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!
Friday, July 03, 2009
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."
Monday, April 27, 2009
New Lower Rates - Lowest Fixed Rates in Decades/Consumer Confidence Climbing
Hello Everyone,
Last week the banks dropped their rates again to what appears to be an all-time low for fixed rate mortgages. Interesting article from the April edition of Marketing Magazine regarding present consumer confidence in Canada:
Canadian consumer confidence bouncing back: TNS
April 23, 2009 By Kristin Laird
Canadians are feeling feel better about the economic future, with consumer confidence increasing 7% this month, according to the latest results from market research firm TNS.
The firm’s consumer confidence index is up to 90.5 compared to 83.7 in March. Throughout 2007 and into 2008, the confidence index hovered over 100, reaching as high 110.
Numbers are also up in the present situation, expectations, and buy indices—three categories produced each month to show how confidence in the economy is changing.
“Clearly, one snapshot does not a trend make,” said Michael Antecol, vice-president of TNS Canadian Facts and director of the firm’s monthly tracking study. “But these results do suggest that despite the troubling economic news dominating headlines, average Canadians are sensing the end is in sight.”
The present situation index, which captures evaluations of the overall state of the current economic and employment situations, is up just over three points to 75.3. (In late 2007 and into 2008 the present situation index peaked at around 120.)
The expectations index, which measures consumers’ estimation of the economy, household income and employment in the next six months, rose for the fourth consecutive month to 97.4, up 11 points from March.
The TNS buy index, which gauges the degree to which people think the current period is a good time to make major purchases, has increased 9% to 103.9—the highest it’s been since the second quarter of 2005.
“Consumers are saying now is a good time to make that major purchase while at the same time having fairly positive expectations about the future,” said Antecol. “It looks more and more like the ingredients for a consumer-led recovery.”
The TNS Canadian Facts’ Consumer Confidence Index, is based on 1,015 telephone interviews, and has a 3.1% margin of error.
Have a great week!
Last week the banks dropped their rates again to what appears to be an all-time low for fixed rate mortgages. Interesting article from the April edition of Marketing Magazine regarding present consumer confidence in Canada:
Canadian consumer confidence bouncing back: TNS
April 23, 2009 By Kristin Laird
Canadians are feeling feel better about the economic future, with consumer confidence increasing 7% this month, according to the latest results from market research firm TNS.
The firm’s consumer confidence index is up to 90.5 compared to 83.7 in March. Throughout 2007 and into 2008, the confidence index hovered over 100, reaching as high 110.
Numbers are also up in the present situation, expectations, and buy indices—three categories produced each month to show how confidence in the economy is changing.
“Clearly, one snapshot does not a trend make,” said Michael Antecol, vice-president of TNS Canadian Facts and director of the firm’s monthly tracking study. “But these results do suggest that despite the troubling economic news dominating headlines, average Canadians are sensing the end is in sight.”
The present situation index, which captures evaluations of the overall state of the current economic and employment situations, is up just over three points to 75.3. (In late 2007 and into 2008 the present situation index peaked at around 120.)
The expectations index, which measures consumers’ estimation of the economy, household income and employment in the next six months, rose for the fourth consecutive month to 97.4, up 11 points from March.
The TNS buy index, which gauges the degree to which people think the current period is a good time to make major purchases, has increased 9% to 103.9—the highest it’s been since the second quarter of 2005.
“Consumers are saying now is a good time to make that major purchase while at the same time having fairly positive expectations about the future,” said Antecol. “It looks more and more like the ingredients for a consumer-led recovery.”
The TNS Canadian Facts’ Consumer Confidence Index, is based on 1,015 telephone interviews, and has a 3.1% margin of error.
Have a great week!
Wednesday, April 22, 2009
Is Your House Paid For? See How You Can Potentially Pay Off All Your Debt in One Half to One Third the Time!
This might seem like a strange question, but as your mortgage lenders for life, we are constantly searching for ways to significantly benefit our clients. Through an innovative financial service, tens of thousands of American and Canadian homeowners are building equity and paying off their mortgage and all their debt in a fraction of the time.
The best part is:
1. You don’t have to refinance your existing mortgage.
2. Your mortgage payment doesn’t change.
3. There is little, if any, change to your monthly household budget.
To find out if you qualify for this revolutionary service, simply give us a call and schedule a time to learn more. After all, what have you got to lose….except your mortgage payment and all your debt!
