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?