Grinding recession sure to cause further decline in prices

Alia Mcmullen
Province

TORONTO — Canada‘s housing market continued to soften in January amid declines in both the price and sales of existing homes, particularly in Ontario, B.C. and Alberta, figures from the Canadian Real Estate Association showed Friday.

“The deepening recession, which began in earnest among exporters, is now more forcefully dragging down the domestic side of the economy,” said Douglas Porter, the deputy chief economist at BMO Capital Markets.

“The ongoing sharp drop in home sales points to further declines in prices as well as a deeper pullback in new home building.”

Existing home sales fell a seasonally adjusted 3.1 per cent to 26,300 units in January, following a 1.8-per-cent decline in December, and were down a sharp 37.3 per cent from January last year.

Despite this decline, Derek Holt, an economist at Scotia Capital, said the supply of unsold homes on the market was still too high relative to demand, putting downward pressure on prices. The average house price dropped 11.3 per cent from a year earlier, the figures showed.

He said the data reflected the further deterioration in the national housing market, which deepened alongside the rise in unemployment and increasing pressure on consumer spending.

About 52 per cent of Canada‘s largest markets reported a decline in house prices from January, 2008.

Calgary was the worst hit, with prices down 11.4 per cent over the year, followed by an 8.8-per-cent drop in Vancouver.

© Copyright (c) The Province

Alan Zibel
USA Today

WASHINGTON — The biggest players in the mortgage industry are halting home foreclosures while the Obama administration develops its plan to help struggling homeowners.

The White House said Friday that President Barack Obama will outline his much-anticipated plan to spend at least $50 billion to prevent foreclosures in a speech Wednesday in Arizona, one of the states hardest hit by the foreclosure crisis.

“It’s not intended to be measured by one day’s market scorekeeping, but instead to ensure that the 10,000 Americans each day that have their homes foreclosed on, and the millions more that are barely getting by, are protected,” White House press secretary Robert Gibbs said Friday without providing other details.

Treasury Secretary Timothy Geithner announced a revised effort to stabilize the financial system on Monday. It contained outlines of a foreclosure-relief effort, but few details.

Though lenders have beefed up their efforts to aid borrowers over the past year, their action hasn’t kept up with the worst housing recession in decades.

More than 2.3 million homeowners faced foreclosure proceedings last year, an 81% increase from 2007, and analysts say that number could soar as high as 10 million in the coming years, depending on the severity of the recession.

JPMorgan Chase, Morgan Stanley and Bank of America said Friday they are halting foreclosures through March 6. And Citigroup said its halt will extend until the administration has completed the details of the loan modification program or March 12, whichever is earlier. Citi’s action expands on a similar effort that it started in November.

The banks’ pledges apply to owner-occupied homes, not those owned by investors.

Fannie Mae said it was suspending all foreclosure sales and evictions for occupied properties, while Freddie Mac said its suspension would apply to properties with up to four units and noted that the ban would not apply to vacant properties.

Both Fannie and Freddie had suspended foreclosure sales during the winter holidays and halted evictions from foreclosed properties through the end of this month. Together, they own or guarantee around half of U.S. home loans.

Obama’s announcement next week is expected to include details about how the administration plans to prod the mortgage industry to do a better job of modifying the terms of home loans so borrowers have lower monthly payments.

Testifying before House lawmakers this week, Geithner said the government would provide incentives to “try to induce economically sensible restructuring of mortgages,” but offered no specifics. A Treasury spokeswoman declined further comment Friday.

A Democratic Senate aide said the plan is likely to include hefty payments designed to encourage the lending industry to lower mortgage rates or reduce the total principal amount owed by borrowers. The idea has become attractive to Obama officials, the aide said Friday, because it is expected to be far less expensive than having the government buy up loans out of mortgage-linked securities.

It was unclear whether those government subsidies would be paid to companies that collect payments for mortgage investors up front, or whether they would stretch out over several years.

Howard Glaser, a mortgage industry consultant who served in the Clinton administration, said if 2 million borrowers’ payments were lowered by $500 a month, it would cost the government and lenders $6 billion each per year — assuming lenders match half the cost.

Unlike previous loan modification plans, borrowers would not have to be in default to qualify, according to people briefed on the plan.

Still, figuring out who would qualify would be a challenge, especially as foreclosures continue to soar. More than 274,000 U.S. households received at least one foreclosure-related notice last month, according to RealtyTrac, a foreclosure listing service.

