29 Jul

Economic Data Better Than Headline Figures Suggest

General

Posted by:

Canadian and U.S. data gatherers posted GDP figures this morning.  The numbers looked pretty bad for both countries, but fortunately, digging deeper, they were not as bad as at first glance. 
 

Canadian GDP Data 


The May figure for Canadian Gross Domestic Product by Industry posted a decline of 0.6 percent, but the weakness was largely the result of the Fort McMurray wildfire and evacuation. The mining, quarrying, and oil and gas extraction sector fell 6.4 percent, as the output of the non-conventional oil extraction industry recorded a whopping 22 percent plunge. This took down the overall output of the goods-producing industries. Excluding the decline in oil extraction, real GDP edged down 0.1 percent in May–much better, but still no great shakes.  

Manufacturing activity declined 2.4 percent. About one-third of the decline was the result of a larger-than-expected 15 percent drop in output from oil refineries, reflecting the fall-off in oil sands production. In coming months, the recovery from the Fort McMurray disaster will boost the GDP figures as rebuilding commences and oil extraction resumes. The weakness in manufacturing was also the result of a drop in transportation equipment manufacturing that “resulted partly from supply interruptions associated with the earthquake in Japan.” This weakness should reverse going forward as well.

Construction activity was also weak in May, falling 0.7 percent following a flat number in April, taking the year-over-year figure down to a 3.7 percent decline. Statistics Canada reported that residential building construction fell 1.2 percent in May as fewer single-family dwellings were built. The real estate and rental and leasing sector edged up 0.1 percent, partly as a result of higher output from lessors of real estate. The sector’s rise was tempered by a 2.4 percent decline in the output of real estate agents and brokers, as home resale activity dropped in most markets, led by those in British Columbia and Ontario.

Many have pointed out the irony of the timing of this week’s introduction of a 15 percent land transfer tax on foreign purchases of residential real estate in Metro Vancouver. Home resales appear to have slowed in this region, although house prices continue to surge.

The output of service-producing companies rose 0.3 percent, led by wholesale trade and public administration. Finance and insurance as well as arts, entertainment and recreation also posted gains. Retail trade was also up in May, bringing the year-over-year increase in this sector to 4.3 percent. Regional data for wholesale and retail sales indicated weakness in Alberta related to the wildfires, although it was offset by strength elsewhere in the country.

Bottom Line: Today’s report was roughly consistent with the 1.0 percent GDP decline in Canada currently projected for the second quarter of 2016 by the Bank of Canada. With indications that oil sand production has returned to levels prevailing prior to the wildfires, this weakness should be fully reversed and is consistent with the Bank of Canada’s third-quarter 2016 growth projection of 3.5 percent. Expect the central bank to remain on the sidelines, maintaining the overnight rate at the current 0.50 percent awaiting confirmation of growth rebounding strongly in the current quarter.
 

U.S. Q2 GDP Disappoints 


The U.S. economy expanded less than forecast in the second quarter after a weaker start to the year than previously estimated as companies slimmed down inventories and remained wary of investing amid shaky global demand.

The second quarter growth in the U.S. economy came it at a less-than-forecast 1.2 percent gain despite a sizable 4.2 percent  jump in consumer spending as declines in business investment and inventories provided offset. Economists had expected a 2.5 percent second-quarter increase. The report raises the risk to the outlook at a time Federal Reserve policy makers are looking for sustained improvement, Where consumers were resilient last quarter, businesses were cautious — cutting back on investment and aggressively reducing stockpiles amid weak global markets, heightened uncertainty, and the lingering drag from a stronger dollar. On a positive note, leaner inventories could set the stage for a pickup in production later this year should demand hold up.

Weakness in business investment was highlighted in this week’s Federal Reserve statement. Corporate spending on equipment, structures and intellectual property, decreased an annualized 2.2 percent after a 3.4 percent fall in the first quarter. Outlays for equipment dropped for the fourth quarter in the last five. Spending on structures — everything from factories to shops to oil rigs — has increased in just one quarter since the end of 2014.

Also holding back U.S. economic growth in the second quarter was a decrease in residential investment, which fell at a 6.1 percent pace. That was the most since the third quarter of 2010 and marked the first decrease in two years.

Government spending also shrank last quarter, declining 0.9 percent, the most in more than two years as outlays for the military fell. States and municipalities also cut back. 

The GDP report also showed price pressures remain limited–another factor keeping the Fed on the sidelines. The Fed’s preferred measure of inflation, which is tied to consumer spending and strips out food and energy costs, climbed at a 1.7 percent annualized pace compared with 2.1 percent in the prior quarter. 

