2009 Farewell Free-for-all!

Well, well.. what a year it was.  Canadian house prices took a leap from a shallow recessionary dip fueled by dirt cheap interest rates, financial stimulus and speculation.  Now instead of ‘bubble talk’ about the Vancouver market, we hear the federal government making some fuss about the potential of a national housing bubble – even in places where house prices aren’t 10x the local income.  Here’s the last open topic posting for 2009, but the first for 2010.  Hope you all have a great year!

Time for Canada to take away the housing punchbowl
How big a mortgage can you carry?
Its different in Seattle
Nice home, wheres the rest of it?
From Boom to Bust, how Ireland did the noughties
USA: 10 years, no gain in house prices
Renters win as vacancy rates rise
Chinese RE bubble may lead to US style slump
Five bubbles set to burst in 2010

So what are you seeing out there? Any predictions for the new year? Resolutions? Post your thoughts, news links and anecdotes here and have a great weekend and an excellent new year!

Raising down payments would sideline FTBs

Don sent in this link to Helmut Pastrick of Central One Credit Union expressing concern about Flaherty’s recent talk of clamping down on the easy mortgage money.  Concern over a Canadian housing bubble has Flaherty, Harper and Carney musing about ways to dampen the market: rising interest rates, cutting terms down from 35 years and requiring a larger down payment.  It’s this last one that has Pastrick concerned.

A senior B.C. economist is warning the Lower Mainland’s recovering real estate market and construction industry will both take a hit if Ottawa makes it harder for first-time home buyers to get mortgages.

Helmut Pastrick of Central 1 Credit Union was responding to federal finance minister Jim Flaherty, who said the government will “likely” boost the minimum down payment from the current five per cent and cut the maximum mortgage term down from 35 years to ward off a potential housing bubble in Canada.

“It would have quite a negative impact,” Pastrick said. “It would certainly soften the real estate market. There would also be less new construction over time.”

A higher down payment threshold would force many first-time buyers with insufficient cash to delay buying.

As Don points out, is that really a bad thing?

A future of higher mortgage rates

Did you get your special edition 2009 rock-bottom interest rate loan yet?  Better get it quick, because you’re running out of time.  We’ve heard from the Bank of Canada, and Harper says the same thing: expect rising rates.

Down south Freddie Mac sees mortgage rate rising to 6% in 2010, while Morgan Stanley is betting on 30 year rates of 7.5 to 8%.  These are still historically very low, but changes like this can have a dramatic effect on high debt levels.

Any more rabbits in that hat?

Holiday free-for-all!

I hope that whatever you’re doing, you’re enjoying it. Normally on Friday I post a list of recent stories, but hey – it’s a holiday! If I get to it, they’ll be posted below, but feel free to add your own links and thoughts in the comments, and have an excellent weekend!

Defusing housing and the rentership society

A few interesting articles: The first from homes2012 is an editorial in the Vancouver Sun about Jim Flaherty as the bomb disposal expert that has to diffuse the Canadian housing bubble before it explodes.

Flaherty is moving slowly — oh, so slowly — to snip a wire here and there in an attempt to defuse the mess. Problem is, the ticking is getting louder by the minute.

If the bomb explodes, home prices could plunge. In the worst case, plunging prices could bring on an economic downfall such as the United States, Ireland and Spain suffered after their real-estate markets collapsed.

But to make Flaherty’s challenge even more difficult, he still has to convince most people the bomb even exists. At the moment, he’s being cautious in how he describes the problem. He’s being even more cautious in how he deals with it. Perhaps too cautious.

The second article was posted by Domus and relates the way that stimulus measures, bailouts and government support of housing market effectively turns ‘homeowners’ into renters.

“The problem with affordability-only modification is that it essentially makes homeowners renters for the foreseeable future and locks them into their homes so they can’t move elsewhere for better jobs.” [said] Paul Leonard, director of the California office at the Center for Responsible Lending in Oakland.

Of course there’s one group that thinks cracking down on Canadian lending standards is a bad idea.  nonymous points out this article in the Vancouver Sun, where Mortgage Brokers are lobbying Flaherty to NOT go through with any changes that raise standards for home lending.

Steps to raise down payment requirements and shorten mortgage amortization periods could do more damage than the problem Flaherty is trying to stem, according to the Mortgage Brokers Association of British Columbia.

“First-time buyers drive the housing market,” association president Joe Santos said in a news release.

“Raising interest rates and reducing amortization periods will severely impact affordability for this important demographic group.”

There’s one sure way to improve affordability: Introduce 100 year term mortgages and allow zero amortization no-income-no-job-or-asset (NINJA) loans like they did in the US a couple of years ago.  This had delightful short term benefits: lower monthly payments AND rising house prices.  What could possibly be wrong with that?