Wednesday, December 29, 2010
Monday, December 20, 2010
Our housing market to side step U.S. style bubble
Written by Mark Weisleder or the Toronto Star
As Bank of Canada Governor Mark Carney tries to talk Canadians out of piling up too much debt, the comments have led to a lot of speculation about whether Canada faces a U.S.- style housing meltdown.
Nothing could be further from the truth. The factors that led to the US housing crisis were unique to their market. Next year should see strong growth in prices and sales, especially in the GTA, and I plan to write about why in the next few weeks.
The differences between the U.S. and Canada can be summarized as:
American politicians encouraged banks to make it easy for consumers to buy a home. The banks ended up lending to people who never would have legitimately qualified for a mortgage. Basically, if you had a pulse, you got approved.
Government programs allowed buyers to get a down payment from the government as well. In other words, many bought properties with none of their own money.
These mortgages came with very low interest payments, but after a few years, the home owner had to make a large lump sum payment. Many couldn’t afford the payment and so these mortgages were called ‘sub-prime.’
The U.S. lets homeowners deduct interest paid on their home mortgage from their income tax. Thus, whatever was paid by the borrower to carry the mortgage was taken as a deduction on their income tax returns. You can’t do that here.
Many states in the U.S. have non-recourse mortgages. This means that if you default on a mortgage loan, the only remedy for the bank is to take back the property. They cannot sue you for any loss suffered. This also doesn’t apply in any province except Alberta?
When you put this together, there was no incentive for home owners to pay down the mortgage principal. They just kept remortgaging and taking out the equity. Wall Street figured out a way to sell these sub-prime mortgages by convincing others about the great profits they would make on these balloon payments. Unfortunately, none of these balloon payments were made and most of these loans were worthless. Currently, besides the hundreds of thousands of properties still in foreclosure in the US, it is estimated that almost 20 per cent of the remaining mortgage loans are “under water,” meaning that the homes are worth less than what is owing on the mortgage debt.
While it may be true that Canadian household debt may be increasing, but with less than 1 per cent of mortgages under water, this is not the basis for any kind of housing collapse.
Here are the main differences between the Canadian and U.S. markets:
Banks have made sure over the last few years that even if you qualified for a 1-year mortgage rate of 2.5 per cent, you had to have the ability to pay the 5-year rate, which was closer to 5.5 per cent, in order to qualify for the mortgage. Thus, even if interest rates rise, as the Governor has warned, most Canadians will still be able to absorb the increased payments.
Banks have been much stricter in requiring evidence of real down payments before lending any money. There are no free down payment programs in effect in Canada.
In Canada, because you cannot deduct interest from your home mortgage on your tax return, you are encouraged to pay down the principal on your mortgage. American lawmakers want to go the Canadian way and remove the home mortgage interest deduction from the US tax code, but can’t for now as this may cause millions more to lose their homes.
Most Canadian mortgages, except in Alberta, are recourse mortgages, so if you don’t pay, you can be sued by the lender for any shortfall.
Mortgage insurance companies are working proactively with borrowers who may be having difficulty making their mortgage payments to find solutions before the mortgage goes into long term default.
The Governor of the Bank of Canada has to walk a very fine line, looking at inflation on one side, interest rates and he overall economy. There is a reason that the Canadian economy is now the envy of most of the G20 countries. It is also a reason for continued optimism for 2011. Enjoy the ride.
Real estate lawyer Mark Weisleder is the author of Put the Pen Down! What homebuyers and sellers need to know before signing on the dotted line.
As Bank of Canada Governor Mark Carney tries to talk Canadians out of piling up too much debt, the comments have led to a lot of speculation about whether Canada faces a U.S.- style housing meltdown.
Nothing could be further from the truth. The factors that led to the US housing crisis were unique to their market. Next year should see strong growth in prices and sales, especially in the GTA, and I plan to write about why in the next few weeks.
The differences between the U.S. and Canada can be summarized as:
American politicians encouraged banks to make it easy for consumers to buy a home. The banks ended up lending to people who never would have legitimately qualified for a mortgage. Basically, if you had a pulse, you got approved.
Government programs allowed buyers to get a down payment from the government as well. In other words, many bought properties with none of their own money.
These mortgages came with very low interest payments, but after a few years, the home owner had to make a large lump sum payment. Many couldn’t afford the payment and so these mortgages were called ‘sub-prime.’
The U.S. lets homeowners deduct interest paid on their home mortgage from their income tax. Thus, whatever was paid by the borrower to carry the mortgage was taken as a deduction on their income tax returns. You can’t do that here.
Many states in the U.S. have non-recourse mortgages. This means that if you default on a mortgage loan, the only remedy for the bank is to take back the property. They cannot sue you for any loss suffered. This also doesn’t apply in any province except Alberta?
When you put this together, there was no incentive for home owners to pay down the mortgage principal. They just kept remortgaging and taking out the equity. Wall Street figured out a way to sell these sub-prime mortgages by convincing others about the great profits they would make on these balloon payments. Unfortunately, none of these balloon payments were made and most of these loans were worthless. Currently, besides the hundreds of thousands of properties still in foreclosure in the US, it is estimated that almost 20 per cent of the remaining mortgage loans are “under water,” meaning that the homes are worth less than what is owing on the mortgage debt.
While it may be true that Canadian household debt may be increasing, but with less than 1 per cent of mortgages under water, this is not the basis for any kind of housing collapse.
Here are the main differences between the Canadian and U.S. markets:
Banks have made sure over the last few years that even if you qualified for a 1-year mortgage rate of 2.5 per cent, you had to have the ability to pay the 5-year rate, which was closer to 5.5 per cent, in order to qualify for the mortgage. Thus, even if interest rates rise, as the Governor has warned, most Canadians will still be able to absorb the increased payments.
Banks have been much stricter in requiring evidence of real down payments before lending any money. There are no free down payment programs in effect in Canada.
In Canada, because you cannot deduct interest from your home mortgage on your tax return, you are encouraged to pay down the principal on your mortgage. American lawmakers want to go the Canadian way and remove the home mortgage interest deduction from the US tax code, but can’t for now as this may cause millions more to lose their homes.
Most Canadian mortgages, except in Alberta, are recourse mortgages, so if you don’t pay, you can be sued by the lender for any shortfall.
Mortgage insurance companies are working proactively with borrowers who may be having difficulty making their mortgage payments to find solutions before the mortgage goes into long term default.
The Governor of the Bank of Canada has to walk a very fine line, looking at inflation on one side, interest rates and he overall economy. There is a reason that the Canadian economy is now the envy of most of the G20 countries. It is also a reason for continued optimism for 2011. Enjoy the ride.
Real estate lawyer Mark Weisleder is the author of Put the Pen Down! What homebuyers and sellers need to know before signing on the dotted line.
Tuesday, December 14, 2010
Cambridge: The little town that grew
Taken from yourhome.ca December 3, 2010
Pat Brennan
SPECIAL TO THE STAR
Deep in space, a navigation satellite is peering down on earth and scratching its head in confusion.
Its sophisticated instruments indicate it’s looking at its birthplace, a factory in Cambridge, Ont. But its powerful lens feels it is admiring a charming little town in Germany, maybe France, possibly England.
It shouldn’t feel bad. Humans down on the ground get that same sense when they arrive in Galt, the small limestone city that forms the heart of the expanded, regional city of Cambridge, 100 kilometres west of Toronto.
The city core has the look and feel of a small European city and that image is going to be enhanced over the next couple of years with a variety of commercial firms proposing downtown rehabilitation projects.
But it’s not just businesses that are finding Cambridge attractive. Homebuyers are also making their way west along the 401 corridor from the GTA. House prices are certainly a major draw, but Cambridge’s charm also has allure.
House prices in Cambridge are on average 15 per cent below prices in nearby Guelph, says Bob Peace, president of Cambridge Real Estate Board. “Most of the new homes being purchased in the northeast quadrant of Cambridge are bought by people who work in Toronto and Mississauga. A lot of them drive to Milton and jump on the GO Train.
“Next year, there’ll be regular GO service to Guelph and Kitchener and I imagine that is going to further stimulate new homes sales in our area,” said Peace.
For the greater Kitchener area, which includes Cambridge, the Canada Mortgage and Housing Corp. measured a 68.3 per cent increase in total housing starts in the first quarter of 2010, compared to the first quarter in 2009.
During that same period, average prices on MLS re-sale homes increased 13.3 per cent to $284,475.
New home construction in Hespeler — one of three communities amalgamated in 1973 to create Cambridge — triggered the construction of two new interchanges with Highway 401 at Franklin Blvd. and Townline Rd.
Mattamy Homes advertised its Mill Pond project in Hespeler as “the gentle side of Cambridge.”
Hespeler has maintained its original village atmosphere, while Hespeler Rd (Highway 24), leading into central Cambridge from Highway 401, has become the commercial big box corridor for the region.
Galt and Preston were the other two communities married to Hespeler and although they are now officially Cambridge, their names will live on in a 173-year-old flour mill sitting on the edge of the Grand River, which flows majestically through the downtown core.
