From the Papers… Important news I want to share.

I would like to add links to articles I have found useful for you here, from our local papers (Globe and Mail, Star, and National Post) on housing, the market, rates, and anything other housing-related.

Let’s start with what has everyone talking today:

How To Weather The Real-Estate Chill In Toronto was a great piece by Carolyn Ireland in the G&M this Saturday, dealing specifically with the Toronto market. Don’t pay attention to the comments section (which has me scratching my head at the job of the moderators at the newspaper, or lack thereof).

David Rosenberg argues the Debt Crisis has not ended yet.

The National Post had a funny take on the US Credit Crisis, in Meet the 33-year old who bought the boss’s house, a tale of a young up-and-coming Hedge Fund Manager who ended up buying the house of his former boss at GS.

Finally, an article I’m a huge believer in: Checking up on your mortgage yearly. It’s a sad fact that I hear from people usually when it’s too late or they are in dire need of help. A quick 5-10 minute discussion on your plans, options, and ideas will help alleviate some pains down the road. Email or call me anytime!

Friday August 27th:

Oftentimes when driving through the Bridal Path, I wonder why the City of Toronto has not declared any of the gorgeous modernist examples as heritage homes. (?). Too many of these have been torn down, yet they are a vital part of our history (and in 100 years the surviving ones…


Can It Get As Bad As Down South?

As the bad news hit the press the other day about the stunning turnaround in the housing market down south, one point that stuck out at me as a mortgage broker was the following:

The feeble demand for housing comes even as mortgage rates continue to plumb new lows. Last week, the average rate for a 30-year fixed-rate mortgage fell to 4.42 per cent, the lowest in the history of the 39-year weekly survey by U.S. housing giant Freddie Mac.

This had me thinking: can it get worse than we expect here also?

Why I say this; 2 years ago if I had a client who was driving and talking on their cellphone about rates, and I offered them 3.69% on a 5-year fixed, chances are pretty high they would have rear ended the person in front of them. I remember when I first bought a house in 2005 and was given 4.39% and thought I won the lottery. Now the rates are so astronomically low that I’m recommending fixed to some people (and I almost never do this). So are many other mortgage planners that I either read about, or talk to. Heck, some clients who locked in at the mid 4s not too long ago are already contemplating breaking their mortgages to go with these new rates.

However, on the flip side, what I’m also noticing is that these extremely low rates are not bringing many new first-time buyers to the tables. I’m sure there are pockets of Toronto that are still busy somewhat, but compared to the Spring (when everyone thought we were in a rebound market to last), bales of hay are rolling by “For Sale” signs in many parts of Toronto.

With the dollar at par (or almost), and our economy…


Personal Finance Corner

There were five great tips today in the Globe and Mail from a personal finance perspective, highlighting a book by Scott Feher, Putting Your Financial House In Order. In it he provides five great tips on “being a CFO of your family”:

1. Create A Family Mission Statement.

As with many other things, if you write down goals for the family, such as cottage ownership, a vacation, early retirement, tuition for high school in Europe etc., they family will have something to work towards. Many families choose to use the equity in their homes to achieve these goals, which is something that can be achieved through a refinance.

2. Know Your Expenses.

This is a big one, which I find many clients and even friends do not do - track expenses for a whole quarter to see where the outbound money goes: the results may shock you. I say a quarter because 1 month won’t cut it, there are too many ups and downs.

3. Analyze Your Expenses.

When you’ve tracked, you can analyze what can go towards achieving the goals, paying down the mortgage, or more important paying off high consumer debt.

4. Hold Regular Finance Meetings.

Simple and as it sounds - although not so easy with children. This should ideally be done between the adults of the house until the children reach working age.

5. Institute A Family Reward System.

The author offers some tips on how to achieve the goals faster by cooking at home, ridding yourself of the household cleaner by doing more at home, and others. This will offer small-time rewards for the family.

