24 Feb

Tightened Regulations Weighing on Home Sales

General

Posted by: Eileen Crosbie

New Mortgage Regulations Weigh On Home Sales

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

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

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

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

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

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

New Listings Continue To Decline

The number of newly listed homes fell 6.7% in January, the second consecutive monthly decline. New listings were down in about two-thirds of all local markets, led by the GTA and environs across Vancouver Island.

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

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

Number of Months of Inventory

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

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

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

Prices Continue to Rise

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

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

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

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

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

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

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

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

24 Feb

China’s Crackdown On Capital Outflows Sending Shudders Through Global Property Markets

General

Posted by: Eileen Crosbie

China’s Global Homebuyers Could

Be Suddenly Cash Poor

China
Property prices around the world have benefited from the demand of foreign buyers, a.k.a. China’s capital outflows. China has issued unexpected rules on exchanging yuan for international currency. This could impact real estate around the world. Some argue it already has.

China’s Clamp Down on Outflows

As capital flight intensified, China’s reserves have plunged, causing the country to sell US treasury bonds. In response, China has introduced new rules, which now require disclosure of the intended use of the yuan being converted. In addition, they must pledge the money won’t be used for the purchase of property, securities, or insurance products. Borrowing or lending on behalf of others is now prohibited, and requires a legal declaration saying you have not done so. Anyone caught breaking the rules will be denied the conversion and lose exchange rights for two years. They can also be subject to an anti-money laundering investigation.

China’s currency is not freely convertible on the open market. In order for yuan to be used internationally, the People’s Bank of China purchases foreign currency and provides liquidity for yuan holders. The government restrictions already exist–each Chinese citizen can trade up to US$50,000 per year, and only that much can leave the country. This rule has not forestalled huge outflows.

Despite the rule, one measure of capital outflow from the State Administration of Foreign Exchange (SAFE) shows approximately US$1 trillion dollars worth of yuan were removed from the foreign exchange reserves from the 2014 peak to November 2016. To put that in perspective, this outflow is larger than the entire gross national product of Canada in 2016.

Much of this money found its way into global real estate markets causing prices to boom. Property prices surged in some parts of Canada, the US, the UK, New Zealand and Australia, all countries that had relatively low barriers to importing large volumes of capital and liquid currencies.

Some analysts believe that the party might be over. However, China has a massive underground banking market that operates in the shadows. In August 2016, the Chinese government shut down one operation in Shenzhen, but no one knows just how many more such shadow banks there are.

Also, some Chinese people purchased homes via a process called smurfing–where large amounts of money are broken down into small undetectable amounts. Homes are an easy way to reassemble the money into a single house-shaped bank account. However, you need to sell the home to retrieve the money.

Many  people that do this are just looking for a way to hedge against any devaluation their hard-earned money might experience as a result of a major currency change. It does present a problem for domestic investors though. If a large number of people smurfing require their money soon, they’ll have to sell. This will provide downward pressure on house prices.

There is anecdotal evidence that tighter restrictions on capital outflows from China is having an impact. According to Bloomberg News, “China’s escalating crackdown on capital outflows is sending shudders through property markets around the world. … In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point.”

“Everything changed’’ as it became more difficult to send money offshore,” said Coco Tan, a broker associate at Keller Williams in Cupertino, California. Bloomberg further reports that “In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments.”

We have seen a slowdown in high-end purchases in Vancouver since the August imposition of a 15% land transfer tax on nonresident foreigners. While home sales were slowing even before the tax, it might just be that some of that slowdown was the result of China’s efforts to stem the outflow of capital.

“While no one expects Chinese demand to disappear anytime soon, the clampdown is deterring first-time buyers who lack offshore assets and the expertise to skirt tighter capital controls.”

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

24 Feb

January Jobs Report Continues Strong

General

Posted by: Eileen Crosbie

Canadian Job Surge in January

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

Employment growth has been strong since August. Canada posted the best quarterly hiring gain since 2010 in the final quarter of last year. Full-time employment held steady following a substantial increase in December. This may signal the country’s economy is finally turning the corner after two years of pain induced by the collapse in oil prices.
Most of the job gains were for men aged 25 to 54, with the increase of about 30,000, the largest in more than two years.

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

Hours worked also fell 0.8% from a year earlier.

