28 Jan

Bank of Canada Holds rate steady!

General

Posted by: Jeannie Stace-Smith

BANK OF CANADA HOLDS OVERNIGHT RATE AS EXPECTED, BUT APPEARS TO BE LESS CONFIDENT IN THE STRENGTH OF THE ECONOMIC OUTLOOK.

Bank of Canada Holds Steady Despite Economic Slowdown

In a more dovish statement, the Bank of Canada maintained its target for the overnight rate at 1.75% for the tenth consecutive time. Today’s decision was widely expected as members of the Governing Council have signalled that the Bank still believes that the Canadian economy is resilient, despite the marked slowdown in growth in the fourth quarter of last year that has spilled into the early part of this year. The economy has underperformed the forecast in the October Monetary Policy Report (MPR).

In today’s MPR, the Bank estimates growth of only 0.3% in Q4 of 2019 and 1.3%in the first quarter of 2020. Exports fell late last year, and business investment appears to have weakened after a strong Q3, reflecting a decline in business confidence. Job creation has slowed, and indicators of consumer confidence and spending have been much softer than expected. The one bright light has been residential investment, which was robust through most of 2019, moderating to a still-solid pace in the fourth quarter only because of a dearth of newly listed properties for sale. 

The central bank’s press release stated that “Some of the slowdown in growth in late 2019 was related to temporary factors that include strikes, poor weather, and inventory adjustments. The weaker data could also signal that global economic conditions have been affecting Canada’s economy to a greater extent than was predicted. Moreover, during the past year, Canadians have been saving a larger share of their incomes, which could signal increased consumer caution which could dampen consumer spending but help to alleviate financial vulnerabilities at the same time.”

The January MPR states that over the projection horizon (2020 and 2021), “business investment and exports are anticipated to improve as oil transportation capacity expands, and the impact of trade policy headwinds on global growth diminishes. Household spending is projected to strengthen, driven by solid growth of both the population and household disposable income.” Growth is expected to be 1.6% in 2019 and 2020 and is anticipated to strengthen to 2.0% in 2021.

Inflation has remained at roughly the Bank’s target of 2%, and is expected to continue at that pace.

Also from the MPR: “The level of housing activity remains solid across most of Canada, although recent indicators suggest that residential investment growth has slowed from its previously strong pace. Demand remains robust in Quebec, where the labour market has been strong. In Ontario and British Columbia, population growth is boosting housing demand. In contrast, Alberta’s housing market continues to adjust to challenges in the oil and gas sector. Nationally, house prices have continued to increase and should strengthen slightly in the near term, consistent with the responses to the Bank’s recent Canadian Survey of Consumer Expectations.”

Bottom Line: The Canadian dollar sold off on the release of this statement and I believe there is a downside risk to the Bank of Canada forecast. Today’s release is a more dovish statement than last month, showing less confidence in the outlook. The Governing Council did express concern that the recent weakness in growth could be more persistent than their current forecast, saying that “the Bank will be paying particular attention to developments in consumer spending, the housing market, and business investment.” They also raised estimates of slack in the economy and dropped language about the current rate being appropriate.

According to Bloomberg News, today’s Governing Council comments “are a departure from recent communications in which officials sought to accentuate the positives of an economy that had been running near capacity and was deemed resilient in the face of global uncertainty. While Wednesday’s decision still leaves the Bank of Canada with the highest policy rate among major advanced economies, markets may interpret the statement as an attempt to, at the very least, open the door for a future move.”

DR. SHERRY COOPER
Chief Economist, Dominion Lending Centres
15 Jan

Canadian Home Sales Rise!

General

Posted by: Jeannie Stace-Smith

Interesting article on increasing home prices!

WEAK NEW LISTINGS SLOW CANADIAN HOME SALES AS PRICES CONTINUE TO RISE.

Sellers Housing Market  Now in the Greater Toronto Area (GTA)

Statistics released today by the Canadian Real Estate Association (CREA) show that national existing-home sales dipped between November and December owing to a dearth of new listings, especially in the GTA.

National home sales edged down 0.9% in the final month of 2019, ending a streak of monthly gains that began last March. Activity is now about 18% above the six-year low reached in February 2019 but ends the year about 7% below the peak recorded in 2016 and 2017 (see chart below).

