Robert Morrow

During Nov and Dec of last year, national housing starts dropped below 180,000 units. The average over the past seven years, beginning in 2002, has been 223,000 units. Be prepared for this to be the new normal level for quite some time, at least through 2010. In fact, it may well turn out that 180,000 units would be more than acceptable given what is transpiring in the overall economy.

{People stopped shopping for (new) real estate and started worrying about their finances in the fourth quarter of last year. This change in thinking was initiated by September's nosedive in stock market values. It is an unfortunate corollary of cycles that a decline in one asset class rarely happens in isolation. It is usually accompanied by declines in others as well. Hence, home prices fall at the same time as equity prices in a generalized slowdown.}

I'm really no expert on new home sales but tell me, isn't this a good thing for the resale market, or am I missing something? Perhaps builder inflexibility in pricing has had a stronger affect than anticipated.

Yes, I know I'm simplifying the whole thing. But it's because I'm looking for some agent level input instead of the usual industry "corporate lineage".

Robert J. Morrow is editor of www.HamiltonHomeReview.com, an online real estate magazine serving Greater Hamilton, Ontario. Click here for a FREE SUBSCRIPTION sent to your email monthly. Click here to receive new Hamilton area listings in your email daily.

I came across an article today that speaks to the increasing frustration all of have with banks. (link below). Despite a downturn in the economy, banks boasted over $19.5 billion in profits for 2007 (not income, profits!).

The Bank of Canada has now lowered the lending rate to 1%, the lowest in history.

The CMHC has purchased over 33 billion in mortgages and the government has agreed to take another $75 million off the bank's books.

{Steve Foerster, a professor of finance with the Richard Ivey School of Business at the University of Western Ontario, said many people are basing their frustration on a trend they saw when times were good. While it has traditionally been the case that banks would lower or raise their interest rates based on the Bank of Canada's rate announcements, there is no law that states they must do so. }

Perhaps we need one.

{Terry Campbell, vice-president of policy for the Canadian Bankers Association, says that lending rates would only affect short-term loans. He says bank policy is often misunderstood and that the balancing act between satisfying customers and satisfying stakeholders is a difficult one to maintain.}

Maybe the government could alleviate their difficulties by creating some new guidelines (i.e. legislation) that would eliminate their need to be all things to all people and allow them to concentrate on solving problems for the common man instead of balancing everything they do against maintaining continually increasing profitability.

{As of last week, posted rates for a five-year-fixed mortgage (the most popular among Canadian households) from Canada's four biggest banks were 6.75 per cent. In January 2004, when both the Bank of Canada and the bank's prime rate were much higher, that same mortgage was being offered at 6.35 per cent.}

Liberal Senator Pierrette Ringuette, a member of the standing Senate committee on banking, trade and commerce says "I believe that government intervention is needed... There is absolutely no logic to this situation at all." Is anyone listening?

http://www.ottawacitizen.com/Business/Give+break+Canadians+tell+banks/1192115/story.html

At press time, this article was just released featuring the actual text of the Bank of Canada's Jan. 20th policy announcement. But it's the blog comments after that fuel the fire.

http://network.nationalpost.com/np/blogs/fpposted/archive/2009/01/20/text-of-bank-of-canada-s-jan-20-policy-announcement.aspx

Robert J. Morrow is editor of www.HamiltonHomeReview.com, an online real estate magazine serving Greater Hamilton, Ontario. Click here for a FREE SUBSCRIPTION sent to your email monthly. Click here to receive new Hamilton area listings in your email daily.

I recently read a release from one of the major Real Estate franchises (I won't say which because I'd be inundated with hate/defensive mail) that states "Canada's real estate environoment is considerably more complex than it has been in recent years."

For crying out loud...

No it's not. The economic downturn in the US--and then by chain reaction--the rest of the world, has made it a little more difficult to sell houses in Canada. Our economy will suffer in relation to the US but Canadians have options our friends to the South don't have. We also have financial stability that will bounce back much quicker. And most importantly, the second largest demographic buying group in history is entering the marketplace (the X and Y generations). It's not complex, it's just different. Corporations don't do different very well, or at least, not very quickly.

The release states that "real estate trends in 22 markets across the country boasted average prices holding up remarkably will in 2008", despite 13 of their own reporting areas stated double-digit declines in home sales. This franchise predicts sales were down 15% last year. An official of the company goes on to predict that "with affordable lending rates and increased selection, first-time and move-up buyers with good credit may choose to...purchase a home. The comfort of a tangible investment like real estate goes a long way in tough times."

