This weeks top stories include how Canada measures up to other countries in the developed world, how consumer debt rose during the month of December to reach a new record, how January’s existing home sales beat analysts expectations, how Vancouver home sales declined yet again and how first time home buyers are back in the swing of things this year with January’s sales numbers reflecting a corresponding increase.
Canada is noted to be one of the best places to live in the world but a new report shows that we are not living up to our standards. With lots of room for improvement, the Conference Board of Canada gave the overall country a grade rating of “B” in comparison to other countries in the world.
The grade is based on 17 measures that track equity and social cohesion, and self-sufficiency. In over 20 years, we have not seen our grade move up or down. Canada is noted to have low rates when it comes to murder, acceptance of diversity and high life satisfaction, which all helped secure the “B” grade. On the other hand, Canada continues to lack in voter turnout, gender income gaps and working age poverty levels. This is why Canada cannot lead the pack and continues to sit in the middle at 7th place out of 17 countries.
Canada has the potential to move up in the ranks but is not taking charge to turn the negatives into positives. Scandinavian nations lead the pack with Netherlands and Austria but we beat out Japan and the United States, which both received grades of “D”. The measure is to assess the degree at which the country provides ” a high and sustainable quality of life for all Canadians”. The indicators include child poverty, jobless youth, inequality, disabled income, suicides and burglaries. What do you think of the report? Please comment below.
Consumer debt is on the rise yet again. The average consumers total debt load rose by roughly 6% to $27,485 by December of last year. This broke the previous record and is now causing the Bank of Canada (BoC) to again revisit it’s current policy. Although the rise was attributed mainly to the Christmas shopping season, it will be interesting to see how the BoC will assess the situation.
2012 witnessed the largest year over year increase for consumer debt in the fourth quarter since 2009, according to a quarterly report by TransUnion that was released this week on Tuesday. When looking at a quarter over quarter basis, consumer debt was up 2.7%, which was also the largest increase on record between the third quarter and fourth quarter since 2008. Annual growth in debt loads had been on the decline since the end of 2009. TransUnion vice president Thomas Higgins commented, “The rise on a year-over-year basis should be more concerning as Canadians’ debt loads increased by more than $1,500.”
The BoC has been continuously warning Canadians about taking on too much debt. With interest rates set to rise, it could be trouble for many who are just teetering on the verge of not being able to meet their monthly obligations. Mr. Higgins commented further by saying, “There could be difficulties for some consumers if there are any short term economic shocks, let alone a full-blown recession.” Canadians continue to manage their payments quite responsibly at the moment and delinquency levels reflect this clearly. What do you think of the BoC’s concerns? Are they valid? Please comment below.
January existing home sales continue to beat analysts expectations with sales in the Greater Toronto Area (GTA) only down a touch from last year, which leads many to suggest that buyers are coming back to the market again. There were 4,375 sales on the Multiple Listing Service (MLS) during the month of January this year. Last year there were 4,432 sales in the same month.
December 2012 witnessed only 3,690 sales, which were down from the previous year when sales reached 4,585. This was a drastic decline from the previous year and led many to believe that the housing market was coming to a halt. But January brought new life for the industry. Ann Hannah, president of the Toronto Real Estate Board (TREB) commented, “The January sales figures represent a good start to 2013. While the number of transactions was down slightly compared to last year, the rate of decline was much less than what was experienced in the second half of 2012. This suggests that some buyers, who put their decision to purchase on hold last year due to stricter mortgage lending guidelines, are once again becoming active in the market.”
Finance Minister Jim Flaherty was taking a lot of heat for recent changes to mortgage lending guidelines and changes to mortgage insurance requirements as well. The industry continued to blame the Finance Minister for taking first time home buyers out of the market as his changes caused a full percentage point increase to mortgage rates by reducing the maximum amortization amounts. Flaherty’s moves were put in place to curb consumer spending as household income to debt ratio’s skyrocketed. What do you think of the news? Does this mean that the market crash will not happened or will be put on hold? Please comment below.
Greater Vancouver continues to deal with a declining housing market as the number of homes sold dwindled down by 14.3% last month. Only 1,351 properties exchanged hands in the month of January, which was down from 1,577 sales the previous year during the same month, according to the Real Estate Board of Greater Vancouver (REBGV).
The year over year price index in January for single family detached homes, condos and townhouses were down 2.8% to $588,100. Helmut Pastrick, chief economist at Central 1 Credit Union commented, “We don’t think it is a crash. We just think it is a mild correction that the real estate market is going through. The market will remain soft for a few more months, and then begin to stabilize. The improvement in economic conditions will generate gains in employment and income, and consumer confidence will pick up.” Eugen Klein, president of REBGV stated that many home sellers are choosing to take their listings off the market rather than settle for less.
Mr. Klein went further by noting, “When a home seller isn’t receiving the kind of offers they want, there comes a point when they decide to either lower the price or remove the home from the market. Right now, it seems many home sellers are opting for the latter. Home sales activity has been below historical averages in Greater Vancouver for about seven months. This has caused a gradual decline in home prices of about 6 per cent since reaching a peak last spring.” Sales were at their lowest levels since January of 2001 last month and pricing is showing signs of this with the price index for a single family detached home down 3.1% in January, from January of 2012, to $901,000. What do you think? Please comment below.
Mortgage brokers have been witnessing a flurry of activity this year as first time home buyers make their way back into the market. There has been an uptick in pre-approvals and renewals this year after a fall and winter that saw the housing market cool and come to the verge of a crash. January is usually a volatile month where things are generally slow but even realtors are now commenting that they cannot remember the last time that they had this much business on their plates at this time of year. There seems to be quite a bit of pent up demand from the winter months where buyers sidelined plans to purchase because of negative news on the housing market. It seems like the dust has settled and buyers have spent additional time saving funds so that they could make their way back into purchasing homes.
The Toronto Real Estate Board (TREB) reported a great start to this year with homes sales down a measly 1.3% in January when compared to the same month in 2012. Prices have also increased 4.3% in the month of January across the Greater Toronto Area (GTA), according to the same report. Jason Mercer, TREB’s senior market analysts commented, “Assuming the turnaround holds, expect annual price growth in the three to five per cent range this year.” TREB president Ann Hannah also commented, “The strong January suggests that some buyers, who put their decision to purchase on hold last year due to stricter mortgage lending guidelines, are once again becoming active in the market.”
Sales continue to be strong in suburban regions all around the GTA, even with the city’s land transfer tax affecting would be buyers but affordability continues to be the key. With current low mortgage interest rates at historical levels, affordability is within reach for most first time home buyers. The 5% down payment requirement is also aiding many first time home buyers by allowing them to purchase with little down. There are currently talks at the Bank of Canada (BOC) that there may be additional changes to the mortgage lending guidelines in the works but nothing has materialized as of yet. What do you think? Is buying a home still affordable for first time home buyers? Please comment below.
Please note that I will be away next week and the latest in mortgage news will return on February 22, 2013
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