Wednesday, October 26, 2011

Half of Manitobans Not Saving Their Money

Half of Manitobans Not Saving Their Money
Canadians are not saving enough money and don’t feel optimistic about the future, that’s according to a new study out today. The survey conducted by Royal Bank of Canada says 57 percent of Canadians don’t have savings for a rainy day fund, and those who do, tend to use the funds to pay for every day expenses. “It speaks to the importance of having a plan for a rainy day, for retirement and for some of the unfortunate unforseens in life such as disability.” says financial consultant Leslie Hamilton with Investors Group. The study also found nearly half of people in the prairies aren’t saving for a rainy day fund with 27 per cent saying they dip into their savings for every day spending or emergency. 27 year old Jason Andrews says he’s struggling to save money these days. “It still just seems like you could never really get ahead, it’s tough to save,” said Andrews. Andrews who recently bought Winnipeg Jets season tickets says he now plans on cutting back on expenses he doesn’t really need. “I’d say anything on my car would be too much, buying a TV big screen just anything that I would have to use my credit card,” said Andrews.

Some say inflation is also hurting consumers but the survey also found Manitobans are also optimistic about the future and plan on reducing their debt this year. “Consumers here in Saskatchewan and Manitoba are concentrating on very positive ways to help mange their debts,” said Rob Johnston, regional president for RBC. University of Winnipeg student Brittany Thiessen isn’t hopeful she’ll be able to save until she pays off her debt. “Well a lot of my money goes towards paying tuition and books are also very expensive and then once you pay for that you really don’t’ have much left over,” said Thiessen.

Most British Columbians Put Savings on Hold to Pay Down Expenses
Nearly six in 10 British Columbians – 58 per cent — are not saving for a rainy-day fund, while 32 per cent are using savings for daily expenses or emergencies, according to the October RBC Canadian Consumer Outlook Index released Wednesday. While the B.C. numbers are slightly higher than the national average — 57 per cent and 30 per cent, respectively — British Columbians also intend to take action in managing their finances in the coming year, with 28 per cent planning to reduce debt, 30 per cent planning to spend less, 19 per cent hoping to save or invest more and 24 per cent planning to do all three. The report found that 58 per cent of B.C. consumers have delayed making a major purchase such as a car, household appliances or vacation because of the economy.

Monday, August 29, 2011

Canadian Delusions of Debt

Delusions of Debt Freedom Abound
Canadians have an unrealistic vision of their financial futures. A new CIBC poll conducted by Harris-Decima found most Canadians think they’ll be debt-free in another decade or so when, in fact, that isn’t likely to happen.One key finding is that across all age groups (18 to 64), Canadians, on average, believe they will be debt-free 10 to 15 years from their current age. However, the CIBC report notes that many Canadians still hold debt beyond the average age identified by each age group.For example, Canadians 25 to 34 believe they will be debt-free, on average, by age 44. Yet among today’s 45 to 54-year-olds, only 18 per cent report being debt free, suggesting today’s 25 to 34-year-olds are in for a bit of a rude shock. Overall, the poll found Canadians expect they will be debt-free by age 55, but in fact only 35 per cent of today’s 55 to 64-year-olds have actually reached credit nirvana.

Saturday, July 30, 2011

Record Household Debt Could Be Canada's Undoing

Record Household Debt Could Be Canada's Undoing
The very thing that lifted the economy from the depths of the recession — Canadians’ passion for owning a home — could also be its undoing, warns the chief economist for RBC Global Asset Management. Central to Eric Lascelles’ concern is that the availability of cheap credit has driven household debt levels to record highs and soon-to-be-rising interest rates will bear a “palpable” impact on individuals as well as the broader economy.“The very source of Canada’s relative success during the worst of the credit crunch — a banking sector that kept on lending and households that kept on buying — could yet spell its undoing if newly enlarged household debt loads prove too onerous to bear,” Mr. Lascelles says in a report issued Tuesday.

Friday, July 15, 2011

Canada House Prices vs Rent 1980-2010

Canada's Income Gap Widens

Canada's Income Gap Widens
The income gap between rich and poor in Canada widened in the period from 1993 to 2009, the Conference Board of Canada reported Wednesday. The richest Canadians increased their share of total national income while the poor and those with middle incomes saw their portions shrink, according to the board's analysis, entitled "How Canada Performs." Incomes of the poor increased marginally in the period, it said, but the gap between rich and poor widened. The average income of the poorest Canadians rose from $12,400 in 1976 to $14,500 in 2009....The average income in 1976 was $51,100. By 2009, it had increased by 17 per cent to $59,700, even after adjusting for inflation.But using the measure of median income, which divides the sample into two equal parts and better reflects how the majority of people are doing, the growth was only 5.5 per cent.

