Real estate buyers to focus on low interest, ignore market turmoil

Mary Gazze, The Canadian Press

TORONTO – Canada’s real estate market will grow in the rest of the year as Canadians undeterred by recent turmoil in global stock markets will continue to be drawn in by low mortgage interest rates, economists say.

The economists made the comments as the Canadian Real Estate Association revised its forecast for national home resales up for the rest of the year, citing stronger than expected sales and higher prices in the second quarter.

The association said sales should grow less than one per cent this year, compared with 2010, up from an earlier forecast that called for a one per cent dip in sales.

CIBC deputy chief economist Benjamin Tal said the stock market uncertainty due to the European debt crisis and the United States credit downgrade is actually helping boost activity in Canada’s real estate market.

He said that bad economic news abroad tends to keep Canadian interest rates low, with economists predicting the Bank of Canada will leave rates untouched until at least next year.

“The uncertainty globally is really benefiting mortgage holders because it’s really postponing the increase in interest rates in Canada,” he said, explaining that when the stock market turns volatile, real estate becomes an attractive investment because of its security.

“Many people can use this opportunity to look into extremely low mortgage rates, so again the misery of other people elsewhere is helping Canadian home buyers.”

Sonya Gulati, an economist at TD Economics said the bank is anticipating that sales will be a bit more subdued in the short term, but buyers, especially first timers and immigrants won’t likely be deterred in the longer term as interest rates stay low.

“People may be waiting to see whether or not they want to purchase homes, see if things turn for the better. It really has been a roller coaster for the last little while so we anticipate a little bit more subdued activity in August and September.”

“(The stock market) will be a factor in their decision making process, but at the end of the day one of the key things for people is the interest rate and mortgage rates are still very low and they may actually want to enter the market for that reason despite the uncertainty out there.”

Overall, CREA said Tuesday that 450,800 housing units are expected to be sold across Canada under its multiple listing service in 2011, and the average selling price will be slightly higher.

About 90 per cent of resales in Canada are listed on MLS.

On a regional basis, British Columbia’s 2011 sales forecast has been revised slightly higher as home sales in the province appear to have bottomed out soon than predicted, while stronger than expected activity in Ontario is expected to offset slightly softer than anticipated demand in Quebec, Manitoba and Newfoundland and Labrador.

Meanwhile, the association said sales expectations for 2012 were revised downward to 447,000 units, roughly on par with the 10-year average, CREA said.

“While there had been some talk of potential interest rate increases. That hasn’t happened,” said CREA president Gary Morse.

“In fact, rates have actually come down and are now expected to remain low for the remainder of this year and into 2012. It’s a great opportunity to purchase a property with financing at very favourable rates.”

The national average home price is expected to rise 7.2 per cent in 2011, to $363,500, reflecting increases in the second quarter in Vancouver and acceleration in other parts of the country, particularly Toronto.

“These two markets exert an outsized influence on the national average due to their relatively high level of activity and average price,” CREA said.

CREA said the average price is expected to moderate in the second half of the year, returning to normal following a heavily skewed start to the year due to a surge in multimillion-dollar sales in selected areas of Vancouver and a higher than normal share of overall sales in more expensive markets.

Additional new listings should also result in a more balanced resale housing market in most provinces, with the national average price forecast to stabilize in 2012.

http://ca.finance.yahoo.com/news/Real-estate-buyers-focus-low-capress-322648189.html;_ylt=As4mSBOF7iz2.uKTOD1LjXzg2ppG;_ylu=X3oDMTFkZzRhY2toBHBvcwMyBHNlYwNuZXdzSHViQXJ0aWNsZUxpc3QEc2xrA3JlYWxlc3RhdGVidQ–?x=0

Transmitted by CNW Group on : July 7, 2011 13:19

Average House Prices a Misleading Gauge of the Health of the Canadian Real Estate Market: CIBC

Detailed analysis shows a highly segmented market that will see prices drop over time, but preconditions for a market crash don’t exist

TORONTO, July 7, 2011 /CNW/ – The Canadian housing market is becoming highly segmented and multi-dimensional which is making traditional measures, like average prices, increasingly irrelevant in gauging the health and state of the sector, finds a new report from CIBC World Markets Inc.

“Glancing at popular metrics such as the price-to-income ratio or the price-to-rent ratio, it is tempting to conclude that the housing market is already in clear bubble territory and a huge crash is inevitable,” writes Benjamin Tal, Deputy Chief Economist at CIBC, in his latest Consumer Watch Canada report.

