Archive for April, 2004

Be wary buying in today’s hot market

Saturday, April 24th, 2004

Diana McMeekin
Sun

Call me a killjoy, but I really don’t like it when the real estate market gets overheated. It is fantastic for the sellers, but it can be really hard on the buyers.

Whether you are looking to buy a new single family home or a condominium apartment or townhome, the pressure is on right now.

If you can find something that suits both your pocketbook and your needs you have to act immediately and, unless you have done your homework, you may get into trouble.

Unbalanced markets also lead to laziness and bad habits. From acquisition of land to design and development, and finally to salespeople, overheated markets can make very average or substandard buildings in mediocre locations look desirable.

A frenzied sales process allows for inexperienced salespeople to become order takers rather than counsellors and facilitators. And prospective purchasers are treated like cattle. It seems to happen every time the market takes off and only the enduring professionals in the business of development seem to remember “from whence they came.”

Many of the less experienced or less principled people in the industry have been very lucky with their timing; some of them start to think that they are bulletproof, and that is when rubbish buildings are hastily built and the industry as a whole starts to get a bad name. So, my comment to home buyers today is: Who you buy from is just as important as what you buy.

How can you be diligent when you don’t have much time? Well, thank goodness for the Internet and for certain industry organizations. There are lots of things you can do to find out more about your chosen development and the company behind it. Here are a few ideas:

* The minute you see a “Coming Soon” sign or an advertisement in the paper, look for the website address and the name of the development company. Log on to the website and register your interest, but also send an e-mail asking to learn more about the developer’s past projects or communities. Judge the swiftness of their response as an indication of their attention to detail.

* As you scroll through the developer’s website, don’t be seduced by too many special effects. They are great to look at, but you want to know a few things. How long have they been in business? What and where are their previous buildings?

Do they have a customer service or after sales service set up? You need to know who is going to be there tomorrow.

Do they have any testimonial letters or can you talk to someone who actually lives in one of their homes to see how they rate?

* Another important piece of information is to find out if the developer is a developer/builder. In other words, do they control and build their own product?

There is a lot more at stake if developers also construct their homes — more accountability, more standards and generally a better product.

If they don’t build their own product, then check out who their preferred builder partnerships are with and then check the builders out on their websites.

* There are several organizations in the home building and development business. These include the B.C. division of the Urban Development Institute (www.udi.bc.ca) and the Greater Vancouver Homebuilders’ Association (www.gvhba.com). You can always call to see that your chosen developer is in good standing or contact St. Paul Guarantee (www.stpaulguarantee.com) to see if they have ever warranted the builder’s or developer’s projects.

* Finally, you can talk to your local realtor and see what they have to say. Many resale realtors are specialists at resales, but not expert or knowledgeable on new home sales. Try to talk to someone who handles resales in several of the newer buildings. In Vancouver, people like Ken Leong (www.kenleong.com) or Gregg Baker ([email protected]) can be helpful.

As you go through the process of deciding to purchase, it is also worth looking at which firms take a bit more time building a relationship with their potential customers and how that can pay off. For example, Intracorp Developments are about to publicly launch their UNO development at 11th and Kingsway.

Friends of mine registered on their interest list and have received numerous personal calls and communications from their sales team since January. They were offered an opportunity to reserve a specific appointment to preview the homes and are about to complete their purchase. I am told that a very high percentage of the homes are likely to be sold to owner/occupiers.

Why? UNO is a great product, but more to the point, Intracorp talked to them personally. They respected their need for information, gave it to them as soon as it was available, and allowed them a little time for a considered decision. This is the best way to buy a home you want to live in.

The Vancouver market is a relatively small one, so it is not hard to figure out the development companies that are in it for the long haul, and who have many of the above attributes. In addition to Intracorp Developments, there are several others that are well known. The list is pretty long, but Polygon Homes, Bosa Properties and The Adera Group of Companies are obvious choices. They are committed to BC, even when the market changes to a level playing field.

Diana McMeekin is president of Artemis Marketing Group Inc., a Vancouver-based consulting company to both Canadian and International development companies. Diana is also a member of the Urban Development Institute and a regularly featured speaker at housing industry events. You can reach Diana via e-mail: [email protected].

© The Vancouver Sun 2004

 

Yellow spice could help with cystic fibrosis

Friday, April 23rd, 2004

Clinical trials are slated for turmeric, the yellow spice common in curries

Margaret Munro
Sun

Turmeric, the bright yellow spice common in curries, appears to have potent medicinal power that could help alleviate cystic fibrosis, a debilitating disease that hits one in every 2,500 Canadian children.

Canadian and U.S. researchers report in the journal Science today that feeding a key component of turmeric, called curcumin, to mice make symptoms of the disease disappear.

While encouraged by the results, the doctors stress more study is needed to find out if curcumin will have the same healing power in people with cystic fibrosis.

“We know that this works in mice, “ says Dr. Michael Caplan at Yale University. “But mice are not people and we don’t know how well these results will translate to people.

“We don’t know what high doses of this stuff will do to people, we don’t know if there are any long-term side-effects and we especially don’t know if this stuff will interact with any of the many medications that CF patients have to take,” he said in an interview.

He also stressed that commercial sources of curcumin can very widely.

“There is no quality control in terms of the composition and what else might be in the preparation,” Caplan said. “So I would encourage people to be patient.”

A clinical trial in humans is slated to start this summer to see if curcumin’s remarkable effect on rodents applies in people with CF, a life-threatening disease in which thick, sticky mucous clogs the lungs and the pancreas. People with CF typically die in their early 30s.

The disease is usually caused by a genetic mutation that causes misfolding of a protein. The protein becomes trapped by the cell’s quality control machinery and does not make it to the surface to perform its normal function.

Caplan and his colleagues at Yale teamed up with Drs. Kai Du and Gergely Lukacs at the University of Toronto to see if curcumin would enable protein to escape the cell’s inner machinery by starving so-called inspector proteins.

They fed curcumin to mice with the CF gene mutation and found that it allowed the protein to function normally in the cells lining the nose and rectum. It also prevented the gastrointestinal problems caused by the disease.

The scientists fed the mice curcumin at doses of 45 mg per kilogram of body weight for three days. Comparable consumption in humans has been shown to have no adverse effects, the scientists note in their paper. People have been eating curcumin in curries for centuries.

While six of the 10 untreated mice in the control group died of intestinal problems within 10 weeks, only one curcumin-treated mouse died. They also found that treating hamster kidney cells with curcumin allowed mutated proteins to reach the cellular membrane.

The researchers say in their Science paper that curcumin and its derivatives represent “promising new candidate compounds” that may prove useful in treatment of CF and other protein-folding diseases.

Turmeric has long been used for medicinal purposes in eastern Asia and recent studies have suggested it can help lower cholesterol and relieve inflammatory bowel disease. Just last week researchers reported that curcumin might also help slow neurodegenerative disorders such as Alzheimer’s disease.

