| Wednesday, 27 October 2010
Canadian housing is overvalued, but not as much as those in Australia, Hong Kong or France, according to a new worldwide survey.
The Economist magazine’s annual survey showed Canadian homes cost on average 23.9 per cent more than they are worth. Meanwhile the scale ranged from the high end with Australian homes overvalued by 63.2 per cent, to Japan at the low end, where houses are undervalued by 34.6 per cent.
“Singapore, Hong Kong and Australia boast the gaudiest year-on-year price increases, even if the rate of appreciation is a down a bit from the summer,” the report states.
Canada’s house prices were up 4.5 per cent from one year earlier. From 1997 to 2010, prices have increased by 70 per cent, according to the report.
The Economist’s analysis of “fair value” housing is based on comparing the ratio of current house prices to rents with the long-term average. In other words, the purchase price of a house is divided by the rent it could have earned per year.
Thursday, October 28, 2010
Money:Canadians outstrip U.S. in home reno projects: RBC
By QMI Agency
Last Updated: October 27, 2010 7:39am
Canadians were much more likely to have completed a home improvement project over the past two years than property owners south of the border, spurred to action by the government’s home renovation tax credit, an RBC poll found.
The bank’s seventh RBC Renovation Poll found 66% of homeowners had completed a renovation in the past two years. That compares with just half of home owners surveyed in the U.S., it said.
The home renovation tax credit, introduced as part of the Ottawa’s plans to stimulate the economy expired in January. The credit sparked a boom in housing projects and spurred demand for paints, furnishing and other related products.
Those figures are likely to go into reverse in the next two years when the number of reno intentions in Canada will slip by four percentage points to 62%, while those in the U.S. rise to 67%.
American homeowners however plan to spend less than their Canadian counterparts at $9,800 versus $10,796.
The RBC survey found that of the Canadian reno projects only half came in on budget, with 28% saying the excess costs were the biggest regret with the upgrade.
“Canadians continue to consider any home improvement as a very good investment but the challenge with renovating is that it’s easy to keep adding on projects,” said Patricia Everingham, director of RBC Personal Lending. “Costs can mount up easily and the next thing you know you’re over budget and behind schedule.”
More than half of renovators either used cash or savings to pay for the upgrades and a third managed to pay off any extra within a month.
Of those still paying, 41% said it will take more than a year to pay it off.
The poll was carried out by Ipsos Reid between Sept. 17-22, 2010. The online survey is based on a randomly selected representative sample of 3,565 Canadian and 3,205 U.S. homeowners of whom 2,156 Canadian and 2,090 U.S. homeowners plan to renovate within the next two years.
Last Updated: October 27, 2010 7:39am
Canadians were much more likely to have completed a home improvement project over the past two years than property owners south of the border, spurred to action by the government’s home renovation tax credit, an RBC poll found.
The bank’s seventh RBC Renovation Poll found 66% of homeowners had completed a renovation in the past two years. That compares with just half of home owners surveyed in the U.S., it said.
The home renovation tax credit, introduced as part of the Ottawa’s plans to stimulate the economy expired in January. The credit sparked a boom in housing projects and spurred demand for paints, furnishing and other related products.
Those figures are likely to go into reverse in the next two years when the number of reno intentions in Canada will slip by four percentage points to 62%, while those in the U.S. rise to 67%.
American homeowners however plan to spend less than their Canadian counterparts at $9,800 versus $10,796.
The RBC survey found that of the Canadian reno projects only half came in on budget, with 28% saying the excess costs were the biggest regret with the upgrade.
“Canadians continue to consider any home improvement as a very good investment but the challenge with renovating is that it’s easy to keep adding on projects,” said Patricia Everingham, director of RBC Personal Lending. “Costs can mount up easily and the next thing you know you’re over budget and behind schedule.”
More than half of renovators either used cash or savings to pay for the upgrades and a third managed to pay off any extra within a month.
Of those still paying, 41% said it will take more than a year to pay it off.
The poll was carried out by Ipsos Reid between Sept. 17-22, 2010. The online survey is based on a randomly selected representative sample of 3,565 Canadian and 3,205 U.S. homeowners of whom 2,156 Canadian and 2,090 U.S. homeowners plan to renovate within the next two years.
Wednesday, October 27, 2010
Homebuyer Tradeoffs: What Will You Have To Sacrifice?
When you're buying a home, whether it's your first home or your third, you want it to be perfect. Your home affects every aspect of your life, from your financial stability to things you do in your free time to the people you spend time with. It's also probably the most expensive purchase you'll ever make. Yet it seems like you always have to sacrifice something when buying a home. Here are the tradeoffs that homebuyers most commonly face.
Location
Location is the one thing you can't change about most homes. Where you choose to buy affects the job opportunities available to you, your commute, your safety, the resale value of your home, where your kids will go to school, how much peace and quiet you will have and dozens of other things.
Since location is so important, you might be thinking that your ideal location is something you should never compromise on. However, people compromise on their ideal location all the time - they move further out into the suburbs even though they work in the city because they want a larger/newer/nicer house for a lower price, for example. Sometimes it's worth making a tradeoff on location to get something else you want.
Privacy
The type of dwelling you choose - house, condo or townhouse - will have a major impact on how much privacy you have. Will someone always notice when you're coming and going and whether you're home or away? Will you be able to play your music at the volume you want, turn up the TV and have parties without disturbing your neighbors? Will your neighbors be able to see what you're doing even while you're indoors or in your backyard?
Keep in mind that privacy goes both ways - do you want to be subject to the intimate details of your neighbors' lives?
If you buy a home in a multi-unit building, your level of privacy will vary with the overall size and layout of the building, the quality of construction materials used, your unit's location in the building and the behavior of the community (do people keep to themselves, or does everyone know each other?). In a single-family house, factors such as lot size, number of stories, fence height, vegetation, the location of the home's windows and doors and whether the home is on a cul-de-sac or in a gated community can all impact its level of privacy.
A house will usually offer more privacy than a condo or townhouse, but not always. Homeowners who want to live near the heart of the city often trade off privacy for location since urban areas tend to be more densely populated than suburban areas.
Dwelling Type
Whether you choose a house, condo or townhouse will also affect your lifestyle, your home's resale value and your monthly finances.
If you choose a condo, it will be difficult-to-impossible to have a backyard barbecue or a nice patch of grass for the dogs - in fact, it may not be possible to have dogs at all.
Condo life means your exterior maintenance responsibilities are limited - there's no repainting the house, replacing the roof or mowing the lawn - but you'll still have to pay for all of these things in the form of monthly homeowners' association fees. You'll also have to pony up extra cash if a major repair comes up and the homeowners' association is short on funds. So while many people think that living in a condo alleviates the burden of having to suddenly pay for major home repairs, whether that ends up being true actually depends on how well your homeowners' association is managed.
Also, condos and townhouses can be more difficult to command top dollar for when you go to sell because there may be other units for sale that are identical to or very similar to yours. The larger your building, the more true this becomes. The same can also be true in neighborhoods of tract houses, but even tract houses with the same floor plan will often have more distinguishing features than condo units within the same building.
Since condos and townhouses are often cheaper than houses, first-time homebuyers commonly make the tradeoff of choosing the former over the latter.
Price
The cost of the home ranks at the top of most people's lists in importance. A better location and nicer amenities will increase a home's price. If you're not wealthy, you'll have to sacrifice some of the things you want to stay within your budget. Be realistic about what you can get for your dollar and remember to rely on your own calculations of what you can afford, not your lender's estimate.
The Bottom Line
It's rarely possible to find a completely perfect home for your needs, tastes and budget, and it's OK to make tradeoffs. Think about your priorities before you start your home search, but be flexible and willing to change your mind once you see what your true options are - viewing actual properties can shift your priorities. And remember that if you can only find places that require too many compromises, it's OK to wait - new homes come on the market every day http://financialedge.investopedia.com/financial-edge/0810/Homebuyer-Tradeoffs-What-Will-You-Have-To-Sacrifice.aspx
Location
Location is the one thing you can't change about most homes. Where you choose to buy affects the job opportunities available to you, your commute, your safety, the resale value of your home, where your kids will go to school, how much peace and quiet you will have and dozens of other things.
Since location is so important, you might be thinking that your ideal location is something you should never compromise on. However, people compromise on their ideal location all the time - they move further out into the suburbs even though they work in the city because they want a larger/newer/nicer house for a lower price, for example. Sometimes it's worth making a tradeoff on location to get something else you want.
Privacy
The type of dwelling you choose - house, condo or townhouse - will have a major impact on how much privacy you have. Will someone always notice when you're coming and going and whether you're home or away? Will you be able to play your music at the volume you want, turn up the TV and have parties without disturbing your neighbors? Will your neighbors be able to see what you're doing even while you're indoors or in your backyard?
Keep in mind that privacy goes both ways - do you want to be subject to the intimate details of your neighbors' lives?
If you buy a home in a multi-unit building, your level of privacy will vary with the overall size and layout of the building, the quality of construction materials used, your unit's location in the building and the behavior of the community (do people keep to themselves, or does everyone know each other?). In a single-family house, factors such as lot size, number of stories, fence height, vegetation, the location of the home's windows and doors and whether the home is on a cul-de-sac or in a gated community can all impact its level of privacy.
A house will usually offer more privacy than a condo or townhouse, but not always. Homeowners who want to live near the heart of the city often trade off privacy for location since urban areas tend to be more densely populated than suburban areas.
Dwelling Type
Whether you choose a house, condo or townhouse will also affect your lifestyle, your home's resale value and your monthly finances.
If you choose a condo, it will be difficult-to-impossible to have a backyard barbecue or a nice patch of grass for the dogs - in fact, it may not be possible to have dogs at all.
Condo life means your exterior maintenance responsibilities are limited - there's no repainting the house, replacing the roof or mowing the lawn - but you'll still have to pay for all of these things in the form of monthly homeowners' association fees. You'll also have to pony up extra cash if a major repair comes up and the homeowners' association is short on funds. So while many people think that living in a condo alleviates the burden of having to suddenly pay for major home repairs, whether that ends up being true actually depends on how well your homeowners' association is managed.
Also, condos and townhouses can be more difficult to command top dollar for when you go to sell because there may be other units for sale that are identical to or very similar to yours. The larger your building, the more true this becomes. The same can also be true in neighborhoods of tract houses, but even tract houses with the same floor plan will often have more distinguishing features than condo units within the same building.
Since condos and townhouses are often cheaper than houses, first-time homebuyers commonly make the tradeoff of choosing the former over the latter.
Price
The cost of the home ranks at the top of most people's lists in importance. A better location and nicer amenities will increase a home's price. If you're not wealthy, you'll have to sacrifice some of the things you want to stay within your budget. Be realistic about what you can get for your dollar and remember to rely on your own calculations of what you can afford, not your lender's estimate.
The Bottom Line
It's rarely possible to find a completely perfect home for your needs, tastes and budget, and it's OK to make tradeoffs. Think about your priorities before you start your home search, but be flexible and willing to change your mind once you see what your true options are - viewing actual properties can shift your priorities. And remember that if you can only find places that require too many compromises, it's OK to wait - new homes come on the market every day http://financialedge.investopedia.com/financial-edge/0810/Homebuyer-Tradeoffs-What-Will-You-Have-To-Sacrifice.aspx
Tuesday, October 26, 2010
Bank vs. budget: How much house can you afford?
Tim Parker Investopedia
We hear it all the time. The housing market is still in a slump and there are dozens of houses just a short drive from where you live that really need an owner and you may be that person.
It's fate, right? Not so fast! If you noticed that a certain (expensive) home calls out for you each time you drive by, the obvious but most important questions must be asked: Can you really afford it?
Who Decides?
Your bank or lending institution decides. They will look at your application and based on a predefined set of criteria and decide if you can afford the home. You've probably heard that it's much more difficult to get a loan following the mortgage crisis. That's true! No longer is there a wealth of 0 per cent down mortgages or other types of loans that cater to those higher risk borrowers.
What Do They Look for?
Sometimes we think that our mortgage applications are judged by a person who uses a gut feeling rather than objective criteria. That's not the case. In fact, even if your mortgage lender was having a bad day, you can rest assured that there is a predefined set of criteria that not only tell the lender if you're approved or not but also what your interest rate will be. Wouldn't you like to know what those criteria are?
Credit History
No secret here, right? For most, a home is the largest purchase they will ever make and, in turn, the largest loan they will ever need. This is when your flawless credit that you've worked so hard to establish and maintain is going to pay you back. The better your credit, the lower your rate.
We should mention this now: If you know that you're going to be looking for a home in the future, work on your credit score now. There isn't a lot that you can do to remove accurate entries but you must keep a close eye on your reports. If there are inaccurate entries, it will take time to get them removed and you don't want to miss out on that dream home because of something that is not your fault.
Down Payment
What are you giving them? If somebody asked you to lend them a large amount of money, wouldn't it make you feel better if they gave you something that you could keep if they don't pay you back? The banks feel the same way! The more they get from you upfront, the safer they feel. A higher down payment can also help offset negative entries in your credit report.
Banks want more money down than they used to so plan for a 10 per cent down payment. Also remember that if you can put at least 20 per cent down, you will avoid mortgage insurance.
Debt to Income Ratio
Before we look at this, you have some homework: You have to total up the amount of monthly payments you make. Then, total up your gross pay, the amount of money you make before taxes and other deductions which are subtracted from your paycheque.
Do you have it now? This is a vital metric that banks use to determine your eligibility. The debt to income ratio (DTI) looks at the amount of money you owe on a monthly basis and compares it to the money you make each month. The number is shown as a percentage of your gross income.
In other words if you pay $2,000 each month in expenses and you make $4,000 each month, your debt to income ratio is 50 per cent. (50 per cent of your monthly income is being used to pay debt.) Here's the bad news, a 50 per cent debt to income ratio isn't going to get you that dream home.
If you're over 36 per cent, you will be considered a higher risk borrower. Each institution will have slightly different DTI requirements.
Your Income
If your DTI (debt to income ratio) is 25 per cent, but you only make $10,000 per year, you aren't going to get that home. We won't spend too much time on this because the obvious guideline is that the more you make, the better you look to the bank.
The Real Decider of Your Loan
The real person who should decide if you can afford a home is you and you have to put your emotions aside. Dave Ramsey, best selling consumer finance author and speaker believes that you shouldn't use any more than 25 per cent of your take-home pay (net pay) on your mortgage payment. This is different than the bank formula which uses your gross pay.
The problem with using gross pay is simple: How much of your cheque is deducted before you get your money? Thirty per cent? Why would you factor in money, most of which you won't ever see? Even if you get it back on your tax return, that doesn't help you now - and how much will you really get back?
What can you realistically afford? That dream home may be everything you've wanted at a great price but is it worth overextending yourself and your family? Is it worth potential bankruptcy if you lose your job?