Government-controlled mortgage finance companies Fannie Mae and Freddie Mac have developed systems to analyze millions of loans and determine which ones need to be modified. But to qualify for those programs, borrowers have to be at least three months behind on their home loans.

At the White House, Gibbs cautioned about the dangers of erroneous information leaking out about the foreclosure plan because he did not want to see “an unreasonable series of expectations based on leaks from God knows where.”

Still, the administration is widely expected to back a push in Congress — but opposed by the mortgage industry — to let bankruptcy judges alter the terms of primary home loans. Earlier this week, Obama said it “makes no sense” that judges are not allowed to do so.

The hope is that, rather than being dragged into bankruptcy court, lenders would prefer to modify loans. The mortgage industry argues that this prohibition allows lenders to charge lower rates.

The top executives of Bank of America, and Citi announced their intention to halt foreclosures under questioning from House lawmakers on Wednesday.

Jamie Dimon, JPMorgan’s chief executive, detailed his plans in a letter to Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, who released it on Friday.

“We stand ready to work with you to put the appropriate processes in place, including a national modification standard, to reduce the incidence of foreclosure and to encourage long-term, sustainable home mortgages,” Dimon wrote.

Gibbs said he thought the banks’ action was “consistent with what the president believes is at least part of something that would be likely seen in a housing policy that protects the American people.”

Fannie Mae and Freddie Mac suspended foreclosure sales during the winter holidays and have halted evictions from foreclosed properties until next month. And earlier this week, John Reich, director of the Office of Thrift Supervision, urged the more than 800 thrift institutions nationwide to do the same.

Associated Press Writers Ben Feller, Christopher S. Rugaber and Madlen Read contributed to this report.

Copyright 2009 The Associated Press. All rights reserved

Peter Simpson
Sun

It’s been a busy week at BC Place, with exhibitors getting ready for the annual spring home show, which starts on Wednesday and runs until Feb. 22.

The 624-square-foot residence is called a laneway home or backyard coach house; was designed by Birmingham & Wood Architects; and will be found in the Greater Vancouver Homes Builders’ Association exhibit. The home has a loft bedroom, space-efficient kitchen with leading-edge appliances, four-piece bath, sun-drenched living/dining area and a spacious L-shaped deck. Eco-conscious folks will appreciate the sustainability features such as green roof, solar collectors, rainwater cistern, geothermal heating, and Energy Star-rated wall systems, windows and appliances.

Laneway homes are ideal mortgage helpers for homeowners, and provide affordable, comfortable, and safe housing for a range of age groups – from young people to seniors.

© Copyright (c) The Vancouver Sun

Deals are great — but current home’s fallen worth is a problem

Kim Pemberton
Sun

Housing prices may be falling but there’s still a psychological hesitation by move-up buyers willing to take the plunge because their current homes have depreciated, says housing experts.

A buyer’s market may be the “perfect time to move up” because your dollar will buy you more but few homeowners are doing it despite the great deals out there, says Cameron McNeil, of Mac Marketing Solutions.

“The problem is psychologically it’s hard for them [the move-up buyer] to see the condo that was worth $400,000 six months ago now at $320,000,” he says.

“But if they’ve owned it three years-plus they probably have equity built up. The bottom line is if you can get a great price on a quality asset and you’ll be in the home for the medium to long term it’s worthwhile.”

Still, it appears many of these would-be buyers are waiting until the prospects of selling their own homes improve. To help try and overcome buyer reluctance many in the house building industry have begun to introduce incentives to try and sell completed new home products.

Morningstar Homes for instance just reduced prices for two projects in Coquitlam and North Delta by 15 per cent, for an estimated savings of $100,000 on large single family detached homes, while Polygon for a Richmond project is throwing in a new Mercedes Benz to help sweeten the deal.

Peter Simpson, of the Greater Vancouver Home Builders’ Association, is one of those who is finding it tempting to move up to a more expensive home in this softening market.

“My wife and I were out there looking. Prices are very attractive. We looked at a house almost twice the size and the difference in price was $60,000 to move up,” says Simpson.

But in the end, the Simpson have opted not to leave their established neighbourhood for the new home because the couple didn’t need the extra space.

“A lot of families need to move up because they have kids. Our kids are grown.”

