Sunday, May 28, 2006

CIBC lowers mortgage costs

Two days after the Bank of Canada raised short-term interest costs, the Canadian Imperial Bank of Commerce (TSX: CM) said Friday it is trimming its posted mortgage rates.
Among the changes, CIBC's one-year closed rate slips to 6.25 per cent from 6.30 per cent, while the three-, five- and 10-year rates each decline by one-fifth of a percentage point, to 6.45 per cent, 6.75 per cent and 7.55 per cent.
The bank's move followed Wednesday's quarter-point increase in the prime lending rate to six per cent at all the major commercial banks, after the Bank of Canada raised its overnight rate to 4.25 per cent from four per cent.
While it increased the cost of short-term money for the seventh time since last autumn, the central bank also signalled that its series of hikes is likely over.
On bond markets, where banks fund their mortgage obligations, the Canadian yield curve flattened this week, as would be expected after the central bank's increase at the short end.
'Interestingly, though, the flattening came through entirely in the long end, where yields declined four basis points,' a commentary from the Bank of Nova Scotia (TSX: BNS) observed.
'For both the Canadian and U.S. curves, yields between the target policy rate all the way to the long end are now nearly flat.'"

Monday, May 22, 2006

A real pain in the gas

"Unlike the United States, motor fuel prices are a sleeper issue here in Canada. At least politicians, at both the federal and provincial levels, are sleepwalking through it.

Stateside, it's one of the three key issues gripping the U.S. mid-term elections (illegal immigrants and Iraq being the others) and threatening to oust the Republicans from the House and Senate, ruining George W. Bush's final two years in office.

It may be resting peacefully in the minds of the politicians here, but Canadians are wide awake on how they are getting hosed at the pumps.

Serious discontent

According to a damning - if you are an oil company or elected official - Ipsos-Reid poll released yesterday, there's a serious mood of discontent out there. That's even true in Alberta, where high energy prices bring mega-millions into the provincial treasury and have touched off the largest energy boom in the province's history.

Albertans seriously resent the high cost of gas and diesel. So much so that only 40% of Albertans polled in late April and early May feel that gas prices are set 'fairly.'

In Ontario the number who feel that gouging is going on rises to 70%. In Quebec the distrust level hits 82%.

Poll respondents also have an inkling where the extra cash is going. Overall, 71% feel that energy company prices are excessive and the feds should bring in a 'special tax on windfall profits' that are made from gas.

Maritimers were the real cost-control hawks at 79%. In Alberta, only 37% "disagreed" with going after the pump pirates. Not an overwhelming endorsement of the leaderless Alberta Tories, especially considering oilsands outfits are getting their bitumen virtually royalty-free until payout in these times of record world oil prices.

Prime Minister Stephen Harper's bold plan to roll back the hated GST by 1% apparently didn't impress Canadian gasoline consumers either.

Asked if the 1% token gesture was an "appropriate" response, seven in 10 Canadians gave Stevo the thumbs-down.
But the most distressing response to the poll - if you're a politician - was what Canadians answered when asked if the government should step in and regulate gasoline prices.

Across the country, 72% back the government getting involved in setting gasoline prices. In Atlantic Canada the support was greatest at 87%. That makes sense because some provinces already regulate pump prices, and the Nova Scotia election is being fought over throwing a noose around gas companies.

But the most telling number comes from free-enterprising, redneck Alberta, where only 39% said no to government intervention at the pump.

The inflationary effect of high gasoline prices may be about to have repercussions in other parts of the economy. It's the old ripple effect.

The C.D. Howe Institute circled the wagons this week and asked a panel of economic experts what Bank of Canada governor Dave Dodge should do on May 24 when he sets Canada's trendsetting interest rate again. It was a six-to-five split decision. But the slim majority recommended Dodge nudge up the rate by another 25 basis points to 4.25%.
Some even said the country's top money man must continue jacking up rates "significantly above the current level" to keep inflation at 2%.

Higher mortgage rates

If this translates into higher mortgage rates - which it inevitably will - then it could put even more pressure on Alberta consumers.

Yesterday, the Royal Bank of Canada revealed that we face the second-worst affordability in the country when it comes to buying a house.

"The good times for the Alberta economy have come at a cost to homeowners," the RBC Financial Group gloomed. House prices may be up 25% over a year ago, and income and employment growth may be the envy of the country.

"However the price of appreciation and higher mortgage rates outpaced this growth."

Remember what happened the last time Canadians were seriously stung with high gasoline prices and a roaring Alberta economy? Pierre Trudeau was able to muster enough political clout to bring in the national energy program to skim excessive windfall profits.

Stephen Harper is no Trudeau. But the Ipsos- Reid poll shows there's serious hurt across Canada - and right here in Oilberta - over gasoline prices.

Klein and Harper have been warned.

