Housing Activity Stronger in 2010

OTTAWA, March 2, 2010 — Housing starts rebounded in the second half of 2009 and will strengthen in 2010, according to Canada Mortgage and Housing Corporation’s first quarter Housing Market Outlook, Canada Edition*.
Following a total of 149,081 units in 2009, housing starts are expected to be in the range of 152,000 to 189,300 units in 2010, with a point forecast of 171,250 units. In 2011, housing starts will be in the range of 156,400 to 205,600 units, with a point forecast of 175,150 units.
“Canadian housing markets will benefit from improving economic conditions and low mortgage rates,” said Bob Dugan, Chief Economist for CMHC. “As well, measures recently announced by the Government of Canada to support the long-term stability of Canada's housing market will help moderate housing activity as some potential buyers will have to save a larger down payment or consider a less expensive home.”
Mr. Dugan also noted that the existing home market has shifted from a buyer’s market, at the beginning of 2009, to a seller’s market. The relative lack of new listings for existing homes has pushed some of the demand into the new home market, which helps explain the forecast for higher housing starts activity in 2010.
The strong pace of MLS® sales seen in the second to fourth quarters of 2009 reflects, in part, activity that was delayed in the previous two quarters. The pace is not likely to be sustained as pent-up demand is exhausted and financing costs increase with anticipated higher interest rates later in 2010. As a result, existing home sales will be in the range of 455,350 to 509,900 units in 2010, with a point forecast of 486,700 units, and then move slightly lower in 2011 to be in the range of 426,300 to 494,600 units, with a point forecast of 469,950 units.
With an improved balance between demand and supply, the average MLS® price is expected to remain close to the average in the last quarter of 2009, for most of 2010, and then rise modestly in 2011.
As Canada's national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.
* The forecasts included in the Housing Market Outlook are based on information available as of February 16, 2010. Where applicable, forecast ranges are also presented in order to reflect economic uncertainty.

How to Cushion Yourself Against Rate Hikes

The prospect of higher mortgage rates and stiffer rules that went into effect last week on qualifying for house mortgages have left Canadians scrambling for answers to their home financing questions before rates rise.

Many Canadians already faced with growing consumer debt are worried about how they'll continue to make payments once mortgage rates rise. And many others, who want to get into the market ahead of rate hikes wonder how or if they'll be able to do so. And as the reality of higher rates creeps closer, mortgage holders have many questions.

The answers are different for each homeowner or prospective homebuyer; but there are some general rules that wise mortgage holders follow in order to cushion themselves against rate hikes.

Those with mortgages coming up for renewal in the next four months and buyers looking to get into the market before rates rise should get pre-approved at current rates, giving them 120 days to lock in. Refinancing is also an option for those worried about existing mortgages, but owners would have to pay a penalty.

If you think that rates are going to go up three points in the next two years and you have a year or two left on your mortgage, to pay a small penalty for the peace of mind for the next five years might be worth it.

If you are going to be worried about what happens with rates, don’t choose a variable rate. Nervous buyers should consider a fixed-rate mortgage for a longer period of time and take comfort in knowing the payment will not change for the term of the mortgage. Taking a five year rate at 4.5% is still an incredible rate.

Instead of buying a dream home, consumers may be buying a starter home like most people used to have to do. Homebuyers worried about their ability to make payments may have to compromise. You might have to settle for a little less house initially in order to start building up equity, or you might want to consider having a cushion in your payments.

Protect yourself from financial storms.

In finances—as in all things in life—it’s not what happens that matters, it’s how you react to what happens. While millions of people suffered during the current economic crisis, many people did just fine because they reacted differently.

The key is to prepare for the worst even when times are good. This can be difficult, especially during boom years like the ones leading up to the current crisis. It’s tough to keep your debt under control and slowly build assets when everyone else is chasing get-rich-quick schemes. But the people who took the slow, responsible route are now benefiting. Here are some tips:
• Be an entrepreneur, not an employee. Start your own small business on the side. Expand on the ideas that work. Eventually, you’ll earn more money, pay less tax, and never be afraid of losing your job.
• Invest for cash flow, not capital gains. Capital gains are what you get from the stock market or the value of your house, and as we know they can drop. Cash flow is an ongoing revenue stream, like the money you earn from a revenue property. Even during bad times, people need places to live, so your cash flow continues.
• Invest for inflation. Having all your assets in cash leaves you at the mercy of inflation. Instead, invest in things that go up in value as inflation rises, like silver and other commodities.

Commonly Used Financial Terms and their Definitions.

There are many financial terms that are commonly used in daily discussions, however if we had to define some of them we might be stumped. Here are a few simple definitions:

Basis Point
One-hundredth of a percentage point. For example, the difference between 5.25% and 5.50% is 25 basis points.

