New Information on the US Market from National Association of Realtors

This artcile was forwarded to me by my friend Ken Millar in Arizona. If you want more information on potential investment south of the border, we can connect you with professionals like Ken.

Home Sales, Prices Seen Rising in Late '08
First, the good news: home sales have stabilized over the last seven months and should increase slightly in the second half of 2008, NAR Chief Economist Lawrence Yun told a crowd of REALTORS® at NAR’s Midyear Legislative Meetings & Trade Expo Thursday. The other good news is that the subprime lending crisis is becoming a thing of the past. “I believe 2008 will be the year when we have to clean up and recover from the subprime mess,” said Yun.

The bad news is that the numbers are in, and 2007’s annual sales volume of about 5.30 million homes was the lowest in 10 years. Luckily, the economy is stronger overall than it was a decade ago. “The difference is that we have 25 million more people and 13 million more jobs than we did 10 years ago,” he said. And while sales should begin to grow later this year, real improvement in the housing market won’t happen until 2009, when sales should climb to 5.71 million units, Yun said.

Price Gains to Vary by Market
Prices also are expected to begin a turnaround later this year, although recovery will vary by market. Middle-America cities that performed evenly over the past few years – like Cincinnati, Milwaukee and the Kansas City, Mo., area – are likely to experience home price gains in the 20 to 30 percent range over the next five years, while markets like Miami, Las Vegas and Phoenix could see prices go up as much as 50 percent during that time period, Yun said.

Healthier Mortgage Market Makes a Difference
A brighter credit picture is a major contributor to this improvement, Yun said. If you look at where home prices fell the most, it’s the markets were subprime loans were prevalent,” Yun said. Cape Coral, Fla.; Detroit; Las Vegas; Miami; Orlando, Fla.; Phoenix and Riverside, Calif. were among the cities with a high percentage of subprime lending and where the markets suffered the biggest downturns, he explained.

These markets should get a boost from a more stable mortgage market. FHA lending doubled to 6 percent of all loans 2007 and should grow to 10 percent in 2008. It should reach near-historic norms of 15 percent in 2009, said Yun. The increase will be slow because many lenders will have to be certified by the U.S. Department of Housing and Urban Development before they can issue FHA mortgages. Higher conforming loan limits at Fannie Mae and Freddie Mac have also helped lower interest rates and unlock the lending log jam for jumbo loans. Even current borrowers with adjustable mortgages are in better shape, thanks to Fed rate cuts. In fact, some adjustable loan borrowers may actually see their resets produce lower payments. “The Fed has done its job on resets; now it’s up to Congress to encourage the home buying that will help stabilize prices,” Yun said.

Other Reasons to Be Optimistic
The home buyer tax credit currently being considered by Congress would also encourage uncertain buyers to act. Stabilized prices will not only encourage sales but could help reduce defaults, he added. The foreclosures aren’t all in the past, warned Yun, though he believes that many investors and speculators already have exited the market. He expects foreclosures to rise throughout 2008 and perhaps into 2009, primarily among subprime borrowers, where foreclosure rates were near 20 percent in the third quarter of 2007.

Still, Yun notes, it’s important to remember that only 9 percent of home owners have subprime loans. Foreclosure rates for all loan types are much lower — currently, around 2 percent.

GTA Resale Housing Market Moderate in May

Below is the text of a press release from the Toronto Real Estate Board. All 2008 figures are compared to 2007, a record year.

May 20, 2008 -- Moderate sales and healthy price increases continued to characterize the GreaterToronto Area resale housing market during the first half of May, Toronto Real Estate Board President Maureen O’Neill announced today.

“With 4,422 sales throughout the GTA in the first two weeks of this month, activity has declined 12 per cent compared to the 5,003 homes sold during the first half of May 2007,” said Ms. O’Neill. “Prices however, continue to be strong, averaging $400,817 in the GTA, up six per cent from the $377,612 reported a year ago.”

In the City of Toronto, there were 1,734 sales, representing a 15 per cent decline from the 2,053 homes sold during the first half of May 2007 and an 11 per cent decline from 006. The average price in the 416 is $437,205, up six per cent from $412,701 a year ago.

