Norm Paget's Blog

Central Bank leaves interest rate untouched

Norm Paget — Wed, 07 Dec 2011 12:36:09 +0000

Uncertainty about the world economy, especially the crisis in Europe, left little choice for the Bank of Canada, but to leave its target for the overnight rate at 1 per cent – the 10th consecutive meeting the Bank has left the rate alone.

“Conditions in global financial markets have deteriorated as the sovereign debt crisis in Europe has deepened. Additional measures will be required to contain the European crisis. The recession in Europe is now expected to be more pronounced than the Bank had anticipated in October, as a result of increased deleveraging and tighter financial conditions, as well as necessary fiscal austerity and structural reforms,” said the Bank in a statement.

Bank of Canada Govenor Mark Carney said recent economic data suggest that growth in the United States has been slightly more robust than anticipated, largely as a result of continued vigour in consumer spending and business investment. “Nonetheless, household deleveraging, fiscal consolidation and negative spillover effects from the European crisis are all expected to weigh on U.S. growth.”

On the home front, the central bank noted that while the Canadian economy shows signs of stronger growth, this may be slowed by external forces.

“Household expenditures have more momentum than had been expected and business investment remains solid,” said the Bank. “Going forward, the weaker external outlook is expected to dampen GDP growth in Canada through financial, confidence and trade channels. The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar.

“With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada,” stated Carney. “The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks.”

The Bank also stated that it continues to expect the inflation rate to decline as a result of reduced pressures from food and energy prices and ongoing excess supply in the economy.

Balanced conditions set to return to most Canadian housing markets in 2012,

Norm Paget — Tue, 06 Dec 2011 12:48:49 +0000

Canadian residential real estate defied conventional logic and outperformed expectations in 2011, posting another solid year of housing activity virtually across the board. The trend is expected to carry forward into 2012 as Canadians continue to demonstrate their faith in homeownership, despite concerns over the European debt crisis and its impact on the global economy, according to a report released by RE/MAX.

The RE/MAX Housing Market Outlook 2012 examined trends and developments in 26 major markets across the country. Eighty-eight per cent (23/26) anticipated average price increases by year-end 2011—with percentage hikes ranging from one to 16 per cent. The forecast for 2012 shows the upward trend moderating, but still ahead of 2011 figures. Overall home sales are expected to remain on par or ahead of last year’s levels in 85 per cent (22/26) of markets in 2011—including Saskatoon with a year-over-year percentage increase of 13 per cent and an eight per cent uptick in Calgary, Winnipeg, Hamilton-Burlington and Sudbury. Almost half of Canadian markets will match the 2011 performance, while the remainder should post increases ranging from one to five per cent next year.

By year-end 2011, an estimated 460,000 homes are expected to change hands, up three per cent from the 447,010 units reported in 2010. Sales are expected to climb one per cent to 464,500 units in 2012. The value of a Canadian home is set to climb to $363,000 this year—an increase of seven per cent over the $339,030 posted one year ago. By year-end 2012, the average price in Canada is forecast to appreciate two per cent to $371,000.

The Canadian housing market has demonstrated tremendous resilience in recent years, but 2011 stands out. Instead of responding to economic concerns both here and abroad with a retreat in sales and prices, residential real estate markets actually experienced an upswing in the volatile third and final quarters. While clearly not impervious to the impact, Canadian consumers are intent on making their moves now, in advance of higher housing values and rising interest rates down the road.

Improvement in both provincial and local economies, especially during the second half of 2012, should serve to further stimulate home-buying activity. Calgary, Saskatoon, and Halifax-Dartmouth will likely lead the country in unit sales in 2012, each with a projected increase of five per cent. Regina, Greater Toronto, Saint John, Moncton, and St. John’s anticipate a three per cent increase in home sales next year.

