The iPhone’s sexy, but ‘iSave’ is far smarter

With all the hype on the new iPhone 5, this puts it a bit into perspective.

Interesting 3 minute read.

Rob Carrick

The Globe and Mail

Published Monday, Sep. 17 2012, 8:10 PM EDT

The new Apple iPhone 5 tells us a lot about why you can’t get your financial act together.

The iPhone is a brilliant device – a deluxe cellphone that has become a cultural icon. So important is the iPhone 5 that the announcement of its features and release date – it’s Sept. 21 – were treated globally as a major media event. Who doesn’t now know that the iPhone 5 is 18 per cent thinner and 20 per cent lighter than its predecessor?

A man talks on a mobile phone in front of an Apple logo outside an Apple store in downtown Shanghai in this September 3, 2012 file photo. Although Apple makes billions from new phones, a significant portion of its sales in recent years have come from dropping the price on older models once a new phone or tablet hits stores REUTERS

Apple could sell 33 million iPhone 5s globally this quarter, a tribute to the company’s gadget-building supremacy. But iPhones are also symbolic of a change in society’s attitude toward money. We now get our gratification through spending money rather than by saving it.

The savings rate in Canada has been falling for decades, more or less in line with the decline in interest rates. Today, savings accounts offer less than 1 per cent in many cases and barely 2 per cent at best. As a result, a lot of us have come to believe that saving is useless, even foolish. And so, we’ve moved on to spending.

The iPhone 5 will sell for a suggested retail price between $699 and $899 (depending on how much memory it offers), but in the past it has been possible to pay much less if you sign up for a multi-year wireless phone plan. If an iPhone sounds like an affordable luxury, ask yourself these questions:

However much the phone costs, have I contributed at least that much money, and preferably much more, to my retirement savings this year?

Have I contributed anything at all to my kids’ registered education savings plan?

Do I have any money saved that I can tap if the car’s “check engine” light comes on, if the basement floods, if the orthodontist says my kid really needs braces or if I lose my job?

If you’re covered on all of this, enjoy your new iPhone. Otherwise, you might want to reconsider that purchase because your spending and saving are out of balance.

The roughest rule of saving is that you should be putting away 10 per cent of your take-home pay for the future in a tax-free savings account or a registered retirement or education savings fund. If you’re getting a late start as a saver, your number is higher.

External factors like wage freezes and inflation can affect our ability to save, and today’s low interest rates offer no encouragement. But the biggest impediment is in our own heads. We see more value in spending than in saving.

In a way, spending by consumers is a good thing because it accounts for roughly two-thirds of our economy. But spending takes away from saving in today’s zero-sum economy, where wage growth isn’t strong enough to put us ahead of inflation. The only way to save more is to spend less.

The iPhone and similar devices make that a challenge because of the way they draw you into a web of higher spending. You could buy a cheap cellphone and your wireless phone company would probably give it to you for free if you signed up for a service plan. A basic cellphone would mean simple data needs, so you could probably get away with an inexpensive plan.

With an iPhone, you’ll pay extra to buy the phone and likely face higher monthly plan costs. And then there’s the temptation to upgrade. An iPhone 5 bought this fall could be superseded by something better within 12 months. By then, there will probably be a new iPad and, who knows, but maybe Research In Motion will have turned some heads with the new BlackBerry 10. Every new product is competition for money you could otherwise use to save or pay down debt.

You’re urged to buy things all the time via mass media, but there’s no lobby for saving. Apple had Steve Jobs on its side. Savers are stuck with Benjamin Franklin, who said that a penny saved is a penny earned.

How can we get people saving more, then? By making it automatic, not discretionary. Have money electronically diverted from your chequing account to your RRSP, TFSA, RESP or a savings account every time you get paid. Have some money left over after the bills are paid? Hello, iPhone.


How the savings rate has tracked in the past 50 years

(data taken from first quarter from each year)

1962 6.50%
1972 9.80%
1982 21.20%
1992 12.40%
2002 4.80%
2012 2.90%

Source: Statistics Canada

Is Calgary’s boom back? Consumer confidence seen climbing ‘with a vengeance’

Calgary mortgage broker Mark Herman

CALGARY – From BMWs to Bentleys to a good bottle of wine, Calgary consumers are opening their wallets in what’s being described as more than just a recovering economy – with some even willing to say the word “boom” again.

Retailer Wayne Henuset is in the thick of it, discovering his own barometer to measure what is quickly turning into a healthier marketplace.

The owner of Willow Park Wines and Spirits says consumer confidence has been rising “with a vengeance” since fall.

“We know this because when things are bad, people just buy wine, on sale, and bring it home.

