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#13 - 300 Eagle Terrace Road
Feature Listing
COMPLEX END UNIT, VIEWS, PRIVACY!
Sunny SW facing end unit with spectacular views. Two bedrooms up with additional bedroom possible on entry level. Two full bathrooms plus a powder room on the main. Single car garage with additional parking in front. Kenmore Elite stainless appliances. Counter level eating bar. Great value for the full time residence or the weekend cabin. Phantom screens installed onto deck door openings. New railings installed on two large deck. Private rear ground level patio facing reserve and spectacular mountain views from the living room! This unit has it all. Registered size is bareland condo.
$625,000
| CONTACT LOUISE FOR MORE INFORMATION
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| How House Prices Depend on Demographics | |
Jason Heath
What's going to happen to home prices in Canada? Despite all of the analyses and hypotheses in the media, the answer may not be based on historical real estate prices, interest rates or ratios. The answers may lie, to a great extent, in our demographics.
The typical Baby Boomer is likely to sell the 3,000 square foot, 4-bedroom home they raised their family in and instead opt for a 1,500 square foot condo before long. They don't need the space and they don't want the stairs. Besides that, they may need the money to fund their retirement. When they're no longer able to care for themselves, the next downsize may be a 500 square foot nursing home. And the final downsize requires considerably less square footage.
This pattern is likely to put a damper on real estate prices, in general, in the coming decades. It's also one reason supply, demand and prices for condos in this country may continue to rise.
According to Statistics Canada, the Baby Boom lasted 20 years in Canada. During that time, more than 8.2 million babies were born, an average of close to 412,000 a year. In comparison, the number of births in 2008, when the population was twice as large as during the baby boom, was only 377,886."
Canadian consumer spending represents about 58% of the Canadian economy as measured by Gross Domestic Product (GDP). Shelter, principal accommodation, household operation and household furnishing represent about 58% of consumer spending. This means expenditures related to real estate ownership and maintenance represent about 1/3 of Canadian GDP.
What this means is that the pressure of Baby Boomer downsizing could be an impediment to home prices, economic growth and inflation.
Canada's annual inflation rate came in at 1.2% for September, below analyst expectations of 1.3%. Core inflation, which excludes the most volatile components of inflation, was 1.3%, compared to an expected 1.5% and down from 1.6% in August. The Bank of Canada maintains a target of 2% for core inflation. The Bank generally increases interest rates in order to keep inflation from rising too much, too quickly. Inflation does not appear to be an issue in Canada at this time, so we continue to have low interest rates.
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Deflation - the opposite of inflation - occurs when inflation falls below 0% and prices generally decline. The problem with deflation is that money becomes more valuable the longer you hold it, which tends to become a self-fulfilling prophecy, as spending slows down and prices decline further. Why buy something for $100 today if it will only cost $99 tomorrow? It's never been much of an issue in Canada, though Japan has fought a battle with it for the past two decades.
Ben Bernanke, governor of the U.S. Federal Reserve, made a famous speech in 2002 in which he said that deflation could be prevented or reversed by dropping money from a helicopter - a speech that earned him the nickname "Helicopter Ben."
"The U.S. government has a technology, called a printing press (or, today, its electronic equivalent)," he said, "that allows it to produce as many U.S. dollars as it wishes at essentially no cost."
Ten years later, Bernanke is putting his money where his mouth is, having recently embarked on a third round of quantitative easing to stimulate the U.S. economy. This stimulus is arguably focused most specifically on putting a floor on U.S. real estate prices.
Despite central bank intervention to help encourage economic growth, according to Harry Dent, author of The Great Crash Ahead, demographics are forecasting deflation.
Dent writes: "When the average kid is born, the average parent is 28. They buy their first home when they're 31 . . . after they had those kids. When the kids age into nasty teenagers, the parents buy a bigger house so they can have space. They do this between the ages of 37 and 42. Their mortgage debt peaks at age 41. And . . . their spending peaks at around 46."
