This weeks top stories include how housing prices are still increasing, how the hot market is still on fire, how mortgage fraud numbers are down, how the loonie is on the rise, the latest manufacturing figures and how Toronto and Vancouver are mopping the floor in home sales.
Housing prices still increasing
August saw an increase in Canadian housing prices but the numbers didn’t reach analysts expectations. Housing prices were up 0.1% in the month of August after following a 0.3% raise in the month of July. Analysts had predicted a gain of 0.2% previously and were disappointed by the 0.1% increase. The latest report from Statistics Canada suggests that new home prices are still fairly weak despite the rebound and dramatic turnaround in existing home prices in the past few months. The months of July to August did see price increases with St. John’s leading the way up 1.1% and followed by Quebec and Regina both up 0.9% and 0.8% respectively. Stats Canada did say that Quebec’s increase was due largely to higher labour and material costs. Builders in Quebec are also hard pressed to find available lots on the market which is causing the land values to increase as well. On the down side of things, decreases were seen in some parts of Canada as Hamilton recorded a decrease of 0.5% in new housing prices and Windsor and Edmonton followed with a decrease of 0.4% and 0.3% respectively. When looking year over year, the new housing price index was down 3.1% as large declines took their toll on the western provinces. The Prairies, when looking at the last 12 months, saw declines in Edmonton, Saskatoon and Calgary. On a positive note, St. John’s had their 10th consecutive month as the leader for year over year increases up 7.5%.
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Hot market still on fire
Statistics Canada released figures on Tuesday showing that new housing prices were up 0.2% in the month of August from July. Toronto’s prices were higher than the national average where the index was up by 0.1%. The positive number is encouraging as new home prices were down 0.1% year over year but the existing home market saw prices increase by 10% in the month of September when compared to the same time the year before. Despite the fact that the rebound in the housing market is strong with existing housing prices increasing, the new homes prices remain weak. During recessions, buyers tend to shy away from the new home market and look at existing homes where they can actually see and touch the product. With the added strength from the existing home market, consumer confidence has trickled over into the new homes market. Sales were up 62% in the month of August when compared to a year earlier. Home sales got an upswing in the third quarter last year but horrible winter sales put us 18% behind last years numbers. This brings forth some concerns, not only of my own but also, from builders and developers. The main concern is that rates are on the rise and that the Bank of Canada (BoC) is trying to determine if another asset bubble is forming. The second concern is that the strong dollar will force the BoC to raise their interest rates well before the promised June 2010 deadline. This factor, mixed with the HST that will take effect soon, is causing sales from next year to be brought forward as people try to get the best rates and avoid the most taxes. Even though we are currently being spoiled with low interest rates a bump of 1% or 2% will not be the end of the world for the first time home buyer. Rates are still low in historical terms but they are on the rise.
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Mortgage fraud numbers down
Maybe it is true. A good crook can beat a smart lawyer any day of the week but put them together and you can walk away with millions. Mortgage fraud was at its prime in the earlier part of this decade with a number of Canadian lawyers involved in frauds involving numerous properties and costing victims millions. There are new figures that show that mortgage fraud is down but not yet eradicated. There have been regulatory changes as of recently and greater consumer awareness but this is not enough by itself to tackle the problem. Mortgage fraud usually takes place in the hotter real estate markets and usually involves the pricier properties. Predominantly the problem is in Ontario with a bit out in British Columbia. The scammers do it numerous times on random properties. The properties that are vacant and appear to be mortgage free or ones with tenants seem to be the best targets for these fraudsters. Even though most consumers purchase title insurance, to protect their purchase, they are still at risk. The problem is that with all the legal loopholes, the involvement of numerous parties and the dispersal of specialized information, it is a prime target for any fraudster. In the U.S. the FBI states “80% of all fraud losses involve collaboration or collusion by industry insiders.” Data about mortgage fraud investigations or crimes is hard to obtain in Canada, as they are never reported to police in some instances. First Canadian Title, a title insurance company, says it paid out 43% of total payouts in 2007 and went up to 72% in 2008. The numbers also show a significant drop in accusations of mortgage fraud against lawyers in Ontario. The Law Society of Upper Canada has only opened 18 investigations in 2009 but saw consistent numbers of 5 new investigations a month between the years of 2006 – 2008. Ontario took a stance and reformed its regulations relating to mortgage fraud in the last few years. Fraudulently obtained land titles are now invalid in Ontario. We are also seeing less publicity around fraudulent activities with a large portion of losses being eaten up by financial institutions and title insurers. Also, independent mortgage brokers and lenders in Ontario are now subject to uniform licensing and disclosure standards, which will have a positive impact on fraud numbers looking forward. This does not mean in any way that mortgage fraud is less attractive to fraudsters and scammers. In fact they are even more enticed to commit fraud when we are in troubled financial times such as the current recession that we are working our way out of. The number one form of mortgage fraud will not go away which is considered to be the marijuana grow ops. This is when people take advantage of larger rental properties to grow marijuana for the purposes of trafficking. Right now these are popping up everywhere and they will not stop. I guess the number of mortgage crimes are only limited to a criminals imagination. What do you think? Please comment below.
