December 2009

Canada’s Recession Finally Ends

Canada’s Recession Officially Ends

As the third quarter’s GDP numbers come in, they show an official end to the recession.  Although the positive 0.4 percent growth is less than the 1-2 percent expected, it is nonetheless a positive sign. In terms of unemployment and GDP decline, this recession was less severe than those of the early ‘80s and ‘90s. The less-than-expected growth also signals that this may very well be a slow recovery and, like many of the other countries emerging from recessions, Canada is not fully out of the woods.

The concerns largely remain unchanged–unemployment and the still high currency value. A strong Canadian currency makes spending domestic dollars abroad or on imports more enticing because they are now cheaper, but it also sends the economic benefit of that purchase abroad rather than keeping it at home. It also makes Canadian goods more expensive for other countries to import, and this is a major component of Canada’s economy. A concern that has more recently cropped up is that the cheap and readily available credit could be creating asset bubbles in gold, housing, and some other financial products.

The strength of the domestic economy has “saved the day.” Because the credit problems that plagued many other major nations were not largely seen in Canada, it has allowed it to take advantage of the low interest rates in ways that other countries could not. This has helped stir a rapid and dramatic recovery in the housing market and will likely have a spillover effect, as the new homeowners purchase new items for their homes and complete renovations. It has also helped spur a surge in personal and in business investment not seen since 1997. 

Source: Canada.com

This Month In Real Estate

Housing Market Activity in Canada

Home Sales

Sales activity reached the highest level ever for the month of October. National resale housing activity had a record-breaking month with 45,818 units trading hands. This is up 45 percent compared to October 2008 and 74 percent above the decade low reached in January. Low interest rates, coupled with upbeat consumer confidence, continue to release pent-up demand from last year and early this year, boosting national sales activity.

Average Home Price

The national average home price reached new heights in October, rising 21 percent to $341,079 from the same month last year. A sustained increase in sales activity, including a sharp rebound in Canada’s priciest markets, continues to draw the national average home price upward.

Inventory

Sales-to-Listings Ratio

The number of new listings coming onto the market in October declined from year-ago levels for the tenth consecutive month. New listings fell 15 percent from October 2008 but inched up on a month-over-month basis to 65,148 units. According to CREA Chief Economist Gregory Klump, “New listings are still expected to rise in the coming months in response to headline average price increases.” Nationally, there were 4.1 months of inventory in October. The sales-to-listings ratio was 70 percent, signaling a stronger seller’s market.

Mortgage Rates

Average for: 25-Year Amortization, 5-Year Term

A recently released study from the Canadian Association of Accredited Mortgage Professionals shows Canadians are benefiting from the lower interest rates. The average mortgage rate negotiated in the past year was 4.55 percent, down from 5.41 percent a year ago. In October, the 5-year conventional mortgage rate edged down to 5.59 percent, 1.61 percent lower than this time last year.

2009 Real Estate Results for Canada

This month came with more encouraging news, tempered by a cautious air of concern. Canada has officially emerged from the recession and the housing market is hot. A survey showed the sentiment of senior accounting executives on the economy rose sharply in the third quarter. However, consumers remain cautious amid concerns over employment and the strong Loonie. 

Due to a stronger currency, Canadians have been able to more easily afford luxury imports, vacations, or properties abroad – the National Hockey League has even benefited. The strong Loonie helped spur the highest operating profits for several Canadian NHL teams in more than a decade. One team’s president said, “There are always two absolutes: Winning is good, and it’s always better when the Canadian dollar is stronger.”

The Bank of Canada has not indicated any intention to discontinue its conditional commitment to hold key interest rates steady until the end of the second quarter of 2010. However, there is concern that the low interest rates could potentially spur financial bubbles.

Canada, like most other countries emerging from a recession, is seeing several positive signs, but should expect recovery to come in small steps. This is especially true as Canada depends on strong demand from other countries to import its goods.

11531 Guelph Line – Sold

Features Include:  Newer two storey addition with Big bright country kitchen great for family use, entertaining and dining.  Big bright windows throughout. 3 Car two storey garage, 2 driveways. Large master suite with great closet space. 2 full baths.

Additional Information: 2009 Taxes about $2610.00, Lot Size 153ft x 220 ft.  Water treatment in 2002, Re-shingled carport 2004, Pressure Tank 2005, Kitchen 2001. Mature trees and garden , backs onto seasonal creek & nature.  Near Brookville School, Deli & Vet. Survey is available.

New Country Listing In Campbellville, On.

If you fancy country living I have just listed a wonderful big century home on the Guelph Line in Campbellville.  That is very near Milton in case you are not familiar.  You can view this on my Facebook page at.http://www.facebook.com/#/album.php?aid=134180&id=589342843

There is also a You Tube video right here.

Cooling Down The Housing Market

Ottawa now wants to cool down the hot housing market which lead the way out of our current recession.
Ottawa makes the claim that prices have increased buy 20% in 2009 and this is too much.
Here is reality.  Between April 2009 and April/May 2009 housing prices dropped by 15%.
In 2009 they picked the 15% back up & went up another 5%.  
5% is a pretty normal amount of increase in a year for house price to rise.
So the question is was there truly a 20% gain or is this just Ottawa trying to control things again.

I am sure that with the gov’t announcment of course this will create another rush in the market as first time buyers scramble to get in. So who are they trying to kid.  The same thing happened when they announced the Toronto land transfer tax everyone rushed into the market to make a purchase quickly and avoid it.

So Flaherty wants to increase the amount of downpayment required to purchase a home, thereby cutting a large percentage of first time home buyers out of the market.  What most people don’t realize is that the first time home buyer market is about 65-70% of the total market.  If these folks get cut out of the market the move up market cannot move either and the whole housing market goes into stagnation. First time home buyers drive our market in Toronto and the GTA.

However, the government does have a legitimate concern.  Over the past 35 years the average interest rate for a mortgage on a home has been in the 10-11% range.  What should happen if rates were to double from their current status.  Mortgage payments upon renewal would also double. Could these first time home buyers afford that.

The government does not want to see us in a situation like the one south of the border with a large number of folks losing their homes because they can’t make the payments. Interest rates will rise and probably in the coming year.  So it is a double edged sword.  The gov’t will have to very carefully dance around this one or they could generate disaster in the market.  The housing market makes up a large percentage of our economic engine.

Some suggestions are to raise the downpayment required, knocking many folks out of the market.
Shortening the amortization period from a maximum of 35 years to 25 years, this could be a very good solution as it forces people to build equity in their homes faster.
One thing for sure is that when interest rates start to rise the housing market will slow down radically.

We will have to wait and see what happens.