The Canadian Real Estate Association is confident that the future of the Canadian residential real estate market is solid. It appears that the largest threat of a 2008 slow-down in the Canadian residential real estate market is from predictions of doom and gloom becoming self-fulfilling if consumers are not informed about certain economic truths, and therefore lose confidence in the market.
There really are no economic reasons for people to lose confidence in the Canadian housing market at this time. Statistics show just how different the housing markets are in Canada versus the United States. According to the January 23rd, 2008 report from CREA "Three key economic ingredients will keep Canada's housing market on a different track from the United States. One is consumer confidence, the second is employment, and third is affordable interest rates." CREA president, Ann Bosley said, "The challenge for the Canadian housing market will be the extent to which employment and consumer confidence may be affected by a slowdown in the U.S. economy."
"Slower job growth, not massive layoffs, are forecast for Canada in 2008," CREA's Chief Economist, Gregory Klump adds. "Consumer confidence may be sideswiped by stock market volatility, and reports that chances of a U.S. economic recession will put the brakes on the Canadian economy. With slower job growth, a low unemployment rate, and the absence of widespread layoffs, consumer confidence will bounce back. The domestic economy and the housing market will weather the sub-prime fallout with the help of lower interest rates."
Friday, February 8, 2008
Friday, January 25, 2008
Canada Lowers Growth Forecast, Signals More Rate Cuts
The Bank of Canada lowered its growth forecast because of weak export demand from the U.S. and said it will probably cut interest rates again this year.
The central bank said today, in an economic forecast paper, that gross domestic product will expand 1.8 percent in 2008, , revising their October prediction of 2.3 percent. Inflation will slow to 1.4 percent in the second quarter, less than the bank's 2 percent target and October's 2.4 percent forecast, as a strong currency makes imports cheaper.
"The weaker U.S. economy will lead to additional downward pressure on Canada's export growth," Governor David Dodge said at a news conference in Ottawa after releasing the new forecast. "Further monetary stimulus is likely to be required in the near term.''
Policy makers reduced their main interest rate a quarter point to 4 percent on January 22, 2008, citing the need for more easing. It is widely believed that the new governor, Mark Carney, who becomes governor on Feb. 1, will cut the rate by a quarter point at each of his first three decisions starting March 4.
The central bank said in its report that "more accommodative monetary policy" in the world's industrialized economies should moderate a global slowdown, and that "lower policy rates" will support Canada's economy in the next two years. The bank said the forecast assumes further rate cuts by the U.S. Federal Reserve, which three days ago made an emergency cut of three-quarters of a point to stave off a recession.
The central bank said today, in an economic forecast paper, that gross domestic product will expand 1.8 percent in 2008, , revising their October prediction of 2.3 percent. Inflation will slow to 1.4 percent in the second quarter, less than the bank's 2 percent target and October's 2.4 percent forecast, as a strong currency makes imports cheaper.
"The weaker U.S. economy will lead to additional downward pressure on Canada's export growth," Governor David Dodge said at a news conference in Ottawa after releasing the new forecast. "Further monetary stimulus is likely to be required in the near term.''
Policy makers reduced their main interest rate a quarter point to 4 percent on January 22, 2008, citing the need for more easing. It is widely believed that the new governor, Mark Carney, who becomes governor on Feb. 1, will cut the rate by a quarter point at each of his first three decisions starting March 4.
The central bank said in its report that "more accommodative monetary policy" in the world's industrialized economies should moderate a global slowdown, and that "lower policy rates" will support Canada's economy in the next two years. The bank said the forecast assumes further rate cuts by the U.S. Federal Reserve, which three days ago made an emergency cut of three-quarters of a point to stave off a recession.
Wednesday, January 23, 2008
Bank Of Canada Not Done In Cutting Rates
The Bank of Canada cut the overnight rate, the morning of January 22, 2008, by a quarter-point to 4.00%. According to a TD Economics Commentary, this was broadly in line with market expectations; however speculation was building in the days leading up to the meeting that the Bank might be more aggressive given that financial market confidence had been severely undermined by the prospects of a U.S. recession and the possibility of some contagion to the global economy. Speculation of a more aggressive Bank of Canada decision climaxed when the Federal Reserve caught financial markets completely off guard this morning with an inter-meeting cut of 75 basis points. Nevertheless, the Bank stuck to their guns with a more measured approach, reflecting their view that domestic demand on this side of the border is expected to remain strong. However, the Bank made it quite clear in the morning’s communication that they are prepared to deliver more rate cuts down the road when they stated that “further monetary stimulus is likely to be required in the near term to keep aggregate supply and demand in balance and to return inflation to target over the medium term”.