Baby Boomers were born between 1946 and 1964, meaning their parents turned 46 in the 70s and 80s. Perhaps not surprisingly, these were the years during which Canadian inflation more than tripled from the post-war average of 2% to closer to 6% - peaking in 1975 at nearly 15%. High inflation during the 70s and 80s was not a Canadian phenomenon, but then again, neither was the Baby Boom.
The Baby Boom peaked in 1961. The thing about the magic number 46 is that if you add it to 1961, you get 2007. It's not that Baby Boomers, the homes they live in and their spending habits caused the financial crises of the last five years - sub-prime mortgage lending in the U.S. and excessive government deficits abroad have played their part. But it's interesting, nonetheless.
There are about 9.6 million Canadian Baby Boomers. They represent more than one-quarter of our population. Their spending habits will greatly influence future real estate prices and make the Bank of Canada's goal of stable, predictable inflation difficult. At least we have Helicopter Ben patrolling our southern borders - for better or for worse.
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| New Mortgage Rules Put Brakes On Housing Market | |
TORONTO - The average price of a home rose between 1.8% and 4.8% in the third quarter of 2012 compared with the same period last year, according to a survey by Royal LePage.
It says the cost of an average two-storey home in Canada increased 4% to $403,747, while detached bungalows rose 4.8% to $366,773.
Standard condominiums saw an increase of 1.8% to $243,607, and while most cities experienced modest price appreciation in the quarter, fewer homes were sold compared with the same period in 2011.
The volume of home sales in Toronto fell 21% in September from the same month last year, the Toronto Real Estate Board said Tuesday.
The number of homes sold in the Greater Toronto Area fell to 5,879 from 7,422, while the average price rose more than 8.5% to $503,662.
"While sales have been lower due to stricter mortgage lending guidelines, we continue to see substantial competition between buyers," said board President Ann Hannah in the statement. "The months of inventory trend remains low from a historic perspective, which explains the strong price increases we are experiencing."
Royal LePage says fewer homes trading hands typically precedes a period of softening prices, and where there is reduced demand, home sellers adjust their asking price to stimulate interest.
Company president Phil Soper says changes to mortgage regulations, which took effect on July 9, accelerated the correction.
In July, the federal finance ministry said the maximum amortization period for insured mortgages would be reduced to 25 years from 30 years.
It was the fourth intervention in the mortgage market in just four years and the most impactful. Potential first-time buyers, which in a typical market represent one third to one half of all purchase transactions, felt the changes immediately.
"While hard-hit in the short-term, first-time buyers will adjust to tougher mortgage qualifications," said Soper.
"The dream of homeownership is very much alive among young Canadians. They may remain renters for sometime as they save; some will opt for less desirable neighbourhoods and some will purchase smaller homes."
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| Our Debt Isn't Like Their Debt | |
Garry Marr
CIBC Deputy Chief Economist Benjamin Tal sounds like he's getting tired of the comparisons linking the Canadian housing market to a U.S. style crash.
Canada is just not going to have a severe crash, he says in a report dubbed "Should We Worry About a U.S. Style Housing Meltdown?
You could lose a "night's sleep" if you glance at charts comparing U.S. household debt and prices before their correction with today's Canadian housing market but Mr. Tal says a closer look reveals vast differences.
"To be sure houses prices in Canada will probably fall in the coming year or two but any comparison to the American market of 2006 reflects a deep misunderstanding of the credit landscapes of the pre-crash environment in the U.S. and today's Canadian market," says the economist.
He lays out a number of myths used to compare the two markets, listing everything from the difference in the quality of debt to the false assumption that most Americans had long-term 30-year mortgages before the crash.
"I just think the comparisons are irrelevant," says Mr. Tal. "There are two different questions. Are we slowing? Yes, we are slowing. But not every slowdown should be a U.S. type crash. Just because it happened there doesn't mean it happens here."
The Canadian Real Estate Association said this month that September sales across the country were down 15.1% from a year ago. Many commentators expect prices to fall next but CREA said last month's average sale price of was up 1.1% from a year ago.
Interestingly enough, Mr. Tal says some of the defences used to explain how the Canadian housing market is different than the U.S. probably are not valid.
