Vacations are mostly over, school starts today and the next four months should tell us whatkind of economic environment we are really dealing with. It’s time to dig in and drive ourbusinesses forward and finish the year strongly. The summer has given us many predictions –some pessimistic and some less so – but, as in sports, enough of the prognostications; let’s get on with the games.

The last full unofficial week of summer, in case you were away or busy with back to schoolshopping, brought some good economic and housing related news from a few differentsources. Not all of the news was entirely good and not all of the good news is directly related tothe housing market but for today, we will focus on the positive messages we received lastweek. It’s a good way to start the fall business cycle.

Last week, Canada’s banks held a parade of stellar quarterly earnings reports. Our banks aredoing very well indeed. The low interest rate environment, combined with good performancefrom the financial markets lead them to report (for some) record earnings along with boosts toshareholder dividends. Bank of Canada Governor, Mark Carney’s warning the week beforeabout the perils of “dead money” must have registered.At a time when some banks around the world are stressed, Canada has benefitted andcontinues to benefit from a strong banking system which seems to be growing stronger. Bank ofNova Scotia announced its plans to acquire ING Direct Canada, its assets, its deposit base andits 1.8 million retail customers. Like it or not, our banks dominate the financial landscape andtheir size and strength helps to provide the foundation for a healthy economy.

Last week, Bank of Montreal published the results of its second annual Labour Day employeesurvey and the results were surprisingly impressive – especially when compared to the resultsfrom a year ago. With the Canadian unemployment rate hovering at 7.3%, some 64% of surveyrespondents said that they were “comfortable” with their sense of overall job security. This isup 13% from the 2011 survey. Even more encouraging was that 41% felt that their companywas growing and would be hiring this year. That number is also up 13% from last year.Respondents in Alberta were the most optimistic about their employer’s fortunes with 60%feeling that their employer will be expanding and adding jobs this year and 55% expecting a payincrease or a promotion as well. The percentage of respondents expecting a promotion or araise this year was 39% nationally. Only respondents currently working were included in thesurvey but the high levels of worker confidence and the increase in that confidence over thepast year are very encouraging.

RBC Economics published its quarterly report on Housing Trends and Affordability last weekand, while affordability dipped slightly across the country on average, the inclusion of theVancouver market in the national statistics distorts levels of affordability, particularly fordetached bungalows. For two-storey homes, affordability levels are “somewhat elevated” (evenwithout Vancouver) but for condominiums, affordability levels “barely exceeded” long termaverages.

The decline in affordability in the second quarter of 2012 is attributed to modest home priceincreases and to increases in mortgage rates. The last six months of 2011 saw affordabilitylevels increase in Canada but the first six months of 2012 have seen housing become somewhatless affordable (relative to regional median incomes). RBC says that a cooling real estate marketcombined with rising household incomes and only a gradual rise in interest rates beginning nextyear should keep affordability from further significant deterioration in the medium term.

Genworth published a report last week on the condominium markets in eight Canadian cities.Contrary to much recent analysis, population growth, immigration, demographic factors andaffordability (or lack of affordability for detached homes) will help continue the strong demandfor this sector of the housing market and Genworth remains generally confident in this assetclass (particularly in the price ranges which they typically insure) . New Canadians, first timebuyers and retirees represent typical purchasers of condominiums and the report says thatdemand from these groups will continue to be strong. Prices are forecast to increase in seven ofthe eight markets (all but Vancouver) in the study. Price increases will be modest at best asbuyer’s market conditions are expected in all eight markets except Calgary and Toronto whichwill both be balanced.

CMHC released their quarterly financial report and, although claims payments increased,arrears levels for insured mortgages 90 days or more past due have declined. The CrownCorporation also stated that it is not concerned about bubble conditions forming in theCanadian real estate market because the market is supported by strong demographic andeconomic fundamentals. Housing starts will decline somewhat but balanced market conditionswill persist in most markets through 2013.Last week’s parade of relatively good news is welcome and timely for the housing andmortgage market. Our decent public balance sheet, strong and stable banking system, growinglabour market confidence and reassuring market forecasts are an encouraging backdrop as weenter the fall of 2012.