Brace for grim housing market news

By Erica Alini - Wednesday, March 13, 2013 at 3:06 PM - 0 Comments

January home sales data had us all wonder whether the downward trip the housing market had embarked on in mid-2012 was already over. After four consecutive months of declines home resales rebounded in the first month of the year from December. Had we already hit bottom?

We hadn’t. February home sales numbers, due out on Friday, will almost certainly show that housing has resumed its southbound trajectory — and at a faster pace this time.

Source: Canadian Real Estate Association

Though figures published by the Canadian Real Estate Association will give us a more refined and complete picture, we can already tell from numbers posted by the major local real estate boards that it isn’t going to be pretty.

Continue…

House prices have propelled Canadians’ net worth gains for a decade

By Erica Alini - Wednesday, February 20, 2013 at 12:56 PM - 0 Comments

House prices down for fifth straight month: Teranet Index

By Erica Alini - Wednesday, February 20, 2013 at 10:22 AM - 0 Comments

House prices dipped 0.3 per cent in January from December, the fifth straight month of declines, according to the National Bank’s Teranet House Price Index, which tracks repeat sales of single-family homes in 11 Canadian cities. Compared to January of last year, prices were up 2.7 per cent, the smallest yearly increase since November 2009 and the 14th straight month of decelerating year-over-year gains.

Monthly house prices dropped in seven cities, but all urban centres except Vancouver registered gains on a year-over-year basis.

In B.C.’s largest city, prices edged down 0.8 per cent in January from a month earlier and were down a more noticeable 2.5 per cent from January 2012.

In Calgary prices were virtually unchanged (-0.1 per cent) last month from December and up 4.3 per cent from a year ago.

In Toronto prices dipped 0.4 per cent on a monthly basis, but were up a robust 5.3 per cent on a yearly basis.

In Montreal price movements tracked the national average, dipping 0.2 per cent from December and gaining 2.6 per cent from January 2012.

The strongest performance came from Atlantic Canada: prices in Halifax were up 1.7 per cent from a month earlier and 6.6 per cent from year-ago levels.

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U.S. housing boom, take two

By Nick Taylor-Vaisey - Thursday, February 7, 2013 at 6:31 PM - 0 Comments

Across the United States, home prices are rising at an impressive rate, and increased residential construction was the biggest bright spot in an economy that contracted slightly in the final quarter of 2012. Even in Phoenix, among the hardest-hit when the last bubble burst in 2007, average home prices shot up 22 per cent last year. It was housing woes that sent the U.S. into an economic tailspin in 2008, and that market is now carrying the recovery. “A lot is riding on the continued upswing in the U.S. housing market to support a stronger U.S. economy this year and next,” says BMO Financial Group senior economist Sal Guatieri.

The housing market is so critical because as prices go up, homeowners feel richer. And that has a big ripple effect across the economy. People who buy homes—particularly new homes—spend more on furniture and appliances. Construction also creates jobs. Consumer confidence as a whole rises. It is what’s known as a “virtuous circle.” Guatieri says all these positive signs in the market should encourage banks to ease lending standards, a move that “would open the doors for many more potential homebuyers to get into the market, and would reinforce the housing market recovery.”

Any hint of a coming interest rate hike could heat up the market even more, as people rush to buy new homes while borrowing rates are still low. That would be enough to spark another U.S. housing boom. Some bloggers south of the border are even murmuring about the foundation for a new housing bubble. Such a bubble could be “born of tight supply and low interest rates,” says one post on the Economist website. The theory has no shortage of critics, who point out that it is far too soon to suggest prices have recovered enough from historic lows just last year to be talking about a bubble. “Most measures of valuation suggest that housing is very cheap across the U.S., even with prices rising significantly in some areas,” says Guatieri. “Affordability is still close to the lowest levels in at least the last four decades.” A perfect time to get in on the ground floor.

Down goes the housing market

By Erica Alini - Tuesday, January 15, 2013 at 10:13 AM - 0 Comments

Nathan Denette/The Canadian Press

To recap:

• Sales of existing homes in Canada dipped 0.5 per cent nationally in December from November in seasonally adjusted terms, the Canadian Real Estate Association said today. It was the the third consecutive month of declines.
• Actual, non-seasonally adjusted sales, dropped 17.4 per cent compared to December 2011.
• CREA’s MLS home-price index rose 3.3 per cent on a year-over-year basis, the smallest gain since April 2011.
• The number of homes newly listed for sale in December fell 1.3 per cent from November. Greater Toronto recorded the largest drop in new listings.
• Four of every five local markets recorded sales declines in December on a year-over-year basis. Calgary was the great exception, with December sales up seven per cent year-over-year.

Commentary:

• Sales numbers are moving exactly the way Finance Minister Jim Flaherty wants them to. “I don’t mind prices coming down a bit, too,” he told the Globe and Mail.
• There’s little doubt the sales plunge reflects the impact of the mortgage-tighnening rules introduced by the federal government in July, TD Economics’ Sonya Gulati wrote in a note to clients this morning. Still, it might be too early to say whether the finance minister has effectively tamed the housing market: Gulati notes that the impact of the new mortgage legislation is now likely fully priced in, and that the cooling effects of similar tightenings in the past have been only temporary.

