Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Our Latest CPI Data Suggests That it’s Back to the Revising Board for the BoC ... Again (Tuesday Interest Rate Update)

Dave Larock in Monday Interest Rate Update, Mortgages and Finance, Home Buying, Toronto Real Estate News

Editor's Note: Dave's Monday Morning Interest Rate Update appears on Move Smartly weekly. Check back weekly for analysis that is always ahead of the pack.

Anyone keeping an eye on Canadian mortgage rates should pay close attention to the Consumer Price Index (CPI) which is released monthly by Statistics Canada. The CPI tells us whether average prices have increased or decreased over the past twelve months, and over time, changes in the CPI influence Bank of Canada (BoC) monetary policy more than any other economic measurement.

Before looking at the details in the latest CPI (released last Friday), let’s highlight a few phrases from the BoC’s oft repeated inflation-control strategy, which it includes at the front of each Monetary Policy Report (MPR).

• At the heart of its inflation-control strategy, the BoC believes that “that the best way to foster confidence in the value of money and to contribute to sustained economic growth, employment gains and improved living standards is by keeping inflation low, stable and predictable”.
• Further to that point, the BoC’s inflation-targeting approach is symmetric, meaning “that the Bank is equally concerned about inflation rising above or falling below the 2 per cent target”.

As you will see in a moment, that last phrase is critical in the current context. If the BoC’s monetary policy actions are primarily governed by the goal of steering inflation towards 2% over time, then current CPI trends clearly imply that the BoC’s next move in its overnight rate should be a decrease, rather than the increase it has repeatedly warned us about.

Toronto Real Estate Roundup - May 17 2013

Realosophy Team in Media Roundup

Real Estate News

OSFI probes longer-term uninsured mortgages, could act (Globe and Mail)

Hookers to High Rises: The Evolution of the Etobicoke Waterfront (Toronto Standard)

Signs of spring – and a soft landing – in Canadian real estate (Globe and Mail)

Toronto real estate: Condo rents hit record high as would-be homebuyers stay on sidelines (Toronto Star)

Canadian housing market not that bad for banks (Financial Post)

Home Buyers: What should a real estate lawyer do for you? (Globe and Mail)

Realosophy Realty Inc. Brokerage is an innovative residential real estate brokerage in Toronto. A leader in real estate analytics and pro-consumer advice, Realosophy helps clients buy or sell a home the right way. Email Realosophy

A Review of Our Latest Employment Report with Implications for Canadian Mortgage Rates (Monday Interest Rate Update)

Dave Larock in Monday Interest Rate Update, Mortgages and Finance, Home Buying, Toronto Real Estate News

Editor's Note: Dave's Monday Morning Interest Rate Update appears on Move Smartly weekly. Check back weekly for analysis that is always ahead of the pack.

Anyone keeping an eye on Canadian mortgage rates should pay special attention to our Labour Force Survey (commonly referred to as our ‘employment report’), which is released by Statistics Canada each month.

The Survey gives us a bevy of useful information about whether and where our economy is adding jobs, whether average incomes are rising or falling, and whether the average worker is putting in more or less hours of work each month. Together, these factors combine to give us valuable insight into where our overall economic momentum is headed.  

Here are the data from the latest report, which was released last Friday, with some thoughts on its implications for Canadian mortgage rates:

• Our economy added 12,500 new jobs overall last month, almost bang on the 12,400 new jobs that we have averaged over the last six months. The federal government has hinted that over the near term the Bank of Canada (BoC) will lean its monetary policy more towards job creation than tight inflation control and the April employment data shouldn’t give them any cause to alter that approach.   
• The public sector added 34,200 new jobs in April. In other words, full-time government hiring was the only reason we added jobs over the past month. That’s an unsustainable trend that can’t be relied upon in this age of austerity-themed government budgets.
• The private sector lost 20,000 jobs in April and has now shed 105,400 jobs over the past two months. In fact, this sector has grown by only 0.1% over the past year so our current private-sector hiring slump is actually very well entrenched. This is a big concern because private-sector job growth and GDP growth go hand-in-hand, making it unlikely that we will see any real change in our overall economic momentum until private-sector hiring looks very different than it does today.

