Canada First Mortgage

Rob Carrick

The Globe and Mail Published on Thursday, Apr. 29, 2010

Interest rates are rising – we all get that – but it looks like the Big Banks are pushing things a bit with mortgages.

After a pair of increases in the past two weeks, the posted Big Bank five-year fixed mortgage rate now stands at 6.25 per cent. Does that seem high? In fact, it’s just half a percentage point below the average level for the past decade.

We’re supposed to be in the early phase of what could be a long cycle of rate increases. The Bank of Canada hasn’t even started raising its overnight rate, which sets the trend for borrowing costs other than fixed-rate mortgages. The overnight rate could very well start rising June 1 (that’s the central bank’s next rate-setting date), but even then it’s not dead certain that rates will move.

Mortgage rates are linked to bond yields, which have been rising for a while now. But mortgage rates have been moving faster.

Thanks to the always helpful Bank of Canada online interest rate database, we know that the yield for five-year Government of Canada bonds has averaged 4.03 per cent since the beginning of 2000. Five-year Canada bonds had a yield of 3.02 per cent yesterday, which means they’re three-quarters of the way back to their average of the past decade.

The 10-year average for posted five-year fixed-rate mortgages is 6.75 per cent, which means this rate is almost 93 per cent of the way back to its long-term average. There is zero consensus that things have normalized after the financial crisis, but the banks are just about all the way back to pricing mortgages as if they were.

And, no, this “go big or go home” attitude to rates has not been extended to guaranteed investment certificates, which are one source the banks use for the money they lend out as mortgages. The current posted Big Bank five-year GIC rate tops out at 2.1 per cent, or 63 per cent of its 10-year average rate of 3.31 per cent.

John Turner, director of mortgages at Bank of Montreal, said the banks are simply reacting to the rising rate environment in setting borrowing costs for mortgages.

“It’s not about any of us trying to get ahead of things, because the market won’t let us,” he said. “It’s a very competitive market.”

Mr. Turner cited two factors that have driven fixed-rate mortgages lately. One is an effort by the banks to anticipate higher bond yields and avoid repeated increases in mortgage rates. “We don’t like to move rates because it causes dissatisfaction, and it causes disruption in the sales force.”

The other driver of higher mortgage costs is the rising cost of providing interest-rate guarantees for people who are smart enough to lock in a rate as soon as they start looking for a home. Mr. Turner said these costs haven’t been a factor much in recent years because the general trend for interest rates has been downward. Now, with rates on a definite upward path, rate guarantees are a bigger consideration for lenders.

Banks won’t say this out loud, but their own internal business considerations help set mortgage rates as well. Sometimes, this works in favour of borrowers. In February, for example, the banks lowered mortgage rates even as bond yields rose a tick or two. Now, the banks seem to be in a mood to emphasize profits over market share or, as it’s known in bank land, widen spreads between what they charge and what they pay.

“The banks normally do this when interest rates are moving,” said David McVay, a financial services industry consultant with McVay and Associates. “But their retail profits have been pretty strong, and they widened spreads quite well when they put up line-of-credit rates [in 2008-09]. That was a big boost to profits right there.”

Mr. McVay seconded Mr. Turner’s comment about the mortgage marketplace being too competitive for banks to be out of line with their mortgage rates. In fact, there is a huge variation in rates right now that demands some shopping around from homebuyers and people facing renewals.

One of the better deals in the mortgage market today is BMO’s offer of a 4.35-per-cent five-year, fixed-rate mortgage. You can’t take an amortization longer than 25 years with this mortgage, and there’s less room to make pre-payments than there is with a standard BMO mortgage. But a glance at the websites of several mortgage brokers yesterday suggests you won’t find a lower rate.

http://www.theglobeandmail.com/globe-investor/are-big-banks-jumping-the-gun/article1550163/

Steve Ladurantaye and Carly Weeks From Saturday’s Globe and Mail

When Rae Whitton started house shopping with Dan Madge last year, she agreed to a variable mortgage rate after their broker explained rates were likely to remain low until spring, at which point they could lock into a fixed rate.

