Ross Newhouse

FREE MONEY (well almost) MAKES HOUSE BUYING TOO GOOD TO PASS UP

2009-03-06T16:19:00Z

My local Mortgage broker, Bill Rainbow of Meridian Motgage Solutions in Invermere which services the entire Columbia Valley including, Fairmont, Radium, Invermere, Windermere and Panorama recently sent me the following:

Affordability is incredible right now!!

March 2008

House price = $550,000

5 year fixed rate = 5.6%

Mortgage Amount (80%) = $440,000

Monthly Payment = $2,373

March 2009

House price (10% decrease) = $495,000

5 year fixed rate = 3.99%

Mortgage Amount (80%) = $396,000

Monthly Payment = $1,743

That’s a $630 per month difference!

I find it very instructive to actually see and quantify what all these interest rate cuts they keep talking about on the doom and gloom news that we are bombarded with every day, are actually doing. As you can see from Bill's example they are making the cost of borrowing money (currently at 3.99% on a 5 year fixed) almost like free money. These numbers would be even more dramatic if using the actual drop in prices, which are probably closer to 20%, and also using a variable rate instead of a fixed rate. In any event, I think that locking into a long term fixed rate mortgage here within the next six months will create a great investment opportunity for real estate investors whether it be for their personal residence, recreational home or income producing property.

You are probably wondering why a mortgage would be considered an investment opportunity. Well, if we see a run up in interest rates when the economy starts to recover and you have a long term fixed rate mortgage that is assumable by a new buyer, this mortgage will make your home that much more valuable and desireable. With so much money being injected into our banking systems in North America, it is almost inevitable that the economy will eventually recover and when it does, the pendulum will have gone too far and inflation will then become the problem which means interest rates will have to increase (probably dramatically).

The conclusion that I draw from all of this is that we are all being offered an incredible opportunity right now. If you have the downpayment (which can be as low as 5% even of recreational property) to buy a home right now with a long term fixed rate mortgage you have a once in a lifetime window of opportunity. Real estate prices have come down in the Valley by as much as 30% off their peaks in 2007 and interest rates have never been lower. So, what are you waiting for? It just doesn't get any better than this!

Real Estate vrs. the Stock Market

2009-02-21T19:25:00Z

Most of my clients have investments in both real estate and the stock market. This is a good thing as this provides them with some diversification. I also have investments in both but this latest bout of lack of consumer confidence has really made me think about what is a better investment. The following discussion then is solely my opinion based on my personal experience and is not meant to address your own personal circumstances. As always you should always do your own research and discuss your investment strategies with your own advisors.

I received an email from one of my clients recently lamenting the decreasing value of his property over the past year and exclaiming that this was the worst investment he had ever made. While I understand and sympathize with his frustration of trying to sell his property in a Buyer's market I would beg to differ with his conclusion. At the price his property is listed at he will still be making a sizeable positive return on his investment just not as much as he would have if he hit the market at its peak two years ago. I have had numerous stock investments that have lost 50% of their value from a year ago and in some cases lost all of their value. This type of rapid loss or total wipe out of value just does not happen in real estate. Real estate, as the name implies, is REAL. The land is not going away and it cannot be replaced. It is not just a piece of paper. In addition, most people derive some personal use or joy from their real estate. One of my real estate investments is a large acreage with stunning views of this beautiful Valley. Every now and then I hike up on this property and it brings me a strong sense of satisfaction and I know that some day someone else will have this same joy of ownership when I ultimately sell. I cannot say the same for my stocks. Even the ones that have made me money.

