30 Aug

Economic conditions will help Canada’s real estate sector stay healthy: CMHC

General

Posted by: Angela Calla

By Mary Gazze, The Canadian Press

Canada’s national housing agency says it expects home sales and construction activity will cool but remain healthy in the second half of the year, due to favourable economic conditions that push up demand for homes.

Canada Mortgage and Housing Corp. said Monday that lower unemployment, a steady level of immigration, and low interest rates are working together to prop up Canada’s real estate industry.

“I think the Canadian housing market is healthy at the moment despite the uncertainty we observed in the financial market,” Mathieu Laberge, deputy Chief Economist at CMHC said in an interview.

He was referring to the stock market ups and downs earlier this month as investors worried about the European debt crisis and feared the U.S. could slip back into recession.

“Employment is expected to grow at a moderate pace in the next few years,” he said.

“We expect interest rates to remain flat for the remainder of the year and increase in 2012, and new immigration is an addition to demand in the housing market.”

Laberge said the CMHC predicts the market sales volumes will hold at a stable level next year.

Canada Mortgage and Housing Corp. said low unemployment, immigration and low interest rates led to fewer claims in the first half of the year under its mortgage insurance programs, which protect lenders from defaults by borrowers.

The agency said it expects fixed mortgage rates to stay relatively flat for most of the year, with the five-year posted rate at between 4.1 per cent and 5.6 per cent, then increase slightly in 2012.

CMHC said variable rate mortgages would remain near historically low levels, although some banks recently increased their variable rates to reflect the higher cost of raising money.

Prices of homes shown on the Multiple Listing Service are expected to grow only slightly going forward because the supply and demand for resale homes will likely stay in balanced territory, CMHC said.

A least one analyst agreed that the real estate market should stay fairly healthy for the rest of 2011, but said it’s already cooling slowly and home prices may decline in the longer term.

“What you’re probably looking at is a period where prices are relatively flat, maybe a little bit lower in the next few years,” said Adrienne Warren, an economist at Scotiabank who specializes in the real estate industry.

“Affordability from a price perspective has deteriorated and that’s going to have to, over time, come back to more normal levels but it doesn’t imply that that has to happen quickly as a type of correction that occurs quickly.”

She said interest rates are low and attractive right now and encourage first time home buyers to enter the market, which drives up prices. Once those rates begin to rise — likely in the second half of 2012 — the current price of homes will become unaffordable for many, putting downward pressure on future prices.

In its report Monday, CMHC said changes to mortgage rules introduced by the federal government earlier this year played a part in reducing mortgage interest payments and allowed Canadians to build equity in their homes faster.

Canadians are finding it easier to pay off their mortgages, with arrears levels improving and the volume of mortgage insurance claims lower than expected.

In March, the federal government put through new rules that reduced the maximum amortization period to 30 years and cut the maximum amount Canadians can borrow to 85 per cent of the home’s value.

After the changes, refinancing activity fell by nearly 40 per cent, which means fewer Canadians took on more debt. Federal Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have repeatedly warned of the dangers of the ballooning debt level of Canadian consumers.

Ten per cent fewer Canadians bought mortgage insurance immediately after the new rules began, and the level was five per cent lower than sales before the changes came into effect.

CMHC also reported its net income for the quarter was $383 million, up $61 million from $322 million in the same quarter last year. Revenues were down slightly at $3.3 billion, versus $3.4 billion.

The agency’s predictions for the rest of the year echo a revised forecast by the Canadian Real Estate Association released earlier this month. CREA said it expected higher national home resales this year, reversing upward its previous forecast of a one per cent dip.

National average prices will be in the range of $347,700 to $374,300, growing to between $349,500 to $385,000 in 2012, CREA predicted.

CMHC said sales of existing homes should range between 429,500 and 480,000 units in 2011 and between 410,000 and 511,900 units in 2012.

Earlier this month, the CMHC said that national housing starts rose to 205,100 units on a seasonally adjusted basis in July, 11.6 per cent higher than the 188,900 reported in the same month last year and 4.3 per cent more than the 196,600 recorded in June.

The uptick, driven by strong construction on condos and apartment buildings in urban centres, is likely due to builders catching up to robust demand last year rather than expectations of coming growth, it said.

Home building activity has been increasing through the first seven months of 2011, but starts are still down 4.6 per cent from a year ago.

Predictions for the Canadian market were in stark contrast with the most recent figures from the United States, which showed that country’s depressed housing market is still trying to get back on track.

The U.S. National Association of Realtors said Monday that its index of sales agreements fell 1.3 per cent in July to a reading of 89.7. A reading of 100 is considered healthy by economists

The association also said a growing number of buyers had cancelled contracts after appraisals showed the homes they wanted to buy were worth less than they bid.

