Real Estate Blog for Buyers & Sellers
Your Lower Mainland and BC REALTOR® for home, investment & life!
Michele Talks Interest Rates and is Joined by Commercial Agent Kevin Rolland
June 21, 2022 | Posted by: Michele Cummins
Warning! This is a digitally automated transcript of the show so there will be mistakes throughout - including the spelling of Michele's name!
Curtis Pope:
It's time for the company's Real Estate Group show with local realtor Rockstar Michelle Cummings and myself Curtis. Bob. Good morning, Michelle.
Michele Cummins - PREC:
Good morning Curtis Pope. How are you?
Curtis Pope:
I'm doing well. I cannot complain things going well for you.
Michele Cummins - PREC:
Exelon pays I like to say. Very nice. And it is June 18. Can you believe that we have summer? It's summer it should be.
Curtis Pope:
Well, it's summer by name and only a name but you know, hey, at least it's not snowing.
Michele Cummins - PREC:
Exactly. You know, you got to look at the positive things in life.
Curtis Pope:
Always gotta find that silver lining. I used to have a boss who called me silver lining boy because I could find a positive and just about anything. He's like, alright, Silver Lining boys settled down.
Michele Cummins - PREC:
That is a cool nickname. That is this another ones I can think of?
Curtis Pope:
Yeah, not. Not the stuff that you call me off air. No, that's that's a whole story.
Michele Cummins - PREC:
So this weekend is Father's Day weekend. And we have a special guest, though. today. Kevin Rollins, who is a commercial realtor here locally with us and who's on the line. Hi, Kevin. Oh, maybe it's an ongoing with us? Not yet later on. But, Curtis, what are you doing this Father's Day weekend?
Curtis Pope:
You know, I'm not 100% Sure. To be quite honest. I mean, I'm sure the kids will want to do something with me. I don't know. But I mean, all today, actually. You know, Cody, the middle guy. It's his convocation for graduation. I can't believe it. But that kid has somehow managed to graduate. Wow,
Michele Cummins - PREC:
blink, you blink. And it's like, he's an adult. Yeah. And,
Curtis Pope:
you know, because he's my kid in so many ways. I you know, I didn't think you know, wasn't, it was not a given that he was going to ever graduate. So I'm glad that he has.
Michele Cummins - PREC:
Oh, my goodness, you know, tell him
Curtis Pope:
all the time.
Michele Cummins - PREC:
You know, it is hilarious. But you know, I did not going to be able to be with my father this weekend. So I'm very happy that your kids get to be with you. And you get to be with them, where they want to be with you. And hopefully you get the best breakfast on Sunday tomorrow that you can ever ask for.
Curtis Pope:
Well, I can guarantee you I'm going to be the one who has to make it so it will be a good breakfast.
Michele Cummins - PREC:
Oh my goodness. My kids
Curtis Pope:
haven't made me breakfast for Father's Day and in yours. Oh my goodness. And that's fine. Because the fact of the matter is, you know, they're still gonna you know, Cody. Cody can cook a few things. Cassidy is not a bad little cook, but she's lazy. And Dylan, you know, get him to cook for somebody other than just himself. Good luck. Well,
Michele Cummins - PREC:
they need a talking to know it not just frozen food in the oven. You know, one day it'll happen. It should
Curtis Pope:
well we lost the Cody Cody apparently only knows how to make like three things he makes a really good pass to like with a really good meat sauce that he does pretty much from you know, from scratch, which is really good. And he also can make steak really good. And then he can make French toast and that's about it.
Unknown:
So Lisha not waffle. No, no, no, I
Curtis Pope:
have to get the waffle maker. Oh, that's that's a little bit too advanced for him.
Michele Cummins - PREC:
Or go to the wonderful, wonderful pancake and waffle place of IHOP and Langley that my sister and brother in law owns
Curtis Pope:
that is a good option. Actually, that is a very good option.
Michele Cummins - PREC:
They make the best breakfast has ever they do so. Okay. So also property tax time. You know what I'm looking at my desk, and I've got so many property, different municipalities, all these property taxes, just staring me in the face to pay the property taxes. So sorry to put that spin on this weekend for your thoughts. Oh my gosh, it's property tax time. And we got to get them paid. And they're just telling me every day I see them pay me pay me. I keep on going I'm too busy to pay you. But it's gonna have to happen.
