• TSX +66.3
• DOW +11.33
• Dollar +.38c to 97.00cUS
• Oil +$.09to $82.75US per barrel.
• Gold +$5.10 to $1,138.20USD per ounce
Bad numbers, but good news
Hope remains despite rise in U.S. jobless figures
Ian McGugan, Financial Post
Wall Street is looking for a happy ending to the Great Recession. Now if it can just get the facts to agree.
Many forecasters had expected yesterday's release of U.S. payroll data to show that the world's largest economy was no longer destroying jobs. Instead, the U.S. Labor Department reported that nonfarm payrolls continued to shrink, shedding 85,000 jobs this past month.
There were bright spots in the lacklustre report. Most notably, November figures were revised upward to show that the economy gained a handful of jobs during that month. It was the first time in two years that U.S. payrolls have managed to eke out any increase.
Overall, though, the U.S. unemployment rate remains stubbornly high at 10% of the workforce. About 15 million people are unemployed, double the number of two years ago.
The continuing pace of job destruction should raise concerns about the gap between the sunny views of the recovery propounded by Wall Street and the darker reality that appears to be prowling Main Street. While stocks are surging, the real economy isn't.
This is distinctly unusual. Stocks usually suffer during periods of rising unemployment because unemployment typically goes hand-in-hand with falling corporate profits. Declining profits make stocks less attractive.
In this downturn, though, stock markets have taken off like a rocket despite rising unemployment. The S&P 500 has advanced by 70% since March, although about two million jobs have been destroyed during those months.
One force driving stock prices higher is massive stimulus spending by government. Another is near-zero interest rates, which make the future stream of dividends from stocks that much more valuable.
But stimulus spending and low interest rates can't keep a stock market up forever. Japan provides the ultimate proof of that. Despite massive government spending and near zero interest rates for much of the past two decades, the Nikkei stock index trades for about a quarter of what it did back in the glory days of the 1980s.
Based on the ratio of its current price to its earnings over the past 10 years, the U.S. stock market is trading at valuations well below its dot-com levels, but about 30% above its average levels. Stocks could take a tumble if the unemployment picture -- and the profit picture -- don't start to recover soon.
Many traders believe such a recovery is well in progress. First-time claims for unemployment benefits have been dwindling, and job losses have grown steadily smaller since the darkest days of early 2009, when nearly 700,000 U.S. workers were being thrown out of work each month.
The small gain of 4,000 jobs in November is invisible compared to the entire U.S. workforce of about 150 million people, but any jobs number with a plus sign these days constitutes a victory in the recovery story. "The fact that positive job creation occurred in November 2009 is a very important fact, one that should not be ignored despite the headline print in December," says Ian Pollick of TD Securities.
Another positive sign is the continued increase in temporary help services, which added 47,000 positions in December. This was the fifth-consecutive monthly increase in the sector and suggests that employers are feeling out opportunities, although they're still reluctant to hire full-time workers.
A further jolt of good news may be in store thanks to the U.S. Census. The once-a-decade count of every American takes place on April 1 and hiring for the survey will provide as many as a million jobs during the first half of 2010.
Derek Holt and Karen Cordes of Scotia Capital believe the combined effects of census hiring and the natural recovery process could propel job creation in the U.S. far past expectations and create two million jobs in 2010. While those new jobs would only partially replace the seven million jobs that have been lost over the past couple of years, they would at least signal an end to the current downturn.
But there is the risk of a double-dip recession if Congress and the Federal Reserve decide to remove stimulus too early. Holt and Cordes, as well as Nobel-winning economist Paul Krugman, worry that any sudden improvement in the jobs numbers could lead to a premature hike in interest rates and withdrawal of stimulus.
If there is any undeniably good news in yesterday's disappointing numbers, it's that nobody will be agitating to hike interest rates or remove stimulus anytime soon. The Great Recovery remains a work in progress.
20,600 Total U.S. jobs lost among women 25 and over.
13,400 Full-time U.S. jobs lost among women 25 and over.
December job losses reality check
8.5% unemployed
Paul Vieira, Financial Post
OTTAWA - Financial markets were dealt a reality check yesterday with disappointing December jobs data from Canada and, more notably, the United States signalling an uneven and choppy recovery, and prompting U.S. analysts to scale back expectations on rate hikes.
Analysts noted, however, that an improving trend is definitely emerging in both countries. Furthermore, some reckon unemployment levels in Canada may have peaked.
