A Buyers Multiple Offer!?

For years many buyers participated in Multiple Offers aka Bidding Wars. In some locations bidding wars were widely accepted as the normal course of purchasing Real Estate. With the shift into a buyers market, buyers now have the upper hand.

How? It's Simple...


Markets with low inventory coupled with continuously high demand caused bidding wars in favour of the Seller.

Buyers can benefit from markets with continuously high inventory and low demand! If you want to tap into those markets and get a great Real Estate deal then contact me and find out how to have Sellers come to you!

Arm yourself with the information you need before you start your house hunt. A must have for anyone thinking of making a move now or in the near future. Click here to order your copy.

US vs. Canada - Some Differences in Lending Practices

Much of this valuable and interesting information is from a course I recently took titled.
The U.S. Housing Crisis: Why it Won't Happen Here. These are some key points.

• A very small percentage of mortgages in Canada are subprime
• Canadian 'subprime' is similar in risk to US 'Alternative A'
• In the US, those unable to have 20% down had little alternative but to turn to subprime lenders.
• In Canada, mortgage insurance is mandatory for those unable to meet the 20% downpayment requirement.
• Because of Mortgage insurance, borrowers in Canada who are unable to meet the 20% downpayment requirement have access to prime market lenders rather than turning to subprime lenders.
• Subprime lenders in the US used borrower evaluation criterea that has been characterized as suspect.
• Canadian banks tend to be more conservative in the type and variety of products they offer.

Other key facts:

• Maximum Loan to Value in the US 125%!!! (hence the stories of the house + new furniture + SUV) Canada had just started down the 100% Loan to Value path but it really never took off.
• Interest only mortgages readily available in the US.
• Stated income mortgages accunted for 10% in Canada and 40% in the US. (Literally a letter signed by the borrower stating how much income they made!)
• Teaser rates were common in the US but very few lenders practiced this in Canada.

The big one "Exploding Adjustible Rate Mortgages' This is a product where the first 2-3 years carried extremely low rates only to jump to 2-3 times that amount when the intro period ended. This 'explosion' was available to homeowners who put 0% or less down. Suddenly faced with a mortgage they could not afford to pay for, falling house prices, and poor job prospects...they simply walked away from the home.

Since most Canadians put 5% or more down, even in a pinch and facing job loss there is enough equity in our homes to merit fighting to ensure payments are made. Or if payments cannot be made, a sale can be initiated to sell the house, pay down debt and rent, with little or no financial loss.

Course: The U.S. Housing Crisis: Why it Won't Happen Here
Subject Expert/Author: Written with the assistance of Instructor Aron Gottesman Ph.D., M.B.A., B.A

Making a Real Estate move in our current economic climate

You planned a move, were finally ready to proceed and now the housing market is suddenly unstable. You got laid off or took a pay cut and need to downsize. You waited for the peak of the market to cash in on your investment property. Whatever the circumstances are, the question on many people’s minds is: Should I hold off or proceed with the sale?

There are several factors to consider in answering this question; however a key determinant is the following. How is the market for what you are selling faring versus the market you want to buy into?

For example: You are selling an entry level detached home in North West Brampton and intend to purchase an entry to mid level home in High Park. At this time there is an oversupply of entry level detached homes in NW Brampton. Prices have been driven down and selling times up in NW Brampton. Meanwhile in High Park there are still reports of multiple offers. If you are selling and relying on the sale of your home as the main source of equity towards the next purchase and happen to be faced with the above scenario, then obviously the best advice would be to hold off for the moment.

The above is an extreme example; however each trade scenario in this unstable market needs to be examined in detail. In doing so you may find that for some segments of the market there is the potential for savings and gains at this time. Take my neighbourhood as an example. The prices of 2000sqft + four bedroom detached homes has declined versus smaller three bedroom detached and larger 3 bedroom semi-detached. Our circumstances dictate that we want to remain in the area but need more space; this is a good purchase opportunity for someone in my situation.

