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3rd times the charm, no new mortgage rules

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Jimmy Flaherty has just announced that there will be no new mortgage rules announced as there is already “softening” showing up in real estate markets across Canada:

Flaherty said he’s already intervened to toughen mortgage rules three times in the last few years and there’s no need for further action as conditions in the market are finally moving in the right direction.

Flaherty said he does not believe there were any unintended consequences in the housing market resulting from government intervention in the mortgage business during the financial crisis to keep banks lending money.

Still, he said his government keeps a close eye on the housing market and subsequently stepped in three times with changes to mortgage rules when there were concerns about risk.

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patriotz
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patriotz
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Flaherty said he does not believe there were any unintended consequences in the housing market resulting from government intervention in the mortgage business during the financial crisis to keep banks lending money.

And Jim is absolutely correct. The huge rise in housing prices across Canada starting 1Q2009 was a fully intended consequence of government intervention, meant to convince Canadians that the country had "recovered" from the crisis and recession.

And convinced they were. But will they stay convinced when the house of cards comes tumbling down?

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7 years 9 months ago
jesse
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Why would Flaherty call out the issue of further mortgage rule changes in a carefully-prepared planned speech? Did anyone ask?

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7 years 9 months ago
Anonymous
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@ patriotz

Ha ha so true

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7 years 9 months ago
Keeping An Eye on Th
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"Of course, it's in no one's interests that house prices remain overvalued, and it makes no sense to try to pump more air into a bubble. On the other hand, a sudden slump in the housing market could have repercussions for both monetary and financial stability"

Flaherty can relate to this:

http://online.wsj.com/article/SB10001424052748703…

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7 years 9 months ago
vreaa
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Manufacturing Exclusivity – "Purchase these hot condos prior to everyone else."

Faking rarity of product at The Village.

http://wp.me/pcq1o-2fN

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7 years 9 months ago
specialfx3000
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"Jimmy Flaherty has just announced that there will be no new mortgage rules announced as there is already “softening” showing up in real estate markets across Canada"

Now if Jimmy can promise to stay the fork out of it when the crash does accelerate and not pull government interventions again to pump the market back up.

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7 years 9 months ago
jesse
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"conditions in the market are finally moving in the right direction"

It's hard to argue that the market post-March 18th has been markedly slower. I think the true effects will become apparent a few months' out; I wouldn't be waving the victory flag just yet.

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7 years 9 months ago
Interest Rate Lover
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Well bears, look at all that wonderful market volatility.

Looks like interest rates may be going down now, especially once the QE funding dries up. And the feds just told us no more mortgage changes. All good good news for the RE market.

Looks like those realtors, and all their supposed lack of knowledge of bonds and interest rate determinants, were right with multi-years of low, low, low interest rates.

We are in year 3 of low “emergency” rates.

Lol, I still remember all the bears here saying interest rates would rise to the moon, with their little analogies to the 1980s spikes.

Oh, that one brings a smirk on my face. Of course, the less than 1% interest rates on all those bear war chests is even more amusing.

Oh well, crash around the corner eh? Maybe 2020.

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7 years 9 months ago
Frank Grimes
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To be filed under the "duh" category:

http://www.news1130.com/news/local/article/224523…

It makes me sad that people need to be told to "learn all you can about the neighbourhood" when buying a house.

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7 years 9 months ago
Devore
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@Frank Grimes: Sad, but true. No one looks at the details (or even looks at all) when it's guaranteed to go up and you can flip to a greater fool a few years later.

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7 years 9 months ago
bubbly
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@Interest Rate Lover: I actually agree. The interest rates can stay low for a long time. Look at Japan.

Of course, their real estate prices have been going down for the past 20 years despite the low rates.

US ditto – Record low rates and their housing market is still sinking.

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7 years 9 months ago
whydoItry
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Japan did not have a baby boom on the scale of North America. North America, like Japan has been, is now on the downside of the demographic trend. Twenty years of falling prices to come.