Statistics Canada said the economy lost 2,600 jobs last month, but the unemployment rate remained unchanged at 8.5%. Markets expected 20,000 new jobs in December, after an off-the-chart 79,000 gain in November.
"It's looking more believable by the day that the 8.7% jobless rate in August will mark the peak for the cycle, far below past recession highs -- 13% in 1982 and 12.1% in 1992 -- and no worse than the average unemployment rate in Canada over the past 30 years," said Douglas Porter, deputy chief economist at BMO Capital Markets.
Stewart Hall, economist at HSBC Securities Canada, said there was "palatable" disappointment given the big gain in November. But the fact the economy held onto most of those jobs "is in and of itself fairly significant," he said.
With the December figures in hand, they suggest the Canadian economy shed 240,000 jobs in 2009 -- the bulk of which occurred in the first half of the year. In the last five months of the year, the economy generated an average of 20,000 new jobs per month.
Mr. Hall said average monthly gains of 20,000 are likely in the offing, as this recovery is likely to mirror the one following the recession of the early 1990s. "One characterized by some jobs growth followed by consolidation. Not terrific, but infinitely preferable to the experience of the previous year."
The Canadian recession ended in the third quarter with meagre annualized growth of 0.4%, as domestic strength was offset by a weak export sector that was hampered by a strong Canadian dollar and weak U.S. demand. Economists estimate growth in the final three months of 2009 to register between 3% and 4%.
The Bank of Canada is expected to begin raising its benchmark lending rate in the third quarter. There is less confidence about near-term tightening from the U.S. Federal Reserve Board.
The U.S. Bureau of Labor Statistics said non-farm employment in December fell 85,000, compared to expectations for no change. The unemployment rate was unchanged at 10%, although analysts note it was due to a plunge in the labour force, as people stopped looking for work.
"Firms are still bent on boosting productivity and remain cautious about hiring," analysts from London-based Capital Economics said of the U.S. data.
The yield on the two-year U.S. Treasury note -- a market gauge of interest rate expectations -- dropped yesterday below 1%, indicating analysts believe the likelihood of a Fed rate hike has been "pushed out for a few more months," Ajay Rajadhyaksha, head of U.S. fixed-income strategy at Barclays PLC in New York, told Bloomberg News.
The U.S. bureau noted, however, that during 2009 monthly job losses moderated, from an average 691,000 in the first quarter to 69,000 in the fourth quarter. Also, the bureau revised data for November indicating the U.S. economy created 4,000 jobs -- the first monthly gain in more than two years.
Still, Avery Shenfeld, chief economist at CIBC World Markets, said the 10% U.S. jobless rate masks the "true extent" of labour slack, "as it ignores those working part-time involuntarily [and] those who gave up looking for work."
Monday, January 11, 2010
Friday, January 8, 2010
Financial Update For Jan. 8, 2010
Real estate market expected to remain strong in first half of 2010
• TSX -57.73 dropping for the first time this year with declines led by telecom and energy stocks.
• DOW +33.18
• Dollar -.23c to 96.62cUS as commodity prices weakened in response to possible indications from China that it plans to cool its economy to keep a lid on inflation by raising rates
• Oil -$.52 to $82.66US per barrel. on worries that demand would ease if China took more substantial steps to remove excess liquidity from its system in order to keep growth in check.
• Gold -$2.80 to $1,133.70USD per ounce
Real estate market expected to remain strong in first half of 2010
DAVID PADDON, THE CANADIAN PRESS
TORONTO - Canada's residential real estate market is expected to remain unusually strong through the first half of this year after a strong finish to 2009, according to a survey published Thursday by Royal LePage.
The Royal LePage analysis is consistent with other recent reports on the state of the Canadian real estate market, which has rebounded over the past 12 months after sales dried up in late 2008 and hit a multi-year low in January 2009.
The Canadian market's sudden plunge was sparked by a credit crunch that originated in the U.S. housing and lending industries - eventually spreading globally, causing a worldwide recession in the late summer and early fall of 2009.
However, the Canadian real estate market has been much quicker to recover than its American counterpart, in part because of a more stable banking industry, historically low interest rates and improving consumer confidence.
Royal LePage executive Phil Soper says Canada's real estate market enters 2010 with "considerable momentum from an unusually strong finish to the previous year."
The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity to new highs, he said in a statement.
Royal LePage says house prices appreciated in late 2009, with fourth-quarter price averages higher than in the fourth quarter of 2008.
