Tuesday, April 21, 2009

March home sales Continued . . . .

The average house price in Canada fell to just under $289,000 - down 7.7 per cent from March 2008 - also the smallest year-to-year decline in six months.

Robert Kavcic, of BMO Capital Markets, wrote in a separate analysis saying that "the improvement in recent months is an encouraging sign that the Canadian housing market has crossed the halfway point for this downturn."

He noted that the number properties put up for sale fell in March, but the ratio of listings-to-sales remained slightly elevated at 2.2.

"Despite two months of improved sales activity, buyers are still in control of the Canadian real estate market," Kavcic wrote.

"Further price declines and low mortgage rates will ultimately help trigger a recovery, but a reversal in the wave of job losses is one major pre-requisite still outstanding."

Realtors say March home sales data contains promising signs


2009-04-15 17:05:00

OTTAWA - The number of existing homes sold last month was down from a year ago, but continued an upward trend that began in February, the Canadian Real Estate Association said Wednesday.

The association, which represents real-estate brokerage firms, also reported that the national average price for homes fell again in March compared with the same month last year.

"Housing markets are starting to show signs of buyer interest because of lower prices and interest rates," CREA president Dale Ripplinger said in a statement.

Sales of existing homes listed with the industry's MLS service totalled 35,225 units across Canada in March. That's 13.5 per cent below actual sales in March 2008, but CREA said it's the smallest year-over-year decline in six months.

The association also noted that, on a seasonally adjusted basis, March sales were seven per cent higher than in February, which was 10.3 per cent above January.

The association said the number of transactions in March was 18 per cent higher than in January, when activity was the lowest in a decade.

Recession not damaging Canadian job quality: CIBC

Bulk of job losses in low-paying positions

TORONTO, April 15 /CNW/ - CIBC (CM: TSX; NYSE) - While Canadian jobs are disappearing at a rate not seen since the 1982 recession, the current
recession has not hurt the employment quality of the remaining Canadian jobs, finds a new report from CIBC World Markets Inc.

Since October 2008, the Canadian economy has lost 356,000 jobs or 2.1 per
cent of the national workforce. However, over the same period Canadian job
quality has basically held steady, declining a trivial 0.2 per cent according
to CIBC's Employment Quality Index (EQI). The bank's EQI ranks job quality by assessing a number of factors including the distribution of part-time vs.
full-time jobs; self-employment vs. paid employment; and the compensation
ranking of full-time paid employment in more than 100 industry groups.

"The relative stability of employment quality during the current
recession is at odds with not only the pace of job losses in the economy, but
also the trajectory seen during previous recessions," says Benjamin Tal,
senior economist and author of the report.

"During the 1991 recession, the three per cent drop in overall employment
coincided with a 7.7 per cent drop in the quality of employment. The Canadian
experience this time around is also very different than the situation in the
U.S. where the quality of employment has fallen by 6.4 per cent over the past
year and by 4.2 per cent in just half a year."

Mr. Tal attributes the surprising strength in Canadian employment quality
to the fact that the bulk of job losses to date have been in low-paying
positions. "To be sure, the number of high and low-paying jobs fell
dramatically over the past six months, but the damage was more pronounced
among low-paying jobs.

"One reason behind the fact that employment in low-paying sectors is
falling faster than in high-paying ones is the significant decline in
employment among young Canadians. Total employment among workers age 20-24 fell by no less than 4.2 per cent over the past year and by 2.9 per cent over the past six months alone. And since many of these young workers are in
sectors or occupations that earn less than the average wage, this trend worked
as a positive for the quality measure."

But the key factor in the relative stability of the EQI during one of the
most difficult recessions in the post-war era is the role of women in the
labour force. Not only has the employment rate among women risen dramatically over the past decade, so has the quality of the jobs they hold. The number of women in professional occupations in business and finance has risen by no less than 50 per cent over the past decade -- more than double the rate seen among men. The same can be found in many other sectors such as public service and the social sciences.

"And so far, women are faring much better than men during this recession,
with total employment among women hardly changed over the past year vs. a 3.3 per cent drop among men," adds Mr. Tal. "And the fact that many of these women hold relative high quality jobs was an important factor behind the resiliency of our quality index."

The report also identified a number of key trends affecting job quality
in the country.

More first-time home buyers entering market

Wed. Apr 15 - 4:47 AM
TORONTO (CP) — Real-estate experts say low mortgage rates and more affordable homes in many markets are drawing out first-time home buyers in droves, but one independent analyst says the correction in Canadian home prices hasn’t been nearly as dramatic as some believe.

