A run down of what's going on in the market and the company.

Wednesday, December 15, 2010

The Shinking Middle Class

Shrinking middle class makes Toronto a city of socioeconomic extremes

December 15, 2010
By ANNA MEHLER PAPERNY
From Wednesday's Globe and Mail

The notion of 'the city that works' is no longer sustainable, researchers say, as Toronto becomes a bipolar metropolis of rich and poor
Toronto is becoming a city of stark economic extremes as its middle class is hollowed out and replaced by a bipolar city of the rich and poor - one whose lines are drawn neighbourhood by neighbourhood.

New numbers indicate a 35-year trend toward economic polarization is growing more pronounced: The country's economic engine, which has long claimed to be one of the most diverse cities in the world, is increasingly comprised of downtown-centred high-income residents - most living near subway lines - and a concentration of low-income families in less dense, service- and transit-starved inner suburbs.

Three years ago, University of Toronto professor David Hulchanski published a paper on Toronto's "Three Cities," illustrating a growing socioeconomic disparity among the city's census tracts. But the three-way divide Prof. Hulchanski and his fellow Cities Centre researchers described is swiftly being reduced to two, according to a new paper they will release Wednesday. Toronto, a predominantly middle-class metropolis just three decades ago, is increasingly dominated by two opposite populations - one with an average income of $88,400, and another of $26,900.

These two groups live in different neighbourhoods, work in different sectors, send their children to different schools and have divergent and unequal access to city services and public transit. Even the 905-area suburbs outside of Toronto are seeing a dramatic drop in the proportion of middle-income earners in their population, the report finds.

Those in the lowest-income areas are also more likely to be immigrants and visible minorities.

"It's only going to become worse," Prof. Hulchanski said. If the trend continues, the paper suggests, Toronto in 2025 will have a concentration of high-earners along the lakefront and the city's subway lines surrounded by low-income areas - with almost nothing in between.

That continuing trend risks creating pockets of the city that become "no-go zones," said Carol Wilding, president of the Toronto Board of Trade. She added the information isn't surprising, but it "starts to put more of a crisis tone" on the need for the city to fix a growing problem that's as economic as it is social.

"It does make it more challenging for businesses to want to get in there to invest in those neighbourhoods," she said. "It's a greater call to action. ... We aren't moving fast enough."

It also seems to contradict Toronto's most prized mottos - "Diversity our strength" and "The city that works." Neither of those rings true any more: Toronto's diversity is becoming balkanized, turning it into a weakness where it could otherwise act to the city's advantage. The creation of economically polarized pockets of high- and low-income residents means Toronto simply won't "work" as a municipal entity.

"We used to brag about it," Prof. Hulchanski said. " 'Toronto's an efficient city - it works.' We know now that's not true.

"To have so much poverty in one geography and for it to be so deep and for the social distance to be so large ... that isn't healthy."

In a five-year period alone, average incomes declined in 34 of the city's census tracts (about 7 per cent of its total) - 23 of those areas became predominantly low-income. At the same time, 12 areas became high-income and nine earned "middle-income" status.

"That change has been quite dramatic," Prof. Hulchanski said, although it's difficult to tell precisely how out of the ordinary it is because such geography-specific research into socioeconomic disparities is new to Canada. But it's becoming far less rare. The most populous cities in the country are finding themselves economically divided by neighbourhood, and are struggling to figure out why.

In Toronto, the idea of neighbourhood-specific poverty came to the fore several years ago. Among city-sponsored and independent community initiatives, it spawned a "priority neighbourhoods" program, in which the city targeted several particularly troubled areas.

Despite the flood of money and services, however, things aren't improving on a broader scale.

Israt Ahmed sees that reality every day. The Scarborough-based community planner sees families, seniors and new immigrants struggling to cope in her Kingston-Lawrence neighbourhood. And she knows firsthand the effect a lack of transit has on economic prospects. She used to commute more than two hours each way to get to her job in Etobicoke - but at least it was full-time.

"Most of the jobs here are part-time, contract. They aren't adequate jobs for people. No wonder accumulation of wealth is happening somewhere else."

Data in the report paint a stark picture even before the recession, which hit some Torontonians far harder than others and whose sluggish recovery is skipping large swaths of the population.

"If anything," said TD Bank economist Derek Burleton, "these challenges have gotten worse."

Mayor Rob Ford won big in Toronto's suburbs in the October election, after his campaign derided his predecessor's policies on rejuvenating Toronto's high-rise apartment towers and using the city's zoning clout to encourage mixed neighbourhoods. Mr. Ford's office referred questions Tuesday to the mayor's appointee to chair city council's planning and growth management committee, Councillor Peter Milczyn.

Mr. Milczyn said he'd like to see the city advocate inclusionary zoning "as one of several options," which would include an emphasis on affordable private housing and incentives for investment that create local employment.

In the years after Beatriz Sousa moved to Canada from Portugal in 1980 to raise her family, she and her husband saved enough money to afford a house. But when heart problems cost him his housekeeping job five years ago, they were forced to sell - living first with their daughter and then in an apartment near Kipling Avenue and Albion Road in north Etobicoke, deep into Prof. Hulchanski's "third city" territory. She'd still like to move elsewhere, at least to a building that won't make her husband dizzy.

But a year after getting laid off from her own job, Ms. Sousa's employment insurance expired last month. Their earnings from Mr. Sousa's disability payments are "never enough," she said, but "what are you going to do? It's better than nothing."

A tale of three cities

City One

High-income earners - 20 per cent to 40 per cent above the median income for the city.

Percentage of city in 1970: 8

Percentage of city in 2005: 4

Very high-income earners - more than 40 per cent above the median income for the city.

Percentage of city in 1970: 7

Percentage of city in 2005: 15

The city's high earners have a much more prominent place now than they did in the 1970s. And they're most prominent in Toronto's downtown core and along its transit arteries.

According to the report, 82 per cent of City One's population is white; 61 per cent of them have a university education. This population also shows the highest increase in average individual income: Income increased by 99 per cent over 35 years, and by 29 per cent from 2000 to 2005.

City Two

Middle-income earners - individuals earning within 20 per cent above and 20 per cent below the median income for the city.

Percentage of city in 1970: 66

Percentage of city in 2005: 29

Back in the 1970s, Toronto was predominantly a City Two kind of town: Middle-of-the-road earners dominated - especially in the suburbs, many of which were built for a car-driving, house-owning middle class.

Not so much now.

City Three

Low-income earners - 20 per cent to 40 per cent below the median income for the city.

Percentage of city in 1970: 18

Percentage of city in 2005: 40

Very low-income earners - more than 40 per cent below the median income for the city.

Percentage of city in 1970: 1

Percentage of city in 2005: 14

This third city has seen the highest population growth of the three categories since the 1970s, despite being less dense, on average, than the others. Its population has more youth and children, and a higher percentage of single-parent households - 23 per cent versus 14 per cent in City One. One in five adults doesn't have a school certificate, diploma or degree.

It also has a far greater number of immigrants and visible minorities: City Three's immigrant population almost doubled in 35 years - from 31 per cent to 61 per cent. And City Three's visible minorities are the majority - 66 per cent of the population. Fifty-four per cent of the city's homicides from 2005 to July, 2009, took place in these neighbourhoods.

The report notes that residents of these neighbourhoods have to travel farther to find employment but have the poorest access to transit. Only 19 of the system's 68 subway stations are within or near City Three neighbourhoods.

Direct Link:
http://www.theglobeandmail.com/news/national/toronto/shrinking-middle-class-makes-toronto-a-city-of-socioeconomic-extremes/article1838176/

Sunday, December 12, 2010

TOP 10 REASONS TO INVEST IN REAL ESTATE NOW!

10. Real estate is the number one investment vehicle for creating millionaires. If this alone is not a good enough reason to become an investor, I do not know what is!

9. By allowing a person to leverage his/her money, investments in real estate can make much more money than stocks. A $10,000 investment in stocks may raise 8-10% a year. This is an increase of $800 - $1000 over a year. A $10,000 dollar investment in real estate on a $100,000 house which may increase in value 5-6% a year would give you $5000 - $6000 ROI which is 50-60% return. This is a no brainer.

8. Instant equity! If you make a good deal on real estate you can end up with 10-30% instant equity. Take the house mentioned above. Say you made a good deal on it and purchased it for $85,000. The house is worth $100,000 and next year it will be worth $105,000. You walk away with $15,000 instant equity, and next year could sell the property for $20,000 in profit. Spend a couple thousand adding curb appeal to the property and you could maybe get $115,000.

7. The real estate market is at or near the bottom. If you buy and hold till the market regains its composure you stand to gain considerable equity.

6. We are in a buyers market. With all the foreclosures on the market, many people are struggling to sell their home giving you bargaining power when you talk to them.

5. Landlords that over leveraged their properties are having a hard time. You may be able to pick up a good deal if you find the right landlord.

4. People are going through tough times with the unemployment rate at about 10%, Many people are losing their homes. If you purchase the house in pre-foreclosure you can help the owner out of his or her tough situation. This opens an opportunity for creative financing using subject to, I would be cautious of doing seller financing because if the person ends up filing bankruptcy you could be out of a house.

3. Many foreclosures and Bank Owned property can be bought for a fraction of the value right now. Here in Miami county Ohio, the foreclosures at the sheriff sale have risen about 50% this month, and the docket looks just as full for the next two months. By going to the Sheriff sales you can get property sometimes at 2/3rds of the appraised value.

2. The next big wave of foreclosures is right around the corner. There was a pause in foreclosures from October 2008 to March of 2009. The six month waiting period is now over and foreclosures are starting to rise again posing an investment opportunity.

1. Real Estate is at an all time low. The current housing market is at levels not seen since the last bust in 1989. This bust created many real estate millionaires. People who saw the opportunity from the 1989 housing bust profited immensely. Many if not more opportunities exist in this bust as there were in the 1989 bust.