The average price of detached bungalows rose to $315,055 (up six per cent), the price of a standard two-storey home rose to $353,026 (up 5.2 per cent), and the price of a standard condominium rose to $205,756 (up 6.4 per cent).
Regions that saw the strongest declines during the recession are now showing marked gains. Those regions include Toronto and the Lower Mainland, B.C.
Vancouver, which is frequently Canada's most expensive real estate market, experienced a particularly robust quarter, with home prices rising across all housing types surveyed.
"No other sector of the economy has been as highly affected by economic stimulus as housing," said Soper.
"As consumer confidence has improved, Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property."
Royal LePage estimates that Vancouver's real estate prices will rise a further 7.2 per cent this year, although February may be soft because of the Olympic Winter Games that will be held in the city and nearby Whistler, B.C.
Detached bungalows in Vancouver sold for an average of $828,750 in the fourth quarter, up 11.4 per cent from the same period last year. Standard condominiums in Vancouver went up 11.8 per cent year-over-year to an average of $452,750. Prices of standard two-storey homes in Vancouver rose 9.6 per cent year-over-year, selling at $917,500.
In Toronto, the average price of a standard condo rose 2.9 per cent to $309,316, detached bungalows rose 9.9 per cent to $446,214 and standard detached homes increased 3.5 per cent to $564,175.
In Montreal, the average price of a detached bungalow rose to $245,125 (up 3.1 per cent; a condo increased to $216,667 (up 16 per cent) and a two-storey house increased 12.3 per cent from a year earlier to $345,789, Royal LePage said.
The Greater Montreal Real Estate Board reported Thursday that the number of sales last year increased 41,802, up three per cent from 2008. The median price of a single-family home was $235,000 last year, up four per cent from 2008.
"Although sales decreased the first four months of 2009, Montreal's real estate market rebounded and finished the year on a positive note," said Michel Beausejour, the Montreal board's chief executive.
The group that represents Toronto-area realtors reported Wednesday that there were 87,308 transactions last year through the Multiple Listing Service, a 17 per cent increase over 2008.
In December, there were 5,541 sales in the Greater Toronto Area (average price $411,931), up from 2,577 sales in December 2008 (average price $361,415), according to the Toronto Real Estate Board.
The Toronto board also said the number of sales of existing homes rebounded in the latter half of 2009 after a slow start at the beginning of last year.
Royal LePage's average price estimates for other Canadian cities include:
-St. John's, N.L.: Detached bungalow, $217,167 (up 14.3 per cent); standard two-storey house $298,833 (up 14.1 per cent).
-Halifax: Detached bungalow, $238,000 (up 10.7 per cent); standard two-storey homes, $265,333 (up 1.8 per cent).
-Charlottetown: Detached bungalow, $160,000 (up 1.9 per cent); standard two-storey $195,000 (up 3.7 per cent).
-Saint John, N.B.: Detached bungalow, $228,000 (up 1.3 per cent); standard two-storey $299,000 (up 1.5 per cent).
-Moncton, N.B.: Detached bungalow, $152,300 in the fourth quarter (up 1.5 per cent); standard two-storey home, $131,000 (up 4.0 per cent)
-Fredericton: Detached bungalow, $182,000 (up 12.3 per cent); standard two-storey, $210,000 (unchanged).
-Ottawa: Detached bungalow, $332,417 (up 3.4 per cent); standard two-story home $331,917 (up 3.7 per cent).
-Winnipeg: Detached bungalow, $241,650 (up 9.9 per cent); standard two-storey home $275,500 (up 10 per cent).
-Edmonton: Detached bungalow, $299,286 (down 0.7 per cent); standard two-storey home, $340,557 (down 1.2 per cent)
-Calgary: Detached bungalow, $412,478 (up 0.5 per cent); standard two-storey home, $427,067 (up 2.3 per cent).
• TSX -57.73 dropping for the first time this year with declines led by telecom and energy stocks.
• DOW +33.18
• Dollar -.23c to 96.62cUS as commodity prices weakened in response to possible indications from China that it plans to cool its economy to keep a lid on inflation by raising rates
• Oil -$.52 to $82.66US per barrel. on worries that demand would ease if China took more substantial steps to remove excess liquidity from its system in order to keep growth in check.
