First-time home buyers should be prepared, rather than surprised, by extra costs
by David Friend, THE CANADIAN PRESS
TORONTO - First-time homebuyers are scouring the market for deals, hoping to take advantage of lower prices but real estate and mortgage experts caution that shoppers need to consider the wide array costs that come with buying a home - including ones that aren't immediately obvious.
They say it's part of a planning process that should start long before the house hunt begins.
Dianne Usher, division vice-president for Royal LePage, says first-time buyers need to run through a checklist of the essential services that will add extra costs to their bottom line.
"Some of the costs that people tend to forget about, or are unaware of, are legal fees," she said.
"They're going to need a lawyer to search and confirm title to the property, physically close the transaction, to register and prepare any charge or mortgage documents.
"They're going to arrange for title insurance, which for some lawyers is an additional cost."
Then there are other factors, like initial property deposits, which are part of down payments, Usher said. Those can increase up-front costs by as much as five per cent, she suggested.
It's a confusing process for those who haven't done it before, which is why it's best to start planning early.
"When I get a client sitting down with me, we actually have a closing cost sheet," said Jeff Mayer, an agent at Mortgage Intelligence, a Toronto-area mortgage broker.
He said making a detailed list helps potential buyers determine whether they can afford that dream home they always wanted, or if they should scale back their expectations to something more reasonably priced.
Mayer said his sheets break down monthly expenses and assess general affordability factors. He said he'll ask clients to determine their maximum, medium and "comfort level" mortgage approval.
"You want to look at the actual payment on that house, meaning the mortgage with mortgage insurance," he said.
"You want to look at what your average household costs are - meaning the heat, hydro, gas, maintenance on the property, and from there you want to see if that's something you can sleep with at night."
"I always tell my clients to downgrade whatever they want to buy. So if they want to buy $500,000 buy $450,000."
Usher said that homebuyers need to choose a knowledgeable local realtor with a good reputation.
"It's always good to choose a realtor that has been referred to you by somebody who has been pleased by their service," she said.
"In some major urban centres there is a higher level of activity than a suburb environment. Sometimes the buyers can get caught up in a frenzy and not do their homework."
Once a deal is secured, and financing worked out, there can be other surprises along the way, Usher added.
"The physical cost of moving is often more than two cases of beer and five pizzas," she said.
And "a resale unit may be untidy, so it might be necessary to arrange for some professional cleaning to be done."
For new home buyers, the Ontario government plans to blend the federal GST with the provincial sales tax next year, which could significantly increase the final price.
On new homes, where GST is already included, the tax harmonization will apply another eight per cent provincial tax to houses worth more than $500,000.
New homes worth under $400,000 will not face the additional tax, while those between $400,000 and $500,000 will pay the tax but get a rebate.
However, Usher noted that there are some refunds for first-time homebuyers, including a provincial land transfer tax rebate of up to $2,000.
In Toronto, where there is also a municipal land transfer tax, first-time buyers can get up to $3,725 back.
Some provinces also offer "green incentive" rebates for energy efficient homes.
Friday, May 29, 2009
Tuesday, May 26, 2009
Affordability and job security most important factors for first-time home buyers
New government incentives help but market fundamentals more important,
Canadians say
TORONTO, May 26 /CNW/ - Canadians who are considering purchasing their
first home are primarily motivated by lower home prices and very low interest rates, but some require confidence in the economy and their employment
prospects before they will enter the market, according to a report released
today by Royal Le Page Real Estate Services. Eighty-six per cent of potential first-time buyers say low interest rates make them more likely to purchase a home; 81 per cent cite lower housing prices as a motivating factor; while 76 per cent cite job security and 64 per cent say a stable economy is an important factor in their decision to buy.
Potential buyers were asked to rank their top incentives for purchasing a
first property. While home prices and interest rates took the number one and
two rankings, respectively, the third most popular incentive was the
First-Time Home Buyers' Tax Credit. The recently introduced Home Renovation Tax Credit for 2009 was cited by 42 per cent of potential first-time buyers as either 'very likely' or 'somewhat likely' to impact their purchasing decision.
"When first time buyers stepped out of the market in the fourth quarter of 2008, at the height of the global recession, their absence was profoundly felt. Without significant volumes of entry-level homes trading hands, the entire market limped through the winter months. First time buyers are back in force this spring, and with them the beginnings of a market recovery. While these consumers appreciate government incentives such as tax credits, greater RSP deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card," said Phil Soper, president and chief executive of Royal LePage Real Estate Services.
