I’m often asked how closely the U.S. housing market mirrors our situation here in Canada. From fluctuating home prices to the effect of federal interest rates on both fixed-rate and variable mortgage products, there are some comparisons to be drawn between both countries.

The holiday season is upon us, and with it many Canadians might be hoping they awaken to a magical, crystal-ball in their stockings this month.  Since that’s wishful thinking, the real estate analysts at RISMedia think a recent Chicago Tribune article might be the next-best thing.

The article first draws attention to the results of nearly a year’s worth of mortgage-backed securities (mbs) purchases by the U.S. Federal Reserve (a staggering number worth over $1.25 trillion and counting).  And that outcome has resulted in the U.S.’s 30-year fixed-rate mortgage hitting a nearly 40-year low. Not surprisingly, that’s gotten a lot of Americans thinking about whether or not to purchase or refinance, when it comes to their most valuable assets – their homes.

With mortgage rates in the States also at historic lows (like in Canada) combined with deflated home prices and an “expanded federal tax-credit that will expire in spring,” some residents there are wondering whether they should take advantage of these factors now – before it’s too late.

The article goes onto explain how each case and each homeowner’s situation is unique and should be essentially approached on a case-by-case basis, so proper, due-diligence needs to be exercised in every case. But if we are to continue learning from our U.S. counterparts, it may cost you more to wait.

On both sides of the border, the general feeling is that interest rates won’t stay this low much past spring of 2010. If that’s the case, we may very well be at that supposed ‘bottom’ that most of the ‘herd’ was and is still waiting to act upon – at least when it comes to interest rates.

Now, granted, U.S. home prices may still have further to fall, over the next several months, in which case the article suggests those Americans who bank on making a move in Q1 or Q2 of 2010 may see “the value of their investment initially depreciate.”

Here in Canada, home prices are expected to remain much more balanced in most provincial markets – and in some markets they may actually see moderate increases – meaning borrowing for something new or refinancing for what you already have will cost you more, whether it’s due to rising interest rates, rising prices for real estate, or perhaps both (beware the double-whammy). In the end, it’s up to you to decide whether it pays to wait or make a move.

What do you think? Send me your two-cents.

Ever heard of an ‘orphaned’ mortgage? If you haven’t, you’re not alone. But estimates from at least one predominant lobby group suggest there could be more than 30,000 Canadians facing foreclosure, from orphaned mortgages.

A recent article in The Globe and Mail breaks this issue down in much more detail, but long story, short: the article hints there’s a significantly large number of Canadians who suddenly face being ‘abandoned’ by their respective alternative lenders. And that’s because these alternative lenders can no longer lend to those customers, based on more challenging critera like poor credit scores, lower-paying jobs, or minimal home equity (criteria upon which a traditional lender,  such as a bank, wouldn’t normally approve).

The article goes on to explain that, upon renewal, these customers who’ve borrowed from non-traditional lenders and whom appear to have diligently paid their mortgage payments on time, every time,  will be ‘orphaned,’ and expected to either pay the balance of their mortgage – or face foreclosure.

Top-level execs with these alternative mortgage companies, like XCeed and Ontario-based N-Brook Mortgage Group Inc., say they cannot renew the stranded mortgages because, quote, “the once-thriving securitization market that attracted investors to these risky – and lucrative – mortgages collapsed in the wake of the U.S. subprime mortgage crisis. To replace the lost pool of capital, lenders are asking the federal government to back a special billion-dollar fund that would renew the healthy mortgages of borrowers who do not qualify for loans from traditional lenders.”

And these execs, along with lobbyists, are asking the feds for a $1-billion dollar bailout program, as a solution to offset the potentially sky-rocketing costs associated with these possible foreclosures.

At the risk of seeming insensitive to these peoples’ plight, I think this is not our government’s responsibility. Ultimately and sadly, these people have to take responsibility for their decisions. Albeit, while these decisions they’ve made may have been a result of misguided advice from some of my colleagues in the Mortgage Brokerage business, they still have to face their brutal realities.

Most of these people will be able to re-qualify, and for those who can’t, they will have to move into a rental and yes they will likely face foreclosure as they will not be able to just sell their house. Also, I fear their closing costs (mortgage balance, payout penalties, and commissions) will exceed their sale price and they likely will not have the money to absorb these losses.

