Archive for the ‘USA’ Category

Global RE frothy again

Monday, September 8th, 2014

After housing markets slumped around the globe governments and central banks did what they could to reinflate them, driving down the cost of debt.

Well it worked.

The US market is down a bit from their precrash highs, but Canada is sailing high.  What’s the endgame?

With global monetary conditions so loose, governments are using regulatory tools to cool overheated housing markets. In Canada, for example, the maximum term of the riskiest mortgages has been lowered from 40 to 25 years. Regulators in both Hong Kong and Singapore have repeatedly raised stamp duties and tightened lending restrictions. The measures seem finally to be working, especially in Singapore, where prices are now falling.

So as potential home buyer on planet earth, what’s your next move? Do you go with low interest rates forever as a way to keep prices up, or do you stand back and wait for a price correction?

As an aside its interesting to note one nation whose market isn’t doing so well is Japan, where they’ve had rock bottom interest rates for a really long time.

Foreign buyers in the USA

Wednesday, August 13th, 2014

Move over China, Canada has become the top foreign investor in US real estate.

A report from commercial brokerage Marcus & Millichap, as reported by the Tampa Bay Times, found that, “an influx of cash-laden foreign investors, especially from Canada and South America, are targeting assets in Tampa Bay for lower entry costs and higher initial yields.”

It’s all pointing to signs of limitless, massive growth opportunity.

While opportunities across the United States are, in fact, limitless for Canadian investors, the key to investing well is to identify hot spots others have not identified. Take Phoenix, Arizona, for example, where Talia Jevan Properties Inc.’s High Income Real Estate has been aggressively buying property.

“Phoenix became one of the most battered real estate regions in the country,” noted Harmel Rayat. “Nowadays, the region just finished securing $430 million in deals in 2013 alone thanks to higher occupancy rates, falling unemployment, and opportunities for strong population growth.”

Read the full article here.

Americans moving for affordable housing

Monday, August 4th, 2014

The fastest growing cities in America are now the ones where housing is more affordable than average.

This is a change from the early part of the millennium where credit was easy and mortgages were easy to get.

Rising rents and the difficulty of securing a mortgage on the coasts have proved a boon to inland cities that offer the middle class a firmer footing and an easier life. In the eternal competition among urban centers, the shift has produced some new winners.

Oklahoma City, for example, has outpaced most other cities in growth since 2011, becoming the 12th-fastest-growing city last year. It has also won over a coveted demographic, young adults age 25 to 34, going from a net loss of millennials to a net gain. Other affordable cities that have jumped in the growth rankings include several in Texas, including El Paso and San Antonio, as well as Columbus, Ohio, and Little Rock, Ark.

Newcomers in Oklahoma City have traded traffic jams and preschool waiting lists for master suites the size of their old apartments. The sons of Lorin Olson, a stem cell biologist who moved here from New York’s Upper East Side, now ride bikes in their suburban neighborhood and go home to a four-bedroom house. Hector Lopez, a caricature artist, lives in a loft apartment here for less than he paid to stay in a garage near Los Angeles. Tony Trammell, one of a group of about a dozen friends to make the move from San Diego, paid $260,000 for his 3,300-square-foot home in a nearby suburb.

Read the full article in the NY Times.

If you’ve tried to hire someone from outside Vancouver for a position here, you may be aware of the challenge presented by expensive housing.

Are home buyers foolish?

Wednesday, July 16th, 2014

Seems a rather odd question to ask, after all homebuyers have seen a sharp rise in equity over the last several years.

But a sharp correction in the US seems to have split young buyers on the option of buying.

Some see it as a good investment, but there are apparently increasing numbers of young Americans who view property as an anchor limiting mobility rather than a sensible investment.

When Kimberly walked up to the front door of a beautiful, 7,500 square foot colonial, anchored in a terrific cul-de-sac in northern Baltimore County, she said to herself: “All my life I thought this was what I wanted. But as beautiful as this property is, I see nothing but a money pit and a trap.”

The 32-year old congressional aide who was arriving at the house for a charity event chose to satisfy her curiosity by exploring the grand rooms and perfect fixtures, only to finally decide, “Yeah, not only would I never buy an individual house, I’d be shocked if my friends would as well.”

