May 2010

[Ally]

Asset slump fingered as central to to recession

OTTAWA - Statistics Canada says the steep decline in asset prices, concentrated in a short period of time, was a bigger factor in driving the country into recession than falling output.

This might explain why Canada`s recession was shorter and milder compared with its industrialized peers, said Philip Cross, chief economic analyst with the data-gathering agency. The Canadian dollar, commodity prices and stock values have all rebounded sharply after they began their descent in the summer of 2008 and reached lows in early 2009. The bounce-back in prices, such as a doubling in crude-oil prices from January of last year, has led to better-than-expected economic growth and prompted the Bank of Canada to set the stage for rate hikes starting next month when it ditches its conditional commitment on rates.

"The 2008-2009 recession in GDP was driven more by prices than volume in Canada, while in the U.S. it was driven more by volume than by prices," Mr. Cross said. "The volume of output is more closely linked to employment; this helps explain why job losses have been more severe in the U.S. than in Canada.... As well, price changes are more easily reversed."

Meanwhile, the pace of change in asset prices was also addressed yesterday by the No. 2 official at the powerful U.S. Federal Reserve. Donald Kohn, in Ottawa to address an economics and monetary-policy conference at Carleton University, said he has "reservations" about central banks hiking interest rates to dampen possible asset bubbles, such as in housing.

This is best left to regulators to examine and keep track of, he added.

Read the full article here.

 

[Ally]

Cut debt, don`t increase rates: IMF

The International Monetary Fund urged governments to cut public debt to prevent higher interest rates and slower economic growth, saying the fiscal crisis in Europe shows such risk "cannot be ignored."

Debt in developed economies will expand to about 110% of gross domestic product by 2015, from 73% in 2007, the IMF said. For the Group of Seven countries, the ratio is the highest since the Second World War, it said.

"As economic conditions improve, the attention of policy-makers should now turn to ensuring that doubts about fiscal solvency do not become the cause of a new loss of confidence: recent developments in Europe have clearly indicated that this risk cannot be ignored," the IMF said.

If developed economies choose only to stabilize debt at its 2015 level, long-term interest rates may climb by 2 percentage points and potential growth may be 0.5 percentage point lower annually, the IMF predicted. That, in turn, would raise borrowing costs in emerging countries, it said.

Read the full article here.

 

[Ally]

Small players, big moment

The town of Hanover in Ontario`s Grey County is like many other small communities in Canada`s most populous province. It has a park and a campground, a theatre and a radio station. One of a handful of famous residents is Ryan Bester, a world-champion lawn bowler.

This is a town of factories and farms. P&H Foods processes its Butterball-brand turkeys here. West Bros. Furniture Manufacturing assembles its living-room and dining-room sets. Nearby, Bruce Power is bringing its nuclear reactors back online and hiring workers.

This is also where Meridian Credit Union, Ontario`s largest financial co-operative with $5-billion in assets under management, is flexing some serious financial muscle.

With one retail and one commercial branch, Meridian has built its Hanover outpost from scratch over the past decade to more than $260-million worth of deposits, loans and mortgages. It is challenging the big banks in town, carefully stoking its image as a local institution that cares about the local people.

Read the full article here.

 

[Ally]

Watching the meltdown

The economic shambles in Europe is the greatest crisis facing the West. It is a startling disintegration, especially given the lofty hopes briefly generated in the Europhoria of the Western and Central European union following the implosion of the U.S.S.R.

The United States, by contrast, remains a proud and determined country with a hardworking and immensely skilled work force, and is unafraid to deploy its superb military in good causes, exchanging live fire with civilization`s enemies.

Letting America be America has already produced some organic progress. The general scourging of Wall Street, well earned in principle if not in the details of the bill being prepared in Congress, will cool out the steroid-bloated financial industry.

The U.S. federal budget deficit for the current year is already $300-billion below the initial forecast and there are plausible indications that it will come down from its present 11% of GDP to less than 5% within three years. The current account deficit is down by almost 50% and the savings rate has risen from zero to about 5%.Most of the cities and states are terribly strapped. (Arizona has sold its state capitol and leased it back, and New Jersey is facing an $11-billion deficit on an initial spending requirement of $30-billion. The suggestion of a5%reduction in the schools budget, or a one-year freeze on the pay of the state`s teachers, was greeted with the composition and circulation by teachers` union officials of a poem hoping for the death of the new governor, Chris Christie.) But at least they can`t expand the money supply and create inflation.

