Bank report says Saskatchewan to follow Alberta’s lead in long-awaited cooling off

Eric Beauchesne
Sun

OTTAWA — Canada‘s long-running housing boom has ended, with the formerly bubbling markets of Calgary and Edmonton already having gone from hot to not, and with the current hot spots of Saskatoon and Regina to follow, a major Canadian bank says.

Mortgage-market innovation delayed the inevitable but couldn’t prevent it, Royal Bank of Canada said in its analysis of major urban real estate markets Thursday.

“After yet another blockbuster year for Canada‘s housing markets in 2007, the much-anticipated housing market slowdown in Canada has arrived,” RBC said.

“The delayed arrival of softer housing markets can be partly attributed to recent mortgage innovation that has seeped into the Canadian market during the last two years,” it said, citing higher loan-to-value ratios and longer amortization periods of up to 40 years, which opened the market to a wider range of buyers and prolonged the housing boom.

The mortgage-market innovations, which make housing more affordable in the short term, also heighten the risk of default in the long term, it said.

Markets in the West, which have risen the furthest above their underlying values, are the most at risk of an increase in defaults as a result of recent mortgage innovations, the report’s author, RBC economist Amy Goldbloom, said in an interview.

However, there will not be a U.S.-style correction, despite such concerns in markets like Calgary and Edmonton, said the report, released amidst further evidence of the depth of the U.S. housing market meltdown — a record drop in a government index of housing prices in the first quarter of this year.

“Canada‘s housing market is on much firmer footing than the U.S. market,” it said, citing more conservative mortgage lending practices, healthy household finances, tight labour markets, and a manageable supply of homes on the market.

Still, after six years of 10-per-cent or better house price increases in major markets and four years of annual construction starts of more than 220,000, Canadian housing markets are now on a clear cooling path with resales last month being down six per cent from a year earlier, price gains from a year earlier slumping to the three-per-cent range, and the number of homes being listed for sale surging by 18 per cent.

“For the year ahead, we’re looking at price gains to converge across the country to a much slower pace, with the west cooling off from double digits and central Canada cooling off further to the low single digit range,” Goldbloom said. “By year end we expect most markets will be eking out mild price gains.”

“The markets that soared well above their underlying economic fundamentals are the very ones with the most downside potential,” the report said. “Calgary and Edmonton have moved from chart-toppers to bottom-of-the heap in only a matter of months on a range of key housing market indicators, including house prices and sales.”

Saskatchewan has since jumped into the housing market spotlight as its commodity-led economic expansion has attracted an influx of migrants and led to a major housing market boom, it said.

“Regina and Saskatoon continue to clock year-over-year price gains that are several multiples above the pace of their local wage growth,” it noted. “This lends evidence that current momentum is unsustainable, with a similar fate to Alberta‘s likely for both of these cities in a year’s time.”

© The Vancouver Sun 2008

 

Ozzie Jurock
Sun

In my 1999 book Forget About Location, Location, Location, I argued that we are too enamoured with that time-worn phrase. Imagine, I said, that you bought a single family house in Burnaby – anywhere – for approximately $260,000 in 1990. Imagine also, that you let it go to pot…roof leaking, front door paint peeling, grass knee high…you still could have sold it to me for $480,000 in 1995. I go and fix the roof, paint the door, create a lawn you can dine from and in 1999 I would only have received $380,000 for it…from – you guessed it -shrewd you. You bought it, kept it till last year (yup, ran it down again – but no matter) you got a whopping $780,000 for it.

What did any of that have to do with location? Had you bought in San Francisco in 1989 you would have lost 30 per cent of the value by 1992…ditto for New York as the Reichman’s demonstrated through buying low (everyone was depressed) and selling high (everyone turned euphoric)…to the tune of raking in a 600 million profit.

There used to be rules. It used to be easy. If you could learn to recite, “Location, Location, Location” from memory you were automatically a real estate expert.

You simply had to find out where the most desirable part of town was, or where the most desirable suburban or rural area was, depending on your interest, push a pin into the map at that spot and then go and buy something as close as possible to where the pin was.

Timing wasn’t important because the dynamics never changed. But in the last 20 years location means less and timing became extremely important.

When you look at any market you are looking at a snapshot in time. That’s the way it is at that moment. In a month or a year, it might be very different. In real estate investing, the degree to which your timing is accurate is the degree to which you will achieve optimal or minimal results. It is very often the difference between success and failure.

