Mortgageman Blogs Again!

Many not prepared for retirement!

2012-01-25T08:10:00.000-08:00

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While all Canadians are likely aware that retirement looms on the horizon, a staggering majority are not prepared for it; many more don’t even have a plan in place to get them there.
A recent poll from ING Direct suggests that 58% of Canadians say that they are not prepared for retirement, and that 68% have no strategic plan assembled to help them along the way.
Not surprisingly, the poll found that the younger the respondents were, the less that retirement saving was on their minds, although most financial planners will tell you the key for gathering assets for retirement with the least amount of pain is to start early and have the power of compounding on your side.
The focus for most is repaying high interest debt in the short term before embarking on savings. Furthermore, respondents with children aged 18 or under living at home say that there are far too many other expenses taking precedence over retirement savings. Paying down their mortgage and saving for children’s education are taking up all of their time and their resources.
It is crucial though, to have a plan in place, or as many will tell you- retirement savings will not just happen. It takes a well-thought out, long term commitment. With governmental support for retirement likely dwindling in the coming years, as well as with the Baby Boomer cohort moving into retirement, the onus for financial planning is falling more squarely on the shoulders of average investors.
“Saving for retirement can't be an afterthought," said Peter Aceto, president and CEO, ING DIRECT Canada. "Despite the amount of debt people are carrying and what we keep hearing in the news, saving is still possible. Understanding the importance of starting early, even if it means starting small, has a huge influence on the ability to meet your financial goals. Canadians should also look at the value they're getting from their existing financial products and have ongoing conversations about money with friends, family and on social networks, which can play a big role in being better informed about personal finances."
Many do have RRSPs; the poll finds that for those that do have them are contributing on average $1001-$2500 each year.
The key is to make savings painless and invisible and habitual.
"Saving $50 a month, at a 2.5% interest rate compounded over 30 years would provide more than $25,000 in savings*. If you can't find $50 to contribute, start by taking a look at the fees you pay for your financial products. In many cases, this expense can be eliminated and redirected to savings," said Aceto.
He added, "A saving habit takes discipline but once you start it's very easy to maintain, especially with an automatic savings plan. Our clients are always happily surprised at how much they've built in savings even with small monthly contributions. It's exciting to see your savings grow and feel in control of your financial wellbeing."

Carney holds rates steady even as his concerns increase

2012-01-18T09:03:00.001-08:00

jeremy torobin AND sean silcoff
OTTAWA— From Wednesday's Globe and Mail
Bank of Canada Governor Mark Carney is getting more worried about record levels of household debt, but until the global recovery is on more solid footing, he’ll be relying on others to deal with the issue.

It’s Mr. Carney’s dilemma. Low interest rates have underpinned a worrisome surge of debt, but the economy is too weak to justify higher rates any time soon.

The central bank leader left his key interest rate at 1 per cent Tuesday for an 11th consecutive meeting, marking policy makers’ longest pause since the mid-1990s, as he and his team watch nervously to see how risks linked to the European debt crisis unfold.

Mr. Carney has repeatedly warned that low borrowing costs are enticing too many Canadians to take on debt that won’t be affordable once interest rates rise. On Tuesday he upped the ante.

Mr. Carney took the unprecedented step of noting in an interest rate decision that he expects the debt-to-income ratio will keep rising. Moreover, he attributed this to “very favourable financing conditions” – i.e. the Bank of Canada’s low policy rate, and its influence on the cost of mortgages.

“When they add something that wasn’t there before,” said Michael Gregory, a senior economist with BMO Nesbitt Burns, “it’s a signal that something has moved on their radar screen.”

Mr. Carney appears increasingly uncomfortable with a byproduct of his low-rate policy, even as debt-fuelled spending holds up the housing market and the economy at a time when soft global demand is crimping exports.

The debt-to-income ratio rose to a record 153 per cent in the third quarter, according to Statistics Canada, and exceeds the current level in the U.S. and the U.K. Canada is inching closer to the 160-plus threshold that got the U.S. and the U.K. into so much trouble four years ago.

Risks tied to the slack global economy are already affecting business decisions in Canada and arguably contributing to the slowdown in the labour market. For that reason, economists say it’s unlikely Mr. Carney will raise interest rates until next year.

Mr. Carney has stressed that there may be cases where interest rate changes can buttress moves by regulators to tame asset bubbles or dangerous buildups of debt that could threaten the entire economy. But higher rates now would hurt manufacturers in Central Canada and deter business investment, and tightening while the U.S. Federal Reserve is debating whether it needs to ease more would boost the currency, adding to exporters’ woes.

“The challenge of monetary policy is that it’s a blunt instrument,” said Derek Burleton, deputy chief economist with Toronto-Dominion Bank. “Regulation tends to have the benefits of surgical precision.”

Mr. Carney is no doubt keenly aware of the U.S. Federal Reserve’s failure to grasp the seriousness of trouble that was brewing in the U.S. housing market in the past decade, and criticism that Alan Greenspan fuelled that debacle by keeping interest rates low for longer than he should have.

But Mr. Greenspan was not presiding over an export-dependent economy that, according to new projections Mr. Carney released Tuesday, will grow just 2 per cent this year and 2.8 per cent in 2013, and that’s assuming the European situation is stabilized.

“Standing pat seems appropriate,” Mr. Gregory said. “But if things nudge either way – Europe clarifies itself a bit sooner, or housing takes off – the case for rate hikes will come a lot closer.”

In the meantime, is appears homeowners can’t resist the allure of rock-bottom mortgage rates.

“In my marketplace I see the consumer confidence to be very high, and it’s high because interest rates have been kept low,” said Peter Majthenyi, a Toronto-based mortgage broker. “Since the holidays, my phone hasn’t stopped ringing.”

Better economic conditions likely dash any chance of interest rate cut

2012-01-17T07:11:00.000-08:00

By Julian Beltrame, The Canadian Press

OTTAWA - Any thoughts Bank of Canada governor Mark Carney might have had about cutting interest rates further today likely flew out the window after a recent spate of relatively good economic news.

The Bank of Canada will announce its policy setting — which influences short term interest rates — at 9 a.m., and the opinion appears virtually unanimous there will be no change from the current one per cent perch.

That should keep in force a credit landscape that has seen borrowing rates across the spectrum of terms and conditions among the most generous in memory.

In fact, last week the Bank of Montreal offered the first 2.99 per cent five-year, fixed mortgage rate in modern Canadian history, forcing other banks to follow suit with similar actions.

In essence, the market is beating the central bank to the punch with credit easing, said Derek Holt, vice-president of economics with Scotiabank.

But there are other reasons analysts — with few exceptions — believe Carney will be loathe to move off one per cent, where he's been since September 2010.

That's because as weak as conditions are, with Europe still at risk of plunging the world into another recession, the economic indicators have been stronger than Carney thought they would be three months ago.

Then, the bank governor projected growth in the third quarter of 2011 would come in at a weak two per cent and the fourth at a barely visible 0.8 per cent. The third quarter is already in the books at 3.5 per cent and the fourth looks closer to two per cent, however.

As well, the resilience of oil prices to the global slowdown likely means inflation in 2012 will be a little stronger than the bank had been counting on.

"The combination of perhaps upward revisions to growth and inflation forecasts ... might be the thing that totally takes rate cuts off the table," said Holt.

There are some who still believe Carney's next move will be to trim interest rates, including Carleton University economist Nicholas Rowe, a member of the C.D. Howe Institute's monetary policy panel, and David Madani of Capital Economics.

Madani expects Carney will take the policy rate to 0.5 per cent by the end of the year. He has a darker than most view of the economy — with growth a mere 1.5 per cent this year, and the unemployment rate rising half-a-point to eight per cent by year's end.

"Although (the bank) ... will no doubt highlight that U.S. economic activity has improved somewhat, even they would admit that a sustained recovery is far from assured, particularly considering Europe's recession and the heightened risk of another global banking crisis," Madani wrote in a note to clients.

But Madani also said Carney is likely to wait out at least one more policy date before making his move.

The main news coming out of Tuesday's announcement, and Wednesday's monetary policy review — the bank's new forecast for the global and Canadian economies — is whether Carney sees the stronger-than-expected second half of 2011 as a precursor for 2012, or simply a blip that merely delayed the onset of weaker growth.

In the previous policy review, the central bank had predicted growth would come in at 2.1 per cent in 2011, 1.9 per cent in 2012, and 2.9 per cent in 2013.

With 2011 already in the books — although all the data points are not yet known — the expectation is that growth was more likely in the moderate 2.4 per cent range. But that may not change Carney's view that 2012 will be even weaker, with considerable downside if Europe's debt issues metastasize.

In past policy announcements, Carney has made it clear he views the current one-per-cent setting to be sufficiently accommodative for the current, slow-growth economy. Easy credit conditions stimulate spending and expansion in the economy.

Holt said it would likely take a European implosion for Carney to cut rates further.

Credit counsellors ready for post-holiday rush as Christmas bills come due

2012-01-16T07:39:00.000-08:00

Craig Wong
The Canadian Press
Published Friday, Jan. 13, 2012 1:18PM EST
The holiday hustle and bustle is over for most Canadians but now, as the bills begin to roll in, the busy season has begun for credit counselling services.

Scott Hannah, president and chief executive of the Vancouver-area-based Credit Counselling Society, said there's a pick up in inquiries every year as the bills for sometimes too-generous decisions made in December start coming due.

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“January is a great time to reflect on what they want to do differently this year – whether it is lose weight, improve their finances or whatever their case may be,” he said.

“Typically, it starts around the middle of the month and coincides when a lot of consumers are just receiving or expecting the statements on their credit cards.”

While financial planners urge Canadians every year to make a plan for their holiday spending, there are some that inevitably don't and overspend or don't stick to a plan, despite the best of intentions.

Pat White, executive director of Credit Counselling Canada, said her organization has been seeing more clients aged 50 and over looking for help in recent years.

“We're seeing more of that side of the population where they still have debts at a time that we think people should be thinking about retirements without debts,” she said in an interview from Brantford, Ont.

Ms. White said as a general rule of thumb, if you can't pay your debts as they come due, you should be seeking help.

“If you're behind on things like utilities, those are obvious signals things are not going well,” she said.

But even if you are current on your bills, but feel stressed or are unable to sleep, she said it is better to seek help before a crisis emerges.

Before you meet with a credit counsellor, experts say you should make a list of your debts, including who you owe, how much, account numbers and when you last made payments as well as a list of your assets.

People also should take with them a statement of income like a pay stub and some idea of their living expenses.

Ms. White said counsellors start with an assessment of a client's financial health before examining their options, including looking for ways to reduce spending and increase income.

“Some people may say, we certainly can cut back on that and it wasn't until we went through this exercise of looking at our expenses did we realize that we were spending more than we thought in one area or another.”

If it is possible, Ms. White said one option to consider may be a bank loan to consolidate other higher interest debt such as credit card balances or a mortgage refinancing that could be used to pay back other borrowings.

But if those options aren't enough, Ms. White said a voluntary debt repayment program may be a possibility.

Under a voluntary debt repayment program, a credit counselling agency contacts lenders and makes arrangements in an informal way to reduce payments and stretch them out over a longer payment. The advantage to the lender is that they receives all that they are owed without having to resort to harsher measures.

There are also the options of bankruptcy or a consumer proposal.

A consumer proposal sees someone repay a percentage of their debt over time, while a bankruptcy is a declaration that someone has nothing left to pay their debts.

“People often think that those are quite drastic measures, but it depends on the circumstances of the person and those options may be the only things that are really viable for them,” Ms. White said.

But Ms. White said the majority of those her agency deals with only require counselling, while around 25 per cent end up taking more drastic steps.

According to the Office of the Superintendent of Bankruptcy Canada, there were 6,259 consumer bankruptcies in October, 2011, the latest month statistics were available, down 20.2 per cent form 7,844 in October, 2010. The number of consumer proposals totalled 3,709 for the month, up 3.1 per cent from 3,598 in the year ago period.

Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty have repeatedly urged Canadians to reduce their debt levels, which stand near all-time highs.

Though economists don't expect the central bank to raise interest rates until perhaps as late as early next year, it is just a matter of time until they come off their near record lows and drive up rates for loans such as lines of credit and variable rate mortgages tied to the prime rate.

Mr. Hannah said with interest rates still sitting near record lows, now is the time to get one's financial house in order and pay down debt before rates start to rise.

He suggested that even those who aren't in financial difficulty should take an opportunity to review their finances to make sure they are on track.

“It is hard to be motivated to save money, especially when the interest that you are being paid by your financial institution maybe one or maybe one and a half per cent,” Mr. Hannah said.

“However, having savings on hand to deal with expenses like car insurance or Christmas is far better than not saving funds, using credit cards and then having to pay for those purchases at 20 or 28 per cent interest.”

The Canadian Press

Average Metro home price to jump 2.3 per cent;

2012-01-13T08:03:00.000-08:00

Strong market means house prices to rise in major cities, realtor says
Average Metro home price to jump 2.3 per cent; widespread calls for major correction this year can't be justified, says Royal LePage CEO
Canada's housing market will continue to be strong this year, with rising property values expected in all major markets, real estate brokerage firm Royal LePage said Thursday.

The company's forecast called for prices across to country to rise 2.8 per cent by the end of 2012, after stronger gains last year.

Even pricey housing markets in Metro Vancouver and Toronto - where standard two-storey homes averaged $1.1 million and $629,188, respectively, in the last quarter - will see continued price appreciation in 2012, though the gain for Metro will be more muted, according to the broker-age firm's forecast.

Metro Vancouver is expected to see its average house price climb 2.3 per cent to $802,000 in 2012, while Toronto is expected to see a 2.6-per-cent jump.

"Widespread calls for a major real estate correction in 2012 simply can't be justified," Royal LePage CEO Phil Soper said in a statement.

"The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand - albeit at a slower pace."

However, Royal LePage said stronger gains will be seen in cities benefiting from commodity-based economies, such as Calgary, Regina and Winnipeg, where price gains will be in the range of four to five per cent.

According to the company, in the fourth quarter of 2011, the average price of a standard two-storey home in Canada was $375,427, up 4.2 per cent from a year earlier.

The average rate of a detached bungalow was up 6.1 per cent to $344,392, while condominiums gained 3.6 per cent to $234,680.

Statistics Canada reported Thursday that its new housing price index rose 0.3 per cent in November, following on a 0.2 per cent increase in October, and was up 2.5 per cent yearover-year.

Price increases in Toronto, Oshawa and Montreal offset declines in Calgary, Metro Vancouver and the Ontario metropolitan regions of Sudbury and Thunder Bay, the agency said.

In Vancouver, Statistics Canada said some builders offered promotional pricing in order to sell units, which helped push new-home prices 0.3 per cent in November from October, and made the

Builders in the other areas reported lowering prices in order to stimulate sales and remain competitive, while price increases elsewhere were attributed to higher material and labour costs.

The Canada Mortgage and Housing Corp. has forecast the average price of a listed homes for resale to be $363,900 this year, up 1.2 per cent from 2011. The Canadian Real Estate Association predicted that the aver-age price would be relatively flat at $362,700.

Both forecasts were made in November.

Home sales up six per cent, prices up 4.6 per cent year-over-year in November

2011-12-16T07:07:00.001-08:00

By Sunny Freeman, The Canadian Press

TORONTO - Canada's housing sector is edging closer to a sellers' market as sales and prices jumped again in November, but the number of listings dropped off.

Home resales rose six per cent last month on a year-over-year basis and jumped 0.5 per cent on a seasonally adjusted basis compared to October levels, the Canadian Real Estate Association said Thursday.

November marked the third straight month that national activity on its Multiple Listing Service was up from the one before.

The national average price increased 4.6 per cent year-over-year to $360,396. And while prices continue to rise, CREA noted that November's increase was the smallest jump since January. Meanwhile, the number of newly listed homes was down 3.4 per cent from October to November.

"The national housing market remains balanced, but is edging closer to seller's market territory," the association said in a release.

A sellers' market occurs when demand outweighs supply and owners can fetch a higher price for their homes in bidding wars between buyers.

The latest signs pointing toward a market that favours sellers stand in stark contrast to predictions earlier this year that demand would drop off, giving buyers a break from rapidly rising prices.

But a continuation of ultra low interest rates — which have sat at one per cent since September 2010 — due to trouble signs outside Canada's borders has kept demand strong and buyers competing.

New listings slipped lower in more than two-thirds of Canadian housing markets, with Toronto, the Hamilton-Burlington region, and Calgary falling the most. The national sales-to-new listings ratio a measure of market balance, rose to 55.5 per cent in November — its highest reading since the spring.

Sales activity rose in about 60 per cent of all local markets, CREA said. Record November sales in the Halifax-Dartmouth region offset a dip in sales in the white hot Toronto market.

"The Canadian housing market is proving resilient in the face of ongoing global economic and financial uncertainty, to the benefit of Canadian economic growth," said Gary Morse, CREA’s President.

And while sales so far this year have been stronger than expected, up 2.1 per cent on a year-to-date basis, they have remained in line with the 10-year average.

However, sales in November were so robust, that they broke that pattern to climb seven per cent above the 10 year average to the fourth highest level on record for the month.

But CREA's chief economist Gregory Klump noted that the upswing heading into year-end is similar to what happened last year.

"By contrast, national average price also picked up toward the end of last year, whereas this year it has held steady after having peaked in the spring," he added.

For the first time this year, Klump acknowledged that the hot real estate market — driven in part by a persistent low interest rate environment that is expected to last well into next year — could lead to signs of trouble.

"With interest rates expected to remain low for longer, the housing sector will no doubt be closely watched for signs of excess," said Klump.

"That said, current trends for resale housing and new home construction suggest that tightened mortgage regulations are working as intended and fostering economic stability in Canada."

Heavy borrowing activity signals dark clouds on the horizon for some households as debt reaches record levels — as much as 153 per cent of disposable incomes, according to data released earlier this week.

The most over-leveraged Canadians could find themselves unable to cope when interest rates eventually rise, federal Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have warned.

A total of 432,048 homes have changed hands on CREA's MLS system so far this year, that's about 0.7 per cent above the 10-year average.

Canada’s economy surges ahead

2011-12-01T07:28:00.001-08:00

Christine Dobby Nov 30, 2011 – 7:06 PM ET

The Canadian economy was not as bad as first feared in the third quarter. In fact, it was much better than almost anyone had hoped.

Fuelled by record monthly output from the oil-and-gas and mining sectors and overall export strength as temporary headwinds drifted away, third-quarter economic growth shot past expectations.

Statistics Canada said Wednesday that gross domestic product for the period rose by an annualized 3.5%, beating economists’ more moderate average prediction of 3.0% growth and the Bank of Canada’s forecast of 2.0%. In September alone, the economy grew 0.2% from August, falling just short of a 0.3% increase economists predicted.

The growth during the quarter comes as a welcome change after a revised 0.5% contraction in the second quarter.

Net exports staged a decided recovery as external pressures like the fallout from the Japanese natural disasters in March were no longer a factor.

But the devil is in the details as flagging domestic demand and weak business investment lurked beneath the report’s strong headline growth. A close look at the data has economists forecasting only modest growth — in the range of about 2% — in the coming quarters and predicting the Bank of Canada will remain on hold with interest rate hikes.

Here’s what stood out from Wednesday’s report:

EXPORTS

The driving force behind the uptick in GDP for the quarter, exports grew at an annualized rate of 14.4%, up from a pullback of 6.4% in the previous quarter.

Paul Ferley, assistant chief economist at Royal Bank of Canada, said that factors that weighed on Canadian exports in the second quarter — including the Japanese supply-chain disruptions as well as wildfires in Northern Alberta that led to shutdowns of oil sand production facilities — were resolved in Q3 and contributed to the increase.

But, he cautioned, “The boost to third-quarter growth provided by the reversal of these factors is not expected to continue to the same extent into the fourth quarter.”

As the global economy stalls and prospects for a quick turnaround look increasingly grim, economists predict it will could spoil the Canadian export party.

HOUSING

Canada’s unstoppable real estate market was another bright spot during the quarter. Residential construction shot up 10.9% annualized, following on comparatively modest increases of 1.6% in Q2 and 6.7% in Q1.

“After quarters of booming housing starts data, the residential construction bonanza finally translated into the GDP numbers,” said Emanuella Enenajor, economist at CIBC Economics.

The expansion in this sector came from all three major components including fees and transfer costs related to resale transactions, new housing construction and renovation activity.

“Continued strength in new-home sales has elicited more and more new housing construction, particularly in the high-rise condo market,” said David Madani, Canada economist for Capital Economics.

He noted that a reported increase in housing starts bodes well for further strong growth in this category next quarter.

CONSUMER SPENDING

Canadians slowed their spending on goods and services during the quarter, raising red flags for economists concerned about sluggish domestic demand.

Personal expenditures grew at an annualized rate of 1.2%, down from an expansion of 2.1% in the previous quarter.

“A slowing pace of income growth owing to tepid hiring and weaker wage dynamics will likely continue to put downward pressure on consumption activity,” Ms. Enenajor said.

BUSINESS INVESTMENT

Business investment actually contracted during the quarter with a decrease of 3.6% annualized, down from last quarter’s 14.6% increase.

“Weak business investment is a worry, as it has been an important source of growth since early 2010 and replaced personal spending as the main source of domestic growth,” said Charles St. Arnaud, an analyst with Nomura Global Economics.

He noted that this, coupled with the fact that personal spending is likely to remain weak, “Could mean that domestic demand stays weak over the next few quarters, as global uncertainty remains high.”

FINAL DOMESTIC DEMAND

The combined slowdown in consumer spending and business investment was a drag on final domestic demand, which rose only 0.9% in the third quarter, down from a 3.1% gain in Q2. The other component, government expenditures, was flat in the quarter as government stimulus spending continues to slow to a trickle.

“Note that the pace of final domestic demand has been consistently slowing since 2010, weakening from around 6% to its current sub-1% pace,” Ms. Enenajor said.

Canada’s slowing economy may need rate cuts: OECD

2011-11-28T07:03:00.001-08:00

By Greg Quinn

Bloomberg

Canada’s economy is slowing because of weaker foreign demand and may need new stimulus from the central bank and government if things get worse, the Organization for Economic Cooperation and Development said.

Gross domestic product will grow 1.9% next year, the Paris-based OECD predicted Monday, down from its May forecast for a 2.8% expansion. The outlook for this year was pared to 2.2% from 3% in May, and it estimated 2013 growth of 2.5%.

Finance Minister Jim Flaherty said last week he may offer additional stimulus if required, adding the risks to the global recovery from Europe’s debt crisis are increasing. Bank of Canada Governor Mark Carney has kept his key lending rate at 1% since September 2010 and has said the economy won’t fully recover until well into 2013.

“Output is projected to expand at a slow pace as exports are restrained by sluggish external demand,” the OECD report said. “Domestic spending should sustain growth but at a moderate rate, as high debt and waning sentiment curb consumption growth.”

Consumers may be discouraged from spending by debts that are a record 150% of disposable income and by a weak job market marked by government cutbacks and slow private hiring, the OECD said. Unemployment will be little changed next year at 7.3% from this year’s 7.4% according to the report.

“Risks are skewed to the downside,” the OECD said, and if they materialize “the Bank of Canada should ease monetary policy via further interest rate cuts, which in a downside scenario would be consistent with the inflation target.”

The Bank of Canada has predicted inflation will slow to 1% in the second quarter of next year from 2.7% this quarter. The bank acts to keep inflation in the middle of a 1% to 3% band.

Bank of Canada could slash interest rates in a big way next year

2011-11-10T08:33:00.001-08:00

John Shmuel Nov 9, 2011 – 4:10 PM ET | Last Updated: Nov 10, 2011 2:06 AM ET

As the nail biter in Europe continues this week, two economists are predicting the Bank of Canada will move to cut rates in a big way next year.

Sheryl King, an economist at Bank of America Merril Lynch, said in a note that the volatility hitting Europe and the risk of damage to the global economy means the Bank of Canada will move to cut its benchmark interest rate to ward off the risk of recession. Her prediction is the cut will be a whopping 0.75% decrease from the current rate of 1%.

“With the Eurozone sovereign debt and banking crisis showing no sign of containment, we think the Bank of Canada will cut rates back to the effective lower bound of 25 basis points (0.25%) early next year,” she said.

Ms. King forecasts that the cut would come in two phases, with a 0.50% trim being announced during the bank’s January 17 meeting, while the second and final 0.25% cut coming during the March 8 meeting.

Also predicting a lower interest rate next year was David Madani, Canada economist at Capital Economics. He is forecasting a more mild cut of 50 basis points, however, saying he expects it to occur in April or June.

Either way, Mr. Madani said he expects interest rates in Canada will remain low for some time.

“The Bank might communicate that its policy rate will remain at 0.50% for a lengthy period of time, conditional on its projected outlook for consumer price inflation,” he said, in reference to the Bank of Canada’s target of 2% annual inflation.

“Even if we are wrong, the broader message remains that interest rates will remain unusually low for a very long time.”

Most economists, however, are still predicting that the Bank of Canada will raise interest rates rather than lower them in 2012. In a recent Reuters survey of 40 economists last month, the consensus was that an interest rate increase will occur in the third quarter of next year.

If rates are cut, it will mark a sharp turnaround for the Bank of Canada, which only last year raised interest rates. Canada became one of the first advanced economies to raise its benchmark interest rates following the recession when the Bank of Canada implemented a 25 basis point hike in September of last year. The benchmark rate has since remained unchanged at 1%.

Royal LePage Launches New Mobile Site

2011-11-04T07:44:00.000-07:00

Wednesday, 02 November 2011 09:12
In an effort to make real estate shopping more accessible, flexible and convenient, Royal LePage Real Estate Services has launched a new mobile site for Android, iPhone and BlackBerry mobile devices.
The site will provide both information about listings and neighbourhood data, as well as feedback and comments from agents and residents that know the neighbourhood inside and out-giving this tool some personal context.

This tool has been nicknamed the “Neighbourhood Navigator”, which Royal LePage describes as the combination of” seller and agent comments ... with neighbourhood "walkability scores" and consumer rankings of nearby businesses to provide valuable insights for users.”

Furthermore, users can take advantage of GPS to position themselves in their targeted neighbourhood, helping them find useful items like open houses and neighbourhood amenities like schools, banks, grocery stores, restaurants and cafes.

“Buying a home is often the largest financial decision Canadians will make in their lifetime," said Phil Soper, president and chief executive, Royal LePage Real Estate Services. "To help prospective buyers make informed decisions, our new mobile site allows users to gain extra insights from the seller about their home and comments from the agent about the neighbourhood."

"While it will take some time to get the seller and agent comments populated, we have many advanced features to serve as the backbone for the mobile site," added Soper.

"The future is mobile and we're pleased to offer homebuyers and sellers the ability to access valuable real estate information right from their mobile devices," said Soper.

Variable Rate Holders May Face Trouble .

2011-11-02T07:25:00.000-07:00

CANADIANS - don't worry too much. In the USA most clients were approved at the LOWER floating rate to the maximum of their buying ability. So naturally a rate change would hurt them - if you have a VIRM in Canada you were probably approved at around 4-5% and Prime is still on 3%. Once in a while it is good not to have "The American Way".

Neil "Mortgage Man" McJannet

Monday, 31 October 2011 10:18 Newsroom . . A new report from Bank of America Merril Lynch warns about the dangers facing some Canadian mortgage holders
The report suggests that there are a vast number of variable rate mortgage holders who will be vulnerable in the event of an interest rate hike. In fact, they suggest that two of every three new mortgages is a variable rate mortgage.
In the past, according to Bank of America Merril Lynch, typically around 25%-30% of mortgages were variable rate, suggesting that the tremendous shift in appetite could spell financial disaster for a big chunk of home owners in the event of a rate hike.

The good news, at least for the moment, is that many economists have put the possibility of a rate hike off the table until around 2013- but the fundamental vulnerability remains.

While it doesn’t mean that a rate hike will spell disaster, the possibility does remain. However, as many Canadian mortgage brokers will tell you, variable rate or not- they typically qualify a client at a higher fixed rate, so as to remove them from the danger zone in the event of a rate hike, simply as a part of due diligence. While the possibility of a US- style collapse exists in theory, the prevailingly stringent attitudes towards lending in Canada suggest that there are stop gaps in place to protect against such vulnerability.

Economists at Bank of America Merril Lynch suggest that, because rates have been so low for such an extended period of time, that mortgage holders are constructing false expectations about the true cost of a mortgage, and as such are taking more risk than they perhaps should be.

They indicate that Canadian mortgage holders must be mindful of the fact that rates will likely rise. According to their research, a rise of 2% will be enough to push those on the fringe into trouble

Real estate appraisers decry Zoocasa calculator

2011-10-27T10:08:00.000-07:00

Again everyone is running to save their souls. I would not use this service as "Gospel" but it sure sounds like a good idea as part of a personal research before buying a home.
Try It - You May like it!

Neil "Mortgage Man" McJannet

steve ladurantaye — REAL ESTATE REPORTER

Globe and Mail Update

Published Wednesday, Oct. 26, 2011 4:30PM EDT

Last updated Wednesday, Oct. 26, 2011 6:11PM EDT

The country’s professional real estate appraisers are sounding the alarm over a service that allows Internet users to receive instant estimates of a house’s worth using past appraisal data.

Zoocasa.com recently unveiled its Zoopraisal service, which allows anyone with a web connection to punch in an address and receive a valuation estimate. The estimate is generated using data provided by Centract Settlement Services, a property valuation company that has appraised millions of homes across the country on behalf of financial services companies.

But the Appraisal Institute of Canada says anyone who let Centract into their home wasn’t doing it so the data could be used by snoopy Internet surfers curious about property values along their street.

“Our organization has significant concerns relative to the confidentiality and custody of the data being used to populate the site,” said Keith Lancastle, the organization’s chief executive officer.

Zoocasa president Butch Langlois said the service isn’t intended to replace the services of professional appraisers or real estate agents, and the estimates are based on similar properties in a neighbourhood and not on any specific report on a specific property.

“We are not actually pulling any data on specific houses,” he said. “It’s based on sales and appraisals in the area around the home.”

Traditionally, the best way to get an estimate of a house’s value was to call a real estate agent. But as data become more available, web services such as Zoocasa are stepping in to make the process less cumbersome for consumers.

Appraisals are typically carried out when someone is looking to borrow money against a property. The Appraisal Institute of Canada has about 5,000 members who are certified to do the work. Mr. Lancastle said he was “concerned” that services such as Zoocasa’s could undermine his organization’s reputation.

“Much as a retail store blood pressure test is not a substitute for regular medical care, a web-based calculator is no substitute for a real property appraisal,” he said. “A proper appraisal comprises a number of stages – including research, analysis and interpretation – needed to provide an accurate estimate of the market value of a property.”

While some real estate agents have also expressed concern about the service, others such as George O’Neill of O’Neil Real Estate Ltd. in Toronto have welcomed it as a one more tool for consumers to use before they approach a professional for help.

“I would prefer that someone do all this research before contacting me so I can provide more value-added services rather than just provide numbers,” he said. “That may put me in the minority amongst my peers. But I’d rather spend my time getting someone the best price, because that can never be automated.”

With little doubt about interest rate, analysts look to Carney's call on economy

2011-10-25T09:00:00.001-07:00

By The Canadian Press

OTTAWA - The Bank of Canada is expected to continue setting the conditions for economic recovery today by passing again on interest rate hikes.

Most economists and markets agree that governor Mark Carney will leave the rate at one per cent until the end of the year and likely well into 2012 or longer.

And, any thought Carney might have had of cutting the rate likely went out the window last week when Statistics Canada reported inflation rose to 3.2 per cent in September, above the bank's one-to-three per cent acceptable range.

TD Bank chief economist Craig Alexander says with uncertainty over Europe's debt issues high, and the U.S. economy still stumbling, the Canadian central bank is in wait and see mode for some time.

He says of greater interest today is what Carney will say about future prospects for the Canadian economy.

A few weeks ago, the bank was expected to dramatically downgrade its official growth projections of 2.8 and 2.6 per cent for this year and next. But with economic data coming in better-than-expected in recent weeks, including last month's surprising 61,000 jobs gain, the bank may not be as glum about prospects going forward.

BC Homes sale and prices rise

2011-10-19T09:17:00.000-07:00

Low mortgage rates and improving employment numbers continued to bolster the already hot B.C. real estate market last month, putting home sales and prices back on an upward trend after experiencing some slight softening, on a month-to-month basis, during the summer.

B.C. home sales processed through the Multiple Listings System rose 8.8% to 5,995 transactions in September compared to the same month last year, while the average residential price rose 6% to $523,568 on a year-over-year basis.

On a seasonally adjusted basis, however, sales were up just 3%, said Cameron Muir, BCREA chief economist.

"Despite a modest gain in unit sales, total active residential listings in the province remained elevated in September,” Muir said. More than 55,600 home were listed in the province at the end of September.

On a year-to-date basis, the total value of residential sales in the province increased 17.5% to $34.8 billion, compared to the same period last year, while the volume of residential sales increased 3.2% to 61,127 units. The average residential price continued to outpace the national average, rising 13.9% $569,922 over the same period.

New Online Home Appraisal Tool .

2011-10-17T07:19:00.000-07:00

“... The launch of Zoopraisals™ addresses one of our most requested features,” said Butch Langlois, President of Zoocasa. “Knowing the current price of your home is the kick-off point for many Canadians as they consider making their next move.”

