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Real Estate Market Update

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Posted by Canadian Real Estate Wealth

on Tuesday, 23 September 2014 07:00

Calgary set to break MLS records… Report highlights income gap between generations… Low rates likely to be the norm says BoC deputy… US existing home sales fall but market is good…

a1a48b783d9b9baacbd9bd1a7de067a0 LCalgary set for record breaking September

A report from the Calgary Real Estate Board suggests that September could break records for MLS sales. The board says that sales are up 11.6 per cent on the same time last year, with 1,500 sales to 21st September and the pace continues. That could mean that this month will beat the record set in 2005 when 2,197 MLS sales were recorded. Last year came close with 1,919. New and active listings are both higher than last year, while realtors say prices are at a record for September. The luxury market in Calgary is buoyant and there has been a resurgence of single-family home sales after two months of year-over-year decline. Read the full story.

Report highlights generational income gap

Twenty-somethings are the first generation to be financially worse off than their parents. New figures from the Conference Board show that over the last thirty years the gap in incomes between older and younger workers has widened; in the 80’s it was 47 per cent, now it’s 64 per cent. The report shows that in many workplaces older workers are being paid more than younger colleagues for doing the same job and while there is often a premium paid for experience it is not always a factor in the wage differential. For the housing market it highlights a big problem of course; younger first-timers struggling to afford a home and older down-sizers affected by stagnation further down the ladder. While an overheated market may be a current factor, the income gap is a longer term concern for the market. Read the full story.

Low rates still needed says BoC deputy

There are signs that the interest rates may stay low for some time to come. Senior deputy governor of the Bank of Canada, Carolyn Wilkins says that output growth may stay lower than it was before the financial crisis and there may therefore need to be continued stimulus for the economy over a longer period. That would include lower interest rates; not the 1 per cent we have seen over the last four years, but more in the 3 to 4 per cent range rather than the 4.5 per cent of the mid 2000’s. Read the full story.

US existing homes fall back

Investors are scaling back their involvement in the US property market but this is unlikely to mean a return to dark days for the market. Figures from the National Association of Realtors show that August saw declines in existing home sales of 1.8 per cent, however this followed four months of increases and the level of sales is still the second highest of the year so far. The level of investors’ involvement was at its lowest for 5 years with expectation of interest rate rises during 2015. Outside of the investment world the US housing market is still showing positive signs with a steady rate of first-time buyers and buyers sentiment increasing. Read the full story.



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Real Estate

10 Must-Know High-Yield CDN Real Estate Stocks

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Posted by Canada Stock Channel

on Friday, 19 September 2014 15:40

(1) Northern Property Real Estate Investment Trust (TSE:NPR.UN.CA) — 5.5% YIELD

Northern Property Real Estate Investment Trust is an unincorporated open-ended real estate investment trust that manages and owns a portfolio of residential and commercial income producing properties. NorSerCo's operates execusuite hotel properties and real estate-related services. The Trust's residential properties are comprised of three components: apartments, townhomes and single family rental units; execusuite apartment rental units; and seniors' properties. The Trust's commercial properties are comprised of office, industrial and retail properties in areas where it has residential operations. As of Dec 31 2010, Co. owned 8,419 residential units and 903,352 sq. ft. of commercial space.

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Real Estate

5 things we look for in real estate

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Posted by Craig Burrows

on Monday, 15 September 2014 16:45

craigburrows1. Job Growth – we look for trends in job creation, type of employment, and unemployment trends

2. Population Growth – we look for trends in growth, demographics, and forecasts that mitigate growth

3. Economic Growth – we look at what is driving the economy, is it diversified and economic trends

4. Healthy Real Estate Fundamentals – are we too late or early? Is the market stable with positive growth trends? Is the market affordable?

5. Business Friendly Government – understanding municipal and provincial / state attitudes towards development (taxation, levies, growth plans)

What Real Estate Markets do we like and what particular sectors in that market?

Canada

Calgary – arguably not only the best market in Canada but in the world to invest. According to the June 2013 IPD Global Cities Report puts Calgary as the leader in overall performance as to real estate returns in the world for the last 2 years.
What we like: concrete tower apartment buildings, inner city development in residential, retail and commercial.

Edmonton – Alberta continues to add over 100,000 new people a year driven by the energy sector and Edmonton as the capital and the “blue collar” side of the energy will continue to grow.
What we like: apartment buildings, medical, light industrial, and raw land development.

United States

Texas – Texas leads the nation in job growth, low unemployment, affordable, projected to double in size by 2040 (over 50 million people), low taxes, pro-business government, energy, etc.
What we like: we love the Texas Triangle (Houston, San Antonio, Dallas). We like raw land for residential and retail.

Arizona – real estate trends around the Greater Phoenix area show growth trends of 30% over the next 3 years that are still well below the peak of 2008. Phoenix is in the Top 10 of fastest growing cities in the US, Top 5 in Job Growth, and #1 in real estate recovery.
What we like: we like apartment buildings in and around the Phoenix area

Craig Burows is the President of TriView Capital, an Exempt Market Dealer specializing in private equity offerings



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Real Estate

Real Interest Rates....