Whether it is a fast market or a slow market these scenarios are always at play in Real Estate. However in a slower market they are more apparent. This may result in a positive gain for some buyers and investors. For example: statistics show that many would be first time buyers are deciding to rent, as a result there is an overabundance of first time buyer condo’s in Mississauga. Condo prices have diminished and there has been an increase in rental prices! I would say this is a good time to purchase an investment condo as a part of your portfolio.

Plan for the worst case scenario

Entry level detached homes in North West Brampton may be the in oversupply today, but that situation can reverse itself as buyers seeking lower priced detached accommodation will migrate and purchase at lower prices being offered in NW Brampton. As such, the opposite could happen if the home you are planning on selling is currently in demand and fetching higher prices - others will seize the opportunity to sell high and perhaps saturate the market driving down prices. Examination of these basic economic principles versus the history of actual house sales in the markets in question is how Realtors help buyers and sellers plan their sale.



Part of the decision making process for trade in Real Estate in this market is getting to the worst case scenario, laying it all out, and deciding if you are willing to take that risk. By defining in advance how and how reasonably the worse case scenario will be handled, the decision on whether to proceed or not can be made wisely. Every Realtor should make this part of the analysis. (This is not always the case, but a worthy Topic of a discussion in a future post)

Now vs. Later (the spring market)

One other major question I have been asked is whether selling now or waiting for the spring is the best course of action. With the steadily increasing market of the last 10 years the answer was invariably yes. The only caveat being that too many of your neighbours may have decided to wait until spring also.

This year the other factor to consider is that the market may continue to decline. Combine that with too many of your neighbours deciding to wait until spring and you may be faced with an oversupply of housing in a declining market; not the ideal situation.

We cannot predict the future; however a frank discussion of your particular needs and an analysis of your home, its current value, as well as its value as a commodity in the potential marketplace, is the first step to consider.


Again - we can never predict the future, however no matter what market you face when you list (or rolls into when longer selling times are in play), preparing your house to stand above the crowd is now more important than ever (see article below).

I welcome your inquiries regarding your potential Real Estate move. Advice is pro bono!
David Smeriglio

Latest CMHC outlook for 2008/9

Hello:

For your reference, please find attached the latest Housing Market Outlookdata for GTA (Fall 2008 edition).

Here are some high-lights fromthe nine page report:

New Home Market: High rise sales will dominate new home market...-New home sales in the Greater Toronto Area (GTA) will continue to moderate in 2009.- High rise sales have accounted for more than 50 per cent of the totalshare of sales since the end of 2007. This trend will continue and the share of high-rise sales will increase in 2009.