© The Vancouver Sun 2004

Interest-rate reduction predicted

Friday, April 23rd, 2004

Sun

TORONTO — Economic growth this year will disappoint the Bank of Canada and prompt a further reduction in short-term interest rates, CIBC World Markets economist Jeff Rubin predicted Thursday. His statement follows by one day predictions from the merchant bank J.P. Morgan and Toronto-Dominion that the central bank will begin raising rates because of a rising economy here and in the United States.

© The Vancouver Sun 2004

Homeowners warm to tankless heating’s water, energy savings

Friday, April 23rd, 2004

European system finally adapted to North American market

David Bradley
Sun

Tankless water heaters are small, natural gas units wall-mounted either in or outside the home as pictured. CREDIT: David Bradley, Associated Press

North Americans love their hot water. Lots of it. And while tankless water heaters deliver unquenchable supplies of on-demand hot water, many homeowners are warming to other benefits of these appliances: big energy and water savings.

According to a water-heater expert, tankless versions can lop 30 to 50 per cent off water heating costs compared with traditional water heaters. On-demand heating doesn’t waste water by allowing the flow to run until warm enough for use.

“A typical 40-gallon heater is like running your car all night in the garage until you drive it,” says Peter LaRose of Nelson and Small, a northeastern U.S. distributor of top-rated Rinnai tankless heaters. “Why have a water heater running when you don’t need it? A tankless system uses no energy until you turn on the faucet.”

Tank systems guzzle energy nearly all day to maintain a preset temperature. As water cools, the system kicks on to reheat water. The cycle repeats day and night whether anyone is home or not.

And as many morning bathers who are last in line for a shower can attest, a tank water heater often can’t keep up with high volume demand for showers, spa-like tubs and whirlpools. LaRose says only about 30 per cent of a tank is drawn off before water must be heated again. “It’s an illogical way to heat water.”

European homes use two or more tankless heaters to offset energy costs several times higher than in North America. But the demand for hot water — and lots of it — makes the U.S. market different.

Tankless heater maker Rinnai now markets a single unit better suited to American homes and American appetites for hot water.

The compact natural gas unit is wall mounted inside or outside a home. Sensors detect when a faucet is turned on, forcing water over a thin copper plate heated by 32 small burners. The unit is vented outside.

The compactness of the heater — 18 inches wide by 27 inches high — makes it a space saver. No mechanical room is necessary.

Homeowners use digital keypads to preset water temperatures to various rooms. Control pads are typically installed in laundry rooms, master baths or kitchens.

The keypads resolve safety issues, too.

Scalding water is a danger to small children or older adults. Tank systems heat water 130 F or higher, well above the 120 F comfort zone for most showers. Once set, tankless water cannot be heated above the preset limit.

Expect to pay $1,000 to $1,200 US for a Rinnai system, including installation. This compares with $200 for the cost of a tank and $300 to $500 for professional installation. Tankless systems are not a do-it-yourself project.

LaRose says beyond energy and water savings, homeowners will save on replacement costs. Tankless systems should last up to 20 years, nearly three to four times longer than tank systems.

“We think within 10 years, tankless systems will be the dominant source of hot water in North America,” says LaRose. “As energy costs and water conservation become even bigger issues, homeowners will turn to tankless systems. It’s the one responsible way to heat water for the home.”

© The Vancouver Sun 2004

Internet saviour just ‘small guy on shoulders of giants’

Friday, April 23rd, 2004

International security conference is ‘geek central’ for ‘spooks, military guys, government,’ top companies

Maurice Bridge
Sun

The Man Who Saved the Internet is a little embarrassed.

“I don’t think I saved the Internet, I think I’m a small guy standing on the shoulders of giants that came before me,” says Paul Watson, a polite and unassuming young man.

He doesn’t particularly stand out in the crowd at CanSecWest/core04, but most of the 200 or so delegates to the Vancouver computer security conference Thursday morning were aware of his headline status.

Some of them were even less convinced than he is of his saviour creds, but that’s the nature of security experts, and these guys — they’re nearly all guys — are definitely experts.

Conference organizer Dragos Ruiu, a Vancouver-based computer security consultant, estimates at least 30 per cent of them have PhDs, a useful qualification if you want to understand much of what goes on in the presentations here.

“There are a lot of spooks, a lot of military guys, government, Fortune 50 large companies — basically anybody that’s large enough to have a dedicated security team,” he explains.

It’s the fifth year for the event he started. Last year, it expanded to add a fall gathering in Tokyo, which he says will now become part of the regular calendar.

It is, as one participant terms it, geek central. Not a tie in the place, a wide array of interesting T-shirts and hairstyles, and some spectacularly high-line wireless laptop computers in bomb-proof cases. A glimpse of a screen over a shoulder is a reminder that we’re a long, long way from Windows 98.

“This is a conference that isn’t sales-oriented, it’s about real research, what’s really going on out there, and it’s a really important place for people to sit down and come up with the ideas that can protect the Internet or critical infrastructures,” says Eric Byres, who is with the Group for Advanced Information Technology at BCIT. “This is probably one of the pre-eminent conferences in the world, this is the one to go to.”

Byres and his group have also been out saving the Internet in their own way, concentrating on security that ensures that power utilities can continue to deliver their services without fear of interruption.

Of Watson, he says: “He’s pointed out a flaw; a lot of people have pointed out flaws.” While he’s not taking anything away from him — “he certainly pointed out something that needed to be addressed and he got the ball rolling” — he notes that the Internet is “still the Wild West” when it comes to security.

He values conferences like this because he gets to meet many of the players in the small global community of computer-security experts, and establish some relationships.

“The tricky part is it’s hard to tell whose side some people are on,” he says. “There are some people that I don’t know if they’re on the black-hat side or the white-hat side or somewhere in between.”

That was part of the problem Watson had when he wrote his paper about a flaw in the transmission control protocol affecting one of the major brands of routers which move traffic around on the Internet.

As he puts it, if you were to discover a flaw that made it easy to cause airliners to crash, you’d want to give the airlines a chance to fix it before you made your knowledge even slightly public.

In his case, he couldn’t get any interest from the U.S. Computer Emergency Response Team, and had to deal instead with the National Infrastructure Security Coordination Centre in the U.K. to get a hearing.

All the time he was working on it, he had to be careful who he talked to: “Some people I’ve known for a year or two I told nothing to, other people I may have known for 10 years, I talked very openly with because I knew they understood the impact,” he says.

Face time at conferences builds that kind of trust, something which will be increasingly important as the Internet continues its spectacular rate of growth.

“There are always new attacks and new defences,” notes Ruiu. “We’ve skimmed the easy stuff off in the last three or four years. Now we’re getting to the really hard problems, the ones that are going to take us a while to eliminate.”

