February 2010

[Ally]

January home sales slip from previous month

Existing home sales declined on a monthly basis for the first time in more than a year but it may only be a temporary decline as new government regulations are expected to boost the spring market.

The Canadian Real Estate Association said yesterday January sales nationally were down 2.8% on a seasonally adjusted basis from December, the first time activity has fallen in 13 months. Despite the decline, January 2010 sales were 58% higher than a year earlier.

"January results suggest that the national resale housing market may be past the recent peak," said Gregory Klump, chief economist with CREA.

"One car doesn`t make a parade, so a few more months of results showing a cooling trend will be required before talk of a Canadian housing bubble begins to fade. It could take until the second half of the year before a cooling trend becomes evident since home buying activity may continue to be accelerated in the first half of 2010 by expected interest rate increases, and by the introduction of the [Harmonized Sales Tax] in Ontario and British Columbia on Canada Day."

Prices across the country continue to climb: Year-over-year gains are more impressive because of the dismal housing market a year ago.

Read the full article here.

 

[Ally]

Lending curbs may open gates

Frank Lee is looking to buy a condominium in Toronto as an investment. He`s hoping to purchase something downtown and close to the subway. But his $300,000 budget means many first-time buyers and other investors are looking at the same properties.

"The market is tight in terms of product, because the interest rates are so low, everyone is looking," Lee said. "You see people out there who are leveraged up to their eyeballs."

On Tuesday, federal Finance Minister Jim Flaherty introduced tighter mortgage rules in Canada to slow the heated housing market before it becomes a bubble. Real estate industry insiders generally applauded the moves that will make it harder for investors to speculate in real estate while beefing up financing requirements for borrowers.

"The changes reflect reasonable public policy," said Phil Soper, president and CEO of Royal LePage. "Our government has taken the opposite tack to what has happened in the United States, where they have tried to attract the maximum number of people to make financial commitments regardless of ability to pay."

Jim Wong, a veteran mortgage broker with the Royal Bank of Canada, said he typically counsels borrowers to make sure they can afford a bigger mortgage down the road, in case interest rates go up.

Read the full article here.

 

[Ally]

Rising investment, inflation good signs

Foreign investors poured a record $109.4-billion into Canada in 2009 and the annual inflation rate pushed higher in January, figures showed Thursday. The numbers were twin positives for economists who are expecting the Canadian dollar to climb out of its rut and back to parity in the next few months.

Canada`s all-items Consumer Price Index came in at a surprising 1.9 per cent for the 12 months ended in January, primarily on gasoline prices, which are up 24 per cent in the past year.

Meanwhile international securities transactions numbers show foreign investors bought $11.2 billion worth of Canadian assets in December, primarily in bonds, rounding out a year of foreign investment almost four times greater than 2008.

It was enough to drive the dollar past the 96 cents US mark in trading Thursday. However, the dollar has been stuck in a range of about 92-98 cents US in the past few months.

Camilla Sutton, a currency strategist with Scotia Capital, said the numbers reinforce their bullish outlook on the dollar.

Read the full article here.

 

[Ally]

Inflation spike not expected to carry through

OTTAWA — Consumer prices spiked in January, thanks to the rising cost of gasoline and cars, but are unlikely to keep it up in the months ahead, economists said following the release Thursday of inflation figures from Statistics Canada.

The sense that January`s gains are more of a blip than a trend also means the Bank of Canada will feel no additional pressure to hike lending rates ahead of its conditional commitment to keep them on hold until July, they said.

Inflation rose 1.9 per cent on an annualized basis in January, following a 1.3 per cent gain in December, producing the largest advance since November 2008, the federal agency said. Core inflation, which does not include volatile items like food and energy, rose two per cent.

Pump prices were largely to blame for gains in the all-items index, just as they were in the previous two months, as gasoline costs climbed 23.9 per cent higher in January from a year before.

Yet, "to some degree what we saw in the latest month is more a reflection of lack of pressures a year ago than any inflationary pressure now," said Craig Wright, chief economist at Royal Bank of Canada, in reference to comparing today`s prices with the significantly depressed rices of a year ago.

