Lower Mainland farmers can sell property for $50,000 to $70,000 an acre

Derrick Penner
Sun

It is a comfort for B.C. farmers — although perhaps a cold one in today’s tough times — that they’re getting richer because the land they’re sitting on is worth a growing fortune.

In a familiar B.C. real estate story, provincial farmland values increased almost 55 per cent in the five years between mid-2002 and mid-2007, according to Farm Credit Canada‘s semi-annual appraisal of benchmark properties.

The steepest curve in that rise began in 2004, with the peak occurring in 2006, when values climbed 10 per cent in the first half of the year and another 10.3 per cent in the second half.

But the inflation of land values has eased somewhat, with the first half of 2007 showing only a 3.7-per-cent increase.

“Certainly the most expensive farmland in the country is here [in B.C.],” Bill Wiebe, a Farm Credit Canada senior appraiser, said in an interview.

B.C. farmland values have been driven up by the province’s booming blueberry sector, Wiebe said, as well as increased foreign investment and the strong performance of the provincial economy. More people have enough money to buy into farms and the rural lifestyle, even though most don’t intend to make a living from farming.

However, while growth of land values has given farmers a more valuable asset, the rise makes it difficult for new participants to buy into a greying industry. It also hinders farmers’ ability to pass their operations on to the next generation.

Wiebe hesitated to estimate average land values because they vary widely depending on location, size, and crops, but Gord Houweling, a realtor who specializes in agricultural land, cited some dramatic examples.

Houweling has seen prices for Matsqui-area farmland top out at $70,000 an acre, after selling for $25,000 to $30,000 just five or six years ago. Houweling has sold land for as much as $120,000 an acre, although that was a smaller blueberry field with a crop ready to be picked.

B.C.’s blueberry sector has been booming, increasing demand for land to grow the fruit now touted as a healthy super-food. And Wiebe noted that higher foreign investment in B.C. agriculture is also pushing values up, although farming as a business in general is going through some tough times.

Statistics Canada, in its latest report on farm balance sheets, said the total equity farmers have in their operations — the value of their land and equipment that is in excess of their debts — increased in 2006 largely because of rising land prices.

However, in another report, Statistics Canada found that in 2006, for the second year in a row, farmers’ cash income from crops and livestock declined.

But it is the seeming stability of that land investment, Wiebe added, that keeps people coming into agriculture.

“Even if some years are tough cashflow-wise, they still feel they have a solid investment in the base of that [farm] business,” Wiebe said.

Steve Thomson, executive director of the B.C. Agriculture council, said B.C.’s beef and pork producers in particular have experienced hard times with prices that have declined at the same time costs in fuel and animal feed have risen precipitously.

“If you’re really struggling in terms of providing a return to labour and a return to investment [rising land prices] puts pressure [on farmers] to sell,” Thomson said.

However, selling at high market prices reveals farming’s other great challenge: trying to attract new farmers.

“There are real challenges in being able to afford to come in,” Thomson said, adding that the people who can afford to buy the land aren’t necessarily the people who plan to work the land as intensively as the previous owners.

the increasing land values offer different choices. Houweling said in recent years he has worked with a handful of dairy farmers who have sold Fraser Valley operations for $50,000 to $70,000 an acre and relocated to other, less expensive locations.

Dairy farmer Ken DeRuiter is one example. In April of last year, he traded the family farm — a 60-acre dairy operation on Matsqui Prairie north of Abbotsford — for a 175-acre property just outside Armstrong in the north Okanagan.

DeRuiter said he sold the Abbotsford property and moved because his options for staying in the Fraser Valley were limited by the high cost of land surrounding his dairy.

He considered buying land to expand, but one 18-acre property for sale was $1.5 million. However, if he bought that bit of land, he wouldn’t have been able to upgrade his dairy’s aging equipment.

And though the Abbotsford property was the farm his Dutch-immigrant parents bought in 1975, it was an easy decision for DeRuiter’s family to sell at $65,000 — $70,000 an acre and buy a bigger property with newer equipment that can support more cows for about $15,000 an acre. He milks 110 cows on the Armstrong property, up from 85 when he was in Abbotsford.

“What we were looking for was land,” DeRuiter said. “But you tie up $1.5 million into a little piece of land that’s only 18 acres, you tie yourself up pretty tight.”

And his family was thinking about the future for his children.

“Are they going to be able to farm here [in Abbotsford]? Where’s the future going? Those are all the factors in the decision.”