The economic underpinnings support ongoing demand, particularly as job creation efforts continue and unemployment rates edge down further. Nationally, we remain on an upward track, and the confidence consumers have demonstrated in housing over the past decade will prove well founded once again next year. The rising belief in homeownership is key, especially among Generation X and Y—some of whom are making their moves sooner. Boomers and retirees are changing, too. They’re healthier and more active, with longer life expectancy. Overall, we’re seeing an extension of the homeownership cycle, and it’s great news for housing.

major markets across Canada this year, an increase in inventory more in line with years previous should ease upward pressure on average price in the year ahead. The highest appreciation is expected in Regina, where values are forecast to increase eight per cent, followed by Greater Toronto, Halifax-Dartmouth, and St, John’s—each posting a five per cent gain. Overall, 81 per cent of the markets examined are forecast to set new records for average price next year. Noteworthy milestones include Greater Vancouver, which will break the $800,000 threshold, as well as Regina and Kitchener-Waterloo, which will reach the $300,000 mark.

While prices will remain on the upswing, buyers will benefit from greater selection moving forward. Stability or modest growth will characterize sales activity while GDP moves forward at a more muted pace in 2012. Whether markets will meet or potentially exceed projections will hinge largely on consumer confidence. An unexpected call for interest rate hikes could also serve to bolster sales.

Other highlights include:

Population growth and immigration are major factors expected to prop-up housing demand and household formation in the coming years. Since 2000, Canada’s population has experienced double-digit growth of 11 per cent. By 2031, over 42 million people are expected to call Canada home.
Investment will also continue in Canada’s major centres, with income-producing properties at the top of the most wanted list. Low vacancy rates and stock market volatility reinvigorated this segment of the market in 2011 and the very same factors are forecast to influence sales moving forward.
Condominiums are expected to gain an increasing share of the marketplace, particularly in Western Canada and Ontario. A focus on higher density urban growth is impacting purchasing patterns and introducing new, affordable options—critical to the attainability of homeownership as prices continue to move upward.

Housing stock in major Canadian centres will improve as municipalities focus on redevelopment and revitalization.

What Your Ceiling Says About Your Home

Norm Paget — Sat, 26 Nov 2011 13:04:52 +0000

What does every room in the home have, yet rarely gets noticed? Look up – it’s the ceiling. While it may not get the attention of the walls and floors, the ceiling can be an indicator of certain elements of the home’s condition, so it’s important to identify and address any problems that arise.

From “popcorn” to plaster to drywall, there are many different ceiling materials in today’s homes. Look for signs of damage no matter what the material. Ceiling stains can indicate water damage from leaking pipes, a bathroom fixture overflow, or a leaking roof. Before any attempt is made to repair water damage, it must be determined if the cause of the leak will continue to affect the ceiling, or if it the damage is related to a single event in the past. If water is dripping from the ceiling, the source of the water will need to be found and stopped, and the ceiling will need to be thoroughly dried before attempting any repair work. If the damage is severe, a professional contractor specializing in structural drying should be consulted.

Mold is a real threat when moisture is allowed to remain in the ceiling and the space above it. It can take a little as a few days for mold to begin growing inside a ceiling, so acting quickly to get everything completely dry is the best course. In addition to being a health hazard, mold can eventually cause structural damage to the home if left to grow and thrive. Mold removal should be done by a qualified professional who will certify their work in the home.

Minor ceiling cracks are not uncommon and may simply be the result of the home settling. Even older homes can continue to settle for decades. If the cracks are minor, they can be repaired with relative ease. The technique used will depend on the ceiling material. Old plaster ceilings will often sag and crack over time, and can be patched with drywall instead of new plaster. Popcorn ceiling cracks can be covered with aerosol sprays made specifically for this use. Major cracking can be due to seismic activity or structural issues and should be assessed by a professional before repair or replacement.

Paying attention to the ceiling can really pay off by allowing the discovery of small problems before they can become big ones — avoiding serious and potentially costly problems down the road.

Housing affordability improves: RBC

Norm Paget — Sat, 26 Nov 2011 12:50:15 +0000

“After two consecutive quarters of deterioration, Canada’s housing affordability has improved modestly in the third quarter, according to the latest Housing Trends and Affordability Report released today by RBC Economics.

Elevated uncertainty relating to the European sovereign-debt crisis and the downside risk for economic growth have contributed to keeping interest rates at low levels,” said Craig Wright, senior vice-president and chief economist, RBC. “The lower interest rate environment – which also includes mortgage rates – has played a part in slightly reducing the costs of owning a home in Canada in the third quarter.”

