Thursday, February 24, 2011

Problem banks made up 12 per cent of all federally insured US banks at the end of last year

Don't you just love the American way! -- They had over 150 BANK FAILURES last year and they are still not out of the woods. Unlike Canada it is obviously much easier to start up a bank and also much easier for onr to fail. We always hear about how great the American Way is but this is just another example of how poor an American Way can get. Like the advent of LIAR LOANS, the American Way is still a lot of "shooting from the hip" and see what happens. In Canada we seem to be over regulated in many ways but in some ways that has really protected us and our banking systems. The other side of the fence often looks greener but walk a bit into that pasture - it may be rotting just a little further in the field.

Neil "Mortgage Man" McJannet

By Marcy Gordon, The Associated Press

WASHINGTON - The number of banks at risk of failing made up nearly 12 per cent of all federally insured banks in the final three months of 2010, the highest level in 18 years.

The Federal Deposit Insurance Corp said Wednesday that the number of banks on its confidential "problem" list rose to 884 in the October-December quarter, up from 860 in the previous quarter. Those are banks rated by examiners as having very low capital cushions against risk.

Twenty-two banks have failed so far this year. And more banks are at risk, even as the FDIC reported the industry's highest earnings as a group since the financial crisis hit three years ago.

Only a small fraction of the 7,657 federally insured banks — about 1.4 per cent with assets of more than $10 billion — are driving the bulk of the earnings growth. They are the largest banks, including Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co.

The big banks accounted for about $20.6 billion of the industry earnings of $21.7 billion in the fourth quarter. The total earnings compared with a net loss of $1.8 billion in the same quarter of 2009. The agency said bank earnings were buoyed in the latest quarter by reduced charges for soured loans.

Most of the big banks have recovered with help from federal bailout money and record-low borrowing rates. On the other side, many smaller banks are struggling.

Last year, 157 U.S. banks were brought down by the soured economy and mounting loan defaults. That was the most in one year since 1992, the height of the savings and loan crisis. They were mostly smaller or regional banks. The failures compare with 25 in 2008 and three in 2007. They cost the federal deposit insurance fund an estimated $21 billion in 2010.

Smaller and regional banks depend heavily on making loans for commercial property and development — sectors that have suffered huge losses. Companies shut down in the recession, vacating shopping malls and office buildings financed by the loans.

Overall, banks' net income reached a three-year high of $87.5 billion in 2010. That contrasted with a loss of $10.6 billion in 2009. But FDIC Chairman Sheila Bair said banks need to lend more vigorously as the economy recovers.

Bank industry revenue remained fairly strong through the financial crisis, Bair noted, but there is little "upward momentum."

"A key reason why revenues haven't grown faster is that loans have not been growing," she said at a news conference. "It's not going as at fast a pace as I would like to see."

The problem is partly due to continued uncertainty about the economy on the part of bankers, Bair said. But she added: "I also think that banks need to get back to the basics of making loans."

Loan balances declined at a majority of U.S. banks in the October-December quarter, falling by $51.8 billion, or 0.4 per cent, from the July-September quarter.

A change reported Monday by Bank of America for results from its FIA Card Services subsidiary for 2009 and 2010 caused the FDIC to significantly revise its industry earnings for three past quarters. For the January-March quarter of 2009, industry net income was revised to a $6.5 billion net loss from the previously reported $7.6 billion profit. The net loss in the April-June quarter of 2009 widened to $12.7 billion from $3.7 billion, and net income in the July-September quarter of 2010 increased to $24.7 billion from $14.5 billion.

The FDIC's deposit insurance fund, which fell into the red in 2009, posted a slight improvement in the October-December quarter. Its deficit narrowed to $7.4 billion from $8 billion in the third quarter. Bair said the agency expects the balance to turn positive this year.

The spate of bank failures that began to accelerate in 2008 are expected to cost the insurance fund about $100 billion through 2013.

The FDIC is backed by the government, and deposits are guaranteed up to $250,000 per account. Also, the agency still has tens of billions in loss reserves apart from the insurance fund.



TORONTO, Feb. 24 /CNW/ - Canada's housing affordability continued to improve in the fourth quarter of 2010, thanks in part to slight decreases in five-year fixed mortgage rates and minimal home price appreciation across the country, according to the latest Housing Trends and Affordability report released today by RBC Economics Research.

"Some of the stress that had been building in the housing market between 2009 and the first half of 2010 has been relieved, but tensions persist overall and the recent improvement in affordability is likely to be short-lived," said Robert Hogue, senior economist, RBC. "We expect that the Bank of Canada will resume its rate hike campaign this spring and with borrowing costs set to climb further in the next two years, housing affordability will erode across the country. That said, we don't expect this to derail the housing market because of rising household income and job creation from the sustained economic recovery."

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 fourth quarter of 2010, measures at the national level fell between 0.4 and 0.8 percentage points across the housing types tracked by RBC (a decrease represents an improvement in affordability).

The detached bungalow benchmark measure eased by 0.8 of a percentage point to 39.9 per cent, the standard condominium measure declined by 0.4 of a percentage point to 27.6 per cent and the standard two-storey home decreased 0.4 percentage points to 46.0 per cent.

"We expect affordability measures will rise gradually in the next three years or so while monetary policy is readjusted, but will land softly thereafter once interest rates stabilize at higher levels," added Hogue. "This pattern would be consistent with moderate yet sustained stress on Canada's housing market. Overall, the era of rapid home price appreciation of the past 10 years has likely run its course and we believe that Canada has entered a period of very modest increases."

A majority of provinces saw improvements in affordability in the fourth quarter, most notably in Alberta where falling home prices once again contributed to lower the bar for affording a home. Only the standard two-storey benchmark became less affordable in Ontario and Quebec, as did the standard condominium apartment in Quebec and the Atlantic region.

RBC's Housing Affordability Measure for a detached bungalow in Canada's largest cities is as follows: Vancouver 68.7 per cent (down 0.4 percentage points from the last quarter), Toronto 46.8 per cent (down 0.5 percentage points), Montreal 41.3 per cent (down 0.4 percentage points), Ottawa 38.7 per cent (up 0.5 percentage points), Calgary 34.9 per cent (down 3.1 percentage points) and Edmonton 31.0 per cent (down 2.4 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: Buying a home in B.C. became slightly more affordable in the fourth quarter of 2010, due primarily to a small drop in mortgage rates. After experiencing some declines in the previous quarter, home prices rose modestly for most housing categories; condominium apartments bucked the trend, however, and depreciated slightly. Prices were supported by a tightening in market conditions with home resales picking up smartly following substantial cooling in the spring and summer that saw sellers lose their edge in setting property values. Demand and supply in the province are judged to be quite balanced at this point. RBC's Affordability Measures fell between 0.8 and 1.0 percentage points in the fourth quarter which came on the heels of much more substantial drops (1.7 to 4.8 percentage points) in the third quarter. Notwithstanding these declines, affordability remains poor and will weigh on housing demand going forward.

· Alberta: Alberta officially became the most affordable provincial market in the country in the fourth quarter, according to the RBC Measures which fell once again by 1.0 to 2.4 percentage points, extending their declines since late-2007. In addition to the lower mortgage rates, the further depreciation of home prices contributed to lowering homeownership costs. Property values were negatively affected by a substantial downswing in demand in the spring and early summer, which put buyers in the drivers' seat. The significant improvement in affordability is near the end of its line, however, as demand has shown more vigour in recent months - alongside a provincial economy that is gaining more traction - and the market has become better balanced. RBC expects that this will stem price declines this year, thereby removing a potential offset to the negative effect of projected rise in interest rates on affordability.

· Saskatchewan: The provincial housing market finished 2010 on an enviable note as affordability improved even though home prices, for the most part, rose slightly in the fourth quarter. Generally, the price increases more than reversed declines in the previous period but were too small to negate the beneficial effect of lower mortgage rates. The home resale market gained back solid forward momentum in the second half of 2010, notwithstanding some softening in the final months, which re-established a stronger balance between demand and supply. The RBC Measures fell between 0.6 and 1.1 percentage points in the quarter, although the levels continue to be modestly above historical averages in the province. RBC projects the Saskatchewan market will take its current affordability position in stride as a rebound in provincial economic growth and continued strong migration inflows will support housing demand this year.

