Wednesday, May 31, 2006

Building Costs Could Soar in US

Up to 40 % of new-home construction in the US is being done wholly or partly by undocumented immigrants. Fuentes suspects the percentage in his home state of Texas is closer to 80 %.

36 % of insulation workers, 29 % of roofers, and 28 % of drywall installers are "unauthorized workers."

Big builders don't employ construction workers, legal or illegal. They hire subcontractors that in turn hire the workers who do the actual sawing and hammering. The entire home building business is outsourced. It's unclear whether this setup will protect builders should the feds start enforcing immigration laws more vigorously.

A crackdown on undocumented workers would shrivel an already tight construction labor market. Lee Wetherington of Lee Wetherington Homes in Sarasota, Fla., estimates that 70 percent of the workers employed by his subcontractors are Hispanic immigrants.

If for any reason they lose that work force, we're going to see the time required to build a house double or triple and the cost of new homes increase 30 to 40 %.

If developers find they can't pass along those costs, they may pull back on construction - and fewer new homes could ultimately boost prices of existing homes.

Saturday, May 27, 2006

Bank of Canada Raises Rate by 0.25 % to 4.25 %

The Bank of Canada on May 24 announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 4.25 %. The operating band for the overnight rate is correspondingly increased, and the Bank Rate is now 4.5 per cent.

The strong momentum in the global and Canadian economies has continued, although there has recently been an increased degree of volatility in commodity markets, foreign exchange markets, and financial markets more generally. Recent Canadian data confirm that domestic demand remains solid, and that both CPI and core inflation are evolving largely in line with the Bank's expectations.

Tuesday, May 23, 2006

After Party Night in a Rental Apartment


You probably weren't there for the last party night, but with a little help from YouTube, we can all be there for the hipster party aftermath. Though filmed back in February, the video is timeless. Just... wow.

Time to Call In a Surveyor

A surveyor draws a map that shows the property limits as well as where the house, garage, and other features, such as boundary fences or walls, driveways and barns and sheds, are located. It also reveals easements such as power poles, sewer manholes, catch basins, drainage ditches, phone and cable TV boxes. This information is especially important when the homeowner or a neighbor undertakes to build any improvements.

Expensive law suits can arise over inconsequential property disagreements. A man sued his neighbor over 9 inches of property. The target of the suit had a driveway that came right up to the lot line of the suing party and when the driveway owner left his car he would always step on the guy's grass. The nine inches and the stepping on the grass didn't start the argument, but that's where it went.

Or two brothers lived side-by-side for years before one had a daughter who wanted to go to college. He applied for a loan and the bank required a survey, which found his metal-rod boundary markers were six inches over on the other brother's lot. They argued and one brother shot and killed the other over it.

Some guys tried to run us over with their car. They're in a dispute with their sister over the lot line and had laid railroad ties over her driveway to block her access. Her lot was on property that had been split off from theirs many years before.

It can be vital to update surveys before undertaking a project.

A homeowner had a fence put up in the wrong place and wanted to sue a surveyor. A woman claimed the fence company used a survey she had done several years earlier and still wound up several feet on the wrong side of her neighbor's yard. Obviously, the survey was incorrect. But the builders had taken measurements from the back of the house, which the surveyor mapped as being a certain distance from the rear plot line.
What the fence builders didn't know, that the house had an addition built on after the survey had been done.

Surveying can be a risky business. Many property owners react angrily just seeing a surveyor. They think it means a neighbor is subdividing or putting in a strip mall or something. But where surveyors can really get into trouble is when they step into the middle of a dispute that goes way beyond disagreements over a few feet of property and involves much more personal animosity.

The cost of avoiding some of this by having a survey done is not prohibitive. They usually cost between $500 and $1,500 although bigger jobs may run higher. It can be money well spent.

With property values so high, knowing just where your land begins and ends is more important than ever. People employ surveyors to get a precise map of their lot and lenders and title insurers often require home buyers to survey a property being purchased before they close on it.

Somebody buying a house would want to know about any problems before they buy. But for years the number of surveys done kept shrinking.

Historically, a survey would be done to make title insurers feel more secure. Insurers, however, found that the incidence of paying off claims has been very low so they've been taking some of that risk.

Now, some title insurers seem to be going back to the requirement.

Adding to the trend is that the average lot size is shrinking, even as the average home size ballooned. People are building 6,000 square foot homes on 8,000 square foot lots. Tolerances are so tight that owners have to be more careful than in the past.