Phil Soper, chief executive of Brookfield Real Estate Services, which operates under the Royal LePage banner, said prices are falling and lenders are lowering their rates, making the market more attractive to people looking to buy their first home.

"The uptick in first-time home buyer purchases across the country is quite astonishing," said Soper, speaking Tuesday at a BMO conference on Canada’s housing market. "Affordability in places like Vancouver has improved for the first time in a very long time."

BMO senior economist Sal Guatieri said the average mortgage payment has fallen by one-third, or $600 a month, from its peak, while average resale home prices have fallen 14 per cent from their highs.

Guatieri said he expects resale prices to fall "moderately further" this year for a cumulative decline in prices of about 20 per cent.

But Peter Norman, a consultant with independent real-estate adviser Altus Group, said the dramatic drops in home prices seen in places like Vancouver, Edmonton and Calgary are the exception rather than the norm.

"This is not a housing adjustment period in Canada," he said in an interview.

Banking on a mortgage broker

'Lenders of last resort' now enjoy 30% share of market

By Derek Sankey, For Canwest News ServiceApril 13, 2009

More than a decade ago, Bob Alexander was working as a professional accountant when he walked into a bank to get a mortgage. When he got turned down, he was completely baffled.

"My friend told me I should go see a broker," says Alexander. It was a perception that was prevalent at the time: Mortgage brokers were seen as the place you went when the banks turned you down.

Alexander went to see a broker, secured a mortgage and bought a home. He was so intrigued by this often misunderstood field that he decided to switch careers and become a broker himself.

"Ten or 15 years ago, mortgage brokers used to be the lenders of last resort," says Jim Murphy, president and chief executive of the Canadian Association of Accredited Mortgage Professionals, the organization that certifies the AMP designation.

"The mortgage broker channel has grown enormously," says Murphy. "I think the consumer sees it in a much more positive light." In fact, about 30 per cent of all mortgages in Canada today are secured through mortgage brokers, according to a study from CAAMP. There are 3,800 certified professionals with the AMP designation working across Canada.

When CAAMP introduced the certification four years ago, Alexander -- whose been a broker for eight years now -- decided to earn his designation.

Banks used to compete directly with brokers, using their own sales forces to go out and develop new leads. The brokers, meanwhile, would charge their own clients a fee to find them a mortgage.

Now, most banks have chopped those sales forces and instead enjoy a more mutually beneficial deal with brokers, who no longer charge the client a fee. Alexander, like other AMP brokers, provides his services free to the client. The lending institution pays him a finder's fee based on the size and type of the mortgage he secures for his clients.

The AMP designation requires two years of industry experience, an entry-level certification course plus 10 hours of continuing education every 12-month cycle to remain current.

"It's really important because a mortgage is the biggest financial investment most people will make in their lives, so they want to make sure the [broker] is knowledgeable, trained, knows the issues and the market and is able to give the consumer good advice," says Murphy.

Since brokers like Alexander have access to 40 lenders offering upward of 400 different products, the field has evolved in recent years to become a viable option for anybody seeking a competitive mortgage.

While he works with the big five banks in Canada, he also taps into other lending institutions such as First National Financial LP and Australian-based lending giant Macquarie Financial (Canada) Ltd.

When anybody walks into Alexander's office, his job is to match your credit level -- A, B, C or D -- with an appropriate lender that caters to the same type or types of customers.

What has changed in recent months, due to the economic recession, is there are fewer D-level lenders around, especially the American banks that ventured north prior to the subprime market collapse last year.

"We've seen a general tightening [of credit] right across the board," he says.
Murphy says it's important that in any kind of economy for potential homebuyers to realize -- and utilize -- the new brand of mortgage professional.

Alexander agrees, but cautions people to do a little research, make sure they're comfortable with the person across the table and ask questions.

"The first thing you should do is look for someone with that AMP designation," says Alexander.

Do You Suffer From Charge Card Misery?

I was watching the channel station the other day to see what was on TV and an ad came on that peaked my interest. It was a Credit Counseling ad that was showing people what charge cards really cost. I did not take down the payments and information at the time but decided to do a little review of the impact on my own.

The following is based on a $10,000 credit card debt and what the payments and end costs really are.

