This weeks top stories include how the Bank of Canada Governor Mark Carney noted that the United States are under extremely difficult times, how Canada is overdue for some policy change, how the Canadian Real Estate Association launched a new system and Toronto home prices have surpassed $600K, how Canada’s housing boom continues with Toronto leading the way, how the Bank of Canada continues to warn Canadians about living beyond their means and I will close off this week with a quick personal note on my thoughts about the mortgage industry today.

America’s challenging times

Bank of Canada Governor Mark Carney made a bold statement during a television show called CTV`s Question Period, where he stated that the U.S. would never get back fully to where they were previously.  Unfortunately, we are in a position where time will be the only thing that can tell us where the U.S. economy is heading.

America is still in a painful recovery from recession, while trying to deal with record unemployment levels at 9%.  The U.S. appears unable to reach a conclusive decision about which path will lead them to an economic recovery.  The two party political system is doing nothing to help with the recovery.  The U.S. is still by far the largest and richest economy in the world and is the leader for global order as they posses the most flexible and largest military capability out of any of their counterparts.

One things for sure, do not misjudge the capacity for the U.S. economy to recover.  Whoever wins the election in November will go on to approve the Keystone XL oil pipeline due to the rich amount of new jobs it will create.  Yes, an average recovery would have had U.S. gross domestic product (GDP) increase by 2.5% by now and exports would be 6.5% better than they are now, which means that Canada has lost $30 billion in export sales to date.  But this is the United States of America, which has the ability to do things that other countries would not think of.  Do you think that this is the end of the U.S. or do you see a recovery in the future?  Please comment below.

Read the full article here

Policy change needed

Millions of Canadians are approaching the end of their working lives or are now living on fixed incomes in retirement and are facing many economic challenges against them.  Weak returns on investments and minimal amounts of Canada Pension Plan (CPP) and Old Age Security (OAS) are causing havoc to budgeting strategies.  When you mix this with steadily rising costs from fuel to housing it becomes a disaster.

Right now savers are in a bad position as the worst time to save is when everyone around you wants to save and no one wants to invest in anything.  Bank of Canada (BoC) Governor Mark Carney has been keeping interest rates low to try and stimulate a stagnant Canadian economy an induce spending.  But with massive concern about economic uncertainty for the future of Canada, and things even worse south of the border, most have begun to hound their money and hold it tight at night.

The main issue with this is that money is now favouring the borrower more than the savers as Canadians continue to pile on debt with cheap money to purchase everything from cars to new homes.  Canadians are in danger of carrying too much debt as an interest rate increase could damage a percentage of Canadian consumers.  Carney continues to warn people of extensive household debt but it’s time for him to do something about it.  Actions speak louder than words so either raise interest rates or make a change to policy but something needs to be done.  What do you think?   Please comment below.

Read the full article here

Average Toronto detached home $600K+

There is a new system that launched that tracks Canadian regional home sales and price increases based on benchmark prices by the Canadian Real Estate Association (CREA).  It is meant to provide buyers and sellers with a clearer picture of what’s happening with housing in their specific neighbourhoods.

The benchmarks are based on factors such as the age of the home, the number of rooms number of bathrooms along with other factors such as proximity to parks and schools.  They also help with localized factors that are causing home prices to increase up or down but not necessarily reflect accurate market conditions for the area.  CREA went one step further and established a new MLS Home Price Index to track prices all the way back to January 2005 based on home types such as single family homes, one or two storey homes, townhouses, condo’s and more.

In January, the benchmark price of a single family home in the city of Toronto reached $606600.  That’s more than $100K than the benchmark price for a similar home in the rest of Canada.  Home prices were up 50.3% from January of 2005.  The new system will take volatility out of housing statistics and provide a tool for consumers to understand where their home should be priced into the market.  Currently the system is only being used in five major real estate boards across Canada including the Greater Toronto Area (GTA), Greater Vancouver, Calgary, Greater Montreal and the Fraser Valley.  CREA is expecting eight more boards to begin use of the system this year alone.

Read the full article here

Condo boom continues

December’s building permit report from Statistics Canada is leading us to believe that Canada’s housing market is still going strong even with signs of cooling late last year.  The value of building permits issued in the month of December were up 11% from the previous month, reaching the highest level on record in more than four years.

The permits that were issued in December were valued at $6.8 million and followed a revised decline of 2.6% in the month of November from an initial estimated drop of 3.6%.  What we witnessed in December was the highest noted value since June of 2007.  The residential sector saw the value of permits increase 16.1% to $4.5 billion and was noted to be the second consecutive monthly rise.  Ontario lead the growth with permits for condominiums and apartments rising at an accelerated pace with a 28.9% gain in value.

The upticks in building permit applications suggest that the condo market is still quite hot in Toronto and many people are pointing out that it’s countering the housing starts numbers that pointed to signs of a cooling market for condo’s.  This means that the low interest rate environment that we are still in is adding to the home building segments as demand continues for housing.  What do you think?  How long can we continue down this road?  Please comment below.

Read the full article here

Canadians living beyond their means

The Bank of Canada (BoC) decided to let the public know again that they remain concerned about borrowers that are spending more money than they earn.  The BoC did notice a slowing in the amount of credit being taken by Canadians but many are still vulnerable to credit shock if interest rates rise.

Senior Deputy Governor Tiff Macklem was quoted as saying, “This is something the Bank of Canada is very much looking at. We have expressed on numerous occasions our concerns about rising household indebtedness. The simple fact is that consumers are consuming more than they’re earning. Household credit growth has been quite strong.” This concern has been mentioned over and over not only by Mr. Macklem but by BoC Governor Mark Carney and Finance Minister Jim Flaherty.

This ultra low interest rate environment that we have been in has made borrowing money cheap for all.  This, mixed with the strong housing market, has pushed the debt to income ratio in Canada to a record high of 153% of household income.  The Boc stated that this number will rise over the next two years but did not state when they see an end.  If the BoC was really concerned, they would raise interest rates and make borrowing more expensive and curb consumer borrowing.  I know that this would rattle the economy but a good shake to bring back people to reality would be better than trying to revive many from the dead.  Do you agree?  Please comment below.

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Our Thoughts

This week I am going to close out my news update with a personal thought of what’s happening in the mortgage sector. I am genuinely concerned. There is news that lenders have failed their audit’s from CMHC while other lenders are no longer offering products for the self employed and CMHC is about to hit their funding cap of $600 billion.

What does this mean to you as a home buyer? Well, before the next budget meeting (1 month away) we will see an end to 30 year amortizations. This is something that has been in talks for months but is becoming very real now. We will also see lenders get rid of all cashback products. These were, in essence, subprime loans to begin with and Canada is now being ridiculed for providing them to consumers. We were suppose to be the leaders for finance but we went ahead and turned a blind eye for gains in the housing market.

We will also see CMHC become more pickey with who they lend money to. Anyone that was borderline qualifying today, will not qualify a month from now. Lack of listings on the market for an extended period of time have raised home prices out of reach for most. The ones that are purchasing homes are buying with 5% down. After closing costs and CMHC costs, these loans are basically 100% of the value of the homes. This means that if home prices do come down, many will have mortgages valued at more than their house. What do you think of what’s going on? Please comment below.