· Manitoba: Manitoba's market enjoyed the best of both worlds in the fourth quarter of 2010 as home price were higher but ownership costs were lower. Thanks to lower mortgage rates in the quarter and continued growth in household income, the negative effect of small gains in property values on affordability was more than offset. The RBC Measures eased between 0.1 and 0.6 percentage points in the fourth quarter, keeping Manitoba among the only two provincial markets in Canada (with Alberta) in which Affordability Measures stand below long-term averages for all housing categories. Sales of existing homes ramped up considerably in the fall, reaching near historical peaks by December. Housing demand is being boosted by the strongest net international immigration in the province since the mid-1950s and by improved job prospects - Manitoba boasts the lowest unemployment rate in Canada (as of the fourth quarter of 2010) and RBC expects this to continue in 2011.

· Ontario: Concerns last year that the housing market would falter have now largely dissipated as home resale activity picked up smartly in the fall and property values resumed their appreciation trend in the closing months of 2010. The slowdown in market activity in the spring and summer last year largely reflected various transitory factors - including the introduction of the HST and changes in mortgage lending rules - that brought demand forward to the start of the year. The silver lining of this slowdown, however, has been an improvement in affordability. The RBC Measures edged lower for the second consecutive time for most housing categories in the fourth quarter, down by 0.2 to 0.3 percentage points. The only exception was two-storey homes, which became marginally less affordable amid notable price gains. RBC expects affordability will play a neutral role for demand in Ontario with RBC Measures close to their long-run average.

· Quebec: Higher home prices in the fourth quarter of 2010 caused some deterioration in affordability following meaningful improvement in the previous period. Home resales strengthened in the latter part of 2010, contributing to tightened market conditions that gave sellers a stronger hand in negotiating prices, particularly for two-storey homes. Price gains and rising household income dominated the positive effects of lower mortgage rates on affordability in the fourth quarter for all housing types except detached bungalows (where a small improvement was registered). RBC Measures rose marginally by 0.1 to 0.2 percentage points for two-storey homes and condominium apartments, and fell by 0.6 percentage points for detached bungalows; however, the levels of all Measures still modestly exceeded long-term averages in the province. RBC expects that modestly strained affordability in Quebec will further deteriorate in the period ahead when interest rates rise.

· Atlantic Canada: Home resale activity sputtered late in 2010 and reversed some of the gains achieved at the end of the summer and early fall. This has not disrupted property values in the fourth quarter as home prices generally appreciated; yet, housing affordability improved for most housing categories because declines in interest rates provided a dominant offset. Only condominium apartments saw a slim deterioration in affordability as the RBC Measures rose by 0.1 percentage point compared with declines of 0.5 percentage points for detached bungalows and two-storey homes. Affordability levels continue to be mostly attractive in Atlantic Canada from both historical and cross-country perspectives. RBC projects that is likely to remain so in the near-term despite our expectation of higher interest rates. Market conditions have recently swung in favour of buyers which will exert downward pressure on prices in coming months.

Wednesday, February 23, 2011

Saskatoon paying renters to buy houses

As the housing boom in Canada continues, Saskatoon, Saskatchewan is taking the unprecedented step of giving renters money to help with a down payment.

While home prices are high across Canada, the boom is being felt even more in the Prairies. Housing has traditionally been less expensive than in the rest of the country, but demand for commodities is fueling blistering growth. According to Statistics Canada, Saskatoon was the fastest-growing metropolitan area in Canada last year. Vancouver was a close second and Regina third.

Prices continued to rise quickly in Calgary and Edmonton, but Saskatoon has now overtaken Alberta's major cities in terms of housing being less affordable. The average home in the city now costs $277,000, 4.3 times the average annual salary of $63,900.

Subsidized housing programs for low-income people exist throughout Canada, but until now there have been no programs to help middle-income buyers daunted by often stratospheric prices.

Saskatoon isn't giving away the money for free — it's offering low-interest loans to renters for the purchase of a home between $220,000 and $280,000. Applicants who meet the criteria will be able to get approximately $12,000.

The move comes amid signs the federal government is becoming concerned Canada's housing market is overheated. Prime Minister Stephen Harper, Finance Minister Jim Flaherty and the Governor of the Bank of Canada Mark Carney have all warned about the effect rising interest rates are bound to have on Canadians who have taken on too much debt.

Flaherty has introduced a series of new mortgage regulations over the last several months aimed at preventing a housing crisis similar to that which helped trigger the financial crisis in the United States in 2007.

While homes are becoming less affordable across the country, prices continue to be worst in British Columbia. The average price for a home in Vancouver is roughly 9.5 times median income. Globally, only Sydney, Australia and Hong Kong are less affordable.

Victoria, Abbotsford and Kelowna were also all ranked as severely unaffordable, all with multiples above five. Toronto and Montreal were the only cities outside B.C. ranked as severely unaffordable. The rankings were compiled by the Winnipeg-based Frontier Centre of Public Policy.

The high prices in B.C. are being blamed by TD Economics for making B.C. the most indebted and vulnerable province in Canada. The ratio of personal debt to disposable income is 160 per cent, roughly the same as that seen in the U.S. just before the mortgage meltdown.

While a recent report from Capital Economics suggests a rise in interest rates could trigger a collapse in housing prices, by as much as 25-35 per cent, don't count on things getting cheaper any time soon. Re/Max predicts the average price for a home in Canada will rise by 3 per cent in 2011 to an average price of $350,000. Just one more reason to move to Saskatchewan.

Friday, February 18, 2011

Why do mortgage rates rise fast, fall slowly?

A very interesting article. The US mortgages have different costs - it costs POINTS to get a mortgage but they have open features in most mortgages. If rates go down they calculate the points and add to their existing rate to see if it is worthwhile re-financing. In Canada we have that INTEREST RATE DIFFERENTIAL cost so moving to a new mortgage is a very strategic exercise. If you have questions at any time about this article feel free to call.

Neil "Mortgage Man" McJannet

John Greenwood Financial Post

Why do mortgage rates rise quickly but fall like molasses?

That’s the question posed by an article in the latest issue of the Bank of Canada Review, and it’s a good one.

The report, by Jason Allen of the central bank’s financial stability department, notes that the big banks that dominate the market tend to adjust interest rates faster when they’re on the way up than they do when rates are falling.

While it come as no surprise to borrowers that such is the case, the article draws an interesting conclusion: That such behaviour by banks and other lenders may have broader implications for Canada’s monetary policy, and that the central bank may want to take this into account when it comes time to plot strategy.

The report comes on the heels of a decision by the federal government to tighten mortgage rules as a way to head off a potential real estate bubble.

All the major lenders in this country tend to offer the same types of mortgage products, credit cards and other services, and in fact Canadians tend to treat their bank as a “one stop shop” where they buy a majority of their financial services, according Mr. Allen.

Leaving aside the issue of whether this is a healthy situation, the author concludes that the mortgage market is “consistent with a model where consumers have different preferences and skills when shopping and bargaining for a mortgage and where lenders maximize profits based on observing these preferences and skills.”

Simply put, borrowers are often complacent and end up paying more than they should.

One of the quirks of the industry in Canada is the prevalence of mortgages with terms of five-years or less, even though the loans amortize over as much as 40 years, according to the article.

Citing a recent study by John Kiff, a senior financial sector expert at the International Monetary Fund, it notes that Americans, by contrast, tend to opt for longer term mortgages than do Canadians, and they have a much broader choice.

The benefit of longer terms is that they provide the borrower with better protection against the risk of rising interest rates. If a loan is amortized over 25 years, the best way for the creditor to ensure he can always make the payments is to take a 25-year term.

Some economists refer to five-year products as “balloon mortgages” because of the possibility that the payments may suddenly shoot up at the end of the term.
Borrowers are also left vulnerable to “roll-over risk,” that the lender may be unwilling to renew the loan at any price.

According to Mr. Kiff, the main reason 10- and 20-year mortgages aren’t more common in Canada is because financial service providers consider them uneconomical.
Whenever banks make home loans they generally protect themselves from the risk that the customer may pay the money back early by including strict repayment penalties. But current regulations put strict limits on such penalties. “So the banks have this wall at five years,” Mr. Kiff said in an interview.

