CMHC to help cash-strapped owners
Looks like Ottawa sees some mortgage problems coming down the pipe even in these times of record low interest rates:
As the recession deepens, Canada’s big banks and its federal mortgage insurer are moving to head off a rise in defaults by homeowners.
Ottawa is launching a campaign to urge the cash-strapped to approach their banks for mortgage relief, as the banks adopt more flexible practices aimed at preventing borrowers from falling behind on payments. The measures by the banks and the Canada Mortgage and Housing Corp., the federal agency that guarantees mortgages, signal growing concern about increasing levels of household debt.
With house prices dropping, job losses rising and the economy not yet showing signs of recovery, both the government and lenders are pushing consumers to be proactive if they think they might have problems paying their debts.
Unfortunately we don’t seem to have many publicly available stats for mortgage debt in Canada, but I wonder how many ‘cash-strapped’ owners went in for the Government approved (but recently canceled) zero down 40 year CMHC mortgages to keep from being ‘priced out forever’?
The full article is at the Globe and Mail. Hat-tip to Observer for the link!
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March 25th, 2009 at 11:10 pm
Hey blueskies,
C’mon over here and let me introduce you to my little friends, the Shun sisters. No matter how bad things get, people will always pay for a cook. That alone will see me through this economic situation. We’ll see how many IT people, marketers, real estate gurus and overextended landlords will be able to say the same thing.
Sucker.
March 25th, 2009 at 9:50 pm
RennieWhereRU?:
market value is way way down from here. C’mon… a 2 bedrm concrete coffin for 1/2 mill in Coquitlam Bwahahahahahahahahahahahahah x 2. You’d really have to be stupid x 10
March 25th, 2009 at 9:26 pm
Anyone know that Mac Bulk are flogging off Cora in Coquitlam? Saw the sign off No. 1 today. All that is happening here is that the developer is passing on their savings to the public, these units are priced well below market value!
March 25th, 2009 at 8:10 pm
islander:
I stand by my point: perma-bulls want everyone to believe that all the time is “a good time to buy real estate.” The perma-bears want everyone to believe “you’d be nuts to buy real estate right now.”
Hey Islander, do you ever use the preview button to look at your post before you submit it?
“Perma” stands for permanent which means “all the time”. Not “right now”. For everyone. Bulls and bears.
I couldn’t make stuff like that up.
March 25th, 2009 at 6:40 pm
The point was that the above exercise to convert my dad’s profit to real dollars (in this case, I set it to 1997 dollars) was a useless exercise. The information didn’t offer any value.
I’m proving Dave’s point: “What is the purpose of correcting nominal dollars from the perspective of an individual homeowner?” He said: “Who cares?”
First off, apologies if this was covered in a previous post. A couple of hours off this blog and I am so far behind.
My answer to your post above is that the utility of converting to real dollars is to allow comparisons of values and profits made at different points in time in terms of purchasing power. For instance, you might like to know if the $1 profit you made in 1900 was good compared to the $1 profit you made yesterday. Or if you sold now versus in five years, you might like to know how much value the transaction produces in terms of purchasing power. That’s all.
I’ll have to read over the voluminous shell fire which went on … but on another note, anyone notice the mom from teranet from dec-jan declined as opposed to increased every so slightly using mls benchmark (overall it seems the two are within range of each other though).
March 25th, 2009 at 6:27 pm
From Garths blog today. Reality catching up with Vancouvers elite as it has with average Vancouverites long priced out of the market. Canadas most unaffordable city settles in for a long downturn. Global Tv’s real estate story today was about the growth in the number of ‘average’ people showing up at homeless shelters for the first time in thier life. I’ll bet a lot of people wished they could curl up in thier parents basement.
“A few blocks away, the condos are so thick they blot out the sun. But looking up into the maze there are scores of units staring blankly back without curtains or occupants. Everyone here is so aware of the collapse of the giant $500-million Ritz project, and now the desperation sales of unsold units in half-built buildings.
Turned out the floor manager in the hotel I spoke at was a Toronto refugee, here for more than a decade. The recession, he confides, is a monster. Hotel business has plunged all across the city. The complex across the road, in the heart of Van’s most fashionable shopping district – Louis Vitton, Hermes — has found it necessary to close off an entire tower as occupancy rates crash.