Rise of the loonie
The U.S dollar is expected to lose its position as the world’s reserve currency as its value keeps declining. The Canadian dollar is set to make its way to parity in the up and coming months with the U.S dollar and is expected to be stronger than it has ever been. Some analyst’s even feel that we will move way past parity and that it may even be within the next three months. Thursday saw the loonie hit a 14-month high of 97.97 U.S. and the loonie will continue to gain strength as ongoing high global demand for our country’s commodities stay strong. Our vast arrays of commodities include oil, natural gas, copper, uranium and wheat. In contrast to the United States, Canada has stayed true to its international trade agreements to date and has become the preferred destination for international capital. The increase in the loonie has been quite alarming to many but the Bank of Canada (BoC) cannot do much to stop it and likely will not intervene. BoC Governor Mark Carney have noted the fact that the loonies rise has the potential to hurt manufacturers and exporters in the short term by making products more expensive for U.S customers but that is not enough. If the Canadian dollar surpasses the Greenback it would hurt the demand for Canadian exports just as businesses are finally emerging from the recession. If the central bank chooses to step in and sell of Canadian dollars in an attempt to increase supply and drive down value it may not be enough. The dollar has increased too fast and gone too far to simply adjust from this. The only real way to hold down the dollar would be to reduce interest rates and we know already that it is not possible as the rates are as low as they could possibly go. The other alternative would be quantitative easing through the printing of more money and with more money in circulation; this will lower the value of the dollar. The only downfall is that we would be implementing quantitative easing when other banks across the world are leaving quantitative easing, now that would be abnormal. Regardless if the BoC decides to do something or not, it will correct itself eventually. As the currency continues to strengthen it will further cut into exports and thus bring down the country’s economic prospects, which will in turn bring down the dollar. The real question is how will all this effect us? What do you think? Please comment below.
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Manufacturing numbers are in
Manufacturing sales were down 2.1% to $40.9 billion in the month of August. This after seeing a 5.2% gain in the month of July. The most recent report from Statistics Canada outlines how aerospace product and parts as well as the motor vehicles industries were the major factors in the decline in sales figures. Sales have been relatively flat since February after seeing a large drop of 20.4% between the months of October and January of last year. The latest numbers show that 13 out of 21 manufacturing industries declined during the month of August. Production in the aerospace parts and products industry fell 35.6% to just $1.2 billion. If we were to take aerospace out of the picture, manufacturing still took a hit of 0.6%. Manufacturing sales in the automotive industry was also down by 6.3% to $3.1 billion after seeing a hefty gain of 48.8% in the month of July. Miscellaneous manufacturing was also down 10.5% and chemical manufacturing saw a decline of 2.5%. On a better note, the coal products and petroleum industries saw a rise of 7.2% mainly due to higher prices not really on a production or sales basis. This leaves us asking, what does the future hold?
Toronto and Vancouver mop the floor in home sales
Canadian purchased homes at a record pace in the third quarter of this year with strong sales in expensive cities drive prices 11% higher than last year. The Canadian Real Estate Association (CREA) stated Thursday that 135 182 units were sold from July of this year to September of this year. This was an increase of 18% from the third quarter of last year and was on record as the highest amount ever sold in the third quarter. The momentum remained strong with low interest rates, rebounding consumer confidence and an improving sense of economic security drawing in homebuyers. When looking at a seasonally adjusted basis, which is the method used to smooth out data by taking out factors such as seasons and one time events, sales were up to 127 941 which was an increase of 12% from the previous quarter. This on the recent note that sales continued to climb well into September with sales up 1.5% from the month of August to 42 958 sales. This puts the seasonally adjusted activity 63% higher than the numbers seen in January. The busiest markets in Canada year over year were Toronto and Vancouver with Toronto seeing a 28% increase and Vancouver seeing a 124% increase. Sales in these cities brought up the average sales prices to $327 736. Average prices have now increased 15% when compared to the same time last year. I guess there is good news around the corner after all!
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