Tuesday, 31 August 2010
Though home sales are slowing, prices in six of Canada's largest housing markets are in bubble territory.
Home prices are sitting at 4.7 to 11.3 times Canadians' annual income - much higher than historical comfort levels of between three and four times income, according to a report by the Canadian Centre for Policy Alternatives. The report defines a bubble occurring when housing prices increase more rapidly than inflation, household incomes and economic growth.
"To see all of the major markets outside of that comfort zone is very unique and concerning," said David Macdonald, a research associate who wrote the report called "Canada's Housing Bubble: An Accident Waiting To Happen."
Sales have fallen by 25 per cent since reaching its peak at the begnning of the year. But canadian home prices were up 13.6 per cent in June from a year ago in Canada's major cities.
"The concern today is all six major markets, not just Vancouver and Toronto, are out of that comfort zone," said Macdonald, including Calgary, Edmonton, Ottawa and Montreal. "All six major markets now have an average price of over $300,000."
Source:
mortgagebrokernews.ca
Tuesday, August 31, 2010
Sunday, August 22, 2010
REAL ESTATE: BUY IT AND KEEP IT
Retirement Case Study: skewed in favor of…Are you looking at skewed numbers when making critical financial decisions? A retirement case study was forwarded to me by an associate who is an independent Certified Financial Planner (CFP). She wanted my input on an investment plan that seemed a little one-sided and sure enough, there was a fundamental flaw in that case study. Its focus was too narrow.
The company's article describes a semi-retired couple who want to travel and maintain their lifestyle. Three options are presented. The first option is to downsize and spend less. The second option is to withdraw money from their registered retirement savings plan. The third option is the investment portfolio offered by this particular company which is presented as the most lucrative of the three options. The case study is real. The analysis of this couple's financial options was dismally short-sighted.
The unfortunate fact is that most financial advisors do not present real estate investments as an o ption to their clients because there is no commission attached. They derive their income and livelihood by selling their company's products or a range of bank products. Independent CFP's charge a fee and provide non-biased advice. However, it all depends on how savvy the CFP is. Rich Dad Poor Dad author Robert T. Kiyosaki cautions his readers about the type of advisors you have on your team. If they're not making more money than you are, then chances are they will manage your finances to the level of their current financial success, not to yours.
The first option to downsize and spend less puts you into scarcity mode. A universal principle kicks in: what you focus on expands. So if you are thinking of spending less, you’re going to end up with less and less like a self-fulfilling prophecy. You actually want to do the opposite. Instead of spending less, make more money. Rightsize, Upsize and go for more. This puts you into abundance mode and opportunities will come into your life. The second option to withdraw money from an RRSP is a no-win plan. When you think about it, the government created RRSP’s as a form of forced savings.
To entice people to make regular contributions, the incentive is tax deferral until you withdraw this money in the future. The premise of planning for the future is sound. I disagree with the method. A savings plan is a type of depletion strategy. You're saving up in order to spend in the future. Let's face it. Most people's money will run out during their retirement years. We are retiring earlier and living longer. My grandmother lived for 98 years. That’s an additional 33 years after retirement. Do the math on your projected life expectancy. The third option offered by the investment company appeared like it was the only viable option. Although the comparison was made using home equity as the source of investment funds, not once did they mention real estate investments as a viable investment option. Using a side-by-side comparison,
I took the same $100,000 of home equity and compared their projected return versus my projected real estate investment return. And guess what? There's really no comparison. Real estate is the undisputed winner. Their portfolio requires a 100% cash investment leveraging only 1 profit center: the fund. My comparison requires a 10% and 20% cash investment leveraging 7 profit centers: purchase of 3 single family dwellings.Their portfolio projects $90,000 in cash flow and an investment portfolio valued at $119,471 after 15 years. My comparison projects $81,000 in cash flow and an investment portfolio valued at $708,336 after 15 years. And even the real estate comparison is skewed as increases in rent and principle paydown of the mortgage were not factored in over the 15 years in order to keep the math simple. In actuality, there’s more cash flow and more equity through the real estate portfolio.
