Purpose- built rental housing can

BOB RANSFORD
Sun

There has been a lot of h o l l o w t a l k a b o u t housing affordability during the campaign leading up to today’s civic election, but very little discussion about specific initiatives that will help spur the construction of new market rental housing — a key to providing more affordable housing in the region.

More than half of Vancouverites and more than a third of those living in Metro Vancouver rent their homes. Rental housing is the affordable housing option that spans all segments of the housing market. In many ways, it is a relief valve for the pressure that builds when the market can’t keep pace constructing new homes for the sale market during spikes in housing demand.

Demand forecasts point to the need for more than 310,000 new housing units, 70,000 of them rental homes, by 2021 to meet population growth.

Even with the high levels of housing production in Metro Vancouver during the housing construction boom that just came to an end, rental housing didn’t keep up with forecasted demand. The number of rental units built over the last decade represents about only a third of the level required in order to meet the estimated future demand. A significant portion of stratatitled condominium units have ended up as rental units, especially in pockets of the market like the downtown south part of Vancouver, but there is no certainty that these homes will remain on the rental market over time, with many already coming on and off the market depending on the demands and desires of their individual owners.

Building rental housing is uncompetitive with condo development. Federal tax law changes more than 25 years ago eliminated the tax incentives that once made the economics of constructing purposebuilt rental apartment buildings. It was those tax incentives that led to the last rental building boom in the 1960s, leaving Vancouver dotted with 40- year old apartments, many which need costly repairs and deferred maintenance that can’t be supported with income from current rents.

Without a significant shift in the current taxation regime or an incentive program, the prospect of adding significant amounts of new purpose- built rental housing is unlikely.

Vancouver’s City Planning Commission is challenging the city’s business- as- usual approach to development policies by recommending a solution for the rental housing crisis. The citizen body, of which I am a member, advises city council on long- range planning issues.

We recently challenged those running for city council, along with other community leaders, to consider trading density for purpose- built rental housing in areas around transportation nodes and neighbourhood centres. Vancouver has traditionally been willing to use “ density bonusing” as a tool to extract value from new development and transfer that value to community benefits. The tool has been used to finance the preservation and restoration of a number of heritage buildings. It has been used to provide social housing. But so far, there has been no program in place to trade increased density for purpose- built rental housing.

The commission is recommending that the city adopt such a policy by pre- zoning land around transit nodes and in defined neighbourhood centres to allow a modest increase in density for new multi- family housing in return for the developer providing a certain number of rental homes for a specified period of time. The success of an incentive program like this is dependent on a number of economic variables, such as the amount of extra density allowed, the length of time during which the developer might have to forgo a profit to maintain a rental unit as opposed to selling it as a condo unit, etc. These are issues that need to be debated before such a policy is adopted.

The views of the community also need to be heard on issues that arise from increased density. It would be somewhat ironic, however, if, after spending billions of taxpayer dollars in constructing expensive public transit infrastructure, the public rejects the notion of increasing density around transit nodes, like SkyTrain stations.

Vancouver’s new city council will undoubtedly give serious consideration to the ideas about rental housing advanced by its planning commission since they are among the very few specific ideas about dealing with housing affordability.

Bob Ransford is a public affairs consultant with CounterPoint Communications Inc. He is a former real estate developer who specializes in urban land use issues. E- mail: ransford@ counterpoint. ca

Number of sold homes drops by more than half compared to 2007

Derrick Penner
Sun

SALES SLIDE: The B.C. Real Estate Association reported October sales at about half the level of a year ago, a drop that can be correlated with recent dismal financial news. Here is a comparison with October 2007. Photograph by : Bill Keay, Vancouver Sun files

To ad lib a phrase, with apologies to T.S. Eliot, October has been the cruellest month for British Columbia real estate so far in 2008 with sales drying up in the face of brutal news in financial markets.