The group I spoke to was uniformly professional, serious money managers, investment bankers, specialty corporate lawyers and accountants, the kind of folks who regularly flit around the continent on business. The conversations inevitably turned to real estate, as they all do in the Lower Mainland. I don’t think anyone liked the words coming from my lips. The declines here, I said, have just begun. And don’t even think about the aftermath of the 2010 games…”
March 25th, 2009 at 5:54 pm
Mish hits the nail on the head
Banks are far more interested in reinflating the price of $500,000 homes now fallen to $300,000 than taking care of urban blight. However, reinflating home prices cannot work because home prices needs to fall to levels that are affordable.
Homes in Flint and other such areas, have indeed fallen to their true value (less than zero). No one wants them at any price. Moreover there’s little incentive for anyone to do anything about this. Thus the discussion involves “shutting down portions of Flint, officially abandoning them and cutting off police and fire service.”
Our throw-away society has effectively reached a new level of efficiency: the throw-away city.
Did you just think ‘Whalley’ ? , so did I.
http://globaleconomicanalysis......ities.html
March 25th, 2009 at 5:49 pm
New York is a smart city, it makes Vancouver look like smudge in a public toilet by comparison. New York is in trouble and people have been in denial, until now.
“Economic dirty bomb goes off in New York
By Tom Engelhardt
http://www.atimes.com/atimes/G.....6Dj01.html
Theres a new catch phrase created here for BC – Before the Collapse. We’ll see it soon enough.
March 25th, 2009 at 5:27 pm
Forest & Marine , BC’s largest financier of forestry and marine related industries suddenly filed for bankruptcy today. This is the main source of financing and payroll for basic industry in BC. The payroll of thousands of workers at 40 large BC industrial companies and groups is immediatley affected as they are OUT OF CASH and cannot make debt payments or payroll.
This will affect the workers ability to make mortgage paymnets and all other debt issues, not to mention food on the table.
At the same time it is estimated that a majority of forestry workers currently laid off are running out of EI benefits. There is nothing but forced sales and then welfare ahead for many as there has been no announcement from any level of government to provide further assistance.
I guess it’s too early to tell these guys and girls that condo’s are cheap and intrest rates are at record lows? If another 10,000 forestry wworkers go down how many more peripheral buisnesses and ancilliary jobs dissapear with them?
March 25th, 2009 at 4:58 pm
hmm, I’m having formatting problems. Let’s try that last bit again:
If anything a modern depression will look like Japan in the 90s.
Well, Paul Krugman and I think you might be right.
Given what happened to the Japanese Real Estate market in the ’90s, I’m surprised to see you acknowledge that. But you are a wriggly fish, and love to flip and love to flop, don’t you?
(You don’t mind if I snap at you twice, right
)
March 25th, 2009 at 4:57 pm
(line broke strangely: BC savings rate was – (negative) 8% running up to this)
March 25th, 2009 at 4:55 pm
“If we enter a depression, it will have little resemblence to the one in the 30’s. So many things have changed since then that comparisons are simply wild guesses.”
That’s not entirely true. There are some specific similarities. For example, bankers hadn’t made this much in earning (since 1929), and that has to do with the amount of risk they were allowed to take on. Loose credit allowed for massive Real Estate bubbles across the US, including Florida in the 20s. We’ve got the return of Hoovervilles, now called shantytowns sprining up (see front cover of new York Times). And then there is this, from NPR:
Alex Blumberg: I talked to a guy who has something to say to people who want to pin this whole thing on banks. I talked to David Beim at Columbia Business School. He’s in his office showing me a graph showing how much debt we the citizens of America are in — how much we all owe on our mortgages and credit cards compared to the economy as a whole, the GDP. For most of American history it was below 50%. And then…
David Beim: From 2000 to 2008, it goes like almost a hockey stick. It goes dramatically upward like a rocket. It’s 100% of GDP. That is to say, currently consumers owe $13 trillion when the GDP is $13 trillion. That 100% of GDP owed by individuals. That is a ton.
Alex Blumberg: I’m going to ask you a leading question because I’m looking at the graph right now. Tell me, professor, has there ever been a time in history when we’ve owed that much before?
David Beim: I’m glad you asked me that. And guess what! The earlier peak way off on the left part of the chart is 100% of GDP in 1929. This is a map of twin peaks. One in 1929. One in 2007.
http://www.democraticundergrou.....id=5161059
Our government debt in Canada is better, but the savings rate in BC is -8%, and our economy won’t escape a US Depression unscathed.
If anything a modern depression will look like Japan in the 90s.
Well, Paul Krugman and I think you might be right.
