28 Jun

Positive Second Half

General

Posted by: Chris Cavaghan

Some more positive news regarding the upcoming months. Victoria’s real estate market is flooded with listings and 5 year Fixed mortgage rates are extremely low, with the Variable rate mortgages at a low risk choice as well.

 

By Christopher S. Rugaber,Paul Wiseman, The Associated Press

WASHINGTON – Farewell and good riddance to the first half of 2011 — six months that are ending as sour for the economy as they began.

Most analysts say economic growth will perk up in the second half of the year. The reason is that the main causes of the slowdown — high oil prices and manufacturing delays because of the disaster in Japan — have started to fade.

“Some of the headwinds that caused us to slow are turning into tail winds,” said Mark Zandi, chief economist at Moody’s Analytics.

For an economy barely inching ahead two years after the Great Recession ended, the first half of 2011 can’t end soon enough. Severe storms and rising gasoline prices held growth in January, February and March to a glacial annual rate of 1.9 per cent.

The current quarter isn’t shaping up much better. The average growth forecast of 38 top economists surveyed by The Associated Press is 2.3 per cent.

The economy has to grow 3 per cent a year just to hold the unemployment rate steady and keep up with population growth. And it has to average about 5 per cent growth for a year to lower the unemployment rate by a full percentage point. It is 9.1 per cent today.

As welcome as the stronger growth envisioned in the second half is, the improvement should be modest. For the final six months of the year, the AP economists forecast a growth rate of 3.2 per cent.

So far this year, high gas and food prices have discouraged people from spending much on other things — from furniture and appliances to dinners out and vacations. That spending fuels economic growth.

And some U.S. auto factories had to suspend or trim production after the March earthquake in Japan interrupted supplies of parts and electronics. American dealerships have had fewer cars to sell.

The latest dose of glum news: The government reported Monday that consumer spending was about the same in May as in April, the first time in a year that spending hasn’t increased from the previous month.

The report confirmed the toll that high gas prices, Japan-related disruptions and high unemployment have taken on personal spending in the second quarter.

“Here’s to a better third,” says Jennifer Lee, senior economist at BMO Capital Markets.

Relief is in sight, economists say. Oil prices have been falling since Memorial Day. The drop has lowered the price of regular unleaded gasoline by 23 cents in the past month, to a national average of $3.57 a gallon, according to AAA.

The timing of the drop in gas prices is especially fortunate because they usually rise during summer driving season, says Robert DiClemente, chief U.S. economist at Citigroup .

And the kinks in the global manufacturing chain are starting to be smoothed out as the Japanese factories that make cars and electronics resume production.

Diane Swonk, chief economist at Mesirow Financial, says auto sales should improve “quite substantially” later this year because the lost production from the earthquake is coming back faster than had been expected.

One sign of that rebound came when the Federal Reserve Bank of Chicago reported Monday that manufacturing in the Midwest rebounded in May after falling sharply in April.

And last week, the government said orders for machinery, computers, cars and other durable goods rose slightly in May after dropping in April. Economists attributed the turnaround, in part, to Japanese factories that started to rev up.

The U.S. economy is also expected to get a slight second-half boost from reconstruction in flood-ravaged sections of the South and Midwest. Construction workers will be employed rebuilding homes and businesses. People will replace destroyed cars and other possessions. Analysts predict the economic losses from the floods in the April-June quarter will be reversed in the July-September quarter.

The economists surveyed by AP predict unemployment will fall to 8.7 per cent at year’s end. It is not exactly the start of a boom: The economy is still carrying too much baggage from the financial crisis — damaged banks, depressed home prices, debt-burdened consumers — to achieve much liftoff.

Though some of the economy’s weakness in the first half is temporary, “it is hard to see much on the horizon to cheer about,” Swonk says.

____

AP Economics Writer Martin Crutsinger contributed to this report.

