Canada Not in Recession... Yet

By Dr. Peter Andersen

We advise Canadian home builders and renovators to play it safe. This is not the time to go out on a limb with expansion plans and big financial commitments. The U.S. recession may be more serious than we would like to think. Canada is bound to feel the impact of even a moderate U.S. recession.

The basic problem of collapsing U.S. home prices and mortgage defaults and foreclosures could continue to worsen. Instead of just a two-quarter U.S. recession ending in the summer of 2008, it could return in 2009 after the temporary boost from the 2008 stimulus package ends.

The U.S. economy slipped into a recession at the end of 2007. Employment is declining and consumer confidence has crashed. Companies are trimming both payrolls and capital spending plans. U.S. real GDP will probably show two consecutive declines in the first and second quarters of this year.

This is bad news for Canada's export-dependent economy and for Ontario in particular. Canadian exports were already declining before the U.S. recession began and we can expect much weaker export performance through the spring and summer. The economic indicators for Canada are still generally positive but it would be a mistake to think that Canada's economy, and its housing and renovation sectors, would be immune to the U.S. downturn.

There has been an unprecedented amount of monetary and fiscal stimulus. Under Chairman Bernanke, the Fed has cut interest rates much more aggressively than it ever did under the leadership of Alan Greenspan. Additional rate cuts are expected. In addition, the U.S. Congress responded very quickly with a $150 billion stimulus package, which could get the U.S. economy growing at around a 3.0 per cent rate in the third and fourth quarters of this year.

U.S. Recession Continues
The economic and financial outlook has continued to worsen despite Fed rate cuts. The fiscal stimulus is a one-time effort that will wear off by early 2009. There will have to be some innovative policy moves this year by the U.S. Government, something like another Resolution Trust Corporation, to bail out both mortgaged homeowners and mortgage investors, and to calm the financial market crisis.

It will be threatened by the possible spread of financial stress from sub-prime mortgages through to consumer debt, bond insurers, commercial real estate loans, corporate debt, hedge funds and private equity debt. The sustainability question will be particularly important for Canada, as we could have enough momentum to sustain growth through to mid-2008 but not enough to last through next year.

Bank of Canada Governor Mark Carney has chosen a particularly difficult time to start his new job. The U.S. economy is in a recession but Canada is not there yet. He was willing to make a 50 basis point interest rate cut on March 4, even though Canada's job market is still tight and wage inflation is at a high level.

Employment increased by 46,000 in Canada in January and the unemployment rate slipped again to a 33-year low of 5.8 per cent. Wage inflation is running around close to 5.0 per cent. Nonetheless, Governor Carney has indicated that he will cut rates further. This must mean that he sees serious threats to Canada's financial system.

Monetary policy easing is good news for mortgage rates, which are coming down. Bank of Canada rate cuts will directly affect six-month and one-year mortgage rates. Variable mortgage rates are coming down as well. The open five-year variable rate is now down to 4.50 per cent on a discounted basis.

The longer-term mortgage rates will move with comparable bond yields. They are moving lower as evidence of a U.S. economic downturn accumulates. The benchmark 10-year Government of Canada bond yield is down by about 70 basis points from last September to a current level of around 3.65 per cent. Canadian banks will be willing to lend to home buyers. This will contrast with the U.S., where the availability of mortgage credit has dried up, even for prime credits.

Starts Forecast to Decline
The resale market is always a good indicator new home market conditions. January resales were below the pace of January 2007, signaling that housing demand is moderating. New listings are up sharply, suggesting that vendors sense a turn in the market and want to sell while conditions are still generally favourable.

House prices give a completely different message in Canada compared to the U.S. The average Canadian new house price edged higher between December and January and stands 6.2 per cent above January of 2007. However, the big run-up in prices seems to be over.

Forecasts for Canadian starts point to a down year in 2008. Projected declines range from seven to 14 per cent. In recent years, however, forecasts for Canadian housing starts have tended to be too low. The actual numbers consistently exceeded earlier forecasts. Our forecast of 198,000 starts in 2008, at the lower end of the forecasting range, is based on our view that the U.S. recession will have an impact on confidence in Canada.

The overall Canadian economy could avoid the U.S. recession that has just begun. However, Ontario is the most exposed and we expect housing starts there to show another significant decline in 2008. Hopefully we are wrong. However, new home builders should be aware of the risk.

Paint and Primer

When it comes to painting, I like working with latex better than oil-based paints. The main reason for this is that clean up is very easy...a little soap and water are all you need to clean your equipment. This month, we will take a closer look at latex paints, with a look at oil-based paint next month.

Latex paint usually comes in a flat finish, but a semigloss finish is also available. With a drying time of about 2 hours, you can easily put on two coats in a single day (as long as the job isn't too big.) I picked up a good trick sometime ago for cutting down on the odor of latex paints you use indoors. Mix a couple of tablespoons of vanilla extract into the paint.

Brushes and rollers should be of man made material. The paint doesn't soak into the material and they clean up faster and easier.

Exterior latex paints keep their color longer than oil-based paints because of a resin coating that forms over the paint. The colors will usually change quite a bit when this coating wears off though. Exterior latex paints also "breathe", letting moisture escape through the painted surface.

Finally, because latex paint sticks to the surface of what you paint without soaking into it, surface preparation is more important than with oil-based paints. You will want your walls to be as clean and dust free as you can get them. Stains should be primed with a stain sealing primer, since they can bleed through the finished paint.

