By Mark Weisleder | Fri May 13 2011
Since writing about whether you could create a bidding war without an agent, I have received numerous emails from sellers, real estate agents and companies that provide “for sale by owner” services on the pros and cons of selling by yourself.
Allison Philpot sold her home in Ottawa using a For Sale by Owner marketing service. She listed her home for $419,000, and was able to create a bidding war after her first open house. She received a top bid of $429,000, which she accepted.
The buyers seemed like nice people, as they lived in the community. Unfortunately, they later terminated the deal, relying on a condition in the offer, although Allison suspected that they just found a house that they liked better. The second bidder was no longer interested.
She then dealt with another buyer, who was represented by a buyer agent. Allison later admitted that she was out-matched in the negotiations, and eventually sold her home for $405,000. In addition, she agreed to pay the buyer agent a commission of approximately 2 per cent or $8,000. So her net selling price was $397,000.
After the fact, she reasoned that had she used an agent from the start, she would have probably sold for about $430,000, and that even if she paid $20,000 in commission, she would have netted $410,000, or $13,000 more, without any of the aggravation.
Still, Allison states that had she not gone through the experience herself, she would probably have felt that she had overpaid the agent.
The buyer who walked away from the first deal later told Allison that he would never try and buy a property again without an agent, as he found the process way too stressful himself.
I received many emails from real estate agents talking about their additional network of potential buyers that they bring to every sale, as well as their own experience in qualifying potential buyers in advance and protecting sellers from unusual clauses that are sometimes inserted into agreements. Many agents in Vancouver are now setting up marketing events overseas, as more and more foreigners are looking at Canadian real estate as a safe haven to invest. More buyers mean better prices for sellers.
I spoke with Patrick Sullivan, a vice-president for Com Free, a company that provides services to assist home owners selling by themselves. These tools include a guide to assist the seller in determining the sale price, staging the home for sale, conducting open houses and preparing for negotiations. He suggested that there is no real harm in a seller trying to save money selling by themselves. They can sell with an agent later if they are not successful. He also claims that Com Free listings continue to grow and that they have many success stories. However, because they have no contract with the seller, the seller is not obligated to tell them how long it took to sell and what the property sold for, so it is difficult for Com Free to state how their seller compares with sellers who use an agent.
If you plan on doing this by yourself, at a minimum either have your lawyer look at the contract before you sign it, or make the deal conditional on your lawyer’s review and approval of the agreement. In my opinion, no marketing service can properly prepare buyers or sellers to deal with the stress and emotion that will invariably be involved with any real estate negotiation. It is not easy. Every buyer, seller and property are unique and will require a successful strategy to win.
Whatever method you choose to buy or sell your next home, be prepared and fully informed before you start.
Sunday, May 15, 2011
Monday, March 28, 2011
Commodities boom fuels rate hikes: BoC
Financial Post With Files From Reuters · Mar. 28, 2011
In what one analyst described as an "unambiguously bullish message for the Canadian dollar," the governor of the Bank of Canada says the global commodity boom is here to stay and countries should be prepared to deal with it in the time-honoured fashion - with higher interest rates.
While Mark Carney directed his message mainly to Latin American countries which are grappling with a surge in capital and inflation brought on by booming commodity prices, Douglas Porter, deputy chief economist at BMO Capital Markets, said his comments also hold implications for Canada.
"I would say that this speech suggests we should begin preparing for higher rates and an even stronger Canadian dollar, and soon," Mr. Porter said on Sunday. "I thought it was an unambiguously bullish message for the Canadian dollar."
In his speech, Mr. Carney said while supply disruptions and speculative pressures have contributed to higher commodity prices, rapid urbanization in emerging markets is underpinning the commodity boom and that process can be expected to continue for decades.
"Even though history teaches that all booms are finite, this one could go on for some time," Mr. Carney told the annual meeting of the InterAmerican Development Bank in Calgary on Saturday.
Against such a backdrop, countries must be prepared to deal with higher commodity prices over the longer term.
"Everything else being equal, higher commodity prices usually necessitate higher policy interest rates," Mr. Carney said. "The degree of the policy response depends on many factors, including the reasons behind the price increases, the expected persistence of the shock, and whether a country is a net exporter."
Many emerging countries have been dealing with the commodity price shock with various capital controls such as taxes on foreign inflows and avoiding raising interest rates in a bid to keep their currencies from rising and choking off export growth.
In a panel discussion on Saturday, Uruguayan central bank chief Mario Bergara said "monetary policy is not enough."
But Mr. Carney appeared unsettled by the view. "Can I jump in on this? I'm a little nervous where we are headed," Mr. Carney said. "Monetary policy has to deal with inflationary pressures, first and foremost," he said.
He warned that misguided policies in emerging markets for dealing with high inflation and a flood of capital could lead to financial instability and weak global economic growth.
"That's where one can make pretty big mistakes and delay too much, both on the monetary side, or on the pretty fundamental structural reforms," he said.
As he has in the past, Mr. Carney said a flexible exchange rate can help offset the inflationary impact from rising commodity prices and capital flows.
"To the extent that the nominal exchange rate responds, it helps offset the expansionary effect of the increase in investment, and gives price signals to the production sector for labour and capital to shift to the areas of higher return," Mr. Carney said.
That is exactly what has happened in Canada, with the loonie rising above US$1. Inflation in Canada has remained remarkably tame throughout the commodity boom.
Declining to let a currency rise, however can create a vicious circle, which can have far-reaching implications. "When large economies with undervalued exchange rates keep their currencies from appreciating, others feel pressured to follow," the governor said.
"Over time, macro policy becomes contorted: exchange rates more inflexible, monetary policy more hesitant, and economic controls more prevalent. The collective impact of this behaviour risks inflation and asset bubbles in emerging economies and, over time, subpar global growth."
As Canada's rising currency has helped restrain inflation, the Bank of Canada has taken a pause in raising interest rates. Many analysts expect the central bank to begin raising Canadian interest rates in the second half of the year, though they will be watching closely for any change in sentiment in the weeks ahead.
