HOME FOR CANADIANS

CMHC backing fewer loans
By Garry Marr
National Post Jan 30, 2012

Canada Mortgage and Housing Corp. is cutting back on mortgages it insures as the Crown corporation edges closer to a $600-billion cap imposed on it by the federal government, the Financial Post has learned.

A CMHC spokesman confirmed that it had approached a number of lenders at the end of 2011 about reducing its “bulk or portfolio insurance” after third-quarter results showed the agency had committed to back $541-billion in mortgages. CMHC, which guarantees mortgages held by financial institutions, is ultimately backed by the federal government and needs approval to go over the $600-billion limit — something that would create greater risk for taxpayers should the housing market collapse.

“CMHC has recently received an unexpected level of requests for large amounts of CMHC portfolio insurance.” said Charles Sauriol, a spokesman for the Crown corporation, in an email.

“To ensure equitable access to portfolio insurance within CMHC’s annual limits, an allocation process is being established which has caused some delays. Portfolio insurance provides lenders with the ability to purchase insurance on pools of previously uninsured low ratio mortgages and does not impact CMHC’s transactional business.”

Financial institutions are required to have mortgage-default insurance when a consumer has less than 20% equity. However, the banks have been seeking insurance on loans with even high downpayments — something not required by law — so they can securitize those bulk lending loans, thereby getting them off their balance sheets and reducing their capital requirements. In those cases in which the loans to value is less than 80%, the bank pays the insurance charge instead of the consumer.

“One of the things that has got them [to the limit] faster than expected is they are doing a lot of conventional insurance for lenders,” said one source. Just three years ago, CMHC had $450-billion in loans it was backstopping and had to go to the government to get that increased to $600-billion.

“I think as a taxpayer you should care. The policy question is why should the Canadian taxpayer take that type of meltdown risk within CMHC,” the source said.

The risk to the taxpayer would be a collapse in the market leading to a defaults like the U.S. saw. If CMHC couldn’t cover those defaults, Ottawa is on the hook for 100% of any shortfall.

On the surface, insuring conventional loans may not appear as risky as traditional mortgage default insurance because it comes with more equity. The banks have been demanding ultra low fees on the conventional mortgages, arguing the equity position makes them a lower risk. However, lenders are skimming their portfolio to load up mortgages that are 70% to 80% debt to equity and may also have other problems, said a source.

With mortgage defaults well below 1%, some might argue the risk to CMHC is negligible. “If you look at what is backing [CMHC’s] guarantee, it should be more than enough to cover any downturn in the market,” said one banking source, who asked not to be identified, about CMHC’s cash reserves. “Besides, what will the government do, not increase their limit? This could kill the entire housing market.”

CMHC gave no indication it would seek an increase in its limit.

“CMHC’s mortgage loan insurance limit in force is $600-billion. CMHC manages its mortgage loan insurance business in accordance with this limit,” said Mr. Sauriol.

The Crown corporation would be going to the government looking for an increase in its limit at a time when both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have been casting a wary eye at the housing market.

“We watch the housing market carefully and we are prepared to intervene if necessary. Having said that, we’re not about to intervene in the housing market now,” said Mr. Flaherty this month. For his part, Mr. Carney said “we see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they’re probably overvalued. So there are risks there.”

Sources have indicated the government is already considering tough new measures for calculating how the self-employed qualify for loans and tightening regulations for condominium buyers, so there is probably little appetite for backstopping even more debt from CMHC. In addition to CMHC, the government has a $300-billion limit for private mortgage default insurers.

WANT TO TAKE STOCK IN THE BLOCK?

Chip off The Block for 17th Ave. living
By Marty Hope
Calgary Herald January 23, 2012

It doesn’t look like much now — just a piece of snow-covered, weedy land wrapped in orange fencing.

Sitting a block off trendy 17th Avenue S.W. at 9A Street, and surrounded by apartment buildings, this land will soon host heavy equipment to begin development of The Block.

The 61-unit project is being undertaken by Avi Urban, the multi-family division of Homes by Avi.

“This is the biggest site left in the Lower Mount Royal area and it was just too good to pass up,” says president Charron Ungar of Avi Urban.

