ON GUARD FOR THEE?

Canada stands ready to tighten mortgage rules: Flaherty
By Randall Palmer
Reuters Mar 22, 2012

STITTSVILLE, Ontario – The Canadian government, dealing with signs of an overheated property market, is ready to tighten mortgage insurance rules again if necessary, Finance Minister Jim Flaherty said on Thursday.

Mr. Flaherty also chided bank executives for asking the government to impose more restrictions, noting that the banks are the entities that offer mortgages.

Canada’s banking regulator, trying to curb risks posed by record-high levels of household debt, said this week it wanted lenders to be more transparent about their mortgage businesses.

Mr. Flaherty has imposed tougher requirements for government-backed mortgages three times since 2008.

“With respect to tightening up the mortgage insurance market we’ve done it three times … and we watch, we monitor the market, and if we have to tighten it some more we will,” he told reporters in Stittsville, Ontario.

“The new housing market produces a lot of jobs in Canada so there’s a balance that needs to be addressed. I’d like the market to correct itself, quite frankly, if it can.”

Mr. Flaherty said he had noted indications of softening in the Toronto condominium market, which he said was a good sign.

Canada’s household debt-to-income ratio hit a record high of 151.9% last year, largely the result of mortgage borrowing. The ratio dipped slightly in the fourth quarter but at 150.6% was not far off the record.

Mr. Flaherty said “it was a bit odd” that some banks were pressing him for tighter rules.

“We have bank executives in Canada saying ’You know, really the rules on insured mortgages should be tightened up’. They must forget that they are actually the ones that issue the mortgages — it’s their market, it’s not my market,” he said.

Since 2008, Mr. Flaherty has lowered the maximum amortization period for new mortgages to 30 years from 40 years, raised minimum down payments required to qualify for government insurance, and required all borrowers to qualify for a five-year fixed-rate mortgage to get insurance.

If he decided to act again, Mr. Flaherty could announce new measures in his March 29 budget.

Mr. Flaherty, who has promised to cut spending to eliminate the federal government’s budget deficit by the 2015-16 fiscal year, said he would be proposing moderate cutbacks in the budget.

“This is not an austerity program,” he said, adding the focus would be on long-term growth, prosperity, innovation and sustainable social programs.

REALTOR BOWLING PARTY!

SPRING BOOST!

Real estate spring boost predicted in Calgary
CBC News
Posted: Mar 19, 2012
 
http://www.cbc.ca/news/canada/calgary/story/2012/03/19/calgary-real-estate-spring.html
 
Calgary realtors say the market is picking up with the approach of spring.

The Calgary Real Estate Board is forecasting a two per cent growth in house prices this year.

But according to board president Bob Jablonski, there are indications sales will be even higher than expected.

Jablonski said multiple offers on the same property and increased interest in homes in all price ranges are two factors that make him optimistic.

"If it’s priced properly and you are in a good community in the type of property you are looking for there may be more than one buyer looking for it,” he said.

Realtor Sano Stante is also seeing signs of an uptick, he said.

"The sense is that the consumers' mood is picking up, generally and they're a little more confident in the economy,” Stante said.

THE ROAD TO RICHES?

Is being a landlord the road to riches?
By Tina McFadden
Postmedia News  Mar 15, 2012

CALGARY — Leaky faucets, broken water heaters, late rent — these aren’t the only issues that landlords have to deal with.

In the 12 years Rod Faulkner’s been renting out properties in Calgary, he’s dealt with unpaid gas and water bills, one physical threat and three trips through the civil court system to sue for damages.

“In the 12 years, people have scammed me in just about every way imaginable,” says Faulkner, who owns 12 Calgary revenue properties. “And every time I get scammed, it costs me money, and I learn a new lesson.”

Property managers can help landlords head off some of the challenges associated with rental properties. Typically, property management companies advertise vacancies, screen tenants, arrange for any maintenance work, deal with tenancy problems and collect rent. However, they typically charge 10 per cent or more of the monthly rent, as well as a tenant finder fee.