Mr. Porter at BMO said he would be watching for any change of tone at the bank's upcoming monetary policy report on April 13.
In what one analyst described as an "unambiguously bullish message for the Canadian dollar," the governor of the Bank of Canada says the global commodity boom is here to stay and countries should be prepared to deal with it in the time-honoured fashion - with higher interest rates.
While Mark Carney directed his message mainly to Latin American countries which are grappling with a surge in capital and inflation brought on by booming commodity prices, Douglas Porter, deputy chief economist at BMO Capital Markets, said his comments also hold implications for Canada.
"I would say that this speech suggests we should begin preparing for higher rates and an even stronger Canadian dollar, and soon," Mr. Porter said on Sunday. "I thought it was an unambiguously bullish message for the Canadian dollar."
In his speech, Mr. Carney said while supply disruptions and speculative pressures have contributed to higher commodity prices, rapid urbanization in emerging markets is underpinning the commodity boom and that process can be expected to continue for decades.
"Even though history teaches that all booms are finite, this one could go on for some time," Mr. Carney told the annual meeting of the InterAmerican Development Bank in Calgary on Saturday.
Against such a backdrop, countries must be prepared to deal with higher commodity prices over the longer term.
"Everything else being equal, higher commodity prices usually necessitate higher policy interest rates," Mr. Carney said. "The degree of the policy response depends on many factors, including the reasons behind the price increases, the expected persistence of the shock, and whether a country is a net exporter."
Many emerging countries have been dealing with the commodity price shock with various capital controls such as taxes on foreign inflows and avoiding raising interest rates in a bid to keep their currencies from rising and choking off export growth.
In a panel discussion on Saturday, Uruguayan central bank chief Mario Bergara said "monetary policy is not enough."
But Mr. Carney appeared unsettled by the view. "Can I jump in on this? I'm a little nervous where we are headed," Mr. Carney said. "Monetary policy has to deal with inflationary pressures, first and foremost," he said.
He warned that misguided policies in emerging markets for dealing with high inflation and a flood of capital could lead to financial instability and weak global economic growth.
"That's where one can make pretty big mistakes and delay too much, both on the monetary side, or on the pretty fundamental structural reforms," he said.
As he has in the past, Mr. Carney said a flexible exchange rate can help offset the inflationary impact from rising commodity prices and capital flows.
"To the extent that the nominal exchange rate responds, it helps offset the expansionary effect of the increase in investment, and gives price signals to the production sector for labour and capital to shift to the areas of higher return," Mr. Carney said.
That is exactly what has happened in Canada, with the loonie rising above US$1. Inflation in Canada has remained remarkably tame throughout the commodity boom.
Declining to let a currency rise, however can create a vicious circle, which can have far-reaching implications. "When large economies with undervalued exchange rates keep their currencies from appreciating, others feel pressured to follow," the governor said.
"Over time, macro policy becomes contorted: exchange rates more inflexible, monetary policy more hesitant, and economic controls more prevalent. The collective impact of this behaviour risks inflation and asset bubbles in emerging economies and, over time, subpar global growth."
As Canada's rising currency has helped restrain inflation, the Bank of Canada has taken a pause in raising interest rates. Many analysts expect the central bank to begin raising Canadian interest rates in the second half of the year, though they will be watching closely for any change in sentiment in the weeks ahead.
Mr. Porter at BMO said he would be watching for any change of tone at the bank's upcoming monetary policy report on April 13.
Sunday, February 27, 2011
Mr. Carney's rate dilemma
Fears that Libya could send oil soaring to new heights and spark another global downturn had eased by the end of last week, but the unpredictability of upheaval in the region gives Mark Carney yet another reason to keep rates on hold for longer than most expect.
On Tuesday, the Bank of Canada Governor is expected to leave his benchmark interest rate at 1 per cent, where it has been since last September. The real question is whether he’ll drop any hints about when he intends to start tightening again.
More related to this story
Most economists say a strengthening labour market, greater investment by businesses and a resurgent export sector will push the central bank off the sidelines in late May or mid-July, and possibly sooner if the next inflation report from Statistics Canada shows higher energy and food costs seeping into other areas.
But a small group of outliers has been saying for months that Mr. Carney might stay on hold until October or later, a timeline that would mark the second pause of more than a year since the crisis started in 2008. Increasingly, it looks as if they may be right.
True, the accelerating rebound in the U.S. economy – Canada’s No. 1 customer – 'points to faster growth on this side of the border, too. A report from Statistics Canada on Monday will probably show that in the fourth quarter, the annual pace of expansion surpassed the 2.3-per-cent rate Mr. Carney estimated in January. Trade figures from December indicated tax cuts and other steps to boost the U.S. helped Canadian exporters clock their best month in three decades. And in January, employers hired four times as many workers as anticipated, a sign that momentum from late last year carried over into 2011.
However, the 7.8-per cent jobless rate is keeping a lid on wages, which is partly why inflation remains well within Mr. Carney’s comfort zone. The central banker aims to keep annual inflation around 2 per cent and pays closest attention to a measure of price gains that strips out things like gasoline, electricity and most groceries. In January, that so-called annual core rate was 1.4 per cent, a tick slower than the previous month’s pace.
Also, recall that at his last decision on Jan. 18, Mr. Carney held firm even while citing a slightly improved forecast for the economy this year and next. Europe’s debt and bank troubles continued to be a “significant” source of uncertainty, he said at the time and could easily still say today. And though things were looking up for the United States, the “cumulative effects” of a currency at par with the greenback and Canadian companies’ tepid progress in improving their productivity would restrain companies’ ability to reap the rewards, he warned.
That was before revolutions in Tunisia and Egypt unleashed the torrent of protest across the region which last week sent oil prices past $100 (U.S.) a barrel for the first time since 2008, when $150-a-barrel crude exacerbated the burgeoning global financial crisis.
