http://businessexchangeblog.blogspot.com/2009/07/leased-heating-equipment-chattel-or.html

reviewed by Alexander Moishe, CEO of  canadian funding corp

You don’t need to be an economist to understand why the nation’s joblessness is the biggest hurdle to reviving growth.

The official U.S. unemployment rate is at 9.5 percent and climbing, and it stands at a startling 16.5 percent when you add in discouraged Americans who have stopped looking for work and those who want to work full time but can only find part-time jobs. No wonder consumer spending has flatlined. That only perpetuates the crises in the housing and banking sectors.

“Everything that got us into this recession is made worse by weak job conditions and any hopes we have of climbing out of this recession will be hindered by the same,” said Niko Karvounis, a policy analyst at the New America Foundation, a nonpartisan think tank based in Washington.

The deep recessions that started in 1973 and 1981 were followed by a burst of hiring about six months after the peak in job losses. That wasn’t the case in 1991 and 2001, when shallower recessions were followed by nearly two years of woes for workers.

The term “jobless recovery” grew from those latter experiences. Even though the economy was looking stronger, plenty of Americans didn’t feel much relief because they still didn’t have jobs.

Part of that shift in post-recession employment had to do with structural changes in the economy. The manufacturing sector lost prominence to the service sector over the years. The diminished role of unions also was a factor.

“Manufacturers tend to have a deeper job cuts in a downturn and they have a sharper upturn,” said David Wyss, chief economist at Standard & Poor’s in New York. “The service sector does layoffs later but hires later, too.”

Many economists are forecasting a “jobless recovery” for the United States as it emerges from the recession that began in December 2007. That includes the Federal Reserve, which on Wednesday bolstered its outlook for economic growth. The central bank now predicts the economy will shrink between 1 percent and 1.5 percent this year, less than it had previously forecast. It also is predicting the economy will expand as much as 3.3 percent next year, a relatively weak showing coming out of a recession. One reason why: The Fed expects the unemployment rate to move above 10 percent this year and remain stuck in the high 9 percent range in 2010.

But can the economy really grow stronger in the face of such joblessness?

Researchers at the Federal Reserve Bank of San Francisco have found that the current recession is much like its predecessors in the overall pace of job losses. But what is different is a historically low level of hiring this time around, which means many of the newly unemployed can’t find new jobs.

At the same time, there are high levels of involuntary part-time workers. The fraction of the labor force that is working part time for economic reasons has nearly doubled to 5.8 percent in June of this year from when this recession began in December 2007. More than half of such workers faced reductions of five hours or more per week, according to the Fed report.

To see that at work, look at the many private and public entities using job furloughs, or short-time hiatuses, to reduce costs. Just this week, US Airways asked 400 flight attendants to take furloughs in an effort to avoid layoffs in that group. Workers at Gannett Co., CSX Corp. and many others have also faced furloughs.

All this presents a problem for the U.S. government, which has been trying to bolster the economy through monetary and fiscal stimulus. The Fed has cut interest rates to near zero, while President Barack Obama’s $787 billion stimulus package reduced taxes and increased government spending after an earlier Bush administration plan to distribute $168 billion in cash through tax rebates had little lasting impact.

None of that has been “labor intensive enough,” argued economist Nouriel Roubini in a note to his clients at his economics analysis firm RGE Monitor. Roubini, who is also an economics professor at New York University, was ahead of the pack in 2006 when he forecast that the worst recession in four decades was on its way.

Deutsche Bank chief U.S. economist Joseph LaVorgna points out that the ratio of household debt to income now stands at 128 percent, much higher than in the final quarters of the last two recessions. That will inhibit consumers’ ability to take on debt again, which helped drive those previous recoveries.

It also amounts to another hurdle to a housing rebound. That will intensify the pressure on already battered bank balance sheets as mortgage and credit-card default rates rise — and make them think twice about boosting lending to both consumers and businesses.

Even though Congress and the Obama administration haven’t shown any inclination to push for another stimulus package, they may have to act again with a plan directly aimed at creating jobs if the unemployment rate stays stubbornly high.

They may want to look at the success in China, where second-quarter growth accelerated 7.9 percent from a year earlier on a stimulus-fed investment boom. That plan included big spending on construction of highways and other public works.

In the U.S., money could be pumped into industries to make them more productive or there could be a further ramping up of spending on infrastructure projects. It also could mean more targeted tax cuts, including some aimed at businesses.

