Canadians still looking towards Alberta for employment

Comment – all the in-migration is what caused the home prices to boom form 200k to 400k in 6 months in 2006 and 2007. This is all happening again right now – as noted below.

The outcome will not be prices going to 600k but well priced homes will move quickly and there will be upward price pressure until most of the excess inventory is moved.

Alberta continues to be a draw for people in other parts of the country.

And that’s good news because in recent months there has been more talk about looming labour shortages in the future.

According to Dan Sumner, economist with ATB Financial in Calgary, 4,720 Canadians relocated to Alberta during the second quarter of 2011, largely unchanged from the 5,275 that moved here during the first quarter. But Alberta is on pace for about 20,000 net-interprovincial migrants in 2011, which if achieved will be the highest annual pace for net interprovincial migration since 2006.

Sumner says the largest net migration gain in the second quarter was from Ontario. Alberta was by far the largest benefactor of net-interprovincial migration in the country with Saskatchewan in second place gaining only 1,239 net migrants.

“Interprovincial migration can be a difficult variable to predict; however, with the unemployment rate lower in Alberta, wages higher, housing prices relatively affordable and the provincial economy expected to grow among the fastest in the country, it’s hard to imagine that more Canadians won’t be calling Alberta home over the near future,” adds Sumner.

“While more skilled workers is essential for the continued development of Alberta’s economy, it also puts pressure on social and institutional resources. As a former premier of this province once stated, ‘when people move to Alberta, they don’t bring their schools and hospitals with them’.”

Calgary house prices to get burst of energy

House prices to get burst of energy

Where oil goes, so goes Calgary.

As much as we like to say the city isn’t as dependent on black gold for its health and prosperity, the fact is, we are.

With oil prices regaining strength and with hiring happening in the oilfields, the economy is beginning to strengthen — and it’s pulling consumer confidence along with it.

A real estate axiom says that when the economy is good, the pace of home sales at the higher end of the market increases.

People in those income brackets aren’t likely to buy if there is an indication the economy is headed south.

“That’s probably true,” says Norb Park, managing broker with Sotheby’s International Realty Canada. “The business-minded are probably saying the economy is heading in the right direction, the oilpatch is in good shape, so this isn’t a bad time to deal.”

Resale housing statistics from the Calgary Real Estate Board tend to agree.

From the start of the year to the end of August, 948 homes priced at $700,000 and more changed hands, up from 779 for the same eight-month period in 2010.

In August, sales in that price range totalled 104 compared with 67 for the same month a year ago.

“There’s a mindset that when oil is doing well, then the economy must be good,” says Park. “That, in turn, increases consumer optimism — and right now, people are feeling positive.”

But not all of us can afford homes that expensive.

Matter of fact, nearly 50 per cent of single-family homes sold this year and last were priced between $300,000 and $450,000.

“With Calgary’s energy sector slated to grow, it is expected to lift the city’s employment, income and in-migration — and in turn help contribute to growth in the resale market,” says Sano Stante, president of the Calgary Real Estate Board. In-migration refers to the migration of people to the city.

“We expect price growth to improve as we approach the end of 2011 and move into 2012,” he says, adding the market is seeing a boost in sales at both ends of the market.

“Improving economic conditions, coupled with affordability and price stability, has given Calgary a boost in buyers for upper-end homes and entry-level condos,” he says.

CREB also reports the average price for single-family resale homes reached $468,051 by the end of August, a one-per-cent increase compared to last year.

Taking a page from the RBC affordability reports, Stante says: “When looking at Canada’s major cities, Calgary is one of the most affordable regions for homeownership in the country. Buyers are benefiting from improved selection at all price ranges in the market.”

The single-family home market had 1,106 sales in August, an increase of 28 per cent when compared to the same month last year — which, by the way, was the lowest for August since 1994.

Sales of 9,485 for the start of the year to the end of August are 10-per-cent higher than the same period last year.

Condo sales totalled 468 units in August 2011, with a year-to-date total of 3,885 — similar to levels recorded in the first eight months of 2010.


Just like the sale of used single-family homes, the pace is also quickening for resale condos.

As of the end of August, 834 units sold at prices below $200,000, well up from 596 for the same eight-month period in 2010, says the Calgary Real Estate Board. But condo prices continue to remain one per cent lower than last year’s figures with an average price of $288,167 for January to August.

