BARBARA GRUMME’S BLOG!

Get ready for steep rate hikes in 2011: economist

OTTAWA — When the Bank of Canada does start raising its key policy interest rate in either late 2010 or early 2011, Canadians should brace for “aggressive” increases of up to a percentage point at a time, says a report from the chief economist at Laurentian Bank Securities.

The call, from Carlos Leitao, adds a new wrinkle to the debate as to whether the central bank will be able to keep its pledge to leave its key policy rate at 0.25%, or the lowest level possible, until June 2010 in an effort to stimulate the economy. This analysis kicks off a debate in terms of how aggressively the central bank needs to act once it believes rate increases are in order.

The Montreal-based economist said he believes Mark Carney, the Bank of Canada governor, will be able to keep his June 2010 promise, based on the amount of spare capacity in the economy and continuing job losses that are likely to peak early next year.

The Bank of Canada is likely to begin hiking rates after unemployment peaks (in early 2010) and before inflation hits the preferred 2% target (sometime in mid-2011). Once that period comes, Canadians should prepare for steep rate hikes.

“An aggressive tightening – rather than a gradual one — will be necessary because rates are extremely low,” Mr. Leitao said in LBS’s weekly note to clients released Wednesday. “A ‘measured pace’ would not be appropriate to ‘normalize’ rates when the starting point is virtually zero.”

Analysts say one of the key causes of the financial crisis was that the U.S. Federal Reserve kept its key policy rate too low for too long. When it did begin raising rates in 2004, they say, the Fed opted by gradual increases of 25 basis points – not nearly aggressive enough, in retrospect, to cool down the white-hot housing bubble that resulted in the financial market meltdown almost a year ago.

Mr. Leitao said should the Bank of Canada take a similar path like the Fed did earlier this decade, its key policy rate would be at just over 3% by the end of 2011.

“This could well prove to be too low for an economy that would be running at a decent pace with inflation already at the 2% target,” he said. “This means we are likely to see a mix of 50, 75 and even 100 basis points hikes — when the time comes.”

The Bank of Canada releases its latest interest-rate statement on Thursday, and analysts are near unanimous that it is unlikely to contain much change. The central bank will leave its target rate unchanged and reiterate its commitment to leave it there until mid-2010.

Information by

Paul Vieira, Financial Post 

Dorm it or own it?

Helen Morris, National Post 

As teens across the country are settling in to university, many, particularly first-years, will have moved into residence. The meal plans and structure of residence life can ease the transition to adulthood — as well as afford parents peace of mind.

The alternative is to head off campus and rent private housing. But as families increasingly review the finer points of their finances, they may opt to buy a property for the duration of their child’s studies so that they may get a return on their investment when Johnny finally goes off to work.

But before starting the research, before inspecting any properties or checking on financing, it is essential to take a very close look at the type of person your child is.

“You’ve got to make sure that your child is mature enough to handle [home ownership], otherwise you’re going to bear the burden of maintaining the house,” says John Nardi, a financial advisor at Edward Jones who has a number of clients who have bought property for children at university. “You don’t want to handhold them through the entire process … the child needs to be able to maintain the home. Make sure that they understand it’s their place and therefore [they must] treat it as such.”

Toronto realtor Julie Kinnear asks, “Are they responsible enough? That’s my bottom line. There’s a lot of costs involved in buying and selling; you can’t take it lightly,” and it’s not just a financial commitment. “I’ve had [situations] … where the student is so rowdy that the other owners in the building don’t want them to live there.”

Once you are sure your child can handle the rigours of owning and running a home, you must decide whether to invest in a house and perhaps rent out some of the rooms to your child’s friends or to buy a condo that may only house your child.

“One of my clients was going to buy a townhouse for her daughter in Kingston, but her daughter said ‘OK, well there’s six of us living together.’ To which the mother replied, ‘I’m not running a sorority.’ “

A property that is relatively easy to maintain should be a priority, Mr. Nardi says, so that the child does not get overwhelmed with the responsibility and allow studies to suffer.

Another issue to weigh when deciding whether to buy or rent is the length of time you will likely keep the property.

“A four-year university degree, that’s a relatively short period of time,” says Murray Pituley at Investors Group. “If in that time period, the market goes down, you could be sitting with a house that is worth a lot less than what you purchased it for. That’s a risk the parent has to be willing to take.”

Of course, when any young person leaves home, things don’t always turn out according to plan.

“There are a lot of surprises that could occur. You could buy a house for a child, thinking that child is going to go through university,” Mr. Pituley says. “Three months into it, he says, ‘Dad, Mum university is not for me … I’m going to quit.’ All of a sudden… you’re left holding all the risk, so to speak.”