Isn't it that tangible investment that has so many consumers worried at this point?

They go on to boldly claim that 11 major centres are forecasting to match or exceed 2008 home sales and 11 are expeced to slide. Talk about riding the fence!

If you are an agent in one of the major franchise organizations, you need to ask yourself if you're not being fed the corporate line. Worse, are you swallowing it hook, line, and sinker, just because they are still--at the moment--a strong force in the industry?

My message? Don't rely on your franchise (the very word meaning they exist because of you, not the consumer) to explain what's going on out there. And for heaven's sake, don't assume they're accurate. The corporate line has kept many a large, slow moving company alive. The big RE franchises are no different. They don't need the consumer to stay afloat, they need fee-paying agents. Yes, it's in their best interests to "influence" the consumer with their awareness advertising, but much more attention is paid to ensuring their stable of agents remains faithful and don't quit in the face of hardship. Thus the "complex environment" they portray: One they can provide training, programs, advertising, etc., to counter-balance and "provide insight into the changing marketplace."

I'm not saying their being decietful. Just corporate. So find out for yourself. Read everything. Surf the internet, sign up for RSS feeds from news groups that are on top of the industry (not just your franchise), and, most importantly, listen to your clients. After all, they are the only ones who really know what they're doing.

Robert J. Morrow is editor of www.HamiltonHomeReview.com, an online real estate magazine serving Greater Hamilton, Ontario. Click here for a FREE SUBSCRIPTION sent to your email monthly. Click here to receive new Hamilton area listings in your email daily.

Statistics can be made to state whatever you want them too, as long as you have info to back you up.

For example, average house prices reported in Canada are derived from the MLS(R) system. It is not wholly accurate as private sales and new home sales are not included. But economists and the CMHC use the results as a major economic indicator.

Well, some other financial institutions are questioning its validity as the prime method of determining whether we're in a bad economy or not. The TD Bank Financial Group was first with their TD Home Price Index. It takes into account, for example, that BCs sales are down 50%. This improperly impacts the national percentage. How different does this make things? CREA says avaerage prices for major markets is down 10.9%. The TD HPI says 4.6%.

Others jumped on the band wagon too. National Bank Financial Group and Teranet have come up with another home price index which is based on "repeat sales methodology". They record public land registries in six major metropolitan centres of properties that have sold at least twice during the recording period. The result is published on the last Wednesday of each month on www.Houspriceindex.ca. It is used primarily to help the industry sell financial products. And for us in Hamilton, since our metropolitan area wasn't included, it should be used as only a back-up measurement.

Massive stabilization on the MLS(R) system has occured during the past four months and I think future indexes will be more accurate, regardless of methodology. But during that "reset" stage, it is best to consider other factors too. Such as demographics. There are more first-time buyers in the marketplace and since they have good credit and no time restraints, they are ideally set to move into the market aggressively. This alone, will drastically solidify statistics as they are set to become the largest market segment over the next ten years.

Robert J. Morrow is editor of www.HamiltonHomeReview.com, an online real estate magazine serving Greater Hamilton, Ontario. Click here for a FREE SUBSCRIPTION sent to your email monthly. Click here to receive new Hamilton area listings in your email daily.

I was sent a notice today about a new book about Canada's new Tax Free Savings Account. If you need more info, check it out. Here's the publisher's ad copy:

"This may be one of the most important little investment books you'll ever read! Financial expert Gordon Pape explains the new Tax-Free Savings Account (TFSA)-the powerful new personal savings vehicle for Canadians - and provides a range of strategies that you can use to add thousands of tax-exempt dollars to your personal wealth.As of January, 2009, everyone 18 and older can contribute to a TFSA and start building your tax-free investments. This indispensible primer will help you get started..."

More reviews and to order: http://www.chapters.indigo.ca/books/Tax-free-Savings-Accounts-Gordon-Pape/9780143171966-item.html?EMS_MID=EMSx321x11805

Robert J. Morrow is editor of www.HamiltonHomeReview.com, an online real estate magazine serving Greater Hamilton, Ontario. Click here for a FREE SUBSCRIPTION sent to your email monthly. Click here to receive new Hamilton area listings in your email daily.