Eric Shackleton
Other

TORONTO – Canada’s cooling real-estate sector is slowly moving toward a more balanced market, but there won’t be any bust like that seen in the U.S. following the subprime mortgage crisis, Scotiabank economist Adrienne Warren said Thursday following the release of several housing reports.

“We have been anticipating lower sales this year and more modest price increases,” said Warren, senior economist at Scotia Economics, after the bank forecast overall sales 15 per cent below last year’s record levels, with home prices increasing on average about five per cent.

“We’re finally seeing that slowdown actually appear in the housing data – housing starts, home sales and price increases.”

On Wednesday, the Canadian Real Estate Association released a survey showing that during April new listings rose by more than sales activity, making it more of a buyer’s market than in any other month in the past nine years

Warren said some regional markets have certainly slipped into the buyers’ category, in which the number of sales is less than the number of properties listed, giving buyers more bargaining power. But nationally “we’re not quite there yet.”

“Calgary and Edmonton, those are clearly buyers’ markets,” she said.

In Alberta, “we’ve seen sales fall off more sharply than in some other areas of the country because of high housing prices. We’ve also seen a significant flood of new listings and new home building.”

Looking at other markets, though, across the country, said Warren, “most of your major urban centres are still modestly sellers, but not as much as they were in recent years. We’re moving towards more balance.”

That’s why, she said “we’re moving from 10 per cent (price) increases, which is a buyers market, to five per cent increases which would be a slight sellers market.”

Said Warren, “by 2009 nationally you’ll be in a balanced market, where prices are growing in line with inflation.”

At the moment, however, said Pascal Pelletier, a housing analyst with Canada Mortgage and Housing Corp., Canada is still basically a sellers market.

Canada Mortgage and Housing Corp. forecast Thursday that new home construction in Canada will slow to 214,650 units this year, from last year’s 228,343, with seven out of 10 provinces registering declines.

As well, the national housing agency says the number of existing homes sold is expected to fall by 8.5 per cent.

The downward trend will continue in 2009, CMHC said, with housing starts dipping to 199,900 and existing home sales crumbling another 2.3 per cent to 465,000 units.

“Most of the pent-up demand that built up during the 1990s has now been fulfilled and residential construction activity will gradually move in line with Canadian demographic fundamentals,” said CMHC chief economist Bob Dugan.

“These factors will continue to exert downward pressure on housing starts,” he said.

Warren said “cracks are appearing on the new home front as well,” as demand for new residential building permits has fallen sharply and price increases are moderating as inventories of unsold homes trend higher.

But despite the cooling trend, all of the reports said Canada’s housing market remains healthy and activity this year, while off last year’s record levels, will be strong by historical standards.

“I don’t think you’re likely to see a whole lot of price discounting in homes at this particular period, given that the economy is still holding up fairly well,” said Warren.

“There are no major strains in the housing market as of yet, but certainly sellers are not going to have the option of being price setters anymore,” she said.

“I don’t think they can expect to see, in most cases outside of a few hot pockets, multiple offers and bidding wars because there are fewer buyers and more choice for those buyers.”

Despite the slowdown in the Canadian housing market, no U.S.-style meltdown is in the cards, said Warren.

“First, home prices in Canada are not substantially overvalued,” she pointed out. “Second, there is still little evidence of widespread speculative home buying that often accompanies the late stages of a housing boom.”

As well, Canada’s real estate market is not overbuilt and households are not excessively indebted, she added.

“At the end of the day, we predict a soft landing for the Canadian housing market, with somewhat lower sales and construction, and a period of relatively flat inflation-adjusted home prices.”

Dugan pointed to strong economic fundamentals such as employment levels, rising incomes and low mortgage rates as providing solid foundations for residential housing this year.

The CMHC forecast sees average home prices rising 5.1 per cent this year and 3.3 per cent in 2009, after average annual increases of about 10 per cent from 2002 to 2007.

What “we’re seeing is the end of a long housing boom being reinforced by softer economic conditions, tighter credit markets, and in some places pressure on consumers from rising fuel and food prices,” said Warren.

So far, “we haven’t seen any rise in defaults on mortgage payments,” she said. “Canadian household finances are still quite sound, job markets are quite strong, wage growth has been quite strong.”

Mostly it is the affordability issue that has seen some potential homebuyers seeking out less costly ways of getting into the market, she said.

“We’ve definitely seen a shift towards the condominium market which is more affordable,” and changes in mortgage product mixes by financial institutions such as “less down, longer amortization periods to make it more affordable.”