Posted December, 2010
Alex Kruzic
IT'S TIME TO OWN INC.
Canada's Premier Real Estate Investing Firm
www.itstimetoown.com
info@itstimetoown.com
1-877-902-8463

Tuesday, October 19, 2010

BoC Keeps Key Rate Unchanged

BoC Keeps Key Rate Unchanged
Date: October 19th, 2010

The market widely predicted the Bank of Canada would not raise rates, and it was right. The BoC has left its key lending rate at 1.00%.

In turn, prime rate will remain at 3.00%, making today’s BoC meeting a non-event for mortgage holders in the short-term.

The BoC’s call comes amid languid recent growth and inflation numbers. Here’s a sampling of the Bank’s commentary from its official statement:

The BoC sees a “weaker-than-projected recovery in the United States.” (No revelations there)
The potential exists for “a more protracted and difficult global recovery.”
“…domestic considerations…are expected to slow consumption and housing activity in Canada.”
“Inflation in Canada has been slightly below the Bank’s July projection.”
“The inflation outlook has been revised down and both total CPI and core inflation are now expected to converge to 2% by the end of 2012.” (As long as inflation doesn’t threaten to exceed the Bank’s 2% target for any extended period, that’s generally good news for mortgage rates.)
The 1% overnight target rate “leaves considerable monetary stimulus in place.”
The Bank also adjusted its growth forecasts as follows:

2010 growth cut to 3.0% from 3.5%
2011 growth cut to 2.3% from 2.9%
2012 growth raised to 2.6% from 2.2%
Translation: Things are worse than the Bank expected.

A key takeaway here is that the BoC sees little inflation threat through 2012. That’s a long ways off. If true, this improves the odds that short-term and variable-rate mortgages will be the lowest-cost options for the next few years. (Remember, however, that the BoC can raise its forecasts just as easily as it lowers them.)

The next and final interest rate meeting of 2010 is on December 7. As of today, most analysts expect no rate move at that meeting either.

Source: CanadianMortgageTrends.com
Link to Article: http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2010/10/boc-keeps-key-rate-unchanged.html

Friday, October 15, 2010

Emerging Trends 2011: U.S. Commercial Real Estate Needs to Cope With “Era of Less”

Oct 13, 2010 6:06 PM, By David Bodamer

There’s light at the end of the tunnel for commercial real estate, but the industry’s recovery will play out in an “era of less”, according to the Emerging Trends in Real Estate 2011 released today by PwC and the Urban Land Institute.

Every property sector will be affected by macroeconomic transformations that have taken place. As a result, the conditions that caused property values to surge to vertiginous heights in 2007 are not likely to materialize again. What it means concretely is that the U.S. is seeing a return to multigenerational households. Children are living with the parents for longer due to diminished job prospects and high student debt loads. And baby boomers—with reduced savings—are increasingly living with their children rather than relocating to swank retirement communities. Indeed, recent data from the U.S. Census Bureau showed that between March 2009 and March 2010, the number of households rose by just 357,000—the lowest level since 1947.

In addition, scaling back will mean fewer cars, smaller offices and fewer distribution links. As a result, every commercial real estate sector faces some continued scaling back rather than any increased demand for new space in the near future.

In this climate, investors should anticipate high single digit returns for core properties and mid-teen returns for higher risk investments.

Jonathan Miller, the report’s principal author, and Stephen Blank, a senior resident fellow for real estate finance with ULI, revealed the annual report’s findings at the Urban Land Institute’s Fall Meeting being held in Washington D.C. from Oct. 12 through Oct. 15. Miller and Blank both emphasized that the outlook for commercial real estate had clearly improved from a year ago, but were quick to point out that any enthusiasm should be restrained by the many challenges that remain.

What may be frustrating for the sector is that its future is not entirely within its control. As one respondent said, “Our problems are much bigger than real estate, and solutions are well beyond the scope of our industry.”

Most significantly, respondents identified job creation as a key determining factor of the sector’s health, but “nobody knows where the jobs are going to come from,” Blank said. As a result, Blank projects the U.S. economy is looking at something more like a “reverse J” recovery as opposed to a V- or L-shaped recovery.

In addition, the outlook is uneven. For example, the investment picture remains bifurcated with only top assets in the best markets trading. In fact, according to Miller, some respondents even expressed reservations that investors may be overpaying for these assets. In all, property values are continuing to re-set to levels below the 2007 peaks and the pricing on some deals does not appear to take this into account. Meanwhile, for lower quality assets “it’s hard to tell at all what their values are,” Blank said. “Investors don’t want to look at them at all.”

Debt remains an overriding issue in assessing the investment climate. Equity is available. In fact, many buyers are sitting flush with cash. More than 55 percent of respondents to the survey said that equity was either “moderately” or “substantially” oversupplied. On the flip side, more than 78 percent of respondents said that debt was either “moderately” or “substantially” undersupplied.

“Regulators looking the other way for a long time certainly have helped,” Blank said. “Low interest rates and [other conditions] have helped lenders” and put them in a position to originate loans. “But they only want to look at the best assets.”

The outlook also varies by market. According to the report, the top 10 markets in the country are Washington D.C., New York, San Francisco, Boston, Seattle, Houston, Los Angeles, San Diego, Denver and Dallas. What the best markets have in common is that they are generally 24-hour cities that boast high concentrations of brain power, echo boomers, empty nesters and are investor magnets. On the flip side, housing bust markets—such as the Southwest and Florida—and the Midwest have the bleakest outlooks, according to the report.

When it comes to property types, apartments ranked as the most attractive investment option among all property types, according to survey respondents. The sector received a score of 6.19 on a scale of 10 followed by industrial at 5.07, hotels at 4.78, office at 4.72 and retail at 4.50.

In the retail sector, only fortress malls and top-tier neighborhood centers in infill markets are performing well. Class-B and class-C malls continue to struggle as do power centers and neighborhood centers built on the fringes where population growth has faltered.

As for development, survey respondents think it is still a long time before the industry will require large amounts of new construction. It could be three to five years before volume rises significantly and even longer than that for the retail sector, which respondents believe is the most overbuilt. No sector got a positive development rating in the survey. Apartments received a 4.85—on a scale of 10—while industrial scored 3.12, hotels 2.33, retail 2.26 and office 2.06.

As Blank put it, "We don't need anything new."

Wednesday, September 8, 2010

Carney hikes rates, cites uncertainty

Bank of Canada governor leaves room to pause at next meeting following three straight increases in benchmark

Jeremy Torobin
Ottawa — Globe and Mail Update
Published on Wednesday, Sep. 08, 2010 9:03AM EDT
Last updated on Wednesday, Sep. 08, 2010 9:45AM EDT

Bank of Canada Governor Mark Carney raised his benchmark interest rate for the third straight time Wednesday, but left himself room to pause at his next scheduled decision by saying that while borrowing conditions in Canada remain “exceptionally stimulative,” the overall economic climate is fraught with “unusual uncertainty.”

In the statements on his decision to lift the overnight rate by another quarter of a percentage point to 1 per cent, Mr. Carney reiterated - arguably more strongly than in the past - that future moves will depend on developments around the world and, in turn, how they are affecting Canada’s export-heavy economy.

“Any further reduction in monetary stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook,” the central bank said, tweaking language in the all-important last line of the statement that accompanied its previous two rate hikes, which referred to “considerable” uncertainty.

Unlike the previous two statements, on June 1 and July 20, Wednesday’s decision included no mention of debt problems or belt-tightening in Europe. However, Mr. Carney left little doubt that the sputtering U.S. recovery is now the No. 1 risk to the global and Canadian recoveries, saying in the second paragraph of his statement that the rebound in private demand south of the border is being crimped by stubbornly high joblessness and that ``recent indicators suggest a more a more muted recovery in the near term.’’

As a result, the central bank said, the global bounce-back from the worst downturn since the Depression is ``proceeding but remains uneven, balancing strong activity in emerging market economies’’ (such as China and India, though the central bank didn’t name them) against ``weak growth in some advanced economies.’’

At the same time, the central bank appeared to downplay the effect that the global turmoil is having on Canada, calling the country’s 2-per-cent annual growth rate in the second quarter ``slightly softer’’ than what policy makers had expected, even though their latest forecast in July was for a 3-per-cent pace.

The Canadian recovery will be ``slightly more gradual’’ than the central bank expected in July, but consumer spending and investment have ``evolved largely as anticipated,’’ it said, reflecting the fact Mr. Carney’s forecasts have warned of a slowdown for several months because of factors such as the fading impact of government stimulus and the cooler real-estate market.

In the future, consumption growth will ``remain solid’’ and business investment -- which has a surprisingly strong pickup in the second quarter, Statistics Canada data last week showed -- will ``rise strongly,’’ the central bank said. For now, as the U.S. recovery proceeds in fits and starts, investor demand for safer investments such as bonds is pushing borrowing costs down and helping consumers and companies, the bank noted.

``Financial conditions in Canada have tightened modestly but remain exceptionally stimulative,’’ the central bank said.

In its July 22 forecast, Mr. Carney said inflation will stay near the central bank’s 2-per-cent target throughout the projection period, and the economy will return to full capacity at the end of 2011. On Wednesday, Mr. Carney said inflation -- which has been tame in recent months -- has been in line with his expectations and the dynamics surrounding prices in Canada ``are essentially unchanged.’’

All of that suggests Mr. Carney and his deputies are still rather uncomfortable with an overnight lending rate so far away from what most economists consider ``neutral,’’ or about 3.5 per cent to 4 per cent.

Still, the continuing emphasis on risks from abroad and on the uncertain nature of the global recovery indicate policy makers are trying to signal to remind investors that the central bank reserves the right to pause at its next decision, on Oct. 19, to spend more time assessing how the situation in Canada and abroad is unfolding. Mr. Carney would explain such a move in a new forecast the following day.

Central bankers in Japan and Australia this week indicated that fears about the durability of the U.S. rebound are weighing heavily even on the minds of policy makers whose countries aren’t quite as dependent on the world’s biggest economy. The Reserve Bank of Australia kept a pause in place on Tuesday, despite having the biggest spike in economic growth in the country since 2007, and the Bank of Japan highlighted ``uncertainty’’ about the U.S. in saying that it is prepared to add more stimulus if needed.