My other philosophy on real estate and the stock market is that the real estate market is imperfect especially in relationship to the stock market. By this I mean that all stock market investors have access to the same information which is readily available. An exception to this would be someone with insider information that is not yet public. This means that the stock market, for the most part, is a relatively perfect market in that prices paid for stocks at any given time are based on everyone having the same information. There are, of course, other exceptions to this. One which comes to mind is Warren Buffett. I am reading his autobiography right now and what I get out of this is that Mr. Buffett made it his policy to know more about the companies that he was investing in than even the owners did and he sometimes had other reasons to buy. In addition, he was in a position to not just buy a small percentage of the shares of the companies that he was interested in but to buy enough shares that he could control the boards of the companies and therefore control the destiny of that company. So, unless you have Warren Buffett size wealth you cannot control your investment in stocks in any way. You are just subject to the whim of the companies management and the public's perception of how that company is doing. Real estate, on the other hand, is a very imperfect market. Some people know and/or have access to more information about a particular piece of real estate than others. An example of this was one of my very first real estate commercial real estate sales where I discovered that the city where I lived was changing the traffic patterns by making opposing one way streets. This would mean that one of the streets which had rarely been used was now going to become a major thouroughfare. I brokered a sale on a piece of raw land on this street to a client of mine and he sold it again six months later at double the price. So, although this information was available to everyone, most people were not aware of it. While this is a straight forward example, there are all sorts of examples which would be more complex and may require some techniques to create value (i.e. by changing zonings, subdivision, etc.). The important thing to realize though is that as a real estate investor you are now like Warren Buffett in that you are in control of your investment. This is a very powerful concept which cannot be overstated.

I guess you probably know by now that my preference between real estate investing and investing in the stock market strongly favours real estate. I do however, think there is a place for both. If you are considering an investment in real estate in our area I would be happy to spend some time with you and share my knowledge of the Valley.

Americans compliment Canadians? What???

2009-02-09T21:54:00Z

NEWSWEEK - From the magazine issue dated Feb 16, 2009

The legendary editor of The New Republic, Michael Kinsley, once held a "Boring Headline Contest" and decided that the winner was "Worthwhile Canadian Initiative." Twenty-two years later, the magazine was rescued from its economic troubles by a Canadian media company, which should have taught us Americans to be a bit more humble. Now there is even more striking evidence of Canada's virtues. Guess which country, alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors. Yup, it's Canada. In 2008, the World Economic Forum ranked Canada's banking system the healthiest in the world. America's ranked 40th, Britain's 44th.

Canada has done more than survive this financial crisis. The country is positively thriving in it. Canadian banks are well capitalized and poised to take advantage of opportunities that American and European banks cannot seize. The Toronto Dominion Bank, for example, was the 15th-largest bank in North America one year ago. Now it is the fifth-largest. It hasn't grown in size; the others have all shrunk.

So what accounts for the genius of the Canadians? Common sense. Over the past 15 years, as the United States and Europe loosened regulations on their financial industries, the Canadians refused to follow suit, seeing the old rules as useful shock absorbers. Canadian banks are typically leveraged at 18 to 1 compared with U.S. banks at 26 to 1 and European banks at a frightening 61 to 1. Partly this reflects Canada's more risk-averse business culture, but it is also a product of old-fashioned rules on banking.

Canada has also been shielded from the worst aspects of this crisis because its housing prices have not fluctuated as wildly as those in the United States. Home prices are down 25 percent in the United States, but only half as much in Canada. Why? Well, the Canadian tax code does not provide the massive incentive for overconsumption that the U.S. code does: interest on your mortgage isn't deductible up north. In addition, home loans in the United States are "non-recourse," which basically means that if you go belly up on a bad mortgage, it's mostly the bank's problem. In Canada, it's yours. Ah, but you've heard American politicians wax eloquent on the need for these expensive programs interest deductibility alone costs the federal government $100 billion a year because they allow the average Joe to fulfill the American Dream of owning a home. Sixty-eight percent of Americans own their own homes. And the rat e of Canadian homeownership? It's 68.4 percent.

Canada has been remarkably responsible over the past decade or so. It has had 12 years of budget surpluses, and can now spend money to fuel a recovery from a strong position. The government has restructured the national pension system, placing it on a firm fiscal footing, unlike our own insolvent Social Security. Its health-care system is cheaper than America's by far (accounting for 9.7 percent of GDP, versus 15.2 percent here), and yet does better on all major indexes. Life expectancy in Canada is 81 years, versus 78 in the United States; "healthy life expectancy" is 72 years, versus 69. American car companies have moved so many jobs to Canada to take advantage of lower health-care costs that since 2004, Ontario and not Michigan has been North America's largest car-producing region.

