Rising oil production will push Alberta economy to fastest growth in country in 2017: Conference Board Solid increases in oil production, Fort McMurray rebuild will be the difference in Alberta this year

After two difficult years, Alberta’s economy is climbing out of recession thanks in part to oil prices, but the Conference Board of Canada warns the road to a full recovery will be long.

In its winter quarterly report released Thursday, the board projects Alberta will lead the country in terms of real GDP growth in 2017, which is forecast at 2.8 per cent.

“The recent stability in oil prices has encouraged optimism that the worst is over, laying the foundation for a modest gradual recovery in capital spending in the energy sector,” the report said.

Oil prices are expected to remain low, which will hinder economic recovery and pull overall real GDP growth down to 1.9 per cent in 2018, the report says.

The OPEC factor

However, an agreement made between Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries in late 2016 to cut crude oil production by 1.8 million barrels per day supports a stronger price outlook for Alberta’s energy sector, the report says.

While OPEC restrains itself, Alberta’s output is forecast to increase, as new oilsands projects come online.

The price of crude oil is also expected to rise to almost $60 US by the end of 2018.

That energy sector recovery is good for the Canadian economy as a whole, according to Marie-Christine Bernard with the Conference Board.

“There was very weak growth for Canada as a whole in the last two years,” she said.

“The difficulties in the resource sector and in particular in the energy sector really hurt investment. That really pulled economic growth down in Canada to one and one-and-a-half per cent on average over the last two years.”

Rebuilding Fort McMurray

The report predicts despite sluggish investment growth in the energy, real total exports are expected to increase by 2.3 per cent this year.

“This will provide relief to the business sector, boost government coffers, and return provincial employment to pre-commodity-shock levels by 2018.”

Construction in Fort McMurray after last year’s devastating wildfire will lead to more than 2,500 homes built over the next few years, contributing around 0.4 percentage points to Alberta’s projected growth.

“Rebuilding efforts in fire-ravaged Fort McMurray and solid increases in oil production will be the difference for the Wild Rose province in 2017,” the report said.

Provincial comparisons

All provinces except Newfoundland and Labrador are expected to grow this year, but the engines of 2016, British Columbia and Ontario, will lose momentum in 2017.

British Columbia will see a significant contraction thanks to the slowdown in the housing market, going from three-plus per cent growth over the last few years to 1.9 per cent growth in 2017.

Saskatchewan isn’t expected to claw out of its recession as successfully Alberta, with GDP forecasted to grow at 0.9 per cent thanks in part to challenges in the potash and uranium markets.

-CBC News

Investing in Alberta is better than buying stocks

Homes provide shelter and refuge, but they are also most Albertan homeowners’ single largest investment. Housing represents 47% of total assets for the average Alberta family – much higher than stock market investments and pension plans combined (29%). Why is this important? Because homeownership benefits the economy as a whole, as well as individual homeowners. Let’s look at this in the context of the most recent stats on Alberta’s real estate, reported by the Canadian Real Estate Association.

Investing in housing in Alberta is better than buying stocks

Over the last 18 years, house price appreciation in Alberta has outpaced Toronto stock market returns. Between 1999 and 2016, with average annual residential sales of roughly 57,000, house price growth in Alberta (6.6%) outpaced yearly returns on stocks traded on the Toronto Stock Exchange (6.4%).

Average residential prices up 3.1% in Alberta in January

Total residential sales across the province were up 17.7% year-over-year, totalling 2,679 resale transactions in January 2016. Roughly 3.4 out of every 10 newly listed homes were sold, translating into a sales-to-new listings ratio (SNLR) of 34%. And the average residential sales price rose 3.1%, to $383,040.

Increased home equity = increased net worth

What’s so great about house prices being up? Rising house prices mean homeowners are building equity in their homes. Home equity represents the current market value of the house, minus any remaining mortgage payments. Equity is built over time as the homeowner pays off their mortgage and fluctuates with the market value.