Monday, August 16, 2010

Canadian home sales sink 30%

Market stalls in July, though prices 1 per cent above year-ago levelss

Steve Ladurantaye
Globe and Mail Update
Published on Monday, Aug. 16, 2010 9:13AM EDT
Last updated on Monday, Aug. 16, 2010 11:04AM EDT

Canada’s housing market stalled in July as sales sank 30 per cent from the same month a year earlier, the Canadian Real Estate Association said Monday.

Prices edged up 1 per cent from July 2009, though slipped 3.5 per cent from June, with sellers finding far fewer buyers willing to step into the market.

The average resale price nationally was $330,351, according to the Canadian Real Estate Association. In June, the price was $342,662.

“We expect a downward correction of nearly 10 per cent in the monthly average prices, followed by several years of stagnation of price growth at the rate of inflation, in order to bring Canadian house prices back to balance,” TD Bank economist Grant Bishop said.

The country's largest cities led the annual decline, with Vancouver posting a 45-per-cent drop in sales.

CREA, a trade association that governs the country's 100,000 real estate agents, attributed the decline to an increased number of sales earlier in the year and said the “outlook for economic and job growth remains generally positive nationally.”

“The soft sales figures we're seeing right now can be attributed in part to accelerated home purchases earlier in the year,” CREA president Georges Pahud said in a statement. “Activity may remain at lower levels for some time, but ultimately we expect a more stable market to emerge, with demand coming back into line with economic fundamentals.”

Earlier this month, CREA lowered its forecast for the year, saying sales would post an annual decline of 1.2 per cent compared to 2009, which saw the market rebound with an unprecedented intensity from the recession. It also forecast prices would end the year at $331,600 - slightly higher than July's average.

Economists suggest many Canadians bought houses earlier in the year than they would have otherwise to take advantage of low interest rates. This caused huge gains in the first half of the year, but is expected to mean a lull as the year winds down.

“While the softening in sales is very real, we continue to view it as a giveback (a big giveback, admittedly) to the surge in sales in the first half of the year,” BMO said in a research note. “Anyone who wanted to buy a home this year seems to have done so already. Still, note that prices remain a bit above year-ago levels in all major cities, and it’s tough to see the market spinning lower amid a sturdy employment backdrop and a still very low interest rate environment.”

The introduction of the Harmonized Sales Tax in British Columbia and Ontario also contributed to the slower sales, with buyers trying to beat the July introduction even though it didn’t have a direct connection with resale homes.

“While existing homes sales are not directly taxed, they could still experience an outsized pullback during that month as some previously untaxed housing-related services now fall under the HST,” Mr. Bishop said.

“Additionally, the anecdote is that a certain of amount of new home buying was moved-forward by mistaken homebuyer perceptions that purchases ahead of HST implementation would save the tax, ignoring that the pre-HST rush may have actually pushed up prices, with consequent give-back in July.

CREA said the number of listings fell by the most in a decade in July at 7.2 per cent, as homeowners opted to stay put rather than sell into a weaker market. Since April, new listings have fallen 17.5 per cent, which the organization said will help lead to a “balance between supply and demand and temper home price volatility.”

The seasonally adjusted number of months of inventory in July was 7.3 months. That's how long it would take to sell every listed house at the current pace of sales, and it's at its highest level since March 2009.

Wednesday, August 11, 2010

June new home sales dive 46%

That may be good news for buyers looking for quality and a bargain

Terrence Belford
From Friday's Globe and Mail
Published on Thursday, Aug. 05, 2010 1:02PM EDT
Last updated on Thursday, Aug. 05, 2010 4:29PM

June’s new home sales are in. If you’ve been following the trends, the results will come as no surprise.

The month traditionally kicks off the summer doldrums in both low- and high-rise sales in the GTA. Peak times are from mid-March to mid-May and mid-September to the early days of November.

This past June, low-rise sales totalled 1,156 units; that is a 24-per-cent drop from May and a whopping 46-per-cent drop from June, 2009.

New high-rise condo sales in the GTA totalled 1,764 suites. They were a bright spot in the housing picture – up 20 per cent from May and down just 1 per cent from last year.

The slower pace of new housing this year may have brought good news for those who did indeed buy. Last week, J.D. Power released its fifth annual survey on new home buyer satisfaction and the results show a sharp jump in Power’s satisfaction ratings.

Last year, only 8 per cent of the 1,864 buyers of low-rise homes – detached, semis and townhouses – surveyed said their home was free of defects when they took possession. This year that number is 20 per cent. While Power does not explain this significant increase, my sense is that it may be linked to a slower pace of activity in the industry.

Less demand for their product this year has meant builders need not rush to capitalize on high demand. Trades have more time to do the job right. No need to bring in inexperienced workers to lay bricks, fasten and finish drywall and do the fine carpentry required for cabinets, countertops and window trims.

The Power survey also revealed another bonus for buyers. Those offered discounts on asking prices almost doubled this year. Again I think this can be directly related to a slowdown in demand. To stay in business builders have to build, which means they also have to sell what they have built.

Fewer buyers means greater competition and greater competition means offering deals.

Over all, prices continued to rise. The average new low-rise home in the GTA went for $487,840 in June, up 2 per cent from the previous month and 11.2 per cent from a year earlier. The average new high-rise suite cost $426,252 in June, up about 0.6 per cent from the previous month and 9.6 per cent from June, 2009.

Take away the impact of the harmonized sales tax, which added 8 per cent to the price of homes over $400,000, and the year-to-year increase did not look all that bad.

What a closer examination of all the facts and figures showed is that the biggest sales in high-rise condos are recorded during the days following the launch of new projects. In the high-rise category, more than 50 per cent of the month’s sales can be attributed directly to new launches, says George Carras, president of RealNet Canada Inc., which tracks these things.

The same cannot be said about low-rise homes. There were eight new launches of detached, semi- and townhouse projects in June, but sales among them only accounted for 14 per cent of the month’s total.

Mr. Carras says eight launches is not a lot of product and that may skew the statistics. He also says there would have been quite a few more new projects launched in June but delays in municipal approvals last spring caused builders to shelve launch plans until the peak buying months of fall.

And what of rising prices? As he sees it, the GTA has a lot of unsold high-priced houses and their numbers may be skewing average prices.

“The homes that really moved well in June were in the lower end of the price range,” he says. “Those starting at $750,000 and running up to well over $1-million just didn’t find buyers. When you have a lot of them on the market still unsold, that can drive the average price up.”

He points to Beaverbrook Homes’s relaunch of University Square in North York. The project originally had a mix of freehold and condo semi- detached homes and townhouses. Prices ran from $393,990 to $399,990.

When Beaverbrook found buyer resistance it eliminated the semis, renamed the project Yorktowns and relaunched with 12 different models of freehold-only townhouses. It dropped prices to as low as $344,990 but also added upscale towns selling for as much as $514,990.

“That seemed to do the trick,” Mr. Carras says. “What I think it shows is that to be successful these days you have to be extremely sensitive to what people want and to price your homes accordingly.

“You can no longer take an ‘if I build it they will come’ philosophy.”

Tuesday, July 20, 2010

Control your debts, central bank tells Canadians

By Rob Carrick
Globe and Mail Update

Bank of Canada's mild pace of rate hikes sends a signal to consumers to take control of their finances. Growing pessimism, rising interest rates.

That's the odd reality today for Canadians trying to make sense of what's happening in the financial world. On one hand, there's a growing sense that global economic growth is slowing. On the other, there's the Bank of Canada's decision to nudge its trendsetting overnight rate higher by one-quarter of a percentage point Tuesday.

The net result is a gift to people with debts. They'll have to pay more in interest on their lines of credit, variable-rate mortgages and floating rate loans, but the increase is mild and the pace of further increases will be muted. It could be a lot worse.

In fact, lots of market watchers thought it would be worse last year when they looked ahead to 2010. They saw all the government stimulus pumped into the economy during the recession producing a significant uptick in inflation, which in turn would send interest rates marching higher.

Now, there's talk of deflation, or falling prices. The Bank of Canada's not outwardly concerned about this, but it did throw a mention into its latest statement on rates about how it expects economic growth to slow next year and in 2012 from the 3.5 per cent growth of 2010. Back in April, the bank expected 3.7 per cent growth this year.

Borrowers would undoubtedly say that no rate increases would be ideal. But keeping rates steady at current levels promotes an unhelpful complacency with borrowers. Rates are still close to the emergency lows they hit in the financial crisis and recession. By increasing rates by a quarter point in June and then another quarter point on Tuesday, the Bank has signalled
people that it's time to get control of their debts.

This seems to be working. The latest research on household debt from CIBC World Markets shows that growth in the use of lines of credit has hit the lowest level since 2007. The housing market is showing a more dramatic slowdown, with sales in June down almost 20 per cent from the same period of 2009.

The Bank of Canada is trying to normalize interest rates these days, and Canadians seem to be on their way to normalizing their use of debt after a binge in the past decade.

That's exactly the right way to play the current economic environment. Get your debts in hand before the economy really turns around and decisively higher rates are needed.

Thursday, July 15, 2010

Which GTA neighbourhood is the best bang for your buck?

July 15, 2010

Tony Wong
Business Reporter

On a sunny weekend, David Ferrari will take a knapsack with some food and a book and bike to the beach in Mississauga’s Lorne Park neighbourhood.

“It really feels great to just sit by the water in this special place,” says Ferrari, a real estate broker. In the 10 years since he set up a popular brokerage in the area, Ferrari has seen Lorne Park become what some people have dubbed the new Oakville.

Bungalows, typically on large lots of at least 70 feet wide, are being torn down for monster homes as buyers discover the tree-lined neighbourhood on Lake Ontario.

Move-up buyers dominated the Greater Toronto Area housing market in the first half of the year, with the suburbs experiencing the greatest price appreciation, according to a study by ReMax Ontario Atlantic Canada released Wednesday.

Lorne Park led in terms of percentage increase for average prices with a 30.2 per cent gain in the first half of this year compared with 2009, according to ReMax. The average price of a detached home in the upscale west-end area is now $880,373 verses $676,289 in 2009.