I could go on. The U.S. currently has a brain-dead immigration system. We issue a small number of work visas and green cards, turning away from our shores thousands of talented students who want to stay and work here. Canada, by contrast, has no limit on the number of skilled migrants who can move to the country. They can apply on their own for a Canadian Skilled Worker Visa, which allows them to become perfectly legal "permanent residents" in Canada no need for a sponsoring employer, or even a job. Visas are awarded based on education level, work experience, age and language abilities. If a prospective immigrant earns 67 points out of 100 total (holding a Ph.D. is worth 25 points, for instance), he or she can become a full-time, legal resident of Canada.

Companies are noticing. In 2007 Microsoft, frustrated by its inability to hire foreign graduate students in the United States, decided to open a research center in Vancouver. The company's announcement noted that it would staff the center with "highly skilled people affected by immigration issues in the U.S." So the brightest Chinese and Indian software engineers are attracted to the United States, trained by American universities, then thrown out of the country and picked up by Canada where most of them will work, innovate and pay taxes for the rest of their lives.

If President Obama is looking for smart government, there is much he, and all of us, could learn from our quiet OK, sometimes boring neighbor to the north. Meanwhile, in the councils of the financial world, Canada is pushing for new rules for financial institutions that would reflect its approach. This strikes me as, well, a worthwhile Canadian initiative.

Real Estate Highlights of the 2009 Federal Budget

2009-02-06T18:13:00Z

Tax credits for home buyers and home owners

Home renovation tax credit
Under a new temporary renovation tax credit, home owners can claim a 15 percent non-refundable tax credit for eligible expenditures over $1,000 but not more than $10,000, for a maximum credit of $1,350 ($9,000 × 15%). The credit is available for eligible costs of work performed or goods acquired after January 27, 2009 and before February 1, 2010 (unless the expenditure is made under an agreement in place on or before January 27, 2009).
Family members (spouses or common-law partners and their children under 18) are subject to a single limit based on their pooled expenditures. The credit is only available for a dwelling that is eligible to be the family’s principal residence or that of one or more of their other family members.
Expenditures will qualify for the credit if they are incurred in relation to a renovation or alteration of an eligible dwelling, provided the renovation is of an enduring nature and is integral to the dwelling. Examples include new furnaces, windows and decks. Eligible expenditures include labour costs, professional fees, building materials, fixtures, equipment rentals and permits.

First-time home buyers’ credit
First-time home buyers who acquire a qualifying home after January 27, 2009 may be entitled to claim a new non-refundable tax credit of $5,000 and worth up to $750 ($5,000 × 15%).
To qualify, neither the individual nor his or her spouse or common-law partner can have owned and lived in another home in the calendar year of the new home purchase or in any of the four preceding calendar years. The credit can be claimed by either the purchaser or by his or her spouse or common-law partner.
The credit will also be available for certain home purchases by or for the benefit of an individual eligible for the disability tax credit.

Home Buyers’ Plan threshold increased
The budget increases the amount that first-time home buyers can withdraw tax-free from a Registered Retirement Savings Plan (RRSP) to purchase or build a new home to $25,000 (up from $20,000). The new limit applies to withdrawals made after January 27, 2009.

Highlights of the 2009 Federal Budget

Ride to Conquer Cancer

2009-02-05T21:27:00Z

I have been fundraising work today for my friend Steve who is riding in the upcoming Ride to Conquer Cancer. This is an issue that is very important to me right now as I have just lost one of my golfing buddies to cancer and have another one who has just recently been diagnosed with serious cancer. As you will read in Steve's intro it is also of utmost importance to Steve. Hope you can help.

Steve Williams Ride to Conquer Cancer intro letter:

In June 2009 I'll be participating in a 2-day major cycling event called The Ride to Conquer Cancer,
benefiting the Alberta Cancer Foundation, one of the top 5 cancer research hospitals in the world.

I'll be cycling over 200 kilometres that weekend, with thousands of other Riders. All the proceeds
will go to the Alberta Cancer Foundation to support cancer research, treatment, and services. the
Alberta Cancer Foundation is a leading comprehensive institution devoted to cancer research and
care, and the work they're doing is cutting-edge.

