In case you missed it, I was on the Drew Marshall show on Joy 1250 on this past Saturday afternoon. Drew talked to me about the mortgage industry and, specifically, about mortgage brokering and my services. In case you did miss it, I'll be getting an audio clip to put on my website.
I also wanted to mention, another incentive to purchasing as a first time home buyer is the government's land transfer tax rebate for first time home buyers. The maximum amount of the refund is $2,000. If the refund is claimed at time of registration, it may offset the land transfer tax ordinarily payable. Hope this helps.
Have a great week!
Monday, November 23, 2009
Wednesday, November 04, 2009
Federal Budget - Advantages to Purchasing or Refinancing
Home, Sweet Home
The federal budget offers several measures of interest to people who plan to renovate or buy a home. Here's how they could theoretically work in unison for a first-time buyer or those considering a refinance:
Step 1: Claim the First-Time Home Buyers' Tax CreditDetails: Offers tax relief of up to $750 to first-time buyers to help defray closing costs on their purchase.
Step 2: Take advantage of changes to the federal Home Buyers' ProgramDetails: You can take up to $25,000 out of your RRSP to buy a first home and pay no taxes, up from $20,000
Step 3: Renovate your new home with help from the temporary new Home Renovation Tax CreditDetails: Claim up to $1,350 in tax relief for upgrades to your home done before Feb. 1, 2010; available to everyone, not just first-time buyers; applies to renos costing $1000 to $10,000
Step 4: Get energy efficient using the ecoEnergy Retrofit program, which was expanded in the budgetDetails: Get a grant of up to $5,000 for changes to your home that add to energy efficiency: you can also claim the home reno tax credit for these upgrades
Have a great week, everyone!
The federal budget offers several measures of interest to people who plan to renovate or buy a home. Here's how they could theoretically work in unison for a first-time buyer or those considering a refinance:
Step 1: Claim the First-Time Home Buyers' Tax CreditDetails: Offers tax relief of up to $750 to first-time buyers to help defray closing costs on their purchase.
Step 2: Take advantage of changes to the federal Home Buyers' ProgramDetails: You can take up to $25,000 out of your RRSP to buy a first home and pay no taxes, up from $20,000
Step 3: Renovate your new home with help from the temporary new Home Renovation Tax CreditDetails: Claim up to $1,350 in tax relief for upgrades to your home done before Feb. 1, 2010; available to everyone, not just first-time buyers; applies to renos costing $1000 to $10,000
Step 4: Get energy efficient using the ecoEnergy Retrofit program, which was expanded in the budgetDetails: Get a grant of up to $5,000 for changes to your home that add to energy efficiency: you can also claim the home reno tax credit for these upgrades
Have a great week, everyone!
Thursday, August 27, 2009
Lower Rates and More Flexible Lending!
Hello everyone. As summer time winds down I hope everyone had a chance to kick back and enjoy some much-deserved holidays with family and friends amongst all the hustle and bustle that we tend create for ourselves throughout the year.
Some exciting news: variable premiums have dropped. You can now get (oac) a variable rate mortgage for 2.4%, ranging from a 33, 36, or 48 month term. This is becoming VERY popular, as you can take advantage of already low interest rates, you are not locked in for 5 years so that you can renew for an even better variable (if variable is the way you wish to go) or you can lock into a fixed term once they start to rise. They have recently fallen, by the way, and there are GREAT mortgages for 3 and 4 year terms 3.39% and 3.85% respectively (fantastic value!).
Below is a recent article from the Financial Post about the housing market which, by all accounts, is recovering steadily, with growth in almost all areas of the country. One point which diverges from several other sources, however, is the last comment about BOC keeping interest rates down - most of what I've read has stated that prime likely won't rise even beyond BOC's promised date of mid 2010 - but who knows for sure. Have a great weekend everyone!
John Morrissy, Financial Post Published: Wednesday, August 26, 2009
OTTAWA -- The worst is over for North America's beleaguered housing markets, with a steady stream of data out of Canada and the U.S. indicating the recovery is at hand, economists say.