Rising home equity benefits homeowners individually, and the Alberta economy as a whole. By how much? More than $40 billion in 2016.

 

Calculating Returns to Equity

Using Statistics Canada’s data on Alberta homeowners’ mortgage balances (Surveys of Financial Security), we calculated equity shares by age group. Equity shares multiplied by user costs (average two-bedroom apartment rents used as proxy) provided the income generated (returns to equity) per homeowner, by age class. The annual income generated by homeownership was then derived by multiplying the number of homeowners by age group in Alberta with returns to equity per homeowner.

For those under 35, the income generated by homeownership reached $11,000 a year per homeowner


Over the past five years (2012-2016), the annual income generated by homeownership averaged roughly $57,000 per homeowner (all ages) in Alberta. Returns on equity per homeowner ranged from annual income generation of $11,000 for homeowners under the age of 35 (generally considered as first-time buyers), to roughly $14,000 for those above 65 (annual average).

REALTOR® Tip: First-time buyers build equity in their home as they pay off their mortgage – roughly $11k a year!

Collectively, annual returns on equity (ROE) for all homeowners in Alberta reached roughly 38 billion dollars, or 12% of GDP

Thirty-eight billion dollars a year represents roughly 12% of Alberta’s nominal GDP and 85% of Government of Alberta’s annual revenues. When people build equity in their homes, they borrow against that equity through a home equity loan, or home equity line of credit. An increase in the value of their homes increases the amount of collateral available to households, leading to higher credit. Rising house prices, which imply higher housing equity, may encourage consumers to borrow more, causing a rise in consumer spending. Looking at the data, we know this to be true.

The increase in consumer spending following a rise in in house prices has been referred to as the marginal propensity to consume (MPC) from housing wealth. We found that, for every $1 increase in average residential prices, Albertans raise their personal spending by 6.7 cents, which collectively amounts to roughly $5 billion a year (2012-2016 average).For every $1 rise in housing prices, Albertan homeowners raise their personal spending by 6.7 cents – collectively $5 billion a year

Five billion dollars a year is 1.5% of provincial GDP, and 11% of government revenues. This is a significant boost to Alberta’s economy. A 3.1% price gain, like the one we just saw in Alberta this January, equals an average increase of $11,420. The associated rise in consumer spending that could come out of that is $868 per homeowner per month, or $10,415 per homeowner per year, or a collective increase of $616 million a year. 

-Regine Durand.  Economist

How to buy a home when you haven’t sold yours yet

You’ve found the perfect new home for your family, but your current house hasn’t sold yet. You can’t afford to carry two mortgages, or maybe you were counting on money from your sale to help with the down payment and closing costs.

Before you let that dream home slip away, consider these strategies to help bridge the transition:

MAKE AN OFFER THAT’S CONTINGENT ON THE SALE OF YOUR HOUSE

A seller may be persuaded to accept your offer with the caveat that you’ll have to sell your house before closing on theirs. You’ll strengthen your chances of getting a seller to take a chance on you if you can show that your home is priced properly and has a solid marketing strategy, says real estate broker Dayolin Pratt with Re/Max Advantage Plus in Minnetonka, Minnesota. Successful contingency offers depend on good communication between the real estate agents representing both sides, Pratt adds. It’s up to you and your agent to reassure the seller that the closing won’t be delayed.

Obviously, in hotter housing markets with potentially multiple bids, it can be harder to get sellers to accept such an offer.

OFFER THE SELLER A RENT-BACK OPTION

One way to buy yourself extra time to complete your sale is to offer to buy the new house, then rent it back to the seller after closing, Pratt says. A rent-back agreement is typically for just a month or two. But this arrangement can give sellers extra time to move — or to find a new house of their own — while putting a little money in your pocket and keeping you from having to pay two mortgages at once.

TAP THE EQUITY IN YOUR CURRENT HOME

If you have a high credit score and considerable equity in your house, you could free up some of the latter with a home equity line of credit. A HELOC lets you use up to 85 per cent of your home’s value, less the balance remaining on your mortgage, and is fine-tuned based on your credit profile and income. Most HELOCs have a variable interest rate, so it’s in your best interest to pay off the loan as soon as your current home sells.

