TD/Canada Trust report: Bank of Canads has further rate cuts to come

TD/Canada Trust feels that the Bank of Canads has further rate cuts to come

January 22, 2008

Bank of Canada cuts by 25 basis points

Bank to cut 50bps on March 4th and 25bps on April 22nd

The Bank of Canada cut the overnight rate this morning by a quarter-point to 4.00%. This was broadly in line with market expectations; however speculation was building in the days leading up the meeting that the Bank might be more aggressive given that financial market confidence had been severely undermined by the prospects of a U.S. recession and the possibility of some contagion to the global economy. Speculation of a more aggressive Bank of Canada decision climaxed when the Federal Reserve caught financial markets completely off guard this morning with an inter-meeting cut of 75 basis points. Nevertheless, the Bank stuck to their guns with a more measured approach, reflecting their view that domestic demand on this side of the border is expected to remain strong. However, the Bank made it quite clear in this morning's communication that they are prepared to deliver more rate cuts down the road when they stated that "further monetary stimulus is likely to be required in the near term to keep aggregate supply and demand in balance and to return inflation to target over the medium term".

We believe the next move on March 4th will be a more aggressive 50 basis point cut. That rate decision will probably not be the result of slumping domestic demand. So far, the domestic side of the Canadian economy appears well grounded. In today's communiqué, the Bank noted that despite tighter credit conditions, strength in domestic demand is expected to remain supported by continued income growth associated with the increase in commodity prices since October, which has led to further gains in our terms of trade." It is also important to remember that unlike their American counterparts, Canadians are not getting hit on both ends of their asset portfolios. Home prices remain on the upswing in most major urban centers, and there is little concern that the Canadian housing market will start to mirror the slump in the U.S. In fact, we believe national home prices will rise at a rate of 5-7% in 2008, compared to a U.S. market that will likely absorb losses of around 5% or more.

However, we believe that by the next meeting, data on the U.S. economy will provide a smoking gun, showing clear signs of a sharp economic slowdown. Given that inflationary pressures remain well in hand, a 50 basis point cut would provide much-needed insurance against the degree to which a U.S. economic downturn would lap onto Canadian shores. Certainly, inflation will not provide a barrier to a more aggressive Bank of Canada. The central bank has indicated that increased competitive pressures in the retail sector and the one percentage point GST cut at the start of the year will cause both core and total CPI inflation to fall below 1.5% by the middle of this year before returning to their 2% target by the end of 2009.

Following the March 4th meeting, there is the potential for another 25 basis point cut. However, given the degree of economic uncertainty on both sides of the border, the extent of additional easing will be highly dependent on how developments in the U.S. unfold and whether financial market confidence remains in question.

Some of the guessing on the Bank's views will be answered on Thursday when they release the update to the Monetary Policy Report (10:30ET). This report will lay out the Bank's downgraded views on Canadian and American economic growth alongside a more detailed assessment of the current economic and financial environment.

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Bank of Canada Announces .25% rate cut, US Feds slash rates by 3/4%

The Bank of Canada Cuts the Federal
Prime Lending Interest Rates by 1/4 %

The Bank of Canada could have cut more, but decided to go with a quarter-point off its own key rate, but it signalled more cuts to come as U.S. recession worries spiral.

In it's regularly scheduled announcement, the central bank of Canada lowered its overnight lending rate to 4 percent from 4.25 percent.

This was the Bank of Canada's second straight quarter-point cut as it seeks to protect the Canadian economy and infrastructure from the very severe slowdown or even a possible recession that faces the United States.

The move came shortly after the US Federal Reserve slashed its federal funds interest rate by 75 basis points to low 3.5 percent.

This cut by the US disappointed a number of market players who are calling for a bolder rate cut by Canada to match the Fed.

"The Bank of Canada is clearly stubborn, not wanting to cut by more than 25 basis points and I think the market is quite disappointed," said Eric Lascelles, chief economics and rates strategist at TD Securities.

Ted Carmichael, chief economist at JP Morgan Canada, said the bank "did what was expected a week ago and hasn't reacted whatsoever to developments in financial markets in the past week."

The Bank of Canada, which prepared its rate announcement on Monday, opted not to alter its decision at the last minute in reaction to the Fed move.

While warning that Canada's exports will be hit by the U.S. slowdown, the bank emphasized that high commodity prices will continue to help keep Canada's economy buoyant.

