23 Feb

So You Want To Port Your Mortgage?

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Recently a video appeared on LinkedIn and a few other places singing the praises of porting your mortgage and making it seem like a walk in the park. If you have ever done one, then you would know that it is anything but that scenario.

Porting is not much different than qualifying for a new mortgage, the video talks about the client moving to a new town and just porting their mortgage along with them. Truth is if that you are moving to a new town and a new job you may be on probation and not qualify for the mortgage. The lenders also have to approve the new property as well so a lot more factors that need to be considered.

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15 Feb

New Mortgage Regulations Weigh On Home Sales

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This morning, the Canadian Real Estate Association (CREA) released its January national real estate statistics showing home sales declined 1.3% month-over-month in the first month of this year. This down draft put resales at their second lowest monthly level since the fall of 2015 and only  a bit above levels recorded last November when new tighter mortgage regulations were first put in place.

Activity was down in about 50% of all local markets, led by the three largest urban markets–The Greater Toronto Area (GTA), Greater Vancouver and Montreal.

For the year as a whole, the number of homes changing hands was up 1.9%. Sales slowed in the second half of 2016 and the newly released data show that the slowdown continues. Notably, year-over-year sales were down significantly in the Lower Mainland of British Columbia (BC). This slowdown was exacerbated by the August introduction of the 15% land transfer tax on foreign nonresident purchasers. The October tightening of mortgage regulations dampened activity further.

Housing activity will not provide the boost to overall economic growth in 2017 that it did in 2015 and the first half of 2016. as first-time homebuyers will find it more difficult to qualify for a mortgage and credit availability is diminished by the disproportionate impact of the new regulations on nonbank lenders.

Sales activity was down from the previous month in about half of all local markets, led by three of Canada’s largest urban centres: the Greater Toronto Area (GTA), Greater Vancouver and Montreal.

Supply shortages are a major issue depressing sales activity and raising prices, especially in and around Toronto and parts of BC. Price pressures will continue in these markets unless demand declines significantly.

New Listings Continue To Decline The number of newly listed homes fell 6.7% in January, the second consecutive monthly decline.

New listings were down in about two-thirds of all local markets, led by the GTA and environs across Vancouver Island.

The monthly decline in new listings dwarfed the decline in sales so the national sales-to-new listings ratio jumped to 67.7% last month compared to 64.0% in December and 60.2% in November. The ratio in the range of 40%-to-60% is considered generally consistent with balanced housing market conditions. Above 60% is considered a sellers’ market and below 40%, a buyers’ market. 

The sales-to-new-listings ratio was above 60% in half of all local housing markets again last month–the vast majority of which continued to be in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario. There were sellers markets already in these regions.

Number of Months of Inventory

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

There were 4.6 months of inventory on a national basis at the end of January–unchanged from December and a six-year low for this measure. Clearly government efforts to increase supply is warranted.

The imbalance between limited housing supply and relatively strong demand in Ontario’s Greater Golden Horseshoe region is without precedent (the region includes the GTA, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country). The number of months of inventory in January is now at or below one month of sales in the GTA, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, Cambridge, Brantford and Guelph.

Prices Continue to Rise

The Aggregate Composite MLS House Price Index (HPI) rose 15.0% y-o-y last month. This was up a bit from December’s gain, reflecting an acceleration in condo and townhouse unit price increases.

This price index, unlike those provided by local real estate boards and other data sources, provides the best gauge of price trends because it corrects for changes in the mix of sales activity (between types and sizes of housing) from one month to the next.

Prices for two-storey single family homes posted the strongest year-over-year gains (+16.8%), followed closely by townhouse/row units (+15.8%), one-storey single family homes (+14.4%) and apartment units (+13.3%). In many of these regions, the supply of new single-family homes is so limited, you practically need to knock down a house to build a new one.

Price trends continued to vary widely by location. In the Fraser Valley and Greater Vancouver, prices continued to recede from their peaks reached in August 2016 but remained above year-ago levels (+24.9% y-o-y and +15.6% y-o-y respectively). Meanwhile, benchmark prices climbed to new heights in Victoria and elsewhere on Vancouver Island as well as in the Oakville-Milton, Guelph, and the GTA. Year-over-year price gains in these five markets ranged from about 18% to 26% in January. By comparison, home prices were down 2.9% y-o-y in Calgary and edged lower by 1.0% y-o-y in Saskatoon, continuing their retreat from peaks reached in 2015. Prices in these two markets are down 5.9% in Calgary and 4.3% in Saskatoon relative to their 2015 peak levels.