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Weekly Mortgage News for February 10, 2012

Post from: paulsidhu.com

Weekly Mortgage News for February 10, 2012

This weeks top stories include how U.S. incomes witnessed a slight rise but consumer spending continued to remain flat, how relaxed mortgage lending in Canada has become an issue, how BMO is stating that house prices in Canada may be pricey but that there is no housing bubble in Canada, how Canadian GDP unexpectedly contracted in the month of November, how Canada Mortgage and Housing Corporation is backing less loans as they reach their threshold, how U.S. home prices fell more than expected in November, how Toronto’s Trump Tower has finally been completed and is Canada’s largest residential condominium, how Canada is slowly weening off of export dependency from the United States, how Canadian manufacturing unexpectedly slowed in the month of January and how one lenders changes to self employed lending is causing a stir in the industry.

U.S. income rises but spending flat

U.S. incomes were up last month with the largest gains in the past nine months as a year of weak wage gains has hurt many.  This would normally be a great sign for economic data but consumer spending remained flat, which is needed with a mix of wage gains to aide the economic rebound.

According to the Commerce Department, incomes were up 0.5% and noted to be the strongest increase since a gain in March of last year that was quite similar.  Consumer spending was left unchanged after a witnessing low gains of 0.1% in the months of October and November.  Unless income grows at a faster pace, consumers will continue to cut back spending and hinder growth, which will lead to less hiring and fewer jobs.

The government stated on Friday that the economy expanded at an annual rate of 1.7% in 2011, which was roughly half of the growth witnessed in 2010.  This was noted to be the weakest expansion on record since the economy contracted 3.5% in 2009.  Unemployment continues to hover around a staggering 8.5%, which is the lowest level it’s seen in nearly three years.  What do you think will happened next?  Please comment below.

Read the full article here

Lax mortgage rules worrisome

The country’s banking regulator is on edge as Canadian lenders continue to loosen standards on mortgages, which is opposite to the tightening of lending policies proposed by Mark Carney and Jim Flaherty.  Lenders continue to be increasingly liberal with home equity lines of credit and mortgages where income is not being proven.

These mortgages are tailored mainly to self employed individuals and new immigrants and are showing similarities to non prime mortgage loans in the United States.  This no income qualified lending is a major concern to the Office of the Superintendent of Financial Institutions Canada (OSFI).  David Madani, economist for Capital Economics commented,  “It just speaks to the general easing in lending standards, which has contributed to a booming housing market.  The problem is sort of baked in now, so I’m not sure there’s a way to prevent a weakening of the housing market.”

Mr. Madani feels that the housing market could correct as much as 25% in the near future.  Canada’s housing market has been on fire since the 2009 recession as record low mortgage rates continue to fuel the rise of home prices and home purchases.  Bank of Canada Governor Mark Carney has continually stated that the greatest domestic threat to Canada’s financial institutions is the record consumer debt that Canadians currently hold.  Anyone with a debt service ratio of more than 40% is considered to be at risk.  To find out where your debt service ratio is, give me a call.

Read the full article here

BMO says no housing bubble

The Bank of Montreal feels that the Canadian housing market is pricey but that there is no housing bubble forming.  They feel that the market will cool but there will be no crash as being speculated by most, including myself.  BMO is stating that the only area of concern is Vancouver but I would definitely add Toronto to that mix, especially the overpriced condo market.

BMO feels that international observers, such as The Economist magazine and the International Monetary Fund, are exaggerating housing woes in Canada.  Economists feel that Toronto housing will cool but not collapse.  House prices compared to household incomes show an increase from ten years ago but the report points out that the increase is not excessive.  The report also states that we are nowhere close to the where the U.S. was when they faltered in 2007 around the sub prime crash.  The outlook that everyone does agree on is that the housing market will cool this year.  What do you think?  Please comment below.

Read the full article here

Canadian economy contracts

According to the latest report from Statistics Canada, released this week, real gross domestic product (GDP) contracted 0.1% in the month of November after no movement in the month of October of last year.  A decline in the energy sector was attributed to the decline in November with gas and oil extraction down 2.5%.

Additionally, finance and insurance, construction and wholesale trade also witnessed declines.  Analysts had forecasted a 0.2% increase in GDP for the month of November but were unexpectedly hit with the news of the decline.  Most of the other sectors posted gains including retail trade, manufacturing, real estate agents and mortgage broker services.  Manufacturing was up 0.6% on production of durable goods.

Higher activity in the resale home market produced a 2.2% rise in output of real estate agents and brokers but the finance and insurance sector was down 0.4%, mainly due to lower trading on the stock exchanges.  This is not a positive sign as these numbers could lead to an unravelling of the economy.  Canada is at a point where we cannot have gross domestic product (GDP) contract.  It must either stay stagnant or expand.  What do you think?  Please comment below.

Read the full article here

CMHC backing less loans

Canada Mortgage and Housing Corporation (CMHC) keeps edging closer to a $600 billion cap imposed on it by the federal government.  In turn, it seems that CMHC is backing less mortgage loans and being selective with who they back moving forward.  A spokesman confirmed that CMHC has approached numerous mortgage lenders about cutting back its insurance offering after noting that third quarter results show $541 billion in mortgages backed by them.

CMHC guarantees mortgages held by lenders where the client has put down less than 20% on their purchase.  CMHC is actually backed by the federal government and requires approval to go past their $600 billion limit, which would impose larger risk on taxpayers in the event of a housing market downturn.  Charles Sauroil, spokesman for CMHC stated, “CMHC has recently received an unexpected level of requests for large amounts of CMHC portfolio insurance.  To ensure equitable access to portfolio insurance within CMHC’s annual limits, an allocation process is being established which has caused some delays. Portfolio insurance provides lenders with the ability to purchase insurance on pools of previously uninsured low ratio mortgages and does not impact CMHC’s transactional business.”

Although it is required by law to obtain mortgage default insurance on anything with less than a 20% down payment, banks are obtaining insurance on loans that have substantial down payments as well.  This allows them to securitize those loans and get them off their balance sheets, which reduces, not only their risk, but capital requirements as well.  In most of these cases, the bank goes ahead and pays the costs for the insurance rather than the consumer.

The largest concern right now is to me as a taxpayer.  We are the ones taking on the risk of CMHC’s books without a say in how things are being managed overall.  The risk is that in the event of a collapse, it would lead to defaults such as those witnessed in the U.S.  CMHC does not currently have $600 billion to cover the defaults and we are left on the hook for all and any shortfalls that CMHC will have.  CMHC will make a plea to the government to increase their limit past $600 billion and the government will have no choice but to grant it or kill the steam that is currently keeping up the housing market.  This is going to be a finicky situation.  What do you think will happen?  Please comment below.

Read the full article here

U.S. home prices decline

U.S. residential real estate prices fell more than expected in the month of November as more distressed properties come on to the market and continue to hinder improvement in the U.S. housing market.  The S&P/Case-Shiller index of property values in 20 cities was down 3.7% from November of last year after witnessing a decrease of 3.4% in the previous month.  Analysts and economists both expected only a drop of 3.3%.

More foreclosures have continued to keep pressure on prices and have continued to delay any recovery that was staged for the housing market south of the border.  More stability is needed in real estate values before Americans will have the confidence to take advantage of ultra low mortgage rates.  Jonathan Basile, a U.S. economist at Credit Suisse in New York stated, “There has been no change in the way households perceive selling conditions.  The majority of them think it’s a bad time to sell their homes. “It’s going to require higher sales numbers and much better housing fundamentals to turn around the notion that the biggest asset for households is no longer expected to go down.”