This strategy may let you buy a house before you sell, but it’s not a last-minute option. A HELOC requires an appraisal, income verification and a thorough credit check, so it takes time — generally 30 days or more — to qualify, says Tim Beyers, mortgage analyst with American Financing in Aurora, Colorado. If you’re thinking of going this route, make sure you run the numbers with an expert upfront, Beyers says.

To qualify for the new loan, a lender will evaluate your current mortgage payment, plus the HELOC payment and your new monthly mortgage payment, to calculate your debt-to-income ratio for the new mortgage approval, Beyers says. If your income is high enough to have a debt-to-income ratio below 40 per cent with all those payments and other monthly expenses taken into account, only then should you consider a HELOC, he adds.

“Once you start dipping into your home’s equity, that changes the equation when you apply for a new mortgage,” he explains. “Taking too much out can hurt your qualification chances on a new mortgage. Don’t make an offer, then try to scramble to do the math.”

ADD A HELOC TO YOUR NEW MORTGAGE

With this strategy, you break up the financing on your new home with a first mortgage for the amount you need, plus a HELOC to make up the difference in your shortfall for a down payment, says Elise D. Leve, senior mortgage banker at Citizens Bank in New York.

Once you sell your current home, you can pay the HELOC portion off in full and end up with the single mortgage you wanted in the first place, Leve says.

 

-NerdWallet: Deborah Kearns

Things to Consider When Buying an Old House.

It’s like a love affair; some older homes make your heart skip a beat. It is hard not to fall in love with an older home’s historic unique architecture, gabled roofs, hardwood floors, crown moldings and antique light fixtures—older homes definitely have their charm.

The plastered walls, leaded glass windows, original chandeliers, and oak paneling make an old home as attractive as it can possibly be. If you found your love you should be aware of the following money pitfalls of old houses. You do not want to discover that beneath the surface of your dream home lays a dilapidated wreck.

This article provides you with some valuable tips to help you identify potential problems and some renovation rules, should you decide that this love affair is going to be your Gold Mine.

Foundation
The foundation is the most important aspect of any home especially for older ones. One problem that is common for older homes is called the “sulphate attack”. This can occur as a result of a chemical reaction between the soil and the concrete, which causes the foundation to crack and crumble and that can be very problematic. Another major concern with older homes is that the centre beam of the home can begin to sink. This can result in a sagging roof, bowed walls, and sloping floors. If the old house has a bad foundation then renovating it can be very expensive where the cost can range from several thousand dollars to approximately $50,000 depending on the size of the home. Also, in some cases, one might need to jack up the house to replace the foundation and shore up the centre beam.

Electrical Wiring
When buying an older house, it is very important to find out if there are any problems with the state of the electrical and lighting system. Do the lights flicker? Is the current steady or do the lights fluctuate between bright and dull? Is there adequate lighting in the home? It’s important to have the wiring carefully inspected. Also, many older houses use aluminum wiring, which is cheaper than copper wiring but it is a serious fire hazard. Ensure that you factor the cost of rewiring into your offer price. Also, you should consider whether there are enough outlets in the home to suit the needs of a modern household. Install more outlets in order for you to run a number of devices at once like a television, computer, stove, etc.

Lead Paint
In older homes, lead paint is very common as lead was used as a white pigment in paint until the mid-1950s. If you are planning to repaint the home, call in a professional renovation firm as they know the safety precautions needed to be taken when repainting the house. Children and pregnant women should not be in the home during renovations.

Asbestos
Asbestos is a mineral that makes a very effective fire and heat-resistant material that was discovered to cause lung disease. When the tiny particles of this mineral are inhaled, over a period of years they begin to damage the tissue of the lungs. In old homes, asbestos was used in carpet underlay, textured paints, roofing felt, electrical wiring insulation, acoustic ceiling material and insulation. Getting the house checked for asbestos is critical.

