ORES Real Estate Index for January 2012

 Ontario Real Estate Source

By Brian Madigan LL.B.

Here is the "ORES REAL ESTATE INDEX" which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.

For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 January 2012, here is the Index representing average prices with the December 31st, November 30^th, October 31^st, and September 30^th, numbers appearing in brackets for comparison:

Real Estate

143.45.....(139.70)…..(148.67)…..(147.97)…..(144.01).....GTA single family

Other market comparisons

407.76.....(357.92)…..(408.18)…..(402.57)…..(378.73).....gold (per ounce)
223.98.....(224.82)…..(228.30)…..(211.99)…..(186.24).....oil (per barrel)
135.29.....(129.89)…..(132.60)…..(133.12)…..(126.29).....TSX index
143.45.....(139.70)…..(148.67)…..(147.97)…..(144.01).....ORES sgl family
114.15.....(114.81)…..(114.72)…..(114.53)…..(114.25)....CPI index
136.43.....(126.32)…..(127.05)…..(130.16)…..(117.12).....NASDAQ index
120.43.....(116.49)…..(114.83)…..(113.97)…..(104.04).....Dow Jones index
111.10.....(106.46)…..(105.56)…..(106.10)…..(95.78)......S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of January, the index stood at 143.45. That's a 43.45% increase in 85 months. That means the increase is 0.511% monthly, or it could also be expressed as 6.13% annually. The performance here is shown without annual compounding for the sake of simplicity. It is noteworthy that the annual percentage was 7.01% as at the end of October. Both numbers were calculated using 1 January 2005 as the starting point.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:

· Commodity prices are just commodity prices

· There is no other "extra return" for commodities

· The same is true for the CPI

· The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 114.15; increases have been modest and inflation appears to be under control; this is significant. There was even a slight decline since December.

· For a realistic performance goal, you should aim for CPI plus 3.5% annually

· Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices

· The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies

· If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes

· Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself

Comparative Observations Using the New Index

· Gold overall is still the best performer, reaching 407.76, increasing this past month by almost 9%, but just making up the ground it lost in December; note the peak for gold was in August 2011 at 423.96

· Oil was the most volatile, (it dropped in half over our measurement period), also declining this past month

· Real estate was the most stable, with solid predictable returns at about 6.13% annually

· Our own stock market posted reasonable gains, but still falls behind single family homes over the measurement period, however, don't forget that the TSX is still well off its highs and is substantially resource based

· All three US stock market indicators now show positive numbers, and may truly be a better overall indication of the true state of the North American economy. The S&P matches inflation, the Dow is now measurably under the Nasdaq which now exceeds our own TSX

Conclusion

For steady, predictable, measured gains pick real estate. It's a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it's never "wiped out" completely, like GM or Chrysler stock. So, unless you're sitting on the edge of a tsunami, you'll still own something when the storm is over.

For a benchmark of success, there's 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

The present rate of return although high by historical standards appears to be sustainable in sought after locations like the GTA. At the moment, over our measurement period we are looking at a 1.13% annual premium over the benchmark 5%.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300
www.OntarioRealEstateSource.com

Other Rates:

10 Comments in 19 minutes

Ontario Real Estate Source

By Brian Madigan LL.B.

Now, that’s more like it. I added Google Chrome and perhaps it’s working.

I had previously posted all the difficulties I was having reading, reviewing and posting comments. It would take well over an hour. That was far too long and not nearly worth the investment of the additional time.

I would rather post a number of extra blogs without points each week than spend countless hours unproductively attempting to fulfill my comment requirement.

So, at the moment, the jury is out. If I can stay in the 15 to 20 minute range, then that’s tolerable.

We’ll see what happens.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Google Chrome Speeds Up AR

Ontario Real Estate Source

By Brian Madigan LL.B.

I had been having a great deal of difficulty manoeuvring the AR site. It was consistently taking over 60 minutes, often 70 minutes or more to simply review and post 10 comments.

Over a year, this is a rather excessive period of time.

Today with Google Chrome that process was down to less than 30 minutes. It is also possible that it was the AR site itself which was improved and Google Chrome was simply a coincidence.

Nevertheless, I don’t have control over the browsers provided by others in their facilities. So, if they have Explorer and that’s slow on AR, then I still have an AR issue. In any event, if I have downtime myself, I am hoping that Google Chrome will come to the rescue.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

January 2012 Sales Figures for Toronto and GTA (Up or Down?)

Ontario Real Estate Source

By Brian Madigan LL.B.

The 2012 market started out with a bang! The sales were 4,567 compared to 4,199 last year.

Pressure also was placed upon the price which moved up to $463,534. Last year it was $425,762.

Sales are up 8.76%

Prices are up 8.87%

Those are the year over year numbers. So, that certainly appears to have things going in the right direction.

