Here’s the latest news reports from Keller Williams Realty.

Recent Notable News

Canada’s Recession Officially Comes to an End

As the third quarter’s GDP numbers come in, they show an official end to the recession. Although the positive 0.4 percent growth is less than the 1-2 percent expected, it is nonetheless a positive sign. In terms of unemployment and GDP decline, this recession was less severe than those of the early ‘80s and ‘90s. The less-than-expected growth also signals that this may very well be a slow recovery and, like many of the other countries emerging from recessions, Canada is not fully out of the woods.

The concerns largely remain unchanged–unemployment and the still high currency value. A strong Canadian currency makes spending domestic dollars abroad or on imports more enticing because they are now cheaper, but it also sends the economic benefit of that purchase abroad rather than keeping it at home. It also makes Canadian goods more expensive for other countries to import, and this is a major component of Canada’s economy. A concern that has more recently cropped up is that the cheap and readily available credit could be creating asset bubbles in gold, housing, and some other financial products.

The strength of the domestic economy has “saved the day.” Because the credit problems that plagued many other major nations were not largely seen in Canada, it has allowed it to take advantage of the low interest rates in ways that other countries could not. This has helped stir a rapid and dramatic recovery in the housing market and will likely have a spillover effect, as the new homeowners purchase new items for their homes and complete renovations. It has also helped spur a surge in personal and in business investment not seen since 1997.

Credit Card Guidelines

Finance Minister Jim Flaherty has issued a new, voluntary code of conduct for credit and debit card companies. If not widely adopted, the code may become government regulations.

The initiative intends to promote fair business practices by creating transparency for merchants and consumers to clearly understand the costs and benefits of the cards. The fees credit card companies charge merchants can vary widely, and this announcement now comes after years of consumer groups and businesses voicing concerns that the disparity of fees can cause unpredictable harm to the bottom line.

The code will be on a sixty-day consultation period where credit card companies and businesses alike will have the opportunity to provide feedback before the code goes into effect.

Topics for Home Buyers and Owners

5 “End of the Year” Tax Tips

Fix up the house. The deadline for the home renovation tax credit (HRTC) is coming up quickly. It’s a 15 percent tax credit and applies to purchases between $1,000-$10,000 for a maximum of $1,350. Materials must be purchased in 2009 but can be installed in 2010, but only labor completed in 2009 may be counted.

Contribute to your children’s education. If your child or grandchild doesn’t have a Registered Education Savings Plan (RESP) and they turned 15 in 2009, the last chance for them to get in is December 31, 2009. By contributing at least $2,000 this year, they will be able to collect a 20 percent Canada Education Savings Grant for 2009 and be eligible for 2010 and 2011. Missing this year’s deadline will make them ineligible for the next two years as well.

Donate. Donations must be made by December 31 in order to get a tax receipt for 2009.

Contribute to a registered disability savings plan. This tax-deferred plan is open to residents that are eligible for the Disability Tax Credit, their parents, and other eligible contributors. A maximum of $200,000 can be deposited and there are no annual limits. Contributions in 2009 may be eligible for the 2009 Canada Disability Savings Grant and the Canada Disability Savings Bond.

Splurge on office furniture. Even if you purchase at the end of the year, you can still take half a year’s depreciation on new office equipment and furniture for small business owners and self-employed. Computer equipment purchased between January 27, 2009 and January 30, 2011, can be written off 100% in the year it is purchased.

By Greg Quinn

(NOTE: In lieu of the recent posts I’ve made about the Bank of Canada and the near-term rising of the interest rates, I think it only fair and prudent to post this latest story from Bloomberg News)

Aug. 5 (Bloomberg) — The Bank of Canada may extend a commitment to leave its main interest rate at a record low if a stronger currency threatens to prolong the country’s recession, said Derek Holt, economist at Scotia Capital in Toronto.

Governor Mark Carney kept the benchmark rate at 0.25 percent last month. At the time, he said the currency is a major risk to economic growth, adding he has the “flexibility” to deal with it. Finance Minister Jim Flaherty yesterday echoed Carney, saying “steps could be taken to dampen” the dollar.

Carney has said he intends to leave the policy rate unchanged through the second quarter of 2010, and extending that pledge by a quarter or two is the best way to restrain the currency over a longer period, Holt said. Andrew Spence, a former central bank adviser and head of global interest rate and foreign exchange research at TD Securities, also made a similar prediction July 31.

“Canadian dollar strength does offset some of the need to take back stimulus through rate hikes at some point over the next year,” Holt said in a telephone interview from Toronto today. “I can see them waiting an extra quarter or two.”

Other options such as selling Canadian dollars to weaken the exchange rate, or purchases of securities, known as quantitative easing, may not be effective and would interfere with credit markets, he said.

‘Good Luck’

“If you’re the Bank of Canada trying to lean against global foreign exchange markets, good luck. You’re setting yourself up to have your head handed to you,” Holt said.

Canada’s dollar was little changed today after weakening following Flaherty’s comments yesterday. The currency was trading at C$1.0729 per U.S. dollar at 11:37 a.m. in Toronto from C$1.0726 yesterday.

The Bank of Canada abandoned a policy of systematic transactions in currency markets to control the dollar’s volatility in 1998. The central bank did not intervene in foreign exchange markets when the currency reached a record high in 2007, or when it had the biggest monthly gain since the Korean War during May.

