One of my clients is a home builder... Business a little slower but strong.
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Century 21 Canada survey finds housing prices remain strong, stable across country
April 30, 2008 - 19:27
By: Eric Shackleton, THE CANADIAN PRESS
TORONTO - A national survey by Century 21 Canada brokers suggests the Canadian house market has definitely cooled but hasn't suffered the big collapses that have been experienced in some parts of the United States.
In its 2008 Spring National House Price Survey released Wednesday, the real estate franchisor looked at typical homes in 198 neighbourhoods within 66 cities across Canada.
It found that prices over the past year increased in 167 neighbourhoods, remained flat in nine neighbourhoods and declined in 21 neighbourhoods.
The survey, based on multiple listings and sold and current listings data, defined a typical home as the type of home that occurs most frequently in any given neighbourhood.
The results, said Don Lawby, Century 21 president, "reflect the solid foundations of Canada's housing markets versus the boom-bust excesses of the U.S. housing market."
The strong, stable housing prices, Lawby said in an interview, are being underpinned by "strong" consumer spending across Canada.
Lawby said he spent several weeks crossing the country talking to hundreds of realtors and found that "housing sales are easing in most communities as the economic growth rate slows."
But, he said, prices "are strong and stable nearly everywhere."
On Tuesday, the Canadian Real Estate Assocation, in an update to an earlier survey, reported that sales of existing homes fell by 6.8 per cent in the first three months of the year compared to a robust fourth quarter in 2007.
CREA attributed the decline to fewer sales in Toronto, which accounts for about 20 per cent of all existing home sales in Canada.
Activity also softened in British Columbia but remained strong in other markets, with new quarterly records for seasonally adjusted sales set in Newfoundland and Labrador and Saskatchewan. On a seasonally adjusted basis, 117,000 units sold during the first quarter.
At the same time, the number of new listings reached a record level, the association said. On a seasonally adjusted basis, new residential listings rose 5.5 per cent over the last quarter of 2007 to 223,400 units, with new listings surging in Alberta and B.C.
Year over year, residential average prices climbed 6.4 per cent to $312,580 in the first quarter - the smallest such rise since the fourth quarter of 2001, CREA said.
The housing market in Canada, said Lawby, is based on "conservative lending practices and regulations, strong banks and Canadians' pride of ownership and diligence at building equity in their homes."
These characteristics, he said, "will sustain our housing market as Canada's economic growth rate slows" throughout the year.
Lawby said while he is "not pessismistic, I'm not exuberant about the housing market either."
"We're going to be off of last year probably seven to eight per cent in units," he said "Prices will be up maybe by the cost of living plus two to three per cent, but not much more than that."
People who have looked at real estate as double digit-price increases, "I don't think we're going to see that this year," except maybe in Saskatchewan and Manitoba.
But those two provinces are small markets, that are being driven by very good economies, high commodity prices, and no housing inventory, said Lawby.
According to the survey, prices for typical homes have increased over the past year as much as 57 per cent to $330,000 for a modest 1,192-square-foot bungalow in the Whitmore Park neighbourhood in Regina.
Other strong markets include Winnipeg where prices have increased between 19 and 34 per cent, and St. John's, NL, where prices in the east and west parts of the city have risen between nine and 19 per cent.
Lawby said during a recent visit to Asia he found that the economies there are continuing to move along.
"They are buying a lot of resources out of Canada" which should continue to fuel growth in Western Canada and even Ontario, and keep the job and housing markets humming, he said. "It's going to continue to bode well."
Even in the U.S. the housing market is looking up especially in Florida , Arizona, Nevada and California, said Lawby
"There's some buyers at the table, in many cases it buyers from outside of the United States that are coming in and making investments," said Lawby.
"People are starting to say 'at least I'm seeing on my books and the real estate industry some closings coming, some buyers there.' And they hadn't been seeing that."
Lawby said that "unless something very dramatic happens, money gets spent" on the housing market.
He also said people from abroad are coming into Canada and buying up real estate. There is a flight of capital to places that people feel safe.