“Tempting, but probably wrong. When it comes to the Canadian real estate market at this stage of the cycle, any statement based on average numbers can be hugely misleading. The truth is buried in the details—and there the picture is still not pretty, but much less alarming.”

He notes that while the average house price in Canada rose 8.6 per cent on a year-over-year basis in May, that number slows to 5.6 per cent if you take Vancouver out of the picture. Remove Vancouver and Toronto and the average price increase drops to 3.7 per cent.

By digging into the details on the high profile Vancouver market he found that the gap between average and median prices is reaching an all-time high. While the average house price climbed 25.7 per cent on a year-over-year basis to more than $800,000 in May, he found that by removing properties that sold for more than a $1 million there was a much more moderate price appreciation in the market. It also reduced the average sale price by $220,000 to just over $590,000.

“What makes Vancouver abnormal is the high end of its property market,” says Mr. Tal. “And in this context many, including Bank of Canada Governor Mark Carney, point the finger at foreign—mainly Asian wealth—as the main driver here.”

Data on the extent of the role that Asian investors have played in Vancouver housing prices is quite limited. Mr. Tal’s analysis of data obtained from Landcor Data Corporation suggests that only 10 per cent of the nearly 4,500 transactions involving foreign money over the past five years were above the $1 million mark, with an average purchasing price of just under $600,000.

According to the information provided by Landcor, foreign money accounted for only 2.6 per cent of all sales during the same period. However, Mr. Tal believes that could be a serious underestimate, as it is based on where property tax assessments are mailed, and would exclude offshore buying on behalf of children or other local proxies. “There are many reasons to believe that a significant portion of what is perceived to be buying by offshore investors is, in fact, driven by Chinese immigrants that are integrated into the community but still maintain strong links to mainland China, with many residing and working in China while their family establishes roots in B.C.”

“Looking beyond the average price numbers reveals a highly segmented and multi-dimensional market that is probably influenced by different forces,” says Mr. Tal. “But even a multi-dimensional market can overshoot—and the likelihood is that prices in the Canadian market and its sub-segments are higher than what can be explained by factors such as income growth, rent and household formation. Given that, the housing market will eventually correct. The only question is what will be the mechanism of that correction.”

Mr. Tal feels the price correction in Canada will be gradual as the two key triggers for a price crash – a significant and quick increase in interest rates and/or a high-risk mortgage market that is very sensitive to changes in economic factors – are not at play in Canada.

“In Canada, a sharp and brisk tightening cycle is unlikely. The market expects a gradual increase in short-term rates in the coming years. The rising number of mortgage holders that carry a variable rate mortgage will be the first to feel the pain. But if history is any guide, they will return quickly to the comfort of a five-year fixed rate the minute the Bank of Canada starts hiking.”

He also believes that the country is in relatively good shape when assessing the two sub-segments of the mortgage market that traditionally account for most defaults: mortgage holders that carry a debt-service ratio of more than 40 per cent and those with less than 20 per cent equity in their house.

Just over six per cent of households have a debt service ratio of more than 40 per cent—a number that has risen by a full percentage point since 2008. “However, this ratio is still well below the ratio seen in 2003, when the effective interest rate on debt was more than a full percentage point higher, and no correction in house prices ensued,” adds Mr. Tal.

“All other things being equal, even a 300-basis-points rate hike by the Bank of Canada would take this ratio to only just over eight per cent. Not surprisingly, Vancouver has the highest ratio of households with high debt-service ratio, followed by Toronto.”

A little more than 17 per cent of the Canadian residential real estate pool is in properties with less than a 20 per cent equity position, a number that has been rising over the past few years. More than 80 per cent of households with less than a 20 per cent equity position are first time buyers.

“Digging deeper and looking at the households with both low equity positions and high debt-service ratios, we found that this fragile segment of the market accounts for only 4.6 per cent of total mortgages—a number that has been on an upward trend over the past few years,” says Mr. Tal. “Shock the system with a 300-basis-points rate hike and that number would rise to a still-tempered 6.5 per cent. Historically, even in that group, the default rate has been well below one per cent. Thus, short of a huge macro shock, there does not appear to be the risk of large scale forced selling that would typically be the trigger for a precipitous plunge in the national average house price.