"Our survey demonstrates how important affordability factors such as interest rates and house prices are in stimulating demand."
Across the country, potential first-time homebuyers agreed that affordability was their top consideration, however the survey also revealed differences amongst buyers in various regions of Canada. In provinces such as British Columbia where high housing prices have kept some buyers out of the market in recent years, 92 per cent of potential first-time buyers are now motivated by low interest rates and 96 per cent say lower home prices are likely to prompt them to buy.
In Atlantic Canada, where local economies have been resilient in the face of a worldwide recession and housing markets remain stable, 43 per cent of first-time buyers say they that job security is a factor in their decision to buy, while 84 per cent of buyers in British Columbia and Alberta said job security will influence them.
Atlantic Canadians were less motivated than other Canadians by declining interest rates, with only 72 per cent saying it will likely prompt a buying decision, compared to 86 per cent of Canadians overall. Buyers in Ontario and Quebec rated the Home Renovation Tax Credit as a bigger factor in their buying decision, compared to the Canadian average.
Mr Soper continued, "The significant response differences from region to region show how closely the residential real estate market is tied to broader economic trends and consumer confidence. Buying your first home is a major life decision, and people are more likely to purchase a home if they feel comfortable about the state of the economy and confident that they will have a job to support their new mortgage obligation."
Top Incentives for First-Time Buyers Across Canada
Potential first-time buyers were asked to choose their number one incentive for purchasing a first property. The table shows the percentage of respondents who selected each factor as their top incentive.
-------------------------------------------------------------------------
BC &
Overall Territories Alberta Prairies Ontario Quebec Atlantic
-------------------------------------------------------------------------
Lower Housing
Prices 33% 49% 48% 55% 32% 13% 26%
-------------------------------------------------------------------------
Low Interest
Rates 27% 32% 29% 4% 23% 41% 17%
-------------------------------------------------------------------------
First-Time Home
Buyers' Tax
Credit 12% 3% 10% 22% 15% 11% 10%
-------------------------------------------------------------------------
Job Security 10% 6% 5% 2% 10% 16% 15%
-------------------------------------------------------------------------
Additional
Government
Actions to
Stabilize
Housing less less
Markets 3% 3% than 1% 10% 3% 4% than 1%
-------------------------------------------------------------------------
Home Renovation less
Tax Credit 2% 1% than 1% 1% 1% 3% 11%
-------------------------------------------------------------------------
Stable less less less
Economy 2% 2% than 1% than 1% 3% 2% than 1%
-------------------------------------------------------------------------
Greater RSP
Deduction less less less
Limits 1% than 1% 1% than 1% 1% 1% than 1%
-------------------------------------------------------------------------
Stable
Financial less less less less less less
Markets than 1% than 1% than 1% than 1% 1% than 1% than 1%
-------------------------------------------------------------------------
REGIONAL SUMMARIES
Alberta
Alberta's urban centres continue to be popular with first-time buyers, who make up nearly a third of home sales in both Calgary and Edmonton.
Condominiums and detached bungalows are the most popular choices for first-time buyers in Edmonton, where lower housing prices and low interest rates are the biggest incentives for buyers entering the market for the first time. Popular areas for new buyers include the suburbs, where a new condominium may be within budget, the university area, where many parents are buying for their kids, Allendale and McKernan. In Calgary, new buyers are most interested in inner city condominiums and detached houses in the suburbs, with many seeking new or renovated homes.
British Columbia
With home prices either flat or declining in many communities in British Columbia and with interest rates at record lows, first-time buyers are taking advantage of greater affordability, with female buyers leading the trend.
Sixty per cent of the buyers getting into BC's housing market for the first time are women. In British Columbia, 40 per cent of prospective first-time buyers intend to purchase a 'fixer-upper' while 80 per cent would take advantage of the Federal Government's Home Renovation Tax Credit in making upgrades to a home. First-time buyers in Vancouver are favouring condominiums and townhomes, however an increasing number of entry-level buyers are finding affordable detached homes outside the city in the Fraser Valley suburbs.
New government incentives help but market fundamentals more important,
Canadians say
TORONTO, May 26 /CNW/ - Canadians who are considering purchasing their
first home are primarily motivated by lower home prices and very low interest rates, but some require confidence in the economy and their employment
prospects before they will enter the market, according to a report released
today by Royal Le Page Real Estate Services. Eighty-six per cent of potential first-time buyers say low interest rates make them more likely to purchase a home; 81 per cent cite lower housing prices as a motivating factor; while 76 per cent cite job security and 64 per cent say a stable economy is an important factor in their decision to buy.
