Monday, June 16, 2008

"Canada's housing boom is over"

Tony Wong
Business Reporter

Toronto Star

The number of new listings of homes for sale set a consecutive monthly nationwide record in May, while prices rose by 1.1% annually – the smallest increase in seven years according to the Canadian Real Estate Association.
“Rising food, fuel and home process are denting consumer confidence” association economist Gregory Klump said.
New listings on the Multiple Listing Service hit 54,029 units on a seasonally adjusted basis in May, the most on record and a 2.2 % increase over the previous peak in April, according to the real estate association.
“The six-year housing boom has indeed fizzled and the poor winter results were not just weather and holiday related.” BMO Capital Markets analyst Robert Kavic said in a note. “The breadth of the declines is eye-catching.”
Nationally, the average price of a home is $337,071. With an increase of 1.1% prices are rising at a pace below the inflation rate.
Sales were also down by a significant 16.9% from last May at 35,040 units.
The association says western provinces, which have seen blistering price appreciation, have finally begun to cool.
“Canada’s housing boom is over, and the days of 40% plus price appreciation in Alberta are behind us,,” says Kavic.
In Edmonton, average house prices are down 4.8%, while Calgary house prices are down 2.4% year over year. House prices were also down 5.5% in hard-hit Windsor, where auto layoffs have taken a toll.
In the Toronto market, listings were up 15% in May, as sales continued a five-month slide. However, prices are still up a moderate 4% year over year.
Meanwhile, an uncertain economy means the market is not expected to pick up anytime soon.
“Increasingly cautious homebuyers may keep listings on the market longer before being sold, which increases the importance of realistic pricing,” Klump warned.

Saturday, June 14, 2008

Happy Tax Freedom Day - June 14,2008

Just a short post today to wish you all a happy "Tax Freedom Day" !

According to The Fraser Institute today, June 14,2008 is Tax Freedom Day in Canada this year. Theoretically, every dime you've earned this year up until today goes to paying taxes and to various levels of government and everything you earn from today onwards your money stays in your pocket for your own use.

Tax Freedom Day is 4 days earlier this year than in 2007. Tax Freedom Day last year was 5 days earlier than 2006. Experts say that reductions in GST and other taxes over the past few years have moved the date earlier in the calendar the last 2 years in a row.

And for tomorrow ... Happy Father's Day - enjoy the rest of the weekend.

Friday, June 13, 2008

Mortgage rates going up today

Well the Bank of Canada may not have changed rates this week but the institutional lenders are changing some rates this morning anyways. They most likely had already built in a little anticipation of a drop into their rates ahead of Tuesday's meeting and now have had time to crunch the numbers and are adjusting to where they think they should be. Nine out of the 20 lenders available had changed their rates in the last 2 days.
Here is a short recap of rates available through our mortgage brokerage partner site Spencer Group Mortgages ... why not pay them a visit and find out a little more ?

Bank Prime 4.75%

Fixed Rates

1 Year 4.90%
2 Year 5.39%
3 Year 4.99%
4 Year 5.39%
5 Year 5.24%

Variable rate prime minus .60%

E. & O. E. rates subject to change without notice, rates subject to lender criteria

Wednesday, June 11, 2008

"Bank of Canada holds rate steady but acknowledges weak economy"

