October 2009

[Ally]

New U.S. Jobless claims rise

WASHINGTON -- The number of U.S. workers filing new claims for unemployment benefits rose more than expected last week, data showed on Thursday, indicating the labour market remains fragile despite signs of economic revival.

Initial claims for state jobless insurance increased 11,000 to a seasonally adjusted 531,000 in the week ended Oct. 17 from a revised 520,000 the prior week, the labour Department said, after declining for two consecutive weeks.

Analysts polled by Reuters had forecast new claims nudging up to 515,000 last week from a previously reported 514,000.

U.S. stock index futures briefly trimmed gains on the report, while government bond prices held losses.

"There is a little bit of noise this time of year with seasonal adjustments," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla.Read the full article here.

 

[Ally]

Consumers to fire growth: BoC

Mark Carney, the governor of the Bank of Canada, said yesterday consumers would be at the "heart" of an economic recovery that continues to pick up steam, leaving analysts worrying a new wave of spending will only drive consumers deeper into debt.

Improved financial conditions and consumer confidence, coupled with indications that labour-market conditions "may have" ceased deteriorating, has led the Bank of Canada to believe consumer spending will account for a larger share of total economic growth in the years ahead, according to the central bank`s quarterly economic outlook, released yesterday.

Consumer spending will offset some of the losses in the export-oriented sector, which is expected to contract 1% next year due to the strength of the Canadian dollar.

"The conundrum for the central bank is the longer they keep interest rates low, the more likely it is that it will create [a debt] problem," said Andrew Pyle, wealth advisor and markets commentator with ScotiaMcLeod.

The central bank upgraded growth projections for the second half of 2009, seeing expansion of 2% for the third quarter and 3.3% for the fourth quarter.

Read the full article here.

 

[Ally]

Office Occupancies hint at recovery

Canadian office markets showed a surprising recovery in the third quarter, signalling the economy might be moving in the right direction, says a report by one of the country`s major real-estate companies.

Cushman & Wakefield says absorption -- the change in occupied space over a period of time -- is on the rise in the majority of the markets it surveyed. The vacancy rate is still rising but that is being attributed to too much new supply hitting the market.

"The recession isn`t over yet, but third-quarter office stats suggest that business is starting to make some positive moves," the company said in a release. "Many companies have finished purging themselves of unwanted space and are once again tackling occupancy decisions."

Cushman & Wakefield said absorption had averaged a negative 2.4 million square feet over the past two quarters, making the sudden move into positive territory more dramatic. Still, total absorption in the third quarter was only 141,008 square feet.

"It`s too early to say that we`re out of the woods. However, our research proves we`re faring better than expected," said Pierre Bergevin, chief executive of Cushman & Wakefield. "Even though private spending is expected to remain sluggish through next year, government spending will help bridge the gap and organizations are definitely taking advantage of the lull to explore ways to achieve new efficiencies in their real estate."

Read the full article here.

 

[Ally]

Don Campbell on BNN

Click here to watch the interview.

 

[Ally]

The New Reality

Yasmin Denner thinks back to when she bought her first house in Toronto in the 1990s. "I had 15% down, but that wasn`t enough. They wanted to know where I`d gotten the money from," says the self-employed IT specialist, recalling Canada`s borrowing environment.

Fast-forward 15 years. She and husband, Trevor, have settled in suburbs outside Washington, D.C., in a relatively spacious 3,000-square-foot home.

As the U.S. housing market roared earlier this decade, and credit was easy to come by, Ms. Denner says she saw more than a few neighbours pull up stakes and buy twice as much house as they could afford, only to find themselves in big trouble a few years later when the market went south.

"I have a friend who was at a dinner party at one of these McMansions, something like 6,000 to 8,000 square feet. She asked why it was so cold in the house and was told it was too expensive to heat," says Ms. Denner.

There is something about the way she was raised in Canada that cautioned her not to bite off more house than she could chew.

Read the full article here.

 

[Ally]

Boomers shape Market - Again

Tom and Jane, long-time friends of ours, last year sold the house they had lived in nearby in east Toronto for more than 30 years and bought a condo on Lake Ontario in Burlington, 60 kilo-metres away. Retired and in their mid-sixties, they had three reasons for selling up and leaving the house and neighbourhood they loved: First, they wanted to be nearer their daughter and their grandchildren. Second, they came out $250,000 ahead on the transaction. And third, they wanted the convenience of living on one floor in a brand-new condo they could lock up in the winter and head south to the sun.