Galvanized Pipe
Galvanized pipes are known to rust very quickly. Most insurance companies now refuse to cover water damage caused by leaks in a home with galvanized pipes.

Condition of the Older Home
Just like people, years will eventually take a toll on homes as well. An older home may begin to sag and slope, which is why it’s very important to know about the conditions of the house you’re planning on purchasing.

Older homes may be beautiful, but they aren’t designed for modern living without a total update or upgrade. Make sure the house structure can be modified easily to suit a current living style.

For older homes, renovations are a challenge. To determine the price you are willing to pay, add up the estimated costs to renovate the property based on a thorough assessment of the house. Then, subtract that from the home’s market value after renovation. Allow for an additional 5% for cost overruns and unforeseen problems plus inflation.

Preserve the Charm of Your Old House
If you have already fallen in love with this old house, then make sure you follow the golden rules in repairing your dream home and preserve its historic features and value.

  1. The golden rule of remodeling is, “do no harm”. As you update your older home, make sure to preserve its historic details. Reuse existing materials. Keep historic moldings and hardware. Wire gas lamps for electricity. Keep distinctive examples of craftsmanship. Restore marbling, stenciling, and carvings.
  2. Don’t try to undo long-ago renovations. Most buildings change over time, and alterations to your house may have historic significance in their own right.
  3. Whenever possible, repair rather than replace. Don’t throw away that old claw foot bathtub—have it re-glazed. Fix damaged doors, refinish old cabinets and patch cracking plaster.
  4. If historic features cannot be repaired, look for a similar item at an architectural salvage centre, or buy a new item that matches the old in design, colour, texture, and other visual qualities.
  5. And best of all make sure you hire a contractor that shares your passion and understands your love affair with your old house.

Good luck, you may have found your Gold Mine.

 

-News4realty.com

6 Things: Calgary’s multi-family real estate market

More apartments, duplexes, and townhomes were sold through Calgary’s resale home market inJanuary than the same month in 2016.

The biggest increase in sales came from townhomes, improving 30 per cent to 129 transactions from 99 year over year, says the Calgary Real Estate Board.

Townhome sales were paced by an area CREB defines as south Calgary, recording 29 deals.

Meanwhile, apartments and duplexes each saw resale pick up 17 per cent from the same time a year earlier. There were new owners for 151 apartments compared to 129 in January 2016, while duplex sales grew to 83 from 71.

Calgary’s city centre led both apartment and duplex sales, with 71 and 24, respectively.

“Conditions have improved over last year, but people need to remember that last year’s market was one of the weakest on record,” says CREB’s chief economist Ann-Marie Lurie. “Despite the appearance of a major shift in activity, the transition in the housing market is going to be a slow process.”

All three segments saw a setback in new listings, says CREB. There were 202 additions to the city’s duplex inventory, down 25 per cent year over year. Meanwhile, there were 329 new listings of townhomes and 629 for apartments.

New listings of apartments slid five per cent and townhomes eased 15 per cent.

Here are six facts about resale prices of multi-family homes in Calgary last month.

SAVINGS

People who bought an apartment in Calgary last month saved more than $14,000 than those who bought a similar unit in January 2016, says CREB. The benchmark price on apartments last month was $269,900, down five per cent from $284,000 year over year.

CITY-CENTRE LEADER

The highest benchmark price on apartments in Calgary last month was in Calgary’scity centre, where it was $295,400. This is down more than four per cent from January 2016. Northeast Calgary was the only end of the city with a year over year price increase in the segment. The quadrant’s apartment benchmark improved 0.9 per cent to $273,200.

TOWNHOME BENCHMARK

The benchmark price on townhomes last month slipped five per cent to $307,100 from $323,800 in January 2016. Last month’s price was also down $800 from December 2016.

TOWNHOME LEADERS

The highest price on townhomes in Calgary last month was also in the city centre. It recorded a benchmark of $460,500, down three per cent year over year. The most attainable price was in an area CREB defines as east Calgary, where it was $207,600, off seven per cent from the same month in 2016.