This free service is provided through a licencing agreement with Centract Settlement Services. “Centract possesses one of the largest national databases of residential real estate prices and information in Canada,” said Rob Soja, Vice President of Business Development at Centract. "We’re really excited to be working with Zoocasa to provide home price estimates to Canadian consumers nationally.”

Consumers who use the tool can expect “An indication of a home’s price ...based on like properties in their neighbourhood. It also provides additional content from the Zoocasa database and its content partnerships including detailed neighborhood demographics.”

In the latest move, demonstrating the tremendous presence of the Internet in all things housing and real estate, real estate search site Zoocasa has released a tool for consumers to get online home price estimates- called the Zoopraisal service.

What this does underscore is the importance of one-stop shopping for busy consumers. Statistics suggest that upwards of 80% of real estate searches at least begin- or have some part taking place on the internet.

Demand for immediate access for full, comprehensive information- especially as it pertains to housing is increasing as well.

“Zoopraisal™ is just the newest in a long line of new tools and services to support consumers in their home search process,” said Mr. Langlois. “Consumers are spending an average of 11 months in their home search process, predominantly online, and Zoocasa wants to support these consumers and allow them to conveniently connect with real estate professionals across the entire process including realtors, mortgage lenders or other such experts.”

Flaherty rules out mortgage tightening

2011-10-13T13:10:00.001-07:00

Finance Minister Jim Flaherty dismissed speculation about a Canadian housing bubble, telling reporters in New York on Wednesday that he sees no need to tighten the country’s mortgage rules further.

"We have seen in the past year some softening in the Canadian housing market, in part due to the tightening of the insured mortgage market rules that we did earlier this year … That's an appropriate result from that tightening," Flaherty said during a news conference. "It will take clear evidence of a bubble in the housing market in Canada, which we have not seen."

Flaherty made those comments despite Royal LePage’s finding in its quarterly housing survey released on Wednesday that the average detached home price in Vancouver in the third quarter rose 17% on a year-over-year basis to more than $1 million. That’s three times the national average.

The soaring prices in Vancouver have largely been influenced by a flood of foreign money being invested into wealthy neighbourhoods like Richmond, Phil Soper, president and CEO of Royal LePage, said.

Asian investors, who are surrounded by some of the most inflated real estate markets in the world – especially in Hong Kong and Australia – typically see Vancouver’s prices as a bargain.

Soper said he believes the Vancouver market will likely soften next year because of slowing domestic demand, but the steady flow of foreign money into the city will likely reduce the amount of overall moderation.

“Vancouver is being influenced at the margin by foreign investment. I believe that that is a sustainable scenario,” he told CRE Online.

Foreign investors tend to purchase homes in Vancouver with cash. That means they are in no way influenced by the Bank of Canada’s interest rate policy. “So that investment will cushion the downside to the Vancouver market because most of those foreign buyers are purchasing with cash,” he said.

Canada Housing Starts Jump 7.3% In September From August

2011-10-12T06:56:00.000-07:00

TORONTO (Dow Jones)--Canadian housing starts rose 7.3% to an annual rate of 205,900 in September, mainly due to an increase in multiple starts, Canada Mortgage and Housing Corp. said Tuesday.

Results were well ahead of the 189,000 rate analysts surveyed by Dow Jones had projected for the month.

The September rate was up from a revised 191,900 units in July.

CMHC said the pickup in September housing starts reflects an increase in multiple starts in the Atlantic region, Quebec and in British Columbia, but noted that multiples "are expected to move back towards levels consistent with demographic fundamentals in the near term."

CIBC World Markets agreed, saying in a note that multiple starts are "widely expected to scale down in the months ahead."

However, CIBC said the data suggest residential construction could be a positive for GDP in the third quarter "as homebuilding continues to garner support from a low rate environment, and a robust multiples market."

In September, urban starts rose 8% to 185,900. Multiple urban starts were up 14.2%, while urban single starts were down 1.5%.

Last month's seasonally adjusted annual rate of urban starts jumped 47% in the Atlantic region, 32% in Quebec and 18.6% in BRitish Columbia, while urban starts fell by 3.5% in Ontario and 12.1% in the Prairie region.

Rural starts were estimated at 20,000 units in September.

Canada adds 61,000 jobs in Sept, jobless rate down

2011-10-07T06:42:00.000-07:00

OTTAWA (Reuters) - A whopping 60,900 new jobs helped slice Canada's unemployment rate to 7.1 percent in September from 7.3 percent in August, Statistics Canada said on Friday.

This far exceeded the median forecast of 10,000 new jobs in a Reuters survey of economists after August's decline of 5,500. The most optimistic forecasters had predicted 30,000 new positions in September .

Adding to the positive news, September saw 63,800 full-time additions, while part-time employment declined by 2,900.

However, 38,400 of the new jobs were in educational services, presumably largely the result of the return to work of teachers and assistants who were laid off for the summer. Statscan tries to adjust for seasonality but said there had not been a consistent pattern in this sector in recent years.

The unemployment rate is the lowest since December 2008. The data should temper market expectations of a rate cut by the Bank of Canada as it signals an economy that is still humming despite dire news out of Europe. Another indicator the bank watches closely for inflationary pressure, showed the average hourly wage of permanent employees had risen by 1.6 percent from a year earlier.

Canada best for business: Forbes

2011-10-05T07:22:00.001-07:00

By Theresa Tedesco, Financial Post

Canada ranks as the top country among 134 major developed nations for business, according to the annual Best Countries for Business survey by influential business magazine Forbes.

The move from fourth in 2010 to top billing is based on a ranking of 11 different factors – including property rights, taxes, freedom of trade, money, corruption, innovation, investor protection and market performance. According to the survey, Canada is the only country to score in the top 20 consistently in 10 of those metrics.

“As an affluent, high-tech industrial society in the trillion-dollar class, Canada resembles the US in its market-oriented economic system, pattern of production and affluent living standards,” the report says.

Canada is lauded for avoiding the financial meltdown that has seen banks teetering perilously in the U.S. and Europe since 2008, for tax reform, mostly with the introduction of the Harmonized Sales Tax in Ontario and British Columbia, and for its ability to maintain a lower unemployment rate than its trading partners. In fact, in terms of overall tax burden, Canada ranked ninth in 2011, up from 23rd in 2010.

“During the run-up to every U.S. presidential election, countless Americans threaten to move to Canada if their preferred candidate does not emerge victorious,” declared Forbes. “Of course, few follow through with a move north. Maybe it is time to reconsider.”

While the U.S. is “paralyzed by fears of a double-dip recession and Europe struggles with sovereign debt issues,” Canada’s economy held its own, the report gushes. “Canada enjoys a substantial trade surplus with the US, which absorbs about three-fourths of Canadian exports each year.”

The unemployment rate of 7.3% in Canada compares favourably with the U.S. rate of over 9% and the eurozone unemployment rate of 10%.

Even economic expansion, projected at 2.4% but down from last year’s 3.1%, is heralded.

While many Canadians have a love-hate relationship with their banks, the folks at Forbes are unequivocal in their adoration. “Canada’s major banks, however, emerged from the financial crisis of 2008-09 among the strongest in the world, owing to the financial sector’s tradition of conservative lending practices and strong capitalization.”

The other countries rounding out the top 10 are New Zealand, Hong Kong, Ireland, Denmark, Singapore, Norway, the United Kingdom, and the U.S, at 10th spot, down from ninth in 2010. The culprit in 2011: the U.S. surpassed Japan as having the highest corporate tax rate among major developed countries.

Three African countries – Burundi, Zimbabwe and Chad – bring up the rear among the 134 nations ranked, all faring poorly mostly because of corruption and red tape.

© Copyright (c) National Post

Building Self Confidence!

2011-10-01T19:58:00.000-07:00

Many people are feeling overwhelmed by the need to achieve, the complexity of competition, and a fear of failure or rejection. As a result their self-confidence is like the mystical unicorn — elusive and seldom, if ever, seen. You will probably never catch a unicorn, but here are the five steps that will help you capture your self-confidence.

1. Focus on what’s right, not what’s wrong.
When people talk about work, school, life, and other people they are usually talking about what’s wrong or everything that could go wrong. That type of thinking can nullify your strengths and kill your self-confidence.

Unconsciously your mind negatively perceives disappointment as a threat. You automatically begin to focus on the perceived threat or what’s wrong or could go wrong. This is not an alligator, you can fight it.

Completing and constantly saying the following phrases to yourself will build confidence:

• I have a good chance of succeeding because…
• Everything will work out because…
• I’m great for this position, listing, or opportunity because…
• Today is going to be an extraordinary day because…
These declarations won’t magically make things perfect but they will help to bring back your self-confidence.
Once you begin to regularly use these and similar phrases you will create vivid images in your mind that will help you to...

2. Visualize Your Victory.
Your unconscious mind makes no distinction between imagination and reality. Think about that. If you imagine having confidence then you will actually experience being confident. Find a quiet place and for a few moments imagine what you will see, hear, feel, taste, and smell during your victory. Envision yourself successfully achieving your desired outcome.

3. Thoroughly prepare and be authentic.
You know if you’ve properly prepared for the task at hand. It’s difficult to be confident when you’re not prepared and pretending to be something that you’re not. Thoroughly prepare and keep it real. Be authentic. As you prepare, focus on what’s right, visualize your victory, and...

4. Avoid Disaster Dan and the Taverns of Turmoili.
Have you ever known or heard of someone that never has anything good to say? Do you know what you should tell people like that? Absolutely nothing. Don’t tell them about your dreams, aspirations, or goals. Don’t even tell them your name, email address, or where you live. And if they know where you live it’s time to move! These kinds of people dwell in Taverns of Turmoil — negative environments — which should be avoided at all costs. Instead use your time to....

5. Set bite-sized goals and celebrate success.
When a task, goal, or obstacle appears to be insurmountable your self-confidence can begin to wane. The good news, however, is that small, successful experiences can produce more confidence. As your confidence grows, celebrate by giving yourself a treat or doing something you enjoy. Then set another small goal and celebrate again. This technique is a tremendous confidence booster.

Self-confidence is a priceless asset that will frequently tip the odds in your favor. The five steps you just walked though will keep your self-confidence from being like the unicorn – elusive and seldom, if ever, seen.

S.M.A.R.T. Goal setting

2011-09-29T06:51:00.000-07:00

The best way to actually formulate your goals is to utilize SMART goal setting.

SMART goals ensure that all your objectives include all the key elements to maximize your goal setting success.

When you use SMART goal setting you will find that it is easier for you to stay on track with your various goals in all areas of your life.

Essentially SMART stands for:
S=Specific: There is a higher likelihood that a specific clearly stated goal would be accomplished than a general goal.

A vague goal can set you up for procrastination since you may not be sure exactly how to approach the goal. To help create a specific goal ask yourself the following questions.

Who is involved? What do I want to accomplish? Where is the central locale? When is my deadline? Which requirements or constraints should I consider?Why do I want to accomplish this goal?

M = Measurable: Goals need to be measurable so that there are benchmarks of attainment.When your goals are measurable or quantifiable you are more likely to stay on track and reach certain milestones which give you that boost of confidence to press on.

A = Attainable: Keep your goals within your control. If you set goals that you do not have reasonable control over, you may be setting yourself up for failure. Having attainable goals is also about identifying goals that are truly important to you.

R = Realistic: Make sure that you set goals that you are both willing and able to achieve. It is important that you are able to make substantial progress toward your goal.

T = Timely: Goals need a time frame attached to them. There needs to be a sense of urgency. A goal that you can taste, touch, smell, see or hear is tangible and is more defined. This will make that goal more attainable.

Here is an example of how you might use SMART goal setting.

Specific: Lose 10 pounds

Measurable: Weigh myself on the scale once a week. Measure my waist every three weeks.

Attainable:Lessen the amount and type of foods I eat. Do 20 minutes of physical activity everyday

Realistic: Lose 1-2 pounds a week

Timely: Lose 10 pounds over the next 8-10 weeks

SMART goal setting really helps you stay motivated through rough patches.

You will notice that you are able to work more efficiently, meet deadlines and make the kind of decisions necessary to bring you closer to achieving your goals. And when that happens don't forget to pat yourself on the back and celebrate your achievements!

Canadian housing market loses momentum, but at less dramatic pace: Scotiabank

2011-09-28T06:33:00.001-07:00

The Canadian Press, On Tuesday September 27, 2011, 8:26 am EDT

By The Canadian Press

TORONTO - A Scotia Economics report says Canada's housing market is cooling, but at a slower pace than most other markets in the developed world.

Scotiabank's latest real-estate outlook said Tuesday that Canada is showing a resilience that few other countries have been able to maintain.

"In the majority of the major markets we track in North America, Europe and Australasia, inflation-adjusted home prices declined on a year-over-year basis in the second quarter of 2011," said Scotia Economics senior economist and real estate specialist Adrienne Warren.

"While Canada's hot housing market also has begun to cool, it remains a notable outperformer."

The bank (TSX:BNS) noted that of the nine major developed markets it tracks, only Canada, France and Switzerland showed housing price increases year over year.

In Canada, existing home prices were up five per cent year-over-year from April to June, while prices appeared to level out in July and August, the report said.

However, the bank pointed to several challenges that could stall the current pace of the domestic housing market.

"Heightened economic uncertainty combined with recent signs of a loss of momentum in Canada's jobs market could keep some potential buyers on the sidelines for the time being," Warren said.

"On balance, we anticipate a modest slowdown in the volume of sales transactions heading into year end, alongside relatively flat prices."

Vancouver prices to keep rising: Central 1 Credit Union

2011-09-21T09:35:00.001-07:00

The Vancouver housing market may already be unaffordable for many, but there’s enough demand to keep prices rising, according to a new forecast.

A report by Central 1 Credit Union economist Brian Yu predicts the median home price will increase 6.8% to $417,000 by the end of the year compared to 2010. This is despite the fact home sales are expected to decline in 2011, down 1% from 2010, to reach 88,200.

The Royal Bank of Canada has recently calculated ownership costs of an average two-storey home in Vancouver equals 95.5% of average income this year, a record high.

Yu defended his prediction in a statement, citing low interest rates, a limited supply of land, and a low percentage of speculation. It runs out most Vancouver buyers are living in their homes, with only 2-3% of properties owned by speculators, he said.

“Our research shows few signs that speculators are overly active in the Vancouver market, which means we are unlikely to see a speculation-induced bust,” Yu said.

And while the average price has skyrocketed in Vancouver, those jumps are mostly limited to particular areas of Vancouver where there have been a high number of luxury home sales such as Richmond. The rest of the market is more stable, he said.

“Even if the economy slows and employment slows, we expect to see individuals hold on to their homes, rather than sell them in a weaker market,” Yu said.

Yu’s report predicts in 2012 home sales in Vancouver will grow 3.4%, driven by new home sales, although existing home sales will decline.

Tax issues might push some home sales until 2013, said the report.

“People looking at new homes priced over $525,000 may very well wait until the tax changes lower the 12% hit they face,” said Yu.

Canadian debt levels no cause for alarm,

2011-09-20T07:27:00.000-07:00

Posted on Monday, September 19, 2011 6:40PM EDT
A report that showed Canadian household debt levels have topped U.S. ones should be taken with a grain of salt, according to one economist.

In a note released Monday, National Bank of Canada’s Matthieu Arseneau says the Canadian government’s indicator on household debt “does not lend itself well to such an international comparison owing to the considerable differences between the social safety nets of the two countries.”

Take charge of credit card debt

At first glance, personal disposable income levels appear much lower in Canada than in the United States. Mr. Arseneau attributes that to higher tax levels in Canada that are used, in part, to fund our national health care system.

Americans, meanwhile, must allocate nearly 20 per cent of their personal disposable income to paying for health care, he says. “If we adjust for this factor, the debt ratio of U.S. households exceeds that of their Canadian counterparts by 12 per cent.”

A report released last week showed that Canadian household debt rose to a record high in the second quarter, surpassing levels seen in the United States since the start of the year.

Statistics Canada said last Tuesday that the ratio of household credit-market debt – which includes mortgages, consumer credit and loans – to personal disposable income climbed to 149 per cent from 147 per cent in the first quarter. That’s the highest level since Statscan started gathering figures in this category in 1990.

The government agency attributed the growing debt to higher mortgages and increased consumer credit borrowing.

With interest rates slated to remain at low levels for the foreseeable future, Canadians are taking on both mortgages and consumer loans. Policy makers have expressed concerns about high household debt levels and warned against what could happen if rates were to rise.

In his note, Mr. Arseneau also noted that the Statscan ratio represents only one facet of the financial health of households.

“If we consider the ratio of debt to net worth, which is still markedly higher in the United States, we understand why household deleveraging is ongoing south of the border whereas nothing of the sort is happening in Canada,” he said.

Mr. Arseneau concluded his note by warning of the need to be vigilant, because excessive household debt levels “could represent a risk factor for Canada’s economic stability down the road.”

US Jobless Claims Continue to Climb .

2011-09-19T10:42:00.000-07:00

Friday, 16 September 2011 09:56 Newsroom . .

In another indication that the US economy may be in trouble, jobless claims jumped last week to the highest level seen in three months. This is hard evidence that the job market is depressed.
According to data released by the US Labor Department said Thursday that weekly applications increased last week 11,000 to a seasonally adjusted 428,000- and this reflects a week that included the Labour Day holiday. Also for the fourth consecutive week, the four week average increased, registering in at 419,500.

What may be a little disturbing about this is that typically short weeks mean a reduction in unemployment claims, but this past week bucked that trend- suggesting that there may indeed be trouble of a serious economic kind brewing south of the border. Also, these unemployment applications are widely considered by many to be a barometer of layoff activity.
The magic number to demonstrate that hiring is outpacing the unemployment mark is 375,000- which continues to be elusive. In fact, claims have not been below that level since February, indicating that this is not a blip on the map.

Compounding things, there was net zero job growth in the US in August, which unfortunately, represents the worst figure seen in almost a year, and the unemployment rate continues to hold at a high 9.1% for the second month in a row.

What may be the most staggering August statistic though is businesses only added 17,000 jobs- which is a remarkable plunge from the 156,000 added the month prior.

Beyond the numbers though, is what this means- bottom line for the US economy, and many analysts are worried that there is a concerning trend emerging here. Amidst talk of a double-dip recession, a frail US economy is in desperate need of job creation to pull itself out of the chasm and away from the brink.

Variable Rate vs. Fixed Rate Conversation Renewed .

2011-09-14T08:33:00.000-07:00

Monday, 12 September 2011 10:39 Newsroom . .
With the most recent interest rate announcement last week, and the knowledge that interest rates are set to remain low for the foreseeable future, the debate for variable rate mortgage over fixed rate has gained new momentum.

“With short-term rates now likely to stay at very low levels, and long-term rates testing record lows, whether to lock into a longer-term fixed mortgage rate or choose a variable rate continues to be a hot-button issue among home buyers,” says Benjamin Reitzes, Senior Economist, BMO Economics.

According to the Bank of Montreal, history would indicate that a variable rate is the way to go: “Research shows that there is little debate as to which has been the better option for homebuyers. Typically, borrowers save money by staying in variable products, and riding the rollercoaster of fluctuating rates. In fact, since 1975 the cost-effective route for borrowers was to stay variable 83 per cent of the time. And while the spread between 5-year fixed mortgage rates and variable rates has fallen from the all-time high hit in mid-2010, it remains historically elevated. “

Although, it is not as straightforward as one being better than the other, history aside. And, as Karen Blomquist, Mortgage Broker, Mortgage Intelligence, told Propertywire.ca, it has a lot to do with matching product to person too. “I still believe that choosing between a fixed-rate versus a variable-rate mortgage has a lot to do with a person's mind-set. I get nervous clients who went variable and then call or send e-mails every week. If you can handle a bit of risk, it's great. But if you can't, you should lock into a fixed rate, even if it is a bit higher.”

It is about lifestyle too, says Blomquist: “"You want to decide that if rates do land at 7%, you can handle it. After all, you need to be able to sleep at night."

There is much to be gained too, into doing a little research, and knowing both your client- and your lenders too, as Blomquist suggests: “I definitely caution anyone looking at variable rate mortgages should check the lender's "best rate" policies to ensure you can still get a discounted rate when locking in. "Not all banks offer it." When working with a broker we can ensure that the lock in terms are that the client would get the lowest locked in rate and not the posted rate like some banks offer.”

And, too in the current rate environment, there exists tremendous opportunity to be proactive with clients who could benefit in the long term by refinancing or consolidating now: “Given the borrowing climate even those with a current mortgage may find it's an ideal time to refinance, even if there are penalties”, she adds.

"Sometimes it will save you a lot of money in the long term. The results can be unbelievable when you crunch the numbers. I've seen some people save themselves $1,000 a month simply by moving to a 3.39% mortgage. If you do refinance, you might also want to consider rolling any consumer credit card debt into your mortgage to have a single lower payment."

Many Canadians Living Paycheque to Paycheque .

2011-09-13T13:13:00.000-07:00

Although many Canadians would dearly love to enjoy their ‘golden years’, a new poll suggests that that may be more of a dream than reality.

According to the Canadian Payroll Association (CPA),” 40% of Canadians said they now expect to retire later than they previously planned. The primary reason (cited by 40%) was "I'm not saving enough money for retirement." “

Considering this data, this is perhaps a bit of a wake-up call for those who are self-employed as well, given the demographic shift in this country- and the knowledge that Federal Pension programs will not be enough to support some down the road through retirement. For those who work for themselves, funding retirement falls squarely on their own shoulders, and takes long-term planning- and saving over time- to achieve the dream of the ‘golden years’.

The report says, “A major contributing factor to the low savings rate is that many Canadians are living close to the line. The CPA survey found that the majority of Canadian workers continue to live pay cheque to pay cheque, with 57% saying they would be in financial difficulty if their pay was delayed by even a week.”

“The numbers were even higher for younger Canadians aged 18 to 34 (63%) and single parents (74%). The regions with the highest percentage of workers living pay cheque to pay cheque were Ontario (60%) and the Atlantic provinces (64%), which may be the result of their slower recovery since the last recession. Financial planners generally recommend that people have approximately three months of expenses (rent, mortgage, bills, groceries, etc.) as an emergency fund.”

74% of Canadians say that they have saved less than one quarter needed to reach their retirement goal.

"This is particularly troubling when you realize that 71% of the respondents are over the age of 35, with the bulk in their main saving years between 35 and 54," states Dianne Winsor, CPM, Chairman of the CPA.

To compound the worry, half of the respondents said that they were saving 5% or less of their pay, and 40% indicated that they were not planning on trying to save more.

According to the findings of the survey, there is a disconnect between what is actually happening, and what needs to happen in order for people to reach their financial goals- which includes eliminating or reducing credit card debt, paying down mortgage and consistently building up savings.

Wealthy Barber is back in business

2011-09-12T10:24:00.001-07:00

Jonathan Chevreau Sep 10, 2011 – 7:00 AM ET | Last Updated: Sep 9, 2011 9:33 AM ET

More than 22 years after finding bestselling success with The Wealthy Barber, financial guru David Chilton is back with a non-fiction follow-up. The Wealthy Barber Returns is arguably the best financial planning book since, well, since The Wealthy Barber.

The lifelong Kitchener, Ont., resident has departed from the fictional setting of the original, maintaining what he terms his “stage voice” — a folksy, witty tone honed over countless speeches. So readers expecting the return of the fictional Sarnia barber, Roy, may be disappointed that character is not the wealthy barber who is returning.

“I quote him [Roy] a few times,” Chilton says in an interview, “His advice was smarter: he ended up right.”

Given that so many others (including me) have imitated Chilton’s fictional format, it seems strange he has switched gears, but his timing has always been impeccable. The fact is the phenomenal success of the first book (more than two million copies have been sold) means Chilton himself has become the wealthy barber, supplanting his fictional creation. As with the original, the cover sports a full-length photo of Chilton and the red-white-and-blue barber pole that’s part of his powerful image.

Chilton acknowledges that he has “become the barber. One guy introduced me as the only author who became his character. No one calls Herman Melville Moby Dick.”

Even though it’s self-published, Chilton’s clout and genius for marketing have assured him widespread bookstore distribution. It’s in stores now, from Chapters to a spot I can confirm personally, a small independent bookstore in Bayfield, Ont.

Judging by initial testimonials, he’s hit another grand-slam home run. Luckily for us other authors, this is only the second time he’s stepped up to the plate.

As explained in the introduction, he was long reluctant to follow up the original because it was “the only good idea” he had, one he’s been “milking” for the better part of two decades (typical of the charming self-deprecating wit he maintains throughout).

But after a detour into co-publishing cookbooks, he decided North Americans are still nowhere close to absorbing the central message that they’re not saving enough. Except for a fortunate minority in employer-provided defined-benefit pensions, or the even rarer few who marry rich or win lotteries, most of us will have to save significant chunks of our income to achieve financial independence at a decent age.

The long-awaited sequel makes it clear there’s no magic bullet that can substitute for consistently saving for retirement, year in and year out. Most need to save till it hurts. Recognizing that most people find it near-impossible to save, Chilton tries to shift their focus to spending less, which amounts to the same thing. In clear and witty prose, he makes a compelling case for lifelong frugality or what I call guerrilla frugality. Forget the fancy stuff: If you can’t save by consistently spending less than you earn, retirement is just a pipe dream.

I’ll spoil one chapter, titled Four Liberating Words, by revealing they are “I can’t afford it.” I’m not a big fan of tattoos, but in the case of some acquaintances I know, I’d consider tattooing that phrase on their foreheads.

Chilton goes out of his way to avoid repeating key concepts from his earlier book, although the pay-yourself-first message of the orignal pervades the sequel in concept if not the actual phrase. I didn’t notice a repeat of the succinct Be an Owner, Not a Loaner — his original stance on emphasizing stock ownership rather than bonds — but he continues to see the value of a diversified portfolio of quality dividend-paying stocks.

However, the mutual fund industry and other proponents of “active” security selection will not be happy the new book joins the growing ranks of passive “indexers,” whether through index mutual funds or exchange-traded funds (ETFs). Nor will the insurance industry be ecstatic that Chilton has not recanted his previous stance in favour of low-cost term insurance rather than costlier whole-life or permanent insurance.

The book is divided into two sections, the first devoted mostly to the need to save more. The second half is a potpourri of short unconnected chapters on various aspects of investing, covering everything from pensions to tax-free savings accounts to wills and estate planning.

Chilton devoted the better part of the past year to the book, bouncing it off multiple experts (notably Mercer’s Malcolm Hamilton) and media pundits. The result is a book parents and teachers should provide to students late in high school or as they enter the work force.

As I note in a back-cover blurb, it’s the kind of book the federal Task Force on Financial Literacy should be distributing — except for the troubling fact its chairs are from the life insurance industry and actively managed investment firms.

Ironically, the first chapter of the original was titled The Financial Illiterate. Too many North Americans are still financially clueless and as Senator Pamela Wallin notes on the front cover of the sequel, Chilton has returned “just in time.”

Just not Roy the barber.

Why do U.S. retailers charge us more, Flaherty asks

2011-09-09T07:04:00.000-07:00

After weeks of hearing Canadian consumers complain they pay higher prices in Canada for identical goods sold in the U.S., federal Finance Minister Jim Flaherty says he shares their “irritation” and wants a committee to look into it.

In a letter obtained by The Star, Flaherty says he wants the standing senate committee on national finance to study why some prices remain higher here five years after the Canadian dollar soared above parity with the U.S. greenback.

“Canadians are rightly irritated when they see large price discrepancies on the exact same products being sold on different sides of the border,” Flaherty says in the letter.

Canadian consumers began complaining about the price gap in 2007 after the Canadian dollar soared above parity with the U.S. greenback for the first time in 30 years.

At the time, Flaherty responded by urging retailers to lower their prices and be more open about their pricing practices. He also suggested consumers shop around to ensure they got the best deal.

Canadian retailers said they felt unfairly blamed. They also said prices in Canada are higher because they face higher costs here for rent, labour, duties, transportation and marketing. As well, some multinational suppliers charge Canadian retailers higher prices, they said.

However, no-one has provided a detailed explanation of how much these factors affect prices. And in some cases, retailers have acknowledged they are charging whatever the market will bear.

In his letter, Flaherty calls on the senate committee to examine how these factors might affect pricing.

The committee, which should consult widely with retailers, distributors, wholesalers, importers, economists, analysts and consumers, could begin meeting this fall, the letter says.

Many prices have fallen since he last met with Canadian retailers five years ago to discuss this issue, Flaherty says in the letter. But many Canadians still have concerns with a persistent gap between some goods, the letter also says.

“We all want Canadians to shop at and support local businesses, especially with the start of the Christmas shopping season only months away. But we live in a market economy and Canadians know the value and power of shopping around. If we want our consumers to shop here, we need competitive prices,” his letter says.

“A strong dollar should benefit Canadian consumers,” the letter says.

The price-gap problem resurfaced last month after popular U.S. fashion retailer J. Crew opened its first store in Canada and also its first Canadian web site.

Fans of the clothing retailer were quick to point out J. Crew had not only raised its prices for Canada but by adding duties and taxes to its online prices, the final bill was in some cases 40 to 50 per cent higher than on its U.S. website.

J. Crew quickly backed down, removing the added duty from its Canadian website, though its prices both in the Yorkdale store and online remain 15 per cent higher on average than in the U.S.

It’s not just consumers who have noticed the price difference.

Doug Porter, deputy chief economist at BMO Capital Markets, has made a habit of surveying the cross-border price gap in recent years. His latest survey, last April, found that prices in Canada were on average 20 per cent higher than in the U.S. on a broad range of goods, from DVDs to luxury cars to golf balls.

When Porter first began tracking prices, in 2007, the gap was 24 per cent. Retailers said they needed time to adapt as most merchandise had been ordered 12 to 18 months earlier when the dollar was at 80 cents U.S.

Obama says U.S. faces ‘crisis,’ proposes $447B jobs plan

2011-09-09T07:03:00.000-07:00

Reuters Sep 8, 2011 – 6:16 PM ET | Last Updated: Sep 8, 2011 7:52 PM ET

By Matt Spetalnick and Alister Bull

WASHINGTON, Sept 8 (Reuters) – U.S. President Barack Obama laid out a $447 billion jobs package of tax cuts and government spending on Thursday that will be critical to his re-election chances but he faces an uphill fight with Republicans.

With his poll numbers at new lows amid voter frustration with 9.1 percent unemployment, Obama said in a high-stakes address to Congress that the United States is in a “national crisis” and called for urgent action on sweeping proposals to revive the stalled economy and avert another recession.

“Those of us here tonight can’t solve all of our nation’s woes,” Obama said in a nationally televised prime-time speech. “But we can help. We can make a difference. There are steps we can take right now to improve people’s lives.”

Taking aim at Republicans who have consistently opposed his initiatives, Obama said it was time to “stop the political circus and actually do something to help the economy.”

Obama, who pushed through an $800 billion economic stimulus package in 2009, said his jobs plan would cut taxes for workers and businesses and put more construction workers and teachers on the job through infrastructure projects.

“It will provide a tax break for companies who hire new workers and it will cut payroll taxes in half for every working American and every small business,” he said.

Obama is seeking to seize the initiative in his bitter ideological battle with Republicans, ease mounting doubts about his economic leadership and turn around his presidency just 14 months before voters decide whether to give him a second term.

Obama wants Congress to pass his “American Jobs Act” — which administration officials said would cost $447 billion — by the end of this year and offset the cost with deficit cuts.

But a deal may be hard to achieve with politicians already focusing on the presidential and congressional elections in November 2012.

If Obama can push through his plan, it might provide an economic boost quickly enough for him to reap political benefits. If it stalls in a divided Congress, his strategy will be to blame Republicans for obstructing the economic recovery.

“RIGHT AWAY”

Obama said his proposed plan would “provide a jolt to an economy that has stalled and give companies confidence that if they invest and hire there will be customers for their products and services.”

“You should pass this jobs plan right away,” he said in a speech interrupted by applause from his fellow Democrats while Republicans sat mostly in silence.

Obama proposed extending unemployment insurance at a cost of $49 billion, modernizing schools for $30 billion and investing in transportation infrastructure projects for $50 billion.

But the bulk of his proposal was made up of $240 billion in tax relief by cutting payroll taxes for employees in half next year and trimming employer payroll taxes as well.

Obama also said he was seeking to broaden U.S. homeowners’ access to mortgage refinancing in a plan to help the ailing housing market and put money back in the pockets of borrowers needing help locking into record low interest rates.

How much of the jobs package is viable remains in question. Almost all of it ultimately depends on winning support from Republicans who control the House of Representatives.

Bipartisan cooperation could be hard to come by in Washington’s climate of political dysfunction where a bruising debt feud this summer brought the country to the brink of default and led to an unprecedented U.S. credit downgrade.

But Obama insisted that “everything in here is the kind of proposal that’s been supported by both Democrats and Republicans — including many who sit here tonight — and everything in this bill will be paid for. Everything.”

Republicans will still be resistant, not wanting to give Obama a helping hand before the election. But they will be under pressure to cede some ground to help boost the economy or risk a voter backlash in 2012.

Obama’s choice of a rare joint session of the House and Senate, a setting better known for the president’s annual State of the Union address, was intended to lend ceremonial pomp to a critical speech and push Republicans to cooperate.

But it also carried the risk of raising public expectations that will be hard to meet.