I've agreed to raise at least $2,500, but my personal goal is higher still. So here's where you
come in, because I need your help to do that. I am asking that you please consider making a
donation to help this cause. Use the link below to viisit my webpage, and please take the time to
support me. Please keep in mind the commitment the riders are making to end this heartbreaking
disease and the personal efforts to accomplish this.

http://www.conquercancer.ca/goto/SteveWilliams

When I say "heartbreaking," here's what I mean: according to the National Cancer Institute of
Canada, over 153,100 new cases of cancer and 70,400 deaths from cancer were estimated to occur in
2006. Men outnumber women for new cases by 5% and mortality by 11%. That's why I'm riding. To do
something BIG about cancer. I hope that you'll share this incredible adventure with me by
supporting me in my fundraising efforts.

Should you have any questions or require assistance with the donation process don't hesitate to
contact me for help. Thank you in advance for your generosity!

Sincerely,

Steve Williams
(250) 342-5599 (bus)
(250) 342-1031 (cell)
steve@rockieswest.com

The importance of proper pricing in a down market (Invermere, Windermere, Fairmont, Radium, Panorama)

2009-01-30T21:58:00Z

With Spring just around the corner (yes, I can predict fairly safely that we will have Spring time again this year), we have seen a jump in the number of Sellers looking to get their properties listed. What I am having difficulty predicting is the proper list prices for the evaluations that I have been doing. Basing the future on the past used to work when you had numerous sales to go on but now we have so few sales that it is almost impossible to predict future sale prices.

The one thing I have learned through going through these hard times before is that the Sellers who are successful in this type of market are the ones that are ahead of the market. By that I mean that they list their homes at prices that are less than what a current appraisal or Comparable Market Analysis would indicate. The reasons for this are many. First of all, the only buyers who are actively looking to buy are aware of market conditions and will only buy what they perceive to be a bargain. The reason they do this is that they want a cushion in case values go down even further. Secondly, REALTORS who are asked to advise their buyers what represents good value will cause these well priced listings to rise to the top of their radar screen.

For a sample of what I perceive to represent excellent value click on my Deals of the Month.

How today's further cut in interest rates will affect our local Invermere real estate

2009-01-22T23:20:00Z

The article below is indicating to me that this year may be the perfect storm to buy real estate. With interest rates already at historic lows and forecast to go even lower, there is a fantastic buying opportunity for leveraged real estate buying in 2009. During the last two major recessions interest rates were through the roof so using leverage to buy real estate during those times did not make any sense. This scenario we have now, however, is completely different. Low interest rates coupled with a huge influx of billions of dollars of liquidity by US and Canada governments into our economies may soon lead to a rapid reversal of trends with inflation coming back and interest rates jumping. With real estate prices already significantly reduced and lots of money soon to be injected into the economy now is the time to be buying leveraged real estate in the Columbia Valley which includes Fairmont, Radium, Invermere, Windermere, and Panorama.

Bank of Canada cuts interest rates again in January
Published January 20, 2009 CREA

As widely expected, the Bank of Canada lowered its benchmark overnight lending rate by a half of a percentage.

The Bank acknowledged the global economy has deteriorated further since it last lowered rates in December 2008, when it announced Canada had entered a recession. “Major advanced economies, including Canada’s, are now in recession and emerging-market economies are increasingly affected,” said the Bank when it again lowered interest rates on January 20th.

The Bank has repeatedly lowered its policy interest rate to support economic growth. Since December 2007, the Bank has cut its overnight lending rate by a total of 3.5 per cent.

“The Canadian economy is widely expected to begin growing in the second half of 2009, as government spending and easier credit begins to lift economic growth,” said CREA Chief Economist Gregory Klump. “Business and consumer confidence are unlikely to improve much until such evidence appears.”

The Bank downwardly revised its forecast for economic growth in 2009, but revised it upward for 2010. It also pushed the goalposts out to the middle of 2011 as to when it expects inflation to climb back to the two per cent midpoint of its target range between one and three per cent. The Bank targets the core rate of inflation at two per cent. The rate has stayed below the target level since October 2007.