© Copyright (c) The Calgary Herald

Alberta repeat home buyers moving on to larger homes

Alberta repeat home buyers moving on to larger homes

This article is EXACTLY what we have been hearing over the last 6 months.
CALGARY — Repeat home buyers in Alberta are moving on to larger or more luxurious homes, according to a survey released Tuesday.

The TD Canada Trust Repeat Home Buyers Report said Albertans are the most likely in the country to feel they compromised on the layout and features of their current home and are not willing to do so again in their next house hunt.

The report, which surveyed Canadians who recently bought or intend to buy a home that is not their first, found that 59 per cent of Alberta repeat buyers are moving on to larger or more luxurious homes. And even though many are upgrading, they are among the least likely to need a mortgage to finance the purchase (58 per cent versus 69 per cent nationally).

“If you are moving because you want more room or certain features in your home, a renovation could be an option to save the expense of moving by making your current home work for you,” said Jessy Bilodeau, Mobile Mortgage Specialists, TD Canada Trust.

The TD Canada Trust Repeat Home Buyers Report found that seven-in-10 Alberta repeat buyers were moving earlier than they expected (40 per cent) or had no intention of moving but now find themselves on the house-hunt again (30 per cent). The number of people intending to buy a home that is not their first in the next two years increased 21 percentage points over 2010 (84 per cent versus 63 per cent in 2010).

The large majority of Albertans (84 per cent) plan to sell their current home before buying a new one. More than one-in-five (22 per cent) say market conditions played a factor in their decision to buy another home and 69 per cent expect to sell their home at or above asking price, said the report.

“The reality is that it’s still a buyers’ market, and homes need to be priced correctly to sell,” said Bilodeau.

Albertans are more likely this year to say they are keeping their current home as a rental property (46 per cent versus 25 per cent last year) or that they will stay in their current home and the new home will be a rental property (41 per cent versus 25 per cent last year).

© Copyright (c) The Calgary Herald

Owning a Calgary house more expensive: But still among most affordable in Canada

This is good news for those looking to buy. Prices are stable and affordable.

Owning a home in Calgary became more expensive in the second quarter of this year but housing in the city is one of the most affordable among major cities in Canada, says a report released Monday.

“The long hoped for rebound in the Calgary-area market that appeared to be on track earlier this year lost some momentum in the second quarter,” says the RBC Housing Trends and Affordability report.

“After posting two successive increases, home resales edged down during the April-June period, providing little impetus to prices, which continued to move sideways for the most part.

“With such absence of price pressure, the loss of housing affordability was minimal in the quarter. The RBC measures for the Calgary area rose between 0.4 and 1.1 percentage points, representing a smaller deterioration among major Canadian cities. Owning a home in the area, therefore, continues to be close to the most affordable that it has been in almost six years.”

The RBC Housing Affordability Measure, which has been compiled since 1985, shows the proportion of median pre-tax household income that would be required to service the cost of mortgage payments (principal and interest), property taxes and utilities. The higher the measure, the more difficult it is to afford a house. For example, an affordability measure of 50 per cent means that home ownership costs take up 50 per cent of a typical household’s pre-tax income.

In the second quarter, Calgary’s measures were 37.1 per cent for a detached bungalow, 38.5 per cent for a standard two-storey, and 23.0 per cent for a standard condominium. The measures increased by 0.6 per cent (bungalow), 1.1. per cent (two-storey) and 0.4 per cent (condo).

However, they are lower than a year ago by 3.1 per cent for a bungalow, 2.9 per cent for a two-storey and 1.6 per cent for a condo.

“Notwithstanding the latest bout of uncertainty, we believe that the strong economic fundamentals of Alberta and Calgary will find their way into the housing market and will support homebuyer demand in the period ahead,” says the report.

RBC says the average bungalow price in Calgary declined by two per cent year-over-year in the second quarter to $411,700 while a two-storey dropped by 1.6 per cent to $415,200 and a condo fell by 1.1 per cent to $249,000.

Sano Stante, president of the Calgary Real Estate Board, said prevailing negative economic conditions will restrain any increases in interest rates for awhile.

“Those are increases that we fully expected prior to these events and they’ve now been abated,” said Stante. “That was our biggest risk of deteriorating affordability.