"Despite tighter credit conditions, domestic demand is projected to remain strong," the bank said in its statement.

We should see reductions in mortgage interest rates in the next few days!


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Mortgage Calculators - help with your payments and income qualification

Online Mortgage Calculators This edition of my blog writings has the latest and best rates for Canadian mortgages. At mortgages, we work on your behalf to find the mortgage that suits your needs. Best of all - our service is "free" for the asking It's the selected lender that gets YOU the best rate. *(O.A.C., E.&O.E.)

• Examples of Current Mortage Interest Rates • Explore Mortgage Scenarios with Helpful Calculators on dominionlending.ca

Terms Posted Rates Discounted Rates 1 YEAR 7.40% 5.65% 2 YEARS 7.55% 6.05% 3 YEARS 7.55% 5.90% 4 YEARS 7.55% 6.04% 5 YEARS 7.54% 5.90% 7 YEARS 7.85% 6.25% 10 YEARS 8.15% 6.30% Rates are subject to change without notice. *OAC E&OE Prime Rate is 6.00%.

Variable rate mortgages from as low as Prime minus 0.60%. Rates are subject to change without notice. Fixed mortgage rates shown in table above and quoted variable mortgage rates are available nationally to qualified individuals. Lower rates may be available to those with higher credit scores or higher net worth – check with your mortage Expert for full details. *O.A.C., E.& O.E. Explore Mortgage Scenarios with Helpful Calculators on mortgages When you're starting to think about what mortgage approach would be beneficial, my online mortgage calculators can help uncover some possible strategies. The Mississauga4Sale website at mortgages features a full line-up of mortgage tools which allow borrowers like you explore mortgage scenarios before speaking to a mortgage expert. If you're planning on buying a home, you can calculate: • the mortgage amount for which you can comfortably qualify, • your mortgage payments along with an amortization schedule to discover what you would owe in five years, • savings realized by making prepayments on your mortgage. If you currently have a mortgage, you can calculate: • how large a home equity line of credit you may be eligible for, • how much interest you could save by refinancing your mortgage, • how to accelerate paying off your mortgage debt. By visiting mortgages and clicking on "Calculators" on the main page, you can access a range of easy-to-use calculators that will provide you with ample insight into all aspects of mortgage financing.

I wish you all the best.

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CREA reports that 2007 of existing home sales sailed to another rrecord

CREA reports it's Another press announcment that existing home sales soar to record in 2007

But demand slumped at the end of the year, signalling a rough start to 2008; average price also hits a new high

The value of existing home sales blew past $100-billion for the first time in 2007, but signs of fatigue late in the year are expected to carry into 2008.

Sales came in at a total of $118.3-billion last year, up 20 per cent from the year before, according to data released yesterday by the Canadian Real Estate Association (CREA).

The average price of an existing home also hit a record $326,055 last year across the 25 major markets tracked by CREA.

Sales peaked in the second quarter, and slowed near the end of the year because there were fewer transactions in Calgary, Vancouver, Ottawa and Montreal, according to CREA. Calgary had the biggest drop in unit sales in December, down 27.8 per cent, compared with the year before.

Some of the country's strongest markets in the latter part of 2007 were Regina, Saskatoon and the province of Newfoundland and Labrador, where year-over-year sales rose 54 per cent, 34 per cent and 27 per cent respectively.

While a sag in December sales activity will likely continue in 2008, the Canadian market is still in much better shape than that of the U.S., said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.

"Even with the slight sag in December, Canadian home sales still easily hit a new annual high last year, in staggering contrast to the deepening trauma south of the border," Mr. Porter said in a research note.

"Housing is very unlikely to provide as much support to Canadian growth in 2008, but it's also highly unlikely to follow the U.S. market's due-south lead either."

For example, a total of 362,934 units were sold in Canada last year, up almost 8 per cent from 2006. This stands in "stark contrast" to the estimated 12.6-per-cent drop in U.S. existing home sales in 2007, Mr. Porter said.

Home prices, which rose 10.8 per cent in 2007 from 2006, are expected to go up at a more modest rate in 2008, according to CREA.

"A decline in inflationary pressures due to slower U.S. economic growth will enable the Bank of Canada to reduce interest rates," said Gregory Klump, CREA chief economist. "Additional interest rate cuts this year will keep resale housing market activity on a strong footing, and prices will continue to rise but at a slower pace."

By the numbers

$118-billion

Total dollar value of residential sales.

