Moshe Milvsky reprised a 2001 study in 2007 and found that 90 percent of borrowers did better with a variable rate mortgage as opposed to a fixed one. Today that may not be the case. There is also the opinion that it would be better for Canadians if the mortgage rates did rise, as long as conditions were favorable. The Bank of Canada and the bond market would have to wait until the time was right, and would have to work in concert. That time might well be determined by what happens in the United States and in Europe, as well as domestic issues.

Keeping the rates as low as they are now may encourage a high level of debt, which Canada has already seen. The danger is getting into the same situation as Greece which had to be bailed by the European Union. In the USA the Federal Reserve has been buying government treasury bills to keep the interest rates in the States artificially low.

Higher interest rates would be painful for many who have high levels of debt because the interest charges would increase. But they would also discourage indiscriminate spending. Those holding bonds may be adversely affected, but on the other hand, those with money in savings accounts would benefit because of the higher interest earned.

The affordability measure calculates the amount of pre-tax income needed to purchase and maintain a home, including the mortgage, property taxes and utilities. The lower the number, the better the affordability. Other factors, such as increase or decrease of housing market prices and abrupt swings in interest rates are also part of the equation.

In Saskatchewan, a standard detached bungalow showed an affordability index of 37.9 percent, a 0.4 percent drop from the third quarter of 2011. In the condominium category, the affordability index was 25.6 percent, a 0.3 percent decrease. Standard two storey properties saw a 0.3 percent increase, coming in at 41.7 percent.

Sales activity was also strong in the fourth quarter, with the province seeing the highest sales volume in the resale market in four years. The area is experiencing accelerated economic growth and the trend will most likely continue throughout 2012.

Compare this to Vancouver, British Columbia, which, not surprising, has the highest affordability index in the country at 86 percent. That is even with the 4.6 percent decrease from the prior quarter.
 

This is the first time the series has traveled west. Shows up until now were focusing on Ontario. But, Edmonton Tourism, Travel Alberta and the Edmonton Economic Development departments convinced the producers to showcase Edmonton. Those wanting to apply to be a competitor on the show are welcome to call 866-598-2591 or send an email to comedinewithme@propertelevision.com. For further information, go to wnetwork.com.

In other news, Patty Milligan, who frequented City Market under her Lola Canola alias, has decided to concentrate on writing and teaching about bees and the honey they produce, rather that selling it. Her bees have been reduced by a series of health issues and an extremely cold winter some years back and her beekeeping operation has been scaled down. If you are interested in attending a class, her number is 780-921-3657 and email is lola@lolacanola.com.

McKesson is based in San Francisco and has an annual profit of $150 billion USD. It ranks number 15 on the Fortune 500 list, and is the largest technology company and health-care service agency worldwide. John Hammergren, CEO of the firm expects the deal with Katz to close sometime in early 2012.  McKesson has been a distributor to Katz’ stores, and will remain so for the 400 stores that are under corporate ownership and not included in the sale.

Despite the influx of cash, Katz does not have any plans on renegotiating the terms with Edmonton to build the arena. Critics of the project note that Katz is wealthy enough to build the arena on his own, which would cost roughly $450 million. That fact that he chooses not to do so raises questions about the economic benefit of the project. After all, it the arena was sure to make money, why is Katz refusing to pay for the project on his own?

The mayor noted that Edmonton already has a great integration system. Mandel envisions the city coordinating waste facilities around the world, even taking part in the design of those facilities. In Clover Bar, the city’s management waste center already operates an organic garbage composter, practices construction and electronic recycling and burns methane siphoned from a landfill to power its own generator.

Edmonton brought in roughly $6.4 billion this past year selling recycled paper, metals and other renewable items. It already recycles construction debris, handles carbon offsets as well as compost. People from other nations have already been to the site to train on proper recycling methods.

Mandel has already approached China and other countries about his global recycling idea, even though at the time he had no firm plan in place. In 2012 there will be a feasibility study done to determine if this is something that Edmonton should consider. It could help save the planet, and be a money maker at the same time.

While this may portray a fairly accurate result, sometimes using just simple averages skews things a bit. Considerations such as housing availability and whether there is a large, or small number of sales that involve mega-luxury properties should be taken into account. The other issue is that to count in the index, a property must be a resale with at least two changes of ownership.