1. $10,000 at 18%, a typical card rate, when you make a minimum monthly payment of $145 and DO NOT CHARGE ANYTHING MORE to the card. After 5 years you would have paid approximately $8600 in interest and $32.55 off your balance. Continuing at $145 per month you would take about 35 years to pay that card off in full. You don’t want to know what interest you paid during that period!

2. If you did the same thing – no more charging – and paid $250 per month you would be paid off in 5 years and the interest cost would be about $5,000.

3. If you rolled your $10,000 credit card debt in with your mortgage at today’s rate of approximately 4% and increased your existing mortgage payment by $185, the debt would be fully paid in 5 years but the interest cost would be just over $1,000 resulting in a saving of about $4000. The cost to re-mortgage would be new legal fees of about $700-800 resulting in savings of several thousand dollars. After the 5 years if you continued with the higher payment you would also end up paying your existing mortgage off long before the original amortization.

If you have more charge card debt, the savings are even greater by converting the debt to your mortgage. If you would like me to review your personal situation feel free to email me at neil@mortgageman.ca or call me at 250-861-8758 and I would be pleased to analyze your affairs.

An added benefit might be that a re-write of your mortgage to a lower rate could also be possible. This could be true even if you have no outside debt to look at. My service for this analysis is “FREE”!

Thursday, April 9, 2009

US Housing Starts to Turn Around

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."

First-time buyers will lead eventual housing recovery: Brookfield CEO

Wednesday, February 25, 2009

Lower home prices and shifting demographics mean first-time buyers could lead a rebound in Canada's real estate market, experts said Wednesday at a real estate conference in Toronto.

Phil Soper, president and CEO of Brookfield Real Estate Services, said rookies are the largest category of buyers in the real estate market, accounting for close to 70 per cent of all transactions at the height of the housing boom.

However, they've been scared away in droves by the economic downturn, which was led in part by record foreclosure rates in the United States as homeowners defaulted on their mortgage debt.

Such a lack of first-time buyers can grind the real estate market to a halt, Soper told Scotiabank's annual real estate outlook conference.

"When new buyers stop entering the market, it's like sand in the gears," he said.

Homes hit a wall

Although Canada has managed to duck the severity of the housing crisis that has hit the U.S., the 10-year boom that saw housing prices soar, particularly in the western provinces, ended abruptly last year.

Canadian housing starts — the number of new residential construction projects — were down to 211,056 in 2008, about eight per cent lower than an average of almost 230,000 in the period from 2004 to 2007. Resale activity fell by 17 per cent in 2008 while home prices dipped by one per cent, according to Scotiabank.

Things seem to have worsened dramatically in January, with housing starts falling to an eight-year low of 153,500 annualized units and home prices down 11 per cent year-over-year.

The bank predicted the decline will continue through 2009, with housing starts forecast to fall to around 155,000 units, another 15 to 20 per cent decline in the number of resales and a 10 per cent drop in prices.

Buyers' market

But Adrienne Warren, a senior economist and real estate specialist at Scotiabank, said all of this seemingly bad news is working to create a buyers' market. And although young buyers are likely keeping an eye on the job market before they rush into buying a home, conditions are improving, she said.

"Certainly, the softening we've seen in prices, the increase in listings, is giving first-time buyers more choice," Warren said.

"We have seen some deterioration in affordability in recent years as home prices continued to rise, and I think that began to pinch a lot of first-time buyers. Hopefully, when we see some relief on prices, more choice, less bidding wars, we'll see more interest coming back."

And even though most first-time home buyers — generally in their late 20s or early 30s — tend to have much more debt than their parents did, Soper said they're also much more "real-estate savvy" than the generations that came before them.

"If you think of the traditionalists, the older people who went through very different economic times, they're very, very conservative about mortgages and debt as it relates to housing," Soper said.

"Today's first-time buyer views this as just a natural way to get into the market."

He added that young prospective buyers also tend to be much more confident about their future, less financially dependent on one job and one company and less concerned about the recession than their parents.

This confidence has combined with lower housing prices, better government incentives and less risk to make the real estate market more appealing to first-time buyers, Soper said.

Warren added that the demographic of first-time home buyers is growing as the children of baby boomers reach the age where they begin to consider entering the housing market.

"The baby 'echo' boomers that are now just graduating university, going out on their own ... will be an increasingly important demographic behind the pickup in some sales," Warren said.

She added that new immigrants will also be an important driver of home sales in the coming years as Canada's population growth becomes increasingly reliant on those born elsewhere.

