The winners and losers of last night’s fiscal cliff deal

By John Shmuel

In case you were asleep when it happened, the U.S. House of Representatives finally reached an agreement late last night to steer the country out of the dreaded “fiscal cliff.”

The bill, which prevents the United States from being hit with a set of tax increases and spending cuts simultaneously this month, passed in the House in a bipartisan 257-167 vote.

Of course, many are wondering what exactly the hefty 150-page bill means and what it does. But don’t worry. Derek Holt, Scotiabank’s vice-president of economics, has a handy breakdown of what last night’s legislation actually does.

Here’s a look at his explanation, which looks at who the bill hurts, who it benefits, and what remains to be seen.

WHO IT HURTS

1. The 2% social security payroll tax cut to the workers’ share is gone permanently. As a consequence, disposable income will decline in January and Q1. By how much? Up to about $2,400 annually for those with earnings at the 2013 cap of $113,700 or more. Just under half that for the roughly average family. This measure is generally thought to knock about a half point off of annual GDP growth and is likely to hit consumption in Q1-Q2. It never really achieved the desired positive impact upon job creation. The hike is also likely to weigh upon consumer confidence through assessments of present conditions when lower after-tax paycheques are realized.

2. Upper income earners (individuals earning over $400k and joint filers over $450k) face a permanent hike in their marginal tax rate to 39.6%. President Obama has remarked that further increases will be sought as part of additional negotiations in 2013 to reduce spending and raise revenues. Thus, we cannot yet evaluate the full tax implications for upper income earners.

3. For the same definitions of upper income earners, taxes permanently rise on capital gains and dividends from 15% previously to 20% now. Those below the income thresholds will pay a permanently capped 15% rate except for lower income earners that pay nothing.

4. The top estate and gift tax rate will rise to 40% from 35% previously for those above the exemption. The estate and gift tax exemptions will remain at $5 million or more per individual (not the $3.5 million at a 45% rate that the White House sought).

5. Tax refunds for early filers will be delayed as the tax filing season will be delayed by several weeks. That will push income out of the early months of 2013 into ensuing months. As a consequence, seasonal adjustment factors for income will be distorted for months and it may take until Q2 before we get cleaner data to evaluate trend income growth.

6. Personal exemptions and itemized deductions will be capped for individuals earning over $250k and couples earning over $300k. This is a permanent restoration of the Personal Exemption phase-out, or Pease provision after the late Donald Pease (Democrat). The formula based approach is thought to add just over 1% to the highest marginal tax rate.

7. 401(k) plans will be rolled into Roth IRA plans and hence taxes will have to be paid up front on gains in the plan. The carrot is that pay-outs from Roth plans are not taxed. Roth plans offer no tax deductions on contributions but shelter investment income upon distribution. They contrast with 401(k) plans that offer deductions on contributions, but then tax investment income flows upon withdrawal. Washington’s move therefore captures higher near term tax revenues at the expense of longer term tax revenues as baby boomers retire. It is likely a relatively short-sighted near term revenue grab that fits the pattern of kicking the can down the road.

8. A pay freeze for members of Congress has been extended for another year. A freeze on pay for federal government workers has been allowed to expire.

WHAT WILL HELP

1. Those earning up to $400k/$450k individual/household income will have the Bush era tax cuts permanently extended. This is not added stimulus, but averts a tax hike for 99% of filers. Some may question whether permanent extensions represent good policy for a heavily indebted government running enormous long-term deficits and I wouldn’t be surprised to see ‘permanent’ being revisited in future.

2. The broadening of the alternative minimum tax in 2013 would no longer occur.

3. Depreciation incentives for businesses to write off up to 50% of equipment spending will be extended for another year. This is a plus for business investment, but it requires confidence for its effects to be unleashed and that isn’t likely until later in the year.

4. Unemployment insurance benefits that were lengthened in the crisis would be extended for another year at a CBO estimated cost of $30 billion. We’ll be having that portion of the debate again by late 2013. At nearly two years, the US offers as generous jobless insurance as the most liberal of European economies.

5. Other miscellaneous tax measures (deductions for teachers, charitable donations, state sales taxes) will be extended for varying periods with retroactive extensions for provisions that expired in early 2012. The American Opportunity Tax Credit is extended for five years, as is the Child Tax Credit and Earned Income Tax Credit.

6. A scheduled cut in Medicare payments to doctors will be delayed a year.

7. At least for now, the GOP fully backed away from efforts toward using chained CPI indexing of entitlement spending which would have represented cost savings to the government.