Bottom line: Lenders can’t charge what they feel they need to charge so they don’t offer longer term mortgages at an affordable price.

Mr. Kiff, who previously worked at the Bank of Canada, said Canadians would be better served if there was more choice of longer term mortgages. The IMF recently recommended that the federal government change the rules around mortgages so that lenders are able to provide broader product choice without unnecessary limits on how they charge for products.

What needs to happen is “at least, let the market determine where the rates should be,” he said. “What [mortgage] works best depends on the borrower, on the borrower’s own personal situation.”

Thursday, February 17, 2011

50% increase in households behind in mortgage payments

Now is the time to review your finances -- don't get behind or your beacon score will kill you for a few YEARS! If you need help or advise call me anytime.

Neil "Mortgage Man" McJannet

| Thursday, 17 February 2011

Average Canadian family debt has hit $100,000 and about 17,400 households were behind in their mortgage payments in fall 2010, an increase of nearly 50 per cent since the recession began, according to the Vanier Institute of the Family. Credit card delinquency and bankruptcy levels were also higher than in pre-recessionary times.

“Even though standard economic indicators tell us the recession is technically over, the confidence Canadian families have in their economic and financial situation is shaky,” said Katherine Scott, the Institute’s director of programs. “As government at all levels craft their budgets for the coming year and look at cutting programs to reduce their deficits, they need to be mindful that the state of Canadian family finances continues to be fragile in many households.”

Vanier’s 12th annual report also notes debt-to-income ratio is at a record 150 per cent, meaning Canadian families owe $1,500 for every $1,000 earned in after-tax income. In 1990, average family debt was $56,800 with a debt-to-income ratio of 93 per cent. This equates to an increase of 78 per cent over the past 20 years.

Wednesday, February 16, 2011

3 ways to deal with rising mortgage rates

This is avery good article and I agree with what he says. I have too often seen clients panic and lock in when historically we know that the floating rate is the best average rate. I generally have clients go 5 years when they buy their first home - for piece of mind - they don't need to worry about interest rates and they know they can afford their payments as they have qualified at that rate. When it is time for renewal I generally suggest a FLOAT rate for the reasons above. It is a good idea to review your total financial situation on a regular basis - you go to the Dr. every year or two for a check up but never look at your financial position -that is just asking for ill financial health.

Neil "Mortgage Man " McJannet

By Moshe Milevsky
Moshe A. Milevsky is a professor at York University’s Schulich School of Business. His latest book is Pensionize Your Nest Egg.Here we go, again. The economy is generating more jobs, a handful of banks raise mortgage rates and all of a sudden you’re being advised to lock-in your mortgage before the bank doors slam shut. In fact, some say you’d better hurry-up and buy a house now before mortgage rates go so high you’re locked-out of the housing market for ever.

This is not the first time that mortgage rates are on the brink of blooming only to fade a few months later. This has happened more than a handful of times in the last decade. The headlines are often the same. A month or two of increasing mortgage rates, the public is urged to act now, and then a few months later something unforeseen appears on the horizon.

The last occasion was just over a year ago. The posted 5-year mortgage rate in March, 2010 went from 4.7 per cent to 5.15 per cent in April, and then to 5.3 per cent by May. The recommendations were clear: lock-in. But then, by October they were back to 4.5 per cent. The economy sputtered, Greece and Spain hit the headlines and the rest was history.

Don’t get me wrong. Short-term interest rates are abnormally low today and the Bank of Canada has pledged to raise them eventually. But that is a far cry from advocating that you lock-in your mortgage - which is actually driven by long-term bond market rates - or heaven forbid using this as an excuse to buy a house you can’t really afford.

My main concern is about relevance and context of this advice. I call it the fallacy of “carve-out thinking.” It stems from the misguided notion that modern-day personal financial problems should be viewed and solved in isolation.

Remember that mortgage payments are just one component of your personal balance sheet. You may also have an RRSP, TFSAs and other investment accounts. You may also have a pension, cottage or rental property and a very large portfolio of debt. Every one of these holdings is sensitive to interest rates.

If long-term interest rates move up quickly and substantially then any bonds or fixed income investment you hold will fall in value – possibly by a lot. A big and sudden rise in interest rates won’t be kind to the real estate market either. There will be many spillover side effects.

Reacting to this fear by locking-in your mortgage is akin to preparing for an ice and snow storm by only salting your driveway, but forgetting to close your windows. Sure, that helps, but if you really believe a bad storm is on its way, there are many other – possibly more important—things you should be doing to prepare.

So what should you do with your mortgage? Here’s the best guidance I can offer.

1.Don’t rush into home ownership because you are convinced that mortgage rates are headed-up and you will never see 5 per cent again.

2.If you’ve just bought a home and you have a large mortgage, relative to the home’s value, I urge you to lock-in for as long as possible. You probably should not have “floated” to begin with and are now facing the probable risk that real estate prices decline and interest rates increase. Add to this the possibility of job loss, disability or other macro factors, and you are the ideal candidate for a fixed rate mortgage. The last thing you want to be doing is trying to renew your mortgage in a year or two from now, if rates increase and possibly the appraised value of your house has declined by 10 per cent or more.

3.If your mortgage payments are only a small fraction of your monthly expenses and you have built-up substantial equity in your home, and – this is key – you have a diversified portfolio of financial assets, like stocks and bond inside your RRSP and other accounts, then my advice to you is very different.

If you are concerned that interest rates are on their way up, then perhaps you should change your asset allocation and reduce the fixed income investments in your portfolio. Remember, if mortgage rates increase, this is because long-term interest rates have gone-up and the longer the duration of your bonds, the greater are your losses. I say, lighten-up on bonds. If the prognostications prove correct and rates go up, then yes you will pay more on the mortgage but you were spared the pain in your RRSP. On the other hand, if rates stay around their current levels, then you win. . Remember, locking-in today will likely involve paying more than what you are paying right now, often by 1 per cent to 2 per cent more. Think of it as insurance.

The point is to think more holistically about all the financial assets – and risk exposures—on your personal balance sheet. As for me, I have a floating rate mortgage because I can tolerate the risk and want to pay as little as possible for unnecessary insurance.

Tuesday, February 15, 2011

RBC offers resale market outlook

After gyrating wildly since 2008, Canada’s housing market is now expected to display greater stability going forward. The evolution in the past two years was shaped by truly ex- ceptional events and factors: a global financial crisis, a major recession that destroyed nearly 430,000 jobs in Canada, cuts in policy interest rates to the lowest levels of our generation, the introduction of a harmonized sales tax (HST) in Ontario and British Columbia (and a rate increase in the HST in Nova Scotia), and two rounds of mortgage rule tightening. These phenomena generated similarly exceptional movements on the part of home buyers and sell- ers—from a mass exodus from the market in late 2008 to a crowded return into it in 2009, and then to a stepping back to the sidelines again in the first half of 2010. Since reaching their most recent lows this past summer, home resales have picked up again, although to levels that still remain well below recent peaks.

With the economy (both global and national) on a more solid footing now, the road ahead will be less bumpy. However, we may not be quite home-free yet. On January 17, Finance Minister Jim Flaherty announced a third round of mortgage rule tightening – which will, among other things, reduce from 35 to 30 years the amortization period permissible for gov- ernment-back insured mortgages (see our commentary Canada’s mortgage rule to tighten published January 17) – that is likely to generate some volatility in the coming months but on a much smaller scale than the wild swings of the last two years. In our opinion, the Ca- nadian housing market is on path towards mostly flat levels of resale activity and minimal price increases this year and next. We assume that the upcoming mortgage rule changes (effective in March in the case of the shortening in the amortization period) will bring for- ward some sales that would have occurred later in the year and their overall impact on hous- ing demand for the year, at the margin, will be negative.

