The Montreal Real Estate Blog

Canadian Home Sales to Dip in 2008 and 2009, Real Estate Agency Says - Canadian Economic Press
“Canada’s resale housing market will cool in 2008 and 2009, with the number of homes sold expected to drop and the pace of price increases to slow, according to a forecast issued Tuesday by the Canadian Real Estate Association (CREA).”
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More evidence housing market cooling - 660 News
“Two new reports are affirming the big chill is hitting our real estate market. R.B.C. Capital Markets is reporting a sharp decline in building permits is being led by this province, and the Canadian Real Estate Association says home sales will drop 19% in Aberta this year.”
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Interest rates drop half a point - The Star.com
“Bank of Canada governor Mark Carney has signalled the need for lower consumer borrowing costs and hinted further interest rate cuts may be required to shield Canada from a worse-than-expected slowdown in the United States. For the second time in eight weeks, the Bank of Canada slashed its policy-setting overnight interest rate by half a percentage point, to 3 per cent.”
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Big banks slow to react to Bank of Canada rate cut - The Vancouver sun.
“The Bank of Canada slashed its key interest rate a further half point, and hinted at more rate relief to come in an effort to keep Canada from being dragged into recession by a deeper and more protracted than expected downturn in the United States.”
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Canadian Mortgages Getting Cheaper, Variable Rates Gaining Popularity - CEP News
“With the Bank of Canada’s easing of interest rates over the last several months, including the most recent half-point reduction Tuesday, variable rate mortgages are gaining in popularity as Canadians try to take advantage of lower credit.”
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• Requirements loosened for rental investors [Montreal Gazette]
  No money down if lender satisfied. Tight market in some regions prompt CMHC changes.
  “Budding real-estate moguls will welcome the news that Canada Mortgage and Housing Corp. has relaxed the rules for would-be Donald Trumps to purchase investment properties with no money down.The changes apply to rental properties with a maximum of four units, but even The Donald had to start somewhere. CMHC has made the changes with the intention of easing the squeeze in the rental housing market.”
  Read the complete article
• More rate cuts likely says Bank of Canada [Financial Post]
  “More interest rates cuts may be necessary to buffer Canada from the impact of the U.S. economic slowdown, according to the senior deputy governor of the Bank of Canada.”
  Paul Jenkins said “the risks surrounding the Canadian economy have shifted to the downside, resulting in our decision to lower our policy interest rate by 50 basis points to 3.5%.”
  Read the complete article

• Canadian Home Prices to Moderate, but No Danger of Meltdown, Economist Says [CEP News]
  “Declining Canadian home sales and moderating home prices could sap domestic demand, a Canadian economist is warning.
  “Canada isn’t in danger of the same sort of real estate meltdown as experienced in the U.S. or the sudden hikes in interest rates associated with subprime mortgages, he said, but Canadians still need to be careful. The disappearance of strong domestic demand would have a negative impact on the economy, he added.”
  Read the complete article

• Longer payback loan fuels housing market [The Star.com]
  “There’s a revolution going on in Canada’s housing market, one that is propping up prices and extending the boom. More buyers are choosing mortgages with longer payback periods.
  By stretching payments over 30 to 40 years (instead of the usual 25), they can enter the market sooner or buy a better property. Mortgages with longer amortizations have caught on like a house on fire (pardon the pun).”
  Read the complete article

• Interest rates head south - but how far? [Times Colonist]
  “Canada’s mortgage rates are heading down. At a time when stock markets are volatile and with the economy and income growth slowing, the positive news for those planning to get into the housing market or whose loans are up for renewal is that it’s going to cost less to finance a mortgage.”
  Read the complete article

• Scotiabank Forum Predicts Another Healthy Year Ahead For Canadian Real Estate Markets (Exchange Morning Post)
  TORONTO - Canadian real estate markets remain remarkably buoyant, especially in light of the deepening housing downturn in the United States and the generally softening conditions in most other advanced economies globally, according to experts who presented today at Scotiabank’s Canadian Real Estate Outlook and Trends Forum 2008.
  >>> Read complete article

• Bank of Canada sets interest rate, Tuesday. (Globe and Mail)
  Bank of Canada makes its interest rate announcement. Economists expect the target for the key overnight rate to be set at 3.75 per cent, down from 4 per cent.
  >>> Read complete article

• Interest-rate cut expected, question is how much. (Financial Post)
  OTTAWA — It’s no longer a question of to cut or not to cut for the Bank of Canada, but of how low will it go. Canadians will find out Tuesday.
  >>> Read complete article

• Canada economy to slow, risks to downside - IMF (Reuters)
  Canadian economic growth will slow to 1.8 percent this year and there is a risk of an even sharper downturn as weakness in the U.S. economy spreads beyond the housing sector, the International Monetary Fund said in a report on Monday.
  After growing about 2.5 percent in 2007, Canada’s healthy economy and fiscal standing will help it withstand the global turbulence but external risks will pose a challenge. >> read more
  …….
• Canadian institutions expected to make writedowns (Exec Canada)
  Some of Canada’s five biggest banks are expected to report headline-catching writedowns when they announce first-quarter earnings. The banks have so far escaped with remarkably little damage from the credit market turmoil. >> read more
  …….
• Storm clouds threaten to rain on bank profits (Globe and Mail)
  Canadian Imperial Bank of Commerce said in January that it will take $2.46-billion (U.S.) in pretax writedowns for the two months ended Dec. 31 because of its exposure to the U.S. subprime mortgage market. >> read more
  
