Only available for the 2009 tax year. The Home Renovation Tax Credit is a non-refundable tax credit based on eligible expenses for improvements to your house, condo or cottage. It can be claimed on your 2009 income tax return. It applies to eligible purchases made after January 27, 2009, and before February 1, 2010.

The HRTC applies to eligible expenses of more than $1,000, but not more than $10,000, resulting in a maximum non-refundable tax credit of $1,350 [($10,000 − $1,000) × 15%]. Who is eligible for the HRTC? Eligibility for the HRTC is family based. The claim can be split among family members but the total amount claimed cannot exceed the maximum allowable. If two or more families share the ownership of an eligible dwelling, each family can claim its own credit (i.e., each up to $1,350) that is calculated on its respective eligible expenses. All expenses must be supported by receipts and acceptable documentation.

Keep them in case we ask to see them. Eligible and ineligible expenses Considering the extensive num his income tax report. Consult the Internet Site at http://www.cra- arc.gc.ca/tx/ndvdls/sgmnts/hmwnr/hrtc/lgblty-prd-eng.html for the complete lists.

The expenses are eligible when they are incurred in relation to renovations or alterations to an eligible dwelling (or the land that forms part of the eligible dwelling) and are permanent in nature. As a general rule, if the item you purchase will not become a permanent part of your home or property, it is not eligible.

Note Some businesses or individuals may assert that certain items qualify for the HRTC. It is important to remember that you are responsible for ensuring that all eligibility requirements are met when you claim this credit on your tax return.

Examples of eligible expenses o Renovating a kitchen, bathroom, or basement, windows and doors o New carpet or hardwood floors o New furnace, boiler, woodstove, fireplace, water softener, water heater, or oil tank o Permanent Home ventilation systems, central air conditioner o Septic systems and wells o Electrical wiring in the home, home Security System (monthly fees do not qualify) o Solar panels and solar panel trackers o Painting the interior or exterior of a house o Building an addition, garage, deck, garden/storage shed, or fence o Re-shingling a roof o A new driveway or resurfacing a driveway o Exterior shutters and awnings o Permanent swimming pools, hot tub and installation costs (in ground and above ground) o Landscaping o Associated costs such as installation, permits, professional services, equipment rentals, and incidental expenses o Fixtures - blinds, shades, shutters, lights, ceiling fans, etc.

Note Window coverings, such as blinds, shutters and shades, that are directly attached to the window frame and whose removal would alter the nature of the dwelling are generally considered to be fixtures and therefore would qualify for the HRTC. In some circumstances, draperies and curtains may qualify for the HRTC, if they would not keep their value or usefulness if installed in another dwelling. If these qualifying criteria are not met, it is likely that draperies and curtains would not qualify for the HRTC.

Examples of ineligible expenses o Furniture, appliances, and audio and visual electronics o Purchasing of tools o Carpet cleaning o House cleaning o Maintenance contracts (e.g., furnace cleaning, snow removal, lawn care, and pool cleaning) o Financing costs Work performed by electricians, plumbers, carpenters, architects Generally, work performed by electricians, plumbers, carpenters, architects, etc. in respect of an eligible expense qualifies. Family member hired for renovations Expenses are not eligible if the goods or services are provided by a person related to you, unless that person is registered for the Goods and Services Tax/Harmonized Sales Tax under the Excise Tax Act.

If your family member is registered for GST/HST and if all other conditions are met, the expenses are eligible for the HRTC. Eligible dwellings An eligible dwelling is a housing unit that is eligible to be your principal residence or that of one or more of your family members at any time between January 27, 2009, and February 1, 2010. In general, a housing unit is considered to be your principal residence when it is owned by you and ordinarily inhabited by you, your spouse or common-law partner, and your children.

This means that any dwelling that you own and use personally could qualify, including your home or your cottage. Cottages If you own and use your home and cottage personally, eligible expenses incurred for both properties will normally qualify for the HRTC. Note that the maximum amount of eligible expenses you can claim for the HRTC is $10,000 per family. Rental and/or business use of an eligible dwelling If you earn business or rental income from part of an eligible dwelling, you can claim the HRTC only for expenses incurred for the personal-use areas of the dwelling.