If you are in an inflationary real estate cycle, the rules are relatively simple. You buy a piece of property utilizing leverage, you wait a certain amount of time for the property to appreciate, then you might sell for a profit and buy something larger or you can borrow on your increased equity and buy something in addition. What could be easier? However, if you’re in a flat-line segment of an inflation cycle you have to buy below fair market value to establish your profit at the beginning. You have to give greater importance to cash flow considerations. And if you are in an ‘unreported inflationary cycle’ – as now, you even have a bigger problem.

But what happens if you buy in an inflationary cycle and then it turns flat-line? You have to shift your focus every time the market changes. Because, like riding a rodeo bull, every time the bull does something different you have to change your position accordingly or you’re going to be thrown very forcibly to the ground, stomped on, and gored unmercifully.

So we agree that there are no rules because the marketplace is continually changing, therefore what we have to do is learn to read the changes, interpret what the changes mean, and adapt to them.

What are the determining factors? Here we come to some good news. The component parts, the determining factors, are not complex or difficult to deal with. You look at migration, affordability, inventory availability, inflation, and environment of growth.

You can gather your facts from wherever they are available but after you’ve done that you have to form an opinion. This isn’t like religion where you decide on a moral philosophy and then go out and carve it in stone. This is an ever-changing continuum, a soup that is boiling and bubbling and nothing is ever where it was the last time you looked. The difference between ‘too soon’ and ‘too late’ is timing! If you watch the trends as they change you’ll be able to time your actions for optimum results.

So, you must watch for changes. Are listings increasing and dramatically? Are sales slowing? Is a forestry town closing its mill? Is a new superport being built? Will bad news affect real estate values here? How many cranes are rising into the sky and is it normal?

Well, I didn’t say it was easy. But the last one is a fine predictor. At the end of the cycle we always overbuild. Always. The last builder and the last developer pay too much for the land, or he takes too long to come to market…and then sales stop. We built like mad in Vancouver and Vancouver Island towns from 1990 – 1995 only to see the market crumble – in all the fine locations, like False Creek…where some values crunched down by 35 per cent. By 1999, no buildings came on stream, buyers were finally absorbed…and then we went on a building binge again. Am I surprised that we have gone too far, overbuilt again and need an adjustment period. No. Do I care about the gloomers who see abject collapses again? No. For the homeowner staying in their residence for 10 years it matters not, for the investor however…the difference of timing…where we are on this particular or any other cycle…is vital.

So, what does that mean for today’s real estate markets? Can the experts really help us? Remember even the experts are guessing. Futurists are never right except by accident. Historians are never wrong. If you had tomorrow’s paper you could make millions; if you have yesterdays paper you can wrap fish in it.

Except, contained in yesterday’s newspaper are changes that have already started and if you get to them soon enough, interpret them correctly and then act on them, you can do yourself some serious good. It’s not necessary for you to have the wisdom of the world at your fingertips. But get good quality information, know who you are – a shark, a flipper or an investor – pick your market segment, pick your professionals and then don’t get emotional about it. You will always make the most money on the day you buy . . . even today.

Ozzie Jurock

Jurock’s Real Estate Insider

web: www.jurock.com

email: [email protected]

© The Vancouver Sun 2008

 

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WASHINGTON (AP) — Fannie Mae’s CEO told shareholders Tuesday that the housing market is “about halfway through” its crisis and home prices could fall as much as 25% before the worst is over.

The largest U.S. buyer and guarantor of home mortgages will be able to weather the downturn and expand its business, Fannie Mae’s (FNM) president and CEO, Daniel Mudd, said as he and other top executives faced shareholders at an annual meeting in New Orleans.

As Mudd spoke in New Orleans, a key Senate panel approved a $300 billion homeowner rescue plan to provide cheaper, government-backed mortgages to as many as 500,000 struggling borrowers. The legislation also includes tougher federal oversight of Fannie Mae and its smaller government-sponsored sibling, Freddie Mac (FRE).

Under a key concession to Republicans for backing the plan, the rescue would be financed with a share of the two companies’ profits.

The White House had threatened to veto a similar House bill, but has said it will take a close look at the version that cleared the Senate committee.

After posting a first-quarter loss of $2.2 billion amid rising mortgage defaults, Fannie Mae earlier this month cut its dividend and raised $7 billion in capital by issuing new shares to shore up its finances. Federal regulators loosened the capital requirements of Fannie and Freddie, to enable them to play a bigger role to bolster the housing market.

Mudd said Tuesday the company expects U.S. home prices to fall as much as 25% from their highs of mid-2005. Losses for Washington-based Fannie Mae from defaulted mortgages are expected to worsen next year.

The housing market is in its most severe slump since the Depression, Mudd said, a crisis “which we’re likely to be about halfway through right now.”