As Jennifer Podmore of MPC Intelligence points out, while the company has noticed more people visiting open houses, there hasn’t been a corresponding increase in sales. “MPC has been doing daily monitoring and we’ve seen a huge level in traffic to sites. We’re definitely seeing more people looking,” she says.

“What we tell people is you’ll never be able to see the bottom [in this buyers’ market] but as soon as you see something you like that you can afford then buy it.”

In the case of the move-up demographic, Podmore points out most have owned their existing home for more than five years so should have enough equity built up in it to make a move to a larger home worthwhile.

“The couple who had resigned themselves to believing a single family home was out of reach is now realizing it’s possible,” she says. “Their money is buying them more.”

Rosey Saroya and Anup Manhas are typical of this demographic. They were able to get their dream home — a four bedroom, two-and-a-half-bath home in Coquitlam for $100,000 less than the original price. The couple is selling a condo and a townhome in order to complete the move to their single family house which sold for $640,000.

Likewise, Gail Tachiyama and her husband Matt were also able to move up in this current housing market from a Burnaby condo to a townhome in South Surrey.

Their condo, which they only owned for one year, sold within two weeks for their asking price.

“The realtor said we should have asked for $10,000 less than what we got but we though we would give it a try. It was a new building and we kept everything in good condition,” says Tachiyama, who adds they were able to make a slight profit.

The big benefit was buying the three-bedroom, two-bath condo and doubling the square footage of their old home –especially necessary for the couple who are now parents of 10-month-old Jamieson.

And while there are sales happening it appears those who aren’t pressed to sell are opting not to put their home on the market.

Statistics from January in the Greater Vancouver region show a continued reduction in the number of homes listed for sale, while sales volumes hit the lowest for that month since the early 1980s.

The Real Estate Board of Greater Vancouver reports that sales of detached, attached and apartment properties declined 58.1 per cent in January 2009 to 762 from the 1,819 sales recorded in January 2008. New listings for detached, attached and apartment properties declined 20.9 per cent to 3,700 in January 2009 compared to January 2008, when 4,675 new units were listed. Total active listings in Greater Vancouver currently sit at 13,966, down nearly 6,000 listings from October 2008. REBGV president David Watt says his advice to homeowners is to time the market to their life.

“If your jobs or income are vulnerable I’d stay away from it [home buying],” says Watt.

But, he adds, if you are in a position to buy the “overall drop in prices is favouring the buyer moving up.”

Home prices in Vancouver have dropped an estimated 10 per cent in less than one year.

For move-up buyers, property equity is power 

Couple brings combined 13 years of ownership to new-home purchase in Coquitlam

Rosey Saroya and Anup Manhas are in an enviable position, with falling house prices. They are move-up buyers with enough equity in their current homes, to make a profit after selling at a reduced price and be able to buy more home for their buck in the current buyer’s market.

The couple recently bought an under-construction four-bedroom home in Coquitlam’s Burke Mountain neighbourhood for $640,000, after the builder slashed about $100,000 from the original price. Rosey Saroya, 33, has owned a townhouse in New Westminster for seven years. Anup Manhas, 36, has owned an apartment in Coquitlam for six years. “This (the Coquitlam detached house) is going to be our dream house. I’m not a mover. I’m the kind of person who wants to do it only once,” Rosey Saroya says.

Yes, the couple will probably start and raise a family in their Burke Mountain residence. They are scheduled to move into their home together in July; they will wed in September.

Anecdotally most buyers right now in this declining housing market are first-time purchasers who recognize low interest rates and declining house prices has finally given them the opportunity to mount the first rung of the property-ownership ladder.

But what about move-up buyers?

These buyers already own a home, but either need or want something else, something typically more expensive. As Jennifer Podmore of MPC Intelligence — a real estate information and consultancy company — points out, move-ups are typically in their 30s and 40s; if single are typically seeking a larger apartment; and if a (new) couple want to merge their accrued equity to buy together.

With interest rates at the lowest level seen in a long time they are now in the position of having purchasing power for homes that were previously unavailable, she says.

But the question is do they wait until the market returns to a seller’s market in order to gain more profit from their existing home or take advantage of lower house prices happening now. “We’ve never seen interest rates so low coupled with declining house prices,” says Podmore.

She points out last year when interest rates for a five-year fixed term were at 5.5 per cent compared to today’s interest rate of 4.5 per cent for the same term a person with $15,000 down and an average income of $79,000 would qualify for a maximum mortgage of $285,000.

