The American Middle Class Is No Longer the World’s Richest

The New York Times made headlines across Canada, as well as the U.S., when it produced a study Tuesday showing the Canadian middle class had surpassed America’s.

The newspaper’s economic analysis was based on data compiled by LIS, which maintains the Luxembourg Income Study Database, and studies the growth of median per capita income after taxes are accounted for.

The Times found Canada, which lagged behind the U.S. in 2000, now has a narrow lead.

Why? “They went through the mother of all recessions,” CIBC economist Benjamin Tal told As It Happens, referring to the devastating 2010 economic collapse.

“We’re doing OK, but we should not relax about it,” he said, adding Canada still struggles to consistently produce high-quality jobs.

On CBC News Network’s Power & Politics, the story started a fiery debate.

Ian Lee, assistant professor at Carleton’s Sprott School of Business, argued the new study “completely deconstructs the narrative” of Canada’s middle-class demise — something Opposition Leaders Tom Mulcair and Justin Trudeau have frequently spoken about.

But Trish Hennessey, director of the Canadian Centre for Policy Alternatives, argued Canada measuring its success against the U.S. is “like comparing ourselves to a sinking stone.”

Source: CBC News.ca

Canada Has Quietly Become One of the World’s Economic Safe Havens

As the world goes through its continuing economic turmoil, Canada has quietly become one of the world’s economic safe havens. A haven where international money is being parked for safety and ROI, a haven that is poised to provide the world what it needs for at least the next decade and probably a lot longer.

However, most Canadians are the last to truly believe what we are sitting on. We have been so programmed over our history to look elsewhere for opportunity – always playing small. Well, 2011 – 2020 will be the exact wrong time to be doing so, in fact, we are in the first year of what will prove to be Canada’s Economic Decade – one of the best times in history to invest in this country.

Unfortunately, due to a misdirected attitude that cheap equals good when investing in real estate, many Canadian investors have turned their eyes south as real estate prices in the United States continue to plummet.

Investors with their eyes solely on the cheap price of U.S. real estate have flooded Canadian media with their tales of deals and steals. One can only hope that these investors understand the real life metrics involved in analyzing a market’s potential (currency risk, taxation, record jobless numbers, massive debt, property supply and demand) and have decided to take the ‘buy cheap’ risk anyway despite the reality.

This is the equivalent of buying a $1,000 suit for $500 and ignoring the fact that the pants are torn in nine places.

Replacement cost means absolutely nothing if you don’t have demand – however it is a wonderful way to sell properties. Investors looking for long-term sustainable wealth for themselves and their families need long-term sustainable economic fundamentals. Using housing stats and prices to predict a real estate market is like driving at full speed and only looking in your rearview mirror – you will crash.

In our 21 years of analyzing and investing real estate markets, our research team has uncovered a predictable long-term pattern for real estate markets across the globe. In fact, the tool we’ve developed is now used by investors, media and investment firms to dramatically reduce the risks in their real estate portfolios.

Titled The Momentum Formula, it shows the progression of an economy and how it will eventually impact the real estate market. You will note that housing stats are very late in the formula: meaning many commentators and speculators are at least 18+ months behind professional investors.

This analysis tool states: No job growth = high risk real estate market.

GDP growth leads to job growth. These jobs attract population growth, which leads to increased rental demand (12 months later). This demand drives rents up, pushing more to buy properties (18 months later), which eventually leads to property price increases.

Right now, Canada is creating jobs by becoming the world’s safe supplier of four key commodities entering supply/ demand super-cycles (food, fuel, fertilizer and forestry).

From this fact, investors will witness select Canadian real estate markets experiencing amazing sustainable growth over the next 10 years. For instance, Alberta, a province of only 3.5 million created more jobs in a month than the total jobs created in the whole U.S. (population over 311 million). Following the formula, this job growth will be reflected in the Alberta real estate market 18 – 24 months from now.

The world’s economic outlook will continue to be cloudy for many years to come, risks will seem to be everywhere but so will long-term opportunities. No matter what occurs, the fact that jobs and population growth drive long-term demand will not change.

