I only do this once in a while but for fun I will set off some predictions of where I think things will shake out in the coming months.

Recession Recovery:

The bank of Canada announced yesterday that they are dropping the bank rate by a further .25%.  The best part of all they said they will keep it at this level until June 2010!  The markets certainly will like this commitment. The bank of Canada also downgraded it’s forecast on the GDP for Canada for 2009 and 2010.  No surprise that everyone is forecasting 2010 to be a positive increase in GDP which would therefore be by definition the end of the recession.

Keep in mind what needs to happen is increased consumer spending, which is starting to happen.  We will start to see improvements in the economy for certain by next quarter and will feel the full effects of recovery s we enter 2010, we will not have to wait until well into 2010.

Housing Market:

Locally the housing market has already started to show excellent signs of recovery, and there is many indicators proving that we are certainly at or near the bottom of the recent 12 month decline in prices.  Couple the significant reduction in home prices with the histrically low “emergency rate” environment and we are set up for a continued stability in the Calgary real estate market. We will be fully in a balanced market by the time the April statistics are realeased.  As far as price appreciation goes, we will likely only see very moderate if at all price increases for the balance of 2009, which quite frankly is a good thing.  Remember what happens when prices rise to fast and affordability gets in the way?

Oil Prices:

China will lead the globe out of this recession.  Why?  Well for one they do not have to pass their stimulus plans through congress, or get support from any other country.  For a second thing they are the only major economy in the world with major cash reserves, and consequently very low debt.

So what will happen when China rises from the ashes?  The demand for commodities will soar.  This will start to really gather steam in 2010.  The challenge for the global economy is this significant rise in demand from China, coupled with the increased demand from the US as they recover will NOT be matched by an equivalent increase in supply, mainly in the energy sector where future capacity is being reduced at an alarming rate.  This will FOR CERTAIN lead to higher oil prices in the future.  Of course this is good for Alberta in general but most specifically for jobs to be created again, and a significant rop in unemployment in Alberta.  in 2010 Alberta will once again have the lowest unemployment in Canada.

A wild card prediction will be an increased in inter-provincial migration again for Alberta as many people who are losing their jobs in the East may once again flock to the west.  Saskatchewan, and BC will likely benefit from this as well.  If this comes to fruition then look for increased demand on housing again, and this may put upward pressure on prices depending on how supply responds to this potential increase in demand.

Mortgage Rates:

We have already seen what the bank of Canada has said for the prime lending rate which influences the variable mortgage rate.  But what about fixed rates which fell once again this week to an unheard of level of 3.69% for a five year fixed rate?  I would say through the all important spring market look for further reductions in interest rates as lenders jockey for their share of the reduced market.  The spreads on fixed rates is still historically high which means lenders have room to offer “specials” and they will continue to do that.  As well many lenders who are struggling with early refinances of their mortgages ave to replace those mortgages back in their pools to the investors and thus will be in a panic situation at times and will offer very low rates especially in a “quick-close” situation where your mortgage will close in less then 30 days.

All eyes are on the US economy again right now.  Rightfully so.  Before people criticize that we should not be following the US economy but rather our own should know that we can not exit this recession ahead of the US, we will follow them out.

The stock market seems to be taking some solace from “less negative” news.

• Consumer spending is improving.  Households are still cautious BUT this important indicator is no longer retrenching
• Car sales actually improved last month.  Certainly lower energy costs are contributing here, after all US households currently spend only 1/3 of what they spent on energy just last summer
• The all important statistic of housing cost as a share of household income has fallen to it’s lowest level EVER.  This is a sure sign that the bottom of the real estate nosedive is near.
• Overall inventory of homes for sale in the US are now at the long term average, signs that the market is certainly balancing

In Canada our affordability index is also at historic levels.  We really get the sense that if people don’t buy in the coming months of 2009 they will definitely want to kick themselves.