Is it okay to have more money than you expected? I thought so. Retirement isn't about saving up to spend less. That model is a dinosaur; extinct. Retirement is about creating passive income that replaces your existing income. It doesn't matter what you do, how you do it or when you do it. You can choose to live the lifestyle of your choice on your terms. If you would like more hands-on learning, you are invited to attend a free upcoming seminar.
Check website at www.OnTheBeachEducation.com for event details.
The company's article describes a semi-retired couple who want to travel and maintain their lifestyle. Three options are presented. The first option is to downsize and spend less. The second option is to withdraw money from their registered retirement savings plan. The third option is the investment portfolio offered by this particular company which is presented as the most lucrative of the three options. The case study is real. The analysis of this couple's financial options was dismally short-sighted.
The unfortunate fact is that most financial advisors do not present real estate investments as an o ption to their clients because there is no commission attached. They derive their income and livelihood by selling their company's products or a range of bank products. Independent CFP's charge a fee and provide non-biased advice. However, it all depends on how savvy the CFP is. Rich Dad Poor Dad author Robert T. Kiyosaki cautions his readers about the type of advisors you have on your team. If they're not making more money than you are, then chances are they will manage your finances to the level of their current financial success, not to yours.
The first option to downsize and spend less puts you into scarcity mode. A universal principle kicks in: what you focus on expands. So if you are thinking of spending less, you’re going to end up with less and less like a self-fulfilling prophecy. You actually want to do the opposite. Instead of spending less, make more money. Rightsize, Upsize and go for more. This puts you into abundance mode and opportunities will come into your life. The second option to withdraw money from an RRSP is a no-win plan. When you think about it, the government created RRSP’s as a form of forced savings.
To entice people to make regular contributions, the incentive is tax deferral until you withdraw this money in the future. The premise of planning for the future is sound. I disagree with the method. A savings plan is a type of depletion strategy. You're saving up in order to spend in the future. Let's face it. Most people's money will run out during their retirement years. We are retiring earlier and living longer. My grandmother lived for 98 years. That’s an additional 33 years after retirement. Do the math on your projected life expectancy. The third option offered by the investment company appeared like it was the only viable option. Although the comparison was made using home equity as the source of investment funds, not once did they mention real estate investments as a viable investment option. Using a side-by-side comparison,
I took the same $100,000 of home equity and compared their projected return versus my projected real estate investment return. And guess what? There's really no comparison. Real estate is the undisputed winner. Their portfolio requires a 100% cash investment leveraging only 1 profit center: the fund. My comparison requires a 10% and 20% cash investment leveraging 7 profit centers: purchase of 3 single family dwellings.Their portfolio projects $90,000 in cash flow and an investment portfolio valued at $119,471 after 15 years. My comparison projects $81,000 in cash flow and an investment portfolio valued at $708,336 after 15 years. And even the real estate comparison is skewed as increases in rent and principle paydown of the mortgage were not factored in over the 15 years in order to keep the math simple. In actuality, there’s more cash flow and more equity through the real estate portfolio.
Is it okay to have more money than you expected? I thought so. Retirement isn't about saving up to spend less. That model is a dinosaur; extinct. Retirement is about creating passive income that replaces your existing income. It doesn't matter what you do, how you do it or when you do it. You can choose to live the lifestyle of your choice on your terms. If you would like more hands-on learning, you are invited to attend a free upcoming seminar.
Check website at www.OnTheBeachEducation.com for event details.