Thursday, July 14, 2011

Wednesday, July 13, 2011

TD Warns, House Prices To Fall

Home Prices To Fall, TD Warns
The average price of a resale home in Canada will fall by more than 10 per cent over the next couple of years, an analysis by TD Economics predicted Wednesday. Calling it a "moderate correction," the report's authors also say sales will decline by more than 15 per cent over the same period."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," the report said. TD economists profiled 12 urban markets across the country. They highlighted Vancouver and Toronto — currently the two most expensive housing markets in Canada — as the cities most vulnerable to a larger-than-average decline, "reflecting in part their exposure to the condominium segment, which appears particularly ripe for a correction."

TD Report

Wednesday, July 6, 2011

Canadian Debt Hits Record High

Canada Household Debt Rises
Canadian household debt hit a fresh high as consumers continued to borrow at a faster rate than their wages grew—heightening a key vulnerability of the country's otherwise healthy-looking economy. Economists, as well as the nation's central bank, have increasingly warned against rising household debt, as Canadians borrow at a healthier clip than even their typically more profligate American neighbors. U.S. borrowers have recently reined in their own debt after a deep recession and housing-market bust there. Canadians, meanwhile, have binged on debt, encouraged by mostly rising home prices, low interest rates and economic-growth prospects that are among the best in the Group of Seven. The quarterly ratio of household credit debt—incorporating mortgages and consumer loans—to disposable income hit 147.3% in the January-to-March period, up from 146.2% in the preceding quarter, according to Statistics Canada data released Monday. That's the highest level since the agency began keeping these figures, dating back to 1990. It is also up sharply from just four years ago, when the figure was 127%.

Canada's Bubble About to Burst
The London-based research firm Capital Economics Ltd. has added a new spark to Canada's housing debate with its assessment that the country's real estate market is a bubble that is about to pop. The boom in Canadian real estate has "resulted in the largest rises in house prices ever seen in Canada," the firm says. "And the trigger of an increase in the Bank of Canada's trendsetting interest rates could result in a 25-per-cent drop in property values," it adds. The organization released the research earlier this year in a report for its subscribers, and it received new currency from Bank of Canada Governor Mark Carney's statement, given earlier this week, warning Canadians that they should expect real estate prices to begin to moderate. However, while Carney did not use the word bubble, Capital markets wasn't shy about doing so.

Wednesday, June 15, 2011

Household Debt Hits Record $1.5-trillion

Household Debt Hits Record $1.5-trillion
Household debt has hit a troubling $1.5-trillion, sparking new fears that the heavy burden on Canadian consumers could hurt the economy, particularly as fiscal stimulus fades.The figure, from a report Tuesday by the Certified General Accountants Association of Canada, means that if household debt were distributed evenly across all Canadians, a two-child household would owe an estimated $176,461, including mortgage costs...About 27 per cent of working Canadians aren’t saving, while single-parent families, retirees and households with an income of $50,000 and under are in particularly dire straits. Single parents were the only family category listed in the report where debt climbs with age, and one-third of retired households are burdened by an average debt of $60,000. Households with an income of less than $50,000 are “six times more likely to be financially vulnerable in terms of their debt-service ratio,” the study said.

Carney Warns On Housing Markets

Carney Warns On Housing Markets
Mark Carney is issuing a sharp warning that the housing market may be overheating, as his ultra-low interest rates, combined with too much optimism on the part of buyers, fuels prices in the country’s hottest markets. Even as growth in mortgage credit has started to slow and prices are expected to moderate, investment in residential properties nationwide is now near peak levels, Mr. Carney said in a speech to the Vancouver Board of Trade. Without using the word “bubble” to describe a housing market where prices are now 13 per cent above their pre-recession peaks, and without saying the Bank of Canada will take specific measures to tame the sector, Mr. Carney left little doubt that he is concerned.