The other fact that won’t change is that Canada has what the world needs to survive and it will be willing to pay for it. Although it will occur in cycles, what you have is an opportunity to be a professional investor (not speculator) who reduces risk and positions yourself for long-term results based not on today’s price, but on tomorrow’s demand.

Source: Don Campbell @ Canadian Real Estate Magazine.ca

Canadian Snowbirds’ Dream Of U.S. Vacation Home Fading Fast

The hundreds of thousands of Canadian snowbirds who flock to the United States are being hit by a falling loonie that should see their purchasing of U.S. winter homes start to slow, says a new report.canadian snowbirds real estate

It’s not going to be any sort of collapse, which is good news for Florida, the number one draw of Canadians where 3.5 million of us spend $4.4-billion annually.

“Make no mistake, the depreciation of the Canadian dollar will have an impact on Canadian stays in snowbird destinations such as Florida, but less than one might expect,” says Derek Burleton, deputy chief economist with Toronto-Dominion Bank, in a report.

Mr. Burleton’s real estate remarks are part of a broader report on the impact of a falling loonie on trips to the United States that are worth about $22.3-billion annually to the American economy based on 23.5 million Canadian visits.

For snowbirds looking to buy, TD says affordability has been impacted not just by the decline of the loonie against the greenback, but also increasing U.S. home prices.

Looking at just Florida, TD says the bottom of the market was reached in 2011 and there has been a steady increase in what it calls its Florida House Price Index. The index is up almost 50% over the past three years.

Much of the increase in Canadians buying in Florida — half a million Canadians own property in the Sunshine State — occurred over the past five years because of what TD calls a “60% cheapening” in property prices.

“No matter how you slice it, new purchase activity by Canadian in the U.S. looks set to slow markedly over the next few years,” writes Mr. Burleton.

In addition to a falling loonie and rising home prices, the cost of borrowing has climbed one percentage point in the U.S. over the past year based on 30-year mortgage rates.

Another problem is Canadians tend to look for cheaper homes where inventories have been drying up. More than half of Canadian buyers paid less than US$200,000 where inventories are down 20% in 2013.

Mr. Burleton emphasizes that the decision to seek a snowbird lifestyle is not going to drop dramatically, demographic trends guarantee that. But it could change people’s thought patterns on buying versus renting.

Existing homeowners might be inclined to ride out a downturn in the loonie because their U.S. homes are rising in values. Investors in U.S. real estate will have the upside of revenue coming in the increasingly stronger greenback.

But for the snowbird looking to buy right now, the game might have changed south of the border.

“We see renting becoming an increasingly preferred option,” said Mr. Burleton.

Looking at just Florida, TD says the bottom of the market was reached in 2011 and there has been a steady increase in what it calls its Florida House Price Index. The index is up almost 50% over the past three years.

Much of the increase in Canadians buying in Florida — half a million Canadians own property in the Sunshine State — occurred over the past five years because of what TD calls a “60% cheapening” in property prices.

“No matter how you slice it, new purchase activity by Canadian in the U.S. looks set to slow markedly over the next few years,” writes Mr. Burleton.

In addition to a falling loonie and rising home prices, the cost of borrowing has climbed one percentage point in the U.S. over the past year based on 30-year mortgage rates.

Another problem is Canadians tend to look for cheaper homes where inventories have been drying up. More than half of Canadian buyers paid less than US$200,000 where inventories are down 20% in 2013.

Mr. Burleton emphasizes that the decision to seek a snowbird lifestyle is not going to drop dramatically, demographic trends guarantee that. But it could change people’s thought patterns on buying versus renting.

Existing homeowners might be inclined to ride out a downturn in the loonie because their U.S. homes are rising in values. Investors in U.S. real estate will have the upside of revenue coming in the increasingly stronger greenback.

But for the snowbird looking to buy right now, the game might have changed south of the border.

“We see renting becoming an increasingly preferred option,” said Mr. Burleton.

Source: <a href=”http://business.financialpost.com/2014/02/24/canadian-snowbirds-dream-of-u-s-vacation-home-fading-fast/” target=”_blank”>Garry Marr @ The Financial Post</a>