Calgary housing became slightly more affordable in 2009, but it’s still just the 23rd most affordable place to own a home from a list of 28 Canadian cities, according to the Winnipeg-based Frontier Centre for Public Policy.

In a study released Monday, the centre found Thunder Bay and Windsor, both in Ontario, were tied for most affordable Canadian cities and Vancouver was the least affordable.

In fact, Vancouver was also the least affordable among the 272 cities in the international study, which covered Canada, Australia, Ireland, New Zealand, the United Kingdom and the United States.

As Canada’s resale housing market boomed and prices rose in 2009, affordability fell, sending the national average to a reading of 3.7 from 3.5 the year before. (A higher score indicates less affordability).

That would place Canada’s overall housing market in the “moderately unaffordable” category — from 3.1 to 4.0. The numbers are calculated by dividing the median residential house sale price for the third quarter by median annual gross household income.

In Vancouver, for example, a median home price of $540,900 was divided by median household income of $58,200 to create a multiple of 9.3, which the group describes as “severely unaffordable” — any reading of 5.1 and over.

Calgary, with an affordability index of 4.6, is just slightly less affordable than Prairie rivals Saskatoon (4.4) and Edmonton (4.1). On the international list, Calgary is 188th and its nearest neighbours are Eugene-Springfield, Ore.; Palmerston North-Manawatu, New Zealand; and Dundee, U.K. It’s just slightly more affordable than Dublin, Ireland.

Calgary and Edmonton became fractionally more affordable in 2009 after climbing two points over the previous four years. In 2008, Calgary’s index was 4.8 and Edmonton’s was 4.2.

Toronto moved from a reading of 4.8 to 5.2, moving it into the severely unaffordable category, while Montreal moved from a reading of 4.6 to 4.9.

“Montreal is approaching severely unaffordable for the first time. It appears Montreal has caught up to its urban growth limit and this has now become a real constraint on land supply,” the group said.

Victoria was second only to Vancouver, with its reading rising from 7.4 to 7.9, while Ottawa’ hot housing market remained within the realm of the moderately unaffordable, at least as measured as part of the Ottawa-Gatineau metropolitan area, with a reading of 3.8, up from 3.4 the year before.

dhealing@theherald.canwest.com

Calgary Herald

CALGARY – In two years, Calgary’s resale real estate market has gone from “sizzle to fizzle to simmer,” incoming Calgary Real Estate Board president Diane Scott said Wednesday.

Aff ordability and low interest rates will keep the pot slowly boiling this year, creating modest growth in sales and prices, she predicted as the board hosted its annual forecast conference.

A panel of economists mostly concurred with the board’s projection of a continuation of the gradual recovery experienced in the second half of 2009, faltering later this year as low interest rates rise to more normal levels.

Scott told about 1,000 real estate agents in attendance a recovery in Calgary’s market is highly dependent on prices for oil and gas.

“Calgary and Alberta remain tied to global energy markets and, ultimately, the outlook for oil and gas will play a big role in employment and migration to Calgary,” she said. “The good news is we have the energy to recover.

“The road will be a little bumpy, but there is light on the horizon.”

The board estimates Calgary-region single-family home sales will climb to 17,000 from 14,440 in 2009 and 7,000 condominium units will change hands, versus 6,328 last year.

In 2007, single-family sales added up to 18,438 and there were 8,236 condos sold. In 2008, the numbers were 13,455 and 5,661, respectively, with the single-family number the lowest since 1996.

The board predicts the average price for a single-family home in Calgary in 2010 will jump six per cent to $470,000 from $442,327 last year and the average condo price will rise 4.3 per cent to $296,000 from $283,734 in 2009.

The average single-family home price peaked at $505,920 in July 2007 and condo prices hit a record $332,237 in May 2007.

Surrounding towns are expected to experience 14 per cent higher sales and 3.2 per cent growth in average prices.

The downtown apartment condo market is expected to be particularly slow this year, while smaller, single-family homes and lower-priced segments will lead in sales and price growth.

Scott noted that younger people buying starter homes have fuelled the market’s recovery so far. Better afford-ability will help encourage 15,000 people to relocate to Calgary this year, the board predicts.

The low level of listings in the market at year-end is expected to grow throughout 2010, giving buyers more options.

“We will not likely tip to a seller’s market until the end of 2010 and into 2011,” said Scott, describing the current market as “balanced.”

Panellist Adam Legge, chief economist for Calgary Economic Development, said he doesn’t think the pace of the recovery in the city in the second half of 2009 is sustainable because the recovery in the larger economy is largely based on stimulus spending and inventory replacement.