Also, we can now help your friends who are not homeowners but have other debts to pay off!
Donna Lewczuk
Mortgage Agent, FSCO Lic M08001430
Mortgage Intelligence, FSCO Lic 10428
905.336.3545
donna.Lewczuk@migroup.ca
***Please Don’t Keep Us a Secret! Should you have family, friends or colleagues who may benefit from this or any of our mortgage and financial services, please have them contact us. Be assured that the people you refer to us will be represented professionally and honestly. Thank you for putting your trust in us.
The best part is:
1. You don’t have to refinance your existing mortgage.
2. Your mortgage payment doesn’t change.
3. There is little, if any, change to your monthly household budget.
To find out if you qualify for this revolutionary service, simply give us a call and schedule a time to learn more. After all, what have you got to lose….except your mortgage payment and all your debt!
Also, we can now help your friends who are not homeowners but have other debts to pay off!
Donna Lewczuk
Mortgage Agent, FSCO Lic M08001430
Mortgage Intelligence, FSCO Lic 10428
905.336.3545
donna.Lewczuk@migroup.ca
***Please Don’t Keep Us a Secret! Should you have family, friends or colleagues who may benefit from this or any of our mortgage and financial services, please have them contact us. Be assured that the people you refer to us will be represented professionally and honestly. Thank you for putting your trust in us.
Monday, April 06, 2009
Government Rebates For 1st Time Home Buyers
These two articles were published Friday April 3, in the National Post and Bloomberg News, respectively.
The first talks about the Canadian economy. It mentions, among other things, incentives for first time home buyers, such as: tax credits for closing costs, an increase in the amount of RRSP withdrawals for downpayments, and rebates on land transfer tax.
The second article highlights some positive signs of late in the U.S. housing and finance economy.
Have a great week!
"A Real Estate Market with Plenty of Reasons to Buy
Helen Morris, National Post, Published: Friday, April 03, 2009
For first-time buyers with secure employment, the housing market may look rather more appealing now than it has in recent years, when they struggled with affordability.
"We know for Toronto, and for Ontario as a whole, there's been a pretty dramatic shift since the fourth quarter of last year, into a buyers' market," says Pascal Gauthier, economist at TD Economics. "Looking ahead to the next, say, 12 to 18 months, it is very difficult to believe that that is going to turn around, just given the economic backdrop."
While a continued buyers' market is good news for them, house hunters shouldn't expect to see a dramatic drop in prices.
"In Toronto, we're not seeing huge price declines," says Laurin Jeffrey, an agent with Century 21 Regal Realty, "but buyers are finding a lot more selection."
While last year, clients would find many properties had been sold before they had a chance to view them, "Now we're going through a list of 50, taking 20 that are good and getting out to see 10 top ones."
Mortgage broker Maria Dominelli advises clients to look very closely at their finances and lifestyle before stepping on to the property ladder.
"The first thing we want to determine is if home ownership is really right for the individual. They've got to look at coming up with the down payment ... [and] maintaining the home. It requires not only money but a commitment in time," says Ms. Dominelli, who works with Invis. "Make sure you do a check on that reality ... so you know the disadvantages and advantages of buying."
Mr. Jeffrey also urges clients to think about potential lifestyle changes that come with home ownership.
"If all of a sudden you're now restricted to a weekend in Montreal and a couple of lattes, when you're used to having dinner out [and vacationing in] Cuba, well, you're not going to be very happy," says Mr. Jeffrey.
If first-time buyers decide they are psychologically ready to take the plunge, there are some new government policies that can help with the finances.
Under the recent federal budget, first-time buyers can qualify for a $750 tax credit to help with closing costs. In addition, they can now withdraw up to $25,000 from their RRSPs under the Home Buyers Plan to help with a down payment, up from the previous $20,000.
First-time buyers in Toronto buying properties of $400,000 or less will receive a maximum rebate of $3,725 on land transfer tax.
Ms. Dominelli says it is always crucial for purchasers to have a back-up financial plan, but especially now in these testing economic times.
"One of the strategies is for people to actually have their mortgages registered for a longer amortization [for lower payments on paper] but to actually make their payments as though they are in a shorter amortization," says Ms. Dominelli. "While you are working, you can afford it. If the sky falls in and you lose your job and need to bide some time, you can ask the lender to change the payments to the lower total again without having to go back and incur legal fees."