Home prices adjusted for seasonal variations were down 0.7% in the month of November and match a similar drop in the month of October.  Unadjusted prices were down 1.3% from October with 19 out of 20 cities posting declines.  18 out of 20 cities in the index posted a year over year decline lead by Atlanta with an 11.8% decline and Las Vegas with a 9.1% decline.  Even with low mortgage interest rates and an increase in GDP growth in the final quarter of last year, home prices are continuing to fall.  What do you think about this?  When will home prices start to increase?  Please comment below.

Read the full article here

Trump Toronto opens Canada’s tallest condo

Canada’s largest residential building opened this week as the Trump International Hotel & Tower Toronto finally finished work.  This was a seven year effort to bring the brand of Donald Trump to Canada’s largest city.  The $500 million Trump tower is the first of three luxury hotel condominium projects that will be opening this year in Toronto.  The Ritz Carlton opened last year, the Four Seasons Hotel and Private Residences is is almost completed and the Shangri La Toronto is set to open its doors later this year.

The luxury hotels are on the heels of a record tourism year for the city with more than 9 million hotel bookings last year.  According to Tourism Toronto, the availability of luxury hotels attracts high value visitors to the city.  Roughly 60% of the 118 residential units in the Trump Tower have been sold and the remaining condo’s are priced between $2.3 million to $6.3 million.  The building also boasts hotel suites that can be owned by investors and generate revenue when rented by a guest.  The project was slated for completion in 2009 but design changes caused a delay in the project until this week.

Time will tell if there is a sufficient market to support all of these luxury hotels.  We need extremely wealthy individuals to keep all of them running and in business.  Once all of the hotels have been completed, we will have roughly 1000 luxury rooms in Toronto.  When comparing to Los Angeles, Miami, Paris, Chicago, London it doesn’t seem like a lot of luxury rooms.  But time will tell what the demand actually looks like in Toronto.  One thing is for sure, these luxury properties will help elevate Toronto as one of the worlds elite cities and should benefit Toronto as a whole.  What do you think?  Please comment below.

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Canada weens off U.S.

According to a new study by TD Economics, it seems that the Canadian economy is gradually becoming less dependent on the United States.  The study showed that Canada’s dependency on the U.S. for its share of exports and gross domestic product (GDP) has been on a steady decline for the past ten years.

Exports to the U.S. directly contributed to an annual average of 0.5% to nominal GDP growth over the past ten years.  This was well below an average annual contribution of 2.3% during the 1980′s and 1990′s.  The study also pointed towards boosted Canadian exports to the U.S. over the next few years once U.S. economic growth begins to rebound.  Over the long term, Canada’s economy will begin to be driven by trade with economies other than the U.S.

Under this direction, future job growth for the Canadian economy will be initiated from mining, energy and other resource based industries.  This will lead to larger trade with Japan, China and other international market.  The strong loonie has continued to hamper trade with our U.S. counterparts making labour costs and trade more expensive.  It will be interesting to see how this will pan out.  What do you think will happened?  Will we become less dependent on the U.S. for our goods?  Please comment below.

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Manufacturing slows in January

Data released on Wednesday in the Canadian Manufacturing Purchasing Managers Index showed that Canadian manufacturing growth slowed drastically in the month of January.  According to the RBC PMI, which is an indicator designed to provide an overview of the health of the manufacturing sector, came in at 50.6 in the month of January, down heavily from the 54.0 registered in the month of December.

This was the worst improvement in Canadian manufacturing business conditions since they started collecting the data in October of 2010.  Any Index reading above 50.0 shows that there was an expansion from the previous month, while any reading below 50.0 are a sign of contraction.  The survey found that manufacturing conditions improved in January but the rate of expansion for output and new order growth were not so bright.

RBC chief economist Craig Wright stated, “Global economic uncertainly, particularly rooted in the euro zone, weighed heavily on the Canadian manufacturing sector in the first month of 2012.  Canada’s modest recovery may be jeopardized if European policymakers fail to contain the sovereign debt crisis.”  This statement leads me to believe that there is hope in the near future for the manufacturing sector but economic conditions will be the major indicator of what’s to come. 

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Hints of housing crisis

Mortgage brokers are watching industry news closely as CIBC’s wholesale mortgage arm, FirstLine mortgages, is no longer accepting any new business from “stated-income” self employed home buyers.  The concern is that other banks and lenders may follow suit causing difficulty for anyone that is self employed, or a new immigrant to Canada, to obtain mortgage financing.

The concern is that Canada is now pushing out, what is considered to be, sub prime mortgage loans to these borrowers, who are allowed to claim whatever income they deem fit if they are self employed or new to Canada.  If other institutions decide to cut their similar programs it could have far reaching effects and could create a massive problem.  The announcement was made on Tuesday by FirstLine that it will no longer accept applications from home buyers that cannot prove their annual net income by way of two years notice of assessments.  This means that anyone that is self employed and writes down their income to a minimum, would be penalized for doing so, even though tax laws encourage them to.

The other concern is for new immigrants to Canada who have no previous credit rating or credit history.  A vast majority of new immigrants come here with money to buy a home and obtain a mortgage so that they start with something.  We are now telling them that they have to come here and start at the bottom like everyone else, even if they have established credit where they come from or have money in their pockets to buy today.  Some see it as being prudent, while others see it as a sign of what’s to come.  What do you think?  Please comment below.

Read the full article here

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Weekly Mortgage News for February 3, 2012

Post from: paulsidhu.com

Weekly Mortgage News for February 3, 2012

This weeks top stories include how Canada’s growth forecast has been slashed by the International Monetary Fund, how there are three times more unemployed people in Canada than there are jobs available, how the Bank of Canada is being pushed to define a clear leadership role for regulatory purposes, how Canadian job quality and availability both declined in the past six months, how baby boomers and debt mongers continue to grow their borrowing loads by taking on more debt and how 2011 was a new low for the U.S. housing market.

Canada’s growth forecast slashed

The European crisis is continuing to affect Canada’s economic recovery and is hindering recovery plans around the globe according to the International Monetary Fund (IMF).  The IMF stated on Tuesday that the Canadian economy will now grow by a mere 1.7%, which is 0.3% below what the Bank of Canada (BoC) estimated just last week.

The IMF stated that 2013 would be even slower for economic growth, which contradicts the BoC who expects 2.8% growth expansion in the next year.  This still leaves Canada at top growth amongst the Group of Seven industrial nations but that is only due to the fact that the European crisis will continue to plague other countries more than Canada.  Italy, Germany and Spain will have negative growth in 2012, according to the IMF, and the euro zone will suffer a recession.

The IMF commented by stating,  “The updated projections see global activity decelerating but not collapsing.  Most advanced economies avoid falling back into a recession, while activity in emerging and developing economies slows from a high pace.”  Global growth is forecasted to slow to 3.3% this year instead of the 4% previously stated. The IMF did continue to state that if Europe continues down the path they are on, the global outlook will have a large revision downward.

If markets raise borrowing costs for vulnerable countries in Europe, it could cause global economic growth slowing another 2% more than expected.  Christine Lagarde, head of the IMF, has continued to urge the international community to take immediate and decisive action to prevent a global catastrophe.  She commented on the matter by saying,  “The longer we wait, the worse it will get.  The only solution is to move forward together. Our collective economic future depends on it.”  What do you think the outcome will be?  Please comment below.

