A trio of thoughts...

Three different thoughts for you today.

First off is the Bank of Canada rate increase today of a quarter point to 1%. This is the third consecutive increase in rates and the BOC rate is now quadruple what it was four months ago.

The focus today is on the language used by the Governor, Mark Carney. Everyone seems to think the message is that this will be the last rate hike for a while.

But as the Globe and Mail noted today, that may not be the case.

• The central bank said, the global bounce-back from the worst downturn since the Depression is "proceeding but remains uneven, balancing strong activity in emerging market economies" (such as China and India, though the central bank didn’t name them) against "weak growth in some advanced economies."
  
  At the same time, the central bank appeared to downplay the effect that the global turmoil is having on Canada, calling the country’s 2-per-cent annual growth rate in the second quarter "slightly softer" than what policy makers had expected, even though their latest forecast in July was for a 3-per-cent pace.
  
  The Canadian recovery will be "slightly more gradual" than the central bank expected in July, but consumer spending and investment have "evolved largely as anticipated," it said, reflecting the fact Mr. Carney’s forecasts have warned of a slowdown for several months because of factors such as the fading impact of government stimulus and the cooler real-estate market.
  
  In the future, consumption growth will "remain solid" and business investment - which had a surprisingly strong pickup in the second quarter, Statistics Canada data last week showed - will "rise strongly," the central bank said. For now, as the U.S. recovery proceeds in fits and starts, investor demand for safer investments such as bonds is pushing borrowing costs down and helping consumers and companies, the bank noted.
  
  "Financial conditions in Canada have tightened modestly but remain exceptionally stimulative," the central bank said. Policy makers also said dynamics affecting inflation in the country-- which has been tame for months - are "essentially unchanged" from their July forecast.

As the Globe notes, all this suggests that the Bank of Canada is still uncomfortable with an overnight lending rate so far away from what most economists consider "neutral," or about 3.5% to 4%.

Both the Globe and I took Carney’s comments on the Canadian economy as a sign the BOC still leans towards raising rates.

On another front, I attend a retirement luncheon today where one retiring colleague, age 60, was asked about several properties he owns and whether he intends to sell any of them (two houses in the Dunbar area and a vacation property).

Naturally I offered my opinion.

His response? "Every time I talked about buying, I was told I was making a mistake, that prices were going to be going down. They were the best moves I could have ever made. I'm content to sit on what I have, I can afford to wait out a 5 year recession"

A comment I think speaks volumes.

Despite the continuing coverage of a possible housing bubble in Canada, and the lessons of the United States, the general public is still completely oblivious to what is going on and the paradigm shift that is taking place.

Finally there is the North Delta condo for sale by a friend that I mentioned in yesterday's post.

Spoke with him today and he said he didn't mind if I gave some more information on this blog. Believing that any publicity is good publicity, he sent me the MLS listing link which you can see here.

Curiously the property is still listed at $144,000 on MLS, but on other sites the price has been reduced to $139,000.

Bought about 5 years ago for $54,000, my friend (who does read this blog) is firm in his belief that this almost 40 year old property (although completely renovated) is worth the price he is asking and he is hesitant to consider offers much below that price.

He dropped the asking price from $144,000 to $139,000 (the price which he feels is the lowest he is prepared to go) because the MLS listing has received zero hits in the past 3 weeks.

I told him that the vast majority of people who visit this site may boost traffic numbers to the listing, but I suspect few would be interested in meeting his price.

As he reiterated to me, any publicity is good publicity.

I'll let you know how he makes out.

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Email: village_whisperer@live.ca

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We will pay you to take out a mortgage!

Just before the housing bubble collapsed in the United States, real estate mortgages had reached absurb proportions.

You could actually buy a house with nothing down and get money back from the bank when you bought... in essence you could get paid to buy a house.

One of the items making the rounds in the Canadian blogoshpere today is this article in the Globe and Mail which notes that Canadian banks are struggling to boost loans as demand ebbs in the weak economic rebound.

• Royal Bank chief executive officer Gordon Nixon said the banks must now find ways to build their lending operations – a key driver of their profits – without being coaxed into making unattractive loans just to get more business in the door.
  
  “What you hope you don’t see happen is banks starting to do stupid things again,” Mr. Nixon said in an interview, referring to the past several years where credit was easy to come by, and banks around the world were all too eager to lend.
  
  “Right now we’re in an environment where demand for credit is very, very low... It’s not that credit isn’t available – there’s not a lot of demand.”

Well I've got news for Mr. Nixon. Canadian banks are doing stupid things as he says this.

In the comments section from yesterday's post comes this link from Rob to an offer from CIBC.

Seems CIBC will you cash back based on your mortgage amount and term, and is available if you are approved for a 3, 4, 5, 7 or 10-year closed, fixed-rate residential mortgage. For example, if you have a $500,000 mortgage and select a 10-year term, you will receive 7% cash back, or $35,000!

And since your 5% downpayment is only $25,000, you can basically buy the home with nothing down and get PAID $10,000 for making the purchase.

Good thing our conservative banks aren't making the same mistakes the Americans did. Again I ask, is it so hard to see what is coming?

Meanwhile I am watching with keen interest as a colleague attempts to sell his one bedroom condo.

He bought the condo several years ago for %54,000 and has moved his girlfriend's house. As a result, the condo has been listed for sale.

After consulting with his realtor, the property was listed for $144,000 - right in the middle of the price range for what comparable apartments were selling for.

So I asked him, "if you get a low ball offer, what would you accept?"

His reply was that he would go as low as $139,000!

Now that's a measly 3.5%, but perhaps that sums up the current mindset of sellers right now. Despite having paid only $54,000 a few years ago, he firmly believes his property is worth almost three times what he paid. And he isn't prepared to move on the price... because 'that's what it's worth'.

Of course... that was three weeks ago.

After receiving the sum total of ZERO hits on the MLS listing, his realtor recommended adjusting the asking price.

This week it was dropped to $139,000. No comment on if he's adjusting the amount at which he is willing to accept.

I'll keep you updated on how things go.

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Email: village_whisperer@live.ca

Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.