Steady as she goes ...the market, that is!

Jon Sowerby is bang on again, in his detailed report below. It's a dry read but come on, he tries hard...bear with him and read to the end....very valuable information! 1. Market Update - No Surprises as Bank of Canada maintains rate and warns of too much debt (again). We’ve heard the story for 2 years now – rates won’t be changing but the average debt of a Canadian household is cause for concern. The average Canadian family will suffer if rates were to move even a couple of percentage points. Spending is out of control. Growth is within a slim margin of where we thought it would be. Steady as she goes. My Opinion? It might almost be better for Mark Carney of the Bank of Canada to hold off on regularly repeating the same old thing every 6 weeks or so. 1) It makes for some terribly repetitive articles from me (sorry, I realize mortgages and lending should be fun to read about and believe you me I am trying my darndest) and 2) it’s because it really starts to hurt the credibility of arguably the country’s most important banker. Although I have had my issues with Minister Flaherty over what I believe have predominantly been poor policy choices with regard to mortgages, one place where I cannot fault him is in his willingness to act. Although I believe much of the action taken has rather missed the point (still waiting to see something from government on unsecured debt like credit cards with rates of 20%+ plus during an interest rate environment that has some of the lowest lending rates on record) but the man has been out there doing something. Contrast that with Mark Carney governor of the Bank of Canada and you can only draw the conclusion that he’s become somewhat irrelevant on the domestic financial scene. Ironically, he has become the toast of the international markets as he continues to give speeches to various countries all over the globe on how to manage their way through a crisis. But proving the old adage that “you can’t go home” the man and his office have become something of a paper tiger in Canada. You can only hear someone threaten an action for so long before you think they just might not do it and clearly that’s a bad thing when you are in essence at the top of the heap of financial decision makers. At some point it likely means a day of reckoning will have to come and let’s all just hope that Mr. Carney doesn’t feel he has a point to prove when things finally swing his way and he is in a position to increase rates. Until that time however, he just might want to you know, put the regular announcements on hold due to a skiing trip or something. 2. Housing Market Revisited – where are we 6 weeks later? In my last piece of commentary I spent a little time looking into the housing market in primarily the GTA. At the time I made some notes about how although the media has frequently portrayed the housing market as one that was suffering and in imminent fear of collapse I illustrated that while the headlines looked dire the facts and figures were somewhat more banal. Once upon a time in a very different period of my life I ran a team of analysts and to this day I still (although believe me when I say I have tried to stop) carry something of an analysts eye. And an analysts disdain for the way things are all too frequently handled in the media. What I mean by that is as follows: The media and folks in general are really good at what I call straight line analysis. What I mean by that is if the markets were down 5% last month in 5 more months we’ll be down 30%. In other words just turn whatever happened, usually based on a very short term, into a definite long term trend, or straight line analysis. For example, last week we got some numbers out for August and they were off previous months. In some instances a decent drop – a decline of 5.8% in homes sales for Canada year over year and in some instances jaw-dropping, led by the decline of 30.7% in the Greater Vancouver Market. Needless to say the one month trending curve is looking pretty scary for anyone who just bought a house! Fearless prediction – it will probably be down in September too. My own personal experience was September was a little slower for new purchases although things have since picked up somewhat in October. Some however, would have you believe that this is in fact the end and you can indeed stick the fork in the housing market. However, (and again putting on my analyst hat) what I am about to share with you is purely anecdotal which mean Not necessarily true or reliable, because based on personal accounts rather than facts or research. In particular this news of the wheels coming off the housing market are likely poor consolation to the 4 couples I have been working with who in the last 4 weeks have lost out in multiple offer situations or the 3 people who actually were able to buy in situations where there were multiple bids but ended up paying more than they hoped. So what does all this really mean? In a word, not much (OK, 2 words for my fellow analysts). As I stress on a regular basis a home purchase is a personal decision influenced by many factors. Looking at broad bands of ultimately very specific statistics is the sort of thing that usually leads to more confusion than good. Now, if some of our friends in the media started to run numbers with 3 year and 5 year and 10 year averages I might be a little more inclined to pay attention. But that’s not what you would call sexy and so the status quo stories are pushed to the side in favour of something that will generate some more water cooler chatter. In the meantime however, what they write or don’t write is likely to have little impact on your personal situation and so I would invite you if you do have questions to touch base with me and let’s get into detail. If I can’t answer your questions I likely know someone who can. It certainly doesn’t hurt to ask and inform yourself at a more intimate level. One thing however on which I would agree with the popular sentiment is as it relates to interest rates. Briefly, I would agree that although it doesn’t look like things are going to change in the short term the clock is ticking on low rates. So I do say that getting your refinancing in or seeing what you would qualify for on a purchase is the sort of thing you should probably be doing sooner. Especially consider those refinances if you have outstanding credit card debt, student loans, car loans etc. No matter what the prognosticators know or don’t know about how the market will turn out, trading high interest rates for low interest rates will make you a winner on your balance sheet every time. 3. Working with professionals: One of my goals as a financial professional over and above my goals as your mortgage professional is to provide you with a support network that will help you manage your complete financial and real estate situation in the way we have managed your mortgage situation – by putting you in touch with ethical, principled and knowledgeable specialists from a variety of fields. If you have questions or needs in any of the following areas: • TVH Mortgages run by yours truly, Jon Sowerby as Mortgage Broker and Broker of Record • TVH Financial, dealing with Investments and Insurance is headed by Jim Lao , Financial Advisor • TVH Legal, dealing with Real Estate and Estate law in addition to civil litigation is headed by Sonia Kociper, Lawyer • TVH Accounting, dealing with personal and business tax matters headed by David Jamestee, Chartered Accountant We also know some excellent people in the following fields: o Real Estate - (and by the way, Sonya Cote is one of our top producers!) o Property Insurance o Contracting Email or phone me, whichever is more convenient. I’m always happy to help and why wonder and maybe miss an opportunity when a few minutes of your time could provide all the help you need. Take care and stay in touch! Jon Sowerby Verico TVH Mortgages Inc. 63 Lombard Street Toronto, ON M5C 1M2 Phone/Fax 416-488-0074 Toll Free 866-449-0074 www.jonsowerby.com Brokerage License No. 11946 License No. M08002811