http://ottawafinance.wordpress.com/files/2009/10/verico-at-home-_nov-09__eng.pdf

Here is the November issue of my Verico at home newsletter

Navigating Government grants for a greener home

This is a great link on a CMHC webinar. Navigating Government grants for a greener home https://admin.na3.acrobat.com/_a40902165/p92138135/

US Housing Prices May Fall Further article from US Mortgage Brokers Association newsletter below

US Housing Prices May Fall Further article from US Mortgage Brokers Association newsletter below

· TSX -248.21 to 10,805(Reuters) every stock market in the world was down yesterday on doubts about the strength of the US economic recovery.

TSX closed to its lowest level in 2 months dipping below the 11,000 pt mark

· DOW -119.48 to 9,762 dipped below 10,000 pts as sales of new US homes fell 3.6% last mth against an expected 2.6% rise

· Dollar -1.08c to 92.72 fell to its lowest level in 3 weeks influenced by a dip in oil prices · Oil -$2.09 to $77.46US per barrel.

· Gold -$4.80 to $1,034.70USD per ounce ·

Canadian 5 yr bond yields -.03bps to 2.70

. four weeks ago the yield was 2.57%.The spread, based on the MERIX 5 yr rate published of 4.34% is 1.64 · http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us * The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds.

This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a spread between 1.35 and 1.55 cid:image001.png@01CA586B.CAE23DD0 Housing Prices May Fall Further Forbes Magazine from MBA Newslink A number of factors suggest housing prices could drop another 10%. Over the past few months, there have been suggestions that the U.S. housing market might finally be bottoming out. Since July, the decline in sales of both new and existing homes has moderated. Moreover, over the past three months, there has been a very modest increase in home prices at the national level as measured by the 20-city S&P/Case-Shiller home price index. However, the high inventory of unsold homes, continuing foreclosures, and double-digit unemployment could mean that housing prices have further to fall. Reasons for cheer. A number of “green shoots” suggest cause for some optimism: –Inventory reduction. Whereas housing starts are presently estimated to be running at a 600,000 annual rate, underlying U.S. household formation is presently running at an annual rate of approximately 1.5 million units. Lower residential construction relative to household formation is allowing excessive home inventories to be gradually worked off. –Cheap mortgages. As a result of the Federal Reserve’s highly accommodative monetary policy, and the activity of the government-sponsored home lending enterprises, mortgage rates have declined to more affordable levels. For example, 30-year fixed-rate mortgages have fallen below 5% for the first time in many years. –Increased affordability. The slide in home values has brought prices more into line with their long-run fundamentals. Since September 2006, U.S. home prices have fallen 27%, bringing prices back to the level prevailing in mid-2003. As a result, the ratios of home prices to rents and of home prices to incomes are now much more in line with historic levels. The index of housing affordability now stands at its most favorable level in the past 20 years. Reasons for doubt. Despite these “green shoots,” there remain a number of factors that suggest that U.S. home prices have not quite hit bottom: –Inventories historically high. Despite small declines in recent months, the inventory of unsold homes at the national level remains at close to its historic high. A key indication of the degree of excess home inventory is that the number of vacant homes, in which neither an owner nor a renter presently dwells, exceeds its normal level by nearly 1 million units. –Foreclosure crisis. The United States is presently suffering from a foreclosure crisis that is further adding more homes to a market already characterized by excess inventories. Forward-looking indicators, such as the number of mortgages that are more than 90 days delinquent (i.e., behind payment) suggest that the pace of foreclosures could increase in the months ahead. –High unemployment. A very weak labor market situation inhibits households from making the long-term financial commitments, such as buying a home. The Labor Department estimates that approximately 16.5% of the labor force is either unemployed or in involuntary part-time employment. At the same time, the huge slack presently affecting the labor market is exerting downward pressure on wage income growth. Most economists–including White House Council of Economic Advisers Chair Christina Romer–do not foresee much improvement in the labor market in 2010. –Mortgage resets. Next year, approximately $200 billion in “Option ARM” mortgages (adjustable rate mortgages) are due to reset to higher rates. This is likely to add to the foreclosure problem, since these resets will produce a sharp jump in debt service payments. –Default incentive. Finally, another factor adding to the foreclosure problem is that a growing number of U.S. households now have “negative equity” in their homes (i.e., their mortgage debt exceeds the value of their homes). Since mortgages in most U.S. states are “non-recourse loans” (the lender cannot pursue the borrowers’ other assets, beyond the home), negative equity gives homeowners a strong incentive to default on their mortgage loans. Outlook. The present high level of unsold housing inventories, the poor state of the labor market and the current wave of foreclosures suggest that home prices may have a further 10% to fall (in real terms). This will add to the financial distress facing the banking sector, inhibiting a return to above trend GDP growth in 2010.

Bond Yields

Canadian 5 yr bond yields +.02bps to 2.81. The spread, based on the MERIX 5 yr rate published of 4.34% is 1.53. A fairly volatile day on the stock and money markets with bond yields  being affected. Both the TSX and Dow are in “neutral” – jumping up, then falling, then back up again.  Once bond yields settle out and show a trend at 2.70%, is when we could see a rate reduction. Right now when and if is the question…

Fixed or Variable

This is a very interesting article from the Jonathan Ratner at the financial Post.