"A similar pattern in both countries is unmistakenly suggesting we've not only bottomed in housing, but we're on the way back up," said TD Bank chief economist Don Drummond.
Canada's already brightening picture was helped along Wednesday by a report showing housing prices in major markets across the country jumped 1.5% in June, building on May's 2% advance.
The rebound in prices was evident even in most of Canada's hardest hit urban markets, like Toronto and Vancouver, the Teranet-National Bank report showed.
For National Bank senior economist Marc Pinsonneault, that means "the worst of home-price deflation in Canada is behind us," he said Wednesday.
"The improvement is consistent with the huge improvement in market conditions in most of the major cities in Canada," which show sales resales rising sharply - up 18% in July alone - and listings on the decline, Mr. Pinsonneault said.
The numbers out of the U.S. are also good, at least relative to bone-jarring declines that marked the subprime meltdown and drove housing prices 31% below their peak in 2006, Drummond said.
On Tuesday, the S&P/Case-Shiller composite index showed home prices in the U.S. also bouncing higher, for the second straight month.
And on Wednesday, the U.S. Commerce Department announced new-homes sales surpassed expectations by increasing 9.6% to 433,000 units in July, the biggest increase in more than four years and the highest level of activity in 10 months.
"The housing market has clearly turned the corner," BMO Capital Markets economist Jennifer Lee said in an interview.
"The items supporting a housing recovery have been working in tandem over the past while, and they are still going strong, like the Energizer bunny."
Renewed strength in the Canadian market was evident in four of six major markets tracked by the Teranet-National Bank survey. Vancouver posted its first price gain after 11 months of declines, up 1.6%; Montreal posted its fourth straight monthly increase, up 1.2%; Ottawa gained 2.1%; and Toronto recorded its second straight month of gains, up 2.3%.
Halifax and Calgary were the only laggards, each slipping 0.2%. For Calgary, it was the 12th consecutive losing month.
Economists were quick to point out that while the trend has shifted, markets on both sides of the border are way off previous peaks. In the U.S., for instance, about 600,000 new homes are being built annually, compared with the 2.3 million homes at the peak of the cycle.
Current conditions in Canada have created a seller's market, said Pinsonneault, although he expects greater balance to return as higher prices draw more properties onto the market.
Mortgage rates, meanwhile, won't rise over the next 12 month by more than 50 to 75 basis points from today's 5.85% posted rate on fixed five-year mortgages, he said.
One uncertainty is whether the Bank of Canada can hold lending rates steady, as promised, until the middle of next year, economists say.
Some exciting news: variable premiums have dropped. You can now get (oac) a variable rate mortgage for 2.4%, ranging from a 33, 36, or 48 month term. This is becoming VERY popular, as you can take advantage of already low interest rates, you are not locked in for 5 years so that you can renew for an even better variable (if variable is the way you wish to go) or you can lock into a fixed term once they start to rise. They have recently fallen, by the way, and there are GREAT mortgages for 3 and 4 year terms 3.39% and 3.85% respectively (fantastic value!).
Below is a recent article from the Financial Post about the housing market which, by all accounts, is recovering steadily, with growth in almost all areas of the country. One point which diverges from several other sources, however, is the last comment about BOC keeping interest rates down - most of what I've read has stated that prime likely won't rise even beyond BOC's promised date of mid 2010 - but who knows for sure. Have a great weekend everyone!
John Morrissy, Financial Post Published: Wednesday, August 26, 2009
OTTAWA -- The worst is over for North America's beleaguered housing markets, with a steady stream of data out of Canada and the U.S. indicating the recovery is at hand, economists say.
"A similar pattern in both countries is unmistakenly suggesting we've not only bottomed in housing, but we're on the way back up," said TD Bank chief economist Don Drummond.
Canada's already brightening picture was helped along Wednesday by a report showing housing prices in major markets across the country jumped 1.5% in June, building on May's 2% advance.
