considered anything over $500,000.

“Greater Vancouver’s luxury market continues to show unprecedented strength, with the number of sales over $2 million more than doubling in the first four months of 2011,” the report said.

Despite the robust activity, housing values in the top end of the market have climbed a nominal two per cent, rising from $2,955,168 to $3,025,947 year-over-year. Days on market have fallen to 48 from 54 one year ago, although some properties are moving within days in coveted neighbourhoods. Purchasers from the Greater Vancouver Area and Mainland China are driving sales in the top-end, with demand strongest for properties in Vancouver’s Westside (447 sales), followed by West Vancouver (160), and Richmond (41).

“Detached properties remain the most popular type of housing [in Metro Vancouver], comprising the vast majority of luxury sales at 673 units. Condominiums are a very small percentage of the market, with 58 sales occurring over $2 million.”

The report said that while foreign investment has augmented sales activity in several Canadian markets, its influence was only significant in MetroVancouver. Most regions reported that locals were the primary drivers of demand for luxury homes.

The report suggested that there are several factors that position Canada as an attractive option for buying luxury homes, including that its real estate remains a bargain by international standards, given its ranking for quality of life, political and economic stability and the strength of its property laws.

“Three key factors – serious equity gains, stock market recovery, and improved economic performance – have been behind the push for luxury housing product across the country,” Michael Polzler, executive vice-president, Re/Max Ontario-Atlantic Canada, said in a statement. “The combination also continues to bolster the bottom line of high net worth individuals both nationally and globally. The impact of that wealth is being seen in the demand for all things luxury—from homes to cars, collectibles and fine wines.”

Re/Max noted that the number of millionaires is rising in Canada, and will continue to do so, and that residential holdings have increased among the wealthy.

Source: Brian Morton, Vancouver Sun

Vancouver Sun May 14, 2011

3605 EAST 27TH AVE, VANCOUVER

Type: 4-bedroom, 3-bathroom detached
Size: 2,231 sq. ft.
B.C. Assessment, 2011: $679,000
Listed for: $799,800
Sold for: $851,000
Sold on: March 27
Days on market: 12
Listing agent: Richard Morrison at RE/ MAX City Realty
Buyers agent: Steven Lee at Royal Pacific Realty Corp.

The big sell: Listing agent Richard Morrison is seeing strong pressure from buyers’ demand spilling over from Richmond and Vancouver’s West Side into the detached housing market in East Vancouver. This 1977 Vancouver Special is in Renfrew Heights on a 33-by-110-square-foot lot and attracted so much interest that a bidding war resulted, with the winning offer coming in at $52,000 over the list price. The home has three bedrooms on the main floor and a one-bedroom suite below with a separate entry. As well, it has a mix of hardwood and carpet, a fireplace on each floor, a master ensuite with a walk-in closet, central air conditioning, a sundeck with views of mountains and downtown and a striking Japanesestyle garden. As with most Vancouver Specials, the rooms are spacious.

UPGRADES AND ACCESSIBILITY SELL FLEETWOOD HOME

15777 95A Avenue, Surrey
Type: 3-bedroom, 2-bathroom detached
Size: 1,939 sq. ft.
B.C. Assessment, 2011: $426,900
Listed for: $474,900
Sold for: $460,000
Sold on: March 21
Days on market: 7
Listing agent: Jayson Sidhu and Manny Chehil at Sutton Group -West Coast Realty
Buyers agent: Bill W. Kwan at Homeland Realty

The big sell: This centrally located residence was built in 1981 and benefits from the newly expanded 96 Avenue, which improves accessibility into the region. According to listing agent Jayson Sidhu, the home had pride of ownership throughout and had undergone many recent upgrades to the paint, carpet, appliances and hot water tank. The driveway had been repaved and widened to accommodate double parking and there is an additional parking pad that can easily fit an RV. A large deck overlooks the rear garden, which is enclosed by a custombuilt wood cedar fence. The basement is unfinished and at 800 square feet provides a blank canvas for the buyers. Fleetwood is eponymously named after Lance Corporal Arthur Thomas (Tom) Fleetwood – a resident of the area who died in the First World War in 1917.

