Saturday, February 15, 2014

American Vs Canadian Home Sale Prices

American Vs Canadian Home Sale Prices - 2000 to 2011

American Vs Canadian Home Sale Prices - 1999 to 2013.

American Vs Canadian Home Sale Prices - 1970 to 2010.

American banks pushing home equity loans to seniors

Bankers are becoming eager to bump up sluggish revenue growth and are therefore once more returning to a business model that lost much of its appeal during the 2007 - 2009 financial crisis: home equity loans.

If you don't what that is, basically it is a reverse mortgage wherein you bargain the value of your home (which has already been fully paid for) and reverse refinance it so you gain money back from the value of your home - essentially selling the bank part of your house, so that when you later sell it (or you die and it gets sold) then the bank collects on the debt after you die.

Thus if you are watching TV, an American channel, you will likely start noticing these ads for reverse mortgages / home equity loans.

The problem during the 2007-2009 subprime lending crisis was that home prices dropped so rapidly that banks were losing money on the value of the homes they had bought into.

New home equity loans reached a record of $430 billion in 2006. Banks made record profits during that time period on home equity lending as home prices soared, but many property owners treated their property value as a personal ATM and spent the money on luxuries they didn't need. As the housing market turned sour, 30% of home equity in the country was destroyed - and with that the banking industry lost billions.

During 2010 and 2011 the banks began offering home equity loans again, but they weren't really pushing them because the market was considered to be too soft and there wasn't enough profit to be made at the time.

But starting in 2012 the USA has recovered from the financial crisis completely and American consumers are now receiving pitches in their mail boxes, email, and brochures in bank branches. Bankers admit the competition is increasing rapidly and they are all trying to capture customers with more flexible terms and lock them into reverse mortgages.

This spells more profits for banks in the long run - so long as home prices in the USA remain stable.

Which, judging by the median new home prices, is happening.

As the USA economic pictures continues to brighten the banks are relaxing their standards for who they are willing to loan money to - and home equity loans to seniors who already have their homes fully paid for is considered a pretty safe bet that can only be affected if the value of someone's home drops.

It isn't just homes being offered reverse mortgages either. Businesses are being offered the same deal for their commercial real estate - pushing the idea that if you own the land, why not cash in on its value NOW instead of later?

According to the U.S. Office of the Comptroller of the Currency survey of 86 of the largest banks in the USA as well as federal savings associations (the survey was conducted between Jan 1st 2012 and ended on June 30th, 2013) it showed a dramatic increase during that 18 month time period of home equity loans. The survey represented 87% of total loans in the system, with 11 categories of commercial lending addressed and 7 categories of retail products, including conventional and high loan-to-value (LTV) home equity products.

Which means banks are again increasing their appetite for risk, which means they are also easing their standards on credit cards, asset-based lending, and more.

High LTV home equity loans saw the most tightening of standards during the 2007 to 2011 period. In 2012, standards were eased at 17% of financial institutions. Many banks however tightened their standards, but are now pushing home equity lending because they are trying to cash in on those people who fit the standards - and thus still make some good money off those people.

Banks say they are being more cautious about home equity loans and are ensuring customers can afford the loan, but they are also covering their assets to make sure they make money off these people.

The push to increase revenue comes as banks are facing increasing pressure from investors to grow revenue, which has declined along with the mortgage refinance business. When mortgage rates spiked in 2013, demand for mortgage refinance loans dried up, and this cost the big banks millions in potential income.

Today banks are pushing the idea that they don't want to lend to people who just have equity - they also want the person to have a strong credit score above 700, and a sufficient income / stockpile of cash to fulfill their new standards.

Wednesday, February 12, 2014

Prefabricated Skyscrapers being built in record times

Imagine if you could buy and build a skyscraper in record time - in the same manner that you build furniture from Ikea.

That is the mantra behind a growing trend in the architecture industry, building prefabricated skyscrapers that have all the parts built in a factory and then are assembled on site in a record time frame.

The trend is growing quickly - and building quickly - in major cities around the globe, including New York and London, where the realization that such buildings can be built faster, cheaper and better by using prefabrication.

For example in the video below you can watch a Chinese construction crew building a new 30 story skyscraper in 360 hours - just 15 days.

And what is more...