He said news Tuesday that the ConocoPhillips and Total plan to expand production at the Surmont in situ oilsands discovery near Fort McMurray, while encouraging, won’t necessarily help create jobs and confidence in Calgary.

“We’re going to see probably a number of years of very, very tepid growth in Calgary,” he said. “There’s not going to be any zooming to the nearly eight per cent GDP growth we saw in 2006.”

Warren Jestin, chief economist for Scotiabank, said he’s not a “double-dipper” — a proponent of a quick return to recession — but he does predict better-than-expected growth in the national economy in early 2010 to slow down in the second half of the year as the Bank of Canada raises its trendsetting interest rate by as much as 200 basis points.

He said the economy, after bumping along the bottom in the first half of 2009, is in a “good news” phase now, but that’s only because there’s less frequent bad news (such as Wednesday’s stock market sell-off).

Two real estate agents questioned panellist Richard Cho, Calgary market analyst for Canada Mortgage and Housing Corp., about whether the federal government will increase the minimum allowable down payment for first-time homebuyers above the existing five per cent.

Cho said the government is looking at it as an option, to prevent homebuyers from taking on too much debt, but added that the change wouldn’t have a great impact on the housing market because not many people use it.

dhealing@theherald. canwest.com

Whether doing it yourself or hiring a professional, interior painting, hardwood flooring and kitchen upgrades are among the renovations that yield the best return on investment.

 Top ‘do it yourself’ renovations with the best return on investment

Buyers : Know your Numbers

This unit shows 10 /10! This very well maintained original owner, non-animal, non-smoker’s house is in the desired Community of Coventry Hills. The main floor offers an open plan with upgraded kitchen that includes stainless steel appliance, maple cabinets & breakfast bar. The main floor also offer a 2 piece bath, a large living/dining room area with patio doors that lead out onto a green space. The upstairs offers 2 spacious bedrooms with walk in closets and a large 4 piece bathroom. The basement is undeveloped and ready for your creative touch. This unit also offers hardwood floors, ceramic tile back splash, built in sound system, roughed in wiring for a security system,single attached garage , upgraded maple railings and a park view. This property is in a great location close to major road ways, public transit, schools, playgrounds, shopping, restaurants, golf, Cardel Place Recreational Center & Movie theater. All appliances are included. This unit is in mint condition, don’t miss this opportunity.

The latest round of statistics released from the Calgary Real Estate Board show May was another strong month in our city.

Single-family home sales in metro Calgary were up 23% from April 2009, according to the MLS sales activity, with 1,584 properties exchanging hands.

Better yet, May 2009 single-family homes sales were an increase of 16% from May 2008.

“We are seeing the first year-over-year gain in single family homes sales since last September,” says Bonnie Wegerich, President of the Calgary Real Estate Board. “A pent up demand has been building — with many first-time home buyers now taking advantage of affordable prices, record low interest rates and federal government housing incentives.”

And first time buyers are coming out in droves. In the Calgary metro area, homes priced at $400,000 or less accounted for nearly 70% of all home re-sales in the month of May.

While reduced interest rates make payments an easier pill to swallow for those making the transition from tenant to homeowner, lower house prices are assisting those who might have previously been priced out of the market as well.

The average price of a single family home in metro Calgary in May 2009 was $436,427, an increase of 2% from April pricing, but a substantial 9% decrease from May 2008’s average house price of $479,564.

The increased market activity is also lowering the gap between supply and demand, which was driving prices down at the end of last year.

“Since December we have seen five consecutive months of increases in home sales, while our inventory continues to trend lower. The gap has narrowed and prices are stabilizing” Wegerich says.

Wegerich went on to say that “all signs indicated we are moving to a balanced and stable market. Consumer confidence is improving, prices are holding steady and inventory is trending downward.”

While inventory is heading down fixed interest rates took a jump recently due to increasing pressure from the raising bond rates. Some lenders increased rates as much as 30 points in one day with hints of additional increases on the horizon.

For those that have been sitting on the fence waiting to take advantage of the current market conditions the window of opportunity may be starting to close on historic low interest rates.

Prospective buyers could protect themselves by securing a pre-approval rate hold, typically available with most lenders for 90 — 120 days, or by ensuring that any pre-approval already in place does not lapse.

It is important to recognize that if you do have a pre-approval in place which is allowed to expire, the slightly increased interest rates available today could lower your maximum purchase price. This is because higher interest rates drive up monthly payments, which translates into a larger payment to factor into your total debt ratio.

