Category Archives: Canada

Realtor: DO NOT PANIC about bubble.

There’s an interesting read over at BCBusinessOnline about those crazy bubble bloggers and forum bears:

The “Bears” talk cover up which I always find so intriguing. Commenting on the September stats from the Real Estate Board of Greater Vancouver, Seth M. says:  “This will only make the conspiratorially minded angrier — most of them convinced that the so-called benchmark indices produced by organized real estate are covering up a major decline.” The reality is the numbers from behind the HPI are actuals.  They aren’t fabricated to prop up a cyclic market so that realtors can hang onto their markets.

Now there may be some of you that believe the ‘cover up’ angle on the HPI, but I think you’re maybe a little crazy.  There is nothing to be gained by massaging the numbers.  My feeling on the HPI is that there seems to have been no good reason to change the methodology for calculating it.  It used to be a very decent apples to apples historical comparison, but by changing the measurement and then recalculating it they’ve killed its value as a long term gauge.

I think any problems with the HPI come down to opacity and bad math, not any smoky back room conspirators whose only goal is to keep house prices high.

But what do I know?  I’m just a crazy anonymous bubble blogger.

Is financing getting tougher for the self employed?

It seems that more and more Canadians are self employed.

The self employed tend to have less steady income then full time employees and as a group it can be more difficult to get a mortgage or refinancing.

As a self-employed website developer who had recently restructured his business, Greg Schmidt knew that refinancing his mortgage wasn’t going to be a piece of cake.

“I had a little bit of a line of credit built up from shifting the focus of the business and my car lease had come up for being bought out, so I needed money to take care of that,” said Mr. Schmidt, a single 42-year-old who owns a home in Toronto that includes an apartment for income. “It turned out the best way to go was to do a new mortgage, increase the amount of the old one and take care of those costs.”

However, when he approached his bank, he was told “the numbers didn’t work for them.”

Read the full article in the Globe and Mail.

Is Emili smart enough to know your house price?

Now that the Canadian housing bubble appears to be running out of steam we’re starting to hear concerns that automated appraisals have helped push prices up higher than they ought to be.

This article in the globe and mail was linked in fridays free-for-all post, but is worth a closer look.

Automated appraisals save time and money but have such a big margin of error that they are practically worthless.

Now people involved in lending are starting to worry about the fall out of relying too much on an automated system:

Introduced in 1996 as a way for the CMHC, banks and other lenders to quickly and inexpensively determine how much money can be lent against a residential property, the database known as Emili is relied upon too heavily by lenders, the documents suggest.

Emili is an automated system that uses figures such as recent sales of nearby homes to gauge values, without sending an actual appraiser to the address. However, the potential margin of error in calculations may pose significant problems. For home buyers, or homeowners with home-equity lines of credit, an inaccurate valuation by the database could allow them to overpay or borrow much too heavily for the home, industry members argue.

For banks, it could mean the collateral they have against the mortgage is not worth as much as believed.

Ooops!  But as a comforting side effect, it appears that appraisals that came in too high in a hot market did enable the CMHC to collect higher fees.  Read the full article here.

Trade deficit at record levels

Patriotz pointed out this article at the CBC: Canadas trade deficit has grown to the largest level ever, and this at a time when oil and commodity prices are high.

The gap between what Canada sells to the world and what it buys from other countries expanded to the largest point on record in July, as its trade deficit expanded to an all-time high of $2.3 billion.

Exports fell 3.4 per cent during the month, Statistics Canada reported Tuesday. That was more than the corresponding decline in imports, which were down 2.2 per cent.

Exports of energy products fell 8.5 per cent to $8.2 billion for the month, the data agency reported, while exports of automotive products dropped 5.3 per cent to $5.9 billion.

“This is about as bad as it gets for Canadian exporters, at least so far,” Scotiabank economist Derek Holt said in a note following the release of the data. “[And] the details are worse.”

Read the full article here.

IMF pessimistic on Canadian outlook

The IMF has put on their grumpy pants and come out against the Canadian Economy again, so says the Globe and Mail.

Markets worldwide reacted with some shock to the news, posting modest declines. But the Toronto Stock Exchange took a bigger hit than most others, falling 1.2 per cent.

The Canadian stock market has been sluggish, relative to other leading global markets, as economic doubts have risen this year. The TSX has grown just 2.7 per cent to date in 2012, compared with a 14.6 per cent jump in the S&P 500 and even 6.7 per cent growth in the Euro Stoxx index.

“We’ve been saying for a while that the Canadian stock market would underperform,” said Pierre Lapointe, the head of global strategy and research for Pavilion Global Markets Ltd. “It has. And we continue to think that it will underperform.”

The IMF report focused heavily on Canada’s deeply entrenched trade relationship with the United States. While Canada’s recovery has been faster, “growth has been constrained by sluggish expansion in the United States,” the report said.

Read the full article here.