Read the full article here.

 

[Ally]

House prices to decline further with forthcoming dramatic increase in foreclosures
13.5% of All Home "Owners" Are Behind in Their Mortgage Payments
Lender Processing Services reports that mortgage delinquencies have reached record highs – a whopping 10.2 % and the percentage is still growing. Add in homes that are in some stage of foreclosure and the rate for non-current mortgages rises to an astounding 13.5 percent or a total of approximately 8 million homeowners behind on their payments.

Foreclosure Rate Up 51.1% vs. Year Ago
That is not all. In February the total number of foreclosures jumped by 51.1 percent over February 2009 levels—which seems to indicate that banks are finally starting to face the music and starting to repossess homes.

Mike Whitney maintains** that "banks have been withholding supply to keep prices artificially high." During the banking panic in 2008 and 2009, banks did not want to foreclose on homes because it would have pushed prices lower, and that would have affected the value of banks` mortgage-backed security bonds—causing the banks more trouble at a time when many big banks were collapsing. The government too wanted to stop foreclosures, for political reasons, so a moratorium on foreclosures was adopted.

That moratorium ended on March 31, and now that the banks are stuffed with reserves (due to the bank bailout program), "there`s no need to continue the charade," says Whitney. "So the dumping of backlog homes has begun" and the house dumping could turn into a flood.

Read the full article here.

 

[Ally]

New housing listings soar as experts expect slowdown

Canadians listed their homes for sale in record numbers in April as countrywide housing inventory hit levels not seen in almost a year, says the Canadian Real Estate Association.

While the market has not slumped, just about everybody tracking the sector - from economists and builders to real estate executives - say there is nowhere else to go but down in prices and sales.

"We are still a far cry from where we were," said Gregory Klump, chief economist with CREA, referring to the bottom of the market in January 2009 when there was 12.8 months of unsold inventory on a seasonally adjusted basis. The inventory represents the number of months it would take to sell current homes at the current rate of sales activity.

Inventory rose to 5.3 months in April on a seasonally adjusted basis, the highest since May 2009, in part because new listings show no sign of slowing: 99,901 homes went to market last month, the best April on record.

Read the full article here.

 

[Ally]

Stop knocking oil sands, Quebec told

MONTREAL - The former head of Quebec`s largest employer group says the province has to bury its criticism of Alberta`s oil sands because much of it is based on myths and ignores the fact that the resource generates wealth for all of Canada.

Michel Kelly-Gagnon, previously the president of Quebec`s Conseil du patronat and now chief executive of the Montreal Economic Institute, said the province has to renew a positive dialogue with Alberta. Tensions between the two provinces have escalated over the past few months as some societal leaders in Quebec adopted a confrontational position toward Alberta`s resource.

"Instead of always bad-mouthing the oil sands, Quebec should look at them as a source of development," Mr. Kelly-Gagnon said in a speech yesterday to the Canadian Club of Montreal. "The oil sands promise not just a tremendous benefit for Alberta -- they will spread wealth across Canada."

Oil and gas activities in Alberta alone, not counting Saskatchewan, will add $2.85-trillion to Canada`s gross domestic product over 25 years, according to estimates. The positive impact to Quebec will be $23-billion over that time, said Mr. Kelly-Gagnon, citing figures from the Canadian Energy Research Institute.

Read the full article here.

 

[Ally]

Alberta oilsands become largest U.S supplier of crude in 2010: Report

If the oilsands were a country, they would be the largest source of crude oil to the United States, according to a new report by a leading American energy think-tank.

Canada has long been a top oil supplier to its southern neighbour, but 2010 will mark the first time oilsands production will account for the lion`s share of U.S. imports of petroleum and refined products, according to the report prepared by Massachusettsbased Cambridge Energy Research Associates. Oilsands could eventually account for 20 to 36 per cent of U.S. supply by 2030, the report notes.