362,934

Number of units sold in 2007.

$326,055

Average price of home in 2007.

587,607

Number of new listings in 2007

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RBC reporting Canadian Economy still expanding, but the pace likely to slow

RBC is reporting that the Canadian Economy still expanding, but the pace likely to slow

The economy grew at a 0.2% pace in October and at a 1.4% annualized pace compared to the 2.9% average of the third quarter, setting up for a more moderate quarter for growth following nine months of robust expansion.

Despite the slowdown in job growth in December, Canada's job market pumped out 370,000 new jobs in 2007 and the unemployment rate finished the year near its lowest level in 33 years. The 2007 job increase pushed the number of job created since 2002 above two-million and 82% of those jobs were full-time positions.

Retail activity started the fourth quarter on a firm note, rising 0.1% in October, stronger than market forecasts for a 0.4% decline. The strong labour market and firm wage growth will likely support retail activity as the fourth quarter progresses.

Housing starts slowed to a 187,500 seasonally adjusted annual rate in December from an upwardly revised 233,300 pace in November. Starts were 229,600 in 2007, a 1% gain over 2006. The housing market may cool a bit in 2008 we forecast starts of 210,000 units in the year.

The merchandise trade surplus was larger than expected in November, rising to $3.7 billion. But, with a strong Canadian dollar boosting imports and a sharply slower U.S. economy dampening demand for Canadian exports, we expect the drag coming from the trade sector to be even greater in 2008 than in 2007 and that the economy will grow at a more modest 2.1%.

Canada's core inflation rate moved to its lowest level since April 2006 in November, and held below the 2% target for the second month running. The all-items inflation rate will likely remain above the Bank of Canada's 2% target in the near-term, but continued discounting by Canadian retailers will keep the core rate below the 2% target.

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Canadian Home Sales: House of the Rising Price

Canadian Home Sales: House of the Rising Price


After a blockbuster year, the Canadian housing market showed some early signs of fatigue as 2007 wore down. Today's December existing home sales data from the Canadian Real Estate Association show that resale activity faded 2.5% from the prior month and was a bit below year-ago levels as well. That's a big turnaround from the steady stream of solid gains through most of last year, which lifted sales to a record annual high and a hefty 7.9% above year-ago levels for all of 2007.

Last year's increase stands in stark contrast to the estimated 12.6% drop in U.S. existing home sales. And while Canadian sales may have lost a bit of momentum late in the year, prices just kept chugging right along. Average home prices were up 13.1% from year-ago levels in December, with 13 of 24 cities reporting double-digit increases. Average price gains have been somewhat skewed up by the mammoth 46% jumps in Regina and Saskatoon, but even the median city saw a 10.4% y/y price increase in December.

All cities west of Lake Superior reported double-digit price increases last year, with Saskatchewan cities firmly taking the baton from Alberta. However, price gains seemed to fade a bit right at the end of the year in Winnipeg and Vancouver. Elsewhere, prices actually gained speed at the end of 2007, despite the growing pressure on central Canada from the surge in the loonie and slowing U.S. growth. Toronto, Ottawa, Sudbury and Quebec City were among those cities in Ontario and Quebec that posted double-digit price gains from a year-ago last month.

Meantime, the previously steaming hot Alberta markets cooled further sales in both Calgary and Edmonton fell steeply from a year ago (Calgary down 27.8% y/y, Edmonton down 20.2% y/y), while new listings continue to rise. That's not a favourable backdrop for prices, although both are still hanging onto double-digit price gains as of December. Still, who would have believed at the start of 2007 that Toronto home prices were poised to rise faster in the next twelve months than in any of Calgary, Edmonton or Vancouver?

The Bottom Line: Even with the slight sag in December, Canadian home sales still easily hit a new annual high last year, in staggering contrast to the deepening trauma south of the border. Housing is very unlikely to provide as much support to Canadian growth in 2008, but it's also highly unlikely to follow the U.S. market's due-south lead either.

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Mark

A. Mark Argentino
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Thinking of Selling? Best Mortgage Rates Current Home Prices Search MLS
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Providing Full-Time Professional Real Estate Services since 1987
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Funny REMAX Commercial, Traffic Commute Move Closer to Reduce Time on Road, REMAX video commercial

Another RE/MAX Video showing you may wish to move so you can have a shorter commute time!

For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
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100% Financing now available on Rental Properties

100% Financing now available on Rental Properties

With the recent changes to CMHC rules, mortgage companies can start the new year offering financing of up to 100% on rental properties with 1-2 units, as it is now available!