Houweling said the Creston Valley in the province’s southeast, where land can be had for about $4,000 an acre, is another location Houweling said farmers talk about. And for an aging generation of farmers who are descendants of immigrants, Houweling added that selling the farm represents success in the long-term plan to make sure their children have a better life than they had.

“And you’re seeing in a lot of different sectors, the children are becoming dentists, doctors and lawyers and everything,” Houweling said. “A lot of guys are hitting that 50-year-old mark and have no one that wants to take over.”

He added that a new wave of immigrants, largely from India, and looking for opportunities in Canada, are the biggest group of new buyers.

© The Vancouver Sun 2008

 

Sue Kirchhoff
USA Today

WASHINGTON — Many families could see tax rebate checks of $1,200 or more by late spring or early summer. Businesses would get financial incentives for new investment. Strapped borrowers and lenders could find it easier to get mortgages or refinance.

The roughly $150 billion stimulus package announced by the White House and the bipartisan House leadership Thursday contains a tight list of targeted incentives that won’t go anywhere near solving underlying economic problems — notably a deepening housing recession — but could blunt the pain of a possible downturn.

While negotiators set aside partisan rancor to quickly work out a package, the proposal could be delayed or modified in the Senate. Still, the main provisions unveiled Thursday will likely form the basic framework of any final bill.

“You’ve got to be encouraged by the response of policymakers,” says Mark Zandi, chief economist of Moody’s Economy.com, while adding that Congress eventually must take stronger action on housing.

There are downsides. Some economists are skeptical stimulus bills work; others say business tax cuts haven’t been particularly effective in the past. Treasury Secretary Henry Paulson said he was “run down” by lawmakers who insisted that mortgage giants Fannie Mae and Freddie Mac be allowed to buy pricier home loans even though Congress hasn’t tightened regulation of the entities, as promised.

There’s also an outside chance the measure, equal to about 1% of annual economic output, could kick in when conditions are already mending.

“If it’s too large and it comes in too late, and you have all these (Federal Reserve interest rate reductions) in the pipeline and it can be counterproductive,” says Michael Wallace of Action Economics. “In the greater scheme of things, it reasonably addresses some specific issues.”

The plan’s highlights:

Rebates.

Consumers with 2007 earned income of at least $3,000 would get a rebate of $300 minimum, even if they have no income tax liability. Those with children would receive another $300 per child. In general, checks rise with tax liability up to $600 for individuals and $1,200 for couples, plus child rebates. The program starts phasing out for single filers with adjusted gross income of more than $75,000 and $150,000 for married couples filing jointly. About 117 million families will benefit.

Studies have shown that 2001 tax rebates turned out to be effective in stimulating consumer spending. It took about 10 weeks to get those checks in the mail. People may not see these proposed rebate checks until early summer, because the IRS must first process 2007 tax returns. Paulson said he was hopeful that Treasury could start to get checks out as soon as May.

Even with the delay, tax rebates “have a psychological impact,” says Tom Ochsenschlager, vice president-taxation for the American Institute of Certified Public Accountants. “Even if people aren’t going to get it (rebate check) until June or July, they think the government is going to do something, which is reflected in the stock market.”

Business.

The package includes more than $40 billion in business tax breaks, including allowing businesses to more quickly deduct the cost of new equipment. The package provides a 50% bonus deduction on new equipment during the year it is put into service, with some exceptions. It also allows faster expensing of property in some cases.

Republicans say previous similar measures brought about a 4% increase in business spending in the first six months they were in effect. The non-partisan Congressional Budget Office in a recent analysis said the impact of such tax breaks was “relatively modest.”

Kent Bentsen, president of the Equipment Leasing and Finance Association, which not surprisingly liked the plan, noted that investment in plant, equipment and software made up 15% to 17% of economic output.

Housing.

The plan tries to make it easier to secure or refinance mortgages for more expensive homes. First it would allow Fannie Mae and Freddie Mac, for a year, to buy loans of up to $729,750. The current limit is $417,000. The package would similarly increase the $362,790 limit on loans insured by the Federal Housing Administration, while making it easier for borrowers to qualify.

The market for bonds containing so-called jumbo loans, those above Fannie and Freddie’s current $417,000 limit, has essentially dried up in recent months due to turbulence in the mortgage market. Lenders making such loans are requiring even borrowers with good credit to come up with larger down payments and are charging higher interest rates. That’s a particular problem in states like California where the median existing home price is about $490,000.