None of that will be cheap. But something has to be done to bring jobs back, for the entire economy’s sake.

http://blog.taragana.com/n/all-business-troubled-labor-market-threatens-a-significant-turnaround-in-us-economy-112799/

reviewed by Moishe Alexander, CFC  canadian funding corp CEO

http://www.announced.us/finance/mortgage-rates-canada-provide/

reviewed by Moishe Alexander, CFC  canadian funding corp CEO

The Re/Max Eastern Realty Inc. vice-president said when he bought his first house in 1972 his mortgage rate was 12%.

In 1980 mortgage rates topped around 21%. Earlier this week, Re/Max, which also has mortgages, was offering a 4.19% five-year fixed rate – the most common mortgage arrangement according to industry officials. “I’ve never seen a mortgage at these rates,”

Hope said. The time is right to buy a new home, he said. “They’re never going to be as affordable as they are now.” Local realtors and builders say the market slump has lifted and housing sales are rebounding because of unusually low mortgage rates.

May sales are almost on par with May 2008, which realtors said was a good year. “June is going like a rocket. But we’re playing a catch up game,” said Carl Oake, broker and owner of Century 21 Unity Realty Inc. Brokerage. His sales were down 75% from November to February. “But we’ll probably close that gap off by August and September,”

because of a rebound in the market, Oake said. Hope also said his sales have rebounded. Traditionally, it’s a busy time of year for home sales, Hope said. But he also believes there are a lot of first time buyers, and people looking to upsize, taking advantage of low mortgage rates. Re/Max mortgage agent Dave Griffin said six months ago Re/Max’s five-year fixed rate was 5.79%.

As of yesterday it was 4.39%, up from 4.19% on Thursday. On Wednesday it was 3.99% and 3.79% a few weeks ago, he said. A $250,000 home, with a 25- year mortgagee and 5% down, at 5.79% would cost $1,531 a month, Griffin said. At 4.19%, payments would be $1,308.91 a month.

At 3.99%, payments would be $1,282.33 a month. While the rate increased between Wednesday and Tuesday it’s “still a great rate,” Griffin said. He also said he thinks it will come down again. “I think now is the time is to lock in and take advantage of these low rates,” he said. “You see how quickly the rates changed.”

Earlier in the week, TD Canada Trust and RBC were both offering 4.15% five-year fixed rates. Yesterday those banks were offering 4.55%. BMO, CIBC and Scotiabank had a 5.85% rate posted online. When Bank of Canada interest rates go up, mortgages cost more.

Builders are also taking advantage of the low mortgage rates by boosting incentive packages, said Bill Turner Jr. with Triple T holdings, which specializes in building custom condominiums. Typically builders offer incentives but “not to the level that we’re talking about,” to help clear inventory, Turner said.

A typical incentive package could be about $5,000 worth of items, such as a new fridge, but Turner said he’s seen packages worth $16,000 including such things as hardwood floors and appliances. “Maybe where (builders) have been thinking we’d wait an extra year to two years to do something now is the time to make some serious financial gains by doing it,” he said.

“All the buyers that are sitting in the wings who might have been interested in upsizing their family home all of a sudden mortgage rates have dropped so much that they can actually afford to purchase a home that might be worth another $50,000 more than what their budget would have been a year ago.”

Paul Dietrich, vice-president of the Ontario Home Builders’ Association and president of the Peterborough and the Kawartha Home Builders’ Association, also credited mortgage rates and “good value” for homes. “It’s probably a very short window that this combination will be there for,” he said.

Several builders and realtors The Examiner spoke with said some of the market rebound could also be buyers trying to beat the harmonized sales tax (HST), which comes into effect in July 1, 2010. The HST only applies to sales of new homes. Right now only GST applies.

The province is creating a rebate to reduce the tax burden on new homes purchased for as much as $500,000. The rebate would be six per cent of the purchase price for homes purchased for less than $400,000, before taxes.

The rebate would be gradually reduced for homes priced between $400,000 and $500,000. For example, currently a $250,000 new home plus GST would cost $262,500. Once HST comes into effect and accounting for the rebate, a $250,000 home would cost $265,550.

Buyers of resale homes don’t pay PST and GST but the harmonized sales tax would increase the tax on services associated with buying a resale home, such as the mortgage insurance premium, legal fees, home inspections and the real estate agent commission, Barbara Criegern, president of the Peterborough and the Kawarthas Association of Realtors Inc., toldThe Examiner in March when Mortgage Calculator was released.