“But when times are good, the restaurants are buying more wine from us, because people are going out more. And that’s what’s happening.”

It’s one of myriad examples that suggest Calgary is reclaiming its economic swagger, as sectors across the board enjoy a surge in consumer and investment confidence, including high-end retail, real estate, construction and, most importantly, oil and gas.

Henuset adds that during the 2008-09 recession, reduced prices and spot sales were what brought customers in.

“Now they’re not really paying attention to that as much, they’re just buying whenever,” Henuset said, adding that the pricier, highend bottles are also getting bought up more.

According to the BMO Blue Book report released this week, Alberta is expected to lead the country in real GDP growth by next year as the province’s economy starts humming again.

Real GDP is expected to expand 3.6 per cent this year before moderating to 3.4 per cent by 2012, according to BMO Capital Markets.

In Calgary, recent reports have suggested record leasing activity in the downtown office market last year, with experts saying job growth isn’t far behind.

Meanwhile, job growth has already started in the construction industry with construction giant Ledcor launching a massive recruitment campaign, with plans to hire up to 9,000 people this year in Alberta and other parts of Western Canada.

In the energy sector, industry activity is way up, says oil and gas analyst Peter Linder, with drilling activity significantly on the rise, record land sales and job prospects improving.

Alberta Energy reported this week it had sold oil and gas leases or licences on 271,000 hectares of land worth $842 million, including a whopping $107 million for a 7,900-hectare licence near Red Deer.

“All of that means more activity in the energy industry, and that means much more jobs,” said Linder.

“In fact, I think we’re on the cusp of another significant labour shortage, another boom.”

Even the lower natural gas prices that have been a hurdle in recent years will start to recover, Linder predicts.

“The second half of this year will be far, far better than the last three years.”

Ben Brunnen, chief economist with the Calgary Chamber of Commerce, explains that as oil prices recover, Calgary’s oil and gas sector is enjoying increased activity and investment confidence.

As of March 2011, 59 oilsands projects valued at nearly $100 billion were either planned or already underway in Alberta.

“And when investment is good, incomes increase here. That’s a unique perspective for Calgary because we are the head office of oil and gas,” Brunnen said.

Businesses seem to already be reaping the rewards of more disposable income.

Justin Havre, a realtor with CIR Realty, says Calgary’s real estate market is bouncing back, particularly in the luxury home market with 44 homes sold for over $1 million in Calgary alone last month.

“The luxury market is becoming really active, and it’s usually a good indicator that there’s some confidence in our economy and in Calgary investment.”

Tony Dilawri, who runs several car dealerships including Calgary BMW and the Distinctive Collection, which sells Bentleys and Aston Martins, says the luxury car market has also improved from last year.

“We’re finding consumer confidence is definitely up as people become a little more willing to spend money on their vehicles.”

BMW sales are up 20 per cent from last year, Dilawri said, adding that some 20 new and pre-owned Bentleys and Aston Martins were delivered to customers last month. Dilawri says the Calgary kind of wealth is on its way back, a swagger that’s proud, but not too boastful. Calgary is not like Montreal and Toronto, he said, filled with old money that isn’t always affected by economic shifts.

“We’re young in Alberta, and we work hard for our wealth,” he said.

“So when we get it back, we want to have some fun. We don’t want to boast, but we want to reward ourselves.”

Brunnen agreed Calgary’s economy is bouncing back, but consumers are still cautious.

“The investment is there, and the consumer confidence will come with it.”

While optimism is growing in Calgary, however, the economic mood elsewhere is guarded. Reuters reported last week the global economy is still in flux, with investors wary that the real stresses still lie ahead. European debt uncertainties and the arrest of the head of the International Monetary Fund mixed with Arab revolt and Japan’s recovery from natural disaster are all contributors.

“It is clear that some investors have decided that they need to take some risk off the table, but they do not want to take too much off,” said Andrew Milligan, head of global strategy at Standard Life Investments.

© Copyright (c) The Calgary Herald

ORES Real Estate Index For January 2011

COMMENT: This is a very cool index I found that compares most investments to real estate. It is interesting right now as gold is at an all time high, oil is back up and Canadian real estate has held most of its value and is coming back.

Wednesday, 16 February 2011 10:09
Brian Madigan LL.B.

Here is the “ORES REAL ESTATE INDEX” which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index.

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.

