Welcome to a new economic cycle

Canada's industrial engine is sputtering. The rest of the economy is purring. How did it happen?
HEATHER SCOFFIELD reports from Windsor.

"WINDSOR, ONT. -- The people of Windsor are fond of saying that when it comes to slowdowns, their city is first in, first out."

""This always happens in Windsor. We feel it first. We're a barometer of where the economy is really going," says Gary Parent, president of the Windsor and District Labour Council."

"Windsor's unemployment rate is nearly in the double digits."

"Companies, especially manufacturers, are shutting their doors or treading a fine line of solvency. The bingo halls have turned out the lights. Charity money is drying up. The food bank is busier than ever."

"And houses are going up for sale so fast prices are actually falling." Full Article.

Housing market fallout

HSBC says profit will be hit by soaring sub-prime home-mortgage defaults
Duncan Mavin, Financial Post, with files from news services
Published: Friday, February 09, 2007

"HSBC Holdings PLC, one of the world's largest banks, is sounding alarm bells over the slowing U.S. housing market, saying its profits will be hit by soaring home-loan defaults from the sector's riskiest mortgage borrowers."

"The bank is warning that it has been forced to hike its total provision for bad loans by 20% because of defaults by sub-prime borrowers in the United States, where house-price growth is stalling."

""The impact of slowing house price growth is being reflected in accelerated delinquency trends across the U.S. sub-prime mortgage market, particularly in the more recent loans, as the absence of equity appreciation is reducing refinancing options," the U.K.- based bank said on Tuesday." Full Article.

New house prices flat in December, Inventory being added. - Canada.

"Of the 21 cities included in the new housing price index, Calgary showed a November-to-December decrease in prices of 0.5 per cent, while Victoria had a decline of 0.4 per cent."

"The drops were attributed mainly to a moderating market. Calgary and Victoria had been among the most heated real estate markets over the past several years."

"December prices for new homes in Sudbury, Thunder Bay, Windsor, St. Catharines–Niagara, Saint John, Fredericton and Moncton were also down from November."

Starts higher

"While prices at the end of 2006 showed signs of flatness, 2007 housing starts got off to a good beginning, Canada Mortgage and Housing Corp. said."

"January starts across the country came in at a seasonally adjusted annual rate of 249,300, CMHC said. That was up from 212,600 in December."

"Starts of urban multiple units, such as condominiums, shot up 31.4 per cent to 124,300 units.
"The volatile multiples segment bounced back in January, accounting for most of the growth this month," said Bob Dugan, chief economist at CMHC’s market analysis centre."

"Urban single starts jumped 5.9 per cent to 92,000 units" Full Article.

Toll, Centex, Lennar Join `Moron' Speculators in Land Grab Bust

"Feb. 7 (Bloomberg) -- Brian Tuttle owns so much land that he paid $3.6 million to get rid of 125 acres ready for development in the middle of Florida's Palm Beach County. "

"``In 2005, I was a brain surgeon, and in 2006, I was a moron,'' said Tuttle, who walked away from his deposit on the land rather than lose even more money buying it and building homes on it. ``The only good news is that I'm not alone.'' "

"The worst housing slump in 16 years made a lot of smart money vanish. D.R. Horton Inc., Pulte Homes Inc., Lennar Corp., Centex Corp. and Toll Brothers Inc., the five biggest U.S. homebuilders, said plummeting land prices cost them a combined $1.47 billion in the fourth quarter. " Full Article.

Housing Prices Down, Listings Up - Lower Mainland.

Home Buyer's Market Sets In
By Jeff NagelBlack PressFeb 06 2007

"Lower Mainland home sales were down again in January, while real estate listings were up and prices tended to either hold steady or sag. "

"New statistics released for last month by area realtor groups continue the recent trend of softening home prices and less of the frantic buying pace seen up until last summer. "

"The average length of time to sell a home climbed from 49 days a year ago to 58 days last month, the Real Estate Board of Greater Vancouver reported. "

"New listings were 17 per cent higher than a year ago in Greater Vancouver and 14 per cent higher in the Fraser Valley. Sales in January dropped 6 per cent and 14 per cent, respectively. "

"A typical detached house in Greater Vancouver sold for $641,600 in January – down from $643,800 in December and off from a peak of around $650,000 last fall. The benchmark price is still up 13.5 per cent from a year ago. "

"Typical attached homes and apartments edged up slightly to $411,500 and $332,500 respectively. "

"The Fraser Valley Real Estate Board said median prices for detached homes dipped to $450,000 from $455,000 in December. That figure is still up nearly 13 per cent from a year ago. "

"Median apartment prices in the valley edged up 0.5 per cent from December to $190,000 and median townhomes climbed 4.7 per cent to $300,000. " Link.

CMHC is warning a record housing bull market has already peaked, and we're now slipping into a bearish trend.

Borrowing is only going to get tougher
By LINDA LEATHERDALE, MONEY EDITOR

"How many times do I have to warn -- debt is Public Enemy No. 1?"

"Well, here's another warning for overly-indebted Canadians, who keep spending more than they earn, with the ratio of debt to personal disposable income now at a staggering 122%.
Borrowing against home equity to keep creditors happy is going to get tougher, if a new forecast by Canada Mortgage and Housing Corp. is right. "

"CMHC is warning a record housing bull market has already peaked, and we're now slipping into a bearish trend. Now, let me be clear: CMHC is not predicting a crash. But we are heading into a slowdown, especially in Ontario where the automotive, forestry and manufacturing sectors have taken a hit -- and that means home price gains will slow, too. "

"In fact, in some cities, like Windsor, prices may even fall. " Full Article.

Prediction: More pain for homeowners - US

A glut of almost 1 million homes sitting vacant may mean another downturn in the housing market, analysts say.
February 5 2007: 12:26 PM EST

"CHICAGO (Reuters) -- A glut of vacant homes suggests that the U.S. housing market has not yet stabilized and may be poised for another downturn, Merrill Lynch said in a research note released Monday."

"Now that oil prices and mortgage rates have stopped falling, we will be back lamenting the downturn in the housing market and its spreading effects on the economy in the second quarter, much as we were in the summer and fall 2006," Merrill Lynch economist David Rosenberg wrote."

"Looking at the inventory backlog and still-stretched affordability levels, this story is far from over." Full Article.