Consumer Confidence and Real Estate Markets Are Looking Up

Hi All,

Another great article - this time from the Globe and Mail. With lowered prices, motivated sellers and record low interest rates it definitely is a Buyer's market - I am very excited to see optimism returning to the housing market as it really is a great opportunity for those who have been waiting to buy.

All the best,
N

Optimism returning to housing market, RBC survey finds
VIRGINIA GALT
Globe and Mail Update
March 4, 2009 at 4:04 PM EST

Confidence appears to be seeping back into the housing market, with young Canadians
the most optimistic that now is a good time to buy, according to the Royal Bank of Canada's annual homeownership survey.

Thirty-year-old David Morris, who owns a condominium in downtown Vancouver, is
among those actively planning to purchase a home. He's looking to sell his condo and
trade up to a house in Vancouver's trendy Kitsilano or North Shore districts – a move that
would have been out of his reach in the overheated real estate market of recent years.
Falling prices, low interest rates – and the fact that he is getting married at the end of this
year – have factored into Mr. Morris' decision to buy.

“We have made the decision to move forward. It's not a situation where we're going to
force it, but if we can find the right house for the right price, we have made the decision
to get serious about it,” said Mr. Morris, a commercial real estate broker.

“From a buyer's perspective, it's encouraging …Now is a good time to come in and find a
home that you love, that isn't going to break the bank.”

In a survey of 2,026 Canadian consumers, conducted in the second week of January, the
Royal Bank found that 65 per cent of respondents believe it is a buyers' market now.
Of those surveyed, 9 per cent said it is “very likely” they will purchase a home or
condominium in 2009 or 2010, and another 18 per cent rated the prospect of purchasing a
new home as “somewhat” likely.

“Additionally, almost half indicate it makes sense to buy a home now versus waiting until
next year.”

Young adults and renters are most likely to spark an upsurge in home sales, Royal Bank
said in releasing its survey results.

“In the under-35 group, 48 per cent said they plan to buy, which is up sharply from 36 per
cent last year. Renters also appear to be saying they are tired of paying someone else's
mortgage payment, with 38 per cent planning to become homeowners in the next two
years.”

Although this optimism is not reflected in the most recent sales statistics – the volume of
sales in the Toronto area, for instance, was down 47 per cent year-over-year in January –
Royal Bank predicts that lower prices will lure a growing percentage of Canadians back
into the housing market in the next two years.

Toronto real estate agent Geon van der Wyst noted that consumers do not always follow
through on their intentions – although it is encouraging that more Canadians appear to be
thinking about buying homes.

“Intention is the step prior to making an educated decision… and I'm sure a lot of those
people with intentions will move forward with purchases, it's just a matter of finding the
right time,” Mr. van der Wyst said.

Karen Leggett, the Royal Bank's head of home equity financing, said low mortgage rates
“and favourable housing prices are influencing home purchase intentions this year and
may be the reason why more Canadians are poised to purchase over the next two years.”
Ms. Leggett said the poll, conducted for the Royal Bank by Ipsos Reid, found that the
vast majority of Canadians believe that the purchase of a home is a good investment.
“The current economic environment does not appear to have dampened Canadians'
overall confidence in the housing market,” she said.

Mr. van der Wyst said there are good deals to be had, from the buyers' standpoint.
However, he added, many prospective buyers – particularly first-time buyers – are still
uncertain about the best time to plunge into the market.

“We tend to hand-hold these first time-buyers, nervous first-time buyers, especially
around here where they know the prices are starting to dip – and who knows where they
will continue to dip before the recovery starts?”

Mr. van der Wyst said that, especially in the current economic environment, he screens
prospective buyers carefully before taking them to look at properties. He noted that the
banks are also “pretty stringent” in qualifying consumers for mortgages.
“Interest rates are at historic lows and borrowing money is very, very affordable. If you
have steady employment and you have some financial responsibility along with a good
interest rate, now is a really, really good time to purchase a property,” said Mr. van der
Wyst, an agent with Royal LePage.

“At this time, employment stability is very important. It would be really unfortunate to
see someone lose their job just as they were about to close on a property,” he said.
A number of leading Canadian economists have observed that Canada's rising
unemployment rate has eroded consumer confidence, and other recent housing forecasts
have been less upbeat than the Royal Bank survey.

Canada Mortgage and Housing Corp. projects that, in spite of falling prices, the volume
of existing home sales is expected to drop by 14.6 per cent in 2009, and then rise by 9.3
per cent in 2010.

Average home prices are forecast to fall 5.2 per cent to $287,900 in 2009. Next year,
prices are expected to remain flat, according to the federal housing agency's forecast.
Ms. Leggett said Royal Bank is not forecasting “a huge housing rebound, by any stretch,”
but there are reasons for cautious optimism that the market will start to recover later this
year and next year.

