31 Mar

Experts best at brokering mortgage


Posted by: Mike Hattim

Cheryl Hutton and Aaron Coates always thought getting a mortgage would be a challenge. But within 18 days of visiting a mortgage broker, they were able to close a deal on a new townhouse in Calgary without a hitch.

Now in their early thirties, both have careers in the theatre, something Ms. Hutton says has been a bit of a sticking point with banks. “In our industry we never fit the paperwork guidelines ‘for the banks.’ For some reason, people don’t think we pay our bills.”

Although it was their first home purchase, Ms. Hutton says it was surprising how easy the whole process was once they had someone who could walk them through it. “He sat us down, told us what our options were, showed us that it was possible and explained all the steps we needed to take. If it wasn’t for him, we may not have made the leap.”

Sorting through a mortgage process and negotiating rates can be overwhelming for first-time and seasoned home buyers alike. That’s why people such as Ms. Hutton and Mr. Coates turn to brokers to do the legwork for them.

Yet mortgage brokers will tell you that a good portion of home buyers out there don’t really understand what they do. “Part of the challenge we have in our world is that people aren’t really sure what a mortgage broker is,” says Gary Siegle, regional manager for Invis Inc., a mortgage brokerage firm in Calgary.

Brokers should not be confused with “rovers,” mortgage specialists attached to a specific financial institution who visit customers outside of banking hours, Mr. Siegle explains.

“They only deal with that bank’s product. A broker, however, is an intermediary whose job is to make a match between a lender and a borrower. We represent the individual, not the bank.”

About 30% of mortgages in Canada are done through a broker, according to Perry Quinton, vice-president, marketing, for Investor Education Fund, a Toronto-based non-profit financial information service.

“The reason more people don’t know about them is because the banks are so visible. It’s easy to gravitate to them when you have your savings accounts, credit cards and investments there already,” Ms. Quinton says.

Going for the comfort factor could cost you however, she adds. “A broker has access to different lenders including banks, and can shop rates and features. A half per-cent may not sound like much but that could make a difference of about $20,000 for a $250,000 mortgage amortized over 25 years. Any little bit helps.”

Mr. Siegle confirms that shopping around can deliver significant savings.

“Let’s take today’s average posted rate of 5.44%, and you get a point off that at your bank. So you think you just got a really great deal. But the vast majority of rates we deal with as brokers would be another 30 basis points lower -around 4.14%. And if you look at preferred deals that don’t offer features such as prepayment privileges, it can get as low as 3.89%. That’s another 25 basis points below what’s generally available.”

The reason for that is simple, he says. “We offer wholesale rates, banks offer retail.”

For anyone considering a broker, Ms. Quinton advises people to do a bit of groundwork first if they have the time.

“It helps to educate yourself about options and what you can afford. Look at all your living expenses, including student loans and credit card debt. Chances are you are understating those.”

Another thing to look into is the different types of available mortgages and features, including interest rates, payment frequency, amortization, cash-back programs and the ability to make lump sum payments.

“Knowing these things before you go in can save you a lot of money,” she adds.

Any mortgage broker you choose should always meet the right licensing and education requirements, so be sure to check their registration.

If you’re not completely prepared, however, that shouldn’t be a concern when working with a good mortgage broker, Mr. Siegle says.

“After all, mortgages are pretty much all we do. So even if you come in cold, good brokers will walk you through the process and ask all sorts of questions,” Mr. Siegle notes.

“You just need to be prepared to answer them openly and honestly so they can get you the best deal possible.”

31 Mar

Mortgage literacy crucial for first-time buyers


Posted by: Mike Hattim

Two years ago, when Michelle Gompf and Jesse Bagelman started thinking about buying a house, they assumed it would be impossible to qualify for a mortgage because of some heavy debt and Mr. Bagelman’s status as a self-employed stone mason.

Rather than give up, Ms. Gompf -now Gompf Bagelman -launched a campaign. “I made up some little posters with a target date called Operation Jesse & Michelle Buy a House. I put them up where we couldn’t miss them -on our fridge, on the bedroom dresser, our laundry, office. I had them everywhere. I just wanted a house to be top of mind. We’re going to figure it out.”

A friend in real estate suggested she speak with a mortgage broker to see how close she was to qualifying for a first-time mortgage. “The broker really worked his magic, and next thing you know we were approved with a monthly payment that was less than the rent we were paying for our basement apartment,” she says.

