James Flaherty on the housing market

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Jesse posted a letter in the forum that he sent To his MP and James Flaherty supporting changes to government support of Canadian housing markets. Evidently a few others wrote in as well, because Jesse posted Flaherties response, which was duplicated in a PDF we received from another reader. You can read the full response in the forum post, but here are a few key sections we thought were interesting:

…we are encouraging responsible home ownership through measures to help first-time home buyers.

Does assisting someone to buy something encourage responsibility?

Unlike the citizens of other countries, such as the United States, Canadians did not face mass foreclosures on their homes, and our banks did not require taxpayer bailouts due to turmoil in the housing market.

Didn’t the taxpayer backed CMHC pump un unprecedented amount of money into Canadian mortgages?

Third, we withdrew government insurance backing on home equity lines of credit (HELOCSs). Taxpayers should no bear any risk associated with such consumer credit products. These risks should be managed by the financial institutions that offer these products.

Agreed! So why were helocs ever government insured?

Those were just a few points that jumped out to me, anyone else spot anything remarkable in that message that you agree or disagree with?

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Londonernow
Member
Londonernow

Its on Bloomberg now:

Chinese Spreading Wealth Make Vancouver Homes Pricier Than NYC

http://www.businessweek.com/news/2011-05-17/chine

jesse
Member

Re Bloomberg article. Anyone normally reading Bloomberg isn't buying in Vancouver.

Maybe Robertson can read with pride that Vancouver is finally mentioned in the same breath as New York 😆

Keeping An Eye On Th
Guest
Keeping An Eye On Th

“Sincerely

James M. Flaherty”

Ha Ha, what a snow job.

Jesse I am so disappointed in you.

I can’t believe I associate with a clan that pleads to politicians to do the right thing.

What a joke, you want to enlist the arsonists to join the fire firefighters.

Do you honestly think the boneheads will pop the bubble?

Do you honestly think they could engineer a soft landing?

Extremely rich Van h
Guest

@Londonernow:

If it weren't Chinese immigrants,Canada is just a third world nation and its residents would be in destitute.We thank Chinese government which is the best government and political system in human history.In 20 yrs Chinese government uplift Great China into a super power which will chanllenge US Empire.We Wish China well and and its governing party.Soon billion of China tourists will come to Canada and spend trillions here.

crabman
Guest

A home is a family's most important investment, and a stable and secure housing market keeps our economy strong. That is why our Government continually monitors the housing market, ready to take careful steps to ensure its ongoing stability.

This statement says one of two things about F:

1. He's just another BS'ing politician.

2. He's completely clueless as to what makes a housing market stable.

jesse
Member

@Keeping An Eye On The Pimps: Subsequent to my letter Flaherty tightened mortgage insurance requirements. My letter had little to do with it but mine was not the only letter.

Poor disenfranchised pimp…

victoria
Member
victoria

So what about Victoria then. Are we like the Hamptons with homeless?

Keeping An Eye On Th
Guest
Keeping An Eye On Th

@jesse:

Jesse, the changes were cosmetic.

Political gamemanship.

In the US Krugman and Shiller had no impact.

The bubble burst when it was time.

David Lereah enjoyed the ride while it lasted.

gordholio
Member
Global TV this morning led off its news program with a spot on sky high Vancouver (west side) real estate prices. It was kinda messy, actually, with field reporter Grace Ke fumbling with her words and pages as seems typical and a script that muddled back and forth between "blaming" offshore Chinese buyers and mentioning the average house in that area now costs 9.5 times median incomes. The piece ended with Grace asking when it will end and suggesting anyone wanting to buy a house will have to wait for some time, presumably for prices to drop. It did not, thankfully, come across as a "buy now or be priced out forever" pump piece. Indeed, one could quite easily see it as one of the few "realistic" spots Global news has aired in quite some time. Maybe someone else saw… Read more »
chip
Guest
chip

Regarding the influx of buyers from mainland China into the Westside, I wonder if there is a recent or upcoming census or survey that can track the progress of average income in the area. With buyers paying about $2 million per home you would think avg income will rise sharply.

But I humbly suggest it will actually flatline or fall because the new buyers' income will be overseas and it's unlikely that they will be reporting it to the CRA.

So I suspect you will be getting an inverse relationship between rising house prices and falling incomes, and this disparity should show up in the data eventually.

patriotz
Member

@chip:

AFAIK the CRA does not release income statistics at a higher detail than metro level.

The census does, but I would doubt the income figures would be that trustworthy (I think it's long form data). What would be interesting from the census would be change in % of foreign-born population.

In any case what matters for house buying is the income of the buyer (i.e. at the margin) not the average income of everyone. There are still a lot of home owners with modest incomes in the West Side.

I don't think price/income tells you much except at a metro level as it's based on statistics, elsewhere I would just look at price/rent for individual properties which isn't.

coastal
Guest
coastal

I got the same blanket reply from Jimbo. In other words "you're on your own Vancouver".

After reading this article I cannot imagine for a second that there is not rampant fraud going on thru CMHC via offshore money. With all the crime and drug/gang money going on, the mortgage fraud has to be Canada's dirty little secret yet to be uncovered. Sorry Canada, but there are just as many scumbags in Canada as in the US, not the angels our government makes out our financial lending system to be. Toss in offshore dirty money, a lax immigration system, and you have a prime recipe for something much bigger.

http://www.huffingtonpost.com/2011/05/16/foreclos

jesse
Member

@chip: "I suspect you will be getting an inverse relationship between rising house prices and falling incomes"

The data are released in late 2012 and aren't aggregated on a neighbourhood level in a readable form until likely 2013. By that point 80,000 more Chinese immigrants will have moved in, rendering the 2011 data useless.

chip
Guest
chip

@patriotz:

I was thinking of something along the lines of this story out of West Van, which found that the area's poverty rate was 17.5%, one of the worst in the province and attributed to immigrants.