Read the full article here

Three times more unemployed than jobs available

A recent report from Statistics Canada outlines that there were 250 000 job vacancies in Canada during the summer but for every opening, there were 3.3 Canadians looking for work.  During that period (Q3), unemployment ranged from 7.1% to 7.3%.  Unemployment now stands at a whopping 7.5%.

The highest vacancy rates for job openings were in educational services followed by construction and manufacturing.  This report was the first of its kind so there is no previous data to compare to but Statistics Canada has planned to begin collecting data from this point forward and issue a quarterly report on their findings.  Labour economist Erin Weir stated that the survey only proves that Canada has a very tight labour market.

Erin commented by saying, “The finding that there were 3.3 unemployed people in Canada for every job vacancy confirms that the main problem is a lack of jobs, not alleged disincentives to work or barriers to labour mobility.”  Statistics Canada’s most recent labour report shows that there are 1.4 million Canadians that are officially unemployed.  How do you think Canada will fare with such high unemployment numbers?  Do you think the numbers will go higher?  Please comment below.

Read the full article here

Bank of Canada being pushed to define leadership

The Bank of Canada (BoC) is being pushed to define a clear leadership role to guarantee the safety of Canada’s financial system.  Although, this has been in the works for some time now, regulations will ultimately be in the hands of Finance Minister Jim Flaherty. 

The C.D. How Institute provided a study that shows Canada‘s current oversight framework has been sufficient but has room for improvement including, but not limited to, beefing up a senior officials committee as well as providing BoC Governor Mark Carney with a senior role while leaving all authority with Mr. Flaherty.  This concept falls under macro-prudential regulation, which are policies aimed at protecting Canada’s financial system while preventing problems from spreading to the wider economy.

These changes would include a Senior Advisory Committee that would be strengthened through added legislation and would be provided with more resources at their disposal.  The new committee would be jointly chaired by Deputy Finance Minister Michael Horgan and Mr. Carney.  The committee is currently made up of Mr. Hogan, who is the chair and Mr. Carney who is just a member.

The overall goal is to give Mr. Carney a more direct role in creating government policy, while trying to keep Mr. Flaherty in his politician role to be accountable for regulatory decisions and changed.  The Bank of Canada is not a regulator unlike the central banks in Britain and the United States.  More regulatory oversight would be in the best interest of the Canadian economy but it will come with it’s downfalls?  Please comment below.

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Canadian job quality declines

The quality of jobs in Canada seems to be on the decline.  Last year Canada saw more people move into self employed positions while the labour market shifted to lower paying positions according to new information in CIBC’s employment quality index.  The country’s job growth was mainly attained during the first half of the year.  The last six months witnessed barely any growth as the quality of work worsened.

CIBC economists stated,  “The impact of a softening pace of job creation is exacerbated by a worsening level of job quality in the Canadian labour market.”  Canadians were hit hard as both the quality and quantity of employment declined at the same time.  While the index is still above levels witnessed during the recession, it is down one percentage point in just the last year alone.

The index looks at three measures: the mix of paid and self employment, full time versus part time work, and wages for full time jobs.  Full time employment was up 1.5% last year but the number of part time positions were down 0.3%.  Self employment was up 2% last year but it has to be noted that self employed people earn 10% to 15% less than a regular salaried employee.  The largest quality drop was witnessed in Ontario followed by British Columbia.

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Boomers continue to create more debt

It seems that a new analysis of Canadians household finances shows that baby boomer and other consumers that are currently in debt just continue to go deeper and deeper.  On average, Canadian households owe $1.53 for every $1 of after tax income that they earn according to a recent report from CIBC.

Canada’s household debt to income ratio is the highest ever on record at 153%.  It’s just a touch under the 160% witnessed when the housing market in the U.S. collapsed four years ago. This number is accurate as on overall picture but some Canadians have minimal debt while others are more indebted, well past 160% of their income.  Rising household debt could cause consumers to spend less, which will cause a large drag on the economy and gross domestic product (GDP) overall.

CIBC chief economist Avery Shenfeld and senior economist Benjamin Tal stated, “While a crisis does not appear imminent, there are cracks emerging in the financial foundation of Canadians that are likely to impair spending growth ahead.  That will leave Canada more at the mercy of the global environment, which remains clouded by the impacts of fiscal tightening across much of the developed world.”  Where do you think this will all lead?  Please comment below.

Read the full article here

2011 a new low for U.S. home sales

December witnessed less home sales south of the border and closed out 2011 as the worst sales year on record for the United States.  According to the Commerce Department, new home sales fell in December to a seasonally adjusted annual pace of 307000.

That’s less than half of the 700000 that must be sold in a healthy economy according to economists.  Total sales last year were even less than the 323000 sold the previous year and made it the worst year on records dating back as far as 1963.  Median sales prices for new homes also declined in the month of December, with builders continuing to cut prices.  New home prices were down 2.5% to $210300.

The decline in sales are taking place at the same time that there are signs showing that the depressed housing market may be at the verge of a recovery with construction picking up and sales of pre-owned home rising.  This is creating a more confident environment for the builders and hopefully will lead to more consumer confidence in the housing market.  Only time will tell.

Read the full article here

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Weekly Mortgage News for January 27, 2012

Post from: paulsidhu.com

Weekly Mortgage News for January 27, 2012

This weeks top stories include how the Organization for Economic Cooperation and Development states that Canada may need to cut interest rates further, how the growth of mortgage debt in Canada has begun to slow, how U.S. home prices have seen another decline, how some of the worlds central banks have joined forces to prevent another credit crunch, how Canada’s gross domestic product rose in the third quarter of this year, how Canadian banks are overexposed to consumer leveraging of debt and how U.S. jobless claims rose last week.

OECD says Canada needs rate cuts

The Organization for Economic Cooperation and Development (OECD) stated this week that Canada may need new stimulus measures from the Bank of Canada (BoC) due to the economy slowing on weaker foreign demand for our goods. They stated that gross domestic product (GDP) will expand 1.9% next year, down from previous forecast in May of a 2.8% expansion.

Finance Minister Jim Flaherty stated last week that he has additional stimulus at his disposal if required. He also stated that the risks to Canada’s global recovery are increasing as the turmoil related to Europe’s debt crisis continues. Mark Carney, BoC governor, has kept the overnight lending rate at 1% since September of last year and expects that the economy will not recover until deep into 2013. He states that if the need arises, he will cut interest rates further.

The OECD commented, “Output is projected to expand at a slow pace as exports are restrained by sluggish external demand. Domestic spending should sustain growth but at a moderate rate, as high debt and waning sentiment curb consumption growth.” Current consumer debt in Canada is at 150% of disposable income. When you mix this with a weak job market, government cutbacks and slow hiring, there is quite a bit of risk to our recovery. Unemployment is currently at 7.4% and is expected to drop to only 7.3% next year. What do you think? When will Canada begin to see a real recovery? Please comment below.

Read the full article here

Mortgage debt slows

It seems that Canadians have slowed down with taking on new mortgage debt in recent months. Canada Mortgage and Housing Corporation (CMHC) released a statement this week saying that the Canadian housing market will hold up as long as mortgage debt continues to slow. The third quarter financial results were released on Tuesday of this week by CMHC.

