CMHC breathes a sigh of relief

The CMHC is revising it’s forecast for housing starts in the slightly upward direction thanks to the US decision to keep interest rates at rock bottom levels:

The outlook runs contrary to a report in July from TD Economics, which projected that Canada’s housing market was poised to correct over the next two calendar years, with resale activity falling 15.2 per cent and average prices dropping 10.2 per cent.

“A combination of more subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages and fewer first-time home buyers are expected to be the chief culprits behind the slowdown,” said the report, prepared by deputy chief economist Derek Burleton and economist Sonya Gulati.

Earlier this summer, BMO Capital Markets warned that the Canadian market could suffer a price setback if there is a rapid rise in interest rates due to higher inflation, an increase in unemployment because of a weak U.S. economy or a slowing in foreign investment.

CMHC, however, projects that despite a slowing in the second half, average resale prices will deliver an overall increase in 2011, and continue to rise, albeit at a more modest pace, in 2012.

Laberge said the key reason for CHMC’s positive outlook is the call later in the summer from U.S. Federal Reserve chairman for interest rates to remain at rock-bottom rates into 2013.

As a result, he said, “We expect mortgage rates will be flat this year and to start increasing only later in 2012.”

Read the full article here.

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ReadyToPop
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ReadyToPop

“We have created a very bad precedent,” said Jim Paulsen, chief investment strategist for Wells Capital Management in Minneapolis. “The financial markets whine and policy officials jump. The Fed has become the Pavlov’s dog of the stock market, and this is a horrible precedent for policy makers.”

Why Bernanke may forgo easing

YLTN @ Work
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YLTN @ Work

@gordholio:

Gordholio, you've been moderated…my comment was posted after yours and is up; let the flaming begin!

coastal
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coastal

Muir calling for flat markets is the death knell for BC. The easy money is gone, never to be seen again in our lifetime. The sheep are maxed out, and the smart HAM money is long gone back to China.

N
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N

@coastal:

Are you really old or do you just not plan on living long? Easy money comes and goes in cycles. In 20 years people will have forgotten this, just as they have the last one.

Patiently Waiting
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Patiently Waiting

Just watched a story on Global News about a long-time failed condo project in Kelowna. I believe it was called The Conservatory.

After ten years sitting idle, they are building it again. Only now it will be rental buildings. I wonder how they made the numbers work.

Patiently Waiting
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Patiently Waiting

"But about $45 billion is with the riskiest group—buyers with less than 10% equity. These people could be wiped out if there’s a sharp correction.

The banks won’t lose. Only Ottawa will. It’s too late to do anything about those insurance policies now—we’re on the hook. But it’s not too late for Mr. Flaherty to show up at the CMHC board with a new set of orders: Shrink it."

http://www.ctv.ca/generic/generated/static/busine