“With an assurance that interest rates are going to stay low for the next 12 months anyway — and there’s somewhat of an assurance — then it really looks like we’re going to lead the nation in affordability especially when we start to get increased employment and in-migration towards the end of this year. That should really lend to a more robust real estate market.”

Robert Hogue, senior economist with RBC, said he too expects Calgary’s affordability to remain about the same.

“Previous to a few weeks ago we expected higher interest rates would start really putting more and more pressure across the board in Canada including in Calgary on the monthly costs of home ownership,” he said. “Now we’ve pushed everything out to the middle of next year.

“For the next few months or quarters I think chances are that affordability is probably will go sideways, the same as the housing market.

© Copyright (c) The Calgary Herald

A 180 Degree Change in Mortgage Rate Expectations

This last blip in the stock market has taken the wind out of the world’s recovery sails. It  now looks like rates are going to stay the same or go DOWN!?! for the 12 months or so.

The USA has said for the 1st time ever that they are not going to change their rates until 2013. They have never given a date in the past and this IS a big deal. It means that Canadian rates are going to have to track closely to the USA rates or our dollar will skyrocket and quickly slow our growth and path to recovery.

That would mean that while fixed rates have NEVER been better in 111-years, variable rates are also super attractive because Prime (P) will now stay close to 3% (where it is today) and the rate of P-8% = 2.2% for a mortgage is CRAZY low now that we know it is going to stay around there for 2 more years!

Call to discuss if you have any questions on this. 403-681-4376: Mark

A 180 Degree Change in Rate Views

  • 46% probability of a rate cut Sept. 7.
  • 100% probability of a rate cut by year-end.

Changing-Rate-ForecastsThat’s what prices of closely-followed overnight index swaps (OIS) were implying at the close of business on Monday. OIS trade on market expectations for Bank of Canada rate moves.

That amounts to a 180 degree swing in market psychology. Just a few weeks ago traders were pricing in a rate hike by January.

“As we’ve seen, markets can swing and perception can swing quite aggressively, and we could well be back to a fall expectation [of a rate hike] in a month’s time,” said RBC economist Eric Lascelles to the Globe & Mail.

Lascelles counterpart at Scotiabank, Derek Holt, says: “Any talk of the Bank of Canada hiking this year is just foolish in my opinion.”

Peter Gibson, chief portfolio strategist at CIBC World Markets notes: “I think it’s clear that there are a lot of serious problems still in the world and it’s more likely that we’re setting the stage for a sustainably low level of interest rates for a very long time.”

And that is the takeaway here.

Despite the roller coaster of emotions as of late, this about-face in rate assumptions reminds us of the necessity to focus on long-term trends. Long-term, North America’s prognosis still seems compatible with low-growth and low-inflation. That’s an environment where fixed mortgage rates typically underperform.

New Virtual Closings for lawyers – the next thing on the way

Innovation In Unlikely Places – Introducing V-Close by Vanguard Law Group

Sunday, 26 June 2011 13:42

Change is often the end result of something. Once in a while, change is introduced to create not only new results, but an entirely new direction.

Enter V-Close, the new virtual document signing service,  for clients needing to sign documentation for a Real Estate purchase or sale transaction, born not only from the evolution of technology, but of an understanding of the preferences of the market for convenience, over all other benefits.

Innovation in Unlikely Places

Sanjay Soni, Managing Partner with Vanguard Law Group, recognizes the irony of the wave of change coming from a law group. In fact, the company’s tag line reflects the tongue in cheek nature of the birth place of this evolution: “Innovative Law Firm? Oxymoron? Not Anymore!”

Soni explains: “People are used to technology and access to information in certain parts of the economy, and in certain services. They are not used to it when it comes to legal services- in fact it is quite the opposite. “

“When people think of law firms, technology and innovation is not what comes to their head. We are going after a market that we think is quite untapped.  Technology is around you all the time, every day- but when you think about having to go into a lawyer’s office that is not what comes in to your head.”

Much like in the Real Estate and Mortgage Industries, for Soni clients are not only who you do business with, they are why you are doing business at all, and refers to this as the impetus for the advances they have made “My philosophy is very simple: Unless you get clients, you don’t get paid…We wanted to bring a customer centric focus to a law firm… How do we do this? How do we make clients feel like they are getting value out of what they pay for, and really mean it?”