WHAT REMAINS TO BE ADDRESSED

There is no agreement on the debt ceiling which has now been surpassed. A large risk facing the US economy is how $110 billion in spending cuts that have now been delayed for two months in this agreement will be tied to an increase in the debt ceiling that will be required by February or March after the Treasury takes extraordinary measures to postpone the ceiling’s binding effects. This will be a significant concern to markets for some time as this mini-deal fails to address the spending and borrowing sides of the picture. It may be that the GOP waved the white flag on the first leg of the negotiations, only to gain leverage in their quest for spending cuts by an administration that is thus far demonstrating little concern for the fiscal position of the United States.

Majority of Canadians keeping up with mortgage payments

By The Canadian Press, reported in The Vancouver Sun


OTTAWA - Federal officials say fewer Canadians are falling behind in their mortgage payments.

Canada Mortgage and Housing Corp. says it has found a downward trend in the number of Canadian residential mortgage payments that are overdue by three months or more.

It says the rate of mortgages in arrears dropped to 0.36 per cent in the first half of 2012.

That's down from 0.41 per cent in 2011.

By comparison, the CMHC report says the U.S. arrears rate in the second quarter of 2012 was more than eight times higher at 3.04 per cent.

The information is included in the federal agency's 2012 Canadian Housing Observer.

Where the “Deals” Are

Rob McLister, Canadian Mortgage Trends


As rate comparison websites evolve, something interesting will happen. Lenders and brokers will realize how easy it is to put special offers in front of thousands of eyeballs.

As new competitors see this, they’ll join the online fray and rate discounts will slowly improve…one basis point at a time.

The best deals won’t always come from one single lender. At any given time, lenders anxious to place money will advertise aggressive specials, fill their pipeline with applications, pull out of the market and let someone else take the lead.

This isn’t much different from how it works today, except that Internet-focused lenders will get their fill a lot quicker than they do through current distribution models (because rate sites will give them more exposure).

But these changes will take time to set in. If you’re looking for the lowest advertised rates today, credit unions and online mortgage brokers are clearly the market leaders. Here’s a quick look at where the national market stands for well-qualified borrowers:

6-month Fixed: There aren’t many 6-month specials out there unless you live in Manitoba where Cambrian, Carpathia and Crosstown Credit Unions feature 2.19% (an exceptional rate that’s equivalent to prime – 0.81%).

1-year Fixed: Rates of 2.39% (or slightly less) are available through a handful of credit unions like First Calgary (Calgary, AB) and Assiniboine (Winnipeg and Northern Manitoba), and also through various brokers online.

2-year fixed: Investors Group has the best widely available special at 2.35%.

3-year Fixed: Scotiabank, Canadiana Financial and a slew of credit unions are at 2.79%, while at handful of online brokers are advertising 2.69%.

4-year Fixed: Dozens of credit unions and brokers are at 2.89%. At the moment, this term has the least amount of price competition of any in the market.

5-year Fixed: While most brick and mortar institutions advertise 3.09% or more, the real market is at 2.99% or less. Numerous brokers are advertising 2.89%, but some of these rates are restricted and/or for “quick close” mortgages only.

10-year Fixed: 3.89% is the worst rate you can expect for a full-feature decade-long term. Online brokers are routinely advertising 3.79%-3.84%.

Variable: Once again, Manitoba credit unions (Assiniboine, Crosstown, Caisse Financial Group and Steinbach) dominate the variable-rate market. They’re all at prime – 0.50%. In the rest of the country, most bank reps and brokers have access to prime – 0.35%, with a few brokers at prime - 0.40%.

HELOC: Banks, credit unions and brokers are all huddled around prime + 0.50% (i.e., 3.50%). A few small and local credit unions, like iNova (Halifax, NS) advertise 3.25%.

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Side Note: This survey only reviews rates. It says nothing about the quality of the mortgages themselves, your ability to qualify or the support you can expect with a given rate. Keep in mind, most deeply discounted rates come with little service or mortgage planning. If you want someone who takes time to carefully review your best alternatives and warn you of lender restrictions, it is rational to pay 5-10 basis points extra for that service (2.99% instead of 2.89% for example). That difference is chicken feed if you need advice, because bad mortgage selection will balloon your cost of borrowing after closing.