But when February came and signs indicated the economy was getting stronger, anxiety kicked in. Ms. Whitton e-mailed Mr. Madge newspaper articles warning of possible mortgage rate hikes, and worried about worst-case scenarios, remembering how her parents paid up to 18 per cent on their mortgage.

“I was just freaking out. Not that I think it will ever be like that again, but what if this happens? What would we do?” she said. “You always think of the worst thing.”

With mortgage rates set to climb in coming months from historic lows, the emotionally charged decision to lock into a predictable fixed-rate mortgage or gamble on a variable rate that could change at any time is pitting couples against each other as they try to plan their future.

Call it the Battle of the Sexes: the Housing Boom Edition.

Ms. Whitton was terrified that rocketing rates would price them out of their new Toronto home and pushed for the certainty of a fixed-rate. Mr. Madge wanted to take a chance that rates would be lower.

“I didn’t like the uncertainty of it,” Ms. Whitton said. “I like knowing how much our payments are going to be every month.”

The conflict is based on fear of the unknown, and the fear of losing a home if circumstances spiral out of control.

A study commissioned by the Bank of Montreal indicated that women were more likely to be overwhelmed when buying a home than men, at 44 per cent versus 28 per cent. Men were also more likely – 39 per cent vs. 26 per cent – to take interest rates into account when deciding whether to buy.

“When it comes to a risky situation which usually involves some kind of uncertainty, women tend to perceive negative consequences to be more likely and perceive negative consequences to be more severe,” says Li-Jun Ji, a psychology professor at Queen’s University in Kingston, Ont., who studies how decisions are made.

After debating for several months, Ms. Whitton and Mr. Madge went to the bank a few weeks ago and locked into a three-year fixed-rate mortgage. And while Ms. Whitton said she knows more of their payment is now going to interest, she’s not going to let it get to her.

“I just try not to look at the statements,” she said.

Variable rate mortgages can be had for about 1.75 per cent right now, while a 5-year fixed-rated can be had for about 4.5 per cent. A homeowner can save thousands by choosing variable, but their monthly payments will get higher every time interest rates increase.

With the Bank of Canada expected to move its key lending rate higher in June, the variable rate will increase as well. And if history is any indication, rates go up a lot faster than they go down. From 1980 to mid-1981, rates gained 67 per cent, making many mortgages unaffordable.

There’s no sense that will happen this time, but even small increases can mess up a tight budget.

For example, a five-year variable rate mortgage at 2.25 per cent on $300,000 would carry a monthly payment of about $1,300, assuming a 25-year amortization period. A move to 5 per cent would boost the payment to $1,750.

It’s that kind of uncertainty women may be hardwired to avoid, said Lise Vesterlund, a professor at the University of Pittsburgh who has studied the role gender plays in financial decisions.

“My own work has shown that women are less confident about their decisions,” she said. “There are evolutionary reasons for that, and you can also argue there are circumstantial reasons as well.”

She said men are natural risk-takers - after all, there was a time when they could reproduce indiscriminately and not worry about consequences, while the women had to be prudent and think about the future.

That sense of risk is still fostered by parents today, she said, with the majority of boys playing games that have measurable results while girls are offered activities that have no discernible conclusion.

“From an evolutionary standpoint, men have always had more to gain by taking gambles,” she said. “Women tend not to get the same kick out of taking risks – part of the reason they like to lock in to something is they want to have more information about what their prospects will be like in the future.”

http://www.theglobeandmail.com/report-on-business/possible-rise-in-mortgage-rates-pitting-couples-against-one-another/article1545411/

JULIAN BELTRAME, THE CANADIAN PRESS
THE CANADIAN PRESS

OTTAWA - Canada is leading the other G7 countries out of recession with the fastest growth in a decade, but it will be trailing those countries in a few years, the Bank of Canada said Thursday.

The central bank’s latest economic outlook released Thursday makes several bold predictions, including that Canada’s fast start out of last year’s slump is already slowing, that the housing boom is fizzling out, and that the country’s long-term growth prospects are discouraging.

And governor Mark Carney is cautioning markets not to be so sure Canada’s central bank will raise its key interest rates in a matter of weeks.