Leanne Ciancone, of the Landmark Group of Companies, will be applying their names to various dining rooms in her $6 million refurbishing of the old mill into an upscale restaurant. The Hespeler Room, Preston Room and Galt Room together will accommodate up to 500 diners in the new Cambridge Mill Restaurant scheduled to open in April 2011.
Ciancone and her brothers Aaron and James are the newest generation of the family to get into the restaurant business. Their grandfather, and subsequently their father, operated major restaurants in the Golden Horseshoe. They own the Ancaster Old Mill on Hamilton Mountain and Spencer’s at the Waterfront in Burlington.
Because she’ll be operating the Cambridge Mill restaurant, Ciancone is moving from Burlington to the Waterscape, a new condominium being erected beside the restaurant on the east bank of the Grand.
She’ll be one of the few out-of-towners to purchase a suite there. Developer Paul de Haas says most of his buyers are coming from the large family homes across the river in Galt’s prestigious Victoria Park neighbourhood.
“They didn’t want to leave downtown Galt when they were ready to move out of their large homes, but until we brought The Waterscape to market, there was nowhere in the city for those people to find a new, spacious condominium suite,” says de Haas.
The Waterscape site was for more than half a century one of the most attractive riverfront parcels of land in Waterloo Region, but developers shied away from it due to excessive de-contamination costs.
It was the site of a coal oil production plant early in the last century and had left a nasty heritage. De Haas specializes in converting old industrial sites in city cores to upscale residential projects. He won tax incentives from the province and Cambridge to offset the heavy costs of cleaning the site.
Greg McDonnell, a retired Kitchener firefighter, lives in a large home across the river from downtown Galt and is hoping to move into his Waterscape suite in time for Christmas.
From the high vantage point of his future home, he can watch traffic on the river plus traffic rumbling across the high trestle carrying the main CNR line over the valley.
Watching trains and ships is more than a hobby for this firefighter. He has more than a dozen photography books published about trains, ships and western grain silos.
“I’ve been up to my unit and when I look through the lens of my camera at Galt’s downtown, it’s like looking at the centre of a small European city,” said McDonnell.
Drayton Entertainment, which operates six theatres for the performing arts in southwestern Ontario, is getting a new theatre and company headquarters in downtown Galt.
With $6 million each from Ottawa, Queen’s Park and the city, the $18 million theatre will be owned by the city and Drayton Entertainment will lease the office and the theatre support facilities, which includes rehearsal halls, prop and set building, wardrobe creations, etc.
Performances are expected to bring 75,000 people downtown each year.
The University of Waterloo’s school of architecture moved into a former riverfront textile mill in the city’s core in 2004. Mayor Doug Craig says that creative presence has had a significant influence on the resurgence of restoration projects and new developments downtown.
Cambridge is home to many high-tech research and manufacturing firms, plus a close neighbour to three of Canada’s leading universities — Guelph, Waterloo and Wilfred Laurier.
The satellite looking down at Cambridge is one of dozens in space that were designed and built by Com Dev International, a Cambridge high-tech firm. Stephen Hawking, one of the world’s best known scientists, signed on this summer to be a professor and researcher at the Perimeter Institute for Theoretical Physics.
A new rapid transit system is proposed for Waterloo Region to tie Kitchener-Waterloo and Cambridge together, but Greg Durocher, president of the Cambridge Chamber of Commerce, believes it’s short-sighted to spend $800 million to $1 billion for a regional rapid-transit system.
“I know what their researching at Com Dev and someday we are going to come out our front door, get in our private vehicle, push a button and then sit back to drink coffee and read the Star on a screen in the dash, while a computer talking to a satellite directs our car hands-free to our job or shopping or church — whereever we’ve asked it to go.
“I might not live to see it, but my daughter will,” said Durrocher.
MAIN STREET
David Gibson has developed commercial and residential projects all over North America, but rarely has he seen a more attractive small town core than in downtown Galt.
That’s why he has spent nearly $4 million acquiring old buildings on Main St. in Galt’s core, which he is now renovating to create a residential/commercial village within the core.
The seven buildings are on both sides of Main Street in the same block between Water St. and Ainsley St.
“We are expecting the municipality to make the streetscape more pedestrian friendly along that block and we’re gutting the buildings down to their bare walls to create fresh, new retail outlets and new residences that will be mostly rental,” said Gibson.
“We are working closely with the city’s heritage committee to maintain the character of the neighbourhood. We love the stone structures along Main St. They create much of the charm of the area and we’re hoping the city will be finishing the street surfaces in brick or cobblestone.”
In the Perimeter plan, sidewalks will be widened, trees planted and benches installed. “We want to make it an attractive people friendly place,” said Gibson. He said two large municipal parking lots behind the buildings fronting on to Main is another of the neighbourhood’s attractive features to the developer.
He expects other downtown property owners will be stimulated by his renovations to upgrade their own properties.
Gibson was chairman and one of the founding partners of First Gulf Developments, a firm that specializes in creating office, commercial and industrial properties. First Gulf is a spin off from homebuilder Great Gulf Homes, which became the Great Gulf Group of Companies.
Most notable among Great Gulf’s residential projects are 1 Bloor St. and Parkside, a $200 million waterfront condo on Queen’s Quay at Sherbourne St.
Gibson said he sold his shares in First Gulf late last year to launch Perimeter Group and concentrate on redeveloping small commercial/residential properties in the central core of Ontario towns and cities.
Pat Brennan
SPECIAL TO THE STAR
Deep in space, a navigation satellite is peering down on earth and scratching its head in confusion.
Its sophisticated instruments indicate it’s looking at its birthplace, a factory in Cambridge, Ont. But its powerful lens feels it is admiring a charming little town in Germany, maybe France, possibly England.
It shouldn’t feel bad. Humans down on the ground get that same sense when they arrive in Galt, the small limestone city that forms the heart of the expanded, regional city of Cambridge, 100 kilometres west of Toronto.
The city core has the look and feel of a small European city and that image is going to be enhanced over the next couple of years with a variety of commercial firms proposing downtown rehabilitation projects.
But it’s not just businesses that are finding Cambridge attractive. Homebuyers are also making their way west along the 401 corridor from the GTA. House prices are certainly a major draw, but Cambridge’s charm also has allure.
House prices in Cambridge are on average 15 per cent below prices in nearby Guelph, says Bob Peace, president of Cambridge Real Estate Board. “Most of the new homes being purchased in the northeast quadrant of Cambridge are bought by people who work in Toronto and Mississauga. A lot of them drive to Milton and jump on the GO Train.
“Next year, there’ll be regular GO service to Guelph and Kitchener and I imagine that is going to further stimulate new homes sales in our area,” said Peace.
For the greater Kitchener area, which includes Cambridge, the Canada Mortgage and Housing Corp. measured a 68.3 per cent increase in total housing starts in the first quarter of 2010, compared to the first quarter in 2009.
During that same period, average prices on MLS re-sale homes increased 13.3 per cent to $284,475.
New home construction in Hespeler — one of three communities amalgamated in 1973 to create Cambridge — triggered the construction of two new interchanges with Highway 401 at Franklin Blvd. and Townline Rd.
Mattamy Homes advertised its Mill Pond project in Hespeler as “the gentle side of Cambridge.”
Hespeler has maintained its original village atmosphere, while Hespeler Rd (Highway 24), leading into central Cambridge from Highway 401, has become the commercial big box corridor for the region.
Galt and Preston were the other two communities married to Hespeler and although they are now officially Cambridge, their names will live on in a 173-year-old flour mill sitting on the edge of the Grand River, which flows majestically through the downtown core.
Leanne Ciancone, of the Landmark Group of Companies, will be applying their names to various dining rooms in her $6 million refurbishing of the old mill into an upscale restaurant. The Hespeler Room, Preston Room and Galt Room together will accommodate up to 500 diners in the new Cambridge Mill Restaurant scheduled to open in April 2011.
Ciancone and her brothers Aaron and James are the newest generation of the family to get into the restaurant business. Their grandfather, and subsequently their father, operated major restaurants in the Golden Horseshoe. They own the Ancaster Old Mill on Hamilton Mountain and Spencer’s at the Waterfront in Burlington.
Because she’ll be operating the Cambridge Mill restaurant, Ciancone is moving from Burlington to the Waterscape, a new condominium being erected beside the restaurant on the east bank of the Grand.
She’ll be one of the few out-of-towners to purchase a suite there. Developer Paul de Haas says most of his buyers are coming from the large family homes across the river in Galt’s prestigious Victoria Park neighbourhood.
“They didn’t want to leave downtown Galt when they were ready to move out of their large homes, but until we brought The Waterscape to market, there was nowhere in the city for those people to find a new, spacious condominium suite,” says de Haas.
The Waterscape site was for more than half a century one of the most attractive riverfront parcels of land in Waterloo Region, but developers shied away from it due to excessive de-contamination costs.
It was the site of a coal oil production plant early in the last century and had left a nasty heritage. De Haas specializes in converting old industrial sites in city cores to upscale residential projects. He won tax incentives from the province and Cambridge to offset the heavy costs of cleaning the site.
Greg McDonnell, a retired Kitchener firefighter, lives in a large home across the river from downtown Galt and is hoping to move into his Waterscape suite in time for Christmas.