The risk is that expectations become extrapolative, prompting the classic market emotions of fear and greed – greed among speculators and investors, and fear among households that getting a foot on the property ladder is a now-or-never proposition,” he said. Tellingly, Mr. Carney noted that in Vancouver, the country’s priciest market, as in other “globalized” markets like Sydney and Hong Kong, Asian wealth is coming in as investors diversify and look for hard assets, fuelling valuations that in some cases are “extreme.”...Indeed, while the mortgage market in Canada is more conservative than in the United States, where the subprime lending collapse triggered the 2008 financial crisis and Great Recession, Mr. Carney said real estate loans now make up more than 40 per cent of Canadian banks’ assets, compared with 30 per cent a decade ago, a situation he called “unprecedented exposure.”

Friday, June 10, 2011

Retire At 80?

Many Of Us Won’t Be Able To Retire...
We all think it’s a panacea. If you don’t have enough money saved for retirement, you’ve got a few ways to close the gap between what you have and what you need in your nest egg: Save more, invest more aggressively, and/or work longer. Well, it turns out that working longer is indeed an option, according to the Employee Benefit Research Institute latest study. The only problem is that the latest research shows that you’ll have to work much longer than you anticipated. In fact, many Americans will have to keep on working well into their 70s and 80s to afford retirement, according to the study, titled “The Impact of Deferring Retirement Age on Retirement Income Adequacy.”

What’s more, it’s even worse for low-income workers, according Jack VanDerhei, one of the co-authors of the study. Those who earned (on average over the course of their careers) less than $11,700 per year, the lowest income quartile, would need to defer retirement till age 84 before 90% of those households would have just a 50% chance of affording retirement. Those who earned between $11,700 and $31,200 will need to work till age 76 to have a 50% chance of covering basic expenses in retirement. Those who earned between $31,200 and $72,500 will need to work to age 72 to have a 50% chance and those who earned more than $72,500, those in the highest income quartile, catch a break; they get stop working at age 65 to have a 50/50 chance of funding their retirement.

Wednesday, June 8, 2011

Asian Real Estate Influx

Vancouver Primed For Housing Correction: BMO

Vancouver Primed For Housing Correction
Vancouver’s housing market looks primed for a correction, according to a report from BMO Nesbitt Burns, with the average house now costing “an astounding” 11.2 times a family’s average income -- more than double the national average. But senior economist Sal Guatieri said there’s hope that any drop in prices could be less severe than previous corrections -- “if interest rates stay low and wealthy immigrants continue to pour into the city, prices could stabilize sooner than in past downturns.”The city has seen four corrections in the last 30 years -- in 1981-82 (-30 per cent), 1990-91 (-14 per cent), 1995-96 (-20 per cent) and 2008-09 (21 per cent). Even so, the average house has gained 21 per cent in the last year, or a whopping 188 per cent in the last decade and was worth $815,000 at the end of April.

Government Intervention Needed In Canadian Real Estate

Is Government Intervention Needed To Stop The Rise In Canadian House Prices?
High housing prices across the country have some wondering if government intervention is needed to make owning a house a realistic goal for the average Canadian family. A BMO Capital Markets report, released Tuesday, suggests that while a real estate market correction is imminent, low interest rates, and levels of immigration and foreign investment have buoyed home prices to historic heights when compared to family incomes. "At 5.1-times median family income, housing is by no means cheap, costing an extra two years of gross income compared with 2001, when the boom began and valuations were closer to historic norms," noted the report. In Vancouver, Canada's most expensive city, the average-priced home is now an astounding 11.2 times family income, more than double the decade earlier ratio and the current national figure. "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," the report stated.

Monday, June 6, 2011

Madani: Canadian Real Estate Overvalued

Building Permits Drop
But Madani said he does see trouble down the road — in late 2011 and 2012 — because Canadian home prices are substantially overvalued. He predicts as much as a 25 per cent drop in home prices in the coming years. As soon as prices drop, he said, construction activity follows because builders want to avoid a glut of unoccupied homes on the market. "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 overbuilt condominium sector — especially in big cities like Toronto and Vancouver — has also started to weigh down the market.

Wednesday, June 1, 2011

Canadian Consumer Debt At 26,000

Canada's Personal Debt Rises
Canadians rang up five per cent more in personal debt in the first three months of 2011 compared with 2010, according to a report released Wednesday. TransUnion, a Chicago-based credit specialist, said the average Canadian had almost $26,000 on his or her credit card, bank lines of credit and other borrowing vehicles — excluding mortgages — during the January-to-March period. That amount represented a jump of more than $1,200 compared to the same three months one year earlier.

