No housing crash for Canada

Canada’s cooling housing market has made a soft landing with steady sales and pricing through the fall, providing further evidence of an expected gradual decrease rather than a U.S.-style housing market crash, according to a report released Tuesday.

“Canada’s national housing market is shifting toward a more sustainable path, though significant differences in regional conditions continue,” Adrienne Warren, Scotiabank’s senior economist, said in the report entitled Global Real Estate Trends.

Click Here to read the complete article via the Vancouver Sun

Is There Really a Housing Bubble?

Sagging home sales and flat ­prices have prompted speculation that the “housing bubble” might be about to burst — a prospect that immediately catches the attention of British Columbians.
But there is no housing bubble, according to Tsur Somerville, director of the University of B.C.’s Centre for Urban Economics in the Sauder School of Business.

“You can’t burst a bubble that wasn’t there,” said Somerville. “But you can have prices above where they should be and it not be a ­bubble.

For prices to go down ­significantly, contended Somerville, “You need people who have to sell, either because the economy has collapsed and they don’t have any income or developers have built a whole bunch of units that are unsold and the bank is screaming at them or foreclosing or something like that.”  None of those conditions appears imminent.

Somerville said it would take “some negative shock,” such as an ­economic meltdown or mortgage interest rates jumping from four per cent to nine or 10 per cent, to trigger lower prices.

“I don’t have a crystal ball but if I had to guess I would be more likely to guess this kind of lower sales/flat prices is more likely to continue.”

The B.C. Real Estate Association is more optimistic. Chief economist Cameron Muir is predicting increased sales in 2013 because of continuing low interest rates, population growth and more full-time jobs.  Employment growth in the ­Greater Vancouver area in the first ­seven months of the year, according to Muir, has been 3.5 to 4 per cent ­higher than the same period last year.

“I would expect to see sales pick up before the end of the year, at least on a seasonally adjusted basis,” Muir said.

Click here to read the complete article form the Vancouver Province.  

Market Update

There have been a couple of highlights for the Canadian housing market in the past week: the U.S. Federal Reserve announcement that it is committed to low interest rates until 2015 and the latest global housing outlook that puts this country in better shape than most. Anyone looking for a mortgage or a renewal will likely be heartened by the American central bank's interest rate pledge.

The commitment to low rates makes it harder, but not impossible, for the Bank of Canada to move on its desire to increase rates.  As for the global housing outlook, it shows Canadian prices continue to rise, albeit more slowly than a year ago. But around the world, countries showing price declines outnumbered gainers by more than two to one.

The Bank of Canada will maintain its rate

The Bank of Canada announced today it will maintain its overnight rate at 1% – while also hinting at the future withdrawal of that stimulus.

“In Canada, while global headwinds continue to restrain economic activity, underlying momentum remains at a pace roughly in line with the economy’s production potential,” writes the Central Bank in its rate review statement. “Economic growth is expected to pick up through 2013, with consumption and business investment continuing to be its principal drivers, reflecting very stimulative financial conditions.”

The current conditions, at least globally, don’t paint quite so rosy a picture. The bank points to “widespread slowing of activity across advanced and emerging economies,” a plodding US economy and a recession-rife Europe.
 These factors will continue to keep interest rates low which will allow Canadians to borrow money at record lows.  BoC is not expected to raise the overnight rate until 2013. 

Home prices to increase in 2013

Canada Mortgage and Housing Corporation is forecasting a stable housing market for British Columbia with light upticks in sales numbers, average prices and housing starts in 2013.

“Factors in 2013 driving the housing market are expected to be a little bit stronger,” Carol Frketich, B.C. regional economist for CMHC said. “There is expected to be a bit of a pick up in job growth next year, economic growth and demographic growth as well.”

Average prices, which are down about five per cent in Vancouver this year from last year, are expected to climb about 2.6 per cent by 2013, both in Vancouver and across B.C.