Curtis Pope:
Not only do you have to pay him but you also if you want to if you want to get your grants, you got to apply for those right before July something.
Michele Cummins - PREC:
Yes. And they're important to apply for if you're a homeowner, if you're over the age of I believe it's 55 or 65. You know, there's some grants out there for you. So apply for them and make sure you get it. So I wanted to talk about interest rate hikes, interest rate hikes, there's moving fast, it's happening so fast. It's a whirlwind and we're all seeing the reality of it right now. And for many, it's scary, but really it's just going into a balanced market, which we typically have and so we've just been really spoiled lately with the market the way it is. So you gotta just kind of put on your big boy pants and prepare for a balanced market and how to do that. And and make sure that you're able to, you know have quality of life and not be overrun with mortgage payments and this and that. So I wanted to actually mention our first segment here are talking about actually from better dwelling an article came out and I thought it was very important to mention on our show about our local real estate here in the Fraser Valley, but overall in Canada, too. And then on our second segment, we have guest, Kevin Walland. And he is on the other line right now and we will introduce him and have a great chat about commercial real estate for our local areas coming up so without further ado, the actual caption of this article is most Canadian real estate gains will be wiped out starting this year and this is from Oxford, econ. So Canadian real estate prices have already begun to see growth slow, but this is just the beginning. They say Oxford Economics is reiterating its forecasts as factors line up to return to affordability. They see home prices falling by 24%, wiping out most of the gains made since the start of 2020. The declines are expected to begin this year and go right into 2020 for a slow but sustainable process. So Canadian real estate prices are forecast to fall, they say by 24%. And now we saw locally residential prices from February to March fall about new 10 11%. Then we saw from a March to April, we saw another slowdown of around seven 8%. And then the next month we saw around five to 6%. So it's like it started came off the hill pretty fast and slowing down but it is still coming down. And again more of a balanced market is what we're entering into this summer. So after cresting in late summer 50% above their pre pandemic level, they forecast home prices will decline that much by 2024. And that's from still are Tony stylo. And that's the firm's director of economics. So the forecast calls for a significant drop and not enough to wipe out all gains since 2020. So it's not all doom and gloom, home prices have increased roughly 50%. And this is again is overall Canada in our area we saw like 100% Like literally in the last couple years. So since the start of the pandemic, they're saying about 50% for Canada. So math challenge, folks may think that's just half of the increase made however, the rate of decline applies to a much larger number a 24% price dropped by 2024 would leave a gain of about 14 points since 2020. So that's roughly 3.3% compound annual growth over the period not a bad increased by any means. But not the kind of growth many investors expect. Even with the price drop, affordability won't be restored in any capacity. yet. We'll circle back to the point later on. But Canadian real estate prices you know, it absolutely can possibly fall by up to 40%, though, if delayed. So this is what they say that no doubt policymakers are already being pressured to prevent any price drops and wealth effect is when people spend more money because they feel rich. rising home prices are believed to have boosted spending this way. concerns that falling home prices may reduce consumption are valid. However, capital economics doesn't see it being as significant as many assume. Lower House prices will likely have a modest negative effect on consumption. But they don't expect it will be result in a recession or undue stress on the financial system is what he explained. He says should the price boom continue. unabated risks grow have a larger crash with dire economic consequences. So in addition, market inefficiency is more likely to reduce consumption more than reduced wealth effects. high inflation erodes consumption by forcing consumers to pay more for less goods. Younger prime consumers are also dedicating more of their income to shelter. This diverged from consumption and reallocate capital to those less likely to spend. It's sort of the reverse Robin Hood scenario. Longer economic inefficiencies also require much greater corrections to return to efficiency. They reiterated a warning that if home prices continue to rise, the fallout will be much worse. They dropped 40% and the risk of the financial crisis is what they previously stated. The outcome would be falling home prices sound bad, but pushing a market to its absolute failure is even worse. The sooner a market corrects the more quickly it becomes efficient so Canada won't be economically devastated by a real estate crash. It's unlikely that the Canadian economy would be devastated by the Home prices by following strong economic growth, a tight labor market and ideally stable inflation will help. Higher interest rates will cost high debt consumers more, but savings will help. So they, I would encourage anybody to check more out so that the fear is gone. And it's reality, and it's balanced. And so there is a housing affordability index that you can check out. And the index is point nine, two 1.1 is affordable range. And they forecast that if they if things aren't corrected, you know, it's going up to the 1.4 range. So got to get back into the more affordable range. So that is the article on better living. Hopefully, that gives a little insight and some encouragement to everyone. And yeah, so there's not sound a little better Curtis than kind of maybe what you're hearing more so in the media or the news, I should say,
Curtis Pope:
well, it gives us a better explanation of cause and effect and how it all plays out. Right. So I think that is, you know, important information to have because a lot of times yeah, you just you look at the headline, you know, the housing prices are gonna drop 40% And you're like, Oh, my home value, what am I gonna do, but when you realize that it's, you know, probably not going to be 40% It's going to be less than you realize how much homes have gone up in the last five, six years. Yeah, it kind of balances out.
