Canadian Bubble? Blame the CMHC

The Canadian Mortgage and Housing Corporation insures nearly $600 billion worth of mortgage insurance.  That’s almost one third of the national GDP.

Much of the discussion about what’s wrong with the housing market focuses on the CMHC, which now counts as one of the country’s largest financial companies, owing to its substantial portfolio of mortgage guarantees covering nearly $600-billion of outstanding home loans, roughly 30% of Canada’s GDP.

Critics say the CMHC is under-charging for its policies, which has opened the door for housing speculators and enabled banks to push the risk of default on hundreds of billions of dollars of mortgages onto the shoulders of government — bottom line, the CMHC is the primary cause of the bubbly market.

In each Annual Report from 1976 onwards, reference has been made to the diminishing viability of the corporation

Read the full article over at the Province for an interesting overview of the history and potential problems faced by the CMHC.

 

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Anonymous
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Anonymous

More correct, the potential problems faced by the bag holders who have to reverse CMHC’s course.

CMHC is a nice wrapper for what is a government policy of promoting home ownership, carefully deflected away from the political leadership ultimately in charge of the Corporation’s conduct.

The calls for CMHC to be privatized is a panacea, not even the mighty free market Americans dare touch their equivalent, the FHA. The real question is how far the Canadian government dare venture into privatization before they stare into the abyss and sh!t their pants.

registered
Member
registered

>The real question is how far the Canadian government dare venture into privatization before they stare into the abyss and sh!t their pants.

Wrong substance. These are the Conservatives, dismantling Canadian social benefits is what gets them out of bed in the morning. That in this case they can do it while enriching banks with tax dollars by buying their risky assets wets their pants.

chilled
Member
chilled

Could someone be as kind to flag these articles for me; you know, when we either dismiss writings from The Sun/Province as real-a-turd propaganda OR something having merit. Last time I saw so much flip-floppin’ I was on Turners site!!

golden_boy
Guest
golden_boy
Let’s remember how we got here: •Prior to 1999 you needed 10% for a mortgage and that mortgage had a maximum amortization of 25 years. CMHC also had limits on how much you could buy with their insurance. •Just after 1999 CMHC lowered the down payment to 5% with price limits on how much they would insure depending on the area. Amortizations were still 25 years. There would be no price limit on what they would insure if 10% or more was put down. •By Sept. 2003 CMHC allowed 5% down on 25 yr amortizations but they removed all price ceiling limitations. Now any mortgage would be insured regardless of the value of home purchased. •In March 2004 CMHC began allowing Flex-Down products which permitted the 5% down to be borrowed and 1.5% closing costs to be borrowed (essentially zero… Read more »
Anonymous
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Anonymous

‘dismantling Canadian social benefits’

…is not what helped them get elected in 2011, goosing housing by unchaining the CMHC MI cap did. I’m trying to think of a government anywhere able to make a free market in practice.

Blast From The Past
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Blast From The Past
Beuller
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Beuller

Canada 10 year note – holy crap. Where are the morons who said this was inconsequential? Oh sorry… would not have any affect or in other words had no idea the relation between the 10 year note and lending rates or even the price of the 10 year bond in relation to the yield. http://www.bloomberg.com/quote/GCAN10YR:IND

Joe Mainlander
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Joe Mainlander

@ Chilled.The flip flopping is the result of the Sun/Province printing press releases from various sources. Which is fine. It’s up to us to analyze what is propaganda and what is truth. No flip flopping. Just healthy analysis and thought. Otherwise we would all just accept what the Sun/Province printed based on someone else’s flagging.

Son of Ponzi
Guest
Son of Ponzi

CMHC!
Canada’s Fannie Mac.
Too big too fail. Will need taxpayers funded bailout.

VHB
Member
VHB

Total days 20
Days elapsed so far 6
Weekends / holidays 4
Days missing 0
Days remaining 14
7 Calendar Day Moving Average: Sales 126
7 Calendar Day Moving Average: Listings 248
SALES
Sales so far 808
Projection for rest of month (using 7day MA) 1758
Projected month end total 2566
NEW LISTINGS
Listings so far 1577
Projection for rest of month (using 7day MA) 3478
Projected month end total 5055
Sell-list so far 51.2%
Projected month-end sell-list 50.8%
MONTHS OF INVENTORY
Inventory as of June 11, 2013 18179
Current MoI at this sales pace 7.08

June norms

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%
2012 2362 5617 42.1%
Mean 3411 5305 64.3%
median 3501 5533 72.4%

As Rob Ford would say, “Everything is fine.”

BULl
Guest
BULl

@blast from the past
lol you are killing the idiots. Stop it please

Anonymous
Guest
Anonymous

Just saw yesterday that TD increased their mortgage rates and bond yields continue to rise. Don’t know if these rate rises are a false start or not, but does anyone have any analysis on the correlation between rising rates and house prices?

BULl
Guest
BULl

Brrrr rates rise bears, how long you plan to live? 150 years
you will be 90 before rates rise. Are you gona buy then or save money Crestor and Lipitor

Not much of a name...
Member
Not much of a name...

@Buli 13

you will be 90 before rates rise.

I think it’s rather rude to assume that we are all in our late 80’s.

Son of Ponzi
Guest
Son of Ponzi

I borrowing costs rise, house prices fall.

crabman
Guest

When it comes to housing prices, interest rates are just one factor. When rates go up, it can cause demand to fall. But if demand is very strong, and the rate increase is modest, prices will probably still rise.

All else equal, when rates go down demand increases. But as we saw during the US bust, demand was so low that falling rates did nothing to stop the crash.

Today in Vancouver, demand is already low and prices are falling. If the recent increase in interest rates is a trend, it will further decrease demand and should speed-up the declines.

Son of Ponzi
Guest
Son of Ponzi

Low interest rates are largely responsible for the housing bubble in Vancouver.
And higher interest rates will prick the bubble.
The big question mark, of course, is HAM.

Son of Ponzi
Guest
Son of Ponzi

We’ll probably see an uptick in sales during the next few months, as buyers will use tiheir pre-authorized mortgages.
After that, we should see a fairly substantial drop in demand, and accelerated decline in prices.

Anonymous
Guest
Anonymous

fixie guy: “Wrong substance. These are the Conservatives, dismantling Canadian social benefits is what gets them out of bed in the morning.”

You have been telling us about the ‘Conservatives, dismantling Canadian social benefits’ for years now. Since the Conservatives have been in power for coming up to 10 years now when do you expect this to start happening?

Anonymous
Guest
Anonymous

golden-boy: “Let’s remember how we got here:”

Lets not forget the whole time mortgage rates have been dropping and house prices have been rising above inflation. Both of these make it nearly impossible for a person to go into foreclosure and a bank to require CMHC insurance to recover a default. This makes CMHC look prudent due to low claims. Wait until things reverse on both rates and property values.

Not much of a name...
Member
Not much of a name...

@Anonymous

Wait until things reverse…

That’s the same as saying wait until the tide goes out then see who’s swimming naked…

Anonymous
Guest
Anonymous

Remember last time bond yields went up?
This time will be different.

VanRant
Guest
VanRant

Today feels like Custer’s last stand for bulls. Interest rates are raising, sales are near record lows and CMHC is being slayed.

jjss
Guest
jjss
Anonymous
Guest
Anonymous

@jjss

Excellent program. Except for the last guy, mayor Dauphin, who thinks we need government subsidies in place so that everyone can afford a sfh downtown in the city of their choice. What a rambling bunch of socialist lip service he spouted.

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