By the end of last week, the general consensus seemed to be that while past oil shocks have led to recessions, all will be fine this time around as long as suppliers bigger than Libya, such as Saudi Arabia and Iran, don’t implode, too, and as long as prices don’t surge beyond about $120 for a long stretch. Indeed, as a net exporter of oil, higher prices aren’t necessarily bad for Canada, and of course are great for energy companies in Alberta.
Nonetheless, the potential stumbling blocks for the Canadian economy are many.
Higher oil prices will make it harder for China, India and other rapidly-growing emerging markets to contain inflation without aggressive tightening moves that choke off demand, while also squeezing the ability of consumers in the United States and Europe to spend money on anything other than basics like energy and food.
“The Bank of Canada is in a bind, because it’s stuck in an environment where the strength in the domestic economy signals rates need to go up, but the external side shows there’s still a lot of risks,” Craig Alexander, chief economist at Toronto-Dominion Bank, said in an interview. “There’s risks around sovereign debt in Europe, there’s risks around excessive strength and inflation in emerging markets, there’s risks around the U.S. recovery, and now there’s risks around geopolitics in the Middle East.” Worse, the loonie could climb higher, making it that much harder for manufacturers in central Canada to sell their goods abroad and making their operations more costly, at least for a while.
“As long as the instability doesn’t continue, short-term price spikes are not so much of a concern for businesses, but what is a major concern right now is what the impact will be on customers,” said Jay Myers, president and chief executive officer of Canadian Manufacturers & Exporters. “A lot of the recovery in central Canada has been auto-related, and a lot of the recovery in the auto sector has been driven by consumer purchases (in Canada and the U.S.) of larger vehicles and trucks, so that’s an area that would probably be extremely sensitive to sustained high energy costs.” TD’s Mr. Alexander is in the camp that says the global economy will ride out the oil storm and domestic conditions in Canada will force Mr. Carney to start raising rates beginning with his July 19 decision. Still, Mr. Alexander acknowledged that persistent uncertainty around the world could delay the central bank.
At the very least, it could mean Mr. Carney pulls the trigger in July to gain some of the ground he needs to make up to get rates back to a “neutral” level – 3.5 per cent or 4 per cent – and then goes back to the sidelines in case more trouble flares up outside of Canada.
Indeed, Mr. Carney will be wary of pulling too much stimulus away too quickly while world events, and exporters’ medium-term prospects, remain so unsettled.
“The one thing they don’t want to do is have to reverse course,” Mr. Alexander said.
So, even as Mr. Carney sprinkles his statement Tuesday with evidence that the domestic rebound is gathering steam, he will continue to stress the growing list of external wild cards.
On Tuesday, the Bank of Canada Governor is expected to leave his benchmark interest rate at 1 per cent, where it has been since last September. The real question is whether he’ll drop any hints about when he intends to start tightening again.
More related to this story
Most economists say a strengthening labour market, greater investment by businesses and a resurgent export sector will push the central bank off the sidelines in late May or mid-July, and possibly sooner if the next inflation report from Statistics Canada shows higher energy and food costs seeping into other areas.
But a small group of outliers has been saying for months that Mr. Carney might stay on hold until October or later, a timeline that would mark the second pause of more than a year since the crisis started in 2008. Increasingly, it looks as if they may be right.
True, the accelerating rebound in the U.S. economy – Canada’s No. 1 customer – 'points to faster growth on this side of the border, too. A report from Statistics Canada on Monday will probably show that in the fourth quarter, the annual pace of expansion surpassed the 2.3-per-cent rate Mr. Carney estimated in January. Trade figures from December indicated tax cuts and other steps to boost the U.S. helped Canadian exporters clock their best month in three decades. And in January, employers hired four times as many workers as anticipated, a sign that momentum from late last year carried over into 2011.
However, the 7.8-per cent jobless rate is keeping a lid on wages, which is partly why inflation remains well within Mr. Carney’s comfort zone. The central banker aims to keep annual inflation around 2 per cent and pays closest attention to a measure of price gains that strips out things like gasoline, electricity and most groceries. In January, that so-called annual core rate was 1.4 per cent, a tick slower than the previous month’s pace.
Also, recall that at his last decision on Jan. 18, Mr. Carney held firm even while citing a slightly improved forecast for the economy this year and next. Europe’s debt and bank troubles continued to be a “significant” source of uncertainty, he said at the time and could easily still say today. And though things were looking up for the United States, the “cumulative effects” of a currency at par with the greenback and Canadian companies’ tepid progress in improving their productivity would restrain companies’ ability to reap the rewards, he warned.
That was before revolutions in Tunisia and Egypt unleashed the torrent of protest across the region which last week sent oil prices past $100 (U.S.) a barrel for the first time since 2008, when $150-a-barrel crude exacerbated the burgeoning global financial crisis.
By the end of last week, the general consensus seemed to be that while past oil shocks have led to recessions, all will be fine this time around as long as suppliers bigger than Libya, such as Saudi Arabia and Iran, don’t implode, too, and as long as prices don’t surge beyond about $120 for a long stretch. Indeed, as a net exporter of oil, higher prices aren’t necessarily bad for Canada, and of course are great for energy companies in Alberta.
Nonetheless, the potential stumbling blocks for the Canadian economy are many.
Higher oil prices will make it harder for China, India and other rapidly-growing emerging markets to contain inflation without aggressive tightening moves that choke off demand, while also squeezing the ability of consumers in the United States and Europe to spend money on anything other than basics like energy and food.
“The Bank of Canada is in a bind, because it’s stuck in an environment where the strength in the domestic economy signals rates need to go up, but the external side shows there’s still a lot of risks,” Craig Alexander, chief economist at Toronto-Dominion Bank, said in an interview. “There’s risks around sovereign debt in Europe, there’s risks around excessive strength and inflation in emerging markets, there’s risks around the U.S. recovery, and now there’s risks around geopolitics in the Middle East.” Worse, the loonie could climb higher, making it that much harder for manufacturers in central Canada to sell their goods abroad and making their operations more costly, at least for a while.