Going forward, we see nearly perfectly offsetting forces driving Canada’s housing market. On the upside, the economic recovery will gather strength in 2011 (real GDP is forecasted to accelerate to 3.2% from 2.9% in 2010) thereby continuing to boost employment and family incomes. On the downside, interest rates are expected to rise—with the Bank of Canada re- suming its rate hiking campaign around spring time, adding 100 basis points to the overnight rate by the end of this year and a further 150 basis points next year)—which will raise the cost of homeownership. The net effect of these forces is expected to be close to nil, thereby leaving resale activity largely flat. In this context, the upcoming changes to the mortgage rules, having a minimal negative effect overall, are likely to tip the scale toward a marginal decline in resale activity this year. We, therefore, project a small 0.2% decline in Canadian home resales in 2011 to 446,200 units following a more meaningful 3.9% drop to 447,000 units in 2010. Growth in resale activity is forecasted to turn slightly positive in 2012 (at 0.3% to 447,700 units).

Home prices (on an annual average basis) are forecasted to rise in all provinces but at a very slow pace in most cases in 2011. Substantial gains in 2010 propelled property values to historically elevated levels across Canada, and with the balanced market conditions expected to prevail throughout this year, this will leave little room for any further significant increases being sustained in 2011.

10 Ways to Multitask Better

How True - How True - we all seem to get caught up in technology and sometimes forget to sort and sift to get the real benefits. This article may open a few eyes - it opened mine!

Neil "Mortgage Man" McJannet

Rick Newman,

Don't send that tweet! It might impair your productivity, raise your anxiety levels, and even damage your health.

If you're feeling overwhelmed by digitalia, it turns out you've got some heady company. In its monthly newsletter, consulting firm McKinsey recently published an article, "Recovering From Information Overload," that validates many of the frustrations ordinary workers feel when trying to keep up with email, manage their Blackberries, download the latest apps, blog, evangelize, tweet, retweet, update, Webinate, Meetup, log in, LinkIn, Plax, and answer the phone--all while doing whatever their actual job is. "Multitasking is not heroic," authors Derek Dean and Caroline Webb insist, refreshingly. "It's counterproductive."

It's also becoming a kind of syndrome. Multitasking, it turns out, leads to something called "attention fragmentation," which happens when we try to direct our brain power to a number of different things all at once. It doesn't work so well. The brain, Dean and Webb explain, works best when handling one job at a time. A 2006 study, for example, found that a bottleneck of information formed when participants tried to do several tasks at once; they made twice as many mistakes and took 30 percent longer, than people who did the same tasks sequentially, one after another. Other studies have shown that information overload adds to stress (no surprise there) and impedes creativity, since it's hard to get in the zone when you're constantly interrupted. There's even evidence that ringing phones and dinging email alerts can temporarily lower your IQ.

That's the way corporate America operates, of course, with a kind of perpetual manhood contest--even among women--over who can answer an email from the boss the fastest, log in from home the latest, garner the most Twitter followers, and find the coolest new iPad apps. Rainmakers and top executives have even more to juggle, since they need to schmooze at dinners and cocktail hours, visit clients, preside over obligatory meetings--lest the company cease to function--and travel to China, India, or wherever the latest distribution center is set to open. "Many senior executives literally have two overlapping workdays," McKinsey says. There's the formal workday of meetings and calls outlined on their calendars, then a second one when they catch up on email and undertake a "vain effort to keep pace with the information flowing toward them."

All that multitasking can drive workers crazy, but never mind that: It's a corporate problem, too. A 2009 Harvard Business Review article by Paul Hemp enumerated a variety of ways that information overload harms the bottom line. It takes 24 minutes for the typical worker to get back on task after opening an email, for instance, and office workers, on average, spend two hours a day on email. Interruptions account for 28 percent of the workday. And overall, information overload sucks $900 billion out of the U.S. economy.

It doesn't have to be this way. Here are 10 ways to beat back the information deluge, minitask instead of multitask, and reclaim your sanity:

Say no as often as possible. In his book American Heroes, historian Edmund Morris argues that George Washington and Benjamin Franklin were transformational leaders because of one trait they shared: "They both knew when and why to say no." No to the many influencers who wanted a favor, no to the amateur generals and diplomats who thought they knew better, no to colleagues or backbenchers who were simply impatient for action. Try it sometime. Say no to tasks that amount to busy work or don't advance a meaningful goal. Or simply don't respond when somebody asks. Start gradually, and make sure you take care of what matters--your clients, your boss, and your employees. But shorten your to-do list by leaving off the items that don't really need to get done.

Ask yourself if you're addicted: To the promise of an unread email, the welcome distraction that your Blackberry offers during a dull meeting, or the self-satisfaction that comes from filling your blog or Twitter stream with your views on everything. If you are, then don't bother with banal coping strategies like checking your email only at infrequent intervals, or declaring certain time windows information-free. It won't work. You need more aggressive strategies--like leaving your Blackberry or laptop behind sometimes--or simply acquiescing to your addiction. But think about that before you start a family, lest your kids become "Blackberry orphans" who battle with your device for your attention.

Turn everything off. If you need time during the day to read, talk, or think, shut down all your gizmos, or go someplace where you can't be reached. Some CEOs declare "alone time" in the early morning or evening, instructing their assistants to make sure nobody bothers them. If you don't have an assistant, be your own--and be ruthless when somebody tries to enter your sanctuary uninvited.

Selectively detach. Bill Gross, CEO of the big bond-trading firm PIMCO, tells McKinsey that he doesn't use a cell phone or Blackberry, and doesn't look at emails that he doesn't want to: "I don't want to be connected; I want to be disconnected." If you're not a CEO, you might not get away with that, but productive workers can make a strong case for not answering every email or phone call immediately: They're working and getting the job done, not manning a communications hub. It takes a confident boss to give workers a longer leash, a luxury many employees don't have. But if you focus on generating results, and make sure the boss is aware when you do, there will be less of a need to track you down at any time of day (or night).

Digest good information, more slowly. The torrent of data and information that's constantly flowing amps up our workday metabolism, since we feel a need to digest it all. But that's impossible--and everybody else feels just as behind as you do. The trick is spending your time on information that matters, and making sure you absorb it. Focus on too many things, by contrast, and you'll probably miss the most important nuggets. Again, disregard what you don't need to spend time on, and devote yourself to the rest.

Exercise. Physical activity can declutter the brain, and many exercisers say they feel bursts of creativity after just 15 or 20 minutes of working out. If you're going to do it, try to single-task instead of running while you answer a few emails, which yes, you can do, thanks to innovations like the "walkstation:" a treadmill with a PC at the head.

Don't rely on technology to simplify your life. Hundreds of apps, programs, and gadgets promise to help make you more productive, and a few might actually work. But they also take time to learn, enlarge the bucket of things you have to manage, and give you more chargers to lose. You don't have to splurge for every upgrade or jump on every social-media bandwagon. Focus on tools that actually help you accomplish your bottom-line goals, and after that, rely on old-fashioned prioritization.

Don't answer every email. Hemp of Harvard Business Review says that every outgoing email generates two replies--so you're lowering your own workload by responding more selectively. Also do your co-workers a favor by limiting "reply all" answers to information everybody needs to know. Save the LOLs and chatty comments for your confidants. Or just skip them.

Say something meaningful. Busy people who manage their time well don't read emails, blogs, or Facebook updates that tell them what somebody else had for breakfast. They only spend their time on useful information. If you're posting your thoughts for professional purposes, leave out the personal trivial while saying something relevant or linking to informative material. If you don't feel you have something original to say, relax. Many people don't, and it's okay. Be a social-media "follower" until you get the hang of it and find a way you might add value.

Remember Friendster. It was hot for a nanosecond, and early adopters rushed to join. Then it faded. Same with MySpace, which looked like it might be headed mainstream but is now mostly a network for musicians and their fans. Facebook, Twitter, and LinkedIn are obviously hot now, but they too could become less important than hype suggests as they become increasingly corporate and more nimble competitors spring up. Sure, you might gain an edge by being part of the first wave, but a lot of those waves peter out. And sometimes a later wave can be even bigger.

Friday, February 11, 2011

Housing market will be stable next two years: RBC

Well here is another viewpoint on the future of housing in Canada. I tend to share this one as I feel we have pretty well weathered the storm that last 2 1/2 years and the mrket is now ready to move forward again.

Neil "Mortgage Man" McJannet

A stronger economy will offset the effects of higher mortgage rates and keep Canadian house prices stable over the next two years, according to the Royal Bank of Canada.