Potential buyers were asked to rank their top incentives for purchasing a
first property. While home prices and interest rates took the number one and
two rankings, respectively, the third most popular incentive was the
First-Time Home Buyers' Tax Credit. The recently introduced Home Renovation Tax Credit for 2009 was cited by 42 per cent of potential first-time buyers as either 'very likely' or 'somewhat likely' to impact their purchasing decision.
"When first time buyers stepped out of the market in the fourth quarter of 2008, at the height of the global recession, their absence was profoundly felt. Without significant volumes of entry-level homes trading hands, the entire market limped through the winter months. First time buyers are back in force this spring, and with them the beginnings of a market recovery. While these consumers appreciate government incentives such as tax credits, greater RSP deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card," said Phil Soper, president and chief executive of Royal LePage Real Estate Services.
"Our survey demonstrates how important affordability factors such as interest rates and house prices are in stimulating demand."
Across the country, potential first-time homebuyers agreed that affordability was their top consideration, however the survey also revealed differences amongst buyers in various regions of Canada. In provinces such as British Columbia where high housing prices have kept some buyers out of the market in recent years, 92 per cent of potential first-time buyers are now motivated by low interest rates and 96 per cent say lower home prices are likely to prompt them to buy.
In Atlantic Canada, where local economies have been resilient in the face of a worldwide recession and housing markets remain stable, 43 per cent of first-time buyers say they that job security is a factor in their decision to buy, while 84 per cent of buyers in British Columbia and Alberta said job security will influence them.
Atlantic Canadians were less motivated than other Canadians by declining interest rates, with only 72 per cent saying it will likely prompt a buying decision, compared to 86 per cent of Canadians overall. Buyers in Ontario and Quebec rated the Home Renovation Tax Credit as a bigger factor in their buying decision, compared to the Canadian average.
Mr Soper continued, "The significant response differences from region to region show how closely the residential real estate market is tied to broader economic trends and consumer confidence. Buying your first home is a major life decision, and people are more likely to purchase a home if they feel comfortable about the state of the economy and confident that they will have a job to support their new mortgage obligation."
Top Incentives for First-Time Buyers Across Canada
Potential first-time buyers were asked to choose their number one incentive for purchasing a first property. The table shows the percentage of respondents who selected each factor as their top incentive.
-------------------------------------------------------------------------
BC &
Overall Territories Alberta Prairies Ontario Quebec Atlantic
-------------------------------------------------------------------------
Lower Housing
Prices 33% 49% 48% 55% 32% 13% 26%
-------------------------------------------------------------------------
Low Interest
Rates 27% 32% 29% 4% 23% 41% 17%
-------------------------------------------------------------------------
First-Time Home
Buyers' Tax
Credit 12% 3% 10% 22% 15% 11% 10%
-------------------------------------------------------------------------
Job Security 10% 6% 5% 2% 10% 16% 15%
-------------------------------------------------------------------------
Additional
Government
Actions to
Stabilize
Housing less less
Markets 3% 3% than 1% 10% 3% 4% than 1%
-------------------------------------------------------------------------
Home Renovation less
Tax Credit 2% 1% than 1% 1% 1% 3% 11%
-------------------------------------------------------------------------
Stable less less less
Economy 2% 2% than 1% than 1% 3% 2% than 1%
-------------------------------------------------------------------------
Greater RSP
Deduction less less less
Limits 1% than 1% 1% than 1% 1% 1% than 1%
-------------------------------------------------------------------------
Stable
Financial less less less less less less
Markets than 1% than 1% than 1% than 1% 1% than 1% than 1%
-------------------------------------------------------------------------
REGIONAL SUMMARIES
Alberta
Alberta's urban centres continue to be popular with first-time buyers, who make up nearly a third of home sales in both Calgary and Edmonton.
Condominiums and detached bungalows are the most popular choices for first-time buyers in Edmonton, where lower housing prices and low interest rates are the biggest incentives for buyers entering the market for the first time. Popular areas for new buyers include the suburbs, where a new condominium may be within budget, the university area, where many parents are buying for their kids, Allendale and McKernan. In Calgary, new buyers are most interested in inner city condominiums and detached houses in the suburbs, with many seeking new or renovated homes.
British Columbia
With home prices either flat or declining in many communities in British Columbia and with interest rates at record lows, first-time buyers are taking advantage of greater affordability, with female buyers leading the trend.