Home prices were up modestly from year-ago levels in Regina (+3.8%), Ottawa (+3.7%), Greater Montreal (+3.1%). In Greater Moncton, prices held steady. Monthly trends suggest that prices have continued to stabilize in these markets.

The actual (not seasonally adjusted) national average price for homes sold in January 2017 was $470,253 about in line with where it stood one year earlier. This marks the smallest y-o-y increase in nearly two years.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and the GTA, which remain two of Canada’s tightest, most active and expensive housing markets. That said, Greater Vancouver’s share of national sales activity has diminished considerably over the last year, giving it less upward influence on the national average price. The average price is reduced by almost $120,000 to $351,998 if Greater Vancouver and GTA sales are excluded from calculations.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

10 Feb

Canadian Job Surge in January

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January’s payroll gain was a huge 48,300 Statistics Canada said on Friday in Ottawa, well above economists’ forecast of a loss of 10,000 jobs. This follows a gain of a whopping 46,100 in December. The unemployment rate fell by 0.1 percentage points to 6.8%.

Employment growth has been strong since August. Canada posted the best quarterly hiring gain since 2010 in the final quarter of last year. Full-time employment held steady following a substantial increase in December. This may signal the country’s economy is finally turning the corner after two years of pain induced by the collapse in oil prices.

Most of the job gains were for men aged 25 to 54, with the increase of about 30,000, the largest in more than two years.

Gains in the average hourly wages of permanent employees slowed to 1% in January from a year earlier, the smallest gain since 2003, from the 1.5% pace in the last two months.

Hours worked also fell 0.8% from a year earlier.

Thus, the report continued to show signs of an uneven job market, something that has led Bank of Canada Governor Stephen Poloz to stress there’s much more labour slack than in the US, meaning there could be further divergence in monetary policy as the Fed continues to gradually hike rates and the Bank of Canada remains on the sidelines this year.

Demand for financial and business services led the way in January.  Employment in finance, insurance, real estate, rental and leasing increased by 21,000, bringing gains from 12 months earlier to 59,000 (+5.3%), with most of this increase concentrated in the last six months. There were 16,000 more people working in business, building and other support services last month. On a year-over-year basis, employment in this industry was little changed.

Compared with December, employment rose in Ontario, British Columbia, Nova Scotia and Newfoundland and Labrador. In contrast, there were fewer people working in New Brunswick. Employment was little changed in the remaining provinces.

Canadian labour markets have improved relative to the US, as labour force participation rates remain above unusually weak levels in the US. Adjusted to the measurement concepts in the US, the unemployment rate in Canada was 5.7% in January, compared with 4.8% in the US. Over the past year, the jobless rate fell 0.5 percentage points in Canada, while it was little changed in the US as it nears full-employment.

In January, the labour force participation rate was 65.8% in Canada (adjusted to US concepts) and 62.9% in the US. On a year-over-year basis, the participation rate was unchanged in Canada, while it increased slightly in the US as some discouraged workers resumed their job search.

In a separate report, Canada posted a second consecutive monthly trade surplus. Exports increased 0.8% on the strength of higher energy product prices. Imports increased 1.0%, mainly reflecting stronger imports of aircraft and industrial machinery.

Canada’s merchandise trade surplus with the United States narrowed from $4.7 billion in November to $4.4 billion in December. This will no doubt be a topic of discussion on Monday in Washington when PM Trudeau meets with President Trump. Those discussions will likely be cordial, although the renegotiation of NAFTA and Trump’s threat of a border tax has jeopardized the stability of one of the largest two-way trading partnerships in the world.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
10 Feb

Get In Front of a Bad Situation

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Financial difficulty can happen. Marital breakdown, economic downturn / job loss, health issues are all realty.

If I can give one piece of advice it’s this – in the face of financial difficulty the worst thing that a person can do is to go dark on their creditors.

In my experience, being 100% upfront and honest with creditors is by far the best 1st step in face of a cash crunch. CALL YOUR CREDITORS. EXPLAIN YOUR SITUATION. ASK FOR A TEMPORARY REPRIEVE. BE PROACTIVE WITH LOOKING AT A SOLUTION EARLY.