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

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

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

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

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

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

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

Provincial Unemployment Rates in January In Descending Order (percent)
(Previous months in brackets)

   — Newfoundland and Labrador        13.8 (15.1)
— Prince Edward Island                     9.8 (10.5)
— New Brunswick                               8.9   (9.3)
— Alberta                                             8.8   (8.5)
— Nova Scotia                                     7.7   (8.3)
   — Saskatchewan                                 6.4   (6.6)
— Ontario                                             6.4   (6.4)
— Quebec                                            6.2   (6.5)
— Manitoba                                          6.1   (6.3)
— British Columbia                             5.6   (5.8)
 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

23 Jan

Bank of Canada On Hold As Expected

General

Posted by: Eileen Crosbie

Bank on Hold As Housing Expected to Continue to Slow

Bank on Hold As Housing Expected to Continue to Slow
It is no surprise that the Bank of Canada maintained its target overnight rate at 1/2 percent today, reaffirming its view that the Canadian economy is still operating with considerable slack despite strong employment growth and inflation remains below the 2 percent target. The policy statement highlighted that that “uncertainty about the global outlook is undiminished, particularly with respect to policies in the United States.”  Trump’s ascendancy to the highest office in the US portends major policy changes, some of which could have a direct impact on Canada.

For now, the Bank has chosen to incorporate assumptions about prospective tax policies only, resulting in a modest upward revision to its US growth outlook. US growth in 2017 was revised up only slightly, from 2.1 percent to 2.2 percent. The impact of the new administration’s fiscal stimulus is more pronounced in 2018, increasing the Bank’s forecast to 2.3 percent (up 0.3 percentage points from the October forecast). These are initial estimates, which include changes in tax policies only. Clearly, an important factor impacting Canada will be US trade policy. The impact of this and other fiscal measures will be updated in future Bank of Canada reports as more details become available. 

The Bank’s forecast for US growth is above its estimate of the rate of potential US output expansion of about 1.8 percent in 2018. The economy is judged to be already at or near full capacity. Business investment in the US is expected to regain momentum as growth in demand remains above potential output.

Bond yields around the world, including here at home, have risen in anticipation of more stimulative fiscal policies and deregulation in the US, though financial conditions remain accommodative (Chart 1).

Global crude oil prices have recently averaged about 15 percent higher than assumed in the October Monetary Policy Report (MPR). By convention, the Bank is now assuming oil prices will remain at near current levels of $55 for Brent, $50 for West Texas intermediate and $35 for Western Canada Select. The Bank believes that the risks to this forecast remain tilted to the upside over 2017-18, since prices are still below levels likely required to support medium-term market rebalancing. The Bank’s new MPR, released today says that “the scope for sustained higher prices is limited, however, because technological advances have contributed to lower production costs for unconventional oil production, notably shale oil in the United States”. And the Trump administration supports the fracking sector.

Nevertheless, the worst is over for the Alberta economy, which we have already seen reflected in the housing sector, which has improved considerably in the most recent Canadian realtors report. 

The Bank believes that growth in the Canadian resource-related sectors have troughed and investment and employment are being reallocated to the growing service sector. Real GDP in Canada is expected to grow at a rate moderately above potential output as housing slows. The Bank is estimating that housing boosted growth in 2015 and 2016 by 0.3 percent and 0.2 percent respectively. Housing will be a small net drain on activity this year, according to the MPR, reflecting the negative impact of tighter mortgage restrictions and the rise in mortgage rates (see Table). 

Some have suggested that the Bank of Canada might cut interest rates again next year, particularly if housing slows too much. Judging from comments made by the CEO of the CMHC, a slowdown in housing is the intended result of the new rules. Clearly, Governor Poloz sees the enhanced mortgage stress tests and changes in the insurability of mortgages as mitigating his concerns of overextended homebuyers. It would take a material negative shock to growth for the Bank to cut rates. 

On the other hand, others recently have suggested the Canadian economy will benefit sufficiently from the fiscal boom in the US for the Bank to hike rates by the end of this year. I believe this is unlikely as market rates have already risen and the potential negative impact of a stronger Canadian dollar on trade, as well as a potential  US harder line on trade–such as recent US saber rattling on a border tax–will keep the Bank on the sidelines through the rest of this year. 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

23 Jan

Housing Data for December–Activity Up in 60% of Markets

General

Posted by: Eileen Crosbie

National Home Sales End 2016 On the Upside

National Home Sales End 2016 On the Upside
This morning, the Canadian Real Estate Association (CREA) released its December national real estate statistics showing home sales rose 2.2% month-over-month in the final month of last year. This rebound retraced less than half of the decline in November, when it posted the largest monthly decline in more than four years in response to the federal tightening of mortgage regulations. 