There was an almost even split between the number of local markets where activity rose and those where it declined, with higher sales in the Lower Mainland of British Columbia, Calgary and Montreal offsetting declines in the Greater Toronto Area (GTA) and Ottawa.

Actual (not seasonally adjusted) activity was up 22.7% compared to the quiet month of December in 2018. Transactions surpassed year-ago levels across most of Canada, including all of the largest urban markets.

The December decline in home sales is not a sign of weakness but is instead the result of diminishing supply. Excess demand continues to push up prices in most regions of Canada. Demand has been boosted by low interest rates, strong population growth and strong labour markets that have triggered significant gains in household incomes. Mitigating this, in part, is the mortgage stress-test, which continues to sideline some potential buyers.

According to Gregory Klump, CREA’s Chief Economist, “The momentum for home price gains picked up as last year came to a close. If the recent past is prelude, then price trends in British Columbia, the GTA, Ottawa and Montreal look set to lift the national result this year, despite the continuation of a weak pricing environment among housing markets across the Prairie region.”

New Listings

The number of newly listed homes slid a further 1.8% in December following a 2.7% decline the month before, leaving supply close to its lowest level in a decade.

Slightly higher sales and a drop in new listings further tightened the national sales-to-new listings ratio to 66.3%, which is well above the long-term average of 53.7%. If current trends continue, the balance between supply and demand makes further home price gains likely.

 

December’s drop was driven mainly by fewer new listings in the GTA and Ottawa–the same markets most responsible for the decline in sales. Listings available for purchase are now running at a 12-year low. The number of housing markets with a shortage of listings is on the rise; should current trends persist, fewer available listings will likely increasingly weigh on sales activity.

With new listings having declined by more than sales, the national sales-to-new listings ratio further tightened to 66.9% in December 2019 – the highest reading since the spring of 2004. The long-term average for this measure of housing market balance is 53.7%. Price gains appear poised to accelerate in 2020.

Considering the degree and duration to which market balance readings are above or below their long-term averages is the best way of gauging whether local housing market conditions favour buyers or sellers. Market balance measures that are within one standard deviation of their long-term average are generally consistent with balanced market conditions.

Based on a comparison of the sales-to-new listings ratio with the long-term average, just over half of all local markets were in balanced market territory in December 2019. That list still includes Greater Vancouver (GVA) but no longer consists of the GTA, where market balance favours sellers in purchase negotiations (see chart below). By contrast, an oversupply of homes relative to demand across much of Alberta and Saskatchewan means sales negotiations remain tilted in favour of buyers. Meanwhile, an ongoing shortage of homes available for purchase across most of Ontario, Quebec and the Maritime provinces means sellers there hold the upper hand in sales negotiations.

The number of months of inventory is another important measure of the balance between sales and the supply of listings. It represents how long it would take to liquidate current inventories at the current rate of sales activity. There were 4.2 months of inventory on a national basis at the end of December 2019 – the lowest level recorded since the summer of 2007. This measure of market balance has been falling further below its long-term average of 5.3 months. While still within balanced market territory, its current reading suggests that sales negotiations are becoming increasingly tilted in favour of sellers.

There remain significant and increasing disparities in housing market activity across regions of Canada. The number of months of inventory has swollen far beyond long-term averages in Prairie provinces and Newfoundland & Labrador, giving homebuyers ample choice in these regions. By contrast, the measure is running well below long-term averages in Ontario, Quebec and Maritime provinces, resulting in increased competition among buyers for listings and providing fertile ground for price gains. The measure is still within balanced market territory in British Columbia but is becoming increasingly tilted in favour of sellers.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.8%, marking its seventh consecutive monthly gain. It is now up nationally 4.7% from last year’s lowest point posted in May. The MLS® HPI in December was up from the previous month in 14 of the 18 markets tracked by the index. ( see table below).

Home price trends have generally been stabilizing in the Prairies in recent months following lengthy declines but are clearly on the rise again in British Columbia and Ontario’s Greater Golden Horseshoe (GGH). Further east, price growth in Ottawa and Montreal has been ongoing for some time and strengthened toward the end of 2019.