She knew very little about the mortgage process initially, which is typical for first-time buyers, says mortgage broker Sandra Grywul.

“For the most part, the first-time homebuyer doesn’t know anything about financing a home,” says Ms. Grywul, owner of Always A Mortgage in Toronto.

“It’s funny, because buyers are thinking so much about what neighbourhood they want to live in, how many bedrooms, bathrooms, square footage. But they’re not thinking about what kind of mortgage they want to enter into.”

And buyers shopping for a mortgage have a lot of choices to sift through. Fixed term or open? Variable or fixed rate? Should they use their RRSPs for a down payment?

But Ms. Grywul says those decisions should be made after the buyers have tackled the most important element, which is to understand how much mortgage they can actually afford.

“The bank will look at your credit report but it won’t know if you like to spend $300 for a haircut or eat in an expensive restaurant each night.

“New homeowners go in, they get the mortgage that the bank says they can qualify for, and after two or three months into the house they’re calling around to see if they can do a consolidation or a refinance.

“The joy of their home has completely dissipated because they didn’t take into account all their monthly expenses when figuring out how much they could afford per month on their mortgage.

“I see this all the time. So as part of getting pre-approved for a mortgage, buyers need to be very honest with themselves about how much money they need to live happily,” Ms. Grywul says.

Toronto real estate agent Cameron Weir of Royal LePage, Johnston and Daniel has worked with a number of first-time home buyers.

He says it’s exciting to watch people go from being renters to owners. He says mortgage pre-approval is vital because it allows the buyer to be nimble in an active market.

“A lot of times today we find that there’s more than one offer in on a property. And if you don’t have everything set with a pre-approval, when your perfect property comes up you can’t close the deal without arranging financing first,” Mr. Weir says.

“While you’re working that out, a competitor who has already done his homework might make a firm offer at the same price and unfortunately you’ll probably lose that property.”

Mr. Weir describes the first-time buyer as “very excited, very nervous, lots of questions. It’s the biggest purchase they’re going to make, after all. But along with that, they’re also pretty cautious.”

Ms. Gompf Bagelman’s fear of high lawyer fees made her cautious. She was also concerned about having a stable and predictable monthly mortgage payment, so she chose a five-year mortgage and a fixed interest rate on the house she and her husband took possession of in February.

“With a variable rate I worried that I don’t have a lot of experience with these interest rates and anything could happen,” Ms. Gompf Bagelman says. “But the five-year term gives me security right now. So I have the current safety net and hope for something better when the five years are up.”

She also wondered if the recent mortgage crisis in the United States would complicate her home financing. And while that financial mess did foster changes in some Canadian mortgage regulations that take effect in April, Ms. Grywul says they don’t have any impact on the first-time buyer.

Instead, they focus on the refinancing business and on those who purchase second homes or investment property.

In considering all the details and requirements of financing a home, Mr. Weir says, “the most important thing is to find the right place, at the right price at the right time.”

30 Mar

Canadians’ net worth hits record level


Posted by: Mike Hattim

Household debt as measured against disposable income nudged lower from a record high in late 2010, data suggested Monday, a sign that Canadians are beginning to curb their borrowing behaviour.

Still, analysts warned debt levels remain at such elevated levels that they would squeeze economic growth for years to come.

Statistics Canada reported that, as of the 2010 fourth quarter, household debt as a percentage of after-tax income dropped to 148.7% from 148.8%, as a 1.8% gain in disposable income outstripped growth in mortgages and other consumer loans.

Household liabilities in the quarter expanded 6.5% from year-ago levels, the slowest annualized growth rate experienced since the fourth quarter of 2002. Households cooled borrowing on all major types of credit, with growth in non-mortgage loans — at 5.8% year-over-year — representing the slowest advance since the mid-1990s.

Meanwhile, the data agency said the market value of households’ net worth, which takes into account real estate, stock portfolios and other cash on hand, increased 2.2% in the October-to-December period to $6.2-trillion, following a 3% advance in the third quarter. A 9% fourth-quarter gain in the benchmark Toronto stock index helped power the advance in net worth, Statistics Canada said.

As a result, Canadians’ net worth hit a record in the fourth quarter, 4.1% above the pre-recession peak set in the second quarter of 2008, and nearly 15% above the trough recorded at the height of the global credit crisis in early 2009.

Nevertheless, most eyes were on updated household debt figures, given the repeated warnings issued by Bank of Canada governor Mark Carney. The concerns prompted the federal government to introduce, for the third time in as many years, tougher rules regulating mortgage-lending standards in an effort to curb how much debt Canadians were willing to take on.