• i) New home sales will trend lower as choice increases in the resale market. The low-rise housing sector will experience moderating sales much more sothan the high-rise sector.- Strong immigration into the GTA has also played a role in increaseddemand for condominium apartments, due to their lower price point.-
• Changing demographics in the GTA also explain the heightened interest inthe high rise market. The average household size is shrinking with anincrease in lone-parent and childless family households.- The luxury high-rise market is also a growing niche that is catering toan increasing number of aging baby boomers and empty nesters.ii) Starts to edge down.
• Softer local economic conditions and elevated home prices will push thedemand for home ownership lower.- Following a healthy increase for 2008, total housing starts will edgelower by 21 percent in 2009.- Low-rise home starts will decline at a greater rate than apartmentstarts.
• Condominium apartment completions have begun to trend higher and willgrow at a stronger rate in 2009. For this reason, condominium apartmentconstruction will remain at high levels through the end of next year.2. Existing Home Market in Existing home sales off the peak...
• Over the next two years, the number of home sales under the MLS® system in the GTA will trend lower off the 2007 record high.
• Sales will moderate due to softer economic conditions domestically and elevated home prices. While home sales will be off record levels, continued steady net migration and low borrowing rates will keep home buying activity in the GTA in line with the average over the past ten years.
• ii) More supply, moderate price growth. New listings will continue to grow to reach a record-high level in 2008.The trend will flatten out in 2009. The trend in listings growth will eventually slow and then change direction, however, as fewer home owners are able to sell their homes for the anticipated values for their properties. This will begin to happen toward the end of 2009. While the sales-to-new listings ratio will continue to decline, it will do so at a diminishing rate. The resale market will remain balanced, with prices growing in line with inflation. The average home price in 2008 will be up 2.6 per cent to $387,000. Bythe end of 2009, the average price of home will reach $394,000 - up 1.8 percent. Not all housing types will experience the same moderation in price growth over the next year. Condominium apartments in the central Toronto area area good example of this. The central Toronto area remains a tighter market than the region as a whole.
• iii) First time buyer niche gets smaller. Over the long term, first-time buyers will remain the most important factor driving sustained demand for home ownership in the GTA. In the short-term, however, the level of first-time buying activity is subject to the economic cycle. The number of households purchasing their first home will be trending lower in 2009. Softer labour market conditions along with elevated homeprices will be the primary reasons. Based on CMHC's Renovation and HomePurchase Survey, the percentage of intended home purchases accounted for by first-time buyers declined to 40 per cent for 2008 compared to 47 per centin 2007. This share will decline further in 2009.

Economic Trends

• i) Toronto will continue to create jobs. Employers in the GTA have persevered in 2008. The rate of job growth will be 1.8 per cent in 2008 - above the average for Ontario. In 2009, job growth will remain positive, but the rate of growth will moderate to one per cent. Job growth will come from the service sector.
• ii) Mortgage Rates. Mortgage rates are expected to be relatively stable throughout the last quarter of this year. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

LIFE STILL GOES ON....DON'T PANIC

Make Your House Stand Out above the Crowd: Are Agents failing to advise their clients?

Recently the quality of listings that I have visited seems to be trending lower and lower. Perhaps the recent corresponding surge in Realtors has something to do with it? (Recent numbers pegged membership at TREB nearing 29,000. Only four years ago it was 21,000) But I digress…

Let me give you an example. This spring/summer I worked with 4 individual buyers looking for condo's in the centre of Mississauga. Between the four of them we saw upwards of 60 properties. Within the price range of $160,000 and $260,000 there were no less than 250 properties available for sale!!! This is fierce competition. I was stunned to find that of all the properties we saw none yes ZERO were staged or had feature sheets. Some did not have online photos; few had video/visual tours.




Lowest 5 Year Fixed Rate on the market! Sutton Member Mortgages. Ask for more details.





Fortunately the late spring/early summer market was relatively good; Properties we're selling 'anyway' so I could see why some agents may not have seen the value in promotional materials. Just Dump it on the market it will sell …………….. eventually.

I recently toured many of the same buildings and condos and I can tell you that inventory is even higher now, and sales are down. But guess what… still no promotion or extra marketing! What is the rational now?

Would you consider selling your car without first detailing and cleaning it? I liken some properties out there like placing your minivan for sale after getting home from a week long road trip with the family, without bothering to clean it up. Stick a for sale sign on it and dump it on the auto trader. Yikes!

The reality is to succeed in today's market you not only need to price properly, but you need to stand out above every other property that has been properly priced.

Our instinct when faced with smaller margins is to save money: Less bottom line means less money to pay agents and less money to promote the property. Unfortunately this strategy is probably the worse thing you can possibly do in times of increased competition.

It is important that together with your Realtor you work out an effective and cost efficient promotion and marketing regimen. I know that both myself and members of my team have been firm believers in promotion and marketing of our properties. Even in the best of times we used

• Staging
• professionally photography and virtual tours
• professional feature sheets
• professional signage, directional signs
• employed handymen and painters
• extensive web presence (facebook, kijiji, craigslist, websites: personal, company and corporate, mls.ca, stratus, matrix [Oakville/Milton], mlxchange [Hamilton/Burlington]

We did this knowing that it would sell anyway because we wanted to cast the property in its best light and give it the best opportunity to achieve maximum market value. Now in less favourable times when these steps are needed more than ever we can cost effectively offer these to our clients. Also professional means professional - not your agent's best shot at using their new digital camera, microsoft word and printing it at home!

