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These are stories Report on Business is following Tuesday, Sept. 17, 2012.

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Housing correction likely 'under way'
A correction in Canada's housing market "appears to be under way," led by Vancouver but destined to spread after the government's new mortgage restrictions, Toronto-Dominion Bank warns today.

"We expect the slowdown will become more broad-based following a fourth round of mortgage insurance regulation tightening by the federal government in July," economists Craig Alexander, Derek Burleton and Diana Petramala said in a new report that also warns Canada's economy is "stuck in a soft patch" this year.

This housing correction will weigh on Canada's over all economic growth, the TD economists added

"For some time now, TD Economics has been warning that the Canadian housing market was overpriced and overbuilt, setting the stage for a gradual correction to take place over the medium term," they said.

"The tide seems to have finally turned. The combination of market fatigue, stricter lending guidelines for insured mortgages and a deterioration in housing affordability is helping to put the brakes on housing activity."

They cited the fact that sales and prices in Vancouver have slumped by 31 per cent and 7 per cent, respectively, over the past year.

Of course, Canadian interest rates are expected to remain low well into 2014, so there's only so far that prices can fall. TD said it still estimates the market is overvalued by 10 per cent, though that's down from an earlier range of 10 per cent to 15 per cent.

"The adjustment is expected to occur gradually over the next two to three years, which should be quite manageable for most Canadian households," they said.

The market has cooled noticeably. Just yesterday, the Canadian Real Estate Association said home sales slipped 5.8 per cent in August in July. That was the steepest drop since mid-June 2010. And average prices now sit just 0.3 per cent above the levels of a year ago.

And today, the Toronto Real Estate Board said sales in the first half of September slipped by 15 per cent from the same period a year earlier, though prices were up by 9.5 per cent.

There's mounting evidence that prospective first-time homebuyers in Canada are deciding to keep renting, amid the new mortgage rules and a softer market.

As The Globe and Mail's Tara Perkins reports, real estate agents and observers are seeing it play out in the market in the wake of the new restrictions.

And today, The Globe and Mail's Claire Neary outlines her compelling reasons for remaining a tenant and waiting to buy her first house.

Analysts wonder whether Lowe's will be back
While some observers still see the possibility of Lowe's Cos. Inc. coming back at Canada's Rona Inc. with a hostile takeover bid, others believe the quest has ended.

As analyst Mark Petrie of CIBC World Markets put it today, it's "back to reality" for the Canadian home improvement chain after its suitor withdrew its $14.50-a-share offer yesterday.

"While a hostile bid for Rona remains a possibility, we do not believe it is likely in the near term," he said.

"Instead, we believe [Lowe's] will continue on its path of new store openings, adding in a smaller format to the mix. We could also see [Lowe's] pursue an alternate transaction to [Rona] to add scale in Canada."

Mr. Petrie hiked his price target on Rona shares to $12 from $10.50.

Analyst Keith Howlett of Desjardins, however, still believes Lowe's could take another run.

"Our view remains that Lowe's wants to conclude a transaction with Rona before Rona closes, or shrinks in size, 23 big-box stores located outside Quebec," he said.

"Lowe's would, in our view, like to convert many of these locations (as well as the other Rona big-box stores outside Quebec) to Lowes."

GM, Chrysler still bargaining
Negotiators for General Motors Co. and Chrysler Group LLC continue to bargain with the Canadian Auto Workers union after the CAW struck a tentative labour pact with rival Ford Motor Co. well before a strike deadline yesterday.

As The Globe and Mail's Greg Keenan reports, the union extended talks with GM and Chrysler but will issue 24-hour strike notices should negotiations stall.

Ford agreed to a four-year contract that it says will boost the competitiveness of its Canadian plants. The union wants GM and Chrysler to match it.

"All attention will be on the tentative agreement reached last evening between Ford and the CAW," said Alex Koustas of BMO Nesbitt Burns.

"As it stands the split was roughly down the line, with the union agreeing to a more competitive wage structure for new hires (though not permanent in nature) and a pay freeze for current workers, while the manufacturer agreed increase hiring and activity while leaving the pension structure relatively untouched."

FedEx cites global weakness
FedEx Corp., which acts as a barometer for the global economy, cited a weak economic recovery today as it cut its profit outlook for the year.

The giant courier group also posted a dip in first-quarter profit to $459-million (U.S.) from $464-million a year earlier.

But it's the company's outlook that's worthy of attention, and it had already warned of this.

It now expects annual earnings per share of $6.20 to $6.60, compared to its previous projection of $6.90 to $7.40.

"Earnings for the first quarter were below our expectations as weak global economic conditions dampened revenue growth, drove a shift by our customers to our deferred services and outpaced our near-term ability to reduce FedEx Express operating costs to match demand levels," said chief financial officer Alan Graf Jr.

Western employers hunt for workers
Hiring trends in Canada have been patchy this year, but a new survey shows demand for labour is mushrooming in some parts of the country, The Globe and Mail's Tavia Grant reports.

According to Statistics Canada's quarterly job vacancy survey, there were 5.3 unemployed people for every job vacancy, down from 5.8 last year. The drop in this ratio was due to more job vacancies and fewer jobless people.

The fiercest competition for jobs appears to be in Newfoundland and Labrador, where there were 10.6 unemployed people for every vacancy. By contrast in Alberta, there were 1.6 unemployed for every job vacancy.

RIM in licensing deal
Research In Motion Ltd.'s stock edged higher today after an announcement that the Canadian smartphone company has struck a licensing agreement to use Microsoft Corp. software, The Globe and Mail's Iain Marlow writes.

The patent deal gives RIM access to technology that will make it easier to move large files from place to place, and will likely be used on the firm's BlackBerry 10 smartphones, which are due out in January.

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An earlier version of this story incorrectly stated that Toronto home slipped 15 per cent in the first half of December. This version has been corrected.

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