Prefabricated buildings are cheaper to build - thanks to saving $$$ on construction workers who often spend half their time on the job standing around waiting for cement and materials to arrive - and then waiting for the cement to dry.

Prefabricated buildings are better quality - because factories have higher quality building standards whereas construction crews sometimes make mistakes and have to use a quick fix to solve a problem.

But the biggest change is SPEED, because prefabricated buildings are really fast to build. All the materials are built in a factory on production lines (which is more time efficient) and the construction crews just need to assemble and attach the final pieces.

What this means is that people could build whole new cities in a hurry if we wanted to, by using factories to build the parts.

The biggest delay is building the foundation of the structure, which would be unchanged from the current methods - but maybe in the future a genius will come up with a faster and more effective way to build foundations too.

Lastly, prefabricated buildings don't have to be boring. They're like Lego. You can make them look like any number of shapes and the technology is there to modify how you want a structure to look. We are only limited by our imaginations to design something better.

I think this is a trend we will see a lot more of in the future.

Tuesday, February 11, 2014

Toronto home prices are a big risk says BMO

Toronto home prices are a deep concern to Canadian banks - and they're banking on a drop in real estate prices.

So much so that surge in Toronto prices is described as a major economic threat in a new Bank of Montreal report.

In an economic forecast for North America released this week, BMO noted three "risks" to the North American economy, namely:

1. embattled emerging markets.
2. the continuing tussle over the U.S. government debt ceiling.
3. residential real estate in Canada’s biggest city.

Seriously, Toronto's housing prices / real estate bubble has bankers quaking in fear and using words like "collapse", "crumbling", "major economic threat", etc.

For months some economists have been trying to downplay the worries of big Canadian banks - who stand to lose a lot of money if the Toronto real estate bubble bursts. Some have tried to describe the impending doom as "a minor setback", hoping that when it happens it will simply be a market correction that causes prices to drop a mere 10% - whereas the Toronto real estate market's bubble is overpriced by about 40 to 50%. A realistic market correction would be ballparked at between 25% to 45% drop in real estate prices - and a huge unemployment rate that would send construction workers, auto manufacturers and bankers running for the hills and wanting to hibernate in a cave (bear market pun) until the chaos is over.

I find it really funny when market analysts try to downplay the size of Toronto's real estate bubble. Let me explain by doing a little economics lesson.

What is Toronto's two biggest industries?

#1. Banking.

#2. Construction.

We don't really manufacture anything, Toronto's economy is basically just banking, construction and the service/sales industry. Money pours into Toronto from Canada and the USA thanks to Canada's big banks - and a lot of that money - the lion's share - is from mortgages.

If housing prices drop, Canada's big banks lose money. If housing prices drop significantly, the banks lose a LOT of money.

Simultaneously if housing prices drop, the construction industry dries up. Construction workers are laid off, they and their families stop spending money, and thus the economic down spiral begins. A local recession ensues and many jobs are lost as companies "tighten their belts" by shedding jobs of anyone they don't see as necessary.

If Toronto has a robust manufacturing sector that ships internationally, this wouldn't be as much of a problem. South Western Ontario has a lot of manufacturing jobs, but that is over near Hamilton, Guelph, Kitchener. The auto manufacturing sector will be hit the hardest - but other types of manufacturing will be fine for the most part.

The problem however is that home prices in Toronto have skyrocketed at a ridiculous rate during the last 20 years - largely due to foreign investors in Toronto's condo market. That means that when prices start going down it won't be any minor dip. It will be more like a landslide as investors suddenly sell off their assets and flee the market in droves.

"In Canada, accelerating home prices in Toronto (7.1 per cent year-over-year in January) risk straining affordability further, causing a correction when interest rates normalize and the market is trying to absorb a record number of newly built condos," says BMO senior economist Sal Guatieri.

Mr. Guatieri’s comments follow last week’s report from the Toronto Real Estate Board, which showed the average selling price in January surged more than 9 per cent to $526,528 from a year earlier. The so-called benchmark price rose 7.1 per cent, as the BMO economist noted while warning that real estate price growth is outpacing family income by a huge margin.

In layman's terms that means Toronto home prices have become so ridiculous people can barely afford them - so a single large economic hiccup could be the flea that breaks the camel's back. The real estate market in Toronto is the keystone that holds Toronto's economy in place - give it a big bump and the whole structure collapses.