For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 January 2011, here is the Index representing average prices:

Real Estate

132.15…..GTA single family homes
130.87…..All condos in GTA
139.34…..Downtown Central Condos
122.53…..East condos
131.35…..West condos
124.97…..North condos

Other market comparisons

310.23… (price per ounce)
206.98…..oil (price per barrel)
147.24…..TSX index
132.15…..ORES Index single family homes
111.59 …..CPI index
130.92…..NASDAQ index
113.37……Dow Jones index
108.88……S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of January, the index stood at 132.15. That’s a 32.15% increase in 73 months. That means the increase is 0.404% monthly, or it could also be expressed as 5.28% annually. The performance here is shown without annual compounding for the sake of simplicity.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:
• Commodity prices are just commodity prices
• There is no other “extra return” for commodities
• The same is true for the CPI
• The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 111.59 (It has been modest and appears under control)
• For a realistic performance goal, you should aim for CPI plus 3.5% annually
• Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices
• The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies
• If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes
• Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself
• Actually, I should have mentioned that if you held gold bullion, you could sit in a room, count it, and enjoy that experience too. I’m not quite sure how to measure that. You’ll have to ask King Midas or Goldfinger!

Comparative Observations Using the New Index
• Gold was the best performer, but reached its peak of 324.61 earlier In January
• Oil was the most volatile, (yes it dropped in half over our measurement period)
• Real estate was the most stable, with solid predictable returns at about 5.28% annually
• single family homes continue to show a better overall return than condos
• Our own stock market posted reasonable gains, and is now ahead of single family homes over the measurement period, however, don’t forget that the TSX is still well off its highs
• All three US stock market indicators now show positive numbers.

For steady, predictable, measured gains pick real estate. It’s a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it’s never “wiped out” completely, like GM or Chrysler stock. So, unless you’re sitting on the edge of a tsunami, you’ll still own something when the storm is over.

For a benchmark of success, there’s 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

One guys thoughts on the Western Economies

If you are a student of economics then this is “interesting.” If not then it will make no sense at all.

I think he is accurate in summarizing where “hidden inflation” will come from at the end of the post.

Stephen Johnston; Partner & CIO – Agcapita Farmland Investment Partners

As Kierkegaard elegantly pointed out, “There are two ways to be fooled: One is to believe what isn’t so; the other is to refuse to believe what is so.”

The problem of being fooled “by believing what isn’t so” appears to be endemic in mainstream economic circles.   Increasingly, we see the panic of central bankers and politicians in the thrall of the mistaken belief that the mere act of printing money can conjure wealth and sustainable growth into existence that this nostrum has stopped working.

In simple terms the powers that be in the west have been fooled by Keynesian dogma that:

– nominal increases in GDP represent growth;

– printing money increases nominal GDP; therefore

– printing money must generate growth.

Surely, this is to believe what isn’t so.  A simple example of the fallacy this represents is Frederic Bastiat’s parable of the “broken window”.  To paraphrase Bastiat, if all the windows in the country were suddenly broken there might be an increase in nominal GDP as the reconstruction took place but we should not be fooled into believing that this has made us wealthier.

Keynesians would argue that business activity has been stimulated, jobs were created and the economy benefited. In his own version of the “broken window” Keynes famously advocated burying newly printed money and paying people to dig it up as a way to stimulate the economy.

With all due respect to Lord Keynes, this belief is in the process of being exposed as the mirage it has always been.  The true measure of the wealth of an economy is the pool of productive capital.  Currency is merely the measuring stick.  In our broken window example, the pool has been maintained but without the reconstruction it could have been increased – therefore the net effect, taking into account both “the seen and the unseen” in Bastiat’s words, is actually a loss of wealth.

If printing money does not create productive capital then how can you explain its perennial appeal amongst the banking and political classes?

For politicians, printing money is desirable for two reasons.  Firstly, it acts as an unseen tax.  One which few voters understand and for which even fewer are likely to blame the political class, at least in the beginning. Secondly, by reducing the value of the currency, the measuring stick I mentioned above, politicians are able to fool many of the voters that their wealth has increased, but of course no such thing has happened.

For members of the privileged banking class the appeal of printing money is that they are best positioned to take advantage of the confusion between the measurement of the pool of capital and the actual pool of capital itself.  In simple terms, they can exchange the declining currency for productive assets while artificially low interest rates finance these activities at minimal cost.

So in general while printing money creates no new wealth in the form of productive capital, a significant amount of wealth can be misappropriated silently by the banking and political classes.   For the rest of us, the relentless expansion of the money supply offers no true benefits and the very real danger that it is our wealth that is misappropriated.
In the spirit of Bastiat, ask yourself if the central banks increased the global money supply 20-fold overnight would we have more farmland, more oil wells, more factories, more of anything other than decimal places in our currency? The nominal price of all these things would likely increase but the size of the capital pool has not changed. How do the money printing programs currently underway differ from this in anything but magnitude?

