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.
Wednesday, June 15, 2011
Household Debt Hits Record $1.5-trillion
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
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
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.
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
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
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.