Thursday, August 12, 2010
BC Home Sales Expected to rise in 2011
BCREA Housing Forecast Update - Third Quarter 2010
BC housing markets are returning to typical post-recession demand patterns. The dramatic rebound in consumer demand during 2009 and subsequent decline during the first two quarters of 2010 has set the stage for a gradual increase in home sales during the fall and through 2011. Residential unit sales through the Multiple Listing Service® (MLS®) in BC are forecast to decrease 7 per cent to 79,500 units in 2010, before climbing 5 per cent to 83,400 units in 2011.
A slower than expected normalization of interest rates will temper erosion of affordability as economic output posts more moderate growth for the balance of this year and through 2011. Stronger corporate profits are triggering employment growth and a reduction in the unemployment rate is now underway.
A larger inventory of homes for sale has created the most favourable supply conditions for home buyers in more than a year. While tighter mortgage qualifications for low equity home buyers has negatively impacted demand, more borrowers are now channeling into 5-year fixed mortgages where discounted rates increase purchasing power.
The average MLS® residential price is forecast to increase 6 per cent to $492,800 this year and edge down 1 per cent to $489,500 in 2011. Some softness in home prices is expected through the summer months in most regional markets. However, inventory levels peaked in May and will likely edge lower in the coming months, leading to more balanced conditions in the fall with a commensurate firming of home prices.
“The volatility in consumer demand characteristic of the past 24 months is expected to give way to more gradual improvement through 2011,” said Cameron Muir, BCREA Chief Economist. “Housing demand has fallen back to earth from its break-neck pace at the end of 2009 and is expected to more closely match overall economic performance over the next 18 months.
“A larger inventory of homes for sale has created the most favourable conditions for home buyers in more than a year,” added Muir. “However, the buyers’ market is expected to be short-lived as total active listings peaked in May and are beginning to wane, with more balanced conditions set to emerge in the fall.”
After a sharp pull back in new home construction last year, home builders are gradually increasing production to meet demand. BC led the country in population growth over the last three quarters and with the inventory of complete and unoccupied units expected to decline, builders are adjusting production to match supply with household formation.
Source: Source: British Columbia Real Estate Association
BC housing markets are returning to typical post-recession demand patterns. The dramatic rebound in consumer demand during 2009 and subsequent decline during the first two quarters of 2010 has set the stage for a gradual increase in home sales during the fall and through 2011. Residential unit sales through the Multiple Listing Service® (MLS®) in BC are forecast to decrease 7 per cent to 79,500 units in 2010, before climbing 5 per cent to 83,400 units in 2011.
A slower than expected normalization of interest rates will temper erosion of affordability as economic output posts more moderate growth for the balance of this year and through 2011. Stronger corporate profits are triggering employment growth and a reduction in the unemployment rate is now underway.
A larger inventory of homes for sale has created the most favourable supply conditions for home buyers in more than a year. While tighter mortgage qualifications for low equity home buyers has negatively impacted demand, more borrowers are now channeling into 5-year fixed mortgages where discounted rates increase purchasing power.
The average MLS® residential price is forecast to increase 6 per cent to $492,800 this year and edge down 1 per cent to $489,500 in 2011. Some softness in home prices is expected through the summer months in most regional markets. However, inventory levels peaked in May and will likely edge lower in the coming months, leading to more balanced conditions in the fall with a commensurate firming of home prices.
“The volatility in consumer demand characteristic of the past 24 months is expected to give way to more gradual improvement through 2011,” said Cameron Muir, BCREA Chief Economist. “Housing demand has fallen back to earth from its break-neck pace at the end of 2009 and is expected to more closely match overall economic performance over the next 18 months.
“A larger inventory of homes for sale has created the most favourable conditions for home buyers in more than a year,” added Muir. “However, the buyers’ market is expected to be short-lived as total active listings peaked in May and are beginning to wane, with more balanced conditions set to emerge in the fall.”
After a sharp pull back in new home construction last year, home builders are gradually increasing production to meet demand. BC led the country in population growth over the last three quarters and with the inventory of complete and unoccupied units expected to decline, builders are adjusting production to match supply with household formation.
