Benjamin Tal is a smart cat - check it out:

CIBC Deputy Chief Economist Benjamin Tal sounds like he’s getting tired of the comparisons linking the Canadian housing market to a U.S. style crash.

Canada is just not going to have a severe crash, he says in a report dubbed “Should We Worry About a U.S. Style Housing Meltdown? You could lose a “night’s sleep” if you glance at charts comparing U.S. household debt and prices before their correction with today’s Canadian housing market but Mr. Tal says a closer look reveals vast differences.

“To be sure houses prices in Canada will probably fall in the coming year or two but any comparison to the American market of 2006 reflects a deep misunderstanding of the credit landscapes of the pre-crash environment in the U.S. and today’s Canadian market,” says the economist.

He lays out a number of myths used to compare the two markets, listing everything from the difference in the quality of debt to the false assumption that most Americans had long-term 30-year mortgages before the crash.

“I just think the comparisons are irrelevant,” says Mr. Tal. “There are two different questions. Are we slowing? Yes, we are slowing. But not every slowdown should be a U.S. type crash. Just because it happened there doesn’t mean it happens here.”

The biggest facts are these:

1. Adjusted Rate Mortgages Dont Exist in Canada

While the 30-year fixed rate mortgage has long been the U.S. standard, 80% of new mortgages in the U.S. went for an adjusted rate mortgage leading up to the crash. Those mortgages had teaser rates for two to three years that were almost 4.25 percentage points below prevailing rates.

“[That teaser] expires and overnight you’ve got two years worth of [Federal Reserve] increases in one day, that’s a shock,” says Mr. Tal.

2. Low percentage of Homeowners in Mortgage Arrears

He says the Canadian market has room for a soft landing which is what Australia experienced recently. “They demonstrated there is such a thing as a soft landing, interest rates went up and prices went down by 7% to 8%.”

So why are we so obsessed with comparing ourselves to the U.S.? Mr. Tal says it’s normal. “It makes sense because it happened in the U.S. and everybody was talking about it and we are going through a significant increase in house prices. I can understand why people do it but it should be based on fact.”

read the Full Article: http://natpo.st/YoEl2C

Best Regards,

Denis Hrstic
AWESOME REALTOR® http://www.MyHomeAgent.ca

High-end U.S. retailer Nordstrom is coming to Toronto, Ottawa, Calgary and Vancouver starting in the fall of 2014.

The announcement this morning in Toronto sees Nordstrom join a fast-growing field of foreign chains vying for coveted Canadian consumer dollars.

Officials from the Seattle-based department store chain and Cadillac Fairview say Nordstrom will be moving into space vacated by Sears and then renovated at Pacific Centre in Vancouver, Calgary’s Chinook Centre, and Rideau Centre in Ottawa.

A new store will be built at Toronto’s Sherway Gardens. The tentative timeline for the stores opening is; fall of 2014 in Calgary; spring 2015 in Ottawa and Vancouver; and fall 2016 in Toronto.

Great market news as the US retailer wants a piece of  the Canadian Market.

Read the full story here: http://natpo.st/PwcYkV

Best Regards,

Denis Hrstic
AWESOME REALTOR® http://www.MyHomeAgent.ca

A new outlook from the Royal Bank predicts Canada’s economy will skirt the global economic turbulence and rebound strongly from a slow start to the year.

The RBC’s new quarterly forecast anticipates the economy will rebound to 3.1% growth during this quarter, which ends in June, and record a 2.6% gross domestic product gain overall for both 2012 and 2013.

The optimistic view from economists at Canada’s largest bank is somewhat surprising, given the stream of negative news emanating from Europe, China and the United States.

Last week, the Bank of Canada noted that “global economic growth has weakened,” and that first quarter growth of 1.9 was disappointing.

On Friday, Statistics Canada confirmed that the strong job gains seen in March and April had flattened in May.

Meanwhile, Europe has teetered from crisis to crisis, from the threat of a Greek default and exit from the eurozone, to insolvency in Spain’s banking sector. The eurozone has announced a $125 billion bailout of its banks, but questions remain about the package.