Read the full article here.

 

[Ally]

B.C. to be No. 1 province in Canadian economic growth: Conference Board

OTTAWA — Olympic spinoffs and an improved outlook for forestry and manufacturing will make British Columbia the leader in economic growth among Canadian provinces in 2010, says the Conference Board of Canada.

B.C. will post growth of 3.7 per cent over the year, while renewed American auto demand will help Ontario surpass the national average for the first time in nearly a decade with growth of 3.5 per cent, the board said in its Provincial Outlook — Winter 2010, released Monday.

B.C. will also benefit from an estimated $770-million boost to the economy from the Winter Olympic Games.

"The recovery in Central and Western Canada began to take shape in the last few months and will continue to do so through 2010. In fact, all provinces are expected to post positive economic growth this year," said Marie-Christine Bernard, associate director, provincial forecasting.

Government stimulus spending in the U.S. and Canada will be the main driver, before a recovery in the private sector begins to take hold in the latter part of 2010 and into 2011, the report forecasts.

Read the full article here.

 

[Ally]

Shoppers open wallets in December

Statistics Canada says the value of retail sales rose 0.4 per cent to $35.3-billion in December, offsetting the previous month`s decline.

In volume terms, sales advanced even more at 0.6 per cent.

The December are expected to add to the already positive expectations for fourth-quarter economic growth .

The agency said five of eight retail sectors gained in December.

The biggest advance was the 3.3 per cent gain registered by general merchandisers, including department stores.

As well, clothing and accessories stores advanced 2.1 per cent, boosted by the shoe component, which jumped 5.2 per cent.

Read the full article here.

 

[Ally]

Shoes may not be done dropping in Ottawa`s mortgage reform

More than a decade ago, my late mother`s house was one of six in central Alberta bought by an Ontario woman in her 60s, who paid the minimum down payment on each one.

And in recent years, people in their 20s have been asking for advice about buying condominium units to be rented out to others, using leverage almost exclusively through various loans and lines of credit set up by developers.

So the new mortgage regulations announced by federal finance minister Jim Flaherty, to take effect April 19, were needed to cool a gurgling Canadian housing market before it becomes a bubble.

They will improve the likelihood that homebuyers will be able to keep up payments when our record-low interest rates rise an expected three per cent within the next two years, and will make it tougher for speculators to drive house prices beyond the affordability of first-time home buyers in particular.

One change is that mortgage loans will be income-tested against the five-year posted interest rate, as opposed to the three-year rate currently used.

Read the full article here.

 

[Ally]

Monetary policy should be based on inflation trends, not blips

News that the consumer price index rose at its fastest pace in more than a year in January has pundits wondering if the Bank of Canada might reconsider its commitment to keep the key overnight rate at 0.25 per cent until the end of June.

Prices rose 1.9 per cent year over year, according to Statistics Canada, closing in on the central bank`s target of two per cent.

While two per cent is hardly galloping inflation, even modest inflation takes a toll on the economy.

Consider that a basket of goods that cost $100 in 2000 today costs $123. Or, to put it another way, the purchasing power of the dollar has declined by 2.1 per cent every year over the last decade.

The bank`s assumption has been that inflation on a quarterly basis wouldn`t reach its two-per-cent target until the third quarter next year, giving it time to phase in rate increases to dampen inflation without pushing the dollar to parity with the U.S. dollar, or beyond. If Bank of Canada governor Mark Carney is forced to move rates before the U.S. Federal Reserve does, he risks raising the value of the dollar and stifling Canada`s economic recovery. The money market is betting that such a scenario is inevitable, pushing yields on Canadian treasury bills higher than those on U.S. bills.

Read the full article here.

 

[Ally]

U.S. economy is in shambles, with no improvement in sight

It has been one year since U.S. President Barack Obama signed the $787-billion stimulus bill, the Recovery Act, to lift the U.S. out of recession, and threw an additional $50-billion lifeline to American homeowners facing foreclosure. The package was subsequently enriched and is now estimated at $862 billion, while the pledge to stem foreclosures has risen to $275 billion.