Tuesday, May 17, 2011

Home Prices Continue Climb

Home Prices Continue Climb

Canadian home prices continued their upward march in April, driven by strong investor demand in Vancouver, as cracks in the Toronto condominium market may be starting to appear.The Canadian Real Estate Association said yesterday the average price of a home sold in April in Canada was $372,544, up 8% from a year ago. It was the third straight month that the average price rose 8% on a yea-over-year basis but the Ottawa-based group cautioned that the figure was skewed due to “surging multimillion-dollar property sales in selected areas of Greater Vancouver.”...orries about the sustainability of the housing market could be stoked by a report from Urbanation Inc., which monitors the Toronto condominium market. The group says more than 50% of condominiums purchased in the last year were by buyers who do not intend to occupy their units and plan to rent in many instances. Condominium rents in Toronto in the first quarter of 2011 were $2.11 per square foot compared to $2.09 a year earlier, a 0.8% increase. Condominiums being registered now and ready to be occupied are priced for sale at $450 per square foot range while newer units are going for $550 per square foot.

Saturday, April 23, 2011

Canadians Struggling To Save

Canadians Struggling To Save
Many Canadians are finding themselves caught between the struggle to save money and repay their debts, says a survey from TD Bank. And with interest rates expected to rise this summer, clearing debts probably won't get any easier. In the report, 38 per cent of Canadians surveyed said they had no savings at all. "I think it's worrisome," said Carrie Russell, senior vice-president of retail banking at TD Canada Trust (TSX:TD). "The reality is that we are all going to come into unexpected expenses from time to time, be it a car or health or a job loss and this can really derail you and your family if you have no cushion behind you," Russell said from Toronto. Russell said the major factor preventing Canadians from saving is that they are using disposable income to pay down debt, whether it be credit cards, car loans or mortgages. She recommends a cushion of three to six months of income saved to get through unexpected financial shocks. One-third of Canadians who responded to the recent online survey also said they didn't have enough money to cover living expenses like rent or food bills. The survey found that 54 per cent of the 1,003 people who took part in the survey said it was a real struggle or impossible to save.

Wednesday, April 13, 2011

Winnipeg House Prices Surpass National Average

Two-storey Digs Ride Price Rocket
THERE'S a new filly leading the local house-prices derby -- the standard two-storey home, according the latest survey by Royal LePage. The real estate firm said Tuesday the average selling price of a two-storey home in Winnipeg increased at one of the fastest paces in Canada during the first quarter this year, jumping by 7.1 per cent to $297,125 from $277,375 a year earlier. The only city among the 16 surveyed with a bigger year-over-year gain was Vancouver, at 9.7 per cent. The surge in two-storey house prices is a change from previous quarters, where bungalows led the charge. But even so, the average price for a bungalow climbed 3.8 per cent to $269,250 from $259,313, and the price of a standard condo rose by four per cent to an average $167,429 from $161,000...Winnipeg also had the third largest year-over-year gain in prices, at 4.6 per cent, eclipsing the national average hike of 2.1 per cent.

Village on False Creek to Lose $250 MM

The Ignored Election Issue

Canadian Real Estate – The Ignored Election Issue
As Canadians go through yet another election, politicians of all stripes are busy dusting off campaign slogans, attack ads and policy books. Each party puts forth its best ideas to fix what ails the country and what will propel it forward on a wave of prosperity. The amazing part of this election campaign is that nobody seems to be addressing the 800 pound gorilla in the room. That gorilla is named “Canadian Real Estate”. The overvaluation of real estate(“bubble” is so overused it has lost its shock value)in many parts of Canada has been propelled by a Canadian addiction to debt and federal government policies that helped to create a runaway freight train in the form of real estate prices. Outside of the Canadian political campaigning trail the Conservatives have paid lip service to the issue through their recent series of mortgage lending restrictions, however, this tightening is only undoing the Conservative party’s mortgage lending loosening from a few years earlier. Again, both key facts are rarely mentioned by any of the political parties currently campaigning.

Parties Silent on Possible Housing Bubble

Jesse Kline: Parties Silent on Possible Housing Bubble
The Canadian housing market is booming, and some economists fear it could come crashing down. There were warning signs for years about the pending housing crisis in the United States, but they all went unheeded. Canadians now have the chance to start discussing how to prevent a similar situation from occurring north of the border, yet politicians from all parties seem intent on turning a blind eye. The only mention of housing in the Conservative and Liberal policy platforms is to say how much the parties have spent, or will spend, to support housing. Yet, the collapse of a government-encouraged housing bubble could endanger the country’s precarious financial situation.

Sunday, April 3, 2011

Saturday, April 2, 2011

How Much Do Canadians Make?