"We get lots of investment from Russia, Iran, China, Hong Kong, Singapore where they feel this is a safe place."
People from overseas generally buy property in Vancouver, Toronto, Calgary and Montreal helping those markets, said Lawby.
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BoC governor Carney warns about loosening mortgage standards in Canada
April 30, 2008 - 18:12
By: Julian Beltrame, THE CANADIAN PRESS
Bank of Canada Governor Mark Carney smiles as he prepares for his appearance before the Commons finance committee on Parliament Hill in Ottawa Wednesday April 30, 2008. THE CANADIAN PRESS/Tom Hanson
OTTAWA - Bank of Canada governor Mark Carney is concerned about the loosening standards in the Canadian mortgage system, particularly the growing popularity of mortgages amortized over a 40-year period.
Carney told a Commons committee Wednesday that the central bank is watching developments in the mortgage lending sector closely to ensure that the abuses seen in the U.S. subprime market do not occur in Canada.
"We have concerns with the increased prevalence of very long amortization and higher value mortgage products," he said.
"They add to momentum in the housing market and if everyone has a 40-year amortization mortgage, then you just have higher housing prices."
And Carney conceded that stand five-year mortgage rates for Canadian home buyers had not decreased in line with his bank's 150-basis point cut in the overnight interest rate to three per cent from 4.5 per cent in early December.
"The costs for the banks have increased and yet there still remains an operating band (for other loans), except for five-year mortgages," he said. "Its difficult to provide a full explanations" beyond the global problems in the security markets.
Still, the governor stressed that the Canadian housing market is not following the path of the U.S., which went through several years of skyrocketing growth before bursting last summer and collapsing.
Although housing prices have risen aggressively in Canada, Carney said the country has the lowest housing affordability measure among 20 industrialized countries surveyed by the International Monetary Fund, alongside Austria.
"The structure of our housing finance is entirely different than that of the United States," he said, and the risk of a housing slump could impact the wider financial system "is not possible in our system, to the U.S. magnitude."
In his first meeting with the Commons finance committee since taking over as governor in February, Carney asked the MPs to support legislation that would widen his powers to expand the assets the central bank can accept in order to lend chartered banks money in times of financial stress.
Carney said currently the central bank cannot accept standard assets as corporate or municipal bonds as collateral in making term loans, adding that these are "big chunks" of the financial market.
"We have tremendous flexibility in the overnight market...and we have flexibility (when markets are under) severe and unusual stress," he explained.
"What we don't have is the modern flexibility in the intervening period. What we are asking for is the first step of what our international peers did in response to this crisis."
Carney also gave the committee a general overview of the Canadian economy, repeating much of what he said last week when he cut interest rates for the second time since taking over as governor.
He made it clear that Canada's economy is undergoing a rough patch that will see its growth rate flatten to 0.3 per cent in the second quarter of the year, largely because of what he called a "deeper and more protracted slowdown in the United States."
The bank governor did not comment on the Statistics Canada report Wednesday that showed Canada's gross domestic product actually contracted in February by 0.2 per cent, saying he hoped the bank's forecast had a lifespan of more than a week. The bank forecast last week that Canada would record a 1.4 per cent growth rate this year.
He conceded that the manufacturing sector will be particularly hard hit.
But there are substantial strengths in the economy, added senior deputy governor Paul Jenkins, including record employment levels and high commodity prices in the resource sector that are feeding the domestic economy.
On the financial crisis, Carney said he was encouraged by the adoption of international banking standards to increase disclosure, but said the global markets are not out of the woods yet.
The central bank rolled over a $2-billion term liquidity injection to lenders on Tuesday because the credit markets "remain somewhat strained," he said.
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This cannot be... oilsands will carry the day !!
Canada's economy flattened in February as retreat widespread
April 30, 2008 - 15:24
By: Julian Beltrame, THE CANADIAN PRESS
OTTAWA - Canada staggered toward recessionary levels in February as an economic retreat extending from the factory floor to the storefront resulted in the second contraction in the past three months.