Contact an experienced mortgage expert today to determine your best course of action, ensuring you are positioned to take advantage of all the market conditions available to those willing to take action right now, including low interest rates. Nothing can last forever.

Canada is experiencing significant increases in foreclosure. Many seasoned investors are spending much time and resources to identify “distressed” (read: foreclosed) properties, in an effort to acquire them at significantly below market value.

Upon acquisition, the investor can improve the property and sell at a higher price or simply keep it as a rental property.

What is a foreclosure?

Many have heard the term foreclosure in their life, but few understand what it means.

Practically speaking, foreclosure is the legal process of transferring property ownership from the borrower to the lender.

Why is a property foreclosed upon?

Normally, foreclosure is caused due to non-payment of a mortgage. This can happen for a number of reasons including loss of job, divorce, disability or other even death.

Other reasons causing foreclosure is one that is more common in today’s climate: lenders failing to renew mortgages. Yes, it is true.

For years many have treated a mortgage renewal as a simple signature on a renewal notice sent to you in the mail.

In the last 12 months however, some lenders are no longer renewing mortgages either because the lender is out of business or because they no longer offer the mortgage product, such as a revenue property mortgage.

As the borrower, you may have made all your payments on time, however upon renewal date, the lender has the right not to renew, despite your good payment history.

If you cannot find a replacement lender within a reasonable amount of time, (sometimes up to 90 days) the existing lender will initiate foreclosure.

Why do savvy investors seek foreclosures?

Experienced investors seek foreclosures because they know that the court system uses a valuation system for properties that are in foreclosure usually at a far lower amount than market value.

The value they use is called “forced sale, cash value.”

The general idea of “forced sale, cash value” is to determine what a person would pay for the property, if it were to be purchased using all cash, not bank financing.

Like in many things in life, a buyer usually gets a good deal if they pay for something with all cash, instead of credit.

You may normally experience this type of pricing in garage sales, flea markets or shopping bazaars.

It may be hard to believe, but this same concept applies in the foreclosure system.

During the foreclosure process, the courts order an appraisal on the subject property in order to determine both the market value and the forced sale, cash value.

In general terms, if the borrower’s mortgage is worth more than the forced sale, cash value then most likely the borrower will end up losing the house to the lender.

If the forced sale value is higher than the mortgage amount owing, then the borrower will be given time to either refinance or sell the house, before the lender is given a chance to take it over.

The savvy investors seek those properties where the mortgage amount owing is far less than the forced sale, cash value so they can negotiate a purchase from the current homeowner at a value that is both low enough to generate a high margin and that will be enough to pay out the lenders on title.

Why do people who are in foreclosure sell their houses to investors at a value far less than what the market will offer?

Many times homeowners who are in foreclosure simply do not want the stress.

In other cases, it may be cheaper to sell the house fast, rather than incur legal fees that can average over $7,000 just for the lender’s lawyers—#8212;not including the borrower’s lawyers, court costs, court appointed REALTOR® costs, bank late interest, fees, other charges and arrears payments.

Example of a foreclosure purchase:

For example, let’s say a property has a market value of $425,000, based upon comparable sales in a neighborhood.

The property is in foreclosure, so the court appointed appraisal firm determines a forced sale, cash value of $360,000.

Additionally, let’s say the owner of the property owes the lender a mortgage amount of $280,000.

In this example, we have “market equity” of $145,000 and “hard equity” of $80,000.

Despite the equity in the property, the homeowner may be happy just to have another person write them a check for $50,000 above the amount owed to the lender and walk away from the headache.

Of course, the investor does not get the instant $95,000 equity for free, they must also have enough money or financial strength to either payout the existing mortgages or bring the arrears payment up-to-date and convince the lender to let them take over the payments.

Now the new owner can fix the house up, or better yet, if the house is already in great shape, just clean it and list it for sale.

If the investor is not interest in making a fast dollar, but would like to make more profit, over the longer term, then they may simply keep it as a rental and sell it in years to come.

1. Rates are the lowest that they have been for 70 years.With the Bank of Canada’s decision to lower Prime a quarter per cent from 2.50% to 2.25% and its commitment to not change rates for another year, Canadians are expected to continue to take advantage of a record-low prime rates, which are 2.25% at most financial institutions. 3.80% for a 5 year fixed or 3.00% variable(Prime +.75%) are the lowest rates have been since WWII. Rates are this low due to the housing problems started in the USA. Canada followed the American lead lowering rates step for step and now is the best time to take advantage of the situation. In fact, most people with mortgages at 5% or more, who are in year 3, 4 or 5 of a 5 year term, should be better off with renegotiating their mortgage rates.