Activity was up in 60% of all markets, led this time by Calgary and Edmonton where sales have been hard hit by the oil slowdown and the knock-on effects of the wildfires. 

For the year as a whole, the number of homes changing hands set a new record. New home sales were up 6.3% last year, reflecting strong sales in the first half of the year, slowing thereafter. Tightened mortgage regulations will however, weigh on activity this year. Housing activity will not provide the boost to overall economic growth in 2017 that it did last year as first-time homebuyers will find it more difficult to qualify for a mortgage.

New Listings Continue To Decline

The number of newly listed homes fell 3.0% in December compared to the prior month. New listings were down in about 60% of all local markets, with sizeable declines in B.C.’s Lower Mainland, Calgary and the Greater Toronto Area (GTA).

With sales up and new listings down, the national sales-to-new-listings ratio rose to 63.5% in December compared to 60.3% in the prior month. A ratio in the range of 40%-to-60% is considered generally consistent with balanced housing market conditions. Above 60% is considered a sellers’ market and below 40%, a buyers’ market. 

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

Number of Months of Inventory

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity. 
There were 4.6 months of inventory on a national basis at the end of December–down from 4.8 months in November. 

The tight balance between housing supply and demand in Ontario’s Greater Golden Horseshoe region is without precedent (the region includes the GTA, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country). The number of months of inventory in December ranged between one and two months in many of these housing markets, and stood below one month in the Durham Region, Orangeville, Oakville-Milton, Kitchener-Waterloo, Brantford and Cambridge.

Prices Continue to Rise

The Aggregate Composite MLS House Price Index (HPI) rose 14.2% y-o-y last month. The rise in prices has diminished in recent months (14.4% y-o-y in November; 14.6% in October) owing to a softening in single-family home prices in B.C.’s Lower Mainland following the introduction of a new 15% land transfer tax on foreign purchasers, which markedly reduced activity. 

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

Price trends continued to vary widely by location. In the Fraser Valley and Greater Vancouver, prices continued to recede from their peaks reached in August 2016 but remained above year-ago levels (+27.0% y-o-y and +17.8% y-o-y respectively). Meanwhile, benchmark prices climbed to new heights in Victoria and elsewhere on Vancouver Island, and in the GTA. By comparison, home prices were down 3.7% y-o-y in Calgary and edged lower by 1.6% y-o-y in Saskatoon, continuing their retreat from peaks reached in 2015.

Home prices were up modestly from year-ago levels in Regina (+5.2%), Ottawa (+4.0%), Greater Montreal (+3.3%) and Greater Moncton (+1.9%). Monthly trends suggest that prices have begun to stabilize in all of these markets except Greater Montreal, where values continue to rise modestly. 

The actual (not seasonally adjusted) national average price for homes sold in December 2016 was $470,661, up 3.5% from where it stood one year earlier. This marks the smallest y-o-y increase in nearly two years.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and the GTA, which remain two of Canada’s tightest, most active and expensive housing markets. That said, Greater Vancouver’s share of national sales activity has diminished considerably over the last year, giving it less upward influence on the national average price. The average price is reduced by almost $120,000 to $352,513 if Greater Vancouver and GTA sales are excluded from calculations.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

23 Jan

Unexpected Strength in Trade and Jobs in Canada

General

Posted by: Eileen Crosbie

Canada Shows Unexpected Strength with Job Surge and Trade Surplus

December’s jobs report was unambiguously strong showing employment gains of 53,700 (0.3%), the result of gains in full-time work. Finally, for the first time this year, full-time jobs outpaced part-time. The unemployment rate increased 0.1 percentage points to 6.9% as more people entered the labour force. This is evidence that the economy may be absorbing the slack that’s kept interest rates near record lows. 

Full-time positions rose 81,300 in December from the previous month, the biggest gain since March 2012, and even after taking away 27,600 part-time jobs, the total employment gain of 53,700 shattered the economist forecasts for a small decline.

For 2016 as a whole, employment grew by 1.2%, compared to a growth rate of 0.9% in 2015. Payrolls rose by 214,000 last year, the fastest December-to-December growth since 2012.

