Kootenay Connector Real Estate Blog: September 2014

Tuesday, September 23, 2014

Dominion Lending Best Rate Mortgages

Terms	Bank Rates	Our Rates
6 Month	4.00%	3.95%
1 YEAR	3.09%	2.89%
2 YEARS	3.04%	2.59%
3 YEARS	3.44%	2.69%
4 YEARS	3.94%	2.87%
5 YEARS	4.79%	2.89%
7 YEARS	6.04%	3.79%
10 YEARS	6.50%	4.39%
Rates are subject to change without notice. *OAC E&OE

Prime Rate is 3.00%

Variable rate mortgages from as low as Prime minus 0.55%

Please note that rates shown above are subject to change without notice. The rates shown are posted rates and the actual rate you receive may be different, depending upon your personal financial situation. “Some conditions may apply. Rates may vary from Province to Province. Rates subject to change without notice. *O.A.C. E.& O.E.” Check with your Dominion Lending Centres Mortgage Professional for full details and to determine what rate will be available for you.

*O.A.C., E.& O.E.

Canadian Retail Sales

Canadian retail sales declined 0.1 per cent in July following six consecutive monthly increases. Sales were lower in 5 of 11 retail sub-sectors. In inflation-adjusted terms, retail sales were flat.

In BC, retail sales fell 0.4 per cent on a monthly basis, but were 6.4 per cent higher compared to one year ago. Through the first seven months of the year, retail sales in BC are up a robust 5.7 per cent. At that pace, retail sales on on pace for their fastest growth since 2007.

Canadian Consumer Price Inflation

Canadian consumer prices rose 2.1 per cent in the 12 months to August, matching the rate of inflation in July. The Bank of Canada's core measure of inflation, which excludes volatile prices such as energy and food products, ticked 0.4 points higher to 2.1 per cent. Consumer prices in BC rose 1.4 per cent.

While CPI inflation has been trending close to the Bank of Canada's 2 per cent target, the jump in core inflation pushed that measure above 2 per cent for the first time since 2012. That surge in core inflation will likely put some pressure on long-term interest rates, particularly if it proves to be more than a transitory blip in prices.

Thursday, September 18, 2014

US Housing Starts

US housing starts fell 14 per cent in August to a seasonally adjusted annual rate (SAAR) of 956,000. For the first 8 months of the year, US new home construction has averaged 976,000 units (SAAR), an increase of 8.1 per cent over 2013. However, housing starts remain well below the 1 million mark most economists expected new home construction to exceed in 2014.

New home construction in the United States has been somewhat slower than expected in 2014, which has meant slower growth in exports of BC wood products. While the turnaround in the US housing market has been frustratingly slow, it will be a key source of economic growth for BC in years to come as our forestry sector recovers and eventually thrives.

Wednesday, September 17, 2014

Mortgage Rate Forecast

The September issue of Mortgage Rate Forecast is now available on BCREA Online.

Highlights:

Mortgage rates remain at historic lows
Canadian economy roars back in second quarter
Poor job growth keeps Bank of Canada in neutral

Canadian Manufacturing Sales

Canadian manufacturing sales increased 2.5 per cent in July to $53.7 billion, surpassing the previous record monthly dollar volume set in July 2008. Sales were higher in 16 of 21 manufacturing sub-sectors.

In BC, manufacturing sales were up 0.2 cent on a monthly basis, and were 10.4 per cent higher year-over-year. Through the first seven months of the year, manufacturing sales are 6.3 per cent higher than last year. The durable goods sector, which includes wood products, mineral products and machinery and equipment manufacturing, has bounced back from a slow start, growing 2.8 per cent year-to-date. Non-durable goods like paper, clothing, and food manufacturing, have posted 10.6 per cent growth compared to 2013.

The manufacturing sector is one of the largest employers in British Columbia. Growth in sales should help drive employment and household income gains in markets with a large manufacturing base, which in turn will ensure a strong local housing markets.

No Vacation For Home Buyer's in August

The British Columbia Real Estate Association (BCREA) reports that a total of 7,341 residential sales were recorded by the Multiple Listing Service® (MLS®) in August, up 7 per cent from August 2013. Total sales dollar volume was $4.1 billion, an increase of 12.4 per cent compared to a year ago. The average MLS® residential price in the province rose to $560,318, up 5 per cent from the same month last year.

“Consumer demand remained relatively robust in August,” said Cameron Muir, BCREA Chief Economist. “The Okanagan and Chilliwack board areas posted the strongest year-over-year gain of 22 to 25 per cent in unit sales, while Victoria and Vancouver increased around 10 per cent respectively.” Home sales last month were the highest for the month of August since 2009.

“Low mortgage rates, increased net-migration and improving economic conditions continue to underpin housing demand in the province,” added Muir.

Year-to-date, BC residential sales dollar volume was up 22.8 per cent to $28.5 billion, compared to the same period last year. Residential unit sales were up 15.8 per cent to 57,715 units, while the average MLS® residential price was up 6.1 per cent at $564,466.

