Alan Zibel, AP Real Estate Writer
USA Today

WASHINGTON — Sales of new homes surged 27% last month, bouncing off the previous month’s record low and blowing past expectations as better weather and government incentives boosted sales.

The Commerce Department said Friday that new-home sales rose in March to a seasonally adjusted annual sales pace of 411,000. It was the strongest month since last July and the biggest monthly increase in 47 years.

Economists surveyed by Thomson Reuters had expected a sales pace of 330,000. February’s results were revised upward to 324,000, but remained an all-time low. Sales had been especially weak over the winter, partly due to bad weather in much of the country.

The median sales price was $214,000, up more than 4% from a year earlier but down more than 3% from February.

The new-home sales report reflects signed contracts to purchase homes rather than completed sales and thus gives economists a feel for how many buyers were out shopping for new homes in a given month.

It is likely capturing consumers who are trying to qualify for federal tax credits that will expire at the end of this month. The government is offering an $8,000 credit for first-time buyers and $6,500 for current homeowners who buy and move into another property.

To qualify, buyers must have a signed contract complete by the end of next week and must complete the transaction by the end of June. Nearly 1.8 million households have used the credit at a cost of $12.6 billion, according to the Internal Revenue Service.

The rise in new-home sales was seen nationwide. Sales grew a whopping 44% in the South and 36% in the Northeast. They also rose about 6% in the West and 3% in the Midwest.

The number of new homes up for sale in March fell 2% to 228,000. At the current sales pace, it would take nearly 7 months to exhaust that supply.

Copyright 2010 The Associated Press. All rights reserved

Jeff Lee
Sun

Vancouver businesses, which the city acknowledges have long laboured under higher tax burdens than their counterparts in other Metro communities, won a small victory Thursday when city council agreed to continue shifting a portion of the tax levy to residential taxpayers.

The shift, in this case, is minute.

Business, which now pays 50 per cent of property taxes, will have that load trimmed by one per cent this year.

City staff estimate that the resulting increase on the average Vancouver residential property, valued at $781,000, will be $33. The decrease on the average non-residential property will be $156.

In real dollars, it’s just over $5.6 million this year moving from the commercial, industrial and utility sectors to homeowners on the city’s $567.25-million property tax base. This year’s municipal tax increase is 2.08 per cent.

But business leaders said afterwards that the amount, part of a five-year program to try to move nearly $24 million in taxes to the much larger residential base, is a welcome sign that the city and council understand they need to correct two decades of inequitable tax policies.

“It is not sustainable for eight per cent of the property owners in this city to be paying 50 per cent of the taxes,” said Paul Sullivan, a member of the Vancouver Fair Tax Coalition, which has waged a long war to make business property taxes more affordable.

Most of the council agreed with him, although in supporting a staff recommendation to shift the ratio, they recognized the political risk of angering homeowners.

But not all liked the idea. Councillors David Cadman and Ellen Woodsworth of the Coalition of Progressive Electors were not happy.

Woodworth said she sympathizes with small business owners.

But she also didn’t want to give a break to large businesses and multinationals which she believes can better afford taxes than homeowners who, despite being asset-rich from an assessment point of view, still struggle with significant tax bills.

Despite the shift, businesses said the relief program, which will eventually see non-residential taxpayers carry 48 per cent of the burden and homeowners the rest, is still not enough.

“In my area property taxes represent $5 per square foot. I have one business that pays $55 a day in taxes,” said Sharon Townsend, the executive director of the South Granville Business Improvement Area.

“That’s the equivalent of paying someone $10 an hour for five hours to stand in the corner and do nothing.”

Sullivan and others in the 45,000-member coalition say the city needs to continue aggressively readjusting the tax levy rates so that residences eventually pay for all the services they use.

For that to happen, non-residential properties would shoulder only 30 per cent of the load. In a city where everyone’s taxes are high and still going up, that’s something “I won’t see in my lifetime,” he said.

For half of the last 16 years, the city has been slowly moving more of the tax burden from businesses to residences. But those shifts are so tiny that they don’t overcome annual tax increases the city levies to balance its budget.

City staff say the commercial business class now pays 47 per cent of the city’s property taxes while residences pay 50 per cent.

The tiny heavy and light industry and utility zones each pay one per cent.

© Copyright (c) The Vancouver Sun

Alan Zibel, AP Real Estate Writer
USA Today

WASHINGTON — Home sales rose more than expected in March, reversing three months of declines, as government incentives drew in buyers and kicked off what’s expected to be a strong spring selling season.

