Bank of Canada Interest Rate Announcement - January 23, 2013

It may be a new year but it is the same story this morning from the Bank of Canada which once again held its target for the overnight rate at 1 per cent. The statement released in support of the interest rate decision noted that the global economic outlook is weaker than the Bank previously projected, though risk of a severe external shock to the economy has diminished. As a result, the slowdown in the Canadian economy in the second half of 2012 was more pronounced than the Bank had anticipated. The Bank has revised its estimate for economic growth in 2012 lower, to 1.9 per cent, and now forecasts 2 per cent growth in 2013 before an acceleration to 2.7 per cent in 2014. Importantly, the Bank has also shifted its expectation that the economy will reach full capacity out to the second half of 2014. On inflation, the Bank expects growth in consumer prices to run significantly below its 2 per cent target for much of 2013 before gradually rising to target in 2014.

Following two years of overly optimistic forecasts, the Bank has struck a slightly more dour tone in its outlook. The gloomier growth forecast and positive signs that households are reigning in household debt have prompted the Bank to revise its language on the gradual withdrawal of monetary stimulus.  In its concluding statement accompanying the rate decision, a key focus of monetary policy watchers over the past year,  the Bank continued to note that a withdrawal of stimulus would likely be required over time, but that the timing of any such withdrawal is less imminent than previously anticipated. This strongly suggests that interest rates will remain constant at 1 per cent for all of 2013.

Copyright BCREA - reprinted with permission

Canadian Manufacturing Sales

Canadian manufacturing sales increased 1.7 per cent in November, following a1.4 per cent decline in October.  Sales rose in 12 of 21 manufacturing industries. Adjusting for inflation, Canadian manufacturing sales were 1.6 per cent higher in November. With the release of November's manufacturing and trade data, we estimate that the Canadian economy grew approximately 1.7 per cent in the fourth quarter of 2012.

Sales in the BC manufacturing sector rose 1.2 per cent in November, and were 4.3  per cent higher year-over-year. Primary and fabricated metal manufacturing, which accounts for 13 per cent of BC manufacturing, was up 4.5 per cent in November while forestry products (30 per cent of BC manufacturing sales) were up just under 1 per cent, and food manufacturing (17 per cent of BC manufacturing sales) was up 1 per cent.

Copyright BCREA – reprinted with permission

Canadian home sales little changed in December

According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity was little changed on a month-over-month basis in December 2012, holding it in line with levels reported in August when demand first geared down in the wake of tighter mortgage lending rules.
Highlights:

• National home sales edged 0.5% lower from November to December.
• Actual (not seasonally adjusted) activity down 17.4% from December 2011.
• Number of newly listed homes dropped 1.3% from November to December.
• Canadian housing market remains firmly in balanced territory.
• National average sale price up 1.6% year-over-year in December.
• MLS® HPI up 3.3% in December, the smallest gain since April 2011.

The number of home sales processed through the MLS® Systems of real estate Boards and Associations in Canada edged down 0.5 per cent on a month-over-month basis in December 2012. While sales activity was little changed nationally, it picked up in just over half of all local markets in December.
“National sales activity continues to hold fairly steady at lower levels since mortgage rules were changed earlier in 2012, but there are still some real differences in trends between and within local housing markets,” said CREA President Wayne Moen. “As always, all real estate is local, so buyers and sellers should speak to their REALTOR® to appreciate how the housing market is shaping up where they live or are considering living.”
Actual (not seasonally adjusted) activity came in 17.4 per cent below December 2011 levels. Four of every five local markets posted a year-over-year declines in sales activity in December. Calgary remained a notable exception, with activity there having risen seven per cent year-over-year.
Sales were handicapped by December 2012’s five full weekends, since far fewer transactions take place on weekends. This trading day effect is among factors taken into account by seasonal adjustment.
“Similar to what we saw in September, December sales had fewer business days compared to the same month last year and most other years,” said Gregory Klump, CREA Chief Economist. “It factored into December’s year-over-year decline in sales activity.”
A total of 453,372 homes traded hands over Canadian MLS® Systems in 2012. This was down 1.1 per cent from annual activity in 2011, and 1.4 per cent below the 10-year average (2002 through 2011).