Tom and Jane are part of a vast cohort of retirees and Boomers heading into retirement who are in the throes of making life-changing decisions about where they will live out their years, helping to stir and shape the real-estate market.

The housing surge of the new millennium -- and the recent re-surge after a year-long pullback -- has been partly fuelled by first-time buyers and other younger people embracing artificially low mortgage rates and other tax incentives. But Boomers and retirees are responsible for much of the buying and selling as they reposition themselves for later life.

U.S. studies have shown that a vast majority of people like to stay put in their region and/or town when they retire, preferring to "age in place," as the demographers put it. But even these folks will often have an impact on the real-estate market by selling the family home and buying a smaller bungalow or condo, or perhaps renting a house or apartment.

Read the full article here.

 

[Ally]

First-Time Home Buyers love the sweet deals

Armed with two incomes, historically low mortgage rates and often a down payment from the bank of mom and dad, the first-time homebuyer has returned to save the housing market.

They have provided the critical thrust that propelled the real-estate market out of a recessionary slump, and are expected to fuel sales in the future, industry experts say.

"We do a seminar for first-time homebuyers each spring and we thought it would wane this year because of the economy," says Peter Simpson, chief executive of the Greater Vancouver Home Buyers Association. "But instead of a drop-off of registrations, we actually set a record with more than 900 young people attending a seminar.

"Because they didn`t have [a home] to sell, they weren`t worried about that end, and they saw that interest rates were low and there were a lot of sweet deals out there because of the economy."

Mr. Simpson also said expectations were mixed for sales of condominiums at a planned tower in the suburb of Burnaby -- in the recession some banks pulled away from financing pre-sold units -- but on the first selling weekend this month people lined up overnight and the builder sold 135 of 180 suites in the first two days.

Banks are out in force offering

Read the full article here.

 

[Ally]

Lawrence Solomon: High Risks in Climate Change Policy

You are hearing at this conference that there is little doubt that human activity is causing profound and negative changes to our climate. Distinguished speakers are warning of enormous fresh water decreases, of disappearing glaciers, of the potential extinction of 70% of all species, of an ecosystem stressed to the breaking point. You are hearing of droughts and starvation and sea level rises that will very likely flood millions of people living in coastal areas from their homes each year, and that Canada will need to be prepared for the chaos to follow, chaos that could include mass migrations of refugees, social unrest, pandemics, war and terrorism and riots born of social injustice.

I`m here to tell you that there are no such likelihoods. That there is no consensus on climate change. That the science that the doomsayers describe cannot credibly be seen as having the weight of scientific opinion behind it. Often, as in the UN`s warning that malaria will spread as the globe warms — a claim you will hear tomorrow — the science has no credibility whatsoever. Not one prominent scientist in the world endorsed the UN`s malaria claims. Likewise, the UN`s hockey stick graph, showing that temperatures rose suddenly in the 20th century after 900 years of stable temperatures, has been thoroughly discredited.

In every single area that the UN points to man-made catastrophe — the disappearing Arctic ice cap or the Antarctic melting or the glaciers melting or the oceans rising — in every single area you will find no shortage of reputable scientists who dispute the UN position.

All scenarios of catastrophe are based on nothing more than output from computer models that have been fed what-if scenarios. These models can`t even model the past, let alone the future. The climate is simply too complex, with too many variables, to project into the future with any degree of confidence.

Man has always faced emergencies and we need to be prepared for emergencies in the future. But we should base our preparations on real-world conditions, not the fantasies of climate modelers at computer keyboards.


Read the full article here.

 

[Ally]

Foreclosures expected to rise in the U.S.

After several months of legal wrangling and help from foreclosure counsellors, Dolores Galloway managed to save the home she`s owned for nearly 21 years in the New York City borough of Staten Island from slipping into foreclosure. She got a loan modification from her bank for a three-month trial period starting in November.

Ms. Galloway, 65, ran into trouble nearly two years ago after losing her job as a bookkeeper. After depleting her savings on mortgage payments and other bills, she started to fall behind on her mortgage, which had a rate of 6.75%.

Ms. Galloway`s monthly social security cheques were insufficient even for a modified mortgage at 2.5%. She qualified for the loan modification program after her daughter moved into her home, boosting the overall household income.

After the trial period, Ms. Galloway is eligible for a five-year modified loan. "God willing, within another five years we can sell the house," she says.

Ms. Galloway is by no means alone. Once dominated by the so-called subprime market, the U.S. housing crisis is now spreading to creditworthy homeowners.