More information in my next article

Montreal Mortgage

The question that all mortgage borrowers ask us most often:

Is it better to opt for a fixed- rate mortgage or variable rate mortgage? For several years, the classic answer was always: it depends on your cash flow and your tolerance for risk, but the variable rate mortgage or short term has been more advantageous in the long term. Example:

During the period 1950 to 2000, a Canadian borrower would have paid on average $ 22 000 in interest over costs on a mortgage of $ 100 000 amortized over 15 years, opting for fixed rate mortgages for five years instead of variable rate mortgages. The only advantage had been a greater peace of mind that payments are fixed and do not change for five years.

Those who felt that this peace of mind was too dearly paid for were right. This is not necessarily true today, some time ago, you could have negotiate a variable rate at Prime less 0.8%, it currently trades at Prime + 1%, or 3.5% at we are writing these lines, while that we can obtain a term of five years to 3.75%, the margin is very thin!

Data from the Canadian Association of Accredited Mortgage Professionals (CAAMP) show that only 27% of Canadian mortgages were at variable rates in the fall of 2008. However, this increases to 40% for mortgages contracted in the past 12 months. The popularity of variable rate mortgages has increased in recent years. It seems that this trend has accelerated since.

THE FINANCIAL CRISIS THE CHANGE

The most visible impact of the crisis is good for mortgage borrowers. The significant decline in interest rates in Canada and the fall in bond yields led to a reduction in retail rates. The rate on a fixed-rate mortgage for five years went from 7.25% in June 2007 to 3.75% today, a historic low. Meanwhile, the variable rate cut, which requires a commitment of five years rose from 5.70% to 3.50%.

Note that this phenomenon is observed everywhere in the world. The variable rate mortgages have been particularly affected by these changes. First, rather than offer variable rate mortgages at a rate slightly below the prime rate, lenders are now asking for new borrowers to pay the prime rate plus a premium of approximately 1%. Secondly, the difference between the rate of financial institutions and the rate of the Bank of Canada (BoC) has been increased by 25 basis points in December.

In the current very low interest rates, these changes have little impact on households, but what would happen when interest rates will resume an upward trend? Finally, the financial crisis has prompted the Canada Mortgage and Housing Corporation (CMHC) to tighten its eligibility criteria for mortgages. This has increased the maximum period of amortization of a mortgage to 35 years rather than 40 years.

In addition, CMHC is now requesting an investment of 5% and a minimum credit rating.

BE CAREFUL IN THE FUTURE

Are the changes observed in the Canadian mortgage market will be sustainable? It is difficult to answer this question, especially as the turbulence does not yet seem about to end. It is likely that the premiums charged by mortgage lenders decline as financial tension to resolve, but they remain significantly higher than before the crisis.

For mortgage borrowers, an assumption would be acceptable to assume that the conditions remain as they are now. A borrower who opts for a floating rate mortgage can be assumed that the gap between the prime rate and the rate of one day of the BoC remains constant throughout the duration of the loan. Under this assumption, a loan at prime +1%. However, variable rate borrowers should be aware that the prime rate remains at the discretion of financial institutions and it could vary in relation to rates.

Credit rating is the means of assessing the credit worthiness of individuals, companies, states and countries. It indicates the ability of the debtor (individual, company, state or country) to fulfill his financial commitments. Credit rating can refer to personal, corporate or sovereign credit rating. Personal Credit Rating: In the US, creditors use a scale of 0-9 in order to rank a debtor. The numbers can be preceded by the alphabets R or I. I refers to credit that is repaid in installments (like mortgage on a house), while R refers to a system of revolving credit (credit cards), whereby the debtor is only required to make minimum monthly payments.

R1/I1 means that the debtor repays his debt in one month, while R2/I2 means that he repays within 2 months. R7/I7 indicates a situation wherein debts are paid by consolidation. R8/I8 implies that debts are recovered by repossession. R9/I9 is the worst rating and indicates the inability to repay debts.

Credit Report and Credit Score: Information about credit inquiries, bankruptcies, liens, judgments or collections is sent to the credit bureaus, which prepare an individual's credit report, and assign credit scores. A person has 3 credit scores assigned to him by the following bureaus: Equifax, Experian and TransUnion. While these scores may differ, the underlying principal is the same.

