Vancouver Condo Info

According to this piece in the Vancouver Sun, more Canadians are leaving BC than moving to it.

In fact according to BC Stats 2,234 people moved away from the province in the last three months of last year alone.

Why are people leaving BC?

That’s up for debate, but basic economics probably has some effect.

Large mortgages are a scourge, seriously limiting what folks can do on other fronts to enhance their lives.

Indeed, onerous mortgages probably are the reason British Columbians have so much non-mortgage debt.

It now takes 82.3 per cent of typical household income to purchase a detached bungalow in Vancouver, according to Royal Bank figures released last week.

Read the full article here.

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.

There’s another article about the OECD report of overpriced real estate over at the CBC.

The Organization for Economic Co-operation and Development looked at real estate prices in developed countries and looked at price-to-rent and price-to-income ratios:

The report found that based on rents, Canadian real estate is overvalued by as much as 60 per cent and in terms of prices to incomes, real estate is still as much as 30 per cent overvalued.

“There is no denying we’re overshooting, vis-a-vis rent, vis-a-vis income, vis-a-vis demographics. So the OECD is not adding anything here to the debate,” Benjamin Tal, CIBC deputy chief economist, told CBC News. “That’s old news.The interesting question is not that we’re overshooting, it’s what will be the corrective mechanism, namely what kind of mechanism will we see bring it back to normal.”

Read the full article here.

We’ve talked recently about the shift in management over at the CMHC.

Bloomberg has an article about the Canadian Mortgage and Housing Corporation seeking a CEO with risk management experience.

Canada’s housing agency said it’s seeking a president and chief executive officer with risk management experience to oversee its C$563 billion ($544 billion) mortgage insurance portfolio.

The next CEO should have “knowledge of the financial management requirements, particularly risk management, of a large financial services organization,” Canada Mortgage & Housing Corp. said today in an advertisement in the Globe and Mail newspaper.

Finance Minister Jim Flaherty said last month the Office of the Superintendent of Financial Institutions will continue to monitor CMHC “very closely,” because it must operate like the country’s largest lenders. The government-backed agency, which had C$563 billion of insurance in force at the end of March, covers most Canadian mortgages and helps commercial lenders securitize home loans.

Read the full article here.

Hat tip to VMD.

Things seem to be changing over at the CMHC.

The Financial Post says some upper management have been leaving or plan to leave.

First they brought in Robert P. Kelley as the new chairman, now they’ve confirmed the VP of insurance underwriting has left with no reason given.

Chief Executive Karen Kinsley has also announced plans to leave.

Why are all these changes happening now?

Speculation has been rife that agency could be set for more dramatic changes since it is now under the auspices of the Office of the Superintendent of Financial Institutions. Jim Flaherty, the finance minister, has also discussed privatizing parts of the agency.

Good luck with the privatizing Jim.

You’ve probably heard of the Economist.

That magazine is the latest voice of doom when it comes to our housing market:

The magazine’s dire prediction comes as Canada’s mortgage brokers’ association is warning that the recent slowdown in home sales will continue and lead to large-scale job losses – though some parts of the country will continue to see growth in housing and related employment.

“A large bubble now looks set to burst,” The Economist predicts in its property markets report.

The U.K.-based business periodical found house prices in Canada are overvalued by 73 per cent when compared to rental prices, and 32 per cent overvalued when compared to household incomes.

Read the full Huffington Post article here and the original Economist article here.

The economist Dave Madani is at it again.

He’s got nothing good to say about the Canadian real estate market.

According to Dave it’s a bit early to claim there will be a ‘soft landing‘.

Finance Minister Jim Flaherty has acted four times in the past five years to make mortgage-lending rules more restrictive amid concern that the Vancouver and Toronto markets were overheating. Flaherty has said he welcomes a slowdown of condominium construction in the two cities and has warned consumers, who have a record debt-to-disposable-income ratio of 165 percent, not to become overextended.

Madani, a former senior economist at the Bank of Canada, was the only person surveyed by Bloomberg News during the past two years who consistently predicted the central bank wouldn’t raise borrowing costs. Madani previously forecast home prices in the country would fall by 25 percent in the next few years.

Read the full article over at Bloomberg.

Banks in Canada get a lot of protection.

One thing that helps drive profit is CMHC mortgage insurance.

Wouldn’t it be great to make an investment where you got the profit and somebody else took over the risk?

The unfortunate side effect of this economic boosting is the the spectre of taxpayer liability for housing bubble fallout.

But what if the banks bailed out the CMHC after being bailed out by the CMHC?

Sounds a bit like a perpetual motion machine but that’s what BMO analyst John Reucassel is suggesting could happen if the CMHC went bust:

“It appears to us that the CMHC is reasonably well capitalized and positioned to meet the challenges from a housing slowdown.  However, investors may be concerned that, in a severe downturn, Canadian banks may either a) need to recapitalize the CMHC; or b) absorb some of the losses.”

Read the full article over at the Financial Post.

There’s an article over at CNBC talking about the National real estate market, it’s warning signs and various slumps.

They revisit Vancouver Real Estate agent Keith Roy’s very public decision to sell his house last year and say prices have dropped 3.9% in Vancouver, 5.6% in West Van.

They also talk about lending practices in Canada and recent efforts to return CMHC amortization terms to their historical norm.

Some of the loopholes people use to avoid the mortgage restrictions are quite extraordinary. For example, although the government requires buyers to purchase private mortgage insurance on mortgages with 100 percent loan-to-value ratios, eHow says this can be avoided just by getting two mortgages, each for 50 percent of the home value.

Canadians are also allowed to borrow against pensions and life insurance policies to fund their down payments. Even credit cards can be used to fund down payments. So it’s very possible that the total housing debt is actually much higher than the official mortgage debt numbers.

If this sort of thing is being openly discussed even after the government has launched its efforts to curb lending excess, just imagine what kind of shenanigans were going on before the crackdown. The quality of the mortgages made in 2011 and 2012 may turn out to be much worse than is commonly suspected.

Read the full article here.

So is the Canadian market falling apart at this point?  Vancouver has certainly fallen over the last year and this is starting to have an effect on developers as well – the Alba has been put on hold due to a ‘challenging real estate market‘.

The age of bankruptcy in Canada is growing.

There’s a troubling move towards more debt later in life.  Many Canadians are now going through their 50s with an increasing debt load rather than using that time to pay off debt.

But between 50 to 59 is usually the time when a person is trying to reduce debt and prepare for the golden years, says Douglas Hoyes, a trustee with the Ontario-based bankruptcy and consumer proposal services firm.

“We found, nope, in fact it’s the opposite. It keeps building and building,” says Hoyes, referring to debt loads.

The surprising thing is that the majority of these bankruptcies aren’t occurring due to unemployment:

A common stereotype is that the average bankrupt person is unemployed, but the study shows that 81 per cent of insolvent debtors were employed at the time of filing. The average take-home pay for Joe Debtor was $2,366 per month on a net basis, while the average household income was $3,058.

Read the full article here.