Full House.. and some tidbits...

Although not quite the Danny, Joey, Jesse, Becky, DJ, Steph and Michelle, the rooms are now full in my house. Scotty moves in today and I had spent last night trying to get a new coat of paint on his walls before he moved in. I've been so busy lately that I have been postponing some of the household repairs, but this weekend should see an improvement in that regard.

On a side note, there are no more houses listed in the Fringewood area of Stittsville. Since I own a house in that area, it will be interesting to see how the market develops over the winter. It's not an overly active area, but the surrounding area is seeing a lot of new development. I'm thinking of disposing of the property in the spring or summer next year, but I think it will be more market dependent.

Good news on the international front today. In the roller coaster that is the economy, the US has reported a better than expected performance in the 3rd quarter. Since it had been doom and gloom in the US, any news of this sort is expected to help the world's markets, and hopefully will make this economic slowdown a very brief and mild one.

US subprime crisis

In a previous post, I mentioned my desire to become a real estate agent. I want to be able to access some key information and networks that will allow me to maximize the potential in a home that I buy or a home that I buy for someone else. I think it will be a key part of being able to get some deals completed. This doesn't come without consequences.

With the housing market in the US taking a huge hit, many Canadians are concerned about the economy north of the border taking a dive as well. Canadians are stretched financially with 40 year mortgages with no money down. There is a real risk that the market does take a hit as banks have been generous with their loaning policies. To me, this indicates that it may not be the best time to enter the market as a real estate agent. The markets are too volatile.

There are two reasons I believe that there will not be a crash in Canada. First, the banks are still loaning money at rates affordable to them in Canada. Even though they are taking on bigger risks, they are protected with rights to the underlying assets. Mumble jumble to you? Simply put, in the US, the banks borrow money at rate A, but loan out at rate B. Due to the intense competition, rate A is higher than rate B thus the banks are poised to lose money. In Canada, rate A is still lower than rate B.

Why would the banks do this in the US? To make it simple, they want to do business with you. Customer loyalty translates into extra revenue in forms of fees and surcharges. However, when the economy started to slow down in the US, people lost their jobs are were forced to try to sell their homes. Subsequently, the price of homes dropped because there are more sellers than buyers.

My second reason for why Canada will be better off than the US is that our economic fundamentals are better. What does this mean? Well, first off, Canadians are continuously paying off their national debt. We are saving billions of dollars in interest charges while the US is poised to sink $700 billion more this week. This is not including the future interest costs.

Next, we are running surpluses in Canada. Albeit, they have been smaller in recent months, but, nonetheless, our revenues exceed our expenses. Given the slowdown in the US economy, we are poised to feel a slight pinch from our biggest trading partner. What does this mean for the housing market? Well, it means that if we needed a bailout package such as the one in the US, we are in a much better position to fight off a recession. Therefore, people will be better suited to keep their jobs and not be forced to sell their homes. I could be wrong, but I think I make sense.

Therefore, given all of the housing market volatility, I am still poised to become a part-time real estate agent. I have an interest in this kind of stuff and I want to be able to help people as much as I can. This is merely a hobby for me, and not a career. My approach as a real estate agent is that I have information available, but I'm not going to force a sale down your throat. I don't need you to buy a house to put food on my table. I'm an accountant, but I like investment decisions.

US real estate

With the American housing market in crisis, the Canadian dollar at near parity, and foreclosures at an all-time high in some of the southern states, Real estate is becoming a very attractive venture for Canadians. I hadn't really thought about US real estate at this point in my portfolio, but it certainly appears as if this is the time to be acting.

There are quite a few risks to consider when going into real estate in the US. At this point, I am probably just posting this as a reminder to myself to look at some these risks in further detail. There are different rules for estate taxes. There is currency risk. There are higher property taxes for non-residents. There are a slew of things to consider.

On the other hand, if you had owned an ocean-side property, in say Florida this past winter, you would be smiling as you would have been able to take a mini-vacation at a very reasonable cost. US real estate may not be everyone's cup-of-tea, but under the current circumstances, this may be the chance to take advantage of the weak American economy.