From the high vantage point of his future home, he can watch traffic on the river plus traffic rumbling across the high trestle carrying the main CNR line over the valley.
Watching trains and ships is more than a hobby for this firefighter. He has more than a dozen photography books published about trains, ships and western grain silos.
“I’ve been up to my unit and when I look through the lens of my camera at Galt’s downtown, it’s like looking at the centre of a small European city,” said McDonnell.
Drayton Entertainment, which operates six theatres for the performing arts in southwestern Ontario, is getting a new theatre and company headquarters in downtown Galt.
With $6 million each from Ottawa, Queen’s Park and the city, the $18 million theatre will be owned by the city and Drayton Entertainment will lease the office and the theatre support facilities, which includes rehearsal halls, prop and set building, wardrobe creations, etc.
Performances are expected to bring 75,000 people downtown each year.
The University of Waterloo’s school of architecture moved into a former riverfront textile mill in the city’s core in 2004. Mayor Doug Craig says that creative presence has had a significant influence on the resurgence of restoration projects and new developments downtown.
Cambridge is home to many high-tech research and manufacturing firms, plus a close neighbour to three of Canada’s leading universities — Guelph, Waterloo and Wilfred Laurier.
The satellite looking down at Cambridge is one of dozens in space that were designed and built by Com Dev International, a Cambridge high-tech firm. Stephen Hawking, one of the world’s best known scientists, signed on this summer to be a professor and researcher at the Perimeter Institute for Theoretical Physics.
A new rapid transit system is proposed for Waterloo Region to tie Kitchener-Waterloo and Cambridge together, but Greg Durocher, president of the Cambridge Chamber of Commerce, believes it’s short-sighted to spend $800 million to $1 billion for a regional rapid-transit system.
“I know what their researching at Com Dev and someday we are going to come out our front door, get in our private vehicle, push a button and then sit back to drink coffee and read the Star on a screen in the dash, while a computer talking to a satellite directs our car hands-free to our job or shopping or church — whereever we’ve asked it to go.
“I might not live to see it, but my daughter will,” said Durrocher.
MAIN STREET
David Gibson has developed commercial and residential projects all over North America, but rarely has he seen a more attractive small town core than in downtown Galt.
That’s why he has spent nearly $4 million acquiring old buildings on Main St. in Galt’s core, which he is now renovating to create a residential/commercial village within the core.
The seven buildings are on both sides of Main Street in the same block between Water St. and Ainsley St.
“We are expecting the municipality to make the streetscape more pedestrian friendly along that block and we’re gutting the buildings down to their bare walls to create fresh, new retail outlets and new residences that will be mostly rental,” said Gibson.
“We are working closely with the city’s heritage committee to maintain the character of the neighbourhood. We love the stone structures along Main St. They create much of the charm of the area and we’re hoping the city will be finishing the street surfaces in brick or cobblestone.”
In the Perimeter plan, sidewalks will be widened, trees planted and benches installed. “We want to make it an attractive people friendly place,” said Gibson. He said two large municipal parking lots behind the buildings fronting on to Main is another of the neighbourhood’s attractive features to the developer.
He expects other downtown property owners will be stimulated by his renovations to upgrade their own properties.
Gibson was chairman and one of the founding partners of First Gulf Developments, a firm that specializes in creating office, commercial and industrial properties. First Gulf is a spin off from homebuilder Great Gulf Homes, which became the Great Gulf Group of Companies.
Most notable among Great Gulf’s residential projects are 1 Bloor St. and Parkside, a $200 million waterfront condo on Queen’s Quay at Sherbourne St.
Gibson said he sold his shares in First Gulf late last year to launch Perimeter Group and concentrate on redeveloping small commercial/residential properties in the central core of Ontario towns and cities.
Wednesday, December 8, 2010
Planning ahead key to getting top value when selling
Written by: KATE ROBERTSON
Special to Globe and Mail Update
Published
As with every exit strategy, experts advise owners to plan early if they think they will eventually sell their business.
According to the business monitor survey published for the first quarter of this year by the Canadian Institute of Chartered Accountants and Royal Bank of Canada, the top two challenges business owners believe they will face in selling are getting the right value for their company and finding the right successor.
Lawrence Wilder, a corporate lawyer with Cassels Brock, said that companies can get a start long before the actual sale date by staying on top of financial reporting and other bits of housekeeping.
“You certainly will get a better value if you have your ducks in a row than if you don't,” Mr. Wilder said.
Business owners who already have comprehensive financial and tax reports completed by third-party advisers will have a leg up on the due diligence process that eventually comes in an acquisition.
Once a business owner has decided to sell, he or she will have to hire an auditor, legal counsel, a business valuator (who does not take a commission on a sale) and, sometimes, a mergers and acquisition adviser (who does take a commission).
The team completes a company review, Mr. Wilder said. Everything from sales projections to employee and intellectual property agreements inform both the sales memorandum document that is used to market the company and the valuation of the business.
Some work with a business broker to market the company, but many owners want to maintain confidentiality during the process. Often, they rely on their adviser's networks to look for potential buyers.
“Most accounting firms have divisions that will assist in finding a buyer,” Mr. Wilder said. “They'll quietly market it around the street, and, very often, they won't name the company. They'll just say it has approximately x…revenues, and to please contact the accounting firm to get the name of the person who's selling.”
Interested buyers can then begin to negotiate the terms of the sale agreement to see if a deal can be made.
Even though the economy will have an effect on M&A activity, there are key factors every business owner should consider to maximize value when they sell, said Farley Cohen, a certified business valuator.
For one, it's important to have developed a business plan that goes beyond the owner's final day. said Mr. Cohen, chair of the board of the Canadian Institute of Chartered Business Valuators and a principal with Cohen, Hamilton, Steger & Co.
“The key thing to keep in mind is that value is prospective,” Mr. Cohen said. “It's looking into the future.”
Along with having comprehensive tax returns and financial statements that put the company in good standing, business owners must have answers for questions about how the company will continue to grow.
What assets and liabilities does the company have today and what are its prospects for the future? What is the value of the real estate and the equipment? How are sales expected to grow? Are there any unusual expenditures coming up?
Secondly, a business valuator will measure the internal risks of the company, which include how it is structured, how it is operated and by whom.
Whether or not a management team has a chief financial officer and a vice-president of sales and marketing will affect how much value he or she can ascribe to the company.
The valuator will also look at how competitive a business's pricing is, the level of customer satisfaction and a company's awareness of its competitors.
“You have to know what's going on in your industry and act accordingly,” Mr. Cohen said. “If there's new machinery that everybody's using, you should have that. I don't want to buy last year's way of doing things. I want to buy this year's – or, even better, next year's.”
Lastly, Mr. Cohen will look at the external risks to the business, which are largely outside of most owners’ control. But any owner would be wise to ask himself or herself the same questions a business valuator will be asking.
“It's sort of like a house,” Mr. Cohen said. “When you're selling your house, you'll look to find out what your neighbour sold their house for.”
Special to The Globe and Mail
Monday, November 29, 2010
Ethnic Chinese number superstition impacts housing prices
UBC researchers find values fluctuate between $8,000 and $10,000 based on $400,000 home relative to street address
Tuesday, November 23, 2010
Monday, November 15, 2010
Friday, November 12, 2010
Monday, October 25, 2010
Your options in the brave new real estate world
The era of 5% commissions may soon become a distant memory
How would you sell your house today if it was on the market? Would you use a real estate agent or go it alone?
It's no small issue given the typical commission paid by the seller in this country is about $15,000 based on the latest average sale price of an existing home. When you consider most home sales are for principal residences -- and profits are not subject to capital gains taxes--that $15,000 looms larger because it is after-tax money.
The option to use one of the dozen or so for-sale-by-owner, or FSBO sites, exists, but you can expect to pay a fee for the service. Plus, you can also assume any customer who buys a house through a FSBO site wants a discount on the market price because they know you are saving commission.
I tried it myself for two weeks before listing my own home on the MLS six years ago. My agent encouraged me. What happened is people who did show interest immediately started to talk about a discount. I was back to an agent and the MLS system.
But maybe there is a compromise solution, where I list on the MLS using an agent who helps me with part of a transaction. After all, there are people who paint their own homes but are reluctant to dabble in electrical wiring.
"Commissions are flexible," says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. "There is [a middle ground] and people have to look for it. Many agents will offer a menu of services and that is out there already. Most people will choose to list with an agent who manages an entire transaction."
But now that that choice is part of the game within the confines of the MLS, expect consumers to take advantage of it to save some cash.
"I'd still use an agent. My life is too busy," says Craig Alexander, chief economist with TD Bank Financial Group. "But there are going to be people who only want an agent for some things."
Mr. Alexander thinks changes are coming, but couldn't put a timetable on it. He says it is basic economic theory that once you introduce elements of competition to a system, it will start to become more efficient.
Robert McLister, editor of Canadian Mortgage Trends, says many realtors will start offering a la carte services such as document preparation, showings, valuation and offer negotiations. He believes high-end real estate will be less affected by the changes and the industry might gear its efforts more to that end of the market.
And, he adds, FSBO sites that charge listing fees could be devastated by a bargain-basement MLS.