The rebound in prices was evident even in most of Canada's hardest hit urban markets, like Toronto and Vancouver, the Teranet-National Bank report showed.
For National Bank senior economist Marc Pinsonneault, that means "the worst of home-price deflation in Canada is behind us," he said Wednesday.
"The improvement is consistent with the huge improvement in market conditions in most of the major cities in Canada," which show sales resales rising sharply - up 18% in July alone - and listings on the decline, Mr. Pinsonneault said.
The numbers out of the U.S. are also good, at least relative to bone-jarring declines that marked the subprime meltdown and drove housing prices 31% below their peak in 2006, Drummond said.
On Tuesday, the S&P/Case-Shiller composite index showed home prices in the U.S. also bouncing higher, for the second straight month.
And on Wednesday, the U.S. Commerce Department announced new-homes sales surpassed expectations by increasing 9.6% to 433,000 units in July, the biggest increase in more than four years and the highest level of activity in 10 months.
"The housing market has clearly turned the corner," BMO Capital Markets economist Jennifer Lee said in an interview.
"The items supporting a housing recovery have been working in tandem over the past while, and they are still going strong, like the Energizer bunny."
Renewed strength in the Canadian market was evident in four of six major markets tracked by the Teranet-National Bank survey. Vancouver posted its first price gain after 11 months of declines, up 1.6%; Montreal posted its fourth straight monthly increase, up 1.2%; Ottawa gained 2.1%; and Toronto recorded its second straight month of gains, up 2.3%.
Halifax and Calgary were the only laggards, each slipping 0.2%. For Calgary, it was the 12th consecutive losing month.
Economists were quick to point out that while the trend has shifted, markets on both sides of the border are way off previous peaks. In the U.S., for instance, about 600,000 new homes are being built annually, compared with the 2.3 million homes at the peak of the cycle.
Current conditions in Canada have created a seller's market, said Pinsonneault, although he expects greater balance to return as higher prices draw more properties onto the market.
Mortgage rates, meanwhile, won't rise over the next 12 month by more than 50 to 75 basis points from today's 5.85% posted rate on fixed five-year mortgages, he said.
One uncertainty is whether the Bank of Canada can hold lending rates steady, as promised, until the middle of next year, economists say.
Thursday, August 06, 2009
Great New Resource For First Time Home Buyers
Hello Everyone,
Canada's most up-to-date website for first-time homebuyers is now up and running at yourfirsthomecanada.com -- this is a great resource.
First-time buyers can get the latest in property news, free downloads and expert advice with the click of a button. Current feature articles include how to tell if you're ready to purchase, how to begin searching for your dream home, the advantages of home inspections and a primer on mortgages. Also look for an exclusive Q&A from David Chilton, author of The Wealthy Barber, who discusses how buying your first home is crucial in attaining long-term financial freedom.
Yourfirsthomecanada.com also includes a comments section and a soon-to-launch forum for prospective homebuyers. The site is powered by The First-Time Homebuyers Guide, a sister publication of CMP magazine and Canadian Real Estate magazine, which brings property investors in-depth market information.
Hope this helps and hope everyone has a great week!
Canada's most up-to-date website for first-time homebuyers is now up and running at yourfirsthomecanada.com -- this is a great resource.
First-time buyers can get the latest in property news, free downloads and expert advice with the click of a button. Current feature articles include how to tell if you're ready to purchase, how to begin searching for your dream home, the advantages of home inspections and a primer on mortgages. Also look for an exclusive Q&A from David Chilton, author of The Wealthy Barber, who discusses how buying your first home is crucial in attaining long-term financial freedom.
Yourfirsthomecanada.com also includes a comments section and a soon-to-launch forum for prospective homebuyers. The site is powered by The First-Time Homebuyers Guide, a sister publication of CMP magazine and Canadian Real Estate magazine, which brings property investors in-depth market information.
Hope this helps and hope everyone has a great week!
