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*** Another look at the US: The old saying for investors is: "When everybody else is yelling buy, you should be selling, and when everybody yells sell, you should buy." Well today there are a lot of people yelling SELL in the United States. Talk about bad news! Not a day goes by when we are not bombarded with the 'terrible U.S. housing markets' - falling housing starts (any thinking builder would slow housing starts now), 10-month inventories (so what, six months is normal) and crashing prices. Crashing prices? Latest statistics show that prices on average in the U.S. are down 4.6 per cent year over year. Of course there are cities far worse off than the national average but according to the National Association of Realtors (NAR) some 21 major cities in the U.S. actually are seeing increases in house prices like Salt Lake City, San Jose, Buffalo, N.Y., Pittsburgh or, closer to home, Seattle. So, why this preoccupation with that minor average number? All excessive booms are usually cleared out ... real estate and stock markets. After all, we've been there before. The Dow Jones in 1974 crashed by 40 per cent, it did it again in 1987, then again in 2002 and often these debacles were followed by reversals in housing markets as well. San Diego prices collapsed by some 35 per cent from 1989 to 1992 for instance. But prices always recovered after a time. Financial stocks in the U.S. fell 21 per cent from its high this year. Now that is something to talk about. Now, of course, to the extent that 'markets become the stories people tell about them', I would not be surprised if in the U.S. people will literally talk themselves into a recession, into further problems with housing before prices will bottom ... but bottom they will. Savvy investors look at the fundamentals: a good marketplace, a good employment base, low vacancy rates and they LOVE to buy when everyone yells: SELL! In fact, the best deals come about in tough markets. So, the bottom may not be in place in the U.S., but with the strong dollar, reversing prices and confidence that the U.S. will turn around - naysayers be darned. We like the idea of investing in the U.S., just not all of the U.S. I do not care how many houses there are for sale at $50,000 in Detroit and Cleveland, you should NOT buy them. There are deep structural problems in many of those cities (manufacturing problems, high unemployment rates, etc.) and even a $50,000 house will not rise in value. Remember that real estate markets are always local in nature first. Never mind the dire news, the terrible forecasts. There are many areas in the U.S. that have fantastic upside and will get oversold in the general paranoia. I like cities that have both a local market (inward migration remains strong, employment base is good, vacancies are low) AND a snow bird market - a Canadian buyer market. Who hasn't dreamed of owning in Phoenix or Scottsdale? So, my investment group (still cautiously but actively) is looking at three markets primarily: Phoenix, Scottsdale and Las Vegas - yes, Nevada has a high foreclosure rate, but 5,000 people a month move to Vegas and prices are (now) cheap and locals depressed. We also are looking at Austin and Houston. Things to watch out for: Just because the price is right (i.e. $25,000 for a house) stay out of the troubled areas - like Detroit. U.S. dollar is a gamble - if it goes back up, quick flips will not work. Whatever city you pick buy only in A or B areas. Avoid tough areas (even foreclosures that sound cheap, are likely in awful parts of town). You are not allowed - as an investor - to do any renovation yourself. You can't paint, cut the grass or even collect the rent ... yep. You may have to declare your world income (in California). You may have trouble getting financing. Canadians will NOT get an investment mortgage from a regular financial institution. You can get a second home mortgage (you must have a home in Canada) but then you must stay in that second home at least three weeks a year. Stay out of limited partnerships where you have not researched quality of owners/operators. Watch for half empty condo buildings or subdivisions. Are there enough owners to keep the building up? Whatever you buy - go see it! Major Point: Looking at current worst markets and current best markets may not mean that one should not buy in the worst markets or even buy in the best. In fact, some of the worst may well be where the 'shark' and the 'flipper' should roam. Important to do your research, take your time, get familiar with areas, get a quality realtor in the area you pick, get good professional tax advice (the U.S. is a foreign country after all) and you may well get rewarded. (Courtesy of the Vancouver Sun and Ozzie Jurock)
