Here is an assortment of topics and items that were on my mind and occurring around us last week.
Bing – Interest Rates May Be Stable For a While!
There are some rumours out there the Bank of Canada may not actually raise rates now until next year. With the continued instability of the world economies any rate changes too soon, may slow down any of the current economic growth Canada has seen and cause us to spiral back again.
This could change at any time and they may very well raise rates in the fall, but it should remind you to keep an eye on what is happening out there. I’m still a big fan of variable rate mortgages, even if the rates do start going up.
Investor Perspective – Variables Rate Mortgages Rock
There are some great deals on variable rate mortgages out there and even if rates do increase a couple of percent over the next few years you will still be ahead. I have asked a mortgage associate friend to help put an article together for me outlining more of this and breaking it down for you.
Hopefully we can have something up for you in a couple weeks to show why I think variable rate mortgages rock!
Bang – Banks Are Still Digging Into Your Pockets
Yes, I am still pretty positive about the market, but I’m still culling some of our properties to make managing them easier. We just sold a property and it was another reminder of why banks are profitable and why you have to keep an eye on your pennies when you are selling.
Our mortgage was up for renewal in mid August this year, which is why we started selling it in the spring. We wanted to minimize any hefty mortgage payouts and avoid having to go through some painful renewal process. The property closes June 30th, mortgage was due on August 15th. What would you expect a reasonable payout penalty to be for 46 days on a mortgage payment less than $2,000 a month?
Apparently, it’s over $3,100 or over a month and a half of mortgage payments. Ironically, they make more money off of me by me selling it a month and a half early than if I sold it exactly on the day it closes. Guess that’s why banks have all the money.
Investor Perspective – It Gets Harder & Harder to Like Banks
Before anyone gets on my case about honoring a contract, I understand what I signed up for, but shouldn’t there be some flexibility when it comes to selling your property, especially when the mortgage is almost up? You cannot tell me I cost this lender $3,100 is losses by selling a month and a half early.
This just turns into a pure profit center for them and if lenders weren’t already making billions in profits I could see why they would need to do this, but really? Couple of extra lessons, if you are selling your property, it doesn’t hurt to position the sale date after your mortgage payment if possible as this may help reduce the payout marginally and second, don;t forget to calculate how much of a hit it may be on your even profits!
Boom – We’re Back!!!!!
Now, let’s get back to back to the market and the province’s future which is appropriately titled boom. The stories keep popping up about everything that is happening in the province.
Prices in the majority of the province have decreased enough that Alberta is quite affordable based on our provinces average wages these days and our average wages keep going up! I’m seeing more Sold signs appearing and with it, more For Sale signs as well.
The summer is a horrible time to sell properties, so there is a good chance many properties could sit on the market for a while, but this could lead to a bit more activity in the fall. People may be receptive to low offers if their property has sat quietly unsold for two months.
It’s 2012 that should be the real story though. Migration to the province has picked up, unemployment has dropped significantly and energy companies are opening their pocket books to start up new projects, increase drilling and generally grow.
Our region gets dragged kicking and screaming with the energy industry and it appears we are set for another little boom. Hope we are better prepared for it this time around.
Investor Perspective – How Rosy Is The Future For Alberta?
I know I keep looking at all the positive things going on out there and I do understand there are some negative stories as well. I’ll leave the negative stories for all the depressed people to bitch and moan about.
Alberta does still have some challenges to watch out for over the next few years, but there are so many more positive aspects that we have to be aware of that they overwhelm the fears. I’m seeing it already in my shared accommodations.
I’m barely advertising right now and still getting calls for rooms every day. The majority of which are individuals coming to Calgary for work. Their story seems to be very consistent, they cannot find work in Ontario, areas of BC, the Maritimes etc. and are coming here because they have something lined up before they even arrive. This is extremely reminiscent of 2005 and 2006 when we last saw the arrivals of new workers.
So people obviously know Alberta is a place for jobs. We are also seeing some nice announcements over the last nine months of many of the oil sands projects moving forward. These generally take a few years to get into full project mode and already we are seeing increased demand for workers, what will it be like in two years?
Oil actually went down in price over the last week, this is also a great thing. Much of the recent pricing has been speculative and the increased costs put extra pressure on worldwide economic growth. With the US’s release of some of it’s reserve supply into their markets, it’s taken a bite out of the speculative price point and pushed it closer to a true market price.
With oil hovering around $90 to $100 a barrel this is great for world demand, as it gets into the triple digits it can actually slow demand. So while higher prices look good on paper, would you rather sell a billion barrels at $90 or 300 million at $110?
All of this still points to quite a rosy future here. If you are a property owner or own some local investment property we are in for some more profitable times. I’d love to hear your thoughts on this, whether you agree or not, so please leave a comment or send me an email to tell me what you think!