On the interest rate front, she said, “we do expect that the Bank of Canada is probably going to lower interest rates a little bit more over the next couple of months.” That should also help support the housing market.

CMHC says prices of existing houses will rise this year by 9.3 per cent in B.C., 3.6 per cent in Alberta, 26.1 per cent in Saskatchewan, 13.5 per cent in Manitoba, 3.5 per cent in Ontario, 4.7 per cent in Quebec, four per cent in New Brunswick, five per cent in Nova Scotia, three per cent in Prince Edward Island and 10.5 per cent in Newfoundland and Labrador.

Stephanie Armour
USA Today

On a brisk day last fall in Prineville, Ore., Raymond and Deanna Donaca faced the unthinkable: They were losing their home to foreclosure and had days to move out.

For more than two decades, the couple had lived in their three-level house, where the elms outside blazed with yellow shades of fall and their four golden retrievers slept in the yard. The town had always been home, with a lazy river and rolling hills dotted by gnarled juniper trees.

Yet just before lunch on Oct. 23, the Donacas closed all their home’s doors except the one to the garage and left their 1981 Cadillac Eldorado running. Toxic fumes filled the home. When sheriff’s deputies arrived at about 1 p.m., they found the body of Raymond, 71, on the second floor along with three dead dogs. The body of Deanna, 69, was in an upstairs bedroom, close to another dead retriever.

“It is believed that the Donacas committed suicide after attempts to save their home following a foreclosure notice left them believing they had few options,” the Crook County Sheriff’s Office said in a report.

Their suicides were a tragic extreme, but the Donacas‘ case symbolizes how the housing crisis is wrenching the emotional lives of legions of homeowners. The escalating pace of foreclosures and rising fears among some homeowners about keeping up with their mortgages are creating a range of emotional problems, mental-health specialists say. Those include anxiety disorders, depression and addictive behaviors such as alcoholism and gambling. And, in a few cases, suicide.

Crisis hotlines are reporting a surge in calls from frantic homeowners. The American Psychological Association (APA) and other mental-health groups are publishing tips on how to handle the emotional stress triggered by the real estate meltdown. Psychologists say they’re seeing more drinking, domestic violence and marital problems linked to mortgage concerns — as well as children trying to cope with extreme anxiety when their families are forced to move.

“They’re depressed, anxious. It’s affected marriages, relationships,” says Richard Chaifetz, CEO of ComPsych, a Chicago-based employee-assistance firm that is counseling homeowners over mortgage fears. “People tend to catastrophize, and that leads to depression. Suicide rates go up. We see an increase in drinking, outbursts at work, violence toward kids. Before, their houses were like ATMs,” as they rose in value. “Now, they feel trapped like a rat in a corner.”

Foreclosure filings surged 65% in April compared with the same month last year, according to a report Wednesday by RealtyTrac. One in every 519 households received a foreclosure filing last month, and the number of homes with foreclosure activity in April was the highest monthly total since RealtyTrac began issuing the report in January 2005.

Don Donaca, Raymond’s brother, says it’s hard to understand the suicide, but he thinks the pending foreclosure led to their deaths.

“He got so deep in debt he couldn’t figure out what else to do,” says Don, 74, a retired sawmill worker in Prineville. “I guess a guy would have to walk a few miles in his shoes to understand.”

Financial concerns at the top

Many other homeowners are at risk of less-severe, but still significant, psychological distress: One in seven homeowners worry that they won’t be able to make their mortgage payments on time over the next six months, according to an April Associated Press-AOL Money & Finance poll, and more than one-quarter fear their home will decline in value during the next two years.

ComPsych says financial concerns are now the top issue the firm’s counselors are hearing in calls from clients. Calls about financial worries have surged 20% over last year; those related to mortgage problems have doubled.

“It’s escalated to the No. 1 issue because of the housing crisis,” Chaifetz says.

Half of Americans identify housing costs, such as rent or mortgage payments, as significant sources of stress, particularly on the East and West coasts, a 2007 survey by the APA says. Sixty-one percent in the West, and 55% in the East (compared with 47% in the Midwest and 43% in the South) reported housing costs as a very or somewhat significant source of stress.

“The problem affects the whole spectrum, not just people losing their homes,” says LeslieBeth Wish, a psychologist and social worker in Sarasota, Fla. “The stress exacerbates what is already there. It brings to the surface problems that were often already there, like marital problems. There is so much blaming people for the situations they’re in, and that adds to it.”

One of Wish’s patients was semiretired when she bought a home in 2005 in southwest Florida as an investment that she hoped to “flip,” turning a profit. The woman now owes more than the house is worth and can’t sell it.