Friday, July 03, 2009
The Canadian Housing Market - Fact and Fiction
Happy Canada Day, everyone! There has been a lot of debate in the last few months about the state of our economy and how closely our economy follows our neighbours to the south. Of late, more and more people are realizing how different the conditions are in these 2 countries.
Present conditions and forecasts (the realistic ones) are not similar. This article attributes a lot of the confusion to "lazy journalism". I couldn't agree more. This article was recently published in the National Post:
Posted: June 29, 2009, 1:00 PM by NP Editor
"Here is what is hopefully one of the last of a once-robust breed - The Apocalyptic Canadian Housing Market Story:
Judging by the latest real estate data, the Canadian housing market could scarcely be better. Average home prices are up more than 16 per cent this year, and in May they hit an all-time monthly high, according to the Canadian Real Estate Association. By those numbers, Canada didn’t just sidestep the housing market crash that continues to plague the United States, it sailed right through it virtually unscathed. And yet, there are plenty of signs that the Canadian housing market is still sitting on some very shaky ground—and even the potential that Canada’s big housing crash is yet to come.
Yadda yadda yadda.
We all know that the proximate cause of the U.S. recession was the bursting of its housing market bubble: it blew up banks, laid waste to personal balance sheets, and left millions of people stuck in homes whose mortgages were more than their market value.
And then Canada went into recession. Unfortunately, this set up the following error of logic that was repeated in all-too-many Canadian newsrooms:
The U.S. is in recession because its housing market blew up.
Canada is in recession.
Therefore, Canada's housing market must be blowing up as well.
And so it was the fate of any number of hapless Canadian journalists to be given assignments to bash out pieces that fit this narrative. But these exercises were all doomed to failure. The decline in house prices in Canada is a symptom of the recession, not its cause.
Let's look at how house prices have behaved since 2003:
U.S. house prices have fallen almost 40% (all changes are expressed in per cent log terms: 100 times the difference in the logs), while Canadian house prices are still within 10% of their peak. There are any number of lazy analysts who have swallowed the faulty syllogism enumerated above and have concluded that 'Canada is following the U.S. with a lag'. This only makes sense if you think that Canadian house prices rose for the same reasons that US prices rose, and that they have fallen for the same reasons that U.S. prices have fallen. This is not the case. As has been documented at great length here and elsewhere, the Canadian economy has avoided the worst of the bubble and its consequences for the following reasons (among others):
1. We never had restrictions on interstate banking, so Canadian banks spread their assets and liabilities across Canada. (So it doesn’t matter if a local housing market goes bust).
2. We don’t have Glass-Steagal. The investment banks joined the retail banks some years ago.
We don’t have mortgage interest deductibility from taxes. So paying down your mortgage is a tax-free investment. So most people want to pay down their mortgages.
3. (Except in Alberta), mortgages are fully recourse. You can’t just walk away from a negative equity home and hand the keys to the bank; the bank will come after you for the difference.
4. Yes, house prices have fallen. But the linkages that make the US story so compelling don't exist here. We don't have banks that are blowing up. We don't have massive waves of foreclosures (even the Globe and Mail has given up on its series of articles that culminated in this silliness). Nor do we have much in the way of evidence that lower house prices are causing undue inconvenience to Canadians: when Maclean's decided to jump on the OMGWTFBBQ housing market bandwagon, the best it could could come up with in the way of a victim was some flipper of 7-figure Vancouver condos who got caught mid-flip. Boo-hoo-freaking-hoo.
5. Moreover, it's becoming pretty clear that the decline in house prices is not so much a national story as it is one of falling house prices in Vancouver, Calgary and Toronto:
Vancouver is and always will be a special case whenever we talk about housing prices in Canada: its geography makes it extremely difficult for developers to respond to increases in demand. This is the sort of environment in which bubbles flourish so I'm not going to pretend that I can predict movements in Vancouver house prices. In Calgary, the incipient recovery in the oil sector will no doubt establish a floor on housing prices there fairly soon. And there's even not-entirely-bad news out of Toronto these days. So I don't see just how the national index is supposed to fall by another 30% or so.