The Bottom Line
The bank may tell you that you can afford a huge estate making you look like a Hollywood celebrity, but can you? Be real with yourself and when you make your calculations, plan for the worst case scenario. Murphy's law states that if it can go wrong, it will. As Dave Ramsey says, if you leave your front door open to Murphy, Murphy will move in.
We hear it all the time. The housing market is still in a slump and there are dozens of houses just a short drive from where you live that really need an owner and you may be that person.
It's fate, right? Not so fast! If you noticed that a certain (expensive) home calls out for you each time you drive by, the obvious but most important questions must be asked: Can you really afford it?
Who Decides?
Your bank or lending institution decides. They will look at your application and based on a predefined set of criteria and decide if you can afford the home. You've probably heard that it's much more difficult to get a loan following the mortgage crisis. That's true! No longer is there a wealth of 0 per cent down mortgages or other types of loans that cater to those higher risk borrowers.
What Do They Look for?
Sometimes we think that our mortgage applications are judged by a person who uses a gut feeling rather than objective criteria. That's not the case. In fact, even if your mortgage lender was having a bad day, you can rest assured that there is a predefined set of criteria that not only tell the lender if you're approved or not but also what your interest rate will be. Wouldn't you like to know what those criteria are?
Credit History
No secret here, right? For most, a home is the largest purchase they will ever make and, in turn, the largest loan they will ever need. This is when your flawless credit that you've worked so hard to establish and maintain is going to pay you back. The better your credit, the lower your rate.
We should mention this now: If you know that you're going to be looking for a home in the future, work on your credit score now. There isn't a lot that you can do to remove accurate entries but you must keep a close eye on your reports. If there are inaccurate entries, it will take time to get them removed and you don't want to miss out on that dream home because of something that is not your fault.
Down Payment
What are you giving them? If somebody asked you to lend them a large amount of money, wouldn't it make you feel better if they gave you something that you could keep if they don't pay you back? The banks feel the same way! The more they get from you upfront, the safer they feel. A higher down payment can also help offset negative entries in your credit report.
Banks want more money down than they used to so plan for a 10 per cent down payment. Also remember that if you can put at least 20 per cent down, you will avoid mortgage insurance.
Debt to Income Ratio
Before we look at this, you have some homework: You have to total up the amount of monthly payments you make. Then, total up your gross pay, the amount of money you make before taxes and other deductions which are subtracted from your paycheque.
Do you have it now? This is a vital metric that banks use to determine your eligibility. The debt to income ratio (DTI) looks at the amount of money you owe on a monthly basis and compares it to the money you make each month. The number is shown as a percentage of your gross income.
In other words if you pay $2,000 each month in expenses and you make $4,000 each month, your debt to income ratio is 50 per cent. (50 per cent of your monthly income is being used to pay debt.) Here's the bad news, a 50 per cent debt to income ratio isn't going to get you that dream home.
If you're over 36 per cent, you will be considered a higher risk borrower. Each institution will have slightly different DTI requirements.
Your Income
If your DTI (debt to income ratio) is 25 per cent, but you only make $10,000 per year, you aren't going to get that home. We won't spend too much time on this because the obvious guideline is that the more you make, the better you look to the bank.
The Real Decider of Your Loan
The real person who should decide if you can afford a home is you and you have to put your emotions aside. Dave Ramsey, best selling consumer finance author and speaker believes that you shouldn't use any more than 25 per cent of your take-home pay (net pay) on your mortgage payment. This is different than the bank formula which uses your gross pay.
The problem with using gross pay is simple: How much of your cheque is deducted before you get your money? Thirty per cent? Why would you factor in money, most of which you won't ever see? Even if you get it back on your tax return, that doesn't help you now - and how much will you really get back?
What can you realistically afford? That dream home may be everything you've wanted at a great price but is it worth overextending yourself and your family? Is it worth potential bankruptcy if you lose your job?
The Bottom Line
The bank may tell you that you can afford a huge estate making you look like a Hollywood celebrity, but can you? Be real with yourself and when you make your calculations, plan for the worst case scenario. Murphy's law states that if it can go wrong, it will. As Dave Ramsey says, if you leave your front door open to Murphy, Murphy will move in.
Monday, October 25, 2010
Real estate association members ratify deal giving consumers wider choice
The Canadian Press
ST. JOHN’S, N.L. — Delegates from Canada’s 101 local real estate boards Sunday ratified a deal worked out by the federal Competition Bureau and the real-estate industry.
It would allow consumers to choose what services they want from their agent when selling their homes, and to pay for only those services.
The deal was reached after months of negotiations between the competition watchdog and the Canadian Real Estate Association that represents some 100,000 realtors.
The bureau chief was quick to praise the ratification.
“I am pleased that CREA members have voted in favour of this agreement,” said commissioner Melanie Aitken. “For Canadian homeowners, it ensures that they will have the freedom to choose which services they want from a real-estate agent and to pay for only those services.”
Association president Georges Pahud also welcomed the vote.
“We are pleased that after careful consideration and reflection, real-estate boards and associations from across Canada have endorsed the agreement,” Pahud said.
Under the deal, the Canadian Real Estate Association has agreed that its rules as well as those of its members should not deny or discriminate against realtors wishing to offer mere posting services.
The Competition Bureau has been pressuring the association to change rules it calls “anti-competitive” on behalf of realtors and consumers who want more flexible services.
“This 10-year agreement brings a close to a long process of negotiation with the Competition Bureau and will allow CREA and realtors to do what they do best — help people with the biggest financial decision of their lives, buying and selling a home in these challenging economic times,” said Pahud.
But experts say the doors to lower-cost services won’t be thrust open overnight because the industry is dominated by traditional agents who are reluctant to change their business models.
Realtors currently operate on the principle that selling agents will split the standard five per cent commission with the buyer’s agent.
Canadian Real Estate Association members voted on amendments to the organization’s rules in March that were expected to appease the Competition Bureau, but the watchdog took issue with a clause in the amendments that said the changes are subject to the rules of local boards.
The watchdog said it would settle for nothing less than a legally binding agreement so that the association couldn’t change its rules back on a whim.
With Sunday’s ratification, the deal will be legally binding as of today and will remain in effect for 10 years, with hefty penalties for any violation.
ST. JOHN’S, N.L. — Delegates from Canada’s 101 local real estate boards Sunday ratified a deal worked out by the federal Competition Bureau and the real-estate industry.
It would allow consumers to choose what services they want from their agent when selling their homes, and to pay for only those services.
The deal was reached after months of negotiations between the competition watchdog and the Canadian Real Estate Association that represents some 100,000 realtors.
The bureau chief was quick to praise the ratification.
“I am pleased that CREA members have voted in favour of this agreement,” said commissioner Melanie Aitken. “For Canadian homeowners, it ensures that they will have the freedom to choose which services they want from a real-estate agent and to pay for only those services.”
Association president Georges Pahud also welcomed the vote.
“We are pleased that after careful consideration and reflection, real-estate boards and associations from across Canada have endorsed the agreement,” Pahud said.
Under the deal, the Canadian Real Estate Association has agreed that its rules as well as those of its members should not deny or discriminate against realtors wishing to offer mere posting services.
The Competition Bureau has been pressuring the association to change rules it calls “anti-competitive” on behalf of realtors and consumers who want more flexible services.
“This 10-year agreement brings a close to a long process of negotiation with the Competition Bureau and will allow CREA and realtors to do what they do best — help people with the biggest financial decision of their lives, buying and selling a home in these challenging economic times,” said Pahud.
But experts say the doors to lower-cost services won’t be thrust open overnight because the industry is dominated by traditional agents who are reluctant to change their business models.
Realtors currently operate on the principle that selling agents will split the standard five per cent commission with the buyer’s agent.
Canadian Real Estate Association members voted on amendments to the organization’s rules in March that were expected to appease the Competition Bureau, but the watchdog took issue with a clause in the amendments that said the changes are subject to the rules of local boards.
The watchdog said it would settle for nothing less than a legally binding agreement so that the association couldn’t change its rules back on a whim.
With Sunday’s ratification, the deal will be legally binding as of today and will remain in effect for 10 years, with hefty penalties for any violation.
Friday, October 22, 2010
Your options in the brave new real estate world
Garry Marr, Financial Post · Saturday, Oct. 16, 2010
How would you sell your house today if it was on the market? Would you use a real estate agent or go it alone?
It's no small issue given the typical commission paid by the seller in this country is about $15,000 based on the latest average sale price of an existing home. When you consider most home sales are for principal residences -- and profits are not subject to capital gains taxes--that $15,000 looms larger because it is after-tax money.
The truth is not much has changed since the Canadian Real Estate Association updated its rules in March to make its Multiple Listing Service more flexible, thus allowing agents to simply list a home with the consumer handling all other aspects of a transaction. Those changes are about to be made permanent because of a consent agreement with the Competition Bureau reached last month.
So, what's the difference today? On a practical level, it's hard to argue against listing your home on the MLS, which controls about 90% of transactions in Canada. And while you may pay as little as $109 for that listing, you can almost be sure to pay a commission of 2% to 2.5% to any agent bringing his or her customer to your door.
The option to use one of the dozen or so for-sale-by-owner, or FSBO sites, exists, but you can expect to pay a fee for the service. Plus, you can also assume any customer who buys a house through a FSBO site wants a discount on the market price because they know you are saving commission.
I tried it myself for two weeks before listing my own home on the MLS six years ago. My agent encouraged me. What happened is people who did show interest immediately started to talk about a discount. I was back to an agent and the MLS system.
But maybe there is a compromise solution, where I list on the MLS using an agent who helps me with part of a transaction. After all, there are people who paint their own homes but are reluctant to dabble in electrical wiring.
"Commissions are flexible," says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. "There is [a middle ground] and people have to look for it. Many agents will offer a menu of services and that is out there already. Most people will choose to list with an agent who manages an entire transaction."
But now that that choice is part of the game within the confines of the MLS, expect consumers to take advantage of it to save some cash.
"I'd still use an agent. My life is too busy," says Craig Alexander, chief economist with TD Bank Financial Group. "But there are going to be people who only want an agent for some things."
Mr. Alexander thinks changes are coming, but couldn't put a timetable on it. He says it is basic economic theory that once you introduce elements of competition to a system, it will start to become more efficient.
Robert McLister, editor of Canadian Mortgage Trends, says many realtors will start offering a la carte services such as document preparation, showings, valuation and offer negotiations. He believes high-end real estate will be less affected by the changes and the industry might gear its efforts more to that end of the market.
And, he adds, FSBO sites that charge listing fees could be devastated by a bargain-basement MLS.
"Removal of listing barriers will allow efficient markets to take over. That will put obvious pressure on realtor fees. The era of 5% commissions in Ontario [other jurisdictions vary] could become a distant memory in three to four years," says Mr. McLister.
How would you sell your house today if it was on the market? Would you use a real estate agent or go it alone?
It's no small issue given the typical commission paid by the seller in this country is about $15,000 based on the latest average sale price of an existing home. When you consider most home sales are for principal residences -- and profits are not subject to capital gains taxes--that $15,000 looms larger because it is after-tax money.
The truth is not much has changed since the Canadian Real Estate Association updated its rules in March to make its Multiple Listing Service more flexible, thus allowing agents to simply list a home with the consumer handling all other aspects of a transaction. Those changes are about to be made permanent because of a consent agreement with the Competition Bureau reached last month.
So, what's the difference today? On a practical level, it's hard to argue against listing your home on the MLS, which controls about 90% of transactions in Canada. And while you may pay as little as $109 for that listing, you can almost be sure to pay a commission of 2% to 2.5% to any agent bringing his or her customer to your door.
The option to use one of the dozen or so for-sale-by-owner, or FSBO sites, exists, but you can expect to pay a fee for the service. Plus, you can also assume any customer who buys a house through a FSBO site wants a discount on the market price because they know you are saving commission.
I tried it myself for two weeks before listing my own home on the MLS six years ago. My agent encouraged me. What happened is people who did show interest immediately started to talk about a discount. I was back to an agent and the MLS system.
But maybe there is a compromise solution, where I list on the MLS using an agent who helps me with part of a transaction. After all, there are people who paint their own homes but are reluctant to dabble in electrical wiring.
"Commissions are flexible," says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. "There is [a middle ground] and people have to look for it. Many agents will offer a menu of services and that is out there already. Most people will choose to list with an agent who manages an entire transaction."
But now that that choice is part of the game within the confines of the MLS, expect consumers to take advantage of it to save some cash.
"I'd still use an agent. My life is too busy," says Craig Alexander, chief economist with TD Bank Financial Group. "But there are going to be people who only want an agent for some things."
Mr. Alexander thinks changes are coming, but couldn't put a timetable on it. He says it is basic economic theory that once you introduce elements of competition to a system, it will start to become more efficient.
Robert McLister, editor of Canadian Mortgage Trends, says many realtors will start offering a la carte services such as document preparation, showings, valuation and offer negotiations. He believes high-end real estate will be less affected by the changes and the industry might gear its efforts more to that end of the market.
And, he adds, FSBO sites that charge listing fees could be devastated by a bargain-basement MLS.
"Removal of listing barriers will allow efficient markets to take over. That will put obvious pressure on realtor fees. The era of 5% commissions in Ontario [other jurisdictions vary] could become a distant memory in three to four years," says Mr. McLister.
Thursday, October 21, 2010
Bank of Canada says third-quarter growth was worst since recession
]By Julian Beltrame
OTTAWA – The Canadian economy likely suffered the worst quarter since the recession over the summer months, but Bank of Canada governor Mark Carney warns against taking too gloomy a view.
“I wouldn’t obsess about the third quarter,” Carney told reporters Wednesday after Canada’s central bank released its latest global economic outlook.
The bank conceded the economy likely continued to brake in the July-September months to 1.6 per cent growth — down from two per cent in the second quarter and the distant memory of the first quarter’s 5.8 per cent advance.
But Carney said Canadians should take a longer view and also take comfort that no matter how modest, at least activity is still positive.
“Two years ago, I (would have said) the economic picture we’ve just seen would have made the bank happy, would have made Canadians happy, given the alternative,” he said.
“We’ve recovered the jobs, we’ve recovered the lost output, we are doing better than virtually anybody else in the advanced world.”
Canada’s current rate of growth is about half the pace the bank had expected a few months ago, and even slower than the U.S., but Carney notes that there’s no comparison between the Canadian and U.S. economies.
While all and more of the about 400,000 jobs Canada lost during the recession have been recovered, the U.S. has only recouped about 15 per cent of their losses. And Canadian domestic demand is outpacing the U.S. by 20 per cent.
Dangers lurk, however, as the bank’s latest quarterly review makes clear.
Both the Canadian and global recoveries, as well as future growth projections, are more modest now than they were three months ago.
To accommodate those diminished expectations and increased risks, the bank on Tuesday suspended the monetary tightening cycle it began in June. Analysts think the bank’s key interest rate will stay at one per cent for many months.
The bank says in the balance it still believes the recovery will continue, but it highlights “important” risks, both internal and external, with the potential to upset the apple cart.