But the area also has many ultra-high-end homes. One of the most expensive is on the market for $8.9 million. The 10,000-square-foot contemporary home was used as a rental by the Rolling Stones when they were in town for a concert.

“This is one of the nicest areas in the GTA,” says Michael Polzler, executive vice-president of ReMax. “It’s a very desirable neighbourhood of gracious homes that is relatively close to the downtown core.”

Polzler said the “near suburbs” have been the winners over the past six months because buyers want homes within a half-hour drive of downtown. “Toronto is one of the cities with the longest commuting times, so there is a real concern about transportation,” said Polzler.

Last year — during the depths of the financial crisis — was a rare window of opportunity for buyers. In 2008, the average price of a home in Lorne Park was $830,041, before falling 18 per cent in 2009.

Last year, 80 per cent of the districts surveyed by ReMax reported declines in value, which made the returns look especially good during this year’s upswing. “The bounce back, fuelled by unprecedented market conditions including a severe shortage of listing inventory, simply returned average prices to their normal course,” said Polzler.

In second place was the northern suburb of Markham, with a 27.7 per cent jump to $779,168 compared with $610,322 in 2009, followed by the neighbourhoods of Armour Heights and Bathurst Manor, with a 27.5 per cent hike to $561,973.

Mississauga’s Creditview, Erindale areas were in fourth place at $561,973, up 26.5 per cent. Rounding out the top five were Hogg’s Hollow and the Bridle Path, with a 26.2 per cent increase to $1,868,591 compared with $1,480,296.

While prices experienced a major run-up in the first half of the year, most analysts expect the second half to be more tempered.

Last week the Toronto Real Estate board reported a second consecutive monthly drop in sales for the year, with 8,442 homes sold in June, a 23 per cent decrease over 2009.

The average price for June sales in the entire Toronto area was $435,034, up 8 per cent from June of 2009. However, that is below the double-digit increases that had been recorded earlier this year.

Active listings were also up by 28 per cent in June, suggesting there is much more product on the market.

The Toronto condominium market did not experience the same extreme gains, says ReMax. While 85 per cent of detached homes had double-digit price gains, only 61 per cent of condos had similar gains.

Wednesday, June 30, 2010

Canada's economy stalls in April

June 30, 2010
By Jeremy Torobin
Globe and Mail Update

GDP unchanged as second quarter gets off to slow start

Canada's economy was unchanged in April after seven straight months of growth, reflecting the more sluggish expansion that policy makers have warned would start in the second quarter, as retail and manufacturing dropped.

The country's gross domestic product on a seasonally adjusted basis unexpectedly stayed at an annualized rate of about $1.2-trillion during the month, Statistics Canada said Wednesday. Retail trade fell 1.7 per cent, mostly erasing the previous month's 1.9-per-cent increase as people bought fewer cars and less clothing, and the factory sector had its first drop since last August, mainly due to a 1.2-per-cent decline in non-durable goods such as pharmaceuticals, printing and food products. Meanwhile, the mining and wholesale industries gained.

Most economists had anticipated a monthly gain of 0.2 per cent, after a reading of 0.6 per cent growth in March, as a stimulus measures and tax incentives that have fuelled domestic spending taper off and mortgages become more expensive. The Bank of Canada's latest forecast for the economy, which policy makers will update on July 20 with their next interest-rate decision, has the first quarter's eye-popping 6.1-per-cent pace of expansion giving way to a 3.8-per-cent annualized rate during the April-through-June period.

``The weaker-than-expected profile for GDP growth raises the chances that the BoC pauses its removal of monetary accommodation at the July meeting,'' said Jonathan Basile, vice-president of economics at Credit Suisse Securities in New York, adding that the result may cause Bank of Canada Governor Mark Carney to lower his second-quarter growth prediction. ``This was not our expectation going into today's report.''

Gross domestic product in April was up 3.3 per cent from a year earlier. At the same time, it is unmistakable that the recovery is settling in at a more sustainable pace. Inflation slowed considerably in May, Statistics Canada reported last week, and job growth was a more average 24,700 in May following an unprecedented gain of almost 109,000 in April.

After becoming the first Group of Seven central banker to tighten monetary policy a few weeks ago, Mr. Carney will probably raise his benchmark interest rate by 25 basis points for a second-straight time next month but then may pause if he doesn't do so in July, most economists say. The European debt crisis and the march to austerity in several economies, plus the stock-market volatility all of that is causing, will loom large in his decisions, Mr. Carney has repeatedly suggested.

``We expect growth resumed in both May and June,'' said Dawn Desjardins of RBC Economics. ``The external environment, however, has the potential to weigh on Canada's economic outlook if developments damage the global economy's momentum and hurt confidence.''

Wednesday, June 23, 2010

The little matter of affordability

Housing-price increases mean future challenges for both owners and renters

Terrence Belford

Toronto — From Friday's Globe and Mail
Published on Thursday, Jun. 03, 2010 10:47AM EDT

Last updated on Thursday, Jun. 03, 2010 10:48AM EDT

Sales of both low- and high-rise newly built homes cooled significantly in April from the near-frenzied pace of the previous month. Why that happened, and whether the pace will pick up again as summer progresses remain matters of speculation.

The only thing that appears certain is that affordability is going to present major challenges for most residents of the Greater Toronto Area. That includes home owners and renters alike.

RealNet Canada reports new high-rise condo sales stood at 1,484 suites in April, off 40 per cent from March numbers. Low-rise new home sales were 1.712 units, off 13 per cent from March.

At the same time, the average new high-rise condo price jumped $5,033 in April from the month before to sit at $425,120. Low-rise new homes meanwhile dipped an average of $1,113 to $489,282.

Resale home sales continued to be brisk during the first two weeks of May. With 4,887 homes changing hands in that period, sales were up 7 per cent from last year. The average selling price was $448,641, up 12 per cent from early May last year.

What caused the big dip in sales of new homes?

George Carras, president of RealNet, suggests sales may be just taking a breather after six bullish months. He also says buyers may be adopting a wait-and-see attitude at this point.

“There is still a good number of new projects coming online in the next couple of months and people may just be waiting to have a look at them before making a buy decision,” he says. “About 40 per cent of April sales were from newly launched projects.

“What is happening is that people flock to new launches for the first 10 days or so and then interest drops markedly.”

But underpinning demand is the crucial matter of affordability. Especially hard-hit are first-time buyers. People selling an existing home they have owned for maybe five years probably have enough cash from that sale to make a down payment greater than 20 per cent of the purchase price.

That means they do not need a CMHC-insured mortgage and are not subject to the rules set in place by the federal government on April 19. They can take advantage of continuing low variable-rate mortgages or negotiate significant discounts on fixed-term mortgages.

Those with less than 20 per cent down, however, must prove they can make payments at whatever the five-year fixed-term interest rate is at the moment.

The Royal Bank of Canada addressed the affordability issue in late May with a cross-country survey. Robert Hogue, senior economist said: “We expect affordability to deteriorate through 2010 and 2011, but this should be limited as more balanced supply-and-demand conditions will take much of the steam out of the housing market.”

Doesn’t sound too bad, right? Now take a look at RBC’s numbers. The bank says anyone owning a detached bungalow in the Toronto area can expect to see 49.1 per cent of their pre-tax income go towards home-ownership costs such as mortgage payments, property taxes and utilities.

The report continues: “With escalating prices, affordability measures are now above the long-term average. This suggests that additional increases in housing costs may price more and more buyers out of the market.”

So, if you cannot buy, you just rent, right? Renters, however, will probably have some very unpleasant surprises in store over the next few years. The Toronto Real Estate Board says that at the end of April, the average rent for a one-bedroom apartment was $1,463 a month, up 2 per cent from April, 2009, and the average rent for a two-bedroom apartment was a hefty $1,909 a month, up 5 per cent from last year.

Since the mid-1980s, condos have supplied almost 98 per cent of the GTA’s stock of new rental units. Investors buy them, then try to rent them for enough money to cover mortgage and monthly maintenance costs.

For the first quarter of this year, those investors have accounted for up to half of all new condo sales in prime locations – in the heart of downtown, along subway lines or in any other area where there is high demand for rental accommodation. In two or three years time, those suites will be built and at the move-in stage.

The prices investors are paying now for suites are significantly higher than those of two and three years ago, which means they will have to charge significantly higher rents.

It is not inconceivable that a one-bedroom-and-den downtown apartment may command $2,000 a month in five years time and a two-bedroom north of $3,000. Nor is it inconceivable to expect total housing expenses to eat up well over 60 per cent of your monthly take-home pay if you want to live in a great central location in the GTA within that five-year time frame.

Wednesday, June 16, 2010

Sub-meter confusion leaves tenants in dark

June 15, 2010

Noor Javed

Melanie Gogan, of 90 Eastdale Tenants' Association, says residents received notices their hydro would be cut off if they didn't reconsent to sub-metering.

KEITH BEATY/TORONTO STAR

After sitting in the dark in her two-bedroom apartment for more than 24 hours, Laurie Brown finally gave in. The mother of two small children says she had no choice but to pay $500 in hydro bills or risk being without power for days, possibly weeks.

Now the Toronto resident is wondering what she will do next month when another bill from third-party energy provider Stratacon shows up again at her door.

The monthly hydro bill at her 100 Sprucewood Court apartment, previously about $40 to $60 a month, had suddenly shot up to nearly $150 a month and she didn’t understand why. She still doesn’t.

“I was told by everyone not to pay, because the bills are illegal,” she said. “But then I ended up in this position where it looks like I am irresponsible,” she said. “It’s hard to know what to do.”

Tens of thousands of Toronto tenants are still experiencing mass confusion over so-called smart sub-meters in individual apartments in the face of an ongoing dispute over who should pay for hydro costs while the province enacts legislation.

In an attempt to clear up the long-standing issue, the Ontario Energy Board, the province’s energy regulator, ruled last August that any sub-meters installed in apartments on or after Nov. 3, 2005 and up until its decision were unauthorized and “any resulting changes to financial arrangements respecting the payment of electricity charges by tenants to be unenforceable.”

In future, the OEB ruled, any use of smart sub-metering systems is only permissible with the express written consent of the tenants.