For starters the low rate of mortgage arrears means nothing, it was just as low before the U.S. crash. Canada is a recourse country where borrowers in every province but Alberta can go after a homeowner's other assets but that's not much different than America where only 12 states are non-recourse states. Mortgage industry deductibility has long been seen as a contributor to the U.S. housing crash but only about 15% of Americans use that tax break, says Mr. Tal.
But the economist doesn't need those excuses. He says the debt-income ratio in Canada is high but look at the quality of debt which rose quickly in the U.S. with almost 22% of the market considered risky - some of those people with a negative equity position even before prices crashed. In Canada, you must have a minimum of a 5% down payment.
While the 30-year fixed rate mortgage has long been the U.S. standard, 80% of new mortgages in the U.S. went for an adjusted rate mortgage leading up to the crash. Those mortgages had teaser rates for two to three years that were almost 4.25 percentage points below prevailing rates.
"[That teaser] expires and overnight you've got two years worth of [Federal Reserve] increases in one day, that's a shock," says Mr. Tal.
He says the Canadian market has room for a soft landing which is what Australia experienced recently. "They demonstrated there is such a thing as a soft landing, interest rates went up and prices went down by 7% to 8%."
So why are we so obsessed with comparing ourselves to the U.S.? Mr. Tal says it's normal. "It makes sense because it happened in the U.S. and everybody was talking about it and we are going through a significant increase in house prices. I can understand why people do it but it should be based on fact."
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Calgary Housing Market Does Not Show Signs of Slowing
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Year over year sales growth remains in double digit territory.
Calgary, Nov. 1, 2012 City of Calgary sales activity marked a 23-per-cent increase over levels recorded in October 2011. The continued improvement in sales has pushed year-to-date sales activity to nearly 16-per-cent above levels recorded in 2011. "Relative to national trends, we continue to move in the opposite direction, recording both sales and price growth," said CREB® President Bob Jablonski. "However, despite the higher than anticipated sales growth this year our market is not overheating, simply returning to levels consistent with long term trends and prices still have not fully recovered after the last recession." Sales improved over 2011 levels across all housing types in the city. Single family sales growth has been the strongest, with nearly 17-per-cent more year-to-date sales this year compared to last year. Meanwhile, apartment condominium sales have been rising at a slower pace, with year-to-date sales nearly 12-per-cent higher than last year. New listings within city limits totaled 2,312 for the month, a 9-per-cent decline over October 2011 levels. The decline in new listings relative to sales has continued to reduce total inventory levels across all sectors. However, because this is a less active period in real estate, the months of supply remains within balanced levels. The strong demand for homes relative to the supply levels has caused some significant increases in the price of single family homes this year compared to 2011. As of October 2012, the benchmark price for a single family home was $433,300, an 8-per-cent increase over the previous year. While there has been significant recovery in Calgary home prices, typical unadjusted home prices have leveled off remaining relatively unchanged over the past 4 months, and remain below the highs recorded in 2007. Condominium apartments recorded a benchmark price of $247,000 in October 2012, losing some ground over the previous month, but still higher than the previous year by 3 per cent. While on average condominium apartment prices have fallen more than risen since 2007, condominium prices this year have recovered to levels comparable to 2010. After the first 10 months of the year condominium townhouse sales totaled 2,279, 16-per-cent higher than last year. The benchmark price for a townhouse in October was $279,000, a 3-per-cent improvement over October 2011. "At the end of last year, the Calgary economy was growing and continued to post job growth," said Ann-Marie Lurie, CREB®'s chief economist. "However, global economic uncertainty was increasing, impacting overall consumer confidence and contributing to a significant amount of caution in the resale market. "While many of these global economic risks remain this year, consumers' concern regarding the impact on our economy has lessened. Calgary has continued to record relatively strong economic, employment and migration growth. This combined with improving affordability has encouraged consumers to purchasing real estate in Calgary." The monthly statistics package is available here.
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Thanks for reading and I will send you more info next month.
For all your real estate needs I am ready and willing to help you take that next, very important step.
Sincerely,
Louise Fuller
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