• The Canadian Press

The TD Bank says Canadians can expect borrowing costs to remain near record lows for the rest of the year.

That’s because the pace of the economic recovery is expected to slow sharply in Canada, the United States and much of the world.

As such, the Bank of Canada will likely refrain from raising its key interest rates until 2012, TD says.

The central bank has had its policy rate set at one per cent since September. The rate was set at all-time low of 0.25 per cent through much of the recession, to stimulate borrowing and spending, until a series of rate hikes began last summer.

The still-low rates have been a double-edged sword for Canadians who are already piling up debt at record levels, according to the Certified General Accountants Association of Canada.

The association says Canadian household debt has reached a record $1.5 trillion, and calculates that more than half of indebted Canadians are borrowing just to afford day-to-day living expenses such as food, housing and transportation.

Low interest rates will make it easier for Canadians to keep borrowing, setting them up for a fall further down the road.

Debt is partly contributing to a slowdown in Canadian growth, says the TD Bank, because households are too tapped out to spend and stimulate the economy.

The bank says Canada’s economy is believed to have already slowed to 1.3 per cent growth during this current quarter that ends at the end of the month, one-third the pace of the first quarter’s 3.9 per cent gain.

The rest of the year will see growth crawl along between two and 2.5 per cent, the bank says.

As the recovery moderates, so will job growth. The bank says it expects the unemployment rate in Canada will remain above seven per cent throughout its forecast period to the end of 2013.

With little help from consumers, Canada will need to depend on exports and business investment to fuel growth.

John Morrissy

Canada’s recreational property market appears to be bouncing back from a recessionary lull as buyers seek to capitalize on equity and stock-market gains, Re/Max says in a report Monday.

Demand rose 78% in the 46 markets across the country covered by the realtor’s Recreational Property Report, while sales had risen or were on par in 41% of those centres.

“Buyers who held off during the recession are back in recreational property markets from coast-to-coast,” says Pamela Alexander, chief executive of Re/Max for Ontario-Atlantic Canada. “Their patience has been rewarded with more affordable recreational values and greater inventory levels.”

While prices have remained stable in many markets, values could be found for higher-end properties, pushing luxury sales higher in almost half of the markets examined, Re/Max said in its report.

Opportunities were also to be found in Western Canada.

“Prices are down as much as 20% from peak levels reported in 2006-2007, bringing ownership within reach to many potential purchasers,” said Elton Ash, regional executive vice-president of Re/Max in Western Canada.

On British Columbia’s Salt Spring Island, for example, starting prices for oceanfront properties have fallen to $669,000 today from $1.3-million in 2008.

In the North Okanagan Valley, a three-bedroom, winterized recreational property on a standard-sized waterfront lot — the common measures used in Re/Max’s report — that sold for $1.5-million in 2008 now sells for $995,000.

Starting prices for similar properties on Alberta’s Sylvan Lake are now at $800,000 from $1.25-million previously and in the Rocky Mountain resort town of Canmore, a two-bedroom condo has fallen to $229,000 from $320,000.

“The strengthening oil sector has . . . brought Albertans back into mix, driving demand for both local and coastal B.C. properties,” Ash said.

Another factor influencing the recreational property market has been that Americans who bought when the Canadian dollar was at 65 U.S. cents are now cashing out, boosting inventories.

The report found that there has been some tightening for entry-level properties in about one-third of the markets covered. As well, it noted, the supply of properties has tightened considerably at the lower end in Ontario, Quebec and Atlantic Canada.

It also noted that recreational properties are moving more toward year-round homes, with fewer traditional cottages available for sale.

“These waterfront properties are disappearing from the landscape. Meanwhile, today’s average recreational getaways are truly earning the distinction as the “home away from home,” with many of the bells, whistles and comforts of their residential counterparts.

By Julian Beltrame

Canada’s unemployment rate fell to its lowest in more than two years as a combination of more self-employed workers and fewer job seekers in May pushed the key economic marker down to 7.4 per cent.