“As a result, while house prices are likely to adjust as interest rates eventually climb, the national pace of any correction is likely to be gradual. That could still entail a period in which housing underperforms other assets as an investment class, until rising incomes and a tame price trajectory bring the market back to equilibrium.”

http://www.newswire.ca/en/releases/archive/July2011/07/c4007.html

Have a great weekend!

Why working is the secret to happiness

Jenna Goudreau, On Wednesday July 6, 2011

I like yoga. The few times I do it a year, I feel warmer, more flexible and rather proud of myself for investing in my personal happiness (though I’ve often had the sneaking suspicion that jogging would have been a better workout and more cost effective). In a recent fit of daring, I even took an aerial yoga class—attempting to calm my breathing as I dangled upside down from fabric suspended from the ceiling. Clearly, I was on the path to inner bliss.

The most impactful part of a good yoga class, at least I am told, is the meditation at the end. Your heartbeat slows. Your body is at rest. Your mind empties. Well, it’s supposed to anyway. Whenever I try to clear my thoughts through meditation, I end up thinking about dinner or tomorrow’s to-do list or what might be wrong with me that I can’t stop thinking.

Thus it comes as some relief to learn that yoga, relaxation, meditation and stress-free living are not clear paths to happiness. On the contrary, economist Todd Buchholz believes that peace and stillness might make you miserable. In his new book, Rush: Why You Need and Love the Rat Race, Buchholz outlines why he’s decided that work is the secret to happiness.

The former White House director of economic policy and Harvard teacher set out to write a book about how Americans were destroying themselves by chasing success and achievement. Soon, however, he realized that it was that very pursuit that makes us happiest.

“Behavioural psychologists and yoga masters are flat wrong,” Buchholz told me. “The idea that our entire society needs to de-stress is treacherous.”

Despite the perception that work and stress stunt our happiness, Buchholz says our brains are wired to thrive in the rat race. He points to the frontal lobe, which evolved to plan for the future and craves forward thinking and motion. If we were to step off the wheel, retiring to an endless beach and flow of daiquiris, we would resort to “a life of stasis” that would “confound and frustrate the frontal lobe.” Retirement, he says, ages us and causes brain function to decline.

Similarly, Buchholz dismisses the idea that smiling and serenity will boost our spirits. Rather he believes that rushing around and frequent activity converts into internal energy that revives us. Dopamine and serotonin—the body’s natural feel-good drugs—flood our systems when we take a risk or begin a new challenge.

And all that society-wrenching competition going on in the workplace? Happiness inducing, Buchholz claims. “Typical academics would say the opposite of competition is cooperation,” he says. “My argument is that competition can lead to cooperation. Human beings created cooperative hunting teams because they were competing against the elements. Competition is what drives people to improve their lives.”

The workplace, then, is not a cesspool of greed, rivalry and political maneuvering. It’s an arena that forces you to compete against the industry standard, your coworkers and even yourself, which ultimately drives innovation, creativity and personal growth.

News Release: July 5, 2011

RATIO OF PROPERTY SALES TO INVENTORY REMAINS STABLE IN THE FRASER VALLEY    

(Surrey, BC) – For three consecutive months, the percentage of properties sold in the Fraser Valley compared to those that were available for purchase has remained at 16 per cent, reflecting a balanced market starting to favour buyers.  

In June, the Fraser Valley Real Estate Board processed 1,588 property sales on its Multiple Listing Service (MLS®), while at the same time had 9,758 active listings available.

Sukh Sidhu, president of the Board, explains, “When supply and demand remain as consistent as they have since April, it indicates a stable market.

“However, it is important for both buyers and sellers to be aware that Fraser Valley’s market is highly localized. In general, 16 out of every 100 properties sold in June, but that’s referring to every property type in all six of our communities. Be sure to ask your REALTOR® for the percentage of properties selling specific to your home in your area.”

The Board received 2,762 new listings in June, a decrease of 10 per cent compared to May and a decrease of 12 per cent compared to the 3,153 new listings received in June 2010.

Sidhu adds, “Although the volume of new homes coming on stream saw a seasonal dip in June, selection remains very good in particular for Fraser Valley apartments. With interest rates remaining stable, there are some excellent opportunities for first-time buyers this summer.”

In June, the benchmark price for Fraser Valley detached homes was $528,060, an increase of 1.9 per cent compared to $518,355 in June 2010 and a decrease of 0.3 per cent compared to May.