Quebec and British Columbia posted job gains in December, while there was little change in the other provinces. In 2016, BC recorded the fastest employment growth rate among the provinces for the second consecutive year, up 3.1%. The gains were evenly split be tweet full- and part-time work and spread across many industries.

In another report, Canada’s trade balance returned to surplus in November for the first time since September 2014, moving from a $1.0 billion deficit in October to a $526 million surplus in November. Exports rose 4.3% on the strength of increased exports of metal and non-metallic mineral products as well as record exports to countries other than the US. Imports were up 0.7%, mainly on higher imports of energy products. 

The data may signal Bank of Canada Governor Stephen Poloz’s long-awaited economic revival is finally on solid ground. Poloz has stressed ahead of his Jan. 18 rate decision that there is still plenty of slack in the job market which may be adding to divergence with a recovering US economy.

The job gain made the fourth quarter the best since 2010 and turned 2016 into a breakout year from some of the slowest hiring since World War II. The trade surplus means struggling energy and manufacturing companies may contribute to growth aided by debt-fueled consumer spending on houses and cars.This would be just in time to help offset what is likely to be a slowdown in housing in Canada this year in the wake of federal government mortgage initiatives to tighten mortgage credit conditions. 

Provincial Unemployment Rates in December In Descending Order (percent)
(Previous months in brackets)

   — Newfoundland and Labrador        14.9 (14.3)
   — Prince Edward Island                     10.7 (10.8)
   — New Brunswick                                9.4   (8.7)   
   — Alberta                                              8.5   (9.0)
   — Nova Scotia                                      8.3   (8.0)
   — Quebec                                             6.6   (6.2)
   — Saskatchewan                                 6.5   (6.8)   
   — Ontario                                             6.4   (6.3)
   — Manitoba                                          6.3   (6.2)  
   — British Columbia                             5.8   (6.1)

US Payrolls Rise As Wages Increase The Most Since 2009

US non-farm payrolls rose 156,000 in December. While below economists forecast, this was a solid gain pointing to an economy at close to full employment. The jobless rate ticked up to 4.7% as the labour force grew. Worker shortages have become more prevalent in the US, putting upward pressure on wages. The job market will continue to boost consumer spending in 2017.

According to Bloomberg News, the latest payrolls report brought the advance for 2016 to 2.16 million, after a gain of about 2.7 million in 2015. The streak of gains above 2 million is the longest since 1999, when Bill Clinton was president.

Among the details of the December report, the participation rate, which shows the share of working-age people in the labor force, increased to 62.7%, from 62.6%. It has been hovering close to its lowest level in more than three decades largely as a result of demographic changes.
Some measures of labor-market slack showed improvement. Americans who are working part time who would rather have a full-time position fell to 5.6 million.The underemployment rate — which includes part-time workers who’d prefer a full-time job and people who want to work but have given up looking — dropped to 9.2% from 9.3%.

Bottom Line: There is little doubt that the Fed will continue to hike interest rates this year. The Trump administration takes office on January 20 and has promised to cut taxes, increase spending on infrastructure and cut regulations. This fiscal stimulus will likely boost economic activity in 2018 and lead to higher budget deficits. The bond markets have already sold off in anticipation of such moves, pushing mortgage rates higher in Canada. 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

19 Dec

BC Introduces Innovative New Program to Help First-Time Homebuyers

General

Posted by: Eileen Crosbie

BC Introduces Innovative New Program to Help First-Time Homebuyers

Premier Christy ClarkIn a move to help BC citizens and residents buy their first home, the BC government announced today that it is launching a new program to augment down payments for first-time buyers. The B.C. Home Owner Mortgage and Equity Partnership program contributes to the amount first-time homebuyers have already saved for their down payment, providing up to $37,500, or up to 5% of the purchase price, with a 25-year loan that is interest-free and payment-free for the first five years. Through the program, the Province is investing about $703 million over the next three years to help an estimated 42,000 B.C. households enter the market for the first time.

During the first five years, no monthly interest or principal payments are required as long as the home remains the homebuyer’s principal residence. After the first five years, homebuyers begin making monthly payments at current interest rates. Homebuyers will repay the loan over the remaining 20 years, but may make extra payments or repay it in full at any time without penalty. The loan must be repaid in full when the home is sold or transferred to another owner.

