Monday, November 29, 2010

Canada's homeownership affordability improves for the first time in over a year says RBC

TORONTO, Nov. 29 /CNW/ - After four consecutive quarters of rising homeownership costs, housing affordability improved in the third quarter of 2010 thanks primarily to a drop in mortgage rates and some softening in home prices, according to the latest Housing Trends and Affordability report released today by RBC Economics Research.

"The improvement in affordability during the third quarter has relieved some of the stress that had been mounting in Canada's housing market over the past year," said Robert Hogue, senior economist, RBC. "After appreciating rapidly during the strong rebound in resale activity last year and early this year, national home prices recently came off the burner and retreated modestly as market conditions cooled considerably through the spring and summer."

The RBC Housing Trends and Affordability report notes that, at the national level, the third quarter improvement in affordability reversed almost two-thirds of the cumulative deterioration that took place over the previous four quarters. For the most part, the RBC Housing Affordability Measures returned to their levels at the end of 2009.

The RBC Housing Affordability Measure captures the proportion of pre-tax household income needed to service the costs of owning a specified category of home. During the third quarter of 2010, measures at the national level fell between 1.4 and 2.5 percentage points across the housing types tracked by RBC (a decrease represents an improvement in affordability).

The detached bungalow benchmark measure eased by 2.4 of a percentage point to 40.4 per cent, the standard condominium measure declined by 1.4 of a percentage point to 27.8 per cent and the standard two-storey home experienced the largest decrease, falling 2.5 percentage points to 46.3 per cent.

Despite some decline in home prices over last quarter, prices were still 5.8 to 6.8 per cent higher year-over-year at the national level. Conventional fixed mortgage rates came down in the third quarter, with the five-year posted rate (the basis on which the RBC Measures are calculated) falling more than 0.5 percentage points to an average of 5.52 per cent, entirely reversing the rise in the second quarter.

RBC notes that affordability could well improve further in the near term, with additional cuts in the posted five-year fixed rate already in place in the early part of the fourth quarter and previous home price increases still being rolled back in certain markets. However, RBC expects the Bank of Canada will resume its rate hiking campaign by the second quarter of next year, which will eventually have a more sustained upward effect on mortgage rates.

"Higher mortgage rates will be the dominant factor raising homeownership costs beyond the short term, although increasing household income - as the job situation continues to strengthen in Canada - will provide some positive offset," added Hogue. "We expect housing demand and supply to remain mostly in balance overall, setting the course for very modest home price increases."
All provinces saw improvements in affordability in the third quarter, particularly in British Columbia where elevated property values amplified the effect of the decline in mortgage rates on monthly mortgage charges. Ontario also experienced some notable drops in homeownership costs, pushing down the RBC Measures below their long-term average in the province for bungalows and condominiums. Alberta and Manitoba are the only two provinces where the RBC Measures stand below their long-term average in all housing categories, indicating little stress in these markets.

RBC's Housing Affordability Measure for a detached bungalow in Canada's largest cities is as follows: Vancouver 68.8 per cent (down 5.4 percentage points from the last quarter), Toronto 47.2 per cent (down 3.0 percentage points), Montreal 41.7 per cent (down 1.3 percentage points), Ottawa 38.2 per cent (down 2.9 percentage points), Calgary37.1 per cent (down 2.0 percentage points) and Edmonton 32.7 per cent (down 2.0 percentage points).

The RBC Housing Affordability Measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow, a reasonable property benchmark for the housing market in Canada. Alternative housing types are also presented including a standard two-storey home and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household's monthly pre-tax income.

Highlights from across Canada:

•British Columbia: Lower home prices and declining mortgage rates brought the B.C. housing market some welcomed reprieve in the third quarter from the significant deterioration in affordability recorded since the middle of 2009. Amid much cooler resale activity through the spring and summer and greater availability of properties for sale, home prices either fell, particularly for bungalows, or remained stable in the case of condominium apartments. The RBC Housing Affordability Measures for B.C. dropped between 1.8 and 5.0 percentage points, representing the largest declines since the first quarter of 2009; however, all remained significantly above long-term averages. Poor affordability is likely to continue to weigh on housing demand in the province in the period ahead.

•Alberta: Despite recording substantial affordability improvements since early 2008, housing demand in Alberta is still a shadow of its former self from just a few years ago and there are few signs that it is picking up meaningfully. The RBC Measures eased between 0.8 and 1.8 percentage points, more than reversing modest rises in the second quarter. Homeownership is among the most affordable in Canada both in absolute terms and relative to historical averages. RBC notes such a high degree of affordability bodes well for a strengthening housing demand once the provincial job market sustains more substantial gains.

•Saskatchewan: Saskatchewan home resales rebounded since August and reversed most of their slide in the first half of this year; however, the earlier softening of activity had a lingering effect on home prices which fell across all housing types relative to the second quarter. RBC's Affordability Measures dropped between 1.8 and 2.2 percentage points, the most since early 2009 but still modestly above their long-term average, suggesting that current market conditions might be stretching Saskatchewan homebuyers' budgets to a degree.

•Manitoba: Manitoba's housing resales picked up smartly in September and October, swiftly turning the page on a particularly weak summer period, with provincial homebuyers taking advantage of improving affordability. RBC's Measures fell between 0.9 and 2.3 percentage points, reversing one-half to three-quarters of the increase that occurred since the spring of 2009. Manitoba is one of only two provinces, with Alberta, where the measures for all housing types are currently below their long-term averages, which will be a supportive factor for demand going forward.

•Ontario: After four consecutive quarterly increases, the cost of homeownership declined in Ontario in the third quarter thanks to lower mortgage rates and some softening in property values. RBC's Measures fell between 1.3 and 2.4 percentage points, fully reversing the increase in the second quarter. Existing home sales ended their precipitous slide confirming RBC's earlier expectation that the slowdown in activity through the spring and summer largely reflected various transitory factors - including the HST and changes in mortgage lending rules - that spurred demand at the start of this year. With the market now back in balance, the recent softness in home prices will likely prove to be a healthy recalibrating following a strong rally.

•Quebec: The Quebec housing market is making its way towards more stable activity levels after plummeting to six-year lows at the end of 2008 and then surging to all-time highs at the start of 2010. Supporting this trend in the near term is an improvement in affordability in the third quarter. Following four consecutive increases, the RBC Measures for the province fell 1.4 to 1.8 percentage points depending on the housing type, but still remain close to the pre-downturn peaks and above their long-term average, which will likely restrain growth in demand in the period ahead.

•Atlantic Canada: The East Coast housing market picked up some steam early this fall following a marked cooling in activity in the spring when resales fell back to the lows reached at the end of 2008. Modest price declines and a drop in mortgage rates contributed to lower third quarter homeownership costs with RBC's Measures moving down between 1.0 and 1.5 percentage points in the third quarter and returning roughly to the levels experienced in mid- to late-2009. Overall, housing affordability remains attractive in Atlantic Canada.

The American Dream is in shambles!

Foreclosures in the USA continue to increase and many Americans are losing their dream of home ownership. The laws in the USA are apparently more in favor of the lenders while in Canada the owner has some support and apathy from the Canadian courts to allow the owner adequate time to re-structure.

Wells Fargo Clarifies Short Sale Criteria for Foreclosure Postponement
Top News
Friday, 26 November 2010 05:31

By: Elizabeth Martinez, Editor
Miami, FL

The National Association of Realtors (NAR) issued a notice this week explaining Wells Fargo's new rules surrounding short sale transactions when a foreclosure is pending.

Earlier this month, Wells Fargo advised NAR that it has modified its existing guidelines to allow the postponement of a scheduled foreclosure in connection with a short sale, but only in limited situations.

NAR explained that for loans owned by Wells Fargo, including those inherited with the bank's Wachovia acquisition, as well as other loans serviced by Wells Fargo but owned by an investor, the policy allows for one fore-

closure postponement, but only if: (1) Wells Fargo has a short sale sales contract in hand that has been approved (including approvals from junior lien holders and mortgage insurers, if applicable), (2) the buyer has proof of funds or financing approved, and (3) the short sale can close within 30 days of the scheduled foreclosure sale.

However, Wells Fargo noted that not all investors allow for such postponements and stressed that in jurisdictions where the courts will not approve the delay, the postponement policy will not apply. Wells Fargo told NAR that it is willing to address situations that do not qualify under these guidelines on a case-by-case basis.

Last month, it was reported that Wells Fargo had stopped delaying foreclosures in order to allow distressed homeowners to complete short sales. But as NAR outlined, the foreclosure timeline can be pushed back for a short sale as long as Wells Fargo's specified criteria are met.

NAR has been holding meetings with the nation's four largest lenders, including Wells Fargo, to address concerns about their processes for short sales and REO disposition. The trade group's talks with the banks are ongoing, but NAR has indicated that the discussions have been productive in fostering mutual success and support for a market recovery.

By: Elizabeth Martinez, Editor

Friday, November 26, 2010

Canada's inflation rate jumps half-point to 2.4 per cent, highest in two years

By Julian Beltrame, The Canadian Press

OTTAWA - Canada's annual inflation rate jumped to 2.4 per cent in October, its highest level in two years, as Canadians were hit with price hikes for most things from gasoline to cars, shelter and food.

The half-percentage-point increase in the annualized consumer price index was well above what analysts had forecast, and is likely to raise some alarms with the Bank of Canada.