The Block will be a courtyard development consisting of 41 one-bedroom and nine two-bedroom flats.

It will also have 11 townhomes, with all the units facing into a central courtyard.

With construction scheduled to begin early this year, first occupancies could start in early 2013.

“I’ve lived in the area for about 20 years now and I’ve always wanted to do a contemporary residential development here — something suitable to the area; something with a Mount Royal look and feel,” says Ungar.

He also wants to build something that people want to live in and watch their families grow, rather than for investors to purchase and rent out. He estimates that 90 per cent of the residences will likely be owner occupied.

“I’ve chosen to build something that will be appreciated by people living there — a community within a community,” says Ungar.

Seeing as how the site is zoned for live/work residences, he expects a solid cross-section of buyers ranging from young professional singles and couples to more mature purchasers.

“I see them as active participants in the 17th Avenue lifestyle, not watchers,” he says. “They will be an integral part of the area’s makeup.”

The one-bedroom units measure 650 square feet and are priced from the mid-$200,000s.

The 850-square-foot two-bedroom residences are priced from the mid-$300,000s. The 1,200-square-foot townhouses are priced from the mid-$400,000s.

The show suite at 1022 17th Ave., which opened in November, is a mock-up of a typical one-bedroom suite in The Block.

The suite has its own patio looking into the courtyard. Inside, the dining area of the suite is finished with built-in cabinets and shelves.

At the living room, a pair of sliding doors open to the suite’s patio and the courtyard beyond.

The kitchen has custom tilt-up cabinets and the countertops are quartz.

An island, also with a quartz top, has a flush eating bar that seats three and holds the dishwasher. The appliances are stainless steel.

The bathroom has a quartz-topped vanity, tile floor and walk-in shower.

Past the kitchen, a barn door rolls open to show the bedroom with a walk-in closet and stacking washer and dryer.

The show suite is open from 2 to 8 p.m. Mondays through Thursdays, noon to 5 p.m. weekends and holidays, and Fridays by appointment by calling 403-536-7238.

WHAT YOU NEED TO KNOW

Project: The Block, which is a courtyard development consisting of 41 one-bedroom and nine two-bedroom flats, along with 11 townhomes.

Developer: Avi Urban, the multi-family division of Homes by Avi.

Location: 1715 9A Street S.W.

Prices: One-bedroom suites measuring 650 square feet are priced from the mid-$200,000s, while 850-square-foot two-bedroom suites start in the mid-$300,000s. The 1,200-square-foot townhomes are priced from the mid-$400,000s.

Directions: The construction site is at 1715 9A St. S.W. The show suite is at 1022 17th Ave. S.W.

Hours: The show suite is open from 2 to 8 p.m., Mondays through Thursdays, noon to 5 p.m. weekends and holidays, and Fridays by appointment by calling 403-536-7238.


GO UPTOWN IN STYLE

Located in the heart of the city in one of Calgary’s oldest communities, Uptown 17th Avenue is a neighbourhood where people come to live, work, dine, shop and to explore one of Canada’s most thriving cosmopolitan areas.

With its unique blend of state-of-the-art, fashionable shops, a sizzling array of eateries and entertainment venues, professional services and historic buildings, the avenue embodies both the charm of old-era small town and all the conveniences of a vibrant city.

There are more than 200 locally-owned and operated boutiques from 14th to Second Street.

For information, visit www.uptown17.ca

AWARD WINNER

Homes by Avi created Avi Urban in 2000.

From the beginning, the goal was to offer homeowners a higher degree of comfort and function through innovative townhome developments.

Avi Urban’s broad range of communities include a highly modern live/work development in the inner-city, multiple examples of street-orientated row housing in exclusive neighbourhoods, and large scale, multi-phase townhome developments.

Headed up by president Charron Ungar, Avi Urban has created notable projects in Calgary such as Victoria Cross in Currie Barracks, Olive in Bridgeland, Wentworth Pointe, and StoneWater at Lake Chaparral.

Named multi-family builder of the year in Calgary in 2008. Avi Urban has received numerous multi-family development and design awards.

