OTTAWA HOUSING MARKET

NCC buys three more acres in Gatineau Park

2008-10-02T13:57:00.001-04:00

The National Capital Commission has agreed to buy an additional three acres of private property within Gatineau Park as part of its plan to buy up to $385 million worth of land to prevent further development inside the federal park.

On Monday, the NCC announced its board of directors had approved the purchase of a two-acre lot on Lac-la-Peche Road and a one acre lot on Kingsmere Road.

Terms of the purchase were not released.

"The acquisition of these vacant lands supports our objective to acquire privately owned properties in Gatineau Park that, based on the Gatineau Park Master Plan and the NCC's budget envelope, are priorities for acquisition," said NCC chief executive Marie Lemay in a statement.

The NCC is currently developing an updated inventory of the 1,400 acres of privately owned land within the park boundaries.

U.S. Headed for Deep Recession

2008-10-02T13:44:00.002-04:00

The U.S. is likely headed for a deep recession, the International Monetary Fund warned Thursday in a report in which it notes that the current banking crisis is the type that's most likely to lead to such a downturn, and suggesting the government's proposed bailout of the banking system is the right course of action.

Episodes of financial turmoil characterized by banking sector distress are more likely to be associated with severe and protracted downturns.

Financial stress is more likely to be followed by an economic downturn when it is preceded by a rapid expansion of credit, a run-up in house prices and heavy borrowing by households and non-financial firms. The current situation of the United States bears some resemblance to previous episodes of banking-related financial stress episodes that were followed by recessions.

Based on a comparison of the current episode of financial stress to previous episodes, there remains a substantial likelihood of a sharp downturn in the United States.

Not all episodes of financial stress lead to economic slowdowns or recessions.

However, when a slowdown or recession is preceded by financial stress, and especially when the stress is concentrated in the banking sector, typically it is substantially more severe than slowdowns or recessions not preceded by financial stress. In particular, slowdowns or recessions preceded by bank-related stress tend to involve two to three times greater cumulative output losses and tend to endure two to four times as long.

The odds that a banking-related crisis is followed by a slowdown or recession is associated with the extent to which house prices and outstanding credit have risen prior to the eruption of the crisis. Further, while greater reliance on borrowing by non-financial corporations is associated with a sharper downturn in the aftermath of financial stress, the indebtedness of households is crucial in determining whether the downturn will turn into a recession.

However, the relatively strong positions of corporate balance sheets at the onset of the crisis and the aggressive monetary easing by the U.S. Federal Reserve may provide some cushion in the U.S., while the relatively strong balance sheets of European households offer some protection against a sharp downturn there.

In the current circumstances, strong actions by policy-makers to deal with the stress and support the restoration of financial system capital seem particularly important.

Canada Likely Bound for Rate Cuts

2008-10-02T13:37:00.002-04:00

Canada is safe from recession, even if the U.S. Congress rejects a bailout package and global credit dries up further, but the economy may take enough of a beating to force the Bank of Canada to cut interest rates.

Credit is harder to come by for Canadian businesses, curtailing their investments. U.S. consumer purchases of made-in-Canada goods is wilting and commodity prices are slamming into reverse from record highs.

That toxic mix has sent economists back to their models to churn out lower growth forecasts for both 2008 and 2009, raising the likelihood that the central bank will have to consider easing borrowing conditions.

If the U.S. government can't put something through, that clearly increases the risk to Canada through the end of the year and into next year.

The export sector, heavy reliant on the U.S. market, is getting clobbered and 70,000 factory jobs have been lost in the past year. But commodity prices are still higher than a year ago, padding household and corporate income.

At this point we don't really see negative growth for Canada, even in the worst-case scenario. We still look at them as being able to eke out a little bit of growth because they've been so resilient thus far.

Last month after holding rates steady at 3%, the Bank of Canada flagged a worsening U.S. outlook as one key risk that could prompt it to change its mind on rates. In a Sept. 25 speech Governor Mark Carney said this risk had become "more probable."
Markets on Thursday had priced in a 96% probability of a rate cut on Oct. 21 due to the financial market meltdown, up from 51% on Sept. 23.
Some economists are gradually coming around to that view as well.

Even if the rescue package is passed, I'm still assuming that there is about a 60 % chance the bank will cut in October.

Strong Showing for Ottawa Housing Prices

2008-10-02T13:07:00.001-04:00

Ottawa's hot housing market is bucking the national trend as homes in the region averaged a near six-per-cent increase year-over-year in August.

Its report on Canada's major markets cataloged a 5.1% decrease in prices compared with last year, with an average listing price at $316,052.

The rosy numbers in Ottawa were a stark contrast to the situation in most other regional housing markets. Calgary's average price of $390,091 was eight per cent less than last year. Vancouver fell by 5.2%, and Edmonton also dropped by 4.8%.

However, Regina's area saw a strong 36% gain, with markets in Saskatoon and Winnipeg also posting gains of at least 10% each.

With the fall in prices also came a drop in listings and mortgage rates.

Ottawa Home Construction Slows

2008-10-02T12:46:00.001-04:00

A 14% drop in Ottawa's housing starts in August was the first significant decline in recent months.

Housing starts fell to 639 last month compared to 743 units in August 2007
However, year-to-date figures show growth in starts has moderated to a "still solid" 14.3% above 2007.

Townhomes continue to drive Ottawa's new home market, up 22.5% over August 2007 and up 28.2% for the year. Single-detached properties - which fell slightly in August by 2.4 % compared to August 2007 - still represented 45% of total starts in Ottawa.

Housing starts in the Gatineau area were up by 21%, to 363 from 299, from the same month a year ago.

Canadian Economic Slowdown Will Be Brief

2008-07-04T08:26:00.000-04:00

Canada's economy will manage growth of just 1.4% in 2008 but stage a quick recovery next year when it is expected to expand by 2.5%.

Weakness in the U.S. economy has had an impact on Canada's economic growth, but domestic demand has helped mitigate the drag.

The surprise economic contraction will be short-lived as growth prospects for the remainder of the year should brighten, with financial market pressures starting to ease, the U.S. economy getting a boost from the issuance of tax rebate checks, and commodity prices remaining historically high.

Canada's core inflation rate will trend higher this year but remain below the Bank of Canada's 2% target and stay there through 2009.

Canada's housing market is also poised to cool as soaring prices have driven the cost of home ownership beyond the reach of many families. Housing affordability in most major markets across the country has deteriorated to its worst levels in almost 20 years.

However, the extent of any weakening is expected to be much less pronounced than what is occurring currently in the U.S. as the Canadian market did not experience many of the excesses evident south of the border.

U.S. economic growth to be modest this year, rising 1.5%. Growth is projected to strengthen to 2% in 2009. We believe that the U.S. economy will avoid a contraction this year and should start to see sustained upward growth momentum in 2009.

Canada's Cautious on Economy

2008-07-02T12:46:00.002-04:00

Canadian Finance Minister said he was concerned that economic weakness in the United States, his country's top trading partner, could hold back the domestic economy in the coming months.

He welcomed Monday's stronger-than-expected report on April gross domestic product, which showed Canada's economy had expanded for the first time in three months.

Even so, "one month does not make a trend.

He was concerned about the impact of the U.S. housing crisis on the economy south of the border and believed the property market would not sort itself out until next year.

Despite the headwinds, he believed Canada's economy could continue to grow, though at a slower pace, due to the country's solid fundamentals and a strong labor market.

A rebound in manufacturing helped Canada's economy grow by 0.4 % in April after two months of contraction. The April performance was slightly more robust that market expectations of a 0.3 % increase, and it followed contractions in March and February of 0.2 % and 0.3 %, respectively.

The Canadian economy shrank by an annualized 0.3 %in the first three months of the year, the first quarterly contraction since since April-June 2003.

He was still confident that the government would show a budget surplus this year.

Canadians Should Expect to See Considerably Slower Gains in Wealth in the NextvTwo Years

2008-07-02T12:43:00.001-04:00

Canadians should expect to see considerably slower gains in wealth in the next two years, limiting their ability to spend.

Consumer spending will slow from a more than 5% annualized rate of increase in early 2008 to about 2.6% in 2009.

Canadians have been able to spend "almost like drunken sailors" over the past 2 years because high commodity prices have brought great wealth into the country.

But most factors point to lower household wealth gains in the next couple of years, including stabilizing commodity prices, lower house price increases and higher unemployment.

Nominal gross domestic product, which includes inflation, will fall from 5.9% in 2007 to 4.1% this year and 3.5% in 2009.

Real GDP, which adjusts for the impact of inflation, is also slowing from 2.7% in 2007 to 1% this year, before recovering somewhat to 1.8% in 2009.

Two-thirds Disapprove of Ottawa Mayor Larry O'Brien

2008-07-02T12:34:00.004-04:00

Ottawa City council itself took a beating in the survey, which ran from May 2 to May 30, after garnering at 80.7 disapproval rating. Ottawa Mayor Larry O'Brien generating a 68.7 per cent disapproval rating after nearly 2 years in office.

Though most councilors polled at under 50 % individually, there were some bright spots. Osgoode Councilor Doug Thompson ranked the highest, with an overall approval rating of 71.4%. Gloucester-Southgate Councilor Diane Deans, meanwhile, finished with the highest disapproval rating of 75%.

Though experts have often disputed the accuracy and reliability of online polling, their popularity has skyrocketed in recent years. Over 700 individuals rated city council in their survey, which asked respondents to answer 47 questions on councilors' performance.

Ottawa Approves Plasco Tax Break

2008-07-02T12:33:00.002-04:00

Ottawa city committee endorsed a property tax exemption for Plasco Energy.

The company is running a test waste-to-energy plant on city property at the municipally owned Trail Rd landfill, and the municipality is a partner of the company's. The city has an agreement with the company stating its garbage disposal technology, which eliminates the need for new landfills, will be used to handle all city garbage if the company wins approval from the province's environment ministry.

Plasco officials requested to be exempted from paying property taxes of about $72,000 per year. The exemption will be before city council next week for final approval.

Canadian Economy on the Rebound

2008-06-30T11:14:00.003-04:00

Canadians should have an extra reason to celebrate Canada Day Tuesday, which will follow expected news Monday that, after two months of shrinkage and a first-quarter decline, the economy rebounded in April.

We are expecting a decent gain in real GDP in April after two months of negative economic growth, in part due to adverse winter weather which kept consumers shoveling snow rather than shopping and resulted in the first quarterly decline in five years. Wholesale and retail sales rebounded during the month, along with manufacturing shipments, supported by strong wage growth and continued employment gains.

However, any celebration, and the rebound itself, will likely be tempered by what analysts also expect will be further evidence of weak housing activity and shrinking auto production.

The spirits of Canadian auto workers won't be lifted by the news out of the U.S. on Tuesday.

It anticipates the June vehicle sales report for the U.S. -- the destination for 80 per cent of Canadian auto production -- will fall below the 14-million mark for the first time in 10 years, in part reflecting the impact of soaring gasoline prices on sales of light trucks and SUVs.

Meanwhile, other reports coming this week out of the U.S., Canada's main export market, aren't expected to give Canadians reason to cheer and will likely give Americans even less reason to celebrate their July 4 holiday on Friday.

The news includes the June employment report, coming Thursday, which we expect will show further job shedding as U.S. firms try to deal with rising fuel and borrowing costs. On the bright side, it expects, despite further job losses, the unemployment rate will ease slightly after jumping to a three-year high of 5.5% in May.

An index of manufacturing activity in the U.S. on Tuesday, meanwhile, is also expected to reveal further weakness, though that should be offset a bit by a report Thursday that is expected to show a slight rebound in non-manufacturing activity there, reflecting in part the impact of the tax-rebate economic stimulus package.

The U.S. manufacturing sector continues to struggle under the weight of sluggish domestic demand and high input costs. Despite the important offset that the export sector continues to provide to these factors, we expect the deterioration in the U.S. manufacturing sector to (have continued) in June.

With the U.S. economy continuing to struggle, we are unlikely to see any sustained upswing in Canadian economic activity in the near term.

On Friday, Statistics Canada will release a report on the state of pension plans at the end of last year, which in light of the losses on stock markets last summer and fall, will not likely do much to improve the mood of Canadian worker.

Measure and Mismeasure of the Canadian Economy

2008-06-30T11:08:00.003-04:00

GDP — or Gross Domestic Product — is the most widely used indicator of the overall size and health of a country 's economy.

The "Gross" in GDP means that it includes the costs associated with the depreciation of things like buildings machinery and equipment.

The "Domestic" refers to the requirement that the economic activity must take place within the boundaries of Canada, so goods produced by Canadian companies overseas are not factored in, and goods produced for foreign companies in Canada are.

As for "Product," GDP measures the result of production — the value of all good and services produced in one year.

When you see GDP growth figures cited, they're usually "real" GDP figures. Real GDP excludes the effects of inflation, so it's easy to see if the economy "really" grew, or if inflation alone was responsible for the increase in a country's total output.

The growth in real GDP is widely used as a standard to indicate the economy's health. It is this growth figure that economists look for in the GDP reports that Statistics Canada churns out and releases at the end of every month.
How is GDP calculated?

Statistics Canada gathers much of the raw data it uses to calculate GDP from its own surveys, like the monthly survey of manufacturing or the survey of employment, payrolls and hours. It also gathers data from other federal departments and agencies, other levels of government and from private industry.

There are many ways to express a country's GDP. Statistics Canada calculates the country's GDP by industry. It divides the economy into goods-producing industries (like manufacturing, construction, and energy) and service-producing industries (like retail trade, health care, and finance).

GDP is calculated on a "value-added" basis. In other words, only the value of production added at each state of the manufacture of a product is counted. If this didn't happen, production would be double-counted and GDP would be inflated.
Problems with GDP

GDP, to put it bluntly, is a blunt instrument. It was designed in the wake of the Great Depression as a way of measuring the size of a country's productive output. But in the decades since, it has been wielded as a sign of economic well-being, even the happiness of the citizenry. If a country's real GDP rises by four per cent in a year, it doesn't seem to take long before you see politicians taking credit for building a "strong" economy. Times are good, and all that.

Even as a measure of economic output, however, GDP has its limitations. Take a look at the first quarter of 2008, when the Canadian economy contracted at an annualized 0.3 per cent that quarter and the U.S. economy grew by 0.9 per cent.

That leaves the impression that the Canadian economy was doing worse than the U.S. economy, which was struggling with rising unemployment, slumping auto sales, and one of the worst housing downturns in decades.

"Without resorting to hyperbole, this understates the relative performance of the Canadian economy by a country mile," said BMO Capital Markets economist Doug Porter in a report he titled "Does GDP Matter?" (He says yes, but not as much as usual.)

More fundamental criticisms of GDP arise when one takes a look at what it measures, and especially what it doesn't. GDP, for instance, does not measure unpaid housework and caregiving. When a maid or professional caregiver is hired, however, that does add to a country's GDP. GDP figures also do not take into account the economic value of the many hours of volunteer work.

GDP includes the costs of rebuilding after a devastating hurricane or earthquake, even though it merely restores the status quo. It also counts the cleanup of an oil spill as "production," just as it counts the billions spent fighting crime and preventing terrorism or dealing with a health epidemic.

And finally, GDP fails to take into account how a country's wealth is divided. A huge gap between rich and poor is irrelevant in the GDP scheme of things, while it clearly matters if one is talking about a healthy society. GDP is a measure of quantity, not quality.
What are some alternative measures?

The increasing use of GDP figures as a proxy for progress and well-being has led to the development of some creative alternatives that attempt to capture the intangibles that make people happy and a society healthy.

Measure of Economic Welfare (MEW) — The MEW is the work of Yale University economists William Nordhaus and James Tobin. They developed their Measure of Economic Welfare back in1972 as one of the first attempts to address the shortcoming and mismeasures of GDP. It proposed accounting for such variables as household work, pollution, and spending on crime. This measure was to form the basis of several later attempts to measure well-being.

Index of Economic Well-being (IDEW) — This index is the work of the Ottawa-based Centre for the Study of Living Standards.It's a weighted average of what the Centre considers to be the four main components of economic well-being: consumption flows, stocks of wealth, inequality, and indicators of economic insecurity like unemployment and poverty in old age.

The Centre found that the economic well-being of Canadians, as measured by the IDEW, has increased at a much slower rate over the last 25 years than real GDP per capita. Its last look at 14 industrialized OECD countries found Norway was at the top of its Index of Economic Well-being, while Canada was in 10th spot, the U.S. was 11th, and Spain was 14th.

Genuine Progress Indicator (GPI) — The GPI was developed in 1995 by Redefining Progress, a private research institute based in California. It arrives at its Genuine Progress Indicator by taking GDP figures and then adjusts them to take into account income distribution. It adds points for household and volunteer work, and subtracts points for the costs of things like crime, pollution, car accidents and the loss of leisure time. Under its per capita GPI formula, the U.S. has been basically treading water for the last 30 years — making no real progress in that time, even though real per capita GDP had jumped significantly.

Nova-Scotia-based GPIAtlantic has developed its own Genuine Progress Index to reflect the standard of living in Nova Scotia. Its GPI is constructed along similar lines to the GPI from Redefining Progress. But GPIAtlantic doesn't turn its index into a single number. One of its research studies found that volunteerism adds $1.9 billion a year to Nova Scotia's economy — a figure that doesn't find its way into traditional GDP reports.

Index of Sustainable Economic Welfare (ISEW) — Developed in 1989 by Herman Daly and John Cobb, the ISEW takes into account private spending on defence (a negative), domestic housework (a positive), the costs of environmental harm (a negative), and it corrects for income inequality.

Human Development Index (HDI) — This index is the work of the United Nations Human Development Report. It calculates an annual HDI that ranks the world's countries on their achievements in three main aspects of human development: health (life expectancy at birth), knowledge (as measured by literacy rates and school and college enrollments) and standard of living (as measured by GDP per capita based on purchasing power parity.) For 2007-08, Iceland was in first place, Canada was fourth, the U.S. 12th, and Sierra Leone was last, in 177th place.

Happy Planet Index (HPI) — The Happy Planet Index was developed by the British-based New Economics Foundation to, in their words, "show the relative efficiency with which nations convert the planet's natural resources into long and happy lives for their citizens." In other words, it doesn't really measure whether people are "happy". Its most recent HPI ranking puts Vanuatu, Colombia and Costa Rica first, second, and third. Canada is in 111th place (just below Benin), and the U.S. is 150th.

Finally, in 1972, the King of Bhutan came up with the Gross National Happiness (GNH) indicator that he felt would be more in tune with his country's Buddhist values (i.e. sharing prosperity, protecting the environment, and preserving culture).

Ottawa Mattress Fire

2008-06-30T11:04:00.002-04:00

A mattress fire late last night forced the evacuation of an Ottawa Housing building and sent at least one man to hospital to be treated for smoke inhalation.
The Ottawa Fire Department was called to a five-storey apartment building at 1390 LePage Ave. at around 10:15 p.m.
A tenant on the third floor reported that a mattress in their apartment was on fire, but by the time firefighters arrived, the burning mattress had been dragged into the stairwell, causing the building's upper three floors to fill with smoke.
"They did what they thought was right, but it didn't make our jobs any easier," said District Chief Lyle Fraser.
The charred remains of the mattress were piled on the lawn near an entrance on the building's east end.
One man who looked to be in his 40s was treated with oxygen at the scene and taken to hospital for smoke inhalation. At least two other people were treated for smoke inhalation at the scene.
A fire fighter cut his hand on a broken window and was taken to hospital for stitches.
The parking lot in front of the two-tone brown brick building was packed with residents from the building, as well as a neighbouring building at 1400 LePage Ave.
That building was not evacuated, but Mr. Fraser reported that smoke had wafted into the upper floors.
Many were senior citizens who depend on wheelchairs or walkers to get around and needed assistance getting out of the building.
Alexandra Travella was spending the night with her 86-year-old mother, Evelyn Goshko, a resident on the second floor.
When the fire alarm went off, Ms. Travella went down to the parking lot to speak with firefighters before going back upstairs to evacuate her mother, who refused to leave her apartment without her walker and her cat, Belle. Ms. Goshko has lived in the building for 27 years.
Kirkwood Avenue between Merivale Road and Chatelain Avenue was temporarily closed while a total of 36 firefighters and 11 vehicles responded to the call.
A fire investigator was on the scene. Damage is estimated at $5,000 to the building.

24-inch Pool ByLaw Situation

2008-06-29T15:51:00.000-04:00

When Kanata resident Richard Lapointe bought a $75 inflatable pool for his two young daughters, it was a huge hit on those hot summer days.

On the box, the pool dimensions are 12 feet by 30 inches -- with an air ring holding up the pool.

According to the instructions, it's supposed to be designed for the water to go up to the ring, the actual water level is supposed to be less than 23-inches deep.

But recently, he and his neighbours received a visit from a building code inspector who was checking for property damage as a result of a new house being built at the end of the street.

"Surprise, the next day we had a Pool Enclosure Bylaw 2001-259 violation report in our mail box. According to the ticket, 'Your pool is designed to hold more than 24 inches of water and must adhere to conditions of By-law 2001-259 being a by-law to regulate privately owned outdoor swimming pool enclosures. This enclosure requires a

permit,' " Lapointe relayed in an e-mail to the Sun.

According to him, the pool is only designed to hold 23 inches of water, but the bylaw says if it's capable of holding 24 inches you need a permit.

And hence, the requirement for a $150 permit for a $75 pool.

The permit is designed to pay for the cost of an inspector to ensure the pool is properly enclosed.

Lapointe said he wouldn't pay the "ridiculous" permit fee, and would instead tell his girls the pool has to come down.

"Is our city so desperate for money they are coming after kids and their pools? Should stores have warnings on them with the bylaw restrictions for Ottawa? How many people are buying these pools for less than $100, not knowing they have to pay the city $150 just to set it up?"

Lapointe wasn't impressed.

"The city seems pretty concerned with my pool, but where were they this winter when I had to shovel five feet of roadway just to get to my driveway? They should be more concerned with maintaining our parks and city lands which are deteriorating at a considerable rate, than kids' pools, but I guess they need the $150," he wrote.

"I am incredibly embarrassed to be a resident of this city. Could we vote on de-amalgamation?"

Arlene Gregoire, the director of Building Code Services, said complaints like this often occur because people simply aren't aware that kiddie pools that can hold 24 inches of water need a permit, regardless of what they cost.

"This is for toddlers, they are the ones that disappear in the blink of an eye," she said.

"It's really all aimed at safeguarding children.

"Every summer we get people who are frustrated. They buy inflatable pools, and may not have a fence, or it's three sided, and then they discover after they've bought the pool, there are these regulations to enclosures -- all for a $59 pool. So, yes, we've received complaints."

