Friday Free-for-all! New Rules Edition

Welcome to the summer of 25 year amortizations!

You’ve made it to the end of another weekend and that means it’s time for our regular end of the week news round up and open topic discussion thread.

Lots of ink spilled over the new mortgage regulations released yesterday.

Here are a few links to kick off the chat:

New rules in effect July 9th
How rules effect mortgage numbers
How new rules will sink houses prices
Final OSFI guidlines released
Brokers not so happy
Inventory growth takes a breather
Be very afraid of the Canadian bubble
Falling prices, no more home ATMs
Moody’s downgrades RBC 2 notches
USA 2006 “I’m not giving it away”

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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jesse
Member

More “bad” news: http://www.bcstats.gov.bc.ca/Publications/PeriodicalsReleases/PopulationHighlights.aspx

Net interprovincial for Q1’12 was negative 2400. Rut-roh!

patriotz
Member

As if you needed any confirmation that the PTB don’t give a rat’s ass about Vancouver:

Toronto condo boom prompted new mortgage rules, Flaherty says

midnite toker
Member
midnite toker

Yesireee celebrated with an extra doob tonight . Will be interesting to see what unfolds over the next few months.

patriotz
Member
f
Guest
f

Yeah, cant wait to watch how Vancouver market unfolds in July, oh, and the olympic too.

registered
Member
registered

2 patriotz Says: It was a near coffee-through-nose moment reading this:

“In Toronto in particular, what I’ve observed and heard about from developers is continuous building without restriction,” Mr. Flaherty said. “It’s distorting the market, quite frankly. And for that reason, we’re taking the steps we’re taking.”

He’s stepping in because of the runaway prices and debt created by…. over supply? This government couldn’t point out honesty with an illustrated field guide.

Boombust
Guest
Boombust

Did any of you see the idiotic spin on Global News at 6 about how the changes to the mortgage rules will only add to the “…thousands and thousands of renters, because they simply will NEVER be in a position to buy”.

Then, the talking head realtor was trotted out, blah blah…

NOT ONCE did they mention, of course, that it is much more likely that prices WILL GO DOWN to solve THAT problem. Duh.

market stats
Guest
market stats

I suppose there will be some minor level of stampede of those buying expensive properties, or those that need max amortisation and heloc’s.

And if it is minor then would assume that it is pretty slow thereafter.

Additionally, I suppose there is also the possibility of a short term listings ramp to try and get out before the changes take effect. Should be interesting numbers next few weeks.

PCinWA
Member
PCinWA
I find it comical to read and hear the arguments from those that have a vested interest in Vancouver real estate activity and prices continuing at elevated levels about how the recent rule changes won’t change anything. The real estate market is a very complex system, where modeling how one thing leads to another is fraught with problems. There are always unintended consequences to actions that people do not and cannot foresee. On the surface, it is easy to see how these changes eliminate a meaningful segment of buyers from the Vancouver real estate market, which will shift the supply/demand equation in such a way that sellers will realize lower prices on their properties. But then things get complicated. What happens next and why isn’t easy to predict. E.g., here in the States, one thing that many people didn’t factor… Read more »
Bailing in BC
Guest
Bailing in BC

Any body know what happens to people who have their mortgages with Firstline?

Do they remain the same and then the borrower has to find a new lender at the end of the term?

I have friends who are with Firstline, who last week were commenting on how they weren’t sure if they would qualify for their mortgage at renewal, which is a few years away. Now they are worried that they may have to go looking for a mortgage sooner rather than later.

Anonymous
Guest
Anonymous

@patriotz: “As if you needed any confirmation that the PTB don’t give a rat’s ass about Vancouver:”

And the best thing that can happen to Vancouver is for the changes to have no impact in Toronto. The Feds will bring in more tightening even if Vancouver is in a full crash. There are advantages to being ignored. Imagine what the new amortization changes will do to already declining markets like the Okanagan.

patriotz
Member

@market stats:
New rules take effect July 9 and sales must be final before then to qualify under the old rules.

That’s just over 2 weeks from today which is far too little time for any meaningful number of buyers and sellers to do anything.

vanpire
Guest
vanpire

Oh my… poor renters, they are pretty much screwed now that they cannot afford to buy
http://vancouver.en.craigslist.ca/van/apa/3085966282.html

condo watcher
Guest
condo watcher

@ Bailing in BC
their mortgages are fine–cibc will continue with previous loans –no change there–this was posted yesterday @ #163 by d

http://business.financialpost.com/2012/06/20/cibc-fails-to-sell-firstline-mortgages-unit/