In Toronto, this is one of the bigger risks, more so to the local economy, Guatieri says in an interview. Guatieri worries what will spark trouble over the next few years is when interest rates rise.

The higher interest rates would cause people to slow their home buying - which is already slowing - and result in people looking to sell to drop their prices in an effort to find buyers. If they see a collapse coming they will be rushed to market and try to sell faster rather than later when prices will be even less.

Consider, too, that according to the latest report from the Canada Housing and Mortgage Corp., also released this week, which showed Toronto ignoring the national trend when it comes to residential construction starts.

While those across the country edged down, housing starts in the Toronto area climbed to an annual pace of 36,186 units in January from 32,281 in December - mostly bought on credit from the banks.

The six-month moving average puts the number at 36,367, up from December’s 35,547.

"Apartment starts remained high as the relatively high number of projects which began selling in 2011 reached sales targets that allow construction to begin," CMHC said of the Toronto market.

Across Canada, housing starts slipped to an annual pace of 180,248 in January from 187,144, the agency said, with the six-month moving average declining to 191,456 from 194,518.

Which means the Canadian economy is cooling, but Toronto is steaming ahead fueled by easy credit.

"The decline in starts is an indication of housing supply falling into alignment with demand in most major markets (Vancouver, Calgary, Edmonton, Quebec City)," says economist Connor McDonald of Toronto-Dominion Bank.

"However, we expect Toronto to follow suit as homes under construction reach completion and more supply comes online. Over all, the recent cooling of housing starts supports our view for a soft landing of the Canadian housing market in 2014 and 2015."

See his choice of words? "Soft landing" is his wishful thinking. He is just thinking in terms of supply and demand, he isn't thinking of what will happen when those same construction workers are laid off and the economy sours - and housing prices drop at a sharper rate than he is expecting.

In his report Guatieri notes how the boom in Canadian housing is largely over as potential home buyers adjust to tighter mortgage insurance rules brought in by the government to head off Toronto's real estate bubble - a tactic designed to prevent it from bursting.

"Not so in Toronto, however, as its prices continue to outrun median family incomes, which averaged slightly over 2-per-cent growth from 2001 to 2011," says the BMO economist.

"Consequently, affordability continues to deteriorate even with relatively steady and low interest rates. While Vancouver remains the least affordable city in Canada, some softening in prices there has allowed Toronto to rapidly narrow the gap."

Yada yada yada, Toronto can't afford these ridiculous high prices in homes so the bubble is going to burst when too much supply outpaces demand and the construction workers are all laid off.

Apartments and Condos in Mallorca

Why Mallorca makes a great option for condo buying instead of Toronto

Mallorca (also known as Majorca, so I will alternate which name I use) is a tiny tropical island off the coast of Spain in the Mediterranean Sea, an island that is 80% dependent upon tourism for its entire economy.

So you would think that the prices of condos and apartments there are probably pretty expensive, right?

After all, we're talking about a tiny country that in 2013 sold 30 estate villas for over 5 million Euros each - the most expensive of which was 18 million Euros. That is a lot of very expensive estates for one little Spanish island.

Thus you would think Majorca really only caters to wealthy estate properties - but we are forgetting that the locals at Mallorca have to live somewhere too, right?

Which means that wherever they are living, it has to be affordable - either by renting a property, owning a condo, or owning a house.

What I have learned is that vacant beach front properties are very expensive. Vacant lots on the beach are in the 450,000 to 600,000 Euros range. (That is $675,000 to $900,000 CDN.)

I browsed some websites for condos and apartments in Majorca and on one of the websites I found 3 small condos for sale 69,000 Euros, 90,000 Euros and 90,000 Euros. (So between $103,000 and $135,000 CDN.)

Now compare those prices in Majorca to small condos in Toronto - and they are about the same. A small condo in Toronto costs about the same as a small condo in a tropical paradise.

And to be fair, the really expensive condos in Mallorca are about the same prices as the really expensive condos in Toronto - a city that so far this winter has average -15 degrees outside, so bitterly cold you start thinking "Hey, why am I living here? Why aren't I living in a tropical paradise instead???"

At which point you have to stop and think why anyone would bother to live in Toronto when they could live in Majorca or some other tropical place instead.