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8 Feb

Beware of Mortgage and Title Fraud

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Now a days with the amount of information that is shared on the Internet and social media, identity theft and Ponzi schemes are happening regularly. Homeowners are taking the necessary steps to protect one of their largest investments which is their home. However, the last thing you want to worry about is yet another way to lose your hard-earned money.

6 Feb

3 Steps to Keep Your Credit In Check

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If you have have overextended yourself with credit card debt, or have consolidated all of your consumer debt into your mortgage, or are at the point where you just want to cancel your credit cards, we have the 3 steps for you to follow to get your credit back in check.

3 Feb

US Jobs Strong, But Not Wages–Trade Restrictions a Real Danger

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Job growth in the US in January was better than expected, rising 227,000–up from 157,000 in December–according to the Labor Department report on Friday in Washington. While payrolls have been strong, however, wage increases remain disappointingly muted. The unemployment rate rose a tick to 4.8 percent, and average hourly earnings grew 2.5 percent year-over-year, the weakest since August following a 2.8 percent gain the prior month.

At this stage in the US economic cycle, we would normally expected that wage pressures would be mounting and employment growth would slow. Federal Reserve policy makers, who left interest rates unchanged on Wednesday, suggested that there was still room for improvement in the jobs market, as they expect to gradually tighten monetary policy this year.

President Trump has pledged to bring people back into the labor force. The participation rate, which shows the share of working-age people in the labor force, increased to a four-month high of 62.9 percent in January. However, it is still low by historical standards as there were 5.84 million Americans in January who were working part-time though they would have preferred a full-time job. The President has promised to boost wages further through tax cuts, infrastructure spending and deregulation. As well, he plans to boost employment by “bringing jobs back” from lower-cost countries through import tariffs and pressure on American companies that produce outside the U.S.

During the election campaign, President Trump called the unemployment rate “phony” and argued that it overstated the strength in the US labor market. A broader measure of unemployment–which includes those people who are involuntarily working less than full-time as well as discouraged workers who have given up looking for a job–rose to 9.4 percent in January from 9.2 percent the prior month. Clearly, there are many people who had formerly been working in manufacturing jobs that have since moved to low-wage countries. Hence, Mr. Trump’s war on Mexico and China. 

However, one crucial missing point here is that many of these (and other jobs) have been rendered obsolete by technological advances. Robots are doing the jobs of thousands of people and advances in artificial intelligence will only accelerate this process, which is impervious to trade restrictions.

Potential Trade War

President Trump has vowed to rip-up NAFTA, but his focus is really on Mexico. Nevertheless, Canada remains vulnerable to potential plans to introduce a 20 percent US border tax. Such a measure would be a radical shift away from free trade and could well trigger retaliatory tariffs, reducing trade and economic activity worldwide. The magnitude of the damage would be enormous and counter-productive, as it would push the US dollar up significantly.

Peter Navarro, the head of Trump’s National Trade Council, has recently suggested that Germany’s “excessive” trade surplus is evidence of a “grossly undervalued” euro. He  has now indicted Germany for alleged theft of American jobs. Chancellor Angela Merkel rejected this charge, telling reporters Tuesday that the euro’s exchange rate was the province of the European Central Bank and the German Government had long upheld the ECB’s independence. On the same day, President Trump accused Japan  and re-accused China of currency manipulation saying they “play the money market, they play the devaluation market and we sit there like a bunch of dummies.”

This protectionist sentiment in the new administration is extremely dangerous, not only to the global economy, but to geopolitical stability and Canada could well get caught in the cross fire. The fact is that no country has the power to sustain a unilateral devaluation of its currency. Even when central banks have acted in concert to drive a currency’s movement, it has been unsuccessful for more than a short period of time as market forces overwhelm central bank activity. All of this kind of rhetoric merely drives the US dollar upward, further devaluing the currencies of the US’s trading partners. In other words, it is self defeating. Nonetheless, tariffs and other protectionist measure run the risk of disrupting global trade flows and hence economic activity.

The Smoot-Hawley Tariff of 1930 helped to drive the US and the global economy into the Great Depression. It has long been held up as a cautionary tale about how a protectionist measure by the US can bring the global economy to its knees and intensify nationalism all over the world. The Republican Congress must prevent the Trump administration from getting the import tariff it is currently proposing.

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres