The Globe and Mail – Sales and Price Surge Due to Consumer Confidence and Low Mortgage Rates

September 21, 2009

Sales of existing homes in August grew by a brisk 18.5 per cent from a year ago, data released by the Canadian Real Estate Association (CREA) showed yesterday. The average price climbed 11.3 per cent from a year earlier.  On a monthly basis, however, there was a slight drop in sales from July to August, at a fraction of 1 per cent.

Still, with unemployment up to 8.7 per cent, and the spectre of deflation existing, how can housing sales enjoy such a boost?

“We’re really double dipping here,” said Benjamin Tal, a senior economist with CIBC World Markets Inc. “Not only are we enjoying the healthiest financial sector globally, therefore a financial sector that is able and willing to offer credit, also consumers are able to accept this credit … it’s all about consumer confidence.”

Without that confidence, Mr. Tal said, buyers would not be poised to take advantage of record-low interest rates, which have driven the recovery.  “If I don’t have confidence that I will have my job tomorrow, you can offer me a 0-per-cent mortgage and I will not take it,” he said. “If you know your job will be there, you jump on it. That’s what’s happening. People know this will not last forever.”

Pent-up demand from the sales slump last fall may explain some of the gains, said Bank of Nova Scotia economist Derek Holt, but low mortgage rates are the dominant factor.
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Commercial Real Estate Recovery Near, Say Execs

September 20, 2009

Commercial-real-estate-canada The Globe recently interviewed four of the biggest commercial real estate executives in Canada.

They had this to say about commercial financing:

Pierre Bergevin, Pres. & CEO, Cushman & Wakefield

  • “I think what we consider normal is between 18 to 24 months away.”
  • Lenders are still financing, but rates are 60 to 80 basis points higher than spring 2008.
  • Financing is typically being capped at 65% LTV
  • A replacement to commercial mortgage-backed securities must be found to add liquidity to the commercial market

Mark Rose, Chairman & CEO, Avison Young

  • “Normal” is 12-18 months away
  • The bellwether will be rising employment figures
  • New forms of mortgage-backed securities will arise to fill the gap in commercial financing.
  • Lenders will soon get comfortable with LTVs over 60-65%
  • “All it will take is just one lender to jump in to get the ball rolling. Someone will see a competitive edge in making 70% financing available and everyone else will start to follow. Then it will go to 75% and then 80%.”
  • “I doubt if we will ever get back to the days of 100% financing no matter how overheated the market gets.”

Stefan Ciotlos, Pres., CB Richard Ellis

  • “My view is that recovery will start for real in the second quarter of 2010.”

David Bowden, Pres., Colliers International Canada

  • “We have bottomed out but I think we are a year to 18 months away from real recovery.”
  • Private lenders are “leading the way” and “seeing great opportunities in Canadian real estate…I am certain their success will encourage traditional lenders and investors to follow.”

Source: Canadian Mortgage Trends

CMHC – Housing Starts Rise More Than Expected in August.

September 12, 2009

OTTAWA – Home construction increased more than expected in August as the housing market continued to rebound, according to Canada Mortgage and Housing Corp (CMHC).   The federal agency said housing starts increased to 150,400 units in August from 134,200 units the previous month.  Most economists had expected housing starts to increase to about 138,000 units in August.

“Housing starts are trending higher, reflecting improvements in both the single and multiple segments, ” said Bob Dugan, CMHC’s chief economist. “The improvement in housing starts is consistent with our expectation of a stronger second half for 2009.” CMHC said the seasonally adjusted annual rate of urban starts rose 14 per cent to 131,800 units in August. Multiple-unit construction rose 23.8 per cent to 77,600 units, while the single-unit sector gained 2.5 per cent to 54,200 units. Overall, urban construction was up 56 per cent in British Columbia, 16.1 per cent in the Prairies, 13.8 per cent in Ontario, 9.6 per cent in Atlantic Canada, and 2.5 per cent in Quebec. Rural starts were unchanged in August at 18,600 units.

Central Banks Signal Low Rates Here to Stay

September 1, 2009

OTTAWA — Despite growing confidence that economic growth is in the offing, monetary policy around the world is likely to remain “ultra-accommodative,” perhaps until 2011, as doubt remains as to whether or not the growth expected this quarter is sustainable, analysts say.

That is the view emerging following the weekend gathering of the world’s leading central bankers in Jackson Hole, Wyo., highlighted by remarks from Ben Bernanke, U.S. Federal Reserve chairman, who warned of the uncertainties ahead, and Jean-Claude Trichet, president of the European Central Bank, who suggested he is in no rush to reverse emergency stimulus measures.

“The key message from Jackson Hole was … that monetary policy is likely to remain ultra-accommodative for the foreseeable future – at least for the next several years,” said Julian Jessop, chief international economist at Capital Economics of London.

“It seems more likely that there will be no increases in interest rates in any of the major economies over the next 12 to 18 months.”
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