Statistics Canada blamed higher energy costs for most of the increase, particularly an 8.8 per cent hike in gasoline prices, but most things were noticeably higher in October.

Transportation costs rose 4.6 per cent, while shelter costs increased 2.8 per cent.

Other higher costs included food which was up 2.2 per cent, electricity 8.1 per cent, cars 4.9 per cent, car insurance 4.6 per cent, and property taxes by 3.5 per cent.

On a month-to-month basis, Canadians paid 0.4 per cent more in October for a basket of items than in September.

Economists had expected an increase to about 2.2 per cent from a recent pick-up in oil prices and the continuing impact of the new harmonized sales tax in Ontario and British Columbia — two populous provinces that can move the national needle — but the higher number suggests that inflation may be more sticky than previously thought.

Even the underlying core inflation, which excludes volatile items like gasoline, rose three-tenths of a point to 1.8 per cent, edging nearer to the Bank of Canada's two-per-cent target.

Central bank governor Mark Carney, whose prime mandate is to guard against price spikes, is still expected to hold steady on interest rates at the next scheduled decision date next month, however.

Not all prices were higher last month. Clothing and footwear continued to be bargains as prices edged down 0.1 per cent, although the drop was less than the 2.2 per cent seen in September.

As well, mortgage interest costs retreated by three per cent, the price of computer equipment and supplies dropped 12.5 per cent and air transportation and furniture were lower than last year as well.

Regionally, the two HST provinces continued to have among the highest inflation rates in the country, with Ontario leading the way at 3.4 per cent, half-a-point higher than in September, and British Columbia at 2.9 per cent. Newfoundland's inflation also remained elevated at three per cent.

Alberta and Manitoba had the lowest inflation among provinces at 1.2 per cent

Thursday, November 25, 2010

Consumers upbeat, but still holding onto wallets

By Julian Beltrame

OTTAWA — Consumer confidence in Canada is on the upswing, but it may not be enough to benefit retailers for this Christmas shopping season.

The Conference Board of Canada’s latest survey of households shows overall confidence rose 3.9 points to 83.6, the second monthly uptick and sufficient to wipe out declines during the summer.

But on the question of whether now was a good time to make a large purchase — such as a home, car, or major appliance — almost half of respondents said no, and the balance of opinion on the question shifted negatively.

The finding is consistent with a new report by the Bank of Montreal, also released Wednesday, that nearly half of Canadians plan to cut back on holiday spending this year, and 48 per cent expect to spend less than they did two years ago.

The majority of respondents in the BMO survey estimated their holiday spending will peak at $1,300, with gift purchases outdoing entertaining family and friends in the size of outlays.

Only 20 per cent said they planned to spend more than two years ago.

“Despite low interest rates, the holiday shopping season this year will be a somewhat more subdued affair than last year, though sales growth should remain healthy,” said BMO economist Sal Guatieri.

Statistics Canada reported this week that retail sales rose 0.6 per cent in September, a relatively healthy gain after a slow summer.

In the latest consumer confidence survey, which was conducted in early November, Canadians said they were more hopeful about their future finances and job prospects.

After a series of declines, the share of respondents who said they expected future job opportunities to increase completely reversed, with the balance of opinion turning positive for the first time since July.

As well, the number of households who thought their finances would improve over the next six months rose to the highest level in six months, although at about 25 per cent the portion remains below what it was at the beginning of the year.

On a regional basis, opinions diverged.

British Columbia, Ontario and Atlantic Canada all registered increases in consumer confidence, while Quebec and the Prairie Provinces showed marginal decreases.

The survey was conducted between Nov. 4 and Nov. 14 and is said to have a margin of error of plus or minus 2.2 per cent.

Canadian home prices drop in September

Financial Post · Tuesday, Nov. 23, 2010

OTTAWA — Canadian home prices declined in September, ending a string of 16 consecutive increases in the Teranet-National Bank House Price Index.

Housing prices dropped 1.1% in September, which also marked the first time since February 2009 that prices declined in all of the metropolitan areas covered by the index.

The index tracks repeat sales of houses in six metropolitan areas using information from public land registries.

Year-over-year price growth also slowed to 7.9% in September, the third consecutive month of deceleration, the report notes, “leaving the 12-month rise the smallest since last January,” the Wednesday report said.

However, home prices are still 5.5% higher than their pre-recession peak, says National Bank senior economist Marc Pinsonneault, a far cry from the situation south of the border, where prices are still 28% from their peak.

“September’s drop notwithstanding, we do not think that a significant price correction looms in housing,” says Mr. Pinsonneault, pointing to a balanced new-listings-to-sales ratio and the continuing health of the Canadian economy.

“This being said, the high indebtedness of Canadian households and record home ownership rate argues for a much slower pace of home price appreciation in the coming years.”

Shahrzad Mobasher Fard, an economist with TD Economics, said there is “very limited scope” for prices to increased, “given the relatively weak prospects for employment and income growth, along with increases in interest rates.

“Some disparities at the regional level will continue to prevail, however, with cities having lagged the recovery in home prices such as, most notably, Calgary, presenting more potential for an upside if the local economy continues to improve.”

Prices fell in September by 2.4% in Halifax, 2.2% in Calgary, 1.6% in Toronto, 0.5% in Ottawa and 0.3% in Montreal and Vancouver, according to the report.

On a year-over-year basis, prices are up 9.2% in Vancouver and Ottawa, nine per cent in Toronto, 7.6% in Montreal, 3.6% in Halifax and 1.7% in Calgary.

Wednesday, November 24, 2010

U.S. feds lower outlook for economy through 2011

By Christopher S. Rugaber

WASHINGTON — U.S. Federal Reserve officials have become more pessimistic in their economic outlook through next year and have lowered their forecast for growth.

The economy will grow only 2.4 per cent to 2.5 per cent this year, Fed officials said Tuesday in an updated forecast. That’s down sharply from a previous projection of three per cent to 3.5 per cent. Next year, the economy will expand by three per cent to 3.6 per cent, the Fed said, also much lower than its June forecast.

Fed officials project that unemployment won’t change much this year, averaging between 9.5 per cent and 9.7 per cent. The current unemployment rate is 9.6 per cent. Progress in reducing unemployment has been “disappointingly slow,” the central bank said, according to the minutes of its Nov. 2-3 meeting.

The darker view helps explain why the Fed decided at its meeting earlier this month to launch another round of stimulus. The central bank plans to buy $600 billion US in Treasury bonds over the next eight months in an effort to lower interest rates and spur more spending.

The Fed is slightly more optimistic about 2012, in part because officials expect the bond-buying program to have a positive impact. The economy should grow 3.6 per cent to 4.5 per cent that year, a tick better than June’s forecast of 3.5 per cent to 4.5 per cent.

The economy will also grow 3.5 per cent to 4.6 per cent in 2013, the central bank said, the first time it has issued projections for that year.

The economic outlook was prepared at the Fed’s meeting earlier this month and released Tuesday. It reflects the views of the Fed’s board of governors and its regional bank presidents.

The jobless rate will be 8.9 per cent to 9.1 per cent next year, Fed officials predict. That’s much worse than June’s projection of 8.3 per cent to 8.7 per cent.

By 2012, when President Barack Obama faces the electorate, unemployment will be 7.7 per cent to 8.2 per cent, up from the previous forecast of 7.1 per cent to 7.5 per cent.

The Fed’s forecasts of a slow economy with only gradual improvement in the job market are broadly similar to those by private economists. An Associated Press survey of 43 leading economists last month found that they expect the economy to expand just 2.7 per cent next year, after growing only 2.6 per cent this year.

The unemployment rate will remain at nine per cent by the end of next year, the economists said.

The Fed said that data released since its last projections showed the economy was weaker in the first half of this year than it previously thought. The economy grew at only a 1.7 per cent annual pace in the April-June period, much lower than the first quarter’s 3.7 per cent rate.

Consumers are still holding back on their spending, the central bank said, and recent reports on housing, manufacturing, international trade and employment were all weaker than expected at the June meeting.

The central bank expects prices will remain in check. Inflation is projected to rise 1.1 per cent to 1.7 per cent in 2011, little changed from the previous forecast of 1.1 per cent to 1.6 per cent.

Inflation, retail sales numbers bring glad economic tidings for Christmas season

By Julian Beltrame

OTTAWA — North American consumers are showing signs of emerging from hibernation in time for Christmas, pushing up inflation in Canada to a new two-year high and improving growth prospects for both economies.

Canada’s inflation rate rose a surprising half-point to 2.5 per cent in October, a sign the economy is not facing the imminent risk of a deflationary slump.

In conjunction with price firmness, Statistics Canada also reported Tuesday that retail sales jumped 0.6 per cent in September as consumers bought more cars and spent more on sporting goods, clothing, books and music.

The strength of the consumer was also evident south of the border, where the third-quarter gross domestic product was revised to 2.5 per cent from a previously reported two per cent.

The three data points are positive indicators for the North American economy — which had been under pressure over the past few months — and for retailers with Christmas shopping season approaching, said Douglas Porter, deputy chief economist with BMO Capital Markets.

“Today’s numbers do suggest the economy had a little more underlying momentum than previously believed,” he said. “The consumer spending numbers are not rock-and-sock’em, but they are solid.”

TD Bank’s chief economist Craig Alexander also doubted the better consumer spending data signalled a return to “booming” sales, saying the increase should be kept in context.

But the improvement was welcomed in Canada given recent soft data in other sectors of the economy, particularly manufacturing, exports, housing and employment.

