Real estate market hoping for return of consumer confidence

Duane Hicks

Given the state of the economy and uncertainty over the future of AbitibiBowater and the local mill, consumers have been extra cautious in recent years and the real estate market here has seen a decline in activity.
But while property values and housing price have remained steady for the most part, local realtors are hoping the near future gets brighter and consumer confidence returns.
David Kircher of Tichborne’s Real Estate said there’s been a drop in sales for local real estate in the last few years—compounded by state of the economy and the uncertainty of the future of the local mill.
Prior to 2007, sales fluctuated by four-five percent year to year. But since then, sales have been going down steadily. Kircher estimated the volume of sales this year probably is down 35 percent from 2009.
“What’s happening is we don’t have the normal absorption rate, where property gets on the market, then it’s reabsorbed by new buyers,” he explained.
“The absorption rate has been reduced, so houses stay on the market longer, new houses come on the market, and the inventory is getting larger.”
It used to be that a house put up for sale in Fort Frances would take an average of 90 days to sell. Now it is normal for it to take 120-180 days, Kircher noted.
He said buyers are “holding their breath,” waiting to see what’s going to happen with the local mill and AbitibiBowater’s emergence from bankruptcy expected later this month.
Additional factors include the lasting effects of the financial crisis of late 2008 as well federal Finance minister Jim Flaherty’s 2009 budget, where he restricted some of the financing practices for the charter banks, mostly with regard to down payments and the fact people had to qualify for a five-year interest rate.
Dan Cousineau of Cousineau Real Estate here agreed sales numbers are down, but felt they are getting a little better.
“It’s definitely better than last year,” he remarked. “We live in a very resilient marketplace. We’ve had a lot of bad news in this town over the last few years, and the market hangs in there.
“It doesn’t fold,” he stressed. “It’s not doing anything magical, but it’s there.
“People’s property values, they can rest assured that their house maybe isn’t worth more than it was last year, but it’s probably not worth less,” Cousineau reiterated.
“It’s a resilient type of town, where it kind of holds itself together somehow. But hopefully, we’ll get some good news in the next month or so here from Abitibi.
“I think that will help a lot of people out—business people and, just, people.”
Cousineau noted that Abitibi going into bankruptcy protection last spring made people cautious, and rightfully so. But this caution affects people’s buying and selling habits.
“Obviously, when people are cautious, they don’t buy as much of everything,” he remarked. “They don’t buy things they don’t need.
“At the same time, if people are being cautious, they don’t necessarily sell because they can make do with what they have,” he added.
“A lot of the time people sell because they need more room, or they want to step up a little bit or they want to downsize.”
This same caution was reflected not only here and not only in real estate, but elsewhere and in other sectors, Cousineau noted.
While homes certainly have not been selling as often as they used to, Kircher said there’s no evidence prices have gone down because of it.
For the most part, owners aren’t prepared to discount their prices, he noted. “They would sooner extend the time horizon to sell their home, unless they are in some need or some duress,” he explained.
This indicates to him, at least from the seller’s perspective, that they have “confidence in the future.”
“Buyers are also exhibiting confidence because they are not trying to get significant discounts in their offers. They must also feel that the future will be okay,” added Kircher.
“That is the bottom line—economic uncertainty.”
Kircher said there continues to be a high demand and lack of supply of “starter homes,” which he classifies as 30- to 35-year-old bungalows in a good location with a double park garage and costing in the $135,000-$185,000 range.
“There is still more demand in that area than there is supply. That’s pretty consistent,” he noted.
Meanwhile, the demand structure for mid- to high-end homes remains about the same, but this demand tends to rely on new professionals coming into the community.
At the other end of the spectrum, Kircher conceded lakeshore property has been significantly affected by the economy.
There’s two distinct markets on Rainy Lake—water access only (predominantly U.S. buyers) and road access property (usually bought by residents of Rainy River District and northern Minnesota).
Kircher said the severe recession in the U.S., as well as the “thickening of the border,” has resulted in almost no demand for water access only properties, with the majority of the sales involving local buyers, not those from afar.
Road access properties have sold intermittently but prices have held, added Kircher.
Kircher said there’s also been an increase in the number of “power of sales” or foreclosures of residential properties in Fort Frances, adding there’s been almost one a month over the past year.
He’s never seen a trend like it here since he’s been in real estate.
Kircher chalked up the foreclosures as likely being a combination of the economy and the result of “the hazards of the lending guidelines which had been relaxed so much since [2000].”
Most of the properties were “entry level” ones.
One difference in the local real estate market within the past year is now there are only two major players—Cousineau and Tichborne’s—after Alan and Anne Zucchiatti retired and closed the doors at Rainy Lake Realty.
Both Cousineau and Kircher said that based on what’s happening in the market, it’s hard to say how much their business has increased because of it. But Kircher noted less competition is not always a good thing.
“My concern is, not only is competition good for the consumer, competition is good for the business,” he remarked. “It keeps everyone sharp, on their toes, doing a good job.
“My concern would be that with the lack of competition, we start sitting on our laurels, and I am hopeful, and watchful, that doesn’t happen,” Kircher added.