It's worth following the housing market numbers. But they are going to be at best a coincident indicator in this cycle."
Thankfully, we are hearing more and more of these type of stories in our media. The doom and gloom reports just don't jive with the facts and figures we have and what we're observing as we climb out of this recession. Have a great weekend, everyone!
Present conditions and forecasts (the realistic ones) are not similar. This article attributes a lot of the confusion to "lazy journalism". I couldn't agree more. This article was recently published in the National Post:
Posted: June 29, 2009, 1:00 PM by NP Editor
"Here is what is hopefully one of the last of a once-robust breed - The Apocalyptic Canadian Housing Market Story:
Judging by the latest real estate data, the Canadian housing market could scarcely be better. Average home prices are up more than 16 per cent this year, and in May they hit an all-time monthly high, according to the Canadian Real Estate Association. By those numbers, Canada didn’t just sidestep the housing market crash that continues to plague the United States, it sailed right through it virtually unscathed. And yet, there are plenty of signs that the Canadian housing market is still sitting on some very shaky ground—and even the potential that Canada’s big housing crash is yet to come.
Yadda yadda yadda.
We all know that the proximate cause of the U.S. recession was the bursting of its housing market bubble: it blew up banks, laid waste to personal balance sheets, and left millions of people stuck in homes whose mortgages were more than their market value.
And then Canada went into recession. Unfortunately, this set up the following error of logic that was repeated in all-too-many Canadian newsrooms:
The U.S. is in recession because its housing market blew up.
Canada is in recession.
Therefore, Canada's housing market must be blowing up as well.
And so it was the fate of any number of hapless Canadian journalists to be given assignments to bash out pieces that fit this narrative. But these exercises were all doomed to failure. The decline in house prices in Canada is a symptom of the recession, not its cause.
Let's look at how house prices have behaved since 2003:
U.S. house prices have fallen almost 40% (all changes are expressed in per cent log terms: 100 times the difference in the logs), while Canadian house prices are still within 10% of their peak. There are any number of lazy analysts who have swallowed the faulty syllogism enumerated above and have concluded that 'Canada is following the U.S. with a lag'. This only makes sense if you think that Canadian house prices rose for the same reasons that US prices rose, and that they have fallen for the same reasons that U.S. prices have fallen. This is not the case. As has been documented at great length here and elsewhere, the Canadian economy has avoided the worst of the bubble and its consequences for the following reasons (among others):
1. We never had restrictions on interstate banking, so Canadian banks spread their assets and liabilities across Canada. (So it doesn’t matter if a local housing market goes bust).
2. We don’t have Glass-Steagal. The investment banks joined the retail banks some years ago.
We don’t have mortgage interest deductibility from taxes. So paying down your mortgage is a tax-free investment. So most people want to pay down their mortgages.
3. (Except in Alberta), mortgages are fully recourse. You can’t just walk away from a negative equity home and hand the keys to the bank; the bank will come after you for the difference.
4. Yes, house prices have fallen. But the linkages that make the US story so compelling don't exist here. We don't have banks that are blowing up. We don't have massive waves of foreclosures (even the Globe and Mail has given up on its series of articles that culminated in this silliness). Nor do we have much in the way of evidence that lower house prices are causing undue inconvenience to Canadians: when Maclean's decided to jump on the OMGWTFBBQ housing market bandwagon, the best it could could come up with in the way of a victim was some flipper of 7-figure Vancouver condos who got caught mid-flip. Boo-hoo-freaking-hoo.
5. Moreover, it's becoming pretty clear that the decline in house prices is not so much a national story as it is one of falling house prices in Vancouver, Calgary and Toronto:
Vancouver is and always will be a special case whenever we talk about housing prices in Canada: its geography makes it extremely difficult for developers to respond to increases in demand. This is the sort of environment in which bubbles flourish so I'm not going to pretend that I can predict movements in Vancouver house prices. In Calgary, the incipient recovery in the oil sector will no doubt establish a floor on housing prices there fairly soon. And there's even not-entirely-bad news out of Toronto these days. So I don't see just how the national index is supposed to fall by another 30% or so.
