Monthly Archives: August 2011

House Price Index (HPI): June 2011

Posted on August 31, 2011 | Leave a comment

Calgary home prices in June were up 1.6% from the previous month, according to the Teranet–National Bank National Composite House Price Index™ released today.

Despite the monthly gain, Calgary prices were down 2.7% from a year earlier for a 9th consecutive month of 12-month deflation.  The Calgary index is still 10.9% off the all-time high of August 2007 and 3.1% off the pre-correction peak of August 2010.

Canada-wide, home prices in June were up 1.7% from the previous month.  According to the report:

 It was the third consecutive monthly increase exceeding 1% and the largest rise since August 2009. It was also the seventh consecutive monthly increase, coming after three straight monthly declines. As in April and May, prices were up in all six of the metropolitan markets surveyed. What is new is that in all six markets the June monthly rise was at least 1%, a first since April 2005.

Year-over-year, the national composite index was up 4.5 with Vancouver leading the way.

(click to enlarge)

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CTRL+C, CTRL+V Forecast – Conference Board of Canada

Posted on August 30, 2011 | 12 Comments

Short-term year-over-year house price growth in the Calgary region is expected to be in the 5-7% range, says the Conference Board of Canada in a report released today.

Sound familiar?  It should.

The Conference Board has been forecasting that same 5-7% range for over a year.

Jump a little further back:

How about to last summer:

Last spring?

The average SFH price at the end of May 2010 was $483,938.   A 5% increase would have us sitting well over $500,000 right now, yet it looks like we’ll end the month in the $450′s.  Then again, the report doesn’t elaborate what “short-term” means and is quite vague overall.

We had some discussion on the blog about this back in May as well as  June of last year.

See you all next month when the next 5-7% increase is forecast.

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Condo Buyers: Don’t Shop For The Lowest Fees

Posted on August 29, 2011 | 1 Comment

The following article was written by Condo-Check, reprinted with permission.

Do Not Shop For the Lowest “Fees”

Condominium Fee amounts are often the first concern of a condominium buyer.  The goal is to find that condominium where the monthly contribution is as minimal as possible.

If you think about the fact that the term “Monthly Contribution” means:  ”an owner’s monthly contribution towards the maintenance of their condominium investment” would it not be rational to expect the monthly fee to be appropriate (enough) to ensure the property is being maintained and the services are being provided both consistently and professionally?

Look for clear information on the use of the fees, not the amount of the fees.

Request all the financial documents needed to assess if there are adequate funds to sustain the property values.  This includes the current year operating budget, a recent financial statement, the most recent year-end financial statement, the Reserve Fund Study and the Reserve Fund Plan.

Condominiums never have condominium fees that are too high.  It is those condos that are afraid of charging what is really required to maintain the project that end up costing owners large sums of money.  Low fees too often are a sign of deferred maintenance.  Although there are exceptions to this rule, the only way to tell is by reviewing the documents of the condominium corporation.

Condo-Check™
A division of Condominium Support Services Inc.

Head Office:  Calgary
Direct line: (403) 509-2250
If Busy : (403) 764-1824
Inquiries or questions:  info@condo-check.com

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Scotia: More U.S. Households Opting To Rent, Landlords Benefit

Posted on August 26, 2011 | 1 Comment

While not relating specifically to Canadian real estate, the following report from Scotia Capital’s August 26th Global Views, shows the direct correlation a housing downturn has on the rental market.

The U.S. homeownership rate in the second quarter was 65.9% (without excluding delinquent borrowers) which was a 14-year low. (Note: In Canada, the home ownership rate, long stuck just above 60%, is now about 70% -Source)

Demand for rental properties, however, continues to rise as the vacancy rate sat at its lowest level since mid-2002. This was despite the inventory influx of distressed properties being turned into rentals.

The report states after staying relatively flat from 1997 to 2005, the number of renter households increased by on average 1% per year through 2009 (latest data available) with just under 3 million turning from homeowners to renters. It’s also forecast that the number of renter households will rise by 360,000 to 470,000 annually between 2010 and 2020.

Rents did not undergo the 30% price correction that occurred in the owner-occupied housing market (see chart below), and as of July sat roughly 20% above their long-run average. Tightening inventory, low rental-unit completions, and long development lags are further boosting landlords’ pricing power.

The report concludes with stating that,

The outlook for the rental housing market is positive…Aside from starting a family later, younger generations may be more reluctant to get onto the property ladder, at least until the labour and housing markets show signs of a more sustainable recovery.

You can read the entire report here

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It must be especially difficult & frustrating for those households that bought a home during the peak and lost it, only to now find rents becoming increasingly more expensive.

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TD: Canadian Home Prices 10-15% Over-valued

Posted on August 23, 2011 | 7 Comments

A new report released by TD entitled, “Canada’s Economy –a Fortress or a Sand Castle?” focuses on the risk of another US recession (40%) and Canada’s ability to weather such a financial shock.

The report takes a very cautious and wary tone:

Despite Canada’s relatively strong economic fundamentals and the continued outlook for growth, the economy is more vulnerable to a nasty external surprise than it was prior to the recent recession in 2008-09. While the business sector appears better positioned to weather a U.S. downturn, policymakers in Canada have less wiggle room on the fiscal and monetary fronts and households face larger debt burdens.

In contrast to the experience in the 2008-09 downturn – when Canada’s economy suffered a considerably lesser blow than that Stateside – there is no assurance that a repeat would be in store in the event of a U.S. double dip. At a minimum, the Canadian economy would probably follow the U.S. into recession.

The report shows that the Home Price to Income ratio has climbed to 5.2 For comparison, the high in 2007 was 4.8

Focusing specifically on Canadian households, the report continues:

The household sector’s flexibility to respond in the event of a severe bout of external headwinds is even more constrained. For one, the jobless rate remains more than a full percentage point above its pre-recession trough. Household debt as a share of after-tax income is considerably higher. It may be the case that the burden of debt service costs is actually lower today than four years ago due to the benefit of lower borrowing rates. However, that could quickly change if income flows are abruptly cut off as a result of, say, a surge in layoffs.

The higher home price-to-income ratio also suggests a larger degree of froth in the nation’s housing market despite the gyrations in home prices since 2007. By our measure, home prices are currently 10-15% over-valued. The bottom line is that household debt leaves households with less financial maneuvering room.

You can read the entire TD report here

Related post:

TD: Calgary to Outperform a Correcting Canadian Market (July 2011)

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