CMHC breathes a sigh of relief

The CMHC is revising it’s forecast for housing starts in the slightly upward direction thanks to the US decision to keep interest rates at rock bottom levels:

The outlook runs contrary to a report in July from TD Economics, which projected that Canada’s housing market was poised to correct over the next two calendar years, with resale activity falling 15.2 per cent and average prices dropping 10.2 per cent.

“A combination of more subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages and fewer first-time home buyers are expected to be the chief culprits behind the slowdown,” said the report, prepared by deputy chief economist Derek Burleton and economist Sonya Gulati.

Earlier this summer, BMO Capital Markets warned that the Canadian market could suffer a price setback if there is a rapid rise in interest rates due to higher inflation, an increase in unemployment because of a weak U.S. economy or a slowing in foreign investment.

CMHC, however, projects that despite a slowing in the second half, average resale prices will deliver an overall increase in 2011, and continue to rise, albeit at a more modest pace, in 2012.

Laberge said the key reason for CHMC’s positive outlook is the call later in the summer from U.S. Federal Reserve chairman for interest rates to remain at rock-bottom rates into 2013.

As a result, he said, “We expect mortgage rates will be flat this year and to start increasing only later in 2012.”

Read the full article here.

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Patiently Waiting
Patiently Waiting
9 years ago

"But about $45 billion is with the riskiest group—buyers with less than 10% equity. These people could be wiped out if there’s a sharp correction.

The banks won’t lose. Only Ottawa will. It’s too late to do anything about those insurance policies now—we’re on the hook. But it’s not too late for Mr. Flaherty to show up at the CMHC board with a new set of orders: Shrink it."

http://www.ctv.ca/generic/generated/static/busine

Patiently Waiting
Patiently Waiting
9 years ago

Just watched a story on Global News about a long-time failed condo project in Kelowna. I believe it was called The Conservatory.

After ten years sitting idle, they are building it again. Only now it will be rental buildings. I wonder how they made the numbers work.

N
N
9 years ago

@coastal:

Are you really old or do you just not plan on living long? Easy money comes and goes in cycles. In 20 years people will have forgotten this, just as they have the last one.

coastal
coastal
9 years ago

Muir calling for flat markets is the death knell for BC. The easy money is gone, never to be seen again in our lifetime. The sheep are maxed out, and the smart HAM money is long gone back to China.

YLTN @ Work
YLTN @ Work
9 years ago

@gordholio:

Gordholio, you've been moderated…my comment was posted after yours and is up; let the flaming begin!

ReadyToPop
ReadyToPop
9 years ago

“We have created a very bad precedent,” said Jim Paulsen, chief investment strategist for Wells Capital Management in Minneapolis. “The financial markets whine and policy officials jump. The Fed has become the Pavlov’s dog of the stock market, and this is a horrible precedent for policy makers.”

Why Bernanke may forgo easing

paulb
9 years ago

New Listings 162

Price Changes 89

Sold Listings 100

TI:16522

Check out my site: http://www.laurenandpaul.ca I have added to the stats section. I now take a closer look at Van West, Van East and the North Shore. Still a work in progress..

Inventory
Inventory
9 years ago

Richmond M L S total sales this week (including today)

New Listings 124

Price Changes 51

Sold Listings 32

**there were only 2 houses sold in the past 2 (wed & thurs) days.

pipewrench
pipewrench
9 years ago

@jesse:

brave, true….but

wait for the fluff in the next 5 pieces to disregard the report as overblown and extremist. You cannot bite the fingers of the advertiser after all.

edit:

thanks,

fixie guy and Van MD , great read. 🙂

jesse
9 years ago

@Van MD: So let's do the math here:

(1+0.14)*(1-0.035) => 5% CAGR

I wonder if they are using the long-term growth trend to justify prices going forward, as if the last 8 years were an anomaly.

Predicting a drop in prices is brave, though.

Van MD
Van MD
9 years ago

[BCREA predicts metro Vancouver price in 2012 to drop 3.5%]

"B.C.'s home sales, property values to slow as job growth ebbs: BCREA"

AUGUST 25, 2011 1:02 PM

"Following a decade where unit sales broke all records, consumer demand for the next few years will be relatively moderate," Muir said in releasing the report.