Analysts were bracing for a potential drop in gross domestic product in September, but the retail numbers now suggest the month will come in positive.

And analysts now think Canada’s third quarter will see the economy advancing at about 1.5 per cent, below the two per cent growth of the second quarter but in line with the Bank of Canada’s expectations.

While that is one percentage point less than the U.S., CIBC chief economist Avery Shenfeld cautioned Canadians against making the comparison, since the American economy is starting from a much deeper hole.

“We have not had as deep a disinflationary trend as the U.S. and that’s a sign we’re not as many miles below full employment as the U.S.,” he said.

“They have a lot more catching up to do,” he added.

The key difference, say analysts, is that while Canada has recouped all the jobs lost during the 2008-09 recession, the U.S. has only brought back about 15 per cent of the almost nine million jobs that vanished.

Still, nothing in Tuesday’s numbers changes the established picture that the recovery will continue to be a long, arduous slog before the conditions return to the robust growth and strong job creation levels that existed prior to the crisis.

“Given all the concerns that continue to swirl around the global economy, I don’t think we should let down our guard just yet,” Porter said.

Analysts said it is unlikely the one-month consumer price jump will scare Bank of Canada governor Mark Carney into raising interest rates in the near future, in part because inflation is expected to moderate.

Breaking down the numbers, Statistics Canada said higher energy costs were responsible for about half of the inflation increase, but most things were noticeably higher in October.

Transportation costs rose 4.6 per cent, while shelter costs increased 2.8 per cent. Other gains included food, up 2.2 per cent, electricity 8.1 per cent, cars 4.9 per cent, car insurance 4.6 per cent, and property taxes by 3.5 per cent.

There were still some bargains, however. Clothing and footwear edged down 0.1 per cent from last year, mortgage interest costs retreated by three per cent, the price of computer equipment and supplies dropped 12.5 per cent, and air transportation and furniture were also lower.

Regionally, the two harmonized sales tax provinces continued to have among the highest inflation rates in the country, with Ontario leading the way at 3.4 per cent, half-a-point higher than in September, and British Columbia at 2.4 per cent.

Tuesday, November 23, 2010

Global troubles bring some good news for Canada: low interest rates

Julian Beltrame

OTTAWA — Canadians could be enjoying historically low interest rates on loans for cars and homes for quite a long time, economists believe.

Since June, the Bank of Canada has been attempting to “normalize” interest rates, hiking its policy rate by one point.

But recent developments in the global economy — and to a lesser extent in Canada — have not to been positive, nor supportive of monetary tightening, regardless of what central bankers want.

The slowing global recovery and the re-emergence of the European debt crisis has caused the TD Bank to revise its outlook on when Bank of Canada governor Mark Carney can safely resume pushing the policy rate, now at one per cent, back to the three to 3.5 per cent range analysts believe is ideal for a balanced economy.

In a note released Friday, TD says Carney is unlikely to start hiking rates until at least next July, when U.S. Federal Reserve chair Ben Bernanke is scheduled to stop pumping billions of dollars into the economy under his controversial quantitative easing initiative.

That is good news for Canadians, both consumers and corporations, looking to borrow cheaply.

But, overall, super-low interest rates are reminders the economy is on life-support and that central bankers are more concerned about sending the economy crashing in the near term than worrying about setting up conditions for a reckoning later on.

Carl Weinberg of U.S.-based High Frequency Economics notes that Bernanke’s much criticized $600 billion US injection and zero interest policy has done nothing to stoke inflation, which this week came in at 0.6 per cent in the United States.

Nor are price pressures building despite stimulative policies in Canada, where core inflation remains a tame 1.5 per cent, or in other advanced economies such as Japan and Germany.

“With employment slack everywhere, and with abundant excess capacity everywhere, the G7 economies are all experiencing historic or near-historic lows in core price increases,” Weinberg notes. “This tells us that the G7 economies all remain depressed, and there is plenty of scope for monetary stimulus.”

The Organization for Economic Co-operation and Development also this week urged Carney to hold tight until at least the spring.

Being the first in the G7 to tighten, it’s unlikely Carney will go so far as reverse course on rates, failing signs of a second downturn.

But TD chief economist Craig Alexander thinks Carney’s fear that Canadians may be induced to take on debt beyond their means is not as great as the fear that raising rates could slow consumption, raise the dollar and crash the economy.

“I think the Bank of Canada would like to have higher rates from a domestic point of view,” he said. “But there is so much slack out there. It does not suggest double-dip recession, but people have to come to terms with the fact that growth of 1.5 to two per cent is now normal and the labour market is not going to recover quickly.”

The often missed fact about two per cent growth, adds Alexander, is not that it is modest, but that it barely keeps up with the trend rate of the economy. That means it will likely take another two years just to return to full capacity.

Evidence of just how profoundly Canada’s economy has slowed since the quick reboot that began a year ago is mounting.

This week, Canadians learned factory shipments shrank 1.4 per cent in volume terms in September — an important indicator because with consumer spending receding, the economy needs a boost from exports to make up the difference.

The most visible sign of braking is in Canada’s much-ballyhooed employment record. While still better than the U.S., job growth has virtually ground to a halt since June, gaining about 5,000 a month when about 15,000 is needed just to keep up with Canada’s population growth.

As little as the Bank of Canada is counting on exports to bolster growth, it may be overbanking on its expectations, says Sal Guatieri of BMO Capital Markets. Europe’s woes, along with those in the U.S., and China’s tighter monetary policy, all point to global markets drying up further.

Not everything argues against a rate hike, says Guatieri, but most things do.

Who is taking advantage of drop in mortgage rates?

While Canadians have enjoyed the lack of foreclosure activity going on in the USA the tightening on refinacing requests could occcur here as well. I feel it is opportune to look at debt consolidation now - before any tighteneing happens.

Neil McJannet

Mortgage Crisis
Monday, 16 August 2010 18:33

By Elizabeth Martinez

Miami, FL-Although several incentives are out there for home buyers to take advantage of, many of these efforts are wasted as other factors are strongly affecting today’s housing market.

Last week, U.S. mortgage rates fell for the eighth consecutive week to a record low of 4.44% after the Federal Reserve said it would buy more government debt to help the economy recover. Help seems to be out there for people to use, but somehow it is always missing those that need the help the most.

When mortgage rates drop, this creates an opportunity for homeowners to lower their monthly loan payments by refinancing their existing loans. Some are taking advantage of this, and are definitely trying to lower their payments. The Mortgage Bankers Association reported last week that 78.1% of all mortgage applications fell under the refinance category, up from 58.7% in April. However, this number still means that there is an amount of homeowners filing out the paperwork who are only getting a rejection letter in response.

When homeowners apply for refinancing, they are subject to many limitations. The mortgage association does not specify how many of those who apply for refinance actually get approved, and mortgage brokers say many homeowners are ineligible. The creation of the Home Affordable Refinance Program (HARP) last year was meant to help homeowners get new loans, but reports indicated that the program has only resulted in a small fraction of the refinancing the government aimed to enable.
"The qualifications are so much stricter," says Dale Robyn Siegel, CEO of Harrison, NY-based Circle Mortgage Group and author of The New Rules for Mortgages. "Banks have realized that even the best of borrowers have lost their jobs. A lot of people are really tapped out."

Among the limitations for homeowners is a range of qualifications that include a higher FICO score of at least 620, a higher down payment and lower monthly debt service ratios. Additionally, banks have started charging higher fees. Furthermore, lenders will probably not give a loan of more than the appraised value of a home. The struggling housing market has left an estimated 15 million U.S. mortgages -- one in five -- worth more than the value of the homes they helped purchase. These all lead to only one conclusion: The 4.44% rate is unfortunately, one that most Americans cannot take advantage of.

Monday, November 22, 2010

Father doesn't know best

Suzanne Wintrob, National Post · Friday, Nov. 19, 2010

Looking for your first home? Then do your homework before hitting the open houses.

"A first-time homebuyer can save a lot of time by knowing in advance how much they would qualify for and what they can afford," says Marcia Moffat, RBC's VP, Home Equity Financing, Canadian Banking.

RBC recently surveyed 1,050 Canadians, half who bought their first home in the past two years and half who intend to do so within the next two years. While two-thirds of future buyers said they hoped to purchase a single detached home, those who had already bought ended up in a townhouse or a condominium. The difference, suggests Ms. Moffat, comes down to dollars and sense.

"Affordability isn't just the house price -- it's thinking about maintenance of the home, taxes, legal feels on top of it and, if it's a young family, factoring in childcare costs," she says. "Sometimes when someone is in the market of intending to buy, they haven't thought through all those elements. Then, when they actually come down to buying, it's part of the whole approval process. Yet if they get pre-approval, it strengthens their credibility with the realtor and means they're not spending all of their time looking at homes that they can't reasonably afford."

Apparently, getting advice is all in the family. While one-third of current homeowners turned to the bank as their primary source of mortgage advice, those planning to buy turn to Mom, Dad and other family members to better understand mortgages. That's not always smart, says Ms. Moffat, since what was right for your parents when you were a kid might not be right for you now.

"I've heard parents say, 'You should go into a 10-year fixed,' but those were parents who lived through the late '80s at a time of very high interest rates and uncertainty," she says.