As for Watson, he’s speaking at one seminar during the three-day event, and sitting in the audience at the others.

© The Vancouver Sun 2004

Developers told to target Gastown Chinatown

Friday, April 23rd, 2004

Planners aim to halt conversion of commercial space to condominiums

Frances Bula
Sun

VANCOUVER Vancouver is poised to clamp down on the impending rush to convert downtown office space into condos in an effort to prevent the central city from turning into a residential resort, the city’s planning co-director warned developers Thursday.

Facing a dilemma that no other city planner in North America has, in which residential space sells for about twice as much as office space, Larry Beasley told 350 people at an Urban Development Institute lunch that “we simply cannot afford to lose our capacity for commercial growth no matter how attractive the alternatives look in the short run.”

Only one office building, the former Westcoast Transmission building on West Georgia, has been converted outright in the last couple of years, but Beasley said he has had half a dozen other inquiries, and just the possibility of more conversions will start to destabilize the commercial real-estate market.

Beasley advised developers to start looking at Chinatown, Gastown and the Downtown Eastside as possible building sites.

But he warned they can’t just import the current Vancouver design favourite of pointe towers and podiums to those areas.

They’ll have to find something that fits with those communities and that those communities will endorse, especially in the Downtown Eastside, he said.

“Since this is a much trickier form of development to build and market, some very creative thinking will be in order for Hastings Street projects and for any project that grows out of the unique DNA of the Downtown Eastside.”

Beasley, who labelled his talk “The Shift East,” emphasized that developers need to look east because the land shortage in western and central downtown will only get worse after the city puts in place its new policies on office-space conversion, as well as a new policy that will affect density in the Downtown South.

He said he’ll be recommending to council shortly that the city not allow extra density on any more of the remaining small building sites in Downtown South.

In the past few years, the city has allowed several developers to build towers higher than the zoning allows in exchange for community spaces, like art galleries or film centres, or if those developers “bought” space from heritage buildings.

“It’s simply too tough with the neighbours and too tight in the setting to put towers on these very small sites where no one has expected them.”

Regarding office-space conversions, Beasley said there will be two policies to slow down the conversion of existing buildings in the central business district and to limit the production of residential buildings in the areas just outside the business district.

In order to discourage the conversion of existing office buildings, city staff will look at a process in which any conversion is reviewed to see what the long-term impact on commercial space will be.

“It won’t be a moratorium,” he said.

To limit production of residential buildings in areas zoned to be either residential or commercial, the city is looking at not automatically approving housing projects in what’s called Area C — the land between the central business district and Beatty, and south of Victory Square.

Beasley’s message was taken to heart by his audience.

David Negrin, second in command at Concord Pacific, joked that CEO Terry Hui would instantly abandon his plan to build a pointe tower on Hastings Street — something Beasley specifically referred to in his speech as a project that wouldn’t be acceptable.

Urban Development Institute president Ward McAllister said developers might not be thrilled about the limitations on building projects downtown, but Beasley’s direct message is better than a “slow no.”

He also agreed with Beasley’s assessment of the dangers of current trends. “I share his concern about the conversion of commercial space,” he said.

Beasley also advised developers to look at ways of broadening their targeted market downtown.

The current boom could easily come to a crashing halt as immigration and migration from the suburbs slows down, or as interest rates increase, he said, adding developers should look at how to make housing more attractive to families.

There are more children in the downtown now than there are in Point Grey, he pointed out. If developers could market even more to that family contingent, “the market potential could be expanded dramatically.”

© The Vancouver Sun 2004

Downtown bars agree to change closing time to 3 a.m.

Thursday, April 22nd, 2004

Frances Bula
Sun

VANCOUVER – City bar owners have agreed to roll back their late-night closings from 4 a.m. to 3 a.m. to try to eliminate problems caused by people driving in from the suburbs to put in an extra two extra hours’ drinking time.

John Teti, president of BarWatch, said the 21 clubs that currently have licenses allowing them to stay open until 4 a.m. have agreed to new licences that will cut an hour off the time. The new hours will probably go into effect the weekend after next, he said.

However, BarWatch and the city have agreed that the bylaw will not be changed so that the licences for 4 a.m. closings could be restored at some later date.

Councillor Tim Stevenson, who has been working closely with the bar owners on the issue, said it’s time to re-assess the experiment.

“We think it’s necessary now to move back to 3 because of the young people coming in from the suburbs. If bars close at 3, those people probably won’t come in because it won’t be worth it for only an hour.”

There has been a significant increase in incidents of fighting and violence since the city started allowing the 4 a.m. bar closings last summer. Stevenson and Teti said the problem partly stems from the fact that a lot of people pour into the downtown after 2 a.m., when suburban bars close, to continue drinking in Vancouver.

Bar owners have been working to find ways to contain the problem by introducing metal and identity checks at bars and hiring private security guards.

Teti said things have been improving in the last three to four weeks, as private security firms have imposed more order. But he thinks it’s time to retrench a little.

“We don’t want to lose the 4 o’clock possibility. So if we have to take a step backwards to take two steps forward, that’s okay.”

He’s hoping that once police are up to full staffing and all bars have introduced new security measures, those who want to will be able to move back to 4 a.m. closings.

In the meantime, he says that everyone will be at 3 a.m., at least for the summer.

© The Vancouver Sun 2004

Eifs – everything you wanted to know but were afraid to ask

Thursday, April 22nd, 2004

WATER-MANAGEMENT:THE FUTURE OF EIFS

Jim Reicherts
Other

Manager-Exterior Panels and Systems

http://www.usg.com/gyprels/reicht.htm United States Gypsum Company

In late 1995, local building inspectors in New Hanover County, N.C. discovered that hundreds of homes sided with Exterior Insulation and Finish Systems (EIFS) had sustained varying degrees of moisture damage. The situation prompted United States Gypsum Company, a manufacturer of EIFS and other stucco-look exteriors, to conduct extensive research into the application and performance of “barrier” EIFS. This article describes what we discovered — and what we’re doing about it.

“Barrier” EIFS construction is not practical or reliable for either residential or commercial construction. That’s the conclusion United States Gypsum Company has reached following extensive research to determine the cause of widespread EIFS moisture-damage problems on homes in New Hanover County, N.C.

The basic problem is that barrier EIFS does not account for the fact that moisture can — and will — penetrate the exterior wall surface. Once moisture penetrates a barrier EIFS wall, it remains trapped inside the wall cavity, where it eventually rots water-sensitive sheathings and framing. This has been proven to be true not just in coastal North Carolina, but in many other areas of the country as well.