Obama’s speech has taken on new urgency after the latest Labor Department report showed zero employment growth in August, stoking fears of a slide back into recession.

The pressure on Obama to act is driven not just by a spate of dismal economic data but by his own increasingly grim approval ratings now languishing around 40 percent, the lowest since he took office in January 2009.

An NBC/Wall Street Journal poll showed Obama was no longer the favorite to win next year’s election.

Economic conditions will help Canada's real estate sector stay healthy: CMHC

2011-08-30T07:10:00.001-07:00

By Mary Gazze, The Canadian Press

Canada's national housing agency says it expects home sales and construction activity will cool but remain healthy in the second half of the year, due to favourable economic conditions that push up demand for homes.

Canada Mortgage and Housing Corp. said Monday that lower unemployment, a steady level of immigration, and low interest rates are working together to prop up Canada's real estate industry.

"I think the Canadian housing market is healthy at the moment despite the uncertainty we observed in the financial market," Mathieu Laberge, deputy Chief Economist at CMHC said in an interview.

He was referring to the stock market ups and downs earlier this month as investors worried about the European debt crisis and feared the U.S. could slip back into recession.

"Employment is expected to grow at a moderate pace in the next few years," he said.

"We expect interest rates to remain flat for the remainder of the year and increase in 2012, and new immigration is an addition to demand in the housing market."

Laberge said the CMHC predicts the market sales volumes will hold at a stable level next year.

Canada Mortgage and Housing Corp. said low unemployment, immigration and low interest rates led to fewer claims in the first half of the year under its mortgage insurance programs, which protect lenders from defaults by borrowers.

The agency said it expects fixed mortgage rates to stay relatively flat for most of the year, with the five-year posted rate at between 4.1 per cent and 5.6 per cent, then increase slightly in 2012.

CMHC said variable rate mortgages would remain near historically low levels, although some banks recently increased their variable rates to reflect the higher cost of raising money.

Prices of homes shown on the Multiple Listing Service are expected to grow only slightly going forward because the supply and demand for resale homes will likely stay in balanced territory, CMHC said.

A least one analyst agreed that the real estate market should stay fairly healthy for the rest of 2011, but said it's already cooling slowly and home prices may decline in the longer term.

"What you're probably looking at is a period where prices are relatively flat, maybe a little bit lower in the next few years," said Adrienne Warren, an economist at Scotiabank who specializes in the real estate industry.

"Affordability from a price perspective has deteriorated and that's going to have to, over time, come back to more normal levels but it doesn't imply that that has to happen quickly as a type of correction that occurs quickly."

She said interest rates are low and attractive right now and encourage first time home buyers to enter the market, which drives up prices. Once those rates begin to rise — likely in the second half of 2012 — the current price of homes will become unaffordable for many, putting downward pressure on future prices.

In its report Monday, CMHC said changes to mortgage rules introduced by the federal government earlier this year played a part in reducing mortgage interest payments and allowed Canadians to build equity in their homes faster.

Canadians are finding it easier to pay off their mortgages, with arrears levels improving and the volume of mortgage insurance claims lower than expected.

In March, the federal government put through new rules that reduced the maximum amortization period to 30 years and cut the maximum amount Canadians can borrow to 85 per cent of the home's value.

After the changes, refinancing activity fell by nearly 40 per cent, which means fewer Canadians took on more debt. Federal Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have repeatedly warned of the dangers of the ballooning debt level of Canadian consumers.

Ten per cent fewer Canadians bought mortgage insurance immediately after the new rules began, and the level was five per cent lower than sales before the changes came into effect.

CMHC also reported its net income for the quarter was $383 million, up $61 million from $322 million in the same quarter last year. Revenues were down slightly at $3.3 billion, versus $3.4 billion.

The agency's predictions for the rest of the year echo a revised forecast by the Canadian Real Estate Association released earlier this month. CREA said it expected higher national home resales this year, reversing upward its previous forecast of a one per cent dip.

National average prices will be in the range of $347,700 to $374,300, growing to between $349,500 to $385,000 in 2012, CREA predicted.

CMHC said sales of existing homes should range between 429,500 and 480,000 units in 2011 and between 410,000 and 511,900 units in 2012.

Earlier this month, the CMHC said that national housing starts rose to 205,100 units on a seasonally adjusted basis in July, 11.6 per cent higher than the 188,900 reported in the same month last year and 4.3 per cent more than the 196,600 recorded in June.

The uptick, driven by strong construction on condos and apartment buildings in urban centres, is likely due to builders catching up to robust demand last year rather than expectations of coming growth, it said.

Home building activity has been increasing through the first seven months of 2011, but starts are still down 4.6 per cent from a year ago.

Predictions for the Canadian market were in stark contrast with the most recent figures from the United States, which showed that country's depressed housing market is still trying to get back on track.

The U.S. National Association of Realtors said Monday that its index of sales agreements fell 1.3 per cent in July to a reading of 89.7. A reading of 100 is considered healthy by economists

The association also said a growing number of buyers had cancelled contracts after appraisals showed the homes they wanted to buy were worth less than they bid.

B.C.'s home sales, property values to slow as job growth ebbs: BCREA

2011-08-29T07:40:00.001-07:00

VANCOUVER - Slower job growth in British Columbia's economy will mean slower increases in home sales and property values through to 2012, the B.C. Real Estate Association said Thursday.

And by the end of 2012, the association expects the high-flying prices in some of B.C.'s bigger markets to show small declines.

Home sales through the realtor-controlled Multiple Listing Service should hit 74,640 by the end of 2011, which is up four per cent from 2010, and then rise to 80,300 in 2012, association chief economist Cameron Muir said in his report.

However, those estimates are below B.C.'s long-term average for sales and the forecast for 2011 represents reduced expectations from Muir's forecast from earlier this year that B.C. should see 78,200 sales this year.

"Following a decade where unit sales broke all records, consumer demand for the next few years will be relatively moderate," Muir said in releasing the report.

A positive note, however, is that weaker global economic growth and uncertainty in world financial markets are signals that interest rates, including mortgage rates, will remain low and "help underpin housing demand."

Across the province, Muir is forecasting that the average home price, which has been heavily influenced by strong sales in the more expensive pockets of Metro Vancouver, to hit $559,179 by the end of 2011.

However, by the end of 2012, Muir is forecasting that the average price will fall back 2.5 per cent to $545,964.

The 2012 price declines, however, are expected to show up primarily in the Lower Mainland Markets, which influence the overall provincial averages.

Muir expects Metro Vancouver's average price to slip 3.5 per cent in 2012 to $742,000. However, that will be a decline off 2011, which Muir predicts will end with the average price having shot up 14 per cent to $769,000.

And Muir is forecasting that the Fraser Valley will see its average price in 2012 dip 1.4 per cent to $498,000. But that follows 2011, where he expects the average price will have gained 12 per cent from the previous year to hit $505,000.

Fall Home Renovation Projects

2011-08-25T06:59:00.000-07:00

Angie Mohr, On Monday August 22, 2011, 12:55 pm EDT
After summer holidays are over and the heat and humidity subsides, it’s a good time to start home renovation and preparation projects before the cold weather sets in. Flower beds can be cut down, lawns fertilized for the last time and windows washed. Here are five projects that are perfect for cool fall days.
Winterize the Deck
Decks get a lot of use during long summer days. By the time fall comes around, they can look worn out and old. Once the deck is cleaned off and all summer chairs and tables are stored away, power-wash the deck with a high-velocity pressure washer. This will dislodge any dirt that is stuck in the wood grain and will take away the gray color that decks fade to over time. Fall is also a good time to reseal the deck if you use a sealant or stain. Choose a warm day that has no chance of rain and start the process in the morning so that the deck has several hours of drying time before nightfall.
Insulate Exposed Plumbing
Uninsulated plumbing lines in unheated spaces are a major cause of power use, as the water heater must work extra hard to heat water. It can also cause pipes to freeze and burst if you live in an area that dips below the freezing mark in the winter. Check all of your plumbing lines to identify those that are outside or underneath the house, or are in an unheated basement or attic. Foam wrap can be purchased at any home improvement store. Wrap all exposed pipes to save on energy when the days start getting colder.
Roof Work
Once all the autumn leaves have fallen, cleaning out the roof gutters will save you from building up ice dams that can damage the roof in the winter. Blow out the gutters with a leaf blower or wash them out with a hose. Check for any holes or other damage to the gutters and repair them before heavy snow makes them worse. It’s also a good time to take a look at the roof itself and fix any shingles that are curling or any flashing around chimneys that has come loose. If your roof is in bad shape, bring in a roofing contractor to assess whether the roof needs to be replaced before winter or can wait until the spring.
Upgrade Doors and Windows
If you have old, single-pane windows, you will lose a significant amount of heat in the wintertime. Replacing old windows with energy-efficient, double-paned upgrades can pay for itself quickly in heat savings. Check all exterior doors to ensure that they are insulated and that there are no gaps or cracks between the doors and the frames that could let heat out. If you have weatherstripping around doors, make sure it is intact and in good shape. If it's not in good shape, replace it before the cold weather sets in.
Interior Painting
Warm fall days are perfect for indoor painting. Summer is often too humid for paint to dry properly and that can cause walls to look splotchy. In winter, the lack of ventilation can make paint fumes hang around and can lengthen drying times. Open up windows to ensure there is a breeze that will both reduce the paint smell and dry it quickly.
The Bottom Line
Fall is an important transition season for home improvement projects. With the cold of winter coming, getting the house and yard prepared will save you money in the long run.

Royal Bank, BMO increase its five-year variable mortgage rates

2011-08-24T06:55:00.001-07:00

Sunny Freeman, The Canadian Press, On Tuesday August 23, 2011, 8:01 pm EDT
By Sunny Freeman, The Canadian Press
TORONTO - Royal Bank of Canada (TSX:RY) is raising its variable rate mortgages for homebuyers in a move that reflects higher costs of borrowing in the bond market.
Canada's largest bank said Tuesday it is hiking the rates charged on its five-year variable closed mortgages by a fifth of a point, effective Wednesday.
That will put that rate even with the bank's prime rate of three per cent.
Bank of Montreal later joined Royal in raising its five-year variable closed mortgage to three per cent which, in the case of BMO, represented a 0.15 percentage point increase.
Meanwhile, the Royal's special variable rate mortgage also increased by a fifth of a point to prime minus 0.45 percentage points, making it 2.55 per cent.
In the past when banks raised variable rates without a corresponding increase in the Bank of Canada rate, they were accused of trying to boost profit margins at the expense of borrowers.
But Royal Bank, which is also Canada's largest mortgage lender, said the latest increase reflects higher costs in the bond market, where it raises money to finance its mortgage loans.
Bond interest rates have risen due to growing debt fears in the United States and Europe as lenders want higher rates to part with their money in a riskier global economy.
The increase in market interest rates comes at the same time central banks are keeping their rates low to stimulate the weak economy.
In the U.S., the Federal Reserve Board has said it will keep interest rates flat for another two years to spur growth, while the Bank of Canada is also expected to hold the line on rates well into next year.
Low mortgage rates in recent years have been a big factor in spurring growth in the Canadian housing market, which remains buoyant in most parts of the country.
Although it is unusual for banks to hike their variable rates without a rise in the Bank of Canada's overnight lending rate, it is not unprecedented.
"This is not the first time that the price for variable rate mortgages is changing relative to prime without a corresponding change in the BOC rate," a Royal Bank spokesman said in an email.
"In fact, over the period that BOC increased its overnight rate from 0.25 per cent to one per cent, the bank reduced the pricing levels for new mortgages relative to prime."
The mortgage market is highly competitive in Canada and in the past variable rate mortgages were popular with borrowers when interest rates were expected to remain low and there was little chance of sudden hikes in borrowing costs.
In the last few months, more consumers opted to lock into fixed terms when it looked like the Bank of Canada would begin to push rates sharply higher to fight inflationary pressures in the economy.
But the recent stock market and economic turmoil that has kept central bank rates low could push borrowers back to variable terms in the Canadian market.
Royal Bank said the Bank of Canada's rate is just one of many factors that go into pricing decisions. Banks mortgage costs are also based on changes in the bond markets, where rates have been volatile and banks raise money for their mortgage lending.
Recent global uncertainty over whether the U.S. can come up with a plan to deal with its debt problems, and over fears the debt crises in smaller European economies will spread across the continent, have caused bond rates to rise.
That makes it more expensive for banks to fund their mortgage operations, and led RBC to recoup some of those costs through a higher variable rate.
"Mortgage rates are tied to the banks funding costs which change from day to day," the bank said. "Due to global economic concerns, the funding costs for banks have been increasing.
"While we have held off in passing on these high costs to our clients, it is now necessary for us to increase this mortgage rate."
The big Canadian banks usually move in tandem when there is a variable rate change along with a change in the Bank of Canada's overnight lending rate, but its unclear whether the rest will follow this time.
Competitive pressures could force some banks to keep variable rates low to attract customers.
Royal Bank will report its third-quarter results on Friday.

Shall I rent or shall I own?

2011-08-15T07:00:00.001-07:00

Mark Wahlberg buys a Toronto condo despite real estate bubble
Golden Girl Finance, On Thursday August 11, 2011, 10:00 am EDT
Donnie Wahlberg may have been a New Kid on The Block, but his cutie-boy brother Mark Wahlberg, (Marky Mark to those who remember the 90s) has become a new kid on a block in Toronto…in the form of a $12 million penthouse condo. The posh bachelor pad is close to Wahlberg's usual digs at The Hazelton Hotel, where rooms run between $500 to $2400 a night. Given that the star of Boogie Nights, The Fighter and former leader of hip-hop group The Funky Bunch spends an increasing amount of time filming movies in the city and hanging out at the Toronto International Film Festival, it seems he's decided to quit forking over money in hotel room rentals and instead buy his own place.
Wahlberg probably has the advantage of owning his new condo outright, giving him full equity ownership. For the rest of us mortgage-carrying mortals, however, now is not an ideal time to be investing in a condo in Toronto. According to Ben Rabidoux, financial adviser, real estate expert and author of the website The Economic Analyst (www.TheEconomicAnalyst.com), in most Canadian cities right now (but certainly not all), the house price versus rent ratio and the house price versus income ratio are at or near their all-time highs. This suggests that, overwhelmingly, it makes better financial sense to rent in these markets and invest your equity elsewhere.
There is no free equity
Building equity is undeniably a wise financial move. The mistake many people make is equating equity with a mortgage. A mortgage doesn't give you equity; equity is only as much as you pay. A down payment is equity. Anything you pay toward the principle of your mortgage is equity. Paying interest to the bank is as useful to your financial situation as paying rent to your landlord.
If you start out with a very small down payment and arrange for a long future of low monthly payments, your ability to build equity before selling your home becomes seriously limited. With less than 15 per cent equity, you may end up merely trading one mortgage for another. If there is a drop in the housing market, the value of your home could fall to the point that if you were to sell it, you would owe more on your mortgage than the actual selling price of the house. Once it's sold, you'd have to write the bank a cheque to make up for the difference. This is called a 'negative equity' situation and while it's a worst case, it happens more often than you might realize.
Renting space or renting money?
Most likely, everyone from your father to your banker has drilled the idea into your head that renting is a waste of money and buying a home is the only prudent way to build equity. According to Rabidoux, this is not always the case, especially in markets that are currently overvalued and highly vulnerable to a real estate crash, such as Vancouver, Victoria and the Toronto condo market.
"There is a very unfortunate stigma attached to renting," Rabidoux says. "This is dangerous and damaging to many people's finances. The reality is that the majority of new home 'owners' are still renters; they've just gone from renting space to renting money." With rents in large cities exceptionally cheap compared to owning, home ownership becomes a very steep tax on those unwilling to crunch the numbers or who give into the societal pressure to buy. Don't be that girl!
Comparing the costs
Rabidoux suggests wannabe-homeowners start by figuring out the monthly costs of owning a home. Calculate the mortgage principal and interest, taxes, insurance and any additional monthly payments such as condo fees. Also add the often ignored but very necessary maintenance costs — two per cent of the cost of the house per year is a good rule of thumb — then divide by 12 to get a monthly cost.
Next, figure out what it would cost you to rent a similar property in the area. Kijiji and online classifieds are a good place to start. Realtors can also help with rent statistics. Remember that rent is often negotiable, particularly if you don't have pets or kids, if you do have a stable job, are a non-smoker and have good references. Landlords often give steep discounts to 'good tenants' they believe will care for their property.
Most importantly, consider the lost opportunity cost of your down payment: what you could be earning by investing your equity in something other than real estate. With stocks or bonds, for example, you can earn a minimum of three to four per cent with a very conservative, low-risk investment. If you have a $20,000 down payment, that means you are foregoing at least $600-$800 a year that this money could be earning you.
You may be tempted to think that you can easily earn that kind of return on the value of a home, as house prices climb to teetering levels and buyers engage in wild bidding wars for the luxury of overleveraging themselves to buy their dream home. Yet, the definition of a housing 'bubble' is an unreal, overly inflated market where people expect prices to rise forever. Depending on the market where you live, you must consider the risk of when the bubble may burst and how you might safely build equity elsewhere. This needs to be factored into the 'true' cost of ownership.
Save the difference
If you find a substantial cost difference between owning and renting and choose to rent, you have a great opportunity to have the best of both worlds — rent the place you want and bank the difference. Of course, there is no financial benefit if you end up using the cost savings to splash out every month on Frette linens, Fall & Barrow paint and a fabulous home theatre system. The wise renter is disciplined enough to invest her monthly cost savings and therefore build that equity that everyone has told you can only come from home ownership.
The long-term view
If you plan to buy a home and live in it for many years or even decades, you will likely ride out numerous market fluctuations, will be more likely to sell at a profit and less likely to find yourself in a negative equity situation. As for Marky Mark, he's probably not in it for the profit; he has his movies for that. We do hope, however, that his foray into Canadian real estate means that he and his "Good Vibrations" will be here for a very long time.

Housing could get boost from market chaos

2011-08-10T07:38:00.000-07:00

The upside in a global stock market rout may ironically be a healthier housing market – at least in the short term, say economists.
“The housing market has nine lives. Every time interest rates are supposed to go down, something happens and it helps to keep the market going,” said Benjamin Tal, senior economist at CIBC World Markets.
Interest rates were supposed to be headed up before the crisis of terrorist attacks in New York on 9/11, and the last crash in 2008. But that didn’t happen. And it looks like rates will be staying down for a while, says Tal.
The market is already betting that Bank of Canada Governor Mark Carney’s plans to hike interest rates as soon as September will have to be put off until the end of next year.
South of the border, the Federal Reserve said Tuesday that it expects “exceptionally low levels of the federal funds rate at least through mid-2013.”
And ironically, while the U.S. has experienced a downgrade in its credit rating from Standard & Poors, investors have continued to pile into the Treasuries market.
The U.S. dollar remains the global reserve currency as investors head for shelter as they find few safe haven options out there.
The demand for treasuries means that yields have gone even lower. Which means there is downward pressure on longer-term interest rates. Long-fixed term rates are affected by a variety of factors such as competition for funds in financial markets and to prices in the bond market. Short-term rates are more affected by the key overnight central bank rate.
“The interest rate environment will continue to be very attractive for homebuyers for both short term and longer term borrowing costs. With the safety of U.S. bonds that’s keeping longer term rates low,” said Scotiabank economist Adrienne Warren.
Industry groups are warning, meanwhile, that during an already tough recovery, any sudden move upward in rates could have dire consequences on real estate sales.
“The very recent global economic news demonstrates the Bank of Canada needs to consider any future rate hikes with extreme caution, as the recovery may be more fragile than believed,” said Ontario Home Builders’ Association President Bob Finnigan.
Some investors may also be looking at real estate assets for a place to park their money because of the volatile stock market, said Tal.
Lance Dore, a member of the U.S.-based Royal Institution of Chartered Surveyors, says investment in real estate may be a beneficiary from those looking for safe haven.
“The sell-off of stocks is a clear signal that people are not confident in the future and want safety now. What has also happened in the past declines in the stock market is a flight to quality,” said Dore. “Real estate tends to be the recipient as part of this flight. Real estate values are at all-time lows with returns at all-time highs. The convergence of excess cash due to stock sell-off and corporations flush with cash for investment will push these excess funds into the inevitable diversification to real estate.”
While the future for the stock market looks shaky, the real estate sector is improving due to improving fundamentals based on increasing rents, absorption of distressed supply and increased interest for diversification, said Dore.
However, if the stock market continues on a downward path, housing will not escape unscathed. While lower interest rates are a huge mitigating factor, the losses on the market may eventually translate into job losses.
For one thing, it takes confidence to plunk down that down payment for a home. It usually means that you’ve got a job, some savings, and hope for the future.
But confidence is not in abundance in global stock markets this week as concerns over sovereign debt have panicked investors. Without confidence, the housing market – the biggest ticket item on the consumer checklist will suffer no matter how low rates go, say economists.
In the United States, where more than a quarter of borrowers have negative equity – meaning they owe more than their homes are worth – this could mean another setback for the already beleaguered market.
In Canada, where markets have been stable, and have been forecast to cool down next year, this could mean that sales and valuations may come down to earth quicker than expected.
“Assuming the volatility and uncertainty continues in the markets it will have negative implications for both potential home buyers and for builders,” said Scotiabank economist Warren. “There is still a big difference between Canada and the U.S. But it certainly reinforces our view that growth in Canada and internationally will be on the soft side.”
So far, economists have not changed their outlook on the Canadian housing market. Most expect the market to flatline or correct slightly by next year. But that could change if the rout continues.
“If this is the precipitation of a larger more protracted slowdown for the economy it will certainly affect housing,” said Peter Norman, chief economist real estate consultancy Altus Group.” If we get into a soft patch with slower employment growth then we will see slower home sales. For investors who are speculating on future events this adds another layer of uncertainty in the market. So this would cause them to sit on the sidelines.”
In separate reports on Tuesday, Canadian housing starts surprised by rising unexpectedly in July, climbing to a 15 month high, up 4.3 per cent to 205,100 units according to the Canada Mortgage and Housing Corporation. And U.S. home values actually had the smallest drop in four years in the second quarter according to figures released by Zillow Inc.
But this was before the impact of the stock market drop which will affect confidence as consumers suffer from a declining wealth effect. During a recession, the high end of the market, of purely discretionary purchases such as cottages and luxury condos might be the first to feel the impact. But a lack of confidence will affect all sectors of the market.
“We continue to hold that new home construction will start to cool in the second half of the year, but this may come more slowly than anticipated as rates remain low for longer,” said Arlene Kish, principal economist for IHS Global Insight. “On the other hand, if the recent slide in financial markets remains persistent, consumers will become less optimistic and will likely stay away from home purchases.”

v

2011-08-09T06:04:00.001-07:00

Harper urges calm as stock markets tumble on financial woes
BRASILIA - Don’t panic.
That was Stephen Harper’s message today as the Toronto stock market plunged to its lowest point in almost a year on the first day of trading after the United States had its credit rating bumped down a tier.
“To date, this doesn’t change our overall assessment,” the prime minister said during a visit to the Brazilian capital.
“Notwithstanding the fragility of the economy and the headwinds that are there, we believe that a gradual recovery can continue. Our policies have been achieving that in Canada.”
The Toronto Stock Exchange and Wall Street’s main market both fell 300 points in afternoon trading, while the price of gold soared as investors looked for shelter in a rout sparked by the historic downgrading by Standard & Poor’s.
At a signing ceremony with Harper for several modest bilateral deals, Brazilian President Dilma Rousseff criticized the credit-rating agency for an “incorrect assessment.”
“We do not agree with the rushed evaluation, a little bit too quick evaluation, and I would even say incorrect assessment made by Standard & Poor’s which reduced the credit rating of the United States.”
The Prime Minister’s Office later clarified that Rousseff was speaking on behalf of Brazil, not Canada.
Harper opened a four-country tour of Latin America by announcing agreements with Brazil on air transport, social security, Olympic co-operation and international development aid effectiveness.
Harper and Rousseff also announced a business leaders’ forum that would see Canadian and Brazilian executives meet on the margins of high-level diplomatic talks.
“Brazil is a major global economic player and a key priority market for Canada,” Harper said in a press release.
“These agreements will benefit both countries by promoting greater two-way flow of people, goods and services, enhancing our competitiveness and further strengthening our partnership in key areas of shared interest.”
Canada is seeking bilateral free trade deals with a number of countries, placing a special emphasis on the countries of Latin America and the Caribbean.
The Conservative government is eager to make inroads with Brazil in particular, the world’s seventh-largest economy and expected to rise to No. 5 within a few years.
But doing a deal with Brazil is tricky. Brazil needs the consent of Argentina, Paraguay and Uruguay — members of a common South American economic bloc called Mercosur — to enter into such an agreement.
Harper said Canada has begun exploratory talks with Mercosur on a free-trade deal.
Harper’s trip takes him to Brazil, Colombia, Costa Rica and Honduras.

U.S. will take a long time to dig out of this hole

2011-08-08T07:13:00.001-07:00

By David Olive Business Columnist
How to put this politely? While not a deadbeat, the U.S. is no longer among the world’s most creditworthy nations. America now has a lower credit rating than Liechtenstein. And the Toronto-Dominion Bank.
Mind you, that’s a matter of opinion.
On Friday, U.S. credit rating agency Standard & Poor’s for the first time in 70 years stripped the world’s largest economy of its top, triple-A rating on America’s $14.3 trillion in government debt. S&P dropped its rating a notch, to AA-plus.
But the two other members of the U.S. ratings oligopoly, Moody’s Investors Service and Fitch Ratings, earlier in the week reconfirmed their top rating on U.S. debt.
Just 16 of the 126 nations whose debt is rated by S&P earn its coveted triple-A rating, Canada among them.
For S&P, last week’s panicky, acrimonious budget-cutting deal that narrowly averted a first-ever default by Washington was a factor in its U.S. debt downgrade.
“(S&P’s) conclusion was pretty much motivated by all of the debate about the raising of the debt ceiling,” John Chambers, chairman of S&P’s sovereign ratings committee, told The Wall Street Journal Friday.
“It involved a level of brinkmanship greater than what we had expected.”
A furious Obama administration pleaded with S&P to hold off on its announcement for a few weeks of further assessment, arguing that such a historic decision should be free of political considerations. But S&P was having none of that.
In S&P’s view, the intransigence of hard-right U.S. deficit hawks, notably the so-called Tea Partiers, is highly relevant in determining a nation’s ability or willingness to honour its debt obligations.
“The kind of debate we’ve seen over the debt ceiling has made us think the United States is no longer in the top echelon on its political settings.” That’s Chambers’ gentle way of saying that America’s political class can no longer be relied upon to expertly manage the nation’s finances.
China’s central banker, Zhou Xiaochuan, was a little blunter, depicting the Americans as a threat to the world economy. “Big fluctuations and uncertainty in the U.S. Treasury market will influence the stability of international monetary and financial systems, thus hurting the global economic recovery,” the chief of the People’s Bank of China said last week.
China, the world’s largest creditor nation, holds about $2 trillion worth of U.S.-denominated securities.
For years, the U.S. has been hectoring Beijing on everything from its allegedly overvalued currency to human rights abuses to intellectual property theft.
You can sense Zhou relishing this moment to return fire: “We hope that the U.S. government and the Congress will take concrete and responsible policy measures . . . to properly deal with its debt issues, so as to ensure smooth operation of the Treasury market and investor safety.”
Stop playing with matches, is Beijing’s humiliating admonition to the U.S. And really, there’s no snappy comeback to that, although the state Xinhua News Agency was piling it on in labelling the recent Washington budget debate a “madcap farce” (we know, we know) and U.S. debt a “ticking bomb.”
Typically, a lower debt rating means steeper borrowing costs, for consumers, business and government. Debt issuers must offer a higher rate of interest to attract buyers of higher-risk securities.
But hold on.
As noted, S&P is an “outlier” in banishing the U.S. from the triple-A club. Also, the U.S. owes most of its debt to itself. Less than one-third of U.S. government debt is held by foreigners, while most of crisis-stricken Greece’s debt is owed to offshore lenders. And U.S. Treasurys are still unmatched as a safe store of value for investors worldwide.
Yet for many economic observers, S&P’s move is overdue.
Across a range of factors — including anemic GDP growth, still-declining house values, a 9.1 per cent jobless rate, stagnant middle-class incomes and recent inflation in food, gasoline and apparel prices — the U.S. economy has been underperforming for years. Layering unmanageable debt atop that plethora of sickly leading indicators made a U.S. debt downgrade inevitable.
Felix Salmon, the top economics analyst who blogs at Reuters, expects the U.S. has lost its triple-A rating forever. “If we came that close to defaulting,” Salmon writes, “there’s no way that our securities can be risk-free.” The downgrade, he says, is “merely a late-to-the-party recognition of that fact.”
I don’t know about forever. But it will take a lot of convincing for S&P to restore America’s membership in the triple-A fraternity. We should know. S&P downgraded Canada in 1992, when we seemed blasé about a record $43 billion deficit.
Not until Canada was well into its 11-year run of consecutive budget surpluses — unmatched by any G8 nation — did S&P deign to restore our triple-A status, in 2002.
Elapsed time: nine years and nine months.

World markets bleed

2011-08-06T08:37:00.000-07:00

See what can happen when you "Call wolf". The USA election politics took precedent over realty. In the end USA was going to print money like they always do and survive another day. If the election was not in swing this bill would have passe quickly and quietly. If the rest of the world were not in such turmoil this stance could have hurt the USA and investors a lot more. Sometimes we just have to grow up and face reality and act in favor of the majority. I guess we pay pay those politicians too much.

Neil "Mortgage Man" McJannet

7:09 PM ET | Last Updated: Aug 4, 2011 7:13 PM ET

Investors are losing faith in the global economy and the policymakers in charge of keeping it afloat, putting the two and a half-year bull market in serious jeopardy.

Stock markets around the world plummeted their most since the financial crisis on Thursday, as escalating U.S. recession fears and Europe’s ballooning sovereign debt crisis were further exacerbated by an emergency intervention of the Japanese yen.

“It’s getting more and more difficult to see the glass half full,” says Serge Pepin, head of investments at BMO Investments Inc. “I’ve always been sort of an optimist if anything, but it is definitely not a rosy picture.”

The S&P/TSX composite index, Canada’s key equity benchmark, suffered its biggest drop since June 2009, by falling 435.90 points or 3.4% to close at 12,380.13. It was the eighth time in the past nine sessions that the market has tumbled.South of the border, the Dow Jones Industrial Average dropped 512.76 points or 4.31% to 11,383.68. It was the Dow’s worst point drop since December 2008. With each market now down 13% and 11% respectively since their most recent peaks in April, stocks have dropped well below the 10% pullback that marks an official correction.

Mr. Pepin said investors are starting to question whether the bull run that began on March 9, 2009 has finally come to an end.

“We are now more than 20% off the market’s all-time high in 2007, so by some people’s definition, we’re already in a new bear market,” he said. “If we can get a clear signal from the U.S. economy that things are moving to the positive, that’s when people will get some solace. At this point we just aren’t seeing that.”

In this type of environment, it makes sense that investors are selling some of their riskier assets including cyclical stocks and commodities, in favour of so-called safe haven investments, such as bonds, defensive equities like consumer staples and healthcare, and gold, which briefly hit another record high at US$1,684.90 an ounce on Thursday.

That said, Mr. Pepin thinks it’s premature to compare the market’s recent malaise with the extreme meltdown that occurred in 2008 at the height of the financial crisis.

“I think this is strictly sentiment and we are getting close to a bottom, ” he said. “I don’t believe we are headed for recession and corporate earnings are still very strong. That has to matter for investors.”

Just how much futher markets will fall could hinge on Friday’s crucial U.S. jobs report for July. If figures are better than estimates calling for an increase of 85,000 in non-farm payrolls and an unchanged unemployment rate at 9.2%, then a relief rally could take place. If the opposite transpires, the sell-off will likely only get worse, as the risk of a U.S. recession moves closer to reality.

“The economy is only one shock away from falling into recession,” said Michelle Meyer, an economist at Bank of America Merrill Lynch, in a note to clients Thursday.

Ms. Meyer believes there is now a 35% chance of a U.S. recession in the next year, about double what her odds were this spring.

With this week’s new debt deal in place, there is no appetite in Washington to provide more fiscal stimulus in aid of the slumping recovery, she said. At the same time, the Federal Reserve, which has left interest rates at near zero for nearly three years, may not have enough ammunition left to prevent another contraction.

On the one hand, investors are in a state of confusion and alarm, not knowing if the world’s problems can be resolved, said Andrew Pyle, a financial advisor at ScotiaMcLeod. On the other hand, panic is often the mother of all innovation.

“The [market slide] is creating the same pro-growth elements as we’ve seen before, such as lower energy prices and interest rates,” he said. “This doesn’t mean we jump and start loading up on equities, but as Warren Buffett says the best time to buy is when there’s blood in the streets.”

2011-08-04T09:32:00.000-07:00

steve ladurantaye

From Thursday's Globe and Mail

House prices pulled back for the first time this year in Canada’s hottest housing market in the clearest sign yet the buying frenzy is slowing after blistering price gains over the past two years.

Since the global recession clobbered real estate values in many cities around the world a few years ago, the amounts that buyers have been paying for houses in Vancouver have skyrocketed. Vancouver’s recovery has far outstripped that of other Canadian cities, with prices jumping 21 per cent in the past year alone – more than double the gains seen in the rest of the country.