Which brings me back to the very lenders who loaned these people these mortgages and are now trying to look like “Robin-Hoods” and lobby the government to help these poor people.  Make no mistake here – these lenders are not asking for the handout, out of concern for their borrowers. Rather, it is strictly out of concern for themselves.  Who will be left holding the bag when these uninsured mortgages go into default and foreclosure?  Yup, the lender.  Shame on you guys. Nice try using the media and “wolf in sheep’s clothing” tactics.  Fact is, you were paid a healthy risk premium to take on this risk, so put some ketchup on it and eat it. Don’t ask us (taxpayers) to bail you out of the mess you created.

What do you think? Send me your comments.

A lot of the water-cooler talk, media-buzz, and overall conversation starters lately seem to be centered around the real estate market. In Calgary, much is being made of the latest Re/Max Housing Outlook for 2010, and a Calgary Herald article highlights that outlook.

According to the Re/Max forecast , local inventory will edge up slightly but high demand areas will see limited listings. In addition, the average MLS residential sale price of a Calgary existing home is expected to rise to $403,000 in 2010 – a rise of about 5%.  The same average price fell an estimated 5%, in 2009, to $385,000 from the previous year. Now, keep in mind that average price is for all residential properties including single-family homes and condominiums, in all of the Calgary MLS.

So where does that leave us? Well it continues to fit within the guidelines of a more balanced market – which Calgary has been in since at least the summer. The volume of listings is significantly lower than it was in fall of 2008 and the winter and early spring of 2009.

Interestingly, the Canada Mortgage & Housing Corporation (CMHC) is also forecasting growth of 4.8% for Calgary’s average MLS sale price, in 2010 – after falling 5.1% in 2009. The CMHC also says sales are predicted to rise more than 10% in Calgary and surrounding area in the new year.

If those numbers seem a bit optimistic to you – you’re not alone. There are some finance experts, mortgage experts, economists and real estate pros who argue that the threat of rising interest rates, the continued slow recovery rate regarding Alberta’s economy, or even the possibility of a greater than expected number of listings flooding the market will serve to soften those numbers instead of pacifying those predictions.

Also, keeping an eye on interest rates, with both fixed and variable products, may factor into the mix as usual when it comes to consumer confidence and following the herd. As long as first-time and move-up buyers continue to keep buying, we may very well see this upward trend come to pass.

And whether this prediction comes true or not, when you compare the numbers with recent years past (as the Herald does, with a neat stat at the end of the article: “in 2007, Calgary had 32,176 MLS sales for an average price of $414,066. In 2008, there were 23,136 sales for an average of $405,267“) we’re still below previous Calgary real estate market highs.

Thoughts? Send me your comments.

Finally some positive, albeit perhaps only slightly, news on the job front in Canada. The Globe & Mail recently reported Canada’s economy created nearly 80,000 jobs – the majority in the services sector.

The latest StatsCan numbers, for November of this year, indicate the private sector added 57,000 jobs, while the public sector added 54,000. Meantime, the number of self-employed jobs actually dropped 32,000.

So overall, there’s some improvement and some reason for optimism (at least when you consider where we were nearly a year ago). But the picture certainly isn’t ‘rosie’ yet. According to these latest stats, national employment is still down almost 2% from last year’s peak. That’s approximately 321,000 jobs. And economists are quick to point out that, “monthly numbers can swing wildly, particularly in education, where many of the gains were made.”

The biggest gains showed up in our more densely concentrated provincial populace, with Ontario and British Columbia leading the way and Quebec and Alberta following somewhat closely behind.

Also of note, it appears our U.S. counterparts have temporarily found a way to stop some of the bleeding, south of the border, as well. The article offers up numbers of a 10% drop in the unemployment rate for November, or 10,000 jobs lost. A far cry from the 125,000 jobs the U.S. feds had anticipated losing in November, and a sharp contrast to the nearly 600,000 jobs they were losing monthly earlier this year.

So we’re seeing signs that we may, and I use that word cautiously here, may be on our way out of the woods. But on both sides of the coin, I tend to agree with Mr. Lascelles’ statement which affirms the Bank of Canada, here, and the U.S. Federal Reserve likely won’t deviate from record-low borrowing costs – especially in the short-term. This type of stimulus is seen as far too valuable by each respective country’s central banks.

What do you think? Send me your comments.

For those of you who continue to keep a keen interest in Canada’s real estate market, you’ll want to keep an eye out for the Canadian Real Estate Association’s latest stats for the month of November – due out shortly.