Why the housing market won’t crash in 2013

LARRY MACDONALD, Special to The Globe and Mail

 

 

The 12-month change in the Teranet-National Bank House Price Index has decelerated in recent months to 3.4 per cent, led by declines in Vancouver (-1.4 per cent) and Victoria (-1.7 per cent). Some people interpret this weakness as a sign that a housing crash has started – see, for example, the Canadian Business article “Canada’s housing crash begins.” I don’t see a collapse in 2013 for several reasons. One is the highly supportive monetary environment.

 

In the case of the U.S. housing boom from 2003 to 2007, the overvaluation was pricked after the Federal Reserve dramatically tightened monetary policy to cool off an overheated economy. This catalyst is absent in Canada as 2013 commences.

 

Indeed, monetary policies in Canada, the U.S., Japan, China and elsewhere around the world are dialled to the opposite extreme. They are hyper-expansionary, with interest rates at record lows and printing presses running like never before.

 

This means that Canada and other countries should continue generating growth in jobs and income. Since higher employment and income typically support housing markets, prices are not likely to fall much in 2013. Or if they do, they shouldn’t stay down for long.

 

The crash crowd says Canadian houses are overvalued on the basis of the price-to-income ratio. So they fear the process of mean reversion will take prices down by 25 per cent or more. But with so much monetary stimulus in the system, the price-to-income ratio should also be normalized by income increases.

 

Interest rates may begin edging up later in 2013. They shouldn’t threaten the housing market because income and employment will be climbing as well, creating offsetting demand for housing. Similarly, the one-off impact of a tightening in mortgage rules during 2012 should not be cause for a serious setback.

 

There are other reasons for expecting a crash to be a no-show in 2013. Suffice it to say that the monetary cycle suggests a soft-landing scenario. This is not to deny there are pockets of extreme overvaluation or oversupply, where the risk of substantial correction remains. Cases in point could be Vancouver housing and Toronto condos.

 

http://www.theglobeandmail.com/globe-investor/investor-community/trading-shots/why-the-housing-market-wont-crash-in-2013/article6738812/

Dealing With Private Insurers is Now More “Necessary”

Rob McLister, CanadianMortgageTrends


Finance Minister Flaherty has publicly stated his preference for a privatized default insurance system. (See: Selling CMHC’s Insurance Arm…)

Now, coincidentally or not, the government has officially increased the private mortgage insurance ceiling to $300 billion while leaving CMHC’s limit stuck at $600 billion.

Last week, Andy Charles, president and CEO of Canada Guaranty, offered us his take on the government’s insurance-in-force policy:

“My view is that the increase in the (private insurer) limit is a strong indication that the Department of Finance would like the private mortgage insurers to take on more of the housing market risk, thereby placing private capital ahead of public capital in terms of managing the government’s exposure to the market.”

He adds: “To the lenders, it is a clear indication that doing reasonable business volumes with the private mortgage insurers has become much more of a necessary condition today than in the past.”

Indeed, many lenders would face higher funding costs if it weren’t for Genworth and Canada Guaranty providing low-ratio insurance. By insuring low-ratio mortgages, lenders can more easily sell them to investors, and/or reduce their capital costs. The prior go-to source for this type of insurance was CMHC, which drastically cut back on it about a year ago.

To private insurers, the government’s actions to slow CMHC’s expansion have been a market share gift. Looking ahead, “There are no constraints to Canada Guaranty's growth in the market,” says Charles, whose company added Scotiabank, ING Direct and RBC as customers this year. He expects significant new growth in 2013, albeit in a “disciplined manner.”

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Sidebar: Despite all this, some mortgage investors still prefer to buy CMHC-insured mortgages due largely to their 100% federal guarantee. (By contrast, there’s only a 90% government backstop in the remote chance that a private insurer goes under.)

Alberta resale housing market tops Canada in annual sales growth

By Mario Toneguzzi, Calgary Herald

CALGARY — Alberta will lead the country this year and in 2013 in the pace of growth in the resale housing market, according to a new forecast by the Canadian Real Estate Association.

The national association of realtors said Monday that Alberta MLS sales this year will finish up 13.1 per cent from last year to 60,800 transactions and sales will lead the country next year as well with 1.3 per cent growth to 61,600.

Nationally, sales are forecast to decline by 0.5 per cent this year to 456,300 and fall by another 2.0 per cent in 2013 to 447,400 transactions.

The Real Estate Investment Network in Canada is “hot” on Calgary’s potential and has ranked it the top investment city in Canada for 2013 to 2016, said Melanie Reuter, director of research for the organization.