HOME WITH MANY NEW FEATURES SNAPPED UP IN THREE DAYS

9 -1350 West 6th Avenue, Vancouver
Type: 1-bedroom, 1-bathroom apartment
Size: 804 sq. ft.
B.C. Assessment, 2011: $350,000
Listed for: $449,900
Sold for: $449,000
Sold on: March 20
Days on market: 3
Listing agent: Maria Senajova at RE/MAX Crest Realty Westside
Buyers agent: Minna Seppanen at RE/MAX Crest Realty Westside

The big sell: Selling a home in three days is no mean feat, but this onebedroom-plus-den apartment in Fairview Slope’s Pepper Ridge complex had been redesigned. The entire building, constructed in 1987, was fully rainscreened in 2008. The private entry leads upstairs to a unit where everything is new – the kitchen and all the appliances, the bathroom with double sinks, cabinetry, refinished hardwood floors, a re-faced wood-burning fireplace, wiring, plumbing, hot water tank and washer/dryer. Providing further appeal were the 47-inch HD television and office furniture included in the sale. A covered balcony provides views of the city and mountains. The home is on a quiet section of West 6 Avenue close to South Granville shops.

LUXURY WHISTLER HOME OFFERS PLENTY OF SPACE TO ENTERTAIN

3426 Blueberry Drive, Whistler
Type: 4-bedroom, 6-bathroom detached
Size: 3,493 sq. ft.
B.C. Assessment, 2011: $3.176 million
Listed for: $3.5 million
Sold for: $2.6 million
Sold on: March 31
Days on market: 243
Listing agent: Marshall Viner at Sutton Group – West Coast Realty
Buyers agent: Ursula Morel at Sea to Sky Premier Properties

The big sell: You know a house is special when the master ensuite bathroom includes a steam shower, Jacuzzi tub and fireplace. This luxurious three-level home in the exclusive Blueberry Hill neighbourhood is a quintessential Whistler property, sheltered amid tall pine trees with an exterior that consists of a mix of wood and stone. It has breathtaking panoramic views that encompass both Whistler and Blackcomb mountains, a large deck off the living room, vaulted ceilings, dark wood floors, a media room, spacious chef’s kitchen, hot tub, family room and a two-car garage to house all those toys. This is a property that offers lots of room for entertaining and relaxing with family and friends.

For the full story, please click on Real estate sales in Vancouver, Surrey and Whistler.

Most Vancouverites who recently purchased or plan to buy a condo say they’d prefer a house if they had more money.

That’s the finding of the TD Canada Trust Condo Poll, which found that 64 per cent of Vancouverites, versus 46 per cent of Canadians, cited affordability of condos is a big attraction.

That was also true for respondents nationally under 35, with 62 per cent liking the affordability of condos, versus 46 per cent of other age groups.

According to the poll, which was released Tuesday, Vancouverites were also more likely than those surveyed in other cities to consider buying a condo with a friend to make it more affordable.

However, condos are also more likely to be seen by Vancouver residents as a stepping stone, with many planning to move up to a house in the future.

According to the survey, half of Vancouver respondents expect to live in their condo for three years or less (18 per cent) or four to six years (32 per cent).

Nationally, 22 per cent of those under 35 said they don’t plan to spend more than three years in a condo, while 45 per cent plan to move after four to six years.

However, it was a different story with those over 50, who say condos fit into their plans to downsize their home. As well, 31 per cent of those over 50 nationally said they don’t plan to move again from their condo and 53 per cent plan to spend more than $10,000 on upgrades (compared to just 15 per cent under 35).

“Moving to a smaller, less expensive home can free up money to allow pre-retirees to make some upgrades and enjoy a bit more luxury in their space,” Barry Rathburn, TD Canada Trust’s manager, residential mortgages, said in a statement.

“It’s especially important for those who are selling their home to downsize as part of their retirement strategy to make a budget for any upgrades and stick to it.”

The poll found that 98 per cent of Vancouver residents named good building security as the most important feature to look for in a condominium.

As well, 96 per cent said low condo fees was the second most popular feature, with 84 per cent saying they would not pay more than $400 a month n condo fees.