  …….
• UPDATE IMF lowers growth projections for Canada on back of US economic downturn (Forbes)
  Canada’s growth will likely decelerate further in 2008 and 2009 as a result of the sharp downturn in the US economy, the International Monetary Fund (IMF) reported. >> read more
  

• Bank of Canada’s Carney ponders degree of rate cut - (Reuters) The Bank of Canada has to weigh strong domestic demand against the spillover effects of the slowing U.S. economy when deciding how much to cut interest rates next month, Governor Mark Carney said on Monday. Carney used his first speech since becoming central bank chief on February 1 to convey that he is keeping his options open, suggesting he could potentially reduce the bank’s overnight rate by 50 basis points, as most market players expect.

>> Read the complete article on reuters.ca

• U.S. credit woes seep across the border (Globe & Mail)
  American subprime shemozzle is beginning to squeeze mortgage and funding availability in Canada.

“Canadian chartered banks have been the main source of financing for real estate projects, but they have got caught up in the U.S. subprime mess and have had to write off those investments. Now, they have returned to what is known as balance sheet lending - or traditional mortgage financing. To maintain government-mandated equilibrium between a bank’s equity and its loans outstanding, the banks have had to both call in loans and cancel commitments for new ones, industry observers say.”

“Intense competition for funds has both increased interest rates on mortgages and created a demand for higher cash-to-mortgage ratios, says David Bowden, president of real estate broker Colliers International Canada in Toronto.”

“The credit crunch is having its greatest effect in smaller centres, says Sheila Botting, senior managing director of Canada for the capital markets group at Cushman & Wakefield Lepage Inc.”

>>Read the complete article on Globe and Mail

• Rate cuts likely to trump inflation fears (Globe & Mail)
  The inflation watch is under way this week in Canada and the United States, but investors are betting the U.S. Federal Reserve Board will to continue to cut regulated interest rates despite price pressures, while the Bank of Canada is expected to play some catch up.It’s anticipated that domestic inflation data scheduled for release today will provide plenty of leeway for the Bank of Canada to lower its target overnight rate on March 4.>> Read the complete article on Globe and Mail

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TORONTO, Feb. 15 /CNW/ - BMO Bank of Montreal announced today it is
decreasing its residential mortgage rates, effective February 16, 2008. The
new rates are:
Fixed Rates: To: Change:
6 month open 8.90% 0.00%
6 month convertible 7.10% 0.00%
1 year open 9.40% -0.10%
1 year closed 7.25% -0.10%
2 year 7.30% -0.10%
3 year 7.30% -0.10%
4 year 7.19% -0.20%
5 year 7.29% -0.10%
6 year 7.45% -0.10%
7 year 7.65% -0.05%
10 year 8.00% -0.05%
18 year open 9.20% 0.00%

(The interest on fixed-rate mortgages compounds semi-annually, not in advance.)

The Five-Year Protected Variable Rate ceiling changes to 7.29%.

Special Offers(*)
To: Change:
3 year (fixed/closed) 6.23% - 0.10%
5 year (fixed/closed) 6.23% -0.10%
7 year (fixed/closed) 6.38% -0.05%

Homeowner ReadiLine(R)
5-year variable rate closed term 5.50% 0.00%

(*) These special discounted rates are not the posted rates of BMO Bank
of Montreal. Rates are subject to change without notice. Offer may be
withdrawn or extended without notice. Mortgage funds must be advanced
within 90 days of the application

OTTAWA, February 4, 2008 — Housing starts reached 228,343 units in 2007, an increase of 0.4 per cent from 227,395 in 2006, according to Canada Mortgage and Housing Corporation’s (CMHC) first quarter Housing Market Outlook, Canada Edition report. In 2008, residential construction will decline to about 211,700 units, given higher mortgage carrying costs. Nevertheless, Canada’s housing market remains strong and 2008 will mark the seventh consecutive year in which housing starts exceed 200,000 units.

“Despite some global financial instability with regards to the U.S. housing market, Canada continues to experience robust employment levels, ongoing income gains and low mortgage rates,” said Bob Dugan, Chief Economist for CMHC. “This has strongly supported Canada’s housing markets. However, housing starts are expected to decrease in 2008 mainly due to recent increases in house prices, which will push mortgage carrying costs higher for home buyers.”

Existing home sales, as measured by the Multiple Listing Service (MLS^®)¹, are poised to experience a very strong year with about 520,000 units in 2007, a 7.6 per cent increase over 2006. In 2008 the level of MLS^® sales is expected to fall by 3.9 per cent to 499,650 units, while 2009 will see an additional decrease to 488,300. Growth in the average MLS^® price has remained high at 10.6 per cent in 2007, mainly because of continued strong price pressures in Canada’s western provinces. However, as most resale markets move toward more balanced conditions, growth in average MLS^® price is forecast to slow to 5.2 per cent in 2008 and 3.8 per cent in 2009.

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