HEATHER SCOFFIELD Globe and Mail Update

June 10, 2008 at 9:12 AM EDT

OTTAWA — The Bank of Canada is holding its key interest rate steady, even though it acknowledges the economy has stagnated and could well weaken further.
The central bank announced Tuesday it is putting an end to its aggressive streak of rate cuts because soaring commodity prices have prompted a fresh fear of inflationary pressure.
“Although the composition of U.S. growth has not been favourable for demand for Canadian goods and services, overall, global growth has been stronger and commodity prices have been sharply higher than expected,” the bank said in a statement.
“The balance of risks to the bank's April projection for inflation in Canada has shifted slightly to the upside.”
The bank's decision maintains the overnight rate at 3 per cent, and shows how much thinking about the global economy has shifted in the past few weeks to focus on the pain consumers feel at the pumps.
Bank of Canada Governor Mark Carney has said in the past that he expected commodity prices to fall because global demand was weakening. That projection has proven wrong, as oil has skyrocketed to close on Monday at more than $134 (U.S.) a barrel.
Economists and market players had widely been expecting a small rate cut of a quarter of a percentage point to stimulate the economy as it deals with recessionary conditions in the United States as well as tighter credit conditions.
But economists had also said that the central bank could quite easily justify a more aggressive rate cut to confront a slowdown in Canada, or swing the other way and freeze rates in the face of rising commodity prices.
The Bank of Canada has cut rates by a total of 150 basis points since late last year, attempting to stimulate the economy as it deals with a rapid slowdown in demand from buyers in the United States.
Indeed, the bank's statement recognized that Canada's gross domestic product contracted slightly in the first quarter. The economy is now in a state of slack, and is expected to slacken further this year.
Growth should pick up later in 2008, and accelerate into 2009 as the U.S. economy recovers and as past interest rate cuts in Canada begin to have an effect, the bank said. Still, there is a risk that growth will be weaker than expected.
Clearly, however, the bank's first preoccupation is inflation, and not sagging growth.
“If current levels of energy prices persist, total [consumer price] inflation will rise about 3 per cent later this year,” the bank warned.
Core inflation, which excludes volatile prices such as energy and some food, will remain below the bank's 2 per cent target, however, throughout this year and next.
The bank said it had already done enough to boost growth in Canada, saying “the current stance of monetary policy is appropriately accommodative.”
Economists have pointed out that inflationary pressure in Canada is relatively benign, giving the central bank room to cut rates if it chooses.
In April, total inflation was running at a 1.7 per cent annual pace, while core inflation was 1.5 per cent – both well below the central bank's target.
“Canada's relatively muted inflation performance gives the bank the luxury of pondering further rate cuts if need be,” said Douglas Porter, deputy chief economist at BMO Nesbitt Burns, in a note to clients Tuesday.
“We think a cut is justified on the fundamentals in Canada – cool core inflation that will likely remain so, and weak GDP figures that sill leave behind a fumbling economy,” said economists at Bank of Nova Scotia Tuesday.
But central bankers around the world are warning about rising inflationary pressure, as they watch commodity and food prices soar, hurting consumers. The European Central Bank has suggested its next move could be an interest rate hike because of inflation. The U.S. Federal Reserve has hinted that its rate cuts have come to an end.
And on Monday, the head of the Bank of France pointed out that central bankers have a tough job in deciding monetary policy these days, as rising commodity prices compete with slowing growth.
“Today we may be at the start of a cycle in the world economy where there is less growth and more inflationary pressures,” Christian Noyer said in an interview. “That is more difficult for central bankers to deal with than in the past, when inflationary pressures were lower.”

Tuesday, June 10, 2008

No rate cuts by Bank of Canada

Variable-rate mortgage holders were slightly disappointed this morning. The Bank of Canada surprised many Bay Street economists by not lowering it's key interest rate. As recently as Sunday, 12 of 12 primary securities dealers had thought a 1/4% cut was in the cards. It once again shows how hard it is to predict rate direction and the Bank of Canada's intentions. Perhaps there was some herd mentality in those forecasts as well.

The Bank of Canada said:

  • The risk of inflation has "shifted slightly to the upside."
  • The Bank projects that "economic growth will pick up this year and accelerate in 2009."
  • "If current levels of energy prices persist, total CPI inflation will rise above 3 per cent later this year."

By 9:15am, Canada's 5-year bond yield had soared to 3.57%. It hasn't been this high since January. That could slow or halt the decline in fixed mortgage rates as well.

Monday, June 9, 2008

Bank of Canada meeting June 10,2008

The Bank of Canada is set to meet June 10,2008 to decide on changes to the key "overnight" interest rate which affects the bank prime and other lending rates as well. Analysts have been expecting a further cut in the rate by .25 basis points which could mean a drop in the bank prime from 4.75% to 4.50%. A change in the overnight rate usually results in corresponding changes about a day later in the bank rates. Many consumers still have confidence that we will enjoy these relatively low rates for the next while and are not rushing to lock-in their mortgage rates just yet.
Not everyone is in agreement with the theory of a potential drop in rates and are instead expecting a hold in the rate. Many expect the rate to begin a slight climb in the fall of this year and feel we may have touched bottom for a while at this level.
Make sure you check back here and for the results of the meeting and how it may affect your cost of borrowing.