On Tuesday, the Canadian dollar shot up more than 1.5 cents to above parity with the U.S. currency after the Bank of Canada said it was dropping its promise not to raise rates before July at the earliest.

But Carney told a news conference Thursday that there is still considerable risk in the global economy, or to anticipating his next move.

“There is nothing pre-ordained from this day forward,” Carney said to a question on interest rates.

Most economists interpreted Tuesday’s statement as an alert to plan for higher rates in June, but some argued Carney had left himself plenty of wiggle room.

“The Bank of Canada has limited scope to raise interest rates in the next several months,” said Brian Bethune, chief economist with IHS Global Insight.

“While we may see one or two token moves to raise the overnight rate by a quarter of a point in the June to October window, action to raise rates will be very limited” by the fact doing so would further boost an already strong dollar.

In Thursday’s report, the bank said it is planning for the dollar to hover around parity for the next three years and listed it as a major impediment to strong growth because it will make exports less competitive in global markets.

The dollar hovered just above and below parity throughout the Thursday trading day.

The report says Canada’s economy expanded by 5.8 per cent in the just past quarter, the largest advance since 1999, but growth will likely slow to 3.8 per cent in the April-June period, and to 3.5 per cent the rest of the year.

It gets worse. Economic growth will average 3.1 per cent in 2011 and 1.9 per cent in 2012, about half what it will be in the United States and lower than both Europe and Japan.

“There is some good news here, our economy has returned to growth,” said Carney, noting that more Canadians will find jobs and those who have had their hours reduced are more likely to be called in to work longer.

But as he has in the past, Carney warned that the longer-term prospects for the Canadian economy is modest unless the corporate sector starts investing heavily in new machinery and equipment to become more productive.

Canada is also facing a bigger issue of an aging workforce than the United States, exacerbating the divergent trend line between the two economies.

“This is in the hands of the private sector,” Carney said. “If we want to grow faster, we’re going to have to work smarter, invest better, (and) build new markets.”

The bank said it fully expects businesses to step up investment this year, but it could hardly get worse - business investment actually declined in the fourth quarter when the rest of the economy was rebounding.

A big reason the economy has shot out of recession is that Canadian consumers, particularly home-buyers, have “front-loaded” their purchases because of record low interest rates.

But Canadians that bought homes in the past six months, or took advantage of the now defunct home renovation tax credit, won’t be doing so in the future, hence bringing an end to the housing sector boom.

Housing, which is contributing about 0.6 per cent to economic growth this year, will actually be a slight drag next year, the bank forecasts. That doesn’t necessary translate to an outright decline, but it does foresee prices and sales levelling out.

For the bank, that is a good thing because it regards the housing market as too hot for home-buyers’ own good. It has warned repeatedly that households should make sure when they purchase a home that they will be able to afford the monthly payments once interest rates rise.

In the main, the bank’s view of the Canadian economy and the world is actually brighter than the previous published analysis issued in January, while noting the high level of uncertainty.

The world economy will grow at around four per cent for the next three years, the bank says, led by China and other emerging countries. This should help Canada’s export sector, the bank said.

The advanced countries, which borrowed heavily to soften the blow from the 2008-09 recession, will end up with lower activity going forward. Europe will be the weakest major economic region, with growth rates of 1.2 and 1.6 per cent over the next two years.

The bank also issued a more detailed explanation of its fears about inflation that provides more ammunition to analysts who expect Carney to raise the policy rate from 0.25 per cent to 0.5 per cent at the next opportunity, June 1.

The report says underlying inflation is higher than it had expected it to be at this point in the recovery because wages unexpectedly held up during last year’s recession. Shelter costs have also increased faster than expected, it said.

The bank also warns that Canadians can expect prices to receive a 0.6-per-cent boost after July 1, when Ontario and British Columbia move to a harmonized sales tax.

The new tax will cut costs to businesses, however, and the bank says cost savings will likely be transmitted into prices in the second half of they year and trim inflation by 0.3 percentage points.