That’s because two of the country’s largest markets appear to have had recent record increases. And that seems to be affecting the collective bottom-line when it comes to Canadian real estate prices.

According to a recent article in the Financial Post, the Greater Vancouver Real Estate Board (GVREB) is reporting a surge in sales activity of more than 252% (yes you read that right), over November of 2008 . Meanwhile, the Toronto Real Estate Board (TREB) is also boasting its “best November on record.”

I like this article because while it points out these eyebrow raising stats, it also brings us back down to earth. Why you ask? Because it mentions that although the average sale price in Canada, on the whole, is up 20% from October of a year ago – that number tends to be skewed by two usual suspects: the Greater Vancouver and Greater Toronto markets.

And Benjamin Tal, senior economist for CIBC World Markets is quick to point out that yes, this is a tremendous increase (especially given what we’ve gone through, nationally, over the last 13+ months) BUT it is also a result of a comparison with a, quote, “dead market” last year.

Also, the tail-end of the article includes some input from the Canadian Association of Accredited Mortgage Professionals (CAAMP), suggesting despite the lingering low-rates and overall real estate rebound, “in the past 12 months, only 20% of consumers opted for a variable-rate product but the overall numbers show 27% of Canadians still have mortgage tied to prime. “

As usual, time will tell. What do you think? Send me your comments

In case you missed the Calgary Herald’s recent article, which sheds light on the state of our city’s real estate market, let me give you a quick rundown on where we’re at:

Take a peek at the latest stats for November ‘09, from the Calgary Real Estate Board (CREB), and you’ll see the average, single-family, home price is up again. Sitting at just over $464,000, that average price is up 7% over this time last year. Now that’s pretty remarkable when you consider some economists, and even the CMHC, originally predicted we likely wouldn’t see this type of growth or recovery until mid 2010 at the earliest.

The stats also show single-family sales, in the metro Calgary area, are up approximately 63% over a year ago – with nearly 1100 units changing-hands last month. And condo sales rose nearly 80%, over last year, with just over 500 units sold, and an average price of more than $294,000.

Once again I’m not surprised, considering the cost of borrowing continues to remain at record-low levels and the feds seem to have reiterated their intentions to remain status-quo on the current Bank of Canada rate. And, as mentioned in several of my previous blog entries, steadily decreasing inventory (especially over the past few months) has fuelled a rise in the MLS single-family average sale price for the 4th consecutive month in Calgary. And the condo market is similar – riding an average MLS sale price increase for the 3rd month in a row.

The article also mentions Canada’s average existing home price could rise nearly 9% – 10%, next year, with actual sales volume also climbing nearly 3% as forecast in a recent report by TD Financial Group Economist Pascal Gauthier. But Gauthier also warns this trend likely won’t last beyond Q3 of 2010.

Interestingly enough, these numbers come on the heels of the latest federal report indicating Canada’s economic sector actually grew by nearly 0.5% in the last quarter of 2009, despite firm assertions our economy still has quite a ways to go, when it comes to what experts consider a ‘full-blown’ recovery.

So the real estate market, especially in Calgary, seems to be recovering quite quickly. Should we be surprised? Well yes and no. I say yes because at this time last year, there were a lot of anxious and apprehensive buyers, sellers, realtors and brokers. And even the optimistic ones weren’t sure we’d recover this soon. And on the ‘no’ side, I go back to the simple facts that we have significantly reduced inventory levels (compared with last year) and continued low interest rates, which is what ultimately got so many buyers to finally ‘get off the fence’ and make their move.

Of course this still hasn’t quieted the normal doomsayers like Garth Turner, and his blog dogs, who still think we are headed for a catastrophic real estate crash.  Even in markets like Vancouver and Toronto, where admittedly there is more surprise in how their markets are performing than people thinking they saw this coming, the simple fact remains that the run-up in prices this year brings us largely back to levels we saw pre-2008 crash.

This is explainable. We saw increased demand from low interest rates, and pent-up demand, coupled with low supply from sellers who were scared of their own shadow during the recession and the naturally occurring “herd effect”.   The herd effect is also going to temper the market as sellers will feel in 2010 they can ‘come back to the party’ just as interest rates climb moderately which, coupled with satisfied pent-up demand, will ultimately cool demand.  This moderate increase in supply at the same time as moderate decrease in demand will allow the market to be healthy and see a moderate increase in average price NOT a crash in ANY way shape or form. Enough said.

Are you surprised by the latest stats? If so, drop me a line.