Read the full article over at CNBC.

The everything bubble: how does it end?

Tuesday, July 8th, 2014

Does every major asset seem expensive to you right now?  Does it seem overpriced?

Well, what if it is, where do we end up?

The NY Times has an article titled How The Everything Boom might end: The Good, Bad and the ugly.

Basically it breaks down into (1) the good: Low price of capital unleashes productivity, economy grows into current valuations. (2) The bad: Japan style stagnation 15 years of low rates and low returns or (3) the ugly: spike in prices with a depressed economy.

But the pattern of the last few years shows that the “bad” scenario has been closest to the reality. That doesn’t mean the rest of the bad script will continue in the years ahead, but it should prompt those predicting the first or third outcome to wrestle with why they have been wrong so far.

So what do you think? Whats the future look like from your view point and would it have been any easier to predict the future in the past?

Vancouver a graveyard for job seekers?

Wednesday, April 16th, 2014

There’s been some discussion lately about the temporary foreign worker program (TFW) and whether Canada needs to import workers, skilled or unskilled.

This of course brings up the debate: companies say they can’t find people to fill positions, workers say thats just because you aren’t paying enough.

Is there something special about Vancouver that enables lower wages to be paid or are is it not true that Vancouverites tend to be underpaid?

Atomic Frog had this to say:

Here are some of the facts that I know of

Highly skilled and highly in demand workers do not stay in Vancouver. You get paid higher in another city and cost of living is likely lower than living in Vancouver. Local companies ALWAYS have problem hiring qualified applicants and if this snowball, they cannot stay in business for very long or be very competitive in their sector. What kind of industry is doing very well in Vancouver anyway these days? Movie industry? Mining? Tech? I work in the local IT industry for the last 20 yrs. I saw all kind of IT ppl who came to town, found a job and eventually left town after a couple of yrs because they had found a much better paying job in another city.

As a result, Vancouver is considered to be a graveyard for job seekers. Even for those who have a job, local salary has been stagnant for yrs. Without a steady stream of local workers who should see their annual salary go up steadily every yr, it is very difficult for this local property bubble to continue.

There are many cases in other parts of the world where property value goes up and stay there. Main reason being foreign investor, but the locals also keep making more money over the yrs. Prices that were higher five yrs ago may not seem to be that high for those cities. However, can we say the same thing for Vancouver?

Do you know skilled workers that have sought better career opportunities outside of Vancouver or are you and your coworkers properly compensated and happy to stay?

Chuck Norris and Vancouver Facts

Monday, July 29th, 2013

Bubble blind Canadians are amazed at the asking price for the Dallas home of Chuck Norris.

Yes, Vancouver, there are places you can get a decent home for $1.2 million.

You’d have to make do with just 4 bedrooms and 8 bathrooms in just over 7,000 square feet.

There’s a theater, a gym, a pool. You know, the basics.

Chuck Norris House

 

Of course, what it doesn’t have is Vancouver.

And for those that don’t know, here are a few Vancouver facts courtesy of reader crikey

Vancouver fact #20:
In Vancouver you can ski, surf, swim, and spend eight hours in the Emergency Room waiting to see a doctor to treat your hypothermia — all in the same day!

Vancouver fact #56:
Vancouver’s property salepeople’s tears can cure cancer. Its a shame that none of them will ever have reason to cry, since Vancouver home prices are only ever going to go up.

Vancouver fact #106
Vancouver could shrink its abundance of rainy days if it *really* wanted to. But Vancouver chooses to allow so much crummy weather every year because it is being ironically hip.

Vancouver fact #66
Children in Vancouver seldom bother to buy chewing gum. There is no point do doing so, because everybody knows that some fundamental laws don’t apply to Vancouver, bubbles cannot ever form in Vancouver.

Vancouver fact #27
Vancouver is home to the greatest Wizards in on Earth! Harry Potter and Gandalf look like rank amateurs compared to Cam Good, a Wizard/salesperson who once put a group of Vancouver property salespeople in a yellow helicopter and magically transformed them on the evening TV news into well-monied overseas investors scouring the city for purchases. More recently, the Wizards at ‘MAC Marketing Solutions’ took two unrelated employees with different nationalities
and magically turned them, on various leading nightly TV new broadcasts, into sisters whose wealthy parents were buying into the condominium market — from the selfsame building MAC was marketing!