Energy efficient buildings also ranked high.

The online survey of 806 people in Vancouver, Calgary, Toronto and Montreal was conducted from March 25 to April 11 by Environics Research Group.

Respondents had either bought a condo in the past 24 months, intend to buy a condo in the next 24 months, or considered a condo when shopping for a home.

Source: Brian Morton, Vancouver Sun

The Canadian Real Estate Association has been adjusting its forecast for 2011 as economic circumstances warrant, and on Monday took another crack at the numbers.

Its first prediction was made in February, 2010, when it said prices would fall 1.5 per cent as sales fell 7.1 per cent.

Monday’s numbers were rosier, as stronger than expected sales across the country and high prices in B.C. caused the trade association to amend its outlook to a 1.3 per cent decline in sales and a 4 per cent gain in prices.

Here’s how it got there:

Initial forecast for 2011, February 2010

Sales: -7.1 per cent

Prices: -1.5 per cent

“Interest rate increases will contribute to weaker national sales activity in 2011.”

June, 2010 forecast for 2011

Sales: -8.5 per cent

Prices: -2.2 per cent

“While sales activity is unfolding as expected in Ontario, the decline in affordability in British Columbia impacted sales in the province during the first quarter. Additionally, changes to mortgage regulations announced in February are expected to marginally impact activity.”

July 2010 forecast for 2011

Sales: -7.3 per cent

Prices: 0.9 per cent

“Weaker than anticipated sales activity during the crucial spring home buying season in Canada’s four most active provincial markets prompted the revision. The decline is consistent with the exhaustion of pent-up demand from deferred purchases during the economic recession, and sales having been pulled forward into early 2010 due to changes in mortgage regulations.”

November, 2010

Sales: -9 per cent

Prices: -0.8 per cent

“Sales activity in the third quarter of 2010 began on a weak footing, but gained traction as the quarter progressed. Improving momentum for home sales activity suggests the resale housing market is stabilizing, but weaker than expected third quarter activity has reduced CREA’s annual forecast.”

February, 2011 forecast for 2011

Sales: -1.6 per cent

Prices: 1.3 per cent

“The upward revision to CREA’s forecast for 2011 reflects recent improvements in the consensus economic outlook and a further expected improvement in consumer confidence.”

May 9 forecast for 2011

Sales: -1.3 per cent

Prices: 4 per cent

“Although sales activity in the first quarter of 2011 came in largely as expected, multimillion dollar property sales in Greater Vancouver have surged unexpectedly. These sales have upwardly skewed average sale prices for the province and nationally, prompting the average price forecast to be revised higher.”

Source: Steve Ladurantaye, Financial Post

Vancouver Sun April 30, 2011

4657 Victory Street, Burnaby

Type: 3-bedroom, 1-bathroom detached
Size: 1,021 sq. ft.
B.C. Assessment, 2011: $691,300
Listed for: $788,000
Sold for: $868,800
Sold on: March 8
Days on market: 6
Listing agent: Leslie Gray at Sutton Group – West Coast Realty
Buyers agent: Bonney Bao at Royal Pacific Realty (Kingsway)

The big sell: This 1935 bungalow has numerous pluses: the living space is on one level, the rooms are spacious and the property is in a central location with Metrotown, the SkyTrain, Crystal Mall and schools and parks within walking distance. Other attractions come in the form of the quiet neighbourhood, the treed outlook and the 60-by-106-foot south-facing flat lot that could provide future development possibilities. All this generated seven offers, with the winning bid coming in at more than $80,000 over the asking price. According to listing agent Leslie Gray, South Burnaby is fast becoming a serious contender for those buyers who have been priced out of nearby Richmond.

