"You may have had people who were expecting ," said Bolduc. So, why, amidst all the warnings, is consumer confidence on the upswing, I asked Walter Bolduc, the economic forecaster who compiled the Conference Board report, in a phone interview on Wednesday.īolduc said the reason for the increase in confidence may be partly seasonal, but he also attributed it to the pause in the Bank of Canada's increase in interest rates. While central bankers insist there are no plans to reduce interest rates, a shock to funding costs is the kind of drastic situation where it could happen. "If global stresses were to return and persist, bank funding costs could rise beyond the higher levels intended by tighter monetary policy," said Rogers. Compounding the problem could be a global shortage of money, meaning that banks could have to restrict lending, even in emergencies. In the prior FSR, the bank warned Canadians were accumulating too much mortgage debt.Īmong this year's warnings, there are concerns banks could face a shortage of cash reserves, if demand for money exceeded conventional sources, including the cash Canadians hold on deposit. (Fiona Goodall/Getty Images)Ī year ago, the bank warned rising interests would hurt the fortunes of those who bought homes when interest rates were low and prices were high. But Canadian borrowing has continued to rise as a perentage of GDP, while it has been falling in comparable nations. BMO and Scotiabank were the first in what is likely to be a trend by all the Canadian banks to set aside extra hundreds of millions of dollars - more than a billion for BMO - to cover loans that borrowers cannot afford to pay back in full.Ī for sale sign is pictured in Auckland, New Zealand during their property boom which has been compared to Canada's. On Wednesday, the latest arrivals to the misery party were the Canadian commercial banks. The gloomy warnings have been coming thick and fast. Just as new consumer confidence figures from the Conference Board of Canada show "a three month streak" of growing optimism, worrywarts from the commercial banks, the Canada Mortgage and Housing Corporation (CMHC) and the Bank of Canada, seem to be saying "not so fast."įor Canadians trying to make sense of a series of frightening headlines, the difficult question is whether the warnings of potential economic turbulence are a signal to take the crash position or if we should trust our fellow travellers who seem to be taking the distressing indicators with a grain of salt. Meanwhile, rates on 30-year fixed-rate mortgages stayed above 6% for the third straight week, rising to 6.15% this week, the highest level in 15 months, mortgage giant Freddie Mac reported Thursday.It is an unfortunate rule that bad things also happen to optimistic people. The median new-home price fell 5.7%, the biggest decline since January 2003. Inventories of unsold new homes nationwide increased to a record of 493,000, a supply that would take 4.9 months to sell. New single-family home sales rose 2.1% last month to a seasonally adjusted annual rate of 1.222 million units. homes rose more slowly than expected in September, in part because sales in the West - which includes California - tumbled 12% last month. Still, there’s a growing raft of indicators pointing to a slowing housing market in California and elsewhere.Ĭommerce Department data released Thursday showed sales of new U.S. Housing starts this year are expected to come close to last year’s 212,960, the most in 15 years. Residential building permits issued in California rose 21% in September from year-earlier levels, the Construction Industry Research Board reported Thursday. “It’s hard to call it a cooling market,” Karevoll said. Last month, the median price of a Bay Area home rose 19%, to $616,000, while Southern California’s median rose 16%, to $475,000. That’s because home values in Northern California are currently rising at a faster pace than in the south, Karevoll said. In contrast, the Bay Area saw a 13% decline. The Southland saw a 20% jump in default activity on a year-over-year basis, to 7,625. The bulk of the state’s default notices were sent to addresses in Southern California, where the torrid rate of appreciation has calmed down slightly since the spring. “It’s just that it has a long way to go before it regains its normal role in the market.” “Foreclosure activity has bottomed out and is starting to go back up,” Karevoll said. John Karevoll, DataQuick’s chief analyst, said default activity was still well below normal levels and involved only a tiny fraction of the state’s 17 million residential properties.
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