Unfortunately, the perverse consequences of printing money do not stop with the misappropriation of wealth from the inflatees to the inflators.  A policy of artificially low interest rates serves to sustain or create additional mal-investments – investments that cannot generate sufficient returns, and in many cases over the last decade ANY returns, to justify their existence.   The failure to liquidate mal-investments allows the economic problems they cause to multiply and the inevitable accounting to be that much more devastating.  Artificially low interest rates also fool the market into believing that capital is plentiful and that consumption can continue at unsustainable levels with severe consequences for the real economy. The word consume means “to expend, to use up, to waste or squander”.   Always remember that consumption represents the diversion of productive capital into non-productive uses – i.e. the destruction of capital.   Savings, on the other hand, are the only source of capital to create productive assets.

I do not believe that the aggressive expansion of the money supply in the west will have a beneficial effect on the real economy – i.e. will not increase the pool of productive capital in any meaningful way.  However, I do believe it will fuel inflation and speculative activities.    Of course, more inflation and speculation are exactly the opposite of what western economies need. We cannot all make our livings selling condos, stocks and bonds to each other – someone has to produce something and production requires genuine capital.

But this Frankenstein, finance driven economy appears to be exactly what our governments and central bankers are trying to keep alive.  The west has become a vast inflation-creating machine in order to support the impaired banking and housing sectors.  According to data published by analyst Mike Hewitt, since the crash in 2001 and the onset of aggressive low interest policies, the global money (M0) supply has increased over 170%.   Some, fooled by government inflation data ask – “but where is all the inflation?”   Fortunately for us, the Renminbi peg and OPEC petro-dollar recycling have been escape routes for a large amount of western money/inflation creation and heavily massaged government inflation data has helped disguise the rest.

As fast as we have been creating money in the west, China and OPEC have been importing and storing it on their balance sheets in the form of developed world sovereign debt.    Some observers even argue that China will indefinitely accumulate western debt in order to maintain its peg against our inherently weak currencies.   I believe that this is wishful thinking and once again it is to be fooled into believing what isn’t so merely because something hasn’t happened to date.  When the emerging economies are forced to take serious steps to check domestic inflation – which for example is already starting to happen in China – they will stop purchasing our debt and even start selling it, at which point decades of stored western inflation could be returned to us in a very short period of time indeed.

In general, my investment premise remains that sustained real growth is unlikely to take place in the developed world until we stop engaging in capital destroying activities.   Worse, our depleted and declining capital pool, combined with an enormous expansion of the monetary base and expanding government is creating a high probability of an extended period of stagflation in the west.

This is not to say that I take a universally pessimistic view of possible future returns.  I believe that exposure to inflation-hedging assets with strong macro fundamentals and underlying cash generating capability, ideally in sectors exposed to growth outside of developed markets, will continue to be a fruitful area to search for outperformance over the long-term.  My personal preference remains agriculture and energy.

Kind Regards

Stephen Johnston

Real gross domestic product rose 0.4% in November

Real gross domestic product rose 0.4% in November
Is this the beginning of the recovery?

Real gross domestic product rose 0.4% in November after growing by 0.2% in October. Oil and gas extraction led the way in November, followed by wholesale and retail trade, real estate and the finance and insurance sector. Manufacturing declined, largely as a result of temporary plant shutdowns for retooling in the motor vehicle assembly industry and shift reductions in the motor vehicle parts industry. Construction also decreased.

Real gross domestic product rises in November

Mining and oil and gas extraction continue to strengthen

Oil and gas extraction grew 2.4% in November. This increase was mainly attributable to higher synthetic crude petroleum production following the completion of maintenance to upgraders. Natural gas production was unchanged.

However, support activities for mining, oil and gas extraction declined 3.4% as a result of decreases in rigging and drilling activities.

n mining, iron ore extraction grew 10.8% returning to its August level after two consecutive monthly declines.


Gains in wholesale and retail trade

Wholesale trade rose 1.5% in November on the strength of trade in machinery and equipment, farm products, building materials as well as food, beverage and tobacco products. Wholesale activity in motor vehicles fell during the month.

Retail trade advanced 1.4% in November after a slight decline the month before. It was the second largest monthly increase in 2010 after the 2.1% gain in March. Growth in November was mostly attributable to clothing and accessory stores, new car dealers as well as food and beverage stores. Retail activity at gasoline stations and home electronics stores declined.

Finance and insurance resume growthOil and gas extraction increases

The finance and insurance sector rose 0.7%. There were increases in the volume of trading on the stock exchanges, in personal lending and in mortgages. The sales of mutual funds declined.

Manufacturing down

Manufacturing declined 0.8% in November. Most of the decline was the result of temporary plant shutdowns for retooling in the motor vehicle assembly industry and shift reductions in the motor vehicle parts industry. Excluding the motor vehicle and associated parts industries, the manufacturing sector was down 0.2%. Output at refineries rebounded 4.6% following the end of maintenance work at various plants.