*** TORONTO (Reuters) - Wild winter weather cooled Canada’s housing market in the first quarter, with sales of existing homes falling 7.1 percent, the Canadian Real Estate Association said on Thursday. But the residential resale market did eke out a 0.9 percent rise in March, to 26,799 units, after three straight months of declines, according to CREA, an industry trade organization representing over 90,000 realtors. For the first quarter, seasonally adjusted sales in Canada declined to 81,747 units. The association said the decline largely reflected fewer sales in Toronto in February and March. Canada’s biggest city accounts for about one-quarter of all existing home sales in Canada’s major markets. “Canada’s six-year housing market boom is officially over,” Doug Porter, deputy chief economist at BMO Capital Markets said in a note to clients, noting that year-to-date home resales dropped by 13 percent. “No doubt these results were lashed by this year’s never-say-die winter weather, but the broad-based nature of the double-digit sales declines suggests that there was more than just a few feet of snow weighing on the market.” Residential listings surged 4.8 percent in the first three months of 2008, to 154,217 units, the highest quarterly level the association had ever recorded. “The quarterly jump in new listings and decline in sales activity made the resale housing market more balanced in the first quarter of 2008 than during any other quarter in the past nine years,” the association said in a statement. PRICES In March, average home prices increased 4 percent year-over-year to C$329,383. For the first quarter, the major market residential average price climbed 5.5 percent, to C$327,620, the smallest year-over-year price increase since the fourth quarter of 2001. “The residential average price continues to increase, unlike conditions in many U.S. markets,” said association president Cal Lindberg. “The size of the increase is returning to what we consider more normal levels for most markets in Canada, reflecting a sound but cooling market for existing homes.” The U.S. housing market slump and a credit crunch have sparked a U.S. economic slowdown. But sales of existing homes in the U.S. rose in February for the first time since July, although economists said it was unlikely the market had reached a bottom. Porter said buyers in Canada should be cautious in the face of the U.S. downturn. “The real test will be how sales and prices fare in the crucial spring season,” he said. [Courtesy of Renato Andrade and Reuters] *** Factors contributing to Alberta's Real Estate boom. Population Nearly 100,000 people migrated to Alberta in 2006/ 2007, fueling demand for housing. This dramatically increased the prices of housing and the rental rates. Of these, the majority of migrants were from other provinces. This represented a 3% increase in the population, three times the Canadian average of 1%. Alberta’s population now sits at around 3.5m residents. Edmonton’s metropolitan area now boasts 1.04m residents (#6 CMA in Canada), while Calgary has 1.2 m residents (#4 in Canada). Facts and figures Alberta has the Highest GDP in Canada; growing at 5%. It is also a Debt free province. $7b surplus in 2006. Why the demand for oil? Oil has recently been hovering around record highs of $100 USD/ barrel. This has fueled the boom in Alberta’s oilsands. There will continue to be a huge demand for oil and the associated petroleum products that are produced from it as worldwide demand shows no signs of subsiding, especially in the burgeoning markets of China and India. Alberta has an incredibly stable business and political climate that makes it incredibly attractive to the large oil companies. Tar sands …what are they and why are they important? Oil sands are crude oil deposits that are substantially heavier than other crude oils, and are made up of sand, bitumen, and water. These oil sands can be upgraded into lighter crude oils, and eventually into petroleum products. Alberta has huge deposits of proven reserves around the Peace River, Cold Lake, and the Fort McMurray region. There are currently 174 billion barrels of proven reserves, and an estimated potential of over 300 billion barrels. This equals 400 years worth of supply at current production rates. Upgrader activity Over $50 billion worth of investment in upgraders has taken place to date, with another $100b planned for the Strathcona and Sturgeon counties surrounding Edmonton. These upgraders will employ 20,000 construction workers over the next 8-10 years, and will require approximately 3200 full time jobs once completed. Each upgrader will employ 800-1000 permanent contractors, and for each upgrader job it is estimated that four other jobs are created as well. Employment rates Alberta has the lowest unemployment rate in Canada, currently at about 3%. 109,000 new jobs were created in 2006 alone. Vacancy rate Currently 1.6% apartment vacancy rate in Alberta; and 1.5% in Calgary and Edmonton. These extremely low vacancy rates have fueled dramatic increases in rental rates across Alberta. *** |