"One year later, thanks to the Recovery Act, we can stand here again and say that a second depression is no longer a possibility," Obama said in marking the anniversary last week.

Oh no? Take another look at the numbers.

After all that spending -- actual and committed (Congress passed an additional $155 billion in aid in December) -- claims of job creation and economic growth remain highly suspect. The U.S. economy has shed more than eight million jobs since the recession began, and losses continue with 20,000 fewer jobs in January alone. A White House advisory council forecast that the economy will create 95,000 jobs per month this year. For forecasters, the year is not off to a good start. Unless the job generator shifts into a higher gear, one analysis concluded, it will take more than seven years to replace the jobs lost since 2007.

Read the full article here.

 

[Ally]

Business group warns of labour shortage

Labour shortages may not be top of mind with the unemployment rate running at 8.3 per cent, but they will be back to haunt Canadian businesses once the economy fully recovers, the Canadian Chamber of Commerce warned Monday.

"Canada will have too few workers to meet the needs of its economy and of society," said Perrin Beatty, the chamber`s chief executive.

"We need to expand Canada`s labour force if we want the Canadian economy to continue to grow."

In order to address those concerns, Canada needs to tap into the pool of talent offered by older workers, aboriginals, the disabled and new immigrants to the country, the business group said.

And it must do more to provide affordable access to a high-quality education system that will help those groups, whose participation in post-secondary education continues to be very low, integrate and contribute to the labour market, it said.

Read the full article here.

 

[Ally]

The case for a higher GST

hen Ed Clark, TD Bank CEO, recently said that nearly all members of the Canadian Council of Chief Executives (a group composed of 150 of Canada`s top CEOs) want the federal government to hike the GST to combat the deficit, he earned a quick rebuke from the Conservatives, who rejected his suggestion and referred to him in an email as the millionaire economic Czar to the Liberals. This in turn provoked responses from Liberal heavyweights including both Michael Ignatieff and former PM Jean Chretien.

But while Mr. Clark`s call for a GST hike to balance the budget shows a surprising lack of understanding about the source of the federal deficit, the idea should not be dismissed out of hand.
For the next several years Canada will be hamstrung by deficits that will hinder any improvement in Canada`s competitiveness, especially on the tax front. However, increasing the GST would create the revenue needed to reduce other, more damaging taxes (i.e. those on income and capital gains) that would dramatically improve Canada`s competitiveness.

Before we get into all that, let`s clear up any confusion regarding the source of the federal deficit. Primarily as a result of the economic downturn, federal revenues are expected to decrease by $16.5 billion this year (2009/10). Next year however, revenues are expected to rebound and then continue to grow at a rather robust average rate of 6.4% until 2014/15. While it`s clear that the economic recession is having a negative impact on federal revenues, the impact is expected to be very short-lived.

Read the full article here.

 

[Ally]

Canadian economic outlook brightens

OTTAWA - Olympic Games spinoffs and an improved outlook for forestry and manufacturing will make British Columbia the leader in economic growth among Canadian provinces in 2010, the Conference Board of Canada says.

B.C. will post growth of 3.7% over the year, while renewed U.S. auto demand will help Ontario surpass the national average for the first time in nearly a decade with growth of 3.5%, the board said yesterday.

B.C. will also benefit from an estimated $770-million boost to the economy from the Winter Olympic Games.

"The recovery in Central and Western Canada began to take shape in the last few months and will continue to do so through 2010. In fact, all provinces are expected to post positive economic growth this year," said Marie-Christine Bernard, the associate director of provincial forecasting.

Government stimulus in the United States and Canada will be the main driver before a recovery in the private sector begins to take hold in the latter part of 2010 and into 2011, the report forecasts.

Read the full article here.