Real estate market up while construction drops

There was a widespread increase in the home resale market across the country in November, leading to a growth of 7.6% in the output of real estate agents and brokers. This marked a fourth consecutive monthly increase for this industry. However, its level of output was still 8% below that recorded in April.

Construction declined 0.4% in November. Residential building construction continued to retreat as a result of reduced demand for single and semi-detached homes. Non-residential building construction decreased 0.2% while engineering and repair work edged up 0.1%.

Main industrial sectors' contribution to the percent change in gross domestic product

Landlords Dodge New CMHC Rule

Landlords Dodge New CMHC Rule

The recent changes to CMHC rules on qualifying for investment mortgage are having an effect that is causing havoc on an investor’s debt-service ratio, making it difficult for investors to qualify without a more-than stable personal income.

The following article discusses how recent investors are experiencing difficulty when qualifying for mortgages, and explores the best ways to avoid CMHC, highlighting that investors should deal with banks that “go outside of CMHC”.

We DO have lenders that still do the offset under certain circumstances. Call to find out how and when.

— Mark Herman

Article Source (Calgary, Alberta – Financial Post) – These are particularly confusing times to be a real estate investor due, for the most part, to a policy change made by the Canada Mortgage and Housing Corp. (CMHC) in April.

The major issue concerns mortgages on CMHC-insured properties with four complete units or less, which went from being calculated using an 80% offset model to a 50% add-back one. As reported in this paper, the offset model meant that up to 80% of the expected rental income is used to offset the cost of the mortgage. With the add-back model, half of the expected gross rental income will be added to an investor’s income, but the entire mortgage is added to expenses.

In other words, it wreaks havoc on an investor’s debt-service ratio, as was the case with full-time Toronto investor and consultant Cindy Wennerstrom, who is currently shopping for her eighth property but is “stuck, mortgage-wise,” she says.

“When banks take off 50% of the rent and apply that to your expenses, there is usually a deficit. That is subtracted from your actual income,” she says.

And with Ms. Wennerstrom’s other properties each producing a cash flow of $800 to $1,100 per month, there still isn’t enough to bring her to the desired debt-service ratio of 40%.

“That means 40% of your gross monthly income has to service your monthly debts,” says Barrie, Ont., broker Adam Bazuk. “That makes it very difficult to qualify investors unless they also have an enormous personal income.”

If that wasn’t difficult enough, the 50% add-back policy is not rubber-stamped across all lending institutions, with some allowing investors to use more than 50%, and others maintaining different versions of the offset program.

“It’s gone from a nice simple A or B plan, to an A, B and C plan, with all different ways to get there,” says Dustan Woodhouse, a B.C. mortgage broker with Invis.

Confusing, perhaps. But is it a bad thing?

Consider the 80% offset, for instance. “Everybody thought rental offset was gone,” says Mr. Woodhouse. “All they could see was that, based on a $1,000 monthly rental income, an 80% offset would qualify you for a $190,000 mortgage, while a 50% add-back would qualify you for $45,000, so it’s messed up the market from that perspective.”

But he says that for “organized property investors,” who have been reporting rental income on their T1 forms for the past two years, there are still good, if not better, options out there.

“Under the old rules, I would only be allowed to subtract 80%,” Mr. Woodhouse says.

While not a true 100% offset, it is the easiest way to explain the program, says Chris Hoeppner, a regional vice-president at Street Capital.

“If a client can provide the statement of real estate rentals from the T1 General, we just go with the net gain or net loss that property produces. As long as a person claims enough rental income to cover all the expenses, it basically becomes a wash, taking that property out of the debt servicing.”

But for those not so organized, who have not been reporting rental income on their T1 forms, there are still options.

As well, private mortgage insurers Genworth allows for rental offset.

Mr. Bazuk suggests avoiding CMHC by having a 20% or more down payment, and dealing with banks that “go outside of CMHC.” He also says Scotiabank, National Bank, Royal Bank of Canada and Canadian Imperial Bank of Commerce still offer a 70% offset arrangement, or are rental-property friendly.

Ms. Wennerstrom, despite being without a mortgage at the moment, is still confident.

“The option is still there, but you just have to buy the right properties,” she says, which means ones with “exceptionally positive cash flow.” To her, that’s more than $700 a month after expenses, plus a 10% reserve for maintenance and a 5.4% vacancy slush fund.

“After that, it’s just what sort of hoops to jump through to get the mortgage,” she says. “They will continue to change the rules and we will continue to find ways around them.”

