Weekend round-up

Here is a collection of real estate articles from around the world to comment on. What are you seeing out there in your area? Post your links and thoughts.

Real Estate Exchange Becoming a Popular Option in Down Market

US Banking System in Crisis- Why banks are Not lending?

Real Estate Investing Like The Pros

Real estate agents busted for low quotes

Chill felt in Toronto real estate

First Nations housing market

The Government of Canada is introducing a new financing plan that will allow First Nations people living on reserve to build, buy or renovate a house on-reserve.

The plan has three stakeholders; the Canadian Government (a.k.a the taxpayer), Canadian financial institutions and First Nations organizations.

The intention of the program is to create an on-reserve housing market that will encourage investment and home ownership.

Essentially, the Fund is designed to provide an extra safety net for the lender in the event the borrower defaults on the loan and the First Nation does not honour its obligation to step in using its own resources, to remedy the default.

Final thoughts: One item that I am not clear on is the ownership of the underlying land. IMO the land must be part of the home ownership if this is to work.

If First Nations people can only invest in the "house" on the land, then they are paying allot of money for a depreciating asset. Under this scenario the program is a money loser for all except the lender.

There are many challenges ahead for this program to create an "investment" type housing market on a First Nations reserve. Some of these challenges are covered in this post by Grassroots News .

It will be interesting to see how this "real estate market" takes form over the long term. If you have any additional information on this please leave a post.

Wary of realty speculators

This article talks about how developers working in the Vancouver, BC real estate market are refusing to sign pre-sale deals to suspected speculators.

The developers are concerned that if the market flattens speculators will just walk away from the deal before the building is finished complicating financing which is dependant upon the number of units pre-sold in the building.

In this particular story the developer blames the marketing company for attracting speculators, however speculators are and will always be a part of a booming market.

Final thoughts: A quick search of Craigslist shows 421 assignments offered in the Vancouver area. What is not known are the number of assignments that are unknowingly transferred from speculator to speculator.

There are plenty of quasi-investors out there who think this market has another 3 plus years to run. I am not saying they are wrong, however the evidence to the contrary is starting to build.

This storey of the developer being concerned about speculators buying in their building tells me they are concerned about the strength of the real estate market over the next couple of years. The financing aspect is just the fallout of a declining market. When real estate values decline, speculators and would-be owners alike will walk away from these assignments.

Agriculture the next real estate play

Everyone has been hearing and reading about the rising costs of food around the world. This storey is in part a decline in food production, increased global demand from developing countries like China and India, the US government pushing forward on corn based ethanol production and finally market speculators pushing up the prices. That being said several commodity, real estate and other experts are looking forward on a 10 year boom in commodity prices.

If we look at it from a real estate perspective, farmland is the obvious place to be. Assuming a 10 year boom in the commodity market plays out, real estate values of farmland will skyrocket. I base this primarily on the limited supply of farmland and adding another billion people to the world population by 2020. In addition to this, farmland around the world is decreasing due to development and loss of ground water .

The Spring 2008 Farmland Values Report released by Farm Credit Canada says the following:

"The average value of Canadian farmland increased 7.7 per cent during the last six months of 2007, Canada's highest increase since 2002. This is higher than the 3.6 per cent increase in the first six months of 2007.

Most provinces continue to see growth in farmland values, with British Columbia experiencing a huge 14.5 per cent increase. Overall increases are consistent with an upward trend in land values since January 2000.

With the largest increase in B.C. at 14.5 per cent, Alberta shows the second largest increase at 10.3 per cent. Saskatchewan follows closely behind with an average 7.8 per cent increase and Manitoba is experiencing a similar per cent increase of 7.3 per cent.

Quebec shows an increase of 3.6 per cent, while Ontario's farmland values increased slightly at 1.2 per cent during the last six months of 2007.

Atlantic Canada land values varied, with Nova Scotia showing a 3.1 per cent increase, while Prince Edward Island and New Brunswick indicating decreases of 1.4 per cent and 3.3 per cent, respectively. Newfoundland and Labrador land values remained the same in the second half of 2007. "

Final thought: For all those times you wish you would have jumped into the market early and made your fortune, now is the time to investigate the future follow the money and make your play.

Calgary is leading the real estate decline

This article talks about Calgary leading the pack of the four most active provinces in resale housing activity.

"A report released Tuesday by the Canadian Real Estate Association says MLS sales in the province were down 30.5 per cent compared with the first quarter of 2007, new listings increased by 36.2 per cent, total dollar volume of all transactions dropped by 26.7 per cent but the average sale price increased by 5.4 per cent to $361,544."

REM: The question is, how long will this "balanced market" and "modest price gains" last? My call is that we will pass by the "balanced market" on our destination to a buyers market.

The duration the market will hold a balance I believe is directly linked to the number of people/quasi-investors who have been holding on to hit the top of the market before selling.

There still seems to be a fair number of people I talk to who believe the market will continue on a 5% -10% gain over the next couple of years (at least in Vancouver BC). The problem with timing the top of the market is that you don't see the top until it has already passed by.

I will leave you with this Wall Street truism as a final thought: Bulls Make Money, Bears Make Money, Pigs Get Slaughtered.

Bullish on Canada

Are you Bullish on Canada? Michael Levy of Custom House gave his outlook on Canada in his final contribution to the World Market Update.

We start with energy because the vast reserves of oil and natural gas in the ground will some day make Canada the world's largest supplier of fossil fuels to the world.

When the method of efficiently extracting the oil reserves from the Canadian oil sands is perfected, and that could be a few years down the road, Canada will even match or surpass the likes of Saudi Arabia and become one of the richest nations on earth because of our ability to safely produce and refine energy products whose world demand continues to grow at record levels year over year.

The world will continue to need our commodities whether the aforementioned energy products, base metals, lumber, precious metals, water, power from the likes of Quebec (and B.C. once again as more hydro is produced in the decades to come), grains from the prairies, and the list goes on.

The list is endless and includes most all the base metals used in the manufacturing of just about everything from cellular phones to electronic devices to automobiles. Base metals that come from Canada.

Canada is the only country in the G-8 that does not have a budget deficit; in fact in the past 10 years where the U.S. national debt has almost doubled to over $9 trillion, Canada has actually paid off over $92 billion on our sovereign debt.

Canada is going to become the lowest taxed regime corporately in the industrialized world, with federal income tax on businesses coming down to 15% in the next five years; an invitation for industries and corporations of world to set up shop in our country.

Canada is safe geo-politically, has a stable government, and invites the world to our doorstep.

Our dollar will once again go back past the recent highs of November and could in years to come go to $1.20 or $1.30 U.S., or even higher as our economy explodes as the world demands what we produce.
Get the full story here.

REM: Agrees that Canada is well positioned to capitalize on its abundant resources. When the world does comes knocking on our door, the good fortune will spill over into the real estate market. Those areas that are close to the action (resources) will see strong gains in real estate value.