But the latest home-sales figures point to a slowdown. The number sold dropped 21 per cent in July from June, and prices edged 0.1 per cent lower to $630,251 for a typical detached house, according to the Real Estate Board of Greater Vancouver. Listings of properties for sale in the city are increasing, while bidding wars are becoming less common.

The slowing real estate scene in Vancouver is adding to concerns that the rest of the country’s housing market will cool off as well against a backdrop of global economic uncertainty and gyrating financial markets.

After two years of price gains across the country pushed the average national resale price to a record high of $372,700 in June, buyers are starting to reconsider how much they are willing to spend.

There’s no shortage of worries for prospective home buyers in the current economic climate. Government debt woes have triggered massive financial bailouts of European countries and major spending cuts in the United States, where indicators show the economy has slowed to a crawl. Stock markets have dropped sharply in recent weeks, while a slew of global companies have announced broad job cuts. Many Canadians have taken on heavy debt to buy homes or make other purchases.

“The resale market has just gotten stupid in a lot of places as agents just make up a big number and put it out there,” said Ross McCredie, chief executive officer of Sotheby’s International Realty Canada. “Agents were losing listings because they weren’t willing to overprice, but I think people are starting to remember that price does matter.”

A slowdown in Vancouver’s real estate market doesn’t guarantee the rest of the country will follow suit, since unique factors have driven prices in recent years. With mountains on one side and an ocean on the other, a lack of supply has contributed to price gains. The city also attracts many Asian immigrants, who move their families into new homes so they can go to school or start a new life in Canada.

But softer sales come as other markets across the country show signs of cooling as would-be buyers fret over the state of the global economy and postpone buying until they get a better sense of where interest rates are likely to settle. The possibility of a double-dip recession in the United States is also weighing on consumer confidence around the world.

“We’re seeing an increased amount of attention to what’s happening in the economy,” said Don Lawby, the Vancouver-based chief executive officer of Century 21. “It’s having an effect – if a house is priced right and the person is confident about their job, you can do a deal. But the price has to be right.”

Canada’s housing market rebounded strongly from the recession, but Vancouver’s recovery has been the most dramatic. The average house now costs 11 times average household income, double that of anywhere else in Canada.

And while home prices and sales in many parts of Canada remain strong, signs of slowing activity have emerged. Sales in Calgary were 17 per cent below their 10-year average in July. In Toronto, the real estate board said a shortage of listings is still propping up prices, but more sellers are likely to emerge and cap further gains. In Vancouver, selling agents have started offering larger bonuses to any other agent who brings a buyer to the table. Many economists and real estate companies generally expect prices nationally will remain close to where they are for the next year – give or take 5 per cent.

Still, industry experts worry that low interest rates have encouraged buyers to stretch their budgets to obtain housing. Once rates begin to rise, their payments could balloon and leave them hard-pressed to meet their payments.

Vancouver’s real estate board said that although competitively priced homes are selling, there’s been a drop in multiple offer situations in recent months.

“You’re starting to see more desperation from the sellers because they want to get out at the top,” said Mayur Arora of Oneflatfee.ca in Surrey, B.C. “It’s not all doom and gloom, because some neighbourhoods in Vancouver are still seeing bidding wars. But you are seeing signs that things are definitely changing.”

Sotheby’s Mr. McCredie said the market has slowed several times since the recession ended, but each dip has brought more buyers into the market.

“Things seem to slow down and then they get busy again a few weeks later,” he said. “It’s difficult to know if it’s just the time of year or if something else is going on.”

Canadian home prices surge to new high

2011-07-28T08:22:00.001-07:00

John Morrissy Jul 27, 2011 – 3:04 PM ET

OTTAWA— Home prices measured by a major national index surged for a sixth straight month to new highs in May but are expected to ease in the months ahead.

The Teranet-National Bank Composite House Price Index, which measures price changes for repeat sales of single-family homes in six metropolitan areas, rose 1.3% in the month, the second consecutive month in which it gained more than one per cent and the largest gain since July 2010.

The month-over-month gains were spread across all six cities covered, with all but Halifax reporting gains of 0.5% or more.

May gains were led by the Vancouver and Toronto markets, ahead 1.6% and 1.7%, respectively, and followed by Montreal (0.7%), Calgary (0.6%), Ottawa (0.5%) and Halifax (0.1%).

“The well-above-one-per-cent monthly rises of the composite index in April and May were fuelled by the Vancouver market,” said the report’s author, senior economist Marc Pinsonneault.

“Given the time lags between home sales and their entry in public land registries, it is possible that the large April and May rises of the composite index were due to front-loading of sales to beat the March effective date of an announced shortening of the maximum amortization period for insured mortgages.”

“This spike in activity is now behind us. Therefore, the recent large monthly rises in home prices in Canada should not be a lasting trend.”

On an annual basis, prices rose 4.4% in May, the same pace of advance as in May.

TABLE

Composite House Price Index for May

Metropolitan area / Index level /m/m change / y/y change
Calgary / 153.72 / 0.6 % / -4.1 %
Halifax / 134.26 / 0.1 % / 4.8 %
Montreal / 141.36 / 0.7 % / 6.3 %
Ottawa / 133.30 / 0.5 % / 5.6 %
Toronto / 128.72 / 1.7 % / 4.6 %
Vancouver / 164.92 / 1.6 % / 6.2 %
National Composite / 142.27 / 1.3 % / 4.4 %

Source: Teranet-National Bank

Beyond debt ceiling, U.S. needs own GST

2011-07-27T08:30:00.001-07:00

Special to Financial Post Jul 26, 2011 – 5:54 PM ET | Last Updated: Jul 26, 2011 5:57 PM ET

By Glen Hodgson and Kip Beckman

For drama, it might seem difficult to top the past couple of weeks on Capitol Hill, but the debt ceiling debate in the United States is really only the opening act of a long-running production. The Obama administration and Congress will eventually have to agree to some watered-down measures that will enable an increase to the debt ceiling, to ensure that the country’s creditors continue to be paid on time. However, the necessary deal between the White House and House Republicans will be a political deal. It will only put off the tough economic and policy decisions to another act of this drama.

The fundamental problem facing the U.S. federal government is bringing taxes and spending into balance over the long run. Even if sustained growth is fully restored, Washington will be taking in the equivalent of 15% of gross domestic product as revenue, but spending 20% of GDP. If the budget is ever to be rebalanced, the U.S. federal government will have to tackle structural factors.

The United States is currently spending about 5% of GDP on defence and homeland security, compared with around 3% before 9/11. Social Security — long the “third rail” of U.S. politics — has a huge unfunded liability, and aging demographics will have a major impact on other social spending entitlements if unchecked. Yet, large cuts to defence and social spending are unlikely to be enough. Increases in taxes, combined with fundamental program redesign and a reduction in benefits, will eventually be required.

The medium-term fiscal plans brought forward by Republicans and by the White House currently fall well short of fiscal sustainability. The Republicans are ready to slash spending but unwilling to consider tax increases, while the Obama plan relies too much on sustained economic growth to reduce future deficits. A third option, from a President-appointed bipartisan panel, proposed a broad mix of spending cuts and revenue measures, but there has been little political takeup so far. Initially, tax hikes will affect wealthy Americans. But there is a limit to how much tax revenue can be raised by hammering rich people. At some point, tax reform will have to hit the broad swath of Americans. Some of the targets could include the elimination of popular but costly incentives such as deductibility of mortgage interest payments. Even these measures, however, will probably still fall short. Eventually, we expect the United States will have to do what Canada and other rich countries have done — implement a value-added sales tax.

Republicans, and even some Democrats, may well threaten to fight to the last breath before ever agreeing to it, but the merits of a sales tax are unmistakeable: It provides stable revenues, it affects almost all of the population, and it has the least impact on business investment. And as Canada found out in the 1990s, a value-added tax is a prolific generator of revenue, which the United States desperately needs.

The United States may already be in the midst of a “lost decade” due to the 2008 financial crisis, and the debt ceiling debate — suspenseful though it is — could be but a prelude to something much more dramatic. If international and domestic bondholders ever decide to stop buying new U.S. government bonds to fund the chronic fiscal deficits, the politicians won’t have much choice. The hard laws of economics will eventually force even the United States to face fiscal reality.

Canadians have a lot riding on the outcome of the current debate, due to our deeply integrated economies. As the U.S. goes through a difficult period fiscally and economically, Canadian businesses must re-double their efforts to adapt, innovate, diversify their sales, and internationalize their business model if they are to remain globally competitive. But Canada must also remain fiscally responsible to help offset the potential shocks ahead, so that a lost decade for the United States does not become a lost decade for Canada as well.

Glen Hodgson is senior vice-president and chief economist of the Conference Board of Canada. Kip Beckman is principal economist at the Conference Board of Canada.

WATER DAMAGE!

2011-07-26T10:05:00.001-07:00

These days, homes are at a greater risk of water damage than ever before. Heavier precipitation and less predictable weather patterns increase the chance of unwanted water entering our homes.

Water damage is serious business. It is a drain – financially, emotionally, even physically. Just one inch is all it takes to destroy sentimental or irreplaceable items, or to create structural damage that can depreciate the value of your home. The bacteria and mold it can leave in its wake can affect air quality in your home and create potential health risks.

The best way to deal with water damage is to prevent it from happening in the first place.

Here are some easy things you can do outside your home to help keep you safe and dry.

• Disconnect downspouts from the municipal sewer system. Extend downspouts at least 6 feet away from your basement walls and drain away from your house towards the street or backyard..

• Install a rain barrel to minimize the amount of surface water that could enter your home

• Grade the earth or hard surfaces around your home to slope away from your foundation.

• Before temperatures drop to freezing, turn off the water supply to outdoor taps and faucets, then open the taps to drain the water completely. Leave taps in the open position until spring.

• Keep gutters and downspouts clear of leaves and other debris – clean them out at least once a year – late fall is a good time.

With a little know-how and some routine maintenance, you can stay ahead of the wave and keep unwanted water out.

Dollar within striking distance of modern-day high

2011-07-22T08:04:00.001-07:00

TORONTO (Reuters) - The Canadian dollar looks set to extend a rally that's taken it to 3-1/2 year highs against the U.S. dollar this week, as more hawkish Bank of Canada comments lifted the currency and global investors pushed into the safety of Canadian assets.
Given the central bank's clear signal it would likely resume interest rate hikes later this year, analysts said the currency might even revisit its modern-day high. It reached C$0.9059 to the U.S. dollar, or US$1.1039, in November 2007, according to Thomson Reuters dealing data.
"Yes, Canada could hit post-Civil War highs once again," said Michael Woolfolk, a senior currency strategist at BNY Mellon in New York.
"(Hitting the high) would not be altogether unwarranted if Canada begins raising interest rates again. It's certainly not in our forecasts, but it's a nontrivial possibility of hitting C$0.90 within the next 12 months."
Based on available data, the Canadian dollar was at an all-time high of C$0.36 to the U.S. dollar, or $2.78 in 1864.
A survey on Wednesday of Canadian primary dealers found most expect a rate hike in September or October, perhaps as much as a year before the U.S. Federal Reserve starts raising interest rates.
"Against a background of firm commodity prices and continued global diversification flows to the relatively safe harbor of Canadian bonds, we look for the loonie to stay close to around US$1.05 even by the early part of 2012, before Fed rate hikes start to kick in," said Douglas Porter, deputy chief economist at BMO Capital Markets in a note.
DRIVING FORCES
The currency began rallying on Tuesday after the Bank of Canada signaled it was closer to resuming rate hikes. Governor Mark Carney indicated that the central bank's focus was on inflation and not the Canadian dollar, despite concerns that a strong dollar could hurt the economy.
But other G10 currencies are still outperforming the Canadian dollar, with part of its strength coming from U.S. dollar weakness, and general strength from the bloc of Australian, New Zealand and Canadian dollars.
A release of draft conclusions from a euro zone meeting on Thursday to tackle contagion from Greece's debt woes helped push the Canadian dollar to a 3-1/2 year high of C$0.9425 to the U.S. dollar, or $1.0610, its highest since November 2007.
"That was viewed very constructively by the market and lifted the euro up. It also helped bolster risk appetite, which undermined the U.S. dollar," said Woolfolk.
Canada, with its relatively robust economy, stable debt market and internationally recognized sound banks, has become particularly appealing to investors as the U.S. and European debt crises send investors elsewhere.
"As uncertainty in Europe continues to rise and problems in the U.S. remain at the forefront, there is likely increased appetite to diversify holdings away from both USD and EUR based assets," Scotia Capital chief currency strategist Camilla Sutton said in a research note.
"Small open economies, with strong sovereign positions and flexible FX regimes, like CAD, are in demand. We expect this is a long-term trend...that will help support CAD into year-end."
RISKY BUSINESS?
Currency analysts polled by Reuters said this month they expected global risks to drag the Canadian dollar down against a stronger U.S. dollar, with parity a possibility within the next 12 months.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said a stronger Canadian dollar will hurt non-commodity aspects of the economy, such as manufacturing.
"The Bank of Canada will get more concerned about ... the higher currency and may dampen expectations of a rate hike," Chandler said.
"The exports are heavily weighted toward commodities, but part of the country doesn't produce commodities, they're consumers of commodities. They get hurt, so it leads to this bifurcation of the economy, which makes it all the more difficult to conduct monetary policy and has political ramifications."
Woolfolk disagreed.
"We think conditions warrant higher interest rates in Canada, but (the central bank) is likely holding back because of the obvious positive it would have for the currency," he said.

Why Canadian mortgage rates are on a roller coaster

2011-07-20T08:45:00.001-07:00

Tom Fennell Yahoo Finance If there's one question being kicked around the barbecue more than any other this summer, it's probably this: should I lock in my variable rate mortgage?
But with interest rates bouncing around, to the point where they make a mortgage-rate chart look more like the diagram of a rollercoaster, homeowners can be forgiven if they are hesitant.
After all, every time mortgage rates rise, they seem to come back down again. Recently, Royal Bank tried to raise mortgage rates, increasing the cost of its five-year fixed mortgage by 0.15 per cent, only to quietly lower them a few weeks later.
What gives?
On the variable side, rates have been stable, holding at 2.1 per cent for so long it seems like the new normal. They are priced based on the Bank of Canada rate. And with the U.S. economy slowing (Alberta created more jobs than the U.S. did in the last quarter), it's little wonder that Bank of Canada governor Mark Carney decided not to raise interest rates this week - and it's doubtful he will anytime soon.
While the variable rate has held steady for months, fixed-rate mortgages are far more difficult to predict. Fixed mortgages are primarily priced off of the five-year bond, and as a result are subject to volatility in the bond market, which is being whipsawed by the European sovereign debt crisis.
As more European countries edge toward default, interest rates have risen on their bonds, in some cases to more than 10 per cent. Many investors, however, fearing widespread defaults, have fled to the safe haven of the U.S. bond market. In the process, that has kept U.S. rates in the 2.3 per cent range, and helped keep mortgages rates low in this country, with a five-year fixed term mortgage going as low as 3.29 per cent.
But these bedrock-low rates could rise quickly if the U.S. does not solve its own debt crisis. President Obama has asked Congress to lift the country's debt ceiling — the amount the country can borrow to meet its obligations. The Republican-controlled House of Representatives is refusing to grant the increase until Obama makes deep cuts to government expenditures.
They have until Aug. 2 to solve the impasse and if nothing is done, the U.S. will default on the latest round of payments it has to make on its debts. Bond rating agencies have already said they will downgrade U.S. bonds if a default occurs. If that happens, it will drive up interest rates in the U.S. and push rates up on Canadian mortgages in the process.
"If Europe gets into trouble and the U.S. gets into trouble, money will be looking elsewhere," says Kelvin Mangaroo, founder and president of RateSupermarket.ca. "Interest rates have been bouncing around and we might continue to see that until the U.S. credit situation gets sorted out."
Could the uncertainty in Europe actually drive interest rates lower in Canada?
If Obama and Congressional Republicans come to an agreement, there could be a sudden flight to quality as investors buy U.S. bonds. That could drive down interest rates on the U.S. five-year bond, and reduce rates on Canadian fixed mortgages.
"There is always the possibility that they could drop a bit still," said Mangaroo. "They've been lower before, so there is no reason that they can't go back."
With so much volatility in the market, should you lock in your mortgage? It's hard to say, but studies have concluded you are better off holding a variable mortgage. Then again, those studies also include periods of extremely high interest rates, but with rates now at historic lows they would only go marginally lower.
In fact, you can purchase a 10-year mortgage for just 4.84 per cent and a 25-year at 8.35 per cent. In effect, you could lock your mortgage costs in at today's historic lows and that would pay dividends long after the crisis in Europe and the U.S. has passed and rates are rising again.
Whether to lock in or not is the most common question Mangaroo gets at RateSupermarket.ca. About one-third of Canadian mortgages are variable, but Mangaroo says, "It all comes down to risk profile. And interest rates will be going up, so if you're uncomfortable with that, you should look at a fixed five-year term which is at 3.5 per cent."
But one thing is certain. If you hold a variable mortgage, you can breathe a little easier knowing Carney won't be raising rates anytime soon. Ian Lee, director of the MBA Program at Carleton University, says this is because of the ongoing failure by the European leadership to address, let alone resolve, the growing Eurozone debt crisis and the ongoing inability of the U.S. political leadership to seriously address their annual $1.5 trillion deficit and $14 trillion debt.
"This clearly suggests," says Lee, "that Governor Carney will think many times before raising interest rates now or in the fall

Bank of Canada maintains overnight rate target at 1 per cent

2011-07-19T08:45:00.001-07:00

OTTAWA, July 19, 2011 /CNW/ - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic expansion is proceeding broadly as projected in the Bank's April Monetary Policy Report (MPR), with modest growth in major advanced economies and robust expansions in emerging economies. The U.S. economy has grown at a slower pace than expected and continues to be restrained by the consolidation of household balance sheets and slow growth in employment. While growth in core Europe has been stronger than expected, necessary fiscal austerity measures in a number of countries will restrain growth over the projection horizon. The Japanese economy has begun to recover from the disasters that struck in March, although the level of economic activity in that country will remain below previous expectations. In contrast, growth in emerging-market economies, particularly China, remains very strong. As a consequence, commodity prices are expected to remain at elevated levels, following recent declines. These high prices, combined with persistent excess demand in major emerging-market economies, are contributing to broader global inflationary pressures. Widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets.

In Canada, the economic expansion is proceeding largely as projected, although the expected rotation of demand is somewhat slower than had been anticipated. Household spending remains solid and business investment robust. Net exports remain weak, reflecting modest U.S. demand and ongoing competitiveness challenges, particularly the persistent strength of the Canadian dollar. Despite increased global risk aversion, financial conditions in Canada remain very stimulative and private credit growth is strong.

Following an anticipated slowdown in growth during the second quarter due to temporary supply chain disruptions and the impact of higher energy prices on consumption, the Bank expects growth in Canada to re-accelerate in the second half of 2011. Over the projection horizon, business investment is expected to remain strong, household spending to grow more in line with disposable income, and net exports to become more supportive of growth. Relative to the April projection, growth in household spending is now projected to be slightly firmer, reflecting higher household income, and net exports to be slightly weaker, reflecting more subdued U.S. activity. Overall, the Bank projects the economy will expand by 2.8 per cent in 2011, 2.6 per cent in 2012, and 2.1 per cent in 2013, returning to capacity in the middle of 2012.

Total CPI inflation is expected to remain above 3 per cent in the near term, largely reflecting temporary factors such as significantly higher food and energy prices. Core inflation is slightly firmer than anticipated, owing to temporary factors and to more persistent strength in the prices of some services. Core inflation is now expected to remain around 2 per cent over the projection horizon. Total CPI inflation is expected to return to the 2 per cent target by the middle of 2012 as temporary factors unwind, excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers, and inflation expectations remain well-anchored.

The Bank's projection assumes that authorities are able to contain the ongoing European sovereign debt crisis, although there are clear risks around this outcome.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn, consistent with achieving the 2 per cent inflation target. Such reduction would need to be carefully considered.

Condo owners stuck with $2.2M repair bill

2011-07-18T06:56:00.001-07:00

Residents of a downtown Edmonton condominium believe better provincial regulations could have prevented them from having to pay $2.2 million to fix problems they say were caused by the developer.
The owners of decade-old Rossdale Court condominiums have spent the last four years fixing problems with pedways, balconies and window seals which are related to water leakage.
"It is pretty disheartening," said Lynn Yakoweshen with the Rossdale Court Condo Association.
"I bought in this building because it's a beautiful location, it's a wonderful neighbourhood, a great sense of community ... like kind of an isolated oasis, Unfortunately if you look around it hasn't been quite the oasis that I had hoped."
The owners of the building's 69 units have each spent between $28,000 to $40,000 on repairs, Yakoweshen said. The balconies needed restoration work and the building's exterior stucco had to be completely replaced.
"All of your savings are depleted," she said. "We're very loathe to open emails because you wonder, 'what now?'"
Liberal MLA Laurie Blakeman blamed the provincial government for the situation. She said building codes are insufficient and fines too low to be a deterrent. She said the current one-year warranty period doesn't help homeowners.
"Most problems turn up at the five, six-year mark and there's no protection for that," she said.
The province plans to take measures which include increasing fines for building code offences but Blakeman said the province hasn't set a timeline for when those changes will come into effect.
The Rossdale Court condo owners say they have had no luck suing the developer. Yakoweshen said the building was built under a company name that no longer exists.
"We have no legal recourse," she said.
Blair Hallet is the developer of Rossdale Court and Glenora Gates, another condominium now under repair because of water leakage problems.

C.D. Howe Institute monetary policy council urges Bank of Canada to raise rates

2011-07-15T08:08:00.001-07:00

By The Canadian Press
OTTAWA - The C.D. Howe Institute's monetary policy council recommended Thursday the Bank of Canada raise its target for the overnight interest rate.
The group of economists recommended the central bank raise the key rate by a quarter point to 1.25 per cent at its rate announcement next week.
Bank of Canada governor Mark Carney is expected to keep rates on hold at one per cent when the announcement is made July 19.
"The principal theme of the group’s discussion was the contrast between the Canadian domestic scene, which most attendees felt justified a more restrictive stance by the Bank," the think tank council said in a statement.
However, the recommendation by the mix of private sector economists and academics was not unanimous.
Five members of the panel recommended the increase, while four others suggested the Bank of Canada keep the rate at one per cent.
The bank last hiked interest rates in September 2010.
"Looking abroad, participants generally agreed that the potential negative impact on global growth and on financial conditions in Canada and elsewhere of sovereign debt defaults was enormous, but they differed in their views about how the Bank of Canada should respond to this prospect," the council said.
"Some argued for more accommodative policy on the grounds that inflation expectations are well anchored and the Bank should support domestic demand. Others stressed the risks of postponing needed tightening for too long in preparation for events that might not occur. "
The group was unanimous though in their recommendation that the rate, which is at an exceptionally low level, needs to rise over the coming year.
The central bank will make its decision next week as the U.S. and global economy present an uncertain future. Even as the Canadian economy appears on track, weakness in the U.S. and threats of sovereign debt defaults threaten the outlook.
Speaking to a Senate committee last month, Carney warned that the U.S. economy is a shadow of its former self and a mountain of debt weighing on the balance sheets of advanced countries around the world will dampen growth for years.
Carney told the committee that the second quarter in Canada could see growth drop all the way to the one per cent range, from 3.9 per cent in the first three months.

Five costly reno mistakes to avoid

2011-07-13T09:06:00.001-07:00

Shelley White Globe and Mail Update
I recently wrote about my kitchen renovation for Home Cents, detailing how I managed to keep my budget under $25,000 while still ending up with a functional and beautiful room.
There were a lot of comments (thanks for those, by the way) - some people thought I’d paid too much, some thought I’d paid too little. But there did seem to be a consensus that the post demanded some photographic evidence. So, due to popular demand, here are the before and after photos of my kitchen renovation. And please note: I took them myself, so excuse my not-quite-awesome camera skills.
Although I’m enormously pleased with how the renovation turned out, I certainly wouldn’t say the project was free of mistakes. In fact, there are some small things I might do differently if I had to do it all again (you may spot a couple of those in the photos, in fact).
So how can you avoid renovation missteps before they happen? HGTV has put together a useful collection of the 25 Biggest Renovating Mistakes. It’s quite a comprehensive list, but here’s a sampling of some of the factors I could relate to:
Gutting Everything
It can be tempting to want to just tear everything out - including the walls - and start from scratch. But that is where the additional costs can come creeping in. My contractor wisely elected to take a look inside the wall we were going to take down before totally ripping it out. Once we found out that tearing the wall would add challenges and money to the job, we changed the plan and kept the wall.
“I see this time and time again where people just start, and they think they’re going to pull a piece of wallpaper off, and by the time the process is over, they’ve completely gotten themselves into a deep, dark hole that’s very difficult to get out of,” says Mr. Eric Stromer, host of home reno show Over Your Head.
Inaccurate Measurements
I measured once, twice, three times and then again before ordering cabinets. My contractor was also meticulous with his measurements, but I could see how things could go quickly off the rails is someone was sloppy or rushed.
When dealing with countertops, always choose a company that will come and do the measuring for you, preferably using a cardboard template. That way, the onus is on them to ensure it fits correctly. That also allows you can take a look at the template and make sure you’re getting the shape you want. When you’re talking about a slab of stone worth thousands of dollars, you don’t want to take any chances.
Going Too Trendy
“People often make the mistake of wanting to be too hip and trendy in their new home by picking the latest, hottest, coolest things,” says Ms. Carmen De La Paz of HGTV show Hammer Heads. “What they don’t take into consideration is that trendy means that it’s short term.”
Five years ago I had my heart set on aqua-coloured glass tile for my kitchen backsplash. Sure, it would have looked good for a couple of years, but take it from someone who really loved her royal blue and bright yellow kitchen when she painted it 11 years ago – your taste will change. Unless you’ve got the extra cash to redo your kitchen, the best thing to do is keep it classic and simple. I think our choices will stand the test of time, but you can be the judge of that.
Ignoring Lighting
Hammer Heads carpenter Ms. De La Paz put it this way: “Another mistake that homeowners will often make is not taking into consideration the lighting in their home. The lighting in your home can completely change the colors, the feeling, the ambiance.”
In other words, ignore lighting at your peril. When I first planned our new kitchen, I completely forgot about lighting. Our old kitchen had one overhead lamp that cast a lot of shadows. Thanks to our contractor’s suggestions, we’ve got a number of pot lights on a dimmer plus under-cabinet lighting, and the difference is vast.
Failure to Anticipate Chaos
Now that it’s over, I can look back on our renovation experience and think, “It was a piece of cake.” But around week three, our kitchen was an utter mess. For readers that wondered why my family and I spent $2,200 to rent a condo instead of sticking it out at home – that place was a dust pit. Moving out was essential for our sanity and our health - drywall dust is not good for anyone.
Your reno might go smooth as molasses, but just in case, it’s a good idea to assume it will be dustier, messier and more annoyingly inconvenient than you ever could have imagined.

Canadian businesses upbeat about hiring, Bank of Canada survey suggests

2011-07-12T07:09:00.001-07:00

By Craig Wong, The Canadian Press
OTTAWA - Businesses across the country are planning to kick their hiring into high gear over the next year, according to a Bank of Canada survey that found corporate Canada in a generally upbeat mood.
"The balance of opinion on employment has risen to a record high level," the bank said in its summer business outlook survey released Monday.
"Intentions to increase employment over the next 12 months were widespread across all regions and sectors, particularly in the services sector."
The central bank said 57 per cent of the firms surveyed expected to hire new workers over the next year compared with just four per cent of firms that expected to have fewer employees over the next 12 months.
The Bank of Canada's report followed a better-than-expected Canadian employment report on Friday. Statistics Canada reported a net gain of 28,000 jobs for June, the third consecutive month of gains, which was in stark contrast to a disappointing report of only 18,000 jobs added in the United States.
The central bank survey was taken between May 24 and to June 16.
BMO Capital Markets senior economist Michael Gregory noted that businesses may not be as upbeat today as they were when the survey was done due to the turmoil in the global economy.
"But even if business expectations have become moodier, they still started from a position of relative, absolute and surprising strength," Gregory wrote in a note to clients.
"The survey is telling the Bank of Canada that its very accommodative monetary policy is doing a good job in stimulating the economy, closing the output gap and pushing underlying inflation back up to target."
The report also found that 25 per cent of firms faced difficulties finding workers and were limited in their ability to meet demand, suggesting there was less slack in the labour market than a year ago.
However the bank noted that the share of firms facing labour shortages was below the survey average.
The report comes as the Bank of Canada governor Mark Carney prepares to make his next interest rate announcement next week.
However, despite the positive outlook on the jobs front, the survey did little to push economists to change their belief that the Bank of Canada would likely keep its policy setting at one per cent.
"Key to our outlook for the Bank of Canada’s overnight rate is the combination of the improving domestic growth outlook and rising inflation expectations," TD economist Francis Fong said in a note.
"At this point, we feel that the increasingly dire situation in Europe and protracted softness in the U.S. are likely to keep the Bank on hold for the remainder of 2011 – however, we must concede that rising domestic inflationary pressures could potentially push them off the sidelines if they prove to be non-transitory."
The central bank also said Monday that its survey found on balance that firms saw an increase in sales growth over the past year and that they expect sales to rise even faster over the coming year.
The bank said strong commodity demand is fuelling the view by companies in Western Canada that sales growth will accelerate over the coming year, while those in the rest of Canada expect stable growth.
"Firms based in Central and Eastern Canada generally expect sales growth to be similar to that over the past 12 months, given an economic background characterized by continuing softness in U.S. demand, strong competition and a high Canadian dollar," the central bank said.
"Nonetheless, a number of firms reported that they expect to benefit from recent efforts to reposition their businesses or diversify their markets."
In its senior loan officer survey, the Bank of Canada says lending conditions in Canada for businesses are continuing to ease.

Why working is the secret to happiness

2011-07-07T10:49:00.000-07:00

And this is my view of life as well. I enjoy working and enjoy my client relationships so I may never retire!Neil "Mortgage Man" McJannet

Jenna Goudreau, On Wednesday July 6, 2011
I like yoga. The few times I do it a year, I feel warmer, more flexible and rather proud of myself for investing in my personal happiness (though I've often had the sneaking suspicion that jogging would have been a better workout and more cost effective). In a recent fit of daring, I even took an aerial yoga class—attempting to calm my breathing as I dangled upside down from fabric suspended from the ceiling. Clearly, I was on the path to inner bliss.
The most impactful part of a good yoga class, at least I am told, is the meditation at the end. Your heartbeat slows. Your body is at rest. Your mind empties. Well, it's supposed to anyway. Whenever I try to clear my thoughts through meditation, I end up thinking about dinner or tomorrow's to-do list or what might be wrong with me that I can't stop thinking.
Thus it comes as some relief to learn that yoga, relaxation, meditation and stress-free living are not clear paths to happiness. On the contrary, economist Todd Buchholz believes that peace and stillness might make you miserable. In his new book, Rush: Why You Need and Love the Rat Race, Buchholz outlines why he's decided that work is the secret to happiness.
The former White House director of economic policy and Harvard teacher set out to write a book about how Americans were destroying themselves by chasing success and achievement. Soon, however, he realized that it was that very pursuit that makes us happiest.
"Behavioural psychologists and yoga masters are flat wrong," Buchholz told me. "The idea that our entire society needs to de-stress is treacherous."
Despite the perception that work and stress stunt our happiness, Buchholz says our brains are wired to thrive in the rat race. He points to the frontal lobe, which evolved to plan for the future and craves forward thinking and motion. If we were to step off the wheel, retiring to an endless beach and flow of daiquiris, we would resort to "a life of stasis" that would "confound and frustrate the frontal lobe." Retirement, he says, ages us and causes brain function to decline.
Similarly, Buchholz dismisses the idea that smiling and serenity will boost our spirits. Rather he believes that rushing around and frequent activity converts into internal energy that revives us. Dopamine and serotonin—the body's natural feel-good drugs—flood our systems when we take a risk or begin a new challenge.
And all that society-wrenching competition going on in the workplace? Happiness inducing, Buchholz claims. "Typical academics would say the opposite of competition is cooperation," he says. "My argument is that competition can lead to cooperation. Human beings created cooperative hunting teams because they were competing against the elements. Competition is what drives people to improve their lives."
The workplace, then, is not a cesspool of greed, rivalry and political maneuvering. It's an arena that forces you to compete against the industry standard, your coworkers and even yourself, which ultimately drives innovation, creativity and personal growth.
To those that still think they'd be better off going back in time to lead a simpler life—uncomplicated by BlackBerry buzzing, Starbucks gulping or flight-hopping—Buchholz adds: "There's no evidence that a simple life made people happier. There was no traffic or Internet, but instead life expectancy was about 45 years."

Fixed-rate hike presents opportunity for brokers

2011-07-05T10:17:00.000-07:00

This has always been a bit of a "crap shoot"!. With a VIRM there are risks but mainly there have been benefits. Historically the VIRM has been the winner and when most research was done VIRM were priced at PRIME and they are now PRIME -.75%. As a result it is hard to see Fixed Rates winning the battle. If rates go up by 1% over the next two years the VIRM would still be lower then the best Fixed rate available today.
There is always a down side possibility so "if you want to play be prepared to pay".