But while she understands the frustration, she said the city has a role to protect the safety of young children. And if you have a pool which can hold 24 inches of water, your yard must be properly fenced and inspected, and the $150 permit is charged on a cost-recovery basis.

The 24-inch rule applies to any kind of pool, whether it's a cheap kiddie pool, hot tub or even a garden pond.

Turns out this story has a happy ending for Lapointe. He says after contacting the Sun, he had phoned the city to have an actual bylaw officer visit his home Friday morning to see if the pool complied with the bylaw.

Seems saner heads prevailed.

Indeed, the officer agreed the inflatable kiddie pool wasn't really capable of holding 24 inches of water and, in fact, would likely burst if it did.

"That's just what I was saying. And that was my frustration, I kept telling them that.

"I'm satisfied with the outcome, but I think the bylaw itself is ridiculous."

Landlords get the dope on tenants

2008-06-29T15:35:00.001-04:00

A crime prevention group wants to teach landlords how to spot and deal with problem tenants.

Landlords aren't familiar with spotting addicts or don't know how to handle them, said Nancy Worsfold, executive director of Crime Prevention Ottawa, which released a six-month report Friday.

The group has focused some of its work in Vanier, identifying the problems with drugs and prostitution. They say Vanier offers cheap rent, which in turn lures tenants with addictions and mental health disease.

Safety and Security in Rental Buildings: An information guide for Ottawa's residential landlords acts as a step-by-step manual for landlords in dealing with problem tenants.

"A lot of residents in Vanier deal with problem addresses, which are often drug related," said Worsfold.

She said the manual is for landlords "who are willing to do the right thing or are scared or don't know what to do and need a little bit of help in how to act in situations."

The manual tells landlords how to avoid renting to tenants they suspect might cause problems for neighbours, other tenants or destruction to property. They can get tips on renting to students, immigrants and other first-time renters.

SCREEN TENANTS

They are encouraged to screen potential tenants, welcoming them when they first move in which sends the signal that "you are keeping an eye on the property early on," said Worsfold.

The manual provides help on resolving situations.

"The people who are victims most of the times in these situations are the other tenants in the building," she said.

There are numbers to call to try to resolve mental health issues.

If all else fails, the manual instructs landlords how to evict tenants.

Crime Prevention Ottawa plans to distribute the manual to landlord associations and at the community and protective services committee on Thursday.

Canada's Housing Boom Over

2008-06-29T15:20:00.004-04:00

A year or so ago, selling a house in most of Canada's major markets was not a significant challenge. If you lived in a city with a strong economy, the selling price was heading in one direction only - straight up, usually in double-digit leaps every year.

But the most recent reports suggest the boom times are over.

Prices have already begun falling in Calgary and Edmonton after a couple of years of breakneck growth, and prices for the country as a whole were up just 1.8% year-over-year in May. Between the beginning of January and the end of May, 202,899 homes had been sold nationwide through the multiple listing service (MLS) compared with 233,213 in the same period last year - a drop of 13%.

It as a move towards a more balanced market, but with new listings coming in at a pace more than double the number of houses sold, analysts say it is clear that a slowdown has begun.

The combination of significantly higher listings, reflecting the desire of homeowners to take advantage of the past increase in prices, and weaker demand, due to the past erosion in affordability, are leading to declining sales and softer price performance across the country, but particularly in the west.

It all comes down to a simple matter of supply and demand. On the supply side, past price performance has strongly encouraged additional supply in both the new and existing home markets. Housing starts averaged a strong 234,000 units in the first quarter. While we expect new home construction activity to remain robust, starts should gradually edge down to a lower level of around 200,000 units over the course of the next 18 months.

We had anticipated an increase in new listings as a result of solid price gains in the last couple of years, but the recent surge in new listings has been far greater than anticipated. The jump in supply of homes for sale is assuredly an attempt to take advantage of the past home price appreciation on the part of homeowners and real estate investors.

The Canadian situation is far different than that in the U.S., where the housing market is in full retreat and prices are plummeting in a number of major markets.

It should be stressed that the rise in listings does not reflect homeowners of principal dwellings desperate to sell, and this is the dominant difference between the Canadian and U.S. experience.

In Canada, speculators may be quickly dumping properties on the market to get out while the times are good, but individuals that have a principal dwelling are not under financial duress. This distinction is crucial to evaluating the impact of weaker home price performance on personal wealth and consumption. Canadian consumers are also nowhere nearly as leveraged through their home equity as American consumers are.

There can be no doubt that housing prices are due for a correction in Canada, with the country's economy growing wobbly and prices in several markets peaking after six years of rapid growth.

Nationally the average house price increased less than 2% year-over-year in May. We are getting close to slipping under water. I expect to see negative growth figures at least for the next few months. Housing markets have a lot of inertia. Once they start to move they can go in that direction for several years. The market was flat on its back for most of the 1990s.

Looking ahead, flat sales and prices "may be the best-case scenario, at least for the next year or so. The Canadian economy is anemic and it will probably be like that for the rest of the year.

Canada's housing boom is getting long in the tooth. "It has been with us for six years running. We have already seen prices start to fall in Edmonton and Calgary - cities where the prices rose too rapidly. And they are down in Windsor because of that city's economic slump.

Given that Canada's economy is weakening there is room for prices to decline further. But, there is little chance of a U.S.-style bust in Canada. Our housing market is on a firmer foundation.

Nor does it mean that Canadians should rush to sell their homes. Owning a home generally makes more sense than renting. But as for investment properties, we probably wouldn't recommend it.

Canada's housing market shows shades of U.S.

2008-06-29T15:16:00.001-04:00

After months of holding fast to the view that Canada will not follow the U.S. into a housing decline, one economist is now raising the specter of an overall drop in prices north of the border.

Canadian home sales are down 13% year over year so far in 2008 and price appreciation has slowed markedly to a year-to-date gain of 1.8%.

When charted out, these data suggest Canada is tracking the U.S. housing market fairly closely, at a two-year lag.

It's a bit unnerving to see how Canadian performance is beginning to look like that of the U.S. two years down the line.

In the past 10 years, the average price of a detached, two-storey home in Canada has risen 129%.

However, this year, sales are down, listings are up, and while prices have mostly stayed in positive territory, a few markets have showed signs of cracking.

Last month, three markets posted slight year-over-year declines in house prices - Calgary, Edmonton and Windsor-Essex.

In the West, the declines look like modest corrections to markets that got ahead of themselves.

More concerning is weakness in cities where economic fundamentals are much less stable, such as Windsor and Thunder Bay.

The most interesting question is what will happen to the middle ground. Will cities like Toronto, Montreal and Ottawa, which have fairly robust markets but have not been blessed by a booming underlying economy, end up seeing home price declines, too?

Economic fundamentals, including strong job growth and low interest rates, suggest that Canada is still in pretty good shape, and that declines in this "mass of cities" have an outside chance instead of a probability.

Thus far, Canada is not even close to experiencing the 8% price drop and 20% decline in existing home sales that has taken place in the U.S. this year, but that doesn't mean there is no cause for concern.

There are a litany of reasons why the Canadian market is different. But even a very pale version of what we saw in the U.S. would not be good news.

Are we on the road to ruin?

2008-06-29T15:12:00.001-04:00

BASF had to increase its prices in North America last week on everything from its kaolin products, an ingredient in paper, to the resins used to make paint, garment hangers and toys, citing "unprecedented" and "dramatic" increases in raw materials, energy and transportation costs.

The former cassette tape company certainly isn't the only one stuck in this inflationary boat. BASF's competitor Dow Chemical announced last week its second price hike in less than a month to offset record costs for energy and raw goods. The Midland, Michigan-based firm makes propylene glycols for antifreeze and pharmaceuticals along with acrylic acid-based products for detergents and diapers.

"It's happening across the industry as a result of rising oil prices," says Rotenberg. In fact, staggering oil prices are winding their way throughout the economy and trickling down to consumers in just about every area imaginable.

Thanks to soaring prices at the pump, airlines have all jacked up their fuel surcharges, and last week Toronto's taxi industry followed suit, announcing a fare increase this summer.

And if you're still mailing it in, Canada Post also wants to squeeze more pennies from your change purse. The federal agency announced Friday that it will ask Ottawa for a six-cent increase in the price of domestic stamps over the next three years as their transportation costs climb, while the price of crude oil and gasoline is expected to cut the post office's profits in half. That request comes on the heels of recent announcements by global shipping giants FedEx Corp. and United Parcel Service Inc. that high fuel costs and a slumping U.S. economy are destroying profits.

"Everything from taxi fares to your morning bowl of cereal has been affected by the rising cost of fuel," says CIBC World Markets economist Avery Shenfeld, who pointed out that most other countries have been experiencing higher inflation for some time. But it didn't kick in for Canada until recently, due primarily to the strength of the loonie and low interest rates along with the GST cut and grocery store price wars, which kept inflation at bay.

"Other than Japan, all the G-7 economies had higher inflation than Canada," notes Shenfeld.

"It's been creeping in over the last year, but the pace of the increase is now noticeable" to consumers at the same time that the Canadian dollar slides back from par, he says.

Relief isn't expected anytime soon either. Oil leapt to a record high above $142 a barrel on Friday (27), extending gains after surging nearly 4 per cent in the previous session, as tumbling global stock markets helped to trigger a wider commodities rally.

China's largest steel maker Baosteel felt the sting of escalating oil prices last week, agreeing to the biggest price hike in more than a decade in iron-ore term contracts with Rio Tinto. Baosteel is set to pay the Australian miner up to 96.5 per cent more for its iron ore.

Meanwhile, global markets endured a sell-off last week amid increasing worries over the rising threat of inflation.

World stocks fell to a three-month low on Friday, hurt in part by the soaring oil price and feeding into inflationary fears.

"There is so much to worry about now (in the Canadian economy). There are risks on the inflation side, on the growth side as well as incredibly volatile currency and equity markets," says RBC Financial Group's chief economist Craig Wright.

"Most central banks are gauging the growth of inflation. It's a delicate balancing act how it's all going to pan out," he says.

"The big sticker price is on food and energy. Those are very visible. And it does raise the risk of spilling over into wages."

Wright does not foresee energy prices soaring ever higher though next year. He is forecasting oil to slide back to $90 by the end of next year, though he adds it likely won't translate into a significant dip in fuel prices.

"Our view (overall) is one of nervous optimism," he adds.

Confidence is also crumbling across Europe as oil-powered inflation, public worry number one, accelerated further in June, compounding the double-trouble central bankers must deal with as economic growth slows in the industrialized world.

Ahead of a meeting next week where the European Central Bank is expected to raise interest rates, Germany's statistics office said the annual inflation rate in Europe's largest economy rose to a near 15-year high of 3.3 per cent in June, from 3 per cent in May.

And in Spain, a one-time boomer hit by a housing bust, inflation in June was announced at 5.1 per cent, the highest since records began in January 1997, while Belgian inflation sat at a near 24-year high of 5.8 per cent. Politicians in Germany, France and Spain have all signalled that the second quarter of the year could look ugly in terms of gross domestic product.

Meanwhile, BASF's Rotenberg is concerned that escalating costs for her company's chemicals will result in customers turning to cheaper substitute materials.

"If you can cover your costs and make a profit you also have to make sure your customers don't look for other products."

Ottawa Transit Cuts Proposal

2008-06-26T16:45:00.000-04:00

The City of Ottawa has ordered firefighters to stop using fire trucks to go grocery shopping. The order is part of a proposal to reduce the amount of fuel used by city vehicles.

Firefighters will now have to buy groceries on their own time before their shift or arrange for delivery if they want to prepare meals at the fire station.

The order is included in an "eco-driving" policy presented to council Wednesday by Coun. Marianne Wilkinson. It will be modified and returned to councillors in the fall.

Considering that it has not yet been passed, the directive is premature, said Peter Kennedy, the president of the Ottawa Professional Firefights Association.

"It's had a real negative impact on the morale of the members and I think what we would have preferred is a consultation process," he said Wednesday.

Ottawa Fire Services has said it receives many calls from the public questioning why firefighters drive to grocery stores in fire trucks.

Kennedy said the practice is part of long tradition that arose because crews have to stay together at all times, in case they're called to an emergency. He added that firefighters are redistributed to stations across the city throughout the day, which means it's hard to predict how much food they will need to prepare meals for all the firefighters at a given station during a 10-hour day, a 14-hour night or a 24-hour shift.

Now, he said, it's unclear what vehicle firefighters will use to go grocery shopping and who will pay for the expense.
Transit cuts, telecommuting proposed

According to Wilkinson's motion, the city must spend an extra $400,000 a year on its vehicles for each one-cent increase in the price of a litre of diesel fuel.

By improving fuel efficiency, she said, the city can reduce costs without reducing services.

"I think that there's a lot of things we can do and some people are loath to even ask or even talk about them," she added.

Her proposal was modified Wednesday to allow for consultation. Fuel-saving suggestions from departments and managers themselves will be brought before council this fall.

Wilkinson's original proposal included a number of other ideas such as:

* Cancelling or changing transit routes with low ridership.
* Speeding up analysis of potential rail links outlined by the Mayor's Task Force on Transportation a year ago.
* Developing a protocol to allow employees to work from home part of the time.
* Revising police patrol routes to reduce fuel usage.
* Review the use of snow removal vehicles and other city vehicles to reduce fuel consumption.
* Ban city vehicles, including emergency vehicles, from idling even when it is very hot. The city bylaw that bans idling for more than three minutes applies only when temperatures are between 4 C and 27 C.

City of Ottawa moves forward with 400 tonne-per-day PlascoEnergy facility

2008-06-26T10:57:00.001-04:00

Plasco Energy Group Inc. of Ottawa announced that the Ottawa City Council unanimously agreed to issue a letter of intent to PlascoEnergy to build, own and operate a 400 tonne-per-day waste conversion facility that will process residual household waste that would otherwise be sent to landfill.

The City will continue to operate source separation blue box (plastic, metal and glass), black box (paper and paperboard) and yard waste composting programs introduced many years ago, and is currently introducing source separation of organics for anaerobic digestion. The Plasco Conversion Facility will convert substantially all residual household waste to valuable products including synthetic fuel gas for operation of internal combustion engines. Generators driven by the engines and by waste heat from the conversion process and the engines will produce approximately 21 MW of net saleable base-load power for delivery to Hydro Ottawa.

Upon approval, the facility will be funded, built, owned and operated by PlascoEnergy and will be capable of processing 400 tonnes per day (150,000 tonnes per year) of garbage. Garbage will be delivered from local collection trucks to the facility. PlascoEnergy will separate large metal objects prior to feeding the garbage into the conversion system and will send them back to the City for recycling. The City will pay a tipping fee of $60 per tonne of waste processed, escalated to reflect CPI over a 20-year contract. All risks of operation and efficiency of power generation are assumed by PlascoEnergy. The City will receive 25% of annual revenues that exceed an amount mutually agreed to by PlascoEnergy and the City.

The facility will occupy a six-acre site near an existing city owned and operated landfill. The City's leftover garbage will be converted into synthetic engine fuel, agricultural sulphur, industrial salt and construction aggregate with no emissions to the air, land or water. In addition, the excess moisture in the waste will be recovered through the process as clean water.

The engines will drive electrical generators to produce reliable base-load power. Emissions from the engines will be monitored by continuous emissions monitoring and by periodic source testing. The results of both continuous and source testing will be reported on the ZeroWasteOttawa.com website and will be reviewed by independent experts approved by the Ministry of the Environment ("MOE"). An independent Public Advisory Committee will review and make public comments as it sees fit on the environmental performance of the facility and MOE will assure that the facility continuously meets its environmental requirements under the Ministry's Certificate of Approval.

The move by City Council comes three years after the Council approved development by PlascoEnergy of a plant to demonstrate the Plasco Conversion System on a City owned site on the capped Nepean Landfill on Trail Road. The demonstration facility received funding support by Sustainable Development Technology Canada, and from the Ontario Ministry of Research and Innovation. Ottawa provided the demonstration site and has provided garbage for processing at the demonstration plant. The Plasco Trail Road demonstration plant began commissioning in July last year. "

;Provided this system meets all the environmental requirements, the City of Ottawa will be supportive," said Ottawa Mayor Larry O'Brien. "I have always said cities have too much waste and not enough energy and exploring technologies like PlascoEnergy is a positive step forward for our City."

All necessary permits including Certificates of Approval by the Ontario MOE must be received before commencement of operations. Certificates of Approval will be based on exhaustive operating data from the existing Trail Road Demonstration Facility. The entire process of approvals and construction is expected to take approximately two years.

Plasco Energy Group Inc. (PlascoEnergy) is an Ottawa-based private Canadian company. PlascoEnergy and its predecessor RCL Plasma, Inc. have operated plasma based R&D and test facilities in Ottawa and Spain for more than a decade. The Plasco Trail Road facility is a full scale semi-commercial demonstration plant using PlascoEnergy proprietary technologies. This project has been supported by a contribution from Sustainable Development Technology Canada, a not-for-profit corporation created by the Government of Canada It has also been supported by a loan from the Ontario Ministry of Research and Innovation under its Innovation Demonstration Fund, and the provision at nominal cost of the site and supply of waste during the demonstration period by the City of Ottawa.

InterRent Buys Ottawa Centretown Condo Building for $6.1M

2008-06-26T10:52:00.000-04:00

InterRent Real Estate Investment Trust has completed its $6.1-million purchase of a 42-suite Ottawa Centretown apartment building.

The Toronto-based trust said it has closed the acquisition of the recently renovated class-A property of condominium quality, which was announced March 20. The building was one of four local properties InterRent had agreed to buy at the time.

"Ottawa currently represents 16% of our portfolio, and is its best-performing region, with an approximately 1.5-per-cent vacancy rate, and a 65-per-cent net operating income," said InterRent CEO Michael Newman in a statement. "The addition of a fully renovated, condominium-quality building in Ottawa's downtown, without the addition of any incremental costs, will serve to strengthen our overall operating performance."

Mr. Newman added that the company was looking to buy more properties in the nation's capital.

InterRent also announced the closing of the sale of a 68-suite, class-B apartment building in the GTA's Scarborough area for $4.65 million, the purchase of which was also announced at the same time as the Ottawa deals.

The company said it had flipped the property to an arm's-length purchaser because it "did not meet management's initial financial operating expectations, and was negatively impacting (the trust's) operating performance."

The Ottawa acquisition is being financed through the assumption of two existing first and second mortgages in the amount of $1.7 million, a vendor take-back mortgage of $1.9 million and the issuance of $360,000-worth of InterRent REIT units at $3.50 each, with the balance being paid in cash.

Ottawa Balcony Case Shows Need for Proactive Inspection of Rental Properties

2008-06-26T10:40:00.002-04:00

While it is encouraging to see the City of Ottawa is following through on balcony complaints, tenants will continue to live in unsafe housing conditions.

The collapsed balcony on Beausoleil Dr was reported to be covered with a material which led to the wood rotting underneath, therefore, by all outward appearances, the balcony appeared safe, otherwise six people would not have ventured out onto it at the time it collapsed.

What is flawed in a complaint-driven system is that there are often cases such as this one where the tenant may not even be aware that a complaint should or needs to be made.

Although Susan Jones, the director of bylaw services, indicated she had never seen a balcony collapse in many years, I do recall the brick façade of a rental building on Metcalfe Street came crumbling down onto the sidewalk below just last fall. No injuries occurred thankfully, but the bricks did fall on a sidewalk.

As the rental stock gets older in the central core, I believe these rare occurrences may become less and less rare if not balconies, then other major deficiencies such as a roof collapsing or health threatening issues such as mold.

The Somerset Ward was plagued with residential fires several years ago, yet it wasn't until a family of five lost their lives in a tragic fire due to a lack of smoke detectors that the city became more proactive in doing frequent ongoing inspections to ensure smoke detectors are working in rental units.

We are now repeating history with serious maintenance deficiencies, leading to serious injury or death.

The other problem with the complaint-driven system is that tenants often fear reprisal from their landlords after a complaint is made. For example, it is not uncommon for tenants to receive an eviction notice shortly after a complaint has been made to the city.

Now is the time to reflect on ways to ensure that every tenant has a safe home and address ways to implement more proactive measures to inspect these buildings and prevent further tragedies from occurring. A good place to start is to bring in more stringent regulations of maintenance and inspections of rental properties.

Canadian Housing Market Not in a Bubble

2008-06-26T10:28:00.002-04:00

Canada's housing market does not appear to be in a bubble and is supported by sound fundamentals.

Canada appears not to be in danger of following the U.S. into a housing market meltdown.

The Canadian housing market does not appear to be characterized by excess supply at this time. The proportion of unoccupied, newly built dwellings in most cities remains below historical averages, suggesting that a major widespread reversal in house prices is unlikely in the near term.

The recent downward trend in building permits suggests supply is adjusting to softening demand and, importantly, the Canadian mortgage market is in reasonably good shape.

The Canadian 'subprime' mortgage market accounts for less than 5% of the residential mortgage market, and might be better characterized as a 'near-prime' market, with quite different lending standards than appear to have been applied in the United States.

However, Canadians cannot afford to be complacent and that they need to remember house prices can go down as well as up.

It wasn't that long ago - in the late 1980s and early 1990s, to be exact - that Canada experienced its own real estate boom and bust. It took a decade after that before we saw activity pick up and real prices increase. More recently, of course, we have seen in this part of the country a strong housing market cycle.

Residential investment has averaged about 6% of GDP over the last decade, with about one third devoted to renovations. Some 68% of Canadians are homeowners and real estate accounts for more than $2.2 trillion, or 37% of total household assets in Canada.

A number of factors can influence housing prices in addition to supply and demand such as innovations in financing and policy. Policy-makers and financial market players must be wary of new financial products and ensure that they do not distort the market and really do make markets more efficient.

While Canada has escaped many of the problems of the U.S. mortgage crisis in part because of a more conservative mortgage environment, increasing use of extended amortization periods could have a dramatic impact on the personal wealth and savings of Canadians and new no-money down or low deposit mortgages can also encourage speculative behavior, which can also distort real estate markets.

U.S. Interest Rate Held for First Time Since Start of Credit Crunch

2008-06-26T10:25:00.004-04:00

The U.S. Federal Reserve ended its rate-cutting streak by freezing the federal funds rate target at 2%, a move that was widely anticipated by analysts.

The Federal Open Market Committee voted in favour of maintaining the benchmark rate as growth in household spending balanced out the overall weakness in the financial and labor markets.

