Why CIBC sees a double-dip in U.S. real estate prices – The Globe and Mail

Why CIBC sees a double-dip in U.S. real estate prices

Foreclosed property

Foreclosed property Justin Sullivan/Getty Images

Plus, what the Toyota recall could cost. Economists tell Jim Flaherty economy is stronger than expected. And, Suncor misses estimates

Globe and Mail Update

Today’s top stories from Report on Business :

Economists see stronger rebound

Top private economists have told Finance Minister Jim Flaherty the economy is rebounding more strongly and the labour market faring better than previously believed. Mr. Flaherty met with several economists in Ottawa today in advance of his March budget. The finance minister said that while his next budget will detail Ottawa’s plan for eventually balancing its financing, the government doesn’t plan to significantly pull back on spending until the recovery takes hold. “While there have been encouraging signs in recent months that the economy continues to stabilize, the global economy remains fragile,” Mr. Flaherty said. Read the story

What the Toyota recall could cost

The massive recall and production shutdown launched by Toyota Motor Corp. (TM-N71.62-1.87-2.54%) is expected to cost the embattled auto maker hundreds of millions of dollars and hit global sales. While a Toyota official in Japan said today it was too early to peg the cost of the recall, which involves millions of vehicles, UBS auto analyst Tasuo Yoshida told the Associated Press it will probably be about $900-million (U.S.), with lost sales adding a further $155-million a week. Toyota today also releases January sales numbers for Canada and the United States that are expected to show a hefty impact. In Canada, the auto maker is expected to report that sales in January fell 13 per cent year over year. “The sales forecast is something that we’re extremely worried about,” Toyota’s executive vice-president, Shinichi Sasaki, told reporters.

Separately, Toyota Canada Inc. said its sales fell 10 per cent last month in the wake of a freeze in sales on its most popular vehicles after the recall because of sticky accelerator pedals. A 15-per-cent drop in sales of Toyota brand vehicles was offset by a 62-per-cent jump in cars and trucks sold by its luxury Lexus brand, Toyota said Tuesday. Sales of Corolla, the auto maker’s most popular car in Canada, fell 38 per cent from year-earlier levels. Corolla deliveries to customers were halted last Wednesday and are expected to resume this weekend. Toyota said its U.S. sales fell 16 per cent last month from year-earlier levels.

Honda sold 6,393 vehicles in January, down from 7,559, according to data compiled by DesRosiers Automotive Consultants.

Among the Detroit Three, General Motors sold 14,817 vehicles last month, up 4.7 per cent. GM took first place in terms of market share, producing 18.2 per cent of the vehicles sold in Canada.

Ford saw a 5.9 per cent boost in sales to 11,540. The only one of the North American auto makers to avoid bankruptcy protection and a government bailout garnered 14.1 per cent of the market. Chrysler sold 11,847 vehicles, up 6.1 per cent.

Hyundai saw its best January ever, selling 6,084 vehicles to claim 7.5 per cent of the market, only slightly below Honda’s 7.8 per cent. Hyundai’s sales were up 32.1 per cent from a year earlier. Read the story

CIBC warns of double-dip in U.S. house prices

CIBC World Markets warned today of a double-dip in U.S. house prices, where the troubles all began. The U.S. economy is healing but a full recovery in the battered real estate market is years away, economists Benjamin Tal and Meny Grauman said in a report that projects American home prices could see prices drop again by 5 per cent to 10 per cent. While most indicators have stabilized, they wrote, that is a sign of a “badly damaged” market and the distortions of temporary tax measures, and they forecast further weakness as supply outstrips demand, mortgage rates rise and the government’s tax credit expires. This, they added, has “significant implications” for related stocks that have priced in a steady recovery in the market.

“The risk of a double-dip in U.S. home prices is not simply the result of properties being sold at ‘fire-sale’ valuations, but also due to a deluge of shadow inventory coming onto the market. Although conventional inventories are trending lower, shadow inventories, capturing seriously delinquent and bank-owned properties, are just as large.”

Mr. Tal and Mr. Grauman noted that almost 2 million U.S. mortgages are more than 90 days delinquent, and most will end in a foreclosure. Some 2.3 million properties are already in foreclosure or seized by banks, they said, also warning of a record number of unemployed and the fact that some 10 million households are in a negative home equity position of more than 20 per cent.

Australia holds rates steady

China’s decision to start pulling back on emergency measures is beginning to affect other economies in more concrete ways. Australia’s central bank today decided to hold interest rates steady, which was something of a shocker given the widespread expectations of another hike. The Reserve Bank of Australia cited several developments, among them that “Chinese authorities are now seeking to reduce the degree of stimulus to their economy.” The Australian dollar sank in response, given that markets had expected the central bank would boost its benchmark rate by another quarter of a percentage point to 4 per cent, though economists see the move as a pause in its tightening, rather than an abrupt halt.

Suncor misses analysts’ estimates

Suncor Energy Inc. (SU-T31.83-0.85-2.60%) said this morning it rebounded to a fourth-quarter profit of $457-million or 29 cents a share, from a loss of $215-million or 24 cents a year earlier. Operating earnings in the quarter surged to $323-million from $14-million, largely on gains from its blockbuster takeover of Petro-Canada, but UBS Securities Canada, keeping its “buy” rating on the stock, noted that was well below expectations. It marked the first full quarter for Canada’s biggest energy concern since the merger. “This is the first quarter of the merged company, and I think there were a lot of housecleaning things and accounting changes that impacted what they reported,” Terry Peters, an analyst at Canaccord Capital Corp. in Toronto, told Bloomberg News. Read the story

BP projects depressed gas prices

The chief executive of BP PLC projects natural gas prices in the United States and Europe will probably stay depressed, and experience continued volatility, for three to four years. Tony Hayward said today that would be due not only to reduced demand but also to higher output of shale gas and liquefied natural gas. BP shares sank this morning after the energy giant, Europe’s biggest, reported sharply higher profit but missed analysts’ estimates, particularly on refining. “They have disappointed relative to some reasonably high expectations,” one money manager told Bloomberg News. “What’s really disappointing is the refining business, which has struggled.”

OECD urges continued China spending

The OECD today urged China to run a deficit and allow its currency to rise. The Organization for Economic Co-operation and Development, in the second study of China that it has done, projected its economy would surge 10.2 per cent this year, though inflation would remain tame. But keeping domestic demand strong will require a continued deficit, it said. “China is in an enviable position that it is able to step up social and economic reforms in the context of a rapidly growing economy,” OECD chief economist Pier Carlo Padoan told reporters in Beijing. Read the story

CNOOC forges ahead

CNOOC Ltd., China’s largest offshore oil and gas company, is moving aggressively to boost production amid rising demand. The energy giant projected in a forecast today it will increase oil and natural gas production by between 22 per cent and 27 per cent this year, while bumping up capital spending by 30 per cent. China’s economy is booming, and demand is surging. Analysts said the company’s projection for up to 290 million barrels of oil equivalent is a lofty one. “That’s a staggering production forecast after a standout 2009,” CLSA Asia Pacific Markets analyst David Hewitt told Bloomberg News. “CNOOC management is delivering on a global scale.”

Posted via web from Toronto Real Estate News | Blog


About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

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