How Much Do Canadians Make?
Of the 24.5 million returns filed, 18 million Canadians reported total income of $50,000 or less. That’s not a typo. In other words, ignoring individuals who don’t file returns such as children, nearly 75% of tax-filing Canadians earned under $50,000 in total income in 2009. Add another 5 million Canadians who reported total income of between $50,000 and $100,000 and you conclude that about 95% of individuals have income below $100,000 annually.

Thursday, March 31, 2011

Monday, March 28, 2011

Comedians Now Flipping Houses

North End housing No Joke
Todd Allen, a transplanted Canadian living in L.A. and working as a stand-up comic, found himself with extra time on his hands last year while perfor­ming here at Rumor’s Comedy Club. "I was here working, but my sets were only 45 minutes a night, so I had a lot of time on my hands," he said via telephone from L.A. Allen rented a bike and began exploring the city. His adventure eventually took him to the North End. "I was baffled at how great some of the housing deals were. Then when I looked at the rental market and saw how high it was; I’ve never seen such a situation," he said. Allen was so impressed by what he saw that he decided to buy a house in the area. He has since sold it and purchased another investment property on Aberdeen Avenue. "I’ve been around North America and never seen things like this," said Allen, who plans to fix up the house and resell it later this spring.

Housing Booms North of the Border

Housing Booms North of the Border
As much of the U.S. housing market limps along, home prices north of the border are on a fresh tear, fired up in part by a borrowing binge that has sent Canadians' debt to record levels—and now higher than their notoriously profligate U.S. neighbors—while income growth pokes along. All that has raised worry at the country's central bank, which repeatedly has warned about rising debt levels, and among some economists, who say the market is ripe for a correction—maybe a steep one. House prices have risen to almost 5.5 times disposable income per worker, well above the long-term historical average of 3.5, he says. "We've been through a fairly hefty housing boom over the last 10 years, and the next three years is going to be an unwinding of that," Mr. Madani says.

Sunday, March 20, 2011

Realtors: No Bubble In Real Estate

Realtors Say Real Estate Bubble Fears Unfounded
Housing prices up 14% over two years, but experts say there’s no fear of sudden drop A healthy labour market, coupled with low interest rates, are behind the strong appreciation in the value of residential real estate in the nation’s capital, several local realtors say.

B.C Realestate Up 18%, National Avg Up 8.8%

Average Price of B.C. Home
The average price of a home in B.C. was up 18 per cent in February compared to the same month last year, according to the B.C. Real Estate Association. The price surge was largely due to sales in Metro Vancouver, the BCREA said in a survey, with the average residential price climbing 19.4 per cent, compared to February 2010, to $791,000 from $663,000.

Tuesday, March 8, 2011

Monday, March 7, 2011

Krugman On Canadian Real Estate

Oy, Canada
My take on the US economic crisis has increasingly been that banks were less central than many people think, while the housing bubble and household debt are the key players — which is why financial stabilization by itself wasn’t enough to produce a V-shaped recovery.

But if I take all that seriously, I should be very worried about Canada

Thursday, March 3, 2011

Rising Food Prices

George Weston to Boost Food Prices
George Weston Ltd., the baked goods giant, will raise prices by an average of 5 per cent starting April 1, as it grapples with mounting costs due to soaring prices of commodities such as wheat, sugar and oil. More price increases could be in the offing later this year if commodity costs continue to climb.

Canadian Housing Overvalued

Housing Overvalued
A new report warns Canada's housing market is reaching the limits of sustainability and could tumble if there is no moderation.The Bank of Montreal's followup on its November analysis finds that Canada's hot housing market is still not in the red zone for prices, but it's close.The bank notes that after slowing last summer, Canadian home sales rebounded in the fall and house prices have kept rising. On average, home prices rose five per cent in the past year to January, while in Vancouver they rocketed 20 per cent. Incomes, however, have not increased nearly as fast. The bank says the ratio between average resale prices and personal incomes nationally is 14 per cent above the long-run trend, up from last summer, but still below the 21 per cent peak that preceded the 1989 crash. But that is not the case in all markets. Five provinces are currently in the danger zone, led by Saskatchewan, where the ratio is 39 per cent above historic norms. Also well-above the long-run levels is Newfoundland, 34 per cent higher; British Columbia and Manitoba, 31 per cent, and Quebec, 23 per cent above.