The National Association of Realtors said Thursday that sales of previously occupied homes rose 6.8% to a seasonally adjusted annual rate of 5.35 million last month, the highest level since December. February’s sales figures were revised downward slightly to 5.01 million.

“The spring selling season will be a success and probably the most active we’re seen in years,” said Stuart Hoffman, chief economist at PNC Financial Services Group.

Sales are up 18% from their low in early 2009, but are still down 26% from their peak in fall 2005. March’s results had been expected to rise about 5% to 5.28 million, according to economists surveyed by Thomson Reuters.

The true test of the housing market will be whether it can stand on its own after federal tax credits expire at the end of this month.

Sales rose in every region, surging more than 7% in the Midwest and South, 6.6% in the West and 6% in the Northeast.

“It’s a very broad-based recovery,” said Lawrence Yun, the Realtors’ chief economist.

The median sales price was $170,700, up almost 4% from $164,600 a month earlier and nearly unchanged from $170,000 in March 2009.

The inventory of unsold homes on the market was up 1.5% at 3.6 million. That’s an eight-month supply at the current sales pace.

Sales nationally had declined over the winter, eroding gains made last fall and summer. The downward direction troubled economists because the government has taken unprecedented steps to support the housing sector.

For several months, home shoppers didn’t feel rushed after lawmakers extended the deadline to qualify for tax incentives. The government is offering a $8,000 credit for first-time buyers and $6,500 for current homeowners willing to buy and move into another property.

But now time is running out. Buyers must sign contract offers by April 30 to qualify, and real estate agents say that’s spurring sales.

“Many people who otherwise wouldn’t be on the market for a home want to take advantage of these tax credits,” said Kathi McLeod, sales manager for Windermere Real Estate in Boise. “You have buyers who have been looking and looking at properties and realizing that it’s almost too late, so they’re really scrambling and jumping into deals.”

The Realtors group is not pushing for an another extension of the tax credit. Yun said he believes there will be enough demand in the second half of the year without a government subsidy.

Still, some housing market experts predict the market will take a dramatic “double-dip” once the government’s supports are gone. But others argue that there is enough pent-up demand to keep the market chugging. And prices have fallen dramatically since the boom years — as much as 50% in some places. So buyers can pick up bargain-priced foreclosures.

Copyright 2010 The Associated Press. All rights reserved.

Garry Marr
Sun

The fix is in, when it comes to the Canadian mortgage market.

New government rules, which kicked in this week, have taken away choice from many Canadians and will force them to lock into a long-term mortgage.

You’ll hear a chorus from commentators who will say this is a good thing because Canadians can be assured of their mortgage payments over the next five years — especially important as the Bank of Canada looks set to raise its key lending rate in June or July. An increase in prime will immediately follow and that will raise the cost of borrowing for anybody with a variable rate product.

What nobody is talking about is how the discount on variable rate products has shrunk considerably. Prime is 2.25% but some light negotiation will easily get you 50 basis points off taking your variable down to 1.75% today.

Credit markets have calmed and the cost of capital on short-term money has shrunk to the point where discounts are heading down. At the height of the credit crisis, consumers were paying 100 basis points above prime for a variable-rate product. At the best of times, variable rates have been almost 90 points below prime.

Canadians are not stupid. They know variable-rate products do better almost 90% of the time, even though they do come with increased risk. They also know that in the past two weeks the five-year fixed-rate mortgage has risen 85 points, meaning even discounters can only get you something in the 4.6% range if you decide to lock in for five years.

“The last few days, we have been seeing people go back into variable-rate product,” says Paula Roberts, a mortgage broker with Mortgage Intelligence. “They know they can get 1.75%.”

The problem is the new government rules are taking away the variable option for some consumers — up to 10% of the market, according to some people in the mortgage industry. Ottawa’s new rules mean even those with variable mortgages have to qualify based on their ability to pay the posted five-year fixed rate, now 6.1%. The only way you can use the rate on your contract for qualifying is to lock into a term for five years or longer.

Mark Herman, a Calgarybased broker with Mortgage Alliance figures anybody getting a variable-rate product is going to qualify for 10% to 15% less debt because of the changes.

CIBC World Markets economist Benjamin Tal said recent interest rate moves mean the argument is swinging back to variable. “A few weeks ago, fixing was a no-brainer. Now if you go for five years, there will not be that much difference because you will be ahead for the first two-and-a-half years, just without the stomach ache.”

Locking in can, as the industry likes to say, help you sleep at night. It’s like an insurance policy. But do we make people buy life insurance, disability insurance and critical care insurance — all of which the consumer planning for the unthinkable should have?