"Removal of listing barriers will allow efficient markets to take over. That will put obvious pressure on realtor fees. The era of 5% commissions in Ontario [other jurisdictions vary] could become a distant memory in three to four years," says Mr. McLister.
The truth is not much has changed since the Canadian Real Estate Association updated its rules in March to make its Multiple Listing Service more flexible, thus allowing agents to simply list a home with the consumer handling all other aspects of a transaction. Those changes are about to be made permanent because of a consent agreement with the Competition Bureau reached last month.
So, what's the difference today? On a practical level, it's hard to argue against listing your home on the MLS, which controls about 90% of transactions in Canada. And while you may pay as little as $109 for that listing, you can almost be sure to pay a commission of 2% to 2.5% to any agent bringing his or her customer to your door. The option to use one of the dozen or so for-sale-by-owner, or FSBO sites, exists, but you can expect to pay a fee for the service. Plus, you can also assume any customer who buys a house through a FSBO site wants a discount on the market price because they know you are saving commission.
I tried it myself for two weeks before listing my own home on the MLS six years ago. My agent encouraged me. What happened is people who did show interest immediately started to talk about a discount. I was back to an agent and the MLS system.
But maybe there is a compromise solution, where I list on the MLS using an agent who helps me with part of a transaction. After all, there are people who paint their own homes but are reluctant to dabble in electrical wiring.
"Commissions are flexible," says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. "There is [a middle ground] and people have to look for it. Many agents will offer a menu of services and that is out there already. Most people will choose to list with an agent who manages an entire transaction."
But now that that choice is part of the game within the confines of the MLS, expect consumers to take advantage of it to save some cash.
"I'd still use an agent. My life is too busy," says Craig Alexander, chief economist with TD Bank Financial Group. "But there are going to be people who only want an agent for some things."
Mr. Alexander thinks changes are coming, but couldn't put a timetable on it. He says it is basic economic theory that once you introduce elements of competition to a system, it will start to become more efficient.
Robert McLister, editor of Canadian Mortgage Trends, says many realtors will start offering a la carte services such as document preparation, showings, valuation and offer negotiations. He believes high-end real estate will be less affected by the changes and the industry might gear its efforts more to that end of the market.
And, he adds, FSBO sites that charge listing fees could be devastated by a bargain-basement MLS.
"Removal of listing barriers will allow efficient markets to take over. That will put obvious pressure on realtor fees. The era of 5% commissions in Ontario [other jurisdictions vary] could become a distant memory in three to four years," says Mr. McLister.
Monday, October 18, 2010
Foreclosure sales may be driving U.S. housing sector
Michael Babad of CTV
What's driving U.S. home sales?
Analysts were impressed yesterday when the latest reading on the U.S. real estate sector showed pending home sales, or signed sales contracts, climbed 4.3 per cent in August to its best showing since April. U.S. housing was the epicentre of the meltdown, and while coming back the outlook is still for weak growth.
Chief economist David Rosenberg of Gluskin Sheff + Associates parsed the numbers, and asks today if sales sparked by record foreclosures are driving the increase.
"What caught our eye was the huge 24-per-cent jump in sales in the West - taking pending home sales back to October 2009 levels," Mr. Rosenberg said in a research note. "We also noticed a large 14--per-cent monthly jump (on a seasonally adjusted basis) in resale sales in the West, when the data were released a few weeks ago. It seems that attractively priced foreclosure sales could be driving the recent gains in existing/pending home sales. While encouraging, we don't believe fundamentals are driving the recent gains in home sales and once the flurry of foreclosure sales dies down, we could be in for much weaker numbers."
Tuesday, October 5, 2010
Tuesday, September 28, 2010
Bubble or not, Canadian markets in for rude awakening
Taken from The Globe and Mail
David Rosenberg
Globe and Mail Update
Published Thursday, Sep. 23, 2010 6:56PM EDT
The Bank of Canada's decision to embark on a series of interest rate hikes is already throttling back on growth. Thanks to those hikes, we have a Canadian dollar that is at least a nickel above any realistic estimate of its fair value, and a pace of overall economic activity that is now falling at a surprising rate.
Real estate: The slowdown
Poll
Are we in a housing bubble?
Yes No Maybe
Results & past polls
.63% 1552 votes Yes
.23% 565 votes No
.14% 332 votes Maybe
The central bank’s decision to raise interest rates was based on Canada’s initially strong rebound from the depths of the recession. Unfortunately, the nature of that recovery may have sown the seeds for trouble ahead.
By my calculations, every basis point of the Canadian economic recovery was the result of the boom in the housing sector. That goose is no longer laying any golden eggs. In fact, from recent peaks, single-family housing starts have plunged 32 per cent, residential building permits have sagged 17 per cent and home prices on average are down 6 per cent. In the absence of an export resurgence, which seems unlikely given the ongoing sluggishness in the U.S. economy, the downturn in housing is bound to keep the pace of domestic activity rather sluggish in coming quarters.
I estimate real GDP for this quarter will grow at a meagre 1.5 per cent annual rate. That is a huge deceleration from the peak pace of 5.8 per cent in the first quarter of this year when Canadians were patting ourselves on the back for our apparent ability to “decouple” from the listless U.S. economy.
Canada’s economy is now slowing down at a more pronounced rate than is the case south of the border and the Bank of Canada's latest 2.8 per cent forecast for third quarter real GDP growth is looking stale, to put it charitably.
There is no doubting the fragility of the recovery, which suggests that the Bank of Canada should put further rate increases on hold for a while. But its recent decisions illustrate how difficult it is for a central bank to navigate the right path between stimulating the economy with low interest rates and cooling off irrational exuberance with higher rates.
Even if this correction in housing is only a fraction as harsh as was the case south of the border, the economy, and the financial markets are likely in for a rude awakening in coming quarters..
Even though I was one of the “doves” advising the bank to refrain from raising rates earlier than planned, there was method in its madness. When the bank followed the U.S. Federal Reserve on the path towards microscopic policy rates in the opening months of 2009, it pledged to maintain such an unprecedented degree of stimulus “conditional” on a prolonged period of economic malaise.
The problem, especially for interest rate doves like me, is that instead of seeing a listless economic recovery in Canada, we saw a bounce back of massive proportions. In short order, Canadian employment has soared to record highs while the U.S. is still more than seven million jobs shy of its pre-recession peak.
Canada’s dramatic recovery has been taken as evidence of the fundamental strength of the country’s financial system – but the rebound was founded on a surge in credit growth and housing-related spending that must have the Bank of Canada feeling a bit uneasy.
Bank-wide mortgage lending has risen 10 per cent in the past year, compared with only a 4 per cent rise in wage and salary income. This is clearly not sustainable.
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them. .
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them.
The ratio of total household debt to income has surged to 146 per cent, right where the U.S. peaked at the height of its credit bubble. Anecdotal evidence suggests that the home ownership rate has risen to record levels of 70 per cent, also close to where the U.S. peaked out during the housing bubble.
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them.
Just to be clear, the Bank of Canada wasn't alone in spurring this huge – and unanticipated – housing boom. Canada Mortgage and Housing Corp. (CMHC) relaxed underwriting criteria in ways that made housing tremendously more affordable for marginal borrowers. Those home buyers could get a mortgage with almost no money down at near-zero short-term interest rates.
People can argue endlessly about whether the Canadian housing market constitutes a bubble. The reality is that we will probably find out at some time in the next year, as all the speculative high-ratio loans come due at interest rates above where they stood at the time of origination, courtesy of the Bank of Canada's tightening cycle, which may or may not have fully run its course.
Even if this correction in housing is only a fraction as harsh as was the case south of the border, the economy, and the financial markets are likely in for a rude awakening in coming quarters as lower home prices cut into household wealth, confidence and spending plans.
At the same time, housing deflation and a rising tide of mortgage delinquencies will bite into CMHC reserves and, at the margin, undercut the quality of Canadian banks’ seemingly pristine balance sheets, which hold $500-billion of residential real estate loans, equivalent to 30 per cent of total bank assets.
It may well be that Canada escaped a housing bubble and its inevitable aftershocks. But it is a close call. If it wasn’t a bubble, it was at least a giant sud.
Bubbles
•Five bubbles set to burst in 2010
•Beware the gold bubble
•'Mini-bubbles,' not big ones, on tap for commodities markets
•The trouble with bubbles: They're elusive
•Bond bubble? Not if you consider the facts
David Rosenberg
Globe and Mail Update
Published Thursday, Sep. 23, 2010 6:56PM EDT
The Bank of Canada's decision to embark on a series of interest rate hikes is already throttling back on growth. Thanks to those hikes, we have a Canadian dollar that is at least a nickel above any realistic estimate of its fair value, and a pace of overall economic activity that is now falling at a surprising rate.
Real estate: The slowdown
Poll
Are we in a housing bubble?
Yes No Maybe
Results & past polls
.63% 1552 votes Yes
.23% 565 votes No
.14% 332 votes Maybe
The central bank’s decision to raise interest rates was based on Canada’s initially strong rebound from the depths of the recession. Unfortunately, the nature of that recovery may have sown the seeds for trouble ahead.
