National resale housing activity edged up by less than one per cent in April, CREA says, with the following highlights:

• Home sales were up 0.8 per cent from March to April.
• The national average home price edged up 0.9 per cent on a year-over-year basis in April.

But, aside from providing an overall picture of the market in Canada, just how valuable and meaningful are such numbers? Moreover, CREA notes that “trends in Vancouver and Toronto continue to diverge. These two housing markets have an obvious influence on national statistics and a high profile, but Canada is a big place.”

No kidding.

As we often stress, housing markets differ widely across Canada. If you own investment properties or your primary home, you don’t own in “the Canadian market,” you own in a specific areas – and that is the area you need to pay attention to when it comes to these statistics.
If a national number is skewed heavily – up or down – because of something that’s going on in a completely different geographical market than yours, and showing different market characteristics, why should you care?

The short answer is, you shouldn’t and don’t need to.

“It bears repeating that the national average price was skewed higher last spring by record level high-end home sales in Vancouver’s priciest neighbourhoods, and that a replay of this phenomenon was not expected this year,” Gregory Klump, CREA’s chief economist said in issuing the latest numbers.

“By contrast, activity in Toronto is stronger this spring than it was last spring. Higher-priced sales activity there is on the rise and buoying average prices. As the most active housing market in Canada, Toronto is the biggest factor supporting national average price.”
Buyers, sellers and investors must remember that all real estate is local, and you need local knowledge and expertise from local experts and realtors to get a true understanding of what’s going on in your market.

That is, the importance of being positive. Indeed, the decision to be positive.

The idea struck me as I read one of the sections in a major daily newspaper in Toronto. Every single headline and story, it seemed, was negative – filled with words such as: worry, guilty, fraud, crumbling, confusing, falling, suspected, accused, arrest, crash…

You get the picture.

Without getting into a philosophical discussion about the media and its propensity for the negative, it got me thinking how people, too, often adopt an attitude of negativity, sometimes unknowingly.

Human psychology is a complex subject, but let’s simplify it some:

Today, let’s decide to be positive.

To look for the good in any situation.

To not utter a single negative word.

To not criticize people, things or situations.

To hold the door for your fellow man – literally and figuratively.

To do good deeds.

To refuse to allow life’s every day challenges to defeat us into a negative mentality.

And, of course, to show your mom due appreciation on Mother’s Day, Sunday, May 13 – and any other significant mothers in your life.

Make the decision to do this for one day. It will test you, but reward you in so many ways.

One obvious conclusion to draw is that, after repeated warnings about consumer debt from the Bank of Canada, federal finance ministry, major banks and others, Canadians are finally listening. They’ve been hearing for months that they’re taking on too much debt, record amounts, in fact, and much of it in housing. The worry is that and that when this period of historically low interest rates finally comes to an end –with increasing hints that this could happen sooner than later – they won’t be able to afford their homes, cars, credit cards and other personal debt.

We shouldn’t be surprised, then, by signs of slowing consumer debt. It’s healthy, and it’s what we were warned about all this time.

The other side of the coin, however, is that when consumer spending slows too much, the economy takes a hit. With government spending already being cut back, a marked drop off in consumer spending could combine to have a more slowing affect on economics growth than hoped.

Sounds like quite the Catch-22 situation, doesn’t it?

In such a scenario, business confidence and spending would be counted on to power growth – otherwise, we’d have all three major parts of the economy gearing down, which wouldn’t be good for anyone.

Thankfully, business confidence is on the rise. C confidence among Canada’s business leaders rose in the first quarter of 2012, according to the Conference Board of Canada.

Following declines in each of the first three quarters of 2011, The Conference Board’s Index of Business Confidence rose 6.6 points in the fourth quarter of 2011 and gained another 2.5 points in the first quarter of 2012 to reach 101.8.

Forty-three per cent of respondents said they believe the economy will strengthen in the next six months; business leaders also expressed greater optimism about future profitability.

With some markets – such as key pockets in Toronto – are hot, hot, hot, and more than just detached homes are generating multiple-offer situations, some home sellers are testing the waters a little too much.

It’s common, for example, for many sellers to believe that bidding wars are universal across the city, regardless of area, neighbourhood and housing type. Highly publicized reports of homes receiving offers around 50 per cent over asking are creating unreasonable expectations among sellers.

This, in turn, puts unreasonable pressure on agents to deliver would-be buyers and wanna-have prices that are just not realistic.

There are also reports of some homeowners and their agents purposely setting list prices exceptionally low – with the express purpose of creating bidding wars. And when not successfully, they wait a few weeks and relist the property and an even higher amount!

We ask you: what does such activity gain – but frustration on the part of just about everyone onvolved.

If you’re about to enter the market as a seller, it is important that you – and your agent – remain realistic.

Price the home fairly, according to comparables and taking into account the specific area and type of home.