In a market update that has the bank forecasting price gains of 0.5 per cent in 2011 and 1.3 per cent in 2012, economist Robert Hogue said that after two years of “gyrating wildly,” the Going forward, we see nearly perfectly offsetting forces driving Canada’s housing market,” he said. “On the upside, the economic recovery will gather strength in 2011, continuing to boost employment and family incomes. On the downside, interest rates are expected to rise.”

The Bank of Canada will likely raise interest rates by 100 basis points this year and another 150 basis points in 2012, he said, making mortgage payments more expensive for the majority of homeowners. But real gross domestic product is expected to increase to 3.2 per cent in 2011 from 2.9 per cent in 2010.

“The net effect of these forces is expected to be close to nil, thereby leaving resale activity largely flat,” he said.

There have been a flurry of forecasts issued in the last week, as the market starts the year stronger than expected

Canadian housing market is likely to be a much less interesting place for the next several years. Capital Economics issued a cautious report that suggested higher interest rates could drive prices down as much as 25 per cent over the next three years, while the Canadian Real Estate Association raised its sales forecast for the next two years as it suggested that a stronger economic recovery and continued low interest rates would keep the market balanced.

“Even though mortgage rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity,” CREA chief economist Gregory Klump said. “Strengthening economic fundamentals will keep the housing market in balance, which will keep prices stable.”

Capital Economics economist David Madani said too many optimistic forecasts are based on too short a time frame to be useful, because many mortgages won’t reset until rates rise much higher than they are today.

“Let’s balance this discussion a bit and think longer term,” he said in a recent interview. “As far as housing prices are concerned, we think they’re overvalued and we don’t see income growth closing that gap.”

Thursday, February 10, 2011

Flaherty warns of even higher mortgage rates after this week's jump

By The Canadian Press

OTTAWA - Interest rates are going up, and the federal finance minister says he expects them to rise even more.

The Royal Bank increased several of its posted and special mortgage rates on Tuesday, joining TD Bank and CIBC.

All three banks have increased the posted rate for a five-year closed mortgage by a quarter of a percentage point, to 5.44 per cent.

RBC also raised its special fixed rate offer for a five-year closed mortgage by the same percentage amount, to 4.39 per cent.

Finance Minister Jim Flaherty said he's not surprised.

"The recent increase by a couple of the banks is exactly what we expected," Flaherty told reporters in the foyer of the House of Commons.

And more increases should be coming, Flaherty predicted, since lending rates have been hovering close to historic lows.

"We're likely to see higher interest rates as we go forward because interest rates are still very low."

Flaherty commented as he denounced a Liberal opposition day motion calling on the Harper government to reverse a planned 1.5-percentage-point corporate tax cut.

Wednesday, February 9, 2011

'Window closing’ on ultra-low mortgage rates

Tim Shufelt, Financial Post · Monday, Feb. 7, 2011

Amid the noise of volatile-but-improving economic indicators, mortgage rate hikes are likely to repeat like a chorus in the coming months.

Canadian banks are raising interest rates on mortgages, marking the beginning of a trend as they correlate with rising bond yields and expected monetary tightening.

That’s making a strong case for borrowers to lock into fixed rates before it’s too late, said Benjamin Tal, deputy chief economist with CIBC World Markets. “The window is closing.”

TD Canada Trust and CIBC both announced Monday hikes to their residential mortgage rates, the first increases since changes to the rules of borrowing were announced by the federal government last month. The other big banks where expected to follow the moves shortly.

Effective Feb. 8, the interest rate on the banks’ benchmark five-year closed fixed rate mortgage will increase 25 basis points to 5.44%. The country’s other major lenders are expected to soon follow suit.

Toronto mortgage broker Paula Roberts said rising borrowing costs will compel more of her clients to abandon ultra-low variable rates in favour of higher, fixed-rate mortgages.

That can be a tough decision for borrowers to accept higher payments, but not one that should strain a mortgagee’s finances, she said.

“If you can’t afford [your payments] ... that’s a problem,” Ms. Roberts said. “That’s why the government has changed the rules.”

In two stages over the past year the federal government announced changes to the conditions of mortgage lending — shortening the maximum amortization from 35 years to 30 years and requiring borrowers to qualify for a fixed-rate plan, even if they are opting for a variable rate.

Many who only qualify under the old rules, however, will try to secure mortgages before the shorter maximum amortization periods come into effect next month, Ms. Roberts said.

“There are going to be a lot of people that will enter into their agreements by March 18.”

Much of the momentum in mortgage rates can be attributed to a bond selloff and rising yields across the board. That effect is partly a reflection of building global inflationary pressures as well as a global economy that is proving more robust than expected.

“In my opinion, the bond market will not be the place to be over the next six months, and if that’s the case, you will see mortgage rates continue to rise,” Mr. Tal said.

In addition, anticipation of increases to the Bank of Canada’s benchmark lending rates is building, also contributing to rising yields, which puts pressure on fixed-income mortgages.

If there was any lingering doubt that the Bank will soon raise rates, last week’s jobs report erased them. The report showed Canada added four times more jobs than expected in January.

“[It] creates a fairly powerful story for the Bank of Canada, which is clearly concerned on the domestic front,” said Camilla Sutton, chief currency strategist at the Bank of Nova Scotia. “I think there’s a material change.”

So do investors. The probability that the central bank will boost its key policy rate by May, as measured by overnight index swaps, jumped to almost 75% after the jobs data.

Canada's housing market could prove more resilient in 2011 than predicted

By Sunny Freeman, The Canadian Press

TORONTO - Canadian home sales this year will be better than previously thought, helped by improving consumer confidence that will partially offset the anticipated deterrent of interest rate hikes, the Canadian Real Estate Association predicts.

CREA released a revised forecast Tuesday that estimates there will be 439,900 existing homes sold in 2011, down 1.6 per cent from 2010, but better than the nine per cent decline that CREA had forecast at the end of last year.

The real-estate association is also taking a more positive view of pricing, with the national average price now expected to rise by 1.3 per cent in 2011 to $343,300. CREA had earlier predicted that the national average home price in 2011 would fall by 1.3 per cent from last year to $326,000.

CREA's January sales data won't be released until next week. But recent reports on building permits and housing starts — two indicators of how much new housing will be available for sale in future — indicate a measured start to 2011.

Canada Mortgage and Housing Corp. reported Tuesday that the pace of new-home construction in Canada increased slightly last month, rising to 170,400 units, up from 169,000 in December on a seasonally adjusted annual rate.

That puts the country on a pace for about 10 per cent fewer housing starts than last year.

Krishen Rangasamy, an economist at CIBC World Markets said housing starts will likely soften over the coming months as home prices moderate and the Bank of Canada resumes its tightening cycle by mid-year.

A moderation in housing starts is a sign that supply is contracting in line with reduced demand, which could avoid an unhealthy glut of available houses on the market if demand declines when interest rate hikes are announced.

Some economists have warned that a combination of higher interest rates and new mortgage rules that go into effect March 18 could put a chill on demand in the later months of this year.

CREA predicted Tuesday that some sales that would have been made later in the year will likely occur in the first quarter, as a result of the new rules. A previous change in mortgage rules last year contributed to extremely strong first-quarter demand as buyers sought to beat the deadline.

"This is expected to produce a milder version of the volatility in sales activity that we saw last year which resulted from additional transitory factors," said CREA's chief economist Gregory Klump.

Last year, sales were also pushed ahead to the first part of the year as buyers in two provinces — British Columbia and Ontario — rushed to avoid a switch to the harmonized sales tax on July 1.

Those factors exacerbated the effect of interest rate hikes last summer and the market reached a trough in July.

Following last year's pattern, sales will likely be robust in the first quarter as buyers enter the market before the tighter mortgage rules take effect and then drop off in the second quarter.

However, CREA predicts that the market will gain traction in the second half of this year as economic conditions, job and income growth and consumer confidence improve, in contrast to 2010 when economic growth softened.

"Even though mortgage interest rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity. Strengthening economic fundamentals will keep the housing market in balance, which will keep home prices stable," Klump said.

The Bank of Canada has forecast that housing will be a minor net negative for the economy this year, although it also cautions the market is a potential key downside risk for the economy.