To be eligible, buyers must be preapproved for an insured high-ratio first mortgage (mortgage down payment is less than 20% of the home price). On completion of the sale, program funds will be advanced and the loan will be registered as a second mortgage on the property’s title.1Íž

Applications will be accepted starting January 16, 2017. This will be a three-year program with loans advanced from February 15, 2017 until March 31, 2020.

Eligible homebuyers

All individuals with a registered interest on title must reside in the home and:

  • Be a first-time homebuyer
  • Have been a Canadian citizen or permanent resident for at least five years
  • Have resided in BC for at least 12 months
  • Have a combined gross income of $150,000 or less
  • Have saved at least half of the minimum down payment they will require
  • Must be pre-approved for the first mortgage before applying

The first mortgage must be high-ratio insured from an NHA approved lender for more than 80% of the purchase price.

Eligible Properties

Any legal, self-contained, mortgageable residence located in BC

  • Must be used as a principal residence for the first 5 years
  • Rental properties and seasonal or recreational properties are not eligible
  • The purchase price cannot exceed $750,000

Home Partnership Loans

  • Up to 25-year term, registered as a second mortgage
  • No interest or principal payments for the first 5 years
  • Monthly principal and interest payments begin in year 6, amortized over remaining 20 years
  • Interest rate for years 6 to 10 set near first mortgage rate at time mortgage is registered
  • Interest rate reset to near first mortgage rate at years 10, 15, and 20
  • Homeowner may repay in full or part at any time without penalty.

The loan is due and payable in full upon

  • The home ceasing to be the primary resident in the first 5 years
  • Default on the first mortgage
  • Sale of home or change of ownership
  • Any other default on the Home Partnership second mortgage

Bottom Line: This is a bold and innovative step to help potential new buyers to meet the greatest hurdle of first-time homeownership—the down payment. The Federal Government’s new mortgage regulations released in October hit first-time homebuyers hard, so this program will be welcome relief for B.C. residents. The B.C. government estimates that it will make more than 42,000 new loans over the three-year life of this program, amounting to $703 million in new funding available for qualified first-time homebuyers to come up with their down payments. This is particularly important for BC, which has the highest home prices in Canada.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

19 Dec

Fed Hikes Rates For First Time This Year

General

Posted by: Eileen Crosbie

No Surprises Here: Fed Hikes By 25 Basis Points

No Surprises Here: Fed Hikes By 25 Basis Points
 
Rarely has there been a more widely expected result as today’s 0.25 percent rate hike by the Fed. This is the second interest rate increase since the Fed started the current process of interest rate re-normalization one year ago. Although, many had called for additional hikes earlier this year, the policy makers held the overnight rate steady until now.In today’s press release, the Federal Open Market Committee (FOMC) said it currently sees the US economy strengthening and the labour market tightening. The unemployment rate has fallen more than earlier forecasted and household spending has been rising moderately. Inflation has increased since earlier this year, but remains below the Committee’s 2 percent longer-run target, partly reflecting earlier declines in energy prices and in the prices of non-energy imports as the US dollar has strengthened. Inflation in wages, salaries and benefits have risen considerably, but still remains low. Inflation expectations remain well anchored at low levels. 

One area of economic weakness highlighted by the Fed is business fixed investment. The same disappointing behaviour is evident in Canada as well as businesses have refrained from adding meaningfully to plant, machinery, equipment or software. This troubling weakness has weighed heavily on productivity.

The FOMC intends to increase the target overnight federal funds rate only gradually, which it now considers to be consistent with GDP growth of 2.1 percent next year, up from the earlier median forecast of 2.0 percent. The median forecast for 2018 remains at 2.0 percent and is up slightly to 1.9 percent in 2019. The Fed’s median estimate of longer-term potential growth remains steady at 1.8 percent, roughly in line with the Bank of Canada’s forecast for Canadian potential growth. The range of Committee forecasts is 1.6 to 2.2 percent in the US. 

The Fed sees the near-term risks to the forecast as balanced. The target range for the federal funds rate is now 1/2 to 3/4 percent, which is deemed to remain accommodative, thereby supporting some further strengthening in labour market conditions and a return to 2 percent inflation.

Committee members believe that only a gradual rise in interest rates is warranted given the low level of inflation. Moreover, they expect the federal funds rate will remain below the longer-run expected rate for some time. According to the newly released forecasts of individual members, most expect to the Fed to hike rates three times next year, although the range of estimates is relatively wide. Actual rate hikes, as always, will be dependent on economic data, market movements and global developments. Most members estimate that the longer-term federal funds rate is likely to be 2-3/4 to 3.0 percent.