The prevailing thoughts now among economists are that the next move on March 4th will be a more aggressive 50 basis point cut. That rate decision will probably not be the result of declining domestic demand. So far, the domestic side of the Canadian economy appears well grounded. In today’s communiqué, the Bank noted that "despite tighter credit conditions, strength in domestic demand is expected to remain supported by continued income growth associated with the increase in commodity prices since October, which has led to further gains in our terms of trade.” It is also important to remember that unlike their American counterparts, Canadians are not getting hit on both ends of their asset portfolios. Home prices remain on the upswing in most major urban centers, and there is little concern that the Canadian housing market will start to mirror the slump in the U.S. In fact, it is believed that national home prices will rise at a rate of 5-7% in 2008, compared to a U.S. market that will likely absorb losses of around 5% or more.
However, it is generally believed that by the next meeting, data on the U.S. economy will show clear signs of a sharp economic slowdown. Given that inflationary pressures remain strong, a 50 basis point cut would provide insurance against the degree to which a U.S. economic downturn would affect the Canadian economy. Certainly, inflation will not provide a barrier to a more aggressive Bank of Canada. The central bank has indicated that increased competitive pressures in the retail sector and the one percentage point GST cut at the start of the year will cause both core and total CPI inflation to fall below 1.5% by the middle of this year before returning to their 2% target by the end of 2009.
Following the March 4th meeting, there could possibly be another 25 basis point cut. However, because there is so much economic uncertainty on both sides of the border, the degree of additional rate cuts will depend on how events in the U.S. unfold and whether financial market confidence is still question.
The prevailing thoughts now among economists are that the next move on March 4th will be a more aggressive 50 basis point cut. That rate decision will probably not be the result of declining domestic demand. So far, the domestic side of the Canadian economy appears well grounded. In today’s communiqué, the Bank noted that "despite tighter credit conditions, strength in domestic demand is expected to remain supported by continued income growth associated with the increase in commodity prices since October, which has led to further gains in our terms of trade.” It is also important to remember that unlike their American counterparts, Canadians are not getting hit on both ends of their asset portfolios. Home prices remain on the upswing in most major urban centers, and there is little concern that the Canadian housing market will start to mirror the slump in the U.S. In fact, it is believed that national home prices will rise at a rate of 5-7% in 2008, compared to a U.S. market that will likely absorb losses of around 5% or more.
However, it is generally believed that by the next meeting, data on the U.S. economy will show clear signs of a sharp economic slowdown. Given that inflationary pressures remain strong, a 50 basis point cut would provide insurance against the degree to which a U.S. economic downturn would affect the Canadian economy. Certainly, inflation will not provide a barrier to a more aggressive Bank of Canada. The central bank has indicated that increased competitive pressures in the retail sector and the one percentage point GST cut at the start of the year will cause both core and total CPI inflation to fall below 1.5% by the middle of this year before returning to their 2% target by the end of 2009.
Following the March 4th meeting, there could possibly be another 25 basis point cut. However, because there is so much economic uncertainty on both sides of the border, the degree of additional rate cuts will depend on how events in the U.S. unfold and whether financial market confidence is still question.
Tuesday, January 15, 2008
2008 to Bring Balance to Fraser Valley Real Estate Market
It is projected that both the Fraser Valley and Greater Vancouver will see another solid real estate year in 2008, with the trend being more selection for buyers and prices rising at a slower pace than we have seen in recent years.
The BCREA (British Columbia Real Estate Association), forecasts that the average residential price increases we will see in 2008 in the Fraser Valley will be approximately six percent. They expect that detached homes will rise approximately six percent, but that townhomes may rise as much as eight percent and apartments somewhere in between, at approximately seven percent.
Cameron Muir, BCREA's chief economist, projects listing volumes will continue to increase in the Valley resulting in, "less upward pressure on prices, reducing the number of multiple offers, and giving consumers and members more time for comparison and negotiation."