Toronto Real Estate Roundup - May 10 2013

Realosophy Team in Media Roundup

Condo News

Peter Munk’s contrarian bet on Toronto’s condo market (Globe and Mail)

Toronto New Condo Sales Drop 55% in First Quarter (Wall Street Journal)

Next Year Could Be a Key One for Toronto Condo Market (Wall Street Journal)

Real Estate News

Homebuyers clueless about mortgages (CNN Money)

Toronto real estate: First-time homebuyers heavily influenced by commute (Toronto Star)

Should everyone consider renting over buying right now? (Globe and Mail)

Early exit from closed mortgage can cost you dearly (Toronto Star)

Drop in housing starts latest signal that housing market is cooling (Toronto Star)

Realosophy Realty Inc. Brokerage is an innovative residential real estate brokerage in Toronto. A leader in real estate analytics and pro-consumer advice, Realosophy helps clients buy or sell a home the right way. Email Realosophy

Beware Sending a Real Estate Deal Off the Rails

Bob Aaron in Legal, Home Selling, Home Buying

An interesting decision from Toronto’s small claims court last December provides a useful lesson on the obligations of buyers, sellers and lawyers when a real estate transaction starts to go off the rails.

In his decision, Justice M. Donald Godfrey wrote that the case came to court because the parties and their lawyers were unable to work out a “reasonable compromise” on the closing of a transaction on Mould Ave., in Toronto.

Nuno Barbosa and Paula Boas agreed to buy the house for $516,000 from Helder and Maria Rodriguez, with a scheduled closing of October 30, 2009. Two days before closing, the buyers discovered that the property taxes were not $2,300 as indicated on the MLS listing but were in fact almost $4,600. The increase was the result of a re-assessment of taxes due to an addition to the property which was completed in early 2008.

The buyers requested a $10,000 price reduction. When the sellers declined the offer, the buyers refused to close even though their lawyer was holding enough trust funds to complete the transaction.

After receiving advice from another lawyer, the buyers changed their minds and told their lawyer that they were willing to close and sue later. But the request was not made until after the 6 p.m. closing deadline.

The sellers did not agree since they did not know what damages they were exposed to as a result of two “chain reaction” closings, which depended on the sale of their Mould Avenue house.

The buyers then sued the sellers for return of their $10,000 deposit, and the sellers sued the buyers for damages resulting from their refusal to close. 

After an unusually long three-day trial, Justice Godfrey ruled that the buyers should have closed the transaction on time since the breach of contract was “not material.” However, the judge also decided that the sellers were entitled to refuse to close 15 minutes after the 6 p.m. deadline because the contract stated that time was “of the essence.”

Toronto Real Estate Roundup - May 3 2013

Realosophy Team in Media Roundup

Real Estate Market

What’s happening in the housing market? (Toronto Star)

You want that dream home? Why you'll have to join the line in this thin housing market (Globe and Mail)

Even in a real estate slump, Canadians lured into bidding wars (Financial Post)

Canadian housing: Bursting bubble or gentle landing? (Financial Post)

Condo News

Tarion new home protections may be extended to condo conversions (Toronto Star)

Toronto real estate: Downtown condos lead broad rise in prices (Toronto Star)


Other Real Estate News

Feeling Pug-ish About Toronto Architecture (Torontoist)

What are the 5 best new buildings in Toronto from 2012? (Blog TO)

Realosophy Realty Inc. Brokerage is an innovative residential real estate brokerage in Toronto. A leader in real estate analytics and pro-consumer advice, Realosophy helps clients buy or sell a home the right way. Email Realosophy

Canadian Mortgage Rates Will Inevitably Rise … But When? (Monday Interest Rate Update)

Dave Larock in Monday Interest Rate Update, Mortgages and Finance, Home Buying, Toronto Real Estate News

Editor's Note: Dave's Monday Morning Interest Rate Update appears on Move Smartly weekly. Check back weekly for analysis that is always ahead of the pack.

Today’s consensus on mortgage rates goes something like this: Central banks around the world are printing money like crazy in an attempt to stimulate (and reflate) their economies and to keep their governments (and in many cases their banks) from going broke. All of this ‘new money’ will eventually lead to higher inflation and when it does, higher mortgage rates will inevitably follow.

I agree with this general premise but it omits the most important detail – when.

While the Bank of Canada (BoC) and many prominent Big Five Bank economists have until recently been warning Canadians that higher mortgage rates could be just around the corner, I have consistently subscribed to the view that this day of reckoning will actually arrive later than most believe.  

Today, let’s look at the impact (or lack thereof) that the U.S. Federal Reserve’s actions have had on the U.S. economy over the last several years – it’s a key element in my ‘lower-for longer’ view. I am focusing on the U.S. example because the U.S. and Canadian economies (and monetary policies) are tightly linked and if the U.S. economy experiences significantly higher inflation, we will import it.   