Sixty per cent of the buyers getting into BC's housing market for the first time are women. In British Columbia, 40 per cent of prospective first-time buyers intend to purchase a 'fixer-upper' while 80 per cent would take advantage of the Federal Government's Home Renovation Tax Credit in making upgrades to a home. First-time buyers in Vancouver are favouring condominiums and townhomes, however an increasing number of entry-level buyers are finding affordable detached homes outside the city in the Fraser Valley suburbs.
Thursday, May 21, 2009
New numbers give hope for early recovery
JULIAN BELTRAME
THE CANADIAN PRESS
OTTAWA -- The hair-raising plunge in the world and Canadian economies this winter is showing signs of levelling off as new evidence emerged yesterday pointing to improving conditions.
Economic growth is still months away, say economists, but with each "less bad'' indicator that is posted, fear of continued free-fall is being replaced by cautious optimism.
"I'm in the glass half-full camp,'' said Bank of Montreal deputy chief economist Douglas Porter. "The way the financial markets are going, I think it's quite possible we'll see a recovery sooner than the end of the year. It seems the optimism is becoming more infectious around the world, and that's a good thing.''
The glass half-empty camp argues that financial markets, while much improved, remain risk adverse and that the recovery may be too dependent on temporary massive government stimulus to be sustained.
Yesterday saw more reasons to support a growing consensus that sees global economies starting to come out of the nightmare of the past few months.
* Canada's inflation rate fell to a near 15-year low of 0.4 per cent in April, a clear signal of economic weakness but because the plunge was due to a single-factor -- lower gasoline prices compared to last year -- the steep drop was not worrisome.
* The country's leading indicator of future economic activity rose 0.5 per cent last month over March, the first sign of life in eight months.
* As significant, a survey of 220 fund managers by Bank of America-Merrill Lynch showed the bulls are waking from their slumber, with 57 per cent of managers forecasting a stronger global economy in the next 12 months.
"The unrelenting gloom of a mere three months ago has been replaced by a fairly typical early-cyclical sentiment, with the only hint of potential irrational exuberance in emerging markets,'' the global investment bank said.
The May survey showed that fund managers are still reluctant to jump into the market with both feet as asset allocations remain underweight in securities by six per cent, but that is less than the minus-17 per cent number found in the April survey.
Merrill Lynch analysts said there is still a risk of "too much, too soon'' with the stock markets rally of the past two months, but noted that unlike last fall and early 2009, investors now appear willing to shrug off bad news in expectation the economy will indeed recover.
The past month has seen the emergence of a number of so-called "green shoots'' that point to an improving economic landscape.
After a correction last week, Toronto's stock exchange was back over the 10,000-point line this week.
More bad news is on the way as countries start reporting first-quarter gross domestic product retreats in the next few weeks.
Japan said yesterday its economy contracted a massive 15.2 per cent, the most since it began to keep records in 1955.
The Bank of Canada forecasts Canada's first quarter GDP contraction will top seven per cent when all the data is available in two weeks, also the worst performance since records began in 1961.
But these numbers represent a rear-view mirror of the economy, say analysts, something markets have already left behind.
Economists also judged that the Bank of Canada is now less likely to resort to extraordinary measures because the risk of further steep contraction has diminished.
In a speech Tuesday, Bank of Canada deputy governor John Murray said the bank's action of dropping the policy rate to 0.25 per cent -- and vowing to keep it there for the next year -- has succeeded in improving credit.
JULIAN BELTRAME
THE CANADIAN PRESS
OTTAWA -- The hair-raising plunge in the world and Canadian economies this winter is showing signs of levelling off as new evidence emerged yesterday pointing to improving conditions.
Economic growth is still months away, say economists, but with each "less bad'' indicator that is posted, fear of continued free-fall is being replaced by cautious optimism.
"I'm in the glass half-full camp,'' said Bank of Montreal deputy chief economist Douglas Porter. "The way the financial markets are going, I think it's quite possible we'll see a recovery sooner than the end of the year. It seems the optimism is becoming more infectious around the world, and that's a good thing.''
The glass half-empty camp argues that financial markets, while much improved, remain risk adverse and that the recovery may be too dependent on temporary massive government stimulus to be sustained.
Yesterday saw more reasons to support a growing consensus that sees global economies starting to come out of the nightmare of the past few months.
* Canada's inflation rate fell to a near 15-year low of 0.4 per cent in April, a clear signal of economic weakness but because the plunge was due to a single-factor -- lower gasoline prices compared to last year -- the steep drop was not worrisome.