Following the overheated market and bidding wars of the past few years, housing is once
again becoming more affordable and there are good buying opportunities for consumers
“who have good solid certitude around their job prospects and have the financial picture
to be able to get into the market,” Ms. Leggett said.

“Buying intentions are one thing. Whether they translate into actual purchases, obviously
time will tell,” she said. “But, anecdotally, we are hearing that there is heightened activity
…and interest in the marketplace overall.”

Canadian Interest Rates at All Time Low

Hi Everyone,

Here's an article that may interest you. Interest rates are at an all time low - an absolutely perfect time to talk to your mortgage broker and get locked in to a great rate.

With any luck, these extreme measures are going to lend a hand getting the Canadian Real Estate markets back on track. Most people do believe we are at the bottom of the market now - meaning, in all honesty, this could be the best time to buy.

All the best,
Neacol

Bank of Canada cuts interest rate to lowest ever

Updated: Tue Mar. 03 2009 11:59:44

CTV.ca News Staff

Bank of Canada governor Mark Carney cut the interest rate Tuesday to 0.5 per cent, the lowest ever, in yet another attempt to stimulate the sluggish economy.

The rate cut, the seventh in the last year, was widely expected by economists.

"Consistent with returning total (consumer price index) inflation to 2 per cent, the target for the overnight rate can be expected to remain at this level or lower at least until there are clear signs that excess supply in the economy is being taken up," Carney said in a statement.

The move comes a day after Statistics Canada released dismal numbers that prove Canada is in a deep recession.

The Statistics Canada report indicated that Canada's economy shrank by 3.4 per cent in the last quarter of 2008.

That is the biggest decline since the recession of 1991 and sparked a significant drop in the markets on Monday. Toronto's S&P/TSX composite index fell 435.51 points, or 5.36 per cent, to 7,687.51, its lowest point since 2003.

Ignatieff asks PM to define position on economy

The precise state of the Canadian economy continues to be a topic of debate in the House of Commons.

On Tuesday afternoon, Liberal Leader Michael Ignatieff asked the prime minister to define exactly what the Canadian economy is going through.

"Canadians deserve a clear message from their prime minister about this economic crisis," Ignatieff said.

"Sometimes he says we're in a recession, sometimes it's a depression, in September it wasn't even going to happen at all. This weekend on CNN, the prime minister called it a 'cyclical downturn, but nothing that requires government intervention.'"

In response, Prime Minister Stephen Harper said his quotes regarding government intervention had been taken out of context by the Liberal leader.

"If the honourable member will look closely at the transcript of that interview, he will see that I was speaking specifically of the mortgage sector," Harper said.

When pressed by Ignatieff to define the challenges facing the economy as a recession, depression or cyclical downturn, the prime minister said "the economic plan of the minister of finance has spoken very clearly about the government's views on this and our action plan to deal with it."

Rate cut impact may take time

While rate cuts are designed to have a stimulative effect on the economy, most experts believe the cut will have a minimal impact.

The central bank has cut its rate from 4.5 per cent 15 months ago to 0.5 per cent, to little effect.

Peter Drake of Fidelity Investments said after the announcement that it could take anywhere from 12 to 18 months for interest rate cuts to take effect, which means today's announcement won't provide immediate relief.

Drake said that a cut to the main interest rate will hopefully ripple through the spectrum of interest rates and therefore stimulate the economy.

"The idea is that it will influence other rates, the rates at which banks lend to people and to commercial customers and indeed to each other," Drake said during an interview on CTV Newsnet.

After Carney's announcement, Canada's major banks -- Royal Bank, Bank of Montreal and CIBC -- said they would cut their prime rates in step with the central bank.

In his statement, Carney also seemed to back away from his January economic outlook report, which suggested that Canada's economy would begin to recover in late 2009.

He had predicted that the economy would start growing by an annualized two per cent in the third quarter of 2009 and record an average growth of 3.8 per cent in 2010.

On Tuesday, Carney acknowledged that economies around the world are performing more poorly than anticipated, and said the Canadian economy will likely decline more sharply in early 2009 than previously predicted.

Carney now suggests the recession could last until 2010.

"The effects of the recent aggressive monetary and fiscal policy actions in Canada and other major economies will begin to be felt in the second half of this year and will build through 2010," Carney said. "Once the global financial system stabilizes and global growth recovers, the underlying strength of the Canadian economy and financial sector should ensure a more rapid recovery in Canada than in most other industrialized economies."

Carney also said it is possible that the Bank may provide additional stimulus, if necessary, by purchasing credit and other assets.

However, the Bank will not offer details on such plans until its April Monetary Policy Report.

With files from The Canadian Press