“As long as the instability doesn’t continue, short-term price spikes are not so much of a concern for businesses, but what is a major concern right now is what the impact will be on customers,” said Jay Myers, president and chief executive officer of Canadian Manufacturers & Exporters. “A lot of the recovery in central Canada has been auto-related, and a lot of the recovery in the auto sector has been driven by consumer purchases (in Canada and the U.S.) of larger vehicles and trucks, so that’s an area that would probably be extremely sensitive to sustained high energy costs.” TD’s Mr. Alexander is in the camp that says the global economy will ride out the oil storm and domestic conditions in Canada will force Mr. Carney to start raising rates beginning with his July 19 decision. Still, Mr. Alexander acknowledged that persistent uncertainty around the world could delay the central bank.
At the very least, it could mean Mr. Carney pulls the trigger in July to gain some of the ground he needs to make up to get rates back to a “neutral” level – 3.5 per cent or 4 per cent – and then goes back to the sidelines in case more trouble flares up outside of Canada.
Indeed, Mr. Carney will be wary of pulling too much stimulus away too quickly while world events, and exporters’ medium-term prospects, remain so unsettled.
“The one thing they don’t want to do is have to reverse course,” Mr. Alexander said.
So, even as Mr. Carney sprinkles his statement Tuesday with evidence that the domestic rebound is gathering steam, he will continue to stress the growing list of external wild cards.
Friday, January 28, 2011
Canada no longer leads recovery standings
BARRIE McKENNA - The Globe and Mail
January 28, 2011
OTTAWA- It’s been badge of honour for Canada on the world stage: the only major economy to recoup all the jobs lost in the recession.
Prime Minister Stephen Harper, Finance Minister Jim Flaherty and scores of economists all trumpeted the rapid jobs recovery as evidence that Canada beat the world in getting back on its feet after the worst global slump in more than a generation.
Unfortunately, it’s not true.
Revisions released Friday by Statistics Canada show that the country is still roughly 30,000 jobs shy of getting back all the jobs destroyed, based on updated population data from the 2006 census. The revisions underscore the reality that the Canadian economy is still facing a lot of turbulence, and that it’s no longer outperforming the rest of the world.
“At some stage we have to turn the page and move on, and look at where the economy is going in the next couple of years, rather than where it’s been,” Toronto-Dominion Bank economist Pascal Gauthier said.
A few tens of thousands of jobs either side of the pre-recession waterline doesn’t change the overall picture, Mr. Gauthier pointed out. Yes, Canada outperformed many others with its quick snap-back from recession, but lagging exports, competitiveness and productivity may hold it back in the months ahead, he said.
“The revisions tell us there’s still some road ahead in terms of recovery in employment,” Mr. Gauthier said.
Statscan’s initial estimate, based on the 2001 census, showed Canada returned to neutral last August, and continued to gain jobs in the months since. Now, the agency says Canada lost 428,000 jobs between October, 2008, and July, 2009, and has only recovered 398,000. That leaves the country short of where it was, and even farther away from where it needs to be just to keep pace with the growing population.
From an economic standpoint, the revisions aren’t overly significant. The net change over the past two years amounts to 75,000 jobs, or about what a healthy Canadian economy would create in a month, pointed out Scotia Capital economist Derek Holt.
Nonetheless, the revisions are a powerful reminder to policy makers that they should stop relying on the “tired” refrain that Canada is outperforming its rivals in jobs and economic growth, Mr. Holt said. It’s no longer true, and several other economies are now generating a lot more economic momentum than Canada, most notably the United States, he said.
“The political tone to the revisions is more important than their economic significance,” Mr. Holt said. “We can’t lay claim to being the best-performing economy anymore.”
He said past performance is a poor predictor of what will happen next. In a research note this week, Mr. Holt highlighted five reasons why the U.S. economy will do better than Canada’s this year and next, including more fiscal stimulus, greater pent-up consumer demand, suddenly cheap house prices, depleted business inventories and Canada’s lagging export competitiveness.
Canada continues to face challenges in export markets, productivity, competitiveness and unit labour costs. And all of those factors will limit economic growth and job creation in the months ahead, he said.
Ultimately, the jobless rate is better gauge of whether the labour market has returned to pre-recession conditions, TD’s Mr. Gauthier said. And at 7.6 per cent (unchanged since December), it’s still more than a full percentage-point higher than what it was when Canada tumbled into recession at the end of 2008.
There’s also some evidence that the quality of the jobs created since the recession isn’t the same. Toronto-based economist Arthur Donner said high-wage, goods-producing industries are still about 40 per cent below pre-recession levels. Governments have played an outsized role in job creation.
Mr. Gauthier, however, said that the trend in recent job creation isn’t significantly different than in previous recessions in terms of measures, such as the mix of part-time versus full-time hiring.
The next snapshot of how Canada’s labour market is faring comes next Friday, when January’s jobs data are due.
Friday’s revisions also affect job-creation figures for November and December. Statscan now says 30,000 jobs were created in December, up from the estimated 22,000. November saw only 6,000 jobs created, instead of the previous estimate of 15,000.
January 28, 2011
OTTAWA- It’s been badge of honour for Canada on the world stage: the only major economy to recoup all the jobs lost in the recession.
Prime Minister Stephen Harper, Finance Minister Jim Flaherty and scores of economists all trumpeted the rapid jobs recovery as evidence that Canada beat the world in getting back on its feet after the worst global slump in more than a generation.
Unfortunately, it’s not true.
Revisions released Friday by Statistics Canada show that the country is still roughly 30,000 jobs shy of getting back all the jobs destroyed, based on updated population data from the 2006 census. The revisions underscore the reality that the Canadian economy is still facing a lot of turbulence, and that it’s no longer outperforming the rest of the world.
“At some stage we have to turn the page and move on, and look at where the economy is going in the next couple of years, rather than where it’s been,” Toronto-Dominion Bank economist Pascal Gauthier said.
A few tens of thousands of jobs either side of the pre-recession waterline doesn’t change the overall picture, Mr. Gauthier pointed out. Yes, Canada outperformed many others with its quick snap-back from recession, but lagging exports, competitiveness and productivity may hold it back in the months ahead, he said.