Canadian households are steeped in debt and could become a drag to the economy should housing prices collapse. Latest data shows debt-to-disposable income among households has reached a record 147 per cent.
“If there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy, such as consumption, given the high debt loads of some Canadian households,” the bank states.
Carney acknowledged keeping rates low for an extended period only increases the debtload risk, but said he believes consumer spending, including on housing, is tracking lower.
Coincidentally, the TD Bank also warned about household debt in a report Wednesday, saying one-in-10 households could find themselves in financial distress when interest rates rise. Fortunately, that many not be for some time.
Externally, the bank heightened its concerns over the growing friction in the world over currency manipulation, with advanced economies threatening to retaliate against China’s undervalued yuan.
The issue will be central to discussions at this week’s G20 finance ministers in Korea, but Carney suggested a solution will be slow and laborious.
Advanced economies, particularly the U.S., have long complained that China and other fast-growing Asian economies are artificially keeping their currencies below their true value in order to boost exports and discourage imports.
Although China has made some moves to increase the value of the yuan and hike domestic consumption, advanced economies believe those actions have not gone far enough.
Carney said as big a concern is that frustration will grow in advanced economies to such an extent that it will touch off a currency war, although he said China was the key.
“It’s not just China’s position ... but as part of rebalancing the global economy, increased flexibility of the (yuan) is absolutely essential,” the bank governor said.
Despite the challenges, the bank sees the Canadian economy advancing from the slow third quarter to a 2.6 per cent gain in the fourth, and an average 2.3 per cent in 2011, followed by 2.6 in 2012.
One encouraging signal is that businesses have begun to invest in new machinery and equipment, which should boost productivity going forward.
Another, said Carney, is that exports will turn from being a net drag on growth to a tiny positive sometime next year as global demand picks up.
Still, it’s going to be a slow, hard slog back to normalcy.
The economy is not nearly as strong as the bank thought it was in July. It calculates output gap — the slack in the economy — remains at 1.75 per cent, not 1.5 per cent as estimated in the previous review.
The bank’s best guess now is that the economy will eventually right itself, but won’t be firing on all cylinders for another two years.
OTTAWA – The Canadian economy likely suffered the worst quarter since the recession over the summer months, but Bank of Canada governor Mark Carney warns against taking too gloomy a view.
“I wouldn’t obsess about the third quarter,” Carney told reporters Wednesday after Canada’s central bank released its latest global economic outlook.
The bank conceded the economy likely continued to brake in the July-September months to 1.6 per cent growth — down from two per cent in the second quarter and the distant memory of the first quarter’s 5.8 per cent advance.
But Carney said Canadians should take a longer view and also take comfort that no matter how modest, at least activity is still positive.
“Two years ago, I (would have said) the economic picture we’ve just seen would have made the bank happy, would have made Canadians happy, given the alternative,” he said.
“We’ve recovered the jobs, we’ve recovered the lost output, we are doing better than virtually anybody else in the advanced world.”
Canada’s current rate of growth is about half the pace the bank had expected a few months ago, and even slower than the U.S., but Carney notes that there’s no comparison between the Canadian and U.S. economies.
While all and more of the about 400,000 jobs Canada lost during the recession have been recovered, the U.S. has only recouped about 15 per cent of their losses. And Canadian domestic demand is outpacing the U.S. by 20 per cent.
Dangers lurk, however, as the bank’s latest quarterly review makes clear.
Both the Canadian and global recoveries, as well as future growth projections, are more modest now than they were three months ago.
To accommodate those diminished expectations and increased risks, the bank on Tuesday suspended the monetary tightening cycle it began in June. Analysts think the bank’s key interest rate will stay at one per cent for many months.
The bank says in the balance it still believes the recovery will continue, but it highlights “important” risks, both internal and external, with the potential to upset the apple cart.
Canadian households are steeped in debt and could become a drag to the economy should housing prices collapse. Latest data shows debt-to-disposable income among households has reached a record 147 per cent.
“If there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy, such as consumption, given the high debt loads of some Canadian households,” the bank states.
Carney acknowledged keeping rates low for an extended period only increases the debtload risk, but said he believes consumer spending, including on housing, is tracking lower.
Coincidentally, the TD Bank also warned about household debt in a report Wednesday, saying one-in-10 households could find themselves in financial distress when interest rates rise. Fortunately, that many not be for some time.
Externally, the bank heightened its concerns over the growing friction in the world over currency manipulation, with advanced economies threatening to retaliate against China’s undervalued yuan.
The issue will be central to discussions at this week’s G20 finance ministers in Korea, but Carney suggested a solution will be slow and laborious.
Advanced economies, particularly the U.S., have long complained that China and other fast-growing Asian economies are artificially keeping their currencies below their true value in order to boost exports and discourage imports.
Although China has made some moves to increase the value of the yuan and hike domestic consumption, advanced economies believe those actions have not gone far enough.
Carney said as big a concern is that frustration will grow in advanced economies to such an extent that it will touch off a currency war, although he said China was the key.
“It’s not just China’s position ... but as part of rebalancing the global economy, increased flexibility of the (yuan) is absolutely essential,” the bank governor said.
Despite the challenges, the bank sees the Canadian economy advancing from the slow third quarter to a 2.6 per cent gain in the fourth, and an average 2.3 per cent in 2011, followed by 2.6 in 2012.
One encouraging signal is that businesses have begun to invest in new machinery and equipment, which should boost productivity going forward.
Another, said Carney, is that exports will turn from being a net drag on growth to a tiny positive sometime next year as global demand picks up.
Still, it’s going to be a slow, hard slog back to normalcy.
The economy is not nearly as strong as the bank thought it was in July. It calculates output gap — the slack in the economy — remains at 1.75 per cent, not 1.5 per cent as estimated in the previous review.
The bank’s best guess now is that the economy will eventually right itself, but won’t be firing on all cylinders for another two years.
Wednesday, October 20, 2010
Canada warned to take steps to secure economy
Kim Covert, Financial Post ·
OTTAWA — The Canadian economy may have raced ahead of others in terms of its recovery from the economic crisis, but it’s slowing down and the finish line is not yet in sight, according to separate reports released Tuesday.
The Canadian Chamber of Commerce and the Conference Board of Canada both noted in reports that the Canadian economy is weakening, at least in part due to poor economic performance in the United States and globally.
As well, the Bank of Canada on Tuesday announced it would hold interest rates at 1% and downgraded its estimates for economic growth.
“Canada’s recovery is further along than many other developed economies, especially when considering the rapid rebound in employment,” said the Conference Board’s Pedro Antunes, director of its National and Provincial Forecast, in the board’s autumn outlook.
“To continue on its path of recovery, Canada will need to rely on the U.S. economy to improve trade and a steady rise in private capital investment — components that are very dependent on the state of the U.S. and global economy.”
The chamber of commerce report, titled Fiscal Policy for a Stronger Tomorrow, outlines the steps it says the government has to take to secure the recovery and job growth which it says have outpaced many of Canada’s G8 partners.
The chamber outlines a three-part strategy for Ottawa that includes continuing with current stimulus plans but working quickly to erase the deficit and “addressing long-standing structural impediments to productivity” including removing internal trade and mobility barriers, as well as “burdensome”regulatory procedures, and minimizing tax and compliance costs.
“The window of opportunity to bring indebtedness down is rapidly closing as demographic changes — a rapidly aging population and slower growth in the labour force — will exert significant pressures on the public purse,” the report says.
Steps needed to secure the recovery include: signing a proposed free trade agreement with the European Union — the fifth round of negotiations for the deal began on Monday in Ottawa; working to conclude the World Trade Organization’s Doha round of trade talks; working with international partners to limit protectionism; looking for ways to limit the thickening of the Canada-U.S. border; and ensuring that businesses have continued access to affordable credit.
The report stresses the importance of eliminating the federal deficit and paying down as much debt as possible. The report notes that by 2019, more than a quarter of the population will be over 65 and by 2029 that group will have grown to more than a third of the population, while the labour force will have shrunk, reducing government revenue while at the same time increasing health-care costs and the amount paid out in benefits to the elderly.
The chamber also recommends a heavier reliance on consumption taxes, such as the GST, and less on personal and corporate income taxes.
“Switching the tax mix towards consumption-based taxes would encourage both work and capital formation and, thus, stimulate productivity and economic growth,” the report says.
OTTAWA — The Canadian economy may have raced ahead of others in terms of its recovery from the economic crisis, but it’s slowing down and the finish line is not yet in sight, according to separate reports released Tuesday.
The Canadian Chamber of Commerce and the Conference Board of Canada both noted in reports that the Canadian economy is weakening, at least in part due to poor economic performance in the United States and globally.
As well, the Bank of Canada on Tuesday announced it would hold interest rates at 1% and downgraded its estimates for economic growth.
“Canada’s recovery is further along than many other developed economies, especially when considering the rapid rebound in employment,” said the Conference Board’s Pedro Antunes, director of its National and Provincial Forecast, in the board’s autumn outlook.
“To continue on its path of recovery, Canada will need to rely on the U.S. economy to improve trade and a steady rise in private capital investment — components that are very dependent on the state of the U.S. and global economy.”
The chamber of commerce report, titled Fiscal Policy for a Stronger Tomorrow, outlines the steps it says the government has to take to secure the recovery and job growth which it says have outpaced many of Canada’s G8 partners.
The chamber outlines a three-part strategy for Ottawa that includes continuing with current stimulus plans but working quickly to erase the deficit and “addressing long-standing structural impediments to productivity” including removing internal trade and mobility barriers, as well as “burdensome”regulatory procedures, and minimizing tax and compliance costs.
“The window of opportunity to bring indebtedness down is rapidly closing as demographic changes — a rapidly aging population and slower growth in the labour force — will exert significant pressures on the public purse,” the report says.
Steps needed to secure the recovery include: signing a proposed free trade agreement with the European Union — the fifth round of negotiations for the deal began on Monday in Ottawa; working to conclude the World Trade Organization’s Doha round of trade talks; working with international partners to limit protectionism; looking for ways to limit the thickening of the Canada-U.S. border; and ensuring that businesses have continued access to affordable credit.
The report stresses the importance of eliminating the federal deficit and paying down as much debt as possible. The report notes that by 2019, more than a quarter of the population will be over 65 and by 2029 that group will have grown to more than a third of the population, while the labour force will have shrunk, reducing government revenue while at the same time increasing health-care costs and the amount paid out in benefits to the elderly.
The chamber also recommends a heavier reliance on consumption taxes, such as the GST, and less on personal and corporate income taxes.
“Switching the tax mix towards consumption-based taxes would encourage both work and capital formation and, thus, stimulate productivity and economic growth,” the report says.
Tuesday, October 19, 2010
High buy/rent ratio may lead to housing price correction
| Tuesday, 19 October 2010
The current high buy/rent ratio may indicate a vulnerable housing market said Desjardins Securities, but others aren’t placing too much weight on the measurement.
Canadian house prices rebounded from the recession, hitting a new record in May and bringing the buy/rent ratio to about 1.85x. This means mortgages are increasingly difficult to afford compared to rent, as house prices increase and rents remain stable.
So, excluding major factors such as taxes and maintenance, homeowners pay about twice what renters pay.
“This is precipitously close to the 2.3x level reached in December 2007 and the 2.5x level reached in 1988, which preceded house price corrections of 13 per cent and 10 per cent, respectively,” Ed Sollbach and Deep Jaitly of Desjardins wrote in a research note.
They added that when the buy/rent ratio hit an “unsustainable” 3.6x in Toronto in 1989, it was followed by a 29-per-cent decline in house prices.
However, at that time unemployment was also rising and a spike in interest rates to 14 per cent forced many homeowners to sell.
The problem with the rent/own ratio is that half of the provinces employ rent control, so prices can’t rise with the broader housing market. For example, house prices in some Toronto neighbourhoods have gained 30 per cent in the last year but Ontario limits rent increases to 2.1 per cent.
“Maybe that’s just telling us that rents are just too low,” said Gregory Klump, the chief economist at the Canadian Real Estate Association in a recent interview with The Globe and Mail. “I’m not a fan of the price-to-rent ratio because it’s so skewed by the fact that rents are subject to rent control.”
The current high buy/rent ratio may indicate a vulnerable housing market said Desjardins Securities, but others aren’t placing too much weight on the measurement.
Canadian house prices rebounded from the recession, hitting a new record in May and bringing the buy/rent ratio to about 1.85x. This means mortgages are increasingly difficult to afford compared to rent, as house prices increase and rents remain stable.
So, excluding major factors such as taxes and maintenance, homeowners pay about twice what renters pay.
“This is precipitously close to the 2.3x level reached in December 2007 and the 2.5x level reached in 1988, which preceded house price corrections of 13 per cent and 10 per cent, respectively,” Ed Sollbach and Deep Jaitly of Desjardins wrote in a research note.
They added that when the buy/rent ratio hit an “unsustainable” 3.6x in Toronto in 1989, it was followed by a 29-per-cent decline in house prices.
However, at that time unemployment was also rising and a spike in interest rates to 14 per cent forced many homeowners to sell.
The problem with the rent/own ratio is that half of the provinces employ rent control, so prices can’t rise with the broader housing market. For example, house prices in some Toronto neighbourhoods have gained 30 per cent in the last year but Ontario limits rent increases to 2.1 per cent.
“Maybe that’s just telling us that rents are just too low,” said Gregory Klump, the chief economist at the Canadian Real Estate Association in a recent interview with The Globe and Mail. “I’m not a fan of the price-to-rent ratio because it’s so skewed by the fact that rents are subject to rent control.”
Monday, October 18, 2010
There has been a bottoming out
Garry Marr, Financial Post ·
Rock-bottom long-term mortgage rates appear to have handed the housing sector the lifeline it desperately needs, helping to push up sales for a second consecutive month and keep prices from falling.
The Canadian Real Estate Association said Friday sales last month rose 3% from August on a seasonally adjusted annualized basis — highest since May 2010 — and the second straight month sales rose.
Meanwhile, prices have also begun to stabilize as fears of a dramatic meltdown appear to be abating. The average price of a home sold in Canada last month was $331,089, down slightly from the $331,683 average a year ago. But prices were up from a month earlier, when the average was $324,928.
“Supply and demand are rebalancing and that’s keeping prices steady in many markets,” said Georges Pahud, president of CREA.
The other factor keeping the market afloat are interest rates.
The Bank of Canada has signalled it will take a pause on raising its key lending rate which should keep the prime rate at most banks at 3%, affecting any variable rate borrowers.
But it’s consumers on the long end of the borrowing spectrum who appear to be getting a better deal with the five-year term fixed-rate mortgage reaching an all-time low over the past month.
Gary Siegle, the Calgary-based regional manager for mortgage broker Invis Inc., said the standard rate for locking in for five years is now 3.69% but adds some lenders have dropped to as low as 3.39%.