Please click here to read the complete Vancouver Sun article. 

Bank of Canada holds on interest rate

As expected the Bank of Canada is holding its benchmark, overnight rate at 1% for the 15th consecutive setting. In the accompanying policy statement the bank said the decision was made in light of the current global economic situation. It also downgraded this year’s economic growth projection from 2.4% to 2.1%.

A growing number of analysts have been backing up the time line for an interest rate hike by the Bank of Canada. Through the last quarter of 2011 and the first quarter of this year the call was for a 25 to 50 basis point hike by late 2012 or early next year. Now that’s being rolled back to the middle of 2013.

Mortgage ratees continue to stay low

Canadian fixed mortgage rates continue to stay at record lows.  The bank of Canada was forced to keep its overnight rate at 1% (bank prime 3%) on the last announcement June 5th.  It acknowledged the European debt crisis has caused a sharp deterioration in the global sector.  The BoC has not increased rates since September 2010 and is clearly in a holding pattern.

Economists are now speculating it could be some time before rates increase and some are even calling for a possible decrease if the Global crisis don't improve.  Either way this is good news for Canadians who want to borrow money.

When interest rates are low it effects all aspects of credit, from car loans, lines of credit, and the biggest of all mortgages.

With 5 year fixed rates as low as 2.99% many people are refinancing their current mortgages into lower rates and to consolidate higher credit card debt, allowing them to save thousands of dollars in interest.

Bank of Canada looks trapped on interest rate

Looks like the BoC will be forced to keep interest rates at 1% (bank rate 3%) next Tuesday June 5th.  Negative Growth in the global economy as well as well as lower than expected GDP growth of 1.5% compared to the forecast of 2.5% are key factors.

With the CDN dollar still overvalued, and the US federal reserve looking to keep it interest rate on hold until 2014, combined with the ongoing European mess continue to give good reason the Bank of Canada's best options will be to continue to exercise its wait and see approach. 

This is good new for borrowers looking to purchase/upgrade on property or refinance an existing mortgage as rates are at all time lows once again with a 5 year fixed rate of 3.09%. 

Click here to read the complete Globe and Mail article

Its not just about the intererst rate

Finding a good mortgage rate online is a cinch. Anyone who has ever looked for rate comparison sites knows the Internet is packed with them.

But determining the best mortgage term – the length of the mortgage contract – is trickier because up-to-date term comparisons are hard to find.

Although mortgage terms are often overshadowed by the intense focus on mortgage rates, it pays to put a lot of thought into term selection. It’s the No 1 factor in determining how much interest you’ll fork over to a lender.

If you pick a closed mortgage with the wrong term, you’re stuck with that rate until maturity, unless you cough up a penalty to break the mortgage. Worse yet, if you choose a “no-frills” mortgage – one with lower rates in exchange for more restrictions – you’re often barred from leaving your lender for the duration of the term, unless you sell the property.

Click here to read the complete Globe and Mail article

The Bank of Canada left its main interest rate untouched at 1% Tuesday   while
painting a brighter economic outlook and hinting for the first time since last
summer that it’s beginning to look for an opportunity to raise borrowing costs.

The decision to stand pat for a 13th consecutive meeting was expected. But
after weeks of sunnier rhetoric from Governor Mark Carney amid a strengthening
domestic recovery, Bay Street analysts had been debating how far he would go in
trying to reshape expectations that he may be on hold until late next year.

The statement on Tuesday’s decision was vague about timing, saying only that it
may become necessary to increase rates, but that this would depend on “domestic
and global economic developments.” But, just by saying so, Carney is clearly
starting to lay the groundwork for rate hikes if the Canadian economy and the
global backdrop continue to improve. Significantly, he boosted his 2012 growth
forecast for Canada by four tenths of a percentage point, to 2.4%. And though
he cut his 2013 forecast by the same amount, to 2.4%, the slack in the economy
is now projected to be chewed up in the first half of 2013 instead of in the
third quarter of next year, so possibly six months earlier.