 

23 Aug

Understanding todays mortgage market August 2011

General

Posted by: Angela Calla

What do falling rates mean for borrowers?

This clearly falls into the 88% of the time where borrowers get significantly ahead by having a variable-rate mortgage. With the mess in the US expected to take several years to get sorted out, we’re in an unprecedented time where we can safely assume rates will remain low.

Where did this come from?

This specifically came from the US and its debt ceiling. When it was announced the US could be a risk to investors and it was downgraded, investors from the stock market moved to safe investments – Canadian Government Bonds. When everyone moves to a safe investment, their return goes down (less risk = less return). This means that fixed interest rates go down. This is déjà vu from 2008.

Although Prime is based on the Bank of Canada and unemployment in both Canada and the US has gone down over a half of a percent, the probability of a rate decrease has gone up significantly for September and again at year’s end. This comes just weeks after the Bank of Canada almost guaranteed we would see a hike before year’s end. On a variable-rate mortgage or line of credit, with every 0.25 decrease, you will see a $14 decrease for every $100,000 mortgage.

Fundamentals never go out of style. Don’t wait! If you have a mortgage above 3.5%, redo it. And if you don’t own, it’s your time to buy.

Will real estate follow?

Real estate does not follow the stock market and it’s not as volatile. You have a basic need to live somewhere so if the payment is affordable and fits into your budget, it’s in your best interest. When people stop migrating to BC and people are leaving BC that’s what you have to watch.

Helping you understand the market

Angela Calla, AMP Mortgage Expert

Dominion Lending Centres-Angela Calla

Host of “The Mortgage Show” CKNW AM980 Saturdays @7pm

Phone: 604-802-3983 Fax: 604-939-8795

Email: acalla@dominionlending.ca  

www.angelacalla.ca

Angela Calla, AMP
Mortgage Expert
Host of “The Mortgage Show” on CKNW AM980 Saturdays at 7pm

 

 

 

23 Aug

4 Essential questions you need to ask your mortgage provider when shopping for a mortgage

General

Posted by: Angela Calla

It’s important to ensure you’re working with an experienced professional mortgage planner carrying an AMP designation. Since this is the largest financial transaction of your life, you need partner with someone who is capable of properly advising you and troubleshoot any issues that may arise.

What questions do you ask? These questions must be answered precisely. If the “professional” hesitates or says something unclear, run to a true professional who can clearly explain the answers!

1. What are mortgage interest rates based on?

The ONLY correct answer is the Bank of Canada rate for variable rate mortgages and for fixed interest rates  mortgage backed securities, specialized mortgage bonds, or Government of Canada long bonds. A professional mortgage originator should at a minimum know the basics of how interest rates are determined. If an originator has their eyes on the wrong indicators, or worse yet has no idea of what these indicators are, needless to say it’s the “blind leading the blind”. At the Angela Calla Mortgage Team, we consistently review these indicators and, therefore, you can be confident in our ability to suggest mortgage strategies upfront to manage your mortgage long term.

2. How will rising interest rates in the coming years affect me if I take a fixed-rate mortgage product?

Most lenders will say if you’re locked in you are protected, which is a MISTAKE. That’s a dangerous answer when you consider what will happen when rates return to more normal levels (an increase of 2%) as experience shows us that the average mortgage payment in that case will rise $300 a month.

This is referred to as payment shock and it’s very risky for your long-term financial health. Working with a mortgage professional who proactively manages your mortgage and notifies you in live time when rates change with a suggestion on how to minimize payment shock is not only smart, but it also saves you thousands of dollars and years off of your mortgage. The Angela Calla Mortgage Team will show you.

3. What strategy are you recommending and why?

The key word here is “strategy”. If your mortgage professional can’t clearly articulate the strategy behind their recommendations to you, they’re simply quoting a rate, and frankly anyone can do that. On your largest investment, make sure you’re dealing with someone who has a solid financial plan that is considering your overall financial wellness.

4. What commitment are you giving me to personally manage my mortgage over the long term?

This is crucial. Many mortgage providers, especially bank personnel, have no desire or ability to proactively manage your mortgage over the long haul.

How can you take advantage of changing markets in the future if no one is watching them for you and all you get is information after it’s too late to benefit? Who will ensure you don’t miss an opportunity to renegotiate? If you’re considering a variable-rate mortgage, why would you do this with someone who’s not committed to keeping an eye on it and giving you information in real time to help you optimize the market and maximize your lifestyle?

At The Angela Calla Mortgage Team, the real job starts when your mortgage funds. Anyone can sell a mortgage, but only those truly committed mortgage professionals can manage your mortgage over the long term. With this long-term management approach, we can significantly reduce your total cost of homeownership and have strategies available when things in life don’t go as planned, isn’t that the point?