16316 92nd Avenue, Surrey

Type: 8-bedroom, 7-bathrooms, detached
Size: 5,403 sq. ft.
B.C. Assessment, 2011: $936,000
Listed for: $970,000
Sold for: $948,000
Sold on: March 16
Days on market: 69
Listing agent: Dennis Fung at Homelife Benchmark Realty
Buyers agent: Suki Bahi at Sutton Group – West Coast Realty

The big sell: Everything about this property is large, from the 12,414-square-foot lot to the twostorey family room. In fact, this home features plenty of room to fill any family’s requirements. Built in 2006 in Surrey’s Fleetwood/Tynehead neighbourhood, the house boasts eight bedrooms and six full bathrooms over three levels. The result? A flexible floor plan that includes a guest suite on the main floor, a gourmet kitchen with butler’s pantry and spice kitchen, a master suite with private deck that showcases the mountain and valley views, two additional spacious bedrooms with ensuites, and a large den. As well, the fully finished basement comprises a games room, hobby room, further bedrooms and a 23-by-18-foot recreation room. There is parking for six vehicles and the southern-exposed back yard has a deck.

#1004 -1616 Bayshore Drive, Vancouver

Type: 2-bedroom, 2-bathroom apartment
Size: 1,257 sq. ft.
B.C. Assessment, 2011: $930,000
Listed for: $999,900
Sold for: $990,000
Sold on: March 12
Days on market: 2
Listing agent: Holly Wood at RE/MAX Masters Realty
Buyers agent: Thomas Spencer at Royal Pacific Realty Corp.

The big sell: The story of the sale of this Coal Harbour condo would be a compelling tale for those who believe fate plays a hand in the direction our lives take. The buyers happened to walk past listing realtor Holly Wood’s agents’ open house and found themselves looking at exactly the type of property that they had been searching for. The Bayshore Gardens waterfront home has oak hardwood flooring, crown moulding and floor-to-ceiling windows framing the spectacular westerly views of the marina, Stanley Park and the seawall. The kitchen features a Sub-Zero fridge and wine bar, Bosch gas cooktop and dishwasher, and two eating areas. The master ensuite has a double sink with marble countertop, a soaker tub and separate shower with Kohler fixtures and heated floors. The building has 24-hour concierge, a gym, sauna, and meeting room.

1142 3rd Avenue, Fernie

Type: 5-bedroom, 3-bathroom detached
Size: 3,886 sq. ft.
B.C. Assessment, 2011: $644,000
Listed for: $544,500
Sold for: $518,000
Sold on: March 20
Days on market: 279
Listing agent: Candace Grey at Royal LePage East Kootenay Realty
Buyers agent: Marilyn Brock at Century 21 Maximum Realty

The big sell: Central to amenities and schools, this five-bedroom property is in the north end of downtown Fernie.
The home was custom built in 1997 and has more than 2,000 square feet on the main level and 1,800 square feet on the lower. The primary floor features a sunroom with beautiful mountain views, striking dark hardwood floors and trim, a family room off the kitchen area, solid oak cabinetry, three bedrooms and two bathrooms, and a rarity in most homes: an elevator that connects both levels. The finished basement -it could double as an in-law or guest suite -has a large recreation room, further bedrooms, a kitchen, abundant storage space and radiant heat. The exterior comprises a single attached garage and the property sits on a 60-by-120-foot lot.

For the full story, please click on Real estate sales in Burnaby, Surrey, Vancouver and Fernie.

Metro Vancouver home sales reached 3,225 in April, an 8.2-per-cent drop from April 2010 and a 21-per-cent decline from March 2011.

According to the Real Estate Board of Greater Vancouver, the numbers reflect a “solid” month of sales following the near-record pace in the two previous months.

“While it continues to be a seller’s market in Greater Vancouver, last month’s activity brought greater balance between supply and demand in the overall marketplace,” REBGV president Rosario Setticasi said in a statement. “The year-over-year decline in April sales can be attributed to a less active condominium market, as there were more detached and townhome sales this April compared to last year.”

In individual markets, the REBGV survey concluded that Richmond saw the sharpest benchmark price increase over the past year for single detached homes (18.5 per cent to $1.08 million), while Squamish saw the sharpest decline over the year (down 8.6 per cent to $447,000).

The numbers were the same over three years, with Richmond experiencing a 40.9-per-cent increase in prices during that period, while Squamish recorded a 24.5-per-cent decrease in prices over three years.

Vancouver West had the highest benchmark price in April ($1.97 million), while the average benchmark price for a detached home in Metro Vancouver stood at $879,000.

