Bank of Canada December Update
As you know, variable rate mortgages, lines of credit and/or student loans are all based on the prime rate and here is an update from me on the recent Bank of Canada announcement on changes to their Overnight Lending Rate which in most cases impacts your Prime rate.At 10:00 am EST, Wednesday December 4th, 2013 the Bank of Canadaagain did what we expected them to do... they continued to maintain their overnight rate.What this means to you is that once again the prime rate on your mortgage, line of creditor student loan willnotchange and remains at 3.00%. This is fabulous news but don't forget to make themostof the low payments you still have, as the ratewill increase in the future. Theholiday season is upon us which often means ourpersonal spendingon gifts and celebrations will potentiallyblow our budgetsas we spend more than we maybe should... let me help you get back on track with a review of your financial situationwhichmight be a savings plan,purchasing anincome property or debtconsolidation topay off high interest loans or credit cards. If you would like to chat about some budgeting and saving strategies - let me know as I would be happy to assist.Here is an excerpt from the announcement from the Bank of Canada and what they had to say about their decision:"The global economy is expanding at a modest rate, as the Bank expected.Although growth in several emerging markets has continued to ease, growth in the US during the 3rd quarter of 2013 was stronger than forcasted.Even if some of this pickup was due to temporary factors, the data is consistent with the Bank's view of gathering momentum in the US economy. In Canada,the housing sector has been stronger than expected but is consistent with updated demographic data and a pulling forward of home purchases in light of favourable financing conditions. The Bank continues to expect a soft landing in the housing market. Non-commodity exports continue to disappoint and the price of oil produced in Canada has eased further.Business investment spending is up from previous low levels, but is still recovering more slowly than anticipated. On balance, the Bank sees no reason to adjust its expectation of a gradual return to full production capacity around the end of 2015"Based on this news and continued slower level of economic activity in Canada, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur in late 2014 or even not until 2015! Remember that any increase to the prime rate since 1992 has only been by 0.25% at anyONE time, so you won't see a large significant increase all at once.Fixed rates did go up but then have come back down since. Right now they are sitting at around 3.39% to 3.59% for a five year fixed term.Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I'd recommend that you remain with your current variable rate product as the interest is lower than a fixed term rate right now. However if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is January 22, 2014.
Canadian home sales edge down from December to January
According to statistics released today by The Canadian Real Estate Association (CREA), national home sales were down slightly in January 2017 on a month-over-month basis.
- National home sales declined 1.3% from December 2016 to January 2017
- Actual (not seasonally adjusted) activity in January was up 1.9% from a year earlier
- The number of newly listed homes dropped 6.7% from December 2016 to January 2017
- The MLSHome Price Index (HPI) in January was up 15.0% year-over-year (y-o-y)
- The national average sale price was little changed (+0.2%) y-o-y in January
Sales activity was down from the previous month in about half of all local markets, led by three of Canadas largest urban centres: the Greater Toronto Area (GTA), Greater Vancouver, and Montreal.
Actual (not seasonally adjusted) sales activity was up 1.9% compared to the same month last year. While sales were up from year-ago levels in about two-thirds of all local housing markets including in the GTA, Calgary, Edmonton, London and St Thomas, and Montreal, they were down significantly in the Lower Mainland of British Columbia.
The number of newly listed homes dropped 6.7% in January 2017, the second consecutive monthly decline. New listings were down in about two-thirds of all local markets, led by the GTA and environs across Vancouver Island.
With the monthly decline in new listings surpassing the decline in sales, the national sales-to-new listings ratio jumped to 67.7% in January compared to 64.0% in December and 60.2% in November.
The ratio was above 60% in about half of all local housing markets in January, the vast majority of which are located in British Columbia, in and around the GTA and across southwestern Ontario. A monthly decline in newly listed homes further tightened housing markets that were already in sellers market territory.
There were 4.6 months of inventory on a national basis at the end of January 2017 unchanged from December 2016 and a six-year low for the measure.
The imbalance between limited housing supply and robust demand in Ontarios Greater Golden Horseshoe region is without precedent (the region includes the GTA, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country). The number of months of inventory in January 2017 stood at or below one month in the GTA, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, Cambridge, Brantford and Guelph.
In the Fraser Valley and Greater Vancouver, prices have receded from their peaks posted in August 2016. That said, home prices in these regions nonetheless remain well above year-ago levels (+24.9% and +15.6% respectively).
Meanwhile, benchmark prices continue to climb in Victoria and elsewhere on Vancouver Island together with Greater Toronto, Oakville-Milton and Guelph. Year-over-year price gains in these five markets ranged from about 18% to 26% in January.
By comparison, home prices were down 2.9% y-o-y in Calgary and by 1.0% y-o-y in Saskatoon. Prices in these two markets now stand 5.9% and 4.3% below their respective peaks reached in 2015.
Home prices were up modestly from year-ago levels in Regina (+3.8%), Ottawa (+3.7%) and Greater Montreal (+3.1%). In Greater Moncton, home prices for the market overall held steady (-0.2%), reflecting an increase in townhouse row units prices (5.8%) that was offset by a decline in prices for one-storey single family homes (-1.0%).
The actual (not seasonally adjusted) national average price for homes sold in January 2017 was $470,253, almost unchanged (+0.2%) from where it stood one year earlier.
The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canadas tightest, most active and expensive housing markets.
That said, Greater Vancouvers share of national sales activity has diminished considerably over the past year, giving it less upward influence on the national average price. The average price is reduced by almost $120,000 to $351,998 if Greater Vancouver and Greater Toronto sales are excluded from calculations.
Canadian Housing Starts Trend Increased in January
The trend measure of housing starts in Canada was 199,834 units in January compared to 197,881 in December, according to Canada Mortgage and Housing Corporation (CMHC). The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of the state of Canadas housing market. In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.
The standalone monthly SAAR for all areas in Canada was 207,408 units in January, up from 206,305 units in December. The SAAR of urban starts increased by 1.0per cent in January to 189,688 units. Multiple urban starts increased by 4.2per cent to 125,886 units in January and single-detached urban starts decreased by 4.6 per cent, to 63,802 units.
In January, the seasonally adjusted annual rate of urban starts increased in Ontario and Atlantic Canada, but decreased in British Columbia, the Prairies and Quebec.
Rural starts were estimated at a seasonally adjusted annual rate of 17,720 units.