Comparing home prices to year-ago levels yields considerable variations across the country, although for the most part has been regionally split along east/west lines, with declines in the Lower Mainland and major Prairie markets and gains in central and eastern Canada.

The actual (not seasonally adjusted) Aggregate Composite MLS® (HPI) rose 3.4% y-o-y in December 2019, the biggest year-over-year gain since March 2018.

Home prices in Greater Vancouver (-3.1%) and the Fraser Valley (-2%) remain below year-ago levels, but declines are shrinking. Elsewhere in British Columbia, home prices logged y-o-y increases in the Okanagan Valley (+4.2%), Victoria (+2.3%) and elsewhere on Vancouver Island (+4.2%).

Calgary, Edmonton and Saskatoon posted y-o-y price declines of around -1% to -2%, while the gap has widened to -4.6% in Regina.

In Ontario, home price growth has re-accelerated well above consumer price inflation across most of the GGH. Meanwhile, price gains in recent years have continued uninterrupted in Ottawa, Montreal and Moncton.

All benchmark home categories tracked by the index accelerated further into positive territory on a y-o-y basis. One-storey single-family home prices posted the most significant increase (3.6%) followed closely by apartment units (3.4%) and two-storey single-family homes (3.3%). Townhouse/row unit prices climbed a slightly more modest 2.7% compared to December 2018.

The actual (not seasonally adjusted) national average price for homes sold in December 2019 was around $517,000, up 9.6% from the same month the previous year.

The national average price is heavily skewed by sales in the GVA and GTA, two of Canada’s most active and expensive housing markets. Excluding these two markets from calculations cuts more than $117,000 from the national average price, trimming it to around $400,000 and reducing the y-o-y gain to 6.7%.

DR. SHERRY COOPER
Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

 

9 Jan

Looking to renew your mortgage in 2020? Great advice!

General

Posted by: Jeannie Stace-Smith

Looking to renew your mortgage in 2020.  This article has some great tips when renewing!

HOW TO RENEW YOUR MORTGAGE IN 5 SIMPLE STEPS!

If you have a mortgage, you’ll be completing a mortgage renewal when your current term has finished.
While most Canadians spend a lot of time and expend tons of effort shopping for an initial mortgage, the same is generally not the case when looking at mortgage renewals.

So what is a mortgage renewal?

Mortgages terms are locked in rates that are *over a set term* which can vary from 1-10 years.

About 3 months before the end of your term, your current lender will suddenly become your best friend showering you with attention and trying to entice you with early renewal offers…And the first offer is never their best. It really shows how they value the relationship.
“Please, please sign here on the dotted line to renew… it’s sooo easy!!”

You have 3 options

1. Sign and send back with no alterations or changes (don’t do it, really I mean it… don’t do it!!)
2. Check the market to make sure you are getting the best rate and renegotiate with your current lender
3. Talk to a mortgage expert and together we can discuss the best options available for your situation

Lenders know that 80% of people will sign their renewal forms because it’s fast, easy and convenient. Banks & lenders push this “take it as it is” tactic to borrowers to ensure they make the highest profits to keep their shareholders happy. As an educated consumer, you need to take the time to ensure you are being offered the best possible rate & terms you can get.
Remember all those hours of research you did regarding lenders and mortgage rates when you were buying your first home… don’t forget!
It is true that signing the renewal document is easy, however it is in your best interest to take a more proactive approach. Money in the lenders pocket comes directly out of your pocket.

5 steps to save you money on your mortgage renewal

1. Receive the renewal offer from your current mortgage lender and examine immediately. This gives you enough time to make an informed decision
2. Do your online research about the best current rates for you
3. Call your current lender and negotiate!
4. If your lender will not offer you a better rate then it is time to move your mortgage. You will have to complete a mortgage application and gather applicable documentation just like you did for your original mortgage, but we will help with most of the work!
5. Take a look at your budget and see if you can increase the amount of your mortgage payments. This will eventually save you money by paying off your mortgage faster

Your mortgage is one of your biggest expenses. For this reason, it is so important to find the best interest rates and mortgage terms you possibly can.
As you can tell there is lots to discuss about mortgage renewals. We can help. Contact a Dominion Lending Centres mortgage professional today!