 

http://ca.finance.yahoo.com/news/Why-economists-see-modestly-capress-1496951129.html?x=0

17 Jun

10 Reason not to panic

General

Posted by: Chris Cavaghan

There stll seems to be some hesitation in the Victoria real estate market. Fixed and Variable rate are incredibly low and the amount of inventory on the market is staggering, and the average price for a home is increasing. What are people waiting for? It could be all the negative news that is spewing out of the media. But, here is some positive news from the Financial Post that will hopefully start spreading.
The European sovereign debt crisis, a potential hard landing in China, weak U.S. economic data, and the U.S. debt ceiling debate have provided investors with plenty to worry about. Since none of these problems look like they will be resolved in the immediate future, don’t be surprised if global financial markets continue to be in a rough patch for at least a few more weeks.
Despite the unpleasant stew that is brewing, it is not noxious enough to either derail the economic recovery or upend the market rally of 2011, says Joseph P. Quinlan, chief market strategist at U.S. Trust, Bank of America Private Wealth Management.
In a recent research note, Mr. Quinlan points out that June is often a lousy month for equities, as the Dow Jones Industrial Average has fallen for the past six years.
“Early indications are that this June will be no better,” he says. “However, beyond the daily gloom and doom, investors should not overlook the fact that the financial markets and global accounting, while facing some stiff headwinds, also have a number of significant tailwinds working in their favor.”
The strategist provided ten reasons why investors should not panic.
1. Corporations are flush with cash
After a two-year profit boom, corporations are putting this money to work in the form of both climbing capital expenditures and hiring. At the same time, share buybacks and higher dividends are on their radars. So despite the deleveraging of U.S. households and the government’s credit limit challenge, the strong capital position of many corporations will be an important driver of the economic expansion in the medium term.
2. Unemployment numbers are misleading
The U.S. unemployment rate remains elevated at 9.1% in May 2011. However,95% of the skilled labour force is currently employed as workers with four-year college degrees or more have an unemployment rate of 4.5%. This cohort accounts for a disproportionate share of personal consumption.
3. U.S. exports are going strong
Total exports hit an all-time high of US$172-billion in March 2011. With the weak U.S. dollar and continued growth overseas, exports should remain strong over the medium term and cement America’s position as the top exporter of goods and services globally.
4. State finances are improving
The weak housing market continues to put pressure on state finances, but the worst is over for many as better-than-expected retail sales and other receipts are helping to establish a floor for their financial position.
5. The Fed isn’t changing its stance
The Fed’s second round of quantitative easing is due to conclude at the end of June, but the central bank’s benign monetary stance will be maintained well into the second half of 2011. The Fed is expected to err on the side of too-easy money rather than premature tightening, unlike the European Central Bank.
6. China will engineer a soft landing
With some US$3-trillion in reserves, the Chinese government has the wherewithal to keep growth in the 7% to 8% range in the near term. Despite challenges such as rising wages and higher food and energy costs, China’s economy may slow, but it will still grow faster than most countries again this year. It managed to post more than 9% GDP growth in 2009 as the global economy slumped.
7. Economic weakness provides relief for food and energy prices
The soft patch for global economies will help contain inflation risks and improve consumer sentiment around the world.
8. The euro crisis will be contained
The euro zone’s wealthiest member, Germany, will provide both the political will and capital to prevent Greece, Portugal or Ireland from imploding.
9. The U.S. debt ceiling will be raised
The debt ceiling has been increased more than 100 times in the past. Once this happens again, the focus will shift to tackling the U.S. federal budget deficit.
10. Everyone is not broke
Nor are they in the midst of austerity campaigns. In fact, the IMF estimates that developing nations have somewhere around US$7.5-trillion in international reserves. The deployment of these excess savings will come faster as a result of slow growth in the United States and Europe, helping the global economy maintain a growth rate of 3.5% to 4% in the near term.
 
 
2 Jun

What is the minimum down payment for a house purchase?

General

Posted by: Chris Cavaghan

I heard today, on 2 separate occations, people thinking that they need more than 5% of the purchase price as a down payment on a house or condo.

With the changes CMHC made this year and in 2010, I guess some people are confused.

The changes were made to the amortization, or the length of the mortgage the payments are based on, and the refinancing rules.

There has been no change to the minimum amount you need to put down.

5% down is the minimum to get best rates. But with the low rates were are experiencing now, you can even get away with 0% down. There are certain conditions that apply to that type of mortgage though so please ask me if you think that might suite you.

If you ever hear of anyone thinking they need 10% or even 15% down on a purchase, please have them call me so I can explain the actual numbers with them.

5 year fixed mortgage rates are continuing to drop and there is no expected increases coming.

Have a great weekend and please pass the word on about the minimum down needed!!