It is expected to maintain its key lending rate at a low one per cent until at least the second half of the year, as some global economic uncertainty lingers. The key lending rate has the most immediate impact on variable-rate mortgages whereas home owners with fixed-rate mortgages won't be affected until renewal time.

The Royal Bank (TSX:RY), CIBC (TSX:CM) and TD (TSX:TD) said this week they are raising the posted rate for a five-year closed mortgages by 0.25 percentage points to 5.44 per cent.

Meanwhile, Finance Minister Jim Flaherty warned Tuesday that Canadians should expect long-term mortgage rates to rise further.

"The recent increase by a couple of the banks is exactly what we expected," Flaherty told reporters in the foyer of the House of Commons. "We're likely to see higher interest rates as we go forward because interest rates are still very low."

Last week, in the gloomiest report to date, Capital Economics analyst David Madani said house prices were just a few interest rate hikes away from a 25 per cent correction over the next three years.

However, a report released Tuesday by real estate agency Re/Max suggests the Canadian market has shown resiliency in the wake of major events in the past decade, such as the 9-11 terrorist attacks in 2001, the SARS health crisis in 2003 and the 2008-2009 recession.

The report said the market has self-adjusted as inventory dwindled during periods of reduced demand.

Through tumultuous times in the past decade, fewer real-estate listings led to higher home values, with national home prices increasing at an average of 6.82 per cent annually.

The market is on track to a similar realignment this year as the number of available homes trends downward, suggesting that the market is closer to seller's territory, in which prices spike said Christine Martysiewicz, a spokeswoman for Re/Max.

"Interest rates would have to go up significantly before we see any impact, and we wouldn't see an immediate impact," Martysiewicz said.

"To say that there might be another real estate bubble is really not a responsible comment."

CREA forecasts that national sales activity will rebound in 2012 by three per cent to 453,300 units, which is roughly on par with the 10 year average.

It believes the market will continue to be relatively balanced between sellers, or supply and buyers, or demand, although the supply of new listings of existing homes is expected to trend higher.

Monday, February 7, 2011

Will the rise in interest rates take down our housing market?

Fear mongering at its finest? I vote yes-- The Canadians reacted far diffrently from our American counterparts - both lenders and borrowers took on that customary "Conservative" approach. Although Canadians started to get more aggressive in the later months the crisis in the US and Europe hit before we could get too involved or overextended. As the Canadian lending practices were much more controlled it is unlikely "Rate Shock" will hurt too many people in the immediate future.

Neil " Mortgage Man" McJannet

A recent report from Capital Economics states that any move by the Bank of Canada could crush our housing market. Stating that house prices here have risen at the same rate as our counterparts in the U.S., along with inflation and higher interest rates looming on the horizon, they say it’s a recipe for a crash similar to the one that happened in America. As publicized David Madani, even the slightest increase in interest rates could change the housing market, and we know how big a player housing is to a nation’s economy. They are saying that it could be the straw that breaks the camel’s back. According to recent research by CAAMP (Revisiting the Mortgage Market**), 79% of the mortgage market are fixed mortgages for terms of five years or more, and just 21% are adjustable or variable mortgages. Given the new rules implemented by Flaherty in the spring of 2010 concerning the benchmark qualifying rate, the average total-debt-servicing ratio for home purchases with variable and adjustable products were well below the 42%/44% range required by the insurers. This standard has implemented a buffer in the adjustable/variable mortgage market, but unfortunately it has only been in force for less than a year, so those who qualified for adjustable or variable mortgages prior to this may be at risk of an interest rate shock. If rates were to double of what they are today, consumers average TDS would increase and approximately 1% would be higher than the 44% threshold. To put this in perspective, we’re looking at 800-950 mortgages in 2010 that would be affected negatively. The numbers are pretty much the same for fixed mortgages, with a couple of hundred more people affected. Are there people on the brink of a financial meltdown? Without a doubt. How do they stack up against those that could handle the pending increase in interest rates? The numbers are far lower, but ultimately it’s hard to tell exactly how many people will be in trouble when rates move up. Again, it all comes down to financial prudence and according to recent reports by some of the major banks and watchdogs, borrowing and spending has slowed a little. On top of managing current debts, as long as jobs and incomes remain strong, the economy should move along just fine. Whichever way you look at it, the future is unknown. Forecasting is very subjective and personal opinion is certainly at play. Looking at the strong fundamentals of Canada, such as commodities and employment, we are faring pretty well at this point. Of course, when rates increase and inflation moves, we may very well be on our way to a correction or a softening of some kind, but a 25% decrease in home values may be a little too bearish. Will we see a drop in value of 25%? Maybe, maybe not; but I’ll put my money on maybe not. Fear mongering at its finest? I’d like to hear your feedback on the topic. **Findings from this report are based on mortgages that were funded in 2010, consisting of 59,000 insured mortgages for home purchasing, and 26,500 mortgages for refinancing purposes.

Friday, February 4, 2011

Rate hikes could spark house price collapse, economist warns

Seems a bit over the top to me. Canadians have been quite conservative in their borrowing for real estate in comparison with the USA. The Canadian Banks also had tighter qualifying policies for their Variable and "Liar" loans to help to resist any shock in rates. Needless to say one day there will be a correction but I doubt it will be as severe as this report states.

Neil "Mortgage Man" McJannet

Steve Ladurantaye Globe and Mail Blog

Any move by the Bank of Canada could “easily” cause house prices to collapse, Capital Economics warns in a bleak report that suggests the Canadian housing market is likely to suffer the same sort of crash that has plagued countries such as the United States.

The report released Thursday suggests that house prices in Canada have climbed at the same pace as that in the United States, but have not fallen at the same rate. In the United States, some markets have seen prices fall as much as 50 per cent through the recession.

As the central bank raises interest rates, mortgages will become more expensive for Canadians. Add inflation to the mix, and Capital Economics predicts prices could fall 25 per cent over the next few years.

“Even small rises in official interest rates have been shown to have a big effect on homeowner confidence in other countries under similar circumstances as they can change perceptions towards the housing market very quickly,” said economist David Madani. “If the Bank of Canada does resume its monetary tightening this year, this could easily prove to be a tipping point for a house price collapse.”

Other market watchers expect higher rates to hinder price gains, but few are calling for as sharp a drop. The Canadian Real Estate Association expects sales to fall 9 per cent this year, for example, but prices are only expected to drop 1.3 per cent. It hasn’t issued a forecast beyond 2011.

The country’s bank economists have varied short-term forecasts, but there are no expectations among the largest forecasters that a crash is even likely.

Some have suggested drops of 10 per cent may be in order next year as mortgage rates move higher and households struggle to service record debt loads, and the Bank of Canada specifically mentioned the prospect of “a more pronounced correction in the Canadian housing market” as one of three key risks to the country's economy.

However, sales data from the fall market showed that fewer houses have been listed and prices were largely unchanged from a year ago.

Capital Economics' chief concern is that as the central bank raises rates, variable rate mortgages become more expensive and homeowners could find themselves priced out of their homes.

Fixed rate mortgages are tied to government bond yields, but would move in the same general direction. If a homeowner is already stretched financially, any hike could prove problematic.

However, a survey released by the Canadian Association of Mortgage Professionals released late last year showed that Canadians are confident they could shoulder higher mortgage payments without too much difficulty, with 84 per cent saying a $300 monthly increase was no problem.

If prices do fall as far as he predicts, “the knock-on effects to consumer spending and housing investment could be significant and perhaps even strong enough to push the economy into another recession.”

In January, the federal government shortened the maximum amortization period for mortgages to 30 years from 35 to help Canadians take on less debt at a time when it is at record highs.

While most private sector watchers expect the market to pull back in the second half of this year after a strong two-year run, the Capital Economics call for a 25 per cent drop is the harshest.

After hitting record highs in May, the Canadian market did slow across most of the country through the summer. Recent data from the Canadian Real Estate Association has many economists predicting a “soft landing,” however, with activity returning at a lower level and prices holding steady rather than rocketing higher each month as they have through the recovery.

ComFree Survey 5000 Canadian Homeowners - Would They Use A Realtor To Sell Their Home?