To that end, the amount of household debt on a per-capita basis climbed in the fourth quarter, to $44,500 from $43,900, although at a pace that trailed the gain in net worth.

Carlos Leitao, chief economist at Laurentian Bank Securities, said elevated household debt levels are likely to become a “legacy” of the recession, in which central banks lowered their benchmark interest rates to near zero.

The debt “will constitute a break, or weight, on economic growth for the years to come,” he said. “This is not going to go away anytime soon.”

Since the trough of the recession, household credit grew at roughly twice as fast as personal disposable income, which helped Canada avoid deep losses from the recession. Mr. Carney’s repeated warnings are, in large part, an attempt to make Canadians aware of their debt levels in the event interest rates start climbing again. Higher rates will ultimately force households to set aside additional income to pay off monthly financing costs, and thereby reducing income available to spend on consumer goods.

Others, however, had a more upbeat view of Monday’s data. Economists at Royal Bank of Canada suggested the “slight” moderation in the pace of household debt growth and an improvement in household leverage ratios “will go some way to ease market concerns over [consumer] debt loads.”

29 Mar

Post-crisis, bank risk on rise again


Posted by: Mike Hattim

A term as emblematic of the heady pre-financial crisis days as “covenant-light” is not something one expects to hear these days from a high-ranking official at Canada’s top financial watchdog.

But that’s exactly the term used on Sunday by Ted Price, assistant superintendent at the Office of the Superintendent of Financial Institutions, to justify a push for more action by regulators even as a recovery appears in flight.

Covenant-light, which refers to lending with few strings attached and therefore more risk, is one that has been mumbled darkly in recent private gatherings of business heavyweights. In these circumstances, executives will acknowledge that less than three years after the worst financial meltdown since the Great Depression, risk has been repriced yet again — and back to the levels before the crisis set in.

In some cases, they say, the strategy is being employed to push off the inevitable — a non-payment of debt — while ensuring that minimum monthly payments continue to trickle in for as long as possible.

Peter Nerby, a senior vice-president at Moody’s who is responsible for the ratings of Canadian financial institutions, said he is worried about the apparent relaxation of loan agreements and the appearance of increased risk-taking at some North American financial institutions.

“It absolutely is making a comeback,” said Mr. Nerby, who is based in New York, adding it is “appropriate” for the regulator to draw attention to such behaviour.

While Mr. Nerby said it would be an “extreme case” where covenants are so light that a default is virtually impossible to be triggered, even anecdotes of such cases are a chilling reminder of an infamous pre-crisis statement by Citigroup chief executive Chuck Prince. In 2007, just before the liquidity dried up and forced markets around the world into turmoil, Mr. Price said his job as head of one of the world’s biggest financial institutions was to continue to dance as long as the music continued to play.

In a speech delivered Sunday at the Latin America Economic Forum in Calgary, OSFI’s Mr. Price likened the phenomenon of increasing competition, diminishing returns and increased risk appetite to a replay of a bad movie. And he urged more regulatory intervention because, he said, the unhappy ending will not miraculously change without some purposeful editing.

The repeating cycle has brought back other pre-crisis instruments such as structured derivatives, this time based on volatile commodities, he said.

“If we want a better outcome, supervisors and business leaders had better do something different this time around,” Mr. Price warned.

He did not restrict his warnings to the behaviour of bankers and their regulatory supervisors. Indeed, his comments extended into the boardrooms of financial institutions.

“Boards need to ensure that effective risk management is truly part of their business culture,” Mr. Price said. “Businesses that take the lead in improving their risk management systems will be better prepared for the next phase in the cycle, when those around them are acting out of fear.”

OSFI officials on Monday declined to elaborate on Mr. Price’s comments.

Banking analysts said it is difficult to envision what specific regulatory interventions could be put in place to control the behaviour Mr. Price highlights.

“As Mr. Price suggests, the vicissitudes of risk appetite are very difficult to contain – being tied, as they are, to human nature,” said Peter Routledge, who tracks Canada’s banks at National Bank Financial. Among the challenges for regulators, he said, will be to pinpoint the primary sources of the increased risk appetite.

“Given the much intensified scrutiny of, and restrictions on, regulated financial institutions, one might be more likely to find excessive risk appetites outside of regulated financial institutions,” Mr. Routledge said. “That is not to say regulators should decrease their scrutiny of the regulated sector, but that they may have to increase their scrutiny of sectors or players not presently under the regulatory umbrella.”