In the 905 Region, there were 2,688 sales, down nine per cent from 2,950 a year ago but up four per cent from the same period in 2006. At $377,688, the average price is up seven per cent from the $353,192 recorded during the same timeframe in May of 2007.

Despite moderate sales overall, some neighbourhoods experienced heightened activity during the first half of May. The GTA is showing signs for a healthy 2008 compared to the diminished activity during the first quarter of 2008.

The Danforth (E03) saw sales increase 29 per cent overall compared to the same timeframe a year ago due to strong detached home sales.

Interest in detached homes also led Streetsville (W20) to a five percent overall sales increase compared to a year ago.

In the Annex (C02) transactions rose 39 per cent compared to the same period a year ago, driven by strong condominium apartment and detached home sales.

Richmond Hill South (N03) saw strong sales in most property types resulting in a three per cent increase compared to a year ago.

“In recent years, homebuyers have faced a major challenge with respect to limited selection,” said Ms. O’Neill. “Now though, inventory is up 11 per cent compared to a year ago, which has resulted in more choice for home buyers and will a positive effect on the quality of available listings.”

A wider selection from which to choose has also resulted in increased Days on Market, which has risen to 35 from last year's 28.

“The Greater Toronto Area offers a wide array of housing stock to fit almost any budget; I encourage anyone thinking of making a move to contact their REALTOR® to learn more about all of their options.”

The important thing to note is that normalcy is returning to the market.

Looking South for Investment?

Below is the text of a letter I received from a colleague in Arizona regarding investment possibilities in that state.

Dear Frank,

I am a fellow RE/MAX Associate and I am contacting you regarding possible opportunities for referrals of your clients who would like to consider investments in the Phoenix, Arizona area, including Scottsdale, a favorite area for "snow birds". Historically, many Canadians have called Arizona home for the chillier seasons of the year and we welcome their seasonal migration. In recent months, we have also witnessed an increased interest to purchase properties within our city from north of the border due to the favorable currency exchange.

If you have any doubt that now may be the BEST time for your clients to consider purchasing a winter home in Arizona, let me share some interesting facts. According to the Department of Real Estate at the Arizona State University, the median price of a Scottsdale resale residential property for the 1st quarter 2007 was $595,000 USD, and for the 1st quarter 2008 it was $525,000 USD. When you consider the current "soft" real estate market, coupled with a shift of Canadian Dollar exchange rates, I think you will agree that purchase opportunities for US properties are near record discounted values for your clients. I estimate that the savings to Canadians in this example to be almost twenty percent in Canadian Dollars. How much longer will this situation last? Current exchange rate and trend line:

Yahoo Finance Currency Converter and Trend Line:

http://finance.yahoo.com/currency/convert?from=USD&to=CAD&amt=1&t=3m

We are now seeing evidence of a stabilizing, if not slowly improving, real estate situation in selective pockets of the Greater Phoenix Metro Area. Overall Maricopa County MLS unit sales (covering mostly Phoenix Metro) were up 27% from February '08, to March '08, and another 14% for the month of April topping our 6-month trend.

These links lead to examples of affordable "second" homes:
Scottsdale $850,000 example:
http://www.larkspurdrive.com
Phoenix Market $250,000 example:
http://www.estatequicksale.com

Why Hasn't Canada Been Affected By Pubprime Market?

Canadian homeowners have watched in horror as the subprime mortgage disaster unfolded down south - and many worry it still might happen here.


The fallout from the subprime mess south of the border has been filling business pages for months with stories of foreclosure epidemics, real-estate market meltdowns, lenders and investment banks going under and a global credit crunch. But what exactly is at the root of it all, and why has Canada not caught the subprime virus like we do most other economic ailments of our largest trading partner? Forthwith, an explanation.

First off, what the heck is a subprime mortgage?
No, it's not a mortgage offered at below-prime interest rate, though that's a common misconception. The term "subprime" instead describes the borrower -- a person who doesn't meet a financial institution's criteria for a loan and so wouldn't qualify for a standard mortgage. Perhaps the client has a lousy record for paying off debts, or lacks regular employment. Subprime borrowers are often low-income people, the elderly and new immigrants. Wags have coined an acronym for those who most benefited from the subprime craze -- NINJAs, or folks with No Income, No Jobs or Assets.