The committee also warned that the continuing credit crunch, weakness in the housing market and soaring energy prices would likely push down U.S. economic growth over the next few quarters, although it said that downside risks appear to have diminished somewhat.

The committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflations expectations, uncertainty about the inflation outlook remains high.

The rate freeze was the Fed's first halt in cuts since September 2007, shortly after the credit crunch hit the markets. The federal funds rate target has been slashed by 3.25% in the past nine months.

Orleans Residents Fight Housing Development

2008-06-20T10:18:00.002-04:00

With both the city and province pushing for increased urban intensification, east-end residents are fighting a new housing addition being proposed for the Rothwell Heights community, calling the development too dense and unsuitable for the neighbourhood.
“It’s the whole issue of how much is enough intensification,” says Jane Brammer of the Rothwell Heights Property Owners’ Association. “Residents believe zoning is there to protect neighbourhoods.”

Located at 741 Blair Rd., the almost 3,000-square-foot property is currently home to a single uninhabited house, though zoned to accommodate up to four single dwellings. A rezoning amendment for the site – to put in five semi-detached homes, or 10 units – went before the city’s planning and environment committee on Tuesday, June 10, resulting in a motion that limited the number of units to a maximum of eight and requested that a concrete site plan be approved before council adopts any zoning changes.

The property owners’ association, meanwhile, has been protesting the proposed development due to concerns about exceptions to city planning policy being made for the project, as well as issues with the proposed density and other impacts, Brammer explains.

With the developer requesting site-specific exceptions to zoning regulations for the property and only a conceptual design currently available, she says a site plan should be in place before any firm decisions are made by the city.

The property is also largely greenspace and home to many mature trees, Brammer continues, questioning why the area isn’t being preserved and how current stormwater standards will be maintained with a dense development.

“The city isn’t living up to its own planning,” she adds. “(The plan) obliterates everything on the site.”

Though a measure of intensification is needed in the area – especially with Montreal Road as a major transit corridor – and even with the modified development plan passed at committee “arguably reasonable,” Brammer says her group still feels skeptical eight units will eventually appear on the property.

“It’s a reasonable compromise, if it can hold,” she explains.

Applicant Lloyd Phillips, meanwhile, questions the rationale behind the committee decision to curb the number of units on the site.

“We don’t really see there’s going to be much difference at the end of the day,” he says, adding that the land can easily accommodate five semi-detached dwellings instead of four.

The proposed development is “very low-scale, low-profile infill,” Phillips continues. The site itself sits 10 feet lower than the backyards of the homes nearest the back of the property, he explains, with mature vegetation acting as a natural barrier. In addition, both provincial policy and Ottawa’s Official Plan have dictated the need for more infill development and intensification, Phillips adds.

As for the next step, with the motion scheduled to go before council on Wednesday, June 25, he says the property’s owners will likely wait to see what decision is made. In the event council upholds the committee’s recommendation, the owners would also have time after such a ruling go to the Ontario Municipal Board, Phillips continues.

Beacon Hill-Cyrville Coun. Michel Bellemare presented two unsuccessful motions during the committee meeting last week, first to reject the zoning application as a whole, and then curb the number of units on the property to six. He calls the limit of eight units passed by committee members a “compromise”.

“Eight is certainly better than 10,” he continues, suggesting the reduction in dwellings would offer a better fit for the project within the limits of the property, and would maintain current standards for issues like road width and setback.

With the site currently zoned for residential purposes, Bellemare says the expectation always existed that the property would be redeveloped.

“It’s one example of an area where intensification is anticipated, and called for,” he explains. “It is really a question of degrees. At the end of the day, intensification is a good thing, because it does curb urban sprawl, helps to rejuvenate neighbourhoods … but there are tradeoffs (that should be made).”
Residential goes commercial on Innes
In other east-end development news, the planning and environment committee also gave a thumbs up to a proposed rezoning request at 3591 Innes Rd., to modify the property from residential to “a limited number” of commercial uses. Currently, a single detached dwelling – where part of the ground floor was previously used as an insurance office – resides on the lot.

Four letters of objection related to the development and the zoning amendment were received by the city, with concerns ranging from questions about the “vague” future commercial uses of the property to the impact of stormwater run-off on residential properties to the location of parking and subsequent noise, litter and pollution issues.

City staff responded to concerns, explaining that uses of the development will be limited to a commercial, medical or dental office, or personal service business – none of which are expected to generate “large amounts of continuous vehicular traffic.” They also noted that plans are underway to ensure stormwater management and landscaping buffers – including a sight-obscuring fence – and that the placement of the property, located within the general urban area designation, calls for a “wide range of uses.”

Minto EcoHome Opens in Ottawa Celebrating the greenest in home building

2008-06-20T09:56:00.005-04:00

The Minto Group opened a new attraction for those interested in Green Building. More like an educational exhibition than a show home, it is one of the greenest houses ever built in Canada. The home, situated in the South Ottawa community of Manotick, demonstrates the future of home building and will help motivate and educate consumers toward greener home choices. The project goal is to not only influence home building in Ottawa, but all across the country.

The Minto Ecohome, it brings together a vision of net-zero energy design with healthy living features that can be afforded by any home buyer. Net-zero means that at the end of the year the home will have produced as much energy as it consumes. The initiative is part of Canada Mortgage and Housing Corporation's (CMHC) EQuilibrium Sustainable Housing Demonstration Initiative. Minto was the only Ontario production builder selected to push the limits of green home building. Twelve projects in all were asked to be part of the program nationwide.

We wanted to give something back to the community by having this home uniquely showcase sustainable building, in a way that inspires consumers to become part of the solution," said Robert Greenberg, Executive Vice President of the Minto Group's home building division.

With an open and informative style, Inspiration has interactive displays and signage to explain the features and benefits of green building. Starting in June 2008, the home will be on display to the public to experience for at least a year. For those who cannot visit the home in person, Minto has set up www.minto.com/ecohome as an interactive green experience.

Global warming and climate change have been strong influences on the green building community. Inspiration strives to limit greenhouse gas emissions. It is designed to generate enough green power on its roof to completely offset the small amount of gas and electricity still used by the home. Thanks to the Ontario Power Authority's Standard Offer Program, Inspiration's homeowners could actually receive payments from their local electricity supplier for the electricity generated by their home.

"We started this project to see what was possible, so we gathered all the experts to build a demonstration home. In the end, we were so inspired by the results that we decided to offer versions of Inspiration in our communities, starting later this year," added Greenberg.

Inspiration is designed to reduce the cost of home ownership, conserve natural resources, improve the indoor air quality for better occupant health, and was constructed mostly with recycled and renewable materials. "In every practical way, we designed this home with conservation, health, and consumer empowerment in mind," explains Andrew Pride, Vice President of Minto's dedicated Green division. "Inspiration has a significantly lower environmental footprint. It uses rain water to flush toilets and water the lawn. It is designed with plenty of windows for natural ventilation to eliminate air conditioning. And, it is architecturally optimized to enjoy the benefit of the sun's heat and light."

The house was developed using an integrated design process and a design charrette - where the key members of the building team start from a blank page to discuss how to practically build a home with minimal impact on the environment.

Minto chose the future community of Mahogany in Manotick as the site for Inspiration. While still in the planning stages, Mahogany will be one of the largest energy efficient communities in Canada, blending the latest in environmentally responsible building technology with the character of the Village of Manotick. Minto has become a leader in LEED(R) - Canada certified green living options with other successful developments, and the company is committed to producing new communities that promote health, material conservation, energy efficiency, and a high quality of life.

"This initiative with CMHC has inspired us to believe that we can slow, and one day even reverse, the effects of global climate change by challenging each of us to do more and to continually strive for better solutions," Pride said.

Inspiration's Green Features:

Rainwater harvesting for irrigation and toilets
Low flow faucets and fixtures
Dual flush water saving toilets
Solar thermal air collectors
Solar hot water collectors
Photovoltaic solar electricity panels
Extended roof-line to block heat from the summer sun
Natural ventilation design to eliminate the need for air conditioning
Passive solar design with slate floors to retain solar heat
Double insulated walls for added warmth, quiet, draft proofing, anddurability
Triple pane windows
Flexible open design to adapt easily to life's changes
Rapidly renewing bamboo flooring and stairs
Built-in recycling centre
Low VOC paints and finishes
Compact fluorescent lights throughout
A convenient All-Off switch connected to green plugs to make conserving energy easy

Sprinklers to be Mandatory in New Apartment Buildings in Ontario

2008-06-20T09:51:00.003-04:00

A move to mandate sprinkler systems in all new Ontario condos and apartments four storeys tall or higher was welcomed by firefighters Wednesday, although they said the new rules fell short of what they were hoping for.

While the Ontario Association of Fire Chiefs applauded the announcement made by Municipal Affairs and Housing Minister Jim Watson, the group suggested sprinklers should be mandatory for all new residential construction projects.

The building code changes follow public consultations and will take effect April 1, 2010.

More Than 400 Defendants Charged for Roles in Mortgage Fraud Schemes as Part of Operation “Malicious Mortgage” in US

2008-06-19T16:43:00.001-04:00

The Department of Justice and Federal Bureau of Investigation (FBI) announced today a national takedown of mortgage fraud schemes, the culmination of substantial coordinated efforts during the last three and a half months to identify, arrest and prosecute mortgage fraud violators through the United States. Operation Malicious Mortgage highlights the strong enforcement response undertaken by the Department of Justice and its law enforcement partners to combat the threat mortgage fraud poses to the U.S. housing industry and worldwide credit markets.

From March 1 to June 18, 2008, Operation Malicious Mortgage resulted in 144 mortgage fraud cases in which 406 defendants were charged. Yesterday, 60 arrests were made in mortgage fraud-related cases in 15 districts. Charges in Operation Malicious Mortgage cases were brought in every region of the United States and in more than 50 judicial districts by U.S. Attorneys’ Offices based upon the law enforcement and investigative efforts of participating law enforcement agencies. The FBI estimates that approximately $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.

In addition to fraud directly related to individual mortgages, the Department is committed to investigating and prosecuting cases of mortgage-related securities fraud. Today, the U.S. Attorney’s Office for the Eastern District of New York announced an indictment against two senior managers of failed Bear Stearns hedge funds, charging Ralph Cioffi and Mathew Tannin with conspiracy, securities fraud and wire fraud. Cioffi was also charged with insider trading. The indictment alleges that the managers marketed the two funds as a low risk strategy, backed by a pool of debt securities such as mortgages. The indictment alleges that by March 2007, the managers believed the funds were in grave condition and at risk of collapse, but made misrepresentations to stave off investor withdrawal. The funds subsequently collapsed in the summer of 2007 resulting in approximately $1.4 billion in losses to investors.

"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation’s housing market and to the peace of mind of millions of American homeowners," said Deputy Attorney General Mark R. Filip. "Operation Malicious Mortgage and our other mortgage-related enforcement actions demonstrate the Justice Department’s commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets."

"Operation Malicious Mortgage is a concerted, joint law enforcement and prosecutorial effort aimed at disrupting individuals and groups engaged in mortgage fraud," said FBI Director Robert S. Mueller, III. "This operation is an example of our unified commitment to address this significant crime problem. The FBI will continue to direct investigative and analytic resources towards mortgage fraud and corporate securities fraud that threaten our nation’s economy."

Operation Malicious Mortgage represents the joint collaborative efforts of the FBI, U.S. Postal Inspection Service, Internal Revenue Service-Criminal Investigation Division, U.S. Immigration and Customs Enforcement, U.S. Secret Service, U.S. Trustee Program, Department of Housing and Urban Development Office of the Inspector General, Department of Veterans Affairs Office of the Inspector General, and Federal Deposit Insurance Corporation Office of the Inspector General. Operation Malicious Mortgage is the most recent coordinated sweep in an ongoing law enforcement effort to combat mortgage fraud, which also included Operation Continued Action in 2004 and Operation Quick Flip in 2005.

Mortgage frauds employ a variety of tactics including misrepresentations, deceit and other criminal abuses to fund, purchase or insure mortgage loans. Operation Malicious Mortgage addresses primarily three types of mortgage fraud schemes: lending fraud, foreclosure rescue scams and mortgage-related bankruptcy schemes. Lending fraud frequently involves multiple loan transactions in which industry professionals construct mortgage transactions based on gross fraudulent misrepresentations about the borrower’s financial status, such as overstating the borrower’s income or assets, using false or fictitious employment records or inflating property values. Foreclosure rescue scams involve criminals who target legitimate homeowners in dire financial circumstances and fraudulently collect fees for foreclosure prevention services or obtain ownership interests in residential properties. Both of these fraudulent mortgage schemes may be furthered by filing bankruptcy petitions that automatically stay foreclosure.

The President’s Corporate Fraud Task Force, chaired by Deputy Attorney General Filip, is also responding to issues raised by mortgage fraud in the corporate sector. Created in 2002 to investigate and prosecute significant financial crimes, the Task Force includes representatives from ten federal departments, commissions and agencies, in addition to seven U.S. Attorney’s Offices and two Divisions within the Department of Justice, combining the experience of thousands of investigators, attorneys, accountants and regulatory experts. Since July 2002, the Department of Justice has obtained nearly 1,300 corporate fraud convictions, including the convictions of more than 200 chief executive officers and corporate presidents, more than 120 corporate vice presidents and more than 50 chief financial officers.

An indictment is not evidence of guilt. All persons charged with a crime are presumed innocent until proven guilty beyond a reasonable doubt.

More Pink Slips at Ottawa City Hall

2008-06-18T10:26:00.004-04:00

Ottawa city committee has green-lighted Mayor Larry O'Brien's motion to have city managers work on a plan to slash 500 full-time municipal jobs and cap staff count.

The corporate and economic services committee yesterday voted 10-1 in favor of the motion, which the mayor put forward as a way to look at cutting costs in the face of another property tax increase in the 2009 budget and an economic slowdown.

The city is looking to save about $100 million over three years, or $19 million to $57 million for the upcoming year, in order to keep the promised 4.9-per-cent tax hike target. City manager Kent Kirkpatrick is already planning to hand out 450 to 600 pink slips and cut programs as part of the cost-cutting measures, according to media reports.

However, the mayor's motion includes a plan to cap full-time equivalent staff at the current level of 13,590, with the 500 cuts to 13,090 to occur by the end of 2009.

The motion goes before full council next week, and if approved, city staff will work on a plan that will be included in the 2009 budget deliberations later this year.

PS:
Ottawa Mayor Larry O'Brien gestures as he leaves the Ontario Provincial Police detachment in Ottawa January 7, 2008. O'Brien was booked, photographed and fingerprinted on charges of trying to bribe an opponent to drop out of the 2006 mayoral race and of pretending to have influence with a minister in Canada's Conservative government.

Hands OFF Ottawa Greenbelt

2008-06-18T10:09:00.003-04:00

Environment Minister John Baird warned yesterday that the federal government has no interest in developing the Greenbelt, dismissing suggestions that its development would enhance environmental sustainability.

His warning, a day after a City of Ottawa white paper laid out three development options for more than 13,700 acres of the Greenbelt, casts serious doubts on any future plans to develop the city landmark.

The Greenbelt was first conceived by William Lyon Mackenzie King and finished by John Diefenbaker ... and I just don't think that from the position of elected representatives -- Liberal, Conservative, NDP -- there is any appetite to develop this treasure.

People should know that there is no appetite from the government for this type of idea.

The Citizen reported yesterday that the city has identified about a quarter of the Greenbelt, worth about $1.6 billion, that could be developed without damaging its integrity.

While the city's white paper is only laying out proposals for a discussion on the future of the belt, it said the land could provide more than 20 years of urban land for housing and employment and help stop, or at least slow down, urban sprawl.

Greenbelt land could be used for showpiece sustainable development that would set out a new vision for the city.

Ottawa residents have to ask themselves whether it makes sense to pave vital farmland on the fringes of the city, while protecting agricultural land inside the Greenbelt.

His report echoes the opinions of several environmental groups and experts, who have said that the Greenbelt has failed as an urban containment belt for which it was created. Some say it has actually fuelled sprawl.

It certainly hasn't had much impact at all in terms of density of suburban development. It did cause leapfrogging and more commuting.

Mr. Baird said the failure of the Greenbelt as an urban containment belt is no longer the issue. He said the belt is now as much a part of the city's history and heritage as the Rideau Canal, and every effort should be made to protect it.

"If we wanted to limit development inside the Greenbelt, we are 30 to 40 years too late," he said.

"There is no doubt that intensification would have environmental benefits, but paving the Greenbelt would be a huge negative. It is good to intensify, but the Greenbelt is a great natural resource and it should be off-limits."

Mr. Baird said the problem is that once development starts, there would be no end to it. He said people may argue that only small portions would be developed, but soon, 13,000 acres would turn into 50,000 acres and before anyone realizes, not much would be left.

If we just start to slice and dice it, next thing you know its integrity has been compromised.

The minister said the National Capital Commission and the city are within their rights to conduct their reviews, but that is no license for development. He said what's often forgotten is that the Greenbelt was expropriated from people who didn't want to sell, and the justification for forcibly removing them from their land was that it was all for the public good. It is now a public trust, and selling it off to the highest bidder would be a betrayal.

He worries that once a decision is made to siphon off parts for development, the original owners could come back and demand the return of their property.

Air Canada Cuts 2,000 Jobs Plus Cutting Flights

2008-06-17T15:23:00.005-04:00

Air Canada has joined a global trend by announcing plans to cut as many as 2,000 jobs at the end of this year as it sharply reduces capacity to deal with the rising cost of fuel, and is warning there are likely more cutbacks to come.

Canada's biggest airline said Tuesday it needs to fly fewer trips as oil prices keep rising to record levels, and it will cut capacity by seven per cent from its fall and winter schedule.

Fewer flights mean the airline will require less staff across all levels of the organization.

The big Montreal air carrier had nearly 24,000 employees at the end of 2007, which means the latest cuts amount to just over 8% of its workforce.

Air Canada, like other global airlines, must adapt the business and reduce our flying, more specifically flying that has become unprofitable in this current environment.

They will be meeting with union representatives to discuss options and these options could help minimize involuntary layoffs.

Arthur declined to outline the possible alternatives.

With the cost of jet fuel more than doubling in the past year and quadrupling since 2004, further capacity reductions are likely if prices remain at current levels.

Air Canada says every time oil increases by $1 per barrel, it costs the airline an additional $26 million a year. The company spend more on fuel than any other expense, representing more than 30% of its total operational spending.

With oil over US$133 a barrel, the airline estimates it will shell out almost C$1 billion more in 2008 than in it did in 2007. It says the average cost of taking one passenger on a round trip has increased to $230, from $146 in 2007 and $110 in 2004.

It also blames federal and provincial fuel excise taxes, security fees and airport charges that are amongst the most expensive in the world as roadblocks to profitability.

The loss of jobs is painful in view of our employees' hard work in bringing the airline back to profitability over the past four years.

They regret having to take these actions but they are necessary to remain competitive going forward.

Rival airline WestJet said it has no plans to cut capacity or lay off employees to combat rising fuel costs.

It is business as usual for us.

"Our low-cost business model continues to work. We are feeling the effects of record fuel prices and excessive airport fees and taxes but we will continue with the execution of our strategic plan."

The Calgary-based non-unionized airline plans to add two aircraft this year, bringing its fleet total to 77, with orders for 121 aircraft through 2013.

Air Canada's various unions learned of the cuts Tuesday morning.

Employees at its offices at Trudeau International Airport declined to comment.

Air Canada plans to cut domestic capacity in the fourth quarter of this year and first quarter of 2009 by two per cent, while slashing U.S. transborder capacity by 13 % and international capacity by seven per cent, for a total of seven per cent across its system.

Among routes being jettisoned are the previously announced suspension of Toronto to Rome non-stop service - although that will remain for the high-traffic summer season - and the elimination of non-stop service from Vancouver to Osaka, Japan.

Airlines around the world have announced similar moves and most have substantially raised fuel surcharges and added a series of new passenger costs.

U.S. carriers including American, United and Delta have announced plans to reduce capacity and eliminate jobs.

Delta Air Lines Inc. said it plans to cut twice as many jobs as the original goal outlined in March, when it offered voluntary severance payouts to more than half its workforce.

Air New Zealand said it will raise air fares and eliminate some routes.

With the reductions, Air Canada expects to see full-year capacity growth between one per cent and minus one per cent. It had originally forecast growth between one and 2.5% over 2007 levels.

On the Toronto Stock Exchange, Air Canada's voting B shares rose 6 cents to $9, down from $17 late last year.

PS:
The Ottawa Macdonald-Cartier International Airport says they're unsure if recent cuts to Air Canada service – equating to up to 2,000 jobs and seven per cent of domestic and international routes.

Ottawa Greenbelt Development Under Review

2008-06-17T15:16:00.004-04:00

For the first time, the City of Ottawa has identified more than 13,700 acres of the Greenbelt, worth about $1.6 billion, that could be developed without damaging the integrity of the capital's most treasured natural landmark.

The land, about a quarter of the 49,400-acre (20,800-hectare) belt, is enough to provide more than 20 years of urban land for housing and employment if the National Capital Commission decides to open it up for development.

It is the first time since the Greenbelt was created in the 1950s that a government body has put out a serious proposal on developing property that has been kept immune to development. It is also the first time that anyone has put a figure on its value. Assembled for $40 million (in 1966 dollars), about 85% of the belt, made of up of farms, woodland, wetland, trails and scrubland, is undeveloped. Today, shorn of the environmentally sensitive lands that are virtually untouchable, the Greenbelt has about 21,500 acres (8,746 hectares) of theoretically developable land.

Those 21,500 acres are worth $2.5 billion, a city estimate based on the going market price of $120,000 an acre for urban land. The city believes that, realistically, only 13,700 acres (5,560 hectares) can be developed without doing lethal harm to the Greenbelt as a whole.

Ian Cross, author of the white paper and the city's manager of research and forecasting, says in the end, the fate of the Greenbelt will be decided by the NCC, which owns and manages the land. However, it is useful for the coming debate on the future of the city's most prized natural asset to ask whether the Greenbelt envisaged by French planner Jacques Gréber almost 50 years ago is still relevant.

Right now we are building on farmland outside the urban area and the question is, does it make sense to protect agricultural land in the Greenbelt when we continue to build farther out? "The primary purpose of the Greenbelt was to contain urban development, but that is gone. It didn't work. Building sustainable communities in the Greenbelt may be the appropriate evolutionary development.

In its white paper, the city laid out three development options for discussion as the federal government considers the future of the once sacrosanct belt.

The options are:

- Corridor development along major roads in the Greenbelt such as Highway 417 in the west, Highway 416 to Barrhaven and Highway 174 to Orléans.

