As posted in the comments section(h/t to bad) and noted at other places, the Canadian government has finally woken up and is trying to do away with the 40 year mortgages, as well as the zero down mortgages that are backed by the government (via CMHC and others). They'll also enforce more rigorous documentation standards.
They specifically mention that this is being done to "reduce the risk of a U.S.-style housing bubble developing in Canada." If you ever wanted a classic example of reactionary measure taken by bureaucrats, this could be it. The time to do this was in 2005 and 2006 when the mad rush was already reaching its zenith in Alberta and BC. Or even in 2007 when the frenzy was near its peak in Saskatoon/Regina. But in 2006, they were cheer leading the 'affordability paradigm' and passing laws to provide 40 year mortgages with zero down payment.
And while they abetted the bubble by offering these products, they are going to help deflate the bubble by eliminating some of these products from their offerings.
I'm pretty sure that this is only going to reduce the pool of buyers that could have otherwise obtained financing on on overpriced Edmonton condo using zero down, no document, 35 year term with credit score of 550.
How much impact will this have on Sales in Alberta? And to prices?
Showing posts with label mortgage markets. Show all posts
Showing posts with label mortgage markets. Show all posts
Wednesday, July 9, 2008
Tuesday, November 6, 2007
But we are different....
and fiascoes like those at Citibank, Merrill, Goldman and CIBC can't really affect the Alberta market. Or Canada in general. May be because, the chicken haven't come home to roost yet. I guess it's just a matter of time.
A satirical look at the whole mortgage meltdown has become very popular on the net and explains very simply how trillions of dollars were bet on the ability of 'some less than stellar' credit worthy individuals. And wall street partied on for last several years declaring mega bonuses to the bosses down to associates and secretaries.
A year ago if someone had questioned that solvency of one of the biggest banks in the world would become an issue due to mortgage problems, it would have been met with derision and contempt.
Can something similar to this happen in Canada, say a year from now? Can it happen at all? Or are we indeed so different that our flippers who own scores of properties really a lot smarter (or luckier) than their US counterparts. May be. Or our banks are really paragons of 'risk management' and moderation and do/did not venture into the unchartered territories? Only time will tell. But be on the watch out for any potential issues in the Canadian mortgage market as well. And for all those 'jealous renters' who are bubble sitting, don't keep more than $100k in any single account to ensure CIDC coverage. We are different, but the extent of speculation in our markets will become clear only when the music stops.
Closer to home, Edmonton numbers are out, and they are quite bad. Of course, those looking for silver lining and some final straws of strength will find that row houses' average price increased. But for everything else, median and average prices fell, as expected. Edmonton too is coming pretty close to surrendering most of its gains made during 2007. Average and Median prices are somewhere between the February and March levels seen this year. Which means all those who rushed out to buy during March, April, May....until last month are in the red.
And roughly 35% of Edmonton's inventory is vacant, which means the rental deals are going to get sweeter and prices will continue to fall.
Higher oil prices of course mean nothing due to the spectacular performance of the loonie. If government isn't raking a whole lot of royalty more due to higher prices, it's not very likely that industry is fairing any better. And natural gas of course is a different story altogether.
A few years from now when dust has settled, and inventory levels do not generate any curiosity amongst the masses, people will probably be astonished at what some of the Edmonton properties sold for in 2006 and 2007. And how thousands of people were sucked into buying properties at obscene valuations.
A satirical look at the whole mortgage meltdown has become very popular on the net and explains very simply how trillions of dollars were bet on the ability of 'some less than stellar' credit worthy individuals. And wall street partied on for last several years declaring mega bonuses to the bosses down to associates and secretaries.
A year ago if someone had questioned that solvency of one of the biggest banks in the world would become an issue due to mortgage problems, it would have been met with derision and contempt.
Can something similar to this happen in Canada, say a year from now? Can it happen at all? Or are we indeed so different that our flippers who own scores of properties really a lot smarter (or luckier) than their US counterparts. May be. Or our banks are really paragons of 'risk management' and moderation and do/did not venture into the unchartered territories? Only time will tell. But be on the watch out for any potential issues in the Canadian mortgage market as well. And for all those 'jealous renters' who are bubble sitting, don't keep more than $100k in any single account to ensure CIDC coverage. We are different, but the extent of speculation in our markets will become clear only when the music stops.
Closer to home, Edmonton numbers are out, and they are quite bad. Of course, those looking for silver lining and some final straws of strength will find that row houses' average price increased. But for everything else, median and average prices fell, as expected. Edmonton too is coming pretty close to surrendering most of its gains made during 2007. Average and Median prices are somewhere between the February and March levels seen this year. Which means all those who rushed out to buy during March, April, May....until last month are in the red.
And roughly 35% of Edmonton's inventory is vacant, which means the rental deals are going to get sweeter and prices will continue to fall.
Higher oil prices of course mean nothing due to the spectacular performance of the loonie. If government isn't raking a whole lot of royalty more due to higher prices, it's not very likely that industry is fairing any better. And natural gas of course is a different story altogether.
A few years from now when dust has settled, and inventory levels do not generate any curiosity amongst the masses, people will probably be astonished at what some of the Edmonton properties sold for in 2006 and 2007. And how thousands of people were sucked into buying properties at obscene valuations.
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