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Posted by Brian Ripley's Canadian Housing Price Charts

on Thursday, 11 September 2014 11:50

Interest Rate Spread Between BoC Bank Rate Less the Posted

5yr Fixed Mortgage and CPI, Real Bank Rate & TSX RE Index

6346118

The chart above shows that in Augusst 2014 the spread between the Canadian Bank Rate (1.25%) and the posted residential 5 year fixed mortgage (4.79%) remained at its narrowest (3.54%) since the Aug-Sept 2008 spread of 3.6% which did not augur well that fateful autumn. 

The continuing zoom in CPI (now 2.1%) is pushing the real Bank Rate deeper into a negative return. The trend



Read more...

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Real Estate

CDN Real Estate: Another Step Down

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Posted by Canadian Housing Price Charts

on Tuesday, 09 September 2014 07:34

764087 orig

The Canadian Real Estate
PLUNGE-O-METER

1680109 orig

The Plunge-O-Meter tracks the dollar and percentage losses from the peak and projects when prices might findsupport. On the price chart in the spring of 2005 there was a 4-6 month plateau period while buyers and sellers twitched like a herd. When the credit spreads narrowed and the yield curve began its journey towards inversion, the commodity stampede began.
 
Ottawa data are Combined Residential (not SFD) and Montreal data are Median (not Average) *The Price Support target represents prices at March 2005; the start of a 40 month period of ardent speculation in all commodities; then a full blown crash into the pit of gloom (March 2009); and then another 39 month rocket ship to the moon but then the crowd suddenly thinned out in April 2012. The revival of spirits erupted in 2013 as globalmoney went short cash and long real estate on an inflation bet. See Whale Watching.

Plunge-O-Nomics

In case you have forgotten the depth and velocity of the previous market reversal when Canadian real estate prices plunged in 2007-2008 (chart); householder equity vanished as follows:
  • '07-'08 Average Vancouver SFD lost $122,900, or 15.9% in 8 months (2%/mo drop)
  • '07-'08 Average Calgary SFD lost $92,499, or 18.3% in 18 months (1%/mo drop)
  • '07-'08 Average Edmonton SFD lost $78,719, or 18.5% in 21 months (0.9%/mo drop)
  • '07-'08 Average Toronto SFD lost $63,867, or 13% in 13 months (1%/mo drop)
  • '07-'08 Average Ottawa Residence lost $25,664, or 8.6% in 6 months (1.4%/mo drop)
  • '07-'08 Median Montreal SFD lost $6,000, down 2.6% in 6 months (0.4%/mo drop)
Another Observation: oil spikes and real estate (TSX Chart)
  • 2008 Vancouver down 16% in 8 mos
  • 2008 Calgary down 14% in 8 mos
  • 2008 Toronto down 14% in 9 mos
  • 2008 TSX RE down 51% in 10 mos
  • 2011 Vancouver down 2% in 6 mos
  • 2011 Calgary down 10% in 8 mos
  • 2011 Toronto down 7% in 3 mos
  • 2011 TSX RE down 6% in 4 mos

The Tech Bubble Blowout...

...occurred in March of 2000 and since then we have had serial bubbles globally (Financial Assets, Commodities & Real Estate). Prior to 2000, Japan and the USSR blew out in the late 1980's and the Asian crisis occurred in the late 1990's. More recently Argentina defaulted in 2001-02 and now European taxpayers are on the hook for public and private mal-investment. Commodities peaked July 2008 and the U.S. 7-10 year Treasury Bond prices peaked in May 2013.

Real estate has boomed and plunged in select markets with awesome volatility since the early 2000's atop a huge edifice of debt that is only being propped up by the willingness of fewer and fewer buyers who think that prices will never collapse despite recent history being full of examples of the opposite (California, Florida, Detroit, Japan, Dubai, Greece, Ireland, Spain, etal). 

Rising prices allow both the private and public sectors to over-leverage and with it comes speculative fervor that leads to prices rising further. But when prices decline then market sentiment changes and real estate becomes a slow moving asset class as debt revulsion sets in and fundamental illiquidity leads to asset re-pricing. At that point there is only one viable solution and that is for debt to be transformed into equity, and that occurs either by the debt being repaid slowly, or written off quickly.

In the sell-off phase, governments (who do not issue their own non-convertible currency eg: Greece, Spain and Italy, ie: members of the Eurozone) and corporations and individuals who defer repayment with more leverage (bailouts, bond issuance, secondary financing) are simply delaying the date of foreclosure, increasing the amount of potential asset destruction or lengthening the time and amount of repayment with valuable income streams that could have been used for productive investment (Canadians are producing more weapony and less infrastructure). Increasing debt leverage only works when prices are rising.

With respect to housing, there are much better mortgage models to follow than CMHC's tax payer "insurance". See the Danish Mortgage Finance Model where the combined loss ratio for all Danish mortgage credit institutions (MCIs) has never exceeded 1% in any one year – a number most other countries can only dream of.

A change in taxation policy is also needed. The way that government collects tax is highly inequitable. For an elegant solution see the APT (Automatic Payment Transaction) which would eliminate the tax complex. Gone would be personal, corporate, property, estate, capital gain, income, sales, excise and all manner of taxes or levies disguised as fees as well as the elimination of tax returns, deductions and special interest exemptions.

Implementation of this simple idea in Canada would allow Canadians to create an original, authentic social organization that would eventually be copied by all other nations. Let's apply the power of the internet to build better housing, financing and taxation institutions. Canadians, write your Member of Parliament.

 



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