"That document used numbers drawn from the 2006 census to rank 54 B.C. communities according to what the authors described as a "child poverty rate," that is, the percentage of families with children whose after-tax income fell below Statistics Canada's low income cutoff. West Vancouver, with a formidable 17.5 per cent, ranked as the 11th worst. The City of North Vancouver came in at No. 6."
http://www.vancouversun.com/story_print.html?id=4

People were puzzled by this, but it would make sense if satellite families (Dad overseas, Mom and kids living locally) were increasing their presence in West Van.

coastal
Guest
coastal
Like I was saying, Canada's dirty little secret. "According to industry estimates, losses from mortgage fraud in Canada range into the hundreds of millions of dollars annually. Some criminal groups are each responsible for losses, primarily to financial institutions, of tens of millions of dollars. Mortgage fraud can leave victims with inflated property values, higher property taxes, an inability to sell their homes, or damaged credit histories. Following the location of strong housing markets across the country, mortgage fraud occurs nationally but is more concentrated in the large urban areas in Quebec, Ontario, Alberta and British Columbia (B.C.). Numerous criminal groups across Canada are involved in a wide variety of mortgage frauds for profit or to further other criminal activities. Some undertake a limited number of relatively simple mortgage-related frauds while others commit multiple mortgage frauds involving anywhere from several… Read more »
jesse
Member

@Keeping An Eye On The Pimps: "Political gamemanship"

I agree that politicians don't like responding to voters and will pay lip service to many issues. However the recent changed DID have an impact. Reducing amortizations from 35 to 30 years reduces the amount a marginal buyer can borrow by 7%. That is not gamesmanship, that is a tangible reduction in credit availability.

If you want my honest cynical opinion there is little Flaherty would like more than to screw over Liberal élite enclaves by destroying their housing markets, or at least refusing to bail them out when they hit the skids.

Anonymous
Guest
Anonymous

i overheard a guy yesterday on his phone. he sold his place in richmond for 300K over assessed value. said he thinks it's a great time to sell because for sale signs are popping up all over. he's now renting a place from a young guy who can't afford the mortgage on the place. and the landlord's mom is a realtor.

on my way to work a couple of guys were talking and one said their customer service dept had a meeting and were asking for volunteers to get laid off.

jesse
Member

Krugman: invisible bond vigilantes

Those wily invisible bond vigilantes are at it again: as part of their cunning plan, they have driven the 10-year bond rate down to 3.11 percent.

As it happens, the Wall Street Journal has now been warning about the attack of the bond vigilantes for almost exactly three years.

Canada's 5 year bond is below 2.5% again. Mortgage rate drops are likely coming soon. You may hate regular poster "Troll" but them's the numbers.

Best place on meth
Member
Best place on meth

@coastal:

"The five separate investigations were conducted by the Department of Housing and Urban Development’s inspector general and examined Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, the sources said."

No wonder their stocks are tanking. It's starting to feel like 2008 again.

registered
Member
registered

In the most recent election it took Harper hours to back away from their 'balanced budget in a few years' promise. The election before that they denied the recession right up to the point the polls closed. Flaherty's words aren't worth the hot hot air hoisting them aloft.

space889
Guest
space889

New last undeveloped waterfront in Vancouver? I thought Millenium was the last one ever? Is Rennie marketing this project also??

http://www.vancouversun.com/travel/Riverfront+pro

coastal
Guest
coastal
@Best place on meth: What's even more interesting is this article from last October that I was unaware that the Big 5 of Canada has been hiring "commisioned mortgage specialists" in huge numbers who do not have to answer to any government regulators. I would bet big money that Joe Average mortgage borrower would think they are hourly paid bank employees giving them safe advice. Whose more inclined to juice the paperwork and get involved in shady deals ? Hmmmm. "I don’t know if there is any correlation but the Big Six Banks (TD, BMO, CIBC, Scotia, RBC, National Bank) have been on a massive hiring blitz… hiring record number of so-called Mobile Mortgage ‘Specialists’ …. These banks have doubled and tripled their commissioned sales force in the past few years…. That’s right, COMMISSIONED sales force… Makes you wonder….." http://canadamortgagenews.ca/2010/10/19/mortgage-…
Patiently Waiting
Member
Patiently Waiting

It doesn't matter how true or false the rich asian stories are, what will break this market is average fools drowning in debt.

BTW seasonally-adjusted sales fell in April:

http://www.vancouversun.com/business/Canadian+hom

The "hot" markets led the declines.

pricedoutfornow
Guest
pricedoutfornow

I think we could all agree that anyone buying a house in the past few years with 5 or 10% down amortized over 35 or 40 years is not exactly being responsible. This is why I know several people who are now in financial distress. Sure, families have not experienced foreclosures….yet. But it's a stone's throw away.

chip
Guest
chip
@jesse: Jesse, you need to extend your horizon beyond daily price movements. Ten years ago foreign investors held only half the US debt held by domestic investors. Today, they own more, holding almost 50% of the total public debt and China owns 1/4 of that. Foreign investors are a lot more skittish than local holders, and as this story shows they are getting increasingly skittish: "May 17 (Bloomberg) — China, the biggest foreign owner of U.S. government debt, trimmed its holdings of Treasuries for a fifth straight month in March as lawmakers debate how to expand borrowing after reaching a statutory threshold." http://www.businessweek.com/news/2011-05-17/china… And while inflation hasn't reared its head in the US it certainly has in the UK, another country with dire public spending problems. "U.K. inflation accelerated more than economists forecast in April to the fastest since October… Read more »
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