Where do Economist Predict Rates are Going?

X6J5VV27TKMP
I chose a dang scary picture for today's post.

As of September 8th the Bank of Canada has set the Overnight Rate is 1%
Where do banks predict the overnight rate will by this time next year:



Scotia Bank: +0.75% (9/2/10)
CIBC: +0.5% (9/30/10)
TD: +0.63 (10/4/10) - This the annual average for the end of 2011
BMO: +0.58 (10/1/10)

Money is still going to be relatively cheap next year, so this will keep the real estate market buoyant.

What will cause a collapse

- Massive Jobs losses
- Credit Crunch and no lending
- People teetering on the brink of insolvency or have very little equity on their property (i.e Those in arrears in their mortgages)
- Big daddy of SARS or swine Flu

I think I'll take my chances buying right...especially since the volatility index of stocks is very high

REal Experts Pre-construction Condo Analysis: July

Project Developer District #Units Sold $/PSF
First Home Brampton Daniels Sandlewood/Bovaird 150 150 $251
Park 570 Vandyk Dundas/Cawthra 180 137 $328
Ventus 2 Metrogate Tridel Kennedy/401 314 113 $438

In July there were 1,222 sales (down 10% year over year)
Year to Date 2010 - 10,981 sales (up 103% from last year)
Unsold Inventory - 14,157 units (down 11.4% last year)

Observations

• No launches downtown meant Mississauga, Brampton and Scarborough did well
  
• Large drop in sales - 32% from the previous month (average drop June to July 15%) - may have been due to HST
  
• Number of projects increasing and absorptions are falling

Conclusions same from last month:

• 29+ launches set for fall, REal Experts expects to see sales fall and incentives to go up

Source: Colliers, pic from UrbanToronto (taken by Jasonzed)

The Greater Fool; Garth Turner

Read a blog post from Garth posted in December 2008 (Where Risk Lies)

Here are some of Garth's predictions:

• Falling house values until at least 2010
• Banks suspend dividend payments to stockholders
• Reduced exports and corporate failures as the US tries to protect jobs
• Fewer services as governments at all level struggle with a funding crisis
• Bankruptcy of major Ontario homebuilders
• Scaling back of 2010 Olympics in Vancouver
• Canadian dollar falls with oil into 60-cent US range
• Ottawa suspends social benefits. Pensions, child benefits etc. only for needy
• Widespread shortages of food, gasoline, home heating fuels
• Mass migration from urban, suburban areas, especially in GTA, as people flee crime and seek self-sufficiency

Obviously, none of these happened....not even close.

So does that mean, after the lack of physical proof Garth would ease up on his beliefs?
From his latest blog post...no?

So what does one do when they lack physical proof? They seek out social proof.

The principle of social proof states: The greater the number of people who find an idea correct, the more the given individual will perceive the idea as being correct.

Interesting to see that Garth is doing 9 Speaking Engagements in the next 5 weeks.

Save me from buying this crappy condo

Reading the latest tweet from a smart realtor Andrew LaFleur I got inspired to write about doing due dilligence on a resale condos.

We know it's important to review the status certificate and condo by-laws, but very few people take the time to review the condo board minutes. From my experience, reading the condo board minutes will give you valuable information on the building state of repair and how the condo board operates. This information will could save you a tremendous amount of money and stress.

So what do you look for when reviewing the condo board minutes?

Thomas Beyer, a specialist in doing condo conversions in Alberta, gives great advice:



Look for:

1. Discussion of major items in minutes of the condo board meetings, i.e. water leaks, new roof, bed bugs, plumbing issues, structural issues, windows, rotten balconies etc.
   
2. Potential cash-calls/special assessments and why
   
3. Reserve fund health vs. age of building (get help with an experienced property manager or lawyer on this)
4. If a newer building: discussion of significant maintenance fee increases
5. If a newer building: any disputes with developer or pending Tarion issues
   
6. Any special meetings outside the usually annual AGM for major decisions
   
7. Any budgeted / future major expenditures and anticipation of funding these same expenditures through reserve fund or special assessment (i.e. you think it is a good deal .. but in 2 months you're on the hook for a $35,000 special assessment to bring reserve fund current and fix all windows and a new roof )

Keep your eyes open

Would Toronto be more safer with no last call?

Night life in Toronto is a hundreds of million of dollars industry. If Toronto extended last call until 5a or staggering last calls over a longer period of time for certain neighborhoods, this may do two things:

• People will not be as drunk. Imagine that their is no mad dash to the bar before 2a. You wouldn't over consume by buying too much before cut off
• City will be safer: There won't be a mad dash of people on the streets looking for their cars or fighting for cabs. When you mix too many drunks in a small area nothing good could happen. By extending last call may cause people to leave at different times so club/lounge closings are more orderly

Toronto would definitely become more profitable and welcoming place for people to visit.

REal Experts Condo Market Analysis

Picture from Urban Toronto


Project Developer District #Units Sold $/PSF
Five Condos Graywood & Mod Downtown Core 493 320 $603
Tango Concord Adex Sheppard Corridor 384 218 $458
One Valhalla Edilcan Group Etobicoke 216 163 $403
King Edward Dundee & Skyline Downtown Core 145 143 $729
Four Seasons Catalia Richmond Hill 201 55 $402

In June there were 1,764 sales (down 0.9% from last year)
Year to Date 2010 - 9,934 sales (up 142% from last year)
Unsold Inventory - 14,498 units (down 15.6% last year)

Observations

• Commonality -Top 5 developers are active in courting the brokerage community
• Lots of sites competing for buyers.
• Developers continuing to buy sites at top dollar (e.g. Freed Developments purchases 2.4 acre site at 578 & 580 Front Street West (on the corner of Bathurst) for $42 million!)
• Toronto is now largest Hi-Rise Market in North America
• Prices are up from last year (2010 Avg $486 psf vs 2009 $430/psf - this stat is an average and really means nothing - have to see what's going on in your local market)
• Banks still tight on construction financing, most projects still require 20% down for the majority of their purchases
  

Conclusions

• 29+ launches set for fall, REal Experts expects to see sales fall and incentives to go up
  

Canada is Just a Rounding Error when Compared to the US

Reading the latest news on foreclosures from Lender's Processing Services, I'm amazed at the size of the US housing collapse when comparing it to Canada (via the Canadian Bankers Association).


US - 7,041,987 loans are either delinquent or in foreclosure
Canada - There are a TOTAL of 4,064,446 loans

US - 2,473,067 mortgages are more than 90 days delinquent
Canada - 17,090 mortgages are more than 90 days delinquent (or 0.69% of the total US mortgages more than 90 days delinquent and 0.42% of the total amount of Canadian mortgages )

Hence, Canada is just a rounding error when compared to US