Cinderella - A Comparison Of A Fairy Tale With the Facts of Our Halifax Real Estate Market - ReMax Nova

We all grew up knowing Disney's version of the beloved Cinderella, a European folk tale. The love story of a pretty girl, down on her luck who meets a prince, falls in love, & lives happily ever after, right? Have you ever thought of the other story being told here? I am talking about the Real Estate story which does not have to be a Fairy Tale.

So you are probably now thinking that this Blogger is nuts.  Don't worry, I have no intention of ruining your childhood fascination with Disney or the Grimm fairy tales but I do plan to give you a new translation of it.


 

Think about how the story begins:

"Once upon a time, there was a widower who married a proud and haughty woman as his second wife. She had two daughters, who were equally vain and selfish. By his first wife, he'd had a beautiful young daughter, a girl of unparalleled goodness and sweet temper. The stepmother and her daughters forced the first daughter into servitude, where she was made to work day and night in menial chores. After the girl's chores were done for the day, she would retire to the barren and cold room given to her, and would curl up near the fireplace in an effort to stay warm. She would often arise covered in cinders, giving rise to the mocking nickname "Cinderella". Cinderella bore the abuse patiently and dared not tell her father, since his wife controlled him entirely."

Our heroine, 'Cinderella' is a renter. The 'widower' is the renter's bank account.  Cinderella's evil 'stepmother' is the landlord of Cinderella's apartment building.  The 2 mean 'stepsisters' are Cinderella's rent & loss of personal investment, growth & equity.  Just like Cinderella, a renter invests time, money & effort to take care of the landlord's investment for them by paying down the mortgage, paying the taxes, perhaps even the utilities, plus takes care of at least a portion of the upkeep of the property while the landlord's equity grows & multiplies.  What does the renter receive in return? A roof over their head & a dwindling bank account.  Of course I could draw further comparisons in regards to Cinderella's living conditions and apartment living with the poor conditions, mouse infestation, etc ( Yes! I rented some real slums in my day before I became a home owner ) but not all apartments are slums.  Some are gorgeous if you are able & willing to pay top dollar. Let's get back to our story & our comparison.

"One day, the Prince invited all the young ladies in the land to a ball, planning to choose a wife from amongst them. The two stepsisters gleefully planned their wardrobes for the ball, and taunted Cinderella by telling her that maids were not invited to the ball.  As the sisters departed to the ball, Cinderella cried in despair. Her Fairy Godmother magically appeared and immediately began to transform Cinderella from house servant to the young lady she was by birth, all in the effort to get Cinderella to the ball. She turned a pumpkin into a golden carriage, mice into horses, a rat into a coachman, and lizards into footmen. She then turned Cinderella's rags into a beautiful jewelled gown, complete with a delicate pair of glass slippers. The Godmother told her to enjoy the ball, but warned that she had to return before midnight, when the spells would be broken. "


 


The 'Prince' is a good comparison to an Open House or a home listed for sale.  He doesn't have one particular buyer picked out yet so he invites "all the young ladies in the land to a ball".  He attempts to swoon them all with the festivities & selected highlights being offered on this one occasion, " the ball " or the Open House with the hopes that he will choose a 'wife' = find a buyer for that particular home.  A Buyer's Real Estate Agent is the 'Fairy Godmother' of real estate.  Their role is to look after the buyer's best interests, to provide knowledge to a buyer so that they can make an informed decision, to offer them means of financing, suited to their needs, by providing them with contact information of respected mortgage brokers, to know about the local market and the factors affecting it... the 'pumpkin, mice, rat & lizards' of our tale. The godmother informs Cinderella to return before midnight or the spell will be broken. Of course, 'midnight' in our fairy tale also represents time in real life.  The longer a renter pays rent, the more equity built over time is lost, the higher the initial investment ( cost of a home & potentially the higher the interest rate, seeing they are very low at present ). The 'broken spell' is when the market growth & prices get out of reach of a renter's affordability.





The relevance of our Fairy Tale is even more applicable in our current local Halifax Regional Municipality real estate market.  In recent years, Canada's Finance Minister Jim Flaherty clamped down on mortgage rules in an attempt to cool the real estate market. Ottawa reduced the maximum amortization period to 25 years from 30 years. Secondly, the maximum amount of equity homeowners can take out of their homes in a refinancing was also reduced.  The maximum gross debt service ratio was fixed at 39% and the maximum total debt service ratio at 44% ( as of July 2012 ). And the 100% financing option was no longer commonly available.  Its effectiveness was limited to small marketplaces & had no real affect on Canada's big city centers which continue to grow. 




"The Prince had become even more infatuated, and Cinderella in turn became so enchanted by him she lost track of time and left only at the final stroke of midnight, losing one of her glass slippers on the steps of the palace in her haste. The Prince chased her, but outside the palace, the guards saw only a simple country girl leave. The Prince pocketed the slipper and vows to find and marry the girl to whom it belonged. Meanwhile, Cinderella kept the other slipper, which did not disappear when the spell was broken.The Prince tried the slipper on all the women in the kingdom. When the Prince arrives at Cinderella's villa, the stepsisters tried in vain to win over the prince. Cinderella asked if she might try, while the stepsisters taunted her. Naturally, the slipper fitted perfectly, and Cinderella produced the other slipper for good measure. The stepsisters both pleaded for forgiveness, and Cinderella agreed to let bygones be bygones. Cinderella married the Prince, and moved into the Palace."

Due to Flaherty's changes in the Summer of 2012, the market did tighten a bit but no bubble occurred.  What happened was that the first time home buyers, such as our renter Cinderella, required a down payment.  So those who were hoping to jump into the marketplace in 2012-2013 with no money down, now had to save additional money for a down payment as well as closing costs.  So the "First time home buyer" became a rare commodity in our local market during this time frame.  So those sellers who wanted to move up to  a larger home had few first time home buyers looking to purchase their "starter home" to get the real estate market moving.  So homes were taking longer to sell & bidding wars became a rare thing. So Cinderella, our renter, is swooned by a prince, a homes listed for sale, & falls in love with it.  After negotiations, a building inspections, a mortgage approval, the 'slipper', the key to the new home, fits & Cinderella, the renter, moves into the Palace, her new home.


So if you are currently renting & day dreaming of owning your own home,
give Merv Edinger & Associates of Re/Max Nova a call so that we can help make "your dreams of home ownership come true" cell ( 902 )497-1217.