However, Warren predicted that the housing market won't see a substantial rebound until 2013 or 2014

CMHC, Genworth reach out to struggling homeowners

| Wednesday, 8 April 2009

Genworth Financial Canada and CMHC launched campaigns in late March to inform homeowners who are struggling with mortgage payments about their options for avoiding foreclosure.

"I think these are great initiatives and they are steps in the right direction for sure," said Andrew Moor, president and CEO of Equitable Trust. "A constructive approach can really help right now."

Genworth's Homeowner Assistance Program, which started in 1995, expanded its online presence with an evaluator tool that helps homeowners assess their financial situations and explore options like extending their mortgage amortization periods to lower payments. The tool encourages homeowners to be proactive about defaults, said Anita DiPaolo-Booth, strategic marketing leader at Genworth Financial Canada.

The CMHC campaign offers consumers advice on how to approach their lender if they're in financial difficulty. Possible options for lenders that can be passed onto consumers include offering them a temporary short-term payment deferral or adding their arrears to their mortgage balance.

"With early intervention, co-operation and a well-executed plan, you can work together with your lender to find a solution," said Mark McInnis, CMHC's vice president of insurance underwriting, servicing and policy.

Moor said he hopes to work with mortgage insurers in the near future to come up with more solutions and "to make sure we're doing the right thing all together."

Canada Quantitative Easing to Be ‘Gentler’ Than U.S., CIBC Says

A further explanation of what may lie ahead for the Bank of Canada in terms of its new “quantitative easing” policy, as well as a subtle rate prediction at the end of the article.

What is Quantative easing? Quantitative easing is an economic term describing an action that may be taken by a country's central bank <http://www.wisegeek.com/what-is-a-central-bank.htm> in times of economic stress. A central bank <http://www.wisegeek.com/what-is-quantitative-easing.htm> controls the amount of available currency in a country, and it can create new money <http://www.wisegeek.com/what-is-quantitative-easing.htm> through what are known as open market operations. Put very simply, this means that the central bank creates or prints money out of thin air, although in an indirect way. When this is done in order to stimulate an economy in recession, it is known as quantitative easing, since it seeks to ease an economic burden by increasing the quantity of available currency.(www.wisegeek.com)
April 6 (Bloomberg) -- Canada will adopt a “gentler” form of quantitative easing than the U.S. has because of its explicit inflation targeting policies and healthier banks, said Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce.

Bank of Canada Governor Mark Carney will adopt so-called quantitative or credit easing within six months of announcing guidelines on April 23, Shenfeld said in a telephone interview from Toronto today. The central bank may purchase corporate debt -- such as short-term commercial paper -- and government bonds that mature in three to seven years, he said.

The Bank of Canada has almost run out of room for using interest-rate cuts to stimulate an economy in recession, after it lowered its key borrowing rate to 0.5 percent on March 3.

Policy makers may be able to boost the economy by purchasing securities to revive debt markets, without using the transactions to inject newly created money into the economy. “It might not be true quantitative easing,” Shenfeld said.

Under quantitative easing, asset purchases can be paid for with new money created by the central bank. The extra cash is supposed to encourage banks to expand lending to consumers and businesses.

The U.S. Federal Reserve’s extraordinary policies are reflected in its balance sheet, which has more than doubled over the past year. The Fed has taken on assets including mortgage securities, corporate debt and now long-term Treasuries under its latest policy decision last month.

“In Canada, the banking system isn’t as broken and therefore a lighter hand will be required,” Shenfeld said.

The Bank of Canada’s 2 percent inflation target will also limit how far the central bank is willing to go to boost demand, Shenfeld said.

‘All-out War’

“Only in the unlikely event that Canadian core inflation goes negative on a sustained basis would we expect the Bank to launch an all-out war on deflation that also pumped up money growth,” he said.

The core inflation rate, the consumer price index excluding eight volatile products, will slow to a 0.8 percent annual pace in the fourth quarter, he predicts.

Governor Carney said at an April 1 speech that publishing guidelines doesn’t mean using extraordinary policies is “preordained,” and any new steps will be consistent with the inflation target.

The Bank of Canada will probably keep its benchmark lending rate unchanged at 0.5 percent through the first quarter of next year, opting first to scale back its quantitative or credit easing policies when the economy picks up again, Shenfeld also said. Gross domestic product will contract until the fourth quarter when it will expand at a 2.5 percent pace, he said.

By Greg Quinn