Wednesday, June 06, 2007

Home of Insanity - Renfrew V643849


This morning we are featuring MLS V643849, a classic stucco covered Vancouver bungalow in the lovely Renfrew neighbourhood, situated between two larger homes (people with low self esteem need not pursue this listing). Buying this listing as a rental property would mean that you have some cajones and a big bank account. You can show off to your friends by telling them how much more your mortgage is than the rent.

Yes, this home with a 'low basement ceiling,' looks like the yard hasn't been maintained, and really needs a coat of paint, some new steps, and windows, is currently rented out at $1050 per month. The cost buying this property at list price by borrowing money and paying it back over 25 years is $3,259.84 per month. Add on some property taxes and basic upkeep and yes that's right you can subsidize your renter to the tune of $2500 per month.
Home of Insanity.

Monday, June 04, 2007

May 2007 FVREB Statistics

May statistics were released today by the Fraser Valley Real Estate Board on their spiffy new website. Not surprisingly, sales were down from last year (-4%), inventory was up (+52%) and prices were up. I am a little surprised by the strength in sales but a little surprised by the inventory number as well - its more than I expected. I expected a small decline in Months of Inventory in May and it fell from 4.4 in April to 3.9 in May. The MOI number is much higher than the last two years for which I have statistics and is poised to head much higher throughout the rest of this year if the trend in sales and listings holds.



Median Prices in May:
Detached - $473,000
Attached - $315,000
Apartment - $210,000


Oops! $400 million down the drain.

Fraser threatens housing development

Partly built subdivision sits on what was flood plain next to Bedford Channel

Kent Spencer
The Province
Monday, June 04, 2007

CREDIT: Parklane's housing development Bedford Landing along the Fraser River in Langley is bracing for spring freshet with a new set of regulations handed down by the government. Most of the newly constructed home's basements will be one metre below the flood level.

A $400-million housing development on the banks of the Fraser in Fort Langley is in danger from the rising river. "We're in the process of understanding what the implications are in relation to water rising," said Randy Dick, manager of the Bedford Landing development for ParkLane Homes. "We're up high. That's the good news. "It's too early to say what the solution is in the long term. For the short term, with the freshet coming, we're going to keep the water table down with flap gates and pumps."

The development bills itself as "waterfront living in the heart of Fort Langley." The partly built subdivision sits on what was once the flood plain next to the Bedford Channel. Basements of the Bedford homes sit at 6.6 metres. But when protection levels were raised from 6.6 to 7.6 m in January, the basements fell below standard. The standard was adjusted after officials realized their 1969-based models were missing key factors, such as runoff caused by pine-beetle devastation.

Most Fraser Valley dikes are about 8.5 m in height. During the catastrophic flood of 1894, the river reached a height of almost eight metres above sea level. Forecasters say the Fraser could reach six metres soon if hot weather continues. Langley has ordered ParkLane to come up with a plan to keep water off the Bedford site. The developer is installing pumps, valves and flap gates. The pumps will take excess water away and the flap gates will prevent river water from flowing backwards up the storm drains.

Protection measures include shoring up the riverbank and repositioning a section of the dike. Ramin Seifi, Langley Township development manager, said the extra flood protection will cost between $1 million and $10 million. It will be paid by ParkLane, which Seifi said the developer was not happy to hear about. "These things are not cheap, especially a retrofit," said Seifi. "[But] ParkLane realizes these things are unavoidable." Dick, the project manager, said he was not upset about the cost: "We had to put in a number of works anyway . . . It's too early to say what the final cost will be."

Connie Blundy, who bought her half-million-dollar home just 200 m from the river three weeks ago, said she was reassured by the developer's commitment to make homes that would withstand a one-in-a-100-year event. She said she was told it took two years to fill the 31-hectare site with sand from the river bottom, elevating it from the lower-lying flood plain. "Perhaps I should be [concerned], but I'm not really," she said. "The water could cover the basement to a depth of one foot. It would not be the end of the world."

The muddy waters are rising noticeably, said a group of teens suntanning near the Bedford construction site. "It's not so much frightening, as inconvenient," said Fort Langley's Shelby Cairns. "School might have to be relocated." Langley Township didn't maintain a right-of-way to an old dike on the edge of the development when it sold the land to the developer. Seifi said the dike was rendered unnecessary because of the landfill put in by the developer. But provincial dike inspector Neil Peters said the B.C. government would like to see Langley have the right-of-way. "We want to have a right-of-way documented for a future dike," he said.
© The Vancouver Province 2007

Sunday, June 03, 2007

Inventory Update



Well, a short update on the Greater Vancouver Real Estate inventory and it appears that the sales rate this May is much lower than last year so we are not seeing the drawdown on inventory that we witnessed last year. This sets the stage for a higher Months of Inventory number later this year, and, as I have argued, it will take over 6 months of inventory to see any real negative price pressure on our local housing prices.

Real estate market statistics will be out this week and it will be interesting to see what the trend is - I predict more inventory, lower sales, and higher prices for the time being.

In a slightly related topic, I saw a great piece of analysis over at Seattle Bubble Blog. It talks about various US housing markets and the number of months from the peak of year over year appreciation to negative year over year appreciation. The average among US markets is 19.6 months from peak appreciation rate to negative. Locally, appreciation in Greater Vancouver peaked May 2006 at 21.8% YOY. Appreciation peaked June 2006 in the Fraser Valley at 23.6% YOY. If we are average, this means we should hit negative YOY appreciation by December 2007 or January 2008.

Friday, June 01, 2007

Dividend Investing

Many investors think of dividend-paying companies as boring, low-return investment opportunities. Compared to high-flying small-cap companies in hot industries, whose explosive nature can be pretty exciting, dividend-paying stocks are usually more established and predictable. Though this may be boring for some, the combination of a consistent and increasing dividend with an increasing stock price can offer a potential return potent enough to get interested in.

This chart tracks the value of 1000 shares in a major Canadian Bank. The Canadian banks and insurance companies have been great dividend payers and growers in the past. The bank highlighted, like all of the banks, has grown its dividend payout over the past 10 years by more than triple and its share prices has also risen substantially by more than 12 times the original value over the past 10 years. The original $5500 investment has grown into $69,000.



I'll be the first to admit this might not be the most ‘sophisticated’ investment strategy out there. On the contrary, it is quite simple, but over the long run, investing in companies with a strong earnings, solid balance sheet and a sustainable and growing dividend payout is a proven strategy to earn exceptional investment returns. In fact, the bank highlighted in this example has returned a compounded annual rate of return, including reinvesting dividends, of 23.5%. Pretty good show for a boring strategy.

If you are not into picking stocks and prefer someone else to do the stock picking for you, every bank and mutual fund company in Canada has a decent dividend fund. Some of my favorites are the AGF Canadian Large Cap Dividend Fund and the TD Dividend Growth Fund. As always you should consult your financial advisor before making any investment decisions and you should ensure that any investment chosen meets your risk tolerance and investment objectives.