Michele Cummins - PREC:
You got it and it's the magic of you know, hold as long as you can renew, reinvest re mortgage when when the rates are good, and you have that equity built in your property and all about timing and just and just being aware of the timing that you're in and doing the best you can with where you're at.
Curtis Pope:
And I'm very happy that I bought my house last year when interest rates were pretty much at rock bottom.
Michele Cummins - PREC:
Yeah.
Curtis Pope:
All right, well, we should probably take a quick break right now people want more information about what you do as a realtor where can they go? Michelle company.ca.
Michele Cummins - PREC:
See
Curtis Pope:
Real Estate Group show with Michelle Cummings and myself Curtis Pope. Now Michelle, you alluded to the fact we have a guest earlier but I figured now is probably the time for one of those world famous Michelle Cummings introductions.
Michele Cummins - PREC:
Oh, thank you, Curtis. Well, welcome Kevin rollin. Oh my goodness. We have a commercial agent here with us today, local here in our Fraser Valley area to lock areas Abbotsford mission Langley, you name it. He works at and he has as many years experience as I do. He's got over 18 years of experience living and working in our areas. So Kevin specializes in helping clients buy and sell and he knows what he's talking about. Whether it's industrial, whether it's business, whether it's leasing, whether it's land commercial, like he, uh, he just did a presentation the other day for a group that I'm part of, and it was such a fantastic presentation and explains all the Brownfields Greenfield's and everything that you would want to know, regarding commercial. So his background in the service industry, Kevin is has this unique edge over other commercial agents. So he is allowing him to provide outstanding customer service to all his clients and I just sold a co list with Kevin and he was an amazing agent to work with as a co listing agents. Amazing and we have another Colace that we will talk about later on. But his outstanding knowledge and judgment in the Fraser Valley market is is superb and he's got he's an expert in understanding fully the what commercial real estate needs your unique like my clients, his clients. He's a proven negotiator. I have witnessed that he consistently ranks among the leading agents in our area. He is dedicated to results. He has great communication skills. And he leverages an extensive network of his working relationships and vast knowledge of the local market and it's helped him become the leader that he is and he is an excellent he's got medallion award club status. He's got award with his home life brokerage that he's with. So I'm excited that I get to work with Kevin and I became a commercial member. Probably a few years after I became licensed I think Kevin pretty much right away gone into it as well. He was top Rookie of the Year for homelife in 2005. And so anyways, without talking more, let's hear from Kevin. Hi, Kevin.
Unknown:
I think for having me. Welcome.
Michele Cummins - PREC:
I don't think we've had a commercial agents on our show before. So welcome. And we haven't had a local agent on our show before.
Unknown:
Yes, when I get to be the first time, perfect, yes.
Michele Cummins - PREC:
And hopefully, hopefully laughs No. But we have a good relationship together and talking about our listing that we is coming up. It's not it hasn't hit yet. Holly tree for some guests. You want to? Let's talk about that.