* The country's leading indicator of future economic activity rose 0.5 per cent last month over March, the first sign of life in eight months.
* As significant, a survey of 220 fund managers by Bank of America-Merrill Lynch showed the bulls are waking from their slumber, with 57 per cent of managers forecasting a stronger global economy in the next 12 months.
"The unrelenting gloom of a mere three months ago has been replaced by a fairly typical early-cyclical sentiment, with the only hint of potential irrational exuberance in emerging markets,'' the global investment bank said.
The May survey showed that fund managers are still reluctant to jump into the market with both feet as asset allocations remain underweight in securities by six per cent, but that is less than the minus-17 per cent number found in the April survey.
Merrill Lynch analysts said there is still a risk of "too much, too soon'' with the stock markets rally of the past two months, but noted that unlike last fall and early 2009, investors now appear willing to shrug off bad news in expectation the economy will indeed recover.
The past month has seen the emergence of a number of so-called "green shoots'' that point to an improving economic landscape.
After a correction last week, Toronto's stock exchange was back over the 10,000-point line this week.
More bad news is on the way as countries start reporting first-quarter gross domestic product retreats in the next few weeks.
Japan said yesterday its economy contracted a massive 15.2 per cent, the most since it began to keep records in 1955.
The Bank of Canada forecasts Canada's first quarter GDP contraction will top seven per cent when all the data is available in two weeks, also the worst performance since records began in 1961.
But these numbers represent a rear-view mirror of the economy, say analysts, something markets have already left behind.
Economists also judged that the Bank of Canada is now less likely to resort to extraordinary measures because the risk of further steep contraction has diminished.
In a speech Tuesday, Bank of Canada deputy governor John Murray said the bank's action of dropping the policy rate to 0.25 per cent -- and vowing to keep it there for the next year -- has succeeded in improving credit.
Tuesday, May 19, 2009
'Banking crisis over' says CIBC economist
Jobs and housing still must recover
May 16, 2009
Julian Beltrame
The Canadian Press
OTTAWA
The financial crisis that plunged the world into the worst recession in decades is showing signs of having righted itself.
A proclamation of the welcome development came at the same time that data showed the Canadian economy took another hard knock in March, with manufacturing sales falling 2.7 per cent, reversing a February pickup.
The cheerier harbinger is a steady reduction in global credit spreads -- the gaps between interest rates on low-risk government bonds and higher-yielding corporate and other debt -- which suggest that the financial meltdown is on course to being resolved.
"The banking crisis is over,'' declared the headline in a note yesterday from CIBC World Markets chief economist Avery Shenfeld.
"Nobody now expects there's another Lehman out there,'' Shenfeld wrote, referring to the mid-September collapse of U.S. investment bank Lehman Brothers, which jolted financial markets around the world.
"Nor will banks be pushed into a fire sale of assets that would depress valuations of like assets on other banks' balance sheets.''
The three-month London Interbank Offered Rate, a benchmark for lending between banks, was down 10 basis points on the week to 0.84 per cent, reducing bank funding costs.
Some base rates were the lowest since the U.S. subprime mortgage crisis erupted in the summer of 2007.
Pointing to narrowing credit spreads and improved interbank lending, Shenfeld said a turning point in the U.S. crisis was reached with the Obama administration's rescue measures.
Bank of Montreal economist Sal Guatieri said he also was encouraged by narrowing credit spreads.
"It means borrowing costs will be coming down for a wide range of borrowers, because a lot of variable-rate mortgages and a lot of personal and business loans are tied to the LIBOR rates,'' he said.
Guatieri cautioned that weakness remains in the economy and he is not ready to declare an all-clear until he sees improvement in job creation and housing, particularly in the United States.
Yesterday's data on Canadian manufacturing showed that the recovery will not be a "neat, straight-line'' move, noted economist Derek Holt of Scotia Capital.
The surprising 2.7 per cent tumble in factory sales in March left them down 23 per cent from their peak last July, despite a bounce in auto shipments following assembly-plant shutdowns in January and February.
The retreat was widespread, and with more auto sector retrenchment on stream, the manufacturing picture only looks bleaker down the road.
"Manufacturers are reining in production, but not as quickly as sales are plummeting,'' said Grant Bishop at TD Economics.
"Downward pressure on Canadian manufacturers will continue throughout the next two quarters.''
