A run down of what's going on in the market and the company.

Friday, May 21, 2010

Inflation rate rises in April

By CBC News, cbc.ca, Updated: May 21, 2010 8:53 AM

Inflation rate rises in April

Canada's annual rate of inflation rose to 1.8 per cent in April, up from 1.4 per cent in March, Statistics Canada said Friday.

For a sixth consecutive month, gasoline prices put the strongest upward pressure on the consumer price index.

In April, prices at the gas pumps were 16.3 per cent higher than they were in April 2009. That follows a 17.2 per cent rise in the 12 months to March, Statistics Canada said.

Higher car prices also put upward pressure on the index for the fourth consecutive month in April. Passenger vehicle prices increased 5.3 per cent following a 3.9 per cent increase in March.

Core rate higher

The Bank of Canada's core index, which factors out several volatile components such as energy and food, advanced 1.9 per cent over the 12 months to April, following a 1.7 per cent rise in March.

The core rate is closely watched as it is used by the Bank of Canada for setting its monetary policy. The central bank has an interest rate announcement scheduled for June 1.

Indications of rising price pressures could lead the bank to push the cost of borrowing money higher after months of rock-bottom lending rates. The Bank of Canada's key overnight rate has been 0.25 per cent for more than a year.

"The economic data are still landing heavily in favour of rate hikes," BMO economist Doug Porter said Friday.

"If the decision was based solely on domestic factors, there would now be precisely zero debate on whether the bank will raise rates on June 1."

But instability in Europe because of sovereign debt fears muddies the picture, so the bank may opt to stand pat, he said.

"While the economic data continue to lean heavily to a rate hike, the decision will ultimately be driven by just how intense the financial storm becomes," Porter said.

Friday, May 14, 2010

A sharp shift in the market

May 13, 2010

A sharp shift in the market

By Carolyn Ireland
From Friday's Globe and Mail

As sale signs mushroom, buyers have more choice, while sellers are adapting.

Some homeowners who were waiting for their gardens to spring to life before they listed their houses for sale are wondering if they would have been better off planting a sign on the lawn in the barren days of February and March. The answer, most likely, is yes.

Toronto's real-estate landscape has shifted in the past few weeks with a burgeoning number of houses listed for sale.

For prospective buyers, the change means they are facing a phenomenon they haven't encountered in quite some time: choice.

Real-estate broker Patrick Rocca of Bosley Real Estate Ltd. says the Toronto market has become quirky since listings began ramping up immediately after Easter.

Now, some houses are selling in bidding contests at premiums above the asking price that Mr. Rocca deems "crazy," while in other cases agents anticipated a quick sale and the property is just sitting.

"A month or six weeks ago, everything was a slam dunk."

Mr. Rocca says every spring brings a rush of new listings when the freshness of new leaves makes houses and tree-lined streets look their best, but in 2010 that seasonal trend is even more exaggerated.

Some sellers have recently gone with the strategy of holding off buyers until a specified hour so that all of the bids can be considered at once, only to see the night pass by without receiving a single offer. Other sellers are trimming their asking price as the competition increases.

As for new houses, Robert Kavcic, economist at BMO Nesbitt Burns, says developers are ramping up their building at a pace that may be too quick compared with the rate at which households are forming. "One could argue that the short-lived construction recession didn't last long enough to work off the overbuilding seen during the 2000s, and therefore starts will moderate in the coming year if demand trails off as expected," Mr. Kavcic said in a note to clients.

Mr. Rocca recently listed two semi-detached houses on one popular street. Another listed a third on the same street, which rarely has any houses for sale, let alone three almost at the same time.

Along with the rise in listings, mortgage rates have edged up and some first-time buyers may have been priced out of the market, Mr. Rocca says. Meanwhile, many prospective buyers who secured a pre-approved mortgage with lenders are anxious to buy a house before the financing offer expires.

With market dynamics changing, Mr. Rocca says that sellers are beginning to realize they may not fetch the same price for a property that their neighbour received two months ago when listings were scarce.

He turns down listings when the sellers press to set an asking price that is too unrealistically high.

"I don't need an overpriced listing just sitting there."

Mr. Rocca is also less likely to recommend that sellers hold off buyers until a specified time - particularly when the asking price is more than $1-million.