Statistics Canada said 22,300 new jobs were created last month, slightly above consensus estimates following April’s strong 58,000 jobs gain. The last time Canada’s unemployment rate was as low as 7.4 per cent was in January 2009, a few months after the economy had plunged into recession.

The finer details of the May report were less impressive, however.

The jobless rate dropped two-tenths of a point due as much to the fact that 27,500 fewer Canadians were actively looking for work as to the new jobs created.

While all the jobs were full time, they came in the less desirable self-employment category, which could indicate that many Canadians turned to creating their own employment because they were unable to find more traditional work.

“Small business is of vital importance to the Canadian economy, but job creation within this category in a soft spot for the economy (and) is always a knock against the quality of the headline gain,” Derek Holt, vice-president of economics for Scotiabank, said in a note to clients.

The number of employees in Canada actually dropped by 7,500 in May and the goods producing sector of the economy saw a pullback in employment, with manufacturing taking the biggest hit with 22,500 fewer jobs. The month also showed the public sector is starting to tighten, shedding 44,300 jobs as governments begin dealing with large deficits.

The markets treated the report as a status quo finding. The loonie barely budged after the data was released early Friday, although the currency swooned in later trading on dipping oil prices.

Holt noted that hours worked rose just 0.3 per cent and wages were only 2.2 per cent higher than last year, down from 2.6 per cent in March.

“After stripping out inflation, real wages are going nowhere and that remains bearish for consumer spending as households are simply unable to post income growth beyond covering higher fuel and grocery costs in a generalized commodity shock,” he said.

Still, analysts said any job gain following April’s strong advance is good news. It showed April was not a mirage.

“The details in this month’s job growth were not all rosy, but any gains at all were impressive given that they came on the heels of an outsized 58,000 prior-month tally and amidst signs that the economy is decelerating sharply in the second quarter,” said CIBC chief economist Avery Shenfeld .

Not to be overlooked, he added, is that private sector employers added workers, although a small number.

Another positive for the future, said Jimmy Jean of Desjardins Capital Markets, is that the factory sector is likely to recover once supply chain disruptions from the Japanese natural disaster are resolved.

The summer months will also benefit from an additional $10 million Ottawa is pumping into the summer jobs program to encourage student hiring. Labour Minister Diane Finley says government support will create 36,000 student jobs this summer.

Most economists had predicted a slowdown in job creation not only because they viewed April’s increase as an above-trend anomaly but also because other economic indicators pointed to slowing activity.

Meanwhile, consumer spending and housing have fallen off of late and, earlier in the week, the government reported that the important export sector shrank by 1.1 per cent in volume terms in April.

Despite the softness, Canada’s economy is doing far better than its southern neighbour, which in the same month created only 54,000 jobs, a tiny amount given the size of the U.S. labour force.

In the past year, Canada has more than recouped all the jobs lost during the 2008-2009 recession, creating 273,000 in the last 12 months alone, most full time and in the private sector. Meanwhile, the U.S. remains several million shy of its pre-crisis level and the jobless rate is above nine per cent.

In May, most of Canada’s employment gains came in the retail and wholesale trade industries, and in information, culture and recreation. There were losses in manufacturing and educational services, mostly of those in post-secondary institutions.

Regionally, the lion’s share of job creation came in Quebec, which saw its employment rise by 24,800, while Ontario saw a drop-off of 16,100.

Tom Fennell

Are rising consumer debt loads the Achilles’ heel of the Canadian economy?

Before we tackle that question, let’s back up a few months and revisit the lecture Bank of Canada Governor Mark Carney gave the country on rising personal debt levels, and the fact that while money is cheap today, it could get expensive again — and quickly.

“Low interest rates today do not necessarily mean low rates tomorrow,” warned Carney. “Risk reversals, when they happen, can be fierce; the greater the complacency, the more brutal the reckoning.”

What’s happened to consumer debt levels since he scolded Canada’s profligate spenders?  Well, apparently nobody was paying much attention, and over the first three months of this year a new study suggests consumer debt has continued to climb.

According to the credit rating agency, TransUnion, Canadians now owe an average of almost $26,000 on their credit cards, lines of credit and auto loans.

That’s an increase of 4.5 per cent, or another $1,000, over the same period last year.

The picture becomes even  bleaker when you factor mortgage debt into the TransUnion report. Currently, Canadians owe just over $1 trillion in mortgage debt, and that pushes the $26,000 figure to just over $100,000 per Canadian family.

Now let’s bring that debt picture into line with earned income.

According to the Ottawa-based Vanier Institute, the average Canadian family is now carrying a household debt that amounts to 150 per cent of their personal disposable income. That’s the highest level in history. And stated in a starker way, for every $1,000 a Canadian family earns, they have to make about $1,500 in debt payments.

Sadly, according to TransUnion, Canadians persist in carrying large credit card balances at onerous rates. And the amount being carried on plastic only fell $25 to an average of $3,539 over the last year.

At the same time, the national credit card delinquency rate rose 11 per cent.

And despite Carney’s hectoring and the rule changes surrounding lines of credit, they are still the most popular lending vehicle. Excluding mortgages, they accounted for more than 41 per cent of outstanding debt at the end of the first quarter at $33,981, up 5.9 per cent from the first quarter of 2010.

It’s interesting to note that Canadian indebtedness rose as interest rates came down steadily over the last ten years. And that begs the question: what will happen when interest rates start to rise again as many analysts believe they must?

In fact, speaking earlier in June, Carney warned that while he was holding the core bank rate at one per cent, it would rise from crisis lows at near zero to what many economists believe to be a more normal rate in the six-per-cent range.

That’s where broader economic conditions come to bear on debt levels.

If interest rates jump, the impact will be immediate on floating-rate vehicles like lines of credit and variable-rate mortgages. For example, someone with a 3.5 per cent variable-rate mortgage can carry a $400,000 mortgage at around $2000 a month.

If interest rates climb, and the variable rate reaches six per cent, that same mortgage would jump to almost $2,600 a month.

The debt picture also gets complicated when you compare the growth in mortgages to annual wage gains. In its annual report, the Canadian Association of Accredited Mortgage Professionals said that over the last 15 years, the annual growth rate in mortgage debt has been around 7.5 per cent. And yet wages have been increasing at around 2.3 per cent a year.

Why is that important? Simply because if consumers are already stretched to keep up because of flat-lined wage increases that have barely matched the inflation rate, they have very little room in their budgets to  accommodate rising costs triggered by a surge in interest rates.

Obviously loan delinquency and home foreclosures would increase. And if you add a job-killing recession to the mix, you have the onset of a perfect storm that could see an increasing number of Canadians fall into personal bankruptcy.

Perhaps that’s why Finance Minister Jim Flaherty joined Carney in warning Canadians to cut back on debt. He certainly fears that the world could be faced with another recession, given the sluggishness of the global economy and the inability of the U.S. to get its fiscal house and economy in order. “I am quite worried,” said Flaherty in an interview. “We have lived three-and-a-half years now since the credit crisis started in late August, 2007. We are seeing in Europe, in particular, some very difficult situations.”

Fortunately, so far the Canadian economy shows little sign of weakness with the Bank of Canada predicting growth in the three-per-cent range for this year.

But with economic stimulus programs being withdrawn in the U.S. and Flaherty vowing to turn off the spending taps in Ottawa, growth could slow sharply as the country enters 2012.  If it does, Canada’s debt binge could make things even worse as consumers cut back on their spending to reduce their loan balances.

Only time will tell. But for now, Canadians seem determined to ignore the warnings and keep on borrowing.

Amy Fontinelle

Buying a home is a very emotional process, but if you allow those emotions to get the best of you, you may fall prey to a number of common home buyer mistakes. Since buying a home has many far-reaching implications – ranging from from where you will live to how hard it will be to make ends meet – it’s important to keep your emotions in check and make the most rational decision possible.

There are eight common emotional mistakes that people make when buying a home. Avoiding these pitfalls will help you find the best home-sweet-home.