Neil "Mortgage Man" McJannet

By Vernon Clement Jones 04/07/2011 6:00:00 PM 0 comments
Selling fixed-rate mortgages may just have gotten a little easier for brokers, with the big banks leading a new round of rate hikes, threatening to kick start the “significant rise” some analysts had expect in the second quarter.

Broker channel lenders are expected to follow the lead of RBC and TD Bank, which moved Monday to raise their benchmark five-year fixed-rate mortgages by 15 basis points, to 5.54 per cent. Most other special and fixed rates at the banks, including Laurentian, also rose between 0.10 and 0.15 percentage points, with their “discounted rates” receiving a similar bump-up, climbing to 4.39 per cent. The banks are now pointing to rising bond yields, specifically a 35-basis point spike in the 5-year bond yield. It effectively increases the cost of money for prime lenders and directly impacts the interest they attach to fixed-rate product.

While mortgage rates remain historically low, analysts suggest the trend is toward further growth by the end of the first half of 2012. Canadian banks are, in fact, forecasting as much as a 100-basis point increase in 5-year bond yields over the next two years, making for a corresponding hike in fixed-rates mortgages over that same period.

The growth comes as an increasing number of brokers are helping clients lock into fixed rates in anticipation of the Central Bank’s move to raise its overnight rate later this year. Early last month economists switched their script, arguing that the Bank would continue to hold the key rate at 1 per cent until the Q2 2012 given a slower-than-expected global economic recover and fears of a double-dip recession in the U.S.

All bets may again be off as inflation fears resurface. Investors are now anticipating Bank of Canada Governor Mark Carney will boost the overnight rate by the end of the year after the country’s annual inflation rate in May jumped to the highest level in eight years. The rise could force the Central Bank to slow down consumer borrowing by raising the cost of those funds.

All the uncertainty may make it easier for brokers looking to convert preapprovals.

“With the fixed rates going up seven weeks ago and then going down and now up, it creates more momentum among risk-averse clients who were waiting to jump into the market,” Arnold Molder, a 35-year veteran of the industry and president of The Mortgage Centre Tridac Mortgages. “If it is a new client, we will offer them both options, but we are still leaning to fixed rates, which are still really near the bottom rate.”

Are we headed for rapid rate rises?

2011-06-29T07:59:00.000-07:00

Bloomberg News Central banks need to start raising interest rates to control inflation and may have to act faster than in the past, the Bank for International Settlements said.
“Tighter global monetary policy is needed in order to contain inflation pressures and ward off financial stability risks,” the BIS said in its annual report published Sunday in Basel, Switzerland. “Central banks may have to be prepared to raise policy rates at a faster pace than in previous tightening episodes.”
While policy makers in Asia and Latin America are already raising borrowing costs to damp price pressures, rates remain near record lows in the world’s largest developed economies. Central banks in the U.S., U.K. and Japan have signalled they intend to keep that stimulus in place for some time, with only the European Central Bank moving to gradually tighten credit as inflation risks increase.
“Global inflation pressures are rising rapidly as commodity prices soar and as the global recovery runs into capacity constraints,” said the BIS, which acts as a central bank for the world’s central banks. “These increased upside risks to inflation call for higher policy rates.”
With U.K. inflation running at 4.5%, more than double the Bank of England’s target, the BIS said “one wonders how long its current policy can be sustained.” The pound rose half a cent in early European trading to $1.5985 before retracing to $1.5931 at 9 a.m. in London.
Crude oil prices have gained 20% in the last 12 months, putting pressure on companies to increase wages and pass on higher costs to consumers.
“The price pressure is there,” said Carsten Brzeski, chief European economist at ING Group NV in Brussels. “One of the lessons of the financial crisis is that you shouldn’t leave rates too low for too long. Now is the time to remember that lesson.”
BIS General Manager Jaime Caruana said global headline inflation has risen a percentage point to 3.6% since April 2010. At the same time, short-term interest rates adjusted for inflation “have actually fallen in the past year, from minus 0.6% to minus 1.3% globally,” he said in a speech in Basel Sunday.
“The world economy is growing at a historically respectable rate of around 4%,” Caruana said. “The resurgence of demand has put concerns about deflation behind us. Accordingly, the need for continued extraordinary monetary accommodation has faded.”
The ECB in April raised its benchmark interest rate from a record low of 1% and has signalled another quarter-point step is likely in July.
By contrast, the Federal Reserve last week repeated a pledge to keep its policy rate close to zero for an “extended period,” while the Bank of Japan this month held its benchmark near zero and kept credit and asset-purchase programs in place.
Minutes of the Bank of England’s last policy meeting this month, at which the key rate was held at 0.5%, show some officials see the potential to extend bond purchases to boost a faltering recovery.
The BIS said that in “some advanced economies” policy tightening still needs to be balanced against the “vulnerabilities” associated with balance-sheet adjustment and financial sector fragility.
Still, “undue delay in the normalization of the monetary policy stance entails the risk of creating serious financial- market distortions,” it said. Furthermore, a “timely tightening” of policy in both emerging-market and advanced economies will be needed “to preserve a low-inflation environment globally and reinforce central banks’ inflation- fighting credibility.”
The BIS said central banks should reduce the size of their balance sheets, though it would be “dangerous” to cut them “too rapidly or too indiscriminately.”
In response to the financial crisis, the Fed and the Bank of England “sharply” increased their total assets from about 8% of gross domestic product to just below 20%, while the ECB expanded its assets from 13% of GDP to more than 20%, according to the BIS.
“Balance-sheet policies have supported the global economy through a very difficult crisis,” it said. “However, the balance sheets are now exposed to greater risks — namely interest-rate risk, exchange-rate risk and credit risk — that could lead to financial losses.”
The BIS also urged governments to pursue fiscal consolidation, saying the biggest risk is “doing too little too late rather than doing too much too soon.” In Europe, policy makers must fix the region’s debt crisis “once and for all,” it said.
“Nowhere is the link between fiscal sustainability and financial health more apparent than in parts of Europe today,” Caruana said. “There is no easy way out, no shortcut, no painless solution.”
The BIS warned that a failure of the U.S. to tackle its budget deficit could become a source of instability, with potentially “far-reaching ramifications for the global economy” should a rapid depreciation of the dollar result.
“The current ability of the United States to easily finance its deficit cannot be taken for granted,” the report said.
The BIS holds currency reserves on behalf of its members and provides policy makers with a forum for discussion. Attendees at the annual general meeting in Basel Sunday included ECB President Jean-Claude Trichet, Fed Chairman Ben S. Bernanke, Bank of Japan Governor Masaaki Shirakawa and Bundesbank President Jens Weidmann.

Why economists see a modestly stronger second half for 2011 after a dismal 6 months

2011-06-28T07:35:00.000-07:00

By Christopher S. Rugaber,Paul Wiseman, The Associated Press
WASHINGTON - Farewell and good riddance to the first half of 2011 — six months that are ending as sour for the economy as they began.
Most analysts say economic growth will perk up in the second half of the year. The reason is that the main causes of the slowdown — high oil prices and manufacturing delays because of the disaster in Japan — have started to fade.
"Some of the headwinds that caused us to slow are turning into tail winds," said Mark Zandi, chief economist at Moody's Analytics.
For an economy barely inching ahead two years after the Great Recession ended, the first half of 2011 can't end soon enough. Severe storms and rising gasoline prices held growth in January, February and March to a glacial annual rate of 1.9 per cent.
The current quarter isn't shaping up much better. The average growth forecast of 38 top economists surveyed by The Associated Press is 2.3 per cent.
The economy has to grow 3 per cent a year just to hold the unemployment rate steady and keep up with population growth. And it has to average about 5 per cent growth for a year to lower the unemployment rate by a full percentage point. It is 9.1 per cent today.
As welcome as the stronger growth envisioned in the second half is, the improvement should be modest. For the final six months of the year, the AP economists forecast a growth rate of 3.2 per cent.
So far this year, high gas and food prices have discouraged people from spending much on other things — from furniture and appliances to dinners out and vacations. That spending fuels economic growth.
And some U.S. auto factories had to suspend or trim production after the March earthquake in Japan interrupted supplies of parts and electronics. American dealerships have had fewer cars to sell.
The latest dose of glum news: The government reported Monday that consumer spending was about the same in May as in April, the first time in a year that spending hasn't increased from the previous month.
The report confirmed the toll that high gas prices, Japan-related disruptions and high unemployment have taken on personal spending in the second quarter.
"Here's to a better third," says Jennifer Lee, senior economist at BMO Capital Markets.
Relief is in sight, economists say. Oil prices have been falling since Memorial Day. The drop has lowered the price of regular unleaded gasoline by 23 cents in the past month, to a national average of $3.57 a gallon, according to AAA.
The timing of the drop in gas prices is especially fortunate because they usually rise during summer driving season, says Robert DiClemente, chief U.S. economist at Citigroup .
And the kinks in the global manufacturing chain are starting to be smoothed out as the Japanese factories that make cars and electronics resume production.
Diane Swonk, chief economist at Mesirow Financial, says auto sales should improve "quite substantially" later this year because the lost production from the earthquake is coming back faster than had been expected.
One sign of that rebound came when the Federal Reserve Bank of Chicago reported Monday that manufacturing in the Midwest rebounded in May after falling sharply in April.
And last week, the government said orders for machinery, computers, cars and other durable goods rose slightly in May after dropping in April. Economists attributed the turnaround, in part, to Japanese factories that started to rev up.
The U.S. economy is also expected to get a slight second-half boost from reconstruction in flood-ravaged sections of the South and Midwest. Construction workers will be employed rebuilding homes and businesses. People will replace destroyed cars and other possessions. Analysts predict the economic losses from the floods in the April-June quarter will be reversed in the July-September quarter.
The economists surveyed by AP predict unemployment will fall to 8.7 per cent at year's end. It is not exactly the start of a boom: The economy is still carrying too much baggage from the financial crisis — damaged banks, depressed home prices, debt-burdened consumers — to achieve much liftoff.
Though some of the economy's weakness in the first half is temporary, "it is hard to see much on the horizon to cheer about," Swonk says.

Flaherty Says No More Mortgage Changes- for Now .

2011-06-24T07:27:00.000-07:00

Although there have been several reports of late indicating that debt in this country is on the rise, Jim Flaherty does not believe that the answer lies in more mortgage and lending restrictions.
It is a delicate balance- to put checks and balances in place to support responsible borrowing and lending--- and allowing enough access to credit to keep the wheels of economic growth turning
One has to look no further than to our neighbours in the South to understand what can happen when credit is too accessible- and then the economic backlash when the reins are pulled in with great haste.
Both Stats Can and BMO released data this week that suggests that debt levels are still rising, even in the face of strategized debt control- in the form of staggered changes to lending, as introduced by Jim Flaherty.
Flaherty cites the health of the Real Estate market in this country as the main reason that there is no immediate need to further impose lending restrictions.

In remarks during a speech delivered this week, he said, “We just took action in March and activity is already starting to moderate.”

Stats Can said, “Mortgage debt advanced, partly reflecting relatively stable borrowing costs as well as higher housing resale and renovation activities.” The concern, as been the impetus for these lending changes- is not even so much about the increase in borrowing amount- but in putting in perimeters for both responsible lending and borrowing. In short, it is about debt management, as opposed to debt accumulation.

Stats Can reported this week that “the ratio of household credit market debt to personal disposable income advanced to 147.3% in the first quarter, as growth in household credit market debt (+1.3%) outpaced that of the personal disposable income (+0.7%). The debt-service ratio also edged up in the first quarter, continuing a trend that started in the third quarter of 2010. Somewhat weaker growth in personal disposable income (as a result of temporary factors) and moderately higher borrowing, accounted for the rise in the debt-service ratio in the first quarter.”

Bank of Canada's Carney warns of mounting risk, predicts bad quarter for economy

2011-06-23T08:49:00.001-07:00

Julian Beltrame, The Canadian Press
OTTAWA - Strain from a world awash in debt is increasing the risk to what is already a fragile and weak economic recovery, the Bank of Canada warns.
And Canada faces a second, more immediate challenge from temporary factors such as disruptions from the Japanese earthquake and tsunami that will limit growth to about one per cent this quarter, governor Mark Carney added Wednesday.
"This is a disruptive time, there are a major series of changes going on ... so there will be some volatility," Carney told a Senate committee after his bank released its latest biennial Financial Systems Review.
The U.S. economy — which most Canadian exporters depend on — is a shadow of itself, he said, adding that U.S. households may need a decade to get out from debt.
Meanwhile, although emerging economies are booming, Canada's exporters, with the exception of commodities, are under-represented in that world.
And lastly, there's the mountain of debt weighing on the balance sheets of advanced countries, from Japan to parts of Europe to the U.S., that will dampen growth for years.
The summary put into stark language the findings of the central bank's financial systems review, released earlier in the morning, which took a more pessimistic view of the recovery.
The big problem facing the world is debt. Debt even threatens Canada's economy, given that household indebtedness is at record levels and could grow further before tailing off.
"The key risks to the stability of the Canadian financial system remain elevated and have edged higher since December," the bank concludes in the systems review.
For the first time, Carney revealed to a Senate committee that the current second quarter in Canada could see growth drop all the way to one per cent, from 3.9 per cent in the first three months.
Acknowledging that he had previously predicted growth of two per cent this quarter, which ends June 30, Carney told the senators: "The growth could be even lighter than that, it could be in the one per cent range."
He added, however, that he still expects the economy to do better in the second half of this year.
The bank report and Carney's testimony comes as Greece is again under the gun to hold off a credit default that would likely cripple some European banks and possibly touch off a new round of global financial jitters.
But the Bank of Canada says the debt woes extend further than Greece to other peripheral European nations — Spain, Portugal and Ireland — and over the longer term, to the U.S. and Japan .
Canada too faces a troubling household debt issue, the bank warns, which could be exacerbated by shocks, including an economic downturn and interest rate hikes.
In a separate report card, U.S. Federal Reserve officials also took a darker view of the situation, downgrading growth expectations both for the economy and job creation.
All these risks "are interconnected and mutually reinforcing," the Bank of Canada said.
Carney urged Canadians to keep things in perspective, however, growth is "reclining, not declining," and Canada still benefits from sound fundamentals.
Canada's financial system got a "healthy" grade both in terms of the soundness of the banking system and business balance sheets, but it is vulnerable somewhat to outside forces.
Carney said Canada's exposure to Europe's sovereign debt is small, but not insignificant, given the interconnectiveness of the international banking system.
"The Canadian financial system is not immune to the tensions that are currently affecting European markets," the bank's policy council says in the report.
Finance Minister Jim Flaherty has also expressed concern about the Greek crisis, urging European policy-makers to "create a firewall that would ensure that this type of issue would not spread beyond Greece."
Despite the weak recovery and the pain it will cause, governments have no choice but to start the process of getting their fiscal houses in order, said Carney.
He cautioned that indebted countries, even the U.S., shouldn't assume bond markets will be always be prepared to fill their credit needs at reasonable rates. Canada learned that lesson the hard way in the 1990s, he pointed out.
"Our experience in the mid-1990s is that the bond market is there and then it's not," he said.
Domestically, the bank is still very worried about Canadian household debt, which is at an all-time high of 147 per cent of disposable income.
The risk, it says, is that as household finances get squeezed, Canadians will have less money to spend on consumer goods, which would slow down economic growth.
"Further moderation in the pace of debt accumulation by households is needed to contain the buildup of this vulnerability," it says.
The bank also cites global imbalances, the two-speed recovery where advanced nations grow far slower than emerging economies, as additional risks that appear no closer to resolution.
"If the significant fragilities that still burden the financial system are not addressed in a timely manner, the progress achieved to date could be derailed," the bank said.
TD Bank economist Diana Petramala said the report suggests the Bank of Canada is very much in worry mode, and is unlikely to raise interest rates — which could weaken the economy — until 2012.
"All of these risks (cited by the central bank) could have significant economic consequences on Canada’s economy and financial system," if they are borne out, Petramala said.
"In addition, they are medium-term (rather than short-term) in nature, suggesting they are unlikely to disappear any time soon. Under our current forecast, we don’t anticipate Canada’s overnight rate to reach a more normal level of three per cent until 2013."
The bank last hiked interest rates last September , lifting its policy setting to one per cent, still exceptionally low by historical standards.

4 Ways To Value A Real Estate Rental Property

2011-06-22T08:49:00.000-07:00

Stephan Abraham, On Tuesday June 21, 2011
During the first half of the 2000s, investing in real estate became more common for average Americans. With easily available financing and minimal down payment requirements many Americans made handsome profits by flipping homes. Well, as we are all aware of, this couldn't go on forever, and the real estate bubble popped in 2007, leading to The Great Recession. Notwithstanding this fundamental change, real estate investment is certainly not unprofitable. Some economic factors such as high unemployment and very strict lending standards by financial institutions have contributed to low vacancies for rentals across the United States. Perhaps real estate investors should look at rental investments as an alternative to a buy and sell approach. So, how does one go about valuing real estate rentals? Here we will introduce at a high level some ways to value rental property.
Sales Comparison ApproachThe sales comparison approach (SCA) is one of the most recognizable forms of valuing residential real estate. This approach is simply a comparison of similar homes that have sold or rented over a given time period. Most investors will want to see an SCA over a significant time frame to glean any potentially emerging trends.
The SCA relies on attributes to assign a relative price value. Price per square foot is a common and easy to understand metric that all investors can use to determine where there property should be valued. If a 2,000 square foot townhome is renting for $1/square foot, investors can reasonably expect a similar rental income based upon similar rentals in the area. Keep in mind that SCA is somewhat generic; that is, every home has a uniqueness that isn't always quantifiable. Buyers and sellers have unique tastes and differences. The SCA is meant to be a baseline or reasonable opinion and not a perfect predictor or valuation tool for real estate. It is also important for investors to use a certified appraiser or real estate agent when requesting a comparative market analysis. This mitigates risk of fraudulent appraisals, which became widespread during the 2007 real estate crisis.

Capital Asset Pricing ModelThe capital asset pricing model (CAPM) is a more comprehensive valuation tool for real estate. The CAPM introduces the concepts of risk and opportunity cost as it applies to real estate investing. This model really looks at potential return on investment (ROI) derived from rental income and compares it to other investments that have no risk, such as United States Treasury bonds or alternative forms of real estate investments such as real estate investment trusts (REITs).
In a nutshell, if the expected return on a risk-free or guaranteed investment exceeds potential ROI from rental income, it simply doesn't make financial sense to take the risk of rental property. With respect to risk, the CAPM considers the inherent risks to rent real property. For example, all rental properties are not the same. Location and age of property are key considerations. Renting older property will mean landlords will likely incur higher maintenance expenses. A property for rent in a high crime area will likely require more safety precautions than say a rental in a gated community. This model suggests building in these "risks" before considering your investment or when establishing a rental pricing structure.
Income Approach
The income approach focuses on what the potential income for rental property yields relative to initial investment. The income approach is used frequently for commercial real estate investing. The income approach relies on determining the annual capitalization rate for an investment. This rate is simply the projected annual income from the gross rent multiplier divided by the original cost or current value of the property. So if an office building costs $120,000 to purchase and the expected monthly income from rentals is $1,200, the expected annual capitalization rate is 10%.
This is a very simplified model with few assumptions. More than likely there are interest expenses on the mortgage. Also, future rental income may be less or more valuable five years from now than they are today. Many investors are familiar with the net present value of money. This concept applied to real estate is also known as a discounted cash flow. Dollars received in the future will be subject to inflationary as well as deflationary risk and are presented in discounted terms to account for this.
Cost ApproachThe cost approach to valuing real estate states that property is really only worth what it can reasonably be used for. It is estimated by summing the land value and the depreciated value of any improvements. Appraisers from this school often espouse the "highest and best" use to summarize the cost approach to real property. It is frequently used as a basis to value vacant land. For example, if you are an apartment developer looking to purchase three acres of land in a barren area to convert into condominiums, the value of that land will be based upon the best use of that land. If the land is surrounded by oil fields and the nearest person lives 20 miles away, the best use and therefore the highest value of that property is not converting to apartments but possibly expanding drilling rights to find more oil.
Another best use argument has to do with property zoning. If the prospective property is not zoned "residential," its value is reduced since the developer will incur significant costs to get rezoned. It is considered most reliable when used on newer structures, and less reliable for older properties. It is often the only reliable approach when looking at special use properties.
The Bottom LineReal estate investing isn't out of vogue by any stretch of the imagination. Since the last crash, however, the housing market has changed dramatically. Flipping homes financed with no money down is an artifact of the past and possibly gone forever. But real estate rentals can be a profitable endeavor if investors know how to value real property. Most serious investors will look at components from all of these valuation methods before making a rental decision. Learning these introductory valuation concepts should be a step in the right direction to getting back into the real estate investment game.

Dream home a nightmare for Idaho couple caught in snake-filled ‘horror movie’

2011-06-16T09:06:00.000-07:00

ALWAYS ALWAYS ALWAYS do your own due dilligence when loking at a property!
You don't want this to be you!

Neil "Mortgage Man" McJannet

REXBURG, Idaho – The five-bedroom house sits on pastoral acreage in the rural U.S. countryside. At a price less than $180,000, it seemed a steal.
But a bargain it wasn’t. Ben and Amber Sessions soon realized the dream home they’d purchased in Idaho for their growing family in 2009 was infested with hundreds upon hundreds of garter snakes.
The ground surrounding the home appeared to move at times, it was so thick with snakes.
Throngs of snakes crawled beneath the home’s siding. At night, the young couple said they would lie awake and listen to slithering inside the walls.
“It was like living in one of those horror movies,” said Ben Sessions, 31.
The family would frequently eat out because their well water carried the foul smelling musk that the snakes release as a warning to predators.
Each day, before his pregnant wife and two small boys got out of bed, Sessions said he would do a “morning sweep” through the house to make sure none of the snakes had made it inside. That didn’t always work. One day, he heard his wife scream from the laundry room, where she had almost stepped on a snake. He rushed into the room to find that she’d jumped onto a counter.
“I was terrified she was going to miscarry,” he said.
They invited family as witnesses and snapped pictures.
At the height of the infestation, Sessions said he killed 42 snakes in one day before he decided he couldn’t do it anymore. He had waged war against the snakes and “they won.”
He and his wife had little recourse, though, when they decided to flee the home.
They had signed a document that noted the snake infestation. They said they had been assured by their real estate agent that the snakes were just a story invented by the previous owners to leave their mortgage behind.
But the so-called Idaho snake house was no myth, according to the Sessionses, their neighbours, and the videos and photographs taken by them and past residents of the house. The couple said it seemed like almost everyone else in this tiny southeastern Idaho college town knew about it.
“I felt bad,” said Dustin Chambers, a neighbour. “By the time we knew someone had bought it, they were already moving in. It was too late.”
All of Rexburg, Chambers said, pretty much knows the property as the “snake house.”
The Sessionses filed for bankruptcy. The house was foreclosed. They left in December 2009, the day after their daughter was born and just three months after moving in.
“We’re not going to pay for house full of snakes,” Ben Sessions said.
His wife, Amber, 27, said she felt like their family was starting to fall apart.
“It was just so stressful,” she said. “It felt like we were living in Satan’s lair, that’s the only way to really explain it.”
Several months ago, the house briefly went back on the market.
Now owned by JP Morgan Chase, it was listed at $114,900 (€79,527) in December 2010, according to Zillow.com, a real estate data firm. The price was reduced to $109,200 in early January, which was more than $60,000 below its estimated value. Then, Discovery Channel’s “Animal Planet” featured the Sessionses’ story in its “Infested” series.
The listing was removed and the home has stayed off the market while Chase decides what to do with it.
A Rexburg real estate company that was hired to sell the house referred all questions to a Chase spokeswoman in Seattle.
Darcy Donahoe-Wilmot did not return repeated phone calls from The Associated Press. But she did tell a business columnist for Dow Jones Newswires that the bank had contracted to have the snakes at the home trapped and released elsewhere.
Ben Sessions said that he has been diagnosed with snake-related post-traumatic stress disorder and that the house should be condemned.
“It’s not right to continue to sell this home,” Sessions said. He and his wife said they still have nightmares and haven’t recovered financially.
The home was most likely built on a winter snake sanctuary, likely a snake den or hibernaculum, where snakes gather in large numbers to hibernate for the winter, said Rob Cavallaro, a wildlife biologist with the Idaho Department of Fish and Game.
In the spring and summer the snakes fan out across the wilds of southeastern Idaho, but as the days get shorter and cooler, the snakes return to the den in order to ball up for heat and to be accessible to each other for spring breeding.
Cavallaro has heard only of one other eastern Idaho home that was likely located on a snake den. There was also a bridge-widening project where workers ran into a hibernaculum, he said.
“It is an important site for the snakes,” Cavallaro said. “Every now and then we build on them and it becomes a conflict.”
Neal and Denise Ard previously lived in the home, and in 2006 they invited the local news station to come and film the buckets of snakes they had collected on the property. The video, which has 2.4 million views on YouTube, was taken before the Ards abandoned the home.
In March 2007, the Ards sued the couple who had sold them the home for $189,900 and the real estate agent who negotiated the sale, according to court documents. The complaint was dismissed a year later.
There have been some people who have looked at the house since the Sessionses moved out, neighbour Chambers said. One day, when a real estate agent was showing the property, a farmer who lives down the road stopped by to warn them, he said.
“Now, if anybody sees anybody, they kind of will let them know,” Chambers said. “Just so that somebody else doesn’t get caught in the same trap.”

TD Bank forecasts low interest rates this year.

2011-06-15T09:50:00.000-07:00

OTTAWA — The TD Bank says Canadians can expect borrowing costs to remain near record lows for the rest of the year.
That’s because the pace of the economic recovery is expected to slow sharply in Canada, the United States and much of the world.
As such, the Bank of Canada will likely refrain from raising its key interest rates until 2012, TD says.
The central bank has had its policy rate set at one per cent since September. The rate was set at all-time low of 0.25 per cent through much of the recession, to stimulate borrowing and spending, until a series of rate hikes began last summer.
The still-low rates have been a double-edged sword for Canadians who are already piling up debt at record levels, according to the Certified General Accountants Association of Canada.
The association says Canadian household debt has reached a record $1.5 trillion, and calculates that more than half of indebted Canadians are borrowing just to afford day-to-day living expenses such as food, housing and transportation.
Low interest rates will make it easier for Canadians to keep borrowing, setting them up for a fall further down the road.
Debt is partly contributing to a slowdown in Canadian growth, says the TD Bank, because households are too tapped out to spend and stimulate the economy.
The bank says Canada’s economy is believed to have already slowed to 1.3 per cent growth during this current quarter that ends at the end of the month, one-third the pace of the first quarter’s 3.9 per cent gain.
The rest of the year will see growth crawl along between two and 2.5 per cent, the bank says.
As the recovery moderates, so will job growth. The bank says it expects the unemployment rate in Canada will remain above seven per cent throughout its forecast period to the end of 2013.
With little help from consumers, Canada will need to depend on exports and business investment to fuel growth

Recreational property markets bouncing back: Re/Max

2011-06-14T08:49:00.001-07:00

OTTAWA — Canada’s recreational property market appears to be bouncing back from a recessionary lull as buyers seek to capitalize on equity and stock-market gains, Re/Max says in a report Monday.
Demand rose 78% in the 46 markets across the country covered by the realtor’s Recreational Property Report, while sales had risen or were on par in 41% of those centres.

“Buyers who held off during the recession are back in recreational property markets from coast-to-coast,” says Pamela Alexander, chief executive of Re/Max for Ontario-Atlantic Canada. “Their patience has been rewarded with more affordable recreational values and greater inventory levels.”
While prices have remained stable in many markets, values could be found for higher-end properties, pushing luxury sales higher in almost half of the markets examined, Re/Max said in its report.
Opportunities were also to be found in Western Canada.
“Prices are down as much as 20% from peak levels reported in 2006-2007, bringing ownership within reach to many potential purchasers,” said Elton Ash, regional executive vice-president of Re/Max in Western Canada.
On British Columbia’s Salt Spring Island, for example, starting prices for oceanfront properties have fallen to $669,000 today from $1.3-million in 2008.
In the North Okanagan Valley, a three-bedroom, winterized recreational property on a standard-sized waterfront lot — the common measures used in Re/Max’s report — that sold for $1.5-million in 2008 now sells for $995,000.
Starting prices for similar properties on Alberta’s Sylvan Lake are now at $800,000 from $1.25-million previously and in the Rocky Mountain resort town of Canmore, a two-bedroom condo has fallen to $229,000 from $320,000.
“The strengthening oil sector has . . . brought Albertans back into mix, driving demand for both local and coastal B.C. properties,” Ash said.
Another factor influencing the recreational property market has been that Americans who bought when the Canadian dollar was at 65 U.S. cents are now cashing out, boosting inventories.
The report found that there has been some tightening for entry-level properties in about one-third of the markets covered. As well, it noted, the supply of properties has tightened considerably at the lower end in Ontario, Quebec and Atlantic Canada.
It also noted that recreational properties are moving more toward year-round homes, with fewer traditional cottages available for sale.
“These waterfront properties are disappearing from the landscape. Meanwhile, today’s average recreational getaways are truly earning the distinction as the “home away from home,” with many of the bells, whistles and comforts of their residential counterparts

Canadians continue to rack up debts

2011-06-11T07:41:00.000-07:00

Tom Fennell, Yahoo Finance Thursday June 9, 2011,
Are rising consumer debt loads the Achilles' heel of the Canadian economy?
Before we tackle that question, let's back up a few months and revisit the lecture Bank of Canada Governor Mark Carney gave the country on rising personal debt levels, and the fact that while money is cheap today, it could get expensive again — and quickly.
"Low interest rates today do not necessarily mean low rates tomorrow," warned Carney. "Risk reversals, when they happen, can be fierce; the greater the complacency, the more brutal the reckoning."
What's happened to consumer debt levels since he scolded Canada's profligate spenders? Well, apparently nobody was paying much attention, and over the first three months of this year a new study suggests consumer debt has continued to climb.
According to the credit rating agency, TransUnion, Canadians now owe an average of almost $26,000 on their credit cards, lines of credit and auto loans.
That's an increase of 4.5 per cent, or another $1,000, over the same period last year.
The picture becomes even bleaker when you factor mortgage debt into the TransUnion report. Currently, Canadians owe just over $1 trillion in mortgage debt, and that pushes the $26,000 figure to just over $100,000 per Canadian family.
Now let's bring that debt picture into line with earned income.
According to the Ottawa-based Vanier Institute, the average Canadian family is now carrying a household debt that amounts to 150 per cent of their personal disposable income. That's the highest level in history. And stated in a starker way, for every $1,000 a Canadian family earns, they have to make about $1,500 in debt payments.
Sadly, according to TransUnion, Canadians persist in carrying large credit card balances at onerous rates. And the amount being carried on plastic only fell $25 to an average of $3,539 over the last year.
At the same time, the national credit card delinquency rate rose 11 per cent.
And despite Carney's hectoring and the rule changes surrounding lines of credit, they are still the most popular lending vehicle. Excluding mortgages, they accounted for more than 41 per cent of outstanding debt at the end of the first quarter at $33,981, up 5.9 per cent from the first quarter of 2010.
It's interesting to note that Canadian indebtedness rose as interest rates came down steadily over the last ten years. And that begs the question: what will happen when interest rates start to rise again as many analysts believe they must?
In fact, speaking earlier in June, Carney warned that while he was holding the core bank rate at one per cent, it would rise from crisis lows at near zero to what many economists believe to be a more normal rate in the six-per-cent range.
That's where broader economic conditions come to bear on debt levels.
If interest rates jump, the impact will be immediate on floating-rate vehicles like lines of credit and variable-rate mortgages. For example, someone with a 3.5 per cent variable-rate mortgage can carry a $400,000 mortgage at around $2000 a month.
If interest rates climb, and the variable rate reaches six per cent, that same mortgage would jump to almost $2,600 a month.
The debt picture also gets complicated when you compare the growth in mortgages to annual wage gains. In its annual report, the Canadian Association of Accredited Mortgage Professionals said that over the last 15 years, the annual growth rate in mortgage debt has been around 7.5 per cent. And yet wages have been increasing at around 2.3 per cent a year.
Why is that important? Simply because if consumers are already stretched to keep up because of flat-lined wage increases that have barely matched the inflation rate, they have very little room in their budgets to accommodate rising costs triggered by a surge in interest rates.
Obviously loan delinquency and home foreclosures would increase. And if you add a job-killing recession to the mix, you have the onset of a perfect storm that could see an increasing number of Canadians fall into personal bankruptcy.
Perhaps that's why Finance Minister Jim Flaherty joined Carney in warning Canadians to cut back on debt. He certainly fears that the world could be faced with another recession, given the sluggishness of the global economy and the inability of the U.S. to get its fiscal house and economy in order. "I am quite worried," said Flaherty in an interview. "We have lived three-and-a-half years now since the credit crisis started in late August, 2007. We are seeing in Europe, in particular, some very difficult situations."
Fortunately, so far the Canadian economy shows little sign of weakness with the Bank of Canada predicting growth in the three-per-cent range for this year.
But with economic stimulus programs being withdrawn in the U.S. and Flaherty vowing to turn off the spending taps in Ottawa, growth could slow sharply as the country enters 2012. If it does, Canada's debt binge could make things even worse as consumers cut back on their spending to reduce their loan balances.
Only time will tell. But for now, Canadians seem determined to ignore the warnings and keep on borrowing.