Total inflation, the amount Canadians actually see when they go to the store, will be higher than two per cent for the rest of this year before returning to target in the second half of 2011, it said

http://news.therecord.com/article/700765

By Julian Beltrame, The Canadian Press

OTTAWA - The Bank of Canada signalled Tuesday it is poised to start raising interest rates in a matter of weeks, a move that will make borrowing costs higher on everything from car loans to mortgages.

Over the last few weeks, Canadians have already felt the impact of expectations that rates were due to rise - most major Canadians banks started hiking fixed-rate mortgage rates by as much as 0.85 per cent.

But with the central bank now saying it is prepared to move off its emergency 0.25 per cent overnight rate as early as June 1, the whole menu of variable and short-term rates are being brought into play.

“The one that will be affected is the prime lending rate… so the whole gamut will go up when the Bank of Canada raises its rate,” said Bank of Montreal economist Michael Gregory. Those include variable-rate mortgages, lines of credit and short-term car loans, he said.

The bank is also risking sending the Canadian dollar into the stratosphere by moving significantly and robustly before the U.S. Federal Reserve moves off its own zero per cent interest rate policy.

The loonie soared within minutes of the central bank’s 9 a.m. ET policy statement, which, while leaving the rate unchanged for now, made no secret of where it is headed.

The bank’s governing council declared that with the economy and inflation growing faster this year than had been previously thought, there was no need to stay with its “conditional commitment” to leave rates unchanged until the end of the second quarter, or after June 30.

“This unconventional policy provided considerable additional stimulus during a period of very weak economic conditions,” the council wrote.

“With recent improvements in the economic outlook, the need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus.”

Hence, the council went on, it was withdrawing the conditional commitment.

The bank also said it was ending its key emergency lending instrument that helped inject liquidity into money markets during the crisis, which economists called a clear signal about the central bank’s future intentions.

The dollar rose about 1.5 cents shortly afterwards, breaking through the parity ceiling with the U.S. greenback. It closed up 1.58 cents at 100.12 cents U.S.

The currency move suggested that while the market had expected bank governor Mark Carney to signal a tightening bias, it was surprised by the hawkish tone.

“Removing the conditional commitment to keep rates on hold until July and ending purchase and resale agreements are as good as cementing a June 1 hike,” said economists Derek Holt and Karen Cordes Woods of Scotia Capital in a note to clients.

Holt added in an interview that the language from the bank opens the door for a bigger-than-expected hike in June, perhaps by as much as half a point.

Not all analysts believe the market is right to anticipate a June hike, however. Some say Carney is still leaving himself some wiggle room to stay at the lower bound until July 20, while others are advising the governor to wait until the Fed acts.

“I would keep rates unchanged until the Fed moves, because otherwise you create this problem on the Canadian dollar,” said Brian Bethune, chief economist with IHS Global Insight.

A strong loonie is regarded as a brake on economic growth because it makes the price of Canadian exports less competitive in foreign markets.

In the statement, the central bank conceded the point, listing the “persistent strength of the Canadian dollar,” along with poor productivity and low U.S. demand as “significant drags” on the Canadian economy.

But economists suggested the bank’s language suggests it is prepared to live with a strong loonie.

Even so, economists that favoured a rate hike said the bank can only get so far ahead of the Fed. They note the Canadian bank has flown solo twice before in the past two decades, only to have to subsequently pull back.

“The need for emergency rates have passed but we still have a need for low rates,” Holt explained.

C.D. Howe’s monetary policy council, a sampling of nine economists, sees the bank’s policy rate rising to 2.5 per cent by the spring of 2011. That is a significant hike from the current level, but it is still below what would be considered normal and only slightly above the rate of inflation.

While the tone on interest rates was hawkish, the bank’s view on the economy was only mildly more rosy. It upgraded this year’s growth to 3.7 per cent, from a previous prediction of 2.9 per cent, but it lowered its forecast for 2011 to 3.1 per cent, and it believes 2012 will only bring a 1.9 per cent advance.

It now expects the economy to return to full capacity in the spring of 2011, a full quarter before the previous estimate it made in January.

The bank did raise the temperature, slightly, on inflation.

It said core prices have been firmer than projected, but that they were expected to ease slightly in the second quarter of this year and remain near the bank’s two per cent target over the next two years.