“All it takes is one bad tenant and costs go through the roof,” warns Gerry Baxter, executive director of the Calgary Residential Rental Association. “It’s very expensive to get rid of bad tenants. . . . More than anything, I think (being a landlord) is a challenging business.”

But the tenant headaches are still worth it, according to Faulkner, because the capital appreciation on revenue properties can pay off big-time — that is, if you can find a good deal in Calgary’s high-priced real estate market.

“Property values have definitely increased, and it’s harder to find a good property nowadays,” Faulkner says.

Realtor Janet Miller, who owns two rental properties in Calgary and one in Sparwood, B.C., says she’s figured out a way to pick good tenants — and keep them. She checks references for all tenants, and then undercharges in rent. For instance, on a single family home that would normally rent for $1,200, the rent may be dropped by $100.

“If we drop that rent to $1,100, for tenants it’s huge,” she says “For us, it’s not that much.”

The benefit is twofold. First, tenants don’t turn over very often. Second, the tenants rarely bother Miller with complaints.

By keeping her rents low, Miller says she also minimizes the maintenance factor with tenants.

“We have tenants who truly believe that they are flying below the radar, and they do not want to phone us when the doorbell fails,” Miller says. “They just go out and fix it. . . . They want to talk to us as little as possible because they know that they’re getting a crazy good deal.”

Faulkner doesn’t have any trouble finding tenants. But he says you need to pick your tenants carefully: “It’s a bit of an art to pick a tenant.”

And his guiding mantra when considering a property is: “Right building, right price, right neighbourhood.”

He looks for properties near downtown or the C-Train stations, as well as in neighbourhoods that exhibit pride of ownership. His portfolio includes townhouses, duplexes and triplexes, as well as the harder-to-come-by multiplexes.

He says multiplexes with four to 12 units are harder to find because they’re owned by guys like him who have accumulated properties and know how profitable multiplexes are.

“They’re not usually willing to sell them,” he says. “You can get 50, 60 years of good solid returns out of a building like that.”

A good revenue property should be “cash positive,” says Faulkner, meaning it should pay down your mortgage, and ideally, provide positive monthly cash flow after expenses.

Faulkner has managed to find the right properties at the right price (his latest purchase was less than a year ago), and he believes you can still find positive cashflowing properties in Calgary today. Again he says it all comes down to the right property, price and neighbourhood. He factors in rising interest rates when determining whether the price is right.

A systems engineer, Faulkner, 42, plans to retire in less than 10 years — many years earlier than he could retire without the revenue properties. He expects to earn approximately $200,000 in cash flow annually from his revenue properties. Alternatively, he says he’ll be able to sell his entire portfolio for $4 million to $5 million. Of course, that’s assuming he continues to make the right purchases and the economy goes well.

“You have to believe in the Alberta economy, that we’re going to have a constant influx of immigrants,” he adds. “Calgary’s forecast to grow and grow and grow.”

As a realtor for MaxWell Canyon Creek, Miller advises clients looking for revenue properties. During the past year, about 20 per cent of her buying clients purchased rental properties. She has recommended single family homes and condos — it all depends on her clients’ needs and goals.

If clients can’t come up with the mandatory down payment for a revenue property (20 per cent), she’ll suggest renting out the property they’re living in, and buying a new primary residence for themselves with five per cent down.

Miller, unlike Faulkner, believes it’s highly unusual to find revenue properties in Calgary that cover all your costs or provide positive monthly cash flow. However, she’s not looking to make money on her rental properties each month. If she starts to make money, she shortens the amortization on the mortgage and reinvests the money into the property. That way, she keeps her mortgage payments high, pays off her mortgages faster, and deducts the mortgage interest and other expenses.

In the meantime, her tenants are paying down her mortgages. By the time Miller and her husband retire, the mortgages will be paid off.