Of course, managing cash flow becomes a much more pressing concern once the sale is final. According to the survey, those planning to buy fret most about three things: being approved for a mortgage, affording the downpayment, and rising housing prices. Once in the market, though, they get cash-flow anxiety, worrying considerably about rising mortgage rates, being able to make their regular monthly mortgage payments, and declining housing prices. With all that stress, it's not surprising that 85% of first-time buyers said they intend to stay in their new home for the long-term.

As for mortgages, the study reveals that first-time homeowners are more likely to opt for fixed or variable rate mortgages -- though older first-timers are more comfortable with variable rates than their younger counterparts. Future buyers go for a combination of the two, which RBC concludes may reflect their uncertainty.

Ms. Moffat says there are many simple ways for first-time homebuyers and those planning to buy to make the experience more soothing. For those unsure if they're ready to buy, mortgage specialists can offer budgeting advice while online mortgage calculators can compare monthly rental payments to mortgage payments.

Ms. Moffat also suggests setting mortgage payments for the highest amount possible.

"If you are concerned about rising rates, a good rule of thumb is to plan for the worst case scenario for the next five years and build your financial plan around that number," she says. "If things turn out better, you'll be ahead of the game because you've already paid down a good chunk of your principal and you've tested your budget for higher payments."

Tough decisions ahead to avoid fiscal trouble: Flaherty

Paul Vieira, Financial Post · OTTAWA — The country’s top financial policymakers warned Canadians on Sunday to brace for tough decisions and “very big challenges” ahead as Canada tries to secure its recovery in an ever-changing global economic landscape.

Finance Minister Jim Flaherty — set to deliver a key speech on federal economic policy in Oakville, Ont., on Monday — said the Conservative government is determined to cap program spending so Canada can return to a balanced budget position and avoid the turmoil Europe is undergoing.

He acknowledges this won’t be a popular decision, with certain segments of the population and his political opponents.

“We have to make sure we protect the country going forward,” he said in a TV interview. “Look at what’s happening elsewhere … like the issues they are dealing with over the weekend in Ireland. We don’t want to get into any fiscal trouble in Canada.

“We still have to watch what’s happening in the world, and be careful that we preserve this modest recovery,” the Finance Minister added. “And that means we cannot act in any sort of extreme or dramatic way.”

The government has forecast returning to a balanced budget by 2016, through reducing spending growth in key areas and allowing the two-year, $48-billlion stimulus plan to expire as planned at the end of this fiscal year.

His speech in Oakville is expected to draw clear boundaries for his political opponents about what the minority government will and won’t undertake in the next federal budget, to be tabled early next year.

Meanwhile, Bank of Canada governor Mark Carney warned there are “some very big challenges” ahead for the global economy set to play out over the next several years.

“There are stresses in the global system without question, and they are going to take years to play out and policy decisions are going to continue to matter,” Mr. Carney said in a radio interview. “There are ways to get this right, and ways to get this wrong.”

The global economy has reached a rather precarious spot, as the recovery slows, Europe’s debt woes re-emerge, and inflation threatens the growth-engine in the increasingly vital emerging economies. In addition, there are heightened tensions among struggling advanced economies and faster-growing emerging markets over foreign-exchange policy, prompting countries to intervene in order to cap the appreciation in their currencies.

Group of 20 members met this month in Seoul but failed to come to an agreement on dealing with the currencies issue. “We didn’t make as much progress quite frankly as we had hoped,” Mr. Flaherty said.

Mr. Carney also stressed the need for global policymakers to instill additional market discipline on banks by removing so-called “moral hazard” from the system, in which the private sector relies on governments to save lenders that get in trouble due to excess risk taking.

“We have to get rid of that,” the central bank governor said.

He also debunked reports that Royal Bank of Canada was on a list of banks deemed by global banking authorities to be too big to fail. Mr. Carney said Canada’s biggest bank was “not on that list,” as compiled by the Financial Stability Board.

Saturday, November 20, 2010

OECD forecasts sluggish growth over next two years

Thursday, 18 November 2010

The slow North American recovery will continue according to the Organization for Economic Co-operation and Development for the next two years. It also warns that a weakening real estate market in both Canada and the U.S. poses a downside risk to the rebound.

Canada’s economy will grow 3 per cent this year, 2.3 per cent in 2011 and 3 per cent in 2012, the Paris-based OECD said in its latest outlook for member countries, and the unemployment rate will drop from 8.1 per cent this year to 7.4 per cent by 2012.

The slowdown and tepid pickup are a function of household finances being stretched, wage growth starting to moderate and government stimulus spending winding down, the OECD said, as well as global uncertainties that are restraining demand for Canadian exports.

“Substantial economic slack should gradually diminish but keep inflation pressures subdued,” the OECD report said. Even though Canadian borrowing costs are still low by historical standards, with the Bank of Canada’s benchmark rate at 1 per cent, Governor Mark Carney and his rate-setting panel “should delay further rate hikes until early 2011 when a recovery in private demand is expected to gain firmer traction,” the OECD said.

After that, “a gradual pace of tightening would be appropriate,” the report said, in keeping with what most economists predict. A “downward correction” in home prices could further crimp demand, it said.

Conference Board Highlights Lessons From The Financial Crisis And Recession In New Book

Tuesday, 16 November 2010

The extraordinary financial meltdown in 2008 and resulting recession demonstrated that in an age of economic and financial globalization, the design of public policy played a critical role in the events. Poor public policy created the conditions for the crisis, while good public policy shaped the exceptional actions to deal with it.

A new book published by The Conference Board of Canada, Crisis and Intervention: Lessons from the Financial Meltdown and Recession, outlines 10 lessons for business leaders and policy-makers to address as the crisis recedes. The Hon. John Manley provides the book’s Foreword.

“Economic actors at all levels should be learning key lessons from this unique episode. When the good times return—and they will—we need to have taken steps to avoid repeating crucial mistakes. The worst of the recession and financial crisis is over. What is not over, however, is the need to adapt—in how we act and organize ourselves to avoid the worst impacts of the next financial crisis,” said Glen Hodgson, Senior Vice-President and Chief Economist, and editor of the book.

Members of The Conference Board of Canada’s Forecasting and Analysis team developed the individual lessons. They include:

· Canada’s fiscal stimulus spending, along with record-low interest rates, helped to overcome the worst of the recession and to kick-start the economy.
· The recession only delayed the inevitable workforce shortages. A mass exodus of baby boomers will force employers to compete even more fiercely for skilled workers, and put pressure on policy-makers to reform labour market and immigration policies.
· The financial sector is unique—because it interacts with all other players in the economy—and it must be treated differently than other industries through regulation and greater transparency.
· Public sector financial institutions are a critical backstop to provide credit when private lending dries up, but they must exist before a crisis hits—it is too late for governments to create them in an emergency. Canada had public sector financial institutions—specifically Export Development Canada and Business Development Bank of Canada—in place, and they provided exceptional support during the crisis.
· Policy coordination among global bodies, such as the International Monetary Fund, World Bank, and G-20 helped to bring the world economy out of the crisis. As the global economy returns to growth, there is a risk that this coordination will weaken.
· Firms can be “too big to fail”—with catastrophic costs to an economy. As a consequence, it is in the public interest to limit the systemic risk posed by very large firms in advance of any crisis.
· International trade links pulled countries into a wider and deeper recession than would have otherwise been the case, but these same connections may have blunted governments’ impulses to enact protectionist measures. These links can help the Canadian and global economies to revive coming out of the recession.
· Local governments do not have the fiscal powers and muscle to help pull their regions out of a recession.
· Policy-makers must enact fiscal and monetary policy change early in a recession, because consumer and investor psychology was a crucial factor in speeding the downturn.
· Governments must begin implementing the tough but necessary measures to get their deficits and debt under control.

Friday, November 19, 2010

Too many clowns with no financial plan

Garry Marr, Financial Post · Wednesday, Nov. 10, 2010

You have to be a real clown not to have a financial plan and be saving for your retirement. Right?

Not really, you would just be among the approximately 80% of Canadians who don’t have any sort of comprehensive financial plan, according to the Financial Planning Standards Council.

Who are these people? They are people such as the 51-year-old rodeo clown I met this past week who goes by the name Shorty Leggs — and has no RRSP and isn’t too interested in starting one.

“I’m about to the retire,” he told me between his assignments at the Royal Agricultural Winter Fair, where his job is to entertain the crowd and also to distract the bulls if a rider is in danger.

In the past year he suffered major injuries in two separate incidents that resulted in a total of six cracked ribs. “I didn’t have any insurance so I kept on working. Insurance companies won’t even touch me.”

And he’ll keep working, just not as a clown. He plans to start training race horses. “I don’t think about it,” he says, referring to retirement.

The FPSC’s data will tell you’s he’s probably not as content and happy as he would be if he had a financial plan. I have to tell you I didn’t sense a trace of sadness in that clown about his financial choices.

I have a few friends, some of whom I might describe as clowns, who conduct their lives the same way. They haven’t contributed to an RRSP in years and they don’t bother with Registered Education Savings Plan for their kids. I’m not sure they’ve even heard of a tax-free savings account.

Are they really in that much trouble as they live for the moment?

According to a study done for FPSC, about 60% of people with no financial plan worry about their financial situation, compared with 44% who have a comprehensive plan. About 13% of those with no plan said they expected to retire to the lifestyle they want versus 44% for those with a plan.

“A big part of this is the focus on instant gratification. People’s concept of living for today has been skewed to meaning to not even give any consideration to the fact that at some point in their future they might not have a job and at some point there will be other demands on their pocketbook,” says Cary List, FPSC chief executive.