The markets are watching for the reaction of the President-elect to today’s Fed release. President-elect Trump accused the Fed during the election campaign of being politically motivated in keeping rates steady this year. There is some concern that the Trump administration might threaten the independence of the Fed, in direct contrast to recent presidential policy. Many are expecting PEOTUS to tweet his opinion of today’s move. 

The Bank of Canada will not follow the Fed’s move. Canada’s economy is weaker than that of the US and inflation remains low. Although oil prices have increased recently owing to OPEC and non-OPEC announcements of production cuts, the future path of oil prices remains uncertain.

Longer-term interest rates around the world have spiked since the Trump election as stock markets have rallied. This has driven up mortgage rates in Canada. It is widely expected that the Trump administration will cut tax rates and increased government spending, thereby conducting a very stimulative fiscal policy. This is the reason for the rise in longer-term interest rates. The validity of this view remains to be seen, but such action would likely have most of its impact on growth in 2018 and beyond. 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

6 Dec

The Latest with Bullying Ends Here

General

Posted by: Eileen Crosbie

The Latest with Bullying Ends Here

Dave Teixeira with Tad Milmine

Home Sweet Home! Since our last update, so much has happened with the charity. I am so happy to announce that Bullying Ends Here has a new updated homepage on the website www.bullyingendshere.ca. I know you will like it as I wanted to have things a bit easier to use and see. Take a look when you can.

We had our first Board of Directors retreat in Vancouver for the charity. This was the first time that our Board has been together in one room. Not only did we have the chance to meet in person, but we had a VERY successful gathering. I don’t want to give away too much right now, but let’s just say, that I will have much to share with you in the coming months!

At the retreat, we had the pleasure of having Dave Teixeira, VP of Marketing, Public Relations and Communication with Dominion Lending Centres attend. He too got to meet the team, BUT, we also got to reward him with our Bullying Ends Here Award. This award consists of a coin and inscribed plaque designed with the help of Jamie’s family. Long before Dave was with DLC, he and I had crossed paths in our crusade to end bullying. As the world would have it, we are still working together to help save lives. Dave has worked hard to ensure that Bullying Ends Here can continue to reach as many as we do.

I took a couple of weeks of vacation time to do my annual East Coast Tour (and beyond). I traveled to AB, BC, SK, NS, NB, PEI and ON for presentations and interviews. To be able to share my journey with so many, across the Country, is such an honour. In this past month alone, I have presented to over 10,000 youth in 7 Provinces and have received hundreds of emails. What a success! I just hope that the message resonates and continues to help long after I have left.

November 13th marked the 4 year mark of Constable Adrian Oliver’s passing. I was fortunate enough to travel to Burnaby, BC to participate in his annual run to raise funds for the Honour House. It was moving to see so many former colleagues, friends and family of Adrian’s all come together for the event.

I just released the second edition to my book ‘Bullying Ends Here – My Life’. This took months to do as I wanted to make some important edits, updates and also add some chapters to act as a resource. I have included some notes on what the youth are saying in the tens of thousands of emails I have received, I included some tips and our very own LAAA concept. The LAAA stands for Listen, Ask, Agree, Act. These are the steps that I have learned are most important on handling a young victim of bullying. I go into detail on these steps in the book. The book is available on Amazon.com or also on www.bullyingendshere.ca. All proceeds continue to go directly to the charity.

I have added some more presentation dates for all across Canada for 2017. The schedule is available on the new homepage that I was speaking about above. These will go fast as we have already received requests a year in advance.

The program has brought a new consultant on board, Keigan, who is now helping reduce the workload by taking over much of the scheduling, social media and travel arrangements. Keigan is an incredible young many with loads of energy and ideas. His addition to Bullying Ends Here will ensure that even more time is available to help those that need it most.

Finally, Jamie Hubley’s birthday was November 23rd. He would have been 21 years old. Not a day goes by that I don’t think about him and how much he means to me. A young person that I never had the honour of meeting. It is because of Jamie that I started this journey, created the program and wrote this blog. My life is dedicated to his memory and I intend on keeping that memory alive. Although it took a tragedy to bring us all together, that very same tragedy is preventing others. Lets continue to spread Jamie’s positive message of acceptance and understanding.

This message, paired with our efforts, will not only change lives, but SAVE them!