Top 8 House-Hunting Mistakes

2011-06-09T08:28:00.000-07:00

Amy Fontinelle,
Buying a home is a very emotional process, but if you allow those emotions to get the best of you, you may fall prey to a number of common home buyer mistakes. Since buying a home has many far-reaching implications - ranging from where you will live to how hard it will be to make ends meet - it's important to keep your emotions in check and make the most rational decision possible.

There are eight common emotional mistakes that people make when buying a home. Avoiding these pitfalls will help you find the best home-sweet-home.
Mistake 1: Falling in Love With a House You Can't Afford
Once you've fallen in love with a particular home, it's hard to go back. You start dreaming about how great your life would be if you had all the wonderful things it offered - the lovely, tree-lined streets, the jetted bathtub, the spacious kitchen with professional-grade appliances. However, if you can't or won't be able to afford that house, you're just hurting yourself by imagining yourself in it. To avoid the temptation to get in over your head financially, or the disappointment of feeling like you're settling for less than you deserve, it's best to only look at homes in your price range.
Start your search at the low end of your price range - if what you find there satisfies you, there's no need to go higher. Remember, when you buy another $10,000 worth of house, you're not just paying an extra $10,000 - you're paying an extra $10,000 plus interest, which might come out to double that amount or more over the life of your loan. You may be better off putting that money toward another purpose.
Mistake 2: Assuming There's Nothing Better Out There
Unless you are a high-end buyer looking at custom homes, chances are that for any home you find that you like, there are quite a few others that are nearly identical to it. Most neighbourhoods have multiple homes that are the same model. Further, most neighbourhoods are full of homes that were all constructed by the same builder, so even if you can't find an identical model for sale, you can probably find a house with many of the same features. If you're considering a condo or townhouse, the odds are also in your favour.
Even when you have a long list of must-haves, there are probably several homes out there that can meet your needs. If there are snags with the home you've decided you like - such as major repair issues, an inflexible asking price or a difficult possession date - consider moving on. Being open to keep looking will save you from making rash decisions you might regret later.
Mistake 3: Being Desperate
When you've been looking for a while and you're not seeing anything you like - or worse, you're getting outbid on the houses you do want - it's easy to get desperate to get into your new house now. However, if you move into a house you'll end up hating, the transaction costs to get rid of it will be costly. You'll have to pay an agent's commission (up to 5-6% of the sale price) and you'll have to pay closing costs for the mortgage on your new house. You'll also deal with the hassle and expense of moving yet again. If you decide not to move but to try to make the best of what you have, remember that alterations and renovations are expensive, time-consuming and stressful. If you have time on your side, it's OK to wait until something that suits you comes along - as long as your demands are realistic for your budget, you are bound to find something you live with.
Mistake 4: Overlooking Important Flaws
For any of the three reasons we just discussed, you might be tempted to ignore major problems with the house that will be difficult, expensive or impossible to change. Carefully consider your options before you make a commitment, and consider waiting until something better comes along. New houses come on the market every day.

Mistake 5: Overestimating Your Handyman Skills
Don't buy a fixer-upper that's more than you can handle in terms of time, money or ability. For example, if you think you can do the work yourself then realize you can't once you get started, any repairs or upgrades you were planning to make will probably cost twice as much once you factor in the labour - and that may not be in your budget. Not to mention the costs involved to fix anything you may have started and the fees to replace the materials you wasted. Honestly evaluate your abilities, your budget and how soon you need to move before purchasing a property that isn't move-in ready.
Mistake 6: Rushing to Put In an Offer
In a hot market, it may be necessary to pull the trigger very quickly if you find a home you like. However, you have to balance the need to make a quick decision with the need to make sure the home will be right for you. Don't neglect important steps like making sure the neighbourhood feels safe at night as well as during the day and investigating possible noise issues like a nearby train. Ideally, you'll be able to take at least a night to sleep on the decision. How well you sleep that night and how you feel about the home in the morning will tell you a lot about whether the decision you're about to make is the right one. Taking the time to consider the decision also gives you a chance to research how much the property is really worth and offer an appropriate price.
Mistake 7: Dragging Your Feet
It's a tough balancing act to make sure you make a careful decision, but don't take too long to make it. Losing out on a property that you were almost ready to make an offer on because someone beat you to it can be heartbreaking. It can also have economic consequences. Let's say you are self-employed. Perhaps for you more than anyone else, time is money. The more time and energy you have to take out of your normal activities to search for a house, the less time and energy you have available to work. Not dragging out the homebuying process unnecessarily may be the best thing for your business, and the continued success of your business will be essential to paying the mortgage. If you don't pull the trigger quickly, someone else might, and you'll have to keep looking. Don't underestimate how time-consuming and routine-disrupting house shopping can be.
Mistake 8: Offering Too Much
If there's a lot of competition in your market and you find a place you really like, it's all too easy to get sucked into a bidding war - or to try to pre-empt a bidding war by offering a high price in the first place. There are a couple of potential problems with this. First, if the house doesn't appraise at or above the amount of your offer, the bank won't give you the loan unless the seller reduces the price or you pay cash for the difference. If this happens, the shortfall on your bid as opposed to your mortgage will have to be paid out of pocket. Second, when you go to sell the house, if market conditions are similar to or worse than they were when you purchased, you may find yourself upside down on the mortgage and unable to sell. Make sure the purchase price for the home you buy is reasonable for both the house and the location by examining comparable sales and getting your agent's opinion before making an offer.

Conclusion
It's natural for emotion to come into play in the home-buying process. Buying a house is a big decision, but this is exactly why you need to ensure you are making rational choices, rather than getting wrapped up in the notion of a dream home. Slow down, overcome your emotions and, ultimately, make a home-purchase decision that's good for both your feelings and your finances

5 Factors That Impact the Value of Your Home

2011-06-07T09:25:00.001-07:00

Money Crashers, On Wednesday June 1, 2011
Selling your house can be a huge headache--especially when you're selling it in today's buyer's real estate market. One of the most challenging aspects to deal with is determining your home's value. When it comes to fixing a fair price, homeowners always shoot high. After all, you love your house and you know how much work you've put into it. Won't someone else appreciate it as much as you do?
The short answer is no. An experienced real estate agent will take the emotional factor out of the equation and help you come up with a realistic market value for your house. But if you want to sell your house yourself without a realtor--or you just want to be prepared for the number they advise--here are five factors that can heavily skew the asking price of your home.
1. Location
We've all heard how important "location, location, location" is, and with good reason. A great house in a bad location can knock as much as 50 percent off the value. If you have the nicest, most expensive house in your average neighbourhood, then the value is also going to be much lower than it would be if you had the least expensive house in a nice neighbourhood. Other factors, like freeways, proximity to a landfill or sewage treatment center, and train tracks, can knock 10 to 15 percent or more off the value of your home. This is why it's so important to shop location first when you're buying a house; you can always add home improvements, but moving it to another neighbourhood isn't going to happen.
2. Outdated Rooms
If your fridge is more than 15 years old and your oven isn't black or stainless steel, then count on listing your house lower than you'd be able to if you had a fully updated kitchen. With the influx of homes on the market right now, people can easily get a home that doesn't need any updating, so why would they choose one that does? If you don't want to update your home in order to sell it, know that outdated rooms can affect the value of your home by up to 10 percent.
3. Renters
Many people don't want to own a home surrounded by rental properties. Although it's a stereotype, tenants often don't keep up the property like an owner would. In this case, the value of your house can go down as much as 15 percent, depending on how many rentals are in close proximity to your home.
4. Major Upgrades
In this market, don't count on getting more for your home if you just upgraded the plumbing, bought a new furnace, or replaced your roof. However, if your home does need those upgrades and you haven't done them, then it's going to knock as much as 20 percent off the value of your home, depending on how severe the upgrade is. Buyers simply don't want to shell out for major upgrades - especially when there is a large pool of other properties to choose from.
5. Fencing
Most people looking to buy a house have kids or pets. If your home doesn't have a fenced backyard, you're going to alienate a huge portion of the market since fenced backyards are essential for keeping kids and pets safe and contained. Not having a fence can knock up to 10 percent off your home's value.
Final Thoughts
Although many of these factors, like location and proximity to renters, are out of your hands, there are plenty of things you can do to increase the value and appeal of your home. For instance, buyers almost always choose light and airy homes over dark ones. Therefore, it's beneficial to do whatever you can to bring a sense of light and space into your home. Other factors, such as fresh paint and a tidy lawn, make a great first impression as well. The important thing is to be realistic when deciding on a price for your home so that you can move it off the market as quickly as possible.

Five myths about homeowner's insurance

2011-06-06T06:58:00.000-07:00

Angie Mohr Investopedia.com Published Friday, Jun. 03, 2011
Homeowner's insurance is one of the most common types of insurance and one of the least understood. Many homeowners believe that their policies will cover them for practically any damage sustained to the house or contents. The reality is that homeowner's policies contain many exclusions and restrictions on coverage that can leave you with a coverage gap. Here are five common myths about homeowner's insurance. (For related reading, also take a look at The Beginner's Guide To Homeowners' Insurance.)
1. Loss-of-Use Coverage
If you have damage to your home severe enough that you cannot live in it while it is repaired, you likely expect that the insurance company will put you up in a hotel while the work is being done. However, that is not necessarily true. Not all policies include a loss-of-use provision. If you have to pay for a hotel, meals and other services out of pocket, it can add up quickly and put you at financial risk. If loss-of-use is covered, it will be stated explicitly in your policy, along with any limits of coverage. For example, your policy may state a maximum per diem amount or restrict the length of time the expenses will be paid for.
2. Replacement Cost
Replacement cost in a homeowner's policy refers to valuing the loss at the amount it will cost to replace the item. For example, if your four-year-old computer is lost in a fire, replacement cost coverage would allow you to purchase a new one with similar features. Most homeowners believe that is what will happen if they have a claim, however, the bulk of policies do not carry this clause. If not included, losses will be valued at what they were worth in their condition before the calamity. The four-year-old computer might be valued at $250 - not enough to purchase a new one. Replacement cost clauses are a valuable inclusion in a homeowner's policy.
3. Flood Coverage
Almost all homeowner's policies exclude flood coverage, along with earthquakes and other natural disasters. Floods can occur from a number of causes, such as a hurricane, burst pipes or sewer backup. A flood is one of the most common causes of home damage and the destruction of contents. There are companies that specialize in flood coverage, and, if you live in a susceptible area, look into having a separate flood policy. Your mortgage company may require this additional coverage as well. (For more information, see Understanding Lender-Required Flood Insurance.)
4. Termites
Termites live all over North America but are most destructive in southern climates, where their lifecycles are not affected by cold weather. Termites eat wood - lots of it - and can eat the supports in your house as easily as fallen leaves in the forest. They live in large colonies and, collectively, can destroy the structure of your home. Repairing termite damage and eradicating them can cost thousands of dollars. Most policies exclude termites and other pest damage. If you live in a susceptible area, the best insurance is to have the house regularly checked and sprayed by a professional.
5. Valuation of Loss
When you have a house insurance claim, the insurance company will send out an appraiser to determine the extent of the damage and the best way to fix it. The appraiser will assess a value to the loss which will be the minimum the insurance company can pay in order to meet their contractual obligations. However, you do not have to take that value as final. If you can prove your loss should be valued higher, you can negotiate the settlement with the company. Keeping receipts and pictures of valuable items will help you back up your claim.
The Bottom Line
To really know what is in your homeowner's policy, you should read it thoroughly. Look for exclusions to coverage and decide how you will cover those risks. In some cases, your insurance company will have separate add-ons that they can attach to your policy or you can get specialized insurance from another company. For those risks that cannot be insured, analyze how you will financially cover those risks if they should happen.

Credit lines worst trend of last 20 years,

2011-06-05T09:48:00.000-07:00

Ray Turchansky, Postmedia News · May 30, 2011

Some 22 years after writing The Wealthy Barber, which became easily the bestselling personal finance book in Canadian history, David Chilton has a dire warning in The Wealthy Barber Returns, to be released this fall.
“The worst thing that’s happening to Canadians in the last 20 years has been lines of credit,” said Chilton, speaking at the conference of the Canadian Pension & Benefits Institute. “If I was prime minister, I’d shut them down. It’s unbelievable how people are abusing these things.”
He helped one person establish a schedule to pay off $30,000 in credit-card debt, only to have the person take on a $150,000 line of credit from a banker, “because the man was so nice and said I needed it.” The banker’s explanation: “It’s my job.”
Chilton’s summation: “That’s the problem. It’s a lot of people’s job to get Canadians to take on debt.
“Our financial institutions, when I was young, were credit providers. Now they’re credit pushers, and they are very aggressively hoisting as much debt onto the Canadian public as they possibly can. The public is taking it in, and it is not a good situation.”
Chilton graduated from Wilfrid Laurier University in Waterloo, Ont., and became a stockbroker. He realized financial education was his calling, and set out to write a book called The Ultimate Guide to Losing Money. Then while watching the TV show Cheers, he changed the book to The Wealthy Bartender, “but by the time I got to retirement savings plans, everybody was hammered. I had guys picking up girls.”
Eventually he did what he advises everyone never to do: He cashed in his registered retirement savings plan. The money was used to self-publish The Wealthy Barber, which held as one of its tenets “pay yourself first,” 10 per cent of your income. The book sold more than two million copies, and led to a U.S. edition and a PBS TV show.
In his followup book, The Wealthy Barber Returns, the message will shift from saving to not spending.
“When I told Canadians to ‘pay themselves first,’ that was three-quarters of the battle; I didn’t care what they did with the rest of their money.
“One thing we’re seeing that we never saw 20 years ago is that all sorts of people who built up their RRSP through ‘pay yourself first,’ have simultaneously built up their credit line through the back end and their net worth has changed modestly if at all.
“People cannot resist lines of credit. And the worst combination in the country is a line of credit and a home renovation — once they renovate one room, the other rooms pale by comparison, so they go on to the next room and it’s a never-ending cycle of renovation as they get deeper and deeper and deeper in debt. The four most expensive words in the English language are ‘while we’re at it.’ And the four most expensive letters are ‘HGTV.’
“We go through a credit crisis brought on by too much private debt in the developed world, particularly in the States, and our response — the Home Renovation Tax Credit. That’s like starting an alcoholic’s rehab by taking him on a pub crawl. The problem with governments is they want to get re-elected.”
“The economy needs to be strong as measured by GDP, and GDP is made up primarily of spending. Government is never going to try to get us away from spending during slow times, through artificially low interest rates and by subsidizing debt. The raison-d’etre of banks is to lend. We are borrowing too much money.”
Chilton says public and private debt in the developed world is “shocking,” and dealing with it through inflation or formal default restructuring is “going to lead to slower economic growth over the next X number of years.”
He also sees an erosion of the middle class in retirement.
“Right now a lot of people 75 or 80 have too much money; they’ve done an excellent job of saving throughout their entire lives, and they had defined-benefit pension plans to boot. It’s so tough to give away money you’ve spent your whole life saving.”
But personal and government debt will cause a new generation of people to run out of money as they live longer in retirement. “Even with pension plans, counting on historic returns is a very shaky move.”
Some people saving for their children’s education or housing will become cash-poor themselves. “Let the kids scramble on their own. You know how many people are headed to retirement with no money now, it’s crazy.”
Chilton reiterated a few topics from his first book.
“Your metric for housing affordability should be: Can you pay it back, can you save for retirement, and can you pay it back before you retire? I think one of the best things that could happen in Canada is if real estate prices fell.”
With life insurance, he said people who need it tend to be 10 to 15 per cent underinsured, but Canadians as a whole are overinsured.
Another way to reduce expenses is by avoiding active money management fees.
“What matters is whether your professional money manager is smarter than the other professional money managers. When you look at Canadian mutual fund sales, it’s amazing how many of the dollars are flowing into funds that have had good recent two-or three-year numbers; the problem is long-term performance has no proven correlation with future performance, and short-term performance has slightly negative correlation with future performance.”
A key is to develop good financial habits early.
“Beyond ‘Pay yourself first,’ I still say ‘Start young’ is the most important personal finance advice by far. It’s getting young kids to save, whether they’re in their 20s or 30s, and to live within their means. Living within their means is what financial planning is all about; it’s still what we struggle most with.”

Variable Rate or Fixed? Canadians Unsure .

2011-06-03T09:10:00.000-07:00

Thursday, 02 June 2011 13:43 Newsroom .After another reprieve from the Bank of Canada for an interest rate rise, there is much talk amongst Canadians about whether or not variable rate or fixed rate mortgages are the way to go.
Realtor vs. FSBO: A Balanced Perspective
To get legal advice, you visit a lawyer; to get medical advice, you go and see a doctor; most people, to get their car repaired, leave it in the hands of a trained professional. Even to get your hair cut, you go to someone who is trained to do that job. In all of these instances, the average consumer, without specific training and resources in a given area, defers to a qualified individual. So what is it about Real Estate that is so different? ...
Read More CIBC recently conducted a poll which indicated that most Canadians are split on whether or variable or a fixed rate is the best strategy, even in light of the knowledge that rates are eventually going to go up.

Highlights from the survey include: 39% of respondents said they would choose a fixed mortgage if they had to choose between a fixed or variable mortgage today; 32% said they would go with a fixed rate; 25% said that they could not choose between the two.
So, there is no clear-cut strategy favoured here.

Also the survey showed that 61% of respondents believe interest rates will be up this time next year, while 24% believe that rates will hold their own throughout the next year. A mere 3% believe that rates will actually go down through the next year.

"The divergent opinions on whether to go fixed or variable underscores what our advisors see everyday in their meetings with clients - choosing the right mortgage depends on your personal financial situation, and there's no single answer for everyone," commented Colette Delaney, Senior Vice President, Mortgages, Lending & Insurance, CIBC Retail Markets.

There are other factors at play than just the directional predictions for interest rates, as Delaney reminds mortgage holders. "You need to approach the fixed versus variable decision from the inside out, starting with your personal financial goals and working from there," added Ms. Delaney. "Your mortgage is a major part of your overall financial plan, and your decisions should be based on how your mortgage fits with your long term financial goals, not on short term rate fluctuations."

Interestingly, the type of rate that you choose seems to have a lot to do with the stage of life that you are in, according to the CIBC poll. 27% of 25-34 year olds (who are also mostly first time home buyers or relatively new homeowners) would choose a variable rate mortgage; 42% among respondents 45-54 years of age, would choose a variable rate and who incidentally “are more likely to be near the end of their mortgage and have greater tolerance for rate changes within their mortgage payment.”

Ms. Delaney noted that homeowners can look at both a fixed and variable strategy over the life of their mortgage. "For most people, your mortgage is a long term proposition, so your strategy should look beyond your first term," commented Ms. Delaney. "You may choose to start with a fixed mortgage when you buy your first home, then transition to a variable mortgage in later terms when you have improved your financial situation and paid down some of the principal."

Is buying a student condo for my child a good investment?

2011-06-02T09:49:00.000-07:00

Sometimes a parent decides to buy a place for their children while they hit the books in university or college. It can be a good alternative to paying thousands of dollars toward residence fees or rent. Just look at the math:
Student rent of $500 a month = $6,000 a year = $24,000 over 4 years of school.
That money could go to your mortgage instead as an investment for you.
In Ottawa, for example, you can buy an older one-bedroom condo for about $195,000. Or, buy a 2-bedroom for $240,000 and let your child's roommate help cover the mortgage by paying rent. Let's assume you pay 20 per cent down. Here's an example of what your monthly costs could total when mortgage rates are low:
Cost 1-bedroom 2-bedroom
Mortgage payment $800 $1,000
Condo fees $350 $450
Property taxes, maintenance $300 $400
Total: $1,450 $1,850
Think about it: if your child rents a place, your money is helping the landlord pay his or her mortgage and other costs. If you buy a place instead and rent it to them, you have a real estate investment with a guaranteed tenant: your child. If the investment goes up in value, you will make money. Just remember that those gains will be taxed.
Also remember, mortgage rates and other costs change, and these changes will impact the numbers and your decision.
Things to consider before you decide:
You can buy the property in your name, in your child's name, or both. If you buy the property in your name, you should consider:
• The rental income you charge can pay a lot of your costs. Just remember you have to declare that income on your tax return.
• As a landlord, you can also claim many of your expenses, including mortgage interest. Assess your costs carefully before you buy. They will vary with the local real estate market, mortgage rates and other factors.
• Plan for some vacancies. Your child (or their roommate) may not stay in the condo over the summer break. Are you really going to ask them to pay rent if they are living somewhere else for a few months?
• Remember that you will own a greater share of the equity as you pay off the mortgage. And, the value of the condo may rise over time. This can offset your costs. But whether you do more than break even depends on what happens to housing prices in the area.
There are other benefits, too. Your child won't need to look for a different place to live each year. They also won't have to worry about subletting every summer. And their furniture won't be coming back with them if they live at home over the summer break. Not a bad deal.
Remember: you may not make money if you buy a student condo.
But there are other reasons you may decide to go ahead. At the very least, you can provide your child with a nice place to live in a good neighbourhood while they go to school.

5 things to ask when buying a cottage

2011-05-31T08:53:00.000-07:00

By Mark Weisleder Moneyville Fri May 27 2011
Buying a house in the city or suburbs can be complicated enough, but buying a cottage or vacation property outside of town requires even more due diligence.
In town, you probably wouldn’t ask if the water coming out of the tap is drinkable. Nor would you wonder if the plumbing was hooked up to the sanitary sewer. But these are exactly the sorts of questions you should ask when buying a cottage, plus a few more.
1. Get an inspection: Cottages are usually occasional residences and so may not be as properly maintained as they should be. This is why every purchase should be conditional a satisfactory professional home inspection. If the cottage has a wood-burning stove or fireplace, then a certificate must be requested from a Wood Energy Technical Transfer specialist, to confirm that the system was installed and is operating correctly.
2. Is the water drinkable? There are two areas of potential concern when it comes to water – the quantity and quality. Is there enough to satisfy family needs and is it good enough to pass the local health department requirements.
Ask the sellers for these things:
• A potability certificate from the local health authority, confirming the water is safe to drink;
• Confirmation that the well, the pump and related equipment have performed adequately during the Seller’s occupancy;
• Confirmation that there is an adequate rate of flow for normal household use;
• Provision of a well driller’s certificate, if available; and
• The location of the well.
A separate inspection may be needed by a well specialist. If nothing else it gives you an idea of what it would cost to replace the well if it fails.
3. How’s the septic system? Septic systems present their own difficulties because it is usually difficult to tell during an inspection how long the system may last. The replacement cost can be up to $20,000, especially if there are stringent environmental regulations in effect in your area.
Buyers should ask for confirmation that:
• The system was installed with all necessary permits;
• The system has been adequately maintained;
• The seller is not aware of any malfunctions;
• The seller will provide copies of any inspection or approval reports in their possession;
• The seller agrees to pump out the tank at their expense prior to closing; and
• There are no work orders on file with the Ministry of the Environment or the local municipality.
The buyer should arrange for their own separate inspection of the system itself.
4. What’s the road allowance? Even if your cottage fronts on water, this does not give you ownership of the land up to the lake. The first 66 feet fronting onto the lake is typically owned by the local municipality and is referred to as the shore road allowance.
Although you have access to the water, you can’t stop others from using it. Nor can you build anything on that 66-foot piece of land. Many cottagers have found out afterwards that either all or part of their cottage was built on land that they do not own.
You may be able to buy the land from the municipality, but it is a process. If you can get an up to date survey from the seller, this should answer your questions. Also inquire to make sure that any required permits were obtained to build a dock or boathouse, as there is no automatic right to do this. In all cases, make sure you have title insurance, which should assist with most of these types of issues.
5. Access to the cottage: If you do not have year round access by a city road, then you must ask how you get from the road to your property. If it is a private right of way over a neighbour’s land, you must understand the terms of this agreement to ensure it is year round access and it is clear who is responsible for maintaining the road.
If there is no registered right of way, it can be a nightmare, with owners fighting over who has the right of way and who owns it.
For all of these reasons, it is recommended that buyers work with a local real estate agent who should be familiar not only with each of these issues, but more importantly, will be able to recommend the professional inspectors and town officials who can satisfy a buyer’s concerns.
By being properly prepared before buying a cottage, you will avoid unwelcome surprises after closing

You — through the eyes of a mortgage lender Golden Girl Finance, On Tuesday May 24

2011-05-26T09:00:00.000-07:00

This is a great learning article for ALL buyers. It is a good startiung ace when you are looking at the pros and cons of buying and need a game plan to prpare your self for the future.

Neil "Mortgage Man" McJannet

2011, 11:36 am EDT
If you're a newcomer to Canada, self-employed, work on commission or have a poor credit history, you may think your chances of qualifying for a mortgage or refinancing are slim to none. Think again. It is often possible to find a way - the trick is seeing yourself through the eyes of a mortgage lender.

The 5 C's of borrowing:
Mortgage lenders look for certain characteristics in potential borrowers. Generally, they're attracted by five key criteria:
Capacity — whether your income is sufficient to repay the mortgage once all your other debts are factored in.
Capital — whether the size of your down payment indicates a serious commitment to the property on your part, and sufficient minimization of risk on the part of the lender.
Collateral — whether the property is of sufficient value and marketability to cover the amount borrowed.
Character — your reputation and reliability, usually based on factors such as your education, employment history and residence.
Credit — your history of meeting credit obligations, which is based on credit-bureau records for the past six years.
If your qualifications are less than stellar in any of these areas, a traditional lender may not accept you. But that doesn't necessarily mean you can't get a mortgage. Like we said before, it is possible! You just need to find the right match.
Bringing your best qualities to light
Many lenders may be perfectly willing to accept you as long as they view you as a reasonable credit risk overall. For example, if you are new to Canada, lenders may consider you based on the steady nature of your employment or the size of your down payment.
Likewise, if you are newly self-employed and can't prove a regular income, the lender may instead look at your debt load, credit history and business plan. If these are all very positive, the fact that you don't have an earnings history may not be so important.
And if your financial reputation is marred by a poor credit history, but you've have taken discernable steps to improve your rating and your debts are under control, your current income and down payment may be enough compensation.
Finding your perfect mortgage match
Each mortgage lender has its own particular requirements. Professional advice can go a long way in helping you find the right one. The right lender will be a good match for your situation, so that the mortgage you get meets your needs.
A financial professional can also help you put the steps in place so that you can make the most out of your best qualities and help you overcome mortgage hurdles — whether they're real or perceived. Remember that you are most often your own worst critic. Let others see the good.

BoC rate hike on hold until September: RBC

2011-05-25T08:02:00.001-07:00

Eric Lam Financial Post May 24, 2011
The Bank of Canada’s plan to raise interest rates and exit its stimulus program has been delayed to September due to renewed uncertainty about the fiscal crunch in Europe and its potential spillover effects into Canada, the team at RBC Economics said Tuesday.
Dawn Desjardins, assistant chief economist with RBC, expects the BoC to maintain its 1.00% rate until September, and has cut the forecast rate to 1.75% by the end of 2011 from 2.00%. RBC maintains expectations for the overnight rate to hit 2.5% in mid-2012, and forecast GDP growth of 3.2% in 2011 and 3.1% in 2012.
RBC had originally forecasted rate hikes in July, September, October and December this year. The bank now only expects hikes in September, October and December, Ms. Desjardins said in an e-mail.
“Combined with already-present downside risks to domestic growth in the second quarter, the Bank of Canada is likely to remain on the sidelines longer than we previously thought,” she said in a note to clients. “Complicating the outlook are global developments with the European sovereign debt crisis bringing fiscal and debt rating concerns to the forefront for investors. In the United States, economic surprises have been to the downside.”
So far, the Canadian economy looks to be holding steady with data suggesting 0.3% growth in March after a dip in February. Monthly growth figures put the economy on pace for 3.7% growth with risks on the upside.
Persistent strength in housing and growth in household credit, however, means the BoC cannot wait too long before taking action to avoid inflationary pressure.
“On balance we remain comfortable with our forecast of real GDP growth of 2.8% annualized in the second quarter although unlike in the first quarter where the risks are to the upside, the risks to our Q2 forecast are to the downside,” she said.

Low interest rates seen sticking around

2011-05-24T08:07:00.001-07:00

MARTIN MITTELSTAEDT
Tuesday's Globe and Mail
Interest rates have recently being going somewhere unexpected: down.
At their trough last week, the yields on 10-year U.S. Treasuries, the benchmark North American rate, touched 3.11 per cent, the lowest level in six months and more than half a percentage point below their February peak.
Yields on 10-year Government of Canada bonds have fallen, too, and are now virtually identical to their U.S. counterparts.
The sliding rates have surprised many market watchers. With the United States government bumping up against its debt ceiling, inflation ticking upward, and a growing debt crisis in Europe, most expected interest rates to be increasing.
While predicting the future for rates is notoriously difficult, some observers believe that the current low-rate environment may continue for a while. If so, it will mean pain for savers, but good news for borrowers.
A drop in interest rates is equivalent to a sale on the price of money, and corporations are already rushing to take advantage of the easy lending conditions, even if they’re in no immediate need of funds. A case in point is Google Inc., which has $37-billion (U.S.) in cash and marketable securities on its balance sheet, but raised $3-billion from a bond issue last week anyway. Mortgage rates have fallen, too – good news for homeowners looking to refinance.
But lower rates have not turned out so well for some of the market’s savviest players, including Bill Gross, the founder of Pimco, the world’s biggest bond fund. Earlier this year, he sold his U.S. Treasuries, because he thought interest rates were poised to rocket higher, which would drive down prices of bonds.
It’s difficult to fault his logic: only a few months ago, the case for higher interest rates seemed so compelling.
Governments around the world are carrying bloated deficits and massive borrowing needs. In the United States, politicians have yet to agree on any clear path to deficit reduction, despite more than $1-trillion in annual red ink. Meanwhile, oil has been trading consistently around the $100-a-barrel level, thereby lifting inflation, another bond-market negative.
And the U.S. Federal Reserve is no longer putting its thumb on the scale. In less than six weeks, it is going to end its program of quantitative easing, under which it is buying $600-billion in Treasuries to goose the economy. Many bond-market followers believe the Fed’s massive buying binge has been propping up Treasury prices and keeping yields artificially low.
So what has been pushing rates lower in recent months?
A weaker-than-expected recovery is the major culprit. “The global economy, and the U.S. economy in particular, is not on quite as solid a recovery track as people were imagining in the very optimistic days of six months or so ago,” observes Peter Buchanan, senior economist at CIBC World Markets.
A slew of recent statistics underlines that weakness, ranging from the poor state of U.S. home sales to the slowing pace of U.S. manufacturing growth. Meanwhile, the Japanese economy, the world’s third-largest, is shrinking and creating a further drag on global commerce, although few foresee a double-dip recession.
“We’re looking ahead toward a bit of a cooling in economic growth,” said Paul Dales, senior U.S. economist at Capital Economics, who foresees output in the U.S. rising about 2 per cent this year.
That level of growth won’t be “anything to celebrate but it’s nothing like the recession we saw previously,” he said.
Another factor driving rates lower has been the early May rout in commodities, which dampened some of the worry on the inflation front. In addition, the recent sluggish performance of the stock market suggests that investors are getting nervous and growing more willing to buy super-safe government bonds.
Mr. Dales believes the current trends have room to run, and that rates will surprise to the downside.
He predicts U.S. 10-year Treasury yields could slip to 2.5 per cent in the low-growth, less inflation-spooked environment he foresees ahead.
If growth continues to be slow, lower rates might be staying around for a while.
Mr. Buchanan says the most likely scenario, given the poorer economic outlook, is for the Fed to hold off on raising rates until 2013. He believes the yield on Treasuries will rise gradually, instead of falling further, getting back to 3.4 per cent by the end of this year and to 4 per cent by the end of 2012.

Refinancing And Debt Consolidation

2011-05-16T10:53:00.001-07:00

Refinancing and consolidating debt can be one of the smartest financial moves you can make for a number of reasons. Managing cash flow is the single most important aspect in relation to protecting your personal credit. I see many couples with substantial equity in their home fall behind on credit card payments. Refinancing at this point may be impossible due to a bad credit report. Debt consolidation the best solution is no longer an option. Proper cash flow management should include adjusting quickly to any anticipated change in cash flow requirements before your credit is affected and your ability to borrow restricted or possibly eliminated.

Let us assume you have $10,000 in credit card debt at 18%. That is costing you $1800 per year in interest charges. Rolled into your mortgage at our current 3.79% rate that would cost you $379 in interest. With your credit card your minimum monthly payment might be $200. Rolled into your mortgage it would be approx $50. These are approx amounts but you can see the advantages to consolidating your debt by refinancing your mortgage.

The purpose of this article is to tell you to not wait until it is too late and your credit has been affected. Many of us struggle with not enough month at the end of the money. Tapping the tax free equity in your home can be key to smoothing out those fluctuations in cash flow that many of us experience.

Money in the bank can mean peace of mind when unexpected cash flow problems arrive. Remember this old saying " Never go the the bank on a rainy day for money for an umbrella" . The best way to get money from a lender is to convince them you don't need money. Refinance your mortgage when times are good and before cash flow problems arise. Take charge of your financial affairs. Don't let your financial affairs take charge of you. For more information on mortgage financing feel free to contact me.

Larry Matthews

Finance Minister Flaherty Loosens Grip.

