Rate hikes urged for summer
 
From Herald News Services February 24, 2010
 
Central Bank - The Bank of Canada should uphold its conditional pledge to keep its key policy rate at 0.25 per cent until July, but should then embark on sharp rate hikes of 50 basis points at every announcement date until mid-2011, says an analysis prepared for the C.D. Howe Institute.

The call for sharp rate increases after June emerged Tuesday, one week before the Bank of Canada releases its latest interest rate statement.

Recent data indicate the Canadian economy likely expanded in the final quarter of 2009 at a faster pace than the central bank expected (four per cent versus 3.3 per cent), and inflation is now closer to the central bank's two per cent preferred target than it previously envisaged.

© Copyright (c) The Calgary Herald

OTTAWA -- The federal government is expected to announce new rules Tuesday that would make it more difficult for first-time buyers to enter Canada's hot housing market.

Sources have told The Canadian Press that Finance Minister Jim Flaherty is ready to move on the issue because of concern Canadians may be taking on too much debt.

Economists have advised the minister the best way to protect Canadians is to institute a debt affordability test in order to qualify for a Canadian Mortgage and Housing Corporation insured mortgage.

Currently, prospective home owners can qualify for a CMHC (Canada Mortgage and Housing Company) insured mortgage if they put at least five per cent down on the cost of a home.

But bank officials say they usually apply a cushion to ensure home buyers have sufficient income to meet payment requirements if floating rates rise, in some cases by more than two percentage points.

Flaherty is expected to make such an income test a condition for acquiring an CMHC insured mortgage.

Another possibility is for the minister to reduce the amortization period from 35 years to 30, which would have the effect of raising monthly payments.

It is believed Flaherty rejected more radical measures to cool the housing market, which has reached record levels in sales and near record levels in average home prices despite the weak economy.

Economists have cautioned the minister against putting on the brakes too strongly. They say raising the minimum downpayment requirement to 10 per cent, one of the suggestions given the minister, could cause a crash in a key mainstay of the fragile economic recovery.

The Bank of Canada has been warning for months that homeowners should ensure they can absorb an increase in their floating rate mortgages once rates start rising, likely as early as this summer.

By the central bank's own stress test calculation, almost one in 10 households would have a debt-service ratio that makes them vulnerable to economic shocks by the middle of 2012 if current trend continue.

In an address written for deputy governor Timothy Lane last month, the bank suggested the government has all the tools it needs to address the problem.

"An array of supervisory and regulatory instruments can be used by the government to restrain a buildup of systemic risks," said notes the address.

"These include capital requirements for institutions, leverage ratios, loan-to-value ratios, terms and conditions for mortgage insurance, and a variety of other measures. These instruments can be targeted to risks to the entire financial system that stem from particular markets or institutions."

The number of single family homes sold in January 2010 in the city of Calgary was up 39 per cent from the same time a year ago, while condominiums sales saw an increase of 67 per cent from the same time a year ago. “Low mortgage rates and earlier price reductions have improved the affordability of home ownership for Calgarians,” says Diane Scott, newly elected president of CREB®. “For the time being average home prices are more in line with average incomes.  A narrowing gap between the costs of renting versus owning a home will attract more first time home buyers into the market in 2010,” adds Scott.January 2010 saw 762 single family homes sold in the city of Calgary. This is a decrease of 5 per cent from 799 sales in December 2009. In January 2009, single family home sales totaled 550. The number of condominium sales for the month of January 2010 was 376. This was an increase of 10 per cent from the 341 condominium transactions recorded in December 2009. In January 2009, condominium sales were 225.

“The story for 2010 will be a balanced and steadier market,” says Scott. “Just one year ago we were facing record low sales and more than 10 months of inventory.  Consequently, year-over-year sales comparisons are up dramatically—but all in all sales this month are moving closer to the range we would expect this time of year,” adds Scott.   The average price of a single family home in the city of Calgary in January 2010 was $441,217, showing a decrease of 2 per cent from December 2009, when the average price was $451,349, and showing an increase of 7 per cent from January 2009, when the average price was $413,049. The average price of a condominium in the city of Calgary was $282,639, showing a 2 per cent decrease from December 2009, when the average price was $288,640 and a 4 per cent increase over last year, when the average price was $270,940.

Average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods, or account for price differentials between geographical areas.  The median price of a single family home in the city of Calgary for January 2010 was $398,000, showing a 1 per cent decrease from December 2009, when the median price was $401,000, and a 6 per cent increase from January 2009, when the median price was $374,700. The median price of a condominium in January 2010 was $265,000, remaining the same as in December 2009, when the median was also $265,000. That’s up 9 per cent from January 2009, when the median price was $243,000.

All city of Calgary MLS® statistics include properties listed and sold only within Calgary’s city limits. The median price is the price that is midway between the least expensive and most expensive home sold in an area during a given period of time. During that time, half the buyers bought homes that cost more than the median price and half bought homes for less than the median price.

“Affordability is the silver lining in Calgary’s housing market. Even in the face of slowing wage growth—we can see affordability has improved.  Higher prices in 2007 and 2008 left the average family with a maximum buying power of $250,000—while average single family prices pushed well into the $450,000 range. Lower interest rates have enabled these same families to now look at homes in the $350,000 to $375,000 range—closer to average market prices,” says Scott. Single family listings in the city of Calgary added for the month of January totaled 1,822, an increase of 126 per cent from December 2009 when 806 new listings were added, and showing a decrease of 12 per cent from January 2009, when 2,068 new listings came to the market. Condominium new listings in the city of Calgary added for January 2010 were 951, up 114 per cent from December 2009, when the MLS® saw 444 condo listings coming to the market. This is an increase of 1 per cent from January 2009, when new condominium listings added were 941. 

“The outlook for Calgary is still about energy. Re-starting of investment in Fort McMurray will be needed to boost employment in Calgary.  Undoubtedly Calgary’s economic recovery is still fragile—and improvements in the housing market will be gradual and modest.  The good news is improved housing affordability will make Calgary more attractive to job seekers than in past years,” says Scott.

CREB® is a professional body of 5,445 licensed brokers and registered associates, representing 252 member offices and is dedicated to enhancing the value, integrity and expertise of its REALTOR® members. REALTORS® are committed to a high standard of professional conduct, ongoing education, and a strict Code of Ethics and Standards of Business Practice. Using the services of a professional REALTOR® can help consumers take full advantage of real estate opportunities while reducing their risks when buying or selling real estate. The board does not generate statistics or analysis of any individual member or company’s market share.

In most communities, garbage day isn’t every week. So, if you show your house on day five or six, there’s going to be some accumulation! Here are some things you can do before a viewing to make sure this
situation doesn’t trash a potential sale.

• If possible, make sure all garbage containers, including waste paper baskets, are empty.
• Since compost and cat litter bags can smell even when tied securely, put them in a covered bin in the garage or outside at the side of your house.
• Check around your property for accumulated debris, such as old lumber. If you’ve been planning a trip to the dump someday, today is that day.

In addition, make sure garbage containers in the kitchen and bathroom have new plastic bag inserts. You may go through more than usual, but it will be worth it.