Mr. Jeffrey believes in the value of the real estate investment. If your job prospects are good, he says, "Relax, take a breath, be smart. If you don't need that big flat screen TV, don't buy it. But if you need a place to live, prices are down a bit, mortgage rates are stupidly low. It's not a bad time to buy".
"Eased Mortgage Rates Point to Consumer-Driven Rebound
Kathleen M. Howley, Bloomberg News Published: Friday, April 03, 2009
U.S. Federal Reserve Chairman Ben Bernanke is delivering what he promised five months ago, record-low mortgage rates and a refinancing boom that's putting cash in consumers' pockets.
Fixed 30-year mortgage rates fell to a record low for the second consecutive week last week, hitting 4.78%, Freddie Mac said on Thursday in a statement. The rates are the lowest in records dating to 1971, and come after Bernanke told Congress in November that helping the most creditworthy borrowers was essential to reviving the economy.
Mortgage applications in the U.S. rose for the fourth straight week last week as a decline in borrowing costs spurred homeowners to refinance, while purchases of new houses unexpectedly rose in February. The Fed's effort to bring down fixed rates may give consumers as much as US$25-billion, said Mark Zandi, chief economist of Moody's Economy.com.
"It certainly gives further fuel to consumer spending," said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies in Cambridge, Massachusetts. "It puts more money into circulation."
The extra cash may help boost first-quarter consumer spending by 1% to 1.5%, said Barton Biggs, managing partner at New York-based hedge fund Traxis Partners LLC. Consumer spending accounts for about two-thirds of the U.S. economy.
Creditworthy Borrowers
Bernanke signaled the Fed's effort to bring down fixed mortgage rates in Nov. 18 testimony to the U.S. House of Representatives' Committee on Financial Services.
"It is imperative that all banking organizations and their regulators work together to ensure that the needs of creditworthy borrowers are met," he said.
One week later, the Fed said it would buy up to $500-billion in home-loan securities, causing the biggest one-day drop in mortgage rates in at least seven years, according to Bankrate.com. On March 18, the central bank almost tripled the size of the program to up to $1.25-trillion in purchases during 2009. The intent is to lower rates and make real estate financing easier to get, the Fed said.
The plan to buy mortgage bonds this year is succeeding where US$11.6-trillion of government lending, spending, and guarantees so far have failed.
‘Successful Effort'
"This has been the most successful effort, at least so far in this crisis, to shore up the economy," said Zandi.
Bernanke's mortgage purchase program may help curb a recession that is in its second year and being driven by the highest jobless rate in a quarter century and shrinking household wealth.
"If you throw enough money at one credit market, you will bring down the price," said Gerald O'Driscoll, a senior fellow at the Cato Institute and former vice president of the Dallas Federal Reserve. "They are targeting the mortgage market in an attempt to speed the process of establishing a floor in the price of housing."
Homeowners who refinance with a half-point drop in fixed rates may save $150 a month on a $300,000 mortgage, said Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut, and a former Fed economist.
Home Prices
Cheaper financing may also help spark a turnaround in the housing market. Sales of previously owned homes rose 5.1% to 4.72 million at an annualized pace in February from the prior month as low mortgage rates spurred demand, the National Association of Realtors said. The NAR's affordability index rose to a record in January, helped by lower home values and mortgage rates. The median U.S. home price in February was $165,400, the NAR said in a March 23 report, down 28 percent from its 2006 high.
Bernanke cited lower mortgage rates in testimony in February as evidence that Fed policies were working, noting that rates had fallen "nearly 1 percentage point" since the program was announced.
On April 1, Federal Reserve Bank of Cleveland President Sandra Pianalto said the Fed's program was resulting in "encouraging signs" for the economy. Besides falling rates, "we are also beginning to see a resurgence in refinancing activity in the residential mortgage markets, spurred on by these lower rates," she said.
The bankers' group boosted its forecast for 2009 home-loan originations by US$800-billion to US$2.78-trillion last month as a wave of refinancing and low interest rates spur homeowners to seek out new loans. Refinancing will increase to US$1.96-trillion in 2009 and purchase originations will total US$821-billion, the group said.
The London interbank offered rate, or Libor, for three- month dollar loans dropped to 1.17% on Thursday, down from 1.43% at the start of the year, showing banks have become more willing to lend.