By my calculations, every basis point of the Canadian economic recovery was the result of the boom in the housing sector. That goose is no longer laying any golden eggs. In fact, from recent peaks, single-family housing starts have plunged 32 per cent, residential building permits have sagged 17 per cent and home prices on average are down 6 per cent. In the absence of an export resurgence, which seems unlikely given the ongoing sluggishness in the U.S. economy, the downturn in housing is bound to keep the pace of domestic activity rather sluggish in coming quarters.
I estimate real GDP for this quarter will grow at a meagre 1.5 per cent annual rate. That is a huge deceleration from the peak pace of 5.8 per cent in the first quarter of this year when Canadians were patting ourselves on the back for our apparent ability to “decouple” from the listless U.S. economy.
Canada’s economy is now slowing down at a more pronounced rate than is the case south of the border and the Bank of Canada's latest 2.8 per cent forecast for third quarter real GDP growth is looking stale, to put it charitably.
There is no doubting the fragility of the recovery, which suggests that the Bank of Canada should put further rate increases on hold for a while. But its recent decisions illustrate how difficult it is for a central bank to navigate the right path between stimulating the economy with low interest rates and cooling off irrational exuberance with higher rates.
Even if this correction in housing is only a fraction as harsh as was the case south of the border, the economy, and the financial markets are likely in for a rude awakening in coming quarters..
Even though I was one of the “doves” advising the bank to refrain from raising rates earlier than planned, there was method in its madness. When the bank followed the U.S. Federal Reserve on the path towards microscopic policy rates in the opening months of 2009, it pledged to maintain such an unprecedented degree of stimulus “conditional” on a prolonged period of economic malaise.
The problem, especially for interest rate doves like me, is that instead of seeing a listless economic recovery in Canada, we saw a bounce back of massive proportions. In short order, Canadian employment has soared to record highs while the U.S. is still more than seven million jobs shy of its pre-recession peak.
Canada’s dramatic recovery has been taken as evidence of the fundamental strength of the country’s financial system – but the rebound was founded on a surge in credit growth and housing-related spending that must have the Bank of Canada feeling a bit uneasy.
Bank-wide mortgage lending has risen 10 per cent in the past year, compared with only a 4 per cent rise in wage and salary income. This is clearly not sustainable.
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them. .
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them.
The ratio of total household debt to income has surged to 146 per cent, right where the U.S. peaked at the height of its credit bubble. Anecdotal evidence suggests that the home ownership rate has risen to record levels of 70 per cent, also close to where the U.S. peaked out during the housing bubble.
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them.
Just to be clear, the Bank of Canada wasn't alone in spurring this huge – and unanticipated – housing boom. Canada Mortgage and Housing Corp. (CMHC) relaxed underwriting criteria in ways that made housing tremendously more affordable for marginal borrowers. Those home buyers could get a mortgage with almost no money down at near-zero short-term interest rates.
People can argue endlessly about whether the Canadian housing market constitutes a bubble. The reality is that we will probably find out at some time in the next year, as all the speculative high-ratio loans come due at interest rates above where they stood at the time of origination, courtesy of the Bank of Canada's tightening cycle, which may or may not have fully run its course.
Even if this correction in housing is only a fraction as harsh as was the case south of the border, the economy, and the financial markets are likely in for a rude awakening in coming quarters as lower home prices cut into household wealth, confidence and spending plans.
At the same time, housing deflation and a rising tide of mortgage delinquencies will bite into CMHC reserves and, at the margin, undercut the quality of Canadian banks’ seemingly pristine balance sheets, which hold $500-billion of residential real estate loans, equivalent to 30 per cent of total bank assets.
It may well be that Canada escaped a housing bubble and its inevitable aftershocks. But it is a close call. If it wasn’t a bubble, it was at least a giant sud.
Bubbles
•Five bubbles set to burst in 2010
•Beware the gold bubble
•'Mini-bubbles,' not big ones, on tap for commodities markets
•The trouble with bubbles: They're elusive
•Bond bubble? Not if you consider the facts
Saturday, September 18, 2010
Canadian home sales rise, prices stable
A real estate agent puts up a sold sign in front of a house in Toronto. Home sales increased in August, only the second time that's happened in calendar 2010. (Darren Calabrese/Canadian Press)
The average price was higher or stable on a yearly basis in two-thirds of the cities where CREA tracks data. On a monthly basis, the average price was slightly lower than the average selling price of $330,351 in July 2010.
It is also the third consecutive month that average sale prices have dropped after increasing at a torrid pace for the previous year.
The number of new listings on the agency's Multiple Listings Service was more than double than the number of sales. A 2-1 ratio of listings to sales is generally viewed as a "balanced" housing market, BMO economist Doug Porter noted.
"Rising interest rates and a projected slowdown in job growth mean that the Canadian housing market is expected to continue to cool," CREA president Georges Pahud said.
"A further tightening of regulations could negatively impact Canada’s softening housing market and consumer confidence."
In terms of sales, activity was 4.1 per cent higher, on a monthly basis, in August. It's the first monthly increase since March and only the second monthly gain of the 2010 calendar year.
Activity was up most in Ontario and British Columbia, with monthly gains in these two provinces accounting for most of the improvement in national sales activity.
Canada's real estate market was abnormally active in late 2009 as buyers rushed to take advantage of low interest rates, so yearly comparisons are likely to be negative for the rest of 2010, the agency warned.
"High sales activity late last year and earlier this year borrowed from sales this summer and will continue do so over the coming months," CREA economist Gregory Klump said.
"This makes the return to more normal levels of sales activity look like a steep downward trend.… The hangover from accelerated home purchases is likely to persist over the rest of the year."
MLS listings were 1.9 per cent higher during the month compared to July, which pushed inventory to 6.9 months at the end of August 2010 on a national basis, down slightly from the seven months of inventory at the end of July 2010.
Inventory is the term used to describe how long it would take to sell the entire available housing stock at the current sales.
"While home sales are still nursing a bit of a hangover from the real estate party in the first half of the year, it looks like conditions are stabilizing," Porter said.
Monday, September 13, 2010
Region sets pace for home prices
Statistics Canada is reporting that new home prices fell in July for the first time in 13 months. But while the average decline in new home prices in July was 0.1 per cent, Waterloo Region was home to Canada's largest new home price increases at 0.6 per cent.
"It just confirms what we've always believed that Kitchener-Waterloo, compared to some areas across Canada where prices have gone down, it just shows that we have a lot of confidence in our marketplace," Ted Scharf, President of the K-W Real Estate Board, says in response to the surge in new home prices here. "There are a lot of positive things happening and those things are leading to people buying houses, people buying cars, people buying any number of consumer goods."
As for the increase itself, Scharf believes it simply reflects what is available in the local real estate market. Home builders are merely building what buyers are demanding and, right now in Waterloo Region, buyers seem to be attracted to more expensive homes.
"It's not that there aren't people buying lower-priced houses or that people aren't out in the marketplace in other price ranges," Scharf muses. "It's just that, in general, the type of housing we have available right now is a little bit more expensive in July than it was in June."
The fact that buyers seem to be attracted to these higher priced homes is equally unsurprising to Scharf. He looks at the local economy and the positive jobs numbers (unemployment is down to 7% from 7.3) and sees consumer confidence.
"We're creating more jobs so more people have the ability to buy houses," Scharf says by way of analysis. "I think that's what's pushing people into the marketplace, too. Employment is really important and (we have) lots of jobs. And they're good-paying jobs."
The July home price declines were led by Vancouver (down 0.8%) and the Ontario centres of Greater Sudbury and Thunder Bay (both down 1.9%), and London (down 1.8%).
Thursday, September 9, 2010
New home prices drop for first time in 13 months
CTV.ca News
The price of new homes fell 0.1 per cent in July after a 0.1 per cent increase in June -- the first drop in more than a year, according to Statistics Canada's latest report.
The agency's New Housing Price Index released Tuesday lists Vancouver, London and Greater Sudbury and Thunder Bay, Ont., as the top contributors to the decline.
Between June and July, prices decreased most in Greater Sudbury and Thunder Bay, which dropped 1.9 per cent; London, down 1.8 per cent; and Windsor, Ont., which fell 1.5 per cent.
Meanwhile, construction on new housing units fell 3 per cent between July and August, according to the Canada Mortgage and Housing Corporation. The seasonally adjusted rate of housing starts was 183,300 units in August, compared with 188,900 in July, the organization reported Thursday.
"Housing starts moved lower in August, reflecting a decrease in both single and multiple starts," Bob Dugan, chief economist at CMHC's Market Analysis Centre, said in a statement.
Statistics Canada attributes the slump in new home prices in part to the introduction of the Harmonized Sales Tax, which isn't included in the index's calculations.
Prices rose in three of the 21 cities examined. The largest increase occurred in Kitchener-Cambridge-Waterloo, Ont., where they climbed 0.6 per cent as builders raised their prices.
The index was up 2.9 per cent year-over-year in July, following a 3.3 per cent rise in June.
Monday, September 6, 2010
Think Tank Experts Warn of Looming Burst of Rare Housing Bubble
Property values in largest cities could fall by nearly 40 percent over 3 years.