Wish says her client has developed anxiety, dwelling on her financial situation from the time she wakes up to the time she goes to sleep. Other clients, Wish says, are reporting physical symptoms such as headaches and stomach pains stemming from anxiety over their mortgage situation.

ComPsych’s counselors are hearing similar stories of the mental-health toll caused by the housing slump. At the request of USA TODAY, ComPsych’s spokeswoman Jennifer Hudson queried counselors to come up with examples of the types of employees they’re helping. One couple were going through a divorce, and the wife told ComPsych counselors that financial stress was the final trigger. They had maxed out their credit cards and were living off credit in hopes that they could keep their house. Another woman called because she suspected her husband was gambling again, apparently hoping to win big so they could repair their financial mess. She was afraid they were going to have to move in with her parents, ComPsych says.

For Gary Sweredoski of Myrtle Beach, S.C., the threat of losing his home to foreclosure has taken both a physical and an emotional toll. In 2007, Sweredoski, who had no health insurance, underwent triple bypass surgery and wound up with more than $300,000 in medical bills. Then Sweredoski, 60, a real estate broker, saw his business suffer as the housing market crashed.

Today, he and his wife, Irene, struggle to make the mortgage payment on the dream home they built in Myrtle Beach and are trying to stave off foreclosure. Like many other homeowners struggling with the financial consequences of the housing slump, Gary says the emotional pain can be severe.

Standing on his deck overlooking a lake where ducks swim and bobbing pontoon boats drift by, he says such circumstances “shatter your pride and become very humiliating, even though the circumstances are not of our making.

“The situation keeps you up at night, preventing you from getting the rest you need. A lot of the depression that I feel, I do in private,” he says.

“It angers you. It frustrates you. It has a large bearing on your emotional state. When the thought of losing a home looms, you lose more than a building. You lose what you worked for so many years, all of the equity that you have accumulated over the years. It’s humbling. It affects us deeply.”

Rising depression, suicide rates

Historically, research shows, rates of depression and suicide tend to climb during times of economic tumult.

In an article published in 2005 by Cambridge University Press, researchers compared suicide data in Australia from January 1968 through August 2002 with economic problems such as unemployment and mortgage interest rates. The study found that economic trends are closely associated with suicide risk, with men showing a heightened risk of suicide in the face of economic adversity.

“For some people, suicide is the rational option when they see no future,” says Ken Siegel, a psychologist in Beverly Hills. “One’s house is very much a projection of one’s self. To have a home taken away is tantamount to having part of yourself taken away. There is embarrassment. For many, it’s overwhelmingly unconquerable.”

In the most severe cases, as with the Donacas, authorities have linked suicides with the financial stress of foreclosures. On Oct. 25, 2007, James Hahn, 39, a chemist in north Houston, was facing foreclosure and had to vacate his home. When deputies arrived with eviction papers, Hahn engaged them and a SWAT team in a standoff that lasted more than 10 hours. It ended in the early morning when Hahn shot himself inside his home, according to a Houston Police Department report.

“Suicides are very much tied to the economy,” says Kathleen Hall, founder and CEO of The Stress Institute in Atlanta. “It’s a public-health issue.”

In many cases, psychiatrists say, financial stresses, such as those caused by the mortgage crisis, tend to bring pre-existing mental-health issues to the surface. Studies also show a strong connection between financial distress and emotional stress, including anxiety, depression, insomnia and migraines.

“Often, there is a dilemma of not being able to afford private mental-health treatment in the midst of a financial crisis,” says Joseph Weiner, a psychiatrist and chief of consultation psychiatry at North Shore University Hospital in Manhasset, N.Y. “Children will likely feel the parents’ tension around financial stress. This could cause feelings of helplessness and anxiety in the child. Sometimes, young children blame themselves for their parents’ stressful situation.”

Jennifer Paschal, 36, of Woodstock, Ga., has tried to ease the effect of the foreclosure of her home on her children, Bailey, 12, and Trent, 9. But she says they’ve been deeply pained. After 13 years of marriage, Paschal is going through a divorce. The divorce and medical bills led the family to lose its home to foreclosure in April. Paschal couldn’t afford the $1,300 monthly mortgage payment on her $45,000 annual salary as a day care center director.

The home is a six-bedroom house on an acre of land, with a trampoline in the backyard, blooming pink azaleas and rose bushes, and a muddy creek where Trent and Bailey would catch frogs and play with their two dogs, a retriever and a Labrador.