Yet landlords continue to argue tenants who signed consent forms prior to the ruling need to pay the costs, while tenants argue the OEB ruling makes their contract null and void. Some tenants say they were never given proper information when they first agreed to pay for their hydro. Others say they are still not given information to make an informed decision; still others are being back-billed for past month’s bills or pressured by their landlords to consent.

In the past week, the Federation of Metro Tenants’ Associations has received more than 60 calls from tenants claiming Stratacon threatened to shut off their hydro, said Geordie Dent, who runs the federation’s tenant hotline.

Residents in one building, at 90 Eastdale Ave., received a disconnection warning notice from Stratacon two weeks ago for failing to pay outstanding bills they say were never received.

“When I moved in three years ago, I had no choice but to sign a paper that said I would pay for my hydro,” said Melanie Gogan, head of the local tenants’ association. “But after the August OEB ruling, I never got a bill from Stratacon.”

“Then all of a sudden . . . we got a disconnection notice within 48 hours, and a threat of having to pay for all the previous months of hydro, if we didn’t reconsent to the sub-metering,” she said. “It feels like a lot of bullying.”

Once the OEB was notified, Stratacon issued an apology notice to residents.

John McDonald, president and CEO of the Consumers’ Water Heater Income Fund — which owns Stratacon — admits the situation has been confusing for all parties.

“When the ruling came out, we were given advice that at this point, you probably shouldn’t bill for the hydro, so they weren’t billed,” said McDonald. He acknowledged many buildings are currently going through renewal of hydro contracts.

Stratacon says it supports the idea that tenants have all information to make an informed decision. In some instances however, that hasn’t been the case. The OEB said tenants must be provided with an energy audit of the apartment, the administrative charge on bills, and specific amount of rent reduction and how it was calculated.

Brown says she wasn’t given accurate information when she moved into the building in April 2008. At the time, she signed a lease agreeing to pay her hydro after being told it would cost about $40 a month; the alternative was a higher rent of $75 per month.

She signed a reconsent form in November 2009, three months after the OEB ruling, but says she wasn’t given details of her hydro costs. She was recently surprised to see hydro bills of up to $150 a month, even though her appliances are new and she doesn’t have a washer, dryer or dishwasher. She stopped paying the bills, but when Stratacon cut off her power on June 3, she paid up.

Many are hoping provincial legislation due out in January will bring clarity to the issue. In the meantime, advocates and tenants say the OEB should enforce the current ruling. Landlords and sub-metering companies could face penalties of between $1,000 and $20,000 per day if found in violation.

An OEB spokesperson said the agency always advises the consumer “to pay their bill, and then resolve any disputes afterwards.”

That is exactly the outcome Stratacon is hoping for, says Gogan, of the tenants’ association at 90 Eastdale Ave. “Once you put people in such a vulnerable situation, they have no choice but to pay. If you twist their arm far enough, of course they will consent.”

Home sales sputter in May

Prices dip as the threat of higher mortgage rates disrupts ‘the normal seasonal pattern’

Steve Ladurantaye Real Estate Reporter

Globe and Mail Update
Published on Wednesday, Jun. 16, 2010 9:00AM EDT

Last updated on Wednesday, Jun. 16, 2010 9:57AM EDT

Housing sales slipped in May, as Canada's resale housing market sputtered after more than 18 months of solid gains.

The Canadian Real Estate Association said sales pulled back 9.5 per cent in May compared to April. The average resale price fell 1.27 per cent, to $340,566 from the record $344,968 reached in May. Still, prices are 8.2 per cent higher than they were last May.

After hitting recessionary lows in late 2008, the market had been on a sharp upward climb. CREA said the pullback in sales was “a departure from the normal seasonal pattern,” and attributed the fall to tighter mortgage regulations and the threat of higher mortgage rates.

With the average sale price sitting at record highs, many have also been priced out of the market, especially in the markets that saw the sharpest declines in sales – Ottawa, Toronto and Vancouver.

“May was the first full month in which sales activity was affected by these changes,” said CREA president Georges Pahud.

TD Bank senior economist Pascal Gauthier said prices are likely to fall 7 per cent from current levels by the end of the year.

“The housing market is cooling its jets in response to a number of factors where, on balance, headwinds are becoming stronger than tailwinds,” he wrote. “Erosions in existing home affordability over the previous quarters, mostly due to prices outpacing incomes, are naturally taking a bite out of current sales. While interest rates should continue to rise modestly, affordability should stabilize in the coming quarters as incomes rise and prices come off their peak levels.”

The number of new listings also decreased month-over-month, as fewer Canadians decided to try their luck at making a sale. The 4 per cent decline is the first in eight months, and a signal that the hot market has cooled significantly. Homeowners hoping to cash in on the hot market raced to put their houses up for sale in recent months, but as the market cools less will be tempted.

At the end of May there were 6.1 months of inventory on the market, the highest level since April, 2009. They are still 20 per cent higher than the low reached in August, 2009.

As prices fall, CREA economist Gregory Klump said sales may begin to increase again.

“The number of months of inventory may rise further in response to easing sales activity and a further rise in the number of active listings,” Mr. Klump said. “However, the number of newly listed homes will ultimately retreat in response to a more competitive sales and pricing environment in a number of local markets. The outlook for the Canadian economy, employment, and mortgage market trends remain upbeat, so supply and demand will remain balanced on a national basis. Canada will avoid a U.S.-style home price correction.”

Thursday, June 3, 2010

The little matter of affordability

Terrence Belford

Published on Thursday, Jun. 03, 2010 10:47AM EDT
Last updated on Thursday, Jun. 03, 2010 10:48AM EDT

Sales of both low- and high-rise newly built homes cooled significantly in April from the near-frenzied pace of the previous month. Why that happened, and whether the pace will pick up again as summer progresses remain matters of speculation.

The only thing that appears certain is that affordability is going to present major challenges for most residents of the Greater Toronto Area. That includes home owners and renters alike.

RealNet Canada reports new high-rise condo sales stood at 1,484 suites in April, off 40 per cent from March numbers. Low-rise new home sales were 1.712 units, off 13 per cent from March.

At the same time, the average new high-rise condo price jumped $5,033 in April from the month before to sit at $425,120. Low-rise new homes meanwhile dipped an average of $1,113 to $489,282.

Resale home sales continued to be brisk during the first two weeks of May. With 4,887 homes changing hands in that period, sales were up 7 per cent from last year. The average selling price was $448,641, up 12 per cent from early May last year.

What caused the big dip in sales of new homes?

George Carras, president of RealNet, suggests sales may be just taking a breather after six bullish months. He also says buyers may be adopting a wait-and-see attitude at this point.

“There is still a good number of new projects coming online in the next couple of months and people may just be waiting to have a look at them before making a buy decision,” he says. “About 40 per cent of April sales were from newly launched projects.

“What is happening is that people flock to new launches for the first 10 days or so and then interest drops markedly.”

But underpinning demand is the crucial matter of affordability. Especially hard-hit are first-time buyers. People selling an existing home they have owned for maybe five years probably have enough cash from that sale to make a down payment greater than 20 per cent of the purchase price.

That means they do not need a CMHC-insured mortgage and are not subject to the rules set in place by the federal government on April 19. They can take advantage of continuing low variable-rate mortgages or negotiate significant discounts on fixed-term mortgages.

Those with less than 20 per cent down, however, must prove they can make payments at whatever the five-year fixed-term interest rate is at the moment.

The Royal Bank of Canada addressed the affordability issue in late May with a cross-country survey. Robert Hogue, senior economist said: “We expect affordability to deteriorate through 2010 and 2011, but this should be limited as more balanced supply-and-demand conditions will take much of the steam out of the housing market.”

Doesn’t sound too bad, right? Now take a look at RBC’s numbers. The bank says anyone owning a detached bungalow in the Toronto area can expect to see 49.1 per cent of their pre-tax income go towards home-ownership costs such as mortgage payments, property taxes and utilities.

The report continues: “With escalating prices, affordability measures are now above the long-term average. This suggests that additional increases in housing costs may price more and more buyers out of the market.”

So, if you cannot buy, you just rent, right? Renters, however, will probably have some very unpleasant surprises in store over the next few years. The Toronto Real Estate Board says that at the end of April, the average rent for a one-bedroom apartment was $1,463 a month, up 2 per cent from April, 2009, and the average rent for a two-bedroom apartment was a hefty $1,909 a month, up 5 per cent from last year.

Since the mid-1980s, condos have supplied almost 98 per cent of the GTA’s stock of new rental units. Investors buy them, then try to rent them for enough money to cover mortgage and monthly maintenance costs.

For the first quarter of this year, those investors have accounted for up to half of all new condo sales in prime locations – in the heart of downtown, along subway lines or in any other area where there is high demand for rental accommodation. In two or three years time, those suites will be built and at the move-in stage.

The prices investors are paying now for suites are significantly higher than those of two and three years ago, which means they will have to charge significantly higher rents.

It is not inconceivable that a one-bedroom-and-den downtown apartment may command $2,000 a month in five years time and a two-bedroom north of $3,000. Nor is it inconceivable to expect total housing expenses to eat up well over 60 per cent of your monthly take-home pay if you want to live in a great central location in the GTA within that five-year time frame.

Tuesday, June 1, 2010

Bank of Canada hikes interest rates

Carney becomes first central banker among G7 to raise benchmark from emergency low

Jeremy Torobin

Ottawa — Globe and Mail Update
Published on Tuesday, Jun. 01, 2010 9:04AM EDT

Last updated on Tuesday, Jun. 01, 2010 9:15AM EDT

The Bank of Canada raised its benchmark interest rate for the first time since 2007, saying inflation is unfolding as expected and that spillover from the European debt crisis has been limited, while stressing there remains “considerable uncertainty” about an “increasing uneven” global recovery.

With his much anticipated decision to lift the central bank’s overnight rate by one-quarter of a percentage point to 0.5 per cent after more than a year at a record low level, Governor Mark Carney has become the first central banker in the Group of Seven to tighten since the financial crisis and recession began in 2008.