Canada Mortgage and Housing Corporation commented on the report by stating, “The level of household debt remains a concern but there are encouraging signals, the growth of mortgage debt has significantly decelerated since March, particularly in recent months.” Personal loans, credit cards and lines of credit have also seen a decline in applications recently. CMHC went further to state that house prices are in line with demographic changes and economic growth but I feel that this statement is way off.

In response, CMHC did state, “CMHC, in consultation with the Bank of Canada and the Department of Finance, is continuing to refine models and techniques used to help identify risks of house price bubbles. At the moment, there is little evidence of a significant over-valuation in the Canadian housing market overall, although some centers warrant close monitoring.” This would be referring directly to Vancouver and Toronto. What do you think? Are low interest rates fueling home price increases? Please comment below.

Read the full article here

U.S. home prices decline again

There are new signs emerging that the U.S. housing market will not see a recovery in the near future as home prices begin to fall again after witnessing small gains throughout the spring and summer of this year. The Standard & Poor’s/Case Shiller Index released on Tuesday of this week shows prices declining in 17 of the 20 cities tracked from August to September of this year. This is the first decline on record after five consecutive months of gains.

The chairman of S&P’s index committee David Blitzer, stated that steep price declines between 2007 and 2009 appear to be over but that home prices are down when compared to the same time last year and are not showing any signs of easing. He went further by stating, “Any chance for a sustained recovery will probably need a stronger economy.” This leaves Americans very reluctant to purchase a home, even two years after the recession has officially ended.

Weak job growth mixed with high unemployment is preventing many consumers from purchasing now in fears that the prices will continue to fall. Even the lowest mortgage interest rates in history are not enough to jump start the housing market. Sales have reached the worst record in the past 14 years with no signs of an upward tick. This could lead to the worst year on record, at the pace it’s going, since the government began keeping records roughly 50 years ago. This number will get drastically worse once the banks are allowed to foreclose on properties, which is currently on hold pending an investigation into bad mortgage lending practices south of the border.

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Central banks work towards liquidity

It seems that five of the largest central banks in the world have joined forces to ease strains on the global financial system and bring more liquidity to the market. The Bank of Canada (BoC) has teamed up with the European Central Bank (ECB), the U.S. Federal Reserve (Feds), the Bank of England (BoE), the Japan Central Bank and the Switzerland Central Bank to improve the supply of credit to businesses and families.

The ECB stated that the banks are working together to make it cheaper, for all banks involved, to get U.S. dollar liquidity when it is needed. They are also taking measures to ensure that money is readily available in all currencies if needed. The BoC commented by stating, “The Bank of Canada continues to closely monitor developments in global financial markets and remains committed to providing liquidity as required to support the stability of the Canadian financial system and the functioning of financial markets.”

With Europe’s debt crisis spreading quickly, the global financial system is pointing towards another credit crunch like the one witnessed in 2008 where loans were extremely tough to obtain. With an outlook that one or more European countries might default on their debts, there are signs of a shock to the global financial system that could lead to major losses for banks along with another recession in the U.S. and Europe. What do you think of the move? Will it be enough to prevent another credit crunch? Please comment below.

Read the full article here

Canadian GDP rises

After witnessing a decline of 0.5% in gross domestic product (GDP) in the second quarter (Q2) of this year, GDP expanded an annualized rate of 3.5% in the third quarter (Q3) of this year according to the latest report from Statistics Canada. Real GDP south of the border only grew at 2% over the same period of time.

Q2 only witnessed an increase of 0.9% over Q1 as demand for exports rose. On a monthly basis, real GDP by industry was up 0.2% in the month of September. Consumer spending on goods and services rose 0.2%. Investments in housing also rose 2.6% and were well above the Q2 pace of 0.4%. Business investment in plant equipment didn’t fare so well, dropping 0.9% and being the first quarterly decline since 2009.

Statistics Canada stated that final domestic demand has been on the decline in 2011 when compared to the previous year. On average, Statistics Canada has recorded quarterly increases of 0.5% since the start of 2011, which is a large decline from the average quarterly growth of 1.1% over the same time frame in 2010. Although we have now witnessed solid growth in Q3, the question remains as to what Q4 will bring for GDP. What do you think? Please comment below.

Read the full article here

Canadian banks overexposed

The European debt crisis has everyone on edge in the banking industry. Some, more so than others according to a report released this week by Moody’s Investors Service. The largest single asset on Canadian banks balance sheets seem to be residential mortgages. Of which, upwards of 30% are insured through Canada Mortgage and Housing Corporation (CMHC) shifting majority of the risk of default onto government and tax payers.

These are insured assets but banks have quite a bit of non-secured risk that leaves them vulnerable as well. This would include but is not limited to credit card debt, which comes at a time that household income to debt is at above 150% of disposable income. The report outlines that the Royal Bank of Canada is at greatest risk with 24% of its total managed assets consisting of uninsured loans. Bank of Nova Scotia comes in at second place with 21%, TD Bank and National Bank of Canada both come in at 18% and Bank of Montreal comes in at 14%.

The author of the report, Mr. Bettie stated, “Canadian household debt as a share of personal disposable income stood at a record 150.8% at the end of June this year. We are concerned that, while taking advantage of low interest rates, consumers are also taking on debt they may not be able to service when rates inevitably go up.” This is a great point made by Mr. Bettie as money is currently quite cheap to obtain but will not stay cheap forever. This will make large debt loads affordable for at least the next year or two but what will happen when interest rates rise? Please comment below.

Read the full article here

U.S. jobless claims rise

New claims for unemployment benefits, south of the border, had a shocking rise last week reaching above 400 000 for the first time in a month. This is a sign that the U.S. labour market is not recovering as expected. Initial claims for state unemployment benefits rose to a seasonally adjusted 402 000 from an upwardly revised 396 000 the prior week according to the Labour Department.

Economists had predicted that claims would only reach 390 000 due to the economy gaining traction during the second half of the year. The U.S. economy grew at a 2% annual rate in the third quarter and hoped it would accelerate in the fourth quarter of this year. If this were the case, it could prevent the U.S. from sliding into a new recession, which may not be preventable if extended unemployment benefits and payroll tax cuts expire at the end of this year. What do you think? Will there be another U.S. recession? Please comment below.

Read the full article here

Please note that I will be away for the Christmas holiday’s on a well deserved vacation. The weekly news will return in the New Year but you may see a post or two in between. Happy Holidays!!

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Weekly Mortgage News for December 2, 2011

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Weekly Mortgage News for December 2, 2011

This weeks top stories include how sales of existing U.S. homes rose last month by 1.4%, how U.S. growth was downgraded to 2% for the third quarter of this year, how retail sales in Canada were up in the month of September, how U.S. jobless claims were up again and how Canadian wage gains have been on a steady decline since April of this year.

U.S. existing home sales up 1.4%

Previously occupied home sales were up across the U.S. last month by 1.4% but sales still remain at depressed levels with more and more deals being canceled at the last minute. This shows that even consumers that were looking at purchasing are now worried that the housing market may fall further.

The rise of 1.4% witnessed last month still show levels well off of the 6 million marker, which is where the signs of a healthy housing market begin. This year’s sales numbers are slightly ahead of last year’s sales, which was the worst year on record in 13 years. Although the numbers are tracked when closing takes place, it seems that numerous deals are falling apart just before closing. 33% of realtors stated that they have lost a deal at closing, which is up from the 18% in the month of September.