Multiple-Listing-Service-recorded sales across B.C. plummeted 51 per cent in October compared with the same month a year ago, the B.C. Real Estate Association reported Friday, over a month that saw the Standard and Poors/TSX Composite Index — Canada‘s bellwether stock index — shrink by 17 per cent.

And as potential homebuyers watched their mutual funds, stock holdings or other investments wither with no sign of a reversal, they stayed on the sidelines of real estate, Cameron Muir, chief economist for the B.C. Real Estate Association, said in an interview.

“Look at it as a kind of a reverse wealth effect,” Muir said, referring to the phenomenon that when a homeowner sees his home’s value rising, he feels wealthier and more willing to make major purchases.

“Now that we see equity markets have come down from lofty heights, we’ve seen prices come off in most housing markets in the province, that (wealth effect) has evaporated.”

In the month of October, that meant MLS sales of 4,018 across the province compared with 8,160 in the same month a year ago.

The dollar value of all those sales added up to $1.7 billion in October, a 54-per-cent drop from the $3.7 billion recorded in October 2007.

And the average price in B.C. dropped 6.5 per cent to $420,259 compared with $449,259 in October 2007.

Muir said he expects the “snakes-and-ladders” volatility in financial markets to continue for some time yet before they become consistent. Once that happens, he expects real estate sales to rebound a little.

However, when markets hit consistency is tough to predict, Stan Hamilton, a professor at the Sauder School of Business at the University of B.C., said in an interview.

“If somebody came out tomorrow and said [markets are] going down another 20 per cent, and you believed them, then we could start to make decisions,” Hamilton said. “But they can’t even tell us if [markets are] going up or down, they being everybody including myself.”

In the meantime, Hamilton added that the people who were counting on investments in the stock market or mutual funds to provide their down payment on a home has watched that capital shrink, with no certainty around when that will change.

Hamilton said October’s drop in financial markets happened “after governments have gone through their first and second levels of policies to save the world,” so people are staying away from real estate.

“Nobody likes to make a commitment that has reasonable odds of backfiring on you,” he said, “whether you are buying or selling.”

Economically speaking, Muir said that while B.C.’s prospects have dimmed, British Columbians are currently well off enough to justify more activity in the real estate market.

Muir said sales levels in 2008 mirror those of 2000, a time when provincial unemployment was higher and the economy in rougher shape.

© The Vancouver Sun 2008

Alan Zibel
USA Today

A foreclosure sign in front of a home in Perris, Calif., in May — By Mark Avery, Reuters file

WASHINGTON — Publicly breaking with the Bush administration’s official stance, the Federal Deposit Insurance Corp. proposed Friday to use $24 billion in government financing to modify 2.2 million mortgage loans and help a projected 1.5 million American households avoid foreclosure.

The FDIC posted the plan on its website two days after Treasury Secretary Henry Paulson rejected the idea of using money from the $700 billion bailout of the financial industry to pay for such a proposal.

A Treasury spokeswoman declined comment Friday, but Interim Assistant Treasury Secretary Neel Kashkari told a panel of the House Oversight and Government Reform Committee that the Treasury Department is “aggressively” looking at ways to reduce skyrocketing home foreclosures under a $700 billion financial rescue program that so far has aimed at shoring up banks.

“We continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a key part of working through the necessary housing correction,” he said.

Kashkari also said steps taken by both U.S. policymakers and overseas counterparts to ease the global credit crisis have had an impact. “Our system is stronger and more stable than just a few weeks ago,” he said.

Still, the Treasury’s chief official for confronting the housing crisis was scolded by lawmakers for doing too little to aid troubled borrowers.

“The Treasury Department has abdicated its responsibility to stem the tide of mortgage foreclosures,” said Rep. Dennis Kucinich, whose subcommittee hosted Kashkari. “They have passed the responsibility back to the private sector and inadequate government efforts.”

The FDIC’s plan would guarantee the 2.2 million modified loans — mainly risky loans made to borrowers with weak credit or small down payments — through the end of next year. Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable.