Mistake 1: Falling in Love With a House You Can’t Afford
Once you’ve fallen in love with a particular home, it’s hard to go back. You start dreaming about how great your life would be if you had all the wonderful things it offered – the lovely, tree-lined streets, the jetted bathtub, the spacious kitchen with professional-grade appliances. However, if you can’t or won’t be able to afford that house, you’re just hurting yourself by imagining yourself in it. To avoid the temptation to get in over your head financially, or the disappointment of feeling like you’re settling for less than you deserve, it’s best to only look at homes in your price range.

Start your search at the low end of your price range – if what you find there satisfies you, there’s no need to go higher. Remember, when you buy another $10,000 worth of house, you’re not just paying an extra $10,000 – you’re paying an extra $10,000 plus interest, which might come out to double that amount or more over the life of your loan. You may be better off putting that money toward another purpose.

Mistake 2: Assuming There’s Nothing Better Out There
Unless you are a high-end buyer looking at custom homes, chances are that for any home you find that you like, there are quite a few others that are nearly identical to it. Most neighborhoods have multiple homes that are the same model. Further, most neighborhoods are full of homes that were all constructed by the same builder, so even if you can’t find an identical model for sale, you can probably find a house with many of the same features. If you’re considering a condo or townhouse, the odds are also in your favor.

Even when you have a long list of must-haves, there are probably several homes out there that can meet your needs. If there are snags with the home you’ve decided you like – such as major repair issues, an inflexible asking price or a difficult possession date – consider moving on. Being open to keep looking will save you from making rash decisions you might regret later.

Mistake 3: Being Desperate
When you’ve been looking for a while and you’re not seeing anything you like – or worse, you’re getting outbid on the houses you do want – it’s easy to get desperate to get into your new house now. However, if you move into a house you’ll end up hating, the transaction costs to get rid of it will be costly. You’ll have to pay an agent’s commission (up to 5-6% of the sale price) and you’ll have to pay closing costs for the mortgage on your new house. You’ll also deal with the hassle and expense of moving yet again. If you decide not to move but to try to make the best of what you have, remember that alterations and renovations are expensive, time-consuming and stressful. If you have time on your side, it’s OK to wait until something that suits you comes along – as long as your demands are realistic for your budget, you are bound to find something you live with.

Mistake 4: Overlooking Important Flaws
For any of the three reasons we just discussed, you might be tempted to ignore major problems with the house that will be difficult, expensive or impossible to change. Carefully consider your options before you make a commitment, and consider waiting until something better comes along. New houses come on the market every day.

Mistake 5: Overestimating Your Handyman Skills
Don’t buy a fixer-upper that’s more than you can handle in terms of time, money or ability. For example, if you think you can do the work yourself then realize you can’t once you get started, any repairs or upgrades you were planning to make will probably cost twice as much once you factor in the labor – and that may not be in your budget. Not to mention the costs involved to fix anything you may have started and the fees to replace the materials you wasted. Honestly evaluate your abilities, your budget and how soon you need to move before purchasing a property that isn’t move-in ready.

Mistake 6: Rushing to Put In an Offer
In a hot market, it may be necessary to pull the trigger very quickly if you find a home you like. However, you have to balance the need to make a quick decision with the need to make sure the home will be right for you. Don’t neglect important steps like making sure the neighborhood feels safe at night as well as during the day and investigating possible noise issues like a nearby train. Ideally, you’ll be able to take at least a night to sleep on the decision. How well you sleep that night and how you feel about the home in the morning will tell you a lot about whether the decision you’re about to make is the right one. Taking the time to consider the decision also gives you a chance to research how much the property is really worth and offer an appropriate price.

Mistake 7: Dragging Your Feet
It’s a tough balancing act to make sure you make a careful decision, but don’t take too long to make it. Losing out on a property that you were almost ready to make an offer on because someone beat you to it can be heartbreaking. It can also have economic consequences. Let’s say you are self-employed. Perhaps for you more than anyone else, time is money. The more time and energy you have to take out of your normal activities to search for a house, the less time and energy you have available to work. Not dragging out the homebuying process unnecessarily may be the best thing for your business, and the continued success of your business will be essential to paying the mortgage. If you don’t pull the trigger quickly, someone else might, and you’ll have to keep looking. Don’t underestimate how time-consuming and routine-disrupting house shopping can be.

