The Altario Quarterly (April, 2014)

 Click HERE to read the entire April, 2014 newsletter, including graphs

 

Rent vs. Own

When my wife and I moved to Camrose in October, 2013, we decided we would rent.  We did this for a number of reasons, the primary ones being maximizing short-term flexibility and getting off the home-maintenance treadmill.  Essentially, we’re at a point in our lives where we want to keep all family and business options open and renting is the best way of doing that.  Moreover, I’m not a big fan of spending my free time doing home improvements, as there are about 100 other things I’d rather be doing, including volunteering, travelling, camping in our RV, playing music, watching football, and watching and coaching basketball.  There are just as many other things on which Michele and I would rather spend our money, too. 

It’s been interesting watching people’s responses when we tell them about our decision.  For many people, home ownership is the Great Canadian Dream – it’s almost like an existential holy grail and I respect that.  However, everyone’s values and priorities are different and there are many personal and economic situations where home ownership makes much more sense than renting, but not all.  The decision to own a home (or the building in which you have your business) should be made on the basis of whether it’s the right strategic choice, given the particular circumstances.   
 

I don’t see either my home landlord or my office landlord (and I’ve been a landlord myself) as people who are getting rich at my expense; I see them as strategic partners (and good ones at that, in my case) who are helping me accomplish the goals I have for my family and my business at this stage of my life and my career.  I also see them as the people who have the expertise to come fix things when they don’t work, and I can’t begin to say how much I appreciate that.  At least they know what they’re doing! 
 

Right now, we’re simply more interested in doing than in having and renting therefore makes perfect sense for us.  My wife and I are enjoying a sense of freedom from obligation that we haven’t experienced in a long time.  Could that change?  Absolutely, but only if the time and circumstances are right.

 

 

	Owning	Renting
Pro	·       can sell for gain in future if values rise over period of ownership ·       gains will be leveraged in a rising market if purchased with mortgage ·       some of the costs of ownership (principal & interest) cease when the mortgage is retired ·       gains on the sale of a principal residence in Canada are tax-free ·       sense of ownership & control; greater sense of a stake in the community ·       can draw on increased equity, if present, to finance renovations or other expenses	·       no worries about what the property value will be when it’s time to sell (a month’s notice is all that’s usually required) ·       not responsible for covering unforeseen occasional repair & maintenance costs ·       no worries about selling expenses or possible tax consequences when moving out ·       no risk of loss, particularly for those who might stay for only a short time ·       less expensive than ownership at certain points in the real estate cycle ·       more convenient and flexible for those who travel for extended periods
Con	·       responsibility for dealing with all costs, particularly repairs and ongoing maintenance ·       shorter duration of residency increases the risk of having to sell at a loss, particularly in light of selling expenses ·       the vast majority of early mortgage payments go toward interest rather than equity ·       subject to rising costs in terms of repairs, maintenance, insurance, and interest rates ·       losses will be leveraged in a falling market if purchased with mortgage	·       at the mercy of the rental market:  subject to rising rents as a result of a changing market or increased expenses passed on by the landlord ·       no sense of ownership or control; less of a stake in the community ·       no opportunity to build up equity in an asset that has a good chance of appreciating in value over the long term ·        there is no point in the rental process when rent ceases to be paid ·       cannot borrow against any equity

 

The Camrose Housing Market in Q1 2014

It seems that the supply-demand factors outlined in our last newsletter continue to manifest themselves by way of rising overall price levels.  Gains reflected in the rolling 12-month average continued in Q1 2014, with median prices in the last two quarters also trending upward as well.  Q1 2014 once again shows the highest rolling 12-month average ever, with a price of $280,923, that my tracking has ever shown.  This is up from a record-setting $277,822 in Q4 2013; it represents a 1.1% quarter-over-quarter increase and a 6.6% year-over-year increase.

Highlights

 

·       The Q1 2014 number of sales, at 71, is the highest for a Q1 since Q1 2008, when there were 77 sales.

 

·       The Q1 2014 median price of $271,000 is up from Q4 2013 ($265,000) and from Q1 2013 ($259,500).

·       There were 39 sales of over $400,000 during the past 12 months, vs. 35 in the previous 12-month period.  This continues to suggest an increasing overall price level and continued confidence in the economy by people with means.