CIBC downgrades growth outlook

September 22, 2010 By CBC News The Canadian Imperial Bank of Commerce has downgraded its growth forecast for Canada and the United States next year, calling the recovery a "great disappointment." The Canadian Imperial Bank of Commerce has downgraded its growth forecast for Canada and the United States next year, calling the recovery a "great disappointment." The bank's top economist Avery Shenfeld slashed his prediction for GDP growth in 2011 to 1.9 per cent growth from 2.5 per cent for Canada. He also scaled back his target for the United States to 1.8 per cent from 1.9 percent.
"The Great Recession that shattered global growth in 2008-09 is now water under the bridge, but the great disappointment of a sub-par global recovery will be with us for a good while longer," he said. The global economic recovery has largely been based on government stimulus, the report says, and now that that's being unwound, the world's economy is likely to slow.
In the four years before the recession started, the world's economy grew by five per cent per year, the report notes. But the bank now expects that will slow to a 3.6 per cent pace in 2011. Europe is a particular area for concern, but the impact of a weak U.S. economy is going to be felt everywhere, Shenfeld said.
The slowing economy will be enough to compel the Bank of Canada to alter its current path and hold rates steady from now until next spring, the report says. "As a result, the Bank of Canada will wait until spring before renewing a very gradualist path to normalcy in interest ates," Shenfeld said. Last week, Toronto-Dominion bank also lowered its forecast for Canada's economy next year to two per cent growth, down from 2.5. Royal Bank did the same earlier this month, shaving 0.3 percentage points off its 2011 forecast, to 3.2.

The Bank of Canada is currently projecting 2.9 per cent GDP growth next year. Canadian Broadcasting

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The Wild Ride of the Victoria Real Estate Market. What the heck is going on??

For many trying to keep up with current market conditions and interest rates is a dizzying experience. When to buy? When to sell? When to refinance? Everyone is trying to predict the most optimal time to make their move. To help answer some of those questions, here are some of the facts and highlights of current conditions.

There are currently around 4 477 properties on the Victoria market which is 23% higher than last year.

• For the purchasers this means a lot of selection to choose from and gives you time to make sound, unhurried decisions.
• For sellers it means you really need to consult your Realtor® in order to price your home realistically in order to attract qualified buyers.

Interest rates have declined to Fall 2009 levels which were at historical lows.

• Now is a great time to secure a mortgage and take advantage of the low rates to keep your monthly payments as low as possible.
• This also gives purchasers some added purchasing power, as it is easier to qualify at lower rates.
• For existing home owners now is the time for a mortgage check up. If you are in higher rates and have some outstanding debts that you are paying high interest rates on, now is time to take advantage and potentially save thousands in interest payments.
• For current rates and rate specials visit lawlessbrown.com or give us a call 250.656.0855

We are always happy to provide advice and help our clients navigate today's markets. If you are unsure of what to do, give us a call and let us help you make the sound choice that is best for you and your mortgage needs.

~Krista & Sherri

CIBC World Markets Inc. trims forecast for rate hikes and currency strength in Canada as economic growth outlook dampens abroad

TORONTO, Aug. 18 /CNW/ - Continuing weakness in the U.S. economy may force the Bank of Canada to put interest rate hikes on hold after September, notes a new report from CIBC World Markets Inc.

"North America's story is again darkening," says CIBC's Chief economist in the latest Global Positioning Strategy report. "We were looking for a material second-half slowdown for the U.S. but as it turns out, it's already happened."

Economic growth stateside from April to June is being revised downward, Mr. Shenfeld notes, and key indicators are pointing to growth that will be slower than anticipated by U.S. monetary policy makers.

And still ahead is a "further fiscal belt tightening in 2011 that will have to be softened, and accompanied by quantitative easing, if the U.S. is to stay out of recession in early 2011 and get back to potential growth by the end of that year.

"Forget about any rates hikes from the U.S. Federal Reserve until sometime in 2012 at the earliest."

While Canada is in much better economic shape - it leads the U.S., Eurozone, U.K. and Japan in first-half growth and has a record gap over the U.S. in the share of working age population holding a job - it "cannot move all the way to normalized interest rates while the U.S. Federal Reserve is still on hold," Mr. Shenfeld contends.

For starters, an interest rate differential of 300-400 basis points would take the loonie "substantially stronger" creating additional headwinds for Canadian economic growth, says Mr. Shenfeld.

Furthermore, the "external environment will be one of less-than-normal growth as fiscal tightening bites in Europe and the U.S., and with our own upcoming fiscal tightening also hitting domestic demand, monetary policy might have to be set at stimulative levels to allow the economy to return to potential and remain there. To keep moving at all, you have to step on the gas if your car is trying to roll up a steep incline."