The REBGV survey also noted that new listings totalled 5,847 units in April, a 23.5-per-cent decline compared to April 2010 when 7,648 properties were listed for sale – a record for April. April’s listings were also 14 per cent lower than March 2011.

At 14,187, the total number of residential property listings increased 8.2 per cent in April compared to last month and 10 per cent less from April 2010.

“There’s considerable variation in activity within the communities in our region,” Setticasi added. “This is causing home price trends to differ depending on the area.”

The benchmark price for all residential properties in Metro Vancouver increased five per cent over the past year to $622,991 in April 2011 from $593,419 in April 2010.

Source: Brian Morton, Vancouver Sun

While plenty of individuals live from pay-cheque to pay-cheque, most consumers know they should be saving money and reducing debt. The recession has drummed that concept into everyone’s head as people have watched their neighbours and friends lose jobs and sometimes their home.

Many people say that money worries keep them awake at night, but that doesn’t necessarily translate to imminent bankruptcy. How do you know when you are truly teetering on the edge of a financial disaster versus simply needing to do a little belt-tightening?

Here are nine signs that indicate you are heading for trouble and may be unable to pay your mortgage in upcoming months:

1. Late Fees

If you missed a payment or let your bill go past due because you didn’t have the money to pay your mortgage or another bill on time, you need to reevaluate your budget. Not only does this indicate an imbalance between your income and expenditures, but it will also ruin your credit score, potentially causing your creditors to increase your interest rate.

2. You Can’t Pay All of Your Bills

Every month, you are forced to decide which bills to pay and which bills to ignore. A lot of people opt to pay their credit card bill to stop harassment from the credit card company and to make sure they have available credit. But it is far more important to pay the bills that protect your home first. Always pay your mortgage first so that you will have a place to live. Next, pay for your car so that you can get to work and keep your job.

3. Making Minimum Payments on Credit Cards

In your mind, paying the minimum due on each bill may mean you are keeping up with your financial commitments, but financial experts know that minimum-only payments are a key indicator of financial distress. While this may mean that you carry too much debt, this also means that all your income is barely covering your spending. Take a careful look at your mortgage payment, other debts and your income to get back on track. Paying only the minimum on credit cards will extend your debt for years and amass expensive interest payments.

4. No Emergency Savings

While amassing six to 12 months of funds to cover you expenses, as many financial planners now recommend, may be a monumental task, every homeowner should have at least one month’s worth of expenses in the bank. At the very least, you need to have enough money in a savings account or a money market fund to pay your mortgage for one month if your income drops or disappears. If you cannot save that much money you need to seriously evaluate your overall household budget.

5. You Can’t Afford Maintenance

Your home needs to be painted and your dishwasher broke two months ago. If you are ignoring basic maintenance because you cannot afford to buy paint or call a repairman, this is a significant indication that you are in financial trouble. Not only does this show that you don’t have any emergency savings or a home maintenance budget, but this will also reduce the value of your home.

6. Reduced Income

Money is already tight and now your work hours have been reduced or you have been laid off. If meeting your monthly budget depends on every dime you earn, then even a small reduction in income can be a disaster. Search for a new job or a second job and, at the same time, start slashing your budget as much as you can.

7. Using Credit or Cash Advances to Pay Bills

You are using your credit cards or, even worse, cash advances on credit cards to pay other bills such as a utility bill or to buy groceries or just to have cash in your pocket. This is a strong indication that your spending is outpacing your income and it is extremely expensive. You need to put yourself on a debt management program or perhaps meet with a credit counselor to straighten out your finances.

8. Using Your Retirement Fund

You have borrowed money from your retirement account for your mortgage payment or other debt. This could seriously jeopardize your future financial security.

9. You’re Maxed Out

One or more of your credit card balances has reached or, worse, gone over the limit. If you are transferring your balances to new accounts in order to avoid paying the debt, this is a sign of a financial imbalance. If you are applying for new credit cards because your other cards have reached their limit, you are in serious danger of a financial meltdown. While you may be making your mortgage payments just fine, if you cannot control your use of credit cards it can be an indication that housing payments are too high.