If you’re fortunate enough to generate sufficient interest and multiple offers for your home, great – but don’t price it artificially low as a ploy to create a bidding war.

It is incumbent upon your agent to educate you every step of the way. A smart and experienced agent likely would not suggest you play any games. Honesty and fairness is paramount.

Remember, pricing a home too high out of greed is dangerous. A home priced incorrectly can languish on the market for weeks, and even the best realtor won’t be able to sell it then.

The news in question is the announcement that the federal government has changed the reporting structure for Canada Mortgage and Housing Corp. Instead of the federal minister of human resources overseeing CMHC, Ottawa is giving the federal banking regulator – the Office of the Superintendent of Financial Institutions – the new authority.

Anything involving CMHC, our national housing agency, tends to grab a lot of attention. And that it did, with some media outlets suggesting the change may trigger a real estate market crash, some using words such as “apocalypse” and “soft landing.”
At issue here, and what prompted Ottawa to make such a move, is a desire to reduce the risk to taxpayers if Canada’s housing market – especially in Toronto and Vancouver – suffers a decline.

The move is also meant to ensure Canadians don’t get in over their heads, amassing loads of debt that they won’t be able to manage should interest rates rise significantly. CMHC insures about 50 per cent of the more than $1 trillion in residential mortgages in Canada, so anything that exposes the agency to high risk in outstanding loans – such as a combination of higher rates and high prices that cause homeowners to default – also puts Canadian taxpayers at risk.

But while many observers equate the move to effectively reining in – and possibly causing a slowdown in – the housing market, almost the opposite is true.

Given what the real estate market means to Canadians and the Canadian economy, is it more likely the change with CMHC will put housing at risk, or that the move is proactive, responsible action to protect – as best as possible – against a severe market decline, let alone a crash.
Federal finance minister Jim Flaherty has made it clear, however, that he’s concerned about the condo markets in Toronto and Vancouver, for example. The bill is aimed at discouraging high-risk borrowing and reducing the risk to taxpayers should these major markets tumble.

Financial and housing industry experts, including CIBC deputy chief economist Benjamin Tal, and TD Bank Financial Group chief economist Craig Alexander, say the change will effectively mean nothing to the overall activity of CMHC, and Canadians will not be harmed by the move.

Once you have selected a tenant you are seriously considering, you must, of course, have them complete an application – and request a copy of their credit report. Once you have received the application from the tenant, there are some key points to consider:

1. Income
2. Credit
3. Employment

Income: Of course, the first thing you should consider is the applicant’s income. Consider all sources of income, not just that earned from a traditional job.

Credit: You want to make sure their credit history is sound and that you can rely on them to make their rent payments. To keep things simple, have your applicants provide their own credit reports. They can go to Equifax’s consumer site, www.econsumer.equifax.ca, and pull a copy of the report online for a small fee. Having the applicant pull their own bureau means you will not have to register with a company to pull credit, or incur the expense of membership with one of the major credit companies. A number of different reports that can be pulled, some of which detail only the open accounts on their bureau and do not disclose the credit score or history. Make sure you advise your applicant to choose the report that includes their credit score. If they’re reluctant to take this step, they may have saved you a lot of time by disqualifying themselves!

Employment: When looking for your ideal tenant, verifying their employment is key. Request a job letter from each applicant’s employer which should state the length of time they have been in the position and their salary. In the meantime, ask about their job tenure. How long have they worked at their current job? What is their annual gross salary? If they have been in their current job for less than two years, where did they work before? Why did they leave? How long were they employed by the previous company? How much did they make? What made them choose their new position?

These are just the few beginning steps in assessing prospective tenants – but they are important ones. Next week, we’ll examine some further due diligence you can perform as an investor-landlord, to ensure this important part of your business operates smoothly.

Wrong.

First, depending on what investment strategy you use – but particularly the one known as Buy, Hold and Rent – becoming a real estate investor means you’re entering into a business.

And just like any such enterprise, it must be run like a business. You have capital costs – your down payment; operating costs – your mortgage payment and other expenses; and income – the rent you charge your tenants.

Since you’re talking about big dollar figures in all areas, it’s important you know what you’re doing, and when you don’t, have the good sense to get the appropriate professional help, such as a good lawyer, accountant and property manager.

One important area many novice investors often overlook, for example, is tenancies. Find the right tenants (those whom you will be counting on for your revenue, remember), your business can operate smoothly. Choose the wrong tenants, and you could face a laundry list of headaches – from complaints from other tenants, to non-payment or late payment of rent to property damage. Any of these issues has the potential to impact your business and your bottom line.

Using the Buy, Hold and Rent strategy means becoming a landlord – and that can be tricky business. You no doubt will find it easier to think of all your own do’s, don’ts, likes and dislikes as a landlord. But you must also remember that tenants have rights, too – and it’s up to you to learn what they are.