The credit bureaus calculate scores based on the credit scoring system created by Fair Isaac Corporation (FICO) in the year 1958. Credit scores computed by Experian are called 'FICO or FICO II', scores calculated by TransUnion are called 'Empirica', and credit rating computed by Equifax are called 'Beacon'. Fair Isaac Corp. has also developed the next generation FICO scores, which are meant to be user friendly. The FICO advanced risk score is used by Experian, while TransUnion uses Precision, and Equifax uses Pinnacle, to calculate credit scores. Credit bureaus also assigns weightage to the following factors while calculating credit scores: 30% to previous credit performance, 30% to current indebtedness, 15% to the use of time of credit, 15% to the types of credit available, and 5% to new credit.

FICO scores are fast gaining popularity over the R/I multiple rating system. Hence, we can discuss the importance of good personal credit rating from the perspective of maintaining good FICO scores. What is a Good Credit Rating for an Individual? Credit ratings for an individual range between R0/I0 and R9/I9. 9 is the worst rating while 0 would mean that a person has no credit history. Credit scores for an individual are generally in the range of 360 and 850. A score below 620 is considered unhealthy. The worst score, of course, is 360 and the best is 850. Higher the credit score, lower the risk of a person defaulting. A poor credit score/credit rating would result in lenders charging a premium for providing loans. If the credit score/credit rating is very poor, lenders may refuse to provide credit. A credit score between 650 and 690 is considered good, while a score above 700 is considered optimal, by the lenders.

When Rahim Moosa lost his job last October, he decided to sell the house he'd bought with his wife a year earlier. His lender, TD Canada Trust, said there would be an $8,000 penalty to break his five-year closed mortgage – an amount he found tolerable. "

By the time we sold in April 2009, TD Bank quoted us a doubled penalty of $18,000. Now, they are stating it will be approximately $25,000 upon closing in June," he says. Most mortgage contracts and renewal forms specify that clients seeking an early exit will pay either three months' interest or an interest rate differential (IRD), whichever is greater.

The IRD is calculated by taking the outstanding balance, multiplying it by the gap between your existing mortgage rate and the current rate for a term similar to what you have left, and multiplying by the number of months left to the end of your term. Mortgage rates have fallen steadily since last fall, making the IRD penalties grow bigger and bigger.

Once I got involved in Moosa's case, TD worked hard to cushion the blow. It sent him to a mortgage specialist, who suggested making a 15 per cent lump-sum prepayment using a line of credit that would be paid back at closing. Since TD hadn't told him about this option last October, Moosa asked for and received the right to make a 30 per cent prepayment to reduce the outstanding balance. The estimated penalty is now $11,000 to $14,000. "We won't know for sure what the exact penalty will be until the payments are made using the line of credit next week," Moosa says. He wonders why TD dragged its feet when told about his financial problems last fall. "Our branch representative should have advised us that we could pay a 15 per cent lump sum to reduce the penalty. "TD needs to have a better process in place, particularly when dealing with clients whose largest investment is in their hands."

Moosa's comments will be reviewed, Hechler said. "We could have moved more quickly to help and provided clearer information from the beginning." Kevin Plautz, also a TD mortgage customer, felt he received misleading information when he asked about breaking the deal to take advantage of lower rates. His financial adviser initially quoted a penalty of $2,100, based on three months' interest. Other TD staff he spoke to later did not challenge that figure. Only when he was ready to renegotiate did he learn there would be an IRD penalty of $5,900. "I wouldn't have bothered doing a renegotiation if I had just been told the correct penalty at the start or one of the many times I asked about it since then," he says TD agreed to reduce his IRD penalty to $4,000 after I escalated his complaint to the head office. "We have offered to substantially reduce the amount of Mr. Plautz's IRD penalty as a goodwill gesture in recognition of the confusion he experienced over the amount he was quoted," Hechler told me. While planning to take the offer, Plautz is leaving TD.

He's found another bank that will give him a lower interest rate and cover $225 of his $270 mortgage discharge fee. "I have a very bad taste in my mouth. I think I still prefer to move my business," he says. I'd like to hear from readers. Have you tried to renegotiate a mortgage amid falling interest rates? How did the lender respond and what penalty was charged? I'll publish comments in a future column.

If Shakespeare's Hamlet were a 20-something living in Toronto today, chances are he'd be working on his first career. He'd have some inheritance in the bank, he might even be living in his mother's basement. He'd have little job security, no pension and would probably be soliloquizing about the same dilemma as everyone else his age: To buy or not to buy, that is the question; Whether 'tis nobler on the pocketbook to suffer the outrageous rent, or to take up a sea of mortgage payments, and by doing so, retire with equity.