"We're not in a recession but it's pretty darn close," said TD Bank chief economist Don Drummond after Statistics Canada reported the nation's gross domestic product shrank 0.2 per cent, a much more severe decline than most analysts had predicted.
The setback from January's 0.6 per cent advance puts in serious question whether the economy will meet the Bank of Canada's expectation, updated only last week, of one per cent growth for the first quarter.
"The official call for growth in the first quarter is one per cent, but now it looks like we could match the weak growth in the U.S., something like half-a-percentage point," said Paul Ferley, deputy chief economist with the Royal Bank.
Drummond said it could be worse, estimating that if March comes in flat the advance for the first quarter would only amount to 0.2 per cent, virtually non-existent.
"It doesn't really matter, the economy is going sideways for all intents and purposes and the second quarter is looking flat as well, possibly a negative."
Most worrying, said Drummond, is that the weakness in February was not attributed only to the usual suspects - manufacturing and exports.
The manufacturing slump did continue in February, falling 0.7 per cent further, an indication that Ontario may be close to a recession. But retail trade also fell 0.6 per cent, largely as a result of poor sales at clothing stores, pharmacies and car dealerships.
As well, wholesale activity dropped 1.4 per cent, particularly in motor vehicle and building supplies, and the energy sector fell 0.9 per cent, tripped by a contraction in oil and gas extraction.
"That's part of the sequence we were predicting, that if the exports go down, it's going to leak into the domestic economy. I don't want to make too much out of one month, but maybe this is the beginning of the signs of this happening," Drummond said.
The numbers suggest that the U.S. slowdown and the ongoing turmoil in the financial sectors were continuing to take a big toll out of the export sector, and that was now filtering through to other parts of the economy as well.
Over the past three months, Canadian economic activity actually contracted 0.7 per cent on an annual basis, the deepest three-month retreat since 1997 and the first negative three-month calculation since Nov. 2001, when the U.S. fell into recession, said BMO senior economist Michael Gregory.
Gregory added that looking at the past year in three-month instalments, the Canadian economy has slid from a 3.9 per cent advance to 3.0 per cent, to 1.4 per cent to the current minus 0.7 per cent.
While Statistics Canada does no do a provincial breakdown, most economists expect that Ontario's economy, which is more heavily-weighted to the slumping manufacturing and exports sector, likely was weaker than the national.
On Tuesday, the TD Bank predicted Ontario could become a have-not province in terms of qualifying for federal equalization payments in two years, noting that the province's GDP per capital has fallen from seven per cent above to two per cent below the national average over the past five years.
As well, both Torstar Corporation (TSX:TS.B) and Rogers Communications Inc. (TSX:RCI.B) reported this week that the slowing economy was beginning to impact their businesses.
There was little good news coming from south of the border, either. The U.S. Commerce Department reported the American economy limped forward by 0.6 per cent in the first quarter, the same as the fourth quarter of 2007, just short of the common definition of recession of two consecutive negative quarters.
Worries over the growing threat of a recession there, brought on by the deep housing slump and credit crisis, prompted the U.S. Federal Reserve to cut a key interest rate Wednesday by a quarter-point.
But economists cautioned about jumping the gun on forecasting a Canadian recession based on February's bleak numbers.
They noted that employment has remain strong throughout the first quarter and that some sectoral setbacks in February, such as petroleum production and aerospace, are particularly volatile and could bounce back in March.
As well, the sales retreat may turn out to be a one-month breather of a sector that has been strong for several years, rather than an indication of a trend.
"These results do not preclude a positive figure for quarterly GDP growth in quarter one," Gregory said.
"However, the report highlights the fact that Canada's sturdy domestic demand is being nearly offset by the headwinds coming from the U.S. recession, a strong loonie and tighter credit conditions."
Drummond said the weak gross domestic activity report likely means that Bank of Canada government Mark Carney may make his third consecutive 50-basis point cut in interest rates at the next announcement date in June.
Not all elements of the economy were weak in February. Statistics Canada said tourism, government-related industries and construction gained during the month, but insufficiently to offset the widespread declines. |