“The Bank’s revised forecast for economic growth and inflation means it won’t raise interest rates anytime this year, but credit conditions have tightened, which will mute the benefit of the Bank of Canada’s recent interest rate cuts for consumers, business, and the economy,” said Klump.

Echoing previous messages about for the potential for additional interest rate cuts when it next meets in March to set its policy interest rates, the Bank also said it “will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the two per cent inflation target over the medium term.”

When the Bank cut interest rates on January 20th, the advertised five-year conventional mortgage rate stood at 6.75 per cent. This is down 0.74 per cent from one year earlier, and 0.2 per cent below where it stood when the Bank made its previous interest rate announcement on December 9th, 2008.

The ongoing credit crunch has led mortgage lenders to reduce discounts on advertised mortgage interest rates, and in some cases these have been completely eliminated.

“Sales activity and prices will decline this year, as many buyers hunker down and put off buying decisions during the economic recession,” said Klump. “Housing market prospects will improve in 2010 in tandem with a rebound in economic growth.” (CREA 20/01/2009)

Deals of the Month for Invermere, Windermere, Fairmont, Radium or Panorama

2009-01-14T21:03:00Z

Yesterday at our weekly sales meeting we had each REALTOR identify one of their listings in Invermere, Radium, Windermere, Radium, Fairmont, Panorama or the rest of the Columbia Valley which they felt represented an excellent value. One of them was the house which I reported as my first sale in 2009 in my blog last week. Another is one of my listings which I am expecting an offer shortly through one of our REALTORS. In my opinion this activity is indicative of the fact our market is obviously slow but properly priced listings do attract Buyers regardless of market conditions. I have started a new page on my website to feature four listings which I or my colleagues feel represent excellent value.

Kootenay Real Estate Board Statistics 2008

2009-01-07T19:52:00Z

The Kootenay Real Estate Board recently released their statistical analysis of real estate sales and listing activity for 2008. This includes our trading area of East Kootenay which comprises the communities of Invermere, Windermere, Fairmont Hot Springs, Radium Hot Springs, Panorama, Toby Benches, Wilmer, Canal Flats, Columbia Lake, Edgewater, Brisco, Spur Valley, Spillimachean and the rest of the Columbia Valley. These stats confirm my gut feel that we have now been in a slow down in our marketplace for about a year and a half now. Our particular trading area is the only one in the East Kootenays that showed prices decreasing over this period of time. While this is somewhat worrisome for real estate owners I do feel very optimistic that the price decreases we have seen will put this area in good stead in the future as prices become more affordable than other areas. For astute buyers this is the time to be picking up some real assets at excellent values.

Ozzie Jurock says: "We'll be fine in 2009"

2009-01-06T20:43:00Z

Ozzie Jurock says: "We'll be fine in 2009"

Ozzie Jurock, British Columbia's best known real estate consultant and investor, has seen housing and financial crashes before and he is confident B.C. will ride out the current downturn with ease.

In 1992, Jurock notes, some 787 U.S. banks had collapsed amidst the savings and loan crisis. At that time, Jurock was buying real estate and urging his clients to do the same.

"It was an easy call to make," Jurock said. "Just as easy a call to make for real estate values now, because the fact is that values grow where people want to go ... and people want to live and play here in Western Canada."

"In today's gloomy environment we must remember that urban real estate always has a use and thus always has a strong asset value.

"We like all urban real estate in Western Canada from Edmonton to Vancouver and most everything in between. No matter the short-term gyrations, urban properties have been a spectacular investment. Downtown used condos on Howe Street rose from $95,000 in 2001 to $350,000 in 2008. The average house price climbed from $16,000 to $700,000 in Vancouver over the last 40 years.

"But we did not get there in a straight line," he said.

In Western Canada for 2009, Jurock said he is only concerned about Saskatchewan, "where volumes are slowing, inventory is soaring, and prices are bound to reverse sharply."

"On average for 2009 we look for prices to firm in Edmonton and go down in Calgary by a a further eight per cent, and Vancouver by 10 per cent."

