Andrew Kyle's Blog – Calgary Real Estate Rob Reynar. Royal Lepage FoothillsIt’s true an Australian computer scientist is about to unveil his new shoe phone. It apparently will have some features that I am sure Max would have found useful. Extended battery life, and most importantly the shoe phone will detect if you fall and call for help.
I need to get one for when I am out with my friends if I fall down it will call my wife to get my butt home…LOL
Many of us probably did not even know that the federal government is not playing fair in the mortgage insurance industry. Keep in mind CMHC which is a federal crown corporation is clearly the market leader. Also remember that competition in tis industry has made the business stronger and brought much innovation and best of all lower prices for mortgage insurance.
The federal government however only fully insures Genworth or AIG to 90% while they back CMHC to 100%. this has been the way it is forever, but in these crazy times the banks have almost exclusively switched their allegience to CMHC.
You might say “who cares”. Well read the above paragraph again. If Genworth and/or AIG leave Canada this will no doubt hurt our industry. Not to mention the fact that right now CMHC is causing all kinds of problems because they are more often not accepting values of real estate.
Let’s hope Stephen corrects this problem tomorrow in the historic budget
This time you don’t need to hear it from me. Here are two different national Real Estate companies coming up with the same opinion for Calgary Real Estate.
Readers know i already think this as I have mentioned it already. But look around. There is still deals being made, sellers who price right will sell their home. Buyers who break the herd will get a great deal…but the herd will be back…soon.
A little good news, modertaing supply in the market, and the forecasted turnaround in the recession by mid-year will bring a stronger second half to this year which will offset the declines in activity and price that we are seein now and for the rest of the first half.
Not that you really needed to spend too much time with an update to builders as many of them already knew in November when CMHC released their annual forecast that their numbers were to aggressive.
In November they told us that the starts for 2009 would be 4500, last week they said it will now be 3800. Even at this number most builders think they are still off. Reviewing a recent survey of builders opinion from the Calgary Region Home Builders Association called for starts at 3300.
Either way it will continue to be a tough year for builders, which means it will continue to be a great year for people wanting to buy a new home. Margins will be tight.
Some people ask me how is this slowdown in the construction industry really hurting the builders? Consider this. Let’s say the average sale of a New home is $550,000. In the height of the boom builders were making around a 25-35% profit margin. Let’s say 30% which means they would have made say $165,000. In “normal times the margin should be around 18% or $99,000. Today most builders are lucky if they are making 13% but it is more like 8-12%. At 10% they make $55,000. That is almost a 200% drop since the boom, and an 80% drop in profits per house built compared to “normal” times.
Do we really need to say anymore…now is a great time to buy a new home.
The Vancouver Sun recently ran an article about whether first time home buyers should take fixed or variable. The answer from their experts in the article was for certain fixed rate?
I wonder if the first time home buyers who took variable rate mortgages in the last few years would agree with these experts?
For the record I think it is first of all very difficult to make such generalizations that all first time home buyers are strapped and need security.
But even those that are could set their payments as if they did take a five year or longer rate, to ensure payment stability as recommended in the article, and work with a mortgage broker who will watch things for you and advise you when you should lock in.
With variable rates for certain being low and lower for the balance of this year, and quite possibly for some time after this year, coupled with high fixed rate spreads which should shrink once lenders have more confidence in the money system variable is likely the best option.
Report on Business reported earlier this week that the Canadian Real Estate Association has asked the Federal government to increase the maximum amount that homeowners can withdraw among other changes requested.
For the record it really seems like a no-brainer anyway andit probably should even be higher. For certain they shpuld open up to all homeowners as well.
As a side note I think that would be real nice as well would be to mimick a program the 80’s conservatives in Sakatchewan under Grant Devine did. The program gave people a tax deduction if they upgraded their home. Increased renovations would be a great boost to the economy in keeping trades working and building materials flowing.
Probably would never be announced…too bad
On the day we have some renewed hope and vigilance and sense of pride in our neighbours we also had a relatively significant reversal in our own backyard.