CHRIS CABEL
Dominion Lending Centres – Accredited Mortgage Professional
Chris is part of DLC HomeHow Mortgage based in Calgary, AB.
7 Jan

Great article on teaching Kids about money!

General

Posted by: Jeannie Stace-Smith

Originally published at Planswell.com

A lot of us grew up with a weird attitude towards money, often centered around not having enough, being jealous of those who did, or feeling shame for what we did have. When we become parents, we have the opportunity to undo that not only for our kids, but for ourselves, in the way we choose to teach our kids about money, and our attitudes towards it. As a mom of three (who is a mindset coach with a background in education), here are my top five tips to creating a healthy, balanced attitude towards money in your family’s life and culture.

Allowance is a money management tool

We have our kids help with the activities of daily life (making beds, cleaning rooms, feeding dogs, setting tables…) because those are the necessary tasks of daily life – not because they’re going to get a reward for doing so. It’s our job as parents to guide our kids, giving them the opportunity to learn life skills along the way. Money management is one of those skills.

Consider giving your kids (7+) a small weekly allowance they can portion off into save/share/spend jars; make peace with the fact that the spend jar is theirs to spend – it is so much easier to learn the lesson of overspending, or blowing all your cash on something you didn’t need when you’re 8, versus 28.

Paying bills is an exercise in gratitude

Getting a bill doesn’t have to be the chore we assume it to be. When you think about it, bills are just reflections of pleasures you’ve already enjoyed. “Thank you, Netflix, for keeping me entertained and relaxed. Thank you, heating and water, for keeping my family cozy and clean. Thank you cell phone, for connecting me to the world (and for endless memes to enjoy, obviously).”

Sharing this attitude with your kids teaches them that everything we consume is actually an exchange of goods and services; involving them in the payment process is another incredible way to teach a valuable life skill. Kids as young as 5 can help you find the amount owed on the bill, which vendor it’s being paid to, and circling the amount, writing “paid” and on which date. They will come to love this process, as it’s a trojan horse for one on one time with you, and it becomes really fun.

Modeling generosity matters

It’s easy to get caught up in that old thinking that “we might not have enough,” and the feeling that what we have, we have to keep for ourselves. It’s not true; when we are conscious of sharing what we have, we are contributing to the greater good. When we show our kids to be generous (via donations, volunteering, helping other friends or families in hard times, tipping the delivery guy, you name it), we are teaching them how good it feels to give.

Anytime we do good for its own sake, we are modeling how to be a good human, and how to live with the sense that we are all connected, and we are very fortunate. That attitude alone sets our kids up to be appreciative for what they have, and to create more of it as they grow up.

Overconsumption does not create happiness

We live in this backwards society in which more is considered more. So when we’re parenting, it can be tempting to give our kids everything they want, and replace it when it breaks. But really, think of the things that are dearest to you: chances are the things you worked really hard for, have a sense that you earned them, and feel a real pride of ownership over them.

Sweeping obstacles out of the way for our kids, and catering to their every whim does not raise happy children – it raises children who have a falsely entitled sense of reality, who tend to develop much anxiety in later years when they realize that things don’t fall magically into their lap without their own grit and gusto. Teach them to appreciate what they have, with modesty and grace.

Wealth is a state of mind

Thinking rich is essential to living a rich life. Constantly living in the fear-based state of never having enough instills a fearful mindset in young children that they will carry forward with them, and have to un-do later. “We can’t afford that, we could never go on that vacation, that’s only for rich people.”

All of that language creates a false reality that money is only for select people, and if you don’t have it, you never will. In reality, anything is possible – anything. And we can teach our kids to use that lens by involving them in planning and dreaming. Always wanted to go to Costa Rica and stay in a tree house (so. Much. Yes)? Start a family vision board for that trip. Look up cool places to stay, airlines to use, monkeys to mimic.

Involve your kids in using some of their own savings to put towards the trip. Make them feel a part of it – and give them the sense that they have ownership in making it happen. This is a hugely empowering pattern of thinking and behaving; much healthier than the attitude that “that’s not for us.”

Our children pick up our words, though, and behaviours, and all the patterns that go along with them – often without us noticing. Being open to shifting your own attitude towards creating wealth in your own life is one of the best gifts we can give our kids, and that starts at a very young age.