ComFree, part of the largest For Sale By Owner network in Canada, recently conducted a survey of 5000 Canadians that states “1.32 per cent of homeowners would not automatically turn to a real estate agent to sell their property.”

In response to this survey, they have introduced a new offering for Canadian homeowners who are considering selling their property without the help of a realtor.
Essentially, Comfree offers a “turn-key marketing service to help homeowners sell their home intermediary-free as well as professional advice, legal and appraisal assistance" they are quoted as saying in a recent press release.

"We can certainly confirm that the real estate sector is undergoing a significant transformation," states Pat Sullivan, Vice President of ComFree. "The survey shows that selling a home without an intermediary is a consumer preference. That's exactly what we are seeing at ComFree. Our company meets the client's needs by providing what we call assisted sales services to sell their home."

Indeed there have been many changes recently in the real estate sector, and some of them are controversial- in particular for realtors.

Robert Morrow, Sales Rep: Chase Realty Inc says that ComFree’s services and business model are not new, but the presentation of it is: “It really boils down to consumer education. ComFree is not a "new" service; they've been around since 1997. What's new is the survey they are using to re-introduce a tired model. The survey may or may not be true but what consumers need to know is that until the government changes the laws that govern the real estate industry, a buyer's access to vital information is limited.”

Morrow believes strongly in the necessity of consumer education, so that all facts are gathered and understood before making decisions; “ComFree still doesn't list the home on the MLS and, in fact, limits exposure to their own site. Again, consumer education is required. Unless all the potential buyers out there know about ComFree, what are the odds of a seller's home being seen? Yes, the site works well but it consists of only a small percentage of the total homes for sale in any given area. The MLS shows ALL the homes and that's the site the home needs to be exposed on. When the Competition Bureau caused a change to the MLS last fall allowing sellers to list on the MLS without paying for all the services of a real estate brokerage, they also maintained that only brokerages can do the actual listing--meaning you still need an agent to get on the MLS.”

Sullivan states that this business model is geared to save homeowners commission; "We offer everything homeowners need to sell their home commission-free and save thousands of dollars. This unique positioning is immediately apparent in ComFree's new slogan 'Committed Without Commission."

Morrow defends the value in retaining the services of a Realtor: "The odds of selling a home without involving an agent are very slim. If the house is priced perfectly, is in the perfect location, and the timing is perfect, then it could and often does work. The problem is that most homes don't fit that situation. And that's why you need professional help; not just to "sell" a not-so-perfect home, but to promote it quickly and get as many potential buyers through the home in the shortest amount of time, so that the odds are in your favour. The generic brokerage model (meaning all models where the brokerage is registered with RECO) is by far the most effective way to do that.”

Morrow actually has anecdotal evidence to support his theory, and urges consumers to consider all financial implications- not just the saving of commissions:; "I recently had a client looking for a home on a certain street and we went to see all those listed on the MLS plus one that was a private sale, also listed on the MLS through a partner brokerage. (After my clients purchased one of the homes they saw) Later, I found a home on ComFree that was on the same street and in the price range. We didn't know about it because, as an agent, I am given no notice by private selling companies about new listings, and worse, there was no sign. I called the owner and she said the home had been listed for a couple of months and that they didn't want a sign on the lawn because the nosy neighbours would want to come in. They were totally relying on the website to sell their home. Homes on that street sell within 7-15 days. As far as I know, hers is still for sale. She did not want to speak to me because she didn't want to pay commission.Meanwhile, I estimate the mortgage costs for the past three months alone are higher than my commission rate. And I could have sold it to my clients in November, had she been willing to speak with me even then.”

It is clear that there are benefits to both using a Realtor and using a service such as ComFree. The most important aspect seems to be that the consumer needs to educate themselves about all facets home selling and buying, before choosing which direction to take.

Thursday, February 3, 2011

How to set up the ideal home office

Working from home has many advantages and some disadvantages. The following article should be helpful in setting up your Home Office - But self control is a MUST if you are working from home - especialy if you are on your own completely. I have worked from home for about 1/2 the time I have been brokering and it is an amazing freedom. Try it - I'm sure you'll like it.

Neil "Mortgage Man" McJannet

JUDY SMITH Globe and Mail
There are inherent challenges that come with a home office.

Distractions, difficulty in separating work from personal life, and creating a true professional feel are just a few. You should give careful thought and planning to a home office, and if you already have one, there are ways to increase your productivity and revenue.

· If at all possible, have a separate entrance to the office. Otherwise, choose a room near the front or back door of your house or apartment. Separate your office from the living areas of your home. Should your office be part of another room, divide it with a screen or several large plants.

· Before entering your office in the morning, take a short walk, and then take another one at the end of your workday. This separates the business and personal aspects of your life. Try to keep your household business separate, such as paying bills and managing the home.

· If your home office does not have a window, brighten the room with yellow paint, bright lights, and pictures of the outdoors. If your home office is in the basement, paint the walls and ceilings bright white, and create as much light as possible. Install a fan to get energy flowing. The best place for your office is in the front of the house.

· Don’t place your desk under a window, but let the light reflect on it from the side. Some people prefer to have their desks facing east. Leave an 18- to 23-centimetre gap between your furniture and the walls.

· If you have clients coming to your home office, it is best for them to use a separate entrance. By so doing, your clients can enter without passing through your living space. Clients who walk through your living space before getting to the office are likely to make a subtle shift away from the focus of business, and their confidence in your professionalism may subconsciously be diminished.

· Wait to do the laundry, cooking, and all other related errands until after designated working hours. Set specific hours and stick to them. They can be different every day, but create a working schedule. Make your family and friends aware of your work areas, advise them of the rules you have set for yourself, and ask them to respect these decisions.

· When you are finished working, make every effort to close the door, leave your business, and return to home life. This means you should ignore the office phone ringing or the urge to run in and check to see if an important e-mail came through.

· Keep television out of your office, unless you need it for your job. TV is generally associated with relaxation and leisure, not work.

· When sorting your mail, bring only what’s related to your business into the office and put your personal mail in another room.

· Avoid working in the centre of your home, in a nook underneath the stairs, in the basement, or next to a bathroom. These areas can reduce the “real office” feel you need to ensure productivity.

Wednesday, February 2, 2011

Flaherty sees little hope for jobless in 2011

Les Whittington | Wed Feb 2 2011

· Comment (13)

OTTAWA—A slower-growing economy is offering little hope to Canada’s 1.4 million unemployed, economists told Finance Minister Jim Flaherty in talks in advance of the March budget.

Unemployment, now standing at 7.6 per cent, will average a slightly higher 7.7-per cent through 2011, according to the average forecast of the dozen economists who met with Flaherty.

Speaking with reporters afterwards, Flaherty said the analysts “anticipate resistance to the unemployment rate coming down.

“This is true also in the United States. A lot of employers have been hesitant to rehire because of their perception of risk in the economy,” he said.

The weak projection for unemployment reflected a more pessimistic view of economic growth in 2011. The economy will expand by only 2.4 per cent this year, a bit weaker than the 2.5 per cent predicted by economists in a September survey.

That compares with growth of nearly 3 per cent last year.

Flaherty said the government, facing a $45-billion budget shortfall in the current fiscal year, is steering clear of any fresh, costly initiatives in its next economic plan.

“Are there billions of dollars of extra money available for big new spending programs? No, and there will be no big new spending programs in this budget.”

He confirmed the budget will be delivered to Parliament in March but declined to say which day.

In the upcoming budget, the government is switching from a period of massive stimulus spending — $46 billion over two years — to concentrate more on fiscal restraint with an eye toward balancing the budget by 2015.

“I can tell you that our goal is to maintain the fiscal track. We’re not far off the fiscal track,” Flaherty told reporters.

The minority Conservative regime is facing the possibility of defeat—and the need to send Canadians to the polls—over its budget.

The government needs one of the federal opposition parties in Parliament to support the March budget or the Conservative regime will fall.

One of the flashpoints with other parties may be Prime Minister Stephen Harper’s decision to go ahead with another round of corporate income tax cuts—worth $6 billion—despite the huge federal budget deficit.

Flaherty has said the government has no intention of backing down on corporate tax reductions. But he said Tuesday there might be room for the Conservatives and the NDP to work together on the issue of additional help for low-income seniors.