Before they left, Paschal took the children to their rooms and told them to fill a box with whatever they wanted to take with them. They moved in July to a two-bedroom, $900-a-month apartment. The “for sale” sign on the house they lost to foreclosure went up this month. When she saw a picture of it, Paschal says, she cried.

The children are suffering, too. Trent worries about money. Recently, at the grocery store, he told his mother not to buy milk because it cost $4. He begs his mother to get a house again, saying that he’s old enough now to cut the grass.

“It’s hard,” Paschal says. “I think they see things very differently now. My son asked me how much money I have, and I told him not to worry about it. We had to give away our Lab and our bird dog (because it seemed unfair to keep them in such a small apartment). That killed my son. That tore him apart, big time.”

In the new apartment, Paschal doesn’t sleep well. After she goes to bed, she hears Trent scurry out of his bed to make sure all the doors are locked. Then Trent comes to her room and quietly tells his mother she can sleep now because everything is safe.

 

Sun

Before making firm plans to put in a new kitchen or add the sunroom you have always dreamed of, it’s a good idea to take a close look at the condition of your home. It’s important to know if there are any underlying problems or repairs or replacements that need to be dealt with in the near future. With a clear picture of the condition of your home, you can budget for the short and the long term.

HERE IS WHAT YOU CAN TYPICALLY EXPECT TO FIND IN AN OLDER HOME:

– Wear and tear. Many items that suffer the most from normal wear and tear are not necessarily expensive to redo or replace, but can make a big difference to the appearance of your home, and your enjoyment of it-for instance paint, wallpaper, carpeting, floor finishes, exterior and interior trim, stairs and eaves.

– Components reach the end of their service life. Many of the products in your home have a defined lifespan. Careful maintenance may extend this somewhat, but sooner or later you need to replace them. For instance, after 15 to 20 years roof shingles may begin to curl, disintegrate and lose their ability to keep out moisture.

— Structural damage. Over time, cracks may appear in the foundation and brick siding, gaps may develop between the foundation and walls, or there may be other evidence of shifting and movement. As a result, your home may not be as comfortable, energy efficient or healthy as it could be, and if these problems are left unattended, further structural deterioration may occur, leading to more costly repairs.

– Moisture problems. Moisture can damage your home and your health. Water seepage around plumbing fixtures can destroy surrounding wood and finishes. Moisture trapped in the exterior walls and roof can cause structural deterioration and create cracks, bulges or stains in walls and ceilings. Condensation on windows can eventually rot wood frames and sills. Molds may grow in both visible and invisible places, and a damp basement may give the whole house a musty, unpleasant smell. Moisture problems should be identified and dealt with before or at the same time as your renovation; this will help to protect your home, improve the quality of the indoor air and ensure a healthier living environment for you and your family.

– Need to upgrade systems. The electrical system in your home may pre-date today’s equipment-intensive lifestyle and may not be adequate, or safe, for your needs. Your plumbing system may not give you enough hot water or steady pressure for your family’s showers and laundry. An older heating system may not deliver enough heat.

– Need to upgrade the energy efficiency. Improving the energy efficiency of your home can save you money and increase your living comfort-fewer drafts, fewer cold and hot spots, less fluctuation in temperature. From caulking to added insulation to better windows, there are many ways to upgrade the energy performance of an older home.

A good first step is to conduct your own inspection. Canada Mortgage and Housing Corporation has a range of information, including a Homeowner’s Inspection Checklist to assist homeowners in this task.

When you discuss plans with a professional renovator, you can expect a detailed assessment of your project-what’s involved, the impact on the whole house and the need to upgrade systems or the structure. The renovator will also advise on other work that may be needed.

Renovators may recommend the services of an EnerGuide for Houses advisor to assess the energy performance of your home and opportunities for upgrading. In the event of severe air quality and mold problems, they may suggest you hire an indoor air quality investigator.

© The Vancouver Sun 2008

 

Listings increase means hotter competition among sellers

Province

OTTAWA — There were a record number of homes for sale last month, resulting in the smallest year-to-year gain in prices in more than six years, the real-estate industry reported yesterday.

The number of newly listed properties in major Canadian cities rose by 1.8 per cent to a seasonally adjusted 52,775, and were 17.7 per cent higher than a year earlier, the Canadian Real Estate Association said.

Meanwhile, the average price for a home was $334,293, up 3.2 per cent from a year earlier, it noted.

“The rise in new listings outpaced a small gain in sales activity, resulting in a more balanced market,” it said, adding that the increase was largely due to a surge in new listings in Toronto and Saskatoon, which more than offset a decline in homes for sales in Edmonton and Calgary from what had been record levels in March.