• Gold -$2.80 to $1,133.70USD per ounce
Real estate market expected to remain strong in first half of 2010
DAVID PADDON, THE CANADIAN PRESS
TORONTO - Canada's residential real estate market is expected to remain unusually strong through the first half of this year after a strong finish to 2009, according to a survey published Thursday by Royal LePage.
The Royal LePage analysis is consistent with other recent reports on the state of the Canadian real estate market, which has rebounded over the past 12 months after sales dried up in late 2008 and hit a multi-year low in January 2009.
The Canadian market's sudden plunge was sparked by a credit crunch that originated in the U.S. housing and lending industries - eventually spreading globally, causing a worldwide recession in the late summer and early fall of 2009.
However, the Canadian real estate market has been much quicker to recover than its American counterpart, in part because of a more stable banking industry, historically low interest rates and improving consumer confidence.
Royal LePage executive Phil Soper says Canada's real estate market enters 2010 with "considerable momentum from an unusually strong finish to the previous year."
The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity to new highs, he said in a statement.
Royal LePage says house prices appreciated in late 2009, with fourth-quarter price averages higher than in the fourth quarter of 2008.
The average price of detached bungalows rose to $315,055 (up six per cent), the price of a standard two-storey home rose to $353,026 (up 5.2 per cent), and the price of a standard condominium rose to $205,756 (up 6.4 per cent).
Regions that saw the strongest declines during the recession are now showing marked gains. Those regions include Toronto and the Lower Mainland, B.C.
Vancouver, which is frequently Canada's most expensive real estate market, experienced a particularly robust quarter, with home prices rising across all housing types surveyed.
"No other sector of the economy has been as highly affected by economic stimulus as housing," said Soper.
"As consumer confidence has improved, Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property."
Royal LePage estimates that Vancouver's real estate prices will rise a further 7.2 per cent this year, although February may be soft because of the Olympic Winter Games that will be held in the city and nearby Whistler, B.C.
Detached bungalows in Vancouver sold for an average of $828,750 in the fourth quarter, up 11.4 per cent from the same period last year. Standard condominiums in Vancouver went up 11.8 per cent year-over-year to an average of $452,750. Prices of standard two-storey homes in Vancouver rose 9.6 per cent year-over-year, selling at $917,500.
In Toronto, the average price of a standard condo rose 2.9 per cent to $309,316, detached bungalows rose 9.9 per cent to $446,214 and standard detached homes increased 3.5 per cent to $564,175.
In Montreal, the average price of a detached bungalow rose to $245,125 (up 3.1 per cent; a condo increased to $216,667 (up 16 per cent) and a two-storey house increased 12.3 per cent from a year earlier to $345,789, Royal LePage said.
The Greater Montreal Real Estate Board reported Thursday that the number of sales last year increased 41,802, up three per cent from 2008. The median price of a single-family home was $235,000 last year, up four per cent from 2008.
"Although sales decreased the first four months of 2009, Montreal's real estate market rebounded and finished the year on a positive note," said Michel Beausejour, the Montreal board's chief executive.
The group that represents Toronto-area realtors reported Wednesday that there were 87,308 transactions last year through the Multiple Listing Service, a 17 per cent increase over 2008.
In December, there were 5,541 sales in the Greater Toronto Area (average price $411,931), up from 2,577 sales in December 2008 (average price $361,415), according to the Toronto Real Estate Board.
The Toronto board also said the number of sales of existing homes rebounded in the latter half of 2009 after a slow start at the beginning of last year.
Royal LePage's average price estimates for other Canadian cities include:
-St. John's, N.L.: Detached bungalow, $217,167 (up 14.3 per cent); standard two-storey house $298,833 (up 14.1 per cent).
-Halifax: Detached bungalow, $238,000 (up 10.7 per cent); standard two-storey homes, $265,333 (up 1.8 per cent).
-Charlottetown: Detached bungalow, $160,000 (up 1.9 per cent); standard two-storey $195,000 (up 3.7 per cent).
-Saint John, N.B.: Detached bungalow, $228,000 (up 1.3 per cent); standard two-storey $299,000 (up 1.5 per cent).
-Moncton, N.B.: Detached bungalow, $152,300 in the fourth quarter (up 1.5 per cent); standard two-storey home, $131,000 (up 4.0 per cent)
-Fredericton: Detached bungalow, $182,000 (up 12.3 per cent); standard two-storey, $210,000 (unchanged).
-Ottawa: Detached bungalow, $332,417 (up 3.4 per cent); standard two-story home $331,917 (up 3.7 per cent).