However, there is good news. A logical, practical solution to “barrier” construction is available. We’re calling it Water-Managed Exterior Finish Systems. Water-managed systems deliver the same aesthetics and design flexibility as conventional EIFS. However, because they also incorporate flashing and weeping details, and a drainage plane, water-managed systems are better able to cope with any water which enters the system. Like other conventional exteriors, including brick and cedar lap and shingle sidings, water-managed systems provide a means of escape for intruding water. It’s a basic — and time-tested — construction premise.

What We’ve Learned

Following the discovery of the moisture-damage problems in Wilmington, N.C., the USG Corporation Research Center contracted with the National Research Council of Canada (NRCC) to investigate the extent and the cause of the performance problems. NRCC, based in Ottawa, Canada, is an internationally recognized research laboratory with specific expertise in the performance of building envelopes. The group conducted a field investigation on several USG EIFS homes located in Wilmington and subsequently conducted detailed laboratory testing of EIFS walls subjected to climate conditions and construction methods typically found in the Wilmington area. The results of the research, completed during the first quarter of 1996, revealed:

While the field of the wall did not show signs of water penetration, water did intrude the system through a variety of means. The most common paths for water entry are:

1) Windows

Causes: 1) Through gaps in joined multiple windows; 2) Through improper sealing around sill/jamb intersections where improper use of sealants and backer rods; 3) Through penetration in the window joints which drained water behind the system at the sill.

2) Wall/Roof Intersections

Cause: Inadequate flashing details allow water to get behind the system

3) Wall Penetrations (i.e. electrical and plumbing services)

Cause: Improper sealing allows water to get behind the system

Laboratory testing also revealed that water which intrudes an EIFS is restricted in its ability to dry, due to multiple vapor barrier conditions. The multiple vapor barrier is created by the water-resistant surface of the EIFS wall, the sheathing and vapor barriers on the interior walls (a poly vapor barrier and/or paint).

NRCC tests revealed that specific drying times for OSB structural sheathing (under climate conditions similar to those found in Wilmington, N.C.) are as follows:

Interior poly vapor barrier and no paint on interior walls: 100 weeks No interior poly vapor barrier and two coats of high-quality paint: 35 weeks No interior poly vapor barrier and one coat of average quality paint spray-applied: 4 weeks

These lengthy drying times, resulting from the inability of the wall to breath and dissipate water, can lead to an environment where micro-organisms can attack sheathing and dimensional lumber, causing wood rot.

USG’s analysis of the research suggests the problem is not confined to warm, high- moisture climates such as coastal North Carolina. Wherever rain can intrude the EIFS “barrier” through wall/roof intersections, windows and other penetrations, there is the potential that the moisture will remain in the wall cavity and damage water-sensitive sheathings and structural members.

The Impact On Commercial EIFS Applications

While U.S. Gypsum’s research has necessarily been focused primarily on residential EIFS applications, a number of conclusions can also be drawn for commercial installations of barrier systems.

First, it should be noted that the construction and maintenance on a typical commercial EIFS is often of better quality than that of a typical residential application. This is not because commercial contractors are more skilled than residential contractors. Rather, it is due to the fact that commercial construction is more closely supervised and regulated by architectural and/or design professionals, helping to ensure that critical EIFS detailing such as backer rods and sealants are properly installed and maintained.

Another critical difference is window construction. Commercial projects generally feature fixed windows which are less prone to moisture infiltration than the wooden jambs and sills or joined multiple windows found on residential construction. Roof construction also differs — as commercial projects often do not feature the complex multiple roof slopes and valley and wall/roof intersections found on residential construction. Commercial EIFS applications are also usually applied over steel framing (except for smaller jobs) … and steel framing does not rot when exposed to moisture.

While all these factors help battle water intrusion problems, the potential for serious trouble still remains, particularly when EIFS is applied over water-sensitive substrates. Commercial EIFS applications have failed due to moisture penetration … and we feel, because of the inherent deficiencies in barrier EIFS construction, they will likely continue to fail.

Commercial EIFS specifiers should be aware of several other related issues resulting from the North Carolina EIFS situation. First, as there are now at least seven class action lawsuits pending against EIFS manufacturers, the controversy over EIFS isn’t about to go away. The class action suits which have been filed are not confined to North Carolina, but allege that the problems with EIFS are nationwide. The information generated by most of the manufacturers still offering barrier EIFS is slanted towards defending the class action suits. More factual and therefore more reliable information will come from third parties such as the NAHB, code bodies and independent research laboratories.

Secondly, specifiers should be aware of the potential for much stricter regulations regarding EIFS for both residential and commercial construction. The North Carolina Building Code Council has already enacted very strict guidelines for EIFS construction and other states are expected to follow suit. The Exterior Insulation Manufacturer’s Association (EIMA), while deploring the strict code requirements, has emphasized more applicator training and may move to certification of applicators and third party inspections. However, no one knows how much this will cost, who will pay for it and whether this assures the long-term performance that homeowners and building owners desire.

In light of all these concerns, USG stopped marketing barrier EIFS in April, 1996. Given the fact that all EIFS wall assembly components must be designed, installed and maintained to function as water barriers and strict adherence to manufacturer guidelines must be adhered to, we feel that barrier EIFS is simply not practical or reliable. Instead USG has returned to a more traditional approach and has concluded that “water-managed” stucco-look exteriors is the most logical way for the industry to proceed.

USG is currently offering several insulated and uninsulated Water-Managed Exterior Finish Systems and the company is researching more options which it expects to introduce in coming months.

(From BUILDER, March 1996 )

http://builder.hw.net/news/1997/eifs/eifs396.htx

Troubleshooters Target EIFS
By Rick Schwolsky

Senior Editor, Building

Like forecasters tracking a hurricane, builders all over the country are following a swirling controversy in North and South Carolina about moisture-damaged homes with exterior insulation and finish systems (EIFS) — synthetic stucco applied over foam sheathing.

Researchers have descended on the region to study the damage. They seem to have identified the problem: Water from outside is getting into exterior walls and damaging framing, sheathing, and in some cases, interior finishes.

EIFS surfaces aren’t failing. Instead, water is leaking through surface penetrations, around flashings at architectural details, and past caulked joints around window and door openings (often the only thing standing between a dry wall and a bad reputation).

Here’s what researchers found:

The North Carolina Home Builders Association says 95 percent of randomly tested houses have some problem; damages average $3,000 to $5,000.

The American Institute of Architects found unacceptable moisture levels in 90 percent of the 205 houses it tested.

The EIFS Industry Members Association (EIMA) inspected 68 houses: 20 had $1,500 or less in damages, 35 had damage of $3,000 or less, and six had damage of more than $10,000.

The situation is keeping local inspectors busy. “Out of 73 homes we tested, we only found two that were dry,” says Allen Golden, assistant director of inspections for Hanover County, N.C. (which includes Wilmington, where the problem is centered).

The moisture damage in the others ranged from a couple of wet windows to total loss, says Golden.