6. Manage The Family Net Worth.

Home ownership has given us the ability to increase our net worth much faster than through normal savings, due to the tax-free…


Market Data from CREA

Canadian Real Estate Association released some market data that show just how badly our housing market is doing, and the numbers are startling. In Vancouver, there was a 45% drop in resale activity, and nationally the sales were down by 30%. Prices fell also, for the first time in a while, with the national price average down to $330K from $342K. Furthermore, the Toronto condominium market is facing added pressures, with 40% of new condos downtown bought by investors - I’d bet a few of them will get caught in the new CMHC rules for investors: 20% down or bust. Although I wasn’t around in the 80s for that market crash, things are eerily similar me thinks, with so many investors owning units downtown. Also, just how many condo projects does Toronto need? We already have more last year than Vancouver or New York City. CREA blames the HST for the drastic downturn in BC and Ontario, something I don’t necessarily buy into. HST only affects new home buyers, not resellers. I will not argue the HST did not have a psychological effect, however. Many buyers were telling me they wanted to “beat the HST rush”, which made no sense since they were buying existing units/houses. One positive is that inflation is expected to be kept in check even with the HST (numbers come out on Friday). This will keep rates stable, although there is a “58%” chance that the rates may rise in September by a quarter point to 3%. Who makes these numbers up? Analysts and market watchers, and just over half of them are predicting a rate increase. As I’ve said all along, a quarter point up will not kill the market, nor will it make things unaffordable. Imagine the panic we’d see if rates went up…


The Role of Media in Today’s Housing Market

The other day a friend and I were discussing the housing market, topic du jour it seems, over some coronas on a patio. He’s a long-time buyer, someone who (thinks) they know the market better than most, someone who has never actually bought a house, but someone who is waiting for a 30% drop in prices. 30%!? “Nobody in the States thought it could happen” was his retort. ....., I spent the next 20-30 minutes trying to convince him otherwise: that we’re not suffering from inflation (but actually facing deflation), therefore rates are very very stable. (mid 3% on a 5-year fixed?). That our banking system, and lending approach, is a lot different here, a lot more conservative, that we don’t have NINJA applications (no income no job approval), that we’ll expect 1 Million new immigrants in the next 11 years, that our economy is slowly improving, etc etc. Nothing could budge him. He’s waiting for the floor to drop, his argument is that we won’t ever see a soft landing but a hard deep decline. Later on we were walking down and the Toronto Star had a front page headline in their Business section that read:

“Housing Market Continues To Cool Down”

and he said “see? it’s everywhere. the market crash is coming”.

This got me thinking: what is the role and impact of the media today in our housing market? Flashy headlines sell newspapers and readership is on the decline. But at what point is it time for people to step back and look more critically at these outlets? At what point can the media itself do a better job of providing further analysis, rather than two quotes from leading economists prophesying such doom and gloom? As one of the top Realtors in Toronto discuss in his…


Favorite Vintage Haunts

When shopping for vintage finds, the stretch along Queen East between Leslie and Broadview is hard to beat. My favorite shops include:

GUFF - or Great Used Furniture Finds. These guys have it down, right. Their prices are fair, product moves fast and their blog is great.

Zig Zag - The purveyor of Zig Zag has a little more “upscale” and discerning feel, but also bar-none when it comes to selection. Easy to talk to about his stuff, too.

Machine Age Modern - Jake has been a fixture on the block for quite some time, with a very minimalist and modern shop. Once again, great knowledge of stuff, and fantastic selection. Recently saw gorgeous vintage Swan Chairs that were snapped up too fast.

Philz - further towards Broadview, packed full of a wide range of mid-century and modern pieces.

Highway 11 - opened by the former owner of Ethel, a little shop beside the Sushi Marche. Little shop does not mean a little selection. Great finds inside.

Ethel - who could forget? One of the originals - still open, new owners, same love and admiration for great MCM stuff.

Go out for a stroll. New shops come and go, the main guys stick around. Lots of good finds so keep your eyes open!


Craigslist - good for what?