“We do have, regrettably, particularly some single older Canadians who are not entitled to the Canadian Pension Plan because in their day they worked at home raising children and did not work outside the home, who have some income issues,” Flaherty remarked.

“And that’s something that, you know, all Canadians I’m sure would like us to address,” he added.

NDP finance critic Thomas Mulcair said he’d be happy to discuss pension issues with Flaherty. But whether the government would be willing to put enough money into overall improvements in pensions to satisfy the NDP is unclear. Layton is calling for the government to expand the Canada Pension Plan, something Flaherty says he is not in a position to do now.

“Our priority continues to be economic recovery,” Flaherty said after the meeting. “The economic recovery remains fragile. Our view is that we must remain focused on creating jobs and economic growth while balancing the budget in the medium term, which is what we intend to do.”

Tuesday, February 1, 2011 Promotes A New Home Selling Option in the Edmonton Real Estate Market

Is this the wave of the future or do you really just "get what you pay for" and don't get solid information on what your home is worth. I would think you would want to get a formal appraisal before setting out on the low end of these services. Think it thru- remember it is always Buyer Beware and now it may also be Seller beware.
Change is inevitable and the Internet makes the world a smaller place but it also can make it a worse place if you do not do your due dillegence.

Neil "Mortgage Man" McJannet

Tuesday, 01 February 2011 12:42

Edmonton based has launched a campaign to draw attention to their available services, which now include four different home selling options- depending on the sellers need and budget. A seller is able to choose the level of advice and support they need, or not, and pay accordingly.By-Owner plus ($999) which includes the same services, plus a range of additional services such as photography;
The services offered are as follows:

By-Owner ($599) which essentially includes an MLS display and limited advice and signage;
By-Owner plus ($999) which includes the same services, plus a range of additional services such as photography;

Professional ($1299) which includes all of the above services plus marketing help and assistance with the paperwork involved in the selling process, among other things;

Professional Plus ($1599), which comprises essentially the same services that a full service realtor does.

"Many people do not realize there are options in between the traditional full commission model and the for-sale-by-owner option. It's time to bring this type of pricing structure and choice to the masses, and let people know that these options exist." said Rod

Thompson, president and founder, of and a licensed broker.

It has been enough to make the competition sit up and take notice, says Thompson; “We've done all of this with a high measure of success and have come a long way already in changing the industry here in Edmonton and the industry has taken notice. We are seeing our competition reducing their fees to compete and that includes our markets’ leading for sale by owner company. They too have reduced fees and have made an attempt to market their homes on MLS and I suspect will continue to try- which is a complete contradiction from previous. We have shown that you can offer more to consumers in the way of exposure and service and at the same time save them thousands of dollars.”

This comes on the heels of the October 2010 agreement between CREA and the competition bureau- which allowed real estate agents to list sellers’ properties on the MLS with compensation by a mutually-agreed upon flat fee; similarly, sellers could choose to use and pay for any type of real estate service separately.

With these changes, a platform for new business models to present themselves, could be seen as somewhat of a pioneer in this regard, as they have already had their business model in place for two years- well ahead of the changes.

Thompson says that the focus at is about quality, not quantity; “As for expansion, yes we are looking to grow the company but that is not our focus. The brand needs more momentum and more time to develop and that requires our full time effort.

We have strong interest from right across Canada but we know that our biggest challenge is choosing the right people to grow with. Our franchisees need to see this model as an opportunity to change lives, they have to see it as a better way not just a great business opportunity, and for that reason we want to take our time.”

The future is bright, according to Thompson; “ The last couple of weeks we've had clients comment that they felt we were the most complete real estate company and that it sounds like we truly believe in the direction we've chosen and we do. With our new ad campaign we feel 2011 will be the year we step out from the shadows.”

Effects of interest rate hike may be overestimated

| Tuesday, 1 February 2011

The aim of recent warnings from government and bank officials about the rising level of household debt was to prepare Canadian consumers for the inevitable rise of interest rates at some point in 2011. The effects of higher interest rates should not be overestimated however.

According to a report from National Bank Financial, although Canadian household debt is at a new high relative to disposable income, only a minority of households are exposed to an interest-rate shock.

“It’s not that Canadians are throwing money out the window,” said Yanick Desnoyers, assistant chief economist at National Bank Financial. “Rather they are buying more houses, taking the homeownership rate to a record 70 per cent. Since very few homebuyers pay cash, the resulting indebtedness is hardly surprising.”

According to the report, 40 per cent of homeowners have no mortgage (compared to 31 per cent in the U.S.). Since about 30 per cent of Canadians are renters, that leaves 58 per cent of households paying no mortgage interest. Moreover, the net equity of owners in their homes is very high, more than 60 per cent compared to 39 per cent in the United States.

Also favourable is the mix of mortgage types. Two out of three mortgaged homes have a fixed-rate mortgage, leaving only 14 per cent of households paying a variable rate.

“In other words, the great majority of Canadians are not exposed to a monthly-payment shock from a rate rise,” said Desnoyers. “Though a larger proportion of households have home-equity lines of credit, all at variable rates, it remains that a rise in interest rates will not be an overnight blow to the bulk of households.”

Reduce CMHC role in mortgage insurance: CD Howe

I could not agree more - why should the Government be taking these risks - their business acumen in the past has proven they do not do public business too well. The reason they get the "Lion's share" of the business is that the banks perceive them as a bottomless supply of funds. If a mortgage goes bad CMHC picks up virtually 100% of the loss. Other Insurers may not have as deep pockets or as generous a payment plan for mortgage defaults! But guess what - the public pays for any CMHC losses that cannot be covered by their administrative fees. Money just moves from pocket to pocket in Government and it is business as usual after that.

Neil "Mortgage Man" McJannet

John Greenwood, Financial Post · Monday, Jan. 31, 2011

TORONTO — The federal government should limit taxpayer exposure to potential problems in the housing market by reducing the role of the Canada Mortgage and Housing Corp. in the provision of mortgage insurance, CD Howe Institute said in a report Monday.

The CMHC has a pervasive presence in the domestic mortgage market, potentially resulting in “unmanageably large risks in financial markets” that are ultimately borne by the Canadian public, according to the report.

Under current rules, people who borrow more than 80% of the value of the home they want to buy must also take out insurance, and the CMHC is by far the most dominant player in that market.

According to the report by Finn Poschmann, vice-president of research at the CD Howe Institute, the CMHC now backstops mortgages equivalent to more than 30% of Canada’s gross domestic product.

That’s left Canadians exposed to “large, ill-defined risks,” said the document, which argues that Ottawa should crank back the CMHC’s presence in mortgage insurance and allow more room for private sector insurers.

Originally conceived as a vehicle for executing public policy, CHMC insurance levels have expanded dramatically, especially in the wake of the financial crisis as the government encouraged banks to hike lending by allowing them to securitize more home loans.

Critics worry that the unintended consequence of government policy was that mortgages became too easy to get, pushing up real estate prices across much of the country to unsustainable levels.

“Beyond the presumed benefits of promoting home ownership, [activities of the CMHC] have had some clearly harmful and well-understood consequences, as well as other less well-understood but also harmful consequences in world financial markets,” Mr. Poschmann said.

The CD Howe recommendation comes on the heels repeated warnings from the Bank of Canada that Canadians have become over leveraged and need to start paying down debt.

One of the main concerns about the CMHC is the lack of disclosure about the quality of its mortgages and details of the types of loans it insures. For instance, when the government announced earlier this month that home equity lines of credit, or HELOCs, would no longer qualify for CMHC insurance, many analysts expressed surprised that such loans were ever allowed to be part of the CMHC program in the first place.

Canada is hardly alone in its policy of boosting home ownership as the United States and many other countries have adopted similar initiatives. But Canada is one of the few western nations that have not so far been hit with a steep decline in real estate prices in the wake of the financial crisis.

The report also makes the case for beefed up oversight of CMHC as right now its relationship with the Office of the Superintendent of Financial Institutions is primarily a courtesy arrangement under which the crown corporation is not compelled to follow OSFI directives.

According to Mr. Poschmann, Ottawa should adopt new legislation to remove the ambiguity from the relationship by legally requiring the CMHC to comply with guidelines laid down by the federal regulator.