“The revisions tell us there’s still some road ahead in terms of recovery in employment,” Mr. Gauthier said.
Statscan’s initial estimate, based on the 2001 census, showed Canada returned to neutral last August, and continued to gain jobs in the months since. Now, the agency says Canada lost 428,000 jobs between October, 2008, and July, 2009, and has only recovered 398,000. That leaves the country short of where it was, and even farther away from where it needs to be just to keep pace with the growing population.
From an economic standpoint, the revisions aren’t overly significant. The net change over the past two years amounts to 75,000 jobs, or about what a healthy Canadian economy would create in a month, pointed out Scotia Capital economist Derek Holt.
Nonetheless, the revisions are a powerful reminder to policy makers that they should stop relying on the “tired” refrain that Canada is outperforming its rivals in jobs and economic growth, Mr. Holt said. It’s no longer true, and several other economies are now generating a lot more economic momentum than Canada, most notably the United States, he said.
“The political tone to the revisions is more important than their economic significance,” Mr. Holt said. “We can’t lay claim to being the best-performing economy anymore.”
He said past performance is a poor predictor of what will happen next. In a research note this week, Mr. Holt highlighted five reasons why the U.S. economy will do better than Canada’s this year and next, including more fiscal stimulus, greater pent-up consumer demand, suddenly cheap house prices, depleted business inventories and Canada’s lagging export competitiveness.
Canada continues to face challenges in export markets, productivity, competitiveness and unit labour costs. And all of those factors will limit economic growth and job creation in the months ahead, he said.
Ultimately, the jobless rate is better gauge of whether the labour market has returned to pre-recession conditions, TD’s Mr. Gauthier said. And at 7.6 per cent (unchanged since December), it’s still more than a full percentage-point higher than what it was when Canada tumbled into recession at the end of 2008.
There’s also some evidence that the quality of the jobs created since the recession isn’t the same. Toronto-based economist Arthur Donner said high-wage, goods-producing industries are still about 40 per cent below pre-recession levels. Governments have played an outsized role in job creation.
Mr. Gauthier, however, said that the trend in recent job creation isn’t significantly different than in previous recessions in terms of measures, such as the mix of part-time versus full-time hiring.
The next snapshot of how Canada’s labour market is faring comes next Friday, when January’s jobs data are due.
Friday’s revisions also affect job-creation figures for November and December. Statscan now says 30,000 jobs were created in December, up from the estimated 22,000. November saw only 6,000 jobs created, instead of the previous estimate of 15,000.
Friday, January 14, 2011
Real estate market heads into 2011 with stronger than expected momentum
Sunny Freeman, The Canadian Press
TORONTO - Low interest rates should continue to prop up sales in Canada's resale housing market in early 2011 as the market continues to ride the momentum of a stronger than expected finish to 2010, the Canadian Real Estate Association said Friday.
"Perceptions are that the housing market has stabilized and people are feeling a little more certain about getting into the market," Gregory Klump, CREA’s chief economist, said Friday after the association reported better than expected sales figures for 2010.
"The hand-off to 2011 for sales activity in the fourth quarter suggests that the continuation of low interest rates will further support the housing market,” he said.
Interest rates that have hovered at historical lows longer than predicted, together with improved consumer confidence, helped stabilize the market in the fourth quarter as sales rose 12.1 per cent over third-quarter levels, Klump said.
In December, seasonally adjusted sales edged down 0.6 per cent from November, ending a four-month string of gains. Actual sales were down 14.4 per cent compared with the record-setting sales of December 2009, but were slightly better than the 10-year average for the month.
The national average home price in December was $344,551 — stable compared with October and November and up two per cent from December 2009.
A solid fourth quarter pushed full-year sales higher than CREA had predicted to 447,000 homes sold over CREA's Multiple Listing Service last year.
That was down 3.9 per cent from 2009, a decline that was about one per cent lower than CREA had forecast in November.
Strong fourth-quarter sales also drove the national average home price higher than CREA had earlier predicted. Last year, the annual average home price climbed 5.8 per cent to $339,030, after reaching a peak of $346,881 in May.
In an earlier forecast, CREA had projected sales volume would fall 4.9 per cent in 2010, while annual average home prices were expected to rise by 3.1 per cent across the country, reaching $330,200.
In that forecast, CREA said housing resales would slide a further nine per cent this year due to lacklustre economic and job growth, weak consumer confidence and interest rate hikes that are expected to turn higher in the middle of this year.
The average national price is projected to fall by 1.3 per cent to $326,000 this year, although actual individual prices vary widely depending on type of housing and location.
However, Klump indicated that CREA would revise its 2011 forecast in early February now that fourth-quarter sales data have been released.
And while the momentum going into the first quarter paints a rosier picture of the housing market, Klump said he anticipates sales activity will decline in the second half of the year as mortgages become more expensive to carry.
Douglas Porter, deputy chief economist at the Bank of Montreal, said the housing market appears to have achieved "a perfect soft landing" after sales skyrocketed as the economic recovery took hold.
"The market is relatively well balanced and prices are still meandering ahead," he said.
"We expect no fireworks in 2011, with rates poised to slowly grind higher later in the year, job growth decent but not spectacular, and buyers potentially constrained by concerns over record household debt levels."
December sales rebounded from a trough reached in July when sales were down as much as 30 per cent year-over-year.
The summer market was struck by the impact of two months of interest rate hikes by the Bank of Canada, the introduction of the harmonized sales tax in B.C. and Ontario and new rules governing mortgage qualification.
Canadians rushed into the market in late 2009 and early 2010 to take advantage of historically low interest rates as the central bank's overnight rate sat at 0.25 per cent before beginning a gradual rise to a still-low one per cent.
The Bank of Canada is widely expected to leave the overnight rate unchanged at its next announcement on Tuesday and economists expect the rate to remain at one per cent until the middle of this year.