Mistake 8: Offering Too Much
If there’s a lot of competition in your market and you find a place you really like, it’s all too easy to get sucked into a bidding war – or to try to preempt a bidding war by offering a high price in the first place. There are a couple of potential problems with this. First, if the house doesn’t appraise at or above the amount of your offer, the bank won’t give you the loan unless the seller reduces the price or you pay cash for the difference. If this happens, the shortfall on your bid as opposed to your mortgage will have to be paid out of pocket. Second, when you go to sell the house, if market conditions are similar to or worse than they were when you purchased, you may find yourself upside down on the mortgage and unable to sell. Make sure the purchase price for the home you buy is reasonable for both the house and the location by examining comparable sales and getting your agent’s opinion before making an offer. 

Conclusion
It’s natural for emotion to come into play in the hombe-buying process. Buying a house is a big decision, but this is exactly why you need to ensure you are making rational choices, rather than getting wrapped up in the notion of a dream home. Slow down, overcome your emotions and, ultimately, make a home-purchase decision that’s good for both your feelings and your finances.

By Sunny Freeman, The Canadian Press

Canada’s economy will grow by 3.2 per cent this year, helped by high commodity prices and a continued recovery in the United States, according to the latest outlook from RBC Economics.

It expects gross domestic product will grow at a respectable 3.1 per cent pace in 2012.

“Strong demand for commodities and a revival in U.S. demand for autos will drive healthy gains in exports – at an average of nine per cent per annum for the next two years,” RBC chief economist Craig Wright said in a report released Thursday.

However, RBC predicts a notable shift in the makeup of domestic growth.

Although consumers were the mainstay of growth coming out of recession, the key driver will switch from households — as consumer spending slows and household debt levels rise —to business-driven growth as corporate investments pick up, the report said.

The positive outlook projects that lingering global economic crises — such as European debt and tensions in North Africa and the Middle East that are driving oil prices higher, and disappointing U.S. economic indicators — will begin to fade in coming months.

RBC’s report suggests that the economy in the United States, Canada’s largest trading partner and a key concern for forecasters north of the border, is moving into expansion mode. The bank projects growth in the U.S. economy will increase 2.7 per cent this year and 3.4 per cent in 2012.

Despite current global economic uncertainties, Canada’s economy posted a 3.9 per cent gain in the first quarter of the year on the back of higher commodity prices, and growth is expected to moderate just slightly over the rest of the year.

“With more than 50 per cent of Canadian exports linked to natural resources, higher commodity prices have provided a substantive and positive boost to our economy,” said Wright.

“Higher prices mean higher domestic income growth.”

Rising commodity prices also helped buoy the loonie above parity with the U.S. dollar in the five months of 2011, and the bank expects it to remain elevated for the rest of the year, which helps to spur business investment, Wright said.

“The dollar has made a remarkable recovery from the all-time low we saw in 2002, to within six per cent of its all-time high,” he said.

“This improvement has caused a dramatic fall in the price of imported machinery and equipment and will likely drive Canadian companies to purchase imported goods to update their capital stock and improve Canada’s productivity performance.”

The forecast factors in the assumption that Canada’s output gap will be eliminated in the second quarter of 2012 as the headline and core inflation rates are expected to hover close to the Bank of Canada’s two per cent target.

“At this point, the level of uncertainty about the global economic outlook — worries about sovereign debt and fiscal balances — is driving the Bank of Canada to hold the policy rate at its current level of one per cent,” Wright said.

“As concerns start to dissipate, attention will turn to domestic fundamentals.”

RBC believes the Bank of Canada will likely raise its key interest rate from the current one per cent this fall, and it will sit at 1.75 per cent by the end of 2011 and three per cent by the end of 2012.

That could put further pressure on Canada’s housing market, which is already slowing due to eroding home affordability amid sky high home prices.

“Rising interest rates will largely be balanced by growing income levels and ultimately contribute to a stable home price environment,” Wright said.