Like just look at these photos I found of Mallorca. I think they demonstrate the difference.

Yada yada yada, basically why would anyone live in Toronto - one of North America's most expensive cities to live in - when you could live in Majorca instead for the same price?

Job? Learn to telecommute. Most of the high paying jobs in Toronto are in the banking and investment industry - jobs that could easily telecommute. Entire workplaces could all move to Mallorca and still hold meetings and do their regular banking stuff while enjoying sun, surf and relaxing drinks in a paradise.

It boggles my mind that tropical islands are not the financial centres instead of cold cities like London, New York and Toronto.

Friday, February 07, 2014

Now is a great time to sell your home in Toronto and Vancouver

If you are thinking about selling your home in Toronto or Vancouver, 2014 is the perfect time to sell.

Act now because pundits and banks are all predicting prices to start dropping in 2015.

The real estate boards of Toronto and Vancouver are reporting year-over-year price increases of between two and twelve per cent for January 2014.

In Toronto, the average selling price for a home in January was $526,528 – up by more than 9% from a year earlier.

January property prices
Property type Toronto Vancouver Change 2013-2014
Toronto / Vancouver
All residential $526,528 $606,800 9.2% 3.2%
Detached $686,688 $929,700 12% 3.2%
Apartment/Condo $346,369 $371,500 8.7% 3.7%
Semi-detached* $481,970 $457,700* 6.6% 1.7%*
Townhouse $346,369 $457,700* 9.0% 1.7%*
Source: Toronto Real Estate Board, Real Estate Board of Greater Vancouver

*Vancouver does not separate townhouses and semi-detached homes and uses the designation 'attached properties.'
In Vancouver, the benchmark price for all residential properties rose 3.2 per cent since January 2013 to $606,800. Detached homes in Vancouver were selling for $929,700 on average last month, a 3.2 per cent increase over the previous year. Apartment and condo properties averaged $371,500, a 3.7 per cent increase over January 2013.

Sales of residential properties in Greater Vancouver were up by over 30% over January 2013 although not as strong as in December 2013, which saw sales rise 7.2 per cent above the 10-year average for the month.

There were 5,345 new listings for Vancouver on the MLS listing service last month, a 4.2 per cent increase over the same time last year - suggesting that homeowners who are looking to sell have realized now is the right time to cash in.

Toronto's market saw fewer new listings in January than last year, with 8,822 properties in the Greater Toronto Area listed on MLS, down 16.6 per cent. Sales were down 2.2 per cent over January 2013, but prices are still rising regardless of the lower volume of sales in all categories.

Detached homes in Toronto were selling for 12 per cent more than in January 2013 while the sale prices of condominium apartments were up 9.7 per cent and semi-detached homes saw a 6.6 per cent increase.


If you want to sell, now is a great time.

If you are looking to buy, you would be better off waiting until 2016 when the bubble has already burst and prices have dropped back down to more reasonable levels.

Average Homeowners Insurance Losses by Causes 2006 to 2010

Average Homeowners Insurance Losses by Causes 2006 to 2010

Watch out for Homeowners Insurance Scams

Did you buy your homeowners insurance online from a company you had never heard of?

Chances are likely that if you did, and you ever try to collect for damages done to your house, that you will never see a dime of that money.

Online insurance scams are a dime a dozen - and there are so many companies out there that are just fronts for insurance scams. They wow you with low prices and stylish websites, but the company is based overseas - which means they have no legal requirement to give you any money should anything happen to your home.

Next, what about a company where you meet the insurance agent in person - and you've heard about the company?

Well many times insurance companies don't like to pay out to homeowners. They use every trick in the book to reduce how much they need to pay you and/or increase how much money they can dig out of you.

Tricks like:

1. The company’s adjuster doesn’t give you the best estimate.

2. You are forced to buy extra policies because you live in a high-risk area - and then they refuse to pay up because you live in a high-risk area.

3. A bad credit report increases your premiums - and then they refuse to pay up because they think you are trying to scam them with fraudulent claims.

4. They jack up their prices afterwards, even though you had nothing to do with the cause of the damage.

5. You end up paying twice when you cancel your policy - because they keep charging your bank account or credit card.

6. The company encourages you to use its mechanic - and then skimps on the repairs. (You are entitled to use your own mechanic to make sure the repairs are done properly.)