- High-density mixed-use development along existing or planned rapid-transit lines such as the east and west sides of the Woodroffe transitway, south of Hunt Club Road, to encourage high transit use.

- Extension of urban land into the Greenbelt in existing neighbourhoods in areas such as north and south of Hunt Club west and the west side of Orléans along Innes Road.

The Greenbelt has long been treated with such reverence that it was considered taboo to contemplate any development on it beyond the public institutions such as the Ottawa Airport and research centers that call it home. A series of experts' reports, including one recently from the Canadian Institute for Environmental Law and Policy, have all said the Greenbelt has fuelled sprawl, instead of containing it. Last year, NCC chairman Russell Mills became the most influential voice in the city to advocate some strip development along the Greenbelt to reduce urban sprawl. And when she announced the NCC's review this spring, chief executive Marie Lemay said "everything is on the table. You've got to ask the basic question: Is the use we have now what we want for the next 10 to 15 years or are there parts where we want something different?"

But others, prominent among them Larry Beasley, a noted urban planner and former chief planner of Vancouver, and Environment Minister John Baird, oppose development in what they consider an important part of the city's heritage. Mr. Baird vowed to fight any such move.

The white paper notes that with 141 kilometres of city roads, 43 kilometres of water pipes and 39 kilometres of sewer pipes running through the Greenbelt, the cost to the city and to commuters of continued expansion beyond the belt is running high. The extra travel through the Greenbelt during the peak period costs drivers $60 million annually. It also costs the city an extra $10 million a year to run buses through the Greenbelt to outlying areas. The cost of vehicle emissions is incalculable, Mr. Cross says. For all those reasons and more, he says, it makes sense to put the Greenbelt into the equation so that whatever the final decision is, all the issues will have been thrashed out.

By the Numbers:

49,400 - Total number of acres in the Greenbelt.

21,500 - Number of acres of theoretically developable land in the Greenbelt.

13,700 - Number of acres that could be developed without affecting the integrity of the natural landmark.

Home Listings Flood Housing Market in Canada

2008-06-16T16:48:00.004-04:00

A fresh flood of homes on the market sent resale listings to their second consecutive record level in May, while sales activity and price gains both cooled.

There were 54,029 new listings of resale housing units in major markets last month, a 2.2% increase over the seasonally adjusted record hit in April.

On an unadjusted basis, listings rose to 67,628 units, up 7% from May 2007.

Unlike listings, year-over-year sales levels fell in 18 of the 20 markets in the study for which data were available. Information was not available for the Quebec markets because geographical areas in the province are being redefined.

Unit sales across Canada dropped by 17% this May from the year before on an unadjusted basis, and by 0.5% compared with April, 2008, on a seasonally adjusted basis.

Prices edged up 1% in May from the year before to $337,071, a new record for the average price, but the smallest such increase in more than seven years.

Rising food, fuel and home prices are denting consumer confidence. Increasingly cautious home buyers may keep listings on the market longer before being sold, which increases the importance of realistic pricing.

The most dramatic surges in new listings occurred in Saskatoon and Regina, a marked reversal from earlier in the year when they were the country's tightest markets in terms of supply.

New resale listings rose by 58% in Regina and 44% in Saskatoon year-over-year in May. During the same month, year-over-year sales fell in those markets by 28% and 37% respectively.

This pattern has already been seen in other markets including Calgary and Edmonton, where tight supply and soaring prices have given way to a cool-down.

Listings in those markets are now retreating from the peak levels reached in March as the market readjusts, with listings up 1% in Calgary and down 9% in Edmonton from the year before.

It is now becoming increasingly clear that the Canadian housing market is gradually cooling off, with the decline in activity in the West particularly pronounced,. However, we believe that the sector will remain in reasonable shape, and will avoid any U.S.-style housing correction.

Other data included in the report (all figures compare May, 2008 with May, 2007):

– Markets with the largest increases in listings: Regina (+58%), Saskatoon (+44%), Greater Vancouver (+20%), Victoria (+20%), Sudbury, Ont. (+16%), Ottawa (+16%).

– Markets with the largest drops in listings: Edmonton (-9%), Windsor-Essex (-6%), Newfoundland and Labrador (-6%).

– Markets with the largest decreases in sales: Saskatoon (-37%), Edmonton (-35%), Calgary (-33%), Greater Vancouvejavascript:void(0)
Publish Postr (-31%), Regina (-28%).

– Markets with increases in sales (2 of 20): Newfoundland and Labrador (+5.5%), Ottawa (+2.5%).

– Markets with the largest increases in unit price: Regina (+45%), Saskatoon (+29%), Saint John (+22%), Newfoundland and Labrador (+21%).

– Markets with decreases in unit price (3 of 20): Windsor-Essex (-6%), Edmonton (-5%), Calgary (-2%) .

Tax On Rental Properties 'unfair' to Tenants

2008-06-16T16:37:00.003-04:00

Research shows that adding tax to rental properties makes rents higher.

New Brunswick is the only province that adds an extra tax to rental properties, an idea that was once supported because it was seen as a target on rich landlords who could afford to pay. But property rental is a business, and like any business it passes its costs on to its customers, who in this case are tenants.

In most places property taxes are controlled by municipalities. Some cities, such as Toronto, raise property taxes 3.5 times on rental units over what a home owner pays. The municipalities then argue they can't reduce the differential without having to raise taxes on single-family homes because they need the money. The situation is not as bad in New Brunswick since the tax goes into provincial coffers and the province has the ability to tax a number of things, so it has many ways to make up the difference.

For the average tenant, if the tax rates were equalized, rents would go down by $45 to $50 a month.

Mortgage firm loses $16.7 million

2008-06-13T11:52:00.004-04:00

Xceed Mortgage Corp. has posted a second-quarter loss of $16.7 million as it shifts away from ill-fated subprime mortgages in the wake of the credit crisis, and predicts the rest of the year will show improved results.

We believe that having essentially completed our transition and taken the necessary unusual charges and writedowns, we can expect to return to profitability in the second half of this year.

The Toronto-based company said its loss for the period ended April 30 amounted to 60 cents per share, compared with a year-ago profit of $4.7 million, or 16 cents per share.

Included in the results was a one-time charge of $10.2 million.

Revenues were down sharply to $4.8 million from $15.6 million, due to the shift to providing mortgages eligible for Canada Mortgage and Housing Corp. insurance.

Xceed has been moving away from high-risk uninsurable mortgages, but "in addition to reduced volumes, this new focus also meant lower profit margins for those significantly lower-risk mortgages. Even though we announced some time ago that we were going to stop issuing new uninsured mortgages, we still had a pipeline which was substantially, initially, uninsured mortgages.

During the first half of the company's financial year, the total value of mortgages it funded dropped to $191 million from $621 million in the year-ago period. At the same time, Xceed insured $102.4 million of previously uninsured mortgages.

Wahl said that Xceed now is only dealing with mortgages that qualify for insurance and sale to CMHC's Canada Mortgage Bond program.

Xceed's stock has been ravaged by troubling conditions in the mortgage industry since last summer when Coventree Inc., the largest non-bank arranger of asset-backed commercial paper in Canada, announced in August it was unable to find investors interested in rolling over asset-backed paper as it matured.

Coventree was a main source of funding for Xceed mortgages, and Xceed stock has lost more than 85 per cent of its value, tumbling from a 52-week high of $7.75 to as low as 92 cents. The shares closed up five cents at $1.20 in Toronto yesterday, representing a market value of $33.3 million.

U.S. recession could hurt Canada banks

2008-06-13T11:42:00.004-04:00

The possibility of a U.S. recession is the biggest risk for the global financial system, and would have dire consequences for the Canadian economy and domestic banks.

However, the central bank said the threat of a deeper-than-expected U.S. downturn is low and that Canadian financial institutions are well-placed to absorb such a shock even though their increased exposure to U.S. securities has made them more vulnerable.

If the U.S. economy does worsen more than anticipated, Canadian banks would likely see further writedowns, shrinking profits and higher loan loss provisions. This in turn would jack up bank funding costs and lead to tighter credit for consumers and business.

While the probability of such outcomes materializing is relatively low, they nonetheless warrant careful consideration by financial institutions because of the potentially large negative repercussions.

Royal Bank of Canada and Toronto-Dominion Bank both made U.S. acquisitions in the past year that boosted their U.S. banking businesses and added to their portfolios of U.S. consumer and commercial loans. Bank of Montreal also has a Chicago-based U.S. retail banking presence.

It is our belief that we are simply seeing the beginning of credit deterioration in the United States.

Those with retail loan exposure outside of Canada will see steeper increases in provisions for loan losses in the second half of 2008, he predicted. Aiken also expects domestic credit quality to begin to weaken noticeably in 2009, but mainly in the commercial/corporate loan area, not in retail lending.

There is a distinct negative story brewing about provisions for loan losses.

While the Canadian banks are in better financial shape than their U.S. or international rivals, strong earnings growth could remain "elusive" into 2009.

The Bank of Canada also warned that the recent growth in Canada of subprime mortgages and mortgages with no down payment or longer amortizations has left a segment of the population more vulnerable to a worsening economy.

Still, subprime mortgages account for less than 5 percent of all housing mortgages, compared with 14 percent in the United States and is considered to be of better quality.

A sharp housing market correction, similar to that in the United States, is unlikely in Canada.

Policymakers at the bank are closely monitoring the mortgage market but have not yet seen any indication that banks have been hurt by the collapse of the market for some of the more opaque, structured products that have been in trouble during the credit crisis.

The financial market turmoil -- with its associated weakening effect on securitization activity and market-based finance -- has not yet had a noticeable adverse impact on the overall growth of credit in Canada.

The rise in household debt has outpaced that of income and the proportion of debt owed by "vulnerable households" rose to 6.5% in 2007 from 6.2% in 2006.

At present, however, the financial situation of households does not pose a threat to the stability of the Canadian financial system.

73,000 US homes lost to foreclosure in May

2008-06-13T11:39:00.001-04:00

The housing crisis grew worse in May, as more than 73,000 American families lost their homes to bank repossessions, up a staggering 158% from the 28,548 households that were dispossessed in May 2007.

Foreclosure filings of all kinds, including default notices, notices of sheriff's sales and bank repossessions, were up 48% from May 2007. Filings increased 7% from April.

US Housing: It'll get worse

2008-06-13T11:34:00.004-04:00

With home prices plunging by more than 30% in some markets, bargain-hunters are ready to pounce.

But it may pay for buyers to wait. Many housing experts say that the worst-hit metro areas have even farther to fall, and could see total drops of as much as 50%.

The housing boom was unprecedented in U.S. history, and the correction will be as well.

Many erstwhile bubble cities have sustained particularly brutal hits. The median-price of a home in Sacramento, Calif. was down 35% during the three months ended May 31 compared to the same period last year, according to the real estate web site Trulia.com. In Riverside, Calif. prices fell 29%, while San Diego prices dropped 26%.

Smaller cities in California's Central Valley, such as Stockton (-39%), Modesto (-37%) and Bakersfield (-29%), also recorded steep declines.

Outside California, hard-hit markets include Phoenix (-18.8%), Las Vegas (-22%), West Palm Beach, Fla. (-32%) and Cape Coral, Fla. (-35%).

Youngblood expects that these markets will likely endure total price drops of 50% or more.
The smart money

Indeed, prices are falling faster and further than in any other post-war housing bust. During the bust in Austin, Tex., which started in 1986 and is one of the worst on record, prices fell 25%, according to Local Market Monitor, a financial data provider. And that cycle took four years to bottom out.

In other major downturns, prices in Los Angeles fell by 21% during a six-year period in the 1990s, and Honolulu home prices saw a decline of 16% in the five years starting in 1994.

Youngblood's forecast is quite plausible, it especially significant that the smart money, investors in the S&P Case/Shiller Home Price Index, are still buying futures as if they expect prices to continue to plummet.

The index, which tracks the sale price of specific homes as they are sold and resold over the years, is considered to be one of the most accurate home price indicators.

The people who are putting their money where their mouths are betting on more losses.

Specifically, Case/Shiller investors are betting that Las Vegas prices will fall an additional 22% by November 2009. Los Angeles futures predict a loss of 24.2% through November 2009, while investors expect to see Miami down 21.6% by then.

These markets may have a hard time recovering because, according to Perna, people are afraid to buy right now, because they're concerned about over-paying. That helps explain why price depreciation seems to be accelerating.

The most severe declines are happening right now.

This correction was inevitable, in Youngblood's opinion; home price gains had simply out-paced income by far too much to be sustained.

Historically, home prices have averaged about four times wages. Whenever homes got significantly more expensive, people could not afford to buy and home prices fell back.

But local price-to-income ratios are still out of whack even after steep price declines, which means prices have further to fall. In Los Angeles, where the ratio peaked at 22.7, according to Youngblood, it's still in the high teens. Home prices would have to come down another 40% or so to get that ratio back into the single digits.

And it's not just the housing fundamentals that lead Youngblood to expect more drops; he also cites the local economic conditions.

Bubble cities are now seeing fleeing employment conditions. In Miami, the unemployment rate rose 34.3% between April 2007 and April 2008, according to Youngblood. And the job picture in California cities, where many jobs were housing related, has been even more disastrous.

Housing was a key economic engine for towns like Riverside, Stockton and Modesto during the boom, according to Zandi. Builders, real estate salespeople, mortgage brokers and lenders, and even retailers, like Home Depot and Lowe's , depended on growth in the sector.

In all those deteriorating housing markets, it's a double hit.

Ten of the 11 cities with the highest unemployment rates in the nation are now in central California, with El Centro, at 18.4% in April, leading the way. Other double-digit disaster areas were in Merced (12.3%), Yuba City (11.8%), Modesto (10.7%), Visalia (10.3%), Hanford (10.2%) and Fresno (10%).

Many of these cities are also among the leaders in foreclosure rates. As more foreclosed properties hit the market, prices are further depressed.

The price drops reflect a wave of distressed sales of bank-owned properties and discouraged sellers.

Not all analysts are pessimistic. Richard DeKaser, chief economist for National City Corp points out that, thanks to the price declines, the national market is the most affordable it's been in years.

With the national median price of a single family home at $204,229, mortgage rates around 6% and the average household earning nearly $50,000, the average home buyer spent about 23.2% of their income on housing during the first quarter of 2008. That's down from 2006, when homeowners spent an average of 29% of their income on housing.

While he expects home prices to stagnate for the next five years, Youngblood's 50% price decline forecast is a little extreme.

But that target is realistic, after taking inflation into account. In markets where prices have fallen 35% or more, and remain depressed through five years of 4% inflation, home prices in real dollars will absorb an additional 20%-plus hit. That would push price declines to over 50%.

Of course, there are plenty of wild cards that could affect home price trends, such as the election, Congressional legislation, unemployment, gas prices, and interest rates.

Vinyl Shower Curtains a 'Volatile' Hazard

2008-06-13T11:27:00.005-04:00

Vinyl shower curtains release over 100 toxic chemicals into the air in people's bathrooms, including known carcinogens and reproductive toxins, according to a new report calling for the ban of Polyvinyl chloride in bath curtains and liners.

The laboratory tests of five new PVC shower curtains, released Thursday, found 108 different volatile organic compounds were released into the air over a 28-day period, including off-gassing above the recommended level in the United States for seven days.

These compounds can cause respiratory irritation, headaches, nausea and damage to the liver, kidney and the central nervous system. Some VOCs are also suspected or known to cause cancer in humans.

The shower curtains also contained phthalates (DEHP), already banned in children's toys in California, Washington and the European Union. Canada has listed DEHP as a "toxic" substance and has recommended it be banned in children's products, but has yet to implement the recommendation.

Two of the chemicals detected, toluene and ethylbenzene, are also on California's Proposition 65 list. The law prohibits companies doing business in the state from exposing individuals to chemicals known to cause cancer or reproductive toxicity without first giving consumers a clear warning.

Several other chemicals found in the curtains are considered a human health concern under Canada's Environmental Protection Act, including ethylbenzene, but are not regulated.

The Canadian Environmental Law Association and Environmental Defence released the results in Canada. The report, titled Volatile Vinyl: The New Shower Curtain's Chemical Smell, was done by the Virginia-based Center for Health, Environment and Justice.

"Everybody knows that smell, and it's not a particularly pleasant smell. It's like a confirmation of common sense. Things that have a heavy chemical smell are probably not good for you. This just puts numbers to it," said Rick Smith, executive director of Environmental Defence.

More importantly, said Smith, it draws attention to the "largely invisible, insidious" problem of indoor air pollutants.

"This study is yet further confirmation that indoor air quality, the toxic ingredients of run-of-the-mill consumer products in our homes, are perhaps an even more serious source of pollution than belching smoke stacks."

The groups are calling on the federal government to ban PVC in shower curtains altogether, and declare the chemicals emitted from PVC in consumer products as hazardous indoor air pollutants and regulate their use in consumer products.

Smith, a parent of two young boys, said the amount of time families spend in the bathroom makes this case a particularly pressing matter.

"Kneeling beside the tub giving my two little kids a bath many times a week, being eye to eye with the shower curtain, having my younger son play peek-a-boo, brings you face to face with the shower curtain on the regular basis, not to mention having your son chewing on it," said Smith.

Some retailers are also moving away from PVC shower curtains.

Sears has developed plans to offer more PVC-free shower curtains, while Ikea plans to phase out PVC shower curtains altogether.

Layoffs at Dell in Ottawa

2008-06-12T10:26:00.002-04:00

Dell has laid off an undisclosed number of sales staff from their Ottawa office this week, adding to the nearly 1,100 pink slips originally announced by the U.S.-based computer giant in late April.

A few sales staff members were laid off this week, but could not provide exact numbers. But he said that number is in addition to 20 to 30 call center employees also to be laid off this week as per Dell's original announcement nearly two months ago, in which more than one thousand jobs were to be cut in two separate rounds of layoffs.

While the bulk of the second round will occur the week of June 27, some jobs would stay in Ottawa until August or even early September. And that's because of the business unit that they're in, and how they're being integrated into our world network.

Although the bulk of the people are slated to go at the end of June, there will be some people leaving at the end of this week.

There are some units that are going to go a little earlier, and some that are going to go a little later than we expected.

Building fees are too low

2008-06-12T10:14:00.002-04:00

Ottawa taxpayers are subsidizing developers by more than $4 million a year because the city charges less for development fees than other Ontario municipalities.

The Ottawa city to take immediate steps to raise the fees and recover the full costs, but Ottawa levies some of the highest fees in the country and any attempt to increase them will lead to higher home prices.

The Ottawa city has about 25 different fees on everything from zoning and engineering to conservation and committee of adjustment procedures. By the time it is all tallied up, a residential subdivision could cost between $35,000 and $40,000 just to get started, while a plan for a condominium often starts at about $12,000.

Ottawa has one of the highest fees in the country and the last thing they need to do is increase them. If they increase fees, buiders are increasing new housing costs. If people think the city is going to hurt builders by increasing fees, they are wrong. It is going to hurt homebuyers.

The city reviews more than 800 development applications a year, and about 1,700 development agreements require monitoring and enforcement that involves several agencies and departments. The auditor general says despite the enormous work and cost involved, little effort is made to recoup the full cost from developers. The planning department has been recovering less than two-thirds of the cost compared with 85% to 100 % in other Ontario cities, and the shortfall costs taxpayers at least $4.3 million a year.

It is a conservative estimate and it could be more in a fee increase.

The Ottawa city doesn't charge the full cost of fees for development projects because the tradition inherited by the new city was to bill developers for 60% of the costs.

Ottawa city staff are "consistently slow" in processing development applications, describing their performance as sub-optimal.

A high Ottawa city official has finally acknowledged a problem that builders have been complaining about for years, and that he is proposing solutions. However, the auditor general is failing to see: the cost-recovery problem is not due to low fees collected by the city, but instead is caused by the much higher staff costs arising out of a bloated bureaucracy.

The fact that they are taking two or three times longer than normal to approve development applications is the reason their costs are high. They don't need more money. We think the auditor general got it right when he said development approvals take much longer, but he has failed to recognize that it is their costs that are too high.

The 2007 audit also confirmed criticism that the city's earlier growth projections were inflated, noting that new figures released last year were more realistic.

It also found that 13% of new building permits issued by the city did not conform to the provincial building code, and while this raises concerns about safety, city staff say the problem, which has to do with the practice of issuing conditional building permits for projects that have not yet been fully vetted, has nothing to do with public safety. Often a builder would be allowed to go ahead with a project even though all the requirements have not yet been met, but city ensures that all conditions are met before the building gets final clearance.

The issue with the building code is about process.

New-house price surges cooling off

2008-06-12T10:07:00.000-04:00

Prices for new homes increased just 5.2% in April from a year earlier, marking the slowest pace in more than 2½ years.

It was the third month in a row for a deceleration.

On a month-to-month basis, national prices were unchanged between March and April, less than economists' expectations of a 0.2% rise.

The Canadian housing sector may be coming off the boil.

Ontario and Quebec saw increases slightly below the national average. In Windsor, Ont., which relies on the automotive industry, housing prices fell 0.2% from a year ago, continuing the downward trend started 19 months ago.

New Ottawa Housing Price Growth Flat in April

2008-06-11T13:41:00.001-04:00

New housing prices in the Ottawa-Gatineau area grew by 3.2% year-over-year in April, with growth roughly flat compared to a month earlier after two months of slowdowns.

Local contractors' selling prices grew at a slightly faster pace than in April, when a year-over-year growth rate of 3.1% was recorded.

However, the trend for the rest of the country was less positive, with new housing prices increasing at their slowest pace in more than two and a half years, at 5.2%. The growth rate was down 0.9% from the previous month, marking the third consecutive month in which there was a deceleration from the previous month.

Despite healthy gains in most of eastern Canada, large declines in price growth for the Prairies canceled out most of the increases, with the sharpest deceleration of 5.4% seen in Edmonton, to 8.1%. It was the ninth consecutive month that the city had seen a slowdown in new housing price growth, as fierce competition among builders resulted in lower prices being offered to prospective home buyers.

Calgary also posted a significant deceleration of by 2.8% to 2.5% in April.

Meanwhile, Saskatoon, while still recording the highest year-over-year growth among all the cities surveyed, also had a large 2.5% slowdown to 43.7%. However, it was the 12th straight month that the city had recorded the strongest year-over-year price gain.

On the upside, Regina posted the biggest acceleration of 6.2%, to 34%, as increased material and labor costs, a strong market and continued high demand for new housing helped to boost contractors' selling prices.

St. John's also saw year-over-year price growth speed up by a strong 4.3%, to 16.3%, as Newfoundland and Labrador's economy continued to strengthen.