Jobs and housing still must recover
May 16, 2009
Julian Beltrame
The Canadian Press
OTTAWA
The financial crisis that plunged the world into the worst recession in decades is showing signs of having righted itself.
A proclamation of the welcome development came at the same time that data showed the Canadian economy took another hard knock in March, with manufacturing sales falling 2.7 per cent, reversing a February pickup.
The cheerier harbinger is a steady reduction in global credit spreads -- the gaps between interest rates on low-risk government bonds and higher-yielding corporate and other debt -- which suggest that the financial meltdown is on course to being resolved.
"The banking crisis is over,'' declared the headline in a note yesterday from CIBC World Markets chief economist Avery Shenfeld.
"Nobody now expects there's another Lehman out there,'' Shenfeld wrote, referring to the mid-September collapse of U.S. investment bank Lehman Brothers, which jolted financial markets around the world.
"Nor will banks be pushed into a fire sale of assets that would depress valuations of like assets on other banks' balance sheets.''
The three-month London Interbank Offered Rate, a benchmark for lending between banks, was down 10 basis points on the week to 0.84 per cent, reducing bank funding costs.
Some base rates were the lowest since the U.S. subprime mortgage crisis erupted in the summer of 2007.
Pointing to narrowing credit spreads and improved interbank lending, Shenfeld said a turning point in the U.S. crisis was reached with the Obama administration's rescue measures.
Bank of Montreal economist Sal Guatieri said he also was encouraged by narrowing credit spreads.
"It means borrowing costs will be coming down for a wide range of borrowers, because a lot of variable-rate mortgages and a lot of personal and business loans are tied to the LIBOR rates,'' he said.
Guatieri cautioned that weakness remains in the economy and he is not ready to declare an all-clear until he sees improvement in job creation and housing, particularly in the United States.
Yesterday's data on Canadian manufacturing showed that the recovery will not be a "neat, straight-line'' move, noted economist Derek Holt of Scotia Capital.
The surprising 2.7 per cent tumble in factory sales in March left them down 23 per cent from their peak last July, despite a bounce in auto shipments following assembly-plant shutdowns in January and February.
The retreat was widespread, and with more auto sector retrenchment on stream, the manufacturing picture only looks bleaker down the road.
"Manufacturers are reining in production, but not as quickly as sales are plummeting,'' said Grant Bishop at TD Economics.
"Downward pressure on Canadian manufacturers will continue throughout the next two quarters.''
Thursday, May 14, 2009
Existing homes sales rise most in five years
National Post
Canadian sales of existing homes rose the most in more than five years in April, a realtor group said, citing lower prices and a rebound in consumer confidence.
Canadian sales of existing homes rose the most in more than five years in April, a realtor group said, citing lower prices and a rebound in consumer confidence.
Sales rose 11% from the previous month on a seasonally adjusted basis to 34,838 units, the Canadian Real Estate Association said Thursday in a statement from Ottawa. The average price fell 3.2% from a year earlier to $306,366.
"Price adjustments in some markets have helped affordability," Dale Ripplinger, the group's president, said in the statement. Consumer confidence has also "risen in the housing market through the spring."
The housing market sagged late last year as the country entered its first recession since 1992, and the Bank of Canada says it will be a drag on the economy this year. Other recent reports have shown housing starts fell to the lowest since 1996 in April, while residential building permits rose 5% in March, according to Statistics Canada figures.
From a year ago, existing sales declined 12%, the real estate group's report today said. The pace of year-over-year decline has slowed from November's record 42% drop.
Monday, May 11, 2009
Housing market coming out of 'hibernation': Scotia
Financial Post
OTTAWA — The Canadian housing market seems to be “emerging from its winter hibernation,” says a report released by Scotia Economics on Tuesday.
The Bank of Nova Scotia’s economic-research division said existing-home sales strengthened in February and March, and preliminary reports indicate this trend continued in April.
The report said a rise in demand and drop in new listings has resulted in the housing market moving closer to being “balanced.” The listings-to-sales ratio averaged 2.2 in March, Scotia said, down from its peak of 2.7 in November. A ratio of 2 is considered balanced.
Scotia said home prices “steadied” in February and March, but still remain down almost eight per cent from a year earlier, or about five per cent when adjusting for heavy sales fluctuations in certain regions.
Adrienne Warren, senior economist with Scotia Economics, said it now seems that housing prices will not fall the full 10 per cent this year she had anticipated, and the drop in resales should be at the low end of her forecast for a 15 to 20 per cent decline.
