US – California Multifamily Recovery

June 29, 2011

While the press corps clamored to see if Governor Edmund J. Brown Jr. would drop any bombshells about California’s budget crisis during his keynote address at PCBC in San Francisco last Thursday, they overlooked one positive economic driver fueling the state’s economy: the multifamily industry.

Multifamily fundamentals are expected to remain positive in the next five, seven years, even 10 years from now, said Mark Obrinsky, vice president of the National Multi housing Council, during a morning panel at the Moscone Center in downtown San Francisco. Apartment starts and completions are increasing nationwide, with a significant amount of new development occurring in major primary metros like Los Angeles. Immigrants will fuel additional renter demand in California as that population increases.

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Bank of Canada – Cautions Real Estate Price at Elevated Level

June 27, 2011

Readers may download the entire report from Source: Bank of Canada.  A few worth-mentioning points:

– A home purchase triggers the biggest liability most families will ever take on.  The value of housing-related debt in Canada has nearly tripled over the past decade to $1.3 trillion.  This debt is also the single largest exposure for Canadian financial institutions, with real estate loans making up more than 40 per cent of the assets of Canadian banks, up from about 30 per cent a decade ago.

– Financial vulnerabilities have increased as a result. Canadians are now as indebted (relative to their income) as the Americans and the British (Chart 9). The Bank estimates that the proportion of Canadian households that would be highly vulnerable to an adverse economic shock has risen to its highest level in nine years, despite improving economic conditions and the ongoing low level of interest rates.5

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US – Housing Double Dip Remains a Substantial Drag on Economy

June 26, 2011
  • The U.S. housing market has fallen into a double-dip slump after last year’s stimulus-driven stabilization and will continue to weigh on the pace of economic recovery through the coming year.  Housing-related output has fallen dramatically since the bubble burst in late 2006, detracting an average of 70 basis points from quarterly GDP.  Additionally, while personal consumption has picked up significantly in the past year, further deterioration in home prices risks consumer pullback as depreciating home values have already cut more than $7.6 trillion from total household wealth.

 

 

 

 

 

 

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US Commercial Lending: Return of CMBS

June 25, 2011

As the conduit space heats up, Fannie Mae and Freddie Mac may soon start feeling the heat.

Since the beginning of the year, CMBS pricing has steadily dropped and now some conduit quotes are comparable to what the government-sponsored enterprises (GSEs) are offering on upper-crust multifamily deals.

“CMBS is going to start competing moving forward on every single multifamily deal because their pricing and leverage is now in line with Fannie and Freddie, and it wasn’t that way three months ago,” says Vic Clark, a senior vice president and central region manager at Bethesda, MD.-based Walker & Dunlop. “CMBS is now literally right on top of Fannie and Freddie on most trophy Class A deals, and that’s huge.”

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Chinese-Canadians and immigrants, not investors from China, largely driving market, experts say

June 25, 2011

A growing belief that Metro Vancouver’s hot housing market is being driven by Asian investment, primarily from mainland China, is a misconception, according to experts in the real estate field.

In fact, they say, evidence suggests buyers are mainly Canadian citizens, immigrants or new residents in Canada -many with strong links to mainland China and many residing and working in China while their families establish roots in B.C.

Most purchases are also being made as long-term holdings – in some cases for children attending local universities -with little of the quick “flipping” prevalent in previous hot markets.

“From what we’ve seen from most of the major launches, it’s a different buying habit than previous runs on the market,” Jennifer Podmore, real estate advisory leader for accounting giant Deloite, said in an interview Friday. “Generally, we’re not seeing the investor as the main drivers of the market. There are certainly a lot more Asian purchasers, but not Asian investors coming to purchase a condo and then leaving.

“Most [buyers] have strong ties to Vancouver, meaning they’re Canadians, immigrants or live here,” added Podmore.

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CREA – National Sales Stats May 2011

June 25, 2011

• National housing market remains firmly entrenched in balanced territory.• National average price is still being skewed upward by historically high sales activity in certain Vancouver neighbourhoods.

Based on a sales-to-new listings ratio of between 40 and 60 per cent, housing markets were balanced in 62 of 101 real estate boards in Canada.  Less than half of the rest can be characterized as sellers’ markets, based on a ratio above 60 per cent. “For the most part, sellers’ markets became slightly more balanced than the previous month,” said Gregory Klump, CREA’s Chief Economist. “Toronto stood out as an exception, with sales activity there growing faster than new supply.”

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Where Rich Chinese Are Buying

June 22, 2011

Vancouver, London and the big cities down under are second homes of choice for China’s super rich, according to real estate services firm Colliers International. One of the reasons the China real estate market is so hot is because wealthy Chinese are buying up property to hold onto real assets, rather than put money in low yielding bank bonds and volatile equities. The super rich are buying real estate outside of China in an effort to avoid taxes.

Chinese demand has pushed the average price of a Vancouver home up 12% in 2010 and is expected to rise another 3% this year, according to the Canada Mortgage and Housing Corporation. Demand from mainland immigrants now accounts for 29% of all new homes in Vancouver, China Daily reports.

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