Once again, Windsor was the only city to post a decline in new housing prices compared to a year earlier, as it continued a downward trend started 19 months ago, but the 0.2% decrease was less severe than the 0.4% decline seen in March.

Canada Less Troubled by Inflation

2008-06-11T10:04:00.000-04:00

Canada is less concerned about inflation than other members of the Group of Eight leading industrialized nations because its strong dollar and a sales tax cut have limited price increases.

It's less of a concern for Canada than it is for other countries.

Waste-to-energy Plant will Help Solve Ottawa’s Garbage Problem

2008-06-10T15:30:00.001-04:00

A city committee added its support today to a project it hopes will help solve Ottawa’s garbage problem and provide electricity for local homes and businesses.

Ottawa's planning and economic development committee is recommending to council it give the green light for a full-scale waste-to-energy facility.

Concerns expressed by some councilors about what will happen if the plant, operated by businessman Rod Bryden’s company Plasco Energy Group, fails to meet environmental and financial standards. Southgate-Gloucester Coun. Steve Desroches, noted that a small facility built to test the process which vaporizes garbage and uses the heat to produce electricity for the local power grid, is still being tested at the Trail Road landfill site.

City Manager Kent Kirkpatrick said there is “zero financial risk” to the city and if Plasco doesn’t meet provincial ministry of the environment criteria the project won’t move ahead. He also said the city is continuing to explore alternative waste disposal technologies.

Kanata South Coun. Peggy Feltmate said although the city is currently reviewing its Integrated Waste Management Plan, she doesn’t feel it’s working fast enough to come up with solutions.

“I’m very concerned we have a bunch of balls in the air and don’t have a plan,” she said.

Bryden said because the plant is the first of its kind to be built in the world, it iss still working out a few bugs. But, he said it should meet all MoE guidelines by the time it expects to be in full-scale, $125-million-a-year operation in two years.

Kirkpatrick said he expects the city to fork over about $8 million a year to the company, but the cost will be offset by royalties and the revenue Plasco is expected to return to the city.

Bank of Canada Leaves Key Interest Rate Unchanged

2008-06-10T10:18:00.003-04:00

The Bank of Canada on Tuesday defied expectations and left its key interest rate on hold at 3%, despite concerns over a weakening economy here and a downturn in the United States.

Although the composition of U.S. growth has not been favorable for demand for Canadian goods and services, overall, global growth has been stronger and commodity prices have been sharply higher than expected.

At the same time, many of the downside risks to inflation ... have eased, while the evolution of credit conditions has been in line with expectations. The risk remains that potential growth will be weaker than assumed.

Most economists had forecast the 25-basis-point rate cut, pointing to disappointing economic growth - and despite a risk of higher inflation from soaring global energy and food prices.

If current levels of energy prices persist, total CPI inflation will rise above 3% later this year. However, with the Canadian economy operating in excess supply, core inflation is expected to remain below 2% through 2009. Both total and core inflation should converge on 2% in 2010 as the economy returns to balance.

Against this backdrop, the bank now judges that the current stance of monetary policy is appropriately accommodative to bring aggregate demand and supply into balance and to achieve the two per cent inflation target. There continue to be important downside and upside risks to inflation in Canada, which the bank will monitor closely.

The bank's decision could be bad news for consumers and businesses.

Traditionally, commercial banks follow the central bank's lead with matching cuts to their benchmark prime rates, now at 4.75%, to which floating-rate consumer and business loans, including mortgages, are linked.

The Canadian dollar remained relatively unchanged after the rate decision. It closed Monday at a two-month low of 97.89 US.

The bank's surprise move indicates the central bank has ended it cycle of rate leave.

The much more focused concern about the upside risks to inflation suggest that the bank is done cutting rates. This is quite an abrupt turn from the last decision date, when the bank declared that 'further monetary stimulus would likely be required'.

Ottawa's Housing Sector to Tighten in 2009

2008-06-10T10:12:00.002-04:00

Construction activity in Ottawa is expected to rise this year, but slower-than-expected economic growth will cause housing starts to drop in 2009.

Total housing starts are expected to increase by 6.1% in 2008 to 6,900 units, with particularly strong activity in the condominium apartment sector, which will reach 1,700 units by the end of 2008. The gain will mitigate the expected drop in the construction of the more costly single-detached units, which are anticipated to drop to 2,750 units from 2,973 a year earlier.

However, sales of existing housing in Ottawa are expected to decline year-over-year by 8.4% to 13,500 units, while the average price growth of a resale home will outpace inflation, rising by more than four per cent to reach $285,000.

The already tight rental vacancy rate is expected to continue its downward trend this year, narrowing further to 2% from 2.3%, fuelling an increase in average rent to $980 from $960.

While the pattern for the rental market is anticipated to extend into 2009, local construction activity is expected to be hit by a province-wide slowdown in housing demand.

A rise in mortgage carrying costs and slower economic conditions will dampen housing demand, particularly among first-time buyers.

However, demand for modestly priced housing will hold up better as declining employment opportunities in higher-paying employment sectors encourage demand for both apartment ownership and rental accommodation.

As a result, housing starts are expected to drop 7.2% to 6,400 units next year, with single-detached housing bearing the brunt of the loss, plunging 9.1% to 2,500 units. Housing sales will drop by roughly 1.9% to an estimated 13,250 units.

Meanwhile, the average price tag for an Ottawa resale home is expected to rise 3.5 % to $295,000, and the rental vacancy rate is forecast to drop to 1.7%, with average rent rising to $1,000.

Ottawa Drops to #19 on City Ranking

2008-06-10T10:07:00.002-04:00

Ottawa has slipped from 18th to 19th place in a survey of the best places to live in the world, but those who administer the survey say the change is hardly worth mentioning.

The capital was one of five Canadian cities ranked by Mercer, a company that does the survey to help governments and corporations decide where to send employees on international assignments. It released results for 215 of the 350 cities it surveys. Cities are given a point-scoring index, with New York City offering a base number of 100.

Zurich was ranked as the best city in which to live, with a score of 108, while Ottawa was at 104.7, down from last year's score of 104.8.

It's a minor change. This is not meaningful in any way. There's nothing noticeably different in the quality of life for people living in Ottawa. Ottawa still ranks higher than 90% of the 215 cities sampled.

Vancouver was the most desirable Canadian city in which to live, placing 4th in the world, while Toronto remained in the same position as last year -- at 15th -- and Montreal remained in the 22nd spot. Calgary took 25th place, down from 24th last year. Cities are ranked according to their political stability, economic and socio-cultural environment, health and sanitation, schools and education, public services and transportation, recreation, consumer goods, housing and natural environment.

Mercer also conducts a personal safety survey and all five Canadian cities tied for 22nd place. Luxembourg was deemed the safest city in which to live, while Baghdad ranked 215th.

European cities dominated the upper echelons of the quality-of-life survey, with Zurich coming 1st, followed by Vienna and Geneva. Besides Vancouver, other cities in the top 10 included Auckland, Dusseldorf, Munich, Frankfurt, Bern and Sydney. That means Switzerland and Germany each had three cities in the Top 10.

The Top 3 U.S. cities were Honolulu, in 28th spot, San Francisco in 29th place, and Boston in 37th.

New Regulations Could Limit Water Use

2008-06-09T15:10:00.003-04:00

Did you already flush twice? Uh oh. That means you may only have one flush left.

Natural Resources Canada is looking at limiting the amount of water flowing through things like toilets, shower heads and dishwashers.

It's all part of Ottawa's energy savings plan.

Amendments to the Energy Efficiency Act were introduced last week, and if they become law, the government would be allowed to regulate products that use energy or affect power consumption, and plumbing fixtures, like toilets, would fall under that category because they affect energy use.

The average Canadian uses more than 300 liters of water every day -- that's about three full bathtubs.

Toilets account for a third of household water use.

Dirty Filters Causing Hot Nights For Ottawa Homeowners

2008-06-09T14:48:00.002-04:00

We advising Ottawa homeowners with central air systems to ensure that their furnace
filters are clean. A dirty filter restricts air flow and reduces performance on central air system.

If you notice that your central air is not keeping up in the hot weather the first thing to check is the furnace filter. Depending on the type of filter you may need to clean or change it monthly. Regular filter changes, in conjunction with an annual professional tune-up will ensure your central air is able to keep your home cool and it will also reduce electrical consumption.

Housing Starts Fall In Calgary

2008-06-09T14:40:00.000-04:00

Total housing starts in the Calgary-area this year continue to climb, even though there was a decline in the month of May alone.

The number of starts fell 9% last month when compared to May 2007.
However, year-to-date housing starts are up 25% from the same period last year.

Multi-family construction is driving the numbers mainly because of continued condo construction activity in Airdrie and Cochrane.
In fact, the number of multi-family starts in May - over 1,000 units - is the highest figure for that month since 1977.

Over-valued Housing Market

2008-06-09T13:52:00.001-04:00

When it comes time for an over-valued market to correct itself there are several ways it can happen. There are investors that think the real estate earnings are out of balance when talking about price to earnings ratios. These ratios refer to the amount of rent collected within a year versus the purchase price of the property. Normally that ration should be right about 150.

There are some areas right now that the ratio is around 400. This earning-ratio could be corrected through the decrease of prices, the increase of rents or some sort of combination. There are some financial experts that say the real estate market could take 20 years to correct.

So that brings up the question of what you are going to do. Will you wait a possible 20 years for the market to change or will you adjust how you invest to make money now? When you talk with financial advisors they speak in terms of controlling the risk relative to the potential to gain in the investment.

If you understand these concepts and follow these steps anyone is able to learn how to invest at times when others perceive the market as a bubble that is dangerous and risky.

Canadian Housing Starts Expected to Soften in Second Half of 2008

2008-06-09T13:10:00.002-04:00

Canadian housing starts increased in May but the Canadian market is likely to cool in the second half of 2008.

The annual rate of housing rose to 221,300 in May, up from 213,900 units in April.

Single homes and multi-family units in urban areas of the country were both up sharply over the previous month while starts in rural areas held steady at 28,500. Urban singles rose 7.3% to 76,700 units, a rebound from April when the category had reached its lowest level since May 2001. Urban multi-family starts increased to 116,100 on an annual basis, up from 113,900 in April.

The May results were a bit stronger than expected and an indication that Canada's housing industry remains quite healthy in continued contrast to the world-famous collapse in U.S. housing.

The latest level of starts is barely below the average pace seen since the housing boom got rolling in 2002. However, the recent cooling in home sales and the downturn in consumer sentiment suggest that building activity will finally begin to lose some momentum later this year.

Despite the rise in May starts, the average level of starts in April and May is down an annualized 7.1% compared to the first quarter. The weakening in single detached homes, usually a more stable indicator of the trend in housing, is down an even greater 9.5%.

That softness will play into the Bank of Canada's interest rate decision to be announced tomorrow, predicting that the central bank will shave another 25 basis points from its key overnight lending rate.

Rate Speculation

2008-06-09T13:07:00.002-04:00

Economists forecast the central bank will cut borrowing costs tomorrow to avoid a recession in the world's eighth-largest economy.

The Bank of Canada will cut the key rate a quarter-percentage point to 2.75% tomorrow. A 25-basis-point reduction would lower the nation's interest-rate advantage over the U.S. to 0.75%.

Ottawa Is The Cheapest City

2008-06-09T11:53:00.002-04:00

When housing investors point to different cities in Canada, they each have a reason why investing there is a practical move. Toronto is Canada’s financial capital, Vancouver is one of the most beautiful cities in North America and has the upcoming Olympics, Calgary and Edmonton are flush in oil money and Montreal has culture, sophistication and one of the highest living satisfaction poll numbers anywhere. Left out of this discussion, in many cases, is Canada’s political capital, Ottawa. What is so redeeming about investing in this, one of Canada’s smallest cities? The answer is price and potential!

According to just-released numbers, Ottawa is the cheapest city of its size to live in in all of Canada. Only Quebec City ranked higher, but Ottawa was number one as far as major Canadian cities went. And even though housing prices are up sharply in Ottawa over the last five years, they still pale in comparison when held up against Toronto or Vancouver. What does this mean for the average real estate investor? It means that there is still a huge opportunity to invest in this beautiful city before prices rise further and the secret of this wonderful place gets out.

So, why Ottawa? Looking on the map, Ottawa is snugly tucked between both Montreal and Toronto, which has made it a popular choice for those needing to do business in both cities on a frequent basis. The home of Canada’s government boasts a metro population of just over a million people, and it is growing rapidly as more and more people realize the appeal of this "flyover" city. 2006 was truly a record year for home sales in Ottawa. It was one of several cities in Canada, including Montreal, Calgary and Edmonton, to break home sales records in 2006. The question is, of course, will this trend continue into 2007 and beyond.

Ottawa’s housing prices have been on the rise since the late 1990’s. During that time, the average home price was just around $125,000-$130,000. But a meteoric rise has gripped the city since then, with housing prices jumping to approximately $225,000 by January of 2004, but it is the rise since that point that has many people skittish about the future of home prices and investment in Ottawa. In the first half of 2005 alone, housing prices jumped from approximately $230,000 to $265,000 in only six months. To say that this growth is unprecedented in a city like Ottawa would be an understatement. Now, experts are trying to figure out if this jump was merely a self correction that put Ottawa back on pace with the rest of Canada (and remember, even with this growth, Ottawa is still the cheapest metropolitan city in Canada) or has rising prices signals a genuine housing "bubble" in the nation’s capital.

Home sales in Ottawa did not meet the national average, but they were still up much higher in 2006 then most experts believed. Sales rose in Ottawa almost 14% over 2005’s blistering pace, while home sales nationally climbed a tad under 18%. Critics of the bubble theory point to the fact that interest rates in Ottawa have remained low and unaffected by a perceived artificial housing bubble. The longer that this housing rise continues, the more and more it looks like is a natural market correction that got Ottawa on the same page with the rest of Canada than a bubble that will burst any time soon.

Predictions for the rest of 2007 are, as usual, all across the board for Canada’s capital. But since there has been very little in the way of concrete evidence of a bubble collapse anytime soon, the smart money is on continued growth in Ottawa for the foreseeable future, which makes this city a fantastic place to invest now and into the future.

Canada May Housing Starts Climbed More Than Expected

2008-06-09T11:48:00.002-04:00

Canadian new-home starts rose a greater-than-expected 3.5% in May from the previous month, led by a gain in single-family dwellings.

The total of 221,300 units on an annualized basis compares with 213,900 units in April. Economists predicted an increase to 220,000.

Canada's housing market remains "healthy" because of low unemployment and rising wages, and because banks in the country offered fewer of the subprime mortgages that roiled the economy in the U.S.. Still, Canadian home starts will fall 6% this year due to higher mortgage interest costs.

Urban single-family home construction rose 7.3% to 76,700. The pace of multiple housing starts in cities rose 1.9% to 116,100 units in May.

Rate Cuts On the Horizon

2008-06-06T15:17:00.002-04:00

The Bank of Canada is expected to lower the target overnight bank rate next week in response to the economic slowdown and today's residential and industrial construction data should provide further evidence of moderating growth.

Building permits data are forecast to have increased by a modest 0.5% during April, compared with a 4.5% drop in March.

There is a discernible downward trend on the value of building permits being taken out by the building community. The real estate market is seeing a pickup in the demand for multiunit dwellings as the population ages and as the cost of single-family homes rises. The dollar value of residential permits has fallen to $3.6-billion, down from $4-billion in the fall of 2007.
Non-residential permits are forecast up slightly at $2-billion in April, but that follows a 22% decline in March.

Building permits likely continued to decline in April as housing starts fell 12% on a month-over-month basis, implying weaker residential permits and a likely continuing trend toward weaker nonresidential permits.

As a result, investors expect the Bank of Canada will lower its target overnight bank rate next Tuesday by one-quarter of a percentage point to 2.75% and that could help the Canadian banks.

More Homeowners, More Debt

2008-06-06T15:06:00.002-04:00

Never before have so many Canadians owned homes. And never before have they owed so much for the privilege.

Interest rates at or near historical lows combined with low unemployment and recent changes that allow people to buy houses with less money down and pay off mortgages over longer periods resulted in 68.4% of Canadians in the housing market in 2006.

That’s up from 65.8% in 2001 and 60% in 1971.

The increase comes despite the fact that the cost of housing in many cities has gone through the roof, outstripping inflation by far, while median incomes have essentially flatlined.

Low mortgage rates have helped offset much, but not all, of the impact of rising house prices in recent years on mortgage debt-service costs.

The overall result has been a small increase in the percentage of Canadian homeowners who spend more than 30% of their gross income on shelter costs.

But the latest CMHC figures show a sharper spike in mortgage-carrying costs in terms of after-tax income.

In 2007, average household spending on monthly mortgage payments had reached 37% of after-tax income, up from 32% in 2006.

That’s significant — mortgage-carrying costs are increasing.

This burden is heavier on the shoulders of first-time buyers because they don’t have the equity.

Most analysts see little comparison between the Canadian housing market and its American counterpart, where hundreds of thousands of homeowners suddenly found themselves in way over their heads, creating a financial meltdown.

Canadian financial institutions jealously guard the number of mortgage defaults they endure. But among the country’s big banks, only about 0.27% of homeowners were three months or more in arrears on their payments.

Anecdotally, we are not seeing any rise in arrears or defaults across the country.

Canadian underwriting standards by lenders and mortgage insurers are much more thorough than they are in the United States. Canadian lenders are much more conservative.

One key factor in the rise of home ownership is the relatively new option of mortgages amortized over 40 years.

Paying off loans for homes over a longer period means much higher total interest costs, but lower ongoing monthly payments. The effect is increased affordability. Growth in such long-term mortgages has been nothing short of dramatic.

Between the fall of 2006 and fall of 2007, 37% of all mortgages carried amortizations longer than 25 years, up from 9% in the preceding period.

Too many people, especially younger buyers, are taking on too much debt to buy into the housing game.

Low interest rates coupled with 40-year amortizations and negligible down payments might make it easier to buy higher-priced homes, but it’s also leaving buyers vulnerable.

The inevitable conclusion is that the current Canadian real estate market is floating on a sea of unrepayable, and perhaps unserviceable, debt.

In total, Canadians owe close to $850 billion on their homes, more than double what it was a decade ago.

If trends continue as expected, the value of all outstanding mortgages will surpass the $1-trillion mark sometime toward the end of next year.

Ottawa is keeping a close eye on developments.

We’ve seen a trend toward longer amortizations and smaller down payments, and that is a matter of some concern.

RioCan Buys Ottawa-area Properties

2008-06-06T15:03:00.002-04:00

RioCan Real Estate Investment Trust is buying 10 properties in central and eastern Canada, including four big-box sites in the Ottawa-Gatineau area.

The trust said it had agreed to buy the portfolio, totalling approximately 1.1 million square feet of "new-format" and strip retail centres, for approximately $156 million on a 50-50 basis with Kimco Realty Corp.

The portfolio includes a 127,416-square-foot plaza at 1701 Merivale Rd., where there is a Loeb, a Best Buy and a Linens and Things, and a 283,877-square-foot property at 720 Maloney Blvd. in Gatineau which houses a Wal-Mart and a Canadian Tire.

As well, RioCan and Kimco, through their RioKim II partnership, will be buying two smaller properties in Hawkesbury, Que., totalling 71,982 square feet of space.

The properties are part of a portfolio which comprises of retail centres in Montreal, Halifax, Belleville, London, Chatham, and Fergus, Ont.

RioCan will source, lease, asset and property manage all the properties and will be paid market fees for its work.

The acquisition is expected to close on or about June 25.

Downtown's Core Values

2008-06-06T14:59:00.002-04:00

Since the City of Ottawa amalgamated in 2001, planners, politicians, academics and even a few garden-variety residents have said the new municipality presents an opportunity to mold the shape of the urban area.

In other words, stop wasteful sprawl and intensify development in the core. Not that the city actually did that. It just seemed like a good idea.

While the municipality drew the urban boundary around the community beyond which development could not pass, it still allowed monotonous tract housing, unimaginative big-box stores with even bigger parking lots around them, and new, long roads. Pedestrians were but an after thought.

Good words from the city. Good intentions. Little follow-through.

The emerging good urban movement is less the city's doing than plain old human need. People are moving into condos and small homes downtown due to increasing gas prices and the attraction of downtown living. You could probably add that boomers are becoming empty-nesters and many are sick of fixing leaks in the basement and other maintenance.

Living in the core means not having to build new roads, new sewers, new watermains, new electricity lines, and new curbs and sidewalks. The city can use the ones it already has downtown. And core living means less driving, fewer greenhouse gases, less pollution and lower transportation costs.

Ottawa Invests in BCIT Green-Building Research

2008-06-06T14:54:00.002-04:00

The Government of Canada is investing in research being conducted by the British Columbia Institute of Technology (BCIT) to strengthen the sustainable building technology (green building) sector in British Columbia.

Federal funding of $500,000 and a $25,000 research grant will enable the expansion of applied research and demonstration projects of green roof and living wall technologies.

The funding from Western Economic Diversification Canada will allow BCIT’s Centre for Advancement of Green Roof Technology to continue to expand its activities. BCIT also received a $25,000 grant under Canada Mortgage and Housing Corporation External Research Program to conduct research on the benefits of green roofs with respect to storm water runoff, roof deck thermal performance and space conditioning energy savings.

This support from Western Economic Diversification will help move our green roof research forward in new and exciting ways.

At BCIT, applied research activities directly involve industry so that we can work together to bring solutions to business. This funding and the support of BCIT industry partners will help bring new ideas to architecture, design, construction and more.

New Ottawa Route

2008-06-06T14:35:00.003-04:00

Air Canada has begun a daily service between Ottawa and Frankfurt. The route is operated with a 767-300. New window to Europe means more housing investment in Ottawa.

Construction Investment Up

2008-06-06T14:31:00.001-04:00

The total value of residential construction investment reached $19.8 billion in the first quarter of 2008, 7.5 per cent more than in the first quarter of 2007. Most provinces registered increases and all three components of residential construction (new housing construction, renovations and acquisition costs) were up, as well.

Bankruptcies Rise

2008-06-06T14:29:00.000-04:00

The Office of the Superintendent of Bankruptcies reports 8,035 personal bankruptcies and 592 business bankruptcies in April. The number of personal bankruptcies was 19.3 % higher than in March and 18.3% above the level recorded in April 2007. Business bankruptcies were up 4.8 per cent over March and 9.2% over April 2007.

Ottawa Building Permits Rise

2008-06-06T14:28:00.000-04:00

Contractors took out $6.4 billion worth of permits in April, up 14.5% from March. The value of residential building permits increased 13.4% to $4 billion, the highest in six months. The value of non-residential permits advanced 16.5% to $2.4 billion.