For starters, it may be splitting hairs but technically the U.S. Fed isn’t actually ‘printing’ new money. Instead, it is expanding its balance sheet by increasing its purchases of U.S. treasuries which it typically buys from U.S. banks. That action increases each bank’s reserves but has no impact on the amount of money that is actually circulating in the economy. If the Fed wants to increase the supply of money circulating in the real economy it needs U.S. banks to act as the transmission mechanism, and it is here that the first breakdown in its master plan is occurring.

Despite its best efforts, the Fed has not increased either the banks’ appetites for lending, or consumer appetites for borrowing. When once asked about how to deal with this specific problem U.S. Federal Reserve Chairman Ben Bernanke famously said that if the banks wouldn’t start lending more he would drop money from helicopters directly into consumer’s wallets, earning him the nickname ‘Helicopter Ben’.

Toronto Real Estate Roundup - April 26 2013

Realosophy Team in Media Roundup

Condo News

Get ready condo flippers, Canada Revenue Agency is hunting you (Financial Post)

Condo renters pay hefty price for downtown living (Toronto Star)

Toronto condo parking spaces can fetch $60K (Toronto Star)

The rise of the mid-rise (Toronto Star)


Other Real Estate News

What’s happening in the housing market? (Toronto Star)

Potential first-time home buyers: Bide your time (Globe and Mail)

Most Canadians say they won’t get sucked into a bidding war (Globe and Mail)

Realosophy Realty Inc. Brokerage is an innovative residential real estate brokerage in Toronto. A leader in real estate analytics and pro-consumer advice, Realosophy helps clients buy or sell a home the right way. Email Realosophy

Problems With Land Titles Just Got Clearer

Bob Aaron in Legal

A decision of the Ontario Court of Appeal in February may have settled the thorny question of whether or not courts have the authority to correct erroneous descriptions of properties in the land registration system.

The origin of the dispute dates back to 1985, when Veikko Kivikangas subdivided a parcel of waterfront land he owned in the Sudbury area into three lots.

Kivikangas instructed his surveyor to prepare a reference plan of survey showing the registered right of way to be in the same location as an existing gravel road which ran from the main highway across the first parcel, then the second, and into the third.

On the ground, the path takes a detour around a large rock outcrop. Unfortunately, the surveyor prepared and registered the reference plan showing the gravel drive going directly through the outcrop rather than around it.

Effectively, it was impossible to access the two inner lots using the registered right of way.

For many years, the owners of the three lots peacefully used the actual roadway on the assumption that it was located as described on the reference plan.

In 2005, Kimberly MacIsaac, one of the current owners, became aware that the registered road went through the rock rather than around it. The other neighbours discovered the discrepancy two years later.

Has the Bank of Canada Discovered Life on Mars? (Monday Interest Rate Update)

Dave Larock in Monday Interest Rate Update, Mortgages and Finance, Home Buying, Toronto Real Estate News

Editor's Note: Dave's Monday Morning Interest Rate Update appears on Move Smartly weekly. Check back weekly for analysis that is always ahead of the pack.

The Bank of Canada (BoC) left its overnight rate unchanged last week, as expected.

The Bank also released its latest Monetary Policy Report (MPR), which I read with great interest because it gives us the BoC’s views on the state of the world’s economies and includes projections for where the Bank sees foreign and domestic economic momentum headed over the next several years.

In a perfect world, the MPR would offer an unbiased assessment but bluntly put, that has not been the case for some time now. The BoC remains primarily concerned about our elevated household debt levels and continues to warn Canadian consumers about higher future interest rates. The Bank’s hope is that this form of ‘moral suasion’ will help counteract the natural effect that its ultra-low interest-rate policy is having on household borrowing. If successful, the BoC would be able to continue stimulating the rest of our small, open economy, which is needed in light of current global economic conditions, without fueling a household credit bubble as a by-product.

The challenge that the BoC has today when drafting its MPRs is that it must support its higher interest-rate warning with forecasts to match. This is where the tangled web that tries to connect the Bank’s warning to the hard economic data can be most plainly seen.

A pattern has emerged in the last several MPRs where the Bank downgrades its current data and near-term forecasts, unable to deny that our near-term economic momentum is slowing, but then offers more optimistic medium-term projections as an offset. This is a clever way of massaging the data because it allows the Bank to use a distant pickup in economic momentum as a way of continuing to justify its threat of higher interest rates, even while we are clearly still in the midst of an economic slump. Then, later, as the future unfolds and that momentum doesn’t materialize, the BoC simply adjusts its projections downward as they move nearer to the present day and makes new medium-term projections to fit as needed. Wash, rinse, repeat (and hope no one notices).