Richard Moody, chief economist at Mission Residential, says he’s skeptical as to how much good raising the Fannie and Freddie limits will do, given lenders’ recent, tougher standards.

“When you’re talking about a $700,000 house, a 20% down payment is still a good chunk of change,” Moody says.

Further, the plan shifts more risk to taxpayers, because FHA loans are insured by the federal government.

How proposed rebates could affect certain taxpayers, according to a statement from House Republican leader John Boehner:

A parent with two children: A man worked part of the year, earning $9,000. He has custody of two children. He owed no federal income taxes for 2007. He would be eligible for a base rebate of $300 for himself because his earned income was at least $3,000. He would also qualify for a $300 children’s bonus for each of his two kids.
Rebate: $900

A couple with two children: Both worked part-time in 2007 and have two children. After taking available deductions and credits, their federal income tax liability was $500 for 2007. Because their earned income was more than $3,000, they would qualify for the $600 base rebate for a couple. They would also have enough earned income to qualify for a children’s bonus of $300 for each of the two children.
Rebate: $1,200

A couple with five children: After taking available credits and deductions, their 2007 taxable income was $95,000, leaving them with a federal income tax liability of just over $16,600. Under the proposal, they would get the full base amount of $1,200. They would also qualify for a children’s bonus of $1,500.
Rebate: $2,700

Retired couple: As a result of their investment income, a retired couple paid $4,000 in federal income taxes in 2007. They had no dependent children, so there is no children’s bonus.
Rebate: $1,200

A couple with one child: They were able to retire young but still collect dividends and capital gains from a business they sold a few years ago. The couple paid $19,000 in federal income taxes on that income in 2007. They would qualify for the base amount of $1,200. They would also qualify for a children’s bonus of $300, because they paid at least $1 of federal income tax in 2007 even though they had no earned income.
Rebate: $1,500

High-income couple with children: Both spouses are lawyers with a combined income in 2007 of $300,000. They have four children. Because their AGI is over $150,000, they are disqualified from receiving either the base amount or the children’s bonus.
Rebate: $0

 

2007 ends with first annual decline in house prices since the Depression

Joanne Morrison
Sun

WASHINGTON — Sales of previously owned U.S. homes fell more than expected in December, ending a year that brought the sharpest housing slowdown since 1982 and the first annual drop in prices since the Great Depression.

But as the economy has taken a hit from the housing slump and credit crisis, the labour market over the past few weeks has been holding steady, leaving economists in a quandary over how far the world’s richest economy will sink.

“I think the economy is pretty darn weak, but you can’t declare that we are in a recession yet,” said Robert MacIntosh, chief economist at Eaton Vance Corp in Boston.

fell on the stronger-than-expected job data, while U.S. stocks jumped in late afternoon trading.

But investors were focusing on the details of a stimulus package designed to stave off a recession. The plan, worked out between the Bush administration and lawmakers, would include up to $1,200 in tax rebates for married couples and tax incentives for businesses.

Meanwhile, Labor Department data on Thursday showed that the number of U.S. workers applying for jobless benefits fell unexpectedly last week to the lowest level in four months. That led economists to believe the unemployment picture at the start of this year will be better than it seemed a month ago.

“The data seems to be suggesting a stronger payroll in January after the weak December,” said David Sloan, senior economist at 4Cast Ltd in New York.

A mere 18,000 new jobs were created in December, intensifying speculation that U.S. growth would slacken and turn negative. But even with a fairly steady labour picture, an end to the housing crisis is still not in sight.

Data out from the National Association of Realtors on Thursday showed a 2.2-per-cent drop in sales of previously owned homes during December to the slowest pace in nearly a decade. For the year, sales of single-family homes — the bulk of the homes covered in this data — were down 13 per cent, the biggest downward spiral since 1982.

The national median price of a single-family home fell 1.8 per cent in 2007. It was the first recorded annual price decline since the Realtor group began tracking home sales data in 1968, but officials there say it is also the first annual decline since the 1930s when the economy was in the throes of the Great Depression, its biggest economic downturn in history.

While a drop in home prices is likely to shave some excess from the bloated inventories of unsold homes and eventually bring the housing slump to an end, economists warn falling home prices could cut into consumer spending.

“The decline in home prices is clearly negative for household net worth and consumer spending. If it’s matched with a similar drop in the equity market, it will begin to take a toll,” said Richard DeKaser, chief economist at National City Corp in Cleveland.