This marks the fifth straight year that annual home sales activity has held to within short reach of 450,000 units. “Successive rounds of tightening mortgage regulations have kept the housing market in check during what has become an extended low interest rate environment,” said Klump.
The number of newly listed homes fell a further 1.3 per cent month-over-month in December. Combined with monthly declines of 1.1 per cent in November and 4.1 per cent in October, new supply reached its lowest level since March 2011.
While Greater Toronto posted the largest decline, new listings were down in half of all local markets in December including Greater Vancouver, the Fraser Valley, and Vancouver Island.
“The decline in new supply may reflect purchase offers below asking price that are made to sellers who are under no pressure to sell. Instead they choose to take their homes off the market once their listing expires,” Klump said. “In the absence of economic stresses like a spike in interest rates or a sharp drop in employment, this dynamic can be expected to keep the housing market in balance.“
With sales and new listings moving lower, the national sales-to-new listings ratio was little changed at 50.8 per cent in December compared to 50.4 per cent in November. Based on a sales-to-new listings ratio of between 40 to 60 per cent, three out of every five local markets were in balanced market territory in December.
The number of months of inventory is another important measure of balance between housing supply and demand. It represents the number of months it would take to sell current inventories at the current rate of sales activity, and it too was little changed in November.
Nationally, there were 6.7 months of inventory at the end of December 2012, unchanged from its reading at the end of November. The number of months of inventory nationally has remained close to 6.6 months since August 2012.
The actual (not seasonally adjusted) national average price for homes sold in December 2012 came in just under $352,800, representing an increase of 1.6 per cent from December 2011. The national average price continues to be influenced by fewer sales in Greater Vancouver and Greater Toronto compared to the same period a year earlier. Excluding these two markets from the national average price calculation yields a year-over-year increase of 3.3 per cent.
The 2012 national average price for homes sold through the MLS® Systems of real estate Boards and Associations in Canada was $363,740, up 0.3 per cent from 2011. Netting Greater Vancouver and Greater Toronto from the annual figure yields a gain of 2.8 per cent.
Unlike average price, the MLS® Home Price Index (MLS® HPI) is not affected by changes in the mix of sales, so it provides the best gauge of Canadian home price trends.














The Aggregate Composite MLS® HPI rose 3.3 per cent on a year-over-year basis in December. This marks the eighth time in as many months that the year-over-year gain shrank and is the slowest rate of increase since April 2011.
Year-over-year price gains decelerated in for two-storey single family homes (+4.0 per cent) and apartment units (+1.2 per cent). By contrast, year-over-year growth accelerated in the townhouse/row segment (+2.0 per cent).
Price growth was unchanged from November’s reading for one-storey single family homes (+4.9 per cent).
The MLS® HPI rose fastest in Regina (+10.5% year-over-year), although the increase was the smallest since March. Price growth also moderated in Greater Toronto (+4.1% year-over-year) and in the Fraser Valley (+0.5% year-over-year).
By contrast, the MLS® HPI saw year-on-year growth accelerate in Calgary (+7.4%) and Greater Montreal (+3.3%). In Greater Vancouver, the MLS® HPI posted a 2.3 per cent year-over-year decline in December.

Copyright CREA - Reprinted with permission

US Housing Starts

US housing starts continued to accelerate in December, surging 12.1 per cent to 954,000 units at a seasonally adjusted annual rate (SAAR), the fastest pace of new home construction since June 2008.  Building permit data, a proxy for future housing starts, edged higher as well to 903,000 (SAAR).
Surging US housing starts suggest that residential investment provided a significant contribution to US economic growth for the first time since 2005. This trend, if sustained, bodes well for BC economic growth, and in particular BC lumber exports in 2013. 

Copyright BCREA - Reprinted with permission

BCREA Housing Market Update (January 2013)

Copyright BCREA - Rebroadcast with permission

B.C. First-Time New Home Buyers' Bonus

The B.C. First-Time New Home Buyers’ Bonus is a one-time payment worth up to $10,000.

 

B.C. residents who are first-time home buyers and who purchase an eligible new home on or after February 21, 2012 and before April 1, 2013 may be eligible for this bonus.

A first-time home buyer is an individual who has never previously owned a primary residence anywhere in the world.
A primary residence is generally a house that you own, jointly or otherwise, and that you intend to live in on a permanent basis. You may have more than one place of residence, but you are considered to have only one primary residence.