Anonymous
Guest
Anonymous
From Cormark morning notes: Equitable Group Inc. (ETC – TSX) Equity Financial Holdings Inc. (EQI – TSX) Genworth MI Canada Inc. (MIC – TSX) Home Capital Group Inc. (HCG – TSX) New Mortgage Rules A Modest Positive For Sub-Prime Lenders, Likely Negative For MIC – Friday, June 22, 2012 The new rules announced on Thursday lower the maximum amortization period to 25 years, impose a maximum loan-to-value on refinance transactions to 80% from 85%, and lower maximum debt service ratios. In addition, homes valued over $1 MM will no longer qualify for mortgage insurance. The independent lenders have been experiencing rising origination volumes and higher credit quality as lending standards have tightened, squeezing more borrowers out of the prime category and into sub-prime. The new rules, in our view, only serve to further strengthen this trend. For Genworth MI Canada,… Read more »
Anonymous
Guest
Anonymous

@vanpire:

I cannot figure out some of these furnished rentals like you just pointed out. A 1000 sf condo which has a market rent unfurninshed of about $2300 per month at best has an asking rent furnished at $8575. The price is so out of line it makes you wonder why a rental agency bothers posting the ad.

Anonymous
Guest
Anonymous

@Anonymous: “The independent lenders have been experiencing rising origination volumes and higher credit quality as lending standards have tightened, squeezing more borrowers out of the prime category and into sub-prime.”

I thought there was no such thing as sub-prime in Canada. Don’t they know if is called non-prime.

Harry Wang
Guest
Harry Wang

http://www.theprovince.com/business/Flat+market+doesn+need+mortgage+rules+expert+says/6823910/story.html

Flat market doesn’t need new mortgage rules, “expert” says – will only “hurt” local market

Anonymous
Guest
Anonymous

@Harry Wang:

Yeah, Muir. Hurt exactly who? Speculators who have absolutely no interest in the community or the local economy? The sheep who bought thinking prices keep going up forever gorging on debt? Real estate marketers who screamed, “Buy now or never”?

If that’s the case, I’d say let this sh*t hit the fan. I have no sympathy for any of them.

coastal
Guest
coastal

@Anonymous:

Muir is the biggest bubble scammer of them all. Doesn’t want to effect his job having to lie to people why 10 times income is normal. What a complete tool !

coastal
Guest
coastal

@Boombust: They can’t tell the masses that prices will go down, that could cause mass panic and there aren’t enough bridges to go around. 😉

Still waiting for the Victoria Times Colonist rag to write an article on the changes, been over 24 hours and still nothing, crap journalism at it’s finest. Guess it’s not news if you don’t want it to be and the real estate advertisers are happy they bury it and pretend it doesn’t exist.

Anonymous
Guest
Anonymous

@Bailing in BC:

Firstline was just a CIBC-owned brand. Existing customers will now be serviced by CIBC directly.

VHB
Member
VHB

Typically, there is a 10-20% dropoff in sales between June and July. Given the CMHC rules changes, I expect a bigger drop than that this year.

June sales were already the lowest over the last 10. July sales, I predict, will come in under 2000. With around 20K of inventory, we will have a shot at 10.0 MoI by end of July.

Here are July norms:

year	sell	list	sell/list
2001	2618	3504	74.7%
2002	2670	3929	68.0%
2003	4023	4447	90.5%
2004	3019	4785	63.1%
2005	3652	4107	88.9%
2006	2732	4370	62.5%
2007	3873	4924	78.7%
2008	2174	7104	30.6%
2009	4114	5061	81.3%
2010	2255	4138	54.5%
2011	2571	5097	50.4%
Mean	3064	4679	65.5%
median	2732	4447	71.3%

and for fun here is June

year	sell	list	sell/list
2002	2689	3850	69.8%
2003	3525	4301	82.0%
2004	3501	5594	62.6%
2005	4333	4742	91.4%
2006	3951	5460	72.4%
2007	4244	5533	76.7%
2008	2425	6546	37.0%
2009	4259	5372	79.3%
2010	2972	5544	53.6%
2011	3262	5793	56.3%
Mean	3516	5274	66.7%
median	3513	5496.5	72.4%
Not much of a name...
Member
Not much of a name...

@Harry Wang: It’s funny that Muir wasn’t saying the same thing when mortgage rules were loosened. Could you imagine him saying “prices are rising so I don’t understand why the government is allowing 40 year amortizations. It will only make the market go higher!”

Gah
Guest
Gah

http://www.vancouversun.com/business/mortgages/First+time+homebuyers+will+squeezed+mortgage+rules/6821870/story.html/

From the article:

If he is able to buy before the new rules kick in, he can afford a $700,000 home with a $643,860 mortgage, including insurance, and will have payments of $2,773.58 a month. After July 9, the maximum mortgage he’d be allowed to carry will decrease to about $566,100 with insurance, dropping his top possible purchase price to $625,000, Trounsell said.

If that is a common case, then the market is hooped – there is no way prices will only go down 10% with such a big cap on mortgage amounts.

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