The benchmark price of Fraser Valley townhomes in June was $327,457, a decrease of 0.2 per cent compared to $328,080 in June 2010 and up 0.8 per cent compared to May. The benchmark price of apartments was $249,537 in June, an increase of 1.3 per cent compared to the $246,351 price in June of last year and down 0.6 per cent compared to May.

Information and photos of all Fraser Valley Real Estate Board listings can be found on the national, public web site www.REALTOR.ca. Further market statistics can be found on the Board’s web page at www.fvreb.bc.ca. The Fraser Valley Real Estate Board is an association of 2,920 real estate professionals who live and work in the communities of North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission.

Full package:

http://www.fvreb.bc.ca/statistics/Package%20201106.pdf 

Buy? Sell? Should Canadians buy into real estate or not? On the plus side, interest rates remain at historic lows coupled with reduced unemployment, may encourage more Canadians into the market. And when they start looking, they’ll find that prices in most regions still haven’t recovered to their pre-recession highs. The drawback is knowing interest rates have only one direction to go-up. Today’s low 5 year fixed rate of 3.59% can provide security in that area of uncertainty for your on-the-fence clients.

• TSX +83.96 to 13,188.94 (CP) its third consecutive day of solid gains as traders took in stronger than expected inflation data and news that Greece had passed an austerity bill that should help Athens avoid defaulting on its debt. The surprisingly strong inflation results could put pressure on the Bank of Canada to take a more hawkish tone on inflation in the next interest rate announcement in less than three weeks. The bank had warned it expected inflation to push above three per cent during the spring, but few expected it would hit such elevated levels
• DOW +72.73 to 12,261.42   
• Dollar +1.27c to 103.03c USD  
• Oil +$1.88 to $94.77USD per barrel   Oil and gold prices appear to have moved past recent lows, a trend that bodes well for the performance of the resource-heavy TSX .  Over two days, oil has recovered the loss from last Thursday when the United States and other oil-importing countries said they would dump emergency oil supplies onto the market
• Gold +$10.40 to $1510.20USD per ounce
• Canadian 5 yr bond yields markets +.15bps to 2.30.  That’s an increase of 30bps since Monday! The spread (based on the MERIX 5 yr rate published rate of 3.79%) is now down  to the middle of the comfort zone at 1.49 as money moves away from bonds to stocks. The spread based on the quick close of 3.59% is well below the bottom of the comfort zone at 1.29 and is at risk of ending. http://www.tmxmoney.com/HttpController?GetPage=BondsAndRates&Language=en  

The rate of return on your bond, can be read through a yield curve, If the increase in bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. 1.40 and 1.60

How To Dominate Twitter And Facebook And Get Millions Of Business Followers

Use targeted advertising on Facebook

Sure it’s pretty basic, but that’s for a reason. It’s the most effective tactic for growing your Facebook followers. These adds are relatively inexpensive, highly targeted, and can be customized to appeal to different prospective demographics

Pay for fans

Believe it or not, there are actual services out there that guarantee you a certain number of fans–if you’re willing to pay for them. FansAndInvites.com and SocioNiks are two such companies that offer these services. You can even target fans or followers by location.

Though the companies absolutely insist that the followers they bring are real, genuine people, beware: their interest in your company or intent to support your small business probably isn’t. Still, one Facebook “like” begets more, and this is one way to get the snowball rolling in hopes of an eventual avalanche.

Incentivize clicking “like” or following on Twitter

If you’re not willing to pay for followers directly, try offering free stuff, discounts, or other attractive items. But make them available only for people who “like” you on Facebook or follow your Twitter feed. 

Piggyback off hot-button issues

How did one little-known author get more Facebook fans than George Clooney? Completely by accident. But it serves as a good lesson for those looking to up their fans.

Gregory Levey’s memoir recounting his experiences as Israeli Prime Minister Ariel Sharon’s speechwriter was titled “Shut Up, I’m Talking.” Facebook users became fans of the book’s page for the title’s implications rather than the content of the book.

Sure, many of those fans aren’t likely to buy the book, but once again, it’s crucial to get the ball rolling. And going from 700 fans to 700,000 in a matter of months does exactly that. Consider using catchy headlines, or reference hot-button issues to garner attention for your Facebook page. The more popular it becomes the more likely you are to turn heads among people that actually might contribute to sales.

Notice trending hashtags

Maybe the popular #RIP2TheCompetition hashtag isn’t the best way to introduce the world to your business, but engaging in trending topics is an excellent way to get the word out.