“And somebody else will have bought the houses for us,” says Miller with a laugh. She expects the income from their rental properties to account for a significant portion of their retirement income.

“The beautiful thing about buying a house instead of stocks is that somebody else is paying off the investment for you,” she says.

“I really believe in real estate as an investment.’

What real estate can do is diversify stock portfolios, says Frederick Montilla, a financial consultant with Investors Group.

“If you speak to affluent Canadians, they have a combination of everything — they’re totally diversified,” he says. “That means they have money in the stock market, they have money in their pension, they have money in their corporations, and they have rental properties as well.

“The person who has an investment property will be better off than the person who is just investing in the stock market because the person buying rental properties has two advantages — the value of their property is appreciating while their tenant is paying their mortgage, and their mortgage is depreciating,” says Montilla.

“The only problem is (real estate) is not liquid,” adds Montilla. “But if you were to compare both, the rental property will outperform the stock market returns.”

In Faulkner’s case, the revenue from his rental properties has enabled him to launch an additional business. He recently opened a liquor store in Canmore, The Market Beer, Wine & Spirits.

You have to look at your rental properties as a business, he says. “Some people get attached to them. They feel it’s their home, and when a tenant puts a hole in the wall, they feel personally affronted . . . . You have to be detached from it . . . . The only reason you’re putting in the extra effort is to make money on it.”

ON THE RISE...NATIONALLY

Canada’s home sales back on the rise
Postmedia News
Mar 15, 2012

Following a rough start to 2012, home sales in Canada rebounded in February with a modest increase from the previous month.

The Canadian Real Estate Association (CREA) said Thursday that home sale rose by 1.4% between January and February, which helped recover roughly one-third of the 4.5% drop recorded the previous month.

Compared with the same reporting period the previous year, activity was 8.6% higher than February 2011. Over the first two months of 2012, some 61,772 homes were sold, which represents a 6.7% hike from the same period in 2011.

“The national rise in both sales activity and the number of newly listed homes beyond the normal seasonal increase provides clear evidence that Canadians are confident in housing market prospects,” CREA president Gary Morse said in a new release.

New home listings also jumped 1.9% in February, representing the highest level since May 2010. The association said a spike in new listings in Canada’s two busiest markets — Toronto and Montreal — helped counterbalance a decrease in listings in Vancouver, which is the country’s third-largest market.

CREA said that the balance between sales and new listings remains fairly equal.

On a year-over-year basis, average home sale prices were up fully two% in February 2012. The average price of all homes sold that month was $372,763.

The association said that the increase was partly due to a rise in high-end home sales in the Vancouver area, which was not anticipated. Single detached residences in the Toronto area also continue to fuel home gains.

LC1 FOR THE DECK/PATIO

Iconic LC1 sling chair remade for outdoors

By L.A. Times
March 8, 2012

It may be unwise to meddle with perfection, but the Italian furniture company Cassina is taking its chances, releasing a clever outdoor version of the LC1 sling chair, the iconic 1928 design by Le Corbusier, Pierre Jeanneret and Charlotte Perriand. The tubular frame, originally produced in steel and later replaced with chrome, has been returned to stainless steel with silver welds for all-weather performance. The leather seat and armrests have been swapped out for waterproof, fade-resistant Sunbrella fabric, proving how “innovation in materials can lift a classic to new heights while still maintaining its original design concept,” said Kari Woldum, vice president at Design Within Reach, which is selling the outdoor LC1. The designer looks still come with a designer price: $2,345.

The springs that add some flex to the backrest also have been fabricated in stainless steel.

And the finished look does mirror the indoor original. The outdoor LC1 is one of several modern classics that DWR has released in outdoor versions.

NORTHWEST ON TOP

Resale pace soars in Calgary
Northwest leads city in terms of sales
By Josh Skapin
Calgary Herald March 10, 2012

Sales of single-family resale homes climbed 11 per cent in February compared to the same month last year, says the Calgary Real Estate Board.

