Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Monday Morning Interest Rate Update (April 30, 2012)

David Larock in Mortgages and Finance, Home Buying, Toronto Real Estate News

The global economic recovery is on a very tenuous footing. While determined optimists can string together enough positive threads in the latest economic data to make an argument that the downturn is bottoming out, the realist in me isn’t biting. Encouraging signs aside, the world’s largest economies are still far too vulnerable to withstand the next major setback, which could seemingly come from almost anywhere but will most probably originate in Spain, the fourth largest economy in Europe and the twelfth largest in the world.

In fact, I now believe that some kind of Spanish debt default is all but inevitable.

When the European Central Bank (ECB) launched its Long-Term Refinancing Operation (LTRO), which allowed euro-zone banks to pledge (and leverage up) suspect quality debt in exchange for three-year loans with a fixed 1% interest rate, it looked like Spain might have at least bought itself some time.

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Monday Morning Interest Rate Update (April 23, 2012)

David Larock in Mortgages and Finance, Home Buying, Toronto Real Estate News

Last week was an interesting one for anyone keeping an eye on Canadian mortgage rates.

The Bank of Canada (BoC) left its overnight rate unchanged on Tuesday, which was good news for variable-rate mortgage borrowers, but BoC Governor Mark Carney also indicated that the Bank may raise the overnight rate (on which variable-rate mortgages are based) sooner than previously expected. Bond-market investors jumped on this news and five-year Government of Canada (GoC) bond yields immediately surged higher in response.

When I read his comments, I couldn’t help but wonder whether Mr. Carney might not be trying to talk the market up, knowing full well that his comments would push longer-term fixed-rate bond yields (and by association, fixed-mortgage rates) higher, as investors priced in expected future rate increases.

Then the BoC issued its latest Monetary Policy Report on Wednesday, which gives readers the BoC’s view of the world and more importantly, tells us what the Bank is worried about. I read this report with great interest and was surprised at some of the conclusions it draws.

The BoC now seems to have a decidedly sunnier view of the world than most of the experts I read, predicting that our economy will return to full capacity in the first half of 2013, that the euro area’s recession will end in the third quarter of this year, and that the U.S. recovery is being underpinned with solid momentum [Insert image of U.S. Fed Chairman Ben Bernanke coughing loudly in the background].

TREB’s Fear-Mongering Hurts its Arguments Against Competition Bureau

Bob Aaron in Legal, Toronto Real Estate News

There are many good reasons to support the Toronto Real Estate Board in its battle with the federal Competition Bureau. After all, TREB created the Multiple Listing Service, investing millions of dollars in its operation, and now the competition folks want to force TREB to make it more open to uncontrolled public use.

As part of its battle with Ottawa, TREB last month launched a website (protectyourprivacy.ca) and a publicity campaign claiming that if the Competition Bureau wins its case, the “privacy safeguards” of the MLS system will be compromised and “personal information” will become freely available on the Internet.

TREB says that consumers are at risk of having their names and addresses, property floor plans, sensitive “property access information,” negotiated sale price and mortgage details freely available on the Internet. This, TREB claims, would threaten the “privacy and safety” of GTA consumers.

TREB seems to be implying that home sellers are at risk of break-ins and personal harm, but to me it’s just fear mongering.

Monday Morning Interest Rate Update (April 16, 2012)

David Larock in Mortgages and Finance, Home Buying, Toronto Real Estate News

When the European Central Bank (ECB) injected more than US$1 trillion in cheap, three-year loans into troubled euro-zone countries using its Long-Term Refinancing Operation (LTRO), investors breathed a sigh of relief. It was widely believed that these loans would buy the euro zone more time – a year at least.

The plan was to let troubled banks use their existing bonds (even those of “questionable quality”) as collateral for three-year loans at 1%. The hope was that domestic banks would use this money to buy up their government’s sovereign debt in countries like Italy and Spain, bringing their respective bond yields back to sustainable levels.

There’s a bit of genius in the way the LTRO was designed. The framers knew that the most troubled banks and countries would lean on these emergency ECB loans the hardest, and the more sovereign debt could be shifted out of foreign hands and back onto the balance sheets of each struggling country’s domestic banks, the more contained the risk of contagion would become (at least in a relative sense).