For example, if you’re in the travel industry, be sure to chime in on the “Travel Tuesdays” hashtag and offer a discount to followers. Or, your company sells treats or luxury items, engage in the “TGIF” hashtag and tell all who are willing to “Like” your Facebook or follow your twitter that they’re eligible for weekend savings

Target popular tweeters

Say you’re opening a sandwich shop in your neighborhood. Seek out a popular local food blogger that tweets, and tell him about your business. Fatten him up with a free sandwich, and, if he likes it, he might fatten your social media following.

How? Be sure to tell him that any of his followers that follow your business on Twitter are welcome to a half-off sandwich. Remember, anyone interested in the blogger’s content is perfectly suited for your business. Or, for a quick gauge of your ROI, consider offering a discount to customers that mention the blogger’s name. 

For a mere $8 sandwich, you could potentially gain dozens of interested followers

Create good content

If people who discover your page find it boring or useless, all that hard work you put into getting them there in the first place will go to waste. Create beautiful, compelling content that invites visitors to click around, read, and truly “like” or want to follow your page.

Update frequently

Several digital media PR experts told us the number one mistake businesses make with their Facebook and Twitter pages is they don’t update enough. Social media is not rotisserie chicken—you can’t “set it, and forget it.”

Take advantage of Facebook’s news feed, and applications like TweetDeck, by constantly updating your social media pages. It will keep you fresh in your follower’s minds and, with a little luck, can appear on news feeds–or be retweeted–to prospective customers. 

Engage customers conversations

The beauty of social media is that customers truly believe they can have direct content with your company. Uphold this belief and create trust by responding to your customers who comment on your page or tweet to your account.

But don’t dare do so in PR-speak or corporatese. You’ll shatter their trust. Answer in an authentic voice that’s consistent with your values to keep existing followers happy and give reasons for new ones to hop on the bandwagon.

 Respond to complaints

Remember Domino’s recent campaign that urged customers to post photos of pizza delivered to their homes? Well, here’s a shocker: some of those pictures showed some pretty sloppy, nasty pies. Worse, some pizzas depicted orders gone wrong.

Yet Dominos used social media savvy to turn a disaster into more Twitter followers. One store manager-turned-social media expert, Ramon DeLeon, took matters into his own hand. He tweeted a link to a video to one unhappy customer, and has since garnered nearly 7,000 followers.

http://www.businessinsider.com/how-to-be-popular-10-tips-for-growing-your-fans-and-followers-on-facebook-and-twitter-2010-10#use-targeted-advertising-on-facebook-1#ixzz1QAPVfFTG

4 Ways To Value A Real Estate Rental Property

Stephan Abraham, On Tuesday June 21, 2011

During the first half of the 2000s, investing in real estate became more common for average Americans. With easily available financing and minimal down payment requirements many Americans made handsome profits by flipping homes. Well, as we are all aware of, this couldn’t go on forever, and the real estate bubble popped in 2007, leading to The Great Recession. Notwithstanding this fundamental change, real estate investment is certainly not unprofitable. Some economic factors such as high unemployment and very strict lending standards by financial institutions have contributed to low vacancies for rentals across the United States. Perhaps real estate investors should look at rental investments as an alternative to a buy and sell approach. So, how does one go about valuing real estate rentals? Here we will introduce at a high level some ways to value rental property.

Sales Comparison Approach
The sales comparison approach (SCA) is one of the most recognizable forms of valuing residential real estate. This approach is simply a comparison of similar homes that have sold or rented over a given time period. Most investors will want to see an SCA over a significant time frame to glean any potentially emerging trends.

The SCA relies on attributes to assign a relative price value. Price per square foot is a common and easy to understand metric that all investors can use to determine where there property should be valued. If a 2,000 square foot townhome is renting for $1/square foot, investors can reasonably expect a similar rental income based upon similar rentals in the area. Keep in mind that SCA is somewhat generic; that is, every home has a uniqueness that isn’t always quantifiable. Buyers and sellers have unique tastes and differences. The SCA is meant to be a baseline or reasonable opinion and not a perfect predictor or valuation tool for real estate. It is also important for investors to use a certified appraiser or real estate agent when requesting a comparative market analysis. This mitigates risk of fraudulent appraisals, which became widespread during the 2007 real estate crisis.