The lower interest rate the person qualifies for the same mortgage but instead of a monthly payment of $1,740 would now be required to pay $1,577 monthly.

As Saroya points out although they will not get as much money for their current homes they are not too worried because both the apartment and the townhouse have doubled in value since they purchased them.

“Even if we take a bit of a hit it’s still a bonus. The lower housing price is enabling us to get a lot more house,” she says.

 © Copyright (c) The Vancouver Sun

Sun

The developer of the residential tower of the year in the annual Georgies competition, the Grace in Vancouver‘s Yaletown neighbour-hood, is holding an open house on Sunday. James Schouw has one Grace apartment left to sell, a residence of 1,850 square feet with an asking price of $1.849 million.

If you want to see what a $1,000/square-foot listing looks like, the open-house hours are 12 p.m. to 4:30 p.m. The Grace address is 1280 Richards. Look for a greeter and harpist in the lobby.

Schouw wants to make it real easy for prospects: he is promising a ‘price fluctuation guarantee’ for the apartment.

If housing prices drop in the next year, he would refund back to the purchaser the difference in the drop.

Schouw plans to place 13 per cent of the purchase price in trust to ensure it would be available to cover the downside.

‘We feel this is a very innovative way to market and provides assurance to prospective purchasers who would like to take advantage of the new build and buy today without worries of the market softening further,’ a news release says.

Another developer to take a similar approach is Larco Investments with its Morgan Crossing project in South Surrey, where condos start at $249,900.

Last summer, the company guaranteed the value of homes at the development by up to 10 per cent.

© Copyright (c) The Vancouver Sun

Alia McMullen
Sun

Canada‘s housing market continued to soften in January amid declines in both the price and sales of existing homes, particularly in B.C., Ontario, and Alberta, figures from the Canadian Real Estate Association showed Friday.

“The deepening recession, which began in earnest among exporters, is now more forcefully dragging down the domestic side of the economy,” said Douglas Porter, the deputy chief economist at BMO Capital Markets. “The ongoing sharp drop in home sales points to further declines in prices as well as a deeper pullback in new home building.”

Existing home sales fell a seasonally adjusted 3.1 per cent to 26,300 units in January, following a 1.8-per-cent decline in December, and were down a sharp 37.3 per cent from January last year. In this environment, fewer people planned to sell their home, with new listings down three per cent from December and 14 per cent from January last year.

Despite this decline, Derek Holt, an economist at Scotia Capital, said the supply of unsold homes on the market was still too high relative to demand, putting downward pressure on prices. The average house price dropped 11.3 per cent from a year earlier.

He said the data reflected a further deterioration in the national housing market, which deepened alongside the rise in unemployment and increasing pressure on consumer spending.

“The fact that Canadian consumer finances are at their most stressed point since the early 1990s recession adds to the downsides facing the consumer sector,” Holt said.

About 52 per cent of Canada‘s largest markets reported a decline in house prices from January 2008. Calgary was the worst hit, with prices down 11.4 per cent over the year, followed by an 8.8-per-cent drop in Vancouver, an 8.2-per-cent fall in Toronto, a 2.2-per-cent decline in Montreal and a 1.8-per-cent slide in Ottawa.

Calvin Lindberg, the president of CREA, said he was confident stimulus measures in the 2009 federal budget would help lift the sagging housing market. And he said there were still buyers and sellers in the residential market.

© Copyright (c) The Vancouver Sun

Scott Simpson
Sun

You don’t need cutting-edge technology to create a gold-standard eco-friendly building.

Compared with a decade ago, a green building proponent has so many competitive, off-the-shelf choices for technology that the biggest challenge is deciding which solution works best for a given project.

Proponents of a $47-million commercial building nearing completion at Discovery Place in Burnaby got to pick and choose, and they’ve come up with a “flagship” design that will attract scrutiny from across North America.

Indicative of the green design options out there in the marketplace, they’ve chosen a Japanese climate control system and energy saving overhead lights developed in Ontario and are taking advantage of coastal B.C.’s predisposition for rainfall to reduce water use as cornerstone aspects of their five-storey, 150,000-square-foot project.

Relative to conventional building design, they’ll cut their reliance on the region’s water system 95 per cent, overall water consumption 72 per cent and electricity costs 45 per cent.

Pending a final inspection, the ”Discovery Green” project will qualify for gold status under the LEED (Leadership in Energy and Environmental Design) certification system which is the international benchmark for green buildings.