In a cruel irony, the policy and the drive by the banks to get everybody into five years might be responsible for driving up rates, Mr. Tal says. Because of all the money going into long-term mortgages, banks are selling more long-term bonds. The flood of paper is creating increased supply and driving down bond prices, which means an increase in yields. The banks then have to raise their mortgages rates to match what is going on in the bond market.

John Turner, director of mortgages with Bank of Montreal, says it’s not that simple. “There are too many other factors at play,” he says about the Canadian push into five-year products driving up rates. “We are dealing with a global market.”

His bank is behind that new commercial you keep hearing, “does your variable need fixing,” but he’ll tell you not everybody needs to go into a fixed rate mortgage.

“If you speak to one of our specialists, we’ll stress test your mortgage,” he says, meaning they’ll see how much of a hike you could actually deal with based on your present mortgage obligation.

There is no question that many consumers are happy to go with a fixed-rate mortgage and pay tens of thousands of dollars of extra interest for the security of having their rate stay fixed for five years.

But what about the people who still want to choose? Some of them will be out of luck. If short-term rates rise quickly, the government protected them. If they don’t, the federal government will have cost them a bundle.

© Copyright (c) The Vancouver Sun

Doug Ward
Sun

The proposal by the City of Vancouver to set aside 125 rental units in the Olympic Village for health and safety public workers may be novel but it isn’t new.

Government agencies across North America and elsewhere are pursuing various ways to produce affordable housing in high-priced urban areas for middle-income employees.

These efforts broadly fall under the phrase “workforce housing” and they are typically targeted at so-called essential workers such as police officers, firemen, teachers, nurses and other public-health employees.

“The idea of encouraging essential workers and other city employees to live in the city is a good one,” said Michael Geller, a developer and housing and planning consultant.

“Unfortunately, many people who work in Vancouver have been priced out of the market.”

A survey by The Vancouver Sun in 2007 found that the majority of policemen and firefighters working in Vancouver live outside of the city. Vancouver had 800 firefighters on staff at the time, 135 of whom lived in the city.

The development of workforce housing has been taken up in recent years by B.C.’s major universities, including Simon Fraser University, where Geller led the creation of the University community, which includes faculty and staff housing.

“I got the idea from San Francisco, where, because of high housing costs, they were having a hard time attracting teachers and emergency workers.”

University staff housing provides both condos and rentals, with all units priced below market value.

The University of B.C. has a similar program for faculty and staff housing in its new UTown community. Twenty per cent of all new apartments and townhouses at UBC are rental and half of these are offered at below-market rates.

Whistler, the other 2010 Winter Games host community, has used its Olympic Village — now known as Cheakamus Crossing — as a legacy of affordable housing for people who work in the municipality and also for workers deemed essential employees.

Whistler Mayor Ken Melamed said that 220 of 350 units at Cheakamus Crossing are set aside for employee housing. Whistler’s goal is to have 75 per cent of Whistler’s workforce reside in the resort municipality by 2020.

The Whist ler Housing Authority has kept rates below market through the use of its land bank and the inclusion of a limited number of market townhouses and/or single-family lots.

Ten per cent of these employee units — about 20 units by the end of the summer — are set aside for essential employees, including firemen, policemen and teachers.

Melamed said these essential employees are able to jump the queue for employee housing.

Martha Lewis of the Tenant Resource and Advisory Centre in Vancouver said restricting rental housing to specific job categories is a valid policy approach and doesn’t contravene provincial human-rights legislation.

“The city has the right to decide who lives in that housing,” said Lewis. “All non-profits have criteria they use to decide who gets units of housing.”

She said that workforce housing is a growing trend in cities faced with high housing costs.

London, England has a program for key public employees — including police officers, teachers and firefighters — that provides them rent subsidies or no-interest loans of up to $100,000 to help them buy property.

© Copyright (c) The Vancouver Sun

City’s target cut to 50 per cent of 252 units

Damian Inwood
Province

“The financial realities are forcing us to scale back.”

He said he believes a staff recommendation to go with a 50-50 split of social housing and market rentals is “a good balance.”

The proposal calls for the market units to be rented to people who work in Vancouver, with a household income of up to 20 per cent of market rent. Preference would be given to people like city police, firefighters, health workers or other essential service workers.

A staff report going to council Thursday says that the cost of the 252 units jumped from $64 million in 2006 to $110 million in 2009.

The only money the city had to offset the cost was $30 million that Vancouver 2010 paid to use the site during the Olympics and $2 million in development cost levies, said the report. The $78 million gap would not be covered by rents from subsidized-housing tenants, it added.

Even with the proposed 50-50 split, there would still be a shortfall of $32 million, according to the report.