Home Stars

Too many people get screwed when it comes to finding the right contractor, so its nice to find people who want to help! Those people are the kind staff of HomeStars.com. The site offers thousands of real homeowner reviews (the good and the bad) of local home improvement companies from tile installers to architects. The site has been around for a couple of years and they are now taking the plunge and letting anyone in North America join the conversation.

Here is some background information about Home Stars and the people behind it:

Home renovation is all too often an agonizing process of unanswered questions, unknown vendors, mounting expenses, and empty promises.

People feel strongly about “home”. Whether it’s a botched electrical job, an unclear contract, or a wonderful new bedroom design coming to fruition, emotions tend to run high.
Increasingly, consumers fill the information void by going online, replacing emotion with facts and advice, lessening their uncertainty and apprehension through sharing with peers and the relevant community. Sometimes, that process leads to making great new contacts. Sometimes, it turns into a new career!

Nancy Peterson, founder and President of HomeStars, learned about the limitations of traditional word-of-mouth when she planned an extensive reno. The goal: take a relatively ordinary home on a beautiful, treed lot in a prime neighborhood, and transform it to its fullest potential. Like you, Nancy sets her standards high.

As the workload of tracking down and finding appropriate contractors mounted, Nancy thought: if only I could have tapped into a huge database of information that was as trustworthy as some of the great word-of-mouth offered by my friends and neighbors!

A little later, Andrew Goodman (an online marketing expert by trade) came on board with enough ideas for the growth of the HomeStars community (be careful what you wish for!) that he found himself wearing co-founder shoes (size 9). Andrew is currently known as Chief Strategy Officer.

HomeStars succeeded beyond our expectations in Toronto, our hometown. Homeowners are quickly finding information about home improvement that just isn’t available anywhere else.
Together, Nancy and Andrew (and Jodi, Cathy, and other team members, family and friends) decided that the plan had to be to share HomeStars with as many cities as possible. So the city rollout plan was born, and is currently in progress. As they say, coming soon to your city!

This is a very useful website and we recomend it to all our readers:
http://www.homestars.com/

Utilize Existing Space With a Basement Renovation

When most homeowners are considering a home improvement project, many times it is to add additional living space to the home. Many homeowners also have financial constraints when planning a remodeling project. A good solution is to consider a basement renovation.

Utilize Existing Space

By utilizing a well-planned basement home improvement, space that is already available can be optimized without the enormous expense of constructing a new addition to the home.

Every successful basement remodeling project begins with a detailed plan. It is advisable to enlist the services of either an architect or remodeling design specialist. It is important to measure the basement and come up with a set of drawings for the project; both designer and homeowner should have input to the design.
Special Considerations

Basements come with special considerations for incorporating them into the available living space offered by the home. Basements are prone to water and humidity problems. If there is a history of such problems they must be addressed in the renovation design.

If mold has been a problem, it must be treated with a microbial agentand then be removed. There are special mold inhibitor paints available that yield excellent results in preventing a re-occurrence, with a single application. Adding adequate basement ventilation in the renovation design plans will help control excess humidity.

Basements also commonly contain the heating, plumbing, electrical and load bearing systems for the entire home. A successful renovation plan will usually hide components such as plumbing or furnace ducts, but will provide access to them, should it become necessary.

If the design includes adding plumbing for a new bathroom, existing concrete slabs sometimes pose a problem. If any concrete must be broken to add plumbing, be sure to include that aspect of the project in the plans.

When planning the basement renovation project, it is important to be thorough and to make sure it is exactly the way you want it before work begins. Desired or necessary changes should be made on paper, not in mid-construction. Plans should include specific details about materials, fixtures, exact cost, and project completion timelines.

Selecting a Contractor

Once you have the final detailed plans, it is time to start the selection process for a contractor. Exact duplicates of the plan should be furnished to all potential candidates to insure an accurate bid from each.

Ask each candidate for licensing and insurance credentials, as well as references from projects similar to yours. Take the time to ask other homeowners about the contractor’s performance on their projects.

Typical Wattages at a Glance

Home Appliance Energy Usage Comparisons

Appliance Vacuum cleaner Computer, printer Computer monitor Dishwasher Dryer, clothes Refrigerator, frostless Heater, space

Energy Usage 250-800 125-200 300 1,080-1,800 5,600-9,000 960-1,200 1,000-1,500

Appliance Lamps, incandescent Lamps, halogen Microwave oven Mixer, portable Stove Toaster Trash compactor

Energy Usage 25-200 20-50 975-1,575 150 8,000-15,000 800-1,600 1,250

Brick house

A brick house can resist damage from windstorms. Brick is simply much more durable than wood, vinyl or other sidings. Cement stucco, concrete block and stone houses also perform well in windstorms.

I live in the Midwest and my daughter lives on the coast of the Florida panhandle. Her house is constructed with concrete block and it leaked like a sieve during last year's hurricanes. I am getting ready to build a new home and wonder what is the best type of exterior skin I can use to resist water, hail, and wind damage. Brick seems like a good idea, but the leaks my daughter experienced make me a little uncomfortable about building with masonry. What would you do?

Read more

Professional Renovation and Décor

Professional Renovation and Décor is a publication solely dedicated to renovation and home improvement.

Professional Renovation and Décor offers advertisers the opportunity to deliver messages to consumers at a time when consumers are making the biggest purchases of their lives - or remodeling, redecorating and maintaining their most important assets.

Professional Renovation and Décor magazine allows for precise targeting of the desired audience. We will direct your campaign to the specific market you wish to reach. Our readers are passionate about home renovation and are more likely to be drawn to your add than average newspaper readers.