28 Mar

TD Canada Trust Mortgages….Hand-cuffs Included


Posted by: Mike Hattim

TD Canada Trust is registering all mortgages as collateral charges.

What does this mean for the consumer?  Well, there is some good but mainly it’s bad..

  • a collateral mortgage is normally registered for floating or revolving debt such as a secured line of credit.  It allows for the balance to float up or down.
  • TD will register a collateral charge for 125% of the loan amount… this will allow the client to come back at a later date and apply to increase their mortgage if needed….
  • in theory, it sounds great…no legal fees required in the future if you need to refinance… and easy approval…


  • a COLLATERAL MORTGAGE is NOT really portable…meaning you cannot transfer to another institution…that’s because no other Bank or Lender is accepting collateral mortgages for transfer… including TD…you will lose some leverage to negotiate the rate when your mortgage matures…
  • and if you wanted to increase your mortgage in the future, you would need to reapply for approval…let’s suppose you don’t qualify in the future..not because your situation changed but because the Bank’s lending policy changes…this happens regularly….you would now have to seek out an entirely  new 1st mortgage as no other lender would register a 2nd mortgage in behind a collateral first mortgage (at least none that I am aware of)…  that could mean penalties, definitely legal fees and other costs….
  • It’s obvious that a big reason TD would be doing this is to improve mortgage retention.. this makes it less appealing to leave TD because of the costs….
  • BOTTOM LINE…this type of mortgage limits your options..it doesn’t expand them.. you MAY save on legal fees..but that’s not a big enough reason to go with this product..

My advise to anyone looking at a TD mortgage is to be careful…make sure you understand all the terms, conditions, the differences and the limitations…you be the judge… is this a good thing for the client or is it a good thing for the Bank??  Will other Banks follow?  Some might say this is like putting handcuffs on the client… I tend to agree…

28 Mar

Businesses make Facebook a marketing network


Posted by: Mike Hattim

People often wonder how, exactly, Facebook makes so much money, enough to make founder Mark Zuckerberg one of the richest people in the world.

After all, it’s free for its nearly 630 million members to use and most would say it isn’t overly littered with ads.

So why is the social networking site supposedly worth about as much as McDonald’s or Disney, at least according to recent valuations as high as $75 billion US?

There’s one key stat that helps explain it all. Although many consider Facebook a place where friends and family share news and photos, it’s increasingly a place where companies share product pitches with willing, receptive audiences.

Every day, an average of about 15 million connections are made between users “friending” each other. Meanwhile, about 50 million connections are made between businesses and users, who have no qualms announcing they’re a “fan” of company X.

So does that mean Facebook users are cool with corporate messages infiltrating newsfeeds, and are they willing to share ads with friends?

Absolutely, says Facebook Canada head Jordan Banks.

“Two years ago, you’d hear brands talking about testing Facebook, seeing how it works; they’d dip their toe in the water. And last year was all about hearing, ‘We don’t need to test anymore, we know it works, now we need to figure out how to make it a meaningful piece of everything we do,’ ” Banks said in a recent interview.

Considering the ubiquitousness of Tim Hortons outlets, it should come as no surprise the chain is one of the most popular brands on Facebook in Canada, with more than 1.4 million fans. About one in 12 of Canada’s 17 million-plus Facebook users are linked to Timmies.

Tim Hortons created its Facebook profile in 2009 and has since started buying ads — which Facebook euphemistically calls “engagement units” — and is growing its online presence, said David Morelli, director of public affairs for the chain.

Their budget for Facebook ads is conservative and Tim Hortons is still trying to figure out their effectiveness against other types of marketing, he added.

“We’re learning and trying to determine what are the right metrics and what are the right spends in those areas … do we see a bump in business? We’re testing the waters with that,” Morelli said.

“But one of the things we found was, unlike traditional ways we’ve reached out to our customers, we’re not talking at them, we’re talking with them on Facebook. So it really gives us a way to engage with our friends and customers in a different way.”

Encouraging users to post about loving Tim Hortons’ coffee results in a special kind of advertising that money can’t buy, Banks said.

“You no longer need Oprah Winfrey to take your product and name it one of her favourite things on her show, you no longer need Ashton Kutcher to tweet to his 6.5 million followers that this is a great product. Having way more influence than either of those in today’s day and age is your friends, your family, your colleagues and people you care about, that are most like you.”