Mr. Nardi says a tax expert can help decide whether to buy the house as an investment property in your own name or to give your child the money to purchase and hold the title. As the owner, expenses can be written off for an investment property, but capital gains tax will be due when the property is sold. However, there are ramifications for the future if the property is in the child’s name.

“When the child is ready to buy their next home they cannot take advantage of the first-time home buyers’ plan … because they’ve already owned a home,” Mr. Nardi says.

“I wouldn’t advise clients or anybody to focus on return on investment,” he adds. “To me, the biggest return on investment is what your kids are going to learn from owning something.”

Is buying a student a house better than renting?

Garry Marr, Financial Post 

It’s nearly back-to-school time and the last thing Pierre Ferland wants to talk about is student housing.

The chief executive of Maestro Realty Advisors, which is 55% owned by Caisse de depot et placement du Quebec, is leaving the student housing business — tired of the endless challenges of upkeep.

“We have four properties and we are probably going to exit them. We didn’t have a lot of success,” says Mr. Ferland. “We underestimated the management side of that business. It’s students, they don’t really care.”

Think John Belushi in Animal House.

If a CEO of a company that manages billions in real estate funds doesn’t think much of investing in student housing, should you be thinking about buying a property for your university-bound child?

It’s a tempting proposition for sure, when you consider the costs of housing. Even with today’s sky-high university fees, the bulk of the cost for sending your child away to university is going to be food and lodging.

Halifax-based broker Al Demings, a former executive director of the Nova Scotia Association of Realtors, says with five universities in his vicinity, a small chunk of the housing market has been dedicated to investment properties housing students.

“Starting in the late spring, June and July, we start to see people coming in looking to [invest]. It’s fairly common, I’ve dealt with several myself,” says Mr. Demings who works for Re/Max Nova. “If you’ve got a doctor in Toronto who is sending his daughter through Dalhousie Medical School, he knows she’s going to university for at least four or five years. They treat it as an investment and they’ve done quite well.”

There’s really two ways to go if you are considering buying a property this way: One is to buy a small condo for your child and the other is to buy a house and rent rooms.

“We are actually seeing students buying housing themselves. They scrape together money, rent to other students, and they come through university with no debts,” says the real estate agent.

One bedroom with a shared kitchen can easily generate $500 per month in rent. Multiply by three bedrooms and you’ve got $1,500 in rental income for that house. The price of a four-bedroom house can run from $250,000 to $400,000, but based on 20% down, the mortgage on a $300,000 home, for example, could be carried from the rent alone (based on today’s interest rates and a 25-year amortization schedule).

“The one thing that happened on the negative [side] is this option became so popular that values of homes were inflated,” says Mr. Demings. But that was two years ago, he says, and prices have since declined.

The one-bedroom option is probably a simpler way to go. In Halifax, a small condo that costs $200,000 to buy could rent for $900 a month. Four years of university could easily amount to $40,000 in rent because students generally have to pay for the summer months, which are almost impossible to sublet.

Let’s say you did buy that condo and put 20% down. Based on a four-year closed mortgage at 4%, your mortgage payments would be less than $850 per month. Taxes and condo fees would probably add another $325 to the monthly bill.

The bill is higher than the rent, but you are saving principal, a small amount in the first four years of a mortgage.

The real bet is on capital appreciation, which would have to be enough to offset the transaction costs and capital gains tax when you do sell it.

It’s a gamble and one that Al Nagy, an Edmonton-based certified financial planner with Investors Group, says a few of his clients have taken. He generally advocates owning versus renting, when you can make it work.

“You realize when you get into this type of investment, it’s almost an occupation. It’s a second source of income but you have effectively become a landlord,” says Mr. Nagy. “It’s more high maintenance because you do have to worry about when the plumbing breaks down.”

That everything includes the parties that are as much a part of university education as the academics. Do you want to invest in that?

Here an article I found that I think will interest all of you as far as how rates are likely to go in the next while.

Rates Flat Till 2011?

 Here are some of the more notable interest rate and housing-related headlines from the past week:

Central banks signal low rates here to stay Recession may be over but growth will be limited next year: CIBC Worst is Over for Housing Market, Economists Say Among the takeaways…

CIBC economist, Avery Shenfeld, proclaims: “Canada’s inflation rate will be no threat to the Bank easily fulfilling its pledge to keep interest rates at a slim quarter point through mid-2010. In fact, market expectations for rate hikes in the first half of 2010 could be a full year too premature.”

Bank of America Securities-Merrill Lynch says it does not expect the Bank of Canada to begin raising rates until 2011.

National Bank economist, Marc Pinsonneault, believes mortgage rates won’t rise over the next 12 month by more than 50 to 75 basis points from today’s 5.85% five-year fixed posted rates.