“This ranking came as a result of extensive research into the underlying economic fundamentals driving Calgary’s economy as well as the current housing market’s response to these fundamentals,” she said. “The job market is strong and is poised to lead the country in job and population growth. Immigration from other parts of Canada as well as abroad is putting a steep downward pressure on vacancy rates and a strong upward movement on rents. This pressure is not predicted to ease significantly in the coming years.

“The high average-weekly-earnings in the city mean more disposable income in this PST-free province, which is creating a country leading consumer confidence level. This is creating further stimulation of the economy through consumer spending, which in turn brings increased employers, people, and demand for housing.”

The CREA forecast for sales in both Alberta and across the country is down from a previous forecast it released in September. At that time, the organization predicted Alberta annual sales growth of 13.8 per cent this year and another 1.7 per cent in 2013. For Canada, it had forecast sales to increase by 1.9 per cent this year but decline by 1.9 per cent in 2013.

On Monday, CREA said the average sale price in Alberta is expected to rise by 2.7 per cent this year to $363,100 and by another 2.3 per cent in 2013 to $371,300.

Across Canada, the national average sale price is forecast to increase by 0.3 per cent this year and next year to $363,900 and $365,100, respectively.

In November, Calgary MLS sales of 1,831 were up 10.6 per cent compared with last year while on the national level sales dipped by 11.9 per cent to 30,573.

The average sale price in Calgary rose by 3.8 per cent to $413,921 but fell by 0.8 per cent across the country to $356,687.

In Alberta, sales increased by 3.2 per cent to 4,034 transactions and the average price was up 4.3 per cent to $365,999.

“National sales activity has remained fairly steady at lower levels since mortgage rules were changed earlier this year, but that stability masks some real differences in trends among local housing markets,” said Wayne Moen, CREA’s president.

CREA on Monday also released its MLS Home Price Index of seven major Canadian markets. Regina’s annual price growth of 11.58 per cent led the nation followed by Calgary at 7.13 per cent.
 

The national aggregate price rose 3.5 per cent year-over-year, the seventh time in as many months that the year-over-year gain shrank and it marks the slowest rate of increase since May 2011.

David Madani, Canada Economist for Capital Economics, said the continued decline in existing home sales across Canaada supports its view that a potentially severe housing correction is underway.

“Assuming that sales continue to trend lower heading into next year, then sharper demand and supply imbalances will eventually lead to widespread home price declines,” he said. “We still think that house prices will decline by 25 per cent over the next year or two.”
mtoneguzzi@calgaryherald.com

BoC’s interest rate warnings drove homeowners to lock in mortgages: Carney

John Shmuel, Financial Post


TORONTO — Two prominent voices made the case on Tuesday that Canada’s housing market is currently undergoing a soft landing, and that a “sustainable” path is around the corner.

In a speech to the CFA Society in Toronto, Bank of Canada governor Mark Carney said a combination of new mortgage rules introduced by the federal government, as well as a clear tightening bias from the central bank, are working successfully together to cool Canada’s red hot housing market.

I wouldn’t say mission accomplished … but a more sustainable housing situation in Canada is within sight

“I wouldn’t say mission accomplished … but a more sustainable housing situation in Canada is within sight,” he said.

That observation came as another optimistic view of the housing market was presented by Scotiabank’s senior economist, Adrienne Warren. She predicted that Canada’s housing market was “shifting toward a more sustainable path.”

“Canada’s housing market so far appears to have achieved a soft landing, with cooler but fairly steady sales and pricing through the fall,” she said.

There have been persistent warnings — from both the Bank of Canada and from many economists — about the risk Canada’s heated housing market poses to the economy this year.

But in his speech, Mr. Carney said that he is seeing “encouraging” signs in the housing market.

Mr. Carney said there is already evidence that Canadian consumers, who have one of the highest debt-to-income ratios in the world, are taking warnings of looming rate hikes seriously. As evidence, he pointed to the mortgage market, in which he says the share of fixed-rate mortgages in Canada has almost doubled to 90% this year, while variable-rate mortgages have seen a corresponding decline. Consumers tend to hover toward variable-rate mortgages when they expect interest rates to be low for a very long time.

Mr. Carney has been sounding the alarm on household debt in Canada for the past year, especially given that household debt-to-income levels have hit the same unsustainable levels that U.S. and British consumers experienced prior to the financial crisis.

Ms. Warren pointed out that while Canada’s housing market appears to be positioning itself into a soft landing, specific markets are set to fare better than others. She said she expects demand to be soft in Vancouver and Toronto, the former of which is currently experiencing significant drops in home prices and sales. Meanwhile, markets in Alberta and Saskatchewan, which continue to benefit from a resource-fuelled economic boom, will see ongoing strength in prices due to a growing population.