3rd Annual Stevington Crescent Street Sale and Charity Drive

Hi Neighbours! Welcome to the 2008 late summer edition of the Street Sale. The 2007 event was a huge success (see last year's photos) let's make 2008 even better.

Purge unwanted items, earn a few dollars in the process, have fun and get out and mingle with the neighbours. (6 new neighbours since last event!)

And to boot this year we are doing it for a good cause. We have teamed up with The March of Dimes of Ontario who have offered to cross promote our event and will be supplying us with materials (perhaps even T-shirts) needed should you or your garage sale visitors wish to contribute in larger amounts. Please visit March of Dimes for more details.

If you come to this by way of the yellow flyer please pass the word around as often the flyer goes unoticed or discarded. Last year several neighours expressed that they wanted to participate but never got saw/received the flyer! Please help us spread the word.

The date is Saturday Sept 13 with a Sunday Sept 14 rain date. As per usual we will be advertised in the Wed and Friday Mississauga News. We have found that putting a number to the event (e.g. 20 + homes participating) attracts more people. So please either comment to this post, or email david@soldhabit.com to let us know you are participating.

Government of Canada Moves to Protect, Strengthen Canadian Housing Market

On July 9, the Department of Finance announced adjustments to the rules for government guaranteed mortgages aimed at protecting the strengthening the Canadian housing market. CMHC supports the new parameters and the government’s ongoing efforts to maintain a strong Canadian housing market.
Consistent with the government’s direction, CMHC will no longer be accepting mortgage insurance applications for 40-year amortizations or 100 per cent loan-to-value mortgages on or after October 15, 2008. Those mortgages with a 40-year amortization and the 100 per cent loan-to-value mortgages already insured by CMHC are not affected. CMHC mortgage insurance coverage on these mortgages is good for the entire life of the mortgage.
However, CMHC will continue to offer mortgage loan insurance for amortizations of up to 35 years and up to 95 per cent of the value of the property, and will continue to offer a wide range of innovative products that meet the needs of borrowers.
CMHC will also continue to offer CMHC Flex Down, which offers homebuyers the flexibility of purchasing a home using a wider range of sources for their down payment — including borrowed funds and lender cash-back incentives.

New energy initiatives good to know for homeowners

New energy initiatives good to know for homeowners
Grants are available for homeowners going green. Both the provincial and federal government have programs designed to encourage energy reduction. By staying up-to-date on the latest programs, you can offer clients valuable information that could save them money.

Natural Resources Canada (NRCan) is offering a new residential energy efficiency assessment service to owners of single family homes, including detached, semi-detached and low-rise multi-unit residential buildings (MURBs) that are no more than three storeys high. Under the ecoENERGY Retrofit program, property owners can qualify for federal grants by improving the energy efficiency of their homes and reducing their home’s impact on the environment.

How it works
NRCan-certified energy advisors conduct a detailed on-site assessment of the home’s energy use from the attic down to the basement. They provide a personalized report, including a checklist of recommended retrofits to improve the energy efficiency of your home and, in some cases, to reduce water consumption. The report also shows the grant amounts for each eligible upgrade that you can receive by carrying out these energy-saving improvements. The maximum grant you can receive for a home is $5,000.

For instance, if you replace an old natural gas furnace with the most efficient unit available (92% AFUE or annual fuel utilization efficiency gas furnace with DC variable speed motor) you could qualify for $1,350 in rebates: $500 (Federal) plus $500 (Provincial) plus $100 from Enbridge plus $250 from the Ontario Power Authority (Cool Savings Rebate). According to the Ontario Ministry of Energy, replacing an old system (63% AFUE) with a new high efficiency condensing furnace (93% AFUE) in an average 1,200 square foot, detached house will result in savings of approximately $450 per year.

