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Worry and frustration mount in Alberta as oil prices languish





The street outside Calgary’s downtown Hyatt hotel was teeming with pro-oil demonstrators Thursday, forcing police to close traffic along a busy avenue as the growing crowd spilled over the sidewalks. 

While a business audience streamed inside the hotel to listen to the prime minister speak, the large crowd chanted, “Build that pipe!” and “Trudeau must go!”

But amidst the rally’s clamour, there emerged an unexpected refrain: “O, Canada.”

The anthem had the feel of an acoustic flare — an SOS signal to the country and its leaders about the province’s plight.

While the miserable price of crude has many Albertans worried, there’s frustration the issue isn’t being met with enough urgency, even as economists warn of a broader impact.

“People don’t realize how much the energy sector contributes to the economy … it supports families and it supports Canadians,” Minh Nguyen, 39, who works in the sector, said at Thursday’s rally.  

“It’s not just an Alberta problem. It is a Canadian problem.”

Nguyen’s concerns have been echoed across the oilpatch and Alberta’s legislature: The situation is serious.

Supporters of the energy sector took part in a protest outside the Hyatt in downtown Calgary on Thursday as Prime Minister Justin Trudeau spoke at a Chamber of Commerce event inside. (Jeff McIntosh/Canadian Press)

The fundamental issue, as Scotiabank Economics explains, is there aren’t enough pipelines to transport the crude from where it’s produced in Western Canada to where it’s consumed — predominantly U.S. refineries.

This has widened the discount received for Canadian crude relative to U.S. varieties as Canadian barrels need to be marked down for the higher cost of transportation, the Scotiabank report said.

The discount is around $13 US a barrel in normal times, it said, climbing over $20 US to account for the cost of pricier transportation like rail. 

“But when production rises beyond the capacity of pipelines and rail combined, as Canada’s oilpatch is experiencing today, producers are forced to utilize even higher-cost transportation methods or to wait out the storm in provincial storage tanks already filled to the brim,” reads the report.

“The value of these stranded barrels plummets, dragging the regional benchmark down with them.”

The result of the oil glut has been hard on many producers, with discounts tracking around $40 US a barrel in recent weeks, climbing as high as $50 US. 

Analysts expect the situation to improve in the months ahead, but meanwhile the industry is losing tens of millions of dollars a day.

While initially the discounts were an issue largely for oilsands crude, it’s not stopping there.

“This price deterioration has now spread to all the other different grades of oil that we produce,” economist Peter Tertzakian, executive director of ARC Energy Research Institute, told CBC News last week.

If the oil glut isn’t addressed in the next few weeks, it could affect spending and jobs across the West, Tertzakian said.

The situation threatens to punch a big hole in Alberta’s finances, but there are also warnings of a broader impact.

Premier Rachel Notley, for one, estimates it is costing the Canadian economy $80 million daily.

Making matters worse, the benchmark price for U.S. oil, West Texas Intermediate, has also been falling, dropping on Friday to its lowest level since September 2017.

Alberta Premier Rachel Notley is considering buying rail tankers to haul the province’s discounted oil to markets. (CBC)

An analysis from BMO Capital Markets on Friday said the longer the extreme lows persist for Canadian oil prices, the greater the economic damage for Alberta, and the national economy.

“The way it can affect the entire country is through overall government revenues,” Doug Porter, chief economist at BMO Capital Markets, said in an interview.

“Generally speaking, the federal government doesn’t get much directly from the energy industry, but indirectly they certainly do.

“This will hit government revenues and it can also weigh on the Canadian dollar as well.”

The price gap has led some oil producers to do something extraordinary: call on the provincial government to mandate production cuts to help clear the glut.

But the request has proven divisive, with large integrated companies — Suncor, Husky Energy and Imperial Oil — rejecting the idea, saying it could create both economic and trade risks.

Alberta’s premier appointed a team of envoys to seek solutions with industry, though a quick and easy solution appears elusive. In the meantime, Notley continues calling on Ottawa to help fund a strategy to move more oil by rail.

“If Ottawa won’t come to the table, well, then we’ll get it done ourselves,” Notley told drillers Thursday.

The premier’s words may speak to a deeper frustration.


‘You’re really dealing with a heavily emotional situation for a lot of Calgarians,’ said Calgary-based pollster Janet Brown. (CBC)

Calgary-based pollster Janet Brown said with the economic downturn, difficult recovery and ongoing troubles with getting pipelines built, there may be more deep-rooted concerns.

“You’re really dealing with a heavily emotional situation for a lot of Calgarians,” Brown said.

“This is not a question of just pure economics. It’s really about people’s lives and livelihood and their family, and it’s just as emotional for Calgarians as it is a practical concern.”

She said some people also feel there’s a measure of satisfaction outside Alberta to see the province struggle.

But University of Toronto political scientist Nelson Wiseman doesn’t believe that’s actually the case. Albertans’ concerns are being heard, he said.

“Once you get outside of the environmental groups, the attitude is … the industry is vital, not just for Alberta, for Canadian revenues,” Wiseman said. “People here don’t think, ‘gee, you know if Alberta loses somehow we’re better off.’ I don’t think people see it that way at all.”