With interest rates at the lowest they've been in more than 50 years and with home and condo prices in decline for the first time since 1996, many potential first-time buyers are viewing this as their best chance to buy into an otherwise unaffordable market.

That's partly what led Ren Ramkhelawan to buy his first highrise condo near Bathurst St. and Lake Shore Blvd. Ramkhelawan, a 27-year-old systems architect with a local charity, reckons he spent $18,000 in rent on his one-bedroom apartment at Spadina and Bloor Sts. After feeling he was "flushing rent down the toilet,"

Ramkhelawan started looking for a condo in October 2007 but was soon priced out of the market. "I'd make an offer and then the seller would get more offers, and before long it was just beyond my price range," he remembers. At one point in his search, he'd actually negotiated the purchase of a 500-square-foot condo for $222,000.

But he backed out because he felt it was too small and he'd be better off in his larger apartment. A year later, the economy had tanked, taking the condo market with it. He's now the proud new owner of a 700-square-foot, $227,000 condo. Though he's paying $200 more per month on the combination of condo fees, mortgage payments and property taxes than he was at his old $980-a-month apartment, he feels he's getting a better deal. "In the end, I wanted my own place. I wanted to know that I was investing in something instead of just handing my rent money away."

But Ramkhelawan, like many other first-time owners, doesn't see himself living in the condo for more than three years, when he plans to flip it and make a profit. Problem is, many in the realty business argue Ramkhelawan and others are banking on returns from a world that no longer exists. "Everyone wants to flip houses and condos like pancakes," says Greg Stanley, a mortgage broker. "Maybe we should have a change of view, thinking that a house is actually a home like they did in the old days. Back then, if you bought a house and sold it, it would be the same price. No one expected the houses to go up in value; they only expected to pay them off." The Organization for Economic Co-operation and Development recently released data that show house prices have fallen in Canada, but prefaced it with the view that such prices "will have to fall still more ... if affordability, measured by the ratio of house prices to income, is to return to its long-term average."

If that's the case, then first-time buyers who choose to jump into the market now could see themselves carrying a hefty mortgage on a depreciating house. Anyone who bought a home when the market peaked in 1989 watched their "investment" plunge when the housing market tanked months later. Those homeowners still haven't recovered the pre-bust value of their homes two decades later, if you factor in inflation. "There's so many myths around real estate," says James McKellar, a professor of real property development at York University. "Let's not forget that before the 1980s, the motto was that a home was a money pit. Over a long period of time, housing does not keep pace with inflation. Don't look at it as an investment.

A house is a cost. You don't buy a car as a good investment – you buy because you need it." "The conditions (for buying) are favourable in terms of interest rates and affordability, but that's just one concern.Remove Formatting from selection "The decision to buy depends on your personal circumstances – that includes your personal needs and how secure you are in your job situation. Ask yourself: is your ability (to pay down a mortgage) going to be the same in a few years time?" The results may surprise you as, in some cases, those who rent and invest the money they would have otherwise thrown into their mortgage come out on top in the long-term. That said, a home is an asset and having to pay off a mortgage forces you to throw your savings into something instead of wasting your money.

The Bank of Canada should cut interest rates to a record low next week to stimulate the economy, a panel of private-sector economists said Thursday as evidence of a deepening recession - globally and in Canada - mounted, including a major drop in Canadian home sales and home prices. The C.D. Howe Institute panel called for a further half-point cut next Tuesday in the bank's trendsetting target rate to one per cent. One of the 10 members called for a full-point reduction, and another for a whopping 1.25-point drop to just 0.25 per cen The half-point recommended by the panel would likely trigger a matching cut in the chartered banks' blue-chip prime rate - to which business and consumer floating-rate loans, including mortgages, are tied - to three per cent from an already all-time low of 3.5 per cent.

The need for further housing-market stimulus was highlighted by the Canadian Real Estate Association, which reported that home sales in December fell 1.8 per cent from November to their lowest level since 2000. And the average price of a home plunged 11 per cent from a year earlier in December, and was down for the year as a whole, ending the nine-year housing boom of steady price gains. "Average prices will remain under pressure during the Canadian economic recession," warned association chief economist Gregory Klump.