Peter Schiff: Canadian Real Estate Overpriced

Home Ownership Isn't For All
....“We’re no different from Americans, that’s for sure,” says John Cocomile, a broker with in Toronto. He says of 100 first-time homebuyers he arranged mortgages for in the past three years, 95 of them took the longest amortizations possible. “Generally homeowners are not conservative. They want the most they can get.” Some of those clients are now living hand-to-mouth, Mr. Cocomile says. And he worries that when interest rates correct upwards, as they inevitably will, they’ll be underwater. “I think there’s a lot of homeowners who probably shouldn’t be homeowners.... There’s a lot of teetering right now.” Those who have acknowledged they are on the edge are seeking the help of counsellors like Laurie Campbell, executive director of Credit Canada. She notes that the average Canadian with a credit profile owes $1.48 for every dollar they make in disposable income, the highest debt-to-earnings-power ratio on record. And she says mismanagement of personal finances remains rampant.

Friday, February 25, 2011

Collapsing Canadian Real Estate with Garth Turner

Stress Test Your Mortgage

Stress Test Your Mortgage
Nearly 20 per cent of Canadians don't know if they'll be able to make their mortgage payments if interest rates increase, according to a poll released Thursday by Bank of Montreal — disturbing findings given that BMO expects the Bank of Canada to raise its benchmark rate by at least one per cent by the end of the year. "Despite high prices, housing remains reasonably affordable due to record low interest rates," said Sal Guatieri, BMO Economics.

Housing Affordability In Canada Improved

Housing Affordability In Canada Improved
Housing affordability improved at the end of 2010 throughout Canada, a study released Thursday says, mainly due to slightly lower interest rates and slowing price gains. The RBC Housing Affordability Index has now eased for two consecutive quarters as bond yields remain relatively low, while the economy shows signs of improvement. The country has also been steadily adding jobs, bringing employment levels back to where they were before the 2008 recession. Still, the respite is likely to be short-lived. RBC economist Robert Hogue estimates housing affordability will begin to erode over the next two years, as the Bank of Canada is seen resuming its rate hike campaign this spring. However, once interest rates stabilize in about three years, housing costs are expected to advance only gradually.

Friday, February 18, 2011

Canadian Consumer Debt Up 5.9%

Credit Card Debt Dropped During Holiday Season
There was a surprising drop in the amount borrowed on credit cards by Canadians during the holiday-laden fourth quarter, but overall non-mortgage debt went up substantially across the country, a credit analysis firm reported Wednesday. TransUnion said average total debt per Canadian consumer, excluding mortgages, was $25,709 in the fourth quarter of 2010 – up 5.6 per cent from $24,346 in the comparable period of 2009.

The Student Poverty Song

Canadian Household Debt Hits 150%

Olive: The Danger In Our Savings Shortfall
And yesterday’s alarming report from the authoritative Vanier Institute of the Family confirms our national dilemma. We’re saving too little, for our own sake and our country’s....The average Canadian household is saddled with about $100,000 in debt, a record level, up 78 per cent since 1990’s $58,000. ...The average household’s debt-to-income rate has shot to 150 per cent, up from 93 per cent in 1990. Which means that for every $1,000 we generate in income, we’re burdened with $1,500 in debt.

Mortgage Delinquencies Up 50%
The report suggested the number of households behind in their mortgage payments by three or more months climbed to 17,400 in the fall of 2010, up nearly 50 per cent since the recession began.And credit card delinquency and bankruptcy rates also remained higher than pre-recessionary levels.

Friday, February 11, 2011

Shiller: Canada Is A Purely Random Success Story

Shiller: Canada Is A Purely Random Success Story
If the historical statistics serve as a guide, Canada looks to be headed for a big drop in home prices, although any decline probably won’t be as pronounced as the U.S. housing bust, he said. U.S. home prices adjusted for inflation surged 79% between 1990 and their peak in 2005. Canada’s gained about 45% over the same period and have continued marching higher, up to about a 50% gain currently, said Prof Shiller.

B.C. Most Indebted

B.C. Most Indebted
B.C. households are the most vulnerable in Canada to interestrate hikes or an economic downturn, says a new report released Wednesday by TD Economics. B.C.'s debt-to-income ratio -which compares all debt including mortgage debt to personal disposable income -is 160 per cent. That's the same level reached in the United States just before the financial crisis and housing meltdown hit....The number of clients seeking help with their debt from the society, a non-profit organization that helps people find solutions to debt and money problems, has skyrocketed in four years."In 2007 we were seeing 500 new clients a month. Now it's 2,000. In the last 90 days we've seen 50-per-cent more people looking for help. It's huge and we're going to be hiring an additional 20 staff to deal with demand," he said.Hannah said if interest rates rise by two per cent, many people will be seriously affected."In the early '80s we saw interest rates of 18 per cent. But that was on mortgages of $70,000. If rates jump to seven per cent on mortgages of $400,000 is there much of a difference?"