“Nonetheless, we still feel there is more downside than upside risk to home sales and prices,” she said, in a statement. “The significant deterioration in domestic labour markets in recent months suggests little prospect for a major resurgence in demand near-term.”
In contrast to the resale market, Scotia said in its report Tuesday that the retrenchment in the housing-construction industry is happening quicker than anticipated. It said builders are adjusting to the lower-pricing environment and rising inventories.
Scotia said there was an annualized rate of 139,000 housing starts in this year’s first quarter, the lowest in a decade. It downgraded its overall forecast for this year to 140,000 housing starts from 155,000.
Financial Post
OTTAWA — The Canadian housing market seems to be “emerging from its winter hibernation,” says a report released by Scotia Economics on Tuesday.
The Bank of Nova Scotia’s economic-research division said existing-home sales strengthened in February and March, and preliminary reports indicate this trend continued in April.
The report said a rise in demand and drop in new listings has resulted in the housing market moving closer to being “balanced.” The listings-to-sales ratio averaged 2.2 in March, Scotia said, down from its peak of 2.7 in November. A ratio of 2 is considered balanced.
Scotia said home prices “steadied” in February and March, but still remain down almost eight per cent from a year earlier, or about five per cent when adjusting for heavy sales fluctuations in certain regions.
Adrienne Warren, senior economist with Scotia Economics, said it now seems that housing prices will not fall the full 10 per cent this year she had anticipated, and the drop in resales should be at the low end of her forecast for a 15 to 20 per cent decline.
“Nonetheless, we still feel there is more downside than upside risk to home sales and prices,” she said, in a statement. “The significant deterioration in domestic labour markets in recent months suggests little prospect for a major resurgence in demand near-term.”
In contrast to the resale market, Scotia said in its report Tuesday that the retrenchment in the housing-construction industry is happening quicker than anticipated. It said builders are adjusting to the lower-pricing environment and rising inventories.
Scotia said there was an annualized rate of 139,000 housing starts in this year’s first quarter, the lowest in a decade. It downgraded its overall forecast for this year to 140,000 housing starts from 155,000.
Quantitative easing: What is it?
CBC News
What is quantitative easing?
Quantitative easing is a term used to describe a process whereby central banks "print" more money (money is generally created electronically these days) and use it to buy assets such as government and corporate bonds held by commercial banks and other financial institutions. Buying the bonds decreases their supply in the market and pushes up prices, which in turn drives down yields or interest rates. Since bond yields are used to set long-term interest rates for mortgages and most business lending, this should have the effect of reducing the cost of borrowing. By selling the bonds, the financial institutions get an infusion of cash that enables them to lend more money and help generate economic activity.
Why is quantitative easing being used?
Normally central banks try to increase the amount of lending and economic activity by cutting interest rates. But with central bank rates at historic lows — 0.25 per cent in Canada and 0 to 0.25 per cent in the U.S. — the availability of credit remains tight and demand relatively weak. So policy makers find themselves having to come up with other ways to boost lending and spending.
Bank of Canada Governor Mark Carney has expressed reservations about quantitative easing.Bank of Canada Governor Mark Carney has expressed reservations about quantitative easing. (Sean Kilpatrick/Canadian Press)Who is using the process?
The U.S. Federal Reserve and the Bank of England are both engaged in quantitative easing, with the U.S. central bank indicating it will buy up more than a trillion dollars worth of debt. The Bank of Canada is not and has expressed reservations about the process, which economists view as an experiment.
Will it work?
It's too early to say. Reducing central bank rates practically to zero was supposed to unlock credit and spur borrowing, but that hasn't happened to the degree policy makers feel is necessary to revive the economy. Whether it can be accomplished by buying up bonds remains to be seen.
Are there risks involved?
Quantitative easing is seen as risky because creating money out of thin air and pumping it into the economy could lead to a higher rate of inflation than is deemed desirable and devalue the currency. At the same time, if the strategy isn't pursued aggressively enough, it won't have the desired effect. Banks will remain reluctant to lend and spending will remain weak.
CBC News
What is quantitative easing?
Quantitative easing is a term used to describe a process whereby central banks "print" more money (money is generally created electronically these days) and use it to buy assets such as government and corporate bonds held by commercial banks and other financial institutions. Buying the bonds decreases their supply in the market and pushes up prices, which in turn drives down yields or interest rates. Since bond yields are used to set long-term interest rates for mortgages and most business lending, this should have the effect of reducing the cost of borrowing. By selling the bonds, the financial institutions get an infusion of cash that enables them to lend more money and help generate economic activity.