Capital Asset Pricing Model
The capital asset pricing model (CAPM) is a more comprehensive valuation tool for real estate. The CAPM introduces the concepts of risk and opportunity cost as it applies to real estate investing. This model really looks at potential return on investment (ROI) derived from rental income and compares it to other investments that have no risk, such as United States Treasury bonds or alternative forms of real estate investments such as real estate investment trusts (REITs).

In a nutshell, if the expected return on a risk-free or guaranteed investment exceeds potential ROI from rental income, it simply doesn’t make financial sense to take the risk of rental property. With respect to risk, the CAPM considers the inherent risks to rent real property. For example, all rental properties are not the same. Location and age of property are key considerations. Renting older property will mean landlords will likely incur higher maintenance expenses. A property for rent in a high crime area will likely require more safety precautions than say a rental in a gated community. This model suggests building in these “risks” before considering your investment or when establishing a rental pricing structure.

Income Approach
The income approach focuses on what the potential income for rental property yields relative to initial investment. The income approach is used frequently for commercial real estate investing. The income approach relies on determining the annual capitalization rate for an investment. This rate is simply the projected annual income from the gross rent multiplier divided by the original cost or current value of the property. So if an office building costs $120,000 to purchase and the expected monthly income from rentals is $1,200, the expected annual capitalization rate is 10%.

This is a very simplified model with few assumptions. More than likely there are interest expenses on the mortgage. Also, future rental income may be less or more valuable five years from now than they are today. Many investors are familiar with the net present value of money. This concept applied to real estate is also known as a discounted cash flow. Dollars received in the future will be subject to inflationary as well as deflationary risk and are presented in discounted terms to account for this.

Cost Approach
The cost approach to valuing real estate states that property is really only worth what it can reasonably be used for. It is estimated by summing the land value and the depreciated value of any improvements. Appraisers from this school often espouse the “highest and best” use to summarize the cost approach to real property. It is frequently used as a basis to value vacant land. For example, if you are an apartment developer looking to purchase three acres of land in a barren area to convert into condominiums, the value of that land will be based upon the best use of that land. If the land is surrounded by oil fields and the nearest person lives 20 miles away, the best use and therefore the highest value of that property is not converting to apartments but possibly expanding drilling rights to find more oil.

Another best use argument has to do with property zoning. If the prospective property is not zoned “residential,” its value is reduced since the developer will incur significant costs to get rezoned. It is considered most reliable when used on newer structures, and less reliable for older properties. It is often the only reliable approach when looking at special use properties.

The Bottom Line
Real estate investing isn’t out of vogue by any stretch of the imagination. Since the last crash, however, the housing market has changed dramatically. Flipping homes financed with no money down is an artifact of the past and possibly gone forever. But real estate rentals can be a profitable endeavor if investors know how to value real property. Most serious investors will look at components from all of these valuation methods before making a rental decision. Learning these introductory valuation concepts should be a step in the right direction to getting back into the real estate investment game.

http://ca.finance.yahoo.com/news/4-Ways-To-Value-A-Real-Estate-investopedia-3634752025.html?&mod=pf-sp14c

TD Bank forecasts low interest rates this year. However with current bond yields, they may not be as low as today’s 3.59%. Submit any applicable applications in to MERIX asap!

OTTAWA — The TD Bank says Canadians can expect borrowing costs to remain near record lows for the rest of the year.

That’s because the pace of the economic recovery is expected to slow sharply in Canada, the United States and much of the world.

As such, the Bank of Canada will likely refrain from raising its key interest rates until 2012, TD says.

The central bank has had its policy rate set at one per cent since September. The rate was set at all-time low of 0.25 per cent through much of the recession, to stimulate borrowing and spending, until a series of rate hikes began last summer.

The still-low rates have been a double-edged sword for Canadians who are already piling up debt at record levels, according to the Certified General Accountants Association of Canada.

The association says Canadian household debt has reached a record $1.5 trillion, and calculates that more than half of indebted Canadians are borrowing just to afford day-to-day living expenses such as food, housing and transportation.

Low interest rates will make it easier for Canadians to keep borrowing, setting them up for a fall further down the road.

Debt is partly contributing to a slowdown in Canadian growth, says the TD Bank, because households are too tapped out to spend and stimulate the economy.

The bank says Canada’s economy is believed to have already slowed to 1.3 per cent growth during this current quarter that ends at the end of the month, one-third the pace of the first quarter’s 3.9 per cent gain.