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7 years 9 months ago
Ravishing Rick
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Cut the Music, @Interest Rate Lover, you over leveraged, under diversified sweat hog, sit down and shut up so I can show you what real manly investor looks like. Interest rates will go up and inflationary pressures are mounting. If they don't go up, then we will be entering a period of deflation. If you are as stupid as your old lady tells me you are then I don't expect you to understand this. Look at Japan -> low interest rate deflation. Or, look at the US – > low interest rate housing deflation. The key thing is, real estate is grossly over valued, hanging onto this is like those sprott followers that were buying silver by the fist full two weeks ago. Look at the commodities today – TCK/B has broken resistance, China is dead in the watter, and… Read more »
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7 years 9 months ago
McLovin
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Ravishing Rick why the disrepect to women?

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7 years 9 months ago
Anonymous
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JF's announcement is predictable outcome of their 40% majority rule. If Gordo isn't the next Vancouverite to become a Senator, that'll be surprising.

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7 years 9 months ago
rookie
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Gas is at CAD$1.43 at the pump…if this continues to go up…then cost of living (i.e. inflation) also goes up….won't the BOC be forced to increase interest rates then?

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7 years 9 months ago
jesse
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@rookie: "then cost of living (i.e. inflation) also goes up….won’t the BOC be forced to increase interest rates then?"

The Bank doesn't care much about headline price inflation as long as you don't get raises — the core measures they primarily track are mostly derived from labour costs, not material input costs. The Bank will start to care a little if you are having trouble paying the bills but that won't mean higher rates, quite the opposite. I know. It sucks. I suggest to go on a diet, give up organic food, and obey the speed limit.

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7 years 9 months ago
paradox
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Announcing more tightening will only heat up the already hot RE market as many more fools will jump in to beat the new deadline and buy before the new rules kick in.

It has played out like that every time the government tried to do smth about it.

I hope the government keep the fxxk out of the RE market instead and let the market go where ever it wants to go.

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7 years 9 months ago
anymouse
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BOC also doesn't care about Vancouver. They aren't going to raise rates if it hurts the Central Canadian economy. We are just collateral damage.

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7 years 9 months ago
jesse
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James Hamilton: Oil prices and trading mechanics

Every day, futures prices can and do move in response to how many people want to buy or sell the contracts. As I explained in a recent study in Brookings Papers on Economic Activity, inventory arbitrage forces the spot price to move along with the futures price. But as I also explained there, this does not mean that sentiment or speculation alone can put the price of oil at any arbitrary value. Ultimately, the critical question is whether the spot price is one at which the physical quantity produced is equal to the physical quantity consumed.

James Hamilton thinks there is now more supply than demand for oil.

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7 years 9 months ago
jesse
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@paradox: "I hope the government keep the fxxk out of the RE market instead and let the market go where ever it wants to go."

Then you are in favour of abolishing government-underwritten mortgage insurance and removing the blanket government guarantee on mortgage-backed bonds? Me too!

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7 years 9 months ago
VanRant
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What is Flaherty supposed to say "I have screwed up the housing market and turn it into a bubble and make housing unaffordable for everyone. When it pops, its going to take the country with it… for years!!!"

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7 years 9 months ago
rksleung
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http://translate.google.ca/translate?u=http%3A%2F…

As long as this craziness continues in HK and China, you can rest teh case that Vancouver West side will drop in prices.

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7 years 9 months ago
jesse
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CBC: TSX falls as speculators get roasted commodities slide

North American markets traded lower Wednesday as gasoline futures tumbled so sharply that the New York Mercantile Exchange briefly halted energy trading…

June oil closed below $100 on the New York Mercantile Exchange, falling $5.67, or 5.5 per cent, to $98.21 US a barrel.

Gasoline fell by 25 cents at midday in New York, the maximum fall allowed under trading rules, and leading to a halt in trades in Nymex crude and gasoline.

Lower oil prices are helpful to enable the US to continue to recover its economic output, which will be a precursor to higher real rates.

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7 years 9 months ago
space889
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Exce@jesse: Except gas went up today?! I wonder what wonderful excuses the gas stations will come up next to justify the price increases that doesn't square with much lower oil prices and higher CAD$.

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7 years 9 months ago