2.Prices are the lowest that they have been for 3 years .The recent price declines have seen condos that were selling at $260,000 in 2007 now selling for $199,000. The average home price in July, 2007 was $473,000 and is now $403,000 – $70,000 less. These are considered short term price reductions due to the overbuilding in the last boom produced.

Fourth quarter 2008 research by RBC, which measured the proportion of pre-tax household income needed to own a home, found that affordability improved across Canada up to 3.5%. This is due in part to rising family income, as well as lower lending rates. For example, the Bank of Canada has further reduced the overnight rate to 0.25%, from 4.5% in about a year

3 & 4. Interest rates & home prices are expected to increase due to inflation. The US has stated that they are ready to print up to $5 trillion in new funds to support their stimulus spending package, bailouts of the banks, fighting 2 wars and continue to pay their debts, including Medicaid and Medicare, which are $2 trillion underfunded today.

Printing the extra money to pay for it all (the largest increase in national debt since WWII) will increase the money supply by 40% – 50%. That means for every $5 in people’s pockets there will be an extra $2. That extra $2 causes more money to chase the same amount of goods when the recession is over and people start to spend again. Prices then increase
because the supply of goods has remained the same, but demand for those goods has increased and those extra dollars in people’s wallets cause the price to be bid up.

Real Estate is a built-in hedge against inflationThe best way to slow inflation is to raise interest rates so interest rates are expected to go up quickly when the recession is seen to be over by the governments. Raising inflation means that your house will also be going up at the same rate as inflation rises.

Let’s say you put down 5% on a house for $400,000. If inflation then goes up to 10% in one year then your house should go up at the same rate, or 10%. Your house is now worth $440,000 and all the other homes would have gone up the same amount as well. Your $20,000 down payment has now made $40,000. This is called leverage and is a great way for most people stay “even with inflation.” If you decided to keep that $20,000 as cash, it would now really be worth only $18,000 after inflation is taken into account ($20,000 – 10%= $18,000).

5. Buying can cost less than renting because rent is “sticky”. Wages and rents are ‘sticky.’ They go up fast but come down slowly as no one wants their wages or rental income to be reduced. A rental house recently purchased with 15% down for $400,000 at 6.5% interest would need to have a rent of about $1500 a month to break even. Most investors would not want to take a loss and would set the rent the same as the mortgage payment. Average rents would then tend to even out at the same $1500 a month.

Cheaper to buy then rent Because house prices are already down 15% – 20% and mortgage interest rates are less than 4% for a 5 year term, that same $400,000 house can now be purchased for $320,000 with 5% down and payments will now be about $1,340 a month plus property tax of $125 = $1,465 a month. It is now cheaper to buy than rent! Generally, the gap between renting and buying is close to the smallest it has ever been for the last 4 years. Rents are expected to stay the same or increase with the expected inflation. If they increase the same stickiness will keep them where they are even when inflation subsides. This makes buying an even better bet as you are paying your own mortgage, not someone else’s.

6. Alberta & Canada Economies Are Still Strong. • Canada is predicted by the International Monetary Fund – IMF – to be one of the first G20 countries
to emerge from the world wide down turn. Our energy and natural resources are the raw materials used for the world’s production and demand for them will kick start our economy first.

• Since October 2008, Canadian job quality has basically held steady according to CIBC’s Employment Quality Index (EQI). The bank’s EQI ranks job quality by assessing a number of factors including the distribution of part-time vs. full-time jobs; self-employment vs. paid employment; and the compensation ranking of full-time paid employment in more than 100 industry groups.

“The relative stability of our employment quality index suggests that when the labour market turns a corner, job gains will translate into income gains much more quickly than they have in the past, as the base of the existing labour pool is of a higher quality when compared to previous recessions.”

It’s still cheaper to buy a resale condo than to rent an apartment in Calgary, says a federal agency. The monthly carrying cost on the purchase of a condo through the MLS system–assuming a 10-per-cent down payment and a five-year fixed but discounted mortgage–comes in at between $1,100 and $1,200 per month, says Canada Mortgage and Housing Corp. While the cost is declining, it still takes about $1,600 per month to rent a two-bedroom apartment.

-By Marty Hope, Calgary Herald

For More information on buying Real Estate please contact the Home Sweet Home Team.