As home prices in Toronto continue to climb, many are wondering if Toronto is experiencing a real estate bubble. While no-one can give a definitive answer, economist argue that Canada is one of the safest countries to keep your investment today as Europe and USA have significant economic and government debt issues still to play out over the next few years. Thus it is very likely interest rates may stay relatively low for prolonged period of time due to the situation in the US. This may continue to drive investment into Canada for the immediate future.
Many Torontonians remember the Toronto real estate market crash of the late 80’s - early 90’s and fear the current market may be due for a similar fate. Some fundamental differences do exist:
1) The current home prices in Toronto are far more affordable than in the late 80’s and is inline with-in a normal range
2) The overall trend line for prices has been consistent over the last 15 years and the current market prices are inline with the trend
The US Real Estate market has been in decline for almost 3 years. Despite what many analysis believe will be a slow recovery, there are signs that 3 years of pent up demand and current low interest rates can start a very fast recovery.
The economic environment is going to get better based on the stimulus packages and the Fed easing.This will intern provide the fuel needed to propel the depressed US real estate market forward very quickly.
An example can be seen in Canada, while in the middle of a recession, Canada is also experiencing a major housing boom. Low borrowing costs, more affordable prices in many markets and some pent up demand after the fall and winter sales freeze provided heavy-duty support for housing. The Canadian national residential average price in May reached the highest monthly level on record.
The major factor holding down the US real estate is liquidity; preventing many would be homebuyers from getting the financing they need. Once liquidity is available to the US market, the homes sales will have all the ingredients needed to propel the US real estate market higher much like the Canadian market.
Signs are already starting, the National Association of Realtors said that sales jumped 7.2 percent to an annual rate of 5.24 million units, the highest since August 2007, beating market expectations for a 5 million unit pace. Sales were at a 4.89 million pace in June.
July’s percentage increase was the largest monthly gain since the series started in 1999 and marked the fourth straight monthly advance. The last time sales rose for four consecutive months was in June 2004, the NAR said.
Just released HMI (Home Builders/Wells Fargo Housing Market Index) declined one point to 15 in June from 16 in May.
NAHB Chairman Joe Robson noted “the outlook for home sales has improved somewhat in recent months, due largely to implementation of the first-time home buyer tax credit and gains in housing affordability”. “However, looking forward, home builders are facing a few headwinds, including expiration of the tax credit at the end of November, a recent upturn in interest rates; and especially the continuing lack of credit for housing production loans.”
Rates on 30-year mortgages touched record lows (4.78%) in April, they have climbed since then on hints of the U.S. recession, now in its highest level (5.59%) since November.
Although the swollen stock of new homes has been shrinking; in April the inventory of homes available for sell fell 4.2 percent to 297,000, the lowest level since May 2001; Home builders remain cautious about the outlook for the next six months for most potential buyers are uncertain about the economy and their income security while the others are still unable to sell their existing homes.
In the meantime, Home Builders remain hopeful that potential homeowners with solid credit history would been nudge off the fence by the possible end of discounted mortgage rates and tax credit.
The National Association of Home Builders announced on May 19th, 2009 that the market for the newly built, single-family homes in the USA improved for a second consecutive month in May to the highest level since September of 2008. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) rose two points to 16 this month.
NABH Chairman, Joe Robson noted several factors contributing to the rise in confidence level in the US real estate market. Favorable mortgage rates, $8000 tax credit for first time home buyers, affordable prices and the multitude of home choices are appealing to potential home buyers and investors to make a move.
Many real estate professionals reported not only are they seeing local homebuyers with solid financials showing interest in the market.They are also reporting a slow rise in foreign interest in US real estate. Although these foreign real estate investors do not qualify for tax incentives, however the potential return on attractively priced quality real estate properties is enough to them focused and interested in US properties.
According to Chicago Bank, larger correspondent warehouse providers are coming back into the market making money available to larger mortgage regional banks.
Although the US government has provided tax credit incentive to boost the housing market, but rising unemployment rate and possible weakness in the US dollar in the next quarter; less optimistic bankers are planning to hold their breath until 2010.
The National Association of Realtors (NAR) estimates that distressed sales have accounted for 45 percent of existing home sales in recent months, which is one reason why prices have fallen so sharply. The combination of falling home prices and lower mortgage rates has made home ownership much more affordable. The NAR Housing Affordability Index has surged more than 50 points over the past 6 months and is at an all-time high.