Plenty of those users didn’t respond well to an announcement in January about so-called Sponsored Stories, a type of ad that co-opts user content for marketing campaigns.

“If you don’t want your actions being boosted then you can go to your preferences and just opt out,” Banks said in defending the feature.

“Ultimately, we want you to control 100 per cent of the experience you’re having: what you’re sharing, when you’re sharing it and with whom you’re sharing it with.”

As Facebook grows into more of a corporate platform, some might predict a backlash. Users certainly rebelled against privacy encroachments.

A search of publicly accessible Facebook posts does reveal a virtually endless list of complaints about ads.

“Can anyone tell me what the hell is the problem with Facebook? Today, it has all these ads scattered all over the place — and I must say it looks TERRIBLE!” posted Marcee Lee Winthrop recently.

“In fact, it looks juvenile! Facebook must be in need of money — this is probably greed-based! I hate it!”

“Is it just me, or are there tons more advertising on FB?” wrote Janice Behler Chapman. “I hate it. Reminds me of reading a magazine. More ads than articles. Is there any way to stop it?”

But Banks isn’t worried that deriving more revenue from advertisers will turn off users.

“I don’t think there’s a risk of that happening because, ultimately, the Facebook platform is a function of what users want to do. So, if a user’s thinking it’s too noisy, they’re going to stop fan-ing brands and they might start x-ing out ads and we’ll be able to see that,” he said.

“I think we’re so early to this game that we’re only going to get better with that. And as we get better with that it only becomes more rich and compelling for the users and they end up appreciating it.”

While there are users who will certainly boycott Facebook when it gets too commercial, the social network isn’t going down the wrong path, predicted Queen’s University business Prof. John Pliniussen.

Young consumers born into a digital world will completely embrace the idea of getting marketed to personally, provided the offers are good and worth their time, he said.

Pliniussen recalled getting stuck in a long line to pay on a recent shopping trip. In front of him was a young woman, who seemed completely unperturbed by the inconvenience as she bounced through social media sites, including Facebook, on her mobile phone.

“If there was something that popped up and knew her profile, that understood she was a woman and in her second year of university, she’d be very comfortable in tapping into that and doing shopping based on that, as would I,” he said.

“I want them to know I’m interested in cars, I want them to know my kids are in university, I have no problem with that, if there are special group-buy advertisements that pop up while I’m on there and give me a chance to save some money or make some bookings without me having to search for it, I find that very convenient.

“So I’m sure what they’re trying to do is have us opt-in for things that fit for our profile.”

That anecdote is music to his ears and Banks says he’s finding a receptive audience in Canada to work with.

“At (Facebook headquarters), whenever people refer to Canadians, the word they always use is ‘addicted,’ because across every engagement metric that matters we are way over-indexed. And, if you take a look at the growth of that, there’s been no deceleration. We continue to grow at engagement levels that are unparalleled around the world,” he said.

“It gives our brand partners in Canada almost a leg up because there’s so much critical mass on the user side to take advantage of.”

25 Mar

10 tips to organize and tidy up your finances


Posted by: Mike Hattim

Happy spring! The sun is out, the birds are singing, and here in Canada, we probably only have one or two more surprise snowfalls before summer.

This is the time of year when we emerge from our dark rooms, stretching and blinking into the sun. We peel off our woolly layers and start thinking about what bikini we will flaunt this summer (yikes). And then we start going for long walks again and haul out the bicycles. Yes, spring is a time to open the windows, clean out the closets, flip the mattresses and sweep away the cobwebs.

While you are busy freshening up your home and garden, you might want to consider pulling out your wallet, blowing off the dust and giving it a good seasonal purge as well. Your finances are like anything else in life: after a while, you start to forget your good habits, and things tend to get sloppy, neglected and disorganized. So seize the spring, darling. Carpe ver!

Here are ten tips to organize your finances and clean up your budget:

1.       Clean out the wallet! Lord knows what is lurking in there. Stuffed full of receipts and bank slips, expired discount cards, phone numbers with no names attached, business cards from your last three jobs. As our feng shui sisters might say, you must make space in the wallet for the money to flow to you.

2.       Be an A-Lister. Dedicate space for lists in your BlackBerry or a notepad that you carry at all times. Lists are critical for clearing trivia out of your head and keeping you focused when it’s time to spend. Mark down items you need as you think of them; that way, when you get to the grocery or department store, you won’t get that overwhelmed, “why am I here?” feeling and end up with a cart full of cocoa puffs and tea lights.