Home buyers look south of the line

The strong dollar has Canadians snapping up properties in Point Roberts.
Out of all my buyers this month, 50 per cent were Canadian, says Paul Rush of the Points National Real Estate, via telephone.

Ive had an increase in Canadian buyers in the last two to three months, prior to that it was mostly US buyers. Canadians are strictly going by the exchange rate and they know (Point Roberts) is close.

Waterfront properties, after all, may seem more affordable in the U.S. as the going price is about $10,000 per foot (measured along the shore). Small beach-front properties are selling for US $550,000 to $600,000 although at least one luxurious home is selling for US $1.6 million.

In Tsawwassen, however, RE/MAX manager Bob Cooke could find only two listings for waterfront homes and the cheapest was $1.7 million for 3,500 square feet and a 35-foot shoreline frontage, looking west.

Views are anywhere from $1 million to $2 million, Cooke says. Waterfront starts at about $1.8 million. I think theres a shortage of waterfront properties and prices are only going to rise.

But before you sell your home or drain that bank account to join the migration, Canadian buyers need to know a few things about purchasing American land.

First off, a Canadian without a Green Card may only reside across the border for 182 days per year and must have a home in Canada. The purchase must be for recreational use or pleasure.

Rush notes there’s no guarantee you’ll be able to access your property when you want to, either.

“It’s really up to US Immigration whether they let you in at all. It’s very strict; you need a permanent residence in Canada, not just an address, and you may have to show your mortgage payments or utilities as proof. It’s a delicate thing – I’ve known them to not let people in.”

As a result, Rush has found that most of the Canadians appearing at his office have dual citizenship, like him.
“They’re taking advantage of the high prices of Canadian real estate, selling out and moving here.”

Point Roberts realtor Jim Julius says most of his Canadian buyers are grandparents who are shopping for recreational property for their grandchildren.

“What we have now is a baby boomer demand for properties. They’re looking for places for their grandchildren so their children’s children have a chance to get out of the city—that’s a big deal.”

Home-buying intentions up slightly, report says

Renovation market also staying strong
May 20, 2006. 01:00 AM

More than 380,000 households in major Canadian cities indicated they were ready to buy a home this year, according to a survey released this week by the Canada Mortgage and Housing Corp.

The results of the CMHC's Consumer Intentions to Buy or Renovate a Home survey represents an average of 8 per cent of households in Halifax, Montreal, Toronto, Calgary, and Vancouver.

While 8 per cent declared that they have a high chance of buying a home and could be considered as 'ready to buy' within the next 12 months, 5 per cent indicated that they have a 50-50 chance of buying. The survey is conducted using a sample of about 4,000 households in each centre surveyed.
'Intentions to buy are up from 2005 when 5 per cent of households were ready to buy a home. This year, strong intentions to buy are consistent with continued high levels of housing starts and sales of existing homes.

Favourable economic conditions, such as low mortgage rates and a healthy labour market are contributing factors to home-buying intentions,' said Bob Dugan, chief economist at the CMHC.

'Home-buying intentions are strongest in Calgary and Halifax, where 10 per cent of households reported that they are ready to buy a home. Purchase intentions are also strong in Vancouver and Toronto where 8 per cent of households are ready to buy, while the share is slightly lower in Montreal (7 per cent).

"Home renovations will remain strong this year, with 13 per cent of surveyed homeowners reporting they were ready to undertake renovations this year, costing $1,000 or more," said Dugan.
"The share of serious renovators is down compared to 2005 when 17 per cent of homeowners were ready to renovate. While the share of homeowners who intend to renovate decreased in 2006, the total dollar amount that will be spent on renovations is expected to increase."

Meanwhile, increases in Canadian house prices over the past five years — dramatic in Alberta and British Columbia and strong in the rest of the country — are the result of a robust economy that also provided a dramatic rise in key economic indicators and popular lifestyle and consumer items, according to a report released this week by Century 21 Canada.
Price increases over five years for typical homes across the country in a selection of markets surveyed by Century 21 range from as high as 129 per cent in Vernon, B.C. to as low as 12 per cent in Thunder Bay.

In Vernon, a 1,200-square-foot bungalow with three bedrooms and two bathrooms on a 55-foot by 100-foot lot increased in value to $355,000 this year (2006) from $155,000 in 2001.

The hottest housing markets in Ontario include Peterborough and Kitchener-Waterloo, Century 21 reported.

In Peterbourgh, the price of a typical home — 1,050-square-foot bungalow with three bedrooms and 1 1/2 baths — increased to $202,000 in 2006 from $131,000 in 2001, an increase of 54 per cent.

In Kitchener-Waterloo, a typical home — 1,200 square foot two-storey home with three bedrooms and two bathrooms — rose to $245,500 in 2006 from $163,000 in 2001, an increase of 51 per cent.