Qualifications

You may qualify for the bonus if you meet all of the following criteria:

• You purchase or build an eligible new home in B.C.
• You and your spouse or common-law law partner are first-time home buyers
• In the case of multiple buyers of a home, each buyer is a
  first-time home buyer
• You file a 2011 B.C. resident personal income tax return or, if you move to B.C. after December 31, 2011, you file a 2012 B.C. resident personal tax return (you are not eligible for the bonus if you move to B.C. after December 31, 2012)
• You are eligible for the B.C. HST New Housing Rebate
• You intend to live in the home as your primary residence
• No one else has claimed a bonus for the home

Eligible New Homes

Eligible new homes include:

• new homes (i.e. newly constructed and substantially renovated homes) that are purchased from a builder
• owner-built homes

A substantially renovated home is one where all, or substantially all, of the interior of the building has been removed or replaced. Generally, 90% or more of the interior must be renovated to qualify.
Eligible homes include detached houses, semi-detached houses, duplexes and townhouses, residential condominium units, mobile homes and floating homes, and residential units in a cooperative housing corporation.

http://www2.gov.bc.ca/gov/topic.page?id=0778BC0286DC4B1DAFEF090568064BB0

Understanding Energy Efficiency Retrofit

How do you decide what to do to make your house more energy efficient? There are so many questions, so many possible directions and so many possible answers. How do you get started?

How are pre-existing problems addressed? What are your retrofit options? How can the retrofit work be organized to help ensure the best results? It is no wonder homeowners sometimes find themselves unsure of how best to proceed with energy efficiency retrofit projects.

 While you can get good advice from qualified contractors, suppliers and other sources of renovation information, it’s a good idea to be generally informed about your energy efficiency retrofit options so you are aware of the possibilities and potential obstacles you might

encounter. By increasing your understanding of some of the more common energy efficiency retrofit options available, you will be better prepared to sort through all the information you will be offered by renovation contractors. It can also give you a head start in developing a retrofit plan.

 

Read on...

 

Copyright CMHC

BC Home Sales Decline in 2012

The British Columbia Real Estate Association (BCREA) reports that a total of 67,637 residential sales were recorded by the Multiple Listing Service® (MLS®) in BC during 2012, a decline of 11.8 per cent compared to 2011. Total sales dollar volume declined 19.1 per cent to $34.8 billion over the same period. The annual average MLS® residential price in the province was $514,836 in 2012, down 8.3 per cent from 2011.

"A notable pullback in consumer demand in Vancouver and the Fraser Valley during 2012 was more than enough to offset increases in home sales in the Okanagan, Kootenays and BC Northern regions,” said Cameron Muir, BCREA Chief Economist.
“At least half of the 8 per cent decline in the BC average home price was the result of fewer luxury homes selling in Vancouver and fewer overall Vancouver home sales relative to the rest of the province in 2012.”

In December, BC residential sales dollar volume was down 28.6 per cent to $1.5 billion, compared to December 2011. Residential unit sales declined 26.4 per cent to 3,011 units, while the average MLS® residential price was down 3 per cent to $498,205 over the same period.

Copyright BCREA - Reprinted with permission

Shadow Inventory Decline Continues, Currently at 7.2 Month Supply

The residential shadow inventory of distressed homes continues to shrink according CoreLogic's monthly report for October. The improvement is across all metrics; number of units, months supply, dollar volume and transition rates.

The inventory as of October was 2.29 million units or a7.2 month supply at the current absorption rate. The number of units in the inventory represented a 12.3 percent decrease from October 2011 when the inventory consisted of 2.62 million units, an 8.6 month supply. The volume of the inventory in October was $376 billion, down from $3.99 billion a year earlier. In September the inventory stood at 2.31 million units or a 7.7 month supply.

The shadow inventory represents the number of properties that are seriously delinquent, in foreclosure, or in bank inventories (REO) but not listed on Multiple Listing Services. CoreLogic uses the rates of transition of properties from delinquency to foreclosure and foreclosure to REO to identify the currently distressed unlisted properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory.

Of the 2.3 million properties currently in the shadow inventory 1.04 million units are seriously delinquent (3.3 months' supply), 903,000 are in some stage of foreclosure (2.8 months' supply) and 354,000 are already in REO (1.1 months' supply).

Roll rates from current to 90 days delinquent have decreased from 0.50 percent in October 2011 to 0.46 percent in October 2012. Rates from 90+ days to foreclosure are down from 6.74 percent to 6.17 percent but rates for transitions from foreclosure to current increased slightly from 0.81 percent to 0.83 percent.

"The size of the shadow inventory continues to shrink from peak levels in terms of numbers of units and the dollars they represent," said Anand Nallathambi, president and CEO of CoreLogic. "We expect a gradual and progressive contraction in the shadow inventory in 2013 as investors continue to snap up foreclosed and REO properties and the broader recovery in housing market fundamentals takes hold."