Unknown:
Yeah, I think anyone that would be looking for a small business or expanding their their existing floral business, to turnkey operation. Definitely, I'm in the beautiful city of Agassi. So it's gonna be a great listing. But it's the the owner parts of the owner to retire. But it's a great listing great business. So
Michele Cummins - PREC:
for like 36 years, like long time, she has such goodwill. She's been running that business for a long time. And it's adorable. Oh, the location that the lease space that she's in is the cutest heritage home. So adorable. And the asking price is 60 69,999. Correct? Correct. Yeah, so that's, that's exciting. So we'll be we'll be sharing that more if you know, anybody who is an artist who loves just the customer relation, like I actually use that company for all my florist needs, I deliver flowers to my clients and any where she delivers, I always hire her to do that. And she's an artist, and I'm just thinking it would be so perfect for somebody who's got a college or you know, it's just such a great business to run and it's got this long term goodwill. It's amazing. Anyways, so I know some people the questions I have that maybe I wanted to talk about today is the different types of commercial like there's different types of commercial spaces. And some people might not know the terminology so did you want to talk about that for us?
Unknown:
Sure. I can cover off a few of those mean primarily have a few classifications one of them would be office which would be an office space, you know typical you'd see downtown Vancouver and the business districts in the Fraser Valley then you have your retail units which would be you know, anything from like a fast food outlet to the stores that you see along the Mall it's not those kind of spaces then you have industrial which would be your warehousing you know places that would be for manufacturing places the doors I mean that's those are the primary the two types and then there is also to me Dave cultural kind of sector to there's different kind of relazione nine deals with like, you know, going concern farms and there's development land as well. You know, people looking to purchase develop multifamily. Multifamily is another facet as well. So there's duplexes, triplex and fourplex Ave flexes. Anyway up to the video condoms and computers and properties like that. You need that's what's the primary the main the main main sections that I deal with?
Michele Cummins - PREC:
And it corrected those inventories pretty low. You were mentioning before and is that basically industrial? Or is that overall commercial spaces and businesses and, and give us some insight on that.
Unknown:
We definitely the industrial market, you mean, it's almost impossible to have a pine land. If it does, it's going in multiple offers and for for every time somebody cell decides to set the price record, you mean to basically putting stuff like that on the market now and just saying bring us offers. It's not even really a price. We need that to sell and crunch and probably, you know, the whole entire lower mainland and Fraser Valley. And they're not really making any more land, especially for industrial. So it's a real tight tight market. Meaning warehousing to you mean, if something's you see something's getting built, it's probably already sold or leased out. There's even multiple offers on some of these spaces. Commercial isn't as crazy as industrial, but it is still very busy. And again, it's a supply and demand. I think a lot of people thought some businesses were gonna close up and stuff during COVID. And unfortunately, some did. But also a lot of them got a pretty innovative and you actually expanded or increased their business, maybe through online sales and stuff. So and then that's for businesses. It's tough to gauge that because a lot of businesses are done off market. But you mean I think there's some businesses or some people probably have recently just said, Hey, we're going to retire. And then some people may be you know, they had tefcold return COVID They're thinking hey, Maybe Maybe we should be looking to do something else. Right?
Michele Cummins - PREC:
Yeah. Well, so does the commercial follow residential as far as prices, and increases in decreases in the flow?
Unknown:
You know, these are usually these seem to be different. But I can say that me personally over the last two years, I found that both are really, really busy. It both seemed to be kind of more along the supply and demand, right? There's more buyers and more people looking for commercial properties, and there was supply in the last month with you, if you want to say the last month has been a slowdown in residential, I haven't seen that as much in commercial, the interest rates probably won't affect it as much longer. I shouldn't say that yet. Because we don't know how high they're gonna go. But a lot of times the commercial person, they're already going to have to put more down than a typical homebuyer would. So you mean, sometimes these guys will have a little bit deeper pockets. So they're not financing as much as possibly as someone would be, like, you know, they're putting five or 10% down on the mortgage. So it's a little bit more insulated for this. But I mean, if they continue to go up, then I think you're gonna run into that that's the answer. If if the interest if the interest rates continue to go up, I think you're gonna run into people maybe looking to purchase a warehouse or commercial unit, that probably will back off because it's not going to cash flow at the end of the day, and they're not gonna be able to charge. You know, they can't double. They'd be realistic.