Flaherty anounces budget. No changes to mortgage rules

Finance Minister rejected calls to tinker with mortgage insurance rules, offering a budget that leaves the maximum amortization cap at 30 years and the minimum down payment at 5 per cent.

With the budget announcement, Flaherty effectively rejected a chorus of banker calls for a 25-year amortization cap, down from the 30 years the government now allows. Some economists also wanted the government to increase down payment requires to a minimum 7- or 10-per cent.

Both suggestions were billed as a way of cutting record levels of household debt and slow down the consumer rush to buy homes.

What you need to know about buying U.S. real estate

The financial crisis that began in 2007 with the breakdown of the U.S. residential mortgage market still persists for millions of Americans who have lost their houses, their jobs and all hope of a secure retirement.

As a result, residential real estate prices in the hardest-hit areas such as California, Arizona, Nevada and Florida are well below replacement value (i.e., the land is valued at zero), leading many analysts to conclude that prices must be near, if not already at, the bottom.

Taken together, these facts seem to suggest that Canadians have a once-in-a-lifetime opportunity: To buy U.S. real estate in desirable locations at historically low prices using cheap U.S. dollars. Seems like a slam dunk, right? Maybe. But there are a number of factors to consider before pulling out your cheque book and booking a flight.

If you have always wanted a vacation home in the sun and are planning to buy a property that you will use yourself, then this seems like the perfect time to buy. In addition to enjoying your new home for years to come, it is more than likely that it will appreciate in value during that time.

If you are approaching the opportunity strictly as an investor, with the basic plan of buy-rent-sell.

Click here to see the following list of what to expect.

Canada housing prices won’t crash: poll

OTTAWA — Canada’s government will make it tougher for many homebuyers to get mortgages this year as it grapples with an overheated property market, according to analysts in a Reuters poll, who also ruled out the prospect that prices could suddenly crash.

Ten of 14 economists and strategists surveyed last week in Reuters’ first poll on the Canadian housing sector answered “yes” when asked if they thought Ottawa would tighten mortgage rules within the next 12 months.

Any move would likely come before the prime spring real estate season, analysts said. “Sometime between now and the next budget,” said Benoit Durocher, senior economist at Desjardins in Montreal, on the timing of such a move.

Housing Market has 2 good years ahead!

Canada’s housing market has two good years ahead of it yet, CMHC said Monday, with low interest rates and a “moderately” expanding economy keeping price corrections at bay.

Canadian banks have recently issued reports probing the consequences of cheap money, and trying to predict whether there is a bubble in prices that will eventually pop and cause prices to crash. They are particularly concerned about Vancouver and Toronto, where some have predicted price corrections of up to 10% because of overbuilding in the condo market.

But CMHC said Monday Canadian markets would “remain steady in 2012 and 2013.”

Click here to read the complete article form the Globe and Mail

Carney Holds Rates Steady

Mark Carney held the overnight interest rate at 1% for the 11th consecutive meeting. Bond yields have also dropped to record lows in the past few weeks which have pushed CDN lending institutions to cut the 5 year rate to as low as 2.99% and the 10 year fixed rate to a record low of 3.89%.

Carney noted he is worried about the level of Canadian household debt with these low interest rates, but said the economy is too weak to justify higher rates anytime soon.

Bank of Canada seen on hold until 2013

A deteriorating European with slower growth and the longer we go without economy and weak global growth will keep the Bank of Canada from raising rates for at least another year, though an interest rate cut looks highly unlikely, according to a Reuters survey

The Reuters poll of 41 economists and strategists released on Tuesday showed the median forecast for the next interest rate hike was pushed back by three months to the first quarter of 2013 from the fourth quarter of 2012 projected in a November poll. The Bank of Canada's target for the overnight rate - its main policy rate - has been at 1 percent for more than a year.

Click here to read the complete article from Reuters Canada