TED Spread
The so-called TED spread, the gap between what banks and the Treasury pay to borrow money for three months, shrank to 96 basis points from 1.35 percentage points on Dec. 31. It touched a yearly low of 91 basis points on Feb. 2. The gauge reached a high of 4.64 percentage points in October, up from 1.35 percentage points on Sept. 12, the last trading day before Lehman Brothers Holdings Inc. filed for bankruptcy.
U.S. home prices fell 6.3% in January from a year ago, the smallest decline in five months, according to the Federal Housing Finance Agency in Washington.
"We have seen evidence that home sales are bottoming," said Jim O'Sullivan, senior economist with UBS Securities LLC, in Stamford, Connecticut. "This should be positive.""
The first talks about the Canadian economy. It mentions, among other things, incentives for first time home buyers, such as: tax credits for closing costs, an increase in the amount of RRSP withdrawals for downpayments, and rebates on land transfer tax.
The second article highlights some positive signs of late in the U.S. housing and finance economy.
Have a great week!
"A Real Estate Market with Plenty of Reasons to Buy
Helen Morris, National Post, Published: Friday, April 03, 2009
For first-time buyers with secure employment, the housing market may look rather more appealing now than it has in recent years, when they struggled with affordability.
"We know for Toronto, and for Ontario as a whole, there's been a pretty dramatic shift since the fourth quarter of last year, into a buyers' market," says Pascal Gauthier, economist at TD Economics. "Looking ahead to the next, say, 12 to 18 months, it is very difficult to believe that that is going to turn around, just given the economic backdrop."
While a continued buyers' market is good news for them, house hunters shouldn't expect to see a dramatic drop in prices.
"In Toronto, we're not seeing huge price declines," says Laurin Jeffrey, an agent with Century 21 Regal Realty, "but buyers are finding a lot more selection."
While last year, clients would find many properties had been sold before they had a chance to view them, "Now we're going through a list of 50, taking 20 that are good and getting out to see 10 top ones."
Mortgage broker Maria Dominelli advises clients to look very closely at their finances and lifestyle before stepping on to the property ladder.
"The first thing we want to determine is if home ownership is really right for the individual. They've got to look at coming up with the down payment ... [and] maintaining the home. It requires not only money but a commitment in time," says Ms. Dominelli, who works with Invis. "Make sure you do a check on that reality ... so you know the disadvantages and advantages of buying."
Mr. Jeffrey also urges clients to think about potential lifestyle changes that come with home ownership.
"If all of a sudden you're now restricted to a weekend in Montreal and a couple of lattes, when you're used to having dinner out [and vacationing in] Cuba, well, you're not going to be very happy," says Mr. Jeffrey.
If first-time buyers decide they are psychologically ready to take the plunge, there are some new government policies that can help with the finances.
Under the recent federal budget, first-time buyers can qualify for a $750 tax credit to help with closing costs. In addition, they can now withdraw up to $25,000 from their RRSPs under the Home Buyers Plan to help with a down payment, up from the previous $20,000.
First-time buyers in Toronto buying properties of $400,000 or less will receive a maximum rebate of $3,725 on land transfer tax.
Ms. Dominelli says it is always crucial for purchasers to have a back-up financial plan, but especially now in these testing economic times.
"One of the strategies is for people to actually have their mortgages registered for a longer amortization [for lower payments on paper] but to actually make their payments as though they are in a shorter amortization," says Ms. Dominelli. "While you are working, you can afford it. If the sky falls in and you lose your job and need to bide some time, you can ask the lender to change the payments to the lower total again without having to go back and incur legal fees."
Mr. Jeffrey believes in the value of the real estate investment. If your job prospects are good, he says, "Relax, take a breath, be smart. If you don't need that big flat screen TV, don't buy it. But if you need a place to live, prices are down a bit, mortgage rates are stupidly low. It's not a bad time to buy".
"Eased Mortgage Rates Point to Consumer-Driven Rebound
Kathleen M. Howley, Bloomberg News Published: Friday, April 03, 2009
U.S. Federal Reserve Chairman Ben Bernanke is delivering what he promised five months ago, record-low mortgage rates and a refinancing boom that's putting cash in consumers' pockets.
Fixed 30-year mortgage rates fell to a record low for the second consecutive week last week, hitting 4.78%, Freddie Mac said on Thursday in a statement. The rates are the lowest in records dating to 1971, and come after Bernanke told Congress in November that helping the most creditworthy borrowers was essential to reviving the economy.