Part of that is new government regulations. Rules and laws dictate location and distance wells must be in relation to septic systems, for example, much more so than in the past. There are regulations about where decks or additions have to end and where utilities can place sewer pipes, electrical conduits and power lines. Many communities dictate how far a swimming pool has to be located away from the lot line.

If the swimming pool gets built in the wrong place, it could cost a fortune to correct the problem.

It's preferable to spend the $500 for a new survey if you have any doubt about where your property limits are.

Monday, May 22, 2006

Ontario's Housing Affordability Declines as Housing Slowdown Continues

Ontario's housing market witnessed a mild drop in affordability across all classes.

While the province continues to see signs of a soft landing for its housing market, there was still some marked deterioration. Despite income gains of about $50 per month this quarter, it was not enough to offset higher mortgage rates and higher
utility costs, which helped drive up the cost of owning a home in Ontario.

Housing Affordability Index, which measures the proportion of pre-tax household income needed to service the costs of owning a home, deteriorated for the benchmark detached bungalow in Ontario to 36.4 %.

A standard two-storey home in the province now requires about 41.8 % of household income and a standard townhouse absorbs about 29.7 %. However for the first quarter of 2006, the cost required to maintain a standard condo jumped to 27.1 % of household income.

The condo sector saw prices jump 7 % from the previous year, with the average price of a condo in Ontario at about $206,453. This price jump has enabled condo owners to realize about 3.5 % gains in the value of their units in one quarter alone.

Meanwhile, the pace of price appreciation for other housing classes appears to be slowing. The cost of a two-storey home and a townhouse declined for the first quarter, compared to the previous.

Residential permits and housing starts retreated in 2005 and have continued to weaken in 2006. March permits dropped 10 per cent and April starts were down 22 per cent from the previous year, continuing to reinforce expectations of a slowdown in Ontario's hot housing market.

In Toronto, two-storey homes saw a mild affordability improvement as prices dipped this quarter, while other housing classes deteriorated. The condo sector felt the sharpest affordability erosion as a result of higher prices, higher mortgage rates and higher monthly utility costs.

Long-term indicators suggest that overall price increases in Toronto are continuing to cool from the 7 to 10 % range over the past couple of years down to the 3 to 5 % range more recently.

In Ottawa, there was little change in affordability but all home classes experienced some form of mild deterioration for a second consecutive quarter.

While the detached bungalow and condo sectors both witnessed declining prices for the first quarter of 2006, year-over-year price appreciation remained healthy. To date, Ottawa has avoided the volatility in affordability conditions that other regions have experienced and continues to offer a relatively stable housing market to homebuyers.

The Bank of Canada Will Raise Interest Rate on May 24

The BoC will raise interest rate on May 24, 2006 and then pause, deciding that 7 straight increases are enough to keep inflation in check without triggering a currency surge, analysts said.

The central bank will raise its target rate for overnight loans between commercial banks a quarter point to 4.25 %, the highest since August 2001. The rate announcement is scheduled for May 24 at 9 a.m. Ottawa time. The bank will then pause through at least September 2006.

A rate increase will serve as "insurance" against rapid inflation in Canada.

A 7th increase would bring the total gain in the benchmark rate since September to 1.75 percentage points, the largest cumulative move since a period that spanned 1997 and 1998. The central bank said last month it would study the impact of past rate increases before deciding whether to keep going. Higher rates might deter borrowing and spending, slowing growth.

The dollar's rise after his April announcement wasn't closely tied to demand for the country's goods. Some economists say the remark signaled the central bank's unwillingness to keep raising rates after.

Monday, May 08, 2006

Ottawa Housing Starts Drop in April

Ottawa housing starts fell by a 13.3 % in April from one year earlier, a surprising signal of weakness in what has been a buoyant sector of the economy.

Residential construction starts dropped to an annualized rate of 218,100 last month, down from a revised figure of 251,700 reported in April.

The slowdown doesn't mean the party is over just yet for home builders and buyers who have been enjoying a red-hot market.

It likely won't deter the BoC from raising interest rates.

Western Canada is expected to remain a hotbed of residential construction activity, fuelled by an exploding resource economy, drawing a steady stream of workers, as well as relatively low mortgage rates.

Despite April's broad-based decline, there are good reasons to believe that the new housing market remains a pillar of strength.