“If we can avoid those foreclosures, then you will get more stability in the housing market,” said Michael Krimminger, a senior adviser to FDIC Chairman Sheila Bair, said Thursday.

The FDIC says the government’s backing will make the lending industry more willing to modify loans because taxpayers will absorb half of the losses if the borrower defaults again. Also, loan servicing companies, which collect and distribute mortgage payments, would be paid $1,000 for each loan they modify.

Even if a third of borrowers default again on their modified loans, 1.5 million homes would still be saved, the FDIC says. Under the agency’s plan, monthly payments shouldn’t total more than 31% of homeowners’ pretax monthly income.

The FDIC says its plans should apply to an estimated 4.4 million loans that are likely to become delinquent though the end of next year. That estimate excludes loans held by mortgage finance companies Fannie Mae and Freddie Mac, which on Tuesday launched their own loan modification program modeled after the FDIC’s effort at failed IndyMac Bank.

The agency has been an aggressive proponent of efforts to alleviate the foreclosure crisis. FDIC officials sounded early warnings about a rise in defaults among risky loans, and have repeatedly reaped praise from Congressional Democrats.

After taking over failed IndyMac Bank of Pasadena, Calif., over the summer, the FDIC launched a loan modification plan in which borrowers receive interest rates of about 3% for five years. That plan was used as a model for a loan modification plan announced Tuesday by mortgage finance companies Fannie Mae and Freddie Mac.

Both of those plans reduce interest rates so borrowers aren’t paying more than 38% of their pretax income on housing expenses.

Dollar volume in October down 54 per cent from a year ago

Sun

VANCOUVER – The British Columbia Real Estate Association is reporting that residential sales dollar volume on the Multiple Listing…

VANCOUVER – The British Columbia Real Estate Association is reporting that residential sales dollar volume on the Multiple Listing Service declined 54 per cent in B.C. to $1.69 billion in October, compared to October 2007.

Residential unit sales were down 51 per cent to 4,018 units during the same period. The average MLS residential price in the province was $420,259, down 6.5 per cent from October 2007.   

 “Housing demand was negatively affected by the global financial crisis and a sharp downturn in the equity markets,” said Cameron Muir, BCREA Chief Economist in a news release. “These events exacerbated an already low level of consumer confidence, keeping many potential homebuyers on the sidelines.”

Residential sales in October were the lowest since December 2000, on a seasonally adjusted basis. “Home sales are unlikely to fall much further,” added Muir. “While the provincial economy has weakened, the fundamentals support a higher level of home sales than experienced last month.”  

Year-to-date MLS residential sales dollar volume in the province declined 27 per cent to $29.2 billion compared to the same period last year. Provincial MLS sales declined 30 per cent to 63,760 units, while the average residential price increased 5 per cent to $458,078 over the same period.  

Meanwhile, the Canadian Real Estate Association reported Friday that the number of properties sold through MLS across Canada declined in October.

Seasonally adjusted residential MLS sales activity in all markets numbered 32,048 units in October 2008, the lowest level for monthly activity since July 2002, the association said in a news release.

“This is down 14 per cent from sales levels recorded in

September, and the largest month-over-month decline in seasonally adjusted sales activity since June 1994,” the association said.

“Many homebuyers across Canada battened down the hatches in October as they were concerned with dire  headlines about stock market volatility and a global economic downturn,” CREA chief economist Gregory

Klump said in a news release. “Elimination of mortgage default insurance availability for purchases with less than a five per cent down

payment and for amortizations beyond thirty-five years also likely played a lesser role in the decline in sales activity.”

Activity was down from levels recorded in September in more than three quarters of Canadian housing markets,

including the five most active major markets: Toronto, Montreal, Vancouver, Calgary, and Edmonton. Fewer

sales in Toronto accounted for nearly one third of the decline in national MLS sales activity.

“The breadth and depth of the drop in MLS activity suggests a major downshift in consumer psychology”

Klump said in the release. “And that has moved many homebuyers to the sidelines until economic news begins to improve.”