The city saw 1,284 single-family homes change hands last month, up from 1,169 last year, says the board.

The largest increase came in homes priced $500,000 to $549,000, with sales in this range soaring from 65 in February 2011 to 106 last month.

Zone A - which roughly consists of northwest Calgary - led the city in sales last month, with 465 homes changing hands.

The zone also led the city in resale activity in January, but with only 271 transactions.

Tuscany led Zone A with 40 sales of single-family homes in February at an average price of $504,347.

At 1,128 homes, Zone A also led the way in inventory last month.

Calgary's slowest resale activity last month was in Zone B - which roughly corresponds to northeast Calgary - which finished the month with only 164 sales.

At $293,714, Zone B also finished with the lowest average single-family resale price.

The lowest average resale price in the zone was $195,333 in Dover, which ended the month with three sales.

At $589.106, Zone C - which roughly covers southwest Calgary - had the highest average single-family resale price among the four zones.

Within Zone C, Bel Aire had the highest average resale price at $ 2.1 million for one sale.

Zone D, which roughly consists of southeast Calgary, was third in average resale price at $422,582.

RESULTS IN VICTORY?

Low-rate mortgage wars are on
John Greenwood
Financial Post Mar 9, 2012

After a string of warnings from policymakers about the perilous state of household debt in this country, it hardly seemed like a good idea.

But this week the big banks launched the latest round in the mortgage war, with Bank of Montreal rolling out its rock-bottom 2.99% five-year home loan, one of the lowest rates on such a product. BMO’s peers quickly followed suit, breathlessly unveiling their cut-price mortgages, available for a limited time.

In public comments the banks wrapped themselves in the maple leaf, claiming the special rates are aimed at bolstering the finances of consumers, since the new products come with fixed rates and shorter amortizations designed to allow borrowers to pay down debt faster. “We think this is totally consistent with the debate about stability of [household finances],” said Frank Techar, head of BMO’s domestic retail bank.

“Canadians have identified effective debt management as their primary focus this year, and these special offers will help new homebuyers and existing mortgage holders reduce interest costs and pay down their mortgage sooner,” said Colette Delaney, executive vice-president at Canadian Imperial Bank of Commerce’s retail bank.

But here’s the thing. Canadian household debt has been steadily rising for more than a decade and it’s now sitting about same the level it was in the United States just before the housing collapse, precursor to one of the biggest waves of consumer defaults since the Depression.

Thanks to low interest rates and a stable economy, Canadians are managing their burden. But Bank of Canada Governor Mark Carney has warned repeatedly that elevated borrowing is the biggest domestic threat to health of the financial system.

But don’t “special offer” mortgage deals encourage people to borrow more, and doesn’t that exacerbate the problem?

Or maybe problem is the wrong word, because from the banks’ perspective it’s not so much a problem as a potential earnings headwind, according Peter Routledge, an analyst at National Bank Financial.

.Residential mortgages are hugely important for the banks, a key business in domestic retail lending which is traditionally one of the most important earnings drivers. At a time of heightened competition, profit margins are razor thin but players are making up for that by hiking the volume of loans they write.

Canadians have about $1.1-trillion of mortgages outstanding, by far the lion’s share of total consumer debt, according to the Bank of Canada.

But the bank’s are mostly protected from risk of default through insurance provided by the Canada Mortgage and Housing Corp.

On average, at least 50% of mortgages held by the banks are covered by insurance, all but the safest, low ratio loans to highly credit-worthy customers.

So in a worst-case scenario — a collapse in the housing market — the banks would have minimal direct exposure to loan losses.

But they would experience a drop in profits since a housing correction would almost certainly result in a consumer pull-back in loan demand, not just for mortgages but across the board, and the banks are very cognizant of that.

“I think banks recognize that scenario would be very bad for earnings, and why would they want to hurt their franchise?” said Mr. Routledge.