Bottom Line: Inventories and the trade gap are two of the most volatile components in GDP calculations. To get a better sense of demand in the U.S., economists look at final sales to domestic purchasers, or GDP excluding inventories and net exports. That measure increased 2.1 percent last quarter after a 1.2 percent gain in the first quarter. The strengthening in consumer spending was encouraging, and  households should  continue to contribute to growth amid an improving labour market and low interest rates. 

In this contentious political season, there is no doubt the Trump forces will highlight the negatives in this morning’s report to support their erroneous assertion that the U.S. economy is in dire straits. 

 

 

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca

29 Jul

Acceptable Down Payment Sources

General

Posted by:

The level of documentation required for the average mortgage these days can be very frustrating. It can seem endless, very nitpicky and annoying because we are able to purchase a vehicle with just a paystub. There are a few reasons for the increased documentation requirements.

Click to continue reading…

Give me a call if you have any questions. I am always here to help.

Cory Kline, AMP
Mortgage Planning Since 1998 

DIRECT: (705) 794-1283

APPLY ONLINEwww.MortgageAndLifestyle.com/how-to-apply-mortgage

Mortgage Agent, FSCO# M09001239  HEAD OFFICE: Neighbourhood Dominion Lending Centres, Brokerage FSCO Lic.# 11764, Independently Owned & Operated, 1140 Stellar Drive, Newmarket, ON L3Y 7B7

18 Jul

What Is Mortgage Default Insurance?

General

Posted by:

One cost that can be overlooked by home buyers is mortgage default insurance.

So, what exactly is mortgage default insurance and why do you need it?

If you’re buying an owner-occupied home with less than 20% down payment, you are required to purchase mortgage default insurance in order to arrange your financing.  When buying a rental property, some lenders require you to purchase this insurance if you put down less than 35% towards your purchase.

As real estate values in Metro Vancouver continue to soar, many home buyers, especially first time home buyers, often have less than 20% of the purchase price available as a down payment.  The average price of a new home is now well above $500,000 meaning a 20% down payment can easily exceed $100,000.  This is a lot of money for most people and it’s understandable why many fall short of this 20% down payment.

Click to read more…

7 Jul

Renewal Time?

General

Posted by:

A couple minutes could save you thousands of dollars.

If your mortgage is coming up for renewal in the next 6 months its a good idea to give us a call and we will send you some mortgage options.  We work with 35 Lenders, including the big banks and credit Unions. We also work with B lenders and Private Lenders for those applicants looking to rebuild their credit or pay off a Consumer Proposal.   

For many people it is very important to choose a mortgage with preferred penalty calculations and prepayment privelges. For some people it very important that the mortgage is flexible so if they have choose to move they have options without $20,000-$30,000 penalties.

Give us a call 705-794-1283.

Thanks!

Cory

 

7 Jul

Accelerated Bi-Weekly vs. Bi-Weekly Payments

General

Posted by:

When signing your mortgage commitment letter you will have to choose your payment frequency. If your goal is to re-pay your mortgage as quickly as possible, then you need to understand how different payment options will affect your repayment schedule.

So what are your options?

Click to read more…

Please give us a call if you have any questions,

~Cory

7 Jul

Residential Market Commentary – Week of July 4th, 2016

General

Posted by:

Jul 5, 2016, 09:50 AM by Maria Broekhof
Thank you First National for your insight.

It has been a full business week since the people of the United Kingdom voted to take their country out of the European Union.

There was a lot of fear-mongering about the “Brexit” and initially some of the apocalyptic predictions appeared to be coming true: the pound sterling sank like lead, markets tumbled and European bond yields fell.

But a week on, cooler heads have prevailed. The markets in Toronto and New York have recovered just about all of their losses, the pound has stabilized and the Government of Canada’s 5-year yield actually went up on the flight to safety.

There are those who say the “Brexit” should not have been a surprise, pointing to the “Boaty McBoatface” fiasco. (Details here in case you missed it: https://www.theguardian.com/…/boaty-mcboatface-wins-poll-to…)

In Canada it does not appear that the “Brexit” will have any effects on housing or mortgages in the foreseeable future. Bond yields have not changed enough to influence fixed rates. Hopes of raising the prime rate in Canada and the U.S. will likely be delayed so there will be not upward pressure on variable rates.

7 Jul

4 Things That Will Kill Your Mortgage Approval

General

Posted by:

So, you’ve worked hard to save every penny and have managed to finally afford the down payment necessary on a home. You have searched high and low, only to find the house of your dreams at a price you can afford. Though your credit rating is good and you have a stable job, there are some key things to avoid while waiting for your mortgage to be approved.

Here are 4 things you must absolutely avoid to ensure that you get that dream house…

Click to read more…

Good tips to be aware of. Thank you,

Cory