On the housing front…

TD economist, Don Drummond, says: “A similar pattern in [the US and Canada] is unmistakably suggesting we’ve not only bottomed in housing, but we’re on the way back up.”

BMO Capital Markets economist, Jennifer Lee, agrees, saying: “The housing market has clearly turned the corner.”

As usual, long-range forecasts are fraught with hazards, so the above should be placed under the “For what it’s worth” heading…

If you have any questions regarding this information or any other mortgage related info please give me a call and I will set up a time for us to get together.

Michael Brooks

Mortgage Agent, FSCO License #M08004068

Home Loans Canada, FSCO #10423

PH# 905-329-2223

Email: michael.brooks@hlcmortgages.com

Simple steps
Start by being informed. Educate yourself about influenza strains, vaccination risks, and the public health laws that may require you or your children to undergo either mandatory vaccination or quarantine. (This is just in case things are blown completely out of proportion.)

Take care of your health to reduce or eliminate your risk of contracting the flu. The key is to keep your immune system strong by following these guidelines:

* Eliminate sugar and processed foods from your diet. Sugar consumption has an immediate, debilitating effect on your immune system.

* Take a high quality source of animal-based omega 3 fats like Krill Oil.

* Exercise. Your immune system needs good circulation in order to perform at its best for you.

* Optimize your vitamin D levels. Vitamin D deficiency is the likely cause of seasonal flu viruses. Getting an optimal level of vitamin D will help you fight infections of all kinds.

* Get plenty of good quality sleep.

* Deal with stress effectively. If you feel overwhelmed by stress, your body will not have the reserves it needs to fight infection.

* Wash your hands. But not with an antibacterial soap. Use a pure, chemical-free soap.

Good Afternoon,

I found this item in my travels today. Hopefully you will find this interesting.

More young Canadians taking advantage of low interest rates in housing market By Luann Lasalle (CP) 1 day ago

  Younger Canadians are expected to lead the way with home buying this year as they take advantage of low interest rates, new jobs and what they consider “good prices,” a bank survey says.

The survey for the Royal Bank suggested that 15 per cent of Canadians between the ages of 18 and 24 were very likely to buy, almost double from eight per cent in 2009.

It’s a marked shift in the attitudes of younger Canadians, who have tightened their budgets over the past few years to cope with tough jobs markets and the recession.

“Our poll found that 35 per cent of younger Canadians, between the ages of 18 and 24, are intending to buy a home due to good real estate prices,” Marcia Moffat, RBC’s head of home equity financing in Toronto, said Monday.

The national average price for a home was $328,537 in January, according to the Canadian Real Estate Association.

Thirty-one per cent of 18 to 24-year-olds surveyed in the online poll said they would buy a house because of a new job. The survey also found 22 per cent in that young age group wanted to buy a home because they considered interest rates were good.

CIBC World Markets senior economist Benjamin Tal said more young people are getting into the real estate market, taking advantage of low interest rates, lower down payments and more years to pay off their mortgages.

Tal said he estimates the young people getting into the market as a bit older, between the ages of 22 and 28.

“Basically parents are begging their kids to buy now because they remember when they were paying 12 to 15 per cent mortgage interest,” Tal said.

“So there’s a sense of urgency to get into the market and young people are a part of it.”

Tal described the coming real estate market of the next three or four years as “boring.”

“I think that what we are doing now is that we are basically stealing activity from the future.”

The RBC survey also suggested that overall attitudes are changing as more Canadians return to shopping for homes as the economy recovers, even though it’s considered a seller’s market.

“Confidence in the housing market is back, essentially,” RBC senior economist Robert Hogue said.

Royal Bank said the study found more Canadians are “very likely” to buy a new home in the next two years.

Ten per cent of the 2,047 people of all ages surveyed for the study said they planned to buy a home within two years - up from seven per cent two years ago.

The RBC study also found that 91 per cent of Canadian homeowners believe a home is a good investment, the highest level in 12 years.

“At this stage last year, there was doom and gloom all around and it definitely affected the housing market,” Hogue said.

One-quarter of those surveyed, 26 per cent, said they expect their home to be their primary source of income when they retire.

However, the surge in optimism doesn’t necessarily mean that Canadians have forgotten about past economic troubles.

The survey found they are still more cautious when it comes to mortgages. Forty-four per cent of those surveyed who plan to buy a home in the next two years said they would take a fixed-rate mortgage.

Also on Monday, the latest new homes numbers showed that the annual rate of housing starts were up in February.

The Canada Mortgage and Housing Corp. said that the seasonally adjusted annual rate of housing starts reached 196,700 units in February, an increase from 185,400 in January 2010.

Senior CMHC economist Bill Clark said the market is seeing a lot of “catch-up” and consumers in Ontario and B.C. are likely trying to avoid the harmonized sales tax before the summer.

“So if you roll all of that together it’s really sort of one big recipe for housing starts to go up,” Clark said.

The report showed the gain was concentrated in the multiple starts segment, particularly in Toronto.

Urban starts increased nine per cent to 179,100 units in February.

Urban multiple starts increased by 19.1 per cent to 89,900 units, while single urban starts increased by 0.5 per cent to 89,200 units.

The annual rate of urban starts increased 28.6 per cent in Ontario in February, 14.3 per cent in Atlantic Canada, 10.8 per cent in the Prairies and by eight per cent in British Columbia.

In Quebec, urban starts fell 14.1 per cent.

Rural starts were estimated at a seasonally adjusted annual rate of 17,600 units in February.

In these important times you don’t want to lose any potential clients. Now is the time to make sure you help your clients out by recommending the best mortgage agent possible. My experience and knowledge of the mortgage industry has made me successful for over 10 years .

Michael Brooks

Mortgage Agent, FSCO #M08004068

Home Loans Canada, FSCO #10423

This is the best time to replace the batteries in your smoke alarms and carbon monoxide detectors.

If your smoke alarm, or carbon monoxide detector is over 10 years old it is recommended that they be replaced. They have a life span of about 10 years.

This is also a good time to get into the habit of testing your smoke alarm on a regular basis.

A candle will smolder after it is blown out. This smoke should activate the smoke alarm if placed directly below it.

REMEMBER; Only WORKING smoke alarms save lives!

Test YOUR smoke alarms and carbon monoxide detectors to-day.

I found a few places that will help wheelchair transportion

http://niagara.cioc.ca/record/NIA3958?UseCICVw=63&Number=0  <– 50 taxi

http://niagara.cioc.ca/record/NIA2014?UseCICVw=63&Number=6   <– First Student Canada

http://niagara.cioc.ca/record/NIA2777?UseCICVw=63&Number=30   <– other informaiton that might help.

http://niagara.cioc.ca/record/NIA1104?UseCICVw=63&Number=0  <– Red Cross - volunteer transportation

http://niagara.cioc.ca/record/NIA0137?UseCICVw=63&Number=2 <— Niagara chair-a-van

http://niagara.cioc.ca/record/NIA2141?UseCICVw=63&Number=3 <– Niagara transit

http://niagara.cioc.ca/record/NIA1418?UseCICVw=63&Number=4 <– Niagara Specialized Transit - door to door

http://niagara.cioc.ca/record/NIA5721?UseCICVw=63&Number=7 <– This may apply depending on were you live
–

www.century21.ca

From February 14, 2010 through March 16, 2010,

Our website generated 128 online leads, including 3 new Account registrations.

Of the 5,527 total visitors, 3,458 were new visitors and 967 were returning visitors.

Visitors to your website previewed 24,083 properties, viewed 38,622 property details,

and launched 2,530 Showcase 21 tours.

Good Morning,

I just wanted to give you this info that will help you be informed on the inflation issue and how it may effect our business.

Inflation jump causes more interest rate speculation

| Monday, 22 March 2010

Some experts are predicting Bank of Canada interest rate hikes are less than three months away after Statistics Canada reported core inflation jumped to 2.1 per cent in February. This compares to the central bank’s outlook of a 1.6 per cent average core inflation rate in the first quarter of 2010.

“We’re progressively leaving the recovery phase,” Yanick Desnoyers, assistant chief economist at National Bank Financial in Montreal told the Globe and Mail. He added policy makers “are going to change their tone on the economy in April, and they’re going to move in June. The longer they wait, the more aggressive they’ll have to be.”

Inflation wasn’t predicted to reach the Bank of Canada’s two per cent target until the third quarter of the year and some are saying the effect of the Olympic Games in Vancouver - which drove up costs, particularly in the hotel sector - caused the jump. The inflation numbers also contributed to a surge in the Canadian dollar, which hit a high of 99.38 cents U.S. on Friday.

“[This] report must be turning heads at the Bank of Canada,” economists Derek Holt and Karen Cordes Woods at Scotia Capital told the Financial Post. “While the details are mixed on the underlying components, it is pretty difficult to argue that emergency rates in Canada [of 0.25%] are still warranted.”

In contrast, the Post said economists at TD Securities don’t expect the Bank of Canada to over-react to the new number because “one-off factors” are well-identified.

In these important times you don’t want to lose any potential clients. Now is the time to make sure you help your clients out by recommending the best mortgage agent possible. My experience and knowledge of the mortgage industry has made me successful for over 10 years .

Michael Brooks

Mortgage Agent, FSCO #M08004068

Home Loans Canada, FSCO #10423

PH# 905-329-2223

Email: michael.brooks@hlcmortgages.com