This is great news for both real estate agents and investors alike! On rental properties with 3-4 units, 95% financing can be offered to qualified individuals.

Let me know if you have any questions, or if you have any questions about financing investment properties.

Let's have a great 2008!

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A. Mark Argentino
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RE/MAX Realty Specialists Inc.

Providing Full-Time Professional Real Estate Services since 1987
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Condo sales bring 2007 to a strong finish!

Condo sales bring 2007 to a strong finish!

January 7, 2008 -- Brisk condo sales in December brought the 2007 Greater Toronto Area resale housing market to a strong finish, Toronto Real Estate Board President Maureen O'Neill announced today.

"Typically condominium apartment transactions comprise just over 20 per cent of total sales but in December they accounted for more than a quarter of resale activity," said Ms. O'Neill. "Condos are often more affordable than other housing options and they show particularly well in winter."

Increasing by 12 per cent over the previous year to a total of 93,193 sales, 2007 was the best year ever for GTA resale housing activity and December's 4,646 sales came within two per cent of the best performance for the month, set in 2001.

The average price in December was $394,931, which resulted in an annual increase of seven per cent from the previous year.

The most active areas in December were in the City of Toronto.

Riverdale (E01) saw a 75 per cent increase in transactions compared to December 2006, primarily based on semi-detached home sales.

In the Mimico area of Etobicoke (W06) transactions were up 57 per cent, driven by a significant increase in the sale of condo apartments.

In North York, (C14) sales increased by 44 per cent compared to last December, as a result of strong detached home transactions.

Toronto's Downtown East (C08) experienced a 59 per cent increase compared to the same timeframe a year ago due to strong condominium and semi-detached home sales.

"We saw strong, stable monthly performances throughout 2007, which illustrates that consumers now recognize it's always a great time to buy or sell their next home," said Ms. O'Neill.

See more about condominiums in Mississauga

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A. Mark Argentino
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Providing Full-Time Professional Real Estate Services since 1987
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Real Estate Market Update from New Home Building Permit Perspective

Building Permits: From Boom to Gloom?

We don't normally write about a drop in Canadian building permits, even one like the 9.9% setback in November. However, given the suddenly heightened sensitivity over every twitch in the economy, today's decline is worth looking at, especially given the fact that it follows hard on the heels of a 19.6% drop in December housing starts and last week's 12.8 point plunge in the Ivey PMI for the same month. Is this trio of steep sags in admittedly third-tier economic indicators an ominous warning for the Canadian economy? In two words…probably not. While there is plenty to be concerned about on the outlook primarily the softening U.S. economy this sudden run of weak data in very volatile series is likely noise.

Putting it in perspective, building permits in the first 11 months of 2007 were up a hefty 12.4% from year-ago levels even with the November decline. And, keep in mind that the drop in November followed a 7.3% pop in the prior month. The latest setback was concentrated in the non-residential sector, which had been particularly frothy earlier last year (up 15.5% so far in 2007). Residential permits were also off 5% m/m, but were up by a surprisingly sprightly 10.5% year-to-date. (Contrast that with the 25% y/y plunge in U.S. building permits in the same period.)

Most provinces saw declines in November, led by Alberta (-13.8%) and B.C. (-20.0%). However, the top of last year's leaderboard was still crowded with western provinces. Permits in Saskatchewan were up 33.9% last year, with Alberta (15.2%) next in line. Notably, Ontario was in third spot, thanks to a strong 26% rise in non-residential activity.

In a separate release, new home prices were a touch firmer than expected in November, rising 0.5% m/m. This held the annual trend steady at 6.1%. In a sign of just how far-flung home price pressures are in Canada, the two biggest monthly increases were posted in Halifax and Quebec City. In contrast, new prices dipped again in Calgary, where annual price increases of 5% are now below the national average.

The Bottom Line: The Canadian building industry appears to be in the first stages of losing some momentum after a blow-out year in 2007. That's still a far cry from the deepening housing descent in clear view south of the border. In fact, given widespread talk of labour shortages in the Canadian industry, some cooling in the sector in 2008 may not be such a bad thing.

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Mark

A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate

Thinking of Selling? Best Mortgage Rates Current Home Prices Search MLS
RE/MAX Realty Specialists Inc.

Providing Full-Time Professional Real Estate Services since 1987
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