 

Region allocated increased amount of land to development, Seattle think-tank finds

Doug W
Sun

The region failed to curb population sprawl in recent years after some success in creating more compact communities in the ’90s, a new report shows.

The share of new urban and suburban growth that went into pedestrian-oriented development in Metro Vancouver declined from 2001 through 2006, according to the Sightline Institute.

Using 2006 census data, the Seattle-based think-tank found that the amount of land developed in Metro Vancouver to accommodate new residents increased compared with the two previous census periods.

Nevertheless, Metro Vancouver’s growth has been “fairly compact” in comparison to many U.S. cities, according to Sightline research director Clark Williams-Derry.

“Yet there are signs that Greater Vancouver’s smart-growth leadership may be slipping,” said Williams-Derry, in the report entitled Slowing Down.

“The region marked its clearest smart-growth successes before 2001.

“Somewhat surprisingly, the pace of compact growth slowed over the most recent census interval.”

Compact neighbourhoods accounted for just 56 per cent of new urban and suburban development, compared with 67 per cent during the ’90s.

In an interview, Williams-Derry said that the decline in density could be connected to a slowdown in the rate of population growth in the region between 2001-2006 compared to the previous census periods.

When governments are faced with a high influx of new people, they are often more willing to accommodate people in concentrated areas than during times of low population growth, he said.

While giving the region a failing grade, the report did praise Vancouver and North Vancouver for creating smart-growth neighbourhoods. These two cities were followed in ranking by New Westminster, Burnaby, White Rock and Richmond.

Between 2001 and 2006, Vancouver‘s pedestrian-oriented communities had a net growth of 27,000 residents — about four-fifths of the net population growth for the city.

In Metro Vancouver, about one out of every eight residents lives in a neighbourhood with pedestrian-oriented densities with the City of Vancouver home to nearly two-thirds of them.

The Vancouver area led the region in another category — the share of residents living in neighbourhoods with at least 20 residents per acre.

In Vancouver, three out of four residents lived in such “compact” densities as of 2006. Similarly, four other municipalities — Burnaby, New Westminster, White Rock and North Vancouver — had one in three residents at such densities.

But even these numbers are low, according to the report, citing research suggesting that urban densities exceeding 40 residents per acre are required for travel on foot and bicycle to really flourish.

Sightline’s report was based on data from the last four census findings. The think-tank divided the landscape of Metro Vancouver into a 30-by-30 metre grid for each census period. In each grid Sightline calculated the population density of circles containing at least 500 residents.

Williams-Derry said in the report that the trend towards greater sprawl is undermining Premier Gordon Campbell’s goal of cutting greenhouse-gas emissions by one-third by 2020.

He said that climate-changing emissions can only be reduced if progress is made “in creating compact, transit-and-pedestrian-friendly neighbourhoods that ease car dependence for B.C. residents.”

© The Vancouver Sun 2008

 

Layer cake to appease any appetite

Kate Webb
Province

Dolce is one sweet layer cake currently rising in downtown Vancouver that’s stacked with enough home styles and sizes to suit any appetite.

The 32-storey glass and concrete tower materializing at the corner of Seymour and Smithe — scheduled to be ready for move-ins in spring of 2010 — is at the heart of one of the most prestigious cultural neighbourhoods in Vancouver‘s already desirable city-centre.

Across the street stands the majestic Orpheum Theatre, and within two blocks are the Queen Elizabeth Theatre and The Centre For Performing Arts. Dolce is also just steps away from the Robson and Yaletown shopping districts, as well as the financial district.

It’s no wonder there are only 18 units left of the original 198 for sale.

But while the price point and location make it an address aimed at high-rolling executives, the main interior design choices, colour schemes dubbed “Diamond” and “Tuxedo”, more bring to mind the lifestyle of a certain triple-digit international spy.

In the digital Tuxedo display unit (the real display has been torn down to make way for construction), glossy black, stainless steel, and frosted glass accents aptly set the tone for energetic entertaining.

“By the time this tower is finished, this is going to be the most desirable part of downtown to live in,” says Kim Lloyd, sales manager for Dolce. “The interiors are different than what you’ll see everywhere else. If you walk in, people are going to go, ‘Wow! I want that kitchen! Cool kitchen.'”

She’s talking about the various European-inspired, very futuristic design features included, such as custom push-open cabinets that stylishly disguise a ton of storage in the kitchen, a microwave drawer that opens at the touch of a button, and sliding frosted-glass walls that form a veil of privacy around the bedroom — or offer to open up the space.