Source: Source: British Columbia Real Estate Association
Old Electronic WANTED
E-Recycling event returns September 16
The last two years, your Board has partnered with the Electronics Recycling Association (ERA) to collect unwanted or unused electronic equipment for environmentally conscious recycling. Combining 2008’s weeklong event and last year’s one-day event, our members and staff have recycled just over 2,400 items through the ERA.
We are happy to announce that we will once again be teaming up with the ERA to host another electronics recycling event for members here at the Board. The event will take place on Thursday, September 16 from 9 a.m. to 3:00 p.m. at the shipping dock in the alley behind our building at 2433 Spruce Street in Vancouver. Hot dogs and pop will be on sale in the afternoon with the profits going to a REALTORS Care® charity.
“This event allows our members the opportunity to dispose of unwanted electronics not only in an environmentally responsible manner, but a socially responsible manner as well,” says Jake Moldowan, REBGV president.
The ERA is a non-profit organization that donates the used electronic equipment they collect to local schools, charities, libraries, seniors’ homes, and other community-based organizations at no charge. They inspect all computers and electronics collected, reuse and refurbish first, and only then will they send the unsalvageable equipment to government certified processors for dismantling and recycling.
We must receive all donations by 3:00 p.m. so that the people from ERA will have enough time to load the collected items into the truck. For more information, contact Jun Bernadas at 604.730.3017.
REALTORS® Electronics Recycling EventThursday, September 16, 20109:00 a.m. to 3:00 p.m. Real Estate Board of Greater Vancouver2433 Spruce St., Vancouver
Items that CAN be donated:
Computers, monitors, PC parts;
Scanners, servers, hubs, printers, fax machines;
Peripherals, barcode equipment, UPS;
Network equipment;
Server racks, switches;
Wires and cables;
Plotters, projection systems;
Telecommunication equipment;
VCRs, DVDs, cameras;
Audio/stereo equipment;
Mobile phones;
Satellite/wireless equipment
Items that CANNOT be donated:
Appliances;
TVs
The last two years, your Board has partnered with the Electronics Recycling Association (ERA) to collect unwanted or unused electronic equipment for environmentally conscious recycling. Combining 2008’s weeklong event and last year’s one-day event, our members and staff have recycled just over 2,400 items through the ERA.
We are happy to announce that we will once again be teaming up with the ERA to host another electronics recycling event for members here at the Board. The event will take place on Thursday, September 16 from 9 a.m. to 3:00 p.m. at the shipping dock in the alley behind our building at 2433 Spruce Street in Vancouver. Hot dogs and pop will be on sale in the afternoon with the profits going to a REALTORS Care® charity.
“This event allows our members the opportunity to dispose of unwanted electronics not only in an environmentally responsible manner, but a socially responsible manner as well,” says Jake Moldowan, REBGV president.
The ERA is a non-profit organization that donates the used electronic equipment they collect to local schools, charities, libraries, seniors’ homes, and other community-based organizations at no charge. They inspect all computers and electronics collected, reuse and refurbish first, and only then will they send the unsalvageable equipment to government certified processors for dismantling and recycling.
We must receive all donations by 3:00 p.m. so that the people from ERA will have enough time to load the collected items into the truck. For more information, contact Jun Bernadas at 604.730.3017.
REALTORS® Electronics Recycling EventThursday, September 16, 20109:00 a.m. to 3:00 p.m. Real Estate Board of Greater Vancouver2433 Spruce St., Vancouver
Items that CAN be donated:
Computers, monitors, PC parts;
Scanners, servers, hubs, printers, fax machines;
Peripherals, barcode equipment, UPS;
Network equipment;
Server racks, switches;
Wires and cables;
Plotters, projection systems;
Telecommunication equipment;
VCRs, DVDs, cameras;
Audio/stereo equipment;
Mobile phones;
Satellite/wireless equipment
Items that CANNOT be donated:
Appliances;
TVs
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