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.

There’s a comedic line that goes, “it’s like deja-vu, all over again.” And maybe that’s appropriate as we continue to watch, not only Calgary’s housing market, but also the national real estate market as a whole.

Here we are a little more than a year after local and national markets each took their respective nosedives, and in most of these same markets, we’ve seen a return to pre-October 2008 values, if not growth (in some cases record growth) above and beyond previous levels.

In fact, a recent Scotiabank report is suggesting Canada may once again be on the verge of another housing bubble. Now, at the time I composed this article, I went online to Scotiabank.ca and searched through their latest media releases and the link for this latest report was yet to be published. But according to a recent CBC write-up , Scotia’s economic experts say the signs are pointing towards a housing bubble of national proportions.

One statistic that jumps out for me is the report’s claim that Canadian real estate prices have jumped an average of 86% over the last decade. This is based on comparing current and past prices but it’s still an impressive number. Housing prices seem to have ‘weathered the storm’ and remain stronger than ever. And Scotiabank economists seem to think this will be how things stay for at least several years to come.

The report says Toronto and Vancouver have helped lead the way when it comes to this overall real estate boom. I’m inclined to think Calgary, Edmonton, Victoria and Ottawa can’t be too far behind either, since all 5 of these larger centres have seen prices rise significantly, and the average and median price (especially in Calgary, Toronto, Vancouver) return to or surpass some 2007 & 2008 levels.

The article is quick to remind us the Bank of Canada (BOC) seems to be holding steadfast to its pledge to keep interest rates the same until at least Q3 of 2010. And a quote from the Scotia report says, “low interest rates are driving healthy affordability right now, but this effect will wane in the next two to four years.”

On a micro-scale, I’ve said, since September of ‘08, that if Calgary’s real-estate supply remains the same or lowers (this means that we don’t suddenly get an influx of new listings on the market) we’d see another rise in average and median prices. Low and behold, that’s been the case over the last year – and it’s also the case on the national level. Supply of homes on the market seems to be limited and that’s creating increased demand for what’s available – thus inflating real estate prices as well.

Also, as the article mentions, and something I’ve talked about before, innovations in the mortgage market, adapting to the economic conditions of the time, have brought more buyers into the market – especially in the last 5 years. Apparently the Scotia report outlines 18% of Canadian mortgages are amortized for periods of longer than 25 years. 10% are amortized for over 35 to 40 years.

And the report seems to suggest we won’t see a slump in values or this ‘real estate bubble,’ as it were, anytime soon. It seems to show that, if anything, we’ve learned from the mistakes of our counterpart to the south, and the U.S. subprime crisis which helped drive one of the worst economic recessions in history, will not be associated with any sort of risk or ‘bursting of the bubble’ in the future.

Does this surprise you? What do you think? Send me your comments

I remember predicting, awhile ago, that if inventory levels continued to remain low, and buyers and sellers finally decided to harness the courage to ‘get off the fence,’ we’d see Calgary’s real estate market recover to one of a more balanced nature.

Sure, that might seem like an obvious forecast, in theory. And yes, some of you would argue Calgary’s housing market has basically been balanced since April or May of this year. But it’s interesting to see, now, the experts are using the city’s recent real estate numbers to show a return to levels quite similar to what we experienced before the sharp decline starting in Q4 of 2008.

According to the latest stats from the Calgary Real Estate Board (CREB) and an article from the Calgary Herald, sales and prices here have definitely recovered. CREB points to October’s numbers as strong evidence the Calgary real estate market has turned a corner.

For instance, the average, single-family sale-price, for October of 2009, is just under $462,500 – that’s up almost 10% over this time last year and up roughly 1% from September. It’s also, according to the Herald, the highest on record and more than $10,000 higher than October of 2007, when the housing market was still booming.

The CREB numbers also demonstrate both single-family and condominium sales are each up more than 50% over October of 2008, with 1285 single-family homes sold and 601 condo-units changing hands, respectively.

So is this a surprise? Well yes and no. Very few people here, including the top realtors, industry analysts, and market experts predicted the Calgary market would seemingly bounce-back this quickly. In fact, rewind back to last December and most of these experts were feeling grim about the near future.

Now, here we are a year later, and the combination of mortgage affordability, low-rates, more affordable carrying costs and a flood of buyers into the market, and we’re essentially back to pre-recession levels in the Calgary market.

And as I’ve pointed out before – for the last 7-8 months, if anything, we’ve seen inventory levels drop and remain low, while demand has increased. And as this continues, that’s what’s driving prices back up. But it’s also important to point out (and the Herald article doesn’t adress this) that most of the increase in sales activity in Calgary is happening in the $200,000 – $500,000 range, and also, interestingly, in the $1,000,000+ category. So not every price-point is seeing noticeable growth.