 

[Ally]

Low inventories will prime spring housing market: Remax

OTTAWA — With new mortgage rules, a new harmonized sales tax in some provinces and the possibility of higher interest rates all set to kick in this summer, Canadian home buyers are on a tear and it is only going to get busier leading up to this summer, according to the Re/Max Market Trends Report 2010 released Wednesday.

The report, which examined real estate trends in 16 markets across the country, found that unusually strong activity in January — traditionally one of the quietest months of the year — has led to a sharp decline in active listings in 81 per cent of markets surveyed. Too many buyers and not enough homes will probably be the main problem in coming months, according to the report.

Markets experiencing the tightest inventory levels include Toronto (-41 per cent), Kitchener-Waterloo (-33 per cent), Ottawa (-30 per cent), Victoria (-30 per cent) and Greater Vancouver (-27 per cent), which also had some of the highest year-over-year sales gains.

The highest year-over-year sales gains were reported in Greater Vancouver (152 per cent), Kelowna (121 per cent), Greater Toronto (87 per cent), Victoria (69 per cent), Hamilton-Burlington (58 per cent), London-St. Thomas (55 per cent) and Calgary (47 per cent), the report said.

Western Canada dominated the list of centres with the greatest increases in price, with Victoria home prices jumping 25.5 per cent in January compared with the same month a year before. Kelowna jumped 22 per cent and Greater Vancouver rose 19.5 per cent. St. John`s saw an increase of 23 per cent and Toronto rose 19 per cent.

Read the full article here.

See attached for the official press release.

 

[Ally]

U.S. slump in sales of new homes threatens recovery

New-home sales in the United States unexpectedly slumped to their lowest level in 47 years in January, stoking fears the housing market has lost its momentum and could start sliding again despite billions of dollars in government intervention.

A pickup in housing construction is considered an essential component to any economic recovery in the United States because it adds directly to gross domestic product when building begins and creates jobs in an economy that is facing double-digit unemployment.

The health of the U.S. banking industry is also closely tied to the real estate market . While prices have been showing signs of stability over the past several months, the January data have stoked fears they could start to decline, leading to a new wave of defaults and foreclosures. One recent report estimated more than 10 million American households owe more than their house is worth and may opt to walk away from their mortgages, leaving banks little choice but to sell them at a loss.

"When one considers the billions and trillions of dollars that have been spent to prop up the housing market, that the best we could muster is a new low in sales is incredibly worrisome," Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York, said in a note to clients.

Sales of new single-family homes hit a seasonally adjusted annual rate of 309,000, from a December rate of 348,000, the Commerce Department said.

Read the full article here.

 

[Ally]

U.S. jobless claimes rise unexpectedly

The number of new claims for unemployment benefits jumped unexpectedly last week as heavy snows led to higher layoffs.

In addition, many state agencies in the mid-Atlantic and New England regions that process the claims were closed due to the storms and are now clearing out backlogs, a Labor Department analyst said.

Still, the increase is likely to amplify concerns that the job market is weakening, potentially slowing the economic recovery.

The Commerce Department said in a second report that orders for big-ticket manufactured goods shot up in January by the 3 per cent, the most in six months.

But much of that gain resulted from a surge in orders for aircraft. Excluding transportation, durable goods orders fell by 0.6 per cent, a weaker showing than economists had expected.

Read the full article here.

 

[Ally]

Listings shortage pushing up prices

The lack of residential Canadian real estate listings is most acute in Toronto, contributing to upward pressure on pricing, according to ReMax Ontario Atlantic Canada.

There were 41 per cent fewer homes listed for sale in the Greater Toronto Area in January compared with a year earlier, ReMax said in a report released Wednesday.

"The overall pressure on sales and price is significant across the board – and it`s not likely to subside until more inventory comes on stream," ReMax said.

Nationally, 81 per cent of markets surveyed showed a sharp decline in listings according to ReMax.

After Toronto, Saskatoon was in second place with 37 per cent fewer listings, followed by Kitchener-Waterloo, down 33 per cent.

Victoria and Ottawa tied for fourth place, down 30 per cent, and Greater Vancouver, down 27 per cent, rounded out the top five tightest markets.

Read the full article here.