Criegern couldn’t be reached for comment this week but in a release, she said the recent activity is good news, but buyers and sellers shouldn’t assume the market has returned to pre-recession levels. “Our region is still suffering from many job losses but financial markets are slowly recovering.

Consumer confidence is returning. Many well-priced homes are attracting multiple offers. We expect this seasonal increase to continue well into the summer months to compensate for the slow start.”

http://www.americanpoems.com/members/alisashuang/housing-sales-are-rebounding-because-of-low-mortgage-rates/

reviewed by Moishe Alexander, CFC  canadian funding corp CEO

According to statistics released by The Canadian Real Estate Association (CREA), actual (not seasonally adjusted) home sales, via the Multiple Listing Service® (MLS®) of Canadian real estate boards, totaled 147,351 units in the second quarter of 2009 – the fourth strongest quarterly sales figure ever. Up 1.4 per cent from the second quarter of 2008, this marks the first year-over-year increase in quarterly activity since the fourth quarter of 2007.

On a seasonally adjusted basis, national MLS® home sales numbered 114,173 units in the second quarter, jumping up a record 31.5 per cent from the first quarter of 2009.

“Potential buyers who moved to the sidelines late last year when economic uncertainty peaked are returning to the housing market now that the worst of the recession may be behind us,” said Dale Ripplinger, President of The Canadian Real Estate Association.

Seasonally adjusted resale activity in the second quarter was up from the previous quarter in about 85 per cent of local markets. Quarterly activity increases in Toronto (45 per cent), Vancouver (77 per cent), Montreal (33 per cent), Calgary (66 per cent) and Edmonton (39 per cent) contributed most to the national increase in activity.

Strong upward momentum for monthly sales activity was sustained throughout the second quarter. June marked the fifth consecutive month in which activity was up from month-ago levels. Some 41,304 homes traded hands via the MLS® of real estate boards in Canada on a seasonally adjusted basis in June 2009. This is up 8.7 per cent from May and represents the first time since January 2008 that monthly activity topped 40,000 units.

Actual (not seasonally adjusted) MLS® home sales climbed 17.9 per cent year-over-year to 54,616 units in June 2009. This is on par with the record for the month of June set in 2007 and is the fourth highest level for activity in any month on record.

The national MLS® residential average sale price reached the highest quarterly level ever in the second quarter of 2009. At $318,696, the average sale price was up half a percent from the previous record set in the second quarter of 2008.

The national average home price also scaled new heights on a monthly basis, climbing 3.6 per cent year-overyear to $326,613 in June 2009. However, only 13 local markets posted new average price records in June, less than a handful of which are among the most active or expensive. The strong rebound in sales activity, not price, in Canada’s most expensive markets is skewing average prices upward nationally and in some provinces, just as a sharp decline in activity in these markets skewed the average lower in late 2008.

MLS® home sales rebound in the second quarter. The price trend is similar but less dramatic for the weighted national MLS® average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. The weighted national MLS® average sale price was up 1.7 per cent year-over-year in June 2009 – less than half of the percentage increase in the unweighted national average price.

The supply of homes coming onto the MLS® market continued retreating in second quarter. Seasonally adjusted MLS® residential new listings were down 16.9 per cent from the previous quarter to 197,049 units, the lowest level since the fourth quarter of 2005.

Nationally, the number of months of inventory was 4.2 months in June 2009. This is the lowest level since August 2007, and well down from the recessionary peak of 12.8 months in January 2009. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

The residential dollar volume for MLS® sales jumped 40.6 per cent on a seasonally adjusted quarter-over-quarter basis in the second quarter of 2009, to reach $34.8 billion.

“Low interest rates have improved the affordability of homeownership, as have price adjustments in housing markets that previously experienced rapid price increases,” said CREA Chief Economist Gregory Klump. “Housing markets where negotiations recently favoured the buyer have become more balanced and the stage is being set for modest price appreciation as inventories are drawn down by sales.”

“Sales momentum remains strong going into the second half of 2009,” said CREA President Dale Ripplinger. “Chances are good that the number of transactions in the second half of 2009 will surpass levels in the first half of the year.”

http://www.myseatosky.com/blog/?p=231

reviewed by Moishe Alexande, CFC canadian funding corp CEO

A rise in mortgage rates and high unemployment are just two of the factors that are likely to hold back prices and sales.

Property experts say that although first-time buyers and Bank of Canada rate cuts have helped restore stability to a market that slumped from late 2008 to early this year caution is still needed.

