House prices slip
Home prices in Canada dipped 0.2 per cent in November from a month earlier, according to a new measure, marking the first drop since the fall of 2010.

Prices fell in eight of the regions measured by the Teranet-National Bank index, notably in Calgary, where prices slipped 1.6 per cent, and Vancouver, down 0.9 per cent.

Prices also dropped in Vancouver, Toronto, Quebec City, Ottawa, Winnipeg and Hamilton, though they rose in Edmonton, Montreal and Halifax.

“The simultaneous monthly declines in Toronto, Hamilton and Winnipeg are noteworthy in that these three markets are considered tight,” said Marc Pinsonneualt, senior economist at National Bank of Canada, adding that November’s showing was the first decline since “a brief correction” in September, October and November of 2010.

On an annual basis, though, prices were up across the board, though varied depending on the city. Toronto, at 10.8 per cent, and Vancouver, at 9.1 per cent, led the pack, followed by Winnipeg (7.5 per cent), Montreal (7.2 per cent), Quebec City (6 per cent), Hamilton (4.4 per cent), Ottawa (4.2 per cent), Halifax (2.8 per cent), Hamilton (1 per cent) and Calgary (0.5 per cent).

Many economists see Canada’s real estate market cooling, and, like most, Mr. Pinsonneualt doesn’t expect a collapse.

“The current period of softness in house prices follows a few months of above-normal increases,” he said.

“This is the same pattern as the one that occurred from April, 2010, to November, 2010 … which ended in a limited price correction,” he said in a report outlining the index.

“For sure, according to the Canadian Real Estate Association, the national existing-home market finished 2011 in balanced conditions … Therefore, fears that the current trend will degenerate into a sudden and huge price correction similar to the one that occurred in the U.S. .. are premature, especially with mortgage rates at their lowest level on record. Given such low rates, we are pleased to see that home sales have increased rather moderately lately, suggesting that households do care about their debt level. In our view, the performance of the Canadian labour market does not herald a protracted period of substantial house price declines.”

Fed to hold tight through late 2014
The Federal Reserve signalled today that it expects to hold its key rate near zero until late 2014, marking a stunning extended period of emergency lows.

“Clearly, the Fed will do whatever it takes to reboot economic activity, particularly housing,” said Sherry Cooper, chief economist at BMO Nesbitt Burns. “Now, let’s see if the ECB will have the guts to follow suit.”

The Federal Open Market Committee, the central bank’s policy-setting panel, held its rate steady today, as expected, and said the economy has expanded modestly despite the slowdown in global growth, The Globe and Mail’s Kevin Carmichael reports from Washington.

“While indicators point to some further improvement in overall labour market conditions, the unemployment rate remains elevated,” the Fed said in its statement.

“Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed.”

The Fed’s actions show it hasn’t seen anywhere near of the improvement in the economy that it wants. Its biggest concerns are jobs, housing and overall growth, said senior currency strategist Camilla Sutton of Scotia Capital, and “they’re potentially failing on all three.”

Here’s the key line from the Fed statement: “In particular, the committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

That changes the timeline from mid-2013, and pushed the Canadian dollar up as the U.S. currency weakened and on further suggestions that the Bank of Canada will act on rates before the Fed moves.

“Markets had anticipated that the Fed would shift the timing into 2014, which is consistent with our own call for no hikes through at least 2013, but we will get more detail later today when it releases individual FOMC views on the appropriate start time and pace for hikes,” said chief economist Avery Shenfeld of CIBC World Markets.

Michael Babad – The Globe and Mail