“I’ve been working for 38 years and I don’t recall rates this low ever in my career,” said Mr. Siegle, adding the discount on variable-rate mortgages has dropped to the point that consumers can float with a rate as low as 2.35%.
“The question I wonder about is at these rates is why are people not all over the real estate market?”
CREA said two-thirds of local markets last month posted sales increases with Winnipeg, Calgary and Montreal standing out. However, compared with last year, sales still lag across the country, down 19.8% in September from a year ago.
“Record level sales activity late last year and earlier this year is expected to further stretch year-over-year comparisons in the months ahead,” the group warned.
TD Bank Financial Group economist Shahrzad Mobasher Fard expects falling mortgage rates to be a significant boost for the market for the near future. “They are a factor that cannot be dismissed,” said Ms. Mobasher Fard. “[Current rates] won’t lead to an overheating but it will support further growth in home sales and prices. The last two months of data indicate there has been a bottoming out of home-selling activity and prices.”
Demand is still tepid but there has been a slowdown in new listings, which are 15% off the peak reached in April. The number of months of inventory, which represents the number of months it would take to sell inventories at the current rate of sales activity, was down to 6.6 months in September.
It was the second straight month inventory levels dropped, having stood at 6.9 months in August and 7.2 months in July.
“Mortgage lending rates eased in the third quarter, which helped support sales activity over the past couple of months,” said Gregory Klump, chief economist with CREA.
“Interest rates are going nowhere fast, so home ownership will remain within reach for many home buyers.”
The chief executive for Royal LePage Real Estate Services Ltd. said he was almost a bit relieved to see the latest figures.
“I was pleasantly surprised to see the year-over-year average price flat given the strength of last year’s September results,” said Phil Soper. “I expected a small decline in average price. It has been driven almost entirely by the low cost of money.”
Rock-bottom long-term mortgage rates appear to have handed the housing sector the lifeline it desperately needs, helping to push up sales for a second consecutive month and keep prices from falling.
The Canadian Real Estate Association said Friday sales last month rose 3% from August on a seasonally adjusted annualized basis — highest since May 2010 — and the second straight month sales rose.
Meanwhile, prices have also begun to stabilize as fears of a dramatic meltdown appear to be abating. The average price of a home sold in Canada last month was $331,089, down slightly from the $331,683 average a year ago. But prices were up from a month earlier, when the average was $324,928.
“Supply and demand are rebalancing and that’s keeping prices steady in many markets,” said Georges Pahud, president of CREA.
The other factor keeping the market afloat are interest rates.
The Bank of Canada has signalled it will take a pause on raising its key lending rate which should keep the prime rate at most banks at 3%, affecting any variable rate borrowers.
But it’s consumers on the long end of the borrowing spectrum who appear to be getting a better deal with the five-year term fixed-rate mortgage reaching an all-time low over the past month.
Gary Siegle, the Calgary-based regional manager for mortgage broker Invis Inc., said the standard rate for locking in for five years is now 3.69% but adds some lenders have dropped to as low as 3.39%.
“I’ve been working for 38 years and I don’t recall rates this low ever in my career,” said Mr. Siegle, adding the discount on variable-rate mortgages has dropped to the point that consumers can float with a rate as low as 2.35%.
“The question I wonder about is at these rates is why are people not all over the real estate market?”
CREA said two-thirds of local markets last month posted sales increases with Winnipeg, Calgary and Montreal standing out. However, compared with last year, sales still lag across the country, down 19.8% in September from a year ago.
“Record level sales activity late last year and earlier this year is expected to further stretch year-over-year comparisons in the months ahead,” the group warned.
TD Bank Financial Group economist Shahrzad Mobasher Fard expects falling mortgage rates to be a significant boost for the market for the near future. “They are a factor that cannot be dismissed,” said Ms. Mobasher Fard. “[Current rates] won’t lead to an overheating but it will support further growth in home sales and prices. The last two months of data indicate there has been a bottoming out of home-selling activity and prices.”
Demand is still tepid but there has been a slowdown in new listings, which are 15% off the peak reached in April. The number of months of inventory, which represents the number of months it would take to sell inventories at the current rate of sales activity, was down to 6.6 months in September.
It was the second straight month inventory levels dropped, having stood at 6.9 months in August and 7.2 months in July.
“Mortgage lending rates eased in the third quarter, which helped support sales activity over the past couple of months,” said Gregory Klump, chief economist with CREA.
“Interest rates are going nowhere fast, so home ownership will remain within reach for many home buyers.”
The chief executive for Royal LePage Real Estate Services Ltd. said he was almost a bit relieved to see the latest figures.
“I was pleasantly surprised to see the year-over-year average price flat given the strength of last year’s September results,” said Phil Soper. “I expected a small decline in average price. It has been driven almost entirely by the low cost of money.”
Sunday, October 17, 2010
Investors to focus on rate decision, earnings
Malcolm Morrison, The Canadian Press
at 11:00 on October 17, 2010, EDT.
TORONTO - It's a busy week shaping up on stock and financial markets as investors look to the Bank of Canada to take a break from hiking interest rates while taking in a slew of earnings from major U.S. corporations and Canadian companies.
Investors start the week feeling reassured after U.S. Federal Reserve chairman Ben Bernanke reiterated that he is ready to do more to stimulate the sluggish economy. Bernanke's comments were the latest confirmation the Fed is about to ramp up its purchase of Treasury bonds to spark growth.
There doesn't seem to be much doubt that the Bank of Canada is set to take a break Tuesday after raising rates three times during 2010 to one per cent, reflecting a slowing Canadian economy and faltering growth around the globe.
And analysts suggest that it won't be just a one-off pause.
"I think pretty much everyone now is looking for them to go on hold (and) we certainly have been of the view that they would pause for some time," said Peter Buchanan, senior economist with CIBC World Markets.
"And what's interesting is the (market) is still pricing in something like an 80 per cent chance of another rate hike by early in the second quarter of 2011. So that really relates to one of the key things people will be looking to get out of this statement, some sense of how long they will be on hold — whether it's a couple of quarters or whether potentially a bit longer than that."
It wasn't that long ago that analysts were looking for the Bank of Canada to continue raising rates well into 2010, but that was at a time when the economy was growing strongly and job growth was impressive.
But CIBC recently projected that real Canadian gross domestic product will grow by 1.9 per cent in 2011, compared with a 3.2 per cent pace assumed in the 2010 federal budget last March.
Investors will be anxious to look at the accompanying statement from the Bank of Canada on Tuesday to get the central bank's latest take on the economy.
The effect on the Canadian dollar is harder to gauge since it has been rising sharply lately because the U.S. dollar has deteriorated against most currencies on the growing certainty that the U.S. Fed is ready to stimulate the economy by buying Treasury bonds, a move known as quantitative easing.
Stocks have rallied strongly on hopes the Fed would embark on a second round of such stimulus.
But the greenback has weakened since quantitative easing involves the Fed pumping more money into the U.S. economy by purchasing those government bonds, which tends to lower the value of each U.S. dollar.
The loonie hit parity last Thursday for the first time since late April but by the close Friday the currency was down to 98.83 cents US as the greenback strengthened on Friday.
Meanwhile, investors will look at earnings this week from big American heavyweights such as IBM, Apple, Bank of America, Boeing and Amazon.
The first quarterly earnings from the Canadian energy sector will also come from EnCana Corp. (TSX:ECA) on Wednesday.
Stocks were lower at the end of the week after General Electric, regarded as a bellwether for the U.S. economy as a whole, beat expectations on profits but missed on revenue.
In any event, analysts think that market momentum is bound to slow now that Bernanke has reassured markets about another round of quantitative easing.
As it is, the TSX is up about six per cent from the end of August when Bernanke initially said that the Fed remains ready to do what it takes to make sure the U.S. economy doesn't slip back into recession.
And the Dow industrial average has ran ahead about eight per cent.
"It's getting a bit stretched," said John Johnston, chief strategist at The Harbour Group at RBC Dominion Securities.
"So the news has to be extremely good to keep pushing the market higher at the rate it's been going so one would suspect that the market is probably over the next week or two or three, is probably more vulnerable to disappointment than it is to good news — just because the rally has been so extensive."
at 11:00 on October 17, 2010, EDT.
TORONTO - It's a busy week shaping up on stock and financial markets as investors look to the Bank of Canada to take a break from hiking interest rates while taking in a slew of earnings from major U.S. corporations and Canadian companies.
Investors start the week feeling reassured after U.S. Federal Reserve chairman Ben Bernanke reiterated that he is ready to do more to stimulate the sluggish economy. Bernanke's comments were the latest confirmation the Fed is about to ramp up its purchase of Treasury bonds to spark growth.
There doesn't seem to be much doubt that the Bank of Canada is set to take a break Tuesday after raising rates three times during 2010 to one per cent, reflecting a slowing Canadian economy and faltering growth around the globe.
And analysts suggest that it won't be just a one-off pause.
"I think pretty much everyone now is looking for them to go on hold (and) we certainly have been of the view that they would pause for some time," said Peter Buchanan, senior economist with CIBC World Markets.
"And what's interesting is the (market) is still pricing in something like an 80 per cent chance of another rate hike by early in the second quarter of 2011. So that really relates to one of the key things people will be looking to get out of this statement, some sense of how long they will be on hold — whether it's a couple of quarters or whether potentially a bit longer than that."
It wasn't that long ago that analysts were looking for the Bank of Canada to continue raising rates well into 2010, but that was at a time when the economy was growing strongly and job growth was impressive.
But CIBC recently projected that real Canadian gross domestic product will grow by 1.9 per cent in 2011, compared with a 3.2 per cent pace assumed in the 2010 federal budget last March.
Investors will be anxious to look at the accompanying statement from the Bank of Canada on Tuesday to get the central bank's latest take on the economy.
The effect on the Canadian dollar is harder to gauge since it has been rising sharply lately because the U.S. dollar has deteriorated against most currencies on the growing certainty that the U.S. Fed is ready to stimulate the economy by buying Treasury bonds, a move known as quantitative easing.
Stocks have rallied strongly on hopes the Fed would embark on a second round of such stimulus.
But the greenback has weakened since quantitative easing involves the Fed pumping more money into the U.S. economy by purchasing those government bonds, which tends to lower the value of each U.S. dollar.
The loonie hit parity last Thursday for the first time since late April but by the close Friday the currency was down to 98.83 cents US as the greenback strengthened on Friday.
Meanwhile, investors will look at earnings this week from big American heavyweights such as IBM, Apple, Bank of America, Boeing and Amazon.
The first quarterly earnings from the Canadian energy sector will also come from EnCana Corp. (TSX:ECA) on Wednesday.
Stocks were lower at the end of the week after General Electric, regarded as a bellwether for the U.S. economy as a whole, beat expectations on profits but missed on revenue.
In any event, analysts think that market momentum is bound to slow now that Bernanke has reassured markets about another round of quantitative easing.
As it is, the TSX is up about six per cent from the end of August when Bernanke initially said that the Fed remains ready to do what it takes to make sure the U.S. economy doesn't slip back into recession.
And the Dow industrial average has ran ahead about eight per cent.
"It's getting a bit stretched," said John Johnston, chief strategist at The Harbour Group at RBC Dominion Securities.
"So the news has to be extremely good to keep pushing the market higher at the rate it's been going so one would suspect that the market is probably over the next week or two or three, is probably more vulnerable to disappointment than it is to good news — just because the rally has been so extensive."
Friday, October 15, 2010
Canadians get creative as loonie flirts with parity for second time this year
Kristine Owram, The Canadian Press
The Canadian Press, 2010
As the loonie flirts with parity for the second time this year, Canadians are becoming increasingly familiar with the effects of a higher dollar and are finding creative ways to take advantage of it.
The Canadian dollar was ahead 0.18 of a cent at 99.7 cents US near midday Thursday, backing off a gain that briefly saw it pass parity with the greenback for the first time since April.
Earlier in the morning it traded as high as 100.14 cents US.
The loonie has been gaining traction on weakness in the U.S. dollar and strength in commodity prices. Since last reaching parity in April, the dollar has approached the psychological barrier several times, only to fall back.
A high dollar has become part of everyday life for Canadians, and people are learning to get the most out of it.
Tim Kropp owns a UPS store in Lewiston, N.Y., bordering the Niagara region of southern Ontario. He said the vast majority of his customers are Canadians who have discovered they can get good deals by ordering goods online from American stores and having them shipped to an American post office box.
Having a mailbox south of the border not only allows Canadians to save on shipping costs and possibly customs duties, but also lets them order items from American stores where they are often less expensive. That's because as the loonie moves higher, price drops often don't keep pace in Canada, making it cheaper for Canadians to go cross-border shopping.
"We get a lot of Canadians ordering from Amazon.com, and I asked them: 'Don't they have Amazon.ca?'" Kropp said.
"But they said you either can't get the item or the price difference makes it worth it to drive down and pick it up."
Book prices, which are determined at the time of publication, can appear out of date when compared to the value of the loonie, which fluctuates on a daily basis. This is why there can be such a big discrepancy between the U.S. and Canadian prices listed on a book jacket, even when the dollar is at par.
But it isn't just books Kropp is seeing delivered to his store.
"I just had a customer from Toronto the other day. She bought a big popcorn machine and she said it was $1,300 cheaper (to order it from the States)," he said.
Of the 150 mailboxes in Kropp's store, only two of them aren't used by Canadians.
"It's definitely a trend we're seeing at all the UPS stores along the border," he said, adding that he's seen his Canadian customer base increase by about 50 per cent since the dollar began to creep higher.
"We contacted UPS about a location, what's available, and their whole main reason of telling us Lewiston was available was because they knew, based on what the other store up in Niagara Falls is doing, that they needed another location just to handle the Canadian customers."
Economists say the dollar could hover near parity for a while, as signals mount that the U.S. economy is going to remain weak.
The American dollar has been pressured by speculation that the U.S. government will start injecting more money into the economy to give it another boost.
The most recent appreciation in the loonie followed the release of minutes from a U.S. Federal Reserve meeting which suggested the American central bank will further ease conditions through buying Treasury bills — so-called quantitative easing.
Quantitative easing is a way for the central bank to inject more liquidity into the economy without lowering interest rates, which are already as low as they can go in the United States.
That suggests U.S. central bankers are worried about the slow pace of the U.S. recovery and want to provide more cash to help jump-start stronger growth.
A stronger loonie will make Canadian exports of everything from auto parts and furniture to newsprint and lumber more expensive for American customers. But it will also cut the cost of imported goods and make it cheaper to travel abroad.
The Canadian Press, 2010
As the loonie flirts with parity for the second time this year, Canadians are becoming increasingly familiar with the effects of a higher dollar and are finding creative ways to take advantage of it.
The Canadian dollar was ahead 0.18 of a cent at 99.7 cents US near midday Thursday, backing off a gain that briefly saw it pass parity with the greenback for the first time since April.
Earlier in the morning it traded as high as 100.14 cents US.