(more…)

TD defends Canada from Krugman

Monday, June 24th, 2013

Why is everybody picking on the Canadian housing market lately?

US economist Paul Krugman was one of the latest to say that we’re at risk for a housing market collapse.

An economist at TD bank couldn’t let that stand though, and was there to defend our delicate reputation.

“Largely owing to a continued low interest rate environment, mortgage interest costs as a per cent of personal disposable income have fallen despite the sharp rise in the debt-to-income ratio,” she added in her report.

“Meanwhile, while mortgage delinquency rates in Canada and the U.S. were similar during the 1990s, the per cent of mortgages in arrears 90 days or more in Canada is about a third of what they were in the U.S. leading up to the 2008-2009 crisis.”

Ms. Petramala cited the “riskier lending practices” in the U.S. between 2002 and 2007, and the tighter restrictions now in place in Canada.

Of course the reason ‘tighter restrictions’ are in place now in Canada was because they had become rather loose.  And as Patriotz points out, mortgages arrears are a trailing rather than leading indicator.

The TD spokesperson is ignoring the fact that the US housing bust started in 2006, when mortgage arrears were at historic lows, not in 2008. Mortgage arrears are a lagging indicator of falling prices.

Lots more “it’s different here” for your enjoyment.

Read the full article in the Globe and Mail.

Learning from the neighbors

Monday, May 6th, 2013

There’s another one of those semantics question articles in the Financial Post:

Canadian Housing: Bursting bubble or gentle landing?

Here’s one chunk of that article with a few asides that always seem to be missed:

Lewandowski believes Canada will not suffer a U.S.-style housing crash simply because policymakers had the benefit of watching it happen next door.

“What we experienced here in the U.S. with housing markets and regulators goes directly to the attitude and changes the minister of finance has made in Canada. A regulator who is being proactive is taking Step One in making sure the housing market doesn’t find itself in a bubble,” Lewandowski said.

So often it seems that ‘bubble’ is used as if it refers to the collapse in prices. It doesn’t. The ‘bubble’ is the inflation of prices beyond reason. By the time the collapse comes the damage is already baked in, falling prices are a correction of the problem, not the problem itself.

Both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have been on the march against a housing bubble for years, aware how low rates and loose lending standards in the United States ignited a boom and bust there.

Well, Carney and Flaherty have definitely been ‘warning’ of consumer debt levels for a while, but government policies like following the US into 40 year zero down mortgages didn’t help to prevent a housing bubble.

The central bank has held rates low since the global financial crisis because growth remains tepid and global woes weigh on Canada’s export market, and Canadians can find a five-year mortgage rate below 3%.

Meanwhile in the states you can lock in to a 30 year mortgage for 3.35%. In fact, while house prices in the US were correcting, interest rates were falling as well.

But the government’s gradual tightening of rules for borrowers — a firm admission that the market was hotter than anyone was comfortable with — has taken some steam out of the market, and economists, like Carney, seem to believe a soft landing may be at hand.

“We’re encouraged by the fact the level of housing starts has come down to slightly below demographic demand, as we see right now, there’s still more adjustments to go,” he said in testimony to Parliament last week. “We’re encouraged by the evolution of house prices in a number of markets. We’re on the path to a balanced evolution of the household sector and we all have to continue to be vigilant.”

Ok, we’ll continue to be vigilant then.

Zombie foreclosures

Tuesday, April 2nd, 2013

Here’s a weird scene from the aftermath of the US housing bubble…

You’ve all heard of underwater mortgages, but have you ever heard of a zombie foreclosure?

There are more than 300,000 properties in the US where the owner has abandoned the property but the bank never completed a foreclosure.

What does this mean?

Reuters revealed the plight of people who walked away from their homes not realizing that their names remained on the deed and that they were financially liable for taxes and other bills related to the abandoned property.

In some cases, homeowners vacated after receiving a notice from the bank of a planned foreclosure sale, only to find out later the bank never followed through.

Zombie properties can be easy to spot as they deteriorate into neighborhood eyesores and havens for criminal activity.

Read the full article here.

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