In a statement on the move, however, Mr. Carney and his rate-setting panel sought to emphasize that investors should not necessarily interpret the increase as the first in an uninterrupted series.

``This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending and the uneven global recovery,’’ the central bank said Tuesday. ``Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.’’

The central bank’s statement touched on themes that will no doubt be front-and-centre at the Group of 20 leaders’ meeting in Toronto at the end of June, where Canadian officials have said they will be pushing for continued efforts to smooth out the global imbalances that exacerbated the slump that much of the world is still clawing out of.

``The required rebalancing of global growth has not yet materialized,’’ the bank said, contrasting ``strong momentum’’ in emerging markets with recoveries in economies such as the United States and Japan that remains ``heavily dependent’’ on low interest rates and government spending.

``In general, broad forces of household, bank, and sovereign deleveraging will add to the variability, and temper the pace, of global growth,’’ policy makers said.

While flagging the possibility of ``renewed weakness’’ in Europe, where drastic spending cuts and higher borrowing costs will be the likely result of continent-wide debt problems, so far the effects of the crisis on Canada have been ``limited to a modest fall in commodity prices’’ and somewhat tighter financial conditions, the bank said.

The Canadian economy, which on Monday posted a whopping 6.1-per-cent annualized growth rate for the first quarter – the fastest in more than a decade – is ``unfolding largely as expected,’’ the bank said, led mostly by a hot housing market, higher incomes and a labour-market recovery that have helped fuel consumer spending.

Still, the central bank suggested that household spending and the economy will slow in the coming months as consumers deal with higher borrowing costs and try to limit or reduce their debt loads and as government stimulus spending fades. As a result, an ``anticipated pickup in business investment will be important for a more balanced recovery,’’ the bank said.

Inflation, which the central bank has been watching closely for months, has been in line with policy makers’ projections to exceed 2 per cent this year and reflects a combination of strong domestic demand, slowing wage increases and ``excess supply’’ leftover from the recession.

The central bank also said it is making a technical, yet significant, change to re-establish ``normal functioning’’ of the overnight market, whereby its benchmark will return to halfway between the rate it pays to chartered banks to hold deposits and the amount that it charges private-sector lenders for loans.

Friday, May 21, 2010

Inflation rate rises in April

By CBC News, cbc.ca, Updated: May 21, 2010 8:53 AM

Inflation rate rises in April

Canada's annual rate of inflation rose to 1.8 per cent in April, up from 1.4 per cent in March, Statistics Canada said Friday.

For a sixth consecutive month, gasoline prices put the strongest upward pressure on the consumer price index.

In April, prices at the gas pumps were 16.3 per cent higher than they were in April 2009. That follows a 17.2 per cent rise in the 12 months to March, Statistics Canada said.

Higher car prices also put upward pressure on the index for the fourth consecutive month in April. Passenger vehicle prices increased 5.3 per cent following a 3.9 per cent increase in March.

Core rate higher

The Bank of Canada's core index, which factors out several volatile components such as energy and food, advanced 1.9 per cent over the 12 months to April, following a 1.7 per cent rise in March.

The core rate is closely watched as it is used by the Bank of Canada for setting its monetary policy. The central bank has an interest rate announcement scheduled for June 1.

Indications of rising price pressures could lead the bank to push the cost of borrowing money higher after months of rock-bottom lending rates. The Bank of Canada's key overnight rate has been 0.25 per cent for more than a year.

"The economic data are still landing heavily in favour of rate hikes," BMO economist Doug Porter said Friday.

"If the decision was based solely on domestic factors, there would now be precisely zero debate on whether the bank will raise rates on June 1."

But instability in Europe because of sovereign debt fears muddies the picture, so the bank may opt to stand pat, he said.

"While the economic data continue to lean heavily to a rate hike, the decision will ultimately be driven by just how intense the financial storm becomes," Porter said.

Friday, May 14, 2010

A sharp shift in the market

May 13, 2010

A sharp shift in the market

By Carolyn Ireland
From Friday's Globe and Mail

As sale signs mushroom, buyers have more choice, while sellers are adapting.

Some homeowners who were waiting for their gardens to spring to life before they listed their houses for sale are wondering if they would have been better off planting a sign on the lawn in the barren days of February and March. The answer, most likely, is yes.

Toronto's real-estate landscape has shifted in the past few weeks with a burgeoning number of houses listed for sale.

For prospective buyers, the change means they are facing a phenomenon they haven't encountered in quite some time: choice.

Real-estate broker Patrick Rocca of Bosley Real Estate Ltd. says the Toronto market has become quirky since listings began ramping up immediately after Easter.

Now, some houses are selling in bidding contests at premiums above the asking price that Mr. Rocca deems "crazy," while in other cases agents anticipated a quick sale and the property is just sitting.

"A month or six weeks ago, everything was a slam dunk."

Mr. Rocca says every spring brings a rush of new listings when the freshness of new leaves makes houses and tree-lined streets look their best, but in 2010 that seasonal trend is even more exaggerated.

Some sellers have recently gone with the strategy of holding off buyers until a specified hour so that all of the bids can be considered at once, only to see the night pass by without receiving a single offer. Other sellers are trimming their asking price as the competition increases.

As for new houses, Robert Kavcic, economist at BMO Nesbitt Burns, says developers are ramping up their building at a pace that may be too quick compared with the rate at which households are forming. "One could argue that the short-lived construction recession didn't last long enough to work off the overbuilding seen during the 2000s, and therefore starts will moderate in the coming year if demand trails off as expected," Mr. Kavcic said in a note to clients.

Mr. Rocca recently listed two semi-detached houses on one popular street. Another listed a third on the same street, which rarely has any houses for sale, let alone three almost at the same time.

Along with the rise in listings, mortgage rates have edged up and some first-time buyers may have been priced out of the market, Mr. Rocca says. Meanwhile, many prospective buyers who secured a pre-approved mortgage with lenders are anxious to buy a house before the financing offer expires.

With market dynamics changing, Mr. Rocca says that sellers are beginning to realize they may not fetch the same price for a property that their neighbour received two months ago when listings were scarce.

He turns down listings when the sellers press to set an asking price that is too unrealistically high.

"I don't need an overpriced listing just sitting there."

Mr. Rocca is also less likely to recommend that sellers hold off buyers until a specified time - particularly when the asking price is more than $1-million.

Paul Johnston of Right at Home Realty is also increasingly likely to recommend that sellers consider an offer as soon as a buyer is willing to make one.

Last week he listed a house on Ridley Boulevard which sold within two days.

"We didn't even hold the open house."

Mr. Johnston says that buyers who have long been frustrated by the shortage of appealing properties on the market are finally feeling more hopeful.

"If someone wants it they can come and get it without having to play the game," he says. "There's optimism among buyers that they may finally get a property that doesn't have 13 offers on it."

Buyers who are committed to the search, he says, are active on a daily basis. Many have their finances in line and they will move quickly.

"They'll be on your listing faster than you can blink."

Also, listings are mushrooming so quickly that sellers who list a house and then decline to look at offers for a week are risking the chance that competing properties will arrive and siphon off bidders.

Single-family houses that are nicely renovated and located in a good neighbourhood are still selling briskly, he says. Investment properties that have been kept in top shape and which provide a steady income are also selling quickly.

"These are still two beasts where buyers are willing to extend themselves."

Looking out to the fall, many market watchers are expecting a slower pace of sales.

Mr. Rocca, who is still hearing from lots of homeowners who are asking him to evaluate their property, expects the next six weeks to be hectic. He says the market may be slower in the fall, but it should remain fairly strong.

In between, he hopes to catch up on some rest if the typical summer slowdown arrives.

"I'm looking forward to July."

Tuesday, May 11, 2010

Canadian household debt soars

May 11, 2010
By Tavia Grant
Globe and Mail Update

Household debt amounts to $41,740 per person - 2.5 times greater than in 1989
Sometimes, recessions can breed a hunker-down-and-save mentality.

Not so this time. Canadian household debt - a perennial worry in recent years - has ballooned to a point where it's now more than double 1989 levels - just as rising borrowing costs are set to squeeze budgets, a national report cautioned Tuesday.

Household debt in Canada reached a record $1.41-trillion in December. If that was spread among all Canadians, each person would carry more than $41,740 in outstanding debt - an amount 2.5 times greater than 1989 after adjusting for inflation and population growth, according to a report by the Certified General Accountants Association of Canada.

And Canadians are okay with taking on still more debt. Nearly 60 per cent of respondents whose debt had increased through the recession - and 92 per cent whose debt decreased or stayed the same - still felt they could either manage it well or take on more debt.

The recession has done little to dampen Canadians' enthusiasm for taking on debt, the 13-page study said.

"This report is another indication of Canadians' readiness to consume today and pay later," said Anthony Ariganello, president and chief executive of CGA-Canada. "The concern is do they understand the full cost of paying later?"

Canada now has the dubious distinction of ranking first in terms of debt-to-financial assets ratio among 20 OECD countries, with its debt-to-income ratio hitting 144 per cent by the end of last year.

"The growth in household debt has been strong during good times and showed remarkable resilience during challenging times," said Rock Lefebvre, co-author of the report. Now, it seems "set to continue its upward trend as we navigate interesting times."

The culture of consumption - or the habit of unrestricted spending - is likely one of the important factors explaining the unaltered trend in household borrowing, the report added.

Mortgage rates - which have been trimmed in recent days - are higher than the start of the year, and poised to rise further as the Bank of Canada readies for a rate hike in the next month or two.

If mortgage rates rise by 2 percentage points, mid-income to mid-to-high income families may have to cut about 10 per cent from other expenditures if they want to maintain the same level of spending on shelter, taxes, food and transportation, the report said.

A separate report yesterday said almost half a million more mortgage holders would be in trouble if their rates hit 5.25 per cent. The study, by the Canadian Association of Accredited Mortgage Professionals, said about 375,000 mortgage holders "are already challenged" by their current payments.

Canada's personal savings rate - which climbed during the recession - is now starting to fall. The rate ebbed to 4.6 per cent in the fourth quarter, down from 4.9 per cent in the previous quarter, according to Statistics Canada data.