Even though we are two years past the official end of the recession, a majority of people are unable to qualify for loans or meet the demands of a higher down payment requirement. Consumers with the credit and income to purchase are also holding off with fears of home price depreciation being the top of mind. There has also been a large decline in first time home buyers as consumers that were thinking about purchasing have been put off by their experience with the global financial meltdown.

Lower housing prices and record low mortgage interest rates have not been enough to hold up sales as economists continue to lean towards the idea that home prices will fall another 5% by the end of this year. Forecasts for housing do not point at a rebound until at least 2013. With the large rate of foreclosures, re-sale home are now much cheaper than new builds with new homes costing roughly 30% more than an existing property. What do you think of the U.S. housing market? Will there be a rebound? Is it a good time to buy? Please comment below.

Read the full article here

U.S. growth revised down to 2%

Weak inventory accumulation with strong consumer spending is supporting views that American output will pick up this quarter but it`s too late for the third quarter (Q3) of this year, which grew slower than anticipated by most. Gross domestic product (GDP) grew at a 2% annual rate in Q3 of this year according to the latest figures released from the Commerce Department, which is down from the 2.5% previously reported by them.

Although the revision was below economists’ forecasts for a 2.5% rate of growth, the GDP report outlined that consumer spending and a drop in business inventories are setting the stage for a stronger economic performance in Q4. Cary Leahey, senior economist at Decision Economics New York stated, “The mix or composition of growth improved. Inventory investment was lower so firms are more likely to produce more goods going forward. And exports rose. So while you lost a half percentage point in the revision to third-quarter growth, you might easily get it back in the fourth quarter of this year or the first quarter of next.”

Current data points the Q4 growth that could surpass 3%, which is noted to be the fastest growth in the past 18 months. Next year’s growth is still to be determined as there is still failure form the U.S. super committee to agree on a resolution to secure a $1.2 trillion deficit reduction in the next 10 years. Regardless of the downward revision in GDP, the numbers are still up from Q2 where GDP had only reached 1.3%. Mr. Leahey went on to state, “The market knows the fourth quarter doesn’t look bad, but there is a considerable amount of fiscal drag coming in the near future.” What do you think? Will the U.S. economy expand in Q4? Please comment below.

Read the full article here

Retail sales up

Canadian retail sales rose in the month of September unexpectedly and marked the largest advance on record since November of last year. This continues to add flames to the fire that the Canadian economy will continue to show solid growth in the third quarter (Q3) of this year.

Retail sales were up 1% to $38.2 billion in the month of September according to the latest report released by Statistics Canada. This was the fifth increase in retail sales within the last six months. Scotia Capital economist Derek Holt stated, “This is a much better-than-expected retail sales report with headline sales rising at twice as fast a pace as that which was expected while core sales posted a further 0.5 per cent print. With all of our observable leading indicators now in place, we are looking for a pretty decent gain in September real GDP as an increase in housing, price-adjusted retail sales and manufacturing shipments outweigh a decline in real wholesale sales and hours worked.”

Most of the growth came from gas and motor vehicle sales, without these, retail sales were up only 0.4% on their own merit. Emanuella Enenajor of CIBC World Markets commented, “Autos were a big part of the story… however, electronics, building materials, gasoline station, clothing stores and sporting goods stores also posted hefty gains — suggesting that the back-to-school season in Canada did a bit better than most analysts had been expecting. The 0.6 per cent lift to volumes suggests that third-quarter GDP could come in around 3.2 per cent or so, aided by accelerating consumption, but mostly due to a surge in exports.”

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U.S. jobless claims rise

It seems that the U.S. labour market is gaining steam as claims for unemployment benefits held below the 400 000 maker for the third consecutive week. New U.S. claims for unemployment benefits were up but just slightly as initial claims for state unemployment benefits rose to a seasonally adjusted 393 000 from an upwardly revised 391 000 the week before according to the U.S. Labor Department.

Economists had previously predicted that claims would reach the 390 000 marker with the U.S. economy gaining traction in the second half of this year. Economist felt that the economy would expand at a 2% annual rate in Q3 of this year with further traction in Q4. If this happens, it could possibly help the U.S. avoid another recession. There are still large risks to a U.S. recession within the next year, mainly if the government allows extended unemployment benefits and payroll tax cuts to expire at the end of this year.

Read the full article here

Canadian wage gains fall

A new report from Statistics Canada states that real wages in Canada are on the decline as weekly payroll gains continue to fall to levels witnessed during the recession. Average weekly earnings for non-farm payrolls fell 0.3% in the month of September, from the previous month, to $827.75

On a year over year basis, the increase in wages has gown down to 1.1% from the same time last year and is noted as the lowest pace of improvement since November of 2009. When looking at the figures, Canadian wages are actually declining, as the year over year increase is roughly one third of the inflation rate. The increase in average weekly earnings had reached 4.1% in April of this year but has been on a steady decline since then. This is bad news for our economy because it translates to Canadians having less disposable income to purchase goods.

Read the full article here

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Weekly Mortgage News for November 25, 2011

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Weekly Mortgage News for November 25, 2011

This weeks top stories include how the U.S. economy could be end up in another recession with a little bit of bad news, how plastic polymer notes are going to be the future of Canadian currency, how Canada’s economy is set to slow down in the near future according to the OECD, how employment insurance claims in Canada were down in the month of September and how U.S. jobless claims also declined and reached a seven month low.

U.S. on verge of recession

A paper released this week from the Federal Reserve Bank of San Francisco points to extreme weakness in the U.S. economy and shows that the U.S. could easily fall back into a recession next year if even a small shock was presented.  This shock is referring to a default in the European economy and there may be no way to prevent it.

Travis Berge of the Federal Reserve Bank of Kansas City stated,  “The odds are greater than 50% that the United States will experience a recession sometime early in 2012.” Travis went on to say that the European default could act as the potential trigger for the next recession south of the border.  Another statement from excerpt from the paper states,  “Prudence suggests that the fragile state of the U.S. economy would not easily withstand turbulence coming across the Atlantic.  A European sovereign debt default may well sink the United States back into recession”

The paper notes that the recession risks are highest now but will gradually fade as we get deeper into the 2013 year.  Regardless, the next six months are crucial to the U.S. economy and will pave the way for either a recovery or a recession, which will lead to a strong recovery or a deep recession.  What do you think?  How do the numbers look to you?  Please comment below.

Read the full article here

Plastic notes the future

The Bank of Canada released its new $100 bills this week, replacing the old cotton/paper blended note. This is Canada’s first polymer bank note and has numerous anti-counterfeiting technological features such as partially hidden numbers, transparent window’s, transparent text, metallic portraits, raised ink and a frosted maple leaf window.

The new note features two pictures of Prime Minister Robert Borden and another image of a researcher at a microscope using a depiction of DNA. The next note to follow will be the $50 polymer note that is scheduled to be released in March of 2012. The remainder of Canadian note currency will follow in polymer format by the end of 2013. What do you think of the new note? Please comment below.

Read the full article here

Canada’s economy slows: OECD

A new report released by the Organization for Economic Co-Operation and Development (OECD) states that Canada, the U.S. and China are countries that are about to experience an economic slowdown in the up and coming months.

The OECD`s monthly index for composite leading indicators for member countries fell to 100.4 in the month of September, which was down 0.4 from the month of August and down from 102.3 witnessed in May of this year. Canada was down 0.4 points and had reached 99.4. Canada`s leading indicator has been dropping for quite a few months now and dropped below the 100 marker back in August.