“The gap between national sales activity and the number of new listings is at its widest since 1990,” Klump added.

“This situation is unlikely to persist for long. New listings will decline, which will stabilize the market.”

Plan Now For Your Upcoming Closing

Other

The final step to complete your transaction is the closing process. There are still a few items which have to be completed and as we get closer to the end of the year, deadlines become critical. Once the investor has given a Final Approval, the closing documents are requested. At the same time, the Notario is completing the Fideicomiso and preparing for the closing.

Unlike in the U.S. and Canada, many of Mexico’s government offices shut down around the 2nd week of December and start up 1-2 weeks after the New Year which makes it imperative to have everything in line to meet that deadline.

Listed below are a few things borrowers can do to avoid delays and help expedite the process:

Updates
After the appraisal and Permits are complete, the investor may request updated income and asset documents for a final approval. These documents are good for 30-60 days, depending on the investor. There may also be additional items the investor may require so get these in as quickly as you can.

Scheduling a Closing Date
Once the closing documents have been reviewed and the Notario has completed the Fideicomiso, it’s time to schedule a trip to sit with the Notario and sign the Trust. One of the most common delays is the ability to schedule a trip right away. Usually there is a two week period before most people can accommodate their travel plans which, nearing the end of the year, can be a problem.

Using a Power of Attorney
The best solution for insuring a timely closing with the most amount of convenience is to use a Power of Attorney (POA). By assigning someone to sign on your behalf, you can be assured that the closing will not be dependent on whether or not you can schedule a trip before the end of the year deadline.

More importantly, the POA’s are valid for a period of time so if the deadline is not met, then it can be used as soon as the file is ready without inconveniencing you. It can take up to a week to have the POA properly validated and sent to the Notario so it is best to decide early if this is an option that you want to exercise.

Be Proactive
By anticipating deadlines and knowing what is required, you can insure that you are doing whatever you can to assist a timely closing and thus avoid missing the December 15th deadline.

Our Clients Say:

Birger Bacino
Purchased Los Cabos BCS. Mexico

Call Finance North America today to learn more on how to realize owning your Mexican Dream Home.

Finance North America – The industry leader, dedicated to providing our clients with exceptional service and peace of mind through a safe and secure transaction insuring clear title – free of liens, and risk aversion.

Finance North America

Mortgages For Mexico Real Estate
www.FinanceNorthAmerica.com

Toll Free from US/Canada: 866-Yes-4-Mex (866-937-4639)

From Mexico: 001-858-481-4871

USA Today

NEW YORK (Reuters) — Foreclosure activity in October rose 25% from a year earlier, although filings in California fell by double-digit percentage points for the second consecutive month due to a state law slowing the foreclosure process, according to a monthly report by RealtyTrac.

Foreclosure filings — default notices, auction sales notices and bank repossessions — rose by 5% from September to 279,561 in October, according to Irvine, California-based research firm RealtyTrac.

That means one in every 452 U.S. housing units received a foreclosure filing in October, the firm said in its report released Thursday.

The California law, which requires lenders to contact homeowners and explore options to avoid foreclosure before initiating the process, took effect in early September and drove the state’s foreclosure activity rates down, at a pace of 31.6% from August to September and 18% from September to October.

But in September, the California law helped drive the national foreclosure rate down, something that did not happen in October.

“Foreclosure activity in other places rose significantly enough to offset the drop in California,” said RealtyTrac Senior Vice President Rick Sharga.

Years of lending to risky, or “subprime” borrowers that fueled the housing boom has created an unprecedented number of foreclosures due to the inability of many of those borrowers to pay their mortgages, particularly as interest rates reset and as plunging home values nationwide increasingly render properties worth less than the mortgage.

The numbers might also be showing the effects of the economic downturn, Sharga said. If they do not yet, they will soon.

“An economic downturn is traditionally a precursor to foreclosures, even in a normal foreclosure cycle,” Sharga said. “This is not a normal foreclosure cycle by any means.”