He thinks there is a fear factor to financial planning because most people think it means giving something up and they don’t want to do that. But who says you can’t have a selfish financial plan — I wouldn’t — that is designed to make sure you die with as little cash as possible and use as much of it as you can in your own lifetime?

“Financial planning is not just about retirement planning,” says Mr. List, adding it can be used for other life goals, including some short-term gratification. “Planning is not synonymous with saving and having X million dollars when you die.”

All that’s true but there is a certain percentage of the population that doesn’t bother to plan because they have no disposable cash to plan with, says Benjamin Tal, a senior economist with CIBC World Markets. “You can’t ask people making $20,000 to contribute to an RRSP,” says Mr. Tal. “The focus should be how many that make a reasonable amount money and still don’t contribute [to RRSPs and other investment vehicles]. That’s really a lack of planning.”

Moshe Milevsky, a finance professor at the Schulich School of Business at York University, says there might me some method to the madness of people who are not saving any money for retirement.

“There is 20% to 30% of the population whose standard of living will actually go up once they retire,” says Mr. Milevsky, adding Statistics Canada data supports the notion that if you are earning median wage or lower and you retire, the Canada Pension Plan and Old Age Security might provide a better standard of living than you had before.

Those people find themselves retired but without the expenses that involve going to work and the costs of a mortgage and kids. “Relative to what you experienced at 55, 65 is better,” Mr. Milevsky says.

But if you want more? You can always keeping working, as least as long as you’re able. It’s at that point when no financial plan might have the biggest impact on your life. “What do you want the last 18 months of your life to look like? Are you willing to live in a nursing home provided by the province or do you want something better,” Mr. Milevsky asks.

Is that something you want to clown around about or are these clowns having the last laugh because they live for today?

Michigan city, seeking bankruptcy, could be first of many

Gus Lubin, Business Insider ·

The City of Hamtramck, Mich. is seeking state permission to declare bankruptcy, according to The Detroit News. City Manager Bill Cooper says he's going to run out of money on January 31:

Unless Hamtramck gets bankruptcy protection, Cooper said it won't be able to pay its nearly 100 employees or the pensions of its 153 retirees who consume nearly a third of the city's US$18 million budget.

Hamtramck would be the first Michigan municipality to declare bankruptcy. It could be the first of many: "There're lots of towns in trouble," Cooper said.

Hamtramck wouldn't even have this trouble if it wasn't squabbling with near-bankrupt Detroit over tax money. The city has sued Detroit for withholding shared tax revenue from the GM Poletown plant, which Detroit says it had overpaid previously.

Foreclosure Preservation Seen as Good Business by Most Contractors

Top News
Friday, 19 November 2010 05:57
By: Elizabeth Martinez, Editor
Miami, FL

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Thursday, November 18, 2010

Travel agents and stockbrokers are nearly obsolete thanks to the Internet - are real estate agents next?

Michael McCullough

Mayur Arora didn't take the death threat very seriously, though he did take the precaution of reporting it to police. He'd heard an earful -- all of it angry, much of it anonymous -- from fellow realtors, ever since launching his discount real estate agency, One Flat Fee, last March. Under pressure from the federal Competition Bureau, the Canadian Real Estate Association had only just introduced interim rules allowing members to offer no-frills services, including simply posting properties on its listing service and leaving the client to show the property, field offers and seal the deal. Arora, based in Surrey, B.C., was one of the first to take advantage. That made him a target for agents who had long relied on commissions and now feared for their livelihoods.

He was new to the industry. He'd sold only three houses under the old regime, and was almost embarrassed accepting the commission, feeling he hadn't earned it. Seven months later, following CREA's Oct. 24 ratification of a consent agreement with the Competition Bureau that will permanently open "mere posting" access to the Multiple Listing Service (MLS), its proprietary database representing about 90% of the homes for sale in Canada, he has 125 listings - most of them no-frills listings for $649 a pop. If the clients complete the sale without further help from Arora, that's all they pay.

The former restaurateur was inspired to enter the real estate business two years ago, after paying an agent $19,500 to sell his $650,000 Langley City home. "I thought it was like highway robbery," Arora says. He took the necessary courses and exams to obtain his B.C. real estate licence. But instead of getting in on the game, he sought to change it from the inside.

And make no mistake, change is coming to Canada's real estate industry. Nobody's sure exactly how much or how fast, but the transformation promises greater choice and cost savings for the consumer. Not only are realtors facing new competition from people like Arora within their own ranks, but also deep-pocketed companies including Power Corp. are moving in on the for-sale-by-owner (FSBO) space, at long last creating a nationwide alternative to the MLS, which for years has been a near-monopoly marketplace. As a Power Corp.-backed venture challenges MLS's supremacy, a rival FSBO, Property Guys, has found a way to get its listings on the MLS itself - a development that may threaten the uneasy truce.

The disruptive power of the Internet has already gutted (or transformed, depending on your perspective) dozens of industries: travel agencies, stock brokerages, the recording industry, bookstores, classified ads. It has allowed consumers, for little or no fee, to cut out the middleman. Why should real estate sales be any different?

The real estate industry is different in one important respect: it's bigger. Real estate agents and brokers grossed $9.07 billion across Canada in 2008, down from a peak of $9.9 billion in 2007. That gives a hint of the potential savings to be had by consumers. It also represents nearly 100,000 realtors, far more than travel agents or stockbrokers, whose careers and incomes are now at risk.

To date realtors have resisted this change through their status as a self-governing profession and their control of the MLS. The database predated the Internet but seemed made for the electronic medium. Only licensed members of a regional real estate board could post on the MLS, though, and they had to carry out the full transaction. Despite benefiting from productivity improvements ranging from a web-accessible MLS to mobile phones, few realtors were willing to break with the old commission formula. And as Canadian home values ballooned over the past decade well ahead of inflation, being a realtor became all the more lucrative. For the old-style agent charging the standard seven-and-three commission, though - 7% on the first $100,000 of the sale price, 3% on anything over that - life is expected to get tougher.

Nicolas Bouchard saw a change coming 15 years ago when, at the age of 21, he founded Until then, private sales (without intermediaries) were a function of the buyer and seller's knowing each other, or spotting the other's lawn sign or ad in the local newspaper. Duproprio started as a text bulletin board of homes for sale by owners who opted not to work with an agent. Even in those early days, Bouchard already had a dream of a national electronic marketplace to compete with the MLS and the accompanying high commissions for agents.

That was easier dreamed than done, though. Real estate markets are notoriously local, and initial attempts to attract home sellers outside of Duproprio's home province of Quebec failed. "The market was way tougher than we were expecting," Bouchard says. Gradually, Duproprio got established in its hometown of Quebec City (where it now claims to have 17% of residential listings), expanded to Montreal, then started an Ontario arm,

Then, three years ago, Bouchard was approached by Square Victoria Digital Properties, a subsidiary of holding company Power Corp. that controls the high-profile web portal Workopolis and the Olive Media online ad sales group. With financial backing from Square Victoria, Duproprio embarked on a buying spree, this year snapping up regional FSBO companies including ComFree in Manitoba and Alberta, Skhomes4sale in Saskatchewan and PrivateRealEstate in Ontario. It was a good time to buy. In certain markets and at certain times, FSBO sites have become essential viewing for anybody looking, and the segment had expanded furiously during the boom years from 2003 to 2007. It became vulnerable as the market cooled and sellers whose houses languished on the market reverted to a realtor.

Today, Duproprio's group has 12,000 listings, making it at least three times larger than the next biggest FSBO company, Moncton-based franchise outfit Property Guys. Bouchard says his site hosts 1.25 million visitors a month - respectable, though still far short of the 200,000-plus listings and 12 million monthly visits of the MLS.

Nonetheless, Realtors were concerned enough about the FSBO threat they launched lawsuits, complaints to provincial regulators and an advertising campaign that ridiculed unqualified sales help, ranging from a mother-in-law to a personal trainer, risible stand-ins for the FSBOs. CREA runs ads with a similar message today, though they focus more on the upside of dealing with its members than scare tactics regarding the alternative.

The Competition Bureau got involved when a realtor himself made a complaint that the MLS rules were anti-competitive. Lawrence Dale attempted to set up an agency offering different levels of realty services back in 2001. When the Toronto Real Estate Board barred him from posting on the MLS, Dale - also a lawyer - took it to court and, three years later, won. But he shut down the business in 2006, maintaining that real estate boards still discriminated against his business model, and in 2007 took his case to the federal agency. After three years of investigation and discussions with CREA, in February this year the Competition Bureau formally charged CREA with stifling competition before the Competiton Tribunal, at which the professional body altered its rules to allow differing levels of service. That put services like Arora's One Flat Fee and Ottawa-based Best Value Real Estate, which promises to list a home on the MLS for just $109, in business.

The Bureau was unsatisfied with the changes, which gave regional boards the power to opt out. The two sides continued to negotiate into September, when they reached the consent agreement ratified by 97% of the country's 101 regional boards in St. John's, Nfld., on Oct. 24.

The agreement, lasting 10 years, allows a realtor "to provide innovative service and pricing options to customers," the Competition Bureau said. Basically, real estate boards are now legally forbidden from discriminating against any member's offering a "mere posting" of a home for sale. While maintaining that organized real estate in Canada "always has been and always will be" highly competitive, CREA president Georges Pahud announced to the assembled board representatives that he was "pleased this agreement lets us get back to doing what we do best."