Tuesday's report, based on a partly survey of 1,530 people conducted in February, advised Canadians to consolidate their credit card debt and replace it with a lower-cost line of credit.

"But it's still debt," Mr. Ariganello noted. "You don't want to hang onto it any longer than necessary."

Wednesday, April 28, 2010

Roseman: When mortgage rates rise, is it time to lock in?


Five reasons to love rising interest rates

April 28, 2010

By John Heinzl
From Wednesday's Globe and Mail

The end of cheap money is good news for savers, seniors and fixed-income investors
With the Bank of Canada poised to raise interest rates as early as June, nervous borrowers are bracing for the end of cheap money.

Big disaster, right? Hardly.

Sure, consumers carrying onerous amounts of debt will feel the pain when rates climb from today's ultralow levels. But for others - savers, seniors and fixed-income investors, for example - higher rates can't come soon enough.

Rising rates might even restore some sanity to segments of our economy that have gotten drunk on all the easy credit. So, with banks already ratcheting up mortgage rates and bond yields creeping higher, let's take a deep breath and focus on the positives.

Here are five reasons to love rising interest rates.

No more bidding wars

The chit-chat on every street corner is the same: "You know that two-bedroom eyesore with the sagging front porch and the raccoons living in the attic? It went for 100 grand over asking."

This sort of lunacy will not last. Here's why.

When the bank decides how much it will lend you to buy a home, it uses an affordability formula based on your income, expenses and the interest rate on the loan. The lower the rate, the smaller the monthly payment, and the larger the mortgage it will give you. Many home buyers gladly take the maximum the bank offers, pushing home prices skyward. (The chart shows just how stretched home prices have become compared with incomes.)

But plug higher interest rates into that same affordability formula and guess what happens? Home buyers suddenly qualify for smaller mortgages. Even a couple of percentage points can mean a difference of $100,000 or more in the maximum loan size.

With less borrowed money sloshing around, home prices will inevitably fall. When that happens, housing market psychology could rapidly turn bearish. For first-time home buyers or real estate investors who are sitting on cash, this would be the time to get in.

Investor Education:
Should I buy a home now, or wait and save more money? [http://www.theglobeandmail.com/globe-investor/investment-ideas/investor-education/chapter-5-should-i-buy-a-home-now-or-wait-and-save-more-money/article658096]
Understanding house prices [http://www.theglobeandmail.com/globe-investor/investment-ideas/investor-education/understanding-house-prices/article658078]
Is it better to buy a home, or choose some other investment? Charlie's story [http://www.theglobeandmail.com/globe-investor/investment-ideas/investor-education/is-it-better-to-buy-a-home-or-choose-some-other-investment-charlies-story/article658068]
What makes buying a home different from other investments? [http://www.theglobeandmail.com/globe-investor/investment-ideas/investor-education/what-makes-buying-a-home-different-from-other-investments/article658074]
What are some renovations that add value to my home? [http://www.theglobeandmail.com/globe-investor/investment-ideas/investor-education/what-are-some-renovations-that-add-value-to-my-home/article658065]


Higher GIC rates

A couple of months ago, the best rate I could find on a five-year guaranteed investment certificate was 3.25 per cent. But when I checked my discount broker yesterday, one financial institution was offering 3.9 per cent, and several others were at 3.8 per cent.

The way things are going, I wouldn't be surprised to see five-year GIC rates crack 4 per cent in the weeks ahead as financial institutions compete for deposits. The dividend yield on the S&P/TSX composite index, by comparison, is a lowly 2.6 per cent.

Suddenly, GICs are interesting again, particularly for seniors and other investors who can't stomach the risk of the stock market. Short-term bond prices have also fallen, pushing up yields and making these fixed-income securities more attractive for investors.

Stock market bargains

Rising interest rates hurt the stock market in several ways. They make bond yields more attractive, raise costs for sectors such as utilities that carry a lot of debt, and compress price-to-earnings multiples.

Many analysts say the stock market is overdue for a correction after its 61-per-cent gain from the lows of March, 2009, and rising interest rates may be just the thing to tip it over the edge. Another reason to expect a correction is that the market is heading into the seasonally weak May-to-October period (hence the phrase "sell in May and go away").

Nobody likes to see their stocks fall, of course, but a correction would be a welcome development for investors who have cash to spend or who reinvest their dividends in more shares, because their money will go further.

Cheaper road trips

If you've been itching to visit Graceland or the Grand Canyon, now's your chance.

Even as Canada's central bank prepares to raise rates, the U.S. Federal Reserve Board is widely expected to stay on hold at least until the end of the year because of the weaker U.S. economy. That divergence has lit a fire under the Canadian dollar, which is hovering near parity with the greenback.

True, a strong dollar is bad news for our exporters, but if you're planning to visit the United States, it's like the entire country has been put on sale.

Happy savers

To the extent that rising interest rates cause prices of homes, stocks and other assets to fall, folks with the foresight to save will be the big winners. That's because they'll be in a position to scoop up assets at discounted prices. Which leads to another upside of rising rates: If you're planning to park your cash in a "high-interest" savings account, these vehicles might actually start living up to their name.

Monday, April 26, 2010

Four-in-ten Canadians retiring with debt, says RBC Poll

THE CANADIAN PRESS 2010/04/26

TORONTO - A survey by the Royal Bank suggests four-in-10 Canadians over the age of 50, who have assets of at least $100,000, have retired with some form of debt

And, one-quarter entered retirement with a mortgage on their primary residence.

The survey also notes that 70 per cent of retirees feel it is still important to be able to save part of their income, yet more than one-quarter have acquired new credit products since they retired.

Inflation and taxes are a major concern of retirees, with more than one-third of those surveyed saying they are worried that inflation will negatively impact their retirement income.

The figure rises to 43 per cent among pre-retirees surveyed.

Six-in-ten retirees say they worry about taxes on their income, with two-thirds believe the percentage of their income required for taxes will rise in the next 10 years.

"It's not uncommon to be concerned about maintaining a sustainable level of income in retirement, but costs you never counted on may also arise," said Lee Anne Davies, the RBC head of retirement strategies.

Luxury home sales soaring, ReMax survey shows

680News staff 2010/04/26

A new ReMax survey has found sales of luxury homes are soaring so far this year.

The study of real estate in 13 major Canadian centres points to improved economic performance, increased personal wealth, immigration and foreign investment all contributed to a big boost in sales between January and March.

Sales compared to last year, which was in the midst of the recession, are up 263 per cent in the Greater Toronto Area. In Kelowna, sales are up 700 per cent.

A high-end home in Toronto is now defined as being listed for $1.5-million.

More Canadians retiring with debt, bank survey shows

James Munroe 2010/04/26

A new survey on our golden years suggests not all of us are going to be riding off into the sunset.

Instead, more of us are retiring with debt.

Royal Bank has determined that four in ten Canadians are retiring these days with some form of debt and one in four entered retirment with a mortgage on their primary residence.

Inflation and taxes are among the top concerns for retirees with more than one third worried that the cost of living will negatively impact their retirement income.

A whopping six in ten sweat the taxman.

Lee Ann Davies is RBC's head of retirement strategies and said costs you never accounted for may arise. For instance, the poll found that almost one in five retirees spend more than $1,000 a year on prescripion medication.

Friday, April 23, 2010

Inflation rate falls to 1.4%

Consumer price increases ease in March from 1.6 per cent the previous month

Julian Beltrame

Ottawa — The Canadian Press
Published on Friday, Apr. 23, 2010 7:07AM EDT

Last updated on Friday, Apr. 23, 2010 10:11AM EDT

Inflationary pressures in Canada eased considerably last month, putting into question expectations that the Bank of Canada will be raising interest rates in a matter of weeks.

Statistics Canada reported Friday that Canada's annual inflation rate slipped by two-tenths of a point to 1.4 per cent, and the closely watched Bank of Canada core rate fell even further – by four-tenths of a point to 1.7 per cent in March.

“That whooshing noise you just heard was a giant sigh of relief from the Bank of Canada,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns wrote in a note to clients.

“At the very least, today's low-side outcome for both headline and core inflation in March will dampen some of the more aggressive expectations for Bank of Canada rate hikes. Talk of 50-basis-point moves any time soon should be quelled by these much milder inflation figures, which suddenly put core trends closer to earlier bank forecasts.”

CIBC economist Krishen Rangasamy said the March data shows inflation is well under control in Canada and that any future rate increases will be modest.

The Canadian dollar fell by about half-a-cent, suggesting that the market too saw the data as a negative factor to a policy rate hike. The dollar traded at 99.49 cents (U.S.) as the Toronto Stock Exchange began trading Friday, down from parity.

On a month-to-month basis, Canadians saw no increase in overall prices between February and March.

The agency said the big reason for the drops in both annual indexes was that the price-distorting Olympics ceased being a major contributor to inflation with the conclusion of the Winter Games at the end of February.

Prices for traveller accommodation soared 16 per cent in February – 64.1 per cent in British Columbia – but in March they dropped back to earth to a more tame 2.8-per-cent increase from March, 2009.

Earlier in the week, the Bank of Canada cited inflationary risks for dropping its year-old conditional pledge to leave interest rates at record lows until at least July after the core reached as high as 2.1 per cent in February.

While Friday's report might raise some doubt on whether the Bank will start raising rates by June, “that still seems to be the most likely course given the strength in the economy,” Mr. Porter wrote.

Economists had expected a slight slip in core inflation, once the Olympics ended, but the consensus was that core inflation would be right on the central bank's target of 2 per cent.

March's large fall now puts the core inflation rate, which excludes volatile items such as gasoline prices, well below the central bank's target.

The March data suggests prices continue to be soft across many sectors with the exception of gasoline and everything else to do with cars.

Prices at gas pumps across Canada were 17.2 per cent higher in March than they had been a year earlier, overall transportation costs were six per cent higher, prices for the passenger vehicles rose 3.9 per cent and the cost of insuring them cost 5.5 per cent more.

But food costs only advanced 1.3 per cent, mostly due to a 2.6-per-cent hike in restaurant bills.

As well, consumers paid slightly more for household operations and furnishings, for health and personal care, reading, tuition fees, and cable and satellite services.