"Almost half of the properties in the shadow are delinquent and not yet foreclosed," said Mark Fleming, chief economist for CoreLogic. "Given the long foreclosure timelines in many states, the current shadow inventory stock represents little immediate threat to a significant swing in housing market supply. Investor demand will help to absorb the already foreclosed and REO properties in the shadow inventory in 2013."

Forty-five percent of the inventory in held in five states, Florida, California, Illinois, New York and New Jersey down from 51.3 percent one year earlier. Over the three months ending in October 2012, serious delinquencies, which are the main driver of the shadow inventory, declined the most in Arizona (13.3 percent), California (9.7 percent), Michigan (6.8 percent), Colorado (6.8 percent) and Wyoming (5.9 percent).

by Jann Swanson Mortgage News Daily

Survey: Consumers Grow in Optimism Toward Home Prices

Uncertainty over the fiscal cliff negotiations did little to shake consumers’ confidence about housing in December, according to the results from Fannie Mae’s latest National Housing Survey.

Consumers continued to show increased optimism toward home price, rental price, and mortgage rate expectations, a sign that home purchase activity may see a boost in the coming months.

“Combined with consumers’ growing mortgage rate and rental price increase expectations, the positive home price outlook could incentivize those waiting on the sidelines of the housing market to buy a home sooner rather than later and thus support continued housing acceleration,” said Doug Duncan, SVP and chief economist at Fannie Mae.

The average 12-month home price change expectation jumped from 1.7 percent in November to 2.6 percent in December, the highest level since the survey’s inception in 2010. To compare, the average price change expectation a year earlier was only 0.8 percent.

The share of respondents who believe home prices will rise over the next year also reached its highest recorded level, increasing 6 percentage points to 43 percent. The share of those expecting price declines fell to 11 percent, while the share who believe prices will stay more or less the same fell to 40 percent.

Twenty-one percent of respondents said now is a good time to sell, a decrease of 2 percentage points from November’s record high but still 10 percentage points above the December 2011 survey. The number of respondents who said now is a good time to buy decreased slightly to 71 percent, staying within the small range seen throughout 2012.

In addition, the percentage who expect mortgage rates will go up continued to rise, increasing 2 percentage points to 43 percent—the highest level since August 2011. Eight percent expect rates will drop (a decline from 9 percent in November), while 44 percent expect flat rates (down from 45 percent).

On the rental side, 49 percent of those surveyed said home rental prices will rise in the next year, a slight increase from November, while the share of those expecting rental prices to drop stayed flat at 4 percent. The average rental price change expectation was 4.4 percent, a survey high.

For all that, though, interest in buying and renting was little changed: The percentage of those who would buy if they were going to move decreased slightly to 66 percent, while the percentage of those who would rent remained unchanged at 29 percent.

That flatness may stem from consumers’ overall economic outlook, which tanked after November’s show of optimism.

“Despite continued strengthening in the housing market, consumers’ concerns over the fiscal cliff and debt ceiling have caused considerable volatility in their perceptions of the larger economy,” Duncan said. “This uncertainty seems to be prompting a growing share of consumers to expect their personal finances to worsen and may contribute to weaker near-term economic growth.”

The share of respondents who believe the economy is on the right track dropped 5 percentage points from November’s high, landing at 39 percent in December. Fifty-three percent say the economy is on the wrong track, up from 50 percent in November.

Meanwhile, the percentage of respondents who said their household income is significantly higher than it was a year ago rose slightly to 22 percent. However, 37 percent reported significantly higher household expenses compared to 12 months ago, a 3 percentage point increase over November and the highest level since December 2011.

Consumers’ outlook for the economy also suffered as the nation waited for news of fiscal cliff talks. The percentage who said they expect their personal financial situation will get worse over the next 12 months rose to 20 percent, its highest level since August 2011, while the percentage of respondents expecting their situation will improve stayed flat at 40 percent.

 

DS News - Tony Barringer

Canadian Building Permits

Canadian building permits rose fell 18 per cent in November, following a 16 per cent increase in October. The decline in permits was primarily due to weakness in both non-residential and residential construction intentions in Ontario.

In BC, permitting activity declined 6 per cent in November due to a slowing of non-residential permits which were down 34 per cent month-over-month and 12 per cent year-over-year. Residential permits rose 17 per cent over October, but were 14 per cent lower than November 2011.