Given what happened to the Japanese Real Estate market in the ’90s, I’m surprised to see you acknowledge that. But you are a wriggly fish, and love to flip and love to flop, don’t you?
March 25th, 2009 at 4:49 pm
More on the Japan – Depression comments from Newsweek
Risk of a Japan-Like Scenario
The real worry is that the U.S. economy could do even worse. The parallels between the U.S. today and Japan at the beginning of the 1990s are too clear for comfort. In both cases, heavy capital losses resulting from property loans constrained the banking system. In Japan, that led to a decade of stagnation, with growth averaging 0.8% from 1992 through 2002. Home prices remain 25% below their peak, and the Nikkei stock index is still trading at one-third its level of 20 years ago. Although there are differences, the risk of the U.S. falling into a Japan-like scenario is frighteningly real.
The U.S. reliance on foreign capital adds more risk. America’s current account deficit reached a record of 6.4% of GDP in third-quarter 2006, but it was a still-high 4.7% in 2008. Private money was almost entirely financing it—at very low interest rates.
Now, foreign investors have lost confidence in most U.S. securities, and money is not so easy to come by. With markets likely to remain tight, we expect the current account deficit to narrow to 2.1% of GDP in 2009. However, for now at least, increased risks abroad have investors sending money into the U.S. and into the safe haven of Treasuries, strengthening the U.S. dollar and bringing 10-year Treasury yields down to 2.83% on Mar. 5, up from the 54-year low of 2.08% on Dec. 18. A rising dollar cuts into U.S. exports and supports the trade surpluses of other U.S. trading partners. But shrinking trade flows also add the risk of protectionist action, which would hurt global growth.
We expect investor fears outside the U.S. about the risk of a dollar decline and credit risk to increase, so the result could be both a sharp drop in the dollar and a sharp rise in U.S. interest rates, extending the recession.
March 25th, 2009 at 4:37 pm
Dave:
#199 Dave , so, when all these people who are going onto EI now ( around the world as well as CDA) and industry is still deteriorating ( as stated by the budget office this am) where will they hide them so as to avoid using the term Depression? This is a very differant situation from Japan in the 90’s . In the 90’s Japan had an in-country specific event and was able to pour money into bad banks to shore up a weakened industrial base while keeping the yen down for export growth. That is not the case today where irregardless how much yen they print they cannot create market share. Like here, Japans unemployment is skyrocketing. When the social safety net dries up look for a rapid deterioration in ‘news quality’.
You can be correct if the recession is over before all of these people run out of EI benefits. Whats that ? 6 mo’s from now? You are cutting in kind of close Dave. Most global economists and even our local apologists in Ottawa don’t agree with you if thats what you’ll need to happen to make your prediction come true.
March 25th, 2009 at 4:31 pm
“However, given the circumstances you would need a crystal ball to determine what future lies ahead.”
Looking at world events right now: we’ve got China trying to shift its relationship with the US; the existing military and financial superpower is insolvent and we’re facing a global downturn.
All those factors lead me to believe that in some way or another, we are more likely to go through a period of volatility and violence. If a soothsayer told me we would go through WW3 I wouldn’t find it implausible (except that I don’t believe in soothsayers).
However…
There is nothing I can do about it. And, unless a more specific, clear threat emerges, there is nothing I will do about it. Ie, I will keep my investment strategy, keep saving and when the time is right, I intend to buy a home (just because I want one, not to get rich).
There is a big difference between the following:
DOOM & GLOOM: GENERAL BEAR STYLE
information considered : many financial institutions are facing insolvency, non-FIRE related production has fallen in N. America; savings have fallen; real incomes have been almost flat awhile; many markets have been overvalued (stock, real estate, art, etc.)
prediction : overvalued markets will fall, joblessness will increase etc. UNTIL we’ve gathered some savings again and begin a new cycle of production.
solution make sure you have savings, keep your risk low, don’t take on too much debt, keep an eye on your job and network in case you lose job
and
DOOM & GLOOM: LIBERTARIAN STYLE
- information considered general global political gongshow. Iceland is insolvent, people are freaked out
prediction : (this is a real prediction, taken from Glenn Beck’s “War Room” on Fox News) The cities are going to look like Dodge City. They’re going to be uncontrollable. You’re going to have gangs in control, motorcycle marauders. You’re not going to have enough police or federales, just like Mexico, to control the situation.
solution panic, don’t trust anyone, buy a lot of gold, get a gun, invest in a bunker
There’s a difference, is what I’m sayin’