Because of its high-tech design, a high-efficiency natural gas furnace squeezes the most heat out of every heating dollar. For every dollar you spend on energy, it produces 88 to 97 cents worth of heat. It could save up to 24% in energy and related energy costs and will also help insulate homeowners from increasing energy prices.

The high efficiency furnace and many of the other retrofits eligible for rebates come with a higher price tag, but environmentally conscious homeowners believe the energy cost savings – and reduced greenhouse gas emissions – are well worth it. Also, from a resale perspective, many potential homebuyers will view “greener” appliances as a desirable feature.

For more information on the ecoEnergy Retrofit Rebate program visit the following sites:

Natural Resources Canada (Federal) Web site at www.oee.nrcan.gc.ca/residential/personal under residential housing, home improvements.
Ontario Ministry of Energy Web site at www.energy.gov.on.ca and click on the Rebate update.
For information on qualifying toilets from the federal and provincial perspective, go to www.veritec.ca under Reports, 11th Edition (test results start on page 16)
For information on residential rebates from the Ontario Power Authority - Cool Savings Rebate Program, go to www.everykilowattcounts.ca.
For information on Energy Star appliances go to www.energystar.gc.ca.
For information on Enbridge rebates, check under Residential, Rebates Incentives and Energy tips at https://portal-plumprod.cgc.enbridge.com.

Courtesy of OREA Edgeewsletter

ZERO DOWN PAYMENT............. GIMMICK??? NOT AT ALL.... READ ON!!

I don’t know about you, but living in this day and age, when I see what looks to be too good to be true, I’m always looking for the catch.

However, it is possible to finance with no money down in a way that really is legitimate. And there are no catches.

Traditionally, one had to Purchase a home with a minimum of 5% down payment. The down payment had to either come from your own savings or as a gift from very close relative, one was not allowed to borrow the 5%

Because the insurance companies such as CMHC and Genworth realized that many people found ways to bypass this requirement, they decided to make the process much simpler and made rules and programs to cater for this contingency.

The no money down issue applies particularly to people that don’t want to wait until they have saved up enough money for a down payment. Or, perhaps there is a new family member on the way, and they need more accommodation right away. Perhaps you don’t have close relatives that are willing and able to gift you the necessary down payment or perhaps you just want to be independent and don’t want to have to ask for any favors.

There are a number of ways that one can get mortgage financing without any money down. All of them require sufficient QUALIFIED INCOME and GOOD CREDIT. The insurers do charge an additional premium for these programs, but the premiums are not significant or material

For those familiar with credit scoring, the minimum beacon score required to qualify is 650. For credit scores in excess of 680 it becomes easier to qualify.

The three most commonly used methods for financing with no money down are:

1) Borrowing 100% of the purchase price. This requires a beacon score of 680 and higher. Qualification ratios are more lenient

2) Borrowing the 5% down payment. This requires a beacon score of 650 and higher and the income qualification criteria are more stringent

3) Getting a 5% cashback, which can be used for the down payment. This option is very costly as there is no discount on the rate and is therefore not recommended in the normal course of events.

Methods 1 and 2 above are available with up to 40 year amortization, and at fully discounted rates.

You should start comparing the carrying costs of your own home in relation to rentals. Not forgetting that when you own your own home you get the benefits of capital appreciation as well as the reduction in principle with each months mortgage payment.

This is not really a do-it-yourself process and requires a fair amount of knowledge and expertise. For a knowledgeable mortgage broker however, it is a fairly simple process that can quickly provide the answer for you. You’re free to call me any time without any obligation to find out whether you qualify and what your monthly carrying costs might be

Merv Gabriel
www.Gabrielmortgages.ca

Using RRSPs for real estate, higher learning

Saving for education, paying off student loans or buying a home often have higher priorities for younger people than contributing to an RRSP.