-Winnipeg: Detached bungalow, $241,650 (up 9.9 per cent); standard two-storey home $275,500 (up 10 per cent).
-Edmonton: Detached bungalow, $299,286 (down 0.7 per cent); standard two-storey home, $340,557 (down 1.2 per cent)
-Calgary: Detached bungalow, $412,478 (up 0.5 per cent); standard two-storey home, $427,067 (up 2.3 per cent).
Thursday, January 7, 2010
Financial Update For Jan. 7, 2010
• TSX +56.46 to 11,944
• DOW +1.66 to 10, 573
• Dollar +.23c to 96.25cUS
• Oil +$1.41 to $83.18US per barrel.
• Gold +$17.80 to $1,136.90USD per ounce
Bond Market Waiting for Jobs Reports
Traders are treading cautiously ahead of Friday’s big U.S. and Canadian jobs reports. Bond yields are hovering just under their 15-month high.
Most lenders are holding off on further mortgage rate increases ahead of the report.
Interestingly, only a few lenders chose to raise mortgage rates following December’s big spike in yields. (Why spoil the holidays, eh?)
Looking forward, this Friday's employment report could be a huge catalyst for rate direction. It should be:
• Positive for mortgage rates if employment gains are dismal; or
• Negative for mortgage rates if job gains are strong.
Mortgage planners will probably want to have their rate locks ready in case yields happen to explode higher.
Canadian and U.S. employment reports will be released Friday, January 8, at 7:00 a.m. and 8:30 a.m. ET respectively.
Posted at 01:38 PM in Mortgage Rate Trends | Permalink
Tackling debt a growing priority
Roma Luciw Globe and Mail
More Canadians are heeding the interest-rate warnings and focusing on curbing their debt loads in 2010.
A Manulife Financial poll released Tuesday found that paying down credit cards and lines of credit is growing as a financial priority among Canadians. In fact, more than a quarter, 28 per cent, pegged debt elimination as their main goal, up from 24 per cent in 2009 and a five-year high.
The results come at a time when households are tackling post-Christmas credit card bills and struggling with record debt, both mortgage and consumer. With interest rate hikes on the horizon, Bank of Canada Governor Mark Carney last month cautioned Canadians against taking on more debt than they can handle.
Despite this red flag, Canadians dug deeper this December, with spending in the holiday period rising 3.44 per cent in volume over the previous year, according to Moneris Solutions, which processes credit, debit and online payments.
The central bank estimates there was nearly $1.4-trillion in total household credit outstanding in October, the most recent data available, up from $1.3-trillion a year earlier. Much of the growth stems from mortgage debt, which stood at roughly $950-billion in October, compared with less than $890-billion a year earlier.
The Manulife national survey of 1,000 people, conducted last month by Research House, found that the second most-cited financial priority among Canadians was paying down the mortgage. It was chosen by 14 per cent of respondents, up from 11 per cent last year.
The third priority – saving for retirement – was listed by 11 per cent of those polled, down from 14 per cent a year ago.
“Paying down debts is understandably a priority, particularly at this time of year,” Paul Rooney, chief executive officer of Manulife Manulife Canada, said in a news release. “Given the economic challenges in 2009, we shouldn't be surprised to see more Canadians focused on ensuring their financial house is in order.”
Only 5 per cent of respondents listed saving for a child's education, through a tool like a registered education savings plan, and saving for purchasing a home, as financial priorities, on par with last year's results.
Home builder backs tighter mortgage rules
BY CHUCK HOWITT, RECORD STAFF
WATERLOO — Tightening mortgage eligibility rules to prevent a housing bubble may not be such a bad idea, says the founder of Canada’s largest homebuilding company.
“Housing is meant to shelter. Secondly, it is an investment,” Peter Gilgan, chief executive officer of Mattamy Homes, told a luncheon at Wilfrid Laurier University Wednesday.
Gilgan, who was in town to accept the Outstanding Business Leader of the Year Award from Laurier’s school of business and economics, was asked about recent statements by federal Finance Minister Jim Flaherty that Ottawa may increase minimum down payments for residential mortgages to ensure that homeowners don’t face huge bills if interest rates rise.
“It would be a very responsible thing to do,” said Gilgan, whose Mississauga-based company has built several thousand homes in Cambridge, including some in an indoor factory, and has land available for development on the west side of Kitchener.
When people start treating houses “as a derivative,” as some kind of vehicle to make a quick buck, “it creates too much volatility in the market,” Gilgan said.