Prime Minister Justin Trudeau speaks to the Chamber of Commerce in Calgary. (Jeff McIntosh/Canadian Press)

On Thursday, Prime Minister Justin Trudeau acknowledged Alberta is in a “crisis” over low oil prices, but people who’d hoped he’d come to Calgary with news of help would probably have been disappointed.

Oilpatch leaders, who met privately with Trudeau, said the prime minister appeared to listen to the sector’s concerns over oil prices, pipeline construction and Bill C-69, which would overhaul the approval process for energy projects.

“He made it very clear he understands the concerns of the industry,” said Cenovus CEO Alex Pourbaix told reporters immediately following the meeting.

But as time winds on — and oil prices languish — concern and frustration build.

“It tells you how desperate times are,” Canadian Natural Resources executive vice chairman Steve Laut said when asked Thursday about the large crowd of demonstrators outside the Hyatt.

“You don’t normally see that kind of thing happen.”


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Real Estate

What to Consider When Hiring a Home Inspector





(BBB) – Buying a home can be one of the most important financial investments you will ever make. But how do you know if the house is everything it appears to be? If your new home has hidden structural issues and needs major repairs, you may be buying into a money pit and sleepless nights. A home inspection is one of the smartest ways to educate yourself about the physical condition of a property before you buy. 

What’s a Home Inspection? 

A home inspection is a visual inspection of the physical structure and mechanical condition of a home – from roof to foundation. The inspection is designed to identify problems, advise of repairs needed, and, in some cases, provide preventive maintenance advice. A home inspection points out the positive aspects of a home, as well as the maintenance that will be necessary to keep it in good shape.

A home inspector may be a residential architect, structural engineer, or building contractor. Currently, home inspectors are not regulated on a federal level in either the United State or Canada. But many states and provinces have their own licensing requirements. To find out what your region requires, check out this list from American Society of Home Inspectors or Professional Home Inspection Institute in Canada. For structural engineer licensing requirements in the U.S., see the National Council of Structural Engineers Association (NCSEA) website.

Tips for Hiring a Home Inspector

Pick a home inspector who has experience, positive references, and is known for being very comprehensive. While this may cost more upfront, hiring a great inspector will save you money in the long run. If you don’t get a complete, accurate inspection, you may miss major problems and your chance to negotiate repairs with the seller. 

  • Ask friends and acquaintances for recommendations. Ask for an experienced home inspector who is known for being very thorough.
  • Find someone familiar with your type of home and the issues you need to inspect. Be sure your inspector specializes in homes, not commercial properties, and any issues you anticipate finding. For example, if you’re concerned about a home’s structure, consider hiring a professional engineer or architect who also does general home inspections. Also, be sure your agreement with the inspector covers the systems you most need to have examined. 
  • Ask prospective inspectors questions about their professional training, relevant experience and/or length of time in business. Find out if the inspector belongs to a professional association, such as the American Society of Home Inspectors, the National Society of Professional Engineers, or the Canadian Association of Home and Property Inspectors. Membership in professional associations may offer added assurance of an inspector’s qualifications and training.
  • Make sure your home inspector is working in your best interests. For example, many home inspectors rely on referrals from real estate agents for their business. This means that the inspector may be more interested in maintaining that relationship than providing you a thorough inspection. They may be less inclined to identify major repair issues that hold up the sale of your home. Also, be cautious about hiring a home inspector who is looking to get contracting work from you.
  • Be present during the inspection. The majority of inspectors will allow you to tour the home with them and ask questions during or after the inspection. The inspection can last anywhere from two to five hours, depending on the size of the house.
  • Ask how soon after the inspection will you receive a copy of the home inspection final written report. Carefully read your home inspection report and make a list of items that need correction. Understand that the home inspection report records the condition of the home, both positives and negatives. This will help you to determine your future expenditures for repairs and maintenance. The report will contain useful information that serves as a reference for you in the future. 
  • Check to see if the home inspector is a BBB Accredited Business and read reviews. Ensure that the business responds to complaints in a timely fashion.  

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Real Estate

What Is A Housing Bubble? And Are We In One?





What is a housing bubble? You’ve undoubtedly heard the term, but what does it actually mean, and is Canada experiencing one? Whether you already own a home, are considering buying one in the near future, or you’re waiting for the right time to sell, here we answer what is a housing bubble, what causes it, and how it may affect you.

What is a Housing Bubble?

A housing bubble happens when the price of homes rises quickly, at an unsustainable rate. Typically, a price-growth rate that’s in the high single-digits is considered to be healthy and sustainable. Under healthy conditions, homeowners continue to earn equity over time, sellers can make a profit on resale, and buyers can still afford to get into the market. This type of price growth can usually be explained by economic factors, such as an employment boom and favourable interest rates.

On the other hand, a housing bubble can happen as a result of non-organic growth. For example, if speculators were flooding the market, buying up homes to take advantage of rapid price growth, with the intention of selling in the near term for a hefty profit. When prices are deemed to have hit a high point, speculators list their properties for sale. This massive influx of listings, coupled with stagnating demand, causes prices to plummet and results in a “housing market crash.”