Mr. Shenfeld doubts that the Bank of Canada "has been shocked enough to forestall a rate hike in September" but his forecast that Canadian growth in Q2 and Q3 will fall below the BoC's outlook will likely warrant a rethinking in the October Monetary Policy Report and in the months to follow.

The report also notes that there are limits to how far the Bank of Canada can diverge from the U.S. Federal Reserve without later regretting it. Episodes in recent years in which rate overnight rates were 2 per cent or more above those stateside resulted in sagging or sacrificed growth. These are "lessons learned, we hope," says Mr. Shenfeld.

"Since a hike at every rate setting date through 2011 would take rates substantially higher than 2%, a pause is coming on the road to tightening."

As a result of the dampened external growth outlook, Mr. Shenfeld has trimmed his call for rate hikes. He sees Canadian overnight rates going no higher than 2% next year as the U.S. Federal Reserve stays on hold.

A less hawkish monetary policy combined with a mixed outlook for commodity prices affected by slow global growth will also likely see the Canadian dollar roughly two cents weaker than earlier forecast over the same horizon, adds Mr. Shenfeld.

The complete CIBC World Markets report is available at: http://research.cibcwm.com/economic_public/download/gps_aug10.pdf

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Home Sales Tumble!

Garry Marr, Financial Post · Monday, Aug. 16, 2010

Housing sales were down 30% in July from a year ago, and the Canadian Real Estate Association is blaming the drop on the new harmonized sales tax in Ontario and British Columbia.

The Ottawa-based group, which represents 100 real estate boards across the country, said July sales plunged 6.8% on a seasonally adjusted basis from the previous month, a decline “almost entirely the result of fewer sales in British Columbia and Ontario,” where the HST went into effect on July 1.

The slowdown had been expected as consumers rushed to buy homes ahead of the July 1 implementation in those provinces. The HST only applies to services used in purchasing and selling an existing home, such as real estate commission, and not the actual sale price.

Phil Soper, chief executive of Royal LePage Real Estate Services Ltd., said the HST, combined with tougher mortgage rules, expectations of higher interest rates and the bounce back from the recession, drove the market earlier this year. “You take those four things and add them together and you get a highly front-ended year, which we forecast,” he said.

The housing market did get some good news from Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Bank of Montreal, which all lowered interest rates Monday. The five-year, fixed-rate closed mortgage is down to 5.49%, which means that on a discounted basis, consumers can likely lock in a rate of less than 4% for five years.

But John Andrew, a professor of real estate at Queen’s University in Kingston, Ont., doubts the cut in bank rates will be enough to reverse a declining housing market.

“With homes sales down 30%, that’s surprising. I was expecting a drop, but nothing that big. I think prices are next [to decline] although they are holding their own now,” Prof. Andrew said.

“Thank goodness rates are as low as they are. If we were seeing significant increases in interest rates, it would disastrous for real estate prices,” Prof. Andrew said.

The average price of a home sold in July was $330,351, just a 1% increase from a year ago. However, the average price of a home sold in June was $342,662, so prices are off 3.6% from a month ago.

CREA said the lack of activity in British Columbia and Ontario — two of the country’s most expensive markets — likely skewed average prices down. In B.C., sales dropped 14.1% from a month ago on a seasonally adjusted annual basis. In Ontario, the decline was 8%.

The two provinces accounted for 85% of the change in national activity.

“The soft sales figures we’re seeing right now can be attributed in part to accelerated home purchases earlier in the year,” said Georges Pahud, CREA’s president.

He warned activity will be off for the rest of 2010.

“Activity may remain at lower levels for some time, but ultimately we expect a more stable market to emerge, with demand coming back into line with economic fundamentals,” Mr. Pahud said.

Prices are getting a boost from a drop in supply. The seasonally adjusted annual number of new residential listings fell 7.2% in July from the previous month, the third consecutive monthly decrease and the steepest drop in more than a decade.

However, the overall inventory rate, which reflects all housing on the market, is climbing. The number of months of inventory, which represents the number of months it would take to sell current inventories at the current rate of sales activity, was seven month in July. A year ago the number was 4.4 months.

Douglas Porter, deputy chief economist of BMO Capital Markets, said most consumers who were sitting on the sidelines already pushed their purchase ahead in the spring, so he’s also expecting a soft market for the next few months.

“Although with long-term mortgage rates dropping, employment improved and prices stabilized, the longer-term outlook is far from dire,” Mr. Porter said.

Financial Post

Read more: http://www.nationalpost.com/Home+sales+tumble/3405783/story.html#ixzz0wte1RWPV


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10 things to check before you buy a new home

The process of buying a new home—especially if it’s your first time—is incredibly intimidating. And while there are certain things you may know you’re going to want to change upon moving in (like paint colors or retiling), if you’ve never gone through this before you may not know what else to watch out for before you sign the dotted line (just because a home is gorgeous on the outside, it’s not impervious to having a bunch of costly-to-fix issues that go way beyond the surface—remember The Money Pit?). Here, via apartmenttherapy.com, a handy checklist of all kinds of things a potential buyer should be mindful of:

1. Check the drains to make sure they’re not backed-up. To test, do a load of laundry, fill up the tub and sinks, and try to drain them all at the same time.

