Builders and Land Developers facing challenges right now

With financial markets roiling, oil and gas prices gyrating and the extent of the fallout in the Canadian real estate market uncertain, many current and aspiring homeowners seem content to stand still and wait out the turmoil.

Home builders don’t have that option.

“This whole industry is a big ship and it doesn’t turn on a dime,” says Niall Haggart, vice-president at Daniels Corp.

Builders and land developers face a battalion of challenges right now: Spillover from the collapse of the U.S. housing market is starting to drag down real estate sales and prices in Canada but no one can predict how long or steep the slide will be.

In Ontario, the government’s official plan to curb urban sprawl is making land available for building scarce and therefore more expensive, developers complain.

At the same time, higher materials costs for builders are also pushing up the cost of even a modest townhouse in the suburbs out of the reach of first-time buyers.

Meanwhile, immigration brings potential new buyers into the housing market just as the looming retirement dates of baby boomers could lead to a wave of downsizing.

Builders buy land several years before they ever have a house or condominium unit ready for a buyer. Many are trying to adjust to the shifting landscape and predict where the market will be a few years out.

Read the complete article

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Tuesday Morning: Housing Market and Subprime on the news

Good morning, Montreal.
Here is a list of Real Estate market, subprime mortgage and Commercial Real Estate investment news.

• Soft landing predicted for real estate [Montreal Gazette]
  Economists say they’re expecting a soft landing for the Canadian real estate market despite a new study that concludes house prices in Montreal and other major Canadian cities are overvalued by as much as 25 per cent.
• Housing market rebounds, Ontario leads way [Reuters.ca]
  Housing starts rebounded in August, beating expectations, but some economists cautioned against reading too much into the number since it followed a weak reading in July.
• CIBC chief says corner being turned on subprime [Calgary Herald]
  The top executive at Canadian Imperial Bank of Commerce shied away from predicting when the bank would stop taking structured-credit charges, but he hinted the worst of its subprime mortgage troubles could be over.
• CREIT Buys 8 Canadian Tire Properties for $137M [Commercial Property News]
  Canadian Real Estate Investment Trust (CREIT) has acquired a portfolio of eight retail properties from Canadian Tire for C$137.3 million. Canadian Tire has leased each of the eight properties back under 15-year triple-net leases at current market rental rates, with escalating contractual rents over the term. The properties have all been either significantly renovated or expanded within three years by Canadian Tire.

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Old Montreal: Pedestrian only in the summertime.

Photo: Payton Chung

The administration of Mayor Gérald Tremblay announced last friday, their plans to make sections of St. Paul and Notre Dame Sts. pedestrian-only each day in the summertime.

Starting from June 15 to September 15th, Rue St. Paul, between Bonsecours Market and St. Laurent Blvd., would be closed to vehicles between 11 a.m. and 6 a.m. every summer. Also Notre Dame, in front of Notre Dame Basilica, at Place d’Armes, would be closed to vehicles during the same hours and months.

• Read the full article at the Montreal Gazette.

RBC Housing affordability forecast for 2008

A new report released by the Royal Bank of Canada informs us: in 2007 home ownership became less affordable nation wide, but prices stayed fairly stable in the Quebec market.

Quebec - affordability still manageable

“The nationwide deterioration in affordability conditions hit every province last year. The hit to Quebec, however, was much more muted.
A generally balanced market has helped keep affordability conditions generally in check. House prices continue to modestly outpace income gains but the gap between the two measures is expected to narrow this year as price growth moderates to the 5% range in 2008. Housing starts have been running at elevated levels (close to 49,000 units) in each of the last three years.
New home construction is expected to slow modestly in 2008 (46,000 units) and more significantly by 2009 (40,000 units) as housing markets shift into slower gear.”

• Download the full Pdf report here
  
• More on this report at the Montreal gazette website

For more news on the housing Market, Subscribe to the Montreal Real Estate Blog !

Quebec housing starts up significantly in February

According to the latest monthly starts survey conducted by Canada Mortgage and Housing Corporation (CMHC), residential construction registered a strong increase this past month in centres with 10,000 or more inhabitants across Quebec. In fact, 2,810 housing units were started in February, or 50 per cent more than during the same period a year earlier.

The dynamics were different, however, depending on the centres. Starts rose by 51 per cent in the census metropolitan areas (CMAs) but fell by 6 per cent in the smaller agglomerations (50,000 to 99,999 inhabitants). The Montréal area stood out by being the engine of this growth. In fact, foundations were laid for 2,167 new dwellings there in February 2008, compared to 1,262 in February 2007, for an increase of 72 per cent. Housing starts went up less significantly in Saguenay (+56 per cent) and Trois-Rivières (+ 21 per cent), while they declined in Québec (-32 per cent), Sherbrooke (-10 per cent) and Gatineau (-3 per cent). The survey also revealed >>

Interest rate cut will help Canadian home owners and buyers

The interest rate cut announced today by the Bank of Canada will help Canadian home owners and buyers, according to The Canadian Real Estate Association. The Bank of Canada cut its benchmark overnight lending rate by one-half of one percentage point to 3 1/2 per cent on March 4th, and signaled further cuts in the near future. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, now stands at 3.75 per cent.

“The threat of inflation is being eclipsed by concerns about slower economic growth, so the Bank of Canada cut its trend-setting bank rate to boost growth,” said CREA Chief Economist Gregory Klump. “Financial market turmoil will remain a downside risk to growth for some time. This means the Bank will probably continue lowering interest rates.”