"How can prices continue to rise after so many years of increases?", you may ask. Muir says consumer confidence in the Lower Mainland and Fraser Valley remains high, "Despite some challenges in the economy such as the high Canadian dollar, we have strong job growth, wages rising higher than inflation and mortgage rates are expected to edge down in the first half of 2008."
Overall experts predict continued stability in Fraser Valley's 2008 housing market, with the resale market remaining sound, new construction at a steady level and hot demand for rental and apartment units, all due to underlying strong economic fundamentals.
The BCREA (British Columbia Real Estate Association), forecasts that the average residential price increases we will see in 2008 in the Fraser Valley will be approximately six percent. They expect that detached homes will rise approximately six percent, but that townhomes may rise as much as eight percent and apartments somewhere in between, at approximately seven percent.
Cameron Muir, BCREA's chief economist, projects listing volumes will continue to increase in the Valley resulting in, "less upward pressure on prices, reducing the number of multiple offers, and giving consumers and members more time for comparison and negotiation."
"How can prices continue to rise after so many years of increases?", you may ask. Muir says consumer confidence in the Lower Mainland and Fraser Valley remains high, "Despite some challenges in the economy such as the high Canadian dollar, we have strong job growth, wages rising higher than inflation and mortgage rates are expected to edge down in the first half of 2008."
Overall experts predict continued stability in Fraser Valley's 2008 housing market, with the resale market remaining sound, new construction at a steady level and hot demand for rental and apartment units, all due to underlying strong economic fundamentals.
Tuesday, December 18, 2007
The Canadian Dollar, Housing Starts, and Retail Sales Up
Good news for Canadians! Seasonally adjusted housing starts are up 19.6% for September over August. Multiple starts account for the bulk of the increase with urban starts up 22.9%. Urban starts were up in all five regions of the country. But that's not all. Canadian retail sales were up 4.3% for the month of August over August of 2006 according to CMHC. That equates to a 0.7% rise for this August rather than the 0.5% rise predicted by Bay Street. This likely reflects the 8% increase in income growth reported so far. Both the number of jobs and the job quality index have risen to the highest levels in 2 years.
Greg Anderson, director of foreign exchange for the Netherlands’ ABN Ambro bank in Chicago believes the increases in Canadian dollar prices can be credited to the recovery of gold, oil, and copper prices. Canadian dollar increases against US currency were around 11.88%, 5.52% against the Euro, and 8.80% against the British Pound. Bank of Canada Governor David Dodge believes much of the increase is due to market speculation, stating that though terms of trade have improved over the last three months the improvement was not sufficient to justify the increase.
Finance Minister Jim Flaherty seems to agree but has recommended that retail prices of consumer goods be rolled back to US prices to reflect the relative currency values between US and Canadian dollars. This will help stock turnover, eliminating stores of old stock. Some major retailers, like Wal-Mart and Zellers have already begun to adjust prices.
Dennis Gartman, a writer for a US investment newsletter, commented that the Bank of Canada is not likely to respond to comments from Dodge and Flaherty with lower rates. Sal Guatieri, economist for BMO Nesbitt Burns (wealth management division of Bank of Montreal) speculated that if downside risk is supported by data, a rate cut may appear early next year.
Greg Anderson, director of foreign exchange for the Netherlands’ ABN Ambro bank in Chicago believes the increases in Canadian dollar prices can be credited to the recovery of gold, oil, and copper prices. Canadian dollar increases against US currency were around 11.88%, 5.52% against the Euro, and 8.80% against the British Pound. Bank of Canada Governor David Dodge believes much of the increase is due to market speculation, stating that though terms of trade have improved over the last three months the improvement was not sufficient to justify the increase.
Finance Minister Jim Flaherty seems to agree but has recommended that retail prices of consumer goods be rolled back to US prices to reflect the relative currency values between US and Canadian dollars. This will help stock turnover, eliminating stores of old stock. Some major retailers, like Wal-Mart and Zellers have already begun to adjust prices.
Dennis Gartman, a writer for a US investment newsletter, commented that the Bank of Canada is not likely to respond to comments from Dodge and Flaherty with lower rates. Sal Guatieri, economist for BMO Nesbitt Burns (wealth management division of Bank of Montreal) speculated that if downside risk is supported by data, a rate cut may appear early next year.