Total headline inflation, which includes volatile items such as gasoline prices, was expected to be higher than two per cent this year, but returning to target in the second half of 2011.

BY JULIAN BELTRAME

OTTAWA — It’s a minority view, but some economists are advising the Bank of Canada to hold off on raising rates — for a long time.

The reason, says Carl Weinberg of U.S.-based High Frequency Economics, is that the Canadian economy is not nearly as strong as recent data suggests and inflation is at acceptable levels.

He says Canada’s central bank could easily keep interest rates at record lows until next year and not worry about inflation getting out of hand.

That flies in the face of the prevailing view of economists, who believe Bank of Canada governor Mark Carney will start raising rates in July — or possibly even in June.

Carney is expected to give a strong hint into his thinking this week, starting on Tuesday with a scheduled interest rate announcement.

No one thinks he will move this week on the policy rate, which is at an emergency level of 0.25 per cent, but the governor is expected to issue a new forecast on both growth and inflation that will tip off when he will act.

Carney made a conditional pledge last spring not to raise rates until the end of the second quarter of 2010 unless inflation becomes a worry.

That’s going to be a high hurdle for him to jump if he does intend to move early, says Michael Gregory of BMO Capital Markets.

“If they go before June, there’s only one reason if they wanted to maintain their credibility, and that’s the inflation projection has changed,” he said.

“But that’s sending a pretty sharp inflation warning and I’m not sure what’s on the ground now justifies ringing that alarm bell.”

Statistics Canada reported last month that the core inflation rate, which the Bank of Canada watches closely, was 2.1 per cent in February while overall inflation was 1.6 per cent.

Both are within the central bank’s target range for the annual inflation rate, set at between one and three per cent.

The Canadian Press

CALGARY - In residential real estate, there’s an old saying about how location is an important factor in any purchase - besides the price of course.

A BMO Bank of Montreal survey, released today, says that among current and future first-time home owners, location is the main reason they would consider offering more than the asking price for a home.

The survey found that:

• 70 per cent of current home owners would consider offering more for a home based on its location

• 63 per cent of future first-time home owners would consider offering more for a home based on its location.

• Future first-time home owners who are men are more likely (70 per cent) than their female counterparts (57 per cent) to consider offering more for a home based on its location.

“Especially in today’s heated market, it’s easy to get caught up in the emotions of a home purchase,” said Jane Yuen, Senior Manager of Mortgages, BMO Bank of Montreal. “It’s hard to walk away from a home you believe is ‘the one’ but homebuyers need to avoid getting caught in a bidding war that pushes their mortgage payments outside their comfort zone. In short, you need to know your limit and stay within it.”

Among future first time home owners the study found some notable gender differences:

• Men are more likely than women to agree that talk of rising interest rates has influenced their decision to enter the housing market (39 per cent vs. 26 per cent).

• Twice the number of men compared to women report that they have been caught up in a bidding war (16 per cent vs. eight per cent)

• Females are more likely than their male counterparts to say they are being overwhelmed by the choices/decisions involved in the home buying process (44 per cent vs. 28 per cent)

The Harris/Decima online poll was conducted from February 16-22 2010 and is based on a sample of 1,000 Canadians between the ages of 25-45 years, who are either current home owners (who currently have a mortgage on their home and needed one when they purchased their home) or are planning on purchasing their first home in the next 12 months, and at least share in their household’s financial decisions.

mtoneguzzi@theherald.canwest.com

Financial Post
OTTAWA — Traders hope next week’s interest-rate decision from the Bank of Canada settles the debate as to whether the central bank’s first rate hike in nearly three years comes in June or July.

Some observers warn, though, that the central bank might keep people guessing.

“The reality may be somewhat messier, with quite a number of viable scenarios, and the most likely outcome [is] that the central bank elects to leave both options open - to be settled by incoming economic data,” said Eric Lascelles, chief Canadian strategist at TD Securities.

It will be a big week for Mark Carney, the Bank of Canada governor, with the rate statement on Tuesday, followed two days later by the release of the central bank’s latest economic outlook, which is bound to incorporate the robust data emerging not just in Canada, but the United States and the rest of the globe.