SOME LIKE IT HOT!

More mortgage rules planned if housing market gets too hot
Garry Marr
Financial Post Jan 23, 2012

A new round of mortgage rules from Ottawa could include tough new measures for calculating how the self-employed qualify for loans and tighten regulations for condominium buyers, according to two separate sources.

Ottawa remains concerned about the possibility of an inflated housing market and wants to crack down on the practice where consumers self-disclose what they make when applying for a loan. In the case of the condominium buyer, the government continues to consider a proposal that would have 100% of condo fees count when assessing how much debt a consumer could afford.

“None of this is happening just yet. The housing market has slowed down and the government wants to see what will happen next,” said one source. “If the spring market picks up, then we will see more changes to the rules.”

Bank of Canada Governor Mark Carney said Sunday that some parts of the Canadian real estate market are “probably overvalued” and policymakers are monitoring to see if further steps are needed to cool it.

“We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they’re probably overvalued. So there are risks there. We’re watching it closely. We’re working with our partners, the federal government, the superintendent of financial institutions,” he said in an interview broadcast on Sunday on CTV.

” Measures have been taken. They’ve been effective. We’ll keep up that vigilance. If more needs to be done, I’m sure the appropriate authorities will take those measures.”

Stated-income products have become very popular during this housing boom, allowing more banks to get involved in loaning to the selfemployed.

“These are individuals that are self-employed, have great credit and won’t be able to validate their ability to pay if they are not showing their income on their notice of assessment,” said one source.

He says those people with stated income could have to make an even higher down payment than the normal 20% that exempts consumers from buying expensive mortgage default insurance.

The source said some self-employed are qualifying for loans based on the assumption they have a lot of write offs, like car payments and housing costs associated with home office costs.

“They get to include that based on the assumption that self-employed people have an advantage from a tax perspective,” said the source. “The government is trying to figure how they would present this.”

A source with one of the banks said the government is trying “zoom in” on marginal borrowers so it doesn’t get into a U.S. type of situation where they were not verifying income.

“What banks are doing usually when it comes with self-employment is not dealing with declared income because nobody believes it. What they do is look at their behaviour and put more weight on it,” said the source, referring to how those consumers handle their debt. “With an employer, you can call and verify their income.”

The labour market is roughly about 13% self-employed so new rules could have a major impact but the source indicated it does not mean those people would be shut out of the loan market. “It will be just more difficult for them. You are going to have to prove income in a more precise way,” he said.

The suggestion the government might crack down on condo buyers is not new, having been scrapped last year in favour of tougher new rules on amortization lengths and refinancings. Most people in the real estate sector now believe amortizations will be reduced to 25 years after having been as long as 40 just three years ago.

Brad Lamb, a Toronto real estate broker and condo developer, has heard the government is again considering including 100% of condo fees in calculating debt levels but doesn’t think it will happen.

“The 25 year amortization is a no brainer, they should do it,” said Mr. Lamb. “It’s not smart to have loose lending rules. But the condo market is hot because of investors not speculators. These investors are coming [from around the globe]. This silly [condo fee] change will do nothing. These people are buying with cash.”

Photo By: Todd Klassy

STEADY AS REAL ESTATE GOES!

'Steady' as she goes forecast for resale
By Josh Skapin
Calgary Herald January 21, 2012

For resale house hunters, 2012 is lining up to be a year of stability.

That's the message from this week's annual forecast conference of the Calgary Real Estate Board.

"It's a nice, steady, relaxed atmosphere for buyers and sellers," says incoming president Bob Jablonski in his outlook for the coming year.

CREB's forecast includes an average sale price of $476,000 for resale homes this year, up 2.1 per cent from 2011.

It also predicts sales to reach 14,800, marking a 12.2-per-cent climb over 2010.

"Buyers have time to research and carefully consider their options without needing to be overly concerned about pricing changes," says Jablonski, a 25-year industry veteran.

Employment growth and migration are factors that are expected to help bolster the city's housing sector, says chief economist Ann-Marie Lurie of CREB.

"Calgary's job market has already recovered a lot of the jobs that were lost during the recession," she says, adding that much of the recent job creation is of the business professional variety.