The loonie has been gaining traction on weakness in the U.S. dollar and strength in commodity prices. Since last reaching parity in April, the dollar has approached the psychological barrier several times, only to fall back.
A high dollar has become part of everyday life for Canadians, and people are learning to get the most out of it.
Tim Kropp owns a UPS store in Lewiston, N.Y., bordering the Niagara region of southern Ontario. He said the vast majority of his customers are Canadians who have discovered they can get good deals by ordering goods online from American stores and having them shipped to an American post office box.
Having a mailbox south of the border not only allows Canadians to save on shipping costs and possibly customs duties, but also lets them order items from American stores where they are often less expensive. That's because as the loonie moves higher, price drops often don't keep pace in Canada, making it cheaper for Canadians to go cross-border shopping.
"We get a lot of Canadians ordering from Amazon.com, and I asked them: 'Don't they have Amazon.ca?'" Kropp said.
"But they said you either can't get the item or the price difference makes it worth it to drive down and pick it up."
Book prices, which are determined at the time of publication, can appear out of date when compared to the value of the loonie, which fluctuates on a daily basis. This is why there can be such a big discrepancy between the U.S. and Canadian prices listed on a book jacket, even when the dollar is at par.
But it isn't just books Kropp is seeing delivered to his store.
"I just had a customer from Toronto the other day. She bought a big popcorn machine and she said it was $1,300 cheaper (to order it from the States)," he said.
Of the 150 mailboxes in Kropp's store, only two of them aren't used by Canadians.
"It's definitely a trend we're seeing at all the UPS stores along the border," he said, adding that he's seen his Canadian customer base increase by about 50 per cent since the dollar began to creep higher.
"We contacted UPS about a location, what's available, and their whole main reason of telling us Lewiston was available was because they knew, based on what the other store up in Niagara Falls is doing, that they needed another location just to handle the Canadian customers."
Economists say the dollar could hover near parity for a while, as signals mount that the U.S. economy is going to remain weak.
The American dollar has been pressured by speculation that the U.S. government will start injecting more money into the economy to give it another boost.
The most recent appreciation in the loonie followed the release of minutes from a U.S. Federal Reserve meeting which suggested the American central bank will further ease conditions through buying Treasury bills — so-called quantitative easing.
Quantitative easing is a way for the central bank to inject more liquidity into the economy without lowering interest rates, which are already as low as they can go in the United States.
That suggests U.S. central bankers are worried about the slow pace of the U.S. recovery and want to provide more cash to help jump-start stronger growth.
A stronger loonie will make Canadian exports of everything from auto parts and furniture to newsprint and lumber more expensive for American customers. But it will also cut the cost of imported goods and make it cheaper to travel abroad.
Thursday, October 14, 2010
Mortgage Shopping?
HERE’S SOME IMPORTANT TIPS ON HOW TO DO IT RIGHT!
First: Ensure you’re working with an Accredited Mortgage Professional that understands the business of Mortgages. This is likely the largest financial transaction of your life and it’s too important to put into the hands of someone that cannot advise you properly on the loan process.
There are 4 simple questions I recommend you ask your lender or advisor. If they cannot answer any one of these 4 questions properly, you should reconsider dealing with them.
1) What are Mortgage interest rates based on? Since mortgages are our business, it is critically important to know the answer to this question to ensure you’re dealing with a professional that knows the business and can therefore guide you properly prior to commitment and post funding.
• The correct answer for fixed rate mortgages is Bond Market Yields mainly determine the price of the mortgage.
• For variable rate mortgages the Bank of Canada determines the rate by setting its rate which then determines the Prime rates Banks charge their customers (you).
2. What is the next Economic Report or event that could cause interest rates to move? This is important for you to know if you’re in a variable rate mortgage. Any professional mortgage advisor should have this information at their fingertips. With my services you’ll obtain a monthly Economic Forecast that details upcoming events that may impact your mortgage interest rate/or the rate you may consider locking into.
3. When the Bank of Canada meets & changes interest rates what impact does this have on my mortgage? If you’re in a variable rate mortgage this is important because the rate the Bank of Canada charges will determine the rate your Bank will charge you. A variable rate mortgage fluctuates with Prime and typically the Prime rate is 1.75% -2% higher than the Bank of Canada rate. This impact is immediate and may impact your next mortgage payment.
4. Do you have access to Daily Bond quotes? If a lender or mortgage officer can’t explain Bonds or how the bond quotes determine the rate charged on your mortgage, or the rate you may want to lock into if you’re in a variable, you should be concerned.
Be smart… ask the right questions…. Make sure you get the right answers before signing on the dotted line!!
First: Ensure you’re working with an Accredited Mortgage Professional that understands the business of Mortgages. This is likely the largest financial transaction of your life and it’s too important to put into the hands of someone that cannot advise you properly on the loan process.
There are 4 simple questions I recommend you ask your lender or advisor. If they cannot answer any one of these 4 questions properly, you should reconsider dealing with them.
1) What are Mortgage interest rates based on? Since mortgages are our business, it is critically important to know the answer to this question to ensure you’re dealing with a professional that knows the business and can therefore guide you properly prior to commitment and post funding.
• The correct answer for fixed rate mortgages is Bond Market Yields mainly determine the price of the mortgage.
• For variable rate mortgages the Bank of Canada determines the rate by setting its rate which then determines the Prime rates Banks charge their customers (you).
2. What is the next Economic Report or event that could cause interest rates to move? This is important for you to know if you’re in a variable rate mortgage. Any professional mortgage advisor should have this information at their fingertips. With my services you’ll obtain a monthly Economic Forecast that details upcoming events that may impact your mortgage interest rate/or the rate you may consider locking into.
3. When the Bank of Canada meets & changes interest rates what impact does this have on my mortgage? If you’re in a variable rate mortgage this is important because the rate the Bank of Canada charges will determine the rate your Bank will charge you. A variable rate mortgage fluctuates with Prime and typically the Prime rate is 1.75% -2% higher than the Bank of Canada rate. This impact is immediate and may impact your next mortgage payment.
4. Do you have access to Daily Bond quotes? If a lender or mortgage officer can’t explain Bonds or how the bond quotes determine the rate charged on your mortgage, or the rate you may want to lock into if you’re in a variable, you should be concerned.
Be smart… ask the right questions…. Make sure you get the right answers before signing on the dotted line!!
Wednesday, October 13, 2010
U.S. to probe mortgage foreclosures
Tuesday, 12 October 2010
As many as 40 U.S. state attorneys general are expected to announce an investigation into the mortgage financing industry on Wednesday.
The investigation may pressure financial institutions to rewrite a large amount of troubled loans, according to the Wall Street Journal. The inquiry comes among recent allegations that mortgage servicers submitted fraudulent documents in thousands of foreclosure proceedings nationwide.
The mortgage companies are scrambling to defend, and where needed, improve their foreclosure procedures due to anger among homeowners and regulators.
The issue arose last month when GMAC Mortgage revealed officials had signed thousands of affidavits supporting such proceedings without knowing their contents.
As many as 40 U.S. state attorneys general are expected to announce an investigation into the mortgage financing industry on Wednesday.
The investigation may pressure financial institutions to rewrite a large amount of troubled loans, according to the Wall Street Journal. The inquiry comes among recent allegations that mortgage servicers submitted fraudulent documents in thousands of foreclosure proceedings nationwide.
The mortgage companies are scrambling to defend, and where needed, improve their foreclosure procedures due to anger among homeowners and regulators.
The issue arose last month when GMAC Mortgage revealed officials had signed thousands of affidavits supporting such proceedings without knowing their contents.
Tuesday, October 12, 2010
Housing Activity Stabilizing
OTTAWA, August 31, 2010 — After rebounding in the second half of 2009 and early 2010, housing starts are expected to moderate in the second half of 2010. Starts are expected to stabilize at levels consistent with demographic fundamentals in 2011, according to Canada Mortgage and Housing Corporation’s (CMHC) third quarter Housing Market Outlook, Canada Edition.1
Housing starts are expected to be in the range of 170,200 to 198,400 units in 2010, with a point forecast of 184,900 units. In 2011, housing starts will be in the range of 146,900 to 210,500 units, with a point forecast of 176,900 units.
"Housing starts will moderate in the coming months as activity becomes more in-line with long-term demographic fundamentals,” said Bob Dugan, Chief Economist for CMHC.
Mr. Dugan also noted that the existing home market conditions will remain balanced over the next two years as MLS®2 sales ease and inventory levels remain elevated. Existing home sales will be in the range of 450,000 to 485,700 units in 2010, with a point forecast of 463,800 units. In 2011, MLS® sales will move lower and are expected to be in the range of 425,000 to 490,700 units, with a point forecast of 456,000 units.
With an improved balance between demand and supply, the average MLS® price is expected to edge lower through the end of 2010 and then rise modestly in 2011.
As Canada's national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.
1 The forecasts included in the Housing Market Outlook are based on information available as of July 30, 2010. Where applicable, forecast ranges are also presented in order to reflect economic uncertainty.
Housing starts are expected to be in the range of 170,200 to 198,400 units in 2010, with a point forecast of 184,900 units. In 2011, housing starts will be in the range of 146,900 to 210,500 units, with a point forecast of 176,900 units.
"Housing starts will moderate in the coming months as activity becomes more in-line with long-term demographic fundamentals,” said Bob Dugan, Chief Economist for CMHC.
Mr. Dugan also noted that the existing home market conditions will remain balanced over the next two years as MLS®2 sales ease and inventory levels remain elevated. Existing home sales will be in the range of 450,000 to 485,700 units in 2010, with a point forecast of 463,800 units. In 2011, MLS® sales will move lower and are expected to be in the range of 425,000 to 490,700 units, with a point forecast of 456,000 units.
With an improved balance between demand and supply, the average MLS® price is expected to edge lower through the end of 2010 and then rise modestly in 2011.
As Canada's national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.
1 The forecasts included in the Housing Market Outlook are based on information available as of July 30, 2010. Where applicable, forecast ranges are also presented in order to reflect economic uncertainty.
Canadians are the lucky ones!
William Hanley, Financial Post · Friday, Oct. 8, 2010
As you tuck into the organic, range-fed turkey with all the trimmings this weekend, you can give a quiet, low-key, typically Canadian thanks for living in this quiet, low-key country. Sure, unemployment remains at high levels and the economic recovery is slowing. But Thanksgiving 2010 will be a good one, relatively speaking, for the great majority of Canadians.
Having spent last week in England — my second visit there in a month — I can offer up my own quiet thanks for being able to return to this country, which some English friends refer to as “the Great White Bore.” The dwindling number of British Christians who still attend church have recently been staging harvest festivals, their version of Thanksgiving in which rich tableaux of food are presented next to altars, a thanks to their God for nature’s bounty.
This year’s celebrations just happened to coincide with the new government unveiling plans for a festival of cuts that eventually might carve back government spending by a massive 40%, making for a bitter harvest of decades of excess.
Compared with Britain and any number of countries, including the United States, Canada is in not-so-bad shape. Of course, you can’t eat relative performance, as the Bay Street saying goes, only the absolute variety. Yet most of us will be able to sit down to a lunch or dinner this weekend that finds us in finer fettle than we might have hoped at Thanksgiving 2009, with the unemployment rate down in the past year, house prices staying firm against the odds, the stock market around a 52-week high and government budget deficits beginning to fall as tax revenues rise.
Just this week, the International Monetary Fund forecast Canada’s economy to grow 3.1% this year and 2.7% in 2011. Though those numbers are down from July projections of 3.6% and 2.8%, respectively, and are not typical of an economy in the early years of recovery, they are respectable given the even slower comeback for the United States, and remain “above potential,” according to the IMF, a circumstance that has us leading the G7 nations, however modestly.
Nevertheless, while most of us are giving thanks this weekend for our good fortune in finding ourselves in this particular corner of the world, some of us can’t help but wonder what we might be offering up thanks for a year from now.
One of the things missing from this recovery and something many of us savers of a certain age will be hoping for by next Thanksgiving is a rise in yields on fixed-income investments. Though the Bank of Canada has raised its overnight rate twice to 0.75% in recent months, GICs and the like are still paying the square root of squat.
Unfortunately, the decelerating recovery here and in the United States will likely put the BoC on hold in the months ahead. While it might seem selfish to wish for a more substantial interest rate increase, such a rise would signal an improvement in the economy and for economic prospects. The BoC and governor Mark Carney would like nothing more than to have to raise rates from their historic lows to guard against a rise in inflation, but will do so only in a substantial way if the U.S. economy shows stronger signs of recovering from its Great Recession.
Meantime, conservative investors – twice bitten by the stock market in the past decade and still shy of getting back in – will be monitoring the progress of equity prices, wondering whether it’s too late to begin buying or to buy more.
That question may be the centrepiece of some Thanksgiving table talk this weekend. Years ago, our Thanksgiving weekends were spent at the family cottage, where parlour games around the dining table were side orders to the lashings of food and drink. We played Scrabble, Monopoly and all manner of card games.
This year, your parlour game might consist of making forecasts for Thanksgiving 2011, writing them down and seeing where they stand a year from now.
I make the following predictions for a year from now: the S&P/TSX composite index will be around where it is now, or a little lower, as earnings advances become scarcer in still-struggling economies; interest rates will be a little higher, but not much; Canadian house prices will be 5% to 10% lower; gold and other commodities will hold their value as the U.S. dollar continues to weaken and emerging economies continue to grow; the loonie will be modestly over par against the greenback; and, finally, the Toronto Maple Leafs will once again have fans fantasizing about making the playoffs and winning the Stanley Cup.
Meantime, pass the sweet potatoes.
As you tuck into the organic, range-fed turkey with all the trimmings this weekend, you can give a quiet, low-key, typically Canadian thanks for living in this quiet, low-key country. Sure, unemployment remains at high levels and the economic recovery is slowing. But Thanksgiving 2010 will be a good one, relatively speaking, for the great majority of Canadians.
Having spent last week in England — my second visit there in a month — I can offer up my own quiet thanks for being able to return to this country, which some English friends refer to as “the Great White Bore.” The dwindling number of British Christians who still attend church have recently been staging harvest festivals, their version of Thanksgiving in which rich tableaux of food are presented next to altars, a thanks to their God for nature’s bounty.
This year’s celebrations just happened to coincide with the new government unveiling plans for a festival of cuts that eventually might carve back government spending by a massive 40%, making for a bitter harvest of decades of excess.
Compared with Britain and any number of countries, including the United States, Canada is in not-so-bad shape. Of course, you can’t eat relative performance, as the Bay Street saying goes, only the absolute variety. Yet most of us will be able to sit down to a lunch or dinner this weekend that finds us in finer fettle than we might have hoped at Thanksgiving 2009, with the unemployment rate down in the past year, house prices staying firm against the odds, the stock market around a 52-week high and government budget deficits beginning to fall as tax revenues rise.