Markets, through bankers’ acceptance futures, have priced in a 100% chance that the rate hike comes in July, allowing the central bank to fulfill its conditional commitment to maintain its 0.25% rate until the end of the second quarter. But those same instruments have priced in a 50-50 likelihood of a June increase.

Pressure on Mr. Carney to move in June has mounted in recent weeks, especially on news that inflation is stronger than the central bank had forecast, and a sharp upturn in inflation expectations among firms.

Core inflation in February surpassed the key 2% mark, while headline inflation remained above forecast. The central bank sets its interest rate to achieve and maintain 2% inflation.

The yield on the two-year Canada bond now stands at roughly 1.92%, for a spread of nearly 170 basis points against the Bank of Canada benchmark rate. Yanick Desnoyers, assistant chief economist at National Bank Financial, said history dictates rate hikes emerge once that spread reaches 160 basis points. (Higher yields generally forecast higher inflation down the road.)

“How can you justify a yield curve that is calling for rate hikes,” said Mr. Desnoyers, who is among those calling for a June move.

Still, the consensus among private sector economists is that the Bank of Canada will wait until July. Even though inflation is stronger than expected, analysts note that’s likely due to one-off factors such as the Winter Olympics, which will no longer be accounted for in future readings.

Further, an early rate hike could spark a sudden surge in the Canadian dollar, as the U.S. Federal Reserve has indicated no plans to raise its policy rate any time soon as inflation in that country remains tepid and unemployment relatively high.

“The Canadian dollar has to be a consideration for the Bank of Canada, and is the main reason we think it will wait until July,” said Sal Guatieri, senior economist at BMO Capital Markets.

Sheryl King, head of Canadian economics strategy at Merrill Lynch Canada, said it would be best if the Bank of Canada began rate hikes in June, and take a “low and slow” approach. One option mentioned – that the central bank waits until July and undertake a 50-basis-point increase at that time – is “crazy talk,” she said, as the market would then expect all future hikes to be similar in size and drive up long-term yields in “a heartbeat.”

Financial Post

Read more: http://www.financialpost.com/news-sectors/financials/story.html?id=2912041#ixzz0lGHKEjVo

Julie Fortier, Financial Post

OTTAWA - With the Canadian economy doing surprisingly well over the past six months, many see higher interest rates from the Bank of Canada in the not so distant future, but according to a report released Thursday from CIBC’s chief economist Avery Shenfeld, rates are likely to remain at a very low 2.5% through to 2011.

In CIBC World Markets’ latest Global Positioning Strategy report, Mr. Shenfeld lists several reasons for Bank of Canada Governor Mark Carney to keep interest rates subdued after July. He points out that the U.S. will probably have a more gradual approach to raising rates and if Canada gets too far ahead, that could send the Canadian dollar soaring.

“While factories are recovering in Canada alongside a global industrial revival, output remains nearly 20% below the pre-recession peak, and wages are now substantially above those stateside without the productivity gains to match. There’s only so much of a competitive challenge that non-resource exporters can take in short order,” Mr. Shenfeld said.

He also pointed out that inflation is not expected to rise much further and stimulus spending is expected to be reigned in by governments - including Canada’s - which will slow growth.

“If the U.S., the U.K., and Japan all move from huge stimulus to even modest restraint, Canada will feel it in our export prospects come 2011,” Mr. Shenfeld pointed out.

Mr. Carney has promised to keep interest rates where they are at 0.25% until the end of June. However, the latest reading of Canada’s economic growth showed the core inflation rate at 2.1% in February, far above the Bank of Canada’s forecast of 1.6% for the first quarter of the year. Many analysts believe the Bank of Canada will not wait until mid-2010 to raise rates.
Read more: http://www.financialpost.com/news-sectors/economy/story.html?id=2777584#ixzz0kYfL1zaB

CALGARY - Calgary’s housing market in March was fueled by an expected rise in interest rates with MLS single-family home sales up by 29 per cent compared with a year ago and condo sales soaring by 37 per cent, according to data released today by the Calgary Real Estate Board.

There were 1,396 single-family home sales last month for an average price of $471,269, up just over 12 per cent from March 2009.