As many expected the bank of Canada dropped the trend setting bank rate but what was more surprising was how quickly the banks got on side by matching. In fact BMO released a press statement only two minutes after the Bank of Canada announcement.
What to make of this? Not sure but I would suggest that BMO is setting a bar for the rest of the industry lets see what they do. What do you think?
The Bank of Canada released the results of their annual survey of business executives and SURPRISE the results are the worst in the past 10 years!!! What did they expect? Since Canada has not been in a major recession since 1992 and the past 8 years has seen massive growth in business earning, and a steady rise in real estate values, as well the past 4 years have seen continued and dramatic increases in the stock market.
Ok a few other highlights in this article:
It has been a while since I blogged about the London Inter Bank Overnight Rate (LIBOR). As a review this rate along with the TED spread (the difference between what the US gov’t and businesses pay to borrow money) are really the magical indicators that tell us when markets are normal again.
This article is a bit long but it is worth reading the whole thing, there are some real good nuggets to explain where we are in the cycle and to see such a dramatic overnight change, coupled with this is the best we have been since the September Lehman Bros. failure.
Granted, it does show that we are still 90 some basis points away from “normal” remember when we were 364 basis points away? The article also suggests that forward markets think that the LIBOR will be “normal” by September 2010.
I know that sounds bad, but again, remember we survived with the TED spread at 4 times what it should have been, so from here to Sept. 2010 the spread will continue to improve and bring more liquidity into the system, as long as Banks keep that money moving through loans etc. then we will see continued improvement and health to the economy.
Many people are certainly upset and maybe rightly so that many of the people who were charged with the responsibility to predict things and consequently help to protect us did a poor job in 2008. Of course I am speaking of the economists or (econo – I – missed – it).
Good article today about this and although they did bring out some predictions from a handful of the real ‘Rockstar’ economists in this country there are some interesting highlights.
“Right now we don’t have buys on any sectors,” she said in January 2008. “You can’t seek refuge in any sector. It’s all going down.” – Danielle Park.
I agree wholeheartedly. People ask me a lot sould I get back in? I repeat the same thing, dont fight negative momentum. It is not “wait for the bottom” as I believe no one knows when the bottom actually is, but you will get a feeling when we are out of negative momentum.
Jeff Rubin is optimistic about the stock market this year, predicting the TSX will end 2009 at 11,000. It closed on Monday, Jan. 12, at 8793.
“The bad news is that we are in a recession, and a fairly deep one at that. The good news is that the stock market has already discounted a depression,” said Rubin.
Again I agree. To be fair Rubin has had a good track record in predicting the upside but sadly he like all his colleagues missed warning us about the impending downside. However I believe the stock market is a leading indicator so the lower it goes or the more bad news there is the better. That leads us closer to the bounce back.
“Rubin’s sidekick at the CIBC, senior economist Avery Shenfeld, is cautious. He said it could take up to three years for the TSX to reach the high it set last year.”
No problem, that’s OK. If we lost four years of value in this collapse and it takes three years to come back then that’s OK. We certainly would not want to see the four years of value come back as fast as it went down (six to 12 months) would we? That would bring some serious problems.
“Even in a mild recession the unemployment rate usually rises about two per cent,” Shenfeld said. “We’re looking at an eight per cent unemployment rate [in 2009] and it could get there in a hurry.” (He said that about 36 hours before Canada’s latest unemployment numbers spiked to 6.6 per cent.)
Expect more bad news about job numbers, and that is to be expected. Remember in the depression unemployment went to 25%, if it is 8% then we can survive.
“This year, the smart money seems to be on the Canadian dollar heading back to par with the U.S. dollar. But then the smart money was almost always wrong last year.”
Yup, and this will delay the recovery in Canada.
“2009 is the one year where it’s almost impossible to find consensus,” Richards said. “There are those who say we’ll bottom in the second quarter [and] those who say it will take until the end of 2010 to work through the economic woes.”
Enough said…no one really knows, but I do know this…this to shall pass…everyone take a deep breath and act rationally.