Although Canada made it through the recession and aftermath of the global meltdown better than most countries, the economy continues to feel pain from a slow global recovery. The debt problems in Europe, mixed with stagnant growth in the U.S., which is Canada`s largest trading partner, has led to a decline in demand for Canada`s natural resources and is causing a drag on GDP.

OECD commented, “Compared to last month’s assessment, the CLIs point more strongly to slowdowns in all major economies. In Canada, France, Germany, Italy, the United Kingdom, Brazil, China, India and the euro area, the CLIs point to economic activity falling below long-term trend.” What do you think? How will Canada fare over the next year? Please comment below.

Read the full article here

E.I. claims down

The number of Canadians that receive regular Employment Insurance benefits was down 2.7% in the month of September. The number was down 15 400 to 549 300 in the month. Statistics Canada states that the number has been on the decline all year long.

Statistics Canada stated that the number of beneficiaries dropped in most provinces with the largest declines being witnessed in Alberta, Manitoba, Ontario and Saskatchewan. The number of initial and renewal employment insurance claims was also down by 10.5%. This fell by 27 100 to 230 700. The largest declines were in Quebec, which was down a whopping 19%, followed by Manitoba, which was down 7.5% and rounded out with Ontario, which was down 7.3%. Newfoundland and Labrador, along with P.E.I, witnessed increases of 3% and 1.2% respectively.

Read the full article here

U.S. jobless claims drop

New U.S. claims for unemployment benefits declined to reach a seven month low last week according to the Labor Department. Initial claims were down 5000 to a seasonally adjusted 388 000 from an upwardly revised 393 000 the previous week. Economist had previously expected claims to reach 395 000.

After an indecisive second quarter to the year, it seems that the labour market is gaining traction. Unfortunately, the traction is not enough to downgrade the 9% unemployment rate or enough to promote an advance in economic growth. The decline in claims is a signal that the economy continues to move into the fourth quarter with a reduced risk of a new recession. The one mitigating factor remaining is the turmoil in Europe, which is heavily affecting the bond markets and could derail any recovery that the U.S. had slated for the near future.

Initial claims have stayed below the 400 000 marker for a second straight week and is usually associated with a recovery in the job market. This would normally be the case but there just isn’t enough data to support that theory. We will need long term data with a steady decline in claims before we can say without a doubt that the job market is fully under a recovery. What do you think? Will the U.S. labour force make a comeback next year? Please comment below.

Read the full article here

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Weekly Mortgage News for November 18, 2011

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Weekly Mortgage News for November 18, 2011

This weeks top stories include how the Canadian economy expanded in the month of August mainly on energy consumption, how a Greek referendum could be a positive thing according to Bank of Canada governor Mark Carney and how the Toronto real estate market is on fire again.

Economy up on energy consumption

There is further proof that the Canadian economy is not slipping into a recession as the Canadian economy expanded 0.3% in the month of August on higher energy activity. Gross Domestic Product (GDP) was up again after witnessing 0.4% growth in July and 0.2% growth in the month of June according to Statistics Canada.

This is on the heels of news that Canadian economists have downgraded their growth forecast in the past few months. The Bank of Canada (BoC) even cut its own projection for this year and next year stating that the outlook has weakened due to a softer global economy. Krishen Rangasamy, senior economist at National Bank stated, “Canadian growth may not have done too badly in the final quarter…hinting that a recession may have been averted this year. Our own concerns are mostly about next year when fiscal drag is expected to hit both here and in the U.S.”

Doug Porter, deputy chief economist at BMO Nesbitt Burns commented, “Underlying growth remains much less impressive.” He stated that annualized growth in the four months since April was just under 2 per cent, “likely not a bad gauge of the economy’s underlying trend.” What do you think? Please comment below.

Read the full article here

Greek referendum on bail out

There are plans in work for a Greek referendum on its austerity measures and the Bank of Canada (BoC) governor feels that it may be for the best. Mark Carney stated to the Commons Finance Committee on Tuesday of this week that in order for Greece to get out of debt, broad democratic support would be required to make it work.

The BoC governor commented, “It is imperative that there is widespread support, broad democratic support for these measures because they will unfold over a period of time. If this is a judgment of the Greek government that this is the best approach to validate that support, we fully respect that.” The decision to hold a referendum on its latest rescue package shocked investors and created uncertainty in global markets including Toronto where the TSX’s main index was down roughly 2%.

The concern is that the referendum would end the agreement but Carney stated that it is up to Greece to determine how to obtain public support for what the country will require moving forward. There has been quite a bit of opposition with Greeks to the debt deal. The deal requires that the country cut tens of thousands of public sector jobs while boosting taxes and selling off government companies along with other government owned assets. This would lead to new loans from European authorities with the banks losing value on their old bonds. What do you think? Please comment below.

Read the full article here

Toronto housing on fire

Existing home sales in the Greater Toronto Area (GTA) market increased year over year in the month of October according to the Toronto Real Estate Board (TREB).  TREB stated that there was an increase in existing home sales of 17.5% when compared to the same time last year.

The Toronto market has boosted the national average price at the same time that the Vancouver market has come to a standstill.  The average sale price in Toronto reached $487 137 last month and is now 8% higher than prices from the same time last year.  Jason Mercer, TREB’s senior manager of market analysis stated,  “Thanks to low interest rates, strong price growth has not substantially changed the positive affordability picture in the city of Toronto and surrounding places.”

Read the full article here

There will be no news next week but we will be back the following week with the most up to date information pertaining to mortgages

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Weekly Mortgage News for November 4, 2011

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Weekly Mortgage News for November 4, 2011

This weeks top stories include how Bank of Canada Governor Mark Carney is poised to be the new head of the Financial Stability Board, how U.S. consumer confidence took another dip in the month of October, how the Bank of Canada decided to keep its overnight lending rate unchanged at this week’s meeting, how the Ontario economy shrank in the second quarter of this year and how the Home Price Index reached an all time high.

Carney taking on the world

The Bank of Canada Governor Mark Carney is set to take on the world’s most powerful banks as the new head of the Financial Stability Board, which is in charge of changes to global financial regulations. He has not officially obtained the job but speculation in the finance industry show’s that he is definitely the man being put up for the job. We are just waiting for the G20 leaders to give him the final nod at the summit in France on November 3rd.

Carney’s past at Goldman Sachs lead to his current job and proven history around new regulations for the financial sectors is putting him up as the top contender for this one. He led Canada to one of the weakest recessions in the rich country group and proved that banks don’t need government assistance to get by during a crisis. Although newspapers are stating that he has recovered all the jobs lost in the downturn, I find that to be a myth as the jobs recouped were jobs lost due to a parts shortage during the tsunami.

The Bank of Canada would not comment on the changes until a formal announcement has been made but the job is his. Regulators feel that the new standards under Carney will help prevent another economic crisis. How do you feel about this? Do you think Carney is the right man for the job? Please comment below.

Read the full article here

U.S. consumer confidence falls

U.S. consumer confidence fell in the month of October to the lowest level since March of 2009 when the U.S. was amidst an economic downturn that was felt all over the world. It seems that Americans are getting more and more nervous about the U.S. economy with the index dropping more than six points to 39.8 in the month of October. This number was down from 46.4, which was the revised number for the month of September.

