This week’s update is going to be a bit different, because I’m writing to you in between games at my son’s baseball tournament in Long Island ( at a place called Baseball Heaven). I don’t have access to the programs I use to prepare and publish the reports, so they will appear next week when I am home.

I did, however, look at the numbers, and it seems to be one of those ‘the more things change, the more they stay the same’ sort of situations. The number of available properties has decreased to 181, down from 195 a week ago. The number of properties sold has stayed at 21, and the number of expired listings is at 6.9%, or 14 listings. The average days to sell is actually, again, artificially high due to one listing that took more than a year to sell; the average days is 81. Remove the one anomaly, and the average days to sell drops down to 39. Remove the other couple of anomalies that are in the 5 to 9 month range, and the average days to sell drops down to 16 days.

45% of the sales this week were in the $300,000 to $325,000 range, which is a typical first-time buyer range, so that’s a good thing.

Here’s the charts for you . . .

First, the weekly Total Market Activity, as discussed above:

And next the Annual Summary:

And finally. the line chart of available properties and sale:

“THIS WEEK’S MORTGAGE NEWS HIGHLIGHTS”

Canadian interest rates to remain low; long-term bond yields to grind lower with USTs

Against the backdrop of burgeoning government deficits and commensurate increased bond supply and rising US Treasury yields, mid- and long-term interest rates rose in Canada in May. Inflation worries remain under wraps as the combination of growing economic slack, a stronger Canadian dollar (reducing imported goods prices) and lower commodity prices compared to a year ago sets up for the headline CPI rate to move lower. Still, the pressure from impending supply both in Canada and the United States is keeping yields up. The forecast is that U.S. yields will slip as the Fed’s quantitative easing program gains traction paves the way for Canadian yields to dip as well.

Canadian dollar’s strength presents clear and present danger to economic outlook

The recent fluctuations in currency markets reflect investors’ rising risk appetite and must acknowledge the impact of these shifts on the economic outlook. In the near-term, it is expected that the dynamic that supported the increase in risk appetite — with economic data reports generally outperforming weak expectations — will fade as forecasts are ratcheted up to align with the turnaround in the global economy’s momentum. This scenario raises the risk that the data won’t continue to exceed expectations, which will put riskier assets back under pressure and revive support for the U.S. dollar. In this environment, currencies like the Canadian dollar and the euro will give up some of their recent gains, although are unlikely to return to their cyclical lows. Longer-term, the pressures on the U.S. dollar are likely to re-emerge as the price of the proactive central bank and government policies take its toll. For the economy, the Canadian dollar’s rally means that the cost of imported machinery and equipment receded once again, giving Canadian companies relief as they invest in productivity-enhancing capital goods. On the downside, Canadian exporters, who are already struggling, face another obstacle to increasing demand for their products. On balance, the risks have grown that the trade account, which was one of the few supportive factors for the economy in the first quarter, will return to acting as a drag on output. The positive effects of the rally in commodity prices on incomes will mitigate some of the downward pressure on the economy. Oil prices are more than double their December lows and non-energy commodity prices have gained 4.2% from their early March lows. The rebound in commodity prices juiced the Canadian dollar’s rally, propelling the currency to levels that were slightly above those predicted by the Bank of Canada’s currency model

Inflation rate stays in positive territory

The headline inflation rate rose by 0.7% in May, but the annual inflation rate continued to moderate, coming in at 0.1% from 0.4% in April. The core measure, calculated by the Bank of Canada which excludes the eight most volatile components, increased by 0.4% and was 2% higher than a year earlier, up from 1.8% in April. The increase in the headline rate reflected an 8.3% jump in gasoline prices, rising passenger vehicle insurance premiums and higher costs for traveler accommodation. The unexpected rise in the year-over-year rate reflected the sharp increase in the cost of food, which was 6.4% higher than in May 2008. Food makes up 17.04% of Canada’s CPI basket. Vehicle insurance premiums were 4.3% higher than in May 2008. Mitigating these upward pressures were sharply lower gasoline prices relative to a year earlier (-25.1%) with other fuel prices following suit, falling vehicle prices (-6.8%) and lower homeowner’s replacement costs (-3.4%). Gyrations in energy prices continue to be a heavy influence on the direction of Canada’s inflation rate, which moderated to 0.1% from April’s 0.4% even in the face of a sharp monthly increase in May. Excluding the energy component, the inflation rate has been much more stable, trading between 1.5% and 2.5%, while the all-items inflation rate’s range was between 3.5% and 0.1%. The core measure, which aims to provide a read on underlying price pressures, rebounded back to the Bank of Canada’s official 2% target in May. While the headline inflation avoided falling into negative territory this month, it is still expected that negative prints in the months ahead. With the economy undergoing a relatively severe downturn and the U.S. economy on track for the worst recession in the post-war period, the central bank and economists expect that core prices will ease relative to a year earlier.