In their report being released Tuesday morning, RBC economists attribute the soft first quarter to temporary factors — a mild winter that reduced demand on utilities, and temporary shutdowns in both energy and mining production facilities.

They believe the economy will catch up in the second quarter, noting the outsized 140,000 employment increase recorded in March and April.

More fundamental to the optimistic outlook, RBC believes that policy-makers will meet the challenge of averting disaster in Europe.

Under that assumption, the bank believes the United States will continue to bounce along with moderate growth and Canada to benefit from strong fundamentals.

The 2.6% forecast for this year is identical to RBC’s previous call in March, but about half a point below the consensus.

“We’re relatively bullish,” agreed Craig Wright, RBC’s chief economist. “On balance, conditions for growth are positive, supported by a continuation of a low interest rate environment and a Canadian financial sector that is healthy and ready to provide credit.”

Wright said a lot of the recent bad news has dampened confidence, but has not changed the overall outlook.

“It’s still basically a risk story,” he said. “In a sense it’s more of the same, we get dragged to the edge of the cliff and then get dragged back.”

The other risks the bank says must be averted are the possibility of a harder than expected landing for China, and the danger that political gridlock in the U.S. will prevent a compromise to extend stimulative fiscal measures beyond this year.

Dodging the pitfalls would enable the U.S. recovery to continue, and for Canadians to benefit, particularly exporters in the auto and industrial production sectors.

“In 2012 and 2013, we expect that a strengthening U.S. economy, a soft landing in China and an eventual return to growth in the eurozone will support the fastest pace of Canadian export growth over a two-year period since 2000,” Wright said.

Given the positive growth, Wright said he expects the Bank of Canada will start raising interest rates later this year.

The report cautions that growth will not be evenly spread. The RBC economists say western Canada will continue to dominate in growth this year, led by Alberta, but with Saskatchewan and Manitoba close behind. Ontario and B.C. are expected to mirror the national average in growth.

RBC also sees the unemployment rate in Canada remaining just above 7% until the middle of next year, which implies modest job creation going forward.

From our friends at The Finanical Post

Denis Hrstic
AWESOME REALTOR® http://www.MyHomeAgent.ca

Looks like the recent data showing a drop in the national inflation rate will NOT affect the interest rate rise in the near term:

A drop in Canada’s year-on-year inflation rate to an 18-month low in March will not delay interest rate hikes by the Bank of Canada, which is paying closer attention to economic growth, analysts said on Friday.

Statistics Canada said the annual inflation rate fell to 1.9% in March from 2.6% in February, the lowest level since the 1.9% recorded in September 2010. Analysts had forecast a rate of 2.0%.

The Bank of Canada, which targets a 2.0% inflation rate, this week made it clear it might have to start raising rates from near-historical lows because of reduced slack in the economy and increased underlying inflationary pressures.

The central bank has kept rates unchanged since September 2010.

“We now see the bank firmly in a data dependent mode as it considers when and how much of the considerable monetary stimulus currently in place will need to be withdrawn,” said TD Securities strategist David Tulk. “There is nothing in this report in our view that will influence the outlook for monetary policy.”

Story from the Financial Post: http://natpo.st/I6lNMr

Denis Hrstic
AWESOME REALTOR® http://www.MyHomeAgent.ca

Today's summary of the Bank of Canada decision:

Interest rates stay at 1% Tuesday.

However, Mr. Carney’s comments send the clearest and most hawkish signal yet that rates will be moving higher — but precisely when remains to be seen.

“In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2% inflation target over the medium term,” Mr. Carney said. “The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.”

Here’s a look at the factors Mr. Carney cites as a basis for this conclusion:

The global outlook is on the upswing

Since the bank released its January Monetary Policy Report, there have been signs of improvement around the world. Europe is now expected to “emerge slowly from recession” in the second half of the year, although the risks remain high. The U.S. is benefiting from somewhat improved labour markets, financial conditions and confidence, as well as fiscal consolidation and household deleveraging. Meanwhile, emerging market economies will “moderate to a still-robust” pace supported by an easing of macroeconomic policies.