Michele Cummins - PREC:
That's what I wanted to talk with you next about is cap rates and ROI is and how you seen all the interest rates and the times and the prices? Change that for the end. Investor?
Unknown:
Yeah, you mean it's gonna be it's kind of a an evolving situation, it's going to be very interesting to see that it's such a rapid rise in interest rates. You know, I did talk to one of my investor clients today about buying an industrial warehouse, it's next door to one over one fields. Then we sat down, we figured out if he paid the aspects that they were that he was going to have to ask like $22 per month, base rent for an industrial warehouse, where typically that would have been about $14.
Michele Cummins - PREC:
I don't think that's much different than residential, the cost of carrying residential now and the way you have to charge for rent to there's Mary's that quite well, the same. Yeah, it's
Unknown:
going to be interesting, you know, because if people are buying places and they want to put them into the rental market, and people are always saying, Oh, well, the landlord's charging too much well, the landlord has to borrow to buy that property, whether it's residential or commercial. He's got to resorb the interest rates that's coming in and then he has to be able to cover his bills. So we always talk about affordable housing and affordable real estate but I mean, there's a problem right there right? I mean, they can only get to they have to be able to show that they can pay the mortgage or the banks are gonna lend them the money. Exactly.
Michele Cummins - PREC:
Well, I wanted to ask you, I've got a listing in another one in Agassi actually and but this one is a beautifully fully renovated house. But the house is like heritage it doesn't appear to status because they don't do that magazines but it's an amazing house that could be a perfect Museum. There's so much history it's called the hush alloga manner. And it also has a an oversized triple car garage with a one bedroom vaulted ceilings gorgeous. One of the prettiest gorgeous carriage houses I've seen. Use them out GM This place is amazing walkout basement two storey walkout basement house, and I'm wondering if maybe you can find somebody who might want to run it live there and run it as a business bed and breakfast or possibly museum because you can do that there with the zoning so it's over 13,000 square feet, Kevin and it is 1,700,000 is all in this place. Is like has everything AC everywhere. Everything is amazing, very low maintenance. So adorable. I'm going to send you information on it, but it's a 3000 square foot house and then the carriage house is another like 1000 square feet. It's huge. Again, amazing. And I have a realtor bonus. A really nice realtor bonus to give you so Yeah, bring me a buyer for that one. And then while I'm talking about new listings, then I also have one in Michigan and it's acreage, five acres to be exact berms road four bedroom, three bathroom house, completely private gated entry, and it has a carriage house over a double garage that's pretty much roughed in cuts the bathroom, bedroom but the kitchen isn't in yet. And that price is 1,350,000 and then another new listing that just hit yesterday the market is off Simon Street in Michigan is a 9000 square foot lot a three bedroom one bathroom house and it is beautiful OCP multifamily. You can do duplexes there if you want to right now. Oh my gosh, that one is on for 998 900 Brand new. So those are my new listings. And Kevin, I know bosses. You know, it's Father's Day weekend, but are you like to have anything planned for Father's Day week?
Unknown:
My parents live out of town so I'd probably like to see him this weekend. But I'm probably going to catch up on the following weekend. But I did recently we went to the Okanagan, so they have a view of Okanagan lake so don't feel too bad that
Michele Cummins - PREC:
fun. Well, I can't be with my father this weekend either. So I know how you feel. And our quote of the week this week is the heart of a father is a masterpiece of nature. And that's from Antolin privo. If I'm saying his last name, correct, Pebble,
Curtis Pope:
I'm gonna say you are because I don't know any better than you do.
Michele Cummins - PREC:
But it's a really nice quote. Hey,
Curtis Pope:
very nice quote for Father's Day. Very nice indeed. All right, Michelle, if people want more information about what you do as a realtor and see your listings and your open houses, and all that fun stuff, where can they go? They'll come in. And join us again next week when we will talk real estate in order to unlock your real estate potential on the show where real estate is maximized. Thanks for listening
If you missed last week's episode where we replay the episode of Michele and the Fearless Millionaire, please go take a listen! It's well worth it.