Mark Carney on Thursday was live on BNN and gave some unexpected news, and even more unexpected advice on mortgages for Canadians.  Watch the video here

Here are some highlights:

• Carney effectively is calling the recession OVER
• He expects the economy to start growing, albeit very slowly, this quarter.
• We will end the year with a contraction of 2%
• He warned we will still have a long road ahead, in other words there will not be blazing growth until well past 2010 and into 2011
• If he is right although this recession was particularly nasty in places it only lasted three quarters which is one of the shortest downturns in history
• According to Mr. Carney the US economy is also at it’s trough.  Due to our strong trade relationship as their economy sputters up our exporters stand to gain, even with a strong dollar.  Increased business is better then no business I guess
• A stronger Canadian dollar could put a damper on inflation and unfortunately also keep the economic recovery slower and more prolonged.

As for his advice for Canadians considering the decision between variable and fixed, when asked directly by a reporter what his advice would be he commented as follows

• He reminded that he has a “conditional commitment” to keep the bank rate at .25% until mid 2010. Hint: variable is still a good bet
• He cautioned as I have been very often about Canadians being sure they can afford renewals of their mortgages when interest rates reach a more normal level in the years ahead as we climb out of these emergency times.

Remember to talk to one of our agents about our inflation hedge mortgage strategy

I just read a blog from a colleague in the Mortgage industry, Rowan Smith from Vancouver.

Rowan does an excellent job of showing the data and where we have come from since the crash last fall.  Congratulations to him as well for having the guts to take this position.  If you want more of this type of advice or commentary then Garth Turners Blog has it in spades.

My two cents worth is to add to his assessment by saying that although I agree the start of this mini-boom we are having right now is most definitely due to rates dropping and the corresponding 35% + savings in mortgage payments.

I think Rowan is only explaining half the story though.  In any market there is demand and of course there is supply.  He has accurately explained that demand has surged faster then expected, but he did not provide any context as to what role supply, or lack therof, has played in the prices appreciating much more then expected.

His article would suggest that he thinks waiting would be the prescription because there will be another crash, but does not tell us why there will be another crash except to suggest that demand will taper off once rates rise more.  He is forgetting that in order to forecast a crash there would have to be this cooling of demand COUPLED with overheated supply.  If demand cools as expected BUT supply does not increase significantly in fact we will be in a very comfortable balanced market.

Let me say this.  The market is HIGHLY VOLATILE and HIGHLY UNPREDICTABLE.  On one thing Rowan and I agree, if you are looking to profit with speculation in this market then you are taking a high degree of risk.  If however you are looking to buy this home to live in AND you can comfortably afford the mortgage you are contemplating, ideally at less then 35 year amortization, then feel confident in this market right now.  The future does not look brighter with certain higher interest rates.

If you are not convinced and you want to wait, then keep an eye on supply numbers not on sales or average price as they will not give you the context you need to decide if there will be a crash in prices.  What I am saying is that by the time you realize prices have crashed the market has already corrected.  To FORECAST if the market will crash you need to watch supply.  If it stays down (as I think it will) then we will balance out and prices will somewhat flatten, but you may be dealing with higher mortgage payments anyways as rates will rise.  If supply shoots up higher then expected then wait as there will be another correction.

On that note call our office and speak to one of our agents on how to buy your house today but protect you in the future with our inflation hedge mortgage strategy.

Last week their was a story in the Calgary Herald that is very optimistic about the Calgary market.

Yep, look down. There’s the bottom.

The Royal Bank has already gone out on a limb with a call that the recession will end in the third quarter–July to September.

and this from easily one of the most pessimistic economists in Canada only a few short months ago

“If you blinked, you may have missed the great correction in the Canadian housing markets,” says Douglas Porter, deputy chief economist for BMO Capital Markets. “Low borrowing costs, more affordable prices in many markets, and some pent-up demand after the fall/winter sales freeze have provided some heavy-duty support for housing.”

For what it’s worth there are many opinions lately on the sustainability of this recent surge.  This story seemed to put a lot of emphasis on the fact that you may have missed the boat.

My concern with this is that it fuels people to think irrationally.  The fact is that the market at this exact time has a incredibly low supply, and buyers even though interest rates have edged up are faced with the “do I buy now, or wait for more supply”.

My advice is simple.  The price appreciation we are seeing now will sustain throughout the balance of this year, and likely well into 2010.  Look for the Calgary real estate market to increase by 5% in 2009, and maybe more in 2010.

Interest rates are also on the rise.  If you put both the increased prices and increased interest rates together affordability will cool.

Make sure the house you are contemplating is well in your affordability today, and not stretching you to the max of affordability.  Also make sure you are working with a mortgage planner who will recommend a mortgage strategy in context of your overall financial wellness AND committ to managing your mortgage over the long term, as we navigate the turbulent waters of inflation and rising interest rates.