2011-05-16T10:49:00.000-07:00

Earlier this week there was a welcomed announcement from Finance Minister Jim Flaherty.

After two consecutive years of tightening mortgage rules, Minister Flaherty has announced that he won’t be making any more changes in the near future, stating that his priority right now is the federal budget, after the Conservatives came away with a majority government.

The Minister said that he’s had to step in three times and there’s no need for any more involvement because the market appears to be moving in the right direction. He also noted that he doesn’t believe there were any unintended consequences to the housing market or economy from the measures taken during the crisis to keep the country afloat.

He said that he kept a close eye on the housing market and decided to step in when he felt like it was required and concerns of risk were high.

Flaherty said his government will present a slightly revamped budget in June. It will be changed to reflect an economic update and may include some items from the election platform, but will be largely the same budget he presented in March, he said.

Flaherty voiced his concerns over the raging conflicts in the Middle East and Northern Africa, sovereign debt issues, as well as the natural disaster in Japan which has caused blips in the economy.

It is evident in both the local and national markets that the market has been softening as of late, hopefully heading off a housing bubble, and also in which the dramatic increase in prices have pushed many marginal buyers out of the picture.

Money-saving tips on driving “fuel- efficiently”

2011-05-13T18:35:00.001-07:00

And use those savings towards a down payment on a home.

Neil "Mortgage Man" McJannet

The Canadian Automobile Association offers these tips for drivers on how to use less fuel and save money:
Avoid jackrabbit starts and hard braking: it can burn as much as 39 per cent more fuel.
Slow down — even a little. Tests have shown that most cars use about 20 per cent less fuel driving at 90 km/h than at 110 km/h.
Avoid idling. Remember, the worst fuel economy rating is zero, and that’s what your fuel economy is while you’re idling.
Consider a smaller engine. In a mid-sized car, a six-cylinder engine can burn up to 400 litres more fuel a year than a four-cylinder engine.
Avoid using roof racks when not required. They have a major impact on fuel consumption due to the air resistance they add to your vehicle
Avoid excessive weight in your vehicle. Every 45 kilograms of extra weight can increase your fuel consumption two per cent. If you have unneeded cargo in your trunk, remove it.

Five steps to scoring a mortgage

2011-05-13T18:32:00.001-07:00

Amy Fontinelle Investopedia.com
A variety of factors can keep you from qualifying for a mortgage. The big ones include a low credit score, insufficient income for the size of the loan you want, insufficient down payment and excessive debt. All of these factors are within your control, however. Let's take a look at your options for overcoming any liabilities you may have as a borrower
1. Repair Your Credit and Increase Your Score
To lenders, your credit score represents the likelihood that you will make your mortgage payments in full and on time every month. Therefore, with most loans, the lower your credit score, the higher your interest rate will be to compensate for the increased risk of lending you money. If your credit score is below 620, you will be considered subprime and will have difficulty getting a loan at all, let alone one with favourable terms. On the other hand, if you have a credit score above 800, you'll easily be able to get the best interest rate available (also known as the par rate). (Find out how your borrowing activities affect your credit rating in The Importance Of Your Credit Rating.)
Measures you can take to improve your credit score relatively quickly include paying down revolving consumer debts, such as credit cards or auto loans, using your debit card instead of your credit cards for future purchases, paying your bills on time every month and correcting any errors on your credit report. However, some flaws, like seriously late payments, collections, charge-offs, bankruptcy and foreclosure, will only be healed with time. (Read How To Dispute Errors On Your Credit Report to find out how to address reporting mistakes.)
In addition to managing your existing credit responsibly, don't open any new credit accounts. Applying for new credit temporarily lowers your credit score, and having too much available credit is also considered a warning sign. Lenders may be afraid that if you have a lot of available credit, you'll take advantage of it one day and adversely affect your ability to make your mortgage payments. (For more tips and techniques to help you rebuild your ruined credit rating, read Five Keys To Unlocking A Better Credit Score.)
2. Get a Higher-Paying Job
If lenders say your income isn't high enough, ask them (or your mortgage broker) how much more you need to earn to qualify for the loan amount you want. Then try to find a new job in your existing line of work where you'll be able to earn that much money.
Because lenders like to see a steady employment history, you'll have to stay in the same line of work for this strategy to be successful. This can be disappointing news for borrowers, as switching professions entirely might offer the best chances for a salary increase. However, switching companies can also be a good way to get a significant boost in income. Significant raises from existing employers aren't that common, but a new employer knows he'll have to offer something special to get you to make the switch. (Read Negotiating For Employment Perks for tips on reaching an agreement with your boss.)
If switching companies right now won't be enough to get the raise you need, think about things you can do relatively quickly to make yourself more valuable to employers. Is there a continuing education program that you could complete? If you're a legal secretary, could you become a paralegal? If you're a receptionist, could you become a secretary? A career counselor or headhunter might be able to give you some guidance specific to your situation about how to improve your marketability and how to reach your income goals. (Read Six Steps To Successfully Switching Financial Careers to learn how to make adjustments without starting over.)
Unfortunately, getting a part-time job on top of your full-time job may not provide what lenders consider qualifying income. The part-time job may be viewed as temporary, and since it will probably take you at least 15 years to pay off your mortgage, lenders are looking for you to have long-term income stability. (Increase Your Disposable Income gives you ideas on how to make more money now, which can make a big difference down the line.)
3. Save Like Crazy
The larger your down payment, the smaller the loan you'll need. In addition, the lower your loan-to-value ratio (LTV ratio), the less risky lenders will consider you. Both of these factors will make you more likely to qualify for a loan. Be aware that you may have to reach a certain down payment threshold, like 10 per cent or 20 per cent (with 20 per cent being the most conventional), before a larger down payment will help you qualify for a loan. (Learn more in Mortgages: How Much Can You Afford?)
4. Don't Pay More Than the Bank's Appraised Value
The bank will not want to lend more than the house is worth because they could be on the losing end of the deal, should you foreclose and owe more than the bank could get for it. A 20 per cent down payment also becomes much less valuable if the house is worth 20 per cent less than the purchase price. Collateral value is important to lenders, so it should be kept in mind when making an offer to purchase a property. (Read 10 Tips For Getting A Fair Price On A Home and learn how to make sure your house is worth the price you pay.)
5. Reduce Your Debt
To a lender, what constitutes excessive debt is not a set number - it's a total monthly debt payment that is too high for you to be able to afford the monthly mortgage payment you're asking for. When deciding how much loan you qualify for, lenders will look at what's called the front-end ratio, or the percentage of your gross monthly income that will be taken up by your house payment (principal, interest, property tax and homeowners insurance), and the back-end ratio, or the percentage of your gross monthly income that will be taken up by the house payment plus your other monthly obligations, such as student loans, credit cards and car payments.
The more debt you're required to pay off each month, whether it's “good debt” like a student loan or “bad debt” like a high-interest credit card, the lower the monthly housing payment lenders will decide you can afford, and the lower the purchase price you'll be able to afford. Decreasing your debt is one of the fastest and most effective ways to increase the size of loan you're eligible for. (Learn what to watch for before you find yourself drowning in debt in Five Signs That You're Living Beyond Your Means.)
Playing to Win
Qualifying for a mortgage isn't always easy. Lenders require all applicants to meet certain financial tests and guidelines and allow a limited amount of flexibility within those rules. If you want to score a mortgage, you'll have to learn how to play the game, and you're likely to win if you take the steps outlined here

Canada's economy creating more full-time, and better paying jobs

2011-05-11T19:41:00.000-07:00

By Julian Beltrame, The Canadian Press
OTTAWA - The Canadian economy is not only creating more jobs, it's creating better jobs according to one of the country's major banks.
CIBC's latest employment quality index shows that 60 per cent of new jobs created over the past year would qualify as high-paying, quality jobs.
The bank says there's been an increase in full-time and paid employment, as opposed to self-employment, over the past 12 months — helping push the employment quality index up 2.7 per cent.
The sharp improvement has come about because many of the 283,000 jobs created in the past year have been in relatively high-paying sectors, including manufacturing, finance, construction and the public service.
Previously, the new jobs created since the end of the recession in the summer of 2009 have tended to be part-time and in lower-paying service industries.
"This (quality) measure is roughly back to the pre-recession levels," said economist Benjamin Tal. "This is a much better performance than a similar measure in the U.S., where the quality of employment index continues to soften despite some improvement in the pace of job creation."
Canada's employment record since the end of the recession has been among the strongest in the industrialized world with over 500,000 new jobs added since July 2009. That's about 80,000 more than was lost during the 2008-2009 recession.
By contrast, the United States remains about six million jobs shy of its pre-crisis levels.
But despite the full rebound in the jobs market, the complaint had been that many of those new jobs were not of the same quality as the jobs that vanished. Some economists derided them as service industry McJobs, or part-time, or "forced self-employment" by those who create their own form of employment — usually lower paying — because they can't find regular work.
Over the past 12 months, that trend has started to reverse. Almost all the new jobs have been in paid employment, not self-employment.
As well, growth in full-time jobs has outnumbered part-time by more than two-to-one, and well-paying jobs in manufacturing, construction, the financial sector and government have outnumbered low-paying jobs three-to-one.
The question is whether the new and better composition of job creation will continue. There is some evidence it might not, says Tal, noting of the 58,000 new jobs added last month, two-thirds were part-time.
"It's clear that governments will not be hiring in the future and the housing market will not be as strong," undercutting two of the sectors that have been producing high quality jobs, Tal explained.
However, the export sector, which tends to generate higher-paying jobs, is expected to be a leading engine of growth going forward and may be sufficiently robust to take up the slack.
The improvement in the quality of jobs has been good for the economy, the report states, since higher pay puts more money in the pockets of homeowners to spend on consumer goods.
"The impact of job creation on income growth and thus spending is currently more notable than it was in early 2010," Tal said, which will put pressure on the Bank of Canada to hike interest rates in the second half of the year.
Canada's economy also got a thumbs up Monday from the Organization for Economic Co-operation and Development, which forecast Canada would continue to be at the forefront of the global economic recovery.
In its May report on composite leading indicators, the OECD put Canada alongside China as countries with a "regained momentum in economic activity."
Economies in the U.S., Germany and Russia are improving. Overall, the international think-tank says most European countries will experience a slower or stable expansion. Some, like Italy, Brazil and India are pointing to slower growth relative to their trends

Nine signs you can't afford a mortgage

2011-05-03T08:08:00.000-07:00

Michele Lerner Investopedia.com
While plenty of individuals live from paycheque to paycheque, most consumers know they should be saving money and reducing debt. The recession has drummed that concept into everyone's head as people have watched their neighbours and friends lose jobs and sometimes their home.
Many people say that money worries keep them awake at night, but that doesn't necessarily translate to imminent bankruptcy. How do you know when you are truly teetering on the edge of a financial disaster versus simply needing to do a little belt-tightening?
Here are nine signs that indicate you are heading for trouble and may be unable to pay your mortgage in upcoming months:
1. Late Fees
If you missed a payment or let your bill go past due because you didn't have the money to pay your mortgage or another bill on time, you need to re-evaluate your budget. Not only does this indicate an imbalance between your income and expenditures, but it will also ruin your credit score, potentially causing your creditors to increase your interest rate.
2. You Can't Pay All of Your Bills
Every month, you are forced to decide which bills to pay and which bills to ignore. A lot of people opt to pay their credit card bill to stop harassment from the credit card company and to make sure they have available credit. But it is far more important to pay the bills that protect your home first. Always pay your mortgage first so that you will have a place to live. Next, pay for your car so that you can get to work and keep your job.
3. Making Minimum Payments on Credit Cards
In your mind, paying the minimum due on each bill may mean you are keeping up with your financial commitments, but financial experts know that minimum-only payments are a key indicator of financial distress. While this may mean that you carry too much debt, this also means that all your income is barely covering your spending. Take a careful look at your mortgage payment, other debts and your income to get back on track. Paying only the minimum on credit cards will extend your debt for years and amass expensive interest payments.
4. No Emergency Savings
While amassing six to 12 months of funds to cover you expenses, as many financial planners now recommend, may be a monumental task, every homeowner should have at least one month's worth of expenses in the bank. At the very least, you need to have enough money in a savings account or a money market fund to pay your mortgage for one month if your income drops or disappears. If you cannot save that much money you need to seriously evaluate your overall household budget.
5. You Can't Afford Maintenance
Your home needs to be painted and your dishwasher broke two months ago. If you are ignoring basic maintenance because you cannot afford to buy paint or call a repairman, this is a significant indication that you are in financial trouble. Not only does this show that you don't have any emergency savings or a home maintenance budget, but this will also reduce the value of your home.
6. Reduced Income
Money is already tight and now your work hours have been reduced or you have been laid off. If meeting your monthly budget depends on every dime you earn, then even a small reduction in income can be a disaster. Search for a new job or a second job and, at the same time, start slashing your budget as much as you can.
7. Using Credit or Cash Advances to Pay Bills
You are using your credit cards or, even worse, cash advances on credit cards to pay other bills such as a utility bill or to buy groceries or just to have cash in your pocket. This is a strong indication that your spending is outpacing your income and it is extremely expensive. You need to put yourself on a debt management program or perhaps meet with a credit counselor to straighten out your finances.
8. Using Your Retirement Fund
You have borrowed money from your retirement account for your mortgage payment or other debt. This could seriously jeopardize your future financial security.
9. You're Maxed Out
One or more of your credit card balances has reached or, worse, gone over the limit. If you are transferring your balances to new accounts in order to avoid paying the debt, this is a sign of a financial imbalance. If you are applying for new credit cards because your other cards have reached their limit, you are in serious danger of a financial meltdown. While you may be making your mortgage payments just fine, if you cannot control your use of credit cards it can be an indication that housing payments are too high.
While these financial woes can mean that you cannot afford your home, they may also be a sign that your spending is out of control. For most people, the mortgage payment is the largest monthly bill, so they often assume that the size of their mortgage is the problem. If your housing payment fits into that budget but you are having difficulty making your payment, then the issue may be that you have taken on too much other debt. Whether the problem is your mortgage or your other debt, you need to find a way to reduce your spending and/or boost your income before the situation gets worse.
The Bottom Line
Handling financial problems is never easy, but the first step is always to know what you owe. Solutions can only become clear once you have every bill written down with the amount owed, the monthly payment and the interest rate you are being charged. Pencil and paper work just fine, or you can create a spreadsheet or invest in some personal finance software. The important thing is to know where you stand so you can create a plan that will get your money under control.

Tips for dealing with a renovations contractor

2011-04-28T07:31:00.001-07:00

Michael Sanibel
Since they rely heavily on word-of-mouth to spread their businesses, contractors are motivated to fully satisfy their customers and build a solid reputation. But because bad news travels faster and farther than good news, it's far more common to hear stories about bad contractors than it is to hear about good ones. (You think your updated house looks great, but potential buyers may not feel the same way.
Hiring a top-notch contractor will pay off in the long run, even if the initial cost is a bit higher than if you simply go with the lowest bidder. If the job is done right to begin with, it will last longer and avoid the cost to correct shoddy workmanship. Plus, you save yourself a lot of time and aggravation because you're dealing with someone you can trust.
The Search
Millard Blakey, cofounder of the remodeling company WreckCREATIONS, in Lexington, KY, says that it's best to know the qualities you're looking for in a contractor before you begin your search. Once you determine those qualities, use referrals from friends, family and neighbors to come up with an initial list of names. Interviewing at least three potential contractors before deciding to ask for a cost proposal is recommended, in order to ensure that you are comfortable with your decision.
Shaun Smith of Koru Landscape Construction in Louisville, CO says that the interview process works both ways. "My experience lets me know very fast what they are really trying to achieve, and if I am the right contractor for them." He encourages homeowners to contact local resources for a list of local contractors. This will help to narrow the search and support the craftsmen in your area. He also recommends touring nearby neighborhoods to find a few homes that are undergoing construction. "Stop by and talk with the owners about how their project is coming along," he advises.
Smith warns against contractors who try to convince you they are the only one for your job. He says that their work should speak for itself, and a strong portfolio, good references and pictures of previous jobs can often say more than the answer to any interview question can.
Contracting
Many homeowners get into trouble because the work they want done isn't clearly defined at the outset. Then, as the work progresses, they change the scope of work causing additional costs to the contractor that are passed on to the owner. That's not the contractor's fault, but he often gets the blame. The way to avoid this is to produce a thorough remodel plan that completely covers every aspect of the job, including the specific materials to be used. A good contractor will let you know if your proposed project and budget is realistic. (Some renovations will mean a bigger sale price on your home, while others will just cost you.
Get everything written down in the form of a contract that includes cost, schedule, materials, bonding and insurance information and a list of subcontractors. For the homeowner, a fixed-price contract is preferred over paying by the hour, because it locks in the maximum liability. However, this leaves you open to price increases if you change any of the work content.
Contractors are entitled to a reasonable down payment in order to cover their initial labour and material costs. This is negotiable, depending on the nature of the job, but should usually not exceed one-third of the total contract amount. The balance of the money can be allocated to completion milestones that incentivize the contractor to stay on schedule. For example, discrete milestone payments could be made upon completion of the framing, plumbing and electrical installations. Hold a sizable amount of money for the final payment that is contingent on your personal inspection and satisfaction of the finished project.
Responsibilities
Perhaps most important is to keep the lines of communication open. A failure to effectively communicate may be the reason for many failed relationships between homeowners and contractors. Whether the issue is money, jobsite cleanliness, finish expectations or even how to deal with additional work, it's critical to discuss these matters as soon as they arise. If you believe the work being done is unsatisfactory, approach the contractor immediately and attempt to get a resolution. Most contractors will work with you to try and solve the problem.
The Payoff
The importance of hiring the right contractor can't be overstated. A good contractor will save you money by doing the job right the first time, and will not only save you money in the long run, but also eliminate stress by ensuring a quality finished product.

FirstLine raises the floor on discounts for variable mortgages

2011-04-27T10:33:00.000-07:00

By Vernon Clement Jones | 27/04/2011 With or without a Central Bank move, brokers are bracing for an increase in adjustable rates offered through the broker channel after FirstLine Mortgages raised its floor by 25 basis points.

“We got notice that FirstLine had changed its five-year closed from (prime minus 0.65) to prime minus 0.40 effective Tuesday,” Michael Di Stefano, agent and co-owner of Dominion Lending Centres BTB Mortgage Solutions in Niagara Falls, told MortgageBrokerNews.ca. “We’re now expecting the other lenders to follow suit over the next week. Basically the spreads are too thin and there just isn’t enough profitability for lenders is what I’ve been told.”

Brokerages across the country are now anticipating that collective move following on the heels of FirstLine, which effectively lowered the maximum discount off of prime now available to brokers and their clients.

Other lenders are now sending out emails to their status brokers warning them to get their clients in before their own hammers drop.

Still, any mass buyer response may be slowed by the Central Bank decision earlier this month to hold the overnight rate steady. It means many prospective homebuyers simply weren’t anticipating any change in adjustable rates this season.

On April 12, the Bank of Canada pointed to global economic challenges, spiking oil prices and a soaring Loonie as chief reasons to hold off on a rate hike. What’s more, there was very little reason for lenders in and outside the broker channel to expect the bank to adjust the overnight before the fall. That inaction may have forced lenders to take matters into their own hands by independently adjusting their discounts in order to widen profit margins hemmed in by rock-bottom interest rates.

The associated bump-up in rates may actually accrue to the benefit of brokers, said Darick Battaglia, head of Dominion Lending Centres Bankfighter. Although FirstLine may lose out in the short term until its competitors slash their own discounts, now running at 65 to 50 basis points below prime.

“Any change in rates or products has historically encouraged those sitting on the fence to jump off into the market,” Battaglia told

Safe as houses? That loud knocking is falling prices

2011-04-27T08:36:00.000-07:00

ROB CARRICK |
From Tuesday's Globe and Mail
The most enduring and simplistic argument for buying a house is that you’re making an investment.
What an understatement. Between your mortgage, property taxes, utility bills, maintenance, furnishings, renovations, landscaping and such, you’ll be investing non-stop in your home. But what’s the return on your money?
Looking back a decade, houses have been an excellent investment that rivalled the stock market. But the view ahead is not nearly so positive. Bear this in mind if you’re considering a jump into this high-priced and increasingly unaffordable real estate market of ours.
How did the market get where it is today? Housing economist Will Dunning says resale housing prices have grown by an average annual 4.9 per cent in Canada since March, 1988, which is the year that comprehensive real estate industry data begins.
The more recent experience with housing is even better, Mr. Dunning found. The 10-year average annual price gain for a house is 8.3 per cent, almost on par with the average 8.9-per-cent increases logged by the S&P/TSX composite index, including dividends.
What we have here is a housing market that has been rising at close to double its long-term rate in the past decade. Don’t expect this to continue.
“I’m not in the camp that says we have a big correction coming, but I think we are looking at a fairly long period of moderate changes in house prices – plus or minus 2 per cent,” Mr. Dunning said.
In its most recent update on housing affordability, Royal Bank of Canada predicted a period ahead of very modest price increases. “(The) rapid home-price appreciation of the past 10 years has likely run its course overall in Canada,” the report said.
We’ll call that the optimistic view of what’s ahead for the market. For the pessimists, the question is how far prices will fall, and for how long. Sample prediction: Toronto-based Capital Economics sees a decline in prices of up to 25 per cent in the next three years.
The negative outlooks for housing are based primarily on factors such as prices, income growth and interest rates, all of which are a function of current economic conditions and thus short-term in nature. A long-term concern for housing values is Canada’s changing demographics.
The fastest-growing component of our population comprises those who are 65 and older. In other words, people who are going to be selling houses over the decades ahead and doing very little buying, if any. That’s bound to affect demand for homes and the potential for price appreciation.
For an actual real life example of how real estate prices can fall, let’s look at what happened in Toronto between April, 1989, and February, 1996. According to Mr. Dunning’s numbers, the average resale home price in the city fell to $192,406 from $280,121, or 31 per cent.
That was an extreme plunge, fuelled in part by a level of rampant speculation that we aren’t seeing in today’s market. But prices can still fall in today’s market. Check out the Calgary market, which dipped 1.7 per cent in March.
“The fact remains that housing can decline in value, and for prolonged periods,” Moshe Milevksy, a finance professor at York University’s Schulich School of Business, wrote in his 2009 book Your Money Milestones. “It is definitely not a risk-free investment.”
Buying a house and living in it for decades can protect you from temporary market dips, just as long-term investing in stocks smoothes out the stock market’s ups and downs. Still, it’s worth noting that someone who bought an average-priced house in Toronto around the ’89 market peak and still owned it would be looking at modest annualized gains in the 2-per-cent range.
Historical changes in housing prices are just a guideline, anyway. They don’t consider things like mortgage interest, property taxes and maintenance, none of which add any value to a home.
Houses bought today have questionable investment value, but there are some other factors to consider if you’re thinking of getting into the market. First, gradually paying down the mortgage on your house is a kind of forced savings plan. Not a great savings plan, but better than nothing.
Second, there’s the best reason of all to own a house. It’s freedom: Your family, your rules, your lifestyle. That’s really what you’re investing in when you buy a home today. ---------------------------------------------
Here's how the housing market compares to other investments over the 10 years to March 31. Returns are expressed on an average annual basis.
Houses (Average resale housing price in Canada) 8.30%
Stocks (S&P/TSX composite index with dividends included) 8.90%
Bonds (DEX Universe Bond Index) 6.10%
T-bills (91-day Treasury Bill Index) 2.60%
Gold bullion (per ounce, in U.S. dollars) 19.10%

The 'thrill' of buying a house

2011-04-26T08:02:00.000-07:00

William Hanley, Financial Post · Apr. 21, 2011
You walk into the open house, take one look and say to yourself: This is it. It’s the house I have to live in. Where do I pay? A bidding war? I’m in.
Over my years of buying houses, I never bought one that did not have that frisson moment, that thrill of finding a place so suited to my wants. Indeed, I have in the past decided that I wanted to buy a house in what seems, in retrospect, to be nanoseconds. (By contrast, I’ve taken weeks to decide on the right pair of shoes.)
It is no way to make an “investment,” to be sure. But, as I’ve previously discussed in this space, buying a house is perhaps the most uninvestment-like of investments.
Just about anyone who’s purchased a property or thought about purchasing knows that it is much about gut-feel, in which the senses can conspire to trump sense.
Now, as the major real estate selling season gets under way, along comes a survey commissioned by BMO Bank of Montreal to give statistical weight to the notion that intuition carries a particularly heavy weight in the house-buying process.
The survey by Leger Marketing found that more than two-thirds of Canadians cited a “good feeling” toward the property as a reason to buy. Meantime, though, good sense is not thrown out of that gorgeous bay window and into those manicured flower beds. More than 90% of house-hunters value affordability and location over resale value.
So, the axiom that there are three important things in real estate – location, location and location – might reasonably be replaced by the Three Ps: Price, place and personality.
Nevertheless, that resale value is not a big concern to these surveyed house-hunters – people between 25 and 45 who plan to buy a home within two years – is a telling sign of the real estate times.
With some dips here and there, Canadian house prices have been rising strongly for more than a decade. Indeed, even the recession created just a downward blip in the chart of ever-growing values, with the average national price rising 8.9% last month from the previous March (but just 4.3% excluding Vancouver).
As a result, most of the house-hunters surveyed might never have been aware of a housing market that was not rising. I suspect many in this 25-to-45 demographic believe house prices basically keep going up forever, that though they downplay resale value in the survey, the expectation for solid gains is, well, a given. (Any significant drop in prices would surely shake that belief.)
In recent times, investors have been asked if they are stocks or bonds. If you’re a stock, you are prepared to take on more investment risk. If you’re a bond, you are not.
Perhaps, though, many people are probably houses when it comes to investing. A home is both partly a stock and a bond – and somehow neither.
It is a bond because over the long term it will likely produce modest returns through the enforced savings required by paying down the mortgage. It is a stock because the gains could be outsized if the investor were to buy and sell at propitious entry and exit points for market-timing gains.
And it is neither because it is an “investment” with many moving parts and frictional costs. You don’t live in a stock or a bond, but when the house leaks, it costs money and cuts into the investment. Meantime, the costs associated with buying and selling a property are becoming more daunting in many jurisdictions, with some observers reckoning that a house is often a mediocre investment at best.
But most young first-time buyers and mover-uppers are not fazed by such commentary. Home ownership is a cornerstone of our culture, with 70% of the population owning properties and many of the other 30% looking to join the majority.
And the real estate industry has become far more adept at marketing and selling than in the days decades ago when I was in the market. Today, houses are often professionally “staged” to produce that frisson moment. Prices are sometimes set artificially low to produce that exciting bidding war and that extra frisson of “winning.”
A house, it is said, is not a home. And a home is not strictly an investment. But does a stock have granite counters? Does a bond have stainless steel appliances?

Canadian consumers expected to remain cautious as interest rates set to rise

2011-04-25T08:41:00.000-07:00

By LuAnn LaSalle, The Canadian Press
Higher food and gasoline prices and hefty debt loads likely to be made worse by interest rate hikes will impact consumers' buying habits going forward, say those who track retail spending.
It's going to be tough for consumers who have depended on a low interest rate environment, said TD Bank economist Francis Fong, adding that rates are expected to go up this summer.
"The rising interest rate environment, this high household indebtedness situation — that's all going to impede the ability of consumers to spend going forward," Fong said Thursday from Toronto.
Statistics Canada said retail sales increased 0.4 per cent in February to $37.3 billion, giving retailers some relief after declining sales at the start of the year.
Consumers filling their tanks with higher-priced gas, along with those buying furniture and clothing, pushed sales higher in February.
But Fong said consumer spending will no longer be the same driving force going forward as it has been throughout the economic recovery.
The Retail Council of Canada said consumers are "still hanging back a little bit," especially now that they have to spend more of their incomes on food and gas.
"Clearly, if they're going to have spend a little bit more on basic necessities, they may pull back a little bit on the nice-to-haves, but not on the need-to-haves," said spokeswoman Anne Kothawala.
Consumer confidence is soft and that mirrors spending, she added.
"Gas and food prices are actually very closely related. It costs more to transport goods," Kothawala said.
Statistics Canada said the largest contributor to February's increase in retail purchases in dollar terms was gasoline sales, which increased 1.3 per cent.
Gasoline prices have been surging along with crude oil, which began rising sharply in February with the outbreak of unrest in Libya, an OPEC member that accounted for about two per cent of the world's crude output before civil war there.
As of Thursday, the Canadian average price compiled by GasBuddy.com was 129.6 cents per litre, up from about 118 cents per litre at the end of February.
But lower retail sales in Quebec — a 0.8 per cent decline — contributed the most towards the dampening of national retail sales, Statistics Canada said.
"The decline reflected, in part, lower sales of new motor vehicles in the province," the federal agency said. "This was the second decline in retail sales in Quebec following six consecutive monthly gains."
Quebec also increased its provincial sales tax to 8.5 per cent in January, up a percentage point.
Sales at clothing and clothing accessories stores were up 2.5 per cent, offsetting a decline in January. Sales at furniture and home furnishings stores grew 2.1 per cent in February, helped by gains in real estate sales.
Prof. Ken Wong of Queen's University business school said once consumers pay down debt and spend more money on food and gas, there isn't much left for anything else.
"You have to ask yourself what can be delayed and what can't be delayed," Wong said of consumer purchases.
"We cannot rely on interest rates remaining as low as they are as long as they have been going forward," said Wong, who teaches business and marketing strategy.
Geographically, retail sales in February gained in six of 10 provinces, powered by Ontario where sales increased 0.7 per cent after two consecutive monthly declines.

Inmate Football

2011-04-23T06:35:00.000-07:00

Wouldn't the world be a better place if we all treated each other this way!!

Neil "Mortgage Man" McJannet

In the fall of 2008, there was an unusual high school football game played in Grapevine, Texas. The game was between Grapevine Faith Academy and the Gainesville State School. Faith is a Christian school and Gainesville State School is located within a maximum security correction facility.

Gainesville State School has 14 players. They play every game on the road. Their record was 0-8. They've only scored twice. Their 14 players are teenagers who have been convicted of crimes ranging from drugs to assault to robbery. Most had families who had disowned them. They wore outdated, used shoulder pads and helmets. Faith Academy was 7-2. They had 70 players, 11 coaches, and the latest equipment.

Chris Hogan, the head coach at Faith Academy, knew the Gainesville team would have no fans and it would be no contest, so he thought, "What if half of our fans and half of our cheerleaders, for one night only, cheered for the other team?" He sent out an email to the faithful asking them to do just that. "Here’s the message I want you to send," Hogan wrote. "You’re just as valuable as any other person on the planet."

Some folks were confused and thought he was nuts. One player said, "Coach, why are we doing this?" Hogan said, "Imagine you don’t have a home life, no one to love you, no one pulling for you. Imagine that everyone pretty much had given up on you. Now, imagine what it would feel like and mean to you for hundreds of people to suddenly believe in you."

The idea took root. On the night of the game, imagine the surprise of those 14 players when they took the field and there was a banner the cheerleaders had made for them to crash through. The visitors’ stands were full. The cheerleaders were leading cheers for them. The fans were calling them by their names. Isaiah, the quarterback-middle linebacker said, "I never in my life thought I would hear parents cheering to tackle and hit their kid. Most of the time, when we come out, people are afraid of us. You can see it in their eyes, but these people are yelling for us. They knew our names."

Faith won the game, and after the game the teams gathered at the 50-yard line to pray. That’s when Isaiah, the teenage convict-quarterback surprised everybody and asked if he could pray and he prayed, "Lord, I don’t know what just happened so I don’t know how or who to say thank you to, but I never knew there were so many people in the world who cared about us." On the way back to the bus, under guard, each one of the players was handed a burger, fries, a coke, candy, a Bible, and an encouraging letter from the players from Faith Academy.

What an incredible act of Christian witness and kindness and goodness that was. Proverbs 11:17 says, "Your own soul is nourished when you are kind." Proverbs 3:27 says, "Do not withhold good when it is in your power to act." Be kind to someone this week. Be kind to every person you meet.

Canadians struggling to save and pay off debt; 38 per cent have no savings

2011-04-21T08:26:00.001-07:00

LuAnn LaSalle, The Canadian Press

Many Canadians are finding themselves caught between the struggle to save money and repay their debts, says a survey from TD Bank.

And with interest rates expected to rise this summer, clearing debts probably won't get any easier. In the report, 38 per cent of Canadians surveyed said they had no savings at all.

"I think it's worrisome," said Carrie Russell, senior vice-president of retail banking at TD Canada Trust "The reality is that we are all going to come into unexpected expenses from time to time, be it a car or health or a job loss and this can really derail you and your family if you have no cushion behind you," Russell said from Toronto.

Russell said the major factor preventing Canadians from saving is that they are using disposable income to pay down debt, whether it be credit cards, car loans or mortgages.

She recommends a cushion of three to six months of income saved to get through unexpected financial shocks.

One-third of Canadians who responded to the recent online survey also said they didn't have enough money to cover living expenses like rent or food bills.

The survey found that 54 per cent of the 1,003 people who took part in the survey said it was a real struggle or impossible to save.

Repaying those debts will only get harder if the Bank of Canada raises interest rates this summer, as expected. A spike in Canada's inflation rate in March was driven by higher food and gasoline prices.

Shopping is also taking a toll on tucking money away for a rainy day.

