LIFE is NOT waiting for you

Forget market timing, it's all about life timing
Garry Marr, Financial Post 
Wednesday, Jun. 9, 2010

'You know, you're making the biggest mistake of your life. The housing market is going to fall."

I got this great piece of advice from another journalist at the Financial Post, who has since left the newspaper, after buying my first home. Not exactly the type of thing you want to hear after taking on huge debt and making the biggest financial decision of your life.

Lucky for me, I didn't heed that advice about Toronto's red-hot real estate market -- in 1998. I'm not going to say I made a shrewd business decision 12 years ago, or even six years later when I bought a larger house.

For me, it wasn't a case of not following what turned out to be bad advice from a fellow business journalist. Nor was it about trying to time the market.

I was simply following the same pattern as most Canadians: I got married and decided to stop renting and buy something. Later came the need for a bigger home when the second kid was on the way.

Which brings us to today. The supply of housing is rising fast as people try to list their homes for sale before the market "crashes." This is happening at the same time that demand is starting to wane. Economists and even the real estate industry are all predicting a correction, the only argument being how severe it will be.

So, the question for anyone buying is, should you wait?

Don Lawby, chief executive of Century 21 Canada, thinks the strategy of waiting for a crash is not going to work during this economic cycle. "For a market to crash, you have to have people who are desperate to sell," says Mr. Lawby. "People will [only sell] if they can't afford their mortgage or they don't have a job."

He doesn't see a decline in prices, "unless you are predicting that mortgages will renew at a hefty premium, which is not the case, or a whole bunch of people are going to lose their jobs."

Mr. Lawby believes neither will happen.

And, he adds, you are really into a risky game if you are timing the market. "A house is a home. If all you are doing is looking at it as an investment --that's what happened the last 15 years--it's not just that. It's a place to live and a place to raise a family," says Mr. Lawby.

Even Benjamin Tal, a senior economist with CIBC World Markets, who last month said in a report that Canadian housing is 14% overvalued, has doubts about playing the market. But he suspects that's exactly what some Canadians will do.

"Is there a sense that prices will go down and people will wait? I think it might be an issue," says Mr. Tal. "It won't be the main reason [people don't buy], but it will happen at the margins. The fact that people sell at the peak and wait to buy is a normally functioning market."

But even if you do make the right call on housing prices, it could end up backfiring on you in other ways. For example, if interest rates rise fast enough, any gains you make on price could be erased by interest charges, says Mr. Tal.

Edmonton certified financial planner Al Nagy says you need to think of your house the way you think about any long-term investment. "Whether it's an investment for use in your retirement or a house to live in, it's a long-term thing. The timing becomes less critical than it would be if it is a speculative [investment]."

And he says making a call on the housing market is as tricky as any other investment call. "It's very rare you catch the bottom. You can't let the market dictate when it's time to buy. The time to buy is when you can afford it," says Mr. Nagy.

I'm not sure that philosophy would fly with my former colleague, but the problem with timing the market is, what if your timing is off?

EMPLOYMENT SIGNS

Canada gains 24,700 jobs in May; unemployment rate remains at 8.1%
Paul Vieira, Financial Post · Thursday, Jun. 3, 2010

OTTAWA -- The Canadian job market continued to churn out jobs in May, adding 24,700 workers -- mostly full-time and in the private-sector -- to payrolls, Statistics Canada reported on Friday.


The May data were well above Bay Street expectations for a 15,000 gain, and has some analysts suggesting this represents more evidence interest rates in Canada will continue to head upward.

“This should up the ante on further Bank of Canada hikes,” said Derek Holt, vice-president of economics at Scotia Capital. “This is simply an astounding jobs report.”

In contrast, the U.S. jobs data for May came in well below expectations, with 411,000 people added to payrolls versus an anticipated 533,000 gain. Particularly disappointing was that gains in private-sector employment, of 41,000, were little changed from the prior month. The anticipation was that the private sector would add 190,000 jobs. As a result, most of the U.S. job gains were temporary hires by the U.S. government to help conduct that country’s census.

John Lonski, chief economist at Moody’s Investors Service, said the U.S. data were “disappointing,” and would mean the U.S. Federal Reserve would be in no hurry to raise its benchmark rate for the foreseeable future. “This tells us the recovery in the U.S. labour market is happening at a snail’s pace.”