To account for the risk, subprime mortgages come with hefty interest rates. However, to persuade people that they can, in fact, afford them, those rates typically kick in only after a year or two at an introductory low (or teaser) rate. The mortgages dangle other lures, such as loan amounts that exceed the value of the home (you need some cash for the furniture, after all!). Some even work like reverse mortgages, meaning the homeowner gets monthly payments that are added to the principal. The sales pitch is that the surging housing prices would allow borrowers to refinance their loans at higher values, keeping their payments affordable indefinitely.

Why did everyone fall for this?
Well, up until 2005, the pitch worked beautifully. Real estate was on a tear, with home prices in cities like Phoenix, Las Vegas and Miami rising by up to 30% a year. When you're on a roll -- especially in Vegas -- it's easy to forget that your luck could run out. So homeowners, dazzled by their homes' values on paper, enthusiastically tapped into home-equity lines of credit, jacking up their principals to the sky. The fact that mortgage interest payments are tax-deductible in the U.S. only bolstered the subprime market's growth by spurring people to become homeowners while offering little incentive for paying off the loans.

The subprime industry was getting rich as well. For those selling them, subprime loans came with cushy commissions, creating fierce competition for the business. Those issuing them, meanwhile, bundled the mortgages into complex stock market securities peddled to others, and so no longer had to fear if the borrowers defaulted. Aggressively marketed, irresistibly priced, subprime mortgages comprised an incredible one-third of all mortgages in the United States by last year.

So what ended the party?
As the real estate market started to slow and then slump, the proverbial chickens came home to roost. With values of their homes reversing course, by early this year one-tenth of American homeowners found that what they owed on their mortgages exceeded what their homes were worth. Unable to afford the higher rates kicking in after the teasers expired, more and more people defaulted. Now, as many as two million U.S. homeowners may lose their homes. In a recent report, Benjamin Tal, senior economist with CIBC World Markets, concluded, "The price appreciation in the U.S. housing market over the past two years was, in many ways, artificial -- boosted by aggressive lending and irresponsible borrowing."

Do we have subprime mortgages in Canada?
Yes, we do. More and more, in fact. They're typically called "alternative" mortgages and tend to cater to the self-employed and immigrants without Canadian credit history to qualify for loans. From no-money-down to cash-back mortgages, the volume of such exotic products has more than doubled in the past five years.

So how come the same disaster hasn't unfolded in Canada?
Because our market has developed differently due to regulation, immaturity and plain old timidity. The reasons are manifold.

Lending practices:
In Canada, it's difficult, expensive and impractical to buy a home without any down payment. Anyone who puts less than 20% down on the home can't qualify for mortgage insurance by the Canada Mortgage and Housing Corp. or Genworth Financial, and such uninsured, high-ratio mortgages charge substantially higher rates. Banks and other mainstream financial institutions also won't provide a mortgage that exceeds a home's purchase price. Even alternative lenders have tended to eschew some of the worst American excesses, such as super-low teaser rates and loose income criteria for borrowers. Option adjustable rate mortgages (ARMs), which allow homeowners to change their monthly payments, sometimes not even covering the interest, haven't seen much uptake. According to Paul Grewal, head of the Canadian Association of Accredited Mortgage Professionals, "We have not seen the aggressive lending practices common south of the border." Backing his assertion is the fact that mortgage defaults are today near all-time lows, hovering around half a percent.

Subprime infancy:
The subprime mortgage industry in Canada is very young. Only five percent of mortgages fall into that category, compared to about one in five U.S. mortgages. (We're more risk-averse in general; only 22% of subprime borrowers in Canada use variable-rate mortgages that are susceptive to interest rate gyrations, half the ratio seen in the U.S.) In a report, CIBC's Tal also points out that there is little connection between Canada's real estate boom and subprime loans. "Granted, some of those exotic mortgages are now being offered in Canada, but their share in the market is too small to have any material impact," he writes.

Real estate market:
While most of Canada (Alberta excluded) didn't get the crazy price increases some U.S. cities saw, it's also not getting the same dramatic decline. Housing prices have been easing and most observers agree the boom is over, but continuing strong employment, a healthy stock market and low interest rates create little reason to expect the bottom to fall out any time soon. This is in part because our market has been largely driven by renters becoming owners rather than by investors looking to cash in on quick flips.