Similar Wikipedia Articles

• Inflation
• Monetary policy

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2010 Rent Increase Guideline

Well, things continue to change in this wild and whacky real estate market. Just take a look at the numbers for this past week; sales down by 50% / listings down by 9% / days to sell all over the map / busiest price range is over $400,000.

Looking at the Weekly Total Market Overview, there are a couple of key points to note, which I will comment on below the chart:

The first thing to note in the above chart is the price range that has the most listings – $450,000 to $500,000. The thing that really makes that interesting is the average number of days it took to sell a home in that price range – 204. That number is somewhat misleading, as 1 of the homes sold was on the market for 375 days.

In fact, there were a number of homes sold that had been on the market for more than 100 days; taking those out of the mix, the average days to sell is reduced from the 58 shown in the chart to 21 days. I noted last week that the days to sell is derived from the date the listing contract was signed to the date an offer is firm. With the adjusted-average being 21 days, this means that houses are going under contract in somewhere between 5 and 14 days; not much time for buyers to get a look at things, really.

The Annual Summary will give you an update on how overall averages are fairing:

Where will the decrease in available properties fall to, before more people decide to take advantage of the excellent opportunities to move up?

Here’s the graph of listings and sales:

Over the last month or so, I’ve been asked this question by more people than at any other time in my career, so I thought I’d write about it here today, and then you can give me your feedback.

We are currently in an almost-perfect storm, as far as real estate investing is concerned; rates are crazy-low, prices are down, and there are lots of properties available in many areas. Combine this with the tougher qualifications to get a mortgage, and many would-be buyers are having to continue as renters. For investor financing, we can still get great mortgages, with only 5% downpayment.

These factors combine to make positive cash-flow an easy thing to accomplish.

Let’s look at one example property, a 7-unit plus 1 big apartment building in Kitchener. This property is offered for sale at $479,500, and has rental income of $3,375 per month if the big apartment is not owner-occupied. So, that’s $39,300 income from rents, and operating expenses of approximately $10,000 for insurance and utilities, leaving you $29,000 per year for debt service, vacancies, and repairs.

This property has had many major updates in last couple of years, including electrical panel, steel roof, asphalt, and new boiler, so there shouldn’t be any big-ticket items coming up in the near future.

On top of that, the tenants in this legal boarding house have been there for between 3 years and 35 years, so there is stability of income.

What would be the carrying costs with 5% down? Well, your mortgage payment will be approximately $2,138pm & property taxes will be $295 per month, for a total annual outlay of ($2,138 + $295) x 12 = $29,196. That’s a break-even opportunity!

If you put 10% down, you have a small positive cash flow every month.

OR, how about this one, in Cambridge:

6 apartments, 2 x 2-bedroom and 4 x 1-bedroom. Rental Income of $45,000; operating expenses of $9049 per year. Carrying costs are:

$1,663 mortgage, $350 property taxes = ($1,663 + $350) x 12 = $24,156 per year.

So, total carrying costs plus operating costs = $9,049 + $24,156 = $33,205.

Result = $11,795 positive cash flow per year.

I think it’s a good time to be a real estate investor. I do; will you?

For information on these, and lots of other excellent opportunities to put your money to work for you, give me a call at 905-208-7002 or send me an email to chris@chrisnewell.com

Smith Manoeuvre