Ottawa Housing Sales Rebound After Half-year of Weakness

2008-06-06T14:22:00.002-04:00

Housing sales recovered in May as Realtors sold more single-family homes, after months of declines or weak growth.

Sold more than 1,900 residential units in total last month, up 2.6% from a year earlier, purely on the strength of a 3.3% increase for the single-detached housing segment, which saw 1,529 sales.

Multiple-unit housing sales, however, edged down by 0.3% to 371 units.

Ottawa's home sales have been declining since November, although there was a very slight rebound of 0.4% in April, following a 16.7% plunge in sales in March.

Just when you think condos are going to drive the market forever, freehold properties make a comeback. We saw the most growth over last May in the two-storey detached and three-storey row unit categories, though apartment-style condos are holding steady.

The average price of all residential properties continued to climb, rising by 7.4% year-over-year to $296,373. The increase was largely driven by a 12.4% jump in condominium prices to $221,069, although there was also a significant 6.3% gain in the average price tag of single-family homes, to $314,645.

Prices are nudging upwards, but at a sustainable pace. In fact, Ottawa is Canada's most affordable big-city housing market right now, so buyers and sellers can both feel confident about this market.

Ottawa condominium prices jumped

2008-06-06T14:10:00.002-04:00

The price of Ottawa condominium housing has jumped in the last decade.

Demand for condos in the urban core will continue to grow as a result of rising gas prices and the appeal of downtown living.

However, people who are wary about the future of the Ottawa housing market can find some other attractive options in the report. The humble bungalow and traditional two-storey house could prove to be hedges against an unpredictable future.

The price of an urban condominium has jumped 152.8% over the last decade to an average of $209,500 in the first quarter of this year compared to 1998. Nationwide, the average urban condominium price rose 131.5% to $284,312.

In Kanata and Orleans, the average price of condos has risen 126.1% to $175,250 in the first quarter of this year compared to a decade earlier. Across Canada, suburban condominium prices rose 103.7% to $212,323.

The condominium is the only class of housing in both urban and suburban settings where Ottawa prices have outpaced the national average. In most other groups, Ottawa trails by about 20%.

We predicts appeal of the central neighborhoods will continue to grow for first-time buyers and baby boomer's selling suburban empty-nests.

It defines the suburban market as Orleans and Kanata. The urban market includes the older city of Ottawa plus newer eastern, western and southern communities.

If you want to live inside the Greenbelt, take a look at urban bungalows. They don't have the appeal of condos for empty-nesters and first-time homebuyers, but the price increase has been much more modest compared to the national average and could prove to be more attractive long-term investments.

Urban bungalows have risen a relatively modest 100% to $273,500 over the decade. But tread carefully with suburban bungalows. Suburban bungalows have risen 106 per cent to $283,500.

Even more attractive is the two-storey house. It may have been the house of choice of the 80s, but the price increase has been modest both in suburban and urban Ottawa.

Two-storey urban houses have risen just 88% to $278,750 while two-storey suburban house prices have risen 110.8% to $325,375.

The study shows that urban housing prices have risen faster than suburban housing over the last decade in Ottawa and across Canada.

Ottawa has been a relatively stable housing market over the decade compared to the explosive price growth in Toronto and Vancouver, the big jumps in Alberta and the current catch-up price movements in Prairie and Maritime cities.

Wwith a high proportion of Ottawa's workforce employed by the government, with offices in the downtown core, it's not surprising that house prices in city's urban neighbourhoods have appreciated as much as they have.

Minimizing travel to work increases family time and lowers gas costs, making the urban choice attractive.

Many people view the higher cost of living in urban areas simply as the price tag for increased personal time.

Canadian Home Ownership At Highest Level

2008-06-05T11:23:00.002-04:00

Home ownership in Canada in 2006 was at its highest level since 1971.

More than 2/3 (68.4%) of Canadian households owned their dwelling in 2006.

Between 2001 and 2006 the median selling price for a home rose to C$200,474 from C$134,240.

Prices reflected Canada's economic climate over the period.

The number of homeowners with a mortgage hit 57.9% in 2006, the highest level since 1981.

The ability of home owners to repay their mortgages isn't a source of concern yet.

Looking forward, we might get into a situation where mortgage payments grow so large that they start to squeeze out spending on other items, to this point it's not obvious that's happened.

More Canadians Struggle To Pay For Housing

2008-06-05T11:09:00.002-04:00

The number of Canadians paying 30% or more of their household income on shelter has increased. Many of these are homeowners. 1.5 million renters pay 30% or more of their
income on housing. This percentage has risen since 2001.

The increase in the percentage of Canadians paying more than they can afford for housing is a clear indicator that housing conditions for low-income Canadians will not improve until there is a cohesive national plan of action. Today's census figures paint a picture of the failure to provide affordable housing to thousands of Canadians across the country.

Things have grown worse, not better since 2001 despite years of economic growth in Canada.

Several segments of the population are struggling to pay for housing. In 2006, 40.3% of all renter households were paying more than 30% of their income on rent. More than half of all renters living alone pay more than 30% of their income on housing. This figure has increased since 2001, from 50.1 to 51.6 %. Immigrant households faced higher increases in shelter costs than the Canadian-born population, but lower increases in income.

Lower-income Canadians are struggling more than ever to pay for their housing. Ottawa needs to take a leadership role in developing a national affordable action plan, in
consultation with the provinces, territories, municipalities and major housing
stakeholder groups. The Conservative government has been in power for nearly 2.5 years, and the number of Canadians paying more than they can afford on housing has increased. A positive first step would be for the federal government to provide some predictability for affordable housing providers, such as non-profit housing co-operatives, and immediately renew the major national housing programs that are set to expire on March 31, 2009, less than one-year from now.

Housing rents rise 1.5% in Ottawa

2008-06-05T11:02:00.002-04:00

Rents are rising in Ottawa and also in Gatineau. But well below the national rate.

The average monthly rent for a two-bedroom apartment rose 1.5% in Ottawa to $957 per month and up 2.2% in Gatineau to $674.

The vacancy rate in Ottawa was stable at 2.2% while the vacancy rate in Gatineau rose to 4.1% from 2.8% a year earlier.

Nationwide, rents rose an average of 3.6% compared to a year earlier, driven by increases as much as 21% in hot cities like Saskatoon, Edmonton and Regina.

Excluding these fast-growth centers, rents rose an average of 2.3%.

The average rental apartment vacancy rate in Canada's 35 major centers decreased slightly to 2.6% in April 2008, from 2.8 per cent in April 2007.

The Canadian economy remains very supportive of strong demand for both ownership and rental housing thanks to solid job creation and healthy income gains.

High levels of immigration and the increasing gap between the cost of home ownership and renting continue to drive rental demand in 2008. These factors have put downward pressure on vacancy rates over the past year.

Home Depot - No more professional home installation service?

2008-06-05T10:55:00.003-04:00

Home Depot (HD) doesn't expect future growth for HD professional home installation service, but the struggling business would not be abandoned either.

Customers have complained about the quality of work done by the people Home Depot hires to do home installation of kitchen appliances, flooring and other items.

HD wants to use the unit to drive customers into its core retail stores.

While Home Depot doesn't expect the unit to be an independent driver of growth for the company, that doesn't mean HD will exit the business.

Without a doubt, HD customers have a need for a 'do-it-for-me' solution, but if HD can't effectively execute, they'll be more interested in serving the pro who does it for HD customer than in providing the service directly ourselves.

Last December, Home Depot announced that it was cutting 950 jobs in the unit and shifting work from three centers to its stores in a bid to improve customer service.

Home Depot said it would have eight call centers left in North America after closing the three.

The call centers give price quotes and complete orders for customers who go into stores and order flooring and other types of home installations.

Home Depot has been hit hard by the slumping housing market. Last month, it reported a 66 % drop in first-quarter profit.

Home Depot see more negatives than positives for the remainder of this year.

The long-term fundamentals of the industry remain strong.

Ottawa Water Problem: Lead Are Coming Down the Pipe

2007-05-19T15:40:00.000-04:00

Many homeowners Ottawa have underground lead pipes connecting their taps to municipal Ottawa water supplies.

Many, perhaps most, have no idea every time they draw a glass of water or put a pot of pasta on the stove that the water they use may be contaminated with lead.

Ottawa City officials have just begun to grapple with the extent of the problem and its potentially alarming health and financial implications.

Chief Drinking Water Inspector Jim Smith recently wrote every municipality in the province to recommend they begin testing homeowners' tap water for lead.

Few municipalities test homeowner tap water for lead. Testing is usually done at water treatment plants or from fire hydrants and municipal testing outlets.

Provincial law obliges municipalities to deliver safe water to the property line and so there's a dilemma over what to do about lead service lines on private property.

Nevertheless, there is sufficient concern over the potential that lead contamination has been underestimated.

Residents who suspect they have lead water lines, particularly if pregnant women or children under six live in the home, take precautions.

If you have lead service lines you should flush your lines, that's good practice.

The best solution is to replace lead lines.

Certainly you should work with our Ottawa municipality and have your lines replaced. It's good to get the lead out period.

There are two basic types of pipes underground - big water "mains" that carry water to neighbourhoods and small, hose-sized "service" lines connecting homes to the water supply.

During the 1930s and 1940s, lead "service" pipes were used to connect tens of thousands of new homes across Ontario, in every major cities (Ottawa, Toronto) and towns, to municipal water supplies.

Ottawa, Toronto, Kingston, Windsor, London, and most other communities that saw housing booms during the 1930s and 1940s almost certainly have lead service lines still in use.

London has had terrible problems with lead this past year and even after replacing lead service lines to homes, after repeatedly flushing water lines, tap water in those homes remains contaminated with lead at levels that exceed provincial standards.

The belief in the past was that flushing for 5 minutes effectively cleared lead from water lines.

Now that the City of London has offered free testing to a lot of its residents, that's not the case.

This gives considerable pause for concern.

Ontario, unlike the U.S., doesn't require municipalities to test tap water in homes nor is there a province-wide program to replace lead pipe.

Residents are primarily on the hook to replace lead service pipes and the cost can range from $2,000 to $10,000 or more.

Worse, municipalities aren't even required to inform residents they have lead pipes

That, at very least, should be addressed, said Gord Miller, Ontario's environmental commissioner.

Drawing people's attention to the need to be cautious about aspects of their drinking water related to lead pipes is a valid thing and it should be brought forward by the government and brought to people's attention so they can check it and they can take precautions.

There little reason for excuse. It's hypocritical for Ontario to impose the most stringent water standards in North America and ignore the problem in the pipes, a problem that's been evident for years.

Justice Dennis O'Connor, in his report on the Walkerton tainted water tragedy, specifically recommended that "lead service lines should be located and replaced over time" and took pains to detail the risks of lead to drinking water, including neurological problems in infants and children resulting from even "minute" exposure. Seven years after the tragedy, that recommendation has been largely ignored.

"The provinces and the federal government and most levels of government around the world have seen fit to ban lead in gasoline, they take the lead out of household paint and any number of materials," said Frank Zechner, executive director of the Ontario Sewer and Watermain Construction Association.

They stopped using lead in those pipes in the early '50s and they went to a lead-free solder more recently.

But the problem is those pipes are still in service. They are still leaching lead into the water.

Ottawa's Condo Market to See Price Gains In 2007-08

2007-05-18T01:47:00.000-04:00

Strong demand is expected in 2007 and 2008 for Canada's major condominium markets because of the healthy labor market, supportive interest rates and aging population.

39 % of Canadians surveyed would consider buying a new or resale condo, a 4 % rise from a similar survey in June 2006.

Several short- and long-term indicators support the large and growing popularity of the condo lifestyle. The hottest markets, notably Calgary and Vancouver, will see some cooling off from dramatic and unsustainable highs last year, but overall conditions will remain healthy and activity will be high.

Condo starts have posted an average annual increase of more than 16 % between 2001 and 2005, with multi-family homes accounting for nearly one-third of all new construction, compared to nearly one-fifth a decade ago.

However, the strong demand for condo units in most urban centers has led to a high sales-to-new listings ratio for apartments and condominiums and created a sellers' market.

Demand for condos would experience a slight dip because of rising prices across the country, leading to a cooling-down of condo construction activity.

Over the next year and a half, the pace of condo starts is expected to decline by about 6 %, while resale prices for condos are expected to dip in the western provinces but remain high.

Strong price gains, especially in western markets, have outpaced growth in personal income and led to a deterioration in condo affordability nationwide. While this decline will eventually dampen demand and lead to slower price growth in future, it is not a major problem for the condo market since condos are, and will remain, considerably more affordable than houses.

Meanwhile,the rapid increases in the price of single-detached houses in most cities, robust urban population growth and land scarcity, as well as strong immigration trends, would sustain demand and contribute to gains in the condominium market.

Ottawa appears to be the only market which will experience a faster pace of condo price growth among the five cities, with price gains rising slightly to 4.5 % in 2007-08 from 3.6 % in the previous period. Calgary is forecasted to see the biggest drop in condo price growth percentage-wise, falling by 16.1 % to 10.5 % over the next year and a half.

real Estate Resale Market Expected to Hit Ottawa

2007-05-18T01:43:00.000-04:00

Ottawa's home resale market is expected to reach record highs this year as residential construction declines.

Housing starts would fall by 2 % in 2007 to 5,750 units, while sales of existing properties would rise by 2 % to 14,300 units.

Meanwhile, the vacancy rate is expected to fall to 2.1 % in October 2007 as a result of quieter activity in the rental construction market.

The resale market will have another excellent year in Ottawa, setting a new record for transactions, multiple-family housing starts will make up the majority of construction activity for new dwellings. The construction of high-density residential projects will therefore continue in Ottawa.

Resale activity is also expected to be extremely strong across the province as a result of stable mortgage and labor market conditions, as well as greater choice in the resale market and the cost gap between new and resale home purchases.

However, new home starts will remain near historical averages.

Ottawa to Give $$$ to Social Housing & Rural Roads

2007-05-18T01:40:00.000-04:00

Ottawa city council committee is recommending that $17.1 million in provincial funding be allocated towards improving social housing and rural roads, instead of putting the money in the bank, in response to pressure by advocates.

The city's economic affairs committee committed $7.1 million towards improving the stock of low-cost housing in Ottawa, and $10 million towards improving rural roads.

The funds are part of a one-time $59-million transfer payment from the Ontario government, which city bureaucrats had recommended be put into the municipality's bank account in order to stabilize property tax rates.

Social housing advocates had objected to the initial recommendation to put the money in the bank, saying that thousands of people are on the waiting list for low-cost housing space and the available stock is in poor condition.

Meanwhile, West Carleton-March Coun. Eli El-Chantiry introduced a motion that $10 million of the $59 million be earmarked for rural roads, saying that the city needs to spend about $85 million on road repair, maintenance and new construction.

Ottawa's Non-Residential Construction Up 1.7 %

2007-05-18T01:38:00.000-04:00

The Ottawa's non-residential construction market rose up 1.7 % from the 4th quarter of 2006. The Ottawa region was ranked fifth out of seven metropolitan areas surveyed for the report.

Meanwhile, the index for non-residential building construction rose to 152.4, a 10% increase from the same quarter last year and a gain of 2% from the fourth quarter of 2006.

Recreational Property Prices Pushed Up By BBoomers

2007-05-18T01:24:00.000-04:00

Large numbers of Canadians will have a "must be nice" moment this weekend as we venture out on our first summer break with dreams about owning a recreational property.

Stats: Prices are "set to soar" in the coming months.

And put the blame for the spike in high-end recreational property on affluent BBoomers, who are cashing in recent stock market gains and plowing it into waterfront.

Retirement and quality family time are the most important motivating factor, while investment is only "secondary."

Still, with starting prices topping $500,000 in 31% of the "upper end" recreational property markets, cost clearly is a serious issue.

There are some bargains out there. The report noted Elliot Lake in Ontario and Lake Winnipeg in Manitoba. But buyers at Invermere, Kelowna and Salt Spring Island in B.C. and Sylvan Lake, Alta., can expect to fork over $1 million and up.

Doug Gray, author of The Complete Guide to Buying and Owning Recreational Property in Canada, advises buyers not to make their decision on an "emotional personal benefit" but to really "drill down" and examine any purchase based on "rational time thinking."

Gray lists his top 5 pitfalls to avoid when a buying recreational property:

Have a realistic assessment of your needs.
Carry out fastidious research using the Internet and a local lawyer.
Be "very aware" of estate planning issues.
If the plan includes a revenue stream to augment the purchase, "check it out thoroughly."
And if you are thinking of a joint purchase and time sharing with others "think twice, then think again."

Mondrian Condominiums in Ottawa Downtown almost Sold Out!

2007-05-18T01:12:00.001-04:00

Ottawa’s skyline is about to change – updated beautifully with the addition of the soaring Mondrian at one of the best locations in the city: the corner of Laurier Avenue and Bank Street. This is a 24-storey glass building of residential condominiums with lovely street-level amenities and public parking on levels two to five.

This is a big project – about two to three times the size of any other condominium project in the city. The Mondrian is also one of the most successful condo projects in the city right now. In just under one year, over 120 (over 50 per cent) of the residences are already sold. The sales pace is very fast... and no wonder!

The architecture and building features are outstanding. The homage to Piet Mondrian is everywhere – from the high-art contemporary architecture of the building to the sleek designer styling in every suite. A stunning boutique hotel-inspired lobby with executive concierge service will be at the Laurier Street entrance. A large rooftop terrace has a resort-style atmosphere. It includes generous lounging areas and a refreshing outdoor pool with cabanas encircling it. For extra entertainment space, residents can enjoy a beautifully appointed party room.

The prime location and edgy, evolutionary concept of this new high-rise inject Ottawa with a notably fresh cosmopolitan flavour – just what the new-home market wants. Fueling the excitement further, the builder recently introduced a very successful program called the “fully loaded loft.” This promotion has taken off like a rocket and will last for the rest of the summer!

The Mondrian offers residents everything they could possibly want in each “fully loaded loft,” including designer kitchens and bathrooms. Open-concept spaces flow beautifully throughout each suite. Nine-ft. high concrete ceilings and huge floor-to-ceiling windows add drama with breathtaking vistas. Almost every unit has a spacious “see-through” glassed balcony.

Designer touches and finishes are everywhere. Hardwood floors are featured throughout. Kitchens are high-end gourmet delights that reflect the most contemporary high-style designs with top-of-the-line cabinetry, designer hardware, sinks and faucets.

Every element is as designer oriented and contemporary as possible, with clean lines and sleek profiles. Granite counters and stainless steel appliances are included. Bathrooms feature a very chic, upgraded combo of sink-faucet-vanity-mirror.

For the utmost convenience, every residence also comes with its own washer and dryer. There’s ample parking and storage lockers available for residents, as well as visitor parking.

Loft-style living at the Mondrian offers fantastic downtown living.

You’ll be close to everything in the heart of the city. Step outside your front door and in every direction you can enjoy unlimited shopping. Head south and you’ll find every type of retail business and service along Bank Street. You can even take a comfortable walk to the boutiques and bistros of The Glebe. Everything is right at hand.

Go north and within minutes, you can stroll along Sparks Street, through the lush lawns of the Parliamentary Precinct, or along the banks of the Ottawa River. To the east, the Rideau Centre shopping mall has hundreds of stores. The ByWard Market is a great haunt for fresh produce, flowers and trendy boutiques. Elgin Street has non-stop entertainment, coffee houses and fine restaurants. You can mix-and-match your pleasure with great theatre at the NAC, numerous museums and galleries, or simply watching the boats go by on the Rideau Canal.

For those wonderful relaxing times at home or on the rooftop terrace, residents of Mondrian will enjoy fantastic views of Ottawa’s downtown, the Parliament Buildings, the Gatineau Hills and the Ottawa River.

Choose from a one-bedroom model, one-bedroom plus den, two-bedroom model and penthouses. Suites at the Mondrian range from about 550 to just under 1,600 sq. ft. The incredible design approach creates a very elegant, connoisseur feel of refinement for every suite, regardless of size. At Mondrian, a very stylish upscale 550-sq.-ft. condo has a signature status and is perfect for a single person or young couple.

Cost is not a barrier at this time. Prices start at only $153,900 for a one-bedroom residence to as much as $532,900 for the largest penthouse. If you hurry, there is a lot of choice in models and price points right now.

Worst of U.S. Housing Slowdown Is Over

2007-02-16T07:13:00.000-05:00

Former Federal Reserve chairman Alan Greenspan said the U.S. housing slowdown may be coming to an end, citing sales of new homes.

"I think the worst is behind us," Greenspan, 80, told a Toronto conference, during a speech broadcast live via satellite. "We are in the midst of a very significant inventory liquidation of unsold new homes."

Greenspan's comments represent a view similar to those of his successor, Ben S. Bernanke. Bernanke told the Senate Banking Committee today that the Fed expects economic growth to strengthen "somewhat as the drag from housing diminishes." Fed policy makers predicted gross domestic product will increase by 2.5 % to 3 % this year.

In the statement after the Federal Open Market Committee's most recent meeting on Jan. 31, the Fed said recent data suggest "somewhat firmer economic growth," while the housing market is showing "some tentative signs of stabilization."

Such stabilization is coming after the market's worst slump in 15 years. Sales of previously owned homes are near a three-year low, while housing starts rebounded in November and December from the slowest pace since 2000.

"The worst of the adjustment is over, meaning not that the market is turning," Greenspan said, "but that the rate of decline was at its maximum in the third quarter and continued over in the fourth quarter and should now be moving to a much less negative direction."

Unsold Homes

Inventories of unsold homes are shrinking by about 10,000 to 15,000 units a month, and will soon start to shrink by about 20,000 to 30,000 units a month as housing starts drop, Greenspan said.

"That inventory will continue to liquidate and markets will turn around," he said.

Greenspan also said "disarray" in the U.S. subprime mortgage market, which serves borrowers with weak credit who typically pay higher interest rates, isn't likely to create greater financial instability in the rest of the economy.

"We do have a problem here, it's probably not over," Greenspan said. "It may actually infect some parts of the prime mortgage market, but there's no real evidence that this is a significant issue."

Bernanke said today during his semiannual appearance before the Senate panel that "distress" in the subprime market is of "significant concern" to him, though he didn't yet think it had implications for the larger economy.

"Predatory Lending"

The comments illustrate concern about the subprime market as rising interest rates, looser lending standards and falling home prices put more borrowers at risk of losing their homes. Senate Banking Committee Chairman Christopher Dodd told Bernanke today he's concerned "about the predatory lending practices that go on" in the subprime market.