Still, could we catch the subprime bug?
According to Garth Turner, federal MP and author of a new book, "Greater Fool: the Troubled Future of Real Estate", "Absolutely, without a doubt, that contagion is spreading to the Canadian real estate market." Pointing to dropping home prices and sales volume, and tightening lending criteria among financial institutions, he suggests that signs of a real estate market meltdown are "all around us."

However, most economists and observers are more sanguine, believing a Canadian version of the subprime mess is possible but it'd take a much less severe form. Both federal Finance Minister Jim Flaherty and the Bank of Canada have recently worried aloud about the growth in long-amortization and no-down-payment mortgages. Forty-year mortgages now represent up to a third of new mortgage business at some institutions. And because such a large portion of our net worth tends to be locked in our homes, many Canadians certainly are exposed to risks if house prices plummet or interest rates soar.

Still, for once, we can take heart in the fact that our more boring, prudent ways will likely save us from the disaster down south.

Property Owners to get a Fairer Assessment Appeal System

A fairer property tax appeal system is expected with changes announced by the provincial government.

The changes mean the onus of proof on property assessment appeals is reversed so that, when a property owner appeals an assessment, the Municipal Property Assessment Corporation (MPAC) would be required to prove the accuracy of the new assessment. The government move follows the Ombudsman’s recommendation that this measure would enhance the fairness of the appeal process. The legislation would place the onus on MPAC to prove the accuracy of property assessments that are appealed to the Assessment Review Board (ARB).

The government also intends to introduce legislation to implement changes to the assessment appeal system announced in the 2007 Budget — changes designed to create a more streamlined and transparent appeal system. A key proposed change would make the Request for Reconsideration (RFR) program the first stage of the appeal process for property owners. The RFR, which is free of charge, encourages the sharing of information between MPAC and the property owner, and provides taxpayers with the opportunity to resolve their concerns directly with MPAC in an informal setting.

The Ministry of Finance is also working with MPAC and the ARB to disclose valuation information to taxpayers about their property assessment in a timely way. This will help property owners review the accuracy of their assessment, decide whether to engage in the RFR process, and prepare for their hearing if they decide to appeal to the ARB.

These measures are proposed to take effect for the 2009 taxation year. Details about the proposed new appeal procedures and deadlines will be communicated to property owners in the coming months, prior to the 2009 implementation date.

OREA, May, 2008

Making Your Home Office More Green

Often the most wasteful room in the house, follow these simple tips to make your workspace more eco-friendly and green.

From solar rooftops to kitchen composting to bamboo flooring, Canadian homes are rapidly changing to become more sustainable, more eco-friendly, energy-efficient and less toxic places. But step into the home office and you will see that's not the same case.
Computers and gadgets stay on day and night; toxic batteries, ink cartridges and old electronics get thrown into the garbage and pretty paper made from old growth forests lands itself in the printer. Chris Winter, executive director of the Conservation Council of Ontario, says while each home is different, we tend to fall off the green living and eco-friendly wagon when it comes to our home offices. "On the whole, the trend of home offices is good from an environmental perspective: it eases gridlock and brings balance and common sense back into our lives," he says.

But the power demands of home computers, internet, cellphones, printers, fax machines and myriad other home office materials still take their toll. "Multiplied by four million homes in a given community, this is a significant energy drain," says Winter.

What can we do?Winter says the top three home office problems are energy wastage, paper consumption and hazardous wastes i.e. batteries, ink cartridges and toner. Here are 5 solutions for a greener home office.

1 Purchase a power bar and turn everything off
"It's a bad rumour that you shouldn't turn your computer off at night," says Winter. "Yes, it peaks on startup, but the base operating load of the computer for 24 hours far exceeds the startup." Not to mention everything that connects to your computer continues to drain energy even when not in use: speakers, printers, scanners, PDAs, etc. Turning everything off with the single flick of a power bar makes it easy to save energy (and money!).

2 Think laptop, not desktop
Besides being sleeker, portable and far cooler, laptops consume one-eighth the power of a traditional desktop. If everyone in the house had laptops they could be downloading music and updating their blogs all at the same time and still not be using as much power as one clunky desktop!