“However, with the Canadian economy continuing to post healthy job growth, and sellers proving responsive to the underlying shift in market conditions, a sharp decline in prices nationally is unlikely,” she said.

Although Ms. Warren calls the current housing situation an “orderly slowdown,” she cautioned there are still risks.

“There’s a lot of uncertainty out there in terms of the global economic outlook, whether it’s the U.S. fiscal cliff or the eurozone problems, that can have a significant impact on the Canadian economy and Canadian hiring in 2013,” she said in an interview.

Canada will probably avoid a housing crash, but Ms. Warren cautioned it may be too early to celebrate, given that even a soft landing has serious implications for the economy.

“A lot of activity in recent years, especially Canada’s relative outperformance to other economies, is attributable to the strength of the housing market,” she said. “It’s generated jobs, a lot of retail spending. We see [a slowdown as] being a drag on the overall economy.”

With files from Melissa Leong

Canada's Housing Market: a victim of demographics

Rob Carrick, The Globe and Mail


Demographic trends built up our housing market, and now they’re going to start pulling it apart.

Prepare yourselves, buyers and sellers. The years ahead for housing will look nothing like the last decade.

A report issued by Pacifica Partners Capital Management in B.C., describes the housing market as we know it today as a product of a wave of buying by baby boomers in their peak earning years. Now, as they start entering retirement, boomers aren’t buying houses any more and the younger generation isn’t large enough to pick up the slack.

Anyone still think the housing market’s going to snap back from the weakening trend that has taken hold in the past couple of months? It’s not, so act accordingly. Adjusting our expectations about housing won’t be easy because we’ve seen prices rise dramatically. Canadian Real Estate Association numbers show an average annual price gain of 7.7 per cent over the past 10 years on a national basis.

Aman Bhangu, Pacifica’s vice-president of research, said real estate has performed a lot like stocks did before the twin stock market crashes of the past decade. “At the end of the 1980s and 1990s, you had that mantra of ‘buy and hold, stock markets always go up, just get in there.’ It’s likewise with real estate – ‘real estate always goes up.’”

Mr. Bhangu said that taking a fresh look at the fundamentals supporting the real estate sector suggests prices are overvalued today by one-third, while other estimates call for a price decline of 10 to 25 per cent from current levels. Forecasts like these are educated guesses, whereas the demographic impact on housing is rooted in basic numbers.

Pacifica’s report says people aged 45 to 64 used to account for just below 20 per cent of the population. In the 1990s and 2000s, however, this cohort claimed an additional 10 per cent of the population. In round numbers, there are 4.3 million more 45- to 64-year-olds now than there were in 1990. Most housing bubbles in the industrialized world have occurred after sharp growth in the number of 45- to 64-year-olds, Pacific said in paraphrasing research issued last fall by the French bank Société Générale.

In previous generations, the supply of young people in Canada was big enough to replenish the gaps created as older workers moved into retirement. Now, with baby boomers such a disproportionate part of the population, there’s a shortfall.

Young adults buy starter homes from people moving up to the more expensive houses where boomers live. Gen Y, you’ve just been handed the perfect comeback the next time a boomer dismisses your complaints about high tuition costs and a tough job market. Just say: “Good luck selling your house, old timer.”

Mr. Bhangu said immigration could help support the housing market as boomers age, but he’s unsure how much of the impact of shifting demographics can be overcome. A key question is whether the job market in Canada can sustain the level of immigration needed to maintain equilibrium in the housing market.

Here’s what Mr. Bhangu suggests if you’re a boomer who has ideas about selling the family home any time soon. Consider all your financial assets and savings, and determine how much you’re depending on the value locked in your home to meet your financial goals. If your home is a dominant part of your net worth, think about selling it now so you can diversify your holdings.

Mr. Bhangu said young people shouldn’t dismiss renting for the near term, in part because it gives them mobility in finding a job. Those who want to buy a house need not feel as if they have to rush into the market now, before house prices climb out of reach. “At this time, there’s more risk going in than there is in holding out.”

That’s the investing point of view on home ownership. Before the rapid increase in house prices of the past decade, people generally bought houses for lifestyle reasons. If that’s your view on owning a home and you figure on staying for 10 years or more, then ignore demographics and focus on affordability.

Here, there’s good news. Housing prices are under pressure as sales decline, and a five-year fixed-rate mortgage can be had with minimal hassle for roughly 3 per cent. Only buy a house you love, though. It’ll carry you through the days ahead when people talk about what a terrible investment housing is.