Why is quantitative easing being used?
Normally central banks try to increase the amount of lending and economic activity by cutting interest rates. But with central bank rates at historic lows — 0.25 per cent in Canada and 0 to 0.25 per cent in the U.S. — the availability of credit remains tight and demand relatively weak. So policy makers find themselves having to come up with other ways to boost lending and spending.
Bank of Canada Governor Mark Carney has expressed reservations about quantitative easing.Bank of Canada Governor Mark Carney has expressed reservations about quantitative easing. (Sean Kilpatrick/Canadian Press)Who is using the process?
The U.S. Federal Reserve and the Bank of England are both engaged in quantitative easing, with the U.S. central bank indicating it will buy up more than a trillion dollars worth of debt. The Bank of Canada is not and has expressed reservations about the process, which economists view as an experiment.
Will it work?
It's too early to say. Reducing central bank rates practically to zero was supposed to unlock credit and spur borrowing, but that hasn't happened to the degree policy makers feel is necessary to revive the economy. Whether it can be accomplished by buying up bonds remains to be seen.
Are there risks involved?
Quantitative easing is seen as risky because creating money out of thin air and pumping it into the economy could lead to a higher rate of inflation than is deemed desirable and devalue the currency. At the same time, if the strategy isn't pursued aggressively enough, it won't have the desired effect. Banks will remain reluctant to lend and spending will remain weak.
Saturday, May 9, 2009
Friday, May 8, 2009
Canada added jobs in April: StatsCan
Last Updated: Friday, May 8, 2009 | 7:36 AM ET Comments148Recommend39
CBC News
The unemployment rate held steady in April at eight per cent as overall employment grew by a surprising 35,900 jobs, Statistics Canada said Friday.
Economists had been projecting overall employment to drop by about 50,000 last month.
The Canadian dollar saw a big jump in the wake of the jobs report. The loonie was trading up more than a cent, topping 86 cents US.
The rise in the number of people working was the result of an increase in self-employment, the federal government agency said. Self-employment rose by 37,000 in April, while there was little in public- and private-sector employment.
Statistics Canada said about 39,400 full-time jobs were added last month, while about 3,600 part-time jobs were lost. That is a reversal from past months, when full-time jobs were lost while there was some growth in part-time work.
The information, culture and recreation sector added 17,000 jobs, while 15,000 jobs were added in the building and business support services sector. The agriculture sector added about 9,000 jobs. Employment in the construction and manufacturing sectors remained flat.
Most growth in Quebec, B.C.
Statistics Canada said that all the employment growth in April occurred in Quebec, where 22,000 jobs were added, and in British Columbia, which added 17,000 jobs. Employment declined in Nova Scotia by 4,100, and by 2,800 in Newfoundland and Labrador. The other provinces saw little change.
Despite the increase in employment last month, overall employment has fallen by 321,000 since the peak in October 2008.
BMO Capital Markets economist Douglas Porter suggested people not read too much into April's report.
"While quite encouraging, it’s important to recall that head fakes are always possible — employment managed to rise in five separate months in 1991, in the middle of a lengthy, deep recession," Porter said. "And some of the rise may reflect a bounce from the extreme drop at the start of the year.
"Still, this marks a huge improvement from the wicked job losses seen over the winter, and is yet another strong signal that the economy may be approaching bottom certainly sooner than most forecasters believed possible just a few short weeks ago," he added.
Stimulus sufficient to turn economy around later this year: Bank of Canada
OTTAWA — Bank of Canada governor Mark Carney says he does not envision that the struggling economy will require additional monetary stimulus.
The central bank governor says he believes the economy will begin to grow again late this year, after four quarters of decline that began at the end of last year. Carney says that as things stand today, he believes there is enough stimulus from governments and the bank to provide the boost the economy needs.
He sees the elements of recovery forming, including a gradual improvement in the world economy, the housing markets in the U.S. and Canada, the depreciation of the Canadian dollar and Canada's sound financial system.
But he admits that the economic recovery will be muted, growing only by 2.5 per cent in 2010 after falling back a full three per cent this year.
While he says he is optimistic, he underplayed talk of encouraging green shoots appearing on the economic terrain as premature.
It is too soon to be totally reassured, he says.
And Carney says he is prudently planning for worse.
Carney says in case of a financial system shock, he has prepared plans to intervene by expanding the money supply or purchasing corporate assets - so-called quantitative and credit easing.
Copyright © 2009 The Canadian Press. All rights reserved.
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