When you ask the right questions, you’re able to make educated decisions.

Fundamentals never go out of style.

With this being one of the most important and largest financial transactions, either for the first time or in the growth of your real estate portfolio, you may only do this 4 or 5 times in your life… we do this EVERY single day and have over a decade of experience both professionally and personally, and sit on the front lines of advisory boards for lenders, government bodies, insurers and media. It’s your home and your future. It’s our profession and our passion. We are ready to work in your best interest.

Angela Calla, AMP
Mortgage Expert
Host of “The Mortgage Show” on CKNW AM980 Saturdays at 7pm

Phone: 604-802-3983
Fax: 604-939-8795

Facebook: Angela Calla Team, AMP Your Mortgage Expert
Toll Free: 1-888-806-8080
Email: acalla@dominionlending.ca
Apply Online: www.angelacalla.ca
CLICK HERE to Watch My Video Presentation

 

 

 

 

22 Aug

BOC has wiggle room to keep rates low till spring

General

Posted by: Angela Calla

Consumer price index eases to 2.7 per cent for July, Statistics Canada says  the first time that inflation has been below a pace of three per cent since February which will give BoC some wiggle room to keep rates low.

OTTAWA – The pace of inflation eased in July as increases in the price of gasoline slowed, giving the Bank of Canada room to keep interest rates at their exceptionally low levels.

Statistics Canada said Friday that the consumer price index rose at an annual pace of 2.7 per cent in July, down from a 3.1 per cent rate in June.

It was the first time that inflation has been below a pace of three per cent since February. TD Bank deputy chief economist Derek Burleton said the “inflation genie” appeared to remain tucked in the bottle.

“It will give the Bank of Canada some wiggle room to keep rates low during this period of global uncertainty,” Burleton said.

“The thinking has shifted now to the fact that economic growth is probably going to slow and the fact that core inflation is still below the Bank of Canada’s target (of two per cent) means that inflation really isn’t a major risk at the moment.”

The core index, which is used by the Bank of Canada to help guide its decision on interest rates, gained 1.6 per cent following a 1.3 per cent gain in June. On a month-over-month basis, the core index was up 0.2 per cent in July, in line with economist expectations.

Bank of Canada governor Mark Carney told the House of Commons finance committee that the latest read on inflation was consistent with the central bank’s expectations.

Finance Minister Jim Flaherty and Carney testified before the committee on Friday following nearly two weeks of volatile trading on stock markets around the world due to fears of a sovereign debt crisis in Europe and worries that the United States may slip back into recession.

As the Canadian recovery has progressed, the central bank has emphasized that it would be prudent with respect to the possible withdrawal of any degree of monetary stimulus, Carney said.

“This is particularly important in the current environment of material external headwinds. To state the obvious, if the outlook for growth and inflation changes, the path for monetary policy will be affected accordingly,” he said.

BMO senior economist Sal Guatieri noted that the core rate appeared to be on track to fall short of the Bank of Canada’s estimate of 1.9 per cent for the third quarter.

“While Canadian inflation has been more volatile than usual of late, core inflation looks to settle just below the two per cent inflation target, providing an anchor for the headline rate to gravitate toward,” Guatieri wrote in a note to clients.

“The tame core reading will buy the Bank of Canada time to remain on the sidelines and is clearly no obstacle for rate cuts should global recession risks intensify.”

Energy prices were the main driver of the increase, gaining 12.9 per cent compared with a year ago. However, that was down from a 15.7 per cent increase in June. Gasoline prices were up 23.5 per cent compared with a year ago, compared with a 28.5 per cent increase in June.

Food prices were up 4.3 per cent, matching the increase in June.

Excluding food and energy prices, the consumer price index increased at a pace of 1.2 per cent in July, compared with a 1.4 per cent increase for June.

July was the first month to compare prices with a year ago that included the introduction of the harmonized sales tax in Ontario and B.C. as well as a two percentage point increase in the tax in Nova Scotia.

Last week, the U.S. Federal Reserve said it would look to keep its key interest rate near zero through the middle of 2013. The low rates in the United States will put more pressure on the Bank of Canada to keep borrowing costs on hold north of the border as well.

There had been recent speculation that the Canadian central bank would begin raising rates this fall to curb inflationary pressures in the Canadian economy, which has been growing faster than the United States.

However, economists say the recent stock market turmoil and fears of a double-dip recession in the United States have made it likely that rates won’t rise in Canada until next spring at the earliest.

http://ca.finance.yahoo.com/news/Consumer-price-index-eases-2-capress-1368143771.html

17 Aug

Got a secure job and lots of debt? Rejoice

General

Posted by: Angela Calla

The debt problems in the US and Europe have taken the pressure off Canadians with mega-mortgages and credit lines that are over the line.