‘We should be less fearful than we were six months ago, but I don’t think we should be exuberant yet. The resale markets in Canada are very strong. May figures were pretty good, and June numbers will be even better,’ said Will Dunning, an economic consultant who specializes in the housing market.

‘But by July and into the fall there will be an offset of considerably slower activity. I don’t think it’s likely to go off a cliff. It’ll depend on what happens in employment and the broader economy, and how that affects confidence,’ he added.

Indeed the latest data from the Canadian Real Estate Association suggest that Canada’s residential property market, which has withstood the financial crisis much better than its hard-hit US neighbour, has been showing signs of improvement for several months.

May resale home prices rose 0.4% to $319,757, topping the previous record set a year earlier and the first year-over-year increase since May last year. Also sales activity climbed for the fourth month in a row.

The association, which represents more than 97,000 real estate brokers and agents, now expects sales activity to continue improving.

Philip Soper, chief executive officer of Brookfield Real Estate Services, an arm of Canadian property giant Brookfield Properties, expects a period of stabilisation over the next year.

Unemployment is one of the biggest dangers for the recovery. The jobless rate increased to an 11 year high in May.

http://www.propertywire.com/news/north-america/canadian-property-market-200907073299.html

reviewed by Moishe Alexander, Canadian funding corp CEO

WINDSOR, ON, July 8 /CNW/ – Ontario’s construction industry could weather
the economic downturn better than many other sectors as proposed government
infrastructure spending provides a soft landing according to figures released
today in the Construction Sector Council’s (CSC) fifth annual edition of
“Construction Looking Forward,” a detailed industry outlook scenario of labour
market trends from 2009 to 2017 in Ontario.
While the recession has weakened housing and industrial activity, other
construction sectors are expected to see employment gains in 2009 and 2010
associated with increased government infrastructure (highway, bridge and other
engineering) spending that potentially offsets employment losses.
Over the remainder of the outlook the overall economy recovers and the
expected increase in construction activity and the need to replace retiring
baby boomers translates into the demand for 135,000 new jobs over the next
decade.
“Due to the size and complexity of the Ontario market, there are varying
degrees of positive construction employment across the province, with the GTA
expecting to realize important gains in the short term,” said George
Gritziotis, Executive Director of the Construction Sector Council. “Despite
the downturn, employment numbers should remain steady as several proposed
major infrastructure projects across Ontario come on-line.”
The CSC report breaks down employment needs across five Ontario regions:
Northern, Eastern, Western, Central, and the Greater Toronto Area and each
have specific circumstances. The GTA will lead the province in construction
employment over the next few years as growth remains steady. Other regions of
the province however will feel the effects of the recession more strongly over
the next three years.
“Transportation and other infrastructure related projects will keep our
industry moving in the next few years,” said Rob Bradford, Executive Director
of the Ontario Road Builders Association. “Meeting industry’s demand will
require a workforce that is flexible as opportunities occur across the
province and workers will need to move to where the jobs are.”
Overall construction employment in the CSC trades is expected to increase
slightly from 2009 – 2011. From 2012 to 2017, growth in construction
employment will average 2.7% annually. These additions to the workforce will
come as the overall growth in the Ontario labour force slows to 1% or less.
Construction employers will be competing for a steadily growing share of the
provincial workforce.
“We need to continue to plan for our existing and future workforce
needs,” said Pat Dillon, Business Manager of the Ontario Building and
Construction Trades Council. “Governments need to step up apprenticeship and
recruitment programs, and put in place measures that include tax relief to
facilitate the mobility of our current displaced workforce to ensure that we
have the skilled labour ready to take on new projects and replace retiring
workers.”
“For Ontario’s construction industry, it remains imperative to promote
construction careers, attract youth and enhance training programs,” said Mark
Arnone, Director, Projects and Modifications, Ontario Power Generation
(Nuclear). “Future major industrial and engineering projects will need a
skilled work force to sustain growth and build Ontario’s future.”

The Construction Sector Council is a national organization committed to
developing a highly skilled workforce – one that will support the future needs
of the construction industry in Canada. Created in April of 2001, and financed
by both government and industry, the CSC is a partnership between labour and
business.
The CSC’s “Construction Looking Forward” national and regional forecasts
provide colleges, labour and industry with accurate information on labour
supply and demand to support the future needs of the construction industry in
Canada.
For a copy of the Ontario labour market forecast visit our website:
www.csc-ca.org.

http://www.dailycommercialnews.com/nw/12938/cb

viewed by Moishe Alexander, Canadian Funding corp CEO

A rise in mortgage rates and high unemployment are just two of the factors that are likely to hold back prices and sales.

