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Posts tagged ‘recession’

The Crisis Of Credit Visualized

Below is an excellent video (RSS and e-mail Readers may need to click through to view it) outlining how the global economic downturn got started with the credit crisis in the U.S. If you’ve heard the term sub-prime and aren’t exactly sure what that’s all about, this video does a great job explaining it.

Bear in mind that this is U.S. focused, but it’s a very informative look at how this mess all started. It will also help you understand why Canada’s banks are in good shape: they avoided much of the financial instruments mentioned in the video, and our conservative banking practices and tighter regulations prevented them from getting over-leveraged, and from giving money to people who shouldn’t have qualified.


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Tim Ayres – Sooke Real Estate Professional

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Bank of Canada Cuts Interest Rate To Lowest Rate In History At January Meeting

SNIP!

SNIP!

Hello Google Searchers! A post about the March 3, 2009 announcement can be found here!

This morning, the Bank of Canada lowered its key overnight lending rate (the rate at which it lends funds to Canada’s commercial banks) to 1%, slashing it a further 0.5% and taking to 3.5% the total amount shaved off the key overnight rate since the current trend of trimming it started last year.

The Bank believes that the Canadian economy will contract 1.2% this year and we will experience two quarters of deflation and expects the economy will start to turn around in 2010, with a healthy growth of 3.8% as changes to policy take hold. The Bank also noted that the lower Canadian dollar will make Canadian commodities cheaper to other countries.

Because the Bank doesn’t foresee core inflation returning to its target 2% until 2011, you can expect interest rates to remain low for all of this year and next.

Canada’s big banks have already indicated that they would be matching the full 0.5% rate cut, trimming their prime rates to 3%. I believe this is a good sign that the availability of credit has loosened up somewhat. In recent months, when the Bank of Canada has made a cut to interest rates, the big banks have been hesitant to match the cut in their prime consumer lending rates, opting to keep the savings to themselves to offset higher credit costs.

As a result, anybody on a variable rate mortgage is now saving more money, and anyone shopping for a new mortgage just increased their buying power. With inventory on the MLS starting to ramp up, this combination is great if you’ve been thinking about buying.

The full Bank of Canada news release can be found here.

For more information and sound advice on real estate in Victoria and Sooke, please contact me.

Tim Ayres – Sooke Real Estate Professional

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BC and Vancouver Island Recessions, Potholes, Flooding, Gas Prices, And Other Things Amiss

storm_clouds_over_swifts_creek

What the hell? I leave the Island for 10 days and it falls apart on me?

I got back on late Sunday night from a week in Mexico to attend my cousin’s wedding and generally unplug from the world for awhile. On that note, an all-inclusive resort with 40 friends and family and really expensive internet connections is a great stress reliever. Before that I spent a couple days on the mainland with (different) friends and (same) family to ring in the new year (kinda lame) and go skating at Richmond’s fabulous new Olympic Speedskating Oval (totally sweet).

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So, being unplugged for a week (well, that and not being geographically co-located with the weather system) caused me to miss most of the weather chaos. It would suck to live in Port Renfrew about now, what with the main highway being washed out and all. Sooke Road (aka Provincial Highway 14), for those not in the know, is a complete disaster all the way along. Sooke Potholes no longer refers to the swimming hole on the Sooke River, but I bet there are some on the road big enough to swim in. I managed to ruin a perfectly good rim and tire on my car by hitting a huge one on Tuesday evening. Mainroad Contracting is going to get a nice letter.

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Tonight, the kind folks from the Provincial Emergency Program were at the Sooke Council Chambers to offer information and applications to residents who suffered uninsured damage to their homes during 6-8 January, 2009.

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Can somebody please explain to me why gas prices have increased by $0.15 while oil prices have decreased to below $40/bbl again? Somebody is gouging, I don’t care what they say.

