It has been quite the week in the stock market world. If you have not been following the action, the past week has been scary as the meltdown was happening. Believe it or not, it affects all of us whether you have a pension, investments, a job or even a house. Here is why the current market downward spiral affects us Canadians…
World economy is slowing. We are so interconnected today that a slowdown in China effects resources here which eventually affects the job market.
Prices of commodities are falling fast. There is no better example than oil. As prices have dropped, layoffs have begun in Alberta. This has had an effect on steel pipes which now affects Hamilton, Ontario. There is huge inventory in steel and prices are dropping but no one is buying.
Local growth will be affected as well since banks, investment companies and venture funds will be scared to lend.This has local companies not expanding and not hiring.
Our Canadian dollar is falling in value. This makes imports more expensive. Our food prices such as bananas and oranges will be much higher at the grocery store. So will your next trip down south. Our dollar has many reasons as to why it is falling. However, the main catalysts are the strength of the U.S Dollar and the price of commodities.
So what happens to our housing sector? This is something that we will be monitoring here at Robert Floris’ Mortgage Architects office. Just today, one of Canada’s big banks (National Bank) are predicting that the Bank of Canada will again lower its overnight lending rate. This is good news for Canadians who have mortgages with the already low variable rates.
This is also signalling that our economy is shaky. As indicated in other articles, I really believe that the Hamilton housing market will come out without the damage that other cities would if there were a recession. Our prices in Hamilton are relatively low and we could basically not rent for any more. High priced homes including Hamilton and the GTA should be wary. If a recession should occur, it is my belief that these areas would be hurt the most. Jobs would be scarce and paying for large homes would certainly affect households.
As for now, we can only smile. Since the great recession of 2008, home prices have only gone up. Let’s continue to wish this good fortune for Canada and for it’s housing which contributes so much to the economy.
Robert Floris is an independent mortgage broker at Mortgage Architects in Hamilton, Ontario.