The mortgage industry has been in turmoil in recent weeks as more homeowners fall behind in their mortgage payments. Subprime mortgages made up about a fifth of all new mortgages in the first half of 2006, according to the Washington-based Mortgage Bankers Association. As of the third quarter, they represented 13.6 % of outstanding home loans, up from 2.4 % in 1998.

Since Greenspan retired from the Fed in January 2006, he's been giving paid talks to audiences around the world and is writing a book, "The Age of Turbulence," to be published later this year. He was appointed Fed chairman in 1987 by then- president Ronald Reagan.

500 Ontario School Teachers Become Millionaires

2007-01-23T16:42:00.000-05:00

500 property owners from Ontario chose to become millionaires by selling out to a Florida developer.

The US$510 million deal from a land developer was accepted by the residents of Briny Breezes trailer park in Palm Beach County, Florida.

Applause reportedly rang out in a large Quonset hut erected in the park as the owners voted 82 % in favor of the multi-million dollar offer. Each person who owns a trailer is slated to receive just over US$1 million in two years when the deal is completed.

Briny Breezes' 43-acre property is surrounded by high-end condominiums and beach front properties. Boca Raton-based Ocean Land Investments plans to build more condos on the site that will sell for around US$3 million each.

Ocean Land Investments sees the patch of land as a big investment.

The prime piece of real estate in Florida and perhaps in the south-east (United States).

The deal will make a group of school teachers from Port Colborne unexpectedly wealthy. About 15 years ago they each bought properties at Briny Breezes as a place to escape the Canadian winter.

They initial investment was around $50,000". Vote result means he will cash in for about $1.2 million.

Briny Breezes is a corporation and each of the owners hold shares. For that reason they had to vote on whether they would accept the deal.

Identity Theft in Canada

2007-01-23T00:55:00.000-05:00

Privacy took center stage in Canada late last week as TJX Cos., the parent company of retail giants Winners and HomeSense, disclosed that as many as two million Canadian credit cards may have been accessed by computer hackers. Less than 24 hours later, the CIBC revealed that account information for 470,000 customers had been lost when a computer file went missing while in transit between company offices.

New RCMP's Headquarters in Barrhaven

2007-01-23T00:23:00.000-05:00

The Liberals are being urged to support plans to move the RCMP's headquarters to Barrhaven.

Nepean-Carleton MP Pierre Poilievre and a few City Councillors have sent a letter to Hull-Aylmer MP Marcel Proulx demanding to know the position.

The Federal Government has finalized a deal to move the RCMP to the old JDS Uniphase building in Barrhaven.

Kanata Residents to Blame Kanata Hydro and Councillor

2007-01-23T00:19:00.001-05:00

Councillor is telling Kanata residents to blame Kanata Hydro for the recent power problems.

5,000 Kanata customers spent a few hours in the dark Monday morning.

Councillor, the Chair of Energy Ottawa, says frequent blackouts in the area are probably the result of the former utility rushing through the installation of infrastructure during the time when Kanata was growing rapidly.

Councillor tells Ottawa is committed to fixing problems with the hydro system in Kanata.

Almost one third of Hydro Ottawa's infrastructure money is being spent in Kanata.

Kanata Residents to Blame Kanata Hydro and Councillor

2007-01-23T00:19:00.000-05:00

Tories Plan $5,000 Grants for "Green" Home Improvements.

2007-01-23T00:04:00.000-05:00

The federal Conservatives yesterday dangled the promise of $5,000 rebates for energy-efficient home renovations.

Natural Resources Minister announced the program yesterday at the Metro Home Show in Toronto, saying Canadians can apply for grants of up to $5,000 to make homes and businesses more energy efficient as part of a $300 million program.

All Canadians regardless of their income will be eligible and the size of their grant will depend on how much they can realize in gains in becoming more energy efficient.

Details of the program, such as how to apply, are not being released until April.

Big-ticket items like new windows, insulation, furnaces and energy-efficient appliances would all be eligible under the program. And he added measures as simple as installing a programmable thermostat would also make a huge difference.

The plan calls for homeowners and small business to first pay for an energy audit and the retrofit before applying for the rebate.

An energy audit of a house can cost $200 to $300. And new windows, for instance, can easily cost $5,000 for a small home.

I don't think you will get as many people taking advantage of it simply because of the upfront costs and then you don't know if you are going to get it.

Last year, the Conservative government scrapped a new five-year, $500 million program proposed by the Liberals called EnerGuide for Low Income Households, which would have paid the full cost of renovations to improve energy use for low-income earners.

The Tories continue to come under fire for their sudden interest in global warming when many of the programs announced in the past week – totalling $2 billion over several years – are dusted off or watered down Liberal plans killed in last year's Tory budget.

Despite this, Stephen Dupuis, CEO of the Greater Toronto Home Builders Association and Urban Development Institute, gave the Conservative plan two thumbs up, while Toronto Mayor David Miller gave the announcement polite support.

The $300 million so-called ecoENERGY Efficiency Initiative spread out over four years has three components:

A $220 million retrofit program aimed at helping homeowners and small and medium businesses make the necessary energy efficiency improvements with grants up to $5,000.
A $60 million program to promote the use of the latest energy efficient practices in new buildings.
A fund of $20 million to encourage the industrial sector to accelerate energy saving investments.

Canada's 13 million homes and 380,000 commercial, industrial and retail buildings use 30 % of the country's energy, and are responsible for almost 30 % of greenhouse gas emissions.

The former Liberal government EnerGuide program as being administratively top heavy with too few dollars finding their way back to consumers' pocket.

Ottawa Housing is the Most Affordable

2007-01-22T23:56:00.000-05:00

Ottawa is the most affordable cities in Canada for home buyers.

Ottawa ranks as the 5th most affordable city — behind three prairie cities and Quebec City.

The rankings were based on how many years it would take to purchase a house in each location, looking at median income and the median house prices in each location.

In Ottawa, where the median house price was $201,500 and median household income was $70,300, it would take 2.9 years of annual income to purchase a house.

Chlorinated Water in Ottawa May Raise Bladder Cancer Risk

2007-01-22T23:43:00.001-05:00

Drinking, bathing or swimming in chlorinated water in Ottawa may increase the risk of bladder cancer.

The findings are the first to suggest that these chemicals can be harmful when they are inhaled or absorbed through the skin, as well as when they are ingested.

Chemicals, most commonly chlorine, used to disinfect water in your house or pool can produce by-products that have been tied to increased cancer risk. The most prevalent chlorination by-products, chemicals called trihalomethanes (THM), can be absorbed into the body through the skin or by inhalation.

To investigate lifetime THM exposure and bladder cancer risk, the researchers matched 1,219 men and women with bladder cancer to 1,271 control individuals who did not have the disease, surveying them about their exposure to chlorinated water via drinking water, swimming pools, showering and bathing. The researchers also analyzed the average water THM levels.

People living in Ottawa households with an average household water THM level of more than 49 micrograms per liter had double the bladder cancer risk of those living in households where water THM concentration was below 8 micrograms per liter. THM levels of about 50 micrograms per liter are common in industrialized societies.

Study participants who drank chlorinated water were at 35% greater risk of bladder cancer than those who didn't, while use of swimming pools boosted bladder cancer risk by 57%. And those who took longer showers or baths and lived in municipalities with higher THM levels were also at increased cancer risk.

When THM is absorbed through the skin or lungs, it may have a more powerful carcinogenic effect because it does not undergo detoxification via the liver.

If confirmed elsewhere, this observation has significant public health in Canada implications in relation to preventing exposure to these water contaminants.

Solar Power Eliminates Utility Bills in U.S. Home

2007-01-19T14:53:00.000-05:00

Michael Strizki heats and cools his house year-round and runs a full range of appliances including such power-guzzlers as a hot tub and a wide-screen TV without paying a penny in utility bills.

His conventional-looking family home in the pinewoods of western New Jersey is the first in the United States to show that a combination of solar and hydrogen power can generate all the electricity needed for a home.

The Hopewell Project, named for a nearby town, comes at a time of increasing concern over U.S. energy security and worries over the effects of burning fossil fuels on the climate.

People understand that climate change is a big concern but they don't know what they can do about it. There's a psychological dividend in doing the right thing.

Strizki runs the 3,000-square-foot house with electricity generated by a 1,000-square-foot roof full of photovoltaic cells on a nearby building, an electrolyzer that uses the solar power to generate hydrogen from water, and a number of hydrogen tanks that store the gas until it is needed by the fuel cell.

In the summer, the solar panels generate 60 % more electricity than the super-insulated house needs. The excess is stored in the form of hydrogen which is used in the winter -- when the solar panels can't meet all the domestic demand -- to make electricity in the fuel cell. Strizki also uses the hydrogen to power his fuel-cell driven car, which, like the domestic power plant, is pollution-free.

Solar power currently contributes only 0.1 % of U.S. energy needs but the number of photovoltaic installations grew by 20 % in 2006, and the cost of making solar panels is dropping by about 7 % annually, according to the Solar Energy Industries Association.

As costs decline and the search accelerates for clean alternatives to expensive and dirty fossil fuels, some analysts predict solar is poised for a significant expansion in the next five to 10 years.

U.S. Housing Starts Up 4.5 %

2007-01-19T14:32:00.000-05:00

The pace of U.S. home construction climbed 4.5 % in December, a 2nd-straight monthly increase that ran contrary to analyst expectations, but for all of 2006 the rate of new home building posted the biggest decline in 15 years.

The housing starts closed out the year at an annual pace of 1.642 million units in December compared to 1.572 million units in November.

Economists had forecast December housing starts to fall to 1.560 million units from November's originally reported pace of 1.588 million units.

For all of 2006 housing starts totaled about 1.8 million, that was down 12.9 % from the 2005 total, the biggest decline since 1991.

Building permits, which offer a clue to future construction plans, rose 5.5 % to a 1.596 million unit pace.

Economists were expecting building permits would register a 1.500 million unit pace, close to the 1.513 million unit figure reported for November.

Permit applications for the year were down 14.9 %, the biggest decline since 1990.

Toronto Tenants Group Demands Landlords Be Licensed

2007-01-18T20:49:00.000-05:00

You've seen them on restaurant doors and windows. How would you feel about seeing them on apartment buildings?

A Toronto councillor is suggesting the city implement a ratings system for landlords to let prospective tenants know if a building is in good condition - and whether you should live there.

It's similar to the red, yellow and green 'pass/warning/fail' system now used in Toronto eateries.

Councillor believes it's the only way to force landlords to literally clean up their acts and be more responsible toward their tenants.

We will divide buildings in the city into "A," "B" and "C" and "D" buildings. The "D" buildings will pay very high license fees, let's say $400 bucks per year ... per apartment unit.

Lobby groups on both sides of the issue will be at the building on Friday for a special committee meeting, but if Moscoe has his way, his licensing plan will be implemented within two years.

Syed is hoping he'll be long gone before then.

Housing Continues Blistering Pace in 2006

2007-01-18T20:44:00.000-05:00

Canada's real estate sector continued to defy predictions of a slump in the market last year, as sales of existing homes continued at near-record levels.

Realtors sold 336,271 homes in 2006, a figure that was just 242 units off the record set the year before.

Moreover, several major cities reported record sales in 2006, including Calgary, Edmonton, Saskatoon, Winnipeg, Ottawa, Montreal and Quebec City.

The high selling pace continued through the fourth quarter and right into December.

Sales surged in Calgary and Toronto, while the smaller centers of Edmonton, Saskatoon, Sudbury and London all set new quarterly records.

Abnormally warm weather gave the market a further boost as the year drew to a close. There were strong gains in Calgary, Toronto and Montreal, giving December the fourth-highest monthly level on record, while Calgary surpassed all previous monthly records.

But there was a downside to the numbers. Selling prices are not going up as fast as they were.

The average Canadian resale house sold for $294,270 in 2006, up 10.6 % over 2005 levels. But that increase was lower than in recent years, and headed lower.

Moreover, the average monthly selling price rose by only 8.1 % in December, compared with the same period in 2005, the smallest increase in the year.

The same trend showed up in the quarter. House prices rose by 9.2 % year-over-year, the first sub 10 % rise in a year.

Price increases have been getting smaller as new listings increased in many markets.

U.S. Housing Market: Soft Landing

2007-01-16T23:03:00.000-05:00

Although the U.S. economy has slowed down, in large part because of a continued weaker housing market, what now is that a soft landing seems more assured as lower energy prices have supported employment growth and consumption.

The correction in the U.S. housing market may be leveling off but it was still too early to make a judgment call.

Some people were of the view in November that the housing correction was going to be a big drop with no end in sight. Well, things don't seem that way now and we don't see a dramatic correction taking place.

In fact, the end of that correction may be in sight and everybody, including us, needs to keep an eye on this issue.

Bank of Canada Keeps Key Rate at 4.25 %

2007-01-16T22:36:00.000-05:00

The Bank of Canada (BoC) kept its main interest rate unchanged for a 5th meeting, saying there's less risk to the economy of an export slowdown.

The target rate for overnight loans between banks remains 4.25 %, the highest since August 2001 and 1 % point less than the U.S. Federal Reserve's target.

Canada's economic growth will accelerate to a 2.5 % annualized pace in the first half of the year, central bankers said today, after declining to 1.6 % in the second half of 2006 as exports to the U.S. slowed. Domestic demand has remained strong and exporters have adjusted to a drop in demand from the U.S., Canada's biggest market, the bank said.

Policy makers seem to think that the worst is behind the Canadian economy. It may well suggest there is little scope for any further reduction in interest rates.

Bank of Canada has kept rates unchanged since May because a high dollar slowed exports, helping control inflation in an economy overstretched by record demand for new homes and energy. His next move may depend on how exports fare this year or if there's a shift in the job market, where unemployment is the lowest in three decades.

Consumers have spent their new paychecks on new homes, driving prices up 11 % in November from a year earlier. Consumer spending and home prices create the risk that inflation may move above his 2 % target.

Inflation minus eight volatile items such as fruit and gasoline rose 2.2 % in November from a year earlier, led by food and shelter costs. Permits for new buildings rose to a seasonally adjusted record C$6.3 billion in November, suggesting housing costs may increase further.

December Housing Starts Weaker Than Expected

2007-01-10T08:39:00.000-05:00

Housing starts in Canada fell in December to a seasonally adjusted annual pace of 211,500.

The consensus estimate had been for 225,000, while the rate in November was 229,300 units.

Despite the weakness, the month capped a year when housing starts were the highest level in nearly two decades.

New home starts are estimated at 227,400 in 2006.

Housing starts are expected to remain strong in 2007, but are forecast to decrease to 210,900 units.

After two strong months in October and November, the volatile multiples segment fell in December and single-detached starts continued to trend downward, reaching their lowest level of the year.

Home Sales in Ottawa Hit New Record in 2006

2007-01-10T08:37:00.000-05:00

Ottawa Realtors sold a record number of homes in 2006 as the region enjoyed a strong employment market.

The Ottawa Real Estate Board reported that Realtors sold 682 homes in December, up from 615 in December 2005, making for a year end total of 13,783. That broke the previous record set in 2004 of 13,152 homes sold.

Overall, it was a very healthy year for Ottawa's residential real estate market. The average sale price of a home continued to trend upward, and the still-growing condominium market drove sales numbers all year long. Condos are also selling more quickly than they did in 2005, while residential sales stayed on pace with the previous year.

The average price of the homes sold in December through the MLS system in the Ottawa area was $247,833, while the average for the year was $255,889.

Also on Tuesday, Canada Mortgage and Housing Corp. reported construction starts on new homes totaled 5,875 last year, up almost 18 % from 2005. CMHC Ottawa market analyst Pascal-Yvan Pelletier attributed the increase to a strong employment market and greater demand for more affordable housing types such as row housing and condos.

Housing Starts in 2006 Reach Their 2nd Highest Level

2007-01-10T08:33:00.000-05:00

New home starts are estimated at 227,400 in 2006, surpassing the level in 2005, reaching their second highest level in nearly two decades. However, the seasonally adjusted annual rate of housing starts decreased to 211,500 units in December from November's 229,300 units, according to Canada Mortgage and Housing Corporation (CMHC).

Growth in 2006 housing starts was driven by low mortgage rates, solid employment and income growth, and a high level of consumer confidence. Even with the slowing trend in residential construction in recent months, new home starts estimated at 227,400 units in 2006 surpassed the level reached in 2005.

After two strong months in October and November, the volatile multiples segment fell in December and single-detached starts continued to trend downward, reaching their lowest level of the year. Housing starts are expected to remain strong in 2007, but are forecast to decrease to 210,900 units."

December's seasonally adjusted annual rate of urban starts declined 9.0 % from November to 180,000 units. Urban multiples fell 13.9 % to 93,400 units in December, while singles decreased 3.0 % to 86,600 units.

All regions saw urban starts fall in December compared to a month earlier. The largest declines were in the Prairie region and the Atlantic region where urban starts fell by 20.5 % and 17.9 %, respectively. Weaker activity in the urban multiples sector drove the decreases registered in both of these regions. British Columbia, Ontario and Quebec recorded smaller declines of 7.1 %, 3.6 %, and 1.5 %, respectively.

Quebec Residential Construction Up In December 2006

2007-01-10T08:25:00.000-05:00

According to the results of latest monthly survey conducted by Canada Mortgage and Housing Corporation (CMHC), residential construction in Quebec was on the rise in December. In all, 3,548 housing units were started in urban centers with 10,000 or more inhabitants, for an increase of 3 % over December 2005. The December result brought the annual total to 39,486 starts, down by 4 per cent in relation to the level recorded in 2005 (see table).

As expected, the slowdown that began in 2005 continued in 2006. Modest economic growth, the increase in mortgage costs and the decrease in pent-up demand are all factors that reduced demand for homeowner housing. On the other hand, steady migration and the aging of the population supported demand for multi-family housing and allowed the new home market to end the year at a still rather high level.

Single-detached home building registered an increase of 1 % in the province. In fact, 1,175 dwellings of this type were started this past December, compared to 1,161 during the same period the year before. This result was due to the significant increases recorded in the census metropolitan areas (CMAs) of Ottawa-Gatineau (Quebec part) (+24 %) and Montreal (+6 %). Elsewhere across Quebec, the other CMAs showed negative results in this market segment. In urban agglomerations with 50,000 to 99,999 inhabitants, housing starts were down slightly (-4 %) in relation to December 2005. In the smaller centers (10,000 to 49,999 inhabitants), however, construction was more active, with a gain of 6 % in the last quarter of 2006 over the same period in 2005.

Urban multiple starts posted a slightly better performance than single starts, with a gain of 4 per cent in December over the same month in 2005. Trois-Rivières (over 100 per cent) and Gatineau (over 100 per cent) registered the most remarkable gains.

Starts of this type fell by 37 % in centers 50,000 to 99,999 inhabitants in December, compared to one year earlier, and by 5 % in the smaller urban agglomerations (10,000 to 49,999 inhabitants) this past quarter, in relation to the same quarter in 2005.

The good performance of the multi-family housing segment in December and throughout 2006 was mainly attributable to semi-detached and row home building. With an increase of 20 % over December 2005, it can be said that this type of housing continued to gain in popularity, while condominium construction lost some ground (-33 %).

Virtual Real-Estate Kiosk

2007-01-10T08:22:00.000-05:00

Signature Real Estate of Culpeper, in conjunction with Aware Concepts LLC of Front Royal, unveiled a "Virtual Realtor" kiosk Tuesday at Manassas Mall.

The kiosk, which is in front of H&M and PacSun clothing stores, is aimed at encouraging shoppers to check out real estate ads, get tips on buying and/or selling a home, all at the touch of a screen.

The machine features two large display screens, with a 16-inch by 12-inch upper full-color display to show home listings and pictures much larger than in any print advertisement.

People can enter their contact information at the kiosk to inquire about a listing or express interest in selling.

After information is entered, the person can get a quick response from a Signature. The machine is updated 24 hours a day through the Internet connection.

The machine immediately sends, via a wireless Internet connection, an e-mail and text message to the agent connected to a listing so he/she can respond almost immediately.

The machine also offers home-selling tips, including when is a good time to sell, first impressions, myths, moving preparation and other pointers.

The main goal was to educate people about the real estate market in a non-threatening mode.

Norma Mayo, co-owner of Signature, said she thinks the kiosk will get her company more exposure in the community.

Mayo said she found out about Aware Concepts at a state Realtors Association conference and has been working with the company for several months on designing the machine.

Maria Fay, Mayo’s business partner, said what’s good about the kiosk is that it will help people get much quicker responses to requests, as opposed to answering or placing an ad in a publication.

Anyone who uses Signature’s real estate services will have their home listed in the kiosk at no extra cost, Fay said.

Aware Concepts placed its first virtual Realtor kiosk at Apple Blossom Mall in Winchester, but the one in Manassas Mall is the company’s first custom-built machine.

Company plans to place more kiosks in other area malls in the near future, including Fair Oaks Mall, Springfield Mall and eventually the Potomac Mills mall.

Housing Market Predictions for 2007

2007-01-02T08:24:00.000-05:00

Daring prediction: Interest rates will rise. While the headline focus is on central bank administered rates and how they have increased, longer-term rates are probably more important — and those rates are too low. Low interest rates continue to contribute to rapid inflation of asset values, which, through expanding wealth effects, is starting to get transmitted into overall price inflation. To alleviate this, interest rates must rise enough to reverse some of that asset inflation and dampen wealth effects.

Biggest fear: Further expansion of excessive wealth effects would increase future inflation and require a later, more painful process of disinflation. The evolving slowdown in the U.S. housing market is just a small part of a frothy global picture.

Biggest hope: That a one-half percentage point increase in mid-term and long-term interest rates can generate a soft landing in asset markets.

Best call: Interest rates would not increase by very much more during the year, and the five-year mortgage rate would average 6.55 per cent during the second half of 2006 — just slightly below where it stands right now. A year ago, I was predicting that five-year rates would, however, rise by half a point during the first half of 2007 — and I continue to expect this.

Worst call: That the Toronto condominium market would enter a serious correction in the second half of 2006, as a result of a prior excess of investment buying. Instead, new condo sales may well match the 2005 record.

Biggest surprise: The continued strength of the industrialized economies (including Canada) in the face of increased energy costs. In Canada, the percentage of adults who have jobs has been sustained at a record level. I see this as the consequence of interest rates that are still too low.

Who Disagrees That House Prices Will Continue to Fall?

2006-12-22T08:31:00.000-05:00

Real estate related businesses disagree, because they don't make money if buyers do not buy. These businesses have a large financial interest in misleading the public about the foolishness of buying a house now.