The Bank of Canada this week raised its key interest rate for the first time in nearly three years, to 0.50% from 0.25%, as strong domestic fundamentals outweighed worries in Europe. However, its cautious rate statement, which emphasized the risks in Europe, had some analysts questioning whether the central bank would hike rates at its next meeting in mid-July.

The gain of 24,700 jobs comes on the heels of a record performance in April, in which 108,700 people were added to payrolls. The unemployment rate remained unchanged in May at 8.1%, as more people entered the labour market in search of jobs.

The headline May number is smaller than April’s whopping performance, but analysts were nonetheless impressed with underlying data that suggest the recovery has legs.

Full-time employment rose by 67,000 in May, while part-time positions fell by 43,000. The private sector accounted for 43,000 new positions during the month, while there were 28,000 fewer self-employed workers, the agency said.

“Those part time jobs that were taken in lieu of more suitable employment are giving way to more suitable full time jobs,” said Stewart Hall, economist at HSBC Securities Canada. “So too may it be the case that part time jobs have evolved into full time positions as companies respond to increased economic activity.”

The strongest job gains were in transportation and warehousing, and health care and social assistance. Public administration and agriculture were also higher. The biggest declines were in the information, culture and recreation sectors, as well as in the accommodation and food services, and natural resources industries.

Ontario, Alberta, and Newfoundland and Labrador recorded the most robust jobs gains. Meanwhile, average hourly wages rose 2.4% in May, in line with gains in the same month a year earlier.

Employment has risen by 215,200 over the past five months. So far this year, the labour force increased by 166,000 and the participation rate, which fell by close to one percentage point during the recession, has risen 0.3% from its recent low.

“The latest employment data confirm a relatively strong domestic economic recovery that has begun to mature – where incremental gains diminish while becoming self-sustaining,” said Pascal Gauthier, senior economist at Toronto-Dominion Bank.

Yanick Desnoyers, assistant chief economist at National Bank Financial, said that based on statistics from the first two months of the second quarter, total hours worked jumped “notably” to 4.6% annualized, the strongest showing in three years. Meanwhile, wages are up a robust 6.4% annualized, the best showing since the third quarter of 2007.

“Since both labour input and the wage bill are accelerating, it is hard to argue for a slowdown in domestic demand in Canada anytime soon,” he said. “As the Bank of Canada stated [this week], there is still considerable monetary stimulus in place this side of the border.”

JUST STAY STRONG

Housing market momentum to carry strong sales volume into 2010: Scotiabank
By Mario Toneguzzi
Calgary Herald
March 23, 2010 9:02 AM

CALGARY - The momentum in the Canadian housing market has carried through to early 2010, with the volume of sales transactions in January and February only slightly below the near-record levels of late 2009, says a report released today by Scotiabank.

And the average MLS sale price in Canada will reach a record level this year.

"Strengthening labour markets are underpinning confidence, while generationally low mortgage rates

— and expectations that borrowing costs will soon be headed higher — are adding a sense of urgency," said the Global Real Estate Trends Report authored by economist Adrienne Warren.

"Milder-than-usual temperatures across much of the country may also have put a bit of spring into the
typically slow winter sales season. Average prices too are testing new highs, both for new and resale homes. A steady increase in the number of listings in recent months alongside a sharp increase in new construction is restoring a much better balance to the overall market compared with the latter half of 2009."

But the report said sellers’ conditions persist in most major centres.

The report said continued strong demand and pricing is expected through the spring, especially given an expected rush of buyers hoping to pre-empt tighter qualifying criteria for insured mortgages effective mid-April as well as the July 1 introduction of the HST (Harmonized Sales Tax) in Ontario and British Columbia.

"However, this should give way to more subdued activity in the second half of the year, as higher interest rates and higher home prices erode affordability. The incentive among builders to add substantial new housing stock should likewise fade as supply increases and prices cool."

The report expects the volume of MLS sales to hit about 510,000 this year, up 10 per cent from

2009 but still a touch shy of the 2007 record at the national level. Average prices are forecast

to increase about eight per cent to a record $345,000 in Canada.

Housing starts are estimated at 190,000, up from 149,000 last year.

Photo by: _Caitlyn