So then, in these client-centric industries, it is about understanding the value of an offering, and making the client aware of it.

What is V-Close?

Education and understanding are some of the cornerstones of communication- necessary for any productive relationship. For Real Estate and Mortgage Professionals, the question might be, why this service, and how does it work- so that they can support clients in weighing their options.

It’s simple really. For a fee comparable to traditional document signing, you essentially sit in your living room, or whatever location suits you, at a designated time, and await the arrival of the Commissioner of Oath.

Says Soni,” The way it works is that we have a secure video link between ourselves, and one of our remote commissioning agents. All of our commissioning agents are Commissioners of Oath, registered with the Attorney General’s office to Vanguard Law Group. “

“They have very modern laptops with dual flat screens. They go into a client’s home after an appointment has been set up. They will turn on their computers and establish a secure wireless link with our central office here in Mississauga, and at that point the clients can see me, and I can see them, and we go over the purchase or sale documents together. Once I’ve finished the explanation of a specific page, we get the clients to sign on a physical piece of paper that the commissioners have with them at the time of signing.”

Demographic Spread

One challenge that Realtors and Mortgage Professionals encounter is a one-size-fits all attitude to technology, as well to servicing the needs of their clients from different generations.  Different generations have different needs, understanding, comfort level and expectations when it comes to technology.

What is common among clients though, is the appeal of an idea that they are empowered to pick and choose service in a location and a time that puts them first.

What is unique about this product is that it appeals across generations, for different reasons, as Soni points out, and the limitations from a demographic point of few are few. “We look at every individual who is over 19 as a customer, which is kind of neat. As long as you are selling, refinancing or purchasing a home, we have the service for you.”

This is demographic reach in action, with seniors happy that they don’t have to venture out of their homes (often a challenge for the most hale and hearty with Canadian winters), and for Gen X & Gen Y, they are drawn in by the technology itself.

“This is for every client.  We’ve seen that the older demographic may not be into computers so much, however, they are into convenience. They actually understand the value of this to their time.  The trade-off from the technology perspective is really their busy lives, and the convenience that this offers. “

“For the younger demographic, they may be first time homebuyers, so they may not realize the hassle involved with going into a lawyer’s office, but they get it from a technology perspective. “

Convenience is the catalyst

Pick an industry, any industry, and you will see clear evidence of evolution driven by delivering customers what they want. And in this age of instant information and convenient access to just about everything at hours that suit consumers, it only makes sense to be open for business when business is there.

To really understand a clients’ needs and wants, one must almost break down processes, working backwards, to understand its’ genesis- rather than just simply trying to market the end result.

As Soni agrees, when you start and finish with the client’s needs, the possibilities are profound.

“I think there is much broader application with what we are doing than just the legal industry… We’re not springing into different areas, but I had a meeting with my accountant the other day to sign paperwork, and the thought went through my head, why am I in your office? I’m signing this paperwork- I can be signing this on the bottom screen, while I can see you on the top screen.”

“There are tremendous implications here, if people think about what they do, and they break down the process of what they are doing and look at what the technological substitute might be, I think there is very wide application in the Real Estate Industry. Anywhere where you need to sign a piece of paper, it should be in an electronic format- and if you need to consult with someone, then you can basically do what we are doing.”

Soni says too, that they have begun to build upon their own design.” We have realized that we have the infrastructure in place- we can actually now create a draft will, based on a checklist, and send it to the customer and then go over the final doing exactly the same process- so now you can do a will at the same time as you are signing mortgage documentation.”

Bricks and Mortar Optional

Part of introducing and selling change, is dealing with objections- and objections and scepticism are not uncommon, especially in the areas of technology- as many consumers are afraid of things like fraud, identity theft and of compromising personal information.

Soni suggests that one must recognize these objections, and address them gently, offering alternatives, and assures too that in theory, there are no differences between a traditional document signing, and a V-Close.

“There is no difference on the other side. If they need to ask questions, they ask questions. If identification needs to be taken, it’s taken by the commissioning agents.

Everything is recorded, which actually enhances the process. From a fraud perspective, it is actually better, we think, than the process today. The Commissioner is key in all of this… We can basically replicate the experience from the office in your own home.”

What’s in it for Realtors?