Canadian Housing Starts

The pace of new home construction in Canada slowed in August, falling 3.7 per cent to 192,368 units at a seasonally adjusted annual rate (SAAR). The six-month trend in Canadian housing starts sits at 189,837 units SAAR.

Housing starts in BC urban centers jumped 31 per cent in August on a monthly basis to 33,631 units SAAR. On a year-over-year basis, housing starts were up 31 per cent compared to August 2013. Single-detached starts were up 6 per cent while multiple units were up 43 per cent compared to this time last year. Year-to-date, total BC housing starts are 8 per cent higher than 2013.

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA were up sharply following consecutive double digit declines in June and July. Vancouver starts rose 50 per cent from August 2013, led by a 67 per cent increase in multiple starts. Year-to-date, Vancouver housing starts are up 6 per cent. In the Victoria CMA, new home construction tumbled 52 per cent year-over-year. Year-to-date, housing starts in Victoria are down 15 per cent. New home construction in the Kelowna CMA pick-up once again in August, rising 46 per cent year-over-year on balanced growth between single and multiple starts. Year-to-date, housing starts in the Kelowna CMA are up 45 per cent . Housing starts in the Abbotsford-Mission CMA showed significant strength for the second straight month, more than doubling the pace set last August. However, year-to-date, new home construction in the Abbotsford-Mission CMA is down 20 per cent.

Canadian and US Employment

Canadian employment declined by 11,000 jobs in August. Both full-time and part-time employment were down while total hours worked, which is closely associated with economic growth, was unchanged. The national unemployment rate remained at 7 per cent.

The BC economy eked out a modest 1,800 hundred jobs in August, however those gains were all in part-time work. Full-time employment declined by 14,400. In spite of slightly higher employment, the provincial unemployment rate ticked 0.2 points higher to 6.1 per cent as the number of people looking for work expanded by 8,200. Year-to-date, employment in BC is up just 0.5 per cent.

In the United States, payrolls were up 142,000, well off of market expectations and below 2014 trend growth over 215,000 jobs per month. The US unemployment rate fell to 6.1 per cent.

Bank of Canada Interest Rate Announcement

The Bank of Canada once again opted to leave its target for the overnight rate unchanged at 1 per cent. In the statement accompanying today's announcement, the Bank noted that though inflation is close to its 2 per cent target, the recent pick-up in inflation was largely due to temporary factors as the Bank anticipated. In spite of stronger global and domestic economic growth last quarter, the Bank still expects excess capacity in the economy to be absorbed over the next 2 years and judges risks to its outlook to be balanced between higher inflation and still elevated household debt. Therefore, the Bank remains neutral with respect to timing and direction of its next change to the policy rate.

As the Bank noted, economic growth exceeded expectations in the second quarter. However, the economy looks far more pedestrian if averaged over the entire first half of 2014. Employment growth has been uneven and the Canadian unemployment rate remains stubbornly high. Therefore, the Bank is unlikely to be moved from its current stance after just one strong quarter of economic growth. We expect that the Bank will continue to take a cautious approach to monetary policy until it sees concrete signs that the economy is growing above trend. That means at least one more quarter of solid GDP growth paired with more steady employment gains, as well as similarly strong data in the United States. While the Bank left the door open to lower interest rates given its "neutral" stance, we still anticipate that the next move for interest rates will be upward, though not until 2015.

Canadian Q2 Economic Growth

The Canadian economy rebounded strongly from a soft first quarter, expanding at a robust 3.1 per cent annual rate in the second quarter of 2014. Growth was led higher by rising household consumption and in particular by a sharp 4.2 per cent increase in exports. That increase is largely owing to a similarly strong rebound in economic growth in the United States that saw the economy grow over 4 per cent last quarter.

Second quarter growth in the Canadian economy far exceeded expectations and was the highest since the third quarter of 2011. That said, average growth in the first half of the year was only about 2 per cent given a weak reading of just 0.9 per cent growth in the first quarter. While the strength of today's GDP data may somewhat complicate thinking at the Bank of Canada, softness in the labour market as well as still below target core inflation will likely tilt the Bank towards holding rates unchanged for the remainder of the year.

BC Commercial Leading Indicator Reaches Record High

BC Commercial Leading Indicator Reaches Record High

The British Columbia Real Estate Association (BCREA) Commercial Leading Indicator (CLI) rose two index points to a new record high of 117.1, eclipsing the previous high of 116.2 set in the second quarter of 2007.

The sharp increase in the CLI pulled the underlying trend in the index higher, also to a new record. This indicates significant strength underpinning the economic environment for commercial real estate. Historically, a rising trend in the CLI indicates stronger commercial real estate activity two to four quarters ahead. Given the current trend, we would expect strength in the commercial real estate market to prevail into the first half of 2015.

"After seven years the CLI has finally surpassed its pre-financial crisis peak” said Brendon Ogmundson, BCREA Economist. “Going forward, significant momentum in the BC economy should help to underpin a strong commercial real estate market over the next six to twelve months."