A positive note, however, is that weaker global economic growth and uncertainty in world financial markets are signals that interest rates, including mortgage rates, will remain low and "help underpin housing demand."

Muir expects Metro Vancouver's average price to slip 3.5 per cent in 2012 to $742,000. However, that will be a decline off 2011, which Muir predicts will end with the average price having shot up 14 per cent to $769,000.

http://www.vancouversun.com/business/home+sales+p

gordholio
9 years ago

18, fixie guy: Great research, man.

I note, BTW, that the Straight has not yet published my comment. Admittedly, it was…ahem…large.

If I dont see it published by tonite, I'm going to post it here

just so y'all can get a laugh. Unedited gorholio mega-rant. And then I'm going to re-address it direct to the Georgia Straight head honcho so they have to go to the trouble of tossing it out yet again. That'll teach the bastards! 🙂

space889
space889
9 years ago

@jesse: Yes I have! So many pretty barely dressed ladies to go ga-ga at. 🙂

space889
space889
9 years ago

@jesse: Uhm…you mean at the back of the papers where people seems not to know any articles of clothing beside underwear, bra, and pantyhose? 🙂

fixie guy
fixie guy
9 years ago

"…. Simon Fraser University’s Andrey Pavlov. According to the associate professor of business….

Well, not really. Andy actually "specializes in real estate finance at the Wharton School of the University of Pennsylvania, where he is visiting associate professor of real estate, and at the Simon Fraser University, Vancouver, BC where he is associate professor of finance." Only a fool expects journalistic accuracy from the Straight.

Andy falsely gives the impression of having a clue here – http://papers.ssrn.com/sol3/papers.cfm?abstract_i– yet fails to extend that grasp far enough to capture the CMHC's role. At least until very recently, many Canadian lenders offered cash back mortgages. That's not zero-almost zero down? Why Andy, why?

Patiently Waiting
Patiently Waiting
9 years ago

@Inventory: Scam did his dirty worked. He crashed Richmond for us.

Inventory
Inventory
9 years ago

M L S Sales from the last 4 days in Richmond

113 New Listings

39 Price changes

26 Solds

jesse
9 years ago

@N: "Asset bubbles often happen when people park money there"

Indeed. Last I checked, when someone buys a house, they literally give someone else their money. It's not really "parked". Just sayin'…

N
N
9 years ago

@gordholio:

Actually, if it were true that there is no other place to put money, or even if it is true that there is a perception that there is no other place to put money, that in itself would be an argument against putting money in real estate for the long term. Asset bubbles often happen when people park money there (look at the history of the price of gold).

But of course, it is also obviously false, otherwise people in the States would also be forced to put their money in real estate and prices there would be rising instead of falling.

It is really frightening that this man has a job.

gordholio
9 years ago

11, Jesse: No, I haven't seen a hard copy of the Georgia Straight for a very long time. All real estate, all the time, huh?

The One
The One
9 years ago

Debunking the supposed drivers of Vancouver's crazy real estate market

http://www.theeconomicanalyst.com/content/debunki

jesse
9 years ago

@gordholio: “It pissed me off – particularly the headline”

Have you leafed through the Georgia Strait to see who puts up full-colour ads? Alas the story should be no surprise.

I am glad they’ve found an academic “expert” other than Sommerville to give soundbites. Nothing against Sommerville, just that I would have thought there should be more “experts”, given the city is so ga-ga over all things real estate.

gordholio
9 years ago

1, Gazza: Can you give us the specific reasons your wife feels the need to buy?

gordholio
9 years ago

6, Jesse: I had a few spare minutes this morning, so I wrote a response to that Georgia Straight piece. My reply was way too aggressive and way too accusatory – but what can I say? It pissed me off – particularly the headline, a real estate salesman's opinion dressed up to look like fact. And let us not forget the infamous line, "There's no other place to put your money." Damn, who pays that Pavlov dude anyway? Utterly shameful.

Every day our personal decision to rent for at least the next two years looks better and better.

Anonymous
Anonymous
9 years ago

@logic: Hopefully it's somewhere where 'everyone' doesn't want to live. Somewhere a family could buy a home to live in where they won't wake up with junkies in their yard. Somewhere with a clean environment, friendly people and a sense of community. Someplace like that would be nice, but please don't tell anyone where it is.