3.       Reality check. Fitness memberships are an essential expense to many of us. However, if your gym is $90 a month and you only show up three times a month, that’s $30 a visit. Be honest with yourself and your schedule. You might be better off paying as you go, or finding a gym where you can buy 10 sessions at a time.

4.       Subscribe to this. What is with that messy stack of unread newspapers and magazines on your coffee table? Don’t you have enough to dust? Subscriptions are no bargain if you’re not reading the products. Consider weekend-only newspaper delivery and buy magazines at the newsstands when you have time to read them.

5.       Stay on season. Now that it’s spring, we can look forward to fresh fruit and vegetables from local farmers. Check labels and choose food products from close to home — not only will they be fresher, but they won’t be packed with big fuel and shipping costs.

6.       Be a contrarian. On the other hand, when it comes to big-ticket items, it helps to be delightfully off-season. The end of February is the time to nab a Prada ski jacket in the clearance sales, saving you money to buy Swarovski Christmas tree ornaments in July and Pottery Barn patio furniture in September.

7.       Friend and follow. Before you shop, check the website of your favourite store or mall for online-only specials and coupons. Sign up for the Facebook or Twitter accounts of your favourite retailers, restaurants or hotels, which often use their online profiles for giveaways, contests and special deals to their friends and followers.

8.       Spring THAW. Remember that trip to Costco where you got 40 chicken breasts for four dollars? Take an inventory of your deep freeze and start planning meals around what you already have on hand. Or throw a dinner party and use up everything you bought more than three months ago. Buying on sale is a waste if you end up throwing out freezer-burnt food.

9.       Get your Groupon. Clipping coupons gets stylish with deal-of-the-day sites such as Groupon. The site offers limited-time discounts on everything from $25 off at The Gap (NYSE:GPS) to half price scuba diving lessons. Going on vacation? Check the site for deals at your destination. When you’re going out a lot, who wouldn’t want to score a free plate of appetizers or two-for-one tickets to a show?

10.   Cheap and cheerful. Fun doesn’t need to cost nearly as much as you think. A morning with the whole family at the playground is just as rewarding as a day at a theme park and much cheaper than driving, parking and paying for family passes. A night in with the girls and a bottle of wine is every bit as fun and boisterous as going out to the newest hotspot. Bonus: by making it OK to have fun on the down-low, everyone feels better about hosting or getting together more often.

Of course, along with the flowers come the inevitable showers. You know what they say about rainy days, don’t you? By cleaning up your financial bad habits and getting in shape for spring, you might actually be able to save a little something…maybe enough to buy yourself one of these must-have items for spring.

25 Mar

For U.S. housing, a new collapse


Posted by: Mike Hattim

Bordered to the west by idyllic Gulf of Mexico beaches and to the east by the natural bounty of the Everglades, upscale Naples is one of Florida’s premier retirement destinations.

Naples’ charms made it an epicentre for the Florida property boom, where unfettered speculation and limitless credit lifted property values to the stratosphere.

Five years ago, the housing market in Naples was pegged as the country’s most overvalued, with single-family homes estimated to cost 85% more than they should. Now, one in three of those homes sits vacant, a testament to how deep the housing crisis runs in the United States and a signal that a recovery in real estate may not be in reach after all.

“I can’t see anything positive is going to happen with housing for at least a year to a year and a half,” said Jack McCabe, a housing analyst with McCabe Research & Consulting in Deerfield Beach, Fla. “Even at that point, we may just hit the bottom and bounce along it for a while.”

Just as some positive indicators in the United States sparked speculation the economic recovery is taking root, home sales and prices plummeted last month, according to data released Wednesday by the U.S. Census Bureau.

New home sales in February fell 17% to an annualized rate of 250,000 units, the slowest pace of sales activity since the agency began tracking figures in 1963. The median sale price fell 13.9% from the previous month to $202,100, the lowest value since December 2003.

The numbers surprised all but the most pessimistic analysts.

“It’s certainly a lot messier than people had hoped for,” said Brian Bethune, chief U.S. financial economist with IHS Global Insight. It’s also creating a big drag on economic growth, one that could renew last year’s worries over a possible double-dip recession.

But these kinds of setbacks are typical of economies recovering from severe recession, Mr. Bethune said. The economy took everybody on a similar ride last year.