The RBC housing affordability measure captures the proportion of pre-tax household income that would be needed to service the costs of owning a specified category of home at going market values. During the third quarter of 2011, measures for the national level fell for all housing categories tracked by RBC (a fall represents an increase in affordability).

Earlier this year, deterioration in affordability at the national level was skewed by substantial increases in homeownership costs in Metro Vancouver. In the third quarter, RBC measures in the majority of provinces and cities experienced modest declines (less than 1 percentage point). More remarkable improvements materialized in a few local markets across Canada, including Montreal (for two-storey homes and detached bungalows), Manitoba (for two-storey homes), and Vancouver (for detached bungalows).

“Housing affordability levels are quite good in most parts of Canada and will pose little threat to overall housing demand,” added Wright. “The Vancouver area market continues to be a major exception, with sky-high property values in upscale neighbourhoods making it both extremely unaffordable and the most at risk of a downward correction.”

Going forward, RBC forecasts that interest rates will remain exceptionally low in Canada until mid-2012 and rise gradually after that.

“We expect to see further slowing in the pace of home price increases next year, as housing demand levels out,” said Wright. “These factors will set the stage for a period of relative stability in affordability trends in Canada.”

The RBC report indicates that the cost of owning a home at market value remains close to historical norms in the majority of markets outside of British Columbia, implying that local markets are, for the most part, at worst, slightly ‘unaffordable’. Affordability tensions emerged earlier this year in Toronto, Ottawa and Montreal (particularly in two-storey homes) and continue to be in a slightly uncomfortable range.

RBC’s housing affordability measure for the benchmark detached bungalow in Canada’s largest cities is as follows: Vancouver 90.6 per cent (down 1.5 percentage points from the previous quarter), Toronto 52.1 per cent (up 0.1 percentage points), Montreal 40.9 per cent (down 1.3 percentage points), Ottawa 40.8 per cent (down 0.6 percentage points), Calgary 37.6 per cent (up 0.5 percentage points) and Edmonton 33.2 per cent (down 0.6 percentage points).

How to Evaluate Properties in 60 Seconds or Less

Norm Paget — Mon, 24 Jan 2011 20:07:35 +0000

I have to give credit to Julie for this little tip. This is her creation. Somewhere along the line she just started doing this to simplify and speed up the process of evaluating properties for their cashflow potential. As she confessed last month, she doesn’t like numbers and math to evaluate properties. And, this technique is one simple calculation that tells her to continue looking at a property or to move on. While I spend hours pouring over spreadsheets and killing the battery on my calculator to assess the cashflow of a property, Julie can make her decision whether to investigate a property further in 60 seconds.

Julie calls it the 1% Rule

All you need are two numbers: the price of the property and the rental income you will get each month. If the monthly income is 1% of the purchase price then you are pretty much guaranteed a property that will cashflow.

For example, if you have a property that costs $300,000 and it gets $3,000 per month in rent, Julie’s simple calculation tells her that it is a property she’d like to learn more about. The numbers are looking really good.

If you have a property that costs $300,000 and the rent is $2,100 per month, it’s hitting .7%. She’d probably still look into this property, but she’d do it knowing that the money will be tight. Anything lower than than .7% is going to be really hard to make cashflow without either a big downpayment, lower purchase price or higher rent.

The 1% Rule in Action – Making Sure Properties in a Specific Area have the potential of producing positive cashflow:

We’re looking at areas in Canada and the U.S. where we will record our upcoming video series. In the video series we’re going to follow our real estate investing process from start to finish to buy a property. One of the places I have been researching is Austin, Texas.

Let me show you how I’m using Julie’s 1% Rule in the evaluation of properties in Austin:

I did a search on Realtor.com, and I found 10 single family homes in the St. Edwards area, ranging in Asking Price from $289,900 to $299,900 (because I limited my search to a max. of $300,000).

Multiply .01 (1%) by $290,000 and you get $2,900. If you can get around $2,900 rent (per month) in that area on a house that costs approx. $290,000, then you can be very comfortable that you will have a strong positive cashflowing property.

You can even drop the 1% to 0.8%, and you will still likely have a positive cashflow property. Why not just use 0.8%, you ask? 1% is just a rule of thumb. Basically anything over .7% is worth looking into further. But, you can decide the exact number you’re looking for based on your objectives, the strength of the area, the size of the down payment you have and the cost of financing you can obtain.