Read the full article here.

 

[Ally]

Canada`s Hot Real Estate Market getting Hotter

The statistics may not say it yet but Toronto real estate sales representative Kate Watson can already feel the ground shifting.

A new set of data from the Ottawa-based Canadian Real Estate Association (CREA) shows the market tighter than ever with the lack of supply in new listings conspiring to make a hot market even hotter.

CREA said Thursday the average sale price of a house in Canada reached $331,602 last month, a 13.6% increase from a year ago. There just isn`t enough new product coming to market to meet demand. Last month, there was 80,816 new listings across the country, compared to 97,657 a year ago.

The supply problem is happening in almost every major Canadian city. Toronto new listings were down 25.3% last month from a year ago. Calgary was off 26.1%.

The number of months of inventory in the market -- which is based on the number of months it would take to sell current inventories based on current sales activity -- was 4.9 months in September. That figure was down slightly from August and way off the peak of 12.8 months reached in January.

Read the fulla article here.

 

[Ally]

Made-in-Canada recovery - Can it go the Distance?

OTTAWA -- Domestic consumers and businesses are doing the lion`s share of dragging Canada out of recession. Figures Friday showed unexpectedly strong job creation and surging business confidence, even as weak global demand and the rising Canadian dollar continues to pound the export sector.

The consumer`s role cannot be underestimated, as the bevy of data revealed Canada posted a record trade deficit in August of $2-billion. Exports plunged 5.1% with big declines in machinery, industrial goods and agriculture, while imports fell a lesser 2.8%.

"The broader story is an important one, and pounded home with the data -- that the domestic side of Canada`s economy is flaring back faster than anyone could believe possible," said Douglas Porter, deputy chief economist at BMO Capital Markets.

"This is a made-in-Canada recovery," added Millan Mulraine, economics strategist with TD Securities.

Others aren`t so confident. They warn the recovery in the works could still be "incremental" and puts too much pressure on households.

Read the full article here.

 

[Ally]

First-Time Buyers provide thrust

First-time home buyers provided the critical thrust that propelled the real estate market out of a recessionary slump, and with historically low interest rates and reasonable prices, the conditions are still ripe to lure many more potential purchasers into the fold, industry experts say.

"We do a seminar for first-time home buyers each spring and we thought it would wane this year because of the economy," says Peter Simpson, chief executive of the Greater Vancouver Home Buyers Association. "But instead of a drop off of registrations, we actually set a record with more than 900 young people attending a seminar.

"Because they didn`t have [a home] to sell, they weren`t worried about that end, and they saw that interest rates were low and there were a lot of sweet deals out there because of the economy."

Mr. Simpson also said expectations were mixed for sales of condominiums at a planned tower in the suburb of Burnaby -- in the recession some banks pulled away from financing pre-sold units -- but on the first selling weekend this month people lined up overnight and the builder sold 135 of 180 suites in the first two days.

Banks are out in force offering tantalizing deals to prospective home buyers, dangling the carrot of ultra-low interest rates. Recently, Bank of Montreal lowered its five-year variable rate mortgage to its lowest posted level in more than 30 years, urging consumers to take advantage of the improved affordability.

Meanwhile, TD Canada Trust reported in its Generational Homeownership Study this week that Canadians aged 18 to 34 were more confident about buying a home than older Canadians did when they bought their first homes years ago.

Read the full article here.

 

[Ally]

Who is behind the Housing resurge?

Tom and Jane, long-time friends of ours, last year sold the house they had lived in nearby in east Toronto for more than 30 years and bought a condo on Lake Ontario in Burlington, 60 kilometres away. Retired and in their mid-60s, they had three reasons for selling up and leaving the house and neighbourhood they loved: First, they wanted to be nearer their daughter and their grandchildren. Second, they came out $250,000 ahead on the transaction. And third, they wanted the convenience of living on one floor in a brand-new condo they could lock up in the winter and head south to the sun.

Tom and Jane are part of a vast cohort of retirees and Boomers heading into retirement who are in the throes of making life-changing decisions about where they will live out their years, helping to stir and shape the real estate market.

The housing surge of the new millennium -- and the recent resurge after a year-long pullback -- has been partly fuelled by first-time buyers and other younger people embracing artificially low mortgage rates and other tax incentives. But Boomers and retirees are responsible for much of the buying and selling as they reposition themselves for later life.