The early stages of 2010 also witnessed a surge in upbeat sentiment, he explained. “Then it unwound, very quickly. In the space of three or four months, the tone of the economy changed dramatically. We went into the pause mode. Now, we’re kind of doing the same thing.”

Recessionary symptoms are likely to resurface in traumatized economies, he said, making it dangerous to extrapolate signs of recovery too far into the future.

It’s possible that financial institutions in the United States did just that.

Early this year, a sense that the housing market had bottomed out and was in the midst of a gradual stabilization prompted a rise in mortgage rates. “Sure enough, banks jumped the gun,” Mr. Bethune said.

The higher rates, combined with more stringent borrowing standards and external economic shocks affecting consumer sentiment, struck directly at housing demand, already fragile and anemic.

Meanwhile, what little buying activity there was focussed on the resale of existing homes, still at bargain basement prices in the most distressed American markets.

New home construction has already fallen close to its “irreducible minimum,” the amount required to replace demolished units so that net supply remains flat, Mr. Bethune said. Home construction currently sits at an annualized pace of about 450,000 houses, one million short of normal levels.

“That’s one million units that have been taken off the market,” he said. Clearly, the foreclosure process, by which vacant and repossessed homes are resold, has yet to exhaust itself.

There are still about 1.5 million vacant homes in Florida, Mr. McCabe said. “Right now, distressed properties are dominating the marketplaces around America.”

And the so-called “shadow supply” of future foreclosed homes still looms, with almost half of Florida mortgage holders facing a property value that falls short of what they owe.

“A lot of people may be carried out feet first before the house is worth what they paid for it.” Many of the properties are even selling for less than what it cost to build them, Mr. McCabe explained.

As long as unemployment remains elevated in the United States, demand will be insufficient to get the market back on its feet, he said.

“Unless you increase demand, you’re not going to fill up these vacant units and get them off the market.”

24 Mar

Home-buying help in your pocket


Posted by: Mike Hattim

Mobile apps can be used for just about anything these days. From remotely starting a car to filming and editing entire feature-length films using a smartphone, there are even apps out there to help buy, sell or renovate a home.

With spring officially arriving on Monday, the busiest time of year for the real estate industry is now here. According to the Canadian Real Estate Association, the majority of deals to buy or sell a home will occur in the next few months. To help buyers and sellers stay on top of their own efforts without having to stay on top of their home computer, Financial Post technology reporter Jameson Berkow found some of the more useful real estate apps for Canadian house hunters.


Hypothecate is when someone offers their property as collateral when taking on a debt, such as a mortgage, but the average person would never know that. Particularly useful for those looking to buy or sell a home without using a real estate agent, there are a number of dictionary apps available on every smartphone platform to help users make sense of all the industry jargon. The Glossary of Real Estate Terms, complete with 700 key definitions, is available for the Google Android platform at a cost of $2 and the Dictionary of Real Estate Terms is available on the Apple iOS platform also for about $2. Anyone who has ever been confounded by the term “estoppel” will find one of these apps to be well worth the price.


The official mobile app of the Canadian Real Estate Association, this free app gives users access to an average of 350,000 Canadian properties for sale on the Realtor.ca website. Using a smartphone’s built-in GPS feature, the app lets users search for houses available near their current location or a specific address, providing them with photos, listing details and contact information to get in touch with the agent. It launched on Microsoft Corp.’s Windows Phone 7 platform last November and a version compatible with Apple Inc.’s iPhone, iPad and iPod touch devices was released in late December; with other versions for Research in Motion Ltd.’s BlackBerry OS and Google Inc.’s Android expected in the next few months. More than 100,000 people have already downloaded this well-designed app.


This free app, currently available only on the iPhone platform, is similar to Realtor.ca but even more intuitive. For those Apple device users who don’t mind using something other than the “official” industry app, Zoocasa will also let users search for properties based on their current location, even displaying full descriptions of properties that would appear on the Zoocasa website. There is also a unique social function built in, allowing users to email listings from directly within the app.


Once the deal has been made and the title transferred, the physical labour can begin. That is where the new MoveTools app specifically designed for the Apple iPad tablet, released by insurance provider State Farm in early March, definitely comes in handy. Users can use this app to customize a weekly moving checklist. Waiting to pack the printer last would also be a good idea, as this app also lets users create and print “smart labels” with digital QR codes, which can be read by any smartphone with a barcode scanning application to display what each smart-labelled box contains.