"The fact that oilsands by themselves -- were they a country -- are set to become the largest single source of U.S. crude oil imports this year, emphasizes the importance they have attained as a supply source for the United States," Daniel Yergin, IHS CERA chairman and Pulitzer Prize-winning author of The Prize, said in a news release. "It also shows how integrated Canada and the United States are in terms of energy, as in their overall economies."

The study is the first in a four-part series that will look at the oilsands and factors such as econ omic and environmental policies that could influence development of the world`s second-largest oil reserves.

Read the full article here.

 

[Ally]

CNQ cites big break cleaning tailings

CALGARY - Canadian Natural Resources Ltd. has made what it says are "promising" steps in solving some of the most challenging environmental problems associated with oil-sands tailings ponds.

The Calgary-based company said it is is using far less -- only 12% to 14% -- of the fresh water it expected to remove from the Athabasca River at its Horizon oil-sands mine near Fort McMurray.

Furthermore, Canadian Natural thinks it has sped up the time needed to clean up the toxic ponds, all while also sequestering carbon dioxide, key in reducing emissions.

"It looks like a very, very promising process," Steve Laut, the company`s president, told reporters yesterday.

The company said the process works by injecting carbon dioxide into the lines that transfer contaminated water out of its oil-sands mining facilities and into toxic-waste ponds. This technological twist forces clay and silt to settle at the bottom of the lakes faster than expected, leaving about 12 metres of clear water on top.

"If you can get [the clay and silt] to settle quicker, then you can reclaim the ponds quicker [and] the ponds get smaller," Mr. Laut said.

Read the full article here.

 

[Ally]

Decorated decor, extreme customization behind bad MLS listings

It took one homeowner about 45 years to collect 30,000 bobblehead dolls—and a big chunk of his home to store them. The real estate agent selling the place had to think quickly to come up with a strategy so the colourful collection wouldn`t scare away potential buyers.

"I decided to mention that he was the original owner, so people would be prepared," says Brian Mayer, an agent for Royal LePage in Toronto. "I also made sure the remarks said that all that custom shelving would be removed."

When it comes to creating real estate listings that will attract potential buyers to their home, sellers aren`t always the best judges of what works for the multiple listing service (MLS) at Realtor.ca. Not everybody can afford to stage their home to make it appealing to buyers, but some owners can be their own worst enemy.

Dated or eccentric decor, massive clutter and extreme customization populate the most cringe-worthy listings. The U.S.-based website Hookedonhouses.net features photos of homes overrun with stuffed animals, china and questionable murals. Mayer`s even come across a bright-orange swastika poster, which he, of course, suggested be removed. Though most homeowners will follow their agent`s lead to sell their property, some are surprised when they`re told that photographs or descriptions of their passions do not make for an effective listing.

Read the full article here.

 

[Ally]

Housing market expected to moderate this year and next, says CMHC

OTTAWA — Canada`s housing market is expected to ease in 2010 and 2011 as the market returns to more balanced conditions, Canada Mortgage and Housing Corporation said Wednesday.

"Canadian housing markets have recovered from the low levels posted in early 2009," Bob Dugan, chief economist for CMHC, said in a release.

"Moving forward, housing starts will moderate as activity becomes more in-line with long term demographic fundamentals. New measures for government-backed mortgage insurance introduced by the government of Canada that took effect on April 19, 2010 will continue to support the long-term stability of Canada`s housing market."

The mortgage insurer said in its second quarter market outlook it expects housing starts in 2010 to be in a range of 166,900 to 199,600 units with a "point forecast" of 182,000 units.

In 2011, it expects starts to be in a range of 148,600 to 208,800 units with a forecast of 179,600 units.

Read the full article here.

 

[Ally]

Ministers fan out around the globe

The idea for a global bank tax emerged in Britain after the MPs` expenses scandal, which created a dilemma for many Britons over whom they felt most deserved to be strung up from the nearest lamppost --bankers or politicians.

In an effort to remind them who was more responsible for them eating Kibble`n`Bits for dinner, former prime minister Gordon Brown suggested the bank tax, which was enthusiastically adopted by politicians in other bankrupt countries. Ever since then, the Canadian government has been arguing that Canada`s banks acted responsibly during the recession and did not deserve to be subject to a punitive tax.

Yesterday, senior Conservative ministers fanned out around the globe to protest the prospect of a bank tax being raised at the forthcoming G20 meeting in Toronto.