By Jim Fox
Ledger Correspondent
Published: Saturday, September 4, 2010 at 4:52 p.m.
A national "think tank" warns of a possible big drop in property values in Canada's largest cities while the country's housing market has cooled more than expected.
The Canadian Centre for Policy Alternatives said a rare "housing bubble" has developed and could burst, leading to values falling by nearly 40 percent in some cities over three years.
It's the first time in 30 years that house prices have increased faster than "historic comfort levels" simultaneously in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the report said.
The average house price in those cities exceeds $300,000.
Bank economists agree there will be price corrections but in the range of 10 percent to 15 percent.
Second-quarter economic growth has slowed more than expected because of cautious consumer spending and less demand for housing and renovations.
The economy expanded by only 2 percent from April to June compared with 5.8 percent in the first three months of the year.
House sales dropped 6.8 percent in July from a month earlier and were off 30 percent from a year ago, the Canadian Real Estate Association said. Renovations fell 0.8 percent after a year of growth.
Higher interest rates, the new combined federal and provincial sales taxes in Ontario and British Columbia and the end of federal tax rebates for home improvements were said to be factors.
PHONE REBATES
Canada's major phone companies have been ordered by federal regulators to refund from $25 to $90 to each of their customers within six months.
The Canadian Radio-television and Telecommunications Commission directed Bell Canada, Bell Aliant, Telus and MTS Allstream to give rebates amounting to $310.8 million to their urban home phone customers.
The companies collected $770 million since 2002 from customers to fund infrastructure projects in rural communities and the rebates amount to the unspent money.
The remaining money is being used to expand Internet broadband services in remote locations and improving accessibility to telecom services for persons with disabilities.
News in brief
The Alberta government is asking federal officials to try to convince Walgreens executives to end a boycott of oil from the province's oil sands. The U.S. drug store chain is switching to suppliers who aren't using fuel containing oil sands crude that is said to emit more carbon dioxide to refine than from other sources. The Gap, Levi Strauss and Timberland are also said to be considering a similar environmental-driven move.
A public opinion poll in advance of Labor Day shows 82 percent of Canadians would take a pay cut in exchange for a better work-life balance. The Harris-Decima poll also found that 57 percent feel they have more job security now than a year ago when only 46 percent felt secure in their work.
Facts and figures
Fewer house sales prompted the Bank of Montreal to drop its fixed-rate mortgage rates to 3.59 percent for a five-year renewable term, down from 3.79 percent.
A slowing economy has led to predictions the Bank of Canada might pause this month in raising the key interest rate after two previous 0.25 percent increases. The rate is 0.75 percent while the prime lending rate is 2.75 percent.
The Canadian Centre for Policy Alternatives said a rare "housing bubble" has developed and could burst, leading to values falling by nearly 40 percent in some cities over three years.
It's the first time in 30 years that house prices have increased faster than "historic comfort levels" simultaneously in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the report said.
The average house price in those cities exceeds $300,000.
Bank economists agree there will be price corrections but in the range of 10 percent to 15 percent.
Second-quarter economic growth has slowed more than expected because of cautious consumer spending and less demand for housing and renovations.
The economy expanded by only 2 percent from April to June compared with 5.8 percent in the first three months of the year.
House sales dropped 6.8 percent in July from a month earlier and were off 30 percent from a year ago, the Canadian Real Estate Association said. Renovations fell 0.8 percent after a year of growth.
Higher interest rates, the new combined federal and provincial sales taxes in Ontario and British Columbia and the end of federal tax rebates for home improvements were said to be factors.
PHONE REBATES
Canada's major phone companies have been ordered by federal regulators to refund from $25 to $90 to each of their customers within six months.
The Canadian Radio-television and Telecommunications Commission directed Bell Canada, Bell Aliant, Telus and MTS Allstream to give rebates amounting to $310.8 million to their urban home phone customers.
The companies collected $770 million since 2002 from customers to fund infrastructure projects in rural communities and the rebates amount to the unspent money.
The remaining money is being used to expand Internet broadband services in remote locations and improving accessibility to telecom services for persons with disabilities.
News in brief
The Alberta government is asking federal officials to try to convince Walgreens executives to end a boycott of oil from the province's oil sands. The U.S. drug store chain is switching to suppliers who aren't using fuel containing oil sands crude that is said to emit more carbon dioxide to refine than from other sources. The Gap, Levi Strauss and Timberland are also said to be considering a similar environmental-driven move.
A public opinion poll in advance of Labor Day shows 82 percent of Canadians would take a pay cut in exchange for a better work-life balance. The Harris-Decima poll also found that 57 percent feel they have more job security now than a year ago when only 46 percent felt secure in their work.
Facts and figures
Fewer house sales prompted the Bank of Montreal to drop its fixed-rate mortgage rates to 3.59 percent for a five-year renewable term, down from 3.79 percent.
A slowing economy has led to predictions the Bank of Canada might pause this month in raising the key interest rate after two previous 0.25 percent increases. The rate is 0.75 percent while the prime lending rate is 2.75 percent.
Canada's dollar has advanced to 96.02 cents U.S. while the U.S. dollar returns $1.0415 Canadian, before bank exchange fees.
Stock markets were higher Friday, with the Toronto exchange index at 12,123 points and the TSX Venture Exchange 1,550 points.
By Jim Fox
Ledger Correspondent
Published: Saturday, September 4, 2010 at 4:52 p.m.
A national "think tank" warns of a possible big drop in property values in Canada's largest cities while the country's housing market has cooled more than expected.
The Canadian Centre for Policy Alternatives said a rare "housing bubble" has developed and could burst, leading to values falling by nearly 40 percent in some cities over three years.
It's the first time in 30 years that house prices have increased faster than "historic comfort levels" simultaneously in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the report said.
The average house price in those cities exceeds $300,000.
Bank economists agree there will be price corrections but in the range of 10 percent to 15 percent.
Second-quarter economic growth has slowed more than expected because of cautious consumer spending and less demand for housing and renovations.
The economy expanded by only 2 percent from April to June compared with 5.8 percent in the first three months of the year.
House sales dropped 6.8 percent in July from a month earlier and were off 30 percent from a year ago, the Canadian Real Estate Association said. Renovations fell 0.8 percent after a year of growth.
Higher interest rates, the new combined federal and provincial sales taxes in Ontario and British Columbia and the end of federal tax rebates for home improvements were said to be factors.
PHONE REBATES
Canada's major phone companies have been ordered by federal regulators to refund from $25 to $90 to each of their customers within six months.
The Canadian Radio-television and Telecommunications Commission directed Bell Canada, Bell Aliant, Telus and MTS Allstream to give rebates amounting to $310.8 million to their urban home phone customers.
The companies collected $770 million since 2002 from customers to fund infrastructure projects in rural communities and the rebates amount to the unspent money.
The remaining money is being used to expand Internet broadband services in remote locations and improving accessibility to telecom services for persons with disabilities.
News in brief
The Alberta government is asking federal officials to try to convince Walgreens executives to end a boycott of oil from the province's oil sands. The U.S. drug store chain is switching to suppliers who aren't using fuel containing oil sands crude that is said to emit more carbon dioxide to refine than from other sources. The Gap, Levi Strauss and Timberland are also said to be considering a similar environmental-driven move.
A public opinion poll in advance of Labor Day shows 82 percent of Canadians would take a pay cut in exchange for a better work-life balance. The Harris-Decima poll also found that 57 percent feel they have more job security now than a year ago when only 46 percent felt secure in their work.
Facts and figures
Fewer house sales prompted the Bank of Montreal to drop its fixed-rate mortgage rates to 3.59 percent for a five-year renewable term, down from 3.79 percent.
A slowing economy has led to predictions the Bank of Canada might pause this month in raising the key interest rate after two previous 0.25 percent increases. The rate is 0.75 percent while the prime lending rate is 2.75 percent.
The Canadian Centre for Policy Alternatives said a rare "housing bubble" has developed and could burst, leading to values falling by nearly 40 percent in some cities over three years.
It's the first time in 30 years that house prices have increased faster than "historic comfort levels" simultaneously in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the report said.
The average house price in those cities exceeds $300,000.
Bank economists agree there will be price corrections but in the range of 10 percent to 15 percent.
Second-quarter economic growth has slowed more than expected because of cautious consumer spending and less demand for housing and renovations.
The economy expanded by only 2 percent from April to June compared with 5.8 percent in the first three months of the year.
House sales dropped 6.8 percent in July from a month earlier and were off 30 percent from a year ago, the Canadian Real Estate Association said. Renovations fell 0.8 percent after a year of growth.
Higher interest rates, the new combined federal and provincial sales taxes in Ontario and British Columbia and the end of federal tax rebates for home improvements were said to be factors.
PHONE REBATES
Canada's major phone companies have been ordered by federal regulators to refund from $25 to $90 to each of their customers within six months.
The Canadian Radio-television and Telecommunications Commission directed Bell Canada, Bell Aliant, Telus and MTS Allstream to give rebates amounting to $310.8 million to their urban home phone customers.
The companies collected $770 million since 2002 from customers to fund infrastructure projects in rural communities and the rebates amount to the unspent money.