Just this week, the International Monetary Fund forecast Canada’s economy to grow 3.1% this year and 2.7% in 2011. Though those numbers are down from July projections of 3.6% and 2.8%, respectively, and are not typical of an economy in the early years of recovery, they are respectable given the even slower comeback for the United States, and remain “above potential,” according to the IMF, a circumstance that has us leading the G7 nations, however modestly.
Nevertheless, while most of us are giving thanks this weekend for our good fortune in finding ourselves in this particular corner of the world, some of us can’t help but wonder what we might be offering up thanks for a year from now.
One of the things missing from this recovery and something many of us savers of a certain age will be hoping for by next Thanksgiving is a rise in yields on fixed-income investments. Though the Bank of Canada has raised its overnight rate twice to 0.75% in recent months, GICs and the like are still paying the square root of squat.
Unfortunately, the decelerating recovery here and in the United States will likely put the BoC on hold in the months ahead. While it might seem selfish to wish for a more substantial interest rate increase, such a rise would signal an improvement in the economy and for economic prospects. The BoC and governor Mark Carney would like nothing more than to have to raise rates from their historic lows to guard against a rise in inflation, but will do so only in a substantial way if the U.S. economy shows stronger signs of recovering from its Great Recession.
Meantime, conservative investors – twice bitten by the stock market in the past decade and still shy of getting back in – will be monitoring the progress of equity prices, wondering whether it’s too late to begin buying or to buy more.
That question may be the centrepiece of some Thanksgiving table talk this weekend. Years ago, our Thanksgiving weekends were spent at the family cottage, where parlour games around the dining table were side orders to the lashings of food and drink. We played Scrabble, Monopoly and all manner of card games.
This year, your parlour game might consist of making forecasts for Thanksgiving 2011, writing them down and seeing where they stand a year from now.
I make the following predictions for a year from now: the S&P/TSX composite index will be around where it is now, or a little lower, as earnings advances become scarcer in still-struggling economies; interest rates will be a little higher, but not much; Canadian house prices will be 5% to 10% lower; gold and other commodities will hold their value as the U.S. dollar continues to weaken and emerging economies continue to grow; the loonie will be modestly over par against the greenback; and, finally, the Toronto Maple Leafs will once again have fans fantasizing about making the playoffs and winning the Stanley Cup.
Meantime, pass the sweet potatoes.
Friday, October 8, 2010
RBC report says BoC likely to hold rates until March 2011
This month's RBC Financial Markets Monthly publication reports that the Bank of Canada is likely to hold rates until March 2010.
Report Excerpts:
Canada takes a breather after sprinting out of recession
With real GDP standing a hair’s breadth away from its pre-recession peak and final domestic demand already treading into new territory, reports of more moderate activity in July did not prove too surprising. The sharp recovery in the housing market started to stall in mid-2010 because pent-up demand generated during the recession was satiated and buying—ahead of the mild tightening in mortgage rules and the implementation or increase in the HST in three provinces—was exhausted. The robust sales pace left a high level of household debt in its wake resulting in the debt-to-income ratio rising to an all-time high in the first quarter.
Recent growth has not been strong enough to exert significant downward pressure on the unemployment rate and inflation pressures have been moderate with the core rate at 1.6%. The headline inflation rate was 1.7% in August, thereby holding below the Bank’s 2% target, even after the harmonization of provincial and federal sales taxes in Ontario and BC were incorporated into the price measure. Unlike in the US, where we expect that core inflation will remain very low, we forecast Canada’s core rate to hold just below the 2% target during the forecast horizon and gravitate above 2% in mid-2012.
Rate increases likely to resume in early 2011
Our overall assessment of the Canadian outlook has changed little in the past month, so we are maintaining our call that the Bank will gradually raise the overnight rate to 2.25% in the second half of 2011. This gradual reduction in policy accommodation will keep a lid on the degree that term interest rates will rise especially against a backdrop of very low U.S. rates. We trimmed our 2011 forecast for yields looking for the two-year rate to end 2011 at 2.85% and the 10-year bond yield at 3.75%.
Report Excerpts:
Canada takes a breather after sprinting out of recession
With real GDP standing a hair’s breadth away from its pre-recession peak and final domestic demand already treading into new territory, reports of more moderate activity in July did not prove too surprising. The sharp recovery in the housing market started to stall in mid-2010 because pent-up demand generated during the recession was satiated and buying—ahead of the mild tightening in mortgage rules and the implementation or increase in the HST in three provinces—was exhausted. The robust sales pace left a high level of household debt in its wake resulting in the debt-to-income ratio rising to an all-time high in the first quarter.
Recent growth has not been strong enough to exert significant downward pressure on the unemployment rate and inflation pressures have been moderate with the core rate at 1.6%. The headline inflation rate was 1.7% in August, thereby holding below the Bank’s 2% target, even after the harmonization of provincial and federal sales taxes in Ontario and BC were incorporated into the price measure. Unlike in the US, where we expect that core inflation will remain very low, we forecast Canada’s core rate to hold just below the 2% target during the forecast horizon and gravitate above 2% in mid-2012.
Rate increases likely to resume in early 2011
Our overall assessment of the Canadian outlook has changed little in the past month, so we are maintaining our call that the Bank will gradually raise the overnight rate to 2.25% in the second half of 2011. This gradual reduction in policy accommodation will keep a lid on the degree that term interest rates will rise especially against a backdrop of very low U.S. rates. We trimmed our 2011 forecast for yields looking for the two-year rate to end 2011 at 2.85% and the 10-year bond yield at 3.75%.
Canada unexpectedly loses jobs Financial Post ·
OTTAWA — The Canadian economy lost 6,600 jobs in September, Statistics Canada said Friday, as the country’s recovery faltered after an initially strong rebound from recession.
The jobless rate declined to eight per cent during the month, from 8.1% in August, “as fewer people, particularly youth, participated in the labour market,” the federal agency said.
Economists’ forecasts had ranged from 10,000 to 12,500 new jobs last month, following a gain of 35,800 in August, with the unemployment rate staying at 8.1%.
Canada’s gross domestic product declined in July for the first time in almost a year Statistics Canada said Thursday the economy shrank 0.1 per cent during the month.
The July data marked the first monthly contraction since August 2009, when GDP shrank 0.1%. That had been the only month to show a decline in economic activity since a 10-month string of reduced GDP readings between August 2008 and May 2009.
The Bank of Canada had anticipated 3.5% growth this year and 2.9% in 2011, although those projections are expected to be revised downward when the central bank releases its updated economic outlook on Oct. 20.
That slower growth has put into question any further interest rate hikes by the Bank of Canada.
The central bank has raised in recent months its trendsetting interest rate from a record low 0.25% to its current level of one per cent. The bank’s next policy meeting is Oct. 19.
Friday, Oct. 8, 2010
The jobless rate declined to eight per cent during the month, from 8.1% in August, “as fewer people, particularly youth, participated in the labour market,” the federal agency said.
Economists’ forecasts had ranged from 10,000 to 12,500 new jobs last month, following a gain of 35,800 in August, with the unemployment rate staying at 8.1%.
Canada’s gross domestic product declined in July for the first time in almost a year Statistics Canada said Thursday the economy shrank 0.1 per cent during the month.
The July data marked the first monthly contraction since August 2009, when GDP shrank 0.1%. That had been the only month to show a decline in economic activity since a 10-month string of reduced GDP readings between August 2008 and May 2009.
The Bank of Canada had anticipated 3.5% growth this year and 2.9% in 2011, although those projections are expected to be revised downward when the central bank releases its updated economic outlook on Oct. 20.
That slower growth has put into question any further interest rate hikes by the Bank of Canada.
The central bank has raised in recent months its trendsetting interest rate from a record low 0.25% to its current level of one per cent. The bank’s next policy meeting is Oct. 19.
Friday, Oct. 8, 2010
Thursday, October 7, 2010
Currency war could be latest threat to global recovery
By Julian Beltrame, The Canadian Press OTTAWA — The prospect of “an international currency war” that could spill over into trade protectionism is adding a new threat to the global recovery, Canadian, U.S. and other officials warned Wednesday.
The issue appears to be coming to a head in advance of Friday’s finance meetings in Washington involving the G7 countries and the International Monetary Fund, with several major players demanding action.
“There is a danger here that countries that have currencies that trade freely are disadvantaged by certain interventions that are made by other countries, and by inflexibility by certain currencies,” federal Finance Minister Jim Flaherty told reporters.
“We don’t want these kinds of distortions in currency values or distortions in trading relations.”
Earlier in the day, U.S. Treasury Secretary Timothy Geithner was far blunter, calling out countries like China that have built a powerful export-based economy on what critics believe are artificially depressed currencies.
For example, a low yuan not only makes Chinese products more attractive in countries like the U.S. and Canada but also discourages imports from those countries while making their domestic manufacturers less competitive even in their own markets.
Geithner said countries with large trade surpluses must let their exchange rates rise or risk a dangerous game of chicken.
“When large economies with undervalued exchange rates act to keep the currency from appreciating, that encourages other countries to do the same,” he said.
He said the issue is so critical that the call by emerging countries for a bigger role at the IMF should be tied to their willingness to adopt more flexible exchange rates.
“I think Mr. Geithner has a point,” said Flaherty.
A form of tit-for-tat on exchange rates has already begun. Japan recently sold yen to cut its value, and Tuesday sliced its policy interest rate to zero, which will also have the effect of undermining the currency.
Brazil, which was one of the first raise the alarm over what it called a brewing “international currency war,” has doubled a tax on bonds purchased by foreign sources in an effort to rein in its strong currency.
Even the United States has been accused of using quantitative easing — printing money — to deflate the greenback.
The moves helped lift the Canadian dollar to a five-month high Wednesday as it once again threatens to reach parity with the U.S. dollar. In afternoon trading, the loonie briefly rose above 99 cents US before settling up 0.59 of a cent at 98.94 cents US.
“There is clearly the idea beginning to circulate that currencies can be used as a policy weapon,” IMF managing director Dominique Strauss-Kahn was quoted as saying Wednesday. “Translated into action, such an idea would represent a very serious risk to the global recovery.”
Bank of Montreal economist Douglas Porter believes the bigger danger may be in the rhetoric than the reality, particularly if countries like the U.S. trigger a far more punitive trade war.
In Washington, Congress is moving forward with legislation that would essentially impose duties on exports from China to compensate for the low yuan.
At the heart of the frustration is that one year out of recession, most advanced economies are still in first gear, and braking, while emerging countries are speeding ahead.
An IMF report issued in advance of Friday’s meetings highlighted the bi-polar world. It predicts growth in the developing world, led by China, will expand at a 7.1 per cent clip this year and 6.4 next, compared with 2.7 and 2.2 per cent among advanced economies.
The issue could get ugly in November when the G20, which includes countries like China and Brazil, meets in Seoul, South Korea, to finalized plans for financial system and economic reform.
Prior to the Toronto summit in June, China announced it was prepared to allow the yuan to appreciate slightly, but it barely moved. Since the U.S. threats of retaliation, it has appreciated about 1.7 per cent.
That will hardly appease critics, given that some place the undervaluation at as much as 40 per cent.
Flaherty said all countries had agreed to implement reforms at the Toronto summit in June, including fixing global imbalances, and now need to fulfil their promises.
“We have to make sure people stay on the right track,” he said. “The timing of this weekend’s meetings, once again, is prescient.”
The issue appears to be coming to a head in advance of Friday’s finance meetings in Washington involving the G7 countries and the International Monetary Fund, with several major players demanding action.
“There is a danger here that countries that have currencies that trade freely are disadvantaged by certain interventions that are made by other countries, and by inflexibility by certain currencies,” federal Finance Minister Jim Flaherty told reporters.
“We don’t want these kinds of distortions in currency values or distortions in trading relations.”
Earlier in the day, U.S. Treasury Secretary Timothy Geithner was far blunter, calling out countries like China that have built a powerful export-based economy on what critics believe are artificially depressed currencies.
For example, a low yuan not only makes Chinese products more attractive in countries like the U.S. and Canada but also discourages imports from those countries while making their domestic manufacturers less competitive even in their own markets.
Geithner said countries with large trade surpluses must let their exchange rates rise or risk a dangerous game of chicken.
“When large economies with undervalued exchange rates act to keep the currency from appreciating, that encourages other countries to do the same,” he said.
He said the issue is so critical that the call by emerging countries for a bigger role at the IMF should be tied to their willingness to adopt more flexible exchange rates.
“I think Mr. Geithner has a point,” said Flaherty.
A form of tit-for-tat on exchange rates has already begun. Japan recently sold yen to cut its value, and Tuesday sliced its policy interest rate to zero, which will also have the effect of undermining the currency.
Brazil, which was one of the first raise the alarm over what it called a brewing “international currency war,” has doubled a tax on bonds purchased by foreign sources in an effort to rein in its strong currency.
Even the United States has been accused of using quantitative easing — printing money — to deflate the greenback.
The moves helped lift the Canadian dollar to a five-month high Wednesday as it once again threatens to reach parity with the U.S. dollar. In afternoon trading, the loonie briefly rose above 99 cents US before settling up 0.59 of a cent at 98.94 cents US.
“There is clearly the idea beginning to circulate that currencies can be used as a policy weapon,” IMF managing director Dominique Strauss-Kahn was quoted as saying Wednesday. “Translated into action, such an idea would represent a very serious risk to the global recovery.”
Bank of Montreal economist Douglas Porter believes the bigger danger may be in the rhetoric than the reality, particularly if countries like the U.S. trigger a far more punitive trade war.
In Washington, Congress is moving forward with legislation that would essentially impose duties on exports from China to compensate for the low yuan.
At the heart of the frustration is that one year out of recession, most advanced economies are still in first gear, and braking, while emerging countries are speeding ahead.
An IMF report issued in advance of Friday’s meetings highlighted the bi-polar world. It predicts growth in the developing world, led by China, will expand at a 7.1 per cent clip this year and 6.4 next, compared with 2.7 and 2.2 per cent among advanced economies.
The issue could get ugly in November when the G20, which includes countries like China and Brazil, meets in Seoul, South Korea, to finalized plans for financial system and economic reform.
Prior to the Toronto summit in June, China announced it was prepared to allow the yuan to appreciate slightly, but it barely moved. Since the U.S. threats of retaliation, it has appreciated about 1.7 per cent.
That will hardly appease critics, given that some place the undervaluation at as much as 40 per cent.
Flaherty said all countries had agreed to implement reforms at the Toronto summit in June, including fixing global imbalances, and now need to fulfil their promises.
“We have to make sure people stay on the right track,” he said. “The timing of this weekend’s meetings, once again, is prescient.”
Wednesday, October 6, 2010
Managing debt is crucial to financial success
By Derek Sankey, Postmedia News October 5, 2010
When Laura Parsons's son, a heavy-duty mechanic, graduated with student debt like so many of his post-secondary peers, he also wanted to get into home ownership. Realizing the financial burden, he found a creative solution.
Over two years, he put money that would have gone to pay student loans into an RRSP for home ownership, which triggered a rebate that paid off half his student loan.