The 609 condo sales averaged $296,660, an increase of just over four per cent from a year ago.

“The spring market has come early to Calgary,” said Diane Scott, CREB president. “Improved economic

conditions, better employment prospects, and an earlier than expected rise in mortgage rates are all contributing

to this early boost in sales this year.

“Undoubtedly the recent announcements by all our major banks to raise mortgage rates are motivating

buyers to take the plunge. But Calgary’s market remains in a healthy position and our sales are not outstripping supply. The rise in demand will also motivate sellers to consider listing this spring.”

She said there has been some speculation that mortgage rate hikes will adversely affect housing demand in the longterm, but it should be noted that a rise in rates was fully expected.

The towns outside Calgary saw 423 sales during the month, up nearly 63 per cent from last year, for an average price of $360,805. That was up by nearly 10 per cent from March 2009.

The country residential (acreages) market experienced a whopping more than 78 per cent increase in sales to 66 transactions for an average price of $970,295, up more than 28 per cent from last year.

“Our average price has edged upwards as more move-up buyers enter the market and overall demand

strengthens,” says Scott. “But this is not an unusual trend during a spring market. We expect this modest price growth to continue, but a rise in listings will likely curb this trend.”

© Copyright (c) The Calgary Herald

Read more: http://www.calgaryherald.com/business/Interest+rates+fuel+Calgary+housing+market/2754209/story.html#ixzz0kKghoid1

BY MALCOLM MORRISON, THE CANADIAN PRESS

TORONTO — A solid employment report showing the strongest U.S. job growth in almost three years should give stock markets a lift this coming week.

The U.S. Labour Department reported Friday that the economy created a total of 162,000 jobs during March. But investors were particularly relieved at data showing that the private sector was responsible for 123,000 of those positions, the most since May, 2007.

“Very positive (and) showing steady job growth,” said Jennifer Lee, senior economist at BMO Capital Markets.

“Some people will pooh-pooh the report and say it’s just a month. And that’s true: it’s just one month but the fact that the private sector increased so much, that’s the main part.”

Monday will be the first chance investors have to react to the employment report as stock markets in Canada, the U.S. and many other countries were closed for the Good Friday holiday.

Lee noted that the report is part of a wider trend showing a continuing recovery from the worst recession in decades.

Data released in the U.S. last week showing rising house prices from December to January, improving consumer confidence and greater than expected expansion in the manufacturing sector — not just in the U.S., but also in the eurozone and China — sent stock markets in Toronto and New York higher last week.

“The global economy is in much better shape than the U.S. but even in the U.S., you’re making some progress,” said John Johnston, chief strategist The Harbour Group at RBC Dominion Securities.

“And the odds of a double dip in the U.S. are quite limited. The equity markets are reflecting the fact that we’re in a sustainable recovery, even if there’s some ebbs and flows.”

The Canadian employment report for March will be released Friday.

It is expected to be positive as economists forecast that the Canadian economy cranked out about 25,000 jobs last month, on top of just under 22,000 jobs in February.

“I think what we’re seeing is underlying job growth in Canada,” added Johnston.

“The trend is improving, the economy has picked up momentum. And the demand side is coming on, profitability is improving which means that capital investment is improving which means jobs both in Canada and the U.S.”

The data could drive the Canadian dollar to parity with the U.S. dollar for the first time since July, 2008 — if it doesn’t happen before then. Rising commodity prices helped push the loonie to just over 99 cents US at the end of last week.

Economists widely expect the loonie to hit parity sooner rather than later because of the solid economic recovery in Canada and the increased likelihood that the Bank of Canada could move to hike interest rates from near zero as early as June 1.

But while a move to parity wouldn’t be a surprise, the loonie could just as easily backtrack as it did during March when the U.S. dollar strengthened during the latest set of worries about the European debt crisis.

And Lee observed that the American currency could strengthen this week, depending on the content of the minutes of the latest Federal Reserve meeting on interest rates, which is being released Tuesday.

“It would be interesting to see if there are any more attentive signs toward exit strategies,” said Lee, since a sign that the Fed could be set to raise interest rates could bolster the greenback and weaken the Canadian dollar.