One unresolved matter, however, is compensation for the buyer's agent. The agreement calls for the agent to be compensated even in sales closed by the seller, but that fee is not stipulated, meaning it theoretically could amount to as little as a penny. Another potential flashpoint is the proxy posting of FSBO listings on the MLS by licensed agents. Property Guys has entered into an agreement with a Hamilton realtor, Kimberley Leone, to post its Ontario listings on the MLS. As of this writing, 65 such listings were on the MLS with 72 more awaiting listing. Property Guys director of partnerships

Walter Melanson says he's talking with realtors about offering the same service in other provinces.

The problem then is that the realtor is relying on information provided by the owner, says Keith Braun, president of Re/Max Real Estate Mountain View in Calgary. "If that realtor doesn't go out and physically measure that property, he's putting his neck way out on the chopping block." The reason CREA restricts postings to its members, he argues, is to protect the consumer. "The minute you let the public in there and do whatever they choose, the integrity of the database is gone."

Like most Realtors, Braun insists that his profession has offered consumers a choice of services and fee options all along and that the new rules won't change much. Others, though, say this is a watershed. The MLS rule changes will usher in a new upsurge in competition, predicts Jane Saber, a marketing professor at Ryerson University. Three years ago Saber and the University of Alberta's

Paul Messinger conducted a survey for the Alberta Real Estate Foundation probing the demand for FSBO and flat-fee services. They uncovered deep dissatisfaction with real estate agents. In the context of the then sizzling real-estate market, 78% of respondents said they would consider using an alternative to a commissioned agent the next time they sold their home. "Because of the availability of information about properties on the Internet, both buyers and sellers valued the services of real estate agents lower as a result," she says.

How quickly FSBOs and flat-fee realtors make inroads into the marketplace here will depend in large part upon market conditions, Saber continues. In the United States, which opened up its MLS to marketing-only services in 2008 as part of a settlement of an antitrust suit brought on by the Department of Justice, flat-fee brokers today represent about 10% of the marketplace, and the FSBOs, according to a 2009 National Association of Realtors survey, 11% (though, it's important to note, the U.S. market has been severely affected by the sub-prime mortgage crisis and had lower commissions in the first place). These alternative models serve only sellers - the buyers are expected to find houses on their own - and in a down market like today's, sellers are more likely to seek the help of a realtor. But the competition will come eventually. There may be pressure on traditional commissions, but more important, there will be a realignment of agents' service model with their customers' needs. Though Saber doesn't see realtors going the way of travel agents, "I do expect they'll have to significantly adjust their business model and their sales model and their strategy model and their service model."

Another lesson from the U.S. experience is that consumers' empowerment by the Internet does not end with FSBO sites and flat-fee listings on the MLS. American buyers and sellers don't just troll the MLS but also Trulia and Zillow and Google Street View and Yelp, points out Butch Langlois, president of Zoocasa, a real-estate-themed advertising site started by Rogers Communications (which also owns Canadian Business) two years ago where agents can post free listings. It's happening here too. A Zoocasa-sponsored survey by SRG Group showed that the Canadian buyer spends an average of 11 months researching the housing market online before making a purchase. "You don't trust the fact the agent knows every house. You have to go online. You have to examine every option because you can," Langlois says.

It's a good moment to reshape our business and merge our best practices," Bouchard says in the wake of the MLS vote. By the end of the year, Duproprio/Bytheowner plans to unveil a single brand identity and standardized offering for clients across the country, which Bouchard calls an "assisted sale." That is, the company will not only advertise your property on its site and provide instructions and legal documents to sell it yourself, but also offer sales coaching, legal and appraisal services from qualified third-party professionals, all included in the fee.

After the verbal abuse he took at first, Arora says realtors are more accepting of his service. "What we're finding is if the house is priced right and there's a fair commission offered to the buyer's realtor, there's no reason why they won't show our property," he says.

Still, the new entrants to the market, whether flat-fee realtors or FSBOs, have to prove one important thing to win a significant share of the market, Arora says: that the houses they list are actually selling.

Wednesday, November 17, 2010

Severing your lot? Get advice, chop-chop!

Helen Morris, National Post ·

If you moved into your neighbourhood a number of years ago, perhaps when new houses were still being built, you may have bought a double lot. Maybe the idea was eventually to build a second home.

However, if you have decided to split your double lot and sell off the vacant half, there are mortgage, planning and property tax issues to consider, which can be lengthy and costly.

"It's one of those areas that can be very tricky," says Ray Leclair, real estate lawyer and vice-president, Title Plus at Law Pro in Toronto. To sever a lot, you will need to know if, legally, it is a double or two single lots, get permission from the City, as well as get your mortgage provider to agree to your newly reduced property size.

"It would affect the total value of their asset that you've got the mortgage on," says Al Roberts, a broker with Mortgage Intelligence in Unionville. "If they sever the double lot, then you may have to proportionally reduce the mortgage to the new value of the reduced amount of land."

The lender may require you to pay the mortgage down by "x" amount of dollars before allowing you to sell part of the asset. A mortgage provider may also demand a new appraisal.

Unlike when you sell a home, you will need to get permission from the municipality to split a lot.

"A person can make an application to the committee of adjustment and ask that a piece of land be severed," says Joe D'Abramo, acting director zoning and environmental planning, City of Toronto. "We would look at the pattern of lot development in that area. This is a fundamental part of city development, the nature of lot size and creation."

Each neighbourhood has its own style and feel, and part of this is down to the size of the lots.

"People view and value their neighbourhood by the width of the lot," says Mr. D'Abramo.

Mr. Leclair says approaching your neighbours ahead of time can often defuse potential conflicts over a severance or planning application.

"People within 200 feet of the application site will receive written notice. The community comes out to the committee meeting and they'll voice their opinion and it can get very heated at times," Mr. Leclair says. "I've seen situations where it's neighbour against neighbour down at the committee."

The planners want to ensure that each lot and home fits with the overall character of the neighbourhood. The city must also consider provision of services to the new lot and the committee tends to grant the size of lot that is compatible or comparable to the pattern of lots in that area.

"Even if you have severed the land, the zoning still remains, so whatever the zoning says in terms of use permission will then apply to that new lot," Mr. D'Abramo says. "It's likely that if you created the new lot through the committee of adjustment, and it is of an appropriate size, that the zoning would allow for the construction of a home." The new owner would need a building permit and must meet the regulations of the zoning to build a home.

Once the severance and sale of land has been registered with the land registry office, it is time for your property taxes to be reassessed.

"MPAC adjusts the site areas and current values of the affected parcels in accordance [with the] information provided by the land registry office," says Joe Regina, account manager, Municipal Property Assessment Corp. in Toronto. "[Every four years], MPAC analyzes all registered real estate sales transactions and associated property-specific information in a community to determine current value."

Tuesday, November 16, 2010

CMT updates its mortgage term review for November

| Monday, 15 November 2010

A client’s mortgage term can have a bigger impact on interest cost than the upfront interest rate because the term dictates how long the consumer is locked into that rate. updated its Mortgage Term Review for November 2010, and wrote that the term “affects how long you’ll overpay or underpay, relative to the other available options. The wrong term can get mighty expensive if interest rates deviate from your assumptions, or if you need to break your mortgage early.”

The site noted the following key developments since its August Mortgage Term Review:
Economic growth concerns have peaked for the year and slightly subsided
The 5-year bond yield, which leads fixed mortgage rates, fell to an 18-month low then strongly rebounded
The prime rate rose 25 basis points to three per cent
Fixed mortgage rates hit another all-time low
The current deep-discount market rates for a five-year fixed range from 3.39 to 3.49 per cent, while the variable rate sits at prime minus 0.75 per cent
Visit for its complete breakdown of the most common mortgage terms.

Friday, November 12, 2010

Is retirement chained to your home?

After reading thsi article you might want to get some information on the Tax Deductible Mortgage program - you need equity in the home to ensure your mortgage is Conventional - currently 20% equity. Then you need a LOC attached to your mortgage and the program starts to accumulate wealth for your retirement - IT IS almost that easy.

Garry Marr, Financial Post · Tuesday, Nov. 9, 2010

Canadians plan to take longer to pay off their mortgages, maybe even 35 years, but they don't expect it to affect their retirement plans. Something in that plan just doesn't add up.

A new study from the Canadian Association of Accredited Mortgage Professionals (CAAMP) shows consumers are taking advantage of longer amortization lengths at previously unheard of levels. Statistics released this week show 42% of mortgages originating in the last year went for an amortization period of more than 25 years.

It's a huge jump when you consider that just five years ago, you couldn't even get an insured mortgage backed by the government that was amortized above that period. Now the government limits insured mortgages to 35 years.

The reason for the longer amortization periods is simple: you can qualify for more mortgage when your monthly payment is lower because it is spread out over 35 years rather than 25.

Within the same survey by CAAMP, consumers were asked about their retirement expectations. Those with extended amortizations plan to retire on average at 61.9 years old. Those amortizing their mortgage for less than 25 years plan to retire on average at a surprisingly similar 61.5 years old.

"This data on expectations does not prove that actual retirement will be unaffected by recent trends in housing and mortgage markets," CAAMP says in its study. No kidding. "But it does suggest that consumer's evaluations of their life-cycle options have not been materially altered."

Are consumers being entirely realistic about their future?