Mortgage applications in the U.S. rose for the fourth straight week last week as a decline in borrowing costs spurred homeowners to refinance, while purchases of new houses unexpectedly rose in February. The Fed's effort to bring down fixed rates may give consumers as much as US$25-billion, said Mark Zandi, chief economist of Moody's Economy.com.
"It certainly gives further fuel to consumer spending," said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies in Cambridge, Massachusetts. "It puts more money into circulation."
The extra cash may help boost first-quarter consumer spending by 1% to 1.5%, said Barton Biggs, managing partner at New York-based hedge fund Traxis Partners LLC. Consumer spending accounts for about two-thirds of the U.S. economy.
Creditworthy Borrowers
Bernanke signaled the Fed's effort to bring down fixed mortgage rates in Nov. 18 testimony to the U.S. House of Representatives' Committee on Financial Services.
"It is imperative that all banking organizations and their regulators work together to ensure that the needs of creditworthy borrowers are met," he said.
One week later, the Fed said it would buy up to $500-billion in home-loan securities, causing the biggest one-day drop in mortgage rates in at least seven years, according to Bankrate.com. On March 18, the central bank almost tripled the size of the program to up to $1.25-trillion in purchases during 2009. The intent is to lower rates and make real estate financing easier to get, the Fed said.
The plan to buy mortgage bonds this year is succeeding where US$11.6-trillion of government lending, spending, and guarantees so far have failed.
‘Successful Effort'
"This has been the most successful effort, at least so far in this crisis, to shore up the economy," said Zandi.
Bernanke's mortgage purchase program may help curb a recession that is in its second year and being driven by the highest jobless rate in a quarter century and shrinking household wealth.
"If you throw enough money at one credit market, you will bring down the price," said Gerald O'Driscoll, a senior fellow at the Cato Institute and former vice president of the Dallas Federal Reserve. "They are targeting the mortgage market in an attempt to speed the process of establishing a floor in the price of housing."
Homeowners who refinance with a half-point drop in fixed rates may save $150 a month on a $300,000 mortgage, said Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut, and a former Fed economist.
Home Prices
Cheaper financing may also help spark a turnaround in the housing market. Sales of previously owned homes rose 5.1% to 4.72 million at an annualized pace in February from the prior month as low mortgage rates spurred demand, the National Association of Realtors said. The NAR's affordability index rose to a record in January, helped by lower home values and mortgage rates. The median U.S. home price in February was $165,400, the NAR said in a March 23 report, down 28 percent from its 2006 high.
Bernanke cited lower mortgage rates in testimony in February as evidence that Fed policies were working, noting that rates had fallen "nearly 1 percentage point" since the program was announced.
On April 1, Federal Reserve Bank of Cleveland President Sandra Pianalto said the Fed's program was resulting in "encouraging signs" for the economy. Besides falling rates, "we are also beginning to see a resurgence in refinancing activity in the residential mortgage markets, spurred on by these lower rates," she said.
The bankers' group boosted its forecast for 2009 home-loan originations by US$800-billion to US$2.78-trillion last month as a wave of refinancing and low interest rates spur homeowners to seek out new loans. Refinancing will increase to US$1.96-trillion in 2009 and purchase originations will total US$821-billion, the group said.
The London interbank offered rate, or Libor, for three- month dollar loans dropped to 1.17% on Thursday, down from 1.43% at the start of the year, showing banks have become more willing to lend.
TED Spread
The so-called TED spread, the gap between what banks and the Treasury pay to borrow money for three months, shrank to 96 basis points from 1.35 percentage points on Dec. 31. It touched a yearly low of 91 basis points on Feb. 2. The gauge reached a high of 4.64 percentage points in October, up from 1.35 percentage points on Sept. 12, the last trading day before Lehman Brothers Holdings Inc. filed for bankruptcy.
U.S. home prices fell 6.3% in January from a year ago, the smallest decline in five months, according to the Federal Housing Finance Agency in Washington.
"We have seen evidence that home sales are bottoming," said Jim O'Sullivan, senior economist with UBS Securities LLC, in Stamford, Connecticut. "This should be positive.""
Wednesday, April 01, 2009
On-line Application up and Running!
Hello everyone,
Recently we have had some technical challenges withour on-line application. We are pleased to say that this problem has been corrected and the application is fully functional.