Lower lending rates will help offset the effect of tightening credit conditions and allow homeowners to obtain better mortgage terms. This will also benefit Canadian homeowners dealing with variable rate mortgages. Read more

Interest rates news headlines

• Scotiabank Forum Predicts Another Healthy Year Ahead For Canadian Real Estate Markets (Exchange Morning Post)
  TORONTO - Canadian real estate markets remain remarkably buoyant, especially in light of the deepening housing downturn in the United States and the generally softening conditions in most other advanced economies globally, according to experts who presented today at Scotiabank’s Canadian Real Estate Outlook and Trends Forum 2008.
  >>> Read complete article

• Bank of Canada sets interest rate, Tuesday. (Globe and Mail)
  Bank of Canada makes its interest rate announcement. Economists expect the target for the key overnight rate to be set at 3.75 per cent, down from 4 per cent.
  >>> Read complete article

• Interest-rate cut expected, question is how much. (Financial Post)
  OTTAWA — It’s no longer a question of to cut or not to cut for the Bank of Canada, but of how low will it go. Canadians will find out Tuesday.
  >>> Read complete article

Subprime mortgage news update

• Canada economy to slow, risks to downside - IMF (Reuters)
  Canadian economic growth will slow to 1.8 percent this year and there is a risk of an even sharper downturn as weakness in the U.S. economy spreads beyond the housing sector, the International Monetary Fund said in a report on Monday.
  After growing about 2.5 percent in 2007, Canada’s healthy economy and fiscal standing will help it withstand the global turbulence but external risks will pose a challenge. >> read more
  …….
• Canadian institutions expected to make writedowns (Exec Canada)
  Some of Canada’s five biggest banks are expected to report headline-catching writedowns when they announce first-quarter earnings. The banks have so far escaped with remarkably little damage from the credit market turmoil. >> read more
  …….
• Storm clouds threaten to rain on bank profits (Globe and Mail)
  Canadian Imperial Bank of Commerce said in January that it will take $2.46-billion (U.S.) in pretax writedowns for the two months ended Dec. 31 because of its exposure to the U.S. subprime mortgage market. >> read more
  
  …….
• UPDATE IMF lowers growth projections for Canada on back of US economic downturn (Forbes)
  Canada’s growth will likely decelerate further in 2008 and 2009 as a result of the sharp downturn in the US economy, the International Monetary Fund (IMF) reported. >> read more
  

Today’s Headlines: Interest Rates and Subprime Mortgage

• Bank of Canada’s Carney ponders degree of rate cut - (Reuters) The Bank of Canada has to weigh strong domestic demand against the spillover effects of the slowing U.S. economy when deciding how much to cut interest rates next month, Governor Mark Carney said on Monday. Carney used his first speech since becoming central bank chief on February 1 to convey that he is keeping his options open, suggesting he could potentially reduce the bank’s overnight rate by 50 basis points, as most market players expect.

>> Read the complete article on reuters.ca

• U.S. credit woes seep across the border (Globe & Mail)
  American subprime shemozzle is beginning to squeeze mortgage and funding availability in Canada.

“Canadian chartered banks have been the main source of financing for real estate projects, but they have got caught up in the U.S. subprime mess and have had to write off those investments. Now, they have returned to what is known as balance sheet lending - or traditional mortgage financing. To maintain government-mandated equilibrium between a bank’s equity and its loans outstanding, the banks have had to both call in loans and cancel commitments for new ones, industry observers say.”

“Intense competition for funds has both increased interest rates on mortgages and created a demand for higher cash-to-mortgage ratios, says David Bowden, president of real estate broker Colliers International Canada in Toronto.”

“The credit crunch is having its greatest effect in smaller centres, says Sheila Botting, senior managing director of Canada for the capital markets group at Cushman & Wakefield Lepage Inc.”

>>Read the complete article on Globe and Mail

• Rate cuts likely to trump inflation fears (Globe & Mail)
  The inflation watch is under way this week in Canada and the United States, but investors are betting the U.S. Federal Reserve Board will to continue to cut regulated interest rates despite price pressures, while the Bank of Canada is expected to play some catch up.It’s anticipated that domestic inflation data scheduled for release today will provide plenty of leeway for the Bank of Canada to lower its target overnight rate on March 4.>> Read the complete article on Globe and Mail

For more news on the housing Market, Subscribe to the Montreal Real Estate Blog !

BMO Bank of Montreal Lowers Mortgage Rates

TORONTO, Feb. 15 /CNW/ - BMO Bank of Montreal announced today it is
decreasing its residential mortgage rates, effective February 16, 2008. The
new rates are:
Fixed Rates: To: Change:
6 month open 8.90% 0.00%
6 month convertible 7.10% 0.00%
1 year open 9.40% -0.10%
1 year closed 7.25% -0.10%
2 year 7.30% -0.10%
3 year 7.30% -0.10%
4 year 7.19% -0.20%
5 year 7.29% -0.10%
6 year 7.45% -0.10%
7 year 7.65% -0.05%
10 year 8.00% -0.05%
18 year open 9.20% 0.00%

(The interest on fixed-rate mortgages compounds semi-annually, not in advance.)

The Five-Year Protected Variable Rate ceiling changes to 7.29%.

Special Offers(*)
To: Change:
3 year (fixed/closed) 6.23% - 0.10%
5 year (fixed/closed) 6.23% -0.10%
7 year (fixed/closed) 6.38% -0.05%

Homeowner ReadiLine(R)
5-year variable rate closed term 5.50% 0.00%

(*) These special discounted rates are not the posted rates of BMO Bank
of Montreal. Rates are subject to change without notice. Offer may be
withdrawn or extended without notice. Mortgage funds must be advanced
within 90 days of the application

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