Permit activity in BC's four major metropolitan areas  was mixed in November. Following a surge in October, the Kelowna CMA saw permit volumes slow in November, falling 34 per cent month-over-month and 7 per cent year-over-year.  The Vancouver CMA saw total permits rise 21 per cent in November following weaker activity in October, but were down 17 per cent over November 2011. In the Abbotsford CMA, permits rose 46 per cent month-over-month and 28 per cent year-over-year. Finally, the Victoria CMA recorded an 8 per cent increase in November permits and a 24 per cent increase over November 2011. 

Copyright BCREA - Reprinted with permission

Canadian Housing Starts - January 9, 2013

Canadian housing starts registered 197,976 units at a seasonally adjusted annual rate (SAAR) in December, down slightly from 201,376 (SAAR) in November.  Annual starts rose 11 per cent in 2012.

New home construction in BC urban centres also posted a modest decline, falling to 20,227 (SAAR) in December from 22,043 units (SAAR) in November.  On a year-over-year basis, multiple unit starts in BC were unchanged from December 2011 while single family starts were 4 per cent lower. Overall,  total BC housing starts were 2 per cent lower than in December 2011. New home construction in BC's urban areas finished the year at 25,477 units, an increase of 5 per cent over 2011. New home construction continued to shift toward multiples in 2012. That segment of the market saw a 9 per cent increase in 2012 to 18.763 starts while single-detached starts declined 5 per cent to just 6,714 units.

Looking at census metropolitan areas (CMA) in BC, Vancouver CMA starts fell 1 per cent year-over-year in December but were 6 per cent higher for all of 2012 at 19,027 total units.  New home construction in the Abbotsford CMA was off 58 per cent compared to December 2011 and down 31 per cent for all of 2012 at just 371 total units.  Housing starts in the Kelowna CMA rose 27 per cent year- over-year in December due to a jump in single-detached starts. For all of 2012, total housing starts in the Kelowna CMA were down 10% from 2011 at 836 units.  Housing starts in Victoria were down 28 per cent year-over-year in December but were up 4 per cent for all of 2012 at 1,700 total starts.

 

Copyright BCREA - Reprinted with permission

Tips for boosting your credit

In today’s economic climate of tighter credit requirements, there’s no doubt that many people may not fit into the traditional banks’ financing boxes as easily as they may have just a few years ago.

Your best solution is to consult your mortgage professional or lender to determine whether your situation can be quickly repaired or if you face a longer road to credit recovery. Either way, there are solutions to every problem.

Mortgage professionals who are experts in the credit repair niche can help credit challenged clients improve their situations via a number of routes. And if the situation is beyond the expertise of a mortgage professional, they can help you get in touch with other professionals, including credit counsellors and bankruptcy trustees.

Following are five steps you can use to help attain a speedy credit score boost:

1) Pay down credit cards. The number one way to increase your credit score is to pay down your credit cards. Revolving credit like credit cards seems to have a more significant impact on credit scores than car loans, lines of credit, and so on.

2) Limit the use of credit cards. Racking up a large amount and then paying it off in monthly instalments can hurt your credit score. If there is a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the balance off the next month.

3) Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other lenders may view your file. Ensure everything’s up to date as old bills that have been paid can come back to haunt you.

Some financial institutions don’t even report your maximum limits. As such, the credit bureau is left to only use the balance that’s on hand. The problem is, if you consistently charge the same amount each month – say $1,000 to $1,500 – it may appear to the credit-scoring agencies that you’re regularly maxing out your cards.

The best bet is to pay your balances down or off before your statement periods close.

4) Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating your accounts. As such, the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even though you have had the cards for a long time. You should use these cards periodically and then pay them off.

5) Don’t let mistakes build up. You should always dispute any mistakes or situations that may harm your score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau aware of the situation.

 

 

The differences between a collateral and standard charge mortgage

Since an increasing number of lenders are moving towards collateral charge mortgages these days, it has never been more important to understand the differences between a collateral and standard charge mortgage.

The primary difference is that a collateral charge mortgage registers the mortgage for more money than you require at closing. For instance, up to 125% of the value of the home at closing with TD Canada Trust or 100% through ING Direct and many credit unions, instead of the amount you need to close your transaction (as is the case with a standard charge mortgage).

The major downside to a collateral mortgage becomes evident at your mortgage renewal date. For borrowers who want to keep their options open at maturity and have negotiating power with their lender, this isn’t the best product feature because collateral charge mortgages are difficult to transfer from one lender to another.