Several Carolina builders report dealing with repairs costing $30,000 to $100,000. Insurers have written off some houses as total losses after only five years.

“The first EIFS home I looked at was a total loss,” says Golden. “I think the insurance settlement was worth about $417,000.”

“When I first heard about this last August I thought it was one bad applicator or builder,” says Paul Wilms of the North Carolina HBA. “But that wasn’t the case because some of the best builders in the area have problems. Then I hoped it was confined to one subdivision, but that wasn’t true either. We’re finding problems across the board.”

As the experts work out the details, homeowners like Ruth Ann Southworth of Wilmington are left to worry about their investments. “After six months my house had minor moisture problems, which my builder repaired,” she says.

“But the truth is, I couldn’t give this house away now if I wanted to.”

EIMA insists this is a local problem. “EIFS have been used successfully for decades in this country,” says EIMA spokesman Keith Hayes. “This is a first. There are no other cities with comparable problems.”

But as reports on the Carolina experience proliferate, calls are coming in from builders throughout the country on NAHB’s HomeBase hot line, according to Research Center analyst Ed Hudson. “I’ve talked with hundreds of industry people,” he says, “and problems are happening everywhere there’s moisture and EIFS are being used, coast to coast.”

Hudson also says he’s heard from builders with moisture problems in dry climates like Austin, Texas.

What’s the Problem?

Anyone who’s ever tried tracing water leakage back to its source knows how hard it can be. Using electronic moisture meters, investigators report finding high meter readings some distance from the actual leak, as water breaches seals and travels away.

Some investigators are also pointing at windows — especially wood ones   as a possible source of water intrusion. Their theory: Even the small amount of moisture that gets in through gaps in window frames — when trapped — will do damage.

“Based on the local AIA chapter’s testing,” says Tom Kenney of the Research Center, “68 percent of the 205 houses they inspected had improper caulking details around windows.”

But AIA tests also revealed that even where proper caulking details existed, 15 percent of the houses had high readings near windows, indicating window-frame leaks.

That may not matter in wall systems that can breathe, but EIFS walls are called barrier systems because the finish is impermeable. And if moisture gets into the wall system, it can’t escape easily, especially if there’s an interior vapor barrier.

So why Wilmington? Hudson speculates that the worst problems are occurring in active markets where the EIFS products are gaining popularity the fastest — like the Carolinas.

He says problems appear to be rare in more established EIFS markets where applicators have experienced, and worked out, the problems.

But there is one building condition that may be contributing to the dilemma in Wilmington: state codes require interior polyethylene vapors. These aren’t causing the trouble, but they may make things worse once water gets into the walls.

To test that theory, the Research Center computer-modeled EIFS wall sections with 50 percent moisture content.

“We looked at a full year’s performance,” says Kenney, “and the tests showed EIFS walls without vapor barriers dry out in five weeks, but the walls with vapor barriers take eight times as long.” That makes it even more important to keep water out.

What’s the Fix?

So how is all this likely to turn out? Look for changes in several areas.

Better details. Would you stake your reputation on a caulk joint? That’s basically what EIFS detailing requires around windows and doors, and even some caulk joints installed to spec are failing.

Part of the problem, researchers say, may be that EIFS companies have adapted commercial details for residential installations. Look for companies to respond with new generations of details designed for home building. EIMA is revising its generic construction details publication.

Applicator training. To the extent that unskilled applicators caused some problems, applicator certification and training by manufacturers may not be stringent or broad enough. There are reports that applicators mixed components from different companies, which puts warranties at risk.

Also, applicators moving from dry regions (like California) to do work in moist climates (like the Pacific Northwest) may not be aware of moisture problems. Look for training and certification to improve, perhaps conducted by a third party like the NAHB Research Center.

Full accountability. The word from many of the builders and inspectors BUILDER talked to is that applicators aren’t, but should be, responsible for the performance of the entire system: surfaces, caulking, flashings, and all.

EIFS contractors commonly come in after flashings are in place, and may not even do the caulking now.

Tougher warranties. Warranties serve two purposes: they cover repair costs for eligible claims, and they build buyer confidence in products. In this case it may prove easier to cover the claims than to rebuild confidence.

Technical warranty settlements will take a long time to resolve. EIMA is negotiating with builders and owners to solve the Wilmington problems. And homeowners filed class action lawsuits against manufacturers last December that will take time to settle.

But in many ways builders and owners are more worried about lost value than wet walls.

What do builders want? Besides taking care of damages, they want EIFS companies to give long-term, transferable, insured, total system performance warranties, says builder Dean Potter, who’s also former president of the Wilmington/Cape Fear HBA.

“If you can’t repair the value of the homes,” he says, “it won’t matter whether you come up with physical repairs.”

The irony is that even as problems with EIFS persist, Wilmington builders would still like to use the product.

That’s because they, and their buyers, like the systems’ energy performance, architectural flexibility, and appearance.

And if they can improve the details, EIFS can even live up to its low-maintenance claims. “None of the builders I know wants to lose these products as options,” says custom builder Steve Weiss of Wilmington.

“We want the industry to solve the problems. But until they do, I’ll be very reluctant to use them.”


                                            What Went Wrong in North Carolina

                                                Pending lawsuits pit EIFS manufacturers

                                             against disgruntled homeowners.

                                                                    By Don Best

http://builder.hw.net/news/1997/eifs/eifs2.htx

In late 1994, building inspectors in the Wilmington-Wrights Beach area of North Carolina began investigating moisture-related problems in EIFS-clad homes. During the next year, the probe revealed that most of the area’s 3,200 EIFS-clad homes were affected.

According to the Moisture Syndrome Task Force, commissioned by the North Carolina Department of Insurance Building Code Council, the problems stemmed from water leaking in behind the EIFS cladding and becoming trapped inside the walls, producing mildew and rot in the sheathing and framing around windows and doors.

Follow-up investigations by NAHB and EIMA confirmed that it wasn’t the EIFS barrier that leaked, but improper seals around windows and doors, inadequate flashing at roof lines, dormers, decks and chimneys, and faulty window frames.

The problem was aggravated, investigators believe, because houses were fitted with poly vapor barriers — a N.C. code requirement — so trapped water had less chance to evaporate.

While the water damage to some N.C. houses was assessed in the tens of thousands of dollars, those appear to be exceptions. EIMA’s inspection of 68 houses in late 1995 found that most could be repaired for less than $3,000.

Though some builders and EIFS manufacturers tried to resolve the problems out of court, a flurry of lawsuits resulted. Apart from several smaller cases, in which individual homeowners sued their builders and EIFS manufacturers, two class-action suits are pending.

In the first, called “Stucco Litigation”, filed in a U.S. Federal Court in North Carolina, lawyers for the 15 homeowner-plaintiffs will try to prove that EIFS are “inherently” or “uniformly” flawed and that the problem is a national one. If Federal Judge Earl Britt, who will decide the case in early 1997, agrees, owners of EIFS-clad houses nationwide would be entitled to join the class-action suit.