While these financial woes can mean that you cannot afford your home, they may also be a sign that your spending is out of control. For most people, the mortgage payment is the largest monthly bill, so they often assume that the size of their mortgage is the problem. If your housing payment fits into that budget but you are having difficulty making your payment, then the issue may be that you have taken on too much other debt. Whether the problem is your mortgage or your other debt, you need to find a way to reduce your spending and/or boost your income before the situation gets worse.

The Bottom Line

Handling financial problems is never easy, but the first step is always to know what you owe. Solutions can only become clear once you have every bill written down with the amount owed, the monthly payment and the interest rate you are being charged. Pencil and paper work just fine, or you can create a spreadsheet or invest in some personal finance software. The important thing is to know where you stand so you can create a plan that will get your money under control.

Source: Michele Lerner, Investopedia.com

You walk into the open house, take one look and say to yourself: This is it. It’s the house I have to live in. Where do I pay? A bidding war? I’m in.

Over my years of buying houses, I never bought one that did not have that frisson moment, that thrill of finding a place so suited to my wants. Indeed, I have in the past decided that I wanted to buy a house in what seems, in retrospect, to be nanoseconds. (By contrast, I’ve taken weeks to decide on the right pair of shoes.)

It is no way to make an “investment,” to be sure. But, as I’ve previously discussed in this space, buying a house is perhaps the most uninvestment-like of investments.

Just about anyone who’s purchased a property or thought about purchasing knows that it is much about gut-feel, in which the senses can conspire to trump sense.

Now, as the major real estate selling season gets under way, along comes a survey commissioned by BMO Bank of Montreal to give statistical weight to the notion that intuition carries a particularly heavy weight in the house-buying process.

The survey by Leger Marketing found that more than two-thirds of Canadians cited a “good feeling” toward the property as a reason to buy. Meantime, though, good sense is not thrown out of that gorgeous bay window and into those manicured flower beds. More than 90% of house-hunters value affordability and location over resale value.

So, the axiom that there are three important things in real estate – location, location and location – might reasonably be replaced by the Three Ps: Price, place and personality.

Nevertheless, that resale value is not a big concern to these surveyed house-hunters – people between 25 and 45 who plan to buy a home within two years – is a telling sign of the real estate times.

With some dips here and there, Canadian house prices have been rising strongly for more than a decade. Indeed, even the recession created just a downward blip in the chart of ever-growing values, with the average national price rising 8.9% last month from the previous March (but just 4.3% excluding Vancouver).

As a result, most of the house-hunters surveyed might never have been aware of a housing market that was not rising. I suspect many in this 25-to-45 demographic believe house prices basically keep going up forever, that though they downplay resale value in the survey, the expectation for solid gains is, well, a given. (Any significant drop in prices would surely shake that belief.)

In recent times, investors have been asked if they are stocks or bonds. If you’re a stock, you are prepared to take on more investment risk. If you’re a bond, you are not.

Perhaps, though, many people are probably houses when it comes to investing. A home is both partly a stock and a bond – and somehow neither.

It is a bond because over the long term it will likely produce modest returns through the enforced savings required by paying down the mortgage. It is a stock because the gains could be outsized if the investor were to buy and sell at propitious entry and exit points for market-timing gains.

And it is neither because it is an “investment” with many moving parts and frictional costs. You don’t live in a stock or a bond, but when the house leaks, it costs money and cuts into the investment. Meantime, the costs associated with buying and selling a property are becoming more daunting in many jurisdictions, with some observers reckoning that a house is often a mediocre investment at best.

But most young first-time buyers and mover-uppers are not fazed by such commentary. Home ownership is a cornerstone of our culture, with 70% of the population owning properties and many of the other 30% looking to join the majority.

And the real estate industry has become far more adept at marketing and selling than in the days decades ago when I was in the market. Today, houses are often professionally “staged” to produce that frisson moment. Prices are sometimes set artificially low to produce that exciting bidding war and that extra frisson of “winning.”

A house, it is said, is not a home. And a home is not strictly an investment. But does a stock have granite counters? Does a bond have stainless steel appliances?

Source: William Hanley, Financial Post