Still, he called December’s 7.4-per-cent decrease in inventories to 3.91 million units at month’s end a good sign. That represents a 9.6-month supply of existing homes at the current sales pace, down from the 10.1-month supply in November. “It’s encouraging to see the pare-down in excess,” DeKaser said.

The climate for buying homes has improved with lower prices and historically low rates on 30-year fixed rate mortgages, according to Lawrence Yun, the Realtor group’s chief economist.

“Wall Street made a big gamble,” Yun said of the subprime mortgage market debacle, adding that for home buyers, conditions are good.

Interest rates on 30-year mortgages have fallen to an average of 5.48 per cent, the lowest since 2004, according to the latest survey from Freddie Mac. A year ago, they averaged 6.25 per cent.

© The Vancouver Sun 2008

 

It now takes 75 per cent of median income to buy a two-storey home

Derrick Penner
Sun

After years of real-estate price increases rising faster than incomes in Metro Vancouver, housing in the third quarter of 2007 became the most unaffordable on RBC Financial’s measure of affordability since 1985, when the bank first started keeping track.

Housing costs “hit all-time highs in the Vancouver market and the broader British Columbia market,” RBC Financial economist Amy Goldbloom said in an interview.

Detached houses were the least affordable option on the RBC index. The average two-storey house in Metro Vancouver carried a $619,892 price tag, requiring 75 per cent of the region’s median pre-tax household income of $60,000 to make the mortgage payments and pay taxes and other ownership costs.

In the second quarter of 2007, it took 73 per cent of the median income to cover those costs.

Provincially, the average two-storey house, priced at $542,012, required almost 71 per cent of the median pre-tax income to pay all its costs, up from 68 per cent in the second quarter. The RBC index assumes a 25-per-cent downpayment and 25-year amortization.

“We do think [unaffordability] last year reached a peak,” Goldbloom added. “People are just getting priced out of the market,” and that factor will cause the demand for housing to wane a bit.

And the RBC report reinforces the shift Metro Vancouver has seen with more people forced to consider multi-family housing over single-family homes because of price. In 2007, condominiums and townhouses accounted for 80 per cent of all new housing starts.

Because houses are not affordable, “people are just buying condominiums instead of houses,” Tsur Somerville, director of the centre for urban economics and real estate at the University of B.C.’s Sauder School of Business, said in an interview.

The RBC affordability index for the third quarter showed that an average Metro Vancouver condominium, priced at $298,787 would eat up almost 36 per cent of that median household income.

B.C.-wide, an average condominium, priced at $271,468, would use about 34 per cent of the medium income to maintain payments, taxes and other fees.

“The [RBC] index tells us levels of affordability are way out from what we normally expect them to be,” Somerville added.

However, while RBC is forecasting the unaffordability of Metro Vancouver and B.C. housing to ease in 2008, in part because high prices will reduce demand, Somerville doubts that Metro Vancouver’s affordability measure will ever see the median income catch up with house prices.

He said the combination of population growth and limited land supply will still keep houses out of reach of median-income buyers.

“There’s no reason to expect [Metro Vancouver] to have anything other than the highest unaffordability in the country,” Somerville said.

The high cost of housing nationwide is a big concern of municipal governments. The Federation of Canadian Municipalities, in a report released Wednesday, warned that a lack of affordable housing is becoming an economic threat to cities.

Vancouver Mayor Sam Sullivan said too many families here are having to choose between buying food or making the mortgage.

Sullivan, during a media scrum following his annual state-of-the-city address to a Vancouver business group, said that on one hand, the city’s high prices are an indication of the investment people are pouring into Vancouver which points to its success.

“On the other hand, it does require us to work harder to provide more affordable housing,” he added.

Sullivan said the city’s so called EcoDensity proposal aims at finding ways to increase the housing supply.

“If we were to develop lane housing or suites that are smaller in neighbourhoods that are perhaps near transit corridors we’d have more options for people who want to buy housing in this city,” Sullivan added.

Atlantic Canada and Manitoba had the most affordable housing on the RBC index. Examples of the relative affordability of a detached two-storey house and proportion of the median pre-tax income required to maintain are:

– Atlantic Canada: $207,222, 34 per cent.

– Manitoba: $220,549, 35 per cent.

– Toronto: $481,315, 52 per cent.

– Calgary: $476,711, 45.7 per cent.

© The Vancouver Sun 2008

 

Vancouver least hospitable to prospective buyer

John Morrissy
Province

OTTAWA — Years of price gains in Canada‘s booming housing market have made owning a home the least affordable it’s been in 17 years, according to a study released yesterday by RBC Economics.