Students Need Help, Not More Debt

Students Need Help, Not More Debt
The federal government says it will require a transfusion of hundreds of millions of dollars to maintain a student loan program that is hemorrhaging millions as a result of loan defaults. According to budget documents tabled Tuesday in the House of Commons, the Canada Student Loans Program needs $149.5 million just to cover writeoffs of more than 60,000 unexpected defaults. On top of that, another $311.2 million is needed to meet increasing demand for loans.But pouring in increasing amounts of money isn't the solution to a student loan system that is clearly in need of an overhaul, as advocates have been urging for some time.The Canada Student Loan Debt ticker on the Canadian Federation of Students website ( shows the tally at $13.7 billion and climbing steadily. The website points out that average student debt in Canada ranges from a low of $13,000 in Quebec to more than $28,000 in the Maritimes. The rate of delinquent borrowers is rising, too, hitting 13 per cent for 2010-11, up from about 10 per cent a year earlier. That's the result of a combination of tuition fees which have spiked in recent years and a tough economy which has pounded students along with everyone else.

Sunday, February 6, 2011

Madani: Canada Housing Prices To Drop 25%

Housing Prices To Drop 25%
House prices in Canada will fall over the next several years by as much as 25 per cent, creating a massive impact on the economy and possibly pushing the country into recession, says a forecast. “The recent housing boom has resulted in the largest rises in house prices ever seen in Canada, which have been similar in magnitude to those during the recent boom in the U.S.,” said Capital Economics analyst David Madani in a report released Thursday. “Unfortunately, the subsequent falls in prices could also be just as severe as those elsewhere.”Madani is predicting house prices will fall by a cumulative 25 per cent over the next several years, or “in the same ballpark as the recorded declines in the U.S. and other countries.”

CMHC Liabilities Equal 30% of Canada's GDP

CMHC Liabilities Equal 30% of Canada's GDP
CD Howe released an interesting commentary on the current role of CMHC in the mortgage market. It is well worth the read as it not only highlights the potential (and unnecessary) risks to taxpayers, which we’ll discuss, but also debunks the notion that high home ownership rates are beneficial to the broader economy.On the dominance of CMHC in the mortgage insurance market Dominating the market in Canada means that as of 2010, CMHC insures mortgages worth approximately $500 billion, almost the entire Canadian mortgage insurance market.

Nearly 11 Percent of US Houses Empty

Nearly 11 Percent of US Houses Empty
More concerning than the home ownership rate is the vacancy rate. The Census tables don't tell the entire story, but they tell a lot of it. Of the nearly 131 million housing units in this country, 112.5 million are occupied. 74.8 million are owned, and that's only dropped by about 30 thousand in the past year. 38 million are rented, but that's up by over a million year over year. That means more new households are choosing to rent.

Friday, January 28, 2011

Social Security Drained By 2037

Social Security Drained By 2037
New congressional projections show Social Security running deficits every year until its trust funds are eventually drained in about 2037. This year alone, Social Security is projected to collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits, the nonpartisan Congressional Budget Office said Wednesday. That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut. Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s. Benefits will be safe until that money runs out. That is projected to happen in 2037 — unless Congress acts in the meantime. At that point, Social Security would collect enough in payroll taxes to pay out about 78 percent of benefits, according to the Social Security Administration.

The $2.5 trillion surplus, however, has been borrowed over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest.

Oil Prices Rise on Egypt Unrest

Egypt Shows How Easily Internet Can Be Silenced
The move by Egyptian authorities to seal off the country almost entirely from the Internet shows how easily a state can isolate its people when telecoms providers are few and compliant.