When the U.S. market started to turn, lenders responded by bringing out ever more risky products that enabled people to lever up even more because their role in the economy had become distorted.

“But that’s very unlikely to happen here because of the [more healthy] structure of the mortgage market,” he said.

Another reason for Canadian banks to be cautious is that CMHC has been fundamental not just to their business models but also to their funding. Last year the big six issued more than $25-billion of covered bonds, mostly backed by CMHC insured mortgages. Thanks to the CMHC, the interest rate on the bonds is only marginally above Canadian government bonds, and significantly lower than the funding costs of even the strongest foreign banks.

The last thing the banks want to do is anything that might cause the federal government to change the rules around CMHC insurance.

With this in mind, we can ask the question again: Are the banks increasing risk in the system with their special low-rate mortgage offers?

Bank officials suggest the main target is customers of other banks along with new customers with solid jobs and a genuine need to own homes.

Rob Mclister, editor of industry newsletter Canadian Mortgage Trends, says such offers typically result in only a small amount of business from new borrowers. Instead what they do is raise the level of market interest in mortgages and home buying generally, he said.

Not surprisingly, the banks continue to grow home loan volumes at mid single digits, a healthy clip given the weak economy.

3 WORDS...AFFORDABLE, QUICK & EASY

Quick Kitchen and Bath Updates To Do Before Selling Your Home
Brendon DeSimone
Zillow  February 17, 2012

Many people say it’s the kitchen and bathrooms that really sell a home.

Buyers prefer that both are clean and in move-in condition. They want to unpack their dishes and glassware as well as their toiletry bag and feel comfortable in their new home right away.

Many homeowners, however, don’t have the time, energy or financial resources for major kitchen and bathroom renovations. Perhaps during their time in the home, the seller focused on turning the basement into a media room or making necessary roof and siding repairs. When it’s time to sell, how can a cash-strapped seller appeal to buyers who want — even expect — an upgraded kitchen and bathroom?

Here are three affordable, quick, easy tips for sprucing up your kitchen and bath right before going on the market.

1. Paint the kitchen cabinets.

It would be too costly to go out and purchase new cabinets just before you sell. But you and your real estate agent despise the old knotty pine or dark grain cabinets from 20 years ago. A quick fix is to paint them white. It will make the kitchen appear lighter, brighter and cleaner. A fresh coat of paint will give the appearance of new, which will appease many buyers. This can be done in one or two days’ time for just a few hundred dollars.

2. Put some new hardware on the kitchen cabinets.

After you’ve brightened up the kitchen with some new paint, throw on some brushed nickel cabinet door hardware. This hardware with the new white paint in the backdrop will make the kitchen pop. Buyers’ eyes may be drawn away from the older counter tops or appliances. And, given that the cabinets are at or just above eye level, the hardware may be the first thing they notice in the kitchen. You can buy new hardware for just a few dollars and install them yourself

3. Re-grout or clean the bathroom tile and grout.

Bathrooms should be sanitary places and a new buyer wants to feel comfortable with their new bathroom. Nothing is more of a turn off than a bathroom where the grout is dirty or moldy or full of soap scum. At a minimum, spend an hour with a toothbrush and some bleach and scrub that grout. This is something you can do on your own in just a half a day. If the bathroom is too far-gone, you may want to spend the money on a tiler to regrout the tile. This will make the bathroom pop, giving a new, clean feeling to this important room

There may be other, more important projects for which you’ve budgeted. In many cases, your real estate agent has suggested painting some of the rooms a more neutral color or spending some money on storage for excess furniture. Staging and home preparation are unique for every home. But, given the focus buyers always put on kitchens and bathrooms, these three tips should be seriously considered as you prepare to go on the market.

With the new day comes new strength and new thoughts. Eleanor Roosevelt

Calgary’s new condo market emerging from economic downturn
Sales increasing for new projects
By Mario Toneguzzi
Calgary Herald March 6, 2012

CALGARY — Calgary’s new residential condominium market is in the early days of a recovery from the 2008 economic downturn, says a new housing report by AltusGroup.