Canada’s homeownership costs continue to climb despite slowing resale activity

Canada’s homeownership costs continue to climb despite slowing resale activity
Comment: Now is a great time to buy in Alberta as mortgage rates are back to all time lows, home prices are giving great value for money and it is still a buyers market. Check out the graph below for value in Calgary.

TORONTO, Sept. 27 /CNW/ – Homeownership costs in the second quarter rose across Canada for the fourth consecutive time despite the recent slowing in resale market activity, according to the latest housing report released today by RBC Economics Research.

“Higher mortgage rates in tandem with a further appreciation in home prices boosted the monthly costs associated with carrying a mortgage on a typical home,” said Robert Hogue, senior economist, RBC. “This extended the deteriorating trend in affordability since the middle of last year; however, affordability levels in Canada generally remain within a safe range.”

The RBC Housing Affordability Measure captures the proportion of pre-tax household income needed to service the costs of owning a home of a certain category. During the second quarter of 2010, measures at the national level rose between 1.1 and 2.1 percentage points across the housing types tracked by RBC (the higher the measure, the more difficult it is to afford a home).

The detached bungalow benchmark measure rose by 1.9 of a percentage point to 42.9 per cent, the standard townhouse inched up by 1.1 of a percentage point to 34.1 per cent, the standard condominium climbed by 1.1 of a percentage point up to 29.3 per cent and the standard two-storey home experienced the largest increase, climbing 2.1 percentage points to 48.9 per cent.

The report notes that the slide in affordability over the past year has reversed approximately half of the considerable improvements in affordability witnessed in 2008 and early 2009.

RBC projects a temporary easing in housing affordability as a result of the recent decline in mortgage rates and the increasing evidence that home prices have started to stabilize in many markets. However, the Bank of Canada is expected to continue raising interest rates over the next 12 to 18 months which will become the dominant factor making homeownership less affordable once the near-term reprieve has passed.

“Current levels of affordability suggest some greater-than-usual stress weighing on Canadian homebuyers, but this does not represent an imminent threat to the market,” noted Hogue. “While we expect rising interest rates to increase mortgage servicing costs, a leveling off in home prices and increasing household income will partly offset the negative effect.”

Ontario and B.C. saw the most significant deterioration in affordability in the second quarter; however, some improvements in specific housing types occurred in Alberta (condominiums) and Saskatchewan (townhouses). All other provinces showed modest erosion, with the exception of two-storey homes in Manitoba where the rise in the RBC measure was quite substantial.

RBC’s Housing Affordability Measure for a detached bungalow in Canada’s largest cities is as follows: Vancouver 74.0 per cent (up 1.7 percentage points from the last quarter), Toronto50.2 per cent (up 2.4 percentage points), Montreal 43.2 per cent (up 1.8 percentage points), Ottawa 41.2 per cent (up 3.6 percentage points), Calgary 39.2 per cent (up 0.9 percentage point) and Edmonton 34.7 (up 2.5 percentage points).

The RBC Housing Affordability Measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow, a reasonable property benchmark for the housing market. Alternative housing types are also presented including a standard two-storey home, a standard townhouse and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

Highlights from across Canada:

  • British Columbia: Homeownership in B.C. is testing household budgets with affordability deteriorating again in the second quarter despite downward pressure on home prices and market activity sinking since the start of this year. RBC’s measures rose between 1.1 and 2.5 percentage points, representing some of the strongest increases among the provinces, and are near all-time highs for all housing categories. Very poor affordability is likely to restrain demand in the period ahead.
  • Alberta: Affordability measures have improved in Alberta since early 2008 as a result of lacklustre housing market conditions. The second quarter saw a mixed picture with prices easing slightly for condominiums but rising in all other categories. RBC notes that affordability measures are at or below their long-term averages, implying little downside risk to the market and boding well for a strengthening in housing demand once the provincial job market shows more substantial gains.
  • Saskatchewan: Rising mortgage rates during the quarter caused further deterioration in affordability for most housing types in the province. With the sole exception of townhouses edging lower, increases in affordability measures pushed levels further above long-term averages, indicating that some tensions may be building. RBC expects a strong rebound in the provincial economy this year and next which is likely to help ease such tensions.
  • Manitoba: Sellers kept a firm hand on pricing by reducing the supply of homes available for sale in the province, resulting in home prices continuing to appreciate, particularly for two-storey homes, which is translating into further deterioration of housing affordability. Homebuyers are feeling more pressure with affordability measures standing close to long-term averages.
  • Ontario: After setting new record highs this past winter, home resales in the province have since fallen precipitously due to a number of factors including the HST, changes in mortgage lending rules and the rush of first-time homebuyers to lock in low mortgage rates. Housing affordability in Ontario continues to reverse the considerable improvements achieved in late-2008 and early-2009 with measures increasing for a fourth consecutive time in the second quarter, representing some of the largest increases among the provinces.
  • Quebec: Quebec’s record-breaking housing market rally proved to be unsustainable in the second quarter with resale activity settling to a pace comparable to levels witnessed in 2006-2007, which were considered to be fairly vigorous at the time. Affordability was hampered by home prices trending upward with RBC affordability measures now at or very close to the pre-downturn peaks and exceeding their long-term averages. Further increases in homeownership costs could have a more visibly adverse effect on housing demand.
  • Atlantic Canada: The East Coast housing market was not immune to the significant downturn in activity that swept across the country since spring with housing resales falling back across the region to the lows reached during late-2008 and early-2009. Cooling demand loosened up market conditions, restraining home price increases and limiting the rise in affordability measures which remain very close to long-term averages. Overall, housing affordability in Atlantic Canada remains attractive and signals little undue stress at this point.