Sunday, November 18, 2007
Mission Residents and REALTORS® Help Local Charities
The 13th Annual REALTORS® Care Blanket Drive runs from November 26 to December 3, 2007. Last year REALTORS® from Fraser Valley and Greater Vancouver collected over 3,300 bags of warm clothing and bedding and delivered them to over 30 local charities. Members take great pride in the fact that Blanket Drive contributions stay in the communities in which they are donated. Last year in Mission we collected 132 bags of clothing, blankets, etc. to go to the local charities, helping those in OUR community who needed it most. The importance of the Drive cannot be stressed enough. These are tough times for some individuals and families.What is most needed are warm and waterproof clothes - mostly for men, but also for women and children. So please donate any socks, shoes and boots, pants, jeans, sweaters, jackets, hats, toques, scarves, and gloves that you are able to do without ... because someone else can't do without them. Also much needed are blankets and tarps. Your donations will be very much appreciated and will be accepted at any Mission Real Estate office between Nov. 26 and December 3rd, 2007. If you have donations and are unable to make it to a local real estate office, please call me and I will be happy to come and pick them up from you.
Photo: REALTORS® (L to R) Dean Tweedle, Jodi Kehler, Debbie Leighland, and Cyndi Polovina are some of the local volunteers of the 50 REALTORS® from Chilliwack to Squamish helping make the 13th Annual REALTORS® Care Blanket Drive happen.
Wednesday, October 17, 2007
Timing Your Listing
It was suggested by one local REALTOR® in a flyer delivered by Canada Post today that the
inventory in the fall and winter tends to be low, and therefore, the last quarter of the year is a great time to sell.
The statistics released from the Fraser Valley Real Estate Board for September, suggest otherwise. Inventory is quite high right now, and we are experiencing a Buyer's Market, (also according to the statistics package for September.)
That is not to say that this is not a good time to sell. Winter prices can be a few percentage points lower than the peak price in spring/summer of the same year, before climbing back up in February/March of the following year. If, as has happened historically at this time of year, we are in a temporary period of moderately declining prices, then a seller could sell as the downward swing begins, only to actually buy a month or two later as the prices have continued to follow the downward decline. (Sell at -1% and buy at -3%, for example). If selling a home whose peak value this year was $400,000.00 and prices have by that time dropped 1%, they could see it as a loss of $4,000.00. However, if they are then buying a home for $300,000.00 and prices have by that time dropped 3%, they will have saved $9000.00 on that purchase, for a net gain of $5,000.00. If they were trading up to a home of value of $580,000.00 and prices had dropped from the peak value by 3%, they would save $17,400.00 on their purchase and be $13,400.00 ahead. So, whether upsizing or downsizing your mortgage, you would be financially wise to sell at this time, and make your purchase before the price upswing.
The statistics released from the Fraser Valley Real Estate Board for September, suggest otherwise. Inventory is quite high right now, and we are experiencing a Buyer's Market, (also according to the statistics package for September.)
That is not to say that this is not a good time to sell. Winter prices can be a few percentage points lower than the peak price in spring/summer of the same year, before climbing back up in February/March of the following year. If, as has happened historically at this time of year, we are in a temporary period of moderately declining prices, then a seller could sell as the downward swing begins, only to actually buy a month or two later as the prices have continued to follow the downward decline. (Sell at -1% and buy at -3%, for example). If selling a home whose peak value this year was $400,000.00 and prices have by that time dropped 1%, they could see it as a loss of $4,000.00. However, if they are then buying a home for $300,000.00 and prices have by that time dropped 3%, they will have saved $9000.00 on that purchase, for a net gain of $5,000.00. If they were trading up to a home of value of $580,000.00 and prices had dropped from the peak value by 3%, they would save $17,400.00 on their purchase and be $13,400.00 ahead. So, whether upsizing or downsizing your mortgage, you would be financially wise to sell at this time, and make your purchase before the price upswing.
There is also a huge benefit to buying in the winter, whether it is your first home purchase, or not. You will see the home as it shows in the winter months, and be able to tell much more about how well the home systems are performing (windows, roof, humidity control, etc.)
Your particular situation of circumstances must be considered before a decision regarding timing your listing can be made. There are also benefits to listing in the spring, for some sellers, depending on their personal set of circumstances. I would be more than happy to review the statistics with you and help you assess your best time to list, based on your situation. Please never hesistate to give me a call for a Free Market Evaluation, and/or advice regarding the best time to sell.
Wishing you and your families a happy, healthy fall and winter,
Cyndi Polovina
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