Remember how Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty were warning not too long ago that high personal debt levels could become unmanageable when interest rates moved higher? Well, interest rates aren’t going anywhere for now.

That’s the view of economists following the worsening of the debt crisis in some European countries and the continuing difficulties the US economy is having.

Click here to read more in the Globe and Mail.

17 Aug

2011 is not 2008-here is why

General

Posted by: Angela Calla

While there are similarities, 2011 is not 2008. And it’s unlikely that we’re in for the same sort of market collapse we saw three years ago.

First of all, the fuel of the 2008 meltdown was an overleveraged US economy, and the match that started the fire was the collapse of the investment bank Lehman Brothers. The financial institutions were full of the now-famous “toxic assets” – basically, rotten debt. And because of the interconnectedness of the global financial system, no one wanted to lend anyone any cash. Credit dried up for almost everyone, including the Mom-and-Pop businesses on Main Street. Soon, even perfectly solvent businesses couldn’t access credit… or pay their bills and the recession was born.

But the trigger that started last week’s market mayhem was a downgrade of US government debt. Lehman had no money to pay its bills, while the US government does. The debt-ceiling story in July and early August was not a financial problem, it was a political one. The US economy is perfectly able to pay its debtors, either through cuts to spending, or through raising taxes. There are options on the table, but US politicians can’t agree on which bad medicine it wants to swallow. Lehman Brothers, on the other hand, had no options, and no medicine. It was bankrupt.

Secondly, leading up to 2008, enormous bubbles in both the US housing market and global equity markets were building. No one wanted to spoil the party, especially in the housing market where everyone was getting rich! But, looking back, it’s plain to see that problems were brewing. Typical for market bubbles, the bigger the bubble the more painful and spectacular is the bust. In 2011, however, there aren’t really any bubbles to burst. The US housing market is still DOA from the collapse it suffered three years ago. Stock and commodity prices, while having recovered significantly from the lows in 2009, are less out of line with reality than they were in the summer of 2008. Today, only gold is showing classic signs of a price bubble.

Click here to hear more from Todd Hirsch, Senior Economist for ATB Financial

17 Aug

Buyers will be the winners in Economic turmoil

General

Posted by: Angela Calla

Canada’s real estate market is now expected to grow this year rather than decline, as buyers take advantage of continued low interest rates that are intended to offset recent economic turmoil, economists said Tuesday.

 The comments came after the Canadian Real Estate Association revised its 2011 national forecast for home resales, citing stronger than expected sales and higher prices in the second quarter.

 An earlier CREA forecast called for a 1% dip in sales this year from 2010. But the association said Tuesday sales should grow this year – albeit less than 1% above 2010.

 CIBC Deputy Chief Economist Benjamin Tal said recent stock market uncertainty due to the European debt crisis and the US credit downgrade is actually helping boost sales in Canada’s real estate market.

 Click here for the full article from The Canadian Press.

17 Aug

Alot has happened since July 20th 2011

General

Posted by: Angela Calla

Bank of Canada Governor Mark Carney is expected to confirm the obvious Friday when he speaks for the first time in almost a month: Canada’s economy is slowing down.

A lot has happened since July 20th, the last time Carney spoke publicly. Then, on the heels of his latest economic forecast, he said Canada’s recovery was picking up steam.

In the weeks since, Washington narrowly escaped a debt-limit crisis, markets fluctuated wildly over European debt squabbles and the US Federal Reserve promised low interest rates through to 2013 shortly after Standard & Poor’s downgraded the US’s AAA credit rating.

This rush of negative economic news is the reason why MPs on the House of Commons finance committee have scheduled a special meeting Friday in Ottawa to hear from Carney and Finance Minister Jim Flaherty on what all these developments mean for Canada.

Click here to read more in the Globe and Mail.

16 Aug

Pitfalls of adding parents or children to the title of your home in order to qualify for a mortgage

General

Posted by: Angela Calla

The Pitfalls of Adding Parents or Children to the Title of your Home

in order to qualify for a mortgage

Here is an article on of our private lenders forwarded over to me I thought I would share. Tune into The Mortgage Show Saturdays at 7pm on CKNW AM980 with 2009 AMP of the Year Angela Calla to learn more or call 604-802-3983 acalla@dominionlending.ca to review your mortgage options.

 Adding parents or children to title in order to qualify for a mortgage may seem like a reasonable request.  After all, helping the family in need is a noble undertaking. However, before making changes to title, it is important to understand the unintended consequences.   Read More