Offsetting the low cost of borrowing is the relatively high level of consumer debt that Canadians have amassed as well as uncertainty about the strength of the economic recovery and a stubborn unemployment rate.
In December, sales were up in half of local markets, led by Calgary, Winnipeg, and Hamilton.
Sales in Canada's largest urban centres and once white hot real estate markets — Toronto, Vancouver and Montreal — were among the markets that posted small monthly declines.
“Sales may be starting to plateau in some of Canada’s most active and expensive housing markets. Combined with a pickup in new listings and further interest rate increases, the stage is being set for smaller price gains and a further deceleration in the growth of mortgage debt,” Klump said.
The number of new listings in December rose by less than one percentage point. New listings remain 14.2 per cent below the peak reached in April 2010.
TORONTO - Low interest rates should continue to prop up sales in Canada's resale housing market in early 2011 as the market continues to ride the momentum of a stronger than expected finish to 2010, the Canadian Real Estate Association said Friday.
"Perceptions are that the housing market has stabilized and people are feeling a little more certain about getting into the market," Gregory Klump, CREA’s chief economist, said Friday after the association reported better than expected sales figures for 2010.
"The hand-off to 2011 for sales activity in the fourth quarter suggests that the continuation of low interest rates will further support the housing market,” he said.
Interest rates that have hovered at historical lows longer than predicted, together with improved consumer confidence, helped stabilize the market in the fourth quarter as sales rose 12.1 per cent over third-quarter levels, Klump said.
In December, seasonally adjusted sales edged down 0.6 per cent from November, ending a four-month string of gains. Actual sales were down 14.4 per cent compared with the record-setting sales of December 2009, but were slightly better than the 10-year average for the month.
The national average home price in December was $344,551 — stable compared with October and November and up two per cent from December 2009.
A solid fourth quarter pushed full-year sales higher than CREA had predicted to 447,000 homes sold over CREA's Multiple Listing Service last year.
That was down 3.9 per cent from 2009, a decline that was about one per cent lower than CREA had forecast in November.
Strong fourth-quarter sales also drove the national average home price higher than CREA had earlier predicted. Last year, the annual average home price climbed 5.8 per cent to $339,030, after reaching a peak of $346,881 in May.
In an earlier forecast, CREA had projected sales volume would fall 4.9 per cent in 2010, while annual average home prices were expected to rise by 3.1 per cent across the country, reaching $330,200.
In that forecast, CREA said housing resales would slide a further nine per cent this year due to lacklustre economic and job growth, weak consumer confidence and interest rate hikes that are expected to turn higher in the middle of this year.
The average national price is projected to fall by 1.3 per cent to $326,000 this year, although actual individual prices vary widely depending on type of housing and location.
However, Klump indicated that CREA would revise its 2011 forecast in early February now that fourth-quarter sales data have been released.
And while the momentum going into the first quarter paints a rosier picture of the housing market, Klump said he anticipates sales activity will decline in the second half of the year as mortgages become more expensive to carry.
Douglas Porter, deputy chief economist at the Bank of Montreal, said the housing market appears to have achieved "a perfect soft landing" after sales skyrocketed as the economic recovery took hold.
"The market is relatively well balanced and prices are still meandering ahead," he said.
"We expect no fireworks in 2011, with rates poised to slowly grind higher later in the year, job growth decent but not spectacular, and buyers potentially constrained by concerns over record household debt levels."
December sales rebounded from a trough reached in July when sales were down as much as 30 per cent year-over-year.
The summer market was struck by the impact of two months of interest rate hikes by the Bank of Canada, the introduction of the harmonized sales tax in B.C. and Ontario and new rules governing mortgage qualification.
Canadians rushed into the market in late 2009 and early 2010 to take advantage of historically low interest rates as the central bank's overnight rate sat at 0.25 per cent before beginning a gradual rise to a still-low one per cent.
The Bank of Canada is widely expected to leave the overnight rate unchanged at its next announcement on Tuesday and economists expect the rate to remain at one per cent until the middle of this year.
Offsetting the low cost of borrowing is the relatively high level of consumer debt that Canadians have amassed as well as uncertainty about the strength of the economic recovery and a stubborn unemployment rate.
In December, sales were up in half of local markets, led by Calgary, Winnipeg, and Hamilton.
Sales in Canada's largest urban centres and once white hot real estate markets — Toronto, Vancouver and Montreal — were among the markets that posted small monthly declines.
“Sales may be starting to plateau in some of Canada’s most active and expensive housing markets. Combined with a pickup in new listings and further interest rate increases, the stage is being set for smaller price gains and a further deceleration in the growth of mortgage debt,” Klump said.
The number of new listings in December rose by less than one percentage point. New listings remain 14.2 per cent below the peak reached in April 2010.
Monday, January 3, 2011
No solid basis for the scary speculation
By JAY BRYAN, The Montreal Gazette December 30, 2010
One of the biggest business stories of 2010 was one that never happened: the disastrous Canadian housing bubble and crash that never came to pass.
Of course, we know this now. Canada's hot housing market has settled down without any serious slump in either prices or sales. It's hard to find a reputable analyst who predicts anything other than mild fluctuations in housing over the coming year or two.
But in the early months of the year, a superficial look at Canada's home values found them rocketing up at an unsustainable pace, making it frighteningly plausible that Canada could be headed into the same kind of disastrous real-estate bubble and meltdown that we saw right across the border.
And a superficial look is just what this issue got. There was never a solid basis for the scary speculation, but it just kept bubbling up. Serious Canadian media, including Toronto's Globe and Mail, made housing-bubble headlines into a staple. Below the headline, there was usually an acknowledgement that there was no evidence of anything more than a hot market, but the scary headlines didn't stop.
Even big American newspapers that usually give Canada about as much coverage as Iceland became interested. The Wall Street Journal ran a front-page story in February under the headline Housing Rebound in Canada Spurs Talk of a New Bubble.
Where was the talk coming from? The most prominently quoted source wasn't an economist or a real-estate expert; it was Garth Turner, a former politician who had been promoting a book predicting a housing collapse.