Fixed or variable? Time to revisit
Jonathan Ratner, Financial Post

Published: Thursday, October 22, 2009

Story tools presented by

BMO Capital Markets economic research Canadian mortgage rates graph
While history has shown that variable mortgage rates save borrowers more money, the anticipated upward trend in interest rates as the economy emerges from recession could make this one of the rare periods when a fixed rate turns out to be the superior choice, a new report says.
Inflation may not have been a problem in Canada since the early 1990s, but there is an outside risk that inflation flares up amid record government deficits and as global central banks keep “the pedal to the policy metal,” says a new report BMO Capital Markets. The inflation risk becomes even more prominent if the global economic recovery turns out to be stronger than expected.
This could force the Bank of Canada to aggressively raise interest rates, driving variable mortgage rates higher, but leaving fixed rate choosers unscathed.
“Another reason fixed rates are attractive in the current environment is that short-term rates are already as low as they can go — rates are only going to move higher from here as the economy recovers,” said BMO economists Douglas Porter and Benjamin Reitzes.
Fixed rates were advantageous during only two recent periods — through the late 1970s and briefly in the late 1980s. In both cases, this was ahead of a period of rising interest rates, as is the case now, the economists added.
For those with limited financial flexibility who could run into problems if there was a pronounced upswing in interest rates, such as your average first-time home buyer, the moderate extra cost for the peace of mind a fixed rate mortgage provides may be worth it.
On the flipside, the case for variable rate mortgages is driven by an inflation outlook that remains benign as the soaring Canadian dollar puts downward pressure on prices. As a result, it looks like the Central Bank may follow through on its commitment to hold rates steady through June 2010.
There is also the possibility that fixed rates fall even further if the economy performs worse than anticipated.

Variable Rate	2.15%
1 Year	2.75%
2 Year	3.05%
3 Year	3.59%
4 Year	4.09%
5 Year	4.19%
7 Year	5.30%
10 Year	5.40%
Prime Rate	2.25%

Current Mortgage Rates – 1/3/5 Year Rates	Oct 2009	Oct 2008	Oct 2007
1 Year	3.80%	6.35%	7.25%
3 Year	4.45%	7.05%	7.40%
5 Year	5.84%	7.20%	7.44%

Source: Bank of Canada

Current Bank & Prime Rates
Bank Rate	0.50%
Prime Rate	2.25%

Source: Bank of Canada

Nationwide Building Permits – August 2008
Residential	$2,913,648,000
Commercial	$2,102,862,000
Total	$5,016,510,000

Source: Stats Canada – preliminary figures

Average House Prices by Province	Aug 2009	Aug 2008	Aug 2007
National	$324,779	$290,347	$305,823
Yukon	$258,864	$294,311	$244,344
Northwest Territories	$305,432	$338,864	$300,876
British Columbia	$471,078	$421,685	$439,939
Alberta	$343,727	$343,148	$361,809
Saskatchewan	$233,361	$216,701	$184,445
Manitoba	$202,204	$182,612	$165,601
Ontario	$313,512	$291,760	$289,154
Quebec	$226,542	$208,878	$204,710
New Brunswick	$156,613	$144,384	$134,106
Prince Edward Island	$146,259	$142,168	$139,845
Nova Scotia	$186,974	$180,801	$177,136
Newfoundland	$211,573	$187,744	$154,595

Source: CREA

Average House Prices by City	Aug 2009	Aug 2008	Aug 2007
Yellowknife	$305,432	$338,864	$300,876
Vancouver	$608,032	$557,114	$587,483
Victoria	$481,279	$452,205	$565,685
Edmonton	$318,321	$329,207	$345,809
Calgary	$388,725	$390,091	$423,801
Saskatoon	$281,871	$279,366	$253,240
Regina	$243,355	$237,814	$174,719
Toronto	$387,899	$364,880	$361,898
Hamilton-Burlington	$291,374	$283,974	$270,893
Ottawa-Carleton	$315,176	$282,792	$267,765
Quebec City	$215,810	n/a	$165,088
Montreal	$276,243	n/a	$228,006
Fredericton	$150,538	$148,339	$135,174
Saint John	$166,117	$158,669	$137,471
Halifax-Dartmouth	$231,203	$222,180	$218,665
Winnipeg	$207,389	n/a	n/a

Source: CREA

First-time Buyers Increase Their Use of Mortgage Brokers

First-time Buyers Increase Their Use of Mortgage Brokers
Broker Origination Share By Customer Segment

Broker Origination Share
(By Customer Segment)

Survey results show that during the past twelve months about one-quarter of all mortgage transactions were arranged through the mortgage broker channel. Most notably, broker share among first-time buyers has increased to 44%, up from 35% in 2007. Among other market segments broker share has remained stable. In particular, broker share among those renewing their mortgage continues be relatively stable at 12%.

Demographically, brokers tend to do better among younger purchasers aged 25 to 34 years (42% share), and female purchasers (43% share).