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Bankers disagree on housing bubble 2:59
The average price of a Canadian home increased 10.4 per cent to $389,119 in December, compared to the same month in 2012.
The Canadian Real Estate Association (CREA) released data Wednesday showing that a total of 457,893 homes changed hands in Canada last year, an increase of about 0.8 per cent from 2012’s level.
“Absent further mortgage rule changes,” CREA’s chief economist Gregory Klump said, “sales in 2014 may surpass the annual total for 2013 if demand holds steady near current levels as strengthening economic and better job growth offset the impact of further expected marginal mortgage interest rate increases.”
As has been the case for some time now, CREA says the large jump in prices was largely due to what was happening in Canada’s most active and expensive markets.
Sales activity in December 2012 in Toronto and Vancouver was abnormally low, which dropped the national average at that time.
“Removing Greater Vancouver and Greater Toronto from national average price calculations cuts the year-over-year increase to 4.6 per cent,” CREA said.
CREA says the average price can be misleading, as it can be too easily influenced by individual factors.
The realtor group says its MLS Home Price Index “provides a better gauge of price trends because it is not affected by changes in the mix of sales activity the way that average price is.”
That index shows home prices rose 4.31 per cent over the past 12 months. Gains were seen in all housing types.
The index was led by an 8.7 per cent gain in Calgary and a 6.3 per cent gain in Toronto.
Vancouver’s market index posted a second straight increase of 2.13 per cent after declines for much of the time between late 2012 and late 2013.
Is the U.S. consumer tapped out? If so, how in the world will the U.S. economy possibly improve in 2014? Most Americans know that the U.S. economy is heavily dependent on consumer spending. If average Americans are not out there spending money, the economy tends not to do very well. Unfortunately, retail sales during the holiday season appear to be quite disappointing and the middle class continues to deeply struggle. And for a whole bunch of reasons things are likely going to be even tougher in 2014. Families are going to have less money in their pockets to spend thanks to much higher health insurance premiums under Obamacare, a wide variety of tax increases, higher interest rates on debt, and cuts in government welfare programs. The short-lived bubble of false prosperity that we have been enjoying for the last couple of years is rapidly coming to an end, and 2014 certainly promises to be a very “interesting year”.
Obamacare Rate Shock
Most middle class families are just scraping by from month to month these days.
Unfortunately for them, millions of those families are now being hit with massive health insurance rate increases.
In a previous article, I discussed how one study found that health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare.
Most middle class families simply cannot afford that.
Earlier today, I got an email from a reader that was paying $478 a month for health insurance for his family but has now received a letter informing him that his rate is going up to $1,150 a month.
Millions of families are receiving letters just like that. And to say that these rate increases are a “surprise” to most people would be a massive understatement. Even people that work in the financial industryare shocked at how high these premiums are turning out to be…
Since Americans are going to have to pay much more for health insurance, that is going to remove a huge amount of discretionary spending from the economy, and that will not be good news for retailers.
Get Ready For Higher Taxes
When you raise taxes, you reduce the amount of money that people have in their pockets to spend.
Sadly, that is exactly what is happening.
This tax season, millions of families are going to find out that they have much higher tax bills than they had anticipated.
If you are a worker, you might want to check out the chart that I have posted below to see where you stack up. In America today, most workers are low income workers. These numbers come from a recentHuffington Post article…
It is important to keep in mind that those numbers are for the employment income of individuals not households. Most households have more than one member working, so overall household incomes are significantly higher than these numbers.
Higher Interest Rates Mean Larger Debt Payments
On Tuesday, the yield on 10 year U.S. Treasuries rose to 3.03 percent. I warned that this would happen once the taper started, and this is just the beginning. Interest rates are likely to steadily rise throughout 2014.
The reason why the yield on 10 year U.S. Treasuries is such a critical number is because mortgage rates and thousands of other interest rates throughout our economy are heavily influenced by that number.
So big changes are on the way. As a recent CNBC article declared, the era of low mortgage rates is officially over…
Needless to say, this is going to deeply affect the real estate market. AsMac Slavo recently noted, numbers are already starting to drop precipitously…
And U.S. consumers can expect interest rates on all kinds of loans to start rising. That is going to mean higher debt payments, and therefore less money for consumers to spend into the economy.
Government Benefit Cuts
Well, if the middle class is going to have less money to spend, perhaps other Americans can pick up the slack.
Or maybe not.
You certainly can’t expect the poor to stimulate the economy. As I mentioned yesterday, it is being projected that up to 5 million unemployed Americans could lose their unemployment benefits by the end of 2014, and 47 million Americans recently had their food stamp benefits reduced.
So the poor will also have less money to spend in 2014.
The Wealthy Save The Day?
Perhaps the stock market will continue to soar in 2014 and the wealthy will spend so much that it will make up for all the rest of us.
You can believe that if you want, but the truth is that there are a whole host of signs that the days of this irrational stock market bubble are numbered. The following is an excerpt from one of my recent articles entitled “The Stock Market Has Officially Entered Crazytown Territory“…
If the stock market bubble does burst, the wealthy will also have less money to spend into the economy in 2014.
For the moment, the stock market has been rallying. This is typical for the month of December. You see, the truth is that investors generally don’t want to sell stocks in December because they want to put off paying taxes on the profits.
If stocks are sold before the end of the year, the profits go on the 2013 tax return.
If stocks are sold a few days from now, the profits go on the 2014 tax return.
It is only human nature to want to delay pain for as long as possible.
Expect to see some selling in January. Many investors are very eager to start taking profits, but they wanted to wait until the holidays were over to do so.
So what do you think is coming up in 2014? Please feel free to share what you think by posting a comment below…
Our grandparents believed in the value of thrift, but many of their grandchildren don’t.
That’s because cultural and economic values have changed dramatically over the last generations as political and media elites have convinced many Americans that saving is passé. So today, under the influence of Keynesian economists who champion government spending and high levels of consumption, thrift has been devalued.
“The growth in wealth, so far from being dependent on the abstinence [savings] of the rich, as is commonly supposed, is more likely to be impeded by it,” according to John Maynard Keynes’s The General Theory of Employment, Interest and Money.
“The more virtuous we are, the more determinedly thrifty, the more obstinately orthodox in our national and personal finance, the more incomes will have to fall,” he writes. “Saving,” Keynes wrote in his Treatise on Money, “is the act of the individual consumer and consists in the negative act of refraining from spending the whole of his current income on consumption.”…
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