"There has been a fundamental shift in consumer confidence, with job insecurities prevailing in every region Canada. That is unlikely to change until the worst of the recession is behind us." The industry association appealed to the federal government to include measures in its Jan. 27 budget to stimulate housing, including an increase from $20,000 to $25,000 in the amount homebuyers can draw tax-free out of their RRSPs for a down payment, and expanding the provision to include more than just first-time home purchasers. However, association president Calvin Lindberg cautioned that "moderating home prices in Canada should not be confused with the downturn in the U.S. housing market" that pushed that giant economy, and in turn the global and Canadian economy, into recession.

The U.S. recession is still deepening, reports Thursday suggested. "Consumer sentiment reached a six-year low as Americans continued to be rocked by increasing job losses, poor holiday-shopping season reports, and the ongoing inability of the government and the private sector to stabilize the economy," RBC said in a report based on a survey of U.S. consumer attitudes and spending. Considering the U.S. consumer accounts for 70 per cent of that economy's GDP, and the U.S. accounts for 75 per cent of Canadian exports, that doesn't bode well for Canadians either.

Still, there was a hint of hope amid the rubble of the RBC survey's findings - a marginal increase from 29 per cent to 30 per cent of respondents who expect their local economy will be stronger in six months' time. The analysis said this may reflect an enthusiasm for soon-to-be-inaugurated U.S. president-elect Barack Obama and "Americans' openness to the stimulus proposals coming out of Washington rather than any expectation that local economies will improve quickly."

In light of the deepening slump in the U.S. economy and consumer confidence, it's not surprising the mood of Canadian exporters has also hit an all-time low. But it was concerns about domestic sales prospects that weighed most heavily on exporters, Export Development Canada chief economist Peter Hall said Thursday in releasing results of the fall survey on the confidence of exporters. Just 28 per cent - the lowest share ever by a wide margin - expected a near-term increase in domestic sales, while only 12 per cent expected an improvement in the domestic economy, while a record high 57 per cent expected a further deterioration.

"Over the past five years, exporters were able to count on a strong domestic market to tide them through the relentless rise in the Canadian dollar," Hall said. "Last fall, that upbeat view of the domestic scene soured considerably." Underscoring their pessimism about the domestic economy was news from Statistics Canada of a further seven per cent drop in new car sales in November, the steepest monthly plunge in three years. Meanwhile, showing the growing global concern about the economic crisis was a decision by the anti-inflation-focused European Central Bank to cut its trendsetting interest rate to two per cent.

Canadian homeowners are green with envy over the fact our neighbours to the south are allowed to deduct the interest paid on their mortgages from their taxes. Is it possible to do the same thing here?

I received an elegant little flyer in my mailbox the other day. It was a small glossy fold-over, and it had a quality look and feel to it. The only text on the front flap of the flyer asked me a provocative question: "Is your mortgage tax deductible?" The inside of the flyer told me that I could learn how to collect tax refunds from my mortgage. "Canadian homeowners are entitled to collect Tax Refunds from their mortgage payments under Canada Revenue Agency (CRA) guidelines for 'Cash Damming'.

By following CRA's specific guidelines for borrowing and investing, you will claim thousands of dollars in Tax Refunds every year from your mortgage." The small flyer mentioned "Tax Refund" five more times, and twice pointed out that I could use my Tax Refund to pay off my mortgage faster. That's pretty exciting,

The biggest single expense of many Canadian families is their mortgage payment, and we've all been making those mortgage payments with after-tax dollars. Many a Canadian has looked across the border in envy at the tax deductibility that Americans enjoy on their home mortgage interest. If it turns out that we can be getting Tax Refunds from our mortgage payments too, well, that's just a no-brainer.

As it happens, I am quite familiar with this topic and strategy, so I can spare you the inconvenience of having to leave the comfort of your home to discover how this works. In fact, I'm going to provide you with all the essential information that you really must know about Canadian mortgage deductibility and Tax Refunds, all in the very next paragraph! How can I possibly do that? By using an enhanced information conveyance technology I like to call No Baloney™.

Ready? Here's what you really need to know about Canadian mortgage deductibility and Tax Refunds: In Canada, when you borrow money to buy your home, you can't deduct the interest. When you borrow money to make certain investments, you may be able to deduct the interest.  There. Now that we've covered all the really important stuff, let's review some of the details. First of all, nothing about buying your personal residence is tax-deductible. You don't get to deduct your mortgage interest, there are no special tricks that have escaped your notice, and you will not be getting "Tax Refunds" from your mortgage payments. Period.