He put $8,000 into the RRSP and received back $4,600.
"It's smart use of debt and understanding all the programs out there," says Parsons.
If it's not managed well, everyone faces the potentially crushing grip of debt.
Parsons's son, perhaps, had one advantage: His mother is a manager for BMO Financial Group in Calgary.
Canadians are living with rising levels of debt, but there's good debt and bad debt.
How you deal with it, financial planners say, will either allow you to move forward with your finances or run you into roadblocks.
Fifty-one per cent of Canadians say they are focusing on reducing their debt over the next year. Meanwhile, 39 per cent plan to spend less, according to the RBC Canadian Consumer Outlook Index.
"It's important that Canadians feel confident and understand that managing debt is crucial to their financial success," Andrea Bolger, a senior vice-president in personal financing products for RBC, said in the report.
Most Canadians' largest source of debt is their mortgage, and recent talk of a housing bubble has led to some fear in the market. But Parsons says that fear is unfounded because Canadian borrowing rules and regulations are vastly different than those in the U.S. Parsons cited a recent Canada Mortgage and Housing Corp. article that argues the housing market is stable in Canada.
"We're nowhere near the U.S. rules that caused so many foreclosures," Parsons says. "That didn't exist in Canada."
Debt needs to be actively managed, according to Calgary financial planner Debbie Ehrstien, with RBC Wealth Management.
"People really need to analyze what kind of debt they're carrying and [determine] if it makes sense," says Ehrstien.
Active debt is debt on which interest rate payments and other expenses associated with the debt are tax deductible, such as borrowing to invest.
Passive debt, such as credit card debt, is non-deductible and the borrower shoulders the entire cost.
Moving forward with any financial plan requires consumers to deal with their debt. Pay off high-interest debt first, understand the true cost of each kind of debt -- the terms and the interest rates -- and manage debt by consulting with planners and using online tools to find ways to pay it down in the most cost-effective way, says Ehrstien.
Eighty-three per cent of Canadians who develop a comprehensive financial plan feel in control of their finances, she adds.
"Most people are starting to slow down enough to ask those key questions [and] utilize the cheaper debt to pay out the more expensive debt," says Parsons.
The Financial Planning Standards Council has launched Financial Planning Week this week, during which certified financial planners will go into the community and give "financial planning health checkups" in various community venues to raise awareness about debt management.
© Copyright (c) The Vancouver Sun
When Laura Parsons's son, a heavy-duty mechanic, graduated with student debt like so many of his post-secondary peers, he also wanted to get into home ownership. Realizing the financial burden, he found a creative solution.
Over two years, he put money that would have gone to pay student loans into an RRSP for home ownership, which triggered a rebate that paid off half his student loan.
He put $8,000 into the RRSP and received back $4,600.
"It's smart use of debt and understanding all the programs out there," says Parsons.
If it's not managed well, everyone faces the potentially crushing grip of debt.
Parsons's son, perhaps, had one advantage: His mother is a manager for BMO Financial Group in Calgary.
Canadians are living with rising levels of debt, but there's good debt and bad debt.
How you deal with it, financial planners say, will either allow you to move forward with your finances or run you into roadblocks.
Fifty-one per cent of Canadians say they are focusing on reducing their debt over the next year. Meanwhile, 39 per cent plan to spend less, according to the RBC Canadian Consumer Outlook Index.
"It's important that Canadians feel confident and understand that managing debt is crucial to their financial success," Andrea Bolger, a senior vice-president in personal financing products for RBC, said in the report.
Most Canadians' largest source of debt is their mortgage, and recent talk of a housing bubble has led to some fear in the market. But Parsons says that fear is unfounded because Canadian borrowing rules and regulations are vastly different than those in the U.S. Parsons cited a recent Canada Mortgage and Housing Corp. article that argues the housing market is stable in Canada.
"We're nowhere near the U.S. rules that caused so many foreclosures," Parsons says. "That didn't exist in Canada."
Debt needs to be actively managed, according to Calgary financial planner Debbie Ehrstien, with RBC Wealth Management.
"People really need to analyze what kind of debt they're carrying and [determine] if it makes sense," says Ehrstien.
Active debt is debt on which interest rate payments and other expenses associated with the debt are tax deductible, such as borrowing to invest.
Passive debt, such as credit card debt, is non-deductible and the borrower shoulders the entire cost.
Moving forward with any financial plan requires consumers to deal with their debt. Pay off high-interest debt first, understand the true cost of each kind of debt -- the terms and the interest rates -- and manage debt by consulting with planners and using online tools to find ways to pay it down in the most cost-effective way, says Ehrstien.
Eighty-three per cent of Canadians who develop a comprehensive financial plan feel in control of their finances, she adds.
"Most people are starting to slow down enough to ask those key questions [and] utilize the cheaper debt to pay out the more expensive debt," says Parsons.
The Financial Planning Standards Council has launched Financial Planning Week this week, during which certified financial planners will go into the community and give "financial planning health checkups" in various community venues to raise awareness about debt management.
© Copyright (c) The Vancouver Sun
Tuesday, October 5, 2010
Canadian recovery to be modest: BoC
| Friday, 1 October 2010
The Canadian recovery is expected to be modest and uneven as the global economy enters into “a new phase of unusual uncertainty,” Bank of Canada Governor Mark Carney told the Windsor-Essex Chamber of Commerce on Sept. 30.
“As a result of the combination of the scale and speed of the policy response and our well-functioning financial system, Canada’s economy is now back at its pre-crisis peak in output,” Carney said. But he added that the recovery remains modest compared to previous economic rebounds and has relied heavily on housing and personal consumption.
The economic output of real estate agents and brokers dropped eight per cent in July, while real gross domestic product dropped for the first time in 11 months by 0.1 per cent, according to a report released by Statistics Canada today.
“The limitations of this reliance are becoming evident,” Carney noted. “In recent months, the speed of the recovery has diminished. A modest pace of growth can be expected in coming months as our economy faces considerable headwinds from both the external sector and the limits of household balance sheets.”
While the housing market is cooling, mortgage rates remain low and it looks as though the Bank of Canada is “close to finishing its tightening for this year,” Ted Tsiakopoulos, Canada Mortgage and Housing Corporation Ontario regional economist, told CRE Online.
“This is good news for housing in that affordability will likely improve through the fourth quarter of this year into the earlier portion of next year. But I think economic growth is going to slow down in the months ahead. So there’s a minus behind that but there are also some pluses in that interests rates will be a lot lower than what we thought through 2011.”
The Canadian recovery is expected to be modest and uneven as the global economy enters into “a new phase of unusual uncertainty,” Bank of Canada Governor Mark Carney told the Windsor-Essex Chamber of Commerce on Sept. 30.
“As a result of the combination of the scale and speed of the policy response and our well-functioning financial system, Canada’s economy is now back at its pre-crisis peak in output,” Carney said. But he added that the recovery remains modest compared to previous economic rebounds and has relied heavily on housing and personal consumption.
The economic output of real estate agents and brokers dropped eight per cent in July, while real gross domestic product dropped for the first time in 11 months by 0.1 per cent, according to a report released by Statistics Canada today.
“The limitations of this reliance are becoming evident,” Carney noted. “In recent months, the speed of the recovery has diminished. A modest pace of growth can be expected in coming months as our economy faces considerable headwinds from both the external sector and the limits of household balance sheets.”
While the housing market is cooling, mortgage rates remain low and it looks as though the Bank of Canada is “close to finishing its tightening for this year,” Ted Tsiakopoulos, Canada Mortgage and Housing Corporation Ontario regional economist, told CRE Online.
“This is good news for housing in that affordability will likely improve through the fourth quarter of this year into the earlier portion of next year. But I think economic growth is going to slow down in the months ahead. So there’s a minus behind that but there are also some pluses in that interests rates will be a lot lower than what we thought through 2011.”
Monday, October 4, 2010
The Top 3 Reasons For Procrastination
Procrastination is a highly illogical and irrational practice, so what are some of the reasons for procrastination? "I'll do it tomorrow" a phrase often uttered by many of us too many times. It's a phrase that can directly result in procrastination.
The thing about that practice is that its reasons may not be clearly apparent at first thought. As humans everything we do has a reason; nothing just happens.
All of our behavior is driven by the need to please our egos. In other words we do things for a positive return. Think about it, everything that you do, is done because you think that it will have a positive effect in your life (depending on your particular circumstance and your own definition of positive) With this is mind let us think about some of the reasons for procrastination.
A big reason is fear. This can be fear of failure, fear of imperfection, fear of the unknown once the task is complete.Being fearful will stop you from taking whatever action that could potentially bring on these feelings of fear.
You may be afraid to look bad in the eyes of others so you will put off a particular task constantly looking for the right time. But in actuality the right time doesn't exist.
You are so caught up in your fear of failing or not doing something right that you never get around to it at all.
Sometimes we genuinely feel that we don't know how to do a particular thing. We lack the skills or knowledge to actually complete a job.
So because we don't really know how to get the job done we just don't do it, instead of gaining the skills needed to complete the task.
Another one of relatively unknown reasons to procrastinate, is a desire to rebel and resist expectations or standards placed upon you. Your procrastinating may be in response to a higher power inflicting demands upon you that you may not necessarily agree with.
Think about school deadlines, schedules that your teachers or parents may have forced you to stick to. In rebellion you put things off and procrastinate as an act of staying true to your beliefs.
Although the reasons for procrastination are varied, the whole point is to pinpoint these reasons and understand that human behavior always has reasoning behind it. This will bring you closer to dealing with your problems with procrastination.
The thing about that practice is that its reasons may not be clearly apparent at first thought. As humans everything we do has a reason; nothing just happens.
All of our behavior is driven by the need to please our egos. In other words we do things for a positive return. Think about it, everything that you do, is done because you think that it will have a positive effect in your life (depending on your particular circumstance and your own definition of positive) With this is mind let us think about some of the reasons for procrastination.
A big reason is fear. This can be fear of failure, fear of imperfection, fear of the unknown once the task is complete.Being fearful will stop you from taking whatever action that could potentially bring on these feelings of fear.
You may be afraid to look bad in the eyes of others so you will put off a particular task constantly looking for the right time. But in actuality the right time doesn't exist.
You are so caught up in your fear of failing or not doing something right that you never get around to it at all.
Sometimes we genuinely feel that we don't know how to do a particular thing. We lack the skills or knowledge to actually complete a job.
So because we don't really know how to get the job done we just don't do it, instead of gaining the skills needed to complete the task.
Another one of relatively unknown reasons to procrastinate, is a desire to rebel and resist expectations or standards placed upon you. Your procrastinating may be in response to a higher power inflicting demands upon you that you may not necessarily agree with.
Think about school deadlines, schedules that your teachers or parents may have forced you to stick to. In rebellion you put things off and procrastinate as an act of staying true to your beliefs.
Although the reasons for procrastination are varied, the whole point is to pinpoint these reasons and understand that human behavior always has reasoning behind it. This will bring you closer to dealing with your problems with procrastination.
Power Corp. Launches Bytheowner.com
Power Corp. has announced that it will be joining Rogers Communications Inc and its online real estate search engine, Zoocasa, in taking a bet that the real estate marketplace will start to look very different in coming years, with more people selling their homes without the help of a Realtor.
Through its subsidiary Bytheowner.com, the company now lists 12,000 properties for sale across Canada. The for-sale-by-owner (FSBO) model removes the real estate agent, allowing a consumer to save as much as 5% to 6% in commissions by listing their home online and then selling it independently
Although this diversification in the marketplace is exciting for the consumer, the downside is that they will lose access to the Multiple Listing Service, an online home listing controlled by the Canadian Real Estate Association. Only licensed realtors can post on MLS, which is a problem for alternative services as the service dominates the market.
Although most FSBO websites lack size and brand-name awareness, Bytheowner.com is a nationally branded company with a billion-dollar backer and may have enough presence to become a threat.
Phil Soper, chief executive with Royal LePage does not see Bytheowner and other such sites as a threat to established realtors, however. He said in an interview “They are competing with the free services, such as Kajiji or Craigslist for that small sector of the market, about 10% to 15%, that chooses that path,” he said. “Most Canadians, despite the existence of these models for the last 15 years, have turned to a professional realtor.”
It remains to be seen how vastly the Canadian real estate market will change as a result of these new online tools for consumers.
Through its subsidiary Bytheowner.com, the company now lists 12,000 properties for sale across Canada. The for-sale-by-owner (FSBO) model removes the real estate agent, allowing a consumer to save as much as 5% to 6% in commissions by listing their home online and then selling it independently
Although this diversification in the marketplace is exciting for the consumer, the downside is that they will lose access to the Multiple Listing Service, an online home listing controlled by the Canadian Real Estate Association. Only licensed realtors can post on MLS, which is a problem for alternative services as the service dominates the market.
Although most FSBO websites lack size and brand-name awareness, Bytheowner.com is a nationally branded company with a billion-dollar backer and may have enough presence to become a threat.
Phil Soper, chief executive with Royal LePage does not see Bytheowner and other such sites as a threat to established realtors, however. He said in an interview “They are competing with the free services, such as Kajiji or Craigslist for that small sector of the market, about 10% to 15%, that chooses that path,” he said. “Most Canadians, despite the existence of these models for the last 15 years, have turned to a professional realtor.”
It remains to be seen how vastly the Canadian real estate market will change as a result of these new online tools for consumers.
Things you think add value to your home - but really don't
Jean Folger, Investopedia.com Every homeowner must pay for routine home maintenance, such as replacing worn-out plumbing components or staining the deck, but some choose to make improvements with the intention of increasing the home's value.
Certain projects, such as adding a well thought-out family room - or other functional space - can be a wise investment, as they do add to the value of the home. Other projects, however, allow little opportunity to recover the costs when it's time to sell.
Even though the current homeowner may greatly appreciate the improvement, a buyer could be unimpressed and unwilling to factor the upgrade into the purchase price. Homeowners, therefore, need to be careful with how they choose to spend their money if they are expecting the investment to pay off. Here are six things you think add value to your home, but really don't.
Swimming Pools
Swimming pools are one of those things that may be nice to enjoy at your friend's or neighbour's house, but that can be a hassle to have at your own home. Many potential homebuyers view swimming pools as dangerous, expensive to maintain and a lawsuit waiting to happen.
Families with young children in particular may turn down an otherwise perfect house because of the pool (and the fear of a child going in the pool unsupervised). In fact, a would-be buyer's offer may be contingent on the home seller dismantling an above-ground pool or filling in an in-ground pool.
An in-ground pool costs anywhere from $10,000 to more than $100,000, and additional yearly maintenance expenses need to be considered. That's a significant amount of money that might never be recouped if and when the house is sold.
Overbuilding for the Neighbourhood
Homeowners may, in an attempt to increase the value of a home, make improvements to the property that unintentionally make the home fall outside of the norm for the neighbourhood. While a large, expensive remodel, such as adding a second story with two bedrooms and a full bath, might make the home more appealing, it will not add significantly to the resale value if the house is in the midst of a neighbourhood of small, one-storey homes.