“With interest rates heading higher, we anticipate that the volume of home sales will calm and prices will post very modest gains.”

At the provincial level, Alberta will lead economic growth with Newfoundland and Labrador following closely behind.

The other Prairie provinces, Saskatchewan and Manitoba, are expected to achieve above-average growth this year, while Ontario will post average growth and British Columbia and the Atlantic provinces fall to the lower end of the pack.

By Sunny Freeman, The Canadian Press

Homes in Vancouver have become so expensive you might have to win the lottery to afford one, says a prominent economist — and with prices that sky-high, odds are the city is ripe for a big drop.

Overpriced homes in some Canadian cities, along with elevated household debt, suggest the real estate market is vulnerable to a correction — especially in Vancouver, senior economist Sal Guatieri said in a Bank of Montreal report released Tuesday.

“Riding a wave of wealthy immigrants, Vancouver’s house prices have nearly tripled in the past decade, spiralling beyond the reach of most first-time buyers or non-lottery winners,” Guatieri said.

Homes in that Pacific Coast city now cost 11.2 times median family incomes — a ratio that measures the median home price to median annual household disposable income. That’s more than double the current Canadian average of 5.1 times income.

Chinese demand for houses in Vancouver has been strong, on the back of looser travel restrictions, as well as stricter buying rules and lofty prices in China. A recent survey by Demographia rated Vancouver the third least affordable city in the world, behind Hong Kong and Sydney, two other cities influenced by Chinese demand, he said.

“While land-use restrictions and high quality-of-life rankings can justify elevated prices, current steep valuations could prove unsustainable if foreign investment ebbs or interest rates climb,” Guatieri said.

Past housing corrections have seen Vancouver home values fall an average of 21 per cent. But prices in the city are even higher today, averaging $815,000 in April, pushing the market further toward the brink of a housing bubble.

However, if interest rates stay low and foreign investment continues, the price correction could stabilize sooner than in the past, Guatieri said.

Even excluding Vancouver, average home prices have more than doubled in the past 10 years to a historically high level.

“Due to ultra-low interest rates, affordability isn’t a major issue yet, with first-time buyers allocating about one-third of their disposable income for mortgage payments, as is the norm,” Guatieri said.

“But high valuations suggest that even a moderate increase in interest rates will slow the market in coming years.”

Some triggers that could set off a broader collapse include a rapid rise in interest rates, a sharp increase in unemployment or a slowing of foreign investment.

High home prices in Toronto also mean the country’s biggest city is likely poised for softer prices in the near term, fuelled by a rising supply of condos that could soon outstrip demand, leaving a glut on the market.

Housing costs in the city eat up 6.7 times family income, comparable to costs in the late 1980s before prices slid 25 per cent. However, mortgage rates now are under four per cent, compared to 14 per cent in the earlier decade.

“That said, while high valuations might be sustainable in an ultra-low rate climate, they could come under pressure in a more normal rate environment,” Guatieri said.

Meanwhile, the report said energy-rich Calgary could see home prices rise in coming years. It is one of the few Canadian cities, along with Edmonton, where prices have not returned to pre-recession peaks, reflecting the fallout of overbuilding during the oil boom before the financial crisis hit.

Nicolas Van Praet 

The risk that the economic slowdown in the United States will turn into another North American recession is not high, Canada’s finance minister said Tuesday as he cautioned that too many people nevertheless remain jobless in this country.

“I do not think the risk is great,” Jim Flaherty said in response to a reporter’s question at the International Economic Forum of the Americas taking place in Montreal. “There are risk indicators with respect to which we are concerned which we reviewed in the budget [Monday] and which I reviewed with the private sector economists with whom I met last week. The nature of the risks have not changed. We are concerned about debts and deficit in the United States and the need for a convincing longer term plan in the United States” to deal with those problems.

Ottawa is also concerned about some evidence of continuing slowness in the U.S. real estate market which puts a damper on consumer confidence in that country, Mr. Flaherty said. As well, it is worried about the sovereign debt situation among some eurozone countries, including Greece.
“These are all risk factors but they are known risk factors,” Mr. Flaherty said, adding that to address the risk in the latest budget, federal finance officials discounted private sector growth assumptions by $10-billion in nominal GDP each year, equalling a revenue markdown of $1.5-billion annually.