If you can put down 25%, you can decrease the 1% rule to 0.8% or possibly even 0.7%. However, if you can only put down 10% and the bank is going to charge you 7% interest rate, you will want to achieve closer to the 1% rule.

Let’s look at the 1% Rule decreased to .8%. Let’s say you have a 25% down payment for this example:

If you have 25% to put down and are going to use the 0.8% rule, that would be .008 x $290,000 = $2,320.

You want to have approximately 35% of your rental income available for expenses (management, insurance, property taxes, maintenance, etc.). So, if you can achieve $2,320 in monthly rent, subtract 35% for expenses, and that leaves you with $1,508 ($2,320 x .65) available for your mortgage costs.

$1,508 in a monthly mortgage payment at 5.5% interest rate, with a 30 year amortization can afford a $267,420 mortgage. In other words with a big down payment and the low interest rates available in today’s market, the .8% rule will work.
If you bought the $290,000 home with only 10% down, this would leave you needing only a $261,000 mortgage ($290,000 x .90 = $261,000) yet the $1,508 monthly payment can actually pay for $267,420!

But, Julie complains that she can’t do the math in her head on .8%, so she sticks with 1% and just knows that a little bit lower than that will still work.

It’s just a simple rule of thumb for quick and easy assessments. Once you’ve found properties that have potential for cashflowing, you still have a lot of work to do to make sure the property is a good one to buy. At least using this trick you can feel comfortable that you will be spending the time learning more about a property that has good potential.
by Dave Peniuk

MOISTURE ISSUES IN NEW HOUSES

Norm Paget — Mon, 24 Jan 2011 14:36:50 +0000

Cracks in the walls and ceilings of a newly-constructed home don’t necessarily indicate a structural concern.

During the first months to a year of occupancy in a newly built home, as the various systems, plumbing fixtures and appliances are operated and the natural drying of many of the materials used to build the home occurs, you may notice cracks or other irregularities forming in walls or ceilings or even floors. This primarily occurs as the wood elements that make up the framing of the house are subjected to their first thermal cycle – expanding and contracting with changes in moisture or temperature.

This is often most noticeable as the heating system is used, accelerating the normal drying process, causing the word to shrink and warp a bit. Sometimes even noticeable sounds can be heard as the cracks open up or components move. Small bumps may occur on surfaces of the drywall as the fasteners loosen or are forced out slightly. Dimples may occur as warpage of the wood pulls secured fasteners back from the surface. The more common use of drywall screws has help minimize the potential for “nail pops,” however, most new homes will still experience some evidence of this condition. In any case, both dimples and pops are cosmetic issues and relatively easy fixes in most cases.

The drying and shrinkage of wood also causes cracks to form, particularly around windows and doors and other openings where the pieces of framing are different sizes or have different orientation. When wood dries, it can also warp, which contributes to cracking, especially along the length of long members such as ceiling or floor joists. Another characteristic of drying wood is that it dries from the outside inward. As a result, where exposed, you may see some crack or chip on the surface, particularly around knots or other irregularities.

As the wood and other building components dry out dry out, they actually add moisture to the house air. While excess moisture is not wanted, a certain amount of moisture is beneficial to maintain a reasonable level of humidity inside a home. Maintaining the acceptable level in any home can be difficult, but can be even more of a task in a newly constructed home, or even an older home recently occupied by a new family with different living habits or lifestyles. Cooking, bathing, or even just the presence of people in a house adds additional moisture to the house air. Moisture from a damp crawlspace and basement can also add significant amounts of moisture to the living area.

The normal opening and closing of doors helps prevent the buildup of excess moisture. However, in some cases mechanical venting will be required. A new home may have a whole-house mechanical ventilation system designed to maintain an acceptable level of moisture by exhausting stale air and drawing in fresh air from outside. But even with these systems it can be difficult to maintain the appropriate moisture level.

If excess moisture is not vented properly, it can cause problems such as mold growth, especially as it mixes with other common sources of moisture in a house. If it is the winter season and the windows are very cold, this indoor moisture may show up as condensation on the cold surfaces. Bay windows, due to their projecting design, or north-facing windows, are generally more prone to moisture condensation than other windows.