Even after the buying and the physical moving is done, a new home still needs to be adapted -either through major renovations or minor redecorations -to suit the new owner’s unique tastes. The Dream Home app for iPhone, as well as the Dream Home HD app for the iPad, brings an element of fun to the process. Users can snap photos with their device’s camera and share them with other users of this $5 app to gain inspiration for their new dwelling. With content arranged by room type, colour and style and new content added regularly, users can find the new style to match their new abode.


Anyone interested in selling their home without using a real estate agent will find this free app valuable. The PropertyGuys.com website charges a set fee, as opposed to the percentage-based commissions charged by accredited agents, to let independent home sellers create a professional-quality listing for their property online. Owners of an Apple or BlackBerry mobile device can then search through the listings, also based on their current location or a specific address, and contact the seller directly with a single touch. Even those without a smartphone can use PropertyGuys.com’s mobile service by sending an SMS message to PRICE (77423) that includes the sign number for any listed property.

23 Mar

Economy pours tax dollars into rosy budget blueprint


Posted by: Mike Hattim

OTTAWA – The economy is coming to the rescue of Jim Flaherty’s wishing-and-hoping balanced-budget plan.

When the finance minister announced last March he would balance the budget in five years, there were plenty of skeptics, notably Parliamentary Budget Officer Kevin Page.

How is a minority government going to hold spending growth to two per cent — which, minus inflation, meant zero — for one, then two, then three, then four, then five years without blinking?

This March, Flaherty is back with the same projections — only improved, despite stocking Tuesday’s budget with a pot-pourri of tempting sweets designed to get the NDP to come into the candy store.

Now not only does Flaherty envision his red ink painted black in 2015-16, by then it will be an even bigger surplus, he says. For all intents and purposes, he will achieve balance a year before.

To do so, the government is counting on an infusion of tax cash from the economic recovery, which has been progressing better than was expected last year.

That has enabled Ottawa to reduce this concluding year’s deficit from a previously projected $45.4 billion to $40.4, and many think it will be lower still.

Counting the current fiscal year, the government figures to pocket $19.1 billion more during the deficit elimination phase than it had expected in October. And this is after Flaherty built in a $7.5-billion prudence factor in case the economy doesn’t perform up to current expectations.

So cautious that following this year, Ottawa is forecasting slower nominal gross domestic product growth four years running than it had last March.

Flaherty described the budget as a “balanced” blueprint that sprinkles targeted relief to people who most need it, but still stays true to his deficit reduction schedule.

“Fundamentally we stay on track, we make sure we get back to a balanced budget to protect our country,” he told reporters. “We want to be in good shape when the next crisis comes, just like we were in good shape when the last crisis came.”

Flaherty believes there’s reason to be cautious, as do economists. The U.S. recovery could vanish as soon as Washington stops pumping money into it; Europe is just pushing its debt crisis down the road, not solving it; and there remains a crisis in the Middle East and destruction in Japan .

The budget document warns that any hiccup in economic performance can throw the numbers out of whack.

As the budget shows, Canada may never recover the lost $100 billion in output from the recession. Analyst projections show that five years out, the economy will still be $105 billion smaller than it would have been had the slump not occurred.

Of course, the opposite is equally true. A bigger economic bounce pays dividends year after year.

The government’s rosier assumptions stem from the fact nominal growth, which includes inflation and price effects from higher commodity-export income, expanded by 6.2 per cent last year and is projected to increase by 5.8 per cent this year. Both are significantly higher than last budget’s projections.

“That better starting point gave them the manoeuvring room to introduce the new measures,” said Bank of Montreal deputy chief economist Douglas Porter.

“The numbers are not unreasonable.”

Analysts caution that staying the course, as Flaherty continually pledges, is easier said than done. The Harper government has still set itself an ambitious target of keeping spending growth to two per cent. Given that spending grew on average six per cent before the downturn, it represents real restraint.

As well, Ottawa projects revenues from personal taxes to rise by an average six per cent over the next five years, ahead of nominal GDP growth. It doesn’t usually happen that way.

But then the government has also built in a prudence factor, and the economy could beat the modest targets the government has set.

“There are high side surprises. If we had another commodities boom, some of these nominal GDP numbers would look quite modest,” Porter notes.

And Flaherty has yet to calculate a contribution from the new Strategic and Operating Review process that could yield the government billions in savings.

Thanks to the high-side economic surprise of the last year, what looked like wishing and hoping last March appears more plausible 12 months later.