In other words, if you want to change lenders in order to seek a better product or rate in the future, you have to start from the beginning and pay new legal fees, which range from $500 to $1,000.

With a standard charge mortgage, in most cases, the new lender will cover the charges under a “straight switch” in order to earn your business.

In addition, with a collateral charge, it could be difficult to obtain a second mortgage or a home equity line of credit (HELOC) unless your home significantly appreciates in value.

Lenders offering collateral charge mortgages promote the benefit that it makes it easier and more cost effective to tap into your equity for such things as debt consolidation, renovations or property investment. There’s no need to visit a lawyer and pay legal fees – the money is available as your mortgage is paid down. Yet, if you read the fine print, you may still have to re-qualify at renewal.

A standard charge mortgage gives you the ability to move to another lender at renewal should you want to without incurring legal fees, and many borrowers find it more beneficial to keep their options open. If you need to borrow more with a standard charge mortgage, you have the option of a second mortgage or a HELOC, which also enables you to take money out as your mortgage is paid down.

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service^® (MLS^®) Systems of Canadian real estate Boards and Associations in 2012 and 2013.

When CREA’s resale housing forecast was published in September, activity showed the first signs of slowing in the wake of new mortgage lending regulations. Demand has remained at lower levels, and this trend is expected to persist through the end of the year. Lower than projected third quarter sales have downgraded the prospects for activity this year in almost every province.

National resale housing activity is now projected to reach 456,300 units in 2012. This represents a 0.5 per cent decline from 458,412 sales in 2011, and stands 0.9 per cent below the 10-year average (2002 – 2011)

Alberta is still expected to post the biggest annual increase this year (+13.1%), offsetting most of the projected decline in British Columbia (-10.7%).

Sales activity is expected to be less volatile next year than it was in 2012. In 2013, CREA forecasts that national sales activity will recede by two per cent to 447,400 units. This is a slightly lower level of activity than previously forecast, reflecting the ongoing impact of new mortgage rules into next year. The continuation of moderate economic, job, and income growth will temper the impact of recent mortgage rule changes, which are not expected to dampen activity much more than has already been felt until interest rates are expected to begin rising in late 2013.

“All real estate is local, so housing market prospects can and do differ among regions and communities,” said Wayne Moen, CREA President. “For that reason, buyers and sellers should talk to their REALTOR® about the housing market outlook where they live or would like to live.”

“Annual sales in 2012 reflect a stronger profile prior to recent mortgage rule changes followed by weaker activity following their implementation,” said Gregory Klump, CREA’s Chief Economist. “By contrast, forecast sales in 2013 reflect an improvement from levels this summer in the immediate wake of mortgage rule changes. Even so, sales in most provinces next year are expected to remain down from levels posted prior to the most recent changes to mortgage regulations,” said Klump.

 

 

 

Despite the small downward revisions to the forecast for national sales in 2012 and 2013, activity is still expected to remain within short reach of the 10-year average (2002 – 2011).

National sales activity over the first five years of the past decade compared to the most recent five years represent two very different periods. Most of the national average price growth in the 2002-2007 period was realized amid sustained sellers’ market conditions in most large urban housing markets. Most provincial housing markets are currently balanced, and are expected to remain or return to balanced market territory for 2013.

The national average home price is projected to rise by 0.3 per cent to $363,900 in 2012, with gains in excess of that in most provinces. The smaller gain in average price nationally as compared to most provinces largely reflects a decline in sales activity among more expensive housing markets compared to 2011, particularly in British Columbia and more recently in Ontario.

The national average price is forecast to edge up another three tenths of one per cent to $365,100 in 2013, with British Columbia, Ontario, and New Brunswick registering small price declines and modest average price gains in line with or below inflation in other provinces.

 

 

 

Copyright CREA -reprinted with permission

Housing Bubbleoney

I am now convinced that we will never hear the end of housing bubble speak. The premise is now as firmly entrenched in popular consciousness as carbon emissions and TMZ. It has taken the form of idolatry in the blogosphere, where any countervailing narrative is demonized. It has catapulted university dropouts into media darlings because of a hackneyed webpage and an opinion. It has been tarted up by so-called experts who predict impending doom year after year, despite being completely wrong every time.

 

Now, I’m not wearing tinted glasses. Housing markets go up and they go down. However, my point is that sharp and significant declines in home prices are usually created by massive economic shocks, like the 21 per cent mortgage rates and recession of 1982. Yes, there can be short-term speculative bubbles that fl oat back to earth after the circus leaves town, but home prices in Vancouver, for example, have been incongruous with other Canadian markets for decades.