Calgary tops the list in places to buy in Canada!

Where to buy: Top 10 cities

Jesse Kinos-Goodin, Financial Post · Sunday, Aug. 8, 2010

When investing in real estate, sometimes it’s necessary to look beyond your own backyard. The Real Estate Investment Network (REIN), a national organization of investors, has compiled what it says are the top 10 Canadian cities in which to invest. Few are major cities and some are surprising. Don Campbell, president of REIN, as well as one of the researchers on the study, says the results are based on factors such as planned transportation improvements, or if the area’s average income, population growth and job growth are increasing faster than the provincial average.

Oddly enough, nothing east of Ontario shows up on the list, and while Mr. Campbell says cities like Halifax, Saint John and Moncton “still provide decent returns,” the top cities are ones that will outperform the national average between 2010 and 2015.

1. Calgary

Calgary is “poised to outperform the average by a wide margin,” says Mr. Campbell, making it the top-ranked city.

After two years of declining average resale housing prices, the Canada Mortgage and Housing Corp. has predicted they will increase year-over-year in 2010.

The REIN report credits the downturn to a much-needed correction, and that it was “economically impossible for the [Calgary] market to continue at the pace at which it was heading.” But now that it is coming out of the recession, along with economies elsewhere, Calgary’s strengths in producing food, fuel and fertilizer will boost its growth.

“Calgary is in a unique economic and geographic position to take advantage of the direct and indirect jobs this increase in demand will create,” says Mr. Campbell, who adds that with strong in-migration and renewed affordability, the city provides a good buying window for long-term investors.

2. Kitchener-Waterloo-Cambridge, Ont.

REIN refers to Canada’s Technology Triangle as the “economic Alberta of Ontario.” That means KWC is not only seen as the economic engine of the new Ontario economy, but also that it “will outperform all other major regions in eastern Canada,” Mr. Campbell says. For indicators, he points to job growth, student growth and a new light rapid-transit system.

3. Edmonton

Edmonton sits near the top of the report’s list because of its future potential. Calling it a “perennial overachieving market,” REIN says the city is a “growing market, [with] an increasing population, and a forward-looking leadership.”

It will also be the main benefactor of energy development in Western Canada, says Mr. Campbell, resulting in a “very affordable, strong rental market with strong in-migration from across Canada.” Major infrastructure improvements, such as the ring road and LRT expansion, will be key.

4. Surrey, B.C.

British Columbia’s second-largest city is growing so fast it could become even bigger than Vancouver.

“Just a decade ago, it was known as the punch line to many a joke,” Mr. Campbell says. But with two border crossings to the United States, links to five major highways, deep sea docks and four railways, Surrey is a prime location to do business, he says.

Although there may be a strong rental market, it’s a city that requires a closer examination, taking “neighbourhoods and even the street’s characteristics into consideration when deciding where to purchase,” REIN warns.

5. Maple Ridge & Pitt Meadows, B.C.

The Translink and Gateway Project infrastructure improvements have made these B.C. towns the “most accessible regions in [Vancouver’s] Lower Mainland,” the report says. They’ve come a long way, Mr. Campbell says. The unofficial motto of Maple Ridge used to be “You can’t get there from here.” As a result of poor infrastructure in the past, property values have been historically low in this area. But with the improvements, it’s predicted an additional 400 business will move into the area, REIN says, improving the demand for both residential and commercial property.

6. Hamilton, Ont.

“The perception no longer matches the reality of Hamilton,” Mr. Campbell says. “The city’s leadership, as well as local business owners, have transformed what was once a rough-and-tumble steel town to a city with economic vitality, diversification and population growth.” REIN applauds Hamilton’s leadership as being innovative in revitalizing the city, adding Hamilton

“has beaten its overall building permit value for the second year in a row.”

