A slow week for mortgage news as this weeks top stories include how housing starts saw a significant rise in February, how many of the worlds top bankers agree that global economic growth is robust, how Canadians are taking advantage of the low interest rate environment by searching for properties now and how the Toronto budget is expected to have a surplus of roughly $100 million over the next two years.
Canada Mortgage and Housing Corporation (CMHC) released a new report on Monday outlining how home construction rose more than previously expected. Home construction was up 6.1% to 96 700 units in the month of February. Bob Dugan, CMHC’s chief economists commented by saying, “The gain in February housing starts was concentrated in the multiple starts segment, particularly in Toronto.”
Economists had previously expected housing starts to total 190 000 units in the month of February. Urban housing starts saw a rise of 9% in February from the previous month and reached 179 100 units on a seasonally adjusted basis. Multiple urban starts also rose by a whopping 19.1% to 89 900 with single starts increasing 0.5% to 89 200 units in February.
Ontario lead the gains board in February with a 28.6% gain with Atlantic Canada following behind with a raise of 14.3%. The Prairie region was close behind with a 10.8% increase and British Columbia trailed with an 8% gain in the month. Quebec went in the other direction with housing starts declining by 14.1%. Rural housing starts totaled 17 600 units in the month of February and were down 17% from the 21 100 units seen the month before.
“The new homes market is slowly coming back to life and may finally be benefiting from the resurgence in overall housing market activity.” says an economics strategist at TD Securities. “However, we caution that the pace of advance will likely be hard pressed to eke out similar gains later in the year, mainly as a result of enthusiastic buyers attempting to close transactions ahead of the regulatory new mortgage rules and harmonized sales tax changes coming into effect mid-2010.
“As such, this report likely overstates the true strength of the recovery in new residential housing, though it is safe to say that housing still remains a bright spot in Canadian economic activity.” I have to agree with this statement. Our housing market is definitely aiding in our recovery. What do you think? Please comment below.
Top central bankers agreed this Monday that global economic growth is robust and that with financial markets improving, some policy stimulus can be withdrawn. This does not mean that investors should interpret the phasing out of non-standard measures as a signal for interest rate rises.
European Central Bank President Jean-Claude Trichet commented by saying, “I would say that at the global level, the sentiment is that growth continues to be positive obviously and with a number of corrections at the global level, global growth has been confirmed to be robust.”
Central bankers from China and Japan were also united in pressing governments to bring public finances in line. As economies continue to recover from the economic crisis, central banks have begun to withdraw stimulus measures that were introduced to support growth. Mr. Trichet went on by saying, “The market is improving, so that we can phase out the non conventional measures without over interpretation of this phasing out, and without this influencing the market sentiment, and without giving the signal that we are changing the monetary policy stance.”
Signs of growth are including rebuilding of inventories, ease in global trade imbalances and revival in global trade. Global trade imbalances are questionable as no one is sure whether or not it is a permanent factor. What do you think? Will the trade imbalances effect growth moving forward? Please comment below.
A new study released this week outlines how more Canadian homebuyers are taking out mortgages that combine fixed and variable interest rates. The number of Canadians looking to purchase a home has also increased according to the same study.
The RBC Homeownership Study outlined that 10% of Canadians are very likely to purchase a home an obtain a mortgage within the next two years. This number was up from the 7% seen during the years of 2008 and 2009. This year changes everything with 67% of those surveyed, thinking it makes more sense to purchase a home this year rather than wait. This number was previously half of what it is now at 33%.
In Ontario alone, the number of consumers looking to purchase in the next two years has matched the national average. These purchases are driven mainly by low interest rates and good prices as the top incentives seen on the survey. 42% of these people are considering a mixed variable and fixed rate component when compared to the 31% that were considering it last year. 41% of those surveyed felt that a fixed rate mortgage was the way to go which was down from the 50% seen last year.
64% of Ontarians think that home prices will rise this year and 66% feel that interest rates will rise this year. Of the existing home owners surveyed, 67% are feeling concerned over rising interest rates and 61% predict that a raise in interest rates will lead to financial difficulty down the road.
Across Canada, 40% of those surveyed are planning to use a mixed rate mortgage which is up from the 32% seen the year before. The number of consumers looking at a fixed rate mortgage was at 44% and down 3% from the previous year. 91% of Canadians feel that purchasing a home was a good investment. This was the highest rating in the last 12 years.
Canadians between 18 and 24 who are also looking to purchase in the next two years pushed last years 8% to a new high of 15%. RBC’s head of home equity financing stated that young Canadians tend to have a smaller time horizon when they look at their first mortgage. They further stated that it is critical that they have an affordability component and tend to take one or three year terms.
This Wednesday, Mayor David Miller announced a new financial plan for the city of Toronto. He pledged to reduce the local property tax increase as well as deal with a proposed increase in user fees. Miller stated that there would be a surplus in the city of Toronto’s budget by as much as $100 million more than previously expected. Miller noted that there would be a two year budget plan in action regardless of the fact of his intent to leave office this year after the municipal election on October 25th. News of Millers announcement sent gossipers into a frenzy about whether or not he was leaving office early or taking another shot at office this election.
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