In Florida, nearly two-thirds of all sales are foreclosures and short sale properties, many of which are not counted by real estate agents since they are sold at auction or by banks directly to home buyers.
A study conducted by the National Association of Realtors (NAR) for the Realtor Association of Greater Miami and the Beaches (RAMB) provides a profile of homebuyers in Miami-Dade and Broward counties. The 2008 Profile of Home Buyers and Sellers provides a comparison of the current state of the South Florida real estate market, and how it compares to the rest of the state and the nation.
A significantly higher number of South Florida home buyers were born outside the U.S. 44 percent of South Florida buyers were not born in the U.S. compared to 17 percent in Florida and 9 percent in the U.S.
The median age of South Florida homebuyers is 41 compared to 43 in Florida and 39 for the entire U.S. For first-time homebuyers, the median age in South Florida is 34 compared to 32 in Florida and 30 for the entire U.S.
The 2007 median household income of homebuyers in South Florida was $74,000 compared to $68,500 in Florida and $74,900 in the U.S.
A U.S. real estate investment expo held in Beijing, China April 10th - 12th had a great turn out as Chinese buyers took advantage of the discounted U.S. real estate. The Chinese economy is far less affected by the current crisis compared to the U.S. combined with the high savings rate of Chinese households, puts the Chinese buyers in a great investment position. Chinese buyers flocked to the expo to finds ways to take advantage of the situation and buy discounted U.S. real estate.
Exhibitors showcases new developments from all over the U.S. as well as discounted resale and government auction solutions. Central Showplace interviewed buyers show particularly strong interest in Florida and Texas. One Texas developer used China’s own Yao Ming to draw crowds of attention and making front page of a local newspaper.
The three-day event concentrated on investment potential of U.S. real estate. Despite the strong Chinese economy buyers were interested in diversifying investments. While other were drawn by the investment U.S. green card opportunities available though the EB5 program. Investors say this is a great time to participate in an investment immigration U.S. green card because the underlying property is so heavily discounted.
More images from the China-USA real estate expo visit our photo gallery
The frenzy is consistent with comments by Lawrence Yun, National Association of Realtors chief economist, “A steady share of investment-home sales results from buyers taking advantage of deeply discounted prices in many areas, with a smaller portion of new homes in the sales mix.”
Many analysts believe that the U.S. government plans are starting to turn around the U.S. real estate market. “Over time, lower mortgage rates should help to improve conditions in the housing market, whose persistent weakness has had a major impact on economic and financial conditions more broadly,” Bernake said.
Forecast by the mortgage bankers’ group raised its 2009 home-loan originations by $800 billion to $2.78 trillion last month. Refinancing will increase to $1.96 trillion in 2009 and purchase originations will total $821 billion. This is evidenced by a surge of refinancing and low interest rates sent homeowners to apply for new loans.
For foreign investors the interest shown by the Chinese buyers is definitely a sign that this is the right time to take advantage of the U.S. real estate discounts.
More images from the China-USA real estate expo visit our photo gallery
Pulte Homes Inc. is buying Centex Corp. for $1.3 billion in stock in a deal that will create the largest U.S. homebuilder. This will give Pulte a large holding of land in Texas and the Carolinas, two of the most resilient real estate markets, and a presence in 29 states.
This purchase supports the buzz that the housing recovery is right around the corner. After a rise in existing and new home sales in February, and a increase in mortgage applications for actual home purchases, the sentiment is clearly improving.
This positions Pulte to be the leading survivor company amongst the big homebuilders in the U.S. Despite the fact that they are taking on Centex’s less healthy balance sheet, this still leaves Pulte with well over three billion dollars in cash.
“We’re not here to necessarily call a bottom of the industry. We do think we’re close to that, and we think this combination provides an accelerated return to profitability which frankly is very important as public companies to return to profitability for our shareholders.” Said Richard Dugas, Pulte’s CEO.
Palm Beach County home prices continued to fall in February, but sales spiked as bargain hunters snapped up foreclosures and short sales, the Florida Association of Realtors.
The median price of a single-family home in Palm Beach County was $228,100, down 34 percent from a year ago. However, 532 homes sold during the month, up 33 percent from a year ago.
Buyers are targeting lower-priced homes that sell for far less than they fetched in 2005 and 2006. “Bargain properties are selling, but expensive Palm Beach County’s homes attract few buyers”, said Steven Presson, an agent at Corcoran Group Real Estate in Palm Beach.