 
Tad Milmine

Tad Milmine

Founder, Bullying Ends Here

6 Dec

November Jobs Report Canada and US

General

Posted by: Eileen Crosbie

Canadian Jobless Rate Falls as Labour Force Shrinks

Canadian Jobless Rate Falls as Labour Force Shrinks
 
Following four consecutive months of job gains, Canadian employment increased by 11,000 (or 0.1%) in November. Economists had expected hiring to decline by 15,000 according to the Bloomberg News survey. All of the rise in employment, however, was in part-time jobs, as full-time hiring fell by 8,700. This pattern is particularly worrisome as over the past 12 months, all of the net rise in employment has been in part-time work. Nationwide, part-time work has grown by 6.4% and full-time has fallen by 0.2% year-over-year.

The jobless rate fell unexpectedly by 0.2 percentage points to 6.8% as fewer people were looking for work. This is the first time the unemployment rate has fallen in five months

The fourth straight monthly jobs gain is another boost to an economy healing from a collapse in commodity prices and business investment. Output growth rebounded to a 3.5% pace in the third quarter, and Governor Stephen Poloz said Monday he would only cut his 0.5% benchmark interest rate if there was another shock. His next rate decision is Wednesday.

The November jobs report highlighted the continued weakness in the oil sector. Unemployment in Alberta surged to its highest level in more than two decades to 9.0%, and in the manufacturing region of Quebec, it fell to a record low 6.2%; however, most of the rise in discouraged workers was in Quebec where the labour force dropped by 20,300, the largest drop since December 2014.

Service companies hired 31,200 workers, with almost half of those in the financial services and real estate sector. Goods producers cut back by 20,600, as manufacturing jobs dropped by 11,900 and construction fell 14,400.

The number of hours worked rose 1.1% in November from a year earlier. Average hourly wages of permanent employees grew 1.5% from a year earlier, slower than the 1.8% pace in October.

Clearly, the Bank of Canada will remain on the sidelines next week. Despite stable monetary policy in Canada, however, mortgage rates are rising reflective of the rise in market yields since President-elect Trump won the US election. Some mortgage rates in Canada are priced off of the 5-year government of Canada bond yield, which has risen more than 30 basis points since the election.

Provincial Unemployment Rates in November In Descending Order (per cent)
(Previous months in brackets)
 

   –– Newfoundland and Labrador     14.3 (14.9)
   — Prince Edward Island                  10.8 (11.7)
   — Alberta                                           9.0 (8.5)
   — New Brunswick                             8.7 (10.0)   
   — Nova Scotia                                   8.0 (7.6)
   — Saskatchewan                               6.8 (6.9)   
   — Ontario                                           6.3 (6.4)
   — Quebec                                           6.2 (6.8)
   — Manitoba                                        6.2 (6.4)  
   — British Columbia                           6.1 (6.2)

US Payrolls Rise As Jobless Rate Falls to Nine-Year Low 

The November jobs report in the US provided a mixed picture as wages and participation rates–two closely watched indicators–showed disturbing declines. The headline payrolls gain was close to expectation, posting 178,000 net new jobs–just shy of the average monthly gain this year. Year-to-date, employers have added an average of 181,000 jobs per month. But the performance has been inconsistent–with a low of 24,000 in May and a peak of 271,000 in June. November’s gain of 178,000 signals steady hiring and more progress toward the Fed’s goal of full employment.

The unemployment rate fell to a nine-year low of 4.6% from 4.9% in the previous month on a drop in the number of people in the workforce. One of the most troubling developments in recent years is a drop in the labour-force participation rate. Its decline is partly because baby boomers are retiring. But the rate for prime-age workers, 25 to 54, has also fallen, matching a 30-year low late in 2015. 

Another piece of good news, however, is that the broader measure of unemployment, which includes people stuck in part-time work and people who have stopped looking, fell from 9.5% in October to 9.3% in November.

Even with tight labour markets, the news on wages was disappointing. Average hourly earnings fell by 0.1% from the prior month, the first decline since December 2014. They rose 2.5% over the past twelve months, following a 2.8% gain in October. 

Other indicators show spotty weakness in the jobs market. Factory payrolls fell once again and retailers reduced payrolls going into the holiday season.

Despite this mixed picture, the headline jobs gain and the fall in the jobless rate assure that the Fed will raise rates when they meet again in December 14.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres