OTTAWA — The Bank of Canada has pegged its key policy interest rate to the lowest level practical — probably for more than a year — in expectation of a deepening recession, but the new glum outlook was disputed Tuesday by Finance Minister Jim Flaherty.
“I’m comfortable with our projections. The Bank of Canada has changed theirs, but my projections are the projections we put in the budget,” Flaherty said in rejecting opposition calls for more stimulus spending.
“I’m staying with our budget projection. We’re on track,” he said after the central bank had halved the overnight interest rate to 0.25 per cent.
The apparent divergence of views comes after close co-operation between the Finance Department and the Bank of Canada so far during the current crisis.
It was not clear whether it marked a fundamental difference about the economy or whether the finance minister was attempting to hold off demands that he re-open his budget that only started taking effect at the start of the fiscal year three weeks ago, on April 1.
But the difference — if it exists — is substantial and if the Bank of Canada proves correct, will have profound repercussions for the government’s books.
The new forecast from the central bank of a three per cent economic retreat this year is half a point weaker than what parliamentary budget officer Kevin Page said last month would add at least $19 billion to Ottawa’s deficit over the next two years.
Both the bank and the government had made their calculations in January in expectations the economy would shrink 1.2 per cent, which now looks like boom times by comparison.
Conceding it had miscalculated in January, the central bank said it will almost certainly have to keep its overnight rate at the “the effective lower bound for the rate” until mid-2010.
Such historically cheap money is needed, it said, because the economy will do much worse this year, but also next, growing by 2.5 per cent as opposed to the 3.8 per cent it had earlier envisioned.
Flaherty said Carney’s original expectation for 2010 was “overly optimistic,” but he was sticking to the budget projection for 2009, although most economists see shrinkage of at least double the rate.
“The minister is making a mistake,” NDP finance critic Thomas Mulcair declared as his party called for a second stimulus package beyond the $40 billion introduced in the January budget.
“More is needed to help the Canadian economy now,” Mulcair said. “We’ve simply bled out far too many jobs.”
Prime Minister Stephen Harper left open the possibility of doing more to stimulate the economy.
“I think it’s important to note that our economic action plan did provide a significantly larger stimulus package than the International Monetary Fund was asking for, and one that we think is fairly robust in handling changing economic circumstances,” Harper said during a visit to Jamaica.
“But obviously we will continue to examine the situation, and particularly the employment situation, and we will make adjustments where necessary.”
Flaherty said the stimulus spending only began with the fiscal year starting in April and there will be a clearer view of how it is working in the summer.
Following the Bank of Canada’s rate-cutting decision, the commercial banks quickly lowered their prime lending rate.
They were led by Bank of Montreal (TSX:BMO) which said less than two minutes after the central bank’s announcement that prime, the benchmark for variable-rate mortgages and other loans, was dropping by a quarter-point to 2.25 per cent. Some fixed mortgage rates were also trimmed.
Carney will make a closely watched policy statement Thursday and is widely expected to detail plans for so-called quantitative easing — increasing the money supply through central bank purchases of bonds and other assets from commercial lenders, increasing their reserves.
TD Bank chief economist Don Drummond predicted that this next step will be modest, however, and will bring to a close Ottawa’s attempts to spark the domestic economy.
“Now our fate is cast with the prospects of recovery in the world and U.S. economy,” said Drummond.
According to the Bank of Canada, conditions have deteriorated significantly since the beginning of the year as a result of a global slump that has “intensified” and deteriorating credit conditions “have spread quickly through trade, financial and confidence levels.”
As a result, Carney has basically thrown out the playbook he outlined in January.
Now the bank says the economy won’t stop falling until at least the fourth quarter, in line with projections by the Organization for Economic Co-operation and Development and a growing number of private-sector economists.
It also is more reflective of an economy that has shed 270,000 since January.
Carney remains a relative optimist with his prediction of a bounce-back of 2.5 per cent next year. While lower than his previous prediction of 3.8 per cent growth in 2010, it is still far above the OECD’s forecast of 0.3 per cent.
Economists at the Bank of Nova Scotia termed the central bank’s revised forecast a “significant mid-course correction ... and one that is on the mark across the board.”
Meanwhile, the central bank sees no danger of inflation — in fact, it predicts prices will drop at a 0.8 per cent rate in the third quarter and not return to its two per cent target before the third quarter of 2011.
Wednesday, April 22, 2009
New home sales rise
The frigid market for new homes could be into a spring thaw.
The Central Alberta branch of the Canadian Home Builders’ Association said in a news release on Tuesday that new home sales in Central Alberta during the first quarter of 2009 were up from the previous quarter. It added that members of its builder council have reported an increase in housing starts and sales across the region.
“We’ve all noticed a fairly substantial increase in sales, basically since the snow melted,” said branch president Jonas Neidert.
This was particularly true in March, he said, with the trend continuing this month.
Neidert, who is partner in Avalon Central Alberta, acknowledged that spring has historically been a busy period for home builders. Climactic conditions were particularly harsh this winter, which compounded the economic problems facing his industry.
But he’s still encouraged by renewed activity in recent weeks.
“It seems the traffic to the show homes is quite good. Maybe we’re returning to more the way it was a few years ago when spring was a really busy season.”
Neidert also suggested that many of the new homes being sold were built some time ago, and accordingly are not included in current construction stats.
“Permit numbers don’t always indicate the whole sales story.”
The local branch of the Canadian Home Builders’ Association also cited data indicating that the price of existing homes in Red Deer that sold twice between February 2008 and February 2009 increased by an average of 3.6 per cent.
Neidert added that local Realtors he’s talked to have indicated a rise in sales activity.
“It seems to be a general trend.”
The association provided information about the impact the housing industry has on the local economy. For instance, it said 1,570 jobs would likely result from the construction of 600 housing units in the region.
“I don’t think people realize how much it does contribute to the local economy overall,” said Neidert.
He believes federal stimulus programs will help the situation.
“I think it’s having a little bit of an impact.”
hrichards@reddeeradvocate.com
The Central Alberta branch of the Canadian Home Builders’ Association said in a news release on Tuesday that new home sales in Central Alberta during the first quarter of 2009 were up from the previous quarter. It added that members of its builder council have reported an increase in housing starts and sales across the region.
“We’ve all noticed a fairly substantial increase in sales, basically since the snow melted,” said branch president Jonas Neidert.
This was particularly true in March, he said, with the trend continuing this month.
Neidert, who is partner in Avalon Central Alberta, acknowledged that spring has historically been a busy period for home builders. Climactic conditions were particularly harsh this winter, which compounded the economic problems facing his industry.
But he’s still encouraged by renewed activity in recent weeks.
“It seems the traffic to the show homes is quite good. Maybe we’re returning to more the way it was a few years ago when spring was a really busy season.”
Neidert also suggested that many of the new homes being sold were built some time ago, and accordingly are not included in current construction stats.
“Permit numbers don’t always indicate the whole sales story.”
The local branch of the Canadian Home Builders’ Association also cited data indicating that the price of existing homes in Red Deer that sold twice between February 2008 and February 2009 increased by an average of 3.6 per cent.
Neidert added that local Realtors he’s talked to have indicated a rise in sales activity.
“It seems to be a general trend.”
The association provided information about the impact the housing industry has on the local economy. For instance, it said 1,570 jobs would likely result from the construction of 600 housing units in the region.
“I don’t think people realize how much it does contribute to the local economy overall,” said Neidert.
He believes federal stimulus programs will help the situation.
“I think it’s having a little bit of an impact.”
hrichards@reddeeradvocate.com
Monday, April 20, 2009
Quarterly stats boost optimism
Sales statistics for the month of March that suggest an improving real estate market appear to be supported by quarterly figures.
Randy Weins, owner of Weins World Real Estate and past-president of the Central Alberta Realtors Association, has been compiling sales volumes and price numbers for Red Deer and other Central Alberta communities in three-month increments for years.
He concludes that the real estate market has hit bottom.
Looking only at single-family dwellings, which Weins believes is most representative of the overall market, he found that 210 homes were sold through the MLS system in Red Deer between January to March of this year.
That figure was up from 171 sales in the fourth quarter of 2008, but down from 296 a year ago.
There were 43 sales of single-detached homes in Sylvan Lake during the most recent three-month period.
That compares with 38 in the final quarter of 2008 and 69 in the first quarter of last year.
Sales of single-detached homes in Innisfail reached 24 last quarter.
The figure was 21 to end last year and 30 in the first quarter of 2008.
This year started with 23 single-detached sales in Lacombe, up from 20 in the final quarter of 2008 but down from 34 in the first three months of that year, reported Weins.
Single-detached home sales in Blackfalds reached 22 in the most recent quarter, jumping from 14 for the final three months of last year but down from 27 to start 2008.
Ponoka and Rocky Mountain House each recorded 20 sales of single-detached dwellings during the first three months of 2009.
That number compares with eight for Ponoka and 15 for Rocky in the fourth quarter of 2008, and 20 and 18 for the two communities respectively to start 2008.
In the case of Stettler, Weins determined that there have been 18 MLS sales of single-detached homes as of March 31 of this year.
For the preceding quarter the figure was 19, and for January to March 2008 it was 13.
He calculated that the median price of single-detached homes sold in Red Deer during the first quarter was $305,000. The median was $310,000 in the preceding quarter and $327,000 in the first quarter of 2008.
In Sylvan Lake the median price for this type of home to start 2009 was $318,000, with the corresponding figures for the fourth and first quarters last year being $370,000 and $323,000, respectively.
For Lacombe, the median price was $289,000 in the most recent quarter, as compared with $308,000 in the preceding three-month period and $320,000 a year ago.
Single-detached dwellings in Blackfalds have sold for a median price of $278,000 so far this year, said Weins, which is down from $284,000 and $305,000 for the fourth and first quarters of 2008.
The median price in Ponoka was $247,000, up from $231,000 at the end of last year and $207,000 at the beginning of last year.
At Rocky, the median price from January to March was $280,000, this was the same figure as the previous quarter but lower than the $306,000 median of a year ago.
Finally, Stettler experienced a big jump in the median price of single-detached houses sold last quarter.
The $254,000 figure was well above the $185,000 median in the fourth quarter of 2008 and also topped the $228,000 median from the first quarter last year.
Randy Weins, owner of Weins World Real Estate and past-president of the Central Alberta Realtors Association, has been compiling sales volumes and price numbers for Red Deer and other Central Alberta communities in three-month increments for years.
He concludes that the real estate market has hit bottom.
Looking only at single-family dwellings, which Weins believes is most representative of the overall market, he found that 210 homes were sold through the MLS system in Red Deer between January to March of this year.
That figure was up from 171 sales in the fourth quarter of 2008, but down from 296 a year ago.
There were 43 sales of single-detached homes in Sylvan Lake during the most recent three-month period.
That compares with 38 in the final quarter of 2008 and 69 in the first quarter of last year.
Sales of single-detached homes in Innisfail reached 24 last quarter.
The figure was 21 to end last year and 30 in the first quarter of 2008.
This year started with 23 single-detached sales in Lacombe, up from 20 in the final quarter of 2008 but down from 34 in the first three months of that year, reported Weins.
Single-detached home sales in Blackfalds reached 22 in the most recent quarter, jumping from 14 for the final three months of last year but down from 27 to start 2008.
Ponoka and Rocky Mountain House each recorded 20 sales of single-detached dwellings during the first three months of 2009.
That number compares with eight for Ponoka and 15 for Rocky in the fourth quarter of 2008, and 20 and 18 for the two communities respectively to start 2008.
In the case of Stettler, Weins determined that there have been 18 MLS sales of single-detached homes as of March 31 of this year.
For the preceding quarter the figure was 19, and for January to March 2008 it was 13.
He calculated that the median price of single-detached homes sold in Red Deer during the first quarter was $305,000. The median was $310,000 in the preceding quarter and $327,000 in the first quarter of 2008.
In Sylvan Lake the median price for this type of home to start 2009 was $318,000, with the corresponding figures for the fourth and first quarters last year being $370,000 and $323,000, respectively.
For Lacombe, the median price was $289,000 in the most recent quarter, as compared with $308,000 in the preceding three-month period and $320,000 a year ago.
Single-detached dwellings in Blackfalds have sold for a median price of $278,000 so far this year, said Weins, which is down from $284,000 and $305,000 for the fourth and first quarters of 2008.
The median price in Ponoka was $247,000, up from $231,000 at the end of last year and $207,000 at the beginning of last year.
At Rocky, the median price from January to March was $280,000, this was the same figure as the previous quarter but lower than the $306,000 median of a year ago.
Finally, Stettler experienced a big jump in the median price of single-detached houses sold last quarter.
The $254,000 figure was well above the $185,000 median in the fourth quarter of 2008 and also topped the $228,000 median from the first quarter last year.
Real estate recovery
Housing sales hit six-month high in March.
Residential real estate activity in Central Alberta continues to lag behind last year’s pace, but the gap appears to be narrowing.
The Central Alberta Realtors Association reported on Wednesday that home sales in the region hit a six-month high in March, with 123 transactions processed through the Multiple Listing Service in Red Deer and 169 in the surrounding area. The combined total is 23 per cent fewer than the 380 city and rural sales in March 2008, but that difference is smaller than in any of the preceding four months.
“If you want to get in at the bottom, it’s probably around this time,” suggested association president Derek Austin, who owns Century 21 Your Realty in Innisfail.
Austin thinks the real estate market will be busier this month, explaining that buyers and sellers tend to become more active as the weather warms. He also believes people are tired of the negative news and are now realizing that the world is not ending.
There is plenty to be optimistic about in Central Alberta, he added, offering as an example major construction projects like the proposed Holiday Inn in Gasoline Alley.
Austin thinks there is a growing awareness of the record low interest rates and reduced home prices as well. And he doesn’t believe federal and provincial stimulus programs have had an effect yet.
“You add those things together, what better time to get into the market?”
The median price of homes sold in Central Alberta last month was $260,000, according to the Central Alberta Realtors Association. That’s down eight per cent from the $283,000 figure for the same month in 2008.
Austin said a better comparison is 2005, prior to the sharp run-up in prices and sales volumes.
In March of that year, single-family dwellings in Red Deer sold for a median price of $182,000. A year ago, the median price for the same type of property was $335,000, and last month it was $326,230.
Prices and sales figures over the past few years were an “anomaly,” said Austin, and are unlikely to be repeated in the near future.
“That would be unreasonable to think that we’d still have the same number of sales.”
Central Alberta Realtors Association said new MLS residential listings for Central Alberta declined 15 per cent last month, as compared with a year earlier. It marked the third consecutive month that new listings have decreased, and contributed to five per cent drop in total active listings.
In Red Deer alone, new listings slid 29 per cent.
Austin said the forces of supply and demand should exert upward pressure on prices, although listing numbers should increase as spring continues.
Nationally, the number of existing homes sold last month was down from a year ago but continued an upward trend that began in February, said the Canadian Real Estate Association.
The association also reported that the national average price for homes fell again in March, compared with the same month last year.
“Housing markets are starting to show signs of buyer interest because of lower prices and interest rates,” CREA president Dale Ripplinger said in a statement.
The year-over-year decline in March sales was 13.5 per cent, but the smallest 2008-to-2009 decrease in six months.
The average house price in Canada fell to just under $289,000 — down 7.7 per cent from March 2008 — also the smallest year-to-year decline in six months.
Robert Kavcic, of BMO Capital Markets, wrote in a separate analysis saying that “the improvement in recent months is an encouraging sign that the Canadian housing market has crossed the halfway point for this downturn.”
“Despite two months of improved sales activity, buyers are still in control of the Canadian real estate market,” Kavcic wrote.
“Further price declines and low mortgage rates will ultimately help trigger a recovery, but a reversal in the wave of job losses is one major pre-requisite still outstanding.”
hrichards@reddeeradvocate.com
File from The Canadian Press
Residential real estate activity in Central Alberta continues to lag behind last year’s pace, but the gap appears to be narrowing.
The Central Alberta Realtors Association reported on Wednesday that home sales in the region hit a six-month high in March, with 123 transactions processed through the Multiple Listing Service in Red Deer and 169 in the surrounding area. The combined total is 23 per cent fewer than the 380 city and rural sales in March 2008, but that difference is smaller than in any of the preceding four months.
“If you want to get in at the bottom, it’s probably around this time,” suggested association president Derek Austin, who owns Century 21 Your Realty in Innisfail.
Austin thinks the real estate market will be busier this month, explaining that buyers and sellers tend to become more active as the weather warms. He also believes people are tired of the negative news and are now realizing that the world is not ending.
There is plenty to be optimistic about in Central Alberta, he added, offering as an example major construction projects like the proposed Holiday Inn in Gasoline Alley.
Austin thinks there is a growing awareness of the record low interest rates and reduced home prices as well. And he doesn’t believe federal and provincial stimulus programs have had an effect yet.
“You add those things together, what better time to get into the market?”
The median price of homes sold in Central Alberta last month was $260,000, according to the Central Alberta Realtors Association. That’s down eight per cent from the $283,000 figure for the same month in 2008.
Austin said a better comparison is 2005, prior to the sharp run-up in prices and sales volumes.
In March of that year, single-family dwellings in Red Deer sold for a median price of $182,000. A year ago, the median price for the same type of property was $335,000, and last month it was $326,230.
Prices and sales figures over the past few years were an “anomaly,” said Austin, and are unlikely to be repeated in the near future.
“That would be unreasonable to think that we’d still have the same number of sales.”
Central Alberta Realtors Association said new MLS residential listings for Central Alberta declined 15 per cent last month, as compared with a year earlier. It marked the third consecutive month that new listings have decreased, and contributed to five per cent drop in total active listings.
In Red Deer alone, new listings slid 29 per cent.
Austin said the forces of supply and demand should exert upward pressure on prices, although listing numbers should increase as spring continues.
Nationally, the number of existing homes sold last month was down from a year ago but continued an upward trend that began in February, said the Canadian Real Estate Association.
The association also reported that the national average price for homes fell again in March, compared with the same month last year.
“Housing markets are starting to show signs of buyer interest because of lower prices and interest rates,” CREA president Dale Ripplinger said in a statement.
The year-over-year decline in March sales was 13.5 per cent, but the smallest 2008-to-2009 decrease in six months.
The average house price in Canada fell to just under $289,000 — down 7.7 per cent from March 2008 — also the smallest year-to-year decline in six months.
Robert Kavcic, of BMO Capital Markets, wrote in a separate analysis saying that “the improvement in recent months is an encouraging sign that the Canadian housing market has crossed the halfway point for this downturn.”
“Despite two months of improved sales activity, buyers are still in control of the Canadian real estate market,” Kavcic wrote.
“Further price declines and low mortgage rates will ultimately help trigger a recovery, but a reversal in the wave of job losses is one major pre-requisite still outstanding.”
hrichards@reddeeradvocate.com
File from The Canadian Press
Monday, April 13, 2009
Building boom stalls
The first quarter of 2009 was one to forget for Red Deer home builders.
Canada Mortgage and Housing Corp. reported on Wednesday that housing starts in the city during the first three months of the year numbered 58 — down 51 per cent from the first quarter of 2008.
Single-detached homes accounted for 50 of the 2009 total, as compared with 89 the preceding year. The rest of the starts were units in multi-family buildings.
During the month of March, there were 20 housing starts in the city, with 16 of these single-detached projects. Last March, the tally was 29, with all of these single-detached homes.
Despite this 31 per cent decline in construction starts last month, Red Deer’s residential construction sector experienced a smaller percentage drop-off than any of Alberta’s other large cities.
Calgary’s metropolitan area experienced a 90 per cent year-over-year slide in residential starts in March, while in the Rural Municipality of Wood Buffalo the decrease was 78 per cent, in the Edmonton metropolitan area it was 72 per cent, in Lethbridge it was 63 per cent, in Medicine Hat it was 47 per cent and in Grande Prairie it was 39 per cent.
On a quarterly basis, Red Deer’s decline in residential construction was less than all but one of its urban counterparts. The Calgary metropolitan area experienced an 84 per cent drop, in the Edmonton metropolitan area it was 67 per cent, in the Rural Municipality of Wood Buffalo it was 63 per cent, in Lethbridge it was 60 per cent, in Medicine Hat it was 48 per cent and in Grande Prairie it was 20 per cent.
For Alberta municipalities with 10,000 or more people, housing starts during the first three months of 2009 fell a cumulative 73 per cent.