The rest of the year will see growth crawl along between two and 2.5 per cent, the bank says.

As the recovery moderates, so will job growth. The bank says it expects the unemployment rate in Canada will remain above seven per cent throughout its forecast period to the end of 2013.

With little help from consumers, Canada will need to depend on exports and business investment to fuel growth. http://www.therecord.com/news/business/article/547758–td-bank-forecasts-low-interest-rates-this-year

Recreational property markets bouncing back: Re/Max

OTTAWA — Canada’s recreational property market appears to be bouncing back from a recessionary lull as buyers seek to capitalize on equity and stock-market gains, Re/Max says in a report Monday.

Demand rose 78% in the 46 markets across the country covered by the realtor’s Recreational Property Report, while sales had risen or were on par in 41% of those centres.

“Buyers who held off during the recession are back in recreational property markets from coast-to-coast,” says Pamela Alexander, chief executive of Re/Max for Ontario-Atlantic Canada. “Their patience has been rewarded with more affordable recreational values and greater inventory levels.”

While prices have remained stable in many markets, values could be found for higher-end properties, pushing luxury sales higher in almost half of the markets examined, Re/Max said in its report.

Opportunities were also to be found in Western Canada.

“Prices are down as much as 20% from peak levels reported in 2006-2007, bringing ownership within reach to many potential purchasers,” said Elton Ash, regional executive vice-president of Re/Max in Western Canada.

On British Columbia’s Salt Spring Island, for example, starting prices for oceanfront properties have fallen to $669,000 today from $1.3-million in 2008.

In the North Okanagan Valley, a three-bedroom, winterized recreational property on a standard-sized waterfront lot — the common measures used in Re/Max’s report — that sold for $1.5-million in 2008 now sells for $995,000.

Starting prices for similar properties on Alberta’s Sylvan Lake are now at $800,000 from $1.25-million previously and in the Rocky Mountain resort town of Canmore, a two-bedroom condo has fallen to $229,000 from $320,000.

“The strengthening oil sector has . . . brought Albertans back into mix, driving demand for both local and coastal B.C. properties,” Ash said.

Another factor influencing the recreational property market has been that Americans who bought when the Canadian dollar was at 65 U.S. cents are now cashing out, boosting inventories.

The report found that there has been some tightening for entry-level properties in about one-third of the markets covered. As well, it noted, the supply of properties has tightened considerably at the lower end in Ontario, Quebec and Atlantic Canada.

It also noted that recreational properties are moving more toward year-round homes, with fewer traditional cottages available for sale.

“These waterfront properties are disappearing from the landscape. Meanwhile, today’s average recreational getaways are truly earning the distinction as the “home away from home,” with many of the bells, whistles and comforts of their residential counterparts http://business.financialpost.com/2011/06/13/recreational-property-markets-bouncing-back-remax/

Top 8 House-Hunting Mistakes

Amy Fontinelle,

Buying a home is a very emotional process, but if you allow those emotions to get the best of you, you may fall prey to a number of common home buyer mistakes. Since buying a home has many far-reaching implications – ranging from where you will live to how hard it will be to make ends meet – it’s important to keep your emotions in check and make the most rational decision possible.

There are eight common emotional mistakes that people make when buying a home. Avoiding these pitfalls will help you find the best home-sweet-home.

Mistake 1: Falling in Love With a House You Can’t Afford
Once you’ve fallen in love with a particular home, it’s hard to go back. You start dreaming about how great your life would be if you had all the wonderful things it offered – the lovely, tree-lined streets, the jetted bathtub, the spacious kitchen with professional-grade appliances. However, if you can’t or won’t be able to afford that house, you’re just hurting yourself by imagining yourself in it. To avoid the temptation to get in over your head financially, or the disappointment of feeling like you’re settling for less than you deserve, it’s best to only look at homes in your price range.

Start your search at the low end of your price range – if what you find there satisfies you, there’s no need to go higher. Remember, when you buy another $10,000 worth of house, you’re not just paying an extra $10,000 – you’re paying an extra $10,000 plus interest, which might come out to double that amount or more over the life of your loan. You may be better off putting that money toward another purpose.

Mistake 2: Assuming There’s Nothing Better Out There
Unless you are a high-end buyer looking at custom homes, chances are that for any home you find that you like, there are quite a few others that are nearly identical to it. Most neighbourhoods have multiple homes that are the same model. Further, most neighbourhoods are full of homes that were all constructed by the same builder, so even if you can’t find an identical model for sale, you can probably find a house with many of the same features. If you’re considering a condo or townhouse, the odds are also in your favour.