In this competitive industry, Realtors are always trying to boost value in their relationships with their clients, as a means of standing out from the crowd. Soni says that V-Close offers an opportunity to do just that: “The value add for the agent is to say- You are busy people…Here is a law firm that not only has the technology, but will actually make it easier for you, where you don’t have to take any time off of work, or you don’t have to take any time in the evening… the experience that they have will be

unrivalled by other experiences that they might have- and that is simply based on their busy lives, and the conveniences that we offer.”

Service comes down to facilitation and ease, and Soni gives an example:”Last week- we had an actual signing in two cities at the same time. Father and Son were both on title on the home. The father was in Ottawa, the son was in Toronto. We had two Commissions at the same time, one in Ottawa, one in Toronto- and then I linked them in on my screen. They signed in two cities at the same time, and I did the explanation to both of them. ”

In client-centric business, sometimes there are challenges in meeting clients needs, and in coming up with new ways to over deliver- in ways that the client does not even expect.   What this opportunity represents is a chance to give more to your clients, by anticipating their needs before they do. In knowing about the options, and presenting them with a solution that they don’t expect, perhaps because they don’t even know the technology exists, you communicate your own value, and set your service apart.

Alberta renovation spending to lead country

This is great news for Calgary. It shows two things.

1. Due to the home price drops from the peak in 2007 many are choosing to renovate rather than move out of their “upside down” mortgages.

2. The Perfect Home Program allows you to include the cost of renovations in the mortgage when it is purchased. Call to discuss how this program work. It means that you can buy a home in the location YOU want and then make it YOUR Perfect Home with your own kitchen, floors, basement and all the rest.

Alberta renovation spending to lead country

1.7% growth in 2011, 4.9% in 2012.
Renovation spending in Alberta is forecast to lead the country in year-over-year growth this year and in 2012, according to a report by the Altus Group, an economic consulting firm.

The report said spending in Alberta on renovations hit $5.7 billion in 2010, which accounted for 9.5 per cent of all spending in the country. Total spending in the province was up 7.2 per cent from the previous year which was behind many other provinces for annual growth.

Canada saw 9.2 per cent growth in 2010 to $60.1 billion.

Altus Group forecasts spending to increase in Alberta by 1.7 per cent this year and by 4.9 per cent next year — both growth rates leading the nation.

For Canada, the report forecasts a 0.1 per cent decline this year followed by a 3.6 per cent hike in 2012.

“Canada’s general economic recovery continues, but at a modest pace,” said the report. “Job growth has been stronger through the recovery than after the last recession, but still suffers from weakness, particularly in terms of youth and full-time jobs. The cautiously optimistic forecast for economic growth translates into equal caution over the forecast for renovation demand.

“The good news for renovators is that weaker than expected economic growth has extended the period of very low interest rates, perhaps into 2012. Low interest rates are important for this sector both in terms of affordability for those who need to borrow to finance their renovations, as well as in keeping mortgage payments in check, thereby freeing up income for discretionary renovation spending.”

© Copyright (c) The Calgary Herald

New-to-Canada mortgages for immigrants have been around for years!

Do you want to read some total BS-PR-spin that the banks put out? Below is a press release from a bank patting themselves on the bank for lending to new immigrants. Funny thing is that this program that they have “developed” has been around for more than 7 years. All they did was sign up for the CMHC New to Canada program that every other lender that we use has had since I started doing this in 2004! Good job ING. Way to do what every one else is doing. Many years late.

We love New to Canada immigrants and do all we can to support you in getting a home. Have a look on our website for the document on how you can buy with as little as 5% down!

Getting a mortgage in this country may have just gotten slightly easier.

ING Direct Bank, recognizing the overwhelming desire for most Canadians, particularly with newcomers to the country, to realize the dream of home ownership is modifying its’ lending criteria.

In a release, ING Direct Bank said, “ING DIRECT, the country’s 6th largest mortgage lender, announced today it is offering its popular unmortgage to permanent and non-permanent residents with limited or no credit history. Permanent and non-permanent residents include those who have been residing in Canada for no longer than 60 months. “

ING Direct recognizes the sheer numbers and the tremendous influence that immigration plays- not just in the makeup of the Canadian population, but in the marketplace as well. As such, they are developing product to meet that need.