He cautions that overbuilt condo areas - he singled out downtown Calgary and Vancouver and the Okanagan - will see sharper price decline.

"Recreational areas will not escape as they always follow - down or up - markets in the major cities. Previous downturns have lasted from one to three years and seen an average of some 17 per cent decline from top to bottom. I would not be surprised to see that this time also."

However, Jurock recommends buying waterfront. He notes that there are now 67 waterfront homes for sale on the Sunshine Coast, up tenfold from a year ago.

From an investor's perspective, Jurock said, "we like cash-flowing properties anywhere there is a good employment base, low vacancies, capital investment and a good price-to-rent ratio."

His picks for such markets include Edmonton, the Kootenays and a number of smaller centres in both Alberta and B.C.

"From a home purchase perspective there will be some great deals in new construction [in 2009]," he added.

Jurock believes that we are in the midst of the most unreported inflation of all times, "because we print more money than ever. All that extra cash created out of thin air will continue to compete with the money you and I make and drive hard asset prices, like real estate, eventually higher again."

"Don't worry," Jurock said. "The best deals come in down markets. On the way up, risk increases every day. On the way down, it decreases every day."

His final advice: work with a sharp Realtor, do your research and make an offer.

2009 Starts with a bang!

2009-01-06T17:27:00Z

Based on my activity on my website, buyer inquiries and my first sale of 2009 already in the books, 2009 could end up being much better than I expected.

Bungalow For Sale in Radium Hot Springs

2009-01-06T17:25:57Z

PEACE & QUIET

• 2,914 sq. ft., 3 bath, 3 bdrm bungalow - $729,000

Radium Hot Springs, BC Kootenay Rockies - PEACE & QUIET! Enjoy the tranquility of acreage style living with The Springs Golf Course surrounding this contemporary bungalow on 3 sides. Walkout basement, A/C, hardwood flooring, granite countertops, security system, double garage, beautifully landscaped.

Property information

Townhouse For Sale in Akiskinook

2008-12-30T06:00:00Z

• 641 sq. ft., 1 bath, 1 bdrm townhouse - MLS® $279,000 - FULLY FURNISHED!

Akiskinook, Lake Windermere - Great Value at Akiskinook! One bedroom unit – renovated and fully furnished including electronics and new stainless steel appliances. Located on the shores of Lake Windermere midway between Invermere and Windermere. Resort amenities include private beach and marina with boat and trailer storage, rec center with indoor pool and tennis courts. Enjoy summer and winter on the lake!

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Apartment For Sale in Panorama Resort

2008-12-08T06:00:00Z

BEST VALUED PANORAMA 1 BEDROOM CONDO!

• 506 sq. ft., 1 bath, 1 bdrm apartment - $139,900 - NOGST!

Panorama Resort, BC Kootenay Rockies - Best Value in a 1 bedroom condo at Panorama! Located in Tamarack Lodge at the heart of the Ski Village, this unit faces the ski hill. Cozy fireplace, balcony, fully furnished and equipped to sleep 4. No GST on purchase price. Use as your own private getaway or enjoy the rental revenue – the choice is yours!

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2 Story For Sale in Fairmont Hot Springs

2008-12-05T06:00:00Z

BRAND NEW LUXURY HOME!

• 3,364 sq. ft., 4 bath, 6 bdrm 2 story - MLS® $787,000 - OVER 3300 SQ FEET!

Fairmont Hot Springs, East Kootenay Regional District - QUALITY & CRAFTSMANSHIP are apparent throughout this brand new 6 bedroom, full walkout basement luxury home with double garage. Located in the new Fairmont Riverside subdivision of Eaglebrook Estates, surrounded by magnificent mountain views, with over 3300 sq feet of living space, this home is perfect for the recreational or full-time home owner. Beautifully finished inside and out with many extras such as radiant in-floor heating, heat recovery exchanger, A/C, steam humidifier, gourmet kitchen, huge media room, granite countertops, bamboo flooring, wet bar, jetted tub, ensuite body spa shower…. This fabulous home also comes with eligibility for a golf membership

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