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Tuesday, May 04, 2004

Canadian Rental Resources Greatly Improved

by PJ Wade

Low interest rates may currently be transforming greater numbers of tenants into home buyers, but Statistics Canada reports that the proportion of Canadians renting their homes has changed little over the decades.

Generally, when household income increases, there is a transition in tenure, or the legal relationship with property, from renting to home ownership. However, lifestyle influences the tenure decision. Some Canadians, who can afford to buy, may rent to avoid home maintenance responsibilities or to wait out a booming real estate market.

Renting is more common in urban areas partly because housing prices are lower in rural areas. Urbanization has resulted in a growth in high-density rental housing such as high-rise apartment buildings and low-rise developments.

Over the past decades, Quebec has consistently had the highest proportion of renters, while Newfoundland has had the lowest. The other three Atlantic provinces, as well as Saskatchewan also had relatively low proportions of households renting.

Apartment availability -- measured as vacancy rates -- has not increased dramatically in urban areas like Vancouver, Victoria, Ottawa-Hull, Toronto and Hamilton. Persistently low vacancy rates indicate that developers are not increasing the supply of rental housing, despite high demand. According to CMHC's Starts and Completions Survey, apartment construction was much lower in 1993 (40,000 starts) than in 1971 (106,000 starts). A variety of factors influence rental housing construction including interest rates and rising construction costs.

Improved Rental Resources

If you are exploring rental housing -- either as a renter, landlord or investor -- there are many resources and organizations to help you understand what you're getting into:

Our federal housing agency Canada Mortgage and Housing Corporation (CMHC) offers both free and for purchase information for tenants and landlords alike:

The free online publication Your Guide to Renting a Home provides insight into the rental process, offering tenants and landlords an overview of their rights, responsibilities and available resources.

If you are new to Canada, ordering the free Newcomer's Guide to Canadian Housing (revised 2003) may clarify Canadian practices, legalities and terminology.

You can purchase CMHC's surveys of Rental Market Vacancy Rates and Rents for most major cities.

Co-operative Housing Federation of Canada (CHFC). Information on both the Canada-wide federation and regional federations. General information about co-operative housing is also provided.

Legal Aid Offices across the country.

RentCanada. Promoting itself as "Canada's Internet Apartment Guide," this Web site lists provinces and cities, with information on property management firms and classifieds on the sub-pages for each region.

Income from Properties: Toolkit. This site offers a series of useful forms and information sheets for landlords, which are presented in PDF format. The information seems very useful, but landlords should ensure that forms such as the rental application form conform to their province's legal requirements.

Canada Apartment Listings is one guide to apartment search sites, apartment listings and tips for finding an apartment in Canada.
Published: May 4, 2004

Copyright © 2004 Realty Times. All Rights Reserved.

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What To Make Of Soaring Real Estate Trends

by Peter G. Miller

You couldn't beat the last week of April for happy real estate news. While 2004 was supposed to be a year of modest home sales and somewhat higher interest rates, what we're seeing this year -- so far -- is stunningly upbeat in many areas of the country.

In March, existing home sales were running at the second highest levels since records were first kept in the 1960s. Existing-home sales increased 5.7 percent to a seasonally adjusted annual rate of 6.48 million units in March, up 12.7 percent according to the National Association of Realtors.

"New-home sales posted an all-time record in March, buoyed largely by the second lowest interest rates since 1956 and a strengthening national economy," according to the National Association of Home Builders.

The latest rate for 11th District Cost of Funds Index -- an index used by many ARM borrowers -- dropped to 1.815 percent. The lowest level since July, 1981 was announced in February, a meager 1.811 percent. In effect, this significant index is trolling near the historic bottom.
Right now, the Washington, D.C. metro area represents one of the hottest markets in the U.S. Why? Some 60,000 new jobs have been created in the past year. If you can draw breath with any regularity you can find employment in the Capital region -- and then you can try to find a house.

The housing part is not so easy. A townhouse development not far from here opened with units priced around $385,000. A few weeks later they were available for $525,000.

This is all great and everyone loves a party. But are we looking at data which represents performance from a period that's no longer relevant?

Consider home sales. If they closed in March then the likelihood is that loan rates were locked in 30 to 45 days earlier -- that would be in January and February. At the end of April, says Freddie Mac, typical mortgage rates for 30-year, fixed-rate financing reached 6.01 percent with .7 points, low by historic measures but as much as .43 percent higher than the rates seen during the first two months of the year.

The questions to ask are:

Have we suspended the laws of economics?

Is there no sting from OPEC's soaring gasoline prices?

Can massive federal deficits continue without impacting mortgage rates?

Even though mortgage rates remain low by long-term standards, will today's above-the-bottom rates reduce home sales? What if rates continue to rise?

Employment nationwide increased by 308,000 jobs in March, but shouldn't we count the 1.4 million "persons not in the labor force" not listed in the unemployment figures?

Can we continue our vast payment imbalances with other countries and not suffer any consequences?
As an income-earning homeowner in the Washington metro area I am elated by local real estate trends, I pray fervently and regularly that they will continue and I look forward to home prices here which one day rival those in San Francisco -- but I am also wary.

What's happening in Washington is not necessarily happening elsewhere. With jobs, for example, Detroit (down almost 21,000 jobs), Boston (more than 30,000) and Los Angeles (2,000 approx.) have all seen employment declines during the past year.

Homes sales and prices are a by-product of many factors including local job growth, economic expansion, rising incomes and tolerable mortgage rates. The Washington metro area now has it all in real estate terms -- but for how much longer no one case say.

Published: May 4, 2004

Copyright © 2004 Realty Times. All Rights Reserved.

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