It's worth following the housing market numbers. But they are going to be at best a coincident indicator in this cycle."
Thankfully, we are hearing more and more of these type of stories in our media. The doom and gloom reports just don't jive with the facts and figures we have and what we're observing as we climb out of this recession. Have a great weekend, everyone!
Friday, June 12, 2009
Variable Rates and Refinances Today
Hello Everyone,
As prime stays low at 2.25% and doesn't appear to be going anywhere in the near future and fixed rates begin to rise, we see lenders dropping their variable rate products. What this means is that refinancing may make more sense than ever: The penalty to break an existing mortgage lowers as fixed rates rise, and you can take advantage of the even lower rates of present day variable rate products for greater savings. If this is something you've been considering, let us see if the numbers work for you. First you need to get an accurate cost of breaking your mortgage from your mortage holder. Then we can run some amortization scenarios and see if there are any substantial savings for what would be the remainder of the term. It's worth checking every now and then.
Below is an article written by our company's National Communications Manager, Steven Moyes, about Mortgage Intelligence in the media and the media's (not surprising) reliance on Mortgage Intelligence as a preferred source of mortgage expertise. Have a great weekend!
"More Than 100 Media Placements
for MI This Year
Hi everyone,
As of this week, Mortgage Intelligence has been mentioned more than 100 times so far this year in the Canadian news media.
We have secured placements in over 70 different outlets including national newspapers such as the Globe & Mail and the National Post, as well as major regional publications including the Toronto Star, the Calgary Herald, and the Chronicle Herald in Halifax. MI spokespeople have also appeared on the National, CBC Newsworld and BNN Business News Network.
MI is now increasingly sought after by the news media as a source of commentary on mortgage issues affecting Canadians. These interviews help raise the profile of MI and its brokers, and brand us as a preferred source of mortgage expertise.
Best Regards,
Steve
Steven J. Moyes
National Communications Manager
Mortgage Intelligence"
As prime stays low at 2.25% and doesn't appear to be going anywhere in the near future and fixed rates begin to rise, we see lenders dropping their variable rate products. What this means is that refinancing may make more sense than ever: The penalty to break an existing mortgage lowers as fixed rates rise, and you can take advantage of the even lower rates of present day variable rate products for greater savings. If this is something you've been considering, let us see if the numbers work for you. First you need to get an accurate cost of breaking your mortgage from your mortage holder. Then we can run some amortization scenarios and see if there are any substantial savings for what would be the remainder of the term. It's worth checking every now and then.
Below is an article written by our company's National Communications Manager, Steven Moyes, about Mortgage Intelligence in the media and the media's (not surprising) reliance on Mortgage Intelligence as a preferred source of mortgage expertise. Have a great weekend!
"More Than 100 Media Placements
for MI This Year
Hi everyone,
As of this week, Mortgage Intelligence has been mentioned more than 100 times so far this year in the Canadian news media.
We have secured placements in over 70 different outlets including national newspapers such as the Globe & Mail and the National Post, as well as major regional publications including the Toronto Star, the Calgary Herald, and the Chronicle Herald in Halifax. MI spokespeople have also appeared on the National, CBC Newsworld and BNN Business News Network.
MI is now increasingly sought after by the news media as a source of commentary on mortgage issues affecting Canadians. These interviews help raise the profile of MI and its brokers, and brand us as a preferred source of mortgage expertise.
Best Regards,
Steve
Steven J. Moyes
National Communications Manager
Mortgage Intelligence"
Tuesday, May 26, 2009
Canada's Recession - Deep But Short
OTTAWA -- Canada's recession, likely its deepest since the Great Depression, may also be its shortest.