A housing bubble is a temporary event and prices eventually return to normal levels, when demand rises again and home-buying activity resumes.

What Happens When a Housing Bubble Bursts?

During a housing bubble, homes become overvalued. When the bubble bursts, prices fall. Homeowners who have no intention of selling are unlikely to feel the direct impacts of the bursting bubble. However, these market conditions often indirectly impact other aspects of the economy, so to call homeowners who aren’t selling “free and clear” would be misleading. The ripple effects of a bursting housing bubble would likely touch most of us, in one way or another.

Homebuyers who purchased a home during a housing bubble likely paid considerably more than it is worth. Properties bought by end-users as a residence, with no intention of being sold in the short-term, will eventually rebound closer to “normal” values and at some point, return to positive growth.

A housing bubble poses the biggest risk to home sellers. Those who purchased in the bubble, but now find themselves forced to sell their home, will come up short on resale. They bought the home at a price that exceeds what they can recoup, putting them in the red with no asset to show for it.

For example, someone purchased at peak market prices, but due to circumstances such as a job loss or the inability to carry the costs for any reason, now has no choice but to sell in a down market. The seller still owes money to their mortgage lender on a home that they no longer own.

Are We in a Housing Bubble?

The Canadian housing market took a surprising upward turn during the COVID-19 pandemic, after coming to a grinding halt in mid-March. The slow-down was short-lived, and what followed through the remainder of 2020 was a a spike in demand for homes met by a shortage of supply. With 2021 well underway, there appears to be no end in sight.

There are a number of factors that indicate we’re not experiencing a bubble caused my market speculators, contrary to some media reports.

A recent online survey of RE/MAX brokers and agents in Western Canada, Ontario and Atlantic Canada found that speculators are not a factor in the Canadian real estate market at this time. In fact, more than 96% of RE/MAX brokers and agents supported this finding, confirming that the majority of homebuyers are end-users. Speculators tend to wait out hot markets, buying when prices are down and selling when they’re up again. The short-term investment opportunities they’re generally looking for are hard to find under current market conditions. Bully offers and bidding wars are commonplace, and we continue to see demand outpacing supply with the release of the monthly housing market data. These factors are generally inhospitable to speculators and investors.

For a housing bubble to burst, there needs to be a steep incline in inventory and new listings, and a decline in demand – neither of which is likely to happen any time soon.

Housing Crash 2021? It’s Highly Unlikely.

The Canadian housing market is still feeling the impacts of the pent-up demand from 2017, when the government introduced the foreign buyer tax and the mortgage stress test as a means to cool the overheating market. These policies prompted many homebuyers to move to the sidelines, opting to wait and save, with plans to re-engage in the housing market in a few years.

Now fast-forward a few years to 2020. COVID-19 had a similar impact on the market, whereby many homebuyers delayed their purchase plans due to pandemic-related uncertainties. That pre-existing pent-up demand for homes continued to swell. With Canadians subject to stay-at-home orders with nowhere to go and spend their hard-earned money, they collectively saved historically high sums, which was injected back into the housing market once consumer confidence returned. The spending came in the form of record-high home sales and for those who were unwilling to face the competitive resale market conditions, renovations to existing dwellings. In fact, Canadian real estate was said to be the driving force behind the Canadian economy in 2020.

Savings, low interest rates and low inventory continue to put pressure on the housing market.

Now, consider the housing needs of the 1.2 million people who are expected to immigrate to Canada through 2023, per the government’s 2021-2023 Immigration Levels Plan.

Given all this, it’s highly unlikely that we’ll experience the influx of real estate listings needed for a housing market crash – and if we did see those listings suddenly come on stream, there should be plenty of buyers to absorb them.

Homebuyers and Sellers, Do Your Due Diligence

Challenging market conditions and a still-present global pandemic have added some personal risk on the part of homebuyers and sellers. It’s important to remember that conditions vary across Canada, and can be dramatically different between provinces, cities, and even from one neighbourhood to the next. Now more than ever, it’s important to work with a trusted, experienced professional Realtor who can guide you though the buying and selling process.

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Real Estate

Who needs to buy a house? Here are five ways to increase your bank balance as a renter





People are drawn to buying a home for all kinds of reasons: more space, a backyard for the dog, the investment opportunities or simply because they want to.

And it may be great for them, but you don’t have to beat yourself with someone else’s yardstick.

If you’re not in the position to be able to (or even want to) buy a home, you may have heard that renting is as bad as burning your money. But it’s not a fair comparison.

Here’s how being a renter can work to your financial benefit.

Take advantage of pandemic prices

At the onset of the pandemic, rent in expensive cities, which had become prohibitively expensive for all but the rich, suddenly took a downward turn.

And the trend has continued: In Toronto, average monthly rents have declined for 15 straight months and are down 16 per cent overall, compared to the early months of 2020, according to recently released research.

As a renter, you can use this to your advantage. Working from home is sure to be the norm for a while longer, and people are flocking to mid-size markets and smaller towns for more space.

If you want to keep renting in the city, now’s the time to lock in a lease at a great price — you may even be able to negotiate with your current landlord for an even better rate.

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