The Practical Broker Episode 7: Covering COVID

The Practical Broker Episode 7: Covering COVID

In this episode of the podcast, we experiment with a different format of the show called the 5-5-5, where we hold short interviews with different professionals in different industries. They will be sharing vital information we need during this uncertain time which you might call a crisis, opportunity, or pandemic, whatever you choose to label it depends on your take on it.

For the first phase of the 5-5-5 format, we interview 3 amazing people in this episode.

Dale Way from Right At Home realty based in the Ottawa area has been a realtor for almost 20 years. He helps clients in diverse areas such as residential, commercial development, land development homes, and a few farms and colleges.

Jean Belliveau and his wife Melanie are financial brokers with World Financial Group. Together they help the client steer through investment decisions, life insurance, and other issues that affect people’s careers.

Jean has been a financial specialist for over 12 years while Melanie is relatively new to the scene with 3 years experience.

Key Insights From This Episode

1. The market right now is on hold but there is still movement and activity in the market.
2. It is advisable to still be involved in inequities. When the markets come down, they tend to come down the most but they tend to also be the ones that bounce back the quickest.
3. There are some industries that are flourishing during this pandemic, especially in the tech space.

Resources

Dale Way
https://www.rightathomerealty.com/Dale-Way

Jean Belliveau
https://www.linkedin.com/in/jean-belliveau-84a39a25/

Covid-19 updates and what homeowners need to know
https://bestinterest.ca/covid-19/

Shownotes

4.04 – Things are changing so quickly in the real estate market. There are different speculation regarding the real estate market, some articles are saying it’s going up while others are saying it’s crashing.
Some are of the opinion that it’s a buyer market while others are saying it’s a seller’s market.
What are you seeing out there in the middle of April 2020, how is the real estate market in Ottawa faring right now?

Dale says that the best way to describe the market right now is on hold and it ought to be that way. There is still some activity because you have people that have sold their homes so they need to find a place to live so they have to actively look for real estate. When you have investors, you know they have vacant units, they need to fill those units, they can’t keep them vacant. So there is still movement and activity in the market but the market is pretty much on hold.

5.12 – Have you been noticing any price changes? Are they going up or down?

Dale says there hasn’t been any significant price reductions in the market. It has been holding strong. So the inventory that has been on there right now has been moving and keeping its prices.

6.00 – What do you think will happen when we come out of this?

Dale says the market was firing on all cylinders prior to the occurrence of COVID-19. The market was very hot and those people have not gone away, they are just on hold. He doesn’t see a big blimp happening in the real estate market because he believes that those people are going to come back as the economy starts to fire again.

Ottawa is also very lucky due to the presence of high tech employees and a very large sector of government.

8.22 – So Jean and Michelle you must be getting a lot of calls from your clients to know if their investments and RSPs have dropped?
How are you handling those conversations with your clients

Jean says they have been very fortunate not to have received many calls however he can’t speak for other financial professionals.

He says it goes back to the educational component which is very important in our industries. He says that a lot of his clients if they have called because they wanted to invest more money because he has educated most of his clients that it is a good thing to do when this crisis has happened.

For the few calls he has had, he makes sure he reminds people to stay the course, if an investment was good pre-COVID, it will most likely good post-COVID.

There are even some industries that are flourishing through the pandemic, Zoom in the month of March was up almost 40% while Amazon was up 30%.

So when he has gotten this call he reminds them of the basic thing is really staying invested.

10.00 – Is there a particular investment you are advising people to make? I know you need to craft a specialized plan for each individual in a client meeting, but do you recommend people stay in equities or move to bonds, do you understand I mean?

Jean says that since he has started his clients that have fared the best are the one that have been literally in full equities and have stayed in full equities. A lot of people shy away from being invested fully in equities however if we look at it traditionally speaking they are the ones that have made us the money.

Jean says that he still encourages people to still be involved in inequities.
Usually, when the markets come down, those do come down the most but they tend to be the ones that bounce back the quickest so he feels it’s something that he believes that everyone should be involved in, even people when they are retired.

Jean also talks about some retired couples that he has educated to have in hold equities not their entire portfolio because at that point they are in retirement. That is the portion of their portfolio that over the last 5-10 years has made them the money that allowed them to actually continue to increase their monthly payments as opposed to receiving less as they get older.

13.26 – I clarify some misinformation on mortgage deferrals.

I have often received calls from my clients asking if they should get mortgage deferrals. You know the information out there is that these banks are offering the mortgage deferrals on credit cards and car payments, on everything.

What I have been telling all my customers is if you need a credit card deferral because you have lost your job, absolutely get it because they are there to help you but you must be absolutely aware that it is not free money.

The banks are not forgiving you 3 months or 5 months of your mortgage payments, the money you should be paying as interest is being added to your principal so your principal is going to go up and your payment is going to go up once the COVID-19 crisis is over.

So be careful, if you need it to get it and don’t struggle or feel guilty about it but get it only if you really need it.

If you have a job, you are working for the government or you are working for Shopify, pay for the mortgage because the banking system needs the cash flow since it’s a business like any other business. If everyone stopped paying their bills the system will definitely collapse.

So if you guys have ability, I always say pay your rent, pay your mortgage, make your car payments, but if you need help, absolutely get it.

14.35 – Are you guys seeing any other question related to mortgages from your clients?

Jean says he has had several clients who have asked recently what’s going on with rates as they have noticed that the rates have continued to go down. And then South of the border they have made mention that rates seem to have gone up there.
Some have asked me why this is happening but I have been unable to give them a concrete answer.

Jean asked me for my perspective on that

15.05 – I wrote about this on a blog post on my website.

The bond market which represents “fixed-rate mortgages” has actually started trending up a little bit so that’s why you see the fixed price coming. It’s all effect of how much liquidity there is in the marketplace.

There used to be smooth interplay between you know TD Bank (Toronto-Dominion Bank) and Scotiabank, and this lender and the merchant banks.

Now the mechanism to go between banks isn’t running as smoothly as it should and that is one of the reasons why we see the fixed rates. And then the variable rates are really interesting. Even though the bank of Canada has dropped their rate, subprime now is 2.5.

We used to get pre-COVID, I could have got somebody a mortgage prime minus 1% which was pretty awesome.

Right now the mortgage is the variable rates just add prime or even prime plus point 2%, all that discount has gone away.

So it comes back to the liquidity between the markets and between the banks because the banks of the day can’t actually transfer their paper very well between each other.

So that is the reason why they are going up