Industry insiders estimate there are at least 260,000 EIFS-clad American homes.

The second class action-called “Ruff” after one of the homeowner-plaintiffs-is a state case.

The defendants in both cases, which include 15 EIFS manufacturers, will argue that the technology is sound, but that egregiously poor building practices in North Carolina led to failures.

The defense will likely point out that EIFS-clad walls penetrated by water can dry out, provided that windows, doors and other points where water is leaking into the wall cavity are properly flashed and sealed.

“There’s a lot more at stake here than whether or not EIFS survives as a building alternative,” says Tom Kenney, director of laboratory services at NAHB’s Research Center in Upper Marlboro, Md. (Tom Kenney isn’t related to consultant Russell Kenney.)

“If EIFS is tarred with the reputation that it can’t work and inevitably leads to rot, property values are going to suffer all over the United States.”

Builders already are feeling repercussions. “My insurance company says it won’t insure my EIFS project here in Denver anymore,” says Chuck Austin, who has built 50 EIFS-clad homes. “Unless our local home builders association can work this problem out, I’ll have to look for an alternative cladding.”

As EIFS manufacturers prepare their defense, they’re modifying their products for North Carolina. The State Building Council ruled that beginning Jan. 1, 1997, all residential synthetic stucco systems construction must include drainage details so that any water penetrating the walls can escape.


(from BUILDING PRODUCTS magazine, Winter 1997)

http://builder.hw.net/news/1997/eifs/eifs1.htx

                                                                          EIFS

                                                                    By Don Best

Synthetic stucco is popping up everywhere– on malls and commercial plazas, hotels, theaters and high-rise apartments. It’s increasingly showing up on American homes, too.

Since 1969, when exterior insulation and finish systems (EIFS) were introduced to the United States from Europe, the technology has blossomed into a thriving industry with about three dozen manufacturers and thousands of distributors and applicators.

And while EIFS (pronounced “eefs“) only account for about 3.5 percent of the residential market, interest in the technology is swelling.

On the practical side, the system provides a durable, water-resistant cladding that also beefs up a wall’s insulating power. On the aesthetic side, EIFS enable designers to employ a wide variety of architectural details and finishes that would be impossible or cost-prohibitive using conventional stucco, brick or stone. While fancy brick or stonework might cost $10 or more per square foot, EIFS is about $4 to $6 per square foot.

“EIFS gives us flexibility in design for a price that can’t be assailed by any other product,” says Wayne Foley of W.M. Foley Construction in Great Falls, Va.

But, despite its advantages, EIFS are far from perfect. The technology’s long and generally successful track record is marred with enough failures to warrant caution.

Builders who embrace the technology without fully understanding it often come to regret it, as witnessed by the problems in North Carolina.

The key to a successful EIFS project, many say, is proper application. “The applicator is 90 percent of the job,” says Robert Carpenter, president of Gibson-Lewis in Mishawaka, Ind., whose firm has been doing EIFS projects for 23 years. “Though installing EIFS is not rocket science, the builder must find someone with the training, experience and integrity to set that base coat properly.”

What Is This Stuff, Anyway?

Unlike conventional stucco, which is a mixture of cement and sand, EIFS employs five distinct components:

an adhesive (or mechanical fasteners)

insulation board

a base coat made of polymer-modified cement

reinforcing fiberglass mesh

a durable finish coat.

Components of an Exterior Insulation and Finish System

1. Substrate

 2. Adhesive Attachment

 3. Reinforcing Mesh

 4, Insulation Board

 5. Base Coat (with Embedded

 Reinforcing Mesh)

 6. Finish Coat

The system can be applied to a variety of substrates, including concrete, masonry, plywood and oriented strand board, as long as the substrate is solid, straight, clean and dry.

An adhesive is used to glue a continuous layer of insulating panels to the substrate. The panels typically are 1-inch-thick expanded polystyrene (EPS), which boosts the wall’s insulating value from about R-11 to R-16. Thicker insulation can be specced to achieve even higher R-values.

Reliefs and decorative moldings are cut out of insulation board and attached to the substrate. Computers can be employed to design and cut intricate motifs, moldings and gingerbread.

Manufacturers say the insulation eliminates the thermal breaks that occur in wood and steel framing, and sharply reduces air infiltration. Thus, EIFS-clad buildings require smaller heating and cooling systems, which are less expensive to install and operate.

After the insulation is in place, a polymer-based coating (base coat) is applied to the face of the insulation and is reinforced with fiberglass mesh. To prevent cracking, the mesh must overlap the seams in the insulation and be fully immersed in the base coat.

Most manufacturers specify extra mesh to reinforce the corners around windows, doors and reliefs, and in high-traffic areas.

The mesh and base coat must be properly back-wrapped where the system interfaces with windows, doors, eaves and other dissimilar materials. This process seals and protects the insulation edges and provides a solid surface to which the sealant can be applied.

Experienced EIFS applicators like Carpenter say that the best base coats have a higher ratio of polymers to cement, making them more flexible and resistant to cracking.

Applicator experience shows that the base coat, when properly applied, provides an effective barrier against water infiltration. Yet EIFS are vapor-permeable, so water vapor won’t be trapped and condense inside the walls.

Once the base coat is applied, the system must be carefully sealed. Most EIFS failures aren’t due to leaks in the cladding, but to windows, doors, eaves and other interfaces that aren’t properly flashed and caulked, according to applicators. As a result, water leaks in behind the base coat.

To ensure proper sealing, the flashing should be completed prior to application of the base coat; the sealant is applied afterward.

John Harold, who’s been building EIFS-clad homes in Pensacola, Fla., for 10 years, says he’s never experienced a problem with his EIFS-clad homes, some of which are beachfront properties that have weathered the brunt of recent hurricanes.

“We’ve been diligent in flashing, backwrapping and sealing our systems the way the manufacturer specs them,” says the former president of the Pensacola Home Builders Association.

“We buy the highest quality sealants our manufacturer recommends, and apply them where they’re supposed to go.”

Last But Not Least

The final EIFS component is the finish coat, an acrylic coating that may include aggregate, elastomeric polymer, silicone and/or mildewcide. Besides providing additional water protection, the finish coat gives the system its architectural appeal.

One reason EIFS are finding favor among builders and architects is that the finish coat can be tinted just about any color, eliminating the need for painting.

Depending upon the surface texture desired, the finish coat is either troweled or sprayed on. Some newer EIFS products-like Senergy’s Aurora Stone, Parex’s Cerastone and Dryvit’s Ultra-Tex create the look of stone, brick or tile.