In general, homebuyers do not want to pay $250,000 for a house that sits in a neighbourhood with an average sales price of $150,000; the house will seem overpriced even if it is more desirable than the surrounding properties. The buyer will instead look to spend the $250,000 in a $250,000 neighbourhood. The house might be beautiful, but any money spent on overbuilding might be difficult to recover unless the other homes in the neighborhood follow suit.
Extensive Landscaping
Homebuyers may appreciate well-maintained or mature landscaping, but don't expect the home's value to increase because of it. A beautiful yard may encourage potential buyers to take a closer look at the property, but will probably not add to the selling price. If a buyer is unable or unwilling to put in the effort to maintain a garden, it will quickly become an eyesore, or the new homeowner might need to pay a qualified gardener to take charge. Either way, many buyers view elaborate landscaping as a burden (even though it might be attractive) and, as a result, are not likely to consider it when placing value on the home.
High-End Upgrades
Putting stainless steel appliances in your kitchen or imported tiles in your entryway may do little to increase the value of your home if the bathrooms are still vinyl-floored and the shag carpeting in the bedrooms is leftover from the '60s. Upgrades should be consistent to maintain a similar style and quality throughout the home.
A home that has a beautifully remodeled and modern kitchen can be viewed as a work in project if the bathrooms remain functionally obsolete. The remodel, therefore, might not fetch as high a return as if the rest of the home were brought up to the same level. High-quality upgrades generally increase the value of high-end homes, but not necessarily mid-range houses where the upgrade may be inconsistent with the rest of the home.
In addition, specific high-end features such as media rooms with specialized audio, visual or gaming equipment may be appealing to a few prospective buyers, but many potential homebuyers would not consider paying more for the home simply because of this additional feature. Chances are that the room would be re-tasked to a more generic living space.
Wall-to-Wall Carpeting
While real estate listings may still boast "new carpeting throughout" as a selling point, potential homebuyers today may cringe at the idea of having wall-to-wall carpeting. Carpeting is expensive to purchase and install. In addition, there is growing concern over the healthfulness of carpeting due to the amount of chemicals used in its processing and the potential for allergens (a serious concern for families with children). Add to that the probability that the carpet style and colour that you thought was absolutely perfect might not be what someone else had in mind.
Because of these hurdles, wall-to-wall carpet is something on which it's difficult to recoup the costs. Removing carpeting and restoring wood floors is usually a more profitable investment.
Invisible Improvements
Invisible improvements are those costly projects that you know make your house a better place to live in, but that nobody else would notice - or likely care about. A new plumbing system or HVAC unit (heating, venting and air conditioning) might be necessary, but don't expect it to recover these costs when it comes time to sell.
Many homebuyers simply expect these systems to be in good working order and will not pay extra just because you recently installed a new heater. It may be better to think of these improvements in terms of regular maintenance, and not an investment in your home's value.
The Bottom Line
It is difficult to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home's value when it comes time to sell. There is no simple equation for determining which projects will garner the highest return, or the most bang for your buck.
Some of this depends on the local market and even the age and style of the house. Homeowners frequently must choose between an improvement that they would really love to have (the in-ground swimming pool) and one that would prove to be a better investment. A bit of research, or the advice of a qualified real estate professional, can help homeowners avoid costly projects that don't really add value to a home.
Certain projects, such as adding a well thought-out family room - or other functional space - can be a wise investment, as they do add to the value of the home. Other projects, however, allow little opportunity to recover the costs when it's time to sell.
Even though the current homeowner may greatly appreciate the improvement, a buyer could be unimpressed and unwilling to factor the upgrade into the purchase price. Homeowners, therefore, need to be careful with how they choose to spend their money if they are expecting the investment to pay off. Here are six things you think add value to your home, but really don't.
Swimming Pools
Swimming pools are one of those things that may be nice to enjoy at your friend's or neighbour's house, but that can be a hassle to have at your own home. Many potential homebuyers view swimming pools as dangerous, expensive to maintain and a lawsuit waiting to happen.
Families with young children in particular may turn down an otherwise perfect house because of the pool (and the fear of a child going in the pool unsupervised). In fact, a would-be buyer's offer may be contingent on the home seller dismantling an above-ground pool or filling in an in-ground pool.
An in-ground pool costs anywhere from $10,000 to more than $100,000, and additional yearly maintenance expenses need to be considered. That's a significant amount of money that might never be recouped if and when the house is sold.
Overbuilding for the Neighbourhood
Homeowners may, in an attempt to increase the value of a home, make improvements to the property that unintentionally make the home fall outside of the norm for the neighbourhood. While a large, expensive remodel, such as adding a second story with two bedrooms and a full bath, might make the home more appealing, it will not add significantly to the resale value if the house is in the midst of a neighbourhood of small, one-storey homes.
In general, homebuyers do not want to pay $250,000 for a house that sits in a neighbourhood with an average sales price of $150,000; the house will seem overpriced even if it is more desirable than the surrounding properties. The buyer will instead look to spend the $250,000 in a $250,000 neighbourhood. The house might be beautiful, but any money spent on overbuilding might be difficult to recover unless the other homes in the neighborhood follow suit.
Extensive Landscaping
Homebuyers may appreciate well-maintained or mature landscaping, but don't expect the home's value to increase because of it. A beautiful yard may encourage potential buyers to take a closer look at the property, but will probably not add to the selling price. If a buyer is unable or unwilling to put in the effort to maintain a garden, it will quickly become an eyesore, or the new homeowner might need to pay a qualified gardener to take charge. Either way, many buyers view elaborate landscaping as a burden (even though it might be attractive) and, as a result, are not likely to consider it when placing value on the home.
High-End Upgrades
Putting stainless steel appliances in your kitchen or imported tiles in your entryway may do little to increase the value of your home if the bathrooms are still vinyl-floored and the shag carpeting in the bedrooms is leftover from the '60s. Upgrades should be consistent to maintain a similar style and quality throughout the home.
A home that has a beautifully remodeled and modern kitchen can be viewed as a work in project if the bathrooms remain functionally obsolete. The remodel, therefore, might not fetch as high a return as if the rest of the home were brought up to the same level. High-quality upgrades generally increase the value of high-end homes, but not necessarily mid-range houses where the upgrade may be inconsistent with the rest of the home.
In addition, specific high-end features such as media rooms with specialized audio, visual or gaming equipment may be appealing to a few prospective buyers, but many potential homebuyers would not consider paying more for the home simply because of this additional feature. Chances are that the room would be re-tasked to a more generic living space.
Wall-to-Wall Carpeting
While real estate listings may still boast "new carpeting throughout" as a selling point, potential homebuyers today may cringe at the idea of having wall-to-wall carpeting. Carpeting is expensive to purchase and install. In addition, there is growing concern over the healthfulness of carpeting due to the amount of chemicals used in its processing and the potential for allergens (a serious concern for families with children). Add to that the probability that the carpet style and colour that you thought was absolutely perfect might not be what someone else had in mind.
Because of these hurdles, wall-to-wall carpet is something on which it's difficult to recoup the costs. Removing carpeting and restoring wood floors is usually a more profitable investment.
Invisible Improvements
Invisible improvements are those costly projects that you know make your house a better place to live in, but that nobody else would notice - or likely care about. A new plumbing system or HVAC unit (heating, venting and air conditioning) might be necessary, but don't expect it to recover these costs when it comes time to sell.
Many homebuyers simply expect these systems to be in good working order and will not pay extra just because you recently installed a new heater. It may be better to think of these improvements in terms of regular maintenance, and not an investment in your home's value.
The Bottom Line
It is difficult to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home's value when it comes time to sell. There is no simple equation for determining which projects will garner the highest return, or the most bang for your buck.
Some of this depends on the local market and even the age and style of the house. Homeowners frequently must choose between an improvement that they would really love to have (the in-ground swimming pool) and one that would prove to be a better investment. A bit of research, or the advice of a qualified real estate professional, can help homeowners avoid costly projects that don't really add value to a home.
Saturday, October 2, 2010
Alberta man convicted of fraud in $3.9-million mortgage scam
| Wednesday, 29 September 2010
A northern Alberta man has been convicted of multiple counts of fraud in a $3.9 million rural mortgage scam.
James Steinhubl, 37, was found guilty of 13 counts of fraud over $5,000 and one count of attempted fraud over $5,000, according to a written decision issued by former Court of Queen’s Bench Justice Myra Bielby.
In the decision, Bielby—who is now with the Court of Appeal of Alberta—said the scam was “particularly harsh” because the fraudsters had borrowers obtain insured mortgages, rather than conventional ones, which allowed for high-ratio mortgages.
“These mortgages maximized the fraudulent returns to the accused at the cost of exposing the straw buyers to huge personal liability when the mortgages ultimately went into default,” said Bielby.
Steinhubl, who was facing 60 counts of fraud, is being held in custody pending a sentencing hearing tentatively scheduled for sometime late this year.
A northern Alberta man has been convicted of multiple counts of fraud in a $3.9 million rural mortgage scam.
James Steinhubl, 37, was found guilty of 13 counts of fraud over $5,000 and one count of attempted fraud over $5,000, according to a written decision issued by former Court of Queen’s Bench Justice Myra Bielby.
In the decision, Bielby—who is now with the Court of Appeal of Alberta—said the scam was “particularly harsh” because the fraudsters had borrowers obtain insured mortgages, rather than conventional ones, which allowed for high-ratio mortgages.
“These mortgages maximized the fraudulent returns to the accused at the cost of exposing the straw buyers to huge personal liability when the mortgages ultimately went into default,” said Bielby.
Steinhubl, who was facing 60 counts of fraud, is being held in custody pending a sentencing hearing tentatively scheduled for sometime late this year.
Friday, October 1, 2010
Real estate group reaches tentative agreement on MLS listings
JOHN IBBITSON AND STEVE LADURANTAYE
Globe and Mail
It will become easier and cheaper for Canadians to sell their homes after peace was declared on Thursday in the war between the Competition Bureau and the organization representing Canada’s real estate agents.
The bureau and the Canadian Real Estate Association (CREA) reached a tentative agreement that will allow sellers to hire an agent to post their property on the all-important Multiple Listing Service and then conduct the rest of the sale on their own, if they choose.
39% 189 votes
Yes
61% 296 votes
No
“It’s better to negotiate something than go to court,” Don Lawby, chief executive officer of Century 21, said in reaction to the agreement. “Bad press is bad press, and whatever the fee structure, people will always think it’s unfair.”
News of the agreement caught industry leaders flat-footed. The heads of several of the country’s largest brokerage firms were unaware of it until contacted by The Globe and Mail.
If ratified by CREA’s membership at the end of October, the agreement will end a challenge from the bureau in which the two sides are scheduled to appear before the Competition Tribunal in April. Once ratified, the new rules will take effect immediately and be in effect for 10 years.
Traditionally, sellers hire an agent in an all-or-nothing agreement, in which the agent lists their homes on the Multiple Listing Service – on which about 90 per cent of residential properties are bought and sold – negotiates the sale with the buyer and handles much of the paperwork. In return, the agent receives a commission that is typically a percentage of the sale price.
Energized by a new commissioner, Melanie Aitken, and an expanded mandate, the Competition Bureau went to the Competition Tribunal in February demanding that CREA allow consumers more choice on what services to use.
The association, which represents nearly 100,000 real estate agents across Canada, loosened some of its rules in the spring. Nonetheless, the bureau decided the measures were insufficient.
But while both sides appeared intransigent in public, negotiations quietly paved the way to Thursday’s agreement after association representatives approached the bureau earlier this month.
The agreement is a major victory for the Competition Bureau, which was determined to force the real estate industry to become more competitive.
“The agreement is welcome news for Canadians,” Ms. Aitken said in an interview. “Consumers are going to have the ability to choose what services they want from a real estate agent, and pay only for those services, and at the same time, it gives much-needed flexibility for the agents to offer the variety of services and prices that meet the needs of consumers.”
CREA president Georges Pahud said in a statement that that the agreement “would avoid unnecessary and expensive litigation proceedings.”
The long-term impact on the country’s real-estate market is far from certain. The cost of buying or selling a home could come down as competitors seek to offer different packages and undercut each others’ prices.
But agents have warned that changes could lead to shoddy service or fraud. The agreement seeks to strike a balance, increasing consumer choice while leaving agents as the only portal to the MLS.
Globe and Mail
It will become easier and cheaper for Canadians to sell their homes after peace was declared on Thursday in the war between the Competition Bureau and the organization representing Canada’s real estate agents.
The bureau and the Canadian Real Estate Association (CREA) reached a tentative agreement that will allow sellers to hire an agent to post their property on the all-important Multiple Listing Service and then conduct the rest of the sale on their own, if they choose.
39% 189 votes
Yes
61% 296 votes
No
“It’s better to negotiate something than go to court,” Don Lawby, chief executive officer of Century 21, said in reaction to the agreement. “Bad press is bad press, and whatever the fee structure, people will always think it’s unfair.”
News of the agreement caught industry leaders flat-footed. The heads of several of the country’s largest brokerage firms were unaware of it until contacted by The Globe and Mail.
If ratified by CREA’s membership at the end of October, the agreement will end a challenge from the bureau in which the two sides are scheduled to appear before the Competition Tribunal in April. Once ratified, the new rules will take effect immediately and be in effect for 10 years.
Traditionally, sellers hire an agent in an all-or-nothing agreement, in which the agent lists their homes on the Multiple Listing Service – on which about 90 per cent of residential properties are bought and sold – negotiates the sale with the buyer and handles much of the paperwork. In return, the agent receives a commission that is typically a percentage of the sale price.
Energized by a new commissioner, Melanie Aitken, and an expanded mandate, the Competition Bureau went to the Competition Tribunal in February demanding that CREA allow consumers more choice on what services to use.
The association, which represents nearly 100,000 real estate agents across Canada, loosened some of its rules in the spring. Nonetheless, the bureau decided the measures were insufficient.
But while both sides appeared intransigent in public, negotiations quietly paved the way to Thursday’s agreement after association representatives approached the bureau earlier this month.
The agreement is a major victory for the Competition Bureau, which was determined to force the real estate industry to become more competitive.
“The agreement is welcome news for Canadians,” Ms. Aitken said in an interview. “Consumers are going to have the ability to choose what services they want from a real estate agent, and pay only for those services, and at the same time, it gives much-needed flexibility for the agents to offer the variety of services and prices that meet the needs of consumers.”
CREA president Georges Pahud said in a statement that that the agreement “would avoid unnecessary and expensive litigation proceedings.”
The long-term impact on the country’s real-estate market is far from certain. The cost of buying or selling a home could come down as competitors seek to offer different packages and undercut each others’ prices.
But agents have warned that changes could lead to shoddy service or fraud. The agreement seeks to strike a balance, increasing consumer choice while leaving agents as the only portal to the MLS.
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