The volatility often seen in multiple dwelling construction and the April statistics don't suggest significant weakening in the economy.

And that means the BoC could raise its key short-term interest rate at its next opportunity on May 24 to 4.25 %.

Declines in new home construction were noted in every region of the country in April.

But multiple family construction in urban areas was hit hardest, dropping by 22 %. Its lowest level since last August.

Construction starts on single-family homes also fell last month by 6 %, marking the third straight negative month.

Quebec saw a whopping drop of 24.7 % in multiple family dwellings while a 20 per cent decline was reported on the Prairies.

April's total of 96,500 multiple-unit starts was significantly less than the 123,000 reported in March 2006.

Multiple starts gave back all the gains registered last month.

In contrast to the volatility in multiple starts, the pace of single starts is slowing consistently as expected.

Multiple dwelling starts tend to be volatile, so the dramatic movements in April don't mean the housing sector is sinking.

With an unemployment rate of 6.4 % in April and interest rates relatively low, the housing market may cool but shouldn't crash in 2006.

We see evidence that the housing sector will continue moderating towards a soft landing amid a very solid employment picture and still-low borrowing costs, which will support the sector.

In Ottawa, total urban starts were down 12.2 % with single urban starts declining more than multiples.

The declines in the Atlantic region and British Columbia were relatively modest at 6.5 % and 2.3 % respectively.

Rural starts in April were estimated at an annual rate of 31,100.

In the first four months of 2006, actual urban starts were up 8.3 % when compared to the same period a year earlier.

Sunday, May 07, 2006

Ottawa Cuts Home Energy Efficiency Grants

Ottawa government has quietly axed a program to help low-income households cope with high energy costs.

EnerGuide for Low Income Houses (EGLIH), a $500-million, five-year initiative introduced with all-party support last November, is the 14th Kyoto climate accord program to bite the dust.

All climate change-related initiatives are being re-examined to make sure they will achieve results for Canada. The government decided not to continue with the delivery of the EGLIH program because they're looking at options. The organization has been told grants already approved under EGLIH will be honoured, but no new ones will be given. EGLIH is the last thing I would have imagined them cutting.

The program would have helped 130,000 low-income households cut their energy bills by an average of 30 per cent, while reducing individual household emissions by 30 per cent.

PM Stephen Harper has condemned the Liberals' Kyoto-implementation plan as ineffective, promising to replace it with a new "made-in-Canada" plan to curb greenhouse gas emissions.

The government has already cut 13 climate programs, including the One-Tonne Challenge advertising campaign. Rumours of additional cuts are running rampant in the environmental community.

Green Communities, an association of 40 community groups, has written to Harper pleading for the home retrofit program to be preserved.

Without EGLIH, Canada will have no strategy to protect low-income households from escalating energy prices, and no strategy to engage these households in the effort to reduce energy-related pollution. But EGLIH is cost-effective and made-in-Canada is practical and realistic.

If EGLIH is cancelled, it will be a serious blow to a great many organizations, agencies and businesses that have invested their own resources in good faith to begin delivering the program.

The five-year EGLIH program is modelled on the popular EnerGuide program which provides subsidies for home-owners who retrofit their houses, but the incentives are more generous. The EnerGuide program remains in place for now.

No comment was available from PM's office or from Environment Minister.

Friday, May 05, 2006

Tie Rent Hikes to Consumer Price Index in Ontario

Ontario's housing minister has introduced a bill to limit annual rent increases to no more than the Consumer Price Index in an effort to protect tenants from exorbitant rental hikes.

Housing Minister John Gerretsen says the proposed legislation protects the province's 1.35 million rental households.

Last year, the consumer price index was at 2.2 per cent. It was 1.9 per cent in 2004.

Under previous rules, landlords were allowed to raise rents by two per cent each year. However, rents were allowed to go higher if landlords could show they incurred higher operating costs.

Gerretsen says the proposed legislation would not hurt landlords and would keep the rental market strong.


Building Permits Up in March

Building permits issued in Ottawa jumped by a stronger than expected 5.3% in March.

Analysts had expected building permits to rise 2.0 % in March.

Non-residential permits surged 15.1 % after an already-strong 15.3 % climb in February.

Non-residential permits were 16.1 % higher than the average monthly rate in 2005, considered a great 2006 year for builders.

The Ottawa housing sector fell 0.1 percent in March as demand for single-family units dropped even though permits for multi-family dwellings rose for the third straight month.