Landlord and tenact acts vary from province to province. In Ontario, a lot of important detail can be found at the government of Ontario site here: ltb.gov.on.ca

As an investor, it’s critical that you spend time not only selecting, screening and approving quality tenants, and using the services of a good lawyer to help you draw up a tight lease arrangement. In times of dispute, the clauses and inclusions in your lease will help determine how any problems are solved.
Your preparedness in these areas will go a long way to determining just how smooth – or otherwise – your business operates.

No, this is the weekend that the Real Estate Investment Network hosts its ACRE Toronto 2012 event, welcoming hundreds of investors to the city to talk about the latest real estate investment opportunities, techniques and tips.

And high on the agenda is REIN’s unveiling of its Top Investment Towns in Ontario to 2012, and one of our favourite markets – Hamilton – is expected to retain its top spot.

It may have something to do with the “$400 million investment by Maple Leaf Foods last year, over 300 new jobs in the downtown, almost 1,000 new small business jobs” in the Hammer, REIN president Don Campbell Tweeted today, in hinting at the top town.

REIN not only ranks Hamilton as the best place to invest in Ontario but also one of the best in all of Canada, after Calgary and Edmonton. The Financial Times has also ranked Hamilton as one of the top 10 large cities in North America for quality of life.

And just last week, another major source, the latest Royal LePage House Price Survey, provided further evident of the strong performance of real estate in this market: reporting that most housing types in Hamilton-Burlington showed healthy year-over-year price gains. For the first quarter of 2012, compared to the same period in 2011, standard two-storey homes in the Mountain district surged 17.2 per cent, and in Hamilton West they grew 6.8 per cent. Detached bungalows, meanwhile, gained 7.0 per cent in the Mountain area and 2.7 per cent in the West.

If you’ve been thinking about buying a home or an investment property in this area, now is the time to wield the Hammer.

Drop me a line at mark@theversatileinvestor.com and we can discuss why – and how you can get started!

The Help-Wanted Index, from the Conference Board of Canada, gained 4.3 points in February – the third significant gain in the past four months, and bringing the index to 125.7. The recent performance suggests the weak employment gains of recent months should soon give way to stronger gains.

Why is this so important?

It’s important because employers, faced with global economic uncertainty, have generally reined in their hiring over the last few months, taking a “batten down the hatches approach.” Recent and continuing improvement in the US economy, however, has Canadian businesses a little more encouraged about hiring again.

The overall trend in the Board’s index suggests we should see a gain of 13,900 jobs in March.

Importantly, the job growth is occurring across the country, as only three provincial indexes posted declines in February: Prince Edward Island, New Brunswick and Saskatchewan.

All other provincial indexes posted gains. Alberta’s index, for example, gained seven points — breaking the record high set the previous month. Ontario’s index climbed a more modest 2.6 points, but continued the upward trend that began last November.

In BC, the index climbed 1.6 points, partially offsetting its January decline, and remaining relatively steady over the past year.

How it all matters is that, without oversimplifying it, the strengthening US economy leads to growing Canadian business confidence, which in turn leads to increasing consumer confidence. Combined with continuing low mortgage rates, the housing market should continue to enjoy its own continuing growth through the spring.

These conditions, however, have done little to temper the spring busy season, and many areas in the GTA market are already heating up – and could grow white hot once warmer weather arrives for good.

Just take a drive around residential neighbourhoods in Toronto, and you’ll see the “For Sale” signs have already sprouted up like some of the early spring flower buds.

We recently offered some tips on how buyers can avoid getting caught up in bidding wars. But an even simpler way buyers of primary homes can better protect themselves in this regard is to adopt more of an investor’s mentality.

Real estate investors look at properties in a much different way. They view them purely as assets from which to profit. They crunch the numbers and work the math to determine, depending on their investment strategy, whether a property is worth purchasing.

Smart investors know precisely to which point a property makes financial sense. For example, if they plan to apply a ‘buy, hold and rent’ strategy, they know exactly how much rent to charge, and how much positive cash flow can be generated.

When you’re looking for a home for you and your family to live in, you may not be able to adopt this perspective entirely, since there are different criteria for your decision. But there are lessons to be learned here.

The discipline it takes to be an investor – always keeping the financial picture in mind – is something even primary homebuyers can practice and benefit from:
• Know how much you really can afford, despite how high market demand (read, bidding wars) may push a purchase price upward;
• Key to the above point is getting pre-approved for a mortgage. This will give you confidence as you view and offer on homes, and will save heartbreak from losing out on a home you really wanted because your financing fell through;
• Do your research, and know that there are other homes in your prospective neighbourhoods that you will love just as much, if not more, if you lose out on one you make an offer on; and
• Know the neighbourhood and the competition, in terms of comparable properties and recent sales, so you know when multiple bids push purchase prices beyond sensible levels.

No matter how much you love a property, try to buy with your head as much as your heart.