The way the House Price Index is based on that second sale. The price of that second sale is compared with the price the home sold for originally. That determines the homes increase in value and is considered a more realistic approach. Teranet and the National Bank have taken this information and converted it into a standardized index. Using an assigned base period, say a specific month and year, all indexes are base-lined at 100. From here, the input for the following months creates a higher or lower index.

The index is computed by taking the amount of money needed for a mortgage, taxes and utilities and subtracting that amount from the typical monthly income. For example, if those combined figures made up 50 percent of that typical income, then it would take half of what that household earned to support that home. Higher index numbers mean less affordability and lower numbers the opposite.

Vancouver, the most expensive place in Canada to buy a home, has an affordability index of 90.6. Toronto comes in second with 52.1 percent and Montreal third with 40.9 percent. As you can see Vancouver far outpaces even the second most affordable city, and there is no indication that this will change in the near future. There is always the risk of a bubble in this sky-high property value scenario, but none is predicted at present.

The indexes for Toronto, Ottawa and Montreal are considerably lower, but still on the high end for a comfortable investment scenario. Calgary, with an index of 37.6 percent, and its Alberta neighbour Edmonton, pulling a 33.2 percent index, are considered very affordable. The still low mortgage interest rates are helping with affordability across the board.

It is probably not a surprise to many who live in British Columbia, but Vancouver came out with the largest price gains. In September of this year, the average home price came in at $757,000. In September of 2010, that per home price figure was $666,000 or 13.6 percent less.

As far as the resale market, in 19 of the studied markets, this past September saw an increase in sales. Ten of these markets showed at least a five percent increase from the prior August. In 17 of those markets, sales showed at least a 10 percent increase over the same month in 2010. In 20 of those markets, listings were also up over those in 2010.

The Conference Board also put out a separate economic report, and there was some positive news about salaries. The expectation is that for 2012, non-union workers should see an average of 3.1 percent raise in pay. In 2011 those workers saw a three percent gain, and in 2010, the raises averaged 2.7 percent. The largest raises are expected in the city of Calgary and in Saskatchewan.

Try and refinance that mortgage to take advantage of the current low rates, even if you are what they refer to as being upside down. That means you owe more on the mortgage than your home is worth. In the States, that’s about 23 percent of homeowners. Refinancing at a significantly lower interest rate, in spite of the associated fees, may not totally “right” your situation, but could help bail out some of that water.

Working with a mortgage broker tends to give your more options than your local bank, unless your local bank is one of those easy-to-work-with credit unions. You will get faster loan approvals and better customer service from a smaller entity. Ask around and get a referral from friends and family if possible.

Get out of the mindset that a mortgage will be part of your life for 30 years. There are alternatives, such as bi-weekly payments or paying an extra amount whenever possible. Just ask the loan servicer to put that additional money on the principal. The thing is to realize that you have more say in how and when you pay that mortgage than you realize.

Information generated by the Canada Mortgage Housing Corporation indicates that the Atlantic region enjoyed a 47-percent jump versus September 2010, Quebec saw a 32-percent increase and British Columbia witnessed an 18.6-percent growth spurt. However, the Prairie region’s housing starts fell by 12.1 percent, and condominium starts in Toronto declined by 2.5 percent. Toronto’s condo starts were the lowest recorded since January.

On a seasonally adjusted basis, housing starts in September grew by eight percent in Canada’s large urban areas, per the CMHC. For the rest of this year, the growth is predicted to slow down. According to Matthieu Laberge, who is the deputy chief economist at the CMHC Market Analysis Centre, starts on multi-family units are expected to draw back to levels that are consistent with demographics.

Montreal accounted for the majority of the growth in Quebec. Per an interview in the Montreal Gazette with Kevin Hughes, a CMHC senior economist, the housing growth was mostly attributable to condo construction.

Some organizations did not greet the news about home starts with enthusiasm. Capital Economics asserted that the increase in starts represented yet another sign of an overbuilt market, and that the growth could not possibly continue. BMO Financial Group economist Robert Kavcic noted that the country’s housing sector continue to exhibit health, and added that the market would show more balance toward the rest of the year. Kavcic said that positive factors, such as still-low interest rates and a healthy job market would be influenced by high home prices and fluctuating levels of consumer confidence.