Buyers' agents get nothing if there is no sale, so they want their clients to buy no matter how bad the deal is, the exact opposite of the buyer's best interest. Agents take $100 billion each year in commissions from buyers. Agents claim the seller pays the commission, but always fail to mention that the seller gets that money from the buyer.

Mortgage brokers take a percentage of the loan, so they want buyers to take out the biggest loan possible.

Banks get origination fees but sell most mortgages, so they do not care about the potential bankruptcy of borrowers, and will lend far beyond what buyers can afford. Banks sell most loans to Fannie Mae or Freddie Mac. The conversion of low-quality housing debt into "high" quality Fannie Mae debt with the implicit backing of the federal government is the main support for the housing bubble. That is ending as Fannie Mae shrinks.

It remains true, however, that banks are not required to get any appraisal at all for loans they sell to Fannie Mae or any government-guaranteed loans. This encourages banks to overstate values and sell bigger loans to Fannie, pushing the risk onto taxpayers.

Even for the "jumbo" loans that banks cannot sell to Fannie Mae and Freddie Mac, they have a motive to lend beyond what buyers can afford. Banks designate interest as "income" whether they receive it or not. As long as borrowers do not actually default, additional interest owed is counted as bank income, and banks can claim higher "earnings". That is going to end when those borrowers cannot even make the principal payments.

Appraisers are hired by mortgage brokers and banks, so they are going to give the appraisals that brokers and banks want to see, not the truth.

Newspapers earn money from advertising placed by MLS, so papers are pressured to publish the Realtors'® unrealistic forecasts.

Worse, MLS have a near-monopoly on sale price information, and newspaper reporters never ask MLS hard questions like "how do we know you're not lying about those prices?" The result is an endless stream of stories which quote David Lereah of the NAR saying it's a good time to buy, as if there were some news in hearing salesmen say that you should give them your money. To be optimistic about this market takes a real estate "professional". Everyone else speaks the truth too clearly.

Owners themselves do not want to believe they are going to lose huge amounts of money.

What are their arguments?

"There are great tax advantages to owning."
FALSE. It is much cheaper to rent a house in most places than to own it. For example, it is far cheaper to rent in the San Francisco Bay Area than it is to own that same house, even with the deductibility of mortgage interest figured in. It is possible to rent a good house for $1800/month. That same house would cost about $700,000. Assume 6% interest, and we can see that a buyer loses at least $4,936 per month by buying. Renting is a loss of course, but buying is a much bigger loss.

Renting:
Rent: $1,800
----------------------
Monthly Loss: $1,800

Buying:
Property Tax: $486 ($729 per month at 1.25% before deduction, $486 lost after deduction.)
Interest: $2,333 ($3500 per month at 6% before deduction, $2333 lost after deduction.)
Other Costs: $450 (Insurance, maintenance, long commute, etc.)
Principal loss: $1,667 (Modest 3% yearly loss on $700,000. Reality will be much worse.)
----------------------
Monthly Loss: $4,936

This is a very conservative estimate of the loss from owning per month. If you include a realistic decline in house prices, as in this rent-vs-own calculator, you'll see that owning right now is a very poor choice. Here's a more optimistic calculator which ignores price changes entirely. House value losses will stop eventually, but it could take 5 or 10 years to bottom out.

Remember that buyers do not deduct interest from income tax; they deduct interest from taxable income. Interest is paid in real pre-tax dollars that buyers suffered to earn. That money is really entirely gone, even if the buyer didn't pay income tax on those dollars before spending them on mortgage interest.

Buyers do not get interest back at tax time. If a buyer gets an income tax refund, that's just because he overpaid his taxes, giving the government an interest-free loan. The rest of us are grateful.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc. Since you can rent a house for 2% of its price, but have to pay 6% to borrow the equivalent amount of money, it is much cheaper to rent the house than to rent the money.

Then there's earthquake insurance. It's really expensive, so most people just skip it and risk everything on the chance that no earthquake will happen.

"A rental house provides good income."
FALSE. Rental houses provide very poor income in the Bay Area and certainly cannot cover mortgage payments. In the best case, a $1,000,000 house can be rented out for at most $25,000 per year after expenses. The return is therefore 2.5% with no liquidity and a huge risk of loss.

If the owner were to sell that rental house for a million dollars, he could get better than 5% with no risk, no work, and no state income tax by buying a US Treasury Bond. And the money would be liquid and secure.

"OK, owning is a loss in monthly cash flow, but appreciation will make up for it."
FALSE. Appreciation is negative. Prices are going down, which just adds insult to the monthly injury of crushing mortgage payments.

"House prices never fall."
FALSE. San Francisco house prices dropped 11 percent between 1990 and 1994. Buyers in SF in 1990 did not break even in dollar amounts until about 1998. So those buyers effectively loaned their money to the sellers for 8 years at no interest, losing all the while to inflation. With inflation, 1990 buyers truly broke even only about the year 2000, ten years after buying.

Los Angeles' average house plummeted 21 % from 1991 to 1995, and of course there have been many similar crashes all around the US. The worst may have been after the oil bust in the 1980's, when Colorado condos lost 90% of the value they had at their peak.

"House prices don't fall to zero like stock prices, so it's safer to invest in real estate."
FALSE. It's true that house prices do not fall to zero, but your equity in a house can easily fall to zero, and then way past zero into the red. Even a fall of only 4% completely wipes out everyone who has only 10% equity in their house because Realtors® will take 6%. This means that house price crashes are actually worse than stock crashes. Most people have most of their money in their house, and that money is highly leveraged.

"We know it will be a soft landing, since it says so in the papers."
FALSE. Prices could fall off a cliff. No one knows exactly what will happen, but the risk of a sudden crash in prices is severe. As Yale professor Robert Shiller has pointed out, this housing bubble is the biggest bubble in history, ever. Predictions of a "soft landing" are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

Most newspaper articles on housing are not news at all. They are advertisements that are disguised to look like news. They quote heavily from people like Realtors®, whose income depends on separating you from your money. Their purpose is not to inform, but rather to get you to buy.

"The bubble prices were driven by supply and demand."
FALSE. Prices were driven by low interest rates and risky loans. Supply is up, and the average family income fell 2.3% from 2001 to 2004, so prices are violating the most basic assumptions about supply and demand.

The www.census.gov site has data for Santa Clara County for the years 2000-2003 which shows that the number of housing units went up at the same time that the population decreased:

year units people
2000 580868 / 1686474 = 0.344 housing units per person
2001 587013 / 1692299 = 0.346
2002 592494 / 1677426 = 0.353
2003 596526 / 1678421 = 0.355

So housing supply in Santa Clara County increased 3% per person during those years. There is an oversupply compared to a few years ago, when prices were lower.

At a national level, there is a similar story in the years 2000 to 2005:

2000 115.9M / 281M = 0.412 housing units per person
2005 124.6M / 295M = 0.422

At a national level, there is 2.4% more housing per person now than in 2000. So national prices should have fallen as well.

The truth is that prices can rise or fall without any change in supply or demand. The bubble was a mania of cheap and easy credit. Now the mania is over.

"They aren't making any more land."
TRUE, but sales volume has fallen 40% in the last year alone. It seems they aren't making any more buyers, either.

"It's pointless to pay rent in the long run."
FALSE, there is a great point in paying rent in the long run -- you can make much more money investing in anything other than housing and then go back and buy a house for cash. Currently, yearly rents in the Bay Area are about 2% of the cost of buying an equivalent house. This means a house is returning about 2%, and it is a bad investment. Pretty much any other investment is better. If you don't like risk, put your money in US Treasuries at 5%.

In effect, landlords are loaning the purchase price of a house to their tenants at a 2% interest rate. This is a fantastic deal for renters.

"As a renter, you have no opportunity to build equity."
FALSE. Equity is just money. Renters are actually in a better position to build equity through investing in anything but housing.
* Owers are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owers are losing principal in a leveraged way as prices decline. A 14% decline completely wipes out all the equity of "owners" who actually own only 20% of their house. Remember that the agents will take 6%.
* Owers must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity. Only houses are such a guaranteed drain on cash.
* Owers must insure a house, but not most other investments.
* Owers must pay to repair a house, but not a stock or a bond.

"If you rent you are a buyer. You are just buying it for someone else."
FALSE. It may be true that rent covers mortgage payments in some places like South Dakota, but not in any of the markets that have shot up in the last few years. Rents are much less than mortgages in most places now. No landlord buys with the intention to rent out in California because that's not profitable. The owner is generously subsidizing the renter, a wonderful thing for renters during this crash.

"If you don't own, you'll live in a dump in a bad neighborhood."
FALSE. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash.

You may worry about being forced to move, but the law says the landlord has to offer you a one year lease at a minimum, and they'll probably be delighted to offer you a two year lease and give you a discount for that. Other people want the mobility that renting affords. Renters can usually get out of a lease and move anywhere they want within one month, with no real estate commission.

It is much easier and cheaper to rent a house in a good school district than to buy a house in the same place.

A fun trick to rent a good house cheap: go to an open house, take the real estate agent aside, and ask if the owner is interested in renting the place out. Often, desperate sellers will be happy to get a little rental cash coming in and give you a great deal for a year or two.

The biggest upside is hardly ever mentioned: renters can choose a short commute by living very close to work or to the train line. An extra two hours every day of free time not wasted commuting is the best bonus you can ever get.

"Owners can change their houses to suit their tastes."
FALSE. Even single family detached housing is often restricted by CC&Rs and House Owner's Associations (HOAs). Imagine having to get the approval of some picky neighbor on the "Architectural Review Board" every time you want to change the color of your trim. Yet that's how most houses are sold these days.
In California, the HOA can and will foreclose on your house without a judicial hearing. They can fine you $100/day for leaving your garage door open, and then take your house away if you refuse to pay. There's a good HOA blog here.

"If and when the market goes south, you can walk away."
FALSE. If you have a single loan with just the house as collateral, it may be a "non-recourse" loan, meaning you could indeed walk and not lose anything other than your house and any equity in it (along with your credit record). But if you refinance or take a "home equity loan", the new loan is probably a recourse loan, and the bank can get very aggressive, not to mention what the IRS can do. A reader who lived through the 1989 housing crash in LA pointed out the following nasty situation that can happen:
* Let's say you buy a house for $600,000, with a $500,000 mortgage.
* Then the house drops in value to $400,000, you lose your job, or otherwise must move.
* If you can't make your payments, the bank forecloses on you and nets $350,000 on the sale of your house.
* The bank's $150,000 loss on the mortgage is "forgiveness of debt" in the eyes of the IRS, and effectively becomes $150,000 of reportable income you must pay tax on.

It is true that buyers who put zero down and have nothing invested in the house are much more likely to walk away. The large number of new uninvested buyers increases the risk of a horrifying crash in prices rather than a "soft landing".

"The house down the street sold for 25% over asking, and that proves the market is still hot."
FALSE. Realtors® try to create the false impression of a hot market by deliberately "underpricing" a house. Say a seller's agent knows that house will probably go for $500,000. He places ads asking $400,000 instead. (Bait-and-switch is illegal when selling toasters, but apparently not when selling houses.) The goal is to first of all prevent buyers from knowing what a realistic price is, and secondly to get buyers to blindly bid against each other. There are four players in this game and three of them are against the buyer: the seller, the seller's agent, and the buyer's agent. Yes, the buyer's own agent works against the buyer, because there is no commission if there is no sale. There's a saying in Las Vegas: "There's a patsy in every game, and if you don't know who the patsy is, you're it."

If you want to prove your agent is not on your side, ask to see houses "for sale by owner" or houses listed by discount brokers. If the agent cannot make a commission, you will not be told about the house.

There is a way around the conflict of interest inherent in being a buyer's agent: let the seller's agent be your agent too, just for that one house he's trying to sell. Then the seller's agent has a big motive to lower the price, because he will get double the comission if you buy it rather than some buyer with his own agent.

Update: the underpricing game is now over. You are free to bid far lower than the asking price. You might be surprised to find out how desperate the sellers are.

"I was lucky that my Realtor® told me to increase my bid by $100,000. Otherwise I would have lost, because my Realtor® knew about a secret bid $90,000 above mine."
FALSE. Your agent gets paid nothing if you don't buy the house, and he gets more if you waste more money by bidding too high. Those are two big motives to invent false bids.

"The MLS proves things are great."
FALSE. All sorts of funny things happen in the MLS (Multiple Listing Service, a private database controlled by real estate agents). For example, if a house just doesn't sell, Realtors® can remove its record in the MLS so that you cannot see that it failed to sell. Then the house comes back on the market at a lower price, and unsuspecting buyers think it's on the market for the first time. Their Realtor® can "prove" it's a new listing by showing the MLS record to the buyer: "See, here's the listing date, just came on the market. Better hurry and buy it, this one is hot."

There is nobody checking that the MLS shows true transaction prices. The MLS prices are often just wrong.

Furthermore, the MLS will not list any house for sale by owner or for sale through a discount broker, except perhaps those listed by Help U Sell. Those cheaper prices are just not in the system, because if you save money, they lose money.

"The Bay Area is a special place that will always be expensive."
TRUE, but it was just as special when it was half as expensive ten years ago, so being special does not account for the run up in prices.

Many people are confused about the difference between high prices and increasing prices. Prices are high, but they are not increasing. They are falling. Falling prices make housing a bad investment.

"Rich Chinese (or Europeans, or Arabs) are driving up housing prices."
FALSE. The percentage of US houses bought by rich foreigners is tiny. Furthermore, American housing is clearly a bad investment at this point. Foreigners can just wait and watch both the dollar and American housing continue to fall, and then buy for much less in a few years. Rich foreign investors are not dumb enough to buy into a badly overpriced market, but your broker is hoping that you are.

"There's always someone predicting a real estate crash."
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

"But housing was high when interest rates were 21%, so higher interest rates don't matter."
FALSE. Inflation was much higher then, so fixed debt was easier to pay off with increasing salaries. Now we have adjustible mortgages and stagnant salaries.

House price increases exactly mirror the increase in mortgage debt. According to the Washington Times: "Consumers have doubled their mortgage debt from $3.5 trillion to $7 trillion since 1996, borrowing and spending profusely on the assumption that house prices will keep rising." So the increase in house prices is not backed by assets. It's backed by debt. The debt in turn is backed by the houses. It's just smoke and mirrors.

"Local incomes justify the high prices."
FALSE. Most bankers use a multiple of 3 as a "safe" price to income ratio. We are well beyond the danger zone, into the twilight zone. The price to income ratio is currently around 10. Another rule of thumb is that a fair house price is less than 200 times the monthly rent. If a house rents for $2000 per month, then a fair price must be less than $400,000.

"Look, housing continued to rise after the 2001 stock market crash, so it will always rise."
FALSE, consider the turkey in the farmer's barnyard. He thinks the farmer will always come feed him and not ask for anything. Then Thanksgiving comes. Whack. Past performance is no indication of future results.

"Rent can go up, but a 30-year fixed mortgage payment cannot."
TRUE, but irrelevant. House owners lose even with a fixed mortgage, because the price of a house falls as interest rates go up. Most people want to sell within 7 years of moving in, and many have to sell because of job loss, illness, or divorce. No one can afford what the owner paid for it, so the owner has to take a large loss. Renting it out will not come close to covering the mortgage. Bay Area rents have fallen 23% in the last 4 years.

"You have to live somewhere."
TRUE, but that doesn't mean you should waste your life savings on a bad investment. You can live in the same kind of house by renting during the crash. A renter could save hundreds of thousands of dollars, not only by paying less every month, but by avoiding the devastating loss of his downpayment. In fact, it's currently cheaper to live in a nice hotel in most parts of the US than it is to make mortgage payments in the Bay Area.

"Newspaper articles prove prices are not falling."
FALSE. The numbers in the papers are not complete and have murky origins. Those prices are "estimated" from the county transfer tax and making that tax public record is optional. A buyer who does not want you to see how little he paid has only to ask to put the transfer tax on the back of the deed and it will not show up on computer searches of the deed, which show only the front. Others voluntarily pay more tax than they have to, in order to inflate the apparent price to fool the next buyer. At a tax rate of about $1 per thousand of sale price, as in San Mateo county, you have to pay only $100 extra tax to make your purchase price look $100,000 higher.

Even though you can in theory go to your county building and get sale price information, in reality the county will give it to you in a painfully slow and inconvenient way. For example, in Redwood City's county building there are PC's where you can look at data for any particular house, but you cannot print, you cannot save to a floppy disk, you cannot email data out. All you can do is write things down manually, one at a time. And that's how real estate interests like it. Your elected representatives are serving them, not you.

Supposedly impartial sources like Dataquick are paid for entirely by people with a large financial interest in "proving" that prices are not falling, like Realtors. This makes it unwise to take their numbers at face value.

For the obviously biased sources like the National Association of Realtors, you can be sure that their sales price numbers do not include the effective price reductions from "incentives" like upgrades, vacations, cars, assumed mortgages and backroom cash rebates to buyers.

"My appraisal proves what my house is worth."
FALSE. "An appraisal in its typical residential real estate form is little more than a comparative analysis conducted by someone with no skin in the game offering confirmation that other lemmings are paying too much for their houses as well." -from an article on morningstar.com

Amazingly, government house price measures do not include houses with mortgages greater than $417,000. This excludes well over half of all houses in California. So the government can report a slight price rise, but fail to mention that prices actually fell for the other 60% of houses in California.

"It's not a house, it's a home."
FALSE. It's a house. Wherever one lives is home, be it apartment, condo, or house. Calling a house a "home" is a manipulation of your emotions for profit.

As a MLS said to me, "a house is a wooden box that sits out in the rain and slowly rots. No one would buy in this market if they really thought about how much pain it's going to cause them in the long run. That's why we have to sell them a home, not a house."

Also, MLS is a not a real word. It's a registered commercial term. Note the "®" symbol.

"If you don't buy now, you'll never get another chance."
FALSE. This argument was also popular in 1989 in Los Angeles, just before a huge crash. It's silly. If no one like you ever gets another chance to buy a house, then you will not be able to sell your house in a few years either, because there will be no more buyers like you ever again.

Here is a great quote from June Fletcher, a Wall Street Journal reporter, that says it all: "The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

"Property in the Bay Area is a luxury good, and so will be less affected by economic downturns."
FALSE. 82% of last year's Bay Area mortgages were ARMs, and ARM loans are not taken out by the rich. People on the border of bankruptcy take out ARMs because they can't afford fixed rate loans. The rich don't have loans at all.

Many of these ARM loans have exceptionally deadly repayment terms, and so are known as "neutron mortgages". Like the neutron bomb, they destroy people, but leave buildings standing. They are also known as "suicide loans".

"Housing will be permanently higher since downpayments are now obsolete."
FALSE. The current wave of defaults is making downpayments suddenly seem like a good idea again. Lending standards are already improving.

"House ownership is at a record high, proving things are affordable."
FALSE. The percentage of their house that most Americans actually own is at a record low, not a high. We do have a record number of people who have title to a house because they have dangerous levels of mortgage debt, but that is no cause to celebrate.

"California houses are worth whatever fools will pay for them."
FALSE. At interest rates of 6%, houses are worth at most 17 times what you can rent them out for per year. (1 / 0.06 = 16.7) You can get 6% with no work and very little risk in the bond market, so why accept less than 6% return (called rent) on your capital in the very risky housing market? Since typical house rent is about $24,000 per year in the Bay Area, the typical house is worth about $408,000, not $700,000.

Another rule of thumb is that houses are worth about three times the median household salary of an area. Let's say four times the median salary because this is a desirable area. Since the median household income is under $70,000, the value of a typical house is under $280,000. Again, not even close to $700,000.

"Limited land means prices will always go up."
FALSE. Japan has a much more severe land shortage than America, but that hasn't stopped prices from falling for 14 years straight. Prices in Japan are now at the same level they were 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

"It would take another 911 terrorist attack or a major earthquake that wipes out this area in order for the price to fall by 50%."
FALSE. Even with a 50% decline in prices to $350,000 or so, the median price in the Bay Area will still be roughly double the median price in most of America, and the median Bay Area household income of about $70,000 will still not be sufficient to buy a house. So a 50% decline is well justified by the fundamentals.

"Housing is a hedge against inflation, so you should buy now anyway."
FALSE. Interest rates go up with inflation, and higher interest will be the last straw for ARM mortgages in the Bay Area. Their defaults and foreclosures will drive down the cost of housing for everyone else around here. Remember that 82% of recent Bay Area mortgages were adjustable. There is little chance that salaries of ARM owners can keep up with inflation because of two billion people in India and China who would be happy to do their jobs for much less money.

"Houses always increase in value in the long run."
FALSE. House values are actually constant. Adjusted for inflation, prices in Holland, for example, rose less than one quarter of one percent annually in the 350 years since their tulip bubble. Warren Buffett and Charles Schwab have both pointed out that houses don't increase in intrinsic value. Unless there's a bubble, house prices simply reflect current salaries and interest rates. Consider a 100 year old house. Its value in sheltering you is exactly the same as it was 100 years ago. It did not increase in value at all. It did not spontaneously get bigger, or renovate itself. Quite the opposite - the house drained cash from its owners for 100 years of maintenance and taxes. Its price went up about as much as salaries went up.

My grandmother always used to complain about the cost of milk. "Why, when I was a girl, a gallon of milk cost a dime! Just look at how much people are overcharging for milk now." I asked her how much people got paid back then. "Oh, about $15 a week", came the reply. Hmmm, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

"Maybe we should just accept that we missed out on a great opportunity to get into the real estate in the past N years."
FALSE. Did we all miss out on a great opportunity to get into the stock of pets.com or other Internet companies with no business model? The real question is what is likely to happen in the next few years according to fundamental economics. The answer is a huge crash. The last guy to buy into the bubble will get hurt the most.

"You failed to factor in emotion. More houses are sold on emotion than will ever be sold based on perceived value. They buy all they can afford plus."
FALSE. Buyer emotion doesn't matter at all to the lenders, not on the way up or on the way down. Most people will borrow more than they can afford, but only if the lender goes along. The whole thing was a party of cheap and easy credit. When the credit machine gets sober again, millions of people are going to be ruined. Foreclosure rates are already going up exponentially.

"I just want to own my own house."
TRUE, most people do and that's fine. Buyers will get their chance when housing costs half as much and they have saved a fortune by renting. House ownership is great - unless you ruin your life paying for it.

As reader Sean Olender put it: "Many people have forgotten that their number one restriction on future freedom -- to do what they want, when they want, and to go where they want -- it isn't the Iraqis, or Iranians, or North Koreans, it isn't the axis of evil, it's their mortgage lender."