But rather than calling for a stake to be driven through the heart of an idea that is all but dead anyway, they should have been quietly encouraging the rest of the G20 to impose a new tax -- thereby presenting politically stable, low-tax Canada as the ideal financial inward investment opportunity.

Read the full article here.

 

[Ally]

Germany faces Canadian-led opposition

Germany showed signs yesterday of cracking under Canadian-led pressure to ditch advocacy of a global bank tax, as its finance minister suggested Europe could find its own solution should the Group of 20 summit in Toronto fail to endorse the universal levy.

The signals from Germany emerged after a series of federal Canadian Cabinet ministers spanned the world, reiterating the message that it is time to stop pressing for a global bank levy because it has become a "distraction" on financial reform talks. This is crucial, analysts and bankers say, because the present debate is "too unwieldy," with too many proposals being bandied about by too many bodies.

"The bank tax is not going to gain the kind of universal support that perhaps some [countries] thought it would obtain," Finance Minister Jim Flaherty said yesterday in a conference call from Mumbai, where he is visiting key Indian officials.

He added the world`s most important economies need to redouble efforts and focus on some basic principles of financial regulation, such as the quality and quantity of capital on banks` balance sheets; a strong cap on leverage; and effective supervision of financial institutions.

Read the full article here.

 

[Ally]

Canadian home sales drop 2.6% in April

Canadian existing home sales fell a seasonally adjusted 2.6 per cent in April from the previous month, as the market continues to retreat from peak levels.

According to figures released by the Canadian Real Estate Association, 52,042 homes changed hands last month, down 6.8 per cent from the height of the market in December of 2009.

A record number of new listings is one reason that sales have been moderating.

Some 99,901 homes were newly listed for sale, surpassing the previous record set in April of 2008, as vendors return to the market in force.

"Canada`s housing market has gone from full gallop to stately cantor, and is poised to slow to a leisurely trot in the months ahead," said Douglas Porter, deputy chief economist at BMO Capital Markets.

The national average price rose a healthy 12.2 per cent over the same time last year. While the figure is robust, this is the smallest increase in the past eight months

Read the full article here.

 

[Ally]

Housing starts to rise: CMHC

Canadian housing construction starts are expected to stabilize in coming years, following an even stronger rebound in 2010 than previously forecast, according to a new CMHC outlook issued Wednesday.

Canada Mortgage and Housing Corp. is now estimating there will be between 166,900 and 199,600 units started this year.

That`s about 18,000 to 50,000 more units than the 149,081 started in 2009 and also higher than CMHC`s previous forecast in March, when it estimated 152,000 to 189,300 starts for 2010.

CMHC`s revised mid-point estimate for this year is 182,000 housing starts and that will moderate to 179,600 units in 2011, the federal Crown corporation said.

Chief economist Bob Dugan said housing starts will become more in line with long-term demographic fundamentals and the home resale market will move towards "balanced conditions" over the next two years.

The housing market is considered to be "balanced" when the number of buyers and sellers is roughly equal. The market early this year was marked by an influx of buyers and a relative shortage of properties for sale, resulting in bidding wars in some markets and a sharp increase in sale prices nationally.

Read the full article here.

 

[Ally]

As China gears down, rebound threatened

Cracks are appearing in the Chinese economy, raising fears that the key driver of the global economic recovery is starting to falter.

As the fastest-growing major economy, China has been instrumental in pulling the world out of recession. The potential for slower expansion in China comes as fallout from the European debt crisis threatens to derail the continent`s recovery, creating new worries for investors hoping a fragile global rebound will solidify.

Global markets have already been rattled by emergency measures in Europe to rescue Greece from a financial meltdown, along with broad spending cutbacks in various European countries needed to bring ballooning deficits under control. Now fears are intensifying that moves in China to control price gains and keep a real-estate bubble from forming will slow the world`s fastest-growing major economy, adding another hurdle for the global rebound.

Two reports Monday indicated that China`s expansion – which came in at a whopping 8.7 per cent last year and 11.9 per cent on an annual basis in the first quarter of 2010 – may have peaked.

Read the full article here.

