CMHC gets a bit weird

Here’s a couple of recent stories about Canada’s Housing Agency:  First off there’s the news that the government seems to be trying to figure out how to distance themselves from it, maybe by selling it off:

Anyone trying to understand the concern over a potential housing bubble in Canada need look no further than the debate among government officials over whether to exit the mortgage insurance business.

The board of Canada Mortgage & Housing Corp. considered selling the home loan insurer last year, according to former Chairman Dino Chiesa, who’s term ended in March. CMHC, set up in 1946 to promote home ownership, also studied the sale of Australia’s government-owned insurer and presented the findings to the Bank of Canada, according to documents released to Bloomberg News under Canada’s Access to Information Act.

Here’s the full article.

But of course the CMHC is also saying they see ‘no sign of a market bubble’.

While the report did not make specific reference to the government’s changes in the oversight of CMHC, it did offer what could be characterized an strong validation of its role and operations.

“CMHC follows prudential regulations as set out by the Office of the Superintendent of Financial Institutions, with CMHC maintaining more than twice the minimum capital required by OSFI,” it said. “As a result, CMHC is well positioned to weather possible severe economic scenarios.”

The report also highlighted the important role CMHC plays in the housing market, which it said accounted for 20%, or $346-billion, of Canada’s gross domestic product last year. It pointed out the agency “manages its mortgage loan insurance and securitization guarantee operations using sound business practices that ensure commercial viability without having to rely on the government of Canada for support.”

Here’s that article.

 

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patriotz
Member
I’ve already said it, but I’ll repeat for this thread. If you’ve bought a CSB, the government can’t tell you that XYZ Ltd. has taken it over and you have to go to them to get your money back. The Crown cannot assign its liabilities. Likewise, the government cannot assign its responsibilities for CMHC’s guarantees and bonds to someone else. Those responsibilities remain with the government until the guarantees become moot (i.e. the mortgages are repaid) and the bonds are redeemed. So what exactly would “selling” CMHC mean anyway? Its liabilities cannot be assigned. Looking forward, does anyone think that any private business would be willing to do as much as guarantee new mortgages? The private sector in the US isn’t even willing today, with prices now 1/2 what they are in Canada. Genworth and other “private” insurers are only… Read more »
VHB
Member
VHB

Tuesday’s sell list crept over 50%. But, I have always noticed weekly day-of-the-week patterns. Friday always seems most quiet. Tuesday always struck me as a big sales day. Mondays are a big listings day. Do the numbers back my ‘feelings’ about days of the week? Here are the averages so far in 2012 by day of week:

Monday	117	335	34.8%
Tuesday	149	310	48.1%
Wednesday	116	279	41.6%
Thursday	113	250	45.0%
Friday	103	240	42.9%

Tuesday is as good as it gets, on average.

Here is 2011 for the full year:

Monday	135	262	51.4%
Tuesday	145	256	56.5%
Wednesday	143	242	59.0%
Thursday	109	219	49.7%
Friday	113	209	53.8%

And 2010:

Monday	119	231	51.6%
Tuesday	145	251	57.8%
Wednesday	140	247	56.6%
Thursday	127	242	52.4%
Friday	106	194	54.7%
VHB
Member
VHB
May-2012			
Total days	22		
Days elapsed so far	6		
Weekends / holidays	2		
Days missing	0		
Days remaining	16		
7 Day Moving Average: Sales	124		
7 Day Moving Average: Listings	353		
SALES			
Sales so far	800		
Projection for rest of month (using 7day MA)	1987		
Projected month end total	2787	+/-	650
NEW LISTINGS			
Listings so far	2119		
Projection for rest of month (using 7day MA)	5648		
Projected month end total	7767	+/-	227
Sell-list so far	37.8%		
Projected month-end sell-list	35.9%		
MONTHS OF INVENTORY			
Inventory as of May 8, 2012	17823		
MoI at this sales pace	6.39		
xyz
Guest
xyz

Mitigating Risk.

Its clear that the Government is trying to Mitigate FUTURE risk to the taxpayer, while at the same time keeping the housing market afloat by offloading future risk to a private corporation.

If it is successful in selling off the business the lag time may give them some time to re-coop loses on behalf of the taxpayer by keeping the housing market afloat on the assumption a Private corporation would be willing to take on even more risk. And at the same time saving face.

Pretty smart move IMHO…
However in the long term it puts all Canadians in the same predicament or worse.

jesse
Member

Agree patriotz, there was little concern when CMHC was used as a mechanism to backstop fallout from the GFC or when Flaherty thought CMHC underwriting tweaks was an adequate method of reining in credit.

Focus should be on the Finance Minister who has had the authority to alter CMHC’s mandate and direction since its inception. That onus is on the media, this blog included.

Many Franks
Guest
Many Franks
Patsan
Guest
Patsan

VHB,
Based on your findings about week day fluctuations, would it be more accurate to use 10-day moving averages for projections?

patriotz
Member
Don Lapre
Member
Don Lapre

Don’t worry everyone!

“One of the key considerations for the purchase of any home has always been location. And location is one of the main reasons the condo market is not in a bubble.”

http://business.financialpost.com/2012/05/09/demographics-make-big-city-condos-hot/

VHB
Member
VHB

@Patsan: Hi, I use 7 calendar days, not business days. I do this for precisely the reason you have in mind–to have an equal number of each day of the week. I experimented with longer averages (14, 21 days) but they don’t pick up trends quickly enough.