The remaining money is being used to expand Internet broadband services in remote locations and improving accessibility to telecom services for persons with disabilities.
News in brief
The Alberta government is asking federal officials to try to convince Walgreens executives to end a boycott of oil from the province's oil sands. The U.S. drug store chain is switching to suppliers who aren't using fuel containing oil sands crude that is said to emit more carbon dioxide to refine than from other sources. The Gap, Levi Strauss and Timberland are also said to be considering a similar environmental-driven move.
A public opinion poll in advance of Labor Day shows 82 percent of Canadians would take a pay cut in exchange for a better work-life balance. The Harris-Decima poll also found that 57 percent feel they have more job security now than a year ago when only 46 percent felt secure in their work.
Facts and figures
Fewer house sales prompted the Bank of Montreal to drop its fixed-rate mortgage rates to 3.59 percent for a five-year renewable term, down from 3.79 percent.
A slowing economy has led to predictions the Bank of Canada might pause this month in raising the key interest rate after two previous 0.25 percent increases. The rate is 0.75 percent while the prime lending rate is 2.75 percent.
Canada's dollar has advanced to 96.02 cents U.S. while the U.S. dollar returns $1.0415 Canadian, before bank exchange fees.
Stock markets were higher Friday, with the Toronto exchange index at 12,123 points and the TSX Venture Exchange 1,550 points.
Wednesday, September 1, 2010
Housing bubble threatens in six cities: Report
By STEFANIA MORETTI, QMI Agency
Last Updated: August 31, 2010 12:21pm
A perfect storm has created a housing bubble in Canada that could lead to a drop in property value of nearly 40% in some markets, according to a report by the Canadian Centre for Policy Alternatives.
For the first time in 30 years, house price increases have climbed faster than historic comfort levels in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the think-tank said.
In the past, inflation-adjusted home price in these “red-hot” markets have held steady at between $150,000 and $220,000 in today’s dollar. But current average price tags in all six cities are now and well over $300,000.
"The bursting of housing bubbles is a rare event in Canada, but the steep rise in house prices in so many cities displays all the hallmarks of an accident waiting to happen," said the report's author, David Macdonald, in a release Tuesday.
Benjamin Tal, a senior economist and real estate expert at CIBC World Markets, said he wouldn’t use the word “bubble” to describe the present situation but did say prices are definitely “overshooting” and will go down.
But Canada’s big six markets are less stable than a generation ago, especially after the steep price increases between 2002-07, the report said.
Ten years ago, prices tended to hover around three to four times the provincial annual median income. Today, prices are pushing anywhere between 4.7 to 11.3 times annual median income.
As prices rise, mortgage holders are more and more vulnerable to rate changes, Macdonald said. As interest rates come off near-zero levels, variable rate holders may struggle to make rising monthly payments.
“Rate-setters at the big banks are in the driver's seat now as mortgage rates inch up. They need to hit the brakes lightly."
Either way, Canada’s real estate markets could be in for a correction at best or, at worst, a bubble burst, Macdonald said.
Using the 2006 housing market collapse in the U.S. as a model and simulating current market conditions, the Centre for Policy Alternatives predicts homeowners in Edmonton and Montreal could be hardest hit, losing 38% to 34% of their property value respectively in less than three years, in a worst-case scenario.
In terms of dollar value, Vancouverites would be worst hit and stand to lose nearly $200,000 on the average home.
“I really don’t see what would trigger this kind of sharp decline,” Tal said.
His forecasts are far less grim because as he sees it, the market fundamentals are still strong. Tal sees price drops to the tune of 10% on average and by 15% only in select cities.
“I’m not in this camp that sees disaster happening,” Tal said.
Canada has seen three housing bubbles burst, twice in Vancouver and once in Toronto, the report said.
Last Updated: August 31, 2010 12:21pm
A perfect storm has created a housing bubble in Canada that could lead to a drop in property value of nearly 40% in some markets, according to a report by the Canadian Centre for Policy Alternatives.
For the first time in 30 years, house price increases have climbed faster than historic comfort levels in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the think-tank said.
In the past, inflation-adjusted home price in these “red-hot” markets have held steady at between $150,000 and $220,000 in today’s dollar. But current average price tags in all six cities are now and well over $300,000.
"The bursting of housing bubbles is a rare event in Canada, but the steep rise in house prices in so many cities displays all the hallmarks of an accident waiting to happen," said the report's author, David Macdonald, in a release Tuesday.
Benjamin Tal, a senior economist and real estate expert at CIBC World Markets, said he wouldn’t use the word “bubble” to describe the present situation but did say prices are definitely “overshooting” and will go down.
But Canada’s big six markets are less stable than a generation ago, especially after the steep price increases between 2002-07, the report said.
Ten years ago, prices tended to hover around three to four times the provincial annual median income. Today, prices are pushing anywhere between 4.7 to 11.3 times annual median income.
As prices rise, mortgage holders are more and more vulnerable to rate changes, Macdonald said. As interest rates come off near-zero levels, variable rate holders may struggle to make rising monthly payments.
“Rate-setters at the big banks are in the driver's seat now as mortgage rates inch up. They need to hit the brakes lightly."
Either way, Canada’s real estate markets could be in for a correction at best or, at worst, a bubble burst, Macdonald said.
Using the 2006 housing market collapse in the U.S. as a model and simulating current market conditions, the Centre for Policy Alternatives predicts homeowners in Edmonton and Montreal could be hardest hit, losing 38% to 34% of their property value respectively in less than three years, in a worst-case scenario.
In terms of dollar value, Vancouverites would be worst hit and stand to lose nearly $200,000 on the average home.
“I really don’t see what would trigger this kind of sharp decline,” Tal said.
His forecasts are far less grim because as he sees it, the market fundamentals are still strong. Tal sees price drops to the tune of 10% on average and by 15% only in select cities.
“I’m not in this camp that sees disaster happening,” Tal said.
Canada has seen three housing bubbles burst, twice in Vancouver and once in Toronto, the report said.
Monday, August 30, 2010
Canada's resale housing market plunges in July
In July, sales in all 28 markets totalled 271,717 units, seasonally adjusted at an annual rate for a decline of 11 per cent, the Conference Board said.Photograph by: Postmedia News files, .OTTAWA — Existing home sales plunged 11 per cent between June and July and have fallen 31 per cent year over year, the Conference Board said in a report Friday.
July resales were below year-earlier levels in all of the 28 markets tracked by the board and at least 10 per cent lower in 26 areas.
The worst declines were posted in the biggest markets, Toronto and Vancouver, where sales declined 13.6 per cent and 20.1 per cent, respectively.
Board economist Robin Wiebe said it is possible the drop came as a result of the application in Ontario and B.C of the harmonized sales tax in July. But aside from associated costs like legal fees, the HST applies only to sales of new homes and not resales, so it would have been more a matter of investor psychology than anything, he said.
Further, he added, the July numbers do not indicate a market in free fall but "a throttling back to less elevated levels," from the red-hot pace witnessed earlier in the year.
"I'd be hesitant to predict another big drop ahead," Wiebe said. "Canada's economic conditions seem sound, so conditions are in place for balanced markets to persist."
In July, sales in all 28 markets totalled 271,717 units, seasonally adjusted at an annual rate for a decline of 11 per cent, the board said.
The sales action in July has in fact left markets balanced in all but four of the 28 markets. The remaining four — Victoria, Calgary, Edmonton and Regina — are now considered buyers' markets.
The board's numbers are in line with those released by the Canadian Real Estate Association in mid-August showing July sales fell 30 per cent from a year ago.
© The Financial Post
Thursday, August 26, 2010
Canada Property Prices Tipped to Rise
The Canada Real Estate Associate (CREA) anticipates that the average price of a home in Canada will rise by 3.5 per cent in 2010 to $331,600 (£203,000), with increases in all provinces.
A fall in the supply of homes in Canada coming onto the market is expected to spearhead the rise in Canada property prices, but also lead to a decline in sales transactions.
The CREA also project that residential sales in Canada will fall by 7.3 per cent in 2011, despite the fact that Canada property prices are likely to rise higher than a previous forecast.
National sales activity is tipped to hit 459,600 homes in 2010, representing an annual decline of 1.2 per cent. However, weaker economic growth and consumer spending will contribute to a fall to 426,100 homes in Canada in 2011.
Georges Pahud, CREA president, said: “The Bank of Canada recognises that inflation remains well contained and that economic growth will soften, so interest rates will rise slowly and at a measured pace, which will keep home financing within reach for many homebuyers.
“While the jump in national sales activity earlier this year likely borrowed from the future, local markets trends are not necessarily in sync with national trends, so buyers and sellers would do well to consult with their local agent to best understand the outlook in their market.”
Written by: A Place in the Sun Tuesday, August 24, 2010
A fall in the supply of homes in Canada coming onto the market is expected to spearhead the rise in Canada property prices, but also lead to a decline in sales transactions.
The CREA also project that residential sales in Canada will fall by 7.3 per cent in 2011, despite the fact that Canada property prices are likely to rise higher than a previous forecast.
National sales activity is tipped to hit 459,600 homes in 2010, representing an annual decline of 1.2 per cent. However, weaker economic growth and consumer spending will contribute to a fall to 426,100 homes in Canada in 2011.
