Real estate roller coaster

Canada's resale housing market eased off the torrid pace of sales and price increases it saw in 2009. Analysts had expected a strong first half of the year followed by a much weaker second half, due a tepid economic recovery and the introduction of the HST in British Columbia and in Ontario.

By late summer, it began to look as though the final months of the year might be a sales season to forget, but things started to pick up again. Not take off, but pick up.

Nationally, the average price for a resale home in November 2010 was $344,268, up about two per cent from the same month a year ago.

But markets varied across the country. In Vancouver, November's average selling price was just under $700,000 compared to around $622,000 a year earlier. Back in March 2009, the average price of a Vancouver home was $530,763.

Calgary's market hasn't shown the same strength. In November 2010, the average resale price was $398,699, about $3,000 less than for the same month in 2009, and around $18,000 below 2010's high, which was recorded in May.

The Canadian Real Estate Association says while the number of sales did drop off from 2009's heady levels, there was also a reduction in the number of new listings, which helped bring the market into "balance."

Stock market's steady gains

It was a fairly tame year for North American stock markets in 2010 — at least compared to the previous two. The S&P/TSX Composite Index ended 2009 at 11,746.11. The index climbed steadily through the year, surpassing the 13,000 mark, for a gain of around 12 per cent.

Traders react positively to trading data on the floor of the New York Stock Exchange. (Richard Drew/Associated Press)That's still more than 2,000 points under the peak close of 15,073.13 reached on June 18, 2008. In the months that followed, financial markets melted down. By Nov. 20, 2008, the TSX bottomed out at 7,724.76.

Global stock markets weathered a few storms, including European debt problems, hanging on to healthy gains for investors.

However, analysts are suggesting that a lacklustre economic recovery should mean more modest returns in the years to come.

Dollar hovers around parity

It was a pretty good year for the Canadian dollar — if parity is your benchmark. The dollar spent most of the year in a narrow range within a few cents of the U.S. dollar.

At the end of 2009, the dollar was at 95.15 cents US. Its 2010 low point came on Feb. 8, when it closed at 93.07 cents US. Just over two months later, the dollar had shot up by more than seven cents to close at $1.0012 US, as the Bank of Canada suggested that interest rates would soon be rising.

There were predictions then that the dollar would keep rising and perhaps hit $1.15 sometime in 2011. The dollar did slip back to 93 cents US a month later.

However, by October, the dollar was once again testing parity.

In 2009, the dollar traded in a much wider range, hitting a low of 76.98 cents US on March 9, 2009, and a high of 97.48 cents US on Oct. 14, 2009.

Interest rates creep north, then stall

At the end of 2010, the Bank of Canada rate is right where it was at the beginning of 2009: 1.25 per cent. But in between, the rate hit a historic low of 0.50 per cent.

The bank cut its rate to that level in April 2009 and held it there until June 2010, in an attempt to coax the economy out of recession and into recovery. Bank of Canada governor Mark Carney warned that Canadians shouldn't get too used to ultra-low interest rates: they'd have to go up eventually to keep a lid on inflation.

So the bank raised its rate by a quarter point in June, July and September, bringing it back to 1.25 per cent, leading to the prime lending rate at the chartered banks of three per cent.

But with the recovery stalling in the second half of the year, Carney signaled in October that the bank would hold off for now on rate hikes.

However, two months later, he suggested that — at some point — rates would again head higher and that the repercussions may be swift and fierce and have the potential to catch many with debt loads they can no longer afford.

When will rates resume their upward course? The next date for the setting of the bank rate is Jan. 18, 2011, followed by March 1, April 12, May 31, July 19, Sept. 7, Oct. 25 and Dec. 6.

Inflation's benign year

In 2009, the Consumer Price Index (CPI) — the number the government of Canada uses to measure inflation - rose by a mere 0.3 per cent, as the world struggled to emerge from the worst recession since the Great Depression. The inflation rate hadn't been that since 1994, when it was 0.1 per cent.

The Bank of Canada has set a target for inflation of between one and three per cent. Financial analysts had spent much of the year wondering whether government stimulus projects, which injected billions of dollars into the economy, would lead to a new round of inflation — or whether the economy would head into another recession and spark a round of deflation.

The Canadian economy had grown at a rate of 5.8 per cent in the first quarter of the year, but by the third quarter, economic output had tailed off dramatically. Statistics Canada reported that Gross Domestic Product had declined by 0.1 per cent in July. The Bank of Canada subsequently revised downwards its outlook for the economy.

While inflation did pick up a bit in 2010 — the CPI was 2.4% per cent higher in October 2010 than it was in October 2009 — some of the increase was attributed to the introduction of the Harmonized Sales Tax in British Columbia and Ontario.

Still, the inflation rate is easily within the Bank of Canada's target range, suggesting that any further interest rate hikes likely won't happen until well into 2011.