Even when you have a long list of must-haves, there are probably several homes out there that can meet your needs. If there are snags with the home you’ve decided you like – such as major repair issues, an inflexible asking price or a difficult possession date – consider moving on. Being open to keep looking will save you from making rash decisions you might regret later.

Mistake 3: Being Desperate
When you’ve been looking for a while and you’re not seeing anything you like – or worse, you’re getting outbid on the houses you do want – it’s easy to get desperate to get into your new house now. However, if you move into a house you’ll end up hating, the transaction costs to get rid of it will be costly. You’ll have to pay an agent’s commission (up to 5-6% of the sale price) and you’ll have to pay closing costs for the mortgage on your new house. You’ll also deal with the hassle and expense of moving yet again. If you decide not to move but to try to make the best of what you have, remember that alterations and renovations are expensive, time-consuming and stressful. If you have time on your side, it’s OK to wait until something that suits you comes along – as long as your demands are realistic for your budget, you are bound to find something you live with.

Mistake 4: Overlooking Important Flaws
For any of the three reasons we just discussed, you might be tempted to ignore major problems with the house that will be difficult, expensive or impossible to change. Carefully consider your options before you make a commitment, and consider waiting until something better comes along. New houses come on the market every day.

Mistake 5: Overestimating Your Handyman Skills
Don’t buy a fixer-upper that’s more than you can handle in terms of time, money or ability. For example, if you think you can do the work yourself then realize you can’t once you get started, any repairs or upgrades you were planning to make will probably cost twice as much once you factor in the labour – and that may not be in your budget. Not to mention the costs involved to fix anything you may have started and the fees to replace the materials you wasted. Honestly evaluate your abilities, your budget and how soon you need to move before purchasing a property that isn’t move-in ready.

Mistake 6: Rushing to Put In an Offer
In a hot market, it may be necessary to pull the trigger very quickly if you find a home you like. However, you have to balance the need to make a quick decision with the need to make sure the home will be right for you. Don’t neglect important steps like making sure the neighbourhood feels safe at night as well as during the day and investigating possible noise issues like a nearby train. Ideally, you’ll be able to take at least a night to sleep on the decision. How well you sleep that night and how you feel about the home in the morning will tell you a lot about whether the decision you’re about to make is the right one. Taking the time to consider the decision also gives you a chance to research how much the property is really worth and offer an appropriate price.

Mistake 7: Dragging Your Feet
It’s a tough balancing act to make sure you make a careful decision, but don’t take too long to make it. Losing out on a property that you were almost ready to make an offer on because someone beat you to it can be heartbreaking. It can also have economic consequences. Let’s say you are self-employed. Perhaps for you more than anyone else, time is money. The more time and energy you have to take out of your normal activities to search for a house, the less time and energy you have available to work. Not dragging out the homebuying process unnecessarily may be the best thing for your business, and the continued success of your business will be essential to paying the mortgage. If you don’t pull the trigger quickly, someone else might, and you’ll have to keep looking. Don’t underestimate how time-consuming and routine-disrupting house shopping can be.

Mistake 8: Offering Too Much
If there’s a lot of competition in your market and you find a place you really like, it’s all too easy to get sucked into a bidding war – or to try to pre-empt a bidding war by offering a high price in the first place. There are a couple of potential problems with this. First, if the house doesn’t appraise at or above the amount of your offer, the bank won’t give you the loan unless the seller reduces the price or you pay cash for the difference. If this happens, the shortfall on your bid as opposed to your mortgage will have to be paid out of pocket. Second, when you go to sell the house, if market conditions are similar to or worse than they were when you purchased, you may find yourself upside down on the mortgage and unable to sell. Make sure the purchase price for the home you buy is reasonable for both the house and the location by examining comparable sales and getting your agent’s opinion before making an offer.

Conclusion
It’s natural for emotion to come into play in the home-buying process. Buying a house is a big decision, but this is exactly why you need to ensure you are making rational choices, rather than getting wrapped up in the notion of a dream home. Slow down, overcome your emotions and, ultimately, make a home-purchase decision that’s good for both your feelings and your finances. http://ca.finance.yahoo.com/news/Top-8-HouseHunting-investopedia-617819117.html?&mod=pf-sp14e