A month later, the New York Times jumped in. "Some see a Real Estate Bubble Forming in Canada," said the headline. Like the Wall Street Journal piece, it was thin gruel. It didn't cite anybody who actually said there was a bubble, but did find one bank economist who speculated that if home prices kept shooting up rapidly for another year, a bubble would form -although he didn't actually predict that this would happen.
The roots of bubble hysteria are understandable. After the terrible experience of the U.S., it made sense that many would be hypersensitive to any evidence that something equally disastrous could happen here.
What's not so understandable was that journalists working for some of the best newspapers in North America would give credence to such a hare-brained idea without finding any evidence that it was actually happening.
Canadian housing was clearly becoming overpriced early this year, but an overpriced market isn't the same thing as a bubble, as any competent economist is quick to explain. Overpricing is a perfectly normal thing in any market.
As investors become more or less optimistic, the price of an asset -stocks, commodities or real estate -constantly moves up and down. Sometimes it's too high and ripe for a fall -but that's not a bubble. And unlike stocks or commodities, homes are an asset that's resistant to big drops in value. Many owners are perfectly willing to wait if they don't get a satisfactory price.
A bubble, unlike a normal price cycle, is a rare phenomenon that occurs when overoptimism and price excesses last so long and becomes so extreme that a large number of people begin to believe that prices can only go up, never down. When this belief became entrenched in the U.S. six or seven years ago, investors and even ordinary wage-earners turned into speculators, taking out loans they could never repay to load up on condos or tract homes. For a while, they made money, flipping these homes at ever-higher prices. But when the music stopped, they were wiped out and the market was so out of whack that it collapsed.
This kind of speculative bubble was allowed to form in the U.S. housing market through a combination of monetary policy that was too easy for too long and shockingly irresponsible regulation of banks, which enabled people to get mortgages they could never repay and allowed banks to package these bad mortgages into toxic securities that eventually shook the foundations of the banking industry in the U.S.
In Canada, nothing remotely like this happened. True, the rock-bottom interest rates we used to fight the recession did cause a brief boom in housing sales, but that's normal. Housing usually booms in response to very cheap money, which is why the authorities count on it to lead the way out of recessions. This time, with interest rates even lower than would be typical, the boom was exceptionally strong. But we had no U.S.-style bubble and there was never much chance of one, because banking regulation here is conservative.
In Canada, it was never possible to get a mortgage without any proof of income or assets. It was uncommon to get a sub-prime loan. As well, banks never adopted the practice of selling off most of their mortgages, so they had a strong incentive to lend only to those who were likely to repay.
That's why it's not at all surprising that once pent-up demand for homes tapered off and rising prices brought more homes onto the market, the boom cooled off and the market returned to balance, just as many analysts had expected.
One of the biggest business stories of 2010 was one that never happened: the disastrous Canadian housing bubble and crash that never came to pass.
Of course, we know this now. Canada's hot housing market has settled down without any serious slump in either prices or sales. It's hard to find a reputable analyst who predicts anything other than mild fluctuations in housing over the coming year or two.
But in the early months of the year, a superficial look at Canada's home values found them rocketing up at an unsustainable pace, making it frighteningly plausible that Canada could be headed into the same kind of disastrous real-estate bubble and meltdown that we saw right across the border.
And a superficial look is just what this issue got. There was never a solid basis for the scary speculation, but it just kept bubbling up. Serious Canadian media, including Toronto's Globe and Mail, made housing-bubble headlines into a staple. Below the headline, there was usually an acknowledgement that there was no evidence of anything more than a hot market, but the scary headlines didn't stop.
Even big American newspapers that usually give Canada about as much coverage as Iceland became interested. The Wall Street Journal ran a front-page story in February under the headline Housing Rebound in Canada Spurs Talk of a New Bubble.
Where was the talk coming from? The most prominently quoted source wasn't an economist or a real-estate expert; it was Garth Turner, a former politician who had been promoting a book predicting a housing collapse.
A month later, the New York Times jumped in. "Some see a Real Estate Bubble Forming in Canada," said the headline. Like the Wall Street Journal piece, it was thin gruel. It didn't cite anybody who actually said there was a bubble, but did find one bank economist who speculated that if home prices kept shooting up rapidly for another year, a bubble would form -although he didn't actually predict that this would happen.
The roots of bubble hysteria are understandable. After the terrible experience of the U.S., it made sense that many would be hypersensitive to any evidence that something equally disastrous could happen here.
What's not so understandable was that journalists working for some of the best newspapers in North America would give credence to such a hare-brained idea without finding any evidence that it was actually happening.
Canadian housing was clearly becoming overpriced early this year, but an overpriced market isn't the same thing as a bubble, as any competent economist is quick to explain. Overpricing is a perfectly normal thing in any market.
As investors become more or less optimistic, the price of an asset -stocks, commodities or real estate -constantly moves up and down. Sometimes it's too high and ripe for a fall -but that's not a bubble. And unlike stocks or commodities, homes are an asset that's resistant to big drops in value. Many owners are perfectly willing to wait if they don't get a satisfactory price.
A bubble, unlike a normal price cycle, is a rare phenomenon that occurs when overoptimism and price excesses last so long and becomes so extreme that a large number of people begin to believe that prices can only go up, never down. When this belief became entrenched in the U.S. six or seven years ago, investors and even ordinary wage-earners turned into speculators, taking out loans they could never repay to load up on condos or tract homes. For a while, they made money, flipping these homes at ever-higher prices. But when the music stopped, they were wiped out and the market was so out of whack that it collapsed.
This kind of speculative bubble was allowed to form in the U.S. housing market through a combination of monetary policy that was too easy for too long and shockingly irresponsible regulation of banks, which enabled people to get mortgages they could never repay and allowed banks to package these bad mortgages into toxic securities that eventually shook the foundations of the banking industry in the U.S.