That would seem to be good unless you looked carefully at the numbers and realized that the high number was achieved in May 2011. That was $485,520, which means that we are still about $22,000 shy of the peak.

Are the prices up this January?

Compared to what?

Yes, compared to last January.

No, if compared to the market peak.

You be the judge as to whether the market is up or down. But, it will be interesting to see how different people comment on the market.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Comparison of Collateral versus Standard Charge Mortgages

Ontario Real Estate Source

By Brian Madigan LL.B.

Here is some valuable information courtesy of a colleague of mine, Robert Lumb. If you need a mortgage don’t hesitate to contact Robert at:

416-275-9284

Fax: 1-866-437-3672

robertlumb@invis.ca

Visit Website

Robert would be pleased to look after all your financing requirements.

"Comparison of Collateral versus Standard Charge Mortgages

More lenders are moving to collateral charge mortgages so it's becoming increasingly important to understand the differences between a collateral and standard charge mortgage.  Which is better for you?  They both have advantages and disadvantages so it all depends on your preferences and future needs. It's important to understand those differences so you can make sure you get the mortgage that best fits your long-term goals.  

Collateral Charge

• Ideal if you want to be able to access your equity for debt consolidation, renovations or to invest in property or investments easily and cost effectively i.e. no legal fees (rate may be higher than original, need to qualify).
• Only option available at ING, TD, and home equity lines of credit (HELOC).
• Your mortgage is registered for the same or more than the property value; 100% at ING, 125% with TD Bank, which is why you can access your equity. 
• May affect your negotiating ability with your lender at renewal. It is harder to switch lenders without getting a new mortgage and paying legal fees, which range from $500 to $1,000.  
• Could be difficult to get a second mortgage unless your home significantly appreciates in value.

Standard Charge

• Ideal if you won't need to refinance your mortgage during your mortgage term.
• Ideal if you want to have the ability to easily and cost effectively move from lender to lender at renewal. 
• Offered by majority of lenders. Some offer both – standard charge mortgages and HELOCs that are a collateral charge. You choose the option that best meets your needs.
• If need to borrow more, you have the option of a second mortgage or line of credit.
• You are not as tied to your lender for your full amortization period; it's easier to switch lenders at renewal with little or no cost; keeps your options open.

Whether you're buying your first or next home, getting ready for renewal, taking out some equity for debt consolidation, renovations, or investing, let us help you get the right mortgage type (collateral or standard charge) with the rate and features matched to your needs now and in the future." 

Robert, thanks once again for this valuable information!

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

In Defence of RIM

Ontario Real Estate Source

By Brian Madigan LL.B.

With everyone jumping on the anti-RIM bandwagon these days I thought that I might be among the first to say that recovery is on its way.

Why?

Prem Watsa through various companies now holds a 5% stake. He is often referred to as Canada’s Warren Buffet. That would be true but two important points should be made:

1)     he has a better track record, and

2)     he hasn’t yet made quite that amount of money.

Prem is a value investor. Rim trades now below book value. Prem finds that appealing. RIM is in a business now and makes lots of money right now. There’s nothing wrong with good positive cash flow and lots of money in the bank. RIM has a plan and is carrying out its objectives. No plan simply makes the company a “loser”. It has its initial owners/investors still backing it, with a vested interest in its success.

While Prem generally doesn’t care for hi-tech companies, since he doesn’t really understand them, RIM is a notable exception.

The way I look at it, if Prem is on board, RIM will be a winner!

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Mimico ~$190,000 over Asking

Ontario Real Estate Source

By Brian Madigan LL.B.

Well, a lot has been written about Toronto “over-heated” housing market. Apparently, it’s due for a fall. But, 31 people lined up to buy a 1,200 square foot house in Mimico listed at $379,900. It went for $570,000 or about $190,000 over asking.

Now, if the same house was in a better neighbourhood, say Lawrence Park or Lytton Park it would have been worth another $400,000.

One of the main problems: a shortage of inventory!

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Eco-Energy Program Suddenly Over

Ontario Real Estate Source

By Brian Madigan LL.B.

The Federal Government ended the popular eco-energy grant program. It had been extended to 31 March but suddenly was terminated. Over 250,000 Canadians had participated in the program since 2007.

It offered a $5,000 grant to those who qualified by increasing the energy efficiency of their homes. It was a substantial benefit to the home renovation industry.

There are some transitional rules for those who have commenced their renovations.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

FirstLine Firms Up Mortgage Rules

Ontario Real Estate Source

By Brian Madigan LL.B.

FirstLine which is the mortgage lending arm of CIBC has imposes new restrictions on its mortgage lending practices.

No longer will “stated income” be acceptable in mortgage applications. It must be provable. This will have an impact on the self-employed and new immigrants.

Clearly, this will take a pool of funds out of the mortgage availability pool.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com