Nationally, CMHC reported that housing starts were up 13.7 per cent in March as compared with February — which marked a nine-year low.
BMO Capital Markets economist Douglas Porter noted that almost all of the gain was in the volatile multiple unit category, which was up 28.3 per cent while urban single-family starts rose just 1.3 per cent.
“Home-building reports around this time of year can be as much a weather report as an economic report, and March was generally on the mild side,” Porter wrote in a note to clients.
“The level of residential building permits sagged to just 124,000 units in February, suggesting activity is likely to fade further.”
“March’s level of starts is still down a towering 35 per cent from a year ago,” Porter said.
CMHC said urban housing starts increased by 35 per cent in Ontario and by 23.3 per cent in Quebec, but declined by 17.3 per cent in British Columbia, by 7.9 per cent in Atlantic Canada, and by 7.5 per cent in the Prairies.
TD economist Pascal Gauthier suggested that poor weather conditions in Central Canada during the first two months of the year likely added to the usual winter weakness, with milder than usual March weather helping to boost residential construction.
“There is not enough in this monthly March data to believe it breaks the previously entrenched downtrend,” Gauthier wrote in a note to clients.
“We expect further weakness in the coming quarters, and will be looking for signs of stabilization in home-building activity towards the end of the year in sync with the rest of the economy.”
With files from The Canadian Press
Canada Mortgage and Housing Corp. reported on Wednesday that housing starts in the city during the first three months of the year numbered 58 — down 51 per cent from the first quarter of 2008.
Single-detached homes accounted for 50 of the 2009 total, as compared with 89 the preceding year. The rest of the starts were units in multi-family buildings.
During the month of March, there were 20 housing starts in the city, with 16 of these single-detached projects. Last March, the tally was 29, with all of these single-detached homes.
Despite this 31 per cent decline in construction starts last month, Red Deer’s residential construction sector experienced a smaller percentage drop-off than any of Alberta’s other large cities.
Calgary’s metropolitan area experienced a 90 per cent year-over-year slide in residential starts in March, while in the Rural Municipality of Wood Buffalo the decrease was 78 per cent, in the Edmonton metropolitan area it was 72 per cent, in Lethbridge it was 63 per cent, in Medicine Hat it was 47 per cent and in Grande Prairie it was 39 per cent.
On a quarterly basis, Red Deer’s decline in residential construction was less than all but one of its urban counterparts. The Calgary metropolitan area experienced an 84 per cent drop, in the Edmonton metropolitan area it was 67 per cent, in the Rural Municipality of Wood Buffalo it was 63 per cent, in Lethbridge it was 60 per cent, in Medicine Hat it was 48 per cent and in Grande Prairie it was 20 per cent.
For Alberta municipalities with 10,000 or more people, housing starts during the first three months of 2009 fell a cumulative 73 per cent.
Nationally, CMHC reported that housing starts were up 13.7 per cent in March as compared with February — which marked a nine-year low.
BMO Capital Markets economist Douglas Porter noted that almost all of the gain was in the volatile multiple unit category, which was up 28.3 per cent while urban single-family starts rose just 1.3 per cent.
“Home-building reports around this time of year can be as much a weather report as an economic report, and March was generally on the mild side,” Porter wrote in a note to clients.
“The level of residential building permits sagged to just 124,000 units in February, suggesting activity is likely to fade further.”
“March’s level of starts is still down a towering 35 per cent from a year ago,” Porter said.
CMHC said urban housing starts increased by 35 per cent in Ontario and by 23.3 per cent in Quebec, but declined by 17.3 per cent in British Columbia, by 7.9 per cent in Atlantic Canada, and by 7.5 per cent in the Prairies.
TD economist Pascal Gauthier suggested that poor weather conditions in Central Canada during the first two months of the year likely added to the usual winter weakness, with milder than usual March weather helping to boost residential construction.
“There is not enough in this monthly March data to believe it breaks the previously entrenched downtrend,” Gauthier wrote in a note to clients.
“We expect further weakness in the coming quarters, and will be looking for signs of stabilization in home-building activity towards the end of the year in sync with the rest of the economy.”
With files from The Canadian Press
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