Great Canadian real estate crash of 2013

By Chris Sorensen - Wednesday, January 9, 2013 at 3:59 PM - 0 Comments

Photo Illustration by Stephen Gregory

Keith Roy began warning his clients about a faltering Vancouver housing market in early 2012. The realtor says he was tipped off not by industry statistics, but by chatter across backyard fences. “When you hear about a homeowner who thinks his neighbour got too much money when he sold his house, you know there’s something going on,” says Roy. “That was the first clue.”

The next shoe to drop was a handful of homes in desirable west side neighbourhoods that took a few extra days to sell. Sensing a shift in the market, Roy put his own house up for sale in June and penned a blog posting the following month that advised people to “cash out.” Though he was criticized by fellow agents for breaking rank, Roy says he now feels vindicated after watching Vancouver home sales crumble to their lowest point in more than decade, with prices falling 3.5 per cent since hitting a high last May. The lesson? Recognizing a looming real estate downturn is more art than science; once it shows up in the numbers, it’s too late to do much about it. “One day the phone just stops ringing,” Roy says. “Then you’re in it.” Continue…

Real estate: Toronto still defying gravity

By Erica Alini - Thursday, November 8, 2012 at 10:51 AM - 0 Comments

For a while, Canadian builders seemed not to notice that “for sale” signs on people’s lawns were lingering there longer than usual. Sales of existing homes took a dive in September, dropping 15 per cent compared to the same month last year. New residential construction projects, though, were still holding up. No longer. The numbers released today by the Canada Mortgage and Housing Corporation seem to indicate that developers have finally gotten the memo: the market is cooling. There were 17,507 actual housing starts in October, according to the CMHC, which translates to an annualized 204,107 starts—down significantly from 223,995 in September and below the 2012 average.

Now, in a sense, this is of course bad news: it shows that the housing market continues to weaken, which will likely weigh on the entire economy. But in a glass half-full reading of the data, it is also a sign that oversupply problems are likely easing.

Unless, that is, you’re in Toronto. “The monthly decrease in total housing starts posted in October was mostly due to a decrease in both single and multiple starts in urban centres in Quebec and the Prairies. Multiple starts also declined in many urban centres in Ontario, more than offsetting an increase in such starts in Toronto,” Mathieu Laberge, deputy chief Economist at CMHC, said in a statement. The condo building frenzy in Ontario’s capital, in other words, isn’t over yet.

Toronto also defied another housing statistic out this morning: Statistics Canada’s New Housing Price Index. According to the agency, prices of new homes in Canada rose for 18th consecutive month in September, edging up 0.2 per cent compared to the same period last year. The index does not include condo prices, which have been slumping in Toronto. High rises aside, though, the Toronto-Oshawa market is still far in front of all other metropolitan areas:

*Source: Statistics Canada.

Most expensive houses in the 7 biggest cities in Canada

By Blog of Lists - Thursday, July 12, 2012 at 5:30 PM - 0 Comments

1. Toronto: $28 million
1400—155 Cumberland St., Toronto—A Yorkville condo with 5,000 sq. ft. of terraces

2. Montreal: $12.7 million
3956 Ch. de la Côte-des-Neiges—An Edwardian manor with stunning views of the city

3. Vancouver: $34 million
5365 Seaside Place, West Vancouver—A waterfront property with indoor parking for your 10-m boat

4. Calgary: $12 million
44 Aspen Ridge Heights St.—It’s a castle, with 14,500 sq. ft. of living space

5. Edmonton: $15 million
5620 Whitemud Rd—A three-hectare backyard right on the North Saskatchewan River

6. Ottawa: $6.9 million
390 Buena Vista Rd.—An English country manor with vast landscaped garden

7. Quebec City: $2.9 million
650 Ave. Wilfrid-Laurier—A penthouse apartment with seven-metre-high windows

See also: Cheapest houses

Have you ever wondered which cities have the most bars, smokers, absentee workers and people searching for love? What about how Canada compares to the world in terms of the size of its military, the size of our houses and the number of cars we own? The answers to all those questions, and many more, can be found in the first ever Maclean’s Book of Lists.

Buy your copy of the Maclean’s Book of Lists at the newsstand or order online now.

Did 2010's man of the year die in 1897?

By Colby Cosh - Thursday, October 21, 2010 at 7:14 AM - 0 Comments

Marxism is dead; long live Georgism! With Britain in austerity mode, its government pre-emptively decommissioning aircraft carriers that haven’t been built yet and preparing to bounce a half-million public-sector employees, everybody is looking for policy solutions to make the state’s in-flow exceed its out-go with the least possible agony. That has some progressives, including the Liberal Democrat Business Secretary Vince Cable, looking at the notion of Land Value Taxation (LVT)—applying the new tax burdens not to capital and labour income, which would discourage work and investment, but to the unimproved value of land area, where, to a first approximation, it would merely encourage efficient land use and make it more affordable.