Because the finish coat has some capacity to flex as the walls moves, it’s less likely to crack than conventional stucco. It isn’t, however, maintenance-free, as some manufacturers claim.

Like any other cladding, EIFS need washing occasionally to remove built-up dirt, and should be inspected periodically to make sure that flashing and sealants haven’t deteriorated.

EIFS typically come with five-year warranties on materials and labor, although some can be extended to 10 years. All warranties are conditional on the system being installed according to the manufacturer’s specs.

Trouble Down South

Although the problems with EIFS-clad homes in North Carolina have been widely reported — and sometimes exaggerated — during the past year, all cladding, whether wood, brick, stone or vinyl, can fail, especially when it’s poorly installed.

EIFS, of course, is no exception.

In the early ’90s, the Dept. of Housing and Urban Development (HUD) experienced numerous problems with EIFS-clad buildings, mostly commercial and multifamily units financed with HUD loans.

Russell Kenney, director of testing at R.J. Kenney Associates in Plainville, Mass., examined more than a hundred troubled HUD buildings. Kenney concluded in 1992 that EIFS, “when properly detailed and applied, can provide durable cost-effective exterior walls with a service life of 20 to 30 years.”

In the same report, however, he stressed the need for improved material and application standards, and the importance of having someone “knowledgeable” inspecting the work during installation.

Partly as a result of Kenney’s work, manufacturers improved some application details. And BOCA now stipulates inspections, but only on EIFS projects over 10,000 square feet. That exempts most residential construction.

Now, Kenney is spending a lot of time in North Carolina, trying to find out why so many EIFS-clad houses there have problems and how to fix them.

“From what I’ve seen, I don’t believe that EIFS is inherently defective or even as unforgiving as some people make it out to be,” Kenney says. “In house after house we’re finding windows and doors that were never caulked, faulty flashing details, and windows that don’t comply with the building code. When builders cut corners like that, you’re going to have lots and lots of failures.”

This viewpoint is echoed by the EIFS Industry Members Association (EIMA), which represents eight large manufacturers accounting for 90 percent of all U.S. EIFS sales, and several thousand distributors and contractors.

Doug Mault, executive director of EIMA, concedes North Carolina is in a category by itself.

“Nowhere else in the United States are we seeing problems that approach the situation in North Carolina, where we’re finding clear and widespread evidence of poor building practices.

Both Kenney and Mault believe the hot pace of housing starts in the area, in part, overwhelmed builders’ ability to maintain quality control and led to the hiring of unqualified applicators using non-code approved EIFS.

Onward and Upward

EIMA and the National Association of Home Builders are working together on new programs to train and certify EIFS applicators and to educate builders. Last summer, EIMA teamed up with the Tidewater (Va.) Builders Association to conduct the first of a series of national workshops for applicators, builders and county and state building officials.

“It’s our responsibility to teach builders what constitutes quality installation and to promote communications between the key players,” says Kent Stumpe, one of the key presenters at the Tidewater workshops.

Stumpe, who is national marketing manager for Senergy, a leading EIFS maker, says EIMA has a pre-job checklist, a job-in-process checklist and a post-job checklist that the builder and the applicator should sign off on.

“It assures that there will be good communications and clear lines of responsibility,” he says.

The degree to which these educational efforts succeed and the outcome of the N.C. lawsuits may be the keys that determine the technology’s future in residential construction.

In the meantime, builders should heed the voices of experience.

“I have used EIFS since 1970 and have found it to be an excellent product, as long as you keep a close eye on the applicator and don’t take any short cuts,” says custom builder Foley. — Don Best is a Surry, N.H.-based freelance writer.


Most Common EIFS Trouble Spots and How to Check Chem Out
By Rick Schwolsky

Senior Editor, Building

http://builder.hw.net/news/1997/eifs/eifs3961.htx

Around Windows and Doors

EIFS check: Check that installers held the surface 3/8 to 1/2 inch back from the window or door. Make sure edges of foam board around openings were “buttered” (coated with EIFS finish). Make sure foam backer-rod was installed before caulk to give it correct shape, bond, and flexibility. Check caulk joints for continuity.

Moisture check: Look for moisture in wall and floor framing below windows.

At Roof and Wall Flashings

EIFS check: Inspect sidewall and roof flashings for proper placement and coverage. Design and install diverters (“kick-outs”) on rake flashings where eaves of lower roof butts into sidewall.

Moisture check: Near roofs, look for moisture in areas that may come in contact with or impede water flow. Check near suspect flashings.

At Penetrations

EIFS check: Make sure installers sealed all penetrations (including deck ledgers, utilities and meters, electrical boxes, gutter components, and shutter fasteners). Maintain seals. Even if a penetration was caulked before fasteners were installed, caulk around components or fastener heads after installation for a secondary seal you can watch.

Moisture check: Look for high readings near penetrations, but also follow likely travel paths away from penetrations.

Next to Architectural Details

EIFS check: Be wary of transitions between different exterior materials like EIFS and wood siding). Flashing and caulking must be reliable in these locations.

Moisture check: Test for moisture content and possible damage both at the site and in the wider area around siding transitions.


 

 

Prof sees ‘time bomb’ in prospect of rising rates, falling house values

Thursday, April 22nd, 2004

Michael McCullough
Sun

Shrinking mortgage rates have been tied to Greater Vancouver’s residential construction boom CREDIT: CanWest News Service

 

Is the house-price bubble about to pop?

With the bond market edging upward and Bank of Canada governor David Dodge predicting a steady rise in interest rates worldwide by next year, many are wondering whether Greater Vancouver’s inflated housing market — which has seen average prices hit $348,084, highest in the country — can hold up.

A fall in home prices could ripple through the entire economy as North Americans have taken on record levels of debt, largely on the strength of the equity in their homes, the pessimists warn.

If house values drop while interest rates rise, many families could find themselves overextended. Suddenly the payments on loans and lines of credit would jump, foreclosures would rise and the consumer spending spree that has powered the economy through the last three years would screech to a halt.

Simon Fraser University business professor Lindsay Meredith sees ominous signs in today’s combination of rock-bottom interest rates, a rapid rise in home prices, brisk remortgaging activity and the Canada Mortgage and Housing Corp.’s new “no money down” policy for first-time buyers.

“There you have the components of a time bomb,” he said. Any sudden rise in interest rates or economic shock could cause young buyers lured into the market by cheaper-than-rent financing to default or even walk away from their purchases.

“These people are holding no equity,” Meredith said. “What does he do if he loses his job? He rips out the sink, the toilet and the electrical and he walks.”

Even longtime homeowners could find themselves stretched thin if they refinance their homes, use the savings to renovate, then get stuck with higher mortgage payments down the line.

“What we have here are artificial factors driving up the market,” said Meredith, who predicts a housing crash should mortgage rates climb above eight per cent.