2. Open all the windows all the way to make sure they’re able to open and shut completely—fixing them is not only a pain, but a financial drain.

3. Turn on all the faucets and make sure they’re in working order.

4. Light a fire in the fireplace. While cleaning them is pretty easy (just call a professional chimney sweeper), you should also make sure they draft correctly.

5. Taste the water. Even if the city you live in has great water, if you’ve got old pipes, they may send out debris into yours.

6. Flush the toilets. Make sure that the toilets are able to flush toilet paper.

7. Open the electrical panel. Watch out for loose wires or ones that simply don’t connect to anything, which could be a sign of live wires inside!

8. Turn on the heat/air. Not only do you want to ensure they turn out, but check to see if they heat/cool to their designated temperatures.

9. Pull the carpets back. Peel away a corner of the carpet to verify what’s underneath (often there’s hardwood under there) and to make sure it’s not mildewing.

10. Basement moisture. Check for signs of dampness, not just on the walls, but near things like dehumidifiers, which suck water out of the air.

http://ca.lifestyle.yahoo.com/home-garden/articles/archive/yahoolifestyle/yahoolifestyle-10_things_to_check_before_you_buy_a_new_home

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Bank of Canada interest rate unlikely to top 1% this year

John Shmuel July 23, 2010 – 11:16 am

Slower than expected economic growth in the U.S. is set to hamper Canadian exports, meaning the Bank of Canada’s interest rate is unlikely to rise beyond 1% by the end of the year, says a research note from Lombard Street Research.

The bank raised interest rates by 25 basis points earlier this week to 0.75%, in a move that was widely expected. The note, authored by analyst Michael Taylor, points out that the bank adopted a very cautious stance in regard to the Canadian economy going forward.

But Lombard Street Research said it expects lower growth than even the Bank of Canada’s revised figures. That leads Taylor to suggest that interest rate hikes from the bank are likely going to be hold on for much of next year.

"We would agree with a domestic slowdown, due to the expiry of temporary policy measures as well as the effects of higher interest rates on a highly indebted household sector. But the Bank has a rather optimistic view on US real GDP growth, which is expected to be around 3% both this year and next. Healthy growth in the US, combined with the recent fall in the Canadian dollar, has resulted in an increase in projected export growth for 2010 and 2011. Our view is that US growth will be below-trend over the next 18 months or so, restricting the scope for Canadian exports to grow strongly (three quarters of which go to the US)."

That leads Taylor to conclude that although a rate rise is likely at the next bank of Canada monetary policy meeting in September, he expects rates to be on hold thereafter for quite some time.

Read more: http://business.financialpost.com/2010/07/23/bank-of-canada-interest-rate-unlikely-to-top-1-this-year-report/?utm_source=twitterfeed&utm_medium=twitter#ixzz0uWj05DPa


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Pre approved or Pre qualified?

An explanation.

Both these terms are now used to describe the the action of seeking a mortgage approval before actually negotiating a property purchase. Unfortunately, in most cases, the borrower is not really fully approved for the mortgage and the lender does little or nothing to actually qualify the borrower.

What really happens is that the typical lender now provides an interest rate guarantee for a period of time, usually to a maximum of 120 days. The borrower is advised that they are pre approved and can begin shopping for a home.

At the pre approval stage, many lenders do not review credit or even determine if the client meets their guidelines for income and down payment. Lenders begin the actual qualification process when the file goes 'live' (meaning the Borrower now has an accepted Contract of Purchase). At this point the lender will begin a serious examination of the borrower's qualifications and may refuse to proceed with the pre approved mortgage for a wide variety of reasons. Because of this, it is very important for purchasers to keep their offer to purchase 'subject to mortgage approval'.

If rates have risen since the original pre approval and the lender now declines the mortgage, the client may no longer be able to get as good a rate elsewhere. Borrowers can reduce the chance of disappointment and get full approval faster by working with a professional Mortgage Broker early in the process. A broker will often recognize potential concerns and address them directly with lenders at the time the pre approval is requested. It may even be prudent to gather employment and income documentation at this stage, particularly for individuals who are self-employed or have had changes or inconsistencies in income or employment. Gathering documents early also helps reduce stress and waiting time after that hard search for the right property at the right price!

Your Mortgage Broker is an experienced professional and will assist in reviewing and advising you in the process. You will be doing yourself a favour by reviewing your situation with a Mortgage Broker before you write that offer!

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