As for the province’s recent law establishing greenbelts around urban areas in southern Ontario to avoid sprawl, he said builders have to adjust to the new reality. Twenty years from now, all the desirable greenfield land in the Golden Horseshoe will be gone, he said.
Mattamy has enough greenfield land to build on for the next 10 years, he said, but after that it will have to adopt a new strategy of infilling, intensification and redevelopment in urban areas.
Gilgan doesn’t oppose the province’s thrust as long as everyone faces the same rules. “You can throw anything at me. As long as it’s a level playing field, we’ll figure it out.”
The development restrictions in Ontario are one of the reasons Mattamy is expanding into other geographic areas such as Alberta and the U.S., he said.
Since its launch in Burlington in 1978, Mattamy has built more than 47,000 homes in over 100 communities. Fifty per cent of those homes are in greater Toronto and beyond, Gilgan said, with Cambridge accounting for about 10 per cent of that activity.
The company has had mixed success south of the border. It has “dug a little trench” in five American cities and hopes to break even this year. Doing business in the U.S. is different, Gilgan said. While Canadians tend to plan a lot and adopt a cautious approach, Americans plunge ahead much more aggressively, he said.
Gilgan also touched on the company’s efforts over the years to be innovative. During the 1990s, it decided there was a better way to build housing than having the garage as the most dominant feature. It started building houses on wider lots, as much as 36 feet in width, so that more living space could look onto the street.
“We’re providing something more than a house, we’re providing a community.”
“Pocket parks” or smaller green spaces among subdivisions was another popular Mattamy innovation, he said.
“Be really aware of the competition,” he advised young entrepreneurs, but try to do something unique or different.
Gilgan had the audience in stitches when he told them about his daughter enrolling at Laurier 13 years ago. When he came to visit her, she and four roommates were living “in something resembling a house on King Street.” You could put your hand through open space in the front door, he said. “There was no glass there.”
He drove around the neighbourhood and found a house for sale on Ezra Street. With the help of an all-female team of architects and designers, he turned the house into a “chick machine” with five bedrooms, five bathrooms and a giant shoe rack.
He assuaged his guilt over doing this for his daughter with the knowledge that some years later “a greater fool” would buy it. And sure enough, someone did. A few years later he came back when his son enrolled at the University of Waterloo, but the house was already gone. It had been replaced by a residence for 80 students.
“At first I was offended. Then when I did the math on it, I thought, yeah, it makes sense.”
• DOW +1.66 to 10, 573
• Dollar +.23c to 96.25cUS
• Oil +$1.41 to $83.18US per barrel.
• Gold +$17.80 to $1,136.90USD per ounce
Bond Market Waiting for Jobs Reports
Traders are treading cautiously ahead of Friday’s big U.S. and Canadian jobs reports. Bond yields are hovering just under their 15-month high.
Most lenders are holding off on further mortgage rate increases ahead of the report.
Interestingly, only a few lenders chose to raise mortgage rates following December’s big spike in yields. (Why spoil the holidays, eh?)
Looking forward, this Friday's employment report could be a huge catalyst for rate direction. It should be:
• Positive for mortgage rates if employment gains are dismal; or
• Negative for mortgage rates if job gains are strong.
Mortgage planners will probably want to have their rate locks ready in case yields happen to explode higher.
Canadian and U.S. employment reports will be released Friday, January 8, at 7:00 a.m. and 8:30 a.m. ET respectively.
Posted at 01:38 PM in Mortgage Rate Trends | Permalink
Tackling debt a growing priority
Roma Luciw Globe and Mail
More Canadians are heeding the interest-rate warnings and focusing on curbing their debt loads in 2010.
A Manulife Financial poll released Tuesday found that paying down credit cards and lines of credit is growing as a financial priority among Canadians. In fact, more than a quarter, 28 per cent, pegged debt elimination as their main goal, up from 24 per cent in 2009 and a five-year high.
The results come at a time when households are tackling post-Christmas credit card bills and struggling with record debt, both mortgage and consumer. With interest rate hikes on the horizon, Bank of Canada Governor Mark Carney last month cautioned Canadians against taking on more debt than they can handle.
Despite this red flag, Canadians dug deeper this December, with spending in the holiday period rising 3.44 per cent in volume over the previous year, according to Moneris Solutions, which processes credit, debit and online payments.