Property experts say that although first-time buyers and Bank of Canada rate cuts have helped restore stability to a market that slumped from late 2008 to early this year caution is still needed.

‘We should be less fearful than we were six months ago, but I don’t think we should be exuberant yet. The resale markets in Canada are very strong. May figures were pretty good, and June numbers will be even better,’ said Will Dunning, an economic consultant who specializes in the housing market.

‘But by July and into the fall there will be an offset of considerably slower activity. I don’t think it’s likely to go off a cliff. It’ll depend on what happens in employment and the broader economy, and how that affects confidence,’ he added.

Indeed the latest data from the Canadian Real Estate Association suggest that Canada’s residential property market, which has withstood the financial crisis much better than its hard-hit US neighbour, has been showing signs of improvement for several months.

May resale home prices rose 0.4% to $319,757, topping the previous record set a year earlier and the first year-over-year increase since May last year. Also sales activity climbed for the fourth month in a row.

The association, which represents more than 97,000 real estate brokers and agents, now expects sales activity to continue improving.

Philip Soper, chief executive officer of Brookfield Real Estate Services, an arm of Canadian property giant Brookfield Properties, expects a period of stabilisation over the next year.

Unemployment is one of the biggest dangers for the recovery. The jobless rate increased to an 11 year high in May.

http://www.propertywire.com/news/north-america/canadian-property-market-200907073299.html

reviewed by Moishe Alexander, CF CEO

The story portrays a young couple getting their first mortgage. It talks about how cash-strapped they are, and the difficulties they’ve experienced in affording a new home.

The story then goes on to say:  “What really helped? The 2.75% interest rate they were offered. It ultimately allowed them to move from a $1,800-a-month apartment into their own home.”

The couple then warns: “But we don’t have a lot of [wiggle] room.  We can go up to 4%, but then we’re done.”

So, illogically enough, they chose a variable-rate mortgage.

The person who recommended a variable to these folks should be examined.  A variable–rate mortgage is the last option a risk-susceptible homeowner should be considering.  Prime rate can move 1.25% before you know it.

In Canada’s current cycle, the Bank of Canada has slashed rates 4.25% in 17 months. The BoC says they will go no lower. After moving sideways, rates will start rising.  Most analysts expect prime rate to jump at least 1/2 of the amount it fell (i.e.,  at least 2+%).  The main question is when…and no one knows.

Going back to 1991, Canada has seen the following increases to prime:

• 0.75% (In 1 month – Feb 92 to Mar 92)
• 3.50% (In 2 months – Sep 92 to Nov 92)
• 2.50% (In 4 months – Feb 94 to Jun 94)
• 2.75% (In 4 months – Nov 94 to Mar 95)
• 2.50% (In 12 months – Sep 97 to Sep 98)
• 1.25% (In 7 months – Oct 99 to May 00)
• 1.25% (In 13 months – Mar 02 to Apr 03)
• 2.50% (In 39 months – Apr 04 to Jul 07)

The above list includes rate increases over both the short and long term.  A few of the short-term hikes took place inside of longer-term rate-increase cycles, so their effect would have been cumulative (i.e.  they would have added to previous rate increases).

It is worth noting that prime rate has usually fallen within 2-3 years after rising. On the other hand, Canada’s key lending rate has never before been cut to 0.25% in emergency fashion, as we’ve recently witnessed.  Perhaps rates will therefore remain elevated for longer, once they start going back up.

Whatever the case, if you eyeball the data it’s clear that a 2% prime-rate increase is very realistic in a 1-2-year timeframe.  This graph of prime rate since 1991 illustrates that.

This isn’t intended to suggest where rates are going, of course. Past data is too limited and random to draw conclusions.  The point is simply that prime rate can move a lot in 1-2 years. Variable-rate mortgages are therefore unsuitable for folks with little financial breathing room.

A 2% increase in prime would raise payments 31% on a 35-year 2.75% variable mortgage.  On a $400,000 loan amount, that’s $463 more a month. 

If you’re a homeowner on a tight budget, and a 31% payment increase concerns you, don’t be seduced by today’s 2.75% adjustable rates. Look at a fixed-rate mortgage instead, or keep renting and build a financial buffer.

______________________________________________________

Sidebar: With mortgages, there are exceptions to every rule because suitability is dependent on individual circumstances. Always consult a licensed mortgage professional to see what terms make the most sense for your personal situation.

(Prime rate data courtesy of the Bank of Canada)