Of the 18 homes still up for grabs, there are four unit types left: Eight, one-bedroom apartments on the second, third and fourth floors; four two-bedroom “private collection” residences on the 25th to 27th floors, four two-bedroom-plus-den “private collection” sub-penthouses on the 30th and 31st floors, and two, two-level, two-bedroom townhomes on the main floor.

Whew! It sounds complicated, but really, living at Dolce is all about enjoying the simple things.

For those who choose the price relief of one of the lower floors, the bonus is the 3,500-square-foot fitness centre on the fifth floor will be a snap to access. All the modern luxuries are included, from a full gym, yoga studio and spinning room to a hot tub and steam room.

Those who scoop one of the two townhomes left on the main floor will also appreciate that the homes have been pre-zoned to double as commercial space. That means the possibilities for working from home are endless, from opening a small, boutique store with sidewalk access or simply saving on taxes by making it your home office.

Note that the townhomes are the only ones with a different set of interior colour schemes. The finishings are slightly earthier and more contemporary, with options code-named “Champagne” and “Moonlight.”

Waaaay up, towards the tip-top of the soon-to-be-glistening skyscraper, are the last eight spectacular views left in the building. Mountains, ocean, and city cityscapes surround the height of urban living.

Once you pass the 25th floor, like entering first-class on an airplane, everything gets just a little bit fancier. The private collection provides wider hallways, nicer doors and fixtures, and ceilings extending from eight feet, six inches to nine feet, four inches, depending on the floor you opt for.

Some of these elite dwellings come with large, open-air terraces, while others feature balconies or garden-friendly sunrooms.

It should come as no surprise that the million-dollar-plus condos are the ones perched on the upper floors, while the more affordable ones starting at $627,900 rest closer to the ground. But whatever your mortgage ceiling, you can relax knowing your actual ceiling is most definitely going to be over-height there are no upgrades to buy, and your layout is designed to optimize every last expensive inch of floor space.

“A couple can live in this home,” says Lloyd of the 796 to 970-sq. ft. one-bedroom suites on the second, third and fourth floors.

“Every square inch of our plans are utilized living space. There are no wasted hallways, no wasted areas.”

The features lists are extensive and the opportunity is unique, so head to Dolce’s presentation centre for a taste of the goods before this sweet treat is all gone.

[email protected]

THE FACTS

What: Dolce, a 198-unit, mixed-type housing development.

Where: 535 Smithe St., Vancouver

Developer: Solterra

Sizes: One-, two-bedroom, and two-bedroom-plus-den condos, two bedroom townhouses, 796 sq. ft. to 1386 sq. ft.

Prices: $627,900 to $1,599,900

Open: Presentation centre (no display suite) at 872 Seymour St., open Saturday to Thursday from 12 to 5 p.m.

More info: Visit www.liveatdolce.com

© The Vancouver Province 2008

 

STABILITY SIGNS: Analysts caution optimism and warn upswing may be statistical fluke

VERONICA SMITHAFP
Province

WASHINGTON — U.S. homebuilding showed a surprisingly strong jump in April, signaling a ray of hope amid the rubble of the worst housing slump in decades, according to government data released Friday.

Housing starts and permits hit their highest levels since February, and new home construction rebounded from a 17-year low in March, the Commerce Department data showed.

Starts rose 8.2 per cent in April from March to an annual rate of 1.032 million units. It was the strongest gain since January 2006 and sharply higher than analysts’ consensus forecast for a cutback to 940,000 units.

Construction permits, a bellwether of future activity in the housing sector, climbed a robust 4.9 per cent in April to 978,000 units. That, too, soundly topped analyst expectations of 912,000 units.

Analysts said the data was an encouraging sign that the housing market finally may be starting to stabilize after the collapse of a real-estate bubble in 2006.

With the housing slump at the root of the economy’s slowdown, finding a floor could give the Federal Reserve more room to pause in its recent interest rateslashing campaign.

But analysts cautioned that any improvement was starting from relatively depressed levels.

“Construction activity has been so low that it has no place but up to go and that might just be happening,” said Joel Naroff of Naroff Economic Advisors.

Global Insight’s Brian Bethune took a slightly dimmer view, arguing that most of April’s upward momentum was probably due to statistical flukes.

“We would not read too much into the April housing report beyond statistical noise,” he said.

“It is definitely too early to uncork the champagne on the long and winding road to more healthy housing market conditions.”

On a 12-month gauge of the slump, April housing starts were down 30.6 per cent and permits fell 34.3 per cent.

The Commerce Department upwardly revised March housing starts to 954,000 units, from a prior estimate of 947,000, and construction permits to 932,000, from a 927,000-unit rate.