The big test was 2008. That was the year of the doomsayers, when the largest financial crisis since the Great Depression besieged us and the collateral damage hurled us into a global recession, one from which we still

haven’t fully recovered. The airwaves were all a buzz with end of the world prophets and those predicting home prices would be chopped in half, at least. It was going to be the big one! The housing market had gone through a significant inflationary period leading up to 2008. Unlike today, speculation was clearly evident. Accusations abounded that Vancouver was overvalued, unsustainable and frothy. One financial institution even had a publication called Housing Bubble Watch, now defunct, in which Vancouver was always the straw man.

 

So what happened? Home prices fell 15 per cent from peak to trough, but that was short-lived. Indeed, once the clouds of uncertainty dissipated only a few months later, buyers came back in droves. 

The most dramatic turnaround ever recorded occurred in Vancouver during 2009, when the year began with 1980s level consumer demand and ended with sales tracking near record levels. Prices came right back to where they were before the crisis, and have stayed there, for the most part, for the past three years. If such a severe financial crisis and global recession couldn’t trigger a meltdown of the housing market or pop any asset balloon, what could? 

The main misconception about housing markets is that they behave like the stock market. They don’t. Bad news can drive stocks lower in a matter of seconds, whereas homes are relatively illiquid; they take a long time to sell and have higher closing costs. In addition, owner-occupiers typically don’t speculate with the family home. In times of hardship, the home is typically the last thing to go. Instead, they hold off on other expenditures like lattes, movie tickets, new TVs and vacations. 

 In a market that has a well-diversified economy and expanding population, fire sales are extremely uncommon. Unless there is household financial catastrophe on a large scale, potential home sellers simply wait until market conditions improve. 

I write this piece as home sales in Vancouver and many other markets stagnate and homes prices tread water (see the Canadian Real Estate Association’s Multiple Listing Service® Home Price Index for an accurate reading). I have no doubt that the voices of impending doom will soon renew their bellicose refrain. Perhaps their tea leaves will be right this time and the market will indeed collapse, leaving homes selling for 50 cents on the dollar. I’d put my money on that refrain continuing for a long time to come.

 

By Cameron Muir, BCREA Chief Economist

Copyright BCREA -reprinte with permission

Housing Market Update (December 2012)

Copyright BCREA - reprinted with permission

Canadian and US Employment - January 2013

On the heels of a surge in employment in November, Canadian employment posted a strong increase again in December, growing by 40,000 jobs. December's increase in jobs was entirely due to gains in full-time employment. The Canadian economy added just shy of 100,000 new jobs in the final two months of 2012, which pushed the national unemployment rate to 7.1 per cent, its lowest level in 4 years.

Job growth in the BC economy was essentially flat as an increase of 4,300 in full-time employment was mostly offset by declining part-time employment. The BC unemployment rate fell 0.3 points to finish the year at 6.5 per cent.  Despite some softness towards the end of the year, the story of the BC labour market in 2012 was overwhelmingly positive.  BC employment grew 1.7 per cent in 2012, a marked improvement from just 0.8 per cent in 2011, while annual growth in full-time employment was 2.8 per cent in 2012 compared with just 0.5 per cent in 2011. The provincial unemployment rate averaged 6.8 per cent in 2012, the first time in 4 years that unemployment fell below 7 per cent.

Finally, the US economy continued its slow and steady recovery, adding155,000 jobs in December following job growth of 161,000 in November. The US unemployment rate remained constant, finishing the year at 7.8 per cent.

Copyright BCREA - Reprinted with permission

Home prices post biggest annual jump in two years

By Chris Isidore @CNNMoneyDecember 26, 2012: 9:14 AM ET

The recovery in the housing market continues to pick up steam, as home prices posted the biggest percentage gain in more than two years in the latest reading of the closely followed S&P/Case-Shiller index.

The index showed prices up 4.3% in October compared to a year earlier. That's the best improvement since May 2010. But that earlier increase was due to a temporary spike caused by a homebuyers' tax credit of up to $8,000 on homes purchased in late 2009 and early 2010.

This latest rise comes as the housing market has shown numerous other signs of recovery in recent months. A combination of near record-low mortgage rates, lower unemployment and a drop in foreclosures to a five-year low means there are more buyers interested in purchasing fewer available homes. That in turn has lifted prices.

October marked the fifth straight month that the index has been up on a year-over-year basis.