Below is an article taken from the National Post. It talks about the housing market in the U.S. mainly, and shows some signs of hope in terms of a recovery. Though the situation up here is far different, the U.S. market nevertheless affects us as well. Here it is:
"Sales of previously owned U. S. homes rose at their fastest pace in nearly six years in February, data showed yesterday, offering some hope to an economy battling a 15-month recession.
The National Association of Realtors said sales rebounded 5.1% in February to a 4.72 million-unit annual rate, notching their largest gain since July, 2003, but about 45% of these were foreclosure or short-sale transactions.
This was above market expectations for a drop to a 4.45 million-unit pace after January's 4.49 million rate. Compared with the same period last year, February sales were down 4.6%, the NAR said.
U. S. stocks, already rallying after the U. S. government released details of a plan to clean out toxic assets from banks' balance sheets, extended gains on the housing data.
The housing market is at the core of the economic, and financial meltdown and stabilizing it is seen as a key ingredient for the recovery from a recession that started in December, 2007.
"Because entry-level buyers are shopping for bargains, distressed sales accounted for 40%-45% of transactions in February," said NAR chief economist Lawrence Yun. "Distressed homes typically are selling for 20% less than the normal market price, and this naturally is drawing down the median price."
Sales were up in all four regions, with the West outperforming. In California, the median listing price rose for the first time in three years.
Government data last week showed a rebound in U. S. housing starts and new building permits in February.
"It suggests that the drop in prices and mortgage rates and an increase in affordability are having an impact in the market," said Alan Gayle, senior investment strategist at Ridgeworth Investments in Richmond, Va. "Stabilization in the housing market is critical for the economy to start, and this is a good report."
There is hope that the government's US$272-billion package to stem the tide of foreclosures, together with aggressive efforts by the U. S. Federal Reserve to keep interest rates down, could lay the foundation for the housing market's recovery.
NAR's Mr. Yun said the government's stimulus package could add a million sales this year, but depressed levels of consumer confidence and rising unemployment could derail this projection. The median national home price declined 15.5% in February from a year ago to US$165,400, the second-biggest decline on record."
Have a great week everyone!
Recently we have had some technical challenges withour on-line application. We are pleased to say that this problem has been corrected and the application is fully functional.
Below is an article taken from the National Post. It talks about the housing market in the U.S. mainly, and shows some signs of hope in terms of a recovery. Though the situation up here is far different, the U.S. market nevertheless affects us as well. Here it is:
"Sales of previously owned U. S. homes rose at their fastest pace in nearly six years in February, data showed yesterday, offering some hope to an economy battling a 15-month recession.
The National Association of Realtors said sales rebounded 5.1% in February to a 4.72 million-unit annual rate, notching their largest gain since July, 2003, but about 45% of these were foreclosure or short-sale transactions.
This was above market expectations for a drop to a 4.45 million-unit pace after January's 4.49 million rate. Compared with the same period last year, February sales were down 4.6%, the NAR said.
U. S. stocks, already rallying after the U. S. government released details of a plan to clean out toxic assets from banks' balance sheets, extended gains on the housing data.
The housing market is at the core of the economic, and financial meltdown and stabilizing it is seen as a key ingredient for the recovery from a recession that started in December, 2007.
"Because entry-level buyers are shopping for bargains, distressed sales accounted for 40%-45% of transactions in February," said NAR chief economist Lawrence Yun. "Distressed homes typically are selling for 20% less than the normal market price, and this naturally is drawing down the median price."
Sales were up in all four regions, with the West outperforming. In California, the median listing price rose for the first time in three years.
Government data last week showed a rebound in U. S. housing starts and new building permits in February.
"It suggests that the drop in prices and mortgage rates and an increase in affordability are having an impact in the market," said Alan Gayle, senior investment strategist at Ridgeworth Investments in Richmond, Va. "Stabilization in the housing market is critical for the economy to start, and this is a good report."
There is hope that the government's US$272-billion package to stem the tide of foreclosures, together with aggressive efforts by the U. S. Federal Reserve to keep interest rates down, could lay the foundation for the housing market's recovery.
NAR's Mr. Yun said the government's stimulus package could add a million sales this year, but depressed levels of consumer confidence and rising unemployment could derail this projection. The median national home price declined 15.5% in February from a year ago to US$165,400, the second-biggest decline on record."
Have a great week everyone!
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