Georges Pahud, CREA president, said: “The Bank of Canada recognises that inflation remains well contained and that economic growth will soften, so interest rates will rise slowly and at a measured pace, which will keep home financing within reach for many homebuyers.
“While the jump in national sales activity earlier this year likely borrowed from the future, local markets trends are not necessarily in sync with national trends, so buyers and sellers would do well to consult with their local agent to best understand the outlook in their market.”
Written by: A Place in the Sun Tuesday, August 24, 2010
Tuesday, August 24, 2010
Home sales expected to have fallen in July as economy remains weak, tax credits run out
By Alan Zibel
Story Tools WASHINGTON (AP) - The housing market is taking a turn for the worse.
Tuesday's report from the National Association of Realtors about sales of previously occupied homes is expected to show sales plunged in July. Economists are predicting as much as a 26 percent drop from a month earlier to a seasonally adjusted annual rate of 3.95 million. That would be the worst month for sales in more than a decade.
Many say the market is hurting because buyers and sellers are in a standoff over home prices. Sellers have unrealistic expectations about their home values and are listing properties on the high end.
Buyers are afraid home prices will start falling after being flat nationally for about a year and even rising in some parts of the country.
"It really is a self-fulfilling prophecy," said Aaron Zapata, a real estate agent in Brea, Calif. "If all buyers perceive that home prices are coming down, then they will stop making offers — and home prices will come down."
The housing market is also being hampered by a weakening economic recovery. Unemployment remains stuck at 9.5 percent and many prospective buyers worry they might not have a job to pay the mortgage. Prices are low, but that's largely because foreclosures are running about 10 times higher than before the housing bust. And while mortgage rates are at the lowest levels in decades, many people can't qualify because banks are being selective in the tough economy.
Home sales picked up in the spring when the government was offering tax credits, with the best incentives for first-time homebuyers. But the tax credits expired on April 30 and the market has been hobbled since.
Last month, first-time buyers made up just over 39 percent of sales, down from more than 48 percent in March, according to a survey of more than 3,000 real estate agents by industry research firm Campbell Surveys. If the economy slips back into a recession, analysts predict the housing market will get a lot worse.
Moody's Analytics projects that home prices could drop another 20 percent by early 2012 if there is another recession. Even if the recovery remains on track, Moody's forecasts that prices will falling another 5 percent and hit bottom early next year.
A continuing surge of foreclosures is also making the problem worse.
The nation is now on track to have more than 1 million homes lost to foreclosure by the end of the year, according to foreclosure listing service RealtyTrac Inc. That would eclipse the more than 900,000 homes repossessed in 2009, and compares with the more than 100,000 homes that lenders typically seized per year before the housing bust.
Those at risk of foreclosure are having a hard time getting help. Nearly half of the 1.3 million U.S. homeowners who enrolled in the Obama administration's flagship mortgage-relief program have fallen out, the Treasury Department said last week. That compares with about 422,000 homeowners, or roughly 32 percent of those who started the program, have received permanent loan modifications and are making their payments on time.
Story Tools WASHINGTON (AP) - The housing market is taking a turn for the worse.
Tuesday's report from the National Association of Realtors about sales of previously occupied homes is expected to show sales plunged in July. Economists are predicting as much as a 26 percent drop from a month earlier to a seasonally adjusted annual rate of 3.95 million. That would be the worst month for sales in more than a decade.
Many say the market is hurting because buyers and sellers are in a standoff over home prices. Sellers have unrealistic expectations about their home values and are listing properties on the high end.
Buyers are afraid home prices will start falling after being flat nationally for about a year and even rising in some parts of the country.
"It really is a self-fulfilling prophecy," said Aaron Zapata, a real estate agent in Brea, Calif. "If all buyers perceive that home prices are coming down, then they will stop making offers — and home prices will come down."
The housing market is also being hampered by a weakening economic recovery. Unemployment remains stuck at 9.5 percent and many prospective buyers worry they might not have a job to pay the mortgage. Prices are low, but that's largely because foreclosures are running about 10 times higher than before the housing bust. And while mortgage rates are at the lowest levels in decades, many people can't qualify because banks are being selective in the tough economy.
Home sales picked up in the spring when the government was offering tax credits, with the best incentives for first-time homebuyers. But the tax credits expired on April 30 and the market has been hobbled since.
Last month, first-time buyers made up just over 39 percent of sales, down from more than 48 percent in March, according to a survey of more than 3,000 real estate agents by industry research firm Campbell Surveys. If the economy slips back into a recession, analysts predict the housing market will get a lot worse.
Moody's Analytics projects that home prices could drop another 20 percent by early 2012 if there is another recession. Even if the recovery remains on track, Moody's forecasts that prices will falling another 5 percent and hit bottom early next year.
A continuing surge of foreclosures is also making the problem worse.
The nation is now on track to have more than 1 million homes lost to foreclosure by the end of the year, according to foreclosure listing service RealtyTrac Inc. That would eclipse the more than 900,000 homes repossessed in 2009, and compares with the more than 100,000 homes that lenders typically seized per year before the housing bust.
Those at risk of foreclosure are having a hard time getting help. Nearly half of the 1.3 million U.S. homeowners who enrolled in the Obama administration's flagship mortgage-relief program have fallen out, the Treasury Department said last week. That compares with about 422,000 homeowners, or roughly 32 percent of those who started the program, have received permanent loan modifications and are making their payments on time.
Real estate speculators, immigrants and crooks: Are they just scapegoats?
By Don Cayo, Vancouver Sun August 23, 2010
What drives Vancouver’s house prices so relentlessly to levels four times higher than Winnipeg’s, and more than half again what Torontonians pay?
Criminals are people, too. As are immigrants, old folks and any other demographic group you can name.
And, yes, these folks all do their bit to drive up the cost of housing in Metro Vancouver.
Because the fact is, the more of us there are, no matter who or how we make our money, the more demand for homes. This, coupled with a housing supply that's limited and skewed by our dramatic but difficult geography, pushes prices sky-high.
But do some of us drive up prices more than others?
Looking at a few specific neighbourhoods, the answer may very well be yes. But region-wide, not so much.
Vancouver's successive waves of wealthy immigrants, for example, no doubt bid up prices of upscale homes in the parts of the city that these newcomers see as choice.
Of course, the same could be said of poorer newcomers, who drive up the rents in basement apartments. After all, if they didn't come here, or if they had more money, half our mortgage-helper suites would be empty and competition for tenants would drive prices down.
Beyond these obvious observations, however, the analysis gets complicated. There's lots of speculation, but no data, on how much money organized (or, for that matter, unorganized) crime injects into the economy, how much spending power immigrants bring with them, or if or how much property flippers influence prices.
B.C.'s underground economy (shady cheats as well as gangland thugs) is likely north of 15 per cent of gross domestic product. This works out to more than -- maybe a lot more than -- $25 billion.
"Ultimately each drug dealer, each gangster, has to buy a Louis Vuitton bag for his girlfriend," says Andy Yan, a planner and researcher at Bing Thom Architects. "The minute this happens, the grey economy hits the real economy."
That's a lot of money, "and no doubt it plays a role," says Jock Finlayson of B.C. Business Council. "But is it an underlying explanation for the price of housing? I don't think so."
My colleague Kim Bolan specializes in crime, not real estate, but she agrees.
Bolan tells me top echelon gangs do invest in real estate and legitimate companies, but "if I think about all the gangsters arrested over the last two years, few had houses. Those who did usually just had one."
Not surprising, perhaps, given that real estate deals attract the attention of the anti-money-laundering FINTRAC system, whereas luxury car purchases and pricey condo rents do not.
But, as with the unknowable amounts in savings and offshore earnings that immigrants bring into B.C., proceeds of crime clearly put a lot of money into circulation. And that can't help but bolster demand beyond the limits suggested by the region's fairly modest level of officially reported income.
Housing supply, apart from the geographical constraints dealt with in Saturday's column, is further restricted by the generous amount of land set aside for parks and other public places, as well as the Agricultural Land Reserve, which becomes an ever-greater factor as housing sprawls farther into the suburbs.
Supply is further choked by the tendency, supported by tax breaks from every level of government, for senior couples or individuals to stay as long as they can in the large homes where they raised families.
Tsur Somerville, an economist who specializes in real estate at UBC's Sauder School of Business, notes that it's hard to say if this will be a bigger or a smaller market factor in the future. On one hand, there's a growing tendency for seniors to sell their big homes and invest the money in condos, which may cost as much but which occupy a lot less land. On the other hand, every year there are more and more seniors, and they're living longer.
Real estate consultant Paul Sullivan of Burgess Cawley Sullivan and Associates notes that even when seniors do sell out, and even when these homes are modest, they often aren't an option for most young buyers, especially in upscale areas.
"Where the one-level, 1,200-square-foot bungalow used to sell for $400,000," he says, "it's been pushed to $800,000, $1 million or $1.2 million as a development site.
"A developer can build a new home for $500,000 or $600,000 and sell it for $1.8 million. So if you want an entry-level home, you're competing with a developer who wants to buy the same house and tear it down."
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