Related: 2013 housing outlook

The improvement in housing market fundamentals has helped to lift the pace of both home sales and home building. But even with the latest rise in prices, the index is still down 29% from the peak reached in June 2006.

The continued rebound in prices likely will be another positive for both purchases and construction in the year ahead. Higher prices give current homeowners a better chance to sell their home and get the down payment they need on their next home purchase. They also encourage buyers who may have been on the sidelines because of uncertainty about home prices' direction that now is the time to buy.

Of course, home builders benefit from higher prices and increased demand. Leading home builders such as PulteGroup (PHA), Lennar (LEN), KB Home (KBH), D.R. Horton, Inc. (DHI) and Toll Brothers (TOL) have all enjoyed better than a 50% rise in their stock price over the last 12 months, with PulteGroup's stock nearly tripling in value.

The increases in home values were widespread in this latest reading, with only two of the 20 cities tracked by index showing modest price declines from a year earlier. Prices were down a little more than 1% in Chicago and New York.

The biggest rise was in Phoenix, one of the cities hardest hit when the housing bubble burst. Prices in Phoenix were 21.7% higher than in October 2011.

Home Prices Could Jump 9.7% in 2013, J.P. Morgan Says

The Wall Street Journal By Al Yoon

Home-price forecasts for 2013 are on the rise.

J.P. Morgan Chase & Co. expects U.S. home prices to rise 3.4% in its base-case estimate and up to 9.7% in its most bullish scenario of economic growth. Standard & Poor’s, which rates private-issue mortgage bonds, on Friday said it expects a 5% rise in 2013.

The J.P. Morgan analysts boosted their base-case estimate from 1.5% after a convincing rise in the “net demand” for housing this year has surpassed 2 million homes for the first time since 2006, said John Sim, a strategist at the investment bank. Net demand is the pace of existing home sales minus the inventory of homes available for sale.

“Net demand has picked up a lot in 2012,” said Mr. Sim. “Once you get north of the 2 million territory, you are in the positive growth area unless you get a lot of distressed inventory, which this year hit a low point” since at least 2008, he added. J.P. Morgan predicts that net demand to rise from 2.7 million next year from 2.3 million this year.

An expected increase in home prices in 2012 triggered a run into some of the riskiest real estate assets, such as subprime mortgage-backed securities from the real estate boom, and analysts including Mr. Sim expect that trend to continue. Rising home prices and the quest for yield has also given a tailwind to new mortgage bond issuance that has been mired in the fallout of the housing crisis and regulatory uncertainty for the past four years.

U.S. home prices nationwide increased on a year-over-year basis by 6.3% in October, the biggest increase since June 2006, according to CoreLogic. Investors zoning in on the increases bought subprime mortgage bonds, which have posted returns of more than 40% since December.

Home price increases could exceed J.P. Morgan’s base forecast if investors seeking yield push deeper into real estate, according to Mr. Sim’s home price report.

That may already be happening, considering recent comments by Luke Scolastico, a vice president at Credit Suisse, one of two issuers of mortgage bonds without government backing since the financial crisis. Credit Suisse is increasing its purchases of jumbo loans to meet demand for securities it sees from investors, he said on an American Securitization Forum panel this week.

“We’re buying loans, every day…and (on the month,) more than the month before,” Mr. Scolastico said. Part of the reason is because of home price appreciation, but also because of the “technical demand” for relatively higher yielding assets as Federal Reserve policies depress interest rates, he said.

New mortgage bond sales from other issuers, including investment banks, could boost issuance of private label bonds this year as high as $30 billion, Mr. Sim said. That’s up from almost $5 billion this year but paltry compared with annual volume above $1 trillion generated as the housing bubble neared its breaking point in 2006.

Mortgage bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae still fund more than 90% of new home loans. Bank portfolios and other private lending make up the rest.

Considering risks, J.P. Morgan analysts conceded that the economy is “gloomy” and tight lending standards can stop a bullish homebuyer from proceeding with a purchase. On the supply side, the “shadow inventory” of more than four million homes near or stuck in foreclosure still looms, though that is dropping, the analysts said.

What’s more, just the uncertainty over whether politicians will be able to steer clear of the “fiscal cliff,” the scheduled tax increases and spending cuts next month, may hurt investor confidence, the J.P. Morgan analysts said.

If taxes rise, reduced income for the potential homebuyers will damp housing demand, they added.

But the expectations for higher home prices are still widespread. Nearly three-quarters of investors polled by J.P. Morgan expect home prices to rise 5% in 2013.