Overall, don’t expect prices to keep rising dramatically. And certainly don’t expect the double-digit price increases to return to what we experienced in the ‘good old days’ of ‘07 and most of ‘08. But, all signs point to a strong. stable, spring-market, after we wade through the usual winter slowdown.

What do you think? Send me a reply.

As some of you may know, one of my more consistent ‘go-to’ sources, when it comes to talking about the economy, is Benjamin Tal. And as we carry through Fall of ‘09, the latest buzz seems to centre around, dare we say it, recovery. But when & how do we raise the flag that officially signals we’re in the recovery phase of economic growth? Well it depends on who you talk to.

Tal is quick to remind us that the true definition of a recovery is, “when GDP (Gross Domestic Product: the size of our economy) begins to grow again—not just for a single quarter, but on a trend basis.” By that definition, he says Canada is on the brink of the ‘r-word,’ by virtue of the latest numbers indicating Q3 growth. Couple that with the latest U.S. growth trend, over the last  6-plus months, and many economists are convinced the word ‘recession’ will soon be replaced with recovery.

On the other side of that proverbial coin (read: loonie) Tal points out a great deal of Canadians are quick to point to the unemployment rate as a primary economic indicator. And until the job losses stop or more jobs are created, recovery will be significantly delayed – perhaps as long as two years. And Tal alludes to a still weakened global economy coupled with a Canadian unemployment rate expected to hover at nearly 9% until at least 2011, as reasons to question whether recovery will happen sooner than expected.

“Even if the growth in GDP over the next couple of quarters is larger than we project, it likely won’t be enough to lower the unemployment rate. US house prices and credit markets remain challenged, Canadian and US consumers are still cautious given their earlier wealth losses, and businesses are hoarding cash rather than buying equipment.”

The good news seems to be that Canada’s national housing market is in recovery, with the auto industry targetted to strengthen further as well, over the coming months. And Tal says interest rates won’t “be tied to when economists declare “recovery”, but to when the unemployed see a recovery too.” He adds that if the Bank of Canada’s benchmark rate remains well below 2%, in 2010, we shouldn’t expect any significant interest rate hikes in the near future.

So the tendency to trade one ‘r’ word for another (that being the word recession with recovery) will vary depending on who’s doing the talking. Certainly, we’re starting to see signs of things returning to some level of normality – or at least subtle to significant improvement. Meantime, we’ll keep monitoring the usual indicators to see where we measure-up.

Thoughts? Drop me a line.

As we edge towards the beginning of a new decade, I can’t help but think about the ‘good old days’ of 2007/2008. Real estate was booming. Calgary’s economy was one of the strongest in the country. The unemployment rate here was minuscule, thanks to increased migration of workers to the ‘Heart of the New West.’ And the oil and gas industry was a part of a global trend of unprecedented profit margins and record-breaking growth.

Now here we are, just a couple years later and as our economic situation seems to be in a state of recovery, we seem to be slowly shaking off the rust, licking our wounds and moving forward. While some of the biggest scars are evident in the housing market, unemployment rate, and the oil and gas industry, it’s the latter which should continue to be a significant measuring-stick for what’s to come.

A recent article in the Edmonton Sun alludes to oil and gas taking a slow and steady approach towards recovery. Oil prices are up significantly over the lows experienced just months ago, and the new low in prices reached during the worst recession we have had since the depression surprised many,  and as oil prices stabilize (which forecasters are saying they will continue to do) heavy oil, produced in the Alberta oilsands, will also fetch a higher price.

The article also hints at the possibility that some of the upcoming oilsands projects, which were originally scrapped due to the sharp economic downturn, will be put back on the table. And that will likely mean more jobs, more net migration to Alberta, and more provincial economic dollars churned-out by the oil industry here.

Add to that notion the fact that steady growth in the oil industry will likely mean more foreign investment as well, and we’re slowly but surely setting ourselves back up for success – well at least on the oil side anyway. Natural gas, as the article illustrates, has certainly been a harder commodity to predict lately.

In the past I’ve shared my opinion that once we see the price of oil continue to climb higher, inflation will set in, and that’s when you’ll see not only the Bank of Canada push the benchmark interest rate higher, but also, interest rates in the mortgage market will follow-suit. And that means it will almost certainly cost you more to borrow money to buy a home or property.

So keep an eye on the oil industry as one of your key economic indicators – not just for big business, but also for everything from the housing market, mortgage rates, and your overall cost of living as well.

Thoughts? Concerns? Opinions? Send me yours.