LEED measures carbon dioxide emissions associated with construction for the building, interior air quality and temperature control, window glazing and a host of other measures, and awards certificates including bronze, silver, gold and platinum.

Discovery Green is the final building at Discovery Place, a 32-hectare business park which was created in the 1979 by the provincial government as a venue for high-tech research and development.

The entire venture now operates as Discovery Parks Trust. It has expanded to the campuses of University of B.C., Simon Fraser University and University of Victoria, and has so far generated $12 million in research funds for those institutions.

“Discovery Green was the last property for Discovery Place,” Tom Douglas, director of development and leasing for Discovery Parks, said in an interview this week.

“It was what we considered our trophy site and therefore it became our trophy property if you like, in terms of development,” Douglas said.

“We certainly think that the building will be a model for sustainable building design,” Douglas said. “It’s important to note that the building has a lot of features that are unique, but we are not pioneering with any of those features.

“It’s simply drawing together all of the best proven technology, and putting in a lot of it, not everything. We don’t have solar panels, we don’t have [ground source] geoexchange, we don’t have wind power.

“There are a number of technologies that will get incorporated more and more in buildings in the future but we didn’t do that there because we still have to bear in mind the cost of the building.”

Discovery Green will be the fourth-largest LEED gold building in B.C., and the largest single building in Canada to be built to LEED gold standards from the ground up as a commercial enterprise.

It won a 2008 BC Hydro Power Smart award for innovative and sustainable building design.

It will also be the first large-scale introduction in North America of an indoor air quality system that uses “VRF” technology in lieu of conventional water-based heating and cooling systems.

VRF is not without controversy, at least in the climate control industry.

It has been widely adopted in Japan and Europe, but Trane, North America‘s leading installer of building control systems, has opted to stay with mainstream technology that relies on piped water, rather than VRF’s piped refrigerant, to circulate heat and cooling around a building.

Trane Western Canada regional manager Peter Hoemberg, who is not involved with the project, believes VRF works better in theory than practice.

But he notes that whether you use VRF or a modern chiller, you will save enough energy to qualify for LEED.

Both systems rely on electricity-driven heat pumps rather than gas-fired boilers, so the only carbon dioxide emissions will be the ones generated when the occupants of the building exhale.

Discovery Parks is undertaking the project on behalf of Morguard Investments Ltd., which is in turn leasing the entire facility to HSBC’s information technology branch.

Morguard owns and manages properties on behalf of institutional investors and pension funds.

Morguard’s Greg Jones said every new project developed by the company attains at least LEED silver certification — but it must also prove cost-effective.

“When we look at a building, we always ask, ‘Does it make economic sense to us? Is it an attractive product?’

“To us, it was a great building and the fact that it was green made it a better building. That just solidified our interest in it,” Jones said.

Everything Morguard develops now is minimum LEED silver, and Jones said lower energy costs represent a benefit to his company and the building’s tenant.

Construction manager Murray Rankin of Applecross Projects concurred that energy efficiency is a priority for both tenants and developers.

“I think most commercial developers these days are thinking along these same lines,” Rankin said. “I think most tenants are saying to developers, ‘This is what I’m looking for. I want an energy efficient building.’ We are just on the very forefront of it.”

One of the most notable features is a storm-water collection system that will capture all of the rain falling onto the building and its landscaped perimeter.

They expect to capture and use more than a million litres a year for both irrigation and Discovery Green’s toilets.

“We make a full cycle with the water,” project engineer Goran Ostojic of Colbalt Engineering said. “The rain comes in. Generally it is just dumped to the city. But in this scenario, we manage to collect all of that water, filter it and use it.

“That’s one of the measures. The building will also have waterless urinals, so there is no water consumption. The toilets are low-flush toilets.

“We will have managed to reduced water consumption in this building 72 per cent compared to any other building. That’s a significant reduction.”

As well there are ”low-emissivity” windows on the sun-facing south and west sides of the building which will reduce by more than 60 per cent the amount of heat coming in, and ”high-induction diffusers” that will mix the air in the building to achieve better overall air quality and even temperature.

“My general impression is that most of the technology is off the shelf now. It’s all about integrated design, putting it together,” observed John Robinson, a professor in the Institute for Resources, Environment and Sustainability at UBC.

“There are all these options, and you’ve got to pick the package solution that works the best for the site, the occupancy, and the size, and all that stuff.”

© Copyright (c) The Vancouver Sun

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