As you’ve probably heard, the Canadian Real Estate Association is asking it’s 100,000 plus members to send in a form letter to their MPs in reaction to rumored changes to mortgage finance rules. In the form letter they say:
In particular, we are concerned about the negative impact modifications to the allowable amortization period or minimum down payment requirements would have. These changes would create affordability problems, especially for first-time buyers. First-time buyers are the first link in a chain reaction of real estate activity.
But let’s be clear – the ‘allowable amortization period or minimum down payment requirements’ are not proposed rules that will prevent private lenders from offering any deal they want, they are a reduction of excess government credit pumped into the housing market over the last few years. What the CREA seems to be proposing is the conflicted idea that our housing market is stable and not in a bubble, but that minor changes to down payments or amortization terms on government insured mortgages could cause a collapse (of that non-existent bubble).
Also from the CREA form letter is this justification:
The housing sector played a key role in Canada’s economic recovery. In fact, a report published by Altus Group in 2009 found the typical MLS® home sale and purchase between 2006 and 2008 produced $46,400 in spin-off spending. Based on this research, forecast annual sales in 2010 generated an estimated $20.5 billion in spin-off economic activity and over 185,000 jobs.
Sounds like a good spin off, but according to this article in the CBC, the issuance of CMHC mortgage backed securities in 2010 is estimated to be $100 billion. Are we really getting the best sustainable economic spin off from that money?
For all the CREA claims to care about first time buyers, they are who would be most protected by adjustments to government backed mortgages. If you can’t afford a down payment right now maybe you shouldn’t be buying. As we’ve seen all around the world from the US to Dubai to Ireland, Spain and Portugal, rocketing property values without income growth is not sustainable, no matter how much governments or real estate associations would like them to be.
This is a small local blog, we get less than 4000 readers a day which is far less than the CREA’s 100,000 plus members, but that doesn’t mean your voice shouldn’t be heard. If you want to make your views known to your MP you are welcome to use this form letter written by Jesse in the forums. You can find contact info for your MP here.