Exhaust fans installed in kitchens and bathrooms vented to the exterior also help control the level of indoor moisture-laden air. Venting clothes dryers to the exterior is always required to expel the significant amount of moisture-laden air produced during the drying process.

If the moisture level falls too low, you may find yourself with stuffy nasal passages or the victim of annoying shocks from static electricity, particularly when heat is provided by a forced air or electric heating system. Cracking in wooden furniture and dried out skin are other effects of dry air. A properly set and functioning humidifier can help maintain a proper relative humidity level; but if improperly set and maintained, the exc3essive moisture can create significant problems.

If you find you are unable to control your indoor moisture conditions, contact your local HouseMaster inspector or an indoor air specialist for an assessment. Sometimes the source of indoor moisture problems can be difficult to determine without an extensive evaluation; but in other cases, an inspection by a qualified professional can provided a simple solution.

Norm Paget Sales Rep. RE/MAX Real Estate Centre Inc. Brokerage 905-877-5211

Cellphones Which Cell Plan???

Norm Paget — Fri, 21 Jan 2011 20:12:22 +0000

Here is a little help to sort through all of the plans that the carriers offfer.

Which Cell Plan? A Checklist
helps you think about what you want and need before shopping for cellphone plans

Which Cell Plan? A Practical Guide to the Canadian Cellphone Marketplace
provides in-depth information for consumers, as well as consumer affairs professionals on the topic of cellphones

Take Charge of Your Debt

Norm Paget — Wed, 19 Jan 2011 20:10:59 +0000

Welcome to your online one-stop shop on how to better manage your debt

This online tool from the Government of Canada will help you fully understand your debt problems and some options that are available to you, regardless of your level of debt and to whom you are indebted. You will also find information on making a budget and budget counselling, collection agencies, credit and credit repair. Finally, if you wish to further increase your knowledge in any of these subject areas, a list of relevant publications is provided for your reference.

The Office of Consumer Affairs would like to thank all of its collaborators for their valuable help in this project: The Association coopérative d’économie familiale de l’Outaouais staff, Dr. Ruth E. Berry (Manitoba Association of Home Economists), Rob Boulanger (Credit Counselling Services of Atlantic Canada, Inc.), Jocelyne Lévesque (Université Laval), the Office of the Superintendent of Bankruptcy and Fran Smith (Credit Counselling Services of Alberta Ltd.).

Disclaimer
When businesses or consumers cannot pay their debts, they may file for bankruptcy or make a proposal (a payment arrangement with their creditors to prevent bankruptcy). These are legal proceedings carried out under the Bankruptcy and Insolvency Act and must be registered with the Office of the Superintendent of Bankruptcy.

“Take Charge of Your Debts” may not be relevant for people involved in either process.

Money Matters $

Norm Paget — Tue, 18 Jan 2011 17:37:02 +0000

If you do nothing else to save money this year, take 5 minutes to see how increasing or accelerating your mortgage payments can save you thousands of dollars in interest. Grab your latest mortgage statement, plug your numbers into Industry Canada’s online mortgage calculator, then play around with the figures. See how much you could save if you switched to biweekly payments, or increased your payments by 5% or more.

The site can also show you what would happen to your payments if interest rates changed or you refinanced your mortgage. Click here to ceck it out.

HST Ontario – Purchasing a home?

Norm Paget — Tue, 11 Jan 2011 16:22:17 +0000

The introduction of the Harmonized Sales Tax in both Ontario and British Columbia on July 1st 2010 has been widely cited by real estate professionals and analysts as one of the major factors affecting a slowdown in housing sales.

This theory seems to be supported by a recent survey commissioned by the Ontario Real Estate Association (OREA) and conducted by Ipsos Reid, which shows that 56% of people in Ontario believe that the new HST applies to the cost of resale homes.

In fact the HST only applies to the cost of services used in the act of buying or selling resale properties (realtors, lawyers, surveyors, home inspectors etc.) HST applies to the cost of new homes over $400,000.

Norm Paget sales Rep. RE/MAX Real Estate Centre Inc. Brokerage 905-877-5211