The U.S. economy grew at a 1.8% annual rate in the first quarter but job growth remains anemic, prompting U.S. Federal Reserve Chairman Ben Bernanke to say Tuesday that the central bank should maintain monetary stimulus to boost a “frustratingly slow” recovery. U.S. employers hired 54,000 more people in April, well below the 165,000 expected by economists.

“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” Mr. Bernanke said in a speech in Altanta.

The U.S. economy is growing above “stall speed,” Deutsche Bank AG foreign exchange analyst Alan Ruskin told Bloomberg in an interview Tuesday.

“A lot of people say that if the U.S. economy slows below 2% in year-over-year gross domestic product historically, we’ve slipped in to recession. The key is that we stay above that line, otherwise that is perceived as stall speed and other issues kick in.”

The pace of economic recovery in the United States is crucial for Canada because America is Canada’s largest trading partner, buying 75% of all Canadian exports like oil, wood and cars. Any major slowdown would hurt Canadian businesses and force layoffs here.

Mr. Flaherty maintained that unemployment in Canada also remains too high, even as his government initiates targeted hiring investments. The country’s unemployment rate stood at 7.6% in April as the economy added 58,000 mostly part-time jobs. Employment has grown by 1.7% in the last year.

Asked if the Canadian government has picked a preferred candidate to lead the International Monetary Fund, Mr. Flaherty said not yet. Former IMF chief Dominique Strauss-Kahn resigned last month amid allegations he sexually assaulted a New York City hotel worker. Agustín Carstens, the head of the Mexican central bank, and Christine Lagarde, France’s finance minister, are vying for the job.

In a speech to conference delegates, Mr. Flaherty stressed the importance of sound fiscal management for an elected government, noting no one truly foresaw the credit crisis in the fall of 2008 and subsequent recession. He said “it’s unpredictable” when the next shock might come.

The finance minister on Monday delivered a budget that included a pledge to bring the federal government back into surplus position by 2014-2015. He said he will do that through a combination of $4-billion in annual spending cuts and closing tax loopholes to generate another $4.1-billion.

The cuts mark the most intense attempt to rein in public sector spending in more than a decade. The government is conducting an operational review of the federal service and some departments have begun laying off staff.

Opposition against the cuts is expected to grow in the months ahead.

Canadian Auto Workers union president Ken Lewenza said Monday the government’s  spending will wipe out thousands of jobs and hurt service delivery. “With the economic rebound being so uncertain and anemic private sector investment growth, these billion-dollar cuts are the last thing Canada needs,” Mr. Lewenza said.

But compared to what a private company would do to trim spending, the government’s $4-billion plan is not very ambitious, Mr. Flaherty argued.

Mr. Flaherty’s savings target represents 5% of Ottawa’s $80-billion in annual discretionary spending. The government won’t book the savings until it achieves them and has not provided any details of which programs and departments will be affected.

By The Canadian Press

Construction activity is expected to remain healthy this summer even after the value of building permits fell 21 per cent in April as the decline followed a particularly strong March, economists say.

Statistics Canada reported Monday that building permits fell to $5.3 billion after increases in February and March on a slide was in both the non-residential and residential sectors.

Economists had expected an average seven per cent drop.

The disappointing April figures followed a March that saw municipalities issue $6.8 billion in building permits, the highest figure since June 2007.

The value of non-residential permits fell 33.2 per cent to $1.9 billion in April after permits were issued for a number of big projects in March. Residential permits came in at $3.5 billion, down 12.6 per cent.

Building permits are a signal of contractors’ intentions and foretell trends in the housing and construction markets. But the monthly data is volatile and must be examined on a longer-term basis to draw any conclusion about the underlying trend, said Capital Markets economist David Madani.

“We can expect fairly active construction activity in both non-residential and residential sectors over the summer,” he said.

“When you consider the work that’s under construction now and the permits that are in the pipeline, we can expect pretty active construction activity in the summer — I think that’s pretty much in the bag.”