But the Home Buyers Plan and the Lifelong Learning Plan can provide options for anyone saving for retirement but in need of investing in more immediate priorities - especially with the increasing price of real estate and tuition.

The Lifelong Learning Plan allows you to withdraw up to $10,000 in a calendar year from your RRSP to finance training or education. You cannot withdraw more than $20,000 in total. To qualify, three conditions must apply:

- The student must be a full-time or a part-time if he or she meets the disability conditions.

- The RRSP owner has to be a resident of Canada.

- The student has to enroll in a qualifying educational program at a designated educational institution.

People may participate in the plan as many times as they wish after repaying an LLP withdrawal. Older students should keep in mind the education has to be completed before the end of the year the person reaches the age of 71.

You and your spouse may also be participants in the LLP at the same time. You may also use the LLP for either or both of you. You may be eligible to participate in the LLP even if you have withdrawn amounts from your RRSP under the Home Buyers' Plan that have not been fully repaid.

Students must receive a written offer to enroll before March of the year after a withdraw from their RRSP. Participants who withdraw funds from their RRSP under the LLP must repay the amounts over a period of up to ten years.

For example, Suzy withdrew $8,000 from her RRSP to attend a program at the University of Victoria on March 1, 2006 that finished in 2006. For 2008, Suzy should repay at least 1/10th (or $800).

This program may be suitable for younger or mature students with an RRSP, individuals who have been laid off, or simply someone interested in a method to fund higher learning costs.

With the Home Buyers Plan, younger people who begin contributing to an RRSP may not even own a house yet. Does it make sense to contribute to an RRSP if you think you will need to keep funds liquid to buy a home?

In some cases the answer is yes, especially if a person is earning good income.

The HBP allows participants to withdraw up to $20,000 in a calendar year from an RRSP to buy or build a qualifying home. Couples may each utilize the HBP (combined maximum of $40,000). The plan may be suitable for any first-time home buyers who are buying a home and may need additional funds to pay for a down payment or reduce financing costs. A larger down payment may eliminate the costs to insure the mortgage.

The Home Buyers plan is open only to first-time buyers.

You may not be considered a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before the withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence.

Participants in these plans should understand that withdrawals need to be repaid or have the amount included as taxable income.

The first repayment is due the second year following the year in which a withdrawal is made. Each year, Canada Revenue Agency will send you a Notice of Assessment with a statement include including: amount repaid (including any additional payments), HBP balance, and the amount of the next repayment to make.

Participants have up to 15 years to repay the amount that is withdrawn.

Generally, each year the repayment amount is approximately 1/15 of the total amount withdrawn until the full amount is repaid to your RRSPs. For example, if Bill withdrew $15,000 from his RRSP in September 2007, he must pay at least 1/15th (or $1,000) of the withdrawal in 2009 (or the first 60 days of 2010).

Withdrawals from an RRSP account are generally considered taxable income.

Financial institutions are required to withhold the following tax on RRSP withdrawals: 10 per cent on the first $5,000, 20 per cent between $5,001 and $15,000, and 30 per cent on amounts greater than $15,000.

Exceptions to this rule are if you give the financial institution a signed form T1036 (HBP) or RC96 (LLP).

These forms allow a financial institution to release the full amount of funds to you without withholding tax.

Both plans require participants to file a completed Schedule 7 with their income tax return to designate the contributions as either a LLP or HBP repayment.

Failure to complete this schedule may result in CRA including the required repayment as income and assessing your tax return accordingly. The repayment may be done to an existing RRSP account or to a new one. The RRSP issuer should give the participant an official receipt for the contribution.

Liquidity is a very important component to consider if you are looking at participating in one these plans. Cash has to be available within the RRSP account.

Some investments that may be purchased within an RRSP are illiquid or require fees for selling early.