U.S. studies have shown that a vast majority of people like to stay put in their region and/or town when they retire, preferring to "age in place," as the demographers put it. But even these folks will often have an impact on the real estate market by selling the family home and buying a smaller bungalow or condo or perhaps renting a house or apartment.

Read the full article here.

 

[Ally]

CMHC Bubble is 100% Made in Canada

Ottawa has been creating a housing bubble in Canada with taxpayer money, which is why residential real estate prices rise in defiance of high unemployment and recession.

Ottawa`s low interest rate policy and Crown agency Canada Mortgage and Housing Corporation`s dramatic increase in mortgage backstopping, for people who put only 5% down, have pushed up activity and prices.

Some, such as Post reader and accountant Derek Bruce, worry that the Tories are allowing CMHC to become like Freddie and Fannie south of the border, a rogue financial institution the size of one of our Big Five commercial banks.

In March, CMHC was allowed to insure up to $600-billion in mortgages, up from $450-billion the year before, a CMHC spokesman said yesterday.

Read the full article here.

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CMHC helps markets

Re: CMHC Bubble Is 100% Made In Canada, Diane Francis, Oct. 22.

Contrary to Diane Francis`s assertions, Canada Mortgage and Housing Corporation (CMHC) has been a significant contributor to the stability of the financial and housing markets in Canada.

First National Financial LP is Canada`s largest non-bank mortgage lender with $45-billion of mortgages under administration. Each year, we lend $12-billion to Canadians across the country, of which a significant portion is insured by CMHC.

In Canada, all OSFI regulated financial institutions such as the banks must obtain mortgage insurance on all mortgage loans where the down payment is less than 20%. In order to obtain CMHC insurance on a mortgage, a lender must undertake a rigorous underwriting process on the prospective borrower. The lender must ensure that the borrower has sufficient resources for the down payment and a good employment history. The borrower`s credit profile is assessed to determine their past history of fulfilling their financial obligations. The borrower must be able to demonstrate the necessary income to meet all the responsibilities of homeownership such as mortgage payments, property taxes, heating expenses and condominium fees as well as any other external financial obligations. In addition, each mortgage loan is sent individually to CMHC for its own evaluation and approval.

Far from creating a bubble, the underwriting standards of CMHC has insured that Canada experienced moderate house price appreciation over the past decade rather than the boom and bust experienced in the United States as a result of uncontrolled lending.

During the financial crisis, the fact that all mortgages over 80% were insured and all mortgages under 80% were underwritten to a similar high standards was one of the principal reasons that Canadian banks were seen as having solid assets rather than the "toxic" debt created by the European and American banks.

In addition, during the past several years, the Canada Mortgage Bond (bonds backed by CMHC insured mortgages and guaranteed by the Government of Canada) was one of the few financial instruments that provided liquidity to mortgage lenders and financial institutions in Canada, ensuring the continuing availability of affordable mortgage lending to Canadians throughout the financial crisis

For from being criticized, CMHC should be commended for its role in contributing to the development as well as the stability of the financial and housing markets in Canada.

Stephen Smith, Chairman and President, First National Financial LP

 

[Ally]

Capital still King, Carney warns Banks

Mark Carney, governor of the Bank of Canada, is warning banks they need to hang on to their cash instead of handing it back to shareholders or distributing it among senior executives in the form of bigger bonuses as some analysts predict they will.

Relief on the part of bankers that the financial crisis is finally over "is in danger of giving way to hubris," Mr. Carney said in a speech to business leaders in Montreal.

"Current bumper profits can compensate employees, be returned to shareholders, or increase capital. The clear priority of the public sector is the recapitalizations of the financial system to expand credit formation," he said.

Even before Group of 20 nations have fully mapped out new rules for the global financial sector, banks have reverted to their pre-crisis ways, behaving as "the self-appointed apex of economic activity," Mr. Carney said.

He said that banks should be acting as "servant of the real economy."

While the comments seemed mostly directed at U.S. giants such as Goldman Sachs, which is on track to distribute a whopping US$20-billion in bonuses this year, Mr. Carney made sure that banks in this country were listening by pointing out that they too were helped out by taxpayers.

Read the full article here.

 

[Ally]

Do no underestimate `Historic` restructuring ahead: Carney

OTTAWA - Bank of Canada governor Mark Carney said Canadians should not underestimate the "historic" restructuring ahead for the economy as it needs to adapt to a reshaped global marketplace in the post-financial crisis era.