Will Dunning, chief economist with CAAMP, says the percentage of Canadians retiring with a mortgage is small — small enough that it is difficult to track.

"We find a lot of people taking [longer amortizations] are making additional payments," Mr. Dunning says, adding previous studies have shown people try "aggressively" to repay their mortgages.

Victor Fiume, president of the Canadian Home Builder's Association, says Canada is just catching up to a trend that has taken place in other jurisdictions.

"In many, many countries across the world, paying off a home is a multi-generational kind of thing. It doesn't happen in this generation. Lots of the stuff going on in England is multi-generational because the houses are so expensive," Mr. Fiume says.

There is no arguing the increased flexibility a longer amortization mortgage gives, but increasingly some consumers find themselves getting into financial trouble because they have bitten off too much, says Patricia White, executive director of Credit Counselling Canada.

"People will always decide what is easiest for them," she says. "But you have to plan in advance to make accelerated payments. You need to make some conscious decisions about how to get rid of that mortgage debt faster."

Canadians always do better when they have direct withdrawals from their bank accounts and less discretionary power about paying down debt, Ms. White adds.

Vince Gaetano, a principal broker and owner at Monster Mortgage, agrees people who choose the longer amortization and the lower payment rarely take advantage of that extra cash flow to make additional payments later on. "It's a very small group of people who do that," he says.

He thinks consumers going for the longer amortization are banking on the fact their homes are going to rise in value faster than any gains they get paying their mortgage off earlier.

"Real estate over time will appreciate at more than 2% to 4% per year," Mr. Gaetano says. "People are saying, 'It won't affect my retirement because I plan to retire with a home that will appreciate in value [in addition to the principal you are paying down].' It's not a bad strategy if you are in a market that gives you consistent appreciation, but you are not going to get that in every market in Canada."

There is no getting around the fact the people who take a longer amortization will take longer to repay their loan. The CAAMP study found consumers going longer than 25 years, were done with their mortgage at age 53 on average, compared with an average of 47 years for those going for the less than 25 years.

If you are going for a longer amortization, you better hope your home goes up in value because you are going to have fewer mortgage-free years in which to save. It's hard to believe that won't affect retirement plans.

Thursday, November 11, 2010

More homeowners opting for long amortization

Wednesday, 10 November 2010

Canadians are taking longer to pay off their mortgages but don’t expect it to affect their retirement plans.

A new study from the Canadian Association of Accredited Mortgage Professionals (CAAMP) showed 42 per cent of new mortgages in the last year went for an amortization period of more than 25 years. Five years ago, you couldn’t even qualify for an insured mortgage backed by the government that was amortized for more than 25 years.

In the same survey, CAAMP found those with extended amortization plan to retire on average at 61.9 years, while those with less than 25 years amortization plan to retire on average at 61.5 years.

“This data on expectations does not prove that actual retirement will be unaffected by recent trends in housing and mortgage markets,” the CAAMP report noted. “But it does suggest that consumers’ evaluations of their life-cycle options have not been materially altered.”

Homeowners opt for longer amortization periods because the monthly payment is lower when spread over 35 years instead of 25.

Deal with China worth billions

Paul Vieira, Financial Post

OTTAWA -- Canada clinched a multibillion-dollar investment deal with China Wednesday that highlights progress in wooing the world’s No. 2 economy while at the same time offering assurances it can continue to attract offshore cash after rejecting a foreign takeover of Potash Corp. of Saskatchewan Inc.

The pact would allow Chinese insurers, with $106-billion in capital at their disposal, to invest in Canadian capital markets. Analysts say it reflects the behind-the-scenes work by government officials to improve trade and investment ties with the burgeoning Asian economy.

The opening of the Canadian market may also be an attempt by Beijing to quell upward pressure on its asset prices and slow yuan appreciation.

Finance Minister Jim Flaherty, who is in Seoul for the Group of 20 leaders summit, announced the deal, which designates Canada as an approved investment destination for insurance companies under Beijing’s qualified domestic institution investor scheme (QDII). This builds on approvals Beijing granted to its banking and brokerage sectors to park cash in commodity-rich Canada.

Mr. Flaherty said the deal, which he has pursued for more than a year, “demonstrates to me the value of travelling personally to visit our trading partners to discuss issues of mutual benefit to our countries.”

He visited China, along with Bank of Canada governor Mark Carney and chief banking watchdog Julie Dickson, in August of last year to pitch Canada as an investment destination. He visited China again in June ahead of the G20 Toronto summit, and has met with his Chinese counterpart in bilateral meetings during G20 meetings of finance and central bank officials.

The deal “is a great development because it demonstrates the government of China’s confidence in Canadian financial markets and Canadian regulatory system,” said Cyndee Todgham Cherniak, an international trade lawyer at Lang Michener and board member for the Canada-China Business Council.

“The government doesn’t get enough credit ... in trying to woo China. We’ve been doing a lot more than people realize,” Ms. Todgham Cherniak said.

Wednesday, November 10, 2010

Winterizing Your Home

It's fall and that means it's time to get your home ready for the upcoming cold weather. Check out the tips below for ideas on how to keep your home more comfortable and efficient this winter.

Seal Drafts - Seal holes, cracks, and openings in your home to stop the flow of heat through the walls and ceiling.

Keep Your Pipes Pumping - Pay less for hot water by insulating pipes. This will also decrease the chance of pipes freezing.

Clean Those Gutters - Once the leaves fall, remove them and other debris from your home's gutters so that rain, melting snow, and ice can drain properly.

Bundle Up - If you have a tank style water heater, wrap it in an insulation blanket to prevent needless energy use.

Turn It Down - Many conventional water heaters are set too high. Try lowering the temperature setting a notch. A lower setting may be hot enough. When you leave the house, turn down your thermostat so you aren't paying for heat you don't need - or consider installing a simple programmable thermostat that will adjust the temperature automatically.

Furnace Care - A simple way to keep your home warm while cutting down on energy waste is by replacing your furnace filters or cleaning them as needed. Follow the manufacturer's instructions.

Insulate - One of the most effective ways to keep a home warm is to install adequate insulation. This is especially true in attics and crawlspaces. Insulation helps keep the home cool in summer and warm in winter.

Use Energy Star® - Energy Star qualified products help you save energy and reduce greenhouse gas emissions. The Energy Star label can be found on more than 40 different kinds of products for the home including heating and cooling equipment, electronics, lighting, and appliances.

Tuesday, November 9, 2010

Canadian mortgage debt rises to over $1 trillion on high prices, low interest

Sunny Freeman

Low interest rates and a hot housing market helped push Canada’s total residential mortgage debt to a record $1 trillion this year, but a cooling real-estate market is expected to slow further accumulation, says the chief economist of Canada’s mortgage industry association.

The value of outstanding mortgages is now 7.6 per cent higher than it was last year, the Canadian Association of Accredited Mortgage Professionals said in its annual report released Monday.

“We’re still seeing a lot of movement into home ownership and that’s what’s driving the growth of debt,” said Will Dunning, CAAMP’s chief economist.

“The growth will gradually decelerate but we’re still looking at rates of six and a half per cent or so, so still fairly rapid,” Dunning said.

This year’s growth was higher than the average annual increase is around 7.1 per cent. However, it is still much lower than it was in the early 2000s, when debt growth hovered closer to 10 per cent year over year.

Higher home prices drove many Canadians to borrow heavily to finance-purchases, while a low interest rate environment encouraged others to refinance loans and consolidate debt, the CAAMP report said.

The low interest rate environment has enabled some consumers to take on bigger mortgages than they might otherwise have been able to carry, while it has encouraged others to borrow against their homes.

Recent housing market data points to a massive downshift in housing market activity.

Less activity in Canada’s resale home market and moderating housing starts will mean fewer people taking on new mortgages, Dunning said.

“That (slowdown) now and in the near future going to result in less mortgage takeout as those sales get closed,” he said.

Canada’s housing market has been on a tear for much of the past year after the Bank of Canada sent its trend-setting policy rate to an emergency low of 0.25 per cent to stimulate borrowing and consumer spending.

Buyers, spurred by easy access to relatively cheap borrowing, rushed into the market and competed aggressively for homes, which drove prices to record highs.

The market has been cooling in recent months as many sales were pushed ahead to the beginning of the year in advance of tighter mortgage qualification rules, a new tax regime in B.C. and Ontario and higher interest rates.

Meanwhile, the Bank of Canada’s policy rate has been hiked three times to one per cent, still historically low. The central bank is expected to take a pause on rate hikes until the middle of next year, giving mortgage holders more time to refinance at low rates.

Most Canadians have heeded warnings from economists — including the Bank of Canada — about growing debt levels and took advantage of low interest rates to refinance and pay off other debts, CAAMP said.

The report found 18 per cent of mortgage holders have taken equity out of their homes to free up extra cash. Almost half of mortgage holders who borrowed against their homes cited a need for “debt consolidation or repayment” and the average amount borrowed against home equity was $46,000.

The association said that most mortgage holders appear to be comfortable with their debt levels and that the vast majority — about 84 per cent — said they could afford at least a $300 or 30 per cent increase in their monthly mortgage payment, Dunning said.

The association asked approximately 2,000 Canadians surveyed how much of an interest rate hike they could withstand. The average Canadian monthly mortgage payment is about $1,025 and the average homeowner has room for $1,056 per month on top of current costs, the report found.

However, about 350,000 out of 5.65 million, or about six per cent of Canadian mortgage holders, would be challenged by rate rises of less than one per cent, CAAMP said.