Before you pay your tuition or buy a home you may want to consider all of your funding options.

Care should be taken to understand all important dates and exceptions that are specific to both plans.

Prior to considering these plans you should read the CRA guides RC4135 (HBP) and RC4112 (LLP) available in both printed versions and online.

-- Keith Greenard CIM FCSI and Kevin Greenard CA FMA CFP are members of The Greenard Group at ScotiaMcLeod in Victoria. Call 250-389-2138 or check www.greenardgroup.com

greenard-group@scotiamcleod.com

Victoria Times Colonist

Canada not linked to US real estate market troubles

The melt-down of the U.S. real estate market has left many homebuyers wondering if and how it may affect the housing market in Canada. But market analysts say the problems in the U.S. will have little impact on Canadian real estate.

For example, according to a recent House Price Survey report released by Royal LePage Real Estate Services, Canada's resale housing market remained on solid ground during the third quarter as high consumer confidence, strong employment rates and stable interest rates led to robust buyer demand and a rise in house prices. “Much like the Canadian dollar, the Canadian housing market is charting its own course, quite independent from the United States and its currency and housing climate,” said Phil Soper, president and chief executive, Royal LePage Real Estate Services. “The strength of the Canadian dollar, and the fact that the country is adjusting well to its value, will continue to keep interest rates at their existing low-to-moderate levels, boding well for buyers looking to enter the market.”

Statistics Canada also recently reported that the home ownership rate stands at its highest on record. “With the combination of the cost of borrowing money remaining relatively low, the availability of longer mortgage amortization periods, and the fact that Canada's population continues to grow, it is no surprise that more and more people are entering the real estate market,” the report states.

Fundamental differences
The Emerging Trends in Real Estate Report 2008, recently released by U.S.-based Urban Land Institute and PricewaterhouseCoopers, suggests the real estate market will remain upbeat in Canada over the coming year. The report is based on interviews with real estate executives in both Canada and the U.S. Some of the reasons why Canada is not expected to experience the same downturn as the U.S. in its real estate markets according to the report include:

Canada benefits from a simpler economy and a more conservative investment environment than the United States, avoiding the consequences of lax underwriting and speculative building.
In Canada, institution-dominated markets appear to be avoiding "transaction mania," but real estate values have reached record highs and a strong economy has accelerated tenant demand for space.
Canadian federal surpluses have given consumers more confidence which has led to increased spending on homes, retail goods and business expansion.
Canada is naturally rich in areas such as energy and resources and benefits from huge global demand, which fuels both the economy and demand for all forms of real estate.
Housing prices continue to skyrocket toward new highs without overdoing mortgage financing.
Canadian metropolitan areas boast below 5% vacancies, and rents have room to push higher. Rental apartments are doing well in major cities with high immigration flows.
Canada's economy continues to be healthy and the soaring dollar brings benefits to importers and any company looking to make capital purchases, which are almost always priced in U.S. dollars.
No sub-prime lending market
Finally, another big difference between the U.S. and Canada has to do with mortgage loans. Unlike the U.S., the Canadian housing market has not been artificially driven by bad lending practices. In the U.S. lenders with liquid assets or investment money were making loans to almost anyone who asked. When U.S. housing prices started to slide and interest rates began to rise, many borrowers ended up in trouble and defaulted which in turn, initiated the credit crunch. However, by June 2007, only 5 per cent of mortgages in Canada were sub-prime as compared to more than 21 per cent of U.S. mortgages. As well, all mortgages in Canada are insured which is not the case in the U.S.

Canada's long-term fundamentals are solid. Canada has a growing population, our energy and commodities are in high demand, and job creation is strong. All of these attributes seem to have created a buffer shielding Canada from some of the problems in the U.S. real estate market. To learn more about the situation in the U.S. lending market and help you to explain it to your clients and customers, CREA has a Credit Crunch Primer available online at www.realtorlink.ca.

courtesy of OREA.