Bloomberg News Published: Wednesday, May 20, 2009
Rising home and car sales, unexpected gains in building permits and employment, easing credit conditions and higher commodity prices signal Canada's slump may be nearing an end. Eight of 11 economists surveyed by Bloomberg this month predict the economy will return to growth next quarter.
"It doesn't feel quite like it's over yet, but people are breathing a little bit better," said Russ Girling, president of pipelines at TransCanada Corp., the country's biggest pipeline company, which recorded a 12% rise in revenue in the first quarter.
All but one of the country's five post-Second World War major recessions have lasted at least one year, with the shortest in 1957 at nine months, according to Philip Cross, who tracks the country's business cycles for Statistics Canada.
Canada's economy contracted at a 3.4% pace in the last quarter of 2008 and growth in the first quarter may shrink at a 7.3% rate, the Bank of Canada estimates.
The U.S. recession started in December 2007, according to the National Bureau of Economic Research, the arbiter of U.S. business cycles. Statistics Canada, which defines a major recession as a slump in which both employment and output post annual declines, has yet to date the start of Canada's recession, Cross said. The Bank of Canada has said the country entered into a recession in the fourth quarter of last year.
No Bailouts
While Canada has suffered from falling U.S. demand for exports, the country's banks have largely avoided credit losses. No government money has been given to any of Canada's 21 banks since global credit seized up in August 2007. The U.S. government oversees about US$200-billion in investments in banks through the taxpayer-funded Troubled Asset Relief Program.
Canada's housing market has also held up better than in the U.S., where prices declined 18.6% in February from a year earlier, according to the S&P/Case-Shiller index of 20 major cities. Average resale home prices in Canada dropped at less than half that pace during the same period, according to the Canadian Real Estate Association.
"We may not be in a recovery, but I think we might be in a position where it's not getting worse, where it's truly plateauing," Prime Minister Stephen Harper said in a May 8 interview, adding he'd like another "month or two" of data before coming to that conclusion.
Canada's benchmark Standard & Poor's/TSX Composite Index has posted a 50% gain in U.S. dollars since its low on March 9, compared with the 34% gain for the Standard & Poor's 500 Index over the same period.
Recession
Economists surveyed by Bloomberg this month said they expect Canadian growth to rebound at an annual pace of 0.5% in the third quarter and by 2% in the fourth quarter.
"In February, the rapid decline in demand had come to an end and by April, the rapid declines in employment had come to an end," Cross said. "Was that a temporary end or not? We don't know."
While Canada's jobless rate is at a seven-year high of 8%, the economy in April created new jobs for the first time in six months and sales of existing homes rose the most in more than five years. Credit markets are also improving. The Bank of Canada's composite index of financial market conditions is at its strongest since September.
Improved credit markets have allowed companies such as Enbridge Inc., the biggest transporter of oil to the U.S. from Canada's oil sands, to move ahead with the new debt sales to finance operations. Enbridge sold $400-million of bonds last week.
'Cross Our Fingers'
"Our approach is to watch for windows when we think there are opportunities to raise capital funds," said Richard Bird, Enbridge's chief financial officer. "This is a window and let's cross our fingers and hope that it's a trend."
A quick end to the recession would raise pressure on the Bank of Canada, led by Governor Mark Carney, to say it no longer plans to keep its benchmark lending rate near zero through June 2010. The country's central bank projected last month the economy will contract four consecutive quarters, bringing it closer to the average length of the last five major recessions.
"The Bank of Canada will have to revisit their own view of what they will do with interest rates," said Paul-Andre Pinsonnault, an economist at National Bank Financial. "GDP will be stronger than what they are looking for."
A quick end to the recession doesn't guarantee a strong rebound. DBRS Ltd., a rating company, predicts an L-shaped recovery for Canada, which it defines as "a prolonged period of flat or slowly improving performance."
"The earliest I can see an improvement is in October or November," said Jacques Plante, chief financial officer of Hart Stores Inc., a discount retailer. "I can't imagine we'll have anything positive this summer."