“At ING DIRECT, our goal has always been to give the power of saving to all Canadians, so offering our unmortgage to new residents allows us to stay true to that promise,” said Peter Aceto, President and CEO of ING DIRECT Canada. “We want to give newcomers access to the same products and savings opportunities we have been providing to Canadians for the last 14 years”

Motivated by the desire to establish a banking relationship right from day one with newcomers to this country, ING Direct jumped into action to provide a solution for people trying to establish their credit history.

Aceto says, “We have always been committed to making the mortgage experience better for our clients. For newcomers to Canada, our product is simple and easy to understand. We always provide the best rates upfront and guarantee those rates for up to 120 days after applying, and our flexible pre-payment options allow our clients to own their homes sooner by paying as little interest as possible over the life of the mortgage.”

Canada is known globally for its’ stringent lending policies- which are partly to thank for escaping the recent recession relatively unscathed.

While qualifying for a mortgage may have loosened slightly, it is likely not a sign that credit criteria is less stringent generally. Qualifying for a mortgage , while taking credit history into account, generally has some different criteria, because it is as much about the asset that is securing the debt, and the amount of cash available to pay for ongoing expenses.


Calgary market transitioning into a more vigorous phase.

This is great news as affordability is super important. Note in Vancouver it takes about 3/4 of a person’s income to pay for their home. Yikes! Have a look at some other good reports here.

TORONTO, May 20 /CNW/ – Unlike most other major centres across Canada, housing affordability in Alberta remained stable in the first quarter of 2011, according to the latest Housing Trends and Affordability report issued by RBC Economics Research.

Until the fall of 2010, abundant availability of homes for sale in the face of sluggish demand kept housing prices firmly under control. Resulting stable or slightly declining property values contributed to a substantial improvement in affordability in Alberta last year.

“The Alberta market continued to be stuck in low gear in the first quarter of 2011. Sales of existing homes and construction of new housing units showed very modest increases,” said Robert Hogue, senior economist, RBC. “While market conditions have become more balanced in recent months, owning a home doesn’t seem to be getting more expensive in the provincial market at this stage. Affordability levels are still looking quite attractive.”

RBC’s housing affordability measures for Alberta, which capture the province’s proportion of pre-tax household income needed to service the costs of owning a home, remained relatively unchanged and below their long-term averages in the first quarter of 2011. The measure for the benchmark detached bungalow in the province moved up to 31.3 per cent (an increase of 0.4 of a percentage point from the previous quarter), the standard condominium stayed flat at 20.2 per cent and the standard two-storey home fell to 34.2 per cent (down by 0.2 of a percentage point).

RBC’s report notes that there are signs that the Calgary housing market is finally overcoming its protracted slump. Home resales in the area grew for the second consecutive period in the first quarter, the most growth since the middle of 2009, helping to remove market slack and setting a healthier balance between demand and supply.

“Calgary home prices have yet to break out of their listless trends, but they rose at their fastest rate in more than a year in the first quarter, with detached bungalows leading the way,” said Hogue. “Firmer market conditions and higher prices had only limited impact on Calgary’s affordability, which remains among the most attractive of Canada’s major cities.”

The majority of Canadian markets experienced weakened affordability in the first quarter of 2011. Most notable was the sizeable deterioration in British Columbia. More specifically, Vancouver saw significant gains in property values, which drove the already elevated cost of homeownership even higher. Quebec’s homebuyers also faced noticeable rises in ownership costs, while those in Atlantic Canada saw their affordability advantage somewhat diminish. The picture remained mixed in other areas of the country, with Ontario, Alberta and Saskatchewan experiencing ups and downs in ownership costs, depending on the housing type.

“Despite the latest erosion in affordability, provincial levels generally continue to stand near their long-term averages, suggesting that owning a home remains affordable or, at worst, slightly unaffordable across Canada – with Vancouver being a notable exception,” said Hogue.

RBC’s housing affordability measure for a detached bungalow in Canada’s largest cities is as follows: Vancouver 72.1 per cent (up 3.4 percentage points from the last quarter), Toronto 47.5 per cent (up 0.8 of a percentage point), Montreal 43.1 per cent (up 2.0 percentage points), Ottawa 39.0 per cent (up 0.4 of a percentage point), Calgary 35.9 per cent (up 0.9 of a percentage point) and Edmonton 31.5 per cent (up 0.5 of a percentage point).