But many items cost less this March than they did a year ago, including shelter costs and mortgage costs, clothing and footwear, as well as fresh vegetables, meat and fresh fruit.

With interest rates at record lows, mortgage costs were a full six per cent less in March than a year ago.

Regionally, the agency said all provinces recorded a price increases, with the Atlantic provinces registering the biggest gains.

In a heated market, some advise buyers to step back

April 22, 2010

By Carolyn Ireland
From Friday's Globe and Mail

A huge increase in available homes - with more on the way - should cool things down
For sellers of one High Park house, a few square metres of hardwood and a stockpile of patience proved to be highly profitable.

The homeowners recently sold the house for more than the asking price of $1.35-million.

The outcome marked a big improvement on their previous foray into the market in the fall of 2008, says real estate agent Chander Chaddah, who handled the listing on both occasions. Back then, the house was listed for about the same price but languished on the market for weeks. The owners rejected the one half-hearted bid they received and pulled the sign out of the lawn.

Eighteen months later, they got more money than they had hoped for.

"All they did was change a linoleum floor in the kitchen to hardwood," says Mr. Chaddah.

The 18-per-cent jump in High Park in the first quarter of 2010 compared with the same period in 2009 is one example of the eye-popping gains in prices as real estate sales across the Greater Toronto Area have been turbo-charged by a huge rebound in consumer confidence.

"In September, 2008, people got the bad news that Lehman Bros. had filed for bankruptcy. They got the good news in September 2009 that the market was back," says Mr. Chaddah of Sutton Group Associates.

That good news for sellers has at long last drawn more of them to the market.

In the downtown core, he says, buyers suddenly have lots to choose from amidst burgeoning condo listings.

"The number of new units coming out there clearly has just exploded."

In Roncesvalles Village and the west end, where Mr. Chaddah's office is located, the number of single-family homes for sale has also risen - especially since Easter.

Mr. Chaddah says he advises sellers to list their houses early in the spring market, which actually begins in February. Buyers are eager to get back into the hunt after the market goes on hold in December and January. He adds that too many people wait until after Easter and then find that two or three of their neighbours have put up 'for sale' signs at the same time. The abundance of choices cools the bidding wars.

"It's easy enough to equate the spring market with grass, leaves and flowers that are in full bloom." But that strategy can backfire, he adds.

"Scarcity is the reason people bid up."

Mr. Chaddah says he has not seen very many huge bids over the asking price on properties priced above $1-million. But in the $400,000 to $800,000 range, offers often swell to 20 per cent above the asking price. Last week he saw a house in Mimico with an asking price of $450,000 go to a buyer who offered $557,000.

Nationally, existing home sales were a hefty 40.8 per cent higher in March than they were in March of last year.

National Bank economist Marc Pinsonneault says a national house price index created by Teranet and National Bank shows that the rapid price gains that have drawn attention to the Toronto and Vancouver markets lately have started to slow.

"It looks to me as if Vancouver has recently turned into a much more balanced market than before. Toronto is on the verge of doing so," says Mr. Pinsonneault.

The economist says Toronto is set to see a supply of new condo units as buildings started in 2008 and 2009 become ready for occupancy. That in turn will prompt some homeowners to list their houses as they prepare to move into a new condo. At the same time, housing starts have also increased.

"New construction should help to increase supply again," says Mr. Pinsonneault.

The economist adds that the return to more balance should ease fears that the Toronto market is inflating into a bubble.

Mr. Pinsonneault does not believe a bubble has formed in Toronto. For one thing, he doesn't see the classic psychology of market mania that occurs when people believe the real estate market is the only place to make money.

Instead, people have moved up their purchases to take advantage of pre-approved mortgages with low interest rates. Consumers in Ontario and British Columbia are also racing to beat the harmonized sales taxes, which will come into effect in both provinces this summer.

Shaun Hildebrand, senior market analyst for Canada Mortgage and Housing Corp., says about 35,000 condo units are under construction in the Greater Toronto Area and many of those will become available in 2010 and 2011.

Until recently, Mr. Hildebrand points out, first-time buyers have been driving the market in Toronto and they have been frustrated by the lack of listings. But now move-up buyers are starting to sell their starter homes, he says, which is helping to loosen the tight supply.

He expects the hectic pace of sales to slow in the second half of 2010 because the Bank of Canada is likely to raise interest rates and first-time buyers are more susceptible to the hikes. At the same time, only so many people can afford to buy a house in the GTA and many of those have already landed.

"We have some payback to do in the market."

Mr. Hildebrand expects price growth in the coming few years to be closer to the rate of inflation.

Robert Kavcic, economist with BMO Nesbitt Burns, points out that a jump in new listings is helping to move housing markets back toward balance between buyers and sellers. New listings were 25.3 per cent higher in March than in March of 2009. That shift toward a more even market should accelerate in the coming months if new supply remains strong and demand cools, Mr. Kavcic says.

Mr. Chaddah, the real estate agent, says he often has to reassure buyers these days that more houses will arrive on the market. But many house hunters want to secure a deal before interest rates rise, and many are worn out by the search.

"They say they want to quit this part-time job we have trying to find a house."

He worries that the market could become overheated if people feel they have to bid an eye-popping amount over the asking price just to secure a deal. Meanwhile he has the same advice for most buyers:

"Don't get flipped out - more stuff is coming."

Tuesday, April 13, 2010

New Housing Price Index rises in February, Statistics Canada reports

THE CANADIAN PRESS 2010/04/13
OTTAWA - The New Housing Price Index rose 0.1 per cent in February following a 0.4 per cent increase in January.

Statistics Canada reports prices rose in 14 of 21 metropolitan areas between January and February. Prices increased the most in Regina (up two per cent), followed by Winnipeg and London (both up 1.9).

Toronto and Oshawa (down 0.7 per cent) as well as Charlottetown (down 0.5) were the only metropolitan areas to register monthly decreases in February.

Year over year, the index was up 0.9 per cent in February following a 0.1 per cent increase in January.

The largest year-over-year increase was recorded in St. John's, N.L. (up 5.5 per cent), followed by Winnipeg (4.1) and Quebec City (3.5).

Higher residential land values were the primary reason for the increases in all three metropolitan areas.

Friday, April 9, 2010

Overheated resale market driving more buyers to new homes

Terrence Belford

Published on Thursday, Apr. 01, 2010 11:32AM EDT

Last updated on Thursday, Apr. 01, 2010 12:07PM EDT


February results are in and I am going to cut right to the chase: The average price of a new low-rise home in the Greater Toronto Area climbed 11 per cent from last year. The average high-rise condo tab also rose, by five per cent, and the average resale-home price was up by a staggering 19.4 per cent.

Worse news is that the worrisome, rising-prices trend appears to have continued through March. The Toronto Real Estate Board, which compiled and posted the statistics, says the average cost in February was $488,297 for a new home, $410,433 for a new condo and $431,509 for a resale home in the GTA. Then, in the first two weeks of March, TREB adds, the average resale home price jumped another $8,644, to $440,153.

It wasn’t just the prices; the number of units sold skyrocketed too. Enormous demand drove high-rise condos sales up 489 per cent over the same month a year earlier, to 1,538 units. The number of low-rise condo sales shot up 140 per cent to 1,610 for the month, and 7,291 resale houses were sold, up 77 per cent.

“We had an amazing month in February,” says Rob Montemarano, vice-president of Lakeview Homes. “At our Cathedral Park project in Markham, we have 130 homes in phase two and sold 100 of them – 85 in just one weekend. What we are seeing are people who might normally have gone to the resale market come to us for a new home because that market is so competitive now that they can’t find what they need.”

Finding a new single-family home is proving an equal challenge, says Joseph Bozzo, new homes sales manager at Spectrum Realty Service. Spectrum represents 34 new-home projects across the GTA.

“What’s really of great concern is that the entire GTA only had 7,493 unsold low-rise homes in inventory at the end of February, or only about a third of what we normally have,” he says. “I think maybe there is a fair amount of panic buying going on right now.”

Anyone looking for a single family home in which to raise the kids – a place with a backyard big enough for a jungle gym – may well be justified in panicking. Every indication is that affordable single family homes are about to go the way of 50-cent coffees and filling up your gas tank for $20.

Whether through well-thought-out policy or the exigencies of municipal finances, the GTA just does not have enough municipally approved building lots to come anywhere close to meeting buyer demand.

“In Oakville, where there have not been any new lots come on stream in a very long time, I know that there are about 2,000 of them north of Dundas Street ready to go,” says Mr. Bozzo. “The hold-up is the city will have to provide schools, recreation, community centres and all those essentials for another 2,000 families. It already imposed development levies that are so high many major builders are reluctant to start projects there, but the city has to pay for those necessary services and the money has to come from somewhere.”

The upshot is that Oakville will probably release lots in dribs and drabs. Mr. Bozzo says he expects perhaps 200 to 300 to come on stream this fall.

Mr. Montemarano says Lakeview has a similar problem. It has been waiting two years for Cambridge, Ont., to give the okay for 1,500 building lots.

“Six or seven years ago, Lakeview would do five projects a year. The industry would build maybe 28,000 to 32,000 new homes a year,” he says. “Now we are down to just three projects and the industry turns out maybe 16,000 to 17,000 new homes a year.”

“I can easily see the day coming when we are forced to do just one or two new projects a year,” he adds. “We have a land bank of 3,800 building lots right now, but we just can’t get them on stream.”

The shortage of land in the face of fierce demand, coupled by dramatically rising municipal development levies is not only driving prices up, it is also driving builders out of business, Mr. Montemarano says. “Six or seven years ago there were 260 builders active in the GTA; today there are just 160,” he says.

If the Toronto area hopes to be able to meet the demand for affordable family housing, then municipalities, builders and home-buyers are going to have to focus on innovative new forms of family housing such as stacked townhouses, says Mr. Bozzo.

That also means an end to the dream of private backyards and an acceptance of shared public spaces for recreation and relaxation, he says.

“That long-held dream of a home on a 50- by 120-foot lot is getting well beyond the reach of the average family,” he says.