"These are typically good paying jobs, which helps with growth in consumption and in housing."

Many of those who moved to Calgary for work, but lost their job during the economic downturn, left the city, says Lurie. However, people are once again moving to Calgary, she says.

"Those migrants are returning and forecasted levels remain strong relative to the long-term average," says Lurie. "Migrants coming to the city need a place to live and while their first choice is often rentals, in time, they will often move to ownership and cause a rise in demand for housing."

Going forward, Jablonski advised the realtors in attendance to listen, communicate and ask.

"Improve your skills and be the best you can be," he says.

"Build your relationships, your business and be the resource to your clients. There is always a market for wellpriced listings."

A TOAST WITH 7UP

Calgary MLS sales in 2011 beat Canadian average
Up 7.0% from the previous year
By Mario Toneguzzi
Calgary Herald January 17, 2012

Calgary MLS sales in 2011 bested the Canadian average for year-over-year growth, according to the Canadian Real Estate Association.

In releasing its year-end data on Monday, the association said sales of 22,466 units last year were up 7.0 per cent from the previous year while in Canada sales grew by 2.2 per cent to 456,749 transactions.

Sales across Alberta jumped by 6.9 per cent to 53,146 units.

However, Calgary and Alberta were behind the national average when it came to the annual price hike.

Calgary and Alberta registered 1.0 per cent year-over-year gains in the average MLS sale price to $402,851 and $355,808 respectively.

The national average was a 7.2 per cent hike to $363,346.

"The momentum in sales activity provides clear evidence that low interest rates continue to draw homebuyers to the housing market," Gary Morse, CREA's president, said in a statement. "While buyers have become increasingly cautious, the hand-off for sales activity going into the New Year suggests that Canada's housing market will continue to benefit from low interest rates in 2012, and continue making a significant contribution to Canadian economic activity."

Momentum for national sales activity and average price remains positive but is slowing, which suggests that the continuation of low interest rates is not causing the Canadian housing market to overheat, said Gregory Klump, CREA's chief economist.

"High-end home sales seem unlikely to spike again in the first quarter like they did at the beginning of 2011, so national average price momentum may wane further over the next few months," he said. "With interest rates widely expected to remain low throughout 2012, home ownership will remain affordable, and continue to support home sales activity."

Douglas Porter, deputy chief economist with BMO Capital Markets, said the Canadian housing market showed distinct signs of moderation in late 2011, with even some of the hottest of the hot cities simmering down.

THE EV

(Image: First by Fram+Slokker)

East Village residential sales centre opening April 1
Developments could break ground by this summer
By Mario Toneguzzi
Calgary Herald January 17, 2012

CALGARY — A sales and marketing centre for residential development in the East Village will open April 1.

Michael Brown, president and chief executive for Calgary Municipal Land Corporation, confirmed Tuesday that the 8,000-square-foot centre will educate interested Calgarians and future residents on the vision of East Village and will showcase the residential homes and product stylings of the area’s “pioneering” developer partners.

“This is the year when we grow up,” said Brown. “This is the year we focus on getting people engaged in the East Village.”

He said the first two residential condominium towers planned for the area could break ground by this summer.

Embassy Bosa is planning its 19-storey, 203-unit tower called FUSE.

Fram+Slokker is planning an 18-storey, 191-unit tower called FIRST.

The first residents are expected to move in by January 2014.

“Both of them in terms of both projects have a phasing approach they’re working toward. That phasing approach you could be looking at as far out as seven years in terms of complete phase build out. Our hope is, and I’m pretty optimistic, that they’ll achieve their sales to allow them to break ground this summer. So they’ll actually start on the construction of those projects,” said Brown.

To date, more than 7,000 people have registered their interest on the neighbourhood website to gain a sneek peek at the first residential offerings of East Village, said Brown.

“Now we’re at the point where we need to get the marketplace buying into it,” he said.

Combined, the two developers will eventually build 1,300 residential units in East Village. Bosa has plans for three towers. Fram+Slokker has plans for seven buildings.

At complete build out in a few years, the East Village neighbourhood will be home to about 11,500 residents.