7. You are encouraged to take supplemental policies.

8. They don't actually give you the best price, but instead jack up the price because they think you are a sucker.

9. You are led to believe you aren’t covered after you lose your job - so instead they sell you a joblessness supplement.

10. You are led to believe the insurance company’s decision is final - but this is not legally the case. You can take your insurance company to court if you want to, and make them pay your legal bills, if they refuse to pay up on a legitimate claim.

11. A very long list of exceptions in the fine print for things that the company refuses to provide coverage for.

Tuesday, February 04, 2014

14 Interesting and Weird Examples of Condo Architecture

So I went looking for examples of strange condo architecture, and the top google images results were all from my website.

It took me a moment to realize. "Wait a sec, that is MY website!"

After my amusement wore off I realized I would need to look harder (and screen out examples of strange architecture that are already posted on My Search for a Home). I feel obligated that I don't post the same weird architecture twice (although I did make an exception for the hanging gardens photo on the right).

So I had to search a bit harder, but I found these examples which add to my collection of strange, interesting and weird condo designs.

Note some of these are actually hotels instead of condos, but they're still very interesting.

Apartment Rental Scams in Toronto

How to Recognize and Avoid Apartment Rental Scams in Toronto

If you're looking for an apartment, the last thing you want is to fall victim to a rental scam that takes your hard earned cash and leaves you with nothing. Scam artists like to take advantage of prospective tenants because emotions involved in the apartment-hunting process can make people more vulnerable and susceptible to making mistakes, often just by trusting people when you should not.

If you are feeling excitement and enthusiasm about finding a new home, your eagerness might make you become more trusting. Scam artists also prey on apartment hunters who are in a time crunch (because of a job relocation or personal issue, for example) and are desperate to find a new place as soon as possible.

What is a Rental Scam?

Rental scams are a variation on a theme. The scammer tries to get money from a prospective tenant for an apartment that the scammer is in no legal position to rent - meaning they don't own it, are not the current renter looking to sublet, etc. The apartment might be real or even fictitious. The scammer could even be a real landlord, former landlord or often just an impostor.

Often they take possession of your money and then you never see or hear from them again. Only to find out the apartment was never theirs in the first place.

Fortunately, there are many ways apartment hunters can lower the likelihood of getting tricked in a rental scam.

#1. Always view an apartment in person - or have a friend or family member view it for you. Never rent anything you haven't seen in real life and can verify it is really on the market. (Seeing lots of photos of it doesn't count.)

#2. If you see an apartment for rent on Kijiji or Craigslist, and the owner is overseas (and unavailable to give you or a friend a tour of the apartment) then it is most likely a scam.

#3. Ask the owner what landmarks / amenities are near the apartment. If they cannot name any then it is probably a scam.

#4. If they try to pressure you to send a payment immediately, it is probably a scam.

#5. Don't assume that just because someone says "God Bless you!" that they are a good Christian or anything like that. Scam artists love pretending to be religious and kindly because it leads people into a false sense of security.

#6. If the price seems to be too good to be true, it probably is.

#7. Don't be in a rush to pay immediately. Take your time and make sure the apartment is for real.

#8. Visit the building and when a tenant leaves ask if they like the building managers, the building in general - maybe they even know the person who lives (or used to live) in the apartment you are hoping to rent.

#9. Check Toronto real estate rental listings - if you cannot find the apartment that is being rented, or worse, if it is being rented, but at a different price - then something is fishy. A quick way to do this is to google the address of the apartment and look for rent listings.

#10. Often the scammer pretends to be the landlord, in which case you should always insist on meeting the landlord in person at the apartment so you can see it in person. If they refuse to meet you, or have someone else meet you, if they don't produce the keys and show you the apartment - then something is fishy. eg. A landlord that meets you there, but doesn't have the keys should not be trusted.

#11. Never let your guard down. Never give them a money order, cash, or anything other than a cheque. With a cheque you can call the bank and ask them to put a stop on the cheque - which means you won't lose your money if it turns out to be a scam.

#12. Don't assume that if you used a reputable website to find the apartment for rent that it is legit. Many rental scams are placed in legitimate rental websites and renters news catalogs.