Russell said 12 per cent of those surveyed said they couldn't save because "they shopped beyond their means." Nineteen per cent of those surveyed under the age of 35 said they spent too much on shopping, she added. "This really comes down to the age-old question of budgeting, choices and skills required in making plans for a healthy financial future."

Changing habits starts with children and making sure they understand how much things cost and understanding the difference between a "want" versus a "need," she said.

"We don't send our children into the deep end of the ocean without teaching them how to swim. We shouldn't send our children out into the workforce and independent lives without giving them the basics of financial literacy."

On the flip side, 30 per cent of respondents said they had enough money saved to cover living expenses for at least four months.

Russell said those who were most successful with savings were "paying themselves first" and using automatic savings programs to put money aside.

Certified financial planner Marta Stiteler had some tough love for Canadians without nest eggs: learn to live with less and start saving every month even if it's just $50.

"People are using the downturn as an excuse," said Stiteler, an associate at Pillar Retirement in Hamilton, Ont..

"The reality is you just have to bite the bullet and save. If you don't save you're going to spend it because your lifestyle will eat up that money," she said. "It's about discipline."

The Vanier Institute of the Family has said that average family debt in Canada hit $100,000 in 2010.

"I do think many families are behind the eight ball and the public supports really aren't there where they once were," said Katherine Scott, director of programs at the Ottawa-based organization.

Scott said local credit and non-profit agencies can provide resources to help families get a financial plan so they can "start to dig themselves out of that hole."

The online survey, based on a representative sample of Canadian adults, was conducted from Dec. 2 to Dec. 7, 2010, by Environics Research for the bank

Jury convicts Taylor Bean's majority owner on all 14 counts in $3B mortgage fraud trial

2011-04-20T09:28:00.000-07:00

The American Way is alive and well. These sort of situations make Canadian Banks look even better. Brings a whole new meaning for me to "Bet heavy and sleep in the streets" - I guess it is steal lots and sleep in jail.

Neil "Mortgage Man" McJannet

By Matthew Barakat, The Associated Press

ALEXANDRIA, Va. - A jury on Tuesday convicted the majority owner of what had been one of America's largest mortgage companies on all 14 counts in a $3 billion fraud trial that officials have said is one of the most significant prosecutions to arise from the U.S. financial crisis.

Prosecutors said Lee Farkas led a fraud scheme of staggering proportions as chairman of Florida-based Taylor Bean & Whitaker. The fraud not only caused the company's 2009 collapse and the loss of jobs for its 2,000 workers, but also contributed to the collapse of Alabama-based Colonial Bank, the sixth-largest bank failure in U.S. history.

The jury returned its verdict late Tuesday after more than a day of deliberations.

Colonial and two other major banks — Deutsche Bank and BNP Paribas — were cheated out of nearly $3 billion, prosecutors estimated. Farkas and his cohorts — six of whom entered guilty pleas to related charges and testified against him at the two-week trial in U.S. District Court — also tried to fraudulently obtain more than $500 million in taxpayer-funded relief from the government's bank bailout program, the Troubled Assets Relief Program (TARP).

While TARP at one point gave conditional approval to a payment of roughly $550 million, ultimately neither Taylor Bean nor Colonial received any TARP money, and investigators from that office, along with the FBI and other agencies, helped uncover the fraud.

Farkas testified in his own defence at the trial and claimed he did nothing wrong. He claimed he was unfamiliar with details or knowledge of many aspects of the various fraud schemes.

In closing arguments, Farkas' lawyer Bruce Rogow, said the six executives at Colonial and Taylor Bean who struck plea deals skewed their testimony to bolster the government's case in the hope of receiving lighter prison sentences for their co-operation. Rogow said Farkas and everyone else at Taylor Bean was working honestly and ethically to get control of its finances and perhaps could have done the job if the government hadn't essentially shut the company down when it raided company headquarters in 2009.

But prosecutors said the evidence against Farkas was overwhelming. They said the fraud began in 2002, when Taylor Bean overdrew its main account with Colonial by several million dollars. Midlevel executives at Colonial agreed to transfer money into Taylor Bean's accounts at the end of each day to avoid generating overdraft notices, a process known as "sweeping."

As the hole grew to well over $100 million, Taylor Bean and a handful of Colonial executives concocted a scheme in which Taylor Bean sold hundreds of millions in worthless mortgages to Colonial — mortgages that had already been sold to other investors. More than $1 billion in such phoney mortgages were eventually sold to Colonial, which listed them on its books and on its quarterly reports as legitimate assets, prosecutors alleged.

In a related scheme, Taylor Bean created a subsidiary called Ocala Funding that sold commercial paper — essentially glorified IOUs — to banks including Deutsche Bank and BNP Paribas. But prosecutors said the collateral that supposedly backed that commercial paper was worthless, and when Taylor Bean collapsed in 2009, the two banks lost roughly $1.5 billion.

Time management secrets anyone can use

2011-04-20T09:26:00.001-07:00

Helen Coster, Forbes · Apr. 13, 2011 |

In the two hours that I've been at work today, I've found many ways to not write this article. I've scanned 44 new emails and visited a colleague down the hall. I've skimmed The New York Times, read a few updates on Facebook, checked a Yahoo account that consists mostly of spam and spent a disproportionately long time writing an email connecting two friends in Beijing. Before I wrote a word of this story I decided that I absolutely needed a cup of tea. And a granola bar. And an orange. And a napkin to clean up after the orange. And where is Butler University, anyway? Thank you, Google.

If you're reading this article instead of doing your work, chances are you face similar obstacles to your focus. You're not alone. According to a survey by Salary.com, the average worker admits to wasting about two hours of each eight-hour workday, not including lunch or scheduled breaks. The Web is like the next-door neighbor who keeps asking us to play when we know we have homework to do. It and email provide so much distraction on a minute-by-minute, hour-by-hour basis that we find it nearly impossible to give our full attention to higher-level tasks. And because there are no defined edges to most of our projects — and certainly not to our workdays — we live in an endless jumble of work and life. We can book a trip to Mexico while participating in a conference call. We can send work emails from a chairlift above the ski slopes of Vermont. It's tough to establish boundaries and focus on any one thing.

Today more than ever, American workers have more to do and less time to do it. Thankfully, there's an entire community of people who specialize in productivity and time management. Their guru is David Allen, author of the 2001 book Getting Things Done: The Art of Stress-Free Productivity — or GTD to its devotees. I've read some of Allen's teachings, as well as those of Merlin Mann, founder of the blog 43 Folders, and the highly addictive Lifehacker.com and others. There's no one-size-fits-all approach to productivity, but Allen and company have some great ideas to help you declutter your life and make way for big, creative boosts of productivity.

Some of their advice, like "don't multitask," is counterintuitive. Apparently, you'll be much more productive if you check your email only a few times a day, rather than incessantly, as I do. But much of it is common sense, in an "I know I should do that, but I never actually do" kind of way. Allen's mission is to help people rein in all the to-do-list items that float around in their heads, and then organize them systematically. A system allows you to identify the next step to take on every project and keep those projects moving forward, while freeing up your mind to relax and dwell on loftier things. "Keeping things out of your head and managing a clear and complete inventory of your commitments brings a great increase in clarity, focus, and control," Allen says. "And it provides the critical background for then making the important distinctions about where you're going and what's really important, so you can make decisions about what to do, and not do, on those lists."

A lot of productivity-speak involves managing technology. My friend Gretchen Rubin, whose blog The Happiness Project is a vital part of my morning routine, describes technology as a great servant but a terrible master. Allen says that if replying to or disposing of an email takes less than two minutes, you should always do so right away. Turn off those annoying email alerts — do not have a sign flash up on your screen every time a new email comes in. Send less to receive less: Keep your emails short, and write fewer of them.

Allen is also a huge proponent of to-do lists. He says that everyone should have an organized, clear and simple way of writing down everything they need to remember.

That way you never need to lie in bed at night trying to recall some crucial thing you're sure you've forgotten. Productivity experts say to keep multiple lists, including a short list of one to three things that you absolutely need to do each day. Hand off anything that can be delegated, and be realistic about what you can reasonably accomplish every day. Don't set yourself up for failure by starting each day with an unrealistically long agenda.

At a time of year when many of us are engaged in some kind of therapeutic spring cleaning, cutting off distractions, decluttering our workspaces and developing systems to keep track of where things go can feel deliciously Type A, and necessary. Now back to my inbox.

After temporary growth spurt, Canadian economy is slowing, says Bank of Canada

2011-04-14T09:07:00.000-07:00

Seems like more good news for the Variable Rate Mortgages.

Neil"Mortgage Man" McJannet

OTTAWA – The Canadian economy likely expanded by a surprisingly strong 4.2 per cent in the first three months of the year, but it was a temporary burst of activity that is already over, the Bank of Canada says in its new outlook.

The central bank’s new quarterly outlook paints a picture of an economy that is settling down to a protracted period of slow growth, being held back by a high loonie, a tapped-out consumer and government spending restraint.

The bank says the current second quarter will see growth brake to two per cent, less than half what it was in the first, in part because of supply disruptions to Canada’s auto sector caused by the Japanese earthquake and tsunami. The disruption will lessen going forward, however.

On an annual basis, the economy is forecast to slow from 2.9 per cent this year, to 2.6 per cent next year and 2.1 per cent in 2013.

The overall take from the document is that the bank appears in no hurry to start raising interest rates to slow the economy because other factors are doing the job.

The bank doesn’t appear to be overly worried that high oil and food prices might trigger inflation. It briefly notes that inflation may hit three per cent, at the upper end of the bank’s acceptable range, in the next few months, but appears unconcerned.

“The combination of modest growth in labour compensation (wages) and higher productivity is expected to continue to dampen inflationary pressures, with the higher assumed value of the Canadian dollar providing further restraint,” the bank said.

Economists had been pointing to either May or July as the most likely dates for the bank to start raising its policy rate from the current one per cent, which would have the effect of also raising short-term interest rates for such things as variable mortgages.

But the dovish tone of the latest outlook suggests interest rates could remain low longer, especially amid fears that moving aggressively in advance of the United States likely would have the undesired effect of lifting the loonie even higher.

The bank does concede that it has been taken by surprise by the 3.3 per cent expansion in the fourth quarter of 2010, and the likely even stronger 4.2 per cent spurt in the first three months of this year.

That means Canada’s economy will likely return to full capacity by the middle of next year, earlier than previously expected.

But it stresses temporary factors were responsible, including stronger exports and domestic consumption, and that there is still plenty of slack in the economy.

The exports surge is already over, the bank says, and the persistently strong dollar averaging $1.03 US will continue to restrain exports going forward.

“The bank continues to project ... that the recovery in exports will be subdued relative to earlier global recoveries, with the higher level of the Canadian dollar assumed in this projection adding to long-standing competitive challenges,” it said.

Consumption may remain moderately stronger than would be assumed, the bank says, in part because high commodity prices are increasing household purchasing power through gains in the terms of trade, the difference between export and import prices. It estimates the country’s gross domestic income will rise by 4.7 this year.

Still, it believes the housing market will continue to cool and that government spending restraint will be a net drag on the economy this year.

The biggest engine of growth remains business investment, it says, in part because the higher Canadian dollar makes investment in foreign-made machinery and equipment less expensive.

Globally, the bank sees little change in the economic outlook, although it continues to stress risk factors such as high debt both among households and governments in the advanced economies, the Japanese crisis, turmoil in the Middle East and high commodity prices, especially oil.

Despite the risks, it says the global recovery is becoming more rooted and that even growth in troubled Europe is strengthening.

“The global economic recovery is projected to proceed at a steady pace over 2011-13,” the bank says, projecting growth of 4.1 per cent this year and 3.9 per cent next.

The bank has slightly lowered its forecast for U.S. growth this year to three per cent, from its previous 3.3 per cent call four months ago.

Surprise, surprise: Central Bank holds overnight rate at 1 per cent

2011-04-13T09:13:00.000-07:00

By Vernon Clement Jones | 12/04/2011
In what may be the worst kept secret, the Bank of Canada today announced it will maintain its key overnight rate at 1 per cent, pointing to global economic challenges courtesy of the Japan disaster and the soaring Loonie’s drag on exports.

What’s more, there’s little indication the bank will move to adjust its key interest rate on May 31, the next review date. Tuesday’s report repeats the same cautious wording used in the March 1 rate decision, which preceded today’s announcement: “Any further reduction in monetary policy stimulus would need to be carefully considered.”

The bank is hinting that the overnight may go up later in the year, given its improved outlook for 2011. The bank has now raised the forecast by a half-percentage point, suggesting economic recovery is moving at a faster clip than expected.

That stepped-up performance continues to be challenged by the soaring Loonie, which has tamped down on global demand for Canadian exports, a key driver of economic growth.

“As in January, the bank expects business investment to continue to rise rapidly and the growth of consumer spending to evolve broadly in line with that of personal disposable income, although higher terms of trade and wealth are likely to support a slightly stronger profile for household expenditures than previously projected,” says the bank announcement. “In contrast, the improvement in net exports is expected to be further restrained by ongoing competitiveness challenges, which have been reinforced by the recent strength of the Canadian dollar.”

Tame global recovery -- especially stateside -- has also played a part in the bank’s decision to keep the overnight rate steady: “The global economic recovery is becoming more firmly entrenched and is expected to continue at a steady pace. In the United States, growth is solidifying, although consolidation of household and ultimately government balance sheets will limit the pace of the expansion.”

While European growth has strengthened, even in the face of ongoing sovereign debt and banking challenges, the Japan disaster “will severely affect its economic activity in the first half of this year and create short-term disruptions to supply chains in advanced economies,” says the bank report.

The Central Bank seems prepared to wait until its July review to start nudging its key rate upward, although it could move as early as May if Canadian business begins to replace the economic stimulus now being provided by the bank’s low interest rates.

“The bank expects business investment to continue to rise rapidly and the growth of consumer spending to evolve broadly in line with that of personable disposable income – although higher terms of trade and wealth are likely to support a slightly stronger profile” than previously expected, according to the bank.

10 tips to organize and tidy up your finances

2011-04-12T12:26:00.001-07:00

Golden Girl Finance,

Happy spring! The sun is out, the birds are singing, and here in Canada, we probably only have one or two more surprise snowfalls before summer.

This is the time of year when we emerge from our dark rooms, stretching and blinking into the sun. We peel off our woolly layers and start thinking about what bikini we will flaunt this summer (yikes). And then we start going for long walks again and haul out the bicycles. Yes, spring is a time to open the windows, clean out the closets, flip the mattresses and sweep away the cobwebs.

While you are busy freshening up your home and garden, you might want to consider pulling out your wallet, blowing off the dust and giving it a good seasonal purge as well. Your finances are like anything else in life: after a while, you start to forget your good habits, and things tend to get sloppy, neglected and disorganized. So seize the spring, darling. Carpe ver!

Here are ten tips to organize your finances and clean up your budget:

1. Clean out the wallet! Lord knows what is lurking in there. Stuffed full of receipts and bank slips, expired discount cards, phone numbers with no names attached, business cards from your last three jobs. As our feng shui sisters might say, you must make space in the wallet for the money to flow to you.

2. Be an A-Lister. Dedicate space for lists in your BlackBerry or a notepad that you carry at all times. Lists are critical for clearing trivia out of your head and keeping you focused when it's time to spend. Mark down items you need as you think of them; that way, when you get to the grocery or department store, you won't get that overwhelmed, "why am I here?" feeling and end up with a cart full of cocoa puffs and tea lights.

3. Reality check. Fitness memberships are an essential expense to many of us. However, if your gym is $90 a month and you only show up three times a month, that's $30 a visit. Be honest with yourself and your schedule. You might be better off paying as you go, or finding a gym where you can buy 10 sessions at a time.

4. Subscribe to this. What is with that messy stack of unread newspapers and magazines on your coffee table? Don't you have enough to dust? Subscriptions are no bargain if you're not reading the products. Consider weekend-only newspaper delivery and buy magazines at the newsstands when you have time to read them.

5. Stay on season. Now that it's spring, we can look forward to fresh fruit and vegetables from local farmers. Check labels and choose food products from close to home — not only will they be fresher, but they won't be packed with big fuel and shipping costs.

6. Be a contrarian. On the other hand, when it comes to big-ticket items, it helps to be delightfully off-season. The end of February is the time to nab a Prada ski jacket in the clearance sales, saving you money to buy Swarovski Christmas tree ornaments in July and Pottery Barn patio furniture in September.

7. Friend and follow. Before you shop, check the website of your favourite store or mall for online-only specials and coupons. Sign up for the Facebook or Twitter accounts of your favourite retailers, restaurants or hotels, which often use their online profiles for giveaways, contests and special deals to their friends and followers.

8. Spring THAW. Remember that trip to Costco where you got 40 chicken breasts for four dollars? Take an inventory of your deep freeze and start planning meals around what you already have on hand. Or throw a dinner party and use up everything you bought more than three months ago. Buying on sale is a waste if you end up throwing out freezer-burnt food.

9. Get your Groupon. Clipping coupons gets stylish with deal-of-the-day sites such as Groupon. The site offers limited-time discounts on everything from $25 off at The Gap (NYSE:GPS) to half price scuba diving lessons. Going on vacation? Check the site for deals at your destination. When you're going out a lot, who wouldn't want to score a free plate of appetizers or two-for-one tickets to a show?

10. Cheap and cheerful. Fun doesn't need to cost nearly as much as you think. A morning with the whole family at the playground is just as rewarding as a day at a theme park and much cheaper than driving, parking and paying for family passes. A night in with the girls and a bottle of wine is every bit as fun and boisterous as going out to the newest hotspot. Bonus: by making it OK to have fun on the down-low, everyone feels better about hosting or getting together more often.

Of course, along with the flowers come the inevitable showers. You know what they say about rainy days, don't you? By cleaning up your financial bad habits and getting in shape for spring, you might actually be able to save a little something…maybe enough to buy yourself one of these must-have items for spring:

West coast residents focusing on debt management

2011-04-12T08:14:00.000-07:00

One way to beat some of this - if you are close to the border is using the USA for gas and groceries. Their prices are way better in many products than Canada. We make regular trips to buy our gas at .80 per litre-- I always say we are going to the USA to buy Canadian gas at US prices!

Neil"Mortgage Man" McJannet

TORONTO, April 12 /CNW/ - One-third (33 per cent) of B.C. residents say that rising food and gas prices have had a significant impact on their budget, according to the latest quarterly RBC Canadian Consumer Outlook Index (RBC CCO). In addition, more than half (53 per cent) of British Columbians say they have delayed a major purchase because of the current economic climate.

Confidence in the economy, however, is rising on Canada's west coast. B.C.'s overall economic outlook index has moved up nine points to reach 98, its highest level this year. Coupled with this rosy outlook, nearly half (49 per cent) of B.C. residents believe they are managing their debt well, the highest ranking in the country and well above the national average of 38 per cent.

"B.C. residents are confident in the job market and believe the economy will continue to improve," said Graham MacLachlan, regional president, British Columbia, RBC. "However, rising day-to-day costs of gas and food are starting to have an impact, so it's good to see British Columbians making debt management a top priority. We continue to stress the importance of meeting with a financial advisor, who can help you refine your budget and financial plan, to ensure there is always room to adjust for everyday financial pressures."

According to the most recent Economic Outlook by RBC Economics, the B.C. economy will grow at a rate of 2.9 per cent this year. "B.C. will continue to benefit from improved market conditions for most commodities produced in the province, as well as from growing demand from China," said Craig Wright, senior vice-president and chief economist, RBC. "Expanding trade ties with fast-growing China and the further strengthening in the U.S. economy will help the B.C. economy set a slightly faster pace of growth of 3.2 per cent in 2012."

The RBC CCO is Canada's most comprehensive consumer assessment of the economy, personal financial situation and economic and purchasing expectations. Other provincial highlights from the March 2011 RBC CCO include:

· Economic Outlook: More than six-in-ten (63 per cent) of B.C.'s residents rate the current Canadian economy as good, two points higher than the national average; nearly half (46 per cent) believe the economy will continue to improve over the next year, compared to 42 per cent nationally. Job anxiety has dipped to 17 per cent, just one point higher than Saskatchewan and Manitoba who have the lowest job anxiety in the country at 16 per cent.

· Interest rates: The vast majority (80 per cent) of B.C. residents believe that interest rates will rise this year, compared to the national average of 74 per cent. To combat this expected interest rate increase, 31 per cent of British Columbians plan to find ways to reduce their interest costs or monthly payments, 28 per cent plan to increase their savings and/or investments and 43 per cent intend to spend less in other areas.

· Personal Financial Situation Outlook: While more British Columbians feel that, over the last quarter, their personal situation has worsened (32 per cent) rather than improved (23 per cent), more than a third (36 per cent) expect it to improve over the next year.

Escaping from mortgage prison

2011-04-11T08:56:00.000-07:00

So don't get your advise from an American advisor- They also tell people to wait for rates to go down before making a dceision to renew early - but the US does not have an Interest Rate differential cost either. Stick with Canadians for Canadian advise. The USA is very differennt in many ways from Canada.

Neil "Mortgage Man" McJannet

Garry Marr, Financial Post · Let's just say you owed somebody a ton of money but there was no legal way to force you to pay it back?

Would you? What if it was one of those evil corporate banks that make for an easy target? Did the answer just get a little easier?

Not for 60% of Americans who say it is never OK to simply stop making payments on your home, according to a survey by Eagan, Minn.-based findlaw.com, a free legal information website.

Another 34% say it's OK to walk away from a mortgage, but only if you can't make the monthly payments. Only 3% believe you should be able to walk away from a mortgage anytime you want, according to the survey, which interviewed 1,000 American adults and had a margin of error of plus or minus three percentage points.

It's an interesting survey given that U.S. law in a number of states allows consumers to simply hand over the keys to their homes without the lender going after their other financial assets -something that is all but impossible in Canada.

That is not to say that walking away from a mortgage isn't affecting the credit of Americans who do so. They might not be able to buy another house for years unless they do so with cash.

Despite what the survey says, Americans have been walking away from mortgages in droves because it makes financial sense.

Think about it. You have a home with a $500,000 mortgage on it. The present value of it is $250,000. Why would you not walk away, if you could?

"We just asked people what do you think of the idea, not would you do it yourself or have you thought about doing it yourself," said Leonard Lee, the researcher behind the survey. "There is a practical argument, but there's a whole philosophical argument."

If you were shareholder in a company that owned a $250-million building but kept making payments on a $500-million mortgage even though the company had the ability to walk away from the debt, how would you feel? Would the executives be breaching a fiduciary responsibility?

The U.S. real estate industry even has a term for all this: strategic default. "You are asking at some point, doesn't it make more sense to walk away from the mortgage where you are unlikely to recoup your original investment," Mr. Lee says.

Ted Rechtshaffen, certified financial planner and president of TriDelta Financial, says once you put aside the moral issues, it would come down to a simple choice.

"It will impact your credit rating, but from a financial perspective, why wouldn't you do it? You are getting a $250,000 head start. Another investment is probably going to be better than your current house," Mr. Rechtshaffen says.

But Benjamin Tal, deputy chief economist with CIBC World Markets, says while it might not make economic sense, there is evidence Americans are not actually walking away from property as much as they probably would if they were listening to a financial advisor.

"Whatever the default rate is now in the U.S., people say it's 8% and that's extremely high. I say that's surprisingly low," Mr. Tal says. "You have up to six to seven million households that could default any day, namely because they are in a negative equity position."

What's in it for them to keep paying? There is something to say for wanting to stay in your home where you have been living and raising a family. There is also a stigma that comes with somebody slapping a foreclosure sign on your property -suddenly your neighbours know a little more about your financial situation.

"At the end of the day though, that's the rational thing to do. You are talking about houses that are under water more than 20%. Based on an economics textbook, that would be the rational thing to do," Mr. Tal says.

In Canada, it's pretty tough to do. For starters, if you have an insured mortgage backed by the government, the bank will get paid off for its loan. But the insurance company, whether it's Canada Mortgage and Housing Corp. or a private insurer, will go after you for any deficiency created by proceeds from the property being less than the mortgage.

It's the case in most of the country for uninsured mortgages, too, says John Turner, director of mortgages for Bank of Montreal. Rules are slightly different in Alberta and are designed to protect consumers, but Mr. Turner says banks can elect to go after other assets in some circumstances.

There's also the scenario where you might have bought a condominium as an investment before it was built and put down, say, a 20% payment. If you think you can walk away if prices dropped by 50% once the building is up, forget it. You'll be sued.

"As lawyers, we can't advise someone to break a contract. The law is not you don't have to obey it, the law is the consequences of not obeying [the contract]," says Calgary lawyer Jeff Kahane. "You haven't broken the law, you've broken your promise. Is it any different than saying why would I want to pay for a chocolate bar at 7-11 when I can put it into my pocket and steal it if I can get away with it."

More than half of young adults waiting till next year to buy home: RBC survey

2011-04-08T07:46:00.000-07:00

By Sunny Freeman, The Canadian Press

TORONTO - As rising home prices continue to outpace income growth, many young Canadians have decided to delay home ownership for another year, according to a poll released Thursday by Royal Bank of Canada.

RBC's annual home ownership poll found that 55 per cent of respondents aged 18 to 34 said it made sense to delay a home purchase until next year. That's 10 percentage points more than the national average for all age groups.

Meanwhile, about half of the young people in the survey who had already delved into home ownership said their mortgage was eating up too much income — suggesting their peers may have good reason to wait.

A sharp rebound in housing market activity as Canada emerged from a recession in late 2009 and early 2010 has sent home prices soaring.

The national average home price rose 8.8 per cent year over year to a record $365,192 in February, although it was skewed upward by sales in the red hot Vancouver market where the average home price was $790,380.

Meanwhile, Canada's job market has taken longer to recover and income levels haven't grown at the same rate. A Bank of Montreal report released last month found average resale home prices compared with personal incomes are 14 per cent above the long-term trend.

That makes it more difficult to afford a home — as mortgage payments eat into a larger portion of Canadians' paycheques — especially those of young people who are just settling into careers and tend to have less money saved.

In addition, young people already struggling with student loan payments may be influenced by a steady stream of warnings over the past year about Canadian debt-to-income ratios reaching record highs, suggested Bernice Dunsby, RBC's director of client acquisition for home equity.

"Canadians are heeding some of the advice around larger debt levels and stretching themselves too thin so they're actually taking the time to pause and reflect and plan accordingly, especially when it comes to things like their down payment," Dunsby said.

Some young people watching home prices soar beyond pre-recession levels may be waiting for a widely predicted drop anticipated over the next year or so, said David Madani, Canada economist at Capital Economics.

"We've kind of reached a threshold in the sense that affordability is pretty tough," he said.

"If you're talking about a potential young home buyer who is living in Toronto or Vancouver or some other big market, it's really pricey to get into right now, so that's discouraging for some young home buyers."

First-time buyers account for a huge portion of all Canadian housing sales, making the demographic influential in determining the health of the country's housing market.

This year's survey, conducted by Ipsos Reid in mid-January, came at a cooling off period in the Canadian housing market following a spate of frenzied buying in the early months of last year.

There will be a drop in demand this year after a number of factors last year combined to drive buyers to jump into the market earlier than planned, Dunsby said.

Many first-time buyers rushed into the market in the first half of 2010 while the Bank of Canada's key interest rate — which influences commercial lending rates — was set at emergency lows of 0.25 per cent because of the recession.

Those changes affect a minority of mortgage holders who opt for variable rate mortgages linked to the commercial banks' prime rates.

"(However) they may look at interest rates as an indicator of when to jump into the market," said Dunsby.

Some buyers also wanted to enter the market before the new harmonized sales tax was implemented last July in Ontario and British Columbia, two of the country's largest real-estate markets.

Although the HST only applied to some services associated with a home purchase, such as lawyers’ fees, some buyers thought it could push closing costs up a lot more.

First-time homebuyers are also most affected by government moves to change mortgage rules that made it more difficult to qualify for a mortgage. Stricter lending rules brought in the spring of 2010 require all homebuyers to qualify for a standard five-year, fixed-rate mortgage.

More recently, new changes enacted last month shortened the maximum amortization period for a mortgage to 30 years from 35, increasing the size of monthly mortgage payments.

Demand for homes began to wane last spring in the face of rising home prices and short-term mortgage rates, along with stricter mortgage rules and the exhaustion of pent-up demand from the recession.

That has put buyers and sellers on a more even footing when they negotiate.

"In a more balanced housing market, it makes sense that younger and first-time homebuyers are waiting to assess all of their options and do their research before buying a home," Dunsby said.

"It's also important to get expert advice on what you can afford and leave yourself with a little extra wiggle room in your budget so you don't become house poor, as home maintenance and lifestyle costs can add up."

While 43 per cent of younger Canadians told Ipsos Reid they were paying off their mortgage faster than expected, two-thirds, or 66 per cent, said their mortgages were still larger than they would like.

Rising real estate prices, along with having a large enough down payment, were the biggest concerns among young people surveyed.

Still, 43 per cent of the young adults who responded to the survey said they were looking to buy in the next two years, suggesting the housing market will continue to be healthy going forward.

That's higher than the national average of 29 per cent for all age groups.

In comparison, only 29 per cent of Canadians aged 35 to 54 said they want to buy within two years and only 17 per cent of respondents over 55 were looking.

The survey also revealed that young people have different ideas about how to seek advice on home ownership than those belonging to older generations.

Most young people said they were more inclined to use websites, family or friends for advice while more than 70 per cent of Canadians over 45 said they would rely on a real estate agent.

The survey's findings are based on responses from an online panel of 2,103 Canadians, conducted Jan. 12 to 17. A survey of this size has a margin of error of plus or minus two percentage points 19 times out of 20

Why we might see a rate hike sooner rather than later

2011-04-07T12:08:00.001-07:00

Paul Vieira, Financial Post

OTTAWA — Stronger economic growth, propelled by a commodity boom and an improving U.S. job market, will prompt the Bank of Canada to begin rate hikes in July to a 2% level by the end of the year and 3.5% in late 2012, economists at BMO Capital Markets said Wednesday in releasing its updated outlook.

The investment bank’s economics team project first-quarter annualized growth of 4.4%, helping to power the Canadian economy to a 3% advance in 2011 -- an improvement from the 2.7% gain BMO Capital Markets had forecast back in January. By year’s end, the country’s unemployment rate should drop to 7.4% from its present 7.8% level.

“The combination of low interests and high commodity prices are fuelling the domestic economy,” said Sal Guatieri, senior economist at BMO Capital Markets.

Consumer spending is expected to ease from 2010 levels, to 3%, but he said exports and a 12.8% surge in non-residential business investment would pick up the slack.

Canada also stands to benefit from an improving U.S. economy, poised to expand 3.2% in 2011, as the job market begins to turn around based on March data, he added. Monthly job gains in the 200,000-plus range could boost confidence among U.S. firms and households, translating into increased spending and investment.

Risks to the outlook include soaring oil prices, which could deliver a “serious blow” to the North American economy; Europe’s sovereign debt woes, with Portugal on the brink of an international bailout and concerns mount over Spain; and any further fallout from Japan’s earthquake and subsequent nuclear crisis.

The Bank of Canada, which issues its next rate decision on April 12, is likely to upgrade its outlook for 2011 based on the data that has emerged, Mr. Guatieri said. In its last outlook tabled in January, the central bank expected 2011 growth of 2.4%, with a first-quarter annualized advance of 2.4% -- which is now well below estimates in the 4% and 5% range.

“The economy is growing much faster than the bank expected, implying less inflation-dampening slack,” Guatieri said, adding he expects the Bank of Canada to move up the timetable as to when the output gap — a measure of spare capacity — closes to mid-2012 from the previous call of the end of next year.

“The central bank will now likely move a little more aggressively on rates than planned.”

While Canada inflation remains muted, with the core rate at 0.9% as of February, Mr. Guatieri said BMO expects price increases to pick up steam in the months ahead. The central bank sets rates to achieve and maintain 2% inflation.

“We are at a low point on inflation,” he said. “The central bank can’t delay rate hikes indefinitely or it might face an inflation problem down the road.”

The European Central Bank is set to raise its benchmark rate on Thursday, even though sovereign debt worries have resurfaced, on inflation concerns.

Canada's big banks raising residential mortgage rates ahead of busy period

2011-04-05T09:31:00.000-07:00

Looks like a profit taking exercise - the banks don't make enough money so why not raise rates when the martket is going to be a bit better.
Look for rates to decline again in the coming weeks.

Neil "Mortgage Man" McJannet

By The Canadian Press

TORONTO - Several of Canada's big banks are raising most of their fixed-term mortgage rates ahead of the busy spring real estate market.

TD Canada Trust (TSX:TD) TD said the biggest increases will be for mortgages with terms of five to 10 years, which will all go up by 0.35 percentage points starting Tuesday.

The move was matched by CIBC (TSX:CM).

The Royal Bank (TSX:RY) raised its rates on mortgages for five and 10-year terms by 0.35 percentage points and its seven-year rate by 0.15 percentage points. The posted rate for five-year closed mortgages — one of the most popular types of loans for Canadian home owners — will rise to 5.69 per cent.

Scotiabank (TSX:BNS) raised its posted rate for a five-year closed mortgage by 0.4 percentage points to bring it to 5.69 per cent.

Fixed mortgage rates, which are closely tied to the bond market, tend to climb when traders shift investment activity to riskier equity assets from bonds, which are considered safer.