Paul Johnston of Right at Home Realty is also increasingly likely to recommend that sellers consider an offer as soon as a buyer is willing to make one.

Last week he listed a house on Ridley Boulevard which sold within two days.

"We didn't even hold the open house."

Mr. Johnston says that buyers who have long been frustrated by the shortage of appealing properties on the market are finally feeling more hopeful.

"If someone wants it they can come and get it without having to play the game," he says. "There's optimism among buyers that they may finally get a property that doesn't have 13 offers on it."

Buyers who are committed to the search, he says, are active on a daily basis. Many have their finances in line and they will move quickly.

"They'll be on your listing faster than you can blink."

Also, listings are mushrooming so quickly that sellers who list a house and then decline to look at offers for a week are risking the chance that competing properties will arrive and siphon off bidders.

Single-family houses that are nicely renovated and located in a good neighbourhood are still selling briskly, he says. Investment properties that have been kept in top shape and which provide a steady income are also selling quickly.

"These are still two beasts where buyers are willing to extend themselves."

Looking out to the fall, many market watchers are expecting a slower pace of sales.

Mr. Rocca, who is still hearing from lots of homeowners who are asking him to evaluate their property, expects the next six weeks to be hectic. He says the market may be slower in the fall, but it should remain fairly strong.

In between, he hopes to catch up on some rest if the typical summer slowdown arrives.

"I'm looking forward to July."

Tuesday, May 11, 2010

Canadian household debt soars

May 11, 2010
By Tavia Grant
Globe and Mail Update

Household debt amounts to $41,740 per person - 2.5 times greater than in 1989
Sometimes, recessions can breed a hunker-down-and-save mentality.

Not so this time. Canadian household debt - a perennial worry in recent years - has ballooned to a point where it's now more than double 1989 levels - just as rising borrowing costs are set to squeeze budgets, a national report cautioned Tuesday.

Household debt in Canada reached a record $1.41-trillion in December. If that was spread among all Canadians, each person would carry more than $41,740 in outstanding debt - an amount 2.5 times greater than 1989 after adjusting for inflation and population growth, according to a report by the Certified General Accountants Association of Canada.

And Canadians are okay with taking on still more debt. Nearly 60 per cent of respondents whose debt had increased through the recession - and 92 per cent whose debt decreased or stayed the same - still felt they could either manage it well or take on more debt.

The recession has done little to dampen Canadians' enthusiasm for taking on debt, the 13-page study said.

"This report is another indication of Canadians' readiness to consume today and pay later," said Anthony Ariganello, president and chief executive of CGA-Canada. "The concern is do they understand the full cost of paying later?"

Canada now has the dubious distinction of ranking first in terms of debt-to-financial assets ratio among 20 OECD countries, with its debt-to-income ratio hitting 144 per cent by the end of last year.

"The growth in household debt has been strong during good times and showed remarkable resilience during challenging times," said Rock Lefebvre, co-author of the report. Now, it seems "set to continue its upward trend as we navigate interesting times."

The culture of consumption - or the habit of unrestricted spending - is likely one of the important factors explaining the unaltered trend in household borrowing, the report added.

Mortgage rates - which have been trimmed in recent days - are higher than the start of the year, and poised to rise further as the Bank of Canada readies for a rate hike in the next month or two.

If mortgage rates rise by 2 percentage points, mid-income to mid-to-high income families may have to cut about 10 per cent from other expenditures if they want to maintain the same level of spending on shelter, taxes, food and transportation, the report said.

A separate report yesterday said almost half a million more mortgage holders would be in trouble if their rates hit 5.25 per cent. The study, by the Canadian Association of Accredited Mortgage Professionals, said about 375,000 mortgage holders "are already challenged" by their current payments.

Canada's personal savings rate - which climbed during the recession - is now starting to fall. The rate ebbed to 4.6 per cent in the fourth quarter, down from 4.9 per cent in the previous quarter, according to Statistics Canada data.

Tuesday's report, based on a partly survey of 1,530 people conducted in February, advised Canadians to consolidate their credit card debt and replace it with a lower-cost line of credit.

"But it's still debt," Mr. Ariganello noted. "You don't want to hang onto it any longer than necessary."