Brown said recent research has indicated the area can accommodate up to 440,000 square feet of retail development and delivery of retail is the focus of attention for this year.

In the spring, CMLC will announce plans for the historic Simmons Building which has been around for 100 years and is 17,394 square feet. There will be four uses for the building including retail as well as food and beverage.

“Simmons is a jewel today and will be a jewel tomorrow,” said Brown.

Michael Kehoe, an Alberta-based retail specialist with Fairfield Commercial Real Estate Inc., said East Village will be an attractive area for retail development.

“The visible progress on the infrastructure side in the exciting transformation of the East Village into a densely-populated urban village is catching the eye of retailers and amenity-style service tenants eager to be part of the action,” he said. “The old saying that ‘retail follows the rooftops’ will certainly be the case in the East Village over the next three to five years. As the major condo towers are erected and populated, expect an armada of retail and food service brands and local business ventures to set up shop.”

This year promises to be a busy one for CMLC and the East Village development. It will complete Phase 3 of the RiverWalk project — the area of the promenade stretching behind Fort Calgary following the Bow River and Elbow River to 9th Avenue S.E. — about 400 metres in length.

CMLC will begin work on several of the neighbourhood’s urban parks, particularly 5th Street Square and Celebration Square.

The St. Patrick’s Island Bridge and island redevelopment program will begin this year and has been budgeted by CMLC at $45 million.

Construction of the new pedestrian/cyclist bridge to St. Patrick’s Island and Bridgeland will begin in March and the overall completion is scheduled for the fall of 2013.

(Image: Fuze by Embassy Bosa)

C/S = CONSEALED SALE OR CONDITIONALLY SOLD?

Home sellers can now keep conditional sales under wraps
By Mario Toneguzzi
Calgary Herald January 11, 2012

There could be fewer conditionally sold stickers on for sale signs in Calgary's real estate market this year.

Not because of declining sales, though.

A new rule change implemented by the Calgary Real Estate Board gives the seller of a property the option of keeping the conditionally sold sticker off the sign when there is a conditional offer. As well, the seller has the option to not report the conditional sale through the MLS system.

"Before it was the real estate board's rule that once a property was conditionally sold you had to report it to the board and on the MLS system," said realtor Cody Battershill with Re/Max House of Real Estate in Calgary. "What the board has done now is give sellers the option because the real estate board wants to let sellers make the best decisions for them.

"There are positives and negatives to changing it or not changing it and that's where the discussion with your realtor and your circumstances comes into play. Sellers do now have the opportunity to decide if they want to report it as conditionally sold or not."

For sellers, not reporting a conditional sale allows them to continue to market their property and have a "backup" offer in case the conditional sale falls through. But for potential buyers, without knowing that a property is conditionally sold, it could cause them grief and time lost looking at a property that really isn't available.

Todd Strong, who conditionally sold his condo through realtor Claudia Walz of Re/Max Real Estate (Central), is waiting for all conditions to be met on the sale. There is no conditionally sold sticker on his property because it's not allowed through the condo's regulations.

But if he had the choice, he said he would not have advertised the conditional sale.

He said it would be nice to have a backup offer in the event that something goes astray in the conditional sale.

"It's nice to have it out there with people looking at it," he said.

David Finch, an assistant professor of marketing at the Bissett School of Business at Mount Royal University, said there is some merit in the change for sellers wanting to have a backup in case a conditional sale falls apart.

"However, I'm not a real estate agent, but as a marketer, transparency is absolute paramount as you build that relationship in any sales cycle. People want full disclosure," he said.

"If I spend the time and the energy researching, potentially going through a property, and if it's not disclosed to me that this is conditionally sold, that's only going to have a negative impact on possibly my interest in the property but also my perception of the parties selling the property, both the agent as well as individuals.

"I suspect the first question going in when your realtor is going to look at a house will now be 'is there any conditions or has been conditionally sold?' before you even go any further down that sales cycle."

Sano Stante, CREB's president, said the board has simply brought its rules up to date.

"The custom still is that when you have a good sound offer on your house you likely will not continue to show it and market it," he said.