While he doesn’t foresee “a big crash and burn,” University of B.C. professor Stan Hamilton expects a “correction” in house prices if interest rates rise 50 to 75 basis points (a half to three-quarters of a percentage point) over the next year.

With interest rates so low, such an increase makes a significant difference in monthly payments, noted Hamilton, who teaches finance and real estate at the Sauder School of Business.

“Going from 10 to 10 1/2 [per cent] doesn’t make such a difference as five to 5 1/2,” he said.

Hamilton believes there is more risk of a market drop this time than after the last market peak in 1995 because the required down payment has dropped to five per cent of the purchase price — and in some cases zero — from 10 per cent.

“We’ve dug into the buyer’s side of the market to the point where people are in debt to the hilt,” he said.

Real Estate Board of Greater Vancouver president Andrew Peck concedes that interest rates can only go up, but believes other factors, such as low housing supply and an improving economy will forestall any price drop.

“It’s not just an interest-rate-driven environment,” he said.

Carol Frketich, regional economist for CMHC, likewise foresees an orderly transition to a new stage of the real-estate cycle.

“Yes, they will have a dampening effect,” she said of higher interest rates. But while sales activity will slow down, house prices will likely continue to rise for another two years, she said.

The factors that stuck Ontario homeowners with mortgages worth more than their homes in the early 1990s, for example, simply aren’t in place in B.C. right now. The bursting of Ontario‘s bubble was accompanied by a severe recession and too many new homes coming on the market.

Though housing starts should exceed 27,000 in B.C. this year, Frketich said, that is coming off a low of 14,418 in 2000 and well short of the 40,000-plus built in 1990. And most of the condominium and townhouse projects going up are pre-sold, meaning there will be no glut of homes for sale.

As for B.C.’s economy, it’s just picking up steam and attracting new arrivals from other provinces after six years of inter-provincial outflows, Frketich said.

The market’s rise since 2000 has been fuelled by pent-up demand from first-time buyers and investors taking advantage of the lowest interest rates in nearly half a century, Frketich said. While higher interest rates may take some of those buyers out of the market, they will be replaced by migrants once again moving into B.C.

One indication that demand continues to outpace supply is the high ratio of home sales to listings, Frketich said. As a result, prices will likely continue to creep up — though at a slower pace than before — until sales and listings come back into balance. CMHC predicts the average price of homes in metropolitan Vancouver to rise another eight to 12 per cent this year.

Even after the peak, don’t expect a sudden price drop, she added. When prices get high, opportunistic homeowners often put their homes on the market “just to see what they can get” and take them off again as prices recede, making the resale market “sticky on the downside.”

And though home prices in Greater Vancouver may look sky-high, they are 10-per-cent lower on average than in January 1995, the last market peak, when adjusted for inflation. Moreover the 11-per-cent average increase in the region last year pales against the 20- to 30-per-cent annual increases recorded in the late 1980s.

© The Vancouver Sun 2004

Interest-rate hike predicted ‘sooner’

Thursday, April 22nd, 2004

TD Bank among those expecting Bank of Canada to raise rates this year, not next

Eric Beauchesne
Sun

OTTAWA – Federal Reserve chairman Alan Greenspan’s conviction the U.S. economy is in a “vigorous expansion” and new evidence that the Canadian economy is picking up steam sparked predictions Wednesday that the Bank of Canada will now raise rates sooner than previously expected.

J.P. Morgan economist Ted Carmichael said the investment bank now anticipates the Bank of Canada will begin raising rates here later this year rather than next year as it had been predicting. His employer’s decision mirrors a decision by the parent company about interest rates in the U.S.

The TD Bank also predicted that rates here will be going up sooner than expected.

“Although the common view on the street is that the Bank of Canada will wait until January 2005 before pulling the trigger, October 2004 seems like a better bet,” said TD economist Marc Levesque.

These predictions follow on two days of testimony by Greenspan to congressional committees and Statistics Canada’s report Wednesday that its barometer of what’s ahead for the economy rose by a stronger-than-expected 0.7 per cent last month, led by strength in manufacturing and a rebound in housing.

Further, Statistics Canada also upwardly revised the increases in the leading economic index for the previous two months. The index is a basket of economic activities that tend to foreshadow the overall future direction of the economy.

The TD Bank’s Levesque said that once the Bank of Canada gets going in October, it will generate a string of rate increases over the following year totalling 2.5 percentage points.

That percentage-point estimate is what it will take to get the bank’s foot off the economic accelerator and bring monetary policy back to neutral.

Additionally the expectation that rates will be rising sooner than previously anticipated follows a warning this week by Bank of Canada governor David Dodge that the period of historically low interest rates is coming to an end and that rates globally will be rising next year.

The view that the rise in rates will be led by the U.S., which was reinforced this week by Greenspan, has also given the depreciated U.S. dollar a boost.

That in turn has pushed the loonie back down to a six-month low of less than 74 cents US, which in turn should ease the squeeze on exporters who have been hurt by last year’s sharp appreciation of the loonie.

The dollar closed at 73.55 cents US Wednesday, down from 73.7 cents US Tuesday and what was more than 78 cents US early this year.

Analysts disagree, however, on where the loonie is going next.

Some, such as those at the Conference Board of Canada, expect the loonie will ease further to 72 cents U.S or less over the coming year.

However, the TD Bank sees the currency rising back up to 78 cents US by year end and then to 79 cents US next year.

“It can be argued that the Canadian dollar remains below its competitive threshold,” Levesque said, noting that the relative purchasing power of the loonie is about 80 cents US.

While Statistics Canada’s index of leading indicators is pointing to increased economic strength, the International Monetary Fund forecast Wednesday that Canada‘s economy will expand by only 2.5 per cent this year, less than the 2.75 per cent being forecast by the Bank of Canada.

Dodge, appearing before a Commons committee, dismissed the difference as statistically insignificant.

Meanwhile, the IMF forecast four per cent growth for the U.S. this year, a prediction that also suggests U.S. interest rates will be rising.

Faster growth has started to boost hiring by American employers, central banker Greenspan told the Joint Economic Committee of Congress in Washington. Worker incomes have yet to rise and trigger higher prices, he added.

“As I have noted previously, the federal funds rate must rise at some point to prevent pressures on price inflation from eventually emerging,” Greenspan said. “As yet, the protracted period of monetary accommodation has not fostered an environment in which broad-based inflation pressures appear to be building.”

J.P. Morgan Chase & Co. moved its forecast for the next rate increase to August from November, economist Dean Maki said in a note to customers. Four consecutive increases of a quarter percentage point may bring the overnight rate to two per cent by year-end, Maki said.

In general, a boost in the rate wouldn’t mean more would necessarily follow, Greenspan said. “There have been many occasions in which we made one move and stop,” Greenspan said. “When we go through protracted moves it is usually a year or so.”

© The Vancouver Sun 2004