However, in a TV interview broadcast on Sunday, he said he`s confident the country`s business community is up to the task, as their balance sheets are in "outstanding shape" and corporate leaders appear to recognize the changes afoot in the global marketplace.

"People should talk about what is a pretty profound restructuring that is coming in the global economy," Mr. Carney said. "Make no mistake: What will be required of our businesses, of policy makers and Canadians will be quite historic. This has been a great recession – it was short, but it is bringing a big restructuring and will require major adjustment in this country."

The Bank of Canada governor – who on Sunday kicked off the first of four public appearances scheduled this week -- was referring to changes in the global marketplace that will be spurred by the unwinding of so-called trade imbalances. These imbalances have resulted in the United States consuming more than it can afford, while emerging economies like China save more than they need.

The United States is Canada`s biggest trading partner, and some of our country`s biggest industrial producers -- such as in the steel, automotive and forest products sectors – have designed their businesses to take advantage of the U.S. market.

Read the full article here.

 

[Ally]

Bank of Canada must keep Loonie stable: CIBC

The Bank of Canada should intervene in the currency market to stabilize the value of the loonie and prevent a further erosion of the country`s manufacturing base, Avery Shenfeld, the chief economist at CIBC World Markets, said in a report.

"If the loonie is overvalued for a few years, we may be sacrificing business plant and equipment on the altar of a strong currency," Mr. Shenfeld said.

He said speculators have driven the currency too high above its economic fundamentals and that action by the central bank would discourage speculative investments.

"Canada could consider what might be called a bounded float," he said in CIBC`s latest Economic Insights report. "By intervening only at extremes, the central bank could help chase away speculative flows that take the currency, in its considered judgment, beyond fundamentally driven levels."

The Bank of Canada has not intervened in the currency market since 1998. Currency intervention is an unpopular strategy with many economists and investors because it disrupts the flow of the free market. Mr. Shenfeld said this is why it was important the strategy only be used in times of "extreme" imbalances.

Read the full article here.

 

[Ally]

Foreclosure Flood endures in the U.S.

Every 13 seconds in America, there is another foreclosure filing.

That`s the rhythm of a crisis that threatens to choke off hopes for a recovery in the U. S. housing market as it destroys hundreds of billions of dollars in property values a year.

There are more than 6,600 home foreclosure filings per day, according to the Center for Responsible Lending, a non-partisan watchdog group. With nearly two million already this year, the flood of foreclosures shows no sign of abating any time soon.

If anything, the country`s worst housing downturn since record-keeping began in the late 19th century may only get worse since foreclosures, which started with subprime borrowers, have now moved on to the much bigger prime loan market on the back of mounting unemployment.

In congressional testimony last month Michael Barr, the Treasury Department`s assistant secretary for financial institutions, said more than six million families could face foreclosure over the next three years.

"The recent crisis in the housing sector has devastated families and communities across the country and is at the centre of our financial crisis and economic downturn," Barr said.

Read the full article here.

 

[Ally]

Home Prices up in August; off 2008 peak, survey

Canadian home prices are on the road to recovery, but still haven`t rebounded to pre-recession levels, according to a survey that shows while housing prices rose in August they are still down 3.4% from their peak in August 2008.

The Teranet-National Bank house price index, which measures resale prices in six urban markets across Canada, shows that housing prices nationally rose by 2% in August, the fourth straight month-over-month increase.

It was also the second month in a row that prices were up in all of the six markets.

"This turnaround is consistent with an improvement in market conditions in the first half of 2009 -- more homes have been selling and fewer have been coming on the market," said Marc Pinsonneault, a senior economist with National Bank Financial Group.

For the ninth month in a row, national housing prices have declined on a year-over-year basis, but Pinsonneault notes that "the 12-month decline has been diminishing steadily since it peaked at 6.9% in May."

Read the full article here.

 

[Ally]

No Matter what the Cheerleaders say, this doesn`t feel like Recovery

Has this year`s unlikely, seven-month-long stock market rally finally slammed into the brick wall of economic reality?

That`s the key question on investors`minds, after the Toronto Stock Exchange`s lead index shed a further 248 points Wednesday.

It marked the fourth straight triple-digit decline, and left the S&P/TSX Composite Index at 10,805.33, 843 points or 7.2 per cent below the 2009 high of 11,648.55.

The picture is only slightly brighter in New York, where the Dow Jones Industrial Average sagged 119 points to 9,762.69.

The loss left the blue-chip index 356 points or 3.5 per cent below its 2009 high of 10,119.47, reached just eight days ago.

Read the full article here.