That being said, when you borrow money to make investments which have a reasonable expectation of income, you may be able to deduct the interest on the debt. So if you use your home as collateral when you borrow money to invest, you may be able to deduct that interest expense from your income taxes. You could, therefore, have a mortgage with interest that is partially or entirely tax deductible.

However, it's very important to remember two things: (1) No matter how you twist it, turn it, or wordsmith-manoeuvre-it, the money you borrow to buy your principal residence is not tax-deductible; (2) The only way the interest on your home mortgage can be tax-deductible is if you borrow against the equity you already own in your home, and use that money to investment.

The reason it's so very important to be clear about this issue is that borrowing to buy a home is something that most people must do in order to buy a home, and as long as they can afford their mortgage payment, they're psychologically comfortable doing so. They generally don't worry that their money is at risk. In fact, they feel a sense of security about the equity they are building as they pay the mortgage down. Borrowing to invest, on the other hand, is not something that anyone needs to do, and most people are not psychologically comfortable with it. In order for borrowing to invest to make sense, the average long-term, after-tax return on the underlying investment has to be higher than the after-tax interest rate on the loan.

That invariably means taking on investment risk. And for most people, tolerating investment risk is already sufficiently challenging without the added stress of knowing that those investments were made with borrowed money. Think about the recent gyrations in the stock markets, and consider how using leverage might change your emotional response to the hysteria. Don't get me wrong - I'm not picking on leverage as a concept. Using "other people's money" is an age-old investment strategy, it absolutely has its place as a financial planning strategy, and I've used it myself.

What I am picking on is the packaging of leverage - a strategy that inherently adds risk to investing - as a clever and heretofore overlooked way to get tax benefits on your home mortgage. Let's be No Baloney™ clear: For some people, borrowing money to invest may be an appropriate investment strategy. But borrowing money and investing it because you can get a tax deduction on the interest expense is a ridiculous tax strategy.

While blue skies and picturesque lakes certainly drew people to this valley, its postcard-perfection hasn’t been enough to stave off the effects of worldwide economic trouble.

The first signs came when water-cooler talk changed from estimating real estate gains to lamenting losses in retirement plans and higher costs for just about everything.

Legitimate concerns about the state of the economy made consumers nervous and more thrifty, despite assurances of “strong economic fundamentals” from Canada’s mortgage economists and political leaders.

And then came the more literal signs. For Sale boards started to pop up in front of houses and never left.

Home owners and speculators who once bragged it only took a week or so to sell their houses or condos are now just boasting “reduced” or “new price” on their sale signs.

While economists were slow to acknowledge what most could surmise by a walk through their neighbourhoods, there are now significant rumblings of a slump in prices for houses this side of the border.

Some are going so far as to call it a housing recession, as realtors and sellers are already well into contingency plans that will allow them to ride out the storm.

Where the market is going

A report last month from Central 1 Credit Union said the province’s housing market in a recession, and it’s not expected to be a quick dip.

According to Helmut Pastrick, the bank’s chief economist, housing sales across B.C. will decline by 30 per cent this year, 17 per cent next year and five per cent the year after that. And prices will be in tow.

Prices will continue falling from their March 2008 high into next year, bringing the provincial median sales price down 13 per cent to $310,000 in 2009 and by a further five per cent in 2010—in total nearly an 18 per cent drop.

Things are supposed to look up later that year following a sales turnaround and relaxing credit conditions. “Recession in any industry—housing, auto or lumber—is a period where the industry experienced sustained declines in output and in prices, and that fits what’s happening in B.C.,” said Pastrick.

He noted that the Okanagan won’t be exempt from any downward trend.

“All regions are participating in this to largely the same degree and the trends and conditions are very similar throughout the province, which is usually the case when we have major economic event or factor coming into play.”

That major economic effect is, of course, the financial crisis in the United States, which has put a crimp on the many industries that are finding it difficult to access credit and move operations forward.

In turn, its stagnated economic growth across the U.S., and to some degree, in Canada hypotheque as well.

“As the general economy suffers and slows down, it has feedback into housing sector.”

Over at the B.C. Real Estate Board, chief economist Cameron Muir is on the same page, although his group’s fall forecast projects declines in the area of 10 per cent, as opposed to 18.

According to him, Okanagan home prices should be down to 2006 levels by the end of the year and remain flat throughout 2009.

“Throughout the province there’s quite an imbalance between supply and demand. There are more homes for sale, while home buyers have dropped off considerably from a year ago, and the combination of those two factors has put downward pressure on prices,” he said.