The study, which examines how much of their income Canadians must put into owning property, says at no point since the fourth quarter of 1990 has average housing affordability dipped so low.

“Housing affordability worsened for the third-consecutive quarter in the third quarter of 2007, and our newly developed econometric models are estimating another deterioration in the fourth quarter before an improving trend unfolds this year,” says the report.

The most recent quarter’s decline was across almost every housing class in every province and every major city.

The results are strongly influenced by western Canadian housing costs.

The share of income going toward home ownership continues to hit record highs across most housing classes in Alberta, B.C. and Saskatchewan.

In B.C., a staggering 70.8 per cent of income is required to own a standard two-storey home, compared with the national average of 47.4 per cent.

Vancouver is particularly expensive, with a standard two-storey home requiring 75.2 per cent on one’s income.

Everything east of Saskatchewan “remains well below the previous record highs for affordability that were set in the late 1980s and early 1990s,” the report said.

But for buyers hoping to enter the market, the year ahead should bring some relief, says RBC economist Amy Goldbloom. “We see a significant moderation in house-price gains,” Goldbloom said.

“We expect the national average to fall from the 10-per-cent range to the five- to-six-per-cent range.

“We expect that trend to be pretty consistent right across the country.”

It should be aided by declines in lending rates, said Goldbloom, who added: “We’re looking for five-year fixed mortgages to drift about 50 to 75 basis points lower through 2008.”

The current posted five-year rate now stands at an average 7.4 per cent.

“This [slowing of price growth] will tilt the balance in the housing market more towards buyers and away from sellers. Some markets like Calgary and Edmonton are already near that point,” the report said.

For the Alberta market, “underlying fundamentals are signalling that housing markets are ripe for a significant slowdown this year.”

For the red-hot Saskatchewan market, the report said, “we expect softer but still-elevated conditions. Price gains should moderate from the 30-per-cent range somewhere down in the 15-per-cent range.”

Ontario‘s price gains have not been on nearly so torrid a pace as the West, but affordability has nevertheless declined as a result of higher mortgage costs and costlier conditions.

Conditions should improve in 2008, the report said.

Quebec‘s housing affordability was also on the decline in the third quarter of 2007, although at a slower pace than the national rate with softening demand expected as a result of slower economic growth forecast for central Canada.

As housing construction activity gears down in the Atlantic region, housing-price gains are expected to ease.

© The Vancouver Province 2008

 

Sun

From Washington State to Florida, Canadian investors are taking advantage of rock bottom prices combined with a strong Canadian dollar. Here are some of the highlights:

In the Northwest prices may soon be on the rise.

“I believe the bottom has arrived in the Puget Sound market place and from here on prices will stay level or advance slightly in 2008,” said NWMLS director Dick Beeson, broker/owner of Windermere/Commencement Associates in Tacoma, adding, “My agents tell me their recent conversations with buyers indicate pent-up demand that should start showing up in the marketplace this month and next.”

“Given the positive job growth, strong regional economic outlook and the fact that buildable land is still scarce, the return of a reasonably hot market is likely, making this an optimum time to buy,” said Ron Sparks, a vice-president at Coldwell Banker Bain in Bellevue.

In Las Vegas thousands of bank- foreclosed properties are currently on the market at bargain prices. Home owners faced with foreclosure are just walking away, placing more distressed homes up for sale, which makes for an extreme buyer’s market. The Las Vegas economy right now is experiencing extraordinary growth due to the major construction projects that are generating many job opportunities.

It is estimated there is well over $69.4 billion dollars worth of projects on the table. The U.S. Census recently reported Nevada as the number one fastest growing state. It is reported that once the major construction projects are completed in late 2009 and 2010 Las Vegas will experience a workforce housing shortage.

If you’re looking for a piece of Florida at the lowest price you’ll see in years, then 2008 may be that year to buy into the Sunshine State. Condominium inventory has soared over the last 20 months and about 35,000 units were recently completed or about to be completed this year, according to Florida Trend Magazine.

The median price of a condo in Florida stands at about $187,000 according the Florida Association of Realtors, down nine per cent from last year at the same reporting period. Meanwhile, the number of units sold compared to the same time last year is down 29 percent.

Nevertheless, investors are moving in to grab good deals while they can in this buyers market. The demand for condos should continue upward as the state brings in more than 300,000 new residents per year, second only to the state of Texas.

© The Vancouver Sun 2008