The index was only at 26.9 in March of 2009, which was definitely a low for the country. Economists had previously expected the reading to come in around 47 but it seems that they were way off. A reading above 90 indicates strength in consumer confidence. Consumer confidence leads to more spending and consumer spending accounts for roughly 70% of U.S. economic activity. The all-time low was in February of 2009 when the index sunk to 25.3. The current concern is based around high unemployment as well as rising prices for clothing and food.

Read the full article here

Bank of Canada holds rate

The Bank of Canada (BoC) went ahead and held the overnight lending rate at 1% and stated that it will be required to keep low interest rates for longer to help stimulate the economy. This was the ninth consecutive time that BoC kept its target rate at 1% while keeping the ground that they will stay “stimulative” for meetings to come.

The loonie instantly dropped in value once the statement was made public at 9 a.m. BMO economist Michael Gregory stated that the bank’s choice to remove the long standing caution that Canadian interest rates will rise constituted a strong message to markets around the world. He further stated, “The mere fact of going from this slight, vague hint of eventually tightening down the road to, ‘Hey guys, we are doing absolutely nothing for a long time,’ you necessarily then at the margin raise the risk that in the interim rates could actually fall.”

This is leading other bank economists to believe that the BoC will keep their stance well into 2013 although they do not feel that an interest rate cut will be part of the overall picture. TD economist Leslie Preston stated, “Our Bank of Canada call implies a flat overnight rate for over two years—an unprecedented situation which underscores the fragility of the economic recovery.” What do you think? Please comment below.

Read the full article here

Ontario economy shrinks

Ontario’s economy shrank in the second quarter of this year according to the Ontario Ministry of Finance. The decline was mainly due to lower exports to the U.S. and the tsunami in Japan that held up the automotive sector. The decrease wasn’t large, coming in at 0.3%, but enough to make heads turn.

Ontario’s gross domestic product (GDP) has seen almost two consecutive years of gains but the tsunami created a parts shortage that resulted in an 8.4% drop in automotive production. The auto sector had increased 5.6% during the previous quarter. Exports were also down 1.4% but there was an increase of 4.9% in investments by businesses in plants and machinery. This was the fifth straight quarterly gain for the sector. The gain is being attributed to the harmonized sales tax and the favourable rules it has for businesses.

Read the full article here

Home price index reaches new high

For the ninth straight month, Canadian home resale prices rose again in August. This took the index to an all-time high according to the latest report released on Wednesday of this week. The Teranet National Bank Composite House Price Index showed that overall prices had increased by 0.9% in August when compared to the previous month. The index measures price changes for repeat sales of single family homes in six metropolitan areas in Canada. Overall prices were up 5.4% when compared to the same time last year.

Read the full article here

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Weekly Mortgage News for October 28, 2011

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Weekly Mortgage News for October 28, 2011

This weeks top stories include how Europe is not moving fast enough to gain control of their debt crisis, how Toronto home prices have risen when compared to the same time last year and how the Toronto condo prices may be in for a correction as supply floods the market.

Europe debt crisis out of control

Finance Minister Jim Flaherty issued a stern warning about the need for Europe to solve their debt crisis this week during a speech in Dublin. He’s concerned that if the issue is not resolved it could set off another global recession. Flaherty addressed the European authorities in a stern manner for not moving fast enough to address the economic turmoil that’s hurting Italy, Greece and other economies in the Eurozone.

Flaherty commented by saying, “If this crisis is left unaddressed, it will eventually become too big for Europe to solve. This is why immediate action is needed. Delays will only make necessary choices more difficult, and this crisis more costly. What started as a sovereign debt crisis in smaller countries in Europe in the spring of 2010 has now spread to larger European countries, causing extreme stress in the European financial sector and threatening global growth.”

He went further by stating, “This is the world’s most immediate and pressing problem. It threatens Europe, and it threatens the strong, sustainable, and balanced growth that G20 countries have made their priority. It is threatening to bring the world to the verge of another recession. Too much time has been wasted. Too many opportunities have been missed. Unless decisive action is taken urgently, our nations will once again be forced to respond to a full-blown global crisis, albeit this time without the full arsenal of policy weapons at our disposal. Quite frankly, Europe’s response over the past year has been disappointing.”

He ended off by saying, “To be clear, this crisis could have been contained. Instead, it was allowed to grow. This crisis has now claimed Dexia and placed Europe’s banking sector in jeopardy. Is this not a sufficient signal that action is needed now? What will it take for Europe to take decisive action and put an end to this crisis, once and for all? The good news is that this crisis can still be contained and reversed, if nations summon the determination to do so. The bad news is that this crisis has already cost way too much. “

Read the full article here

Toronto home prices rise

Toronto has seen home prices increase yet again as housing sales continue to move forward. Newly listed homes were up 2.7% in the month of September when compared to the previous month and were up 11% when compared to the same period last year. This year saw 361 749 homes purchased and sold through the Multiple Listing Service (MLS) between January and September. That’s 1.2% higher than the same period last year according to statistics released by the Canadian Real Estate Association (CREA) this week Monday.

CREA president Gary Morse commented, “The Canadian housing market remains a bright spot against a backdrop of mixed headline news about the global economy.” Toronto housing continues to lead sales as seasonally adjusted home prices averaged $463 480 from January to September of this year. Home prices were up 7.6% during the period when compared to the same time last year. New listings are also on the rise, which is a good sign. Last year’s lack of listings, mixed with a higher demand for homes, led to bidding wars that helped inch up home prices past the normal levels. What do you think about our housing market? Please comment below.

Read the full article here

Condo correction may come

As stated in my previous posts, the Toronto condo market will soon be flooded with excess supply. It’s interesting how the newspapers are just catching up to this now. Major newspapers and economists are now stating that the market for condominiums in Toronto could see a 15% price correction. They went further to state that the condo market construction will also become stagnant over the next few years.

Bank of America Merrill Lynch Global Research released a report and commented, “We think investors are underestimating the wall of inventory about to come on the market in the next 12-24 months which could dampen price appreciation and investor returns.” The report also estimates that 60% of pre-construction sales in Toronto are to investors and flippers. Residential construction across Canada has continued to beat expectations with last week’s housing starts for the month of September coming in higher than expected at 206 000.

Writers of the report, Mr. Bohren and Ms. King stated, “Although this condo boom is generally seen nationwide, Toronto in particular has seen the strongest condo boom in over a decade with the number of condo units under construction at record levels. With apartment completions currently running at 18,000 and 37,000 condo units currently under construction, there is about 4.8 years’ worth of inventory in the pipeline.”

There is a large concern about the underestimation of the supply that is expected to reach the Toronto market within the next two years. An influx of supply will put downward pressure on resale prices and rents across the city. For a prime example, take a look at British Columbia who is currently going through a market correction of their own. They had a huge demand from 2000 to 2008 with construction increasing more than nine fold. When housing demand collapsed, construction continued to produce new units as inventory reached record levels. Now home prices remain 15% below the peak of 2008.

Although B.C. is an extreme example, due to the Olympics and an increase in demand prior to and after, it`s a good measuring tool. Toronto is looking like it is currently in the same down phase in the inventory cycle now when compared to B.C. This down phase is where prices stagnate or drop as construction activity also begins to decline. What do you think? Please comment below.

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Post from: paulsidhu.com

Weekly Mortgage News for October 21, 2011

Post from: paulsidhu.com

Weekly Mortgage News for October 21, 2011