3 Embrace the flatscreen
Flatscreen monitors, or LCD (Liquid Crystal Display) screens, use less than half the energy of traditional CRT (Cathode Ray Tube) monitors. LCD screens are lighter, more adjustable, and cause less eye strain as they don't flicker plus their sharp display makes it easier to read text.

4 Reuse materials as much as you can
Print documents and recipes using on the back of used paper; save paper clips, push-pins, elastics, sticky flags; make a point to buy rechargeable batteries and refillable toner cartridges.

5 Recycle! Recycle! Recycle!
Buy a handy basket to throw all your old inkjet and toner cartridges, dead cell phones, PDAs, and finished rechargeable batteries and bring them back to any STAPLES Business Depot location across Canada. Staples will now accept any of these items and will send them off to be refurbished and recycled. "You no longer feel you have to keep grocery bags full of cell phones and PDAs.

You can bring them to us and know they're not going into the landfill," says Leigh Pearson, Staples manager of facility services. Alternatively, your municipal recycling and waste disposal depot will also take these off your hands.Plus, no paper should ever find its way into the wastebasket. Have a couple of trays on hand for paper piles: one for re-use and one for recycle.

Extend your home outdoors

Create a cozy outdoor room where you can entertain or just relax.

Here's the buzz in the backyard: outdoor rooms. Rather than the yard being all about the lawn and the shrubs, it's now about comfortable, cozy areas designed to entertain or relax. Here are some of the outdoor choices that are creating buzz.

Elemental Elements
Water features have been popular for years now, but the latest ones tend to be less like ponds and more like waterfalls over stone – partly because lot sizes are generally smaller and a vertical feature takes up less space than a horizontal one. But it's also because the sound of softly flowing water gives an intimate sense closer to a room than to an expanse of wilderness.

Stone is also a fantastic natural element that's hot in outdoor design. Instead of the old cement patio stones, natural – or natural look –stone is the "flooring" of choice for patio space. A new option, highlighted outside of the model home at the National Home Show in Toronto this April, is cement imprinting. In this process, wet cement is infused with solid or patterned colors in the mix. As it sets, rubber matting with a patterned design is set on top of it. The cement hardens to a textured surface that looks like real stone.

Fire has really taken off lately, as outdoor kitchens come into vogue. As entertaining moves outdoors, the concept of the bonfire or hearth as the gathering place has come back into play. Barbeques have never gone out of style, but the trend now is towards more elaborate fire elements. Outdoor fireplaces range from the portable to the impressively built. Fire pits – the jazzed-up campfire, contained within copper or cast iron – are also available. Chimineas, or Mexican-style outdoor fireplaces, feature a chubby base where the fire burns, and a tall narrow chimney to vent the smoke. And patio heaters prolong the season by providing warmth at night early in spring and into the fall.

Overhead, wooden structures such as porticos, shaded areas like gazebos, or screened-in porches admit light and air while defining space – and in some cases, keeping out mosquitoes or filtering the sun's rays.

Furnish the Space
A couple of Muskoka chairs won't do it anymore. The new outdoor space contains elegant dining suites, bar-height tables and stools, and sofas to lounge about in. New synthetic materials marry traditional looks with easy-care furnishings – such as synthetic fibers over an aluminum frame that looks like rattan. The fibers are heat and cold resistant, UV resistant and colourfast (so they won't fade), and wash easily.

Accessories and lighting are just as important outdoors as indoors. A variety of lighting options offers the possibility of entertaining at night – and many lanterns and garden lights now operate on solar power, making them an environmentally friendlier choice. Waterproof art and outdoor sculpture – decidedly not of the garden-gnome variety – are hot choices in furnishing stores from coast to coast. The trend is towards a focal piece – larger than life, and statement- producing – rather than small, kitschy pieces in the flower bed.

Go Multicultural!
Another trend is to bring garden style from around the world into your own. Mediterranean or Middle Eastern type courtyards are leading the way in creating outdoor space that has a slightly exotic feel. And a more restrained, Asian-type landscaping style remains enormously popular, bringing a peaceful and Zen sense to even small outdoor plots. Furnishings and accessories can reflect this new global feel.

But no matter what the trends the key to designing your backyard remains decorating with your home's personal style in mind. Create an outdoor space that suits you, whether that's an impressive entertaining area complete with outdoor entertainment system or a luxurious nook designed as a personal reading retreat.