Canadian housing market comes in for ‘a soft landing’

The Vancouver Sun

TORONTO — The Canadian housing market appears to have achieved “a soft landing” so far with sales cooler but still fairly steady along with prices, Scotiabank says.

Nationally, sales in October were down about 10 per cent from the spring, but only marginally below the average pace of the past decade, said the report Tuesday by Scotiabank economist Adrienne Warren.

Warren noted the moderation mirrors a modest softening in the job market over the summer and follows repeated warnings to Canadians to be careful about the amount of money they borrow.
The easing also follows a tightening of mortgage lending rules by the federal government in the summer.

“The latest round of regulatory changes that took effect in early July, including the lowering of the maximum amortization period from 30 to 25 years, has contributed to the softening but does not appear to have sharply accelerated the decline,” Warren wrote in the report.

“Meanwhile, anecdotal reports point to a lower level of investor and/or foreign demand.”

A report by the Canadian Real Estate Association last month suggested that the resale of homes across Canada in October was down slightly from September and a year ago, while prices held steady.

However, some of the country’s hottest markets — Vancouver, Toronto and Montreal — saw sales down from a year ago.

Warren said housing demand is expected to remain on the softer side for now.

“This could put some further downward pressure on sales volumes as well as prices, especially in markets that have already shifted into buyers’ territory or in certain market segments that are potentially oversupplied,” she said.

“However, with the Canadian economy continuing to post healthy job growth and sellers proving responsive to the underlying shift in market conditions, a sharp decline in prices nationally is unlikely.”

The Scotiabank report noted that globally there is still more weakness than strength in housing markets around the world, though the downward pressure on prices in a number of countries has eased.

“In the majority of advanced and emerging-nation property markets we track, average inflation-adjusted house prices were negative on a year-over-year basis in the third quarter,” Warren wrote.

“However, many are showing some tentative signs of stabilization, including the U.S., the U.K., Australia and China, supported in part by highly accommodative monetary policy.”

Warren suggest the relatively flat global performance suggests households are being cautious, even with low interest rates and lower prices making homes more affordable.

Housing markets remain weakest in Europe.
 

© Copyright (c) The Vancouver Sun

Sellers in Toronto and Vancouver Just Say No as Housing Markets Sink

Michael Babad, The Globe and Mail


Vancouver, Toronto hit

Homeowners looking to sell are pulling back or holding out - and buyers are taking a breather - in the fast-cooling Vancouver and Toronto markets.

Both cities, the focus of concern as Canada’s housing market slows, are feeling the heat, as the latest numbers show.

As The Globe and Mail’s Brent Jang reports today, sales fell almost 29 per cent in November from a year earlier, to 1,686, while prices declined by 1.7 per cent.

“Home sellers appear more inclined to remove their properties from the market today rather than lower prices to sell their properties,” said the realtor group’s president, Eugen Klein.

“On the other hand, buyers appear to be expecting prices to moderate.”

Indeed, new listings fell more than 14 per cent last month, and were almost 13 per cent below the 10-year average for the month of November.

“Sales are down 42 per cent from the past-decade norm, a victim of excessive valuations, tougher mortgage rules and the temporary suspension of the Immigrant Investor Program,” said senior economist Sal Guatieri of BMO Nesbitt Burns.

“Price declines have quickened, too, down 1.7 per cent year-over-year and off 4.5 per cent from the spring peak. Vancouver’s market is on the downslope of its historical roller-coaster ride, though low interest rates are keeping it on the tracks.”

According to the Toronto Real Estate Board today, sales in November fell 16 per cent from a year earlier to 5,793, with condos particularly hard hit. Average prices rose 1.6 per cent.

New listings fell 1.3 per cent, while active listings climbed almost 18 per cent.

“Stricter mortgage lending guidelines, including a reduced maximum amortization period and a purchase price ceiling of $1-million for government insured mortgages, have prompted some buyers to move to the sidelines,” said the group’s president, Ann Hannah.

“This situation has been exacerbated in the City of Toronto because the additional upfront Land Transfer Tax takes money away from buyers that otherwise could be used for a larger down payment.”

The cooling of Canada’s housing market is expected to play out across the country, and most observers expect a soft landing.

“Moderating home sales are expected to slow the pace of residential building, particularly in the overbuilt condo markets in Vancouver and Toronto,” Bank of Nova Scotia economists said in a new forecast.