The stronger currency makes Canada’s factory goods less competitive, in a year where the bankruptcies of General Motors Corp. and Chrysler Group LLC shut Canadian plants, dealers and parts suppliers. Factory sales have dropped 29 percent since last July, and manufacturers fired 221,500 workers in the 12 months through June, an 11 percent drop.

‘Always a Risk’

“There is always a risk with that sort of thing,” said Paul Riganelli, chief financial officer of Exco Technologies Ltd. in Markham, Ontario, referring to the central bank trying to influence the currency’s value. “I think it’s done what it can, and I think the rest is up to us.”

“We are seeing major fluctuations of 5 to 10 percent within a 30-day period in either direction, and that is causing all sorts of problems with planning,” said Riganelli, whose company’s products include die-cast auto parts.

The Bank of Canada said July 23 the economy will grow at a 1.3 percent annualized pace this quarter, marking the end of a recession that began at the end of last year. Output for the year as a whole will still shrink 2.3 percent, the bank says.

The central bank provides updates on the rate commitment at each of its fixed announcement dates. The next is on Sept. 10. Low Canadian interest rates can weaken the currency if investors take their money out of the country to seek higher returns elsewhere.

“It has its most impact in terms of the jawboning if it comes in an official rate statement,” said Mark Chandler, a fixed income strategist at RBC Capital Markets in Toronto. Over a longer period, statements of concern about the currency have to “be tied to some shift in bank policy to some easier stance,” he said.

To contact the reporter on this story: Greg Quinn in Ottawa atgquinn1@bloomberg.net.

BoC may have to break interest rate promise

Alia McMullen, Financial Post Published: Thursday, July 23, 2009

I came across this article today, and it made me think about the real estate market locally – more specifically, how the market is in kind of a shambles because people have been buying into the messages from the mainstream media (msm) for far too long.

You see, the msm has spent the last 12 months talking about how everything is so bad, and how much worse things are going to get, and everybody listened. It reminds me of the politician who reports when gas prices are going to go up – they go up. What if he reported that gas prices are going to go down? Might they go down?

Anyway, my position on the real estate market has been, and still is, that people have to live somewhere, so why not buy a house? Prices have gone down, rates are crazy-low, and rents have gone up. Talk about three things to stop people from renting! Yet they have continued to hold off on buying a home.

The reasons given are varied:

1. Worry about job security. Well, as mentioned, if you have to live somewhere, and it is cheaper to own than to rent, why would you rent?
2. Prices are going to go down even more. Are they? They haven’t, and they’re not going to. Why? Because we are not the United States, our systems work very differently, and Canadian banks don’t want to own real estate.
3. If it is such a great time to buy, more people would be buying. Actually, the fact of the matter is that if there were more well-priced, well-maintained houses on the market, more people would be buying. There’s almost a herd-mentality amongst homebuyers – when everyone’s buying, it must be a good time to buy. Hmmm. The laws of supply and demand say the opposite, don’t they?
4. I’ve got 9 months left on my lease. Yes, and? What I mean by this is that there are all kinds of creative ways to buy now even if you are in a 1-year lease for another 364 days. Call me for details – there are lots of ways to take advantage of the rates and prices before they go up (which they will once everyone else starts buying).
5. I don’t have enough of a downpayment saved. Well, what is ‘enough’? You can still get 100% financing; you can still get cash-back. I’m telling you, times are perfect to buy!

So, are you going to just sit back and wait? Wait for changes that won’t come? Wait until the home of your dreams is priced out of what you can afford because prices and/or rates have gone up?

Search on Twitter for GTA real estate agents – they are all saying the same thing: multiple offers. The sellers won’t sit back and wait for you – get into the market while it is to your BEST advantage.

Here’s the article that spurred my thinking:

The Bank of Canada is declaring the recession essentially over in Canada and projecting the economy will bounce back at least twice as strongly as in the United States.

The bank said today it estimates the Canadian economy will advance by 1.3% during the current July-September period, and 3% in the fourth quarter, both at annualized rates.

The bank’s quarterly monetary policy report contains many cautions about how the world and Canada is coming out of the deepest and most painful downturn since the Second World War.

The bank remains concerned that the fragile financial systems in the United States and Europe may contain more unpleasant surprises that will sideswipe the global economy once more, and it believes the strengthening loonie is not helpful given the Canada’s dependence on exports.

As well, it warns the recovery is at best nascent and dependent on massive government stimulus and historic low interest rates to support domestic activity and consumer spending.

But overall, the new outlook represents a clearly more optimistic view of the Canadian economy than governor Mark Carney presented in April, when he saw the contraction that began last October lasting at least until the fourth quarter of 2009, and the dip in the first month of this year breaking all records.

The Bank of Canada first indicated it was about to brighten its outlook on the economy on Tuesday in a statement accompanying the decision to keep short-term interest rates unchanged.

At that time, it said the economy would shrink by 2.3% this year—implying growth had already begun—and expand by 3% in 2010.

On Thursday it said that economic growth “is now projected to turn positive in the third quarter.”

Carney told reporters the recovery it will be a “gradual” process.

“Global economic activity appears to be nearing its trough, and there are increasing signs that activity has begun to expand in many countries in response to monetary and fiscal policy stimulus and measures to stabilize the global financial system,” he said.

“However, this recovery is nascent, and to sustain global growth effective and resolute policy implementation remains critical.”

That effectively means that the downturn that cost Canadians close to 400,000 jobs since October has ended, although the recovery will be modest by historic standards.

The bigger bounce the bank is projecting starting this quarter does not change its overall view that it will take until mid-2011 for Canada’s economy to return to full capacity.