Tuesday Morning Interest Rate Update (April 10, 2012)

David Larock in Mortgages and Finance, Home Buying, Toronto Real Estate News

Statistics Canada released its latest employment report last Friday, and the data were a welcome surprise. The Canadian economy created 82,300 new jobs in March, smashing analyst expectations. The gains were broad-based, most were for full-time positions, and there were increases in both hours worked and average earnings. The data also showed our unemployment rate dropping from 7.4% to 7.2%, despite the fact that 52,500 more people started looking for work.

While the report was very encouraging, one month does not a trend make. Reactions to the March report should be tempered by a look in the rear-view mirror, which shows more net new jobs in March than were created in the previous ten months combined. With that in mind, maybe we should keep the champagne on ice for at least a month or two more.  

The bond market seems to agree with this assessment because so far, reaction to this unexpected bump in the job numbers has been muted. Our five-year Government of Canada (GoC)bond yields were up a little on Friday and down yesterday to start the week. Perhaps the latest U.S. jobs data, which was also released last Friday, gave investors pause.   

Toronto Home Prices up 10% in March

John Pasalis in Toronto Real Estate News

The Toronto Real Estate Board just published their March sales figures.  A copy of their press release is below.  You can see our updated sales charts here.

Greater Toronto REALTORS® reported 9,690 sales through the TorontoMLS System in March 2012. This result was up by almost eight per cent in comparison to the 8,986 deals reported during the same period in 2011.

“The GTA resale market has not suffered from a lack of willing buyers this year. Buyers have been spurred on by the positive affordability picture brought about by low mortgage rates,” said Toronto Real Estate Board President Richard Silver. “The challenge has been a lack of inventory. Many listings have attracted multiple interested buyers. Strong competition has led to annual rates of price growth well above the long-term average.

”The average selling price in the GTA was $504,117 in March – up by 10.5 per cent in comparison to March 2011.

“The number of new listings was up last month in comparison to March 2011. However, based on the historic relationship between price and listings, the GTA resale market should be better supplied. If competition between buyers remains as strong as it is right now, we will almost certainly see an average selling price above $500,000 for 2012 as a whole,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

John Pasalis is the President and Broker-Owner of Realosophy Realty Inc. 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 John

Basement Apartments are a Minefield for the Uninformed

Bob Aaron in Legal, Home Buying, Home Selling

My column on basement apartments earlier this month seems to have touched a nerve among homeowners and real estate agents, many of whom sent me emails. The message in the column was that simply using the term “retrofit” to signify whether an apartment was legal or not was misleading and dangerous.

Bill Johnston, past president of the Toronto Real Estate Board (TREB), wrote: “Thank you for your excellent article on basement units in the Saturday Star. They can be a minefield for the uninformed.”

Current TREB president Richard Silver agreed, saying: “It certainly is a minefield for consumers and agents unless we get some clarification.”

Brian Edwards, of Westbrook Building Inspection Services, pointed out: “I have lectured to agents over 80 times on this topic and it never ceases to amaze me how devious efforts are to hide the fact that the unit is illegal.”

Bill Owen, of Re/Max Realty Services, told me there are “thousands of illegal (units) out there, especially in Mississauga and Brampton. I see them every day.”

In fact, the minefield is even more complicated in light of provincial legislation, which came into effect at the beginning of this year.

Monday Morning Interest Rate Update (April 2, 2012)

David Larock in Mortgages and Finance, Home Buying, Toronto Real Estate News

Last week the euro-zone finance ministers increased the size of the European Stability Mechanism (ESM) by another US$670 billion in their latest attempt to restore investor confidence in the European bond market. In their typical fashion, the ministers tried to boost the fund by just enough to satisfy investors, but not by enough to further inflame the voters (and taxpayers) in their member countries who have become increasingly wary of the bailout brigade.  

The latest expansion was a response to rising bond yields in Italy and most worryingly in Spain, a country that is now mired in what is likely to be a deep and long-lasting recession. Spain’s economy is slowing at the same time that the cost of its debt, measured by yield, is rising (Spain’s ten-year bond yield has risen about .5% over the last month). While the Spanish government wants to provide stimulus to try to kick-start its economy, it must instead choose between raising taxes or reducing spending by almost 20%, in order to meet the austerity targets imposed by the Troika (the European Central Bank, the International Monetary Fund and the European Commission).