In Canada, nothing remotely like this happened. True, the rock-bottom interest rates we used to fight the recession did cause a brief boom in housing sales, but that's normal. Housing usually booms in response to very cheap money, which is why the authorities count on it to lead the way out of recessions. This time, with interest rates even lower than would be typical, the boom was exceptionally strong. But we had no U.S.-style bubble and there was never much chance of one, because banking regulation here is conservative.
In Canada, it was never possible to get a mortgage without any proof of income or assets. It was uncommon to get a sub-prime loan. As well, banks never adopted the practice of selling off most of their mortgages, so they had a strong incentive to lend only to those who were likely to repay.
That's why it's not at all surprising that once pent-up demand for homes tapered off and rising prices brought more homes onto the market, the boom cooled off and the market returned to balance, just as many analysts had expected.
Tuesday, December 14, 2010
Debt picture not so bleak: BMO
CBC NEWS - Tuesday, December 14, 2010
The cacophony of concern over rising Canadian debt levels is overshadowing other encouraging personal finance data, a prominent economist says.
Statistics Canada released data Monday showing that Canadian household debt has risen to 148 per cent of disposable income. The eye-popping figure is all the more alarming considering it's the first time since the 1990s that Canada's ratio has been higher than that of the U.S.
Alarm bells rang everywhere from the Bank of Canada to the Finance Department on Monday, and Canadians were urged to tighten their belts and prepare for a time of austerity.
But a closer look at the numbers indicates the picture might not be so bleak.
"The continued laser-like focus on debt overshadows the other half of the balance sheet," BMO chief economist Doug Porter said Monday.
Namely, Canadians are borrowing. But they're also saving, and they're worth more than they used to be.
The savings rate has averaged four per cent over the past year and is now below the U.S rate of 5.8 per cent. But Canada's rate is now more than double the level it was at during its all-time low in 2005.
And as Porter notes, Statistics Canada's rate of personal savings as a percentage of disposable income doesn't give the full picture of how much Canadians are actually saving.
The current rate narrowly looks at how much households are saving from current income but ignores unrealized capital gains as well as returns in tax-sheltered vehicles like RRSPs and tax-free savings accounts, Porter said.
A better measure might be to track the change in household financial assets as a share of income. It's much more volatile (prone to 50 per cent swings in both directions within the same year), but for the last five years, it has hovered at roughly double the published savings rate. And it's never gone below the conventional "savings rate" in the last 15 years.
Increasing assets
A closer inspection of the numbers Statistics Canada released Monday shows more reason for optimism.
Yes, the debt-to-income level has gone from around 100 per cent in 1990 to almost 150 per cent today (the orange line on the chart above). But assets — the green line (showing net worth as a percentage of income) — have gone up too: from 417 per cent to 610 per cent over that same period.
In layman's terms, "assets are again growing faster than debt in absolute terms," says Porter.
That suggests that the assets Canadians are buying are padding their net worth more than enough to offset the debt load they take on to buy some of them. And debt as a percentage of net worth (the blue line on the chart above) has remained relatively flat.
"While debt has risen to record heights, so, too, have financial assets due to a rebound in equities and an underlying rise in savings," Porter said.
The sum total of all stocks, bonds, cash, GICs, life insurance and pension assets, minus household debt, is a fairer picture of real savings, Porter says. That figure has recovered from recessionary lows to $2.7 trillion so far this year — which works out to $80,000 per Canadian, or 167 per cent of per capita GDP.
"Taking these factors into account … leads to the conclusion that household finances are not nearly as weakened as the dire headlines would suggest," said Porter.
The cacophony of concern over rising Canadian debt levels is overshadowing other encouraging personal finance data, a prominent economist says.
Statistics Canada released data Monday showing that Canadian household debt has risen to 148 per cent of disposable income. The eye-popping figure is all the more alarming considering it's the first time since the 1990s that Canada's ratio has been higher than that of the U.S.
Alarm bells rang everywhere from the Bank of Canada to the Finance Department on Monday, and Canadians were urged to tighten their belts and prepare for a time of austerity.
But a closer look at the numbers indicates the picture might not be so bleak.
"The continued laser-like focus on debt overshadows the other half of the balance sheet," BMO chief economist Doug Porter said Monday.
Namely, Canadians are borrowing. But they're also saving, and they're worth more than they used to be.
The savings rate has averaged four per cent over the past year and is now below the U.S rate of 5.8 per cent. But Canada's rate is now more than double the level it was at during its all-time low in 2005.
And as Porter notes, Statistics Canada's rate of personal savings as a percentage of disposable income doesn't give the full picture of how much Canadians are actually saving.
The current rate narrowly looks at how much households are saving from current income but ignores unrealized capital gains as well as returns in tax-sheltered vehicles like RRSPs and tax-free savings accounts, Porter said.
A better measure might be to track the change in household financial assets as a share of income. It's much more volatile (prone to 50 per cent swings in both directions within the same year), but for the last five years, it has hovered at roughly double the published savings rate. And it's never gone below the conventional "savings rate" in the last 15 years.
Increasing assets
A closer inspection of the numbers Statistics Canada released Monday shows more reason for optimism.
Yes, the debt-to-income level has gone from around 100 per cent in 1990 to almost 150 per cent today (the orange line on the chart above). But assets — the green line (showing net worth as a percentage of income) — have gone up too: from 417 per cent to 610 per cent over that same period.
In layman's terms, "assets are again growing faster than debt in absolute terms," says Porter.
That suggests that the assets Canadians are buying are padding their net worth more than enough to offset the debt load they take on to buy some of them. And debt as a percentage of net worth (the blue line on the chart above) has remained relatively flat.
"While debt has risen to record heights, so, too, have financial assets due to a rebound in equities and an underlying rise in savings," Porter said.
The sum total of all stocks, bonds, cash, GICs, life insurance and pension assets, minus household debt, is a fairer picture of real savings, Porter says. That figure has recovered from recessionary lows to $2.7 trillion so far this year — which works out to $80,000 per Canadian, or 167 per cent of per capita GDP.
"Taking these factors into account … leads to the conclusion that household finances are not nearly as weakened as the dire headlines would suggest," said Porter.
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