7. St. Albert, Alta.

“Long thought of as a satellite of Edmonton, St. Albert is poised to be the biggest benefactor of the new Edmonton Ring Road,” says Mr. Campbell, who adds that as the transportation access improvement is completed, the city will begin to experience “a flood of not only new residents, but also the relocation of companies and jobs into town.” Other attributes of the city include consistently low vacancy rates, high rents and strong property value increases. It also helps that the city has “turned itself into a major retail centre for the northern region while adding to its industrial and commercial job base,” REIN says.

8. Barrie & Orillia, Ont.

These two cities have been shedding the perception of being just cottage country and have become a “hot bed for growth,” Mr. Campbell says. University and college expansion campuses have brought new life to the area, and the addition of Go Train access has made them viable commuter towns for the Greater Toronto Area, REIN says. For investors, this all adds up to healthy property appreciation, a respectable vacancy rate of 4.7% and the youngest residents on average in a given Census Metropolitan Area (CMA).

9. Red Deer, Alta.

In the centre of the Edmonton-Calgary corridor, Red Deer is not close to either. But REIN suggests reviewing city plans, as there will be a lot of hidden opportunities. “The whole central Alberta region has witnessed very strong population and job growth, as well as a real estate market that has continually outperformed most other regions of the country,” Mr. Campbell says. He adds that with a continually expanding industrial and commercial job base, Red Deer is in a good position to “take advantage of the inevitable growth in demand for food, fuel and fertilizer.”

10. Winnipeg

Winnipeg is often left off the real estate investment radar, but Mr. Campbell says it’s a good city for “consistent economic performance — not too high during booms and not too low during downturns.” But people should stick to buying top-quality properties. REIN also notes that housing prices, after dipping last year, are back to double-digit increases, which could “lead to an influx of inventory on the market.” But with one of the lowest vacancy rates in the country, at 1.2%, there is room for movement. Another positive factor for the city is international immigration is expected to increase under the provincial nominee program being undertaken by the government.
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Toronto woman paying for mortgage fraud

This is too bad and we see it all the time. There is no free lunch. If you sign papers for a house and they pay you to do it is pretty much fraud and you pay the price.

Toronto woman paying for mortgage fraud

| Tuesday, 29 June 2010

A Toronto woman is being ordered to pay RBC $95,000 after failing to realize she was being tricked into a mortgage fraud.

Angela Isaacs accepted $6,000 to co-sign a stranger’s mortgage and signed the documents without reading them, reported the Toronto Star.

Madam Justice Anne Molloy of the Ontario Superior Court of Justice also decreed that Isaacs owes 6.3 per cent annual interest on the $95,000 loss from June 26, 2008 until the debt is paid and, within 30 days, $13,500 of the bank’s legal fees.

“She took the risk and got stung,” said Molloy during the ruling. “That is her own responsibility, not the fault of the bank.”

In late 2004, Isaacs was discussing her financial woes with her then common-law husband in a Tim Hortons coffee shop. She was earning $35,000 a year at a full-time job and raising three young children.

A stranger called Mike told her she could receive $4,000 for co-signing a mortgage for six months so a man with a poor credit rating could buy a house. Later Isaacs decided against it but was persuaded after she was offered $6,000.

Isaacs clued into the scam when RBC started sending her late payment notices for a $280,000 mortgage on a house she owned with a man supposedly named Mark Forrest.

Alberta’s economy to rebound this year, lead nation in GDP growth

More good news on the economy that does not make the papers.

Alberta’s economy to rebound this year, lead nation in GDP growth

Oil sands investment boosts forecast of 4.1% spurt

CALGARY – Alberta will experience a significant economic rebound this year and lead the nation in GDP growth, says a report released today by Scotiabank.

The report forecast GDP growth of 4.1 per cent for the province while overall Canadian growth would be 3.6 per cent, the strongest advance in a decade for the country. In 2011, Scotiabank is forecasting Alberta economic growth at 3.4 per cent – tied with Saskatchewan for the best in Canada. Nationally, it is predicting Canadian GDP at 2.7 per cent next year.

Scotiabank said a strong pickup in investment will fuel growth in the energy and manufacturing sectors this year in Alberta.

“Investment has perked up in the oil sands, as easing costs and higher oil prices revived investment intentions in late 2009, with $2.2 billion in outlays scheduled for 2010 alone,” said the report. “Renewed activity in the industry will lead to significant benefits flowing through the economy, with manufacturing and services all heavily tied to conditions in the energy sector. While the bulk of investment will stem from oil sand development and tight oil plays, recent revisions to the province’s royalty framework are a major positive for the natural gas industry.”

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