As the Spectator‘s James Forsyth points out, LVT is an “eye-catching” policy that the Conservatives, if only for cultural or spiritual reasons, would be unlikely to adopt. (They’ll still be the party of the great country houses long after the last one is reduced to ashes and its occupants sent to the salt mines of Gliese 581g.) The Lib Dems will need distinctive policies to help preserve their identity after years of helping the Conservatives govern.

When Henry George fought for the “single tax” on land in the 19th century—becoming a mirror-image Marx, a preacher of land-labour rivalry rather than capital-labour rivalry—he grew to be one of the world’s most popular orators and social theoreticians. His philosophy brought together liberal modernizers, non-revolutionary radicals, and the literate working class; it was attractive to a broad spectrum of opinion between the Marxian socialists (plus the anarchists) and the great estates (plus their sycophants). George’s big idea might still have the ability to splice together a coalition of class interests and intellectual tastes. It’s not just the nerdiest of utopian Lib Dem nerds who like it; in July, Martin Wolf, perhaps the English-speaking world’s most respected finance columnist, went on a Georgiacal tear in the Financial Times:

In 1984, I bought my London house. I estimate that the land on which it sits was worth £100,000 in today’s prices. Today, the value is perhaps ten times as great. All of that vast increment is the fruit of no effort of mine. …This appropriation of the rise in the value of land is not just unfair: what have I done to deserve this increase in my wealth? It has obviously dire consequences.

First, it makes it necessary for the state to fund itself by taxing effort, ingenuity and foresight. Taxation of labour and capital must lower their supply. Taxation of resources will not have the same result, because supply is given. Such taxes reduce the unearned rewards to owners.

Second, this system creates calamitous political incentives. In a world in which people have borrowed heavily to own a location, they are desperate to enjoy land price rises and, still more, to prevent price falls. Thus we see a bizarre spectacle: newspapers hail upward moves in the price of a place to live—the most basic of all amenities.

If you’re a renter who reads the newspapers, you have spent the last few years in a constant state of low-level anger at this “bizarre spectacle”—the unexamined assumption that perpetually escalating housing prices are the natural state of human affairs, and certainly a good enough proxy for economic health that the two quantities are freely interchangeable. How much more bizarre must it look in England?

There are practical problems with LVT, the biggest one being how exactly you assess the unimproved value of a plot of land. How do you calculate the part of the asset value that’s derived not from human activity, but from the pure quantity of the footprint and its geographical station? There’s no easy answer, but, hell: the odious necessity of forcing citizens to define, document, and disclose their income is an enormous “practical problem” with the income tax, yet by some miracle, we are oh so lucky enough to have one. Towns and cities already employ an army of land-value assessors that can’t be 1% as large as the hordes of enterprise-destroying revenuers that virtually every polity considers itself obliged to provide with the necessities of life. Henry George was already falling out of favour before the industrial democracies adopted income taxation to any serious degree; contemporaries who argued against him all shrieked to heaven about the sacredness of property, hardly suspecting that the alternative was to be wholesale readoption of the corvée.

It is common for economists—like Wolf and Cable—to harbour admiration for George, a figure all but forgotten outside their profession (although 100,000 people attended his funeral, and John Dewey compared him to Plato). Milton Friedman said that “in my opinion, the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago”. (This is a quote to which undergraduates are now being exposed through the medium of Greg Mankiw’s Essentials of Economics.) Friedrich von Hayek admitted that “It was a lay enthusiasm for Henry George which led me to economics.” Paul Krugman, confronted recently by a latter-day orthodox Georgist in Germany, escaped by admitting that “urban economics models actually do suggest that Georgist taxation would be the right approach at least to finance city growth” and scrambling away, making but-of-course-it’s-impossible noises. Barry Eichengreen credits George with anticipating modern business-cycle theory.

Similar examples could be compounded endlessly, but the basis for George’s big idea isn’t merely theoretical: see, for example, the 2008 OECD paper that ranks types of taxes on their apparent growth-friendliness, and finds, unsurprisingly, that the worst-to-best order runs 1) corporate income taxes, 2) personal income taxes, 3) consumption taxes, 4) “Property taxes, and particularly recurrent taxes on immovable property.” It must be remembered, however, that economists count non-avoidability as a virtue. The main reason they find land-value taxation attractive in principle is basically this: good luck finding a place to stand that’s not land, sucker.

[A glowing biographical notice of George, which highlights his fleeting connection to British Columbia, can be found at the website of the Federal Reserve Bank of Dallas. It was, naturally, written by the Dallas Fed's senior economist (who carelessly describes pre-Confederation B.C. as part of "Canada"). The OECD paper was brought to my attention by Brian Dell, who has so many degrees there must be one with "economics" scribbled on it somewhere in the pile, and who did a little Georgizing himself a few days ago.]