Other options included a “bridging” option to provide temporary, mixed-income housing for three to five years.

Another option was to have 100-per-cent market rental housing with profits from sales used to build 250 social housing units elsewhere.

Coun. Suzanne Anton said that’s the option she’ll be supporting. “I think the right option is to sell these buildings off as market rentals and recover the cost of construction,” she said. “There’ll be money in the bank at the end and we can put that into social housing elsewhere, at a cheaper rate”

Coun. Ellen Woodsworth said that the 50-50 split was the best of the three, to “optimize” the amount of affordable housing in the city.

“However, the bid book commitment was 250 units of non-market housing,” she added. “I have some concerns about that.”

Am Johal, chairman of the Impact on Communities Coalition, branded the cut in social housing as “another broken Olympic promise.“

© Copyright (c) The Province

New tax would add $40,000 to the price of an $800,000 home after July 1

Derrick Penner
Sun

Developers are doing what they can to beat the harmonized sales tax July 1 deadline, building units ahead of schedule and hoping to make sales earlier rather than having to charge the unpopular tax later.

Opportunities are limited, the time fleeting, but with the tax adding a cost in the tens of thousands of dollars to homes, builders who have serviced lots figure they’re better off taking the risk of having to hold onto excess inventory.

For Ranjit Rai, it has meant building nine houses on spec on lots in a Surrey subdivision he is developing rather than customizing them to suit buyers, just so he has them done before July 1.

“It is risky for me,” Rai, head of Raicon Developments Inc., said in an interview. “I’m relying on a lot of people wanting to get in before July 1 and that I can move that inventory.”

New homes have always been subject to the seven-per-cent federal GST, but the harmonized tax will add the five-per-cent provincial tax to transactions.

The province included a rebate program that will pay consumers back the equivalent of the provincial tax portion on new homes up to $525,000, with the full tax owing on amounts above that threshold.

In Metro Vancouver in March, the benchmark price, which is an average for typical properties sold, hit $800,341 for detached homes.

Rai said that after July 1, the HST will add $35,000 to $40,000 in taxes to his $750,000-to-$800,000 homes.

“Homes are getting priced out of the comfort zone of a lot of buyers,” he said.

Rai, however, was lucky that he had poured the foundations for the homes some 18 months ago and had been building houses to suit buyers.

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said the public will likely see more advertisements from developers looking to clear outstanding inventory as July 1 gets closer.

There is no HST rebate for secondary homes, so developer Jon Van Geel decided he was better off doubling the construction program on his Cottages at Cultus Lake project and building 20 to 30 cottages on spec in addition to the pre-sold units he was already building.

“We thought then that [the HST] was going to have a pretty big impact on recreational real estate in general in B.C.,” Van Geel said in an interview.

“We thought we have to take advantage of that and push [construction] as hard as we can.”

His incentive is being able to sell units in the development without having to tack on the five per cent the HST will add to prices of cabins that now range from $379,000 to $629,900.

Van Geel was also fortunate. Cottages at Cultus Lake development, with 230 building lots in total, was already well underway with 90 units already built.

Van Geel’s remaining lots are serviced, he had enough cash reserves and previous sales to convince banks to put up financing for spec construction and with the region’s residential construction sector still not running at full speed, he had crews willing and able to work.

George Hare, with Higher Ground Project Marketing, Van Geel’s sales agent, said the company is launching its 2010 sales campaign about 12 weeks early to try to move the spec-built units before July 1.

Rudy Nielsen, president of the recreational property firm NIHO Land and Cattle Co., said Van Geel has hit on a good marketing tool, but doubts it will be repeated by a lot of recreational developers who were caught in the middle of the recession with the HST announcement.

“It takes a while to develop a subdivision, let alone build a cabin on [a piece of land],” Nielsen said. “People just weren’t ready for [the HST] so most people won’t do [what Van Geel has done].”

Van Geel said that after July 1, he will return to his usual model of pre-selling first and building later, but will first have to get post-HST repricing from his suppliers and contractors to see how it will affect his new costs.

As businesses, they will receive HST input tax credits, so Van Geel wants to see if he will be able to pass some of those savings into his final prices.

Nielsen doubts that the HST will put too big a hit on the recreational real estate market.

He recalled that when the federal GST was applied to recreational properties in the late 1980s, buyers and sellers adjusted relatively quickly.

Nielsen said the GST forced sellers to bargain more with buyers, which he said will be likely again once the HST is in effect.

“I don’t like the HST as much as anyone,” Nielsen said.

“I think it was bad for the government to do, but I still think people will get over it and it will be bargained in as part of the price.”

© Copyright (c) The Vancouver Sun