But Madani said he does see trouble down the road because Canadian home prices are substantially overvalued.

“We’re of the opinion that we’ve simply built too many homes,” Madani said.

The housing market has been slowing in many parts of Canada and in some cities, an over built condominium sector — especially in big cities like Toronto and Vancouver — has also started to weigh down the market.

CIBC World Markets analyst Emanuel la Enenajor emphasized the weakness in the report.

“In particular, the softness in residential permits continues to suggest homebuilding activity will ramp down this year, with roughly a 10 per cent drop in housing starts for 2011 from the prior year,” Enenajor wrote in a note.

BMO Capital Markets senior economist Sal Guatieri said one month of permits doesn’t make a trend.

“We are not seeing — at least in most regions — overbuilding of housing units,” he said in an interview.

“So, that’s good, because if demand does fall off in response to higher interest rates, we won’t see a glut of unsold homes sitting on the market depressing prices,” he added.

However, he noted the data suggested non-residential construction is cooling off after activity soared 14.4 per cent in the first quarter of the year.

Selling your house can be a huge headache–especially when you’re selling it in today’s buyer’s real estate market. One of the most challenging aspects to deal with is determining your home’s value. When it comes to fixing a fair price, homeowners always shoot high. After all, you love your house and you know how much work you’ve put into it. Won’t someone else appreciate it as much as you do?

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The short answer is no. An experienced real estate agent will take the emotional factor out of the equation and help you come up with a realistic market value for your house. But if you want to sell your house yourself without a realtor–or you just want to be prepared for the number they advise–here are five factors that can heavily skew the asking price of your home.

1. Location

We’ve all heard how important “location, location, location” is, and with good reason. A great house in a bad location can knock as much as 50 percent off the value. If you have the nicest, most expensive house in your average neighborhood, then the value is also going to be much lower than it would be if you had the least expensive house in a nice neighborhood. Other factors, like freeways, proximity to a landfill or sewage treatment center, and train tracks, can knock 10 to 15 percent or more off the value of your home. This is why it’s so important to shop location first when you’re buying a house; you can always add home improvements, but moving it to another neighborhood isn’t going to happen.

2. Outdated Rooms

If your fridge is more than 15 years old and your oven isn’t black or stainless steel, then count on listing your house lower than you’d be able to if you had a fully updated kitchen. With the influx of homes on the market right now, people can easily get a home that doesn’t need any updating, so why would they choose one that does? If you don’t want to update your home in order to sell it, know that outdated rooms can affect the value of your home by up to 10 percent.

3. Renters

Many people don’t want to own a home surrounded by rental properties. Although it’s a stereotype, tenantsoften don’t keep up the property like an owner would. In this case, the value of your house can go down as much as 15 percent, depending on how many rentals are in close proximity to your home.

4. Major Upgrades

In this market, don’t count on getting more for your home if you just upgraded the plumbing, bought a new furnace, or replaced your roof. However, if your home does need those upgrades and you haven’t done them, then it’s going to knock as much as 20 percent off the value of your home, depending on how severe the upgrade is. Buyers simply don’t want to shell out for major upgrades – especially when there is a large pool of other properties to choose from.

[See the best personal finance stories from around the Web at the U.S. News My Money blog.]

5. Fencing

Most people looking to buy a house have kids or pets. If your home doesn’t have a fenced backyard, you’re going to alienate a huge portion of the market since fenced backyards are essential for keeping kids and pets safe and contained. Not having a fence can knock up to 10 percent off your home’s value.

Final Thoughts

Although many of these factors, like location and proximity to renters, are out of your hands, there are plenty of things you can do to increase the value and appeal of your home. For instance, buyers almost always choose light and airy homes over dark ones. Therefore, it’s beneficial to do whatever you can to bring a sense of light and space into your home. Other factors, such as fresh paint and a tidy lawn, make a great first impression as well. The important thing is to be realistic when deciding on a price for your home so that you can move it off the market as quickly as possible.

If you’ve sold your home before, what are some of the biggest factors that impacted the final selling price?