Moreover, California‘s law will likely not prevent most of the state’s homes which are teetering on the brink of foreclosure from falling off the cliff, Sharga said.

Previous experience with similar laws in Maryland and Massachusetts attests to such laws’ inability to make a material difference.

“For most homeowners, these laws just delay the inevitable,” he said.

The markets that once lead the housing boom topped the foreclosure list in September.

Nevada posted the nation’s highest foreclosure rate for the 22nd consecutive month in October, with one in every 74 housing units, or 14,483, receiving a foreclosure filing during the month — more than six times the national average.

Arizona registered the second-highest state foreclosure rate. Filings were reported on 17,507 Arizona properties, an increase of 35% from the previous month and 176% from October 2007.

In Florida, one of every 157 units received a filing during October, the nation’s third-highest state rate. A total of 54,324 Florida properties received a foreclosure filing during the month, an increase of 13% from the previous month and nearly 80% from last year.

However, the government unveiled a plan Tuesday which, unlike California‘s law, could permanently reduce the number of foreclosures, Sharga said.

Homeowners facing foreclosure who are spending more than 38% of their income on mortgage payments could have monthly payments reduced by Fannie Mae and Freddie Mac, the two largest U.S. mortgage finance companies.

“The good news is that there are programs and facilities in place that could actually have a material effect of stemming the tide of foreclosures, but as always the devil is in the details,” Sharga said, adding that he does not expect to see that effect until late in the first quarter of 2009.

RealtyTrac counts foreclosures by compiling the total number of properties with at least one foreclosure filing reported during the month. If more than one foreclosure document is filed against a property, RealtyTrac counts only the most recent filing. (Reporting by Helen Chernikoff and Patrick Rucker, editing by Matthew Lewis)

Copyright 2008 Reuters Limited.

Eric Beauchesne
Sun

OTTAWA – The federal government and Bank of Canada have dramatically stepped up their efforts to manage the financial market crisis with promises of further multibillion-dollar injections of liquidity into domestic mortgage and credit markets.

But neither the measures here, nor the announcement of a shift in U.S. government efforts to ease the credit crisis there, reassured investors.

Bay Street’s benchmark S&P/TSX composite stock index plunged more than 500 points to under 9,000 points which also helped knock 2.77 cents off the dollar, leaving it at 80.81 cents US. That marks the longest losing streak for the currency in three weeks, as oil fell to the lowest in 22 months.

The Bank of Canada announced “measures to provide exceptional liquidity to the Canadian financial system” consisting of an additional $8 billion in short-term loans, and the Finance Department said it is prepared to purchase $50 billion more in mortgages from financial institutions.

Further, deputy bank governor Paul Jenkins, in a presentation to business leaders in Toronto, revealed the central bank will “likely be required” to cut interest rates further.

The additional measures by the Finance Department, meanwhile, triples, to $75 billion, the maximum value of mortgages that will be purchased by the government through Canada Mortgage and Housing Corp.

“At a time of considerable uncertainty in global financial markets, this action will provide Canada‘s financial institutions with significant and stable access to longer-term funding,” Finance Minister Jim Flaherty said.

“This extension of the program to purchase insured mortgages will further support the availability of credit, which will benefit Canadian households, businesses and the economy,” he said, adding it will also earn the government a modest rate of return with no additional risk.

The action was applauded by Dominion Bond Rating Service, Canada‘s major bond-rating agency.

“While the Canadian banking industry remains strong, today’s announcement further reinforces DBRS’s assessment that the largest six Canadian banks would be expected to receive external support, given their importance to the Canadian financial system, if these institutions were to become distressed.”

The action came as U.S. Treasury Secretary Henry Paulson said the U.S. government was changing tactics in dealing with the financial crisis and will divert half of the $700 billion US that was to go into buying up bad mortgages and to increasing credit market liquidity.

© The Vancouver Sun 2008