Canada’s economy firmer than expected; 2012 growth boosted

The bank has hiked its GDP forecast for 2012 higher, to 2.4% from 2.0%. “The external headwinds facing Canada have abated somewhat, with the U.S. recovery more resilient and financial conditions more supportive than previously anticipated,” the bank said. “As a result, business and household confidence are improving faster than forecast in January.” Mr. Carney expects domestic demand and consumption to remain the primary driver of the economy, again warning that household debt burdens are still the biggest domestic risk. Business investment will remain robust, but government spending contributions will be modest.

But 2013 growth will slow

On the other hand the bank has also trimmed its forecast for 2013 growth to 2.4% from 2.8%, returning to full capacity in the first half of that year, while maintaining a 2.2% outlook for 2014. “The BoC is signalling that it does not expect growth to materially outstrip potential growth, or the speed limit of the economy,” Mr. Holt said. “While spare capacity may close in 2013H1 it won’t trip materially into excess demand that would spark deeper inflation concerns. That’s why the guidance here is toward ‘modest’ rate hikes.”

Speaking of inflation

Mr. Carney also characterized inflation as “somewhat firmer than anticipated” in January. Total CPI inflation is expected, along with core inflation, to be around 2% for the foreseeable future. This fits with the more hawkish tone, as Mr. Carney had previously forecast inflation to ease to 1.7% for both headline and core by the fourth quarter, Mr. Porter said. “The bank is clearly uncomfortable with keeping interest rates below inflation when household debt continues to grind higher.”

The loonie will be a factor

The loonie, meanwhile, is spiking higher, up a penny and rising. Mr. Holt suspects that fiscal tightening has not been priced into the dollar and its movements will be a limiting factor on the BoC’s policy flexibility.

Commodities are still elevated

Improving global economic prospects, supply disruptions and geopolitical risk have also kept commodities prices higher, particularly oil. However, international oil is now “considerably higher than that received by Canadian producers” — a possible reference to the supply bottleneck at Cushing, Okla. that has contributed to the price gap between North American crude and London Brent. “If sustained, these oil price developments could dampen the improvement in economic momentum.” As well, exports will remain constrained due to the persistent strength of the dollar.

Read the Full article: http://natpo.st/IumE9l

Denis Hrstic
AWESOME REALTOR® http://www.MyHomeAgent.ca

“People are being heavily compelled to lock in,” says Doug Porter, deputy chief economist with the Bank of Montreal, in talking about the negligible spread between short and long-term money. Will Dunning, an economist CAAMP, said his group was not surveying consumers the last time short-term rates climbed like this so he can’t be sure what the reaction will be this time around.

While Benjamin Tal, deputy chief economist with CIBC World Markets, doesn’t think variable rates premiums will rise above prime, the drop in the discount we’ve seen in the last few months could impact on the housing market.

OTTAWA — Home prices rose during the third quarter of 2011, but the raw numbers may not be telling the whole story of the Canadian housing market, a new survey says.

The average price of a detached bungalow was $349,974, a standard two-storey home was $388,218 and a standard condominium was $239,300, according to the survey.

Royal LePage said that the rise in price defied expectations and suggested that record-low interest rates and a fairly stable Canadian economy have bolstered consumer confidence.

Vancouver had the highest priced homes in the country during the third quarter of 2011 and was the only city in the survey where the average bungalow or two-storey home cost more than $1 million.

U.S. giant retailer Big Lots has entered an agreement to buy the 92 Liquidation World stores in Canada and is setting its sights on opening numerous new stores under its corporate banner in the near future.

Recently, Liquidation World Inc., which began with its first store in Calgary in 1986, announced it had entered into a definitive acquisition agreement with Big Lots, the largest closeout retailer in the U.S. The offer is expected to close by July 31 subject to and shortly after receipt of shareholder and court approvals.