 

[Ally]

Funding bank drops Xceed

Rising pressures in the Canadian mortgage market continued to squeeze Xceed Mortgage Corp. as the Toronto-based company disclosed yesterday that one of the banks that buys its home loans has served notice that it will no longer do so.

Xceed typically finances its activities by bundling up its mortgages and selling them to larger lenders -- known as aggregators -- that in turn sell them into the Canada Mortgage Bond program. The loss of one aggregator means it must now find an alternate funding source.

The company said it should not be a challenge and the news is not material, but other observers disagree.

"Xceed has been having some difficulties along with other mortgage originators," said Alex Jurshevski, managing partner at Recovery Partners, a risk-management advisory firm. "Basically, they are being squeezed here."

Until the financial crisis, such firms as Xceed that served clients that could not get loans from major banks financed themselves by selling their mortgages to others in the securitization business to be turned into asset-backed commercial paper.

Read the full article here.

 

[Ally]

Hybrid mortgages gain in popularity

or many homeowners, the choice between a fixed or a variable rate mortgage is a difficult one. They agonize over whether to lock into a rate that is predictable and at which they’re comfortable or to go with a lower rate that will fluctuate. But for a growing number of Canadians, hybrid mortgages, which combine fixed and variable rate components, are the way to go.

Forty per cent of Canadians that are likely to buy a home in the next two years plan to take out a combination mortgage, an RBC Royal Bank survey released on Monday showed. Only 32 per cent of those surveyed a year ago were looking at the hybrid mortgage option.

“Although interest rates are expected to rise, our study shows that not all Canadians intend to automatically opt for a fixed mortgage with a longer term,” said Marcia Moffat, head of home equity financing, RBC Royal Bank. “As consumers begin to learn about the benefits of mortgage diversification, we’re seeing more homebuyers gain a better comfort level with adding floating rate mortgage options.”

Banks in addition to RBC that offer hybrid mortgages include Scotiabank, National Bank, HSBC and Laurentian Bank.

Read the full article here.

 

[Ally]

Oil sands on track to be biggest source of U.S. oil imports

Canada`s oil sands will become the largest single source of imported oil to the United States this year, and could supply more than a third of America`s foreign oil by 2030, under an aggressive growth scenario that would have to overcome labour shortages and environmental concerns, an influential U.S. think tank said Wednesday.

The growing volume of Canadian oil sands imports "emphasizes the importance they have attained as a supply source for the United States," Daniel Yergin, Cambridge, Mass.-based chairman of energy research firm IHS CERA, said in releasing a new report on the controversial Alberta oil projects.

Canada is already the largest source of imports for the U.S. market. But as conventional Canadian production declines and oil sands volumes grow, those non-conventional supplies are becoming increasingly critical.

In the third quarter of 2009, oil sands imports to the United States hit one million barrels a day for the first time, of total Canadian exports of 1.9 million. This year, IHS CERA expects oil sands producers to average 1.08 million barrels a day in sales to the U.S., eclipsing imports from both Mexico and Saudi Arabia, which will be declining or flat.

In the report, IHS CERA director Jackie Forrest projects production in the oil sands will grow from 1.35 million barrels a day last year, to as many as 5.7 million barrels a day by 2030 – a figure that would represent 36 per cent of anticipated American imports.

Read the full article here.

 

[Ally]

Home listings firm fight over data

Long known for pulpy convenience-store magazines advertising used cars and trucks, Trader.ca is taking on Canada`s biggest real estate website with a new site that features thousands of house listings.

Trader.ca, owned by Yellow Pages, already focuses on the rental and new-homes market. Now its hometrader.ca site is diving into the much bigger resale housing market, the company plans to announce Wednesday.

It`s not the only site trying to steal a piece of the Canadian Real Estate Association`s action. Alternatives are sprouting up to CREA`s popular Realtor.ca, which is powered and paid for by the listings entered by real estate agents across the country.

Trader.ca is one of 19 websites in Canada being fed listings by a data stream generated by Saskatoon`s Point2 Technologies. The company solicits brokerages and real estate associations to sign on, and then repackages and rebroadcasts their listings across all of the sites in order to provide maximum exposure for a listing.

Point2 charges brokerages and agents fees to access enhanced services and to access the data generated when users visit the listing.

Read the full article here.