Bloomberg News Published: Wednesday, May 20, 2009
Rising home and car sales, unexpected gains in building permits and employment, easing credit conditions and higher commodity prices signal Canada's slump may be nearing an end. Eight of 11 economists surveyed by Bloomberg this month predict the economy will return to growth next quarter.
"It doesn't feel quite like it's over yet, but people are breathing a little bit better," said Russ Girling, president of pipelines at TransCanada Corp., the country's biggest pipeline company, which recorded a 12% rise in revenue in the first quarter.
All but one of the country's five post-Second World War major recessions have lasted at least one year, with the shortest in 1957 at nine months, according to Philip Cross, who tracks the country's business cycles for Statistics Canada.
Canada's economy contracted at a 3.4% pace in the last quarter of 2008 and growth in the first quarter may shrink at a 7.3% rate, the Bank of Canada estimates.
The U.S. recession started in December 2007, according to the National Bureau of Economic Research, the arbiter of U.S. business cycles. Statistics Canada, which defines a major recession as a slump in which both employment and output post annual declines, has yet to date the start of Canada's recession, Cross said. The Bank of Canada has said the country entered into a recession in the fourth quarter of last year.
No Bailouts
While Canada has suffered from falling U.S. demand for exports, the country's banks have largely avoided credit losses. No government money has been given to any of Canada's 21 banks since global credit seized up in August 2007. The U.S. government oversees about US$200-billion in investments in banks through the taxpayer-funded Troubled Asset Relief Program.
Canada's housing market has also held up better than in the U.S., where prices declined 18.6% in February from a year earlier, according to the S&P/Case-Shiller index of 20 major cities. Average resale home prices in Canada dropped at less than half that pace during the same period, according to the Canadian Real Estate Association.
"We may not be in a recovery, but I think we might be in a position where it's not getting worse, where it's truly plateauing," Prime Minister Stephen Harper said in a May 8 interview, adding he'd like another "month or two" of data before coming to that conclusion.
Canada's benchmark Standard & Poor's/TSX Composite Index has posted a 50% gain in U.S. dollars since its low on March 9, compared with the 34% gain for the Standard & Poor's 500 Index over the same period.
Recession
Economists surveyed by Bloomberg this month said they expect Canadian growth to rebound at an annual pace of 0.5% in the third quarter and by 2% in the fourth quarter.
"In February, the rapid decline in demand had come to an end and by April, the rapid declines in employment had come to an end," Cross said. "Was that a temporary end or not? We don't know."
While Canada's jobless rate is at a seven-year high of 8%, the economy in April created new jobs for the first time in six months and sales of existing homes rose the most in more than five years. Credit markets are also improving. The Bank of Canada's composite index of financial market conditions is at its strongest since September.
Improved credit markets have allowed companies such as Enbridge Inc., the biggest transporter of oil to the U.S. from Canada's oil sands, to move ahead with the new debt sales to finance operations. Enbridge sold $400-million of bonds last week.
'Cross Our Fingers'
"Our approach is to watch for windows when we think there are opportunities to raise capital funds," said Richard Bird, Enbridge's chief financial officer. "This is a window and let's cross our fingers and hope that it's a trend."
A quick end to the recession would raise pressure on the Bank of Canada, led by Governor Mark Carney, to say it no longer plans to keep its benchmark lending rate near zero through June 2010. The country's central bank projected last month the economy will contract four consecutive quarters, bringing it closer to the average length of the last five major recessions.
"The Bank of Canada will have to revisit their own view of what they will do with interest rates," said Paul-Andre Pinsonnault, an economist at National Bank Financial. "GDP will be stronger than what they are looking for."
A quick end to the recession doesn't guarantee a strong rebound. DBRS Ltd., a rating company, predicts an L-shaped recovery for Canada, which it defines as "a prolonged period of flat or slowly improving performance."
"The earliest I can see an improvement is in October or November," said Jacques Plante, chief financial officer of Hart Stores Inc., a discount retailer. "I can't imagine we'll have anything positive this summer."
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