I use 7 calendar days rather than 5 biz days because
a) after holidays, I would get an uneven mix of days of the week
b) after holidays, I might get data that are a bit too old to make it consistent.

The cost of using 7 calendar days is that after holidays sometimes I’m including only 4 or 3 (easter) days in the average. That’s the tradeoff.

Not saying I’m for sure right about any of this; just telling you how I see it.

Patsan
Guest
Patsan

VHB,
Thanks for the detailed explanation. I was also thinking about skewed data around statutory holidays and possible ways to simplify calculations. It looks like you have found a very good and simple formula by using 7 calendar vs work days in calculations. My confusion came from assumption that word “day” in the table has equal meaning for each position.

Vansanity
Guest
Vansanity

I saw this, this morning on google news… it’s like Yale and I were talking about on the last thread: There is no set definition of a bubble. Analysts seem to require the pop or rapid deflation in order for it to be called a bubble. We haven’t had that YET, ergo until then there is no bubble, per the CMHC.

I wonder if they’re going to try to move all the CMHC backed mortgages to the private sector. Tough sell if there’s all this bubble talk going on everywhere.

patriotz
Member

@Vansanity:
“There is no set definition of a bubble.”

Yes there is. Market price exceeds any credible estimate of fundamental value. That is, the earnings of the asset are not sufficient to cover the purchase price.

Anonymous
Guest
Anonymous
I love this question from a Washington Post real estate chat in 2005: “I’m so mad at my neighbor. I bought my new home here in Ashburn last summer and plan to sell it next year (after holding two years to avoid taxes) to make a nice return on my investment. The problem is my neighbor is trying to sell his house (very similar to mine) right now and he keeps lowering his asking price. Each time he lowers his price, I see my potential profits next year getting squashed. Doesn’t he realize he’s hurting the comps for all of his neighbors by doing this? I don’t think he is acting very “neighborly” by doing this. I want to say something to him and tell him he should stop putting his interests ahead of his neighbors. It’s people like him… Read more »
Mick Murphy
Guest
Mick Murphy

@Vansanity: These guys want to have long carriers. They don’t want to stick their neck out and potentially be wrong. After it pops they’ll talk about how all the signs were there, etc, etc.

It’s just the way of the world.

Anonymous
Guest
Anonymous

@Vansanity: “There is no set definition of a bubble. Analysts seem to require the pop or rapid deflation in order for it to be called a bubble.”

Yes that is where the term bubble came from. With real estate it always takes years to deflate but due to it not being liquid owners are stuck and have the same fate as a traditional bubble that does actually pop very quickly. Anyone who does not call this a bubble would also have to say the US and Japan were not bubbles either. Call it what you want it won’t be pretty to own real estate.

Hyperventelator
Guest
Hyperventelator

The real estate top is in. Can’t wait to see the debtors whining on CBC for the government to fix it so that they can avoid selling their 5 speculation condos.

Can’t wait for all the HAM to move back to china rather than pay off the giant underwater mortgage they owe to some Canadian bank.

Hyperventelator
Guest
Hyperventelator

Ode to Vancouver:

HAM be damned.
Speculators are masturbators.
Realtors are real ‘tards.
Vancouver is the biggest joke on earth.

Mick Murphy
Guest
Mick Murphy

Chinese Architect Comments on “Dark Apartments”, Vacancies, Residential Malinvestment

http://globaleconomicanalysis.blogspot.ca/2012/05/china-architect-comments-on-dark.html

registered
Member
registered
@12 Vansanity Says: “I saw this, this morning on google news… it’s like Yale and I were talking about on the last thread: There is no set definition of a bubble.” When the word doesn’t convey the right message, attack the word’s meaning. Claiming “it’s not a bubble until it pops” wipes hiney with reason. Does the act of popping retroactively change history? “In 2005 the US wasn’t in a bubble in 2005, in 2009 the US was in a bubble in 2005?” Horseshit, what you’re witnessing is social parasites willing to launch remorseless attacks on reason for the sake of profits. Nothing newer here than tobacco company medical evidence. An agreed definition of bubbles was common in 1841: http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds Search enough and you’ll find modern ‘objective experts’ attacking Mackay’s description of the tulip mania as a bubble too, contending… Read more »
DaMann
Member
DaMann

@Anonymous:

That’s absolute gold!
“I don’t think he is acting very “neighborly” by doing this.” ( lowering his price)

Scott
Guest
Scott

@Anonymous: The fact that it pops isn’t the sole reason you call a market a ‘bubble’. Like a real bubble it’s not the pop that defines it, it’s the rapid fragile inflation filled with nothing but air. You know it’s going to pop, but you don’t know when. It doesn’t suddenly become a bubble after it’s popped, claiming so is just a convenient way for those responsible to try to pass the buck.

Maverick
Guest
Maverick

@Scott:

Personally, when I hear terms like “the fundamentals don’t apply anymore”, is when the “bubble siren” starts flashing in my head.

Vansanity
Guest
Vansanity

@fixie guy:

I agree with you. However, every time I’ve seen an “expert” (bullish) asked if we’re in a bubble there’s always the preamble of “there’s no definition of a bubble…” before they dismiss such a notion.

They said the same shit during the US bubble. I remember watching CNBC and this “expert” laugh at the suggestion on air.

He who laughs last, laughs best.

jumpin in
Guest
jumpin in

In the segment I am following (600k- 800k, Vancouver East), houses are moving pretty fast 🙁
See:

http://i49.tinypic.com/2hywd49.jpg

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