Last night I attended, with the other directors of the Victoria Real Estate Board, the Canadian Home Builders Association Crystal Ball event, which featured several economists and our Board President, Chris Markham, giving their outlook on the economy and the housing markets for 2009. It was a good event, but obviously a heavy topic. I can’t imagine too many home builders that are thrilled about the recent slowdown in real estate sales.

Über-pessimist economist David Hobden of Central 1 Credit Union gave a grim forecast for 2009 (and 2010 somewhat), stating that the Island and Coast region are already in recession, and will remain so. He forecasts housing value to drop by 10 per cent in 2009. Hobden appeared to want to be anywhere but in that room last night, and his body language screamed doom, gloom, and defeat – it was painful to watch.

Jock Finlayson, BC Business Council executive vice president of policy was slightly more optimistic, and a much better speaker. He delivered his not-exactly-rosy forecast with levity and looked as if he enjoyed informing the room, which he had laughing on many occasions – and his visuals were way easier to read and understand. Finlayson explained that 2009 will be a difficult year, but by mid-year, credit conditions that are slowing the business cycle should improve, along with the U.S. economy, and 2010 should be a much better year. He forecasts housing starts (new construction) to be down by 40 or 50 per cent. Finlayson did a great job of explaining where all this mess came from and how Canada is better positioned to spend its way out of this recession via deficit budgets. Another positive point came in the fact that job losses will not likely be as sharp as in previous recessions because the demographics of recent years (families having fewer children and later in life, and people nearing retirement) will keep heavy losses in check – I’m sure you realize how tight labour markets have been up until a few months ago.

Victoria Real Estate Board 2009 President Chris Markham explained that while sales are slowing, it’s hard to compare 2008 to 2007 because it was an exceptionally strong year. This was emphasized by CMHC market analyst Travis Archibald showing that 2008 sales were actually very close to the 15-year average. The same goes for housing starts. They fell by a large percentage in 2008 over 2007, but are in-line with the historical averages. CMHC will be releasing its full outlook next month.

I think that Vancouver Island, and in particular, Victoria will fare better than the rest of the province, as we have a diversified economy, and stable major employers such as government and military. As for housing, it’s opportunity time out there. Buyers have their choice of many properties, and many would-be first-time buyers from the last few years, priced out by the rapidly increasing prices, will be looking at re-entering the hunt.

So, all in all, maybe the Island isn’t falling apart exactly, and I’m glad to be back. I’m optimistic about 2009, and we’re all in this together, so you might as well be optimistic too.

It’s all you can do.

Tim Ayres – Sooke Real Estate Professional

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Bank of Canada Slashes Interest Rates In December 2008 Meeting

Chop Chop Goes The Interest Rate!

Chop Chop Goes The Interest Rate!

UPDATE JAN 20, 2009: Click Here

In an effort to provide economic stimulus, the Bank of Canada has lowered its key overnight interest rate by 3/4 of a percent to 1.5% in its meeting today. Since the Canadian economy has been effectively hung out to dry by the political three-ring circus in Ottawa, I’m not surprised to see such a deep cut. If Parliament can’t/won’t do anything, then it’s up to the monetary policy makers at the Bank of Canada to provide stimulus to our economy.

Citing worse-than-expected economic performance both in this country and around the globe, the Bank has admitted that we are in fact in recession, but notes that recent fiscal and monetary actions by world governments is starting to have a positive effect on financial markets, however more time is needed for things to stabilize.

The trimming of the key rate provides a 50-year low in borrowing costs in Canada.

As with any rate cut by the BoC, it remains to be seen whether or not those savings will be reflected in the Big Five banks’ prime lending rates, currently at 4.0%.

Assuming the banks adopt the Bank’s drop in lending rates, and with the recent decline in real estate prices, sidelined buyers may just decide it’s a good time to enter the marketplace.

The Bank of Canada next meets on January 20th, 2009 to set the overnight rate. You can read the full Bank of Canada news release here.

If you have any questions about mortgages or about buying or selling real estate, please call me at 250-885-0512 or use the following link to contact me.

Tim Ayres – Sooke Real Estate Professional

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