Egypt Protests: America's Secret Backing
The American Embassy in Cairo helped a young dissident attend a US-sponsored summit for activists in New York, while working to keep his identity secret from Egyptian state police. On his return to Cairo in December 2008, the activist told US diplomats that an alliance of opposition groups had drawn up a plan to overthrow President Hosni Mubarak and install a democratic government in 2011

Wednesday, January 26, 2011

Homes Less Affordable Across Canada

Homes Less Affordable Across Canada
The dream of owning a home in Canada continues to get hazier as housing prices in some of the country's largest markets skyrocket while income growth lags behind, results of a 325-city international survey of housing affordability suggest. "There are a lot of people that tend to be squeezed out of the housing market," said David Seymour, a policy analyst with the Frontier Centre for Public Policy which compiled the survey's findings. "Owning your own little patch of Canada is a dream for a lot of people that is getting tougher." The annual International Housing Affordability Survey, released Tuesday, compared home prices and household income in 325 cities in Canada, Australia, Hong Kong, Ireland, New Zealand, Britain and the United States.

Household Debt At A Near-boiling Point
With average household debt in Canada at nosebleed levels -- it reached 148 per cent of annual disposable income in the third quarter of 2010 -- and interest rates likely to rise later this year, many consumers are flirting with disaster. Some are already in crisis mode, says Hannah, whose New Westminster, B.C.-based non-profit organization offers free credit counselling, education and debt management programs for debt-strapped consumers. "For a lot of people, they've leveraged themselves to an extreme. With the vast majority of our clients, most of them are just a paycheque or two away from financial difficulty. They're that highly leveraged," he says. "The average consumer walking through our door is in their early 40s, they carry six or seven credit cards and owe anywhere from $25,000 to $50,000 on those cards." "So they're just able to keep up with their minimum obligations."

Saturday, January 22, 2011

The Triumph of Hacker Culture

The Triumph of Hacker Culture
It's the best of times and the worst of times for hacker culture. On the one hand, this is a moment of history-making triumph for a cyber-worm, the complex computer virus known and feared as "Stuxnet." A stunning evolutionary leap in development of "malware" (the generic term for the mischief-making software a virus embeds in computers via digital networks). Composed, it has been reported, of 15,000 lines of code. Stuxnet exhibited virtual superpowers last fall by penetrating, taking control of, and jamming into self-destruction some 1,000 precisely calibrated uranium-refining centrifuges in Iran's Natanz nuclear facility.

Friday, January 21, 2011

No More 35 Year Mortgages

Mortgage Rules Will Sideline Some Buyers
This week, Finance Minister Jim Flaherty did just that. As of March 18, the government will no longer insure mortgages with amortization periods of more than 30 years. That will keep some potential home buyers out of the market, and in theory, help stop already debt-burdened households from going even deeper. Ottawa will also make home refinancing rules tighter, among other moves.

Saturday, January 8, 2011

Canadian Real Estate Association - Call To Action

Additional changes to mortgage financing rules would raise the barrier to homeownership excessively and destabilize housing markets and the economy. In particular, we are concerned about the negative impact modifications to the allowable amortization period or minimum down payment requirements would have. These changes would create affordability problems, especially for first-time buyers. First-time buyers are the first link in a chain reaction of real estate activity. They allow existing home owners to change properties or rent. Creating burdensome barriers for first-time buyers will seriously impact the rest of the market, including retirees looking to downsize.

Further tightening of mortgage rules would have other far reaching consequences for the economy. It risks causing a home price correction, a drop in the net worth of Canadian households, lowered economic growth and reduced tax revenues. Consumer confidence would be damaged, labour mobility would be impeded, and unemployment would stay elevated.

Canada Debt Warnings

Canada Debt Warnings
Canada's Superintendent of Bankruptcy issued a warning to Canadians about the dangers of high household debt Friday, adding his voice to the chorus from officials concerned about the amount of leverage the average resident now has. In a letter attached to the latest report on bankruptcy statistics, James Callon said it was "important for Canadians to be aware of the risks and possible consequences of taking on a large amount of debt." He noted that a significant event - a change in employment such as job loss, or a change in family status such as a divorce, or a serious illness - "can cause a huge drain on finances." If such an event were to suddenly occur in a household carrying a large amount of debt, that could lead to "the harsh realities of insolvency," Callon said. The number of consumer insolvencies filed in Canada in October 2010 was 22.5% higher than in 2007-08, before the economic crisis that led to the recent recession. Household debt in Canada reached a record C$1.41 trillion in December.

According to Statistics Canada, debt to household income levels has reached a record 148%, rising above comparable U.S. figures for the first time since the late 1990s. Bank of Canada Governor Mark Carney recently warned that a growing number of Canadian households were vulnerable to adverse shocks, and more would become vulnerable if interest rates go up from record low levels as expected. Finance Minister Jim Flaherty has also sounded numerous warnings on household debt levels in recent months.

Monday, January 3, 2011