The RBC housing affordability measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow, a reasonable property benchmark for the housing market in Canada. Alternative housing types are also presented including a standard two-storey home and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

Low interest rates seen sticking around – fuel for the Variable rate side

Low interest rates seen sticking around- great news for the variable rate people. Remember with a broker lender you lock-in at the best broker rate for the day when you lock in. With the banks you lock in at Posted (or Posed-1% if they pretend that they love you – and they actually love your money, not you.)

That means that for today the broker rate is 3.99% for a 5 year. Posted is 5.66%. If “the bank loves you” you get 5.66-1% = 4.66% BUT you should have had 3.99% at a broker bank.

So would you love your bank back when that happens?


 Tuesday’s Globe and Mail

Interest rates have recently being going somewhere unexpected: down.

At their trough last week, the yields on 10-year U.S. Treasuries, the benchmark North American rate, touched 3.11 per cent, the lowest level in six months and more than half a percentage point below their February peak.

Yields on 10-year Government of Canada bonds have fallen, too, and are now virtually identical to their U.S. counterparts.

The sliding rates have surprised many market watchers. With the United States government bumping up against its debt ceiling, inflation ticking upward, and a growing debt crisis in Europe, most expected interest rates to be increasing.

While predicting the future for rates is notoriously difficult, some observers believe that the current low-rate environment may continue for a while. If so, it will mean pain for savers, but good news for borrowers.

A drop in interest rates is equivalent to a sale on the price of money, and corporations are already rushing to take advantage of the easy lending conditions, even if they’re in no immediate need of funds. A case in point is Google Inc., which has $37-billion (U.S.) in cash and marketable securities on its balance sheet, but raised $3-billion from a bond issue last week anyway. Mortgage rates have fallen, too – good news for homeowners looking to refinance.

But lower rates have not turned out so well for some of the market’s savviest players, including Bill Gross, the founder of Pimco, the world’s biggest bond fund. Earlier this year, he sold his U.S. Treasuries, because he thought interest rates were poised to rocket higher, which would drive down prices of bonds.

It’s difficult to fault his logic: only a few months ago, the case for higher interest rates seemed so compelling.

Governments around the world are carrying bloated deficits and massive borrowing needs. In the United States, politicians have yet to agree on any clear path to deficit reduction, despite more than $1-trillion in annual red ink. Meanwhile, oil has been trading consistently around the $100-a-barrel level, thereby lifting inflation, another bond-market negative.

And the U.S. Federal Reserve is no longer putting its thumb on the scale. In less than six weeks, it is going to end its program of quantitative easing, under which it is buying $600-billion in Treasuries to goose the economy. Many bond-market followers believe the Fed’s massive buying binge has been propping up Treasury prices and keeping yields artificially low.

So what has been pushing rates lower in recent months?

A weaker-than-expected recovery is the major culprit. “The global economy, and the U.S. economy in particular, is not on quite as solid a recovery track as people were imagining in the very optimistic days of six months or so ago,” observes Peter Buchanan, senior economist at CIBC World Markets.

A slew of recent statistics underlines that weakness, ranging from the poor state of U.S. home sales to the slowing pace of U.S. manufacturing growth. Meanwhile, the Japanese economy, the world’s third-largest, is shrinking and creating a further drag on global commerce, although few foresee a double-dip recession.

“We’re looking ahead toward a bit of a cooling in economic growth,” said Paul Dales, senior U.S. economist at Capital Economics, who foresees output in the U.S. rising about 2 per cent this year.

That level of growth won’t be “anything to celebrate but it’s nothing like the recession we saw previously,” he said.

Another factor driving rates lower has been the early May rout in commodities, which dampened some of the worry on the inflation front. In addition, the recent sluggish performance of the stock market suggests that investors are getting nervous and growing more willing to buy super-safe government bonds.

Mr. Dales believes the current trends have room to run, and that rates will surprise to the downside.

He predicts U.S. 10-year Treasury yields could slip to 2.5 per cent in the low-growth, less inflation-spooked environment he foresees ahead.

If growth continues to be slow, lower rates might be staying around for a while.

Mr. Buchanan says the most likely scenario, given the poorer economic outlook, is for the Fed to hold off on raising rates until 2013. He believes the yield on Treasuries will rise gradually, instead of falling further, getting back to 3.4 per cent by the end of this year and to 4 per cent by the end of 2012.