#13. Sometimes the scammer might even use the name of a real landlord - in which case find out from a secondary source what their phone number is so you can contact them directly.

#14. If something feels wrong or fishy, look elsewhere. Avoid anything that is a red flag.

#15. If they ask you to send money wirelessly (not a cheque) for an apartment you haven't seen, its a scam.

#16. If they are asking you to lease the apartment and want you to pay before signing lease documents, its a scam.

#17. Never rely on promises, photos or even video of the apartment. See it IN PERSON.

#18. Even if you do see it in person, it is always possible they might try to rent it to multiple people at the same time - and they don't even own it. Moving day comes and 20 people all try to move into the same apartment - complete with 20 different copies of the same key. Make certain they are the owner of the place and not just some Joe Schmoe who lived there for 2 months.

#19. 99% of apartment rental scams are because the person didn't visit the apartment in person.

#20. If the supposed landlord seems too eager to lease the apartment to you, its a scam.

#21. If the supposed landlord suddenly lowers their price in an attempt to make it more appealing, its a scam.

#22. If the supposed landlord didn't check your credit score / criminal background / occupation, its a scam.

#23. If they are extremely willing to negotiate the rent and other lease terms with you, its a scam.

#24. If you're asked to pay 3 or more months in advance (or a whole bunch of upfront fees), its highly suspicious.

#25. If you say you want to consult a friend or a lawyer (regarding a lease agreement) and they tell you don't need a lawyer or to consult your friend, then they are up to something fishy and they want to rush you into signing and paying.

#26. If you ask the supposed landlord about other apartments they have for rent and they either don't have any, or they do but it is more expensive, be extra suspicious.

#27. If the landlord has a convenient excuse for not being able to meet you or show the property its a scam. eg. In the hospital, out of the country, visiting family for a funeral, etc.

#28. If the person has really bad English (like Nigerian spam emails), its more likely to be a scam.

#29. If they offer to help you get a green card for the country in question, its a scam.

#30. If they are Canadian but don't have a Facebook profile, it is suspicious. (80% of Canadians have Facebook profiles.)

What To Do If You Get Scammed?

If you become the victim of an apartment scam, you might feel there's not much you can do. But there are steps you can take to help catch who's behind the scam, get your money back, and put this unfortunate experience in the past.

#1. If you sent a cheque, put a stop on that cheque by calling your bank.

#2. Call the police. They can advise you on other options you can do to try and get your money back.

#3. Ask the bank to trace who cashed the cheque.

#4. Contact the publisher where you saw the ad. See if they have any contact info for the scammer which allows you and the police to track them down.

#5. If the scam occurred in the USA contact the Federal Trade Commission (FTC), which is the federal consumer protection agency. They can also provide tips for tracking down scam artists.

#6. Review your correspondence and look for red flags - and anything that might be a clue to the scam artist's whereabouts.

#7. Try finding another one of their ads, pretend to be someone else and see if you can catch them the 2nd time around.

#8. Learn from this experience as a lesson on when not to trust people.

#9. Warn others not to make the same mistakes you did.

Toronto house prices to slip in 2015

TD Bank report estimates Toronto and Vancouver real estate markets are 10 to 15 per cent overvalued, compared to 10 per cent for rest of country, and due for a market correction.

The first of the big Canadian banks has weighed in with a warning that Toronto’s housing market is overvalued by 10 to 15 per cent.

So is Vancouver’s, says TD Economics in a report released yesterday, noting that both cities have been seeing “frothier conditions” than the rest of the country, where house prices remain at least 10 per cent overvalued, largely because of low interest rates which have been allowing rampant bidding wars.

“Toronto and Vancouver make up 40 per cent of the Canadian housing market, so that’s what’s really driving the overvaluation measure,” said TD economist Diana Petramala in an interview.

The coming increase in interest rates will cause a "negative economic shock" could will send resale home prices tumbling by 25 per cent, Petramala notes. But it’s far more likely there will be a “gradual unwinding of excesses” in the Canadian market as interest rates slowly rise, along with incomes, over the next few years.

Toronto home prices jumped 6.8 per cent in 2012 and 5.4 per cent in 2013, they are expected to rise just 2.7 per cent this year and then slip by 1.2 per cent in 2015, when interest rates are expected to start climbing, the report forecasts.

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