This is a guest post by James Lander.
If you’re like most people, you’re probably dreaming of relocating to a new place for your retirement. We all want to take off to some warmer, quieter place when we finally get freedom from jobs that tie us down to one place. It can be hard choosing a place to retire so you really need to give it careful thought and planning before you make a decision.
In a month when losses in the billions are frequently in the headline, this loss tops them all. Quebec pension giant posts $39.8B loss.
The Caisse de dépôt et placement du Québec has reported the greatest losses in the pension fund’s history with a $39.8 billion loss for 2008. As a result of this 25 per cent drop in the fund’s assets, the Caisse assets were worth $120.1 billion as of Dec. 31, 2008. Quebec Finance Minister Monique Jérôme-Forget has called special hearings to investigate this historic loss.
The fund was set up in 1954 and has never seen a loss as big as this. There has been much speculation about the damage the slumping stock market and the troubles with asset-backed commercial paper stocks (ABCP) would have on the fund’s performance.
“As with all other investors, the first element that explains our return this year is the global financial crisis that broke out in the 4th quarter,” said Caisse president and CEO Fernand Perreault. “In hindsight, we placed far too much confidence in these securities…. It was a mistake to accumulate so much ABCP.”
Another factor, that caused major problems for the Caisse was lower than anticipated returns on real estate investments. The portfolio lost the fund $3.7 billion last year. The pension fund is one of Canada’s largest pools of investment capital and is a major investor in real estate, blue-chip Canadian companies and some well-known Quebec firms such as Quebecor Media.
Globe and Mail Update Today
Quebec to overhaul Caisse in wake of losses
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Today’s BBC headline, US home sales see surprise rise, might make you feel optimistic about the house market. However this unexpected rise in sales in December was triggered as buyers took advantage of much lower house prices.
There are many more headlines on that aspect of the market. CNN tells us that home prices are falling at a record pace:
The S&P Case-Shiller Home Price Index, a sampling of 20 cities from across the nation, fell a record 18.2% over the 12 months ended Nov. 30. That brought the index to its lowest point since February 2004. From its peak in mid-2006, the index has plunged a whopping 25.1%. Eleven of the 20 cities showed record declines, and the 12-month price drop for 14 of the cities was a double-digit percentage.
It is the same story in the UK where house prices fell 8.6% year-over-year in November according to the Department for Communities and Local Government (DCLG).
A similar picture is occurring in Canada particularly in the West. Statistics Canada reported that the year-over-year decrease recorded in Edmonton (7.9%) was the largest since May 1985, while the drop in Calgary (2.5%) was the largest since November 1991. Across the country, only Vancouver (2.3 %) and Victoria (2.4 %) also registered year-over-year declines.
The bad news is continuing. Vancouver house prices fell 6% in the fourth quarter according to a survey released by Royal LePage Real Estate Services.
With such big declines you might wonder whether the market is close to bottoming out. However economists seem to be agreeing that further declines are still in the cards. Neal Soss, chief economist at Credit Suisse Holdings in New York, opines, “The housing market has not yet reached its bottom. People have to be in a position where they are not afraid of their most significant asset.” Joe Schapiro, chief economist of MFR Inc. suggests it is unlikely that we are anywhere near the bottom in nationwide home prices.
Given that governments are only now doing what may be needed to turn the recession around, there is no reason for any quick reversal in home prices. Unless you are one of those snapping up bargains with available cash, the best advice is undoubtedly to sit tight.
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The Vancouver Sun proclaims that a pensioner gets stolen house back but that is perhaps misleading. To be precise it is only the house title that has been restored. To get to this point has cost Norman Gettel $10,000-and-counting in legal fees.
The Land Title and Survey Authority of British Columbia wrote: “Further to your story this summer about Norman Gettel, we are pleased to advise you that Mr. Gettel’s land title has been restored in his name.” So it has taken over six months to correct this since the Vancouver Sun headlined the story and almost a year since the LTSA was advised there was a problem.
According to the property records, Gettel sold his property, assessed at $600,000-plus in the summer of 2007, and the buyer had also immediately put a $400,000 mortgage from CIBC on it. The buyer never showed up to claim the property. The identity cards used to get the property transferred included a B.C. driver’s licence and a B.C. CareCard.
Gettel had no idea that his property had been transferred to someone else until his annual property assessment didn’t arrive in the mail. When he went to the land titles office, he was told he didn’t own the property any more.
The nightmare isn’t over for Gettel with a $400,000 mortgage against the house and his legal fees so far of $10,000. He expects the provincial Land Title Office will be dealing with the CIBC which holds the mortgage. I hope he will not have to get involved in the mortgage case as Stan Rule describes in another case of Land Title Fraud.
Dave Watt, president of the Real Estate Board of Greater Vancouver wrote to the Vancouver Sun back in the summer of 2008 pointing out re Title Fraud in B.C. that title insurance protects the lending institution, not the homeowner. He said that REALTORS® have a high level of confidence in the land title system.
That may be so, but it has still cost Mr. Gettel a great deal of time, money and heartache to get this title fraud corrected. It should be easier than this. It is perhaps the most grievous example of what can happen in an identity theft situation.
Footnote: If you are interested in books on Real Estate, then why not visit the Real Estate section of the Money Bookstore.
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Realism might be thought to be an essential property of the Real Estate market, given the similarity in the word roots. However Marketing people often believe their own hype so starry-eyed optimism is often more prevalent than hard-nosed realism. .. except in an economy like that we are seeing now. Hopefully we all learn lessons that stick from the current tragedies all around us.
That certainly is why Washington policy makers are now Taming inflated home appraisals.
When home prices are soaring, appraisers, often pressured by loan officers and mortgage brokers, keep hyping home values. Homebuyers wind up paying more, and the exotic mortgage products needed to finance their purchases subsequently implode setting off the kind of financial and economic turmoil the nation is facing today.
Now, the Federal Housing Finance Agency (FHFA), the government agency created to oversee Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), has announced a plan to curb the influence that loan originators exert on appraisers to overvalue homes. A new Home Valuation Code of Conduct, which will take effect this May, is an attempt to improve the reliability of appraisals for mortgages sold to the two companies. The guidelines prohibit lenders from coercing, extorting, colluding with, intimidating or bribing appraisers into making inaccurate appraisals.
Bringing back realism is long over-due. It applies not only in the real estate market but in every other aspect of budgeting and financial planning. Out with the starry eyes, in with the hard noses. It couldn’t be a better time.
Footnote: If you are interested in books on Real Estate, then why not visit the Real Estate section of the Money Bookstore.
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