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(August 15, 2008) The fallback in U.S. housing prices is far from over, a new report by TD Economics says. If housing prices are looked at from a historical and regional perspective, the nature of the crisis is not as severe as some may think.

Examining the performance of house prices in the 20 major U.S. cities covered by the S&P/Case-Shiller home price index over the period extending from 2002 to the present. TD Economics finds the current level of home prices is not particularly low — in aggregate prices — to have dropped to mid-2004 in nominal terms.

The report suggests that real home prices are up a cumulative 10% nationally since 2002, with substantial gains in the range of 23-27% for the cities of Los Angeles, Washington, D.C, and Miami. However, the authors note from a portfolio standpoint, a 10% real gain over six years averages to a 1.6% annual gain, which isn’t a great return on assets, especially when you take into consideration a homeowner’s expenses of property taxes and maintenance.

TD says the house price gains that occurred late in the housing cycle overshot fundamentals and are now in the process of correcting to a more sustainable level. The report’s authors believe 2002 prices serve as a good benchmark for the performance of the U.S. housing market under more balanced conditions and is a likely candidate for where prices might be expected to return to once the excess returns of the late housing boom have worked themselves off.

Following this logic then, from a regional perspective, those areas that grew the fastest before the housing correction will likely be the areas to experience the largest declines. In fact, the report notes, of the nine cities that have seen cumulative gains above the 10% national average, five of them — Los Angeles, Miami, Tampa, Las Vegas and Phoenix — are now experiencing year-over-year declines in excess of the national average.

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Canadian housing starts slow

(August 15, 2008) New home construction will slow in 2008, but will remain high by historical standards, according to Canada Mortgage and Housing Corporation (CMHC).

The CMHC’s third quarter Housing Market Outlook says higher mortgage carrying costs will drive a decrease in residential construction to 215,475 units in 2008, from 228,343 in 2007. As a result, seven of the 10 provinces will register a lower number of housing starts in 2008 than in 2007.

“Strong economic fundamentals, such as continuing high employment levels, rising incomes and low mortgage rates, will provide a solid foundation for healthy housing markets this year,” says Bob Dugan, chief economist for CMHC. “Increased competition from the existing home market, coupled with the elimination of the pent-up demand that built up during the 1990s, will exert downward pressure on housing starts, which will decline to 194,000 units in 2009 from 215,000 in 2008.”

Existing home sales, as measured by the Multiple Listing Service (MLS(R)) (1), are also expected to fall by 11.9% in 2008 to 458,300 units. In 2009, the trend will continue, with a decrease to 446,600 units (-2.6%).

Despite a slowdown of demand, remains strong by historical standards. For 2008 and 2009, MLS(R) price growth will remain above inflation. CMHC expects prices to reach $317,450 (+3.3%) in 2008 and $327,000 (3%) in 2009.

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RCMP lays investment fraud charges against five

(August 15, 2008) The Royal Canadian Mounted Police (RCMP) Commercial Crime Section has charged six individuals with investment fraud for their involvement with Toronto-based Themed Technological Innovations (TTI).

The RCMP investigation was launched in 2006, following a complaint alleging a large-scale fraudulent investment made in Toronto-based, Themed Technological Innovations (TTI).

The investigation traced investment funds to financial accounts controlled by TTI and revealed that the victim investments were converted for the personal use of those charged.

“The investment promised a return of 40% in four months. No return was received, contact between investors and the company decreased, with various excuses offered to the victim including problems with the bank due to new laws passed after 9/11,” says Inspector Dwight Blok, officer in charge of RCMP London Detachment.

Ross Alexander of London, Ontario; Richard Hughes of Kitchener, Ontario; Matthew Sherban and Peter Turcaj of Toronto; and Peter Snyder of Woodstock, Ontario, have all been charged with fraud over $5000 under Section 380(1)(a) of the Criminal Code of Canada.

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iShares launches Asian Equity ETF in the U.S.

(August 15, 2008) Barclays Global Investors (BGI) has launched the iShares MSCI All Country Asia ex-Japan Index Fund on the NASDAQ (Symbol: AAXJ) on the stock market.

AAXJ will offer diversified access to Asian equity-market performance of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Taiwan and Thailand. The fund’s management fee is 0.74%.

“Since iShares launched the first pure mainland China ETF for U.S. investors in 2005, investors have continued to ask for deeper access to the Asian markets,” says Michael Latham, CEO of U.S. iShares at Barclays Global Investors. “The iShares MSCI All Country Asia ex-Japan Index Fund includes developed markets such as Hong Kong and Singapore, as well as emerging markets such as India and Thailand, without the weighted impact of Japan and Australia.”

(08/15/08)