Seasonally adjusted sales in Canada’s major markets edged up 0.8 per cent to 27,039 units in April, with the small monthly gain due to increases sales in Quebec City, Toronto, Winnipeg, Halifax-Dartmouth, Hamilton-Burlington, Ont., St. Catharines, Ont., and in Newfoundland & Labrador, which offset fewer sales in Vancouver, London, Ont., and St. Thomas, Ont., Calgary and Victoria.

“This means buyers face less competition in their search for a home,” said Calvin Lindberg, president of association. “It also means more competition among home sellers, so presentation factors such as prudent pricing are necessary for faster sale.”

“An increase in listings is resulting in a more balanced resale housing market in Vancouver, Calgary, Toronto and Montreal, the four most active of Canada’s major markets,” said association chief economist Gregory Klump.

“New listings are forecast to rise further as sales activity continues retreating from the peak last year, resulting in an increasingly balanced resale housing market and smaller home price increases.”

© The Vancouver Province 2008

 

Realtor urges more density in exchange for extra units sold at lower profit

Lena Sin
Province

Bob Rennie, one of Vancouver‘s most influential realtors, says he’s got a solution to the housing squeeze on families and first-time home buyers.

“It’s simple, simple, simple,” said Rennie. “It has to be so simple that the developer would be crazy not to do it.”

With housing affordability gone in the Lower Mainland, Rennie says it’s time industry, government and would-be homeowners come together to tackle the issue.

The affordability problem is expected to be the focus of Rennie’s annual address today at the Urban Development Institute.

The institute represents the development industry and Rennie’s “state of the union” delivery is closely watched.

“All highrises, whether it’s in Coquitlam, Surrey, Port Moody, Port Coquitlam or Burnaby — they’re all hovering either side of that $500 per square foot. That’s really starting to tax local incomes,” he said.

To help homebuyers latch onto the property ladder, Rennie says city officials need to grant extra density to developers on new projects.

In return, the developer reduces the profit on those extra units to just 10 per cent — a figure Rennie calls “ridiculously low.”

Costs can be further reduced if interior finishes are done to an “Ikea level” rather than high-end granite and stainless steel.

By doing all of that, the price tag can be substantially reduced, by possibly as much as 25 per cent, Rennie estimates.

“I can’t put the developer in the social housing business or the middle-market business,” said Rennie. “But with this model, it’s just icing on the cake. Everyone wins.”

It’s a model that Rennie envisions working not just in Vancouver, but throughout the Lower Mainland.

While it will likely do little for those aspiring to own a detached house in Vancouver, Rennie argues it at least provides first-time buyers and young families the chance to own a larger condo or townhouse, which are currently out of reach for many wage-earners.

By the end of 2007, it required 79.2 per cent of the median pre-tax household income in Vancouver to buy a 1,500-square-foot house, an 18-year high, according to report in January by RBC Financial Group.

While the report said it expects some relief this year, with an increased supply of housing in the Vancouver market, it also predicted moderate price gains.

Whistler has already implemented a similar affordable-housing scheme by increasing densities for developers.

But Whistler politicians say their exact model — which requires the bonus units to be sold at cost — would never work in Vancouver.

“There’s pushback from the development community which places [city] councils in an awkward position,” said Whistler Mayor Ken Melamed. “And particularly in the Lower Mainland, the developer will often move to the next jurisdiction where the council isn’t as worried about it.”

By allowing developers to make a 10-per-cent profit on bonus units, everyone wins, says Rennie.

Rennie says he’s committed to figuring out how to get “the fortunate living with the less fortunate.”

“I want to get all municipal planning departments together and let them yell at me and tell me how stupid I am and how it doesn’t work. But I want to convince them — and I’m going to be rather hard on them,” he said.

A SERIES OF QUESTIONS AND ANSWERS ON PROPERTY VALUES AND WINDFALL PROFITS

Q: Will the first buyer be able to re-sell the property for a windfall profit?

A: No. To prevent flipping of the property for a windfall profit there must be a charge on title in favour of the city, which allows the city to access any proceeds of sale. The charge on title essentially gives the city a claim to the property.

Q: Will implementing this model affect property values?

A: No. The property value will continue to travel with the market. But if the owner purchased a condo for 75 per cent of market value, for example, when he wants to sell the unit he will only get 75 per cent of the profit.

The city, or whoever granted the bonus density, will be entitled to the remaining 25 per cent.

Q: How are prices kept affordable for the next buyer?

A: The next buyer can still purchase at below market as long as they keep the charge on title in favour of the city.

© The Vancouver Province 2008