“Most of the people who have low tolerances for increased payments have fixed-rate mortgages,” the reports said. (So) by the time their mortgages are due for renewal, their financial capacity will have expanded and their mortgage principal will have been reduced.”

Canadians continue to favour fixed-rate mortgages and a five-year fixed-rate mortgage remains the most popular option despite the fact that variable rates have become much less expensive than fixed rates, the report found.

Monday, November 8, 2010

Canadians comfortable with their mortgage debt levels;

One third have made additional payments in the last 12 months
Canadian Association of Accredited Mortgage Professionals releases
Annual State of the Residential Mortgage Market in Canada report

TORONTO, Nov. 8 /CNW/ - Canadian homeowners are comfortable with their mortgage debt, have significant home equity and could withstand an increase in their mortgage interest rate, according to the sixth Annual State of the Residential Mortgage Market report from the Canadian Association of Accredited Mortgage Professionals (CAAMP), released today.


The vast majority of Canadians with mortgages are able to afford at least a $300 increase in their monthly mortgage payments.
One in three (35 per cent) mortgage holders have either increased their payments or made a lump sum payment on their mortgage in the last year.
89 per cent of Canadian homeowners have at least 10 per cent equity in their homes and 80 per cent have more than 20 per cent equity.
Overall home equity is at 72 per cent of the total value of housing in Canada; for homeowners who have mortgages, equity level averages 50 per cent.
As of August 2010, there was $1.01 trillion in outstanding residential mortgage credit in Canada, an increase of 7.6 per cent from last year.
"Canadians are being smart and responsible with their mortgages," said Jim Murphy, AMP, President and CEO of CAAMP. "They are building equity in their homes and making informed, long-term mortgage decisions. The survey results speak to the strength of our mortgage market, especially when compared to the United States."

Homeownership is a good long-term investment
Most Canadians agree that buying a home is a good long-term investment and are focused on their mortgages to support that investment.

Many mortgage holders are making voluntary additional payments: 16 per cent have increased monthly payments during the past year, 12 per cent have made lump sum payments, and 7 per cent did both.

Canadians are exercising caution when taking out their mortgages, with a majority choosing a fixed-rate (66 per cent). A five-year fixed-rate mortgage remains the most popular option in Canada. Despite the fact that variable rate mortgages have become much less expensive compared to fixed rates, the majority choice is still fixed rates: this decision is based on people's individual assessments of risk, not just the cost difference.

Potential rate increases won't be a problem
The CAAMP study found that a vast majority of Canadians have significant capabilities to afford higher payments if and when mortgage interest rates rise. 84 per cent report that they could weather an increase of $300 or more on their monthly payments.

Most of the people who have low tolerances for increased payments have fixed rate mortgages, by the time their mortgages are due for renewal, their financial capacity will have expanded and their mortgage principal will have been reduced.

Also, Canadians have been able to negotiate better than posted mortgage interest rates. For five year fixed rate mortgages arranged in the past year, the average rate is 4.23%, which is 1.42 points lower than typical, advertised rates.

Of the 1.4 million Canadians who renewed their mortgage in the past year, 72 per cent were able to renegotiate a decreased rate: on average, rates are 1.09 percentage points less than the rates prior to renegotiating.

Canadians have significant equity in their homes, strengthening the housing market
Canadians' home equity is impressively high. Among homeowners who have mortgages, the average amount of equity is about $146,000, or 50 per cent of the average value of their homes.

The amount of equity take-out in the past year is unchanged from last year with around one in five homeowners, or 18 per cent, taking equity out of their home, at an average of $46,000. The most common purpose for equity take-out is debt consolidation and repayment (45 per cent) followed by home renovations (43 per cent), purchases and education (19 per cent) and then investments (16 per cent).

The report is authored by CAAMP Chief Economist Will Dunning and based on information gathered by Maritz Research Canada in a survey of Canadian consumers conducted in October 2010.

The CAAMP survey report contains a wealth of industry information, including consumer choices and borrowing behavior, opinions on current "hot topics" related to housing and mortgages, regional breakdowns of responses, and an outlook on residential mortgage lending.

Thursday, November 4, 2010

Mortgage Fraud

How to Protect Yourself When Purchasing or Refinancing a Home
The promise of “easy money in real estate” can be hard to resist. But consumers who knowingly misrepresent information when buying or refinancing a home could find themselves becoming accomplices to mortgage fraud.

What is Mortgage Fraud?
Mortgage fraud occurs when someone deliberately misrepresents information on a loan application, to obtain mortgage financing that likely would not have been approved if the truth had been known.

There are several different forms of mortgage fraud. One of the most common is when a con artist convinces someone with good credit to act as a “straw buyer.”

A straw buyer is someone who agrees to put his or her name on a mortgage application for a home that someone else will be buying. Mortgage applications for straw buyers also often misrepresent other important information as well, such as their income, occupation and the real source of a down payment. In return for their participation, straw buyers may be offered cash or promised high returns when the property is sold.

While the promise of an easy payday may be tempting, consumers should be aware that in most cases, the fraudsters are the ones who walk away with all the profits, while the straw buyer is left “holding the bag” when the mortgage defaults. Consumers who knowingly take part in these frauds will also be responsible for any shortfall when the property is resold, and could even be held criminally responsible for their misrepresentation.

What Can You Do to Protect Yourself?
To protect yourself and your family from becoming victims of, or accomplices to, mortgage fraud, be an informed consumer. This means:

•Never accept money, guarantee a loan or add your name to a mortgage unless you fully intend to purchase the property. If you allow your personal information to be used for a mortgage, even for a brief period, you could be held responsible for the entire debt even after the property is sold.
•Always know who you are doing business with. If you are buying or selling a home, use only licensed Real Estate Agents and other industry professionals. And never sign anything until you know exactly what you are signing.
•Determine the sales history of any property you are thinking about buying, and consider having it inspected and appraised. Ask for a copy of the land title search.
•Find out if anyone other than the seller has a financial interest in the home. If a deposit is required, make sure the funds are held “in trust” by the Vendor’s Realty company or lawyer / notary.
•Get independent legal advice from your own lawyer / notary. Talk to your lawyer / notary about title insurance and other alternative methods of protection.
•Be wary of anyone who approaches you with an offer to make “easy money” in real estate. Remember: if a deal sounds too good to be true, it probably is.
There are also several simple steps you can take to protect yourself from another common form of fraud: identity theft. These include:

•Never give out your personal information until you know who you are dealing with and how your information will be used. This includes requests for information in person, by mail, or over the phone or Internet.
•Never reply to e-mails or phone calls that ask for your banking information, credit card details, passwords or other personal or sensitive information, particularly if you did not initiate the exchange.
•Review your mail, bank statements and other financial statements on a regular basis to look for any inconsistencies. If you don’t receive a bill on time, follow up with your creditors or service providers.
•Shred or destroy all personal and financial documents before you throw them away.
•Inspect your credit report on a regular basis by contacting Canada’s two credit-reporting agencies: Equifax Canada at and TransUnion Canada at
Find Out More
If you suspect that you or someone you know has been the victim of mortgage fraud, contact your local police department immediately.

To find out more about mortgage fraud, visit the fraud prevention section of the Canadian Association of Accredited Mortgage Professionals (CAAMP) website at

Canada's real estate market outlook for 2011 “decent”: PwC

| Tuesday, 2 November 2010

2011 promises slowing, steady growth and decent prospects for Canadian real estate investors as long as the U.S. economy does not drag them down, according to the Emerging Trends in Real Estate 2011 report, released by PwC and the Urban Land Institute (ULI). The report reflects interviews with and surveys of more than 875 of the industry's leading real estate experts, including investors, developers, lenders, brokers and consultants in both Canada and the U.S.

According to the report, Canadian property owners and financial institutions cannot help contrasting their reasonably healthy condition with precarious U.S. markets. Canadian fundamentals trend near equilibrium, employment is recovering and banks boast sound balance sheets, putting Canada in a better place and boosting confidence that the local market can escape issues faced in the U.S. However respondents say a weak U.S. dollar and sputtering U.S. economy dampen cross-border commerce, especially hurting Ontario industrial markets, which serve Midwestern U.S. manufacturing centres.

"The big difference for Canada has been the sound condition of its banks," said Chris Potter, leader of the Real Estate Tax practice for PwC Canada. "We have no distressed banks and few distressed owners and sales. Now, rising interest rates coupled with tight bank requirements and broader economic concerns tamper down a recent home buying spurt, particularly in Ontario and B.C., where purchasers stepped up activity before HST went into effect."

While capital returns, investment opportunities will be limited. Institutions dominate the major central city markets, holding on to assets for steady income instead of trading. Emerging Trends respondents exemplify the hold-on mentality: they think it is a good time to buy, but do not want to sell. In this "compressing cap rate" environment, many deal-starved Canadians will be active in the U.S., where they should have greater opportunity to spend and find higher yields.

Canada has one of the world's healthiest capital markets and few borrowers confront refinancing issues. Overall in 2011, Emerging Trends respondents expect a reasonable balance in debt market capital availability and an oversupply of equity capital, the result of non-satiated buyers.

"In Canada, the real estate industry didn't get overleveraged and the markets never suffered any interruption of credit availability," said Holly Allen, leader of the Real Estate Deals practice for PwC Canada. "Canadian banks benefit from a combination of institutional risk aversion and relatively stringent government regulation."