The report said new condo apartment sales had plummeted in Calgary with the recent economic crisis and stayed low through 2010, but the market turned around in 2011.

New condo apartment sales in Calgary more than doubled in 2011 to just under 2,500 units, up from just over 1,100 units in 2010.

The report said a large number of new project launches boosted the number of units in projects on the market at year-end to about 8,000 units, up 26 per cent from a year earlier, split almost evenly between low-rise and highrise buildings.

“The weakness in the Calgary market in 2008-2010 was at least in part due to the exit of investors,” said the report. “However, improving economic conditions and lower vacancies are attracting investors back into the market.”

TIME FOR TAKE OFF

Move over Toronto, Calgary’s condo market about to take off in 2012
Garry Marr
Financial Post Mar 2, 2012

A new report suggests Toronto’s condominium market may have finally peaked in 2011 but Calgary’s may be just catching fire.

The report from real estate research firm Altus Group notes new condominium sales climbed more than 100% in 2011 from a year earlier in the oilpatch.

“New condominium apartment sales in Calgary had plummeted with the recent economic crisis and stayed low in 2010. However, the market turned in 2011,” says Altus, in its report. Sales of new condominiums climbed from 1,100 in 2010 t0 2,500 in 2011.

Altus says the number of unsold units was steady from the end of 2010 as new projects saw strong initial sales. The group says improved economic conditions and lower rental vacancies are attracting investors back into the market.

“The weakness in the Calgary market from 2008-2010 was at least in part due to the exit of investors,” says Altus.

Meanwhile, Toronto has to deal with a large potential supply of new condominiums in the pipeline. RealNet Canada says more than 79,000 condominium apartments were under construction or in pre-construction in the greater Toronto area at the end of 2011.

“Planned occupancies extend as far as 2016,” Altus says, noting it takes about five years for all units released for sale in any given year to be completed.

Even if half of those condos under construction become rentals, that would add 40,000 units to the supply of condo apartments, meaning demand for rental would have to increase by 8,000 units per year to maintain current vacancy levels.

“While this was achieved last year it is more than double the average annual growth,” says Altus, adding government plans are encouraging condos as a percentage of new home sales.

The issue in Toronto remains whether rental levels can be maintained for investor-owned apartments, although a portion of investors are said to be off-shore buyers with less concern about their returns in the short-term and medium term.

“Looking ahead our expectation is that GTA new condominium apartment sales peaked in 2011, and more moderate sales levels will emerge over the next few years,” says Altus. “In Calgary, there is a potential for further improvement in sales during this cycle.”

RISING DEMAND IN ALBERTA

House prices expected to ease
Financial Post Staff
Mar 5, 2012

OTTAWA — Home resales are expected to rise by 0.3% this year in Canada, with low interest rates continuing to support the market, the Canadian Real Estate Association said Monday.

National sales are forecast to reach 458,800 units in 2012, up from 457,305 in the previous year. “Rising demand in Alberta, Saskatchewan, and Nova Scotia, is expected to offset softer activity in British Columbia, Ontario, and New Brunswick,” CREA said.

In 2013, CREA said, sales are expected ease back to 457,200 units, with modest gains in all provinces except Ontario “as economic and job growth picks up later this year and builds into 2013,” it said.

Meanwhile, the national average price is likely to decline by 1.1% this year to $359,100, followed by a slight increase of 0.9% to $362,300 in 2013.

“Risks to the Canadian economic outlook remain elevated owing to the European sovereign debt quagmire, but the continuation of low interest rates is the silver lining,” said Gregory Klump, CREA’s chief economist.

“So long as the European debt crisis is contained and a global economic recession avoided, low interest rates will support Canadian home sales and prices. Recent trends are reassuring, but interest rates remaining low for longer will doubtless keep the Canadian housing market under scrutiny for signs of overheating.”