Monday, May 15, 2006

Hot housing market expected to cool

Boosted by Alberta�s red-hot housing market, national home sale prices jumped by the highest amount in more than 16 years in March, Statistics Canada said this week.
Eye-popping increases of 29.6 per cent in Calgary and 14.3 per cent in Edmonton helped to increase the national average rise in houses prices to an annualized 7.6 per cent in March � an increase not seen since at least January 1990.

More moderate price increases were seen in Vancouver, with a 6.9 per cent rise, while Quebec saw a 6.6 per cent increase.
The average price for a residential property in the Halifax area was $279,748, a 4.8 per cent increase last year. Toronto reported a 4.3 per cent annualized increase while in Montreal, home prices rose by 3.3 per cent.

The only monthly drop was in St. John�s, Nfld., where prices slipped 0.1 per cent from February. But if you haven�t bought your home yet, don�t panic � the federal housing agency says the market should begin to soften in 2006.

Rising mortgage prices and market saturation will begin to cool demand, at least a bit this year, says Canada Mortgage and Housing Corp.
Home construction starts will slip to 222,200 units this year, down from the 225,481 units that were built last year, the Ottawa-based agency said. 'Higher mortgage carrying costs and rising house prices will temper housing demand this year,' Bob Dugan, CMHC�s chief economist, said in a statement.
But that still represents a higher rate this year than previously forecast by CMHC.

Booming demand in Alberta and British Columbia led the agency to increase its outlook for this year’s construction to 208,700. Still, a gradual cool is coming, says CMHC.
"Over the medium term, housing starts will continue to slow gradually, reaching 184,400 units by 2010," Dugan said.
The resilient housing market is one more factor that will likely convince the Bank of Canada to raise short-term interest rates in late May, said Marc Levesque, chief fixed income strategist with TD Securities.

"This is just one more tick mark in the tightening column," for the central bank, which has already boosted its key interest rate on six consecutive opportunities to four per cent. "This is one sector of the economy that is being supported pretty well by low interest rates."

Record low unemployment and a flourishing resource sector all threaten to push up inflation, something the central bank desperately aims to avoid. Its next chance to raise rates comes on May 24 and many analysts have forecast another quarter-point rate hike as the central bank aims to hold the consumer price index to about two per cent.

Monday, May 08, 2006

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Monday, May 01, 2006

Housing market continues

Eric Beauchesne, CanWest News Service
Published: Saturday, April 29, 2006
OTTAWA - Home sales and prices hit all-time highs in the first quarter of this year, according to a report Friday which will add to puzzlement, and possibly more inflation worries, at the Bank of Canada.
There were 125,142 existing homes sold from January through March, up 2.4 per cent from the fourth quarter of last year, and 0.2 per cent above the previous record high set in the third quarter of last year, the Canadian Real Estate Association said.
Earlier in the week, Bank of Canada governor David Dodge said ``we're a little bit surprised'' at the strength of the housing market considering the steady climb in interest rates and prices since last summer.
And real estate association chief economist Gregory Klump agreed it was a surprise that sales hit new record highs.
``Rising household incomes and upbeat consumer confidence are keeping resale housing activity on a tear, even with rising home prices and interest rates,'' Klump said.
The industry association reported sales reached their highest level of any quarter on record for both the number of units sold and the total dollar volume. The value of sales reached $33.4 billion, a 5.8 per cent increase from the final quarter of 2005, and the highest level ever, with records set in most provinces.
New quarterly sales records were set in Alberta, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
The quarterly surge in sales was despite a decline in March, when sales slipped 1.4 per cent from February, which was the second highest month of sales on record. British Columbia, Alberta and Ontario led the decline in sales, while sales rose in Quebec, New Brunswick, and in Nova Scotia where sales hit a record for the month of March.
While sales slipped in March, the average home price continued to rise to reach a record $274,163, up 12.4 per cent from a year earlier. The average price in the quarter was up 12.1 per cent from the same quarter in 2005, which was the steepest increase since the 1980s housing boom, which eventually went bust.
In March, the average price of a home was at an all-time high in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Prince Edward Island. And during the quarter, the average price was at an all-time high in every province except Quebec.
The average price of a home sold in March was highest in British Columbia at $383,712, up nearly 20 per cent from a year earlier. The steepest increase in the average price was in Alberta at 24.7 per cent to $267,641.
While most analysts continue to predict housing sales should eventually slow this year and price increases moderate, they say that unlike during the 1980s, there is no housing bubble to burst.
``Interest rates are widely expected to be near their peak,'' Klump noted. ``The continued ability to negotiate rates is also helping to keep sales activity high by keeping monthly payments down and affordability reasonable.''
The posted five-year closed mortgage rate is now 6.6 per cent, which is up less than a full percentage point from a low of 5.7 per cent last July, before the Bank of Canada resumed raising rates.
``It's not a substantial increase,'' Klump said, noting a recent survey by mortgage brokers found even with the higher rates, families are finding their housing payments manageable.