The central bank estimates there was nearly $1.4-trillion in total household credit outstanding in October, the most recent data available, up from $1.3-trillion a year earlier. Much of the growth stems from mortgage debt, which stood at roughly $950-billion in October, compared with less than $890-billion a year earlier.
The Manulife national survey of 1,000 people, conducted last month by Research House, found that the second most-cited financial priority among Canadians was paying down the mortgage. It was chosen by 14 per cent of respondents, up from 11 per cent last year.
The third priority – saving for retirement – was listed by 11 per cent of those polled, down from 14 per cent a year ago.
“Paying down debts is understandably a priority, particularly at this time of year,” Paul Rooney, chief executive officer of Manulife Manulife Canada, said in a news release. “Given the economic challenges in 2009, we shouldn't be surprised to see more Canadians focused on ensuring their financial house is in order.”
Only 5 per cent of respondents listed saving for a child's education, through a tool like a registered education savings plan, and saving for purchasing a home, as financial priorities, on par with last year's results.
Home builder backs tighter mortgage rules
BY CHUCK HOWITT, RECORD STAFF
WATERLOO — Tightening mortgage eligibility rules to prevent a housing bubble may not be such a bad idea, says the founder of Canada’s largest homebuilding company.
“Housing is meant to shelter. Secondly, it is an investment,” Peter Gilgan, chief executive officer of Mattamy Homes, told a luncheon at Wilfrid Laurier University Wednesday.
Gilgan, who was in town to accept the Outstanding Business Leader of the Year Award from Laurier’s school of business and economics, was asked about recent statements by federal Finance Minister Jim Flaherty that Ottawa may increase minimum down payments for residential mortgages to ensure that homeowners don’t face huge bills if interest rates rise.
“It would be a very responsible thing to do,” said Gilgan, whose Mississauga-based company has built several thousand homes in Cambridge, including some in an indoor factory, and has land available for development on the west side of Kitchener.
When people start treating houses “as a derivative,” as some kind of vehicle to make a quick buck, “it creates too much volatility in the market,” Gilgan said.
As for the province’s recent law establishing greenbelts around urban areas in southern Ontario to avoid sprawl, he said builders have to adjust to the new reality. Twenty years from now, all the desirable greenfield land in the Golden Horseshoe will be gone, he said.
Mattamy has enough greenfield land to build on for the next 10 years, he said, but after that it will have to adopt a new strategy of infilling, intensification and redevelopment in urban areas.
Gilgan doesn’t oppose the province’s thrust as long as everyone faces the same rules. “You can throw anything at me. As long as it’s a level playing field, we’ll figure it out.”
The development restrictions in Ontario are one of the reasons Mattamy is expanding into other geographic areas such as Alberta and the U.S., he said.
Since its launch in Burlington in 1978, Mattamy has built more than 47,000 homes in over 100 communities. Fifty per cent of those homes are in greater Toronto and beyond, Gilgan said, with Cambridge accounting for about 10 per cent of that activity.
The company has had mixed success south of the border. It has “dug a little trench” in five American cities and hopes to break even this year. Doing business in the U.S. is different, Gilgan said. While Canadians tend to plan a lot and adopt a cautious approach, Americans plunge ahead much more aggressively, he said.
Gilgan also touched on the company’s efforts over the years to be innovative. During the 1990s, it decided there was a better way to build housing than having the garage as the most dominant feature. It started building houses on wider lots, as much as 36 feet in width, so that more living space could look onto the street.
“We’re providing something more than a house, we’re providing a community.”
“Pocket parks” or smaller green spaces among subdivisions was another popular Mattamy innovation, he said.
“Be really aware of the competition,” he advised young entrepreneurs, but try to do something unique or different.
Gilgan had the audience in stitches when he told them about his daughter enrolling at Laurier 13 years ago. When he came to visit her, she and four roommates were living “in something resembling a house on King Street.” You could put your hand through open space in the front door, he said. “There was no glass there.”
He drove around the neighbourhood and found a house for sale on Ezra Street. With the help of an all-female team of architects and designers, he turned the house into a “chick machine” with five bedrooms, five bathrooms and a giant shoe rack.
He assuaged his guilt over doing this for his daughter with the knowledge that some years later “a greater fool” would buy it. And sure enough, someone did. A few years later he came back when his son enrolled at the University of Waterloo, but the house was already gone. It had been replaced by a residence for 80 students.
“At first I was offended. Then when I did the math on it, I thought, yeah, it makes sense.”
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