Muir said real estate markets most conducive to recreation and investment buyers— such as the Okanagan—will be a little bit worse off than major markets, like Victoria and Vancouver, simply because of the fact that there are fewer investment and recreation home buyers around now.

Kelowna, he said, is well diversified but part of the responsibility of the downward trend can be placed upon the same group who helped drive up prices.

Just as fast as oil money flowed into the Okanagan, it’s started to dry up in relation to the Albertan housing market flattening.

Calgary, for example, saw their housing prices start to tumble months before B.C. felt any pangs of contraction, said Muir.

Basically, that’s meant those who were leveraging gains in home equity for new home purchases are out of luck and, as a result, no longer looking to buy.

But, that’s not what Kelowna residents will have to worry about.

The real test of how this region will fare is the level to which residents are able to comfortably live and work here, Muir said.

“What we really need to look at is what are the financial conditions and the confidence of people who live work and raise their families there because they are the ones who drive positive demand,” he said.

“Unlike the U.S., the financial condition of households in this province, and in Kelowna, are on relatively strong footing.”

B.C. isn’t seeing a sharp increase in foreclosure activity, the unemployment rate is staying quite low from a historical perspective as are interest rates, Muir said.

“Without a collapse in household financial positions, homeowners are not in a position where they have to sell at any price like they are in the U.S.”

According to Muir, the biggest stumbling block is consumer confidence, which is at the lowest it’s been in 26 years.

Realtors

A lack of consumer confidence is something local realtors are far too familiar with.

Ian Share, of the Century 21 office in Glenmore, has seen a sharp decline in sales, although he said he remains busy. The problem, as he sees it, is that sellers are having a hard time adjusting to the market. A house that may have flown off the market a year ago for a cool $500,000 isn’t going to have the same appeal today as buyers have far more to choose from and are taking their time.

While his focus is on North Glenmore, Lake Country and Phoenix, Arizona, he says only the latter market is seeing eager buyers.

Share tapped into the Phoenix market successfully to pursue an opportunity he saw resulting from the U.S. financial crisis.

“The conclusion you can start to draw is that the real estate market is adjusting and correcting massively and that the buyers that are willing to step up to the plate are few and far between,” he said.

“Generally they consist of investors picking up rental properties and other clients who are relocating here for work.”

Drawing upon some of his office stats, Share also pointed to a much sharper decline than the 10 or 20 per cent the economists are forecasting—and it’s happening now.

Share was the listing agent on one of only two homes that sold in Lake Country (excluding Carrs Landing) last month—118 were listed.

While the lack of sales may be disturbing, Share pointed out it’s actually the pricetag changes that are the most dramatic, citing the two Lake Country listing sales examples.

“One was originally listed for $549,000 and sold for $400,00—that’s a difference of $149,000,” he said.

“The other was originally listed for $449,000 and sold for $351,500—that’s a difference of $97,500.”

In the months leading to the dry spell, Share added only nine single family homes sold and the average price difference from the original list price to the sold price was $37,966, whereas this last month the average price difference was $123,250.

“Even though we’re been reassured that our banking system is solid and that our economy is ticking along nicely…in my opinion we’re crazy to think that Canada is impervious to some sort of significant adjustment in our economy and in the real estate market,” he said.

That said, this is the time for buyers to gather their resources and plunge into the market and time for sellers to start listening to their agents, Share believes.

“Sellers that are in this current market generally dump realtors if they haven’t sold their homes during the listing period, and they probably most likely figure they’ll just get someone else that will get the job done,” he said.

“The majority of time it may not be the fault of the realtor if he or she priced it correctly and aggressively to start with…If it isn’t priced right in this market then both the realtor and the seller get frustrated as they’re simply just spinning their wheels.”

Over at Coldwell Banker, Horizon Realty, Paul Pofpnikoff is also feeling the pinch.

Like Share, he’s finding a way to leverage the conditions of the current market so they work to his benefit and opened a sideline project.

Focusing on developers who have a property they need to market, he’s created a website—www.propertyexchangekelowna.com—that lures potential buyers from markets as far flung as Europe.

He has to go there “to create opportunities” because he admits things have dried up locally.

“I know realtors have to have this rosy picture, but currently there aren’t many buyers and I am finding many people that could are resorting to renting their place rather than selling it,” he said.

“I have had vendors calling about listing, and quickly changing their mind, saying, ‘The price we’d be getting wouldn’t be good enough—we’ll rent for a year or two until the market gets better.’”

It’s something “everyone” is seeing and he too blames it on the problems in the U.S., the “troubling effect it’s had on the psychology of the buyer.”

Reduce the price, or rent?

For contractor Robert Tissington, building, buying and selling homes has been a way of life for as long as he can remember.

It’s what his dad and grandfather did, and he followed their lead into the local market a few years ago.

His first house—among several properties he owns and can’t currently sell—was purchased in Kelowna’s North End a few years ago for about $200,000.

He added a carriage house to it for about $130,000 and got ready to move into another place.

When he listed his property with a real estate agent, he was told to list somewhere in the area of $700,000, which he thought to be quite high, but competitive. It didn’t move. His price dropped by nearly 10 per cent and it still didn’t move.

With that, he decided to take it off the market.

“A year ago I thought selling it for about $550,000 would have been brilliant, but it’s the type of property you hang onto,” he said.

His property is a good rental—a market that’s not shrinking—and will continue to earn as the real estate market fluctuates.

In the meantime, he didn’t see the point of putting his life on hold waiting for the property to sell.

“The amount of tire kickers you have to go through—the people who want to see all the houses, but aren’t prepared to buy, even if they think they are—just aren’t worth it.”

He’s comfortable with the idea of riding out the changes in the meantime, and as a contractor thinks he sees a lot of opportunity in the current market—if not to sell, to buy.

“You just sort of acquiesce, give it a reasonable chance, and go off in another direction,” he said.

“Now I feel great about the decision, but you have to be moving forward or backward.”

Tissington said that the current market should have been expected, as Kelowna functions on a six-year cycle.

“Prices peak and everybody lists when they sense it’s the end of cycle and then there’s a glut of houses on the market,” he said. “The last one was in 2001, and before that in 1993-94.”

When he bought his house for $212,000, that seemed like an incredible amount of money for an old house, but he pointed out it was worth the investment.

“This whole economic situation is running alongside what may have been a natural price adjustment anyway,” he said.

The good news

Property owners may be in a pinch, but this region has suffered the pains of rising costs for years.

Reports earlier in the year boasted that young buyers were still entering the housing market with “reduced expectations,” while many complained prices became too restrictive for many to enter the market at all.

Now prices are becoming more competitive. Developers trying to unload units are offering bonuses, rent to own incentives and coming out with a product that’s more attainable.

All in all, it’s something Brenda Moshansky, a director with the Okanagan Mainline Real Estate Board, believes will create some opportunities for first-time home buyers looking to get into the market.

“Properties that are marketed competitively will continue to sell, and with the interest rates where they are, it’s a wonderful time for buyers to get into the market,” she said, adding realtors are working a lot harder to draw interest in their listings.

Moshansky said that the Okanagan and its natural allure will ensure that the prices don’t dip too drastically.

“One thing that’s very unique about this region is that it’s a little bit immune to some of the problems because it’s a destination market,” she said.

“Ski hills are expanding, popular resorts as well as accommodations are coming here and we accommodate a lot of recreational consumers for second homes as well as being a retirement market.”

Although Moshansky knows the economic predictions for the next year, she believes that the market is already correcting itself as fewer listings are starting to come out. “Real estate is traditionally very cyclical,” she said.

“Some people say it’s a six year cycle, others say it’s seven…it will turn around. Real estate is not as volatile as the money market.”

When it will end?

Housing is a high reach industry. Realtors, retailers, builders and architects are just a few who will feel the pinch if the bottom falls out of the market.

Construction has become a major economic driver of this region, and job growth has been substantial, with some estimates being in the area of 94 per cent.

“Usually there is a time delay to response in new construction and housing market conditions after sales decline,” said economist Helmut Pastrick, adding that housing starts are likely to drop off by 30 to 40 per cent next year.

But, things will get better.

“It’s not a downward endless spiral,” said Pastrick.

“There will be forces at play to reverse the downturn and some of them are already beginning to materialize.”

It’s still early in the decline of sales and prices, but by 2009, and 2010, things will get better.

“Lower interest rates, lower mortgage rates and lower prices can stimulate demand so that will set the stage for some improvement in housing sales,” he said.

“It’s open to debate how strong that recovery will be—at this time it doesn’t look that strong, but as long as the decline ends…that’s positive.”