Financing for multi-unit (5+ unit) residential buildings comes in two varieties:

* CMHC Insured
* Non-CMHC Insured

People with healthy down payments frequently ask why they’d ever want to pay the CMHC premium if they can simply get a conventional mortgage.

Let’s take a $500,000 loan at 75% LTV, for example, on a 5-unit building. CMHC’s premium is 2.25% for a 25-year amortization. That’s $11,250—not exactly chicken feed.

But here’s the thing. Lenders consider multi-unit financing to be much safer when it’s insured. That means there’s less of a risk premium and borrowers get better rates on CMHC-backed deals. “There is a 200 basis point difference between that and a conventional loan,” First National’s, Jeremy Wedgebury, told BrokerNews.ca.

What many don’t realize is that this 2% rate differential translates into big dollars. On that same $500,000 mortgage, a 2% lower 5-year rate would save almost $34,000 after accounting for the $11,250 premium and CMHC’s $750 application fee. Moreover, the property cash flows better because the payment is 16% lower.

In sum, with multi-unit apartments, “pay to save” is often a good motto.

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2009/07/cmhc-insured-multi-residential-financing.html

reviewed by MOISHE ALEXANDER, CFC Canadian Funding Corp CEO

Global Demographics 2009: Shaping Real Estate’s Future explores how demographic trends are affecting real estate investment and development decisions worldwide. The publication, the second in an annual series from the Urban Land Institute, examines major factors that affect land use, namely population growth, urbanization, aging and migration.

Some of the book’s highlights include:

* The greatest population increases worldwide in the next 40 years will occur in China, India and the United States.
* The population of Europe will decline between now and 2030.
* Mature but still growing economies, including the U.S., Canada, U.K., Ireland, Australia and New Zealand, will offer attractive real estate investment and development prospects once the recession subsides.
* The developed world’s large workforce is aging rapidly while the young labor pools in the Middle East, Africa and South Africa are expanding.
* Fertility rates have dropped globally, even in developing countries.

The report states that demographics are the foundation of real estate decision-making. Population, household and income characteristics, along with the direction of future trends, determine whether demand will exist for new housing or retail space. Growth in the labor force and its composition strongly influence the success of office and industrial properties.

http://www.realestateindustrywatch.com/book-describes-impact-of-global-demographics-on-real-estate%E2%80%99s-future/

brought by Moishe Alexander, CFC Canadian Funding Corp CEO

Do any of you know of the economist David Rosenberg? Long-time readers of Boom2Bust.com know that Rosenberg, considered one of the best North American economists around, is one of our original “crash prophets” and called the current recession and crisis a long time before most of his colleagues. As a matter of fact, not only was Rosenberg correct about the recession, but his timing on the start of the downturn was only off by a few weeks. I wrote the following way back on November 12, 2007:

A runner-up in the October contest was chief North American economist David Rosenberg of Merrill Lynch. The Wall Street Journal is reporting in their MarketBeat Blog post today that Rosenberg is saying the U.S. economy may already be in a recession.

And here’s a post I dug up from July 17, 2008, which isn’t too far off from what some of his contemporaries are now warning about:

According to the Financial Post (Canada) from July 9, David Rosenberg, the chief North American economist at Merrill Lynch, is warning of the possibility of not one U.S. economic recession, but a series of them. The Post’s Jacqueline Thorpe wrote:

Rosenberg has consistently held one of the more pessimistic views on Wall Street, arguing the housing slump and credit crunch will exact a heavy toll on U.S. consumer spending. He believes the data will eventually show the recession started in January.

But he adds it’s not the peak-to-trough decline in real GDP that’s important but the duration. Trouble is, the duration could be Japanese-like (about a decade).

Just like Japan, he says a series of rolling recessions is possible for the next three to five years, making it extremely difficult to time the market. Japanese equities got trashed through the process. At the 1998 post-bubble lows, Japanese bank, construction, real estate and transport stocks were all down 80%, retail stocks were down 50%. The only place to hide was bonds, notes the bond bull.

Rosenberg told the Canadian publication:

We are nervous that we have ended up following in Japan’s footsteps due to the inept fiscal response to the problem. A temporary tax rebate from Uncle Sam to buy iPods tackles a real estate deflation and credit crunch as effectively as the LDP’s (Liberal Democratic Party) “solution” in the early 1990s to build bridges and pave river beds that nobody needed.

FREE VIDEO for Traders/Investors! Dow Update

So, what is Rosenberg, now chief economist and strategist at Toronto wealth management firm Gluskin Sheff, forecasting these days? From the CNBC website yesterday morning:

The stock market is still in danger of breaking through its March lows as the economy continues to struggle, economist David Rosenberg told CNBC.

An additional round of government stimulus is likely to have little more impact than “cushioning the blow” of unemployment that will “easily” break the post-World War II high of 10.8 percent in 1982, said Rosenberg, chief economist and strategist at Gluskin Sheff.

“Could we see a new low? Who’s to say that we couldn’t?” he said. “A lot’s going to depend on the economic outlook. I don’t think another fiscal package is going to save the day.”

Some of Rosenberg’s other points:

• The market is currently only half-way through a secular bear market that could last another nine years. “You’ve got to trade accordingly, because there’s going to be huge spasms and rallies along the way,” he said.
• Stocks have priced in an earnings level that probably won’t be achieved until 2012, posing more danger of a move lower.
• The gap between the so-called “U6″ unemployment rate, which entails virtually all jobless including part-time workers who want to work full-time, and the number the government releases is at its widest ever. That indicates that even when the outlook improves for companies they are likely to bring part-time workers to full-time status first before hiring new workers, which in itself indicates a protracted period of a high unemployment rate.
• Cutbacks at the state and local government levels as well as a massive reduction in household balance sheets pose further headwinds for the economy.

“There are secular changes taking place in the economy right now, and you really have to be braced for it,” he said.

http://www.boom2bust.com/2009/07/08/stock-bear-cycle-only-half-over-9-more-years-to-go/

posted here by Moishe Alexander, CFC Canadian Funding Corp CEO