Bear Market
A market in which stock prices are falling. The rule of thumb seems to be at least 20 percent. However, a lot depends on how long the drop lasts. The quicker the rebound, the less likely that investor psychology will turn from optimism to the pessimism that usually accompanies a bear market.

Bull Market
A market in which stock prices are rising for a length of time. Prices need not rise continuously. There can be days, weeks and even months in which prices fall. What matters is the long-term trend. When it comes to people, bullish describes one who is optimistic.

Dow Jones Industrial Average (DJIA)
There are thousands of investment indexes around the world for stocks, bonds, currencies and commodities however the DJIA is one of the best known and most widely quoted stock market averages in the media. It contains an average made up of 30 actively traded blue chip stocks spanning many different industries that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing.. The DJIA is calculated by adding the prices of each of the 30 stocks and dividing by a divisor. The average is quoted in points rather than dollars. It is price weighted, meaning that a $2 change in a $100 per share stock will have a greater affect than a $2 change in a $20 per share stock.
Gross Domestic ProductGDP is the value of all goods and services produced in Canada in a calendar year. The gross domestic product includes only final goods and services, not goods and services used to make another product. Changes in the gross domestic product are an indication of economic output.

Income Trust
Trusts structured to own debt and equity of an underlying entity, which carries on an active business, or has royalty revenues generated by the assets of an active business. By owning securities or assets of an underlying business, an income trust is structured to distribute cash flows, typically on a monthly basis, from those businesses to unit holders in a tax-efficient manner. The trust structure is typically utilized by mature, stable, sustainable, cash-generating businesses that require a limited amount of maintenance capital expenditures. An income trust is an exchange-traded equity investment that is similar to a common share.

Index or stock price index
A statistical measure of the state of the stock market, based on the performance of stocks. Examples include the S&P/TSX Composite Index.

Recession
Two consecutive quarters of contraction in the gross domestic product.

TSX Composite Index
Comprises the majority of market capitalization for Canadian-based, Toronto Stock Exchange listed companies. It is the leading benchmark used to measure the price performance of the broad, Canadian, senior equity market. It was formerly known as the TSE 300 Composite Index

Nip your allergies in the bud this spring.

As anyone who suffers from allergies knows, springtime can leave you with scratchy or watery eyes, sneezing, coughing, a runny nose, hives and more. Since diet and lifestyle factors are the main causes of allergies, it’s a good idea to get yourself tested for sensitivity by a medical professional. But even without a formal test, there are lots of steps you can take to prevent many common allergies:
• Avoid known allergens like wheat, dairy, refined sugars, and foods high in saturated and hydrogenated fats. Eat more fresh, organic fruits and vegetables, rich essential fatty acids, and low-fat, non-dairy animal protein.
• Drink 8-12 glasses of purified water each day.
• To help detoxify your body, consider doing a juice fast of organic vegetable juices.
• Try herbal remedies like yarrow and myrrh to help reduce mucus; or Echinacea, astragalus root and goldenseal root to strengthen the immune system.
• For digestive issues, try digestive enzymes, probiotics, zinc, vitamin A, vitamin C, vitamin P and other bioflavonoids.
• Try chamomile or lavender aromatherapy to relieve reactions and stress.
• Wash all bedding at least once a month. Remove synthetic carpets and commercial stuffed animals. Keep all windows closed during peak allergy seasons and don’t allow smoking. Try using ozone air purifiers to reduce airborne allergens.

New credit card rules help, but the best advice is to wean yourself off credit card debt.

On January 1st, the Canadian government implemented new credit card regulations, which it says increase transparency and protect consumers. Here are some of the new regulations now in place:
• Credit contracts and application forms must have a "summary box" that clearly explains interest rates, fees, and how long it would take to fully repay a balance if only minimum monthly payments are made.
• Banks must give advance disclosure of interest rate increases, even if this information is already in the credit contract.
• You must give your consent before your credit limit can be increased.
• If you transfer your balance to a lower-interest card, your payments now have to be allocated in your favour.
• There’s now a limit on certain debt collection practices used by financial institutions.
• Banks can’t charge over-the-limit fees resulting from holds placed by merchants.
• One of the most significant changes has been delayed until September 1st. As of that date, you’ll have a minimum 21-day interest-free grace period on all new purchases if you pay your outstanding balance in full by the due date.

Critics of the new rules say they don’t go far enough. However, at least the government is trying to make an effort to help consumers avoid predatory lending practices. And that’s a good thing.

However, an even better strategy is to start weaning yourself off of credit card debt. Unlike taking out a mortgage to buy a home or revenue property, buying stuff with your credit card at high interest rates doesn’t yield any returns—it simply gets you deeper in debt. Instead of making the minimum monthly payment, put yourself on a budget, take a part-time job (or start a home business) and eventually get your credit cards paid off. You’ll be astonished how much extra money you’ll have to invest in assets that actually appreciate in value and put cash in your pocket!