Canadian housing market slowing, but remains the envy of the world

Housing marketMagnifying glass

After what seems like years of increasing home sales and low mortgage rates, could it be that the Canadian housing market is finally slowing down? Let's take a look at the evidence:

• Housing prices rose 5 percent during May – an increase, yes, but a much smaller one than in previous months.
• Growth in home sales in Toronto – the hottest market in the country – dropped by more than one-third compared with previous months.
• Home sales in British Columbia, particularly in Vancouver, continued to slide at dramatic rates, with the number of units sold falling roughly 16 percent from 2011.

This information, released earlier this week from the Canadian Real Estate Association, is among the first signs that the market as a whole may be coming to an end of the roller coaster ride of recent years. You may recall that the Royal Bank of Canada came out with similar numbers recently. Its analysis showed a decrease in the value of building permits, which could indicate slower growth down the line. Continue reading

Former BoC head less worried about debt than successor

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Canadians are receiving mixed messages when it comes to the dangers of rising personal debt. During a recent speech, former Bank of Canada governor David Dodge dismissed his successor's repeated warnings that consumer debt is the greatest domestic threat to the Canadian economy.

In interviews following an event in Edmonton, Dodge said he doesn't share current BoC governor Mark Carney's fears over the state of the economic recovery, particularly where debt is concerned, reported The Globe and Mail. Though acknowledging that debt levels are high, Dodge argued that most Canadians aren't overexposed and that, even in areas of the country with higher-than-average debt, it's not a big deal. When asked about rising interest rates, he suggested consumers would likely find the increased payments manageable, according to the source. Continue reading

Canadian housing market echoes Spain

Housing marketMagnifying glass

Canadians wondering how the current housing market boom might end could look to Spain for a real-world example. Citizens of that country invested heavily in housing during the late 1990s through the last decade and are now facing serious economic woes, according to BMO Financial Group.

Starting in 1999, investment in the Spanish housing market took off, with up to 80 percent of the country's wealth tied up in bricks and mortar. Foreign investors seeking big returns on their purchases bought property all over the country, driving up costs. Locals looking to cash in on the trend took out second and third mortgages, noted BMO Chief Economist Dr. Sherry Cooper.

"Housing is a key sector in any economy and many developed countries pride themselves on a high level of homeownership, but as we have painfully seen in recent years, over-investment in housing can result in enormous economic instability and dislocation," said Dr. Cooper. "The entire growth boom in Spain was focused on housing and households invested almost all of their assets in residential real estate." Continue reading

Superheroes demonstrate importance of financial planning

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In an unusual superhero team-up, The Avengers and Visa Canada have joined forces to teach consumers about sound financial planning.

The comic features beloved superheroes Spider-Man, the Hulk and Iron Man facing off against arch villain Mole Man, while at the same time battling financial illiteracy, according to the Financial Post. The news source asked experts to weigh in on the state of the heroes' fictional financial affairs.

Unsurprisingly, given all their vigilantism, none of the superheroes – save billionaire weapons manufacturer Tony Stark/Iron Man – hold down much in the way of a day job, according to the Post's experts. Peter Parker/Spider-Man, for example, supports an elderly aunt on a freelance photographer's pay and is constantly broke. Bruce Banner, a.k.a. The Incredible Hulk, spends much of his time living in a cave, which at least spares him the burden of a mortgage payment. Continue reading

Canadian mortgage insurance firm to limit growth, slow housing market

CMHCMagnifying glass

All good things must come to an end, the saying goes, and Canada's super-charged housing boom may be next on the block. The Canadian Mortgage and Housing Corporation has indicated it will lessen its involvement in the housing market over the next few years as it approaches a federally mandated mortgage insurance limit.

By law, CMHC is allowed to insure up to $600 billion in mortgages, a cap that has been raised three times in the last five years as the housing market accelerated, the Globe and Mail reports. As the agency prepares to cross the $500 billion threshold this year, it has begun making plans to slow down the rate of new mortgages insured, effectively limiting the amount of credit available to borrowers and dampening the overall market.

CMHC projects it will grow by $30.8 billion between 2011 and 2014, reaching overall levels of $587.7 billion by 2016, according to the Globe and Mail. This marks a significant slowdown from the $170 billion in growth the agency experienced between 2007 and 2010. Continue reading

Liberal lending practices leading Canadians to excess debt

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Household debt in Canada has reached an all-time high, the result of lenders offering mortgages similar to subprime loans in the United States, according to a recent Bloomberg News report.

Bloomberg obtained 152 pages of documents from Canada's Office of the Superintendent of Financial Institutions, which said the country's current mortgage environment poses an emerging risk to financial institutions.

"It just speaks to the general easing in lending standards, which has contributed to a booming housing market," David Madani, an economist in Toronto with Capital Economics, told the source. "The problem is sort of baked in now, so I'm not sure there's a way to prevent a weakening of the housing market." Continue reading

Bank of Canada expects key interest rate to remain stable

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Canadians with variable rate mortgages can breath a sigh of relief, as Bank of Canada governor Mark Carney recently said interest rates will most likely remain low.

Carney, speaking to the Board of Trade of Metropolitan Montreal, said the BoC is comfortable with its current policy, which has kept Canada's overnight lending rate at 1 percent.

"The path for interest rates in Canada will be appropriate … to achieve the inflation target, and we're not going to tie our hands on that path because we're obviously living in volatile times," Carney said, according to the Globe and Mail. "At some point over that horizon there will be a removal of monetary stimulus, but obviously we have to manage according to events."

Carney admitted interest rates will likely increase by the end of 2013, but he failed to disclose when and by what percentage, the report said. Continue reading

Consumers need not worry too much about rising debt figures

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According to a recent editorial in The Montreal Gazette, consumers shouldn't be too scared about the rising household debt figures many economists have pointed to as a reason for a potential crisis.

The article explained that authority figures in Canada have warned residents about their borrowing habits. During the second quarter, the debt-to-income ratio was 147 percent, meaning for every dollar in disposable income earned, the average household owed $1.47 in consumer and home loan debt.

While this figure is large, the editorial explains it is not leading to a crisis. The author explains that Canadians should moderate their "appetite for debt," which is actually already happening. Continue reading

Mortgage rates sinking even lower in some regions

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According to a recent report from The Canadian Press, the country's already low interest rates for home loans are sinking even further at some banks.

As of Thursday, September 15, rates at TD Canada Trust, the Royal Bank of Canada and Bank of Montreal are declining.

TD Canada Trust, the first major bank to announce a change in the country's steady mortgage sector, reduced its five-year closed-mortgage rate 15 one-hundredths to 5.24 percent. Both RBC and Bank of Montreal plan to drop their five-year closed-home loan rate 20 one-hundredths to 5.19 percent. Continue reading

New Housing Price Index declines 0.3 percent for June

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Statistics Canada revealed its most recent New Housing Price Index for June, showing a 0.3 percent decline from May after it had grown 0.4 percent during the previous month.

Toronto and Oshawa led the country in terms of new home prices, as values increased by 0.8 percent in the region, followed by Winnipeg with a 0.7 percent jump.

While these increases are positives for the country's real estate market, the index revealed prices were unchanged in 10 of the 21 metropolitan regions surveyed. Continue reading