Craigslist is a wonderful place. It’s wonderful in its stubbornness, its lack of originality but also its comprehensive nature. You can truly find anything you need if you are patient enough. One great tool I have found is the use of a reader application. Google reader, for example, will bring all the most recent postings from any topic/item for sale I’m looking for into one neat package. You can use any RSS reader/feeder, but I use google because of gmail, picasa, calendar, etc.

How does google reader work?

Say you’re looking for a vintage, credenza. One pop onto craigslist toronto and you’ll find many options:

Problem is there are many entries per day/week, and after looking you haven’t found what you want. On the bottom of each search page is an orange box with RSS in it. Click on it, and you may subscribe to the “feed” or the search in any RSS reader. I select Google Reader and voila. will be your next visit, where you can search for, and see, what the most recent postings are and what people are selling.

Craigslist has its down points - spam, items that are of no value and should be thrown out - but eventually if patient enough you could find that amazing Montauk couch, or Ligne Roset table, for half or less than retail!

Happy Craigslisting and RSSing!


Our Housing Market In Five Charts

Almost any card you have will be higher than current mortgage rates. Furthermore credit cards continue to charge interest on the full balance even if you’ve paid it down to $1.00. Refinancing your debt is easy, and especially important to do now if the market goes south, and your equity dries up. Some would argue that refinancing at a time like this isn’t a wise idea if housing prices fall, since some could fall into a negative equity position. This is why CMHC ruled out 95% refinance options and have capped it at 90%, to give homeowners some breathing room.

Check out the chart below care of the Globe and Mail’s Saturday Report on Business:


My answer to “Getting real: Bull run coming to an end for Canada’s housing”

Firstly, the article identifies a young couple with a baby who bought a condo, then a detached home, decided to keep both because “people were making 00,000’s of thousands on paper in real estate”. Get real. This is eerily similar to when everyone was investing in Nortel, yet few knew what Nortel did. Remember those days? I’m scared to think people thought (or think) or real estate the same way. Real Estate is not a get-rich-quick-scheme. The problem is that “our” Generation is so used to the idea that housing will continuously rise, that we fail to look back in history to see what could happen, instead. Furthermore, the “crash” that we experienced was over so fast, yet few realized it was because of the changes in mortgage rules and the HST deadline. Instead people assumed things were once again back to “normal”.

What is “normal” anyways in the housing market? Inflation and then some, not double-digit gains. Think about how fast housing will become unaffordable even to the wealthy if housing went up in double-digits continuously.  The media and entertainment sectors do not play an innocent role in this either. “If it bleeds, it leads” could not be more true with the housing market - quite frankly everyone talks about it, everyone wants to know about it, and there are magazines dedicated to it on a continuous basis. Yet, each article is written in a shock nature. When times are good, we hear nothing but the boom times ahead. When they are bad, the gravy train is over. Furthermore, shows such as “flip this house” and others on TLC, A&E, and HGTV further add fuel to our urges and desires for a quick buck. Sweat equity is definitely one of the top ways to add value to your property,…


Fixed or Variable?

Rarely has the question been more relevant than this year, when 5-year fixed rates are dropping like flies, and the Bank of Canada is on pace to hike up the Prime rate. My general rule of thumb is that when fixed and variable are spread by more than 1%, take variable. IN today’s instance, the best discount available on a variable is -0.75, which gives us 2%, vs the best fixed at the 3.7%ish range. However, moving long-term, it wouldn’t be unwise to consider a 5 year fixed when the rate is below 4%, like it is today. It is said that more than 77% of the time, it’s better to take variable, and this wonderful chart.

click to see larger image

Yet, there are many other factors to take into account such as: Income / Risk Factor / Savings and Equity. Is it a client’s first-time purchase? A rental? Is the client on a fixed-income or do they anticipate a great upswing in the long-term? Dependents? Aging parents? Debt load? So many questions mean that each client will get a different answer.

One solution I am not a big proponent of is the 50/50 mixed mortgage. In my experience I prefer a client to go one way or another, because if they are indeed anxious about rising rates, why expose half their borrowing to a variable rate AND one that isn’t at the deepest discount? Nor for the fixed? A typical 50/50 rate is priced about .10-.20 points higher than the best on either side.

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