DUPLEXES HOLD STEADY

The benchmark price on duplexes last month was the most similar of any multi-family segment to January 2016. It was $384,600, down 1.5 per cent from $390,200 a year earlier. Last month’s price was also down from $385,400 in December 2016.

DUPLEX LEADERS

For duplex prices last month, Calgary’s city centre again led the way. The benchmark price was $701,700, up 0.3 per cent year over year. Both northwest Calgary and west Calgary, also recorded price growth, increasing 0.2 and 0.6 per cent, respectively.

-Calgary Herald

Home sales in B.C. return to ‘historic averages’ says real estate board

VANCOUVER – The British Columbia Real Estate Association says the province’s housing market has tumbled from record highs posted in 2016 to return to what it calls historic, long-term averages.

The association says 4,487 condos, townhomes and detached homes sold in B.C. in January, down 23 per cent compared with the same period last year.

The total sales value also dropped 36.5 per cent over the same period to $2.79 billion, while the average home price was off 17.5 per cent to $621,093.

Figures from the real estate association show the change was most pronounced in Vancouver where fewer detached homes sold and sales of all property types made up just 35 per cent of sales across B.C., an eight per cent decrease from January 2016.

With fewer expensive, single-family homes changing hands compared with condos or townhomes, the association’s news release says the average price of a property in the Vancouver area skewed downward.

It says the residential benchmark price in Greater Vancouver declined 3.7 per cent over the last six months, but record hikes last year mean prices are still 15.6 per cent higher than they were in January 2016.

“A marked decrease in the average residential price (across B.C.) is largely the result of relatively more home sales occurring outside of the Lower Mainland,” association chief economist Cameron Muir says in the release.

He said Victoria’s sales showed above average performance in January, but overall, the market is returning to long-term average levels.

-Calgary Herald

Parker: Chandos stays busy in challenging times

No doubt some construction companies in Calgary are having a hard time, while some, like Chandos, still enjoy a full worksheet.

Chris Chornohos, director of business development, reports 2016 was a record year and he’s forecasting 2017 to equal its revenues.

Nearing its 37th anniversary, Chandos Construction was founded in Edmonton, where its head office is located. It also has offices in Calgary and Red Deer. Sean Penn was recently appointed managing director in the Calgary office.

Tim Coldwell, previously vice-president responsible for business development, relocated to Edmonton as managing director there. He’ll also lead recruitment and development of the newly opened office in Burnaby, B.C. He has already hired five locals and persuaded three staff from Calgary to move there to work on building an auto dealership.

The company’s 125 Calgary employees have moved into new space in Sunpark Plaza S.E. Among its current projects is the new Calgary Climbing Centre near Canada Olympic Park that will celebrate its groundbreaking ceremony Wednesday.

Walson Tai opened his first climbing gym in 1995 on Fisher Road in the south Chinook area and has two other facilities on 15th Avenue N.W. and the newest location on Aero Drive N.E.

His substantial new facility will provide a high-quality training ground for future Olympians — and add another 50 opportunities for Calgarians to join his staff of 150.

Chandos crews are also busy on a second building in Marda Loop for Ronmor — it completed Garrison Corner last year — that will welcome tenants next month.

Designed by McKinley Burkart, The Odeon is a four-storey mixed use building in the heart of the community on 33rd Avenue S.W. that will feature a Blush Lane Organic Market covering the entire main floor. Thanks to Chris Law at Colliers International and Ronmor’s sales team, its 32,000 square feet of office space is almost 90 per cent leased.

Other notable construction projects for Chandos are the retrofit of the John Ware Building at SAIT on the occupied campus, an expansion of Strathcona-Tweedsmuir School and work on five Calgary Board of Education schools, including a renovation of Bowness High School and the new Martindale School.

It’s also redesigning the Best Buy store at Deerfoot Meadows and building a $90-million First Responders Campus for the City of Barrie, Ont.

-Calgary Herald